Fiscal Year Ended March 31, 2002

COMSYS—For Excellence in Telecommunications

Profile
Nippon COMSYS Corporation was established in 1951, during Japan’s postwar turmoil, to undertake the rebuilding of the country’s
telecommunications infrastructure. That was the year before the establishment of Nippon Telegraph and Telephone Public Corporation, which waslater privatized and renamed Nippon Telegraph and Telephone Corporation(NTT). At that time, the primary function of COMSYS was to execute telecommunications network construction projects in support of NTT. The Company
subsequently made a place for itself in the industry on the basis of its
successes in the postwar construction of Japan’s telecommunications
infrastructure, and has remained an industry leader to this day.
Because we recognize the importance of novel and creative thinking,each of our employees brings pride to his work, and can take satisfaction in
the results of his efforts. Further, by giving maximum freedom of expression
to talent and ability, we have fostered an open and innovative corporate
culture. In building this team of talented and creative people, we at Nippon
COMSYS Corporation are actively working to realize a splendid future, oneflourishing with as-yet unborn possibilities.

Contents
Consolidated Financial Highlights

1

Letter from the President

2

Toward a New Leap Forward in the 21st Century—Our Vision of the Future

6

Corporate Citizenship

8

Review of Operations
NTT Construction
Domestic Construction and Engineering
International Operations
Information Systems

9
10
12
14
16

Management

18

Financial Section

19

Organization Chart

35

Corporate Information

36

Corporate Directory

Inside Back CoverConsolidated Financial Highlights
Nippon COMSYS Corporation and Consolidated Subsidiaries
Years ended 31st March, 2001 and 2002

Millions of yen

Contract backlog at beginning of the year
Contract backlog at beginning of the year
adjusted for newly consolidated subsidiaries
New orders received during the year
Transfer of contract backlog to an
unconsolidated subsidiary and others
Net sales

Change

2001

2002

2002

(%)

¥ 76,781¥ 80,461$ 603,835

4.8%

272
229,211

1,192
213,986

8,946
1,605,899

338.2%–6.6%

3,583
222,220—
231,351—
1,736,218—
4.1%

80,46164,288482,462–20.1%

30,822
1,430,214
839,917

–8.7%
1.2%
–5.2%

Contract backlog at end of the year
Net income
Total assets
Shareholders’ equity

Thousands of
U.S. dollars¥ 4,498
188,250
118,055¥

4,107
190,576
111,919$Yen

Per share:
Net income— Basic— Diluted
Cash dividends¥ 33.11
31.70
12.00

¥

U.S. dollars

30.39
29.10
10.00

$

0.23
0.22
0.08

–8.2%
–8.2%
–16.7%

Note: For convenience only, the accompanying Japanese yen figures for 2002 have been translated into U.S. dollars at the rate of¥133.25 to $1, the rate prevailing on 29th March, 2002.

Net Sales(¥ Billions)

Net Income(¥ Billions)

New Orders
Received(¥ Billions)

.9

4
.8
31.
231
.3
.2 2
225 220.5
222

235

8.3

.9
5
.2
229 228. 229

.0

214

6.3
5.6
4.5

98 99 00 01 02

4.1

98 99 00 01 02

98 99 00 01 02

Nippon COMSYS Corporation - Annual Report 20021

Letter from the President
Environment

D
Hironobu Takeuchi
President and Representative Director

2

Nippon COMSYS Corporation - Annual Report 2002

During the fiscal year ended March 31, 2002, theJapanese economy was characterized by a severe
unemployment situation and a weak stock market.
As a result, there was no recovery in consumer
spending. Falling prices and the business recession
sent the economy into a deflationary spiral, anduneasiness with regard to the economy’s course
deepened steadily.
However, in the midst of the general economic
doldrums, the information and communicationsindustry in which COMSYS is engaged benefited
from both the e-Japan Strategy and the public- andprivate-sector IT innovation boom that began last
fiscal year. As a result, capital investment remained
vigorous, particularly in IP (Internet Protocol) networks. In addition, with the rapid proliferation ofbroadband services and the evolutionary advances
in mobile communication, a society in which telecommunications are ubiquitous is unfolding before
our eyes. In the broadband market, though, whichis global in scope, competition continues to worsen.
These conditions led to an increase in tie-ups
among telecommunications firms. Competition forsubscribers caused providers to undercut one
another on user fees, and as fees spiraled downward,
the struggle for survival among telecommunications
firms intensified yet further.
Given this state of affairs, and anticipating expansion in currently troubled information andcommunications markets, COMSYS moved to efficiently implement new measures through abroad-ranging structural reorganization in May
2001. The Company reorganized its marketingorganization from a layered structure to a more
simple and efficient system.
Our technical organization was restructured togive the Engineering Division a major role in theformulation of strategy. By pressing forward with
the implementation of new technologies, increased
efficiency in project execution, and the maintenance and improvement of quality, this Division
tailored its operations to its mission. At the sametime, the Tokyo area construction organization had
grown too large. Therefore, it was split into separate organizations according to function, whichenhanced overall project execution capabilities.
The Company is making IP network business acore business, and in October 2001, inaugurated the
Comsys IP Network Integration Support (COINS)
project. COINS was formed around a cohort ofexperts in advanced technologies, and provides
integrated network services. To expand our activities in the network solutions business, we establishedan IT Business Division within the Company, and an
IT office within each branch in March 2002.
The Company also organized an independent
division to handle its environment-related business,
including the sale, installation, and maintenanceof wind power and solar power equipment.
To facilitate entry into new fields of business,
the Company implemented an internal venture system that creates an environment that encourages
employees with business ideas to develop those
proposals themselves, and also promotes joint
business activities with firms in other industries.

mergers and alliances, reductions in materials
costs through detailed implementation of centralized purchasing, and the efficient applications offunds. Despite these efforts, competition for orders caused the value of orders to fall off, andretirement benefit obligations increased. As aresult, consolidated operating income declined
9.7% to ¥10.5 billion (US$79 million). Consolidated
net income fell 8.7% to ¥4.1 billion (US$31 million),primarily as a result of a ¥1.6 billion (US$13 million)transfer to the allowance for losses on debt guarantees. This step was taken in preparation for the
possibility that the Company may become liable
for the debts of an unconsolidated subsidiary
which has excessive debts.
To improve asset health and maintain financialtransparency, the Company re-valued its commercial real estate in accordance with the Land
Revaluation Law, and posted a land revaluation
excess of ¥8.6 billion (US$65 million) in the assets
section of its balance sheets.

Consolidated Performance

L

Looking at consolidated orders received for thisfiscal year, orders from NTT DoCoMo in connection with FOMA (Freedom of Mobile Multimedia
Access) service were healthy, but NTT restrained
capital investments, and public-sector demandalso contracted. These factors caused a 6.6% decline in total orders received, to ¥213.9 billion(US$1,606 million).
Consolidated net sales rose 4.1% to ¥231.3 billion(US$1,736 million), primarily because the Company
added two consolidated subsidiaries during thisfiscal year, because completed NTT DoCoMo
projects were higher than in the previous term, andbecause construction projects brought forwardfrom last term were completed.
The Company took various measures toimprove profitability, including transfers of personnel at affiliates, reduction of labor costs
through decreased use of temporary employees,
improvement of construction site administration,
reduction of subcontracting expenses throughcontracting with blue-chip firms, and strengthening our subsidiary and affiliate structure throughOutlook and Important Issues

T

The telecommunications market, which is COMSYS’s
sphere of operation, anticipates significant capital
investment from NTT in its new high-capacity, highspeed broadband network, “HIKARI.” At the sametime, though, NTT is expected to restrain its capital
investments and prolong the existing adverse operating environment. We look for substantial capital
investment from NTT DoCoMo, however, in connection with FOMA.
In non-NTT markets, measures by the Japanese
government to promote the IT revolution are
expected to produce growth in that field. In the telecommunications market, though, the accelerationof technological progress and the new entries into
this market are causing a continual escalation ofcompetition. At COMSYS, to meet the challengesof this rapidly changing era of IT innovation, we
are increasing the consolidation of our operations,heightening the cumulative strengths of the companies of the COMSYS Group, strengthening themanagement of Group companies, and enacting therevolutionary reforms described below:

Nippon COMSYS Corporation - Annual Report 2002

3

1. Dynamic deployment and right-sizing of the workforce—training,
integration, and proper organizationof IP technicians
Operational personnel will be organized
into a pool to facilitate support, and IP
technological capabilities will bestrengthened as called for in the COINS
Project. Marketing personnel will be
reorganized according to their skills andmarket needs, and the administrative
sector will be slimmed down.
2. Shifting to a winning personnel andremuneration structure
The Company will implement a wage structure corresponding to the Company’s
performance, a regional wage structurethat reflects actual competitive conditions,an annual salary system for all management-level employees, reforms of thepersonnel system to include an abilitybased grade system, and a re-evaluationof the wage structure.
3. Enhancing project-execution capabilities by strengthening the affiliate
structure, and optimizing subcontracting expenses
This will involve concentrating capabilities by reorganizing the Companiesof the Group, fostering superior subsidiaries, affiliates, and associates
through directed subcontracting, andreducing subcontracting costs throughenhanced and strengthened subcontracting control.
4. Broad-ranging enhancement of administrative efficiency
Efficiency gains will be enhanced
through the establishment of a computerized work-site administrative support
system. Together with this, Group administration will be concentrated throughjoint administration and outsourcing.
5. Expanding our sphere of operations
The Company will strengthen its involvement in wind and solar power generation
projects, as well as its involvement in“total business solutions.” We will alsopress forward in joint businesses withfirms in other industries, as well as
expanding the scope of new businesses.

4

Nippon COMSYS Corporation - Annual Report 2002

Through these measures the Company will eradicate outdating thinking and procedures to reformand regenerate itself. We will utilize marketingand technological capabilities to overcome theharsh business environment and further increase
our cost competitiveness, in this way achieving
improved performance.

Dividends and Internal Reserves

D

Dividend policy is one of the most important
issues that face any firm. It is the foundation forthe continued expansion of a company’s operations, and through it the strengthening of its
financial structure and improvements in returnon equity. COMSYS balances the imperative toprovide the best possible dividend payout toshareholders with considerations of theCompany’s performance and its continued ability to generate dividends.
In accordance with this policy, COMSYS
declared a midterm dividend of ¥5 per share, andplans to declare a year-end dividend of ¥5 pershare, for a total dividend of ¥10 per share forthis fiscal year. This will generate a payout ratioof 39.1%, return on equity of 3.2%, and a ratio ofdividends to shareholders’ equity of 1.3%.
In addition, as a measure to increase income
to shareholders, we have been allocating a portion of revenues to a fund for the retirement oftreasury stock. This fiscal year, we purchased andretired 1,578 shares.
This fiscal year we will again use internal
reserves to reinforce our business base throughcapital investments in the expansion of training
facilities, in the replacement of tools and instruments to upgrade technology and improve safety,
and in the enhancement of construction bases
through improvement of the work environment.
It is also our intention to make effective investments in the opening up of new fields of businessfor the Company.
Dividends continue to be the primary sourceof shareholder income. However, the Company
wants to continue to retire treasury stock todiversify returns to shareholders, using a fixed
percentage of income. Therefore, these dividend
and treasury stock policies will remain in placein the coming fiscal year.

Capital Investment and Fund Acquisition
Capital investments were ¥3,790 million (US$28
million) during this fiscal year, primarily in theconstruction of the COMSYS Adachi Building (theAdachi Technostation), which was completed in
May 2001, and the Higashi Gotanda Redevelopment Building (our new headquarters officebuilding), completed in June 2001. No bonds orother instruments were issued during this term.

COutlook for the Term Ahead

T

Three of the Company’s consolidated subsidiaries, Okoshi Denken Co., Ltd., Tokyo Denwa
Shisetsu Co., Ltd., and COMSYS Kanto Kita Engineering Co., Ltd., merged on January 1, 2002 to
become OT Engineering Co., Ltd. This brings theCompany’s total number of consolidated subsidiaries to fourteen.
During the term to come, Nippon COMSYS
Corporation and its fourteen consolidated subsidiaries are forecast to post consolidated net
sales of ¥214 billion (US$1,606 million), a declineof 7.5%, but consolidated net income is predicted
to grow 51.0% to ¥6.2 billion (US$47 million). The
continued restraint in capital investment at NTT
will again affect NTT-related orders received.
The Company will continue as before to reinforce the management and technologicalcapabilities needed to mount a nimble response tothese rapidly changing market conditions, as wellas to the worldwide slump in IT-related industries.
We will enhance our cost competitiveness in
response to today’s exacting business environment,
deploying the capabilities of the entire Group toachieve stronger and stronger performance.
COMSYS celebrated the 50th anniversary of
its founding in December 2001. Building on thefoundation of technological expertise, knowledge, and tradition amassed throughout ouryears of operation, we will in the coming term
implement new measures to facilitate the flexible
provision of high-quality products and services
Head Officethat contribute to our customers’ profitability.
We will endeavor to maintain our sound financial structure and the trust we have earned in
the market, employing them in support of thegrowth of the 21st century’s high-order information society. We will also continue to strengthen
our business base to advance toward our goal of
becoming a true comprehensive engineering firm,
COMSYS requests the continued support of its
shareholders, clients, business partners, andemployees in these endeavors.

Hironobu Takeuchi
President and Representative Director

Nippon COMSYS Corporation - Annual Report 2002

5

Last fiscal year the Japanese Government implemented the e-Japan Priority Policy Program in
response to the IT revolution and the building of
high-order, information-based societies across theface of the globe. The e-Japan Priority Policy Program calls for Japan to become the world leader in
information technology within five years. The IT
sector is forecast to display long-term growth
despite the slump seen during the period of thisreport. COMSYS expects to be deeply involved inthese developments. In addition, the needs of customers in the telecommunications market are rapidly
shifting from fixed communications to mobile com-

Sources ofConstruction
Contracts

64%NTT
36% Non-NTT

125

The Growing
Multimedia
Market¥125

trillion(2010)The Ministry of Public Management, Home
Affairs, Posts and Telecommunications (formerly the
Ministry of Posts and Telecommunications) projects
that Japan’s information and communications market will grow to ¥125 trillion (US$9,380 billion) by¥16 trillion(1995)
16

95

6

Nippon COMSYS Corporation - Annual Report 2002

munications, from the telephone to the Internet,
and from narrow band to broadband. Together with
this, changes in the social economy are also emerging. In response to these, our most importantcustomer, NTT, is concentrating its investments inbroadband capabilities and the expansion of its IP
network. These trends indicate rapid changes in
COMSYS’s operating environment.
To clarify its response to the current situation,
COMSYS drafted a medium-term management plan,
then revised that plan from the standpoint of theCompany’s performance through the fiscal year
ending March 31, 2007. Goals now include:• Strengthening our NTT construction operations. However, we are putting even more emphasis
on increasing the earnings of our domestic andoverseas telecommunications construction
projects, and information services such as softwaredevelopment. By the fiscal year ending March 31,
2007, on an unconsolidated basis, we will increase
total annual revenues to ¥310 billion (US$2,326 million), while bringing the ratio of NTT contracts
down from the current 60% to approximately 35%.
• Responding to the stronger cost competitionin the market with a companywide efficiency enhancement program, which will encompass not
only subsidiaries and affiliates, but subcontractor
firms as well, and achieving recurring profits of ¥16billion (US$120 million).
• Strengthening training programs and developing proprietary technology, primarily in the fieldof construction, in response to today’s rapid paceof technological innovation.

10

Eleven Yearsof Growth(¥ Billions)the year 2010, including a telecommunications market of ¥26.8 trillion (US$201 billion), a broadcasting
market of ¥8.4 trillion (US$63 billion), a communications and computer terminal market of ¥26.0 trillion(US$195 billion), and a content (databases, images,
video games, software, etc.) market of ¥63.4 trillion(US$476 billion). Of this, telecommunications andbroadcasting industry investment in 2010 is forecast
at ¥7.2 trillion (US$54 billion).
COMSYS is resolved to become the leading firmin the field. With a strong commitment to enhancing the quality of everyday life, COMSYS intends tobecome involved fully in all of the business opportunities represented by these new developments
in telecommunications.

250

200

150

100

Net Sales
Total Assets

50

Shareholders’ Equity
Operating Income

0

91

92

93

94

95

96

97

98

99

00

01

02

COMSYS employs awide spectrum oftechnological expertiseand fine workmanshipto its projects, while
paying close attention
to safety.

With Gratitude on our 50th Anniversary
COMSYS celebrated the 50th anniversary of its
founding on December 20th, 2001. As we commemorate our first 50 years in the first year of the
21st century, we would like to express our sincere
gratitude to our shareholders, business partners,
and employees.
From the time of the Company’s establishment
in 1951, COMSYS expanded primarily on thestrength of facilities construction projects for NTT.
In 1957, the Company undertook Japan’s firstmicrowave communication system. In 1962 we werelisted on the second section of the Tokyo Stock
Exchange. We won our first overseas contract in
1965, from BNP for a project in Bangkok, Thailand.
In 1972 the Company was listed on the first sectionsof both the Tokyo and Osaka stock exchanges. In
1978 COMSYS laid Japan’s first optical communications cables. Through this track record theCompany has consistently shown itself to be theleading company in the telecommunications construction industry.
The Company grew on the strength of construction projects for NTT during its first 50 years.
With the completion of Japan’s communications
infrastructure, there had been times that we felt
the adverse wind as COMSYS had come to dependon NTT for 90% of its net revenues. The Company
had already begun to implement operationalchanges, and quickly began to diversify into newfields such as software development and to makeinroads into the domestic construction market.
Now, the weight of NTT contracts in our net revenues
has fallen to 60%.
In 1998 COMSYS began working on a new corporate philosophy and new operational policies,
which were instituted in 1990. Our first corporate
identity campaign, under which we changed ourname to Nippon COMSYS Corporation, and, for thesake of achieving a change in direction suited to
the 21st century, succeeded in creating a new consciousness throughout the Company.
In addition to this corporate identity campaign,

the Company has also undertaken programs toreevaluate business practices and procedures,
bolster its business base, improve its financial
condition, and make its stock a more attractive
investment.
Notwithstanding the persistently adverse economic conditions ushered in when the economic
bubble collapsed in the 1990s, COMSYS has posted
continued growth in revenues and profits. Despite
growth of only 10% in the Company’s work force,
net revenues have more than doubled, operating
profits have tripled, net assets have more thantripled, shareholders’ equity has more than quadrupled, and capital has quintupled. New
technologies such as cellular telephony, fiber optics,
and digital communications have shown rapid
expansion of demand, but the growth in our profitability also reflects the success of our corporate
identity campaign and other reform measures. The
efforts of each employee of the Company are evident
in this performance.
The issue of improvement and reform remains
a top priority for the Company. In April 1999 wecommenced our second corporate identity campaign, which has the objectives of further
strengthening consciousness of the corporate philosophy and operations policies established in thefirst corporate identity campaign, as well as creating a fresh and freer corporate atmosphere and astronger sense of unity throughout the Group. We
believe this will provide a solid foundation for ouroperations in the 21st century.

Nippon COMSYS Corporation - Annual Report 2002

7

Corporate CitizenshipThis antenna blendsin perfectly with thenatural surroundings.

COMSYS supports
the J league soccer
team, Omiya Ardija.

The Tokyo
Philharmonic
Orchestra.

In May 2001 COMSYS
won ISO 14001
certification for all its
domestic operations,demonstrating due
concern with environmental protection.

COMSYS is strongly conscious of its duty to thecommunities in which it operates. The Company
engages in activities that promote environmental awareness, sponsors cultural events, andprovides disaster-preparedness training.
In February 2000 COMSYS commenced inspection, analysis, and evaluation of every corner of
the Company from an environmental perspective.
It was necessary to create a new culture in which
every employee became highly conscious of environmental problems, and committed to finding
solutions. In May 2001, all of COMSYS’s domestic operations received ISO 14001 certification.

C
8

Nippon COMSYS Corporation - Annual Report 2002

An Environmental Management System is in effectthroughout the Company.
While offering our clients trusted, high-quality
services, supported by strong technological capabilities, we are also protecting the environment,saving energy, and conserving materials. This not
only strengthens our competitiveness, but supports the development of the 21st century’shigh-order, information-intensive society. We
firmly believe that this will also help strengthen
our business base.
COMSYS also undertakes projects in which
concern for the environment is a factor. In 1999,
we installed a cellular telephone facility inwestern Japan’s Setonaikai National Park. The
facility is on the grounds of the Rokkosan Farm,which is operated within the park by the cityof Kobe. To ensure that there was no degradation of the natural beauty of the site, to blend
in with nature, and to assure compatibility withthe park’s natural atmosphere, we created an
artificial Japanese oak tree for the antennapole. The pole is approximately 12 meters tall,and sports an artificial Japanese oak pattern,branches and leaves. Everyone concerned is very
pleased with this non-intrusive facility, which
greatly increases convenience with no degradation of the environment.
COMSYS is also an active participant in theregional community. The Omiya Ardija soccer
team, founded through joint participation by
COMSYS, NTT, and 19 other companies closely
associated with NTT, is active in the J2 soccer
league. The Japan Professional Football League
is composed of regional teams, and develops
players at all levels, from youth to professional.
Omiya Ardija is intended to support and participate in player development, as well as being aclub that all can enjoy. We are pleased and happy
to have the opportunity to contribute to thewellbeing of the public in this way.
Another of the Company’s activities is supporting The Tokyo Philharmonic Orchestra, of which
COMSYS is a special supporting member.
The Tokyo Philharmonic Orchestra, whichcelebrated its 90th anniversary in 2001, boasts
the most venerable history and tradition of any
orchestra in Japan. In April 2001, the orchestra
welcomed one of the world’s leading conductors,
Myung-Whun Chung, as its Special Artistic Advisor. Under the leadership of this conductor, theTokyo Philharmonic is reaching new heights ofartistic expression, and taking a great step forwardin the world of music.
COMSYS is proud to be able to contribute inthis way to the culture and society of our hostregions. By doing so, we are able to give something in return to the communities that havemade our existence and growth possible.

Review of Operations

NTT Construction

59%“Outside” Projects

21 %“Inside” Projects

38%

Domestic Construction
and Engineering

31 %Overseas Construction

1%

Information Systems

9%

Nippon COMSYS Corporation - Annual Report 2002

9

NTT Construction
Constructing a steel
tower and installing anantenna on the roof of
the NTT DoCoMo
Building.

COMSYS is building an
impressive track record
installing switchingsystems, transmission
equipment, and otherfacilities inside central
telephone offices.

From trunks connecting major cities to lines
serving single homes,
COMSYS is engaged inevery aspect of television cable and fiberoptic cable installation.

10

Nippon COMSYS Corporation - Annual Report 2002

T

The structure of the telecommunications market
is shifting from fixed communications to mobile
communications, and there is also a rapid shift
from voice communications to data communic a t i o n s . O u r b i g g e s t c u s t o m e r, N T T, i s
responding to these conditions by positioning
itself to take the lead in the information andcommunications era of the 21st century. To thisend, NTT is implementing a number of management reform measures, centered on the
expansion of broadband services and the efficient
deployment of human resources within the NTT
group. In addition, NTT DoCoMo is participating in the deployment of IT technology in thefinancial and societal realms by developing thenext-generation of mobile telephones and by
expanding its mobile multimedia services.
COMSYS’s NTT Construction Sector is responding to these challenges with changes to
its operational structure. First, we have assigned account managers with the direct
responsibility for serving each client. This will
also help us win more contracts. Next, to further reduce construction costs, we havebolstered our subcontracting procedures, reevaluated our project manager system, andstrengthened systems for on-site backup by theManagement Support Division. As a result,while the Company was affected by the cutback
in NTT’s capital investments, there was growthin some “outside” project areas, including thelaying of optical access cables. Some “inside”
project areas also showed expansion, such as
electrical power switching projects in connection with DSL facilities. COMSYS also won acontract for a FOMA project from NTT DoCoMo.
Net revenues, therefore, rose 0.7% to ¥135,963
million (US$1,020 million).
Of particular note among this sector’s projects

A cable vault ready toreceive telecommunications cables.

during this fiscal year was the constructionof a small-scale base transceiver station in
Shikoku’s Ehime Prefecture. The construction
site was in the Hinoki Forest, a difficult place
to lay both electric power lines and NTT cables.
For that reason, we installed unique solar
power generation equipment. In the future, wewill certainly make use of our experience inusing this environmentally friendly solar power
generation technology.
We are improving safety and quality by expanding our “safety patrols” and striving for evencloser compliance with ISO 9001. We received
recognition from the Labor Standards Bureauof the Ministry of Health, Labour and Welfare
for completing the optical fiber project on the
Osaka NWC—Naniwa NWC network without
accident. There are few examples anywherein the country of a project on this scale, andit could be called a showcase of the Company’s
practical and technological expertise.
In the coming term, the NTT Construction
Sector will be affected by NTT’s continued restraint
in capital investment, and, with the exceptionof optical cable projects, “outside” projects will
decline. With the proliferation of IP networks,
investment in telephone land lines will contract
significantly, and this will cause “inside”
projects to fall off as well. In preparing for IP
network construction, the Company has
trained a staff of 1,100 to receive their vendor
qualifications as IP technicians, to staff the
Comsys IP Network Integration Suppor t(COINS) system.
The NTT Construction Sector will be endeavoring to increase its revenues, while working to
improve safety and efficiency, to strengthen its
subcontracting procedures, and to train newtechnical personnel.

59%of Total Revenue

.2
151
3
74.

.7
143
4
.
4
7

.3

144

1
80.

.0
135
2
78.

.0

136

7

87.

Sales ofNTT Construction(¥ Billions)
9

76.

3

69.

2

64.

8

56.

3

48.

“Inside” Projects“Outside” Projects

98

99

00

01

02

Nippon COMSYS Corporation - Annual Report 2002

11

Domestic Construction and Engineering
Telecommunications
equipment installation
inside the Tokyo
Opera City Tower.

We are now constructing
a wind power plant,
and will in the future
seek involvement inenvironmentallyfriendly projects.

The installation of
emergency telephones
in a tunnel on Ken-o-do(Metropolitan Inter-city
Expressway)

12

Nippon COMSYS Corporation - Annual Report 2002

T

The Domestic Construction and Engineering
Sector handles all domestic telecommunications construction projects other than thosefor the NTT Group’s communications infrastructure construction, as well as ordinary
domestic construction projects. This includes
contracts with the public sector, with the “newcommon carriers,” and with firms in other industries. This sector is engaged in a broad
spectrum of activities, including the construction of telecommunications facilities andelectric utility facilities, structural construction, and the installation of “CC Box” (multi-use
underground cable conduits), cable TV equipment, and network solutions.
The sophistication and diversification ofdata communications networks is accelerating, and IT is permeating the corporate andgovernmental sectors at a rapid rate. The
Japanese government’s e-Japan Priority Policy
Program calls for changes in society throughIT, including “e-government” and other administrative digitalization, and the building of an
ITS infrastructure through public investment.
In addition, the plan calls for closing the digital divide by bringing IT to sparsely populatedareas and by updating school curricula. Longterm growth is forecast for the IT sector, andthese developments will have a favorable impact
on the operating environment surrounding theDomestic Construction and Engineering Sector.
The Domestic Construction and Engineering
Sector pursued the expansion of orders received
throughout the period of this report, continuing in its companywide strategy of pressing CC
Box and cable TV projects, but centering its
efforts on architecture projects. As a result, net
sales in this sector increased 5.5% to ¥73,025
million (US$548 million).

Noteworthy projects in the Domestic Construction and Engineering Sector this fiscal
year included the installation of emergency
telephones in a tunnel on Ken-o-do (Metropolitan
Inter-city Expressway) between the Hinode interchange and the Ome interchange. This
contract from the Public Roads Administration
required the laying of metal cable to link facilities throughout the entire area. We also
installed optical cable for observation equipment in this area under a contract from KDDI.
In projects involving the installation of communications equipment in new highway construction,
it is customary to delay the communications
project until the road construction itself is completed. This project, though, had an extremely
tight schedule for all phases, including road
construction. In addition, it was necessary totake the greatest care not to disturb a goshawk
nesting ground in the Tama Hills area near the
Hinode Interchange. COMSYS provided highquality services even under these constraints.
In the general construction field, the Company was lead contractor for the constructionof condominiums in the highly popular resident i a l a re a s o f Yo k o h a m a a n d F u j i s a w a i n
Kanagawa Prefecture. The units in Fujisawa areequipped with dual satellite broadcast andcommunications satellite antennas, are wired
for cable television, and are equipped with aresidential LAN that offers 24-hour Internet
access. COMSYS’s capabilities in multimedia
technology were valuable in the execution ofthis project, and the Company’s Customer Services Department was chosen to perform thedesign, installation, and maintenance of the
LAN equipment.
Guided by the COMSYS Group’s mediumand long-term operational strategy, the Domestic Construction and Engineering Sector willcontinue striving to broaden the scope of its
operations.
In the coming term, we will endeavor to increase
orders received in this Sector through strategic
sales programs based on market sector, by developing and retaining highly skilled personnel, andby strengthening our subcontracting system.

Civil engineering andarchitectural expertise
gained through cabletunnel construction isapplied to building andcondominium construction.

31%of Total Revenue

6
66.

2
69.

0
73.

Sales of
Domestic
Construction
and Engineering(¥ Billions)

4
52.
5
47.

98

99

00

01

02

Nippon COMSYS Corporation - Annual Report 2002

13

International Operations
Installing undergroundcables in Bangkok.

S

Right: An outside plant
project in Cebu, thePhilippines' second
most developed island
after Luzon.
Left: Installing aerial
optical fiber cables in
Bangkok.

1%of Total Revenue

5

10.

Sales of
Overseas
Construction(¥ Billions)

7.9

3.0

2.5
1.3

98

14

Nippon COMSYS Corporation - Annual Report 2002

99

00

01

02

Since the Company’s founding, it has contributed
to development in a number of countries in Asia,
Africa, the Middle East, South America, and otherareas working to develop needed telecom infrastructure. Over the course of these myriad projects,
and from its participation in the domestic telecommunications market and construction projects,
COMSYS has developed a wealth of experience andtechnological expertise. This, in turn, has facilitated
the Company’s access to these competitive overseas markets.
During this fiscal year, the Company won contracts for the installation of optical communications
equipment in the Philippines. As a result, net revenues in this sector almost doubled, rising to ¥2,499
million (US$19 million).
ISO certification is fast becoming a prerequisite
for bidding on construction projects internationally. The Overseas Construction Sector wascertified five years ago, and our overseas subsidiaries, COMSYS Philippines, Inc. (CPI) and COMSYS
Thailand Co., Ltd. (CTC) completed ISO 9001 certification a few years ago, so COMSYS is well prepared
to meet this requirement for international bids.
The Company was particularly active in Thailand this fiscal year, with several major projects
under way. These included the Optical Fiber Transmission Network Expansion Project and the 100,000
Telephone Line Expansion Project, which COMSYS
Thailand Co., Ltd. (CTC) is executing for TOT in
Thailand’s northeast, north, south and central regions.
CTC’s excellent performance and the high qualityof its work has made it one of the most respected
telecommunications network construction companies in Thailand.
In Samut Prakan Province, Thailand, we are
executing a wastewater management project, ourfirst contract outside the field of telecommunications network construction. The fact that we won
this contract clearly shows that our tunneling technology has won a worldwide reputation for
reliability. This market has considerable potential,
and we will continue our vigorous efforts to expand
orders, not only in the field of telecommunications
network construction, but also in the new fields ofwastewater management and sewer construction.
In the coming term, changes to telecommunications networks and continued privatization will
have a tendency to delay major telecommunications network construction projects. COMSYS,
therefore, will look overseas, primarily to Southeast Asia. Through the medium of local subsidiaries,
we will deepen and strengthen ties with the regionsin which we operate, thereby enhancing our costcompetitiveness. We will become more aggressivein our attempts to win contracts in the rapidly expanding fields of fiber-optic cable installation and mobile
communications, as well as in the construction ofsocial infrastructure.

Construction Revenues for Last Three Years

Over ¥5,000 million
Over ¥300 million
Over ¥200 million
Over ¥50 million
Less than ¥50 million

Major Overseas Projects Completed
Nigeria
Iraq
Egypt
ThailandTaiwanSri Lanka
Nepal
Thailand
KuwaitTanzania
ThailandPhilippines
Philippines
Philippines
ThailandPhilippines
Philippines

Ibadan new local line project
Installation of telephone lines for 17 local exchanges
Supply and installation of telecommunication cable network in Ismailia and Suez
Installation of digital exchange equipment
Installation of highway traffic control system
Installation of local telephone lines in the Badulla and Anuradhapura regions
Installation of microwave telecommunications system (inside and remote)
Fifth local cable network installation for TOT in Bangkok and provinces
Installation of digital loop coil system in Farwaniah Exchange
Rehabilitation of telecommunications network in Dar es Salaam
Seventh local cable network for TelecomAsia and TT&T
Supply and installation of local cable network for Major Telecom Inc. in Mindanao
Supply and installation of OSP equipment and optical fiber cable for ICC in Manila
Installation of trunk lines and local network for GLOBE Telecom PHASE-2 in Manila and the provinces
The telephone expansion project to overcome short-term line shortage / B.E.1996-1998 for TOT (800K)
Supply contract for OSP & optical fiber cable (BAYANTEL 40K)
Turnkey backhaul fiber optic network construction for DCI in Philippines

Overseas Projects in Progress (As of June 2002)
Philippines
ThailandThailand

Supply and installation of local cable and junction network for GLOBE Telecom PHASE-4 in Manila
and the provinces
Optic Fiber Transmission Network Expansion Project for TOT
100,000 Telephone Line Expansion Project in the North-East, North, South and Central Regions for TOT

Nippon COMSYS Corporation - Annual Report 2002

15

Information Systems
COMSYS personnel
preview a satellitebroadcast programwith the clients whoordered it.

COMSYS has developed many custom
software packages for
its clients.

Our BtoE System
automatic wage-debit
software allows acompany to set up
intranet shopping for
its employees, then to
automatically deduct
the amount of each
employee’s purchasesfrom his salary.
Comsys is directing
much of its energy
toward making a place
for itself in the field of
e-commerce.

16

Nippon COMSYS Corporation - Annual Report 2002

T

The operational environment faced by theCompany’s Information Systems Sector wascharacterized by the rapid progress of the IT
revolution and by intensifying competition. In
response, COMSYS has turned to “total business solutions,” by which we mean that we
proactively create total business proposals for
specific clients, develop all needed plans, andmaintain systems and equipment installed.
The computer market is expected to show
steady growth during the 21st century, during which e-commerce will become firmly
established. Various companies in the information systems field are developing customer
relationship management (CRM) systems,
which provide an easy means to strengthenties with their clients. This presents COMSYS
with an opportunity to supply them with CRM
software and systems. In addition, the application ser vice provider (ASP) market is
expected to show pronounced growth, and thesoftware market is forecast to expand steadily.
Participation in Internet-related businesses
and CRM operations is increasing. In response,the Information Systems Sector has embarked
on a broad spectrum of business activities,
which include the presentation of total solutions packages to its clients. As a result, net
revenues in this sector jumped 18.9% to¥19,861million (US$149 million).
On December 1, 2000, Japan inaugurated
digital satellite broadcast television, andCOMSYS is producing data-broadcast programcontents. All broadcasts are scheduled to bedigital by the year 2010. Japan’s three largest
metropolitan areas (the Kanto, Kinki, and Tokai
regions) will begin ground-based digital broadcasts in 2003. Because satellite broadcasts andground-based broadcasts alike must be digitized, it is expected that a large demand forprogramming will be required. At present, thereare few companies other than COMSYS thathave digital-broadcast technicians and that can
prepare digital broadcast programming. Therefore, COMSYS is meeting the needs of themarket with comprehensive program production, from planning through writing and design.
We intend to pursue this business opportunityand expand sales in this field.
Another new business is the “LAN Convenience
Store” service, inaugurated in June 2001, whichis engaged in assisting small and medium-sizedusers such as small office and home office businesses(SOHO) and Internet service providers to build
LANs and WANs. The LAN Convenience Storesystem handles initial contacts, requests forservice, subcontracting, scheduling, invoiceadministration, and maintenance completely
through the Internet, so customers can builda network as easily as going shopping. Further,costs are lower because service is provided
as a package.
Beginning in the middle of this fiscal year,
the Company developed and commenced salesof a revolutionary automated key control system that uses a personal computer. The caseis locked and unlocked using a non-contact IC
card to read the user’s ID card, and the system
controls keys individually, keeping track of who
has removed which key and who returned it,
and storing all data automatically in the computer. This eliminates the need for a key
custodian, is much more accurate and reliable
than a ledger system, and data can be read via
the Internet from distant locations. We aremarketing this system to such potential users
as office buildings that are open 24 hours a day
and hospitals.
In the year to come, this sector will carryout strong marketing programs based on our
anticipation of market needs, in search of further expansion of orders received.

A screen shot from oneof the Company's
digital satellite broadcast programs.

9%of Total Revenue

9

19.
9
17.
1

6
16.

98

99

16.

7

16.

00

01

Sales of
Information
Systems(¥ Billions)02

Nippon COMSYS Corporation - Annual Report 2002

17

Management
As of June 27, 2002

BOARD OFDIRECTORS

President and Representative Director
Hironobu Takeuchi

Senior Managing Director
Kiyoto Kuwabara

Managing Director
Masahide Kajiyama

Managing Director
Takuo SueManaging Director
Takaaki Okayama

Managing Director
Yoichi Chiba

Managing Director
Kaoru Noda

CORPORATE AUDITORSCORPORATE EXECUTIVE OFFICERS

Standing Auditors
Teruji Mukai
Masaharu Ogawa

Senior Vice Presidents
Masayuki Nose
Kyoichi Suzuki
Syotaro Chikamoto
Kenji Kondo
Toyohiro Goto
Yoshihiro Yoshioka

Auditors
Takashi Kakimi
Tadashi Kumakura

18

Senior Executive Vice President and Director
Hirofumi Shimada

Nippon COMSYS Corporation - Annual Report 2002

Executive Officers
Yoshinobu Tanaka
Yasuhiko Kubota
Etsuo Shibata
Yukuo Asakura
Akira Takasaki
Katsuo Takeda
Masanori Fukuda
Kazuo Takiguchi
Toshimasa Hattori

Takero Mizoguchi
Minoru Sobami
Takashi Furusho
Hideki Ishikawa
Seiichiro Nakatani
Akiyoshi Sekiguchi
Shuichi Tominaga
Akinori Ishigaki

Financial Section

Financial Review

20

Selected Financial and Operating Data

23

Consolidated Balance Sheets

24

Consolidated Statements of Income and Retained Earnings 26
Consolidated Statements of Cash Flows

27

Notes to the Consolidated Financial Statements

28

Report of Independent Certified Public Accountants

33

Supplemental Non-Consolidated Financial Information

34

Nippon COMSYS Corporation - Annual Report 2002

19

Financial Review
Sales by Business Category
Nippon COMSYS Corporation and Consolidated Subsidiaries
Years ended 31st March, 1998, 1999, 2000, 2001 and 2002
Thousands of
U.S. dollars

Millions of yen
1998

Construction Business
NTT Construction¥151,207
Domestic Construction and Engineering 47,476
Overseas Construction
10,545
Other BusinessInformation Systems
16,085
Total¥225,313

1999

2000

2001

2002

2002

¥143,705
52,412
7,850¥144,296
66,567
3,007¥134,981
69,2191,315¥135,964
73,0252,500$1,020,368
548,030
18,762

16,555

17,88016,705

19,862

149,058¥220,522¥231,750¥222,220¥231,351$1,736,218

Note: For convenience only, the accompanying Japanese yen figures for 2002 have been translated into U.S. dollars at the rate of¥133.25 to $1, the rate prevailing on 29th March, 2002.

Share of Sales by Business Category
Year ended 31st March, 2002
Information Systems 9%
Overseas Construction 1%

Domestic Construction
and Engineering 31%

NTT Construction 59%“Outside” Projects 21%“Inside” Projects 38%

Proportion of
Revenues fromNTT Market(¥ Billions, %)

.3

225

.5

220

.8

231

.2

222

.4

231

100

50
Net Sales
Percentage Generarted
by NTT Construction Projects

0

98

20

Nippon COMSYS Corporation - Annual Report 2002

99

00

01

02

REVENUES
Severe unemployment and a declining stock market
precluded a recovery in consumer spending during
the fiscal year ended March 31, 2002. Competitionin the broadband market intensified further, andmany telecommunications firms experienced financial difficulties. COMSYS embarked on a sweeping
structural reorganization in May 2001. Because theCompany added two new consolidated subsidiaries
during the period of this report and projects completed for NTT DoCoMo increased, net sales grew
4.1% to ¥231,351 million (US$1,736 million).
Net revenues in the NTT Construction Sector
edged up 0.7% to ¥135,964 million (US$1,020 million). “Outside” projects accounted for ¥48,287
million (US$362 million) of the sector’s total, while“inside” projects accounted for the remaining¥87,677 million (US$658 million). The Domestic
Construction and Engineering Sector extended its
unbroken run of growth to seven years, this termincreasing 5.5% to ¥73,025 million (US$548 million).
Despite instability in economies around the world,
the Overseas Construction Sector achieved the
beginnings of a recovery in this term. Net revenues
soared 90.1% to ¥2,500 million (US$19 million), gaining back well over half the decline suffered in the
March 31, 2001 fiscal year. With the Japanese
government’s e-Japan Strategy and the private-sector
IT upgrade boom, revenues in the Information Systems Sector advanced 18.9% to ¥19,862 million(US$149 million).
RESULTS OF OPERATIONS
Cost of sales for the fiscal year ended March 31,
2002 increased by ¥9,557 million, or 4.9%, to ¥204,089
million (US$1,532 million), and increased as a percentage of sales from 87.5% last term to 88.2% thisterm. The increase in cost of sales was primarily
due to growth in construction project-related

expenses such as raw materials and other expenses.
The increase in cost of sales, together with a decline in the value of contracts brought byintensifying competition, caused gross profit to slip
1.5% to ¥27,262 million (US$205 million) despite thegrowth in net sales. Selling, general, and administrative expenses increased by 4.4% to ¥16,762
million (US$126 million), and as a percentage ofgross profit grew from 58.0 percent last term to 61.5
percent. However, the ratio of selling, general, andadministrative expenses to sales was virtuallyunchanged from the previous year at 7.2%. These
factors drove operating income down by 9.7%, to¥10,500 million (US$79 million). The operating margin
also decreased from 5.2% to 4.5%. Interest and dividend income fell 64.7% to ¥289 million (US$2 million).
Interest expenses rose, but other expenses fell
44.7% to ¥1,822 million (US$14 million). The difference arising from the change in the accounting
standard for accrued severance indemnities werecompletely amortized last term, and so did not
impact other expenses this term, but an allowance
for losses arising from guarantees of the loans of anon-consolidated subsidiary in the amount of¥1,680 million (US$13 million) was posted. The contraction of income before income taxes and otheradjustments to net income was therefore limited
to 2.2%, and this figure declined to ¥8,913 million(US$67 million).
Income taxes for the fiscal year ended March
31, 2002 decreased by ¥80 million, or 1.9%, to ¥4,228
million (US$32 million), and the ratio of income
taxes to income before income taxes (the effective
tax ratio) increased from 47.2% to 47.4%. Minority
interests jumped 85.9% to ¥578 million (US$4 million). Net income, as a result of the foregoing,
decreased 8.7% to ¥4,107 million (US$31 million).
The ratio of net income to net sales declined from
2.0% a year earlier to 1.8%, and return on equity
slid to 3.6%. Basic net income per share decreased
8.2% to ¥30.39 (US$0.23), and diluted net income
per share decreased 8.2% to ¥29.10 (US$0.22). Dividends of ¥10.00 (US$0.08) were declared.
FINANCIAL POSITION
Cash and cash equivalents were increased 9.0% to¥43,036 million (US$323 million), while short-term
investments were reduced 3.2% to ¥1,132 million(US$8 million). Notes and accounts receivablegrew 5.0% to ¥64,888 million (US$487 million).
The accumulated cost of construction inprogress dropped 22.8% to ¥16,328 million(US$123 million). Deferred income taxes wereincreased from ¥908 million in the previous fiscal
year to ¥1,542 (US$12 million). Other current
assets rose 6.8% to ¥2,948 million (US$22 million).
Thus, total current assets edged up 1.7% to¥130,358 million (US$978 million).
Turning to liabilities, short-term bank loans
more than doubled, rising 227.1% to ¥3,457 million(US$26 million). A figure of ¥9,312 million (US$70
million) was posted under the current portion of
convertible bonds. Trade payables edged up 3.6%
to ¥36,607 million (US$275 million), but advances

10.0

Operating Income
and Net Income
as Percent of
Revenues (%)

8.0

6.0

4.0

2.0

Operating Income
Net Income

0

98

99

00

01

02

Net Income
per Share (¥)

55

66.

73

97

42.

46.

11

33.

98

99

01

02

.6

189

.0

188

.3

190

00

01

02

7
71.

1
66.

1

98

99

1

00

39

30.

Total Assets(¥ Billions)

Nippon COMSYS Corporation - Annual Report 2002

21

Shareholders’Equity andReturn on Equity(¥ Billions, %)

7
94.

.7
101

.8
115

.1
118

20

.9
111

16

12

8

4
Shareholders’ Equity
ROE

0

98

Dividends
per Share (¥)

14.

99

00

01

25

12.
00

10.

99

00

10.

98

22

Nippon COMSYS Corporation - Annual Report 2002

02

00

00

10.

01

00

02

received on construction in progress fell 39.0% to¥4,327 million (US$32 million), and other current
liabilities declined 4.4% to ¥5,230 million (US$39
million). Current liabilities therefore climbed 25.5%
to ¥62,471 million (US$469 million), for a current
ratio of 2.0.
Investments and other assets slipped 2.2% to¥21,040 million (US$158 million), primarily as a result of reductions in investment securities. Total
property and equipment increased 1.5% to ¥39,178
million (US$294 million) after depreciation. As aresult of the above, total assets edged up 1.2% to¥190,576 million (US$1,430 million). To strengthen
the Company’s financial structure and to increase
the transparency of its operations, a revaluation ofland for business was conducted during this fiscal
year. As a result, an unrealized loss on land revaluation in the amount of ¥8,633 million (US$65 million)
was posted under shareholders’ equity. This caused
shareholders’ equity to contract by 5.2% to ¥111,919
million (US$840 million).
The capital ratio decreased from 62.7% in theprevious term to 58.7%. Based on the number ofshares outstanding at March 31, 2002, shareholders’ equity per share decreased to ¥835.04 (US$6.27)
from the ¥869.84 recorded at the end of the previous fiscal year.
CASH FLOWSNet cash provided by operating activities more thandoubled, jumping 240.9% to ¥11,582 million (US$87
million). Although income before income taxes andother adjustments to net income slipped 2.2% to¥8,913 million (US$67 million), depreciation and amortization soared 92.6% to ¥3,363 million (US$25
million), an increase in the allowance for losses arising from guarantees of loans of ¥1,680 million (US$13
million) was posted, and the decrease in inventories
soared 172.7% to ¥5,628 million (US$42 million). In addition, cash and cash equivalents paid for income
taxes fell 56.4% to ¥2,762 million (US$21 million).
Net cash used in investing activities rose to ¥5,900
million (US$44 million). COMSYS posted an increasein short-term investments of ¥999 million (US$7 million), while acquisitions of property and equipment
soared 324.5% to ¥5,884 million (US$44 million). Collection of long-term loans dropped 23.4% to ¥464
million (US$3 million), and cash used in other investing activities fell from ¥1,368 million to ¥88 million(US$0.7 million).
Net cash used in financing activities was ¥2,766
million (US$21 million), primarily used for acquisitions of treasury stock in the amount of ¥1,884
million (US$14 million), and cash dividends of¥1,638 million (US$12 million). In addition, repayment of long-term debt of ¥184 million (US$1
million) was posted.
The above resulted in a net increase in cash andcash equivalents of ¥2,916 million (US$22 million).
Cash and cash equivalents at the beginning of theyear were ¥39,473 million (US$296 million). After¥647 million (US$5 million) in adjustments for newly
consolidated subsidiaries, cash and cash equivalents at the end of the year were ¥43,036 million(US$323 million).

Selected Financial and Operating Data
Nippon COMSYS Corporation and Consolidated Subsidiaries
Years ended 31st March, 1998, 1999, 2000, 2001 and 2002

Thousands of
U.S. dollars

Millions of yen
1998

1999

2000

¥225,313
14,348¥220,522
14,261¥231,750
15,55914,333
8,309

13,522
5,625

13,054
6,315¥166,067
27,334
16,791
94,654¥171,669
30,976
9,409
101,721

Per Share of Common Stock (in yen and U.S. dollars):
Net income— Basic¥ 66.55— Diluted
62.59
Cash dividends
14.25
Shareholders’ equity
725.59¥ 42.9740.87
10.00
765.74

Results of Operations:
Net sales
Operating income
Income before income taxes andother adjustments to net income
Net income
Financial Position:
Total assets
Property and equipment
Long-term debt
Shareholders’ equity

Financial Ratios:
Operating income to net sales
Net income to net sales
Capital ratio
Return on equity
Other Statistics:
New orders received during the year
Contract backlog at end of the year
Common stock price range (in yen):
High
Low

6.37%
3.69
57.0
10.2

6.47%
2.55
59.3
5.7

2001

2002

2002

¥222,220 ¥231,351
11,62810,500$1,736,218
78,799

8,913
4,107

66,88930,822¥188,961
38,626
9,312
115,834¥188,250 ¥190,576
38,606
39,1789,312—
118,055 111,919$1,430,214
294,019—
839,917¥ 46.7344.67
10.00
851.01¥ 33.11 ¥ 30.39
31.70
29.10
12.00
10.00
869.84835.04

$

9,117
4,498

6.71%
2.72
61.3
5.8

5.23%
2.02
62.7
3.8

0.23
0.22
0.08
6.27

4.54%
1.78
58.7
3.6

¥235,923
68,995¥229,875
78,348¥228,518
76,781¥229,211 ¥213,986
80,46164,288¥ 2,0201,240¥ 1,7101,280¥ 2,700
1,420¥ 2,370 ¥
1,636$1,605,899
482,4622,095
580

Note: For convenience only, the accompanying Japanese yen figures for 2002 have been translated into U.S. dollars at the rate of ¥133.25 to $1, the rate
prevailing on 29th March, 2002.

Nippon COMSYS Corporation - Annual Report 2002

23

Consolidated Balance Sheets
Nippon COMSYS Corporation and Consolidated Subsidiaries
As of 31st March, 2001 and 2002

Millions of yen
ASSETS

Current Assets:
Cash and cash equivalents
Short-term investments (Note 3)
Notes and accounts receivable—trade
Inventories:
Accumulated cost of construction in progress
Other
Deferred income taxes (Note 7)
Other current assets
Less: Allowance for doubtful receivables
Total current assets

Investments and Other Assets:
Investment securities:
Unconsolidated subsidiaries and affiliates
Other (Note 3)Long-term loans receivable
Deferred income taxes (Note 7)
Other assets
Less: Allowance for doubtful receivables
Total investments and other assets

Property and Equipment:
Land (Note 4)
Buildings and structures (Note 4)
Machinery and equipment
Construction in progress
Less: Accumulated depreciation
Total property and equipment

See Notes to the Consolidated Financial Statements.

24

Nippon COMSYS Corporation - Annual Report 2002

Thousands of
U.S. dollars (Note 1)

2001

2002

2002

¥ 39,473
1,170
61,825¥ 43,036
1,132
64,888$ 322,972
8,495
486,964

21,138
991
908
2,760
(129)

16,328
611
1,542
2,948
(127)

122,537
4,585
11,572
22,124(953)

128,136

130,358

978,296

864
5,694
4,179
3,669
8,280
(1,178)

630
4,806
3,716
4,636
8,599
(1,347)

4,728
36,06827,887
34,79264,533(10,109)21,50821,040157,899

23,58817,361
7,509
2,649(12,501)

18,62923,713
14,8670(18,031)

139,805
177,959
111,5720(135,317)

38,606

39,178294,019¥188,250¥190,576$1,430,214

Millions of yen
LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent Liabilities:
Short-term bank loans (Note 4)
Current portion of convertible bonds (Note 4)
Accounts payable—trade
Advances received on construction in progress
Income taxes payable
Other current liabilities
Total current liabilities
Long-Term Liabilities:
Convertibles bonds (Note 4)
Accrued severance indemnities (Note 5)
Allowance for losses arising from guarantees of loans
Deferred tax liabilities for unrealized gains on land revaluation (Note 11)
Other long-term liabilities
Total long-term liabilities
Minority Interests

Thousands of
U.S. dollars (Note 1)

2002

2001

¥

¥ 1,057—
35,352
7,094
788
5,469

3,457
9,312
36,607
4,327
3,538
5,230

2002

$

25,94469,884
274,724
32,47326,552
39,24949,76062,471

468,826

9,312
3,769
—
—
16

—
3,640
1,680
2,484
888

—
27,317
12,60818,642
6,664

13,097

8,692

65,231

7,338

7,494

56,24031,140—30,73657,828—29—
31,14030,73660,725(8,633)(172)—
233,696
230,664455,722(64,788)(1,291)

119,733(1,678)

113,796(1,877)854,003(14,086)

118,055

111,919

839,917¥188,250¥190,576$1,430,214

Contingent Liabilities (Note 6)
Shareholders’ Equity (Note 10):
Common stock, par value ¥50 per share:
Authorized— 249,341 thousand shares (31st March, 2001)— 247,763 thousand shares (31st March, 2002)
Issued— 136,842 thousand shares (31st March, 2001)— 135,264 thousand shares (31st March, 2002)
Additional paid-in capital
Retained earnings
Unrealized loss on land revaluation (Note 11)
Unrealized gain (loss) on securities
Treasury stock, at cost
Total shareholders’ equity

Nippon COMSYS Corporation - Annual Report 2002

25

Consolidated Statements of Income andRetained Earnings
Nippon COMSYS Corporation and Consolidated Subsidiaries
Years ended 31st March, 2001 and 2002

Millions of yen

Net Sales:
Construction contracts
Other
Cost of Sales:
Construction contracts
Other
Gross profits
Selling, General and Administrative Expenses

Thousands of
U.S. dollars (Note 1)

2001

2002

2002

¥205,515
16,705¥211,489
19,862$1,587,160
149,058

222,220

231,351

1,736,218

179,452
15,080185,735
18,354

1,393,884
137,741

194,532

204,089

1,531,625

27,68827,262

204,593

16,06016,762

125,794

Operating income

11,62810,50078,799Other Income (Expenses):
Interest and dividend income
Interest expenses
Other, net (Note 12)

819
(35)
(3,295)289(54)(1,822)

2,169
(405)
(13,674)(2,511)(1,587)(11,910)

9,117

8,913

66,889

Income Taxes (Note 8):
Current
Deferred

4,082
226

5,521
(1,293)41,433(9,703)

Minority Interests

4,308
311

4,228
578

31,730
4,337

4,498

4,107

30,82255,477
4

57,8282,205

433,981
16,548

1,366
102
683

1,624
107
1,684

12,188803
12,638

2,151

3,415

25,629¥ 57,828¥ 60,725$ 455,722

Income before income taxes and other adjustments to net income

Net Income
Retained Earnings:
Balance at beginning
Increases arising from newly consolidated subsidiaries, net
Appropriations:
Cash dividends
Bonuses to directors
Retirement of treasury stocks
Balance at end

Yen

Per Share:
Net income— Basic— Diluted
Cash dividends
Weighted average number of shares (in thousands)
See Notes to the Consolidated Financial Statements.

26

Nippon COMSYS Corporation - Annual Report 2002

¥ 33.1131.70
12.00
135,858

U.S. dollars (Note 1)

¥

30.39
29.10
10.00
135,139

$

0.23
0.22
0.08

Consolidated Statements of Cash Flows
Nippon COMSYS Corporation and Consolidated Subsidiaries
Years ended 31st March, 2001 and 2002

Millions of yen

Cash Flows from Operating Activities:
Income before income taxes and other adjustments to net income
Depreciation and amortization
Write-down of investments and other assets
Increase in allowance for doubtful receivables(Decrease) increase in accrued severance indemnities
Increase in allowance for losses arising from guarantees of loans
Interest and dividends received
Interest expenses
Loss on disposal of property and equipment
Gain on securities contributed to employee retirement benefit trust
Amortization of the difference arising from changeof the accounting standard on accrued severance indemnities
Increase in receivables—trade
Decrease in inventories
Increase in payables—trade
Decrease in other assets
Decrease in other liabilities
Directors’ bonuses paid
Other
Cash and cash equivalents received on interest and dividends income
Cash and cash equivalents paid for interest expenses
Cash and cash equivalents paid for income taxes
Net cash provided by operating activities
Cash Flows from Investing Activities:(Increase) decrease in short-term investments, net
Increase in investment securities, net
Acquisitions of property and equipment
Acquisitions of other assets
Proceeds from sale of property
Increase in long-term loans
Collection of long-term loans
Other
Net cash used in investing activities
Cash Flows from Financing Activities:
Increase in short-term borrowings, net
Repayment of long-term debt
Proceeds from long-term debt
Acquisitions of treasury stock
Cash dividends paid
Net cash used in financing activities
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at Beginning of Year Adjusted for
Newly Consolidated Subsidiaries
Cash and Cash Equivalents at End of Year

Thousands of
U.S. dollars (Note 1)

2001

2002

2002

¥ 9,117
1,746
536
170
2,019
—
(819)
35
47
(5,810)¥ 8,913
3,363
142
113
(267)
1,680
(289)
54
84
—

$ 66,889
25,2381,066
848(2,004)
12,608(2,169)
405
630
—

8,756
(4,482)
2,064
801
(865)
(3,960)
(133)
(205)
9,017
751
(35)
(6,336)
3,397—(1,583)
5,628
173
(235)
(3,416)(137)(113)
14,110288(54)(2,762)
11,582—(11,880)
42,237
1,298(1,763)(25,636)(1,028)(848)
105,891
2,161(405)(20,728)
86,919(1)(1,000)(1,386)
(490)
64
(627)
606
(1,368)(4,202)

999(678)(5,884)
(485)
125
(353)
464
(88)
(5,900)7,497(5,088)(44,158)(3,640)938(2,649)3,482(660)(44,278)

308
(16)
—
(841)
(1,376)(1,925)(2,730)41,892

183
(184)
757
(1,884)(1,638)(2,766)2,916
39,473

1,373(1,381)
5,681(14,139)(12,292)(20,758)
21,883296,233311¥39,473647¥43,0364,856$322,972

See Notes to the Consolidated Financial Statements.

Nippon COMSYS Corporation - Annual Report 2002

27

Notes to the Consolidated Financial Statements
Nippon COMSYS Corporation and Consolidated Subsidiaries

1. Basis of Presenting Consolidated Financial
Statements
The accompanying consolidated financial statements have been preparedfrom accounts and records maintained in Japanese yen by Nippon COMSYS
Corporation (the “Company”) and its subsidiaries (together, hereinafterreferred to as the “Companies”) in conformity with accounting principles
and practices generally accepted in Japan (hereinafter referred to as the“GAAP of Japan”), which are different in certain respects as to applicationand disclosure requirements from International Accounting Standards.
Also, the accompanying consolidated financial statements have been prepared from the consolidated financial statements filed with the Ministryof Finance of Japan as required by the Securities and Exchange Laws ofJapan. Certain reclassifications of account balances have been made so
as to present the financial statements in a form that is more familiar toreaders outside Japan.
The accounts and records of the Companies are maintained in Japanese yen. The accompanying consolidated financial statements have beenpresented in Japanese yen and have also been presented in U.S. dollars bytranslating all Japanese yen amounts using the rate of ¥133.25 to US$1.The
presentation of such dollar amounts is solely for the convenience of thereader and is not intended to imply that yen amounts have been or could
be converted, realized or settled in dollars at that or at any other rate.

2. Summary of Significant Accounting Policies(a) Principle of consolidation
The consolidated financial statements as at, and for the years ended, 31st
March, 2001 and 2002, include the accounts of the Company and 12 subsidiaries and affiliates (see “Corporate Directory”at the last page of thisannual report).
Effective from the year ended 31st March 2002, COMSYS Tusan Co., Ltd.
and COMSYS Business Service Co., Ltd. have been consolidated, since theiraggregate sales, total assets, net income and retained earnings have become material.
For the purposes of preparing the consolidated financial statements, allsignificant inter-company transactions, account balances and unrealized
profits among the Companies have been eliminated.
The accounts of other subsidiaries were not consolidated, since theiraggregate sales, total assets, net income and retained earnings have little
affect upon the total consolidated results of operations and assets. Investments in unconsolidated subsidiaries and affiliates are carried at cost due
to their immateriality.
(b) Point of sales— construction contracts
Construction contracts of the Companies are accounted for by the completed-contract method. The accumulated cost of uncompleted construction is shown as “Accumulated cost of construction in progress” and therelated billings (advances received) on uncompleted construction contracts are shown as “Advances received on construction in progress” in theaccompanying balance sheets.
(c) Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments, generallywith original maturities of three months or less, that are readily convertible to known amounts of cash and are so near maturity that they present
insignificant risk of changes in value because of changes in interest rates.
(d) Short-term investments and investment securities
The GAAP of Japan requires the classification of short-term investments
and investment securities (except for “unconsolidated subsidiaries andaffiliates”) of the Companies into three categories as follows:i) Debt securities that are expected to be held-to-maturity: carried ataccumulated cost using straight-line method.

28

Nippon COMSYS Corporation - Annual Report 2002ii) Other securities whose fair values are readily determinable: carried atfair value with unrealized gains or losses included in Stockholders’Equity as “Unrealized gain (loss) on securities,” net of applicable income taxes.
iii) Other securities whose fair values are not readily determinable: carried at cost using moving-average method.
With respect to investments in unconsolidated subsidiaries and affiliates, the Companies are carrying their amounts at cost, determined by themoving average cost.
(e) Accumulated cost of construction in progress
In connection with (b) above, “Accumulated cost of construction inprogress” is stated at cost based on an individual project basis.
(f) Property and equipment
Property and equipment are stated at cost. Depreciation is computed primarily by the declining-balance method, while the straight-line method isapplied to building acquired after 1st April, 1998, both using estimated useful
lives of assets principally as follows:
Buildings and structures
7 to 50 years
Machinery and equipment
2 to 45 years(g) Intangible assets and deferred charges
Intangible assets including software are amortized by the straight-line
method over the estimated useful lives of assets. Research and development costs are charged to income as incurred.
(h) Leases
Financial leases that do not transfer ownership of the property to lessee
are accounted for as transactions of rent. Under the GAAP of Japan, financial leases in which ownership of the property is deemed to be transferredto the lessee are treated as capital leases, while it is permitted to treat others as operating leases if certain “as if capitalized” information is disclosed
in the notes to the lessee’s financial statements.
(i) Income taxes
Deferred tax assets and liabilities arising from temporary differences between financial and tax reporting are measured using the enacted tax rates
and laws which will be in effect when the differences are expected toreverse. For the purpose of preparing consolidated financial statements,
deferred tax assets and liabilities also arose from the elimination of unrealized profits among the Companies and the adjustment of allowance for
doubtful receivables caused by the offsetting of inter-company receivables
and payables.
(j) Appropriations of retained earnings
Appropriations of retained earnings of the Company at each year-end arereflected in the consolidated financial statements for the following year
upon shareholders’ approval (See Note 13).
(k) Net income and cash dividends per share
The computations of basic net income per share are based on the weighted
average number of shares outstanding during each year. Diluted net income per share assumes the dilution that could occur if convertible bonds
were converted into common stock. Cash dividends per share are basedon the cash dividends applicable to the respective years, including dividends to be paid after the end of the year.

3. Short-term Investments and Investment
Securities-other
Information that is required to be disclosed in the Notes of the consolidated financial statements by the regulations and rules on disclosures under the Securities and Exchange Laws of Japan, as amended to conformwith the certain reclassification of account balances made to present theconsolidated financial statements, consists of the following:Book value
Millions of yen(a) Debt securities that are expected to be held-to-maturity whose fair value
was readily determinable as at 31st March, 2001 and 2002, were as follows:
Thousands of
U.S. dollars

Millions of yen
31st March,
2001

31st March,
2002

31st March,
2002

Book
value

Book
value

Book
value

Fair
value

Japanese government bonds ¥1,077 ¥1,100 ¥99

Fair
value

Fair
value

¥100 $743 $750(b) Other securities whose fair value was readily determinable as at 31st
March, 2001 and 2002, were as follows:
Millions of yen

Classification

31st March, 2001

31st March, 2002

Gross
Gross
Unrealized Unrealized Fair
Cost
Gains
Losses Value

Gross
Gross
Unrealized Unrealized Fair
Cost
Gains
Losses Value

Stocks¥1,144
Bonds anddebentures 1,133
Others
1,606
Total¥3,883¥403¥ 83¥1,464¥1,128

¥219

37
2

53
207

1,117
1,401

1,010
1,491

20
1

¥442

¥343

¥3,982¥3,629¥240¥278 ¥1,069
8
180

1,022
1,312

¥466 ¥3,403

Thousands of U.S. dollars
31st March, 2002

Classification

Cost

Gross
Gross
Unrealized Unrealized
Gains
LossesFair
Value$ 8,465 $1,643 $2,086 $ 8,022
7,580
150
60 7,670
11,189
8 1,351 9,846

StocksBonds and debentures
Others$27,234 $1,801 $3,497 $25,538

Total(c) Proceeds from sales of other securities and realized gains/losses onsales of them, cost of the sales being determined by moving averagemethod, for the year ended 31st March, 2001 and 2002, were as follows:

Proceeds from sales
Realized gains
Realized Losses

Millions of yen

Thousands of U.S. dollars

For the year ended
31st March

For the year ended
31st March

2001

2002

2002

¥128
4
0

¥324
9
38

$2,43268285(d) Other securities whose fair value was not readily determinable as at
31st March 2001 and 2002 mainly consisted of unlisted stocks
amounted to ¥1,395 million and ¥2,029 million (US$15,227 thousand),
respectively.
(e) Debt securities that are expected to be held-to-maturity and othersecurities with maturity date as at 31st March, 2001 and 2002 consistedof the following:Book value
Millions of yen
31st March, 2001

Due: Within 1 yr.

Bonds and debentures:Japanese government bonds
Corporate bonds
OthersOthersInvestment trust
Total

¥ 978
—
47

Within 5 yr.

¥ 99
1,093
150

Within 10 yr. After 10 yr.

¥—
7
—

¥—
17
—

—

148

—

—

¥1,025¥1,490¥7¥ 17

31st March, 2002

Due: Within 1 yr.

Bonds and debentures:Japanese government bonds
Corporate bonds
Others
Total

Within 5 yr.

Within 10 yr. After 10 yr.

¥ —
500
267

¥100
280
—

¥—
10
—

¥—
—
—

¥767

¥380

¥10

¥—

Book value
Thousands of U.S. dollars
31st March, 2002

Due: Within 1 yr.

Within 5 yr.

Bonds and debentures:Japanese government bonds $ —Corporate bonds
3,752
Others
2,004

$ 751
2,101
—

$—
75
—

$—
—
—

$5,756$2,852

$75

$—

Total

Within 10 yr. After 10 yr.

In July 2000, the Company contributed certain marketable equity securities to an employee retirement benefit trust, with no cash proceeds thereon.
The fair value of these securities at the time of contribution was ¥8,648
million (US$69,798 thousand). Upon the contribution of these securities,
the net unrealized gain was realized and included in “Other, net” of “Other
Income (Expenses)” in the consolidated statements of income and retained
earnings (see Note 12).
For the year ended 31st March, 2002, the Companies made write-downof investment securities, whose fair value was readily determinable,amounted to ¥15 million (US$ 113 thousand), following an accounting
policy of the Companies which requires a write-down of investment securities whose fair value at the fiscal year’s end declined to the amount not
more than 50% of the book value.

4. Short-Term Bank Loans and Long-Term Debt
The weighted average interest rates of short-term bank loans as at the year
ended 31st March, 2002, was approximately 0.9 per cent.
At 31st March, 2002, short-term bank loans of consolidated two subsidiaries and one affiliate amounting to ¥1,133 million (US$8,503) in the aggregate were secured. A summary of assets pledged as collateral consistedof the following:
Millions of yen

Thousands of
U.S. dollars

¥363
34

$2,724255¥397$2,979Buildings and structures,
net of accumulated depreciationLand

At 31st March, 2001 and 2002, long-term debt consisted of the following:
Millions of yen

Thousands of
U.S. dollars

31st March

2001

2002

2002

0.3 per cent yen unsecured convertible
bonds due 2003
Less: Current portion¥9,312—¥9,312
9,312$69,884
69,884¥9,312

¥

$

Total

—

Nippon COMSYS Corporation - Annual Report 2002—

29

Convertible bonds
At 31st March, 2002, unsecured convertible bonds consisted of the following:
The original amount issued at 24th June, 1996 ¥10,000 million
Balance as at 31st March, 2002
¥9,312 million
Interest rate
0.3%
Maturity date
31st March, 2003
Conversion period:
On and after
1st August, 1996
Up to and including
28th March, 2003
Conversion price:
At 31st March, 2002
¥1,435(US$10.77)
The number of shares of common stock required for conversion of theabove unsecured convertible bonds outstanding at 31st March, 2002, atthe current conversion price would have been approximately 6,489 thousand. The conversion price is subject to adjustment under certain circumstances, including stock splits pursuant to the relevant agreement.

5. Accrued Severance Indemnities
Employees of the Companies are usually entitled to lump-sum severance
indemnities determined by reference to their current basic rate of pay,
length of service and conditions under which the termination occurs.With
respect to directors and corporate auditors of the Companies, lump-sum
severance indemnities are calculated using a similar formula and are normally paid subject to the approval at the shareholders’ meeting of each of
the Companies.
The Company has a contributory and funded defined benefit pension
plan, which are pursuant to the Welfare Pension Insurance Law of Japan.
The contributory pension plan covers a portion of the governmental welfare pension program, under which the Company and its employees makethe contributions. As mentioned in Note 3 above, in July 2000, the Company contributed certain marketable equity securities to an employee retirement benefit trust. The securities held in this trust are qualified as plan
assets under the GAAP of Japan.
Consolidated subsidiaries provide for severance indemnities based on
the liability if all eligible employees were to voluntarily terminate employment on the balance sheet date. In addition, several subsidiaries have funds
for tax qualified defined benefit pension plans and a few subsidiaries havenon-contributory and funded defined benefit pension plans.
“Accrued severance indemnities” recognized in the consolidated balance sheet as at 31st March, 2001 and 2002 were as follows:
Millions of yen
2001

2002

2002

¥(47,763) ¥(47,594) $(357,178)
36,57935,813
268,765

Unfunded benefit obligation
Unrecognized actuarial difference(11,184)
7,831

Net amount recognized¥ (3,353) ¥ (3,252) $ (24,405)(88,413)64,008“Accrued severance indemnities” in the consolidated balance sheet as at
31st March 2001 and 2002 also includes the provision for accrued severance indemnities for directors and corporate auditors of the Companies
amounted to ¥416 million and ¥388 million (US$2,912), respectively.

30

Nippon COMSYS Corporation - Annual Report 2002

Thousands of
U.S. dollars

Millions of yen
2002

2002

Service cost
¥ 2,671
Interest cost
1,261
Expected return of plan assets(1,693)
Amortization of the difference arisingfrom change of the accounting
standard
8,756
Amortization of unrecognizedactuarial difference—
Amortization of unrecognizedprior service cost (negative)( 219)
Other—¥2,593
1,351(497)$19,460
10,139(3,730)

—

—

522

3,917

(596)
22

(4,473)165

Net pension cost

¥3,395$25,478

2001¥10,776

Unrecognized actuarial difference are amortized and charged to income
on a straight-line method from a succeeding year of the incurrence over
the average remaining years of service of employees at the incurrence.
Significant assumption used to calculate the above-mentioned amount
were as follows:• Allocation method of benefit obligation
Straight-line method• Discount rate
3.0%
• Expected rate of return on plan assets
1.7%• Unrecognized prior service cost is amortized at the incurrence.
• Unrecognized actuarial difference is amortized over 15 years.
• The difference arising from change of the accounting standard was
fully amortized and recognized at the incurrence.

6. Contingent Liabilities
At 31st March, 2001 and 2002, contingent liabilities consisted of the following:
Millions of yen

Thousands of
U.S. dollars

31st March

2001

2002

2002

Guarantees of loans borrowed by:
COMSYS Thailand Co., Ltd.
COMSYS Philippines, Inc.
Other

¥1,093955
455¥1,590
1,032
98$11,932
7,745
736¥2,503¥2,720$20,413

Thousands of
U.S. dollars

Projected benefit obligation
Fair value of plan assets(11,781)8,529

Net pension cost of the plans included in the consolidated statements
of income and retained earnings for the year ended 31st March, 2001 and2002 were as follows:

7. Income Taxes
The Companies are subject to corporate (national), inhabitant and enterprise (local) taxes based upon taxable income, which resulted in statutory tax rates of approximately 42%, in aggregate, for the two years ended
31st March, 2001 and 2002. The effective tax rate reflected in the accompanying consolidated statements of income and retained earnings differsfrom the statutory tax rate primarily due to such items as permanently
non-deductible expenses and timing differences in recognizing certain
income and expense items for financial and tax reporting purposes.

The differences between the statutory tax rate and effective tax rate
reflected in the consolidated statements of income for the ended 31st
March, 2002, primarily consisted of the following:
Statutory tax rate of the Company
42.0%
Effects of:
Expenses permanently not deductible for income tax purpose 3.6
Dividend income deductible for income tax purpose(0.4)
Other, net
2.2
Effective tax rate

47.4%

Deferred tax assets and liabilities of the Companies, except for that relating to land revaluation mentioned in Note 11, as of 31st March, 2001 and
2002, primarily consisted of the following:
Millions of yen

Deferred tax assets:
Accrued bonuses
Accrued enterprise tax
Accrued severance indemnities
Allowance for doubtful receivables
Allowance for losses arising fromguarantees of loans
Write-down of investments inunconsolidated subsidiaries
OthersLess: Valuation allowance
Deferred tax liabilities:
Deferred gain on exchange of lands
Unrealized gain on securities
Net deferred tax assets

2002

2002

¥ 682
71
2,715
469

¥ 878
294
2,542
506

$ 6,589
2,207
19,077
3,797

—

706

5,298

386
395

467
902

3,505
6,769

4,718
(52)

6,295
(100)

47,242
(750)

4,666

6,195

46,492

(91)
(21)

(90)
(3)

(675)
(23)

(112)

(93)

(698)

¥4,554¥6,102$45,794

8. Leases(As a Lessee)
The Companies lease mainly machinery and equipment by financial leases.
Pro forma amounts of the acquisition costs (including the interest portion
thereon), accumulated depreciation (depreciation expenses of the leased
property were computed by the straight-line method over the respective
lease terms) and net book value of leased property as of 31st March, 2001
and 2002, which would have been reflected in the consolidated balance
sheets if capitalized, were as follows:

31st March

2001

2002

2002

Due within one year
Due after one year

¥319
437

¥ 62
115

$ 465
863

¥756

¥177

$1,328Total(As a Lessor)
One of the Companies leases mainly machinery and equipment by financial leases. Future lease receipt, inclusive of interest, at 31st March, 2002
were as follows:

Due within one year
Due after one year
Total

2001

2002

2002

Acquisition costs
Accumulated depreciation¥1,511
755

¥394
217

$2,957
1,629

Net book value

¥ 756

¥177

$1,328

Lease payments relating to financial leases accounted for as transactionsof rent amounted to ¥315 million and ¥67 million (US$503 thousand) for
the years ended 31st March, 2001 and 2002, respectively.

Millions of yen

Thousands of
U.S. dollars

¥248
469

$1,861
3,520¥717$5,381

Lease fees received and depreciation charges for the year ended 31st
March, 2002 were as follows:

Lease fees received
Depreciation

Millions of yen

Thousands of
U.S. dollars

¥383
221

$2,874
1,659

9. Segment Information
The Companies’ operating results consisted of two business segments.
Information by business segment for the years ended and as of 31st March,
2001 and 2002, were summarized as follows:
Millions of yen
For the year ended/as of 31st March, 2001
Other

Sales to customers
Intersegment sales/transfers¥205,515¥16,705 ¥222,220

—

—

—

—

—

Total
Operating expenses

205,515
195,050

16,705
15,542

222,220
210,592——

222,220
210,592

Operating income¥ 10,465¥ 1,163 ¥ 11,628¥ —¥ 11,628

AssetsDepreciation andamortization
Capital expenditures¥175,595¥12,655 ¥188,250¥ —¥188,250

—
—

1,746
2,010

1,648
1,854

98
156

Total

Corporate/
Eliminations Consolidated

Construction

¥ —

1,746
2,010

¥222,220

Millions of yen
For the year ended/as of 31st March, 2002

Thousands of
U.S. dollars

31st March

Thousands of
U.S. dollars

Millions of yen

Thousands of
U.S. dollars

2001

Millions of yen

Obligation (including the interest portion thereon) under financial leases
at 31st March, 2001 and 2002, were as follows:

Construction

Other

Sales to customers
Intersegment sales/transfers¥211,489

Total
Operating expenses

211,489
201,795

Operating income¥ 9,694¥

AssetsDepreciation andamortization
Capital expenditures¥177,083

Corporate/
Eliminations Consolidated¥19,862 ¥231,351 ¥

—

2,776
5,815

Total

7,258

—

¥231,351

7,258 (7,258)—

27,120 238,609 (7,258)
26,247 228,042 (7,191)

231,351
220,851873 ¥ 10,567 ¥(67)¥ 10,500¥13,493 ¥190,576 ¥—¥190,576

—
—

3,363
6,390

587
575

3,363
6,390

Nippon COMSYS Corporation - Annual Report 2002

31

Thousands of U.S. dollars

The book value before and after revaluation and unrealized gains andlosses resulting from the revaluation at 31st March, 2002 were as follows:

For the year ended/as of 31st March, 2002
Construction

Other

Total

Corporate/
Eliminations Consolidated

Sales to customers
Intersegment sales/transfers$1,587,160 $149,058 $1,736,218 $Total
Operating expenses

1,587,160
1,514,409—

54,469(54,469)—

203,527 1,790,687 (54,469)
196,976 1,711,385 (53,966)

1,736,218
1,657,419

72,751 $ 6,551 $

54,469Operating income$

AssetsDepreciation andamortization
Capital expenditures$1,328,953 $101,261 $1,430,214 $
20,83343,640— $1,736,218

4,405
4,315

79,302 $ (503) $25,23847,95578,799— $1,430,214——

25,23847,955

10. Shareholders’ Equity
The amended Commercial Code of Japan (the “Commercial Code”),
effective on 1 October, 2001, provides that an amount not less than 10 per
cent of cash dividends and bonuses to directors paid as appropriations ofretained earnings, as well as the amount of 10 per cent of interim cash
dividends, be set aside in legal reserve until an aggregate amount of additional paid-in capital and the legal reserve equals 25 per cent of the amountof stated capital. The additional paid-in capital and the legal reserve may
be transferred to stated capital by a resolution of the board of directors orused to reduce a deficit by shareholders’ resolution, but they are not available for dividend payment. On condition that the aggregate amount ofadditional paid-in capital and the legal reserve remains equal to or exceeding 25 per cent of the amount of stated capital, it is available for distributions by the resolution of the shareholders’ meeting within a certain
limit. The amounts of the reserve of the Company included in “Retained
earnings” as at 31st March, 2001 and 2002 were ¥1,983 million and ¥2,093
million (US$15,707 thousand), respectively.
Under the Commercial Code, the entire amount of the issue price of
new shares is required to be accounted for as “Common stock” although a
company may, by resolution of its board of directors, account for an amountnot exceeding one-half of the issue price of such new shares as “Additional
paid-in capital.”
On 28th June, 2001, the board of directors of the Company, pursuant to
the regulations under the Commercial Code, resolved to reacquire andcancel outstanding share of its common stock with its retained earnings
up to a total value not exceeding ¥1,685 million (US$12,645 thousand).
For the year ended 31st March, 2002, under the resolution, the Company
retired 1,578 thousand shares of its common stock amounted to ¥1,684
million (US$12,638 thousand) and the authorized shares of the Company
decreased by 1,578 thousand, from 249,341 thousand to 247,763 thousand,due to the retirement of common stocks.

Book value:
Before revaluation
After revaluation
Unrealized—
Gains
LossesNet (Loss)

Millions of yen

Thousands of
U.S. dollars¥22,995
16,847$172,570
126,431

5,915
12,06344,39090,529¥ 6,148$ 46,139

Deferred tax assets and liabilities relating to revaluation of land of theCompany consisted of the following:

Deferred tax assets:
Relating to unrealized losses
Less: Valuation allowance

Millions of yen

Thousands of
U.S. dollars¥5,066(5,066)$38,019(38,019)——

Deferred tax assets:
Relating to unrealized gains

2,484

18,642

Net: Deferred tax liabilities¥2,484$18,642

12. Other Income and Expenses“Other, net” in “Other Income (Expenses)” consisted of the following:
Millions of yen
31st March

2002

2001

Thousands of
U.S. dollars
2002

Foreign exchange gains¥— ¥ 154 $ 1,156
Allowance for doubtful receivables—(242)(1,816)
Gain on securities contributed to
employee retirement benefit trust
5,810
—
—
Allowance for losses arising fromguarantees of loans— (1,680) (12,608)
Amortization of the difference arisingfrom change of the accounting standard
on accrued severance indemnities(8,756)——
Write-down of investments andother assets
(536)
(142)
(1,066)
Amortization of newly consolidation
adjustments
—
304
2,281
Other
187
(216)
(1,621)¥ (3,295) ¥(1,822) $(13,674)

13. Subsequent Events
11. Revaluation of Land for BusinessAt 31st March 2002, land owned by the Company were revalued under theLand Revaluation Law and related regulations. Net of unrealized gains andlosses resulting from the revaluation were debited directly to shareholders’ equity as a negative revaluation surplus after adding the related deferred tax liabilities as mentioned bellow. The negative revaluation surplus
will be credited as a gain or loss when a part of the land is sold.

32

Nippon COMSYS Corporation - Annual Report 2002

On 27th June, 2002, the shareholders of the Company approved the following appropriations of retained earnings:

Cash dividends
Reacquisition and cancellation ofcommon stock

Millions of yen

Thousands of
U.S. dollars¥674$5,058674

5,058

Report of Independent Certified Public Accountants

To the Board of Directors,
Nippon COMSYS Corporation
We have examined the consolidated balance sheets of Nippon COMSYS Corporation and its consolidated subsidiaries as of 31st March, 2001 and 2002, and therelated consolidated statements of income and retained earnings and cash flows
for each of the two years ended 31st March, 2002, all expressed in Japanese yen.
Our examinations were made in accordance with auditing standards, proceduresand practices generally accepted and applied in Japan and, accordingly, included
such tests of the accounting records and such other auditing procedures as we
considered necessary in the circumstances.
In our opinion, the consolidated financial statements referred to above present
fairly, the consolidated financial position of Nippon COMSYS Corporation and its
consolidated subsidiaries as of 31st March, 2001 and 2002, and the consolidated
results of their operations and cash flows for each of the two years ended 31st
March, 2002, in conformity with accounting principles and practices generally accepted in Japan (see Note 1) applied on a consistent basis.
The U.S. dollar amounts, presented solely for the convenience of the readers,have been translated on the basis stated in Note 1.

Masatoshi Yoshino

Eiji Miyashita
Certified Public Accountants of Japan

Hideo Niwa

27th June, 2002

Nippon COMSYS Corporation - Annual Report 2002

33

Supplemental Non-Consolidated
Financial Information
Nippon COMSYS Corporation
Years ended 31st March, 2001 and 2002
Thousands of
U.S. dollars

Change2002(%)¥215,586 ¥219,206
10,402
8,526
4,283
3,461
174,118 159,344
112,529 102,883$1,645,073
63,98525,974
1,195,827
772,105

1.7%–18.0%–19.2%
–8.5%
–8.6%

Yen

U.S. dollars

Millions of yen
2002

2001

Net sales
Operating income
Net income
Total assets
Shareholders’ equity

Per share:
Net income— Basic— Diluted
Cash dividends¥ 31.27 ¥
29.98
12.00

25.48
24.41
10.00

$

0.19
0.18
0.08

–18.5%–18.6%–16.7%

Note: For convenience only, the accompanying Japanese yen figures for 2002 have been translated into U.S. dollars at the rate of ¥133.25 to $1, the rate
prevailing on 29th March, 2002.

Net Sales(¥ Billions)250

Net Income(¥ Billions)

200

8

150

6

100

4

2

50

Consolidated

Consolidated
Non-Consolidated

Non-Consolidated

098

Total Assets(¥ Billions)

99

00

01

200

Net Income
per Share
(¥)

99

00

01

02

98

99

00

01

02

60

45

80

30

40

98

75

120

15
Consolidated

Consolidated

Non-Consolidated

0

98

34

0

02

160

Non-Consolidated

10

99

Nippon COMSYS Corporation - Annual Report 2002

00

01

02

0

Organization Chart
As of June 27, 2002
West Japan Headquarters
Corporate Planning Division
General Affairs Department
Public Relations OfficeFinance & Accounting Department
Auditing Department
Personnel Department

Senior Management Committee

COMSYS Group Administrative Support Department
Affiliates Department
Human Resources Department

Board of Directors
NTT Sales Division
NTT DoCoMo Sales Division

President

NTT Sales Division II
Government Sales DivisionCorporate Sales Division

Statutory Auditors
IT Business Division
Safety & Quality Control Division
Technology Research & Development Center
Access Engineering Division
Network Engineering Division
Mobile Engineering Division
Information Systems Division
Customer Services Department
Architecture Department
Eco-Power System Department
Overseas Division

Nippon COMSYS Corporation - Annual Report 2002

35

Corporate Information
As of March 31, 2002

Head Office:17-1, Higashigotanda 2-chome,
Shinagawa-ku
Tokyo 141-8647, Japan
Tel: 81 (3) 3448-7031
Overseas Division:
Tel: 81 (3) 3448-7181
Fax: 81 (3) 3440-5941
Branches:
Hokkaido, Tohoku, Akita, Fukushima, Kantominami,
Kantonaka, Tochigi, Shinetsu, Niigata, Tokai, Hokuriku,
Kansai, Chugoku, Shikoku, Takamatsu, Kyushu, Okinawa
Overseas Liaison Office:Bangkok, Thailand Tel: 66 (2) 319-5551
Establishment:
1951
Common Stock:
Authorized: 247,763,000 shares
Issued: 135,264,252 shares
Number of Shareholders:
9,641
Paid in Capital:¥31,141 million
Stock listings:
Common stock—Tokyo, Osaka
Transfer Agent:
The Mitsubishi Trust and Banking Corporation
Securities Department
11-1, Nagatacho 2-chome
Chiyoda-ku, Tokyo 100-0014
Number of Employees:
Parent company
Consolidated subsidiaries
Total

Bank References:
The Bank of Tokyo-Mitsubishi, Ltd.
The Mitsubishi Trust and Banking Corporation
Mizuho Bank, Ltd.
UFJ Bank, Limited
The Sumitomo Mitsui Banking Corporation

3,530
1,347
4,877
Hokkaido

Akita
TohokuFukufhima
Tochigi
Shinetsu

Niigata
Hokuriku

Kantonaka

TOKYO
Kantominami

Tokai
Chugoku
KyushuTakamatsu
ShikokuHead Office
BranchBangkok Liaison Office

Okinawa36

Nippon COMSYS Corporation - Annual Report 2002

Main Clients:
Nippon Telegraph and Telephone Corporation (NTT)
Nippon Telegraph and Telephone East Corporation (NTT EAST)
Nippon Telegraph and Telephone West Corporation (NTT WEST)NTT Communications Corporation (NTT COMMUNICATIONS)NTT Data Corporation (NTT DATA)NTT DoCoMo, Inc. (NTT DoCoMo)
KDDI Corporation (KDDI)
Japan Telecom Co., Ltd. (JAPAN TELECOM)
J-PHONE Communications Co., Ltd. (J-PHONE)
The Tokyo Electric Power Company, Incorporated
The Furukawa Electric Co., Ltd.
Sumitomo Electric Industries, Ltd.
Matsushita Electric Industrial Co., Ltd.
Fujikura Ltd.
Hitachi Cable, Ltd.
NEC Corporation
Sharp Corporation
Fuji Xerox Co., Ltd.
IBM Japan, Ltd.
Fujitsu Limited
Lucent Technologies
Mitsubishi Corporation
Mitsui & Co., Ltd.
Sumitomo Corporation
Marubeni Corporation
TOT Corporation (Thailand)
TelecomAsia Corporation Public Co., Ltd. (Thailand)
Thai Telephone & Telecommunication Public Co., Ltd. (Thailand)
Philippine Long Distance Telephone Co. (Philippines)
Bayan Telecommunications, Inc. (Philippines)
Globe Telecom Inc. (Philippines)
Smart Communications Inc. (Philippines)
East Asia Crossing Philippines Inc. (Philippines)
Ministry of Communications (Kuwait)Corporate Directory
Nippon COMSYS Corporation
As of March 31, 2002

Company Name

Location

Principal Business

Paid-in Capital

Percentage
Owned (%)

Consolidated Subsidiaries and Affiliates
OT Engineering Co., Ltd.*Tokyo, Japan

Telecommunications engineering andelectrical engineering
Construction of telecommunications facilities¥120 million

98.0

Tsuken Kiko Co., Ltd.

Tokyo, Japan¥30 million

100.0

COMSYS Techno Co., Ltd.

Tokyo, Japan

Planning and consultation with regard
to information-processing technology¥50 million

100.0

COMSYS Tec Co., Ltd.

Tokyo, Japan

Construction of telecommunications facilities¥90 million

83.6

Tokyo Tsuken Co., Ltd.

Tokyo, Japan

Construction of telecommunications facilities¥54 million

39.2

Nitto Tsuken Co., Ltd.

Tokyo, Japan

Construction of telecommunications facilities¥60 million

33.3

Taiei Seisakusho Co., Ltd.

Kanagawa, Japan¥60 million

49.7

COMSYS Tusan Co., Ltd.

Tokyo, Japan

Design, manufacturing, and sales oftelecommunications equipment
Sales of construction materials¥60 million

100.0

COMSYS Business Service Co., Ltd.

Tokyo, Japan

Construction of telecommunications facilities¥304 million

100.0

COMSYS Net Corporation

Tokyo, Japan

Construction of telecommunications facilities¥50 million

100.0

COMSYS Tohoku Techno Co., Ltd.

Miyagi, Japan¥50 million

100.0

COMSYS Shinetsu Engineering Co., Ltd. Nagano, Japan

Planning and consultation with regard
to information-processing technology
Construction of telecommunications facilities¥30 million

100.0

COMSYS Kansai Engineering Co., Ltd.

Construction of telecommunications facilities¥15 million

68.0

Construction of telecommunications facilities¥15 million

100.0¥250 million¥60 million

91.0
35.0

Osaka, JapanCOMSYS Kyusyu Engineering Co., Ltd. Fukuoka, Japan

Major Non-Consolidated Subsidiaries and Affiliates
Nippo Kensetsu Kogyo Co., Ltd.
Jinwa Co., Ltd.

Tokyo, Japan
Saitama, Japan

Civil engineering
Construction of telecommunications facilities

Overseas Affiliates
COMSYS Thailand Co., Ltd.

Bangkok, Thailand Technological consulting and engineering services B15,000 thousand

48.0

Thai COMSYS & Jackson Co., Ltd.

Bangkok, Thailand Technological consulting and engineering services B2,000 thousand

49.0

COMSYS Philippines, Inc.

Manila, Philippines Technological consulting and engineering services P12,500 thousand

30.0

CMC Engineering SDN. BHD.

Kuala Lumpur,
Malaysia

30.0

Technological consulting and engineering services RM1,053thousand*OT Engineering Co., Ltd. was incorporated at 1st January 2002 by merging Okoshi Denken Co., Ltd. (a survivor as a legal entity), Tokyo Denwa
Shisetsu Co., Ltd. and COMSYS Kanto Kita Engineering Co., Ltd.

*This Company’s financial data is available on the Internet at URL http://www.comsys.co.jp/

This entire annual report is printed on 100% recycled paper.

17-1, Higashigotanda 2-chome, Shinagawa-ku, Tokyo 141-8647, Japan
Telephone: 81(3) 3448-7031
URL http://www.comsys.co.jp/

Printed in Japan