Shin Etsu Chemical : Matters to be Disclosed via the Internet for the Notice of Convocation of the 144th Ordinary General Meeting of Shareholders（PDF）

This English language translation is prepared for reference only. In the event of any discrepancy between the text of this translation and the text of the original Japanese-language, the Japanese language text will prevail.

June 7, 2021

To: All Shareholders of Shin-Etsu Chemical Co., Ltd. (the "Company")

Matters to be Disclosed via the Internet for the Notice of Convocation of the 144th Ordinary General Meeting of Shareholders

1. Notes to Consolidated Financial Statements
2. Notes to Non-Consolidated Financial Statements

Shin-Etsu Chemical Co., Ltd.

The matters mentioned above are provided to the shareholders by publishing them via the Internet on the website of the Company (https://www.shinetsu.co.jp/en/) pursuant to laws and Article 16 of the articles of incorporation of the Company.

Notes to Consolidated Financial Statements

Basis of presenting consolidated financial statements

1. Scope of consolidation
(1) Information on consolidated subsidiaries
Number of consolidated subsidiaries-------97
Names of the principal consolidated subsidiaries
SHINTECH INC.	Shin-Etsu Handotai Co., Ltd.
Shin-Etsu Handotai America, Inc.	Shin-Etsu PVC B.V.
Shin-Etsu Engineering Co., Ltd.	S.E.H. Malaysia Sdn. Bhd.
Shin-Etsu Handotai Taiwan Co., Ltd.	Shin-Etsu Polymer Co., Ltd.
SE Tylose GmbH & Co. KG	Shin-Etsu Astech Co., Ltd.
Shin-Etsu Silicones (Thailand) Limited	SHIN-ETSU HANDOTAI EUROPE LIMITED
Asia Silicones Monomer Limited	JAPAN VAM & POVAL Co., Ltd.

1. Information on unconsolidated subsidiaries
   Name of the principal unconsolidated subsidiary Shin-EtsuMagnetics (Thailand) Ltd.
   Reasons for excluding unconsolidated subsidiaries from scope of consolidationThere are 34 unconsolidated subsidiaries excluded from the scope of consolidation as their total assets, net sales, net income (loss) and retained earnings in the aggregate are not material to the consolidated financial statements.

2. Application of equity method

1. Information on unconsolidated subsidiaries and affiliates to which equity method is applied
   Number of affiliates to which equity method is applied-------3
   Names of the principal subsidiaries and affiliates to which equity method is appliedMimasu Semiconductor Industry Co., Ltd.
   Shin-Etsu Quartz Products Co., Ltd.
2. Information on unconsolidated subsidiaries and affiliates to which equity method is not applied
   Name of the principal unconsolidated subsidiary and affiliate to which equity method is not applied
   Shin-Etsu Magnetics (Thailand) Ltd.
   Reasons for excluding unconsolidated subsidiaries and affiliates from scope of equity method
   There are 34 unconsolidated subsidiaries and 10 affiliates excluded from the scope of the equity method as their net income (loss) and retained earnings in the aggregate are not material to the consolidated financial statements.

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1. Details on the application of equity method
   Two of the affiliates accounted for under the equity method have a different closing date from that of the consolidated financial statements with one of those affiliates consolidated based on its latest financial statements and, for the remaining affiliate, provisional financial statements as of the end of February are prepared.

3. Fiscal year of consolidated subsidiaries

The fiscal year of SHINTECH INC., Shin-Etsu Handotai America, Inc. and 72 other subsidiaries ends on December 31, and the fiscal year of Nissin Chemical Industry Co., Ltd., Nagano Electronics Industrial Co., Ltd. and 5 other subsidiaries ends at the end of February. For consolidation of subsidiaries whose fiscal year-ends are not the same as the Company, necessary adjustments are made on significant inter-company transactions occurring during the periods between the fiscal year-end of respective consolidated subsidiaries and that of the Company.

4. Summary of significant accounting policies

1. Valuation of significant assets:

1. Valuation of securities:

Held-to-maturity debt --------------

securities Available-for-sale securities

Marketable securities --------------

Non-marketable securities --------------

ii) Valuation of derivatives:

Amortized cost (straight-line method)

Fair market value as of the balance sheet date (Any net unrealized gains or losses are recognized in net assets, while costs of sales of marketable securities are calculated based mainly on the moving-average method.)

At cost, mainly determined by the moving- average method

Fair value based on market quotations

1. Valuation of inventories:
   Inventories are mainly stated at cost determined primarily by the weighted-average method. (Balance sheet amounts are written down based on any decline in profitability.)

1. Depreciation and amortization of fixed assets:

1. Property, plant and equipment (excluding leased assets):
   The Company and certain domestic subsidiaries mainly apply the declining-balance method, and overseas subsidiaries mainly apply the straight-line method. It should be noted, however, that the straight-line method is applied for buildings (excluding facilities attached to buildings) acquired on or after April 1, 1998, and for facilities attached to buildings and structures acquired on or after April 1, 2016 by the Company and certain domestic subsidiaries.

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Useful lives mainly are as follows:
Buildings and structures -------	15	- 47 years
Machinery and vehicles ---------	2	- 20 years

Additional depreciation is recorded based on excess operating hours for machinery and equipment that operate significantly in excess of their normal utilization rates.

1. Intangible assets (excluding leased assets): Straight-line method
2. Leased assets:

Leased assets under	finance lease	--------------	The same method is applied as that for
transactions that transfer ownership		owned fixed assets.
Leased assets under	finance lease	--------------	The straight-line method is applied using
transactions that do	not transfer		the lease term as the useful life with zero

ownership	residual value.

(3) Calculation policy for allowances:

i) Allowance for doubtful accounts:

The Company and its consolidated subsidiaries provide an allowance for doubtful accounts using the historic percentage of bad debt loss against the balance of general receivables plus an amount deemed necessary to cover individual accounts estimated to be uncollectible.

ii) Accrued bonuses for employees:

Certain consolidated subsidiaries recognize the estimated amount of employees' bonuses to be paid in the subsequent period that is attributable to the current fiscal year.

iii) Accrued bonuses for directors:

The Company and its certain consolidated subsidiaries recognize the estimated amount of directors' bonuses to be paid in the subsequent period that is attributable to the current fiscal year.

1. Other bases for presenting consolidated financial statements:
2. 1. Hedge accounting:
      The Company and certain subsidiaries defer recognition of unrealized gains or losses on hedge transactions.
      For interest rate swaps, the Company and certain subsidiaries apply special hedge accounting when the swap transaction meets the criteria for such treatment.
   2. Accounting treatment for retirement benefits:

The Company records the retirement benefit obligation after deducting pension plan assets as net defined benefit liability. For the calculation of the retirement benefit

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obligation, the Company attributes the expected retirement benefit to the service period of employees by the benefit formula basis.

Actuarial differences are amortized over a five-year period, which is within the average remaining service period of employees, using the straight-line method from the fiscal year when the difference was generated. Prior service cost is amortized as incurred over a ten-year period, which is within the average remaining service period of employees, using the straight-line method from the time when the prior service cost was generated.

1. Consumption tax:
   Consumption tax withheld by the Company and certain subsidiaries on sales of products and services is not included in the amount of net sales in the consolidated statement of income.

Notes to changes in presentation

Application of "Accounting Standard for Disclosure of Accounting Estimates"

"Accounting Standard for Disclosure of Accounting Estimates" (ASBJ Statement No. 31, March 31, 2020) is applied from the first quarter of the fiscal year ended March 31, 2021. In addition, "Notes to accounting estimates" is disclosed in the notes to consolidated financial statements.

Notes to accounting estimates

In preparing the consolidated financial statements, the Company makes estimates and assumptions based on the situation at the end of the period, but certain items that are considered to have a significant impact on the consolidated financial statements are described as follows.

Impairment of property, plant and equipment

As of March 31, 2021, the balance of property, plant and equipment was 1,165,149 million yen, accounting for 34% of total assets. Impairment should be considered when economic trends in countries and regions where major product markets are located or increased price competition due to lower global demand negatively impact business performance. When considering impairment, the process of asset grouping and estimating indications of impairment is complex and subjective, and future cash flow estimates are based on many assumptions, so it is necessary to assess the prerequisites carefully. As a result, depending on the amount of estimated future cash flows, there is a possibility that loss on impairment of fixed assets will be recorded.

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