Kurotani Corporation
Financial Statements for theYears Ended August 31, 2011 and 2010,
and Independent Auditors' ReportINDEPENDENT AUDITORS' REPORTTo the Board of Directors ofKurotani Corporation:
We have audited the accompanying balance sheets of Kurotani Corporation (the "Company") as of August 31, 2011
and 2010, and the related statements of income, changes in equity, and cash flows for the years then ended, allexpressed in Japanese yen. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial
position of Kurotani Corporation as of August 31, 2011 and 2010, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally accepted in Japan.
Our audits 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, 2011

Kurotani Corporation
Balance Sheets
August 31, 2011 and 2010

Millions of Yen
2011
2010

ASSETS
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
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)
SoftwareDeferred tax assets (Note 9)
Other assets
Total investments and other assets¥

Thousands of
U.S. Dollars(Note 1)2011

LIABILITIES AND EQUITY

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

1,890
3,548
708
1,679
115
499

32,00454,6707,223
40,174
1,953
8,582

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

13,261

11,275

172,209

Total current liabilities

1,521
581
288
73

1,521
627
214
60

19,755
7,551
3,747
952

2,463

2,422

32,005

460
62
80
129

445
89
88
121

5,969
811
1,042
1,661

731

743

9,483

1,427
699

¥

2,138
698

$

18,527
9,076

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 2011 and 7,000,000 shares in 2010
Capital surplus:
Additional paid-in capital
Other capital surplus
Retained earnings:
Legal reserve
Retained earnings—unappropriatedUnrealized loss on available-for-sale securities
Treasury stock—at cost, 972,000 shares in 2010
Total equity

TOTAL¥ 16,455¥ 14,440

Millions of Yen
2011
2010

$ 213,697

TOTAL

See notes to financial statements.

-2-

¥

3,899
908

¥

3,650
2,402

Thousands of
U.S. Dollars(Note 1)
2011$

50,634
11,792

408
840
433
771
31
22

388
902
327
451
24
55

5,294
10,904
5,625
10,017
407
270

7,312

8,199

94,943

1,882
65

1,439
67

24,439
850

1,947

1,506

25,289

593

500

7,706

293
799

199
109

3,806
10,383

9
5,542
(40 )

9
4,350
(44 )
(388 )

117
71,969(516 )

7,196

4,735

93,465¥ 16,455¥ 14,440$ 213,697

Kurotani Corporation
Statements of Income
Years Ended August 31, 2011 and 2010

Millions of Yen
2011
2010
NET SALES

Thousands of
U.S. Dollars(Note 1)2011

¥ 53,684¥ 48,319$ 697,192

50,05545,698650,061

3,629

2,621

47,131SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES

1,198

1,157

15,562

Operating income

2,431

1,464

31,569OTHER INCOME (EXPENSES):Interest and dividend income
Interest expense
Foreign exchange loss
Other—net

8
(95 )
(19 )
(73 )

7
(112 )(206 )
18

104(1,235 )(253 )(939 )

Other expenses—net(179 )(293 )(2,323 )INCOME BEFORE INCOME TAXES

2,252

1,171

29,246

INCOME TAXES (Note 9):
Current
Deferred

1,031
(30 )

545
(20 )

13,390(397 )

1,001

525

12,993COST OF SALES
Gross profit

Total income taxes
NET INCOME

¥

1,251

¥

646

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

¥ 199.28
20.00

See notes to financial statements.

-3-$

16,253

U.S. Dollars¥ 107.64
10.00$ 2.590.26

Kurotani Corporation
Statements of Changes in Equity
Years Ended August 31, 2011 and 2010
Millions of Yen

BALANCE, SEPTEMBER 1, 2009
Net income
Cash dividends, ¥10 per share
Sale of treasury stock
Net change in the year

Outstanding
Number of
Shares ofCommon Stock

CommonStock6,000,000¥ 500

Capital Surplus
Additional
Other Capital
Paid-in Capital
Surplus
¥ 199

¥ 101

Legal
Reserve

UnappropriatedUnrealized
Gain (Loss) on
Available-for-Sale
Securities¥9¥ 3,764¥ 36

Retained Earnings

Treasury
Stock

Total
Equity¥ (399 )¥ 4,210646(60 )
28,000

8

11
(80 )

BALANCE, AUGUST 31, 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

109

9

4,350

(44 )

(388 )

4¥ (40 )

¥ 7,196

690

¥ 593

¥ 293

¥ 799

388

¥9

¥ 5,542

4,735
187
1,251
(59 )
1,078
4

1,251
(59 )
972,000

646
(60 )
19
(80 )

Thousands of U.S. Dollars (Note 1)

CommonStock
BALANCE, AUGUST 31, 2010
Issuance of new stock (Note 8)
Net income
Cash dividends, $0.13 per share
Sale of treasury stock
Net change in the year
BALANCE, AUGUST 31, 2011

Capital Surplus
Additional
Other Capital
Paid-in Capital
Surplus$ 6,491$ 2,590

1,215

1,216

$

1,411

Legal
Reserve

UnappropriatedUnrealized
Loss onAvailable-for-Sale
Securities$ 117$ 56,499$ (571 )Retained Earnings

Treasury
Stock

Total
Equity$ (5,040 )$ 61,497

55

2,431
16,253(783 )
14,01255$ (516 )$ 93,465

16,253(783 )
8,972$ 7,706$ 3,806

See notes to financial statements.

-4-$ 10,383

5,040

$ 117

$ 71,969

Kurotani Corporation
Statements of Cash Flows
Years Ended August 31, 2011 and 2010

Millions of Yen
2011
2010
OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Income taxes—paidDepreciation and amortization
Changes in assets and liabilities:
Increase in accounts receivable
Increase in inventories
Increase in accounts payable(Decrease) increase in liability for retirement benefits
Other—net
Total adjustments

Thousands of
U.S. Dollars(Note 1)2011

¥ 2,252¥ 1,171$ 29,246(714 )
192(305 )
199(9,276 )2,489(1,083 )(1,415 )64(1 )(338 )(3,295 )(1,571 )(204 )
56
13
17(1,795 )(14,069 )(18,373 )835(14 )(4,381 )(42,789 )(1,043 )(624 )(13,543 )(1,065 )
1,065
(37 )
6
(8 )
(5 )
(6 )

(1,791 )
1,790
(94 )
1
(138 )(5 )(13,837 )
13,831(482 )
74(106 )
(64 )
(66 )

(50 )

(237 )(650 )

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

1,000
1,300
(1,738 )
(60 )
19

3,231
20,779(34,427 )2,430(783 )
14,012

404

521

5,242

FOREIGN CURRENCY TRANSLATION ADJUSTMENT ON
CASH AND CASH EQUIVALENTS(22 )(143 )(284 )NET DECREASE IN CASH AND CASH EQUIVALENTS(711 )(483 )(9,235 )CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

2,138

2,621

27,762¥ 1,427¥ 2,138$ 18,527

Net cash 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
Purchases of software and other intangible assets
Other—net
Net cash used in investing activities
FINANCING ACTIVITIES:
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
Net cash provided by financing activities

CASH AND CASH EQUIVALENTS, END OF YEAR

See notes to financial statements.

-5-

Kurotani Corporation
Notes to Financial Statements
Years Ended August 31, 2011 and 2010

1.

BASIS OF PRESENTING FINANCIAL STATEMENTS
The accompanying financial statements have been prepared from the accounts maintained by Kurotani
Corporation (the "Company") in accordance with the provisions set forth in the Companies Act of Japan (the"Companies Act") and in conformity with accounting principles generally accepted in Japan, which are different
in certain respects as to the application and disclosure requirements of International Financial ReportingStandards.
In preparing these financial statements, certain reclassifications and rearrangements have been made to theCompany's financial statements issued domestically in order to present them in a form which is more familiar toreaders outside Japan.
The financial statements are stated in Japanese yen, the currency of the country in which the Company isincorporated 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 ¥77 to $1, theapproximate rate of exchange at August 31, 2011. Such translations should not be construed as representations
that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.

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.

b.

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.

c.

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.
Non-marketable 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.

d.

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.

-6-

e.

Software—Software is carried at cost less accumulated amortization, which is calculated by thestraight-line method over 5 years.

f.

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.

g.

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.

h.

Asset Retirement Obligations—In March 2008, the Accounting Standards Board of Japan (the "ASBJ")
published the accounting standard for asset retirement obligations, ASBJ Statement No. 18, "AccountingStandard for Asset Retirement Obligations," and ASBJ Guidance No. 21, "Guidance on AccountingStandard for Asset Retirement Obligations." Under this accounting standard, an asset retirement obligation
is defined as a legal obligation imposed either by law or contract that results from the acquisition,
construction, development and the normal operation of a tangible fixed asset and is associated with theretirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the
discounted cash flows required for the future asset retirement and is recorded in the period in which the
obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement
obligation cannot be made in the period the asset retirement obligation is incurred, the liability should berecognized when a reasonable estimate of asset retirement obligation can be made. Upon initial recognitionof a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing thecarrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is
subsequently allocated to expense through depreciation over the remaining useful life of the asset. Overtime, the liability is accreted to its present value each period. Any subsequent revisions to the timing or theamount of the original estimate of undiscounted cash flows are reflected as an increase or a decrease in the
carrying amount of the liability and the capitalized amount of the related asset retirement cost. This
standard was effective for fiscal years beginning on or after April 1, 2010.
The Company applied this accounting standard effective September 1, 2010. There was no effect of thischange on the statements of income for the year ended August 31, 2011.

i.

Income Taxes—The provision for income taxes is computed based on the pretax income included in thestatements of income. The asset and liability approach is used to recognize deferred tax assets andliabilities 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.

j.

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 income statement
to the extent that they are not hedged by forward exchange contracts.

-7-

k.

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 income statement.

l.

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,
which was 6,279,761 shares and 6,001,000 shares for the years ended August 31, 2011 and 2010,
respectively, retroactively adjusted for the stock split effective April 1, 2011.
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, 2011 and 2010.
Cash dividends per share presented in the accompanying statements of income are dividends applicable to
the respective years including dividends to be paid after the end of the year, retroactively adjusted for thestock split effective April 1, 2011.

m. New Accounting Pronouncements
Accounting Changes and Error Corrections—In December 2009, the ASBJ issued ASBJ Statement
No. 24, "Accounting Standard for Accounting Changes and Error 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 due to a revision of accounting standards, the new policy is applied
retrospectively unless the revised accounting standards include specific transitional provisions. When therevised accounting standards include specific transitional provisions, an entity shall comply with thespecific transitional provisions. (2) Changes in Presentation—When the presentation of financial
statements is changed, prior period financial statements are reclassified in accordance with the newpresentation. (3) Changes in Accounting Estimates—A change in an accounting estimate is accounted forin the period of the change if the change affects that period only and is accounted for prospectively if thechange 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. Thisaccounting standard and the guidance are applicable to accounting changes and corrections of prior period
errors which are made from the beginning of the fiscal year that begins on or after April 1, 2011.
3.

INVENTORIESInventories at August 31, 2011 and 2010 consisted of the following:
Millions of Yen
2011
2010
Merchandise
Finished products
Work in process
Raw materials and supplies

¥

Total

¥ 3,093

-8-

7
899
112
2,075

¥

6
346
127
1,200

¥ 1,679

Thousands of
U.S. Dollars
2011
$

85
11,678
1,459
26,952$ 40,174

4.

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at August 31, 2011 and 2010 consisted of the following:

Millions of Yen
2011
2010

5.

Thousands of
U.S. Dollars
2011

Land
Buildings and structures
Machinery and equipment
Furniture and fixtures
Acquisition cost
Accumulated depreciation¥ 1,521
2,153
2,036
262
5,972
(3,509 )¥ 1,521
2,140
1,935
238
5,834
(3,412 )$ 19,755
27,961
26,452
3,401
77,569(45,564 )Net book value¥ 2,463¥ 2,422$ 32,005

INVESTMENT SECURITIESInvestment securities as of August 31, 2011 and 2010 consisted of the following:

Millions of Yen
2011
2010

Thousands of
U.S. Dollars
2011

Investment securities:
Marketable equity securities
Non-marketable equity securities
Others

¥ 365
15
80

¥ 352
15
78

$ 4,737
195
1,037

Total

¥ 460

¥ 445

$ 5,969

The cost and aggregate fair value of the investment securities that have a quoted market price in an active
market at August 31, 2011 and 2010 were as follows:
Millions of Yen
Unrealized
Unrealized
Gains
LossesFair
Value

August 31, 2011

Cost

Equity securities
Others

¥ 411
100

¥10

¥ 56
20

¥ 365
80

Total

¥ 511

¥10

¥ 76

¥ 445

August 31, 2010
Equity securities
Others

¥ 404
100

¥ 52
22

¥ 352
78

Total

¥ 504

¥ 74

¥ 430

-9-

6.

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

August 31, 2011

Cost

Equity securities
Others$ 5,343
1,297

$ 128

$ 734
260

$ 4,737
1,037

Total

$ 6,640

$ 128

$ 994

$ 5,774

SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans at August 31, 2011 and 2010 consisted of the following:

Millions of Yen
2011
2010
Unsecured bank loan with weighted
average interest rate 1.10% (2011)¥ 3,899¥ 3,650

Thousands of
U.S. Dollars
2011$ 50,634

Long-term debt at August 31, 2011 and 2010 consisted of the following:

Millions of Yen
2011
2010
1.70% Unsecured yen bonds, due 2011
0.60% Unsecured yen bonds, due 2011
0.59% Unsecured yen bonds, due 2013
Unsecured bank loans due serially to 2016 withweighted average interest rate 1.10% (2011)
Total
Less current portion115¥ 1,000
500
185

2,675
2,790
(908 )

2,156
3,841(2,402 )34,73836,231(11,792 )¥ 1,882¥ 1,439$ 24,439¥

Long-term debt, less current portion

Thousands of
U.S. Dollars
2011

$

1,493

Annual maturities of long-term debt at August 31, 2011 were as follows:

Millions of Yen

7.

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

¥

908
665
578
560
79

$ 11,792
8,642
7,511
7,266
1,020

Total

¥ 2,790$ 36,231

RETIREMENT BENEFITSThe liabilities for employees' retirement benefits at August 31, 2011 and 2010 were ¥65 million ($850 thousand)and ¥67 million, respectively.

8.

EQUITYJapanese companies are subject to the Companies Act. The significant provisions in the Companies Act that
affect financial and accounting matters are summarized below:- 10 -

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 criteriasuch as: (1) having a Board of Directors, (2) having independent auditors, (3) having a Board of Corporate
Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years ofnormal 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 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.
On April 1, 2011, the Company made a thousand-for-one 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, thenumber of issued 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' over-allotment 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, 2011 and 2010.

- 11 -

The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities atAugust 31, 2011 and 2010 are as follows:
Thousands of
U.S. Dollars
2011

Millions of Yen
2011
2010
Deferred tax assets:
Inventories
Accrued expenses
Accrued enterprise tax
Depreciation and amortization
Pension and severance costs
Investment securities
Unrealized loss on available-for-sale securities
Other

¥ 77
11
52
25
26
2
27
10

¥ 79
6
30
29
27
2
30

$ 1,005
147
676
321
343
28
350
125

Total

¥ 230

¥ 203

$ 2,995

A reconciliation between the normal effective tax rate and the actual effective tax rates reflected in theaccompanying statements of income for the years ended August 31, 2011 and 2010 is as follows:

10.

2011

2010

Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Accumulated earnings tax
Other—net

40.4 %
0.3
2.9
0.8

40.4 %
0.7
3.3
0.4

Actual effective tax rate

44.4 %

44.8 %FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESOn March 10, 2008, the ASBJ revised ASBJ Statement No. 10, "Accounting Standard for Financial
Instruments," and issued ASBJ Guidance No. 19, "Guidance on Accounting Standard for Financial Instruments
and Related Disclosures." This accounting standard and the guidance were applicable to financial instruments
and related disclosures at the end of the fiscal years ending on or after March 31, 2010. The Company applied
the revised accounting standard and the guidance effective August 31, 2010.
(1) Company Policy for Financial Instruments
The Company uses financial instruments, mainly long-term debt including bank loans and bonds, based on
its capital financing plan. Cash surpluses, if any, are invested in low risk financial assets. Short-term bankloans are used to fund its ongoing operations. Derivatives are used, not for speculative purposes, but tomanage exposure to financial 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 inforeign 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.

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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, trade receivables and payables are exposed to risk resulting fromfluctuations 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 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 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.

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(a) Fair value of financial instruments

August 31, 2011

Carrying
AmountMillions of Yen
Fair
Value

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

Cash and cash equivalents
Short-term investments
Receivables
Investment securities¥ 2,138
698
6,146
430

¥ 2,138
698
6,146
430

Total

¥ 9,412¥ 9,412

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

¥ 3,650
1,617
451
3,841

¥ 3,650
1,617
451
3,852

¥ 11

Total

¥ 9,559¥ 9,570¥ 11

August 31, 2011

Carrying
AmountUnrealized
Gain/Loss

August 31, 2010

Thousands of U.S. Dollars
Fair
Unrealized
Value
Gain/Loss

Cash and cash equivalents
Short-term investments
Receivables
Investment securities

$

Total

$ 127,274$ 127,274

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

$

$

Total

$ 118,705- 14 -

18,527
9,076
93,897
5,774

50,634
21,823
10,01736,231$

18,527
9,076
93,897
5,774

50,634
21,823
10,01736,367$ 136$ 118,841$ 136

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
Carrying AmountThousands ofMillions of Yen
U.S. Dollars

August 31, 2011
Investments in equity instruments that do nothave a quoted market price in an active market

¥ 15

$ 195

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

August 31, 2011

Due in1 Yearor Less

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

Total

¥ 9,348

August 31, 2010
Cash and cash equivalents
Short-term investments
Receivables¥ 2,132
698
6,146

Total

¥ 8,976- 15 -

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

Due after
10 YearsDue in
1 Yearor Less

August 31, 2011
Cash and cash equivalents
Short-term investments
Receivables

$

Total

$ 121,404

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

Due after
10 Years

18,431
9,076
93,897

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.
Derivative Transactions to Which Hedge Accounting Is Not Applied at August 31, 2011
Millions of Yen
Contract
Amount Due
Fair
after One Year
Value

August 31, 2011

Contract
AmountCommodity forward contracts:
Selling
Buying

¥ 357
355

¥2

¥2

Total

¥ 712

¥2

¥2

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

Unrealized
Gain/Loss

August 31, 2011

Contract
AmountCommodity forward contracts:
Selling
Buying$ 4,640
4,614

$ 21
5

$ 21
5

Total

$ 9,254

$ 26

$ 26

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Unrealized
Gain/Loss

The following is the fair value information for commodity forward contracts to which hedge accounting is notapplied at August 31, 2010:

August 31, 2010

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

Commodity forward contracts:
Selling
Buying¥ 1,190
1,199¥ (99 )
90

¥ (99 )
90

Total

¥ 2,389¥ (9 )¥ (9 )

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 at August 31, 2011 was approved at the shareholders meeting
held on November 29, 2011:

Year-end cash dividends, ¥20 ($0.26) per share******- 17 -

Millions of Yen

Thousands of
U.S. Dollars¥ 143$ 1,862