ANNUALREPORT

2003
Fiscal Year Ended March 31, 2003

COMSYS—For Excellence in Telecommunications

Profile

Consolidated Financial Highlights

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

Nippon COMSYS Corporation and Consolidated Subsidiaries
Years ended 31st March, 2002 and 2003

Thousands of
U.S. dollars

Millions of yen

Contract backlog at beginning of the year

2002

2003

2003

Change(%)¥ 80,461¥ 64,288$ 534,842–20.1%

Contract backlog at beginning of the year
1,192

—

—

New orders received during the year

adjusted for newly consolidated subsidiaries

213,986

199,495

1,659,692–6.8%

Net sales

231,351

200,610

1,668,968–13.3%

Contract backlog at end of the year

64,28863,173

525,566

–1.7%

4,107

¥ 2,468

20,532–39.9%

Total assets

190,576

166,528

1,385,424–12.6%

Shareholders’ equity

111,919

111,724

929,484–0.2%

Net income

¥

$

Yen

Contents—

U.S. dollars

Per share:
Consolidated Financial Highlights ............................................................................................................. 1

Net income— Basic

Letter to Our Shareholders ........................................................................................................................ 2
Interview with Hirofumi Shimada,
New President of Nippon COMSYS Corporation—Becoming a “comprehensive engineering services firm” in the era of IT innovation— ............................ 430.29¥ 18.340.15–39.7%— Diluted

¥

29.01

—

$

—

—

Cash dividends

10.00

12.00

0.10

20.0%

Note: 1. For convenience only, the accompanying Japanese yen figures for 2003 have been translated into U.S. dollars at the rate of ¥120.20 to $1, the rate prevailing on 31st March, 2003.
2. Net income per share for the year ended 31st March, 2002 have been adjusted to conform with the method required by the GAAP of Japan for computing these figures for the year ended
31st March, 2003.

Corporate Citizenship ................................................................................................................................ 8
Review of Operations ................................................................................................................................ 9
NTT Construction ....................................................................................................................... 10
Domestic Construction and Engineering ..................................................................................... 12International Operations ............................................................................................................. 14
Information Systems ................................................................................................................... 16
Research & Development ........................................................................................................... 18

Net Sales(¥ Billions)

Net Income(¥ Billions)

New Orders Received(¥ Billions)Management ........................................................................................................................................... 20
Financial Section ..................................................................................................................................... 21
Organization Chart ................................................................................................................................... 37
Corporate Information ............................................................................................................................. 38
Corporate Directory ........................................................................................................ Inside Back Cover

250

10

250

200

8

200

150

6

150

100

4

100

2

50

0

99

00

01

02

50

03
0

99

00

01

02

03
0

99

00

01

02

03

Nippon COMSYS Corporation - Annual Report 2003

1

Letter to Our Shareholders

B

Business Environment
During the fiscal year ended March 31, 2003, an increase in exports
driven by the US economy and an improvement in corporate profits
brought about by restructuring gave rise to a temporary upturn in theJapanese economy. Overall, however, the recovery was weak, as thecontinuing slump in personal consumption caused by persistently highunemployment negatively impacted the economic climate. The increased sense of uncertainty stemming from the unstable internationalsituation and a worldwide slump in stock prices, among other factors,
suggest that, in the immediate future, the business environment willgrow even more difficult.
In the telecommunications industry where COMSYS does business, however, there were several positive developments. This fiscal
year marked the middle phase of the Japanese government’s e-Japan
Strategy, which is being implemented with the goal of making Japan the world leader in information
technology. This term also saw
growth in ADSL services andInternet Protocol (IP) networks andthe rapid spread of new services,
including third-generation mobile
phones and wireless local area
network (LAN) services. Despite
these favorable trends, competition in the telecommunications
market is becoming more intense,
and telecommunications firms areengaged in a battle for survival.

B

Business Results
Given this state of affairs, COMSYS
Hironobu Takeuchi
has responded to the sweeping reChairman
forms taking place in the telecommunications market by integrating and expanding strategic head officedivisions, and reinforcing organizational functions in existing sales andmarketing divisions and construction engineering division.
The Company’s IT Business Division, which was establishedin preparation for the important roles that the IP and solutions businesses will assume for the Company in the not-too-distant future, iscommitted to expanding its total solutions initiatives, building on expertise in applications technology and strong performance in communications equipment related projects. The division has produced
successful results, as illustrated by orders received from a number of
local authorities for large projects involving the establishment of wide
area networks (WAN). In the maintenance business, the addition of
new surveillance and security diagnosis services has resulted in a transformation from a service focused on fault repair to a comprehensive
network management service offering constant monitoring, fault iden-

2

Nippon COMSYS Corporation - Annual Report 2003

tification, analysis and isolation, and onsite repair of customer networks. In the terminal business, as well, the Company has strengthened efforts in the area of its core competencies, such as the “LANConvenience Store” service.
Despite these successes, however, restrained capital investments by telecommunications companies such as those of the NTT
Group, a re-evaluation of public-sector investment as a result of thegovernment’s economic structural reforms, and the effect of generalcutbacks in IT investment resulted in a 6.8% year-on-year decline inorders received to ¥199.5 billion. Net sales fell 13.3% year-on-year to¥200.6 billion, due to the slump in orders.
The Company took various actions to improve profitability, including reducing labor costs by introducing a regional wage structurereflecting actual competitive conditions, achieving personnel reductions by offering temporary assistance for employees seeking other
employment, transferring Company employees to affiliates, andthe reduced use of temporary employees. The Company also cut
subcontracting expenses bystrengthening the structure of its
subsidiaries and materials costs
through detailed implementation of centralized purchasing. The
decline in sales and a decline in
the unit value of orders caused byincreased competition for orders,
however, led to a substantial decline in operating income of 38.2%
year-on-year to ¥6.5 billion. Net income also fell 39.9% to ¥2,468
Hirofumi Shimada
million, despite a gain on reversal
Presidentof the prior service cost of the employee pension fund of ¥1,598 million resulting from a lowering of scheduled interest rates for the pension fund and levels of entitlement. The
gain was not enough to offset a special charge of ¥1,234 million arising from temporary measures relating to employees’ retirement benefits for the assistance for employees seeking other employment, aloss on liquidation of subsidiaries and affiliates of ¥490 million arisingfrom the reorganization of affiliates, and other expenses, which totaled¥2,800 million.
Concerning cash dividends to shareholders, COMSYS maintains the basic policy of redistributing profits by taking payout ratios
into account and linking returns more directly with business results,
while ensuring sufficient internal reserves for reinvestment. Based on
this policy, COMSYS declared a year-end dividend of ¥7 per share(ordinary dividend of ¥5 and special dividend of ¥2), resulting in a total
dividend of ¥12 per share for this fiscal year. The special dividend isbeing paid because there will be no retirement of treasury stocks in thenext fiscal year, a practice the Company has followed in recent years
under its policy of returning profits to shareholders, due to the scheduled business merger between the Company, Sanwa ELEC Co. Ltd.,and TOSYS Corporation.
Outlook for the Next Term
In the telecommunications market, the Company’s sphere of business,
restraint in capital investments by the NTT Group and other telecommunications companies added to the long-term stagnation of the Japanese economy, making the environment in which the Company operates
extremely challenging. Looking ahead, however, measures such as thegovernment’s e-Japan Strategy have brought about a demonstrable increase in the use of IP broadband. Currently, the rapid growth of broadband is mainly through ADSL, but intense competition in FTTH is forecast,largely between the NTT Group and actors connected to electric powercompanies. Last year, the NTT Group launched its “Hikari—Vision for a
New Century” under the theme “Broadband leads to the world of resonant communication,” displaying a strong desire to take the lead in the“optical” age. In the mobile communications sector, as well, there arehuge hopes for third generation mobile phones, yielding an optimistic
outlook for this market.
Given circumstances like these, COMSYS is working to ensure that it is ready to provide comprehensive engineering services inthis new era of IT innovation, the Company is making the most of thetechnologies and expertise it has accumulated over the years as aproject-based construction business to establish a structure for providing comprehensive services to customers—ranging from IT consulting to design, supply of machinery and equipment, constructionengineering, and maintenance. Although it remains extremely difficult
to predict the future, the realization of an IT society in the near future isa certainty. COMSYS is determined to play an active role in IT related
markets as a comprehensive engineering services firm, providing customers with total solutions for the era of IT innovation.
In light of this situation, and in response to the rapid changes inthe telecommunications market, COMSYS has formulated a “New Medium-Term Management Plan”—a three-year plan that will be implemented during fiscal 2003 (fiscal year ending March 31, 2004) in order to
execute needed reforms and make clear progress in the strategic direction set by the Company. This medium-term management plan will enhance the Company’s business spheres, organization, structure,marketing, and cost competitiveness, clarify its operational strategies ina wide range of areas, including the retention of skilled personnel andGroup operations, and ensure that these strategies are reliably executed.
It is with the approval of our shareholders and of the relevant
government organizations that COMSYS has agreed in principle toestablish a joint holding company through the transfer of shares in
September 2003 between COMSYS and Sanwa ELEC Co. Ltd., and
TOSYS Corporation. A flexible, yet robust business structure will beObuilt on the basis of this joint holding company, with the target of becoming the leading firm in the industry, which in its role as a comprehensive engineering services firm will respond swiftly to rapid changes
in the environment and to fierce competition for orders within the telecommunications project industry, electrical project industry and the IT
related business sector.
In this way, we will work proactively as we aim to undertake innovations, retain orders and sales, and strive to reach our income targets.
After the annual shareholders’ meeting of June 27, 2002, the
COMSYS Board of Directors resolved to change COMSYS’s representative directors, as follows. Hironobu Takeuchi, president, was appointed as new chairman, and Hirofumi Shimada, senior executive vicepresident, as new president.
On behalf of the members of the Board, we would like to extend our sincere appreciation to our valued shareholders, customers,
business partners and employees around the world for their support.
June 27, 2003

Hironobu Takeuchi
Chairman and Representative Director

Hirofumi Shimada
President and Representative Director

Nippon COMSYS Corporation - Annual Report 2003

3

Interview with Hirofumi Shimada,
New President of Nippon COMSYS Corporation— Becoming a “comprehensive engineering services firm” in the era of IT innovation —In light of your recent appointment as the new president of Nippon COMSYS,
what sort of plans do you have for the Company, and what are your aspirations?

In taking over the reins of the Company from Chairman Takeuchi, theformer president, I take it as an honor to be responsible to our shareholders, customers, and employees.
Amid the deflationary Japanese economy we are now experiencing, markets are shrinking and companies are doing everything they
possibly can to retain their competitiveness in a severe business environment. In the world of telecommunications, the move into IP andbroadband is in full swing. As a result of advances in the openness of
networks, the networks (operators) nolonger control demand; it is the end
users who are now in a position to select which networks they want. Although there has been a deteriorationin the performance of the IT industry,largely related to hardware such as
semiconductors, personal computers
and the like, the IT service market, whichcenters on software, is showing healthy
growth. Indeed, a paradigm shift is on
the verge of taking place, and we believe that we must constantly, and progressively, endeavor to be one stepahead of the times.
The telecommunications projects industry will not survive unless it changes in response to these changing times. Advances in computer and network technologies have brought with them the IT era,and it is our belief that information technology is capable of bringing
about a total reform of management styles, not only mere operational
reforms. This is why we can also call today the era of the solutions
business. In the future, orders for telecommunications projects will cometo be placed as one part of a solution. In order to receive an order as
the principal contractor, COMSYS will have to provide a solution thatinvolves all aspects—ranging from IT consulting to design, supply, con-

Eleven Years of Growth(¥ Billions)

250

200

150

100

50

Net Sales
Total Assets
Shareholders’ Equity
Operating Income

4

0

3
02 0
0 01
0
9
98 9
6 97
95 9
4
9
3
92 9

Nippon COMSYS Corporation - Annual Report 2003

struction, management and maintenance. This is the reason why ourCompany has to make this paradigm shift.
Each of us at COMSYS must also change in order to makethis paradigm shift. Ironically, I believe that perhaps the largest obstacle preventing us from doing so is our previous successes. We must
break away from the concept that “We are successful; our performance
is not very good now because the situation is not very good.” Nothing
will come of this concept. I believe that changing the shape of theCompany will also play a huge part inbeing able to go above and beyond ourprevious successes. Also, we no longer
live in an age when we can do everything on our own.
It is in this context that thethree companies, each with its own
unique characteristics (COMSYS,
Sanwa ELEC Co. Ltd., and TOSYS
Corporation) are merging our operations so that together we may lookahead to further growth as we adapt
swiftly to the challenges of today’s
business environment.
I would like to take a moment here to address the arrest ofan employee at our Kyushu office—who was dismissed from thecompany after the arrest—on bribery charges in connection withbidding for a construction project, and the accompanying 30-day
freeze on business in the Kyushu and Okinawa regions imposed on
the Company in May 2003 by the Ministry of Land, Infrastructure
and Transport. I would like to extend my sincere apologies to ourshareholders for the concern this incident must have caused. I will
work with the entire company to ensure that this type of incident
never happens again, and will also make sure that our compliancestructure is further strengthened.

Please tell me about the recently formulated New Medium-Term Management Plan to begin
during the fiscal year ending March 31, 2004.

We live in an age when we don’t know what lies ahead. Because it is atime when we are required to respond to change, and with great speed,
we have adapted the conventional five-year plan to a three-year plan.
The seriousness of the deflation in the Japanese economy isintensifying, and for the time being we continue to face a situation inwhich there are no prospects of an economic recovery. Despite this,however, it is my belief that the telecommunications market is a dynamic market and one in which there is plenty of unfulfilled potential.
More specifically, there is potential for:(1) increased use of information technology in public and social systems arising from the government’s e-Japan
Strategy; (2) establishment of a connection environment resulting from the“Hikari—Vision for a New Century”
three-year plan of the NTT Group inwhich “optical” or “photonic” connection becomes the norm; (3) the widespread adoption in the mobile
communications field of next-generation mobile phones and wireless LAN;and (4) the establishment of a ubiquitous communications environment in enterprise networks by meansof broadband and the rapid adoption of IP networks such as “IP-VPN(virtual private network)”, “wide area networks” and “IP telephones.”
In this way, a paradigm shift is taking place within the telecommunications market, and our response to this is a most pressing
issue. It is for this reason that we have formulated a new medium-

Medium-Term Management Plan

Sources of Construction
Contracts
Corporate Governance:
Basic Approach and Status of Implementation
Amid demands for transparent management and enhanced corporate governance,
COMSYS recognizes that developing and maintaining an organizational structure andcrisis management system capable of responding swiftly to the rapidly changing business environment is a critical management issue. To this end, in an effort to strengthen
its compliance system, COMSYS established a Compliance Promotion Office in October 2002, held regular meetings of the Compliance Committee, and prepared a new,easily understandable Compliance Manual. The Company also provided training to its
entire staff in order to improve each and every employee’s awareness of the importance of compliance.
Additionally, the COMSYS Group Management Committee met regularly
with a view to improving management and enhancing business performance at all
COMSYS Group companies, and the Group Companies’ Presidents Meeting and Affiliated Companies’ Business Plan Meeting both convened twice during the year inan effort to enhance corporate governance.

term management plan by adapting the conventional five-year plan
to a three-year plan. That is to say, the general market itself, in the
future, will be the IT market, and construction work will arise fromwithin the parameters of solutions work. Consequently, it is necessary to shift the mainstay of the Company’s business, which has
tended in the past to focus on the business of building infrastructure,
to a solutions-oriented business that incorporates all aspects of the
field—from telecommunication network consulting to design, management and maintenance. This is the
key to becoming a comprehensive engineering services firm. The goals contained in this plan are as follows:
1. Aim for growth that exceeds market levels so that within the threeyear period, the IT business willgrow to make up more than 40%
of our total sales;
2. Undertake business restructuring
and improve the Company’s organization in order to retain orders
and reduce costs;
3. Train and retain skilled personnel
and implement human resource management with a focus on
younger people that selects and appoints people with appropriate skills to appropriate positions;4. Establish COMSYS branded products;
5. Promote M&A and alliances as a means of complementing ourtechnological capabilities.

Vision for Corporate Structure
While maintaining our existing core business as a comprehensive engineering services firm, we are undertaking aparadigm shift to transform ourselves into a comprehensive engineering services firm. This will enable us to better
serve our customers with the products and services that they need by allowing us to coordinate all aspects of a
project: consulting, design, execution, testing, management, operation, and maintenance.

63% NTTInfrastructure development projects+
solution projects (network systems security)

37% Non-NTT

IT projects
Circuitry network projects

IP Networks

Application projects

In-home

Networks

Construction

Construction
In-home solutions

Platform
IP projects

Infrastructure development

Consulting, design, execution,
testing, management, monitoring,
maintenance and operation.

SoftwareDevelopment of application
software andsoftware for servers

Nippon COMSYS Corporation - Annual Report 2003

5

COMSYS is planning to merge its operations with Sanwa ELEC Co. Ltd., and TOSYS Corporation. What are yourthoughts on this, including measures taken in response to today’s market, where a paradigm shift is taking place?

Please tell me the reasons why you chose to merge operations througha joint holding company and not a direct merger of companies.

I believe that we ourselves must change in order to respond to themarket’s paradigm shift, and the most important thing here is anawareness among our employees of the new environment. In addition to this, changing the shape of the Company will also bring hugebenefits. I believe that fast-paced management featuring quick decisions on selection and concentration of resources is also important.
It is for these reasons that COMSYS, Sanwa ELEC
Co. Ltd., and TOSYS Corporation have chosen to merge theiroperations. By merging our operations, the customer bases,
regional bases and first-rate technological capabilities of thethree companies will mutually complement each other, marketing capability will be enhanced, and solutions businesses
will be strengthened and expanded. On the basis of an integrated Group business strategy under a joint holding company, we will be able to select and concentrate on optimum
businesses, implement the most efficient allocation of opera-

Merging operations through a
joint holding company is different
from a merger inthat the operatingcompanies retain
their own identities and autonomy,
and a new andsimple joint holding company is established through the transfer ofshares. It is possible for operations to be merged swiftly since there
are no accompanying changes such as those to the labor conditionsof company employees. As an operating company, each subsidiary company works independently to reach their respective operations targets
on the basis of an integrated group business strategy, and this in turntional resources,
and maximize thevalue of the firms
in the Group.
Today, weare about to witness the shift to an
IP/broadband society. As a leading
firm in this industry,
we have no time to waste in becoming a comprehensive engineering services firm befitting the IP/broadband era. Our goal is to become a highly productive company that is the most competitive in
the industry, boasting a robust financial position that meets global
standards, thanks to special management emphasis on consolidated
results and cash flows.

maximizes the value of the group’s firms and maximizes
share values. There are two main advantages gained from merging operations under a joint holding company. These are: (1) markets such as
the customer bases and the regional bases of the three companies thatwill become subsidiaries can be used as they are; and (2) while following
the operations policies of the holding company, the subsidiaries are able
to undertake their own operational reforms independently.
Merging operations by establishing a joint holding company
through the transfer of shares is a new method, and though I havetalked mainly about its advantages, it is not comprised only of advantages. Merging operations through a new method has a component of
trial and error, and the path ahead will be far from easy. However, change
is important in a new era. As a result of this merger, I hope that thedifferent cultures of the three companies will encounter one another,creating a new culture that enables us to become, before long, a firm
befitting the upcoming IP/broadband era.

Please tell me a little more about the aims of the merger ofoperations you have been talking about.

As a result of the economic recession and price competitiveness,
we cannot expect any near-term market growth in the NTT market or in other general markets. The way in which many companies are doing the same kind of work in the same kind of markets
in the same way as they have for years has, I believe, an adverse
effect on efficiency. I also think that expanding the range of one’s
business has its limitations as a response undertaken by a single
company. It is for these reasons that we have decided to merge
our operations.
COMSYS and Sanwa ELEC Co. Ltd., concluded a businessalliance contract in 1999, and since this time we have been complementing each other’s businesses and developing new business.
COMSYS has also been collaborating with TOSYS Corporation, mainlyin the Shin’etsu area, for some time. Because of the different specialist
areas, customer bases and regional bases that the three companies
have, merging our operations will easily produce valuable synergies.
More specifically, COMSYS is engaged in the installation of communications equipment and IT related projects on a nationwide scale largely
in connection with NTT and NTT DoCoMo, while Sanwa ELEC Co.
Ltd., is selectively engaged in general electrical projects and privatesector projects mainly in the greater Tokyo metropolitan area. For its
part, TOSYS Corporation is selectively engaged in NTT projects and6

Nippon COMSYS Corporation - Annual Report 2003

private-sector
projects, mainly in
the Shin’etsu area.
By concentrating the operations resources of
the three companies in each of our
specialist areas,
we will be able tostrengthen competitiveness as a result of the efficient reallocationof operational resources, strengthen marketing as a result of thecomplementarities of the customer bases, regional bases and firstrate technological capabilities of the three companies, andstrengthen and expand our solutions businesses. Also, we can
expect cost reductions by sharing administration between the threecompanies, subsidiaries and affiliates, integrating in-house systems, shifting to outsourcing, joint purchasing of materials, andthe integration and elimination of sales offices and project offices.
Furthermore, the reorganization of subsidiaries and affiliates andthe rationalization of construction works will become possible, producing an enormous synergistic effect.

Outline of
the Holding
Company

Trade Name: COMSYS Holdings Corporation
Establishment: September 29, 2003
Address: 17-1, Higashigotanda 2-chome
Shinagawa-ku, Tokyo 141-8647, Japan
Representative: Hirofumi Shimada, President
Paid-in Capital: ¥10,000 million
Fiscal Year-End: March 31
Net Sales: ¥274,800 million**Net sales are the simple totals of the three companies’
figures for the fiscal year ended March 2003.

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○Outline of
Nippon COMSYS
Corporation(As of March 31, 2003)

Outline of
SANWA ELEC Co., Ltd.
(As of March 31, 2003)

Outline of
TOSYS Corporation(As of March 31, 2003)

Trade Name: Nippon COMSYS Corporation
Establishment: December 20, 1951
Address: 17-1, Higashigotanda 2-chome
Shinagawa-ku, Tokyo 141-8647, Japan
Representative: Hirofumi Shimada, President
Paid-in Capital: ¥31,140 million
Net Sales: ¥200,610 million
Net Income: ¥2,468 million
Trade Name: SANWA ELEC Co., Ltd.
Establishment: September 12, 1947
Address: 6-17, Aobadai 3-chome
Meguro-ku, Tokyo 153-0042, Japan
Representative: Chusei Sonta, President
Paid-in Capital: ¥1,374 million
Net Sales: ¥42,264 million
Net Income: ¥131 million
Trade Name: TOSYS Corporation
Establishment: January 23, 1960
Address: 1108-5, Higashiyama Aza, Watauchi, Wakaho,
Nagano, Nagano 381-0193, Japan
Representative: Joichi Magara, President
Paid-in Capital: ¥360 million
Net Sales: ¥20,530 million
Net Income: ¥193 million

ippon
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SYS Presiden
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President Hir

Nippon COMSYS Corporation - Annual Report 2003

7

Corporate Citizenship

COMSYS is strongly conscious of its duty to the communities in which
it operates. The Company engages in activities that promote environmental awareness, sponsors cultural events, and provides disasterpreparedness training.
In February 2000 COMSYS commenced inspection, analysis,
and evaluation of every corner of the Company from an environmental
perspective. It was necessary to create a new culture in which every
employee became highly conscious of environmental problems, andcommitted to finding solutions. In May 2001, all of COMSYS’s domestic operations received ISO 14001 certification. An Environmental Management System is in effect throughout the Company.
While offering our clients trusted, high-quality services, supported by strong technological capabilities, we are also protecting theenvironment, saving energy, and conserving materials. This not only
strengthens our competitiveness, but supports the development of the
21st century’s high-order, information-intensive society. We firmly believe that this will also help strengthen our business base.
COMSYS is also an active participant in the regional community. The Omiya Ardija soccer team, founded through joint participation by COMSYS, NTT, and 19 other companies closely associatedwith NTT, is active in the J2 soccer league. The Japan Professional
Football League is composed of regional teams, and develops players
at all levels, from youth to professional. Omiya Ardija is intended tosupport and participate in player development, as well as being aclub that all can enjoy. We are pleased and happy to have the opportunity to contribute to the wellbeing of the public in this way.
In another field, training courses for assistants who support
people with visual and hearing challenges using personal computerswere held in April 2003 at the COMSYS IT Plaza, located on the
Kantonaka Branch premises. At the COMSYS IT Plaza, people canexperience ADSL, ISDN and B-Flets, and personal computing classes
are held regularly for members of the local community. Computers
are a powerful communications tool, and a tool for obtaining information for people with visual and hearing challenges. However, the number of these people who make use of the Internet is extremely low
compared to that for people without such challenges. Thus, the Company has planned and held training courses for personal computerassistants for people with visual and hearing challenges, so that as
many people as possible will be able to enjoy the benefits of the IT
society. It is our hope that those who complete the course will take onroles as assistants who support people with these challenges at various public or welfare facilities in the future.
COMSYS is proud to be able to contribute in all of theseways to the culture and society of our host regions. By doing so, we
are able to give something in return to the communities that havemade our existence and growth possible.

Review of Operations

Information Systems
Overseas Construction

7%

1%“Outside“Outside”
Outside” Projects

21%

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

COMSYS supports the J league
soccer team, Omiya Ardija.

Domestic Construction
and Engineering

34%“Inside“Inside”
Inside” Projects

37%
NTT Construction

58%

The COMSYS IT Plaza

8

Nippon COMSYS Corporation - Annual Report 2003

The training courses for personal computer assistants forpeople with visual and hearing challenges.

Nippon COMSYS Corporation - Annual Report 2003

9

NTT Construction

Cable-Tunnel Construction Project(underground tunnel construction)

tions both increased, and among NTT “Inside” Projects, electrical powerswitching projects for ADSL facilities and orders for the replacementof electric generators increased. Nevertheless, due to the impact ofNTT’s curtailment of capital investment, net revenues in this sector
declined by 14.1% year-on-year to ¥116,737 million (US$971 million).
In April 2003, COMSYS launched a new medium-term business plan, COMSYS21—Ver. II. Based on this plan, the Company aims
to focus on IP network infrastructure for NTT and NTT DoCoMo, whoare expected to implement an IP network business strategy in the near
future, strengthen its sales capabilities in the areas of research anddevelopment and joint facilities, and train personnel in aspects of construction. At the same time, COMSYS hopes to secure orders for optical fiber access for FTTH construction and to maintain its construction
capabilities in optical fiber and other junction switches. The NTT Construction Sector is making a concerted effort to increase revenues whileworking to improve safety and construction efficiency, develop andstrengthen its outsourcing system, and train technical personnel.

Cable Engineering Works Project(installation of communications cables)

HIGHLIGHTS
Large Projects Vital to a New Mobile Era
As a result of the merger of municipalities,
Shizuoka City now occupies the largest
area of any Japanese city. The NTT
DoCoMo Tokai Shizuoka Building opened
in February 2003 as the tallest building in
Shizuoka Prefecture. This landmark represents a new mobile era for Shizuoka,
and COMSYS was responsible for all contract construction work involving electrical
power, transmission, wireless, and exchange facilities. COMSYS also assumed
management of all works related to telecommunications construction ina joint venture. For exchange facility construction, the Company installed
two mobile multimedia switches with FOMA capability. This construction of exchange facilities was on a large scale, and the construction
schedule was challenging in light of the need to complete the facilities
before the “Wakafuji Kokutai” national sports event to be held in
September. COMSYS combines high quality technologicalcapabilities with a wealth of experience to meet the expectations of its customers.

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○COMSYS’ largest customer, Nippon Telegraph and Telephone Corporation (NTT), is making a concerted effort to create new services. NTT
recently announced its vision for the next generation, which calls for atransition from fixed telephone networks to internet protocol (IP) networks and the emergence of a ubiquitous broadband era over the next
five years, through the use of optical fiber. Moreover, NTT is promoting
the conversion of access networks to optical fiber in order to achievefiber to the home (FTTH), and anticipates an expansion of relay switch
facilities, including optical fiber, thanks to the rapid advance of broadband content. Concerning backbone networks for NTT DoCoMo, construction of 3.5-generation networks is expected to begin in 2005.
Intensifying competition among telecommunications carriers, however, will result in high demand for reducing facilities construction
costs as well as the need to further enhance cost competitivenessgoing forward.
Given these circumstances, among NTT “Outside” projects,
B-Flet’s installations and orders for the replacement of cable installa-

Achieving Results Overseas in Constructing Mobile Communications Base Stations
Since 1996, this sector has
been responsible for building several mobile communications base stations forinternational conferences,international mobile communications exhibitions,and other venues. In 2002,
the sector built FOMA
(DoCoMo’s 3G services) installation of DoCoMo-extended base station inoverseas in New York, USA
and The Hague, in the
Netherlands. The FOMA
service is geared toward to the age of international communications,and COMSYS is involved at every step from consulting to testing.
Transplanting Japanese technology overseas is a difficult
task owing to different standards and approaches to safety andquality. With the mission of bringing the technology and services of
NTT DoCoMo to the world, the success of this project is an accolade for COMSYS.

150

120

“Inside” Projects
90“Outside” Projects

Switching System and Transmission
Equipment Projects

10

Electric Power Equipment Projects

Nippon COMSYS Corporation - Annual Report 2003

A Steel Tower for a Mobile
Telecommunications System

Antenna on a building roof for a mobile
telecommunication
system (in a city)

Base station for amobile telecommunication system (in a suburb)

60

58%

30

of Total Revenue

0

99

00

01

02

03

Sales of NTT
Construction(¥ Billions)

Nippon COMSYS Corporation - Annual Report 2003

11

Domestic Construction and Engineering

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

The Mio Castello Kouhoku
ILVIALE Condominiums,
a COMSYS projectIn this environment, COMSYS aggressively expanded sales
activities in company-wide strategic businesses, notably the CC Box
Business. The Company also re-categorized sales in the Solutions
Business from the Information Systems Sector to the Domestic Construction and Engineering Sector starting in the current fiscal year (figures from the previous fiscal year were adjusted accordingly).
Nevertheless, owing to the impact of a decline in public projects andother factors, net revenues in this sector declined by 13.0% year-onyear to ¥67,946 million (US$565 million).
The Domestic Construction and Engineering Sector plays acentral role in the Company’s new medium-term business plan,
COMSYS21—Ver. II. In particular, COMSYS is focusing on the Maintenance Business, Terminal Business, and e-Japan Business. The Maintenance Business is actively involved in network monitoring, on-site
maintenance, and other fields. The Terminal Business (home solutions)is promoting and improving systems for a wide range of home applications, from wiring work for installing information appliances to the construction of home LANs. In the e-Japan Business, though investment as
part of the government’s e-Japan Strategy in optical fiber and otherinfrastructure in major metropolitan areas has ended, investment in regional infrastructure is expected to pick up going forward. Moreover, themarket for joint use outsourcing, where local governments team up to
outsource development and operations to private companies, is expected
to be large. COMSYS is focusing on local governments and is actively
involved in regional development projects intended to upgrade information and communications infrastructure.
In the Architecture Business, COMSYS with continue to construct base stations for NTT DoCoMo. The Company is also actively
pursuing construction orders with an emphasis on orders for electricaland communications facilities at large-scale buildings. Moreover,
COMSYS is making aggressive efforts in the eco business, in fields
such as the environment, resources, and energy that hold promise for
future growth. The Domestic Construction and Engineering Sector will
work to expand the scope of its business going forward.

HIGHLIGHTS
Telecom Construction Companies Participate in FIFA
World Cup 2002

For the World Cup, COMSYS provided construction, maintenance, andremoval services for the International Media Center, communications
facilities at 11 venues accommodating 10 soccer fields nationwide, andhotel LANs for the Japan Organising Committee for the 2002 FIFA World
Cup Korea/Japan. COMSYS also maintained communications equipment during World Cup matches and removed this equipment when thematches were over.
With such a major event, the scale of construction is complicated and far-reaching, and because coordinating construction is critically important, quick and sophisticated decision-making is required.
The success of the Company’s World Cup related projects can be attributed to COMSYS’ specialized expertise in performing construction
and maintenance on a national scale, and to its skill in quickly transferring and sharing information. COMSYS is proud that the success ofthese projects has served to enhance the Company’s global image andfurther enhance its reputation in Japan.

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○The Domestic Construction and Engineering Sector handles all domestic telecommunications construction projects other than those for
the NTT Group’s communications infrastructure construction, as wellas ordinary domestic and IT related construction projects. This includes
contracts with the public sector, with the “new common carriers,” andwith firms in other industries. This sector is engaged in a broad spectrum of activities, including the construction of telecommunications
facilities and electric utility facilities, structural construction, and theinstallation of “CC Box” (multi-use underground cable conduits), cableTV equipment, and network solutions.
In the business environment affecting the Domestic Construction and Engineering Sector, information communications networks
are rapidly becoming more sophisticated and diverse, and various new
information technologies (IT)—including IP virtual private networks(VPN), wide area ethernet, and wireless local access networks (LAN)—
are quickly spreading throughout private companies and government
institutions. Despite the deflationary economic environment, corporate willingness to invest in IT is quite high, especially in the manufacturing and distribution industries. Additionally, the Japanese
government’s e-Japan Priority Policy Program, which aims to transform Japanese society through IT, is driving the implementation of alarge number of measures, including e-government and other efforts
to computerize administrative activities, as well as the construction of
an intelligent transportation system (ITS) infrastructure through public
investment. Growth in IT is expected to continue over the long-term.

Solar Power System from COMSYS’ Eco Business
Achieves Results
The town of Tahara in eastern Aichi
Prefecture is known for its progressive ecological policies, and various
buildings within the town have already installed solar and wind powersystems. Tahara has a growing
reputation as a nature-friendly, ecological town. The town is making steady progress in use of new energy
sources, and the latest installation is a solar power system on the roof of thelocal government offices. COMSYS served as the principal contractor in thisproject, demonstrating that the Company is highly regarded for its reliable
construction expertise in the new energy field. Groundbreaking took place in
October 2002 and construction commenced in December. As Tahara issandwiched between the Pacific Ocean and Mikawa Bay, full attention wasgiven to the constantly gusting winds, and the job was completed successfully without incident.
A similar solar power system project was completed in July 2002
for SCS Co., Ltd. This order encompassed the entire process from the planning and proposal stages to the design and construction stages. SCS is
located in Saitama Prefecture and is engaged in a wide range of cleaning
operations on the front lines of environmental protection, including waste collection and drainpipe cleaning. SCS is focusing on efforts to be an “environmentally friendly business,” and COMSYS is well respected for its value-added
proposals, which appeal to an environmentally friendly corporate philosophy.
COMSYS established the Ecosystem Sales Group within its
headquarters in order to focus on eco
businesses such as wind and solar
power. Going forward, the groupplans to step up sales activities to private businesses and local government authorities.

100

80

60

40

Communications facilities project for
the new Runway B at Narita Airport.

12

Nippon COMSYS Corporation - Annual Report 2003

Communications line project between the Takaido andHachioji interchanges on the Chuo Expressway.

34%

20

of Total Revenue

0

99

00

01

02

03

Sales of Domestic
Construction
and Engineering(¥ Billions)

Nippon COMSYS Corporation - Annual Report 2003

13

International Operations

Since COMSYS was founded, the Company has contributed to development in a number of countries in Asia, Africa, the Middle East, SouthAmerica, and other areas attempting to develop needed telecom infrastructure. Over the course of these myriad projects, and from its participation in the domestic telecommunications market and construction
projects, COMSYS has developed a wealth of experience and technological expertise. This, in turn, has facilitated the Company’s access tothese competitive overseas markets.
The global business environment is characterized by restricted
or frozen IT investment by telecommunications carriers in all countries
as a result of the global economic downturn and collapse of the IT
boom. Moreover, shakeout and consolidation among telecommunications carries is accelerating on a global scale, as typified by the bankruptcies of Global Crossing and WorldCom in the US.
However, there are many countries and regions, especially indeveloping parts of the world, where the communications networks
that provide social infrastructure are still undeveloped, and capital investment is expected to resume in these countries as soon as theireconomies bounce back. With a view to reducing the digital divide,
there is evident progress in developing information and communications networks to serve as infrastructure, in building IP backbone net-

works, and in providing applications for e-government as well as remote health care, education, and disaster prevention networks.
During the current fiscal year, due partly to a decline in orders
for projects in the Philippines and elsewhere, net revenues in the Overseas Construction Sector declined by 25.4% year-on-year to ¥1,864
million (US$16 million).
COMSYS, as part of the basic strategy in its new mediumterm business plan, COMSYS21—Ver. II, is working to expand its overseas business, especially in Southeast Asia. Specific actions include
the following:• Expand business in Southeast Asia, mainly through COMSYS’ local
Thai subsidiary, COMSYS Thailand Co., Ltd. (CTC).
• Closely monitor project trends in other regions, and respond as needed.
• Pursue sales, in conjunction with domestic business sectors, to foreign-affiliated clients and the overseas operations of domestic clients.
As the International Operations Sector is involved mainly inoverseas operations, based on the needs of each business sector, it
gathers and analyzes leading-edge technologies, mainly IT, and new
business models from overseas. These efforts will be reflected in
COMSYS’ business strategy and operations.

Construction Revenues for Last Three Years

Over ¥5,000 million
Over ¥100 million

Installing underground cables
in Bangkok.

Installing aerial optical fiber cables
in Bangkok.

An outside plant project in Cebu, the Philippines’
second most developed island after Luzon.

Over ¥50 million
Less than ¥50 million

Major Overseas Projects Completed○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○Nigeria
Iraq
Egypt
ThailandTaiwanSri Lanka
Nepal
Thailand
KuwaitTanzania
ThailandPhilippines
Philippines
Philippines
ThailandPhilippines
Philippines
Thailand10

8

Ibadan new local line project
Installation of telephone lines for 17 local exchanges
Supply and installation of telecommunication cable network in Ismailia and Suez
Installation of digital exchange equipment
Installation of highway traffic control system
Installation of local telephone lines in the Badulla and Anuradhapura regions
Installation of microwave telecommunications system (inside and remote)
Fifth local cable network installation for TOT in Bangkok and provinces
Installation of digital loop coil system in Farwaniah Exchange
Rehabilitation of telecommunications network in Dar es Salaam
Seventh local cable network for TelecomAsia and TT&T
Supply and installation of local cable network for Major Telecom Inc. in Mindanao
Supply and installation of OSP equipment and optical fiber cable for ICC in Manila
Installation of trunk lines and local network for GLOBE Telecom PHASE-2 in Manila and the provinces
The telephone expansion project to overcome short-term line shortage / B.E.1996-1998 for TOT (800K)
Supply contract for OSP & optical fiber cable (BAYANTEL 40K)
Turnkey backhaul fiber optic network construction for DCI in Philippines
100,000 Telephone Line Expansion Project in the North-East, North, South and Central Regions for TOT

6

Overseas Projects in Progress (As of June 2003)○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○4

14

Nippon COMSYS Corporation - Annual Report 2003

1%

2

of Total Revenue

0

99

00

01

02

03

Sales of
Overseas
Construction(¥ Billions)

Philippines Supply and installation of local cable and junction network for GLOBE Telecom PHASE-4 in Manila and the provinces
Thailand
Optic Fiber Transmission Network Expansion Project for TOT

Nippon COMSYS Corporation - Annual Report 2003

15

Information Systems

COMSYS personnel preview a satellite-broadcast
program with the clients who ordered it.

to pick up in the area of comprehensive home and community management systems encompassing information services, home healthcare, nursing care, education, energy conservation, and so forth.
In this environment, the Information Systems Sector sought toexpand orders through wide-reaching and aggressive sales initiatives
in the area of software development and other information processing
related business. However, due partly to intensifying competition in
the information processing market and partly to the transfer of the
Solutions Business from the Information Systems Sector to the Domestic Construction and Engineering Sector during the current fiscal
year, net revenues declined by 4.8% year-on-year to ¥14,063 million(US$117 million).
In order for COMSYS to achieve a “paradigm shift to become atotal engineering services company,” as outlined in its new medium-termbusiness plan, COMSYS21—Ver. II, the Company aims to deliver highvalue-added solutions services, shift from contract software development
to systems integration, and participate in upstream processes. It is also
working to strengthen its information business by training engineers anddeveloping an organization capable of providing integrated network, software, and hardware solutions. Going forward, given the increasingly competitive economic environment, COMSYS hopes to differentiate itself fromother companies and gain a competitive advantage by moving forward
aggressively in developing COMSYS brand products.

COMSYS has developed many custom
software packages for its clients.

HIGHLIGHTS
Developing an Integrated Management Support System
COMSYS is providing support for thebuilding of an integrated management
support system to T.I.C-Citizen Co.,
Ltd. (Tokyo), which has a long history
in the areas of measurement systems
for sports competitions, display equipment, and so forth. The relationship between T.I.C-Citizen and COMSYS
dates back 12 years, when, early inthe 1990s, the two companies introduced an advanced menu input system capable of real-time processing.
Since then, T.I.C.-Citizen has continued to draw on COMSYS’ high-level planning and proposal capabilities in a wide range of projects, including the development of accounting
systems and sales support systems.
As part of the current implementation of a new third-generation production system, due to its regard for the high quality of
COMSYS’ system design capabilities, T.I.C.-Citizen has entrusted thecoordination of PBX and LAN construction entirely to COMSYS. Moreover, in pursuing efficient and trouble-free management systems, because integrated real-time
management on an open
network is essential, efforts are underway to build
a management support
system that integrates production management, accounting, sales support,
and CAD systems.

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○COMSYS is engaged in the development of commercial systems, andhas built a strong track record through the development of many business applications, networks, and database solutions. The Company
has also developed many applications and control systems for various
types of infrastructure for the NTT Group and other telecommunications firms, offering total solutions service packages encompassing
everything from design to maintenance and administration. In fiscal
2001, the company launched its highly lauded service, which provides
LAN and WAN construction support to small office, home office (SOHO)
operators, Internet service providers, and small and medium-sizedbusinesses using the Internet.
Other information systems businesses include the productionof interactive programming for digital satellite broadcasts, which allow
viewers to interact with broadcast stations. The Company will be watching the rapid progress of IT for opportunities to employ its high level oftechnological expertise in crafting proposals for new services.
The market environment affecting the Information Systems
Sector is characterized by the rapidly progressing IT revolution andintensifying competition. The IT industry is expected to trigger a revitalization of the Japanese economy, supported by IT related policies
initiated by the Japanese government, including the e-Japan Strategy
and IT investment tax cuts. Moreover, with the penetration of home
networks which provide the needed infrastructure, activity is expected

Digital Content Production: “Great Skill of the World”
Since the launch of BS
digital broadcasting inJapan in December
2000, COMSYS has
been involved in producing the data-broadcasting portion of certain
program content. The
Digital Content Group in
the IT Business Division, which employs leading digital broadcasting engineers, was involved in the production of the digital high vision program,“Great Skill of the World.” This variety program featured interactive broadcasting—only possible with digital broadcasting—to enable audiences toparticipate in quizzes. COMSYS’ unsurpassed technological capabilities
contributed significantly to this interactive entertainment program.

25

20

15

10

16

Our BtoE System automatic wage-debit software
allows a company to set up intranet shopping for its
employees, then to automatically deduct the amount ofeach employee’s purchases from his salary. Comsys is
directing much of its energy toward making a place foritself in the field of e-commerce.
Nippon COMSYS Corporation - Annual Report 2003

A screen shot from one of the Company’s
digital satellite broadcast programs.

7%

5

of Total Revenue

0

99

00

01

02

03

Sales of Information
Systems(¥ Billions)

Nippon COMSYS Corporation - Annual Report 2003

17

Research & Development

1) R&D for technology to improve construction efficiency• Sewerage FTTH construction technology• Development of aerial cable bundlingconstruction methods• Development of mobile construction knowledge
management systems

2) R&D for technology to improve construction safety and quality• Development of metal tools for removing
telephone polls• Development of tools to pull optical drop cables tight• Development of methods to reduce grounding
resistance in mountainous areas

HIGHLIGHTS
Tuned Rotary-Mass Damper
COMSYS began developing a tuned rotarymass damper together with university researchers in 1999. The Company exhibited
one at the Highway Maintenance Show heldat the Tokyo Big Site on November 27, 2002.
Tuned rotary-mass dampers can beinstalled in buildings, bridges, and towers to
reduce vibration caused by earthquakes,
strong winds, and other factors. This simple
yet revolutionary system uses a rotating cylindrical weight within another cylinder to absorb vibration energy. The new system is low-cost and maintenance free,and because operational testing on expressway lighting has already been
completed, the Company is currently receiving a large number of inquiries with a view to installation.

3) R&D for new technology and systems

Strong vibration:
an exciter adds to the vibration• Construction of security systems
verification equipment• Development of automatic incoming and outgoingsignal testing equipment employing FOMA
• IPv6 test network construction and VoIP verification• Applications of IC chips in the construction field• Research related to digital content and security

A damperCOMSYS’ subsidiaries are not engaged in any
particular research and development activities.

Displacement

R&D Strategy in the New Medium-Term Business Plan, COMSYS21—Ver. II
With an accurate understanding of trends in new technology andsociety, including the “new, optical generation,” COMSYS is pressing forward with R&D aimed at creating COMSYS brand products,
systems, and services. At the same time, in order to maintain andenhance the confidence COMSYS has won among the public as aleading company, the Company is pursuing R&D targeting the delivery of ultra safe and secure products, systems, and services. ForCOMSYS, this R&D strategy makes an essential contribution in many
areas: sales proposals, increasing orders, eliminating accidents, andincreasing customer confidence.
In choosing new development themes, COMSYS effectively
focuses R&D resources on work directly linked to cutting-edge businesses. The Company is working to increase R&D productivity by actively pursuing joint products among its business divisions and joint
R&D contract work in partnership with manufacturers and universities.

COMSYS is proud of its R&D accomplishments
in fiscal 2003, which are outlined below.

0.5
1,000

0.4

800

0.3

Free vibration:
600

0.2

R&D Expenses

400

0.1

200

0

00

18

Percentage of Sales

Instantaneously cuts
the wire loadingon the plumb bob○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○The information and communications market is expected to expand
further as a result of the IT revolution, as represented by the rapid
spread of the internet and increase in e-commerce. COMSYS is rapidly making the transition from the era of the fixed-line to the age of IP
and broadband, buoyed by strong research and development targeting enhanced safety and efficiency in electrical and telecommunications facilities construction—the main business involved in meetingthe needs of the new age. The Company is also pursuing R&D focusedon new technologies that will be useful in market creation strategies
and systems development related to management streamlining.
R&D expenses stood at ¥369 million (US$3 million) during thecurrent fiscal year. COMSYS’ research and development organizationconsists of 28 researchers at the Company’s Technology Researchand Development Center.

“Meta Arc Method”—The Latest in Thermal Spraying Technology
Thermal spraying is a technology used to form a coating by spraying
atomized metal onto steel. COMSYS’s new rust protection method,
known as the Meta Arc Method, has caught the attention of the civilengineering industry as an effective technology for preventing structural
corrosion. The Meta Arc Method represents an innovative coating technology that is ideal for preventing rust and corrosion on bridges andother large structures. The technology can prevent iron from rusting for
more than 30 years by applying an inorganic sealer called NeoSeal
through electric arc spraying. Using an inorganic, solventless product also helps reduce
environmental impact. COMSYS independently established and is working to expand
the Arc Thermal Method Association with theaim of creating new technology in this field.
As evidenced by the decision to use the Meta
Arc Method in the Chubu International Airport construction project, COMSYS’ newtechnologies are attracting much attention.
Construction Sludge Solidification System
COMSYS began developing the construction sludge solidification system in 1996, and completed the initial system in 1998. Subsequent
improvements gave rise to the current system. This innovative construction sludge solidification system is able to improve ordinary soil byprocessing sludge removed through pipe jacking or other methods as
general surplus soil.
In the conventional ACE mole method and non-open cut pipejacking method, the cut dirt and sand is mixed with wastewater and removed by pressure through a pipe. Sludge that is removed must legally
be classified as industrial
waste, and processing costs
are extremely high. COMSYS’new system lowers processing costs by enabling sludge
to be processed as generalsurplus soil. This feature is attracting widespread attention.
Presentation made at the 37th Japan National
Conference on Geotechnical Engineering

0.0

00

01

02

03

Nippon COMSYS Corporation - Annual Report 2003

R&D Expenditure andas Percentage of Sales(¥ Millions, %)Nippon COMSYS Corporation - Annual Report 2003

19

Management
As of June 27, 2003

BOARD OF DIRECTORS

Financial Section

Chairman and Representative Director
Hironobu Takeuchi

President and Representative Director
Hirofumi Shimada

Financial Review .............................................................................................................. 22
Selected Financial and Operating Data ........................................................................... 25
Consolidated Balance Sheets ......................................................................................... 26
Consolidated Statements of Income and Retained Earnings ......................................... 28
Consolidated Statements of Cash Flows ........................................................................ 29
Notes to the Consolidated Financial Statements ........................................................... 30

Senior Managing Director
Masahide Kajiyama

Managing Director
Yoichi Chiba

Managing Director
Kaoru Noda

Report of Independent Certified Public Accountants ..................................................... 35
Supplemental Non-Consolidated Financial Information ................................................. 36

Managing Director
Kenji Kondo

Director
Yoshiaki Miyawaki

CORPORATED AUDITORSCORPORATED EXECUTIVE OFFICERS

Standing Auditors
Teruji Mukai
Takero Mizoguchi

Senior Vice Presidents
Kyoichi Suzuki
Yoshihiro Yoshioka
Etsuo Shibata
Yukuo Asakura
Minoru Sobami

Auditors
Takashi Kakimi
Tadashi Kumakura

20

Managing Director
Toyohiro Goto

Nippon COMSYS Corporation - Annual Report 2003

Executive Officers
Yasuhiko Kubota
Akira Takasaki
Kazuo Takiguchi
Toshimasa Hattori
Takashi Furusho
Hideki Ishikawa
Seiichiro Nakatani
Akiyoshi Sekiguchi
Shuichi Tominaga

Akinori Ishigaki
Tamio Maeshige
Masaki Nakayama
Yuji Inada
Tadao Koyama
Masato Shimohara
Junichi Tamura
Yoshiaki Aigami
Yoshihiro Mimata
Nippon COMSYS Corporation - Annual Report 2003

21

Financial Review(US$16 million), affected by the instability in economies around theworld. Net revenues in the Information Systems Sector declined 4.8%
to ¥14,063 million (US$117 million). The re-categorization of sales ofmainly construction related business in the Information System Sector to the Domestic Construction and Engineering Sector has been
made in the current fiscal year. The figures for the Domestic Construction and Engineering Sector and Information System Sector in
the financial statements of the previous fiscal year have been recalculated for this report in accordance with the new business categorization of the current fiscal year.

Information Systems
Overseas Construction

7%

1%“Outside” Projects

21%
Domestic Construction
and Engineering“Inside” Projects

37%

34%

Sales by Business Category

58%

Thousands of
U.S. dollars

Millions of yen
1999

2000

2001

2002

2003

2003

Construction Business
NTT Construction¥143,705¥144,296¥134,981¥135,964¥116,737$ 971,190

Domestic Construction and Engineering

52,412

66,567

69,21978,111

67,946565,275

Overseas Construction

7,850

3,007

1,315

2,500

1,864

15,507

16,555

17,88016,705

14,776

14,063116,996¥220,522¥231,750¥222,220¥231,351¥200,610$1,668,968

Other BusinessInformation Systems
Total

Note: 1. For convenience only, the accompanying Japanese yen figures for 2003 have been translated into U.S. dollars at the rate of ¥120.20 to $1, the rate prevailing on 31st March, 2003.
2. Mainly construction related business in the Information System Sector has been re-categorized under the Domestic Construction and Engineering Sector. The related figures for the previous
year (ended 31st March, 2002) have been adjusted to reflect the new categorization.

Revenues

100

Proportion of Revenues
from NTT Market(¥ Billions , %)

250

80

200

60

150

40

Net sales

100

20

Percentage generated by NTT
Construction Projects

50

0

0

22

99

00

01

02

03

Nippon COMSYS Corporation - Annual Report 2003

During the fiscal year ended March 31, 2003, despite strenuous efforts
to enhance orders from the NTT Group, from the public sector including government organizations, and from NCC-related or other generalcustomers, net sales decreased 13.3% to ¥200,610 million (US$1,669
million). This was mainly due to restrained capital investments by telecommunications companies such as the NTT Group, and the effect ofrestraint in IT investment among private enterprises in general.
Net revenues in the NTT Construction Sector decreased
14.1% to ¥116,737 million (US$971 million). “Outside” projects accounted for ¥42,536 million (US$354 million) of the sector’s total, while“inside” projects accounted for the remaining ¥74,201 million (US$617
million). Net revenues in the Domestic Construction and Engineering
Sector also decreased 13.0% to ¥67,946 million (US$565 million).
Net revenues in the Overseas Construction Sector, which showedsigns of recovery in the previous term, fell 25.4% to ¥1,864 million

Cost of sales for the fiscal year ended March 31, 2003 decreased by¥25,470 million, or 12.5%, to ¥178,619 million (US$1,486 million), but
increased as a percentage of sales from 88.2% in the prior term to89.0% in this term. Gross profit slipped 19.3% to ¥21,991 million(US$183 million). Selling, general, and administrative expenses decreased by 7.5% to ¥15,501 million (US$129 million), but grew as apercentage of gross profit from 61.5% last term to 70.5%. The ratio of
selling, general, and administrative expenses to sales increased from
7.2% in the previous term to 7.7% this term. These factors drove operating income down by 38.2%, to ¥6,490 million (US$54 million). The
operating margin also decreased from 4.5% to 3.2%. Interest and dividend income fell 28.4% to ¥207 million (US$2 million). Interest expenses fell 37.0% to ¥34 million (US$0.3 million). The net amount ofother expenses fell 40.5% to ¥1,084 million (US$9 million). Contributing to this decline were extraordinary events such as a gain on reversalof the prior service cost of employee pension fund of ¥1,597 million(US$13 million), which offset expenses such as a special charge of¥1,234 million (US$10 million) for employee retirement benefits used
to assist employees seeking other employment and a loss on liquidation of subsidiaries and affiliates of ¥490 million (US$4 million). Income
before income taxes and other adjustments to net income decreased
37.4% by ¥5,579 million (US$46 million).
Income taxes for the fiscal year ended March 31, 2003 decreased by ¥1,500 million, or 35.5%, to ¥2,728 million (US$23 million),and the ratio of income taxes to income before income taxes (the effective tax ratio) increased from 47.4% to 48.9%. Minority interests fell
sharply by 33.7% to ¥383 million (US$3 million). Net income, as a result of the foregoing, decreased 39.9% to ¥2,468 million (US$21 million). The ratio of net income to net sales declined from 1.8% in theprior term to 1.2%, and return on equity slid to 2.2%. Basic net income
per share was ¥18.34 (US$0.15), but diluted net income per share is
not reported, as there were no residual securities outstanding at theend of this term. The New Accounting Standard is applied in calculation of basic net income per share. Further details related to this areshown in Note2 (k) to the Consolidated Financial Statements. Dividends of ¥12.00 (US$0.10) were declared.

10

8

6

4

Operating income2

Net income

0

Results of Operations
NTT Construction

Nippon COMSYS Corporation and Consolidated Subsidiaries
Years ended 31st March, 1999, 2000, 2001, 2002 and 2003

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

99

Net Income
per Share
(¥)

00

01

03

02

50

40

30

20

10

0

Total Assets(¥ Billions)

99

00

01

02

03

250

200

150

100

Financial Position
Cash and cash equivalents significantly decreased by 41.0% to ¥25,411
million (US$211 million), while short-term investments were reduced by

50

0

99

00

01

02

Nippon COMSYS Corporation - Annual Report 2003

03

23

Selected Financial and Operating Data
Nippon COMSYS Corporation and Consolidated Subsidiaries
Years ended 31st March, 1999, 2000, 2001, 2002 and 2003
10

150

8

120

6

90

4

60

2

Shareholder’ equity
ROE

30

0

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

0

99

00

01

02

03

Dividents per Share
(¥)
15

12

9

6

Cash Flows

3

0

24

73.8% to ¥297 million (US$2 million). Notes and accounts receivable
were down 9.2% to ¥58,899 million (US$490 million). The accumulated
cost of construction in progress increased 3.2% to ¥16,845 million(US$140 million). Deferred income taxes were decreased from ¥1,542
million in the previous fiscal year to ¥830 (US$7 million). Other current
assets rose 60.5% to ¥4,733 million (US$39 million). Thus, total current
assets shrank by 17.1% to ¥108,053 million (US$899 million).
Reviewing liabilities, short-term bank loans, which more thandoubled in the previous term, declined drastically by 95.8% to ¥145
million (US$1 million). There is no outstanding balance of convertible
bonds redeemable within a year, in contrast to ¥9,312 million posted in
the previous term. Trade payables decreased 14.4% to ¥31,344 million (US$261 million), while advances received on construction inprogress fell 8.8% to ¥3,945 million (US$33 million). Other current liabilities declined 8.8% to ¥4,769 million (US$40 million), resulting in acurrent ratio of 2.7.
Investments and other assets slipped by 10.7% to ¥18,791 million (US$156 million), primarily as a result of reductions in deferred income
taxes. Total property and equipment increased 1.3% to ¥39,684 million(US$330 million) after depreciation. As a result of the above, total assets
shrank by 12.6% to ¥166,528 million (US$1,385 million). Shareholders’equity contracted by 0.2% to ¥111,724 million (US$929 million).
The capital ratio went up from 58.7% in the previous term to67.1%. Based on the number of shares outstanding at March 31, 2003,
shareholders’ equity per share increased to ¥851.20 (US$7.08) fromthe ¥835.04 recorded at the end of the previous fiscal year.

99

00

01

02

03

Nippon COMSYS Corporation - Annual Report 2003

Net cash provided by operating activities decreased significantly by
78.9% to ¥2,441 million (US$20 million). Income before income taxes
and other adjustments to net income slipped 37.4% to ¥5,579 million(US$46 million). There were negative factors such as increase of inventory assets including the increase of accumulated cost of construction in progress for ¥349 million (US$3 million), and reduction of trade
payables for ¥5,663 million (US$47 million), although there were somepositive factors such as reduction of trade receivables for ¥6,191 (US$52
million). In addition to the above, cash and cash equivalents paid forincome taxes more than doubled to ¥6,145 million (US$51 million).
Net cash used in investing activities was ¥4,328 million (US$36
million). The main items of payment were for the purpose of acquisition of tangible fixed assets of ¥2,581 million (US$21 million) and anincrease in long-term loans of ¥2,041 million (US$17 million).
Net cash used in financing activities was ¥15,738 million(US$131 million), primarily used for redemption of convertible bonds inthe amount of ¥9,312 million (US$77 million), and repayment of shortterm borrowings of ¥3,037 million (US$25 million).
The above resulted in a net decrease in cash and cash equivalents of ¥17,625 million (US$146 million) in comparison with the previous term. Cash and cash equivalents at the beginning of the fiscal year
were ¥43,036 million (US$358 million). Cash and cash equivalents at
the end of the fiscal year were ¥25,411 million (US$211 million).

Thousands of
U.S. dollars

Millions of yen
1999

2000

2001

2002

2003

2003

¥220,522¥231,750¥222,220¥231,351¥200,610$1,668,968

14,261

15,559

11,62810,5006,490

53,993other adjustments to net income

13,522

13,054

9,117

8,913

5,579

46,414

Net income

5,625

6,315

4,498

4,107

2,468

20,532¥171,669¥188,961¥188,250¥190,576¥166,528$1,385,424

Property and equipment

30,976

38,626

38,606

39,17839,684

330,150

Long-term debt

9,409

9,312

9,312

—

—

—

101,721

115,834

118,055

111,919

111,724

929,484— Basic¥ 42.97¥ 46.73¥ 33.11¥ 30.29¥ 18.34— Diluted

40.87

44.67

31.70

29.01

—

—

Results of Operations:
Net sales
Operating income
Income before income taxes andFinancial Position:
Total assets

Shareholders’ equity

Per Share of Common Stock (in yen and U.S. dollars):
Net income$

0.15

Cash dividends

10.00

10.00

12.00

10.00

12.00

0.10

Shareholders’ equity

765.74851.01869.84835.04851.20

7.08

Financial Ratios:
Operating income to net sales

6.47%

6.71%

5.23%

4.54%

3.24%

Net income to net sales

2.55

2.72

2.02

1.78

1.23

Capital ratio

59.3

61.3

62.7

58.7

67.1

Return on equity

5.7

5.8

3.8

3.6

2.2

New orders received during the year

¥229,875¥228,518¥229,211¥213,986¥199,495$1,659,692

Contract backlog at end of the year

78,34876,78180,46164,28863,173

525,566

Other Statistics:

Common stock price range (in yen):
High
Low

¥

1,710
1,280

¥

2,700
1,420

¥

2,370
1,636

¥

2,095
580

¥

891
354

Note: 1. For convenience only, the accompanying Japanese yen figures for 2003 have been translated into U.S. dollars at the rate of ¥120.20 to $1, the rate prevailing on 31st March, 2003.
2. Net income per share of commom stock for the year ended 31st March, 2002 have been adjusted to conform with the method required by the GAAP of Japan for computing these figures
for the year ended 31st March, 2003.

Nippon COMSYS Corporation - Annual Report 2003

25

Consolidated Balance Sheets
Nippon COMSYS Corporation and Consolidated Subsidiaries
As of 31st March, 2002 and 2003

Thousands of
U.S. dollars (Note 1)

Millions of yen

ASSETS

2002

2003

LIABILITIES AND SHAREHOLDERS’ EQUITY

2003

Current Assets:
Cash and cash equivalents¥ 43,036¥ 25,411$ 211,406

1,132

297

2,471

Notes and accounts receivable—trade

64,88858,899490,008

Inventories:
Other

2003

2003

Short-term bank loans (Note 4)

¥

3,457

¥

145

$

1,206

Current portion of convertible bonds (Note 4)

9,312

—

—

Accounts payable—Trade

36,60731,344

260,765

Advances received on construction in progress

4,327

3,945

32,82016,328

16,845140,141

Income taxes payable

3,538

277

2,305

611

1,159

9,642

Other current liabilities

5,230

4,769

39,67662,471

40,480336,772

Accrued severance indemnities (Note 5)

3,640

2,194

18,253

Allowance for losses arising from guarantees of loans

1,680

—

—

Deferred tax liabilities for unrealized gains on land revaluation (Note 11)

Deferred income taxes (Note 7)

1,542

830

6,905

Other current assets

2,948

4,733

39,377

Less: Allowance for doubtful receivables

(127)

(121)

(1,007)130,358

108,053

898,943

Total current assets

2002

Current Liabilities:

Short-term investments (Note 3)

Accumulated cost of construction in progressThousands of
U.S. dollars (Note 1)

Millions of yen

Total current liabilities

Long-Term Liabilities:

2,484

2,366

19,684

Consolidation adjustments account

—

2,821

23,469Other long-term liabilities

888

1,536

12,779

8,692

8,917

74,185

7,494

5,407

44,983

Total long-term liabilities

Investments and Other Assets:
Investment securities:
Unconsolidated subsidiaries and affiliates
Other (Note 3)

630

450

3,744

4,806

4,904

40,799Long-term loans receivable

3,716

3,413

28,394

Deferred income taxes (Note 7)

4,636

3,349

27,862Other assets

8,599

8,330

69,301

Less: Allowance for doubtful receivables(1,347)(1,655)(13,769)

21,04018,791

156,331

Total investments and other assets

Minority Interests
Contingent Liabilities (Note 6)
Shareholders’ Equity (Note 10):
Common stock, par value ¥50 per share:
Authorized— 247,763 thousand shares (31st March, 2002)— 246,953 thousand shares (31st March, 2003)
IssuedProperty and Equipment:— 135,264 thousand shares (31st March, 2002)

31,140——— 134,454 thousand shares (31st March, 2003)—

31,140259,068

Additional paid-in capital

30,73630,736

255,707

Retained earnings

60,725

61,158508,802(8,633)(8,514)(70,832)

(172)

(205)

(1,705)

113,796

114,315

951,040(1,877)(2,591)(21,556)

111,919

111,724

929,484¥190,576¥166,528$1,385,424

Land (Note 4)

18,62919,884

165,424

Buildings and structures (Note 4)

23,71323,857

198,478

Unrealized loss on land revaluation (Note 11)
Unrealized gain (loss) on securities

Machinery and equipment

14,867

14,995

124,750

Construction in progress

0

—

—

(18,031)(19,052)(158,502)

39,17839,684

330,150¥190,576¥166,528$1,385,424

Less: Accumulated depreciation
Total property and equipment

Treasury stock, at cost
Total shareholders’ equity

See Notes to the Consolidated Financial Statements.

26

Nippon COMSYS Corporation - Annual Report 2003

Nippon COMSYS Corporation - Annual Report 2003

27

Consolidated Statements of Income and Retained Earnings

Consolidated Statements of Cash Flows

Nippon COMSYS Corporation and Consolidated Subsidiaries
Years ended 31st March, 2002 and 2003

Nippon COMSYS Corporation and Consolidated Subsidiaries
Years ended 31st March, 2002 and 2003

Thousands of
U.S. dollars (Note 1)

Millions of yen
2002

2003

2003

¥216,575
14,776¥186,547
14,063$1,551,972
116,996

231,351

200,610

1,668,968

190,924
13,165167,034
11,585

1,389,634
96,381

204,089

178,619

1,486,015

27,262

21,991

182,953

16,762

15,501

128,960

Operating income

10,5006,490

53,993

Other Income (Expenses):
Interest and dividend income
Interest expenses
Other, net (Note 12)

289
(54)
(1,822)207(34)(1,084)

1,722
(283)
(9,018)(1,587)(911)(7,579)

8,913

5,579

46,414

Income Taxes (Note 7):
Current
Deferred

5,521(1,293)

756
1,972

6,290
16,406

Minority Interests

4,228
578

2,728
383

22,696
3,186

4,107

2,468

20,532

57,8282,205

60,72514505,200
116

1,624
107
1,684

1,325
47
677

11,023
391
5,632

3,415

2,049

17,046¥ 60,725¥ 61,158$ 508,802

Net Sales:
Construction contracts
Other
Cost of Sales:
Construction contracts
Other

Gross profits
Selling, General and Administrative Expenses

Income before income taxes and other adjustments to net income

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

Balance at end

Yen

Per Share:
Net income— Basic— Diluted
Cash dividends
Weighted average number of shares (in thousands)

¥

30.29
29.01
10.00
135,139

U.S. dollars (Note 1)¥ 18.34—
12.00
134,587

$

0.15
—
0.10

Thousands of
U.S. dollars (Note 1)

Millions of yen
2002

2003

2003

¥ 8,913
3,363
142
113
(267)
1,680
(289)
54
84
—
(1,583)
5,628
173
(235)
(3,416)
(137)
(113)

¥ 5,579
3,645
327
274
(1,580)
—
(207)
34
149
490
6,191
(349)
(5,663)496(1,242)(65)340$ 46,414
30,3242,720
2,280(13,145)—(1,722)
283
1,240
4,077
51,506(2,903)(47,113)
4,126(10,333)
(541)
2,829

14,110288(54)(2,762)

8,419
201
(34)
(6,145)70,042
1,672(283)(51,123)

11,582

2,441

20,308999(678)—(5,884)
(485)
125
(353)
464
(88)

1,046
(772)
(233)
(2,581)(452)
91(2,041)
525
89

8,702
(6,423)(1,938)(21,473)(3,760)757(16,980)4,368
740

Net cash used in investing activities(5,900)(4,328)(36,007)

Cash Flows from Financing Activities:(Decrease) increase in short-term borrowings, net
Repayment of long-term debt
Proceeds from long-term debt
Redemption of convertibles bonds
Acquisitions of treasury stock
Cash dividends paid

183
(184)
757
—
(1,884)(1,638)(3,037)(466)
230(9,312)(1,820)(1,333)(25,266)(3,877)
1,913(77,471)(15,141)(11,090)

Net cash used in financing activities(2,766)(15,738)(130,932)

Net Increase (Decrease) in Cash and Cash Equivalents
2,916
Cash and Cash Equivalents at Beginning of Year39,473
Cash and Cash Equivalents at Beginning of Year Adjusted for Newly Consolidated Subsidiaries
647(17,625)
43,036—(146,631)
358,037—

Cash and Cash Equivalents at End of Year

¥25,411$211,406

Cash Flows from Operating Activities:
Income before income taxes and other adjustments to net income
Depreciation and amortization
Write-down of investments and other assets
Increase in allowance for doubtful receivables
Decrease in accrued severance indemnities
Increase in allowance for losses arising from guarantees of loans
Interest and dividends received
Interest expenses
Loss on disposal of property and equipment
Loss on liquidation of subsidiaries and affiliates
Decrease (increase) in receivables—trade
Decrease (increase) in inventories
Increase (decrease) in payables—trade
Decrease (increase) in other assets
Decrease in other liabilities
Directors’ bonuses paid
Other, net
Cash and cash equivalents received on interest and dividends income
Cash and cash equivalents paid for interest expenses
Cash and cash equivalents paid for income taxes
Net cash provided by operating activities
Cash Flows from Investing Activities:
Decrease in short-term investments, net
Increase in investment securities, net
Increase in investments in a subsidiary to be consolidated
Acquisitions of property and equipment
Acquisitions of other assets
Proceeds from sale of property
Increase in long-term loans
Collection of long-term loans
Other¥43,036

See Notes to the Consolidated Financial Statements.
See Notes to the Consolidated Financial Statements.

28

Nippon COMSYS Corporation - Annual Report 2003

Nippon COMSYS Corporation - Annual Report 2003

29

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

1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements have been prepared fromaccounts and records maintained in Japanese yen by Nippon COMSYS Corporation (the “Company”) and its subsidiaries (together, hereinafter referred to as the“Companies”) in conformity with accounting principles and practices generally
accepted in Japan (hereinafter referred to as the “GAAP of Japan”), which differ incertain respects as to application and disclosure requirements from International
Accounting Standards. Also, the accompanying consolidated financial statements
have been prepared from the consolidated financial statements filed with the Ministry of Finance of Japan as required by the Securities and Exchange Laws of Japan.
Certain reclassifications of account balances have been made so as to present thefinancial statements in a form that is more familiar to readers outside Japan. Also,
certain reclassifications and changes, if any, have been retrospectively made to theconsolidated financial statements and their respective Notes, as of and for the year
ended 31st March, 2002 so as to conform with those applied to the consolidated
financial statements and their respective Notes, as of and for the year ended 31st
March, 2003.
The accounts and records of the Companies are maintained in Japanese yen.
The accompanying consolidated financial statements have been presented in Japanese yen and have also been presented in U.S. dollars by translating all Japanese
yen amounts using the rate of ¥120.20 to US$1. The presentation of such dollar
amounts is solely for the convenience of the reader and is not intended to imply thatyen amounts have been or could be converted, realized or settled in dollars at thator at any other rate.
2. Summary of Significant Accounting Policies(a) Principle of consolidation
The consolidated financial statements as at, and for the years ended, 31st March,
2002 and 2003, include the accounts of the Company and 13 subsidiaries and anaffiliate (see “Corporate Directory” at the last page of this annual report).
Effective as at 31st March, 2003, Chuo Denki Tsushin Kensetsu Co., Ltd. has
been consolidated, since it has become a subsidiary of the Company due to theadditional acquisition of its common stock capital by the Company. Chuo Denki
Tsushin Kensetsu Co., Ltd. also acquired (merged with) Tsuken Kiko Co., Ltd., aconsolidated subsidiary of the Company, on 1st January, 2003.
For the purposes of preparing the consolidated financial statements, all significant inter-company transactions, account balances and unrealized profits among
the Companies have been eliminated.
The accounts of other subsidiaries and affiliates were not consolidated, since
their aggregate sales, total assets, net income and retained earnings have little
affect upon the total consolidated results of operations and assets. Also, Investments in unconsolidated subsidiaries and affiliates are carried at cost due
to their immateriality.
(b) Point of sales—construction contracts
Construction contracts of the Companies are accounted for by the completedcontract method. The accumulated cost of uncompleted construction is shown as“Accumulated cost of construction in progress” and the related billings (advances
received) on uncompleted construction contracts are shown as “Advances received
on construction in progress” in the accompanying balance sheets.
(c) Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments, generally with original maturities of three months or less, that are readily convertible to known amountsof cash and are so near maturity that they present insignificant risk of changes invalue because of changes in interest rates.
(d) Short-term investments and investment securities
The GAAP of Japan requires the classification of short-term investments andinvestment securities (except for “unconsolidated subsidiaries and affiliates”) of the30

Nippon COMSYS Corporation - Annual Report 2003

Companies into three categories as follows:i) Debt securities that are expected to be held-to-maturity: carried at accumulated
cost using straight-line method.
ii) Other securities whose fair values are readily determinable: carried at fair value
with unrealized gains or losses included in Stockholders’ Equity as “Unrealized
gain (loss) on securities,” net of applicable income taxes.
iii) Other securities whose fair values are not readily determinable: carried at costusing moving-average method.
With respect to investments in unconsolidated subsidiaries and affiliates, the Companies are carrying their amounts at cost, determined by the moving average cost.

Exchange Laws of Japan, as amended to conform to certain reclassifications ofaccount balances made to present the consolidated financial statements, consistsof the following:(a) Debt securities that are expected to be held-to-maturity whose fair value wasreadily determinable as at 31st March, 2002 and 2003, were as follows:(e) Accumulated cost of construction in progress
In connection with (b) above, “Accumulated cost of construction in progress” isstated at cost based on an individual project basis.

Japanese government bonds(f) Property and equipment
Property and equipment are stated at cost. Depreciation is computed primarily by
the declining-balance method; while the straight-line method is applied to building
acquired after 1st April, 1998, both using estimated useful lives of assets principally
as follows:
Buildings and structures
2 to 50 years(g) Intangible assets and deferred charges
Intangible assets including software are carried at cost and amortized by the straightline method over the estimated useful lives of assets. The useful life of software
utilized in the Companies is estimated to be 5 years. Research and development
costs are charged to income as incurred.
(h) Leases
Financial leases that do not transfer ownership of the property to lessee are accounted for as transactions of rent. Under the GAAP of Japan, financial leases inwhich ownership of the property is deemed to be transferred to the lessee aretreated as capital leases, while it is permitted to treat others as operating leases if
certain “as if capitalized” information is disclosed in the notes to the lessee’s financial statements.
(i) Income taxes
Deferred tax assets and liabilities arising from temporary differences between financial and tax reporting are measured using the enacted tax rates and laws which will
be in effect when the differences are expected to reverse. In the preparation of theconsolidated financial statements, deferred tax assets and liabilities also arose fromthe elimination of unrealized profits among the Companies and the adjustment of
the allowance for doubtful receivables caused by the offsetting of inter-company
receivables and payables.
(j) Appropriations of retained earnings
Appropriations of retained earnings of the Company at each year-end are reflectedin the consolidated financial statements for the following year upon shareholders’approval (See Note 13).
(k) Net income and cash dividends per share
The computations of basic net income per share are based on the weighted average number of shares outstanding during each year. Diluted net income per shareassumes the dilution that could occur if convertible bonds were converted into
common stock. Effective from the financial year ended March 31, 2003, the GAAP
of Japan have required deductions of the amounts with which stockholders of common stock are not vested (e.g. bonus paid to directors and corporate auditors) fromnet income when computing net income per share.
Cash dividends per share are based on the cash dividends applicable to therespective years, including dividends to be paid after the end of the year.

31st March,
2002

31st March,
2003

31st March,
2003

Book
value

Fair
value

Book
value

Fair
value

Book
value

Fair
value

¥99

¥100

¥100

¥100

$832

$832

(b) Other securities whose fair value was readily determinable as at 31st March,
2002 and 2003, were as follows:
Millions of yen

Classification

Cost

Gross
Gross
Unrealized Unrealized
Gains
LossesStocks¥1,128
Bonds anddebentures 1,010
Others
1,491
Total¥3,62931st March, 2003
Fair
Value

Cost

Gross
Gross
Unrealized Unrealized Fair
Gains
Losses
Value

¥219

¥278

¥1,069¥1,041

¥126

20
1

8
180

1,022
1,312

168
1,157

2
1

¥240

¥466

¥3,403¥2,366¥129¥308 ¥ 859
—
137

170
1,021

¥445 ¥2,050

Thousands of U.S. dollars
31st March, 2003
Gross
Gross
Unrealized Unrealized Fair
Cost
Gains
Losses ValueClassification

StocksBonds and debentures
OthersTotal$ 8,661 $1,048
1,397
17
9,626
8

$2,562 $ 7,147— 1,4141,140 8,494$19,684 $1,073$3,702 $17,055(c) Proceeds from sales of other securities and realized gains/losses on such sales,
cost of the sales being determined by moving average method, for the year
ended 31st March, 2002 and 2003, were as follows:

Proceeds from sales
Realized gains
Realized losses

Millions of yen

Thousands of U.S. dollars

For the year ended
31st March

For the year ended
31st March

2002

2003

2003

¥324
9
38

¥608
39
28

$5,058324
233

Book value
Millions of yen
Due:

Bonds and debentures:Japanese government bonds
Corporate bonds
OthersBonds and debentures:Japanese government bonds
Corporate bonds
Others
Total

Within 1 yr.

Within 5 yr.

Within 10 yr.

After 10 yr.

¥ —
500
267

¥100
280
—

¥—
10
—

¥—
—
—

¥767

¥380

¥10

¥—

Within 5 yr.

Within 10 yr.

After 10 yr.

¥100
100
—

¥—
50
—

¥—
10
—

¥—
—
—

¥200

¥50

¥10

¥—

Thousands of U.S. dollars
31st March, 2003

Due: Within 1 yr.

Bonds and debentures:Japanese government bonds $ 832
Corporate bonds
832
Others—$1,664

Within 5 yr.

Within 10 yr.

After 10 yr.

$ —
416
—

$—
83
—

$—
—
—

$416

$83

$—

For the years ended 31st March, 2002 and 2003, the Companies made writedown of investment securities, whose fair value was readily determinable, amounting to ¥15 million and ¥189 million (US$ 1,572 thousand), respectively, following
an accounting policy of the Companies which requires a write-down of investment
securities whose fair value at the fiscal year’s end declined to an amount not morethan 50% of the book value.
4. Short-Term Bank Loans and Long-Term Debt
The weighted average interest rates of short-term bank loans as at the year
ended 31st March, 2002 and 2003, was approximately 0.9 per cent. and 1.4
per cent., respectively.
At 31st March, 2003, a short-term bank loan of a consolidated subsidiary amounting to ¥145 million (US$1,206 thousand) was secured. A summary of assets
pledged as collateral consisted of the following:
Millions of yen

Thousands of
U.S. dollars

¥26
4

$216
33

¥30

$249

Buildings and structures,
net of accumulated depreciationLand

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

0.3 per cent yen unsecured
convertible bonds due 2003
Less: Current portion
Total(d) Other securities whose fair value was not readily determinable as at 31st March,
2002 and 2003 mainly consisted of unlisted stocks amounted to ¥2,029 million and ¥2,935 million (US$24,418 thousand), respectively.
(e) Debt securities that are expected to be held-to-maturity and other securities
with maturity dates as at 31st March, 2002 and 2003 consisted of the following:

31st March, 2002

Due: Within 1 yr.

Total

31st March, 2002

Total

3. Short-term Investments and Investment Securities-other
Information that is required to be disclosed in the Notes to the consolidated financial
statements by the regulations and rules on disclosures under the Securities andThousands of
U.S. dollars

Millions of yen

Millions of yen
31st March, 2003

¥9,3129,312¥—

5. Accrued Severance Indemnities
Employees of the Companies are usually entitled to lump-sum severance indemnities determined by reference to their current basic rate of pay, length of service andconditions under which the termination occurs. With respect to directors and corporate auditors of the Companies, lump-sum severance indemnities are calculatedusing a similar formula and are normally paid subject to the approval at the shareholders’ meeting of each of the Companies.
The Company has a contributory and funded defined benefit pension plan, which
is pursuant to the Welfare Pension Insurance Law of Japan. The contributory pension plan covers a portion of the governmental welfare pension program, underwhich the Company and its employees make the contributions. As qualified andallowed under the GAAP of Japan, the plan assets include an employee retirement
benefit trust to which the Company contributed certain marketable equity securities
in July 2000.

Nippon COMSYS Corporation - Annual Report 200331

Consolidated subsidiaries provide for severance indemnities based on the liability if all eligible employees were to voluntarily terminate employment on the balance
sheet date. In addition, several subsidiaries have funds for tax qualified defined
benefit pension plans and a few subsidiaries have non-contributory and funded
defined benefit pension plans.
“Accrued severance indemnities” recognized in the consolidated balance sheet
as at 31st March, 2002 and 2003 were as follows:
Thousands of
U.S. dollars

Millions of yen

Projected benefit obligation
Fair value of plan assets

2002

2003

2003

¥(47,594)
35,813¥(48,200)
32,791$(400,998)
272,803

Unfunded benefit obligation
Unrecognized actuarial difference(11,781)
8,529(15,409)
13,644(128,195)
113,511

Net amount recognized¥ (3,252)¥ (1,765)$ (14,684)“Accrued severance indemnities” in the consolidated balance sheet as at 31st
March, 2002 and 2003 includes the provision for accrued severance indemnities
for directors and corporate auditors of the Companies amounted to ¥388 millionand ¥429 million (US$3,569 thousand), respectively.
Net pension cost of the plans included in the consolidated statements of income and retained earnings for the years ended 31st March, 2002 and 2003
were as follows:
Thousands of
U.S. dollars

Millions of yen
2002

Service cost
Interest cost
Expected return of plan assets
Amortization of unrecognizedactuarial difference
Amortization of unrecognizedprior service cost (negative)
Other

2003

¥ 2,270
1,309(89)$ 18,885
10,890
(741)

522

603

5,017

(596)
22

—
28

—
233

Net pension cost
¥3,395
Reversal of the prior service cost due to the
cut-off of the level of employee pension plan—

¥ 4,121$ 34,284(1,597)(13,286)¥3,395¥ 2,524$ 20,998

Unrecognized actuarial differences are amortized and charged to income using astraight-line method from the succeeding year of the incurrence over the averageremaining years of service of employees at the incurrence.
Significant assumptions used to calculate the above-mentioned amount wereas follows:• Allocation method of benefit obligation
Straight-line method• Discount rate
3.0%
• Expected rate of return on plan assets
3.0%• Unrecognized prior service cost is amortized at the incurrence.
• Unrecognized actuarial difference is amortized over 15 years from the succeeding fiscal year of the incurrence.
6. Contingent Liabilities
At 31st March, 2002 and 2003, contingent liabilities consisted of the following:
Millions of yen

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

32

Thousands of
U.S. dollars

2002

2003

2003

¥1,5901,032
98¥1,876—73$15,608—607¥2,720¥1,949$16,215

Nippon COMSYS Corporation - Annual Report 2003

Lease payments relating to financial leases accounted for as transactions of rent
amounted to ¥67 million and ¥57 million (US$474 thousand) for the years ended
31st March, 2002 and 2003, respectively.
Obligation (including the interest portion thereon) under financial leases at 31st
March, 2002 and 2003, were as follows:

Statutory tax rate of the Company
Effects of:
Expenses permanently not deductible for income tax purpose
Dividend income deductible for income tax purpose
Write-down of deferred tax assets (net) arising from a changeof statutory tax rate applicable to certain timing differences
Other, net

42.0%(As a Lessor)
One of the Companies leases mainly machinery and equipment by financial leases.
Future lease receipts, inclusive of interest, at 31st March, 2002 and 2003 wereas follows:

Effective tax rate

48.9%

4.6
(0.6)
1.9
1.0

Thousands of
U.S. dollars

Millions of yen
2002

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

Net deferred tax assets

2003

Millions of yen
31st March

2002

2003

2003

Due within one year
Due after one year

¥ 62
115

¥ 47
73

$391
607

¥177

¥120

$998

Total

2002

2003

2003

Due within one year
Due after one year

¥248
469

¥ 383
877

$ 3,186
7,296

¥717

¥1,260$10,482

Total

¥ 719
2,026
601

$ 5,982
16,855
5,000

706

—

—

467
1,196

368
723

3,061
6,015

6,295
(100)

4,437
(175)

36,913(1,456)

6,195

4,262

35,457

(90)
—
(3)

(100)
(482)
(8)

(832)
(4,010)
(66)

(93)

(590)

(4,908)¥6,102¥3,672$30,549

8. Leases(As a Lessee)
The Companies lease mainly machinery and equipment by financial leases. Pro
forma amounts of the acquisition costs (including the interest portion thereon), accumulated depreciation (depreciation expenses of the leased property were computed by the straight-line method over the respective lease terms) and net bookvalue of leased property as of 31st March, 2002 and 2003, which would havebeen reflected in the consolidated balance sheets if capitalized, were as follows:
Thousands of
U.S. dollars

31st March

2002

2003

2003

Acquisition costs
Accumulated depreciation

¥394
217

¥279
159

$2,321
1,323

Net book value

¥177

¥120

$ 998

31st March

2002

2003

2003

Lease fees received
Depreciation

¥383
212

¥398
285

$3,311
2,371

9. Segment Information
The Companies’ operating results consisted of two business segments. Effectivefrom 1st April, 2002, the Companies changed the method of segmentation, which
re-categorized mainly construction related business in the Information System Sector from “Other” to “Construction.” Conforming to the method mentioned above,
information by business segment required to be disclosed for the years ended andas of 31st March, 2002 and 2003, were summarized as follows:
Millions of yen
For the year ended/as of 31st March, 2002
Total

Corporate/
Eliminations Consolidated

Sales to customers
Intersegment sales/transfers¥216,575
—

7,258

7,258

(7,258)—

Total
Operating expenses

216,575
207,096

22,03420,946

238,609
228,042(7,258)(7,191)

231,351
220,851

Operating income¥ 9,479¥ 1,088 ¥ 10,567 ¥(67)¥ 10,500

AssetsDepreciation andamortization
Capital expenditures¥181,065¥ 9,511 ¥190,576 ¥—¥190,576

—
—

3,363
6,390

2,805
5,978

¥14,776 ¥231,351 ¥

558
412

3,363
6,390

—

Other

Sales to customers
Intersegment sales/transfers¥186,547
—

5,502

Total
Operating expenses

186,547
180,869

19,56518,700Operating income

¥

5,678

AssetsDepreciation andamortization
Capital expenditures¥156,876
2,890
2,565

Total

Corporate/
Eliminations Consolidated¥14,063 ¥200,610 ¥

¥

865 ¥

—

¥200,610

5,502(5,502)—

206,112
199,569(5,502)(5,449)200,610
194,120

6,543 ¥

(53)¥

¥ 9,652 ¥166,528 ¥—¥166,528

—
—

3,645
2,743

755
178

3,645
2,743

6,490

Thousands of U.S. dollars
For the year ended/as of 31st March, 2003
Other

Total

Corporate/
Eliminations Consolidated

Sales to customers $1,551,972 $116,996 $1,668,968 $— $1,668,968
Intersegment sales/transfers—
45,77445,774 (45,774)—

Thousands of
U.S. dollars

Millions of yen

Other

Construction

Construction

Lease fees received and depreciation charges for the years ended 31st March,
2002 and 2003 were as follows:

Construction

Millions of yen
For the year ended/as of 31st March, 2003

Thousands of
U.S. dollars

31st March

2003

¥ 878
2,542
506

Millions of yen

Thousands of
U.S. dollars

Millions of yen

Deferred tax assets and liabilities of the Companies, except for that relating toland revaluation mentioned in Note 11, as of 31st March, 2002 and 2003, primarily consisted of the following:

2003¥2,593
1,351(497)

Total, net

7. Income Taxes
The Companies are subject to corporate (national), inhabitant and enterprise (local)
taxes based upon taxable income, which resulted in statutory tax rates of approximately 42%, in aggregate, for the two years ended 31st March, 2002 and 2003.
The effective tax rate reflected in the accompanying consolidated statements ofincome and retained earnings differs from the statutory tax rate primarily due tosuch items as permanently non-deductible expenses and timing differences in recognizing certain income and expense items for financial and tax reporting purposes.
The differences between the statutory tax rate and effective tax rate reflected in
the consolidated statements of income for the year ended 31st March, 2003,
primarily consisted of the following:¥231,351

Total
Operating expenses
Operating income

1,551,972
1,504,734$

47,238 $

162,770 1,714,742 (45,774)
155,574 1,660,308 (45,333)
7,196 $

54,434 $Assets$1,305,125 $ 80,299 $1,385,424 $Depreciation andamortization
24,0436,281
30,324
Capital expenditures
21,3391,481
22,8201,668,968
1,614,975(441) $

53,993— $1,385,424——

30,324
22,82010. Shareholders’ Equity
The Commercial Code of Japan (the “Commercial Code”) provides that an amount
not less than 10 per cent of cash dividends and bonuses to directors paid asappropriations of retained earnings, as well as the amount of 10 per cent ofinterim cash dividends, be set aside in legal reserve until an aggregate amount ofadditional paid-in capital and the legal reserve equals 25 per cent of the amountof stated capital. The additional paid-in capital and the legal reserve may betransferred to stated capital by a resolution of the board of directors or used toreduce a deficit by shareholders’ resolution, but they are not available for dividend payment. On condition that the aggregate amount of additional paid-in capitaland the legal reserve remains equal to or exceeding 25 per cent of the amount ofstated capital, it is available for distributions by the resolution of the shareholders’meeting within a certain limit. The amount of the legal reserve of the Company
included in “Retained earnings” as at both 31st March, 2002 and 2003 was¥2,093 million (US$17,413 thousand).
Under the Commercial Code, the entire amount of the issue price of new sharesis required to be accounted for as “Common stock,” although a company may, byresolution of its board of directors, account for an amount not exceeding one-half of
the issue price of such new shares as “Additional paid-in capital.”
For the year ended 31st March, 2003, as allowed by the Commercial Code, theCompany retired 810 thousand shares of its common stock acquired and amounting to ¥677 million (US$5,632 thousand), and the authorized shares of the Company decreased by 810 thousand, from 247,763 thousand to 246,953 thousand,due to this retirement of common stock.

Nippon COMSYS Corporation - Annual Report 2003

33

Report of Independent Certified Public Accountants

11. Revaluation of Land for BusinessAt 31st March, 2002, land owned by the Company was revalued under the Land
Revaluation Law and related regulations. Net unrealized gains and losses resulting
from the revaluation were debited directly to shareholders’ equity as a negativerevaluation surplus after adding the related deferred tax liabilities as mentioned
bellow. The negative revaluation surplus will be credited as a gain or loss when apart of the land is sold.
The book value before and after revaluation and unrealized gains and losses
resulting from the revaluation at 31st March, 2002, in the aggregate, wereas follows:
Millions of yen

Book value:
Before revaluation
After revaluation
Unrealized—
Gains
Losses¥22,995
16,847
5,915
12,063

Net (loss)¥ (6,148)

The fair value for the revalued land mentioned above as of 31st March, 2003
has been reduced by ¥684 million (US$5,691 thousand) in the aggregate, but thebook value has not been restated, as allowed by the GAAP of Japan.
Deferred tax assets and liabilities relating to revaluation of land of the Company
as of 31st March, 2003, restated due to an applicable statutory tax rate, consistedof the following:
Millions of yen

Deferred tax assets:
Relating to unrealized losses
Less: Valuation allowanceThousands of
U.S. dollars¥4,825(4,825)$40,141(40,141)——

Deferred tax assets:
Relating to unrealized gains

2,366

19,684

Net: Deferred tax liabilities¥2,366$19,684

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

2003

2003

Foreign exchange gains¥ 154
Allowance for doubtful receivables(242)
Allowance for losses arising fromguarantees of loans(1,680)
Write-down of investments and other assets(142)
Amortization of newly
consolidation adjustments
304
Gain on reversal of the prior service cost—
Loss on sales of investments in securities—
Loss on liquidation of subsidiaries
and affiliates—
Special charge arising from employees’
retirement benefits
—
Other
(216)

¥ (170)(469)$ (1,414)(3,902)0(327)

0(2,720)

18
1,597
(146)

150
13,286(1,215)(490)(4,077)(1,234)
137(10,266)
1,140¥(1,822)¥(1,084)$ (9,018)

34

2002

Thousands of
U.S. dollars

Nippon COMSYS Corporation - Annual Report 2003

13. Subsequent Events(a) On 27th June, 2003, the shareholders of the Company approved the following
appropriations of retained earnings:

Cash dividends
Bonuses paid to directors
Reserve for cash dividends

Millions of yen

Thousands of
U.S. dollars

¥ 923
31
1,700

$ 7,679
258
14,143(b) On 27th June, 2003, the shareholders of the Company approved paving theway for the establishment of COMSYS Holdings Corporation, a parent company
under which the Company, Sanwa ELEC Co., Ltd. and TOSYS Corporation will
become wholly owned subsidiaries through the transfer of shares, as stipulated
in Article 364 of the Commercial Code of Japan.
A summary of the transfer of shares is as follows:i) A total of 145,977,866 shares of common stock in COMSYS Holdings Corporation will be issued, and these will be distributed to all shareholders ofrecord, including beneficial shareholders, listed in the shareholder registers of
the Company, Sanwa ELEC Co., Ltd. and TOSYS Corporation in the ratios
described below:a) Shareholders of the Company will receive one share of COMSYS Holdings Corporation common stock for every one share of the Company’scommon stock,b) Shareholders of Sanwa ELEC Co., Ltd. will receive 0.27 share of COMSYS
Holdings Corporation common stock for every one share of Sanwa ELEC
Co., Ltd. common stock, andc) Shareholders of TOSYS Corporation will receive 0.98 share of COMSYS
Holdings Corporation common stock for every one share of TOSYS Corporation common stock.
ii) Capital and Additional Paid-in Capital for COMSYS Holdings Corporationa) Capital: ¥10 billionb) Additional Paid-in Capital: The amount remaining after the aforementioned capital and the share transfer payment have been subtracted
from the combined net assets of the Company, Sanwa ELEC Co., Ltd.
and TOSYS Corporation on the day that the transfer of shares is executed. However, this may be adjusted by agreement among the Company, Sanwa ELEC Co., Ltd. and TOSYS Corporation if the state of their
net assets is deemed to require such adjustment.
iii) Share Transfer Payments
Every shareholder, including beneficiary shareholders, and every registered holder
of voting rights on the registers of the Company and TOSYS Corporation at theend of the day preceding the day on which shares will be transferred will receive
a share transfer payment of ¥5 for each share of the Company and TOSYS
Corporation. However, the amount of this transfer payment may be adjusted byagreement among the Company, Sanwa ELEC Co., Ltd. and TOSYS Corporation, or by COMSYS Holdings Corporation, if the state of the net assets of theCompany and/or TOSYS Corporation or their economic circumstances is deemed
to require such adjustment.

To the Board of Directors,
Nippon COMSYS Corporation
We have audited the accompanying consolidated balance sheets of Nippon COMSYS Corporation (the “Company”) and its consolidated subsidiaries as of 31st March, 2002 and 2003, and the related consolidated statements
of income and retained earnings and cash flows for each of the two years ended 31st March, 2003, all expressed inJapanese yen. Preparing these financial statements is the responsibility of the Company’s management. Our responsibility is limited to express an independent opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards, procedures and practices generally accepted andapplied in Japan, which require that we plan and perform the audits to obtain reasonable assurance that the financial
statements are free of material misstatement. Our audits include examining evidence supporting the amounts anddisclosures of the financial statements on a test basis, and also include assessing the accounting policies and significant estimates adopted and applied by the Company’s management, as well as evaluating the overall presentation of
the financial statements. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Nippon COMSYS Corporation and its consolidated subsidiaries as of 31st March,
2002 and 2003, and the consolidated results of their operations and cash flows for each of the two years ended
31st March, 2003, in conformity with accounting principles and practices generally accepted in Japan as described in Note 1 to the consolidated financial statements.
Without qualifying our opinion, we draw attention to the following:a)

As described in Note 9 to the consolidated financial statements, effective from 1st April, 2002, the Company
changed the method of segmentation, andb)

As described in Note 13(b) to the consolidated financial statements, the shareholders of the Company approved
paving the way for the establishment of COMSYS Holdings Corporation, a parent company under which theCompany, Sanwa ELEC Co., Ltd. and TOSYS Corporation will become wholly owned subsidiaries through thetransfer of shares.

The U.S. dollar amounts, presented solely for the convenience of the readers, have been translated on the basis as
described in Note 1 to the consolidated financial statements.

Masatoshi Yoshino

Eiji Miyashita

Hideo Niwa

Certified Public Accountants of JapanTokyo, Japan
27th June, 2003

Nippon COMSYS Corporation - Annual Report 2003

35

Supplemental Non-Consolidated Financial Information

Organization Chart

Nippon COMSYS Corporation
Years ended 31st March, 2002 and 2003

As of July 1, 2003

Thousands of
U.S. dollars

Millions of yen
2002

2003

2003

Change(%)¥219,206¥189,258$1,574,526–13.7%

Operating income

8,526

5,378

44,742–36.9%Net income

3,461

2,274

18,918–34.3%

Total assets

159,344

142,993

1,189,626–10.3%

Shareholders’ equity

102,883

102,124

849,617–0.7%

Net sales

NTT Business Division
NTT DoCoMo Business DivisionTokyo Metropolitan Business Division

Yen

U.S. dollars
Information Systems Business Division

Per share:
Net income

Architecture Business Department— Basic¥

25.48¥ 16.89— Diluted

24.41

Cash dividends

10.00

$

0.14

–33.7%

—

—

—%

12.00

0.10

20.0%

Senior Management Committee
Overseas DivisionCorporate Management Division

Note: For convenience only, the accompanying Japanese yen figures for 2003 have been translated into U.S. dollars at the rate of ¥120.20 to $1, the rate prevailing on 31st March, 2003.

Board of Directors
Safety & Quality Control Division

Net Sales(¥ Billions)250

Net Income(¥ Billions)

IT Management Division

10

200

8

150

6

100

4

President

COMSYS Holdings Corporation Preparatory Office

Statutory Auditors
50

Consolidated

Consolidated

2

Non-Consolidated

Non-Consolidated

99

01

02

Corporate Planning Division
Compliance Department

0

0

00

West Japan Headquarters

03
99

00

01

02

Public Relations Office03

Finance & Accounting Department
Auditing Department
Personnel Department

Total Assets(¥ Billions)200

Group-wide Business Reform Division

120

30

General Affairs Department

80

20

10

Consolidated

0

0

99

00

01

Nippon COMSYS Corporation - Annual Report 2003

02

Human Resources Department40

Non-Consolidated

Non-Consolidated

36

50

160

40

Consolidated

Net Income
per Share
(¥)

03

99

00

01

02

03

Nippon COMSYS Corporation - Annual Report 2003

37

Corporate Information

Corporate Directory

As of March 31, 2003

Nippon COMSYS Corporation
As of March 31, 2003

Company Name

Location

Head Office:Transfer Agent:

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

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

Consolidated Subsidiaries and Affiliates

Overseas Division:

Number of Employees:

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

Parent company
Consolidated subsidiaries
Total

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

Establishment:
1951

Common Stock:
Authorized: 246,953,000 shares
Issued: 134,454,252 shares

Number of Shareholders:
10,020

Paid in Capital:¥31,140 million

Stock listings:
Common stock—Tokyo, Osaka

Hokkaido

Akita
TohokuFukushima
Niigata
Hokuriku
Shinetsu

Tochigi
Kantonaka

TOKYO
Kansai

Tokai

Chugoku
Takamatsu
Shikoku

KyushuKantominami

Bangkok Liaison Office

Okinawa38

Nippon COMSYS Corporation - Annual Report 2003

¥120 million

99.8¥ 50 million

100.0¥ 90 million

92.6

Tokyo, JapanCOMSYS Techno Co., Ltd.

Tokyo, JapanCOMSYS Tec Co., Ltd.

Tokyo, Japan

Telecommunications engineering andelectrical engineering
Planning and consultation with regard
to information-processing technology
Construction of telecommunications facilities

3,398
1,361

Tokyo Tsuken Co., Ltd.

Tokyo, Japan

Construction of telecommunications facilities¥ 54 million

55.5

4,759

Nitto Tsuken Co., Ltd.

Tokyo, Japan

Construction of telecommunications facilities¥ 60 million

52.2

Taiei Seisakusho Co., Ltd.

¥ 60 million

49.7

COMSYS Tusan Co., Ltd.

Kanagawa, Japan Design, manufacturing, and sales oftelecommunications equipment
Tokyo, Japan
Telecommunications material sales and leasing¥ 60 million

100.0

COMSYS Business Service Co., Ltd.

Tokyo, Japan

Construction of telecommunications facilities¥304 million

100.0

COMSYS Net Corporation

Tokyo, Japan

Construction of telecommunications facilities¥ 50 million

100.0

COMSYS Tohoku Techno Co., Ltd.

Miyagi, Japan¥ 50 million

100.0

COMSYS Shinetsu Engineering Co., Ltd. Nagano, Japan

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

100.0

COMSYS Kansai Engineering Co., Ltd.

Osaka, Japan

Construction of telecommunications facilities¥ 50 million

100.0

COMSYS Kyusyu Engineering Co., Ltd.

Fukuoka, Japan

Construction of telecommunications facilities¥ 50 million

100.0

Chuo Denki Tsushin Kensetsu Co., Ltd.*Tokyo, Japan

Construction of telecommunications facilities¥ 50 million

100.0¥250 million¥ 60 million

91.0
35.0

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

Head Office
BranchPaid-in Capital

OT Engineering Co., Ltd.

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

Percentage
Owned (%)

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

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

Tokyo, Japan
Saitama, Japan

Civil engineering
Construction of telecommunications facilities

Overseas Affiliates
COMSYS Thailand Co., Ltd.

Bangkok, Thailand Technological consulting and engineering services B 15,000 thousand

48.0

Thai COMSYS & Jackson Co., Ltd.

Bangkok, Thailand Technological consulting and engineering services B 2,000 thousand

49.0

COMSYS Philippines, Inc.

Manila, Philippines Technological consulting and engineering services P 12,500 thousand

30.0

CMC Engineering SDN. BHD.

Kuala Lumpur,
Malaysia

30.0

Technological consulting and engineering services RM1,053 thousand* Our further acquisition of shares in Chuo Denki Tsushin Kensetsu Co., Ltd. means that it is now a subsidiary of ours, and subject to inclusion in our consolidated
results. Tsuken Kiko Co., Ltd., which was previously a subsidiary of Nippon COMSYS, was fully merged with Chuo Denki Tsushin Kensetsu on January 1, 2003.

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

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

Printed in Japan on recycled paper made from 100% post-consumer materials.