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

NOTICE OF CONVOCATION OF
THE 158TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
Date and Time:Thursday, June 22, 2017 at 10:00 a.m.

Place:

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

Proposals to be resolved:
Proposal No. 1:

Appropriation of Surplus

Proposal No. 2:

Consolidation of Shares

Proposal No. 3:

Election of Eight (8) Directors

Proposal No. 4:

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

Proposal No. 5:

Determination of amount and details of stock compensation, etc., for Directors

Proposal No. 6:

Revision of the Amount of Remuneration to Directors

Please exercise your voting rights in writing or via the Internet by
5:00 p.m. on Wednesday, June 21, 2017.

1

Message from the Management
To Our Shareholders
Based on the new management model, we are compiling the successor to the Denka100 management
plan for the next stage, moving toward realization of “The Denka Value” corporate philosophy.
Enclosed please find the Notice of Convocation of the 158th Ordinary General Meeting of Shareholders.
We would like to take this opportunity to express our gratitude to you for your continued support of Denka
and make some observations concerning the Company’s results and current initiatives.
During the fiscal year ended March 31, 2017 (fiscal 2016), the Japanese economy showed moderate
recovery, with signs of a rebound in personal spending and capital investment as exports and production bothpicked up. Likewise, the global economy continued to show moderate recovery momentum overall, despite
deceleration in the Chinese economy in the first half and signs of weakness in some emerging countries. In thechemical sector, corporate earnings generally held up despite the effect of the high yen and raw material prices
beginning to rise again in the second half.
In these economic circumstances, the Denka Group strove to expand its businesses and secure profitability
by working to increase sales in Japan and overseas and cutting costs. As a result, consolidated net sales forfiscal 2016 increased in volume terms, but fell in value terms year on year due to a net reduction amid thehigh yen and revisions of selling prices for petrochemical products in response to falling raw material prices in
the first half. While the Company posted its highest-ever earnings in the previous fiscal year, performance inthe year under review fell back due to the high yen, biennial maintenance of styrene monomer facilities, andincreases in costs for the acceleration of overseas development and research and development. This brought
down operating income, ordinary income, and net profit attributable to owners of the parent.
On the occasion of the year 2015, the 100th anniversary of our founding, we changed our name to Denka
Co., Ltd. In 2016, we compiled “The Denka Value” corporate philosophy, and set for ourselves the Denka
Mission of “taking on the challenge of expanding the possibilities of chemistry to create new value andcontribute to sound social development.” This has enabled us to set a clear course for the next 100 years andbuild up a solid track record from implementation of policies in the Denka100 management plan to date,including optimization of production systems, an overall scrutiny of costs, a shift to growth fields in thebusiness portfolio, improvement of working conditions and promotion of diversity.
As part of the Denka100 plan initiatives, we made changes two years ago to strengthen the corporate
governance model, with measures including a shift to a system of 3 Outside Directors and a reduction in thenumber of directors, by 2, in moves to further raise standards of management transparency and soundness.
However, in light of recent business conditions and changes in the global situation, an urgent need has
arisen to create a resilient corporate structure enabling the Company to achieve sustainable growth without
being influenced by changes in the external environment.
Against this background, in April 2017, we decided to switch to a chairman and president-based businessexecution system, to enable us to appropriately and rapidly address the expansion and globalization ofbusiness domains and to develop our corporate governance mechanisms. The current fiscal year is the final
fiscal year of the current management plan Denka100. We are currently formulating “Denka Value-up” a new
management plan that will follow the ongoing Denka100 management plan. Fundamental concepts of the“Denka Value-up” plan have been approved by the Board of Directors and publicized externally. For details,
please see pages 31 to 33 of the Notice of Convocation (Issues to be addressed).
We plan to officially launch the “Denka Value-up” plan, in autumn, including a recap of Denka100.
The Denka Group will continue to take measures to realize the corporate philosophy “The Denka Value”
in a spirit of unity. In these endeavors, we request your understanding and look forward to your continued
support.
Shinsuke Yoshitaka
Representative Director, Chairman, Board of Directors
Manabu Yamamoto
Representative Director, President2

(Securities Code: 4061)
May 31, 2017
To Our Shareholders:Manabu Yamamoto
President
Denka Co., Ltd.
1-1, Nihonbashi-Muromachi 2-chome, Chuo-ku, TokyoNOTICE OF CONVOCATION OF
THE 158TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 158th Ordinary General Meeting of Shareholders of Denka Co., Ltd.
(the “Company”) to be held as described below.
If you are unable to attend the meeting in person, you may exercise your voting rights in writing bysubmitting the Voting Rights Exercise Form by mail or via the Internet etc. as described in the “Guide for
Exercise of Voting Rights” (Page 5). Please review the attached Reference Documents for the General
Meeting of Shareholders and exercise your voting rights by 5:00 p.m. on Wednesday, June 21, 2017.
1. Date and Time:Thursday, June 22, 2017 at 10:00 a.m.

2. Place:

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

3. Meeting Agenda:
Matters to be reported: 1. The Business Report, Consolidated Financial Statements for the Company’s
158th Term (from April 1, 2016 to March 31, 2017) and results of audits by
the Accounting Auditor and the Audit & Supervisory Board of theConsolidated Financial Statements
2. Non-consolidated Financial Statements for the Company’s 158th Term (from
April 1, 2016 to March 31, 2017)
Proposals to be resolved:
Proposal No. 1: Appropriation of Surplus
Proposal No. 2: Consolidation of Shares
Proposal No. 3: Election of Eight (8) Directors
Proposal No. 4: Election of One (1) Substitute Audit & Supervisory Board Member
Proposal No. 5: Determination of amount and details of stock compensation, etc., for Directors
Proposal No. 6: Revision of the Amount of Remuneration to Directors

3◎ The following are posted on the Company’s website at http://www.denka.co.jp/ in accordance with law
and Article 16 of the Company’s Articles of Incorporation and thus are not included in the documents
attached to this notice of convocation.
•Company’s Systems and Policies (Systems to Ensure the Appropriateness of Operations, Operational
Status of Systems to Ensure the Appropriateness of Operations, and Basic Policies regarding theControl of the Company) in the Business Report•Consolidated Statement of Changes in Net Assets and Notes to Consolidated Financial Statements•Non-consolidated Statement of Changes in Net Assets and Notes to Non-consolidated Financial
Statements
The Business Report, consolidated financial statements and the non-consolidated financial statements
audited by the Audit & Supervisory Board Members and the Accounting Auditor include the above
documents posted on the Company’s website.
◎ If any revisions are made to the Business Report, Consolidated Financial Statements, Non-consolidated
Financial Statements, or Reference Documents for the General Meeting of Shareholders, they will be
posted on the Company’s website at http://www.denka.co.jp/.

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

(1) Exercise of Voting Rights by Attending the Meeting
Please bring the enclosed Voting Rights Exercise Form with you to the meeting and submit it to thereceptionist at the meeting venue.
* In the case of exercising voting rights by attending the meeting as a proxy, please submit a document
evidencing the authority of proxy to the receptionist at the meeting venue together with the Voting Rights
Exercise Form. Please note that such proxy must be one shareholder of the Company with voting rights
in accordance with Article 18 of the Company’s Articles of Incorporation.
(2) Exercise of Voting Rights in Writing by Mail (Voting Rights Exercise Form)
Please indicate your vote for or against the proposals on the enclosed Voting Rights Exercise Form and send
the completed form to us so that it is received by 5:00 p.m. on Wednesday, June 21, 2017.
(3) Exercise of Voting Rights via the Internet etc.
Please access the website for exercising voting rights designated by the Company (http://www.web54.net),
use the “Voting Rights Exercise Code” and the “Password” indicated on the enclosed Voting Rights Exercise
Form, and follow the on-screen guidance. Please vote for or against the proposals by 5:00 p.m. on Wednesday,June 21, 2017.
(Inquiry about Exercise of Voting Rights via the Internet etc.)
Sumitomo Mitsui Trust Bank Stock Transfer Web Support Dial
Tel: 0120-652-031(office hours: 9:00 a.m. - 9:00 p.m.)*Handling of duplicated exercise of voting rights
If you exercise your voting rights both by Method (2) Exercise of Voting Rights in Writing by Mail (Voting
Rights Exercise Form) and by Method (3) Exercise of Voting Rights via the Internet etc., the exercise of
voting rights by Method (3) Exercise of Voting Rights via the Internet etc. shall prevail regardless of the timeof arrival of the votes.
In addition, if you exercise your voting rights multiple times via the Internet, etc., the vote made last shallprevail.

5

Reference Documents for the General Meeting of Shareholders

Proposal No. 1: Appropriation of Surplus
It is proposed that the surplus be appropriated as follows:
Matters concerning year-end dividends
The Company is implementing many concrete measures for the future in accordance with the new growthstrategies of the Denka100 management plan and is resolved to achieve solid performance at an early stage.
Reflecting our determination to return the profits yielded by these initiatives to shareholders, weformulated the Policy on Shareholder Returns in November 2014. At the same time, with the aim ofachieving further growth, we set aside a budget for strategic investment, including M&A.
1. Policy on shareholder returns
Target total payout ratio*: 50%* Total payout ratio = (Dividends paid + treasury stock purchased) / consolidated net income
2. Methods for returning profits to shareholders(1) Dividends: Maintain steady payment of cash dividends, with minimum payout ratio set at 30%(2) Purchase of treasury stock: Flexibly purchase treasury stock in view of the stock price trend and themarket environment
3. Budget for forward-looking strategic investments
After returning profits to shareholders, the Company will appropriate funds from retained earnings aswell as cash inflows to finance such investments. The total amount budgeted for is approximately¥50.0 billion (for the four years from 2014 to 2017).
4. Term
Four years to the end of fiscal 2017, the target year of the Denka100 management plan
With respect to the year-end dividend for the 158th term, in accordance with the policy stated above, theCompany proposes the following.
(1) Type of dividend property
Cash(2) Allocation of dividend property and total amount thereof¥7 per share of common stock of the Company
Total amount of dividends: ¥3,097,363,563(3) Effective date of dividends from surplus
June 23, 2017
The amount of dividends for the full year will be ¥14 per share, including the interim dividend of ¥7 pershare paid in December 2016.

6

Proposal No. 2:

Consolidation of Shares

1. Reason for consolidation of shares
Following publication of the Action Plan for Consolidating Trading Units, Japan’s stock exchanges areworking toward harmonization of the minimum trading unit for common stock (fractional share unit) listed
on Japanese securities exchanges at 100 shares.
Listed as it is on the Tokyo Stock Exchange, the Company respects the aims of this policy, and has
decided to reduce the trading unit of Denka stock to 100 shares, from 1,000 shares, and to carry out aconsolidation of shares to adjust the basic investment unit to a suitable level.
2. Consolidation ratio
The ratio of consolidation of common stock of the Company shall be 1 share for every 5 shares.
As a result of this consolidation of shares, fractional shares shall be collectively disposed of based on the
Companies Act of Japan, with the proceeds distributed to shareholders who hold fractional shares inproportion to the number of such shares held.
3. Effective date of share consolidation
October 1, 2017
4. Number of authorized shares as of effective date of share consolidation
290 million shares[Reference]
Subject to the approval of this proposal as originally proposed, the Articles of Incorporation of theCompany will be partially amended as follows on October 1, 2017.
(Underlined portions are amended)
Proposed Amendments of Articles of Incorporation
Article 6 (Number of Authorized Shares)
The total number of authorized shares of theCompany shall be 290 million shares.
Article 8 (Number of Shares Per Unit)
The number of shares per unit of the Company shallbe 100 shares.

Current Articles of Incorporation
Article 6 (Number of Authorized Shares)
The total number of authorized shares of theCompany shall be 1,584 million 70,000 shares.
Article 8 (Number of Shares Per Unit)
The number of shares per unit of the Company shallbe 1,000 shares.

7

Proposal No. 3:

Election of Eight (8) Directors

The terms of office of all of the eight (8) Directors will expire at the conclusion of this Ordinary General
Meeting of Shareholders. Accordingly, the election of eight (8) Directors is proposed.
The Company’s views regarding Directors and the candidates for Directors are as follows.
[The Company’s views regarding Directors]
To meet the goals of the current Denka100 management plan and of “The Denka Value” corporate
philosophy compiled in 2016, the Company aims to strengthen the management structure with Directors andExecutive Officers, while enriching the governance structure and supervisory functions. In electing Directors,
internal Directors are chosen from persons who possess a wealth of experience and achievements in various
divisions within the Company, while also possessing insights and adequate specialized knowledge as
Director, and Outside Directors are chosen from persons who possess specialization required for continuous
growth and improvement in corporate value of the Company and wide insights based on a wealth of businessexperience. The Company believes that a well-balanced election of persons with various knowledge,
experience, and abilities is important for the Board of Directors as a whole.
Additionally, the Company believes that Independent Directors should comprise at least one-third of
Directors, and implements this policy.

No.

Name

Positions and responsibilities at the Company

Attendance atBoard ofDirectors
meetings

1

Reappointed Shinsuke Yoshitaka Representative Director, Chairman, Board of Directors

13/13(100%)

2

Reappointed

Representative Director, President and Chief Executive
Officer

13/13(100%)

3

4

5

6
7
8

Manabu Yamamoto

Director and Executive Vice President
13/13
Supervisor of Life Innovation
Reappointed
Mitsukuni Ayabe(100%)
President and Representative Director of DENKA SEIKEN
Co., Ltd.
Managing Executive Officer
Chief R&D Officer, Innovation Center—/—
New candidate Norihiro Shimizu
New Business Development Dept., R&D Promoting Dept.,Intellectual Property Dept.
Director and Managing Executive Officer
10/10
Chief Compliance Officer (CCO)(100%)
Reappointed
Kenji Nakano
Secretary Dept., Internal Auditing Dept., Administrative(After assuming
office in June 2016)
Dept., Legal Dept., HR Dept., Denka100 Promoting Dept.
Director
13/13
Reappointed
Yasuo Sato
(Outside Director)(100%)(Independent Director)
Director
13/13
Reappointed
Akio Yamamoto (Outside Director)(100%)(Independent Director)
10/10
Director(100%)
Reappointed Tatsutsugu Fujihara (Outside Director)(After assuming(Independent Director)
office in June 2016)

8

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

Career summary and significant concurrent positions, etc.

April 1974
January 2001
June 2006
June 2007
June 2008
April 2010

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

Number ofshares of theCompany held

131,000

Shinsuke Yoshitaka(February 1, 1951) April 2011
Age: 66
June 2011
April 2017
[June 2008][9 years
1 * at the conclusion ofthis Ordinary General Reasons for selection as the candidate for Director
Subsequent to responsibility for management strategy, medical business, accounting andMeeting offinance, and investor relations and corporate communication, Mr. Shinsuke Yoshitaka has
Shareholders]promoted the “Denka100” management plan as Representative Director, President. In[100% (13/13)]
addition to a wealth of experience and results as a manager, he serves as the Chairman of(Reappointed)
the Board of Directors, as the Representative Director and Chairman based on his deep
knowledge and understanding of the Group. The Company has judged that he canappropriately fulfill the role of supervising the business execution of Directors andExecutive Officers, and requests his election as Director.
Message to shareholders
As Chairman of the Board of Directors, the management supervisory organ and the highest
decision-making body for execution of company business, my goals are to improvetransparency and soundness of management activities and make every effort to boost
corporate value and realize “The Denka Value,” the Company’s philosophy.
Note: No material conflict of interest exists between the Company and the above candidate.

9

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

Career summary and significant concurrent positions, etc.

April 1981
June 2004
April 2009
April 2011
April 2013
June 2013
April 2015
Manabu Yamamoto(March 31, 1956) April 2016
Age: 61
June 2016

Joined the Company
General Manager of Functional Ceramics Div. ofElectronics Materials Business Group of the Company
Executive Officer of the Company, General Manager ofElectronics Materials Div. of Electronics Materials
Business Group of the Company
Senior Executive Officer of the Company
Managing Executive Officer of the Company, Head ofElectronics & Innovative Products
Director and Managing Executive Officer of theCompany
General Manager of Corporate Planning Dept. of theCompany
Director and Senior Managing Executive Officer of theCompany
Outside Audit & Supervisory Board Member of Koatsu
Gas Kogyo Co., Ltd. (present)
Representative Director, President and Chief Executive
Officer of the Company (present)

Number ofshares of theCompany held

28,000[June 2013]
April 2017
[4 years
2 * at the conclusion ofthis Ordinary General
Reasons for selection as the candidate for Director
Meeting ofThrough work experience at overseas subsidiaries and many years of responsibility for the
Shareholders]electronics materials business division, Mr. Manabu Yamamoto possesses international[100% (13/13)]
viewpoints and adequate operational experience. After he integrated new business strategies(Reappointed)
and accounting and finance strategies across the entire Denka Group as the executive
responsible for management strategy, accounting and finance, and investor relations andcorporate communication divisions, Mr. Yamamoto currently serves as President andRepresentative Director. Based on his rich experience and impressive track record inCompany administration, it is hence judged by the Company that he can appropriately fulfil
the role of determining important business execution and supervising the businessexecution of Directors and Executive Officers, and requests his election as Director.

Message to shareholders
Aiming to ensure sustainable growth even in a market environment of rapid change, and toenable sound growth that generates due benefits for all stakeholders, I am committed torealize “The Denka Value” concept while striking a balance between enhancement ofcorporate value and fulfilment of social responsibility.
Note: No material conflict of interest exists between the Company and the above candidate.

10

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

Career summary and significant concurrent positions, etc.

April 1977
June 2004
June 2007
April 2010
June 2011
April 2013
Mitsukuni Ayabe April 2015
(September 23, 1952)
Age: 64
April 2016

Joined the Company
General Manager of Research and Development Dept. of
the Company
Executive Officer of the Company, Managing Director of
Denka Singapore Pte., Ltd., Managing Director of
Denka Advantech Pte., Ltd.
Senior Executive Officer of the Company, Director andChairman of Denka Chemicals Holdings Asia PacificPte., Ltd.
Director and Managing Executive Officer of theCompany
Director and Senior Managing Executive Officer of theCompany
Representative Director and Senior Managing Executive
Officer of the Company
Representative Director, Executive Vice President andChief Operating Officer of the Company
Director, Executive Vice President of the Company(present)
President and Representative Director of DENKA
SEIKEN Co., Ltd. (present)

Number ofshares of theCompany held

54,000[June 2011]
April 2017
[6 years
3 * at the conclusion ofthis Ordinary General
Meeting of
Reasons for selection as the candidate for Director
Shareholders]
Subsequent to management of research and development and overseas subsidiaries and[100% (13/13)]
responsibility for medical business, accounting and finance, and investor relations and(Reappointed)
corporate communication, Mr. Mitsukuni Ayabe directed the overall technical divisions as
the general executive for planning and development, while also assisting the President as
Executive Vice President and Chief Operating Officer. Currently, Mr. Ayabe is in charge of
the Life Innovation Division and supports strategies in the growing healthcare field. The
Company has judged that he can appropriately fulfill the role of determining importantbusiness execution and supervising the business execution of Directors and Executive
Officers, and requests his election as Director.
Message to shareholders
Looking ahead to the next 100 years, by thoroughly promoting “The Denka Value” visionof the Company internally and externally, I will work to strengthen and develop ourearnings platform for future growth, and build a company that is even more deeply andwidely trusted thanks to its social contribution activities.
Note: No material conflict of interest exists between the Company and the above candidate.

11

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

Career summary and significant concurrent positions, etc.

April 1980
October 2008
April 2009
April 2011
April 2013
April 2017
Norihiro Shimizu(October 2, 1955)
Age: 61
4

[—]
[—]
[—/—]
(New candidate)

Joined the Company
General Manager of Electronic Materials ResearchInstitute of the Company
Executive Officer of the Company
Senior Executive Officer, General Manager of Central
Research Institute of the Company
Managing Executive Officer, General Manager ofResearch and Development Dept. of the Company
Managing Executive Officer of the Company (present)

Number ofshares of theCompany held

22,000Reasons for selection as the candidate for Director
Mr. Norihiro Shimizu has ample practical experience, including oversight of research anddevelopment activities for many years in the fields of polymers and electronic materials. As
overall executive officer in charge of research and development and Denka Innovation
Center now, he is responsible for all research and development operations, and for businessstrategy including development of next-generation products and of new businesses. In lightof his deep expertise and experience in research and development operations, we judge him
to be well-suited for decision-making regarding significant business matters, and forsupervision of business execution by directors and executive officers, and so seek hiselection as a director.
Message to shareholders
Through continuous innovation leveraging the comprehensive capabilities of the Group, I
am committed to ensuring sustainable growth and improving corporate value byimplementing business strategy at individual businesses in a way that strikes a balance
between profitability and sustainability.

Note: No material conflict of interest exists between the Company and the above candidate.

12

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

Career summary and significant concurrent positions, etc.

April 1980
June 2007
April 2011
April 2013
April 2014
Kenji Nakano(November 17, 1955) June 2016
Age: 61

Joined the Company
General Manager of Secretary Dept. of the Company
Executive Officer of the Company, General Manager of
HR Dept. of the Company
Executive Officer of the Company, Representative in
China
Managing Executive Officer of the Company
Director and Managing Executive Officer of theCompany (present)

Number ofshares of theCompany held

24,000Reasons for selection as the candidate for Director[June 2016]
Through work experience at plants and many years of responsibility for management[1 year5* at the conclusion of divisions such as general affairs, legal, and HR divisions, Mr. Kenji Nakano possesses
adequate operational experience, in addition to integrating business strategy in China as thethis Ordinary General
Representative in China. Currently, in addition to overseeing general affairs, legal matters,
Meeting of
personnel affairs, internal auditing and other areas, Mr. Nakano is promoting strengthening
Shareholders]risk management and compliance systems as the executive responsible for compliance. The[100% (10/10)]
Company has judged that he can appropriately fulfill the role of determining important(Reappointed)
business execution and supervising the business execution of Directors and Executive
Officers, and requests his election as Director.

Message to shareholders
From a long-term, overhead point of view with the aim of building corporate value, I am
committed to working for continuous growth based on transparent and sound managementthat prioritizes compliance.
Note: No material conflict of interest exists between the Company and the above candidate.

13

Candidates for Outside Director
Name(Date of birth)[Director since]
Number of
No. [Director’s term ofCareer summary and significant concurrent positions, etc.
shares of theCompany held
office][Attendance at Boardof Directors meetings]
April 1965
Joined TEIKOKU SANSO Co., Ltd. (present Air Liquide
Japan Ltd.)March 1987
Director and Vice President of Electronics Div. of Air
Liquide Japan Ltd.
April 1992
Vice President of Worldwide Electronics Div. of L’Air
Liquide S.A. (until March 1996)
March 1999
Representative Director and President of Air Liquide Japan
Ltd. (until January 2003)
January 2003 Director and Chairman of Japan Air Gases Co., Ltd. (until
March 2005)
Yasuo Sato
March 2005
Director and Advisor (part-time) of Air Liquide Japan Ltd.
(September 30, 1942)(until September 2007)
Age: 74
June 2005
Outside Director of Denal Silane Co., Ltd. (until February
2008)(Outside Director) May 2006
President & CEO of I.B. Associates Co., Ltd. (present(Reappointed)
Wisemech Corporation) (until June 2016)(Independent
June 2006
Outside Auditor of Santen Pharmaceutical Co., Ltd. (until
Director)
6
June 2014)[June 2015]
February 2008 Auditor of Denal Silane Co., Ltd. (until June 2014)[2 yearsJune 2015
Outside Director of the Company (present)* at the conclusion July 2016
Director Chairman of Wisemech Corporation (present)of this Ordinary
General Meeting of Reasons for selection as the candidate for Outside Director
Shareholders]Mr. Yasuo Sato has gained rich experience and great insight as a manager through his[100% (13/13)]
involvement in corporate management for many years. His career included serving as the
President of Air Liquide Japan Ltd. He also has rich international experience, including
serving as a vice president at global enterprises. The Company proposes that Mr. Sato beelected as an Outside Director in the expectation that he will utilize his knowledge inproviding suggestions about the Company’s overseas business expansion strategy andmanagement in general.
Message to shareholders
In a spirit of rationality and fairness, I am committed to working for the sustainable growthand enhanced corporate value of the Company from a global, medium- to long-term
perspective.
Notes: 1. No material conflict of interest exists between the Company and the above candidate.
2. Up to February 2008, Mr. Sato was an Outside Director of a subsidiary of the Company. Up to June
2014, he worked as corporate auditor of a subsidiary of the Company.
3. Based on Article 427, Paragraph 1 of the Companies Act, the Company currently concludes liability
limitation contracts with the candidate that limit his liability for damages of Article 423, Paragraph 1 ofsaid Act to a predefined amount of ¥5 million or more or the amount stipulated by laws and regulations,whichever is higher. If the election of Mr. Sato is approved, the Company plans to continue the same
contracts.

14

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

Career summary and significant concurrent positions, etc.

April 1974
April 1999
April 2004
April 2007
April 2009
June 2014
June 2015

7

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

Number ofshares of theCompany held-

Akio Yamamoto(December 2, 1951)
Reasons for selection as the candidate for Outside Director
Age: 65
Mr. Akio Yamamoto has rich experience and great insight as a manager in Japan and(Outside Director) overseas through his involvement in corporate management for many years. His career
included serving as an Executive Officer of Mitsui & Co., Ltd. and the Representative(Reappointed)
Director and President of Mitsui & Co. Plastics Ltd. He also has rich international(Independent
experience, including serving as a vice president at global enterprises. The Company
Director)
proposes that Mr. Yamamoto be elected as an Outside Director in the expectation that he[June 2015]
will utilize his knowledge in providing suggestions about the Company’s overseas business[2 years* at the conclusion expansion strategy and management in general. Although he used to work at a company
that has transactions with the Company, the Company considers that there is no risk thatof this Ordinary
conflict of interest with other general shareholders will arise because 1) he is not a current
General Meeting ofor a recent operating officer of the said company; 2) although the Company’s sales to the
Shareholders]said company account for 6.4% of the Company’s total sales, substantial transactions[100% (13/13)]
between the Company and the said company are payments of commission by the Company
to the said company for services offered by its trading company function and the amount ofcommission paid is modest (under 2% of the said company’s sales); and 3) he satisfies theCompany’s “Standards of Independence for Outside Executives” and thus, the Company
considers that the said company has no special impact on the Company’s decision-making
by the Board of Directors etc.

Message to shareholders
Viewing the Company from a global and historical perspective of our industry, I am
determined to contribute to the further sound growth of Denka in my work, always in a
spirit of humility and sincerity.
Notes: 1. No material conflict of interest exists between the Company and the above candidate.
2. Until June 2014, Mr. Yamamoto worked as president and representative director for a specified related
party of the Company.
3. Based on Article 427, Paragraph 1 of the Companies Act, the Company currently concludes liability
limitation contracts with the candidate that limit his liability for damages of Article 423, Paragraph 1 ofsaid Act to a predefined amount of ¥5 million or more or the amount stipulated by laws and regulations,whichever is higher. If the election of Mr. Yamamoto is approved, the Company plans to continue thesame contracts.

15

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

Career summary and significant concurrent positions, etc.

April 1976
May 2000
April 2002
March 2003
June 2003
April 2005
June 2007

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

Number ofshares of theCompany held-

June 2013
Tatsutsugu Fujihara(November 23, 1952) June 2014
Age: 64
April 2016
(Outside Director) June 2016
(Reappointed)(Independent
June 2016
Director)
8[June 2016])
Reasons for selection as the candidate for Outside Director[1 yearHaving worked in corporate management at financial institutions for many years, Mr.
* at the conclusion Tatsutsugu Fujihara has rich experience and great insight as a manager and possessesof this Ordinary
advanced insights regarding corporate finance, and to utilize these insights and receive
General Meeting of recommendations toward the Company’s overall management, his election as Outside
Shareholders]
Director is requested. Additionally, although he used to work at a financial institution that
[100% (10/10)]
has transactions with the Company, the Company considers that there is no risk that conflictof interest with other general shareholders will arise because 1) he is not a current or a
recent operating officer of the said financial institution; 2) a significant number of years
have passed since he retired from the said financial institution (ten years have passed since
his retirement as of the day of this Ordinary General Meeting of Shareholders); 3) thecomposition of borrowings relative to net assets of the Company is low at approximately
30%, and the Company’s dependency on the said financial institution is low as it accounts
for less than 10% of overall borrowings; and 4) he satisfies the Company’s “Standards ofIndependence for Outside Executives” and thus, the Company considers that the said
financial institution has no special impact on the Company’s decision-making by the Boardof Directors, etc.
Message to shareholders
In a spirit of fairness, I am determined to contribute to the creation of a platform (in termsof reforming organizational culture and attitudes) enabling creation of corporate value
particularly through greater competitiveness.
Notes: 1. No material conflict of interest exists between the Company and the above candidate.
2. Based on Article 427, Paragraph 1 of the Companies Act, the Company currently concludes
liability limitation contracts with the candidate that limit his liability for damages of Article 423,
Paragraph 1 of said Act to a predefined amount of ¥5 million or more or the amount stipulated bylaws and regulations, whichever is higher. If the election of him is approved, the Company plans tocontinue the same contracts.

16

Proposal No. 4:

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

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

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

Gotaro Ichiki(December 4, 1949) January 2015
March 2015
Age:67
March 2016
Candidate for
Substitute Outside
April 2016
Audit &
Supervisory Board
April 2017
MemberAdmitted to the bar in Japan (Yokohama Bar Association)
Joined Sagami Godo Law Office
Joined Hamada & Matsumoto Law Firm (transferred toDaini Tokyo Bar Association)
Partner in Hamada & Matsumoto Law Firm
Vice President of Daini Tokyo Bar Association (until
March 1997)
Deputy Secretary of Japan Federation of Bar Associations(until March 2002)
Partner in Mori Hamada & Matsumoto Law Firm formed
as a result of merger (until December 2014)
Joined Kowa Law OfficeOutside Director of Nippon Denko Co., Ltd. (present)
Outside Director (Directors Serving on the Audit &Supervisory Committee) of COCA-COLA WEST
COMPANY, LIMITED (until March 2017)
Supervisory Officer of DBJ Private REIT Investment
Corporation (present)
Outside Auditor of COCA-COLA WEST COMPANY,
LIMITED (present) (to date)

Number ofshares of theCompany held-

Reasons for selection as the candidate for substitute Outside Audit & Supervisory Board
MemberMr. Gotaro Ichiki has a long experience as a lawyer and abundant legal knowledge. The
Company proposes that Mr. Ichiki be elected as a substitute Outside Audit & Supervisory
Board Member in the expectation that he will utilize his knowledge for the benefit of theCompany’s auditing system. Although he has never been directly engaged in corporate
management, the Company deems that Mr. Ichiki will duly execute his duties as an Outside
Audit & Supervisory Board Member because he is well versed in corporate legal affairs and has
extensive insight into corporate governance.
Notes: 1. No material conflict of interest exists between the Company and the above candidate.
2. Based on Article 427, Paragraph 1 of the Companies Act, the Company currently concludes
liability limitation contracts with Outside Audit & Supervisory Board Members that limit their
liability for damages of Article 423, Paragraph 1 of said Act to a predefined amount of ¥5 million
or more or the amount stipulated by laws and regulations, whichever is higher. If Mr. Gotaro
Ichiki assumes the position of Outside Audit & Supervisory Board Member, the Company plans
to conclude an identical contract with him.

17

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

18

Proposal No. 5:

Determination of amount and details of stock compensation, etc., for Directors

1. Reasons for proposal and reasons why the remuneration is appropriate
Approval is sought for the introduction of a new stock remuneration plan (hereinafter the “Plan”) for
Directors (excluding Outside Directors; hereafter the same applies). The Company requests that specificdetails be entrusted to a resolution of the Board of Directors within the scope of 2. hereafter.
The Plan will establish a clear peg between the Company’s stock value and Director remuneration.
Directors will benefit from rises in the stock price, but they will also bear risk when it falls. With the aim of
improving medium-to-long-term business performance and raising awareness of contribution to increased
corporate value by ensuring that benefits and risks from share price changes are shared by all stockholders,the Company considers the Plan appropriate and seeks approval for its aim of creating a new form of
payment by stock remuneration, as a separate framework from compensation limits for Directors for whichapproval is sought in Proposal No. 6 “Revision of the Amount of Remuneration to Directors.”
Additionally, if Proposal No. 3 “Election of Eight (8) Directors” is approved as originally proposed, thenumber of Directors subject to the Plan at the conclusion of this Ordinary General Meeting of Shareholders
will be five.
2. Amount and details of remuneration, etc., under the Plan
(1) Overview of the Plan
In the Plan, cash shall be entrusted to a trust (hereinafter the “Trust”) to be established by the Company.
The Company’s common stock (hereinafter the “Company Stock”) shall be acquired by the Trust. Points
shall be granted to Directors in line with the Stock Allotment Regulations laid down by the Company, and,through the Trust, the Company Stock shall be allocated in proportion to the number of points granted.
In principle, Directors receive the Company Stock at the time when the Director resigns. For an outline of
the Plan, please see “Notice of Introduction of Stock Remuneration Plan to Directors of the Company,”
announced on May 10, 2017.
(2) Trust period
The Trust period shall be the three years from August 2017 (planned) to August 2020 (planned). However,
the Trust period may be extended as provided in (3) below.
(3) Upper limit of cash the Company will contribute
As remuneration for Directors in office during the three years from the conclusion of this Ordinary
General Meeting of Shareholders until the conclusion of the Ordinary General Meeting of Shareholders inJune 2020 (hereinafter the “Applicable Period”), the Trust will contribute a maximum of ¥120 million in
cash (corresponding to ¥40 million per year) during the Trust period (three years) as funds to acquire theCompany Stock to grant to Directors under the Plan, and will establish the Trust with Directors who satisfy
certain requirements as beneficiaries.
(Note) Cash that will be actually entrusted to the Trust by the Company shall be an amount that includes not only funds foracquisition of the Company Stock stated above, but also estimated amounts for requisite expenses such as trust remunerationand trust administrator fees.

By a resolution of the Board of Directors, the Trust period may be extended at its expiration, and the Plan
may be continued (this includes de facto extension of the Trust contract by the transfer of assets of the Trustto another trust with the same purpose as the Trust created by the Company, and likewise hereafter). In sucha case of extension, the Company shall make additional cash contributions to the Trust of up to ¥40 million
multiplied by the number of years of extension, during the period of the Trust extension, as funds for
additional acquisition of the Company Stock needed for payment to Directors under the Plan. In such case,moreover, the period corresponding to the continuation of the Plan and the extension of the Trust period shallbe extended, and during the extended Trust period, granting of points as in (5) 1) below and payment of theCompany Stock as in (5) 2) below shall be continued.
However, even in the cases where granting of points as described above is not continued, when there are
Director(s) who have not yet resigned despite having already been granted their points at the expiry of theTrust period, the Trust period of the Trust may be extended until retirement of the Director(s) and completionof transfer of the Company Stock.

19

(4) Method of acquisition of Company Stock by the Trust
While keeping to the upper limit of funding for stock acquisition in (3) above, acquisition of the initialround of Company Stock by the Trust is scheduled to be carried out through a securities exchange (including
after-hours transactions) or through disposal of treasury stock at the Company. Details of the method ofacquisition will be decided by resolution of the Ordinary General Meeting of Shareholders and made public.
During the Trust period, if, due to an increase in the number of Directors, etc., the possibility arises of ashortfall in the number of shares in relation to the number of points to be granted to Directors, additional
cash may be entrusted to the Trust for additional acquisition of Company Stock, within the upper limit ofTrust funding approved by the Ordinary General Meeting of Shareholders in (3) above.
(5) Method of calculation and upper limit for number of shares of Company Stock to be delivered to
Directors
1) Method of granting points for Directors and upper limits
Based on the Stock Allotment Regulations laid down by the Board of Directors, points shall be granted
based on position or role of the individual Director on the day of point granting, as laid down in theprovisions of share transfer during the period of the Trust.
However, the total number of points to be granted by the Company to Directors shall not exceed
110,000 per year.
2) Grants of Company Stock corresponding to number of points granted
In line with the procedures described in (6) below, Directors shall receive Company Stock in a total
corresponding to the number of points granted to them as described in 1) above.
The total of shares of Company Stock to be granted to individual Directors shall be 1.0 times thenumber of points granted to the Director. (However, with regard to Company Stock, in the cases where it
is deemed reasonable to adjust the number of shares of Company Stock to be transferred due to stock
split or stock consolidation, etc., a reasonable adjustment shall be made in proportion to the ratio of thestock split or consolidation. Please note that, as stated in (2) above, establishment of the Trust is planned
for August 2017, and a proposal for consolidation of stock will be discussed as Proposal No. 2 at theOrdinary General Meeting of Shareholders. If this proposal is approved in its original form, the date ofeffect of the stock consolidation is scheduled to be October 1, 2017, at which point, reasonableadjustments shall be made based on the said consolidation of stock.)(6) Grant of Company Stock to Directors
The grant of Company Stock to individual Directors described in (5) above shall be undertaken by theTrust through the prescribed beneficiary determination procedures at the time of retirement of the Director.
However, when conditions of the provisions for grant of stock are met, cash payment may be made insteadof Company Stock compensation, after converting a certain proportion of the Company Stock within the
Trust. In the event of a settlement of the Company Stock in the Trust by responding to a tender offer, etc.,
when Company Stock in the Trust is converted to cash, cash payments may be made instead of granting
Company Stock.
(7) Exercise of voting rights
In accordance with instructions from trust administrators independent of the Company and theCompany’s executive officers, no voting rights of any kind relating to Company Stock in the Trust may be
exercised. Through this measure, our aim is to ensure the neutrality of the Company management withregard to the exercise of voting rights relating to Company Stock under the Trust.

20

(Reference)
Outline of the Plan structure[Entrustor]

2) Establishment of Trust <Third-party benefit trust> (Entrustment of cash)

The Company

3)’ Funds for purchase3) Payment[Trustee] (Scheduled)
3) Disposal of treasury stock

Sumitomo Mitsui Trust Bank, Limited(Re-trustee: Japan Trustee Services Bank, Ltd.)

Exchange markets3)’ Purchase of stock6) Sale of stock

Stock allotment trust
Company Stock5) Granting ofpointsCash1) Formulation of Stock

6) Proceeds from sale6) Stock or cash

Allotment Regulations

4) Instruction for non-exercise of voting rights

Trust administrator[Beneficiaries]
Directors

1) We will formulate Stock Allotment Regulations for Directors of the Company.
2) A stock allotment trust (third-party benefit trust) has been set up with the Directors of the Company as
beneficiaries. In that connection, the Company has entrusted to the trustee a sum of cash equivalent to
the funds for acquisition of stock (however, this sum is within the limit approved by the General Meetingof Shareholders).
3) The Trustee shall acquire Company Stock in a single lot in an amount equivalent to the future transfersthat can be expected (with methods of acquisition being disposal of treasury stock or acquisition on
exchange markets (including after-hours transactions)).
4) The interests of beneficiaries to whom the Stock Allotment Regulations apply during the Trust period
shall be protected, and a trust administrator to supervise the trustee shall be appointed (as an entity
independent of the Company and its executive officers).
Regarding Company Stock in the Trust, the Trust administrator shall instruct the trustee not to exercise
voting rights. The trustee will comply with such direction and will not exercise any kind of voting rights
during the Trust period.
5) Pursuant to the Stock Allotment Regulations, the Company will grant points to Directors.
6) Directors who satisfy conditions defined in the Stock Allotment Regulations and the trust agreement for
the Trust will, as beneficiaries of the Trust, receive Company Stock from the trustee, in an amountcorresponding to their cumulative total of points. It should be noted that in certain applicable cases laid
down in advance in the Stock Allotment Regulations and trust agreement, some of the Company Stock to
be granted may be sold on securities exchanges, and payment of cash may be made.
Sumitomo Mitsui Trust Bank, Limited, the trustee in the Plan, will assign the Trust assets to Japan
Trustee Services Bank, Ltd. for management (under a “re-trust” arrangement).

21

Proposal No. 6:

Revision of the Amount of Remuneration to Directors

It was approved at the 156th Ordinary General Meeting of Shareholders held on June 19, 2015 that the
maximum amount of remuneration for Directors of the Company shall be ¥540.0 million a year (including
the maximum amount of ¥50.0 million for Outside Directors). Assuming approval of Proposal No. 5,“Determination of amount and details of stock compensation, etc., for Directors,” the Company proposesthat the maximum amount of remuneration, etc. to Directors be revised to ¥500.0 million a year (including
the maximum amount of ¥50.0 million for Outside Directors).
This revised payment will be made outside the framework of the compensation limits for new stockcompensation to be discussed and approved in Proposal No. 5. A reduction in a corresponding sum will be
made.
As previously, the above amount of remuneration to Directors does not include portions of their salaries
as employees.
Outside Directors are outside the scope of the payment of bonuses for Directors.
If Proposal No. 3 is approved as originally proposed, the Company will have eight (8) Directors(including three (3) Outside Directors).

22

(Reference)
Denka’s Corporate Governance Initiatives
Basic Approach to Corporate GovernanceIn order to fulfill the expectations and trust of its many stakeholders, including shareholders, customers,
local society, and employees, based on “The Denka Value” (corporate philosophy), which was outlined in2016 and forms the basis for the activities of the Denka Group, the Company strives to strengthen its
business foundation by improving its earnings power and expanding the scope of operations, while also
working to improve corporate value by making every effort to continue being a company that can win thetrust and sympathy of society.
The Company considers corporate governance as the foundation for the above, and so we have striven tostrengthen governance, in order to fulfill the responsibilities we owe to all our stakeholders, and ensure thetransparency and soundness of our management.
The Denka Value (Corporate Philosophy)“The Denka Value” (corporate philosophy) consists of the “Denka Mission,” which represents ouruppermost mission statement, and the “Denka Principles,” a set of precepts guiding actions taken by every
Group employee.
“The Denka Mission”, which stands above all else, is defined as “taking on the challenge of expanding
the possibilities of chemistry to create new value and contribute to sound social development.”“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.”
The Denka PrinciplesWe: 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 craftsmanship23

Board of Directors
The Board of Directors makes decisions relating to the execution of important business duties andmonitors and supervises the execution of business duties by corporate officers, in accordance with strategic
initiatives and management plans aimed at realizing the corporate philosophy of the Company.
In addition, in principle, the Company has discontinued the use of executive titles, (such as Senior
Managing Director, Managing Director) for Directors, such that all Directors may focus on monitoring andsupervising the execution of business duties from an equal standpoint. Also, the Company has set the lengthof directors’ terms to one year, in order to facilitate flexible checks on directors at the General Meeting of
Shareholders.
Furthermore, the Board of Directors as a whole appoints candidates to be directors in line with thestandards for the appointment of both internal and outside directors, based on the belief that it is important toappoint a good balance of people with a variety of expertise, experiences, and skills. (Please see page 8 fordetails of the Company’s approach to the appointment of directors.)■Evaluation of the Effectiveness of the Board of Directors
At Denka, the effectiveness of the Board of Directors is analyzed and evaluated annually by all Directors
and Audit & Supervisory Board Members, and the results disclosed in the Corporate Governance Report.
In the previous fiscal year, the Company analyzed and evaluated the effectiveness of the Board of
Directors by having all Directors and Audit & Supervisory Board Members complete a “Self-Evaluation
Questionnaire,” which covers 20 items related to the effectiveness of the Board of Directors, such as its scale,composition, operation, and other items, and discuss the questionnaire results at Board of Directors
meetings.
Based on the results of the evaluation, Denka concluded that the scale and composition (the balance anddiversity of expertise, experience and skills) of the Board of Directors, as well as the frequency and timing ofBoard of Directors meetings are appropriate; discussions at Board of Directors meetings are stimulated by
active opinions from Outside Directors, drawing on their significant insights in their respective fields; andthat systems are in place to facilitate important decision-making and monitor the execution of duties.
Moreover, the Board of Directors offer constructive views that further promote a management system thataims to enhance the corporate value of the Denka Group. Going forward, we will continually strive toenhance the functions of the Board of Directors to further increase corporate value based on more in-depth
and insightful discussions among all Directors and Audit & Supervisory Board Members.

Audit & Supervisory Board
24

In accordance with their fiduciary responsibilities to shareholders, Corporate Auditors and the Audit &Supervisory Board work with the support of the full-time staff of the Auditor’s Office, whose independence
from management is ensured, to conduct audits of the execution of directors’ duties, internal governance,business duties, and accounting, by exercising statutory rights that include requesting reports on thebusinesses of the Company, investigations pertaining to business duties and accounting, and the appointment,
dismissal, and remuneration of an external auditing firm.
In addition, in view of the roles and responsibilities of the Audit & Supervisory Board, the Company
appoints candidates to be Audit & Supervisory Board Members based on the decision that there should be atleast one person with expertise in finance and accounting.
Outside Officers
Regarding Outside Directors and Outside Audit & Supervisory Board Members, the Company selects
candidates based mainly on practical considerations, such as whether we can expect the candidate tocontribute to an increase in the corporate value of the Company as an independent officer, and has also
defined its own standards of independence (Please see page 18.), in accordance with the requirements forindependence stipulated in the Companies Act, in addition to the standards for independence defined by the
Tokyo Stock Exchange and other factors.
In addition, by enhancing their understanding of the Company, the Company strives to create anenvironment that allows those appointed as Outside Officers to perform their roles for the sake of thesustainable growth of the Company and the increase of its corporate value.
Specifically, in addition to tours of offices, plants, and other facilities, the Company has been
implementing the following initiatives:■Directors and Corporate Auditors Round-Table Conference
In order to facilitate in-depth discussions regarding management matters that are of particular importance,internal and outside Directors and Audit & Supervisory Board Members hold a “Directors and Corporate
Auditors Round-Table Conference” once a month as a forum for free, open-minded, constructive discussions,exchanging opinions and information, and strengthening cooperation.
■Business and research policy briefings
Briefings are held twice a year in order to have Outside Officers understand the Company’s medium- tolong-term and short-term business and research policies.
■Outside Officer Liaison Committee
The Company holds “Outside Officer Liaison Committee” meetings four times a year to facilitate theexchange of information and mutual awareness among Outside Officers concerning matters related to
Denka’s corporate governance and business.
Message to Shareholders from Outside Audit & Supervisory Board Members“Pursuant to the code and guidelines related to corporate governance and compliance, I will work tomonitor Directors in the execution of their duties” (Tsunehiro Sasanami, Outside Audit & Supervisory Board
Member)“As one of Denka’s Outside Audit & Supervisory Board Members and a Certified Public Accountant, I
am committed to monitoring and preventing corporate wrongdoing as well as strengthening corporate
governance.” (Toshio Kinoshita, Outside Audit & Supervisory Board Member)

25

Initiatives to Corporate Governance Thus Far
2007

2008

2015

2016

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

26

[Attached Documents]

Business Report(From April 1, 2016 to March 31, 2017)

1. Overview of the Group(1)

Business Progress and Results
During the fiscal year ended March 31, 2017 (fiscal 2016), the Japanese economy was on a mild
recovery trend with signs of recovery in personal consumption and capital investment, and increase inexports and production as well. Overall, the global economy continued a moderate recovery, despite aslowdown in the Chinese economy in the first half of the fiscal year and weak momentum in someemerging countries.
In the chemical industry, in addition to yen appreciation, raw materials prices, which had remained
low year on year, started to rise during the second half of the fiscal year, however corporate profits
remained largely strong.
In these economic circumstances, the Denka Group strove to expand its businesses and secure
profitability by working to increase sales in Japan and overseas and cutting costs. As a result, sales
volume increased, but consolidated sales decreased ¥7,205 million or 1.9% year on year to ¥362,647
million. This is because of yen appreciation which decreased the actual income and the Company’s sales
prices revision for petrochemical products following the decline in prices of raw materials. In terms of
profits, operating income decreased by ¥4,789 million or 15.6% to ¥25,844 million because of theeffects from yen appreciation as well as higher costs for scheduled biennial maintenance of styrene
monomer plants and to accelerate the development of overseas business and research and development.
The ratio of operating income to net sales decreased 1.2 percentage points to 7.1%. Furthermore,ordinary income decreased ¥3,863 million or 14.3% to ¥23,158 million, and profit attributable toowners of parent decreased ¥1,327 million or 6.8% to ¥18,145 million.
Results of operations by division are described below.
Elastomers & Performance Plastics Division (Sales: ¥151,705 million)
Principal products: Chloroprene rubber, acetylene black, styrene monomer, polystyrene resin, ABS
resin, CLEAREN, heat-resistant resin, transparent resin, POVAL, etc.
Revenue from chloroprene rubber declined due to yen appreciation, but sales volume and profit roseas the sales volume increased thanks to full year steady operation of the Company’s Omi Plant and a
US-based subsidiary Denka Performance Elastomer, which had started its operation in the second halfof the previous fiscal year. Shipment of styrene monomers, ABC resin, and polystyrene resin by Denka
Singapore Pte. Ltd., a subsidiary in Singapore, was robust, however sales were down as a result of therevision of the sales prices corresponding to the lower raw material prices.
As a result, division sales decreased ¥3,895 million or 2.5% year on year to ¥151,705 million.
Infrastructure & Social Solutions Division (Sales: ¥51,816 million)
Principal products: Cement, special cement additives, fertilizers, calcium carbide, fire resistantmaterials, environmental materials, etc.
Increased sales volumes resulted in higher sales of corrugated drainpipes for agriculture and civilengineering, and while sales of fire resistant cement and ferrous raw materials were largely flat year on
year, sales of special cement additives declined and sales of cement and fertilizers also decreased.
As a result, division sales decreased ¥1,536 million or 2.9% year on year to ¥51,816 million.

27

Electronics & Innovative Products Division (Sales: ¥46,252 million)
Principal products: Fused silica, electronic circuit substrates, fine ceramics, electronic packaging
materials, etc.
Shipment of ALONBRIGHT SiAlON phosphors for LED and functional films such as THERMOFILM ALS for transportation and packing of electronic components and semiconductors was favorable
due to robust demand, and sales of spherical fused silica fillers for semiconductor sealing were higher
than the previous year. However, sales volume of electronic circuit substrates and ALSINK highly
reliable heat-dissipating plate declined and caused sales to decrease.
As a result, division sales increased ¥559 million or 1.2% year on year to ¥46,252 million.
Life Science & Environmental Products Division (Sales: ¥75,209 million)
Principal products: Food packaging materials, vaccines, joint function improvers, diagnostic
reagents, housing materials, social life products, etc.
Regarding life innovation products, both domestic and export sales volumes of reagents of a
subsidiary of DENKA SEIKEN Co., Ltd increased and caused sales to rise, and shipment of influenza
vaccines exceeded the plan.
In processed products, sales of plastic rain gutters and DX Film, anti-weather fluorine alloy film
increased due to higher sales volumes. However, while sales of film for food packaging and sales of
products processed by subsidiary DENKA Polymer Co., Ltd. remained largely firm, sales of
TOYOKALON synthetic fiber for wigs and hairpieces and vinyl tapes declined.
As a result, division sales increased ¥69 million or 0.1% year on year to ¥75,209 million.
Others Division (Sales: ¥37,662 million)
Principal business: Plant engineering etc.
Transaction volumes of Akros Trading Co., Ltd. and other trading companies were down from theprevious year. The value of projects completed by Denka Consultant & Engineering Co., Ltd. remained
flat year on year.
As a result, division sales decreased ¥2,403 million or 6.0% year on year to ¥37,662 million.

28

(Reference)
TopicsIn order to cultivate the health and life science sector, which is expected for further growth, as a mainstay
business of the Group, Denka established the new fifth business division, “Life Innovation Division” in April,2017. Through this establishment, Denka will allow the Company to integrate all of the Group’s health related
businesses, and utilize resources efficiently and strengthen efforts to promote its business strategy. The
newsletter provides two recent news and three other topics concerning the health and life science sector.
Opening ceremony for Denka Life Innovation Research
Denka established its first overseas research center in the health and life science sector, Denka Life
Innovation Research Private Limited (DLIR), in Biopolis, Singapore. The opening ceremony was held on
February 13, 2017.
In order to develop biomedical science research systems, the Singapore government has been actively
soliciting domestic and overseas research institutions and companies. The Agency for Science, Technology
and Research (A*STAR), Singapore’s bio research institute, as well as global bio companies have gathered in“Biopolis”, biomedical research hub linking government sectors with private entities to promote cutting-edge,
dynamic research and development.
Several researchers and Singapore government officials attended the ceremony, including the Chairman ofSingapore’s Economic Development Board, Beh Swan Gin, and the Chairman of A*STAR, Lim Chuan Poh.
Chairman Yoshidaka (at that time, President) expressed our appreciation to the people of Singapore, and withthe aim of bringing, 2017 “life innovation”, expressed our commitment to contribute to society by using newtechnologies to tackle issues that people are facing such as cancer and infectious diseases.
With the opening of DLIR, the Denka Group started measures to accelerate the research and developmentof simple diagnostic systems that use genetic testing methods for tropical infectious diseases such as the zika
virus and dengue fever, and seasonal influenza vaccines derived from protein production technologies using
plants.
Denka established Denka-KEW Genomics, a joint venture with KEW, Inc., which offers diagnostics
services in the U.S.
On February 15, 2017, Denka and U.S.-based KEW, Inc., established a joint-venture, Denka-KEW
Genomics LLC (DKGX), for the purpose of providing comprehensive genomic profiling to cancer patientsand guiding therapeutic decisions based on individual patient tumor profiles. In June 2015, Denka and KEW,
Inc. collaborated with Niigata University and other entities to study and evaluate the benefits of KEW, Inc.’s
CANCERPLEX® in Japanese cancer patients. The results of the study, which focused on colorectal cancer
cases, was published in the Genome Medicine providing possibility of implementing in Japan, and served as
the basis for establishing DKGX. DKGX conducts diagnostics on solid tumors at the examination lab in
Denka Innovation Center in Machida City, Tokyo, and plans to use CANCERPLEX®, a genome sequencing
platform, for the purpose of providing comprehensive genomic profiling and information to cancer patients inJapan. Denka and KEW, Inc. intend to use DKGX to create an environment that provides optimal treatment
services for all patients, and to contribute to enhancing the quality of life of all individuals.
(Note) CANCERPLEX® is a comprehensive genomic profiling platform using next generation sequencer andbioinformatics for sequencing over 400 cancer-related genes, providing analysis of gene mutation of solid tumor
accurately, timely and in detail.
CO2-SUICOM®, an environment-friendly concrete product, was awarded the 13th Eco ProductsGrand Prize Promotion Council’s Special Award (Excellence Award)
CO2-SUICOM®, an environment-friendly concrete product jointly developed by four companies (Denka,
Chugoku Electric Power Co., Inc., Kajima Corporation and Landes Co., Ltd.) was awarded the 13th Eco
Products Grand Prize Promotion Council’s Special Award (Excellence Award).
The award recognizes outstanding products and services that give consideration to lessening theirenvironmental impact.
By absorbing CO2, CO2-SUICOM® utilizes special cement additives that strengthen concrete (capturing),
which and since it reduces the volume of cement used and absorbs CO2 in exhaust gas emitted from power
stations and factories. The product is capable of reducing net CO2 emissions volume during curing to zero or
less.
Leveraging special cement additive technologies accumulated over the years, Denka developed a29

carbonization agent LEAF® that serves as a key material of CO2-SUICOM.
In addition to CO2-SUICOM®, Denka has been marketing EIEN®, which absorbs CO2 and thereby
prolongs the life of concrete structures, as well as SUQCEM®, a lightweight, ultrahigh-strength
fiber-reinforced concrete product. Going forward, Denka hopes to contribute to environmental preservation
through CO2-reduction, resource conservation and other various solutions.
Hosting the Support Itoigawa Charity Concert
There was a major fire in central Itoigawa City of Niigata Prefecture on December 22, 2016 that destroyed
approximately 150 buildings, including homes and shops.
Denka’s Omi Plant is located in Itoigawa City. After the disaster, we promoted various initiatives tocontribute to the reconstruction of the disaster-stricken area to facilitate the safe and comfortable developmentof the community. As part of these initiatives, on March 2, 2017, the Denka Group companies hosted the“Support Itoigawa Charity Concert” at Sumida Triphony Hall in Sumida Ward, Tokyo.
More than 1,000 people attended the successful event and enjoyed performances by the Japan Philharmonic
Orchestra and other musicians with historical ties with the City who supported the cause. Proceeds from theconcert were donated to Itoigawa City.
Renewed Naming Rights for Niigata Stadium (DENKA BIG SWAN STADIUM)On December 31, 2016, Denka renewed its naming rights for Niigata Stadium (DENKA BIG SWAN
STADIUM).
DENKA BIG SWAN STADIUM was one of venues for the 2002 FIFA World Cup, and is now home to
ALBIREX NIIGATA, a J1 League team, and ALBIREX NIIGATA Ladies, participating in the Japan Women’s
Football League. The stadium has also been used as an athletics field, to host the Japan National
Championships in 2015 and other events.
In addition to the Omi Plant in Niigata, several Denka Group companies are located in Niigata, such as
DENKA SEIKEN Co., Ltd., which manufactures vaccines and test reagents, having close ties with the local
communities in Niigata dating back many years. As a naming rights sponsor, Denka will promote the Stadium
as a familiar facility to be enjoyed by all the people in the region, as we continue to support its further
development as a revered location for regional activity and sports promotion.

30

(2)

Capital Investment
The Group is steadily implementing many concrete measures with an offensive attitude inaccordance with the three new growth strategies of the Denka100 management plan: “Create the most
optimal production system,” “Scrutinize every cost element,” and “Focus management resources on
new growth drivers and develop next-generation products.” In the fiscal year ended March 31, 2017, theGroup conducted capital investment totaling ¥25,720 million.
Capital investment in the Elastomers & Performance Plastics Division amounted to ¥8,364 million.
Principal items were capital investment for the Company’s Omi Plant and Chiba Plant.
In the Infrastructure & Social Solutions Division, capital investment amounted to ¥8,692 million,
which mostly concerned the Company’s Omi Plant and Omuta Plant.
In the Electronics & Innovative Products Division, capital investment amounted to ¥2,947 million,
which mostly concerned the Company’s Omuta Plant and Isesaki Plant.
Capital investment in the Life Science & Environmental Products Division amounted to ¥5,625
million mainly for the Company and DENKA SEIKEN Co., Ltd.
Main capital investment projects completed during fiscal 2016 include construction work tostrengthen competitiveness by optimizing utility usage and to lower costs at the styrene monomer plantat the Company’s Chiba Plant. Furthermore, ongoing construction work at facilities include constructionof a new hydroelectric power plant at the Company’s Omi Plant and an anti-cancer virus G47Δ
production facility at DENKA SEIKEN Co., Ltd.
In addition, in the “environment”, “energy”, “infrastructure” and “health” sectors, which have been
identified as “four growth sectors”, the Company has been actively implementing strategic investment
such as M&A to generate further growth. In the “infrastructure” sector, as part of its efforts to develop
the special cement additives business in Southeast Asia and in a follow up to Malaysia, the Company
converted Indonesia-based PT. ESTOP Indonesia, a construction materials manufacturer, to a subsidiaryby raising its capital stake from 33% to 79%.
Furthermore, in the “health” sector, the Company utilized its partnership with Singapore’s Agency
for Science, Technology and Research (A*STAR) to establish Denka Life Innovation Research Private
Limited in Singapore. This is the Company’s first overseas R&D base specializing in the life science
sector. It also collaborated with KEW, Inc., a U.S.-based diagnostics service company, to establish
Denka-KEW Genomics for the purpose of providing comprehensive genomic profiling to cancer
patients and anti-cancer information.

(3)

Financing
The Company did not procure funds through the issuance of new shares or bonds during the fiscal
year under review.

(4)

Issues to be Addressed
Last year, the Company renewed “The Denka Value”, the corporate philosophy that serves as thebasis for our corporate activities to lay the groundwork for the next 100 years. This coincided with thefirst year of our second century, which marked the Denka’s 101st anniversary. For details, please see“Denka’s Corporate Governance Initiatives” on page 23 of this Notice.
In order to realize “The Denka Value,” Denka has continued steadily implementing initiatives
related to “focusing management resources on four growth sectors and developing next-generation
products,” one of the new growth strategies of the “Denka 100” management plan.
As part of initiatives for the “environment” and “energy” sectors, we created the Automotive
Materials & Solution Department at our headquarters. This department will serve as a contact point forthe overall Denka Group to effectively address new requirements for next-generation automobiles andauto parts. Furthermore, the Company officially decided to construct a new hydroelectric power plant
after the investigation and examination at the Kurobegawa Power Plant, which is a joint venture with
the Hokuriku Electric Power Company.
In the “infrastructure” sector, as part of initiatives to develop the special cement additives businessin Southeast Asia, which is experiencing remarkable economic growth, after doing so, the Company
converted a construction materials manufacturer in Indonesia to a subsidiary.
Among the four growth sectors, we have particularly accelerated initiatives in the “health” sector,
where future growth is expected. Specifically, mainstay Group company DENKA SEIKEN Co., Ltd.
and a strategic partner PlexBio, which is headquartered in Taiwan, concluded a business allianceagreement related to measuring systems developed by PlexBio. These measuring systems havepioneered a method of simultaneously measuring several proteins and genes in a shorter time and with asimpler method than conventional measuring systems. The Company will focus on populizing this31

technology as a system that solves various issues in the medical field. Furthermore, in the partnershipwith Singapore’s Agency for Science, Technology and Research (A*STAR), the Company establishedDenka Life Innovation Research Private Limited in Singapore, and welcomed members of theSingapore government at the opening ceremony in February this year. Research institutions of global
bio-related companies gather in Singapore, and we plan to take advantage of the new facility toaccelerate training of global personnel and promote open innovation in the life science sector.
Furthermore, Denka also collaborated with KEW, Inc., a U.S.-based diagnostics service company, toestablish Denka-KEW Genomics for the purpose of providing comprehensive genomic profilingrelevant information to cancer patients in Japan to guide therapeutic decisions based on individual
patient profiles. Through this business, we hope to create an environment that provides optimaltreatment services to each and every cancer patient in Japan.
These initiatives allow us to steadily promote the “Denka100” management plan and strengthen our
corporate governance system. Accordingly, from April this year, based on an executive management
structure headed by the Chairman and President, we aim to respond to an expansion of our businessfields and globalization effectively and promptly, and further enhance our corporate governancefunctions. Furthermore, we are presently formulating the new management plan, “Denka Value-up,” tofollow up on the progress achieved under “Denka100.”
Our fundamental concepts in formulating “Denka Value-Up” was resolved at a meeting of the Boardof Directors, and has been announced. Specific details are outlined on the next page.
Fundamental concepts for “Denka Value-UP” (FY2018 to 2022)○ Growth vision for “Denka Value-Up”◆ Become a Specialty Company* with a strong global presence* A business that meets or has a potential to meet the following conditions in the near
future :1) boasting distinctive strengths and product value; 2) equipped with resilience tochanges in external factors; and 3) commanding an industry-leading market share◆ Maintain Sustained Growth by significantly enhancing productivity through innovative
processes◆ Secure Sound Growth through work style reforms○ Growth Strategy 1 : Sharper Focus on Specialization
Business portfolio shift = Focus on specialization(1) Accelerate the expansion of our specialty businesses◆ Focus our management resources on three key fields
1) Healthcare: Expand into health checkup, treatment and disease prevention employing vaccine anddiagnostic reagent technologies; Expand into markets related to cancer and infectious
diseases with epoch-making technologies2) Sustainability and energy: Innovative materials for mobility, energy saving and clean energy
3) High-value-added infrastructure : Technologies and solutions for construction and civil engineering(2) Specialize our original businesses◆ Increase “specialty grade” ratio in product lineup◆ Shift to solution business●Original Businesses: Elastomer, styrene-based and inorganic products and resin processing, etc.
(3) Redefine positioning of the commodity businesses◆ Value chain optimization, operational downsizing in step with market demand and businessreorganization, etc.
⇒Aim to have specialized businesses contribute to 90% of fiscal 2022 operating income○ Growth strategy 2 Innovative Processes
Process reforms in production, R&D and back-office operations
Launch process reform initiatives (introduce cutting-edge ICT technologies, streamline back-office
operations and standardize processes) to achieve a drastic improvement in productivity;
create new businesses; promote work style reforms; and realize a more vibrant organization thatembraces diversity.
(1) Production32◆ Apply IoT- and AI-based technologies ⇒ AI-based, unmanned futuristic plants◆ Revolutionary production methods ⇒ Improved production stability and efficiency(2) R&D◆ Create new businesses Strengthen key operations ⇒Speedier R&D utilizing advanced digitaltechnologies(3) Back-office operations◆ Improve the productivity of back-office operations◆ Create a healthy and attractive workplace◆ Promote diversity

33

(5)

Financial Position and Results of Operations

Item

155th term(Millions of yen, unless otherwise stated)
156th term
157th term
158th term(from April 1, 2013 to (from April 1, 2014 to (from April 1, 2015 to (from April 1, 2016 to
March 31, 2014)
March 31, 2015)
March 31, 2016)
March 31, 2017)

Net sales
376,809
383,978
369,853
362,647
Operating income
21,23024,04730,63425,844
Ordinary income
20,60424,28727,022
23,158
Profit attributable to13,57319,021
19,472
18,145owners of parent
Net income per share
29.03
41.48
42.94
41.01
(yen)
Total assets
431,347445,569
443,864
454,944
Total net assets
189,516
210,798
216,071
227,487
Net assets per share
402.77455.94473.35505.28(yen)
Total shareholders’
43.5
46.9
47.7
49.1
equity ratio (%)
Return on equity
7.4
9.6
9.3
8.3
(ROE) (%)
Total dividends paid
4,659
5,723
5,836
6,194
Dividends per share
10.00
12.50
13.00
14.00
(yen)
Notes: 1. Net income per share is calculated using the average number of shares issued andoutstanding excluding treasury stock. Net assets per share are calculated using thenumber of shares issued and outstanding at the end of the fiscal year excluding
treasury stock.
2. For total dividends paid and dividends per share for the 158th term, the sum of theinterim dividend paid in December 2016 and the dividend proposed for resolution at
this Ordinary General Meeting of Shareholders is indicated.

34

(6) Significant Subsidiaries (as of March 31, 2017)1) Significant subsidiaries
Company name

CapitalDenka Singapore Pte., Ltd.

SGD 69,410 thousand

Denka Chemicals Holdings
Asia Pacific Pte., Ltd.
Denka Performance
Elastomer LLC

USD 68,700 thousand
USD 62,000 thousand

Hinode Kagaku Kogyo

JPY 300 million

Nishi-nihon Koatsu Gas Co.,Ltd.

JPY 80 million

DENKA RENOTEC Co., Ltd.

JPY 50 million

DENKA Azumin Co., Ltd.

JPY 300 million

DENKA Inorganic Materials
Tianjin Co., Ltd.
DENKA Infrastructure
Technologies Shanghai Co.,Ltd.
Denka Infrastructure
Malaysia Sdn Bhd.
Estop Sdn. Bhd.
PT. ESTOP Indonesia
Denka Advantech Pte., Ltd.
Denal Silane Co., Ltd.

JPY 250 million
JPY 210 million
MYR 7,151 thousand
MYR 1,500 thousand
IDR 6,300 million
SGD 17,000 thousand
JPY 500 million

Denka Advanced Materials(Suzhou) Co., Ltd.

CNY 55,440 thousand

Denka Electronic Materials
Dalian Co., Ltd.

JPY 1,000 million

DENKA Polymer Co., Ltd.

JPY 2,080 million

Nakagawa Techno IndustrialCo., Ltd.

JPY 50 million

Denka Advanced Materials
Vietnam Co., Ltd.

USD 12,000 thousand

DENKA SEIKEN Co., Ltd.

JPY 1,000 million

35

The
Company’s
percentage ofequityparticipation

Principal business

Manufacturing and sales of
100.0
acetylene black and functional(100.0)polystyrene resin products
Regional headquarters for
100.0
Southeast and South Asia
70.0 Manufacturing and sales of(70.0) synthetic rubbers
Manufacturing and sales of
100.0
chemical fertilizers
Manufacturing and sales of
93.2
high-pressure gas
Repair and reinforcement
work for concrete structures
100.0
and buildings and sales ofmaterials
Manufacturing and sales of
100.0 fertilizers and agricultural
materials
Manufacturing and sales of
100.0
special cement additives
Business headquarters for100.0 special cement additives in
China
90.0 Manufacturing and sales of(90.0) construction chemicals
100.0 Manufacturing and sales of(100.0) construction chemicals
78.9 Manufacturing and sales of(78.9) construction chemicals
Manufacturing and sales of
100.0
fused silica and synthetic fiber(100.0)for wigs and hairpieces
Manufacturing and sales of
51.0
monosilane gas, etc.
Manufacturing, processing,and sales of electronic
100.0
packaging materials and foodpackaging materials, etc.
Processing and sales of
100.0
electronic materials
Manufacturing and sales of
100.0 various packaging materials
and plastic containers
Manufacturing, processing,
100.0
and sales of metal rain gutters
Manufacturing and sales of
100.0
electronic packaging materials(100.0)and vinyl tapes
Manufacturing and sales of
100.0 vaccines and clinicaldiagnostic reagents

Sales of raw materials forindustrial applications, civil
YK Inoas Co., Ltd.
JPY 100 million
100.0 engineering and construction
materials, and interiormaterials
Design and engineering of
Denka Consultant &JPY 50 million
100.0 various industrial facilities,
Engineering Co., Ltd.
transportation facilities, etc.
Sales of inorganic industrial
Akros Trading Co., Ltd.
JPY 1,200 million
68.5 products, organic industrial
products, industrial resins, etc.
Akros Trading China Co.,
100.0 Sales of electronic packaging
USD 300 thousandLtd.
(100.0) materials, etc.
Sales of resins andAkros Trading Taiwan Co.,
100.0
TWD 29,000 thousandsemiconductor-related
Ltd.
(100.0)materials, etc.
Note:
The Company’s percentage of equity participation is calculated by dividing thenumber of shares held by the Company by the number of shares issued and outstanding.
The figure within parentheses indicates the percentage of indirect ownership by
subsidiaries.
2) Significant affiliates
Company nameToyo Styrene Co., Ltd.
Denak Co., Ltd.

The
Company’s
percentage ofequityparticipation

CapitalPrincipal business

Manufacturing, processing,and sales of polystyrene resin
Manufacturing and sales of
50.0
monochloroacetic acid

JPY 5,000 million

50.0

JPY 600 million(7) Principal Business Details (as of March 31, 2017)
The Company manufactures and sells the following products.
Business division
Elastomers & Performance
Plastics Division
Infrastructure & Social
Solutions Division
Electronics & Innovative
Products Division
Life Science &Environmental Products
Division
Others Division

Main products
Chloroprene rubber, acetylene black, styrene monomer, polystyrene
resin, ABS resin, CLEAREN, heat-resistant resin, transparent resin,
POVAL, etc.
Cement, special cement additives, fertilizers, calcium carbide, fire
resistant materials, environmental materials, etc.
Fused silica, electronic circuit substrates, fine ceramics, electronic
packaging materials, etc.
Food packaging materials, vaccines, joint function improvers,
diagnostic reagents, housing materials, life science and industrial
materials, etc.
Plant engineering etc.

36

(8)

Principal Offices and Factories (as of March 31, 2017)
Company namePrincipal offices
Head Office:1-1, Nihonbashi-Muromachi 2-chome, Chuo-ku,
TokyoBranches:
Osaka, Nagoya, Fukuoka, Niigata, Hokuriku(Toyama), Sapporo, Tohoku (Sendai)
Plants:Omi (Itoigawa, Niigata Prefecture), Omuta, Chiba(Ichihara, Chiba Prefecture), Shibukawa, Ofuna(Kamakura, Kanagawa Prefecture), Isesaki
Denka Co., Ltd.
Research Institutes: Denka Innovation Center (Advanced Technologies
Research Institute, Life Innovation ResearchInstitute, Infrastructure & Solutions Development
Research Institute) (Machida, Tokyo)
Polymer & Processing Technology Institute(Ichihara, Chiba Prefecture)
Denka Singapore Pte., Ltd. Head Office and Plants: Singapore
Denka Chemical Holdings
Head Office: Singapore
Asia Pacific Pte., Ltd.
Denka Performance
Head Office and Plant: Louisiana, United States
Elastomer LLC
Hinode Kagaku Kogyo
Head Office and Plant: Maizuru, Kyoto Prefecture
Nishi-nihon Koatsu Gas
Head Office: Fukuoka, Fukuoka PrefectureCo., Ltd.
DENKA RENOTEC Co.,
Head Office: Chuo-ku, TokyoLtd.
DENKA Azumin Co., Ltd. Head Office and Plant: Hanamaki, Iwate Prefecture
DENKA Inorganic
Head Office and Plant: Tianjin, China
Materials Tianjin Co., Ltd.
DENKA Infrastructure
Technologies Shanghai
Head Office: Shanghai, China
Co., Ltd.
Denka Infrastructure
Head Office and Plant: Selangor, Malaysia
Malaysia Sdn Bhd.
Estop Sdn. Bhd.
Head Office and Plant: Selangor, Malaysia
PT. ESTOP Indonesia
Head Office: Special Capital Territory of Jakarta, Indonesia
Denka Advantech Pte., Ltd. Head Office and Plant: Singapore
Denal Silane Co., Ltd.
Head Office: Chuo-ku, Tokyo
Denka Advanced Materials
Head Office and Plant: Suzhou, Jiangsu, China(Suzhou) Co., Ltd.
Denka Electronic Materials
Head Office and Plant: Dalian, Liaoning, China
Dalian Co., Ltd.
Head Office: Koto-ku, Tokyo
DENKA Polymer Co., Ltd. Plants: Sakura, Katori (Tako-machi, Chiba Prefecture), Goi (Ichihara,
Chiba Prefecture)
Nakagawa Techno
Head Office: Kasai, Hyogo Prefecture
Industrial Co., Ltd.
Denka Advanced Materials
Head Office and Plant: Hung Yen, Vietnam
Vietnam Co., Ltd.
Head Office: Chuo-ku, Tokyo
DENKA SEIKEN Co., Ltd.
Plant: Gosen, Niigata Prefecture
YK Inoas Co., Ltd.
Head Office: Bunkyo-ku, Tokyo
Denka Consultant &Head Office: Chuo-ku, Tokyo
Engineering Co., Ltd.
Akros Trading Co., Ltd.
Head Office: Minato-ku, Tokyo
Akros Trading China Co.,
Head Office: Shanghai, China
Ltd.
Akros Trading Taiwan Co.,
Head Office: Hsin-Chu, Taiwan
Ltd.
37

(9) Employees (as of March 31, 2017)
1) The Group
Business segment
Number of employees
Elastomers & Performance Plastics Division
1,060 [149]Infrastructure & Social Solutions Division
935 [161]
Electronics & Innovative Products Division
952 [171]
Life Science & Environmental Products Division
1,744 [389]
Others Division
773 [200]
Corporate (common)
352 [ 72]
Total
5,816 [1,142]
Notes: 1. The number of employees indicated is the number of full-time employees and theannual average number of temporary employees is indicated in brackets.
2. The number of employees indicated for “Corporate (common)” is the number of
employees who belong to administrative divisions that cannot be classified into a
specific business.
2) The Company
Increase (Decrease)from the previous
Average age
Average service years
fiscal year-end
2,960 [645]-14 [-12]
40.1
17.7
Note:
The number of employees indicated is the number of full-time employees and theannual average number of temporary employees is indicated in the brackets.
Number of employees(10) Principal Lenders (as of March 31, 2017)
LenderOutstanding borrowings (Millions of yen)
Syndicated loan
25,000Mizuho Bank, Ltd.
17,049M&A loans
12,442
Sumitomo Mitsui Banking Corporation
6,358
The Norinchukin Bank
6,334
Notes: 1. The syndicated loan is managed by Mizuho Bank, Ltd., Sumitomo Mitsui Banking
Corporation, and the Development Bank of Japan and is co-financed by The Daishi
Bank, Ltd. and other financial institutions.
2. M&A loans refers to an overseas M&A support loan system maintained by the Japan
Bank for International Cooperation in cooperation with private banks.
(11) Other Significant Matters concerning the Group’s Current Situation
Not applicable38

2. Status of Shares (as of March 31, 2017)(1) Total Number of Authorized Shares

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

465,954,121 shares(including 23,473,612 shares of treasury stock)
29,363(3) Number of Shareholders(4) Major Shareholders

Number of shares
held(thousand shares)
36,06931,805

Shareholder name

Percentage ofshares held
(%)
8.15
7.19

The Master Trust Bank of Japan, Ltd. (Trust Account)
Japan Trustee Service Bank, Ltd. (Trust Account)
Trust & Custody Services Bank, Ltd.
(Mizuho Corporate Bank, Ltd. Retirement Benefit Trust
16,0793.63
Account re-entrusted by Mizuho Trust and Banking Co.,Ltd.)
National Mutual Insurance Federation of Agricultural
13,795
3.12
Cooperatives
MITSUI LIFE INSURANCE, CO., LIMITED
11,908
2.69
STATE STREET BANK AND TRUST COMPANY
10,3762.35505001
Japan Trustee Service Bank, Ltd. (Trust Account 9)
9,105
2.06
Japan Trustee Service Bank, Ltd. (Trust Account 5)
7,972
1.80
Trust & Custody Services Bank, Ltd. (Investment Trust
7,501
1.70
Collateral Account)
Mitsui Sumitomo Insurance Company, Limited
6,916
1.56
Notes: 1. The Company holds 23,473,612 shares of treasury stock but is excluded from theabove major shareholders.
2. Treasury stock is excluded for calculation of the percentage of shares held.
(5) Other Significant Matters concerning Shares
Not applicable

3. Matters concerning the Company’s Stock Acquisition Rights (as of March 31, 2017)
Not applicable394. Company Officers(1)

Directors and Audit & Supervisory Board Members (as of March 31, 2017)
Name

Position

Shinsuke Yoshitaka

President

Mitsukuni Ayabe

Representative
Director

Manabu Yamamoto

Director

Kenji Nakano

Director

Tetsuro Maeda

Director

Yasuo Sato
Akio Yamamoto
Tatsutsugu Fujihara
Shohei Tamaki
Masanori
Sakamoto
Tsunehiro Sasanami

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

Responsibilities and significant concurrent positions
President and Chief Executive Officer
Outside Director of Koatsu Gas Kogyo Co., Ltd.
Executive Vice President and Chief Operating Officer
Assistant to CEO, Supervisor Corporate Planning,
Development
Purchasing Dept., Logistics Dept.
Senior Managing Executive Officer
Investor Relations Dept., CSR & Corporate
Communications Dept., Internal Auditing Dept.,
Accounting & Finance Dept., Information System Dept.
General Manager, Corporate Planning Dept.
Outside Audit & Supervisory Board Member of Koatsu
Gas Kogyo Co., Ltd.
Managing Executive Officer
Chief Compliance Officer
Representative in China
Secretary Dept., Administrative Dept., Legal Dept.,
HR Dept., DENKA100 Promoting Dept.
President and Representative Director of DENKA
SEIKEN Co., Ltd.
Chairman and Director of Wisemech Corporation

Chairman and Executive Officer of KSO Corporation

Lawyer, Sasanami Law Office

Representative Director of Global Professional Partners
Outside Audit & Supervisory Board Member of
Outside Audit &Panasonic Corporation
Toshio Kinoshita
Supervisory
Outside Corporate Auditor of Weathernews Inc.
Board Member
Outside Director of ASATSU-DK Inc.
Outside Director of Mizuho Bank, Ltd.
Outside Director of TACHI-S CO., LTD.
Notes: 1. Directors Mr. Yasuo Sato, Mr. Akio Yamamoto, and Mr. Tatsutsugu Fujihara areoutside directors as stipulated in Article 2, Paragraph 15 of the Companies Act.
2. Audit & Supervisory Board Members Mr. Tsunehiro Sasanami and Mr. Toshio
Kinoshita are outside auditors as stipulated in Article 2, Paragraph 16 of theCompanies Act.
3. Audit & Supervisory Board Member Mr. Toshio Kinoshita is a certified public
accountant, and has an adequate level of knowledge regarding finance and accounting.
4. The Company designated Directors Mr. Yasuo Sato, Mr. Akio Yamamoto, and Mr.
Tatsutsugu Fujihara and Audit & Supervisory Board Members Mr. Tsunehiro Sasanami
and Mr. Toshio Kinoshita as independent directors/auditors as defined by Tokyo Stock
Exchange, Inc. and notified it of the designation.
40

(Reference)
Executive Officers (as of May 1, 2017)
Position
President and Chief
Executive Officer
Executive Vice
President and Chief
Operating Officer
Managing Executive
Officer

Name
Manabu Yamamoto
Mitsukuni Ayabe
Norihiro Shimizu

Kenji Nakano

Masaharu Suzuki

Tetsuya Shinmura
Junichi Kimura
Toshio Imai
Executive Officer

Responsibilities

Hideki Hirano
Koichi Taguchi
Hideki Watanabe
Toyoki Yokoyama
Koki Tabuchi
Shojiro Watanabe
Nobuyuki Yoshino
Kazuya Tokumoto
Hideki Takahashi
Kazuo Takahashi
Rimiru Hayashida

Supervisor, Life Innovation
President and Representative Director of DENKA
SEIKEN Co., Ltd.
Chief R&D Officer, Innovation Center
New Business Development Dept., R&D Promoting
Dept., Intellectual Property Dept.
Chief Compliance Officer
Secretary Dept., Internal Auditing Dept.,
Administrative Dept., Legal Dept.,
HR Dept., Denka100 Promoting Dept.
Investor Relations Dept., CSR & Corporate
Communications Dept.
General Manager, Corporate Planning Dept.
Director Chairman, DCHA
General Manager, Business Process Reform Promotion
Dept.
Chief Technical Officer (CTO)
Environment and Safety Dept., Purchasing Dept.,
Logistics Dept.
Representative, China
General Manager, Life Science & Environment
Products
Representative, USA
General Manager, Elastomers & Performance Plastics
General Manager, Omi Plant
General Manager, Isesaki Plant
General Manager, Chiba Plant
General Manager, Infrastructure & Social Solutions
President of Denka Performance Elastomer LLC
General Manager, Electronics & Innovative Products
Assistant to Chief R&D Officer, Innovation Center
General Manager, Advanced Technologies ResearchInstituteManaging Director, DCHA, DSPL, and DAPL
General Manager, Life Innovation
General Manager, Omuta Plant
Information System Dept.
General Manager, Accounting & Finance Dept.
Member of Business Process Reform Promotion Dept.

Notes: DCHA: Denka Chemicals Holdings Asia Pacific Pte., Ltd.
DSPL: Denka Singapore Pte., Ltd.
DAPL: Denka Advantech Pte., Ltd.

41

(2)

Directors that Retired During the Fiscal Year Under Review

Name

Date of retirement

Reason for retirement

Hideyuki Udagawa

June 22, 2016

Term of office expired

Tadashi Hashimoto

June 22, 2016

Term of office expired

Positions, responsibilities,
and significant concurrent
positions at time ofretirement
Director
Senior Managing Executive
Officer
General Manager,
Infrastructure & Social
Solutions
Special Cement Additives
Overseas Business
Promotion
General Manager, Disaster
Reconstruction Support Div.
Director (Outside Director)(3) Summary of Liability Limitation Agreements
Based on Article 427, Paragraph 1 of the Companies Act, the Company currently concludes liability
limitation contracts with Directors Mr. Yasuo Sato, and Mr. Akio Yamamoto, and Mr. Tatsutsugu Fujihara
and Audit & Supervisory Board Members Mr. Tsunehiro Sasanami and Mr. Toshio Kinoshita that limit
their liability for damages of Article 423, Paragraph 1 of said Act. The limit of liability under thecontract is set to a predefined amount of ¥5 million or more or the amount stipulated by laws andregulations, whichever is higher.
(4) Remuneration for and Other Payments to Directors and Audit & Supervisory Board Members
Category

Number of persons

Amount paid
(Millions of yen)

Directors
10305(of which Outside Directors)(4)(36)
Audit & Supervisory Board Members
479(of which Outside Audit & Supervisory(2)(24)
Board Members)
Total
14
384
(of which outside officers)(6)(60)
Notes: 1. The amount paid to Directors does not include portions of their salaries as employees.
2. The maximum amount of remuneration for Directors is ¥540 million per year (ofwhich the maximum amount of remuneration for Outside Directors is ¥50 million,
excluding the portions of their salaries as employees) as resolved at the 156th Ordinary
General Meeting of Shareholders held on June 19, 2015.
3. The maximum amount of remuneration for Audit & Supervisory Board Members is¥13 million per month as resolved at the 147th Ordinary General Meeting of
Shareholders held on June 29, 2006.
4. The number of Directors as of the end of the fiscal year under review was eight(including three Outside Directors). The difference between these figures and thefigures in (1) above are due to the retirement of two Directors (including one Outside
Director) at the 157th Ordinary General Meeting of Shareholders held on June 22,2016 as in (2) above.

42

(5) Outside Officers
1) Significant concurrent positions as executive directors etc. at other companies, etc. and therelationship between the Company and such companies, etc.
Director Mr. Yasuo Sato is Chairman and Director of Wisemech Corporation. There are no
significant transactions between the Company and Wisemech Corporation.
Director Mr. Tatsutsugu Fujihara is the Chairman and Executive Officer of KSO Corporation.
There are no significant transactions between the Company and KSO Corporation.
Audit & Supervisory Board Member Mr. Tsunehiro Sasanami is a lawyer with Sasanami Law
Office. There are no significant transactions between the Company and Sasanami Law Office.
Audit & Supervisory Board Member Toshio Kinoshita is Representative Director of Global
Professional Partners. There are no significant transactions between the Company and Global
Professional Partners.
2) Significant concurrent positions as outside officers etc. at other companies, etc. and therelationship between the Company and such companies, etc.
Audit & Supervisory Board Member Mr. Toshio Kinoshita is Outside Audit & Supervisory
Board Member of Panasonic Corporation and Outside Corporate Auditor of Weathernews Inc. andOutside Director of ASATSU-DK Inc., Outside Director of Mizuho Bank, Ltd., and Outside Directorof TACHI-S CO., LTD.
There are no significant transactions between the Company and Weathernews Inc., Asatsu-DK Inc.,and TACHI-S CO., LTD.
The Company has transactions with Panasonic Corporation and Mizuho Bank, Ltd., but there areno special interest relationships.
3) Relationship with specified related parties such as major customers
Not applicable4) Principal activities in the fiscal year ended March 31, 2017
i. Outside Directors[Board of Directors meetings]
The Board of Directors met 13 times in the fiscal year ended March 31, 2017. Mr. Yasuo Sato and
Mr. Akio Yamamoto attended all 13 meetings of the Board of Directors (attendance rate: 100%), and
Mr. Tatsutsugu Fujihara attended all 10 meetings of the Board of Directors (attendance rate: 100%)after assuming office as Director on June 22, 2016. Mr. Sato and Mr. Yamamoto, based on their richexperience and wide views as managers and rich international experience serving as persons
responsible for business at global companies, and Mr. Fujihara, based on his rich experience and wideviews as a manager, and expert knowledge of corporate finance, actively made inquiries andrecommendations regarding the Group’s business plans, particularly regarding overseas expansion,and its internal rules, personnel strategy and compliance. Mr. Fujihara also visited the Company’sbusiness sites and subsidiaries and received briefings on the business, and asked questions and statedopinions to Directors etc., as necessary, from external viewpoints.
ii. Outside Audit & Supervisory Board Members[Board of Directors meetings]
The Board of Directors met 13 times in the fiscal year ended March 31, 2017. Mr. Tsunehiro
Sasanami attended all 13 meetings of the Board of Directors (attendance rate: 100%), and Mr. Toshio
Kinoshita attended 12 out of the 13 meetings of the Board of Directors (attendance rate: 92%). Mr.
Sasanami, based on his rich experience and expert knowledge as a lawyer, and Mr. Kinoshita, based on
his experience and rich accounting knowledge as a certified public accountant in Japan and the US,
actively made inquiries and made recommendations regarding the organizational structure of theCompany’s overseas subsidiaries, compliance and other legal risks, and business and funding plans.
They also visited the Company’s business sites and subsidiaries and received briefings on the businessand asked questions and stated opinions to Directors, etc., as necessary, from external viewpoints.
[Audit & Supervisory Board meetings]
The Audit & Supervisory Board met 15 times in the fiscal year ended March 31, 2017. Mr.
Tsunehiro Sasanami attended all 15 meetings of the Audit & Supervisory Board (attendance rate:100%), and Mr. Toshio Kinoshita attended 14 out of the 15 meetings of the Audit & Supervisory
Board (attendance rate: 93%). They also attended the Board of Directors meetings and other important
meetings. In addition, they reviewed important minutes, authorization documents, etc., investigated43the Company’s divisions and departments, business sites and subsidiaries, and received briefings on
the status of business execution at periodic divisional report meetings. They reported the results ofthese activities to the Audit & Supervisory Board and had necessary discussions with other Audit &Supervisory Board Members.
Board of Directors meetings
Director
Yasuo Sato
Director
Akio Yamamoto
Director
Tatsutsugu Fujihara
Audit & Supervisory Board Member
Tsunehiro Sasanami
Audit & Supervisory Board Member
Toshio Kinoshita

Audit & Supervisory Board
meetings
Attendance Attendance rate

Attendance

Attendance rate

13/13

100%

-

-

13/13

100%

-

-

10/10

100%

-

-

13/13

100%

15/15

100%

12/13

92%

14/15

93%

44

5. Accounting Auditor(1)

Accounting Auditor’s Name
Ernst & Young ShinNihon LLC(2)Accounting Auditor’s Remuneration, etc. for the Fiscal Year Ended March 31, 2017
Amount paid (thousands of yen)
Remuneration, etc. for the Accounting Auditor for the fiscal
67,000year ended March 31, 2017
Monetary or property benefits to be paid by the Company
103,470
and its subsidiaries to the Accounting Auditor
Notes: 1. Under the audit agreement between the Company and its Accounting Auditor,
remuneration for audits based on the Companies Act and that for audits based on the
Financial Instruments and Exchange Act are not strictly distinguished and they cannot
be substantially distinguished. Consequently, the sum of the amounts of these
remunerations is stated as the amount of remuneration, etc. for the Accounting Auditor
for the fiscal year ended March 31, 2017.
2. The Audit and Supervisory Board of the Company, in observance of the “Practical
Guidelines for Cooperation with Accounting Auditors” published by the Japan Audit &Supervisory Board Members Association, has confirmed the time taken to audit each
audit item compared to audit plans for previous fiscal years and comparisons withamounts for other companies as disclosed for the fiscal year ended March 31, 2016,
and agrees to the fees, etc., of the Accounting Auditor under Article 399, Item 1 of theCompanies Act.
3. Financial statements (including corresponding statements) of some of the Company’s
significant subsidiaries are audited (subject to regulations of the Companies Act andthe Financial Instruments and Exchange Act; including corresponding laws andregulations overseas) by Certified Public Accountants or Audit Corporations(including persons with qualifications that correspond to these qualifications overseas)other than the Company’s Accounting Auditor.

(3)

Non-audit Services
The Company pays fees to Ernst & Young ShinNihon LLC mainly for work to verify tax reductionand exemption applications regarding the feed-in tariff scheme for renewable energy.

(4)

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

(5)

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

(6)

Outline of the Limited Liability Contracts
Not applicable

45

Consolidated Financial Statements
Consolidated Balance Sheet(As of March 31, 2017)

Account item
(Assets)
Current assets
Cash and deposits
Notes and accounts
receivable-trade
Merchandise andfinished goods
Work in process
Raw materials andsupplies
Deferred tax assets
Other
Allowance for
doubtful accounts
Noncurrent assets
Property, plant andequipment
Buildings
Structures
Machinery andequipment
VehiclesTools, furniture andfixturesLand
Lease assets
Construction inprogress
Intangible assets
Software
Goodwill
Right of using patent
Investments and otherassetsInvestment securities
Long-term loans
receivable
Long-term prepaid
expenses(Reference)
157th term
443,864
161,876158th term

Account item

454,944
168,902(Liabilities)
Current liabilities
Notes and accounts
payable-trade

11,895

10,25876,00985,06943,981(Millions of yen)
(Reference)
158th term
157th term
227,793
227,456
147,537
144,190
41,811

46,811

Short-term loans payable

42,861

43,492

42,532

Commercial paper

5,000

-

3,279

3,745

Current portion of
long-term loans payable

18,22572

16,83916,907

Current portion of bonds-

10,000

1,753
8,336

2,039
8,809

11,5432,806

14,229
3,659

(218)

(460)

1,433

814

8,972
2,741

9,690
2,880

12,142

12,53980,25530,00083,26620,000281,988

286,041

Accounts payable-other
Income taxes payable
Accrued consumption
taxes
Accrued expenses
Provision for bonuses

214,329

213,456

Other

40,70920,35039,84922,13277,73073,761Long-term loans payable

28,51040,184

647

577

3,984

5,895

3,046

2,895

8,407

8,405

63,084

63,247

8,314

7,774

371

312

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

1,039

1,006

8,388

10,679

11,131
917
6,401
3,813

10,342
1,170
5,694
3,477

(Net assets)
Shareholders’ equity
Capital stock

216,071
190,647
36,998227,487
199,865
36,99856,527

62,242

Capital surplus

49,28449,284

49,84354,604Retained earnings

112,335

123,752

1,293

664

Treasury stock(7,971)(10,170)

1,581

2,789

Noncurrent liabilities
Bonds payable46

Deferred tax assets

1,210

1,608

Other

3,368

3,399

Allowance for
doubtful accounts

(770)

(823)

Total

443,864

454,944

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

47

21,087

23,70010,775

14,837

10,267

10,265

2,739

1,496

(2,695)(2,898)4,336
443,864

3,922
454,944

Consolidated Statement of Income(From April 1, 2016 to March 31, 2017)(Millions of yen)
(Reference)
157th term
369,853

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

158th term
362,647

278,064

273,263

91,78889,38361,15463,53930,63425,844Non-operating income
Interest and dividend income

1,210

1,428

Equity in earnings of affiliates

1,097

568

Other

850

3,158

640

2,637

Non-operating expenses
Interest expenses

860

Other

5,909

Ordinary income

820
6,770

4,502

27,022

5,322
23,158Extraordinary income
Gain on sales of investment securities

-

-

683

683

Extraordinary loss
Provision of allowance for doubtful accounts

671-

Acquisition-related expenses
Difference on change from simple method toprincipled method for retirement benefits
Loss on liquidation of business

632

-

544

-

-

Income before income taxes

1,848

1,356

25,174

Income taxes-current

5,488

Income taxes-deferred

438

1,356
22,486

5,133
5,926

(464)

4,669

Profit19,247

17,816

Loss attributable to non-controlling interests

(225)

(329)

Profit attributable to owners of parent

19,472

18,145(Note) Amounts are rounded down to the nearest million yen.

48

Non-consolidated Financial Statements
Non-consolidated Balance Sheet(As of March 31, 2017)

Account item
(Assets)
Current assets(Reference)
157th term
345,893
103,015158th term
352,757
103,773

Cash and deposits

4,476

2,926

Notes receivable-trade

3,157

4,446

Accounts
receivable-trade46,31052,307

Merchandise andfinished goods

29,014

26,767

Raw materials andsupplies

9,686

9,851

Prepaid expenses

944

980

Deferred tax assets

699

807

Short-term loans
receivable

3,960

706

Other

4,772

4,986

(6)

(6)

Allowance for doubtful
accounts

Noncurrent assets
Property, plant andequipment
Buildings

242,878

248,984

168,557

167,764

28,30527,587Structures

17,455

19,468

Machinery andequipment

53,71450,184464

422

Tools, furniture andfixtures

2,118

1,967

Land

60,15360,373

Construction inprogress

6,344

7,760

Vehicles49

Account item
(Liabilities)
Current liabilities
Accounts
payable-trade
Short-term loans
payableCommercial
paper
Current portionof long-termloans payable
Current portionof bonds
Accounts
payable-other
Income taxes
payableAccruedconsumption
taxes
Accruedexpenses
Deposits
received
Provision forbonuses
Other
Noncurrent
liabilities
Bonds payable
Long-term loans
payableDeferred tax
liabilities
Deferred tax
liabilities forland
revaluation
Provision for
retirement
benefits
Long-term
accounts
payable-other
Asset retirement
obligations(Millions of yen)
(Reference)
158th term
157th term
190,142
189,854
116,531
113,660
23,002

26,766

27,67527,6755,000-

18,05858-

10,0009,808

12,454

-

1,169

1,012

335

5,557

6,021

24,38927,080

1,488

1,523

537

575

73,611

76,19430,00020,00027,63739,554

4,906

6,456

8,407

8,405

2,522

1,639

13

13

125

126

Intangible assets

1,048

1,246

Software481

776

Right of using patent

566

470

Investments and otherassets73,272

79,972

Investment securities

27,58033,25240,59340,787

2,412

2,283

Long-term prepaid
expenses

950

1,908

Other investments

1,743

1,742

(7)

(1)

Treasury stock

352,757

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

Stocks of subsidiaries
and affiliates
Long-term loans
receivable

Allowance for doubtful
accounts

Total

345,893(Note) Amounts are rounded down to the nearest million yen.

50

(Net assets)
Shareholders’equityCapital stock
Capital surplus
Legal capitalsurplus
Other capitalsurplusRetainedearnings
Other retained
earnings
Reserve foradvanceddepreciationof noncurrent
assetsRetainedearnings
brought
forward155,750

162,903

135,840

139,320

36,99849,28436,99849,28449,28449,2840057,51963,19957,51963,199

3,854

3,835

53,66559,363(7,962)(10,161)

19,91023,582

9,643

13,317

10,267

10,265345,893352,757

Non-consolidated Statement of Income(From April 1, 2016 to March 31, 2017)(Millions of yen)
(Reference)
157th term
225,823

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

158th term
217,017

169,841

161,349

55,981

55,667

41,87942,66914,101

12,997

Non-operating income
Interest and dividend income

4,562

Other

964

5,177
5,527

716

5,893

Non-operating expenses
Interest expenses

702

Other

4,786

Ordinary income

618
5,488

3,524

14,1404,142
14,748Extraordinary income
Gain on sales of investment securities

-

-

432

432

Extraordinary loss
Acquisition-related expenses

632

Loss on liquidation of business-

Income before income taxes

632

1,110

13,508

Income taxes-current

2,188

Income taxes-deferred

554

Profit51

14,0702,109

2,742
10,766(Note) Amounts are rounded down to the nearest million yen.

1,110

57

2,166
11,904

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

Independent Auditors’ Report(English Translation)
May 8, 2017
To the Board of Directors
Denka Co., Ltd.
Ernst & Young ShinNihon LLC
Shunji Momoi
Certified Public Accountant
Designated and Engagement Partner
Mineo Kambayashi
Certified Public Accountant
Designated and Engagement Partner
Shigeyuki Honda
Certified Public Accountant
Designated and Engagement Partner

Pursuant to Article 444, Section 4 of the Companies Act of Japan, we have audited the consolidated
financial statements, which consist of the consolidated balance sheet, the consolidated statement of income,the consolidated statement of changes in net assets, and the notes to consolidated financial statements of
Denka Co., Ltd. (hereinafter referred to as the “Company”) for the fiscal year from April 1, 2016 to March 31,
2017.
Management’s Responsibility for Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statementsin accordance with accounting principles generally accepted in Japan. This responsibility includes designingand operating internal control, which management considers necessary for the preparation and fairpresentation of the consolidated financial statements that are free from material misstatements, whether due tofraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audit as
independent auditors. We conducted our audit in accordance with auditing standards generally accepted inJapan. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected and applied depend on the auditors’ judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. The purpose of the audit is not to express an opinion on the effectiveness of theentity’s internal control. However, in making those risk assessments, we consider internal control relevant to
the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit
procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of52accounting policies used, the method of their application, and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the financial position and the results of operations of the Denka Group consisting of Denka Co., Ltd. and its
consolidated subsidiaries, applicable to the fiscal year ended March 31, 2017 in conformity with accounting
principles generally accepted in Japan.
Conflicts of Interest
Our firm and engagement partners have no interest in the Company which should be disclosed incompliance with the Certified Public Accountants Act of Japan.

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

53

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

Independent Auditors’ Report(English Translation)
May 8, 2017
To the Board of Directors
Denka Co., Ltd.
Ernst & Young ShinNihon LLC
Shunji Momoi
Certified Public Accountant
Designated and Engagement Partner
Mineo Kambayashi
Certified Public Accountant
Designated and Engagement Partner
Shigeyuki Honda
Certified Public Accountant
Designated and Engagement Partner

Pursuant to Article 436, Section 2, Paragraph 1 of the Companies Act of Japan, we have audited thenon-consolidated financial statements, which consist of the balance sheet, the statement of income, thestatement of changes in net assets, the notes to financial statements, and the accompanying supplementaryschedules thereof of Denka Co., Ltd. (hereinafter referred to as the “Company”) for the 158th term from April
1, 2016 to March 31, 2017.
Management’s Responsibility for Non-consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the non-consolidated financial
statements and the accompanying supplementary schedules in accordance with accounting principles
generally accepted in Japan. This responsibility includes designing and operating internal control, which
management considers necessary for the preparation and fair presentation of the non-consolidated financial
statements and the accompanying supplementary schedules that are free from material misstatements, whether
due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the non-consolidated financial statements and theaccompanying supplementary schedules based on our audit as independent auditors. We conducted our audit
in accordance with auditing standards generally accepted in Japan. Those standards require that we plan andperform the audit to obtain reasonable assurance about whether the non-consolidated financial statements andthe accompanying supplementary schedules are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
non-consolidated financial statements and the accompanying supplementary schedules. The procedures
selected and applied depend on the auditors’ judgment, including the assessment of the risks of material
misstatement of the non-consolidated financial statements and the accompanying supplementary schedules,
whether due to fraud or error. The purpose of the audit is not to express an opinion on the effectiveness of theentity’s internal control. However, in making those risk assessments, we consider internal control relevant to
the entity’s preparation and fair presentation of the non-consolidated financial statements and the54accompanying supplementary schedules in order to design audit procedures that are appropriate in thecircumstances. An audit also includes evaluating the appropriateness of accounting policies used, the methodof their application, and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the non-consolidated financial statements and the accompanying
supplementary schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinion.
Audit Opinion
In our opinion, the financial statements and the accompanying supplementary schedules thereof referred toabove present fairly, in all material respects, the financial position and the results of operations of theCompany applicable to the fiscal year ended March 31, 2017 in conformity with accounting principles
generally accepted in Japan.
Conflicts of Interest
Our firm and engagement partners have no interest in the Company which should be disclosed incompliance with the Certified Public Accountant Act of Japan.

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

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Transcript of the Audit Report by the Audit & Supervisory Board

Audit Report(English Translation)
With respect to the Directors’ performance of their duties during the 158th term from April 1, 2016 to
March 31, 2017, the Audit & Supervisory Board has prepared this audit report after deliberations based on theaudit reports prepared by each Audit & Supervisory Board Member, and hereby reports as follows:
1. Auditing Method Applied by the Audit & Supervisory Board Members and the Audit & Supervisory
Board and Details Thereof(1) The Audit & Supervisory Board established auditing policies, assignment of duties, and otherrelevant matters, and received a report from each Audit & Supervisory Board Member regarding thestatus of implementation of audits and results thereof. In addition, the Audit & Supervisory Board
received reports from the Directors, other relevant personnel and the Accounting Auditor regarding
the status of performance of their duties, and requested explanations as necessary.
(2) In conformity with the auditing standards for Audit & Supervisory Board Members established by
the Audit & Supervisory Board, and in accordance with the auditing policies, assignment of duties
and other relevant matters, each Audit & Supervisory Board Member communicated with Directors,
the Internal Auditing Department, other employees, and any other relevant personnel, andendeavored to collect information and maintain and improve the audit environment, conducting
audits as follows.
1) Each Audit & Supervisory Board Member also attended meetings of the Board of Directors
and other important meetings, received reports from the Directors, employees and otherrelevant personnel regarding the status of performance of their duties, requested explanations
as necessary, examined important documents related to important decisions and associatedinformation, and inspected the status of operations and assets at the head office and otherprincipal business offices. Concerning subsidiaries, communication was made with Directors
and Audit & Supervisory Board Members, etc., of subsidiaries, and information wascollected, and business reports were received from subsidiaries as necessary.
2) The Audit & Supervisory Board Members also expressed opinions on the resolutions of theBoard of Directors regarding the establishment of the system to ensure that the Directors’
performance of their duties as stated in the Business Report complies with laws andregulations and the Company’s Articles of Incorporation and other systems that are set forthin Article 100, Paragraphs 1 and 3 of the Ordinance for Enforcement of the Companies Act
of Japan as being necessary for ensuring the appropriateness of operations of a corporategroup comprised of a joint stock company (kabushiki kaisha) and its subsidiaries, and thesystems (internal control systems) established based on such resolutions. Audit &Supervisory Board Members periodically received reports from Directors, employees andother relevant personnel regarding the status of development and operation of such systems
and requested explanations as necessary.
3) With respect to the basic policy set forth in Article 118, Item 3 (i) of the Ordinance for
Enforcement of the Companies Act and the measures set forth in Item 3 (ii) of the said
article, which are described in the Business Report, the Audit & Supervisory Board
Members examined the content based on the status of deliberations at meetings of the Boardof Directors and other meetings.
4) Audit & Supervisory Board Members monitored and verified whether the Accounting
Auditor maintained its independence and implemented appropriate audits, received reports
from the Accounting Auditor regarding the status of the performance of its duties, andrequested explanations as necessary. In addition, the Audit & Supervisory Board Members
received notice from the Accounting Auditor that the “system for ensuring that duties are
performed properly” (matters set forth in each item of Article 131 of the Ordinance for
Corporate Accounting) had been prepared in accordance with the “Quality Control
Standards Relating to Auditing” (issued by the Business Accounting Council on October 28,2005) and other relevant standards, and requested explanations as necessary.
56Based on the above method, the Audit & Supervisory Board Members reviewed the non-consolidated
financial statements (non-consolidated balance sheet, non-consolidated statement of income,non-consolidated statement of changes in net assets, and notes to non-consolidated financial statements) andthe accompanying supplementary schedules, as well as the consolidated financial statements (consolidatedbalance sheet, consolidated statement of income, consolidated statement of changes in net assets, and notes
to consolidated financial statements), and the business report and its accompanying supplementary schedules
for the fiscal year in question.
2. Results of Audit(1) Results of Audit of Business Report, etc., and Other Relevant Documents
1) In our opinion, the Business Report and the accompanying supplementary schedules present fairly
the conditions of the Company in conformity with the applicable laws and regulations and the
Articles of Incorporation of the Company.
2) We have found no instances of misconduct or material violation of the applicable laws andregulations or the Articles of Incorporation with respect to performance of duties by the Directors.
3) In our opinion, the contents of the resolutions of the Board of Directors related to the internal
control systems are fair and reasonable. In addition, we have found no matters requiring special
mention regarding the description in the Business Report and the performance of duties by the
Directors related to such internal control systems.
4) We have found no matters requiring special mention with respect to the basic policies regarding thedetermination of policies on control of the finances and business of the Company described in theBusiness Report. In our opinion, the measures described in the Business Report, set forth in Article
118, Item 3 (ii) of the Ordinance for Enforcement of the Companies Act, are in line with the basic
policy, do not impair the common interests of the Company’s shareholders, and are not for the
purpose of maintaining the position of the Company’s officers.
(2) Results of Audit of Non-consolidated Financial Statements and the Accompanying Supplementary
Schedules
In our opinion, the method and the results of the audit performed by Ernst & Young ShinNihon
LLC are fair and reasonable.
(3) Results of Audit of Consolidated Financial Statements
In our opinion, the method and the results of the audit performed by Ernst & Young ShinNihon
LLC are fair and reasonable.
May 8, 2017
Audit & Supervisory Board, Denka Co., Ltd.
Full-time Audit & Supervisory Board Member
Full-time Audit & Supervisory Board Member
Audit & Supervisory Board Member
Audit & Supervisory Board Member(Note)

Shohei Tamaki
Masanori Sakamoto
Tsunehiro Sasanami
Toshio Kinoshita

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

57

(Reference)
Notice of Decision to Purchase and Disposal of Treasury StockAt the meeting of the Company’s Board of Directors held on May 10, 2017, we resolved to purchase up to
7,000,000 shares of the Company (1.58% of shares of common stock issued, excluding treasury stock) and on
May 15 resolved to dispose of stock 23,174,919 shares (4.97% of total shares outstanding prior to thedisposal) of treasury stock for the purpose of flexibly returning profits to shareholders in accordance with the
Policy on Shareholder Returns.

58