210mm210mm 背幅:2.5m背幅:2.5mmm 210mm210mm Kaneka Integrated Report 2017 Kaneka Integrated Report 2017

KanekaKaneka Integrated Integrated Report Report 2017 2017

1-12-32,1-12-32, Akasaka, Akasaka, Minato-ku, Minato-ku, Tokyo 107-6028, 107-6028, Japan Japan Tel:Tel: +81-3-5574-8000 +81-3-5574-8000 Fax: Fax: +81-3-5574-8121 +81-3-5574-8121

ThisThis printed printed matter matter is using is using FSC® FSC® certi ed certi ed paper paper includes includes KANEKA CORPORATION KANEKA CORPORATION sourcessources from from responsibly responsibly managed managed forests. forests. DisclaimerDisclaimer TheThe environment-friendly environment-friendly vegetable vegetable oil inkoil inkis used is used for forprinting. printing. ThisThis report report is intended is intended to provideto provide information information concerning concerning Kaneka Kaneka Group, Group, including including our our subsidiaries, subsidiaries, but but should should notnot be understoodbe understood as anas offer,an offer, or aor solicitation a solicitation of an of offer,an offer, to buyto buy or sellor sell securities. securities. The The business business performance performance forecastsforecasts and and certain certain other other statements statements that that are aremade made on thison this report report are areforward-looking forward-looking statements, statements, which which havehave been been rationally rationally formulated formulated based based on theon theinformation information currently currently available available to theto thecompany. company. Consequently, Consequently, thesethese statements statements do donot not constitute constitute a guarantee a guarantee that that the thecompany company will willachieve achieve these these forecasts forecasts or otheror other forward-lookingforward-looking statements. statements. For For a variety a variety of reasons, of reasons, the thecompany’ company’ s actual s actual performance performance may may differ differ substantiallysubstantially from from these these forecasts. forecasts. Please Please note note that that Kaneka Kaneka Group Group does does not not accept accept any any liability liability for forany any damage damage resultingresulting from from this this report. report. To Our Stakeholders CONTENTS

For Publication of the Integrated Report

1. To Our Stakeholders 3. Infrastructure to Support This year, for the first time, Kaneka Group will issue the Kaneka Report, which combines the conventional Annual Report, the CSR For Publication of the Integrated Report Value Creation Report, and the Intellectual Property Report. • Organizations to be Reported, Languages, Intellectual Capital Reporting Period, Our Treasured Values The Kaneka Report delivers information on how we will continue Overview of Business Results 2016 • Research and Development of Regenerative Medicine and Cell Therapy to create value, integrate ESG into our business, and contribute to • Financial and Nonfinancial Highlights • Establishment a Development Site for Life achieving a sustainable society through business efforts. Science and Information-Communication Technology (ICT) This report and its detailed information can also be found on our 2. For Kaneka’s Value Creation Human Capital website. (Innovation and Growth) We hope that our shareholders, investors, and other stakeholders CSR Promotion System Top Message understand the significance of the Kaneka Report. • Transforming our management system Environment and Safety

Medium-Term Management Plan (Fiscal 2017–2019) Communication with Society Growth Drivers Corporate Governance • R&D Organizations Covered in This Report • Globalization 4. Corporate Profile and This report covers Kaneka Corporation and its consolidated • Active Investment Global Network subsidiaries both in Japan and other countries. Transformation of Business Portfolio In this report, “Kaneka” refers specifically to Kaneka Corporation. Performance Targets “Kaneka Group” encompasses Kaneka Corporation and Group Strategies of Each Solutions Unit companies (its consolidated subsidiaries). References to “Group • Material Solutions Unit company/companies” do not include Kaneka Corporation. • Quality of Life Solutions Unit

Examples of Our Efforts Providing Solutions for a Zero-Energy Society • Nutrition Solutions Unit

• Health Care Solutions Unit Languages Examples of Our Efforts Contribute to Developing a Healthy Society This report is available in Japanese and English. with Our Biopharmaceuticals

Period Covered Fiscal 2016 (April 1, 2016 to March 31, 2017). In some cases, reporting covers activities before or after fiscal 2016. Detailed financial data are contained in the separate Financial Section 2017.

01 02 To Our Stakeholders Our Treasured Values Support for the United Based on the belief of committing to challenging the environmental issues of Nations Global Compact our planet and contributing to upgrading quality of life, we pursue creation of In March 2015, the Kaneka Group became a signatory to the United Nations Global Compact. The UN new value with people and technology growing together in creative fusion. Global Compact is a voluntary code of conduct through which the top management of signatory companies commit themselves Management Philosophy Structure to take action aimed at achieving “Declaration of Kaneka United” Kaneka Group’s ten principles in the four areas of Human Rights, Labour, Expresses our raison d’être and our social mission Stakeholders Environment, and Anti-Corruption. With people and technology growing together into creative fusion, Starting in fiscal 2015, the Group we will break fresh ground for the future and tie in to explore New Values. Employees has participated in the working We are also committed to challenge the environmental issues of our planet Our employees include the groups of the Global Compact, people who work for the Kaneka and contribute to upgrading the quality of life. which enables us to gather a Group, as well as their families. We offer employees appropriate wealth of information about CSR treatment, remuneration, for our new initiatives through Customers self-ful llment, and safe working Society enhanced communication with other environments. companies. 1 Our customers are Including citizens and As a group with a global network, the people who consumers. Describes our key values Corporate Philosophy purchase Kaneka We can increase we actively share information Group products. enterprise value by about our commitment to global Toward an Even More Impressive We provide them with Employees ful lling our social sustainable growth as a responsible and Productive Future quality products and responsibilities. corporate citizen with our Hold in your hands the future services, ensure We consider such stakeholders and the international you have always dreamed of. Kaneka Group’s 2 product safety, and factors as plant community. We are a highly perceptive and CSR Activities disclose information. Customers Society operational safety from the perspectives of collaborative value-creating Corporate Ideals Group CSR activities group or, as we like to say, a aim to increase social contributions, United Nations “Dreamology Company. stakeholder Kaneka welfare, and community (see note)” satisfaction through engagement. business activities, Group Global Compact’s ※Note: "Dreamology" is thereby boosting an expression coined from enterprise value. Shareholders Network Japan Ten Principles 'dream' and 'logy' (science). 3 Shareholders The The WE SUPPORT Our "Dreamology Company" and Environment is a "highly perceptive and Investors Environment Area Principle and collaborative Basic CSR Policy value-creating group." 1 Businesses should support Investors By this we mean the and respect the protection of They recognize the Vendors global environment. Human internationally proclaimed human Rights rights; and Provides an action agenda for each employee for value of our corporate We ful ll our social 2 make sure that they are not materialization of our Corporate Philosophy brand and own our responsibilities by complicit in human rights abuses. shares. considering the 3 Businesses should uphold the The Kaneka Group will ful ll our corporate social responsibility through the environment in our freedom of association and the We offer appropriate effective recognition of the right to materialization of our corporate philosophy with the earnest and returns and disclose business activities, collective bargaining; forward-looking efforts of each employee. timely information so Vendors including raw materials 4 the elimination of all forms of Labour forced and compulsory labour; 1. We will strive to fully understand the cultural backgrounds, manners and customs of we can increase Raw materials suppliers and procurement, 5 the effective abolition of child the countries and regions where we do business as a means of actively contributing overall trust in the contractors. manufacturing, and labour; and 6 the elimination of discrimination to local societies and communities. Group. We build mutually bene cial transportation. in respect of employment and 2. We will abide by all relevant laws and regulations and, in undertaking our business relationships with vendors, occupation. activities, conduct ourselves in a fair manner based on free competition. ensuring that transactions 7 Businesses should support 3. We will place high priority on communicating with all our stockholders and are fair and that we offer a precautionary approach to stakeholders, and will disclose all pertinent information. environmental challenges; equal opportunities to do Environ- 8 undertake initiatives to 4. We will respect the personalities and individuality of all our employees to support and promote greater environmental business. ment encourage the development and utilization of their abilities. responsibility; and 9 encourage the development and 5. We will uphold safety as the top-priority concern of management as we dedicate our diffusion of environmentally best efforts to securing a sound and safe workplace environment, offering safe friendly technologies. products, and working to protect the global environment. 10 Businesses should work against Anti- corruption in all its forms, Corruption including extortion and bribery.

03 04 To Our Stakeholders Overview of Business Results 2016

Global economic conditions became unstable the Foodstuffs Products segment due to expansion overall during the fiscal year ended March 31, 2017 in sales of new products and progress in business although economic conditions in Europe and in structure reforms, despite sluggish performance Nonfinancial Highlights emerging and resource-rich countries experienced a in the Electronic Products, and Synthetic Fibers

gradual recovery. This was because the issue of the and Others segments mainly affected by the CO2 Emissions from Energy Consumption and Carbon Intensity Waste Generated and Recycled

U.K.’s withdrawal from the EU and the inauguration appreciation of the yen and delays in the recovery Volume of waste generated by Kaneka Amount recycled by Kaneka Nonconsolidated Other greenhouse gases on a nonconsolidated basis Group companies in Japan Amount of waste generated by group companies in Japan of President Donald Trump among other factors of demand. Group companies outside Japan Carbon intensity for all parent plants (right scale) Amount recycled by group companies in Japan resulted in a situation that could have an impact on We will continue to engage in R&D activities 140 110 90 business confidence, although economic conditions (investment toward the future) and achieve the 111.9 115.4 115.6 112.3 80 120 105 107.5 71

) 69 63 66 68 63 in U.S. remained firm. In the Japanese economy, transformation of our business portfolio with a focus 2 70 the appreciation of the yen had an impact on its on outcomes as soon as possible. 100 100 100.0 60 economic conditions and personal consumption As a result of foregoing, the Kaneka Group 80 95 96.2 95.2 50 45 94.9 41 stagnated. reported consolidated net sales of ¥548,222 million 93.4 40 42 37 60 90 40 35

In this business environment, the Kaneka Group’s (down 1.3% year on year). Operating income was Carbon intensity (thousands of tons) 30 emissions (10,000 t-CO 2 40 85

business performance remained solid in the ¥33,164 million (down 13.2% year on year), and CO 25.5 20 21.7 21.4 23.4 25.0 14 14.8 16.8 16.4 14.9 15.3 11 6 10 7 12 7 11 6 6 Chemicals, Functional Plastics, and Life Science net income attributable to owners of the parent was 20 80 10 2.3 2.4 2.5 2.5 2.5 Products segments due to steady expansion in ¥20,484 million (down 2.4% year on year). We paid 0 75 Amount of waste generated and amount recycled 0 2012 2013 2014 2015 2016 1996 2012 2013 2014 2015 2016 sales of new and specialized products mainly in a dividend for the fiscal year ended March 31, 2017 (base year) (fiscal year) (fiscal year) overseas markets, and our profitability improved in of ¥18 per share.

Financial Highlights *Data are as of fiscal years ended March

Net sales / Operating income Net income attributable to owners of parent / ROE Overseas sales / Overseas sales ratio VOC Discharge: Voluntary Plan and Performance Water Consumption Net sales / Operating income Net income attributable to owners of parent / ROE Overseas sales Asia North America Europe Kaneka Group companies in Japan Net income attributable to owners of parent Other Group companies outside Japan Net sales Operating income (right scale) ROE (Return on equity) (right scale) Overseas sales ratio (right scale) 6,000 (Billions of yen) (%) 5,436 25 (Billions of yen) (Billions of yen) (Billions of yen) (%) 22.8 21.9 600.0 60.0 25.0 7.1 6.9 7.5 300.0 45.0 5,000 21.5 21.5 21.5 552.2 555.2 548.2 39.2 524.8 6.3 38.2 21.0 36.1 37.1 20 500.0 476.5 50.0 20.5 20.0 6.0 32.3 4,000 5.1 18.0 211.1 217.4

203.3 ) 400.0 38.2 40.0 200.0 189.2 30.0 FY2010 Target 3 15 33.2 [tons ] 2,829 15.0 13.7 4.5 3,000 3.7 153.9 300.0 30.0 24.8 24.6 2,282 2,263 (million m 1,994 1,977 2,160 1,853 1,702 10 10.0 9.3 3.0 2,000 200.0 20.0 100.0 15.0 1,669 1,556 7.1 15.8 5.7 6.1 6.5 4.65.4 4.4 3.8 5.0 1.5 5 100.0 10.0 1,000 3.3 3.6

0 0 0 0 0 0 0 0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 Base year (fiscal year) (fiscal year)

Capital expenditure / Depreciation R&D expenses Net income per share / Dividend per share Changes in the Number of Female Managers Changes in Rate of Employment of Persons with Disabilities Capital expenditure / Depreciation R&D expenses Net income per share / Dividend per share

Capital expenditure Depreciation R&D expenses Net income per share Dividend per share (Person) 15 (%) Company Employment Rate Legally Mandated Employment Rate (Billions of yen) (Billions of yen) (Yen) 15 2.2 28.5 80.0 13 50.0 30.0 2.06 2.19 45.6 26.8 42.0 12 40.5 23.7 63.0 40.0 38.0 24.0 61.7 2.0 21.4 21.1 60.0 53.5 9 1.86 1.90 29.9 9 1.83 30.0 29.0 27.6 18.0 26.2 40.5 7 7 1.8 23.5 40.0 20.4 6 20.0 12.0 27.7

20.0 16 16 16 18 18 1.6 10.0 6.0 3

0 0 0 0 0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 (fiscal year) (fiscal year)

05 06 For Kaneka’s Value Creation (Innovation and Growth)

Top Message Compact in 2015. We are working on sharing Prompt Response to the our corporate philosophy to gain the trust of Changing Environment to Take our stakeholders worldwide by implementing a Lead in Technical Innovation We will create new value for social corporate initiatives in line with the Ten Principles The need for energy saving and a sustainable of the UN Global Compact in the four areas of society, including the Zero-Energy House, are human rights, labour, the environment, and anti- development by addressing increasing along with the growing world population, corruption. increasing demand for resources and energy, Shifting from “Product Out” to “Solution” and rising environmental awareness. Today, IoT global and social challenges and integrates different industries and generates new Shifting from “product out” to “market in”: This business models. Business opportunities are also management system reform is intended to expanding globally in the fields of advanced medical empower us to turn our growth strategies into achieving business growth technology, health care, and nursing care due to the concrete actions from the solution provider’s point progression of the aging society and expansion in of view to steadily embody the reform scenarios. the medical and health care markets. Food shortages Specifically, our business section was renamed in emerging nations and aging in advanced countries Solutions Vehicle (hereinafter called “SV”) to carry are promoting dietary diversification and the need for out growth strategies from a solutions perspective. value-added foods as well. Nine new Solutions Vehicles were separated into the following four domains or Solutions Units Management System Reform to (hereinafter called “SU”): the Material Solutions Accelerate the Growth Strategy Based Unit, the Quality of Life Solutions Unit, the Health on Social Problem-Solving Efforts Care Solutions Unit, and the Nutrition Solutions We have made a great change to our management Unit. system in the new medium-term management plan Setting R&D, globalization, and human for fiscal 2017. This change is intended to address resources development as growth drivers, we will global environmental protection, population growth, actively promote open innovation to enhance the food problems, health promotion in an aging society, earning power of core businesses and accelerate and other social issues. We also aim to accelerate business portfolio reform. Globally, we have our social contributions through new values established our regional headquarters in Europe, generated from technological innovation, such as the Americas, and Asia for speedy community- IoT and AI. based management. Kaneka Group joined the United Nations Global It is essential for us to understand the customs and culture of the countries and regions where [Achieve results of the business portfolio reform] we operate, and offer products that suit local customer needs.

Further Enhancing the Production Capacity for More Creative R&D Capability Chairman of the Board President Shifting from products to solutions As a solutions provider, we are conducting research activities to strengthen the technology M&A of global sourcing and open innovation. We also Source-in/Source-out Open business innovation actively introduce cutting-edge technologies, Change of business organization Establishment of new business domains pursue market and customer-oriented values, and Reform of management system develop creative technologies to provide unique, global number-one, and excellent materials. Last

07 08 For Kaneka’s Value Creation (Innovation and Growth)

year, an operation site for corporate research and and products based on external technologies. Human Resources as a Source of Growth management policy for all operations is “Safety business development was established in Silicon Kaneka will accelerate new business development is our top priority.” To achieve our goal of zero Developing Capable Leaders and Valley on the U.S. West Coast, where world-class through acquiring cutting-edge technologies, accidents, we will further raise safety awareness and Promoting Diversity R&D institutions and industries exist. promoting open innovation with universities and strengthen disaster prevention through continuous Based on the belief that only tough materials can venture companies, and facilitating partnership and We are currently working on building a system to initiatives together with top management, including provide solutions, we will do our utmost to develop M&A within and outside Japan. facilitate reform. Above all, what is most important facility inspections by the Board of Directors and overwhelmingly competitive materials. for reform is human resources that are also a CSR safety and quality inspections. Challenge to Business Innovation source of growth for Kaneka Group. Since fiscal 2017, we have defined and enhanced Achieving Discontinuous Growth through and Working-Style Reform While striving to develop leaders highly capable our original eco-friendly products under the concept M&A and Open Innovation In order to promote business operation reform of driving reform within and outside Japan, we will of environmentally friendly management. In addition to management system reform, M&A- using digital technology and IoT and changing labor also promote diversity, including women’s active This medium-term management is important in based discontinuous growth is also essential systems as a working-style reform, the Business participation in society to enable us to work more achieving the goals in our long-term vision. for increasing sales volume to achieve our long- Process Innovation Division was newly established. globally. Our sustainable growth will be achieved We will be committed to solving social issues, term vision. Integrated coordination between the Company-wide cooperation for staff work by steadily cultivating human resources who will creating an attractive company image, and building Strategic Unit, corporate, and SV is expected to management is also an important key to successful support Kaneka Group over the next few decades. a competitive business structure to be reborn as a promote organizational M&A. working-style reform. To achieve this, we have set company that meets the expectations of all of our Safety Is Our Top Priority By breaking away from self-sufficiency policy up a Staff Function and Productivity Improvement stakeholders and is evaluated highly. and adopting open innovation, we will pursue Meeting to boost the cross-sectoral performance of Based on our belief that “safety is a competitive technological innovation and cluster our business the entire company. strength in itself” for manufacturers, Kaneka’s

Transforming our management system

Evolving into a solution provider (Current Business Units) (New Organizational Structure) We will evolve from a conventional supplier of materials into “a solution provider” that both delivers Business Units Segments solutions for social issues and is also committed to realizing Innovation and growth. Chemicals Vinyls and Chlor-Alkali SV Material Solutions Unit Functional Plastics Performance Polymers SV

Expandable Plastics and Products Foam & Residential Techs SV Bold management system revamping Electronic Materials E & I Technology SV As a step towards becoming a solution provider, we transformed our management system from Electronic Quality of Life Solutions Unit Products product-based business units to a new organizational structure comprising Solutions Vehicles (SVs) Solar Energy PV & Energy management SV and Solutions Units (SUs). Synthetic Fibers and Others Performance Fibers SV · The driving force for growth strategy execution from a solutions perspective Solutions Vehicle · Create new business models and utilize open innovation, alliances, M&A and Medical Devices Medical Devices SV (Business Units) other types of insourced and outsourced operations to advance business growth Life Science Health Care Solutions Unit Products QOL Pharma & Supplemental Nutrition SV

· Business domains set up based on solutions provided by SVs Nutrition Solutions Unit Solutions Unit Foodstuffs Products Foods & Agris SV (Segments) · Help solve social issues by strengthening ties between business units

09 10 For Kaneka’s Value Creation (Innovation and Growth) Medium-Term Management Plan (Fiscal 2017–2019) Kaneka Group is always committed to enhancing corporate value to achieve the Declaration of Kaneka United, our Active Investment long-term vision.Our goal is dramatic growth. To get there, we will speed up business portfolio transformation via • Investment budget of ¥200-300 billion that includes capital expenditures, business alliances, and M&As three growth drivers: R&D, Globalization, and Active Investment. Capital Investment / Investments • Promote investments in facilities utilizing evolved (year) Growth Drivers technology with a focus on Material and QOL, mainly targeting markets peripheral to existing business 2011~2013 105 Billions of yen R&D • Acquire full-scale mass production facilities for new businesses • Develop materials that give us an edge in providing solutions for social problems. Especially, create only-one, global 2014~2016 124 Billions of yen number-one excellent materials that support our solution-oriented spirit through creative technological development from market and customer perspectives. • Promote investments in business tie-ups, M&As and so on with a focus on Health Care 2017~2019 • Embrace open innovation and other insourced and outsourced operations to acquire trailblazing technology. Plan and Nutrition, targeting new or peripheral • Keep aggressively deploying resources and realize a new product sales ratio of 30% or higher. 200-300 Billions of yen markets in areas where we have existing technologies and can generate synergies. Especially, build a relationship to share synergy and global value for technology and value chains mainly in overseas markets. Also, focus on enhancing the competitiveness of, and expanding the scale of, our R&D Expenses New Product Sales number-one global businesses through M&A and other source-in, source-out approaches.

(Billions of yen) (Billions of yen) 35 350 40% Ratio of new product sales to total sales New product sales 34% 30 300

30% 25 250 27% 24% 21% 22% 20 200 33.0 20% Transformation of Business Portfolio 30.0 300.0 15 28.5 150 23.7 26.8 • We will sharply Net Sales by SUs FY2019 10 100 170.0 10% increase the Health 118.3 131.2 123.3 Care and Quality of 5 50 Life solutions units’ Nutrition share of total sales by FY2016 Material 200 (23%) 0 0 0% Material 283 2014 2015 2016 2017 2019 2014 2015 2016 2017 2019 providing new materials (32%) (fiscal year) (fiscal year) and products as well as 158 Nutrition solutions of value and 207.3 (29%) Net Sales executing M&A. (38%) Net Sales ¥880 ¥548.2 billion 45.1 billion 140 Globalization (8%) (16%) Health Care Swiftly promote regionally distinctive growth strategies from a “Glocal” perspective. 136.8 Health Care • (25%) • End cycle of intensive investment in Asia and commence investment to restart Aim to quickly 250 growth in Europe and the Americas. Quality of Life (28%) • Further strengthen overseas holding companies in Europe, the Americas, achieve an overseas and Asia, and actively carry out strategic M&A and alliance based on local sales ratio of 50% Quality of Life perspectives and information-gathering capacity.

• Aggressively invest in growth fields and conduct M&As (Health Care, Material solutions units) Performance Targets EUROPE • Actively expand solutions business into new businesses and fields • We regard this medium-term Net sales Overseas Sales management plan as important towards Operating income (Billions of yen) 1,000 150 (Billions of yen) achieving the goals in our long-term Overseas sales 880.0 • Further strengthen production and sales systems in existing 500 60% vision. businesses 800 120 Ratio of overseas 420.0 • We aim to accelerate business portfolio • Create and expand new businesses in the health care field sales to total sales AMERICAS 400 55% transforming under the new management 555.2 610.0 and the aerospace field 600 548.2 90 • Aggressively conduct M&As and alliances system to achieve our performance • Strategically utilize the Kaneka US Innovation Center 300 48 % 50% targets, regardless of numerous 87.0 240.0 uncertainties including geopolitical risks, 400 60 203.3 200 45% political trends, and foreign exchange rates and crude oil market prices. 200 43.0 30 • Maximize returns on large-scale capital expenditure 38.2 32.2 100 38 % 40% ASIA • Expand markets in China, ASEAN, and India 37 % • Expand business in the health care field 0 0 2015 2016 2017 2019 (fiscal year) 0 35% 2016 2017 2019 (fiscal year) *Data for 2017 are based on the financial results disclosed on May 12, 2017.

11 12 For Kaneka’s Value Creation (Innovation and Growth) Strategies of Solutions Unit Material Solutions Unit Quality of Life Solutions Unit We will keep ahead of changing times and We will maximize the strengths of each business environments and produce excellent materials to unit and provide solutions for information-oriented provide solutions for social issues society and our daily lives Senior Managing Executive Officer In charge of Material SU, Executive Vice President In charge of Quality of Life SU and Material Solutions Research Institute Shinichiro Kametaka Minoru Tanaka The Material Solutions Unit provides excellent We see these changes as a great growth The Quality of Life Solutions Unit contributes to Contribute to energy-saving and a rich life advanced materials, products, and services while opportunity. Not limited to serving our client upgrading people’s lives through pursuing energy- also offering solutions on energy-saving manufacturers, Kaneka will look at future demands saving technologies, improving the convenience and • Deliver energy-efficient housing solutions⇒Create technologies and protection of the global and provide new excellent materials that help cope comfort of community infrastructure, and creating a high quality, sustainable housing market environment, development of social infrastructure, with various social problems. new value with digital technological innovation for • Provide unique materials and services that and progress of mobility (automobiles, aeronautics, an information-oriented society. Directly accessing excel regarding both energy-saving and smart Contribute to global environmental conservation space, etc.). This unit takes a lead in developing market needs, this unit provides solutions based on application needs and comfortable living innovative material technologies, including new its excellent materials and original services. For • Provide outstanding materials for evolving social polymers based on cutting-edge technologies, such example, our package solution that includes solar infrastructure, mobility (lighter weight, more fuel as composites and biodegradable polymers. cells, insulator materials, a solar circuit method, and efficient vehicles), and more In an age of rapid change, eye-opening organic EL lighting equipment is expected to • Provide solutions where materials like biopolymers technological innovation using materials and IoT contribute to the design and construction of energy- Energy-saving are of direct help to ecological society has been accelerated over the past few years, saving houses and buildings. Energy-efficient houses and buildings (ZEH/ZEB※) including high fuel efficiency, reduced vehicle Develop materials for QOL SU In the electronic materials field, for example, this weight, and self-driving technology in the unit aims to create unconventional materials and automobile industry. Excellent materials are a must Environmental technologies for smart and connected houses and for such changes. cars that have been promoted by technological Marine microplastics※ Mobility innovation. ●High-efficiency solar cells ●Organic EL lighting (Hetrojunction back-contact type) Automobiles (Weight Reduction and CO2 reduction) Aviation·Aerospace Functional fibers Logistic solution ●Storage batteries ●New functional fibers ●HEMS(Home-use energy management system) ●High-performance insulation ●Biopolymer that degrades in sea water materials Housing (bio mass) ●SC construction system Strategic ※Tiny plastic particles present in the ocean. Their impact on the marine environment is a problem. Unit ●Structural adhesives ●Composites ●Phase change materials (Composites used as (Temperature controlled ※A zero energy house (ZEH) or a zero energy building an alternative to metal) (ZEB) refers to a house or building with basically a zero transportation containers in the net primary energy consumption annually Infrastructure pharmaceutical and medical field)

Digital Devices Weight·Size·Wearable·High tech ●Flexible display materials ●Modified silicone polymers ●Miniature sensor ●Specialty PVC resins materials (Pipes Sealing materials Adhesives)

Net sales Net sales (Billionsof yen) (Billionsof yen) Modifier 300 Synthetic Fibers 300

250 (Modacrylic fiber) 250 Modified silicone polymers 200 200

Polyvinyl chloride 150 150 Photovoltaic modules Specialty PVC resins 100 100 Insulation materials Circuit·Thermal management materials 50 50

0 0 Supply materials to other solutions units 2016 2017 2019 (fiscal year) *Data for 2017 are based on the financial results disclosed on May 12, 2017. 2016 2017 2019 (fiscal year) 13 (Plan) (Plan) (Plan) (Plan) 14 Examples of efforts by the Quality of Life Solutions Unit

A show home for Net Zero Energy House was built, and Solar Circuit House for ZEH

visitors can actually experience the comfort of the house. Voice of employee Stakeholder Message In 2016 the Kaneka Sustainable For reduction of CO2 emissions from houses, the government set the Net Zero Energy New Town was established at the House (ZEH) as a standard for new houses by 2020. With energy-saving technologies Many of our customers say, I expect to see the innovative ideas and Takasago Plant, and a ZEH show cultivated in the Solar Circuit House and energy creation technologies using solar home was also opened on the “It was comfortable to stay here.” technologies of Kaneka as a material provider. panels, Kaneka will provide human-and eco-friendly solutions. Concierges at Department of Architecture premises. ZEH is a house that Kaneka Sustainable Faculty of Engineering generates the same amount of New Town Shinshu University ZEH show home energy as is consumed at the house Associate Professor to achieve zero annual electricity Hideki Takamura The Solar Circuit House Ayako Fumino Providing Comfort and consumption. My research theme is Energy-Saving Performance Equipped with VISOLA, which is a Mariko Nakama how to build comfortable and eco-friendly houses. solar-cell system built into the tiles of Actually, there are many different means the Solar Circuit House, the show The Solar Circuit (SC) method, combining Since opening last September, many for achieving comfort and saving energy. Kaneka’s Solar Circuit House is a natural energy. Dampers are also external heat insulation and double home has storage batteries and an people have visited and stayed at the I think my research should be based on residents’ opinions, measurements, and highly airtight and heat-insulating placed under the floor and in the ventilation techniques energy management system so that show home. Some of them stayed actual conditions. Since last summer, I detached house providing comfort attic. Wind flow can be generated by lightening equipment and air here with their children. We have Outer Circuit Outer Circuit have been surveying the comfort and received many favorable comments, and energy-saving performance. opening the damper in summer, Eject hot air Eject moisture that conditioners can be used with the airtightness of a Solar Circuit House The entire house, from the roof to while closing it can prevent heat produced by solar causes condensation electricity generated and stored such as, “It was comfortable to stay,” heat to the outside to the outside with the cooperation of the house’s the foundation, is completely from escaping in winter (see the during daylight hours. Surplus and, “I comfortably took my clothes owner, and evaluating the aging of solar off in the dressing room because of circuit performance. My interaction with covered with an insulation material diagram below). In addition, pollen Summer Winter electricity can also be sold. Not limited called Kanelite Foam, and the is removed by Refrair, a 24-hour to taking a look around, the show no temperature difference.” A visitor Kaneka, a material provider, allowed me to find their unique ideas, which are seams of insulation materials are ventilation system with filters and a home provides an opportunity for with an allergy said, “Stepping into the house, I found the air clean.” Dampers different from assembly manufacturers. filled with Airtight Sealing Tape. dehumidification function. This visitors to stay a night at the house Kaneka, producing insulation materials, are automatically opened and closed, Doing so made it possible to provide system also dehumidifies the house and discover the comfort of ZEH. solar panels, storage batteries, and so you do not even have to worry high airtightness; for example, the in summer and brings warm air into We will continue to work with organic EL, can potentially evolve ZEH about difficult technical things and will airtight function (equivalent the rooms in winter, bringing a construction companies to make even further with their original material find it comfortable to stay. technologies. clearance area) for a housing unit of comfortable life without relying too Damper Damper ZEH more popular and reduce CO2 approximately 132 m2 is equivalent much on air conditioners. Since its emissions, while also striving to to one postcard. release in 1988, more than 21,000 provide a comfortable and healthy Inner Circuit Inner Circuit The space between exterior and Solar Circuit Houses have been life through our solutions for making Feel refreshed Feel warm interior walls is used to leverage built. when open when closed residents’ dreams come true. Efforts for Net Zero Energy Building (ZEB)

Kaneka is also committed to Center (see the photo), which realizing ZEB. was opened last November as a To promote ZEB, it is important training facility, low-reflective solar to increase the energy self- cells were installed on the walls, sufficiency rate by introducing a while handrails are equipped photovoltaic system not only on with thin-layer see-through the building’s roof but also on the solar cells that transmit light to walls. However, installation of this verify the effectiveness of the system to the walls caused light photovoltaic system. In this way, pollution due to sunlight reflecting we are making progress on ZEB around it, which was considered solutions. a problem. To address this issue, we developed a low-reflection eco-friendly photovoltaic system in 2016 jointly with the New Energy and Industrial Technology Development Organization (NEDO), a National Research and Development Agency. At the Kaneka “Dreamology”

*A Net Zero Energy Building (ZEB) is a building whose energy consumption from fossil fuels, etc. is zero or roughly zero due to its building structure, energy-saving equipment, and utilization of renewable energy.

Panoramic view of the Kaneka Sustainable New Town. Show home where visitors can experience the Solar Circuit House

15 16 For Kaneka’s Value Creation (Innovation and Growth)

Nutrition Solutions Unit Health Care Solutions Unit We will reform our business portfolio and Based on the knowledge acquired in the United States, create profitable business models from a new the largest market in medically advanced countries, we will perspective establish a solid business infrastructure in the life science field Managing Executive Officer Managing Executive Officer In charge of Health Care SU In charge of Nutrition SU and Health Care Solutions Research Institute Contribute to a society advancing in age and Hidesuke Amachi Kazuhiko Fujii medical sophistication The Nutrition Solutions Unit supplies solutions The Health Care Solutions Unit offers solutions • Strengthen marketing and product development Contribute to health and a plentiful, varied diet that increase the value of food by defining on health promotion and medical progress in globally in cutting-edge medical fields including “nutrition (sustenance essential for living)” as • Provide a broad range of solutions that help the aging society and the high-tech medical biopharmaceuticals, and regenerative medicine “food.” In response to diversified food culture, diversify and enrich people’s diets. society. This unit provides medical solutions, and cell therapy this unit provides unique food materials that offer • Offer solutions that help prevent disease and such as globally distributed endovascular therapy • Proactively utilize open innovation and U.S. R&D deliciousness, nutrients, and other added value promote health, and enhance the food materials catheters treatment and other medical devices, bases as well as materials for dietary supplements that lineup small-molecule drugs (APIs and intermediates), • Provide solutions that deliver value by fusing maintain and promote human health. Through • Deliver solutions that assist production in the fields biopharmaceuticals, technologies for regenerative devices and medicine expanding our business domain to the origin of agriculture, livestock, and fishery medicine and cell therapy, and advanced treatment Regenerative medicine and cell therapy of food—the fields of agriculture, livestock, and and diagnostic techniques. Putting regenerative medicine and cell therapy fishery—we will provide solutions for food production In order to increase our life-science presence into practical and widespread use improvement, including high-performance fertilizers. in the United States, Kaneka will actively explore In addition to conventional confectionery, bread Expand into agriculture and new business opportunities with a view to collecting ingredients, and dietary supplements, we will also livestock domains relevant information, cooperating with research pursue marketing strategies to make people aware institutions, and even M&A. We also established Dietary diversification and of the Kaneka brand as a healthy product brand and health consciousness an R&D site in Silicon Valley in 2016 to build a contribute to health and rich food cultures as well. business-oriented research structure. ●Automatic culturing system ●Cell separation devices Enhance food Expand dietary supplement and Innovative medical Tests and diagnostics product quality health food business devices Genetic testing and disease prevention Cutting-edge medicine Added-value food product needs Greater health consciousness New treatment devices Bio, nucleic acid medicine and other technological advancements ●Drug-delivery stents ●Biodegradable stents

●DNA ●Bacteria testing ● chromatography equipment ● Enhance product lineup by M&As, etc. Antifreeze Protein ●Develop new dietary supplement materials Food Production Support chip (New food product material) (Genetic testing ●Protein A Resin ●Bio and nucleic acid Health Food Strategic Unit Population growth and food issues and diagnostic (Material for purification medicine (Contracted equipment) of antibody drugs) manufacturing business)

Small-molecule drugs

●Kaneka Peptide Expand API business (New high-performance fertilizers) ●Global business expansion P42

Net sales Net sales (Billionsof yen) (Billionsof yen) 250 160

Endovascular 140 200 catheters Supplements 120 (Coenzyme Q10) 150 100 80 100 Baking and confectionary materials 60

(Margarine, Shortening, Baker’s yeast) 40 50 Blood purification Pharmaceutical intermediates and API equipment 20 0 0 2016 2017 2019 (fiscal year) 2016 2017 2019 (fiscal year) (Plan) (Plan) *Data for 2017 are based on the financial results disclosed on May 12, 2017. (Plan) (Plan) 17 18 Examples of the efforts by the Health Care Solutions Unit

Enter the Biopharmaceutical Field with Our Biotechnology Knowledge, Contribute to Developing Cultivated through Producing Small Molecule Drugs

also increased the number of Biopharmaceuticals Entered transactions with major leading a Healthy Society with Generated from the Biopharmaceutical pharmaceutical companies. Advanced Biotechnology Field in 2010 In technological development, the R&D divisions of Kaneka Biopharmaceuticals are medicinal Since the 1970s, Kaneka has and Eurogentec are accelerating Our Biopharmaceuticals products produced through genetic built trustful relationships with their joint research on plasmids, recombination, cell fusion, cell pharmaceutical companies to be used as DNA vaccines and Biopharmaceuticals were put to practical use in the 1980s culture, and other advanced worldwide by developing its own expected to become a key to new biotechnologies. Genes (DNA) technologies in the area of chiral treatments. They have filed patents and have showed significant growth in recent years. Today, were found to be the blueprints of compounds*1 through combining on efficient plasmid production more than 350 million people around the world enjoy proteins, and technologies made biotechnology and organic synthetic techniques and have successfully the benefit of these medications. Kaneka Group introduced it possible to recombine DNA, techniques for small molecule mass-produced plasmid DNA which eventually contributed to the drugs. Taking advantage of our molecules as well. biotechnology into its techniques for producing evolution of biopharmaceuticals. biotechnology and related know- “In biopharmaceutical development, small molecule drugs, allowing us to successfully build Unlike small molecule drugs made how backed with experience, research on non-conventional relationships of trust with pharmaceutical companies using conventional organic synthetic we made Eurogentec our treatments for cancer, diabetes, worldwide. In 2010 we made Belgium-based techniques, biopharmaceuticals subsidiary in 2010 to enter into the and other diseases has become have large molecular weight and biopharmaceutical field. Eurogentec increasingly active. Plasmids are Eurogentec our subsidiary in order to enter into complicated shapes, because was founded in 1985 as a spin- essential for the creation of new the biopharmaceutical field. Our business on both they are produced using DNA and off company of the University of medicines. The Kaneka Group’s small molecule drugs and biopharmaceuticals proteins in the living things. The Liège in Belgium. Having extensive successful mass production of will provide health and medical solutions. structure of biopharmaceuticals experience and achievements plasmids is expected to accelerate is similar to the original structure in the biotechnology field, the drug development and even achieve of living things. Because of this, company is mainly engaged in early detection and treatment of they have not only a low risk of the contract manufacturing of various diseases. Our customers side effects but also high treatment biopharmaceuticals. They also highly evaluate our technology effects for many diseases, and are produce and sell life-science as being at the top international also useful in disease diagnosis. products, including proteins, DNA, level. Going forward, we will install Today, biopharmaceuticals are also and peptides for research and new large-scale GMP production drawing attention as medications diagnostic purposes. equipment to meet the growing that are effective for rheumatoid demand,” says Lieven Janssens, arthritis, cancer, and other Kaneka and Eurogentec Ph.D., Executive Vice President of Production cultures of plasmids used as DNA vaccines for new treatments intractable diseases. Work Together on Kaneka Eurogentec. New Medications

Eurogentec’s affiliation with Kaneka Group has brought numerous *1 Chiral compounds: Substances having benefits to both companies. Kaneka mirror stereoisomeric forms, just like right was able to set biopharmaceuticals and left hands. In some cases, the right hand has medicinal properties, while the left hand as its new core business, while causes side effects. General organic synthetic Eurogentec enjoys its increased techniques generate both hands. Kaneka used biotechnology and made it possible to selectively social credibility thanks to Kaneka’s produce just one hand of chiral compounds presence. The consolidation has

Osaka Synthetic Chemical Kaneka Group’s Network of Pharmaceutical Takasago Plant Laboratories, Inc. Pharmaceutical Development and Production Business Kaneka manufactures pharmaceutical intermediates As part of pharmaceutical 2 and active pharmaceutical ingredients (APIs* ) at its business, Kaneka Group Takasago Plant and Kaneka Singapore. We also have is working on “active an open innovation base, the Kaneka US Innovation pharmaceutical ingredients Center, in California, where many universities and and intermediates” , bio-venture companies exist. Furthermore, Kaneka “protein A chromatographic Eurogentec has its headquarters and manufacturing carrier for antibody medical sites for biopharmaceuticals and life-science refinery (KANEKA KanCap products in Belgium, and also manufacturing sites For more details, A)”, “generic medicine” , for life-science products in the United Kingdom and “regenerative and cell please visit our website. in California. Kaneka Eurogentec S.A. Kaneka US Innovation Center medicine”, etc. Kaneka CSR Search

*2 APIs: Active Pharmaceutical Ingredients 19 20 Examples of the efforts by the Health Care Solutions Unit

Stakeholder’s Message

Kaneka Eurogentec is an Ideal Company Connecting a Region to the World Wallonia Export-Investment Agency (AWEX), Belgium

CEO Pascale Delcomminette (left) Senior Business Development Manager for Asia-Pacific Aicha Benmaalla (right) AWEX is a public agency with the mission of developing the economy of the Wallonia region by assisting local companies in expanding overseas as well as by attracting and supporting foreign businesses. Today, there are more than 200 life-science companies in the region, which is growing remarkably as a science park. In particular, Kaneka Eurogentec has an ideal business model to drive the regional growth. The company provides customers with solutions for prompt and safe treatments and plays an innovative role in medical progress. Kaneka Eurogentec covers biopharmaceuticals and all fields of biotechnology including agents Their efforts are highly valuable in Become a Reliable Partner for Pharmaceutical Companies Worldwide in the for research and diagnostic purposes. The company continues to maintain and enhance the improving the QOL (quality of life) of quality control essential for pharmaceutical production by introducing the latest equipment, patients. Integrated Field of Biopharmaceuticals and Small Molecule Drugs systematizing facilities, and developing human resources. In 2016, we presented Kaneka Eurogentec with the top award for export business to the EU in the FDA certifications. Since then, we providing flexible responses to our original technologies which “To keep the world’s top solution- Wallonia region, the Grand Prix Credibility and Flexibility have maintained and enhanced our customers’ demands is also a must. are suitable for pharmaceutical providing company, we need to Wallonie à l’Exportation, in grateful Required as a Partner for quality control system. The efforts Kaneka Eurogentec offers the “One- structures ordered by customers. continue to innovate technologies. acknowledgment of their social Pharmaceutical Companies include preparing, maintaining, Stop Shop” system to collectively Setting biopharmaceuticals as our Kaneka Eurogentec has already contributions. We believe that Kaneka Eurogentec will continue to take and managing standard operating manage all procedures from process new core business allowed us to started the development of leadership in contributing to global A contract manufacturing company manuals pursuant to the criteria, development to GMP production widely extend the scope of our gene therapy, which is drawing health care and further develop trusted by pharmaceutical clients providing periodic staff training, and and quality control to provide proposals. attention as the next-generation together with the Wallonia region. must not only have cutting-edge undergoing customer and authority efficient development support. The For prompt response to new biopharmaceutical. We will technologies but also be capable of inspections,” says Ingrid Dheur, expertise and response ability of technological development continually pursue frontline and safe and stable delivery of products. Biologics Division Vice President, the project team involved in the and customers’ needs, Kaneka unique technologies to advance the Kaneka Eurogentec*3 has Kaneka Eurogentec. operations and other staff members Eurogentec is currently developing health care field and contribute to acquired certification of Good are highly appreciated, resulting in platforms*4 of the technologies society,” Lieven Janssens says. Manufacturing Practice (GMP), long-term and loyal customers. of producing biopharmaceuticals Kaneka and Kaneka Eurogentec which is the international criteria for based on its many years of contract will continue to play a vital role production management and quality manufacturing knowledge. in pharmaceutical development Providing Solutions for control of pharmaceuticals, and “We need to further strengthen and provide health care a Healthy Society also obtained certifications from the the technology platform for us to solutions in the integrated field U.S. Food and Drug Administration continually contribute to health of biopharmaceuticals and small (FDA), enabling the company to Kaneka Group’s pharmaceutical care. We will promote research molecule drugs. ensure its high credibility. business is not simple synergy with Kaneka and reinforce “Stringent quality systems At the early stage of pharmaceutical manufacturing work but has been our R&D capability to become *4 Platform: To provide business foundations are required for pharmaceutical development, the structure of target focusing on the solution-providing the center of the Kaneka Group’s (technologies, equipment, services, etc.) to third production. We faced no problems in materials and schedules frequently approach by offering efficient biopharmaceutical business,” states parties. obtaining strict world-level GMP and change; thus, the capability of production methods based on Ingrid Dheur.

*3 The company name was changed on April 1st, 2017

21 22 Infrastructure to Support Value Creation Intellectual Capital

Number of Patent Applications Number of published applications in Japan Number of published PCT applications Policies Regarding Intellectual (publication and republication excluded) / Number of Patents Held Property 338 202 The number of domestic applications published 350 200 281 Kaneka upholds the global-scale reinforcement under the umbrella of the KANEKA Group in 300 69 62 fiscal 2016 was 281 excluding Kohyo publication 263 of intellectual property conducive to new 150 (Japanese translation of PCT* application) and Sai- 250 70 133 business, as well as intellectual property that 71 118 Kohyo publication (domestic re-publication of PCT protects existing business, as a key policy, and 200 47 application). 200 100 38 we work to acquire the necessary rights in the 150 94 The number of domestic applications published 140 necessary countries. 141 in fiscal 2015 (filed in fiscal 2012-2013) temporarily 100 45 43 Moreover, we respect the intellectual property 50 fell in comparison to fiscal 2014 because we started 38 rights of other companies and, to avoid 50 45 35 24 38 39 the challenge to improve patent allowance rate by 23 Other1 33 disputes, are sure to conduct patent searches 0 16 11 5 7 strengthening of prior art search before applications FY2014 FY2015 FY2016 0 and secure patent clearance whenever a new were filed from fiscal 2011. FY2014 FY2015 FY2016 Material SU Quality of Life SU theme is proposed, business commercialized, or In fiscal 2016, however, domestic publication Material SU Quality of Life SU Health Care SU Nutrition SU Other specification revised. number increased in comparison to last year while Health Care SU Nutrition SU continuing said allowance rate improving challenge. Contribution to Business The number of PCT applications published increased significantly from 133 in fiscal 2015 to Number of national patents held Number of foreign patents held 4000 3500 (1)Global IP Activities 202 in 2016 as a result of initiatives to strengthen 3210件 3299 3442 2956 We decided to station an intellectual property our patent portfolio overseas. 3500 3000 The number of patents held by Kaneka Group 3031 2669 1010 specialist at our holding company in Europe from 3000 1022 987 2500 968 increased steadily both domestically and overseas, 894 fiscal 2017, thereby enabling issues to be dealt with 2500 878 quickly. This follows on from the placement of such with domestic and foreign patents totaling 3,442 2000 and 3,210 respectively as of the end of fiscal 2016. 2000 specialists at our holding company for the Americas 1651 1500 1147 1274 and our holding company in Asia. In particular, the number of foreign patents held 1500 1429 1518 1004 increased significantly as a result of said initiatives 1000 1000 to strengthen our patent portfolio overseas. 468 493 571 (2) Contribution to Existing Business 500 438 466 506 500 A large number of patents relating to Organic EL Other2 Other2 Other2 In fiscal 2016, we obtained patent rights concerning, 268 291 296 319 348 355 0 0 for example, new crystalline form of reduced (OEL) lighting panels, heat-resistant, light-resistant transparent resins, endoscope treatment tools, and FY2014 FY2015 FY2016 FY2014 FY2015 FY2016 coenzyme Q10, in which oxidation stability has Material SU Quality of Life SU been dramatically improved over conventional so on were registered domestically throughout fiscal Material SU Quality of Life SU crystals, and a manufacturing method for flame- 2016. Health Care SU Nutrition SU Other Health Care SU Nutrition SU retardant expandable styrene resin particles using A large number of patents relating to modified a brominated flame retardant that demonstrates silicone liquid polymers, graphite sheets, synthetic excellent environmental compatibility. fibers for artificial hair, and so on were registered Patents concerning multilayer polyimide films and overseas. Lawsuits Concerning Intellectual Property thermosetting resin composition tablets for LED *PCT: Patent Cooperation Treaty packages were subject to oppositions by third party. In all cases, however, oppositions were dismissed As of the end of June 2017, no intellectual manufacturing method, the United States and the patents were maintained. property lawsuits with the potential to District Court, the Central District of California Concerning synthetic fibers for artificial hair, significantly affect operations have been filed gave a judgement ordering the defendant to on the basis of our trademark rights, the export against the KANEKA Group. Meanwhile, we pay the damages of approximately $ 13.5 of counterfeit goods was monitored by Chinese have filed the following patent infringement million to Kaneka (May 2017). customs and one company suspected of lawsuits in response to the suspected infringement was charged, whereby counterfeit goods were switched with our official products. infringement of patents held by KANEKA. Regarding patent infringement lawsuit based on KANEKA’s US patent rights (3) Contribution to New Business Regarding patent infringement lawsuits based concerning a flame retardant polyester fiber Concerning biodegradable polymer, which uses on KANEKA’s US patent right concerning the for artificial hair, the United States District vegetable fats and oils and other biomass as its production method for oxidized Coenzyme Court, the Northern District of Texas gave primary raw materials, during fiscal 2016, patents Q10 are still pending before the United a judgement ordering the defendant to pay for resin compositions that demonstrate excellent States District Courts, the Central District of the damages of approximately $ 6 million to moldability were registered in both Japan and the California and the Southern District of Texas. Kaneka. The appeal court (CAFC) affirmed United States. Moreover, patents such as a nucleic acid the first instance decision (April 2016) and chromatography chip which enables quick visual Regarding patent infringement lawsuit based the defendant-appellant did not make a final detection of specific bacterial or viral genes, and a on KANEKA’s US patent rights concerning appeal to the Supreme Court. Therefore, the high-performance fertilizer expected to boost crop polyimide film products and relevant case has been terminated by our win. yields were registered in Japan.

23 24 Infrastructure to Support Value Creation

As a topic for fiscal 2016, this column features our intellectual property rights activities in the field of regenerative medicine and cell therapy, the promotion of open innovation in the United States, and other R&D efforts.

TOPICS 1 TOPICS 2 Research and Development Regarding The Kaneka US Innovation Center in Silicon Valley, United States In Japan, regenerative medicine promotion As a significant result achieved Established a Development Site for Life Science and act(*1) was issued in 2013. Moreover during fiscal 2016, we developed a new regenerative medicine safety securing revolutionary technique, in collaboration Information-Communication Technology (ICT) act(*2) and pharmaceuticals and medical with the University of Tokyo with support of device act(*3) came into force in 2014. As AMED(*4), for preparing iPS cells in a large Silicon Valley, in California, the United States, trends in life science in the U.S. market to a result, it is now possible to outsource scale by suspension culture using lipids is the center of the world’s most advanced develop new technologies and products. production of cell-processed products used present in blood. for regenerative medicine. Thus, the business The iPS cells cannot grow under a research and development activities and As IoT becomes increasingly sophisticated, environment has been drastically changed. condition in which cells are individually front-line industries. This area is known as a and automated driving is getting closer to Kaneka believes that this change in the suspended in culture medium. We have place of open innovation, where companies practical use, potential needs for highly environment is a great opportunity and has successfully prepared more than 1 billion iPS are working with university researchers functional materials exist in the information actively promoted research and development cells, required to treat one patient with severe and venture companies to develop new and communication field. We will explore of regenerative medicine and cell therapy. diabetes, by adding minute amounts of the technologies and industries. advanced and specific material needs and Kaneka has so far developed various devices lipids (lisophosphatidic acid and sphingosine-1-phosphate) In September 2016, the Kaneka US propose various solutions by working with required for a series of processes from cell to a medium and only by culturing with mildly Innovation Center was established in Newark, the Kaneka US Material Research Center at separation to administration such as "cell shaking in a commercially available culture in Silicon Valley, as a development site for Texas A&M University, which is the Kaneka’s separation device", "cell concentration and vessel. research and business activities. This is our first open innovation center in the United washing device", ”automatic cell culturing This technique is expected to reduce the second R&D base, following one in Texas. States. system”, ”thermostat-controlled transporting cost to about one-third and the process time system” and "cell injection syringe" based to about one-tenth compared to conventional This center promotes open innovation and on the technique and know-how of blood methods, thereby significantly contributing to surveys the advanced technological trends in purification systems we have accumulated in practical application of iPS cell preparations. life science and information-communication the medical device business. An international patent application for the technology. Further, from 2015, we established outcome of the research was filed together Kaneka Pharma America, a sales our research and development center with the University of Tokyo (WO2016/121737). company, pioneers the sales of catheters specializing in regenerative medicine and In addition, patent applications and design and other medical equipment, while cell therapy in Port Island, Kobe. We have applications have been actively filed based Europe-based Kaneka Eurogentec exports begun in earnest research and development on the knowledge accumulated so far such as biopharmaceuticals to the United States. of "mesenchymal stem cell preparation a method for highly efficiently concentrating The Kaneka US Innovation Center derived from amniotic membrane", "large- and recovering mesenchymal stem cells investigates the needs for and technical scale culture technique for iPS cell" and from a cell culture medium (Japanese Patent A meeting at the Kaneka US "drug discovery supporting technique by No. 5800797), a cell separation filter, a culture Innovation Center using iPS cell" and are accelerating activities device, a method for inducing differentiation aiming to be "the top company of practical to a desired cell, and characteristic designs application of world standard cells, devices of a cell separation vessel. We thereby and facilities". aspire to secure our superiority in the intellectual property (as of June 30, 2017, 85 patent families among which 14 registered Japanese patents and 2 foreign registered patents).

Suspension culture of iPS cells

*1 Act on comprehensive promotion measure for prompt and safe Lipids Mild Shaking regenerative medicine for the people *2 Act on the safety of regenerative medicine *3 Act on Securing Quality, Efficacy and Safety of Pharmaceuticals, Medical Devices, Regenerative and Cellular Therapy Products, Gene Therapy Products, and Cosmetics *4 AMED: Japan Agency for Medical Research and Development The Kaneka US iPS cell suspension Formation of cell flock Innovation Center

25 26 Infrastructure to Support Value Creation Human Capital TOPICS 1 Basic Concepts for People Global Human Resource Development and the Organization Strengthening Our Efforts to Develop Human Resources in Malaysia In the Overseas Dispatch Training, the trainee The basic concepts for people and the system has been enhanced to allow young members At Kaneka (Malaysia) Sdn.Bhd., the patiently explained them the reasons and organization—based on our corporate to become familiar with overseas operations from construction of the production lines for Kane importance of the efforts. After a while, these philosophy and long-term vision—are also at an early stage. Employees who have worked for the Ace and Kaneka MS Polymer was completed activities gradually produced measurable the heart of our personnel system. This concept, company for two years or more are eligible to serve this year to increase our market share in results and finally became routine practice. the Kaneka Spirit, has derived from ongoing as voluntary trainees working at a Group company the ASEAN region. Human resources The Takasago Plant is planning to send dialogues between labor and management and outside Japan. Not limited to advanced nations, development is an important key to stable next-generation leaders to the plant in evolved through the infused human resources the scope of personnel development has been operation. Malaysia over the next three years. This is systems, through which we foster people eager expanded to India, Indonesia, and other emerging Thus, experienced leaders of operation not just an assistance project; they should to meet new challenges, as well as a strong countries. at the Takasago Plant, a mother plant, have have the perspective of optimizing the whole organization, diverse human resources, and In the Global Employee Development Program been sent to Malaysia since April 2016 to plant and will take a broad view of the overall inquiring minds. In fiscal 2016, we revised the (KG Program), in addition to the “show-of-hands” improve and streamline the production line business. Employees cultivated through system of evaluating managers to accelerate the style language training, the company also provides operation with local employees. this opportunity are expected to become company reforms. an opportunity to learn languages for those who are In order to stabilize and improve production, Kaneka’s global leaders, not limited to Japan. assigned overseas by the business department and the 3S (see note 1) activity and the pointing and calling-out procedures (see note 2) were who are engaged in overseas operations, in order to Note 1. 3S: seiri (organize), seiton (arrange), and seisou (clean up). Management philosophy improve their practical language and communication introduced, but it was not easy to have local Note 2. Pointing and calling-out procedures: To check the safety by pointing skills. employees understand the concept. So, we at each item with a finger and calling out its name and status. In fiscal 2016, we have newly started the Kaneka All members Management vision Creative Corner, a group training sessions where keeping in mind the direct guidance from our top management, and Zen pointing and calling-out Deploying the Kaneka Spirit as Part of sitting practice are provided to prospective national procedures to check Management Initiatives to Drive Innovation and Growth staff leaders from group companies outside Japan the safety to cultivate their potential as global leaders. Kaneka Spirit Through the activities, =Basic concepts for people and the organization I want to find the Active Promotion of Female Employees importance of on-site confirmation Meeting new In fiscal 2016, we committed to the theme stipulated challenges in the Action Plan of the Act on Promotion of Women’s Participation and Advancement in the Workplace. We established the new time-based TOPICS 2 annual leave system and revised the telecommuting Strong Inquiring organizational Personal program in response to proposals from the minds skills growth participants in the first phase of the Women’s Organizational Culture to Make Women More Active in the Workplace Network System, where female employees address The Act on Promotion of Women’s their leadership. workplace-related issues. In the second phase, Participation and Advancement in the Action plans were developed in 2016 all participants have created and accomplished Workplace that came into force in April based on the act described above. In these a vision to enable female employees to be more Diversity 2016 requires companies to take four steps, plans, the number of female managers will active in Kaneka. including identifying the working situation be doubled, and several women will be There were 16 voluntary participants in of female employees, analyzing issues, and appointed as senior managers by March the training for fostering female leaders. The developing action plans. 2021. Under these plans, we will continue to employment rate of female students who graduated After 2013, when Kaneka started improve our corporate culture and working Personnel System from colleges of technology and universities in institutional reform for women’s active conditions to make female employees more fiscal 2017 exceeded 30%. Our female members participation, the two occupational categories active in the workplace. also gave career seminars at colleges to motivate ■The four elements of the Kaneka Spirit of the management-track position and The Women’s students’ willingness to work and cultivate future the regional career-track position were Network System, Create workplaces that can human resources. established in 2015 Meeting new attract, cultivate, and properly eliminated. Instead, the Work-at-Home Embrace new challenges Diversity While creating a women-friendly company to encourage female challenges deploy diverse human System, the Leave of Absence for Spouse’ environment, we will be more active in hiring women employees to address resources Overseas Transfer System, and the and building their capacity. work-related issues Babysitting Expenses Aid System were newly Strong Build a robust organization Inquiring organizational that integrates the strengths Cherish a free and open culture established.We also actively sent female minds skills of individuals employees to external training to cultivate

27 28 Infrastructure to Support Value Creation CSR Promotion System Environment and Safety

public confidence in their operations. Kaneka has been actively promoting this Promoting Responsible Care approach since 1995 as a founding member of the Japan Responsible Care Council (which merged with the Japan Chemical Industry Association in fiscal All members of the Kaneka Group share a 2012). In order to strengthen its organizational problem- We at Kaneka conduct trainings for employees at commitment to Responsible Care (RC) (see note 1), solving capacities related to CSR matters, Kaneka all levels, based on our CSR Handbooks covering and all of our activities are managed in keeping with Basic Policies for Responsible Care Group created the CSR Committee in March 2009. fundamental and practical aspects. In fiscal 2016, Responsible Care principles. The CSR Committee determines and revises the training sessions were held three times for new 1. Protect the natural ecosystem and reduce We carry out CSR safety and quality inspections basic policies that provide direction for the group to employees, twice for mid-career entrants, and one environmental impact for all group companies in and outside Japan. These 2. Offer safe products and information fulfill its responsibility as a good corporate citizen. time each for those newly promoted to managerial address considerations related to environmental 3. Develop products and technologies in The Committee also develops comprehensive and supervising positions. protection, occupational health and safety, product consideration of the environment and safety strategic plans and produces action plans for CSR We also held 18 sessions to explain our CSR safety and quality assurance, and compliance. We 4. Reduce waste and promote the recycling of activities, and assesses their implementation status. activities, including at meetings of group company also actively monitor the progress of implementation plastics In fiscal 2016, the CSR Committee met twice, and presidents and group company top management, as of the relevant policies and actions. 5. Enhance process safety, disaster-prevention, the Safety and Human Health Subcommittee once, well as at briefing sessions held for new employees Kaneka’s Environmental Health and Safety and occupational safety and health the Earth Environment Subcommittee twice, and the of group companies and group companies in Japan. 6. Win public confidence Management Regulations and Quality Management Product Safety and the Compliance Subcommittees We will encourage individual employees to Regulations clearly define the actions and each met three times. consciously commit themselves to CSR activities so responsibilities expected of group companies. that we can successfully fulfill our corporate social Win public confidence Employees of group companies are urged to be responsibility and make social contributions as well. proactive, and together we endeavor to reduce the From the management to every employee, all environmental impact and risks of occupational our members shall act in compliance with laws, accidents, as well as to improve our capacity to regulations, standards, etc. relating to environment respond to natural disasters or product-related and safety both at home and abroad. Our approach accidents that may occur. to Responsible Care as such shall be publicized CSR Structure Note 1: Responsible Care refers to actions undertaken on a voluntary basis by accurately to the public, in hope of rightfully gaining the chemical industry to promote improvements in aspects of environmental, public recognition and confidence. safety, and health performance, throughout the entire process, from the Management development of chemical products to their manufacture, usage, and disposal. President The initiatives and achievements are communicated to the public to raise

Organization in Action TOPICS Policy, Measures, and Inspection Committees CSR Division

Internal Control Department Joined Community Dialogues Implementation Bodies Conferences Group Company Support Department Community dialogues were held by the Japan outcomes. This was not just a briefing session; Responsible Care (RC) Council in and we spent sufficient time answering questions. CSR Committee CSR Inspection Committee Investor & Public Relations Department Hyogo on November 16, 2016, and February Such efforts resulted in a vigorous exchange Chairperson : President Production Technology & Engineering Department 18, 2017, respectively. of views among the competent authorities, Administration Office CSR Committee The Osaka Plant belongs to the Osaka relevant companies, local residents, and Environment and Safety Department Promotes and supports CSR initiatives district and the Takasago Plant to the Hyogo residents’ associations. We will continue to district; this fiscal year, we participated in promote mutual understanding with local Safety & Human Health Subcommittee Manufacturing Sites Safety & Technology Promoting the dialogues as a member of the group of communities through RC activities. Focuses on occupational and process safety Takasago Plant Osaka Plant Experts Conference Shiga Plant Kashima Plant managing companies. Earth Environment Subcommittee Responsible Care Leaders Community dialogue is intended to introduce Energy Officers Conference Environment, Health & Safety Concentrates on global environmental issues Departments the activities of district RC member companies Quality Management Product Safety Subcommittee Quality Assurance Promoters to community residents and administrative Conference Departments Oversees product safety and quality assurance officials and enable them to have better Product Safety Review Conference Divisions understanding of our business activities. The Compliance Subcommittee Responsible Care Leaders activities are mainly composed of five codes: Focuses on corporate ethics and compliance Quality Managers environmental protection, process safety and disaster prevention, occupational safety Group Companies and health, chemical and product safety, and Environment and Safety Departments distribution safety. Staff Divisions On the day, member companies gave Dialogue in Osaka with many participants, including the Responsible Care Leaders presentations on their RC activities and pertinent authorities, relevant companies, and local residents

29 30 Infrastructure to Support Value Creation (Environment and Safety)

Protect the natural ecosystem 3R Initiatives and reduce environmental impact Environmental Efficiency Initiatives to Cut Carbon Intensity Focusing on the impact of corporate activities on We assess the environmental impacts of our At Kaneka, we are working to reduce carbon Because reducing waste leads to improving global the global environment and the ecosystem, we production activities using Environmental Impact intensity, using a carbon intensity index (see note sustainability by means of resource savings, cost endeavor to reduce environmental impact and Points (EIP), which are compiled using the JEPIX 3) as an indicator for management, based on reduction, as well as carbon dioxide emissions promote resource conservation and energy saving methodology (see note 1), and we use those points carbon dioxide emissions from energy consumption reduction, Kaneka is pursuing waste reduction on a throughout the lifecycle of products. to assess our environmental efficiency (see note 2). associated with production activities. Since the base company-wide basis. Our total environmental impact in fiscal 2016 year was changed from fiscal 1990 to fiscal 2013, We effectively achieved zero emissions in fiscal decreased slightly, by 0.4% from the previous the target was accordingly changed to “93.2 or 2016, with a final landfill volume for Kaneka (see Reduce waste and promote year, to 4.58 billion EIPs, while our environmental below compared to fiscal 2013 (100) in fiscal 2020” note 5) of 3.0 tons, equivalent to a final landfill rate the recycling of plastics efficiency dropped by 5.1% from the previous year without changing the target level. of 0.005%. We reduce waste associated with manufacturing due to a decline in sales. The carbon intensity index of all parent plants The final landfill rate of 45 group companies in and its processes. We actively develop technologies was 93.4 in fiscal 2016, so we achieved our target Japan (see note 5) in fiscal 2016 failed to achieve Note 1: The Japan Environmental Policy Priorities Index (JEPIX) for the adequate disposal or recycling of plastic methodology involves the calculation of an “eco-factor” coefficient for each of 97.0 for the year, based on a target of 93.2 for zero emissions, with a rate of 1.8%. waste concerning our products in cooperation with emitted substance that has an environmental impact, using a ratio of the fiscal 2020. We will work on controlling the emission intensity annual target for emissions under national environmental policies versus relevant industries, and endeavor to dispose of and actual annual emissions (“Distance to Target”). The eco-factors are then Non-consolidated carbon dioxide emissions (see of industrial wastes and reducing the final landfill recycle waste in a proper manner. multiplied by a quantity for each environmental impact to produce a single note 4) decreased by 4.3% from the previous fiscal rate. integrated index known as Environmental Impact Points (EIP). Calculations year to 1,075,000 tons. Main factors in the decrease of eco-factors are done by the JEPIX Project (www.jepix.org, in Japanese). included activities to reduce carbon intensity, Note 5: The landfill volume, landfill rate, industrial waste volume, and recycling amount of Kaneka and group companies in Japan indicate totals differences in the product mix, CO2 emission factors Note 2: Environmental efficiency is a yardstick to for the company as a whole, including its facilities and companies other than the plant department. measure efforts to maximize value and minimize of purchased electricity, and so forth. environmental impacts, with the aim of achieving Note 3: The carbon intensity index is calculated as carbon dioxide emissions sustainable growth. Kaneka calculates this by dividing from energy consumption in production activities divided by activity volume, with the index set at 100 in the base year of fiscal 2013, using fixed numbers net sales (yen) by the EIP. for Kaneka. It helps in the visualization of the impact of our activities, and was used to establish targets for fiscal 2020.

Note 4: Carbon dioxide emissions are calculated as prescribed by the Act on Promotion of Global Warming Countermeasures, and as with energy the figure is a non-consolidated total for Kaneka.

TOPICS

Eco-Friendly Products Kaneka Groups is engaged in various environmental initiatives. Focusing on eco-friendly management from fiscal 2017, we will define, enhance, and expand our eco-friendly products. Environmental Efficiency Energy Creation Energy Storage Energy Saving Energy Saving Waste Reduction Clearing Agents for Chemical Pollutants

Product name Product name Product name Product name Product name Product name VISOLA/Soltilex/ Kaneka residential Kanepearl Eperan PHBH KANEKA Surfactin GRANSOLA electricity storage Intended use Intended use Intended use Intended use Intended use systems Residential/automotive Automotive parts Biodegradable Biosurfactant Solar power generation Intended use foams Package cushioning polymers Cleaning agents systems Reason for environmental materials (Packaging materials, Reason for environmental Residential stationary garbage bags, foams) Environmental efficiency(yen/EIP) Reason for environmental contribution Reason for environmental contribution batteries Reason for environmental contribution (Lithium ion secondary Saving energy as insulation contribution A naturally derived and contribution Creating energy with houses battery) and lightweight residential / Saving energy as lightweight biodegradable material A naturally derived and equipped with this product Reason for environmental automotive materials automotive parts friendly to the environment biodegradable polymers contribution (Fiscal year) that has little environmental Storing energy by houses impact when discarded equipped with this product

31 32 Infrastructure to Support Value Creation (Environment and Safety)

Enhance process safety, disaster-prevention, Offer safe products and information and occupational safety and health Occupational Safety and Health Product Safety Review Conference We endeavor to offer products that are safe to Safety and disaster prevention constitute the In 2016, a total of 18 occupational accidents distribute and use, and to provide adequate Due to expanded business operations and foundations of the local community’s trust, and occurred in the Kaneka Group, of which 10 resulted information on the products such as instructions on diversified activities of the group, we need to occupational health and safety are issues that in lost work time, and eight did not. In response to how to use and handle products correctly. conduct an increasing number of reviews of our new need to be fulfilled by chemical companies. We the high number of accidents due to body parts services and products. Develop products and technologies in persistently strive to make improvements in these getting caught in machines, we provide a risk To respond to emerging opportunities in a consideration of the environment and safety areas. sensory learning program using sensory equipment timely and speedy manner, in fiscal 2016 the and a profession-specific safety education program Upon the development of new products, we give administration office of the Product Safety Review Number of Group Employee Accidents to reduce the number of occupational accidents to consideration to the environment and safety Conference carried out related pre-consultations Resulting/Not Resulting in Lost Time zero, in order to boost personal safety awareness throughout the lifecycle of the products to the (hearings). (Accident) and strengthen our safety management capacity. greatest extent possible, and endeavor to develop Moreover, for products in new business fields, we 25 products and technologies with low environmental involved external experts in the reviews, receiving impact. their input from the initial stages of product 20 7 development. Accident Severity Rate and Accident Quality Management Activities 15 6 8 Frequency Rate Chemical Substance Management We at the Kaneka Group strive to benefit society 4 Group Companies in 10 9 Area All Kaneka Group Kaneka 6 7 Japan and Overseas and satisfy our customers, through providing a Internationally, regulatory systems are becoming 6 1 6 Year 2015 2016 2015 2016 2015 2016 stable supply of safe and reliable products. To that more stringent in order to achieve appropriate 5 Frequency 1 3 2 0.61 0.56 0.18 0.35 0.74 0.67 end, we undertake quality management activities to management of chemical substances related to Employees of Rate 5 2 Kaneka of 3 3 1 3 Group Accident ensure the safety and quality of our products at all consumer products. We strictly follow Japanese 0 2012 2013 2014 2015 2016 (year) Companies Severity 0.01 0.01 0.008 0.01 0.01 0.01 stages of design, development, manufacturing and and international laws and regulations, and also Lost time No lost time Lost time at group No lost time at group Rate at Kaneka at Kaneka companies companies sales. actively offer information for the proper handling of our products, through displaying the Globally In fiscal 2016, related activities included the Harmonized System of Classification and Labelling TOPICS following: of Chemicals (GHS) labels and providing a safety data sheet for products. • We inspected the status of product tests to We will also continue our efforts on information The Safety Room verify conformity with laws and regulations disclosure, including working with the Japan as well as with certification and accreditation Initiative of Product Stewardship (JIPS), an criteria. initiative supported by the Japan Chemical Industry Regarding safety as the highest priority in • We conducted on-site inspections of food Association, which promotes voluntary efforts within management, Kaneka Group actively makes its logistics management in terms of legal the chemical industry to minimize chemical risks. plants safe and secure for employees. The Safety Room, named Sokai-juku at the Kashima compliance and food defense and found no In addition, we revised and publicized the internal Plant, to retain the memory of the accident The Kashima Plant performs PDCA based problems. standards for chemical risk assessment to respond on two concepts—equipment safety technology and receiving an electric shock. In addition • We undertook a range of activities to build the to the Revised Industrial Safety and Health Act, and employee safety awareness—to retain the to learning about the importance of strictly capacity of our employees, including through which came into force in 2016. safety mind-set alive and continually evolve observing the working regulations, they will outside seminars and in-house lectures by safety activities. This PDCA is intended to also develop self-maintenance skills in the external experts. retain the memory of the fatal accident caused maintenance training room to pursue safe and • We provided employees in the business and by an explosion in 2009. secure operations. This training has had more research divisions with e-learning regarding The Safety Room was opened in 2015 as than 400 participants so far, which exceeds quality control as part of strengthening the a place to make all employees aware of and the total number of employees at the Kashima foundation of quality management. familiar with the mind-set and techniques of the Plant. Every single employee carries out safety-first policy. This place allows employees repetitive learning and makes a new pledge to understand the basics of safety by learning to work on safety, which improves safety about the relationship between direct and awareness through the PDCA. indirect causes and discussing accidents that In 2017, the Safety Room received the Effort occurred at their workplace. Award, one of the Responsible Care Awards, Furthermore, employees will actually from the Japan Chemical Industry Association, experience and learn the potential risks, such as a benchmark example of popularizing the as getting a body part caught in a machine safety-first policy across the chemical industry.

33 34 Infrastructure to Support Value Creation

Communication with Society Stakeholder Dialogue Kaneka Group continues to holds dialogues with various stakeholders to exchange different perspectives and opinions to deepen mutual understanding, and collaborate by sharing common issues. On March 1, 2017, we had a dialogue with Japan Platform (JPF), Kaneka’s partner for the Great East Japan Earthquake and the Kumamoto earthquake.

Details of this dialogue with JPF are available on our website. Kaneka CSR Search From left: ©JPF Acting Manager, Domestic Division Manager Senior Officer, General Manager CSR Division Manager Assistant Manager We provide relief supplies, including Kanelite Foam, a External Relations Head of the Tohoku Office, Administration Office CSR Committee Administration Office CSR Committee Administration Office CSR Committee resin foam product used as a floor insulation material, for Japan Platform, a Specified NPO Japan Platform, a Specified NPO Kaneka Corporation Kaneka Corporation Kaneka Corporation Naoya Hirano Yukihiko Akutsu Minetoshi Marufuji Kiyotaka Kondo Mika Fujii gymnasiums serving as evacuation centers.

“Cooperating with a company that has Mr. Hirano: After reading the CSR Communication natural disasters has also increased. NGOs and cutting-edge technologies will enhance the Book 2016, I found the management of Kaneka has a various sectors other than supporters are required to regional capability and save many lives.” —JPF strong commitment. I think Kaneka’s strength is that get involved in addressing complicated global issues. “We continue to provide reconstruction the president serves as the head of CSR Committee, There are high global expectations for innovative support through business activities, such as sets up the administration office, and creates a support activities. Sustainable activities will be by supplying our products.” —Kaneka companywide CSR system. provided through cooperation among universities, Mr. Hirano: JPF is an all-Japan system for overseas Mr. Akutsu: The CSR Communication Book 2016 research institutions, and private companies that cope humanitarian assistance. We leveraged our foreign emphasizes the importance of having a dialogue with with social problems from a business perspective. In Mr. Hirano: Kaneka has a concept of Build Back experience and provided the first full-scale support society and verifying the inconsistency between the this respect, Kaneka is leading in the wig business in Better, meaning better reconstruction. This is great. activities in Japan when the Great East Japan direction of Kaneka CSR activities and social needs. Africa. We think private companies have the power to revive Earthquake occurred. I was very impressed with Kaneka’s humble attitude. Mr. Akutsu: We expect Kaneka to make many dreams afflicted areas, such as by helping recover businesses Mr. Akutsu: We focus on addressing both deaths Even NGOs and NPOs sometimes fail to accurately come true. Innovation in chemistry will enhance and even creating jobs. directly caused by disasters and deaths in the meet the needs of humanitarian activities. It is not regional capability, which is our goal as well. reconstruction phase. We believe that cooperating “CSR activities play a pivotal role in passing easy to catch up with and respond to rapidly changing Marufuji: I think the role of private companies has —Kaneka with Kaneka, which has cutting-edge technologies, will down the wish for reconstruction.” social needs. But, we must avoid being self-righteous. been changing. Our management team has a strong enhance regional capability and save many lives. “We found that the management of Kaneka I was inspired by your CSR activities of being humble desire to become a solution provider to satisfy social —JPF Mr. Hirano: Before our request, Kaneka actively has a strong commitment.” and thinking about affected people first. This is what and future needs. Another important role of companies offered us solar panels to deal with power shortages. Marufuji: Kaneka learned a lot from the Great we need to be. is to build a profitable business model that also Hanshin-Awaji Earthquake. The plant had little That offer was so helpful. “Cooperating with a company providing contributes to society and continues their business Fujii: At the time, our employees in charge of the damage, but our employees and partner companies a dialogue opportunity makes support activities. For this reason, we will continue to have photovoltaic modules business proposed that they were afflicted. Our members, who had warm support activities innovative.” —JPF dialogues with stakeholders and make sound efforts. could produce portable and easy-to-install solar from people around the country, want to repay them. “Kaneka will aim to become a solution panels. So, we sent you around 100 solar panels via CSR activities play a pivotal role in passing down their provider to meet future needs.” —Kaneka About Japan Platform our distribution network, and you let us know about wishes to young members. Mr. Hirano: Today, the world faces the highest number many words of thanks from affected people and gave of refugees since World War II, while the scale of Japan Platform (JPF), an international humanitarian us their pictures, which made us aware that how our ©GNJP organization, was established as a platform where NGOs, products were helpful to them. financial circles, and the government cooperate with Kondo: After the disaster, for early reconstruction one another and utilize their strengths and resources to provide efficient and prompt emergency assistance for of the fishery industry in Kesennuma, we started to refugees and people affected by natural disasters. By rebuild Kanae, the only company making styrene seeking financial aid from the government and raising foam fish containers in the city, and the company contributions from private companies and individuals, this began operation again in 2013. We also provided platform promptly secures initial activity nuclear decontamination agents and Soil Block (large- funds for emergency assistance, so that NGOs can swiftly start support activities. size foam for civil engineering work) for Kaneka made a donation of 10 million yen through JPF to the We made a company donation through JPF to people affected highway recovery. Kumamoto earthquake that occurred in April 2016. by the Great East Japan Earthquake in 2011.

35 36 Infrastructure to Support Value Creation Corporate Governance List of Directors Basic Philosophy

Kaneka believes that a working corporate • Respecting and ensuring the equality of governance function is extremely important shareholder rights. in order to realize its diverse, global business • Collaborating with other stakeholders in the value- growth, and to maintain the optimal allocation creation process. of corporate resources to the R&D, production • Ensuring transparency through the timely, and sales activities that support that growth. appropriate disclosure of information. The corporate governance function is also • Strengthening the oversight and strategic essential to realize sustainable growth together recommendation functions of the Board of with the medium- to long-term improvement of Directors by leveraging the independence and Kimikazu Sugawara Mamoru Kadokura Minoru Tanaka corporate value. From this perspective, Kaneka insight of its outside officers. Chairman of the Board President(Representive Director) Executive Vice President In charge of Quality of is working to enhance corporate governance, • Appropriately communicating and encouraging (Representive Director) Chairperson of CSR Committee Life SU, and Corporate R&D Planning and Administration Division, Corporate Planning both to ensure transparency and fairness in understanding of Kaneka’s corporate philosophy Department and Global Planning Department Communication with Society decision-making, and to build more dynamic and policies among all stakeholders. management through swift, bold decisions. • Conducting a constructive dialogue with Kaneka believes the following basic items are shareholders based on an understanding of particularly important in those efforts. Kaneka’s corporate policies. [Our Efforts to Strengthen the Governance Capacity] 2006 • Introduced the executive Officer system 2015 • Increased the number of outside directors from 1 to 2 • Changed the number of directors from 21 to 13 • Formulated the Basic Policy on Corporate Governance • Formulated the Basic Policy on Internal Control System • Established the Appointment and Remuneration Advisory Committee • Established the Independent Outside Officers Meeting 2011 • Appointed an outside director Shinichiro Kametaka Akira Iwazawa Hidesuke Amachi Shinobu Ishihara 2016 • Commenced the effectiveness evaluation on the Board of Directors Member of the Board Member of the Board Member of the Board Member of the Board 2013 • Formulated the Criteria for Independence of Outside Directors Senior Managing Executive Officer Managing Executive Officer Managing Executive Officer Managing Executive Officer In charge of Material SU, and Material In charge of Production Technology, Process In charge of Nutrition SU, and New In charge of CSR Division, Investor & Solutions Research Institute, Development Research Laboratories, Business Development Division, Public Relations Department, Legal Diagram of Corporate Governance System Chemicals Purchasing Department, Photovoltaic & Thin Film Device Research OLED Business Development Project Department, Accounting Department and General Manager of Performance Laboratories, Intellectual Property and BDP Business Development and Finance Department, and General Polymers Solutions Vehicle Department and Procurement Department Project Manager of Finance Department General Meeting of Shareholders Communication with Society Communication with Society

Report Chairman of the Board Independent Outside of Directors Officers Meeting Appointment Appointment Board of Directors Nomination & Compensation Report Advisory Committee Appointment

President Kazuhiko Fujii Yasuaki Nuri Takeo Inokuchi Mamoru Mohri Member of the Board Member of the Board Independent Member of the Board Independent Member of the Board Management Managing Executive Officer Managing Executive Officer Conference Audit In charge of Health Care SU and In charge of Business Process Audit & Health Care Solutions Research Innovation Division, General Affairs Supervisory Board Institute, President and Director of Department and Secretariate, and Liaison Kaneka Americas Holding, Inc., and General Manager of Secretariat President and Director of Kaneka CSR North America LLC Committee Audit & Supervisory Board Members Managing Executive Officers Executive Officers

Hideyuki Matsui Atsushi Kawakatsu Katsunobu Doro Yasuhiro Sumi Takamune Yasuda Liaison Masami Kishine Ikuo Aoi Jun Enoki Haruhiko Maki Hitoshi Yahara Accounting Hiroshi Fujiwara (Outside) Fuminori Hoya Riichi Nishimura Masahiro Ueda Operating, Production, R&D CSR Division Auditor Yasuhiro Uozumi (Outside) Masaaki Kimura Kan Okabe Takuo Ishibashi and General and Administration Internal Audit Internal Control Accounting Audit Divisions, etc. Group companies Evaluation of Department Yoshiki Takeoka Toshio Komori internal controls

Note: SU=Solutions Unit

37 38 Infrastructure to Support Value Creation (Corporate Governance)

discussions is reported to the Chairman of the linked to operating results and stock option equity Organizational Design and Audits and Oversight Board, as appropriate. compensation. Compensation for outside directors Business Execution Structure The Independent Outside Officers Meeting was comprises a fixed compensation. Each of these The Audit & Supervisory Board consists in principle held once in fiscal 2016 to discuss the operation of components is maintained within caps approved Kaneka has put in place two independent outside of four Audit & Supervisory Board members, the Board of Directors, the roles of outside directors, by the General Meeting of Shareholders, and is directors and two independent outside Audit & two of whom are independent outside Audit & risk management, and other matters. decided after consideration of Kaneka’s operating Supervisory Board members, all of whom provide Supervisory Board members. Audits are conducted environment, business results and other factors. fully functioning oversight of the execution of in coordination with the accounting auditor and CSR Corporate Officer Remuneration for individual directors is business by the Board of Directors and audits by Division Internal Control Department. The Audit & Compensation determined by the Board of Directors after the Audit & Supervisory Board. Kaneka has thus Supervisory Board members meet periodically to discussion by the Appointment and Remuneration chosen the “company with an Audit & Supervisory exchange opinions with Kaneka’s representative • Policy for Determining Corporate Officer Advisory Committee in accordance with the Board” format as our organizational design under directors, and attend meetings of the Board of Compensation Concept of Remuneration for Officers. the Companies Act. Directors, Management Conference, division Compensation for directors is linked to the medium- Auditors are provided with fixed remuneration, Important management matters pertaining to manager meetings and other important meetings to long-term interests of Kaneka’s shareholders and which is determined within the limitation in total management of the Kaneka Group are decided where key matters regarding business execution are is intended to enhance the directors’ motivation for amount approved by resolution of shareholders by resolution of the Board of Directors following decided. In this way, the Audit & Supervisory Board maximizing corporate value through a system that meeting. The amount for individual auditors is deliberation at a Management Conference, a body members properly monitor the status of operational is appropriate, fair and balanced. determined after discussion with the auditors consisting of the President and other executives of execution in Kaneka. Compensation for directors is comprised of a according to their duty and responsibility. Kaneka. Kaneka has introduced an executive officer The Internal Control Department of the CSR fixed monthly compensation, together with a bonus system with the purpose of promoting swift and Division is responsible for evaluating internal flexible responsiveness to changes in the business controls and conducting internal audits with regards Breakdown of Corporate Officer Compensation environment, as well as to separate and enhance to the business operations of each division. Breakdown of Compensation by Type (Millions of yen) business execution and oversight functions. While Total Persons Position Compensation (fixed) (Millions of yen) Monthly Stock Option Equity Compensated division managers, including executive officers Nomination & Compensation Compensation Compensation Bonuses selected by the Board of Directors, are given Advisory Committee extensive authority over daily business execution, Directors (excluding outside directors) 605 452 53 100 11 directors are responsible for or in charge of each To ensure that its corporate governance initiatives division to supervise the execution of operations. function effectively, Kaneka has put in place a Audit & Supervisory Board members (excluding outside Audit & Supervisory Board members) 48 48 - - 2 Division managers hold monthly meetings to report Nomination & Compensation Advisory Committee on the status of operations in their respective as an advisory committee to the Board of Outside directors 68 68 - - 5 divisions directly to all directors and Audit & Directors. When Directors and Audit & Supervisory Notes: 1. Amounts less than the specified unit have been rounded off. Supervisory Board members. Board members are appointed and dismissed 2. Persons compensated and monthly (fixed) compensation for directors include compensation paid to a director who retired from their positions at the close of the 92nd Ordinary General The CSR Committee, chaired by the President, or the remuneration of directors is decided, the Meeting of Shareholders on June 29, 2016. 3. Persons compensated and monthly (fixed) compensation include compensation paid to a outside Audit & Supervisory Board member who retired from their positions at the close of the 92nd has been established to promote activities that independent outside directors on the Nomination Ordinary General Meeting of Shareholders on June 29, 2016. contribute to society’s sustainable development, & Compensation Advisory Committee advise the 4. Maximum compensation to directors is ¥46 million per month (fixed salary) (resolved at the 76th Ordinary General Meeting of Shareholders on June 29, 2000), and annual stock option equity compensation is ¥75 million (resolved at the 83rd Ordinary General Meeting of Shareholders on June 28, 2007). as well as to guide Kaneka in ensuring legal and representative directors by expressing their opinions 5. Maximum compensation to Audit & Supervisory Board Members is ¥7.8 million per month (resolved at the 83rd Ordinary General Meeting of Shareholders on June 28, 2007). regulatory compliance, and fulfilling its accountability from the standpoint of fairness and neutrality and to stakeholders. report the results to the Board of Directors. of the Kaneka Group, including examination of risk The members of the Nomination & Compensation Evaluation of Effectiveness management, that the Board plays an effective role Board of Directors Advisory Committee comprise Kaneka’s of the Board of Directors in supervising the business operation, and that the representative directors and independent outside Board has the ability to maintain its effectiveness. Meetings of the Board of Directors are convened, directors. In fiscal 2016, this committee was held The Chairman of the Board regularly checks reports Kaneka will continue to make efforts to maintain in principle, at least once a month. The Board of twice to discuss the remuneration of the directors, from the Independent Outside Officers Meeting the effectiveness of the Board of Directors through Directors discusses important matters regulated by the company system, and the operational system. and the opinions of Kaneka officers. The Chairman evaluation in the future. laws and regulations, the Articles of Incorporation, then analyzes and evaluates the significance and and Board of Directors regulations, and then Independent Outside operations of the current Board of Directors, and Status of Internal decides on the execution thereof. In tandem, Officers Meeting discloses an overview of the results. Control System directors report to the Board of Directors on the In June 2016 Kaneka discussed the operations status of execution of their prescribed duties, with The Independent Outside Officers Meeting, of the Board of Directors (the content of information By resolution of the Board of Directors, Kaneka has the Board of Directors monitoring the legality and comprising Kaneka's independent outside directors provided in advance, content of proceedings, stipulated a basic policy concerning the system to appropriateness of their actions. The number of and independent outside Audit & Supervisory deliberations, etc.), the roles of outside directors, ensure operational appropriateness (internal control directors is capped at 13, and in principle 2 of Board members, meets at least once a year to risk management and other matters in the system). This basic policy is confirmed periodically them are independent outside directors appointed discuss matters regarding corporate governance. Independent Outside Officers Meeting. As a result and revised as necessary in an effort to maintain to strengthen the oversight function of the Board Prior to a meeting being held, the members of of a self-assessment performed based on those the effectiveness of the internal control system. The of Directors. The terms of office of directors are the Independent Outside Officers Meeting collect discussions, Kaneka has confirmed that the Board policy was resolved for the fiscal year ending March limited to one year in order to clarify management necessary information from the standing Audit & of Directors has been effectively functioning as a 31, 2017 by the Board of Directors meeting held on accountability. Supervisory Board members, and the content of decision-making body regarding important matters March 22, 2017.

39 40 Corporate Profile Global Network

NAME INVESTOR INFORMATION (As of March 31, 2017) KANEKA CORPORATION COMMON STOCK TRADED Tokyo, Nagoya OFFICES 1-12-32, Akasaka, Minato-ku, Tokyo 107-6028, Japan TRANSFER AGENT Tel: +81-3-5574-8000 Mitsubishi UFJ Trust and Banking Corporation, Fax: +81-3-5574-8121 Osaka Branch 3-6-3, Fushimimachi, Chuo-ku, Osaka 541-8502, Japan DATE OF ESTABLISHMENT September 1, 1949 ACCOUNTING AUDITOR KPMG AZSA LLC PAID-IN CAPITAL Ginsen Bingomachi Bldg., 3-6-5, 33,046 million yen (As of March 31, 2017) Kawaramachi, Chuo-ku, Osaka 541-0048, Japan

NET SALES AUTHORIZED CAPITAL 548.222 billion yen (Fiscal years ended March 2017) 750,000,000 shares

NUMBER OF EMPLOYEES (As of March 31, 2017) ISSUED SHARES 9,666 (including consolidated subsidiaries) 350,000,000 shares

FACILITIES IN JAPAN Belgium Malaysia America NUMBER OF SHAREHOLDERS Osaka Head Office 16,807 Sales Office Nagoya(Aichi Prefecture) Plants Takasago (Hyogo Prefecture) DISTRIBUTION OF SHAREHOLDERS Osaka (Osaka Prefecture) 1.5% Financial institutions Shiga (Shiga Prefecture) 7.6% 170,380,000 shares (91 shareholders) Kashima (Ibaraki Prefecture) Foreign corporations and individuals 16.5% 90,080,000 shares (457 shareholders) RESEARCH INSTITUTES Individuals and others Kaneka Europe Holding Company N.V. Kaneka (Malaysia) Sdn. Bhd. Kaneka Americas Holding, Inc. Material Solutions Research Institute 48.7% 57,721,000 shares (15,936 shareholders) Kaneka Belgium N.V. Kaneka Eperan Sdn. Bhd. Kaneka North America LLC Kaneka Pharma Europe N.V. Kaneka Paste Polymers Sdn. Bhd. Health Care Solutions Research Institute Other corporations Kaneka Innovative Fibers Sdn. Bhd. (Biotechnology Development Laboratories) 25.7% 26,616,000 shares (263 shareholders) Kaneka Eurogentec S.A. Kaneka Apical Malaysia Sdn. Bhd. (Regenerative Medicine and Cell Therapy Securities companies Kaneka MS Malaysia Sdn. Bhd. Laboratories) 5,201,000 shares (60 shareholders) Process Development Research Laboratories Notes: 1. Share numbers are rounded down to the nearest thousand. Process Technology Laboratories 2. Percentages are rounded to the nearest decimal point. Photovoltaic & Thin Film Device Research EUROPE / AFRICA ASIA / OCEANIA Laboratories ■Kaneka Europe Holding Company N.V. ■Kaneka Asia Co., Ltd. ■Kaneka Belgium N.V. ■Kaneka Trading () Co., Ltd. AFFILIATED COMPANIES ■Kaneka Pharma Europe N.V. ■Kaneka Eperan (Suzhou) Co., Ltd. 104 subsidiaries COMMON STOCK PRICE RANGE (; Yen) ■Kaneka Eurogentec S.A. ■HiHua Fiber Co., Ltd. (including 41 (in Japan) and 35 (outside Japan) ■Kaneka Modifiers Deutschland GmbH ■Kaneka (Foshan) High Performance Materials Co., Ltd. consolidated subsidiaries) Years ended March 31 2013 2014 2015 2016 2017 ●Kaneka’s European Photovoltaics Research Laboratory ■Kaneka (Malaysia) Sdn. Bhd. ■Kaneka Africa Liaison Office ■Kaneka Eperan Sdn. Bhd. High 567 710 898 1,278 1,061 ■Kaneka Paste Polymers Sdn. Bhd. ■Kaneka Innovative Fibers Sdn. Bhd. Low 370 495 558 810 643 AMERICA ■Kaneka Americas Holding, Inc. ■Kaneka Apical Malaysia Sdn. Bhd. ■Kaneka North America LLC ■Kaneka MS Malaysia Sdn. Bhd. ■Kaneka Pharma America LLC ■Kaneka Singapore Co. (Pte) Ltd. ■Kaneka Aerospace LLC ■Kaneka (Thailand) Co., Ltd. ■Kaneka South America Representative Ltd. ■Kaneka Pharma Vietnam Co., Ltd. ●Kaneka US Material Research Center ■Kaneka India Pvt. Ltd. ●Kaneka US Innovation Center ■PT. Kaneka Foods Indonesia ■Kaneka Taiwan Corporation ■Kaneka Korea Corporation ■TGA Pastry Company Pty. Ltd.

■Overseas Subsidiaries and offices ●Overseas R&D Facilities

41 42