Financial Report
Year ended June 30, 2014

Company Profile

Nippon Koei Co., Ltd. established in 1946, specializes in engineering
consulting and electric power engineering. Since its foundation, the Company
has adhered to a policy of contributing to society through technology.
Our engineering consulting services, provided by the Consulting
Administration Group, draws on the technical expertise of specialists in diverse
fields. Since our first overseas venture, a hydroelectric power project inMyanmar in 1954, we have participated in a broad variety of sophisticateddevelopment projects worldwide.
The Engineering Administration Group spearheads the Company’s electric
power engineering business. Here, we provide a complete engineering package,from surveys and designs to the installation of a wide range of equipment,
including power stations and substations, transmission lines, and end-user
equipment. We are active both in Japan and overseas.
Committed to responsible corporate citizenship, Nippon Koei and its
employees dedicate their efforts to creating comfortable living environmentsfor people around the world.

CONTENTS
Financial Highlights .................................................................................................................. 1
Consolidated Business Report for Fiscal Year Ended June 30, 2014 .......................................... 2
Consolidated Balance Sheet .................................................................................................... 10
Consolidated Statement of Operations and Comprehensive Income ................................... 12
Consolidated Statement of Changes in Equity ....................................................................... 13
Consolidated Statement of Cash Flows .................................................................................. 14
Notes to Consolidated Financial Statements ......................................................................... 15
Nonconsolidated Balance Sheet .............................................................................................. 42
Nonconsolidated Statement of Operations ............................................................................ 44
Nonconsolidated Statement of Changes in Equity ................................................................ 45
Notes to Nonconsolidated Financial Statements ................................................................... 46
Corporate Information ............................................................................................................ 56
Major Nippon Koei Group Companies ................................................................................... 58

Financial Highlights

Consolidated
Thousands of
U.S. Dollars

Millions of Yen

12-month3-month12-month

June 30, 2014

June 30, 2013

June 30, 2014

Net sales ................................................................

¥79,193¥6,897$781,304

Net income (loss) .................................................

2,998(1,914)29,578Net income (loss) per share (yen/dollars) ...........

39.61(25.35)

0.39

Total assets ...........................................................

76,14571,451

751,233

Equity ������������������������������������������������������������������

47,83543,671

471,932

As of June 30

Nonconsolidated
Thousands of
U.S. Dollars

Millions of Yen

12-month3-month12-month

June 30, 2014

June 30, 2013

June 30, 2014

Net sales ................................................................

¥59,308¥5,326$585,122

Net income (loss) .................................................

2,199(1,233)

21,695

Net income (loss) per share (yen/dollars) ...........

29.05(16.33)0.29

Total assets ...........................................................

68,43966,340675,207

Equity ������������������������������������������������������������������

43,53640,933

429,519

As of June 30

Notes: 1. Per share amounts are based on the weighted average number of shares outstanding during each period.
2.	The dollar amounts in this report represent translations of yen, for convenience only, at the rate of ¥101.36 = US$1, the rateof exchange at June 30, 2014.
3.	The Company, in accordance with the resolution of the 68th general shareholders’ meeting held on June 27, 2013, changed
its fiscal year-end from the previous March 31 to June 30. Consequently, the previous fiscal period represents an irregular3-month accounting period from April 1, 2013 to June 30, 2013.

1

Consolidated Business Report for Fiscal Year Ended June 30, 2014
1. Overview of Performance and Cash Flows(1) Performance
Due to the change of the fiscal year-end, the previous fiscal year was an irregular 3-month accounting period,
and thus no comparative information with the previous fiscal year has been stated.
During the consolidated fiscal year under review (from July 1, 2013 to June 30, 2014), the Japanese economy
remained on a recovery trend marked by increasing public investment projects and signs of improvement incorporate production activities backed by steadily growing domestic demand led by personal consumption.
The Nippon Koei Group’s domestic consulting operations remained favorable thanks to growing demand mainly
for large-scale management projects focused on PPP (Public-Private Partnership) and CM (Construction
Management), nationwide disaster prevention and disaster mitigation projects, and maintenance andmanagement operations for deteriorated social infrastructure – all in spite of declining demand for existing postquake reconstruction efforts in the Tohoku region. Our overseas operations remained steady, benefiting fromgrowing demand for infrastructure projects in Asia, Latin America, and other developing countries. In ourelectric power engineering operations, business conditions continued to be harsh mainly due to a nationalenergy policy revision and reduced new capital expenditure by electric power companies, our main customers.
Against this backdrop, the Group, under the Medium-term Management Plan (From April 2012 to June 2015),
which sets as its basic policies (1) enhancement of global operations, and (2) exploration and formulation of
new business domains, continued to maintain the current scale of its existing operations while engaging in new
initiatives including “the development and management of overseas bases and the introduction of multidomestic operations,” “the enhancement of the existing business sectors and expansion of business domains,”
and “the exploration of new business models including new initiatives in business operations,” in addition tosteadily putting new and necessary measures into practice. Additionally, we have achieved some positive resultsin our “assurance of work-life balance” initiative.
As a result, for the fiscal year ended June 30, 2014, consolidated orders received were ¥92,486 million, while
consolidated net sales were ¥79,193 million.
In terms of profit, domestic consulting operations showed significant improvement associated with increasing
net sales. Operating income stood at ¥4,256 million, however, due to a rising cost-to-sales ratio in overseas
consulting operations and higher selling, general and administrative expenses, along with a severe orderreceiving environment in electric power engineering operations in the first half of the fiscal period under review
and intensified cost competition. Net income was ¥2,998 million, because subsidiaries recorded negative figures
for income taxes-deferred following the application of tax effect accounting.
The performance for each segment is outlined below.

Domestic Consulting Operations
With orders received remaining steady as stated above, we received steady orders for post-quake reconstruction
efforts and duly conducted them. In addition, increase was seen in orders received for disaster prevention anddisaster mitigation projects, including nationwide measures against tsunami and earthquake resistance. Orders
received also increased for administrative support type projects focused on post-quake reconstruction andmaintenance and management projects for long-life and functional preservation at public facilities. As a result,for the fiscal year ended June 30, 2014, orders received were ¥46,618 million, while net sales were ¥41,817
million. Segment profit totaled ¥2,526 million.

Overseas Consulting Operations
The Company continued to pursue global expansion thanks to steadily growing demand for infrastructuredevelopment in Myanmar and other Southeast Asian countries, India, Latin America, Middle East, Africancountries, and other developing countries. With the conclusion of the large-scale railway project contracts in
Bangladesh and India, orders received were ¥30,023 million and net sales were ¥20,947 million. Segment profit
came to ¥494 million.

2

Power Engineering Operations
While harsh conditions prevailed among the electric power companies, our main customers, as stated above, theCompany stepped up its sales efforts, resulting in the receipt of orders for works such as repair projects for adeteriorated hydropower station and a full scale renewal of a hydropower station taking advantage of the Feedin Tariff Scheme from a new domestic customer. With the Company’s strengthened efforts for the mini-hydroprojects in Japan and overseas in addition to the above, orders received amounted to ¥15,832 million. However,as orders received rebounded in the second half of the fiscal period under review, net sales were ¥14,170 million.
Segment profit came to ¥1,256 million.

Real Estate Leasing Operations
Net sales from our real estate leasing operations reached ¥1,126 million, while segment profit was ¥846 million.

(2) Cash Flows
Cash and cash equivalents at the end of the fiscal year under review totaled ¥8,465 million, decreasing ¥3,149 million overthe previous fiscal period. The factors behind this increase included the following.
Net cash provided by operating activities totaled ¥1,340 million (compared to a net inflow of ¥14,357 million during theprevious fiscal period). This was due to factors such as income before income taxes and minority interests was ¥4,562
million despite an increase of ¥5,178 million in trade accounts receivable.
Net cash used in investing activities totaled ¥4,559 million (compared to a net outflow of ¥772 million during the previous
fiscal period). This was due primarily to purchases of property, plant and equipment.
Net cash provided by financing activities amounted to ¥62 million (compared to a net outflow of ¥8,539 million during
the previous fiscal period). This was due primarily to proceeds from long-term debt, etc.
The table below shows trends in cash flow-related indicators for the Group.
Reference: Trends in Cash Flow-related Indicators

Capital-to-asset ratio (%) .....................
Capital-to-asset ratio
on market value basis (%) ................
Interest-bearing
debt-to-cash flow ratio (years) .........
Interest coverage ratio (times) ............

Fiscal Year
Ended March2011

Fiscal Year
Ended March2012

Fiscal Year
Ended March2013

Fiscal Period
Ended June2013

Fiscal Year
Ended June
2014

58.1

54.5

55.0

60.8

62.4

32.0

27.4

34.5

39.2

50.0

1.6
52.3

—
—

3.1
73.7

0.2
1,519.0

1.8
29.3

Capital-to-asset ratio: shareholders’ equity / total assets
Capital-to-asset ratio on market value basis: market capitalization / total assets
Interest-bearing debt-to-cash flow ratio: interest-bearing debts / cash flow
Interest coverage ratio: cash flow / interest payment
Notes: 1. All figures are calculated on the basis of consolidated financial figures.
2. Market capitalization is computed on the basis of the number of shares issued, excluding treasury stocks.
3. Cash flow here means operating cash flow.
4. Interest-bearing debt here comprises all debts included in the balance sheet on which interest is paid.
5.	The interest-bearing debt-to-cash flow and interest coverage ratios for the fiscal year ended March 31, 2012, were negative
as indicated by “—.”
6.	Due to the change of the fiscal year-end, the consolidated fiscal period ended June 30, 2013 is an irregular 3-monthaccounting period. Accordingly, the interest-bearing debt-to-cash flow ratio and interest coverage ratio are based on cash
flows and interest payments for the 3-month period.

3

2. Production, New Orders and Sales
Due to the change of the fiscal year-end, the previous fiscal year was an irregular 3-month accounting period,
and thus no comparative information with the previous fiscal year has been stated.

(1) New Orders
Current Consolidated
Fiscal YearBusiness Segment

Change onPrevious Year

(Millions of yen)

New Orders
Domestic consulting operations ..............................
Overseas consulting operations ..............................
Power engineering operations .................................
Real estate leasing operations .................................
Other business operations .......................................
Total new orders ..................................................
Outstanding orders
Domestic consulting operations ..............................
Overseas consulting operations ..............................
Power engineering operations .................................
Real estate leasing operations .................................
Other business operations .......................................
Total orders on hand ...........................................

(%)¥46,618
30,023
15,832—
13
92,486

—
—
—
—
—
—

27,32344,218
11,216—
4¥82,761

—
—
—
—
—
—

Notes: 1. Figures above do not include consumption tax.
2.	The above figures are related to transactions with non-Group organizations; they do not include internal transactions
between Group segments or the transfer amounts involved.

(2) Sales Performance
Current Consolidated
Fiscal YearBusiness Segment

Change onPrevious Year

(Millions of yen)Domestic consulting operations ..............................
Overseas consulting operations ..............................
Power engineering operations .................................
Real estate leasing operations .................................
Other business operations .......................................
Total sales ..............................................................

(%)¥41,817
20,947
14,1691,126
1,134¥79,193

—
—
—
—
—
—

Notes: 1. Production status is not stated due to difficulties in defining consolidated group production performance.
2. Transactions between business segments are offset and eliminated.
3. Amounts above do not include consumption tax.
4. Sales to major customers as a proportion of total sales are given as follows.

Customer
Ministry of Land, Infrastructure,
Transport and Tourism .....................
Japan International
Cooperation Agency ..........................
Tokyo Electric Power
Company, Incorporated ....................
4

Current Consolidated
Fiscal Year
Amount(Millions of yen)

Proportion(%)

Previous Consolidated
Fiscal Year
Amount(Millions of yen)

Proportion(%)¥16,632

21.0

¥246

3.6

9,004

11.4

508

7.4

6,028

7.6

873

12.7

3. Future Challenges(1) Management Policy
The Nippon Koei Group takes the management philosophy “Act with integrity & Contribute to society throughtechnology and engineering.” Guided by the slogan “Challenging mind, Changing dynamics,” the Group isaiming to realize its management philosophy.
Looking ahead, under this management philosophy and slogan, we see that the domestic market environment is
expected to stay strong in the short term and that the growth of emerging markets in Asia and other parts of theworld is likely to fuel demand for overseas infrastructure construction over a medium- and long-term
perspective. Amid this environment, we will continue to make further inroads into the global market.
Accordingly, while maintaining a secure technical foundation in Japan (construction consulting and engineeringbusinesses), the Group will focus on the expanding infrastructure development market in emerging markets tosignificantly expand its businesses. On the other hand, to attain sustainable growth, the overseas bases shouldtake the initiative of exploring and forming new business domains.
In line with this long-term goal, the NK Group has been addressing the key challenges listed below, based on thethree-year Medium-Term Management Plan (from April 2012 to June 2015).
(1) Development and management of overseas bases (introduction of multi-domestic management)(2) Enhancement of the existing business sectors and expansion of business domains(3) Exploration of new business models including new initiatives in project management(4) Enhancement of the work-life balance
In view of the Medium-Term Management Plan, we will address the key challenges in the next fiscal year (fromJuly 2014 to June 2015), the last fiscal year of the plan.
1) Development and management of overseas offices and/or group companies (introduction ofmultidomestic management)
Overseas offices and/or group companies will be established and/or enhanced in the four major regional markets(Asia, the Middle East and North Africa, Latin America, and Sub-Saharan Africa), and the business will bepromoted based on the sales and production structure focusing on region-based marketing. We will also
promote our business not only by supporting the technology, quality, and safety sides, but also by striving tostrengthen governance, thorough implementation of risk management, procurement of global human resources,
and reinforcement of management from our central base in Tokyo, while making efforts to aggressively engage
in the non-ODA market.
2) Enhancement of the existing business sectors and expansion of business domains
In response to drastic changes occurring in the existing business sectors where the Group operates, we intend to
identify business domains to expand each business operation, develop technologies, and employ, train andstrengthen human resources, in order to steadily expand our businesses. Specifically, our domestic consulting
operations will focus on disaster prevention and disaster mitigation projects and maintenance and management
operations associated with the long-life of social infrastructure, while overseas consulting operations willconcentrate on railway and urban development projects in emerging countries and power engineering
operations on expanding the mechanical and electromechanical consulting and projects to renew deteriorated
facilities.
3) Exploration of new business models including new initiatives in project management
We will promote the development of new businesses led by the Business Promotion Headquarters by taking
advantage of the Group’s one-stop service in an attempt to build up an energy segment focused on hydroelectric
projects as our key new business model. We will also work on developing a new assets-held-type technicalservice model, such as a model for investment in overseas infrastructure funds and the provision of technicaladvisory services to the funds.

54) Enhancement of the work-life balance
We will continue with our past measures led by the Work-Life Balance Promotion Committee, while addressing
new issues, as well. We will also further strengthen our efforts to develop a working environment appropriate toeach workplace in each segment, raise the awareness of employees centering on managerial personnel, andrevise operation processes to improve the balance between work and other aspects of employees’ lives.
Based on the above policies, the Group will proactively engage in business operations and address these issues
in an effort to improve our performance further.

(2) Basic Policy Governing Corporate Decision-Makers on Financial Affairs and Operations
Our basic policy governing corporate decision-makers on financial affairs and operations (GovernancePrinciples) is as detailed below.
1) Governance Principles
As a publicly listed company allowing its shares to be traded freely, we believe that whether or not we will sell sharesin response to a particular person’s attempt to acquire a large number of shares (an attempt to acquire a large
number of shares) should be determined ultimately by our shareholders.
However, we are proud of our company’s track record as a good corporate citizen. The Company has been charged
with fulfilling a social mission and public works projects, including construction consulting. The power of our brandis backed by a wide range of technological expertise, years of experience, and a rock-solid performance record. It
would be impossible to manage the Company, improve its corporate value, or bring profit to its shareholders without
a good understanding of everything the brand stands for or without the relationship of mutual trust that has been
built between the Company and its customers, employees, suppliers, and other stakeholders in Japan and abroad.
We believe that, in the event of a takeover bid, any party attempting to acquire a large number of shares (the bidder)should provide shareholders with all the information necessary for them to make a sound decision.
2) Special measures for realization of the Basic Policy
At the Company, we implement the following special measures in line with the Governance Principles describedin 1) above(i) Medium-term goals
Our medium-term goals and specific measures under our Medium-Term Management Plan are as described in
the section entitled “(1) Management Policy.”(ii) Enhancing corporate governanceWorking to boost the corporate value of the Company and the Group as a whole, we are continually improving
corporate governance by strengthening management oversight, ensuring transparency, and establishing a systemthat will enable us to quickly perform our operations. We also focus on compliance as well as risk management
to enhance the effectiveness of internal controls and have adopted a corporate auditor system. The Board of
Directors provides oversight of our operations, while the Board of Corporate Auditors audits the directors’
activities.
3) Preventing an undesirable takeover in accordance with the Basic Policy
In line with the Governance Principles described in 1) above, we maintain an anti-takeover policy (hereinafter
the “Policy on Substantial Acquisition of Shares”) that is intended to prevent undesirable control over decisions
on our financial and operational policies.
The Policy on Substantial Acquisition of Shares generally applies to any bidder attempting to acquire a large
number of Nippon Koei shares in a bid to control 20% or more of the voting rights held by a certain group ofshareholders or acquiring enough shares to change the balance of power to ensure that a certain group ofshareholders has 20% or more of the voting rights. The Policy requires the bidder to (1) provide the Board of
Directors with all relevant information including written notification 6 declaring his/her exact intentions inadvance, and (2) begin purchasing shares only after the elapse of a tender assessment period to be specified by
the Company’s Board of Directors.
The Policy on Substantial Acquisition of Shares was first introduced upon resolution by the Board of Directors

6

in May 2006, after which the Board voted to partially revise and continue it in June 2007. The Policy was laterpartially revised upon approval of shareholders at the 63rd general shareholders’ meeting held in June 2008, andwas again partially revised upon approval of shareholders at the 66th general shareholders’ meeting held in June
2011 and at the 69th general shareholders’ meeting held in September 2013.
The details of the Policy on Substantial Acquisition of Shares have been made available on the Company website(http://www.n-koei.co.jp/).
4) Board of Directors’ decision concerning the measures described in 2) and 3) above and the reason
The measures described in 2) above are in line with the Governance Principles described in 1) above, since they
were implemented for the purpose of enhancing corporate value and carried out in the common interests of ourshareholders. These measures emphasize protecting the interests of our shareholders over protecting thecorporate directors from being replaced.
The measures described in 3) above (the Policy on Substantial Acquisition of Shares) are in line with theGovernance Principles described in 1) above. It protects the interests of our shareholders over protecting thecorporate directors from being replaced in the following ways:a. The Policy on Substantial Acquisition of Shares meets the three basic requirements set forth in the Guidelines
Regarding Takeover Defense for the Purposes of Protection and Enhancement of Corporate Value andShareholders’ Common Interests published by the Ministry of Economy, Trade and Industry (METI) and theMinistry of Justice on May 27, 2005. It also incorporates a June 30, 2008, report entitled “Proper Role of
Takeover Defense Measures in Light of Changes in Various Environments” published by METI’s Corporate
Value Study Group.
b. The Policy enables our shareholders to make an informed decision on whether a takeover would be beneficial,prevents any apparent infringement on the Company’s corporate value and is in the best interest of Nippon
Koei and its shareholders.
c. The Rules on Substantial Acquisition of Shares and the necessary conditions for taking countermeasures arereasonable in light of our aim to maintain and enhance the Company’s corporate value and protect theinterests of its shareholders.
d. The Rules on Substantial Acquisition of Shares and the necessary conditions for taking countermeasures areconcrete and clear enough to make it possible for the shareholders, investors and potential bidders to makefair predictions about the future.
e. The policy was enacted by a vote of the shareholders at a shareholders’ meeting. The Company’s Board of
Directors can convene a shareholders’ meeting to verify the shareholders’ intentions to implement a
countermeasure or not. Decisions about whether to maintain, rescind or alter the policy, made in the form ofa resolution to be voted on at a general shareholders’ meeting, will ensure that the wishes of the shareholders
are reflected in company policy.
f. The policy establishes objective and clear conditions for taking countermeasures. It also establishes priorconditions needed to implement countermeasures, requiring that the Company’s Board of Directors consult
its independently established ad hoc committee in advance concerning the initiation of countermeasures.
Only after carefully considering the recommendations of the committee will the Board make its final decision
on implementing counter-takeover measures. The Policy on Substantial Acquisition of Shares ensures that all
decisions of the Board regarding countermeasures are objective and reasonable.
g. The policy empowers the ad hoc committee to seek the advice of independent experts at the Company’s
expense. The policy goes to such great lengths that it leaves no room for doubt about the fairness andobjectivity of the ad hoc committee’s recommendations.
h. The Policy on Substantial Acquisition of Shares is not intended to be a dead-hand takeover defense and may
be abolished subject to a vote at the Company’s shareholders’ meeting or at a Board of Directors’ meeting
comprised of directors elected at a shareholders’ meeting. It is not a slow-hand takeover defense either, since
the term of the Company’s Board members is one year.

74. Business Risks
The following are matters that could significantly affect the judgment of investors, from among matters related to
Overview of Performance and Cash Flows and Financial Section, etc. stated in the Consolidated Business Report.
Items related to future events within the text are the Group’s judgment as of June 30, 2014.

(1) Uneven Annual Distribution of Performance Results
The primary operations of the Group include domestic and overseas construction consultancy and powerengineering and equipment manufacturing. In particular, the domestic construction consultancy operations
entail national and local government projects whose orders come in as a cluster toward the end of their fiscal
year (March). As a result, approximately 70% of Group sales tend to occur during the period from January
through March.

(2) Dependence on Major Customers
Our domestic and overseas construction consultancy operations rely on national and local government contracts
and projects based on the Japanese ODA budget for some 90% of sales. Sales performance on the domestic front
tends to be affected by trends in government spending, while our international orders are a reflection of theJapanese ODA budget.
Since about 50% of our power engineering operations are for the Tokyo Electric Power Company, Incorporated(TEPCO), our sales performance is largely dictated by capital investments by TEPCO.

(3) Defect Liability for Deliverables
The Group has introduced ISO9001 Quality Assurance System under the management philosophy of “Act withintegrity & Contribute to society through technology and engineering,” to ensure that the Group will always
strive to secure and improve quality. If the Group assumes gross responsibility attributable to defects indeliverables it has delivered to a customer, the Group’s performance could be affected.

(4) Legal Restrictions
The Group strives for strict legal compliance and internal education under the “Code of Conduct” and is subject
to legal restrictions under the Antimonopoly Act, Construction Business Act, Act against Delay in Payment of
Subcontract Proceeds, Etc. to Subcontractors, etc. in Japan, and various relevant laws and regulations overseas.
If any situation entailing a potential breach of laws and regulations arises, the Group’s performance could be
affected.

5. Operationally Significant Contracts
The Group reports no operationally significant contracts.

6. Analysis of Financial Status, Management Performance and Cash Flow Status
Below is an analysis of the Group’s financial status and management performance as well as its cash flow status
for the consolidated fiscal year under review.

(1) Analysis of Financial Status
Total assets under review amounted to ¥76,145 million, up ¥4,694 million over the previous period.
The main causes for this increase were a ¥263 million increase in current assets and a ¥3,459 million increase inproperty, plant and equipment and a ¥972 million increase in investments and other assets.
The increase in current assets was due primarily to a ¥3,149 million decrease in cash and cash equivalents, a¥5,196 million increase in trade notes receivable and trade accounts receivable, a ¥1,906 million decrease ininventories, and a ¥1,097 million decrease in deferred tax assets, as well as a ¥121 million increase in advancepayments-trade, a ¥371 million increase in accounts receivable-other, and a ¥93 million increase in prepaid
expenses, included in other of current assets.
The increase in property, plant and equipment was due primarily to a ¥3,291 million increase in land. The
increase in investments and other assets was due primarily to a ¥503 million increase in investment securities,
and a ¥652 million increase in deferred tax assets.

8

Liabilities under review amounted to ¥28,310 million, up ¥530 million over the previous period.
The main causes for this increase were an increase of ¥1,152 million in current liabilities, despite a ¥622 million
decrease in long-term liabilities.
The increase in current liabilities was due primarily to an ¥848 million increase in trade notes payable and tradeaccounts payable, a ¥1,533 million decrease in accrued expenses, a ¥681 million increase in income taxes
payable, a ¥1,730 million decrease in advances received, and a ¥100 million increase in allowance for anticipatedproject loss as well as a ¥296 million increase in accounts payable-other, a ¥1,708 million increase in accrued
consumption tax, and a ¥587 million increase in deposits received, included in other of current liabilities.
The decrease in long-term liabilities was due primarily to a ¥207 million increase in long-term debt, a ¥331
million increase in deferred tax liabilities and a ¥1,058 million decrease in net defined benefit liability.
Equity (net assets) increased by ¥4,164 million from the total of previous period to ¥47,835 million.
The main causes behind this increase were an increase of ¥2,844 million in retained earnings, a ¥475 million
increase in unrealized gain on available-for-sale securities and a ¥694 million increase in defined retirement
benefit plans.

(2) Performance Analysis
Due to the change of the fiscal year-end, the previous fiscal year was an irregular 3-month accounting period,
and thus no comparative information with the previous fiscal year has been stated.
Net sales for the fiscal year under review came to ¥79,193 million.
Operating income came to ¥4,256 million. The cost of sales ratio was 74.8%, while the ratio of selling, generaland administrative expenses to net sales was 19.8%. These results brought the ratio of operating income to net
sales to 5.4%.
Other income—net amounted to ¥306 million, due mainly to income primarily from interest income anddividend income exceeding expenses including interest expense and foreign currency exchange loss.
As a result, income before income taxes and minority interests totaled ¥4,562 million, and net income after
deducting current income taxes, income taxes for prior periods, deferred income taxes, and minority interests,
reached ¥2,998 million.
Net income per share came to ¥39.61.

(3) Analysis of Cash Flow Status
An analysis of cash flow status for the fiscal year under review is provided in the section entitled “(2) Cash flows”
under “1. Overview of Performance and Cash Flows” in the Consolidated Business Report.

Noriaki Hirose
President:

9Co n s ol i d ated B a lanc e S h eet
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
June 30, 2014

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS

June 30, 2014

June 30, 2013

June 30, 2014

¥ 8,465¥11,614$ 83,514

Trade notes .........................................................

79

75

779

Trade accounts ...................................................

13,712

8,520

135,280

Allowance for doubtful accounts ......................

(27)

(181)

(266)

Inventories (Note 4) .............................................

10,111

12,01799,753

Deferred tax assets (Note 13) ..............................

1,449

2,546

14,296

Prepaid expenses and other current assets ........

2,961

1,896

29,213

Total current assets ............................................

36,75036,487362,569

Land ......................................................................

17,247

13,956

170,156

Buildings and structures .....................................

21,19920,393

209,146

Machinery and equipment ..................................

2,486

2,607

24,526

Furniture and fixtures .........................................

2,676

2,695

26,401

Lease assets ..........................................................

265

227

2,614

Construction in progress .....................................

9

13

89

Total ....................................................................

43,88239,891

432,932

Accumulated depreciation ...................................

(17,294)(16,762)(170,619)

Net property, plant and equipment ...................

26,58823,129262,313

8,287

7,784

81,758

associated companies (Note 7 and 16(5)(b)) ....

1,479

1,286

14,592

Goodwill ...............................................................

233

542

2,299

Receivables in bankruptcy ...................................

123

123

1,213

Deferred tax assets (Note 13) ..............................

1,404

752

13,852Other assets ..........................................................

1,623

1,525

16,011

Allowance for doubtful accounts ........................

(342)

(177)

(3,374)

Total investments and other assets ...................

12,807

11,835

126,351TOTAL ....................................................................

¥76,145¥71,451$751,233

CURRENT ASSETS:
Cash and cash equivalents (Note 16) ..................
Receivables (Note 16):

PROPERTY, PLANT AND
EQUIPMENT (Notes 5, 6, and 10):INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 3 and 16) ..............
Investments in and advances
to unconsolidated subsidiaries and

See notes to consolidated financial statements.

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

Millions of Yen

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short‑term borrowings (Note 8) .........................
Current portion of long-term debt (Note 8) .......
PayablesTrade notes .........................................................
Trade accounts ...................................................
Accrued expenses .................................................
Income taxes payable ...........................................
Advances received ................................................
Accrued bonuses ..................................................
Allowance for anticipated project loss ................
Other current liabilities .......................................
Total current liabilities ....................................
LONG-TERM LIABILITIES:Long-term debt (Note 8) ......................................
Provision for directors’
retirement benefits (Note 9) ..............................
Allowance for environmental measures .............
Net defined benefit liability (Note 9) ..................
Asset retirement obligations (Note 11) ...............
Deposits received (Note 10) .................................
Deferred tax liabilities (Note 13) .........................
Total long-term liabilities ................................

June 30, 2014

June 30, 2013

June 30, 2014

¥100
181

¥10
211

$987
1,786

303
3,058
1,601
843
7,587
1,061
205
5,590
20,529

490
2,023
3,134
162
9,317
895
105
3,030
19,377

2,989
30,17015,795
8,317
74,852
10,4682,022
55,150202,536

1,768

1,561

17,443

59
34
3,248
54
1,598
1,020
7,781

59
34
55
1,699
689
8,403

582
335
32,044533
15,766
10,06376,7667,393
6,209
36,367

7,393
6,209
33,52372,93861,257358,790(3,344)(3,435)(32,991)

4,306

COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 15, 17 and 18)
EQUITY (Notes 12 and 20):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares on June 30, 2014 and 2013 ....
Capital surplus .....................................................
Retained earnings ................................................
Treasury stock—at cost
10,793,274 shares on June 30, 2014
and 11,085,421 shares on June 30, 2013 ..........
Accumulated other comprehensive income:Unrealized gain on
available-for-sale securities .............................
Deferred loss onderivatives under hedge accounting ...............
Foreign currency translation adjustments .......
Defined retirement benefit plans ......................
Total ....................................................................
Minority interests .................................................
Total equity .......................................................

1,365

890

13,467

(176)
(14)
(269)
47,531
304
47,835

(186)
(21)
(963)
43,410261
43,671(1,736)(138)(2,654)
468,933
2,998
471,931

TOTAL ....................................................................

¥76,145¥71,451$751,233

11

Consolidated Statement of Operations and Comprehensive Income
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2014

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

NET SALES ...........................................................
COST OF SALES ...................................................
Gross profit ......................................................
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (Note 14).......
Operating income (loss) ..................................
OTHER INCOME (EXPENSES):Interest and dividend income .............................
Interest expense ...................................................
Foreign currency exchange loss...........................
Other-net ...............................................................
Other income-net .............................................
INCOME (LOSS) BEFORE INCOME TAXESAND MINORITY INTERESTS .........................
INCOME TAXES (Note 13):
Current .................................................................
Income taxes for prior periods ............................
Deferred ................................................................
Total income taxes ...........................................
NET INCOME (LOSS) BEFOREMINORITY INTERESTS ...................................
MINORITY INTERESTS IN NET
INCOME (LOSS) ................................................
NET INCOME (LOSS) .........................................
MINORITY INTERESTS IN NET
INCOME (LOSS) ................................................
NET INCOME (LOSS) BEFOREMINORITY INTERESTS ...................................
OTHER COMPREHENSIVE INCOME (Note 19):
Unrealized gain on
available-for-sale securities ...............................
Deferred loss onderivatives under hedge accounting .................
Foreign currency translation adjustment ...........
Defined retirement benefit plans ........................
Total other comprehensive income .....................
COMPREHENSIVE INCOME .............................
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owners of the parent ...........................................
Minority interests .................................................

12-month3-month12-month

June 30, 2014

June 30, 2013

June 30, 2014

¥79,193
59,253
19,940¥6,8976,138
759$781,304
584,579
196,725

15,684
4,256

3,973(3,214)

154,736
41,989

342
(45)
(130)
139
306

89
(10)
(59)
37
57

3,374
(444)
(1,283)
1,372
3,019

4,562

(3,157)45,008

1,340
(0)
190
1,530

129
(230)
(1,119)(1,220)13,220(0)
1,875
15,095

3,032(1,937)

29,913

34
2,998

(23)
(1,914)335
29,578

34

(23)

335

3,032

(1,937)

29,913

477

275

4,706

10
9
694
1,190
¥4,222

(54)
(28)
193
¥(1,744)

99
89
6,847
11,741$41,654¥4,186¥36¥(1,719)¥(25)$41,299$355
U.S.Dollars(Note 1)Yen

PER SHARE OF COMMON STOCK (Note 2.s):
Basic net income (loss) ........................................
Cash dividends applicable to the year ................
See notes to consolidated financial statements.

12¥39.61
7.50¥(25.35)
2.00$0.390.07

Co n s ol i d ated S t atemen t o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2014

Thousands

Millions of Yen
Accumulated Other Comprehensive Income

BALANCE, APRIL 1, 2013 �����������������������������
Net loss ������������������������������������������������������������Cash dividends, ¥7.50 per share ���������������������
Purchase of treasury stock �����������������������������
Disposal of treasury stock ������������������������������
Net change in the fiscal period (3 months) ���BALANCE, JUNE 30, 2013 �����������������������������
Net income ������������������������������������������������������Cash dividends, ¥2.00 per share ���������������������
Purchase of treasury stock ���������������������������������
Disposal of treasury stock ������������������������������
Net change in the year ������������������������������������
BALANCE, JUNE 30, 2014 �����������������������������

Outstanding
Number of
Shares ofCommon Stock

Common Stock

Capital Surplus

75,471¥7,393¥6,209Retained
Earnings¥36,018

TreasuryStock¥(3,468)

Unrealized
Gain onAvailable-forSale Securities

Deferred Loss on
Derivatives
under Hedge
Accounting¥ 615¥(132)

Foreign
Currency
Translation
Adjustments

DefinedRetirement
Benefit Plans¥ 3¥46,638(1,914)
(3)

108

36

75,571

7,393

6,209

33,523(3,435)

Total Equity¥291¥46,929(1,914)(1,914)

(581)

(581)

(3)

(3)

(581)
(8)

Minority
Interests

Total

36

36

275

(54)

(24)

¥(963)

(766)

(30)

(796)

890

(186)

(21)

(963)

43,410261

43,671

2,998

2,998

2,998

(154)

(154)

(154)

(136)

(54)

(54)

(54)

428

145

145

145

75,863¥7,393¥6,209¥36,367¥(3,344)

475

10

7

694

1,186

43

1,229

¥1,365¥(176)¥(14)¥(269)¥47,531¥304¥47,835

Thousands of U.S. Dollars (Note 1)
Accumulated Other Comprehensive Income

BALANCE, JUNE 30, 2013 �����������������������������
Net income ������������������������������������������������������Cash dividends, $0.02 per share ���������������������
Purchase of treasury stock �����������������������������
Disposal of treasury stock ����������������������������������
Net change in the year ���������������������������������������
BALANCE, JUNE 30, 2014 �����������������������������

Common Stock

Capital Surplus$72,938$61,257$72,938$61,257

Retained
Earnings$330,732

TreasuryStock$(33,889)

Unrealized
Gain onAvailable-forSale Securities

Deferred Loss on
Derivatives
under Hedge
Accounting$ 8,781$(1,835)

Foreign
Currency
Translation
Adjustments$(208)

DefinedRetirement
Benefit Plans$(9,501)

Minority
Interests

Total$428,275$2,575

Total Equity$430,850

29,57829,57829,578(1,520)(1,520)(1,520)$358,790

(533)

(533)

(533)

1,431

1,431

1,431

$(32,991)

4,686

99

70

6,847

11,702423

12,125$13,467$(1,736)$(138)$(2,654)$468,933$2,998$471,931

See notes to consolidated financial statements.

13

Co n s ol i d ated S t atemen t o f C as h Fl ow s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2014

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

OPERATING ACTIVITIES:

12-month3-month12-month

June 30, 2014

June 30, 2013

June 30, 2014

Income (loss) before income taxes andminority interests ....................................................

¥ 4,562¥(3,157)$ 45,008

Adjustments for:
Income taxes – paid ..............................................
Depreciation and amortization ............................
Gain on sales of property, plant and equipment .......
Loss on sales of investment securities .................

(1,038)
997
(3)
(10)

(1,608)
221
(2)
(16)

(10,241)
9,836
(30)
(99)

(Increase) decrease in tradeaccounts receivable ...........................................

(5,178)24,658(51,085)

Decrease (increase) in inventories .....................

1,907(4,551)

18,814

Increase (decrease) in tradeaccounts payable ...............................................

835(4,546)

8,238

Decrease in net defined
benefit liability ..................................................

(38)

(19)

(375)

(Decrease) increase in advanced received .........
Other—net .............................................................
Net cash provided by operating activities ...

(1,740)
1,046
1,340

3,138
239
14,357(17,167)
10,321
13,220INVESTING ACTIVITIES:
Proceeds from sales of property,
plant and equipment ...............................................

4

3

39

Purchases of property, plant and equipment ..........

(4,328)(228)(42,699)

Proceeds from sales and redemption of
investment securities ..............................................

1,060

200

10,458Purchases of investment securities ..........................
Increase in other assets ............................................
Net cash used in investing activities ................

(949)
(346)
¥(4,559)

(117)
(630)
¥ (772)(9,363)(3,413)$(44,978)See notes to consolidated financial statements.

14

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

FINANCING ACTIVITIES:

12-month3-month12-month

June 30, 2014

June 30, 2013

June 30, 2014

90
300
(180)
(44)
(54)
145
(194)
(1)

¥ (8,990)
1,000
(30)
(10)
(3)
36
(539)
(3)

Net cash provided by (used in)financing activities ..........................................

62(8,539)612

FOREIGN CURRENCY
TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS ................

8

(11)

78

NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS ............................................

(3,149)5,035(31,068)

CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR (PERIOD) .......................

11,614

6,579

114,582

CASH AND CASH EQUIVALENTS,
END OF YEAR (PERIOD) ......................................

¥ 8,465¥11,614$ 83,514

Net increase (decrease) in short-term borrowings .....
Proceeds from long-term debt ..................................
Repayments of long-term debt .................................
Repayments of lease obligations ..............................
Purchase of treasury stock .......................................
Disposal of treasury stock ........................................
Dividends paid ..........................................................
Other—net .................................................................

¥

$

888
2,960
(1,776)
(434)
(533)
1,431
(1,914)(10)

N o tes to C on solid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year Ended June 30, 2014

1.	B A S I S O F P R E S E N TAT I O N O F C O N S O L I D AT E D F I N A N C I A L
STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and inaccordance with accounting principles generally accepted in Japan, which are different in certain respects as tothe application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form which ismore familiar to readers outside Japan. In addition, certain reclassifications have been made in the consolidated
financial statements for the 3-month fiscal period ended June 30, 2013 to conform to the classifications used in
the consolidated financial statements for the year ended June 30, 2014.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Nippon
Koei Co., Ltd. (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into
U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at therate of ¥101.36 to $1, the rate of exchange at June 30, 2014. Such translations should not be construed as
representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
Change in fiscal year-end
The Company changed its fiscal year-end from March 31 to June 30 by the resolution of the 68th Annual General
Shareholders’ Meeting held on June 27, 2013, in order to make operations more efficient and decrease the work
load which becomes heavy in March with the cluster of projects requiring completion. Due to this change, thefiscal period ended June 30, 2013 is the 3-month period from April 1 to June 30, 2013.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.	Consolidation — The consolidated financial statements as of June 30, 2014, include the accounts of theCompany and its 11 significant (11 in 2013) subsidiaries (together, the “Group”).
Under the control concept, those companies in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated.
Investments in unconsolidated subsidiaries and associated companies are stated at cost. If the equity methodof accounting had been applied to the investments in these companies, the effect on the accompanying
consolidated financial statements would not be material.
Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets of theacquired subsidiaries at the date of acquisition.
Goodwill is amortized using the straight-line method over 5 to 10 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is also eliminated.

b.	Cash Equivalents — Cash equivalents are short-term investments that are readily convertible into cash andthat are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits and investment trusts, all of which mature or become due within
three months of the date of acquisition.

c.	Inventories — Work in process is stated at the lower of cost, mainly determined by the specificidentification cost method or net selling value.

d.	Investment Securities — Investment securities are classified and accounted for, depending on
management’s intent, as follows:(1) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent andability to hold to maturity are reported at amortized cost and (2) available-for-sale securities, which are not15

classified as the aforementioned securities, are reported at fair value, with unrealized gains and losses, netof applicable taxes, in a separate component of equity.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For
other-than-temporary declines in fair value, investment securities are reduced to net realizable value by acharge to income.

e.	Property, Plant and Equipment — Property, plant and equipment are stated at cost. Depreciation ofproperty, plant and equipment is computed substantially by the declining-balance method at rates based on
the estimated useful lives of the assets, while the straight-line method is applied to buildings acquired after
April 1, 1998, and lease assets as well as other equipment for rent. The range of useful lives is principallyfrom 3 to 50 years for buildings and structures, from 2 to 15 years for machinery and equipment and from 2
to 20 years for furniture and fixtures. The useful lives for lease assets are the terms of the respective leases.

f.	Long-Lived Assets — The Group reviews its long-lived assets for impairment whenever events or changes incircumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment
loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of theundiscounted future cash flows expected to result from the continued use and eventual disposition of theasset or asset group. The impairment loss would be measured as the amount by which the carrying amountof the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from thecontinued use and eventual disposition of the asset or the net selling price at disposition.

g.	A llowance for Doubtful Accounts — The allowance for doubtful accounts is stated in amounts
considered to be appropriate based on the Group’s past credit loss experience and an evaluation of potential
losses in the receivables outstanding.

h.	R etirement and Pension Plans — The Group has contributory defined benefit pension plans andunfunded retirement benefit plans for the benefit of its employees.
Effective April 1, 2000, the Group adopted a new accounting standard for retirement benefits and accounted
for the liability for retirement benefits based on the projected benefit obligations and plan assets at theconsolidated balance sheet date. The projected benefit obligations are attributed to periods on a straight-line
basis. Actuarial gains and losses are amortized on a straight-line basis over mainly 13 years within the
average remaining service period. Past service costs are amortized on a straight-line basis over mainly 13
years within the average remaining service period. The transitional obligation of ¥2,016 million for thesubsidiaries, determined as of April 1, 2000, is being amortized over 15 years.
Hitherto, retirement benefits for directors and Audit & Supervisory Board members were provided at theamount which would be required if all directors and Audit & Supervisory Board members retired at thebalance sheet date, but currently, the Group abolished benefit pension plans for directors and Audit &Supervisory Board members. The balance in the consolidated balance sheet is the estimated amount for
directors and Audit & Supervisory Board members who have belonged to the Group since when the plans
were effective.

i.	Allowance for Anticipated Project Loss — The Group has made a provision for anticipated losses on
uncompleted project contracts.

j.	Asset Retirement Obligations — In March 2008, the Accounting Standards Board of Japan (the “ASBJ”)
issued ASBJ Statement No. 18, “Accounting Standard for Asset Retirement Obligations” and ASBJ Guidance
No. 21, “Guidance on Accounting Standard for Asset Retirement Obligations.” Under this accounting
standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contractthat results from the acquisition, construction, development and the normal operation of a tangible fixed
asset and is associated with the retirement of such tangible fixed asset. The asset retirement obligation isrecognized as the sum of the discounted cash flows required for the future asset retirement and is recordedin the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonableestimate of the asset retirement obligation cannot be made in the period the asset retirement obligation isincurred, the liability should be recognized when a reasonable estimate of asset retirement obligation can be
made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is
capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The

16

asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful lifeof the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to
the timing or the amount of the original estimate of undiscounted cash flows are reflected as an adjustment
to the carrying amount of the liability and the capitalized amount of the related asset retirement cost.

k. Research and Development Costs — Research and development costs are charged to income as incurred.
l.	Leases — In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease
Transactions,” which revised the previous accounting standard for lease transactions. The revised accounting
standard for lease transactions was effective for fiscal years beginning on or after April 1, 2008.
Under the previous accounting standard, finance leases that were deemed to transfer ownership of the leased
property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as
operating lease transactions if certain “as if capitalized” information was disclosed in the note to the lessee’s
financial statements. The revised accounting standard requires that all finance lease transactions becapitalized by recognizing lease assets and lease obligations in the balance sheet. In addition, the revised
accounting standard permits leases which existed at the transition date and do not transfer ownership of theleased property to the lessee to be measured at the amount of obligation under finance leases less interest
expense at the transition date and recorded as acquisition cost of lease assets.
The Group applied the revised accounting standard effective April 1, 2008. In addition, the Group accounted
for leases which existed at the transition date and do not transfer ownership of the leased property to thelessee as acquisition cost of lease assets measured at the amount of obligation under finance leases at thetransition date.
All other leases are accounted for as operating leases.

m.	Accrued Bonuses — Bonuses to employees, directors and Audit & Supervisory Board members are accruedat the end of the year to which such bonuses are attributable.

n.	A llowance for Environmental Measures — The Group has made a provision for the treatment of
Polychlorinated Biphenyl (PCB) Wastes based on the Act on Special Measures concerning Promotion of
Proper Treatment of PCB Wastes.

o.	Income Taxes — The provision for income taxes is computed based on the pretax income included in the
consolidated statement of operations and comprehensive income. The asset and liability approach is used torecognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured byapplying currently enacted tax laws to the temporary differences.

p.	Foreign Currency Transactions — All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet
date. The foreign exchange gains and losses from translation are recognized in the consolidated statement ofoperations and comprehensive income.

q.	Revenue Recognition — If the outcome of a construction contract can be estimated reliably, the contract
revenue is recognized by the percentage-of-completion method which is measured by reference to thepercentage of total cost incurred to date to estimated total cost.
All other construction projects, except the aforementioned, are recorded using the completed-contract
method (including the partially completed-contract method).

r.	Derivatives and Hedging Activities — The Group uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange. Foreign exchange forward contracts are utilized by the Groupto reduce its exposures to fluctuations in foreign currency exchange rates. The Group does not enter into
derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as follows: (1) all derivatives are recognized
as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are17

recognized in the consolidated statement of operations and comprehensive income and (2) for derivatives
used for hedging purposes, if such derivatives qualify for hedge accounting because of high correlation andeffectiveness between the hedging instruments and the hedged items, gains or losses on derivatives aredeferred until maturity of the hedged transactions.
Foreign exchange forward contracts are measured at fair value but the unrealized gains/losses are deferred
until the underlying transactions are completed.

s.	Per Share Information — Basic net income per share is computed by dividing net income available toshareholders of common stock by the weighted-average number of shares of common stock outstanding forthe period. The weighted-average numbers of shares of common stock for the year ended June 30, 2014 andthe period ended June 30, 2013, were 75,693,610 and 75,517,610, respectively.
Diluted net income per share of common stock is not disclosed because the Group had no securities
outstanding which might dilute the per share information for the year ended June 30, 2014, and the period
ended June 30, 2013.
Cash dividends per share presented in the accompanying consolidated statement of operations andcomprehensive income are dividends applicable to the respective years including dividends to be paid after
the end of the fiscal year.

t.	Accounting Changes and Error Corrections — In December 2009, the ASBJ issued ASBJ Statement No.
24, “Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No. 24,“Guidance on Accounting Standard for Accounting Changes and Error Corrections.” Accounting treatments
under this standard and guidance are as follows:(1) Changes in Accounting Policies:
When a new accounting policy is applied following revision of an accounting standard, the new policy isapplied retrospectively unless the revised accounting standard includes specific transitional provisions, inwhich case the entity shall comply with the specific transitional provisions.
(2) Changes in Presentation:
When the presentation of financial statements is changed, prior-period financial statements are reclassified
in accordance with the new presentation.
(3) Changes in Accounting Estimates:
A change in an accounting estimate is accounted for in the period of the change if the change affects that period
only and is accounted for prospectively if the change affects both the period of the change and future periods.
(4) Corrections of Prior-Period Errors:
When an error in prior-period financial statements is discovered, those statements are restated.

u.	New Accounting Pronouncements and accounting change
Accounting Standard for Retirement Benefits — On May 17, 2012, the ASBJ issued ASBJ Statement No.
26, “Accounting Standard for Retirement Benefits” and ASBJ Guidance No. 25, “Guidance on AccountingStandard for Retirement Benefits,” which replaced the Accounting Standard for Retirement Benefits that had
been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000, and the otherrelated practical guidance, and were followed by partial amendments from time to time through 2009.
Major changes are as follows:(a) Treatment in the balance sheet
Under the current requirements, actuarial gains and losses, past service costs and transitional obligationthat are yet to be recognized in profit or loss are not recognized in the balance sheet, and the difference
between retirement benefit obligations and plan assets (hereinafter, “deficit or surplus”), adjusted by suchunrecognized amounts, is recognized as a liability or asset.

18

Under the revised accounting standard, actuarial gains and losses, past service costs and transitional
obligation that are yet to be recognized in profit or loss shall be recognized within equity (accumulated
other comprehensive income), after adjusting for tax effects, and the deficit or surplus shall be recognized
as a liability (liability for retirement benefits) or asset (asset for retirement benefits).
(b) Treatment in the statement of operations and comprehensive income
The revised accounting standard does not change how to recognize actuarial gains and losses, past service
costs and transitional obligation in profit or loss. Those amounts would be recognized in profit or loss
over a certain period. However, actuarial gains and losses, past service costs and transitional obligationthat arose in the current period and have not yet been recognized in profit or loss shall be included inother comprehensive income, and actuarial gains and losses, past service costs and transitional obligationthat were recognized in other comprehensive income in prior periods and then recognized in profit or loss
in the current period shall be treated as reclassification adjustments.
(c) Amendments relating to the method of attributing expected benefit to periods and relating to the discountrate and expected future salary increases
The revised accounting standard also made certain amendments relating to the method of attributing
expected benefit to periods and relating to the discount rate and expected future salary increases.
This accounting standard and the guidance for (a) and (b) above are effective for the end of annual periods
beginning on or after April 1, 2013, and for (c) above are effective for the beginning of annual periods
beginning on or after April 1, 2014, or for the beginning of annual periods beginning on or after April 1,
2015, subject to certain disclosure in March 2015, both with earlier application being permitted from the
beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of thisaccounting standard to consolidated financial statements in prior periods is required.
The Group has applied the revised accounting standard for (a) and (b) above effective June 30, 2013, andexpects to apply (c) above from July 1, 2014. As a result, retained earnings as of July 1, 2014 will decrease by¥645 million.

Practical Solution on Transactions of Delivering the Company's Own Stock to Employees etc.
through Trusts — On December 25, 2013, the ASBJ issued ASBJ Practical Issues Task Force (PITF) No. 30,“Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees etc. throughTrusts.” This PITF is effective for the beginning of annual periods beginning on or after April 1, 2014, withearlier application permitted from the beginning of annual periods first ending after the date of issuance of
this PITF, and applied retrospectively.
In accordance with the PITF, upon transfer of treasury stock to the employee stockownership trust (the“Trust”) by the entity, any difference between the book value and fair value of the treasury stock shall berecorded in capital surplus. At year end, the entity shall record (1) the entity stock held by the Trust as
treasury stock in equity, (2) all other assets and liabilities of the Trust on a line-by-line basis, and (3) aliability/asset for the net of (i) any gain or loss on delivery of the stock by the Trust to the employee
shareholding association, (ii) dividends received from the entity for the stock held by the Trust, and (iii) any
expenses relating to the Trust.
The Company expects to apply PITF No. 30, from the beginning of the annual period beginning on July 1,
2014, and there are no effects of applying the PITF in future applicable periods.

v. Additional Information
Employee Stock Ownership Plan Trust (“ESOP”) — The Company has introduced an employee
incentive plan, ESOP. Acquisition and sales of the Company’s shares are accounted for under the assumptionthat the Company and ESOP are the same entity, and its liabilities are guaranteed by the Company.
Accordingly, the Company’s shares owned by ESOP are accounted for as treasury stock in the Company’s
consolidated balance sheet, and consolidated statement of changes in equity. Also, assets and liabilities, andprofits and losses of ESOP are included in the Company’s consolidated balance sheet, consolidated statementof operations and comprehensive income and consolidated statement of changes in equity.

19

3. INVESTMENT SECURITIESInvestment securities as of June 30, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

June 30, 2014

June 30, 2013

June 30, 2014

¥7,447800
40¥8,287¥6,457779
548¥7,784$73,471
7,893
394$81,758

Non-current:
Marketable equity securities ...............................
Government and corporate bonds ......................
Other .....................................................................
Total .................................................................

The carrying amounts and aggregate fair values of investment securities at June 30, 2014, were as follows:
Millions of Yen

June 30, 2014
Securities classified as:
Available-for-sale:
Equity securities ..................................
Debt securities ......................................
Other .....................................................
Total ...................................................

Cost¥5,171550
48¥5,769Unrealized
Gains

Unrealized
Losses¥2,033
110

¥44
5
9
¥58

¥2,143

Fair
Value¥7,160655
39¥7,854

Millions of Yen

June 30, 2013
Securities classified as:
Available-for-sale:
Equity securities ..................................
Debt securities ......................................
Other .....................................................
Total ...................................................

Cost¥4,822550
624¥5,996

Unrealized
Gains

Unrealized
Losses¥1,38296
12¥1,490

¥ 35
12
88
¥135

Fair
Value

¥6,169634
548¥7,351Thousands of U.S. Dollars

June 30, 2014

Cost

Securities classified as:
Available-for-sale:
Equity securities ..................................
Debt securities ......................................
Other .....................................................
Total ...................................................

$51,016
5,426
474$56,916

20

Unrealized
Gains$20,057
1,085$21,142

Unrealized
Losses

$434
49
89
$572

Fair
Value

$70,6396,462
385$77,486

The proceeds, realized gains and realized losses of the available-for-sale securities which were soldduring the year ended June 30, 2014, and the period ended June 30, 2013, were as follows:
Millions of Yen

June 30, 2014
Securities classified as:
Available-for-sale:
Equity securities ................................................
Debt securities ....................................................
Other ...................................................................
Total .................................................................

Proceeds

Realized Gains

Realized Losses

¥ 444

¥ 9

¥37

591
¥1,035

53
¥62

38
¥75

Millions of Yen

June 30, 2013

Proceeds

Securities classified as:
Available-for-sale:
Equity securities ................................................
Debt securities ....................................................
Other ...................................................................
Total .................................................................

Realized Gains

Realized Losses

¥69

¥15

¥0

¥69

¥15

¥0

Thousands of U.S. Dollars

June 30, 2014
Securities classified as:
Available-for-sale:
Equity securities ................................................
Debt securities ....................................................
Other ...................................................................
Total .................................................................

Proceeds

Realized Gains

Realized Losses$ 4,380

$ 89

$365

5,831
$10,211

523
$612

375
$740

The carrying values of debt securities and other by contractual maturities for securities classified as availablefor-sale at June 30, 2014, were as follows:
Millions of Yen

Due after 10 years ..................................................
Total .................................................................

¥550
¥550

Thousands of
U.S. Dollars$5,426$5,42621

4. INVENTORIESInventories at June 30, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Merchandise ...........................................................
Work in process ......................................................
Raw materials and supplies ...................................
Total .................................................................

June 30, 2014
¥
0
9,800
311
¥10,111

June 30, 2013
¥42
11,805170¥12,017

June 30, 2014
$096,685
3,068$99,753

5. INVESTMENT PROPERTYOn November 2008, the ASBJ issued ASBJ Statement No. 20, “Accounting Standard for Investment Property and
Related Disclosures” and issued ASBJ Guidance No. 23, “Guidance on Accounting Standard for Investment
Property and Related Disclosures.”
The Group owns some rental properties such as office buildings and land in the metropolitan area. The net ofrental income and operating expenses for those rental properties was ¥846 million ($8,346 thousand) and ¥210
million for the year ended June 30, 2014 and for the period ended 2013, respectively.
In addition, the carrying amounts, changes in such balances and market prices of such properties are as follows:
Millions of Yen
Carrying AmountJune 30, 2013

¥7,096

Decrease

Fair Value
June 30, 2014¥(425)¥6,671

June 30, 2014¥12,769

Millions of Yen
Carrying Amount
April 1, 2013

¥7,133

Decrease¥(37)

Fair Value
June 30, 2013

¥7,096

June 30, 2013¥13,235

Thousands of U.S. Dollars
Carrying AmountJune 30, 2013

$70,008

Decrease$(4,193)

Fair Value
June 30, 2014

$65,815

June 30, 2014

$125,977

Notes:
1. Carrying amount recognized in the consolidated balance sheets is net of accumulated depreciation andaccumulated impairment losses, if any.
2. Decrease during the fiscal period ended June 30, 2013, primarily represents the recognition of depreciation.
Decrease during the fiscal year ended June 30, 2014, primarily represents transfers to assets for own use of¥395 million ($3,897 thousand).
3. Fair value of properties was measured by the Group in accordance with its Real-Estate Appraisal Standard.

6. REDUCTION ENTRY
Due to the acquisition expenses of the Group that have been subsidized by the national government, the amountof such subsidies, ¥148 million ($1,460 thousand), is offset against the acquisition cost of the machinery andequipment.

22

7.	I N V E S T M E N T S I N A N D A D VA N C E S T O U N C O N S O L I D AT E D
SUBSIDIARIES AND ASSOCIATED COMPANIESInvestments in and advances to unconsolidated subsidiaries and associated companies at June 30, 2014 and2013, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Investments ............................................................
Advances .................................................................
Total .................................................................

June 30, 2014
¥ 924
555
¥1,479June 30, 2014
$ 9,116
5,476$14,592

June 30, 2013
¥ 801
485
¥1,286

8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at June 30, 2014 and 2013 consisted of notes to banks and loan from an unconsolidated
subsidiary. The annual interest rates applicable to the short-term borrowings were 0.739% at June 30, 2014, and
0.640% at June 30, 2013.
Long-term debt at June 30, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

June 30, 2014

June 30, 2013

June 30, 2014

¥1,820¥1,650$17,956

129
1,949
(181)
¥1,768

50
72
1,772
(211)
¥1,561

1,273
19,229(1,786)$17,443

Unsecured loan from bank due seriallyto 2023 with interest rates ranging from
0.680% to 0.870% .................................................
Loan from bank due seriallyto 2013 with interest rate of 1.250% ...................

Obligation under finance leases ............................
Total .................................................................
Less current portion ..............................................
Long-term debt, less current portion ....................

Annual maturities of long-term debt at June 30, 2014, for the five years and thereafter were as follows:
Years Ending June 30

2015 .........................................................
2016 .........................................................
2017 .........................................................
2018 .........................................................
2019 .........................................................
2020 and thereafter .................................
Total ..................................................

Thousands of
U.S. Dollars

Millions of Yen
Long-Term Debt

Lease Obligations

Long-Term Debt

Lease Obligations

¥130
164

¥51
35
26
14
3

$1,283
1,618
2,625
2,625
4,301
5,504
$17,956

$503
345
257
138
30

266
266
436
558

¥1,820¥129$1,273

The Group had a commitment line contract of ¥8,000 million ($78,927 thousand) over three years with financial
institutions in order to secure the stability of long-term funding. The contract included a restrictive financial
covenant. At June 30, 2014, the Group had not utilized the commitment line. In addition, the Group had
overdraft contracts of ¥16,000 million ($157,853 thousand) in total. At June 30, 2014, the Group had not utilized
the overdraft.

23

9. RETIREMENT AND PENSION PLANS
The Group has severance payment plans for employees, directors and Audit & Supervisory Board members.
Under most circumstances, employees terminating their employment are entitled to retirement benefits
determined based on the rate of pay at the time of termination, years of service and certain other factors. Suchretirement benefits are made in the form of a lump-sum severance payment from the Company or from its
consolidated subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments if thetermination is involuntary, by retirement at the mandatory retirement age, by death or by voluntary retirement
at certain specific ages prior to the mandatory retirement age.
The liabilities for retirement benefits at June 30, 2014 and 2013, for directors and Audit & Supervisory Board
members were ¥59 million ($582 thousand) and ¥59 million, respectively. The retirement benefits for directors
and Audit & Supervisory Board members are paid subject to the approval of the shareholders.
(1)	The changes in defined benefit obligation for the year ended June 30, 2014 and the period ended June 30,
2013, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year (period) ..................
Current service cost ...............................................
Interest cost ............................................................
Actuarial (gains) losses ..........................................
Benefit paid ............................................................
Past service cost .....................................................
Balance at end of year (period) .............................

12-month
June 30, 2014¥13,722
966
216
292
(987)
68
¥14,277

3-monthJune 30, 2013¥13,849
238
55
(6)
(414)
¥13,72212-month
June 30, 2014
$135,379
9,530
2,131
2,881
(9,738)671$140,854(2) The changes in plan assets for the year ended June 30, 2014 and the period ended June 30, 2013, were as follows:
Millions of Yen

Balance at beginning of year (period) ..................
Expected return on plan assets .............................
Actuarial losses .......................................................
Contributions from the employer .........................
Benefit paid ............................................................
Balance at end of year (period) .............................

24

12-month
June 30, 2014
¥10,064
201
864
1,437
(843)
¥11,723

3-monthJune 30, 2013
¥ 9,795
49
237
359
(376)
¥10,064

Thousands of
U.S. Dollars

12-month
June 30, 2014
$ 99,290
1,983
8,524
14,177(8,317)$115,657

(3)	The changes in defined benefit obligation for the simplified method for the year ended June 30, 2014 and theperiod ended June 30, 2013, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year (period) ..................
Periodic benefit cost ..............................................
Benefit paid ............................................................
Balance at end of year (period) .............................

12-month
June 30, 2014
¥648
58
(14)
¥692

3-monthJune 30, 2013
¥657
14
(23)
¥648

12-month
June 30, 2014
$6,393572(138)$6,827(4)	Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined
benefit obligation and plan assets as of June 30, 2014 and 2013, was as follows:
Thousands of
U.S. Dollars

Millions of Yen

Unfunded defined benefit obligation ....................
Net liability for defined benefit obligation ...........

June 30, 2014
¥10,954(11,723)
(769)
4,017
3,248

June 30, 2013¥10,760(10,064)
696
3,610
4,306

June 30, 2014$108,070(115,657)(7,587)
39,631
32,044

Liability for retirement benefits ............................
Net liability for defined benefit obligation ...........

3,248¥ 3,248

4,306¥ 4,306

32,044$ 32,044

Funded defined benefit obligation ........................
Plan assets ..............................................................

(5)	The components of net periodic benefit costs for the year ended June 30, 2014 and the period ended June 30,
2013, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Service cost .............................................................
Interest cost ............................................................
Expected return on plan assets .............................
Recognized actuarial losses ...................................
Amortization of prior service cost ........................
Recognized transition obligation ..........................
Periodic benefit cost in simplified method ..........
Others .....................................................................
Net periodic benefit costs ......................................

12-month
June 30, 2014
¥966
216
(201)
361
22
135
58
27
¥1,5843-monthJune 30, 2013
¥238
55
(49)
104
5
34
14
3

¥404

12-month
June 30, 2014
$ 9,530
2,131(1,983)
3,562
217
1,332
572
266
$15,627

25

(6)	The amount of reconciliation of the retirement benefit for the year ended June 30, 2014 and the period ended
June 30, 2013, was as follows:
Thousands of
U.S. Dollars

Millions of Yen

Past service cost .....................................................
Actuarial losses .......................................................
Recognized transition obligation ..........................
Total ........................................................................

12-month
June 30, 2014
¥ 22
361
135
¥518

3-monthJune 30, 2013¥¥12-month
June 30, 2014
$217
3,561
1,332
$5,110(7)	Accumulated other comprehensive income on defined retirement benefit plans as of June 30, 2014 and 2013,
was as follows:
Millions of Yen

Unrecognized prior service cost ............................
Unrecognized actuarial losses ...............................
Unrecognized transilation obligation ...................
Total ........................................................................

June 30, 2014¥(312)(2)(101)¥(415)

June 30, 2013
¥ (265)(936)(236)¥(1,437)

June 30, 2014
35%
44
18
3
100%

June 30, 2013
36%
43
18
3
100%

Thousands of
U.S. Dollars

June 30, 2014$(3,078)(20)(996)$(4,094)(8) Plan assets
a. Components of plan assets
Plan assets consisted of the following:

Debt investments ..................................................
Equity investments ..............................................
Cash and cash equivalents ...................................
Others ...................................................................
Total ......................................................................

b. Method of determining the expected rate of return on plan assts
The expected rate of return on plan assets is determined considering the long-term rates of return which are
expected currently and in the future from the various components of the plan assets.
(9)	Assumptions used for the year ended June 30, 2014 and the period ended June 30, 2013, were set forth asfollows:

Discount rate ..........................................................
Expected rate of return on plan assets .................
Lump-sum election rate .........................................

26

June 30, 2014
1.5%
2.0
80.0

June 30, 2013
1.5%
2.0
80.0

(10) Multiemployer pension plana. Required contribution amount
The Group’s required contribution amount for the year ended June 30, 2014 and the period ended June 30,
2013, was ¥887 million ($8,750 thousand) and ¥193 million, respectively.
b. Funded status
The funded status of the multiemployer pension plan at June 30, 2014 (available information as of March 31,2014), and at June 30, 2013 (available information as of March 31, 2013), to which contributions were recorded
as net periodic retirement benefit costs, was as follows:

Fair value of plan assets ......................................
Pension benefit obligation recordedby pension fund ..................................................
Difference .............................................................

Millions of Yen

Millions of Yen

March 31, 2014
¥162,116

March 31, 2013
¥145,345

188,180¥(26,064)

176,729¥ (31,384)

c. Contribution ratio
The Group’s contribution percentage for its multiemployer pension plan at June 30, 2014 and 2013, was 12.6%
and 12.5%, respectively.
Note:
1. The difference in b. above mainly resulted from prior service cost of ¥(23,463) million, adjustment of asset
valuation of ¥(6,400) million and surplus of ¥3,800 million for the year ended June 30, 2014, and from priorservice cost of ¥(24,984) million, adjustment of asset valuation of ¥(8,337) million and surplus of ¥1,937
million for the period ended June 30, 2013.
2. Prior service cost is amortized over 15 years.
3. The Group expensed special contributions of ¥337 million in the consolidated statement of operations andcomprehensive income for the year ended June 30, 2014, and ¥81 million in the consolidated statement ofoperations and comprehensive income for the period ended June 30, 2013.
4. The contribution ratio in c. above does not conform to the actual ratio applied to the Group.

10. DEPOSITS RECEIVED
Deposits received from tenants amounted to ¥1,333 million ($13,151 thousand) at June 30, 2014, and ¥1,501
million at June 30, 2013.
At June 30, 2014, land, building and structures for rent of ¥1,286 million ($12,687 thousand) were pledged ascollateral for these deposits.

2711. ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the year ended June 30, 2014 and the period ended June 30,
2013, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year (period)...................

June 30, 2014¥55

June 30, 2013
¥53

Additional provisions associated withthe acquisition of property, plant andequipment .............................................................

June 30, 2014
$543

1

Reconciliation associated withpassage of time .....................................................

2

Reduction associated with meeting
asset retirement obligations ................................
Balance at end of year (period) .............................

3
¥54

1

20

¥55

30
$533

12. EQUITY
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant
provisions in the Companies Act that affect financial and accounting matters are summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to theyear-end dividend upon resolution at the shareholders’ meeting. For companies that meet certain criteria such as(1) having a Board of Directors, (2) having independent auditors, (3) having a Board of Audit & Supervisory
Board members, and (4) the term of service of the directors is prescribed as one year rather than two years ofnormal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends
in kind) at any time during the fiscal year if the Company has prescribed so in its articles of incorporation. The
Company meets all the above criteria.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the Company so stipulate. The Companies Act provides certain limitations on theamounts available for dividends or the purchase of treasury stock. The limitation is defined as the amountavailable for distribution to the shareholders, but the amount of net assets after dividends must be maintained at
no less than ¥3 million.
(b) Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve(a component of retained earnings) or as additional paid-in capital (a component of capital surplus) dependingon the equity account charged upon the payment of such dividends until the aggregate amount of legal reserve
and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount ofadditional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides
that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can betransferred among the accounts under certain conditions upon resolution of the shareholders.
(c) Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock byresolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available
for distribution to the shareholders which is determined by a specific formula. Under the Companies Act, stockacquisition rights are presented as a separate component of equity. The Companies Act also provides thatcompanies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisitionrights are presented as a separate component of equity or deducted directly from stock acquisition rights.

28

13. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, inthe aggregate, resulted in statutory tax rate of approximately 36.8% for the year ended June 30, 2014, and theperiod ended June 30, 2013.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at June 30, 2014, and 2013, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Deferred tax assets:
Accrued bonuses ..................................................
Tax loss carryforwards .........................................
Liability for retirement benefits for directors
and Audit & Supervisory Board members .......
Net defined benefit liability .................................
Allowance for anticipated project loss ................
Loss on impairment of long-lived assets ............
Other .....................................................................
Less valuation allowance .....................................
Total .................................................................

June 30, 2014

June 30, 2013

June 30, 2014

¥ 854
310

¥1,431966$ 8,425
3,058

21

21

207

1,170
71
72
735
(440)
¥2,793

1,509
39
73
757
(1,476)¥3,320

11,543
700
710
7,253
(4,341)$27,555
Thousands of
U.S. Dollars

Millions of Yen

June 30, 2014

June 30, 2013

June 30, 2014

Deferred tax liabilities:
Reserve for deferred gains on saleof property ..........................................................

¥170

¥ 174

$1,677

Unrealized gain on available-for-salesecurities .............................................................

716

Other .....................................................................
Total .................................................................
Net deferred tax assets .......................................

74
¥960
¥1,833

463
74
¥ 711
¥2,6097,064
730$9,471$18,084

A reconciliation between the statutory tax rate and the actual effective tax rate reflected in the accompanying
consolidated statement of operations and comprehensive income for the year ended June 30, 2014, and theperiod ended June 30, 2013, is as follows:

Statutory tax rate ...................................................
Per capita levy of local tax .....................................
Expenses not deductible for tax purposes ............
Foreign income tax ...................................................
Valuation allowance ...............................................
Income taxes for prior periods ..............................
Other – net ..............................................................
Actual effective tax rate .........................................

June 30, 2014
36.8%
2.9
1.9
8.0
(20.3)
0.0
4.2
33.5%

June 30, 2013(36.8)%
1.0
0.5
2.2
1.3
(7.3)
0.4
(38.7)%29

As of June 30, 2014, the Company and its certain subsidiaries had tax loss carryforwards aggregating
approximately ¥933 million ($9,205 thousand) which were available to be offset against taxable income of thesecompanies in future years. These tax loss carryforwards, if not utilized, will expire as follows:
Millions of Yen

March 31, 2015 .......................................................
March 31, 2016 .......................................................
March 31, 2018 .......................................................
March 31, 2019 .......................................................
June 30, 2020 ..........................................................
June 30, 2021 ..........................................................
Total .................................................................

Thousands of
U.S. Dollars

¥92
99
35
65
603
39
¥933

$908
977
345
641
5,949
385
$9,205

New tax reform laws enacted in 2014 in Japan changed the normal effective statutory tax rate for the fiscal year
beginning on or after April 1, 2014, from approximately 36.8% to 34.4%. The effect of this change was todecrease deferred tax assets in the consolidated balance sheet as of June 30, 2014, by ¥108 million ($1,066
thousand) and to increase income taxes—deferred in the consolidated statement of operations andcomprehensive income for the year then ended by ¥108 million ($1,066 thousand).

14. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥403 million ($3,976 thousand) and ¥92 million for theyear ended June 30, 2014, and the period ended June 30, 2013, respectively.

15. LEASES(1) Lessee
The minimum rental commitments under noncancelable operating leases at June 30, 2014 and 2013, were as
follows:
Millions of Yen

Due within one year ...............................................
Due after one year ..................................................
Total .................................................................

June 30, 2014¥2
3
¥5

June 30, 2013
¥2
5
¥7

Thousands of
U.S. Dollars

June 30, 2014
$20
29
$49

(2) Lessor
The minimum rental commitments under noncancelable operating leases at June 30, 2014 and 2013, were as
follows:
Millions of Yen

Due within one year ...............................................
Due after one year ..................................................
Total .................................................................

30

June 30, 2014
¥333
955
¥1,288June 30, 2013
¥ 604
1,288
¥1,892Thousands of
U.S. Dollars

June 30, 2014
$3,285
9,422$12,70716. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The Group uses financial instruments (mainly bank loans) based on its capital financing plan. Cash surpluses, ifany, are invested in low-risk financial assets. Derivatives are used, not for speculative purposes, but to manage
exposure to financial risks as described in (2) below. To clarify the accountability for transactions, the Group set
up an investment committee that it examines basic principles of transactions and each financial instrument.
(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables such as trade notes and trade accounts are exposed to customer credit risk. Although receivables inforeign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates, the position,
net of a portion of payables in foreign currencies, is hedged by using forward foreign currency contracts.
Marketable and investment securities, mainly held-to-maturity securities and equity instruments of customers
and suppliers of the Group, are exposed to the risk of market price fluctuations.
Payment terms of payables, such as trade notes and trade accounts, are less than one year.
Derivatives mainly include forward foreign currency contracts, which are used to manage exposure to market
risks from changes in foreign currency exchange rates of receivables and payables and investment securities.
Please see Note 17 for more details about derivatives.
(3) Risk Management for Financial Instruments
Credit Risk Management
Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to
the contractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines,
which include monitoring of payment term and balances of major customers by each business administration
department to identify the default risk of customers at an early stage. With respect to held-to-maturity financial
investments, the Group manages exposure to credit risk by limiting investments to high credit rating bonds inaccordance with its internal guidelines.
The maximum credit risk exposure of financial assets is limited to their carrying amounts as of June 30, 2014.
Market risk management (foreign exchange risk and interest rate risk)
Foreign currency trade receivables and payables are exposed to market risk resulting from fluctuations in foreign
currency exchange rates. Such foreign exchange risk is hedged principally by forward foreign currency contracts.
Marketable and investment securities are managed by monitoring market values and the financial position ofissuers on a regular basis.
The basic principles of derivative transactions are approved by the investment committee based on the internal
guidelines which prescribe the authority and the limits for each transaction by the corporate treasury
department. Reconciliation of the transaction and balances with customers is made, and the transaction data isreported to the chief financial officer on a monthly basis.
Liquidity risk management
Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on its maturity
dates. The Group manages its liquidity risk by concluding the commitment line and overdraft contracts, alongwith adequate financial planning by the corporate treasury department.
(4) Concentration of Credit Risk
35.7% of total receivables are from two major customers of the Group as of June 30, 2014.

31

(5) Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is notavailable, another rational valuation technique is used instead.
(a) Fair value of financial instruments
Millions of Yen

June 30, 2014

Carrying
AmountFair Value¥8,465
13,791(27)
13,764
7,854¥30,083

Cash and cash equivalents
Receivables
Allowance for doubtful accounts
Investment securities
Total

Unrealized
Gain/Loss¥8,465¥

13,764
7,854¥30,083¥Millions of Yen

June 30, 2013

Carrying
AmountCash and cash equivalents
Receivables
Allowance for doubtful accounts

Fair Value¥11,614
8,595
(181)
8,414
7,350
¥27,378

Investment securities
Total

Unrealized
Gain/Loss¥11,614

¥

8,414
7,350
¥27,378¥

Thousands of U.S. Dollars

June 30, 2014
Cash and cash equivalents
Receivables
Allowance for doubtful accounts
Investment securities
Total

Carrying
Amount$83,514
136,059(266)
135,793
77,486$296,793

Fair Value

Unrealized
Gain/Loss$83,514$

135,793
77,486$296,793$Cash and cash equivalents and receivables
The carrying values of these financial instruments approximate fair value because of their short maturities.
Investment securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for theequity instruments and at the quoted price obtained from the financial institution for certain debt instruments.
The information of the fair value for the investment securities by classification is included in Note 3.
Derivatives
Fair value information for derivatives is included in Note 17.

32

(b) Carrying amount of financial instruments whose fair values cannot be reliably determined
Thousands of
U.S. Dollars

Millions of Yen

June 30, 2014 and 2013
Investments in equity instruments that do nothave a quoted market price in an active market
Investments in debt instruments that do nothave a quoted market price in an active market

2014

2013

2014

¥1,212¥1,089$11,957

¥ 145

¥ 145

$1,431(6) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen

June 30, 2014
Cash and cash equivalents
Receivables
Investment securities
Available-for-sale securities with
contractual maturities
Total

Due in one
Year or Less

¥ 8,465
13,791¥22,256

Due after one Yearthrough five Years

Due after five Years
through ten Years

¥

¥

¥

¥

Due afterten Years

¥550
¥550

Millions of Yen

June 30, 2013
Cash and cash equivalents
Receivables
Investment securities
Available-for-sale securities with
contractual maturities
Total

Due in one
Year or Less

¥11,614
8,595¥20,209

Due after one Yearthrough five Years

Due after five Years
through ten Years

¥

¥

¥

¥

Due afterten Years

¥550
¥550

Thousands of U.S. Dollars

June 30, 2014
Cash and cash equivalents
Receivables
Investment securities
Available-for-sale securities with
contractual maturities
Total

Due in one
Year or Less

Due after one Yearthrough five Years

Due after five Years
through ten Years$83,514
136,059$$$219,573$$

Due afterten Years$5,426$5,426

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

17. DERIVATIVESThe Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange.
Foreign exchange forward contracts are utilized by the Group to reduce foreign currency exchange risk.
It is the Group’s policy to use derivatives only for the purpose of reducing risks, not for trading or speculative
purposes.

33

Because the counterparties to these derivatives are limited to highly reputable domestic banks, the Group does
not anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies which
regulate authorization and credit limit amount.

Derivative Transactions to Which Hedge Accounting Is Not Applied
Millions of Yen

June 30, 2014
Foreign currency forward contracts:
Selling Euros ......................................

Contract
Amount¥416

Contract
Amount Due after
One Year

Fair
Value

¥416

Unrealized
Gain¥(136)¥(136)

Thousands of U.S. Dollars

June 30, 2014
Foreign currency forward contracts:
Selling Euros ......................................

Contract
Amount$4,104Contract
Amount Due after
One Year

Fair
Value

$4,104

Unrealized
Gain$(1,342)$(1,342)Millions of Yen

June 30, 2013
Foreign currency forward contracts:
Selling Euros ......................................

Contract
Amount

Fair
Value

¥416

Unrealized
Gain

¥(96)

¥(96)

Derivative Transactions to Which Hedge Accounting Is Applied
Millions of Yen

June 30, 2014
Foreign currency forward contracts:
Selling U.S. dollars .............................
Foreign currency forward contracts:
Selling Euros ......................................

HedgedItem

Contract
AmountContract
Amount Due after
One Year

Fair
Value

Investment
securities

¥357

¥357

¥ (99)

Investment
securities

¥521

¥521

¥(169)

Thousands of U.S. Dollars

June 30, 2014
Foreign currency forward contracts:
Selling U.S. dollars .............................
Foreign currency forward contracts:
Selling Euros ......................................

HedgedItem

Contract
AmountContract
Amount Due after
One Year

Fair
Value

Investment
securities$3,522$3,522$ (977)

Investment
securities$5,140$5,140$(1,667)

The fair value of derivative transactions is measured at the quoted price obtained from the financial institution.
The contract amounts of derivatives which are shown in the above table do not represent the amounts
exchanged by the parties and do not measure the Group’s exposure to credit or market risk.

34

18. CONTINGENT LIABILITIESAt June 30, 2014, the Group had the following contingent liabilities:
Thousands of
U.S. Dollars

Millions of Yen

Guarantees of bank loans related to employees ...................

¥85

$839

On June 19, 2014, Nippon Civic Consulting Engineers Co., Ltd (“NCC”), one of the consolidated subsidiaries, wassued by Osaka prefecture for damages resulting from a project related to designing a shield tunnel. The amountof the claimed damages is ¥750 million ($7,399 thousand). NCC has concluded that it did not engage in an illegal
act in the course of the project, and intends to contest the claims brought forth by Osaka prefecture in court.

19. COMPREHENSIVE INCOME
The components of other comprehensive income for the year ended June 30, 2014, and the period ended June30, 2013, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

June 30, 2014

3-monthJune 30, 2013

June 30, 2014

¥717
13
730
(253)
¥477

¥434
(15)
419
(144)
¥275

$7,074128
7,202(2,496)$4,706¥15¥(82)

$148

15
(5)
¥10

(82)
28
¥(54)

148
(49)
$99

¥9

¥(28)

$89

9

(28)

89

¥9

¥(28)$89

12-month12-month

Unrealized gain on available-for-salesecurities:

Gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Deferred gain (loss) on derivatives under hedge
accounting:

Gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal
Foreign currency translation adjustments:
Adjustments arising during the year

Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Defined retirement benefit plans:
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total

¥504
518
1,022
(328)
¥694

Total other comprehensive income¥1,190Gains arising during the year$4,973
5,110
10,083(3,236)$6,847¥193$11,74135

20. SUBSEQUENT EVENTSAppropriations of Retained Earnings
On August 11, 2014, the following appropriation of retained earnings at June 30, 2014, was resolved by theboard of directors:
Millions of Yen

Year-end cash dividends, ¥7.5 ($0.07) per share ..................

Thousands of
U.S. Dollars¥569$5,614

The total amount of the dividends above does not include ¥10 million ($99 thousand) in dividends to the ESOP
because the Group’s shares owned by the ESOP are included in the Group’s treasury stock.

21. SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures” and ASBJ Guidance
No. 20, “Guidance on Accounting Standard for Segment Information Disclosures,” an entity is required to reportfinancial and descriptive information about its reportable segments. Reportable segments are operating
segments or aggregations of operating segments that meet specified criteria. Operating segments arecomponents of an entity about which separate financial information is available, and such information isevaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing
performance. Generally, segment information is required to be reported on the same basis as is used internallyfor evaluating operating segment performance and deciding how to allocate resources to operating segments.

(1) Description of Reportable Segments
The Group’s reportable segments are those for which separate financial information is available and regular
evaluation by the Company’s management is being performed in order to decide how resources are allocatedamong the Group. Therefore, the Group’s reportable segments consist of the Domestic, Overseas, PowerEngineering and Real estate leasing segments. Domestic consists of consulting services in public and private
sectors related mainly to infrastructure development in Japan. Overseas consists of consulting services related
mainly to development projects funded by Official Development Assistance (“ODA”). Power Engineering consistsof manufacturing of products and appliances related to electric production and distribution systems andengineering services related to construction and maintenance of public and private electric power facilities. Realestate leasing consists of sales of our Group’s real estate leasing operation.

(2)	Methods of Measurement for the Amount of Sales, Profit (Loss), Assets,
Liabilities and Other Items for Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “Summary of
Significant Accounting Policies.”36

(3) Information about Sales, Profit (Loss), Assets, Liabilities and Other Items
Millions of Yen

12-month
June 30, 2014
Reportable Segment
OthersTotal¥78,060
788¥1,1338¥79,193
796

1,250

78,8481,141

79,989(796)

79,193¥1,256¥846¥5,122¥(575)¥4,547¥(4)¥4,543¥17,832¥7,839¥7,691¥52,707¥34,094¥86,801¥(10,656)¥76,145

¥58
8

¥233

¥145

¥605
317

¥392

¥997
317

9

70

198

268

¥(217)

51

14

196

66

262

(217)

45

403

4,126

4,529

Power
Real EstateEngineering
Leasing

Domestic

Overseas¥20,947

Intersegment sales ...............

¥41,817454¥14,170210¥1,126
124

Total sales ......................

42,271

20,947

14,380

Segment profit (loss) ............
Segment assets .....................

¥2,526¥494¥19,345

Amortization of goodwill .....

¥169
309

Interest income ....................

38

19

4

Interest expense ...................

40

100

42

Increase in property, plantand intangible assets ..........

141

81

179

2

Sales
Sales to customers ...............

Other:
Depreciation .........................

Total

Reconciliations

Consolidated¥79,193¥(796)

¥997
317

4,529

Millions of Yen

3-monthJune 30, 2013
Reportable Segment
Domestic

Overseas¥1,35468¥2,863Intersegment sales ...............
Total sales ......................

1,422

Segment profit (loss) ............
Segment assets .....................

Sales
Sales to customers ...............

Power
Real EstateEngineering
Leasing

Total

Reconciliations

Other

Total

¥6,897143¥(143)

7,040

(143)

Consolidated¥2,353
44

¥283
31

¥6,853
143

¥44

2,863

2,397

314

6,996

44

¥(2,451)¥(748)¥(103)¥210¥(3,092)¥(73)¥(3,165)¥8¥(3,157)¥17,506¥14,200¥8,014¥9,803¥49,523¥31,590¥81,113¥(9,662)¥71,451

Other:
Depreciation .........................

¥37

¥13

¥68

¥37

¥155

¥66

¥221

¥221

Amortization of goodwill .....

77

77

77

Interest income ....................

14

5

3

4

26

32

58

¥(48)

10

Interest expense ...................

8

23

8

4

43

15

58

(48)

10

Increase in property, plantand intangible assets ..........

54

14

23

12

103

15

118

77

¥6,897
6,897

118

37

Thousands of U.S. Dollars

12-month
June 30, 2014
Reportable Segment

Sales
Sales to customers ...............
Intersegment sales ...............

Domestic

Overseas$412,559
4,480$206,659

PowerReal EstateEngineering
Leasing$139,799
2,072$11,109
1,223

Total

$770,126
7,775

Others$11,178

78

Reconciliations

Consolidated$781,304$781,304
7,853 $(7,853)

Total sales ......................

417,039

206,659

141,871

12,332777,901

Segment profit (loss) ............
Segment assets .....................

$24,922$4,874$12,391$8,346$50,533$(5,673) $44,860 $(40) $44,820$190,855$175,927$77,338$75,878$519,998$336,365$856,363 $(105,130) $751,233$1,667
3,048

$572
79

$2,299$1,431$5,969
3,127$3,867$9,836
3,127

Other:
Depreciation .........................
Amortization of goodwill .....

11,256

Total

789,157(7,853)

781,304$9,836
3,127Interest income ....................

376

187

39

89

691

1,953

2,644 $(2,141)

503

Interest expense ...................

395

987

414

138

1,934

651

2,585

444

Increase in property, plantand intangible assets ..........

1,391

799

1,766

20

3,976

40,70644,682(2,141)

44,682

Notes:The differences between total amounts for reportable segments and amounts in the consolidated balance sheets
or consolidated statement of operations and comprehensive income and the main details of these differences,which are related to difference adjustments at June 30, 2014 and 2013, were as follows:

Net sales
Thousands of
U.S. Dollars

Millions of Yen

Reportable segment total .......................................
Other net sales ........................................................
Elimination of intersegment transactions ............
Net sales in the consolidated statementsof operations and comprehensive income ....

12-month
June 30, 2014
¥78,848
1,141
(796)

3-monthJune 30, 2013
¥6,99644(143)

12-month
June 30, 2014
$777,901
11,256(7,853)¥79,193¥6,897$781,304

ProfitThousands of
U.S. Dollars

Millions of Yen

Reportable segment total .......................................
Other loss ................................................................
Elimination of intersegment transactions ............
Non-operating items ..............................................
Operating income in the consolidated
statements of operations and comprehensive
income ............................................................

38

12-month
June 30, 2014
¥5,122
(575)
(4)
(287)

3-monthJune 30, 2013¥(3,092)
(73)
8
(57)

12-month
June 30, 2014
$50,533(5,673)(40)(2,831)¥4,256¥(3,214)$41,989

Assets
Thousands of
U.S. Dollars

Millions of Yen

Reportable segment total .......................................
Other property ........................................................
Elimination of intersegment transactions ............
Total assets in the consolidated balance
sheets ..............................................................

June 30, 2014
¥52,707
34,094(10,656)

June 30, 2013¥49,523
31,590(9,662)June 30, 2014
$519,998
336,365(105,130)¥76,145¥71,451$751,233

Other items
Millions of Yen

June 30, 2014
Reportable
Segment

Depreciation ........................................
Amortization of goodwill ....................
Interest income ...................................
Interest expense ..................................
Increase in property, plant andintangible assets ................................

OthersReconciliations

¥605
317
70
196

¥ 392

403

4,126

¥(217)
(217)

198
66

Total

¥ 997
317
51
45
4,529

Millions of Yen

June 30, 2013
Reportable
Segment

Depreciation ........................................
Amortization of goodwill ....................
Interest income ...................................
Interest expense ..................................
Increase in property, plant andintangible assets ................................

OthersReconciliations

¥155
77
26
43

¥66

103

15

32
15

¥(48)
(48)

Total

¥221
77
10
10
118

Thousands of U.S. Dollars

June 30, 2014
Reportable
Segment

Depreciation ........................................
Amortization of goodwill ....................
Interest income ...................................
Interest expense ..................................
Increase in property, plant andintangible assets ................................

Others$5,969
3,127
691
1,934

$ 3,867

3,976

40,706

1,953
651

Reconciliations$(2,141)(2,141)

Total$ 9,836
3,127
503
444
44,682Note:
The main reconciling items of interest income and expense are eliminations of corporate interest in accounting
for control.

39

The information about geographical areas for the fiscal year ended June 30, 2014, was as follows:

Sales
Millions of Yen

12-month
June 30, 2014
Japan

Asia

Middle East

¥56,265¥13,216

Latin
America

Africa¥1,317¥4,462Other¥3,552

Total

¥381

¥79,193

Thousands of U.S. Dollars

12-month
June 30, 2014
Japan

Asia

Middle East

$555,101$130,387

Latin
America

Africa$12,993$44,021

Other$35,043

Total$3,759$781,304

The information about major customers for the fiscal year ended June 30, 2014, was as follows:
Millions of Yen

12-month
June 30, 2014
Name of Customers

Sales

Related Segment Name

¥16,632
9,004
6,028

Ministry of Land, Infrastructure, Transport and Tourism ..
Japan International Cooperation Agency .............................
Tokyo Electric Power Company, Incorporated .....................

Domestic
Overseas
Power Engineering

Thousands of U.S. Dollars

12-month
June 30, 2014
Name of Customers

Sales

Related Segment Name

$164,088
88,83259,471

Ministry of Land, Infrastructure, Transport and Tourism ..
Japan International Cooperation Agency .............................
Tokyo Electric Power Company, Incorporated .....................

Domestic
Overseas
Power Engineering

The information about goodwill for the fiscal year ended June 30, 2014, was as follows:
Millions of Yen

12-month
June 30, 2014
Reportable Segment

Amortization of goodwill .....
Goodwill at June 30, 2014 .......

Power
Engineering

Domestic

Overseas

¥309
233

¥8

Real Estate
Leasing

¥

¥

Total

¥317
233

Others¥Elimination/
Corporate¥

Consolidated

¥317
233

Thousands of U.S. Dollars

12-month
June 30, 2014
Reportable Segment

Amortization of goodwill .....
Goodwill at June 30, 2014 .......

40

Domestic

Overseas$3,048
2,299

$79

Power
Engineering$

Real Estate
Leasing$

Total$3,1272,299

Others$Elimination/
Corporate$

Consolidated$3,1272,299

41

Nonconsolidated Balance Sheet
Nippon Koei Co., Ltd.
June 30, 2014

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS

June 30, 2014

June 30, 2013

June 30, 2014

¥5,697¥ 9,189$56,206

Trade notes .........................................................

76

75

750

Trade accounts ...................................................

10,816

6,731

106,709

Allowance for doubtful accounts ......................

(6)

(154)

(59)

Short-term loan receivables ................................

1,286

1,217

12,687

Inventories (Note 4) .............................................

7,198

8,830

71,014

Deferred tax assets (Note 10) ..............................

980

2,063

9,669

Prepaid expenses and other current assets ........

1,926

1,472

19,001

Total current assets ..........................................

27,97329,423275,977

Land ......................................................................

15,137

11,884

149,339

Buildings and structures .....................................

18,951

18,125

186,968

Machinery and equipment ..................................

2,174

2,285

21,448

Furniture and fixtures .........................................

2,245

2,193

22,149CURRENT ASSETS:
Cash and cash equivalents ...................................
Receivables:

PROPERTY, PLANT AND
EQUIPMENT (Notes 6 and 8):

Construction in progress .....................................

12

Lease assets ..........................................................

131

124

1,292

Total ..................................................................

38,63834,623381,196

Accumulated depreciation ...................................

(15,712)(15,149)(155,013)

Net property, plant and equipment .................

22,926

19,474226,183

Investment securities (Note 3) ............................

8,140

7,639

80,308Investments in and long-term loans to
subsidiaries and associated companies (Note 5) ......

6,501

7,053

64,138Other assets ..........................................................

3,051

2,753

30,101

Allowance for doubtful accounts ........................

(152)

(2)

(1,500)Total investments and other assets .................

17,54017,443173,047

TOTAL ....................................................................

¥68,439¥66,340$675,207

INVESTMENTS AND OTHER ASSETS:

See notes to nonconsolidated financial statements.

42

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short‑term borrowings (Note 7) .........................
Current portion of long-term debt (Note 7) .......
Payables:Trade notes .........................................................
Trade accounts ...................................................
Accrued expenses .................................................
Income taxes payable ...........................................
Advances received ................................................
Accrued bonuses ..................................................
Allowance for anticipated project loss ................
Other current liabilities .......................................
Total current liabilities ....................................
LONG-TERM LIABILITIES:Long-term debt (Note 7) ......................................
Liability for retirement benefits ..........................
Allowance for environmental measures .............
Asset retirement obligations ................................
Deposits received (Note 8) ...................................
Deferred tax liabilities (Note 10) .........................
Total long-term liabilities ................................

June 30, 2014

June 30, 2013

June 30, 2014

¥ 6,480160¥ 7,090
198$ 63,931
1,579

303
2,434
787
149
4,495
841
171
4,556
20,376

490
1,588
2,543
29
5,965
757
60
2,511
21,231

2,989
24,0137,764
1,470
44,347
8,297
1,687
44,948201,025

1,738
216
25
50
1,598
900
4,527

1,544
238
25
48
1,699
622
4,176

17,147
2,131
247
493
15,766
8,879
44,663

7,393

7,393

72,938

6,093
115

6,093
115

60,112
1,135

1,546
30,497

1,546
28,453

15,253300,878

1,342

884

13,240

COMMITMENTS AND CONTINGENT
LIABILITIES (Note 11)
EQUITY (Notes 9 and 12):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares on June 30,
2013 and 2014 ....................................................
Capital surplus:
Additional paid-in capital ..................................
Other capital surplus .........................................
Retained earnings:
Legal reserve ......................................................
Retained earnings - unappropriated .................
Unrealized gain on
available-for-sale securities ...............................
Deferred loss onderivatives under hedge accounting .................
Treasury stock—at cost
10,793,274 shares on June 30, 2014
and 11,085,421 shares on June 30, 2013 ..........
Total equity .......................................................

(176)

(186)

(1,736)(3,274)43,536(3,365)40,933(32,301)
429,519

TOTAL ....................................................................

¥68,439¥66,340$675,20743

N o n conso lida ted S t atemen t o f Op erat i o n s
Nippon Koei Co., Ltd.
Year ended June 30, 2014

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

12-month3-month12-month

June 30, 2014

June 30, 2013

June 30, 2014

NET SALES ...........................................................
COST OF SALES ...................................................
Gross profit ..........................................................

¥59,308
44,478
14,830¥5,3264,770
556$585,122
438,812146,310SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ........................
Operating income (loss) ......................................

11,7333,097

2,889(2,333)

115,756
30,554

960
(77)
(175)
(21)

211
(20)
(60)
16

9,471
(760)
(1,727)
(207)

233
920

(152)
44
39

2,300
9,077

INCOME (LOSS) BEFORE INCOME TAXES ...

4,017(2,294)

39,631

INCOME TAXES (Note 10):
Current .................................................................
Income taxes for prior periods ............................
Deferred ................................................................
Total income taxes ...........................................

704
(1)
1,115
1,818

88
(230)
(919)
(1,061)

6,946(10)
11,00017,936NET INCOME (LOSS) ........................................

¥ 2,199¥(1,233)$ 21,695

OTHER INCOME (EXPENSES):Interest and dividend income ..............................
Interest expense ...................................................
Foreign currency exchange loss ..........................
(Loss) gain on sales of investment securities .....
Provision of allowance for doubtful accountsof subsidiaries and associated companies ........
Other-net ...............................................................
Other income-net .............................................

U.S. Dollars(Note 1)Yen

PER SHARE OF COMMON STOCK (Note 2.s):
Basic net income (loss) ........................................
Cash dividends applicable to the year ................
See notes to nonconsolidated financial statements.

44¥29.05
7.50¥(16.33)
2.00$0.290.07

N o n conso lida ted S t atemen t o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd.
Year ended June 30, 2014

Thousands

Millions of Yen

Outstanding
Number of
Shares ofCommonStock

BALANCE, APRIL 1, 2013 .............

75,471

Capital Surplus

Retained Earnings

CommonStock¥7,393

Additional

Other

Paid-in
CapitalCapitalSurplus¥6,093¥115

Legal
Reserve¥1,546

Unrealized
Gain onDeferred
Loss onAvailable-

Derivatives

Unappropriatedfor-sale
Securities

under Hedge
Accounting¥30,266¥ 612

Treasury

Total

Stock

Equity¥(132) ¥(3,398) ¥42,495

Net loss ............................................

(1,233)(1,233)

Cash dividends, ¥7.50 per share ......

(580)

(580)

Purchase of treasury stock .............

(8)

(3)

(3)

Disposal of treasury stock ..............

108

36

36

(3,365)40,933

Net change in the fiscal period(3 months) .......................................
BALANCE, JUNE 30, 2013 .............

75,571

7,393

6,093

115

1,546

28,453

272

(54)

884

(186)

218

Net income ......................................

2,199

2,199

Cash dividends, ¥2.00 per share ........

(155)

(155)

Purchase of treasury stock ...............

(136)

(54)

(54)

Disposal of treasury stock ..............

428

145

145

458

Net change in the year ....................
BALANCE, JUNE 30, 2014 .............

75,863¥7,393¥6,093¥115¥1,546¥30,497¥1,34210468¥(176) ¥(3,274) ¥43,536

Thousands of U.S. Dollars (Note 1)
Capital Surplus

Retained Earnings

CommonStock

BALANCE, JUNE 30, 2013 .............

$72,938

Additional
Paid-in
Capital

Other
CapitalSurplus$60,112$1,135

Legal
Reserve

Unappropriated$15,253 $280,712

Unrealized
Gain onDeferred
Loss onAvailablefor-sale

Derivatives
under Hedge

Securities

Accounting$ 8,721$(1,835) $(33,199) $403,837

Treasury
Stock

Total
EquityNet income ......................................

21,695

21,695

Cash dividends, $0.02 per share ......

(1,529)(1,529)Purchase of treasury stock .............

(533)

(533)

Disposal of treasury stock ..............

1,431

1,431

4,519

Net change in the year ....................
BALANCE, JUNE 30, 2014 .............

$72,938$60,112$1,135$15,253 $300,878$13,240

99

4,618$(1,736) $(32,301) $429,519

See notes to nonconsolidated financial statements.

45

N o tes to No nco nso lid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd.
Year Ended June 30, 2014

1.	B ASIS OF PRESENTATION OF NONCONSOLIDATED FINANCIAL
STATEMENTS
The accompanying nonconsolidated financial statements have been prepared from the accounts maintained by
Nippon Koei Co., Ltd. (the “Company”) in accordance with the provisions set forth in the Companies Act ofJapan (the “Companies Act”) and in accordance with accounting principles generally accepted in Japan, which
are different in certain respects as to the application and disclosure requirements of International Financial
Reporting Standards.
As consolidated statements of cash flows and certain disclosures are presented in the consolidated financial
statements of the Company, nonconsolidated statements of cash flows and certain disclosures are not presented
herein in accordance with accounting principles generally accepted in Japan.
Effective for the year ended March 31, 2014, the Japanese Financial Instruments and Exchange Act and its
related accounting regulations were amended to allow an entity to not disclose certain designated footnote
information in its nonconsolidated financial statements if the entity prepares and discloses consolidated
financial statements. Accordingly, the Company has omitted disclosure of certain footnote information in theaccompanying nonconsolidated financial statements.
In preparing these nonconsolidated financial statements, certain reclassifications and rearrangements have been
made to the Company’s nonconsolidated financial statements issued domestically in order to present them in aform which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in
the nonconsolidated financial statements for the 3-month fiscal period ended June 30, 2013 to conform to theclassifications used in nonconsolidated financial statements for the year ended June 30, 2014.
The nonconsolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and have been made at the rate of ¥101.36 to $1,
the approximate rate of exchange at June 30, 2014. Such translations should not be construed as representations
that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
Change in fiscal year-end
The Company changed its fiscal year-end from March 31 to June 30 by the resolution of the 68th Annual General
Shareholders’ Meeting held on June 27, 2013, in order to make operations more efficient and decrease the work
load which becomes heavy in March with the cluster of projects requiring completion. Due to this change, thefiscal period ended June 30, 2013, is the 3-month fiscal period from April 1 to June 30, 2013.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Nonconsolidation — The nonconsolidated financial statements do not include the accounts of subsidiaries.
Investments in subsidiaries and associated companies are stated at cost.

b. Cash Equivalents — Cash equivalents are short-term investments that are readily convertible into cash andthat are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits and investment trusts, all of which mature or become due within
three months of the date of acquisition.

c. Inventories — Work in process is stated at the lower of cost, mainly determined by the specificidentification cost method or net selling value.

d. Investment Securities — Investment securities are classified and accounted for, depending on
management’s intent, as follows:(1) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent andability to hold to maturity are reported at amortized cost; (2) available-for-sale securities, which are not46

classified as the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of
applicable taxes, reported in a separate component of equity and (3) investments in subsidiaries andassociated companies are reported at cost.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method.
For other-than-temporary declines in fair value, investment securities are reduced to net realizable value by acharge to operations.

e. Property, Plant and Equipment — Property, plant and equipment are stated at cost. Depreciation ofproperty, plant and equipment is computed substantially by the declining-balance method at rates based on
the estimated useful lives of the assets, while the straight-line method is applied to buildings acquired after
April 1, 1998, and lease assets as well as other equipment for rent. The range of useful lives is principallyfrom 3 to 50 years for buildings and structures, from 2 to 15 years for machinery and equipment and from 2
to 20 years for furniture and fixtures. The useful lives for lease assets are the terms of the respective leases.

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

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

h. Retirement and Pension Plans — The Company has a contributory defined benefit pension plan andunfunded retirement benefit plan for the benefit of its employees.
Effective April 1, 2000, the Company adopted a new accounting standard for employees’ retirement benefits
and accounted for the liability for retirement benefits based on the projected benefit obligations and plan
assets at the balance sheet date. The projected benefit obligations are attributed to periods on a straight-line
basis. Actuarial gains and losses are amortized on a straight-line basis over 13 years within the averageremaining service period. Past service costs are amortized on a straight-line basis over 13 years within the
average remaining service period. Accounting treatments for unrecognized actuarial gains and losses andunrecognized past service costs in the nonconsolidated financial statements are different from those in the
consolidated financial statements.
Hitherto, retirement benefits for directors and Audit & Supervisory Board members were provided at theamount which would be required if all directors and Audit & Supervisory Board members retired at thebalance sheet date, but currently, the Company abolished benefit pension plans for directors and Audit &Supervisory Board members. The balance in the nonconsolidated balance sheet is the estimated amount for
directors and Audit & Supervisory Board members who have belonged to the Company since when the plans
were effective.

i. Allowance for Anticipated Project Loss — The Company has made a provision for anticipated losses on
uncompleted project contracts.

j. Asset Retirement Obligations — In March 2008, the ASBJ issued ASBJ Statement No. 18, “AccountingStandard for Asset Retirement Obligations” and ASBJ Guidance No. 21, “Guidance on Accounting Standard
for Asset Retirement Obligations.” Under this accounting standard, an asset retirement obligation is defined
as a legal obligation imposed either by law or contract that results from the acquisition, construction,
development and normal operation of a tangible fixed asset and is associated with the retirement of suchtangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows
required for the future asset retirement and is recorded in the period in which the obligation is incurred if a47

reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be madein the period the asset retirement obligation is incurred, the liability should be recognized when a reasonableestimate of the asset retirement obligation can be made. Upon initial recognition of a liability for an asset
retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related
fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense
through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its
present value each period. Any subsequent revisions to the timing or the amount of the original estimate ofundiscounted cash flows are reflected as an adjustment to the carrying amount of the liability and thecapitalized amount of the related asset retirement cost.

k. Research and Development Costs — Research and development costs are charged to income as incurred.
l. Leases — In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease
Transactions,” which revised the previous accounting standard for lease transactions. The revised accounting
standard for lease transactions was effective for fiscal years beginning on or after April 1, 2008.
Under the previous accounting standard, finance leases that deemed to transfer ownership of the leased
property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as
operating lease transactions if certain “as if capitalized” information was disclosed in the notes to the lessee’s
financial statements. The revised accounting standard requires that all finance lease transactions becapitalized to recognizing lease assets and lease obligations in the balance sheet. In addition, the revised
accounting standard permits leases which existed at the transition date and do not transfer ownership of theleased property to the lessee to be measured at the amount of obligation under finance leases less interest
expense at the transition date and recorded as acquisition cost of lease assets.
The Company applied the revised accounting standard effective April 1, 2008. In addition, the Company
accounted for leases which existed at the transition date and do not transfer ownership of the leased property
to the lessee as acquisition cost of lease assets measured at the amount of obligation under finance leases at
the transition date.
All other leases are accounted for as operating leases.

m. Accrued Bonuses — Bonuses to employees, directors and Audit & Supervisory Board members are accruedat the end of the year to which such bonuses are attributable.

n. Allowance for Environmental Measures — The Company has made a provision for the treatment of PCB
Wastes based on the Act on Special Measures concerning Promotion of Proper Treatment of PCB Wastes.

o. Income Taxes — The provision for income taxes is computed based on the pretax income included in thenonconsolidated statement of operations. The asset and liability approach is used to recognize deferred tax
assets and liabilities for the expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently
enacted tax laws to the temporary differences.

p. Foreign Currency Transactions — All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet
date. The foreign exchange gains and losses from translation are recognized in the nonconsolidated
statement of operations.

q. Revenue Recognition — If the outcome of a construction contract can be estimated reliably, the contract
revenue is recognized by the percentage-of-completion method which is measured by reference to thepercentage of total cost incurred to date to estimated total cost.
All other construction projects, except the aforementioned, are recorded using the completed-contract
method (including the partially completed-contract method).

r. Derivatives and Hedging Activities — The Company uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange. Foreign exchange forward contracts are utilized by the48

Company to reduce its exposures to fluctuations in foreign currency exchange rates. The Company does notenter into derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as follows: (1) all derivatives are recognized
as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions arerecognized in the nonconsolidated statement of operations and (2) for derivatives used for hedging purposes,
if such derivatives qualify for hedge accounting because of high correlation and effectiveness between thehedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of thehedged transactions.
Foreign exchange forward contracts are measured at fair value but the unrealized gains/losses are deferred
until the underlying transactions are completed.

s. Per Share Information — Basic net operations per share is computed by dividing net operations available
to shareholders of common stock by the weighted-average number of shares of common stock outstanding
for the period. The weighted-average numbers of shares of common stock for the year ended June 30, 2014,
and the period ended June 30, 2013, were 75,693,610 and 75,517,610, respectively.
Diluted net operations per share of common stock are not disclosed because the Company has nothing thatmight dilute the per share information for the year ended June 30, 2014, and the period ended June 30, 2013.
Cash dividends per share presented in the accompanying nonconsolidated statement of operations are
dividends applicable to the respective years including dividends to be paid after the end of the fiscal period.

t. Accounting Changes and Error Corrections — In December 2009, the ASBJ issued ASBJ Statement No.
24, “Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No. 24,“Guidance on Accounting Standard for Accounting Changes and Error Corrections.” Accounting treatments
under this standard and guidance are as follows:(1) Changes in Accounting Policies: When a new accounting policy is applied following revision of an
accounting standard, the new policy is applied retrospectively unless the revised accounting standard
includes specific transitional provisions, in which case the entity shall comply with the specific transitional
provisions.
(2) Changes in Presentation: When the presentation of financial statements is changed, prior-period financial
statements are reclassified in accordance with the new presentation.
(3) Changes in Accounting Estimates: A change in an accounting estimate is accounted for in the period of
the change if the change affects that period only and is accounted for prospectively if the change affects boththe period of the change and future periods.
(4) Corrections of Prior-Period Errors: When an error in prior-period financial statements is discovered, thosestatements are restated.

u. Additional Information
Employee Stock Ownership Plan Trust (“ESOP”) — The Company has introduced an employee
incentive plan, ESOP. Acquisition and sales of the Company’s shares are accounted for under the assumptionthat the Company and ESOP are the same entity. Accordingly, the Company’s shares owned by ESOP areaccounted for as treasury stock in the Company’s nonconsolidated balance sheet, and nonconsolidated
statement of changes in equity. Also, assets and liabilities, and profits and losses of ESOP are included in the
Company’s nonconsolidated balance sheet, nonconsolidated statement of operations and comprehensive
income and nonconsolidated statement of changes in equity.

49

3. INVESTMENT SECURITIESInvestment securities as of June 30, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

June 30, 2014

June 30, 2013

June 30, 2014

¥7,345756
39¥8,140¥6,350741
548¥7,639$72,464
7,459
385$80,308

Non-current:
Marketable equity securities ...............................
Government and corporate bonds ......................
Other .....................................................................
Total .................................................................

4. INVENTORIESInventories at June 30, 2014 and 2013, consisted of the following:
Millions of Yen

Work in process ......................................................
Raw materials and supplies ...................................
Total .................................................................

June 30, 2014
¥6,888310¥7,198June 30, 2013
¥8,661
169¥8,830Thousands of
U.S. Dollars

June 30, 2014
$67,956
3,058$71,014

5.	INVESTMENTS IN AND LONG-TERM LOANS TO SUBSIDIARIES AND
ASSOCIATED COMPANIESInvestments in and advances to subsidiaries and associated companies as of June 30, 2014 and 2013, were as
follows:
Millions of Yen

Investments ............................................................
Long-term loans .....................................................
Total .................................................................

June 30, 2014
¥5,732769¥6,501

June 30, 2013
¥6,320733¥7,053Thousands of
U.S. Dollars

June 30, 2014
$56,551
7,587$64,138

The value of the investment securities of subsidiaries and associated companies are measured at the originalacquisition costs, as their fair value cannot be reliably determined at June 30, 2014, since market value andestimated future cash flows are not available.

6. REDUCTION ENTRY
Due to the acquisition expenses of the Company that have been subsidized by the national government,
the amount of such subsidies, ¥148 million ($1,460 thousand), is offset against the acquisition cost of themachinery and equipment.

50

7. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at June 30, 2014 and 2013 consisted of notes to banks and loan from subsidiaries.
The annual interest rates applicable to the short-term borrowings were ranged from 0.720% to 0.739% and0.640% to 0.850% at June 30, 2014 and 2013, respectively.
Long-term debt at June 30, 2014 and 2013, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

June 30, 2014

June 30, 2013

June 30, 2014

¥1,820¥1,650$17,956

78
1,898
(160)
¥1,738

50
42
1,742
(198)
¥1,544770
18,726(1,579)$17,147

Unsecured loan from bank due seriallyto 2023 with interest rates ranging from
0.680% to 0.870% .................................................
Loan from bank due seriallyto 2013 with interest rate of 1.250% ...................
Obligation under finance leases ............................
Total .................................................................
Less current portion ..............................................
Long-term debt, less current portion ....................

Annual maturities of long-term debt at June 30, 2014, for the five years and thereafter were as follows:
Period Ending June 30

2015 .........................................................
2016 .........................................................
2017 .........................................................
2018 .........................................................
2019 .........................................................
2020 and thereafter .................................
Total ..................................................

Thousands of
U.S. Dollars

Millions of Yen
Long-Term Debt

Lease Obligations

Long-Term Debt

Lease Obligations

¥130
164
266
266
436
558
¥1,820

¥31
23
18
6
0

$1,283
1,618
2,624
2,624
4,301
5,506
$17,956

$306
227
178
59
0

¥78

$770

The Company had a commitment-line contract of ¥8,000 million ($78,927 thousand) over three years withfinancial institutions in order to secure the stability of long-term funding. The contract included a restrictive
financial covenant. At June 30, 2014, the Company had not utilized the commitment-line. In addition, theCompany had overdraft contracts of ¥16,000 million ($157,853 thousand) in total. At June 30, 2014, theCompany had not utilized the overdraft.

8. DEPOSITS RECEIVED
Deposits received from tenants amounted to ¥1,333 million ($13,151 thousand) at June 30, 2014, and ¥1,501
million at June 30, 2013.
At June 30, 2014, land, building and structures for rent of ¥1,286 million ($12,687 thousand) were pledged ascollateral for these deposits.

51

9. EQUITY
Japanese companies are subject to the Companies Act. The significant provisions in the Companies Act that
affect financial and accounting matters are summarized below:
a. Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to theyear-end dividend upon resolution at the shareholders’ meeting. For companies that meet certain criteria, suchas (1) having a Board of Directors, (2) having independent auditors, (3) having an Audit & Supervisory Board,and (4) the term of service of the directors is prescribed as one year rather than two years of normal term by its
articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time
during the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets all
the above criteria.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the company so stipulate. The Companies Act provides certain limitations on theamounts available for dividends or the purchase of treasury stock. The limitation is defined as the amountavailable for distribution to the shareholders, but the amount of net assets after dividends must be maintained at
no less than ¥3 million.
b. Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve(a component of retained earnings) or as additional paid-in capital (a component of capital surplus) dependingon the equity account charged upon the payment of such dividends until aggregate amount of legal reserve andadditional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount ofadditional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides
that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can betransferred among the accounts under certain conditions upon resolution of the shareholders.
c. Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stockby resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amountavailable for distribution to the shareholders which is determined by specific formula. Under the Companies
Act, stock acquisition rights, which were previously presented as a liability, are now presented as a separate
component of equity. The Companies Act also provides that companies can purchase both treasury stockacquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate
component of equity or deducted directly from stock acquisition rights.

52

10. INCOME TAXESThe Company is subject to Japanese national and local operations taxes which, in the aggregate, resulted instatutory tax rates of approximately 36.8% for the year ended June 30, 2014 and the period ended June 30, 2013.
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at June30, 2014 and 2013, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Deferred tax assets:
Accrued bonuses ..................................................
Tax loss carryforwards .........................................
Liability for retirement benefits for directors
and Audit & Supervisory Board members .......
Liability for retirement benefits
for employees .....................................................

June 30, 2014

June 30, 2013

June 30, 2014

¥516
208

¥1,175626$5,091
2,052

9

9

89

65

74

641

Allowance for anticipated project loss ................
Allowance for doubtful accounts ........................
Loss on impairment of long-lived assets ............
Deferred loss on derivatives under hedge
accouning ...........................................................
Investment in subsidiaries ...................................
Other .....................................................................
Less valuation allowance .....................................
Total .................................................................

59
54
54

22
57
54

582
533
533

92
347
360
(500)
¥1,264

98
446
(248)
¥2,313

908
3,423
3,551
(4,933)$12,470

Deferred tax liabilities:
Reserve for deferred gains onsale of property ..................................................

¥170

¥174

$1,677

704

463

6,946

304
5
¥1,183
¥81

229
5
¥871
¥1,442

2,999
49$11,671$799

Unrealized gain on available-for-salesecurities .............................................................
Prepaid pension cost ............................................
Other .....................................................................
Total .................................................................
Net deferred tax assets .......................................

53

A reconciliation between the statutory tax rate and the actual effective tax rate reflected in the accompanying
nonconsolidated statement of operations for the year ended June 30, 2014 and the period ended June 30, 2013,
was as follows:

Statutory tax rate ...................................................
Per capita levy of local tax .....................................
Expenses not deductible for tax purposes ............
Valuation allowance ...............................................
Income taxes for prior periods ..............................
Other – net ..............................................................
Actual effective tax rate .........................................

June 30, 2014
36.8%
2.1
1.8
10.2
(0.0)
(5.6)
45.3%

June 30, 2013(36.8)%
0.9
0.5
(0.5)
(10.0)(0.3)(46.2)%

As of June 30, 2014, the Company had tax loss carryforwards aggregating approximately ¥603 million ($5,949
thousand) which were available to be offset against taxable income of the Company in future years. These tax
loss carryforwards, if not utilized, will expire in 2020.
New tax reform laws enacted in 2014 in Japan changed the normal effective statutory tax rate for the fiscal year
beginning on or after April 1, 2014, from approximately 36.8% to 34.4%. The effect of this change was todecrease deferred tax assets in the noconsolidated balance sheet as of June 30, 2014, by ¥74 million ($730
thousand) and to increase income taxes—deferred in the nonconsolidated statement of income for the year thenended by ¥74 million ($730 thousand).

11. CONTINGENT LIABILITIESAt June 30, 2014, the Company had the following contingent liabilities:
Millions of Yen

Guarantees of bank loans related to employees ..................................
Refundment bonds of subsidiaries ......................................................

¥85
¥398

Thousands of
U.S. Dollars$839$3,927

12. SUBSEQUENT EVENTSAppropriations of Retained Earnings
On August 11, 2014, the following appropriation of retained earnings at June 30, 2014, was resolved by the
Board of Directors:
Millions of Yen

Year-end cash dividends, ¥7.5 ($0.07) per share .................................

¥569

Thousands of
U.S. Dollars$5,614

The total amount of the dividends above does not include ¥10 million ($99 thousand) in dividends to the ESOP
because the Group’s shares owned by the ESOP are included in the Group’s treasury stock.

54

55

Co rp orate In form atio n
B o a r d o f D i r e c t o r s , O ff i c e r s a n d A u d i t &Supervisory Board Members
Director and Chairman:
Noriaki Hirose*
Director and Vice Chairman:
Katsumi Yoshida

Director and Counselor:
Yoshihiko Tsunoda
Director and Executive Vice Presidents:
Asao Yamakawa
Director and Senior Managing Executive Officer:
Akira Mizukoshi
Director and Senior Managing Executive Officer:
Noboru Takano*
Director and Managing Executive Officers:
Yoshikimi Inoue
Director and Executive Officer:
Hiroyuki Akiyoshi
Naoki Honjo
Hiroshi Tanaka
Director:
Masahisa Naito
Hiizu Ichikawa
Audit & Supervisory Board Member:
Toshiaki Shimizu
Izumi Arai
Mineo Enomoto
Senior Managing Executive Officer:
Takashi Karasaki
Hiromichi Sekine
Executive Officers:
Masanao Nishimura
Takashi Seki
Hiroyuki Kasahara
Haruyoshi Takura
Yoshikatsu Inada
Shingo Ono
Masanobu Sakamoto
Takayasu Tsuyusaki
Shuichi Ueda
Yasushi Sugo
Akichika Ishibashi
Noriaki Yoshida
Haruhiko Kanai
Kevin Tynes

56

Shares authorized

189,580,000

Shares issued

86,656,510

Stockholders of minimum tradable stock unit

5,312

As of June 30, 2014

Major Shareholders

Director and President:
Ryuichi Arimoto**Representative Directors

Stock Information

As of September 25, 2014

Share owned

Percentage of
total owned

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

3,699,263

4.27

Meiji Yasuda Life Insurance
Company.

3,529,522

4.07

Japan Trustee Services Bank,
Ltd. (Trustee)

3,297,000

3.80

The Koei Employees’
Stockholders Association

2,892,078

3.34

The Master Trust Bank ofJapan, Ltd. (trust a/c)

2,304,000

2.66

Mizuho Corporate Bank, Ltd.

1,910,634

2.20

Tsukishima Kikai Co.,Ltd

1,843,000

2.13

CBNY DFA INTL SMALL CAP
VALUE PORTFOLIO

1,394,000

1.61Japan Trustee Services Bank,
Ltd. (ESOP trust a/c)

1,375,000

1.59

CREDIT SUISSESECURITIES (EUROPE)
LIMITED PB OMNIBUS
CLIENT ACCOUNT

1,224,000

1.41

As of June 30, 2014
Besides the above, the Company owns 9,418,274 shares of treasury stock(10.9%)

Major Offices and Facilities

Major Businesses

Head Office
4 Kojimachi 5-chome, Chiyoda-ku,
Tokyo 102-8539, Japan

Consulting Administration

Shin-Kojimachi Office
2 Kojimachi 4-chome, Chiyoda-ku,
Tokyo 102-0083, Japan
Hanzomon Office
5 Kojimachi 2-chome, Chiyoda-ku,
Tokyo 102-0083, Japan
Domestic Branch Offices
Tokyo, Sapporo, Sendai, Fukushima, Niigata,
Nagoya, Osaka, Hiroshima, Shikoku, Fukuoka
Research Facility
Research and Development Center in Tsukuba
Science City, Ibaraki
Overseas Offices (Liaison Office)Jakarta, Manila, Hanoi(Ho Chi Minh), Bangkok(Vientiane, Phnom Penh), Yangon(Naypyidaw),
New Delhi(Dhaka),
Colombo, Middle East(Amman, Baghdad, Tunis,
Rabat, Cairo), Nairobi, Lima

Field of activity• Water Resources• Energy• Urban & Regional Development• Transportation• Agriculture & Rural Development• Environment• Climate Change• Information & Communication Technology• Geosphere Engineering• Project and Program Management•	Public Private Partnership/Private FinanceInitiative
Services•	Preliminary investigation, Planning, Feasibility
studies, Assessment, Detailed design,
Construction supervision , Operation andmaintenanceEngineering Administration
Field of activity•	Electrical and civil works for electric power
facilities (generation, transmission, substation,
distribution schemes and wiring of buildings)•	Electric power utilities (turbines, generators,
transformers, control deices andcommunications equipment)• Electric equipment and devices• Safety equipment•	Skin electric thermo-system heaters (SECTheaters)• Factory automation equipment
Services•	Surveys, Studies, Planning, Design, Construction,
Installation, Sale

57

M a j o r Nip po n Koe i Gro u p C o mp an i es
While mainly focused on engineering consulting, electrical power engineering, and power generation, the Nippon Koei
Group is also active in a wide range of related fields. The various businesses peripheral to the activities of Nippon Koei, themain company in the Group, are taken on by subsidiaries and affiliates located both at home and abroad.
These related companies, together with the principle corporation, make up the Nippon Koei Group.
The various firms maintain close cooperation based on relationships of interdependence that enhance the strength andcohesion of the Group as a whole.
As of June 2013, the total number of employees of the Group companies based in Japan came to about 2,919, of which over
1,200 were registered engineers. The Group truly has a wealth of highly skilled technical experts.
The subsidiary companies that comprise the major Nippon Koei Group are as follows:
Tamano Consultants Co., Ltd.
This company is headquartered in the city of Nagoya and provides engineering consulting services centered on the Chubu
Region. The company boasts the most highly regarded urban and regional planning group in Japan.
Nippon Civic Consulting Engineers Co., Ltd.
This company provides consulting services centered on planning, design, and construction supervision of undergroundstructures such as urban tunnels. The company specializes in shield tunneling technology and the development of newunderground construction technology.
El Koei Co., Ltd.
This company conducts employment and staff supply for Nippon Koei Group. The company provides various fields ofqualified human resources to support the activity of the Group Companies.
KRI International Corporation
This company has been established to enhance non-engineering consulting works of the Nippon Koei Group’s activities.
KRI provides the consulting services mainly in the fields of economic and industrial development including finance andmanagement, education and human resources development, and regional and community development.
Nippon Koei U.K. Co., Ltd.
This company provides engineering consulting services to enforce Nippon Koei’s overseas operation.
Nippon Koei Latin America-Caribbean Co., Ltd.
This company has been established to enhance Nippon Koei’s operation in Latin America and Caribbean and provides
consulting engineering and technical services for various development sectors in the region.
Nippon Koei LAC, Inc.
This company has been incorporated in Panama in order to promote further localization of Nippon Koei’s operation in
Latin America and Caribbean region.
Nippon Koei LAC do Brasil Ltda.
This company has been incorporated in Brasil in order to promote further localization of Nippon Koei’s operation in Latin
America.
Nippon Koei India Pvt. Ltd.
This company has been established to enhance Nippon Koei’s operation in India and provides consulting engineering andtechnical services for various development sectors focusing on projects in India and other developing countries.
Nippon Koei Vietnam International Co., Ltd.
This company has been established to enhance Nippon Koei’s operation in Vietnam and surrounding countries in the
Greater Mekong Subregion and provides consulting services for various development sectors in the region.
PT. Indokoei International
This company has been incorporated in Indonesia by Nippon Koei Co., Ltd. and Indonesian partner company and provides
the services of engineering and management consultancy to clients in Indonesia as well as overseas.
Philkoei International, Inc.
This company has been incorporated in the Philippines by Nippon Koei Co., Ltd. and Filipino investors and providing
consulting engineering and technical services for various development sectors focusing on projects in the Philippines andother overseas countries.
Thaikoei International Co., Ltd.
This company has been incorporated in Thailand and providing consulting services for various development sectors focusing
on projects in Thailand and other countries in Greater Mekong Subregion.
Myanmar Koei International Ltd.
This company has been incorporated in Myanmar by Nippon Koei Co., Ltd. and Myanmar partner company and provides
consulting services for various development sectors in the region.
Nippon Koei Africa Pty. Ltd. / Nippon Koei Mozambique, Ltda.
This company has been established to enhance Nippon Koei’s operation in Sub-Saharan Africa and provides consulting
engineering and technical services for various development sectors in the region.
Koei System Inc.
This company develops software programs used in computer control applications, dispatches personnel, and provides
support and software development for office automation systems on a consignment basis.
Nikki Corporation
This company conducts real estate management, leasing, and insurance services for Nippon Koei and other Group
companies. It also sells, imports, and exports electrical power equipment and rents and leases various goods.

58

4, Kojimachi 5-chome, Chiyoda-ku, Tokyo 102-8539, Japan
Telephone: +81 3 3238 8027 Facsimile: +81 3 3238 8326
http://www.n-koei.co.jp E-mail: info@n-koei.co.jp

Printed in Japan