Kurotani Corporation
Nonconsolidated Financial Statements
for the Year Ended August 31, 2014,
and Independent Auditor's ReportKurotani Corporation
Nonconsolidated Balance Sheet
August 31, 2014

Millions of Yen
2014
2013

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Notes 11 and 12)
Short-term investments (Note 12)
Receivables (Note 12):Trade notes
Electronically recorded monetary claims—operating
Trade accounts
Other
Inventories (Note 3)
Deferred tax assets (Note 10)Prepaid expenses and other current assets¥

Thousands of
U.S. Dollars(Note 1)
2014

897
695

¥ 1,399
695

$

1,787
373
4,653
789
3,431
72
1,078

1,869
4,117
564
1,920
95
828

17,186
3,587
44,7397,589
32,990692
10,36013,775

11,487

132,452

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short-term bank loans (Notes 7 and 12)
Current portion of long-term debt (Notes 7 and 12)
Payables (Note 12):Trade notes
Trade accounts
Other
Income taxes payable (Note 12)
Accrued expenses
Other current liabilities

8,622
6,687

Total current liabilities
Total current assets
PROPERTY, PLANT, AND EQUIPMENT—Net (Note 4):Land
Buildings and structures
Machinery and equipment
Furniture and fixtures
Construction in progress
Total property, plant, and equipment—net
INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 5 and 12)
Investments in unconsolidated subsidiary
and associated company (Note 6)
SoftwareDeferred tax assets (Note 10)
Other assets (Note 6)
Total investments and other assets

1,521
462
331
74

1,521
497
238
68
160

14,626
4,444
3,186
715

2,388

2,484

22,971

572

484

5,498

212
24

2,042
234

49

157
20
4
173

857

838

8,233

LONG-TERM LIABILITIES:Long-term debt (Notes 7 and 12)
Liability for retirement benefits (Note 8)
Deferred tax liabilities (Note 10)
Total long-term liabilities
EQUITY (Note 9):
Common stock—authorized, 28,000,000 shares;
issued, 7,168,600 shares in 2014 and 2013
Capital surplus:
Additional paid-in capital
Other capital surplus
Retained earnings:
Legal reserve
Retained earnings—unappropriatedUnrealized gain on available-for-sale securities
Treasury stock—at cost, 108 shares in 2014 and77 shares in 2013

459

Total equity
TOTAL¥ 17,020¥ 14,809$ 163,656

TOTAL

See notes to nonconsolidated financial statements.

-2-

Millions of Yen
2014
2013

Thousands of
U.S. Dollars(Note 1)
2014

¥ 5,588
1,229¥ 2,100
1,044$

53,726
11,815

385
818
261
9
34
22

390
1,504
290
257
27
32

3,705
7,863
2,506
87
328
220

8,346

5,644

80,250

1,349
75
9

1,861
71

12,973
723
89

1,433

1,932

13,785

1,000

1,000

9,615

293
392

293
392

2,818
3,777

9
5,439
108

9
5,484
55

87
52,296
1,028

7,241

7,233

69,621¥ 17,020¥ 14,809$ 163,656

Kurotani Corporation
Nonconsolidated Statement of Income
Year Ended August 31, 2014
Thousands of
U.S. Dollars(Note 1)
2014

Millions of Yen
2014
2013
NET SALES¥ 51,001¥ 50,084$ 490,393

49,77948,037

478,643

1,222

2,047

11,750SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES

1,137

1,256

10,933Operating income

85

791

817

11
7
18

10

102
66
169

COST OF SALES
Gross profit

OTHER INCOME (EXPENSES):Interest and dividend income
Insurance income
Foreign exchange gain
Subsidy income
Loss on derivative transactions
Interest expense
Gain on sales of property, plant, and equipment
Gain on sales of investment securities
Gain on sales of insurances
Provision of allowance for doubtful accounts
Other—net

19
7
(99 )
(68 )
2
13

(5)
(73)
2

(47)
(707)
18

162
(39)
4

2

1,559
(374)
45

87

(114 )

831

INCOME BEFORE INCOME TAXES

172

677

1,648

INCOME TAXES (Note 10):
Current
Deferred

64
10

248
19

620
88

74

267

708

Other income (expenses)—net

Total income taxes
NET INCOME

¥

98

¥

410

Yen
PER SHARE OF COMMON STOCK (Note 2.m):
Basic net income
Cash dividends applicable to the year

¥ 13.64
20.00

See notes to nonconsolidated financial statements.

-3-

$

940

U.S. Dollars¥ 57.25
20.00$ 0.130.19

Kurotani Corporation
Nonconsolidated Statement of Changes in Equity
Year Ended August 31, 2014
Millions of Yen
Outstanding
Number of
Shares ofCommon Stock
BALANCE, SEPTEMBER 1, 2012
Transfer from other capital surplus
Net income
Cash dividends, ¥25 per share
Purchase of treasury stock
Net change in the year
BALANCE, AUGUST 31, 2013
Net income
Cash dividends, ¥20 per share
Purchase of treasury stock
Net change in the year
BALANCE, AUGUST 31, 2014

7,168,600

Common
Stock
¥

593

Capital Surplus
Additional
Other Capital
Paid-in Capital
Surplus
¥ 293

407

¥ 799

Legal
Reserve

UnappropriatedUnrealized
Gain onAvailable-for-Sale
Securities¥9¥ 5,253¥ (47 )

Retained Earnings

Treasury
Stock

Total
Equity¥ 6,900(407)
410(179 )

410
(179)

(77 )

7,168,523

1,000

293

392

9

5,484

102

102

55

7,233

98
(143 )

98
(143)

(31 )

7,168,492¥ 1,000

¥ 293

¥ 392

¥9

¥ 5,439

53

53

¥ 108

¥ 7,241

Thousands of U.S. Dollars (Note 1)

CommonStock
BALANCE, AUGUST 31, 2013

$ 9,615

Capital Surplus
Additional
Other Capital
Paid-in Capital
Surplus$ 2,818$ 3,777

Retained Earnings
Legal
Reserve

Unappropriated$ 87$ 52,735

Net income
Cash dividends, $0.19 per share
Purchase of treasury stock
Net change in the year
BALANCE, AUGUST 31, 2014

Unrealized
Gain onAvailable-for-Sale
Securities
$

517

940
(1,379 )$ 9,615$ 2,818

See notes to nonconsolidated financial statements.

-4-$ 3,777$ 87$ 52,296

Treasury
Stock

Total
Equity$ 69,549
940(1,379)511

511$ 1,028$ 69,621

Kurotani Corporation
Nonconsolidated Statement of Cash Flows
Year Ended August 31, 2014

Millions of Yen
2014
2013
OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Income taxes—paidDepreciation and amortization
Increase in allowance for doubtful accounts
Foreign exchange loss—net
Gain on sales of investment securities
Changes in assets and liabilities:
Increase in receivables
Increase in inventories(Decrease) increase in payables
Increase in liability for retirement benefits
Other—net
Total adjustments¥

172(326 )
207
39¥

Thousands of
U.S. Dollars(Note 1)
2014677

$ 1,648(4 )
193(3,136)
1,993
374

159
(13 )
(1,052 )(1,511 )(721 )
4(314 )(3,674 )(470 )(430 )
572
3(154 )(144 )(10,114)(14,525)(6,929)40(3,030)(35,327)(3,502 )533(33,679)(1,071 )
1,071(197 )
2(8 )(1,071 )1,077(291 )
2(8 )
113(10,300)
10,299(1,898)
19
(81)

(55 )
(12 )
280

(141 )
(11 )
(8 )

(533)
(115)
2,703

10

(338 )

94

3,149
800
(1,127 )(143 )(791 )
1,500(885 )(179 )

30,280
7,692(10,839)(1,379)Net cash provided by (used in) financing activities

2,679(355 )

25,754

FOREIGN CURRENCY TRANSLATION ADJUSTMENT ON
CASH AND CASH EQUIVALENTS

7

(4 )

82

NET DECREASE IN CASH AND CASH EQUIVALENTS(806 )(164 )(7,749)CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

1,399

1,563

13,450593¥ 1,399$ 5,701

Net cash (used in) provided by operating activities
INVESTING ACTIVITIES:Payments into time deposits
Proceeds from withdrawal of time deposits
Purchases of property, plant, and equipment
Proceeds from sales of property, plant, and equipment
Purchases of investment securities
Proceeds from sales of investment securities
Investments in unconsolidated subsidiary andassociated company
Purchases of software and other intangible assets
Other—net
Net cash provided by (used in) investing activities
FINANCING ACTIVITIES:
Increase (decrease) in short-term bank loans—net
Proceeds from long-term debt
Repayments of long-term debt
Dividends paid

CASH AND CASH EQUIVALENTS, END OF YEAR (Note 11)
See notes to nonconsolidated financial statements.

-5-¥

Kurotani Corporation
Notes to Nonconsolidated Financial Statements
Year Ended August 31, 2014

1.

BASIS OF PRESENTING NONCONSOLIDATED FINANCIAL STATEMENTS
The accompanying nonconsolidated financial statements have been prepared in accordance with the provisions
set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and inaccordance with accounting principles generally accepted in Japan, which are different in certain respects as tothe application and disclosure requirements of International Financial Reporting Standards.
In preparing these nonconsolidated financial statements, certain reclassifications and rearrangements have been
made to the nonconsolidated 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 2013
nonconsolidated financial statements to conform to the classifications used in 2014.
The nonconsolidated financial statements are stated in Japanese yen, the currency of the country in which
Kurotani Corporation (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 ¥104 to $1, the approximate rate of exchange at August 31, 2014. 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 POLICIESa.

Nonconsolidation—The nonconsolidated financial statements do not include the accounts of subsidiary.
Investments in subsidiary and associated company are stated at cost. If the equity method of accounting
had been applied to the investments in these companies, the effect on the accompanying nonconsolidated
financial statements would not be material.

b.

Cash Equivalents—Cash equivalents are short-term investments that are readily convertible into cash andthat are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits, certificates of deposit, commercial paper, and bond funds, all ofwhich mature or become due within three months of the date of acquisition.

c.

Inventories—Inventories are stated at the lower of cost, determined by the average method formerchandise, finished products, work in process, raw materials and supplies, or net selling value.

d.

Investment Securities—Investment securities are classified and accounted for, depending on
management's intent, as follows:
Available-for-sale securities, which are not classified as either trading securities that are held for the
purpose of earning capital gains in the near term, or held-to-maturity debt securities, which are expected
to be held to maturity with the positive intent and ability to hold to maturity, are reported at fair value,with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity.

-6-Nonmarketable available-for-sale securities are stated at cost determined by the moving-averagemethod.
For other-than-temporary declines in fair value, investment securities are reduced to net realizable value
by a charge to income.
e.

Allowance for Doubtful Accounts—The allowance for doubtful accounts is stated in amounts considered
to be appropriate based on the companies' past credit loss experience and an evaluation of potential losses
in the receivables outstanding.

f.

Property, Plant, and Equipment—Property, plant, and equipment are stated at cost.
Depreciation of property, plant, and equipment is computed by the declining-balance method, while thestraight-line method is applied to buildings acquired after April 1, 1998. The range of useful lives isprincipally from 15 to 35 years for buildings and 7 years for machinery.

g.

Software—Software is carried at cost less accumulated amortization, which is calculated by thestraight-line method over five years.

h.

Long-Lived Assets—The Company reviews its long-lived assets for impairment whenever events orchanges 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 sumof 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 fromthe continued use and eventual disposition of the asset or the net selling price at disposition.

i.

Retirement and Pension Plans—The employees' retirement benefits consist of two plans, a defined
contribution pension plan and an unfunded retirement benefit plan as a defined benefit plan, which coversubstantially all of the Company's employees.
The liability for the defined benefit plan is recorded at the amount that would be required if all employees
retired at each balance sheet date.

j.

Income Taxes—The provision for income taxes is computed based on the pretax income included in thenonconsolidated 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.

k.

Foreign Currency Transactions—All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance
sheet date. The foreign exchange gains and losses from translation are recognized in the nonconsolidated
statement of income to the extent that they are not hedged by forward exchange contracts.

l.

Derivatives and Hedging Activities—The Company uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange and nonferrous metal prices. Foreign exchange forward
contracts and options are utilized by the Company to reduce foreign currency exchange risk. Also,
commodity forward contracts are utilized by the Company to reduce nonferrous metal price risk. The
Company does not enter into derivatives for trading or speculative purposes.

-7-All derivative financial instruments are recognized as either assets or liabilities and measured at fair value,and gains or losses on derivative transactions are recognized in the nonconsolidated statement of income.
m. Per Share Information—Basic net income per share is computed by dividing net income available tocommon shareholders by the weighted-average number of common shares outstanding for the period.
Diluted net income per share of common stock is not disclosed herein because the Company has not issued
any securities that are potentially dilutive for the years ended August 31, 2014 and 2013.
Cash dividends per share presented in the accompanying nonconsolidated statement of income are
dividends applicable to the respective years, including dividends to be paid after the end of the year.
3.

INVENTORIESInventories as of August 31, 2014 and 2013, consisted of the following:

Millions of Yen
2014
2013

4.

Merchandise
Finished products
Work in process
Raw materials and supplies

¥

6
620
132
2,673

Total

¥ 3,431

¥

5
376
101
1,438

¥ 1,920

Thousands of
U.S. Dollars
2014
$

55
5,957
1,270
25,708$ 32,990

PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment as of August 31, 2014 and 2013, consisted of the following:

Millions of Yen
2014
2013
Land
Buildings and structures
Machinery and equipment
Furniture and fixtures
Construction in progress
Acquisition cost
Accumulated depreciation¥ 1,521
2,185
2,375
299

Net book value-8-

Thousands of
U.S. Dollars
2014$ 14,626
21,00822,841
2,880

6,380(3,992)¥ 1,521
2,173
2,153
281
160
6,288
(3,804 )¥ 2,388¥ 2,484$ 22,971

61,355(38,384)

5.

INVESTMENT SECURITIESInvestment securities as of August 31, 2014 and 2013, consisted of the following:

Millions of Yen
2014
2013

Thousands of
U.S. Dollars
2014

Investment securities:
Marketable equity securities
Nonmarketable equity securities

¥ 557
15

¥ 469
15

$ 5,354
144

Total

¥ 572

¥ 484

$ 5,498

The cost and aggregate fair value of the investment securities that have a quoted market price in an active
market as of August 31, 2014 and 2013, were as follows:
Millions of Yen
Unrealized
Unrealized
Gains
LossesFair
Value

August 31, 2014

Cost

Equity securities

¥ 397

¥ 163

¥ 3

¥ 557

Total

¥ 397

¥ 163

¥ 3

¥ 557

Equity securities

¥ 388

¥ 93

¥ 12

¥ 469

Total

¥ 388

¥ 93

¥ 12

¥ 469

August 31, 2013

Thousands of U.S. Dollars
Unrealized
Unrealized
Gains
LossesFair
Value

August 31, 2014

Cost

Equity securities$ 3,816$ 1,566$ 28$ 5,354

Total$ 3,816$ 1,566$ 28$ 5,354

The proceeds from sales of available-for-sale securities for the year ended August 31, 2013, were ¥113 million.
The gross realized gains on these sales, computed on the moving-average cost basis, for the year ended August
31, 2013, were ¥13 million.
The investment securities of subsidiary and associated company whose fair value cannot be reliably determined
are measured at the original acquisition costs. The carrying amounts of such investment securities of subsidiary
and associated company were ¥212 million ($2,042 thousand) at August 31, 2014, and ¥157 million at August
31, 2013.

-9-

6.

ALLOWANCE FOR DOUBTFUL ACCOUNTS
The amount deducted directly from investments and other assets as of August 31, 2014 and 2013, was asfollows:

Millions of Yen
2014
2013
Other assets
7.

¥ 39

Thousands of
U.S. Dollars
2014
$ 374

SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans as of August 31, 2014 and 2013, consisted of the following:

Millions of Yen
2014
2013
Unsecured bank loans with a weighted-averageinterest rate of 0.96% (2014)¥ 5,588¥ 2,100

Thousands of
U.S. Dollars
2014$ 53,726

Long-term debt as of August 31, 2014 and 2013, consisted of the following:

Millions of Yen
2014
2013

Thousands of
U.S. Dollars
2014

Unsecured bank loans due serially to 2018 witha weighted-average interest rate of 0.79% (2014)
Total
Less current portion¥ 2,578
2,578(1,229)¥ 2,905
2,905(1,044 )$ 24,788
24,788(11,815)

Long-term debt, less current portion¥ 1,349¥ 1,861$ 12,973

Annual maturities of long-term debt as of August 31, 2014, were as follows:

8.

Millions of Yen

Thousands of
U.S. Dollars

Within one year
In the 2nd year
In the 3rd year
In the 4th year
In the 5th year and thereafter¥ 1,229
670
369
245
65

$ 11,815
6,438
3,552
2,355
628

Total

¥ 2,578$ 24,788

RETIREMENT BENEFITSa.

Overview of the Company's Retirement Benefit Plan
The employees' retirement benefits consist of two plans, a defined contribution pension plan and an
unfunded retirement benefit plan as a defined benefit plan, which cover substantially all of the Company's
employees.

- 10 -

The liability for the defined benefit plan is recorded at the amount that would be required if all employees
retired at each balance sheet date (the simplified method).
b.

Defined Benefit Plan
Movement in liability for retirement benefits of the defined benefits plan applying the simplified method
for the year ended August 31, 2014, was as follows:

Millions of Yen

Thousands of
U.S. Dollars

Balance at September 1, 2013
Retirement benefit cost
Benefits paid

¥ 71
8
(4 )

$ 683
81
(41)

Balance at August 31, 2014

¥ 75

$ 723

Reconciliation from retirement benefit obligations to liability for retirement benefits as of August 31, 2014,
was as follows:

Millions of Yen

Thousands of
U.S. Dollars

Unfunded retirement benefit obligations

¥ 75

$ 723

Total net liability for retirement benefits
at August 31, 2014

¥ 75

$ 723

Retirement benefit cost of the defined benefit plan applying the simplified method for the year ended
August 31, 2014, was ¥8 million ($81 thousand).
c.

Defined Contribution Pension Plan
The amount of contributions to the defined contribution plan for the year ended August 31, 2014, was¥9 million ($87 thousand).

d.

As of August 31, 2013
Retirement Benefits at August 31, 2013
Millions of Yen
Unfunded retirement benefit obligations¥ 71

Total net liability for retirement benefits¥ 71

Retirement Benefit Cost for the Year Ended August 31, 2013
Millions of Yen
Service costs
Contributions to the defined contribution plan

¥ 7
9

Total

¥ 16

- 11 -

9.

EQUITYJapanese companies are subject to the Companies Act 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, including (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 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 ofincorporation. However, the Company cannot do so because it does not meet 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 theamount available for distribution to the shareholders, but the amount of net assets after dividends must be
maintained at no less than ¥3 million.

b.

Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal
reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus)
depending on the equity account charged upon the payment of such dividends until the total of theaggregate amount of the legal reserve and additional paid-in capital equals 25% of 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 theamount 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 andtreasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or
deducted directly from stock acquisition rights.

- 12 -

10.

INCOME TAXESThe Company is subject to Japanese national and local income taxes, which, in the aggregate, resulted in anormal effective statutory tax rate of approximately 37.8% for the years ended August 31, 2014 and 2013.
The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities as ofAugust 31, 2014 and 2013, are as follows:
Thousands of
U.S. Dollars
2014

Millions of Yen
2014
2013
Deferred tax assets:
Inventories
Accrued expenses
Accrued enterprise tax
Depreciation and amortization
Liability for retirement benefits
Investment securities
Provision of allowance for doubtful accounts
Other
SubtotalLess valuation allowance

¥ 61
11
1
16
26
15
14

Total
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Other
Total
Net deferred tax assets

¥ 66
9
19
17
25
15

$

587
104
7
151
256
142
132

144
(27)

2
153
(27 )

1,379
(259)

117

126

1,120

(53)
(1)

(27 )

(510)
(7)

(54)

(27 )

(517)

¥ 63

¥ 99

$

603

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in
the accompanying nonconsolidated statement of income for the year ended August 31, 2014, with thecorresponding figures for 2013, is as follows:
2014

2013

Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Accumulated earnings tax
Per capita levy of corporate tax
Effect of tax rate reduction
Tax credit
Other—net

37.8 %
4.4

37.8 %
0.9
1.1
0.6

Actual effective tax rate

43.0%

2.5
2.9
(3.8)
(0.8)

(1.0)
39.4 %New tax reform laws enacted in 2014 in Japan changed the normal effective statutory tax rate for the fiscal year
beginning on or after April 1, 2014, from approximately 37.8% to 35.4%. The effect of this change is notmaterial.

- 13 -

11.

SUPPLEMENTAL CASH FLOWS INFORMATION
A reconciliation of cash and cash equivalents between the nonconsolidated balance sheet and thenonconsolidated statement of cash flows as of August 31, 2014 and 2013, is as follows:

Millions of Yen
2014
2013

12.

Thousands of
U.S. Dollars
2014

Cash and cash equivalents in thenonconsolidated balance sheet
Bank overdraft

¥ 897
(304)

¥ 1,399$ 8,622(2,921)

Cash and cash equivalents in thenonconsolidated statement of cash flows¥ 593¥ 1,399$ 5,701

FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Company Policy for Financial Instruments
The Company uses financial instruments, including bank loans and bonds, based on its capital-financing
plan. Cash surpluses, if any, are invested in low-risk financial assets. Short-term bank loans are used tofund its ongoing operations. Derivatives are used not for speculative purposes, but to manage exposure tofinancial risks as described in (2) below.
(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables, such as trade notes, electronically recorded monetary claims—operating and trade accounts,
are exposed to customer credit risk. Also, receivables in foreign currencies are exposed to the risk offluctuations in foreign currency exchange rates. Investment securities, mainly equity instruments ofcustomers and suppliers of the Company, are exposed to the risk of market price fluctuations.
Payment terms of payables, such as trade notes and trade accounts, are less than one year. Short-term bankloans are used for operating funds. Long-term debt is used for capital expenditures.
Maturities of bank loans are less than five years after the balance sheet date.
Derivatives mainly include forward foreign currency contracts, options, and commodity forward contracts,
which are used to manage exposure to risks of changes in foreign currency exchange rates of receivables
and of fluctuations of nonferrous metal prices. Please see Note 13 for more detail about derivatives.
(3) Risk Management for Financial Instruments
Credit risk management
Credit risk is the risk of economic loss arising from a counterparty's failure to repay or service debt
according to the contractual terms. The Company manages its credit risk from receivables on the basis ofinternal guidelines, which include monitoring of payment terms and balances of major customers by eachbusiness administration department to identify default risk of customers at an early stage. With respect toderivative transactions, as a means of mitigating the risk of financial loss from defaults, the Company has
adopted a policy of only dealing with creditworthy counterparties.

- 14 -

Market risk management (foreign exchange risk and interest rate risk)
Foreign currency bank deposits, bank loans, and trade receivables and payables are exposed to risk
resulting from fluctuations in foreign currency exchange rates. Such foreign exchange risk is hedged
principally by forward foreign currency contracts and options.
Investment securities are managed by monitoring the market values and financial position of issuers on aregular basis.
With respect to derivative transactions, the Company has internal guidelines that prescribe the authority
and the limit for each transaction by the corporate planning department. The director who is in charge ofthe corporate planning department is required to report the status and results of derivative transactions tothe chief executive officer on a monthly and annual basis. Reconciliation of transactions and balances withcounterparties is made by the corporate treasury department.
Liquidity risk management
Liquidity risk comprises the risk that the Company cannot meet its contractual obligations in full on
maturity dates. The Company manages its liquidity risk by holding adequate volumes of liquid assets alongwith adequate financial planning by the corporate treasury department.
(4) Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If quoted prices are notavailable, other rational valuation techniques are used instead. Also, please see Note 13 for details of thefair value of derivatives. The determination of the quoted price requires certain assumptions for related
variable factors and the quoted price may fluctuate with different assumptions.
(a) Fair value of financial instruments

Carrying
AmountAugust 31, 2014¥

Unrealized
Gain/Loss

Cash and cash equivalents
Short-term investments
Receivables
Investment securities

¥

Total

¥ 9,751¥ 9,751

Short-term bank loans
PayablesIncome taxes payable
Long-term debt

¥ 5,588
1,464
9
2,578

¥ 5,588
1,464
9
2,585

¥7

Total

¥ 9,639¥ 9,646¥7- 15 -

897
695
7,602
557

Millions of Yen
Fair
Value
897
695
7,602
557

August 31, 2013

Carrying
AmountMillions of Yen
Fair
Value

Cash and cash equivalents
Short-term investments
Receivables
Investment securities¥ 1,399
695
6,550
469

¥ 1,399
695
6,550
469

Total

¥ 9,113¥ 9,113

Short-term bank loans
PayablesIncome taxes payable
Long-term debt

¥ 2,100
2,184
257
2,905

¥ 2,100
2,184
257
2,907

¥2

Total

¥ 7,446¥ 7,448¥2

August 31, 2014

Thousands of U.S. Dollars
Carrying
Fair
Unrealized
AmountValue
Gain/Loss

Cash and cash equivalents
Short-term investments
Receivables
Investment securities$ 8,622
6,687
73,101
5,354$ 8,622
6,687
73,101
5,354

Total

$ 93,764$ 93,764

Short-term bank loans
PayablesIncome taxes payable
Long-term debt

$ 53,726
14,07487
24,788$ 53,726
14,07487
24,854

$ 66

Total

$ 92,675$ 92,741$ 66

Unrealized
Gain/Loss

Cash and cash equivalents
The carrying values of cash and cash equivalents approximate fair value because of their shortmaturities.
Investment securities
The fair values of investment securities are measured at the quoted market price of the stock exchange
for equity instruments. Information on the fair value of investment securities by classification is
included in Note 5.
Short-term investments, receivables, payables, income taxes payable, and short-term bank loans
The fair values of short-term investments, receivables, payables, income taxes payable, and short-termbank loans approximate carrying value because of their short-term maturities. Therefore, the fairvalues are measured at carrying values.

- 16 -

Long-term debt
The fair values of long-term debt are determined by discounting the cash flows related to the debt at
the Company's assumed corporate borrowing rate.
Derivatives
Information on the fair value of derivatives is included in Note 13.
(b) Financial instruments whose fair value cannot be reliably determined as of August 31, 2014 and 2013,
are as follows:
Carrying AmountThousands ofMillions of Yen
U.S. Dollars
2014
2013
2014
Investments in equity instruments that
do not have a quoted market price inan active market
Investments in unconsolidated subsidiary
and associated company

¥ 15

¥ 15

212

157

$

144
2,042

(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities

Due in1 Yearor Less

August 31, 2014
Cash and cash equivalents
Short-term investments
Receivables

¥

Total

¥ 9,190

Millions of Yen
Due after
Due after
1 Year
5 Years
throughthrough
5 Years
10 Years

Due after
10 YearsThousands of U.S. Dollars
Due after
Due after
1 Year
5 Years
throughthrough
5 Years
10 Years

Due after
10 Years

893
695
7,602

August 31, 2013
Cash and cash equivalents
Short-term investments
Receivables¥ 1,393
695
6,550

Total

¥ 8,638

August 31, 2014

Due in1 Yearor Less

Cash and cash equivalents
Short-term investments
Receivables$ 8,585
6,687
73,101

Total$ 88,373

Please see Note 7 for annual maturities of long-term debt.

- 17 -

13.

DERIVATIVESThe Company enters into foreign currency forward contracts and options to hedge foreign exchange risk
associated with certain assets and liabilities denominated in foreign currencies. The Company also enters into
commodity forward contracts to hedge future price fluctuations of nonferrous metal inventories.
All derivative transactions are entered into to hedge foreign currency and nonferrous metal price exposuresincorporated within its business. Accordingly, market risk in these derivatives is basically offset by opposite
movements in the value of hedged assets or liabilities.
Because the counterparties to these derivatives are limited to major international financial institutions, trading
companies, and London Metal Exchange ("LME") brokers, the Company does not anticipate any losses arisingfrom credit risk.
Derivative transactions entered into by the Company have been made in accordance with internal policies,
which regulate the authorization and credit limit amount.
Derivative Transactions to Which Hedge Accounting Is Not Applied as of August 31, 2014 and 2013

August 31, 2014

Contract
AmountMillions of Yen
Contract
Amount Due
Fair
after One Year
Value

Commodity forward contracts:
Selling
Buying¥ 249
252¥ (5 )
1

¥ (5)
1

Total

¥ 501

¥ (4 )¥ (4)Commodity forward contracts:
Selling
Buying

¥ 509
472

¥ 3
(1 )

¥ 3
(1)

Total

¥ 981

¥ 2

¥ 2

Unrealized
Gain/Loss

August 31, 2013

August 31, 2014

Contract
AmountThousands of U.S. Dollars
Contract
Amount Due
Fair
after One Year
Value

Commodity forward contracts:
Selling
Buying$ 2,4032,433$ (43 )
14

$ (43)
14

Total$ 4,836$ (29 )$ (29)

Unrealized
Gain/Loss

The fair value of derivative transactions is measured at the quoted price obtained from the financial institutions,trading companies, and LME brokers.
The contract or notional amounts of derivatives, which are shown in the above table, do not represent theamounts exchanged by the parties and do not measure the Company's exposure to credit or market risk.

- 18 -

14.

RELATED-PARTY TRANSACTIONSTransactions of the Company with related parties for the years ended August 31, 2014 and 2013, were as
follows:
2014
Millions of Yen
KH Premium Co., Ltd. (a company whose
majority shares were owned by one of theCompany's directors)
Satoru Kurotani (a close relative of one of theCompany's directors)¥ 251

Sales of insurance

33

Sales of insurance
2013

Millions of Yen
KUROTANI NORTH AMERICA INC. (subsidiary)¥ 2,063
282

Purchase
Advance payments
2014

Thousands of
U.S. Dollars
KH Premium Co., Ltd. (a company whose
majority shares were owned by one of theCompany's directors)
Satoru Kurotani (a close relative of one of theCompany's directors)
15.

$ 2,415

Sales of insurance

321

Sales of insurance

SUBSEQUENT EVENT
The following appropriation of retained earnings as of August 31, 2014, was approved at the shareholders'meeting held on November 26, 2014:

Year-end cash dividends, ¥10 ($0.10) per share
16.

Millions of Yen

Thousands of
U.S. Dollars

¥ 72

$ 689

SEGMENT INFORMATION
Under ASBJ Statement No. 17, "Accounting Standard for Segment Information Disclosures," and ASBJ
Guidance No. 20, "Guidance on Accounting Standard for Segment Information Disclosures," an entity isrequired to report financial and descriptive information about its reportable segments. Reportable segments areoperating segments or aggregations of operating segments that meet specified criteria. Operating segments arecomponents of an entity about which separate financial information is available, and such information isevaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing
performance. Generally, segment information is required to be reported on the same basis as is used internallyfor evaluating operating segment performance and deciding how to allocate resources to operating segments.

- 19 -

(1) Description of Reportable Segments
The Company has two segments, "nonferrous metals segment" and "art crafts segment." Nonferrous metals
segment is engaged in the manufacture and sale of ingots, and processing and sales of scrap. The majorityof sales are in the nonferrous metals business, and therefore, the Company is not required to disclose
separate financial information by segment.
(2) Information about Products and Services
Millions of Yen
2014
Scrap
Other

IngotsSales to external customers¥ 20,184¥ 30,129Millions of Yen
2013
Scrap
Other

IngotsSales to external customers¥ 18,419¥ 31,173¥ 492

Thousands of U.S. Dollars
2014
Scrap
Other

IngotsSales to external customers¥ 688$ 194,079$ 289,701$ 6,613

Total¥ 51,001

Total¥ 50,084

Total$ 490,393(3) Information about Geographical Areas(a) Sales

Japan

Asia

¥ 39,468¥ 10,424

Japan

Asia

¥ 37,348¥ 11,328

Millions of Yen
2014
Europe¥ 972
Millions of Yen
2013
Europe¥ 1,118

Japan

Asia

Thousands of U.S. Dollars
2014
Europe$ 379,503$ 100,226$ 9,350

Other

Total

¥ 137

¥ 51,001

Other

Total

¥ 290

¥ 50,084

Other

Total

$ 1,314$ 490,393

Note: Sales are classified by country or region based on the location of customers.
(b) Property, plant, and equipment
Property, plant, and equipment exist in Japan only and, thus, there is no requirement to disclose suchinformation.

- 20 -

(4) Information about Major Customers
2014
Millions of Yen
Sales

Name of Customer
Sumitomo Metal Mining Co., Ltd.

¥ 5,158

Related Segment Name
Nonferrous metals segment
2013

Millions of Yen
Sales

Name of Customer
Mitsubishi Materials Corporation
JX Nippon Mining & Metals Corporation¥ 5,643
5,503

Related Segment Name
Nonferrous metals segment
Nonferrous metals segment
2014

Thousands of
U.S. Dollars
Sales

Name of Customer
Sumitomo Metal Mining Co., Ltd.

$ 49,598******- 21 -

Related Segment Name
Nonferrous metals segment