Minato Mirai Grand Central Tower
4-6-2, Minatomirai, Nishi-ku,
Yokohama 220-8765, Japan
Tel: (81)45-225-7777 (voice guidance)
http://www.chiyoda-corp.com/en/

Seize the Moment,
Open Up New Frontiers
Corporate Philosophy
Enhance our business in aiming for harmony between energy and the environment,
and contribute to the sustainable development of a society as an integrated engineering company
through the use of our collective wisdom and painstakingly developed technology.

ANNUAL REPORT FY2015
For the year ended March 31, 2016
(As of August 2016)

Selected in the FTSE4 Good
index series

Profile

INDEX
2

Financial Highlights

3

To Our Shareholders

4

At a Glance

5

Qualitative Information on
Business Performance

8

Topics10

Commitment to CSR

16

Corporate Governance18

Corporate Information20

Directors and Officers

21

Stock Information

Founded in 1948 in the post war period to reconstruct Japan,
Chiyoda started its engineering business for domestic projects
mainly in petroleum refining, gas processing and petrochemical
fields, and expanded into overseas projects in the 1960s. Since
then, Chiyoda has been and is growing steadily under the corporate
philosophy of enhancing its business by aiming for harmony
between energy and the environment and contributing to thesustainable development of society.

Aiming to raise corporate value, the Group announced in 2013
a four-year business plan, “Seize the moment, Open up new
frontiers”. The Medium-Term Management Plan includes a growthstrategy and an operating foundation strategy. The Group aims tomaintain growth as a constant provider of the value and service
required by society and customers, by identifying the current trend.
The operating foundation strategy provides the base for achieving
the sustainable growth of the Group.

The management team and employees of the Group will also
reflect the aspects of Environment, Social and Governance (ESG)
to fulfil Corporate Social Responsibility (CSR) when implementing
each action plan.

Courtesy of Qatargas Operating Company Limited.
CHIYODA CORPORATION ANNUAL REPORT FY2015

1

Financial Highlights

To Our Shareholders

2016

2015

2014

2013

2012

¥611,548¥480,979¥446,147¥398,918¥254,675

Cost of revenue

570,028

435,327404,685

356,402

215,783

Operating income

16,015

21,466

21,07925,11324,197

Income before income taxes
and minority interests

14,46022,012

22,53826,74723,543

Net income attributable toowners of the parent

3,375

11,02913,447

16,077

14,364

Total assets¥528,219¥515,839¥475,288¥435,379¥365,795

Total equity

202,128

208,405

198,031

189,356

168,737

146.3

151.0

156.3

166.3

165.5

Years Ended March 31,

For the Year (Millions of yen)
Revenues

At Year-End (Millions of yen)

Current ratio (%)
Per Common Share (yen)¥Earnings per share (EPS)

13.03

¥

42.58

¥

51.91

¥

62.06

¥

55.44

772.89796.89758.31727.24648.95

10.0

13.0

16.0

19.0

17.0

Return on assets (ROA)

3.1

4.5

5.0

6.4

6.6

Return on equity (ROE)

1.7

5.5

7.0

9.0

8.9

Book value per share (BPS)
Dividend per share
Ratios (%)

Note: Yen amounts are rounded down to the nearest million and percentages are rounded to the nearest unit.

Revenues(Billions of yen)

611.5

398.9

446.1

Operating Income

24.2(Billions of yen)

25.1
21.1

481.0

Net income
attributable toowners of the parent(Billions of yen)

21.5

16.0

14.4

16.1
13.4
11.0

254.7

3.4
2012

2013

2014

2015

2016

2012

2013

2014

2015

2016

2012

2013

2014

2015

2016

Forward-Looking Statements: This annual report contains forward-looking statements about Chiyoda Corporation’s outlook, plans, forecasts, results and other items that may take place inthe future. Such statements are based on data available as of May 2016. Unknown risks and other uncertainties that happen in the future may cause our actual results to be different fromthe forward-looking statements contained in this report. The risks and uncertainties include business and economic conditions, competitive pressure, changes in laws and regulations,addition or elimination of products, and exchange rate fluctuation, among others.

2

CHIYODA CORPORATION ANNUAL REPORT FY2015“ Take on new challenges
for sustainable growth.”
On behalf of the Chiyoda Group, I highly appreciate
your continued support over the past 12 months. I am
pleased to present our corporate overview for the fiscal
year 2015 which is in the latter stage of the current
Medium-Term Management Plan, "Seize the moment,
Open up new frontiers.”
While implementing various measures in accordancewith the growth strategies and corporate system definedin the Plan, we have reached some milestones which leadto sustained growth in various fields.
In the field of LNG, a core segment of our business, inaddition to ongoing large projects in Australia, Russia andNorth America, we expanded our business into new areas
like Mozambique, to make our position more stable. In
the fields of petroleum refineries, petrochemicals andmetals, we have won large projects in Saudi Arabia andIndonesia. In the pharmaceutical and life science industries, we made steady progress by receiving an order for adevelopment project on regenerative medicine which
has the potential for further orders.
In addition, the Group established EMAS CHIYODA
Subsea Ltd. to perform Engineering, Procurement,
Construction and Installation (EPCI) for subsea projects.
Hereby, the Group is able to provide services for all phasesin the subsea value chain development from planning tocommissioning. This joint venture is one of our strategic
actions to expand our business portfolio.
We have implemented systems for data management and human resource training, which were
established as part of the plan to strengthen our corebusiness operations. We will continue to take on new
challenges for our further growth by making the bestuse of such systems.

Shogo Shibuya President & CEO, Chiyoda Corporation
Our financial results, however, deteriorated as a resultof an increase in construction costs for some petroleum
related projects and the worsening performance of overseas group companies; especially our affiliate in the U.K.,
which was affected by a prolonged drop in oil prices. In
order to recognize the management’s responsibility, theGroup resolved to cut management compensation. In
addition, to regain the trust of stakeholders, we will makeevery effort to improve profitability through the sound
implementation of each project, as well as implementing
effective management measures in projects and groupcompanies’ operations.
Consequently, we have decided to pay a dividend of¥10 per share, in line with our earnings excluding impairment loss for the fiscal year 2015.
We ask all of our shareholders for your continued support in our ongoing efforts.
June 2016

CHIYODA CORPORATION ANNUAL REPORT FY20153

At a Glance

Qualitative Information
on Business Performance
Revenues

611.5

*3

(Billions of yen)Backlog of Contracts

403.6

1,165.0(Billions of yen)(Billions of yen)

Results of Operations
Analysis of Results

LNG

*4

New Orders366.8 60%

155.2 38%

860.3 74%

11.4 3%19.8 2%161.5 40%

198.6 17%31.0 5%32.7 8%32.4 3%52.8 9%42.8 11%53.9 5%

Gas Processing*1

22.1 4%*5

Petroleum and Petrochemicals

138.8 23%

Fine Industries*2*6

OthersMajor Projects in Progress(As of May 2016)

The global economic environment remained uncertain.
Emerging countries including China slowed down andgeopolitical risk in the Middle East increased. The destabilization of Europe due to the recurrent terrorist attacks
continued. In a nutshell, global markets were in turmoil.
Although oil prices, with an impact on the plant industry
and the Group’s
main business,showed a sign ofbottoming out, theyfluctuated due to theunwillingness toadjust production among oil-exporting countries. Under
those circumstances, our clients were prudent to proceedwith their investment plans. The Japanese economy
waxed and waned. Some capital investment was made,backed by a high level of corporate earnings andextremely low interest rates. The strong yen from the

Backlog of Contracts

1,165.0

beginning of the year and lower oil prices led to the market contraction.
Under such circumstances, the Group was concentrating on the initiatives designed to create sustainablegrowth by accelerating its growth strategy and operating
foundation defined in the Medium-Term Management
Plan beyond the mid-point of the 4-year term. The Group
had made progress toward the goal in the metal field
including new orders received for a titanium sponge
plant in Saudi Arabia followed by a large scale project inIndonesia. While keeping a strong presence in the conventional field, the Group also received a letter of intent
for a Liquefied Natural Gas (LNG) plant, although it was
subject to a Final Investment Decision (FID) to be made. In
parallel, the Group was set for expansion in new businessfields including offshore and upstream where EMASCHIYODA Subsea Ltd. was established to implement an
Engineering, Procurement, Construction and Installation(EPCI) business, new and renewable energy, including theHydrogen Supply Chain utilizing its own technologies,
and solar power generation utilizing photovoltaic andconcentrating solar power technology, and life science
like iPS related projects.

Yamal LNG
Courtesy of Laffan Refinery 2 Company Limited

Alaska LNG
New Ulaanbaatar
International Airport

Laffan Refinery Phase 2
Titanium Sponge Plant

Sakhalin II Tr.3

Nghi Son Refinery

RasGas Helium 3
RAPID

Mozambique Area 1

CHIYODA CORPORATION ANNUAL REPORT FY2015

Puerto La Cruz

Tangghu Tr.3

Jangkrik FPU

Abadi, FLNG
Ichthys*1: Classified as “Other Gas Related Works” in “Consolidated Financial Results”*2: Classified as “General Chemicals/Industrial Facilities” in “Consolidated Financial Results”*3: Courtesy of ExxonMobil PNG Limited*4: Courtesy of Shell*5: Courtesy of Solar Frontier K.K.
*6: Courtesy of Kashima Aromatics Co., Ltd.

4Golden Pass
Cameron LNG
Freeport LNG

New Bohol Airport

Copper Smelter
Mozambique Area 4

LNG Canada

LNG/GasPetrochemical/Refinery
Metal
Offshore
Infrastructure

EPC*/EPCm**/EPsCm***/EPCI****FEED*****/Feasibility Study*
EPC:
Engineering, Procurement and Construction** EPCm: Engineering, Procurement and Construction management*** EPsCm: Engineering, Procurement support and Construction management**** EPCI: Engineering, Procurement, Construction and Installation***** FEED: Front-end Engineering and Design

CHIYODA CORPORATION ANNUAL REPORT FY2015

5

Qualitative Information on Business Performance

The ongoing projects including LNG plants inAustralia, the USA and Russia, refinery plants in Vietnam,
Qatar and Venezuela, a Floating Production Unit (FPU) in
Indonesia, a Titanium Sponge plant in Saudi Arabia, airport projects in Mongolia and the Philippines, and LNG
receiving terminals and photovoltaic power generation
systems in Japan, all progressed on schedule.
Consequently, consolidated new orders for the periodamounted to 403,595 million yen (46.0% decrease compared to the same period of the previous fiscal year). The
backlog and revenue were 1,164,991 million yen (17.8%
decrease from the end of the previous fiscal year), and611,548 million yen (27.1% increase year on year) respectively. Operating income amounted to 16,015 million yen(25.4% decrease), ordinary income to 16,205 million yen(27.2% decrease), and profit attributable to owners of parent resulted in 3,375 million yen (69.4% decrease).
Operating income was lower than the forecast due tothe increase in construction costs to meet the delivery
schedule for some petroleum related projects, as well as
the worsening performance of overseas group companies including one in England and the prolonged tumblein oil prices. The profit attributable to owners of parent
was also lower, mainly due to an extraordinary loss
incurred by goodwill impairment in connection withacquisition of the shares of a group company in England.
With great regret about lower earnings, the Group isaiming to improve profitability, and recover stakeholders’trust by performing more rigorous management for profit
and loss and for the Group Companies.

Results by Business Segment
LNG Plants/Other Gas Related Works
The Group has been selected as an Engineering,
Procurement and Construction (EPC) contractor for an
LNG plant in Mozambique, contracts with the client for
which are being negotiated and will be finalized in thenear future. The EPC execution of LNG plants, two in the

6

CHIYODA CORPORATION ANNUAL REPORT FY2015

USA and one each in Russia and Australia and Front End
Engineering and Design (FEED) works for LNG plants in
Mozambique and the USA are in progress as planned. The
Group has completed the FEED work in Indonesia and iscurrently under negotiation for an EPC contract. The
Group has also completed the FEED work in Canada andis negotiating for an EPC contract with the client. The
Group Company in Qatar has been carrying out EPC workfor helium recovery facilities and the Engineering,
Procurement and Construction management (EPCm)
work for the maintenance and modification of the existing LNG and gas processing plants
built mainly by the Group. In Japan,
several EPC works on LNG receiving
terminals and the expansion/modification of the existing plants are in
progress.
LNG plants and other gas-related facilities constitutethe Group’s core business. In that regard, the Group will
pursue any such project globally.

Revenues

611.5

Refinery/Petrochemicals/Metal
Engineering, Procurement, Construction andCommissioning (EPCC) is progressing for a Residue Fluid
Catalytic Cracking (RFCC) project in Malaysia. EPC is ongoing for a refinery and petrochemical complex in Vietnam
and a refinery project in Qatar. Engineering, Procurement
support and Construction management (EPsCm) for
heavy oil upgrading facilities in Venezuela is going on.
Additionally, the Group Company in Singapore is performing project management under the Enterprise
Framework Agreement for downstream projects within
Asia. For metal fields, the Group has been awarded
Engineering and Procurement (EP) work for a Copper
Smelter project in Indonesia, in addition to the EPC work
for a Titanium Sponge Plant in Saudi Arabia.
In Japan, the Group continues to perform the EPC work
for modification to fortify existing facilities in the case of a
possible catastrophic event, a petrochemical plant andenergy saving measures among several facilities. The Groupalso continues to expand its sales activities in the petroleum
and petrochemical field.

Pharmaceutical/Biochemistry/General
Chemistry/Environment/Infrastructure
The Group has been moving forward with the EPC execution for a new international airport in Mongolia and a new
Bohol airport in the Philippines.
Meanwhile, the Group has also been responding tothe overseas expansion in Japanese clients’ businesses in
non-hydrocarbon fields. In Japan, the Group has won a
number of EPC projects for large-scale photovoltaic
power generation systems. The Group has been expanding its sales activities by enhancing its group operationsin this field. And the Group has been awarded EPC work
for a food factory to support food safety and hygiene
control. In the pharmaceutical industry, the Group has
been awarded EPC work for an advanced pharmaceuticalplant to manufacture injections, and been carrying out
EPC work for manufacturing facilities of active pharmaceutical ingredients, vaccine and bio-medicine plants
individually. The Group has been also gearing up for thelife science field as a growing market, marked by iPS cells
and regenerative medicine, applying our pharmaceuticaland medical expertise.

New Business Fields
Chiyoda Corporation and Ezra Holdings Limited
established a joint venture named EMAS CHIYODA
Subsea Ltd. on March 31 of this year, in order to accelerate
its expansion of the Offshore & Upstream business field.
The transaction has been completed within this fiscal
year. In parallel, the Group’s strategic alliance partner,
Xodus Group has been providing integrated services in
the offshore and upstream field for resource explorationcompanies worldwide. The Group hereby has been set toprovide a value chain for resource development on offshore and upstream for all the phases from design to
EPCI, including operation and maintenance.
As for new energy fields, the Group has developed its
own technology for transporting and delivering a large
volume of hydrogen. The Group has been actively collaborating with various parties in order to achieve ahydrogen-based society.
Moreover, the Group has been selected as an EPC
contractor for Japan’s first demonstration plant to produce and supply renewable jet and diesel fuels, and iscurrently doing basic design work.

Outlook for the Next Fiscal Year
With its highest backlog of contracts more than
one trillion yen, the group will continue to work
diligently on the execution of existing large
projects in Australia, U.S., and Russia. To
materialize the Medium-Term Management Plan,
the Group will also continue to accelerate its
growth strategy to diversify the business portfolio
by expanding new business fields. In considerationof these circumstances and assuming an exchange

rate of ¥110/US dollar, its forecast for the fiscal year
ending March 31, 2017 include 470.0 billion yen inconsolidated new orders and 550.0 billion yen on
consolidated revenues. Its forecast for the
consolidated operating income is 18.0 billion yen,consolidated ordinary income is 14.0 billion yen,and the consolidated profit attributable to ownersof parent is 5 billion yen.

CHIYODA CORPORATION ANNUAL REPORT FY2015

7

Topics
Growing in the LNG industry
Chiyoda Group’s large-scale EPC projects are proceedingwell. For the projects in Australia and Russia, modules arebeing produced across the world. We are employing themodular construction method to enhance theconstruction efficiency and adapt to the harsh local
construction environment. As for the Australian project,some modules are already completed and assembled
onsite. For the project in North America, earthworks andfoundation construction are in progress.
In those ongoing projects, we are trying to maintain
good communication with clients and project partners
and trying to be flexible about detailed requirements on
specifications and schedules.
Chiyoda has been chosen as a contractor in a
number of LNG projects planned around the world,
including ones in Mozambique and Canada. As theworld’s No. 1 leading contractor, we are continuing with
our efforts to find new markets and to open a newfrontier to achieve further growth.

Enhancing global operations
We are strengthening the performance and thecompetitiveness of our overseas affiliates to achieve asystem of local production for local consumption. The

Courtesy of FLNG Liquefaction LLC
Freeport LNG Plant site, Texas, USA

8

CHIYODA CORPORATION ANNUAL REPORT FY2015

division of work on a worldwide basis by regional
strategic bases, included in the Medium-Term
Management Plan, is beginning to take shape.
Chiyoda Almana Engineering LLC, Chiyoda’s Qatarbased affiliate, is a pioneer in Chiyoda Group’s global
operations and is active in local-based Project Lifecycle
Engineering (PLE).
In 2015, Chiyoda Almana renewed two (2) long-term
service agreements while maintaining a total of eight (8)ongoing agreements by the end of 2015. In addition, it
won an order for a helium plant EPC project and started
to implement the project.
In Southeast Asia, the affiliates have been
demonstrating the capability to implement projects. The
refinery upgrading project in the Philippines wascompleted in 2015. Chiyoda Singapore (Pte) Limited won
the order and Chiyoda Philippines Corporation
implemented the project, working with other affiliates.

Setting up an EPCI venture for offshore
construction, the first of its kind in Japan
Chiyoda Group is defining the offshore and upstream
business as a growth strategy in the Medium-Term
Management Plan. We are putting our efforts into theoffshore and upstream business to develop it into one of
our pillars, second to LNG.

Chiyoda has set up EMAS CHIYODA Subsea Ltd. (ECS),a joint venture specializing in Engineering, Procurement,
Construction and Installation (EPCI) services in the subsea
construction field, and it came into operation on April 1,
2016. That, coupled with the capital alliance with the
UK-based consultancy Xodus, has completed a value
chain system covering all the phases of the offshore
and upstream field from conceptual design to its EPCI
and its operation.
We will expand the business of ECS by making themost of our client network, including oil majors, and ourcapability to implement large projects in addition to ourpast accomplishments. We believe the growth of thecompany will help ensure energy security at home
and abroad.

Winning orders for metal plant projects in
Saudi Arabia and Indonesia
In April 2015, Chiyoda won an order for the EPC service ofa titanium sponge production plant in Saudi Arabia. In
March 2016, Chiyoda won an order for a large-scale EPservice of a copper smelting plant in Indonesia.
Chiyoda Group has great experience in this field. We
are meeting the requirements of each client, utilizing ourcomprehensive technology, including environmental
protection as well as our expertise in improving smelting

and refining technologies and increasing production
capacity. We are aiming for further growth in this field, in
addition to the LNG, oil and petrochemical industries,
Chiyoda’s speciality, to create a well-balanced
corporate portfolio.

Growing in domestic businesses
While Chiyoda’s overseas businesses are greatly
expanding, its domestic businesses are steadily growing,
too. We are well regarded for our technological expertiseand responsiveness to individual client requirements. We
are continuing with our efforts to improve ontechnologies and work closely with domestic affiliates tomeet clients’ needs to further improve the Chiyoda
brand image.
The domestic businesses include two projects
completed in 2015: a large LNG project for Hitachi and a
new onshore shipping facility of oil products as part of
the Japanese government’s oil supply infrastructure
resilience project. We are also engaged in projects to help
shape our future. The projects include a demonstration
plant to produce and supply renewable jet and diesel
fuels, a state-of-the-art plant for regenerative medicine
using iPS cells, and projects related to renewable energy
and hydrogen-based society.

Courtesy of INPEX Operations Australia Pty Ltd
Large Scale module for Ichthys LNG, Australia

Most modernized and specialized vessel for subsea construction

Representatives from companies concerned with renewable jet and diesel fuels

CHIYODA CORPORATION ANNUAL REPORT FY2015

9Commitment to CSR
Our Mission

Chiyoda Group Corporate Philosophy

Chiyoda Group's CSR

Enhance our business in aiming for harmony between energy and the environment and contribute to the sustainable development of a society
as an integrated engineering company through the use of our collective wisdom and painstakingly developed technology.

Our Values

Chiyoda Group CSR Visions

As an integrated engineering company, the Chiyoda Group pledges tocontribute to the sustainable development of society through its businessactivities, and to constantly strive to increase corporate value and earn thetrust and understanding of all stakeholders by adhering to the following
principles.

CSR Vision 1 A Reliable Company
We strive to be a reliable company to our customers andother business partners by providing world-classtechnologies and knowledge.

Compliance with International Guidelines
ISO 26000
Core Subjects

CSR Vision 3 Social Contributions throughBusiness Activities
Through our engineering business in Japan and overseas,
we contribute to local communities in ways including
human resources development, technology transfer andenvironmental protection.

CSR Vision 5 Commitment to Fairness
We are dedicated to achieving even greater transparency
and stability by conducting our operations fairly inaccordance with the highest ethical standards.

Basis of Our Actions

CHIYODA CORPORATION ANNUAL REPORT FY2015

Activities in This Year

• Provide industrial plants that earncustomer trust through engineering ofoutstanding quality• Share our CSR principles with suppliers
and other business partners• Initiatives for a stable supply of energy and reduction of greenhouse gases• Contribution to diversification of energy sources• Plant construction that lives up to customer trust• Initiatives for enhanced awareness of information security management andthe training• Initiatives for supply chain management

The
environment

Principle 7: Businesses should support a precautionary
approach to environmental challenges;
Principle 8: undertake initiatives to promote greater
environmental responsibility; andPrinciple 9: encourage the development and diffusionof environmentally friendly technologies.

• Develop and provide environmentallyfriendly energy and conservation
technologies• Conduct business activities that
contribute to environmental conservation• Continuing research and development for a low-carbon society(energy conservation/ effective utilization of CO2)
• Promotion of business development towards a hydrogen-based society• Expansion and promotion of renewable energy• Execution of projects that consider environmental conservation• Implementation of biodiversity preservation activities

Community
involvement
anddevelopment—• Contribute to society through integrated
engineering business activities• Enhance social contribution activities by
providing knowledge and labor• Promotion and support of culture in the community• Contribution to local economic development and human resource development• Tie-ups and cooperation with educational institutions to educate the next
generation• Response to the Great East Japan Earthquake• Support for other major disasters

Human rights
Labor practices

Principle 1: Businesses should support and respect theprotection of internationally proclaimed
human rights; andPrinciple 2: make sure that they are not complicit inhuman rights abuses.
Principle 3: Businesses should uphold the freedom of
association and the effective recognition of
the right to collective bargaining;
Principle 4: the elimination of all forms of forced andcompulsory labour;
Principle 5: the effective abolition of child labour; andPrinciple 6: the elimination of discrimination in respectof employment and occupation.

• Create a lively and energetic working
environment and help employees
develop their talents• Instill in everyone involved that safety is acore value• Creation of pleasant work environments• Establishment and enforcement of a safety culture• Enhancement of human resource development systems• Establishment of crisis management systems• Promotion of diversity including active female participation• Conduct business activities based onstrict compliance and a high degree oftransparency• Conduct a thorough risk management
program• Compliance Reinforcement Plan and Group Company Liaison Meeting onCompliance established• Continuous compliance training and auditing• Promotion for better understanding of UN Global Compact• Thorough awareness of export controls• Establishment of "Chiyoda Corporation Corporate Governance Policy"• Establishment of the Audit and Supervisory Committee• BCP (Business Continuity Plan)

Organizational
governanceFair operating
practices

Principle 10: Businesses should work against corruption
in all its forms, including extortion andbribery.

Code of Conduct of the Chiyoda Group / Chiyoda Group Compliance Manual (Employee’s Practical Guide)
10

Action Policies—

CSR Vision 4 Respect for Human Rights
We are dedicated to respecting the human rights of all
people. We will create a corporate culture where thediversity, individuality and character of employees arerespected, where people are motivated to do their best,and of which employees and their families are proud.

and Sustainable Development Goals in their behaviors and also work withour business partners and other parties concerned to understand and comply
with the principles.
Our Group's basic stance towards communication in our business activities
is "Smile and Respect," meaning to smile to express a warm feeling and toshow respect to the other party, and we will continue to proactively engage
in CSR activities with the aim of being a reliable company for all stakeholders.

Consumer(customer)
issuesCSR Vision 2 Environmental Initiatives
We will work to remain an invaluable company to society
by utilizing refined technologies to promote harmony
between the global environment and economic andsocial activities.

UN Global Compact

We believe the Chiyoda Group's corporate social responsibility is to accurately
assess the current demands and deploy engineering to provide the value thatsociety requires for addressing global challenges such as poverty,
environmental issues and securing resources, consistent with our Group
Corporate Philosophy.
In this respect, we will have all of our employees reflect the principles ofsuch global guidelines as the ISO 26000 Core Subjects, UN Global Compact

Details of these philosophies, visions and guidelines can be viewed on the Chiyoda website.

http://www.chiyoda-corp.com/company/en/policy/index.html
CHIYODA CORPORATION ANNUAL REPORT FY2015

11

The Chiyoda Group’s CSR

CSR Vision 2

CSR Vision 3

Environmental Initiatives

Social Contributions through Business Activities

Photo: Reforestation in Kamaishi“SPERA Hydrogen®” System for Large-Scale
H2 Storage and Transportation Technology
The Japanese government has been promoting a “hydrogen society,” and Fuel Cell Vehicles (FCVs), hydrogen
refueling stations and residential fuel cells (ENE-FARM®)
have all been commercialized. A safe technology for thelarge-scale storage and transportation of hydrogen isrequired to increase the utilization of hydrogen energy.
Chiyoda completed a technical establishment of the“SPERA Hydrogen®” System through a demonstration
operation with a pilot plant in 2013, the first in the world.
Chiyoda received the “Jules Verne Award” from theInternational Association of Hydrogen Energy in 2014, thefirst Japanese business in the Award’s history. In 2015,
Chiyoda also received the “JIE Award” from the Japan
Institute of Energy, and the “Noguchi
Memorial Award” from the Japan
Petroleum Institute.
Chiyoda plans to play a role inresolving the issue of global warming through building a “hydrogensociety” with the “SPERA Hydrogen®”
System Technology.

Commitment to biodiversity
Chiyoda Group is participatingin the Japan Business and Biodiversity
Partnership. Our aim of “harmony between energy andthe environment” defined in our corporate philosophy
shares common points with the Vision 2050
“Living in harmony with nature” adopted at
the Convention on Biological Diversity(COP10).
Chiyoda Group is making the efforts
below for conservation of biodiversity.

(1) E fforts inbusiness operations• Carbon management
toward a low carbon society• Optimizing energy consumption,
detoxifying, reducing and recycling emissions and waste• Development of eco-friendly technologies(2) Efforts in CSR activities• “Chiyoda no mori (Chiyoda’s forest),” reforestation in
Kamaishi, Iwate Prefecture, as part of reconstruction
assistance for earthquake-stricken areas
The report on this activity is posted on the website ofGreen Wave launched by the UN Secretariat of theConvention on Biological Diversity.

Launching the first project to produce andsupply renewable jet and diesel fuels in JapanOn 1 December 2015, Chiyoda Corporation attended apress conference for “Launching the project to produce
and supply renewable jet and diesel fuels.”
It was sponsored by euglena Company, Limited at a
Haneda Airport hangar.
Our role is to build and complete a demonstration
plant to produce an ASTM-compliant renewable jet fueland a next-generation renewable diesel fuel.
Based on the knowledge, experience, and data to beacquired through the operation of the demonstration
plant, euglena is aiming to move on to a new program of
constructing a full scale commercial plant sometime in the 2020s.
Chiyoda will support theseprojects to the best of its ability.

CHIYODA CORPORATION ANNUAL REPORT FY2015

The Group has been supporting its members toparticipate in social activities, understanding that societyis the basis of our sustainable existence. The activities weengage in are mainly categorized as follows:
1. Educational aid in career development for students fromelementary school to university
2. Support to communities including disaster-stricken areas
3. Collaboration in social programs with NPOs , or othersocial welfare organizations
To ensure performing such activities in a sustainable
manner, we have established the “CSR Promotion Staff”*
system to encourage the participation of all Group
members. In FY 2015 as well, our members visited the
Tohoku areas hit by the Great East Japan Earthquake tocontinue the areas’ reconstruction support with theGroup’s monetary donations also made incommemoration of the fifth anniversary of the disaster.
More donations for the Kumamoto Earthquake in the
Kyushu area were solicited in the Group in April 2016.
*CSR Promotion Staff
CSR Promotion Staff are volunteer members who take the lead in CSR activities,
involving of employees in all the Chiyoda Group companies.

In educational aid, the following Chiyoda Group
companies received students to develop communication
skills and first hand technical knowledge for fostering
professionals capable of true leadership on a world stage
under the Coupling Internship Program:(1) Chiyoda Malaysia Sdn. Bhd. (CMSB) hosted 8 students
from University of Malaya and Osaka University(2) C hiyoda Almana Engineering LLC hosted 8 students
from Qatar University and Osaka University under thetheme of “Practical Global Talent Development System."Photo: Site visit at one of Petronas plants, Melaka Refinery

Main Activities in FY2015(Including domestic Group Companies)

Dispatch of lecturers to universities
18 people
Training for interns
78 people
Visiting seminars
7 times
Dispatch of volunteers to disaster-stricken areas 64 people
Community cleanup campaigns
95 people
Food aid as TABLE FOR TWO
1,782 meals
ECOCAP program for the purchase of vaccines For 267 people
Collaboration with NPO (Second Harvest Japan) 3 times
Support to challenged people with the Yokohama City Council of Social
Welfare• In-house sale events of goods made by challenged people: 7 times• Inviting 50 people from the Yokohama Blind Association to a concert

Image: Plant appearance

12

Sustainable activities for thecommunity as a corporate citizen

Photo: Support to Children Society in Singapore

CHIYODA CORPORATION ANNUAL REPORT FY2015

13

The Chiyoda Group’s CSR

CSR Vision 4

CSR Vision 5

Respect for Human Rights

Commitment to Fairness

Photo: Corporate SQEI Convention

Promotion of diversity
Chiyoda Group highly respects the diversity andindividuality of employees and their personalities. We aremaking efforts to create a supportive environment,
provide assistance and change the employees’ mentality
to help them make the most of their potential in theworkplace regardless of gender, nationality, age or religion.
As part of the efforts to promote diversity, Chiyoda isengaged in two major activities. One of them is a task
team aimed at changing the employees’ mentality about
female participation in the workplace. The task team,formed in 2014, gathers and exchanges information andorganizes lectures by outside lecturers. The team is seeking
to build a corporate culture and a system that enable
women to fulfill their potential without depending muchon their own efforts, supervisors’ decisions, the working
environment or the atmosphere. The team provides not
only female but also male employees with a chance toreview their ways of working in the light of development
and advancement of women in the workplace.
The other activity is the human rights working grouphosted by Global Compact Network Japan. We are discussing various subjects related to “businesses and humanrights” with other participants. We feed back what is discussed into our employee training to increase theirawareness of human rights. That will help promote
Chiyoda’s diversity. Those subjects include the clear
understanding of LGBT and the attitude toward LGBT people in recruitment.
* LGBT is an initialism for lesbian, gay, bisexual and transgender.

Promotion of a safety
culture through lessons learned of
excellent construction for domestic andoverseas projects
One of the Chiyoda Group’s CSR medium-term policies is toinstill in everyone involved the idea that safety is a corevalue. We are making efforts to make all the employees fully
understand that safety should be their number-one priority.
In order to share the knowledge and expertise fromboth outside and inside Chiyoda about Safety, Quality
and the Environment (SQE), the Group is holding a seriesof Corporate SQEI Conventions.
In July 2015, the 8th Convention titled “Promote a
Safety Culture through Lessons Learned about Excellent
Construction for Domestic and Overseas projects” was agreat success attended by more than 500 ardent participants including corporate management executives. Two(2) projects awarded by the incentive scheme of SQE activities in FY2014 were presented and their excellent activities
on safety management were shared by all the participants.
After the presentation, a panel discussion took place inorder to recognize and study each other from the view
points of common or different aspects for domestic andoverseas projects as well as the issues to be learned or
improved. Such panel discussion was also effective for the
persons not directly involved in the construction to imagine how important safety is for construction.
In that way, the Group will constantly make efforts toinstill the corporate policy “Safety is a core value.”

A risk survey conducted

The whistle blowing system
expanded into overseas subsidiaries
and affiliated companies

Chiyoda Corporation maps out a risk management planin accordance with the Corporate Risk Management
Policy established in 2015. We identify the risks weshould prioritize and carry out a plan-do-check-act(PDCA) cycle on the identified risks.
To identify the risks to be prioritized, a risk survey has
been conducted on more than 200 employees, including executives, by the Corporate Risk Management
Division. Those employees assessed 100 risks on a riskquestionnaire from three perspectives, impact, frequency and risk management. The questionnaire listed
risks to the Chiyoda Group in various aspects of its business, such as management, project implementation,
natural disaster, IT, information security, and complianceincluding corruption, human rights and harassment.
The departments in charge, the Corporate Risk
Management Division and other relevant departments
will work closely together to avoid those identified risks
or minimize the effects if the crises should ever arise.

Chiyoda Corporation has a whistleblowing system. The
system is aimed at early detection of illegal activities orunethical behavior by groups of people or individuals
and their remedy and prevention by handling information on such activities and behavior according to theestablished system.
The coverage of the whistleblowing system has
been expanded. It was introduced into 16 overseas
subsidiaries and affiliated companies in 2015. Until
then, the system had been adopted by Chiyoda
Corporation and eight domestic subsidiaries and affiliated companies only.
We offer those requesting consultation or whistleblowers convenience and protection. All subsidiaries
and affiliated companies, Chiyoda Corporation as theglobal headquarters, and law firms in Japan and overseas
serve as liaison points for those requesting consultationor whistleblowers. The liaisons are open to not only
Chiyoda Group's employees but also the employees of
the Group's business partners. Chiyoda Corporation has
also set up liaison points staffed by women.

BCP (Business Continuity Plan) drill
We conducted a BCP drill jointly with our domestic
subsidiaries on March 11, 2016. We conducted a real-time
simulation drill* assuming that an inland earthquake
measuring six on the Japanese scale of seven hit the Tokyo
Metropolitan area. All the participants actively gathered
information, analyzed it and took measures accordingly.
The results of the drill will be reflected in BCM(Business Continuity Management). We will analyze theproblems found during the drill. Based on the analysis, wewill revise the BCP to enhance its effectiveness. The BCP
drill will be held annually in the future.
* Real-time simulation drill: The participants receive information, or reports ondamage, and inquiries chronologically about the events likely to occur withinseveral days from a disaster. The participants analyze a wide variety of information flowing in simultaneously. Based on the information, the participants makedecisions and give instructions.

Photo: Medical Seminar during the celebration of International Women’s Day in Qatar

14

CHIYODA CORPORATION ANNUAL REPORT FY2015

Photo: BCP drill

CHIYODA CORPORATION ANNUAL REPORT FY201515

Corporate Governance
The Company pledges to constantly strive for sustainable growth and to enhance the corporate values of the Chiyoda Groupon a mid- to long-term basis. To achieve this goal, the Group established the “Chiyoda Corporation Corporate Governance
Policy” in October, 2015, which developed the Group’s basic views and guideline with regard to corporate governance. The
Group will continue to actively secure soundness and transparency of its corporate management through the policy.

Corporate Governance System
In order to further reinforce its corporate governancestructure, the Company has sifted to a “Company with
Audit and Supervisory Committee.”
The Company has established the Corporate Risk
Management Division, which presides over theCompliance Unit, the SQEI (Safety, Quality, Environment,
and Information Security) Management Unit, and the
Crisis Management Unit, and the Internal Audit Unit. The
Corporate Risk Management Division and the Internal
Audit Unit directly report to management to raise thequality and transparency of management, enable timely
response to stakeholders, and reinforce the risk
management and the compliance system.
To ensure speedy and accurate decision-making todeal with rapidly changing social and economic
environments, the Company has adopted the executive
officer system, which separates the functions of directors,
who are responsible for management supervision, fromthose of executive officers, who are responsible for the
execution of business operations.
By shifting to a Company with Audit and Supervisory
Committee, with the new functions, the Company will beable to improve and implement the soundness andtransparency of management and prompt decisionmaking, and further enhance its corporate value.

The Board of Directors and Meetings of theBoard of Directors
The Board of Directors is composed of 13 directors.
Important matters concerning the Company are reported
and resolved at meetings of the Board of Directors. The
Executive Committee, made up of the four representative
directors, examines matters before they are submitted for
resolution at meetings of the Board of Directors. It makes
decisions about business execution matters by unanimous
resolution.

16

CHIYODA CORPORATION ANNUAL REPORT FY2015

Audit and Supervisory Committee
The newly established Audit and Supervisory Committee
is composed of 3 directors (including 2 Independent
officers) as Audit and Supervisory Committee members
who closely monitor the execution of duties by directors
and executive officers. The Audit and Supervisory
Committee members attend meetings of the Executive
Committee and express their opinion when necessary. In
addition, their responsibilities include deciding thecontent of resolutions submitted to the General Meetingof Shareholders, such as the appointment or dismissal of
accounting auditors, auditing consolidated financial
documents in close cooperation with the accounting
auditors, and preparing audit reports.

Executive Officer System
Where necessary, executive officers cooperate withoutside specialists such as corporate lawyers in carryingout duties assigned to them at meetings of the Board of
Directors and the Executive Committee. Executive officers
provide regular progress reports at executive officer andExecutive Committee meetings attended by directors
and corporate auditors.

Development and Management of the Internal Control System
1. Framework of Compliance with Laws and Regulations

4. Framework to Ensure Efficiency
5. Framework of internal control in the Chiyoda GroupThe Chiyoda Group clearly sets forth the values to be shared by allgroup executives and employees in its corporate philosophy andthe Code of Conduct of the Chiyoda Group, while the Company
and the group companies conduct business based on close mutual
cooperation.

2. Framework of Information Retention and Management
3. Framework of Loss and Risk Management

6. Framework to Ensure the Effectiveness of Audits by
Audit & Supervisory Committee Members

The Company establishes a risk and crisis management framework
for each type of risk in accordance with basic policy regarding theCompany’s risk and crisis management, in-house regulations andvarious manuals. In addition, the Company establishes anorganization that constantly monitors risks throughout theCompany to centrally supervise the risk management activities
implemented by the risk managers assigned to each division.

7. Framework for Reporting to the Audit & Supervisory
Committee Members
8. Framework for Securing the Appropriateness ofFinancial Reporting

Corporate Governance and Internal Controls
General Shareholders’ Meeting
Election

Submit/ReportElection

ReportElection

Audit/Supervision

Reinforcing Internal Controls
The Chiyoda Group constantly conducts self-assessmentsof existing internal control functions and reinforcesinternal control systems. In addition, its Internal Audit Unit
as an autonomous unit performs the evaluations,
including auditing the development and operation of asuitable overall internal control framework and constituent
components, and submitting reports to the Executive
Committee. The unit aims to ensure the establishment of
an integrated framework of internal controls and a realtime monitoring system to the management.
Furthermore, the information management system
encompasses the Group companies, so that all important
information can be appropriately handled among all
employees and reported to the Board of Directors andthe Executive Committee.

The division in charge of risk supervision fulfills the crisis
management secretariat function in the event of a crisis and deals
with emergency situations, while it engages in constant activities
to prevent and manage risks including providing relevant
information and promoting awareness.
In terms of risk management associated with receiving contract
awards and executing awarded projects, which are the Company’s
core business, the Company develops several examination systems.
In addition, an organization is established to be responsible forinternal checking including cold-eye reviews and project audits.

The Company conducts business activities based on corporate
philosophy and the principles provided in the Code of Conduct of
the Chiyoda Group, by setting compliance with domestic andinternational laws and regulations and business execution inaccordance with corporate ethics as the top priority.
To enhance the framework of compliance with laws andregulations, the Company has established the Compliance
Committee chaired by a Representative Director, which reports on
the status of compliance and proposes improvements to the
Executive Committee, as necessary. In addition, by creating
relevant rules and manuals, conducting various training andproviding relevant information, the Company thoroughly raises theawareness of its executives and employees, as well as enhances theeffectiveness of compliance through the development of whistleblowing systems and consultation systems.

Board of Directors

Audit & Supervisory Committee

Directors(excluding Audit & Supervisory Committee Members)

Survey,Report Request
Election

Supervision

Election

Submit/ReportSupervision(advice) Submit/Report

Executive Officer Meeting

Executive Committee

Executive Officers

4 Representative Directors

Scheduled Reports(deliverables, etc.)

Organization
Staffing

Submit/ReportSubmit/ReportCompliance
Committee

Group
Companies(Risk Manager)

Self-Assessment

Audit Referral

ReportAccounting
AuditorReportFinancial
Audit

Internal Controls
Management Committee(ICMC)

ReportDepartment Internal Controls

Business Execution
Departments

ReportDirectors (Audit & Supervisory Committee Members)

Global Operation Unit

Internal Audit Unit
Corporate Risk Management DivisionCorporate Planning Unit
Corporate Services Unit, HR* Unit
Finance & Accounting Unit
Legal & Project Audit Unit

SQEI Management Unit
Compliance Unit
Crisis Management Unit
(Crisis Manager)*HR: Human Relations■ : Important organizations and arms of the Company■ : Departments with internal control functions

CHIYODA CORPORATION ANNUAL REPORT FY201517

Corporate Information(As of March 31, 2016)

Corporate Data

Global Network

Chiyoda Global Headquarters Minato Mirai Grand Central Tower
4-6-2, Minatomirai, Nishi-ku, Yokohama 220-8765, Japan
Tel: (81)45-225-7777 (voice guidance)
Established
January 20, 1948
Paid-in Capital¥ 43,396 million
Number of Employees
1,573 (Non-Consolidated)
5,866 (Consolidated)
Annual Fiscal Close
March 31
Shareholders’ Meeting
June

Organization Chart

Board of Directors(As of April 1, 2016)

Executive Committee

Chiyoda’s global network enables Project Lifecycle

SQEI Management Unit
Compliance Unit
Crisis Management Unit

Engineering Operation Unit
Gas & LNG Process Engineering Unit
Refinery, Petrochemical & New Energy
Process Engineering Unit
Integrity Management Unit
Mechanical Engineering Unit
Control System Engineering UnitElectrical System & Smart Grid
Engineering Unit
Piping Engineering Unit
Civil Engineering Unit

Corporate Planning & Management
Division
Corporate Planning Unit
IR, PR & CSR Sec.
Corporate Services Unit
Human Relations Unit
Finance & Accounting Unit
Legal & Project Audit Unit
Group Operation Unit
Business Development DivisionS trategic Business Planning &Administration Unit
Corporate Relations Sec.
Business Development Unit 1
Business Development Unit 2
Business Development & Planning Unit
Global Project Management Division
Project Administration Unit
Project Management Unit
IT Management Unit
Global Human Resource Planning Unit
		 Work Process Innovation Task Team		 Chiyoda Global Taskforce Team
Change the Mindset

Project Logistics & Construction Division
PLC* Planning & Administration Unit
Procurement Unit
Construction Unit
Commissioning Unit
Offshore & Upstream Project Operations
 ffshore & Upstream BusinessO
Development Unit
Offshore & Upstream Strategic Project
Development Unit
Offshore & Upstream Project Unit
Gas & LNG Project Operations No. 1
Gas & LNG Project Unit No. 1
Strategic Project Development Unit

Engineering Center
Project Execution Base

Xodus Group (Holdings) Ltd
Milan Representative Office
Chiyoda Corporation Netherlands B.V.

Secretarial OfficeInternal Audit Unit
Technology & Engineering Division

Sales Base
Procurement Center
Operation Support

Audit & Supervisory Committee

President

Corporate Risk Management Division

through to operation and maintenance. With a view tomeeting the ever-changing needs of our customers, weoffer services by utilizing local offices and groupcompanies with thorough knowledge of the latest local
and global circumstances in countries around the world.

Engineering to be offered all over the world. Chiyoda has
expanded its network in order to provide prompt support
for customers’ business activities on a global scale. Ourservices cover the entire life cycles of projects – fromplanning, engineering, procurement and construction

Beijing Office

Chiyoda International Corporation

Chiyoda Corporation (Shanghai)
Korea Representative OfficeDownstream & Non Hydrocarbon Project
Operations
Downstream & Chemical Project Unit
International Downstream and Transport
Infrastructure Project Unit
Metals & Mining Project Unit
Global Collaboration Unit

UK

The Netherlands
Italy

Korea

Saudi Arabia

ChAS & Life Science Project Operations
 hAS/Life Science Business Planning &C
Administration Unit
ChAS Marketing Unit
Advanced Process Engineering Unit
Plant Diagnosis Unit
Consulting Unit
Pharmaceutical Industries Project Unit
Space & Bio Engineering Unit

India

UAE

Technology Development, Investment
and Project Operations
TIP* Planning & Administration Unit
Strategic Business & Investment
Management Unit
Hydrogen Supply Chain Development
Unit
Green Infrastructure Project Unit
Environmental Project Unit
Technology Development Unit
Research & Development Center

Qatar

China

Japan
<Chiyoda Global Headquarters>

MyanmarPhilippines
Thailand
Malaysia
Singapore

USA

Chiyoda Philippines Corporation

Indonesia
BrazilMozambique

Chiyoda Mozambique Limitada
L&T-Chiyoda Limited

Australia
Chiyoda Oceania Pty Limited

PT. Chiyoda International Indonesia
Chiyoda Human Resources International (Pte) Limited
Chiyoda Singapore (Pte) Limited

Abu Dhabi Office

EMAS CHIYODA Subsea Ltd.

Chiyoda-CCC Engineering (Pte) Limited

Chiyoda Malaysia Sdn. Bhd.

Middle East Headquarters Doha Office

Chiyoda Sarawak Sdn. Bhd.

Chiyoda Almana Engineering LLC

Chiyoda (Thailand) Limited

Chiyoda Petrostar Ltd.

Chiyoda & Public Works Co., Ltd.

Chiyoda do Brasil Representações Ltda.

Gas & LNG Project Operations No. 2
Gas & LNG Project Unit No. 2
PLC: Project Logistics & Construction TIP: Technology Development, Investment and Project18

CHIYODA CORPORATION ANNUAL REPORT FY2015

CHIYODA CORPORATION ANNUAL REPORT FY2015

19

Directors and Officers

Stock Information(As of June 25, 2016)(As of March 31, 2016)

Authorized Shares
570,000,000
Capital Stock Issued
260,324,529
Number of Shareholders
20,434
Number of Shares per Unit 1,000
Transfer Agent of Common Stock
Mitsubishi UFJ Trust and Banking Corporation
1-4-5 Marunouchi, Chiyoda-ku, Tokyo

Number of
Shares Owned(Thousands of Shares)

Ratio of
Shares Owned(%)

Mitsubishi Corporation

86,931

33.39

Japan Trustee Services Bank, Ltd. (Trust account)

13,148

5.05

The Master Trust Bank of Japan, Ltd. (Trust account)

10,983

4.21

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

9,033

3.47

The Mitsubishi UFJ Trust and Banking Corporation

4,816

1.85

Trust & Custody Services Bank, Ltd.

3,221

1.23

Northern Trust Co. (AVFC) Re 15PCT Treaty Account

3,085

1.18

State Street Bank and Trust Company

2,946

1.13

Goldman Sachs Japan, Co., Ltd.

2,776

1.06

BNP Paribas Securities (Japan) Limited

2,441

0.93

Major Shareholders

12

9

8

5

3

1

6

11

2

7

13

4

10

Board of Directors
Representative Directors

Directors

President & CEO

Executive Vice President

Audit & Supervisory Committee Member

1. Shogo Shibuya
2. Keiichi Nakagaki
3. Hiroshi Ogawa

5. Katsuo Nagasaka
6. Masahiko Kojima
7. Ryosuke Shimizu
8. Arata Sahara

11. Mikio Kobayashi*
12. Hideaki Takaishi
13. Yukihiro Imadegawa*

Executive Vice President & CFO

Director

4. Masahito Kawashima

9. Nobuo Tanaka*
10. Tetsuji Nakagawa*Senior Executive Vice President

Executive Officers

20

Executive Vice President

Senior Vice President

Vice President

Tadashi Izawa

Masao Ishikawa
Akira Fujisawa
Yasumitsu Abe
Nobuyuki UchidaToshihiro Shimazaki Hiromi Koshizuka
Mamoru Nakano

Shuichi Wada
Hideo Matsui
Noriyuki Kasuya
Masao Fujiwara
Jinei Yamaguchi

CHIYODA CORPORATION ANNUAL REPORT FY2015

Monthly Stock Price Range
(Yen)
2,100

* External Director

Stock CodeISIN:
JP3528600004
SEDOL1: 6191704 JP
TSE:
6366

Share Price (left)

Breakdown by Shareholder

Total Number of
Shares Issued:

260,325
thousand• Financial Institutions• Securities Companies• Other Corporations• Foreign Investors and Others• Individuals and Otherson the Tokyo Stock Exchange

Volume (right) — Nikkei Stock Average (right)(Yen)
21,0001,400

14,000700

7,000(Thousandsof shares)
100,000

0

Toshiyuki Kariya
Hiroyuki Shimizu
Terunobu Iio
Hideaki Tomiku
Eisuke Oki

50,000
0
2011

2012

2013

2014

2015

2016

CHIYODA CORPORATION ANNUAL REPORT FY2015

21

Minato Mirai Grand Central Tower
4-6-2, Minatomirai, Nishi-ku,
Yokohama 220-8765, Japan
Tel: (81)45-225-7777 (voice guidance)
http://www.chiyoda-corp.com/en/

Seize the Moment,
Open Up New Frontiers
Corporate Philosophy
Enhance our business in aiming for harmony between energy and the environment,
and contribute to the sustainable development of a society as an integrated engineering company
through the use of our collective wisdom and painstakingly developed technology.

ANNUAL REPORT FY2015
For the year ended March 31, 2016
(As of August 2016)

Selected in the FTSE4 Good
index series

Minato Mirai Grand Central Tower
4-6-2, Minatomirai, Nishi-ku,
Yokohama 220-8765, Japan
Tel: (81)45-225-7777 (voice guidance)
http://www.chiyoda-corp.com/en/

Seize the Moment,
Open Up New Frontiers
Corporate Philosophy
Enhance our business in aiming for harmony between energy and the environment,
and contribute to the sustainable development of a society as an integrated engineering company
through the use of our collective wisdom and painstakingly developed technology.

Consolidated Financial Statements FY2015
For the year ended March 31, 2016, and Independent Auditor’s Report(As of August 2016)

Selected in the FTSE4 Good
index series

Consolidated Balance Sheet(March 31, 2016)

Chiyoda Corporation
Chiyoda Corporation
and Consolidated
and Consolidated
SubsidiariesSubsidiaries
Consolidated Consolidated
Balance SheetBalance Sheet
March 31, 2016
March 31, 2016

ASSETSASSETS

Thousands of Thousands of
U.S. Dollars U.S. Dollars
Millions of YenMillions of(NoteYen 1)(Note 1)
2016
2015
2016
2015
2016
2016 LIABILITIES AND
LIABILITIESEQUITY AND EQUITYCURRENT ASSETS:
CURRENT ASSETS:
and cashequivalents(Note 14)
Cash and cash Cashequivalents
(Note
14)
¥ 136,919
Short-term investments
Short-term(Noteinvestments
14)(Note 14)
7,795
Notes and accounts
Notesreceivable—trade
and accounts receivable—trade(Note 14)
(Note 14)35,651
Costs and estimatedCosts andearnings
estimatedon long-term
earningsconstruction
on long-term construction
contracts (Notes
contracts
4 and 14)
(Notes 4 and 14)
33,644
Costs of construction
Costs ofcontracts
constructionin processcontracts in process
35,053
Accounts receivable—otherAccounts receivable—other
7,112
Jointly controlled
Jointly
assetscontrolledof joint venture
assets of(Notejoint 14)venture (Note 14)
179,360
Deferred tax assets
Deferred(Notetax
11)
assets (Note 11)12,889Prepaid expenses
Prepaidand other
expenses and other
8,888
Allowance for doubtful
Allowanceaccounts
for doubtful accounts(2,285 )Total current assets
Total current assets
PROPERTY,
PLANT AND EQUIPMENT:PROPERTY, PLANT
AND EQUIPMENT:
Land
Land
Buildings and structures
Buildings and structures
Machinery andMachinery
equipmentand equipment
Tools, furniture,
Tools,
and furniture,
fixtures and fixtures
Construction inConstruction
progress
in progress
Total
Total
Accumulated depreciation
Accumulated depreciation
Net property,
plant and equipment
Net property, plantand equipment
AND OTHER ASSETS:
INVESTMENTSINVESTMENTS
AND OTHER ASSETS:
Investment
securities(Notes 5 and 14)
Investment securities(Notes5 and 14)
Investments inInvestments
and advances
in to
and
unconsolidated
advances to unconsolidated
subsidiaries andsubsidiaries
associated andcompanies
associated(Notecompanies
7)(Note 7)
Goodwill (NoteGoodwill
6)(Note 6)
Software
SoftwareAsset for retirement
Asset forbenefits
retirement(Note benefits
9)(Note 9)Other assets (NoteOther11)assets (Note 11)
Allowance for doubtful
Allowanceaccounts
for doubtful accounts
Total
investments
and other assets
Total investments
andother assets

455,030

136,919¥¥113,246
7,795
69
35,651
29,740$1,211,678¥ 113,246
68,985
69
315,499
29,74033,644
24,10035,05359,668
7,112
16,327
179,360
182,855
12,889
11,6978,888
6,930(2,285(56 ))

297,742
24,100310,20959,66816,327
62,942
1,587,264
182,855
114,064
11,69778,655
6,930(20,223(56 ) )

455,030
444,578

4,026,820
444,578

5,266
13,887635
7,439
22
27,251(13,309)

5,266
5,266
13,887
13,915
635
721
7,439
7,211
22
16
27,251
27,131(13,309))(12,304

46,602
5,266
122,899
13,9155,627
721
65,8397,211
195
16
241,164
27,131(117,782(12,304 ) )13,942

13,942
14,826

123,381
14,826

14,113

14,11323,940124,902
23,94029,650
3,931
7,079
94
4,755
(379 )

29,6508,547
3,931
12,034
7,079
7,393
94
33
4,755
4,717
(379))(231

262,395
8,547
12,03434,79562,6517,393
837
33
42,0884,717(3,359(231 ) )59,24759,24756,434524,31056,434CURRENT LIABILITIES:CURRENT LIABILITIES:
(Note
14)
$1,211,678 Short-term borrowings
Short-termborrowings(Note 14)
Current
of long-term
portiondebtof long-term(Notes 8 anddebt14)(Notes 8 and 14)
68,985 Current portion
Notespayable—trade
and accounts payable—trade(Note 14)
(Note 14)315,499 Notes and accounts
Advance receipts
Advanceon construction
receipts oncontracts
construction contracts
Income(Notetaxes 14)payable (Note 14)
297,742 Income taxes payable
Deposits received
310,209 Deposits received
Allowancecosts
for warranty
for completed
costs forworks
completed works
62,942 Allowance for warranty
Allowance
on construction
for losses oncontracts
construction contracts
1,587,264 Allowance for losses
Accruedand other
expenses and other
114,064 Accrued expenses
78,655(20,223 )Total current liabilities
Total current liabilities

TOTAL¥ 528,219¥ 528,219¥515,839$4,674,512¥515,839¥333
45
150,078
135,667
2,841
1,209
337
3,160
17,432

¥¥

991
333
45
51
150,078
137,652
135,667
123,869
2,841
1,366
1,209
3,352
337
364
3,160
3,988
17,432
22,703

$¥

2,950
991
405
51
1,328,130
137,652
1,200,593
123,869
25,145
1,366
10,702
3,352
2,988
364
27,9693,988
154,267
22,703$

311,106

294,339
311,106

2,753,153
294,3392,753,153

10,036
10,063
2,134
1,070
340
339
996
983
1,477
636

10,06388,814
18,886
1,070
3,013
339
8,820
983
13,079636

88,814
18,886
3,013
8,820
13,07913,093
14,985

132,614
13,093

132,61443,39643,396
37,112
37,112
115,839
115,831384,039
43,396
328,430
37,112
1,025,127
115,831384,039
328,430
1,025,127(1,422) )(1,405(12,585(1,405 ) )(12,585 )

2,386
7,218
(1,618) )(2,064
5,229
4,171
300
1,076
200,166
206,395
2,010
1,961

21,1207,218(14,324(2,064 ) )36,918
5,229
1,076
2,663
1,771,389
206,395
17,354
2,010

21,120(14,324 )
36,9182,663
1,771,389
17,354202,128

208,405
202,128

1,788,743
208,405

1,788,743¥ 528,219¥¥515,839
528,219$4,674,512¥ 515,839$4,674,512

4,026,820LONG-TERM LIABILITIES:LONG-TERM LIABILITIES:Long-term debtLong-term(Notes 8 and
10,036debt14)(Notes 8 and 14)
Liability for retirement
Liability forbenefits
retirement(Note benefits
9)(Note 9)2,134
Provisionof
forPCB
treatment
waste of PCB waste
340
46,602 Provision for treatment
Asset
obligations
retirement obligations
996
122,899 Asset retirement
Other
1,477
5,627 Other
65,839195
Total long-term
liabilities
14,985Totallong-term liabilities
241,164(117,782COMMITMENTS)
AND CONTINGENT
LIABILITIES LIABILITIESCOMMITMENTS
AND CONTINGENT(Notes 8, 13, 15
and 16)(Notes8, 13, 15 and 16)
123,381
EQUITY (NotesEQUITY
10 and (Notes
19):
10 and 19):
Common stock—authorized,
570,000 thousand
shares;Common stock—authorized,
570,000
thousand shares;
issued, 260,324issued,
thousandsharesin 2016 sharesand 2015
43,396260,324
thousandin 2016 and 2015
124,902
Capital surplusCapital surplus
37,112Retained earnings
115,839
262,395 Retained earnings
Treasury
cost, stock—at
1,340 thousand
cost, 1,340
sharesthousandin 2016 sharesand in 2016 and
34,795 Treasury stock—at
1,323 thousand
1,323
sharesthousandin 2015 shares in 2015
(1,422 )62,651comprehensive
income (loss): income (loss):
Accumulated
other comprehensive
837 Accumulated other
Unrealized gain
on available-for-salesecurities
2,386
Unrealized
gain on available-for-salesecurities
42,088Deferredderivatives
loss onunder
derivatives
hedge accounting
under hedge accounting(1,618 )(3,359 ) Deferred loss on
Foreign currencytranslation
adjustments
4,171
Foreigncurrencytranslation adjustments
Defined retirement
Definedbenefitretirement
plans benefit plans
300
524,310
Total
Total
200,166
NoncontrollingNoncontrollinginterests
1,961
interests
Total equity

TOTAL

Thousands of Thousands of
U.S. Dollars U.S. Dollars
Yen 1)
Millions of YenMillions of(Note(Note 1)
2016
2015
2016
2015
2016
2016

$4,674,512TOTAL

TOTAL

Total equity

2,950
405
1,328,130
1,200,593
25,145
10,702
2,988
27,969154,267

See notes to consolidated
statements.
See notes tofinancial
consolidated
financial statements.
-2-

1

Consolidated Financial Statements-2-

Consolidated Financial Statements2Consolidated Statement of Income

Consolidated Statement of Comprehensive Income

Chiyoda Corporation and Consolidated Subsidiaries

Chiyoda Corporation and Consolidated Subsidiaries

Consolidated Statement of Income
Year Ended March 31, 2016

Consolidated Statement of Comprehensive Income
Year Ended March 31, 2016

(Year Ended March 31, 2016)(Year Ended March 31, 2016)

Millions of Yen
2016
2015

Thousands of
U.S. Dollars(Note 1)
2016

Millions of Yen
2016
2015

Thousands of
U.S. Dollars(Note 1)2016

REVENUE¥ 611,548¥ 480,979$5,411,937

NET INCOME¥ 3,496¥ 11,212$ 30,944

COST OF REVENUE

570,028

435,327

5,044,498

41,52045,651

367,438

25,50524,185

225,712OTHER COMPREHENSIVE (LOSS) INCOME (Note 17):
Unrealized (loss) gain on available-for-sale securities
Deferred gain (loss) on derivatives under hedge accounting
Foreign currency translation adjustments
Defined retirement benefit plans
Share of other comprehensive (loss) income of associates(4,831 )441(1,135 )(775 )(83 )

2,298(2,712 )
2,815
1,364
142

(42,758 )
3,907(10,050 )(6,867 )(740 )

16,015

21,466

141,726(6,385 )3,908(56,509 )COMPREHENSIVE (LOSS) INCOME¥ (2,888 )¥ 15,121$ (25,564 )

2,484
2,686
(216 )(1,318 )(665 )

3,111

21,98523,777(1,912 )(11,668 )(5,890 )TOTAL COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests¥ (2,844 )(44 )¥ 14,722
398$ (25,174 )(390 )

See notes to consolidated financial statements.

Gross profit
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES(Note 12)
Operating income
OTHER (EXPENSES) INCOME:
Interest and dividend income
Gain on sales of investment securities
Interest expense
Equity in losses of associated companies
Foreign exchange loss
Loss on valuation of investment securities
Impairment loss (Note 6)
Other—net(255 )(783 )(1,182 )(258 )(4,431 )
(93 )

(85 )

(39,217 )(829 )(1,554 )545(13,755 )INCOME BEFORE INCOME TAXES

14,46022,012

127,971

INCOME TAXES (Note 11):
Current
Deferred

8,708
2,255

6,257
4,542

77,062
19,964

10,963

10,79997,026

3,496

11,21230,944

121

183

1,075

3,375

¥ 11,029

Other (expenses) income—net

Total income taxes
NET INCOME
NET INCOME ATTRIBUTABLE TO NONCONTROLLINGINTERESTS
NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT¥Yen
PER SHARE OF COMMON STOCK (Notes 2.z and 18):
Basic net income
Cash dividends applicable to the year

¥ 13.03
10.00$

Total other comprehensive (loss) income

29,869U.S. Dollars¥ 42.58
13.00

$0.12
0.09

See notes to consolidated financial statements.
-3-

3

Consolidated Financial Statements-4-Consolidated Financial Statements

4Consolidated Statement of Changes in Equity(Year Ended March 31, 2016)

Chiyoda Corporation
Chiyodaand Consolidated
CorporationSubsidiaries
and Consolidated Subsidiaries
Consolidated Statement
Consolidatedof Changes inStatement
Equity of Changes in Equity
Year Ended March 31, Year2016 Ended March 31, 2016
Thousands

Thousands

Outstanding
Number of
Shares ofCommonStock

Outstanding
Number of
Shares ofCommonCommon Capital
Common Retained
CapitalStock Stock
Surplus Stock
Earnings
Surplus

BALANCE, MARCH 31, 2014
BALANCE, MARCH 31, 2014
¥ 43,396259,014 ¥ 37,112¥ 43,396 ¥ 109,525¥ 37,112(APRIL 1, 2014, as previously(APRIL
reported)
1, 2014, as previously
259,014 reported)
Cumulative effect of accounting
Cumulative effect of accountingchange (Note 2.r)change (Note 2.r)Millions of Yen
Millions of Yen
Accumulated Other Comprehensive
AccumulatedIncome
Other Comprehensive(Loss)
Income (Loss)
Unrealized
Deferred
Unrealized
Deferred(Loss) GainGain(Loss) GainDefined
Gain onon onForeignon
ForeignDefinedCurrency
Currency
AvailableDerivatives
AvailableDerivatives
Retirement
Retirement
Treasury
Retained for-SaleTreasury
under Hedge
for-SaleTranslation
under Hedge
BenefitTranslation
Benefit
Noncontrolling
StockEarnings Securities StockAccounting
Securities
Adjustments
AccountingPlansAdjustmentsTotal Plans Interests Total¥ (1,390¥ 109,525)¥4,920 ¥ (1,390 )¥(579 )BALANCE, APRIL 1, 2014
BALANCE,(as restated)
APRIL 1, 2014
259,014(as restated)

43,396259,014

Net income attributableNet
to owners
income attributable to ownersof the parentof the parent
Cash dividends, ¥16.00 Cashper share
dividends, ¥16.00 per share
Purchase of treasury stock
Purchase of treasury stock(12 )Net change in the year Net change in the year
BALANCE, MARCH 31, 2015
BALANCE, MARCH 31,259,001
2015

108,94637,112
11,029(4,144 )(12 )43,396259,001

Net income attributableNet
to owners
income attributable to ownersof the parentof the parent
Cash dividends, ¥13.00 Cashper share
dividends, ¥13.00 per share
Purchase of treasury stock
Purchase of treasury stock(16 )Net change in the year Net change in the year
BALANCE, MARCH 31, 2016
BALANCE, MARCH 31,258,984
2016

37,112 43,396

37,112 43,396

115,83137,112(1,390108,946)(579 )
4,920

11,029(4,144 )(15 )(1,405115,831)(1,390 )

2,486

648

(579 )
197,451

11,029(4,144 )(15 )3,693 1,363

11,029 11,029(4,144 ) (4,144 )
(15 )
(15 )
391 3,693
4,084 391

11,029(4,144 )
(15 )
4,084

2,010 206,395 208,405 2,010

208,405

2,743(2,712 ) 1,363

2,743

7,218

(1,405 ) (2,064 ) 7,218

5,229(2,064 ) 1,076

5,229 206,395 1,076

3,375(3,367 )(16 )445(579 )¥ 198,031

1,619 195,831 197,451 1,619(2,712 ) 2,298

445 (4,831 ) (1,057 )(579 )

Total
Equity(287 ) 2,486 195,831 (287 )(15 )(4,831 )¥ 43,396258,984 ¥ 37,112¥ 43,396 ¥ 115,839¥ 37,112648 4,920

2,298

(16 )

Chiyoda Corporation
Chiyodaand Consolidated
Corporation
Subsidiaries
and Consolidated Subsidiaries

648 ¥ (287 ) ¥2,486 ¥ 196,411¥ (287 ) ¥1,619¥ 196,411 ¥ 198,031¥1,619(579 )

3,375(3,367 )(16 )648 ¥4,920 ¥2,486 ¥Total
Noncontrolling
EquityInterests(775 ) (1,057 )

3,375(3,367 )(16 )(6,219 ) (775 )¥ (1,422¥ 115,839)¥2,386 ¥ (1,422 )¥ (1,618 )¥2,386 ¥4,171 ¥ (1,618 )¥ 300 ¥4,171 ¥ 200,166¥ 300

3,375(3,367 )(16 )(49 ) (6,219 )

3,375(3,367 )(16 )(6,269 ) (49 )3,375(3,367 )(16 )(6,269 )¥1,961¥ 200,166 ¥ 202,128¥1,961¥ 202,128

Consolidated StatementConsolidatedof Changes inStatement
Equityof Changes in Equity
Year Ended March 31, 2016
Year Ended March 31, 2016

BALANCE, MARCH 31, 2015
BALANCE, MARCH 31, 2015

CommonStock

Thousands of U.S. DollarsThousands(Note 1) of U.S. Dollars (Note 1)
Accumulated Other Comprehensive
Accumulated
IncomeOther(Loss)
Comprehensive Income (Loss)
DeferredUnrealized
Deferred
Unrealized
Gain onLoss on Gain onForeign Loss on
Defined Foreign
Defined
Derivatives
CurrencyDerivatives
AvailableAvailableRetirement Currency
Retirement
CapitalCommon RetainedCapital TreasuryRetained for-Sale Treasury
under Hedgefor-Sale
Translation
under Hedge
Benefit Translation
Benefit
Noncontrolling
Surplus Stock EarningsSurplus
Stock EarningsSecurities Stock
Accounting
Securities
Adjustments
Accounting
Plans Adjustments
Total
Plans Interests Total$ 384,039$ 328,430$ 384,039$1,025,054$ 328,430 $ (12,437$1,025,054)$ 63,879 $ (12,437$ (18,266))$ 63,879$ 46,275 $ (18,266$9,530)Net income attributable toNetownersincome attributable to ownersof the parentof the parent
Cash dividends, $0.12 perCash
sharedividends, $0.12 per share
Purchase of treasury stockPurchase of treasury stock
Net change in the year Net change in the year
BALANCE, MARCH 31, 2016
BALANCE, MARCH 31, 2016

$ 384,039

29,869(29,796 )29,869(29,796 )(147 )-5-(147 )(42,758 )-5-3,942 (42,758 )(9,357 )

3,942(6,867 )$ 328,430$ 384,039$1,025,127$ 328,430 $ (12,585$1,025,127)$ 21,120 $ (12,585$ (14,324))$ 21,120$ 36,918 $ (14,324$2,663)

Noncontrolling
Total
Equity Interests$ 46,275$1,826,505$9,530 $ 17,794$1,826,505$1,844,299$ 17,794
29,869(29,796 )(147 )(9,357 )(55,040 )(6,867 )Total
Equity$1,844,299

29,869 29,869(29,796 ) (29,796 )(147 )(147 )(439 ) (55,040 ) (55,480 ) (439 )(Continued)

29,869(29,796 )(147 )(55,480 )(Continued)$ 36,918$1,771,389$2,663 $ 17,354$1,771,389$1,788,743$ 17,354$1,788,743

See notes to consolidated See
financialnotes tostatements.
consolidated financial statements.

5

Consolidated Financial Statements

Consolidated Financial Statements

6Consolidated Statement of Cash Flows(Year Ended March 31, 2016)

Chiyoda Corporation and Consolidated Subsidiaries

Chiyoda Corporation and Consolidated Subsidiaries

Consolidated Statement of Cash Flows
Year Ended March 31, 2016

Consolidated Statement of Cash Flows
Year Ended March 31, 2016

Millions of Yen
2016
2015
OPERATING ACTIVITIES:
Income before income taxes
Adjustments for:
Income taxes paid
Depreciation
Impairment loss
Amortization of goodwill
Increase in allowance for doubtful accounts
Decrease in allowance for warranty costs for completed
works
Decrease in allowance for losses on construction contracts(Decrease) increase in liability for retirement benefits
Foreign exchange loss (gain)—net
Equity in losses of associated companies
Gain on sales of investment securities
Loss on valuation of investment securities
Changes in operating assets and liabilities:(Increase) decrease in trade notes and accounts
receivable, and costs and estimated earnings onlong-term construction contracts
Decrease (increase) in costs of construction contracts inprocess
Increase (decrease) in trade notes and accounts payable
Increase in advance receipts on construction contracts
Decrease (increase) in accounts receivable—other
Decrease (increase) in jointly controlled assets of joint
ventureDecrease in deposits received(Increase) decrease in interest and dividend receivable
Other—net
Total adjustments
Net cash provided by (used in) operating
activities—(Forward)-7-

7

Consolidated Financial Statements

Thousands of
U.S. Dollars(Note 1)
2016

Millions of Yen
2016
2015
Net cash provided by (used in) operating activities—(Forward)¥ 14,460¥ 22,012$ 127,971(1,673 )
3,589
4,431
1,256
2,387

(12,550 )3,569(14,811)31,762
39,217
11,12021,125(21 )(826 )(117 )
813
1,318(2,686 )(170 )(47 )
100(499 )
783

1,469
216

(186 )(7,315 )(1,037 )
7,197
11,668(23,777 )258(16,491)

21,217(145,944 )

24,543
13,293
12,184
5,158(25,282 )(9,759 )43,019(3,637 )

217,194
117,641
107,830
45,6463,501(2,108 )(812 )(6,673 )41,065(55,246 )(1,710 )109(7,997 )(46,157 )

30,987(18,659)(7,192 )(59,053)
363,413¥ 55,526¥ (24,145 )$ 491,385(Continued)¥ 55,526

INVESTING ACTIVITIES:Net increase in time deposits
Purchases of property, plant and equipment
Purchases of intangible assets
Payments for purchases of investment securities
Proceeds from sales of investment securities
Payments of loans receivable
Proceeds from collections of loans
Other—net(7,739 )(806 )(1,801 )(21,998)
5,463(382 )
489
25

Net cash used in investing activities¥ (24,145 )Thousands of
U.S. Dollars(Note 1)
2016
$ 491,385(605 )
118
161(68,489 )(7,140 )(15,941 )(194,680 )
48,346(3,387 )
4,330
228(26,750)(5,444 )(236,734 )(498 )(4 )(3,362 )(76 )(390 )(4 )(4,139 )(34 )(4,413 )(41 )(29,752 )(680 )(3,942 )(4,569 )(34,888 )FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS(1,159 )2,101(10,264 )NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS

23,673(32,057 )

209,498

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

113,246

145,303

1,002,180

CASH AND CASH EQUIVALENTS, END OF YEAR

¥ 136,919¥ 113,246$1,211,678

FINANCING ACTIVITIES:Net decrease in short-term borrowings
Repayments of long-term debt
Payments of cash dividends
Other—net
Net cash used in financing activities(1,441 )(2,431 )(1,245 )See notes to consolidated financial statements.

-8-(Concluded)

Consolidated Financial Statements

8Notes to Consolidated Financial Statements(Year Ended March 31, 2016)

Chiyoda Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Year Ended March 31, 2016
1.

BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

Investments in the remaining unconsolidated subsidiaries and associated companies are statedat cost. If the equity method of accounting had been applied to the investments in thesecompanies, the effect on the accompanying consolidated financial statements would not bematerial.

The accompanying consolidated financial statements have been prepared in accordance with theprovisions set forth in the Japanese Financial Instruments and Exchange Act and its related
accounting regulations and in accordance with accounting principles generally accepted in Japan("Japanese GAAP"), which are different in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards.

Most of the foreign consolidated subsidiaries have a December 31 year-end which does notaccord with that of the Company. As a result, adjustments have been made for any significant
transactions which took place during the period between the year-end of these subsidiaries andthe year-end of the Company.

In preparing these consolidated financial statements, certain reclassifications and rearrangements
have been made to the consolidated financial statements issued domestically in order to present
them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications
have been made in the 2015 consolidated financial statements to conform to the classifications
used in 2016.
The consolidated financial statements are stated in Japanese yen, the currency of the country inwhich Chiyoda Corporation (the "Company") is incorporated and principally operates. The
translations of Japanese yen amounts into U.S. dollar amounts are included solely for theconvenience of readers outside Japan and have been made at the rate of ¥113 to $1, theapproximate rate of exchange at March 31, 2016. Such translations should not be construed as
representations that the Japanese yen amounts could be converted into U.S. dollars at that or any
other rate.

The excess of the cost of acquisition over the fair value of the net assets of an acquired
subsidiary at the date of acquisition is amortized over a period of 5 to 20 years.
All significant intercompany balances and transactions have been eliminated in consolidation.
All material unrealized profit included in assets resulting from transactions within the Group isalso eliminated.
b.

Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated
Financial Statements—The Accounting Standards Board of Japan (the "ASBJ") issued ASBJ
Practical Issues Task Force ("PITF") No. 18, "Practical Solution on Unification of Accounting
Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements" which wasrevised in March 2015 to reflect revisions of the relevant Japanese GAAP or accounting
standards in other jurisdictions. PITF No. 18 prescribes that the accounting policies andprocedures applied to a parent company and its subsidiaries for similar transactions and events
under similar circumstances should in principle be unified for the preparation of theconsolidated financial statements. However, financial statements prepared by foreignsubsidiaries in accordance with either International Financial Reporting Standards or generally
accepted accounting principles in the United States of America (Financial AccountingStandards Board Accounting Standards Codification) tentatively may be used for the
consolidation process, except for the following items that should be adjusted in the
consolidation process so that net income is accounted for in accordance with Japanese GAAP,
unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of
actuarial gain or loss of pensions that has been recorded in equity through othercomprehensive income; (c) expensing capitalized development costs of R&D; and(d) cancellation of the fair value model of accounting for property, plant and equipment andinvestment properties and incorporation of the cost model of accounting.

c.

Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity
Method—ASBJ Statement No. 16, "Accounting Standard for Equity Method of Accounting forInvestments" which was revised in line with the revisions to PITF No. 18 above requires
adjustments to be made to conform the associate's accounting policies for similar transactions
and events under similar circumstances to those of the parent company when the associate's
financial statements are used in applying the equity method unless it is impracticable todetermine such adjustments. In addition, financial statements prepared by foreign associatedcompanies in accordance with either International Financial Reporting Standards or generally
accepted accounting principles in the United States of America tentatively may be used inapplying the equity method if the following items are adjusted so that net income is accounted
for in accordance with Japanese GAAP, unless they are not material: (a) amortization of
goodwill; (b) scheduled amortization of actuarial gain or loss of pensions that has beenrecorded in equity through other comprehensive income; (c) expensing capitalized
development costs of R&D; and (d) cancellation of the fair value model of accounting forproperty, plant and equipment and investment properties and incorporation of the cost modelof accounting.

Japanese yen figures less than a million yen are rounded down to the nearest million yen, except
for per share data.
U.S. dollar figures less than a thousand U.S. dollars are rounded down to the nearest thousand U.S.
dollars, except for per share data.
2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.

Consolidation—The consolidated financial statements as of March 31, 2016, include theaccounts of the Company and its 30 significant (30 in 2015) subsidiaries (together, the"Group").
Under the control and influence concepts, those companies in which the Company, directly or
indirectly, is able to exercise control over operations are fully consolidated, and thosecompanies over which the Group has the ability to exercise significant influence are accounted
for by the equity method.
Investments in seven (six in 2015) associated companies are accounted for by the equity
method.
EMAS CHIYODA Subsea Limited, newly acquired through share purchase, has been accounted
for by the equity method for the year ended March 31, 2016.

-9-9

Consolidated Financial Statements- 10 -

Consolidated Financial Statements

10Notes to Consolidated Financial Statementsd.

Business Combinations—In September 2013, the ASBJ issued revised ASBJ Statement No. 21,"Accounting Standard for Business Combinations," revised ASBJ Guidance No. 10, "Guidanceon Accounting Standards for Business Combinations and Business Divestitures," and revised
ASBJ Statement No. 22, "Accounting Standard for Consolidated Financial Statements." Major
accounting changes are as follows:

The above accounting standards and guidance for (a) transactions with noncontrollinginterest, (b) presentation of the consolidated balance sheet, (c) presentation of the consolidated
statement of income, and (e) acquisition-related costs are effective for the beginning of annual
periods beginning on or after April 1, 2015. Earlier application is permitted from the beginningof annual periods beginning on or after April 1, 2014, except for (b) presentation of theconsolidated balance sheet and (c) presentation of the consolidated statement of income. In
the case of earlier application, all accounting standards and guidance above, except for(b) presentation of the consolidated balance sheet and (c) presentation of the consolidated
statement of income, should be applied simultaneously.

(a) Transactions with noncontrolling interest—A parent's ownership interest in a subsidiary mightchange if the parent purchases or sells ownership interests in its subsidiary. The carrying
amount of noncontrolling interest is adjusted to reflect the change in the parent's
ownership interest in its subsidiary while the parent retains its controlling interest in its
subsidiary. Under the previous accounting standard, any difference between the fair valueof the consideration received or paid and the amount by which the noncontrollinginterest is adjusted is accounted for as an adjustment of goodwill or as profit or loss in the
consolidated statement of income. Under the revised accounting standard, such differenceis accounted for as capital surplus as long as the parent retains control over its subsidiary.

Either retrospective or prospective application of the revised accounting standards andguidance for (a) transactions with noncontrolling interest and (e) acquisition-related costs ispermitted. In retrospective application of the revised standards and guidance, the accumulated
effects of retrospective adjustments for all (a) transactions with noncontrolling interest and(e) acquisition-related costs which occurred in the past shall be reflected as adjustments to thebeginning balance of capital surplus and retained earnings for the year of the first-time
application. In prospective application, the new standards and guidance shall be applied
prospectively from the beginning of the year of the first-time application.

(b) Presentation of the consolidated balance sheet—In the consolidated balance sheet, "minority
interest" under the previous accounting standard is changed to "noncontrolling interest"
under the revised accounting standard.

The revised accounting standards and guidance for (b) presentation of the consolidatedbalance sheet and (c) presentation of the consolidated statement of income shall be applied to
all periods presented in financial statements containing the first-time application of the revised
standards and guidance.

(c) Presentation of the consolidated statement of income—In the consolidated statement ofincome, "net income before minority interest" under the previous accounting standard ischanged to "net income" under the revised accounting standard, and "net income" under
the previous accounting standard is changed to "net income attributable to owners of theparent" under the revised accounting standard.

The revised standards and guidance for (d) provisional accounting treatments for a businesscombination are effective for a business combination which occurs on or after the beginning ofannual periods beginning on or after April 1, 2015. Earlier application is permitted for abusiness combination which occurs on or after the beginning of annual periods beginning on
or after April 1, 2014.

(d) Provisional accounting treatments for a business combination—If the initial accounting for abusiness combination is incomplete by the end of the reporting period in which thebusiness combination occurs, an acquirer shall report in its financial statements
provisional amounts for the items for which the accounting is incomplete. Under theprevious accounting standard guidance, the impact of adjustments to provisional amounts
recorded in a business combination on profit or loss is recognized as profit or loss in theyear in which the measurement is completed. Under the revised accounting standard
guidance, during the measurement period, which shall not exceed one year from theacquisition, the acquirer shall retrospectively adjust the provisional amounts recognized at
the acquisition date to reflect new information obtained about facts and circumstancesthat existed as of the acquisition date and that would have affected the measurement of
the amounts recognized as of that date. Such adjustments shall be recognized as if theaccounting for the business combination had been completed at the acquisition date.
(e) Acquisition-related costs—Acquisition-related costs are costs, such as advisory fees orprofessional fees, which an acquirer incurs to effect a business combination. Under theprevious accounting standard, the acquirer accounts for acquisition-related costs by
including them in the acquisition costs of the investment. Under the revised accounting
standard, acquisition-related costs shall be accounted for as expenses in the periods inwhich the costs are incurred.

11

Consolidated Financial Statements- 11 -The Company applied the revised accounting standards and guidance for (a) transactions with
noncontrolling interest, (b) presentation of the consolidated balance sheet, (c) presentation of
the consolidated statement of income, and (e) acquisition-related costs above, effective April 1,
2015, and (d) provisional accounting treatments for a business combination above for abusiness combination which occurred on or after April 1, 2015. The revised accounting
standards and guidance for (a) transactions with noncontrolling interest and (e) acquisitionrelated costs were applied prospectively.
With respect to (b) presentation of the consolidated balance sheet and (c) presentation of theconsolidated statement of income, the applicable line items in the 2015 consolidated financial
statements have been accordingly reclassified and presented in line with those in 2016.
There was no impact from these accounting changes.
e.

Construction Contracts—Under Japanese accounting standards, construction revenue andconstruction costs should be recognized by the percentage-of-completion method if theoutcome of a construction contract can be estimated reliably. When total construction
revenue, total construction costs, and the stage of completion of the contract at the balance
sheet date can be reliably measured, the outcome of a construction contract is deemed to be
estimated reliably. If the outcome of a construction contract cannot be reliably estimated, thecompleted-contract method should be applied. When it is probable that the total construction
costs will exceed total construction revenue, an estimated loss on the contract should be
immediately recognized by providing for a loss on construction contracts.

- 12 -

Consolidated Financial Statements

12Notes to Consolidated Financial Statements

Concerning the construction contracts, the Group applies the accounting methods as follows:
Unbilled costs on contracts, which are accounted for by the completed-contract method, arestated as costs of construction contracts in process.
Payments received in excess of costs and estimated earnings on contracts, which areaccounted for by the percentage-of-completion method, and payments received on the othercontracts, are presented as current liabilities.
Costs of preparation work for unsuccessful proposals and other projects that are not realized
are charged to income, as incurred, and are included in cost of revenue.
f.

g.

Cash Equivalents—Cash equivalents are short-term investments that are readily convertible
into cash and that are exposed to insignificant risk of changes in value. Cash equivalents
include time deposits, certificates of deposit, and commercial paper, all of which mature or
become due within three months of the date of acquisition.
Investment Securities—All marketable securities are classified as available-for-sale securities
and are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported
in a separate component of equity. The cost of securities sold is determined based on themoving-average method.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-averagemethod or at amortized cost. For other-than-temporary declines in fair value, investment
securities are reduced to net realizable value by a charge to income.

h.

Short-Term Investments—Short-term investments are time deposits, which will mature threemonths after the date of acquisition. Short-term investments are exposed to insignificant riskof changes in value.

i.

Jointly Controlled Assets of Joint Venture—The jointly controlled assets of the joint venture
consist of jointly controlled cash recognized based on the Company's share of the venture.

j.

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

k.

Property, Plant and Equipment—Property, plant and equipment are stated at cost.
Depreciation is computed by the declining-balance method, except for buildings owned by theCompany that are depreciated using the straight-line method, at rates based on the estimateduseful lives of the assets. The range of useful lives is from 8 to 57 years for buildings andstructures, from 4 to 17 years for machinery and equipment, and from 4 to 15 years for tools,
furniture, and fixtures. Equipment held for lease is depreciated by the straight-line method
over the respective lease periods.

l.

13Long-Lived Assets—The Group reviews its long-lived assets for impairment whenever events orchanges in circumstance indicate the carrying amount of an asset or asset group may not berecoverable. An impairment loss is recognized if the carrying amount of an asset or asset groupexceeds the sum of the undiscounted future cash flows expected to result from the continued
use and eventual disposition of the asset or asset group. The impairment loss would bemeasured as the amount by which the carrying amount of the asset exceeds its recoverable
amount, which is the higher of the discounted cash flows from the continued use and eventual
disposition of the asset or the net selling price at disposition.

Consolidated Financial Statements- 13 -

m. Software—Software for internal use is amortized on a straight-line basis over its estimateduseful life (five years at the maximum).
n.

Other Assets—Intangible assets are carried at cost less accumulated amortization, which is
calculated by the straight-line method over their estimated useful lives.

o.

Allowance for Warranty Costs for Completed Work—The allowance for warranty costs forcompleted work is provided based on past rate experience.

p.

Allowance for Losses on Construction Contracts—The allowance for losses on construction
contracts is provided for an estimated amount of probable losses to be incurred in future years
in respect of construction projects in progress. When there are losses on completed-contract
method applied contracts, the allowance for losses on construction contracts is offset against
the costs of construction contracts in process in the balance sheet.

q.

Provision for Treatment of PCB Waste—Provision for treatment of PCB (Poly ChlorinatedBiphenyl) waste is provided based on estimated costs of the treatment for PCB products andequipment as well as their collection and transportation fees.

r.

Retirement and Pension Plans—The Company and consolidated subsidiaries have funded or
unfunded defined benefit pension plans and defined contribution pension plans for
employees. Certain consolidated subsidiaries have defined benefit corporate pension plans orseverance lump-sum payment plans, and calculate retirement benefit expenses by using thesimplified method.
The Company and its domestic consolidated subsidiaries account for the liability for
retirement benefits based on the projected benefit obligations and plan assets at the balance
sheet date. The projected benefit obligations are attributed to periods on a benefit formulabasis. Actuarial gains and losses are amortized on a straight-line basis over 10 years within the
average remaining service period. Past service costs are amortized on a straight-line basis over
10 years within the average remaining service period.
In May 2012, the ASBJ issued ASBJ Statement No. 26, "Accounting Standard for Retirement
Benefits" and ASBJ Guidance No. 25, "Guidance on Accounting Standard for Retirement
Benefits," which replaced the accounting standard for retirement benefits that had been issued
by the Business Accounting Council in 1998 with an effective date of April 1, 2000, and theother related practical guidance, and were followed by partial amendments from time to timethrough 2009.
(a) Under the revised accounting standard, actuarial gains and losses and past service costs
that are yet to be recognized in profit or loss are recognized within equity (accumulated
other comprehensive income), after adjusting for tax effects, and any resulting deficit or
surplus is recognized as a liability (liability for retirement benefits) or asset (asset for
retirement benefits).
(b) The revised accounting standard does not change how to recognize actuarial gains andlosses and past service costs in profit or loss. Those amounts are recognized in profit or loss
over a certain period no longer than the expected average remaining service period of theemployees. However, actuarial gains and losses and past service costs that arose in thecurrent period and have not yet been recognized in profit or loss are included in othercomprehensive income, and actuarial gains and losses and past service costs that wererecognized in other comprehensive income in prior periods and then recognized in profit
or loss in the current period are treated as reclassification adjustments.

- 14 -

Consolidated Financial Statements

14Notes to Consolidated Financial Statements(c) The revised accounting standard also made certain amendments relating to the method of
attributing expected benefit to periods, the discount rate, and expected future salary
increases.

v.

This accounting standard and the guidance for (a) and (b) above are effective for the end ofannual periods beginning on or after April 1, 2013, and for (c) above are effective for the
beginning of annual periods beginning on or after April 1, 2014, or for the beginning ofannual periods beginning on or after April 1, 2015, subject to certain disclosure in March 2015,
all with earlier application being permitted from the beginning of annual periods beginning on
or after April 1, 2013. However, no retrospective application of this accounting standard toconsolidated financial statements in prior periods is required.
The Company applied the revised accounting standard and guidance for retirement benefitsfor (a) and (b) above, effective March 31, 2014, and for (c) above, effective April 1, 2014.
With respect to (c) above, the Company changed the method of attributing the expected
benefit to periods from a straight-line basis to a benefit formula basis and the method ofdetermining the discount rate from using the period which approximates the expected averageremaining service period to using a single weighted average discount rate reflecting theestimated timing and amount of benefit payment, and recorded the effect of (c) above as ofApril 1, 2014, in retained earnings. As a result, retained earnings as of April 1, 2014, decreasedby ¥579 million. The effect on the profit and loss for the year ended March 31, 2015, was notmaterial.
s.

15

Asset Retirement Obligations—Under Japanese accounting standards, an asset retirement
obligation is defined as a legal obligation imposed either by law or contract that results fromthe acquisition, construction, development and normal operation of a tangible fixed asset andis associated with the retirement of such tangible fixed asset. The asset retirement obligation isrecognized as the sum of the discounted cash flows required for the future asset retirement andis recorded in the period in which the obligation is incurred if a reasonable estimate can be
made. If a reasonable estimate of the asset retirement obligation cannot be made in the period
the asset retirement obligation is incurred, the liability should be recognized when areasonable estimate of the asset retirement obligation can be made. Upon initial recognition ofa liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing
the carrying amount of the related fixed asset by the amount of the liability. The asset
retirement cost is subsequently allocated to expense through depreciation over the remaining
useful life of the asset. Over time, the liability is accreted to its present value each period. Any
subsequent revisions to the timing or the amount of the original estimate of undiscounted
cash flows are reflected as an adjustment to the carrying amount of the liability and thecapitalized amount of the related asset retirement cost.

Income Taxes—The provision for income taxes is computed based on the pretax income
included in the consolidated statement of income. The asset and liability approach is used torecognize deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of assets and liabilities.
Deferred taxes are measured by applying currently enacted income tax rates to the temporary
differences.
The Company and its wholly owned domestic subsidiaries file a tax return under the
consolidated corporate-tax system, which allows companies to base tax payments on the
combined profits or losses of the parent company and its wholly owned domestic subsidiaries.

w. Foreign Currency Transactions—All short-term and long-term monetary receivables andpayables denominated in foreign currencies are translated into Japanese yen at the exchange
rates at the balance sheet date. Foreign exchange gains and losses from translation arerecognized in the consolidated statement of income to the extent that they are not hedged byforeign currency forward contracts.
x.

Foreign Currency Financial Statements—Balance sheet accounts of consolidated foreignsubsidiaries are translated into Japanese yen at the current exchange rate as of the balance
sheet date except for equity, which is translated at the historical rate. Differences arising fromsuch translation are shown as "Foreign currency translation adjustments" under accumulated
other comprehensive income in a separate component of equity. Revenue and expense
accounts of consolidated foreign subsidiaries are translated into Japanese yen at the current
exchange rate as of the balance sheet date.

y.

Derivatives and Hedging Activities—The Group uses derivative financial instruments,
including foreign currency forward contracts and interest swap contracts, as a means ofhedging exposure to foreign currency risks and interest rate risks. The Group does not enter
into derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as follows:(1) All derivatives are recognized as either assets or liabilities and measured at fair value, withgains or losses recognized in the consolidated statement of income.
(2) For derivatives used for hedging purposes, if such derivatives qualify for hedge accounting
because of high correlation and effectiveness between the hedging instruments and thehedged items, gains or losses on derivatives are deferred until maturity of the hedgedtransactions.

t.

Research and Development Costs—Research and development costs are charged to income as
incurred.

Foreign currency forward contracts are utilized to hedge foreign exchange risks. Certain assets
and liabilities on construction contracts denominated in foreign currencies are translated at
the contracted rates if the forward contracts qualify for hedge accounting.

u.

Leases—Japanese accounting standards require that all finance lease transactions be capitalized
by recognizing lease assets and lease obligations in the balance sheet.

Foreign currency deposits are held to hedge foreign exchange risks derived from forecasted
purchases of fixed assets denominated in foreign currency.

All other leases are accounted for as operating leases.

Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are
not remeasured at market value but the differential paid or received under the swap
agreements is recognized and included in interest expense.

Consolidated Financial Statements- 15 -- 16 -

Consolidated Financial Statements

16Notes to Consolidated Financial Statementsz.

Per Share Information—Basic net income per share is computed by dividing net income
available to common shareholders by the weighted-average number of common shares
outstanding for the period, retroactively adjusted for stock splits.

4.

Costs and estimated earnings recognized with respect to construction contracts which areaccounted for by the percentage-of-completion method at March 31, 2016 and 2015, were as
follows:

Diluted net income per share reflects the potential dilution that could occur if securities were
exercised or converted into common stock. Diluted net income per share of common stock
assumes full conversion of the outstanding convertible notes and bonds at the beginning of
the year (or at the time of issuance) with an applicable adjustment for related interest expense,
net of tax, and full exercise of outstanding warrants.

Costs and estimated earnings
Amounts billed¥ 550,114(516,469 )¥ 397,990(373,890 )$4,868,270(4,570,528 )Cash dividends per share presented in the accompanying consolidated statement of income are
dividends applicable to the respective fiscal years, including dividends to be paid after the endof the year.

Net¥ 33,644¥ 24,100$ 297,742

5.

INVESTMENT SECURITIESInvestment securities at March 31, 2016 and 2015, consisted of the following:
Millions of Yen
2016
2015
Non-current—Equity securities¥ 14,113(2) "Proceeds from sales of property, plant and equipment" included within investing activities,
which had previously been separately presented, is included in "Other" from the fiscal year
ended March 31, 2016, because its materiality has decreased. The prior period consolidated
financial statements have been reclassified in accordance with the new presentation.
(3) "Payments of short-term loans receivable" and "Payments of long-term loans receivable"
included within investing activities, which had previously been separately presented, areincluded in "Payments of loans receivable" from the fiscal year ended March 31, 2016, because
their materiality has decreased. The prior period consolidated financial statements have been
reclassified in accordance with the new presentation.
(4) "Proceeds from collections of short-term loans" and "Proceeds from collections of long-termloans" included within investing activities, which had previously been separately presented, areincluded in "Proceeds from collections of loans" from the fiscal year ended March 31, 2016,
because their materiality has decreased. The prior period consolidated financial statements
have been reclassified in accordance with the new presentation.

Consolidated Financial Statements- 17 -¥ 23,940

Thousands of
U.S. Dollars
2016$ 124,902

The costs and aggregate fair values of investment securities at March 31, 2016 and 2015, were as
follows:
March 31, 2016

CHANGES IN PRESENTATION (Consolidated Statement of Cash Flows)(1) "Loss (gain) on sales and disposals of fixed assets" and "Increase (decrease) in accrued
consumption taxes" included within operating activities, which had previously been separately
presented, are included in "Other" from the fiscal year ended March 31, 2016, because theirmateriality has decreased. The prior period consolidated financial statements have been
reclassified in accordance with the new presentation.

17

Thousands of
U.S. Dollars
2016

Millions of Yen
2016
2015

Diluted net income per share is not disclosed because there was no potential stock having adilutive effect for the fiscal years ended March 31, 2016 and 2015.

aa. Accounting Changes and Error Corrections—Accounting treatments under Japanese
accounting standards are as follows: (1) Changes in Accounting Policies—When a new
accounting policy is applied following revision of an accounting standard, the new policy isapplied retrospectively unless the revised accounting standard includes specific transitional
provisions, in which case the entity shall comply with the specific transitional provisions.
(2) Changes in Presentation—When the presentation of financial statements is changed,
prior-period financial statements are reclassified in accordance with the new presentation.
(3) Changes in Accounting Estimates—A change in an accounting estimate is accounted for in
the period of the change if the change affects that period only, and is accounted forprospectively if the change affects both the period of the change and future periods.
(4) Corrections of Prior-Period Errors—When an error in prior-period financial statements is
discovered, those statements are restated.
3.

CONSTRUCTION CONTRACTS

Cost
Securities classified as—
Available-for-sale—equity securities¥8,697

Millions of Yen
Unrealized
Unrealized
Gains
Losses¥3,382

Fair
Value¥ 12,080

March 31, 2015

Cost
Securities classified as—
Available-for-sale—equity securities¥ 11,471

Millions of Yen
Unrealized
Unrealized
Gains
LossesFair
Value¥ 10,426¥ 21,898

March 31, 2016

Cost
Securities classified as—
Available-for-sale—equity securities$ 76,969- 18 -

Thousands of U.S. Dollars
Unrealized
Unrealized
Gains
Losses$ 29,933

Fair
Value

$ 106,902
Consolidated Financial Statements

18

Notes to Consolidated Financial Statements

Available-for-sale securities whose fair value cannot be reliably determined at March 31, 2015, wereas follows. Similar information for 2016 is disclosed in Note 14.

7.

Investments in and advances to unconsolidated subsidiaries and associated companies at March 31,
2016 and 2015, were as follows:

Carrying AmountMillions of Yen

March 31, 2015
Securities classified as—
Available-for-sale—equity securities

INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATEDCOMPANIES

Thousands of
U.S. Dollars
2016

Millions of Yen
2016
2015

¥2,041

The information for the available-for-sale securities which were sold during the year ended March
31, 2016, was as follows:

Investments
Long-term receivables¥ 28,957
693¥7,3871,159$ 256,257
6,137

Total

¥ 29,650¥8,547$ 262,395

March 31, 2016
Millions of Yen
Realized
Realized
Gains
LossesProceeds
Securities classified as—
Available-for-sale—equity securities¥5,467

8.

SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings as of March 31, 2016 and 2015, mainly consisted of notes to banks. The
weighted average interest rates of short-term borrowings as of March 31, 2016 and 2015, were 1.9%
and 1.7%, respectively.

¥2,686

March 31, 2016

Long-term debt at March 31, 2016 and 2015, consisted of the following:Thousands of U.S. Dollars
Realized
Realized
Gains
LossesProceeds

Securities classified as—
Available-for-sale—equity securities
6.

$ 48,388$ 23,777

IMPAIRMENT LOSS OF LONG-LIVED ASSETS
Impairment loss on long-lived assets for the fiscal year ended March 31, 2016, was as follows:

Location

Used Status

Category of Assets——

Goodwill

Impairment Loss
Thousands ofMillions of Yen
U.S. Dollars¥4,431$ 39,217

During the year ended March 31, 2016, the goodwill in relation to the Group subsidiary in UK was
impaired in the amount of ¥4,431 million ($39,217 thousand) as other expense following a fall in
the long term cash flow forecasts resulting from the decline in the price of oil. The carrying
amount of goodwill was written down to its recoverable amount. The recoverable amount wasmeasured at its value in use and the discount rate used for computation of the present value of
future cash flows was 16.9%.

19

Consolidated Financial Statements- 19 -

Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016Long-term loans principally from banks, due seriallythrough 2024, with interest rates at 2.0% (2016 and2015)—Unsecured
Obligations under finance leases
Total
Less current portion¥ 10,014
67
10,081(45 )¥ 10,020
95
10,115(51 )$ 88,626
593
89,220(405 )

Long-term debt, less current portion¥ 10,036¥ 10,063$ 88,814

Annual maturities of long-term debt, excluding finance leases, at March 31, 2016, were as follows:Year Ending
March 31

Millions of Yen$

44
88,539
25

2017
2018
2019
2020
2021
2022 and thereafter

¥

1

16

Total

¥ 10,014$ 88,626- 20 -

5
10,005
2

Thousands of
U.S. Dollars

Consolidated Financial Statements

20Notes to Consolidated Financial Statements

Commitment-line contracts at March 31, 2016, were as follows:

9.

(2) The changes in plan assets for the years ended March 31, 2016 and 2015, were as follows:

Millions of Yen

Thousands of
U.S. Dollars

Commitment-line contracts¥ 15,000$ 132,743

Unused commitments¥ 15,000$ 132,743

RETIREMENT AND PENSION PLANS
The Company and consolidated subsidiaries have funded or unfunded defined benefit pension
plans and defined contribution pension plans for employees.
Under defined benefit corporate pension plans, all of which are funded, employees are entitled tocertain lump-sum payments or pension payments based on cumulated points which are granted inaccordance with years of continuous employment, occupational classification and performance
evaluation. Under severance lump-sum payment plans, employees are entitled to certain lump-sum
payments based on salary and service period.
Certain consolidated subsidiaries have defined benefit corporate pension plans or severance
lump-sum payment plans, and calculate retirement benefit expenses by using the simplified
method.
(1) The changes in defined benefit obligation for the years ended March 31, 2016 and 2015, wereas follows:
Millions of Yen
2016
2015
Balance at beginning of year (as previously
reported)
Cumulative effect of accounting change
Balance at beginning of year (as restated)
Current service cost
Interest cost
Actuarial losses
Benefits paid
Prior service cost
OthersBalance at end of year

¥ 22,151
22,151966
228
229(1,999 )32
122¥ 21,732¥ 21,787
901
22,689913
198
6(1,709 )Thousands of
U.S. Dollars
2016$ 196,02952

196,029
8,557
2,023
2,033
(17,698 )
290
1,087

¥ 22,151$ 192,322

Thousands of
U.S. Dollars
2016

Millions of Yen
2016
2015
Balance at beginning of year
Expected return on plan assets
Actuarial (gains) losses
Contributions from the employer
Benefits paid
Others¥ 21,815
418(852 )
947(1,990 )(24 )¥ 20,370
405
1,495
1,195
(1,709 )57$ 193,056
3,705(7,543 )8,386(17,615 )(217 )

Balance at end of year

¥ 20,314¥ 21,815$ 179,772(3) The changes in the liability recorded in the consolidated balance sheet by using the simplified
method for the years ended March 31, 2016 and 2015, were as follows:
Thousands of
U.S. Dollars
2016

Millions of Yen
2016
2015
Balance at beginning of year
Benefit costs
Benefits paid
Contribution to the plans
Others

¥ 700
288
(97 )
(91 )
(179 )

¥ 629
235
(95 )
(107 )
39$6,2012,554(859 )(809 )(1,587 )Balance at end of year

¥ 621

¥ 700

$5,498(4) Reconciliation between the liability recorded in the consolidated balance sheet and thebalances of defined benefit obligation and plan assets
Millions of Yen
2016
2015
Funded defined benefit obligation
Plan assets
Total
Unfunded defined benefit obligation¥ 22,892(21,429 )
1,463
576

¥ 23,441(23,073 )367
669$ 202,587(189,637 )
12,9495,099

Net liability arising from defined benefit obligation¥ 2,039¥ 1,036$ 18,049

Millions of Yen
2016
2015

21

Consolidated Financial Statements- 21 -

Thousands of
U.S. Dollars
2016

Thousands of
U.S. Dollars
2016

Liability for retirement benefits
Asset for retirement benefits¥2,134(94 )¥1,070(33 )$ 18,886(837 )Net liability arising from defined benefit obligation¥2,039¥1,036$ 18,049- 22 -

Consolidated Financial Statements

22

Notes to Consolidated Financial Statements(5) The components of net periodic benefit costs for the years ended March 31, 2016 and 2015,
were as follows:(8) Plan assetsa.

Millions of Yen
2015
2016

$8,5572,023(3,705 )103(1,009 )

288

¥ 913
198
(405 )
134(176 )
608
235

2,554

¥ 963

¥1,507$8,523Service cost
Interest cost
Expected return on plan assets
Recognized actuarial losses
Amortization of prior service cost
Amortization of transitional obligation
Benefit costs in simplified method

¥ 966
228
(418 )
11(114 )Net periodic benefit costs

Components of plan assets

Thousands of
U.S. Dollars
2016

Plan assets as of March 31, 2016 and 2015, consisted of the following:b.

¥ (146 )(1,070 )¥ (176 )
1,620
608$ (1,299 )(9,473 )Total¥ (1,217 )¥2,053$ (10,773 )(7) Amounts recognized in accumulated other comprehensive income (before income tax effect)
in respect of defined retirement benefit plans as of March 31, 2016 and 2015
Millions of Yen
2015
2016

23

Thousands of
U.S. Dollars
2016

Unrecognized prior service cost
Unrecognized actuarial gains¥ (393 )¥ (146 )(1,463 )$ (3,480 )Total¥ (393 )¥ (1,610 )$ (3,480 )Consolidated Financial Statements- 23 -

Debt investments
Equity investments
General accounts
Others

26 %
35
25
13

24 %
40
24
12

Total

100 %

100 %

The expected rate of return on plan assets is determined considering the long-term rates
of return which are expected currently and in the future from the various components ofthe plan assets.

Thousands of
U.S. Dollars
2016

Prior service cost
Actuarial (gains) losses
Transitional obligation

2015

Method of determining the expected rate of return on plan assets(6) Amounts recognized in other comprehensive income (before income tax effect) in respect ofdefined retirement benefit plans for the years ended March 31, 2016 and 2015
Millions of Yen
2015
2016

2016

(9) Assumptions used for the years ended March 31, 2016 and 2015, were set forth as follows:

Discount rate
Expected rate of return on plan assets

2016

2015

Mainly 0.7%
Mainly 1.9%

Mainly 0.7%
Mainly 1.9%

(10) Payables to defined contribution plans of the Company and consolidated subsidiaries for theyears ended March 31, 2016 and 2015, were ¥653 million ($5,783 thousand) and¥824 million, respectively.
10.

EQUITYJapanese companies are subject to the Companies Act of Japan (the "Companies Act"). The
significant provisions in the Companies Act that affect financial and accounting matters are
summarized below:a.

Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in
addition to the year-end dividend upon resolution at the shareholders' meeting. Additionally,for companies that meet certain criteria, an Audit & Supervisory Board may declare dividends(except for dividends-in-kind) at any time during the fiscal year if the company has prescribedso in its articles of incorporation. The Board of Directors of a company with an audit andsupervisory committee (as implemented under the Companies Act effective May 1, 2015) may
also declare dividends at any time because such company, by its nature, meets the criteria
under the Companies Act. The Company is organized as a company with an audit andsupervisory committee, effective June 23, 2016. However, the Company does not meet all thecriteria.

- 24 -

Consolidated Financial Statements

24Notes to Consolidated Financial Statements

The Companies Act permits companies to distribute dividends in kind (noncash assets) toshareholders subject to a certain limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of
Directors if the articles of incorporation of the company so stipulate. The Companies Act
provides certain limitations on the amounts available for dividends or the purchase of treasury
stock. The limitation is defined as the amount available for distribution to the shareholders,
but the amount of net assets after dividends must be maintained at no less than ¥3 million.
b.

Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriatedas a legal reserve (a component of retained earnings) or as additional paid-in capital (acomponent of capital surplus), depending on the equity account charged upon the payment ofsuch dividends, until the aggregate amount of legal reserve and additional paid-in capitalequals 25% of the common stock. Under the Companies Act, the total amount of additional
paid-in capital and legal reserve may be reversed without limitation. The Companies Act also
provides that common stock, legal reserve, additional paid-in capital, other capital surplus, andretained earnings can be transferred among the accounts within equity under certain
conditions upon resolution of the shareholders.

c.

Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of suchtreasury stock by resolution of the Board of Directors. The amount of treasury stock purchased
cannot exceed the amount available for distribution to the shareholders, which is determinedby a specific formula.
Under the Companies Act, stock acquisition rights are presented as a separate component ofequity.
The Companies Act also provides that companies can purchase both treasury stock acquisitionrights and treasury stock. Such treasury stock acquisition rights are presented as a separate
component of equity or deducted directly from stock acquisition rights.

11.

The tax effects of significant temporary differences and tax loss carryforwards which resulted indeferred tax assets and liabilities at March 31, 2016 and 2015, were as follows:

Deferred tax assets:
Cost of revenue
Tax loss carryforwards
Allowance for employees' bonus
Allowance for losses on construction contracts
Future deductible depreciation
Deferred loss on derivatives under hedge
accounting
Allowance for doubtful accounts
Costs of construction contracts in process
Other
Less valuation allowance
Total
Deferred tax liabilities:
Unrealized gain on available-for-sale securities
Other
Total
Net deferred tax assets¥ 5,087
4,971
1,258
1,276
811

$ 41,929
40,611
9,447
8,588
5,965

671
610
600
3,428
(1,694 )

885
2
709
4,082
(1,161 )

5,940
5,400
5,316
30,336(14,995 )

15,655

17,922

138,541

987
171

3,207
384

8,737
1,521

1,159

3,592

10,259¥ 14,495¥ 14,329$ 128,282

Net deferred tax assets as of March 31, 2016 and 2015, were recorded in the accompanying
consolidated balance sheet as follows:

INCOME TAXES- 25 -

Thousands of
U.S. Dollars
2016

Millions of Yen
2016
2015
Current assets—Deferred tax assets
Investments and other assets—Other assets

Consolidated Financial Statements¥ 4,737
4,589
1,067
970
674

Prior to April 1, 2015, "Allowance for doubtful accounts" was included in "Other" within deferred
tax assets section. From this fiscal year ended March 31, 2016, the amounts are disclosed separately
due to the increase in materiality.

The Company and its domestic subsidiaries are subject to Japanese national and local income taxes
which, in the aggregate, resulted in normal effective statutory tax rates of approximately 33% and
36% for the years ended March 31, 2016 and 2015, respectively.

25

Thousands of
U.S. Dollars
2016

Millions of Yen
2016
2015

- 26 -¥ 12,889
1,606¥ 11,697
2,631$ 114,064
14,218

Consolidated Financial Statements

26

Notes to Consolidated Financial Statements

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates
reflected in the accompanying consolidated statement of income for the year ended March 31,
2016, with the corresponding figures for 2015, is as follows:
2016

2015

Normal effective statutory tax rate
Expenses not deductible for income tax purposes
Nontaxable dividend income
Jointly controlled assets of joint venture
Difference in tax base between corporate income tax and enterprise tax
Change in valuation allowance
Higher income tax rates applicable to subsidiaries
Effect of reduction of income tax rates on deferred tax assets
Equity in losses of associated companies
Other—net

33%
1
(3)
4
4
16
15
5
2
(1)

36 %
1
(4)
(1)
4
3
6
6

Actual effective tax rate

76 %

49 %

(2)

New tax reform laws enacted in 2016 in Japan changed the normal effective statutory tax rate fromapproximately 32% to 31% for the fiscal year beginning on or after April 1, 2016. The effect ofthese changes was to decrease deferred tax assets, net of deferred tax liabilities, by ¥534 million($4,729 thousand) and deferred loss on derivatives under hedge accounting by ¥30 million($269 thousand), and increase accumulated other comprehensive income for unrealized gain on
available-for-sale securities by ¥52 million ($466 thousand) and defined retirement benefit plans by¥4 million ($40 thousand), in the consolidated balance sheet as of March 31, 2016, and to increase
income taxes—deferred in the consolidated statement of income for the year then ended by¥561 million ($4,965 thousand).
In conjunction with the tax rate reduction, the reform laws limit the utilization of carryforward ofunused tax losses to 60% of taxable profit for the fiscal year beginning on or after April 1, 2016,
55% for the fiscal year beginning on or after April 1, 2017, and 50% for the fiscal year beginning on
or after April 1, 2018. The effect of this change on the consolidated financial statements isimmaterial.
12.

RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥1,908 million ($16,889 thousand) and¥2,456 million for the years ended March 31, 2016 and 2015, respectively.

13.

LEASESThe Group leases certain machinery, computer equipment, and other assets.
Future minimum payments under noncancelable operating leases were as follows:
Millions of Yen
2015
2016

14.

Thousands of
U.S. Dollars
2016

Due within one year
Due after one year

¥ 731
1,691

¥ 449
773

$ 6,476
14,967

Total¥2,423¥1,222$ 21,443

FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The Group uses financial instruments for cash surpluses, if any, invested in low-risk financial
assets, such as commercial paper. For operating capital, the Group uses bank loans. Derivatives
are used, not for speculative purposes, but to manage exposure to the market risk of fluctuation
in foreign currency exchange rates and interest rates.
(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables, such as trade notes and trade accounts, are exposed to customer credit risk.
Although receivables in foreign currencies are exposed to the market risk of fluctuation inforeign currency exchange rates, the position, net of payables in foreign currencies, is hedgedby using foreign currency forward contracts.
Cash equivalents include commercial paper, which have short maturities and are used for cash
surpluses.
Short-term investments include time deposits, which will mature three months after the dateof acquisition. Both commercial paper and time deposits are exposed to default risk of theissuing company.
Investment securities are equity securities related to the business, which the Group operates.
Marketable securities are exposed to the risk of fluctuations in stock prices.
Payment terms of payables, such as trade notes and trade accounts, are generally less than one
year. Although payables in foreign currencies are exposed to the market risk of fluctuation inforeign currency exchange rates, those risks are netted against the balance of receivables
denominated in the same foreign currency as noted above.
Bank loans are used for operating capital. Although they are exposed to the market risks fromchanges in interest rates, the risk is hedged by using interest rate swap contracts.

27

Consolidated Financial Statements- 27 -- 28 -

Consolidated Financial Statements

28

Notes to Consolidated Financial Statements

Derivatives are foreign currency forward contracts and interest rate swap contracts, which areused to manage exposure to market risks from changes in foreign currency exchange rates ofreceivables and payables, and from changes in interest rates, respectively. Please see Notes 2.yand 15 for more details about derivatives.

(a) Fair values of financial instruments
March 31, 2016
Millions of Yen(3) Risk Management for Financial Instruments

Carrying
AmountFair Value

Cash and cash equivalents
Short-term investments
Notes and accounts receivable—trade
Allowance for doubtful accounts*
Costs and estimated earnings onlong-term construction contracts
Jointly controlled assets of joint venture
Investment securities¥ 136,919
7,795
35,651(2,283 )¥ 136,919
7,795
35,651(2,283 )33,644
179,360
12,08033,644
179,360
12,080Total¥ 403,169¥ 403,169

Short-term borrowings
Current portion of long-term debt
Notes and accounts payable—trade
Income taxes payable
Long-term debt

¥

333
5
150,078
2,841
10,009¥333
5150,078
2,841
10,062

¥ 52

Total

¥ 163,268¥ 163,320¥ 52

Credit risk management
Credit risk is the risk of economic loss arising from a counterparty's failure to repay or service
debt according to the contractual terms. The Group manages its credit risk from receivables on
the basis of internal guidelines, which include monitoring of payment terms and balances ofmajor customers to identify the default risk of customers at an early stage.
Commercial paper and time deposits are exposed to insignificant default risk because
transactions are limited to companies with high credit ratings.
With respect to foreign currency forward contracts, the Group limits the counterparties tothose derivatives to major financial institutions that can bear losses arising from credit risk.
Market risk management (risk of foreign exchange and interest rates)
Foreign currency trade receivables and payables are exposed to market risk resulting fromfluctuations in foreign currency exchange rates. Such foreign exchange risk is hedged
principally with foreign currency forward contracts.
Interest expense associated with long-term debts is exposed to market risk resulting fromchanges in interest rates. Such risk is hedged by interest rate swap contracts.
Foreign currency forward contracts are controlled under internal guidelines. The position
related to particular construction contracts is identified and is reviewed monthly.
Reconciliation of the transaction and balances with customers' confirmation replies is made,and the transactions related to foreign currency forward contracts are executed and accounted
for under internal guidelines.
Marketable and investment securities are managed by monitoring the market values andfinancial position of issuers on a regular basis. The Group assesses the stock price risk
quantitatively so as to account for significant declines in market value as impairment losses.
Liquidity risk management
Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in fullon their maturity dates. The Group manages its liquidity risk by holding adequate volumes ofliquid assets along with timely adequate financial planning.
(4) Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If a quoted
price is not available, another rational valuation technique is used instead. Also, please see
Note 15 for the details of fair value for derivatives.

29

Consolidated Financial Statements- 29 -

Unrealized
Gain (Loss)

March 31, 2015
Millions of Yen
Carrying
AmountFair Value

Cash and cash equivalents
Short-term investments
Notes and accounts receivable—trade
Costs and estimated earnings onlong-term construction contracts
Jointly controlled assets of joint venture
Investment securities¥ 113,246
69
29,740¥ 113,246
69
29,74024,100182,855
21,898

24,100182,855
21,898Total¥ 371,909¥ 371,909

Short-term borrowings
Current portion of long-term debt
Notes and accounts payable—trade
Income taxes payable
Long-term debt

¥

991
4
137,652
1,366
10,015¥Total¥ 150,030¥ 150,030- 30 -

Unrealized
Gain (Loss)

991
4
137,652
1,366
10,015

Consolidated Financial Statements

30Notes to Consolidated Financial Statements

March 31, 2016

Current Portion of Long-Term Debt (Bank Loans) and Long-Term Debt (Bank Loans)Thousands of U.S. Dollars
Carrying
Unrealized
AmountFair Value Gain (Loss)

Cash and cash equivalents
Short-term investments
Notes and accounts receivable—trade
Allowance for doubtful accounts*
Costs and estimated earnings onlong-term construction contracts
Jointly controlled assets of joint venture
Investment securities$1,211,678
68,985
315,499(20,203 )$1,211,678
68,985
315,499(20,203 )297,742
1,587,264
106,902297,742
1,587,264
106,902

Total$3,567,869$3,567,869

The fair value of fixed rate loans is calculated by discounting total principal and interest
payments to present value using a discount rate equal to the rate that would be charged if
the loan was newly borrowed. The fair value of floating rate loans, which are subject to a
specific method for interest rate swaps, is calculated by discounting total principal andinterest payments, which are handled together with interest rate swaps, to present value
using a discount rate equal to the rate that would be charged if the loan was newly
borrowed.
Derivatives
Fair value information for derivatives is included in Note 15.
(b) Carrying amount of financial instruments whose fair values cannot be reliably determined
Millions of Yen
2016
2015

Short-term borrowings
Current portion of long-term debt
Notes and accounts payable—trade
Income taxes payable
Long-term debt

$

2,950
44
1,328,130
25,14588,582$2,950
44
1,328,130
25,14589,045

$ 463

Total

$1,444,853$1,445,316$ 463* Allowance for doubtful accounts corresponding to trade receivable is deducted.
Cash and Cash Equivalents, Short-Term Investments, Notes and Accounts Receivable—
Trade, and Costs and Estimated Earnings on Long-Term Construction Contracts
The carrying values of the accounts mentioned above approximate fair value because of
their short maturities.
Jointly Controlled Assets of Joint Venture

Investment securities that do not have a quoted
market price in an active market
Investments in equity instruments that do nothave a quoted market price in an active market
Investments in unconsolidated subsidiaries andassociated companies that do not have a quoted
market price in an active market¥ 2,030¥2,038$ 17,973

2

2

26

28,957

7,387

256,257

The impairment losses on investment securities for the year ended March 31, 2015, were¥258 million.
(5) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
March 31, 2016

The jointly controlled assets of the joint venture are jointly controlled cash recognizedbased on the Company's share of the venture. The carrying values of jointly controlled
assets of the joint venture approximate fair value because of their short maturities.

Due in1 Yearor Less

Investment Securities

Millions of Yen
Due after Due after
1 Year
5 Years
throughthrough
5 Years
10 Years¥ 136,625
7,795

The above schedules do not include investment securities whose fair value cannot be
reliably determined.

Cash and cash equivalents
Short-term investments
Notes and accounts receivable, and costs andestimated earnings on long-term construction
contracts*
Jointly controlled assets of joint venture

67,010179,360¥3

Short-Term Borrowings, Notes and Accounts Payable—Trade and Income Taxes Payable

Total¥ 390,791¥3

The fair values of investment securities are measured at the quoted market price of thestock exchange for the equity instruments. Fair value information for investment securities
by classification is included in Note 5.

Thousands of
U.S. Dollars
2016

The carrying values of the accounts mentioned above approximate fair value because of
their short maturities.

31

Consolidated Financial Statements- 31 -- 32 -

Consolidated Financial Statements

32

Notes to Consolidated Financial Statements

15.

March 31, 2015

Due in1 Yearor Less

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

Cash and cash equivalents
Short-term investments
Notes and accounts receivable, and costs andestimated earnings on long-term construction
contracts
Jointly controlled assets of joint venture¥ 113,206
69
52,285
182,855

¥ 882

Total

¥ 348,415

¥ 882

¥ 672

¥ 672

Thousands of U.S. Dollars
Due after Due after
Due in1 Year
5 Years
1 Yearthroughthroughor Less
5 Years
10 Years
Cash and cash equivalents
Short-term investments
Notes and accounts receivable, and costs andestimated earnings on long-term construction
contracts*
Jointly controlled assets of joint venture$1,209,073
68,985593,009
1,587,264

$ 27

Total

$3,458,334$ 27

Please see Note 8 for annual maturities of long-term debt.

33

Consolidated Financial Statements- 33 -

Derivative Transactions to Which Hedge Accounting Is Not Applied
March 31, 2016

Contract
AmountMarch 31, 2016

* Allowance for doubtful accounts is deducted.

DERIVATIVES

Millions of Yen
Contract
AmountFair
Due after
Value
One Year(Loss)

Foreign currency forward contracts:
Selling U.S.$/buying yen
Selling Euro/buying yen
Selling GBP/buying yen
Selling AUD/buying yen
Selling MYR/buying yen
Buying Euro/selling U.S.$
Buying AUD/selling Euro
Buying U.S.$/selling Euro
Buying AUD/selling GBP
Buying U.S.$/selling GBP¥ 42,188
6,438
5,088
8,665
1,392
98
575
191
1,029
195

¥ 207

Total

¥ 65,863

¥ 221

13

Unrealized
Gain (Loss)¥ (87 )(1 )

¥ (87 )
(1 )

23
(55 )
(21 )
(3 )
(1 )
6

23
(55 )
(21 )
(3 )
(1 )
6

¥ (141 )¥ (141 )March 31, 2015

Contract
AmountMillions of Yen
Contract
AmountFair
Due after
Value
One Year(Loss)

Foreign currency forward contracts:
Selling U.S.$/buying yen
Selling Euro/buying yen
Selling GBP/buying yen
Selling AUD/buying yen
Selling MYR/buying yen
Buying U.S.$/selling yen
Buying Euro/selling yen
Buying Euro/selling U.S.$
Buying AUD/selling Euro¥ 36,414
4,738
4,704
13,571
2,640
17
3
210
795

¥ 509

Total

¥ 63,094¥ 621- 34 -

2
109

Unrealized
Gain (Loss)¥ (124 )
(6 )
(9 )
31
1
2

¥ (124 )
(6 )
(9 )
31
1
2

(22 )
5

(22 )
5

¥ (122 )¥ (122 )Consolidated Financial Statements

34

Notes to Consolidated Financial Statements

March 31, 2016

March 31, 2015

Contract
AmountThousands of U.S. Dollars
Contract
AmountFair
Due after
Value
Unrealized
One Year(Loss)
Gain (Loss)

Foreign currency forward contracts:
Selling U.S.$/buying yen
Selling Euro/buying yen
Selling GBP/buying yen
Selling AUD/buying yen
Selling MYR/buying yen
Buying Euro/selling U.S.$
Buying AUD/selling Euro
Buying U.S.$/selling Euro
Buying AUD/selling GBP
Buying U.S.$/selling GBP$ 373,349
56,97945,026
76,687
12,324
870
5,094
1,692
9,106
1,727

$1,835

Total$ 582,859$1,959$ (774 )
(13 )
(7 )
205
(487 )(190 )
(27 )
(14 )
53
7

$ (1,249 )$ (1,249 )Foreign currency forward contracts—
Accounted for under deferred hedge
accounting method:
Selling U.S.$/buying yen
Buying U.S.$/selling yen
Buying Euro/selling yen
Buying Euro/selling U.S.$
Buying KRW/selling U.S.$

Derivative Transactions to Which Hedge Accounting Is Applied
March 31, 2016

Total

Foreign currency forward contracts—
Accounted for under deferred hedge
accounting method:
Selling U.S.$/buying yen
Buying U.S.$/selling yen
Buying Euro/selling yen
Buying Euro/selling U.S.$
Buying KRW/selling U.S.$

Foreign currency
forecasted
transaction

Total
Other*1:
Selling U.S.$/buying yen
Buying U.S.$/selling yen
Buying Euro/selling yen

Receivables
PayablesTotal
Interest rate swaps*2 (fixed rate payment,
floating rate receipt)¥ 6,491
473
302
1,292
1,293

¥ 1,465¥ 9,852¥ 1,792¥¥
Long-term debt

Total
Consolidated Financial Statements

Millions of Yen
Contract
AmountFairContract
Due after
Value
AmountOne Year(Loss)- 35 -

226
100

415
64
22

¥

22

502

¥

22

¥ 10,000¥ 10,000¥ 10,000¥ 10,000

Foreign currency
forecasted
transaction

Total
Other*1:
Selling U.S.$/buying yen
Buying U.S.$/selling yen
Buying Euro/selling yen

Hedged Item

35

123

$ (774 )
(13 )
(7 )
205
(487 )(190 )
(27 )
(14 )
53
7

Hedged Item

Interest rate swaps*2 (fixed rate payment,
floating rate receipt)

Receivables
PayablesMillions of Yen
Contract
AmountContract
Due after
AmountOne Year

Fair
Value
(Loss)¥ 16,971
673
186
7,271
3,347

¥ 5,396
207
102
726
616

¥ (2,295 )36(19 )(1,453 )65¥ 28,450¥ 7,049¥ (3,666 )¥¥Long-term debt

Total

342
242
100

¥

28

685

¥

28

¥ 10,000¥ 10,000¥ 10,000¥ 10,000¥ (266 )
(23 )
(12 )
(106 )
33¥ (376 )- 36 -

Consolidated Financial Statements

36

Notes to Consolidated Financial Statements

17.

March 31, 2016
Thousands of U.S. Dollars
Contract
AmountFairContract Due after
Value
Amount One Year
(Loss)

Hedged Item
Foreign currency forward contracts—
Accounted for under deferred hedge
accounting method:
Selling U.S.$/buying yen
Buying U.S.$/selling yen
Buying Euro/selling yen
Buying Euro/selling U.S.$
Buying KRW/selling U.S.$

Foreign currency
forecasted
transaction

Total
Other*1:
Selling U.S.$/buying yen
Buying U.S.$/selling yen
Buying Euro/selling yen

Receivables
PayablesTotal$ 57,444
4,186
2,673
11,436
11,446$ 12,965$ 87,187$ 15,864

2,006
892

$ 3,678
572
197

$

195

$ 4,448$

195$ 88,495$ 88,495$ (2,356 )(211 )(113 )(942 )292$ (3,331 )OTHER COMPREHENSIVE (LOSS) INCOME
The components of other comprehensive (loss) income for the years ended March 31, 2016 and2015, were as follows:

Unrealized (loss) gain on available-for-sale securities:(Losses) gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Deferred gain (loss) on derivatives under hedge
accounting:
Gains (losses) arising during the year
Adjustment to acquisition cost of assets
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total

Interest rate swaps*2 (fixed rate payment,
floating rate receipt)

Long-term debt

Total

$ 88,495$ 88,495

Foreign currency translation adjustments—
Adjustments arising during the year
Total

*1 Foreign currency forward contracts, which are applied to the foreign currency translation at thecontract rate of the assets and liabilities on construction contracts denominated in foreign
currencies.
*2 Interest rate swap contracts accounted for under a specific method, are treated as part of thehedged long-term debt and thus their fair values are integrally computed with those of thehedged long-term debt. See Note 14 for the fair value of long-term debt.
16.

Share of other comprehensive (loss) income ofassociates—(Loss) income arising during the year

At March 31, 2016, the Group had the following contingent liabilities:

Guarantees on employees' housing loans and others
Performance bond for an unconsolidated subsidiary37

Consolidated Financial Statements

Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total

CONTINGENT LIABILITIES- 37 -

Millions of Yen

Thousands of
U.S. Dollars

¥ 59
950

$ 526
8,414

Thousands of
U.S. Dollars
2016

Millions of Yen
2016
2015

Total
Total other comprehensive (loss) income¥ (4,365 )(2,686 )(7,052 )2,220¥ 2,787258
3,046(747 )$ (38,630 )(23,777 )(62,407 )19,649¥ (4,831 )¥ 2,298$ (42,758 )

¥

534
202
(80 )
656
(214 )¥ (591 )(3,464 )100(3,955 )
1,243

$

4,727
1,790
(711 )
5,805(1,897 )¥441¥ (2,712 )

$

3,907

¥ (1,135 )¥ 2,815$ (10,050 )¥ (1,135 )¥ 2,815$ (10,050 )¥ (1,082 )(135 )(1,217 )441¥ 1,486566
2,053(689 )$ (9,577 )(1,196 )(10,774 )
3,906¥ (775 )¥ 1,364$ (6,867 )

¥

(83 )

¥

142

$

(740 )

¥

(83 )

¥

142

$

(740 )¥ (6,385 )- 38 -¥ 3,908$ (56,509 )Consolidated Financial Statements

38

Notes to Consolidated Financial Statements

18.

NET INCOME PER SHAREb.

Appropriations of Retained Earnings
The following appropriation of retained earnings at March 31, 2016, was approved at theCompany's shareholders' meeting held on June 23, 2016:

A reconciliation of the differences between basic and diluted net income per share ("EPS") for theyears ended March 31, 2016 and 2015, was as follows:Year Ended March 31, 2016

Basic EPS—Net income available
to common shareholders

Millionsof YenNet Income
Attributableto Owners of
the Parent

Thousandsof Shares¥3,375258,990

Yen

U.S. Dollars
20.

WeightedAverage
SharesEPS¥ 13.03$0.12

There is no dilutive effect for the year ended March 31, 2016.
Year Ended March 31, 2015

Basic EPS—Net income available
to common shareholders

Thousandsof Shares

Yen

WeightedAverage
SharesEPS¥ 11,029

259,006¥ 42.58

SUBSEQUENT EVENTSa.

Thousands of
U.S. Dollars¥2,589$ 22,918

SEGMENT INFORMATION
Under Japanese accounting standards, an entity is required to report financial and descriptive
information about its reportable segments. Reportable segments are operating segments oraggregations of operating segments that meet specified criteria. Operating segments arecomponents of an entity about which separate financial information is available and suchinformation is evaluated regularly by the chief operating decision maker in deciding how toallocate resources and in assessing performance. Generally, segment information is required to bereported on the same basis as is used internally for evaluating operating segment performance anddeciding how to allocate resources to operating segments.
(1) Description of Reportable Segments

Millionsof YenNet Income
Attributableto Owners of
the Parent

There is no dilutive effect for the year ended March 31, 2015.
19.

Year-end cash dividends, ¥10.00 ($0.09) per share

Millions of Yen

EMAS CHIYODA Subsea Limited Partnership

The Group's reportable segments are those for which separate financial information is available
and regular evaluation by the Company's management is being performed in order to decide
how resources are allocated within the Group. The Group globally provides "Engineering"
services, including planning, engineering, construction, procurement, commissioning, andmaintenance, adapting the most appropriate functions of each related company.
(2) Methods of Measurement for the Amounts of Sales, Profit (Loss), Assets, Liabilities, andOther Items for Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in
Note 2, "Summary of Significant Accounting Policies."
The profit in reporting segments is based on the operating income. Intersegment income andtransfers are measured at the quoted market price.

On May 27, 2016, the Board of Directors approved the Company's sale of a portion of its sharesin EMAS CHIYODA Subsea Limited (an equity method affiliate of the Company, "ECS"). On
June 10, 2016, the Company, Ezra Holding Limited ("Ezra"), and Nippon Yusen Kabushiki
Kaisha ("NYK") entered into a binding agreement for NYK to invest in ECS. Under thisagreement, the Company and Ezra will sell their 15% and 10% interests in ECS, respectively, to
NYK.
Through the acquisition of shares from Ezra and the Company, NYK will own 25% of ECS,
with Ezra and the Company retaining 40% and 35% shareholding, respectively, uponcompletion of the transaction.

39

Consolidated Financial Statements- 39 -- 40 -

Consolidated Financial Statements

40Notes to Consolidated Financial Statements

Year Ended March 31, 2016(3) Information about Sales, Profit, Assets, Liabilities, and Other Items

Thousands of U.S. Dollars

Year Ended March 31, 2016
Reportable
Segment
Engineering

Other*1

Total

Reconciliations*2

Sales:
Sales to external customers
Intersegment sales or transfers$5,377,822
189$ 34,115
55,126$5,411,937
55,316$ (55,316 )Total$5,378,011$ 89,242$5,467,254$ (55,316 ) $5,411,937

Segment profit
Segment assets
Segment liabilities
Other:
Depreciation
Amortization of goodwill
Investment in associatedcompanies
Increase in property, plantand equipment andintangible assets$ 138,607
4,625,607
2,801,751$ 2,906
42,221
13,070$ 141,513
4,667,829
2,814,821$

31,576
10,854186
265

31,762
11,12031,762
11,120238,317238,317

23,87823,878Millions of Yen
Reportable
Segment
Engineering

Other*1

Total

Reconciliations*2

Consolidated*3

Sales:
Sales to external customers
Intersegment sales or transfers¥ 607,693
21¥ 3,855
6,229¥ 611,548
6,250¥ (6,250 )Total¥ 607,715¥ 10,084¥ 617,799¥ (6,250 )¥ 611,548

Segment profit
Segment assets
Segment liabilities
Other:
Depreciation
Amortization of goodwill
Investment in associatedcompanies
Increase in property, plantand equipment andintangible assets¥ 15,662
522,693
316,597

¥

328
4,771
1,476

¥ 15,990
527,464
318,074¥¥ 16,015
528,219
326,091

21
29

3,589
1,256

3,589
1,256

26,92926,9293,568
1,226
26,92920

2,677

Consolidated*3$5,411,937¥ 611,548

24
755
8,016

2,698

2,698

238,317
23,697

181

213
6,682
70,946$ 141,726
4,674,512
2,885,768

Notes for the year ended March 31, 2016:*1 "Other" represents industry segments, which are not included in the reportable segment,
consisting of temporary staffing services and travel services.

Year Ended March 31, 2015
Millions of Yen

41*2 The details of the reconciliations are as follows:

Reportable
Segment
Engineering

Other*1

Total

Sales:
Sales to external customers
Intersegment sales or transfers¥ 476,499
136¥ 4,479
6,678¥ 480,979
6,814¥ (6,814 )Total¥ 476,635¥ 11,157¥ 487,793¥ (6,814 )¥ 480,979

Segment profit
Segment assets
Segment liabilities
Other:
Depreciation
Amortization of goodwill
Investment in associatedcompanies
Increase in property, plantand equipment andintangible assets¥ 21,146
509,992
297,441

¥

314
5,418
2,248

¥ 21,460
515,411
299,690¥¥ 21,466
515,839
307,433

24
29

3,569
1,469

3,569
1,469

5,479

5,479

3,960

3,960

Consolidated Financial Statements

3,545
1,439
5,479
3,943

- 41 -

17

Reconciliations*2

Consolidated*3¥ 480,979

6
427
7,742

(1) The reconciliation in segment profit of ¥24 million ($213 thousand) is the eliminationof intersegment trades.
(2) The reconciliation in segment assets of ¥755 million ($6,682 thousand) is the result of
the elimination of intersegment trades of ¥(1,994) million ($(17,649) thousand) and
the Group's assets of ¥2,749 million ($24,331 thousand), which are not included in thereportable segment.
(3) The reconciliation in segment liabilities of ¥8,016 million ($70,946 thousand) is
the result of the elimination of intersegment trades of ¥(1,983) million($(17,549) thousand) and the Group's liabilities of ¥10,000 million ($88,495 thousand),
which are not included in the reportable segment.
*3 The calculation of the segment profit is based on the operating income in the consolidated
statement of income.

- 42 -

Consolidated Financial Statements

42

Notes to Consolidated Financial Statements

Notes for the year ended March 31, 2015:

Year Ended March 31, 2015

*1 "Other" represents industry segments, which are not included in the reportable segment,
consisting of temporary staffing services and travel services.
*2 The details of the reconciliations are as follows:(1) The reconciliation in segment profit of ¥6 million is the elimination of intersegment
trades.
(2) The reconciliation in segment assets of ¥427 million is the result of the elimination ofintersegment trades of ¥(2,275) million and the Group's assets of ¥2,703 million, which
are not included in the reportable segment.
(3) The reconciliation in segment liabilities of ¥7,742 million is the result of theelimination of intersegment trades of ¥(2,257) million and the Group's liabilities of¥10,000 million, which are not included in the reportable segment.
*3 The calculation of the segment profit is based on the operating income in the consolidated
statement of income.

Millions of Yen
Japan
Australia
RussiaAsia
Middle East
Others¥ 113,341
151,255
52,08773,93550,62439,735Total¥ 480,979

Note: Revenue is classified by country or region based on the location of construction
sites.
(b) Property, plant and equipment
Year Ended March 31, 2016
Millions of Yen

Thousands of
U.S. Dollars

Japan
Asia
Others¥ 11,732
1,704
504$ 103,831
15,084
4,465

Total

¥ 13,942$ 123,381

Related Information(1) Information about Products and Services
The engineering business represents more than 90% of the total sales of the Group.
Accordingly, the presentation of the information about each service is not required underJapanese accounting standards.
(2) Information about Geographical Areas

Year Ended March 31, 2015(a) Revenue

Millions of Yen

Year Ended March 31, 2016

Japan
Australia
RussiaU.S.A.
Vietnam
Others
Total

Millions of Yen

Thousands of
U.S. Dollars¥ 111,464
143,980
117,274
79,75071,88587,193$ 986,413
1,274,160
1,037,827
705,753
636,158
771,623¥ 611,548$5,411,937

Japan
Asia
Others¥ 12,183
1,974
668

Total

¥ 14,826(3) Information about Major Customers
Year Ended March 31, 2016

Name
Ichthys Lng Pty Ltd.
OJSC Yamal LNG
Nghi Son Refinery and Petrochemical
LLC
Cameron LNG LLC

43Consolidated Financial Statements- 43 -

Related Segment

Millions of Yen
Revenue

Thousands of
U.S. Dollars
Revenue

Engineering
Engineering¥ 134,100
116,803$1,186,731
1,033,660

Engineering
Engineering

71,867
63,619635,993563,006- 44 -

Consolidated Financial Statements

44Independent Auditor’s Report

Notes to Consolidated Financial Statements

Year Ended March 31, 2015

Name
Ichthys Lng Pty Ltd.
OJSC Yamal LNG

Related Segment

Millions of Yen
Revenue

Engineering
Engineering¥ 143,688
51,948(4) Information about Impairment Loss on Fixed Assets by Reportable Segment
Impairment loss of goodwill as of March 31, 2016 and 2015, were as follows:
Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016

Engineering¥4,431$ 39,217

Total¥4,431$ 39,217(5) Information about Goodwill by Reportable Segment
The ending balance of goodwill as of March 31, 2016 and 2015, were as follows:
Millions of Yen
2016
2015

Thousands of
U.S. Dollars
2016

Engineering
Other*¥3,527404¥ 11,599
434$ 31,212
3,583

Total

¥3,931¥ 12,034$ 34,795* Other involves temporary staffing services.

******

45

Consolidated Financial Statements- 45 -

Consolidated Financial Statements

46

Minato Mirai Grand Central Tower
4-6-2, Minatomirai, Nishi-ku,
Yokohama 220-8765, Japan
Tel: (81)45-225-7777 (voice guidance)
http://www.chiyoda-corp.com/en/

Seize the Moment,
Open Up New Frontiers
Corporate Philosophy
Enhance our business in aiming for harmony between energy and the environment,
and contribute to the sustainable development of a society as an integrated engineering company
through the use of our collective wisdom and painstakingly developed technology.

Consolidated Financial Statements FY2015
For the year ended March 31, 2016, and Independent Auditor’s Report(As of August 2016)

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