Kurotani Corporation
Non-consolidated Financial Statements
for the Year Ended August 31, 2012,
and Independent Auditor's ReportINDEPENDENT AUDITOR'S REPORTTo the Board of Directors of Kurotani Corporation:
We have audited the accompanying non-consolidated balance sheet of Kurotani Corporation as of August 31, 2012,
and the related non-consolidated statements of operations, changes in equity, and cash flows for the year thenended, and a summary of significant accounting policies and other explanatory information, all expressed inJapanese yen.
Management's Responsibility for the Non-consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these non-consolidated financial statements
in conformity with accounting principles generally accepted in Japan, and for such internal control as management
determines is necessary to enable the preparation of non-consolidated financial statements that are free frommaterial misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these non-consolidated financial statements based on our audit. We
conducted our audit in conformity with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the non-consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
non-consolidated financial statements. The procedures selected depend on the auditor's judgment, including theassessment of the risks of material misstatement of the non-consolidated financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparationand fair presentation of the non-consolidated financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and thereasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the
non-consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the non-consolidated financial statements referred to above present fairly, in all material respects,
the financial position of Kurotani Corporation as of August 31, 2012, and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally accepted in Japan.
Convenience Translation
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion,such translation has been made in conformity with the basis stated in Note 1. Such U.S. dollar amounts arepresented solely for the convenience of readers outside Japan.

November 29, 2012

Kurotani Corporation
Non-consolidated Balance Sheet
August 31, 2012
Thousands of
U.S. Dollars(Note 1)Millions of Yen

LIABILITIES AND EQUITY

ASSET
S

2012

CURRENT ASSETS:
Cash and cash equivalents (Note 10)
Short-term investments (Note 10)
Receivables (Note 10):
Trade notes
Trade accounts
Other
Inventories (Note 3)
Deferred tax assets (Note 9)
Prepaid expenses and other current assets

2011

2012

¥ 1,563701¥ 1,427
699

$

2,109
3,507
464
1,490
113
668

2,464
4,210
556
3,093
150
662

26,691
44,396
5,879
18,8671,431
8,445

10,615

13,261

134,365

CURRENT LIABILITIES:
Short-term bank loans (Notes 6 and 10)
Current portion of long-term debt (Notes 6 and 10)
Payables (Note 10):
Trade notes
Trade accounts
Other
Income taxes payable (Note 10)
Accrued expenses
Other current liabilities

19,781
8,875

Total current liabilities
Total current assets
PROPERTY, PLANT, AND EQUIPMENT—Net (Note 4):Land
Buildings and structures
Machinery and equipment
Furniture and fixtures
Total property, plant, and equipment—net
INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 5 and 10)
Investments in unconsolidated subsidiary (Note 5)
SoftwareDeferred tax assets (Note 9)
Other assets
Total investments and other assets

1,521
538
222
62

1,521
581
288
73

19,255
6,806
2,810
789

2,343

2,463

29,660

460

421
16
43
57
159

62
80
129

5,331
200
538
725
2,011

696

731

8,805

LONG-TERM LIABILITIES:Long-term debt (Notes 6 and 10)
Liability for retirement benefits (Note 7)
Total long-term liabilities
EQUITY (Note 8):
Common stock—authorized, 28,000,000 shares;
issued, 7,168,600 shares in 2012 and 2011
Capital surplus:
Additional paid-in capital
Other capital surplus
Retained earnings:
Legal reserve
Retained earnings—unappropriatedUnrealized loss on available-for-sale securities
Total equity
TOTAL

TOTAL

¥ 13,654¥ 16,455

Millions of Yen
2012
2011

Thousands of
U.S. Dollars(Note 1)2012

$ 172,830

See notes to non-consolidated financial statements.

-2-¥ 2,736772¥ 3,899
908$

34,630
9,769

462
864
286
7
18
22

408
840
433
771
31
22

5,844
10,940
3,624
89
230
270

5,167

7,312

65,396

1,519
68

1,882
65

19,225
861

1,587

1,947

20,086

593

593

7,511

293
799

293
799

3,709
10,120

9
5,253
(47)

9
5,542
(40)

114
66,497
(603)

6,900

7,196

87,348¥ 13,654¥ 16,455$ 172,830

Kurotani Corporation
Non-consolidated Statement of Operations
Year Ended August 31, 2012
Thousands of
U.S. Dollars(Note 1)
2012

Millions of Yen
2012
2011
NET SALES¥ 48,606¥ 53,684$ 615,265

47,26150,055598,245

1,345

3,629

17,020SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES

1,225

1,198

15,502

Operating income

120

2,431

1,518

OTHER INCOME (EXPENSES):Interest and dividend income
Insurance income
Subsidy income
Gain (loss) on derivative transactions
Interest expense
Foreign exchange loss
Gain on sales of property, plant, and equipment
Loss on valuation of marketable securities (Note 5)
Other—net

8
8
8
5
(73)
(21)
7
(40)
4

8
3
(24 )
(95 )
(19 )
5
(57 )

107
105
107
63
(922)
(267)
85
(502)
36

Other expenses—net(94)(179 )(1,188)

INCOME BEFORE INCOME TAXES

26

2,252

330

INCOME TAXES (Note 9):
Current
Deferred

4
59

1,031
(30 )

53
751

63

1,001

804

(37)

¥ 1,251

COST OF SALES
Gross profit

Total income taxes
NET (LOSS) INCOME¥Yen
PER SHARE OF COMMON STOCK (Note 2.m):
Basic net (loss) income
Cash dividends applicable to the year

¥ (5.22 )30.00

See notes to non-consolidated financial statements.

-3-

$

(474)

U.S. Dollars¥ 199.28
20.00$ (0.07 )0.38

Kurotani Corporation
Non-consolidated Statement of Changes in Equity
Year Ended August 31, 2012
Millions of Yen
Outstanding
Number of
Shares ofCommon Stock

CommonStock

BALANCE, SEPTEMBER 1, 2010

6,028,000

¥ 500

¥ 199

Issuance of new stock (Note 8)
Net income
Cash dividends, ¥10 per share
Sale of treasury stock
Net change in the year

168,600

93

94

BALANCE, AUGUST 31, 2011

7,168,600

Capital Surplus
Additional
Other Capital
Paid-in Capital
Surplus
¥ 109

Legal
Reserve

UnappropriatedUnrealized
Loss onAvailable-for-Sale
Securities¥9¥ 4,350¥ (44 )

Retained Earnings

Total
Equity¥ (388)¥ 4,735

4

187
1,251
(59)
1,078
4

(40 )

7,196

(7 )

(37)
(252)
(7)

¥ (47 )

¥ 6,900

1,251
(59 )
972,000

690

593

293

799

388

9

Net loss
Cash dividends, ¥35 per share
Net change in the year
BALANCE, AUGUST 31, 2012

Treasury
Stock

5,542
(37 )
(252 )

7,168,600

¥ 593

¥ 293

¥ 799

¥9

¥ 5,253

Thousands of U.S. Dollars (Note 1)

CommonStock
BALANCE, AUGUST 31, 2011

$ 7,511

Capital Surplus
Additional
Other Capital
Paid-in Capital
Surplus$ 3,709$ 10,120

Legal
Reserve

UnappropriatedUnrealized
Loss onAvailable-for-Sale
Securities$ 114$ 70,147$ (503 )$ 91,098(100 )(474)(3,176)(100)$ (603 )$ 87,348

Retained Earnings

Net loss
Cash dividends, $0.44 per share
Net change in the year
BALANCE, AUGUST 31, 2012(474 )(3,176 )$ 7,511$ 3,709

See notes to non-consolidated financial statements.

-4-$ 10,120$ 114$ 66,497

Treasury
Stock

Total
EquityKurotani Corporation
Non-consolidated Statement of Cash Flows
Year Ended August 31, 2012

Millions of Yen
2012
2011
OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Income taxes—paidDepreciation and amortization
Loss on valuation of investment securities
Changes in assets and liabilities:
Decrease (increase) in accounts receivable
Decrease (increase) in inventories(Decrease) increase in accounts payable
Increase (decrease) in liability for retirement benefits
Other—net
Total adjustments
Net cash provided by (used in) 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
Investments in unconsolidated subsidiary
Purchases of software and other intangible assets
Other—net
Net cash used in investing activities
FINANCING ACTIVITIES:(Decrease) increase in short-term bank loans—net
Proceeds from long-term debt
Repayments of long-term debt
Proceeds from issuance of common stock
Dividends paid
Sale of treasury stock¥Thousands of
U.S. Dollars(Note 1)
201226

¥ 2,252(760 )
225
40(714 )
192(9,626)
2,853
502

1,150
1,603
(68 )
3
158
2,351

(1,083 )(1,415 )64(1 )(338 )(3,295 )14,554
20,290
(863)
32
2,016
29,7582,377(1,043 )30,088(1,119 )1,096(223 )
7
(8 )
(16 )
(11 )
(12 )

(1,065 )
1,065
(37 )
6
(8 )
(5 )
(6 )

(14,160)
13,878(2,821)
95
(104)
(200)
(144)
(162)

(286 )(50 )(3,618)(1,163 )500(999 )

249
1,600(2,651 )
187
(59 )
1,078

(14,722)
6,329(12,649)(250 )$

330(3,158)Net cash (used in) provided by financing activities(1,912 )404(24,200)

FOREIGN CURRENCY TRANSLATION ADJUSTMENT ON
CASH AND CASH EQUIVALENTS

(43 )

(22 )

(547)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

136(711 )

1,723

1,427

2,138

18,058¥ 1,563¥ 1,427$ 19,781

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, END OF YEAR

See notes to non-consolidated financial statements.

-5-

Kurotani Corporation
Notes to Non-consolidated Financial Statements
Year Ended August 31, 2012

1.

BASIS OF PRESENTING NON-CONSOLIDATED FINANCIAL STATEMENTS
The accompanying non-consolidated financial statements have been prepared in accordance with the provisions
set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in
conformity 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 non-consolidated financial statements, certain reclassifications and rearrangements have been
made to the non-consolidated financial statements issued domestically in order to present them in a form which
is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2011non-consolidated financial statements to conform to the classifications used in 2012.
The non-consolidated 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 ¥79 to $1, the approximate rate of exchange at August 31, 2012. 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.

Non-consolidation—The non-consolidated financial statements do not include the accounts of subsidiary.
Investments in subsidiary are stated at cost. If the equity method of accounting had been applied to theinvestments in this company, the effect on the accompanying non-consolidated 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 which 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.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-averagemethod.

-6-

For other-than-temporary declines in fair value, investment securities are reduced to net realizable value
by a charge to income.
e.

Investments in Unconsolidated Subsidiary—Investments in subsidiary are stated at cost.

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 from 6 to 10 years for machinery.

g.

Software—Software is carried at cost less accumulated amortization, which is calculated by thestraight-line method over 5 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, which cover substantially all of its
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 the
non-consolidated statement of operations. 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 non-consolidated
statement of operations 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.
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 non-consolidated statement ofoperations.

-7-m. Per Share Information—Basic net income or loss per share is computed by dividing net income or loss
available to common shareholders by the weighted-average number of common shares outstanding for theperiod.
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, 2012 and 2011.
Cash dividends per share presented in the accompanying non-consolidated statement of operations are
dividends applicable to the respective years, including dividends to be paid after the end of the year.
n.

3.

Accounting Changes and Error Corrections—In December 2009, the Accounting Standards Board ofJapan (the "ASBJ") issued ASBJ Statement No. 24, "Accounting Standard for Accounting Changes andError Corrections" and ASBJ Guidance No. 24, "Guidance on Accounting Standard for Accounting
Changes and Error Corrections." Accounting treatments under this standard and guidance are as follows:(1) Changes in Accounting Policies—When a new accounting policy is applied with revision of accounting
standards, the new policy is applied retrospectively, unless the revised accounting standards include
specific transitional provisions. When the revised accounting standards include specific transitional
provisions, an entity shall comply with the specific transitional provisions. (2) Changes in Presentations—
When the presentation of financial statements is changed, prior-period financial statements are reclassified
in accordance with the new presentation. (3) Changes in Accounting Estimates—A change in an
accounting estimate is accounted for in the period of the change if the change affects that period only, andis accounted for prospectively if the change affects both the period of the change and future periods.
(4) Corrections of Prior-Period Errors—When an error in prior-period financial statements is discovered,those statements are restated. This accounting standard and the guidance are applicable to accountingchanges and corrections of prior-period errors, which are made from the beginning of the fiscal year thatbegins on or after September 1, 2011.

INVENTORIESInventories as of August 31, 2012 and 2011, consisted of the following:

Millions of Yen
2012
2011
Merchandise
Finished products
Work in process
Raw materials and supplies

¥

Total

¥ 1,490

-8-

5
352
92
1,041

¥

7
899
112
2,075

¥ 3,093

Thousands of
U.S. Dollars
2012
$

67
4,460
1,169
13,171$ 18,867

4.

PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment as of August 31, 2012 and 2011, consisted of the following:

Millions of Yen
2012
2011

5.

Thousands of
U.S. Dollars
2012

Land
Buildings and structures
Machinery and equipment
Furniture and fixtures
Acquisition cost
Accumulated depreciation¥ 1,521
2,165
2,048
268
6,002
(3,659)¥ 1,521
2,153
2,036
262
5,972
(3,509 )$ 19,255
27,40625,926
3,392
75,979(46,319)

Net book value¥ 2,343¥ 2,463$ 29,660

INVESTMENT SECURITIESInvestment securities as of August 31, 2012 and 2011, consisted of the following:

Millions of Yen
2012
2011

Thousands of
U.S. Dollars
2012

Investment securities:
Marketable equity securities
Nonmarketable equity securities
Others

¥ 326
15
80

¥ 365
15
80

$ 4,126
190
1,015

Total

¥ 421

¥ 460

$ 5,331

The cost and aggregate fair value of the investment securities that have a quoted market price in an active
market as of August 31, 2012 and 2011, were as follows:
Millions of Yen
Unrealized
Unrealized
Gains
LossesFair
Value

August 31, 2012

Cost

Equity securities
Others

¥ 380
100

¥ 22

¥ 76
20

¥ 326
80

Total

¥ 480

¥ 22

¥ 96

¥ 406

Equity securities
Others

¥ 411
100

¥ 10

¥ 56
20

¥ 365
80

Total

¥ 511

¥ 10

¥ 76

¥ 445

August 31, 2011-9-

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

August 31, 2012

Cost

Equity securities
Others$ 4,810
1,265

$ 275

$

959
250

$ 4,126
1,015

Total

$ 6,075$ 275$ 1,209$ 5,141

The investment securities of subsidiary whose fair value cannot be reliably determined at August 31, 2012, aremeasured at the original acquisition costs. The carrying amounts of such investment securities of subsidiary are¥16 million ($200 thousand).
The impairment loss on available-for-sale equity securities for the year ended August 31, 2012, was ¥40 million($502 thousand).
6.

SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans as of August 31, 2012 and 2011, consisted of the following:

Millions of Yen
2012
2011
Unsecured bank loan with weighted-averageinterest rate 0.94% (2012)¥ 2,736¥ 3,899

Thousands of
U.S. Dollars
2012$ 34,630

Long-term debt as of August 31, 2012 and 2011, consisted of the following:

Millions of Yen
2012
2011
45

¥

115

Thousands of
U.S. Dollars
2012

0.59% Unsecured yen bonds, due 2013
Unsecured bank loans due serially to 2016 withweighted-average interest rate 1.01% (2012)
Total
Less current portion

¥

$

570

2,246
2,291
(772)

2,675
2,790
(908 )

28,42428,994(9,769)Long-term debt, less current portion¥ 1,519¥ 1,882$ 19,225

Annual maturities of long-term debt as of August 31, 2012, were as follows:

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

¥

772
678
659
172
10

$ 9,769
8,582
8,342
2,170
131

Total

¥ 2,291$ 28,994- 10 -

7.

RETIREMENT BENEFITSThe liabilities for employees' retirement benefits at August 31, 2012 and 2011, were ¥68 million($861 thousand) and ¥65 million, respectively.

8.

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, such as (1) having a Board of Directors, (2) having independent auditors, (3) having a board ofcorporate auditors, 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.
The Company capitalized other capital surplus of ¥406 million ($5,147 thousand) in accordance withapproval at the shareholders meeting held on November 29, 2012.

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 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.

- 11 -On April 1, 2011, the Company made a 1,000-for-1 stock split by way of a free share distribution based on
the resolution of the Board of the Directors meeting held on March 31, 2011. As a result, the number ofissued shares of common stock increased by 6,993,000 shares.
The Company listed its securities on the Tokyo Stock Exchange Second Section and sold 972,000 shares of
its treasury stock as at an initial public offering on June 9, 2011. In relation to the initial public offering, theCompany issued 168,600 shares pursuant to the exercise of the underwriters' overallotment option on July8, 2011.
9.

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 40.4% for the years ended August 31, 2012 and 2011.
The tax effects of significant temporary differences, which resulted in deferred tax assets and liabilities as ofAugust 31, 2012 and 2011, are as follows:

Millions of Yen
2012
2011

Thousands of
U.S. Dollars
2012

Deferred tax assets:
Inventories
Accrued expenses
Accrued enterprise tax
Depreciation and amortization
Liability for retirement benefits
Investment securities
Unrealized loss on available-for-sale securities
Other
Less valuation allowance

¥ 74
6
2
19
24
15
26
31
(27)

¥ 77
11
52
25
26
2
27
10

$

Total

¥ 170

¥ 230

$ 2,156

940
73
24
244
305
188
330
393
(341)

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in
the accompanying non-consolidated statement of operations for the year ended August 31, 2012, with thecorresponding figures for 2011, is as follows:
2012

2011

40.4 %
27.9

40.4 %
0.3
2.9

Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Accumulated earnings tax
Per capita levy of corporate tax
Increase in valuation allowance
Effect of tax rate reduction
Other—net

16.1
102.9
59.8
(4.4)

0.8

Actual effective tax rate

242.7 %

44.4 %- 12 -

On December 2, 2011, new tax reform laws were enacted in Japan, which changed the normal effective
statutory tax rate from approximately 40.4% to 37.8%, effective for the fiscal years beginning on or after
September 1, 2012, through August 31, 2015, and to 35.4% afterwards. The effect of this change was todecrease deferred taxes in the non-consolidated balance sheet as of August 31, 2012, by ¥19 million($245 thousand) and to increase income taxes—deferred in the non-consolidated statement of operations for theyear then ended by ¥16 million ($199 thousand).
10.

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 and trade accounts, are exposed to customer credit risk. Also, receivables
in foreign currencies are exposed to the risk of fluctuations in foreign currency exchange rates. Investment
securities, mainly equity instruments of customers and suppliers of the Company, are exposed to the risk ofmarket 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 and bonds 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 11 for more detail about derivatives.
(3) Risk Management for Financial Instruments
Credit risk management
Credit risk is the risk of economic loss arising from 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.
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.

- 13 -

With respect to derivative transactions, the Company has internal guidelines, which 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 11 for the detail of thefair value of derivatives. The determination of the quoted price requires some assumptions for related
variable factors and the quoted price may fluctuate with different assumptions.
(a) Fair value of financial instruments

August 31, 2012

Carrying
AmountMillions of Yen
Fair
Value

Cash and cash equivalents
Short-term investments
Receivables
Investment securities¥ 1,563
701
6,080
406

¥ 1,563
701
6,080
406

Total

¥ 8,750¥ 8,750

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

¥ 2,736
1,612
7
2,291

¥ 2,736
1,612
7
2,297

¥ 6

Total

¥ 6,646¥ 6,652¥ 6

Cash and cash equivalents
Short-term investments
Receivables
Investment securities¥ 1,427
699
7,230
445

¥ 1,427
699
7,230
445

Total

¥ 9,801¥ 9,801

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

¥ 3,899
1,681
771
2,790

¥ 3,899
1,681
771
2,800

¥ 10

Total

¥ 9,141¥ 9,151¥ 10

Unrealized
Gain/Loss

August 31, 2011- 14 -

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

August 31, 2012
Cash and cash equivalents
Short-term investments
Receivables
Investment securities$

19,781
8,875
76,966
5,141$

19,781
8,875
76,966
5,141

Total

$ 110,763$ 110,763

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

34,63020,40889
28,994

$

Total

$

84,121$

34,63020,40889
29,075$ 81

84,202$ 81

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.
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 11.
(b) Financial instruments whose fair value cannot be reliably determined as of August 31, 2012 and 2011,
are as follows:
Carrying AmountThousands ofMillions of Yen
U.S. Dollars
2012
2011
2012
Investments in equity instruments that
do not have a quoted market price inan active market- 15 -

¥ 15

¥ 15

$ 190

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

August 31, 2012

Due in1 Yearor Less

Cash and cash equivalents
Short-term investments
Receivables¥ 1,557
701
6,080

Total

¥ 8,338

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

August 31, 2011
Cash and cash equivalents
Short-term investments
Receivables¥ 1,419
699
7,230

Total

¥ 9,348

Due in1 Yearor Less

August 31, 2012
Cash and cash equivalents
Short-term investments
Receivables$

19,711
8,875
76,966

Total$ 105,552

Please see Note 6 for annual maturities of long-term debt.
11.

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.

- 16 -

Derivative Transactions to Which Hedge Accounting Is Not Applied as of August 31, 2012 and 2011

August 31, 2012

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

Unrealized
Gain/Loss

Commodity forward contracts:
Selling
Buying

¥

588
470

¥1

¥1

Total

¥ 1,058¥1¥1

Commodity forward contracts:
Selling
Buying

¥

357
355

¥2

¥2

Total

¥

712

¥2

¥2

August 31, 2012

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

Commodity forward contracts:
Selling
Buying$ 7,478
5,976

$ 19
3

$ 19
3

Total

$ 13,454

$ 22

$ 22

August 31, 2011

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.
12.

SUBSEQUENT EVENT
The following appropriation of retained earnings as of August 31, 2012, was approved at the shareholders
meeting held on November 29, 2012:

Year-end cash dividends, ¥15 ($0.19) per share- 17 -

Millions of Yen

Thousands of
U.S. Dollars¥ 108$ 1,361

13.

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.
(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 sales of ingot, and processing and sales of scrap. The
majority of sales are nonferrous metals business, and therefore, it is not required to disclose separate
financial information by segment.
(2) Information about Products and Services
Millions of Yen
2012
Scrap
Other

IngotsSales to external customers¥ 19,702¥ 28,361

Millions of Yen
2011
Scrap
Other

IngotsSales to external customers¥ 23,327¥ 29,690¥ 667

Thousands of U.S. Dollars
2012
Scrap
Other

IngotsSales to external customers¥ 543$ 249,386$ 358,995$ 6,884

Total¥ 48,606

Total¥ 53,684

Total$ 615,265(3) Information about Geographical Areas(a) Sales

Japan

Asia

¥ 36,307¥ 11,565

Japan

Asia

¥ 40,593¥ 12,103

Millions of Yen
2012
Europe¥ 467
Millions of Yen
2011
Europe¥ 960- 18 -

Other

Total

¥ 267

¥ 48,606

Other

Total

¥ 28

¥ 53,684

JapanAsia

Thousands of U.S. Dollars
2012
Europe$ 459,577$ 146,392$ 5,910

Other

Total

$ 3,386$ 615,265

Note: Sales are classified in countries or regions based on 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.
(4) Information about Major Customers
The Company does not have a major customer that accounted for more than 10% of the Company sales forthe year ended August 31, 2012, and thus, there is no requirement to disclose such information in 2012.
Millions of Yen
Name of Customers

Sales

2011
Related Segment Name

Hyundai Heavy Industries Co., Ltd.

¥ 6,667

Nonferrous metals industry******- 19 -