23

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

Telecommunications

p.24

Energy and Industrial
Products

p.25

Electronics andAutomotive Systems

p.26

Business Outlook
and Focus
Electronics andAutomotive Systems

Telecommunications

15.6 %

20.5 %

Energy andIndustrial Products

24.1%
Metalsp.27

Light Metals

p.28

Services and Others

4.3%

MetalsTransmission
Infrastructure
Business

Functional
Materials
Business

13.8 %
Light Metals

21.7%

Furukawa Electric Co., Ltd. ANNUAL REPORT 201024

Business Outlook and Focus

Transmission Infrastructure BusinessTelecommunications

Strengthening the Production of
Optical Fiber Cables
Furukawa Electric anticipates that demand for optical fiber cables in Asia,
centering on China, will return to growth in fiscal 2011 after an initial flat trend.
The outlook is based on the continuing development of 3G cellular phonesystems in the region. Based on the outlook, we have agreed to establish a joint
venture in China to manufacture raw materials for optical fiber cables. Our joint
venture for laying optical fiber cables in India, established in September 2009, isalso proceeding steadily.
There is also new demand for optical fiber cables in South America generated
by the launch of broadband telecommunication networks in Brazil and Argentina,
while demand in North America is showing signs of recovery from the economic
recession. However, sluggish economic conditions in Europe and the maturationof the Japanese market are expected to result in weaker demand in these regions.
Global demand for
optical fiber cableMarket conditions and our actions
Market conditions
Our actions

200

Asia

Increase in investments
for broadband

EuropeLower investments in
optical f iber cables

Americas

Recovery of investment
in optical fiber cables

Japan

Lower investments in
optical fiber cables(million-finder-meter)

Other
Emerging

150
100

AsiaPacific50

Europe0America2009 2010 2015

Agreed to establish joint
venture in China (announced
June 2010)

Completed consolidation ofcable plants (December 2008)

Optical ﬁber cables businessNet sales (Billions of yen)

Operating income (Billions of yen)

120

6

100.5

99.0

92.6

4.3

80

4

40

2

0

2009

2010

2011
(Forecast)

0

+2.5

4.0

-0.3

1.8

2010

2009

2011
(Forecast)+ Growth in exports to China
and India+ Steady demand for FTTH in Japan− Recovery of demand in US;
sluggish demand in EU− Lower demand for cable in Japan+ Continued healthy demand for
optical fiber cable in China, atlevels in FY2010+ Healthy demand for LAN cablein South America

Photonics and networks businessNet sales (Billions of yen)
60
58.6
42.9

40

Operating income (Billions of yen)
9

46.0

-2.0

5.6

6

20

0

7.6

2009

2010

2011
(Forecast)

0

-2.1

3.5

3

2009

2010

2011
(Forecast)− Slowdown in demand for lasers
and amplifiers for NGN in Japan− Sluggish demand for routers+ Strong demand for cable TV andrailway radio systems− Continued weak demand forlasers and amplifiers± Strong demand for FTTH in Japan+ Continued strong demand forrailway radio systems, at levels
in FY2010

25

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

Business Outlook and Focus

Transmission Infrastructure Business

Energy andIndustrial Products

Meeting Demand for Ultra-HighVoltage Cable in Growth Markets
Furukawa Electric anticipates that demand for ultra-high-voltage cable ingrowth markets including China will deliver sustained long-term future
growth. Shenyang Furukawa Cable Co., Ltd. is positioned as the leading
manufacturer and supplier of high-quality cable products in China. The
Company increased its production capacity by 25% in fiscal 2009 to meet thegrowing demand.
Furukawa Electric also anticipates weaker demand for copper wire andlow-voltage cable in Japan, due to sluggish construction-related demand.
Accordingly, we will move forward with plans to consolidate our production
facilities in Japan.

Market conditions and our actions
Market conditions

Our actions

High-voltage cables

Healthy investment in power
infrastructure in China

Copper wires / lowvoltage cables

Continued weak demand
from construction

Industrial products(plastics)

Recovery in demand
for semiconductors
and LED televisions

Increased production of reflective sheets
for LED televisions

Energy and industrial products
Net sales (Billions of yen)

Operating income (Billions of yen)

400

8

300

277.4
208.8

200

241.5

2

2009

2010

+1.3

4

100
0

6

2011
(Forecast)

0

+2.6

5.0

Industrial products+ Recovery in demand forsemiconductor tape
− Lower demand for
foamed plastics

3.7

1.1
2009

2010

Energy+ Strong demand for HV cablein China− Lower demand for industrial cablein Japan

2011(Forecast)

Energy+ Cut costs for HV cables in China+ Cut costs for industrial cablein JapanIndustrial products+ Strong demand for semiconductor tape
+ Reduce costs for foamed plastics

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

Functional Materials BusinessElectronics andAutomotive Systems

26

Launch of Glass Blank Mass
Production
Demand for automotive parts including wire harnesses and othercomponents began to recover starting from the second half of fiscal 2010,
and is anticipated to continue recovering in the first half of fiscal 2011. In
the magnet wire segment, we have streamlined our business operations
encompassing our subsidiaries.
Furukawa Electric anticipates healthy demand for electronic components
including aluminum blanks for HDDs, heat sinks and other products. We
also launched mass production of glass blanks for HDDs used in mobile
applications, starting in May 2010.

Market conditions and our actions
Market conditions

Our actions

Automotive parts

Healthy demand for use
in automobiles

Made US joint venture Lear Furukawa
Corporation a wholly-owned subsidiary(June 2010)

Magnet wires

Healthy demand for magnet
wires used in electronics

Integrated operations with our subsidiaries(April 2010)

Electronics

Healthy demand for HDDs
and computer games

Launched production of glass blanks(May 2010)

Electronics and automotive systems
Net sales (Billions of yen)

Operating income (Billions of yen)

300

12

223.8
177.2

200

195.0

100

+1.3 8.5

8

4

7.2

+4.7
2.5

0

2009

2010

2011
(Forecast)

0

2009

2010

2011
(Forecast)+ Recovery in demand for vehicle
wire harnesses+ Continued healthy demand foraluminum blanks used in
HDD devices− Sluggish demand formagnet wire
− Conservative outlook for wire
harnesses, in spite of continued
healthy demand+ Continued healthy demand foraluminum blanks for HDD
devices, in first half of FY2011+ Continued recovery in demand
for magnet wire

27

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

Business Outlook and Focus

Functional Materials Business

MetalsBoosting Production of Copper
Foils for Lithium-Ion Batteries
Although demand for copper strips used in electronics has recovered rapidly,
Furukawa Electric anticipates that demand for copper pipes used in air
conditioners will remain flat. Demand for copper foils used in lithium-ion
batteries and flexible print circuits (FPC) is also rapidly recovering. Meanwhile,
recent growth of the electric vehicle (EV) market is expected to generatesignificant growth in demand for copper foils used in lithium-ion batteries.
We will therefore expand the production capacity for copper foils, as a leading
manufacturer of copper foils for lithium-ion batteries.

Market conditions and our actions
Market conditions

Our actions

Wrought copper
products

Recovery in demandfor electronics
Continued weak demand for
air conditioners

Streamline our domestic manufacturing
plants that produce copper pipes for
air conditioners

Copper foils

Recovery in demand forlithium-ion batteries

Increase the production capacity for copper
foils used in EV lithium batteries

Metals
Net sales (Billions of yen)

Operating income (Billions of yen)

200

6

170.2
143.5

150

4

119.6
100

2

50

0

0

2009

2010

2011
(Forecast)

-6

+4.2
-4.9

-2.2

2009

2010

2.0

+2.7

2011
(Forecast)+ Recovery in demand for copper
strips and foils− Lower demand for copper pipes
used in air-conditioners+ Improvement in impact fromapplying lower of cost or market(LCM) method+ Improvement in metals position+ Recovery in demand for copper
strips and foils− Continued uncertainty indemand for copper pipes usedin air conditioners

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

Functional Materials Business

Light Metals

28

Recovery in Thick Plate Demand for
Semiconductor and LCD Equipment
There was a recovery in demand for rolled aluminum products startingfrom the second half of fiscal 2009, particularly for thick plates used insemiconductor and LCD manufacturing equipment. We will endeavor to
expand our international business and implement structural changes to thebusiness segment for general-purpose products in Japan.

Market conditions and our actions
Market conditions

Our actions

Aluminum canstock

Economic recovery

Automotive parts

Recovery in auto sales

Thick plates

Recovery in demand for
LCD and semiconductor
manufacturing equipment

Capital participation in Chinese enterprise(Oct. 2009)

Light metals (aluminum processing products)
Net sales (Billions of yen)

Operating income (Billions of yen)

300

14

234.0
188.1

200

195.0

7

100

0

0

-7

2009

2010

2011
(Forecast)

7.0

+7.2
+0.2
-0.4
2009

+ Recovery in demand for thickplates and radiators usedin vehicles+ Improvement in impact fromapplying LCM method+ Improvement inmetals position

-0.2
2010

2011
(Forecast)+ Anticipate higher demand forall products+ Healthy demand for thick plates
used in semiconductor and LCD
manufacturing equipment

29

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

CORPORATE GOVERNANCE
Basic Philosophy

Reinforcing Internal Controls

The Furukawa Electric Group strives to enhance its
performance by promptly responding to changes in thebusiness environment and the market through efficientmanagement based on timely decision making. At thesame time, we ensure sound management practices under
our internal control system. We uphold the basic policyof seeking to expand and develop our operations on asustainable basis and to raise corporate value throughthese efforts.
While pursuing compliance best practices acrossthe Group, we also provide society with excellent
products and technologies that enrich people’s lives
while maintaining harmony with the environment. We
fulfill our corporate social responsibility to develop solid
relationships with all stakeholders, including shareholders,business partners, local communities and employees, andto remain a company that benefits society.

Furukawa Electric establishes, develops and operates its
internal controls based on the following five principles:(1) Efficient execution of responsibilities(2) Compliance system(3) Risk management system(4) Information management system(5) Group company management(6) Sound, reliable financial statements

Management Organization
Furukawa Electric’s organizational structure incorporates
internal auditors, with emphasis on the independentfunctioning of Auditors and a Board of Auditors separate
from the Board of Directors. We are also tuning theoperations of our Board of Directors to strengthen
monitoring and supervision of business execution and toaccelerate decision making.

Compliance
The Furukawa Electric Group defines compliance as
extending beyond adherence to laws, to encompass
actions in accordance with the ethical standards andvalues required of a corporate citizen that is a contributing
member of society. We strive to ensure that all employees
follow compliance best practices in line with the Furukawa
Electric Group Action Guidelines that lay out our basic
philosophies on compliance.
Our compliance activities, including internal
educational programs and inspections for legal violations,take place centered around the Central Compliance
Committee with the president as chief officer in charge.
Compliance directors and compliance promotion officers,
placed under the company president and chief officerof each business division, further ensure the effective
implementation of activities.

External Board Members

Tetsuo Yoshino

Takasuke Kaneko

Sumitaka Fujita

Former Chairman and President of
Furukawa Co., Ltd.

Former Vice President of The Dai-ichi
Kangyo Bank, Ltd., President of Dai-ichi
Kangyo Shoken K.K., and Chairman of
the Board of Mizuho Securities Co., Ltd.

Former Vice President and subsequent
Vice Chairman of Itochu Corporation

Tetsuo Yoshino has an extensive
executive background in the nonferrous metals sector. With knowledge
and experience covering all aspects ofmanagement, including operations,
he brings valuable insight anddirection to the Board of Directors.

With years of management experience inthe financial services industry, Takasuke
Kaneko provides vital knowledge offinancial strategies and risks to the Boardof Directors.

Sumitaka Fujita’s strong foundationof knowledge and experience as a
trading company top executive brings
perspectives on global management
to the Board of Directors.

External Corporate Auditors

Yuzuru Fujita

Tadashi Kudou

Kenji Koroyasu

Former Chairman and President of Asahi
Mutual Life Insurance Co.

Former President of Mizuho Bank, Ltd.

Former Prosecutor for the Supreme
Public Prosecutors Office

With experience as a financial institution
top executive and as an external board
member for other firms, Yuzuru Fujita’s knowledge and background informthe Board of Directors on effective andlegally-compliant Group management
practices from a risk management andinstitutional investor perspective.

Tadashi Kudou has accumulated a broadbase of knowledge and experience as afinancial institution top executive and as
an external board member for other firms.
He strengthens the Board of Directors
with insights into effective and legallycompliant Group management practices
from a risk management perspective.

Kenji Koroyasu possesses far-reachinginsight as a long-serving legal professional.
With knowledge of corporate legal affairs
and corporate management gained as
an external board member and external
corporate auditor for other firms, heis uniquely suited to advise the Boardof Directors on effective and legallycompliant Group management practices.

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

In particular, Furukawa Electric has strengthened
controls over meetings with other firms in the industry
and over the price-setting process to prevent thereoccurrence of cartel violations, and has enhanced
the monitoring process through regular guidance fromexternal compliance experts. We have also set up an
anonymous internal “whistleblower” hotline to identify
compliance violations as early as possible.
Furthermore, our CSR Division, which also functions as
an internal audit division, closely monitors the executionof work processes in each business unit to verify whether
internal control systems, including the compliance system,
are functioning effectively. The Internal Audit Division
reports its findings to the executive management team,ensuring appropriate internal disclosure and transparency.

Risk Management
Furukawa Electric’s risk management structure andcontrol methods are stipulated in its Risk Management
Basic Rules & Regulations. We have established a CSR and

30

Risk Management Committee, consisting of the chairman,
president, chief officers, and company presidents underthe Board of Directors as a key component of our risk
management system. The Committee assesses all businessand operational risk of the Group and verifies the validityof this assessment and control methods.
The CSR and Risk Management Committee alsoestablishes information security systems in all businessdivisions and affiliate companies, and prepares ourbusiness continuity plan in case of natural disaster.
In addition, information security has been positioned
as one of the highest priority risks facing the Company
today. As a countermeasure against counterfeit goods
and industrial espionage of intangible assets at Group
companies overseas, the Committee conducts ongoing
follow up activities through interviews at our overseas
offices. We have also began a second reexaminationof our management practices concerning confidential
proprietary business information, in order to respond torevisions made to the Unfair Competition Prevention Act.

Corporate Governance Organization Chart
Shareholders’ Meeting
Monitoring andSupervision

Appoints

Appoints

Board of Directors

Appoints

Audits accounts

12 Directors
Board of Auditors
Three external board members (including two independent members)
Submits reports,
Five corporate auditors
Delegates
attends(Three external corporate
meetings
Compensation Committee
auditors, including two
and audits
independent members) Assistants
Three or more members from the Board of Directors and thetothe corporate auditors
Board of Auditors (including one or more external members)

Delegates

business reports•Reviewing
Examines status of operations•andassetsCommittee members as of submission date of this reportThree board members (including one external board member)
One external corporate auditor

CSR and Risk Management Committee•Development and enhancement of internal control systems•Promotion of CSR activities
Chairman: CSRO (Chief Social Responsibility Off icer)
Members: Chairman, president, chief officers, and company presidents

of critical matter relating•toDecisionbusiness operation•Supervises business operation

Submitreports

Accounting
Auditors
Screen reports•relatingtoaccounting

Collaboration between
auditsstatus•ofExamine
operations
and assets

Submit reports

Monitors
Appoints

Business Operation

Chairman, PresidentManagement Committee•Deliberation and decision making on key issues inoperational execution
Chairman, President, Chief Off icers,
Company Presidents

Direction

Internal Audits(CSR Division)

Chief Officers
Group-wide management, strategy, and business resource allocation
CSO (Responsible for corporate governance, Group strategy, personnel, and legal matters)
CFO (Responsible for finance, accounting, and investor relations)
CMO (Responsible for marketing)
CPO (Responsible for production technologies, purchasing, cost control, and quality control)
CSRO (Responsible for internal controls, compliance, internal auditing, export controls, safety and theenvironment, risk management, and CSR)
CTO (Responsible for R&D and intellectual properties)

Provide support and guidanceBusiness
operations

Company Presidents
Telecommunications Company, Energy and Industrial Products Company,
Metals Company, Electronics and Automotive Systems Company
Affiliate Companies

Furukawa-Sky Aluminum Corporation
Light Metals Company
Other Affiliate Companies

31

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

CSR ACTIVITIES
Fundamental Philosophy
The Furukawa Electric Group recognizes the corporate
responsibility it bears toward society: providing products
and services that contribute to social development andimproving people’s lives, while emphasizing public
regulations and corporate ethics, product safety, thesafety of employees and the local community, andreduced environmental impact from business activities.
To meet these social responsibilities, the Group
formulated the Furukawa Electric Group Basic Policy on
CSR in February of 2007, thereby establishing a structure
for reinforcing CSR efforts across the entire Group.
Under this structure, we plan to conduct corporate
activities that effectively balance the three factorsof business, environmental protection, and social

contribution, by deepening communication with our
stakeholders and further advancing and developing the
CSR activities of the Group.

CSR Basic Policy
We fully recognize the responsibilities of the
Furukawa Electric Group to society and will
strive to maintain and improve on solid, friendly
relationships with all of our stakeholders andcontribute to the sustainable development ofsociety through corporate, environmental andsocial activities.

CSR Management
The Furukawa Electric Group has established theCSR Division, a specialized organization in charge ofpromoting CSR activities, and has appointed a Chief
Social Responsibility Officer. Through this initiative we will
ensure a uniform Company-wide approach to CSR while
applying a CSR perspective to the monitoring of corporate
activities, including internal controls, compliance, risk
management, safety, environmental conservation, andsocial contributions.
In addition, we maintain a framework for taking any
necessary action should problems arise, for example
investigating allegations and the causes of problems,
instituting remedial or preventive measures andreleasing statements, to deal with all eventualities
quickly and appropriately.

CSR Promotion Framework
Board of Directors
Submit Proposals and Reports

CSR and Risk Management Committee

President

Compliance Committee
Central Committee forEnvironmental Management

CSRO
Collaboration

CPO
Collaboration

CSR Division

Central Safety and Health Committee
Central Quality Control Committee

In-House Companies

Promotion
Monitoring

Domestic Affiliate Companies

Other Chief Officers
Collaboration

Quality Promotion
Department

Each Corporate
Division

Collaboration

International Affiliate Companies

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

32

Relationship with the Global Environment
The Furukawa Electric Group has introduced a systemfor certifying and registering products defined asenvironmentally sound due to beneficial effect orreduced negative impact on the environment, as
determined through an evaluation of the entire productlifecycle. We are working to expand the distribution ofthese products.
Environmentally sound products must exhibit
overall improvements over conventional products bymeeting agreed-upon environmental criteria at every
stage, from the purchase of raw materials and parts to
manufacturing, use, distribution, and disposal. Afterapplication and screening by the division, productsthat pass the screening by the Environmentally Sound
Product Development Committee, a cross-sectionalorganization of the Furukawa Electric Group, areregistered as environmentally sound products. The
number of registered products in fiscal 2010 totaled
36, or 90% of our annual target. In addition, a total of
40 products across the Group were registered in fiscal
2010, contributing to the cumulative 56 products thathave been registered under the program since its
launch in September 2008.
In addition, we created the “e-friendly” logo in
December of 2008 to identify the Furukawa ElectricGroup’s environmentally sound products. This logo isdisplayed on the packaging of these products and isutilized for sales promotion.
We will continue expanding distribution ofenvironmentally sound products while establishing
benchmarks for environmental performance, in an effort
to increase visibility in this area. Through the creationof innovative technologies and environmentally soundproducts that exceed existing standards, we hope tofurther advance the creation of a sustainable, recyclingoriented society.

“e-friendly” logo

Packaging box for commercial lead automobile battery(The Furukawa Battery Co., Ltd.)

Relationship with Society and Local Communities
The Furukawa Electric Group has undertaken numerous
social contribution activities rooted in local communities
under the Furukawa Electric Group Basic Policy on
Social Contribution Activities. We plan to further
strengthen these efforts to fulfill our responsibility asa member of society, through activities centered on
youth development, sports and culture promotion, andcoexistence with local communities.

Campaign to remove and prevent illegal dumping (Mie Works)

Furukawa Electric Group’s Basic Policy on Social Contribution Activities
The Furukawa Electric Group seeks to carryforward and strengthen the bonds it has cultivatedwith society over the past century to pass on aneven brighter future for generations to come bycontributing to society through business activities,

as well as by undertaking steady, consistent social
contribution activities centered on nurturing thenext generation, promoting sports and culture, andcoexisting with the local community.

33

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

DIRECTORS AND AUDITORS

Hiroshi Ishihara
Chairman

Masao Yoshida
President

Tetsuo Yoshino

Takasuke Kaneko

Sumitaka Fujita

Hideo Sakura

Masahiro Yanagimoto

Shunichi Shindo

Director (Outside)

Director
Chief Financial Officer

Director (Outside)

Director
President of the Electronics and Automo-tive
Systems Company

Director (Outside)

Director
President of the Energy
and Industrial ProductsCompany

Statutory Auditors

Takahiko Ito
Kaoru Yabuki
Yuzuru Fujita (Outside)
Tadashi Kudou (Outside)
Kenji Koroyasu (Outside)
Tohru Shirasawa
Director
Chief Production
Officer

Nozomu Amano
Director
Chief Strategy Officer

Tetsuya Satou
Director
Chief Social
Responsibility
Officer

Mitsuyoshi Shibata
Director
President of the Metals
Company

34

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

SIX-YEAR SUMMARY
Thousand of
U.S. dollars

Millions of yen
For the year
Net sales
Cost of sales
Selling, general andadministrative expenses
Operating income
Income taxes
Income (loss) before income taxes andminority interests
Net income (loss)
Research and development costs
Capital expenditure
Depreciation
At year-end
Total assets
Net assets
Total current assets
Property, plant and equipment,net ofaccumulated depreciation
Total current liabilities
Interest-bearing debt
Cash frows
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Cash and cash equivalents
Per share date (yen)Net income
Net assets
Cash dividends
Ratios (%)
ROE
ROA
D/E ratio
Operating income Ratio
Ratio of shareholders’ equity
Total assets turnover (times)

2005

2006

2007

2008

2009

2010

2010

775,894
640,901

872,535
722,575

1,104,709
930,399

1,174,247
1,002,410

1,032,807
899,409809,693
679,4038,706,376
7,305,408

111,256

112,529

120,676

123,390

123,646

109,968

1,182,452

23,736
13,17237,43015,78053,632
23,40348,447
11,466

9,752
12,732

20,322
1,371

218,516
14,74233,06044,542

57,98631,034-30,896

10,947

117,710

15,805
17,19327,294
41,03225,50818,01730,88636,94329,765
19,976
41,83337,903

15,291
19,78945,264
42,128-37,405
19,89541,27546,933

9,704
17,27025,43342,461

104,344
185,699
273,473456,570

991,358
175,845442,937

1,052,256
286,701
483,171

1,096,708
316,302531,584

1,014,778
294,982
501,436

845,658
190,429397,264

835,819
208,929
400,4988,987,301
2,246,549
4,306,430

335,687

325,325

337,679

338,227

312,073

291,189

3,131,065

392,908471,271430,205435,346454,690428,173

419,175
399,050

332,374
383,114332,315362,088

3,573,279
3,893,398

32,60040,360-84,578
50,58722,719
11,133-46,782
41,56750,724-29,612-20,694
45,86390,760-52,113-41,581
43,82878,728-51,267-14,553
53,45336,668-25,113-23,582
40,808394,280-270,032-253,570
438,79624.11
268.24----36.94
316.243.00

42.16
349.896.50

21.81
332.61
7.00-53.34203.166.00

13.80
231.39
5.00

0.148
2.488
0.054

9.2
2.4
2.7
3.1
17.7
0.8

12.8
3.6
2.7
4.3
21.2
0.8

12.7
4.9
1.7
4.9
22.5
1.0

6.4
4.8
1.7
4.1
22.9
1.2

-20.0
1.2
2.7
0.9
16.9
1.2

6.3
2.4
2.2
2.5
19.6
1.0

-------------------Note) 1. U.S. dollar amounts have been translated, for convenience only, at the rate of ¥93 to US$1.
2. ROA = Operating income (loss) / Total assets
3. Net assets for 2005 are equivalent to the figure of total shareholders’ equity.

Financial Section
Contents
SIX-YEAR SUMMARY34

CONSOLIDATED FINANCIAL REVIEW

35

CONSOLIDATED BALANCE SHEETS

43

CONSOLIDATED STATEMENTS OF OPERATION

45

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

46

CONSOLIDATED STATEMENTS OF CASH FLOWS

48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

50

REPORT OF INDEPENDENT AUDITORS

87

35

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

CONSOLIDATED FINANCIAL REVIEW
Scope of Consolidation
The consolidated financial statements for the fiscal year ended March 31,
2010 (fiscal 2010) include the business results of 106 subsidiaries and 16
affiliates accounted for using the equity method.
In the fiscal year under review, five subsidiaries were added while
five subsidiaries were dissolved, four due to mergers and one due toliquidation, and one subsidiary was removed due to divestiture.
With respect to consolidated equity-method affiliates, three wereadded, one was added to the scope of consolidation, one was soldand one was removed due to a merger.

Overview of Business Performance
Net Sales
In fiscal 2010, the global economy was supported by aggressive
monetary and fiscal stimulus measures, such as public investment,
adopted by countries to combat the severe economic recession
triggered by the US financial crisis in September 2008. Despite
signs of a gradual recovery, economic activity fell short of levels
marked prior to the US financial crisis, and fears over downside risks
in the economy made conditions unstable. In the US, job growth
remained low, but there were signs of improved consumer spending
from the second half of the fiscal year. In contrast, the economic
recovery lagged in Europe, while Greece’s debt crisis made thefuture even more uncertain. In the Asian region, emerging countries,
and China in particular, showed early signs of an economic recovery
and exhibited a growing presence, giving them the key role indriving the global economy during the fiscal period under review.
In Japan, the environment remained as harsh as in fiscal 2009 in thefirst half of the fiscal 2010, particularly in the first quarter, as a resultof the deterioration in the global real economy. However, there
were signs that the economy had bottomed out as exports to Asia
picked up in the auto industry and other manufacturing industries.
Nevertheless, this economic recovery was not self-sustaining, in lightof the prolonged slump in consumer spending and other sources ofdomestic demand and the drop in corporate earnings due to falling
prices and yen appreciation.
In this situation, the Furukawa Electric Group adapted to the harshenvironment in global markets by taking cost-cutting measures, suchas a thorough review of expenses and cuts in fixed costs, and bringing
the Group together to ensure profitability. At the same time, we took
the first strategic steps to strengthen the Group’s position in global
markets. For example, we aggressively expanded our global presencewith increased production of ultra-high voltage transmission cables in
China and the launch of optical fiber production with a local partner
in India to meet investment demand in transmission infrastructure
sectors, such as telecommunications and electricity, in emerging
economies. In the functional materials business, we also expanded
our trade area for automotive wire harnesses, and began operatinga new factory for foamed plastic products in Russia. We continued torestructure our businesses and Group companies, and sought to raise
efficiency and strengthen Group management.
Sales were hurt by the strong yen and sluggish demand in Japan,
the US and other developed countries, but earnings were bolsteredby solid demand from China and other emerging countries. In
addition, clients wrapped up their inventory adjustments and Japan’s eco
car tax incentives restored demand for automotive-related products.
As a result, consolidated sales fell 21.6% from the previous fiscal yearto ¥809.7 billion, but we achieved the sales forecast made at the startof the fiscal year. Overseas sales dropped 21.5% over the previous
fiscal year to ¥249.2 billion.
Results by Business Segment
Telecommunications
Consolidated net sales decreased 14.8% from the previous fiscal yearto ¥135.5 billion. Demand in the FTTH-related market was robust inJapan, and exports of optical fibers to India, China and other Asian
countries were solid. Sales of terrestrial digital broadcasting products
were strong as regions throughout Japan prepare for the complete
transition from analog to digital broadcasting in July 2011. However,sales fell due to faltering demand for infrastructure in Europe andother developed countries as well as the exchange rate.

Net sales (Billions of yen)
–23.6
Telecommunications–68.6
Energy andIndustrial
Products

Down ¥223.1billion
year-on-year–50.6

1,032.8
Metals–45.9
Light Metals–46.6
Electronics
andAutomotive
Products

2009

–4.4

16.6

Services and Others Elimination or
corporate

809.7

2010

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

36

Energy and Industrial ProductsElectronics and Automotive Systems

Consolidated net sales decreased 24.7% from the previous fiscal
year to ¥208.8 billion. Sales of high-voltage cables in China wererobust, and demand for tapes used in semiconductor manufacturing
recovered, particularly in Asia, after a sharp fall in the second half ofthe previous fiscal year. However, this was offset by stagnant sales ofcopper wires and electric cables for construction.
In April 2009, we acquired F-Co Co., Ltd., which manufacturesand sells electric insulated wires, tape for anti-corrosion applications,
heat release and thermally-conductive sheets and other products. In
February 2010, Asahi Electric Works Co., Ltd., a subsidiary which excels
in the power transmission component business, became a whollyowned subsidiary through a share exchange. In addition, as part ofour business reorganization, we sold subsidiary Sun Sunny Industry
Co., Ltd., which specializes in floor heating systems, to MAX Co., Ltd. inAugust 2009.

Consolidated net sales fell 20.8% from the previous fiscal year to¥177.2 billion. Some products achieved a dramatic recovery. Salesof automobile parts-related products, such as automotive wire
harnesses, were strong due to restored demand for automobiles inemerging economies and the effect of eco-car tax incentives in Japan.
In addition, the production of aluminum blanks used in memory disksrose sharply from the second half of the fiscal year on the recovery indemand for computers. However, overall demand remained stagnant
in the harsh market environment.
As part of our efforts to consolidate similar businesses andstrengthen collaboration within the Group, Furukawa Magnet Wire
Co., Ltd., established in April 2009, took over TOTOKU Electric Co., Ltd.’smagnet wire business in October 2009. This business and the magnet
wire business of Riken Electric Wire Co., Ltd. were consolidated under
Furukawa Magnet Wire in April 2010.

MetalsServices and Others

Consolidated net sales fell 29.7% from the previous fiscal year to¥119.6 billion. Although demand for electrolytic copper foils forlithium-ion batteries recovered and prices were raised for products
as a result of higher copper metal prices, demand for copper pipes
used in air conditioners and building plumbing was stagnant and thedecline in the market for electronic equipment parts in the first half
had a major impact, despite signs of a recovery in the second half of
this fiscal year.

Consolidated net sales for this segment fell 10.7% from the previous
fiscal year to ¥36.9 billion.

Cost of Sales/Selling, General and Administrative
Expenses
While cost of sales decreased 24.5% from the previous fiscal yearto ¥679.4 billion, the cost of sales ratio improved by 3.2 percentage
points from 87.1% to 83.9%.
Selling, general and administrative expenses fell 11.1% from theprevious year to ¥110.0 billion.

Light Metals
Consolidated net sales decreased 19.6% to ¥188.1 billion. In the first halfof the fiscal year, in addition to lower sales of materials for beveragecans, sales volume of general purpose materials and thick plates used
for semiconductor and liquid crystal fabrication fell sharply without any
recovery. In the second half, sales volume of materials for automobile
cooling units, thick plates and general purpose materials recovered
sharply on the back of restored demand for light metals for electronics
and automobiles. However, this was not enough to offset the decline insales in the first half.

Net Income
Operating income increased ¥10.6 billion over the previous fiscal
year to ¥20.3 billion (US$ 0.2 billion) in fiscal 2010. Although sales fell,Group-wide cost-cutting efforts compensated, and a decline in crude
oil and auxiliary material prices also contributed. This resulted in a
sharp increase in income.
In other expenses (net), we eliminated the foreign exchange
risk posed by our yen-denominated loans in our US subsidiary as aOperating income (Billions of yen)UP ¥10.5 billion
year-on-year

15.6

20.3

9.8
Fixed cost
cutting

-15.2
6.8

2009

Sales decrease
Mix worsening-0.7
Metal position
worsening-1.2
FX loss

5.2
LCM-basis rebound

Crude oil/
auxiliarymaterials price
down

2010

37

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

result of the reorganization of our North American business in theprevious fiscal year, which improved foreign exchange gains/losses
by a substantial ¥19.4 billion over the previous fiscal year. In addition,
equity in income of non-consolidated subsidiaries and affiliates
increased ¥3.0 billion.
We posted ¥6.3 billion in net gains on sales of investment
securities, but we recorded ¥2.8 billion in business restructuringcosts and ¥4.6 billion in provisions for penalties under the AntiMonopoly Law.
As a result, income before income taxes and minority interests
totaled ¥10.9 billion (US$0.1 billion) and net income after income
taxes and minority interests in loss of consolidated subsidiaries totaled¥9.7 billion (US$0.1 billion).

Dividends
Furukawa Electric intends to pay dividends to shareholders, upholding
its basic policy of paying solid dividends, while maintaining a longterm outlook on future income trends and business development.
The Company adheres to the basic principle of paying cash
dividends twice a year out of its earned surplus as interim and fullyear dividends. Full-year dividends paid out of earned surplus are
determined by the shareholders’ meeting and interim dividends
are decided by the Board of Directors meeting. For fiscal 2010, theCompany paid a dividend of ¥5.0 per share (interim dividend was ¥2.5
per share) based on the above principle. The Company will also seek
to strengthen its financial condition by securing retained earnings.
The Company stipulates in its articles of incorporation that it can
pay an interim dividend based on the record date of September 30 ofeach year through a resolution by its Board of Directors.

Cash Flows
In fiscal 2010, income before income taxes and minority interests
increased by ¥41.8 billion from the previous fiscal year to ¥10.9 billion.
On a consolidated basis, cash and cash equivalents decreased by¥12.6 billion compared with the end of the previous fiscal year to¥40.8 billion due to a decrease in payments for the acquisition ofproperty, plant and equipment and the use of cash and deposits to
reduce interest-bearing debt .
Net cash provided by operating activities was ¥36.7 billion. While
income before income taxes made a sharp turnaround after a net loss
in the previous fiscal year to net income, trade receivables increased
significantly, which narrowed the extent of the increase from thefirst half.
Net cash used in investing activities was ¥25.1 billion. This wasdue to decreased payment for purchase of property, plant andequipment.
Net cash used in financing activities was ¥23.6 billion. This wasprimarily due to a decline in interest-bearing liabilities.

Liquidity
Since launching the Furukawa Survival Plan in 2004, a three-year
medium-term management plan, we have endeavored to sell
investment securities and real estate holdings and reduce interestbearing debt to bolster our financial condition.
As a result, interest-bearing debt decreased by ¥21.0 billion fromthe previous fiscal year to ¥362.1 billion.
We established the New Frontier 2012 Medium-Term Plan in April
2010 and are endeavoring to further improve our financial strength.
We will seek to curb increases in total assets, continue to reduceinventory, trade receivables and fixed costs, repay interest-bearing
debt by generating income, and build up shareholders’ equity.
In terms of numerical targets, we are forecasting shareholders’equity of ¥210.0 billion, interest-bearing liabilities of ¥320.0 billion, adebt-to-equity ratio of 1.5, ROA of 5.6% and total asset turnover of 1.1
by March 31, 2013.

R&D Activities
The Furukawa Electric Group maintains a solid R&D structure thatenables it to create and develop new businesses through innovative
products and technologies and to aggressively pursue R&D activities.
Furukawa Electric Co., Ltd. operates five research laboratories in Japan,
including Yokohama R&D Laboratories, the Metal Research Center, theEcology and Energy Laboratory, the FITEL Photonics Laboratory, and
the Automotive Technology Center, which are further complemented
by the research laboratories of other Group companies. We also
operate two overseas laboratories, OFS Laboratories, LLC in the U.S.
and Furukawa Electric Institute of Technology Ltd. in Hungary. Total
R&D expenditures in fiscal 2010 were ¥17.3 billion. The major resultsof our R&D activities segment were as follows:

Telecommunications(1) We applied our hole structure fiber technology to develop a fiberthat can simultaneously transmit optical signals in wavelengths
from 1um to 1.6um. This will expand the number of opticalsignals that can be transmitted by more than 10 times compared
to existing fibers. We expect this to be a key technology increating ultra-high density transmissions in the future.
(2) We succeeded in developing a small chip using silica waveguidetechnology that can convert to an intensity modulator. These
are needed for optical digital coherent receivers, a new opticalcommunications technology, which require a function converting
signals with multiple values resulting from phase modulationand polarized multiplexing to optical intensity signals. We beganshipping these chips to appliance manufacturers.
(3) Optical modulators used in phase modulation and polarized
multiplexing have significant optical loss, creating the need for higher
output semiconductor lasers used as optical signal sources. We
succeeded in raising output by more than 50% of previous levels
with a semiconductor laser that can change the wavelength atwill, and began shipping the product.

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

(4) We developed a single mode fiber with a core cross-section thathas been expanded to more than double its previous size using
hole structure fiber technology. This inhibits the degradationof nonlinear signals, which complicates signal processing indigital coherent technology, and also reduces the input power
limitations resulting from an increase in information transmission
volume. We expect this to be one of the ultra-high density fibertransmission paths in the future.
(5) We are developing a 10Gbps transmitter, a transmission ratethat is 10 times faster than previous rates, in anticipation of thegrowing sophistication of subscriber-type PON systems.
(6) In the optical interconnection field, we have provided samples ofour proprietary 1060nm VCSEL-equipped low-power consumption
module to optical transmitter manufacturers, transmission
equipment manufacturers and computer manufacturers. We are
currently having these samples evaluated.
(7) We have developed cable sheathing suitable for vertical flame
resistance available in a range from thin walls to average thickness,and have commercialized a thinner cable than previously available.
R&D expenditures for the segment totaled ¥5.6 billion.

superconducting power cables to replace ultra-high voltage
power cables. In addition, we are proactively participating indemonstration projects both in Japan and overseas. Furthermore,with respect to devices applying yttrium-based superconducting
thin films, we will conduct verification tests of simulated films at
an early date and are pursuing commercial development.
(4) We are developing smart grid technology and products
compatible with the construction of next-generationelectricity transmission/distribution networks and the highvolume introduction of renewable energy. In particular, we areendeavoring to develop practical applications for secondary
battery-related technologies and products, which are particularly
important and enjoy high demand, at an early date under aGroup-wide system, while also participating in the national
project. R&D expenditures for the segment totaled ¥1.1 billion.

Metals(1) In high-performance connector material, we are expanding salesof highly flexible alloys, and have obtained certification fromseveral customers. We gained competitive advantages in priceand quality by establishing a low-cost, high-precision gauge
control technology.
(2) We began mass producing new highly adhesive products fordeveloping aluminum plastic composite products.
(3) We presented some customers with internally grooved tubes
with improved heat exchange functions achieved with a nextgeneration groove shape.
(4) We made progress in developing a current collector for a nextgeneration lithium-ion secondary battery, and introduced it tosome customers.
(5) In the development of high-temperature superconducting wire rods,
we are specializing in yttrium-based materials that are expected
to become revolutionary next-generation wire rods. We havecontinued to participate in the national project for yttrium-based
superconducting power device technology, and have improved
lengths by introducing our proprietary layered structure.
(6) We developed nano metal powder as a material for hard-wiring

Energy and Industrial Products(1)We established a pipe development system for oceanic energy
resource development, and we are participating in a national project
to promote such efforts. We intend to contribute to the productionof Japan’s LNG, crude oil and mineral resources by offering specificspecifications for offshore, undersea and seabed applications.
(2) We are making progress in the development of high-functioning
foamed materials. Specifically, in the automotive area we are
pursuing R&D to reduce CO2 emissions by realizing lighter weight,
reducing the environmental impact by using engineering plastic
foamed materials and non-halogen flame resistant foamed
materials, and reducing energy consumption through the use ofhighly reflective foamed materials.
(3) We continue to participate in a national project for developing
yttrium-based, high-temperature superconducting power cables,
and we are promoting the development of ultra-high voltage

Research and development costs (Billions of yen)
–0.9

Telecommunications

19.9

-0.2
Energy andIndustrial
Products-0.2

0MetalsLight Metals

Down ¥2.6 billion
year-on-year-0.7
Electronics
andAutomotive
Products-0.7
Services and Others

17.3

2009

38

2010

39

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

and bonding for electronics, and are conducting tests for practicalapplications. R&D expenditures for the segment totaled ¥1.1 billion.

Light Metals(1) We developed new materials for next-generation applicationsin the manufacture of aluminum foil used for current collectors
for positive electrodes of lithium-ion secondary batteries, andsupplied them to domestic and overseas customers. We also
developed and expanded sales of aluminum foil for lamination
and aluminum foil for oblong cases used as current collectors fornegative electrodes as well as battery jacket materials.
(2) As a top manufacturer of materials for automobile heatexchangers, we are developing thin-walled, high-performancematerials, but began developing materials used in intercoolers,
which will be used in greater volumes to comply with regulations
on automobile gas emissions. This product has been wellreceived by heat exchanger users.
(3) The use of aluminum in place of copper pipes used in the
pipework for air-conditioning devices has been attracting
attention, and we have developed aluminum pipes that excel inheat exchange, corrosion resistance and workability. The pipes
have earned high praise from air conditioner manufacturers.
(4) Given the growing importance of thermal management in nextgeneration automobiles, such as electric cars, we developed
the VL Fan, an aluminum air-cooled chiller with significantly
enhanced cooling capability. Many users have inquired about thisproduct, which is being given high marks. R&D expenditures forthe segment totaled ¥2.6 billion.

Electronics and Automotive Systems(1) We have continued to develop a radar system by applying ultra-wideband (UWB) technology. The radar is expected to be used as a sensor
capable of monitoring the automobile’s periphery, which would be
helpful in realizing preventative safety functions for automobiles. We
have started technical discussions with system manufacturers andautomobile manufacturers.
(2) We expect to mass produce a sensor for automobile batteries

within the next few years. Battery power management is
expected to improve the efficiency of automobiles’ energy use.
(3) The new process we developed for shortening processing timeand reducing processing energy for cellular phone antennas, isbeing expanded to other products within the Company.
(4) We completed a stick antenna for high-performance compact
ground-wave digital tuners that are easier to mount and havebetter designs than film antennas. We are moving ahead withnew offers.
(5) We completed the substrate tape for our chip-size packages(CSPs), which involves lamination of tape and wafer, and havealmost completed reliability testing, which indicates that there
are no problems.
(6) We further refined our proprietary flat 1mm heat pipes, whichhave been adopted for use in high-performance heat sinks thatare essential for the characteristic features of high-performancehome information appliances, and commercialized 0.8mm
heat pipes. In addition, we proposed thin, lightweight heatsinks for use in backlights for flat-screen LCD TVs and in coolingapplications for power source boards. This product has been
increasingly introduced by our customers.
(7) Heat sinks using heat pipes in cooling power modules used ininverters and converters for high-speed railways and subways
are being increasingly adopted, and heat and fluid simulations
have been conducted on its design. High performance andoptimization can now be achieved.
(8) We are developing magnetic wires for the drive motors of
hybrid vehicles (HVs), which use highly conductive, thin films,
and in conjunction with this, we have accelerated R&D toachieve higher voltage resistance and thinner films for nextgeneration magnetic wires.
(9) We established a research association for next-generation powerdevice technology jointly with the Fuji Electric Group to speed up
the development of transistors and diodes for devices using GaN(gallium nitride).
(10) We were commissioned by the New Energy and Industrial
Technology Development Organization (NEDO) and began

Capital expenditure (Billions of yen)
-2.1
Telecommunications

41.3

-1.5
Energy andIndustrial
Products

Down ¥15.8 billion
year-on-year-6.7

Metals-4.5
Light Metals

2009

1.4

-0.2
Electronics
andAutomotive
Products-2.2

Elimination or
corporate

25.4

Services andOthers2010

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

40

Light Metals

developing a revolutionary ultra-lightweight electric wire using
carbon nano tubes. R&D expenditures for the segment totaled¥3.7 billion.

•Expand production of aluminum extrusion products•Upgrade rolling equipment

Services and Others

Electronics and Automotive Systems

This area is primarily related to our new business fields.
(1) We developed a fiber laser device with optical output power
amounting to several hundred watts, and are conducting
verification tests in customers’ laser fabrication processes. We
have also set up infrastructure internally and have begun to
examine laser fabrication technology.
(2) We were commissioned by NEDO to begin developing negativeelectrode materials for lithium-ion secondary batteries. R&D
expenditures for the segment totaled ¥3.3 billion.

Capital Expenditures
The Furukawa Electric Group conducted investments below levels of theprevious fiscal year in all segments, and total Group capital expenditures,at ¥25.4 billion, were lower than the previous fiscal year. The primarygoals for capital expenditures by segment were as follows:

Telecommunications•Expand production capacity of optical fiber cables•Mass produce and expand production capacity of opticalcomponents, such as semiconductor lasers•Upgrade factory buildings and consolidate production facilities
Energy and Industrial Products•Expand production capacity of foamed products•Raise efficiency, maintain and upgrade older buildings and facilities
Metals•Expand production capacity of copper alloys and strips, plated
strips and copper foil products for the automotive, IT andelectronics markets•Integrate facilities after consolidation of magnet wire business•Mass produce electronic components for automobiles
Major facilities completed in the consolidated fiscal year underreview included: expansion of facilities for manufacturing copper
strips at Furukawa Electric’s Nikko Works; expansion of facilities
for manufacturing electrolytic copper foil at Furukawa Circuit Foil
Taiwan Corporation; upgrading of rolling mill motors at FurukawaSky Aluminum Corporation; and the construction of a plant for
optical fiber cables at Furukawa Optical Solutions Indonesia. No
significant facilities were disposed of or sold during the fiscal year
under review.

Financial Position
Total assets decreased by ¥9.8 billion from the previous fiscal year to¥835.8 billion. Current assets increased by ¥3.2 billion to ¥400.5 billion
and non-current assets decreased ¥13.1 billion to ¥435.3 billion. The
major reasons for these fluctuations were decreases in cash and bankdeposits, inventories of work-in-progress, raw materials and stored
goods, and property, plant and equipment, while trade receivables,
investment and long-terms loans increased.
Operating capital increased as decreases in inventories andincreases in trade payable exceeded the increase in trade receivables.
Major factors behind changes in non-current assets included anincrease of ¥25.4 billion in capital expenditures, a decrease of ¥42.5
billion in depreciation, and impairment losses.
With respect to current liabilities, interest-bearing debt, whichis the sum of long- and short-term debt, commercial paper andcorporate bonds, decreased by ¥21.0 billion from the end of theprevious fiscal year to ¥362.1 billion.

Assets (Billions of yen)
-6.1
Inventori
es

-7.6
0.4

36.2

-11.1
845.7

2009

0.0
Cash and Marketable Tradebank securities receivable
deposits

Deferred
Refundable income
incometaxes
taxes due tocarryback oflosses

13.2
-8.4

-20.9
0.0

Other Allowance Investmentsforcurrent
andassets doubtful long-term
accounts
loans
Property,plant and-3.5
equipment,
net ofaccumulatedDeferred
depreciation income
taxes

Current assets:
Up ¥3.2 billion
year-on-year

-3.3
Other
assets

1.4
Allowancefordoubtfulaccounts

835.8
2010

Non-current
assets:Down ¥13.1
billionyear-on-year41

Furukawa Electric Co., Ltd. ANNUAL REPORT 2010

In the category of net assets, retained earnings increased by¥6.3 billion, while there was a decrease in shareholders’ equity
resulting from share exchanges with a consolidated subsidiary
and an increase in valuation and translation adjustments causedby the recovery in the market value of investment securities andmetals prices. Consequently, total shareholders’ equity ratio rose 2.7
percentage points from the end of the previous consolidated fiscal
year to 19.6%.

Business-Related Risks
The Furukawa Electric Group’s management performance is affectedby the economic conditions of the various markets in which we sell
our products and provide services.
The Furukawa Electric Group’s management performance, stock
price and financial condition may be affected by the following risks,assessed by the Group as of June 29, 2010, the date on which we
submitted our financial report.

1) Infringement of third-party intellectual property
rights and other rights
The Furukawa Electric Group takes appropriate measures to preventthe infringement of intellectual property and other rights ownedby third parties in connection with business activities, including thedevelopment, manufacture, use and sales of products and software.
These measures include prior research of such rights andthe arrangement of licensing as required. However, we may
become engaged in disputes or negotiations in situations inwhich a third party sues the Group for alleged infringement ofintellectual property or other rights owned by the third party,
or in cases where intellectual property or other rights ownedby the Group are infringed upon by a third party. Lawsuits
involving intellectual property may result in the suspension of
the manufacture or sale of Group products or a major claim fordamages or settlement benefits, and in the event the Group is
faced by such suspensions or payment obligations, the resultsof operations and financial position of the Group may be
adversely affected. In addition, despite having a framework inplace to deal with property rights, corporate competitivenessmay decline in the event that the Group’s manufacturing
technology (knowhow) is leaked to a third party.

2) Defective products
The Furukawa Electric Group manufactures products and services inaccordance with prevailing domestic and international standards andspecifications as well as its own quality control standards developed
over the course of its extensive business experience. However, wecannot warrant that all our products and services are free fromdefects or that we will not be liable for any unforeseen future
losses or damages. Any defects in products such as power cables,
communication cables and automotive parts may incur significant
additional costs.
While our product liability insurance policy covers risks associatedwith our products, it may not cover all the damages we might
be required to pay. Product defects causing significant damage
or product liability may incur major costs and tarnish the Group’s
reputation, adversely affecting the results of the Group’s operations
and financial position.

3) Fluctuations in raw material and fuel prices
Prices for our main raw materials, including non-ferrous metals
such as copper and aluminum, and polyethylene, along with fuelssuch as heavy oil and LNG, may fluctuate beyond expectations due
to changes in international politics and market trends. We may not
be able to sufficiently reflect such substantial price fluctuations
onto our sales prices, or we may be unable to do so in a timely
manner. This may adversely affect the results of our operations or
financial position.

4) Fluctuations in exchange rates
The Furukawa Electric Group owns foreign currency-denominatedcredit and obligations. Therefore, fluctuations in the foreign currency
environment may result in exchange gains or losses.

Liabilities and net assets (Billions of yen)

18.8

845.7

-15.6

-2.2

Other
Trade current
payables liabilities

-32.7

12.4

-30.0
-7.6
12.1

29.6
Bonds

Short- Current
term debt portionof bonds

2009

Accrued -0.8
retireLong-ter ment
6.3
m debt benefits Provision -2.0
0.0
0.0
for
environm Other Common Common Retained
ental long-term stock
stock, earnings
costs liabilities
CapitalsurplusTotal
valuation
Common andtreasury translation
stock, at adjustments
cost

Minority
interests

Liabilities:
Down ¥28.3
billionyear-on-year

2.0

835.8

2010

Net assets:
Up ¥18.5
billionyear-on-yearFurukawa Electric Co., Ltd. ANNUAL REPORT 20105) Higher interest rates
If interest rates rise, our interest expenses will increase, which may
adversely affect the results of operations.

6) Lowering of credit ratings
Should our performance stagnate, we may incur the risk of credit
rating agencies downgrading our long-term bonds and commercial
paper.

7) Impairment of assets
In the event of unfavorable conditions in the market or businessenvironment, the market value of our assets may substantially decline,or the profit generated by our assets may decrease, leading us toincur impairment losses on such assets.

8) Soil pollution on land held for business purposes
The Furukawa Electric Group discovered contaminated soil on partof the land owned by the Group in the Nikko area. We are planningfor necessary soil remediation actions. Remediation work is also
underway in part of the land owned in the Yokohama area. We alsobegan a survey concerning disposal and ground contamination
related to waste being stored in land owned in the Koyama area. In
addition, we are conducting remediation work at the former site of
the Neyagawa Plant, owned by subsidiary Kyowa Electric Wire Co.,
Ltd., toward the lifting of the contaminated area designation. We
are also implementing soil and groundwater-related measures forthe land at the Ibaraki Plant, owned by Aoyama Kinsho. When wesell our land or change its use in other areas, we may incur costs
associated with soil pollution in the event a soil survey demonstrates
the land is contaminated.

9) Overseas activities
The Furukawa Electric Group manufactures and sells products not
only in Japan but also in overseas markets, including markets in the
U.S., Europe and Asia, as well as emerging markets. We face various
potential risks in these overseas markets, such as unexpected changes
in laws and regulations, labor disputes caused by changes in theeconomic environment or sudden outbreaks of epidemics. Such risks
may adversely affect the result of our operations.
Particularly in China, where the economy has been growing
rapidly over the past several years, we have established and operate
a number of business sites, namely in Shanghai, Beijing and Tianjin.
Unexpected events in China, such as changes in laws, rules andregulations associated with investment, foreign currency, finance andtrade; suspension of power supply; or the outbreak of epidemics, may
adversely affect our operations. Concretely, should the Chinese GDP
growth rate sharply decline due to the adoption of a governmental
policy to curb excessively rapid economic growth, or should theexchange rate of the yuan be adjusted, the results of our operations in
China may significantly differ from our business plan forecast. In suchcases, the cash flows of our subsidiaries in China may be adversely
affected because the collection period for sales receivables from
Chinese customers is relatively long.

42

Future Outlook
The steady growth of emerging economies is expected to drive
the global economy going forward, while next-generation cars andnext-generation transmission networks (smart grids) and other newmarkets in the environmental sector are expected to expand globally.
We formulated the 2007–2010 medium-term management plan,
Innovations 09, in March 2006, but the business environment haschanged dramatically since then as a result of the global economic
recession and sharp fluctuations in resource prices. In light of thesechanges in the business environment, we established the New
Frontier 2012 Medium-Term Plan, in April 2010 to achieve our
medium-term vision of a Group with greater collective strength oncourse for further expansion. This plan aims for the Group’s growthin new frontiers (new markets and new businesses), as well as amanagement system that can adapt to changes. The plan will address
the following issues.

New Frontier 2012
I. Restructure our operating portfolio and develop new
businesses(1) Expand our transmission infrastructure business globally(telecommunications, energy, high-speed railways, and others)(2) Enhance our functional materials business (develop products
capitalizing on our particular strengths in the materials sector)(3) Develop new eco business (increase R&D particularly for nextgeneration vehicles, power transmission networks and highdensity optical telecommunications)(4) Restructure traditional processing businesses (acceleratepace of improvements in operating portfolio)

II. Reform our organizational climate (reinforced compliance,development of global workforce, and other)
III. Improve our financial strength (generate profits bystrengthening Group businesses and repay interest-bearing
debt, and other)

In fiscal 2011, we expect ¥920.0 billion in consolidated net sales, ¥36.0
billion in operating income, ¥32.0 billion in ordinary income and ¥12.5
billion in net income.

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Corporate Data
Head Office

Manufacturing Facilities

2-3, Marunouchi 2-chome, Chiyoda-ku, Tokyo 100-8322, Japan
PHONE: 81-3-3286-3001
URL: http://www.furukawa.co.jp/english/¥69, 395 million (As of March 31, 2010)

Chiba
Nikko
Hiratsuka
Mie
Yokohama
Osaka

Branches

Research Laboratories

Osaka
NagoyaFukuoka
Hiroshima
Sendai
SapporoYokohama R&D Laboratories
Metal Research Center
Ecology & Energy Laboratory
FITEL Photonics Laboratory
Automotive Technology Center

Common Stock

Stock Information
Stock InformationNumber of shares authorized March 31, 2010

2,596,000,000

Common shares 

2,500,000,000

Preferred shares 

50,000,000

Subordinated shares 

46,000,000

Total number of shares issued and outstanding (Common shares)

706,669,179

Distribution of Stock Ownership(Common shares) March 31, 2010

Treasury stock
0.06%
428,463 shares

Financial institutions
41.46%
293,012,185 shares

Domestic corporations,others7.11%
50,269,751 shares

Securities companies
2.52%
17,835,143 shares

Individuals andothers27.24%
192,462,031 shares

Foreign corporations
21.60%
152,661,606 shares

Total number of shares issued and outstanding: 706,669,179

Major Stockholders
Name

March 31, 2010

Number of shares held

Shareholding ratio

The Master Trust Bank of Japan, Ltd. (trust account)

42,859,000

6.06%

Japan Trustee Services Bank, Ltd. (trust account)

35,606,000

5.04%

Trust & Custody Services Bank, Ltd.
(Mizuho Corporate Bank, Ltd. Retirement Benefit Trust Account re-entrusted by Mizuho Bank, Ltd.)22,928,250

3.24%Japan Trustee Services Bank, Ltd. (trust account 4)

20,906,000

2.96%Japan Trustee Services Bank, Ltd. (trust account 9)19,406,000

2.75%

Asahi Mutual Life Insurance Company

16,060,500

2.27%

Furukawa Co., Ltd.

13,290,455

1.88%

Nippon Life Insurance Company

11,895,000

1.68%

Fuji Electric Holdings Co., Ltd.

11,000,000

1.56%

Trust & Custody Services Bank, Ltd.
(Mizuho Corporate Bank, Ltd. Retirement Benefit Trust Account re-entrusted by Furukawa Co., Ltd.)

10,919,000

1.55%