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

Disclosure on the Internet accompanying
the Notice of Convocation of the 158th Ordinary General Meeting of Shareholders

Company’s Systems and Policies
Consolidated Statement of Changes in Net Assets
Notes to Consolidated Financial Statements
Non-consolidated Statement of Changes in Net Assets
Notes to Non-consolidated Financial Statements(from April 1, 2016 to March 31, 2017)

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

1Company’s Systems and Policies(1) Systems to Ensure the Appropriateness of Operations
The Company 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.

2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
to affiliated 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.
3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, in 2016, which marked 101 years since our founding, Denka outlined “The Denka
Value” as below as its corporate philosophy that will form the basis of the Denka Group as we looktowards the next 100 years. Denka has conducted activities to instill this philosophy into every Group
employee.

◇ The Denka Value (Corporate Philosophy)
The Denka Value consists of the Denka Mission, which represents our uppermost mission statement, and the
Denka Principles, a set of precepts guiding actions taken by every Group employee.

・The Denka Mission
Taking on the challenge of expanding the possibilities of chemistry to create new value and contributeto sound social development.
Note: Based on the corporate slogan “Possibility of Chemistry.”

・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 craftsmanship42) 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 portionof 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
The following matters were decided at a meeting of the Board of Directors of the Company
I. Details of the Basic Policies
The Company was established in 1915 for the production of calcium carbide and chemicalfertilizers by utilizing limestone resources and its in-house electric power plants. Since then, we havegrown to become a unique chemicals manufacturer whose business lines include diverse chemical
products ranging from inorganic and organic materials to electronic materials, processed resin products
and pharmaceutical products. These materials are based on our proprietary technologies of electric
furnace controls, high-temperature reaction controls, organic synthesis and others nurtured in the courseof many years of experience in the field of carbide chemicals business.
In view of this history, characteristics of the Company’s businesses are represented by many of its
products involving very lengthy processes from raw materials to final products or utilizing proprietary
technologies in various fields in a complex manner.
These businesses are based on the accumulated efforts over the years, including steady R&D andsafety activities, capital investment and human resources development from a long-term perspective,
and building of relationships of trust with suppliers, customers, and the local community. In other words,
diverse technologies and people who have knowledge and experience capable of utilizing suchtechnologies in a complex manner are the sources of the Company’s corporate value, and management
resources and the relationships of trust that have been cultivated underpin the Company’s corporate
value. This is our basic recognition of the Company’s current situation.
As the onward march of globalization and informatization rapidly change the business environment,
those who fail to notice changes in market needs or economic structures will jeopardize their business5

platforms. In Japan, too, merger and acquisitions (M&As) and business tie-ups are increasingly used asa means of pursuing growth strategies. The Company’s Board of Directors also recognizes thatutilization of dynamism based on market principles is important for sustainable growth of society andcompanies, including the Company, and for enhancement of corporate value over the medium to longterm.
As a listed company, we recognize the diversity of our shareholders and consider that ourshareholders should make a final decision about the transfer of the control of the Company, including
purchasing of a large amount of the Company’s shares. However, certain large-scale purchases that haveactually carried out may be detrimental to the corporate value or the common interests of theshareholders of the company, or sufficient information or time may not be provided for the company toconsider whether it should accept or reject such a purchase attempt. Unconditionally accepting alllarge-scale purchase attempts is contrary to fulfilling the responsibility of management entrusted byshareholders.
The Company’s Board of Directors considers that a person that governs the Company’s financial
and business policies should fully understand the source of the Company’s corporate value and be
capable of continuously and sustainably securing and enhancing the Company’s corporate value and thecommon interests of its shareholders. The Company, in principle, raises objection to any attempts topurchase a large amount of the Company’s shares or similar attempts that come under the items listed
below.
If a person attempting a large-scale purchase of the Company’s shares does not provide sufficient
information and time for the Company or its shareholders to consider whether such attempt comesunder the items listed below, the Company’s Board of Directors also raises an objection to such attempt,
in principle.
If there is an attempt to conduct a large-scale purchase of the Company’s shares that comes under
the items listed below, the Company’s Board of Directors considers implementing necessary andconsiderable countermeasures within the scope permitted by laws and regulations, regulations offinancial instruments exchanges etc., and the provisions of the Company’s Articles of Incorporation, inorder to prevent damage to the Company’s corporate value and the common interests of its shareholders,
and to secure an environment where each of our shareholders can make a convincing decision. The
Company’s Board of Directors intends to perform day-to-day monitoring of any attempts of large-scalepurchase of the Company’s shares or similar attempts and take actions agilely to prevent damage to thecommon interests of the shareholders and the Company’s corporate value.
1) Purchases that may cause obvious harm to the Company’s corporate value and the common interestsof its shareholders through actions such as those described below or any similar action:(i) A buyout of share certificates, etc. and demanding the Company or its related parties purchasesuch shares at high prices(ii) Temporary obtaining of control of the management of the Company to further the interest of thepurchaser at the expense of the Company, such as by temporarily obtaining control of the
management of the Company to acquire the Company’s material assets, etc. at low cost(iii) Making the Company’s assets subject to use as collateral or for repayment of debts of thepurchaser, etc., its group companies, or other related parties(iv) Temporary obtaining of control of the management of the Company to dispose of high-value
assets that have currently little relevance to the Company’s businesses and declare temporarily
high dividends based on the proceeds from the disposal of such assets, or to sell the shares at ahigh price once the share price rises sharply by virtue of high dividends
2) Purchases that may have the substantive effect of compelling shareholders to sell shares, such as
coercive two-tier tender offers (a takeover bid in which the purchaser, etc. does not propose topurchase all the shares in the first stage, but sets second-stage purchase terms disadvantageous or
unclear to the shareholders)
3) Purchases that do not allow the Company’s Board of Directors to have reasonably necessary time tosubmit an alternative proposal
4) Purchases that do not provide the Company’s shareholders with necessary information andinformation reasonably necessary for evaluating the details of the purchase5) Purchases whose terms (including amount and type of consideration for the purchase, the timing of
the purchase, the legality of the purchase method, the probability of the purchase, management
policies or business plans following the purchase) are inadequate or inappropriate in light of theCompany’s intrinsic value

66) Purchases that may significantly harm the Company’s corporate value and, in turn, the common
interests of its shareholders, such as by damaging relationships with the Company’s employees,
suppliers, etc. and the Company’s brand power, which are indispensable for creating the Company’s
corporate value7) Inappropriate obtaining of the control of the Company from the viewpoint of public order that thepurchaser, etc., for example, when management or major shareholders of the purchaser etc. includes
person(s) who have relationships with antisocial forces
II. Outline of the Special Measures Contributing to Realization of the Basic Policies
1) Special measures contributing to realization of the basic policies
The Company is promoting the Denka100 management plan to achieve sustainable growth andenhancement of corporate value. The strategies of Denka100 were revised in April 2013. Specifying
goals for 2017, we set three new growth strategies to achieve numerical targets and are implementing
many concrete measures with a proactive attitude.
Three new growth strategies
1. Optimize the most optimal production system
2. Scrutinize every cost element
3. Focus management resources on new growth drivers and develop next-generation products
Numerical targets Fiscal 2017
Consolidated operating income of ¥60 billion or more
Operating income ratio of 10% or more
Ratio of overseas sales to net sales of 50% or more
In 2014, reflecting our determination to return the profits yielded by these initiatives to ourshareholders, we established the Policy on Shareholder Returns. Concurrently, with the aim ofachieving further corporate growth, we have secured a budget for strategic investments such as M&As.
Furthermore, in order to build a more robust management structure better suited to pursuing the new
growth strategies set forth in the Denka100 management plan and to strengthen corporate governanceand enhance management transparency and soundness, in June 2015, the Company adopted a new
structure, including an increase in the number of Outside Directors (from two to three) and a decreasein the number of Directors on the Board (reduction by two). This change will enable the Company tobolster its management structure for both defensive and offensive purposes.
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 changed
its trade name on October 1.
2) Measures to prevent decisions on the Company’s financial and business policies from being controlled
by persons viewed as inappropriate under the basic policy
As measures to prevent decisions on the Company’s financial and business policies from being
controlled by persons viewed as inappropriate under the basic policy, the Company formulated
countermeasures for large-scale purchase of the Company’s shares (so-called poison pill, hereinafterreferred to as the “Plan”) in the past but a resolution was passed not to continue the Plan upon its
expiration.
The Company will continue to strive to enhance corporate value and to secure the common interestsof its shareholders by ensuring compliance with the basic policy.
III. The Decisions of the Company’s Board of Directors and the Reasons Thereof
The Company’s Board of Directors believes the measures described in II-1) above are for the
purpose of enhancing the Company’s corporate value and the common interests of the shareholders
from a medium to long term perspective and contributing to realization of the Company’s basic policy.
These measures are in accordance with the common interests of the shareholders and are not for the
purpose of maintaining the positions of the Company’s officers.

7

Consolidated Statement of Changes in Net Assets(From April 1, 2016 to March 31, 2017)(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(7,971)

190,647

112,335

Dividends from surplus(6,228)(6,228)

Profit attributable to owners ofparent18,145

18,145

Change of scope of consolidation

(503)

(503)

Purchase of treasury stock
Disposal of treasury stock0

Reversal of revaluation reserve forland
Net changes of items other thanshareholders’ equity(2,200)(2,200)

0

0

4

4
-

Total changes of items during the
fiscal year-

011,417(2,199)9,217

Balance at end of the fiscal year

36,99849,284

123,752(10,170)

199,865(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

10,775

Foreign
Total
Remeasurements
currency
valuation andof defined benefit
translationtranslationplans
adjustment
adjustments

10,267

2,739(2,695)21,087

Noncontrollinginterests

Total
net assets

4,336

216,071

Dividends from surplus–(6,228)

Profit attributable to owners ofparent–18,145

Change of scope of consolidation

–

(503)

Purchase of treasury stock–(2,200)

Disposal of treasury stock

–

0

(4)

–

Reversal of revaluation reserve forland
Net changes of items other thanshareholders’ equity

(4)
4,061

2

(1,243)

(203)

2,617

(414)

2,202

Total changes of items during the
fiscal year

4,061

(2)

(1,243)

(203)

2,613

(414)

11,416

Balance at end of the fiscal year

14,837

10,265

1,496(2,898)23,7003,922

227,487(Note) Amounts are rounded down to the nearest million yen.

8

Notes to Consolidated Financial Statements
1. Significant Matters, etc. Providing the Basis for Preparation of Consolidated Financial Statements(1) Scope of consolidation
1) Consolidated subsidiaries
Number of consolidated subsidiaries: 42
Names of principal consolidated subsidiaries:
Denka Singapore Pte., Ltd.
Denka Advantech Pte., Ltd.
Denka Performance Elastomer LLC
DENKA SEIKEN Co., Ltd.
DENKA Polymer Co., Ltd.
Hinode Kagaku Kogyo
Akros Trading Co., Ltd.
YK Inoas Co., Ltd.
DENKA Inorganic Materials Tianjin Co., Ltd., Denka Infrastructure Technologies Shanghai Co,.
Ltd., and Denka Electronics Materials Dalian Co., Ltd., which were non-consolidated subsidiaries
until the previous fiscal year, are included in the scope of consolidation during the fiscal year underreview as their significance has increased.
Additionally, Indonesian subsidiary PT ESTOP INDONESIA is included in the scope of
consolidation due to additional purchase of its shares.

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

9(2) Application of the equity method
1) Non-consolidated subsidiaries and affiliates to which the equity method is applied
Number of non-consolidated subsidiaries and affiliates to which the equity method is applied: 14
Names of principal non-consolidated subsidiaries to which the equity method is applied:
KAMBARA NAMAKON K.K.
SANSHIN BUSSAN K.K.
Names of principal affiliates to which the equity method is applied:
TOYO STYRENE Co., Ltd.
JUZEN Chemical Corporation
Denak Co., Ltd.,
Kurobegawa Electric Power Company

2) Non-consolidated subsidiaries and affiliates to which the equity method is not applied
Name of the principal non-consolidated subsidiary to which the equity method is not applied:
DS POVAL K.K.
Name of the principal affiliate to which the equity method is not applied:
Shogawa Nama Concrete Kogyo K.K.
Reason for not applying the equity method:
The non-consolidated subsidiary and affiliate not subject to the equity method are excluded fromapplication of the equity method because their individual impacts on consolidated net income or loss,
retained earnings, etc., are negligible, and their overall impact on the consolidated financial statements isimmaterial.

(3) Accounting periods of consolidated subsidiaries
Among the consolidated subsidiaries, Denka Singapore Pte., Ltd. and 27 other subsidiaries have ayear-end balance sheet date of December 31.
Necessary adjustments are made in preparing the consolidated financial statements to reflect any
significant transactions that took place between that date and the consolidated balance sheet date.

(4) Accounting policies
1) Standards and methods for valuation of principal assets
Securities
Available-for-sale securities
Securities with market value
Stated principally at market value based on the average quoted market price for a period of
one month before the balance sheet date(Valuation difference is reported as a separate component of net assets. The cost of sales iscalculated principally using the moving-average method.)
Securities without market value

10Stated principally at cost using the moving-average method
Derivatives
Stated at market value
Inventories
Stated principally at cost using the weighted-average method(Balance sheet amounts are calculated by writing down their net realizable value when there isevidence of deterioration in value.)2) Depreciation method for principal depreciable assets
Property, plant and equipment
Principally, the straight-line method is applied.
Intangible assets
Principally, the straight-line method is applied. (However, software for internal use is amortized by
the straight-line method over the estimated internal useful life (principally five years).)
Lease assets
For finance leases that do not transfer the ownership of the lease assets to the lessee, thestraight-line method with no residual value is applied, regarding the lease term as the useful life.
Finance leases commencing on or before March 31, 2008 that do not transfer the ownership of thelease assets to the lessee are accounted for in the same manner as ordinary rental transactions.
3) Standards of accounting for principal allowances and provisions• Allowance for doubtful accounts
Allowance for doubtful accounts is provided to cover possible losses on receivables. The
Company records an estimated irrecoverable amount based on the historical write-off rate forordinary receivables and based on assessment of recoverability of individual receivables for
specific doubtful accounts.
• Provision for bonuses
The Company provides reserve for payment of bonuses to employees based on the amount of
estimated employees’ bonuses.
4) Other significant matters providing the basis for preparation of consolidated financial statements• Method of amortization of goodwill and amortization period
Goodwill is amortized within twenty years over a reasonable period, and amortized using thestraight-line method.
• Method of hedge accounting
The Company adopts the deferral method of hedge accounting. Interest rate swaps are accounted
for by the special method provided by the accounting standards as they satisfy the criteria for
application of the special method. Forward exchange contracts that satisfy the criteria for
application of the appropriation method are accounted for by the appropriation method.
• Method of accounting for retirement benefits11In order to prepare for payment of employees’ retirement benefits, based on the projected amounts
at the fiscal year-end, the amount of retirement benefit obligation from which the amount of plan
assets is deducted is recorded as net defined liability.
In calculating retirement benefit obligations, the benefit formula basis is adopted for attributing
expected benefits to periods.
Prior service cost is principally recorded by the straight-line method over certain periods(principally 10 years) within the average remaining service period of employees expected to receive
benefits.
Actuarial gains and losses are principally recorded by the straight-line method over certain periods(principally 10 years) within the average remaining service period of employees expected to receive
benefits, commencing with the following fiscal year.
Unrecognized actuarial gains and losses and unrecognized prior service cost are recorded, after
adjustment for tax effects, as remeasurements of defined benefit plans in accumulated othercomprehensive income in the net assets section.
• Consumption taxes
Consumption taxes are recorded using the tax-excluded method.

(5) Change in accounting policies(Changes in accounting policies)
In line with the revisions to the Corporation Tax Act of Japan, the Company applied the Practical
Solution on a change in depreciation method due to Tax Reform 2016 (Practical Issues Task Force(PITF) No. 32, June 17, 2016) from the fiscal year under review. Accordingly, the depreciation
method for facilities attached to buildings and structures acquired on or after April 1, 2016 waschanged from the declining-balance method to the straight-line method.
The impact on operating income, ordinary income and income before income taxes as a result of thesechanges is immaterial.
(Additional information)
The Company applied the Implementation Guidance on Recoverability of Deferred Tax Assets(Accounting Standards Board of Japan (ASBJ) Guidance No. 26, March 28, 2016) from the fiscal
year under review.

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

357 million yen

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

222 million yen
397,094 million yen(3) Guarantee obligations, etc.
Guarantee for loans from financial institutions:

167 million yen

3. Notes to the Consolidated Statement of Changes in Net Assets(1) Type and total number of shares issued and type and number of shares of treasury stock
Number of shares atthe beginning of theyear
Shares issued
Common stock
Total
Treasury stock
Common stock
Total

Increase during the Decrease during the Number of shares atthe end of the year
year
year

465,954,121
465,954,121

−
−

−
−

465,954,121
465,954,121

18,640,888
18,640,888

4,859,552
4,859,552

1,828
1,828

23,498,612
23,498,612

Note: The increase in the number of shares of common stock of treasury stock was due to the purchase of
4,831,000 shares of treasury stock and the purchase of shares constituting less than one unit inaccordance with the provisions of Article 165, Paragraph 2 of the Companies Act and of the Articles
of Incorporation. The decrease in the number of shares of common stock of treasury stock was dueto the sale of shares constituting less than one unit.

(2) Dividends
1) Payment of dividends• Dividends for common stock
Resolution
Ordinary General
Meeting of
Shareholders held on
June 22, 2016
Meeting of the Boardof Directors held on
November 8, 2016

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

Record date

Effective date

March 31, 2016

June 23, 2016

Common
stock

3,131

7.00

Common
stock

3,097

7.00 September 30, 2016 December 2, 2016

2) Dividends whose record date falls during fiscal 2016 but whose effective date is in the next fiscal
year
13• Dividends for common stock
The following resolutions are expected to be made.
Dividends paid
Types of
Source of
Resolution(millions ofsharesdividends
yen)
Ordinary General
Meeting ofCommonRetained
3,097
Shareholders to bestock
earnings
held on June 22, 2017

Dividends per
Record dateshare (yen)Effective
date

March 31,2017

June 23,
2017

7.00

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

14(2) Fair values of financial instruments
Carrying amounts and market values of the financial instruments and the differences between
carrying amounts and market values as of March 31, 2017 (consolidated balance sheet date of fiscal
2016) are as follows.
(Millions of yen)

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

Carrying amount(*)
10,25885,069Market value (*)

31,820(46,811)(43,492)(40,256)(30,000)−

Difference

10,25885,069−−31,820(46,811)(43,492)(40,410)(30,124)
−

−
−
−
153
124
−

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

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

15

(8) Derivatives
The market value is calculated based on the prices provided by the financial institutions.
However, interest rate swaps that qualify for the special method are accounted for as part ofhedged long-term payables, and therefore, the market value of such interest rate swaps is includedin the market value of the corresponding long-term payables (Refer to (6) above.). Forward
exchange contracts that qualify for the appropriation method are accounted for as part of hedged
accounts receivable and accounts payable, excluding those associated with forecasted transactions,and therefore, the market value of such forward exchange contracts is included in the market valueof the corresponding accounts receivable and accounts payable (Refer to (2) and (4) above.)
Note 2: Unlisted stocks (amounting to 22,783 million yen on the consolidated balance sheet) are notincluded in “(3) Investment securities, Available-for-sale securities” because it is extremely
difficult to identify their market values as no quoted market price is available and it is impossible
to estimate their future cash flows.
5. Real Estate for Rent
Disclosure is omitted because the Group does not own real estate for the purpose of gaining rental
revenues or capital gains and the total amount of real estate for rent is immaterial.
6. Notes to Per Share Information(1) Net assets per share:

505.28 yen(2) Profit attributable to owners of parent per share:

41.01 yen

7. Other Notes
Not applicable
8. Figures shown in millions of yen have been rounded down to the nearest million.

16

Non-consolidated Statement of Changes in Net Assets(From April 1, 2016 to March 31, 2017)(Millions of yen)

Capitalstock

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

36,998

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

Total
shareholders’equity(7,962)

135,840

49,284

3,854

53,66557,519

-

(18)

18

-

-

0

(6,228)
11,904(6,228)
11,904-(6,228)
11,904(2,200)
0

-

4

0

-

(2,200)
0

4

4

-

-

-

-

0

0

(18)

5,698

5,679

(2,199)3,480

36,99849,284049,284

3,835

59,36363,199(10,161)

139,320

17

(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
Reversal of reserve foradvanced depreciationof noncurrent assets

Total net assets

19,910155,750––Dividends from surplus–(6,228)Net income–

11,904Purchase of treasury stock–(2,200)

Disposal of treasury stock

–

0

(4)

(4)

-

3,674

2

3,676

3,676

3,674

(2)

3,672

7,152

13,317

10,26523,582

162,903

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

9,643

10,267(Note) Amounts are rounded down to the nearest million yen.

18

Notes to Non-consolidated Financial Statements
1. Significant Accounting Policies(1) Standards and methods for valuation of assets
1) Securities
Stocks of subsidiaries and affiliates
Stated at cost using the moving-average method
Available-for-sale securities
Securities with market value
Stated at market value based on the average quoted market price for a period of one month
before the balance sheet date(Valuation difference is reported as a separate component of net assets. The cost of sales iscalculated using the moving-average method.)
Securities without market value
Stated at cost using the moving-average method
2) Inventories
Stated at cost using the weighted-average method(Balance sheet amounts are calculated by writing down their net realizable value when there isevidence of deterioration in value.)(2) Depreciation method for noncurrent assets
Property, plant and equipment
The straight-line method is applied.
Intangible assets
The straight-line method is applied. However, software for internal use is amortized by thestraight-line method over the estimated internal useful life (five years).
Lease assets
Finance leases that do not transfer the ownership of the lease assets to the lessee
The straight-line method with no residual value is applied, regarding the lease term as the usefullife.
Finance leases commencing on or before March 31, 2008 that do not transfer the ownership of thelease assets to the lessee are accounted for in the same manner as ordinary rental transactions.
(3) Standards of accounting for allowances and provisions
1) Allowance for doubtful accounts
Allowance for doubtful accounts is provided to cover possible losses on notes and accounts
receivable. The Company records an estimated irrecoverable amount based on the historical
write-off rate for ordinary receivables and based on assessment of recoverability of individual
receivables for specific doubtful accounts.

192) Provision for bonuses
The Company provides reserve for payment of bonuses to employees based on the amount of
estimated employees’ bonuses at the fiscal year-end.
3) Provision for retirement benefits
The Company provides reserve for employees’ retirement benefits based on the projected benefit
obligation and plan assets at fair value at the fiscal year-end.
In calculating retirement benefit obligations, the benefit formula basis is adopted for attributing
expected benefits to periods.
Prior service cost is recorded by the straight-line method over certain periods (10 years) within the
average remaining service period of employees expected to receive benefits, commencing with thefollowing fiscal year.
Actuarial gains and losses are recorded by the straight-line method over certain periods (10 years)
within the average remaining service period of employees expected to receive benefits,commencing with the following fiscal year.
(4) Changes in accounting policies(Additional information)
The Company applied the Implementation Guidance on Recoverability of Deferred Tax Assets(ASBJ Guidance No. 26, March 28, 2016) from the fiscal year under review.
(5) Consumption taxes
Consumption taxes are recorded using the tax-excluded method.

2. Notes to the Non-consolidated Balance Sheet(1) Assets pledged as collateral:

None(2) Accumulated depreciation of property, plant and equipment:

331,617 million yen(3) Guarantee obligations
Guarantee for loans from financial institutions:

3,909 million yen(4) Monetary receivables from and monetary obligations to subsidiaries and affiliates
Short-term monetary receivables:

26,525 million yen

Short-term monetary obligations:27,601 million yen

Long-term monetary receivables:

2,280 million yen

3. Notes to the Non-consolidated Statement of Income
Amount of transactions with subsidiaries and affiliates
Sales to subsidiaries and affiliates:

71,278 million yen

Purchase from subsidiaries and affiliates:

27,149 million yen

Transactions with subsidiaries and affiliates other than business transactions
6,887 million yen

20

4. Notes to the Non-consolidated Statement of Changes in Net Assets
Type and number of shares of treasury stock

Common stock

Number of shares at
Increase during the Decrease during the Number of shares atthe beginning of the
year
year
the end of the yearyear
18,615,888
4,859,552
1,828
23,473,612

Note: The increase in the number of shares of common stock of treasury stock was due to the purchase of
4,831,000 shares of treasury stock and the purchase of shares constituting less than one unit inaccordance with the provisions of Article 165, Paragraph 2 of the Companies Act and of the Articles
of Incorporation. The decrease in the number of shares of common stock of treasury stock was dueto the sale of shares constituting less than one unit.

5. Notes to Deferred Tax Accounting
Breakdown of deferred tax assets and deferred tax liabilities by major cause(Millions of yen)
As of March 31, 2017
Deferred tax assets
Allowance for doubtful accounts
Provision for retirement benefits
Provision for bonuses
Loss on liquidation of business
Loss on valuation of investment securities
Loss on valuation of golf club membership
Impairment loss
Enterprise tax payable
Other
Subtotal of deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities
Valuation difference on available-for-sale securities
Reserve for advanced depreciation of non-current assets
Total deferred tax liabilities
Net deferred tax assets (liabilities)

21

2
504
470
101
195
368
849
201
552
3,242
(1,616)
1,626
5,587
1,688
7,275
(5,649)

6. Notes concerning Related Party Transactions
Subsidiaries
Type

Subsidiary

Company nameLocation

Capital or
equity1,200
Akros Trading Co., Minato-ku,
million
Ltd.
Tokyo
yen

Business

Sales of inorganic/organic industrial
products, industrial
resins, etc.

Relationship
Concurrent
Transactions
Business
positions, etc.
relationshipof directors
1 director
with a
68.5% directly concurrent The Company sells Sales of theowned by the position at the synthetic rubber
Company’s
Company
Company products etc. to it.
products
2 directors onloan
Ownership ofvoting rights

Transaction
amount(Millions ofyen)Account

Balance at theend of the year
(Millions ofyen)

23,953

Accounts
receivable-trade

7,485

1,417

-

-

13,520Accounts
receivable-trade

4,556

-

Deposits
received

12,100Accounts
receivable-trade5,280

Accounts
payable2,276

Deposits
received

5,500

Manufacturing andsales of acetylene 100% indirectlyTechnology
2 directors on
Singapore
black andowned by thelicensing by the Loan guarantee
loanpolystyrene resin,Company
Company
etc.
Sales of raw
materials for
The Company sells
industrial
synthetic resin
100
100% directly
Sales of the
Bunkyo-ku,
applications, civil
4 directors on products, civil
Subsidiary YK Inoas Co., Ltd.
millionowned by theCompany’sTokyoengineering andloan
engineering andyenCompany
products
construction
construction
materials, andmaterials, etc. to it.
interior materials
2 directors
with aManufacturing and
The Company
1,000
100% directly
concurrent
DENKA SEIKEN Chuo-ku,
sales of vaccines andconducts joint
Subsidiary
millionowned by the position at theCo., Ltd.
Tokyo
clinical diagnostic
research andyenCompany
Company
reagents
development
1 director on
Denka Singapore
Subsidiary
Pte., Ltd.

69.41
millionUSdollarsloan

Affiliate

5,000
Manufacturing,
TOYO STYRENE Minato-ku,
million processing, and sales
Co., LtdTokyo
yen
of polystyrene resin

50% directly
owned by theCompany

The Company
Sales of the
supplies its
Company’s
products as raw
1 director on
products andmaterials andloanpurchase of raw
purchases certain
materials fromfinished products
the Company
from it.

11,932

6,118

Notes: 1. Transaction amounts do not include consumption taxes, etc. Balance at the end of the year
includes consumption taxes, etc.
2. Sales of the Company’s products, etc. and purchase of raw materials, etc. are determined in thesame manner as for terms of transactions with unrelated parties.
3. The Company provides loan guarantee to Denka Singapore Pte., Ltd. for part of its purchaseliabilities.

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

368.16 yen(2) Net income per share:

26.90 yen

8. Other Notes
Not applicable
9. Figures shown in millions of yen have been rounded down to the nearest million.

22