Fiscal Year Ended March 31, 2001

COMSYS—For Excellence in Telecommunications

Consolidated Financial Highlights

ProfileNippon COMSYS Corporation and Consolidated Subsidiaries
Years ended 31st March, 2000 and 2001

•
•
•
•
•

•
•
•

Nippon COMSYS Corporation was established in 1951, during Japan’s post-

quently made a place for itself in the industry on the basis of its successes in the post-

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

war construction of Japan’s telecommunications infrastructure, and has remained anContract backlog at end of the year

was privatized, becoming the firm we know today as Nippon Telegraph and Telephone
Corporation (NTT). At that time, the primary function of COMSYS was to execute
telecommunications construction projects in support of NTT. The Company subse-

Change

2000

2001

2001

(%)

¥ 78,348¥ 76,781$ 619,701

–2.0%

1,665
228,518272
229,2112,195
1,849,968–83.7%
0.3%—
231,750

3,583
222,220

28,918
1,793,543—–4.1%

76,78180,461

649,403

4.8%¥ 6,315
188,961
115,834¥ 4,498
188,250
118,055

36,304
1,519,370
952,825–28.8%–0.4%
1.9%

war turmoil, to undertake the rebuilding of the country’s communications infrastructure. That was the year before Nippon Telegraph and Telephone Public Corporation

Thousands of
U.S. dollars

Millions of yen

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

Net income
Total assets
Shareholders’ equity$

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, one flourishing with as-yet unborn possibilities.

Yen

Per share:
Net income— Basic— Diluted
Cash dividends¥ 46.73
44.67
10.00

U.S. dollars¥ 33.11
31.70
12.00

$

0.27
0.26
0.10

–29.1%–29.0%
20.0%

Contents•••••

Note: For convenience only, the accompanying Japanese yen figures for 2001 have been translated into U.S. dollars at the rate of¥123.90 to $1, the rate prevailing on 30th March, 2001.

35

Corporate Information

36

Corporate Directory

Inside Back Cover

229.2

Organization Chart

228.5

19

235.9

Financial Section

229.9

18

226.6

Management

6.3

7
8
10
12
16

4.5

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

8.3

6

New Orders Received(¥ Billions)

5.6

Corporate Citizenship

6.8

4

231.8

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

Net Income(¥ Billions)

222.2

2

220.5

Letter from the President

Net Sales(¥ Billions)

225.3

1

221.6

Consolidated Financial Highlights

97 98 99 00 01

97 98 99 00 01

1

97 98 99 00 01

Letter from the President••••

Environments a result of vigorous IT-related capital
A investment, and of various financial andmonetary reforms enacted by the government,
business conditions in Japan showed gradual
recovery during this term. However, employment and consumer spending both remained
at low levels, and the slowdown in the US
economy brought recovery in business conditions to a standstill in that country. These
factors precluded a full-scale recovery in theJapanese economy.
In contrast, the information and communications industry in which COMSYS operates
benefited from rapid growth in the content software market, as well as in the market for
telecommunications services. In addition, theIT revolution hurtled on toward the future,bringing growth in demand for internet access,data transmission, e-commerce, and mobile
telephony. Despite the fundamentally weakeconomy, therefore, the information and communications market continued to expand. The
high-speed communications sector also expanded, and companies from outside thetelecommunications industry are competing fora share of this market. Many telecommunications providers are strengthening themselves
through alliances and mergers, and foreign telecommunications firms are also participating inthis M&A activity. As this industry becomes
global in scope, competition for survival amongtelecommunications providers is stiffening.
Last July, in response to this unsettled
and expanding telecommunications market,
COMSYS conducted a sweeping reorganization. To achieve an increase in orders, the salesorganizations of the NTT Sector and the nonNTT Sector were integrated, creating a newdivision to establish sales strategies for theentire company. This has strengthened ourcustomer-specific sales strategy system. Our
project-execution organization, on the other
hand, combined its NTT and non-NTT Sectors to increase eff iciency through better
utilization of human resources and enhanced
technology-sharing.
Another new organization was established to undertake the Company’s vigorous
expansion into new fields. Drawing on latentin-house abilities, this sector is uncovering ourpotential for new, forward-looking operations
and expanding the Company’s horizons.

President Hironobu Takeuchi

Of course, COMSYS is also striving tofurther expand orders from NTT and the NTT
Group, and is also striving to win more contracts for total solutions, encompassing the full
spectrum of project development from businessproposal through development and maintenance, with a focus on network construction
technology and systems development. We aresupporting the preservation of the world’s
environment through our involvement inwind-powered electricity generation, and are
actively involved in CC BOX and CATV
projects. In addition, COMSYS is a major participant in overseas construction projects,
primarily in Southeast Asia.

Consolidated Performance
ith the Southeast Asian economies still
W unable to achieve recovery, our Overseas
Construction Sector was hard pressed regarding consolidated new orders received during theyear, as some projects scheduled to begin during the term were cancelled. However, theDomestic Construction and Engineering Sector achieved substantial growth, and thisallowed total new orders received during theyear to rise 0.3 percent to ¥229.2 billion(US$1,850 million).
The second half of the fiscal year saw
a surge in orders received, but many of thesewere originally scheduled for completion

2during the coming term, and consolidated net
sales declined 4.1 percent to ¥222.2 billion(US$1,794 million).
A companywide reevaluation of operations undertaken as part of the Company’s effort
to increase profitability has allowed us toachieve greater efficiency, to implement thorough cost control procedures, to strengthen our
subcontracting procedures, and to utilize fundswith greater efficiency. As a result of thisdecline in net sales, the stiffer competition fororders, and a decline in the average value of acontract, operating income contracted 25.3 percent to ¥11.6 billion (US$94 million), and net
income dropped 28.8 percent to ¥4.5 billion(US$36 million).
During this fiscal year COMSYS employed
a portion of its negotiable securities holdings
to establish an employee retirement benefit
trust, to correct the deficit in reserves for employee
benefit obligations that materialized with our
implementation of new accounting standards.
This resulted in a gain on securities contribution to employee retirement benefit trustof ¥5.8 billion (US$47 million) was posted
under other income, and amortization of
the difference arising from a change of theaccounting standard for accrued severance
indemnities of ¥8.8 billion (US$71 million)
was posted under other expenses. As a result,
the Company’s deficit in reserves for employee
benef it obligations has been corrected at
one stroke.

Outlook and Important Issues
ooking at next term and beyond, it is
L thought that orders in the NTT Sector
will be affected by NTT’s restraint in capital
investments related to rationalization of operations, and by the sluggishness of capital
investment overall. However, NTT is expected
to be investing in its three-year management
plan, which is centered on fiber-optic broadband services, and NTT DoCoMo is expected
to be investing in its next-generation mobile
telephone operations.
The explosive expansion of information
technology, the building of the 21st century’s
worldwide high-order information society, theadvent of the Internet, mobile telephony, andbroadband access technology have propelled
our Non-NTT Sector to new levels of activity.
In addition, the Japanese government’s e-Japan

Plan calls for Japan to become the world leader
in information technology within five years.
These developments are forecast to bring wider
participation in e-commerce, the expansion of
intelligent transportation systems (ITS), andlong-term growth in the information technology
market. COMSYS will be a strong participant
in this field, utilizing its sales and technological capabilities to their utmost, and will
also be striving to win more orders for network
solutions and other projects. The Company
is also actively involved in CC Box, cable
television, and the new field of wind power
plant construction. We think these operations
will contribute most to our effort to expand
orders received.
In response to the dramatic changes
in the telecommunications market, and to makeclear the direction that the Company plans totake, COMSYS has published its New MediumTerm Business Plan, which will take effectin fiscal 2001 (the term ending March 31,
2002). Rather than setting out vague goals, thisplan specifies concrete actions to be taken.
Rather than an outmoded tearing down ofexisting organizations and processes, theCompany seeks with this plan to achieve
improved performance through further reforms
that will strengthen sales and technologicalcapabilities, while bolstering the Company’s
cost-competitiveness.

Dividends and Internal Reservess the foundation for the continued expanA sion of a company’s operations, dividend
policy is one of the most important issues
that face any firm. We are also seeking further strengthening of our financial structure
and improved return on equity. We also balance the best possible dividend payout toshareholders with considerations of theCompany’s performance and its continued ability to generate dividends.
In line with this policy, the Company
declared a mid-term dividend of ¥5 per share,
and a yearend dividend of ¥5 per share. In addition, a special dividend of ¥2 per share was
declared to commemorate the 50th anniversaryof the Company’s founding, for a total of ¥12
per share for the fiscal year. This represents apayout ratio of 38.2 percent, for return on
equity of 3.8 percent. The ratio of dividends toshareholders’ equity is 1.5 percent.

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 are setting
aside ¥683 million (US$6 million) for this purpose.
This program is scheduled to continue until the
midpoint of next fiscal year.
Internal reserves accumulated during thisfiscal year we plan to use to reinforce our business base. This will be done by making capital
investments in the expansion of training facilities, in the replacement of tools and instrumentsfor purposes of upgrading technology and improving safety, and in the improvement of the work
environment through enhancement of construction bases. It is also our intention to makeeffective investments in the opening up of new
fields of business for the Company.
Dividends will continue to be the primary source of shareholder income. However,from the standpoint of diversifying returns toshareholders, we want to continue to retire treasury stock using a fixed percentage of income
for the purpose. To this end, COMSYS plans
to extend this term’s dividend and treasury stock
policies into the coming fiscal year.

Capital Investment and Fund
Acquisition
apital investments by the COMSYS
group rose to ¥1,390 million (US$11 million) during the period of this report. These
investments were primarily in the constructiona Technostation construction base in Adachi.
No bonds or other instruments were issued
during this term.

Csion of the IT revolution has created an opportunity to expand our business.
In response to these conditions, theCompany will continue as before to reinforce
the management and technological capabilities needed to mount a nimble response tothese rapidly changing market conditions. We
must also enhance our cost competitivenessin response to today’s exacting business environment, deploying the capabilities of theentire Group to achieve stronger and stronger performance.
Recognizing the importance of speed andtiming, and to realize the policies set forth in
the above-mentioned New Medium-Term Business Plan, the Company has established the
COMSYS 21 Promotion Committee to facilitate the exchange of ideas on important issues
among top management and elicit prompt decisions. We are also actively committed topreservation of the global environment, andwon ISO-14001certification of all our domestic operations in May of 2001.
In December, 2001, COMSYS will celebrate the 50th anniversary of its founding. We
are employing the technological expertise accumulated during that history, our sound financial
structure, and the trust we have earned in themarket to support the growth of the 21st
century’s high-order information society. In
addition, to take another giant stride toward ourgoal of becoming a true comprehensive engineering firm, we will continue to strengthen ourbusiness base. COMSYS requests the continued support of its shareholders, clients, business
partners, and employees in these endeavors.

Outlook for the Term Aheadn the coming fiscal year, we will add
COMSYS Business Service Co., Ltd.
and COMSYS Tsusan Co., Ltd. to our roster ofconsolidated subsidiaries, bringing our total tosixteen. Looking at the performance of Nippon
COMSYS Corporation and its sixteen consolidated subsidiaries during the term to come,consolidated net sales are forecast to rise 7.6
percent to ¥239 billion (US$1,929 million),while consolidated net income is expected to
grow 53.4 percent to ¥6.9 billion (US$56 million). As we mentioned above, we expect thatthe contraction of capital investments at NTT
will have an effect on our NTT-related orders
received. Overall, though, the explosive expan-

I

3

Hironobu Takeuchi
President and Representative Director

Toward a New Leap Forward in the 21st Century—Our Vision of the Future
Our Second Corporate Identity Campaign

As the IT revolution and the building of high-order, information-based societies spread
across the face of the globe, the Japanese Government has implemented the e-Japan Priority
Policy Program, which calls for Japan to become the world leader in information technology
within five years. With e-commerce continuing to expand and intelligent transportation
systems (ITS) proliferating, the IT sector is forecast to display long-term growth. COMSYS
expects to be deeply involved in the execution of these developments.
To clarify its response to these trends, COMSYS drafted a medium-term management
plan. Recently, we revised that plan from the standpoint of our performance through thefiscal year ending March 31, 2006. Goals now include:
Strengthening our NTT construction operations is, of course, a high priority. However,
we are putting even more emphasis on increasing the earnings of our domestic and overseas
telecommunications construction projects, and information services such as softwaredevelopment. By the fiscal year ending March 31, 2006, on an unconsolidated basis, we will
increase total annual revenues to ¥320 billion (US$2,582 million), while bringing the ratioof NTT contracts down from the current 60 percent to approximately 35 percent. Responding to the stronger cost competition in 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 ¥22 billion (US$178 million).
Strengthening training programs and developing proprietary technology, primarily in thefield of construction, in response to today’s rapid pace of technological innovation. Continuing to stress mechanization and advanced facilities on our construction sites, for the
purposes of improving the work environment and ensuring worker safety.
The Ministry of Public Management, Home Affairs, Posts and Telecommunications(formerly the Ministry of Posts and Telecommunications) projects that Japan’s informationand communications market will grow to ¥125 trillion (US$1,009 billion) by the year 2010,
including a telecommunications market of ¥26.8 trillion (US$216 billion), an ¥8.4 trillion(US$68 billion) broadcasting market, a communications and computer terminal market of¥26.0 trillion (US$210 billion), and a content (databases, images, video games, software,etc.) market of ¥63.4 trillion (US$512 billion). Of this, telecommunications and broadcasting industry investment in 2010 is forecast at ¥7.2 trillion (US$58 billion).
COMSYS is resolved to become the leading firm in the field. With a strong commitment
to enhancing the quality of everyday life, COMSYS intends to become involved fully in allof the business opportunities represented by these new telecommunications capabilities.

The year 2001 will be the first of the 21st century, and will also be the 50th anniversaryof this Company’s founding. This fiscal year marks the 13th since the inauguration of our
first Corporate Identity Campaign, and the 11th since we selected the Company’s current name.
Following the Company’s establishment in 1951, COMSYS expanded chiefly on thestrength of facilities construction projects for NTT. By the second half of 1970, however,the country’s communications infrastructure was virtually completed. COMSYS, which
generated over 90 percent of its revenues through NTT projects, found itself in gravedifficulty. At that juncture, the Company began planning and preparing for the 21st century,
entering the Non-NTT domestic construction and engineering market, and diversifying into
the field of software development. This allowed the Company to reduce its reliance on NTT.
This change in direction required a commitment to the new policies on the part of each
employee, and it was to promote the permeation of these ideas throughout the Company that
we launched our first Corporate Identity Campaign. In addition to this CI campaign, theCompany has also undertaken programs to reevaluate business practices and procedures,
bolster the Company’s business base, improve its financial condition, and make theCompany’s stock a more attractive investment.
As a result of this program, despite the persistently adverse economic conditions thatcommenced when the economic bubble collapsed, COMSYS was able to achieve continued
growth in revenues and profits. Since adopting our current company name of Nippon COMSYS
Corporation in the fiscal year ended March 31, 1990, and despite growth of only 10 percent in
the work force, net revenues have more than doubled, operating profits tripled and net assets
have more than tripled, shareholders’ equity has more than quadrupled, and capital has quintupled. Of course, the rapid expansion of demand in connection with new technologies such as
cellular telephony, fiber optics, and digital communications played a significant role in this, but it
also reflects the success of our CI campaign and other management-improvement measures. The
efforts of each employee of the Company are seen in this performance.
However, our efforts to improve did not end there. The issue of improvement and reform
is continuously before the Company. In April 1999 we commenced our Second Corporate
Identity Campaign, with the objectives of further reinforcing the permeation of the corporate philosophy and operations policies established in the first CI campaign, of creating a
fresh and freer corporate atmosphere, and of creating a stronger sense of unity throughout
the COMSYS group. We believe this will allow us to lay the cornerstone of our operationsin the 21st century.

125

Eleven Years of Growth(¥ Billions)

250

200

150

34% Non-NTT

lo y s a
S emp
COMSY ctrum ofpe
is e
w id e s g ic a l e x p e r t
lo
ip
o
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tec
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ty
to safe

Sources of Construction
Contracts¥125trillion (2010)¥16 trillion (1995)
The Growing
Multimedia Market

Net Sales

50

Shareholders’ Equity
0

Operating Income

90 91 92 93 94 95 96 97 98 99 00 01

1995

4

100

Total Assets

16

66% NTT

2010

5

Review of Operations

Corporate Citizenship

COMSYS always strives to take an active role in the communities that host it, fostering environmental awareness, sponsoring
cultural events, and offering disaster-preparedness training.
In May 2001, all of COMSYS’s domestic operations received
ISO 14001 certification. Working from the conviction that theprotection of the planet is the duty of every business and every
company, in February 2000 COMSYS commenced inspection,
analysis, and evaluation of every corner of the Company froman environmental perspective. An Environmental Management
System was implemented throughout the Company.
It was necessary to create a new culture in which every
employee became highly conscious of environmental problems,and committed to finding solutions. We firmly believe that thiswill also help strengthen our business base.
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’s high-order,
information-intensive society.
COMSYS also undertakes projects in which concern for theenvironment is a factor. In 1999, we installed a cellular telephonefacility in western Japan’s Setonaikai National Park. The facility
is on the grounds of the Rokkosan Farm, which is operated within
the park by the city of Kobe. To ensure that there was no degradation of the natural beauty of the site, to blend in with nature,and to assure compatibility with the park’s natural atmosphere,
we created an artificial Japanese oak tree for the antenna pole.

•
•
•
•
•

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 the regional community. The Omiya Ardija soccer team debuted in the J2 soccer
league. The team was founded through joint participation by
COMSYS, NTT, and 19 other companies closely associated with
NTT. The Japan Professional Football League is composed ofregional teams, and develop players at all levels, from youth toprofessional. Omiya Ardija is intended to support and participate in player development, as well as being a club that all canenjoy. We are pleased and happy to have the opportunity to contribute to the public in this way.
Another of the Company’s activities is supporting The Tokyo
Philharmonic Orchestra, of which COMSYS is a special member.
The Tokyo Philharmonic Orchestra, which celebrates 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, the Tokyo Philharmonic will reach new highs ofartistic expression, and take a leap forward in the world of music.
COMSYS is proud to be able to contribute in this way to theculture and society of our host regions. By doing so, we are able
to give something in return to the communities that have madeour existence and growth possible.

Sales by Business Category

Overseas Construction

Domestic Construction and Engineering

Information Systems

1% 7%

31%

2

1

•
•
•
•
•

"Outside" Projects

26%"Inside" Projects

35%
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3

4

6

NTT Construction

61%

7

NTT Construction

The structure of the telecommunications market is shiftingfrom fixed communications to mobile communications, and there
is also a rapid shift from voice communications to data communications. Our biggest customer, NTT, is responding to these
conditions by positioning itself to take the lead in the information and communications era of the 21st century. To this end,
NTT is implementing a number of management reform
measures, centered on the expansion of broadband services andthe efficient deployment of human resources within the NTT
group. In addition, NTT DoCoMo is participating in the deployment of IT technology in the financial and societal realms by
developing the next-generation of mobile telephones and by
expanding its mobile multimedia services.
COMSYS’s NTT Sector is responding to these challenges
with changes to its operational structure. First, we have assigned
account managers with the direct responsibility for serving eachclient. This will also help us win more contracts. Next, to further
reduce construction costs, we have bolstered our subcontracting
procedures, reevaluated our project manager system, andstrengthened systems for on-site backup by the Management
Support Division. We are improving safety and quality by
expanding our “safety patrol” and striving for even closer
compliance with ISO 9001. Despite these measures, net sales
were adversely affected by NTT’s restraint in capital investments
and declined 6.5 percent to ¥135.0 billion (US$1,089 million).
Representative of this sector’s projects during the period of
this report was the NTT DoCoMo Nagano Building in Nagano
Prefecture, opened in June, 2000. This was a large-scale
contract under which COMSYS installed infrastructure, including the electricity generators, radio equipment, transmitters, andswitching equipment, as well as the building’s LAN. This build-

•
•
•
•
•

ing will become the mobile telephony nucleus of Nagano Prefecture. We also installed an environmentally friendly
gas-turbine co-generation system in the NTT Osaka Higashi
Building. This system uses waste heat from the gas-turbine generators to heat and cool the building, saving energy, reducing
costs, and protecting the environment. While few of thesesystems are yet used in Japan, the number is expected to increase,
and we at COMSYS are now well-positioned by our provenperformance in this project to compete for these contracts.
Also during this term, the NTT Sector participated in the
installation of antennas at the Kashiwakura base station in Tochigi
Prefecture, completed in December 2000. As there is no roadleading to the construction site, this project was carried out
under unprecedentedly difficult conditions. A monorail and acable crane were constructed to span the 1,214 feet from themountainside to the summit, and some materials had to be hauledup the mountainside to the summit by hand. As more such basestations will be constructed in the future, it is certain that we will
be faced with diverse working conditions.
We are now engaged in a project to lay 1,312 feet of underground conduit at depths of up to 43 feet, under Saitama New
Urban Center near Japan Railways Omiya Station. Using our
high-precision shield thrust technology and surveying by laser
light, our shield machine is laying Hume pipe within tolerancesof a few millimeters through a forest of gas lines, water lines,
and other impediments, and underneath the buildings of a heavily
urbanized area. To work under these unpredictable and highly
constricted conditions, COMSYS has deployed an experienced
organization with a high level of technological expertise.
The NTT Sector’s operating environment will grow yet moredifficult in the coming term, as competition among foreign anddomestic communications firms continues to intensify. While
striving to improve safety and efficiency, strengthening our subcontracting procedures, and mentoring new technical personnel,
the NTT Sector will be endeavoring to increase its orders received.

2

1

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tions c

144.3

135.0

143.7

160.4

151.2

3

61%
of Total Revenue“Inside” Projects

Sales of NTT Construction(¥ Billions)“Outside” Projects

97 98 99 00 01
48

9

Domestic Construction and Engineering3

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52.4

37.4

47.5

2

69.2

Noteworthy among the Domestic Construction and Engineering Sector’s achievements during this term was being named prime
contractor for the construction of a wind power construction
plant in Hokkaido. This contract, which represents a new field of
business for COMSYS, was tendered by Ino-san Wind Power
Generation Co., Ltd., headquartered in Yokohama. Ino-san Wind
Power Generation is acquiring sites across Japan for further wind
power plants, and COMSYS has hopes that it will build a close
association with Ino-san in this project.
In February, 2001, the Domestic Construction and Engineering Sector completed the replacement of the sound system andelectrical wiring in the Musashino City Citizens’ Cultural Hall,a well-known venue located in Musashino city, Tokyo. The soundsystem in the hall had reached the end of its useful life, andCOMSYS replaced it in its entirety, down to power sources,
controllers, mixers, and even the associated electrical wiring.
A major issue in this project was the very difficult schedule that
required us to sandwich the work in the open days between thescheduled programs. In addition, the installation of the electricalwiring and sound system required specialized knowledge, anda thorough familiarity with stage design was needed. Working
with stages facilities is a specialized area within the field of
remodeling, and COMSYS has been building a track record inthis area since we replaced the audio-visual system in Tokyo
University’s Yasuda Hall in 1999. We expect, therefore, to win anumber of public sector contracts for installation of facilities inmusic halls and other structures.
This field plays a central role in the COMSYS Group’s
medium- and long-term operational strategy. Guided by thisstrategy, 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 basedon market sector, by developing and retaining highly skilled
personnel, by strengthening our subcontracting system.

66.6

The Domestic Construction and Engineering Sector handles
all domestic telecommunications construction projects other thanthose for the NTT Group, as well as ordinary domestic construction projects. This includes contracts with the public Sector, withthe “new common carriers,” and with firms in other industries.
This Sector is engaged in a broad spectrum of activities, including the construction of telecommunications facilities and electricutility facilities, structural construction, and the installation of“CC Box” (multi-use underground cable conduits), cable TV
equipment, and network solutions.
The sophistication and diversification of data communications networks is accelerating, and IT is permeating the corporate
and governmental sectors at a rapid rate. The Japanese
government’s e-Japan Priority Policy Program calls for changes
in society through IT, including “e-government” and otheradministrative 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 populated areas and by updating school curricula. Long-term growthis forecast for the IT sector, and these developments will have afavorable 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 thisreport, 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 showed a significant
increase, growing 4.0 percent to ¥69.2 billion (US$559 million).

•
•
•
•
•

31%
of Total Revenue
Sales of Domestic Construction
and Engineering (¥ Billions)
97 98 99 00 01
4

10

11

International Operations

Since the Company’s founding, it has assisted a number ofcountries in Asia, Africa, Central and South America, and otherareas to develop needed infrastructure. Over the course of these
myriad projects, and from its participation in the domestic telecommunications market and construction projects, COMSYS hasdeveloped a wealth of experience and technological expertise.
This, in turn, has facilitated the Company’s access to thesecompetitive overseas markets.
During the period of this report, affected by the slowdown
in the US economy and the persistent economic doldrums in theSoutheast Asian economies, which are our most important
market, net sales in the Overseas Construction Sector dropped
56.3 percent to ¥1.3 billion (US$11 million).
ISO certification is fast becoming a prerequisite for bidding
on construction projects internationally. The Overseas Construction Sector was certified four years ago, and our Philippine
subsidiary, COMSYS Philippines, Inc. (CPI) completed ISO 9001
certification two years ago, so COMSYS is well prepared to meetthis requirement for international bids when it materializes.

•
•
•
•
•

With the start of a new project, CPI transferred its offices to
Davao, the second-largest city on the island of Mindanao. Bayan
Telecommunication, Inc., Globe Telecom Inc., and other NCCs
are also active in Davao’s telecommunications market. CPI’s new
project is predicted to energize and stimulate capital investmentin this newly opened market. In fact, CPI has been awarded acontract from Bayan Telecommunication for cable construction,
and Globe Telecom Inc. has awarded CPI a contract for junction
line construction.
The Company’s participation in the Asia Multimedia Forumhas allowed COMSYS to make a more significant contribution
to the development of a high-order information-intensive
society in Asia. The Forum, whose aim is to help develop multimedia infrastructure that will be compatible throughout the Asian
region, is involved in the testing and trial of multimedia systems,
the joint development of multimedia systems and equipment, andother multimedia-related projects in Asia. The Asia Multimedia
Forum also holds seminars, symposia, exhibitions, and disseminates information on multimedia-related activities and technology.
In Samut Prakan,Thailand, we are executing a wastewater
management project, our first contract outside the field of telecommunications construction. That we won this contract clearlyshows 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 construction, but also in the new fields of wastewater management andsewer construction.

2

1

3

7.9

8.9

10.5

ound
ndergrlling u k.
ta
s
In
1.
gko
in BancablesCPerial C
lling a kok
ta
s
In
ng
2.
in a Ba
cables.
suburbaerialtallingin
3. Ins ber cables
l fi
a
c
ti
p
o
ok.
Bangk
logy intechnor CAD ippines.
u
O
.
4
il
the Phuse in

1.3

3.0

1%
of Total Revenue
Sales of Overseas
Construction(¥ Billions)

97 98 99 00 01
4

12

13

Construction Revenues for Last Three Years
•
•
•
•
•

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 Thailand and thePhilippines. Through the medium of local subsidiaries, we will
deepen and strengthen ties with the regions in which we operate,

thereby enhancing our cost-competitiveness. We will become
more active and aggressive in our attempts to win contracts
in the rapidly expanding fields of fiber-optic cable installationand mobile communications, as well as in the construction ofsocial infrastructure.

1

2

3

4

Over ¥10,000 million
Over ¥400 million
Over ¥100 million
Over ¥50 million
Less than ¥50 million

Major Overseas Projects Completedble
ber ca intical fi
1. Op on projects
ati
install
a.
il
n
a
M
ct
nt proje
ide pla ines'
ts
u
o
2. An
Philippu, the evelopedin Cebtsom dsecond fter Luzon.
aislandct
nt proje
ide pla uala
ts
u
o
n
K
3. A
s of
suburb sia.
yin the
la
a
M
r,
Lumpu
rimeon of c s at
ti
a
ll
ta
ie
4. Ins on capabilit
in
ti
n
r
e
te
v
n
e
pr
Ce
ckwellthe Ro.
Manilawater
t of the .
n
e
m
e
rov
ines
5. Imp the Philipp
in
ly
p
p
u
s

5

Nigeria
Ibadan new local line project
Iraq
Installation of telephone lines for 17 local exchanges
Egypt
Supply and installation of telecommunication cable network in Ismailia and Suez
Thailand Installation of digital exchange equipment
TaiwanInstallation of highway traffic control system
Sri Lanka Installation of local telephone lines in the Badulla and Anuradhapura regions
Nepal
Installation of microwave telecommunications system (inside and remote)Thailand Fifth local cable network installation for TOT in Bangkok and provinces
KuwaitInstallation of digital loop coil system in Farwaniah Exchange
Tanzania Rehabilitation of telecommunications network in Dar es Salaam
Thailand Seventh local cable network for TelecomAsia and TT&T
Philippines Supply and installation of local cable network for Major Telecom Inc. in Mindanao
Philippines Supply and installation of OSP equipment and optical fiber cable for ICC in Manila
Philippines Installation of trunk lines and local network for GLOBE Telecom PHASE-2 in Manila and the provinces
Thailand The telephone expansion project to overcome short-term line shortage / B.E.1996-1998 for TOT (800K)
Philippines Supply contract for OSP & optical fiber cable (BAYANTEL 40K)
Overseas Projects in Progress (As of June 2001)
Philippines Supply and installation of local cable and junction network for GLOBE Telecom PHASE-4 in Manila and the provinces
Philippines Turnkey outside plant network engineering services for EACP in Philippines

14

15

Information Systems

2

17.9

1

l
sonne
YS per S
MO
1. C
tellite ith thew a saprevie st program w
ait.
broadc ho orderedwclients
one ofot from tellite
h
s
n
e
sa
cre
2. A s any's digitalp
the Com t programs.
asbroadcSystemitr BtoE
3. Ou c wage-deb pany
m
ati
o
m
c
a
to
u
a
ws
re allooppingsoftwa intranet sh n toputheto setyees,
emplo educt the
s
it
r
fo
yd
loyee’s
aticall
autom of each emp lary.
t
s
n
his a
amou
es from ng much of
s
a
h
c
r
pu
ecti
a
s is diraking
Comsy y toward m eld of
g
fi
r
e
e
its en r itself in thfoplace erce.
m
e-com
d
velopehas de eSYSrM
4. CO stom softwa .
nts
cumany s for its clie
e
g
a
k
c
a
p

3

16.7

16.6

16.1

pronounced growth, and the software 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 businessactivities, which include the presentation of total solutions
packages to its clients. Notwithstanding these measures, net
sales in this Sector contracted 6.6 percent to ¥16.7 billion (US$135 million).
On December 1, 2000, Japan inaugurated digital satellite
broadcast television, and COMSYS is producing data-broadcast
program contents. In addition to sound and images, data broadcast offers a number of easy-to-use features, including programcontents search capability, which allows the user to extract the
information he needs, and interactive data communications
between the broadcaster and the user. All broadcasts arescheduled to be digital 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 and ground-based broadcasts alike must
be digitized, it is expected that a large demand for programming
will be required.
At present, there are not many companies other than
COMSYS that have digital-broadcast technicians andthat can prepare digital broadcast programming. Therefore,
COMSYS is meeting the needs of the market with comprehensive program production, from planning through writing anddesign. We intend to pursue this business opportunity andexpand sales in this field.
In the future, this Sector will endeavor to develop systems
and software, as well as the technological expertise to meetthe demand for total solution packages. Together with ourvigorous entry into this new field, we are seeking to expand
our presence in this market by concentrating sales efforts on
promising customers.
In the coming term, this sector will carry out strong
marketing programs based on our anticipation of market needs,
in search of further expansion of orders received.

14.9

The operational environment faced by the Company’s
Information Systems Sector was characterized 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 businessproposals for specific clients, develop all needed plans, andmaintain systems and equipment installed.
Among the products offered by the Information Systems
Sector are the Dream Web Server, an all-in-one server thatincorporates the router, terminal adapter, digital service unit,
firewall, and switching hub into a single PCI card, and the Red
Brick DataWarehouse, a quick-loading, high-performance, online
analytical processing tool. Other products include the Smart Carecomputer telephone integration (CTI) customer support system,
which provides speedy, efficient, and reliable communications
management for small and medium-sized businesses, the
CTI+WINE small office CTI system, an economical system
which is useful in client management and cost reduction efforts,
and the new BL-3000 Digital Monitoring System, which adds
digital video monitoring capabilities to existing network
systems. The Sector also markets solution package software, suchas Cable Manager, a resource management system, The Pert, aproject-management package for the construction industry, and
CONDUIT-CAD, a full-featured civil-engineering CAD system.
The computer market is expected to show steady growthduring 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 strengthen ties
with each its clients. This presents COMSYS with an opportunity to supply them with CRM software and systems. In addition,
the application service provider (ASP) market is expected to show

•
•
•
•
•

7%
of Total Revenue
Sales of Information
Systems (¥ Billions)
97 98 99 00 01

16

4

17

Management

Financial Section

•
•
•
•

•
•
•
•
•

As of June 28, 2001

BOARD OF DIRECTORS

President and Representative Director
Hironobu Takeuchi

Senior Managing Director
Kiyoto Kuwabara

Managing Director
Ko TamaiManaging Director
Takuo SueManaging Director
Masahide Kajiyama

Managing Director
Takaaki Okayama

Director
Michiaki Ono

CORPORATE AUDITORSCORPORATE EXECUTIVE OFFICERS

Standing Auditors
Teruji Mukai
Masaharu Ogawa

Senior Vice Presidents
Tatsuya Sato
Masayuki Nose
Kyoichi Suzuki
Syotaro Chikamoto
Yoichi Chiba
Kaoru Noda
Kenji Kondo

Auditors
Takashi Kakimi
Tadashi Kumakura

18

Executive Officers
Suguru Sugiyama
Yoshinobu Tanaka
Yasuhiko Kubota
Etsuo Shibata
Yukuo Asakura
Toyohiro Goto
Akira Takasaki
Katsuo Takeda

Director
Yasunobu Sasaki

Masanori Fukuda
Kazuo Takiguchi
Toshimasa Hattori
Takero Mizoguchi
Minoru Sobami
Takashi Furusho
Hideki Ishikawa
Seiichiro Nakatani

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

Financial Review
Nippon COMSYS Corporation and Consolidated Subsidiaries

NTT Construction

Years ended 31st March, 1997, 1998, 1999, 2000 and 2001

61%
Thousands of
U.S. dollars

Millions of yen
1997

Construction Business
NTT Construction¥160,432
Domestic Construction and Engineering
37,415
Overseas Construction
8,926
Other BusinessInformation Systems
14,863
Total¥221,636

1998

1999

2000

2001

2001

¥151,207
47,476
10,545¥143,705
52,412
7,850¥144,296
66,567
3,007¥134,981
69,2191,315$1,089,435
558,668
10,61416,085

16,555

17,88016,705

134,826¥225,313¥220,522¥231,750¥222,220

$1,793,543

231.8• Revenues •The Japanese government implemented further financial andmonetary reforms during the period of this report, but rising unemployment, weak consumer spending, and non-performing debts inthe banking industry continued to weaken the economy. A slowdown
in the US economy and continued economic instability in Southeast
Asia also had an adverse impact. COMSYS, however, benefited fromrapid growth in demand for telecommunications services, content
software, Internet access, data transmission, e-commerce, andmobile telephony. Despite these positive developments, net sales
declined 4.1 percent to ¥222,220 million (US$1,794 million).
The NTT Construction Sector saw revenues contract by 6.5
percent to ¥134,981 million (US$1,089 million), after a 0.4 percent gain in the previous term. The share of the Company’s total
revenues generated by this sector has declined from 72.4 percent
in the fiscal year ended March 31, 1997 to this year’s 60.7 percent, demonstrating that the Company’s efforts to increase
non-NTT revenues is having a consistent effect. “Outside” projects
accounted for ¥56,764 million (US$458 million) of the sector’s
total, while “inside” projects accounted for the remaining ¥78,217
million (US$631 million).
After posting double-digit gains in each of the previous five years,

Proportion of
Revenues fromNTT Market(¥ Billions, %)

222.2

220.5

225.3

221.6

Note: For convenience only, the accompanying Japanese yen figures for 2001 have been translated into U.S. dollars at the rate of¥123.90 to $1, the rate prevailing on 30th March, 2001.

75.0
70.0

Net sales

65.0
60.0

Percentage generated by NTT
Construction Projects

97 98 99 00 01

20

1.0

Net income

97 98 99 00 01

Net Income per Share (¥)

97 98 99 00 01

Total Assets (¥ Billions)• Financial Position •The Company reduced cash and cash equivalents by 5.8 percent
to ¥39,473 million (US$319 million). Short-term investments morethan doubled, rising to ¥1,170 million (US$9 million), largely as aresult of a change in Japan’s generally accepted accounting procedures that took effect on April 1st, 2000. Notes and accounts receivable
increased 4.2 percent to ¥61,825 million (US$499 million). We posted
a 6.0 percent decline in the accumulated cost of construction inprogress, to ¥21,138 million (US$171 million). Deferred income taxes
were reduced from ¥2,504 million in the previous term to ¥908 million

188.3

Nippon COMSYS Corporation and Consolidated Subsidiaries

2.0

46.73

Sales by Business Category

Operating income

33.11

35%

3.0

• Results of Operations •Reflecting our vigorous campaign to win new contracts and enter new fields, cost of sales as a percentage of net sales rose slightly
from last year’s 86.8 percent to 87.5 percent in the term underreview. This and lower net sales caused gross profit to decline 9.5
percent to ¥27,688 million (US$223 million). Selling, general, andadministrative expenses increased by 6.7 percent to ¥16,060 million(US$130 million), and as a percentage of gross profit rose from 49.2
percent last term to 58.0 percent. These factors resulted in a 25.3
percent decrease in operating income, to ¥11,628 million (US$94
million). Interest and dividend income increased 74.3 percent to ¥819
million (US$7 million), but interest expenses also rose. “Other, net”
rose 11.2 percent to ¥3,295 million (US$27 million). The events that
led to this included the amortization of the difference arising fromthe change in the accounting standard on accrued severance indemnities in the amount of ¥8,756 (US$71 million) and the gain on
securities contribution to the employee retirement benefit trust in theamount of ¥5,810 million (US$47 million). This arose as a result of
our contribution of a portion of our negotiable securities holdings toestablish an employee retirement benefit trust that corrected the deficit
in reserves for employee benefit obligations. A ¥536 million (US$4
million) write-down of investments and other assets was also included
in “Other, net.” As a result of the above, income before income
taxes and other adjustments to net income fell 30.2 to ¥9,117
million (US$74 million).
The effective income tax rate rose to 47.2 percent from last year’s
47.0 percent, primarily as the result of an increase in expenses permanently not deductible for income tax purpose. Minority interests
declined nearly 50 percent, and net income fell 28.8 percent to ¥4,498
million (US$36 million). The ratio of net income to net sales, which
was 2.72 percent for the previous fiscal year, declined to 2.02 percent. Return on equity fell from 5.8 percent last term to 3.8 percent.
Net income per share contracted 29.1 percent to ¥33.11 (US$0.27).
Dividends were increased to ¥12.00 (US$0.10), and we allocated ¥5
per share through the midpoint of the next fiscal year to a fund forthe retirement of treasury stock.

189.0"Inside" Projects

4.0

66.55

26%

5.0

42.97

"Outside" Projects

31%

6.0

171.7

Domestic Construction
and Engineering

7.0

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

59.15

1% 7%

the Domestic Construction and Engineering Sector achieved 4.0 percent growth in revenues during the period of this report, to ¥69,219
million (US$559 million). The, political and economic woes of Southeast Asia continued to have an impact on revenues in the Overseas
Construction Sector, which fell a further 56.3 percent to ¥1,315
million (US$11 million), on the heels of a 61.7 percent contractionin the previous term. Revenues in the Information Systems Sector declined by 6.6 percent to ¥16,705 million (US$135 million).

166.1

Information Systems
Overseas Construction

158.8

•
•
•
•

97 98 99 00 01

21

Selected Financial and Operating Data

118.1

115.8

101.7

Shareholders’ Equity
and Return on Equity(¥ Billions, %)

69.0

94.7

Nippon COMSYS Corporation and Consolidated Subsidiaries
Years ended 31st March, 1997, 1998, 1999, 2000 and 2001

10.0
8.0

Shareholder’ equity
6.0
4.0
2.0

ROE

97 98 99 00 01

12.00

10.00

10.00

11.75

14.25

Dividends per Share (¥)(US$7 million). Other current assets expanded 60.2 percent to ¥2,760
million (US$22 million). Thus, current assets declined a negligible
0.3 percent to ¥128,136 million (US$1,034 million).
Looking at liabilities, short-term bank loans rose from ¥632
million in the previous term to ¥1,057 million (US$9 million). Thiswas chiefly because short-term bank loans of consolidated subsidiaries were increased. Trade payables were almost static, edging up
0.7 percent to ¥35,352 million (US$285 million), while advances
received on construction in progress increased by 18.5 percent to¥7,094 million (US$57 million). Other current liabilities rose by 92.8
percent to ¥5,469 million (US$44 million). As a result of the above,
current liabilities declined 3.5 percent to ¥49,760 million (US$402
million), for a current ratio of 2.6.
After rising for four consecutive terms, investments and otherassets declined 1.6 percent to ¥21,508 million (US$174 million).
This was primarily the result of cuts in investment securities and alarge increase in the allowance for doubtful receivables. Total property and equipment was reduced less than one percent to ¥38,606
million (US$312 million) after depreciation. Total assets, then,declined 0.4 percent to ¥188,250 million (US$1,519 million). Shareholders’ equity, though, continued its upward path. After a 13.9
percent increase last term, this year saw a 1.9 percent rise to ¥118,055
million (US$953 million).
The capital ratio increased from 61.3 percent in the previous
term to 62.7 percent. Based on the number of shares outstanding at
March 31, 2001, shareholders’ equity per share increased to ¥869.84(US$7.02) from the ¥851.01 recorded at the end of the previous
fiscal year.
• Cash Flows •Net cash provided by operating activities dropped 73.0 percent
to ¥3,397 million (US$27 million), as income before income taxes
and other adjustments to net income fell to ¥9,117 million (US$74
million). An increase in trade receivables of ¥4,482 million (US$36
million), an increase in other assets of ¥865 million (US$7 million),and a decrease in other liabilities of ¥3,960 million (US$32 million)
all played a role in the decline, as did ¥6,336 million (US$51 million) in cash and cash equivalents paid for income taxes. After a netincrease in investment securities of ¥1,000 million (US$8 million),acquisitions of property and equipment in the amount of ¥1,386 million (US$11 million), a ¥627 million (US$5 million) increase inlong-term loans, and other investments of ¥1,368 million (US$11
million), net cash used in investing activities declined 46.3 percent
to ¥4,202 million (US$34 million).
Net cash used in financing activities declined 46.9 percent to¥1,925 million (US$16 million), primarily composed of acquisitionsof treasury stock in the amount of ¥841 million (US$7 million) andcash dividends of ¥1,376 million (US$11 million). Cash and cash
equivalents at the beginning of the year were ¥41,892 million (US$338
million). After a ¥2,730 million (US$22 million) decrease in cash
and cash equivalents, and ¥311 million (US$3 million) in adjustments for newly consolidated subsidiaries, cash and cash equivalents
at the end of the year declined by ¥2,419 (US$20 million) to ¥39,473
million (US$319 million).

97 98 99 00 01

22

Thousands of
U.S. dollars

Millions of yen
1997

1998

1999

2000

2001

2001

¥221,636
13,733¥225,313
14,348¥220,522
14,261¥231,750
15,559¥222,220
11,628$1,793,543
93,85013,675
6,831

14,333
8,309

13,522
5,625

13,054
6,315

9,117
4,498

73,58436,304

Financial Position:
Total assets
Property and equipment
Long-term debt
Shareholders’ equity¥158,839
26,471
25,12868,979¥166,067
27,334
16,791
94,654¥171,669
30,976
9,409
101,721¥188,961
38,626
9,312
115,834¥188,250
38,606
9,312
118,055$1,519,370
311,590
75,157
952,825

Per Share of Common Stock (in yen and U.S. dollars):
Net income— Basic— Diluted
Cash dividends
Shareholders’ equity¥ 59.1556.13
11.75
595.77¥ 66.55
62.59
14.25
725.59¥ 42.9740.87
10.00
765.74¥ 46.7344.67
10.00
851.01¥ 33.1131.70
12.00
869.84

$

6.20%
3.08
43.4
10.4

6.37%
3.69
57.0
10.2

6.47%
2.55
59.3
5.7

6.71%
2.72
61.3
5.8

5.23%
2.02
62.7
3.8

¥226,643
58,385¥235,923
68,995¥229,875
78,348¥228,518
76,781¥229,211
80,461¥ 1,560
1,190¥ 2,0201,240¥ 1,7101,280¥ 2,700
1,420¥ 2,370
1,636

Results of Operations:
Net sales
Operating income
Income before income taxes andother adjustments to net income
Net income

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

$1,849,968
649,403

Note: For convenience only, the accompanying Japanese yen figures for 2001 have been translated into U.S. dollars at the rate of ¥123.90 to $1, the rate
prevailing on 30th March, 2001.

23

0.27
0.26
0.10
7.02

Consolidated Balance Sheets
Nippon COMSYS Corporation and Consolidated Subsidiaries
As of 31st March, 2000 and 2001

Millions of yen

ASSETS
Current Assets:
Cash and cash equivalents
Short-term investments (Note 4)
Notes and accounts receivable—trade
Inventories:
Accumulated cost of construction in progress
Other
Deferred income taxes (Note 8)
Other current assets
Less: Allowance for doubtful receivables
Total current assets

Investments and Other Assets:
Investment securities:
Unconsolidated subsidiaries and affiliates
Other (Note 4)Long-term loans receivable
Deferred income taxes (Note 8)
Other assets
Less: Allowance for doubtful receivables

Thousands of
U.S. dollars (Note 1)

2000

2001

2001

¥ 41,892
499
59,355¥ 39,473
1,170
61,825$ 318,588
9,443
498,991

22,488
169
2,504
1,723
(149)

21,138
991
908
2,760
(129)

170,605
7,998
7,329
22,276(1,041)

128,481

128,136

1,034,189

Millions of yen

LIABILITIES AND SHAREHOLDERS’ EQUITY

2000

Current Liabilities:
Short-term bank loans (Note 5)
Accounts payable:
Trade
Other
Advances received on construction in progress
Income taxes payable
Other current liabilities¥

Total investments and other assets

Property and Equipment:
Land (Note 5)
Buildings and structures (Note 5)
Machinery and equipment
Construction in progress
Less: Accumulated depreciation
Total property and equipment

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

6,973
45,95633,72929,613
66,828(9,508)21,85421,508173,591

23,585
17,125
7,596
2,076(11,756)

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

190,380140,12160,605
21,380(100,896)

38,626

38,606

311,590¥188,961¥188,250$1,519,370

2001¥ 1,057

35,119
4,412
5,989
2,566
2,836

35,352
—
7,094
788
5,469

285,327—
57,2566,360
44,14051,55449,760401,614

9,312
1,883
1,442
1,945

9,312
3,769
—
16

75,15730,420—129

14,582

13,097

105,706

Minority Interests in Consolidated Subsidiaries

6,991

7,338

59,225

Shareholders’ Equity (Note 11):
Common stock, par value ¥50 per share:
Authorized— 249,665 thousand shares (31st March, 2000)— 249,341 thousand shares (31st March, 2001)
Issued— 137,166 thousand shares (31st March, 2000)— 136,842 thousand shares (31st March, 2001)
Additional paid-in capital
Retained earnings
Unrealized gain on securities

31,141—30,73655,477——31,14030,73657,82829—
251,332
248,071466,731234

117,354(1,520)119,733(1,678)966,368(13,543)

115,834

118,055

952,825¥188,961¥188,250$1,519,370

Total current liabilities
Long-Term Liabilities:
Convertibles bonds (Note 5)
Accrued severance indemnities (Note 6)
Provision for possible losses arising from overseas investments
Other long-term liabilities

$

8,531

Contingent Liabilities (Note 7)

Treasury stock, at cost
Total shareholders’ equity

See Notes to the Consolidated Financial Statements.

24

2001

632

Total long-term liabilities
1,535
8,136
4,132
2,309
5,875
(133)

Thousands of
U.S. dollars (Note 1)25

Consolidated Statements of Income and Retained Earnings

Consolidated Statements of Cash Flows

Nippon COMSYS Corporation and Consolidated Subsidiaries
Years ended 31st March, 2000 and 2001

Nippon COMSYS Corporation and Consolidated Subsidiaries
Year ended 31st March, 2000 and 2001

Thousands of
U.S. dollars (Note 1)

Millions of yen
2000

Net Sales:
Construction contracts
Other
Cost of Sales:
Construction contracts
Other
Gross profits
Selling, General and Administrative Expenses
Operating income
Other Income (Expenses):
Interest and dividend income
Interest expenses
Other, net (Note 12)
Income before income taxes and other adjustments to net income
Income Taxes (Note 8):
Current
Deferred
Minority Interests
Net Income
Retained Earnings:
Balance at beginning
Increases arising from:
Adoption of interperiod allocation of income taxes, net
Newly consolidated subsidiaries, net
Appropriations:
Cash dividends
Bonuses to directors
Retirement of treasury stocks
Balance at end

2001¥205,515
16,705222,220$1,658,717
134,826
1,793,543

185,932
15,212
201,144
30,606

179,452
15,080
194,532
27,6881,448,361
121,711
1,570,072
223,471

15,047
15,55916,06011,628

129,62193,850470(13)(2,962)(2,505)
13,054819(35)(3,295)(2,511)
9,117

6,610
(282)
(26,594)(20,266)
73,584

7,218(1,084)
6,134
605
6,315

4,082
226
4,308
311
4,498

32,946
1,824
34,7702,510
36,30447,07455,477447,756

3,208
1,050
4,258

—
4
4

—
32
32

1,350
155
665
2,170
¥ 55,477

1,366
102
683
2,151
¥ 57,828

11,025823
5,513
17,361$ 466,731

Yen

Per Share:
Net income— Basic— Diluted
Cash dividends
Weighted average number of shares (in thousands)¥ 46.73
44.67
10.00
135,136

See Notes to the Consolidated Financial Statements.

2001¥213,870
17,880231,750

U.S. dollars (Note 1)¥ 33.1131.70
12.00
135,858

$

0.27
0.26
0.10

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 liability for prior service cost
Decrease in provision for possible losses arising from overseas investments
Interest and dividends received
Interest expenses
Loss on disposal of property and equipment
Gain (loss) on sale of securities
Gain on securities contributed to employee retirement benefit trust
Amortization of the difference arising from changeof the accounting standard on accrued severance indemnities
Decrease (increase) in receivables, trade
Decrease in inventories
Increase in payables, trade
Increase in other assets
Decrease in other liabilities
Directors’ bonuses paid
Other

2000

2001

2001

¥13,054
1,665
311
81
(4,920)
4,241
(150)
(470)
57
68
(124)
—

¥ 9,117
1,746
536
170
2,019
—
—
(819)
35
47
—
(5,810)$ 73,584
14,092
4,326
1,372
16,295——(6,610)282
379—(46,893)

—
2,922
458
3,498
—
—
(182)
443
20,952462(57)(8,793)
12,5648,756(4,482)
2,064
801
(865)
(3,960)
(133)
(205)
9,017
751
(35)
(6,336)
3,397

70,670(36,174)
16,6586,465(6,981)(31,961)(1,073)(1,655)72,776
6,061(282)(51,138)
27,417

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 in short-term investments, net(48)
Increase in investment securities, net—
Acquisitions of property and equipment(7,018)Acquisitions of other assets(702)
Proceeds from sale of property
166
Increase in long-term loans(693)
Collection of long-term loans
1,120
Other
(651)
Net cash used in investing activities(7,826)
Cash Flows from Financing Activities:
Increase in short-term borrowings, net
265
Repayment of long-term debt
(20)
Redemption of notes with warrants(7,373)
Proceeds from exercise of warrants
6,214
Acquisitions of treasury stock(1,348)Cash dividends paid
(1,364)
Net cash used in financing activities(3,626)Net Increase in Cash and Cash Equivalents
1,112
Cash and Cash Equivalents at Beginning of Year34,887
Cash and Cash Equivalents at Beginning of Year Adjusted for Newly Consolidated Subsidiaries 5,893
Cash and Cash Equivalents at End of Year
¥41,892(1)(1,000)(1,386)
(490)
64
(627)
606
(1,368)(4,202)(8)(8,071)(11,186)(3,955)517(5,061)
4,891(11,041)(33,914)

308
(16)
—
—
(841)
(1,376)(1,925)(2,730)41,892311¥39,473

2,486
(129)
—
—
(6,788)(11,106)(15,537)(22,034)
338,1112,511$318,588

Supplemental Disclosure of Cash Flow Information:
Conversion of convertible bonds to common stock

¥

$

¥

See Notes to the Consolidated Financial Statements.

26

Thousands of
U.S. dollars (Note 1)

Millions of yen

27

97

—

—

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 prepared fromaccounts and records maintained in Japanese yen by Nippon COMSYS
Corporation (the “Company”) and its subsidiaries (together, hereinafter referred
to as the “Companies”) in conformity with accounting principles and practices generally accepted in Japan (hereinafter referred to as the “GAAP ofJapan”), which are different in certain respects as to application and disclosure requirements from International Accounting Standards. Also, the accompanying consolidated financial statements have been prepared from theconsolidated financial statements filed with the Ministry of Finance of Japanas required by the Securities and Exchange Laws of Japan. Certain reclassifications of account balances have been made so as to present the financial statements in a form that is more familiar to readers outside Japan.
The accounts and records of the Companies are maintained in Japaneseyen. The accompanying consolidated financial statements have been presented
in Japanese yen and have also been presented in U.S. dollars by translating all
Japanese yen amounts using the rate of ¥123.90 to US$1. The presentation ofsuch dollar amounts is solely for the convenience of the reader and is notintended 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,
2000 and 2001, include the accounts of the Company, Okoshi Denken Co.,
Ltd., Tokyo Denwa Shisetsu Co., Ltd., Tsuken Kiko Co., Ltd., COMSYS TechnoCo., Ltd., COMSYS Tec Co., Ltd., Taiei Seisakusho Co., Ltd., Tokyo Tsuken
Co., Ltd., and Nitto Tsuken Co., Ltd.
Effective from the year ended 31st March, 2001, COMSYS Tohoku TechnoCo., Ltd., COMSYS Kanto Kita Engineering Co., Ltd., COMSYS Kansai
Engineering Co., Ltd., COMSYS Kyusyu Engineering Co., Ltd., COMSYSNet Corporation and COMSYS Shinetsu Engineering Co., Ltd. have been
consolidated, since their aggregate 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 affectupon the total consolidated results of operations and assets. Investments inunconsolidated subsidiaries and affiliates are carried at cost due to theirimmateriality.
(b) Point of sales—construction contracts
Construction contracts of the Companies are accounted for by the completedcontract method. The accumulated cost of uncompleted construction is shownas “Accumulated cost of construction in progress” and the related billings(advances received) on uncompleted construction contracts are shown as“Advances received on construction in progress” in the accompanying balance
sheets.
(c) Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments, generally withoriginal 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 ofchanges in value because of changes in interest rates.
(d) Short-term investments and investment securities
Effective from the financial year beginning on 1st April, 2000, the GAAP ofJapan have required the classification of short-term investments and investment securities (except for “unconsolidated subsidiaries and affiliates”) of theCompanies into three categories as follows:i) Debt securities that are expected to be held-to-maturity: carried at accumulated cost using straight-line method.
ii) Other securities whose fair values are readily determinable: carried at fairvalue with unrealized gains or losses included in Stockholders’ Equity as“Unrealized gain on securities,” net of applicable income taxes.
iii) Other securities whose fair values are not readily determinable: carried atcost using moving-average method.
With respect to investments in unconsolidated subsidiaries and affiliates,
the Companies are carrying their amounts at cost, determined by the moving
average cost.
The effect of the change of the GAAP on financial instruments, primarily
as mentioned above, was to decrease “Income before income taxes and otheradjustments to net income” by ¥404 million (US$3,261 thousand).
(e) Accumulated cost of construction in progress
In connection with (b) above, “Accumulated cost of construction in progress”
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 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 arecharged to income as incurred.
(h) Leases
Financial leases that do not transfer ownership of the property to lessee areaccounted for as transactions of rent. Under the GAAP of Japan, financial
leases in which ownership of the property is deemed to be transferred to thelessee are treated as capital leases, while it is permitted to treat others as

28

operating leases if certain “as if capitalized” information is disclosed in thenotes 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 to reverse. For the
purpose of preparing consolidated financial statements, deferred tax assets
and liabilities also arose from the elimination of unrealized profits among theCompanies and the adjustment of allowance for doubtful receivables causedby 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 uponshareholders’ 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 based on the cash
dividends applicable to the respective years, including dividends to be paid
after the end of the year.

(b) Other securities whose fair value was readily determinable as at 31st March
2001 were as follows:
Millions of yen

Classification

Stocks¥1,144
Bonds anddebentures 1,133
Others
1,606
Total

Effective from the financial year ended 31st March, 2001, the Companies
changed the method of computing costs of securities investments from using
periodic average to using moving average. This accounting change was madefor the purpose of recognizing and measuring promptly gains or losses onsales of securities investments. As a result of this accounting change, “Income
before income taxes and other adjustments to net income” increased by ¥158
million (US$1,275 thousand).

¥ 83¥1,464 $ 9,233 $3,253$ 670 $11,816

37
2

53
207

1,117
1,401

9,145
12,962

428
1,670

¥442

¥343

¥3,982$31,340 $3,567

298
16

9,015
11,308$2,768 $32,139(c) Proceeds from sales of other securities were ¥128 million (US$1,033 thousand) for the year ended 31st March 2001. On those sales, gross realized
gains computed on the moving average cost basis were ¥4 million (US$32
thousand) and gross realized losses were ¥0 million (US$0 thousand).
(d) Other securities whose fair value was not readily determinable as at 31st
March 2001 mainly consisted of unlisted stocks amounted to ¥1,395 million (US$11,259 thousand).
(e) Debt securities that are expected to be held-to-maturity and other securities with maturity date as at 31st March 2001 consisted of the following:Book value
Millions of yen
Within 5 yr.

Bonds and debentures:Japanese government bonds ¥ 978
Corporate bonds—
Others47
OthersInvestment trust
—
Total

¥

¥1,025

99
1,093
150

Within 10 yr. After 10 yr.

¥—
7
—

¥—
17
—

148

—

—

¥1,490¥ 7¥17

Thousands of U.S. dollars

4. Short-term Investments and Investment Securities-other

Due: Within 1 yr.

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 conform with the certain reclassification of account balances made to present the consolidated
financial statements, consists of the following:(a) Debt securities that are expected to be held-to-maturity whose fair value
was readily determinable as at 31st March 2001 were as follows:
Millions of yen
Book
Fair
value
value

Thousands of
U.S. dollars
Book
Fair
value
value

¥1,077$8,692¥1,100¥3,883

Cost

Gross
Gross
Unrealized Unrealized Fair
Gains
Losses Value¥403

Due: Within 1 yr.

3. Accounting Changes

Japanese government bonds

Thousands of U.S. dollars

Gross
Gross
Unrealized Unrealized Fair
Cost
Gains
Losses Value$8,87829

Bonds and debentures:Japanese government bonds $7,894
Corporate bonds—
Others379
OthersInvestment trust—
Total$8,273

Within 5 yr.

$

799
8,822
1,211

Within 10 yr. After 10 yr.

$—
56
—

$ —
137
—

1,194

—

—

$12,026$56$137

In July 2000, the Company contributed certain marketable equity securities toan employee retirement benefit trust, with no cash proceeds thereon. The fairvalue 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).

5. 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, 2001, was approximately 1.3 per cent.
At 31st March, 2001, short-term bank loans of two consolidated subsidiaries amounting to ¥300 million (US$2,421) in the aggregate were secured. A
summary of assets pledged as collateral consisted of the following:

Buildings and structures,
net of accumulated depreciation
Land

Millions of yen

Thousands of
U.S. dollars

¥186
34

$1,501274¥220$1,775

At 31st March, 2000 and 2001, long-term debt consisted of the following:

31st MarchMillions of yen
2000
2001

0.3 per cent yen unsecured convertible
bonds due 2003

¥9,312¥9,312Thousands of
U.S. dollars
2001

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 make the contributions.
As mentioned in Note 4 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 theliability if all eligible employees were to voluntarily terminate employment on
the balance sheet date. In addition, six of the subsidiaries have funds for tax
qualified defined benefit pension plans and two of the subsidiaries have noncontributory and funded defined benefit pension plans.
Effective from the financial year beginning on 1st April, 2000, the GAAP
of Japan have required providing “accrued severance indemnities” based on
the projected benefit obligation and fair value of pension assets. The effect of
this change was to decrease “Income before income taxes and other adjustments to net income” by ¥3,131 million (US$25,270 thousand).
“Accrued severance indemnities” recognized in the consolidated balance
sheet as at 31st March 2001 were as follows:
Millions of yen

Thousands of
U.S. dollars

Projected benefit obligation
Fair value of plan assets¥(47,763)
36,579$(385,496)
295,230

Unfunded benefit obligation
Unrecognized actuarial difference(11,184)
7,831(90,266)
63,204

Net amount recognized¥ (3,353)$ (27,062)$75,157

Convertible bonds
At 31st March, 2001, unsecured convertible bonds consisted of the following:
The original amount issued at 24th June, 1996
¥10,000 million
Balance as at 31st March, 2001
¥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, 2001
¥1,435(US$11.58)
The number of shares of common stock required for conversion of the above
unsecured convertible bonds outstanding at 31st March, 2001, at the 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.

6. 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, lengthof service and conditions under which the termination occurs. With respect todirectors and corporate auditors of the Companies, lump-sum severance“Accrued severance indemnities” in the consolidated balance sheet as at 31st
March 2001 also includes the provision for accrued severance indemnities for
directors and corporate auditors of the Companies amounted to ¥416 millions(US$3,358).
Net pension cost of the plans included in the consolidated statements ofincome and retained earnings for the year ended 31st March 2001 were as
follows:
Millions of yen

Thousands of
U.S. dollars

Service cost
Interest cost
Expected return of plan assets
Amortization of the difference arisingfrom change of the accounting standard
Amortization of unrecognizedactuarial difference
Amortization of unrecognized priorservice cost (negative)¥ 2,671
1,261(1,693)$21,558
10,177(13,664)

8,756

70,670

—

—

(219)

(1,768)Net pension cost

¥10,776$86,973

Unrecognized actuarial difference are amortized and charged to income on astraight-line method from a succeeding year of the incurrence over a certain
years within the average remaining years of service of employees at theincurrence.
Significant assumption used to calculate the above-mentioned amount wereas follows:• Allocation method of benefit obligation
Straight-line method• Discount rate
3.0%
• Expected rate of return on plan assets
5.8%• 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.

7. Contingent Liabilities

Deferred tax assets and liabilities of the Companies as of 31st March, 2000
and 2001, primarily consisted of the following:
Millions of yen
2000
2001

Deferred tax assets:
Accrued bonuses¥1,204
Accrued enterprise tax
196
Accrued severance indemnities
657
Accrued prior service cost
1,781
Allowance for doubtful receivables—
Write-down of investments inunconsolidated subsidiaries—
Provision for possible losses arising fromoverseas investments
606
Others426

At 31st March, 2000 and 2001, contingent liabilities consisted of the following:
Millions of yen
2000
2001

31st March

Guarantee of loans borrowed by:Thai Telecommunications Engineering
Co., Ltd.
COMSYS-TTEC J.V.
COMSYS Philippines, Inc.
Other

Thousands of
U.S. dollars
2001¥2,008
2,458
680
131

¥1,093—955
455$ 8,822
—
7,708
3,672

¥5,277¥2,503$20,202

Valuation allowance
Deferred tax liabilities:
Deferred gain on exchange of lands
Unrealized gain on securities
Net deferred tax assets

¥ 682
71
2,715
—
469

$ 5,505573
21,913
—
3,785

386

3,115

—
395

—
3,188

4,870
—

4,718
(52)

38,079
(420)

4,870

4,666

37,659

(57)
—

(91)
(21)

(734)
(170)

(57)

(112)

(904)

¥4,813¥4,554$36,755

9. Leases as Lessee

8. 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, 2000
and 2001. The effective tax rate reflected in the accompanying consolidated
statements of income and retained earnings for the year ended 31st March,
2000, differs from 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 reflectedin the consolidated statements of income for the ended 31st March, 2001,
primarily consisted of the following:
Statutory tax rate of the Company
Effects of:
Expenses permanently not deductible for income tax purpose
Dividend income deductible for income tax purpose
Other, net

42.0%

Effective tax rate

47.2%

4.0
(0.5)
1.7

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, 2000 and 2001, which
would have been reflected in the consolidated balance sheets if capitalized,
were as follows:

31

Thousands of
U.S. dollars
2001

31st MarchMillions of yen
2000
2001

Acquisition costs
Accumulated depreciation¥1,167684¥1,511
755$12,195
6,093

Net book value

¥ 483

¥ 756

$ 6,102

Lease payments relating to financial leases accounted for as transactions ofrent amounted to ¥221 million and ¥315 million (US$2,542 thousand) for theyears ended 31st March, 2000 and 2001, respectively.
Obligation (including the interest portion thereon) under financial leases
at 31st March, 2000 and 2001, were as follows:
Thousands of
U.S. dollars
2001

31st MarchMillions of yen
2000
2001

Due within one year
Due after one year

¥209
274

¥319
437

$2,575
3,527

¥483

¥756

$6,102

Total

30

Thousands of
U.S. dollars
2001

Report of Independent Certified Public Accountants

10. Segment Information
The Companies’ operating results consisted of two business segments. Information by business segment for the years ended and as of 31st March, 2000
and 2001, were summarized as follows:

For the year ended/as of 31st MarchMillions of yen
2000
2001

(a) Sales, operating expenses and operating income
Construction business:
Sales to outside customers¥213,870 ¥205,515
Operating expenses
200,315 195,050
Operating income
Other business:
Sales to outside customers
Operating expenses
Operating income
Total:
Sales to outside customers
Operating expenses
Operating income$1,658,717
1,574,254¥ 13,555 ¥ 10,465$¥ 17,880 ¥ 16,705
15,876
15,542$ 134,826
125,439¥ 2,004 ¥ 1,163$

84,463¥231,750 ¥222,220
216,191 210,592$1,793,543
1,699,693¥ 15,559 ¥ 11,628$¥188,961 ¥188,250
1,664
1,746
7,776
2,010

93,850$1,417,231
13,301
14,964102,139791
1,259$1,519,370
14,092
16,223

8TH FLOOR NO.10 MORI BUILDING
1-18-1 TORANOMON MINATO-KU
TOKYO 105-0001 JAPANCERTIFIED PUBLIC ACCOUNTANTS
公認会計士桜友共同事務所

To the Board of Directors,
Nippon COMSYS Corporation

We have examined the consolidated balance sheets of Nippon COMSYS Cor poration and its
consolidated subsidiaries as of 31st March, 2000 and 2001, and the related consolidated statements
of income and retained earnings and cash flows for each of the two years ended 31st March, 2001, all
ex p r e s s e d i n J a p a n e s e ye n . O u r ex a m i n a t i o n s we r e m a d e i n a c c o r d a n c e w i t h a u d i t i n g s t a n d a r d s ,9,387

procedures and practices generally accepted and applied in Japan and, accordingly, included such

12. Other Income and Expenses

tests of the accounting records and such other auditing procedures as we considered necessary in the“Other, net” in “Other Income (Expenses)” consisted of the following:(b) Assets, depreciation and capital expenditures
Construction business:
Assets¥175,299 ¥175,595
Depreciation
1,576
1,648
Capital expenditures
7,188
1,854
Other business:
Assets
13,662
12,655
Depreciation
88
98
Capital expenditures
588
156
Total:
AssetsDepreciation
Capital expenditures

Thousands of
U.S. dollars
2001

Under the Commercial Code, an amount equivalent to at least one-half ofproceeds from issues of shares shall be accounted for as an addition to thecommon stock account at a minimum of ¥50 per share. The remaining portionof the proceeds is accounted for as an addition to “Additional paid-in capital.”
On 29th June 2000, the shareholders of the Company, pursuant to the regulations under the Commercial Code, authorized the Company to reacquire andcancel outstanding shares of its common stock with its retained earnings up toa total value not exceeding ¥685 million (US$5,529 thousand), on and after
30th June 2000.
For the year ended 31st March 2001, under this authorization, the Company retired 324 thousand shares of its common stock amounted to ¥683 million(US$5,513 thousand).
The authorized shares of the Company decreased by 324 thousand, from249,665 thousand to 249,341 thousand, due to the retirement of treasury stocks
as mentioned above.

•
•
•
•
•

Millions of yen
2000
2001

31st March

Thousands of
U.S. dollars
2001

Reversal from possible losses arising fromoverseas investments¥ 150 ¥ — $—Reversal of accrued severance indemnities
4,312
—
—
Amortization of the unrecognizedprior service cost
(7,100)——Gain on securities contributed to
employee retirement benefit trust—
5,810
46,893
Amortization of the difference arisingfrom change of the accounting standard
on accrued severance indemnities— (8,756) (70,670)
Write-down of investments and other assets
(311)
(536)
(4,326)
Other
(13)
187
1,509

circumstances.
I n o u r o p i n i o n , t h e c o n s o l i d a t e d f i n a n c i a l s t a t e m e n t s r e f e r r e d t o a b ove p r e s e n t f a i r ly, t h econsolidated f inancial position of Nippon COMSYS Cor poration and its consolidated subsidiaries asof 31st March, 2000 and 2001, and the consolidated results of their operations and cash flows fore a c h o f t h e t wo ye a r s e n d e d 3 1 s t M a r c h , 2 0 0 1 , i n c o n f o r m i t y w i t h a c c o u n t i n g p r i n c i p l e s a n dpractices generally accepted in Japan (see Note 1) applied on a consistent basis except as follows:
As discussed in Note 3, Nippon COMSYS Corporation and its consolidated subsidiaries
changed its method of computing costs of securities investments from using periodic average tou s i n g m ov i n g a v e r a g e , w i t h e f f e c t f r o m t h e y e a r e n d e d 3 1 s t M a r c h , 2 0 0 1 . T h i s c h a n g e w a s
appropriately made from prompt measurement of gains or losses on sales of securities investments.
As a result of this accounting change, “income before income taxes and other adjustments to net
income” for the year ended 31st March, 2001 increased by ¥158 million.
As mentioned in Note 2(d) and 6, with effect from the year ended 31st March, 2001, accounting
principles and practices generally accepted in Japan on f inancial instruments and accrued severance
i n d e m n i t i e s we r e r ev i s e d . T h e e f f e c t o f t h e s e r ev i s i o n s we r e d e c r e a s e “ i n c o m e b e f o r e i n c o m etaxes and other adjustments to net income” for the year ended 31st March, 2001 by ¥404 million and¥3,131 million, respectively
T h e U. S . d o l l a r a m o u n t s , p r e s e n t e d s o l e ly f o r t h e c o nv e n i e n c e o f t h e r e a d e r s , h av e b e e ntranslated on the basis stated in Note 1.

¥ (2,962) ¥(3,295) $(26,594)

13. Subsequent Events
11. Shareholders’ Equity
The Commercial Code of Japan (the “Commercial Code”) provides that an
amount of not less than 10 per cent of the amount of cash dividends and bonuses
to directors paid be appropriated as legal reserve until such reserve equals 25
per cent of common stock. This reserve is not available for dividends but may,subject to shareholders’ approval, be used to reduce deficits or may be capitalized subject to a resolution of the Board of Directors. The amount of the reserveof the Company included in “Retained earnings” as at 31st March, 2001, was¥1,983 million (US$16,005 thousand).

On 28th June, 2001, the shareholders of the Company approved the following
appropriations of retained earnings:
Millions of yen

Cash dividends
Transfer to legal reserve
Bonuses to directors
Reacquisition and cancellation ofcommon stock

32

Masatoshi Yoshino

Eiji Miyashita
Certified Public Accountants of Japan

28th June, 2000

Thousands of
U.S. dollars

¥955
110
51

$7,708
888
412

¥685

$5,52933

Hideo Niwa

Supplemental Non-Consolidated Financial Information

Organization Chart

Nippon COMSYS Corporation
Years ended 31st March, 2000 and 2001

As of July 1, 2001

Millions of yen

Net sales
Operating income
Net income
Total assets
Shareholders’ equity

Thousands of
U.S. dollars

Change

2000

2001

2001

(%)

¥226,146
13,626
5,818
171,802110,400¥215,586
10,402
4,283
174,118
112,529$1,740,000
83,95534,568
1,405,311
908,224–4.7%–23.7%–26.4%
1.3%
1.9%

•
•
•
•
•

West Japan Headquarters
Corporate Planning Division
General Affairs Department
Public Relations OfficeYen

Per share:
Net income— Basic— Diluted
Cash dividends

U.S. dollars

Finance & Accounting Department
Auditing Department¥ 42.78
40.92
10.00

¥ 31.27
29.98
12.00

$

0.25
0.24
0.10

–26.9%–26.7%
20.0%

Personnel Department
Welfare Department

Senior Management Committee

Human Resources Department

Note: For convenience only, the accompanying Japanese yen figures for 2001 have been translated into U.S. dollars at the rate of ¥123.90 to $1, the rate
prevailing on 30th March, 2001.

Materials Control & Procurement Department

Board of Directors

Net Sales(¥ Billions)

Net Income(¥ Billions)

250

Sales and Marketing Headquarters

8.0

NTT Sales Division
NTT DoCoMo Sales Division

6.0

200

President

Consolidated

Government Sales Division

Consolidated

150

NTT Sales Division II

4.0

Corporate Sales Division
Non-Consolidated

Non-Consolidated
100

2.0

Statutory Auditors

Solutions Business Division
Safety & Quality Control Division

97 98 99 00 01

Engineering Division

97 98 99 00 01

Engineering and Construction Headquarters
80

Total Assets(¥ Billions)

Access Engineering Division

Net Income per Share
(¥)

190

Network Engineering Division
60

Mobile Engineering Division

160

Information Systems Division
Consolidated

40

Consolidated

130

Customer Services Department
Architecture Department

Non-Consolidated

Non-Consolidated
100

20

Overseas Division

97 98 99 00 01

97 98 99 00 01

34

35

Corporate Information

Corporate Directory

As of March 31, 2001

Nippon COMSYS Corporation
As of March 31, 2001

•
•
•
•
•

Head Office:Transfer Agent:

17-1, Higashigotanda 2-chome, Shinagawa-ku
Tokyo 141-8647, Japan
Tel: 81 (3) 3448-7031

The Mitsubishi Trust and Banking Corporation
Securities Department
11-1, Nagatacho 2-chome
Chiyoda-ku, Tokyo 100-0014

Hokkaido, Tohoku, Akita, Fukushima, Kantominami,
Kantonaka, Tochigi, Shinetsu, Niigata, Tokai,
Hokuriku, Kansai, Chugoku, Shikoku, Takamatsu,
Kyushu, Okinawa

Bangkok, Thailand Tel: 66 (2) 319-5551

Establishment:
1951

Common Stock:
Authorized: 249,341,000 shares
Issued: 136,842,252 shares

Number of Shareholders:
5,753

Paid in Capital:¥31,141 million

Stock listings:
Common stock—Tokyo, Osaka

Hokkaido

Akita
TohokuFukushima
Niigata
Shinetsu

Tochigi
Kantonaka
TOKYO
Kantominami

Head Office
BranchOkinawa

Bangkok Liaison Office36

100.0%

Construction of telecommunications ¥ 30 million
facilities
Telecommunications engineering¥ 60 million
and electrical engineering
Design of telecommunications¥ 40 million
facilities and civil engineering projects
Construction of telecommunications ¥ 90 million
facilities
Planning and consultation with regard ¥ 50 million
to information-processing technology
Construction of telecommunications ¥ 20 million
facilities
Construction of telecommunications ¥ 15 million
facilities
Construction of telecommunications ¥ 15 million
facilities
Construction of telecommunications ¥ 50 million
facilities
Construction of telecommunications ¥ 30 million
facilities
Design, manufacturing, and sales¥ 60 millionof telecommunications equipment
Construction of telecommunications ¥ 54 million
facilities
Construction of telecommunications ¥ 60 million
facilities

100.0

Tokyo, JapanTokyo Denwa Shisetsu Co., Ltd.

Tokyo, Japan

Main Clients:

COMSYS Tec Co., Ltd.

Tokyo, JapanCOMSYS Tohoku Techno Co., Ltd.

Miyagi, JapanCOMSYS Kanto Kita Engineering Co., Ltd.

Tochigi, JapanCOMSYS Kansai Engineering Co., Ltd.

Osaka, JapanCOMSYS Kyusyu Engineering Co., Ltd.

Fukuoka, JapanCOMSYS Net Corporation

Tokyo, JapanCOMSYS Shinetsu Engineering Co., Ltd.

Nagano, Japan

Taiei Seisakusho Co., Ltd.

Kanagawa, JapanTokyo Tsuken Co., Ltd.

Tokyo, Japan

Nitto Tsuken Co., Ltd.

Tokyo, Japan

Major Non-Consolidated Subsidiaries
COMSYS Tusan Co., Ltd.

Tokyo, Japan

Sales of construction materials¥ 60 million

94.0

Nippo Kensetsu Kogyo Co., Ltd.

Tokyo, Japan

Civil engineering¥ 50 million

54.5

COMSYS Business Service Co., Ltd.

Tokyo, Japan

Construction of telecommunications
facilities¥304 million

100.0

Overseas Affiliates
COMSYS Thailand Co., Ltd.

Bangkok, Thailand

B15,000 thousand

48.0

Thai COMSYS & Jackson Co., Ltd.

Bangkok, Thailand

B 2,000 thousand

49.0

COMSYS Philippines, Inc.

Manila, Philippines

P12,500 thousand

30.0

CMC Engineering SDN. BHD.

Kuala Lumpur,
Malaysia

Technological consulting
and engineering services
Technological consulting
and engineering services
Technological consulting
and engineering services
Technological consulting
and engineering services

RM1,053 thousand

30.0

The Bank of Tokyo-Mitsubishi, Ltd.
The Mitsubishi Trust and Banking Corporation
The Dai-Ichi Kangyo Bank, Ltd.
The Fuji Bank, Limited
The Sanwa Bank, Limited
The Sumitomo Mitsui Banking Corporation

Takamatsu
Shikoku

Planning and consultation with regard ¥ 50 million

Okoshi Denken Co., Ltd.

Bank References:

Kansai Tokai

Chugoku
KyushuHokuriku

Percentage
Owned (%)

Parent company
3,588
Consolidated subsidiaries 1,298
Total
4,886

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
Telephone Organization of Thailand (Thailand)
Ministry of Communications (Kuwait)
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)

Overseas Liaison Office:Consolidated Subsidiaries and Affiliates
COMSYS Techno Co., Ltd.
Tokyo, Japan

Paid-in
CapitalPrincipal BusinessTokyo, Japan

Number of Employees:

Branches:

Location

Tsuken Kiko Co., Ltd.

Overseas Division:
Tel: 81 (3) 3448-7181
Fax: 81 (3) 3440-5941

Company Name

96.4
85.3
81.7
76.0
75.0
68.0
100.0
52.0
100.0
49.7
39.2
33.3

*This Company’s financial data is available on the Internet at URL http://www.comsys.co.jp/
Printed on paper certified as recycled by the Eco Mark Officeof the Japan Environment Association.

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