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1 DOWA HOLDINGS CO., LTD. Annual Report 2015 For the year ended March 31, 2015

2 Through its business operations on the world stage, Dowa seeks to contribute to a high standard of living and the emergence of a resource-recycling society. CONTENTS 1 The Dowa Resource Recycling Loop 2 Our Five Core Business Segments 4 Financial Highlights 6 Message from the Management 10 Special Feature: Medium-Term Plan 12 Business Review 12 Environmental Management & Recycling 14 Nonferrous Metals 16 Electronic Materials 18 Metal Processing 20 Heat Treatment 22 Corporate Governance 24 CSR Policy & Planning 25 Board of Directors and Officers 26 Financial Section 26 Financial Review 30 Consolidated 11-Year Summary 32 Consolidated Balance Sheet 34 Consolidated Statement of Income and Consolidated Statement of Comprehensive Income 35 Consolidated Statement of Changes in Equity 37 Consolidated Statement of Cash Flows 38 Notes to Consolidated Financial Statements 65 Report of Independent Auditors 66 Subsidiaries and Affiliates 68 Global Network 69 Corporate History 70 Corporate Data Cautionary note regarding forward-looking statements Within this report, present plans, forecasts, strategies, beliefs, and other statements relating to the Company and the Group that are not historical facts are forward-looking statements about future performance. These forward-looking statements are based on assessments by the Company s management using information available at the time of writing, and many assumptions and opinions that form the basis for these statements derive from information that carries significant risk and uncertainty. Due to a variety of factors, actual performance may differ materially from the performance expressed or implied in these statements. Actual performance may be influenced by such factors as economic conditions, particularly changes in consumer trends and exchange rates, changes in legal and administrative systems, pressure due to competitors price and product strategies, a reduction in the salability of the Company s existing and new products, interruption of production, infringement of the Company s intellectual property rights, rapid technological innovation, and damaging court rulings in major lawsuits. However, factors that may influence performance are not only limited to those listed here. In this report, fiscal 2014 represents the year ended March 31, 2015.

3 The Dowa Resource Recycling Loop Environmental Management & Recycling Business Waste treatment Soil remediation Resource recycling 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 manufacture 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. After being processed by our Electronic Materials, Metal Processing and Heat Treatment businesses, these metals are incorporated in our user end products, including automotive and electronic devices, 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, the Dowa Group will continue to develop its business activities, contributing to the building of a society based on the recycling of resources. Nonferrous Metals Business Electronic Materials Business Metal Processing Business Gold metal LED chips Zinc alloy Silver powder Rolled copper products Metal-ceramic substrates Heat Treatment Business Industrial furnaces Heat treatment Heat treatment manufacturing plant ANNUAL REPORT

4 Our Five Core Business Segments DOWA ECO-SYSTEM CO., LTD. Environmental Management & Recycling Business Waste treatment business: Integrated and comprehensive services from collection and transport of general and industrial waste through intermediate waste treatment to controlled landfilling. Soil remediation business: Provision of total support services ranging from soil survey and 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. DOWA METALS & MINING CO., LTD. Nonferrous Metals Business 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. Rare metals business: Recovery of platinum group metals from used exhaust gas catalyst material from automobiles. Zinc business: Integrated business structure that covers every phase from the mining of raw ore to bullion production and sales of finished goods centered on Akita Zinc Co., Ltd., the largest zinc smelting plant in Japan, with an annual output of 200,000 tons. DOWA ELECTRONICS MATERIALS CO., LTD. Electronic Materials Business 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 and 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. DOWA METALTECH CO., LTD. Metal Processing Business Metal-processing business: Manufactures copper, brass, and 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. DOWA THERMOTECH CO., LTD. Heat Treatment Business Industrial furnace business: Employs expertise in heat treatment to offer complete services ranging from facilities design to startup and maintenance. Heat treatment processing 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. 2 DOWA HOLDINGS CO., LTD.

5 Net Sales and Composition Ratios (Fiscal year ended March 31, 2015) Operating Income and Composition Ratios (Fiscal year ended March 31, 2015) Segment Policy Secure the top position in Asia in a bid to help improve the global environment as one of the leading environmental companies in the world 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 billion 19.6% 7.3 billion 19.4% P. 12 Establish the world s best recycling smelting complex 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 materials as we work to further strengthen recycling and smelting operations billion 44.9% 13.5 billion 35.8% P. 14 To become the world's top-class material manufacturer with many niche / top products 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 billion 13.9% 8.8 billion 23.3% P. 16 Promote business expansion in growth fields and growth areas 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, which are positioned to target growing demand within the region billion 16.5% 5.8 billion 15.3% P. 18 Make a leap forward as global manufacturer of comprehensive heat treatment company Dowa Thermotech Co., Ltd. is engaged in a heat treatment processing 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 treatment and other areas, we will expand our business in Japan and overseas billion 5.1% 2.3 billion 6.2% P. 20 ANNUAL REPORT

6 Financial Highlights Dowa Holdings Co., Ltd. and its Consolidated Subsidiaries (Billions of yen) (Millions of U.S. dollars* 2 ) For the years ended March * * 1 Financial Performance Net Sales $3,863 Operating Income Ordinary Income Net Income Capital Expenditures Depreciation R&D Expenses Financial Condition Equity ,628 Total Assets ,155 Interest-bearing Debt* Cash Flows Cash Flows from Operating Activities Cash Flows from Investing Activities (19.2) (19.4) (19.3) (18.6) (20.3) (169) Free Cash Flows Ratios Return on Assets (%)* Equity Ratio (%) Debt Equity Ratio (Times) * 1. The years stated in the text are ended March 31 of the year. Thus 2015 refers to the fiscal year, which ran from April 1, 2014 through March 31, =US$1, the rate of exchange on March 31, 2015, is used. 3. Interest-bearing debt does not include lease obligations. 4. ROA is Ordinary Income divided by the average of Total Assets (the sum total of the balance of Total Assets as of the beginning of the period and the end of the period divided by 2). 4 DOWA HOLDINGS CO., LTD.

7 Net Sales Operating Income Ordinary Income (Billions of yen) (Billions of yen) (Billions of yen) Net Income (Billions of yen) 26.5 Cash Flows from Operating Activities (Billions of yen) Capital Expenditures / Depreciation (Billions of yen) Capital Expenditures Depreciation Interest-bearing Debt / Debt Equity Ratio (Billions of yen / Times) Total Assets / ROA (Billions of yen / %) Equity / Equity Ratio (Billions of yen / %) Interest-bearing Debt Debt Equity Ratio Total Assets ROA Equity Equity Ratio ANNUAL REPORT

8 Message from the Management Masao Yamada President and Representative Director The Dowa Group will pursue further growth by expanding its operations in Asia and other emerging markets where growth is ongoing, continuing to invest in growth fields such as new energy and recycling, and steadily carrying out policies directed at improving productivity and increasing orders. 6 DOWA HOLDINGS CO., LTD.

9 Business Environment In fiscal 2014, the fiscal year ended March 31, 2015, the Japanese economy saw weak movement in consumer spending due to a consumption tax rate hike and rising prices of imported goods. In contrast, an improvement was seen in corporate performance due to the more beneficial export environment brought about by the weak yen. In the global economy, business conditions underpinned by robust consumer spending and increased numbers of people in employment were experienced more widely in the United States, which drove the global economy. In China, the growth rate slowed down, and although there had been signs of a recovery in the employment situation as well as from the sovereign debt crisis, the economic stagnation in Europe continued. Regarding the Group s business environment, in global terms demand for automotive-related products continued to be strong. Demand for smartphones and alternative energy also continued to grow. In metal prices, whereas the price for zinc remained strong, the prices for precious metals and copper were soft against the backdrop of a strong U.S. dollar and weak crude oil prices. With regard to exchange rates, the yen continued its plunge to the 120 yen to the U.S. dollar range due to such factors as the Bank of Japan s financial relaxation and other measures. Financial Performance for Fiscal 2014 Amid these conditions, the Dowa Group carried out policies directed at improving productivity and increasing orders in response to evolving markets and user trends. As a result, on a consolidated basis, net sales for fiscal 2014 increased 5% year on year to billion, operating income rose 23% to 39.0 billion, and ordinary income also rose 20% to 42.0 billion. Consolidated net income increased 14% year on year to 26.5 billion. Financial Condition As of March 31, 2015, shareholders equity increased 28.8 billion compared with the end of the previous fiscal year, to billion, and interest-bearing debt decreased by 12.9 billion, to 86.6 billion. The equity ratio rose 5.23 points compared with the end of the previous fiscal year, to 49.35%. Fiscal 2014 Initiatives I would like to present some information on efforts made in fiscal 2014 that were in line with the three policies stated under the previous Medium-Term Plan: expand overseas operations, invest in growth fields, and strengthen the competitive edge of our business. Expand Overseas Operations In the Environmental Management & Recycling business, we commenced waste treatment in line with oil and natural gas development in both Indonesia and Thailand. In addition, we established a new waste treatment company in Myanmar and started site construction. In addition, we worked to expand operations for collecting raw materials for metal recycling from overseas, such as from North America and Asia. Waste treatment facility in Thailand ANNUAL REPORT

10 Message from the Management In the Nonferrous Metals business, we expanded production at our zinc processing plant in Thailand, which had commenced operations in the previous fiscal year, and worked to increase sales to Southeast Asia, a growing market. In the Metal Processing business, we enhanced our copper rolled products and plating processes in China and Thailand and promoted increased sales in Asia. In the Heat Treatment business, we established a local company in Mexico as a new base and commenced a maintenance business. In addition, we worked to augment the production capacity of our heat treatment plant in Indonesia. Invest in Growth Fields In the automotive field, which includes that of hybrid cars, we made progress in expanding sales of high-performance copper alloys for connectors and engaged in the development of new plating processes. In the field of smartphones, we increased production of high-output LEDs used in sensors, for which there is a burgeoning demand, and expanded our production capabilities for them. We also made headway in expanding sales of the high-strength copper alloys used for connectors. High-performance copper alloys In the alternative energy field, we expanded and reinforced our facilities for silver powders used in electrode materials, promoted improvements in productivity and worked to expand sales, and made progress in developing and expanding the sales of the metal-ceramic substrates used in high-voltage inverters. In addition, we improved the characteristics of nitride semiconductors and deep ultraviolet LEDs and engaged in the early commercialization of newly developed products, including an expanded lineup of conductive materials and expansion of sample work. Strengthen the Competitive Edge of Our Business In the waste treatment operations of the Environmental Management & Recycling business, we worked to enhance marketing and our network for the collection of low-contaminated PCB waste, while commencing the construction of our new treatment facility in Akita. In the Nonferrous Metals business, we bolstered the recovery of tin and antimony, while promoting the increased treatment of raw materials due to enhanced pre-treatment in the recovery of platinum group metals. We also participated in an exploration project in Mexico, in addition to that in Alaska. In the Electronics Materials business, we worked on the volume production of next-generation magnetic material products for the recording tapes used in data backup. In the Metal Processing business, we promoted yield ratio improvements and enhanced productivity. In the Heat Treatment business, we promoted such initiatives as the integration of our heat treatment furnace design bases with our manufacturing plants in Japan and the operational reorganization of our heat treatment processes. At the same time, we promoted the development of a small-sized, cost-competitive heat treatment furnace. Heat treatment manufacturing plant 8 DOWA HOLDINGS CO., LTD.

11 Fiscal 2015 Policies Fiscal 2015 marks the start of our new Medium-Term Plan. While assessing market trends, we will implement the policies below. Over the course of the plan, we plan to achieve net sales of billion, operating income of 42.5 billion, and ordinary income of 42.5 billion. Further Expansion of Overseas Business In the Environmental Management & Recycling business, we will promote expansion of waste treatment at our existing bases in Southeast Asia and make progress with the construction of the waste treatment facility in Myanmar, a market that we recently entered. In the Nonferrous Metals business, we will increase production at our zinc processing plant in Thailand and expand sales in Southeast Asia. In the Metal Processing business, we will launch a copper rolled product processing plant in Taiwan, a market that we recently entered, and will expand and reinforced our precious metal plating line in Thailand. In the Heat Treatment business, we will commence our furnace maintenance business in Mexico, again a market that we recently entered, and engage in the construction of new bases for heat treatment processing in India. Business Expansion by Entering Growth Markets and Related Fields In the automotive field, which includes that of hybrid cars, we will develop and expand sales of high-performance copper alloys for connectors, and work on the volume production of highstrength plating for high-voltage terminals. In the communications devices field, we will expand sales of thin, high-hardness copper alloys and develop electrodes for next-generation displays. In the power semiconductors field, we plan to strengthen the production systems for nitride semiconductors. Continual Reinforcement of Business Competitiveness In the Environmental Management & Recycling business, we will make progress with the construction of the low-contaminated PCB treatment facility in Akita. In the Nonferrous Metals business, we will further strengthen the recovery of tin and antimony while working to both expand the overseas collection of raw materials for platinum group metals recycling and augment treatment capacity. In the Electronics Materials business, we plan to expand sales of the LEDs for sensors and conductive materials for electrodes. In the Metal Processing business, we will work to increase production of copper rolled products and metal-ceramic substrates while taking steps to improve productivity. In the Heat Treatment business, we will work to improve the efficiency of our production systems by reorganizing our plants in Japan. By steadily implementing these policies, the Dowa Group intends to achieve continued growth. Masao Yamada President and Representative Director ANNUAL REPORT

12 Special Feature: Medium-Term Plan The DOWA Group formulated a new Medium-Term Plan for the three years starting from fiscal In keeping with the plan s basic policy of pursuing sustained growth, the Group will continue to implement a raft of measures to further expand overseas business, expand business by entering growth markets and related fields, and continually reinforce its business competitiveness. Overview of Medium-Term Plan Basic Policy: Pursue Sustained Growth 1. Further Expansion of Overseas Business Further expand overseas business predominantly in Asia by ensuring past investment results are reflected, promoting additional facility expansion and refurbishment, and establishing new bases 2. Business Expansion by Entering Growth Markets and Related Fields Further strengthen efforts in growth markets, such as the markets for next-generation automobiles, communication terminals, and new forms of energy Enter fields related to existing businesses and thereby expand the scope of business 3. Continual Reinforcement of Business Competitiveness Promote increase in production capacity and investment to improve productivity in the manufacture of main products, and expand the collection network for materials to further reinforce the business foundation Target Figures Medium-Term Plan FY2015 through FY2017 Exchange Rates and Metal Prices (Assumptions) FY2014 (Actual) Ordinary Income 50.0 billion 42.0 billion Operating Income 48.0 billion 39.0 billion ROA 12% 11.4% Operating CF billion billion* Investment 80.0 billion 63.5 billion* R&D Expenses 15.0 billion 14.6 billion* * Cumulative figures for three years from FY2012 to FY2014 Medium-Term Plan FY2015 through FY2017 FY2014 (Average) Exchange Rate: ( /$) Zinc: ($/t) 2,000 2,175 Indium: ($/kg) Copper: ($/t) 6,500 6,554 Profit Targets by Segment Environmental Management & Recycling Nonferrous Metals Electronic Materials Metal Processing Heat Treatment Others Investment and R&D Expenses Environmental Management & Recycling Nonferrous Metals Electronic Materials Metal Processing Heat Treatment billion % 8% Investment 9% 80.0 billion 44% 13% R&D Expenses 10% 7% 15.0 billion 10% % 60% (Plan) (Plan) Ordinary income of 50.0 billion in fiscal 2017, the final year of the Medium-Term Plan Proactive investment centered on augmenting capacity and bolstering the business base Of the 80.0 billion, plan to devote 20.0 billion to overseas investments R&D to focus on the development of products that will become the mainstay products of the future * Cumulative figures for the three years from FY2015 to FY DOWA HOLDINGS CO., LTD.

13 Business Visions and Main Actions of the Five Businesses DOWA ECO-SYSTEM CO., LTD. Business Vision Major Actions Secure the top position in Asia in a bid to help improve the global environment as one of the leading environmental companies in the world Waste Treatment Expand the low-contaminated PCB waste treatment business and range of menus, such as menus for the separation, sorting, and recycling of materials Soil Remediation Enhance treatment of naturally caused soil contamination resulting from public investment DOWA METALS & MINING CO., LTD. Recycling Strengthen overseas collection, improve quality of extracted materials by enhancing the separation function Southeast Asia Open new bases and expand the waste treatment business Business Vision Major Actions Establish the world s best recycling smelting complex Precious Metals and Copper Enhance ability to handle impurities and increase recovery of tin and antimony Rare Metals Expand platinum group metal recycling facilities, strengthen raw materials collection system, such as by improving sampling efficiency Zinc Increase production of zinc and indium, strengthen processing plant in Thailand, and expand sales in Southeast Asia Resource Development Promote exploration and development projects in an effort to raise the percentage of zinc concentrate from Dowa s proprietary mines to 50% DOWA ELECTRONICS MATERIALS CO., LTD. Business Vision Major Actions To become the world's top-class material manufacturer with many niche / top products Semiconductors Maintain share of high-output infrared LEDs and increase production, develop new applications for nitride semiconductors and improve their properties Electronic Materials Increase share of silver powders for electrode materials, improve productivity Mass production of conductive materials for jointing paste Functional Materials Develop and maintain share of next-generation magnetic recording materials, improve properties of carrier powder and increase share New Developments Improve properties of ultraviolet LEDs for disinfection and photocatalysts, improve properties of materials for fuel cells and mass produce DOWA METALTECH CO., LTD. Business Vision Major Actions Promote business expansion in growth fields and growth areas Metal-Processing Increase production capacity and expand sales of high-performance copper alloy strips for automotive and information communication equipment, strengthen processing of overseas bases in countries such as China and Thailand Plating Improve properties and expand sales of automotive plating, strengthen overseas bases in countries such as Thailand Substrates Develop and expand sales of substrates for trains and automobiles as well as industrial machinery DOWA THERMOTECH CO., LTD. Business Vision Major Actions Make a leap forward as global manufacturer of comprehensive heat treatment company Industrial Furnaces Expand sales of industrial furnaces made in India and China into the Southeast Asia market, expand maintenance service Expand product lineup, improve productivity by integrating the design and manufacturing departments in Japan Heat Treatment Processing Increase number of bases in India, expand capacity at existing plants, enter the parts processing business Consolidate domestic production lines, reinforce competitiveness by introducing small, Dowa-made low-cost furnaces Research & Development Build high-productivity facilities for handling small lots, develop new surface treatment technology ANNUAL REPORT

14 Business Review Environmental Management & Recycling DOWA ECO-SYSTEM CO., LTD. Waste Treatment Soil Remediation Recycling Southeast Asia Main Products and Services Waste treatment, controlled landfilling, soil remediation, metal recycling, household appliances recycling, automobile recycling, consulting on environmental matters, logistics, etc. Medium-Term Plan VISION Secure the top position in Asia in a bid to help improve the global environment as one of the leading environmental companies in the world Dowa Eco-System Co., Ltd. offers one-stop integrated services with high traceability. These services range from the collection and transport of waste, contaminated soil, and recyclable raw material to intermediate waste treatment such as compacting / detoxification and conversion into raw material for smelting or controlled landfilling. By expanding into the consultation business, such as performing environmental impact assessments, and responding to a wide range of environmental needs both in Japan and overseas, we aim to become the leading company in the environmental and recycling businesses. Kenichi Sasaki President Net Sales (Billions of yen) Operating Income (Billions of yen) Investment* (Billions of yen) * The total of investments in property, plant and equipment, and R&D expenses 12 DOWA HOLDINGS CO., LTD.

15 Business Conditions and Financial Performance for Fiscal 2014 The waste treatment business leveraged its collection network and took steps to increase sales. Amid the gradual recovery seen in the real estate market, the soil remediation business expanded its sales. The recycling business worked to expand collections of scraps from electronic components in Japan and overseas. As a result of these factors, segment consolidated sales increased 2% year on year to billion. Segment consolidated operating income decreased 23% to 7.3 billion due to a temporary decrease in orders for waste treatment in Japan. Future Initiatives In the Environmental Management & Recycling business, we will work to enhance domestic operations by the constructing our new low-contaminated PCB waste treatment facility in Akita. In addition, we will launch a new waste treatment facility in Myanmar, work on new base developments in Southeast Asia, and promote the further expansion of our overseas business. Plans are to achieve segment consolidated sales of billion and segment consolidated operating income of 8.2 billion in fiscal Environmental Management & Recycling Initiatives in Each Business Waste Treatment Harnessing Japan s largest waste treatment network, we will make ongoing efforts to increase collections. In addition, we will also work to enhance the collection and improve the treatment efficiency of low-contaminated PCB waste, including at our newly constructed plant in Akita. Low-contaminated PCB treatment plant under construction in Akita Soil Remediation With a view to capturing soil remediation demand arising from large-scale public investment, which is forecast to increase, we will make headway with the strengthening of our treatment system, such as by starting the operation of facilities that utilize innovative cleanup technologies. Soil remediation facility in Akita Recycling By leveraging our new sales bases in Japan and overseas bases, such as in Singapore, we will expand our raw material for metal recycling collection operations and enhance our metal recycling business. Used substrates Southeast Asia Focusing on Indonesia, we will enhance our export bases and expand our waste treatment operations. We will also make progress with the construction of a waste treatment facility and the launch of business in Myanmar. Waste treatment facility in Indonesia ANNUAL REPORT

16 Business Review Nonferrous Metals DOWA METALS & MINING CO., LTD. Precious Metals and Copper Rare Metals Zinc Main Products and Services Gold, silver, copper, zinc alloy, lead, platinum, palladium, indium, gallium, germanium, tin, antimony, nickel, bismuth, tellurium, sulfuric acid, and other metals Medium-Term Plan VISION Establish the world s best recycling smelting complex Utilizing its engineering capabilities honed over many years, Dowa Metals & Mining Co., Ltd. recovers more than 20 kinds of metal from a variety of raw materials, such as from ore and recycled materials at its proprietary smelting complexes that focus mainly on the smelting and refining of copper as well as zinc. In the years to come, we will bolster our business base by promoting the further strengthening of such areas as the efficiency of our metal recovery and our raw material procurement. Akira Sekiguchi President Net Sales Operating Income Investment* (Billions of yen) (Billions of yen) 13.5 (Billions of yen) * The total of investments in property, plant and equipment, and R&D expenses 14 DOWA HOLDINGS CO., LTD.

17 Business Conditions and Financial Performance for Fiscal 2014 Whereas the price for zinc remained steady, the prices for copper and precious metals softened. Segment consolidated sales rose 10% year on year to billion as a result of increased production and sales of such metals as platinum and of mainstay metals, such as copper and zinc. Despite being buffeted by rising electric power prices, segment consolidated operating income increased 92% to 13.5 billion due to improvements in raw material conditions and the exchange rate for the yen remaining weak. Initiatives in Each Business Precious Metals and Copper Kosaka Smelting & Refining Co., Ltd. actively promotes the processing of recycling materials and will increase its profitability by enhancing the recovery of a wide range of metals, including tin and antimony. Future Initiatives In the Nonferrous Metals business, efforts will be made to strengthen the recovery of tin, antimony, and other alloys at Kosaka Smelting & Refining Co., Ltd. Energies will also be channeled toward reinforcing cost competitiveness through a variety of measures including the increase in production of zinc at Akita Zinc Co., Ltd. and promoting improvements in electric power consumption rates. Moreover, proceeding with mine development projects in Alaska and Mexico, we will ensure the stable supply of raw materials. Plans are to achieve segment consolidated sales of billion and segment consolidated operating income of 13.6 billion in fiscal Nonferrous MetalsRecycling Tin ingots Rare Metals Leveraging our worldwide group network, which includes sampling facilities in the United States and the Czech Republic, we are expanding our raw material collection operations. In addition, we are working to bring about further expansion in the operations to recover platinum group metals from automobile exhaust catalysts by carrying out improvements to our processing capacity. Used automobile exhaust catalysts Zinc At Akita Zinc Co., Ltd., we are increasing the production of zinc by augmenting our facilities and are engaged in bolstering our cost effectiveness by, for example, improving the rate by which we consume electric power. We are also working to increase production of zinc processed products in Thailand and to expand sales in the Southeast Asian market. Our zinc processing plant in Thailand Resource Development To secure the stable supply of raw materials for our smelters, we are continuing our exploration activities in Alaska and proceeding with a survey toward commercialization in Mexico. Exploration activities in Alaska ANNUAL REPORT

18 Business Review Electronic Materials DOWA ELECTRONICS MATERIALS CO., LTD. Semiconductors Electronic Materials Functional Materials Main Products and Services High-purity gallium, indium, compound semiconductor wafers, light-emitting diodes (LEDs), silver powders, copper powders, silver oxide powders, metal powders, carrier powders, and ferrite powders Medium-Term Plan VISION To become the world's top-class material manufacturer with many niche / top products Dowa Electronics Materials Co., Ltd. supplies products with distinctive features in each of the semiconductors, electronics materials and functional materials fields. We continue to maintain a high market share by striving to meet ever-changing market needs. Based on these products, which are supported by a high level of technological capability, we are currently focusing management resources on priority products. At the same time, we are advancing the development of new products and expediting the start-up of innovative businesses. Akira Otsuka President Net Sales (Billions of yen) Operating Income (Billions of yen) Investment* (Billions of yen) * The total of investments in property, plant and equipment, and R&D expenses 16 DOWA HOLDINGS CO., LTD.

19 Business Conditions and Financial Performance for Fiscal 2014 There was continued expansion in demand for smartphones and alternative energy. As a result, LEDs and silver powders sales volumes steadily increased. Affected by transactions having been partly shifted to contracted processing not containing silver metal prices, segment consolidated sales decreased 12% year on year to 73.6 billion. As a result of enhanced production capacity in LEDs and silver powders, in keeping with the expansion in their respective markets, and efforts to expand sales of next-generation magnetic products for data tapes, segment consolidated operating income increased 31% to 8.8 billion. Future Initiatives In the electronic materials business, we will promote sales expansion in LEDs used for all types of sensor and silver powders used in conductive materials, while trying to capture demand in burgeoning markets, such as smartphones and alternative energy. With regard to products for which market expansion is expected, such as power semiconductors and materials for fuel cells, we will work toward early commercialization. Plans are to achieve segment consolidated sales of 49.0 billion and segment consolidated operating income of 8.9 billion in fiscal Initiatives in Each Business Semiconductors While advancing improvements in semiconductor characteristics, such as the higher-output, thinner LEDs used for all types of sensor, we are capturing expanding demand. We are also working to launch new products at an early date. These products will include nitride semiconductors, which are expected to be used as materials in next-generation power semiconductor devices, and deep ultraviolet LEDs for sterilization and antibacterial applications. Electronic Materials Deep ultraviolet LEDs Electronic Materials In response to the burgeoning electrode materials market for silver powders, we are moving forward with plans to increase production, for example, by making improvements in productivity. At the same time, we will continue to expand our lineup by developing new products that accurately meet user needs and broadly respond to diversifying electrode material needs. Silver powder for electrode materials Functional Materials In magnetic materials for the recording tapes used in data backup, we will maintain our leading share of the market by augmenting our next-generation production capacity and working to increase sales. We will also proceed with the development of high-reaction efficiency electrode materials for fuel cells. Data tape for which magnetic materials are used ANNUAL REPORT

20 Business Review Metal Processing DOWA METALTECH CO., LTD. Metal-Processing Plating Substrates Main Products and Services Copper, brass, copper alloy strips, nickel alloy strips, reflow tin plated strips, brass rods, forged brass products, electroplated products, and metal-ceramic substrates Medium-Term Plan VISION Promote business expansion in growth fields and growth areas Dowa Metaltech Co., Ltd. is developing business in its mainstay products high-performance copper rolled products and electroplated products as well as metal-ceramic substrates for growth fields such as next-generation automobiles. In concert with advancing the development of new products to meet market needs, such as for high conductivity and strength, we are expanding our business by, for example, upgrading and expanding our bases in Asia, where growth is forecast for the coming years, and augmenting our production capabilities. Haruo Nishizawa President Net Sales (Billions of yen) Operating Income (Billions of yen) Investment* (Billions of yen) * The total of investments in property, plant and equipment, and R&D expenses 18 DOWA HOLDINGS CO., LTD.

21 Business Conditions and Financial Performance for Fiscal 2014 Amid steady automobile production in Japan and overseas, sales of copper rolled products and electroplated products increased. We promoted expanded sales of metal-ceramic substrates for industrial machinery and rail transport applications. As a result of these efforts, segment consolidated sales increased 7% year on year to 87.6 billion. As a result of expanding the sales of mainstay products, and ongoing efforts to improve productivity and reduce costs, segment consolidated operating income rose 8% to 5.8 billion. Future Initiatives In the metal processing business, we will launch a new copper rolled product processing plant in Taiwan and will promote the augmentation of our copper rolled product plant in China and of our electroplating plant in Thailand. We will also promote the sale of metal-ceramic substrates to growth market applications, such as industrial machinery and rail transport. Plans are to achieve segment consolidated sales of 91.0 billion and segment consolidated operating income of 7.1 billion in fiscal Initiatives in Each Business Metal-Processing We will work to develop high-performance copper alloys and increase our production capacity and move forward with plans to expand our sales in fields where growth is expected such as hybrid cars and smartphones. In addition, we will expand our business in Asia by, for example, launching a new plant in Taiwan and augmenting our facilities in China and Thailand. High-performance copper alloys Plating In response to increased automobile production in Southeast Asia and the accompanying localization of procurement among customers in the region, we will bolster our plating line for automobiles in Thailand, expand our product lineup, and work to expand sales. At the same time, in Japan we will work on the volume production of new plating products for next-generation automobiles. Metal Processing Plating process plant in Thailand Substrates In addition to industrial machinery, we are actively working to expand sales for rail transport applications, an area in which growth is expected both in Japan and overseas. We will also move ahead with the making of improvements to the characteristics of new products that will offer superior heat dissipation and be highly reliable. Metal-ceramic substrates ANNUAL REPORT

22 Business Review Heat Treatment DOWA THERMOTECH CO., LTD. Industrial Furnaces Heat Treatment Processing Main Products and Services Various types of heat treatment, various types of surface treatment, design, manufacture, marketing, and maintenance of various types of industrial furnaces and ancillary equipment Medium-Term Plan VISION Make a leap forward as global manufacturer of comprehensive heat treatment company In the field of heat treatment, which increases the durability of metal parts, for example in automobiles, Dowa Thermotech Co., Ltd. undertakes the manufacture, sales, and maintenance of heat treatment facilities as well as contracted heat treatment processing. In addition to advancing overseas business expansion in geographical areas where growth is expected in the years ahead, we are working to strengthen our business competitiveness by, for example, realigning our bases in Japan. Toshiro Sumida President Net Sales Operating Income Investment* (Billions of yen) (Billions of yen) (Billions of yen) * The total of investments in property, plant and equipment, and R&D expenses 20 DOWA HOLDINGS CO., LTD.

23 Business Conditions and Financial Performance for Fiscal 2014 In concert with the growth in the automobile market, the industrial furnace business increased sales in Japan and overseas and increased maintenance orders. In the heat treatment processing business, we promoted the augmentation of facilities in Indonesia and other locations, while increasing overseas sales. Consequently segment consolidated sales increased 11% compared with the previous fiscal year to 27.3 billion. As a result of the realignment of our bases in Japan and efforts to strengthen our competitiveness, such as by improving productivity, segment consolidated operating income rose 4% to 2.3 billion. Future Initiatives In the industrial furnace business, we will further promote overseas business development, such as in India and Mexico, while reorganizing our manufacturing and maintenance bases in Japan, where we will work to improve the productivity of our heat treatment plants. Furthermore, we will advance the development of the small-sized, cost-competitive heat treatment furnace. Plans are to achieve segment consolidated sales of 28.5 billion and segment consolidated operating income of 3.1 billion in fiscal Initiatives in Each Business Industrial Furnaces Primarily in areas where growth is expected, such as Southeast Asia and North America as well as in India and Mexico, where we have recently entered the market, we will work to expand our maintenance business. In Japan, we will develop a small-sized, cost-competitive heat treatment furnace, promote its installation at our heat treatment processing bases, and continue to strengthen our competitiveness. Heat treatment furnace manufactured at our base in India Heat Treatment Processing In Asia, where robust expansion in automobile production is expected, we will move ahead with plans to augment our heat treatment processing capabilities. In Indonesia, we will increase production of heat treatment processing, while in India we will build new bases and boost the treatment capabilities of our existing plants. Domestically, we will work to make our production framework more efficient in response to shifts in demand, promote the winning of new sales, and devise ways to strengthen profitability. Heat treatment processing plant in Indonesia Heat Treatment ANNUAL REPORT

24 Corporate Governance The Dowa Group has made strengthening of corporate governance (corporate control) 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 Governance System The Dowa Group uses a system of executive officers and a holding company structure that separates business divisions as subsidiaries in order to expedite decision making and improve management efficiency. In addition, the maximum number of directors has been set at 13 to further improve the supervisory function of the Board of Directors. Managerial responsibilities are clearly maintained by keeping the term of office at one year. As of June 24, 2015, there were seven directors (including two outside directors). The Board of Directors meeting is held once every month, in principle. There are also six executive officers as of June 24, 2015 (none that are also directors) with a Committee of the Operating Officers held once every month in principle, for directors and executive officers to share information regarding the status of business execution. We also have a Audit & Supervisory Board, comprising four Audit & Supervisory Board members as of June 24, 2015 (including three outside Audit & Supervisory Board members) who conduct audits of business execution by directors, reporting to the Audit & Supervisory Board meeting, held once every month in principle, ensuring audit effectiveness and efficiency. Corporate Governance System (As of June 24, 2015) Organization Form Number of Directors Among these, Outside Directors Articles of Incorporation Chairman of the Board of Directors Number of Audit & Supervisory Board members Among these, Outside Auditors Company with Auditors 7 (Number of the Company s Articles of Incorporation: 13) 2 (including 1 designated Independent Director) 1 year President 4 (Number of the Company s Articles of Incorporation: 5) 3 The DOWA Group Corporate Governance Structure (As of June 24, 2015) Meeting of Shareholders Elect / dismiss Elect / dismiss Elect / dismiss Board of Directors 7 Directors (including 2 outside directors) Audit Audit & Supervisory Board 4 Auditors (including 3 outside auditors) Independent Auditors Business execution Dowa Holdings President Audit Operating Companies Group Committee of the Board Dowa Eco-System Co., Ltd. Dowa Metals & Mining Co., Ltd. Dowa Electronics Materials Co., Ltd. Committee of the Operating Officers Directors Directors, Officers* Strategic Planning & Public Relations Dept., Human Resources Dept., General Affairs & Legal Dept., Accounting & Finance Dept., CSR Dept., Technologies Dept., Information System Dept. Management Operating companies* Report Audit Dowa Metaltech Co., Ltd. Dowa Thermotech Co., Ltd. Support Audit Instruct / supervise Report Support companies Business Support Companies Technical Support Companies Advise Notice Lawyer Dowa Consultation Desk (outside lawyers) Instruct / supervise Report Operating Subsidiaries * President of each operating company serves concurrently as an officer of DOWA Holdings. 22 DOWA HOLDINGS CO., LTD.

25 Status of Internal Audits and Auditor Audits Internal audits based on internal audit regulations stipulated by the Dowa Group cover all corporate activities, including accounting, legal, safety, and environmental audits. The Company s CSR Department, relevant divisions, and Group companies conduct internal audits in coordination with one another, with findings reported to directors, auditors, and relevant departments. Audit & Supervisory Board members audit the execution of director duties in accordance with the audit policies and audit plans for the term stipulated by the Audit & Supervisory Board. They also monitor the independence of the independent auditors, and coordinate with them by explaining audit plans and reporting audit findings. Audit & Supervisory Board members, independent auditors, and the CSR Department regularly set up discussion forums and work closely with one another in order to further improve internal audits. Development and Overview of Internal Control Systems Approach Regarding Internal Control Systems In accordance with the Dowa Group s Values and Standards of Conduct, the Company and Group companies have made a collective effort to design and operate effective and efficient internal controls to contribute to society, maximize corporate value, and fulfill management responsibilities conferred by shareholders. At the same time, laws are being revised and the public s general stance toward compliance is hardening, so we expect even stronger demands to be placed on the Group going forward. Given these trends, the Company converted to a holding company structure on October 1, The holding company structure raises the level of specialization of each business group and the speed at which policies can be executed. However, it also carries the risk that control systems will become localized and overall governance will suffer. As a result, at 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 effective and efficient internal control system suited to our holding company structure. Moreover, the internal control system must continually be revised in line with changes in business activities and the social environment, so the Company and Group companies intend to promote the system even more robustly. Overview of Internal Control Systems The Company will work to strengthen oversight of the Board of Directors by appointing executive officers and separating the execution function from the Board. We will clarify the authority and responsibilities of personnel for each rank based on company rules such as Board regulations and administrative authority regulations and will rigorously ensure compliance with the law, articles of incorporation, and social norms through independent study and educational programs for directors and employees. We will continue to design and operate systems for ensuring the reliability of financial reporting. We will adopt a firm stand across the organization toward antisocial forces. In addition, we will coordinate efforts with all relevant organizations including the police as well as legal advisors. We established the Dowa Consultation Desk, and have put in place the necessary mechanisms to use internal audits to prevent any improprieties or misconduct and to quickly discover any such incidents. In order to identify and avoid risk, the Company will have the Board of Directors and other bodies conduct stringent reviews when decisions are made on important matters. We will also work to build a communication system to facilitate coordination among Group companies and improve our emergency response capabilities. Remuneration for Directors and Auditors Remuneration for directors and Audit & Supervisory Board members is determined by resolution of the general meeting of shareholders. Specific amounts and payment dates for directors are determined by the resolution of the Board of Directors based on the recommendations of the Remuneration Committee, which includes outside members. Specific amounts and payment dates for Audit & Supervisory Board members are decided through Audit & Supervisory Board member deliberations. Total Remuneration Amount of Individual Directors or Audit & Supervisory Board members for Fiscal 2014 Remuneration Position Number Amounts Directors million Audit & Supervisory Board members (Among these, Outside Directors and Audit & Supervisory Board members) 4 61 million (3) ( 20 million) ANNUAL REPORT

26 CSR Policy & Planning To promote CSR activities from a long-term perspective, the DOWA Group prepared its CSR Policy based on the DOWA Group s Corporate Philosophy and its Standards of Conduct. On the basis of our CSR policy, we fulfill our responsibilities to society through the implementation of management-integrated CSR activities. To encourage effective CSR, we continue to promote the policy s adoption within the Group. Upon the CSR Policy s implementation, the DOWA Group formulated a raft of focus measures to be addressed as a matter of priority. To promote responsible management as a company, we will continue to work on the deployment of those measures. For details, refer to the CSR Report at DOWA Group s CSR Policy and Planning Governance Safety Environment Society CSR Policy We will aim at being an open, transparent company to society. We will respect international agreements and strive to prevent corruption such as bribery. We will take CSR into consideration when making procurements. All employees will take part spontaneously in safety activities to improve the level of safety and hygiene in the workplace, based on our basic philosophy of Safety is the top priority. We are committed to preventing accidents at work and supporting the health of employees. We will provide customers (clients and local communities) with products and services that contribute to building a resource-recycling society. We will reduce environmental burden and risk in our business activities. We, the management and employees together, will take part in environmental conservation activities. We will promote business activities that take biodiversity into consideration. We will promote social contribution appropriate with community standards together with local communities. Focus Measures We will strengthen internal control and governance. We will prepare CSR procurement guidelines. We will improve our risk assessment. We will enhance our safety education program throughout the Group. We will promote environmentally friendly products and renewable energy fields. We will conduct a survey on biodiversity and prepare guidelines. We will promote diversity and work-life balance. We will promote CSR education. We will contribute to local communities. CSR Activities at DOWA s Overseas Sites Initiative in India Having set up five heat treatment businesses in four regions within India, HIGHTEMP FURNACES Ltd. actively encourages CSR activities that benefit its employees and their families as well as the local residents in each of those regions. Located in a district of Bangalore, the Nelamangala plant opened a water well that was drilled inside the plant for free to the local residents of two neighboring villages, not only for them to use the water on the premises, but to provide water for household use. The delayed laying of waterworks in the area would normally have necessitated the villagers having to go to a remote location to draw water for household use, but opening the well has removed that inconvenience. Local residents using the well at the Nelamangala plant Formulation of CSR Procurement Guidelines In keeping with the rising social demands in recent years for aspects of CSR to be implemented along the entire supply chain, the DOWA Group CSR Procurement Guidelines, which are based on its CSR procurement policy, was formulated in fiscal The guidelines address the basic thinking on what each company in the DOWA Group and their suppliers should take into consideration with regard to the promotion of CSR in their procurement activities. Going forward, we will provide our suppliers with questionnaires based on the guidelines and conduct on-site audits. In partnership with our suppliers, we will continue to engage in proactive CSR promotion. 24 DOWA HOLDINGS CO., LTD.

27 Board of Directors and Officers As of June 24, 2015 Directors Masao Yamada President & Representative Director Fumitoshi Sugiyama Representative Director Hiroshi Nakashio Director Hiroyuki Kai Director Katsuji Matsushita Director Eiji Hosoda Outside Director Yoshiko Koizumi Outside Director Auditors Kazu Iwano Corporate Auditor (full-time) Junichi Iwabuchi Outside Corporate Auditor (full-time) Jin Takeda Outside Auditor Kazuo Nakasone Outside Auditor Officers Kenichi Sasaki Officer President, Dowa Eco-System Co., Ltd. Akira Sekiguchi Officer President, Dowa Metals & Mining Co., Ltd. Akira Otsuka Officer President, Dowa Electronics Materials Co., Ltd. Haruo Nishizawa Officer President, Dowa Metaltech Co., Ltd. Toshiro Sumida Officer President, Dowa Thermotech Co., Ltd. Kiyoshi Yamada Officer President, Dowa Technology Co., Ltd. ANNUAL REPORT

28 Financial Review Fiscal year ended March 31, 2015 Financial Performance During the fiscal year ended March 31, 2015, conditions throughout the Japanese economy were mixed. On the one hand, there were signs that personal consumption was weak due mainly to the impact on consumer spending of the consumption tax rate hike and an increase in the prices of imported products. On the other hand, there were indications of an upswing in corporate-sector results largely reflecting improvements in export conditions on the back of the weak yen. Turning to conditions outside Japan, the global economy was driven by growth in the United States, which experienced firm personal consumption and an increase in employment. China, on the other hand, is experiencing a slowdown in its rate of economic growth. Despite signs of a recovery in both the employment and financial environments, Europe continued to experience stagnant conditions. Looking at the business environment of the Dowa Group, global demand for automotive products remained firm. Demand was also sound in each of the smartphone and new energy fields. The prices for precious metals and copper were soft against the backdrop of a strong U.S. dollar and weak crude oil prices. Turning to foreign currency exchange rate markets, the value of the yen declined to 120/US$1 owing mainly to the easy-money policies implemented by the Bank of Japan. Under these circumstances, the Dowa Group carried out initiatives aimed at enhancing productivity and increasing orders in response to movements in market conditions and consumer behavior. Accounting for the aforementioned factors, net sales amounted to 464,219 million in the fiscal year under review, an increase of 5% compared with the previous fiscal year on a consolidated basis. From a profit perspective, consolidated operating income climbed 23% year on year to 39,094 million, consolidated ordinary income also grew 20% to 42,037 million, and consolidated net income improved 14% to 26,543 million. Forecasts for the Next Fiscal Year Management expects the global economy as a whole will continue to follow a recovery path. Despite a persistent slowdown in the rates of economic growth of certain developing countries, this positive outlook is mainly attributable to the underlying strength of the United States. Japan is also projected to experience an ongoing recovery on the back of a modest upturn in commodity prices, improvements in exports due to the weak yen, and other factors. Net Sales / Operating Income to Net Sales (Billions of yen / %) Net Income (Billions of yen) Net Sales Operating Income to Net Sales 26 DOWA HOLDINGS CO., LTD.

29 Against this backdrop, the Dowa Group will continue to steadfastly carry out various measures and strengthen business operations while working to identify global market trends. For the fiscal year ending March 31, 2016, net sales are forecast to reach billion while operating income, ordinary income, and net income attributable to the parent are expected to total 42.5 billion, 42.5 billion, and 27.0 billion, respectively. This forecast data assumes an average US dollar exchange rate of 115 and a market price for copper and zinc of $6,000/ton and $2,200/ton, respectively. Analysis of Financial Position Assets Total assets as of the end of the fiscal year under review stood at 379,193 million, up 20,475 million compared with the end of the previous fiscal year. Current assets grew 6,216 million and fixed assets increased 14,259 million. The increase in current assets was due mainly to the rise of 3,321 million in raw materials and supplies. The growth in fixed assets was largely attributable to the 9,152 million increase in investment securities as a result of a rise in the value of publicly listed stocks owned by the Group. Liabilities Liabilities decreased 8,187 million compared with the previous fiscal year-end. Despite the increase of 2,277 million in net defined benefit liability, this decrease was mainly due to a reduction in interestbearing debt of 12,995 million. Equity While net income came in at 26,543 million, the payment of cash dividends and other factors meant that the increase in shareholders equity was held to 20,820 million. Accumulated other comprehensive income climbed 8,047 million due mainly to the application of mark-to-market accounting to investment securities and an increase in foreign currency translation adjustments. As a result, equity was 28,662 million higher than the balance as of the end of the previous fiscal year, with the equity ratio rising to 49.35%. Total Assets Interest-bearing Debt (Billions of yen) (Billions of yen) ANNUAL REPORT

30 Financial Review Analysis of Cash Flows Consolidated cash and cash equivalents ( cash ) increased 2,221 million compared with the end of the previous fiscal year to 8,044 million. Net cash provided by operating activities was 38,345 million (up 8,156 million year on year). Principal cash inflows were income before income taxes and minority interests of 41,816 million (up 8,826 million) and the non-financial expenses of depreciation and amortization of 15,572 million. Major cash outflows were the decrease in trade payables of 4,104 million and income taxes paid of 13,846 million. Net cash used in investing activities was 20,321 million (up 1,631 million). This was primarily due to capital expenditures of 16,838 million mainly in the Environmental Management & Recycling business and purchases of shares of 6,254 million for expanding operations. Net cash used in financing activities was 16,905 million (up 4,564 million). This largely reflected the repayment of interest-bearing debt totaling 12,805 million and cash dividends paid of 4,653 million. (For reference) Cash Flow-related Indicator Trends Equity ratio Market price-based equity ratio Interest-bearing debt-to-cash flow ratio Interest coverage ratio *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 statement of cash flows. 5. Interest-bearing debt includes all liabilities (except lease obligations) bearing interest posted on the consolidated balance sheet. The total interest paid is the (Decrease) increase in interest payable on the consolidated statement of cash flows. Cash Flows from Operating Activities (Billions of yen) Cash Flows from Investing Activities (Billions of yen) DOWA HOLDINGS CO., LTD.

31 Basic Dividend Policy and Dividends for the Fiscal Year Under Review and the Next Fiscal Year Dowa views the payment of dividends to shareholders as one of its most important management issues. The Company 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 as well as the need to pursue business development and strengthen its financial structure, the Company intends to pay an annual dividend of 18 per share, an increase of 3 per share compared with the previous fiscal year. At present, the Company also plans to pay the same dividend of 18 per share in the fiscal year ending March 31, Business Risks The 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, Economic Conditions The 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 shrinking demand accompanying such changes. Metal and Currency Markets Among 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 Regulations The 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 performance 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 Fluctuations The Group is subject to risks due to fluctuations in stock prices stemming from the approximately 32.7 billion in marketable securities it held as of March 31, These securities primarily represent stock held in Group business partners. Interest Rate Fluctuations As of March 31, 2015, the Group s balance of interest-bearing debt was 88.6 billion, with external fund procurement accounting for 23% of total assets. Consequently, a sharp rise in interest rates could adversely affect business performance. Disasters and Power Outages The 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. ANNUAL REPORT

32 Consolidated 11-Year Summary Dowa Holdings Co., Ltd. and its Consolidated Subsidiaries For the years ended March * Financial Performance Net Sales 464, , , ,468 Cost of Sales 391, , , ,015 Selling, General and Administrative Expenses 33,616 30,111 28,863 27,443 Operating Income (Loss) 39,094 31,794 24,564 22,009 Operating Income by Segment (%) Environmental Management & Recycling (2000~) 18.80% 29.86% 26.37% 20.34% Nonferrous Metals Electronic Materials (2007~) Metal Processing (2007~) Electronic Materials & Metal Processing (2003~2006) Heat Treatment (2000~) Others and Elimination EBITDA* 2 54,667 48,000 41,551 40,354 Net Income (Loss) 26,543 23,310 15,213 10,610 Capital Expenditures 17,247 16,549 18,422 15,910 Depreciation 15,572 16,205 16,987 18,344 R&D Expenses 5,320 4,651 4,604 4,623 Exchange Rate and Metal Prices Copper (Price quoted, Average) 765, , , ,816 Zinc (Price quoted, Average) 285, , , ,683 US Dollar (Average) Financial Position Equity* 3 195, , , ,807 Minority Interests 8,528 8,733 8,807 7,999 Total Assets* 3 379, , , ,665 Interest-bearing Debt* 4 86,668 99, , ,670 Per Share (Yen) Basic Net Income (Loss) Fully Diluted Net Income* 5 Fully Diluted Equity* Cash Dividends Cash Flows Cash Flows from Operating Activities 38,345 30,189 34,970 31,499 Cash Flows from Investing Activities (20,321) (18,689) (19,354) (19,491) Cash Flows from Financing Activities (16,905) (12,341) (14,982) (24,134) Free Cash Flows 21,098 13,639 16,547 15,589 Cash and Cash Equivalents at End of Year 8,044 5,823 6,129 4,788 Ratios Return on Assets* % 8.98% 7.34% 6.67% Return on Equity* 7 * Operating Income (Loss) to Net Sales (%) Equity Ratio* Operating Income Growth (3.99) Interest Coverage (Times) Debt / Equity Ratio (Times)* Debt / Capacity Ratio (Times) Return on Invested Capital* *1. The years stated in the text are ended March 31 of the year. Thus 2015 refers to the fiscal year, which ran from April 1, 2014 through March 31, EBITDA is calculated by adding Operating Income and Depreciation. 3. The Equity and Total Assets for 2006 have been reclassified to reflect the Accounting standards for presentation of net assets in the balance sheet. 4. 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 Consolidated 11-Year Summary do not include lease obligations. 30 DOWA HOLDINGS CO., LTD.

33 () 379, , , , , , , , , , , , , ,447 26,511 25,022 26,042 31,605 26,830 26,101 24,102 22,924 13,701 (8,497) 44,319 48,733 36,897 27, % 15.35% % 18.11% 16.31% 16.32% 17.02% (1.23) 41,410 32,978 19,268 18,657 14,023 9,934 9,343 8,521 4,359 (28,138) 24,520 26,337 14,532 10,609 17,820 10,763 24,213 26,324 21,821 12,497 11,551 18,486 19,276 18,612 13,974 9,897 9,316 9,242 4,266 4,099 4,980 7,996 4,689 4,100 3, , , , , , , , , , , , , , , , , , , , ,869 94,670 6,942 5,663 5,263 6,078 4,491 3, , , , , , , , , , , , ,757 99,653 97, (94.36) ,955 25,011 33,593 40,398 13,700 17,783 17,432 (19,257) (14,602) (36,477) (39,138) (24,387) (15,616) (7,636) (15,070) (33,888) 49,303 (1,820) 9,634 (1,758) (8,917) 6,135 14,248 9,380 12,565 (6,504) 6,050 5,162 16,741 27,115 50,681 4,294 4,792 5,813 5, % 4.07% % 12.31% 14.87% 13.07% 10.89% (23.18) (2.45) (9.06) (2.79) (10.08) Fully diluted net income is not stated from 2005 to 2006 and from 2010 to 2015 because no diluted shares existed. Fully diluted net income is not stated for 2009 although diluted shares existed because a net loss per share was incurred. 6. Operating Income divided by average of Total Assets at the start and end of the year. 7. Net Income divided by average of Equity at the start and end of the year. 8. From 2007, the ratios have been calculated using shareholders equity (the amounts after deducting minority interest amounts from equity amounts). ANNUAL REPORT

34 Consolidated Balance Sheet DOWA Holdings Co., Ltd. and its Consolidated Subsidiaries As of March 31, ,517 5,857 and affiliates (Notes 4, 6 and 14) , ,717 *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, 2015 refers to the year ended March 31, * = U.S. $1, the rate of exchange on March 31, 2015, is used. 32 DOWA HOLDINGS CO., LTD.

35 15,223 25,848 Accrued directors bonuses... Reserve for employees retirement benefits (Note 12)... Reserve for directors and audit & supervisory board members retirement benefits... (14,008 thousand shares in 2015 and 14,004 thousand shares in 2014) , ,717 ANNUAL REPORT

36 Consolidated Statement of Income DOWA Holdings Co., Ltd. and its Consolidated Subsidiaries For the years ended March 31, , ,985-26,543 23, *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, 2015 refers to the year ended March 31, * = U.S. $1, the rate of exchange on March 31, 2015, is used. Consolidated Statement of Comprehensive Income DOWA Holdings Co., Ltd. and its Consolidated Subsidiaries For the years ended March 31, ,702 23,444 26,702 23,444 - Share of other comprehensive income in affiliates... 34,913 29,253 - Share of other comprehensive income in affiliates... 34,590 28,874 34,913 29,253 34,590 28,874 *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, 2015 refers to the year ended March 31, * = U.S. $1, the rate of exchange on March 31, 2015, is used. 34 DOWA HOLDINGS CO., LTD.

37 Consolidated Statement of Changes in Equity DOWA Holdings Co., Ltd. and its Consolidated Subsidiaries For the years ended March 31, 2015 Shareholders Equity 36,437 26,362 68,180 ( 5,688) due to increase in number of consolidated subsidiaries ,437 26,362 87,806 ( 5,695) ,437 26,362 86,475 ( 5,695) due to increase in number of consolidated subsidiaries ,437 26, ,630 ( 5,699) Shareholders Equity due to increase in number of consolidated subsidiaries *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, 2015 refers to the year ended March 31, * = U.S. $1, the rate of exchange on March 31, 2015, is used. ANNUAL REPORT

38 Consolidated Statement of Changes in Equity 8, ( 777) - 133,593 8, , due to increase in number of consolidated subsidiaries , ,604 ( 523) 158,253 8, , , ,604 ( 523) 156,922 8, , due to increase in number of consolidated subsidiaries ,801 (197) 6,167 (381) 187,121 8, , due to increase in number of consolidated subsidiaries DOWA HOLDINGS CO., LTD.

39 Consolidated Statement of Cash Flows DOWA Holdings Co., Ltd. and its Consolidated Subsidiaries For the years ended March 31, ,816 32,989 - Increase in reserve for employees retirement benefits ,044 5,823 *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, 2015 refers to the year ended March 31, * = U.S. $1, the rate of exchange on March 31, 2015, is used. ANNUAL REPORT

40 Notes to Consolidated Financial Statements DOWA Holdings Co., Ltd. and its Consolidated Subsidiaries Years ended March 31, 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. Japanese yen figures are rounded down to the nearest 1 million (U.S. $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. In addition, certain reclassifications have been made in the 2014 consolidated financial statements to conform to the classifications used in 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 to U.S. $1, the approximate rate of exchange at March 31, 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, 2015, include the accounts of the Company and its 77 significant (74 in 2014) 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 investment in 15 significant (14 in 2014) affiliate companies are accounted for by the equity method. Investments in the remaining nonconsolidated subsidiaries and affiliate companies are stated at cost because of their immaterial effect on the consolidated financial statements. The excess of the cost of acquisition over the fair value of the net assets of an acquired subsidiary at the date of acquisition is being amortized on a straight-line basis within 20 years. (a) Note Regarding Consolidation (2015) The consolidated financial statements for the year ended March 31, 2015, newly include DOWA METALS & MINING (THAILAND) CO., LTD., PT. DOWA THERMOTECH INDONESIA and PT. DOWA THERMOTECH FURNACES, which were nonconsolidated subsidiaries in the consolidated financial statements for the year ended March 31, 2014, from the viewpoint of materiality. Newly established during this fiscal year, DMM Palmer Co., Ltd. has been included within consolidation. Furthermore, Tianjin Dowa Green Angel Summit Recycling Co., Ltd. has been excluded from consolidation because substantive control over the company was not recognized. (2014) The consolidated financial statements for the year ended March 31, 2014, newly include NIPPON PGM AMERICA, INC. and Nippon PGM Europe s.r.o., which were nonconsolidated subsidiaries in the consolidated financial statements for the year ended March 31, 2013, from the viewpoint of materiality. Newly established during this fiscal year, Dowa Metals & Mining Alaska Ltd. has been included within consolidation. (b) Accounting Period of Foreign Subsidiaries In preparing the consolidated financial statements for the year ended March 31, 2015, the Company used the financial statements with an account closing date of December 31, 2014, in the cases of 17 foreign subsidiaries including Modern Asia Environmental Holdings, Inc.; Dowa Environmental Management Co., Ltd.; Dowa Advanced Materials (Shanghai) Co., Ltd.; and other companies. Material transactions that occurred between January 1, 2015, and March 31, 2015, were adjusted in the consolidated financial statements, as necessary. 38 DOWA HOLDINGS CO., LTD.

41 (2) Cash and Cash Equivalents Cash and cash equivalents in the consolidated statement 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 nonconsolidated subsidiaries and affiliates are accounted for by the equity method. In certain cases, investments in nonconsolidated 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 and losses on these securities are stated, net of applicable taxes, as unrealized gains on available-for-sale securities on the consolidated balance sheet. Available-for-sale securities without market quotations are stated at cost by using the moving-average method. In cases where the fair value of equity securities issued by nonconsolidated 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 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 statement of income as incurred. Expenses relating to the development of internal use computer software are charged to the consolidated statement of income when incurred, except when it is determined that 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. ANNUAL REPORT

42 Notes to Consolidated Financial Statements (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 fixed assets owned by the Group. (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 the existing lease accounting standard, 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 an 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 the 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 the year-end. (12) Reserve for Employees Retirement Benefits (a) When calculating retirement benefit obligations, the benefit formula method is used for attributing expected retirement benefits to periods through March 31, (b) Method of amortization for actuarial differences Unrecognized actuarial differences are treated as an expense and recognized from the following consolidated fiscal year on a straight-line basis over 5 years within the average remaining service period when incurred. (c) Adoption of the simplified method in some consolidated subsidiaries In the calculation of retirement benefit costs and liabilities, some consolidated subsidiaries adopt the simplified method, by which total payments pertaining to retirement benefits as required for personal reasons as of the end of the term are treated as retirement benefit obligations. In May 2012, the Accounting Standards Board of Japan (ASBJ) issued ASBJ Statement No. 26, "Accounting Standard for Retirement Benefits" and ASBJ Guidance No. 25, "Guidance on Accounting Standard for Retirement Benefits," which replaced the accounting standard for retirement benefits that had been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000, and the other related practical guidance, and were followed by partial amendments from time to time through (a) Under the revised accounting standard, actuarial differences and past service costs that are yet to be recognized in profit or loss are recognized within equity (accumulated other comprehensive income), after adjusting for tax effects, and any resulting deficit or surplus is recognized as a liability (liability for retirement benefits) or asset (asset for retirement benefits). 40 DOWA HOLDINGS CO., LTD.

43 (b) The revised accounting standard does not change how to recognize actuarial differences and past service costs in profit or loss. Those amounts are recognized in profit or loss over a certain period no longer than the expected average remaining service period of the employees. However, actuarial differences and past service costs that arose in the current period and have not yet been recognized in profit or loss are included in other comprehensive income and actuarial differences and past service costs that were recognized in other comprehensive income in prior periods and then recognized in profit or loss in the current period shall be treated as reclassification adjustments (see Note 12). (c) The revised accounting standard also made certain amendments relating to the method of attributing expected benefit to periods and relating to the discount rate and expected future salary increases. This accounting standard and the guidance for (a) and (b) above are effective for the end of annual periods beginning on or after April 1, 2013, and for (c) above are effective for the beginning of annual periods beginning on or after April 1, 2014, or for the beginning of annual periods beginning on or after April 1, 2015, subject to certain disclosure in March 2015, both with earlier application being permitted from the beginning of annual periods beginning on or after April 1, However, no retrospective application of this accounting standard to consolidated financial statements in prior periods is required. The Company applied the revised accounting standard and guidance for retirement benefits for (a) and (b) above, effective March 31, 2014, and for (c) above, effective April 1, With respect to (c) above, the Company changed the method of attributing the expected benefit to periods from a straight-line basis to a benefit formula basis, the method of determining the discount rate from using the period which approximates the expected average remaining service period to using a single weighted average discount rate reflecting the estimated timing and amount of benefit payment and the method of estimating expected future salary increases from salary increases expected to be certain to salary increases expected, and recorded the effect of (c) above as of April 1, 2014, in retained earnings. As a result, reserve for employees retirement benefits as of April 1, 2014, increased by 1,823 million ($15,173 thousand), and retained earnings as of April 1, 2014, decreased by 1,331 million ($11,077 thousand). (13) Reserve for Directors and Audit & Supervisory Board Members Retirement Benefits Some of the Company s subsidiaries also provide for the liability for directors and audit & supervisory board members 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. Those amounts are included in other long-term liabilities in the consolidated balance sheet. (15) Construction Contracts The construction revenue and construction costs are 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. ANNUAL REPORT

44 Notes to Consolidated Financial Statements (16) 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. 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. (17) 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 statement 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 mainly 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. (18) Accounting Treatment for Consumption Tax All transactions are recorded net of consumption tax. (19) Consolidated Tax Return The Group files a tax return under the consolidated corporate-tax system, which allows companies to base tax payments on the combined profits or losses of the parent company and its wholly owned domestic subsidiaries. (20) 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. (21) New Accounting Pronouncements Accounting Standards for Business Combinations and Consolidated Financial Statements In September, 2013, the ASBJ issued revised ASBJ Statement No. 21, "Accounting Standard for Business Combinations," revised ASBJ Guidance No. 10, "Guidance on Accounting Standards for Business Combinations and Business Divestitures," and revised ASBJ Statement No. 22, "Accounting Standard for Consolidated Financial Statements." Major accounting changes are as follows: (a) Transactions with noncontrolling interest A parent's ownership interest in a subsidiary might change if the parent purchases or sells ownership interests in its subsidiary. The carrying amount of minority interest is adjusted to reflect the change in the parent's ownership interest in its subsidiary while the parent retains its controlling interest in its subsidiary. Under the current accounting standard, any difference between the fair value of the consideration received or paid and the amount by which the minority interest is adjusted is accounted for as an adjustment of goodwill or as profit or loss in the consolidated statement of income. Under the revised accounting standard, such difference shall be accounted for as capital surplus as long as the parent retains control over its subsidiary. 42 DOWA HOLDINGS CO., LTD.

45 (b) Presentation of the consolidated balance sheet In the consolidated balance sheet, "minority interest" under the current accounting standard will be changed to "noncontrolling interest" under the revised accounting standard. (c) Presentation of the consolidated statement of income In the consolidated statement of income, "income before minority interest" under the current accounting standard will be changed to "net income" under the revised accounting standard, and "net income" under the current accounting standard will be changed to "net income attributable to owners of the parent" under the revised accounting standard. (d) Provisional accounting treatments for a business combination If the initial accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs, an acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. Under the current accounting standard guidance, the impact of adjustments to provisional amounts recorded in a business combination on profit or loss is recognized as profit or loss in the year in which the measurement is completed. Under the revised accounting standard guidance, during the measurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date and that would have affected the measurement of the amounts recognized as of that date. Such adjustments shall be recognized as if the accounting for the business combination had been completed at the acquisition date. (e) Acquisition-related costs Acquisition-related costs are costs, such as advisory fees or professional fees, which an acquirer incurs to effect a business combination. Under the current accounting standard, the acquirer accounts for acquisition-related costs by including them in the acquisition costs of the investment. Under the revised accounting standard, acquisition-related costs shall be accounted for as expenses in the periods in which the costs are incurred. The above accounting standards and guidance for (a) transactions with noncontrolling interest, (b) presentation of the consolidated balance sheet, (c) presentation of the consolidated statement of income, and (e) acquisition-related costs are effective for the beginning of annual periods beginning on or after April 1, Earlier application is permitted from the beginning of annual periods beginning on or after April 1, 2014, except for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income. In the case of earlier application, all accounting standards and guidance above, except for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income, should be applied simultaneously. Either retrospective or prospective application of the revised accounting standards and guidance for (a) transactions with noncontrolling interest and (e) acquisition-related costs is permitted. In retrospective application of the revised standards and guidance, the accumulated effects of retrospective adjustments for all (a) transactions with noncontrolling interest and (e) acquisition-related costs which occurred in the past shall be reflected as adjustments to the beginning balance of capital surplus and retained earnings for the year of the first-time application. In prospective application, the new standards and guidance shall be applied prospectively from the beginning of the year of the first-time application. The revised accounting standards and guidance for (b) presentation of the consolidated balance sheet and (c) presentation of the consolidated statement of income shall be applied to all periods presented in financial statements containing the first-time application of the revised standards and guidance. The revised standards and guidance for (d) provisional accounting treatments for a business combination are effective for a business combination which occurs on or after the beginning of annual periods beginning on or after April 1, Earlier application is permitted for a business combination which occurs on or after the beginning of annual periods beginning on or after April 1, The Company expects to apply the revised accounting standards and guidance for (a), (b), (c) and (e) above from April 1, 2015, and for (d) above for a business combination which will occur on or after April 1, 2015, and is in the process of measuring the effects of applying the revised accounting standards and guidance in future applicable periods. ANNUAL REPORT

46 Notes to Consolidated Financial Statements 3. Cash and Cash Equivalents Cash and cash equivalents at March 31, 2015 and 2014, consisted of the following: Thousands of U.S. dollars (Note 1) Cash and time deposits 8,517 5,857 $70,876 Time deposits with deposit terms of over three months (472) (34) (3,932) Cash and cash equivalents 8,044 5,823 $66, Investments Investments at March 31, 2015 and 2014, consisted of the following: Thousands of U.S. dollars (Note 1) Investments in and advances to nonconsolidated subsidiaries 37,332 34,066 $310,663 and affiliates Available-for-sale securities with market quotations 32,721 26, ,290 Unlisted securities 2,167 1,942 18,039 Total 72,221 62,490 $600,993 The net unrealized gains on the available-for-sale securities with market quotations as of March 31, 2015 and 2014, were 21,028 million (U.S. $174,985 thousand) and 14,763 million, respectively. Available-for-sale securities that the Group sold during the years ended March 31, 2015 and 2014, consisted of the following: Thousands of U.S. dollars (Note 1) Proceeds from sales $1,858 Gain on sales ,339 Loss on sales Long-lived Assets The Group reviewed its long-lived assets for impairment as of the years ended March 31, 2015 and 2014, and, as a result, recognized a loss on impairment of 536 million (U.S. $4,462 thousand) and 52 million, respectively, as other expenses for idle assets, due to a decline of market value. 44 DOWA HOLDINGS CO., LTD.

47 6. 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 0.53% to 5.60% (an approximate average rate of 0.93%) per annum at March 31, 2015, and 0.48% to 10.30% (an approximate average rate of 0.99%) per annum at March 31, 2014, respectively. Commercial paper from banks and other financial institutions were represented by commercial paper bearing interest at an approximate average rate of 0.09% per annum at March 31, 2015, and an approximate average rate of 0.09% per annum at March 31, It is customary in Japan for short-term borrowings to be rolled over each year. At March 31, 2015 and 2014, long-term debt consisted of the following: Thousands of U.S. dollars (Note 1) % to 10.25% loans, principally from banks and due between 2015 and 2030: Collateralized 18,381 22,704 $152,959 Unsecured 25,063 31, , % straight bonds due ,000-83, % straight bonds due ,000 - Lease obligations 1, ,103 Total 54,658 64, ,844 Long-term debt, bonds, and lease obligations (due within one year) 15,549 26, ,397 Long-term debt (due after one year) 39,108 38,671 $325,446 At March 31, 2015 and 2014, the following assets were pledged as collateral for short-term borrowings and the long-term debt of the Group: Thousands of U.S. dollars (Note 1) Cash and time deposits $3,726 Property, plant, and equipment, less accumulated depreciation ,109 Investments in and advances to affiliates 2,411 2,395 20,067 Investments in securities 4,072 4,222 33,890 Total 7,185 6,874 $59,793 Annual maturities of long-term debt as of March 31, 2015, for the next five years and thereafter were as follows: Millions of yen Thousands of U.S. dollars (Note 1) ,235 $126, ,358 94, ,724 64, ,755 39, and thereafter 4,369 36,358 Total 43,444 $361,524 ANNUAL REPORT

48 Notes to Consolidated Financial Statements 7. Contingent Liabilities At March 31, 2015 and 2014, the Group guaranteed loans incurred by nonconsolidated subsidiaries and affiliates in the amount of 3,824 million (U.S. $31,822 thousand) and 5,377 million, respectively. 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, 2015 and 2014, in connection with this structured finance agreement and the maximum repurchase commitment, the Company s exposure was 580 million (U.S. $4,832 thousand) and 470 million, respectively. 8. Equity Japanese companies are subject to the Corporate Law of Japan (the Companies Act ). 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 an audit & supervisory board, and (4) the term of service of the directors is 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 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 are 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. 46 DOWA HOLDINGS CO., LTD.

49 9. 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 a normal effective statutory tax rate of approximately 35.0% and 37.0% for 2015 and 2014, respectively. The provision for income taxes is computed based on the pretax income included in the consolidated statement 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, 2015 and 2014, the significant components of deferred tax assets and liabilities were as follows: Thousands of U.S. dollars (Note 1) Deferred tax assets Reserve for employees retirement benefits 4,646 4,161 $38,665 Consolidated subsidiaries deficit 3,882 6,194 32,306 Unrealized earnings 2,713 2,753 22,576 Loss on devaluation of investment securities 2,386 1,905 19,858 Loss on devaluation of inventories 1,542 1,212 12,838 Loss on impairments of property, plant, and equipment 1,375 1,334 11,443 Accrued bonus 1,199 1,178 9,979 Accrued enterprise tax ,843 Loss on disposal of property, plant, and equipment ,770 Reserve for directors and audit & supervisory board members ,883 retirement benefits Excess depreciation ,396 Deferred losses on derivatives under hedge accounting Allowance for doubtful accounts Unrealized gains on available-for-sale securities Others 3,296 3,337 27,430 Total 22,508 23, ,308 Valuation allowance (9,780) (11,425) (81,385) Deferred tax assets 12,728 11, ,923 Deferred tax liabilities Unrealized gains on available-for-sale securities (5,976) (4,514) (49,731) Unrealized gains on land (765) (818) (6,374) Special depreciation reserve (10) (15) (90) Enterprise tax receivable (7) (3) (61) Deferred gains on derivatives under hedge accounting (0) (166) (4) Others (1,767) (1,094) (14,707) Deferred tax liabilities (8,528) (6,612) (70,969) Net deferred tax assets 4,200 5,299 $34,953 The components of net deferred tax assets (liabilities) at March 31, 2015 and 2014, were as follows: Thousands of U.S. dollars (Note 1) Deferred tax assets, current 5,248 4,713 $43,675 Deferred tax assets, noncurrent 3,372 3,527 28,060 Deferred tax liabilities, noncurrent (4,420) (2,940) (36,782) ANNUAL REPORT

50 Notes to Consolidated Financial Statements For the year ended March 31, 2014, the reconciliation of the normal effective statutory tax rate to the actual effective tax rate was as follows: 2014 Normal effective statutory tax rate 37.0% Valuation allowance (6.6) Equity in earnings of affiliates (2.8) Tax credits (1.4) Nontaxable items, including dividend income (0.3) Difference of tax rate on special corporate tax for reconstruction 0.7 Nondeductible items, including entertainment expenses 0.7 Inhabitants tax 0.3 Others 1.2 Actual effective tax rate 28.9% (Note) For the year ended March 31, 2015, the difference between the normal effective statutory tax rate and the actual effective tax rate after the application of deferred tax accounting was less than 5% of the normal effective statutory tax rate. Accordingly, disclosure of the reconciliation has been omitted. New tax reform laws enacted in 2015 in Japan changed the normal effective statutory tax rate for the fiscal year beginning on or after April 1, 2015, to approximately 33.5% and for the fiscal year beginning on or after April 1, 2016, to approximately 32.75%. The effect of these changes was to increase deferred tax assets, net of deferred tax liabilities, by 61 million (U.S. $514 thousand), accumulated other comprehensive income for unrealized gain on available-for-sale securities by 409 million (U.S. $3,408 thousand), deferred loss on derivatives under hedge accounting by 1 million (U.S. $15 thousand), in related deferred tax liability, in the consolidated balance sheet as of March 31, 2015, and to increase income taxes deferred in the consolidated statement of income for the year then ended by 345 million (U.S. $2,877 thousand). 10. Research and Development Expenses Research and development expenses for the years ended March 31, 2015 and 2014, were 4,199 million (U.S. $34,947 thousand) and 4,078 million, respectively. 11. Leases (1) As discussed in Note 2. (8), the Group accounts for leases, which existed at March 31, 2008, and which 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, and depreciation expense, on an as if capitalized basis for the years ended March 31, 2015 and 2014, is as follows: Thousands of U.S. dollars (Note 1) Machinery and equipment Others Total Machinery and equipment Others Total Machinery and equipment Others Total Acquisition cost $2,002 $463 $2,466 Accumulated depreciation , ,466 Net book value $- $- $- 48 DOWA HOLDINGS CO., LTD.

51 Thousands of U.S. dollars (Note 1) Lease rental expenses for the year $109 Depreciation expense The amounts of outstanding future lease payments under finance leases due at March 31, 2015 and 2014, including the portion of interest thereon, are summarized as follows: Future lease payments Thousands of U.S. dollars (Note 1) Within one year - 13 $- Over one year Total - 13 $- (2) The amounts of outstanding future leases payable and receivable payments under noncancelable operating leases due at March 31, 2015 and 2014, are summarized as follows: Operating leases (lessee) Thousands of U.S. dollars (Note 1) Within one year $2,083 Over one year ,226 Total 1, $9,310 Thousands of U.S. dollars (Note 1) Operating leases (lessor) Within one year $291 Over one year Total $ Employees Retirement Benefit Plan The Company and its consolidated subsidiaries have adopted lump-sum benefit plans as their defined benefit pension plans. In addition, the Company and certain consolidated subsidiaries have adopted contributory defined benefit pension plans. Meanwhile, certain consolidated subsidiaries have adopted the Smaller Enterprise Retirement Allowance Mutual Aid (SERAMA) Scheme. Moreover, the payment of a premium severance amount that falls outside the scope of retirement benefit obligations based on computations that comply with accounting standards for retirement benefits may arise at the time of an employee s retirement. Further, the lump-sum benefit plans adopted by certain consolidated subsidiaries calculate the liabilities for employees retirement benefits and retirement benefit expenses using the simplified method. ANNUAL REPORT

52 Notes to Consolidated Financial Statements (1) The changes in defined benefit obligations relating to defined benefit plans in the consolidated fiscal years ended March 31, 2015 and 2014, are as follows: Thousands of U.S. dollars (Note 1) Balance at beginning of year (as previously reported) 6,677 6,327 $55,569 Cumulative effect of accounting change 1,823-15,173 Balance at beginning of year (as restated) 8,501 6,327 70,742 Service cost ,923 Interest expense Actuarial difference Benefit paid (432) (269) (3,601) Other Balance at end of year 8,797 6,677 $73,204 (2) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligation and plan assets is as follows: Thousands of U.S. dollars (Note 1) Funded defined benefit obligation - - $- Plan assets Unfunded defined benefit obligation 8,797 6,677 73,204 Net liability arising from defined benefit obligation 8,797 6,677 $73,204 (3) The components of net periodic benefit costs for the years ended March 31, 2015 and 2014, are as follows: Thousands of U.S. dollars (Note 1) Service cost $4,923 Interest expense Recognized actuarial differences ,750 Other Net periodic benefit costs $7,302 (4) Amounts recognizes in other comprehensive income (before income tax effect) in respect of defined retirement benefit plans for the years ended March 31, 2015 and 2014, are as follows: Thousandsof U.S. dollars (Note 1) Actuarial differences $1,083 Total $1, DOWA HOLDINGS CO., LTD.

53 (5) Amounts recognizes in accumulated other comprehensive income (before income tax effect) in respect of defined retirement benefit plans as of March 31, 2015 and 2014, are as follows: Thousands of U.S. dollars (Note 1) Unrecognized actuarial difference $4,146 Total $4,146 (6) Matters concerning the assumptions to the main actuarial calculations related to defined benefit plans as of March 31, 2015 and 2014, are as follows: Discount rate 0.88% 1.54% The Company uses the index of salary increases by age at March 31, 2015 as the expected rate of future salary increases. (Note) Excluding plans applying the simplified method (7) The changes in defined benefit obligations related to defined benefit plans to which the simplified method is applied in the consolidated fiscal year ended March 31, 2015 and 2014, are as follows: Thousands of U.S. dollars (Note 1) Balance at beginning of year 5,552 5,492 $46,206 Retirement benefit expenses ,342 Benefit paid (363) (438) (3,020) Other (0) (29) (0) Balance at end of year 5,711 5,552 $47,526 (8) Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined benefit obligation and plan assets that apply the simplified method as of March 31, 2015 and 2014 is as follows: Thousands of U.S. dollars (Note 1) Funded defined benefit obligation - - $- Plan assets Unfunded defined benefit obligation 5,711 5,552 47,526 Net liability arising from defined benefit obligation 5,711 5,552 $47,526 (9) The retirement benefit costs related to defined benefit plans calculated by the simplified method in the consolidated fiscal years ended March 31, 2015 and 2014, are as follows: Thousands of U.S. dollars (Note 1) Retirement benefit costs calculated by simplified method $4,342 ANNUAL REPORT

54 Notes to Consolidated Financial Statements (10) The required contributions to defined contribution plans of the Company and its consolidated subsidiaries in the consolidated fiscal years ended March 31, 2015 and 2014, are as follows: Thousands of U.S. dollars (Note 1) Required contributions to defined contribution plans $3, Loss on Devaluation of Inventories The Group recorded the following loss on devaluation of inventories held for ordinary sales purposes due to impairments reflecting a drop in profitability for the years ended March 31, 2015 and 2014: Thousands of U.S. dollars (Note 1) Cost of sales 773 1,279 $6, Financial Instruments (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, 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 to not 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 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. 52 DOWA HOLDINGS CO., LTD.

55 (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 15. Derivatives, in and of 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 sheet and their fair values as of March 31, 2015 and 2014, 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 (refer to (b) below). As of March 31, 2015 Carrying amount Fair value Unrealized gains (losses) Carrying amount Thousands of U.S. dollars (Note 1) Fair value Unrealized gains (losses) (1) Cash and time deposits 8,517 8,517 - $70,876 $70,876 $- (2) Notes and accounts receivable (*1) 73,126 73, , ,528 - (3) Investments in securities (*2) 48,108 51,451 3, , ,157 27,822 Total 129, ,095 3,343 $1,079,739 $1,107,562 $27,822 (1) Notes and accounts payable (*3) 31,041 31, , ,315 - (2) Commercial paper 18,000 18, , ,787 - (3) Short-term borrowings 15,223 15, , ,684 - (4) Long-term debt (including repayments due within one year) (*4) 53,444 53, , , Total 117, , $979,528 $979,998 $469 Derivatives (*5) (755) (755) - $(6,283) $(6,283) $- ANNUAL REPORT

56 Notes to Consolidated Financial Statements As of March 31, 2014 Carrying amount Fair value Unrealized gains (losses) (1) Cash and time deposits 5,857 5,857 - (2) Notes and accounts receivable (*1) 71,838 71,838 - (3) Investments in securities (*2) 41,767 39,005 (2,762) Total 119, ,701 (2,762) (1) Notes and accounts payable (*3) 34,502 34,502 - (2) Commercial paper 10,000 10,000 - (3) Short-term borrowings 25,848 25,848 - (4) Long-term debt (including repayments due within one year) (*4) 63,814 64, Total 134, , Derivatives (*5) (547) (547) - (*1) Assets (2): Notes and accounts receivable as of March 31, 2015 and 2014, stated above are obtained by subtracting advances paid of 367 million (U.S. $3,056 thousand) and 520 million, accounts receivable other of 5,758 million (U.S. $47,917 thousand) and 7,591 million, and loans of 274 million (U.S. $2,286 thousand) and 466 million from the amount of notes and accounts receivable of 79,527 million (U.S. $661,788 thousand) and 80,416 million, presented in the consolidated balance sheet. (*2) Assets (3): Investments in securities as of March 31, 2015 and 2014, stated above are obtained by subtracting financial instruments whose fair values are deemed extremely difficult to assess of 22,655 million (U.S. $188,524 thousand) and 19,845 million and long-term loans of 1,456 million (U.S. $12,121 thousand) and 878 million from the sum of investments in securities of 34,888 million (U.S. $290,329 thousand) and 28,423 million, and investments in and advances to nonconsolidated subsidiaries and affiliates of 37,332 million (U.S. $310,663 thousand) and 34,066 million presented in the consolidated balance sheet. (*3) Liabilities (1): Notes and accounts payable as of March 31, 2015 and 2014, stated above are obtained by subtracting accounts payable other of 5,617million (U.S. $46,744 thousand) and 3,711 million and deposits received of 468 million (U.S. $3,899 thousand) and 541 million from notes and accounts payable of 37,127 million (U.S. $308,959 thousand) and 38,755 million presented in the consolidated balance sheet. (*4) Liabilities (4): Long-term debt as of March 31, 2015 and 2014, stated above is obtained by subtracting lease obligations of 1,214 million (U.S. $10,103 thousand) and 878 million from the sum of current maturities of long-term debt of 15,549 million (U.S. $129,397 thousand) and 26,022 million and long-term debt of 39,108 million (U.S. $325,446 thousand) and 38,671 million presented in the consolidated balance sheet. (*5) Derivative transactions stated above are stated net of assets and liabilities. (a) Fair value measurement 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 using market prices from stock exchanges. Liabilities (1) Notes and accounts payable, (2) Commercial paper, and (3) 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. (4) Long-term debt (including repayment due within one year) The fair value of this account 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 (refer to Note 15. 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 Refer to Note 15. Derivatives. 54 DOWA HOLDINGS CO., LTD.

57 (b) Financial instruments whose fair value is deemed extremely difficult to measure Thousands of U.S. dollars (Note 1) Classification Unlisted securities and others (carrying amount) 22,655 19,845 $188,524 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. (c) Maturity analysis for financial assets with contractual maturities As of March 31, 2015 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 1, Notes and accounts receivable 73, Total 74, As of March 31, 2015 Due in one year or less Thousands of U.S. dollars (Note 1) Due after one year through five years Due after five years through ten years Due after ten years Cash and time deposits $10,421 $- $- $- Notes and accounts receivable 608, Total $618,949 $- $- $- As of March 31, 2014 Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years Cash and time deposits Notes and accounts receivable 71, Total 71, (d) Maturity analysis for long-term debt See Note 6. Short-term Borrowings and Long-term Debt 15. Derivatives The Group had the following derivative contracts outstanding at March 31, 2015 and 2014: (1) Derivative Transactions to which Hedge Accounting is Not Applied Currency-related transactions (2015) Transactions not conducted on the open market Thousands of U.S. dollars (Note 1) Type Contract amount Over one year Fair value Unrealized gains/losses Contract amount Over one year Fair value Unrealized gains/losses Forward Exchange Contract Transactions Selling U.S.$ 17,882 - (222) (222) $148,812 $- $(1,847) $(1,847) Thai Baht (46) (46) 6,334 - (387) (387) Total (268) $- $- $- $(2,235) ANNUAL REPORT

58 Notes to Consolidated Financial Statements Commodity-related transactions (2015) Transactions not conducted on the open market Thousands of U.S. dollars (Note 1) Type Nonferrous Metal Forward Contracts Selling Contract amount Over one year Fair value Unrealized gains/losses Contract amount Over one year Fair value Unrealized gains/losses Gold (4) (4) $4,169 $- $(35) $(35) Silver 2,830 - (22) (22) 23,556 - (190) (190) Zinc (4) (4) 3,537 - (34) (34) Copper 12,194 - (85) (85) 101,479 - (715) (715) Lead 6 - (0) (0) 53 - (0) (0) Nickel Buying Copper 10,237 - (108) (108) 85,194 - (906) (906) Total (221) $- $- $- $(1,842) Currency-related transactions (2014) Transactions not conducted on the open market Type Forward Exchange Contract Transactions Selling Contract amount Over one year Fair value Unrealized gains/losses U.S.$ 8, Thai Baht (7) (7) Buying U.S.$ Total Commodity-related transactions (2014) Transactions not conducted on the open market Type Nonferrous Metal Forward Contracts Selling Contract amount Over one year Fair value Unrealized gains/losses Gold 2, Silver 3, Zinc Copper 11, Nickel 50 - (6) (6) Buying Copper 9,697 - (613) (613) Total (Note) Fair value was calculated using quotations obtained from the commodity futures market and the exchange futures market as of March 31, 2015 and DOWA HOLDINGS CO., LTD.

59 (2) Derivative Transactions to which Hedge Accounting is Applied Currency-related transactions (2015) Transactions not conducted on the open market Treatment Type Hedged item Standard treatment Currency swaps under designated hedge accounting Forward exchange contract transactions Accounts receivable Contract amount Thousands of U.S. dollars (Note 1) Over one year Fair value Contract amount Over one year Fair value Selling U.S.$ (4) $5,838 $- $(35) Thai Baht (5) 1,797 - (42) Forward exchange contract transactions Accounts receivable Selling U.S.$ 1,454 - (*1) $12,104 $- (*1) Thai Baht (*1) 7,446 - (*1) Total $- $- $- Interest-related transactions (2015) Transactions not conducted on the open market Treatment Type Hedged item Interest rate swaps under special accounting treatment Interest rate swaps Fixed rate payment, Floating rate receipt Long-term debt Contract amount Thousands of U.S. dollars (Note 1) Over one year Fair value Contract amount Over one year Fair value 19,877 17,752 (*2) $165,408 $147,724 (*2) Total $- $- $- Commodity-related transactions (2015) Transactions not conducted on the open market Treatment Type Hedged item Contract amount Standard treatment Thousands of U.S. dollars (Note 1) Over one year Fair value Contract amount Over one year Fair value Nonferrous Metal Inventory Forward Contracts Selling Gold 5, $43,908 $- $90 Silver 6,757 - (74) 56,234 - (616) Zinc 8,662 - (16) 72,086 - (137) Copper 5,699 - (300) 47,432 - (2,502) Lead (1) 1,017 - (9) Buying Silver $4,912 $- $92 Zinc , Copper 4, , Total $- $- $- ANNUAL REPORT

60 Notes to Consolidated Financial Statements Currency-related transactions (2014) Transactions not conducted on the open market Treatment Type Hedged item Standard treatment Currency swaps under designated hedge accounting Forward exchange contract transactions Accounts receivable Contract amount Over one year Fair value Selling U.S.$ (1) Forward exchange contract transactions Selling U.S.$ 1,688 - (*1) Euro 16 - (*1) Thai Baht (*1) Total Interest-related transactions (2014) Transactions not conducted on the open market Treatment Type Hedged item Interest rate swaps under special accounting treatment Interest rate swaps Fixed rate payment, Floating rate receipt Long-term debt Contract amount Over one year Fair value 24,919 23,885 (*2) Total Commodity-related transactions (2014) Transactions not conducted on the open market Treatment Type Hedged item Contract amount Standard treatment Nonferrous Metal Forward Contracts Inventory Over one year Fair value Selling Gold 6,368 - (100) Silver 7, Zinc 6, Copper 9, Lead 21-0 Buying Silver (33) Zinc (0) Copper 4,227 - (63) Total (Note) Fair value was calculated using quotations obtained from the commodity futures market and the exchange futures market as of March 31, 2015 and (*1) The fair values of currency swaps under designated hedge accounting are included in the fair values of accounts receivable because they are accounted for as an integral part of accounts receivable, which are hedged items. (*2) The fair values of interest rate swaps under special accounting treatment are included in the fair values of long-term debt because they are accounted for as an integral part of long-term debt, which are hedged items. 58 DOWA HOLDINGS CO., LTD.

61 16. Comprehensive Income The components of other comprehensive income for the years ended March 31, 2015 and 2014, were as follows: Thousands of U.S. dollars (Note 1) Unrealized gain on available-for-sale securities: Gain arising during the year 6,314 2,362 $52,548 Reclassification adjustments to profit or loss (55) (17) (463) Amount before income tax effect 6,258 2,345 52,084 Income tax effect (1,467) (833) (12,208) Total 4,791 1,511 $39,876 Deferred (loss) gain on derivatives under hedge accounting: Loss arising during the year (2,068) (5) $(17,212) Reclassification adjustments to profit or loss 1, ,070 Amount before income tax effect (738) 266 (6,141) Income tax effect 230 (88) 1,914 Total (508) 177 $(4,227) Foreign currency translation adjustments: Adjustments arising during the year 3,162 2,274 $26,320 Reclassification adjustments to profit or loss (139) - (1,157) Amount before income tax effect 3,023 2,274 25,162 Income tax effect Total 3,023 2,274 $25,162 Defined retirement benefit plan Adjustments arising during the year (56) - $(470) Reclassification adjustments to profit or loss 186-1,554 Amount before income tax effect 130-1,083 Income tax effect (38) - (323) Total 91 - $760 Share of other comprehensive income in associates: Gain arising during the year 1,214 2,368 $10,107 Reclassification adjustments to profit or loss (402) (522) (3,348) Total 812 1,846 $6,758 Total other comprehensive income 8,211 5,808 $68,329 ANNUAL REPORT

62 Notes to Consolidated Financial Statements 17. Subsequent Event The following appropriation of retained earnings at March 31, 2015, was approved at the Board of Directors meeting held on May 19, 2015: Thousands of U.S. dollars (Note 1) Year-end cash dividends, 18 (U.S. $0.1) per share 5,409 $45, Segment Information (1) Outline of reporting segments The Company s reporting segments are the components of the Group 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 Group conducts waste treatment, soil remediation, resource recycling, logistics, and other operations. In the Nonferrous Metals segment, the Group produces and sells copper, zinc, lead, gold, silver, zinc alloys, platinum, palladium, rhodium, indium, sulfuric acid, tin, antimony, and other materials. In the Electronic Materials segment, the Group produces and sells high-purity metal materials, compound semiconductor wafers, LEDs, conductive materials, battery materials, magnetic materials, reduced iron powder, and other materials. In the Metal Processing segment, the Group produces and sells copper, brass and copper alloy strips, electroplated products, brass rods, metal-ceramic substrates, and other materials. In the Heat Treatment segment, the Group provides heat and surface treatment of metallic materials, such as automobile components, and manufactures, sells, and provides maintenance of industrial furnaces and ancillary equipment. (2) Method for calculating sales, income and loss, assets and liabilities, and other amounts by the reporting segment The accounting treatment and methods for the reporting segments are largely consistent with Note 1. Basis of Presentation of the Consolidated Financial Statements, and Note 2. Summary of Significant Accounting Policies. Segment income for each reporting segment is presented on an operating income basis. Intersegment sales and transfers are measured based on prices that reflect actual market conditions. 60 DOWA HOLDINGS CO., LTD.

63 (3) Information on sales, income and loss, assets and liabilities, and other amounts by reporting segment Segment information as of March 31, 2015 and 2014, is summarized as follows: 2015 Net sales Environmen- tal Management & Recycling Nonferrous Metals Reporting segment Electronic Materials Metal Processing Heat Treatment Total Others (*1) Total Reconciliations (*2) Consolidated Outside customers 65, ,796 71,580 87,670 27, ,062 2, , ,219 Intersegment 38,179 28,759 2, ,021 8,424 77,445 (77,445) - Total 103, ,556 73,646 87,685 27, ,083 10, ,665 (77,445) 464,219 Segment income (*3) 7,349 13,562 8,814 5,804 2,354 37, , ,094 Segment assets 83, ,926 45,204 57,222 37, ,429 7, ,004 6, ,193 Other items Depreciation 4,651 3,427 2,534 2,217 1,838 14, , ,572 Amortization of goodwill Investment in equity-method affiliates Increase in property, plant, and equipment and intangible fixed assets 2,540 10, ,599-14,599 15,509 30,109 5,937 2,411 2,230 1,880 4,334 16, , ,247 Thousands of U.S. dollars (Note 1) Reporting segment Environmen tal Management & Recycling Nonferrous Metals Electronic Materials Metal Processing Heat Treatment Total Others (*1) Total Reconciliations (*2) Consolidated Net sales Outside customers $546,484 $1,745,834 $595,656 $729,551 $227,546 $3,845,073 $17,951 $3,863,024 $- $3,863,024 Intersegment 317, ,321 17, ,361 70, ,469 (644,469) - Total $864,198 $1,985,155 $612,852 $729,676 $227,552 $4,419,435 $88,059 $4,507,494 $(644,469) $3,863,024 Segment income (*3) $61,155 $112,864 $73,347 $48,303 $19,595 $315,266 $2,911 $318,177 $7,148 $325,326 Segment assets 697,398 1,181, , , ,149 3,040,938 63,033 3,103,971 51,504 3,155,475 Other items Depreciation 38,707 28,519 21,094 18,455 15, ,075 1, ,787 5, ,588 Amortization of goodwill 2, ,281 4,183-4,183-4,183 Investment in equity-method affiliates Increase in property, plant, and equipment and intangible fixed assets 21,138 90,512 1,865 7, , , , ,558 $49,408 $20,068 $18,561 $15,646 $36,069 $139,755 $1,406 $141,161 $2,365 $143,526 ANNUAL REPORT

64 Notes to Consolidated Financial Statements 2014 Net sales Environmental Management & Recycling Nonferrous Metals Reporting segment Electronic Materials Metal Processing Heat Treatment Total Others (*1) Total Reconciliations (*2) Consolidated Outside customers 64, ,648 81,400 82,191 24, ,359 2, , ,985 Intersegment 36,944 28,965 1, ,769 7,416 75,186 (75,186) - Total 101, ,614 83,246 82,204 24, ,129 10, ,171 (75,186) 443,985 Segment income (*3) 9,493 7,058 6,715 5,392 2,262 30, , ,794 Segment assets 76, ,065 44,894 53,326 34, ,617 6, ,877 10, ,717 Other items Depreciation 4,786 4,369 2,618 2,297 1,702 15, , ,205 Amortization of goodwill Investment in equity-method affiliates Increase in property, plant, and equipment and intangible fixed assets 2,230 10, ,480-13,480 15,408 28,888 5,653 1,666 3,171 2,714 1,924 15, ,460 1,089 16,549 (*1) The Others segment comprises business operations that are not included in the reporting segments. These operations primarily comprise intergroup 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, 2015 and 2014, were as follows: (1) The reconciliations of 859 million (U.S. $7,148 thousand) and 674 million to segment income include intersegment eliminations of 775 million (U.S. $6,453 thousand) and 700 million, respectively, and reconciliations for intersegment unrealized earnings of 83 million (U.S. $695 thousand) and unrealized losses of 25 million, respectively. (2) The reconciliations to segment assets of 6,189 million (U.S. $51,504 thousand) and 10,840 million include corporate assets of 57,810 million (U.S. $481,073 thousand) and 54,883 million that are not allocated to any reporting segment, respectively, and intersegment eliminations of 51,621 million (U.S. $429,569 thousand) and 44,043 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 statement of income. 62 DOWA HOLDINGS CO., LTD.

65 Related Information 1. Information by product and service (2015) The Company has omitted disclosure here because equivalent information appears in the segment information. 2. Information by geographic region (2015) (1) Net sales Japan North America Europe China Asia (excluding Japan and China) Other Total 376,337 10,721 6,627 15,588 54, ,219 Thousands of U.S. dollars (Note 1) Asia (excluding Japan North America Europe China Japan and China) Other Total $3,131,709 $89,221 $55,150 $129,720 $457,215 $8 $3,863,024 (2) Total property, plant, and equipment Japan North America Europe China Asia (excluding Japan and China) Other Total 88,454 1, ,540 14, ,675 Thousands of U.S. dollars (Note 1) Asia (excluding Japan North America Europe China Japan and China) Other Total $736,076 $15,385 $2,690 $21,138 $120,737 $- $896, Information by major customer (2015) Name of corporate customer Net sales (Note 1) Name of involved segment TANAKA KIKINZOKU KOGYO K.K. 64,656 million (U.S. $538,044 thousand) Mainly the Nonferrous Metals segment 4. Information on impairment losses on fixed assets by reporting segment (2015) Reporting segment Environmental Management Nonferrous Electronic Metal Heat 2015 & Recycling Metals Materials Processing Treatment Total Others Total Eliminations Consolidated Impairment losses on fixed assets (383) 536 Thousands of U.S. dollars (Note 1) Reporting segment Environmental Management Nonferrous Electronic Metal Heat 2015 & Recycling Metals Materials Processing Treatment Total Others Total Eliminations Consolidated Impairment losses on fixed assets $- $2,418 $- $5,240 $- $7,658 $- $7,658 $(3,195) $4, Amortization of goodwill and unamortized balance of goodwill by reporting segment (2015) Reporting segment Environmental Management Nonferrous Electronic Metal Heat 2015 & Recycling Metals Materials Processing Treatment Total Others Total Eliminations Consolidated Unamortized balance at fiscal year end 4, ,043 6,970-6,970-6,970 Thousands of U.S. dollars (Note 1) Reporting segment Environmental Management Nonferrous Electronic Metal Heat 2015 & Recycling Metals Materials Processing Treatment Total Others Total Eliminations Consolidated Unamortized balance at fiscal year end $40,997 $- $- $- $17,007 $58,004 $- $58,004 $- $58,004 ANNUAL REPORT

66 Notes to Consolidated Financial Statements 1. Information by product and service (2014) The Company has omitted disclosure here because equivalent information appears in the segment information. 2. Information by geographic region (2014) (1) Net sales Japan North America Europe China Asia (excluding Japan and China) Other Total 367,248 6,688 1,680 10,341 57, ,985 (2) Total property, plant, and equipment Japan North America Europe China Asia (excluding Japan and China) Other Total 88,708 1, ,289 10, , Information by major customer (2014) Name of corporate customer Net sales Name of involved segment TANAKA KIKINZOKU KOGYO K.K. 60,678 million Mainly the Nonferrous Metals segment 4. Information on impairment losses on fixed assets by reporting segment (2014) Reporting segment Environmental Management Nonferrous Electronic Metal Heat 2014 & Recycling Metals Materials Processing Treatment Total Others Total Eliminations Consolidated Impairment losses on fixed assets Amortization of goodwill and unamortized balance of goodwill by reporting segment (2014) Reporting segment Environmental Management Nonferrous Electronic Metal Heat 2014 & Recycling Metals Materials Processing Treatment Total Others Total Eliminations Consolidated Unamortized balance at fiscal year end 5, ,728 6,997-6,997-6,997 (Note) The Company has omitted disclosure of amortization of goodwill because equivalent information appears in the segment information. 64 DOWA HOLDINGS CO., LTD.

67 Report of Independent Auditors ANNUAL REPORT

68 Subsidiaries and Affiliates As of March 31, 2015 Name 77 Consolidated Subsidiaries and 15 Affiliates Accounted for by the Equity Method Environmental Management & Recycling Issued Share Capital (Millions of Yen) Percentage Owned Directly or Indirectly by the Company (%)* 1 Principal Business Dowa Eco-System Co., Ltd. 1, Waste treatment, soil remediation, and recycling Eco-System Hanaoka Co., Ltd Soil remediation and waste treatment Eco-System Recycling Co., Ltd Recovery of precious and nonferrous metals Act-B Recycling Co., Ltd Recovery of discarded household appliances, personal computers, and other items Eco-Recycle Co., Ltd Recovery of discarded household appliances, personal computers, and other items Green Fill Kosaka Co., Ltd Waste treatment Eco-System Okayama Co., Ltd Industrial waste treatment; recovery of ferrous and nonferrous metals Eco-System Sanyo Co., Ltd Waste treatment and resources recycling E&E Solutions Inc Comprehensive technological consulting in environmental management and energy Geotechnos Co., Ltd Soil surveys and remediation projects, environmental consulting, etc. Okayama Koyu Co., Ltd Industrial waste intermediate treatment, sales of recycled oil, real-estate leasing Auto Recycle Akita Co., Ltd Recovery, scraping, and recycling of used cars Biodiesel Okayama Co., Ltd Manufacturing of biodiesel Eco-System Chiba Co., Ltd Industrial waste treatment Meltec Co., Ltd Treatment and resource recycling of waste Eco-System Akita Co., Ltd Waste treatment and resources recycling Eco-System Kosaka Co., Ltd Industrial waste treatment; recovery of ferrous and nonferrous metals Eco-System Japan Co., Ltd Operation of waste and resources recycling; collection and transportation of industrial waste Dowa-Tsuun Co., Ltd Vehicle transportation, forwarding, and warehousing Modern Asia Environmental Holdings, Inc. 16 million U.S. Dollars 100 Holdings company of waste treatment businesses Eastern Seaboard Environmental Complex Co., Ltd. 100 million Thai Baht 100 Final treatment of harmless waste Bangpoo Environmental Complex Ltd. 80 million Thai Baht 100 Incineration of harmless waste Technochem Environmental Complex Pte. Ltd. 3 million Singapore Dollars 100 Incineration of harmful waste PT. Prasadha Pamunah Limbah Industri 49,578 million Indonesia Rupiah 95 Final treatment of harmful and harmless waste Dowa Environmental Management Co., Ltd. 13 million U.S. Dollars 90 Recovery of precious and nonferrous metals, recycling of discarded household appliances and electronic devices DOWA ECO-SYSTEM SINGAPORE PTE. LTD. 3 million Singapore Dollars 100 Recovery of precious and nonferrous metals Jiangxi Dowa Environmental Management Co., Ltd. 30 million Chinese Yuan 90 Recycling of discarded household appliances and electronic devices Nonferrous Metals Dowa Metals & Mining Co., Ltd. 1, Manufacturing and sales of nonferrous, precious, and rare metals Akita Zinc Co., Ltd. 5, Refining of zinc; manufacturing of sulfuric acid Kosaka Smelting & Refining Co., Ltd. 4, Smelting and refining of copper and lead; recovery of precious metals DMM Palmer Co., Ltd. 1, Mineral exploration Akita Zinc Solutions Co., Ltd Processing of zinc alloy, zinc wire, and other products Nippon PGM Co., Ltd Recovery of platinum group metals from disposable catalysts Zinc Excel Co., Ltd Sales of zinc, cadmium, zinc alloy, zinc wire, and other products Akita Zinc Recycling Co., Ltd Recovery of zinc from iron and steel dust, and other byproducts; outsourcing of zinc secondaries processing Akita Recycle & Finepack Co., Ltd Pretreatment of nonferrous Akita Rare Metals Co., Ltd Recovery of indium and other products Dowa Metals & Mining Alaska Ltd. 11 million U.S. Dollars 100 Mineral exploration NIPPON PGM AMERICA, INC. 1 million U.S. Dollars 51 Spent catalyst shredding and sampling Dowa Metals & Mining (Thailand) Co., Ltd. 520 million Thai Baht 100 Processing and sales of zinc products Nippon PGM Europe s.r.o. 22 million Czech Koruna 51 Spent catalyst shredding and sampling Electronic Materials Dowa Electronics Materials Co., Ltd. 1, Manufacturing and sales of semiconductors, and functional and magnetic materials Dowa Hightech Co., Ltd. (Chemical) Manufacturing of metal compounds, chemical and other products Dowa Semiconductor Akita Co., Ltd Manufacturing of high-purity metal materials, compound semiconductor wafers and light-emitting diodes Dowa IP Creation Co., Ltd Manufacturing of iron and carrier powders Dowa F-Tec Co., Ltd Manufacturing of ferrite powders Dowa Electronics Materials Okayama Co., Ltd Manufacturing of metal powders, copper powders, and other materials 66 DOWA HOLDINGS CO., LTD.

69 Name 77 Consolidated Subsidiaries and 15 Affiliates Accounted for by the Equity Method Metal Processing Issued Share Capital (Millions of Yen) Percentage Owned Directly or Indirectly by the Company (%)* 1 Principal Business Dowa Metaltech Co., Ltd. 1, Metal processing and metal plating Dowa Hightech Co., Ltd. (Electroplating) Metal plating Dowa Metal Co., Ltd Manufacturing of copper strip and other products Dowa Metanix Co., Ltd Manufacturing of mainly nickel alloys, copper alloys, and electronics parts Hoei Shoji Co., Ltd Processing and sales of copper strip, aluminum, and other products Dowa Power Device Co., Ltd Metal-ceramic substrates manufacturing New Nippon Brass Co., Ltd Manufacturing of brass bars and forged products Dowa Advanced Materials Shanghai Co., Ltd. 2 million U.S. Dollars 100 Processing and sales of copper strip products DOWA METALTEC (THAILAND) CO., LTD. 475 million Thai Baht 100 Processing and sales of copper strip products Heat Treatment Dowa Thermotech Co., Ltd. 1, Heat treatment processing Dowa Thermoengineering Co., Ltd Design, manufacturing, maintenance, and improvement of heat treatment equipment, heat treatment processing, surface processing, surface improvement CEMM Co., Ltd Heat treatment processing and surface processing Tonetsu Kosan Co., Ltd Heat treatment processing Kunshan Dowa Thermo Furnace Co., Ltd. DOWA THT AMERICA, INC. DOWA Thermotech (Thailand) Co., Ltd. PT. DOWA Thermotech Indonesia PT. DOWA Thermotech Furnaces HIGHTEMP FURNACES Ltd. 12 million U.S. Dollars 5 million U.S. Dollars 270 million Thai Baht 211,498 million Indonesia Rupiah 11,666 million Indonesia Rupiah 90 million Indian Rupee Design, manufacturing, maintenance, and improvement of heat treatment equipment, heat treatment processing, surface processing Heat treatment processing, surface processing, maintenance of heat treatment equipment Heat treatment processing, surface processing, maintenance of heat treatment equipment 100 Heat treatment processing and surface processing Imports, maintenance, and maintenance of heat treatment equipment Design, manufacturing, maintenance, and improvement of heat treatment equipment, heat treatment processing, surface processing, processing of machine component Others Dowa Techno Engineering Co., Ltd Plant construction Dowa Kohsan Co., Ltd Outsourcing and management of golf courses and real estate, brokerage Dowa Management Service Co., Ltd Outsourcing of general indirect business services Akita Kouei Co., Ltd Construction of machinery and electronics, maintenance of plants Yowa Kouei Co., Ltd Construction, maintenance of machinery and electronics, heavy concrete works business Dowa Technology Co., Ltd Technological development support; outsourcing of analysis and evaluation services Dowa Techno-Research Co., Ltd Environmental measurement Five other companies Affiliates Accounted for by the Equity Method Kowa Seiko Co., Ltd. 1, Industrial waste treatment, recovery of ferrous and nonferrous materials Akagi Kouyu Co., Ltd Waste treatment Okayama Rinko Co., Ltd Warehousing; other business activities Onahama Smelting & Refining Co., Ltd. 7, Copper smelting and refining, general and industrial waste treatment Acids Co., Ltd Sale of sulfuric acid and others Cariboo Copper Corporation 91 million Canadian Dollars 25 Mining and sales of products from mines MINERA TIZAPA, S.A. DE C.V. 10 million Mexican Pesos 39 Nonferrous metal resource mining ARRENDADORA MINERA ZACAZONAPAN, S.A. DE C.V. EXPLORACIONES Y DESARROLLOS MINEROS TIZAPA, S.A. DE C.V. 8 million Mexican Pesos 728 Thousand Mexican Pesos 39 Nonferrous metal resource mining 39 Nonferrous metal resource mining Kyoto Elex Co., Ltd Manufacturing and sales of pastes Dowa Olin Metal Corporation Manufacturing, marketing, and sales of special copper alloy strips TOKUYAMA-DOWA Power Material Co., Ltd Ceramic substrates manufacturing Japan Copper Casting Co., Ltd Various types of copper manufacturing and production Fujita Kanko Inc.* 2 12, Lodging and hotel management; real estate agent Nippon AN-FO Manufacturing Co., Ltd 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. ANNUAL REPORT

70 Global Network As of March 31, 2015 Overseas Subsidiaries and Offices For details, refer to the list of Group Companies at North America and Central America U.S.A. 1 NIPPON PGM AMERICA, INC. 2 DOWA THT AMERICA, INC. 3 DOWA INTERNATIONAL CORPORATION 4 DOWA INTERNATIONAL CORPORATION San Jose Branch Canada 5 Dowa Metals & Mining Co., Ltd. Vancouver Office 6 Cariboo Copper Corporation Mexico 7 Dowa Metals & Mining Co., Ltd. Mexico Office 8 MINERA TIZAPA, S.A. DE C.V. 9 DOWA THERMOTECH MEXICO S.A. de C.V. Europe Germany 10 DOWA HD Europe GmbH Czech Republic 11 Nippon PGM Europe s.r.o Subsidiaries Offices Asia Singapore 12 Technochem Environmental Complex Pte. Ltd. (TEC) DOWA ECO-SYSTEM SINGAPORE PTE. LTD. 14 Dowa Metaltech Co., Ltd. Singapore Branch Indonesia 15 PT. Prasadha Pamunah Limbah Industri (PPLi) 16 PT. DOWA THERMOTECH INDONESIA 17 PT. DOWA THERMOTECH FURNACES Taiwan 18 Dowa Eco-System Co., Ltd. Taiwan Office India 19 HIGHTEMP FURNACES Ltd. China 20 Dowa Environmental Management Co., Ltd. 21 Dowa Environmental Engineering (Suzhou) Co., Ltd. 22 Jiangxi Dowa Environmental Management Co., Ltd. 23 Dowa Advanced Materials (Shanghai) Co., Ltd. 24 Kunshan Dowa Thermo Furnace Co., Ltd. 25 Dowa Holdings (Shanghai) Co., Ltd. 26 Dowa Holdings (Shanghai) Co., Ltd. Shenzhen Branch 27 Dowa Metaltech Co., Ltd. Shenzhen Sales Office Thailand 28 Eastern Seaboard Environmental Complex Co., Ltd. (ESBEC) 29 Bangpoo Environmental Complex Ltd. (BPEC) 30 Waste Management Siam Ltd. (WMS) 31 DOWA Metals & Mining (Thailand) Co., Ltd. 32 DOWA METALTECH (THAILAND) CO., LTD. 33 DOWA Precision (Thailand) Co., Ltd. 34 DOWA Thermotech (Thailand) Co., Ltd. 35 DOWA HOLDINGS (THAILAND) CO., LTD. Myanmar 36 GOLDEN DOWA ECO-SYSTEM MYANMAR CO., LTD. 68 DOWA HOLDINGS CO., LTD.

71 Corporate History As of March 31, The Japanese government sells the Kosaka mine to Fujita Gumi, which was established by Dowa s founder, Denzaburo Fujita Fujita Gumi begins using a dry-refining method for refining kuroko (complex sulfide ores) at the Kosaka mine Fujita Gumi begins land drainage and reclamation work in Kojima Bay, Okayama Prefecture Fujita Gumi begins using a revolutionary method for processing kuroko, thereby restoring the commercial viability of the Kosaka mine Production of electrolytic zinc is begun at the Kosaka mine Fujita Gumi acquires the Hanaoka mine Fujita Gumi acquires the Yanahara mine 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 Corporate name is changed to Dowa Mining Co., Ltd Okayama Works is established Dowa Mining absorbs Fujita Kogyo Co., Ltd Kosaka Plant is completely equipped with flash furnaces Akita Zinc Co., Ltd. is established Kosaka Plant begins producing indium 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 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 Dowa Mining absorbs Tokyo Heat Treating Co., Ltd Mexico-based MINERA TIZAPA, S.A. DE C.V. is established. Shiojiri Works (currently Dowa Power Device Co., Ltd.) is completed MINERA TIZAPA, S.A. DE C.V. starts operations DOWA THT AMERICA, Inc. is established Okayama Clean Works (currently Eco-System Sanyo Co., Ltd.) starts operation of new incinerator for industrial waste Eco-Recycle Co., Ltd. is established Dowa acquires Nippon Purle Limited (currently Eco- System Chiba Co., Ltd.) Dowa acquires E&E Solutions Inc. Recycle Systems Japan Co., Ltd. (currently Eco-System Recycling Co., Ltd.) is made a subsidiary Shanghai office is established in China. Akita Zinc Solutions Co., Ltd. is established. Dowa Advanced Materials (Shanghai) Co., Ltd. is established in China Zinc Excel Co., Ltd. and Acids Co., Ltd. are established. Dowa Environmental Management Co., Ltd. is established in China Dowa Techno-Research Co., Ltd. is established. Landfill site Green Fill Kosaka starts operations 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 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 Akita Zinc Recycling Co., Ltd. is established. Commercial operations start at new smelting facility of Kosaka Smelting & Refining Co., Ltd Dowa acquires Modern Asia Environmental Holdings, Inc. (MAEH) Construction completed of new incinerator at Eco-System Chiba Co., Ltd. Dowa acquires Meltec Co., Ltd 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. Dowa Environmental Engineering (Suzhou) Co., Ltd. is established in China Jiangxi Dowa Environmental Management Co., Ltd. is established in China. Dowa Holdings (Shanghai) Co., Ltd. is established in China. Dowa acquires controlling interest in HIGHTEMP FURNACES Ltd Metal recycling plant begins operations at DOWA ECO-SYSTEM SINGAPORE PTE. LTD., Singapore. DOWA Metals & Mining (Thailand) Co., Ltd. is established in Thailand. PT. DOWA THERMOTECH INDONESIA is established in Indonesia DOWA HOLDINGS (THAILAND) CO., LTD. is established in Thailand GOLDEN DOWA ECO-SYSTEM MYANMAR CO., LTD. is established in Republic of the Union of Myanmar DOWA THERMOTECH MEXICO S.A. de C.V. is established in Mexico. ANNUAL REPORT

72 Corporate Data As of March 31, 2015 The data indicated below is for Dowa Holdings Co., Ltd. Founded September 18, 1884 Number of Shareholders 11,414 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 Sapporo Securities Exchange. Principal Shareholders The Master Trust Bank of Japan, Ltd. (Trust Account) Percentage of Outstanding Shares (%) 8.68 Japan Trustee Services Bank, Ltd. (Trust Account) 6.46 Fujita Kanko Inc JFE Steel Corporation 3.74 National Mutual Insurance Federation of Agricultural Cooperatives 3.06 Mizuho Bank, Ltd Resona Bank, Ltd Trust & Custody Services Bank, Ltd. (Investment Trust Collateral Account) 1.91 CMBL S.A. RE MUTUAL FUNDS 1.89 JUNIPER 1.56 * 1. The Company holds 9,427,000 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 its consolidated subsidiaries. Main Businesses Environmental Management & Recycling, Nonferrous Metals, Electronic Materials, Metal Processing and Heat Treatment Employees Approximately 5,900 people Major Domestic Operations Domestic Works Akita, Iwate, Tochigi, Gunma, Saitama, Chiba, Tokyo, Nagano, Shizuoka, Aichi, Shiga, Okayama, Kumamoto Domestic Branches Tokyo, Chiba, Shizuoka, Aichi, Osaka, Okayama, Fukuoka Laboratories & Development Groups Environmental Management & Recycling Environmental Protection Laboratory (Akita, Tokyo) Nonferrous Metals Metallurgical Laboratory (Akita) Electronic Materials Semiconductor Materials Laboratory (Akita) Electronics Materials Laboratory (Saitama) Advanced Fine Materials Laboratory (Okayama) Metal Processing Technology Center (Saitama, Shizuoka) Heat Treatment GRD Center (Aichi), Technical Solution & Research Center (Aichi) DOWA HOLDINGS Co., Ltd. Website 70 DOWA HOLDINGS CO., LTD.

73 ANNUAL REPORT

74 DOWA HOLDINGS CO., LTD. 14-1, Sotokanda 4-chome, Chiyoda-ku, Tokyo , Japan URL Cover Photo Waste treatment facility in Indonesia (PT. Prasadha Pamunah Limbah Industri) Printed in Japan