Corporate Governance Report
Last Update: June 23, 2016
Denka Company Limited
Shinsuke Yoshitaka, President & CEO
Contact: Administrative Section, Administrative Department +81-3-5290-5055
Securities Code: 4061
http://www.denka.co.jp
The corporate governance of Denka Company Limited (the “Company”) is described below.

I.

Basic Views on Corporate Governance, Capital Structure, Corporate Profile andOther Basic Information

1. Basic Views
To respond to the expectations and trust of many persons concerned with the Company, including
shareholders, customers, local communities, and employees, the Company strives to increase its corporate
value by strengthening its business base through expansion of its earnings power and business operations,while ensuring that it holds a stance to continue being a company that is able to gain the trust and sympathy ofsociety.
As it considers corporate governance to be the foundation for this, the Company works to invigorate its Boardof Directors, strengthen its audit system, optimize its management system, and enhance its compliancesystem.
Specifically, it has introduced an Executive Officer System to speed up its decision-making, and bydelegating powers and roles in the execution of business to the Executive Officers, clearly separates theexecution of business by Executive Officers and the overseeing and supervision of such execution by the
Directors. In addition, it has strengthened its corporate governance system by in principle abolishingexecutive roles for Directors (such as senior managing director and managing director). In this way, it hasestablished a system in which each Director oversees and supervises business execution from an equal
position. Also, to promote flexibility of monitoring, it appoints Directors for one year terms.
With regard to its outside officers system, the Company appoints Outside Directors as well as Outside Audit& Supervisory Board Members prescribed by the Companies Act. Personnel appointed as outside officers are
sufficiently independent and have extensive knowledge in their respective areas. In addition to carrying out
supervision of management from an external perspective, they have established places for regular exchangesof opinions with top management. This enables them to provide sufficient advice through exchanges outside
the Board of Directors meetings and enables the Company to monitor its management from an external
perspective.
In order to build a more robust management structure better suited to pursuing the goals set forth in the-1-Denka100 management plan and to strengthen the corporate governance system, thereby enhancing
management transparency and soundness, the Company received approval for a new structure including an
increase in the number of Outside Directors (from two to three) and a reduction in the number of Directors on
the Board (reduction by two), at the 156th Ordinary General Meeting of Shareholders held in June 2015.
This new structure is in light of increasing globalization of the management environment and emergence of
the information era. These changes will enable the Company to bolster its management structure possessing
both proactiveness and prevention.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code] Updated[Principle 3.1 Full Disclosure](v) Explanations with respect to the individual appointments and nominations of the senior management,
Directors and Audit & Supervisory Board Members candidates, the reasons for the appointment of outside
and internal officers are included in the Reference Documents for General Meetings of Shareholders.As toreasons for the appointment of new Executive Officers, the Company will consider to disclose the respective
career records on the Company’s website at the time the appointment is resolved by the Board of Directors,
starting from the fiscal year ending March 31, 2017.
[Supplementary Principle 4.2.1 Remuneration system for Management]
Although the Company currently has adopted a cash remuneration system linked to performance, it has ashare-based remuneration program etc. under consideration, with an aim of introduction of incentive
remuneration that promotes the management’s demonstration of sound entrepreneurship.

[Disclosure Based on the Principles of the Corporate Governance Code] Updated[Principle 1.4 Strategic Shareholdings]○ Policy concerning strategic shareholdings
The Company holds shares in cases where it judges that doing so is in accordance with the creation of stablebusiness relationships and will maintain and strengthen business alliances in line with growth strategies andcontribute to increased corporate value over the medium- to long-term.
○ Examination on strategic shareholdings at the Board of Directors
The Company reviews the shares annually at the Board of Directors meeting in compliance with the above
policies. The purpose of holding said shares are stated in the securities report. Going forward, the Company
will continue to review them annually.
○ Standards for exercise of voting rights as to strategic shareholdings
Regarding the exercising of voting rights in relation to shares held as strategic shareholdings, in principle, theCompany respects the business policies and strategies of the issuing company. After consideration of theissuing company’s management situation by the department in charge of the management of those shares, the-2-Company carefully examines proposals individually from the perspective of whether they will ultimately
contribute to increased shareholder value before making its decision for or against the proposals.
[Principle 1.7 Related Party Transactions]
The Company requires, in the Board of Directors Regulations, that the prior consent of the Board of Directors
must be obtained for any competing transactions and self-dealing matters by Directors and the results must bereported afterwards. In the case of continuing transactions, the results of competing transactions andself-dealing in the previous fiscal year are reported to the Board of Directors once a year, and prior approval
for the current fiscal year is sought.
Also, related party transactions are determined in the same way as general transaction terms, and are disclosed
in the notes to financial statements and securities reports in accordance with laws and regulations.
[Principle 3.1 Full Disclosure](i) Company objectives (e.g. business principles), business strategies and management plans(Corporate Philosophy)
Upon the Company’s centenary in 2015, we strove to further promote its corporate culture that encourages
taking up challenges within the Group. We also worked to show, internally and externally, our will to rebuild
a new Denka by changing the Company’s name, updating the corporate logo, as well as establishing a new
slogan “Possibility of Chemistry.” and the Denka Principles.
In 2016, which marks the Company’s 101st anniversary, looking upon the next centennial, we renewed “TheDenka Value” corporate philosophy that serves as the basis for the Group’s corporate activities.
“The Denka Value” consists of the Denka Mission, which represents our uppermost mission statement, andthe Denka Principles, a set of precepts guiding actions taken by every Group employee.
“The Denka Value” (Corporate Philosophy)
・The Denka Mission
Taking on the challenge of expanding the possibilities of chemistry to create new value and contribute tosound social development.
Note:Based on the corporate slogan “Possibility of Chemistry.”
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-stylecraftsmanship-3-

(Management Plan)
In April 2013, the Company established three new growth strategies under the Denka100 management plan,with the target year set at the fiscal year ending March 31, 2018. It takes an aggressive business approach
involving specific initiatives to further enhance corporate and shareholder value in medium- to long-term.
Denka100 management plan
Three new growth strategies
1. Create the most optimal production system- Accelerate a shift to overseas production while reorganizing our business structure by seeking out alliancesand collaborating with other companies
2. Scrutinize every cost element- Thoroughly review all cost elements, including those associated with production processes, yield rates, rawmaterials and facility maintenance3. Focus management resources on new growth drivers and develop next-generation products- Focus our management resources on such growth fields as the environment, energy, infrastructure andhealthcare(ii) Basic views and guidelines on corporate governance based on each of the principles of the Code
Please refer to 1.1 “Basic Views” in this report.
(iii) Board policies and procedures in determining the remuneration of the senior management and Directors
The remuneration for Directors of the Company is linked to each Director’s roles and responsibilities, andwill be resolved by the Board of Directors within the total amount approved at General Meeting of
Shareholders, with a draft prepared by the President who is the Representative Director, and the Executive
Officers in charge.
The remuneration for Executive Officers of the Company is also linked to each Executive Officer’s roles andresponsibilities, and will be resolved by the Board of Directors, with a draft prepared by the President who is
the Representative Director, and the Executive Officers in charge.
The remuneration for Directors and Executive Officers is comprised of fixed monthly remuneration andperformance-linked remuneration. Regarding the performance-linked remuneration, the amount paid isdetermined based on consolidated operating income for each fiscal year.
In addition, in the event that such consolidated operating income does not meet a certain amount, or a serious
violation of compliance occurs, the performance-linked remuneration may not be paid or may be reduced.
(iv) Board policies and procedures in the appointment of the senior management and the nomination ofcandidates for Directors and Audit & Supervisory Board Members
The Company, in nominating candidates for Directors and Audit & Supervisory Board Members, selects
personnel who have abundant experience and great insight in their respective fields and also are expected to-4-

contribute to enhancing the Company’s corporate value. Those candidates are proposed by the President who
is the Representative Director, and deliberated and decided by the Board of Directors.
In appointing Executive Officers, candidates are proposed by the President who is the Representative Director
and the Board of Directors then deliberates on the candidates and decides in accordance with the appointment
criteria set out in the Executive Officers Regulations (1. Abundant business experience and familiarity withthe business of the Company; 2. Excellent management sense; 3. Superior guidance, leadership, vitality andplanning abilities; 4. Personality and insight suited to an Executive Officer; and 5. Good physical and mental
health).
[Supplementary Principle 4.1.1 Scope of Delegation to Management]
After review of the role of the Board of Directors, the Company clearly positioned the role of Board of
Directors as a body with decision-making function and supervisory function for management. The executionof business has been delegated to the respective Executive Officers, except for important business executions.
Matters to be resolved by the Board of Directors, including basic policies regarding corporate management
and other important matters relating to business execution, are clearly set forth in the Board of Directors
Regulations. In accordance with the Regulations, the Board of Directors oversees and supervises theexecution of business. In addition, the Board of Directors resolves on the assignment of duties and authorityof the Executive Officers responsible for business execution. As well as delegating business execution to
Executive Officers within that scope, the Board of Directors receives reports on the status of their executionof business. Furthermore, the Company has established a Management Committee comprised of Directors,
Audit & Supervisory Board Members and selected Executive Officers for the purpose of deliberating anddiscussing the most important managerial issues to streamline discussion on important managerial matters andaccelerate decision-making.
[Principle 4.8 Effective Use of Independent Outside Directors]
The Company believes that there should be at least two independent Outside Directors appointed, and at least
one third of the total number of Directors should be independent Outside Directors, in light of increasing
globalization in the business environment and emergence of the information era. Based on this policy, inorder to build a management structure possessing both proactive and preventive functions throughstrengthening the corporate governance system and enhancing management transparency and soundness, a
proposal for appointment of Directors that increases the number of Outside Directors by one (from two to
three) and decreases the number of internal Directors by two (from seven to five) was proposed at the 156th
Ordinary General Meeting of Shareholders held in June 2015, and was approved. As a result, currently, threeout of eight Directors of the Company are Outside Directors (37.5%).
All three Outside Directors have been designated as independent directors pursuant to the rules of the Tokyo
Stock Exchange and registered with the Exchange.

-5-

[Principle 4.9 Independence Standards and Qualification for Independent Outside Directors]
For both independent Outside Directors and independent Outside Audit & Supervisory Board Members, theBoard of Directors of the Company selects candidates for appointment as independent officers based on
judgment focused on substantiality, such as whether they can be expected to contribute to increasing theCompany’s corporate value. Details are specified as follows and are based on the externality requirements
prescribed in the Companies Act and the independence standards set by the Tokyo Stock Exchange.
○ Independence standards for Outside Officers
The independence standards for the Company’s Outside Directors and Outside Audit & Supervisory Board
Members are that they must be persons who do not fall under any of items (1) to (5) below.
(1) An operating officer(*1) of a main customer(*2), main supplier(*3) or main lender(*4) that is a main
business partner of the Company.
(2) A consultant, accountant, lawyer or the like who has received money or other property from the Company
exceeding a yearly amount of 10 million yen, other than officer’s remuneration, in the most recent fiscal year.
(3) In the event that the party receiving the property referred to in item (2) above is an organization, a person
belonging to an organization in which the amount paid by the Company to that organization in the most recent
fiscal year comprised 2% or more of that organization’s net sales or gross revenue.
(4) A person who fell under items (1) to (3) above within the period of the past year.
(5) A person who is the spouse or a relative within the second degree of kinship of a person listed below(excluding immaterial persons):
1. A person falling under items (1) to (4) above;
2. A person who is currently, or was within the period of the past year, an operating officer at the Company ora subsidiary of the Company; or
3. A person who is currently, or was within the period of the past year, a non-executive director of theCompany or a subsidiary of the Company (limited to cases of Outside Audit & Supervisory Board Members).
*1 Operating officer: an Executive Director, Operating Executive, Executive Officer, or other employee or the
like.
*2 Main customer: a customer that paid to the Company an amount that comprised 2% or more of theCompany’s net sales in the most recent fiscal year.

-6-

*3 Main supplier: a supplier to which the Company paid an amount that comprised 2% or more of that
supplier’s net sales in the most recent fiscal year.
*4 Main lender: a lender that, at the end of the most recent fiscal year, was essential to the Company’s
financing and is relied upon by the Company to the extent that there is no substitute.

[Supplementary Principle 4.11.1 View on Diversity and Size of the Board of Directors]
The Board of Directors of the Company is currently comprised of five internal Directors and three Outside
Directors, in total eight Directors. Considering the transparency and soundness of management, the Company
believes that it is appropriate to have no more than ten Directors. Furthermore, regarding the Board of
Directors as a whole, the Company believes that it is important to have a good balance of personnel withdiverse knowledge, experience and skills by appointing internal Directors from persons who have sufficientexpert knowledge and business experience in the Company’s business and administrative divisions andappointing Outside Directors from persons with a high level of expertise and broad insight.
Going forward, in selecting Director candidates, the Company will give full consideration to the balance
between knowledge, experience and skills, as well as diversity, and the selection will also be based onwhether or not each candidate is expected to contribute to enhancing corporate value, before submitting therelated proposal to an Ordinary General Meeting of Shareholders every year.
[Supplementary Principle 4.11.2 Status of Concurrent Position of Officers held at Other Listed Companies byDirectors and Audit & Supervisory Board Members]
The status of concurrent positions of officers held at other listed companies by the Company’s Directors andAudit & Supervisory Board Members are stated in the Reference Documents and Business Reports for
General Meeting of Shareholders every year.
[Supplementary Principle 4.11.3 Analyzation and Evaluation of the Effectiveness of the Board of Directors](1) Method of Evaluation
The Company analyzed and evaluated the effectiveness of the Board of Directors by having individual
Directors and Audit & Supervisory Board Members to complete the “Self Evaluation Questionnaire,” which
covers items related to the effectiveness of the Board of Directors, such as scale, composition, operation, and20 other items, and discussing the questionnaire results at Board of Directors meetings.
(2) Summary of Evaluation Results and Future Efforts
After the evaluation, the Company came to the following conclusions: the scale and composition (the balanceand diversity of knowledge, experience and ability), as well as the frequency and timing of Board of Directors
meetings are appropriate; discussions at Board of Directors meetings are invigorated by active opinions of
Outside Directors and Outside Audit & Supervisory Board Members, with their deep insights in theirrespective fields; the systems for important decision-making and monitoring business executions are-7-

appropriately ensured.
Moreover, constructive opinions on the further increase of the Denka Group’s corporate value have surfaced.
Going forward, we will work to enhance the function of the Board of Directors through higher-leveled andmore in-depth discussions among all Directors and Audit & Supervisory Board Members in order to increase
corporate value.
[Supplementary Principle 4.14.2 Training policy for Directors and Audit & Supervisory Board Members]
The Company conducts tours of its offices and plants and training sessions about the Company’s business,particularly for newly-appointed Outside Directors and Outside Audit & Supervisory Board Members, toenable them to gain information about the Company. Also, all newly appointed Directors and Audit &Supervisory Board Members, including outside officers, are encouraged to participate in external seminars tolearn necessary legal and other knowledge for the purpose of increasing their understanding of the roles andresponsibilities required of them. In addition to providing and arranging these opportunities and assisting withthe costs, the Company has a policy to provide training in the same way to incumbent officers as necessary inorder to continually update their knowledge.
[Principle 5.1 Policy for Constructive Dialogue with Shareholders]
In order to promote constructive dialogue with shareholders and investors, the Company has formulated
management plans aimed at sustainable growth and increased corporate value over the medium- to long-term
and works to gain the understanding of shareholders and investors by setting up various opportunities andendeavoring to provide explanations.
(i) The Investor Relations Department and the Administrative Department are the points of contact for
responding to shareholders and investors, and actions are taken under the supervision of the Executive Officer
in charge.
(ii) Related departments actively cooperate in information sharing and other measures in order to provide
timely and appropriate disclosure of information.
(iii) Results briefings for share analysts and institutional investors, as well as business briefings and tours of
the Company’s plants are held as appropriate to promote fuller understanding of its business structures,
management plans and results by shareholders and investors. Also, yearly corporate briefings are held forindividual investors.
(iv) Opinions and matters of concern communicated during dialogue with shareholders and investors arereported as appropriate to the Executive Officers in charge and, if necessary, to the Board of Directors.
(v) The Company has established Regulations on Insider Information Management and Prevention of Insider-8-

Trading as measures for the management of insider information, and conducts appropriate information
management based on these regulations.

2. Capital Structure
Foreign Shareholding Ratio

More than 30%[Status of Major Shareholders] Updated
Name / Company Name

Number
Owned

Japan Trustee Services Bank, Ltd. (Trust
Account)
The Master Trust Bank of Japan, Ltd. (Trust
Account)
Trust & Custody Services Bank, Ltd. (Mizuho
Bank, Ltd. Retirement Benefit Trust Accountre-entrusted by Mizuho Trust & Banking Co.,Ltd.)
National Mutual Insurance Federation ofAgricultural Cooperatives
MITSUI LIFE INSURANCE COMPANY
LIMITED
STATE STREET BANK AND TRUSTCOMPANY 505001
Mitsui Sumitomo Insurance Company,
Limited
Trust & Custody Services Bank, Ltd.
(Securities Investment Trust Account)
MSCO CUSTOMER SECURITIESCBNY – GOVERNMENT OF NORWAY
Controlling Shareholder (except for Parent
Company)
Parent Company

ofSharesPercentage (%)

28,918,000

6.21

28,792,000

6.18

16,079,000

3.45

15,965,000

3.43

11,908,000

2.56

10,978,324

2.36

6,916,000

1.48

6,914,000

1.48

6,798,000
6,415,550

1.46
1.38

—
None

Supplementary Explanation Updated
Although a Report on Changes regarding Large-Scale Holdings which include four joint holder companies
was filed with the Director-General of the Kanto Finance Bureau on March 8, 2016 (the date on which
reporting obligation s accrue: March 2, 2016) by Sumitomo Mitsui Trust Bank, Limited, as the actual holding
status as of the end of the current fiscal year has not been confirmed, such holdings are not included in theabove Status of Major Shareholders. Total number of shares held by those three companies is 41,382,000(8.88%).

-9-

3. Corporate Attributes

Fiscal Year-End

Tokyo Stock ExchangeFirst Section
MarchType of Business

Chemicals

Listed Stock Market and Market Section

Number of Employees (consolidated) as of the
End of the Previous Fiscal YearSales (consolidated) as of the End of thePrevious Fiscal Year
Number of Consolidated Subsidiaries as of the
End of the Previous Fiscal Year

More than 1000
From ¥100 billion to less than ¥1 trillion
From 10 to less than 50

4. Policy on Measures to Protect Minority Shareholders in Conducting Transactions with Controlling
Shareholder—

5. Other Special Circumstances which may have Material Impact on Corporate Governance—

II. Business Management Organization and Other Corporate Governance Systems
regarding Decision-making, Execution of Business, and Oversight in Management
1. Organizational Composition and Operation
Organization Form

Company with Audit & Supervisory Board Members[Directors]
Maximum Number of Directors Stipulated in
Articles of Incorporation
Term of Office Stipulated inIncorporation

Articles of

10
1 yearChairperson of the Board

President

Number of Directors

8

Appointment of Outside Directors

Appointed

Number of Outside Directors

3

Number of Independent Directors

3- 10 -

Outside Directors’ Relationship with the Company (1) Updated
Relationship with the Company*

Name

Attribute

Yasuo Sato
Akio Yamamoto

From another company
From another company

Tatsutsugu Fujihara

From another company

*
*
*

a

b

c

d

e

f

g

h

i

j

k


△

Categories for “Relationship with the Company””○” when the director presently falls or has recently fallen under the category;“△” when the director fell under the category in the past“●” when a close relative of the director presently falls or has recently fallen under the category;“▲”when a close relative of the director fell under the category in the pasta. Operating officer of the Company or its subsidiaries
b. Non-executive director or operating officer of a parent company of the Company
c. Operating officer of a fellow subsidiary company of the Company
d. A party whose major client or supplier is the Company or an operating officer thereof
e. Major client or supplier of the listed company or an operating officer thereof
f. Consultant, accountant or legal professional who receives a large amount of monetary consideration orother property from the Company besides compensation as a Director/Audit & Supervisory Board
Memberg. Major shareholder of the Company (or an operating officer of the said major shareholder if theshareholder is a legal entity)
h. Operating officer of a client or supplier company of the Company (which does not correspond to any of d,e, or f) (the Director himself/herself only)
i. Operating officer of a company, between which and the Company outside officers are mutually appointed(the Director himself/herself only)
j. Operating officer of a company or organization that receives a donation from the Company (the Director
himself/herself only)
k. Others
Outside Directors’ Relationship with the Company (2) Updated
Name
Yasuo Sato

Designation as
Independent
DirectorSupplementary
Explanation of
the Relationship
Not applicable- 11 -

Reasons of Appointment
Mr. Yasuo Sato has gained abundant
experience and great insight as amanager through his involvement incorporate management for many years.
His career includes serving as theRepresentative Director of Air Liquide
Japan Ltd. He also has abundantinternational experience, including
serving as a vice president at global
enterprises. The Company has elected
him as an Outside Director andappointed him as an independent officer
in the expectation that he would utilize
his knowledge in providing suggestions
about the Company’s overseas businessexpansion strategy and management ingeneral.

Akio Yamamoto

Mr. Akio Yamamoto
served as an operating
officer (President andChief Executive Officer)
at Mitsui & Co. Plastics
Ltd. until June, 2014,
which is one of our main
business partners.
The Company engages
inproduct
sales
transactions with thesaid company, and thetransaction
amountaccounts for 6.1 % of
the Company’s total
sales.

- 12 -The Company deems that his
independence as an independent officer
is not questionable because 1) none of
the categories above (a through k)
applies to him; 2) the Company
considers that there is no risk thatconflict of interest will arise with othergeneral shareholders.
Mr. Akio Yamamoto has abundant
experience and great insight as amanager in Japan and overseas throughhis
involvementin
corporate
management for many years. His career
includes serving as a Managing Officer
at MITSUI & CO., LTD., and thePresident and Chief Executive Officer at
Mitsui & Co. Plastic Ltd. He also hasabundant international experience,
including serving as a vice president at
global enterprises. The Company has
elected him as an Outside Director andappointed him as an independent officer
in the expectation that he would utilize
his knowledge in providing suggestions
about the Company’s overseas businessexpansion strategy and management ingeneral.
Although the category “e” above applies
to him, the Company deems that his
independence as an independent officer
is not questionable because 1) he is nota current or a recent operating officer ofthe said company; 2) although theCompany’s sales to the said 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 theCompany to the said company forservices offered by its trading company
function and the amount of commission
paid is modest (less than 2% of the said
company’s net sales); 3) he satisfies
the Company’s “Standards ofIndependenceforOutside
Executives” 4)currently no materialinterest exists between the said
company and Mr. Akio Yamamoto, andthus, the Company considers that thesaid company has no special impact on
the Company’s decision-making by the
Board of Directors etc.; and 5) the
Company considers that there is no riskthat conflict of interest will arise withother general shareholders.

Tatsutsugu Fujihara

Mr. Tatsutsugu Fujihara
served as an operating
officer(Managing
Executive Officer) at
MizuhoCorporateBank(present
MizuhoBank,Ltd.),
until
March, 2007, which isone of our business
partners.
Although the Company
has debts from the saidbank, the ratio of debts
to the Company’s total
assets is approximately
30%, and the debt fromthe said bank accounts
for 10% or less of theCompany’s total debts.

Voluntary Establishment of Committee(s)Corresponding to Nomination Committee orRemuneration Committee

Not Established[Audit & Supervisory Board Members]
Establishment of Audit & Supervisory Board

Established- 13 -

Mr. Tatsutsugu Fujihara has worked atfinancial institutions for many years
and possesses advanced insights
regarding corporate finance, and toutilize these insights and receive
recommendations
towardtheCompany’s overall management. The
Company has elected him as an
Outside Director and appointed him as
an independent officer in the
expectation that he would utilize hisknowledge in providing suggestions
about the management ingeneral.
Although the category “h” above
applies to him, the Company deems
that his independence as anindependent officer is not questionablebecause 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 heretired from the said financial
institution (nine years have passed
since his retirement as of the date thisreport was submitted; 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 overallborrowings; and 4) he satisfies theCompany’s“StandardsofIndependence for Outside Executives”
and thus, the Company considers thatthe said financial institution has no
special impact on the Company’s
decision-making by the Board of
Directors, etc.

Maximum Number of Audit & Supervisory
5

Board Members Stipulated in Articles ofIncorporation

4

Number of Audit & Supervisory Board Members

Cooperation among Audit & Supervisory Board Members, Accounting Auditor and Internal Auditing
Organizations
Between the Audit & Supervisory Board Members and the Accounting Auditor, results of accounting audits
are reported and explained regularly from the Accounting Auditor to the Audit & Supervisory Board
Members, while they exchange opinions and information with each other as necessary, to improve theeffectiveness and efficiency of audit function.
Between the Audit & Supervisory Board Members and the Internal Auditing Department, audits of businessexecution by the Internal Auditing Department are performed by the Audit & Supervisory Board Members,
while they exchange opinions and information with each other as necessary, to improve the effectiveness andefficiency of audit function.
Appointment of Outside Audit & Supervisory

Appointed

Board Members
Number of Outside Audit & Supervisory Board

2

Members2

Number of Independent Auditors

Outside Audit & Supervisory Board Members’ Relationship with the Company (1)NameAttribute

Relationship with the Company*
a

b

c

d

e

f

g

h

i

j

K

l

m

Tsunehiro Sasanami Lawyer
Toshio Kinoshita
CPA* Categories for “Relationship with the Company”* ”○” when the director presently falls or has recently fallen under the category;“△” when the director fell under the category in the past
* “●” when a close relative of the director presently falls or has recently fallen under the category;“▲”when a close relative of the director fell under the category in the pasta. Operating officer of the Company or its subsidiaryb. Non-executive director or accounting advisor of the Company or its subsidiaries
c. Non-executive director or operating officer of a parent company of the Company
d. Audit & Supervisory Board Member of a parent company of the Company
e. Operating officer of a fellow subsidiary company of the Company
f. A party whose major client or supplier is the Company or an operating officer thereof
g. Major client or supplier of the Company or an operating officer thereofh. Consultant, accountant or legal professional who receives a large amount of monetary consideration orother property from the Company besides compensation as an Audit & Supervisory Board Member- 14 -

i. Major shareholder of the Company (or an operating officer of the said major shareholder if the shareholder
is a legal entity)
j. Operating officer of a client or supplier company of the Company (which does not correspond to any of f,g, or h) (the Audit & Supervisory Board Member himself/herself only)
k. Operating officer of a company, between which and the Company outside officers are mutually appointed(the Audit & Supervisory Board Member himself/herself only)
l. Operating officer of a company or organization that receives a donation from the Company (the Audit &Supervisory Board Member himself/herself only)
m. Others

Outside Audit & Supervisory Board Members’ Relationship with the Company (2)Tsunehiro Sasanami

Designation as
Independent
Auditor

Supplementary
Explanation of
the Relationship
Not applicable

Toshio KinoshitaNot applicable

Name[Independent Officers]
Number of Independent Directors/Auditors

5- 15 -

Reasons of Appointment
Mr. Tsunehiro Sasanami has longexperience as a lawyer and abundantlegal knowledge. The Company has
elected him as an Outside Audit &Supervisory Board Member andappointed him as an independent officer
in the expectation that he would utilize
his knowledge for the benefit of theCompany’s auditing system.
The Company deems that his
independence as an independent officer
is not questionable because 1) none of
the categories above (a through m)
applies to him; 2) the Company
considers that there is no risk thatconflict of interest will arise with othergeneral shareholders.
Mr. Toshio Kinoshita has experienceand abundant accounting knowledge
gained as a certified public accountant
who practiced in Japan and the U.S. formany years and is well versed ininternational accounting. The Company
has elected him as an Outside Audit &Supervisory Board Member andappointed him as an independent officer
in the expectation that he would utilize
his knowledge for the benefit of theCompany’s
auditing
systemin
preparation for the Company’s overseas
business expansion.
The Company deems that his
independence as an independent officer
is not questionable because 1) none of
the categories above (a through m)
applies to him; 2) the Company
considers that there is no risk thatconflict of interest will arise with othergeneral shareholders.

Matters relating to Independent Directors/Auditors
The Company has appointed all outside officers who are eligible for independent directors/auditors (three
Outside Directors and two Outside Audit & Supervisory Board Members) as independent directors/auditors.
[Incentives]
Incentive Policies for Directors

Other

Supplementary Explanation
The Company has adopted a directors’ bonus program to provide incentives to Directors.
Recipients of Stock Options
Supplementary Explanation—[Director Remuneration]
Disclosure of Individual Directors’ Remuneration

No Individual Disclosure

Supplementary Explanation Updated
Remuneration for Directors of the Company is disclosed in the Business Report and Securities Report[Remuneration for and Other Payments to Directors and Audit & Supervisory Board Members (for the fiscal
year ended March 31, 2016)]
296 million yen for eleven Directors (including 33 million yen for four Outside Directors)
80 million yen for seven Audit & Supervisory Board Members (including 24 million yen for three Outside
Audit& Supervisory Board Members)
Total 376 million yen for 18 officers (including 57 million yen for seven outside officers)(Notes)1. The amount paid to Directors does not include portions of their salaries as employees in case they
concurrently serve as employees.
2. The maximum amount of remuneration for Directors is 540 million yen per year (of which the maximum
amount of remuneration for Outside Directors is 50 million yen, excluding the portions of their salaries as
employees) as resolved at the 156th Ordinary General Meeting of Shareholders held on June 19, 2015.
3. The maximum amount of remuneration for Audit & Supervisory Board Members is 13 million yen permonth as resolved at the 147th Ordinary General Meeting of Shareholders held on June 29, 2006.
4. The number of Directors and Audit & Supervisory Board Members indicated is the number of
Directors as of the end of the fiscal year ended March 31, 2016 that was eight (including three
Outside Directors), and the number of Audit & Supervisory Board Members that was four

- 16 -

(including two Outside Audit & Supervisory Board Members) and the three Directors(including one Outside Director) and three Audit & Supervisory Board Members (including
one Outside Audit & Supervisory Board Members) who retired at the 156th Ordinary
General Meeting of Shareholders held on June 19, 2015.
5. In addition, remuneration and other payments totaling 10 million yen were paid to one outside officer by a
subsidiary of the Company.
Policy on Determining Remuneration Amounts
and Calculation Methods

Established

Disclosure of Policy on Determining Remuneration Amounts and Calculation Methods
The amount of remuneration and other payments to Directors and Audit & Supervisory Board Members isdetermined within the amount approved at the General Meeting of Shareholders (the maximum amountpayable to Directors is 540 million yen per year, and 13 million yen per month to Audit & Supervisory Board
Members). In order to further clearly separate business execution from supervisory function, remuneration for
Directors is divided into portions, which are remuneration paid for supervisory function for businessexecution and remuneration paid for business execution. The former applies to all Directors, and the latter
applies to Directors who concurrently serve as Executive Officers.

[Supporting System for Outside Directors and/or Outside Audit & Supervisory Board Members]
The Audit & Supervisory Board Members Department with one dedicated staff member has been established
as an assisting body of the Audit & Supervisory Board Members, including Outside Audit & Supervisory
Board Members.
And then, to allow sufficient time for examination so that vigorous debate can take place on the day of themeeting, materials for Board of Directors meetings are distributed in advance. This includes ensuring thatmaterials relating to agenda items to be resolved are distributed to Directors and Audit & Supervisory Board
Members, including Outside Directors and Audit & Supervisory Board Members, in advanceIn addition, if there are specific projects that required adequate explanation, the Company explains to Outside
Officers in advance.

2.Matters on Functions of Business Execution, Auditing, Oversight, Nomination and Remuneration
Decisions (Overview of Current Corporate Governance System)
The Company’s current system of governance structure that involves the execution of business and methodsof auditing and supervision is formed in a system where the Board of Directors, the Audit & Supervisory
Board and organizations conducting internal auditing and internal control, such as the Internal Auditing
Department and the Legal Department, collaborate, upon election of multiple independent Outside Directors.
The roles of each function in supervision, business execution and auditing in the system are as follows.
- 17 -

1. Supervising function (Directors, Outside Directors, and the Board of Directors)
As of the date this report was submitted, eight Directors (including three Outside Directors) are appointed.
To strengthen corporate governance, executive roles for Directors (such as senior managing directors or
managing directors) have been abolished in principle, focusing on carrying out the overseeing and supervisingof the execution of business from an equal position.
All three Outside Directors are appointed as independent directors, and elected with expectation of further
enhancing the supervising function at the Board of Directors through their opinions regarding overallmanagement that is based on their expertise and external viewpoint.
In addition, pursuant to Article 427, Paragraph 1 of the Companies Act, the Company has entered into liability
limitation agreements with the Outside Directors that limit liability of damages in the event that he/she failed
to perform his/her duties to the higher of the amount that is set forth in advance over 5 million yen or theamount specified by laws and regulations.
The Board of Directors meetings are held once a month, making important decisions related to businessexecution, and supervising the business execution of Directors and Executive Officers, in accordance withlaws and regulations, the Articles of Incorporation, and the Board of Directors Regulations.
2. Business execution function (Executive Officer System, committees, deliberative councils, and others)
To strengthen corporate governance, the powers and roles in the execution of business which were formerly
held by Directors were transferred to Executive Officers. With a purpose of a distinct separation of businessexecution from the overseeing and supervising function of such execution, the Company has adopted the
Executive Officer System.
As of the date this report was submitted, 18 Executive Officers (including four Executive Officers
concurrently serving as Directors) were elected, reporting the status of the business execution at the Board of
Directors meetings and being overseen and supervised by Directors.
The Company established the Management Committee comprised of Directors, Audit & Supervisory Board
Members, and selected Executive Officers, to streamline and accelerate deliberation on important managerial
matters. Concerning individual important matters, such as budget formulation and capital investment, theCompany set up deliberative councils or special committees by function, where professional and efficient
discussion is held.
3. Auditing function (Audit & Supervisory Board Members, Outside Audit & Supervisory Board Members,
Audit & Supervisory Board, Internal Auditing Department, and Accounting Audits)
As of the date this report was submitted, four Audit & Supervisory Board Members (including two Outside
Audit & Supervisory Board Members) are appointed.
Audit & Supervisory Board Members, in accordance with the audit policy set forth by the Audit &Supervisory Board, audit the execution of business by Directors and Executive Officers, through attending theBoard of the Directors and other important meetings, hearing reports from Directors and Executive Officers,
and reviewing important documents.

- 18 -

Both of the two Outside Audit & Supervisory Board Members are appointed as independent officers, andelected with the expectation that their professional and external viewpoint will be utilized in the Company’s
audit system.
In addition, pursuant to Article 427, Paragraph 1 of the Companies Act, the Company has entered into liability
limitation agreements with the Outside Audit & Supervisory Board Members, that limit liability of damages
in the event that he/she failed to perform his/her duties to the higher of the amount that is set forth in advanceover 5 million yen or the amount specified by laws and regulations.
The Audit & Supervisory Board meetings are held once a month, where each member reports on the results ofaudits performed, and discussions are held. Furthermore, divisional report meetings are held whenevernecessary, in order to hear the status of business execution.
The Audit & Supervisory Board Members Department with one dedicated staff member has been established
as an assisting body of the Audit & Supervisory Board and Audit & Supervisory Board Members.
With regard to internal audits, the Company has established the Internal Auditing Department with three staff
members as a dedicated department that conducts comprehensive internal auditing.
As to accounting audits, the Company has appointed Ernst & Young ShinNihon LLC as its Accounting
Auditor (appointed on June 28, 2007), and has received audits by the accounting corporation. The certified
public accountants who engage in the accounting audits for the Company and the respective number ofcontinuous years they conducted audit are as follows. In addition, there are around ten assistants, including
certified public accountants, engaging in the accounting audits for the Company.
Designated Limited Liability Partner: Certified Public Accountant

Shunji Momoi (number of continuous

years he conducted audit: 3 years)
Designated Limited Liability Partner: Certified Public Accountant

Masahiko Minai (number of continuous

years he conducted audit: 7 years)
Designated Limited Liability Partner: Certified Public Accountant
continuous years he conducted audit: 1 years)

Honda Shigeyuki (number of

3. Reasons for Adoption of Current Corporate Governance System
The Company’s current system of governance structure that involves the methods of execution of businessand auditing and supervision is described in 2. above.
In this system, the roles of each function in supervision, business execution, and auditing are defined in each
item of 2. above. The Company believes that such system is optimal for said roles to be fulfilled, and suitable
to secure the confidence of shareholders, investors, etc.

- 19 -

III.

Implementation of Measures for Shareholders and Other Stakeholders

1. Measures to Vitalize the General Meetings of Shareholders and Smooth Exercise of Voting Rights
Early Notification of General
Meeting of Shareholders
Scheduling General Meetingsof Shareholders Avoiding thePeak Day
Allowing Electronic Exerciseof Voting Rights
Participation in
Voting Platform

Electronic

Providing Convocation Noticein English

Other

Supplementary Explanations
The Company sends out the notice by around three weeks before the date of
the Ordinary General Meeting of Shareholders.
The Company pays attention to hold Ordinary General Meetings ofShareholders early and therefore the date of the meeting falls on the dateother than the peak day.
Starting with the Ordinary General Meeting of Shareholders for the fiscal
year ended March 31, 2007, the Company has adopted a method of
exercising voting rights via the internet, etc. using computers and mobile
phones.
Starting with the Ordinary General Meeting of Shareholders for the fiscal
year ended March 31, 2007, the Company has adopted the Electronic Voting
Platform for institutional investors (TSE Platform) operated by ICJ, Inc.
Starting with the Ordinary General Meeting of Shareholders for the fiscal
year ended March 31, 2014, the Company has prepared and provided thenotice of convocation in English (full text, including website disclosure
items).
Starting with the Ordinary General Meeting of Shareholders for the fiscal
year ended March 31, 2015, the notice is disclosed before being sent out in
mail, on Japan Exchange Group’s website (under the Listed Companiespage), on Arrow Force, a website operated by ICJ, Inc. for institutional
investors to browse notices of convocation, and on the Company’s website.

2. IR Activities
Explanation by
Supplementary Explanations

the Company’s
Representative

Regular Investor Briefings forAnalysts and Institutional
Investors

Posting of IR Materials on
WebsiteEstablishment of Department
and/or Manager in Charge ofIR

Regular briefings are held semi-annually. The briefing
results are distributed later on the Company’s website.

Yes

IR materials posted on the website are as follows.
Notices of convocation, reports (former shareholder
newsletters), securities reports, summaries of
consolidated financial statements (“kessan tanshin”),
summaries of consolidated financial results, quarterly
reports, and reference materials for results briefings.
The Company has established the Investor Relations
Department.

3. Measures to Ensure Due Respect for Stakeholders
Stipulation of Internal Rules
for Respecting the Position of
Stakeholders

Supplementary Explanations
The Denka Group Ethics Policy provides the policy to pay due respect to thestakeholders.

- 20 -

In order to engage more actively in CSR activities, the Company has
established the CSR & Corporate Communications Department and issues a
CSR Report once a year, which is posted on the Company’s website.
ImplementationofEnvironmental Activities, CSR
Activities etc.

With regard to the Great East Japan Earthquake which occurred in March
2011, the Company established a program to support volunteers for thedisaster affected area in July 2011, and has continuously been implementing
the volunteer activities of its employees at the disaster affected area until
present.

IV. Matters Related to the Internal Control System
1. Basic Views on Internal Control System and the Progress of System Development○ Systems to Ensure the Appropriateness of Operations
1. Systems to ensure that Directors’ and employees’ execution of duties complies with laws and regulations
and the Articles of Incorporation
The Board of Directors of the Company performs important decision-making concerning business executionin 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 andoversee employees’ execution of duties at divisions for which they are in charge.
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 andother important meetings, receiving briefings from Directors, and reviewing important documents.
The Company establishes the Denka Group Ethics Policy as a set of action guidelines for all the officers andemployees 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, the Company
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 and regulations andaudit compliance statuses according to functions and report to the officers in charge, as necessary.
The Internal Auditing Department also performs assessment of statuses of design and operation of internal
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 officer in charge.
The Company establishes the Compliance Hotline System to supplement internal audits by the departments- 21 -

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 the Board of
Directors Regulations, job descriptions, and other internal rules and regulations, and stores and manages suchinformation 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 to incidents
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, therelevant 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 oversight by separating
them.
Apart from the Board of Directors as the decision-making body, the Company establishes the Management
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, andemployees to enhance efficiency of execution of duties.
5. Systems to ensure the appropriateness of operations of the GroupRegarding management of subsidiaries, the Company specifies organizations responsible for each subsidiary.
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 and independence of eachaffiliated 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.
(1) Systems for reporting of matters relating to execution of duties by subsidiaries’ directors etc. to the parent
company- 22 -

The Company dispatches directors, etc. to subsidiaries from the organization that is responsible for thesubsidiaries and information about important matters for the subsidiaries is exchanged and discussed atmeetings of the Company’s Board of Directors, etc.
Regarding execution of business, taking into account the degree of impact on the Group as a whole,subsidiaries report matters of greater importance in advance to the parent company, that is the Company, via
their supervisory organizations, in accordance with the Job Descriptions for Management of AffiliatedCompanies.
(2) Subsidiaries’ rules and other systems for management of risk of loss
The Company responds to occurrence of risks 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 the subsidiary provide advice
and guidance through discussion with specific organizations responsible for each such item.
(3) 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 thesubsidiaries to facilitate information sharing between the Company and subsidiaries and to execute businesssystematically and efficiently by the Group as a whole.
Depending on the degree of importance of subsidiaries, the Company has subsidiaries introduce the sharedaccounting system and provides resources of administrative organizations to enhance efficiency of executionof business of subsidiaries.
(4) Systems to ensure that execution of duties by subsidiaries’ directors, etc. and employees complies withlaws and regulations and the Articles of Incorporation
The Company establishes the Denka Group Ethics Policy applicable to the Group, including subsidiaries, andencourages all the officers and employees of subsidiaries to ensure compliance with laws and regulations. At
the same time, the Company manages subsidiaries in accordance with the Job Descriptions for Managementof Affiliated Companies.
The Company’s Internal Auditing Department is principally responsible for internal audits of subsidiaries andconducts internal auditing, in a timely manner, receiving support from the Company’s Legal Department, as
necessary.
The Company establishes the Compliance Hotline System for early detection and correction of non-compliant
conduct at subsidiaries.
6. Systems concerning employees who provide assistance to Audit &Supervisory Board Members, mattersconcerning securing effectiveness of instructions to such employees and matters concerning independence ofsuch employees from Directors- 23 -

The Company sets up the Audit & Supervisory Board Members Department as an organization that provides
assistance to the Audit & Supervisory Board and to the Audit & Supervisory Board Members and assigns atleast 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.
7. Systems concerning reporting to Audit & Supervisory Board Members by the Company’s Directors andemployees 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 and subsidiaries
periodically to Audit & Supervisory Board Members.
The Company establishes the Compliance Hotline 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 Compliance Hotline. If the Audit &Supervisory Board Members Department, etc. receives a report, the content of the report is reported 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 Compliance Hotline 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, the expenses and liabilities
relevant to the claim will be paid without delay, unless it is deemed that they are unnecessary for execution ofduties of the said Audit & Supervisory Board Member.
The Internal Auditing Department and other internal auditing organizations collaborate with Audit &Supervisory Board Members and cooperate with their auditing so that both internal auditing organizations andAudit & Supervisory Board Members can perform their duties efficiently.

- 24 -

○ 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, the Company
continued to implement awareness activities, including training, during the fiscal year under review.
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 with society, and it
was distributed to each employee.
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-stylecraftsmanship2. 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 underreview. 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 portion 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 business execution of Directors, they also visited various
business sites including those of Group companies, and reported 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 the Company, theRisk Management Guidelines were defined, containing categories of specific types of risk that may occur, anda controlling division and emergency contact structure are maintained. Meetings of the Risk Management
Committee as defined by the above guidelines and various other meetings related to risks are held periodicallyand 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 theCompany 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,- 25 -

working together to conduct operations that are mutually efficient.

2. Basic Views on Eliminating Anti-Social Forces
The Denka Group Ethics Policy, established in December 2002, states that all officers and employees of theCompany and its Group companies comply with laws and regulations in Japan and overseas, as well asinternal regulations, and that they do not act against social rules and ethics. With regard to antisocial forces, italso stipulates that they take a resolute attitude against such forces and do not provide any payoff. This is theCompany’s basic approach to eliminate antisocial forces.
Based on this basic approach, the Company has developed an internal structure aiming at elimination ofantisocial forces by appointing the Administrative Department as a responsible department for dealing withsuch forces. The Company also conducts information exchange and consultations with external experts
including the police and lawyers concerning information related to antisocial forces as well as holds internalseminars for all officers and employees.

V. Other
1. Adoption of Anti-Takeover Measures
Adoption of Anti-Takeover Measures

Not Adopted

Supplementary Explanation Updated
Since its establishment in 1915, applying technologies developed through the years, the Company has grown
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 pharmaceuticalproducts.
Reflecting this history, many of the Company’s products involve extremely long 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 medium- tolong-term perspective, and the cultivation of relationships of trust with business partners and local
communities in the long-term.
As the onward march of globalization rapidly transforms the business environment and the information era
gains traction, we recognize the effectiveness of M&A and business alliances as means of pursuing corporate
growth strategies.
The Company’s Board of Directors considers that a “person that controls the Company’s financial andbusiness 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 and the common
interests of its shareholders from a medium- to long-term perspective.
In order to realize the Basic Policies regarding the Control of the Company outlined above, the Company ispromoting specific initiatives as described below.
- 26 -

1. Promotion of Denka100 management plan to achieve sustainable growth and enhancement of corporate
value- Promote the “three new growth strategies”—“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 preventive and proactive purposes- In order to build a more robust management structure for achieving the Denka100 management plan and tostrengthen corporate governance and enhance management transparency and soundness, the Company
increases the number of Outside Directors (from two to three) and reduces the number of Directors on the
Board (reduction by two).
Coinciding with the Company’s centenary in 2015, to express our determination to achieve the Denka100
management plan through a concerted effort of all employees, we renewed our corporate logo, formulated a
Corporate Slogan and Denka Principles for employees, and changed the Company’s trade name on October 1,
2015.

2. Other Matters Concerning Corporate Governance System
The Company’s internal corporate structure of Corporate Governance System including Outline of Internal
Control System is shown in Attachment 1.
[Outline of Timely Disclosure System]
In order to maintain timely and appropriate disclosure of corporate information to investors, the Company has
established a system as follows based on the Financial Instruments and Exchange Act and Regulations on
Insider Information Management and Prevention of Insider Trading, which are the Company’s internal
regulations.
1. Decisions by the Company and Financial Results Information
Gathering information on decisions by the Company and management of internal information are handled by
the respective General Managers of Administrative Department, Accounting & Finance Department, Investor
Relations Department, and CSR & Corporate Communications Department. Determination on the materiality
and on whether or not the information is required to be timely disclosed is made among Corporate Planning
Department, Legal Department, Investor Relations Department, CSR & Corporate Communications- 27 -

Department, and the division in charge of the matter, centered on Administrative Department and the
Accounting & Finance Department. The results are reported to the Director and President, and the person
responsible for information handling discloses the decisions without delay after approval of the Board of
Directors.
With regard to financial results information, they are reported to the Director and President from the
Accounting & Finance Department, and the person responsible for information handling discloses the relevant
information without delay after approval of the Board of Directors.
2. Facts which occurred for the Company
Concerning facts which occurred for the Company, related information is gathered promptly after theoccurrence from the division in charge where the facts occurred, to Departments centered on Administrative
Department, Accounting & Finance Department, Investor Relations Department, and CSR & Corporate
Communications Department. If necessary, same as the aforementioned decisions by the Company, theinformation is discussed among Corporate Planning Department, Legal Department, Investor Relations
Department, CSR & Corporate Communications Department, and the division in charge. The results arereported to the Director and President, and the person responsible for information handling discloses the facts
without delay.
The Company’s internal corporate structure of Timely Disclosure System is shown in Attachment 2.

- 28 -