Annual Report 2011 - DOWAホールディングス

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Annual Report 2011

Jump up to the New Stage

DOWA HOLDINGS CO., LtD.

Annual Report 2011For the year ended March 31, 2011

pages

01 Financial Highlights

02 Message from the Management


04 Corporate Structure andStrategy at Dowa

10 Business Review

10 Environmental Management & Recycling

12 Nonferrous Metals

14 Electronic Materials

16 Metal Processing

18 Heat treatment

20 Environmental Management

21 Contribution to Society

22 Corporate Governance

23 Board of Directors and Officers

24 Consolidated 11-Year Summary

26 Financial Review

30 Consolidated Balance Sheets

32 Consolidated Statements of Operations

33 Consolidated Statement of Comprehensive Income

34 Consolidated Statements of Changes in Equity

35 Consolidated Statements of Cash Flows

36 Notes to Consolidated Financial Statements

55 Report of Independent Auditors

56 Global Network

57 Subsidiaries and Affiliates

58 Corporate History

59 Corporate Data

Message from the Management


Business Review

04

02

10

Corporate Structure and Strategy at Dowa

Contents

Environmental Management & Recycling

Nonferrous Metals

Electronic Materials

Metal Processing

Heat treatment

DOwA HOlDINGS CO., ltD. Annual Report 2011

Financial HighlightsYears ended March 31

*1 The years stated in the text are ended March 31 of the year. Thus “2011” refers to the fiscal year, which ran from April 1, 2010 through March 31, 2011.*2 ¥83.15=US$1, the rate of exchange on March 31, 2011, is used.*3 Interest-bearing debt does not include lease obligations.*4 ROA is Ordinary Income divided by average of Total Assets at the start and end of the year.

Net Sales(Billions of Yen)

07 09 1008 110

500

400

300

200

100

Net Income (loss)(Billions of Yen)

07 09 1008 11–30

30

20

10

0

–10

–20

Operating Income (loss)(Billions of Yen)

07 09 1008 11–10

50

40

30

20

10

0

Total Assets(Billions of Yen)

07 09 1008 110

400

300

200

100

Ordinary Income (loss)(Billions of Yen)

07 09 1008 11–20

60

40

20

0

Capital Expenditures and R&D Expenses(Billions of Yen)

07 09 1008 110

40

30

20

10

Millions of YenThousands of U.S. Dollars*2

2011*1 2010 2011

For the Year:

Net Sales ¥379,816 ¥307,462 $4,567,847

Operating Income (loss) 22,924 13,701 275,696

Ordinary Income (loss) 23,371 13,809 281,074

Net Income (loss) 8,521 4,359 102,479

Cash Flows from Operating Activities 23,955 25,011 288,102

Capital Expenditures 17,820 10,763 214,316

R&D Expenses 3,962 3,829 47,650

At Year-end:

Equity 113,785 111,667 1,368,435

Total Assets 340,161 330,720 4,090,940

Interest-bearing Debt*3 138,119 149,371 1,661,092

Return on Assets (ROA*4) 7.0% 4.1% 7.0%

01Dowa HolDings Co., ltD. Annual Report 2011

Message from the Management

we offer our deepest sympathy to all those

affected by the great East Japan Earthquake.

the Dowa group has numerous locations

in the tohoku/Kanto regions, but damage has

fortunately been minimal, and production

has been able to continue. we will refocus

our efforts on fulfilling our responsibility to

supply products that can contribute to

rebuilding of the supply chain, led by metal

products such as copper and zinc that are

indispensable for electric wires and automo-

biles, high-value-added products that are

useful in new energy and energy conserva-

tion fields, and environmental/recycling

services.


02 Dowa HolDings Co., ltD. Annual Report 2011

Results for Fiscal 2010The Japanese economy in fiscal 2010, the year ended March 31, 2011, experienced sources of concern

such as yen appreciation, but was on a recovery track overall, underpinned by the effects of govern-

ment stimulus measures in addition to expanded demand resulting from economic growth in China

and other emerging economies in Asia. However, the outlook for the domestic economy continues to

be uncertain following the Great East Japan Earthquake that occurred on March 11.

The business environment for the Dowa Group featured relatively firm demand for automotive

and IT-related products throughout the year, as well as a brisk market for consumer electronics recy-

cling. Prices for key metals rose to historical high levels, while the yen appreciated further in foreign

exchange markets.

In this environment, the Dowa Group advanced aggressively into markets that can count on signifi-

cant growth, such as new energy fields and emerging economies, mainly in Asia, and also worked to

bolster and expand existing businesses by enhancing productivity and raising utilization.

As a result, consolidated sales for fiscal 2010 increased by ¥72.3 billion to ¥379.8 billion and consoli-

dated operating income rose by ¥9.2 billion to ¥22.9 billion, with all segments achieving gains in both

sales and profit from the previous year. Consolidated net income virtually doubled from the previous

year to ¥8.5 billion despite the booking of extraordinary losses as a result of the earthquake.

Response to Disaster and Outlook for Fiscal 2011The Dowa Group’s main locations did not suffer major damage to facilities as a result of the disaster, ex-

cept for equity-method affiliate Onahama Smelting and Refining. Some locations halted operations

temporarily due to problems with electricity supply, etc., but operations were resumed from mid-March

to early April. We will continue to contribute to recovery from the disaster through our main business of

providing a stable supply of metals and materials/products that are indispensable to rebuilding, as well

as waste disposal and recycling.

In fiscal 2011, we will work to increase earnings while monitoring market developments and the im-

pact of the earthquake on the supply chain.

We will expand sales of growth products such as silver powders for solar cells, circuit boards for

powered semiconductors, nitride semiconductors, and carrier powders for copiers to markets that can

count on significant growth in the future such as new energy and energy conservation fields. In addi-

tion, the disposal business for waste material with trace amounts of PCB, where large market needs are

expected, will be fully started up at four domestic locations.

The entire Dowa Group will also accelerate its overseas expansion in the Asian market, which con-

tinues to grow. Within Japan as well, we will further enhance productivity at each plant to strengthen

competitiveness in existing businesses, such as bolstering metal recycling facilities, consolidating heat

treatment business production sites, and improving yield at copper alloy and plating plants.

Looking ahead, we will work on our strategy of selection and concentration under the policies not-

ed above, aiming for growth and development by bolstering our business base.

Jump up to the New StageMasao YamadaPresident and Representative Director


1 The Dowa Resource Recycling Loop

2 Our 5 Core Business Segments

3 Business Structure Reform Plan

4 Expansion into Asia and Emerging Markets

in order to strengthen its corporate structure and “Jump up to the new stage,” the Dowa group intends to

implement a number of measures such as a concentration on carefully selected businesses, the bolstering of

technological capabilities, productivity improvements, and cost-cutting, all designed to allow rapid response

to changes in markets and the business climate.

Corporate Structure and Strategy at Dowa


1

Operations at the Dowa Group, established in 1884, are based on our

unique resource recycling loop. The loop begins with our production

of nonferrous metal materials, and progresses, through the manufac-

ture of a variety of value-added products, to recycling.

In our Nonferrous Metals business, we extract useful metals from

a variety of recyclable raw materials in addition to natural resources.

These metals, after being processed by our Electronic Materials,

The Dowa Resource Recycling Loop

Metal Processing and Heat Treatment businesses, are incorporated in

our end products after being given sophisticated functionality. In our

Environmental Management & Recycling business, we make waste

materials harmless and recover metals from products after they have

been used. These recovered metals are then refined again for re-use.

In this manner, Dowa’s businesses are contributing to the recycling

of resources.

The technology of the Dowa Group contributes to

people’s lives and to the global environment.

Heat Treatment

Metal Processing


Nonferrous Metals

Environmental Management &

RecyclingSoil remediation

Ores

Metal

Compound semiconductor wafers, etc.

Copper alloy

Heat treatment of parts

Waste treatment

Recycling


2 Environmental Management & Recycling Business

Dowa ECo-sYstEM Co., ltD.

• Waste treatment business: Integrated and comprehensive services from collection and transport of general and industrial wastes through intermediate waste treatment to final disposal.• Soil remediation business: Provision of total support services ranging from soil survey, remediation, to monitoring.• Recycling business: Recovery of a variety of valuable metals from scrap generated during production processes, consumer electronics, automobiles and

other discarded products.

• Precious metals and copper business: One of the few smelting operations worldwide that can recover a wide variety of metals including gold, silver, and copper from recyclable raw materials.• Zinc business: Integrated business structure that covers every phase from the mining of raw ore, to bullion production and sales of finished goods cen-

tered on Akita Zinc Co., Ltd., the largest zinc smelting plant in Japan, with an annual output of 200,000 tons, the Dowa Group has established an integrated business structure that covers every phase from the mining of raw ore, to bullion production and sales of finished goods.• Rare metals business: Recovery of platinum group metals from used exhaust gas catalyst material from automobiles.

• Semiconductors business: Leading manufacturer of semiconductor materials such as high-purity gallium and indium, compound semiconductor wafers, and high-intensity, high-output LEDs.• Electronic materials business: Largest producer of silver powder for solar cells and manufacturer of copper powders for electronics parts, zinc powder and

silver oxide for batteries.• Functional materials business: Dominant share in the world market for metal powders used in high-capacity data storage tape, and producer of a range of

products from carrier powder for copying machines, to ferrite powder used in printers and copiers.

• Metal-processing business: Manufactures copper, brass, copper alloy strips used in terminals and connectors for automobiles; brass rods and forged brass products.• Plating business: Precious metal plating of connectors and switches for automobiles, mobile telephones and consumer electronics.• Substrates business: Manufactures metal-ceramic substrates, employed in industrial machinery such as power management devices.

• Heat treatment business: Provides surface treatment for metal parts, adapted for different applications, and used in automobile engines and transmission parts to increase factors including abrasion resistance, fatigue resistance and seizure resistance.• Industrial furnace business: Employs expertise in heat treatment to offer complete services ranging from facilities design to startup and maintenance.

Sub-segments

Sub-segments

Sub-segments

Sub-segments

Sub-segments

Nonferrous Metals Business

Dowa MEtals & Mining Co., ltD.

Electronic Materials Business

Dowa ElECtRoniCs MatERials Co., ltD.

Metal Processing Business

Dowa MEtaltECH Co., ltD.

Heat Treatment Business

Dowa tHERMotECH Co., ltD.

Our 5 Core Business Seg ments

* The years stated in the text are ended March 31 of that year. Thus “2011” refers to the fiscal year from April 1, 2010 through March 31, 2011.


Percentage of Total Net Sales Segment PolicyNet Sales (Billions of Yen)

P. 10

P. 12

P. 14

P. 16

P. 18

07 08 09 10 11

300

200

0

100

07 08 09 10 11

80

60

0

40

20

07 08 09 10 11

100

80

0

60

40

20

07 08 09 10 11

30

20

0

10

18%

Dowa Eco-System Co., Ltd. is expanding operations in Japan and abroad by furnishing comprehensive and reliable waste management, soil remediation, and recycling services. As the leading environmental and recycling company in Asia, we are strengthening our business foundations and increasing operating bases overseas to help improve the environment in Asia.

44%

Dowa Metals & Mining Co., Ltd. is establishing distinctive recycling and smelting complexes using its engineering capabilities honed over many years in these two areas. We are helping to develop a resource recycling society by furnishing steady supplies of copper, zinc, precious metals, rare metals, and other metals recovered from the processing of raw materi-als as we work to further strengthen recycling and smelting operations.

16%

Dowa Electronics Materials Co., Ltd. is engaged in various businesses—semiconductor materials such as high-purity gallium, compound semiconductor wafers, and LEDs, electronic materials that use electrical conducting materials and functional materials that use magnetic materials—and provides its characteristic products worldwide. In the rapidly changing market for electronic materials, we are always working to further bolster competitiveness in line with our policy of being a leading technological company.

18%

Dowa Metaltech Co., Ltd. supplies value-added products for in-vehicle installation, power steering, and information communication applications from its metal processing, plating, and substrate businesses. We are promoting operations at the global level, particularly at production bases in Asia for satisfying growing markets there.

4%

Dowa Thermotech Co., Ltd. is engaged in a heat treatment business for extending the life of metal materials and an industrial furnace business that applies our accumulated expertise. Backed by our technological prowess in carburizing heat treat-ment and other areas, we aim to become a leading company in the heat treatment industry through-out Asia.

Our 5 Core Business Seg ments

07 08 09 10 11

90

60

0

30

*


3Business Structure Reform PlanThe Dowa Group, through the business structure reforms it started

working on from fiscal 2000, is transforming itself into a company

that is not swayed by the external environment and can secure

stable earnings by building businesses based on a unique resource

and recycling loop which leverage its mining and smelting technol-

ogy, and generating high-value-added products and services.

In Business Structure Reform Plan I, we reviewed the potential of

all businesses, in terms of profitability, growth prospects, and other

indicators, and consolidated non-core businesses under a policy of

selection and concentration. Meanwhile, we concentrated allocation

of management resources on the current Environmental Manage-

ment & Recycling, Nonferrous Metals, Electronic Materials, Metal

Processing, and Heat Treatment businesses, which were selected as

our five core segments. As a result, although consolidated net sales

and consolidated operating income fell in fiscal 2002 compared to

fiscal 2000, the initial year of the plan, to ¥221.0 billion (down ¥18.7

billion) and ¥14.7 billion (down ¥708 million) respectively, asset

efficiency increased as reflected in the rise in ROA*1 to 4.5% (up 1.1

percentage points).

In Business Structure Reform Plan II from fiscal 2003 to fiscal 2005,

we made further progress with our selection and concentration

strategy under the slogan of “Charge2 & Expansion.” We also made

concentrated investments in the Environmental Management &

Recycling and Electronic Materials businesses, in particular, expand-

ing these segments further. We also worked on bolstering our tech-

nological base to realize our goal of becoming a “technology-oriented

company,” and improved our financial profile further by heightening

asset efficiency. As a result, fiscal 2005 results included consolidated

net sales of ¥316.3 billion, consolidated operating income of ¥36.8

billion, and ROA of 11.8%.

In Business Structure Reform Plan III from fiscal 2006 to fiscal

2008, our new slogan was “Jump up to the New Stage,” and our aim

was to become the leading corporate group in the industry by con-

tinuing the process of selection and concentration as well as making

aggressive investments in all businesses. However, a simultaneous

global recession occurring in the final year of this plan had a major

impact on fiscal 2008 performance. As a result, consolidated net sales

were limited to ¥346.8 billion, and we recorded a consolidated oper-

ating loss of ¥8.4 billion.

The business environment in fiscal 2009 was harsh due to the

lingering effects of the global recession, but consolidated operating

income was able to recover to ¥13.7 billion as a result of our early

efforts to bolster our business profile. In fiscal 2010, we continued to

work on bolstering profitability through improved productivity and

cost reductions, and as a result of firm demand for automotive and

IT-related products, as well as a strong market for the recycling of

consumer electronics, we were able to achieve an increase in consoli-

dated operating income from fiscal 2009 to ¥22.9 billion despite the

impact of the Great East Japan Earthquake.

Looking ahead, the Dowa Group will continue to steadily fortify

its corporate profile, contributing to the creation of comfortable lives

and the building of a society based on the recycling of resources.

*1 ROA is ordinary income divided by average of total assets at the start and end of the year.*2 The years stated in the text are ended March 31 of the year. Thus “2011” refers to the fiscal year, which ran from April 1, 2010 through March 31, 2011.

•Consolidationofnon-corebusinesses•Concentratedallocationofmanage-

ment resources to core businesses•Heighteningassetefficiency

20010

100

200

300

400

500

-20

0

20

40

60

80

100(Billions of Yen)

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

•Continuationofselectionandconcentration•Technology-orientedcompany•Aggressiveinvestmentsinfocusareas

(Environmental Management & Recycling, and Electronic Materials)


Business Structure Reform Plan I Business Structure Reform Plan II Business Structure Reform Plan III Business Structure Reform Plan IV

2001–2003 2004–2006 2007–2009 2010–2012

Charge2 & ExpansionSelection and Concentration

•Bolsteringofbusinessprofile•Improvingproductivity•AggressiveexpansionintoAsiaand

growth markets

•Continuationofselectionandconcentration•Aggressiveinvestmentsinallbusinesses•Technology-orientedcompany

(Billions of Yen)

Net Sales Ordinary Income

Net Sales Ordinary Income

*2


Dowa Environmental Management Co., Ltd.Suzhou, China

Dowa Eco-System Co., Ltd.Taiwan

PPLiIndonesiaTEC

Singapore

(Management company for operations in

China)

Dowa Holdings (Shanghai) Co., Ltd.Shanghai, China

Kunshan Dowa Thermo Furnace Co., Ltd.Kunshan City, Jiangsu Province, China

Suzhou Dowa Environmental Engineering Co., Ltd.Suzhou, China

Jiangxi Dowa Environmental Management Co., Ltd.Yingtan, China

Tianjin Dowa Green Angel Summit Recycling Co., Ltd.Tianjin, China

Environmental Management & Recycling Business

Metal Processing Business

Heat Treatment Business

Attractiveness of Asia and Emerging MarketsAsian countries experiencing high economic growth, led by China,

which became the world’s leading producer of automobiles by volume

in 2009, as well as India and Indonesia, are not only the world’s manu-

facturing plant, but are becoming the center of consumption as well.

Demand for products including automobiles and IT-related products is

growing on the back of brisk consumption. This demand however, is

not limited to local procurement by Japanese companies, as demand

from local companies is also steadily increasing.

In response to the rapid pace of industrialization, many countries

are fortifying their array of environmental policies. New laws are

being developed to govern waste disposal, the protection of air,

water, and soil environments, as well as laws on the recycling of used

products that reflect the heightening global need for a society fo-

cused on recycling.

The Dowa Group’s Expansion into Asia and Emerging MarketsFaced with the above conditions, the Dowa Group has been steadily

advancing into China and Southeast Asia from the 2000s in the

Environmental Management & Recycling, Metal Processing, and Heat

Treatment businesses. In fiscal 2010, in particular, we established new

Chinese companies in a total of four locations in the Environmental

Management & Recycling and Heat Treatment businesses. The

Chinese market, which continues to develop, is an important part of

the Dowa Group’s overseas expansion. To this end, we have estab-

lished a management company to bolster our operations further,

enhance earnings, and strengthen administration, risk management,

and compliance at individual local companies.

The Dowa Group will solidify its domestic business base and

expand our business more aggressively than ever. In addition, we

intend to fully utilize the technology and know-how that we have

accumulated in Asian and other emerging markets—markets that are

expected to continue growing in the future.

Dowa Advanced Materials (Shanghai) Co., Ltd.Shanghai, China

Expansion into Asia and Emerging Markets

4

IDESThe PhilippinesBPEC

Thailand

ESBECThailand

Dowa Metaltech (Thailand) Co., Ltd.Thailand

Dowa Thermotech (Thailand) Co., Ltd.Thailand


Business ConditionsIn waste treatment, production activities at customers recovered overall, but industrial waste

emissions were virtually flat as emissions were held down due to a trend towards lowering the

burden on the environment as well as cost reductions. In soil remediation, harsh conditions

continued as price competition intensified and the slump in real estate transactions continued.

In recycling, volumes of discarded consumer electronics and recovery of precious metals from

electronic components, etc., rose based on increased replacement buying triggered by the

Eco-point system.

Fiscal 2010 ResultsAs a result, segment consolidated sales rose 23% year on year to ¥79.6 billion. We bolstered

our waste collection network to boost collections and treatment, and at our plants, we fo-

cused on improving utilization and worked on boosting treatment by enhancing our capacity

to accept waste. As a result, segment consolidated operating income increased 33% year on

year to ¥2.8 billion.

Fiscal 2011 OutlookIn the waste treatment business, we will expand the menu of treatments by starting up a

detoxification treatment business for waste material with trace amounts of PCB, and enhance

competitiveness by bolstering our waste collection network further and increasing treatment.

In soil remediation, we will develop new markets and reduce costs, and in metal recycling, we

will bolster our sales capabilities and develop capabilities for metals as yet not recycled. Over-

seas, we will work closely with the various bases of Modern Asia Environmental Holdings Inc., a

Southeast Asian waste management company, expanding our soil remediation and metal

recycling business overseas. In China, we will work to expand our consumer electronics recy-

cling business.

By executing these initiatives, in fiscal 2011 we expect to achieve consolidated sales of ¥85

billion and consolidated operating income of ¥4.7 billion.

Dowa Eco-System offers integrated services from collection and trans-port of waste, contaminated soil and recyclable raw materials, to interme-diate waste treatment such as com-pacting/detoxification, and conversion into raw material for smelting or final disposal. By expand-ing into consultation business, such as environmental impact assess-ments, and responding to a wide range of environmental needs both in Japan and overseas, Dowa Eco-System aims to become the leading company in the environmental and recycling businesses.

Business Review

Kenichi SasakiPresident

Environmental Management & Recycling

DOWA ECO-SYSTEM CO., LTD.

Main Products and ServicesWaste treatment, landfill facilities, soil remediation, metal recycling, consumer electronics recycling, automobile recycling, consulting on environmental matters, logistics, etc.

Leading Company in Environmental/Recycling Business


Waste TreatmentWe are working to improve utilization at our intermediate treatment plant for waste prod-

ucts, and bolstering our sales and collection network. We also continued towards startup

of a detoxification treatment business for waste material with trace amounts of PCB. We

were granted the necessary approval, in December 2010, for a facility in Fukuoka, we made

a similar application for approval in Akita, and progressed with construction of an incinera-

tor in Okayama.

Soil RemediationApproval to operate contaminated soil treatment business was newly acquired in accor-

dance with the Amended Soil Contamination Countermeasures Act implemented in April

2010. We also established a local subsidiary in Jiangsu Province, China in November 2010

to expand our business in China, where soil contamination is becoming a major issue as

property development progresses at breakneck speed.

RecyclingWe started up consumer electronics recycling plants in Suzhou, Jiangsu Province and

Tianjin, China to coincide with the implementation of Rules on the Administration of the

Recovery and Disposal of Discarded Electronic and Electrical Products in China in January

2011. Together with a local subsidiary in Jiangxi Province, established in January 2011, we

will respond to resource-recycling needs in China by leveraging technology and experi-

ence developed in Japan.

2007.3 (FY2006)

2008.3 (FY2007)

2009.3 (FY2008)

2010.3 (FY2009)

2011.3 (FY2010)

Net Sales 74.7 84.5 69.7 64.8 79.6Operating Income 7.9 8.0 4.9 2.1 2.8Investment* 3.0 5.2 17.6 4.1 7.0* The total of investments in property, plant and equipment, R&D expenses


07 08 09 10 11

90

60

0

30

Operating Income(Billions of Yen)

07 08 09 10 11

9

6

0

3

Investment*(Billions of Yen)

07 08 09 10 11

20

15

0

5

10

(Billions of Yen)


Business ConditionsPrices for gold, silver, and copper rose to record levels, while prices for zinc, indium, and the

platinum group also rose year on year. Demand was firm overall for automotive and electronic

material applications.

Fiscal 2010 ResultsAs a result, segment consolidated sales rose 21% year on year to ¥188.8 billion. We were able

to increase sales of all main products by focusing on stable operations and ensuring adequate

production volumes, and we also promoted disposal of unfinished products, resulting in seg-

ment consolidated operating income increasing 72% year on year to ¥5.1 billion.

Fiscal 2011 OutlookIn the precious metals and copper business, we will enhance Kosaka Smelting & Refining Co.,

Ltd.’s ability to remove impure substances and diversify its metal recovery practices, while

bolstering capacity to handle recyclable raw materials. In the zinc business, we will steadily

execute initiatives to stabilize operations as well as reduce costs, and start full operation of our

zinc recycling business to bolster our business base. In rare metals, we will strengthen our

collections from overseas by starting up collection and sampling bases in Europe, and bolster

our domestic and overseas sales networks.

By executing these initiatives, in fiscal 2011 we expect to achieve consolidated sales of

¥160 billion and consolidated operating income of ¥2.5 billion.

Dowa Metals & Mining is responsible for the Dowa Group’s nonferrous metal operations, the foundation of the Group. With a high level of tech-nological capability in the precious metals and copper business, zinc business, rare metals business, and recycling business, Dowa Metals & Mining is steadily expanding its operations. Looking ahead, we will bolster our business base through expanding metal recovery and pro-moting overseas collection, and build a world-class recycling and smelting complex.

Business Review

Nobuo YamazakiPresident

Nonferrous Metals

DOWA METALS & MINING CO., LTD.

Main Products and ServicesGold, silver, copper, zinc, zinc alloys, lead platinum, palladium, indium, bismuth, tellurium, sulfuric acid, and other metals

Building a World-Class Recycling and Smelting Complex


Precious Metals and CopperAt Kosaka Smelting & Refining, we progressed with construction of recovery facilities for

tin, nickel, antimony and other metals, and together with further enhancement of opera-

tions at smelting facilities for recycling refining, we are diversifying our metal recovery

practices.

ZincAkita Zinc Recycling Co., Ltd. commenced full operation of its zinc recycling business,

centered on iron and steel dust, in December 2010. We are strengthening our business

base through improved ties with our customers, steel producers, and by securing sources

of raw materials other than zinc ore.

Rare MetalsA collection and sampling base for used automobile exhaust catalysts was established in

Liberec, the Czech Republic, in September 2010 to strengthen collections from the Euro-

pean market, where the volume of used automobile exhaust catalysts containing large

quantities of platinum group metals, is expected to increase in the future. We are moving

forward with preparations to start operation of this facility by July 2011.




2007.3 (FY2006)

2008.3 (FY2007)

2009.3 (FY2008)

2010.3 (FY2009)

2011.3 (FY2010)

Net Sales 276.6 272.2 173.6 155.5 188.8Operating Income 25.1 22.4 (14.1) 3.0 5.1Investment* 7.3 17.3 10.3 8.3 5.9* The total of investments in property, plant and equipment, R&D expenses

07 08 09 10 11

300

200

0

100

07 08 09 10 11

30

15

–15

0

07 08 09 10 11

20

15

0

10

5

(Billions of Yen)


Business ConditionsSales of semiconductor-related products, such as LED compound semiconductor wafers, and

indium were strong as demand for information communication-related products such as PCs

and mobile phones recovered. Sales of silver powders for solar cells and nitride semiconduc-

tors used in energy-efficient consumer electronics also did well on the back of rising needs in

new energy and energy conservation fields.

Fiscal 2010 ResultsAs a result, segment consolidated sales rose 40% year on year to ¥70.5 billion. We strove to

launch new products and expand production capacity in growth areas, and worked to

enhance productivity through continuous efforts to raise yields and improve operating

structures. As a result, segment consolidated operating income jumped 48% year on year

to ¥7.1 billion.

Fiscal 2011 OutlookIn the semiconductor business, we will work to accurately grasp market trends and thereby

capture market share and expand sales of HEMT for nitride semiconductors and deep-UV LEDs.

In the electronic materials and functional materials businesses, we will steadily capture ex-

panding demand for growth products such as silver powders and carrier powders by expand-

ing facilities. We will push forward with development of new products such as silver

nano-powders and automobile catalysts and quickly bring them to market, thereby bolstering

and expanding our business for future growth.



Dowa Electronics Materials Co., Ltd. supplies products that have come to represent their respective markets in our semiconductor, electronic mate-rials, and functional materials busi-nesses, and continues to maintain a high market share by striving to meet ever changing market needs. Based on this product lineup and the high level of technological capability that underpins it, we are currently focusing management resources on priority products. While at the same time, we are forging ahead with plans to further differentiate our products and expediting the start up of new businesses.

Business Review

Akira OtsukaPresident


DOWA ELECTRONICS MATERIALS CO., LTD.

Main Products and ServicesHigh-purity gallium, indium, compound semiconductor wafers, light-emitting diodes (LEDs), silver powders, copper powders, silver oxide powders, metal powders, carrier powders, ferrite powders

Creating New Businesses, Aiming for Top Market Share in a Wide Range of Electronics Materials


SemiconductorsWe bolstered manufacturing facilities for HEMTs* and worked to improve technology and

expand sales. HEMTs have a number of characteristics, such as a high threshold voltage,

low resistance, and low heat generation, that make them excellent candidates for the

next-generation products for powered semiconductor devices that control electric power.

*HEMT: High Electron Mobility Transistor

Electronic MaterialsWe bolstered production capacity at Dowa Hightech Co., Ltd., to respond to the brisk

growth in demand for silver powders used as an electrode material in plasma solar cells

and display panels. We will work to expand our operations in the solar cell field, where

growth is expected for new energy applications.

Functional MaterialsIn metal powders for high-capacity data storage tape, which are being used by all leading

tape manufacturers, in addition to efforts designed to maintain our top market share, we

are pushing forward with development of next-generation products.

The market for carrier powders used in copier machines is expanding due to increas-

ing demand in emerging economies and the shift to full-color machines. In response, we

are bolstering facilities and working to expand sales.


DOWA ELECTRONICS MATERIALS CO., LTD.Net Sales(Billions of Yen)



2007.3 (FY2006)

2008.3 (FY2007)

2009.3 (FY2008)

2010.3 (FY2009)

2011.3 (FY2010)


07 08 09 10 11

80

60

0

40

20

07 08 09 10 11

8

6

0

4

2

07 08 09 10 11

8

6

0

4

2

(Billions of Yen)


Business ConditionsSales of rolled copper products used in terminals and connectors for automobiles and other

applications, and plated products used in mobile phones and other IT-related products, grew

strongly as demand recovered. Sales of metal-ceramic substrates also increased on the back of

new product launches for industrial machinery applications, where there is a growing trend

towards energy conservation.

Fiscal 2010 ResultsAs a result, segment consolidated sales rose 26% year on year to ¥75.8 billion. Due to the shift

to high-value-added products such as next-generation high-strength copper alloys as well as

efforts to enhance yields and reduce costs through productivity improvements, segment

consolidated operating income jumped 65% year on year to ¥5.4 billion.

Fiscal 2011 OutlookIn the metal processing business, we will continue to work to further strengthen cost competi-

tiveness through a number of initiatives including productivity improvements, and expand

sales to new customers, while building and expanding overseas bases. In the plating business,

we will enhance profitability through improved productivity, cost reductions, and develop-

ment of new uses of our products. In metal-ceramic substrates, we will bolster sales and tech-

nological development for the European market and aim for increased sales in the high-speed

railroad and new energy fields.



Dowa Metaltech’s mainstay product is high-value-added copper alloys. In the metal processing business, the company will enhance features and productivity of next-generation automotive materials and strengthen its global supply network, maintain-ing the top market share in automo-tive connector materials. In the plating business, we will provide high-quality products, mainly pre-cious-metal plating, globally. In the metal-ceramic substrate business, we will work to capture market share in the high-speed railroad and new energy fields, where growth is ex-pected in the future.

Business Review

Haruo NishizawaPresident

Metal Processing

DOWA METALTECH CO., LTD.

Main Products and ServicesCopper, brass, copper alloy strips, nickel alloy strips, reflow tin plated strips, brass rods, forged brass products, electroplated products, metal-ceramic substrates

Expanding into the Global Market on the Strength of World-Class Connector Materials


Metal ProcessingWe will work to improve yields at Dowa Metal Co., Ltd. and Dowa Metanix Co., Ltd., and

continue to work on cost reductions and productivity improvements. In addition, we will

pursue further strengthening of our overseas operations with the expansion of facilities

and production capacity at Dowa Advanced Materials (Shanghai) Co., Ltd.

PlatingWe will bolster precious metal plating capacity at Dowa Metaltech (Thailand) Co., Ltd., and

increase our range of product offerings in growth areas such as electrodes for lithium-ion

batteries. We will also build and expand overseas bases to respond to the local procure-

ment needs of our customers.

SubstratesWe are expanding our circuit board operations into the energy conservation and clean

energy fields to take advantage of new applications in devices such as inverters. In other

developments, together with Nippon Light Metal Co., Ltd., we developed a cooling device

incorporating a substrate for power modules that is both lightweight and has high cooling

performance. Going forward, we will continue with active sales efforts as part of a modal

shift to fields including high-speed rail applications.




2007.3 (FY2006)

2008.3 (FY2007)

2009.3 (FY2008)

2010.3 (FY2009)

2011.3 (FY2010)

Net Sales 78.0 91.7 71.2 60.4 75.8Operating Income 4.5 3.0 (5.7) 3.2 5.4Investment* 5.7 8.4 3.2 1.0 1.5* The total of investments in property, plant and equipment, R&D expenses

07 08 09 10 11

100

80

0

60

40

20

07 08 09 10 11

6

3

–6

0

–3

07 08 09 10 11

10

8

0

6

4

2

(Billions of Yen)


Business ConditionsHeat treatment volume grew as orders rose in line with recovering demand for automobile

components and construction machinery parts. Orders for industrial furnaces were also brisk

as demand for maintenance services increased on the back of the recovery in domestic auto

production volumes. Sales of new furnaces and maintenance demand similarly increased

overseas in line with expanded auto production outside Japan.

Fiscal 2010 ResultsAs a result, segment consolidated sales rose 25% year on year to ¥16.9 billion. We bolstered our

production framework by shifting production to more efficient plants, and worked on reduc-

ing parts procurement costs. As a result, segment consolidated operating income soared 867%

year on year to ¥1.4 billion.

Fiscal 2011 OutlookIn the heat treatment business, we will enhance profitability by re-organizing domestic bases

and improving productivity. In the industrial furnace business, we will strengthen our business

base by bolstering our maintenance division and developing the next generation of furnaces.

Overseas, we will expand our business to emerging markets through the startup of our local

subsidiary in Jiangxi Province, China, and the strengthening of overseas maintenance bases.


billion and consolidated operating income of ¥1 billion.

As a pioneer in heat treatment tech-nology, Dowa Thermotech provides top-class services in Japan in terms of both scale and quality. In the heat treatment business, we will strength-en our business structure through productivity improvements and streamlining of processes, enhance profitability, and strive to expand domestic market share while acceler-ating overseas expansion. In the industrial furnace business, we will heighten product capabilities to develop environment-friendly fur-naces that reduce carbon dioxide emissions and new furnaces with lower costs. In addition, we intend to expand overseas, in order to become the leading company in the global heat treatment industry.

Business Review

Toshiro SumidaPresident

Heat Treatment

DOWA THERMOTECH CO., LTD.

Main Products and ServicesVarious types of heat treatment, various types of surface treatment, design, manufacture, marketing, and maintenance of various types of industrial furnaces and ancillary equipment

A Pioneer in Heat Treatment Technology that Meets Diverse Requirements through High Reliability and Technology


Heat TreatmentWe will continue efforts to improve productivity by shifting production processes: for

example in the Kanto region to the Ota plant in Gunma Prefecture, processes in central

Japan to the Handa plant in Aichi Prefecture, and CEMM Co., Ltd., among others, and

processes in western Japan to facilities such as the Shiga plant in Shiga Prefecture. We will

also add to facilities at Dowa Thermotech (Thailand) Co., Ltd. to capture demand for heat

treatment in Thailand, where customers are increasingly procuring locally.

Industrial FurnacesIn July 2010 we established a local subsidiary in Jiangxi Province, China and started pro-

duction of industrial furnaces. We have also opened a maintenance and servicing base in

Jakarta, Indonesia. These projects were part of a plan to strengthen our networks and

services in Asia, to address the trends in both the demand and supply of automobiles.

Technological DevelopmentIn response to changes in both the market and in user needs, we are currently promoting

the development of environment-friendly furnaces that consume less energy and emit

less carbon dioxide, as well as new surface treatment technology, at the same time as

strengthening our competitiveness.




2007.3 (FY2006)

2008.3 (FY2007)

2009.3 (FY2008)

2010.3 (FY2009)

2011.3 (FY2010)


07 08 09 10 11

30

20

0

10

07 08 09 10 11

4

2

3

0

1

07 08 09 10 11

7

3

5

0

1

6

2

4

(Billions of Yen)


Environmental Management

The Dowa Group’s environmental preservation initiatives are centered on the building of a recycling-oriented and low-carbon society through our businesses and the reduction of environmental impact in the Group’s own business activities.

The Dowa Group will create economic value in tandem with environmental preservation activities, and contribute to the creation of a sustainable society.

(Please see our CSR Report at http://www.dowa-csr.jp/en/index.html/ for details.)

Initiatives toward Creation of a Recycling-oriented SocietyThe Dowa Group conducts the full range of processes, from collection

of waste materials and products to metal refining, in an integrated

fashion, mainly at Kosaka Smelting & Refining in Akita. Based on tech-

nology and experience built up in Japan, we bolstered businesses and

services in regions with increasing resource recycling needs in fiscal

2010, such as consumer electronics recycling and soil remediation in

China and collection of used automobile exhaust catalysts in Europe.

Initiatives toward Creation of a Low-Carbon SocietyAs new energy and electricity conservation continues to spread, there

will be more opportunities for Dowa products to shine.

We supply products such as silver powders and metal-ceramic

substrates for solar and wind power generation, which are attracting

attention as renewable energy sources. There are also high hopes for

nitride semiconductors and HEMT as products that can further reduce

the power consumption of household electrical appliances.

We also continue to work on the manufacture of diesel alterna-

tives that are not based on petroleum, as well as heat separation of

Freon and methane gases.

Gold (Au), Silver (Ag), Copper (Cu), Zinc (Zn), Lead (Pb), Cadmium (Cd), Indium (In), Gallium (Ga), Germanium (Ge), Bismuth (Bi), Antimony (Sb), Selenium (Se), Tellurium (Te), Platinum (Pt), Palladium (Pd), Rhodium (Rh), Ruthenium (Ru), Tin (Sn), Nickel (Ni), Cobalt (Co), Lithium (Li), Sulfuric acid and Gypsum (S)

Dowa Eco-System Co., Ltd.

Green Fill Kosaka Co., Ltd. (Controlled land�ll)

Residue

Materials for Recycling

Zinc dust

Mobile phones and electronic substrates

Used exhaust catalysts from automobiles

Industrial and general waste

Metal scrap

Contaminated soil

Incinerated ash

Used home electrical and electronic appliances

Used cars

Zinc concentrate Silver concentrate

Akita Zinc Recycling Co., Ltd.

Zinc leaching solutionResidue containing

precious metals

Residue of incinerated raw materials containing valuable metals

Akita Zinc Co., Ltd.Kosaka Smelting &

Re�ning Co., Ltd.

Residue containing rare metals

Residue containing zinc Residue containing PGM

Akita Rare Metals Co., Ltd.

Dowa Metals & Mining Co., Ltd.

Nippon PGM Co., Ltd.

Products

Eco-Recycle Co., Ltd.(Dismantling and classi�cation of used

home electrical and electronic appliances)

Eco-System Kosaka Co., Ltd.(Recovery of metals and steam)

Auto Recycle Akita Co., Ltd.(Disassembling of automobiles)

Eco-System Hanaoka Co., Ltd.(Soil remediation)

Meltec Co., Ltd.(Melting of incinerated ash)

Eco-System Recycling Co., Ltd.(Recovery of precious metals)

Eco-System Akita Co., Ltd.(Incineration and intermediate processing)

The DOWA Recycling Network


Contribution to Society

The Dowa Group is undertaking social contribution activities tailored to the characteristics of each region in which it operates. In fiscal 2010, we were involved in the following community activities.

Dowa Cup Junior Cross-Country Ski Festival in AkitaThe Dowa Group holds a cross-country ski festival for elementary and junior high

school students each year on the shores of Lake Towada in Kosaka, Akita Prefecture.

This event is led by Dowa Group employees within Akita Prefecture and is supported

by local government and educational institutions, as well as many other groups in

the area.

In the 21st festival in fiscal 2010, a total of 496 students participated in two days of

cross country races and relay competitions between schools, as well as sit-ski races for

participants with disabilities.

Initiatives at PPLi in IndonesiaPPLi, one of the main units of MAEH, which joined the Dowa Group in 2009, has earned the trust of

local communities as Indonesia’s only licensed operator of harmful substance disposal, and is con-

stantly working to maintain smooth communications with local communities.

The majority of the roughly 330 employees currently working at PPLi are local Indonesian staff,

and about 40% of this majority has been hired from the local village of Nambo. We are also continu-

ing a wide range of activities closely tied to local life, such as support for schools, hospitals and

other facilities used daily by local residents, the hosting of sports events, and educational support

tied in with schools.

Okayama City Lake Kojima Flower Corridor ProjectLake Kojima, the largest manmade freshwater lake in Japan, is also the location where Denzaburo

Fujita, the founder of Dowa, took on a reclamation project. The Dowa Group is actively co-operating

in enhancing the surrounding environment, and has been planting Kawazu cherry trees, together

with local supporters, since 2007. Trees planted now number more than 4,000, and the area is

becoming a favorite spot for the local community.

The Flower Corridor golf course, where trees were also planted, started hosting a Sakura Festival

from fiscal 2009, and a Lake Kojima Flower Corridor Healthy Marathon was held in fiscal 2010, with

this first event attracting 1,601 citizen runners from 18 prefectures.

Employee volunteers supporting sit-ski race participants

Start of the marathon

Planted Kawazu cherry trees have taken root

An event for employees’ families

One facet of educational support: Hiring of scholarship students


Corporate Governance

The Dowa Group has made strengthening of corporate governance one of its most important management priorities, and the entire Group is engaged in developing and operating effective and efficient internal controls based on the Dowa Group’s Values and Standards of Conduct.

Outline of Corporate Control SystemThe Dowa Group is building a management structure that can re-

spond speedily to the rapidly changing business environment, and is

enhancing the supervisory functions of the Board of Directors. There

are currently seven directors (including one outside director). The

Board of Directors meeting is held once every month, in principle.

There are also five executive officers (none that are also directors) with

a Committee of the Operating Officers held once every month in

principle for executive officers to share information regarding the

status of business execution. We also have a Board of Auditors, com-

prising four auditors (including two outside auditors) who conduct

audits of business execution by directors, reporting to the Board of

Auditors meeting, held once every month in principle, ensuring audit

effectiveness and efficiency.

Development of Internal Control SystemsAt the Dowa Group, basic policies and systems

for internal control are shared among Group

companies. Additionally, individual companies

can utilize their own unique characteristics for

specific activities, in order to develop an effec-

tive and efficient internal control system suited

to our holding company structure.

Furthermore, we established the Dowa

Consultation Desk as a point of contact with

outside lawyers, and have put in place the

necessary mechanisms to use internal audits

such as legal audits and accounting audits, to

prevent any improprieties or misconduct, and

to quickly discover any such incidents.

Status of Internal Audits and Auditor AuditsInternal audits based on internal audit regulations stipulated for the

Dowa Group involve all corporate activities, such as accounting audits,

legal audits, and safety and environment audits.

These are implemented by the CSR Department of Dowa Holdings

Co., Ltd. (four members), working together with relevant divisions and

Group companies, with the results reported to directors, auditors, the

CSR Department and relevant departments.

Auditors audit directors’ execution of their duties in accordance

with the audit policies and audit plans for the term stipulated by the

Board of Auditors. They also monitor the independence of indepen-

dent auditors, and collaborate with independent auditors by explain-

ing the audit plan and reporting audit results.

Auditors, independent auditors and the CSR Department regularly

set up forums for information exchange and work closely with each

other in order to bolster internal audit functions.

The DOWA Group Corporate Governance Structure

Election/dismiss

Advise

Audit

Audit

Audit Audit

Board of Directors7 Directors

(including 1 outside director)

Notice

ReportInstruct/supervise

Support

｜Support companies｜

Business support companies

Technical support companies

Operating subsidiaries

Board of Auditors4 Auditors

(including 2 outside auditors)

Meeting of shareholdersElection/dismiss Election/dismiss

Independent auditor

Business execution

President Committee of the Board Directors

Committee of the Operating O�cers Directors, O�cers*

Strategic Planning & Public Relations Dept., Human Resources Dept., General A�airs & Legal Dept., Accounting & Finance Dept., CSR Dept., Technologies Dept., Information System Dept.

ManagementReport

｜DOWA Holdings｜

｜Operating companies group｜

Operating

companies*

Dowa Eco-System Co., Ltd.Dowa Metals & Mining Co., Ltd.Dowa Electronics Materials Co., Ltd.Dowa Metaltech Co., Ltd.Dowa Thermotech Co., Ltd.

Instruct/superviseReport

* President of each operating company serves concurrently as an o�cer of DOWA Holdings.

Lawyer

Dow

a Consultation Desk (outside law

yers)


DIRECTORS

AUDITORS

OFFICERS

Masao YamadaPresident & Representative Director

Yoji MizumaCorporate Auditor

Kenichi SasakiOfficerPresident, Dowa Eco-System Co., Ltd.

Akira SegawaDirector

Fumitoshi SugiyamaRepresentative Director

Susumu YoshidaCorporate Auditor

Nobuo YamazakiOfficerPresident, Dowa Metals & Mining Co., Ltd.

Hiroshi NakashioDirector

Takeaki YamadaDirector

Akira OtsukaOfficerPresident, Dowa Electronics Materials Co., Ltd.

Hiroyuki Kai Director

Haruo NishizawaOfficerPresident, Dowa Metaltech Co., Ltd.

Eiji HosodaOutside Director

Toshiro SumidaOfficerPresident, Dowa Thermotech Co., Ltd.

Board of Directors and OfficersAs of June 24, 2011

Osamu HamamatsuOutside Auditor

Jin TakedaOutside Auditor


Consolidated 11-Year SummaryDowa Holdings Co., Ltd. and Consolidated Subsidiaries

Millions of Yen

For the years ended March 31 2011*1 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001

For the year:Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥379,816 ¥307,462 ¥346,885 ¥475,826 ¥458,701 ¥316,388 ¥254,192 ¥234,675 ¥221,051 ¥222,175 ¥239,758Cost of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330,380 268,738 329,340 399,901 383,136 253,389 202,447 192,843 181,142 182,689 197,882Selling, General and Administrative Expenses . . . . . . . . . . . . . . . . . . . . 26,511 25,022 26,042 31,605 26,830 26,101 24,102 24,192 25,159 26,875 26,419Operating Income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,924 13,701 (8,497) 44,319 48,733 36,897 27,642 17,640 14,749 12,609 15,457Operating Income by Segment (%)

Environmental Management & Recycling (2000~) . . . . . . . . . . . . . 12.22% 15.35% –% 18.11% 16.31% 16.32% 17.02% 25.77% 22.09% 18.94% 10.36%Nonferrous Metals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.56 21.95 – 50.74 51.55 45.58 41.31 13.99 11.30 24.32 22.95 Electronic Materials (2007~) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.16 35.12 – 14.23 14.31 – – – – – –Metal Processing (2007~) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.66 24.00 – 6.86 9.37 – – – – – –Electronic Materials (2000~2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – – – – – – – – 22.20 39.88 Metal Processing and Chemical Products (~2003) . . . . . . . . . . . . . – – – – – – – – 7.95 5.31 8.99 Electronic Materials & Metal Processing (2003~2006) . . . . . . . . . . – – – – – 28.15 32.04 40.47 27.27 – –Heat Treatment (2000~) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.18 1.07 – 8.11 7.37 8.90 10.86 16.76 20.30 14.19 10.44 Others and Elimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.21 2.51 – 1.93 1.08 1.04 (1.23) 3.01 11.10 15.03 7.38

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 41,410 ¥ 32,978 ¥ 19,268 ¥ 18,657 ¥ 14,023 ¥ 9,934 ¥ 9,343 ¥ 9,260 ¥ 10,622 ¥ 10,535 ¥ 11,118Net Income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,521 4,359 (28,138) 24,520 26,337 14,532 10,609 8,683 (2,619) 282 4,921 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,820 10,763 24,213 26,324 21,821 12,497 11,551 9,419 9,814 10,244 11,641 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,486 19,276 18,612 13,974 9,897 9,316 9,242 10,608 10,522 11,102 11,516 R&D Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,962 3,829 4,421 7,309 4,384 3,739 2,993 2,690 2,195 2,454 2,177 Copper (Price quoted, Average) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥738,200 ¥609,483 ¥657,408 ¥915,950 ¥867,400 ¥517,308 ¥371,141 ¥270,283 ¥234,425 ¥232,658 ¥238,008 Zinc (Price quoted, Average) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231,858 222,575 202,725 388,183 461,633 228,191 162,408 143,916 138,200 147,008 162,308 US Dollar (Average) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86.22 93.35 101.03 114.78 117.52 113.81 108.05 113.57 122.45 125.64 111.09

At Year-end:Equity *6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥113,785 ¥111,667 ¥103,830 ¥150,281 ¥141,276 ¥114,869 ¥ 94,670 ¥ 84,673 ¥ 70,931 ¥ 76,125 ¥ 69,564 Minority Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,942 5,663 5,263 6,078 4,491 3,833 – – – – –Total Assets *6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,161 330,720 343,208 367,931 352,299 303,029 261,461 246,275 248,689 284,552 313,209Interest-bearing Debt *8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,119 149,371 180,496 120,953 114,757 99,653 97,709 104,375 132,179 158,440 188,831

Per Share:Basic Net Income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 28.80 ¥ 14.96 ¥ (94.36) ¥ 81.86 ¥ 87.82 ¥ 48.12 ¥ 35.14 ¥ 28.79 ¥ (8.85) ¥ 0.93 ¥ 17.61 Fully Diluted Net Income *7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – – 77.91 83.59 – – – – – –Fully Diluted Equity *5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361.18 358.33 339.93 481.85 456.10 382.69 315.46 282.15 236.29 250.59 239.65Cash Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.00 10.00 10.00 20.00 20.00 14.00 10.00 7.00 7.00 5.00 5.00

Cash Flows:Cash Flows from Operating Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 23,955 ¥ 25,011 ¥ 33,593 ¥ 40,398 ¥ 13,700 ¥ 17,783 ¥ 17,432 ¥ 29,725 ¥ 23,134 ¥ 23,503 ¥ 21,176 Cash Flows from Investing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,257) (14,602) (36,477) (39,138) (24,387) (15,616) (7,636) (1,290) (1,520) (7,708) (4,033)Cash Flows from Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,070) (33,888) 49,303 (1,820) 9,634 (1,758) (8,917) (30,072) (26,882) (26,127) (17,523)Free Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,135 14,248 9,380 12,565 (6,504) 6,050 5,162 21,393 12,566 14,256 10,319 Cash and Cash Equivalents at End of Year . . . . . . . . . . . . . . . . . . . . . . . . 16,741 27,115 50,681 4,294 4,792 5,813 5,286 4,414 5,624 10,429 20,696

Ratios:Return on Assets *2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.83% 4.07% –% 12.31% 14.87% 13.07% 10.89% 7.13% 5.53% 4.22% 4.88%Return on Equity *3*4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01 4.26 (23.18) 17.45 20.93 13.87 11.83 11.16 (3.56) 0.39 7.50 Operating Income (loss) to Net Sales (%) . . . . . . . . . . . . . . . . . . . . . . . . 6.04 4.46 (2.45) 9.31 10.62 11.66 10.88 7.52 6.67 5.68 6.45 Equity Ratio *4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.41 32.05 28.72 39.19 38.83 37.91 36.21 34.38 28.52 26.75 22.21 Operating Income Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.31 – – (9.06) 32.08 33.48 56.70 19.60 16.97 (18.42) 85.16Interest Coverage (times) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.55 5.12 (2.79) 21.10 30.18 29.23 20.30 12.04 8.38 5.59 5.14 Debt/Equity Ratio (times) *5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.29 1.41 1.83 0.84 0.84 0.87 1.03 1.23 1.86 2.08 2.71Debt/Capacity Ratio (times) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.90 1.91 2.11 1.48 1.42 1.91 1.87 2.22 2.85 2.86 3.41Return on Invested Capital *5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.48 1.71 (10.08) 9.25 10.47 6.77 5.52 4.59 (1.29) 0.12 1.91

*1 The years stated in the text are ended March 31 of the year. Thus “2011” refers to the fiscal year, which ran from April 1, 2010 through March 31, 2011.*2 Operating Income divided by average of Total Assets at the start and end of the year.*3 Net income divided by average of Equity at the start and end of the year.*4 From 2007, the ratios have been calculated using shareholders’ equity (the amounts after deducting minority interest amounts from equity amounts).*5 From 2007, the ratios have been calculated after deducting minority interest amounts from equity amounts.

*6 The Equity and Total Assets for 2006 have been reclassified to reflect the “Accounting standards for presentation of net assets in the balance sheet.”*7 Fully diluted net income is not stated up to 2001 because bonds with subscription rights were issued and net income per share did not decrease due to adjustment calculations. Fully diluted net income is not

stated from 2002 to 2006 and 2010 to 2011 because no diluted shares existed. From 2002, fully diluted net income is calculated after deducting the average number of shares of treasury stock during the term. Fully diluted net income is not stated for 2009 although diluted shares existed because a net loss per share was incurred.

*8 From 2008, in the balance sheets, long-term loans payable and current portion of long-term loans payable were stated including lease obligations. However, interest-bearing debt amounts stated in the Consoli-dated 11-Year Summary do not include lease obligations.


Millions of Yen

For the years ended March 31 2011*1 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001

For the year:Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥379,816 ¥307,462 ¥346,885 ¥475,826 ¥458,701 ¥316,388 ¥254,192 ¥234,675 ¥221,051 ¥222,175 ¥239,758Cost of Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330,380 268,738 329,340 399,901 383,136 253,389 202,447 192,843 181,142 182,689 197,882Selling, General and Administrative Expenses . . . . . . . . . . . . . . . . . . . . 26,511 25,022 26,042 31,605 26,830 26,101 24,102 24,192 25,159 26,875 26,419Operating Income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,924 13,701 (8,497) 44,319 48,733 36,897 27,642 17,640 14,749 12,609 15,457Operating Income by Segment (%)

Environmental Management & Recycling (2000~) . . . . . . . . . . . . . 12.22% 15.35% –% 18.11% 16.31% 16.32% 17.02% 25.77% 22.09% 18.94% 10.36%Nonferrous Metals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.56 21.95 – 50.74 51.55 45.58 41.31 13.99 11.30 24.32 22.95 Electronic Materials (2007~) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.16 35.12 – 14.23 14.31 – – – – – –Metal Processing (2007~) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.66 24.00 – 6.86 9.37 – – – – – –Electronic Materials (2000~2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – – – – – – – – 22.20 39.88 Metal Processing and Chemical Products (~2003) . . . . . . . . . . . . . – – – – – – – – 7.95 5.31 8.99 Electronic Materials & Metal Processing (2003~2006) . . . . . . . . . . – – – – – 28.15 32.04 40.47 27.27 – –Heat Treatment (2000~) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.18 1.07 – 8.11 7.37 8.90 10.86 16.76 20.30 14.19 10.44 Others and Elimination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.21 2.51 – 1.93 1.08 1.04 (1.23) 3.01 11.10 15.03 7.38

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 41,410 ¥ 32,978 ¥ 19,268 ¥ 18,657 ¥ 14,023 ¥ 9,934 ¥ 9,343 ¥ 9,260 ¥ 10,622 ¥ 10,535 ¥ 11,118Net Income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,521 4,359 (28,138) 24,520 26,337 14,532 10,609 8,683 (2,619) 282 4,921 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,820 10,763 24,213 26,324 21,821 12,497 11,551 9,419 9,814 10,244 11,641 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,486 19,276 18,612 13,974 9,897 9,316 9,242 10,608 10,522 11,102 11,516 R&D Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,962 3,829 4,421 7,309 4,384 3,739 2,993 2,690 2,195 2,454 2,177 Copper (Price quoted, Average) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥738,200 ¥609,483 ¥657,408 ¥915,950 ¥867,400 ¥517,308 ¥371,141 ¥270,283 ¥234,425 ¥232,658 ¥238,008 Zinc (Price quoted, Average) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 231,858 222,575 202,725 388,183 461,633 228,191 162,408 143,916 138,200 147,008 162,308 US Dollar (Average) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86.22 93.35 101.03 114.78 117.52 113.81 108.05 113.57 122.45 125.64 111.09

At Year-end:Equity *6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥113,785 ¥111,667 ¥103,830 ¥150,281 ¥141,276 ¥114,869 ¥ 94,670 ¥ 84,673 ¥ 70,931 ¥ 76,125 ¥ 69,564 Minority Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,942 5,663 5,263 6,078 4,491 3,833 – – – – –Total Assets *6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,161 330,720 343,208 367,931 352,299 303,029 261,461 246,275 248,689 284,552 313,209Interest-bearing Debt *8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,119 149,371 180,496 120,953 114,757 99,653 97,709 104,375 132,179 158,440 188,831

Per Share:Basic Net Income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 28.80 ¥ 14.96 ¥ (94.36) ¥ 81.86 ¥ 87.82 ¥ 48.12 ¥ 35.14 ¥ 28.79 ¥ (8.85) ¥ 0.93 ¥ 17.61 Fully Diluted Net Income *7 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – – – 77.91 83.59 – – – – – –Fully Diluted Equity *5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 361.18 358.33 339.93 481.85 456.10 382.69 315.46 282.15 236.29 250.59 239.65Cash Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.00 10.00 10.00 20.00 20.00 14.00 10.00 7.00 7.00 5.00 5.00

Cash Flows:Cash Flows from Operating Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 23,955 ¥ 25,011 ¥ 33,593 ¥ 40,398 ¥ 13,700 ¥ 17,783 ¥ 17,432 ¥ 29,725 ¥ 23,134 ¥ 23,503 ¥ 21,176 Cash Flows from Investing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,257) (14,602) (36,477) (39,138) (24,387) (15,616) (7,636) (1,290) (1,520) (7,708) (4,033)Cash Flows from Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,070) (33,888) 49,303 (1,820) 9,634 (1,758) (8,917) (30,072) (26,882) (26,127) (17,523)Free Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,135 14,248 9,380 12,565 (6,504) 6,050 5,162 21,393 12,566 14,256 10,319 Cash and Cash Equivalents at End of Year . . . . . . . . . . . . . . . . . . . . . . . . 16,741 27,115 50,681 4,294 4,792 5,813 5,286 4,414 5,624 10,429 20,696

Ratios:Return on Assets *2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.83% 4.07% –% 12.31% 14.87% 13.07% 10.89% 7.13% 5.53% 4.22% 4.88%Return on Equity *3*4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.01 4.26 (23.18) 17.45 20.93 13.87 11.83 11.16 (3.56) 0.39 7.50 Operating Income (loss) to Net Sales (%) . . . . . . . . . . . . . . . . . . . . . . . . 6.04 4.46 (2.45) 9.31 10.62 11.66 10.88 7.52 6.67 5.68 6.45 Equity Ratio *4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.41 32.05 28.72 39.19 38.83 37.91 36.21 34.38 28.52 26.75 22.21 Operating Income Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.31 – – (9.06) 32.08 33.48 56.70 19.60 16.97 (18.42) 85.16Interest Coverage (times) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.55 5.12 (2.79) 21.10 30.18 29.23 20.30 12.04 8.38 5.59 5.14 Debt/Equity Ratio (times) *5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.29 1.41 1.83 0.84 0.84 0.87 1.03 1.23 1.86 2.08 2.71Debt/Capacity Ratio (times) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.90 1.91 2.11 1.48 1.42 1.91 1.87 2.22 2.85 2.86 3.41Return on Invested Capital *5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.48 1.71 (10.08) 9.25 10.47 6.77 5.52 4.59 (1.29) 0.12 1.91

*1 The years stated in the text are ended March 31 of the year. Thus “2011” refers to the fiscal year, which ran from April 1, 2010 through March 31, 2011.*2 Operating Income divided by average of Total Assets at the start and end of the year.*3 Net income divided by average of Equity at the start and end of the year.*4 From 2007, the ratios have been calculated using shareholders’ equity (the amounts after deducting minority interest amounts from equity amounts).*5 From 2007, the ratios have been calculated after deducting minority interest amounts from equity amounts.

*6 The Equity and Total Assets for 2006 have been reclassified to reflect the “Accounting standards for presentation of net assets in the balance sheet.”*7 Fully diluted net income is not stated up to 2001 because bonds with subscription rights were issued and net income per share did not decrease due to adjustment calculations. Fully diluted net income is not

stated from 2002 to 2006 and 2010 to 2011 because no diluted shares existed. From 2002, fully diluted net income is calculated after deducting the average number of shares of treasury stock during the term. Fully diluted net income is not stated for 2009 although diluted shares existed because a net loss per share was incurred.

*8 From 2008, in the balance sheets, long-term loans payable and current portion of long-term loans payable were stated including lease obligations. However, interest-bearing debt amounts stated in the Consoli-dated 11-Year Summary do not include lease obligations.


–4

–2

0 0

2

4

6

400 8

10

12

07 08 09 10 11–200

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100

200

300

600

500

07 08 09 10 11

20

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0

10

30

Net Sales and Operating Income to Net Sales(Billions of Yen) (%)

Net Income(Billions of Yen)

Net Sales (left scale)

Operating Income to Net Sales (right scale)

Results of OperationsDuring the fiscal year ended March 31, 2011, the Japanese economy was, overall, on a recovery trajec-

tory despite a number of concerns, including the surfacing of inflationary pressures in high-growth

economies and a persistently strong yen. Positive factors behind this recovery include growth in

demand from China and other emerging economies in Asia, and the positive effects of the govern-

ment’s stimulus measures. This being said, a large shadow fell over the domestic economy when the

Great East Japan Earthquake struck on March 11, 2011.

Looking at the business environment of the Dowa Group, demand for products related to automo-

biles and IT (information technology) was comparatively strong over the year as a whole. Prices for

gold, silver, and copper increased to record levels while the price of zinc remained robust. On the other

hand, movements in currency markets were unfavorable with the yen hitting a new high of ¥76.25 to

the U.S. dollar shortly after the earthquake.

In this environment, the Group worked to preserve earnings by pushing ahead with such measures as

improving productivity, bringing products to market in response to changing needs and rebounding

demand. While the Dowa Group did not suffer any direct damage as a result of the earthquake, the associ-

ated rolling blackouts did have a negative impact on our operations.

As a result of the above, on a consolidated basis, sales in the fiscal year under review amounted to

¥379,816 million, up 24% year on year. Operating income increased 67% to ¥22,924 million and ordi-

nary income increased 69% to ¥23,371 million. The Group posted net income of ¥8,521 million, up 95%

despite posting extraordinary losses, including a loss on valuation of investment securities of ¥2,007

million and a loss on disaster of ¥1,714 million in relation to the Great East Japan Earthquake.

After comprehensive consideration of its performance in the fiscal year under review, business

development in the future and strengthening the financial structure, the Company paid an annual

dividend of ¥10 per share, the same level as in the previous year.

Forecast for next fiscal yearManagement expects growth in China, India, and other emerging economies to fuel external demand

over the medium and long term. This said, the shortages of both power and materials resulting from

the Great East Japan Earthquake and the associated nuclear crisis are expected to further darken the

cloud that hangs over the Japanese economy. Facing such conditions, The Dowa Group intends to

look beyond the confusion wrought in supply chains to identify future market trends, and armed with

this insight, implement its policies and forge ahead with the strengthening of its businesses.

For the fiscal year ending March 31, 2012, the Group forecasts net sales of ¥360 billion, operating

income of ¥19 billion, ordinary income of ¥20 billion and net income of ¥10 billion. These figures

assume average U.S. dollar exchange rates of ¥80, and metal prices for copper and zinc of $8,500/ton

and $2,100/ton, respectively.

Financial ReviewYears ended March 31


07 08 09 10 110

100

200

300

400

07 08 09 10 11

150

0

30

60

90

120

180

Total Assets(Billions of Yen)

Interest-bearing Debt(Billions of Yen)

Analysis of Financial PositionAssetsTotal assets at the end of the fiscal year under review increased ¥9,440 million from the end of the

previous fiscal year, to ¥340,161 million. Current assets increased ¥18,752 million, and fixed assets

decreased ¥9,312 million. The increase in current assets reflected the ¥25,974 million rise in raw materi-

als and supplies in turn due to an increase in valuable metals included in refined metals, and soaring

prices in markets for nonferrous metals. The decline in fixed assets reflected the fact that investments

in securities decreased by ¥4,108 million due to a drop in stock prices and other factors.

LiabilitiesLiabilities increased ¥7,323 million, with an increase in notes and accounts payable of ¥4,654 million

and ingot leasing liabilities of ¥11,340 million countered by a decrease of ¥11,251 million in interest-

bearing debt.

EquityEquity increased ¥2,117 million. The primary factors for the increase were net income of ¥8,521 million,

a rise of ¥5,357 million in shareholders’ equity because of cash dividends paid and other factors, and a

decrease of ¥4,519 million in other comprehensive income due to the estimated fair value of invest-

ment securities and derivative transactions at the end of the period. As a result, the equity ratio was

31.4% at the end of the fiscal year under review.


07 08 09 10 11

40

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20

30

50

07 08 09 10 11

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Cash Flows from Operating Activities(Billions of Yen)

Cash Flows from Investing Activities(Billions of Yen)

Analysis of cash flowsConsolidated cash and cash equivalents (“cash”) declined ¥10,373 million from the end of the previous

fiscal year to ¥16,741 million at the end of the fiscal year under review.

Net cash provided by operating activities was ¥23,955 million (down ¥1,055 million year on year)

with income before income taxes and minority interests of ¥17,219 million (up ¥7,495 million from the

previous year) and the non-financial expenses of depreciation and amortization of ¥18,486 million

offset by an increase in trade receivables of ¥4,569 million and an increase in inventories of ¥23,054

million, among other factors.

Net cash used in investing activities was ¥19,257 million (up ¥4,654 million), primarily reflecting

capital expenditures of ¥17,307 million, mainly in the Environmental Management & Recycling and

Nonferrous Metals businesses, and purchases of shares of ¥1,631 million for expanding operations.

Net cash used in financial activities was ¥15,070 million (down ¥18,817 million) with a fall in

interest-bearing debt of ¥11,532 million due to decreased cash reserves, and cash dividends paid of

¥3,157 million.

(For reference) Cash flow-related indicator trends2007.3 2008.3 2009.3 2010.3 2011.3

Equity ratio 38.8 39.2 28.7 32.1 31.4Market price-based equity ratio 102.0 48.1 31.0 50.4 45.0Interest-bearing debt-to-cash flow ratio 8.4 3.0 5.4 6.0 5.8Interest coverage ratio 8.6 19.5 14.0 8.5 10.7

(Notes) 1. Equity ratio: shareholders’ equity / total assets

Market price-based equity ratio: market capitalization / total assets

Interest-bearing debt-to-cash flow ratio: interest bearing debt / cash flows

Interest coverage ratio: cash flows / total interest paid

2. Each ratio is calculated on a consolidated basis.

3. Market capitalization is calculated based on the number of outstanding shares excluding treasury stock.

4. Cash flows are the cash flows from operating activities on the consolidated statements of cash flows.

5. Interest-bearing debt includes all liabilities (except lease obligation) bearing interest posted on the consolidated balance sheets. The total interest paid is the interest expenses paid on the consolidated statements of cash flows.

Basic Dividend Policy and Dividends for the Fiscal Year Under Review and Next Fiscal YearThe Company views the payment of dividends to shareholders as a key management issue. The Com-

pany’s policy is to pay a dividend commensurate with performance, having appropriated sufficient

retained earnings to bolster the Group’s business position and support future business development.

After comprehensive consideration of its performance in the fiscal year under review, business

development in the future and strengthening the financial structure, the Company paid an annual

dividend of ¥10 per share, the same level as in the previous year. At present, the Company also plans to

pay only the same dividend of ¥10 per share in the fiscal year ending March 31, 2012.


Business RisksThe Group faces a variety of risks such as those described below that could potentially and adversely

impact its operating results, stock price and financial position.

Forward-looking statements among the risk items that follow reflect the opinion of the Group as of

March 31, 2011.

Economic conditionsThe Group’s business performance and financial condition may be negatively affected by economic

recessions in its principal markets, which include Japan, North America, Asia, and Europe, or by shrink-

ing demand accompanying such changes.

Metal and currency marketsAmong its products, the Group handles gold, silver, copper, and zinc, the prices for which are set by

international markets. The unprocessed ore for these metals is also procured from overseas. For these

reasons, the Group is confronted with risks due to changes in international market conditions and

fluctuations in currency exchange rates. The Group employs a variety of hedging measures, including

nonferrous metal commodity forward contracts and forward exchange contracts, in an attempt to

mitigate these risks.

Public regulationsThe Group is subject to a variety of legal regulations. In Japan, these include laws pertaining to the

environment and recycling, as well as anti-trust laws. Overseas, the Group must comply with legal

regulations present in the countries where it operates, for example regulations regarding customs,

imports and exports, and laws concerning the control of foreign currency. The Group, for its part, takes

every legal precaution to protect its rights with respect to these laws. Nevertheless, business perfor-

mance may be adversely affected if Group business operations are restricted as a result of mandates

stipulated by the establishment of presently unforeseen regulations.

Stock price fluctuationsThe Group is subject to risks due to fluctuations in stock prices stemming from the approximately

¥22.3 billion in marketable securities it held as of March 31, 2011. These securities primarily represent

stock held in Group business partners. Similarly, the Group faces the risk that a fall in stock prices could

erode the value of pension assets, causing shortfalls in the reserve for retirement benefits and leading

to a substantial increase in retirement benefit expenses.

Interest rate fluctuationsAs of March 31, 2011, the Group’s balance of interest-bearing debt was ¥138.1 billion, with external

fund procurement accounting for 41% of total assets. Consequently, a sharp rise in interest rates could

adversely affect business performance.

Disasters and power outagesThe Group conducts disaster prevention and equipment inspections at all of its facilities in an attempt

to minimize any possible negative effects that could result from sudden production line stoppages.

Nevertheless, the Group may experience a dramatic decline in production capacity should a disaster,

power outage, or other type of interruption occur at its production facilities.


BS_E左(GS送付用)

Consolidated Balance SheetsDowa Holdings Co., Ltd. and Consolidated SubsidiariesAs of March 31, 2011 and 2010

Thousands ofU.S. Dollars

(Note 1)Assets 2011 2010 2011Current Assets:

Cash and time deposits (Note 4) ........................................................... ¥17,231 ¥27,390 $207,236Notes and accounts receivable:

Trade ................................................................................................. 52,101 47,670 626,595Non-consolidated subsidiaries and affiliates ..................................... 5,076 4,909 61,056Others ............................................................................................... 3,382 3,408 40,673Subtotal ............................................................................................. 60,560 55,988 728,324

Inventories:Merchandise and finished products .................................................. 16,021 19,357 192,679Work in process ................................................................................ 3,980 3,558 47,870Raw materials and supplies .............................................................. 59,790 33,815 719,062Subtotal ............................................................................................. 79,791 56,732 959,612

Deferred tax assets, current (Note 10) .................................................. 6,605 4,602 79,442Other current assets .............................................................................. 3,680 4,253 44,263Allowance for doubtful accounts, current ............................................... (416) (267) (5,009)

Total current assets .......................................................................... 167,453 148,700 2,013,870

Property, Plant and Equipment (Notes 6 and 7):Land ....................................................................................................... 22,275 22,228 267,892Buildings and structures ........................................................................ 88,581 85,779 1,065,323Machinery and equipment ..................................................................... 184,381 179,340 2,217,460Construction in progress ........................................................................ 5,052 3,295 60,762Others .................................................................................................... 11,756 11,302 141,388

Subtotal ............................................................................................. 312,047 301,947 3,752,826Accumulated depreciation ..................................................................... (207,945) (196,350) (2,500,851)

Total property, plant and equipment ................................................. 104,101 105,597 1,251,975

Investments and Other Assets:Investments in securities (Notes 5 and 7) ............................................. 24,410 29,991 293,570Investments in and advances to non-consolidated subsidiaries and affiliates (Notes 5 and 7) ............................................................... 28,120 26,803 338,187Long-term loans ..................................................................................... 8 13 105Deferred tax assets, non-current (Note 10) ........................................... 5,542 8,140 66,653Goodwill ................................................................................................. 6,506 7,038 78,252Other assets .......................................................................................... 4,222 4,696 50,779Allowance for doubtful accounts, non-current ....................................... (204) (260) (2,454)

Total investments and other assets .................................................. 68,606 76,422 825,094Total assets ..................................................................................... ¥340,161 ¥330,720 $4,090,940

*1. The accompanying notes are an integral part of these consolidated financial statements.

2. The years stated in the text are for fiscal years, which run from April 1 of the previous year through March 31.

Thus, 2011 refers to the year ended March 31, 2011.

3. ¥83.15=US$1, the rate of exchange on March 31, 2011 is used.

Millions of Yen

Consolidated Balance SheetsDowa Holdings Co., Ltd. and Consolidated SubsidiariesAs of March 31, 2011 and 2010


BS_E右(GS送付用)


(Note 1)Liabilities and Equity 2011 2010 2011Current Liabilities:

Short-term borrowings (Note 7) .................................................................... ¥31,304 ¥40,338 $376,479Current maturities of long-term debt (Note 7) ............................................... 23,439 25,805 281,898Notes and accounts payable:

Trade ........................................................................................................ 32,768 28,033 394,087Non-consolidated subsidiaries and affiliates ............................................ 609 700 7,334Others ....................................................................................................... 5,007 3,971 60,224Subtotal .................................................................................................... 38,385 32,704 461,646

Accrued expenses ........................................................................................ 6,317 6,035 75,979Accrued income taxes ................................................................................... 2,732 1,729 32,861Deferred tax liabilities, current (Note 10) ...................................................... – 2 –Accrued bonuses .......................................................................................... 2,831 2,628 34,054Accrued directors’ bonuses ........................................................................... 158 141 1,903Other current liabilities .................................................................................. 19,062 7,262 229,254

Total current liabilities ............................................................................... 124,232 116,648 1,494,078

Long-term Liabilities:Long-term debt (Note 7) ................................................................................ 85,077 85,159 1,023,178Reserve for employees’ retirement benefits (Note 13) ................................. 10,637 11,964 127,927Reserve for directors’ and corporate auditors’ retirement benefits ............... 517 557 6,219Deferred tax liabilities, non-current (Note 10) ............................................... 1,888 1,213 22,711Other long-term liabilities .............................................................................. 4,023 3,510 48,390

Total long-term liabilities ........................................................................... 102,143 102,404 1,228,426Total liabilities ........................................................................................... 226,376 219,053 2,722,505

Contingent Liabilities (Note 8):

Equity (Note 9):Common stock:

Authorized: 1,000,000 thousand shares in 2011 and 2010, respectivelyIssued: 309,946 thousand shares in 2011 and 2010, respectively ……......… 36,437 36,437 438,212

Capital surplus .............................................................................................. 26,362 26,362 317,044Retained earnings ......................................................................................... 48,152 42,791 579,100Treasury stock, at cost (14,127 thousand shares in 2011 and 14,120 thousand shares in 2010) ... (5,763) (5,759) (69,317)

Accumulated Other Comprehensive Income: Unrealized gains on available-for-sale securities ..................................... 5,024 7,533 60,431 Deferred gains (losses) on derivatives under hedge accounting ............. (865) 160 (10,412) Foreign currency translation adjustments ................................................ (2,504) (1,521) (30,123)

Total ......................................................................................................... 106,842 106,003 1,284,935 Minority Interests ...................................................................................... 6,942 5,663 83,499

Total equity ............................................................................................... 113,785 111,667 1,368,435Total liabilities and equity ..................................................................... ¥340,161 ¥330,720 $4,090,940

Millions of Yen


PL_E(GS送付用)

Consolidated Statements of IncomeDowa Holdings Co., Ltd. and Consolidated SubsidiariesFor the years ended March 31, 2011 and 2010


(Note 1)2011 2010 2011

Net Sales ................................................................................................... ¥379,816 ¥307,462 $4,567,847Cost of Sales (Note 14) ............................................................................ 330,380 268,738 3,973,305

Gross profit ....................................................................................... 49,436 38,724 594,541Selling, General and Administrative Expenses (Notes 11 and 12) ....... 26,511 25,022 318,845

Operating income ............................................................................. 22,924 13,701 275,696Other Income (Expenses):

Interest and dividend income ................................................................ 739 715 8,891Interest expense ................................................................................... (2,242) (2,815) (26,972)Loss on sales of property, plant and equipment, and loss on disposals of property, plant and equipment, net .............. (870) (979) (10,471)Foreign exchange gain ......................................................................... 312 65 3,753Equity in earnings of affiliates ............................................................... 1,228 1,568 14,777Gain on sales of investments in securities ............................................ 45 6 553Loss on valuation of investment securities ........................................... (2,007) (238) (24,138)Loss on impairments (Note 6) ............................................................... (118) (851) (1,429)Provision of allowance for doubtful accounts ........................................ (168) (153) (2,028)Business structure improvement expenses .......................................... – (1,490) –Losses from natural disaster ................................................................. (1,714) – (20,613)Loss on revision of retirement benefit plan ........................................... (981) – (11,805)Other, net .............................................................................................. 72 193 874

Subtotal ............................................................................................ (5,704) (3,978) (68,609)Income before income taxes and minority interests ......................... 17,219 9,723 207,086

Income Taxes (Note 10): Current .................................................................................................. 3,968 2,394 47,727Deferred ................................................................................................ 3,349 1,944 40,285

Total income taxes ........................................................................... 7,318 4,338 88,012Net income before minority interests ................................................ 9,900 5,385 119,073

Minority Interests ..................................................................................... (1,379) (1,025) (16,594)Net income ...................................................................................... ¥8,521 ¥4,359 $102,479

Per Share (Note 18):U.S. Dollars

(Note 1)Basic net income ................................................................................... ¥28.80 ¥14.96 $0.35Cash dividends ..................................................................................... 10.00 10.00 0.12

*1. The accompanying notes are an integral part of these consolidated financial statements. 2. The years stated in the text are for fiscal years, which run from April 1 of the previous year through March 31. Thus, 2011 refers to the year ended March 31, 2011. 3. ¥83.15=US$1, the rate of exchange on March 31, 2011 is used.

Millions of Yen

Yen

Consolidated Statements of IncomeDowa Holdings Co., Ltd. and Consolidated SubsidiariesFor the years ended March 31, 2011 and 2010


Consolidated Statement of Comprehensive IncomeDowa Holdings Co., Ltd. and Consolidated SubsidiariesFor the year ended March 31, 2011

Consolidated Statement of Comprehensive IncomeDowa Holdings Co., Ltd. and Consolidated SubsidiariesFor the year ended March 31, 2011

Millions of Yen


(Note 1)2011 2011

Net Income before minority interests .................................................................................... ¥9,900 $119,073Other comprehensive income

Unrealized losses on available-for-sale securities ........................................................... (2,255) (27,124)Deferred losses on derivatives under hedge accounting ................................................. (1,026) (12,348)Foreign currency translation adjustments ........................................................................ (596) (7,169)Share of other comprehensive loss in affiliates ................................................................ (653) (7,864)Total other comprehensive loss ....................................................................................... (4,532) (54,507)

Comprehensive income ........................................................................................................ ¥5,368 $64,566Comprehensive income attributable to

Owners of the parent ........................................................................................................ ¥4,002 ¥48,133Minority interests .............................................................................................................. 1,366 16,433


Equity_E(GS送付用)Consolidated Statements of Changes in EquityDowa Holdings Co., Ltd. and Consolidated SubsidiariesFor the years ended March 31, 2011 and 2010

2011 2010Number of Shares of Common Stock

Balance at beginning of year ................................................................. 309,946 303,790Issuance of new shares-exercise of subscription rights to shares .... – 6,155

Balance at end of year ........................................................................... 309,946 309,946Number of Shares of Treasury Stock

Balance at beginning of year ................................................................. 14,120 13,828Net change in treasury stock held by affiliates during year ............... 0 224Purchases of treasury stock .............................................................. 8 69Sales of treasury stock ...................................................................... (1) (3)

Balance at end of year ........................................................................... 14,127 14,120


(Note 1)2011 2010 2011

Equity　Common Stock

Balance at beginning of year ................................................................. ¥36,437 ¥36,436 $438,212Issuance of new shares-exercise of subscription rights to shares .... – 0 –

Balance at end of year ........................................................................... ¥36,437 ¥36,437 $438,212　Capital Surplus

Balance at beginning of year ................................................................. ¥26,362 ¥26,361 $317,042Net change due to sales of treasury stock ........................................ 0 0 2Issuance of new shares-exercise of subscription rights to shares .... – (0) –

Balance at end of year ........................................................................... ¥26,362 ¥26,362 $317,044　Retained Earnings

Balance at beginning of year ................................................................. ¥42,791 ¥41,262 $514,624Net income ........................................................................................ 8,521 4,359 102,479Cash dividends paid .......................................................................... (3,005) (2,944) (36,144)Increase due to sales of treasury stock of affiliate ............................ 0 0 2Increase in retained earnings due to decrease in number of consolidated subsidiaries................................................................. (155) 238 (1,860)Change of scope of equity method ................................................... – (126) –

Balance at end of year ........................................................................... ¥48,152 ¥42,791 $579,100　Treasury Stock, at Cost

Balance at beginning of year ................................................................. ¥(5,759) ¥(5,618) $(69,271)Net change in treasury stock held by affiliate during year ................ – (107) –Purchases of treasury stock .............................................................. (4) (34) (51)Sales of treasury stock ...................................................................... 0 1 5

Balance at end of year ........................................................................... ¥(5,763) ¥(5,759) $(69,317)Accumulated Other Comprehensive Income　Unrealized Gains on Available-for-sale Securities

Balance at beginning of year ................................................................. ¥7,533 ¥4,238 $90,605Net change during year ..................................................................... (2,509) 3,295 (30,174)

Balance at end of year ........................................................................... ¥5,024 ¥7,533 $60,431　Deferred Gains(Losses) on Derivatives Under Hedge Accounting

Balance at beginning of year ................................................................. ¥160 ¥(2,542) $1,936Net change during year ..................................................................... (1,026) 2,703 (12,348)

Balance at end of year ........................................................................... ¥(865) ¥160 $(10,412)　Foreign Currency Translation Adjustments

Balance at beginning of year ................................................................. ¥(1,521) ¥(1,571) $(18,297)Net change during year ..................................................................... (983) 50 (11,825)

Balance at end of year ........................................................................... ¥(2,504) ¥(1,521) $(30,123)Minority Interests 　Minority Interests

Balance at beginning of year ................................................................. ¥5,663 ¥5,263 $68,113Net change during year ..................................................................... 1,279 400 15,385

Balance at end of year ........................................................................... ¥6,942 ¥5,663 $83,499*1. The accompanying notes are an integral part of these consolidated financial statements. 2. The years stated in the text are for fiscal years, which run from April 1 of the previous year through March 31. Thus, 2011 refers to the year ended March 31, 2011. 3. ¥83.15=US$1, the rate of exchange on March 31, 2011 is used.

Millions of Yen

Thousands of shares

Consolidated Statements of Changes in EquityDowa Holdings Co., Ltd. and Consolidated SubsidiariesFor the years ended March 31, 2011 and 2010


Equity_E(GS送付用)Consolidated Statements of Changes in EquityDowa Holdings Co., Ltd. and Consolidated SubsidiariesFor the years ended March 31, 2011 and 2010

2011 2010Number of Shares of Common Stock

Balance at beginning of year ................................................................. 309,946 303,790Issuance of new shares-exercise of subscription rights to shares .... – 6,155

Balance at end of year ........................................................................... 309,946 309,946Number of Shares of Treasury Stock

Balance at beginning of year ................................................................. 14,120 13,828Net change in treasury stock held by affiliates during year ............... 0 224Purchases of treasury stock .............................................................. 8 69Sales of treasury stock ...................................................................... (1) (3)

Balance at end of year ........................................................................... 14,127 14,120


(Note 1)2011 2010 2011

Equity　Common Stock

Balance at beginning of year ................................................................. ¥36,437 ¥36,436 $438,212Issuance of new shares-exercise of subscription rights to shares .... – 0 –

Balance at end of year ........................................................................... ¥36,437 ¥36,437 $438,212　Capital Surplus

Balance at beginning of year ................................................................. ¥26,362 ¥26,361 $317,042Net change due to sales of treasury stock ........................................ 0 0 2Issuance of new shares-exercise of subscription rights to shares .... – (0) –

Balance at end of year ........................................................................... ¥26,362 ¥26,362 $317,044　Retained Earnings

Balance at beginning of year ................................................................. ¥42,791 ¥41,262 $514,624Net income ........................................................................................ 8,521 4,359 102,479Cash dividends paid .......................................................................... (3,005) (2,944) (36,144)Increase due to sales of treasury stock of affiliate ............................ 0 0 2Increase in retained earnings due to decrease in number of consolidated subsidiaries................................................................. (155) 238 (1,860)Change of scope of equity method ................................................... – (126) –

Balance at end of year ........................................................................... ¥48,152 ¥42,791 $579,100　Treasury Stock, at Cost

Balance at beginning of year ................................................................. ¥(5,759) ¥(5,618) $(69,271)Net change in treasury stock held by affiliate during year ................ – (107) –Purchases of treasury stock .............................................................. (4) (34) (51)Sales of treasury stock ...................................................................... 0 1 5

Balance at end of year ........................................................................... ¥(5,763) ¥(5,759) $(69,317)Accumulated Other Comprehensive Income　Unrealized Gains on Available-for-sale Securities

Balance at beginning of year ................................................................. ¥7,533 ¥4,238 $90,605Net change during year ..................................................................... (2,509) 3,295 (30,174)

Balance at end of year ........................................................................... ¥5,024 ¥7,533 $60,431　Deferred Gains(Losses) on Derivatives Under Hedge Accounting

Balance at beginning of year ................................................................. ¥160 ¥(2,542) $1,936Net change during year ..................................................................... (1,026) 2,703 (12,348)

Balance at end of year ........................................................................... ¥(865) ¥160 $(10,412)　Foreign Currency Translation Adjustments

Balance at beginning of year ................................................................. ¥(1,521) ¥(1,571) $(18,297)Net change during year ..................................................................... (983) 50 (11,825)

Balance at end of year ........................................................................... ¥(2,504) ¥(1,521) $(30,123)Minority Interests 　Minority Interests

Balance at beginning of year ................................................................. ¥5,663 ¥5,263 $68,113Net change during year ..................................................................... 1,279 400 15,385

Balance at end of year ........................................................................... ¥6,942 ¥5,663 $83,499*1. The accompanying notes are an integral part of these consolidated financial statements. 2. The years stated in the text are for fiscal years, which run from April 1 of the previous year through March 31. Thus, 2011 refers to the year ended March 31, 2011. 3. ¥83.15=US$1, the rate of exchange on March 31, 2011 is used.

Millions of Yen

Thousands of shares

CF_E(GS送付用)Consolidated Statements of Cash FlowsDowa Holdings Co., Ltd. and Consolidated SubsidiariesFor the years ended March 31, 2011 and 2010


(Note 1)2011 2010 2011

Cash Flows from Operating Activities:Income before income taxes and minority interests ........................................... ¥17,219 ¥9,723 $207,086Adjustments for:

Income taxes (paid) refunded ....................................................................... (2,750) 2,153 (33,078)Depreciation and amortization ...................................................................... 18,486 19,276 222,329Loss on sales of property, plant and equipment and on disposals of property, plant and equipment, net .......................................... 870 979 10,471Increase in allowance for doubtful accounts ................................................. 97 183 1,176Equity in earnings of affiliates ....................................................................... (1,228) (1,568) (14,777)Gain on sales of investment in securities, net ............................................... (45) (6) (553)Loss on valuation of investments in securities .............................................. 2,007 238 24,138Loss on impairments (Note 6) ....................................................................... 118 851 1,429Business structure improvement expenses .................................................. – 1,490 – Loss on change in accounting standard for asset retirement obligations ................................................................... 80 – 971

Changes in assets and liabilities Increase in trade receivables ........................................................................ (4,569) (16,256) (54,953)Increase in inventories .................................................................................. (23,054) (3,491) (277,267)Increase in trade payables ............................................................................ 4,670 10,186 56,166Decrease in interest and dividend receivables .............................................. 302 1,261 3,635(Decrease) increase in interest payables ...................................................... 7 (137) 86

Other, net ........................................................................................................... 11,744 127 141,239Net cash provided by operating activities ...................................................... 23,955 25,011 288,102

Cash Flows from Investing Activities:Acquisition of property, plant and equipment ..................................................... (17,307) (10,062) (208,148)Proceeds from sales of property, plant and equipment ..................................... 86 114 1,042Acquisition of investments in securities ............................................................. (6) (61) (76)Proceeds from sales of investments in securities .............................................. 55 8 672Acquisition of investments in subsidiaries and affiliates .................................... (1,625) (2,616) (19,543)Proceeds from sales of investments in affiliates ................................................ – 9 –Acquisition of subsidiaries, net of cash acquired ............................................... – (576) –Payments for loans ............................................................................................ (1,172) (1,623) (14,102)Proceeds from collection of loans ...................................................................... 983 595 11,832Other, net ........................................................................................................... (272) (391) (3,273)

Net cash used in investing activities ............................................................. (19,257) (14,602) (231,595)Cash Flows from Financing Activities:

Net decrease in short-term bank loans .............................................................. (9,162) (11,514) (110,190)Proceeds from long-term debt ........................................................................... 23,220 1,430 279,254Repayment of long-term debt ............................................................................ (25,582) (20,989) (307,672)Payments for redemption of bonds .................................................................... (7) (10,007) (84)Proceeds from issuance of bonds ...................................................................... – 10,000 –Proceeds from issuance of stock resulting from exercise of subscription rights to shares ............................................................................. – 0 –Cash dividends paid ........................................................................................... (3,157) (3,543) (37,970)Proceeds from stock issuance to minority shareholders..................................... 62 – 751Increase in lease obligations by sale and leaseback ......................................... 4 1,118 53Repayment of lease obligations ......................................................................... (444) (349) (5,347)Proceeds from sales of treasury stock ............................................................... 0 1 7Purchases of treasury stock ............................................................................... (4) (34) (51)

Net cash used in financing activities ............................................................. (15,070) (33,888) (181,250)Foreign currency translation adjustment on cash and cash equivalents ....... (165) (51) (1,988)Net decrease in Cash and Cash Equivalents ..................................................... (10,537) (23,531) (126,731)Cash and Cash Equivalents of Newly Consolidated Subsidiaries ................... 164 – 1,978Decrease in Cash and Cash Equivalents due to Exclusion of Subsidiaries from Scope of Consolidation ...................................................... – (35) –Cash and Cash Equivalents at Beginning of Year ............................................ 27,115 50,681 326,099Cash and Cash Equivalents at End of Year (Note 4) ......................................... ¥16,741 ¥27,115 $201,345 *1.The accompanying notes are an integral part of these consolidated financial statements.

2.The years stated in the text are for fiscal years, which run from April 1 through March 31 of the following year. Thus, 2011 refers to the year ended March 31, 2011.

3.¥83.15=US$1, the rate of exchange on March 31, 2010 is used.

Millions of Yen

Consolidated Statements of Cash FlowsDowa Holdings Co., Ltd. and Consolidated SubsidiariesFor the years ended March 31, 2011 and 2010


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1. Basis of Presentation of the Consolidated Financial Statements The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting standards and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.

Under Japanese GAAP, a consolidated statement of comprehensive income is required from the fiscal year ended March 31, 2011 and has been presented herein. Accordingly, accumulated other comprehensive income is presented in the consolidated balance sheet and the consolidated statements of changes in equity. Information with respect to other comprehensive income for the year ended March 31, 2010 is disclosed in Note 17. In addition, “net income before minority interests” is disclosed in the consolidated statements of income from the year ended March 31, 2011.

Japanese yen figures less than ¥1 million (US$1 thousand) are rounded down to the nearest ¥1 million (US$1 thousand), except for per share data.

In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan.

The consolidated financial statements are stated in Japanese yen, the currency of the country in which Dowa Holdings Co., Ltd. (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥83.15 to US$1, the approximate rate of exchange at March 31, 2011. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. Summary of Significant Accounting Policies (1) Principles of Consolidation

The consolidated financial statements as of March 31, 2011 include the accounts of the Company and its 61 significant (59 in 2010) subsidiaries (together, the “Group”).

Under the control or influence concept, those significant companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those 12 significant affiliate companies (12 in 2010) over which non-consolidated subsidiaries and the Group have the ability to exercise significant influence are accounted for by the equity method.

Investments in non-consolidated subsidiaries have not been accounted for by the equity method, but carried at cost, since the Company’s equity in their combined earnings, in the aggregate, does not have a material effect on the consolidated financial statements.

The net difference between the purchase price and the underlying equity in the equity of an acquired business is amortized on a straight-line basis within 20 years.

(a) Note Regarding Scope of Consolidation (2011) The consolidated financial statements for the year ended March 31, 2011 include TONETSU KOSAN CO., LTD. and DOWA THERMOTECH (THAILAND) CO., LTD.,�which were unconsolidated subsidiaries in the consolidated financial statements for the year ended March 31, 2010 from the viewpoint of materiality. (2010) The Company acquired shares of Meltec Co., Ltd. during the year ended March 31, 2010 and therefore included the company in the scope of consolidation. Additionally, the Company excluded DOWA F-TEC (SINGAPORE) PTE. LTD. from the scope of consolidation following its withdrawal from the business. The results of operation of the company were included in the consolidated financial statements up to the date of withdrawal.

(b) Accounting Period of Foreign Subsidiaries In preparing the consolidated financial statements for the year ended March 31, 2011, the Company used the financial statements with an account closing date of December 31, 2010 in the cases of 12 foreign subsidiaries including Modern Asia Environmental Holdings Inc., Dowa Environmental Management Co., Ltd., and Dowa Advanced Materials (Shanghai) Co., Ltd., and other companies. For material transactions that occurred between January 1, 2011, and March 31, 2011, adjustments were made in the consolidated financial statements, as necessary.

Notes to Consolidated Financial Statements Dowa Holdings Co., Ltd. and Consolidated Subsidiaries Notes to Consolidated Financial Statements

Dowa Holdings Co., Ltd. and Consolidated Subsidiaries


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(2) Cash and Cash Equivalents Cash and cash equivalents in the consolidated statements of cash flows are composed of cash on hand, bank deposits able to be withdrawn on demand and short-term investments with an original maturity of three months or less and which represent a minor risk of fluctuation in value.

(3) Securities Securities held by the Group are classified into three categories.

Investments in equity securities issued by non-consolidated subsidiaries and affiliates are accounted for by the equity method. In certain cases, investments in certain non-consolidated subsidiaries and affiliates are stated at cost by using the moving average method because the effect of application of the equity method would be immaterial.

Available-for-sale securities with market quotations are stated at fair value. Unrealized gains on these securities are stated, net of tax and minority interests, as “unrealized gains on available-for-sale securities” on the consolidated statements of changes in equity.

Available-for-sale securities without market quotations are stated at cost by using the moving average method, except as stated in the paragraph below.

In cases where the fair value of equity securities issued by non-consolidated subsidiaries and affiliates or available-for-sale securities has declined significantly and such impairment of the value is deemed other-than-temporary, those securities are written down to the fair value and the resulting losses are included in net profit or loss for the period.

(4) Inventories Inventories are stated at the lower of cost or market value. The costs of the primary finished products and imported raw materials are determined by the first-in, first-out (FIFO) method. The costs of other finished products and other raw materials are determined by the moving average method.

(5) Property, Plant and Equipment Property, plant and equipment, including significant renewals and additions, are stated at cost. Repairs and maintenance expenses are charged to current income. Depreciation is computed by the declining-balance method based on the estimated useful lives of the respective assets. Depreciation of the landfill is computed using the production method.

The Company and domestic consolidated subsidiaries have computed the depreciation for buildings (excluding leasehold improvements and auxiliary facilities attached to buildings) that were acquired on or after April 1, 1998 by the straight-line method.

(6) Long-lived Assets The Group reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable.

An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group.

The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.

(7) Research and Development and Intangible Assets Research and development expenses are charged to the consolidated statements of income as incurred.

Expenses relating to the development of internal use computer software are charged to the consolidated statements of income when incurred, except when it is determined the software contributes to the future generation of income or cost savings. Such expenses are capitalized as an asset and are amortized using the straight-line method over their estimated useful life, which is five years.

Intangible assets other than software are amortized using the straight-line method, in accordance with the Japanese Corporate Tax Law.

(8) Leases (a) Lease Assets Pertaining to Finance Leases that are Deemed to Transfer Ownership of the Leased Property to the Lessee

These are calculated using the same method as the depreciation method that applies to non-current assets owned by the Group.


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(b) Lease Assets Pertaining to Finance Leases that are not Deemed to Transfer Ownership of the Leased Property to the Lessee

These use a method of calculation that takes the lease period to be the useful life and the salvage value to be zero. Note, however, that when the lease start date of a finance lease that is not deemed to transfer ownership of the leased property to the lessee is before April 1, 2008, which is the date of the adoption of this accounting method, such finance leases shall be accounted for by the method pertaining to ordinary operating lease transactions.

(9) Allowance for Doubtful Accounts The Group has recorded on allowance for doubtful accounts based on the percentage of its own historical bad debt losses against the balance of total receivables, plus the amount deemed necessary to cover individual accounts estimated to be uncollectible.

(10) Accrued Bonuses Accrued bonuses to employees are provided for at the estimated amounts which the Group is obliged to pay to employees after year-end.

(11) Accrued Directors’ Bonuses Accrued bonuses to directors, including bonuses for the portion corresponding to the corporate performance-based remuneration system, are provided for at the estimated amounts which the Group is obliged to pay to directors after year-end.

(12) Reserve for Employees’ Retirement Benefits Employees of the Group are entitled to severance indemnities, which are generally determined based on the length of service, current rates of pay and certain other factors at the time of retirement. The Company records a reserve for employees’ retirement benefits in an amount determined based on the retirement benefit obligation and fair value of retirement assets at fiscal year-end. Actuarial differences are amortized as an operating expense on a straight-line basis over five years, usually beginning the year following the year in which the difference arises. The Group has adopted the simplified method of accounting for severance indemnities at certain consolidated subsidiaries. Additional Information (2011) The Company and certain domestic consolidated subsidiaries applied “Accounting Standard for Transfers Between Retirement Benefit Plans” (Accounting Standards Board of Japan (ASBJ) Guidance No.1) upon transferring their retirement plans to defined contribution plans through revisions to the retirement plans in October 2010 and March 2011.

The effect of these transfers and related transactions was accounted for as other expense of ¥981 million (US$11,805 thousand) in the year ended March 31, 2011.

(13) Reserve for Directors’ and Corporate Auditors’ Retirement Benefits Some of the Company’s subsidiaries also provide for the liability for directors’ and corporate auditors’ severance indemnities in an amount determined by the Company’s internal regulations for such severance indemnities.

(14) Allowance for Environmental Measures The Group adopted the Act Concerning Special Measures against PCB Waste (Act No. 65 of June 22, 2001) and recorded the estimated cost for the disposal of polychlorinated biphenyl waste.

(15) Asset Retirement Obligations In March 2008, the ASBJ published the accounting standard for asset retirement obligations, ASBJ Statement No.18, “Accounting Standard for Asset Retirement Obligations”, and ASBJ Guidance No. 21, “Guidance on Accounting Standard for Asset Retirement Obligations”. Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fixed asset and is associated with the retirement of such tangible fixed asset.

The asset retirement obligation is recognized as the sum of the discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of the asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability.

The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows are reflected as an increase or a decrease in


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4

the carrying amount of the liability and the capitalized amount of the related asset retirement cost. This standard was effective for fiscal years beginning on or after April 1, 2010.

The Group applied this accounting standard effective April 1, 2010. This change had no effect on operating income for the year ended March 31, 2011, but reduced income before income taxes and minority interests by ¥80 million (US$971 thousand). The change in asset retirement obligations as a result of the start of application of the above accounting standard on April 1, 2010 was ¥677 million (US$8,146 thousand).

(16) Construction Contracts In December 2007, the ASBJ issued ASBJ Statement No. 15, “Accounting Standard for Construction Contracts,” and ASBJ Guidance No. 18, “Guidance on Accounting Standard for Construction Contracts.” Under the previous Japanese GAAP, either the completed-contract method or the percentage-of-completion method was permitted to account for construction contracts. Under this new accounting standard, the construction revenue and construction costs should be recognized by the percentage-of-completion method, if the outcome of a construction contract can be estimated reliably. When total construction revenue, total construction costs and the stage of completion of the contract at the balance sheet date can be reliably measured, the outcome of a construction contract can be estimated reliably. If the outcome of a construction contract cannot be reliably estimated, the completed-contract method should be applied. When it is probable that the total construction costs will exceed total construction revenue, an estimated loss on the contract should be immediately recognized by providing for a loss on construction contracts. This standard is applicable to construction contracts and software development contracts and effective for fiscal years beginning on or after April 1, 2009. The Company applied the new accounting standard effective April 1, 2009. The effect of this change was to increase net sales by ¥229 million and operating income and income before income taxes and minority interests by ¥42 million for the year ended March 31, 2010.

Also, the effect of this change was to increase net sales by ¥46 million and operating income and income before income taxes and minority interests by ¥6 million in the Environmental Management & Recycling segment and increase net sales by ¥183 million and operating income and income before income taxes and minority interests by ¥36 million in the Heat Treatment segment for the year ended March 31, 2010.

(17) Foreign Currency Translations All monetary assets and liabilities denominated in foreign currencies, whether long-term or short-term, are translated into Japanese yen at the exchange rates prevailing at the balance sheet date. Resulting gains and losses are included in net profit or loss for the period.

The assets and liabilities of the Company’s consolidated subsidiaries are valued using the fair-value method. Assets and liabilities, and revenues and expenses of foreign subsidiaries are converted into Japanese yen at the

spot exchange rates prevailing on the balance sheet date of the foreign subsidiaries in question, and translation differences are included as minority interests and foreign currency translation adjustments in equity.

(18) Derivatives and Hedging Activities The Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange, interest and nonferrous metal rates.

Foreign exchange forward contracts, interest rate swaps and nonferrous metal forward contracts are utilized by the Group to reduce foreign currency exchange, interest and nonferrous metal rate risks. The Group does not enter into derivatives for trading or speculative purposes.

Derivative financial instruments and foreign currency transactions are classified and accounted for as follows: a) All derivatives are recognized as either assets or liabilities and measured at fair value and gains or losses on

derivative transactions are recognized in the consolidated statements of income, and b) For derivatives used for hedging purposes, if derivatives qualify for hedge accounting because of high correlation

and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions.

The foreign exchange forward contracts employed to hedge foreign exchange exposures for export sales and import purchases are measured at fair value and the unrealized gains or losses are recognized in income.

Forward contracts applied for forecasted (or committed) transactions are also measured at fair value, but the unrealized gains or losses are deferred until the underlying transactions are completed.

The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value, but the differential paid or received under the swap agreements is recognized and included in interest expense or income.

(19) Accounting Treatment for Consumption Tax All transactions are recorded net of consumption tax.

(20) Application of the Consolidated Taxation System The Group applies the Consolidated Taxation System.


5

(21) Net Income per Share Basic net income per share is based on the weighted average number of shares of common stock of the Company issued and outstanding during the respective year.

3. Changes of Accounting Policies Application of “Accounting Standard for Equity Method of Accounting for Investments” (2011)

Commencing the fiscal year ended March 31, 2011, the Company applied the “Accounting Standard for Equity Method of Accounting for Investments” (ASBJ Statement No. 16, March 10, 2008) and “Practical Solution on Unification of Accounting Policies Applied to Associates Accounted for Using the Equity Method” (Practical Issues Task Force (PITF) No. 24, March 10, 2008).

The new standard requires adjustments to be made to conform the affiliate’s accounting policies for similar transactions and events under similar circumstances to those of the parent company when the affiliate’s financial statements are used in applying the equity method unless it is impracticable to determine adjustments.

This change had no effect on the consolidated statements of income for the year ended March 31, 2011.

4. Cash and Cash Equivalents (1) Cash and cash equivalents at March 31, 2011 and 2010 consisted of:

Millions of Yen

Thousands of U.S. Dollars

(Note 1)

2011 2010 2011

Cash and time deposits ······························································· ¥17,231 ¥27,390 $207,236

Time deposits with deposit terms of over three months ······················ (489) (275) (5,890)

Cash and cash equivalents ······················································· ¥16,741 ¥27,115 $201,345

(2) The main items of assets and liabilities of Meltec Co., Ltd. at the acquisition date which was newly included in the consolidated financial statements for the year ended March 31, 2010 were as follows:

Meltec Co., Ltd. as of December 31, 2009 (2010) Millions of Yen

Current assets ······························································································································ ¥268

Non-current assets ························································································································ 745

Current liabilities ··························································································································· 471

Non-current liabilities ······················································································································ 18

5. Investments Investments at March 31, 2011 and 2010 consisted of:

Millions of Yen


(Note 1)

2011 2010 2011

Investments in and advances to non-consolidated subsidiaries and affiliates ············································································ ¥28,120 ¥26,803 $338,187

Available-for-sale securities with market quotations ··························· 22,371 26,400 269,055

Unlisted securities ······································································ 2,038 3,590 24,515

Total ····················································································· ¥52,530 ¥56,794 $631,758

The net unrealized gains on the available-for-sale securities with market quotations as of March 31, 2011 and 2010 were ¥8,015 million (US$96,400 thousand) and ¥12,036 million, respectively.

For the year ended March 31, 2011, impairment losses on available-for-sale securities with market quotations were recognized in the amount of ¥297 million (US$3,574 thousand). Impairment losses on available-for-sale securities without market quotations were recognized in the amount of ¥1,534 million (US$18,454 thousand).


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6

Available-for-sale securities that the Group sold during the years ended March 31, 2011 and 2010:

Millions of Yen


(Note 1)

2011 2010 2011

Proceeds from sales ··································································· ¥55 ¥17 $672

Gain on sales ············································································ 38 6 463

Loss on sales ············································································ (0) (0) (0)

6. Long-lived Assets The Group reviewed its long-lived assets for impairment as of the years ended March 31, 2011 and 2010 and, as a result, recognized a loss on impairment of ¥118 million (US$1,429 thousand) and ¥851 million as other expenses for idle assets, due to a decline of market value.

7. Short-term Borrowings and Long-term Debt Short-term borrowings from banks and other financial institutions were represented by short-term borrowings bearing interest at 0.46% to 1.99% (an approximate average rate of 0.74%) per annum at March 31, 2011 and 0.63% to 2.40% (an approximate average rate of 0.79%) per annum at March 31, 2010.�

It is normal business custom in Japan for short-term borrowings to be rolled over each year. At March 31, 2011 and 2010, long-term debt consisted of the following:

Millions of Yen


(Note 1)

2011 2010 2011

0.87% to 4.50% loans, principally from banks and due between 2011 and 2026:�

Collateralized ········································································· ¥36,918 ¥42,023 $443,997

Unsecured ············································································· 59,897 57,002 720,351

2.15% straight bonds due 2010 ····················································· – 7 –

1.01% straight bonds due 2014 ····················································· 10,000 10,000 120,264

Lease obligations ······································································· 1,701 1,932 20,463

108,517 110,964 1,305,077

Long-term debt, bonds and lease obligations (due within one year) ··· 23,439 25,805 281,898

Long-term debt, bonds and lease obligations (due after one year) ····· ¥85,077 ¥85,159 $1,023,178

At March 31, 2011 and 2010, the following assets were pledged as collateral for short-term borrowings and the long-term debt of the Group:

Millions of Yen


(Note 1)

2011 2010 2011

Property, plant and equipment, less accumulated depreciation ············ ¥966 ¥1,028 $11,627

Investments in and advances to affiliates ········································ 5,456 5,944 65,627

Investments in securities ······························································ 3,196 3,930 38,448


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7

Annual maturities of long-term debt as of March 31, 2011 for the next five years and thereafter were as follows:

Millions of Yen


(Note 1)

2012 ············································································································ ¥23,439 $281,898

2013 ············································································································ 27,091 325,812

2014 ············································································································ 21,075 253,461

2015 ············································································································ 21,298 256,144

2016 and thereafter ························································································ 15,612 187,760

Total ········································································································· ¥108,517 $1,305,077

8. Contingent Liabilities At March 31, 2011, the Group guaranteed loans incurred by non-consolidated subsidiaries and affiliates in the amount of ¥5,253 million (US$63,186 thousand).

The Company sold notes and accounts receivable amounts to a finance company. As part of the finance agreement, under certain circumstances, the Company has the obligation to repurchase these amounts. At March 31, 2011, in connection with this structured finance agreement and the maximum repurchase commitment, the Company’s exposure was ¥527 million (US$6,348 thousand) .

9. Equity Since May 1, 2006, Japanese companies have been subject to the Corporate Law of Japan (the “Companies Act”), which reformed and replaced the Commercial Code of Japan. The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:

(a) Dividends Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders’ meeting. For companies that meet certain criteria, such as;

(1) having a Board of Directors, (2) having independent auditors, (3) having a Board of Corporate Auditors, and (4) having the term of service of the directors prescribed as one year rather than the two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends-in-kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation.

The Company meets all the above criteria. Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles

of incorporation of the Company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of equity after dividends must be maintained at no less than ¥3 million.

(b) Increases/decreases and transfer of common stock, reserve and surplus The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of the aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock.

Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.

(c) Treasury stock and treasury stock acquisition rights The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by a specific formula. Under the Companies Act, stock acquisition rights, which were previously presented as a liability, are now presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.


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8

10. Income Taxes Income taxes applicable to the Company and its domestic consolidated subsidiaries consist of corporation tax, inhabitants’ tax and enterprise tax, which in the aggregate resulted in normal statutory tax rates of approximately 40.0% for 2011 and 2010, respectively.

The provision for income taxes is computed based on the pretax income included in the consolidated statements of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences.

At March 31, 2011 and 2010, the significant components of deferred tax assets and liabilities were as follows:

Millions of Yen


(Note 1)

2011 2010 2011

Deferred tax assets

Consolidated subsidiaries’ deficit ························································· ¥12,448 ¥16,007 � $149,712

Reserve for employees’ retirement benefits ··········································· 4,227 4,760 50,840

Unrealized earnings ·········································································· 2,444 � 3,118 � 29,404

Loss on impairments of property, plant and equipment ···························· 1,662 1,700 19,994

Loss on valuation of investment securities ············································· 1,381 665 16,613

Accrued bonus ················································································ 1,117 1,022 13,439

Loss on valuation of inventories ·························································· 904 153 10,881

Loss on disposals of property, plant and equipment ································ 691 800 8,314

Deferred losses on derivatives under hedge accounting ··························· 488 268 5,872

Accrued enterprise tax ······································································ 440 291 5,300

Excess depreciation ·········································································· 380 603 4,578

Reserve for directors’ and corporate auditors’ retirement benefits ·············· 260 277 3,133

Allowance for doubtful accounts ·························································· 227 184 2,735

Others ···························································································· 3,243 2,617 39,007

Total ··························································································· 29,919 32,473 359,830

Valuation allowance ·········································································· (14,891) (14,584) (179,088)

Deferred tax assets ······································································· ¥15,028 ¥17,889 $180,742

Deferred tax liabilities

Unrealized gains on available-for-sale securities ···································· (3,219) (4,684) (38,719)

Unrealized gains on land ··································································· (924) (924) (11,122)

Special depreciation reserve ······························································ (4) (11) (52)

Deferred gains on derivatives under hedge accounting ···························· (3) (427) (40)

Provision for loss on foreign investments ·············································· (0) (0) (1)

Others ···························································································· (617) (312) (7,421)

Total deferred tax liabilities ······························································ (4,769) (6,361) (57,357)

Net deferred tax assets ·································································· ¥10,259 ¥11,527 $123,385

(Note) The components of net deferred tax assets (liabilities) for the years ended March 31, 2011 and 2010 were as follows:

Millions of Yen


(Note 1)

2011 2010 2011

Deferred tax assets, current ·························································· ¥6,605 ¥4,602 $79,442Deferred tax assets, non-current ···················································· 5,542 8,140 66,653Deferred tax liabilities, current ························································ – (2) –Deferred tax liabilities, non-current ·················································· (1,888) (1,213) (22,711)


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9

For the years ended March 31, 2011 and 2010, the reconciliation of the statutory tax rate to the effective income tax rate was as follows:

2011 2010

Statutory tax rate ···························································································· 40.0% 40.0%

Equity in earnings of affiliates ··········································································· (2.2) (0.5)

Non-taxable items including dividend income ······················································· (0.8) (5.5)

Tax credits ···································································································· (0.1) (0.2)

Valuation allowance ························································································ 2.6 3.9

Non-deductible items including entertainment expenses ········································ 1.6 2.7

Inhabitants’ tax ······························································································ 0.6 0.9

Others ·········································································································· 0.8 3.3

Effective income tax rate ··············································································· 42.5% 44.6%

11. Research and Development Expenses Research and development expenses for the years ended March 31, 2011 and 2010 were ¥3,962 million (US$47,650 thousand) and ¥3,829 million, respectively.

12. Leases As discussed in Note 2. (8), the Company accounts for leases which existed at March 31, 2008 and do not transfer ownership of the leased property to the lessee as operating lease transactions.

Pro forma information of such leases existing at March 31, 2008, such as acquisition cost, accumulated depreciation, obligations under finance leases, depreciation expense, on an “as if capitalized” basis for the years ended March 31, 2011 and 2010 is as follows:

Acquisition cost, accumulated depreciation, and net book value at March 31, 2011 and 2010, if capitalized, are summarized as follows:

Millions of Yen Thousands of U.S. Dollars (Note 1)

2011 2010 2011

Machinery and

equipment Others Total

Machinery and


Machinery and


Acquisition cost ·················· ¥1,330 ¥380 ¥1,710 ¥1,941 ¥467 ¥2,408 $15,996 $4,571 $20,567

Accumulated depreciation ···· 1,089 259 1,348 1,462 273 1,735 13,097 3,121 16,218

Net book value ·················· ¥241 ¥120 ¥361 ¥479 ¥194 ¥673 $2,898 $1,450 $4,348

Millions of Yen


(Note 1)

2011 2010 2011

Lease rental expenses for the year ················································· ¥302 ¥374 $3,640

Depreciation expense ·································································· ¥302 ¥374 $3,640

The amounts of outstanding future lease payments under finance leases due at March 31, 2011 and 2010, including the portion of interest thereon, are summarized as follows:

Millions of Yen


(Note 1)

2011 2010 2011

Future lease payments

Within one year ········································································ ¥209 ¥310 $2,517

Over one year ········································································· 152 363 1,831

Total ··················································································· ¥361 ¥673 $4,348


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10

The amounts of outstanding future lease receivable payments under noncancellable operating leases due at March 31, 2011 and 2010 are summarized as follows:

Millions of Yen


(Note 1)

2011 2010 2011

Operating leases (lessee)

Within one year ········································································ ¥94 ¥125 $1,131

Over one year ········································································· 209 219 2,520

Total ··················································································· ¥303 ¥344 $3,651

Millions of Yen


(Note 1)

2011 2010 2011

Operating leases (lessor)

Within one year ········································································ ¥35 ¥35 $421

Over one year ········································································· 139 177 1,673

Total ··················································································· ¥174 ¥213 $2,094

13. Employees’ Retirement Benefit Plan The Group has a defined retirement benefit plan covering substantially all employees.

The reserve for employees’ retirement benefits for the years ended March 31, 2011 and 2010 is analyzed as follows:

Millions of Yen


(Note 1)

2011 2010 2011

Projected benefit obligations ························································· ¥(11,340) ¥(14,154) $(136,387)

Plan assets ··············································································· 514 1,883 6,188

Unfunded retirement obligations ···················································· (10,826) (12,270) (130,198)

Unrecognized actuarial differences ················································ 188 306 2,271

Reserves for employees’ retirement benefits ···································· ¥(10,637) ¥(11,964) $(127,927)

Net pension expenses related to retirement benefits for the years ended March 31, 2011 and 2010 are as follows:

Millions of Yen


(Note 1)

2011 2010 2011

Service cost ··············································································· ¥924 ¥1,042 $11,113

Interest cost ··············································································· 187 243 2,259

Expected return on plan assets ······················································ (8) (15) (100)

Amortization of actuarial differences ················································ (25) (29) (301)

Amortization of prior service cost ···················································· – (71) –

Other pension expenses ······························································· 349 860 4,206

Net pension expenses ·································································· ¥1,428 ¥2,030 $17,176

Loss on revision of retirement benefit plan ·············································· 981 � 11,805

Total ··················································································· ¥2,409 ¥2,030 $28,981


11

Assumptions used in the calculation of the above information were as follows: 2011 2010

Discount rate ····················································································· Principally 2.5% Principally 2.5%

Expected rate of return on plan assets ···················································· Principally 1.25% Principally 1.25%

Method of attributing the projected benefits to periods of service ················· Straight-line basis Straight-line basis

Amortization period of prior service cost ·················································· – Five years

Recognition period of actuarial differences ·············································· Five years Five years

14. Loss on Valuation of Inventories The Group recorded the following loss on valuation of inventories held for ordinary sales purposes due to impairments reflecting a drop in profitability for the years ended March 31, 2011 and 2010:

Millions of Yen


(Note 1)

2011 2010 2011

Cost of sales ················································································ ¥1,073 ¥681 $12,904

15. Financial Instruments Additional Information (2010) In March 2008, the ASBJ revised ASBJ Statement No. 10, “Accounting Standard for Financial Instruments,” and issued ASBJ Guidance No. 19, “Guidance on Accounting Standard for Financial Instruments and Related Disclosures.” This accounting standard and the guidance are applicable to financial instruments and related disclosures at the end of the fiscal years ending on or after March 31, 2010 with early adoption permitted from the beginning of the fiscal years ending before March 31, 2010. The Group applied the revised accounting standard and the new guidance effective March 31, 2010.

(1) Status of Financial Instruments (a) Policy on financial instruments

The Group manages its funds using short-term deposits and bond repurchase agreements. Financial instruments used for financing are mainly bank loans and other instruments including corporate bonds and

Electronic Commercial Paper (“Electronic CP”), based on the Group’s policy of diversifying the financing methods, sources and maturities, etc.

Derivatives are used to avoid the market fluctuation risks of interest on borrowings and the sale and purchase prices of inventories, etc. only within the range of the hedged items, and the Group’s policy is not to use derivatives for speculative purposes.

(b) Nature, extent of risks and risk management for financial instruments Notes and accounts receivable, which are operating receivables, are exposed to customer credit risk. The Group manages the credit risk of receivables by monitoring the payment terms and balances for each customer.

Listed securities, which are among the equity instruments in investments in securities, are exposed to the risks of market price fluctuations. The Group has a system to periodically monitor and assess the fair values of listed securities, although the securities are held neither for pure investment purposes nor short-term trading purposes.

Payment terms of notes and accounts payable, which are operating debt, are mostly less than one year. Borrowings are exposed to liquidity risk and interest rate risk. In order to mitigate these risks, the Group uses

multiple financial institutions and staggers the redemption dates of loans. With regard to a portion of long-term debt, the Group uses interest rate swaps as hedging instruments to avoid fluctuation risks of interest rates. The Group periodically compiles cash flow plans and its performance, and the status of financing is reported at the management meeting monthly.

In addition to interest rate swaps, the Group enters into derivative financial instruments, namely, foreign exchange forward contracts and nonferrous metal forward contracts. The former are used to avoid risks of foreign exchange fluctuations associated with the sale of finished products and purchases of inventories (mainly imported raw materials), which are denominated in foreign currencies. The latter are used to avoid fluctuation risks in market prices for raw materials and finished goods that are influenced by nonferrous metal rates.

Monthly meetings are held regarding derivative transactions, with attendance of directors who are in charge of hedge transactions and the head of each business division. At the meetings, the implementation policies for hedge transactions are determined, the execution of derivative transactions is managed and reported, and hedge effectiveness is evaluated. In accordance with the policies, each derivative transaction is executed based on internal guidelines which regulate the credit limit amount and procedures of transactions and reporting. The evaluation of


12

hedge effectiveness is omitted for interest rate swaps as the swaps qualify for hedge accounting and meet specific matching criteria for interest rate swaps. The Group has a policy to diversify transactions through multiple counterparties with high credit standings in order to mitigate credit risk.

(c) Supplementary explanation to fair values of financial instruments Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is not available, other rational valuation techniques are used instead. Such techniques include variable factors and the results of valuation may differ depending on prerequisites. The contracted amounts related to derivatives, mentioned in “16, Derivatives,” in and if themselves should not be considered indicative of the market risks associated with the derivatives.

(2) Fair Value of Financial Instruments The table below shows the amounts of financial instruments recorded in the consolidated balance sheets and their fair values as of March 31, 2011 and 2010, as well as their differences between the balance sheet amounts and the fair values. Financial instruments whose fair value is deemed extremely difficult to assess are not included. (Please refer to “Note 2” below).

Millions of Yen Thousands of U.S. Dollars

As of March 31, 2011 Carrying amount Fair value

Unrealized gains/losses

Carrying amount Fair value


(1) Cash and time deposits ············ ¥17,231 ¥17,231 ¥ – $207,236 $207,236 $ –(2) Notes and accounts receivable (*1)····· 55,484 55,484 – 667,284 667,284 –(3) Investments in securities (*2) ········ 37,992 34,829 (3,162) 456,909 418,873 (38,036) Total Assets ····························· 110,708 107,545 (3,162) 1,331,431 1,293,395 (38,036)(1) Notes and accounts payable (*3) ····· 33,367 33,367 – 401,290 401,290 –(2) Short-term borrowings ·············· 31,304 31,304 – 376,479 376,479 –(3) Long-term debt (including repayments due within one year) (*4) · 96,815 97,993 1,177 1,164,348 1,178,513 14,164

Total Liabilities ························· 161,487 162,664 1,177 1,942,118 1,956,283 14,164Derivatives (*5) ······························· (2,155) (2,155) – (25,926) (25,926) –

Millions of Yen

As of March 31, 2010 Carrying amount Fair value


(1) Cash and time deposits ············ ¥27,390 ¥27,390 ¥ –

(2) Notes and accounts receivable (*1)····· 50,954 50,954 –

(3) Investments in securities (*2) ········ 42,491 40,160 (2,331)

Total Assets ····························· 120,837 118,505 (2,331)

(1) Notes and accounts payable (*3) ····· 28,712 28,712 –

(2) Short-term borrowings ·············· 40,338 40,338 –

(3) Long-term debt (including repayments due within one year) (*4) · 99,025 100,559 1,533

Total Liabilities ························· 168,077 169,610 1,533

Derivatives (*5) ······························· (368) (368) –

(*1) Assets (2): Notes and accounts receivable as of March 31, 2011 and 2010 stated above are obtained by subtracting advances paid of ¥208 million (US$2,505 thousand) and ¥209 million, accounts receivable—other of ¥3,215 million (US$38,669 thousand) and ¥3,299 million, and loans of ¥1,651 million (US$19,864 thousand) and ¥1,523 million from the amount of notes and accounts receivable of ¥60,560 million (US$728,324 thousand) and ¥55,988 million presented in the Consolidated Balance Sheets.

(*2) Assets (3): Investments in securities as of March 31, 2011 and 2010 stated above are obtained by subtracting financial instruments whose fair values are deemed extremely difficult to assess of ¥14,323 million (US$172,266 thousand) and ¥13,932 million and long-term loans of ¥214 million (US$2,582 thousand) and ¥370 million from the sum of investments in securities of ¥24,410 million (US$293,570 thousand) and ¥29,991 million and investments in and advances to non-consolidated subsidiaries and affiliates of ¥28,120 million (US$338,187 thousand) and ¥26,803 million presented in the Consolidated Balance Sheets.

(*3) Liabilities (1): Notes and accounts payable as of March 31, 2011 and 2010 stated above are obtained by subtracting accounts payable—other of ¥4,554 million (US$54,772 thousand) and ¥3,559 million and deposits received of ¥464 million (US$5,583 thousand) and ¥432 million from notes and accounts payable of ¥38,385 million (US$461,646 thousand) and ¥32,704 million presented in the Consolidated Balance Sheets.

(*4) Liabilities (3): Long-term debt as of March 31, 2011 and 2010 stated above is obtained by subtracting bonds payable of ¥10,000 million (US$120,264 thousand) and ¥10,007 million and lease obligations of ¥1,701 million (US$20,463 thousand) and ¥1,931 million from the sum of current maturities of long-term debt of ¥23,439 million (US$281,898 thousand) and ¥25,805 million and long-term debt of ¥85,077 million (US$1,023,178 thousand) and ¥85,159 million presented in the Consolidated Balance Sheets.

(*5) Derivative transactions stated above are stated net of assets and liabilities.


13

(Note 1) Fair value measurement of fair value of financial instruments and matters regarding securities and derivatives Assets (1) Cash and time deposits and (2) Notes and accounts receivable The fair value of these accounts approximates their book value because of their short maturities. Thus, the book value is used as fair value. (3) Investments in securities The fair value of equity instruments is measured by market prices from stock exchanges.

Liabilities (1) Notes and accounts payable and (2) Short-term borrowings The fair value of these accounts approximates their book value because of their short maturities. Thus, the book value is used as fair value. (3) Long-term debt (including repayment due within one year) The fair value of these accounts is calculated by discounting the total of interest and principal by an interest rate assuming new borrowings of similar amounts are taken out. Long-term debt with variable interest rates qualifies for special treatment under hedge accounting (Please refer to Note “16. Derivatives”). The fair value of these accounts is calculated by discounting the total of interest and principal, including the relevant interest rate swap, by an interest rate reasonably estimated assuming similar borrowings are taken out.

Derivatives Please refer to Note “16. Derivatives.”

(Note 2) Financial instruments whose fair value is deemed extremely difficult to measure

Classification Millions of Yen


(Note 1)

2011 2010 2011

Unlisted securities and others (Carrying amount) ····························· ¥14,323 ¥13,932 $172,266

These financial instruments are not included in “Assets (3) Investments in securities,” as they have no quoted market prices and it is deemed extremely difficult to measure their fair values.

(Note 3) Maturity analysis for financial assets with contractual maturities Millions of Yen

As of March 31, 2011 Due in one year or less

Due after one year through

five years

Due after five years through

ten years Due after ten years

Cash and time deposits ································································ ¥573 ¥ – ¥ – ¥ –

Notes and accounts receivable ······················································ 55,484 – – –

Total ······················································································ ¥56,058 ¥ – ¥ – ¥ –

Thousands of U.S. dollars



five years



Cash and time deposits ································································ $6,897 $ – $ – $ –


Total ······················································································ $674,182 $ – $ – $ –

Millions of Yen



five years



Cash and time deposits ································································ ¥14,275 ¥ – ¥ – ¥ –


Total ······················································································ ¥65,230 ¥ – ¥ – ¥ –

(Note 4) Maturity analysis for long-term debt See Note 7.


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14

16. Derivatives The Group had the following derivative contracts outstanding at March 31, 2011 and 2010:

(1) Derivative Transactions to which Hedge Accounting is not Applied Currency-related transactions (2011) Transactions not conducted on the open market


Type Contract Amount

Over One Year

Fair Value

Unrealized Gains/Losses

Contract Amount

Over One Year

Fair Value


Forward Exchange Contract Transactions

Selling

U.S.$ ············· ¥16,642 – ¥(122) ¥(122) $200,148 – $(1,478) $(1,478)

� � Thai Baht ········ 1,032 – (23) (23) 12,416 – (284) (284)

Buying

U.S.$ ············· 62 – 1 1 747 – 12 12

Total ··········· ¥ – – ¥ – ¥(145) $ – – $ – $(1,751)

Commodity-related transactions (2011) Transactions not conducted on the open market



Over One Year

Fair Value


Contract Amount

Over One Year

Fair Value


Nonferrous Metal Forward Contracts

Selling

Gold ·············· ¥1,063 – ¥(38) ¥(38) $12,795 – $(464) $(464)

Silver ············· 4,536 – (915) (915) 54,561 – (11,014) (11,014)

Zinc ··············· 359 – 7 7 4,317 – 92 92

Copper ··········· 2,060 – 14 14 24,780 – 173 173

Lead ·············· 171 – (11) (11) 2,057 – (143) (143)

Nickel ············ 13 – 0 0 167 – 11 11

Buying

Silver ············· 233 – 12 12 2,802 – 151 151

Nickel ·············· 13 – (0) (0) 158 – (2) (2)

Total ··········· ¥ – – ¥ – ¥(930) $ – – $ – $(11,196)

Currency-related transactions (2010) Transactions not conducted on the open market

Millions of Yen


Over One Year

Fair Value


Forward Exchange Contract Transactions

Selling

U.S.$ ····················································································· ¥18,056 – ¥(460) ¥(460)

Buying

U.S.$ ····················································································· 30 – 0 0

Total ··················································································· ¥ – – ¥ – ¥(460)


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15

Commodity-related transactions(2010) Transactions not conducted on the open market

Millions of Yen

Type ContractAmount

Over One Year

Fair Value


Nonferrous Metal Forward Contracts

Selling

Gold ······················································································ ¥384 – ¥(10) ¥(10)

Silver ····················································································· 3,848 – (158) (158)

Zinc ······················································································· 483 – (13) (13)

Copper ··················································································· 2,191 – (17) (17)

Nickel ···················································································· 433 – (109) (109)

Total ··················································································· ¥ – – ¥ – ¥(310)

(2) Derivative Transactions to which Hedge Accounting is Applied



Treatment Type Hedged item Contract Amount

Over One Year

Fair Value

ContractAmount

Over One Year

Fair Value

Standard treatment

Nonferrous Metal Forward Contracts Inventory

Selling

Gold ··································· ¥7,829 – ¥(397) $94,159 – $(4,778)

Silver ·································· 4,948 – (1,092) 59,510 – (13,141)

Zinc ···································· 4,234 – 90 50,932 – 1,088

Copper ······························· 8,673 – 88 104,310 – 1,065

Lead ··································· 298 – (21) 3,586 – (262)

Buying

Gold ··································· 217 – 13 2,613 – 161

Silver ·································· 670 – 224 8,058 – 2,698

Zinc ···································· 509 – 8 6,123 – 101

Copper ······························· 6,375 – 7 76,669 – 91

Total ······················································ ¥ – – ¥ – $ – – $ –

Currency-related transactions (2010) Transactions not conducted on the open market

Millions of Yen


Over One Year

Fair Value

Method for translation Forward Exchange Contract Transactions Inventory

Selling

U.S.$ ······································································ ¥523 – ¥(18)

Total ············································································································ ¥ – – ¥ –


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16


Millions of Yen


Over One Year

Fair Value

Standard treatment Nonferrous Metal Forward Contracts Inventory

Selling

Gold ······································································· ¥3,726 – ¥(107)

Silver ······································································ 1,824 – (254)

Zinc ······································································· 3,560 – (219)

Copper ··································································· 775 – (289)

Buying

Gold ······································································· 475 – 23

Silver ······································································ 1,220 – 88

Zinc ······································································· 274 – 25

Copper ··································································· 7,210 – 1,145

Total ············································································································ ¥ – – ¥ –(Note) Fair value was calculated by quotations obtained from the commodity futures market and the exchange futures market as of March 31, 2011 and 2010.

17. Comprehensive Income Other comprehensive income for the year ended March 31, 2010 consisted of the following:

Millions of Yen

Other comprehensive income:

Unrealized gains on available-for-sale securities ··········································································· ¥3,555

Deferred gains on derivatives under hedge accounting ··································································· 2,703

Foreign currency translation adjustments ····················································································· 8

Share of other comprehensive loss in affiliates ·············································································· (215)

Total other comprehensive income ································································································ ¥6,051

18. Subsequent Event The following appropriation of retained earnings at March 31, 2011 was approved at the Board of Directors’ meeting held on May 17, 2011:

Millions of Yen


(Note 1)

Year-end cash dividends, 2011 ¥10 (US$0.1) per share ··················································· ¥3,005 $36,143

19. Segment Information In March 2008, the ASBJ revised ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures”, and issued ASBJ Guidance No. 20, “Guidance on Accounting Standard for Segment Information Disclosures”. Under the standard and guidance, an entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. This accounting standard and the guidance are applicable to segment information disclosures for the fiscal years beginning on or after April 1, 2010.

The segment information for the year ended March 31, 2010 under the revised accounting standard is also disclosed hereunder as required.

1. Outline of reporting segments The Company’s reporting segments are the components of the Company about which separate financial information is available. These segments are subject to periodic examinations to enable the Company’s Board of Directors to decide how to allocate resources and assess performance.

The Company’s operations are classified into five product and service segments based on its operating companies. Each segment’s businesses are as follows.

In the Environmental Management & Recycling segment, the Company conducts waste treatment, resource recycling, soil remediation, logistics, and other operations.


�

17

In Nonferrous Metals, the Company conducts the production and sale of copper, zinc, lead, gold, silver, zinc alloys, platinum, palladium, rhodium, cadmium, bismuth, sulfuric acid, and other materials.

In the Electronic Materials segment, the Company conducts the production and sale of high-purity rare metals, various compound semiconductor wafers, light-emitting diodes (LEDs), conductive materials for electronic components, battery materials, metal powders, ferrite powders, and other materials.

In the Metal Processing segment, the Company conducts the production and sale of copper, brass and copper alloy strips, electroplated products, brass rods, metal-ceramic substrates, and other materials.

In the Heat Treatment segment, the Company provides heat and surface treatment of metallic materials, such as automobile components, and conducts the manufacture, sale and maintenance of industrial furnaces and ancillary equipment.

2. Method for calculating sales, income and loss, assets and liabilities, and other amounts by reporting segment The accounting treatment and methods for the reporting segments are largely consistent with the Basis of Preparation of the Consolidated Financial Statements.

Segment income for each reporting segment is presented on an operating income basis. Inter-segment sales and transfers are measured based on prices that reflect actual market conditions.

3. Information on sales, income and loss, assets and liabilities, and other amounts by reporting segment Segment information as of March 31, 2011�and�2010 is summarized as follows:

Millions of Yen

Reporting segment

Others (Note 1)

Total Reconcili-ations Consolidated

2011

Environmen- tal

Management & Recycling

Nonferrous Metals


Metal Processing

Heat Treatment Total

Net Sales

Outside customers ··········· ¥49,678 ¥166,922 ¥68,254 ¥75,793 ¥16,919 ¥377,568 ¥2,248 ¥379,816 ¥– ¥379,816

Intersegment ··················· 30,020 21,887 2,272 37 0 54,218 9,171 63,390 �63,390) –

Total ································ 79,699 188,809 70,526 75,830 16,919 431,786 11,420 443,206 �63,390) 379,816

Segment income (Note 3) ¥2,802 ¥5,170 ¥7,144 ¥5,424 ¥1,417 ¥21,959 ¥317 ¥22,276 ¥647 ¥22,924

Segment assets ··············· ¥62,978 ¥123,699 ¥47,985 ¥50,323 ¥21,683 ¥306,671 ¥5,669 ¥312,340 ¥27,820 ¥340,161

Other items

Depreciation ···················· 5,179 6,590 2,028 2,628 1,573 18,000 136 18,137 349 18,486

Amortization of goodwill ··· 531 – – – – 531 – 531 – 531

Investment in equity-method affiliates ····

2,165 6,414 216 892 – 9,689 – 9,689 15,739 25,429

Increase in Property, plant and equipment and intangible fixed assets ········

6,301 5,110 3,515 1,190 1,505 17,623 146 17,769 51 17,820

Millions of Yen

Reporting segment

Others (Note 1)


2010

Environmen- tal


Nonferrous Metals


Metal Processing


Net Sales Outside customers ··········· ¥45,078 ¥137,129 ¥48,705 ¥60,384 ¥13,489 ¥304,787 ¥2,675 ¥307,462 ¥– ¥307,462

Intersegment ··················· 19,818 18,469 1,524 30 0 39,843 7,288 47,131 �47,131) –Total ································ 64,897 155,599 50,229 60,415 13,489 344,630 9,963 354,594 �47,131) 307,462

Segment income (Note 3) ¥2,103 ¥3,008 ¥4,812 ¥3,288 ¥146 ¥13,358 ¥136 ¥13,495 ¥206 ¥13,701

Segment assets ··············· ¥60,440 ¥109,749 ¥29,618 ¥48,917 ¥21,100 ¥269,827 ¥5,577 ¥275,404 ¥55,316 ¥330,720

Other items

Depreciation ···················· 4,711 7,102 2,105 3,205 1,578 18,701 186 18,888 388 19,276

Amortization of goodwill ··· 599 – – – – 599 – 599 – 599

Investment in equity-method affiliates ····

2,127 5,659 252 905 – 8,945 – 8,945 16,210 25,155

Increase in Property, plantand equipment and intangible fixed assets ········

2,693 5,602 785 667 597 10,345 26 10,371 391 10,763


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18

Thousands of U.S. Dollars (Note 4)

Reporting segment

Others (Note 1)


2011

Environ- mental

Manage- ment &

Recycling

Nonferrous Metals


Metal Processing


Net SalesOutside customers ········· $597,461 $2,007,480 $820,856 $911,527 $203,479 $4,540,806 $27,040 $4,567,847 $� $4,567,847

Intersegment ················· 361,045 263,234 27,327 448 2 652,058 110,304 762,363 �762,363) �

Total ······························ 958,507 2,270,715 848,184 911,975 203,481 5,192,864 137,345 5,330,210 �762,363) 4,567,847

Segment income (Note 3) ·································· $33,703 $62,187 $85,918 $65,239 $17,045 $264,094 $3,818 $267,913 $7,782 $275,696

Segment assets ············· $757,408 $1,487,667 $577,094 $605,219 $260,777 $3,688,168 $68,187 $3,756,355 $334,585 $4,090,940

Other itemsDepreciation ·················· 62,293 79,257 24,394 31,605 18,928 216,480 1,643 218,124 4,205 222,329

Amortization of goodwill · 6,391 � � � � 6,391 � 6,391 � 6,391

Investment in equity-method affiliates ··

26,042 77,147 2,607 10,734 � 116,531 � 116,531 189,289 305,821

Increase in Property, plant and equipment and intangible fixed assets ······

75,784 61,459 42,282 14,314 18,100 211,942 1,759 213,701 615 214,316

Notes: 1. The Others segment comprises business operations that are not included in the reporting segments. These operations primarily comprise inter-group transactions, including real estate leasing, plant construction, civil engineering, construction and engineering, office administration services, technological development support and other operations.

2. Reconciliations for the fiscal years ended March 31, 2011 and 2010 were as follows: (1) The reconciliations of ¥647 million (US$7,782 thousand) and ¥206 million to segment income include intersegment eliminations of ¥618 million

(US$7,441 thousand) and ¥340 million, respectively, and reconciliations for intersegment unrealized earnings of ¥28 million (US$341 thousand) and unrealized losses of ¥133 million, respectively.

(2) The reconciliations to segment assets of ¥27,820 million (US$334,585 thousand) and ¥55,316 million include corporate assets of ¥59,674 million (US$717,678 thousand) and ¥83,618 million that are not allocated to any reporting segment, respectively, and intersegment eliminations of ¥31,854 million (US$383,092 thousand) and ¥28,302 million, respectively. The main components of corporate assets are surplus working capital (cash and deposits), long-term investments (investments in securities), and assets of administrative departments.

3. Segment income is reconciled with operating income on the consolidated statements of income. 4. Converted at ¥83.15=US$1, the prevailing exchange rate on March 31, 2011.

Related Information 1. Information by product and service

The Company has omitted disclosure here because equivalent information appears in the segment information.

2. Information by geographic region (1) Net Sales The Company has omitted disclosure here because sales to external customers in Japan account for more than 90% of net sales reported on the consolidated statements of income. (2) Total property, plant and equipment The Company has omitted disclosure here because property, plant and equipment in Japan account for more than 90% of the amount of property, plant and equipment reported on the consolidated balance sheets.

3. Information by major customer

Name of corporate customer or full name of individual customer Net Sales Name of involved segment

TANAKA KIKINZOKU KOGYO K.K. ¥43,788 million (US$526,615 thousand) Mainly the Nonferrous Metals segment


�

19

Information on impairment losses on fixed assets by reporting segment

Millions of Yen

Reporting segment

Others (Note 1)

Total Eliminations Consolidated

2011

Environmen- tal


Nonferrous Metals


Metal Processing


Impairment losses on fixed assets ····························· ¥� ¥� ¥3 ¥33 ¥51 ¥89 ¥� ¥89 ¥29 ¥118

Thousands of U.S. Dollars (Note)

Reporting segment

Others (Note 1)


2011

Environmen- tal


Nonferrous Metals


Metal Processing


Impairment losses on fixed assets ····························· $� $� $44 $407 $623 $1,076 $� $1,076 $353 $1,429

Note: Converted at ¥83.15=US$1, the prevailing exchange rate on March 31, 2011.

Amortization of goodwill and unamortized balance of goodwill by reporting segment Millions of Yen

Reporting segment

Others (Note 1)


2011

Environmen- tal


Nonferrous Metals


Metal Processing


Unamortized balance at fiscal year-end ··················· ¥6,506 ¥� ¥� ¥� ¥� ¥6,506 ¥� ¥6,506 ¥� ¥6,506

Thousands of U.S. Dollars (Note 2)

Reporting segment

Others (Note 1)


2011

Environmen- tal


Nonferrous Metals


Metal Processing


Unamortized balance at fiscal year-end ··················· $78,252 $� $� $� $� $78,252 $� $78,252 $� $78,252

Notes: 1. The Company has omitted disclosure of amortization of goodwill because equivalent information appears in the segment information. 2. Converted at ¥83.15=US$1, the prevailing exchange rate on March 31, 2011.


Report of Independent Auditors


Global NetworkAs of March 31, 2011

5

4

11

21222324

Overseas Subsidiaries and Offices

Taiwan11 Dowa Eco-System Co., Ltd. Taiwan Office

India12 Hightemp Furnaces Ltd.

China13 Dowa Holdings (Shanghai) Co., Ltd.14 Dowa Advanced Materials (Shanghai) Co., Ltd.15 Dowa Environmental Management Co., Ltd.16 Tianjin Dowa Green Angel Summit Recycling Co., Ltd. 17 Kunshan Dowa Thermo Furnace Co., Ltd.18 Suzhou Dowa Environmental Engineering Co., Ltd.19 Jiangxi Dowa Environmental Management Co., Ltd.

Thailand20 Dowa Metaltech (Thailand) Co., Ltd.21 Dowa Thermotech (Thailand) Co., Ltd.22 Modern Asia Environmental Holdings Inc. (MAEH)

23 Bangpoo Environmental Complex Ltd. (BPEC)

24 Eastern Seaboard Environmental Complex Co., Ltd. (ESBEC)

U.S.A.1 Dowa International Corporation2 Dowa THT America Inc.3 Nippon PGM America Inc.

Canada4 Dowa Metals & Mining Co., Ltd. Vancouver Office

Mexico5 Dowa Metals & Mining Co., Ltd. Mexico Office6 Minera Tizapa, S.A. de C.V.

Germany7 Dowa HD Europe GmbH

Czech Republic8 Nippon PGM Europe s.r.o.

Singapore9 Technochem Environmental Complex Pte. Ltd. (TEC)

Indonesia10 PT. Prasadha Pamunah Limbah Industri (PPLi)

Note: Please see P. 9 for our overseas subsidiaries and offices located in China and Southeast Asia.


Subsidiaries and AffiliatesAs of March 31, 2011

Name 61 Consolidated Subsidiaries and 12 affiliates

accounted for by the equity method

Issued Share Capital

(Millions of Yen)

Percentage Owned Directly or Indirectly by the Company (%)*1 Principal Business

Environmental Management & RecyclingDowa Eco-System Co., Ltd. 1,000 100 Waste treatment, soil remediation and recyclingEco-System Hanaoka Co., Ltd. 300 100 Soil remediation and waste treatmentEco-System Recycling Co., Ltd. 300 100 Recovery of precious and nonferrous metalsAct-B Recycling Co., Ltd. 200 55 Recovery of discarded household appliances, personal computers and other itemsEco-Recycle Co., Ltd. 150 60 Recovery of discarded household appliances, personal computers and other itemsGreen Fill Kosaka Co., Ltd. 100 100 Waste treatmentEco-System Okayama Co., Ltd. 100 100 Industrial waste treatment; recovery of ferrous and nonferrous metalsEco-System Sanyo Co., Ltd. 100 100 Waste treatment and resources recyclingE&E Solutions Inc. 100 100 Comprehensive technological consulting in environmental management and energyGeotechnos Co., Ltd. 100 100 Soil surveys and remediation projects, environmental consulting, etc.Eco-System Chiba Co., Ltd. 90 100 Industrial waste treatmentMeltec Co., Ltd. 90 100 Melting and recycling of incinerated ash, manufacture and sale of artificial aggregateEco-System Akita Co., Ltd. 50 100 Waste treatment and resources recyclingEco-System Kosaka Co., Ltd. 50 100 Industrial waste treatment; recovery of ferrous and nonferrous metalsEco-System Japan Co., Ltd. 30 100 Operation of waste and resources recycling; collection and transportation of industrial wasteDowa-Tsuun Co., Ltd. 20 100 Vehicle transportation, forwarding and warehousingDowa Environmental Management Co., Ltd. USD 13.2 *4 90 Treatment and recycling of industrial wasteModern Asia Environmental Holdings Inc. USD 16.4 *4 100 Holdings companyEastern Seaboard Environmental Complex Co., Ltd. THB 100.0 *5 100 Final treatment of harmless wastesBangpoo Environmental Complex Ltd. THB 80.0 *5 100 Incineration of harmless wastesTechnochem Environmental Complex Pte. Ltd. SGD 3.5 *6 100 Incineration of harmful wastesPT. Prasadha Pamunah Limbah Industri IDR 49,578.2 *7 95 Final treatment of harmful and harmless wastesNonferrous MetalsDowa Metals & Mining Co., Ltd. 1,000 100 Manufacturing and sales of nonferrous, precious and rare metalsAkita Zinc Co., Ltd. 5,000 81 Refining of zinc; manufacturing of sulfuric acidKosaka Smelting & Refining Co., Ltd. 4,700 100 Smelting and refining of copper and lead; recovery of precious metalsAkita Zinc Solutions Co., Ltd. 375 85 Processing of zinc alloy, zinc wire and other productsNippon PGM Co., Ltd. 300 60 Recovery of platinum group metals from disposable catalystsAkita Zinc Recycling Co., Ltd. 100 100 Recovery of zinc from iron and steel dust, and other byproducts; outsourcing of zinc secondaries

processingZinc Excel Co., Ltd. 200 85 Sales of zinc, cadmium, zinc alloy, zinc wire and other productsAkita Rare Metals Co., Ltd. 20 100 Recovery of indium and other productsElectronic MaterialsDowa Electronics Materials Co., Ltd. 1,000 100 Manufacturing and sales of semiconductors, and functional and magnetic materialsDowa Hightech Co., Ltd. (Chemical) 450 100 Manufacturing of metal compounds, chemical and other productsDowa Semiconductor Akita Co., Ltd. 300 100 Manufacturing of high-purity metal materials, compound semiconductor wafers and light-emitting

diodesDowa IP Creation Co., Ltd. 300 70 Manufacturing of iron and carrier powdersDowa F-Tec Co., Ltd. 300 100 Manufacturing of ferrite powdersDowa Electronics Materials Okayama Co., Ltd. 100 100 Manufacturing of metal powders, copper powders and other materialsMetal ProcessingDowa Metaltech Co., Ltd. 1,000 100 Metal and plating processingDowa Hightech Co., Ltd. (Electroplating) 450 100 Plating of electronics parts and stripsDowa Metanix Co., Ltd. 400 90 Manufacturing and sales of nickel, copper and other alloys, and electronics partsDowa Metal Co., Ltd. 400 100 Manufacturing of copper strip and other productsHoei Shoji Co., Ltd. 110 100 Processing and sales of copper strip, aluminum and other productsDowa Power Device Co., Ltd. 100 100 Metal-ceramic substrates manufacturingNew Nippon Brass Co., Ltd. 100 100 Manufacturing and sales of various types of brass bar and forged productsDowa Advanced Materials (Shanghai) Co., Ltd. USD 2.5 *4 100 Processing and sales of copper strip productsHeat TreatmentDowa Thermotech Co., Ltd. 1,000 100 Heat treatment processingDowa Thermoengineering Co., Ltd. 100 100 Design, manufacturing, maintenance and improvement of various heat treatment equipment; various

heat treatment processing; various plating; surface improvementCEMM Co., Ltd. 55 100 Various heat treatment processing; various platingTonetsu Kosan Co., Ltd. 30 100 Various heat treatment processing; maintenance and improvement of various heat treatment equipmentDowa THT America, Inc. USD 5.0 *4 100 Various heat treatment processing; various plating on consignment; maintenance of various heat

treatment equipmentDowa Thermotech (Thailand) Co., Ltd THB 270 *5 100 Various heat treatment processing; various plating on consignment; maintenance of various heat

treatment equipmentOthersDowa Techno Engineering Co., Ltd. 400 100 Plant constructionDowa Kohsan Co., Ltd. 305 100 Outsourcing and management of golf courses and real estate, brokerageDowa Management Service Co., Ltd. 100 100 Outsourcing of general indirect business servicesAkita Kouei Co., Ltd. 95 100 Power business; maintenance of various plantsYowa Kouei Co., Ltd. 20 100 Civil engineering and construction projectsDowa Technology Co., Ltd. 10 100 Technological development support; outsourcing of analysis and evaluation servicesDowa Techno-Research Co., Ltd. 10 100 Environmental measurementFive other companies – – –Nine Affiliates Accounted for by the Equity MethodKowa Seiko Co., Ltd. 1,000 50 Industrial waste treatment, recovery of ferrous and nonferrous materialsOkayama Rinko Co., Ltd. 98 33 Warehousing; other business activitiesAkagi Kouyu Co., Ltd. 99 20 Waste treatmentCariboo Copper Corp. CAD 91.0 *8 25 Mining and sales of products from minesOnahama Smelting and Refining Co., Ltd. 7,000 32 Copper smelting and refining, general and industrial waste treatmentAcids Co., Ltd. 150 50 Sale of sulfuric acid and othersMinera Tizapa, S.A. de C.V. *3 MXN 21.1 *9 39 Prospecting, development, mining and ore preparationKyoto Elex Co., Ltd. 80 50 Manufacturing and sales of pastesDowa Olin Metal Corporation 480 50 Manufacturing, marketing and sales of special copper alloy stripsJapan Copper Casting Co., Ltd. 200 30 Various types of copper productionFujita Kanko Inc. *2 12,081 33 Lodging and hotel management; real estate agentNippon AN-FO Manufacturing Co., Ltd. 91 29 Production and marketing of industrial explosives

*1. The figures for the percentage owned by the Company include indirect ownership by the Company.

*2. The shares of this company are listed on the Tokyo Stock Exchange and the Osaka Securities Exchange.

*3. Common stock includes revaluation adjustments under inflation accounting.*4. USD: Millions of U.S. Dollars

*5. THB: Millions of Thai Baht*6. SGD: Millions of Singapore Dollars*7. IDR: Millions of Indonesia Rupiah*8. CAD: Millions of Canadian Dollars*9. MXN: Millions of Mexican pesos


Corporate HistoryAs of March 31, 2011

1884 The Japanese government sells the Kosaka mine to Fujita Gumi, which was established by Dowa’s founder, Denzaburo Fujita.

1898 Fujita Gumi begins using a dry-refining method for refining kuroko (complex sulfide ores) at the Kosaka mine.

1899 Fujita Gumi begins land drainage and reclamation work in Kojima Bay, Okayama Prefecture.

1902 Fujita Gumi begins using a revolutionary method for process-ing kuroko, thereby restoring the commercial viability of the Kosaka mine.

1912 Production of electrolytic zinc is begun at the Kosaka mine.

1915 Fujita Gumi acquires the Hanaoka mine.

1916 Fujita Gumi acquires the Yanahara mine.

1919 Fujita Gumi establishes the Toyosaki Plant (currently Dowa Metal Co., Ltd.)

1937 Fujita Gumi and Fujita Mining Co., Ltd. merge to create Fujita Gumi Co., Ltd.

1945 Corporate name is changed to Dowa Mining Co., Ltd.

1953 Okayama Works is established.

1957 Dowa Mining absorbs Fujita Kogyo Co., Ltd.

1967 Kosaka Plant is completely equipped with flash furnaces.

1971 Akita Zinc Co., Ltd. is established.

1976 Kosaka Plant begins producing indium.

1983 Okayama Works completes and begins operating a facility for manufacturing metal powders used in 8mm videotape.

1986 Hanaoka and Kosaka mining operations are transferred from the parent company to two newly established subsidiaries—Hanaoka Mining Co., Ltd. and Uchinotai Mining Co., Ltd., respectively.

1989 New York-based Dowa International Corporation is established.Kosaka Plant is separated from the parent company in the form of a subsidiary—Kosaka Smelting & Refining Co., Ltd.

1990 Dowa Mining absorbs Dowa Kosan Co., Ltd.

1991 Dowa Mining absorbs Tokyo Heat Treating Co., Ltd.

1992 Mexico-based Minera Tizapa, S.A. de C.V. is established.Shiojiri Works (currently Dowa Power Device Co., Ltd.) is completed.

1994 Kyushu Branch is established.Minera Tizapa, S.A. de C.V. starts operations.

1997 Dowa THT America, Inc. is established.

1998 Okayama Clean Works (currently Eco-System Sanyo Co., Ltd.) starts operation of new incinerator for industrial waste.

1999 Eco-Recycle Co., Ltd. is established.

2000 Dowa acquires Nippon Purle Limited (currently Eco-System Chiba Co., Ltd.).

2001 Dowa acquires E&E Solutions Inc.Recycle Systems Japan Co., Ltd. (currently Eco-System Recycling Co., Ltd.) is made a subsidiary.

2002 Shanghai office in China is established.Akita Zinc Solutions Co., Ltd. is established.Dowa Advanced Materials (Shanghai) Co., Ltd. is established in China.

2003 Zinc Excel Co., Ltd. and Acids Co., Ltd. are established.Dowa Environmental Management Co., Ltd. is established in China.

2004 Dowa Techno-Research Co., Ltd. is established.Landfill site “Green Fill Kosaka” starts operations.

2006 Dowa acquires Act-B Recycling Co., Ltd.Dowa relocates Head Office to Akihabara, Tokyo.Dowa acquires CEMM Co., Ltd. Dowa adopts a holding company system.

Dowa Mining changes its name to Dowa Holdings Co., Ltd.Dowa Mining’s five business divisions are spun off to become core operating companies.

Dowa Metaltech (Thailand) Co., Ltd. is established in Thailand.

2007 Tokuyama-Dowa Power Materials Co., Ltd. is established. Dowa Thermotech (Thailand) Co., Ltd. is established in Thailand.Dowa Eco-System Co., Ltd. Taiwan office is established.Auto Recycle Akita Co., Ltd. is established. Dowa acquires Yamaha Metanix Corporation (now Dowa Metanix Co., Ltd.) and Yamaha-Olin Metal Corporation (now Dowa Olin Metal Corporation). Dowa HD Europe GmbH is established in Germany.

2008 Akita Zinc Recycling Co., Ltd. is established.Commercial operations start at new smelting facility of Kosaka Smelting & Refining Co., Ltd.

2009 Dowa acquires Modern Asia Environmental Holdings Inc. (MAEH)Construction completed of new incinerator at Eco-System Chiba Co., Ltd.Dowa acquires Meltec Co., Ltd.

2010 Tianjin Dowa Green Angel Summit Recycling Co., Ltd. is established in China.Kunshan Dowa Thermo Furnace Co., Ltd. is established in China.Nippon PGM Europe s.r.o. is established in the Czech Republic.Suzhou Dowa Environmental Engineering Co., Ltd. is established in China.

2011 Jiangxi Dowa Environmental Management Co., Ltd. is established in China.Dowa Holdings (Shanghai) Co., Ltd. is established in China.


Corporate DataAs of March 31, 2011

The data indicated below is for Dowa Holdings Co., Ltd.

Founded:September 18, 1884

Incorporated:March 11, 1937

Authorized Shares:1,000,000,000 shares

Shares Issued:309,946,031 shares

Common Stock:¥36,437 million

Stock Listing:Common stock is listed on the Tokyo, Nagoya and Fukuoka stock exchanges and the Osaka and Sapporo securities exchanges.

Number of Shareholders:19,259

Principal Shareholders:Percentage of

Outstanding Shares

(%)

Japan Trustee Services Bank, Ltd. (Trust Account) 7.77The Master Trust Bank of Japan, Ltd. (Trust Account) 6.19Fujita Kanko Inc. 4.79JFE Steel Corporation 3.74National Mutual Insurance Federation of Agricultural Cooperatives

2.60

Mizuho Corporate Bank, Ltd. 2.58Resona Bank, Ltd. 2.43JUNIPER 1.81Nippon Life Insurance Company 1.71The Nomura Trust & Banking Co., Ltd. (Trust Account) 1.60

Notes: 1. The Company holds 9,409,000 shares of treasury stock.2. Shareholding ratios are calculated after deducting treasury stock from outstanding

shares.

The data indicated below is for Dowa Holdings Co., Ltd. and consoli-dated subsidiaries.

Main Businesses:Environmental Management & recycling, Nonferrous metal smelting and refining, Electronic materials, Metal processing and Heat treatment

Employees:4,511

Major Domestic Operations:

Domestic WorksAkita, Iwate, Tochigi, Gunma, Saitama, Chiba, Tokyo, Nagano, Shizuoka, Aichi, Shiga, Okayama, Kumamoto

Domestic BranchesTokyo, Chiba, Shizuoka, Aichi, Osaka, Okayama, Fukuoka

Laboratories & Development GroupsEnvironmental Protection Laboratory (Akita, Tokyo), Dowa Eco-System Co., Ltd.Metallurgical Laboratory (Akita), Dowa Metals & Mining Co., Ltd.Semiconductor Materials Laboratory (Akita), Electronics Materials Laboratory (Saitama), Advanced Fine Materials Laboratory (Okayama), New Business Promotion Dept. (Okayama), Dowa Electronics Materials Co., Ltd.Technology Center (Saitama, Shizuoka), Dowa Metaltech Co., Ltd.GRD Center (Aichi), Dowa Thermotech Co., Ltd.

59DOwA HOlDINGS CO., ltD. Annual Report 2011

Printed in Japan

14-1, Sotokanda 4-chome, Chiyoda-ku, Tokyo 101-0021, Japan

URL http://www.dowa.co.jp/

Dowa HolDings Co., ltD.

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Annual Report 2011

Documents

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