Top message“We will contribute to society through engineering”
is one of our Company Credos.
The fact that we actually realize this philosophy is
the corporate value of the Sanki Engineering Group,
and we are justly proud of this.
Japan has been undergoing great changes since the Great East Japan
Earthquake of March 11, 2011. That event has impacted life and society
in huge ways. It has greatly affected not only the methodology related
to anti-disaster measures, BCP (Business Continuity Plan), power-saving
and energy-saving, but also our personal lifestyles throughout the waysof our daily life and society. This makes us reconsider what we can doand how we should cope with such recent adversity.
The business domains of the Sanki Engineering Group involve various
fields of social infrastructure, including the facilities construction
business (heating, ventilation, and air conditioning, plumbing, electricalwork, information and communications, office relocations, etc.),
machinery systems business (material handling systems, conveyors,etc.), environmental systems business (water and sewage treatment
facilities, waste incineration facilities, etc.) and more.
While each of these is an individual business, we believe it is our
mission to meet society’s needs by working across Group businesses tooffer solutions that take advantage of our total engineering strength.
In particular, we have launched a project addressing recovery fromthe Great East Japan Earthquake and are submitting proposals that use
our total engineering strength to help complete that recovery as quickly
as possible.
In all our actions, we are constantly considering what society
expects of us as well as what we can offer society. This is the spirit
with which Sanki Engineering was born, and it is just as relevant today.

Takuichi Kajiura

President

02

03

Contents

Company Credos
We will contribute to society
through engineering
This means that we will make a social contribution through our business.
Sanki Engineering will make continuous contributions to society with its advanced technology, and,especially at the present time, mainly with environmental technology.

We will meet our customers’ needs
by working with them in good faith.
This means that we will ensure customer satisfaction.
Taking customer and stakeholder needs as our own, we will understand what they are looking for,consider how to respond and act accordingly.

We will act in a considered manner,and always in a spirit of good fellowship.
This means that we will strive for mutual understanding
and our actions will be based upon collective knowledge. We will practice communication with care,
not only within Sanki Engineering but with our stakeholders as well.

02

Top message

06

Fiscal 2011 Topics

07

Consolidated financial highlights

08

The History of Sanki Engineering

12Interview with the President

Summaries of Businesses by Segment
16

SANKI at a Glance

18

Facilities Construction Business

22

Machinery Systems Business

24

Environmental Systems Business

26

Real Estate Business26

Research and Development

28

Introduction to Group Companies

Sanki Engineering’s CSR Activities
30

Corporate Governance40

Our Relationship with Our Employees

Ministry of the Environment“Environmental Reporting Guidelines 2012”

36

Our Relationship with Our Customers

42

Health and Safety in the Workplace

Global Reporting Initiative“Sustainability Reporting Guidelines Version 3”

38

Our Relationship with Our Business Partners

44

Our Relationship with Local Communities

39

Our Relationship with Our Shareholders
and Investors

46

Our Relationship with the Environment

52

An Overview of the Executives

About the Publication of SANKI REPORT

Reference Guidelines

Recent years have brought great changes to our business environment. The environmental●

and energy problems we face, globalization in so many areas, our ability to respond to crises
and so on are all interrelated with each other, making it difficult to predict the future of ourbusiness activities. Financial data alone is not sufficient to evaluate modern businessactivities. Strategy, organization, human resources, governance and so on must be
considered in the context of environmental change in order to discuss future predictions andinitiatives organically and convincingly.
This understanding inspired us to begin publishing CSR reports in 2005. Starting this●●Organizations Covered by Report●Non-financial information basically concerns
Sanki Engineering Co., Ltd. alone.

●

When the information concerns the Group(e.g., compliance information),
the text specifies that this is Group information.

●

Financial information shows consolidated Group figures.

year, however, we have renamed the publication SANKI REPORT and designed it to serve asa new communication tool. Our purpose is to provide our stakeholders with a report that will
help them better understand Sanki Engineering. This is a new experiment for us. While thisreport may not contain all the information our readers need to fully understand how ourenterprise will grow and continue to thrive in the future, we look forward to improving andexpanding it with their cooperation and input.
We hope to hear your opinions and suggestions after you have looked at this report.

ISO 26000

Reporting Period
April 2011 - March 2012
(with some information from outside this period)

Precaution on performance outlooks, etc.
In addition to past and present information concerning the Sanki Engineering Group, this report includes targets, plans, outlooks, strategies, forecasts of future performance andFinancial section
54

11-year consolidated financial summary

60

Consolidated Statements of Changes in Net Assets

56

Business overview for FY 201261

Consolidated Statements of Cash Flows

57

Consolidated Balance Sheets

62

Notes of Consolidated Financial Statements

59

Consolidated Statements of Income andComprehensive Income

76

Independent Auditor’s Report

77

Corporate information and share information

so on as based on our medium-term management plan “SANKI VITAL PLAN 90th” and other sources. Please be aware that these forecasts are the best judgments of SankiEngineering management based on the information available at the time, and actual performance may differ significantly from these forecasts owing to changes in economic
conditions, market trends, exchange rates and so on.

04

05

Topic s

Hi g h l i g h t
Consolidated financial highlights

Fiscal 2011 Topics

Head office moved to St. Luke’s Tower to better drawout our total engineering strength

Opening of Sanki Smart Office Demonstration RoomIn October 2011, we consolidated our operations divisions and major
subsidiaries into one location by moving our head office into St. Luke’s Tower.
This makes it easier for Group employees to communicate between
departments and bolsters the total engineering strength of Sanki Engineering.
The new office is equipped for a number of functions. For example, theFoyer, a waiting room next to the reception area, contains displays of SankiEngineering history and technology. There is also a Smart Office Model
Room, while Cafe Session gives employees a place to communicate witheach other.

The Sanki Smart Office Demonstration Room opened on the 41st floor alongwith the Head Office move.
Modeled upon an actual office, the Demonstration Room is a showroom
containing building facilities such as entrance & exit control, lighting and air
conditioning control system along with IT equipment such as IP telephones,
PCs, task lights, electric blinds and more, all interconnected with each other.
Visitors can learn about Sanki Engineering’s smart building solutions
technology and experience how well it actually works. (cf p. 21.)

(Millions of yen)

FY ended March 31, 2008

FY ended March 31, 2009

FY ended March 31, 2010

FY ended March 31, 2011

FY ended March 31, 2012

Fiscal year

¥ 218,256¥ 188,653¥ 143,348¥ 147,129¥ 175,291

Sales

254,460

203,340

159,273

151,794

147,994

Operating income or loss

（3,958）

7,125

5,027

3,843

2,525

Ordinary income or loss

（3,307）

6,900

5,456

4,239

2,268

3,134

3,283

3,141

2,124

176

Cash flows from operating activities（4,097）

19,177

1,294

11,554（2,697）

Cash flows from investing activities

11,511

1,726（1,664）2,610（1,046）

Orders received

Net income or loss

Cash flows from financing activities（3,812）（4,377）（2,936）（1,883）

Cash and cash equivalents at end of year

¥ 19,617¥ 36,142¥ 32,825¥ 45,135¥ 41,097（280）

As of end of fiscal year under review
Total assets

215,680

176,664

163,307

158,501

163,120

Net assets

80,27678,78080,49879,833

79,662

Number of employees

2,225

2,239

2,272

2,316

2,289

42.42

44.45

42.86

29.67

2.46

1,086.02

1,065.77

1,119.40

1,115.41

1,113.70

15.00

15.00

15.00

15.00

15.00

Equity ratio (%)

37.2

44.6

49.3

50.3

48.8

Return on assets (%)

（1.4）

3.5

3.2

2.6

1.4

Return on equity (%)

3.7

4.1

3.9

2.7

0.2

Per share information
Earnings per share (yen)Book-value per share (yen)Cash dividends (yen)Other information

Winner of Energy Conservation Center, Japan
Chairman’s Award for Energy Conservation

Order acceptance of the sewage treatment system
for Showa Station

The “Nagoya University Hospital Patient Ward, Etc., ESCO Project,” acollaboration of Sanki Engineering with Nagoya University, Mitsubishi UFJ
Lease & Finance Company Limited and Toyota Enterprise Inc., won the Energy
Conservation Center, Japan Chairman’s Award at the Energy Conservation
Awards, Energy Conservation Case Studies Division.
The ESCO project with integrated management that included operations
management of the energy conservation facilities was honored for sharply
reducing CO2 emissions.

The Research Organization of Information and Systems (ROIS) National Instituteof Polar Research (NIPR) placed an order for sewage water treatment systems
for the Showa Station at the South Pole in November 2011. Sanki Engineering
has since delivered the systems to the institute.
The systems are compact and easy to maintain and manage, securing a high degreeof quality of the treated water even in comparison with effluent standards in Japan.
We have long dispatched employees to the Japanese Antarctic Research
Expedition in the form of temporary transfers to NIPR. (cf p.44.)

Orders received
Sales

Orders received and sales(Millions of yen)

Operating income

Ordinary income(Millions of yen)
7,125

254,460

Net income(Millions of yen)

(Millions of yen)

6,900

218,256

5,456

203,340

5,027

188,653

4,239

175,291
159,273
143,348

3,843
151,794
147,129

147,994

3,134

2,525

06

’08

’09

’10

’11 (FY)（3,958）

2,268

2,124

176

’07

’07
’07

3,283 3,141

’08

’09

’10

’11 (FY)（3,307）

’08

’09

’10

’11 (FY)

’07

’08

’09

’10

’11(FY)07

The History of Sanki Engineering
Sanki's Technology Responds to the Needs of the Era
Laying the Foundation for TechnologicalCompetence by Meeting the Needs of the Era

Diversified and Expanded Businesses Led
to Greater Technological Competence

Sanki’s Advanced Technology Bolsters aConstruction BoomIn its earliest years, Sanki Engineering got its start with two major
projects for Toyo Rayon (the precursor of Toray Industries, Inc.): its Shiga
manufacturing plant and its Aomori ice-making plant and refrigerated
warehouse. At that time, the Company worked on steel frame
construction and building materials, in addition to heating and sanitation
projects.
Hiring highly skilled electrical technicians away from other companies
allowed Sanki to venture into the field of electrical construction.
As Sanki was finding its footing technologically, it became aware thatcities would inevitably develop urban environmental sanitation systems,
so it focused on the current state of trash incineration and prospects inthat field and began working on improvements. After repeated tests,
surveys, and research projects, it developed its own incinerator forbuildings. The Sanshin Building was the first large building in Japan toinstall this kind of incinerator.

In 1930, Sanki entered into a joint venture with the U.S. firm Carrier
Engineering to establish Toyo Carrier Industries, which quickly began
working on air conditioning projects. By that time, Sanki had alreadystarted businesses in areas such as electrical facilities, incinerators,
conveyors, and sashes, as well as conducting technological research,and in 1937, it entered into contracts with two more U.S. companies,
Dorr Inc. and Oliver, Inc., to market machinery for mining-related
chemistry. This represented a further leap in Sanki’s technologicalcapabilities.
In addition to heating and cooling, sanitary water supplies,
kitchen, electricity, sashes, building incinerators, and other architectural businesses, Sanki also began serving as a general agency
for Mosler Safes andFukokuseki (an artificial
stone cladding for decorating the outsides ofbuildings).

During the construction boom that occurred right before the outbreak ofWorld War II, Sanki carried out a number of major projects,
incorporating the most advanced technology available at the time.
In 1938, Sanki Engineering completed construction of Daiichi
Seimei’s main building, making it the first building in Japan to have apower supply with the special high voltage of 22kV. The building
boasted the largest central monitoring board of any building at thattime, located four floors underground.
At the same time, the Company also took a proactive approach toincorporating new technology. In an attempt to develop its machinery
manufacturing businesses, it began manufacturing conveyors. This was
also the era in which it incorporated electric resistance welded steel
tubing technology.

A Proactive Approach to Technological Innovation
In the favorable economic climate of the postwar years, SankiEngineering’s performance improved rapidly, reflecting its projects inbuilding construction and facilities expansion. Sanki installed Japan’s
first all-fluorescent lighting system in the Taisho Marine and Fire Insurance Building, completed in 1953.
In 1957, Sanki Engineering delivered its roller conveyor to agovernment-sponsored scientific venture, the Second South Pole
Regional Monitoring Team, and it was used in stacking supplies for the
winter on the ice.
The Company carried out a project that perfectly equalized air flow
and suppressed noise in the high speed ducts in the Ohtemachi Building, which was constructed in that era and was then the largest building in East Asia. The project was completed in only 20 months andrepresented a major advancement in air conditioning technology.
As part of its urban environmental sanitation business, it also
became involved in building sewage
disposal facilities.

Fluorescent lighting in the Taisho Marine andFire Insurance Building

The Nihon Seimei Building, Tokyo
The central monitoring board of Daiichi Seimei’s main building

A trash incinerator

Kumagaya sewage disposal facilities

The Toyo Rayon Shiga plant

The History of Sanki Engineering

1925:

The 1930s:

The 1940s:

The 1950s:

Established as an Offshoot of the Machinery Department of Mitsui Bussan

Growth Leading Up to Its 10th Anniversary

Major Construction Orders Due to a Strong Demand for Construction Before World War II

Major Advances as Japan Recovers

The destruction of brick and steel frame buildings during the Great Tokyo
Earthquake of 1923 prompted a subsequent major turn to ferroconcrete
construction and an era of large-scale construction projects for the architectural and construction industries. Due to theprevailing trend of modernization, demand forbuilding utilities such as heating, cooling, watersupplies and sewage, and electrical fixtures andfittings increased and brought about technological advances.
On April 22, 1925, Sanki Engineering wasestablished as a spin-off from Mitsui Bussan’ s
Machinery Department. It began as a small
company with only ¥500,000 in capital and 12 First President,
Meijiro Yasumoto
employees.

In 1931, Sanki Engineering moved its main office to the Sanshin Building, which was
outfitted with the era’s most up-to-date facilities. This move promised new majoradvances in technology.
In 1933, the Tokyo Nihon Seimei Building (now the Nihonbashi branch of Takashimaya Department Store) was completed,showcasing a compendium of the era’s
latest technology. This success led to
Sanki Engineering becoming one of thebiggest suppliers of facilities construction
and facilities in Japan. The Company
steadily grew and expanded, establishinga branch in Dalian, Manchuria.
In 1935, as it approached its 10th
anniversary, Sanki Engineering had fivebranches and six field offices, as well as
three affiliated companies, and over 300
employees.

During the period in 1941 before Japan’s
sudden entry into World War II, there was astrong demand for construction of financial
institutions, insurance companies, department
stores, and hotels in Japan, and SankiEngineering participated in one project after
another.
However, as the war intensified, theThe Showa Emperor visits the Nakatsu Plant
Company was plagued with a chronic shortageof workers and with distribution of goods tightly controlled, there were constant shortagesof materials. As the course of the war worsened in 1943, there were emergency metalcollection campaigns throughout Japan, which created noticeable shortages. During that
period, the Kawasaki and Tsurumi plants were designated as military-industrial plants, andthe Company decided to move its headquarters and domestic manufacturing plants to thecountryside, but the war ended in August 1945 before these moves could take place.

While still reeling from the shock of losing the war, the people who
had guarded the factories in Japan and the people who had returned
from the battlefields set about the task of rebuilding the business.
In the Tokyo area, work was available remodeling buildings that
the Occupation Forces had taken over, as well as the construction of
new bases and barracks. In addition, the outbreak of the Korean War
in 1950 led to a war-driven economy, and the Japanese economy asa whole took a favorable turn. This
upturn in the domestic economy wasreflected in a demand for building
construction and improvement in equipment, and Sanki Engineering’s performance dramatically improved.
With the expansive new growth, theCompany’s capital reached ¥1 billion in1958.
A copy of the Sanki News, the in-house
Company publication, from 1958.

The Sanshin Building

The Growth andDevelopment of Technology

08

1925: Radio broadcasts begin
1927: The first subway opens, linking Ueno and Asakusa

1931: Tokyo Haneda International Airport Opens
1939: Japan Airlines succeeds in flying between New York and Yokohama

1942: Kanmon Tunnel between Honshu and Kyushu opens
1949: Hideki Yukawa becomes the first Japanese to win a Nobel Prize

1953: Television broadcasts begin
1958: Tokyo Tower completed

09The History of Sanki Engineering
Sanki's Technology Responds to the Needs of the Era

Feature as a Manufacturer that Responds to
the Needs of the Era

Technological Innovations:
From Skyscrapers to Clean Rooms

Opening the Way to a New Era: Advances inEnvironmental and Information Technology

Towards Environmentally Friendly Technology

In addition to long-distance conveyors for coal mines and dam
construction frames, there was a growing demand for the kinds ofportable conveyors used in steel plants and construction sites, andshipments to clients in various industries increased.
Formerly, sashes could only be made to order, but SankiEngineering instituted standardization and large-scale manufacturingof sashes for buildings and plants, which were 40% more expensive
than wooden construction hardware, not only bringing down the price
but also ensuring high quality and timely shipping. The standardized 6S
sash was a huge hit and was adopted for construction of plants,
schools, offices, hospitals, and other buildings throughout Japan,
giving Sanki Engineering the largest share of the market for steel sash
manufacturers.

In 1968, Sanki Engineering participated in construction of the heating,ventilation, and air conditioning, plumbing, and electrical equipment forJapan’s first real skyscraper, the Kasumigaseki Building. These air
conditioning and plumbing facilities received an award from the Societyof Heating, Air-Conditioning and Sanitary Engineers of Japan in 1970.
The clean room technology that undergirds the semiconductor
industry was developed in the 1970s. Sanki Engineering built Japan’s
first real large-scale clean room at NEC’s Sagamihara plant. During thisperiod, it made innovations in several areas of technology. In the area of
mechanical engineering, Sanki Engineering built the world’s first
unmanned automatic sorting system and airport freight handling system.
In the area of environmental technology,
its innovations included bringing incontinuous sand filtering technology from
Sweden.

In addition to building Japan’s first cogeneration system, SankiEngineering was a pioneer in taking advantage of unused energy
sources, such as developing a power generating system that uses thegas from sewage sludge.
“The environment” and “information” became buzzwords in the
1990s. Sanki Engineering started an information and communications
business and developed a great deal of environmental technology,
including an ice thermal storage system, sophisticated sewage
processing systems, and gas-fired melting furnaces. It also got involved
in information-related technology, such as LANs and monitoring andcontrol systems. On the other hand, offices were often integrated or
moved, and Sanki Engineering’s facility systems business began
attracting notice as a unique one-stop business for such moves.

The 21st century has brought about increased needs for saving energy
and reducing CO2 emissions. Sanki Engineering is focusing mostly onenergy efficiency and has developed a wide variety of energy-saving
systems for various fields, including offices, industrial plants, hospitals,
and data centers.
It is actively importing technology from Europe, and this has
resulted in the development of many major technologies, including
Aero Wing, trans heat containers, and next-generation stoker furnaces.

Conveyor belt at a steel production site

The Shiodome buildings

6S sashes
A clean room

Sophisticated sewage processing facilities
Ice thermal storage system

The 1960s:

The 1970s:

The 1980s:

The 21st Century:

Strengthening the Organization Behind Sanki, the Technology Company

Large-Scale Organizational Reform for a New Era

The Challenge of Building New Businesses for the Turbulent 21st Century

Given Sanki Technology’s multifaceted policies dating back to the prewar period, it was

The environmental protection movement grew, and the Environmental Agency waslaunched in 1971. During this era, Sanki Engineering developed a track record in urban
waste incineration facilities and industrial wastewater processing equipment and set up
an Environmental Administrative Office.
The so-called “Nixon shock”—U.S. President Nixon’s sudden decision to establish
diplomatic relations with the People’s Republic of China—and the first oil shock led to a
deep recession in Japan, and companies operated on a reduced scale. Sanki Engineering
was no exception, and it spun-off its sash
business and instituted centralized
controls on the departments as it sought
the optimal mix for ensuring the growth ofeach business.
Overseas, it provided HVAC equipment
for satellite communications groundstations in places such as the Middle
East, Africa, and Venezuela, and built
automotive testing equipment in the
Suntory Hall, where Sanki Engineering was involved ininstalling the HVAC and plumbing systems
Soviet Union.

The Company Credo was formulated in 1980. Later,in 1982, it built a new Technical Research Laboratory
in Yamato, Kanagawa prefecture, equipped withlarge-scale experimental facilities, as a basic
research facility for the cutting-edge technology
demanded in every field and for developing original
proprietary technology and technology that is usefulacross many business areas. As Japan moved fromTransport system (Tohan Co., Ltd.)the Showa era (1926-1989) to the Heisei era(1989-present), people’s needs included acquisition of comfortable living spaces, intelligent
devices based on rapid progress in computers and communications and the wave of
informatization, and urban management, which covers urban planning in general. These
needs resulted in Sanki Engineering receiving a series of large-scale orders.
However, the collapse of the bubble economy in 1990 brought about dark days in theJapanese economy, including a reduction in investments in housing, a decrease in personal
consumption, and a downward correction in investment in equipment and facilities.
Japanese companies were forced to rethink their existing businesses and restructure inorder to rejuvenate themselves.

Placing the Global Environment as the Central Focus of theCompany, Aiming to Bring About a Sustainable Society

1970: Wireless phones and picture phones are exhibited at the Osaka World’s Fair
1978: New Tokyo International Airport (Narita Airport) opens

1988: Tokyo Dome completed
1995: Windows 95 goes on saleable to keep up with the innovations in production technology that undergirded Japan’s
period of rapid growth. It underwent organizational reform to increase production capacity

The History of Sanki Engineeringin such well-performing businesses as the 6S Sash and ESCON, while positioning facilities
construction as the main pillar of the company, concentrating on building up a new
foundation for both its construction materials and machinery businesses. The Sagami plant(now the Yamato Engineering Center), completed in 1963, had production equipment
specifically tailored for mass production.
On the occasion of the 1964 Tokyo Olympics,
Sanki Engineering participated in two major
construction projects that reflected Japan’s
accomplishments and sophisticated technology:
the Yoyogi National Gymnasium and the NHK
Broadcasting Center, which became a base forbroadcasting to the entire world.

The Growth andDevelopment of Technology

10

The Kasumigaseki Building

The Yoyogi National Gymnasium

1960: Color television broadcasts begin
1964: The Tokaido Shinkansen begins service

Moving into the 21st century, consideration for the global environment has
become an essential corporate responsibility and an important element inSanki Engineering’ s business activities.
The company opened its Shonan Training Center (in Zushi, Kanagawa prefecture) in 2000 and began training human Kansai International Airport, where Sanki Engineering
was involved in constructing sorting facilities related
assets for the new era. It moved its to HVAC, water supply and drainage, plumbing, andmain office from Tokyo’s Hibiya district international mailto Nihonbashi in FY2005 and to Tsukiji, Akashi-cho, in FY2011.
In FY2012, Sanki Engineering launched a Smart Building Solution
Business and emphasized reduction of the environmental burden throughenergy efficiency and development of technology to provide comfortableenvironments.

2003: Digital cameras, DVD recorders, and flat-screen television
sets take center stage as the “three must-have treasures”

2008: The iPhone goes on sale and becomes a massive hit

11Interview with the President

rental revenues following revisions to rents of major rental
properties in our real estate business, such that sales decreased by
2.5% on a year-on-year basis to ¥147,994 million.
In terms of income, although the Group worked together toimprove construction profitability by lowering costs and expenses,
this was not enough to offset the decline in sales. Operating
income decreased by 34.3% on a year-on-year basis to ¥2,525
million, ordinary income decreased by 46.5% on a year-on-yearbasis to ¥2,268 million, and net income decreased by 91.7% on a
year-on-year basis to ¥176 million.

Takuichi KajiuraQbusinesses,” we are aiming to achieve medium- to long-term
development. In terms of financial performance, our targets for the
final year of the plan are ¥200 billion in consolidated sales and¥10 billion in consolidated ordinary income.
During fiscal 2011, the first year of the plan, we started byreforming the organization, establishing the Sales Administration
Division for example, to enhance inter-departmental synergy. We
founded the Smart Building Solution Division in April 2012 as aStrategic Growth Business, thus creating an organization capableof quickly responding to customers’ multiple needs.
The medium-term management plan sets theme-based actionplans that we are carrying out. We have considered more than 300
proposals for initiatives relating to starting new businesses. A
number of those proposals have advanced to the next step. As
part of expanding our overseas businesses, we have implemented
a new overseas training program and begun initiatives that arelooking several years ahead. We are also starting to reform thepersonnel system to better develop our human resources.
As for technical development, the main focus is on promoting
technical proposals that include energy conservation, whether weare dealing with core or strategic businesses. This is the major key
to achieving the medium-term management plan. Examples ofTell us about the progress of“SANKI VITAL PLAN 90th.”

President

Q

First, please tell us your thoughts
as the new President about what you
enthusiastically have in mind and show us
the direction of the Company's road ahead?

For the time being, the objective of Sanki Engineering is to fulfill“SANKI VITAL PLAN 90th,” the medium-term management plan weannounced in September 2010. Under the new organization in
effect since April 2012, this is something we must achieve, and wewill certainly be able to do so if our employees work together totake firm action on the measures described in the plan. Since theCompany's establishment, we've had the good fortune of doing
business with good customers and growing along with them. We
will continue to make sustainable efforts through engineering forthe satisfaction of our customers, by placing the top priority on
their demands. Now that I have assumed the office of President,
Executive President and Representative Director, this stanceremains unchanged, but our management needs to take measures
suited to the times. For example, my recognition is that it is time
for us to lightly step on the gas pedal to increase our orders. WhileI am leading Sanki Engineering, my mission is to enhance ourcorporate value by making sure we meet our medium-term
management plans, increase customer satisfaction and lift
consolidated sales to ¥200 billion by fiscal 2015, our 90th
anniversary year. The challenges of the business environment weface are certainly urgent, but I hope to use Sanki Engineering’s

12

total engineering strengths to overcome them. I believe this can beattained through the business expansion by blending our coretechnologies such as M & E Works (i.e., heating, ventilation, and air
conditioning, plumbing and electric works) with the technologies
such as conveyance systems, and water and sewage treatment
systems that our competitors do not possess.

Q

How was the Group’s financial performancein the fiscal year ended March 31, 2012?

In fiscal 2011, there was a gradual recovery trend from the sudden
slump in business following the Great East Japan Earthquake, but
subsequently the European debt crisis and high yen brought private
capital investment in the facilities constructions market to a low
point. The amount of construction overall was sluggish and the bids
more competitive. We have faced this environment by actively
proposing energy conservation systems, which is somethingcustomers are really looking for. As a member of society, we worked
to help achieve a comfortable, low-carbon society, and as anenterprise we endeavored to win more orders while stressing
profitability from construction. As a result, orders during the fiscal
year increased by 19.1% on a year-on-year basis to ¥175,291 million.
However, the effects of the Great East Japan Earthquake havebeen delays in construction progress and starts and a decline in“SANKI VITAL PLAN 90th” is our five-year medium-term management
plan that is effective to fiscal 2015, our 90th anniversary year.
Upholding the basic policies such as “Maintain a profitability focus
and optimum-sized orders,” “Further strengthen Core Businesses andexpand Strategic Growth Businesses” and “Exploit and cultivate new

90 th

SANKI
VITAL PLAN

Management Philosophy

VisionFinancial performance targets

Through its total engineering, the SankiEngineering Group shall promote the diffusion ofenergy-conserving and new-energy systems tohelp achieve a comfortable low-carbon society.

We shall strengthen Core Businesses, expand
Strategic Growth Businesses and create Unique
New Businesses to ensure our long-term
development.

Fiscal 2015 consolidated sales:¥200 billion
Consolidated ordinary income:¥10 billion

Unique New Businesses

・Combine engineering from various businesses
・Energy conservation/new energy

Strategic GrowthBusinesses

Strategic GrowthBusinesses

・Life cycle engineering

・Renovation（※）
・Integrated networks

Core Businesses
・Building HVAC and Plumbing
・Industrial HVAC
・Electricity

・Facilities Constructions
・Machinery Systems
・Environmental Systems

Strengthening the management base・Reform of work processes
・Strengthening the customer base・Cultivation and appropriate allocation ・Practice of efficient managementof human resources（※）Integrated as Smart Building Solution Business as of April 1, 2012

Consolidated sales(billion of yen)

FY2011 (actual)

FY2013 (planned)

FY2015 (target)

Core Businesses

136.6

169

176

106

132

137

102.9

126.5

131

Facility systems

3.1

5.5

6

Machinery systems

10.8

14

15

Facilities constructions
HVAC, plumbing and electricity

Environmental systems

19.8

23

24

Strategic Growth Businesses

8.9

15

19

Life cycle engineering

5.4

6

7

Renovation

0.7

4

5

2.8

5

7

Unique New Businesses

0

0

2

Real estate business

2.8

3

3

Adjusted amount

（0.4）

ー

ー

Total

147.9

187

200

Facilities constructions overhaul sales

69

80

85

Overseas sales

1.7

5

8

Consolidated ordinary income

2.2

Integrated networks（※）

Of the above

1.5%

7.5 4.0%

10.0 5.0%(Note) Percentage indicates ratio of consolidated ordinary income to consolidated sales

13Interview with the President

important technical developments in fiscal 2011 included an“energy-conserving system for data centers” and an“energy-conserving supercharged fluidized incineration system.”
We also won an energy conservation award (the Energy
Conservation Center, Japan Chairman’s Award) for an ESCO
project at a hospital affiliated with a national university. The trend
is continuing in fiscal 2012, with development including suchthemes as a “temperature stratification air conditioning system forlarge spaces” and an “energy-conserving logistics conveyor withdirect-drive motor.”

Q

What is your financial outlook forthe present term (fiscal year ended March 2012)and specific measures for implementation?

This period we will continue to follow the key measures of “SANKI
VITAL PLAN 90th” to turn around our financial performance andachieve our targets. This entails maintaining and expanding ourCore Businesses, cultivating and strengthening our Strategic
Growth Businesses and keeping up measures to strengthen the
management base. We are also taking steps to reduce fixed costs
and along with that reviewing our organization and portfolio
assets to make management more efficient.
We forecast increasing revenue and profits, with consolidated
performance as follows: orders of ¥175 billion (decreased by 0.2%
on a year-on-year basis), sales of ¥170 billion (increased by 14.9%
on a year-on-year basis), ordinary income of ¥3.4 billion (increasedby 49.9% on a year-on-year basis) and net income of ¥1.8 billion(increased by 922.7% on a year-on-year basis).
As for specific initiatives, it is crucial to work crossorganizationally–that is, make sure that different operations
divisions are sharing information and technologies with each otherso they can solve any issue that customers bring in–and thereby
distinguish ourselves from the competition. The relocation of thehead office has consolidated all our operations divisions and major
subsidiaries in one place, and we have created open spaces
where people can trade views freely.
We have also introduced and begun operating a marketing
information sharing system. Going forward, we will be reforming
awareness in a number of aspects. For example, under the new
Earthquake Recovery Project, we have begun activities that
promote recovery of disaster-affected areas and are not limited by
the boundaries between operations divisions. Actual initiatives
like these will help keep things fresh and open. The three
representative directors, including myself, work in a common
executive office instead of private offices. This is to enhance theexchange of information among our respective areas of
responsibility and enable quick decision-making. I myself am goingout to workplaces to improve communication with our employees.
I think the President should be like the conductor of anorchestra, and our employees like professional musicians. No
matter how talented the individual players, the music will only be
beautiful if the orchestra as a whole is playing in harmony. SankiEngineering is involved in a wide range of business domains, andour customers likewise comprise a variety of fields. For that reason
we have gained such varied engineering experience over the years.
This is where I get to show my skills as a conductor! (Laughs)

Q

Q
In fiscal 2010, we launched the SANKI YOU Eco Contribution
Point System, an initiative unlike any other in the constructionindustry. (cf p. 50.) A total of 129 proposals we made for reducing
CO2 emissions were adopted by customers in fiscal 2011, leading
to a total reduction of 31,095 tons. The resulting eco contribution
points were worth ¥3,109,500.
We donated the money to the non-profit Environmental
Relations, which used it to plant trees. Such an initiative converts
our work into figures or physical goods, which helps to make theirsignificance understandable. As I mentioned previously, our major
businesses include M & E works (heating, ventilation, and air
conditioning, plumbing and electric work), information andcommunication systems for buildings and factories, andconveyance systems, and water & sewage treatment systems.

SANKI YOU Eco Contribution Point System

What role would you like
Sanki Engineering to have in society?

① Energy conservation

proposal③ Each ton of CO2 reduced

is converted to ¥100 invalue④ Value is added up eachhalf-year and donatedWhat is your message to the shareholders?

Returning profits to our shareholders is one of the mostimportant issues for management. Although consolidated
revenues and profits declined last year, We have secured
sufficient resources to maintain payments of stable dividends
to our shareholders. We set a year-end dividend of ¥7.50 per
share (the same as the previous year) for a total yearly
dividend of ¥15 per share (also the same as the previous year).
While the business environment we face is increasingly
challenging, we intend to boost revenues and income andlive up to our shareholders’
Dividends per shareexpectations. We will doInterim dividend
Year-end dividend (yen)(yen)
Consolidated payout ratio (%)
this by steadily and swiftly
1000
carrying out reforms(rebuilding our programsand business foundation) to
7.5 7.5 7.5 7.5 7.5 500(forecast)achieve the targets of“SANKI VITAL PLAN 90th.”100
I ask our shareholders
for their ongoing support
50
and advice.

Environmental
protection
initiatives

We suggest
ways toconserve energy
with equipment
and reduce CO2

SankiEngineering

Customer

Our Company Credo says, “We will contribute to society throughengineering,” which is a clear statement of our social
responsibility as a business. The Company Credo says, in otherwords, that the very reason for our existence should be tocontribute to society. We put as much stress on conserving energy
and reducing environmental burden as we do on offering
technologies that save time and labor and enhance convenienceand comfort.

14

Such facilities are critical to people’s lifestyles and businessactivities. Maintaining them requires much energy. Our
business activities are directly connected to lifestyles,
enterprises and the environment. Sanki Engineering will practice
CSR management proactively, always considering how we canfulfill our responsibility to society by contributing to reduce C0 2
emissions through our core businesses. We will make concerted
and united efforts to be an enterprise that is indispensable to ourstakeholders.

7.5

7.5

7.5

7.5
(forecast)’08

FY2008(Period 85)
Interim dividend (yen)Year-end dividend (yen)② Proposal adopted

7.5

Consolidated
payout ratio (%)

7.5

’09

’10

’11

’12

0
(FY)

FY2009(Period 86)

FY2010(Period 87)

FY2011(Period 88)

FY2012(Period 89)

7.5

7.5

7.5

7.5

7.5

7.5

7.5

7.5

7.5

33.7

35.0

50.6

609.8

ー

15

Summaries of Businesses by Segment

SANKI at a Glance

Sales Composition
HVAC System●●●

Facilities
Construction
Business●●

HVAC system
Clean rooms
Freezing & refrigeration
plant
District heating & cooling
plant
Nuclear power plant

Plumbing &Drainage System●●●

Water supply & drainage
Sanitary equipment
Kitchen equipment

Fire Services System●

Fire fighting equipment &systemElectrical System
●

●

●

●

Facility Systems●●●

Material Handling Systems●●

Machinery
Systems
Business●●●

Clean transport systems
Material handling system
Airport baggage and cargo handling systems
FA systems
Control and information systems

Electrical system
ICT facilities
Instrumentation
Electrical civil works

Financial Offices
Creation/Relocation
Dealing Rooms, Offices, Branches
Workplace Planning
Facility Management

●

●

●

●

Lightweight capacity conveyer
Environmental conveyer
Belt and Roller conveyer
Sorting device
Automated packet warehouse

In FY2011, we used energy-saving equipment and systems and reduced power
consumption to work with an emphasis on proposals and sales of remodeling projects
for reassessing and optimizing energy consumption throughout entire buildings. The
resulting growth in orders put us above the number of orders for the previous fiscal¥115,019

year in both building HVAC and plumbing, and industrial HVAC. Demand for reduced

millionpower consumption and rising energy costs due to the effects of the earthquake have
led to further requests for energy-saving equipment, and in these circumstances, wewill work on developing new technology and expanding the use of next-generationenergy sources, guaranteeing continuous growth for the Company.

7%

Conveyance Systems●

78%

Summary of FY2011

18

page

Summary of FY2011
The appreciation of the yen in FY2011 led to companies cutting back on investment inequipment, and the total value of orders received fell below the figure for the previous
fiscal year, but we worked on selling logistical conveyors with high-efficiency motors¥10,823and developing the material handling system in aging rooms in lithium-ion battery

millionplants. We did our best to improve earnings while maintaining orders from existingcustomers while moving forward with expansion into overseas markets.

22

page

Water treatment●●

Environmental
Systems
Business●●●

Water and sewage treatment facilities
Industrial wastewater treatment facilities
Sludge treatment facilities
Sludge incineration facilities
Industrial plant facilities

13%

Waste treatment●●

Waste incineration facilities
Landfill wastewater
treatment facilities

Summary of FY2011
In FY2011, the effects of the earthquake caused further demand for energy-saving
equipment and systems and increased requirements for disposal of earthquake
debris, and Sanki Engineering proposed and developed equipment and systems to¥19,825

deal with these problems. As a result, we succeeded in developing a next-generation

millionsewage sludge incineration system that reduces greenhouse gas emissions and areaiming to increase orders in the area of water processing. We are also enhancing
sales support and relationship with technical cooperation, as well as expanding ourbusiness overseas.

2%

Our real estate business includes operations in the areas of real estate leasing andbuilding management. We are making efforts to expand into higher value-added realestate while making use of our current technology.

Real EstateBusiness¥2,824
million24

page

Summary of FY2011
Sales in our real estate business in FY2011 were far below those of the previous
fiscal year, due to a reduction in earnings from leasing caused by a revision of rental
fees in our major rental properties. We plan to deal with aging facilities andreductions in rental earnings caused by revisions of rental fees by adding value to ourproperties through renewal projects and making use of idle assets to reconstruct ourbusiness and maintain stable earnings.

26

page

16

17

(FY)

90 th

Medium-Term Management Plan

Reports by Segment

Facilities Construction
Business

SANKI
VITAL PLAN

Point

Important policies
for achieving
our goals

・As a result of our efforts to strengthen our proposals

and sales and increase orders, orders in the field of
both HVAC and plumbing for buildings and industrial
HVAC increased over the previous fiscal year.

・Increasing orders for proposed renewal projects in response to the
Revised Energy Saving Act
・Strengthening cost competitiveness・Developing technology for next-generation energy-saving and newenergy・Streamlining and enhancing our bases in Southeast Asia

・We aim to achieve the goals in our medium-term

management plan, increasing orders mainly in thefield of HVAC and plumbing for buildings with ourcomprehensive energy-saving and low-powerengineering technology.

（billion of yen）
Facilities construction
Consolidated sales

FY2013 (planned)

FY2015 (target)

115.0

147.0

156.0

Creating Facilities Construction That is Friendly to Both People and the Environment

HVAC & Plumbing for Buildings

Sanki Engineering is creating facilities construction that is friendly to both people and the environment with its convenient,
comfortable and yet energy-saving and efficient systems. We will make unceasing efforts to increase our business activities whiledeveloping unique new technology and dealing with the challenges of globalization.

Given calls for saving electricity and a sharp rise in energy costs due
to a supply and demand crunch for electric power in FY2011, societal
demands prompted us to intensify efforts toward our aim of
optimizing energy consumption for entire buildings.
Sanki Engineering is aiming to increase orders with its
comprehensive engineering technology, which enables savingenergy and increasing the added value of buildings, by integrating
functions such as heating, ventilation and air conditioning, watersupply and drainage, and plumbing systems.
We will increase our overall engineering capabilities in order toenhance our abilities to propose technologies to customers. With
new technology unique to our Company that leads not only toenergy-saving and power-saving, but also to open the way for
reduction in life-cycle cost, we will broaden our business fields andguarantee growth potential.

Summary of Results and Performance for FY2011
Orders in our facilities construction business were 18.8% higher
than in the previous fiscal year at ¥134.8 billion, and sales were2.2% below the previous fiscal year at ¥115.0 billion.
We strove to increase orders, emphasizing profits from projects
and actively pursuing proposals and sales in the areas of energy
saving and low power. As a result, we had more orders than in theprevious fiscal year in our facilities construction business, in bothbuilding HVAC and plumbing, and industrial HVAC.
Record of Major Projects Implemented
Plans for Redevelopment of Mitsui Memorial Hospital(HVAC, plumbing and electrical equipment works)● Plans for the Mitsui-Sumitomo Marine and Fire Insurance New Kanda
Surugadai Sanchome Building(HVAC, plumbing and electrical equipment works)● Yokohama West Exist KN Building(HVAC, plumbing and electrical equipment works)● Additional construction and refurbishing of Daimaru’s Umeda Store(HVAC, plumbing and electrical equipment works)●

Orders（billion of yen）
115.8

’09

18

FY2011 (actual)113.5 134.8’10’11 (FY)

Sales （billion of yen）
125.5

117.5

’09

’10

115.0

We attempted to increase sales by concentrating on obtaining
orders for small projects, especially short-term remodelingprojects, in order to compensate for a decrease in the number ofprojects carried over from the previous year. However, the Great
East Japan Earthquake caused delays in both making progress inconstruction projects and in starting construction, so we ended up
with a figure below that of the previous year.

The Market Environment in FY2012
The accelerating shift of manufacturing industries overseas due tosuch factors as the appreciation of the yen and the Great East Japan
Earthquake has tended to cause a decrease in domestic private
investment. Moreover, even though there were expectations of ademand for earthquake recovery projects, competition for orders for
publicly funded projects is extremely fierce overall, so the businessenvironment in which the Sanki Group finds itself remains harsh.
On the other hand, the demand for remodeling of buildings andfacilities to meet increasing demands for energy efficiency as part ofmoving toward a low-carbon society is expected to expand further,
prompted by the Great East Japan Earthquake.
Even in this type of harsh business climate, industrial HVAC
and electricity are trending toward a strong recovery, especially inthe areas of building HVAC and plumbing, and we believe that
small-scale remodeling projects will continue to show a slightincrease. In FY2012, we aim to achieve the goals in our
medium-term management plan by maintaining our emphasis on
profits as we increase the number of appropriately scaled orders
with our ability to propose technological solutions, especially inthe areas of energy efficiency and low power consumption.

Industrial HVAC
Even in such cutting-edge industries as electronics andpharmaceuticals, increasing numbers of companies were not only
faced with recovery from the Great East Japan Earthquake andreassessment of their business continuation plans but also began
looking at improving and upgrading their HVAC equipment in order tosave energy. We will propose further advanced technologies andsolutions to our customers by taking advantage of our conventional
unique cleanroom technology.
In addition to the enhancement of our competitiveness indomestic markets, we will pave our way for globalization bystreamlining and enhancing our bases especially in Southeast Asia,
where many Japanese factories have relocated from Japan, so as tomeet the demands arising from newly developing countries.

’11 (FY)

19

Reports by Segment

Facilities Construction
Business

Electrical Equipment
Until now, Sanki Engineering has been proposing systems toprovide stable power supply and make highly efficient use ofelectricity in the fields of lighting installation, power substations,monitoring systems, information infrastructure and intelligent
building management.
While focusing on the roles of electric systems that will be
required for more advancement, diversity and energy-saving, weare aiming to raise the satisfaction level of our customers and toachieve steady growth, seeking amenities and conveniences
through proposals for the reduction of power consumption bymeans of energy-saving lighting, receptacle equipment and thevisualization of power consumption.
From the perspective of the customer, we also are aiming to
make proposals for power-saving measures and securing of
power supply in case of emergency.

Facility Systems
Facility Systems Division offers consulting service and project
management service for workplace, such as office planning,
fit-outs, and relocation by using Facility Management andConstruction Management method. Our over 20 years experiencein these services, especially for the trading rooms, headquarters,
and branches of financial institutions is very unique and reliable.
Our specialized consulting service for workplace planning withworkstyle change considering customer’s business goal andbusiness process makes optimal work environment and raises
customers’ productivity and creativity up. We always provide
customers the best solutions by taking advantage of ourknowledge and technologies in building facilities construction andinformation communications since Sanki Engineering
establishment. Recently, we started devising and marketing ofbusiness continuity planning (BCP) and energy saving planning forthe office as well.

20

TopicsLaunching Our Smart Building Solution Business
Enhancing Our Ability to Devise Technology in the Areasof Energy Efficiency and Power Conservation
One of the policies we are emphasizing as we move toward achieving
the goals of our medium-term management plan is to enhance ourability to devise technology in the areas of energy efficiency and power
conservation. As part of this effort, we launched our Smart Building
Solutions Business in April 2012.
Until now, Sanki Engineering has focused on expanding its
Renovation Business, which undertakes remodeling projects, especiallyin the areas of building monitoring and controls, while at the same timeoffering an Integrated Network Business that works on newly
constructed office buildings, especially for laying integrated trunk lines.
However, given the unstable power supplies since the Great East Japan
Earthquake, customers’ demands for smart buildings have increased
sharply. This prompted us to integrate our Renovation Business and ourIntegrated Network Business to launch our Smart Building Solution
Business, which allows us to offer solutions from both businesses atonce and deal with customers’ needs in a timely manner.

Installing Smart Office Model Rooms
We have installed a model room in our main office (St. Luke’s Tower,
41st floor) to allow our customers to experience this environment.
Customers can see how lighting, air conditioning, and other amenities
are controlled to appropriate levels, depending on how many persons
enter or leave the room and the level of daylight outside.
Smart seating
sensorNetwork
LED lighting

We define “smart buildings” as buildings that achieve energy efficiency
while pursuing comfort and convenience by means of information andcommunications technology (ICT).
The Smart Building Solution Business will take our strengths ingeneral engineering and make use of them offer high value-added
smart buildings, with energy efficiency and comfort improved throughlinks between building automation (BA) technology in areas such as
HVAC, plumbing, power, and ICT. At present, we are actively devisingtechnology mainly for upgrading existing buildings. Our target areas
will be projects in large cities such as Tokyo and Osaka, especiallycommercial and office buildings, hospitals, and schools above acertain size.

Digital signage(Energy visualization)

Integrated network
Building modelGreen IT devices

Smart Office
Manager

Using Our Strengths in Integrated Engineering toProvide High Value-Added Smart Buildings

Ceiling radiantpanelsLight control type
LED lighting

Smart PDU
(Outlet)(PC,IP telephone,task lighting,personal air conditioner )Wireless compound sensor(Lighting intensity,temperature,humidity)

Overview of the Model RoomDeveloping Control Systems In-HouseSanki Smart Office Manager (SSOM), developed in-house, is a control
system that optimizes energy use. SSOM allows personal lighting andair conditioning control geared to an individual’s actions, and even when
it is installed with existing lighting fixtures, customers can expect 60%
greater efficiency in lighting.
Another feature is visualization of electrical power. The systemmeasures power consumption in units of blocks or desks within offices
and displays it in real time, leading to greater awareness of saving
electricity on the part of each individual in the office. As a result of
installing SSOM in the offices (with about 50 employees) on the ninth
floor of our main office, the employees became more aware of saving
electrical power and realized 30% greater efficiency in use of power
outlets than in standard offices. In August 2012, we also installed
SSOM in our sixth-floor offices.

21

90 thMedium-Term Management Plan

Reports by Segment

Machinery
Systems Business

SANKI
VITAL PLAN

Point

Important policies
for achieving
our goals

・Sales in our Machinery Systems Business were
14.1% higher than in the previous fiscal year at¥10.823 billion.

・Venturing into new energy-related markets
・Developing and selling new conveyors for specific markets
・Establishing competitive bases in overseas markets

・We will respond to society’ s increasingly diverse

needs with an emphasis on proposals for efficiency
and clean plants as well as energy efficiency.
（billion of yen）
Machinery Systems

FY2011 (actual)

FY2013 (planned)

FY2015 (target)

Consolidated sales

10.8

14.0

15.0

Providing Material Handling Systems for Supply Chain Management
Sanki Engineering has been providing Material Handling systems for supply chain management but we are working on developing
technology that can deal with the issues of both customers and society as well as with changing needs.

Summary of Results and Performance for FY2011
Orders for the Machinery Systems Business were down 21.2%
from the previous fiscal year at ¥9.3 billion, but sales were up
14.1% over the previous fiscal year at ¥10.8 billion.
The reason that orders fell below last year’s figure is that theeffects of the appreciation of the yen led companies to decrease
their investment in equipment.
Record of Major Projects Implemented
Replacement of the Tohan Ageo Center Transport System
Cubic sorter for the Wakasa Seikatsu Logistics Center(system for sorting by postal code)● Door-foam equipment for the Hitachi Appliance Tochigi plant●●

Orders（billion of yen）

22

Sales （billion of yen）

4.7

11.8

9.3

11.3

9.4

10.8

’09

’10

’11 (FY)’09’10’11 (FY)

Market Conditions in FY2012
The worsening economic environment and the appreciation of theyen have caused private sector investment in equipment tocontract in the medium and long term, and competition among
companies is increasingly fierce. Sanki Engineering has beenhighly-esteemed for Material Handling System (MHS)
technologies in the fields of manufacturing and logistics domain.
And in recent years, we have been providing the advanced MHS
technologies for demands of supply chain management, enterprise
resource planning (ERP) for production and distribution andproduction line in the clean room. Since the Great East Japan
Earthquake has prompted an increasing number of companies toreassess their supply chains, we anticipate that they will haveincreasing needs to construct systems that take disaster recovery
into consideration as well as moving freight as quickly, safely, andaccurately as possible.
While responding to these societal changes, Sanki Engineering
is working on greater energy conservation and efficiency inproduction and distribution equipment that is essential for ourcustomers’ business and contributing to the development andmaintenance of logistical systems.
Given the anticipated demand for things like airport baggage
and cargo handling systems in developing countries, we are also
trying to expand into overseas markets.

Efforts in FY2012
In FY2011, we worked on marketing conveyors with high-efficiency
motors and developing systems for efficient transport within
low-dew-point control rooms or aging rooms for lithium-ion
batteries. Under certain conditions, these systems that wedeveloped can achieve a 60% reduction in annual power
consumption compared to conventional systems, when combinedwith the installation of automated transport devices and HVAC
technology.
With investments in equipment shrinking in our main market,
Japan, it will be more difficult than before to increase our

performance in our business areas, so we will venture into newenergy fields and move into automating production lines andreducing the amount of power that they use, as well as developing
new conveyors for specific markets.
We are also managing our business with an eye toward
expanding into overseas markets.

23

90 thMedium-Term Management Plan

Reports by Segment

Environmental
Systems Business

SANKI
VITAL PLAN

Point

Important policies
for achieving
our goals

・Orders for the Environmental Systems Businessincreased 62.5% over the previous fiscal year, due
to the introduction of new types of incinerators inwater processing facilities.

・Increasing orders for strategic, energy-saving products
for sewage processing facilities
・Development of major next-generation products
for the field of sewage processing
・Expanding our marketing networks overseas

・We worked to expand our environmental businessoverseas, beginning with our ultrafine aerationequipment, for which we established a marketingalliance with a major U.S. company.

（billion of yen）
Environmental Systems
Consolidated sales

FY2011 (actual)

FY2013 (planned)

FY2015 (target)

19.8

23.0

24.0

Helping Bring About a Low-Carbon Society
through Development of Our Technologically Superior Products
Sanki Engineering is developing energy-saving devices, energy-saving systems, water and waste processing equipment andsystems that can deal with problems such as the debris from earthquakes, and is helping bring about a low-carbon society withequipment and systems that reduce greenhouse gas emissions.

Summary of Results and Performance for FY2011
Orders in our Environmental Systems Business were 62.5% higher
than in the previous fiscal year, at ¥28.8 billion, while sales were
4.3% lower than in the previous fiscal year at ¥19.8 billion.
Orders were much higher than in the previous fiscal year due toinvestment in supercharged fluidized combustion systems (cf. p. 49).
Sales fell as a reflection of sales of large-scale waste
processing facilities during the previous year.
Record of Major Projects Implemented
Tokyo Ukima Water Recycling Center(work on sewage treatment equipment)● Sapporo Shinkawa Water Recycling Plaza(work on sewage treatment equipment)● Tokyo Southern Area Sludge Processing Plant(work on sewage treatment equipment)●

Orders（billion of yen）

24

Sales（billion of yen）

18.6

17.7

28.8

18.4

20.7

19.8

’09

’10

’11 (FY)’09’10’11 (FY)The Market Environment in FY2012
According to METI, the market for environmental businesses was
about ¥60 trillion in 2005 but is expected to be over ¥80 trillion in2015 and over ¥90 trillion in 2020. On the other hand, since bothpublic and private demand for environmental infrastructure has
decreased across the board, production of environmental
equipment peaked in FY2001 and has been decreasing. In order toguarantee sales in these areas, it will be essential for us torespond to demands for upgrading and maintenance of existing
equipment, to make proposals that take energy efficiency into
account, and to pursue technology that allows us to make the best
possible proposals for meeting the needs of cities, suburbs, andother areas.
While dealing with the historical and societal factors behindthese environmental businesses and the changes they are
undergoing, Sanki Engineering is determined to emphasize
Environmental Systems as one of its core businesses. Specifically,
we will develop our ultrafine aeration equipment (Aero Wing) andits supercharged fluidized combustion system further, cultivate
customers in the field of private water processing, expand ourwaste-related businesses, develop new energy-saving technology,
and strengthen our overseas expansion. We will strive tomaintain and develop technologically superior products that are
not in price competition.

Efforts in FY2012
In FY2011, the Great East Japan Earthquake caused further
requirements for energy-saving devices and systems, as well as
increasing demand for processing of earthquake debris, and SankiEngineering’s major medium-term policies also involved
developing and devising equipment and systems for dealing withthese problems. As a result, we succeeded in developing a
supercharged fluidized combustion system, a next-generation
sewage sludge incinerator that can reduce greenhouse gas
emissions, and received orders for two units.
We are also expanding the marketing of our ultrafine aeration

device (Aero Wing) overseas. In FY2011, a marketing agreement
was concluded between our subsidiary AEROSTRIP and a major
North American water processing plant manufacturer, OVIVO USA,
LLC, (Texas, USA). This will help us fulfill our aim of using OVIVO
USA’s nationwide network of agencies to expand our business inNorth America, as well as in our existing European markets.
We will work on developing technology for water and sewage
processing and waste disposal systems to contribute toimprovements in our living environment and the realization of alow-carbon society.

25

Reports by Segment

Real estateBusiness

Our Real estate Business is involved in leasing operations and building management,

Our R&D Framework

and we are working on expanding to include higher value-added properties.

We have built the Technology Research Institute in Yamato City,
Kanagawa Prefecture, alongside our plant facilities, in whichmost of our R&D activities are performed. Our verification fields
include actual buildings and plant facilities. We also engage injoint research with external research and educational institutions
and companies.
The Sanki Global Environment Plaza, located within the
research institute and offering educational tours, serves as ashowroom where our most recent developments are presented.

Summary of Results for FY2011

Sanki Global Environment PlazaThe Sanki Global Environment Plaza showcases our focus on environmental protection,
including energy conservation, CO2 reduction, and recycling of resources.

The Market Environment in FY2012
Major institutions having undertaken joint research with us in 2011:

Sales in our Real estate Business were 32.0% below those of theprevious fiscal year at ¥2.8 billion, and profits (ordinary income)from the segment were 47.7% below those of the previous fiscal
year at ¥1.3 billion.

Our Real estate Business will respond to aging facilities and thedrop in rental earnings due to rent revision by raising the added
value of properties through facilities upgrades and using
underutilized assets to rebuild our business and maintain a stable
income.

Tokai University, Fukui University of Technology, Shinshu University, Kanagawa
Industrial Technology Center, Chiba University Graduate School, Hokkaido University

Profile of our Technology Research InstituteAnalytical Laboratory
This is where we conduct key water quality analyses that are
crucial for water supply equipment and sewage processing
equipment, and evaluate the environment.

Large Tank
The 125m3 water tank allows us to measure the oxygen
transfer efficiency and base flow speed of our ultrafine
aeration device and verify the simulation results.

Clean Room
We have set up a Class 1000 clean room, which allows us toevaluate devices requiring a high degree of cleanliness.

Ion Chromatograph
The ion chromatograph, a device for measuring ion
components in a solution, is used to evaluate chemicals inclean rooms during the initial construction and operation.

Ventilation Laboratory
In this 200m2 testing facility resembling an actual space suchas an office, various property verifications such astemperature and airflow can be performed.

Transport Laboratory
We experimentally evaluate non-contact power supply
devices and conduct endurance tests on transport conveyers
while actually moving objects from one place to another.

Research andDevelopment

Aims of Our R&D Projects
While pursuing its diverse businesses, Sanki Engineering istirelessly conducting various R&D projects. All of them involve us
repeating verifications and measurements under specific conditions,and creating highly practical technologies to resolve our customers’
problems. Our R&D projects aim to devise high value-added
solutions, focusing on energy conservation, upgrading, andrenewing, thereby helping create a sustainable society.

Concept of R&D
We primarily develop new core technologies and improve thoseexisting and applicable to architectural equipment (such asv e n t i l a t i o n , s a n i t a t i o n , e l e c t r i c i t y , i n f o r m a ti o n , a n dcommunication systems), mechanical systems (such astransportation and energy-saving systems), and environmental
systems (such as water processing and thermal processing
systems). While specializing in development in specific fields, weview events broadly in terms of “air,” “water,” and “heat,” and26

focus our energies on “creation,” “maintenance,” and“diagnosis,” which enables technologies from different fields to
be integrated as multidisciplinary engineering and unique
technologies unmatched elsewhere to be created. We embrace
the concept of determining what we should “create, “maintain,and “diagnose” from a cross-sectional perspective to encourage
unique development.

Developments since FY2011● A decontamination system using an acetyl hydroperoxide disinfectant● Energy-saving supercharged fluidized combustion system (cf. p. 49)● New engine exhaust-gas treatment system● Hybrid energy-saving heat source system for data centers (cf. p. 49)● Temperature stratification ventilation system for large spaces (cf. p. 48)

A new engine exhaust-gas treatment
system for processing black smoke
emitted from automobile engine
testing equipment.

27

Introduction to Group Companies
The Sanki Engineering Group demonstrates its engineering strength in a wide range of fields in many regions.
Our aim is to build a comfortable environment for our customers and people around the world.
Together with our customers, we work as a Group to help achieve a recycling society.

GlobalEngineering around the World

Life Cycle Engineering (LCE)
Helping Customers by Designing, Building, Operating and Maintaining
The Sanki Engineering Group offers life cycle engineering (LCE) of buildings and facilities.

AQUACONSULT
Anlagenbau GmbH

We work as a Group of knowledgeable facility professionals to provide support from planning,

Business areas: Manufacture andsale of air diffusers

design and building to maintenance, operation/management and repair.

THAI SANKI ENGINEERING &CONSTRUCTION CO.,Ltd.

Shanghai SankiEngineering Consulting Co., Ltd.
Business area: Consulting

AEROSTRIP Corporation
Business area: Sale of air diffusers

Sanki Construction
Engineering (Shanghai) Co., Ltd.
Business area: Facility construction in China

Business areas: Facility design, building,maintenance and consulting

Recycling Society
Services, Products and More for a Recycling Society
We are engaged in businesses like waste treatment and recycling to protect the environment and achieve a recycling society.

Ou Clean Technology Co., Ltd.

Akita Eco Plash Co., Ltd.

EstablishedFebruary 1, 2005
Capital¥494,825,000
Business areas Treatment and incinerationof industrial and municipal
waste and supply of heat

EstablishedFebruary 13, 2004
Capital¥250 million
Business areas Waste plastic processing
and production of recycled
products“Contribution to Treating Earthquake Debris”“Plant Factory Pedestals Support Recovery”

The city of Hachinohe was among those damaged by tsunami after the Great East Japan

Among other materials, Akita Eco Plash recycles container and packaging plastic from

Earthquake of March 11, 2011. Ohu Clean Technology, located at the tip of the port island

households and turns them into plastic products like rain barrels, plant factory pedestals

area of the Port of Hachinohe, suffered tsunami damage to its incineration facility

and U-shaped gutters.

equipment. Recovery took about two months.

Sanki Techno Support Co., Ltd.
Established April 1, 1980
Business areas

Prefecture, designated as a Great East Japan Earthquake Recovery Project. Leaf lettuce

starting to receive industrial waste from the border area of Aomori and Iwate prefecturesand other vegetables are now grown hydroponically with rainwater and without

as well as waste fertilizer from a similarly damaged fertilizer plant nearby and earthquake

agricultural chemicals. They rest on pedestals on top of fields that were damaged bydebris from Hachinohe City.

seawater.

● Installation, relocation, removal and altering of general equipment

Tomakomai Netsu Service Co., Ltd.

Shin-yu Service Co., Ltd.

● Electrical wiring, instrumentation work, computer software changes

Established
July 20, 1971
Capital¥200 million
Business areas Heat supply to multi-unit housing, operation and maintenance ofcleaning center facilities

Established
August 1, 1980
Capital¥10 million
Business areas Insurance agency, leasing

Sanki Sangyo Setsubi Co., Ltd.

Capital ¥100 million

Established May 1, 1980
Business areas● Design, building, operation/management, maintenance and repair of air conditioning,water supply and drainage sanitation and electricity facilities● Energy conservation diagnosis and consulting● Building IP phone systems, call center systems and networks

Capital ¥20 million(production, transportation, etc.)

Sanki Kako Kensetsu Co., Ltd.

Sanki Kankyo Service Co., Ltd.

PFI Okubo Techno Resource Co., Ltd.

Established September 1, 1980
Business areas

Established June 29, 1990
Business areas

Established December 3, 2004
Business areas

Capital ¥80 million● Design, building, operation/management, maintenance,

upgrading and improving of waste treatment facilities● Manufacture, sale and installation of solid-liquid separators● Design, building and maintenance/management of water/
wastewater treatment facilities

28

These products are in use at San’ichi Farm, a plant factory in Natori City, Miyagi

Following the recovery, the company showed that it has a key social mission by

Capital ¥50 million● Design, building, administration and work contracting ofenvironmental protection facilities including water supply
and sewage facilities● Operation, maintenance and management and sale ofchemical products for above facilities

Capital ¥10 million● Update, maintenance, management and operation ofwastewater treatment facilities and emergency generators
at Okubo Water Purification Plant, Saitama Prefecture
Period of business Design and construction 3 years, 4 months;
operation, maintenance and management 20 years

Support for Thailand Flooding

TopicsThai Sanki Engineering & Construction mobilized more than 9,000 workers for recovery from major flooding in Thailand in September 2011, thus
helping customers carry on production.

29

Sanki Engineering’s CSR Activities

Corporate GovernanceSanki Engineering’s Basic Conceptof Corporate Governance
Increasing the efficiency of managementwith absolute compliance as the watchword
Sanki Engineering positions contribution to society throughengineering, communication with all of our shareholders andother stakeholders, and the realization of business activities
that make us a company both valued and trusted by the community as our basic management principles. We further position the achievement of improved business results throughincreased management efficiency, with absolute compliance as
the watchword, as an important management objective
towards the realization of these goals.

Corporate governance system
In order to increase business efficiency and speed up thedecision-making process, we are employing an executive
officer system in which we divide management functions
between the Board of Directors, which is responsible fordecision-making and supervision functions, and executive
officers, who are responsible for the execution of businessaffairs. We also have a system in place by means of which
the decision-making process of our Board of Directors andthe execution of business affairs by our executive officers
are subject to multifaceted monitoring and restraints fromexternal executive officers, a Board of Company Auditors(including external auditors), an Internal Audit Office, andaccounting in order to verify the legality and appropriateness of our business procedures.

Diagram of corporate governance system(As of June 27, 2012)

System for the Promotion of Internal Controls
in relation to Financial Reporting

Making CSR Part of Our Work ProceduresSupervision of Our Main Work Processes
In order to ensure the reliability of financial reporting
demanded by the Financial Instruments and Exchange Act,
we operate a system to promote internal controls, with the
President as the highest authority. As an independent
initiative on our own part, we also appoint Chief Auditorswith specialized knowledge and experience of construction
from the Chief Auditors Section of the CSR Promotion
Division to each of our workplaces to act as supervisors,constantly overseeing our main work processes.
In fiscal 2011, we verified the effectiveness of ourinternal controls, and we received an unqualified opinion
from our auditing firm. We will continue to maintain theeffectiveness of our internal controls, and go on working toensure the reliability of our financial reporting.

General Shareholders’ Meeting
Appointment to/removal from office

Board of Company Auditors

Business auditing
Accounting auditing

Of four auditors, two are external auditors
Appointment to/removal from officeAppointment to/removal from office

Board of Directors

Appointment to/removal from office
Accounting auditing

Of nine Directors, two are External Directors

Accounting auditors
CSR Promotion
Division

Appointment to/removal from office

Representative Director

Corporate Ethics Committee

President and Representative Director

Executive officers responsible for corporate ethics

Management Meeting

Individual responsible forinancial internal controls
General Manager, Administration DivisionInternal Audit Office

Company-wide secretariat

Executive officers

Business divisions, branches, consolidated subsidiaries
Internal Audit OfficeSections, Headquarters, Centers,
Business Divisions, branches, subsidiaries

30

Financial Internal
Controls Committee(Accounting Department, Administration Division)

Policy Conference
CSR Promotion Division

Highest authority(President)

Reporting

Individual responsible for internal controls in workplace(Head of division, President of affiliates and branches, President of subsidiary)
Individual responsible for promotionof internal controls at workplace(Assistant Manager, Operations/Technology)

Workplace supervisors①Chief Auditor at each branch②Manager (or Section Chief),
Management (or Administration)
Division General Manager,
Accounting Department

Board of Directors

officers and the Presidents of affiliates and branches, and the CSR Promotion

The Board of Directors meets at least once a month in order to decide on

Division functions as the Secretariat. The committee deliberates on action plans

important matters and supervise the status of execution of business affairs.

and other measures to achieve further penetration and stricter observance of theManagement Meetingcompany’s Code of Conduct and Action Guidelines at two regularly scheduled

Made up of executive officers nominated by the President. Meets weekly to deliber-

meetings per year.

Highest authority: President

ate on important matters, including those to be discussed by the Board of Directors.

Internal Audit Office

Responsible for all aspects of internal controls related to financial reporting.

Board of Company Auditors

This section conducts internal audits of the operations of each of the company’s

Individual responsible for financial internal controls

Convened at least six times a year. The auditors attend Board Meetings andbusiness divisions, based on the Auditing Plan for that fiscal year. It verifies theother important meetings, and offer opinions as necessary. The Board conducts

appropriateness, efficiency, etc. of the internal management system. As(General Manager of Administration Division)accounting auditing and business auditing activities in cooperation with thenecessary, the Internal Auditing Section exchanges opinions with or makes

accounting auditors, the Internal Audit Office, and the Internal Controls

proposals concerning the improvement or correction of a problem to the Internal

Departments. In June 2012, a supplementary external auditor was appointed inControls Departments of Administration Division and other divisions. The

order to fill potential future vacancies in the Board.

Section reports the results of its audits to the President.

With the president acting as Chairperson, this committee deliberates andCorporate Ethics Committee

Executive Officers

makes decisions on important matters in the area of internal controls related toWith the President as Chairperson, via this committee executive officers

Appointed by the Board of Directors, the executive officers are responsible forfinancial reporting, and plays a central role in company-wide regulation.

nominated by the President to be responsible for corporate ethics oversee all

and possess authority in relation to the execution of the affairs that fall undermatters related to corporate ethics. The Committee is made up of executive

their purview.

Head of workplace secretariat(Chief of the section responsible for operations)

Our Basic Concept of CSR and Our Promotion of CSR

The executive officer responsible for internal controls related to financial
reporting, acting as an aide to the President.
Financial Internal Controls Committee

The foundation of our CSR initiatives is our continuing effort tocontribute to society through our business while respecting
social norms as a corporate citizen, and we takecommunication with our stakeholders very seriously as ameans of enabling us to gain an accurate understanding of thedemands of society. This in itself is the practice of our
Corporate Credo, which we formulated in 1980. To enable us to
go on responding to the demands of society, we haveestablished a CSR Promotion Division as part of our corporate
governance system, and we are working steadily to make CSRpart of our management practice, towards the realization ofsocially responsible corporate management.
Formulation of Our Code of Conduct and Action Guidelines(The Sanki Engineering Group CSR Manifesto)
We formulated our Corporate Ethics Regulations in
December 2002. The Corporate Ethics Regulations
stipulated that we should create a Code of Conduct andAction Guidelines, and establish a structure centering on
the Corporate Ethics Committee in order to ensure thatthey took root and were observed. Based on the spirit of
the Corporate Credo, the Code of Conduct and Action
Guidelines are not limited to simply requiring observance oflaws and regulations, but represent our CSR manifesto,
indicating how Sanki Engineering executives andemployees should behave as corporate citizens. At SankiEngineering, we are attempting to ensure that the conceptof CSR penetrates into our daily duties throughout ourorganization.
Revision of Code of Conduct and Action Guidelines
Climate change and human rights issues are only some of thediverse problems facing contemporary society. In addition, thesocial responsibilities expected to be fulfilled by companies are
increasing, for example with the issuing of ISO 26000, standards
for corporate social responsibility, in November 2010 by theInternational Organization for Standardization (ISO). In order toenable us to respond to these social trends, we therefore revised
our Code of Conduct and Action Guidelines in May 2012.

31

Sanki Engineering’s CSR Activities

Sanki Engineering’s CSR Activities

The Sanki Engineering Group’s Code of Conduct and Action Guidelines

Corporate Governance (Compliance)
Formulated on December 1, 2002
Revised on May 1, 2012

[The colored sentences (1-8) are our Code of Conduct, while the sentences in black print ((1)-(34)) are our Action Guidelines]

Contribution to society through business activities

Always taking our customers’ perspective, we will provide safe and useful１．
products and services that satisfy our customers and earn their trust, and wewill contribute to the development of society through Total Engineering.
①Taking our customers’ needs seriously, we will present solutions based on our superior
technological capacity as engineering professionals, enabling us to provide safe and usefulproducts and services.
②We will strictly manage confidential information belonging to our customers that wehave access to in the course of our work, and we will only use such information for
legitimate purposes.
③In the course of our business activities, we will present accurate information
concerning our products and services, and we will not make any statements that might
potentially be misunderstood by our customers.

Disclosure of company information

Recognizing our social responsibility as a listed corporation, we will disclose２．
the company information necessary to increasing our management transparency
in an appropriate and timely manner, improving our level of communication with
our stakeholders and earning their trust.
④We will disclose company information, including information concerning our businessactivities and our financial status, to our stakeholders in a timely and appropriate manner.
⑤We will prioritize communication with our stakeholders in order to live up to the trust
placed in us by society.
⑥We will not engage in insider trading or any form of buying or selling of shares, etc.
that may arouse suspicions of insider trading.

Fair market competition and trading

In seeking to win contracts, we will observe the rules of fair market
３．
competition, and in issuing contracts we will build fair, equal and transparent
business relationships with all of our business partners,* and we will conduct
honest transactions, in accordance with the stipulations of the related laws
and regulations and the relevant contracts.
*Business partners: Subcontractors and companies from which we purchase materials, etc.

⑦We will pursue profits by means of free and fair competition, observing the stipulations of theAnti-Monopoly Act and other relevant laws and regulations.
⑧We will not make decisions based on discussion of prospective recipients of contracts
or the method of selection of prospective recipients of contracts with companies
involved in the contract bidding process, and we will not exchange information
concerning the granting of contracts.
⑨We will always adopt a fair and unbiased viewpoint in our dealings with business
partners, and we will conduct honest transactions in accordance with the stipulationsof the related laws and regulations and the relevant contracts.
⑩We will not exploit our position as the contracting party in order to coerce our business
partners to engage in any improper actions.
⑪In negotiating the offering of contracts, etc., we will not pursue individual profit.
⑫We will not accept any entertainment, gifts, or other economic benefits from ourbusiness partners that exceed the bounds of ordinary social etiquette.

Respect for human rights

In all of our business activities, we will respect the human rights of every
４．
individual with whom we have dealings, and we will eliminate discrimination
and any actions that impair the dignity of the individual.
⑬We will ensure that every individual is able to work safely and healthily at all of ourworksites, including construction sites.
⑭We will not discriminate or perform any action that impairs the dignity of theindividual on the basis of sex, age, place of birth, nationality, race, ethnicity, creed,
religion, physical characteristics, disabilities, etc.
⑮We will not benefit from child labor or forced labor in our business activities.
⑯In the course of our business activities, we will consider our impact on human rights,
and we will deal with any potential human rights violations.
⑰We will eliminate sexual harassment and power harassment from the workplace, andwe will prevent any deterioration in the working environment.
⑱We will respect the privacy, individuality, and diversity of each person, and we will
work to harmonize work and life.

32

Management of company finances

We will work to manage and protect company rights and assets, both tangible
５．
and intangible, and will not use these for inappropriate purposes such as
personal use; in addition, we will respect the rights and assets of others.
⑲We will manage company assets appropriately and in accordance with the rules, andwe will not use them for other than business purposes.
⑳We will secure and preserve company rights and assets, including intellectual
property rights, and we will also respect the rights and assets of others and avoid
violating those rights.
㉑We will manage information appropriately, based on our information security policy.
㉒In addition to protecting information provided by customers, we will treat all personal
information that we receive appropriately and manage it safely.
㉓We will strictly manage company confidential information; during their period of
employment our employees will ensure that there are no leaks or disclosures of
information, and will continue to do so after having left employment without observing
fixed procedures. The same holds true for the confidential information of others.

Protection of the global environment

We will make active efforts for the protection of regional environments and６．
the global environment.
㉔In our design of facilities, etc., we will contribute to the realization of a low-carbon
society by actively proposing means of conserving resources and energy.
㉕In our respective workplaces, we will strive to prevent pollution and environmental
contamination, and we will work to promote conservation of resources and energy,
reduction of industrial waste, and recycling.
㉖In our business activities, we will always consider our impact on the environment, andwe will respect environment-related laws and regulations and actively work towards
the resolution of environmental problems.

Prevention of association with anti-social elements

We will resolutely reject advances from anti-social elements that threaten the order７．
and safety of civil society, and we will have no association with such elements.
㉗If we receive improper requests or demands from anti-social elements or groups that
represent a threat to the order and safety of civil society, we will not yield to thesedemands, but will resolutely reject them. In addition, we will not conduct any transaction
with anti-social elements or groups, or individuals associated with such elements or groups,
for any reason whatsoever, and will break off any contact with such elements or groups.

Respect for social rules

Maintaining a constant awareness that we are members of society, we will
８．
follow social rules and actively contribute to society, working to win thetrust of the community.
㉘In the performance of our work duties, we will observe the stipulations of theConstruction Industry Act and other relevant laws and regulations, our Code of
Conduct and Action Guidelines, and our company regulations, and we will follow
social rules, maintaining a constant awareness that we are members of society.
㉙When we stand to gain from such activities, we will not offer any favors such asentertainment or gifts to public officials or any equivalent person (including foreign
public officials), and even when we do not stand to gain we will not offer
entertainment, gifts, etc. to such persons that exceed the bounds of ordinary social
intercourse. We will not provide any economic benefits such as entertainment or giftsthat exceed the bounds of ordinary social common sense to the executives or
employees of our customers. In addition, when the company rules of our customers
prohibit the provision of entertainment, we will follow those rules.
㉚We will not perform any actions that damage the good name or prestige of our company.
㉛We will work to contribute to society as a good corporate citizen and member ofsociety, seeking to contribute to the development of local communities.
㉜When we engage in business activities overseas, we will respect international normsof behaviour, while adhering to the principle of respect for the rule of law.
㉝We will make our business partners aware of this Code of Conduct and these Action
Guidelines, and we will request their observance of them.
㉞All personnel in managerial positions will actively practice the precepts of this Codeof Conduct and these Action Guidelines, and will provide instructions and engage insupervision to ensure that the personnel under their management also observe them.

Our Concept of Compliance and Our Management System
Absolute Compliance is the Foundation of a Trusted
Company
Compliance at Sanki Engineering is not restricted to simply
obeying laws and regulations. We have a broader understandingof compliance as conforming to the standards of society, and webelieve that compliance is the requirement that must be fulfilled
above all others by a corporate citizen. Absolute compliance is in
itself the foundation for being a company that is trusted bysociety. Based on our recognition of the overwhelming
importance of compliance, we are pushing ahead withGroup-wide compliance initiatives centering on our Corporate
Ethics Committee, of which our President acts as Chairperson.
Corporate Ethics Training
We conduct corporate ethics training for all Group executives
and employees in order to further diffuse the Code of Conduct
and Action Guidelines throughout the Group and provide
information on the latest trends in laws and regulations.
In fiscal 2011, our corporate ethics training took up thefollowing themes for detailed coverage: (1)The introduction of aprovision prohibiting involvement with organized crime groups incontracts with subcontractors, etc. (2)The prevention of sexual
harassment and power harassment (3)Changes to the corporate
ethics hotlines (4)The enactment of the Security Export Control
Regulations (5)Appropriate accounting procedures (Case studiesof improper procedures)

Corporate ethics hotlines (Whistleblowing system)
We have set up corporate ethics hotlines both within and outside
the company to enable employees to blow the whistle. Theinternal hotline goes to the CSR Promotion Division, while theexternal hotline goes to our consulting attorney’s office. We act
with appropriate haste to resolve the issues that are reported,with consideration of the protection of the consultant and thewhistleblower. All of the reported information is presented to the
executives responsible for corporate ethics, and important
information is reported to the Management Meeting. In fiscal
2011, there was one case of whistleblowing, which did notconcern a major infringement.
Receipt of check sheets from executives and employees
In order to refresh the awareness of all Group executives andemployees of the responsibilities that they must fulfill in theirrespective positions and roles, since fiscal 2008 we have distributed
check sheets at the beginning of each fiscal year covering items
such as observance of the Code of Conduct and Action Guidelines
and association with criminal elements and groups.
Because of the occurrence of an incident involving improperaccounting practice in relation to proceeds from the sale of leftover
and scrap materials, the fiscal 2012 check sheet contains an added
item concerning proper accounting procedure in these cases.
Status of distribution of check sheets (Fiscal 2012)
Sanki Engineering (Relevant employees)
Check sheets concerning performance of duties
Check sheets

Subsidiaries (Relevant employees)

37（37）

26（26）

２，
０６7（2,083）

569（570）* Check sheets concerning performance of duties are submitted by directors and executive officers.

Status of corporate ethics training* Some individuals have not submitted check sheets, but these individuals are on maternity leave,receiving medical treatment, etc.

PeriodAug-Sept 2011

Number of participants

Number of enrollments

２，
０６５

２，
３68※
* (As of April 1, 2011)

Avoidance of involvement with criminal elements or groups
In accordance with the enforcement of regulations concerning
the exclusion of organized crime groups by municipalities
throughout the country, since October 2011 we have requested
pledge letters regarding avoidance of involvement withcriminal elements and groups from our subcontractors andother business partners (companies to which we offer
contracts). As of the end of March 2012, we have received
pledges from approximately 2,600 companies.

Training at our Yamato Engineering Center

33

Sanki Engineering’s CSR Activities

Corporate Governance (Risk Management)

survey, we put a variety of initiatives into effect, seeking tofoster increased compliance and CSR awareness.

Questionnaire concerning Compliance AwarenessContinuous Checking of Awareness of Complianceand CSR
Every fiscal year we conduct a questionnaire survey of all
Group executives and employees to check their awarenessof compliance and of CSR. Based on the results of thisOur Basic Guidelines for Risk Management
At Sanki Engineering, the department responsible for responding
to specific business risks (risks related to compliance,
information security, quality, profit and loss, the environment,
disasters, etc.) formulates rules and guidelines and conducts
responses as necessary. On this page, we discuss our initiatives
in the areas of disaster risk and information security.

Results of questionnaire concerning compliance awareness (Excerpt)
Survey period: April 16-26, 2012 // Subjects: All Group executives and employees // Type of response: Anonymous // Number of questionnaires distributed: 2,426 / Number of responses: 2,057 (84.8%)
The questionnaire covers a wide range of subjects, and we present only the main themes here.

Q：What would you do if you were aware of a violation of the Code of Conduct and Action Guidelines,
and the situation was not resolved despite the fact that you had cautioned the person concerned or consulted with other employees?
The percentage of respondents answering “Not report the incident” declined against

FY 2011

FY 2012

Report the incident

78.6

75.9

76.9

observed a decline in trust in the corporate ethics hotlines. We therefore believe thatNot report the incident

20.9

24.1

23.1

it will be necessary in future to issue information to assist in recovering trust in thethe preceding fiscal year, and when we checked the reasons for not reporting, we

Q：What do you believe that CSR consists of for Sanki Engineering? (Multiple choice)（%）
FY 2010

FY 2011

FY 2012

To obey laws and regulations

85.7

80.5

80.0

To respond to social expectations through our business activities

60.4

58.2

56.0

To perform activities that contribute to society

53.3

64.1

60.7

To protect the global environment (To contribute to reduced CO2 emissions through the supply of energy-conserving technologies)

29.8

58.6

46.1

To provide excellent services and products

25.6

48.6

49.0

To increase profits and pay taxes, and offer dividends to shareholders

17.9

25.6

27.6

The percentage of respondents answering “To protect the global environment (To contribute to reduced CO2 emissions through the supply of energy-conserving technologies),” which corresponds
to our Management Principle “Contribute to the realization of a low-carbon society,” declined against fiscal 2011, and we therefore believe that it will be necessary to achieve further penetrationof the Management Principles.

Incident of improper accounting procedure in relation to the proceeds of sales of leftover and scrap materials: Apology and Report
As a result of our tax examination for fiscal 2011, we were advised

34

of our stakeholders, concern as a result of these incidents.

that our accounting procedures in relation to proceeds from the sale

We view this matter with the utmost seriousness, and we haveof leftover and scrap materials were improper. We immediately

been dealing with it strictly and appropriately throughout fiscal 2011,

launched an investigation via our Internal Audit Committee, which

for example by taking disciplinary action against the individuals

also contains external experts. As a result of this investigation, it

involved. In addition to this, recognizing that trust is a company’s

was judged that at some worksites, mainly between fiscal 2006 andmost important asset, we are putting in place measures to prevent a

fiscal 2008, proceeds from the sale of leftover and scrap materials

reoccurrence of the problem, for example by making renewed efforts

had not been credited to the company, but had been used forto ensure that employees have a thorough knowledge of theexpenses at the worksites themselves. We offer our sincere

operating rules we formulated in 2009, and we are working toapologies for having caused our shareholders and investors, and all

restore trust in our company.

①Rapid establishment and effective functioning of Disaster Response headquarters.
②Establishment of safety confirmation system for employees and their families.
③Clarification of the chain of command in order to ensure that employees areappropriately allocated in response to the situation.
④Formulation of measures to ensure power supply and communications until
the public infrastructure is brought back into operation.
⑤Securing of personnel, materials and equipment, and transportation
methods to enable the rapid establishment of a system to assist in therecovery of customers’ facilities.

President
Information Security Management Committee
Chairperson of Information Security Management Committee(Executive officer responsible for Information System Section)

System managers

Sections･Headquarters･Centers･Business Departments･Branches･Affiliates･Subsidiaries
System managers
Staff members responsible for IT promotion andother staff members responsible for aspects of security

Thoroughgoing Efforts to Increase Awareness andprovide Education in the Area of Information Security
Making use of e-learning, we are working to ensure that each of
our executives and employees has a thorough grounding in
information security and the handling of personal information. In
fiscal 2011, we offered training in the area to 54 new recruits,
and achieved a 100% completion rate. Since fiscal 2003, wehave provided training to more than 3,000 members of staff.
We will continue our intensive efforts to increase awarenessand education into the future, seeking to raise our level of
information security still further.

Voice

Improving information security in the workplace
In fiscal 2011 we deployed software to encrypt the hard drives of
the computers in our workplaces as a measure against
information leaks should they be lost or stolen. However, thisdoes not mean that computers are no longer lost or stolen. I
believe that the important thing in terms of information security,
prior to systemic measures, is the awareness of information
security possessed by each of our employees. I seek to create

Information System Section

hotlines.

Formulation of the Sanki BCP : Response to a Large-scale
Disaster
Learning from the experience of the Great East Japan Earthquake that struck in 2011, we formulated the draft business
continuity plan (BCP) that we were already drawing up into
the Sanki BCP: Response to a Large-scale Disaster in June
2011. The plan positions the five responses listed below asabsolute priorities, and clarifies the advance preparations to
be made in order to ensure that they can be implemented.
Because our BCP focuses on customer-centered responses,
ensuring a support system for customers and putting advancemeasures in place are important elements.

Activities based on Our Information Security Policy
Sanki Engineering has established a system for the promotion of
information security with our president in the position of highest
responsibility, and we are pushing ahead with activities basedon our Information Security Policy, formulated in October 2003.
We are making particular efforts in the appropriate handling ofimportant information provided to us by our customers, including
personal information, to ensure that it will not be stolen, leaked,
or exposed in any other way.

Secretariat（%）

FY 2010

Responses to Disaster Risk

Initiatives to Ensure Information Security

mechanisms enabling continuous education
using e-learning and other methods, in order
to increase concern for information security
among all of our executives and employees.
Information System office,
CSR Promotion Division

Shigenori Iwase

35

Sanki Engineering’s CSR Activities

Our Relationship with Our Customers

Responding to Customers’ Needs
The Group Acts as One to Increase Customer Satisfaction
Based on the concept of “Feeling as one with our customers
and responding to their needs in good faith,” which forms
part of our Company Credo, we proceed on the basis of close
cooperation between all involved departments throughout
the entire process from understanding what the customer
needs, to design, development, construction and after
service, pursuing customer satisfaction with the Groupworking as a single unit.
In particular, we offer a range of energy-conserving
proposals in order to assist our customers in their efforts toconserve energy. Please see our Environment pages (pages
48-49) for information on these proposals and on ourenergy-conserving technologies.
In fiscal 2010, we introduced the business support
system SSSS (Tetris) to enable us to share information concerning customers’ requests and other information throughout the company and to make fast and appropriate
responses. Our services and proposals are created from thecustomer’s perspective, and in order to ensure their further
enhancement, in
fiscal 2011 weestablished a newSales Administration Division, and
we also enhanced
our in-house training for sales staff.
Providing the latest energy conservation information at an exhibition

Initiatives to Ensure Quality
Continuous Improvement through the Operation of a
Quality Management System
Our Facilities Construction Business Division, Machinery
Systems Business Division, and Environmental Systems
Business Division are each operating quality management
systems based on ISO 9001, and are working to increase
product quality by making continuous improvements. Employing
quality management systems tailored to the details of their
specific areas of business, and basing their efforts on the spiritof the Company Credo, each division is deploying quality
management guidelines and using other initiatives in order tocreate systems enabling us to respond to our customers’ needs.

36

Enhancement of Quality Education and Training for
the Acquisition of Qualifications

Information on Claims
We treat information on claims as an important company asset,
and we share details on the background to the occurrence of the
problem and its status, using this information to help us preventthe same thing from occurring at other worksites. We employ asystem under which we send bulletins on claims arising in theareas of construction and building management to all ourbranches by email, and we formulate Claim Reports detailingcorrective measure and preventive measures on the basis ofthese bulletins. In the case of problems the details of which
necessitate the involvement of our Chief Engineers* in order toresolve the issues, and that have technological causes for which
it is considered that company-wide measures to prevent areoccurrence are necessary, we issue technological instruction
manuals and technological information to prevent the problem
from arising again.
*Chief Engineers
The highest position for a specialist in a technological field. The Chief Engineers’ main role is topass on technological expertise via supervision of construction projects. In addition to this, theChief Engineers also inspect quality and conduct design checks in order to guarantee quality, andoffer advice and guidance across the entire range of technological issues.

Meeting for thepresentation of the
fiscal 2010
Construction Method
Improvement Award(September 2011)

Changes in the number of submissions for theConstruction Method Improvement Award
890

901

Changes in the number of personnel with quality-related qualifications(Total number as of April 1 for each fiscal year)

808

786
700

Qualification
Professional engineer
Project management technician(Civil works/Construction/Electrical construction/Pipe-laying work)

’06

’07

’08

’09

’10 (FY)

Fostering Human Resources to Sustain
Our Technological Level
Viewing the fostering of human resources who willcontribute to the realization of quality as the most importantfactor in stabilizing and further improving the quality of our
products and services, we work to enhance our technologicaleducation and support the improvement of the technologicalcapability of our employees and our business partners.
In order to ensure the transmission and improvement oftechnological expertise in the field of onsite construction andencourage the acquisition of qualifications, in fiscal 2010 weestablished our Technology Training Center as a specialist
educational division, and we are working to foster humanresources able to oversee design and construction frombroader perspectives.
In addition, given that it is also important to increaseawareness of safety and quality among our employees, we
impart a sense of the importance of these factors through site
visits by top management. We will continue to enhance ourdevelopment of human resources to sustain our technologicallevel in addition to working to improve quality.

FY 2011

FY 2012

83

89

93

1,225

1,234

1,212

32

36

40

Facilities construction architect

261

257

250

Electrical engineer

184

184

176

Chief electrical engineer

38

39

37

First class instrument engineer

282

291

292

Qualified management engineer

Top page of our board for technological consultation and discussion

FY 2010

Architect

Fire protection engineer

Sharing Expertise and Information towards
the Achievement of Increased Quality
Since fiscal 2002, we have offered the Construction Method
Improvement Award to commend innovations in construction
techniques on the worksite and reexaminations of techniquesfrom a technological perspective. In fiscal 2010, we newly
established the Contribution to Customers Award, honoring
proposals that increase our customers’ work efficiency, andfrom fiscal 2011 we expanded the scope of the award to take inthe entire Group.
All of the proposals submitted for the awards can besearched in the Treasure Chest of Construction Method
Improvements on our in-house website, enabling us to shareand spread examples of improvements such as day-to-day
innovations in construction methods, the introduction of
new technologies and changes in management methods.
In addition to these initiatives, since fiscal 2008 we haveprovided a notice board on our in-house website offering
consultations and the opportunity to discuss experiences
concerning any aspect of technology, as a system to enable
our engineers to directly query in-house specialists
concerning technological problems or questions that ariseon the site and to share technological knowledge. We havealso published the Chief Engineers’ Bulletin every monthsince fiscal 2009, enabling our engineers to learn aboutsophisticated technologies from our Chief Engineers.

Quality education at Sanki Engineering is implemented
around the twin axes of introductory education whenemployees enter the company and education for internal
auditors, with the realization of increased skills through theconducting of internal audits in the field once a year as its
foundation. Because a variety of qualifications are necessary
when engaging in work in the construction industry, we arealso working to enhance our training programs for theacquisition of qualifications.

744

749

724

1,546

1,629

1,634

Support for Improvement of theTechnological Capacity of Our Business Partners
Seeking to provide technological support to our business
partners and improve their technological level, we haveheld the All-branches Electrical Engineering Quality
Convention continuously since 2002. In fiscal 2012, 20
electrical engineers from 19 business partners
recommended by Sanki Engineering branches participated,
and took part in written and practical tests drawing onmaterials including actual claims against the company. All
the participants received the in-house certified
qualification Sanki Engineering-certified Class A ElectricalEngineer.

Performing a practical test at the All-branches Electrical Engineering Quality Convention

37

Sanki Engineering’s CSR Activities

Sanki Engineering’s CSR Activities

Our Relationship with Our Business Partners

Our Relationship with Our Shareholders and Investors

Building Fair, Equal, and Transparent Business Relationships
Conducting Transactions in Accordance with the Relevant
Laws and Regulations and the Related Contracts
We work to build equal, fair and transparent relationships withour business partners, with respect for the stipulations of therelevant laws and the related contracts as a major prerequisite.
In addition to clearly specifying the nature of our relationshipwith our business partners in our Code of Conduct, we distribute
manuals of contracting procedure to all executives and employees
that, among other details, prohibit the abuse of a superiorbargaining position.
The signing of a basic construction contracting agreement is aprerequisite for our transactions; following agreement on theconditions of the individual contract, we are scrupulous regarding
the conclusion of the individual contract by means of the issuing oforder forms and acknowledgments of orders received. From fiscal
2011 onwards, we have also requested the submission of pledge
letters regarding avoidance of involvement with criminal elements
and groups from our business partners. We decide to undertake
transactions based on a wide variety of objective criteria, including
the status of functioning of quality and environmental management
systems, construction
ability, status ofmanagement, quality,
construction
outcomes, and cost.

Strengthening Cooperation with Business Partners
Communication via Liaison Meetings and Training
Workshops
Cooperation with our business partners is essential to ourability to provide our customers with higher-quality
equipment and services. At Sanki Engineering, our Sales
Division and each of our branches establishes cooperative
committees with business partners from which it isrequesting construction work, and we also work to improve
technologies and realize goals including thorough quality
management and occupational health and safety
management at our business partners by means of regularliaison meetings and training workshops. In addition tothese efforts, we offer a variety of programs taught by SankiEngineering employees, including occupational health andsafety education and education towards the acquisition ofqualifications.

Ensuring Management Transparency by Disclosing
Information in a Timely and Appropriate Manner
Our Thinking regarding Disclosure of Information
We strive to disclose information in a timely and appropriatemanner, based on our Disclosure Policy “ ” and inaccordance with the relevant laws and regulations and therules stipulated by the stock exchanges on which we arelisted. Even if laws and regulations enforce no obligation todisclose information, our principle is to actively makeavailable information that we judge to be of use to ourshareholders and investors.
Into the future, we will continue to increase ourmanagement transparency through the disclosure of thenecessary company information in a timely and appropriatemanner, seeking to be a company that is both trusted andrespected.
WWW

WWW

General Shareholders’ Meeting
To enable more of our shareholders to attend our generalshareholders’ meeting, we make it a rule to hold it one or
two days before most other companies hold theirs (in 2011
this was June 28, and in 2012, June 27). We work toincrease convenience for our shareholders in other ways as
well, for example by publishing notification of the meetingon our website.
We will go on working to actively communicate with ourshareholders and investors, and we will make effective useof the opinions that they offer in our business management.

Our Disclosure Policy can be accessed on our website.
Information for Investors >> Disclosure Policy

Communication with Shareholders and Investors

WWW

We publish IR information on our website.
Information for investors >> IR LibraryCommunication by a Variety of Means
Branch managers and other top company officials attend regular liaison meetings as company representatives

Establishment and Operation ofWhistleblowing Hotline for Business Partners
Seeking to prevent any improper transactions, we haveestablished and are operating a whistleblowing hotline forour business partners. No information was received frombusiness partners in fiscal 2011. Following on from therevision of our Code of Conduct and Action Guidelines, inJune 2012 we contacted approximately 1,100 business
partners to inform them of the revisions and request theircooperation, and at this time we also requested once againthat they make use of the hotline.

Conducting Evaluations of Our Business Partners
Every year we conduct evaluations of our business partners,
working to achieve increased quality throughout our supply
chain and improve business operations. We objectively
evaluate a variety of factors, including the quality of
construction outcomes, cost, delivery, and safety, based on
the evaluation criteria stipulated by our quality management
system (ISO 9001). We notify our business partners of theresults of the evaluations, and exchange opinions towards
the achievement of improvements as necessary.

Strengthening cooperation with our business partners – Initiatives of the Tokyo Branch

WWW

Voice

At the Tokyo Branch, we hold regular liaison meetings with our main business partners once a month, at which we
secure the necessary workforce and solve problems, for example by introducing new worksites and reporting on theoperating status and problems of existing sites. When accidents or problems occur, we immediately determine thecauses and propose appropriate measures, notifying each of our worksites and our business partners. Since last fiscal
year, we have launched eight working groups with our main business partners, and we are moving ahead withinitiatives to further increase quality, ensure safety, and reduce costs. In the future, I want to aim towards the creation名字 名前of an even higher-quality community with our business partners.
Ikuo Karibe, Tokyo Branch38

We conduct events including results briefings for investment
analysts and institutional investors (twice a year, in May andNovember; in fiscal 2011, a total of 99 people participated),
individual meetings as necessary in response to requests, andtours of our Technical Research Laboratories. On our website“ ”, in addition to materials used at our results briefings andpress releases, we publish information including earnings
summaries, securities reports, and notifications for shareholders.
This broad range of IR activities enables us to maintaincommunication with our shareholders and investors, and all of
our other stakeholders.

Our President and executive officers responsible for management provide explanations at a results briefing

Our Basic Policy concerning Returns to Shareholders
Dividends are the Fundamental Means of Returning
Profits to Shareholders
Sanki Engineering sees returning profits to shareholders as oneof its most important management duties. With the offering ofdividends as our basic means of returning profits, we giveconsideration to the achievement of a balance between
sustainable corporate development and short-term returns toshareholders. Based on demands from shareholders, investors,
and society more generally, we examine comprehensive
methods of offering returns to shareholders, including buybacksof our own shares, with the offering of stable dividends as ourbasic principle.
We also effectively invest retained funds in areas including
the development of new businesses and new technologies,
seeking to achieve sustainable increases in our company value
by means of enhancing our competitiveness and building thefoundations for further corporate development.

39

Sanki Engineering’s CSR Activities

Our Relationship with Our Employees

Employing Disabled Workers

Our Thinking with Regard to Our Employees
Employees are a Vital Asset for a Company
We see employees as a vital asset for a company, as essential
human resources. We attach overriding importance to the hiring,development and utilization of human resources, while also
promoting diversity. Our Company Credo contains the phrase“Act in a considered manner, and always in a spirit of good
fellowship,” and on the basis of this concept we strive to createa working environment and a corporate culture in which all
employees grow together with the company, respect eachother’s individuality, and are able to succeed and thrive.

We are working to create an environment in which disabled
employees can feel secure and display their abilities to thegreatest possible extent.
As of the end of fiscal 2011, Sanki Engineering had 35
disabled employees, representing 1.80% of our workforce.
Work Transfer System
In fiscal 2007, seeking to create more opportunities for rank andfile employees to demonstrate their abilities, we introduced awork transfer system enabling employees to upgrade to career
positions. To date, 33 employees have made use of the system.
Hiring Foreign Employees

Fostering Human Resources
Systems to provide Support in line with Career Plan
Sanki Engineering has created its personnel system based on
the concept of rewarding individuals for their abilities and theirefforts. In evaluating our employees, we do not use aperformance-based method that focuses only on results; rather,
we evaluate both results and processes, and on this basis revise
annual salaries based on our published wage scale.
Our training programs provide support tailored to ouremployees’ career paths, for example through management
training, technological training, and training in individual fields inorder to enable each of our employees to enhance their
specialized abilities and their technological and managerial
capabilities and to grow as individuals.

Our mid-term plan that commenced in fiscal 2011, SANKI
VITAL PLAN 90th, positions efforts to foster foreign
employees as a means of strengthening our managementfoundations, and we are making active efforts to recruit
foreign employees on this basis. As of April 2012, we had
hired seven employees from three countries.
Promoting Diversity
A System in which Diverse Personnel can Succeed
We believe that promoting diversity among our employees andcreating working environments in which diverse personnel areable to display their particular talents leads to increased

System for Reemploying Workers following Retirement
Seeking to provide employment opportunities for older workers
with advanced skills and expertise, we led our industry byintroducing a system in 2001 for the reemployment of workers
following retirement.

company value, and we are therefore actively working toestablish a variety of systems to make this a reality.

Changes in employee data
FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

Number of employees
Figures in parentheses are consolidated

1,950（2,225）

1,947（2,239）1,974（2,272）2,001（2,316）

1,965（2,289）Figures in parentheses are consolidated

42.6

42.6

42.7

42.5

42.8

Average number of years of employment

19.0

18.9

18.8

18.5

18.6

Number of new recruits

152

101

94

98

63

Number of disabled employees

32

34

37

37

35

Ratio of disabled employees (%)

1.73

1.85

1.94

1.98

1.80

Number of reemployed post-retirement-age employees

35

35

43

43

53

Number of employees taking child raising leave

5

5

8

12

15

*Figures for number of new recruits differ from the figures published in our 2011 report because of changes to the standards for aggregation40

we have in place to make it possible for employees tobalance work and family. In fiscal 2011 we introduced a“refresh leave” system under which employees are able totake five consecutive days of leave for each five years of
employment using their accumulated reserved leave.*
Since 1992 we have had a child raising leave system, andin 2002 we introduced a family care leave system.
Employees are also able to use reserved leave for these
purposes.
As a system for the benefit of managers of construction
sites, we also have a continuous leave system forconstruction managers that enables these employees totake three days of consecutive leave when they have been
onsite continuously for a period of six months or more, andwhen they transfer to the next site.
*Reserved leave: A unique Sanki Engineering system under which employees are able to reserve their untaken
leave for the past 10 years and use it in the event of injury or illness occurring outside the workplace.

Responses to Harassment
We have newly established a Counseling Service
with Qualified External Counselors

Training for new recruits

New Overseas Training Program
In fiscal 2012, we established a one-year overseas training
program in order to foster personnel with a high level ofability to communicate and to adapt to diverse environments.
We call for applicants within the company, and those
selected receive practical training at one of our overseas
workplaces. To date, four employees have been dispatchedoverseas under this system.

Promoting Work-life Balance
Support Systems making it Possible to
Balance Work and Family
In our quest to enable each of our employees to harmonize
work and other aspects of their lives and to display theirabilities while experiencing a sense of challenge andfulfillment, we are working to enhance a variety of systems

As part of our attempts to prevent sexual harassment, weformulated guidelines and published them on our website in1999, and we created a system offering consultation on thesubject at each of our workplaces. Today we offer
consultation on a variety of problems, including power
harassment. In August 2011, we newly established acounseling service giving employees access to qualified
external counselors.
Maintaining and increasing the Health of Our Employees
We are creating an Environment in which Employees
are able to Work Secure in a Sense of Psychologicaland Physical Wellbeing
To ensure that our employees are able to work secure in theknowledge that they and their families are in good health bothmentally and physically, in April 2008 we introduced a 24-hour
telephone health consultation service. The consultants are
based outside the company, and employees and their family
members are able to discuss any concerns they might haveover their physical or mental health, in addition to subjects
including medical treatment, care, and child raising, free ofcharge. The privacy of callers is strictly protected.

41

Sanki Engineering’s CSR Activities

Health and Safety in the Workplace

Our Occupational health and Safety System
Promoting Initiatives towards an
Accident-free Workplace
Based on our Basic Health and Safety Principles, and withthe realization of accident-free, bright and satisfying
workplaces as our ultimate goal, we are working together
with our business partners to promote health and safety
initiatives. In our attempt to eliminate or minimize potential
risks that might lead to accidents in the workplace, we wereamong the first in the Facilities construction industry to
introduce an occupational health and safety management
system (the Sanki OHSMS, introduced in October 2001),
and we implement organized and continuous safety
management tailored to the specific characteristics of eachof our business divisions, based on health and safety
guidelines formulated every year.
Basic Health and Safety Principles①Health and safety take precedence over all other considerations.
②Health and safety are an important responsibility for the entire
organization (including business partners)③In the area of health and safety, we will always take theopportunity for dialogue, and we will decide on and implement
measures based on relationships of trust.
④Health and safety will be promoted by everyone concerned, with
Sanki Engineering and its business partners, and managers andworkers, acting together as one.

Overview of Fiscal 2011 Initiatives

Thorough Health and Safety Education

In fiscal 2011, we pursued initiatives with the following
three areas as points of focus: (1)Enhancement of risk
assessment (2)Strengthening of measures to eliminate
accidents or illness in the summer months (3)Promotion oftaking health and safety qualifications. In the area of
eliminating accidents or illness during the summer months,
we made use of lessons learned from incidents of heatstroke during the record hot temperatures in fiscal 2010, andwe created prevention campaign posters and enhanced our
education on the matter by training heat stroke prevention
instructors. As a result, we only had one case of heat strokein fiscal 2011. Into the future, we will continue to increaseawareness of health and safety in the workplace bymeasures including thorough health and safety education,
the holding of safety conventions and the conducting ofsafety patrols, and the publication of information including
Health and Safety News, aiming to realize zero accidents.

Safety Conventions and Safety Patrols

Conducting Education for Sanki Employees and the
Employees of Our Business Partners
To ensure safety in the workplace, we offer education to people
who are newly visiting a worksite by means of health and safety
notebooks, and for employees we provide health and safety
education at designated educational institutions and in classes
taught by in-house instructors. In cooperation with the Sanki
Health and Safety Cooperative Associations, we also offer thehealth and safety education stipulated by the Industrial Safety
and Health Act to Sanki employees and the employees of ourbusiness partners. In fiscal 2011, we provided education to a
total of 1,971 employees of Sanki and other companies.

Raising Safety Awareness with the Participation of
Top Management
Every year during June, the preparatory month for National
Safety Week, we hold safety conventions at each of ourworkplaces with the participation of top management. We
also conduct a variety of safety patrols in order to raisesafety awareness among workers on construction sites. In
addition to patrols including patrols conducted by the top
management and staff members of business divisions andbranches, patrols conducted by site supervisors, and patrols
conducted by the proprietors of business partners, we also
conduct special summer joint patrols and year-end joint
patrols as special events.

Number of individuals receiving health and safety education in fiscal 2011
Number (Figures in brackets refer to employees of business partners)
Special education
Education to increase skills
Health and safety education
Total

1,253

（1,092）

6

（6）

712

（477）

1,971

（1,575）

Safety convention at Kansai branch*Limited to education by in-house instructors provided by Sanki Engineering or by Sanki Engineeringin cooperation with the Sanki Health and Safety Cooperative Associations; education provided at
designated educational institutions is excluded from the figures.

Trends in number and frequency rate* of accidents
Frequency rate for Sanki Engineering
Average frequency rate for the general construction industry(Accidents)
14

5

1.95

1.89

6

11

7
Heat stroke prevention campaign poster
Takuichi Kajiura, Sanki’s President, participates in a special summer safety patrol

三機工業株式会社 安全推進室 発行

1.56

1.09

1.03

2011年10月25日

安全衛生ニュース

0.85

0.84
0.68
0.57

（2011年10月号）
９月は無災害でしたので、中部支社の安全新聞(あんぜんさん）
を紹介します。

0.41

’07

’08

’09

’10

’11 (FY)

Source for average frequency rate for the general construction industry: Survey on Industrial Accidents,
Ministry of Health, Labour and Welfare※From fiscal 2010, accidents resulting in one or more days’ absence from the workplace became thesubject of the statistics; figures for fiscal 2009 and before have been corrected on the same basis.
※Data for Sanki Engineering is measured for the fiscal year (April – March), while data for the general
construction industry is measured for the calendar year (January – December).
＊Frequency rate: Calculated as the number of deaths and injuries caused by accidents in the workplace per
one million working hours, this figure indicates the frequency with which accidents occur.

42

Working as one with Sanki Engineering to promote health and safety – Safety at Sanki’s Chubu branch

Voice

The history of Sanki Engineering’s Nagoya branch over the course of the past almost 50 years, has beena history of safety. Commencing from ensuring that workers wear their helmets, morning assemblies and
TBM have become a fixed custom, and the company has truly made safety profitable. Today, with risk
assessment as its basis, the company’s corporate culture is becoming a safety culture backed byaffection. As a business partner of Sanki Engineering, we are thankful for this working environment, and,without relying on others and never forgetting the basic dictum that our safety is our own responsibility,
we are aiming towards the realization of zero accidents.

Toyoaki Hayashi,

Chairman, Chubu Sanki Engineering Health and Safety Cooperative Association
President, Sogo Engineering, Ltd.
After months in which no accidents have occurred,
Health and Safety News introduces positive examples from various workplaces.

*TBM: An abbreviation of toolbox meeting. Before the day’s work commences on a site, workers assemble at each area of work in order to discuss procedure, check safety, etc.

43

Sanki Engineering’s CSR Activities

Our Relationship with Local Communities

Our Thinking with regard to Local Communities
Promoting Activities that Contribute to Society
as a Good Corporate Citizen
We seek to contribute to society in order to aid in thedevelopment of local communities as a good corporate citizen
and member of society. Based on this guiding principle, we work
to contribute to society through our business, for example bydispatching team members to the Japanese Antarctic Research
Expedition, and at the same time we make efforts to contributeto society around our worksites, seeking to deepen our relations
with local communities. Into the future, we will constantly
maintain our awareness that we are a member of civil society,and we will go on fulfilling our corporate social responsibility
while maintaining active communication with the members of
our local communities and all of our stakeholders.
Offering Support following the Great East
Japan Earthquake
Following the Great East Japan Earthquake of March 2011,
the Sanki Group and our business partners joined together
as one in working towards the reconstruction and recoveryof the affected regions.
In addition to immediately making donations on behalf ofthe company, we also called for donations from theexecutives and staff members of Group companies.

From the initial stages following the earthquake, ourComprehensive Disaster Response Headquarters went into
action, and exerted its utmost efforts in providing support
for our workplaces in the affected area and aiding in therecovery of our customers’ facilities.
In May 2012, we established an Earthquake Recovery
Project in the affected areas (Headquarters) and in our head
office (Secretariat), and we are working to make the Group’s
technologies and expertise of use to the needs of theaffected area, even if only in a small way.
Our executives and staff members are one in praying forthe recovery of the affected areas even a little earlier, andwe will maintain our support into the future.

44

Yamato Engineering Center: Social studies field trip for students of a neighboring elementary school

Cleanups and beautification of the Environment by Branches
In addition to actively conducting cleanups of their respective
surrounding areas, our branches and Group companies also
participate in events organized by their municipalities and engage inactivities to beautify the environment. Yamato Engineering Center,
where we also have a factory, conducts regular cleanups, and also
accepts visits from neighboring elementary school students on social
studies field trips. In fiscal 2011, 281 students visited the facility.

Dispatch of Team Members to the Japanese Antarctic
Research Expedition
We have cooperated in Antarctic research since 1991, theyear of adoption of the Protocol on Environmental Protection
to the Antarctic Treaty; for example, we have dispatchedeight engineers to supervise environmental protection as
members of the Japanese Antarctic Research Expedition. Asof the present, we have dispatched our ninth engineer to bea member of the winter team of the 53rd Japanese Antarctic
Research Expedition, and our technologies are contributing
to the protection of the environment at Syowa Station in the
Antarctic. Next fall, we plan to dispatch our 10th engineer tothe winter team.

Participating in the Japanese Antarctic Research Expedition
I started my life as a member of the winter team of the 53rd
Japanese Antarctic Research Expedition in February 2012. As theteam member responsible for environmental protection, my main
duties are managing and maintaining the sewage treatment
equipment and managing waste. This year for the first time in 18
years, the Antarctic exploration ship Shirase was unable to makelandfall at Syowa Station, and so the amount of supplies able to betransported was limited. This has necessarily meant that theprovision of infrastructure over the summer months at the station
has been cut back from initial plans. Happily, though, all of the parts
for the new sewage treatment equipment sent by Sanki arrived, andI was able to successfully complete its installation with the help ofnumerous team members. During March, we worked at fever pitch
to prepare for the winter shut-in, for example by collecting andgathering together scattered materials and equipment and waste,
and storing it in places in which it would not be buried by snow.

Main Activities for Social Contribution in Fiscal 2011

Voice

When things began to calm down a bit in April, the onslaught ofblizzards meant that we were busy with removing snow from aroundthe station, and when I looked up it was May. The polar night, when
the sun never sets, had arrived. This period is perfectly suited toobserving the aurora. I have watched it many times, but it always
fills me with wonder. I am in good mental and physical health, andevery day is rich as I am surrounded by characterful individuals andexposed to stimulating and thrilling experiences.

Nobuaki Kadota,
Environmental Protection Supervisor,
53rd Japanese Antarctic Research Expedition

Toyota branch: Traffic safety activities

Head office: Cleaning the Nihonbashi Bridge

Chugoku branch: Cleaning Heiwa Avenue

Donations and Contributions
In fiscal 2011, in addition to making donations to universities andresearch institutes, we also supported cultural activities throughdonations to the New National Theater, the Japan Chamber Music
Foundation, and other institutions. In addition, each of ourbranches and Group companies actively engaged in a variety ofactivities in which it was easy for employees to take part, such as
donating used stamps and cards, collecting bottle caps and pulltabs for recycling, and giving blood.
Head office: Donation of unused office supplies

Collection of bottle caps for recycling

Sanki Nature Park
Established in 2005 as a biotope to make the greatest possible useof the self-purifying powers of the natural environment, the Sanki
Nature Park receives numerous visitors, for example serving as aclassroom for observation of
the natural environment for
students in the local area, andis also a place for local
residents to relax. Today,
many creatures can be seenin the park, making it possiblefor it to also be used as avenue for teaching theimportance of biodiversity.

Yamato Engineering Center: Nature Park45

Sanki Engineering’s CSR Activities

Our Relationship with the Environment

Environmental Management of Sanki Engineering
In Advancing Environmental Management,
We fulfill Two Missions
Sanki Engineering believes that environmental problems
represent an important management issue, and we advanceenvironmental management with the aim of fulfilling two
missions: To protect the global environment by means of ouradvanced technological expertise, and to reduce the burden
on the environment caused by our business activities. We
have constructed a system for the promotion ofenvironmental management with our President as its overall
director. At company-wide environmental conferences, eachof our divisions reports on its activities and we decide on
future plans, and we continually enhance our environmental
activities through the efficient and continuous operation of
our environmental management system (EMS).
Environmental management of Sanki Engineering: Two missions

Environmental Management System (EMS)
Our entire company received ISO 14001 certification in2006. In 2011, the scope of the certification was broadened
to include two of our subsidiaries (Sanki Kakou and Sanki
Kankyo Service Co., Ltd.).
The results of external audits and internal environmental
audits have shown no major incidents of noncompliance inthe past five years.
System for promotion of environmental management
Top manager (President)
Environmental conference
Reports on company-wide activities anddecisions on plans (Once per year)

Overall supervisor of environmental management (General Manager of CSR Promotion Division)Company-wide EMS Secretariat(Global Environment Office)Each division

Conducting Environmental Education
By enhancing Our Environmental education, we seek
to increase Awareness of Environmental Protection
among All Employees
Environmental Lecture Meetings
In order to increase awareness of environmental protection among
all of our executives and employees, we hold environmental
lecture meetings via our tele-conferencing system, offering
presentations by company and external instructors. We held
environmental lecture meetings twice in fiscal 2011, with 540
people participating. In fiscal 2012, we have held one
environmental lecture meeting, as described below.
4th Environmental Lecture Meeting: May 30, 2012
Theme: Trends in the Development through to Practical Application ofTechnologies for the Use of Renewable Energies
Presenter: Hironao Matsubara, Senior Researcher and Director,
Institute for Sustainable Energy Policies
Number of participants: 307

Divisional managers(Heads of headquarters, business divisions, and branches)

To protect the global environmentby means of our advanced
technological expertise●●●

Development and introduction oftechnologies for exploitation ofenergyDevelopment and introductionof technologies for the effective
use of energy

To reduce the environmental
burden caused byour business activities●

Minimization of consumptionof energy and resources●

Reduction of waste andpromotion of recycling●

Provision of environmental
education for employees

Development and introductionof technologies enabling reuseof resources

Environmental Committee
Reports on divisional activities and decisions
on plans (Twice per year)

46

We are Enhancing Energy-saving Activities in Our Offices
In October 2010, having become a Designated Businessunder the Revised Energy Saving Act, we set the target
for our office energy-saving activities of reducing energy
consumption in the three-year period between fiscal 2010
and fiscal 2012 by 10% against fiscal 2009. We put avariety of energy-saving measures into effect, such as
switching to LED lighting in the Chubu branch, and testing
the use of screens and allowing employees to do awaywith neckties and suit coats earlier in the Head Office. In
response to the electricity shortage following the Great
East Japan Earthquake, our initiatives included strictly
enforcing no-overtime days and switching all employees’
computers to power-saving mode.
In another initiative, we are proceeding experimentallywith the use of natural energies, introducing solar andwind power at the Technical Research Laboratories in our
Yamato Engineering Center and solar power in the Toyota
branch facility.
Section of a sunlight monitor

Divisional environmental management supervisors
Divisional EMS Secretariats

Staff responsiblefor design
Maximization of energy efficiency

Target management

We fulfill two missions in our environmental management
In relation to our mission to protect the global environment bymeans of our technological expertise, our core business area, the
SANKI YOU Eco Contribution Point System, launched in October2010 in order to further invigorate our proposals of energy-saving,energy creation, and energy storage solutions to our customers, has
found a steady footing. (→P50)
With regard to our other mission, to reduce the burden on theenvironment caused by our business activities, in fiscal 2010 weformulated a three-year plan to cut power consumption in ourbusiness activities by 10%. During the plan period, the effects of
the Great East Japan Earthquake resulted in a restricted power
supply, and in the second year of the plan we achieved reductionsin advance of our targets. In fiscal 2012, the final year of the plan,

Minimizing the Burden on the Environment
caused by Our Business Activities

Staff responsible for
production and construction

Staff responsible
for office duties

Manufacturing and construction
with minimal environmental burden

Reduction of environmental burden
through increased productivity

Target management

Target management

Voice

we are extending our measures to also encompass facility
investments, seeking to achieve results above our 10% target.
We are already steadily proceeding towards the achievement ofour goals, but we will not be satisfied with this, instead constantly
pushing ahead towards ever higher targets.

The environmental lecture was relayed to offices outside the Head Office by television hook-up

Other Education
We offer introductory training in EMS and other forms ofeducation every year to new recruits, as well as
mid-career recruits. In fiscal 2011, 78 employees received
training to become internal environmental auditors,
bringing our total number of qualified staff to 858.
Trends in number of employees withenvironment-related qualifications

Masato Komura,
Director, Senior Executive Officer,
and General Manager, CSR Promotion Division(Number as of April 1 each year)

FY 2009

FY 2010

FY 2011

FY 2012

Certified environmental
measurer

9

9

8

8

Supervisor of management of industrial
waste subject to special control

78

96

115

124

Pollution prevention manager

67

70

71

75

Solar generation at the Toyota branch facility

47

Protecting the Environment by means of Our Technological Expertise
We are contributing to the Realization of a Low-carbon
Society by providing Total Engineering

Turbocharger model

Energy-conserving supercharged fluidized combustion system

TurbineThere is a significant demand to reduce greenhouse gas emissions

Combu

during the operation of fluidized bed sewage sludge incineration

Pressurizedstion gasfacilities. To meet this demand, we have developed an

air

Air

energy-conserving fluidized combustion system, and thus succeeded

Combustion gas

Sanki Engineering’s business activities contribute to theprotection of the environment through our presentation of
Total Engineering, our company’s strength. In our facilities
construction and machinery systems business, in addition toseeking functionality and user-friendliness, we are constantly
working to develop new systems to assist in conserving
energy and reducing lifecycle costs. In addition, in ourenvironmental systems business, we are working to conserve
energy and reduce CO2 emissions through the provision ofwater purification technologies, sewage treatment technologies, and comprehensive waste treatment technologies.

At our Energy Solutions Center (established in 2009), in
addition to collecting data concerning subjects including theeffective use of energy and energy conservation to support
technological development and the proposal of solutions tocustomers, we also manage data on these proposals andtheir implementation, and on orders received andconstruction work performed, seeking to make constantimprovements.

in saving a significant amount of energy.

Exhaust gas

Compressor

The new system combines a fluidized bed incinerator and asupercharger, thereby reducing greenhouse gas emissions by

Turbocharger
Fluidized bed incinerator
with turbocharger

approximately 40% (reduction in power consumption of

Proposals for CO2 reduction and outcomes in fiscal 2011
Number

CO2 reduction (t-CO2/year)

approximately 40%, fuel consumption by 10%, and N2O emissions by

Proposed solutions

355

88,48050%). The system is scheduled to commence operation in Japan inOrders received

129

31,095

March 2013.

White smoke
prevention equipment

Sewage sludge

Air to prevent white smoke
Flue gas treatment tower
Air preheater

Dust collector with filter

System for Data Centers
Data on Energy-saving Technologies Announced in Fiscal 2011 OnwardHybrid energy-conserving heat source system
We have developed the “S Module,” a hybrid energy-conserving

Temperature stratification air-conditioning system for large spaces

heat source system, capitalizing on natural energy as far as

Air-conditioning systems for large spaces such as factories and gymnasiums condition the air over the entire space, despite the fact people arecapable of operating with high efficiency, in accordance with the

only working or exercising in a space up to two to three meters above the floor surface. Consequently this present various problems, such as
high power consumption and the need to change equipment for summer and winter.
Under such circumstances, we have developed a

Cooling (Temperature stratification)energy-saving performance.
Features of the S Module

large spaces that conserves energy while cooling the air①Switching control in accordance with cooling load and external air conditions

in summer by generating temperature layers, and controls

Cooling working area only

and comfort can both be achieved at the same time.

Conveyor belt achieving a significant reduction in power consumption
There is further increasing demand for energy saving in various industries and fields, regardless ofwhether systems are intended for industrial or domestic use. We have therefore developed anenergy-conserving conveyor belt by reexamining the conveyor structure, developing a dedicatedenergy-saving motor (direct drive) for the conveyor belt, and installing it as standard. The conveyer belt
developed reduces power consumption by approximately 40% (in-house comparison with ourconventional conveyer belts under a 65% load). This has helped save energy in various distribution
facilities such as delivery centers, distribution warehouses, truck terminals, airports and post offices.

48④Minimized transport energy achieved by non-valve connection

Special outlet

Heating down to floor level②Positive use of free cooling achieved by continuously assessing cooling performance③Automatic judgment of conditions for switching to completely free cooling

Loop duct

position three meters or more above the floor surface, theThe product went on sale in July 2012.

Non-air-conditioned area

Area of hot air

heating the air in winter. By installing an air outlet at afloor space can be used effectively, and energy saving

cooling load. Achieving a coefficient of performance (COP) of 8.1 ata load factor of 70%, the system leads the way in terms of domestic

Heating (Entire space)temperature stratification air-conditioning system forcold air and provides warmth down to floor level whenpossible, as a system intended for data centers. This system isAir-conditioned area
(3 m from the floor surface)

Energy-saving air-conditioning system
Cooling using external air during winter and more temperate months
is an effective method of controlling energy consumption in data
centers, but the task of maintaining appropriate indoor humidity had
remained unaccomplished.
To accomplish this task, we developed an air-conditioning systemcapable of capitalizing on the energy-saving effect achieved by external air
cooling during winter and the more temperate months. This air conditioner
uses an internal spray humidification system called Package Fog as amethod of providing the necessary humidity for cooling via external air. By
using this system, the annual energy-saving effect has been boosted to alevel three to five times higher than steam humidification systems, and thevolume of water used annually for humidification has been reduced to
one-third of that of drip humidification systems.

Package Fog
Pressurization pump

Air circulation

NozzleEliminator

Control valve

Air supply

External air

Package FogC

Air circulationC

Medium-pressure type

Water supply(water pressure)Control valve

NozzleEliminator
Air supply

External air

CC

Low-pressure type49

SANKI YOU Eco Contribution Point System
Sanki Engineering’s main areas of business include HVAC andplumbing equipment, electrical wiring and equipment, information and communications equipment, clean water and sewage
treatment facilities, and transportation machinery andequipment for buildings and factories. The operation of thisequipment necessitates the use of large amounts of energy,
and our business can therefore in itself be seen as directly
contributing to global warming. Based on this realization, we
launched the SANKI YOU Eco Contribution Point System in
October 2010 in order to adopt a clear stance, together with ourcustomers, in relation to contributing to the prevention of global
warming and the realization of sustainable societies.
Under this system, when we propose an energy-saving
solution to a customer that reduces CO2 emissions, and that
proposal is adopted, the amount of the achieved emissions
reduction is converted to “Eco Points” (100 yen per 1 ton
reduction in CO 2 ), which are aggregated for the entire
company. The resulting funds are then used to support
non-profit environmental protection activities. In addition to
enabling us to share our concern for the prevention of global
warming with the customers who accept and apply our
proposals, this system enables our employees across thefields of sales, design, technology and development toexperience a real sense of the direct connection of their own
jobs to the protection of the environment.
In fiscal 2011, proposals made by us and adopted by ourcustomers resulted in the reduction of 31,095 tons of CO2
emissions, equivalent to 3,109,500 yen when converted into
Eco Contribution Points.

Contribution to Tree-planting Projects
With a focus on non-profit organizations, we sought arecipient for our donations working in the area ofenvironmental protection activities. We settled on the
Present Tree* project conducted by the NPO Environmental
Relations.
Our second donation was to a tree-planting project
seeking to create a base for semi-urban woodland
activities in Sanmu City, Chiba Prefecture. Our third
donation, like the first, was made to a tree-planting projectin a watershed protection forest in the Hida-Takayama
area. We also participated in tree-planting events
organized by these projects.

Environmental Accounting
To enable us to proceed with our environmental protection
initiatives efficiently and effectively, we determine andpublish the cost of environmental protection in ourbusiness activities and the outcomes of our environmental
protection initiatives.

Fiscal 2011 Environmental Protection Costs(Expenditures for environmental protection in our business activities are divided into expenses and investments for aggregation)
Details of main initiatives

Expenses

Investments

Cost of disposal of waste CFCs and halons

51,241

0

Resource recycling costs

Cost of waste disposal (Construction sites)

315,0120

Cost of operating ISO 14001

2,716

0

Cost of environment-related education

184

0

Cost of exhibiting in exhibitions / publishing materials

33,8390

Cost of replacing lights with LEDs

3,700

0

Cost of introducing presence sensors

130

0*Present Tree

As its name suggests, Present Tree is a project that seeks to restore forests by planting
seedlings in areas that have not been replanted after clearing, areas struck by disaster, burnt-out
areas, etc., as a gift to loved ones and to the planet’s future.

Management costs

Cost of cutting back vegetation at Yamato Engineering Center / Cost of maintaining Nature Park

4,066

0

Cost of environmental protection-related R&D

346,392

10,716

Donations to environmental protection-related organizations

2,435

0

Cost of participating in environmental protection activities and supporting education

2,003

0

R&D costs ※Social activities costs※As a result of revision of the accounting standards, expenses appear to have increased and investments to have decreased.

Outcomes of donations to tree-planting projects
Tree-planting project
1st: Takayama City,
Gifu Prefecture

Amount of donation

CO2 reduction resulting
from proposal

Outcomes of Environmental Protection (Annual comparison of resources consumed, emitted gas, green purchasing results and waste products)
Number oftrees planted

Second half, 2010:
725,200yen

7,252tons

207

2nd: Sammu City,
Chiba PrefectureFirst half, 2011:
1,390,100yen

13,901tons

397

3rd: Takayama City,
Gifu Prefecture

Second half, 2011:
1,719,400yen

17,194tons

491(Donation made May 31, 2011)(Donation made December 28, 2011)(Donation made July 31, 2012)

As SANKI YOU Eco Contribution Points accumulate, the forests grow!

50(1,000 yen)

Environmental protection costs

Global environmental protection costs

Resources consumed

Voicewith the surrounding region and with the people who live there. This is
Present Tree’s true goal. Without human and economic interaction,
there can be no regional revival and development, and without regional
revival, there can be no revival of theforests. I would like to offer my sincere
thanks to everyone who has supported
regional revival through their businessactivities.

Details

FY 2008

FY 2009

FY 2010

FY 2011

Number of sheets of copy paper purchased for offices(1,000 sheets)

18,601

17,96018,696

18,768Volume of water used at Yamato Engineering Center (m3)

14,552

15,02312,12015,828Energy consumed by offices(Crude oil equivalent; kl)

2,021

2,056

1,922

As a result of energy consumption in offices

3,377

3,146

2,931

As a result of energy consumption at worksites

1,013

1,016

839

17,712

11,272

12,034

12,07012,50624,48032,50628,537

Details

FY 2008

FY 2009

FY 2010

FY 2011

Construction sites

Profit from sale of scrap, etc.

34,316

22,768

5,412

15,053

Yamato Engineering Center

Profit from sale of scrap, etc.

188

36

98

327

Energyconsumed
CO2 emissions(t-CO2)
Volume of industrial waste

Thanks to businesses that have made efforts to save energy basedon proposals from Sanki Engineering, we have been able to plant
more than 1,000 trees on abandoned land.
With “Plant a tree on a special day!” as our slogan, Present Treeattempts to revive forests through the planting of commemorative
trees on denuded land and other barren areas. To date, we havereceived support from approximately two million people. A distinguishing feature of our project is that the people who plant trees as part of it
look after those trees for 10 years or more following their planting.
During this period, the attachment they initially feel exclusively for“their own” tree grows to become a concern for the forest as a whole.
They come to visit the forest, and as they do so, they begin to interact

Scope of aggregation:Sanki Engineering as a whole, or designated sections
Period:April 2011 – March 2012
Guidelines for reference:①Environmental Accounting Guidelines, Ministry of the Environment(2005 edition)②Environmental Accounting Guidelines for the Construction Industry(2002 edition)

Amount of industrial waste from company-wide
construction sites and Yamato Engineering Center (t)Green purchasing of stationery (1,000 yen)

Economic Effects of Environmental Protection Measures
Related departments(1,000 yen)

Atsuko Suzuki,
Chief Executive
NPO Environmental Relations Association

51

Sanki’s Management TeamAn Overview of the Executives

Financial section(As of June 27, 2012)

❿
⓬

❽

❶

Representative Director and President❷

Representative Director and Senior Executive Officer

Takeo Kubota❸

Representative Director and Senior Executive Officer

Akio Yamashita❹

Director, Senior Executive Officer, and General Manager, CSR Promotion Division

Masato Komura❺

Director, Senior Executive Officer, and General Manager, Sales Administration Division❻

Director, Managing Executive Officer, General Manager,
Environmental Systems Administration Division❼

Director, Managing Executive Officer, and General Manager, Administration Division❽

External Director

Hiroshi Nishimura❾

External Director

Mitsuhiro Masumi❿

Full-time Auditor

Keiji Akamatsu⓫

Full-time Auditor

Toshikatsu Yasunaga⓬

External Auditor

Takeo Iguchi⓭

External Auditor

Mamoru Norisada

52

Takuichi Kajiura

❹

❺

❼
❷

❶

❻
❸

⓫
❾

⓭

54

11-year consolidated financial summary

56

Business overview for FY 201257

Consolidated Balance Sheets

59

Consolidated Statements of Income and Comprehensive Income

60

Consolidated Statements of Changes in Net Assets

61

Consolidated Statements of Cash Flows

62

Notes of Consolidated Financial Statements

Tsutomu Hasegawa
Tetsuo Usui
Mamoru Shinma

53

Financial section
11-year consolidated financial summary(Millions of yen)
FY ended March 31, 2002

FY ended March 31, 2003

FY ended March 31, 2004

FY ended March 31, 2005

FY ended March 31, 2006

FY ended March 31, 2007

FY ended March 31, 2008

FY ended March 31, 2009

FY ended March 31, 2010

FY ended March 31, 2011

FY ended March 31, 2012

Fiscal year

¥ 225,576¥ 214,276¥ 212,379¥ 245,047¥ 235,401¥ 237,022¥ 218,256¥ 188,653¥ 143,348¥ 147,129¥ 175,291

Balance carried forward

152,904

145,544

143,999

155,876

153,593

144,456

108,253

93,566

77,641

72,976100,272

Sales

236,291

221,635

213,924

233,170

237,684

246,159

254,460

203,340

159,273

151,794

147,994

Selling, general and administrative expenses

15,797

16,04015,657

14,94814,42613,994

13,962

14,97815,41915,763

15,712

Operating income or loss

5,345

5,805

3,314

4,281

2,892

（9,502）（3,958）

7,125

5,027

3,843

2,525

Ordinary income or loss

5,161

5,782

3,533

4,946

3,319

（8,782）（3,307）

6,900

5,456

4,239

2,268

Net income or loss

2,301

3,214

3,644

2,600

2,355

（6,536）

3,134

3,283

3,141

2,124

176

Cash flows from operating activities（8,099）（20,808）

11,942（3,151）（5,557）（2,819）（4,097）

19,177

1,294

11,554（2,697）

Cash flows from investing activities（7,809）3,468（9,839）7,662（1,024）

2,833

11,511

1,726（1,664）2,610（1,046）

Cash flows from financing activities（5,335）（3,021）（3,345）（3,315）（3,067）（2,697）（3,812）（4,377）（2,936）（1,883）

Orders received

Cash and cash equivalents at end of year（280）

¥ 48,805¥ 28,416¥ 27,170¥ 28,365¥ 18,717¥ 16,018¥ 19,617¥ 36,142¥ 32,825¥ 45,135¥ 41,097

As of end of fiscal year under review
Total assets

236,725

214,605

220,563240,234

245,367

251,323

215,680

176,664

163,307

158,501

163,120

Net assets

79,91080,01686,49187,774

98,333

88,94380,27678,78080,49879,833

79,662

Number of employees

2,429

2,463

2,371

2,327

2,332

2,179

2,225

2,239

2,272

2,316

2,289

Per share information（88.47）

28.89

41.04

46.93

34.49

31.46

42.42

44.45

42.86

29.67

2.46

1,031.64

1,036.44

1,145.59

1,187.36

1,330.41

1,203.57

1,086.02

1,065.77

1,119.40

1,115.41

1,113.70

15.00

15.00

15.00

18.00

15.00

15.00

15.00

15.00

15.00

15.00

15.00

Equity ratio (%)

33.8

37.3

39.2

36.5

40.1

35.4

37.2

44.6

49.3

50.3

48.8

Return on assets (%)

2.2

2.6

1.6

2.1

1.4

（3.5）

（1.4）

3.5

3.2

2.6

1.4

Return on equity (%)

2.9

4.0

4.4

3.0

2.5

（7.0）

3.7

4.1

3.9

2.7

0.2

SANKI REPORT 2012

55

Earnings per share (yen)Book-value per share (yen)Cash dividends (yen)Other information(Millions of yen)Orders received and sales

Profit300,000

25,000Operating income (right axis)
Ordinary income (right axis)
Net income (right axis)
Orders received (left axis)
Sales (left axis)

250,000

20,00015,000200,000
10,000150,000
5,000
100,000
0
50,000（5,000）（10,000）

0
'02

54

SANKI REPORT 2012

'03

'04

'05

'06

'07

'08

'09

'10

'11

'12 （FY）

Business overview for FY 2012 (fiscal year ended March 31, 2012)

Consolidated Balance Sheets
March 31, 2011 and 2012

Operations overview
orders received increased by 19.1% on a year-on-year basis to 175,291
million yen, while sales decreased by 2.5% on a year-on-year basis to147,994 million yen, and balance carried forward increased by 37.4% on
a year-on-year basis to 100,272 million yen. Operating income
decreased by 34.3% on a year-on-year basis to 2,525 million yen,ordinary income decreased by 46.5% on a year-on-year basis to 2,268
million yen, and net income decreased by 91.7% on a year-on-year basis
to 176 million yen.

Segment overview
Facilities construction
Orders received increased by 18.8% on a year-on-year basis to 134,878
million yen, while sales decreased by 2.2% on a year-on-year basis to115,019 million yen. The segment loss (ordinary loss) amounted to 561
million yen (the segment income of the prior year was 1,540 million yen).
Orders received increased in Building air-conditioning and Industrial
air-conditioning, driven by promoting proposal-based sales of energy
and power-saving systems proactively, in order to avoid missing achance to receive orders, while putting emphasis on profitability of
constructions.
In respect of sales and the segment income or loss, we focused onreceiving minor work orders, mainly renewal constructions that requirea short construction period, and strived to expand sales by increasedorders and to reduce costs and expenses, for covering the decline inconstruction carried forward from the prior fiscal year. Nevertheless, anordinary loss was recorded since the loss due to the delay in the startand progress of construction work, which was due to the great EasternJapan Earthquake, was not absorbed during the year.
Machinery systems
Orders received decreased by 21.2% on a year-on-year basis, to 9,361
million yen, while sales increased by 14.1% on a year-on-year basis, to10,823 million yen. The segment loss (ordinary loss) amounted to 187
million yen (the segment loss for the same period in the previous year

was 675 million yen).
Although orders received were below the level of the prior year
because companies revised downward their capital expenditure plans,
the segment loss was improved by increased sales.
Environmental systems
Orders received increased by 62.5% on a year-on-year basis to 28,833
million yen, while sales decreased by 4.3% on a year-on-year basis to19,825 million yen. The segment income (ordinary income) decreased by
10.7% on a year-on-year basis to 879 million yen.
Orders received sharply increased attributed mainly to theintroduction of a new incinerator to a water treatment plant. While
sales and the segment income decreased in comparison of the previous
year, since the sales of a large-scale waste treatment plant wererecorded in the previous consolidated fiscal year.
Real estate
Sales decreased by 32.0% on a year-on-year basis to 2,824 million yen,and the segment income (ordinary income) decreased by 47.7% on a
year-on-year basis to 1,331 million yen.
Sales and income decreased due to the influence of the revision of
the rent for the main rental property.

Segment information(Millions of yen)
Sales

Orders received

Segment income

2011

2012

Diff.

Change2011

2012

Facilities construction

113,502

134,878

21,375

18.8%

117,556

115,019

Machinery systems

11,8869,361（2,524） （21.2%）

9,486

10,823

1,337

Environmental systems

17,74028,833

11,093

62.5%

20,714

19,825subtotal

143,128

173,072

29,944

20.9%

147,758

Real estate

4,154

2,824

（1,330） （32.0%）

Adjustments

（154）

（606）

（451） −

147,12956

SANKI REPORT 20122012

Current assets:¥ 31,137¥ 31,098

Trade notes and accounts receivable on completed construction contracts

58,27665,375

Securities

13,998

9,999

1,652

2,125

391

445

Deferred tax assets

2,415

1,809

Other current assets

2,963

4,298

Less allowance for doubtful receivables

（158）

（285）

Cash and time deposits

Inventories:
Expenditures for construction contracts in progressMaterials and supplies

Total current assets

Total

2011
AssetsSanki Engineering began to make an effort on a company-wide basis tocontribute to the realization of a comfortable low-carbon society, in
response to the demand for an energy-saving system and a new energy
system from our clients. As a total engineering company, we are
implementing this under the management policy of the mid-term
management plan (SANKI VITAL PLAN 90th), which has started in thisfiscal year.
The consolidated performance for this fiscal year was as follows:

Segment(Millions of yen)

175,291

28,162

19.1%

Change2011（2,537） （2.2%）

1,540（561） （2,102） −

（675）

（187）

（889） （4.3%）

984

879

（105） （10.7%）

145,669（2,089） （1.4%）

1,849

130

（1,719） （93.0%）

4,154

2,824

（1,330） （32.0%）

2,547

1,331

（1,215） （47.7%）

（118）

（498）

（379） −

（157）

806

（3,799） （2.5%）

4,239

2,268

151,794

147,994

Diff.

14.1%

2012

Diff.

488

963

Change110,677

114,866

Fixed assets:
Tangible fixed assets:

46,71846,873

Less accumulated depreciation（33,628）（34,030）

Buildings and structures, net

13,08912,842

Buildings and structures

Machinery, transportation equipment, and tools, furniture and fixtures
Less accumulated depreciation
Machinery, transportation equipment, and tools, furniture and fixtures, net
Land
Leased assets
Less accumulated depreciation
Leased assets, net
Total tangible fixed assets

4,369

4,204

（3,648）（3,695）

721

508

4,517

4,468

242

284

（21）

（45）

220

239

18,54818,058Intangible fixed assets:
Goodwill

71−

Other intangible fixed assets

415

414

486

414

14,727

16,672

Total intangible fixed assets
Investments and other non-current assets:
Investment securities

541

409

Prepaid pension cost

8,065

7,646

Deferred tax assets

121

125

Long-term loans receivable

Lease deposits

1,524

1,057

Insurance premiums

1,129

1,006

Other non-current assets

3,617

4,341

Less allowance for doubtful receivables（938）（1,478）

Total investments and other non-current assets

28,78829,781

Total fixed assets

47,824

48,254¥ 158,501¥ 163,120

Total assets−−（1,970） （46.5%）

SANKI REPORT 201257

Consolidated Statements of Income and Comprehensive Income(Millions of yen)

2011

2012

Liabilities and Net Assets
Liabilities:
Current liabilities:
Trade notes and accounts payable on construction contracts
Short-term loans payable¥ 44,961¥ 51,350

5,507

5,669

Lease obligations

24

34

Accrued income taxes

761

561

Deferred tax liabilities

8

14

Advances received on construction contracts in progress

3,237

2,788

Accrued employees’ bonuses

2,159

1,917

Accrued bonuses to directors and corporate auditors

41

46

Accrued compensation for completed construction contracts

729

471

Accrual for loss on construction contracts in progress

222

497

Accrual for headquarters relocation expenses

269−

Other current liabilities

3,620

2,508

Total current liabilities

61,54465,8600660

Non-current liabilities:
Long-term loans payable

225

231

Deferred tax liabilities

2,274

2,463

Accrued employees’ retirement benefits

9,197

8,288

478

522

Lease obligations

Accrued retirement benefits to directors and corporate auditors

25

24

Other non-current liabilities

4,921

5,407

Total non-current liabilities

17,123

17,59778,66783,458

Accrual for loss on guarantees

Total liabilities
Net assets:
Shareholders’ equity:
Common stock¥ 8,105¥ 8,105

Capital surplus

4,181

4,181

Retained earnings

67,802

66,905

Treasury stock（1,934）（1,936）

Total shareholders’ equity

78,154

77,256

Accumulated other comprehensive income:Net unrealized gains on other securities

1,740

2,538

4

−

Translation adjustments

（111）

（132）

Total accumulated other comprehensive income

1,633

2,405

45

−

79,833

79,662¥ 158,501¥ 163,120

Net deferred gains on hedges

Stock subscription rights
Total net assets
Total liabilities and net assets*See notes to consolidated financial statements.

Sales:
Completed construction contracts
Real estate and otherTotal sales
Cost of sales:
Completed construction contracts (Note 1)
Real estate and otherTotal cost of sales
Gross profit:
Completed construction contracts
Real estate and otherTotal gross profit
Selling, general and administrative expenses:
Salaries and wages
Provision for employees’ bonuses
Provision for bonuses to directors and corporate auditors
Provision for employees’ retirement benefits
Provision for retirement benefits to directors and corporate auditors
Provision for doubtful receivables
Depreciation and amortization
Other
Total selling, general and administrative expenses
Operating income
Non-operating income:Interest income
Dividends income
Other
Total non-operating income
Non-operating expenses:
Interest expense
Equity in losses of affiliates
Rework cost on construction contracts
Other
Total non-operating expenses
Ordinary income
Special gains:
Gain on sales of fixed assets
Gain on sales of investment securities
Gain on expiration of stock subscription rights
Gain on transition of retirement benefit plans
Total special gains
Special losses:
Impairment loss (Note 2)
Loss on natural disaster
Loss on disposal of fixed assets
Loss on devaluation of investment securities
Headquarters relocation expense
Provision for loss on guarantees
Provision for doubtful receivables
Cumulative effect on prior years of adopting the accounting standard for asset retirement obligations
Total special losses
Income before income taxes and minority interests
Income taxes:
Current
Additional taxes for prior years
Deferred
Total income taxes
Income before minority interests
Net income
Income before minority interests
Other comprehensive income (Note 3):
Net unrealized (losses) gains on other securities
Net deferred gains (losses) on hedges
Translation adjustments
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to:Shareholders of Sanki Engineering Co., Ltd.
Minority interests(Millions of yen)

2011

2012

¥ 147,639
4,154
151,794¥ 145,170
2,824
147,994

130,630
1,556
132,186

128,325
1,431
129,757

17,0092,597
19,607

16,844
1,392
18,237

6,226
959
41
644
193
66
486
7,145
15,763
3,843

6,076
844
46
642
193
157
472
7,279
15,712
2,525

67
374
417
859

71
331
288
691

93
34
47
288
463
4,239

85
480
90
292
947
2,268

−
−

526
25
45

39
¥ 663

¥ 598

623

−

−

165
12
69
121
644
25
20
67
1,126
3,776

85
91
427
80

−

529

−

1,215
1,651

867

648
231
595
1,475
176
176
176

−

784
1,652
2,124
2,124
2,124
（1,414）4（63）（1,473）
¥ 650

797
（4）
（21）
772
¥ 948

¥ 650
¥ −

¥ 948
¥ −

*See notes to consolidated financial statements.

58

SANKI REPORT 2012

SANKI REPORT 201259

Consolidated Statements of Changes in Net Assets(Millions of yen)

2011
Shareholders’ equity
Common stock
Balance at beginning of the year
Balance at end of the year
Capital surplus
Balance at beginning of the year
Balance at end of the year
Retained earnings
Balance at beginning of the year
Changes during the year:
Cash dividends
Net income
Effect of changes in scope of consolidation
Total changes during the year
Balance at end of the year
Treasury stock
Balance at beginning of the year
Changes during the year:
Acquisition of treasury stock
Total changes during the year
Balance at end of the year
Total shareholders’ equity
Balance at beginning of the year
Changes during the year:
Cash dividends
Net income
Acquisiton of treasury stock
Effect of changes in scope of consolidation
Total changes during the year
Balance at end of the year

Accumulated other comprehensive income
Net unrealized gains on other securities
Balance at beginning of the year
Changes during the year:
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year
Net deferred gains on hedges
Balance at beginning of the year
Changes during the year:
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year
Translation adjustments
Balance at beginning of the year
Changes during the year:
Effect of changes in scope of consolidation on translation adjustments
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year
Total accumulated other comprehensive income
Balance at beginning of the year
Changes during the year:
Effect of changes in scope of consolidation on translation adjustments
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year
Stock subscription rights
Balance at beginning of the year
Changes during the year:
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year
Total net assets
Balance at beginning of the year
Changes during the year:
Cash dividends
Net income
Acquisition of treasury stock
Effect of changes in scope of consolidation
Effect of changes in scope of consolidation on translation adjustments
Net changes in items other than shareholders’ equity
Total changes during the year
Balance at end of the year

*See notes to consolidated financial statements.

60

SANKI REPORT 2012

Consolidated Statements of Cash Flows

2012(Millions of yen)

2011

2012

¥ 3,776¥ 1,651

1,448

1,367

Cash flows from operating activities:¥ 8,105
8,105¥ 8,105
8,105

Income before income taxes and minority interests
Depreciation and amortization
Impairment loss

165−

Amortization of goodwill

71

71

4,181
4,181

4,181
4,181

Gain on transition of retirement benefit plans

（39）

−

66,76167,802

Headquarters relocation expense

644

80

（1,075）（1,072）

Cumulative effect on prior years of adopting the accounting standard for asset retirement obligations

67

−

2,124
（7）
1,040
67,802（1,712）

176
−

（896）
66,905（1,934）(Decrease) increase in allowance for doubtful receivables
Decrease in accrued employees’ retirement benefits

（20）

667

（2,070）（489）(Decrease) increase in accrued retirement benefits to directors and corporate auditors

（27）

43

(Decrease) increase in accrual for loss on construction contracts in progress

（154）

275

Interest and dividends income

（442）

（402）

93

85

Equity in losses of affiliates

34

480

Gain on sales of fixed assets

−

（526）

（222）
（222）
（1,934）（1）（1）（1,936）

Interest expense

77,33678,154Gain on sales of investment securities（623）

Decrease (increase) in trade notes and accounts receivable on completed construction contracts

5,196（7,668）Decrease (increase) in expenditures for construction contracts in progress

4,693

（479）

(Decrease) increase in trade notes and accounts payable on construction contracts

（254）

6,404

（1,075）

2,124
（222）
（7）
817
78,154（1,072）

176
（1）

−
（898）

77,256

3,155

1,740

（1,414）（1,414）

1,740

797
797
2,538

−

4

4
4
4

（4）
（4）
−

（38）

（111）

（9）
（63）
（72）
（111）

3,116
（ 9）
（1,473）（1,482）

Decrease in advances received on construction contracts in progress
Increase (decrease) in other current liabilities（25）（2,624）

（449）

539

（1,523）

Other

1,139

（1,515）

Subtotal

11,612（1,955）Interest and dividends received

451

401

Interest paid

（91）

（83）

Income taxes paid

（541）

（1,060）

Income taxes refunded−123
11,554（2,697）

Increase in time deposits

−

（50）

Decrease in time deposits−

50

Purchases of fixed assets

（450）

（814）

Net cash provided by (used in) operating activities
Cash flows from investing activities:

Proceeds from sales of fixed assets

13

664

Purchases of investment securities（423）（1,563）

−
（21）
（21）
（132）

Proceeds from sales of investment securities

1,035

234

Proceeds from redemption of investment securities

1,000

−

Execution of loans

（116）

（22）

Collection of loans receivable

107

110

1,633

Refund of insurance premiums

1,574

227

Other

（131）

115

Net cash provided by (used in) investing activities

2,610（1,046）

−

1,633

772
772
2,405

Cash flows from financing activities:

46

45

Proceeds from long-term loans payable

−

1,000

Repayment of long-term loans payable

（380）

（194）

Purchases of treasury stock

（222）

（1）

Payment of lease obligations

（18）

（28）

Cash dividends paid

（1,075）（1,072）

Net cash used in financing activities（1,883）

（280）

（0）
（0）

45

（45）
（45）
−

80,49879,833（1,075）（1,072）

2,124
（222）
（7）
（ 9）
（1,473）（665）¥ 79,833

176
（1）
−
−

726
（171）
¥ 79,662(Decrease) increase in short-term loans payable

Effect of exchange rate changes on cash and cash equivalents

（186）

16

（24）

（14）

Net increase (decrease) in cash and cash equivalents

12,256（4,038）Cash and cash equivalents at beginning of year

32,82545,135

Increase in cash and cash equivalents due to a new consolidation

26−

Increase in cash and cash equivalents due to a merger with an unconsolidated subsidiary27−¥ 45,135¥ 41,097

Cash and cash equivalents at end of year (Note 1)*See notes to consolidated financial statements.
SANKI REPORT 201261

Notes to Consolidated Financial Statements

Basis of Preparation of Consolidated Financial Statements
1. Basis of Preparation
Sanki Engineering Co., Ltd. (the “Company”) and its domestic
subsidiaries maintain their books of account in conformity with thefinancial accounting standards of Japan, and its foreign subsidiaries
maintain their books of account in conformity with those of theircountries of domicile.
The accompanying consolidated financial statements have been
compiled from the consolidated financial statements prepared by theCompany as required under the Financial Instruments and Exchange
Law of Japan and, therefore, have been prepared in accordance withaccounting principles generally accepted in Japan, which are different
in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards.
Certain amounts in the prior year’s financial statements have been
reclassified to conform to the current year’s presentation.
As permitted, amounts of less than one million yen have been omitted.
As a result, the totals shown in the accompanying consolidated financial
statements do not necessarily agree with the sums of the individual
amounts.

2. Scope of consolidation(1) Number of consolidated subsidiaries: 6
Names of consolidated subsidiaries:
Sanki Techno Support Co., Ltd.
THAI SANKI ENGINEERING & CONSTRUCTION CO., LTD.
Sanki Sangyo Setsubi Co., Ltd.
Sanki Kako Kensetsu Co., Ltd.
Sanki Kankyo Services Co., Ltd.
AQUACONSULT Anlagenbau GmbH
(2) Number of unconsolidated subsidiaries: 5
Names of unconsolidated subsidiaries:
Tomakomai Netsu Services Co., Ltd.
Shin-yu Services Co., Ltd.
Shanghai Sanki Engineering Consulting Co., Ltd.
Sanki Construction Engineering (Shanghai) Co., Ltd.
AEROSTRIP Corporation(3) Reasons for exclusion of unconsolidated subsidiaries fromconsolidation
The five unconsolidated subsidiaries above were excluded fromconsolidation because their total assets and sales and theCompany's equity in their net income and retained earnings were
not material to the consolidated financial statements.

3. Application of the equity method(1) N umber of companies to which the equity method of
accounting has been applied:
Unconsolidated subsidiaries: –Affiliates: 2
Akita Eco Plash Co., Ltd.
Ou Clean Technology Co., Ltd.

62

SANKI REPORT 2012(2) Number of companies excluded from application of the equity
method:Unconsolidated subsidiaries: 5
Affiliates: 2
Names of unconsolidated subsidiaries and affiliates:
Tomakomai Netsu Services Co., Ltd.
Shin-yu Services Co., Ltd.
Shanghai Sanki Engineering Consulting Co., Ltd.
Sanki Construction Engineering (Shanghai) Co., Ltd.
AEROSTRIP Corporation
SHUN HING-SANKI JV LIMITEDPFI Okubo Techno Resource Co., Ltd.

Inventories
Expenditures for construction contracts in progress:
Expenditures for construction contracts in progress are stated atcost by the individual identification method.
Materials and supplies:
Materials and supplies are carried at cost determined by themoving average method (in the case that the net selling value
falls below the cost at the end of the period, the book value on
the balance sheet is carried at the net selling value on thebalance sheet, regarded as decreased profitability of assets).

(3) Reasons for exclusion of unconsolidated subsidiaries andaffiliates from the equity method of accounting
The five unconsolidated subsidiaries and two affiliates referred toabove were excluded from being accounted for by the equity method
because the Company's equity in their net income and retained
earnings was not material to the consolidated financial statements.

(2) Depreciation of significant assets
Tangible fixed assets (excluding leased assets)
Depreciation is calculated by the declining-balance method, except
for the tangible fixed assets of the foreign consolidated
subsidiaries which are depreciated by the straight-line method.
The useful lives and the residual value are primarily in accordancewith those stipulated in the Corporation Tax Law.

4. Fiscal year end of the consolidated subsidiaries
Names and the fiscal year end of the consolidated subsidiaries
whose fiscal year end is different from that of the consolidated
financial statements:

Intangible fixed assets (excluding leased assets)
Depreciation is calculated by the straight-line method.
Depreciation of the software for internal use is computed by thestraight-line method over the useful life of the software (principally
5 years).

Name
AQUACONSULT
Anlagenbau GmbH
THAI SANKI ENGINEERING &CONSTRUCTION CO., LTD.

Fiscal year end
December 31
December 31

Financial statements of the above subsidiaries were consolidated on thebasis of its own fiscal year end. However, the necessary adjustments
were made to reflect any significant transactions from the fiscal year
end of the subsidiary to that of the consolidated financial statements.

5. Accounting policies(1) Valuation policies for significant assets
Securities
Held-to-maturity securities:
Held-to-maturity securities are stated at cost and amortized by
the straight-line method.
Other securities:
Marketable securities are stated at fair value with any changes
in unrealized gain or loss, net of the applicable income taxes,
included directly in net assets. Cost of securities sold isdetermined by the moving average method.
Nonmarketable securities are stated at cost determined by themoving average method.
Derivatives
Derivatives are stated at fair value.

Leased assets
Finance lease assets which transfer ownership title to the lessee
Depreciation of finance lease assets which transfer ownership
titles to the lessee is calculated by the same method as that for
the fixed assets owned.
Finance lease assets which do not transfer ownership title to the lessee
Depreciation of finance leases assets which do not transfer ownership
title to the lessee is calculated by the straight-line method over therespective lease terms with a nil residual value.
Finance leases which do not transfer ownership title to the lessee,
entered into on or before March 31, 2008, are accounted for as
operating leases.
(3) Significant accruals and allowances
Allowance for doubtful receivables
The allowance for doubtful receivables is provided at an amountsufficient to cover possible losses on collection. The allowance
consists of an estimate of the uncollectible amounts with respect tospecific receivables plus a percentage based on historical losses on
accounts receivable.
Accrued employees’ bonuses
Accrued employees’ bonuses are stated at an estimate of theamounts to be paid by the Company and its consolidated
subsidiaries for services rendered by the balance sheet date.

an estimate of the amounts to be paid by the Company and its
consolidated subsidiaries for services rendered by the balance
sheet date.
Accrued compensation for completed construction contracts
Accrued compensation for completed construction contracts isprovided at an estimated amount based on historical experienceand certain other factors.
Accrual for loss on construction contracts in progress
The accrual for loss on construction contracts in progress isprovided at an amount of estimated loss if a significant amount ofloss is expected to occur for construction contracts in progress andthe amount of the loss can be reasonably estimated.
Accrued employees’ retirement benefits
Accrued employees’ retirement benefits are provided based on theretirement benefit obligation and the fair value of the plan assets
as adjusted for the net unrecognized actuarial gain or loss andunrecognized prior service cost.
Prior service cost is amortized by the straight-line method over a
period (10 years) within the average estimated remaining years ofservice of the eligible employees.
Actuarial gain or loss is amortized in the year following the year inwhich the gain or loss is recognized by the straight-line method
over a period (10 years) within the average estimated remaining
years of service of the eligible employees.
Accrued retirement benefits to directors and corporate auditors
Accrued retirement benefits to directors and corporate auditors arestated at 100% of the amount which would be required to be paid if
all directors and corporate auditors resigned their positions at thebalance sheet date.
Accrual for loss on guarantees
The accrual for loss on guarantees is provided at an amount of
estimated loss on fulfillment of guarantee obligations.
(4) Recognition criteria for significant revenues and expenses
Recognition criteria for revenues and costs of construction contracts
Construction contracts, of which the percentage of completion canbe reliably estimated:
Revenues and costs of construction contracts, of which thepercentage of completion can be reliably estimated, arerecognized by the percentage-of-completion method. The
percentage of completion is calculated at the cost incurred as apercentage of the estimated total cost.
Other construction contracts:
Revenues and costs of construction contracts, of which thepercentage of completion cannot be reliably estimated, arerecognized by the completed-contract method.

Accrued bonuses to directors and corporate auditors
Accrued bonuses to directors and corporate auditors are stated at
SANKI REPORT 201263

(5) Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies
are translated into yen at the exchange rates prevailing at the yearend date of the consolidated financial statements, with the resulting
translation gains and losses credited or charged to income.
Receivables and payables denominated in foreign currencies hedgedby the forward exchange contracts which qualify for the assigning
method of hedge accounting are translated into yen at theirrespective forward exchange contract rates.
The assets and liabilities and the revenue and expense accounts ofthe foreign subsidiaries are translated into yen at the exchange
rates prevailing at the fiscal year-end date of those respective
companies. The resulting translation adjustments are presented astranslation adjustments in net assets.
(6) Hedge accounting
Principally, deferral hedge accounting is applied for derivatives
which qualify as hedges. For the forward exchange contracts whichmeet certain criteria, the assigning method is applied.
Hedging instruments are the forward exchange contracts, andhedged items are receivables, payables and forecasted transactions
denominated in foreign currencies.
The Company uses the forward exchange contracts for the purposeof mitigating risks arising from fluctuations in foreign currency
exchange rates. The Company does not enter into derivativetransactions for speculation.
Hedge effectiveness is assessed quarterly by matching changes inmarket prices/rates or cash flows of hedged items with those ofhedging instruments. Hedge effective is not assessed if thesubstantial terms and conditions of the forward exchange contracts
and the hedged items are the same because their correlation in
future fluctuation in exchange rates is ensured.

Changes in Presentation ofConsolidated Financial Statements
Consolidated Statement of Income and Comprehensive Income
Exchange loss, net, which was presented separately for the year
ended March 31, 2011 is included in “Non-operating expenses –Other” on the consolidated statement of income and comprehensive
income for the year ended March 31, 2012 because the amount is
not greater than 10% of the total non-operating expenses.
Rework cost on construction contracts, which was included in “Nonoperating expenses - Other” for the year ended March 31, 2011 ispresented separately on the consolidated statement of income andcomprehensive income for the year ended March 31, 2012 due to its
increased materiality.
For these changes, the consolidated statement of income andcomprehensive income for the year ended March 31, 2011 is represented. As a result, “Exchange loss, net” of ¥69 million and“Non-operating expenses - Other” of ¥265 million for the year ended
March 31, 2011 are reclassified as “Rework cost on construction
contracts” of ¥47 million and “Non-operating expenses - Other” of¥288 million.

Notes to Consolidated Statements of Income and Comprehensive Income(Note 1)
(Reversal of accrual) provision for loss on construction contracts in progress included in cost of sales
for the years ended March 31, 2011 and 2012 are as follows:(Millions of yen)
2011

2012

￥（154）￥ 275(Note 2)
Impairment losses were recognized for the following assets for the ended March 31, 2011:
Location(Millions of yen)

Use

Asset class

AmountHakone Ashigarashimo-gun, Kanagawa

Business-use assets (*1)

Land, Buildings¥ 149

Chuo-ku, Tokyo, and others

Business-use assets (*2)

Buildings, Tools, furniture and fixture, and others

224

Idle assets

Land, Buildings, Structures

15

Onobaru Izumi-shi, Kagoshima

The Company groups its business-use fixed assets based on the three business segments (facilities construction, machinery systems and environmental systems)
to perform assessments of impairment losses.
For idle assets and assets used for the real estate business, the Company determines whether or not indications of impairment exist on an individual asset basis.
(*1) Since the Company decided to sell these business-use assets, their net book value was reduced to the respective net realizable value (i.e., expected sales amount). The reduction
was recognized as the impairment loss in the special losses.

Additional Information
Effective April 1, 2011, the Company has applied the “AccountingStandard for Accounting Changes and Error Corrections” (ASBJ
Statement No.24 issued on December 4, 2009) and the “Guidanceon Accounting Standard for Accounting Changes and Error
Corrections” (ASBJ Guidance No.24 issued on December 4, 2009).

(*2) The net book value of these business-use assets was reduced to their respective recoverable amount (i.e., memorandum amount) with the decision for the headquarters
relocation. The reduction was recognized as the headquarters relocation expense in the special losses.
The net book value of the idle assets was reduced to their respective recoverable amount (i.e., estimate based on the assessed value for the property tax) due to a significant decline
in their market value. The reduction was recognized as the impairment loss in the special losses.
No impairment losses were recognized for the year ended March 31, 2012.

(Note 3)
The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive income for the year
ended March 31, 2012:(Millions of yen)

(7) Amortization of goodwill
Goodwill recognized for AQUACONSULT Anlagenbau GmbH, aconsolidated subsidiary, is amortized using the straight-line method
over a period of five years.
(8) S cope of cash and cash equivalents in the consolidated
statement of cash flows
The scope of cash and cash equivalents in the consolidated
statement of cash flows covers cash on hand, deposits which can beeasily withdrawn at any time, and highly liquid investments with amaturity of three months or less when purchased.
(9) OtherConsumption taxes:
Transactions subject to consumption taxes are recorded at
amounts exclusive of consumption taxes.

64

SANKI REPORT 2012

Net unrealized gains (losses) on other securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income

¥ 596
406

Amount before tax effect1,002

Tax effect(204)

Net unrealized gains (losses) on other securities

797

Net deferred gains (losses) on hedges:
Amount arising during the year

(4)

Reclassification adjustments for gains and losses included in net income(2)

Amount before tax effect(7)

Tax effect2

Net deferred gains (losses) on hedges(4)

Translation adjustments:
Amount arising during the year

(21)

Total other comprehensive income￥ 772

SANKI REPORT 201265

Notes to Consolidated Statements of Changes in Net Assets[For the year ended March 31, 2011]

1. Types and total number of shares issued were as follows:

2. Types and number of treasury shares were as follows:(shares)(shares)

Type ofstock

As of April
1, 2010

Increaseduring theyear

Decreaseduring theyear

As of March
31, 2011

Type ofstock

As of April
1, 2010

Increaseduring theyear

Decreaseduring theyear

As of March
31, 2011

Commonstock

74,461,156−−

74,461,156

Commonstock

2,590,156

339,028−

2,929,184(Note) Increase of 339,028 shares was due to purchase of treasury
stock of 336,000 shares from dissenting shareholders inaccordance with Article 797, Section 1 of the Corporation Law
and repurchase of fractional shares of 3,028.

3. Details of stock subscription rights were as follows:(2) Cash dividends with the record date within this fiscal year and the effective date after the end of this fiscal year were as follows:
Resolution

Type of stock

Total amount ofcash dividends(millions of yen)

Source ofdividends

Cash dividends
per share (yen)Record date

Effective dateJune 27, 2012 Ordinary
general meeting ofshareholders

Common stock

536

Retained earnings

7.50

March 31, 2012

June 28, 2012

Type of stock
subscription rights

Balance as of March
31, 2011(millions of yen)

Stock options

45

Notes to Consolidated Statements of Cash Flows

45(Note 1) Reconciliation of cash and time deposits to cash and cash equivalents:

The Company(Parent company)
Total

4. Cash dividends(1) Cash dividends paid by the Company were as follows:

Cash and time deposits
Short-term investments

Resolution

Type of stock

Total amount ofcash dividends(millions of yen)

June 25, 2010 Ordinary general
meeting of shareholders

Common stock

539

7.50

March 31, 2010

June 28, 2010

November 10, 2010 Meeting of boardof directors

Common stock

536

7.50

September 30,
2010

December 10,
2010

Cash dividends per
share (yen)Record date

Effective date(securities) with a maturity within three months
after the acquisition dateCash and cash equivalents at end of year

(Millions of yen)

2011

2012

￥ 31,137￥ 31,098

13,9989,999¥ 45,135￥ 41,097

Financial Instruments(2) Cash dividends with the record date within this fiscal year and the effective date after the end of this fiscal year were as follows:
Resolution

Type of stock

Total amount ofcash dividends(millions of yen)

June 28, 2011 Ordinary general
meeting of shareholders

Common stock536

Source ofdividends

Cash dividends
per share (yen)Record date

Effective date

Retainedearnings

7.50

March 31, 2011

June 29, 2011

Notes to Consolidated Statements of Changes in Net Assets[For the year ended March 31, 2012]

1. Types and total number of shares issued were as follows:
Type ofstock

As of April 1,
2011

Increaseduring theyear

Commonstock

74,461,156−

2. Types and number of treasury shares were as follows:(Shares)

Decreaseduring theyear

As of March
31, 2012

Type ofstock−

74,461,156

Commonstock(Shares)

As of April 1,
2011

Increaseduring theyear

Decreaseduring theyear

As of March
31, 2012

2,929,184

2,705

−

2,931,889(Note) Increase of 2,705 shares was due to repurchase of fractional
shares.

3. Cash dividends(1) Cash dividends paid by the Company were as follows:
Resolution

Type of stock

Total amount ofcash dividends(millions of yen)

Cash dividends per
share (yen)Record date

Effective dateJune 28, 2011 Ordinary general meetingof shareholders

Common stock

536

7.50

March 31, 2011

June 29, 2011

November 11, 2011 Meeting of board of
directors

Common stock

536

7.50

September 30,
2011

December 9, 201166

SANKI REPORT 2012

1. Overview
1) Policy for financial instruments
The Company and its consolidated subsidiaries (collectively, the “Group”) invest funds in financial instruments such as debt securities with high credit ratings
and with low risk for loss of principal. The Group raises funds through borrowings from banks and life insurance companies.
The Group uses derivatives for the purpose of reducing the foreign currency exchange risk arising from the receivables and payables denominated in foreign
currencies and the interest rate fluctuation risk for borrowings. The Group does not enter into derivative transactions for speculative purposes.
2) Types of financial instruments and related risks, and risk management for financial instruments
Trade receivables - trade notes and accounts receivable on completed construction contracts - are exposed to credit risk in relation to customers. To manage
credit risk arising from trade receivables, each related division of the Group monitors due dates and outstanding balances by individual customer. Further, it
periodically monitors credit worthiness of the main customers.
Investment securities are composed mainly of held-to-maturity debt securities and the shares of common stock of other companies with which the Group hasbusiness relations. These investment securities are exposed to market fluctuation risk. The Group periodically reviews the fair values of such investment
securities and the financial position of the issuers.
Most of the trade payables - trade notes and accounts payable on construction contracts - have payment due dates within one year.
Regarding derivative transactions, the Group uses derivatives for the purpose of reducing the foreign currency exchange risk arising from the receivables andpayables denominated in foreign currencies and the interest rate fluctuation risk for borrowing.
Those derivative transactions are entered into based on actual needs for hedging risks and not for speculative or trading purposes.
In conducting derivative transactions, the Group follows the internal policies established by the financial division, which set forth delegation of authority andmaximum upper limit on position.
In addition, to mitigate the credit risk of derivatives, the Group transacts only with financial institutions which have a high credit rating.
Trade payables and borrowings are exposed to liquidity risk. Each company of the Group prepares and updates its cash flow plans monthly to manage
liquidity risk.
3) Supplementary explanation of the estimated fair value of financial instruments
The notional amounts of derivatives in “Derivatives” of “Notes to Consolidated Financial Statements” are not necessarily indicative of the actual market risk
involved in derivative transactions.

SANKI REPORT 201267

Securities

2. Estimated fair value of financial instruments
Carrying value of financial instruments on the consolidated balance sheets, estimated fair value and unrealized gain (loss) are summarized in the following
table. The following table does not include financial instruments for which it is extremely difficult to determine fair value. (Please refer to Note 2 below.)(Millions of yen)

2011
Carrying value
Assets:1) Cash and time deposits2) Trade notes and accounts receivable
on completed construction contracts3) Securities and investment securities:
Held-to-maturity debt securities
Other securities
Total assets
Liabilities:
Trade notes and accounts payable on
construction contracts

Estimated fair value

Carrying value

Unrealized gain
(loss)

Estimated fair value(Millions of yen)2011

¥ 31,137¥ー¥ 31,098¥ 31,098¥ーType

58,27658,276

ー

65,37565,375ーSecurities whose fair value exceeded their carrying value
Government bonds

14,493
11,689115,596

14,496
11,689115,5982

10,79813,127
120,399

10,801
13,127
120,4012ー

244,96144,961¥7

Total liabilities

Unrealized gain (loss)¥ 31,137

44,961

Derivatives

20121) Trading securities
Not applicable, because the Company and its consolidated subsidiaries
had no trading securities both at March 31, 2011 and 2012.

44,961¥7−

51,350−51,350
¥ー

¥ー

−

Other

2

Subtotal−

51,350−51,350¥ー

Corporate bonds¥ー(Note 1) Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions

3) Securities and investment securities
The fair value of stocks is based on quoted market prices. The fair value of debt securities is based on either quoted prices or prices provided by the financial institutions
making markets in those securities. For information on securities classified by holding purpose, please refer to “Securities” of “Notes to Consolidated Financial Statements.”

¥ー
2,294

¥ー
2,300

¥ー
5

ー

ー

ー

2,300

5

Other

–
12,199––12,192
–

–
(6)
–

–
8,504
–

–
8,501
–

–
(2)
–

Subtotal

12,19912,192

(6)

8,504

8,501

(2)

¥ 14,493¥ 14,496¥2¥ 10,798¥ 10,801¥2

Securities whose carrying value exceeded their fair value
Government bonds
Corporate bonds(Millions of yen)

2011

2012

Carrying value

Acquisition cost

Difference

Carrying value

Acquisition cost

Difference

Other¥ 8,477––¥ 5,224––¥ 3,253––¥ 11,881––¥ 8,020––¥ 3,861––

Subtotal

8,477

5,224

3,253

11,881

8,020

3,861

3,023
–
188

3,480
–
189

(457)
–
(1)

745
499
–

804
505
–

(58)
(5)
–

Securities whose carrying value exceeded
their acquisition cost
Stock
Bonds

Securities whose acquisition cost exceeded
their carrying value
Stock

3,211

3,670

(459)

1,245

1,309

(63)

¥ 11,689¥ 8,894¥ 2,794¥ 13,127¥ 9,329¥ 3,797

Gross realized loss on sales

¥ 623
–
–

¥1
–
–

¥ 46
–
187

¥ 25
–
–

¥–
–
1

¥ 623

¥1

¥ 234

¥ 25

¥1

2012

Other

¥ 2,120

Total¥ 1,0352012
Due after
ten years¥ー

Due within
one year¥ 31,090

Due after one year
through five years¥ー

Due after five years
through ten years¥ー

Due after
ten years¥ー

58,276ーーー

65,375−−−

13,998ー

400

94

10,294

−

504

−

ー

ー

ー

ー

−

201

298

−

¥ 103,401

¥ー

¥400

¥94

¥ 106,759

¥ 201

¥ 803

¥ー

Proceeds from sales Gross realized gain on sales Gross realized loss on sales

Gross realized gain on sales

2011

2011

2012

Proceeds from sales¥ 2,139

Bonds(Millions of yen)2011
¥ 1,035––

Stock(Millions of yen)

SANKI REPORT 2012

¥ー
9

2,294

Type

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are not included in“Assets: 3) Securities and investment securities” of the above table.
(Note 3) Redemption schedule for receivables and securities with maturities

68

¥ー
2,303

4) Information regarding sales of securities classified as other securities:

Carrying Value

Total

¥ー
2,294

9

Total

(Millions of yen)

¥ 31,126

DifferenceーSubtotal(Note 2) Carrying value of financial instruments for which it is extremely difficult to determine the fair value.

Cash and time deposits
Trade notes andaccounts receivable on completed
construction contracts
Securities and investment securities:
Held-to-maturity securities(corporate bonds)
Othersecurities with maturitydate(corporate bonds)

Fair value

ー

Other

Derivatives:
Please refer to “Derivatives” of “Notes to Consolidated Financial Statements.”

Due after one year Due after five years
through five years through ten years¥ー¥ー

Carrying value

2,303

Bonds

Liabilities:
Trade notes and accounts payable on construction contracts
Since these payables are settled in a short period of time, their carrying value approximates the fair value.

Due within
one yearDifference3) Other securities

2) Trade notes and accounts receivable on completed construction contracts
The fair value of these receivables is based on the present value of the receivables categorized by age, discounted by a discount rate that reflects theremaining term and the credit risk. It was determined that, as of March 31, 2012, the fair value of these receivables was almost equal to their carrying value.

Unlisted stocks

Fair value

ー

Type

Type

Carrying value

2,294

Total

Assets:1) Cash and time deposits
Since all the deposits are short-term, their carrying value approximates the fair value.

2012(Note) “Securities classified as other securities” presented above include securities for which it is extremely difficult to determine the fair value.

5) Impairment loss on securities
An impairment loss on other securities of ¥121 million (marketable other securities of ¥101 million and other securities for which it is extremely difficult todetermine the fair value of ¥19 million) was recorded for the year ended March 31, 2011, and an impairment loss on investment securities of ¥427 million(marketable other securities of ¥404 million and equity securities of unconsolidated subsidiaries of ¥23 million) was recorded for the year ended March 31, 2012.
For marketable other securities, if the fair value of each security has declined by more than 30% from the acquisition cost, the Company and its consolidated
subsidiaries recognize an impairment loss after considering the potential recoverability. For other securities for which it is extremely difficult to determine the fairvalue, if the net assets per share of each security based on the issuer’s most recent financial statements available has declined by more than 50% from theacquisition cost, the Company and its consolidated subsidiaries recognize an impairment loss after considering the potential recoverability.

SANKI REPORT 201269

Derivatives
1) Derivative transactions, to which hedge accounting is not applied
Not applicable both for the years ended March 31, 2011 and 2012

The retirement benefit obligation for each consolidated subsidiary is stated at the amount which would be required to be paid if all employees covered by
the plans voluntarily terminated their employment at March 31, 2011 and 2012.

2) Derivative transactions, to which hedge accounting is applied

Effects of the transition of the tax-qualified pension plan to the defined contribution pension plan for the year ended March 31, 2011 were as follows:

1.Currency-related transactions

Decrease in retirement benefit obligation¥ 6,974[For the year ended March 31, 2011]

Decrease in plan assets at fair value(4,319)(Millions of yen)

(Millions of yen)

Hedge accounting method

Type of derivatives

Notional amounts(total)(over one year)

Major hedged items

Fair
value

Principle method

Forward exchange contracts
Buy: U.S.Dollars

Investment securities

¥ 158

–

¥7

Assigning method for forward exchange
contracts

Forward exchange contracts
Sell: U.S.Dollars

Trade notes and accounts receivable oncompleted construction contracts

1,111

–

(*)

*Since the fair values of forward exchange contracts to which the assigning method was applied were treated as part of the hedged trade notes andaccounts receivable on completed construction contracts, their fair values were included in those notes and accounts receivables.

(456)

Decrease in assets in trust for employees’ retirement benefit(867)

Decrease in unrecognized actuarial loss

¥ 1,330

Decrease in accrued employees’ retirement benefits

The amount of assets to be transferred to the defined contribution plan was¥380 million, which was planned to be transferred in 4 years. The untransferredassets of ¥151 million at March 31, 2012 are included in “Other current
liabilities” and “Other non-current liabilities.”

3) The components of retirement benefit expenses for the years ended March 31, 2011 and 2012 are outlined as follows:(Millions of yen)

(Note) Fair value was estimated based on the price information provided by the financial institutions.
[For the year ended March 31, 2012](Millions of yen)
Notional amounts(total)(over one year)

Hedge accounting method

Type of derivatives

Major hedged items

Assigning method for forward exchange
contracts

Forward exchange contracts

Trade notes and accounts receivable oncompleted construction contracts

¥ 336

–

Fair
value

(*)

*Since the fair values of forward exchange contracts to which the assigning method was applied were treated as part of the hedged trade notes andaccounts receivable on completed construction contracts, their fair values were included in those notes and accounts receivables.

Other *3

2011
¥ 921
678
(403)
427
(202)
1,421
(39)
37

2012
¥ 908
491
(330)
483
(202)
1,350
–
90

Total

¥ 1,419¥ 1,441

Service cost *2
Interest cost
Expected return on plan assets
Amortization of unrecognized actuarial loss
Amortization of unrecognized prior service cost
Total retirement benefit expenses
Gain on transition to the defined contribution plan

*1: In addition to the amount presented above, additional retirement benefits of¥22 million and ¥21 million were paid for the years ended March 31, 2011
and 2012, respectively. These expenses have been included in cost of sales,and selling, general and administrative expenses.
*2: The consolidated subsidiaries’ retirement benefit expenses have been
included in the service cost.
*3: “Other” shows the amount contributed to the defined contribution plan.

(Note) Fair value was estimated based on the price information provided by the financial institutions.
4) The assumptions used in accounting for retirement benefits were as follows:

2.Interest-related transactions
Not applicable both for the years ended March 31, 2011 and 2012

Discount rate
Expected rate of return on plan assets

Retirement Benefits
1) Summary of retirement benefit plans for employees
The Company and its consolidated subsidiaries including foreign consolidated subsiteiaries have set up a lump-sum payment plan as a defined benefit
plan. The Company also has a defined-benefit corporate pension plan and a defined contribution pension plan. The Company has established an
employees’ retirement benefit trust. The Company and its consolidated subsidiaries may pay additional retirement benefits under certain circumstances.
The Company has amended a part of its retirement benefit plans and transferred the tax-qualified pension plan to the defined contribution pension plan on
October 1, 2010.

2011
2.0%
2.0%

2012
2.0%
2.0%

The retirement benefit obligation has been attributed to each year by the straight-line method over the estimated years of service of the eligible employees.
Unrecognized prior service cost is amortized by the straight-line method over a period (10 years) within the average remaining years of service of the eligible
employees.
Unrecognized actuarial gain or loss is amortized commencing the year following the year in which the gain or loss is recognized by the straight-line method
over a period (10 years) within the average remaining years of service of the eligible employees.

2) The following table sets forth the funded and accrued status of the plans, and the amounts recognized in the consolidated balance sheets at March 31,
2011 and 2012 for the Company’s and its consolidated subsidiaries’ defined benefit plans:(Millions of yen)

2011

Assets in trust for employees’ retirement benefit

7,094

Unfunded retirement benefit obligation(6,033)2012¥ (23,858)
11,838
7,102(4,917)

Unrecognized actuarial loss

5,740

4,912

Unrecognized prior service cost
Amounts recognized in the consolidated balance sheets, net(838)(1,131)

(636)
(642)
7,646
¥ (8,288)

Retirement benefit obligation
Plan assets at fair value

Prepaid pension costAccrued employees’ retirement benefits

70

SANKI REPORT 2012

¥ (24,882)
11,754

8,065¥ (9,197)

SANKI REPORT 201271

Tax-effect Accounting

Investment and Rental Properties

1) The significant components of deferred tax assets and liabilities at March 31, 2011 and 2012 were as follows:(Millions of yen)

2011

2012

¥ 270
880
295
91
6,376
236
638
222
110
98
262

¥ 399
731
179
189
5,464
225
610
190

1. Deferred tax assets
Allowance for doubtful receivables
Accrued bonuses
Accrued compensation for completed construction contracts
Accrual for loss on construction contracts in progress
Accrued employees’ retirement benefits
Accrued retirement benefits to directors and corporate auditors
Loss on devaluation of investment securities
Loss on devaluation of utility rights
Loss on construction contracts under percentage-of-completion method
Impairment loss
Headquarters relocation expense
Tax loss carryforward
Other
Subtotal
Valuation allowance for deferred tax assets
Total deferred tax assets

933
10,416(1,357)
9,059

274
775
9,040
(1,448)7,591

2. Deferred tax liabilities
Gain on valuation of securities contributed to employees’ retirement benefit trust
Deferred capital gains for tax purposes
Gain on revaluation of investment securities
Net unrealized holding gain on other securities
Other
Total deferred tax liabilities
Net deferred tax assets (liabilities)(5,001)(1,060)(1,678)(1,053)(11)(8,805)¥ 254(4,380)(910)(1,470)(1,258)(114)(8,134)¥ (542)−−−−The Company owns research facilities, commercial facilities and housing for rent in Kanagawa Prefecture and other areas. Profit from renting thosereal-estate properties was ¥2,597 million and ¥1,392 million for the years ended March 31, 2011 and 2012, respectively. Rental revenues were recorded
as sales - real estate and other, and rental expenses as cost of sales - real estate and other.
Carrying value on the consolidated balance sheets and corresponding fair value of those rental real-estate properties for the years ended March 31,
2011 and 2012 were as follows:(Millions of yen)
Carrying value
At beginning of the year
Net change during the year
At end of the year
Fair value at end of the year

2011

2012

¥ 12,413(769)
11,644¥ 26,154¥ 11,644(656)
10,987¥ 24,902

Notes:
1) The carrying value represents the acquisition cost less accumulated depreciation.
2) Decrease in the carrying value included in the net change during the year was mainly due to depreciation of ¥781 million and ¥749 million for the years
ended March 31, 2011 and 2012, respectively.
3) The fair value is estimated for major rental properties based on the appraisal value obtained from outside real-estate appraisers with reasonableadjustments for timing and for the other rental properties based on the assessed value for fixed-asset taxes.

Segment Information(Segment Information )2) The reconciliations of the significant difference between the statutory tax rate and the effective tax rates reflected in the consolidated statements ofincome and comprehensive income for the years ended March 31, 2011 and 2012 are presented as follows:(Millions of yen)

2011
Statutory tax rate
Items permanently not deductible for tax purposes
Items permanently not taxable
Inhabitants' per capita taxes
Amortization of goodwill
Valuation allowance
Effect of revision of tax return
Effect of changes in effective statutory tax rate
Equity in losses of affiliates
Research and development tax credit
Other
Effective tax rates

40.7 %
4.8
(2.9)
2.8
0.8
(0.5)
0.2
–
0.4
(2.1)
(0.4)
43.8 %

2012
40.7 %
10.7
(6.0)
6.3
1.8
15.3
11.1
(2.8)
11.8
−

0.4
89.3 %

3) The “Act for Partial Revision of the Income Tax Act etc. for the Purpose of Creating Taxation System Responding to Changes in Economic and Social
Structures” (Act No.114 of 2011) and the “Act for Special Measures for Securing Financial Resources Necessary to Implement Measures for Reconstruction
following the Great East Japan Earthquake” (Act No.117 of 2011) were promulgated on December 2, 2011 and the staged reduction of the national corporate
tax rate and a special reconstruction corporate tax will apply to corporate taxes effective for fiscal years beginning on or after April 1, 2012.

1. Outline of reportable segments
The reportable segments of the Group are components for which discrete financial information is available and whose operating results are regularly
reviewed by the Executive Committee to make decisions on resource allocation and to assess performance.
The Group's business divisions are based on the activities of the Company. The six consolidated subsidiaries of the Company conduct their respective
business operations in cooperation with the relevant business divisions of the parent.
Thus, the Group consists of the segments based on the Company’s business divisions. It has four reportable segments: “Facilities construction” offers
general facilities construction services, “Machinery systems” offers services of industrial facilities such as FA systems, logistics systems and conveyor
equipment, “Environmental systems” offers services of environmental sanitation equipment such as equipment for cleaning sewers, and “Real estate”
offers services of rental and administration of real estate.
2. Calculation method for sales, profits or losses and other items by reportable segment
Accounting policies of the segments are substantially the same as those described in “Basis of Preparation of Consolidated Financial Statements.”
Segment performance is evaluated based on ordinary income or loss. Intersegment sales and transfers are recorded at the same prices used intransactions with third parties.
Segment assets and liabilities are not disclosed because they are not reviewed to make decisions on resource allocation or to assess performance.

As a result, the effective statutory tax rate used to measure the Company’s deferred tax assets and liabilities was changed from 40.7% to 38.0% for the
temporary differences and tax loss carryforward expected to be realized or settled in the periods from April 1, 2012 to March 31, 2015 and to 35.6% for
temporary differences and tax loss carryforward expected to be realized or settled for fiscal years beginning on or after April 1, 2015. The effect of theannounced reduction of the effective statutory tax rate was to decrease deferred tax liabilities (net of deferred tax assets) by ¥224 million and deferredincome taxes by ¥46 million as of and for the year ended March 31, 2012 and to increase net unrealized gains on other securities by ¥178 million as ofMarch 31, 2012.

72

SANKI REPORT 2012

SANKI REPORT 201273

3. Sales, profits or losses and other items by reportable segment(Millions of yen)

2011
Reportable segments
Facilities
construction

Machinerysystems

Environmental
systems

Real estate

Total

Adjustments(Note 1)

Consolidated(Note 2)

Sales tothird parties¥ 117,427¥ 9,486¥ 20,706¥ 4,154¥ 151,775¥ 19¥ 151,794

Inter-segment sales
and transfers

129

−

8

−

137

(137)

−

¥ 117,556¥ 9,486¥ 20,714¥4,154¥ 151,913¥ (118)¥ 151,794¥ 1,540¥ (675)¥ 984¥ 2,547¥ 4,396¥ (157)¥ 4,239

Sales :

Total sales
Segment profit (loss)
Other items:
Depreciation

¥ 406

¥ 138

¥ 93

¥ 781

¥ 1,419

¥ 28

−

−

71

−

71

−

71

Interest income

16

0

10

−

26

40

67

Interest expense

48

0

3

−

52

41

93

Equity in earnings(losses) of affiliates

−

−

7

−

7

(42)

(34)

(Millions of yen)2012
Reportable segments
Facilities
construction

Machinerysystems

Environmental
systems

Real estate

Total

Adjustments(Note 1)

Consolidated(Note 2)

Sales tothird parties¥ 114,525¥ 10,816¥ 19,812¥ 2,824¥147,979¥ 15¥ 147,994

Inter-segment sales
and transfers

493

7

12

−

513

(513)

−

¥ 115,019¥ 10,823¥ 19,825¥2,824¥148,493¥ (498)¥ 147,994¥ (561)¥ (187)¥ 879¥ 1,331¥ 1,462¥ 806¥ 2,268

¥ 396

¥ 103

¥ 90

¥ 748

¥ 1,340¥ 27¥ 1,367

Sales :

Segment profit (loss)

3. Major customer information
Disclosure of major customer information has been omitted because the sales to any specific customers of third parties did not account for over 10% of thesales in the consolidated statements of income and comprehensive income.
(Information about impairment losses on tangible fixed assets by reportable segment)[For the year ended March 31, 2011](Millions of yen)
Machinerysystems¥ −Facilities construction¥ 1,448

Amortization of
goodwill

Total sales(2) Tangible fixed assets
Disclosure of tangible fixed assets information has been omitted because the tangible fixed assets located in Japan accounted for over 90% of the tangible
fixed assets in the consolidated balance sheets.

Impairment loss

¥ 15

Environmental
systems¥ −Real estate

Total

¥ −

¥ 15

Adjustments(Note)¥ 374

Consolidated¥ 389(Note)
Adjustments of ¥374 million were impairment loss in connection with headquarters relocation of ¥224 million and impairment loss on welfare facilities to be
sold of ¥149 million.
The impairment loss in connection with headquarters relocation was included in headquarters relocation expense in special losses.
[For the year ended March 31, 2012]
Not applicable(Information about amortization and balance of goodwill by reportable segment)[For the year ended March 31, 2011]

Amortization for the year
Balance of goodwill at end of the year

(Millions of yen)
Facilities
construction

Machinerysystems

Environmental
systems

Real estate

Total

Adjustments

Consolidated

¥−
¥−

¥−
¥−

¥ 71
¥ 71

¥−
¥−

¥ 71
¥ 71

¥−
¥−

¥ 71
¥ 71

Facilities
construction

Machinerysystems

Environmental
systems

Real estate

Total

Adjustments

Consolidated

¥−
¥−

¥−
¥−

¥ 71
¥−

¥−
¥−

¥ 71
¥−

¥−
¥−

¥ 71
¥−

Other items:
Depreciation
Amortization of
goodwill

−

−

71

−

71

−

71

Interest income

15

0

6

−

22

49

71

Interest expense

50

0

3

−

54

30

85

Equity in earnings(losses) of affiliates

−

−

4

−

4

(484)

(480)

(Note 1)
Adjustments for segment profit or loss of ¥157 million for the year ended March 31, 2011 included corporate general losses of ¥578 million which were not allocableto the reportable segments such as adjustments for expenditures for construction contracts in progress, and reversal of interest expenses of ¥421 million which had
been allocated to each of the reportable segments for administrative purpose.
Adjustments for segment profit or loss of ¥806 million for the year ended March 31, 2012 included corporate general profits of ¥411 million which were not allocableto the reportable segments such as interest income and dividend income, and reversal of interest expenses of ¥395 million which had been allocated to each of thereportable segments for administrative purpose.
(Note 2)
Segment profit was adjusted to be equal to ordinary income in the consolidated financial statements.

[For the year ended March 31, 2012]

Amortization for the year
Balance of goodwill at end of the year

(Information about gain on negative goodwill by reportable segment)[For the years ended March 31, 2011 and 2012]
Not applicable

Per Share Data
2011

2012

Net assets per share¥ 1,115.41¥ 1,113.70

Net income per share¥ 29.67¥ 2.46

Although there was the dilutive potential, disclosure of diluted net income per share was omitted because it had no dilutive effect.
Basis for the calculation of net income per share for the years ended March 31, 2011 and 2012 is summarized as follows:(Other Information)[For the years ended March 31, 2011 and 2012]

Net income

1. Product and service information
Disclosure of product and service information has been omitted because similar information was disclosed in “Segment information.”
2. Geographical information(1) Sales
Disclosure of geographical sales information has been omitted because the sales to third parties of the Japan operation accounted for over 90% of the sales
in the consolidated statements of income and comprehensive income.

Net income attributable to common stock

74

SANKI REPORT 2012

(Millions of yen)Amount not attributable to shareholders of common stock

Average number of shares of common stock outstanding
Outline of dilutive potential which was not included in calculation ofdiluted net income per share due tonon-dilutive effect(Millions of yen)

2011

2012

¥ 2,124

¥ 176

–

–

¥ 2,124¥ 176

71,601 thousand shares

71,530 thousand shares
Stock subscription rights:
782 rights

Stock subscription rights: 782 rights(Note)
Since the exercise period of the stock subscription
rights expired on July 25, 2011, all the rights havebeen forfeited as of March 31, 2012.

SANKI REPORT 201275

Independent Auditor's Report

Corporate information and share information
As of March 31, 2012

Corporate information
Company name

SANKI ENGINEERING CO., LTD.

Company name in English

SANKI ENGINEERING CO., LTD.

Date of establishment

April 22, 1925

Stated capital

8,105.18 million yen

Representative

Takuichi Kajiura, President (as of April 27, 2012)

Principal lines of business

Facilities construction, plant systems, real estate

Number of employees

Consolidated: 2,289 Non-consolidated: 1,965

Offices

Regional office: 3 Branch: 15 Laboratory: 1

Head office8-1, Akashicho, Chuo-ku, Tokyo

Share information
Fiscal year

April 1 to March 31of the following year

Annual general meeting ofshareholders

Ownership statistics
Treasury stock 1
2,931 thousand shares (3.94%)

Late June

Trading unit

1,000 shares

Number of shares authorized

192,945,000 shares

Number of shares issued

74,461,156 shares

Number of shareholders

4,015

Transfer agent
Sumitomo Mitsui Trust Bank, Limited
1-4-1, Marunouchi, Chiyoda-ku, Tokyo
Stock exchange listing

Tokyo Stock Exchange

Securities code

1961

Individuals and other 3,676
13,925 thousand shares(18.70%)Financial institutions 45
36,159 thousand share(48.56%)

Foreign corporations
and other 120
15,797 thousand shares(21.21%)Other corporations 141
5,269 thousand shares(7.08%)

Securities companies 32
380 thousand shares(0.51%)

Major shareholders
株主名

Number of shares held (thousand shares)

Shareholding ratio (%)

Mitsui Life Insurance Company Limited.

7,000

9.79

Nippon Life Insurance Company

6,078

8.50

Meiji Yasuda Life Insurance Company

6,000

8.39

Japan Trustee Services Bank, Ltd. (Trust account)

2,816

3.94

Sanki Kyoueikai

2,571

3.59

Japan Trustee Services Bank, Ltd. (Trust account 9)

2,442

3.41

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

2,419

3.38

CBNY DFA International Cap Value Portfolio

1,508

2.11

Sanki Engineering employee shareholders’ association

1,159

1.62

Northern Trust Company AVFC RE
Northern Trust Guernsey Irish Clients

1,105

1.54

※Although the company holds 2,931 thousand shares of treasury stock, the company is excluded from the major shareholders listed above.

Shareholding ratio is calculated excluding treasury stock.

76

SANKI REPORT 2012

SANKI REPORT 201277