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

Annual Report 2007
Year Ended March 31, 2007

Printed in JapanC o m p a ny P ro f i l e

Nippon Koei Co., Ltd. established in 1946, specializes in engineering consulting andelectric power engineering. Since its foundation, the Company has adhered to apolicy 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 ourfirst overseas venture, a hydroelectric power project in Myanmar in 1954, we haveparticipated in a broad variety of sophisticated development projects worldwide.
The Engineering Administration Group spearheads the Company’s electric powerengineering business. Here, we provide a complete engineering package, fromsurveys 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 environments for people aroundthe world.

CONTENTS
Financial Highlights ....................................................................................................... 1
Consolidated Business Report for Fiscal 2006 . ............................................................ 2
Consolidated Balance Sheets ........................................................................................10
Consolidated Statements of Income ............................................................................ 12
Consolidated Statements of Changes in Equity .......................................................... 13
Consolidated Statements of Cash Flows ..................................................................... 14
Notes to Consolidated Financial Statements .............................................................. 15
Non-consolidated Balance Sheets . .............................................................................. 32
Non-consolidated Statements of Income .................................................................... 34
Non-consolidated Statements of Changes in Equity .................................................. 35
Notes to Non-consolidated Financial Statements . ..................................................... 36
Corporate Information ................................................................................................. 46
Major Nippon Koei Group Companies . ...................................................................... 48

Financial Highlights

Consolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended March 31

2007

2007

2006

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

¥67,053¥68,152$568,005

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

1,465

1,455

12,411

Net income per share (Yen/Dollars) ....................

17.47

16.64

0.15

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

82,78884,273

701,296

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

44,38943,880376,019

As of March 31

Non-Consolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended March 31

2007

2007

2006

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

¥49,787¥50,855$421,745

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

801

701

6,785

Net income per share (Yen/Dollars) ....................

9.55

7.78

0.07

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

71,45372,268605,277

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

41,08841,617

348,056

As of March 31

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 ¥118.05=US$1, theapproximate rate of exchange at March 31, 2007.

C o n s ol i dated Busines s Re p o rt fo r F i s c a l 2 0 0 6( F i s c a l Year Ended Ma rch 3 1 , 2 0 0 7 )1. Overview of Performance and Cash Flow
(1) Performance
Despite sluggish growth in wages and personal consumption during the period under review, the Japanese
economy as a whole remained on course for recovery as improved corporate earnings led to increased privatesector capital investment.
Although capital investment by electric power companies increased, the Nippon Koei Group continued to face aharsh operating environment due to continued reduction in budgets for public works and official development
assistance (ODA) and the consequent market contraction in core fields of business.
In the face of these circumstances, the Group worked to expand our share of orders and improve operational
efficiency through enhanced coordination between Company operational divisions and between Group
companies, while also seeking to improve our cost structure with extensive reductions in payroll expenses andother expenditures to build an organization capable of withstanding changes in the business environment.
As a result, performance during the period under review was largely favorable with consolidated orders of
63,837 million yen, down 3.4% from the previous year, and sales level with the previous year at 67,053 million
yen.
Earnings held steady compared with the previous year, with operating income 2,314 million yen and current net
income of 1,465 million yen.
Outlines of Group performance in specific sectors follow below.

Domestic Consulting Operations
Although the road planning and survey businesses enjoyed increases in orders, the value of orders booked only
held steady from the previous year at 36,168 million yen and sales likewise at 37,224 million yen.

Overseas Consulting Operations
While railway operations enjoyed increases survey business in, for example, India, the water resource
development operations dropped off, resulting in orders of 13,946 million yen, down 19.7% from the previous
year, and sales of 14,972 million yen, down 8.8% from the previous year.

Manufacturing Operations
With the conclusion of such contracts as for centralized monitoring and control systems for electric powercompany transformer substations, orders held steady from the previous year at 9,295 million yen while sales fell
to 9,578 million yen, down 5.7% from the previous year.

Engineering Operations
The booking of such orders as for installation of electrical machinery at electric power company transformer
substations brought strong growth in orders of 43.7% over the previous year to 3,786 million yen and in sales of
33.9% over the previous year to 3,365 million yen.

Other Business Operations
Other business operations, consisting primarily of real estate leasing and software development and sales, saw
steady growth in sales of 13.8% over the previous year to 1,914 million yen.

(2) Cash Flow
An increase in current income before income taxes and minority interests, our efforts for early collection ofreceivable and a decrease in inventory assets contributed to cash flow from operating activities of 4,680 million
yen (an increase of 3,448 million yen from the same period the previous year).
Cash flow from investment activities amounted to a negative 1,415 million yen (a decrease of 1,305 million fromthe same period the previous year) due to the acquisition of negotiable securities, including in strategic
investments.
Cash flow from financial activities amounted to a negative 2,757 million yen (an increase of 2,280 million yen
from the same period the previous year) due to the payment of dividends to shareholders, including acommemorative dividend, and, as in the previous year, the redemption of interest-bearing corporate bonds.
As a result, cash and cash-equivalents increased 515 million yen to close the fiscal year with a balance of 5,498
million yen, including an additional 214 million yen due to the additional consolidation of subsidiaries.

2. Production, New Orders and Sales(1) New Orders
This Consolidated
Fiscal YearBusiness Category

Change onPrevious Year(%)

(Millions of yen)

New Orders
Domestic consulting operations . ............................
Overseas consulting operations ..............................
Power equipment manufacturing operations ........
Electric power engineering operations . .................
Other business operations .......................................
Total new orders ..................................................
Outstanding orders
Domestic consulting operations . ............................
Overseas consulting operations (*1) .......................
Power equipment manufacturing operations ........
Electric power engineering operations . .................
Other business operations .......................................
Total orders on hand ...........................................

36,168
13,946
9,295
3,786
641
63,837

-0.1
-19.7
-0.7
43.7
31.7
-3.4

15,56822,149
1,851
1,424
—
40,995

-6.3
-0.5
-13.2
42.1
-100.0-2.5

Notes: 1. Includes outstanding orders of 906 million yen as of initiation of consolidation of Nippon Koei U. K. Co., Ltd., aconsolidated subsidiary with a deemed acquisition date of September 30, 2006.
2. Amounts above do not include consumption tax.

(2) Sales PerformanceThis Consolidated
Fiscal YearBusiness Category

Change onPrevious Year(%)

(Millions of yen)Domestic consulting operations . ............................
Overseas consulting operations ..............................
Power equipment manufacturing operations ........
Electric power engineering operations . .................
Other business operations .......................................
Other operations (*4) . .............................................
Total FY2006 sales ...............................................

37,224
14,972
9,578
3,365
653
1,261
67,053

-0.4
-8.8
-5.7
33.9
36.0
4.9
-1.6

Notes: 1. Status of production is not stated due to the difficulty of defining production performance for this consolidated group.
2. Transactions between businesses are offset and eliminated.
3. Amounts above do not include consumption tax.
4. Other operations (real estate leasing, etc.) are included in neither new nor outstanding orders.
5. Sales to major customers as a proportion of total sales are as follows.

CustomerThis Consolidated
Fiscal Year
Amount(Millions of yen)

Proportion(%)

Previous Consolidated
Fiscal Year
Amount(Millions of yen)

Proportion(%)

Ministry of Land,
Infrastructure and Transport ...........

9,834

14.7

8,268

12.1

Tokyo Electric Power Co. Ltd. ............

8,001

11.9

8,979

13.2



3. Future Challenges
As public works and the national ODA budgets continue to decline and price competition continues to intensify,
capital investment and other spending by electric power companies are also forecast to level off and ouroperating environment is likely to remain difficult.
In these circumstances, the Group is resolutely committed to the following policies grounded in our mediumterm management plan, of which FY2008 is the final year, and will make a concerted effort to improve
performance.

(1) Enhanced Capabilities in Core Businesses
We will direct our efforts to maintaining our top market share in the comprehensive disaster prevention fieldand expanding our share of orders in those sectors that have been long-standing strengths of the Group,
including water resources development, transport, environmental assessment and planning, and transformer
substation control systems and other computerized control systems. We will also seek to offer differential value
and expand our share of orders in the ground foundations sector by exploiting our distinctive capabilities.
We will also prioritize management resources in an effort to acquire the required personnel and advancetechnology development, working to expand orders in other areas in which growth is forecast, including: theapplication of information technology to public works; social infrastructure renovation and maintenance; asset
management; redevelopment for the effective utilization of existing facilities; urban development; social
development, such as support activities in the establishment and restoration of peace, poverty reduction, and theguarantee of human security; major railway projects overseas; and electric power facility renovation projects.

(2) Enhanced Solutions Capabilities in High-Value-Added Businesses
We will both focus on expanding orders arising from technical proposals and enhance proposal-driven sales that
exploit the technology and know-how that the Group has developed. We will also work to enhance our solutions
capabilities for customers and win more orders for yen-loan projects by reinforcing our sales organization in the
Company’s overseas offices, including offices opened in India and the Middle East, and through coordination
with such entities as Nippon Koei U. K. Co. Ltd., our strategic subsidiary based in the United Kingdom which
this year was made a consolidated subsidiary.

(3) Thoroughgoing Operational Efficiency
We will seek to further reduce fixed costs through consolidating the domestic business offices of Group
companies and centralizing clerical operations and improve our earnings structure to raise production efficiency
by means of a comprehensive revenue management system. In addition to thorough pursuit of operational
efficiencies through continued system upgrades and enhanced employee training, we will continue to work toaugment the corporate structure by extending practices for treatment commensurate with performance andcontribution to enhance the morale of employees who generate high returns.

(4) Enhanced Coordination between Company Operational Divisions and between
Group Companies
We will both enhance coordination between Company operational divisions, by stimulating interaction among
their personnel, and exploit those technologies that are the strength of Group companies, including the urban
development technologies of Tamano Consultants Co., Ltd. and the underground construction technologies of
Nippon Civic Consulting Engineers Co., Ltd., to cultivate synergies between those entities and increase thecorporate value of the Group as a whole.

The Group will continue to position compliance as the foundation of corporate management, and individualGroup officers and employees will work to enhance the effectiveness of compliance-based management in their
day-to-day work on the basis of the Charter of Corporate Responsibility. We will continue to construct aframework of internal control on financial reporting so as to conduct appropriate financial reporting of highreliability.
In April 2007 the Group instituted a new corporate brand. In order to generate high value and contribute to thedevelopment of society through independent thinking infused with competitive spirit and a sense of
professionalism on the basis of sincerity and advanced technology grounded in the Group management
philosophy that states “Act with sincerity and contribute to society through technology,” we have adopted theslogan “Challenging Mind, Changing Dynamics” to mobilize the full potential of individual Group companies
with renewed vigor.
With these policies we will work to further improve performance and towards achieving the goals of our
medium-term management plan. We hope that we may enjoy the continued particular understanding andsupport of all our shareholders.

4. Business Risks
Uneven Annual Distribution of Business Results
The primary operations of the Group are in the construction consultancy and electric power engineeringbusinesses. In construction consultancy operations in particular, work completion for government and publicagency orders is clustered towards the end of the financial year (March). As a result, 70-80% of Group sales tend
to occur in the second half of the year.

Dependence of Business on Major Customers
Construction consultancy operations have a high degree of dependency, some 90%, on sales to domestic
government offices and agencies and foreign governments and tend to be affected domestically by movements inJapanese public investment and overseas by movements in Japanese ODA budgets.

Electric power engineering operations have a high degree of dependency, some 60-70%, on sales to Tokyo
Electric Power Company (TEPCO) and tend to be affected by movements in TEPCO electric power capital
investment.

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

6. Research and Development
The Group works to achieve a living environment that is safe and comfortable for people through theappropriate utilization of technology with the motto, “Contribute to society through technology”. Our Central
Research Laboratory and Nippon Koei Power Systems Co., Ltd. conduct our technology development activities.
Research and development costs for the Group overall in this consolidated fiscal year amounted to 218 million
yen.

Domestic and Overseas Consulting Operations
Research and development in a wide range of construction consulting services is conducted at our Central
Research Laboratory. We monitor research by means of adjusted return mapping in order to accelerate researchoutcomes and evaluate their practical contribution. During the consolidated fiscal year under review, researchand development was conducted primarily as follows:(1) Research and development of advanced numerical analysis techniques andgeneral-purpose software applications
Research relating to practical applications of two- and three-dimensional hydraulic analysis, applied research inneural networks and other soft computing technologies, development of software for the evaluation of theearthquake-resistant properties and ultimate load-bearing capacity of superannuated structures, development of
NK-GIAS hydrology application software(2) Research and development relating to disaster prevention on national lands
Development of support systems for the design of landslide groundwater control, research into upgrading
mudslide detection systems, development of earthquake motion plotting technologies and real-time damage
prediction systems using fault models, the use of centrifugal load modeling equipment to research the flotationof manholes caused by ground liquefaction, research into slope failures and predicting the deposition of moving
soil materials(3) Research and development relating to environmental preservation
Development of technologies for using soil microorganisms to prevent runoff and soil loss from agriculturalland, research into the sustainable utilization of forests for mitigating global warming, experiments in andanalysis of littoral saltwater intrusion and accounting for tidal variability(4) Research and development in performance verification and management support
systems
Research into performance verification techniques for hybrid structures, research into risk assessment andproject assessment for social infrastructure improvements(5) Technical exchanges with overseas research institutes
Technical exchange activities conducted with Tongji University and Tsinghua University in China
Research and development costs in support of these operations were 132 million yen.

Manufacturing and Engineering Operations
Research and development for these businesses is conducted primarily by Nippon Koei Power Systems Co., Ltd.,and during the consolidated fiscal period under review consisted primarily of the following:(1) Development of advanced synchronizer
Implementation of human interface functions for improved operability to develop a lower-cost synchronizer as
an advance on existing equipment for long-term production and maintenance(2) Development of standard TC interface and maintenance system
With the move to two-layer control in centralized monitoring and control systems for transformer substations,development of standard TC (remote monitoring and control) interface equipment to serve as the backbone
information conduit between existing TC equipment and direct control cables via existing systems, and of
maintenance systems to replace existing systems for monitoring and maintenanceResearch and development costs in support of these operations were 85 million yen.

7. Analysis of Financial Condition and Management Performance
The following is an analysis of the Company’s financial condition and management performance for the
consolidated fiscal year under review.

Financial Condition
Consolidated assets at the end of the year amounted to 82,788 million yen, a decrease of 1,485 million yen fromthe previous year. The primary causes of the decrease were the decrease in current assets of 501 million yen andthe decrease in fixed assets of 984 million yen.

The primary causes of the decrease in current assets were the decrease in inventories of 940 million yen, thedecrease in trade notes and trade accounts of 201 million yen and the increase in cash and cash equivalents of
729 million yen.
The primary cause of the decrease in fixed assets was the extinguishment of depreciable assets and software of
1,188 million yen.
The primary causes of the decrease in current liabilities were the decrease in short-term borrowings of 1,700
million yen, the decrease in allowance for anticipated project loss reserve of 556 million yen and the increase inadvance received of 636 million yen.
The primary cause of the decrease in fixed liabilities was the decrease in liability for retirement benefits of 267
million yen.
The primary causes of the increase in equity were the increase in retained earnings of 572 million yen and thedecrease in unrealized gain on available-for-sale securities of 436 million yen.

Management Performance
Net sales amounted to 67,053 million yen, a decrease of 1,099 million yen from the previous year.
On the other hand, we recorded operating income of 2,314 million yen, up 125 million yen from the previous
year, as a result of an improved sales-profit ratio due to reductions in production costs. The ratio of operating
income to sales improved by 0.3% from last year to 3.5%.
Other income gave a revenue surplus of 327 million yen, an increase of 390 million yen from the previous year.
Thus, income before income taxes and minority interests came to 2,641 million yen, and net income came to1,465 million yen, an increase of 10 million yen from the previous year.

Osamu Takahashi
PresidentC o n s o l i dated Balance S he e t s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
March 31, 2007 and 2006

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

ASSETS

2007

2007

2006

CURRENT ASSETS:
Cash and cash equivalents . .................................

¥ 5,498

Marketable securities (Note 3) ............................

40¥ 4,769$ 46,573
339

Receivables :Trade notes .........................................................

79

87

669

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

27,15527,348230,030

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

(273)

(531)

(2,313)Inventories (Note 4) .............................................

9,299

10,23978,772

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

1,652

1,622

13,994

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

1,602

2,019

13,571

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

45,05245,553

381,635

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

13,152

13,166

111,410

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

18,43318,800156,146

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

2,423

2,480

20,525

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

2,685

2,740

22,745Construction in progress .....................................

68

1

576

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

36,761

37,187

311,402

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

(13,265)(13,058)(112,368)

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

23,49624,129199,034

8,691

8,263

73,622subsidiaries and associated companies ............

550

561

4,659

Long-term loans receivable .................................

148

454

1,254

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

2,482

2,771

21,025

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

136

130

1,152

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

251

198

2,126

Other assets (Note 5) ...........................................

2,228

2,443

18,873

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

(246)

(229)

(2,084)

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

14,24014,591

120,627

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

¥82,788¥84,273$701,296

PROPERTY, PLANT AND
EQUIPMENT (Notes 5, 6 and 8):

INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 3) ............................
Investments in unconsolidated

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 6) .........................
Current portion of long-term debt (Note 6) .......
Payables :Trade notes .........................................................
Trade accounts ...................................................
Income taxes payable ..........................................
Advances received ................................................
Accrued bonuses ..................................................
Allowance for anticipated project loss . ..............
Other current liabilities (Note 10) ......................
Total current liabilities ....................................
LONG-TERM LIABILITIES:Long-term debt (Note 6) ......................................
Liability for retirement benefits (Note 7) ...........
Deferred tax liabilities (Note 10) . .......................
Deposit received (Note 8) ....................................
Other liabilities ....................................................
Total long-term liabilities ................................

2007

2007

2006

¥ 3,500190¥ 5,200190$ 29,648
1,609

604
5,989
409
6,761
1,097
123
3,995
22,668

671
5,706
256
6,125
997
679
4,413
24,237

5,116
50,733
3,465
57,272
9,293
1,042
33,842
192,020

8,814
2,959
973
2,857
128
15,731

9,005
3,226
505
2,857
191
15,78474,66325,066
8,242
24,202
1,084
133,257

MINORITY INTERESTS .....................................

372

COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 12, 13 and 14)
EQUITY (Notes 9 and 15):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares in 2007 and 2006 .................
Capital surplus .....................................................
Retained earnings ................................................
Unrealized gain on
available-for-sale securities ...............................
Treasury stock—at cost
2,840,445 shares in 2007
and 2,775,714 shares in 2006 ............................
Total ..................................................................
Minority interests . ...............................................
Total equity . .....................................................
TOTAL ....................................................................

7,393
6,132
30,077

7,393
6,132
29,50562,626
51,944
254,782

1,529

1,965

12,952(1,137)43,994395
44,389(1,115)43,88043,880(9,631)
372,673
3,346
376,019¥82,788¥84,273$701,296

11

C o n s o l i dated Statem e n t s o f I n c o m e
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2007 and 2006

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

2007

2007

2006

NET SALES ...........................................................

¥67,053¥68,152$568,005

COST OF SALES (Note 11) ..................................
Gross profit ......................................................

51,13915,91452,411
15,741

433,198
134,807

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (Note 11) . ....
Operating income ............................................

13,6002,314

13,552
2,189

115,205
19,602

226
(170)
(16)

214
(196)
157

1,914
(1,440)
(136)

(40)
231
255

(72)
401
71

(339)
1,957
2,160

(170)

(308)

(1,440)

(46)
57
327

(365)
35
(63)

(390)
484
2,770

INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS . .................................

2,641

2,126

22,372

INCOME TAXES (Note 10):
Current .................................................................
Deferred ................................................................
Total income taxes ...........................................

497
655
1,152

258
479
737

4,210
5,548
9,758

24

25
(91)
¥ 1,455

203

OTHER INCOME (EXPENSES):Interest and dividend income .............................
Interest expense ...................................................
Foreign currency exchange (loss) gain................
Loss on disposal of property,
plant and equipment . ........................................
Gain on sales of investment securities . ..............
Reversal of allowance for doubtful accounts .....
Special retirement benefits for
employees (Note 7) ............................................
Loss on impairment of long-lived
assets (Note 5) ....................................................
Other—net ............................................................
Other income (expenses)-net . .........................

MINORITY INTERESTS IN NET INCOME .....
ADJUSTMENT OF MINORITY INTERESTS ....
NET INCOME .......................................................

¥ 1,465

U.S.Dollars(Note 1)Yen

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

12¥17.477.50$ 12,411¥16.64
10.00

$0.15
0.06

C o n s o l i dated Statem e n t s o f C h a n ge s i n E q u i t y
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2007 and 2006

Thousands

Millions of Yen

Outstanding Number of
Shares of Common
Stock

BALANCE, MARCH 31, 2005 �������������������������������
Adjustment of retained earnings
for newly consolidated subsidiary ����������������������
Net income �������������������������������������������������������������Cash dividends, ¥7.50 per share ����������������������������
Adjustment of capital surplus for
additional investments in aconsolidated subsidiary througha stock exchange ��������������������������������������������������
Net increase in treasury stock �������������������������������
Net increase in unrealized gain
on available-for-sale securities �����������������������������
BALANCE, MARCH 31, 2006 �������������������������������
Reclassified balance asof March 31, 2006 (Note 2.h) ������������������������������
Adjustment of retained earnings
for newly consolidated subsidiary �����������������������
Net income �������������������������������������������������������������Cash dividends, ¥10.00 per share ��������������������������
Bonuses to directors ����������������������������������������������
Net increase in treasury stock �������������������������������
Net decrease in unrealized gain on
available-for-sale securities ��������������������������������
Net change in the year �������������������������������������������
BALANCE, MARCH 31, 2007 �������������������������������

85,331

Common Stock¥7,393

Capital Surplus¥6,110Retained Earnings

Unrealized Gain on
Available-for-sale
Securities¥28,555¥925

Treasury Stock¥ (394)

Total¥42,589

136
1,455
(641)

136
1,455
(641)

47
(768)

68
(767)

68
(767)

1,040

1,040

(1,115)43,88043,88021
1
1,040

83,881

7,393

6,132

29,505

1,965

Total Equity¥42,589

136
1,455
(641)

192
(1,642)

Minority Interests

372
(12)
1,465
(841)
(40)
(65)

(12)
1,465
(841)
(40)
(22)

(22)
(436)

83,816¥7,393¥6,132¥30,077¥1,529

(12)
1,465
(841)
(40)
(22)

(436)
¥(1,137)¥43,994

372

23
¥395

(436)
23
¥44,389

Thousands of U.S.Dollars (Note 1)

Common Stock

BALANCE, MARCH 31, 2006 �������������������������������

$62,626

Capital Surplus$51,944

Retained Earnings

Unrealized Gain on
Available-for-sale
Securities$249,937$16,646

Treasury Stock$(9,446)

Total

Minority Interests$371,707

Reclassified balance asof March 31, 2006 (Note 2.h) ������������������������������
Adjustment of retained earnings
for newly consolidated subsidiary �����������������������
Net income �������������������������������������������������������������Cash dividends, $0.08 per share ����������������������������
Bonuses to directors ����������������������������������������������
Net increase in treasury stock �������������������������������
Net decrease in unrealized gain on
available-for-sale securities �������������������������������������
Net change in the year �������������������������������������������
BALANCE, MARCH 31, 2007 �������������������������������

$371,707
3,151

(102)

(102)

12,41012,41012,410(7,124)(7,124)(7,124)

(339)

(339)

(185)

(185)

(3,694)(3,694)(185)(3,694)$51,944

3,151

(102)

(339)

$62,626

Total Equity$254,782$12,952$(9,631)$372,673

195

195$3,346$376,019

See notes to consolidated financial statements.

13

C o n s o l i dated Statem e n t s o f C a s h F l ow s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2007 and 2006

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

OPERATING ACTIVITIES:
Income before income taxes andminority interests . ..................................................

2007¥ 2,641

FINANCING ACTIVITIES:

2007

2006

¥2,126$ 22,372

Adjustments for:
Income taxes – paid ................................................
Depreciation and amortization ..............................

(347)
1,188

(289)
1,376

(2,939)10,064Gain on sales of property, plantand equipment ......................................................

(5)

(2)

(42)

Loss on disposal of property, plantand equipment ......................................................

39

72

330

Gain on sales of investment securities . .................

(231)

(401)

(1,957)

Changes in assets and liabilities,
net of effects from newly consolidated
subsidiaries:

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

2007

2007

2006

$(14,401)

(191)
(22)
(842)
(2)
(2,757)¥(1,825)
4,000(5,799)
(768)
(640)
(5)
(5,037)

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

7

55

59

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

515(3,860)4,362

CASH AND CASH EQUIVALENTS OF
NEWLY CONSOLIDATED SUBSIDIARY,
BEGINNING OF YEAR ..........................................

214

109

1,813

Net decrease of short-term bank loans ....................
Proceeds from long-term debt .................................
Repayments of long-term debt .................................
Purchase of treasury stock .......................................
Dividends paid ..........................................................
Other—net .................................................................
Net cash used in by financing activities ..........

¥(1,700)(1,618)(186)(7,133)(17)(23,355)

Decrease (increase) in trade accounts
receivable ���������������������������������������������������������

447(1,281)

3,787

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

968

(163)

8,200

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

161

(299)

1,364

(Decrease) increase in liability for
retirement benefits . .........................................

CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR ..........................................

4,769

8,520

40,398(267)

430(2,262)Other – net . .............................................................
Net cash provided by operating activities .......

86
4,680

(337)
1,232

727
39,644

CASH AND CASH EQUIVALENTS,
END OF YEAR .........................................................

¥ 5,498¥4,769$ 46,573¥

341¥ 126$ 2,889

547

50

4,634

INVESTING ACTIVITIES:Assets increased by consolidation ofsubsidiary previously unconsolidated ...................

Proceeds from sales of marketable securities .........

40

Liabilities increased by consolidation ofsubsidiary previously unconsolidated . ..................

Proceeds from sales of property, plantand equipment ........................................................

13

6

110

Purchases of property, plant and equipment ..........
Proceeds from sales of investment securities . ........
Purchases of investment securities ..........................
Increase in other assets ............................................
Net cash used in investing activities ................

(249)
1,292
(2,272)(199)¥(1,415)

(219)
1,898
(1,754)(81)¥ (110)(2,109)10,945(19,246)(1,686)$(11,986)

See notes to consolidated financial statements.

14

NON-CASH INVESTING AND
FINANCING ACTIVITIES:N o te s to Consolidate d F in a n c i a l S t a te m e n t s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2007 and 2006

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Securities and Exchange Law and its related accounting regulations, and in conformity
with accounting principles generally accepted in Japan, which are different in certain respects as to applicationand disclosure requirements of International Financial Reporting Standards.
On December 27, 2005, the Accounting Standard Board of Japan (the “ASBJ”) published a new accounting
standard for the statement of changes in equity, which is effective for fiscal years ending on or after May 1, 2006.
The consolidated statement of shareholders’ equity, which was previously voluntarily prepared in line with theinternational accounting practices, is now required under generally accepted accounting principles in Japan andhas been renamed “the consolidated statement of changes in equity” in the current fiscal year.
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 2006
financial statements to conform to the classifications used in 2007.
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 ¥118.05 to $1, the approximate rate of exchange at March 31, 2007. 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation —The consolidated financial statements as of March 31, 2007 include the accounts of theCompany and its nine significant (eight in 2006) subsidiaries (together, the “Group”).
Under the control or influence 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 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 —Inventories are stated at cost, mainly determined by the specific identification cost method.
d. Marketable and Investment Securities —Marketable and investment securities are classified andaccounted for, depending on management’s intent, as follows:15i) 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 ii) available-for-sale securities, which are notclassified as the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of
applicable taxes, in a separate component of equity.
Non-marketable 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 as well as other equipment for rent. The range of useful lives is principally from 3 to 50 years
for buildings and structures, from 2 to 15 years for machinery and equipment and from 2 to 20 years forfurniture and fixtures.

f. Long-lived Assets —The Group reviews their long-lived assets for impairment whenever events or changes
in circumstances 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
the undiscounted 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 asset or the selling price as disposition.

g. Retirement 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 employees’ retirement benefits andaccounted for the liability for retirement benefits based on the projected benefit obligations and plan assets
at the balance sheet date. The transitional obligation of ¥2,016 million for the subsidiaries, determined as ofApril 1, 2000, is being amortized over 15 years. Unrecognized actuarial gain or loss are recognized by thestraight-line method over 13 years.
The Group changed its period of unrecognized actuarial gain or loss from primarily 15 years to 13 years infiscal 2008 as the employees’ remaining service period was shortened. Unrecognized amortization of priorservice cost, are recognized by the straight-line method over 13 years.
Retirement benefits for directors and corporate auditors are provided at the amount which would be
required if all directors and corporate auditors retired at the balance sheet date.

h. Presentation of Equity —On December 9, 2005, the ASBJ published a new accounting standard forpresentation of equity. Under this accounting standard, certain items which were previously presented asliabilities are now presented as components of equity. Such items include stock acquisition rights, minority
interests, and any deferred gain or loss on derivatives accounted for under hedge accounting. This standard iseffective for fiscal years ending on or after May 1, 2006. The consolidated balance sheet as of March 31, 2007
is presented in line with this new accounting standard.

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

j. Leases —All leases are accounted for as operating leases. Under Japanese accounting standards for leases,
finance leases that deem to transfer ownership of the leased property to the lessee are to be capitalized, whileother finance leases are permitted to be accounted for as operating lease transactions if certain “as if
capitalized” information is disclosed in the notes to the lessee’s financial statements.

16k. Bonuses to directors and corporate auditors —Prior to the fiscal year ended March 31, 2005, bonuses
to directors and corporate auditors were accounted for as a reduction of retained earnings in the fiscal year
following approval at the general shareholders meeting. The ASBJ issued ASBJ Practical Issues Task Force(PITF) No.13, “Accounting Treatment for Bonuses to Directors and Corporate Auditors”, which encouraged
companies to record bonuses to directors and corporate auditors on the accrual basis with a related charge
to income, but still permitted the direct reduction of such bonuses from retained earnings after approval of
the appropriation of retained earnings.
The ASBJ replaced the above accounting pronouncement by issuing a new accounting standard for bonuses
to directors and corporate auditors on November 29, 2005. Under the new accounting standard, bonuses todirectors and corporate auditors must be expensed and are no longer allowed to be directly charged toretained earnings. This accounting standard is effective for fiscal years ending on or after May 1, 2006. The
companies must accrue bonuses to directors and corporate auditors at the year end to which such bonuses
are attributable.
The Company adopted the new accounting standard for bonuses to directors and corporate auditors from theyear ended March 31, 2007. The effect of adoption of this accounting standard was to decrease income before
income taxes and minority interests for the year ended March 31, 2007 by ¥60 million ($508 thousand).

l. Income Taxes —The provision for income taxes is computed based on the pretax income included in the
consolidated statements 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.

m. Appropriations of Retained Earnings —Appropriations of retained earnings are reflected in the
consolidated financial statements for the following year upon shareholders’ approval.

n. 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 statements ofincome.

o. Revenue Recognition —Revenues and gross profits on long-term contracts which have over two
years duration and more than ¥1 billion contract amount are recognized by the percentage-of-completion
method, measured by the percentage of costs incurred to date to estimated total construction costs (cost to
cost method).
Revenues and gross profits on long-term contracts in the Manufacturing and Engineering business segments
which have over one year duration and more than ¥300 million contract amount are also recognized by thepercentage-of-completion method, measured by the percentage of costs incurred to date to estimated total
construction costs (cost to cost method).
While individual construction projects, except the aforementioned, are recorded using the completedcontract method.

p. Derivatives and Hedging Activities —The Group uses derivative financial instruments to manage its
exposures to fluctuations in interest rates. Interest rate swaps are utilized by the Group to reduce interest
rate risks. The Group does not enter into derivatives for trading or speculative purposes.
All derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses onderivative transactions are recognized in the consolidated statements of income.
The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are notmeasured at market value but the differential paid or received under the swap agreements are recognized andincluded in interest expense or income.

17

q. 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, retroactively adjusted for stock splits. The weighted-average numbers of shares of common stock
for the years ended March 31, 2007 and 2006 are 83,845,738 and 84,997,532, respectively.
Diluted net income per share of common stock is not disclosed because it is anti-dilutive.
Cash dividends per share presented in the accompanying consolidated statements of income are dividends
applicable to the respective years including dividends to be paid after the end of the year.

r. New Accounting Pronouncements
Measurement of Inventories —Under generally accepted accounting principles in Japan (“Japanese
GAAP”), inventories are currently measured either by the cost method, or at the lower of cost or market. On
July 5, 2006, the ASBJ issued ASBJ Statement No. 9, “Accounting Standard for Measurement of Inventories”,
which is effective for fiscal years beginning on or after April 1, 2008 with early adoption permitted. This
standard requires that inventories held for sale in the ordinary course of business be measured at the lowerof cost or net selling value, which is defined as the selling price less additional estimated manufacturing costs
and estimated direct selling expenses. The replacement cost may be used in place of the net selling value, if
appropriate. The standard also requires that inventories held for trading purposes be measured at the market
price.

Lease Accounting —On March 30, 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard
for Lease Transactions”, which revised the existing accounting standard for lease transactions issued on June
17, 1993.
Under the existing accounting standard, finance leases that deem to transfer ownership of the leased
property to the lessee are to be capitalized, however, other finance leases are permitted to be accounted for as
operating lease transactions if certain “as if capitalized” information is disclosed in the note to the lessee’s
financial statements.
The revised accounting standard requires that all finance lease transactions should be capitalized. The
revised accounting standard for lease transactions is effective for fiscal years beginning on or after April 1,2008 with early adoption permitted for fiscal years beginning on or after April 1, 2007.

Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated
Financial Statements —Under Japanese GAAP, a company currently can use the financial statements offoreign subsidiaries which are prepared in accordance with generally accepted accounting principles in theirrespective jurisdictions for its consolidation process unless they are clearly unreasonable. On May 17, 2006,
the ASBJ issued ASBJ Practical Issues Task Force (PITF) No. 18, “Practical Solution on Unification of
Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements”. The newtask force prescribes: 1) the accounting policies and procedures applied to a parent company and its
subsidiaries for similar transactions and events under similar circumstances should in principle be unified
for the preparation of the consolidated financial statements, 2) financial statements prepared by foreignsubsidiaries in accordance with either International Financial Reporting Standards or the generally accepted
accounting principles in the United States tentatively may be used for the consolidation process, 3) however,the following items should be adjusted in the consolidation process so that net income is accounted for inaccordance with Japanese GAAP unless they are not material:(1) Amortization of goodwill(2) Actuarial gains and losses of defined benefit plans recognized outside profit or loss
(3) Capitalization of intangible assets arising from development phases(4)	Fair value measurement of investment properties, and the revaluation model for property, plant andequipment, and intangible assets(5) Retrospective application when accounting policies are changed(6) Accounting for net income attributable to a minority interest
The new task force is effective for fiscal years beginning on or after April 1, 2008 with early adoption
permitted.

18

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2007 and 2006 consisted of the following:Thousands of
U.S.Dollars

Millions of Yen

2007
Current:
Government and corporate bonds .....................
Total ................................................................
Non-current:
Marketable equity securities ..............................
Government and corporate bonds .....................
Other ....................................................................
Total ................................................................

¥
¥

2007

2006
40
40

¥7,301240
1,150¥8,691

$
$

339
339

$61,847
2,033
9,742$73,622¥7,321294
648¥8,263The carrying amounts and aggregate fair values of marketable and investment securities at March 31, 2007 and2006 were as follows:
Millions of Yen

March 31, 2007
Securities classified as:
Available-for-sale:
Equity securities .................................
Debt securities . ...................................
Other ....................................................
Total ..................................................

Cost¥4,476113
1,120¥5,709Unrealized
Gains

Unrealized

Fair
Value

Losses¥2,5967
36¥2,639

¥105
4
8
¥117

¥6,967116
1,148¥8,231Millions of Yen

March 31, 2006
Securities classified as:
Available-for-sale:
Equity securities .................................
Debt securities . ...................................
Other ....................................................
Total ..................................................

Cost¥3,814113
556¥4,483

Unrealized
Gains

Unrealized

Fair
Value

Losses¥3,15214
93¥3,259¥1
71¥9¥6,965120
648¥7,733Thousands of U.S.Dollars

March 31, 2007

Cost

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

$37,916
957
9,488$48,361

Unrealized
Gains$21,991
59
305$22,355

Unrealized

Losses

$889
34
68
$991

Fair
Value

$59,018
982
9,725$69,725

19

Securities whose fair value are not readily determinable as of March 31, 2007 and 2006 were as follows:
Carrying amountThousands of
U.S.Dollars

Millions of Yen

2007
Available-for-sale:
Equity securities ...............................................
Other ..................................................................
Held-to-maturity .................................................
Total ................................................................

2007

2006
¥335
1
164
¥500

$2,8388
1,390$4,236

¥356
1
173
¥530

Proceeds from sales of available-for-sale securities for the years ended March 31, 2007 and 2006 were ¥1,005
million ($8,513 thousand) and ¥1,240 million, respectively. Gross realized gains and losses on these sales,
computed on the moving average cost basis, were ¥231 million ($1,957 thousand) and ¥17 million ($144
thousand), respectively for the year ended March 31, 2007 and ¥401 million and ¥33 million, respectively for theyear ended March 31, 2006.
The carrying values of debt securities and other by contractual maturities for securities classified as availablefor-sale and held-to-maturity at March 31, 2007 are as follows:
Million of Yen

Due in one year or less .......................................
Due after one year through five years . ..............
Due after five years through ten years ...............
Due after ten years ..............................................
Total ................................................................

Thousands of
U.S.Dollars

¥ 40
126
119
207
¥492

$ 339
1,067
1,008
1,754
$4,168

4. INVENTORIESInventories at March 31, 2007 and 2006 consisted of the following:Thousands of
U.S.Dollars

Millions of Yen

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

2007
¥ 225
8,753
321
¥9,2992007$ 1,906
74,147
2,719$78,772

2006
¥

225
9,738
276
¥10,239

5. LONG-LIVED ASSETSFor the year ended March 31, 2007, the Group recognized impairment losses on the following assets:
Type of assets

Location

Number ofassetsMillions ofYen

Thousands of
U.S.Dollars

Idle properties ......................

Land

Chiba Prefecture

2

¥14

$119

Rest homes ...........................

Land, buildings, and other

Gunma Prefecture

3

14

119

Niigata Prefecture

2

11

93

Chiba Prefecture

1

7

59

20

The Group reviewed its long-lived assets for impairment as of March 31, 2007 and 2006, and as a result,recognized an impairment loss of ¥46 million ($390 thousand) and ¥365 million as other expense on idle
properties, rest homes and assets used for business due to a substantial decline in their fair market value.
Asset grouping is based on the nature of the Company’s business and the classification for its management
accounting, and as for idle assets, each individual unit is considered as a group.

6. SHORT-TERM BORROWINGS AND LONG TERM DEBT
Short-term borrowings at March 31, 2007 and 2006 consisted of notes to banks. The annual interest rates
applicable to the short-term borrowings ranged from 1.032% and 0.467% to 1.750% at March 31, 2007 and 2006,
respectively.
The Company has commitment-line contracts of ¥8,000 million ($67,768 thousand) in total over three years withfinancial institutions in order to secure the stability of long-term funding. Each contract includes a restrictive
financial covenant. At March 31, 2007, the Company has utilized ¥3,500 million ($29,648 thousand) of thecommitment-line.
Long-term debt at March 31, 2007 and 2006 consisted of the following:Thousands of
U.S.Dollars

Millions of Yen

2007
Unsecured loans from banks due seriallyto 2013 with interest rates ranging from1.250% to 1.775% . ..............................................
Unsecured loans from Fukushima Prefecturedue serially to 2009 without interest: ..............
Total ................................................................
Less current portion .............................................
Long-term debt, less current portion . .................

2006

2007

¥8,786¥8,905$74,425

218
9,004
(190)
¥8,814

290
9,195
(190)
¥9,005

1,847
76,272(1,609)$74,663

Annual maturities of long-term debt at March 31, 2007 for the five years and thereafter were as follows:Year Ending March 31

Millions of Yen

2008 .......................................................................
2009 .......................................................................
2010 .......................................................................
2011 .......................................................................
2012 .......................................................................
2013 and thereafter . .............................................
Total ................................................................

¥ 190
4,190
192
4,117
118
197
¥9,004

Thousands of
U.S.Dollars$ 1,60935,493
1,626
34,8751,000
1,669$76,272

At March 31, 2007, land, building and structures of ¥2,252 million ($19,077 thousand) were pledged as collateralfor short-term borrowings and long-term debt of ¥787 million ($6,667 thousand).

7. RETIREMENT AND PENSION PLANS
The Group has severance payment plans for employees, directors and corporate auditors.
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 from21

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 March 31, 2007 and 2006 for directors and corporate auditors were ¥117
million ($991 thousand) and ¥114 million, respectively. The retirement benefits for directors and corporate
auditors are paid subject to the approval of the shareholders.
The liability for employees’ retirement benefits at March 31, 2007 and 2006 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Projected benefit obligation .................................
Fair value of plan assets .......................................
Unrecognized actuarial loss .................................
Unrecognized transitional obligation ..................
Unrecognized amortization ofprior service cost ................................................
Net liability . ......................................................

2007

2006

2007

¥(13,313)
8,512
1,046
1,080

¥(13,563)
7,620
1,616
1,215

$(112,775)
72,105
8,861
9,149¥ (3,112)(1,415)$ (24,075)(167)¥ (2,842)

The components of net periodic benefit costs for the years ended March 31, 2007 and 2006 are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2007
Service cost . ..........................................................
Interest cost ...........................................................
Expected return on plan assets ............................
Recognized actuarial loss .....................................
Amortization of transitional obligation . .............
Net periodic benefit costs .................................

¥ 956
299
(231)
180
135
¥1,339

2006
¥ 986
305
(197)
274
134
¥1,5022007$ 8,098
2,533(1,957)
1,525
1,144$11,343

Assumptions used for the years ended March 31, 2007 and 2006 are set forth as follows:

Discount rate .........................................................
Expected rate of return on plan assets ................
Amortization of prior service cost ......................
Recognition period of actuarial gain / loss . ........
Amortization period of transitional obligation ...

2007

2006

2.50%
3.00%
13 years
13 years
15 years

2.50%
3.00%
—
15 years
15 years

The Company and a subsidiary offered early retirement programs to their employees and paid special retirement
benefits of ¥170 million ($1,440 thousand) and ¥308 million in the years ended March 31, 2007 and 2006,
respectively.

8. DEPOSITS RECEIVED
Deposits received from tenants amounted to ¥2,395 million ($20,288 thousand) at March 31, 2007 and 2006.

22

At March 31, 2007, land, building and structures for rent of ¥1,782 million ($15,095 thousand) were pledged ascollateral for these deposits.

9. EQUITY
On and after May 1, 2006, Japanese companies are subject to a new corporate law of Japan (the “Corporate
Law”) , which reformed and replaced the Commercial Code of Japan (the “Code”) with various revisions thatare, for the most part, applicable to events or transactions which occur on or after May 1, 2006 and for the fiscal
years ending on or after May 1, 2006. The significant changes in the Corporate Law that affect financial andaccounting matters are summarized below:(a) Dividends
Under the Corporate Law, companies can pay dividends at any time during the fiscal year in addition to the yearend dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as: (1)having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, 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 Corporate Law 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 Corporate Law requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on
the equity account charged upon the payment of such dividends until the total of aggregate amount of legal
reserve and additional paid-in capital equals 25% of the common stock. Under the Corporate Law, the total
amount of additional paid-in capital and legal reserve may be reversed without limitation. The Corporate Law
also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained
earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Corporate Law 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 Corporate Law, stock acquisition rights, which were previously presented as a liability, are now
presented as a separate component of equity.
The Corporate Law also provides that companies can purchase both treasury stock acquisition rights andtreasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or
deducted directly from stock acquisition rights.

10. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, inthe aggregate, resulted in a normal effective statutory tax rate of approximately 39.5% for the years ended March
31, 2007 and 2006.

23

The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at March 31, 2007 and 2006 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2007
Deferred tax assets :Accrued bonuses ................................................
Tax loss carryforwards . ......................................
Liability for retirement benefits
for directors and corporate auditors ...............

2007

2006

¥ 8843,108¥ 8373,673$ 7,488
26,328

47

46

398

Liability for retirement benefits
for employees ....................................................
Allowance for anticipated project loss . .............
Loss on impairment of long-lived assets ...........
Other ....................................................................
Less valuation allowance ...................................
Total ................................................................

1,138
50
122
579
(3,695)¥2,233

1,247
269
172
632
(3,973)¥2,903

9,640
424
1,033
4,905
(31,300)$18,916

Deferred tax liabilities:
Unrealized gain on available-for-salesecurities . .........................................................

¥1,005¥1,286$ 8,513

Reserve for deffered gains on saleof property . .......................................................
Other ....................................................................
Total ................................................................

229
72¥1,306234
82¥1,6021,940
610$11,063

Net deferred tax assets ......................................

¥ 927¥1,301$ 7,853

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying consolidated statements of income for the years ended March 31, 2007 and 2006 is as follows:

2007
Normal effective statutory tax rate ......................
Per capita levy of local tax ....................................
Expenses not deductible for tax purposes ...........
Valuation allowance . ............................................
Other – net . ...........................................................
Actual effective tax rate ........................................

39.5%
5.0
2.6
(10.7)
7.2
43.6%

2006
39.5%
5.9
5.7
(21.1)
4.6
34.6%

As of March 31, 2007, the Company and certain subsidiaries had tax loss carryforwards aggregating
approximately ¥7,697 million ($65,201 thousand) which were available to be offset against taxable income ofthese companies in future years. These tax loss carryforwards, if not utilized, will expire as follows:24Years Ending March 31

2008 .......................................................................
2009 .......................................................................
2010 .......................................................................
2011 .......................................................................
2012 .......................................................................
Total ..................................................................

Millions of Yen

¥

22
944
985
2,149
3,597
¥7,697

Thousands of
U.S. Dollars

$

186
7,997
8,344
18,20430,470$65,201

11. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥218 million ($1,847 thousand) and ¥184 million forthe years ended March 31, 2007 and 2006, respectively.

12. LEASES(1) Lessee
The Group leases certain machinery, computer equipment and other assets.
Total rental expense include finance leases, where the ownership of the property is not deemed to transfer to thelessee, in the amount of ¥80 million ($678 thousand) and ¥93 million for the years ended March 31, 2007 and2006, respectively.
Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligations underfinance leases, depreciation expense and interest expense of finance leases that do not transfer ownership of theleased property to the lessee on an “as if capitalized” basis for the years ended March 31, 2007 and 2006 is asfollows:
Millions of Yen

2007
Furniture
andFixtures

Acquisition cost . ...................................................
Accumulated depreciation . ..................................
Net leased property ...........................................

Other

¥315
181
¥134

Total

¥20
10
¥10

¥335
191
¥144

Millions of Yen

2006
Furniture
andFixtures

Acquisition cost . ...................................................
Accumulated depreciation . ..................................
Net leased property ...........................................

¥401
217
¥184

Other

Total

¥20
7
¥13

¥421
224
¥197

25

Thousands of U.S. Dollars

2007
Furniture
andFixturesOther$2,668
1,533$1,135Acquisition cost . ...................................................
Accumulated depreciation . ..................................
Net leased property ...........................................

Total$ 16984$ 85$2,837
1,617$1,220Obligations under finance leases:
Thousands of
U.S. Dollars

Millions of Yen

2007

2007

2006

Due within one year . ............................................

¥ 55

¥ 72

$ 466

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

90
¥145

125
¥197

762
$1,228Depreciation expense and interest expense under finance leases:
Thousands of
U.S. Dollars

Millions of Yen

2007

2007

2006

Depreciation expense . ..........................................

¥75

¥87

$635

Interest expense ....................................................
Total ................................................................

5
¥80

6
¥93

42
$678

Leased properties less than ¥3 million are excluded from the above pro forma information because they are
immaterial.
The minimum rental commitments under noncancellable operating leases at March 31, 2007 and 2006 were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2007

2007

2006

Due within one year . ............................................

¥1

¥1

$ 8

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

2
¥3

3
¥4

17
$25

(2) Lessor
The minimum rental commitments under noncancellable operating leases at March 31, 2007 and 2006, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2007

2006

2007

Due within one year . ............................................

¥ 682¥ 684$ 5,777

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

5,268¥5,9505,950¥6,634

44,625$50,40226

13. DERIVATIVESThe Group enters into interest rate swap contracts in order to reduce fluctuation risk of interest rates.
All derivative transactions are entered into to hedge interest exposure incorporated within the Group’s business.
Accordingly, market risk in these derivatives is basically offset by opposite movements in the value of hedgedloans.
Because the counterparties to these derivatives are limited to domestic banks having high reputations, theGroup 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 the authorization and credit limit amount.
The Group had the following derivatives contracts outstanding at March 31, 2007 and 2006:
Millions of Yen

2007
Contract
AmountInterest rate swaps:(fixed rate payment, floating
rate receipt) .....................................

¥560

Fair
Value

2006
Unrealized
Loss

¥(6)

Contract
Amount

¥(6)

¥700

Fair
Value

Unrealized
Loss

¥(7)

¥(7)

Thousands of U.S. Dollars

2007
Contract
AmountInterest rate swaps:(fixed rate payment, floating
rate receipt) .....................................

$4,744

Fair
Value

Unrealized
Loss

$(51)

$(51)

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.

14. CONTINGENT LIABILITIESAt March 31, 2007, the Group had the following contingent liabilities:
Thousands of
U.S. Dollars

Millions of Yen

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

¥323$2,736

Guarantees of foreign exchange contracts related to an
unconsolidated subsidiary . ................................................

107

906

15. SUBSEQUENT EVENTSAppropriations of Retained Earnings
The following appropriations of retained earnings at March 31, 2007 were approved at the Company’s
shareholders’ meeting held on June 28, 2007:
Millions of Yen

Year-end cash dividends, ¥7.5 ($0.06) per share .................

¥629

Thousands of
U.S. Dollars$5,32827

16. SEGMENT INFORMATIONThe Group operates in the following segments:

Domestic consulting services in public and private sectors related to mainly infrastructure development;
Overseas consulting services related to mainly ODA funded development projects;
Manufacturing of products and appliances related to electric production and distribution systems;
Engineering services related to construction and maintenance of public and private electric power
facilities; andOthers including real estate leasing.
Information about business segments, geographic segments and sales to foreign customers of the Group for theyears ended March 31, 2007 and 2006, is as follows:(1) Business Segments
a. Sales and Operating Income
Millions of Yen

2007
Engineering

OthersEliminations/Corporate

Consolidated

Domestic

Overseas

Manufacturing

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

¥37,224¥14,972¥9,578¥3,365¥1,914

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

229

7

63

1,477

1,504

¥(3,280)

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

37,453

14,979

9,641

4,842

3,418

(3,280)67,053Operating expenses.............................

36,361

14,613

8,822

4,746

2,484

(2,287)64,739Operating income ..............................

¥ 1,092¥¥ 819¥¥ 934¥ (993)¥ 2,314366

96¥67,053b. Total Assets, Depreciation, Loss on Impairment of Long-lived Assets, and Capital
Expenditures
Millions of Yen

2007
Domestic

Overseas

Manufacturing

Engineering

OthersEliminations/Corporate

Consolidated

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

¥26,710¥10,289¥7,408¥1,863¥11,154¥25,364¥82,788

Depreciation ......................................

164

38

254

4

292

683

1,435

15

31

46

3

93

457

Loss on impairment oflong-lived assets ............................
194

Capital expenditures .........................

38

119

10

a. Sales and Operating Income
Thousands of U.S. Dollars

2007
Overseas

Manufacturing

Engineering

OthersSales to customers ............................ $315,324$126,828$81,135$28,505$16,213Intersegment sales ............................

1,940

59

534

12,512

12,741$(27,786)

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

317,264

126,887

81,66941,01728,954(27,786)

568,005

Operating expenses ...........................

308,014

123,787

74,73140,204

21,041(19,374)

548,403

Operating income ............................ $ 9,250$ 3,100$ 6,938$$ 7,913$ (8,412) $ 19,602

Domestic

28

813

Eliminations/Corporate

Consolidated$568,005

b. Total Assets, Depreciation, Loss on impairment of long-lived assets and Capital
Expenditures
Thousands of U.S. Dollars

2007
Overseas

Manufacturing

Engineering

OthersEliminations/Corporate

Consolidated

Total assets ........................................ $226,260$87,158$62,753$15,781$94,485$214,859$701,296

1,389

322

2,152

34

2,474

5,785

12,156

127

263

390

25

788

3,871

Domestic

Depreciation ......................................
Loss on impairment oflong-lived assets ............................

1,643

Capital expenditures .........................

322

1,008

85

a. Sales and Operating Income
Millions of Yen

2006
Domestic

Overseas

Manufacturing

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

¥37,385¥16,416¥10,155¥2,514¥1,682

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

198

16

47

1,583

557

¥(2,401)

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

37,583

16,432

10,202

4,097

2,239

(2,401)

68,152

Operating expenses ...........................

36,88816,034

8,968

4,023

1,381

(1,331)

65,963Operating income .............................

¥

¥

¥

¥ 858¥(1,070)¥ 2,189695

398¥ 1,234

Engineering

Others74

Eliminations/Corporate

Consolidated¥68,152b. Total Assets, Depreciation and Capital Expenditures
Millions of Yen

2006
Domestic

Overseas

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

¥26,984¥11,172

Depreciation ......................................

179

25

Manufacturing

Engineering

OthersEliminations/Corporate

Consolidated¥8,121¥1,180¥9,900¥26,916¥84,273

373

2

330

467

1,376

113

149

365

3

33

374

Loss on impairment oflong-lived assets ............................

103

Capital expenditures .........................

134

23

180

1

(2) Geographical Segments
The Group was located in Japan for the years ended March 31, 2007 and 2006.

(3) Sales to Foreign Customers
Sales to foreign customers for the years ended March 31, 2007 and 2006 amounted to ¥14,976 million ($126,861
thousand) and ¥16,449 million, respectively.

2917. SUPPLEMENTAL CASH FLOW INFORMATION
Nippon Koei U.K. Co., Ltd. was newly consolidated in 2007 due to an increase in its significance.
The breakdown of assets and liabilities of Nippon Koei U.K. Co., Ltd. on the date of consolidation were as
follows:
Millions of Yen

Current assets . ......................................................................
Non-current assets ................................................................
Current liabilities ..................................................................
Non-current liabilities ..........................................................

Thousands of
U.S. Dollars

¥520
34
(297)
(250)

El Koei Co., Ltd. was newly consolidated in 2006 due to an increase in its significance.
The breakdown of assets and liabilities of El Koei Co., Ltd. on the date of consolidation were as follows:
Millions of Yen

Current assets . ......................................................................
Non-current assets ................................................................
Current liabilities ..................................................................
Non-current liabilities ..........................................................

30

¥228
7
(48)
(2)

$4,405288(2,516)(2,118)31

Non-consolidated Balance Sheets
Nippon Koei Co., Ltd.
March 31, 2007 and 2006

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

ASSETS

2007

2007

2006

CURRENT ASSETS:
Cash and cash equivalents . ................................

¥ 3,691

Marketable securities (Note 3) ...........................

40¥ 3,208$ 31,266
339

Receivables:
Trade notes ........................................................

39

30

330

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

21,621

22,366

183,151

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

(38)

(50)

(322)

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

3,896

3,468

33,003Inventories ‑ work in process .............................

3,810

4,150

32,274

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

1,427

1,330

12,088Prepaid expenses and other current assets .......

1,310

1,561

11,098

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

35,79636,063

303,227

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

9,756

9,769

82,643

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

16,243

16,251

137,594

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

1,180

1,194

9,996

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

1,077

1,043

9,123

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

28,25628,257239,356

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

(9,989)(9,421)(84,616)

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

18,267

18,836

154,740PROPERTY, PLANT AND
EQUIPMENT (Note 8):

INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 3) ...........................
Investments in and advances to subsidiaries
and associated companies (Note 4) .................
Other assets (Note 5) ..........................................

8,454

8,004

71,614

6,444
2,516

6,650
2,726

54,58721,312

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

(24)

(11)

(203)

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

17,39017,369147,310TOTAL ...................................................................

¥71,453¥72,268$605,277

See notes to non-consolidated financial statements.

32

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short‑term borrowings (Note 6) ........................
Payables:Trade notes ........................................................
Trade accounts ..................................................
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 6) .....................................
Liability for retirement benefits (Note 7) ..........
Deferred tax liabilities (Note 10) . ......................
Deposit received (Note 8) ...................................
Total long-term liabilities ...............................

2007

2006

2007

¥ 4,800¥ 6,200$ 40,661

12
6,396
103
3,376
742
5
2,631
18,065

17
5,872
119
2,344
625
631
2,873
18,681

102
54,180873
28,5986,285
42
22,287
153,028

8,000
539
904
2,857
12,300

8,000
685
429
2,856
11,97067,7684,566
7,658
24,201
104,193

7,393
6,131

7,393
6,131

62,626
51,936

1,546
25,565

1,546
25,64313,096
216,561

COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 12 and 13)
EQUITY (Notes 9 and 14):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares in 2007 and 2006 ................
Capital surplus ....................................................
Retained earnings:
Legal reserve ...................................................
Retained earnings - unappropriated ................
Unrealized gain on
available-for-sale securities .............................
Treasury stock—at cost
2,840,445 shares in 2007
and 2,775,714 shares in 2006 ...........................
Total equity . ....................................................

1,520

1,948

12,876(1,067)41,088(1,044)
41,617(9,039)348,056

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

¥71,453¥72,268$605,277

33

N o n - cons olidated Sta te m e n t s o f I n c o m e
Nippon Koei Co., Ltd.
Years Ended March 31, 2007 and 2006

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

2007

2007

2006

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

¥49,787
39,8909,897¥50,855
41,2039,652$421,745
337,908
83,837SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES(Note 11) . ..............................................................
Operating income ...........................................

8,797
1,100

8,843
809

74,519
9,318

407

228

445
(178)
157
399

3,448
(1,516)
(178)
1,931

(32)

(149)

(271)

OTHER INCOME (EXPENSES) :Interest and dividend income ............................
Interest expense ..................................................
Foreign currency exchange (loss) gain ..............
Gain on sales of investment securities . .............
Loss on impairment of long-lived
assets (Note 5) ..................................................
Reversal of allowance for doubtful accounts ....
Special retirement benefits for employees ........
Gains from donated subsidiary’s stock ..............
Other-net . ............................................................
Other income-net ............................................

(179)
(21)

13

110

124
540

(307)
104
87
558

1,050
4,574

INCOME BEFORE INCOME TAXES ...............

1,640

1,367

13,892

INCOME TAXES (Note 10):
Current ................................................................
Deferred ...............................................................
Total income taxes ..........................................

181
658
839

121
545
666

1,533
5,574
7,107

701

$ 6,785

NET INCOME . ....................................................

¥

801

¥

U.S.Dollars(Note 1)Yen

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

34¥ 9.55
7.50¥ 7.78
10.00

$

0.08
0.06

N o n - cons olidated Sta te m e n t s o f C h a n ge s i n E q u i t y
Nippon Koei Co., Ltd.
Years Ended March 31, 2007 and 2006

Thousands

BALANCE, MARCH 31, 2005 .......

Millions of Yen
CapitalSurplus

Outstanding
Number of
Shares ofCommonStockCommonStock85,331¥7,393Retained Earnings

Unrealized
Gain onAvailable-for-

Additional
Paid-in
CapitalLegal
Reserve

Unappropriatedsale Securities¥6,110¥1,546¥25,582¥ 886

Treasury
Stock

Total
Equity¥ (324)¥41,193

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

701

701

Cash dividends, ¥7.50 per share ...

(640)

(640)

Adjustment of capital surplus for
additional investments in a subsidiarythrough a stock exchange ..........

192

Net increase in treasury stock ......

(1,642)21

Net increase in unrealized gain on
available-for-sale securities ........
BALANCE, MARCH 31, 2006 . .....

47

68

(767)

(767)

1,062
83,881

7,393

6,131

1,546

25,643

1,948

1,062
(1,044)

41,617

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

801

801

Cash dividends, ¥10.00 per share . ..

(839)

(839)

Bonuses to directors .................

(40)

(40)

Net increase in treasury stock ......

(65)

(23)

Net decrease in unrealized gain on
available-for-sale securities . ......
BALANCE, MARCH 31, 2007 . .....

(428)
83,816¥7,393¥6,131¥1,546¥25,565¥1,520(23)(428)¥(1,067)¥41,088

Treasury
Stock

Total
EquityThousands of U.S.Dollars (Note 1)
CapitalSurplus
CommonStock

BALANCE, MARCH 31, 2006 . .....

Additional
Paid-in
CapitalRetained Earnings

Legal
Reserve

UnappropriatedUnrealized
Gain onAvailable-forsale Securities$62,626 $51,936 $13,096 $217,222 $16,501$(8,844) $352,537

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

6,785

6,785

Cash dividends, $0.08 per share ...

(7,107)(7,107)

Bonuses to directors ...................

(339)

(339)

Net increase in treasury stock ......

(195)

(195)

Net decrease in unrealized gain on
available-for-sale securities ........

(3,625)(3,625)BALANCE, MARCH 31, 2007 . .....

$62,626 $51,936 $13,096 $216,561 $12,876$(9,039) $348,056

See notes to non-consolidated financial statements.

35

N o te s to Non-consolid a te d F i n a n c i a l S t a te m e n t s
Nippon Koei Co., Ltd.
Years Ended March 31, 2007 and 2006

1. BASIS OF PRESENTING NON-CONSOLIDATED FINANCIAL STATEMENTS
The accompanying non-consolidated 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 Corporate Law ofJapan or the Commercial Code of Japan and in conformity with accounting principles generally accepted inJapan, which are different in certain respects as to application and disclosure requirements of International
Financial Reporting Standards.
On December 27, 2005, the Accounting Standard Board of Japan (the “ASBJ”) published a new accounting
standard for the statement of changes in equity, which is effective for fiscal years ending on or after May 1, 2006.
The statement of shareholders’ equity, which was previously voluntarily prepared in line with the international
accounting practices, is now required under generally accepted accounting principles in Japan and has beenrenamed “the statement of changes in equity” in the current fiscal year.
As consolidated statements of cash flows and certain disclosures are presented in the consolidated financial
statements of the Company, non-consolidated statements of cash flows and certain disclosures are not presented
herein in accordance with accounting procedures generally accepted in Japan.
In preparing these non-consolidated financial statements, certain reclassifications and rearrangements havebeen made to the Company’s financial statements issued domestically in order to present them in a form which
is more familiar to readers outside Japan. In accordance with accounting procedures generally accepted inJapan, certain comparative disclosures are not required to be and have not been presented herein. In addition,certain reclassifications have been made in the 2006 financial statements to conform to the classifications usedin 2007.
The non-consolidated 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 ¥118.05 to $1,
the approximate rate of exchange at March 31, 2007. 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Non-consolidation —The non-consolidated 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 cost, determined by the specific identification cost method.
d. Marketable and Investment Securities —Marketable and investment securities are classified and accounted
for, depending on management’s intent, as follows:i) 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 ii) available-for-sale securities, which are notclassified 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.
Non-marketable 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.

36

e. P
 roperty, Plant and Equipment —Property, plant and equipment are stated at cost. Depreciation iscomputed by the declining-balance method, while the straight-line method is applied to buildings acquired
after April 1, 1998, as well as certain buildings and 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.
f. L
 ong-lived Assets —The Company adopted the new accounting standard for impairment of fixed assets as ofApril 1, 2005. The Company reviews their long-lived assets for impairment whenever events or changes incircumstances 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
the undiscounted 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 asset or the selling price as disposition.
g. 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 the employees’ retirement
benefits and accounted for the liability for retirement benefits based on projected benefit obligations andplan assets at the balance sheet date. Unrecognized actuarial gain or loss are recognized by the straight-line
method over 13 years.
The Company changed its period of unrecognized actuarial gain or loss from 15 years to 13 years in fiscal
2008 as the employees’ remaining service period was shortened. Unrecognized amortization of prior service
cost, are recognized by the straight-line method over 13 years.
Retirement benefits for directors and corporate auditors are provided at the amount which would be
required if all directors and corporate auditors retired at the balance sheet date.
h. Presentation of Equity —On December 9, 2005, the ASBJ published a new accounting standard forpresentation of equity. Under this accounting standard, certain items which were previously presented asliabilities are now presented as components of equity. Such items include stock acquisition rights, minority
interests, and any deferred gain or loss on derivatives accounted for under hedge accounting. This standard iseffective for fiscal years ending on or after May 1, 2006. The consolidated balance sheet as of March 31, 2007
is presented in line with this new accounting standard.
i. A
 llowance for Anticipated Project Loss —The Company has made a provision for anticipated losses on
uncompleted project contracts.
j. L
 eases —All leases are accounted for as operating leases. Under Japanese accounting standards for leases,
finance leases that deem to transfer ownership of the leased property to the lessee are to be capitalized, whileother finance leases are permitted to be accounted for as operating lease transactions if certain “as if
capitalized” information is disclosed in the notes to the lessee’s financial statements.
k. Bonuses to directors and corporate auditors —Prior to the fiscal year ended March 31, 2005, bonuses todirectors and corporate auditors were accounted for as a reduction of retained earnings in the fiscal year
following approval at the general shareholders meeting. The ASBJ issued ASBJ Practical Issues Task Force(PITF) No. 13, “Accounting Treatment for Bonuses to Directors and Corporate Auditors”, which encouraged
companies to record bonuses to directors and corporate auditors on the accrual basis with a related charge
to income, but still permitted the direct reduction of such bonuses from retained earnings after approval of
the appropriation of retained earnings.
The ASBJ replaced the above accounting pronouncement by issuing a new accounting standard for bonuses
to directors and corporate auditors on November 29, 2005. Under the new accounting standard, bonuses todirectors and corporate auditors must be expensed and are no longer allowed to be directly charged toretained earnings. This accounting standard is effective for fiscal years ending on or after May 1, 2006. The

37

companies must accrue bonuses to directors and corporate auditors at the year end to which such bonuses
are attributable.
The Company adopted the new accounting standard for bonuses to directors and corporate auditors in theyear ended March 31, 2007. The effect of adoption of this accounting standard was to decrease income before
income taxes for the year ended March 31, 2007 by ¥60 million ($508 thousand).
l. I ncome Taxes —The provision for income taxes is computed based on the pretax income included in the
non-consolidated statements of income. 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.
m. Appropriations of Retained Earnings —Appropriations of retained earnings are reflected in the nonconsolidated financial statements for the following year upon shareholders’ approval.
n. 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 non-consolidated
statements of income.
o. Revenue Recognition —Revenues and gross profits on long-term contracts which have over two years
duration and more than ¥1 billion contract amount are recognized by the percentage-of-completion method,measured by the percentage of costs incurred to date to estimated total construction costs (cost to cost
method).
Revenues and gross profits on long-term contracts in the Manufacturing and Engineering business segments
operations which have over one year duration and more than ¥300 million contract amount, are also
recognized by the percentage-of-completion method, measured by the percentage of costs incurred to date toestimated total construction costs (cost to cost method).
While individual construction projects, except the aforementioned, are recorded using the completedcontract method.
p. Derivatives and Hedging Activities —The Company uses derivative financial instruments to manage its
exposures to fluctuations in interest rates. Interest rate swaps are utilized by the Company to reduce interest
rate risks. The Company does not enter into derivatives for trading or speculative purposes.
All derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses onderivative transactions are recognized in the non-consolidated statements of income.
The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are notmeasured at market value but the differential paid or received under the swap agreements are recognized andincluded in interest expense or income.
q. 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, retroactively adjusted for stock splits. The weighted-average numbers of shares of common stock
for the years ended March 31, 2007 and 2006 are 83,845,738 and 84,997,532, respectively.
Diluted net income per share of common stock is not disclosed because it is anti-dilutive.
Cash dividends per share presented in the accompanying non-consolidated statements of income are
dividends applicable to the respective years including dividends to be paid after the end of the year.

38

r. N
 ew Accounting Pronouncements
Measurement of Inventories —Under generally accepted accounting principles in Japan, inventories are
currently measured either by the cost method, or at the lower of cost or market. On July 5, 2006, the ASBJ
issued ASBJ Statement No. 9, ”Accounting Standard for Measurement of Inventories”, which is effective forfiscal years beginning on or after April 1, 2008 with early adoption permitted. This standard requires thatinventories held for sale in the ordinary course of business be measured at the lower of cost or net selling
value, which is defined as the selling price less additional estimated manufacturing costs and estimateddirect selling expenses. The replacement cost may be used in place of the net selling value, if appropriate.
The standard also requires that inventories held for trading purposes be measured at the market price.
Lease Accounting —On March 30, 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard forLease Transactions”, which revised the existing accounting standard for lease transactions issued on June 17,
1993.
Under the existing accounting standard, finance leases that deem to transfer ownership of the leased
property to the lessee are to be capitalized, however, other finance leases are permitted to be accounted for as
operating lease transactions if certain “as if capitalized” information is disclosed in the note to the lessee’s
financial statements.
The revised accounting standard requires that all finance lease transactions should be capitalized. The
revised accounting standard for lease transactions is effective for fiscal years beginning on or after April 1,2008 with early adoption permitted for fiscal years beginning on or after April 1, 2007.

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2007 and 2006 consisted of the following:Thousands of
U.S.Dollars

Millions of Yen

2007
Current:
Government and corporate bonds .....................
Total ................................................................
Non-current:
Marketable equity securities ..............................
Government and corporate bonds .....................
Other ....................................................................
Total ................................................................

¥
¥

2007

2006
40
40

¥7,110194
1,150¥8,454

$
$

339
339

$60,229
1,643
9,742$71,614¥7,105251
648¥8,004Market values for investment securities in subsidiaries and associated companies are not available.

4. I NVESTMENTS IN AND ADVANCES TO SUBSIDIARIES AND
ASSOCIATED COMPANIESInvestments in and advances to subsidiaries and associated companies as of March 31, 2007 and 2006 were as
follows:
Thousands of
U.S.Dollars

Millions of Yen

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

2006¥5,464980¥6,4442006¥5,4601,190¥6,6502006$46,285
8,302$54,58739

5. LONG-LIVED ASSETSFor the year ended March 31, 2007, the Company recognized an impairment loss on the following asset:
Tipe of assets

Number ofassetsLocation

Millions ofYen

Thousands of
U.S.Dollars

Idle properties .... Land

Chiba Prefecture

1

¥ 7

$ 59

Rest homes ......... Land, buildings, and other

Gunma Prefecture
Niigata Prefecture

3
2

14
11

119
93

0

The Company reviewed its long-lived assets for impairment as of the years ended March 31, 2007 and 2006,
as a result, recognized an impairment loss of ¥32 million ($271 thousand) and ¥149 million as other expenseon idle properties and rest homes and assets used for business due to a substantial decline in their fair market
value.
Asset grouping is based on the nature of the Company’s business and the classification for its management
accounting, and as for idle assets, each individual unit is considered as a group.

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2007 and 2006 consisted of notes to banks. The annual interest rates
applicable to the short-term borrowings 1.032% and 0.467% at March 31, 2007 and 2006, respectively.
The Company has commitment-line contracts of ¥8,000 million ($67,768 thousand) in total over three years
with financial institutions in order to secure the stability of long-term funding. Each contract includes a
restrictive financial covenant. At March 31, 2007, the Company has utilized ¥3,500 million ($29,648 thousand)of the commitment-line.
Long-term debt at March 31, 2007 and 2006 consisted of the following:Thousands of
U.S.Dollars

Millions of Yen

2007
Unsecured loans from banks due serially to2010 with interest rates ranging from 1.515%
to 1.775% .............................................................

¥8,0002006¥8,0002007$67,768

7. RETIREMENT AND PENSION PLANS
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.
Such retirement benefits are made in the form of a lump-sum severance payment from the Company andannuity payments from a trustee. Employees are entitled to larger payments if the termination 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 March 31, 2007 and 2006 for directors and corporate auditors were
¥52 million ($440 thousand) and ¥68 million, respectively. The retirement benefits for directors and corporate
auditors are paid subject to the approval of the shareholders.

40

8. DEPOSITS RECEIVED
Deposits received from tenants amounted to ¥2,395 million ($20,288 thousand) at March 31, 2007 and 2006.
At March 31, 2007, land, building and structures for rent of ¥1,782 million ($15,095 thousand) were pledged ascollateral for these deposits.

9. EQUITY
On and after May 1, 2006, Japanese companies are subject to a new corporate law of Japan (the “Corporate
Law”) , which reformed and replaced the Commercial Code of Japan (the “Code”) with various revisions thatare, for the most part, applicable to events or transactions which occur on or after May 1, 2006 and for the fiscal
years ending on or after May 1, 2006. The significant changes in the Corporate Law that affect financial andaccounting matters are summarized below:(a) Dividends
Under the Corporate Law, companies can pay dividends at any time during the fiscal year in addition to the yearend dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as: (1)having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, 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 Corporate Law 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 Corporate Law requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on
the equity account charged upon the payment of such dividends until the total of aggregate amount of legal
reserve and additional paid-in capital equals 25% of the common stock. Under the Corporate Law, the total
amount of additional paid-in capital and legal reserve may be reversed without limitation. The Corporate Law
also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained
earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Corporate Law 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 Corporate Law, stock acquisition rights, which were previously presented as a liability, are now
presented as a separate component of equity.
The Corporate Law also provides that companies can purchase both treasury stock acquisition rights andtreasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or
deducted directly from stock acquisition rights.

10. INCOME TAXESThe Company is subject to Japanese national and local income taxes which, in the aggregate, resulted in anormal effective statutory tax rate of approximately 39.5% for the years ended March 31, 2007 and 2006.

41

The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at March
31, 2007 and 2006 are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2007

2007

2006

Deferred tax assets:¥ 743651¥1,177547$ 6,294
5,515

21

27

178

193
2
72
229
(160)
¥1,751

244
249
59
229
(121)
¥2,411

1,635
17
610
1,939
(1,355)$14,833

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

¥ 994¥1,274$ 8,420

Reserve for deffered gains on saleof property . .......................................................
Other ....................................................................
Total ................................................................
Net deferred tax assets ......................................

229
6
1,229
¥ 522234
21,510¥ 901

1,940
51
10,411$ 4,422

Tax loss carryforwards . ......................................
Accrued bonuses .................................................
Liability for retirement benefits
for directors and corporate auditors ...............
Liability for retirement benefits
for employees ....................................................
Allowance for anticipated project loss . .............
Loss on impairment of long-lived assets ...........
Other ....................................................................
Less valuation allowance ....................................
Total ................................................................
Deferred tax liabilities:

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying non-consolidated statements of income for the years ended March 31, 2007 and 2006 is asfollows:

2007
Normal effective statutory tax rate ....................
Per capita levy of local tax ..................................
Expenses not deductible for tax purposes .........
Valuation allowance . ..........................................
Other – net . .........................................................
Actual effective tax rate ......................................

2006
39.5%
4.9
2.5
2.3
2.0
51.2%

39.5%
5.9
6.1
3.6
(6.4)
48.7%

As of March 31 , 2007, the Company had tax loss carryforwards aggregating approximately ¥1,878 million($15,909 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 mostly in 2010.

11. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥137 million ($1,161 thousand) and ¥124 million forthe years ended March 31, 2007 and 2006, respectively.

4212. LEASES(1) Lessee
The Company leases certain machinery, computer equipment and other assets. Total rental expense include
finance leases, where the ownership of the property is not deemed to transfer to the lessee, in the amount of ¥44
million ($373 thousand) and ¥42 million for the years ended March 31, 2007 and 2006, respectively.
Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligations underfinance leases, depreciation expense and interest expense of finance leases that do not transfer ownership of theleased property to the lessee on an “as if capitalized” basis for the years ended March 31, 2007 and 2006, is asfollows:
Millions of Yen

2007
Furniture
andFixtures

Other

¥221
120
¥101

Acquisition cost . ...................................................
Accumulated depreciation . ..................................
Net leased property ........................................

Total

¥19
9
¥10

¥240
129
¥111

Millions of Yen

2006
Furniture
andFixtures

Acquisition cost . ...................................................
Accumulated depreciation . ..................................
Net leased property ........................................

Other

¥214
97
¥117

Total

¥20
7
¥13

¥234
104
¥130

Thousands of U.S.Dollars

2007
Furniture
andFixtures

Acquisition cost . ...................................................
Accumulated depreciation . ..................................
Net leased property ........................................

Other$1,872
1,017$ 855

Total

$161
76
$ 85

$2,033
1,093$ 940

Obligations under finance leases:
Thousands of
U.S. Dollars

Millions of Yen

2007
Due within one year . ............................................
Due after one year . ...............................................
Total ................................................................

2007

2006
¥ 40
75
¥115

¥ 37
97
¥134

$339
635
$974

43

Depreciation expense and interest expense under finance leases:
Thousands of
U.S. Dollars

Millions of Yen

2007
¥40
4
¥44

Depreciation expense . ..........................................
Interest expense ....................................................
Total ................................................................

2007

2006

$339
34
$373

¥39
3
¥42

Depreciation expense and interest expense, which are not reflected in the accompanying non-consolidated
statements of income, are computed by the straight-line method and the interest method, respectively. Leased
properties less than ¥3 million are excluded from the above pro forma information because they are immaterial.
The minimum rental commitments under noncancellable operating leases at March 31, 2007 and 2006 were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2007
Due within one year . ............................................
Due after one year . ...............................................
Total ................................................................

2007

2006
¥1
2
¥3

¥1
3
¥4

$ 8
17
$25

(2) Lessor
The minimum rental commitments under noncancellable operating leases at March 31, 2007 and 2006 were as
follows:
Thousands of
U.S.Dollars

Millions of Yen

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

2007
¥ 682
5,268
¥5,950

2006
¥ 684
5,950
¥6,6342007$ 5,777
44,625$50,402

13. CONTINGENT LIABILITIESAt March 31, 2007, the Company has the following contingent liabilities:
Millions of Yen

Guarantees of bank loans related to a subsidiary, an associatedcompany and employees ..................................................................

¥1,327

Thousands of
U.S.Dollars$11,241

14. SUBSEQUENT EVENTSAppropriations of Retained Earnings
The following appropriations of retained earnings at March 31, 2007 were approved at the shareholders’ meeting
held on June 28, 2007:
Millions of Yen

Year-end cash dividends, ¥7.5 ($0.06) per share .................................
44

¥629

Thousands of
U.S.Dollars$5,32845

C o rp orate Informatio n

Board of Directors, Officers and Corporate
Auditors
President:
Osamu Takahashi*

Stock Information
Shares authorized

189,580,000

Shares issued

86,656,510

Stockholders of minimum tradable stock unit

Director and Executive Vice President:
Yoshihiko Tsunoda*
Seijiro Usuda *Kaoru Ono

8,257

As of March 31, 2007

Major Stockholders
Share owned(thousands)

Percentage of
total owned

Director and Senior Managing Executive Officer:
Noriaki Hirose*
Naoki Ariga*

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

4,089

4.72

Mizuho Corporate Bank, Ltd.

3,820

4.41

Director and Managing Executive Officers:
Ichiro Mishina
Katsumi Yoshida
Shoji Nishitani
Akikazu Tokumasu

Meiji Yasuda Life Insurance
Company.

3,652

4.21

Morgan Stanley & Co.
International Ltd.

2,981

3.44

Kokusai Kogyo Co., Ltd.

2,600

3.00

The Koei Employees’
Stockholders Association

2,245

2.59

Japan Trustee Services Bank,
Ltd. (Trustee)

1,991

2.30

The Master Trust Bank ofJapan, Ltd. (Trustee)

1,732

2.00

Nippon Life Insurance
Company

1,349

1.56

Tokyo Electric Power Co., Inc.

1,262

1.46

Director and Executive Officers:
Tamotsu Yoshida
Yoichi Abe
Director:
Masahisa Naito
Corporate Auditors:
Kenichi Sakata
Kunio Shimizu
Mineo Enomoto
Koichi Kosumi

As of March 31, 2007

Managing Executive Officers:
Hiroaki Ozasa
Shigemichi Hatao
Executive Officers:
Yoichi Kobayashi
Teruyuki Kita
Yutaka Murai
Koichi Tanuma
Hajime Tanimura
Akio Katayama
Yoshiki Tamemitsu
Kunio Kurokawa
Hiromichi Sekine*Representative Directors

46

As of June 28, 2007

C o rp orate Informatio n

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, Niigata, Nagoya, Osaka,
Hiroshima, Shikoku, Fukuoka
Research Facility
Research and Development Center in Tsukuba
Science City, Ibaraki
Overseas Offices
Jakarta, Manila, Nairobi, Hanoi, Colombo, New
Delhi, Hyderabad, Middle East (Amman), Vientiane

Field of activity• Natural and social environment• Water supply and urban sanitation• Information technology• Urban and regional development• R iver and sabo sediment and debris-flow control)
engineering• Water resources• Dams• Groundwater• Highway and Bridges• Airports• Ports and coastal engineering• Landslide protection• Agriculture• Electric power
Services• Preliminary investigation• Planning• Feasibility studies• Assessment• Detailed design• Construction supervision• Operation and maintenanceEngineering Administration
Field of activity• E lectrical and civil works for electric power
facilities (generation, transmission, substation,
distribution schemes and wiring of buildings)• E lectric power utilities (turbines, generators,
transformers, control deices andcommunications equipment)• Electric equipment and devices• Safety equipment• S kin electric thermo-system heaters (SECTheaters)• Factory automation equipment
Services• S urveys, studies, planning, design, construction,
installation and sale47

M a j o r Ni p pon Koei G ro u p C o m p a n i e s

While mainly focused on technical consulting, electrical power engineering, and power generation, theNippon Koei Group is also active in a wide range of related fields. The various businesses peripheral
to the activities of Nippon Koei, the main company in the Group, are taken on by subsidiaries andaffiliates 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 and cohesion of the Group as a whole.
As of March 2007, the total number of employees of the Group companies based in Japan came toabout 2600, of which approximately 900 were registered engineers. The Group truly has a wealth ofhighly skilled technical experts.
The subsidiary companies that comprise the consolidated Nippon Koei Group are as follows:
Nippon Koei Power Systems Co., Ltd.
This company manufactures power generation equipment and systems and electronic equipment anddevices. A wholly owned subsidiary and the largest in the Group, it works in close partnership with
Nippon Koei on business projects.
Nikki Corporation
This company is responsible for real estate management, leasing, and insurance services for Nippon
Koei and other Group companies. It also sells, imports, and exports electrical power equipment andrents and leases various goods.
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 aconsignment basis.
El Koei Co., Ltd.
This company is responsible for employment and staffing solution for Nippon Koei Group. The
company provides various fields of qualified human resources to support the activity of the Group
Companies.
KRI International Corporation
Established to enhance the think tank function required for the Nippon Koei Group’s activities, KRI
is responsible for providing survey, research, and consulting work for clients, both within and outside
the Group, on a contract basis. KRI is also responsible for education, training, and publishingactivities.
NEPCO Ltd.
This company provides services for geological disaster prevention. Services include landslideprediction and preventative activities such as hazard surveys, action planning, and construction ofprotective measures. NEPCO also manufactures and sells various types of equipment for landslide
monitoring and management.
Nippon Koei U.K. Co., Ltd.
This company provides engineering consulting services to enforce Nippon Koei’s overseas operation in
the primary fields of transportation, environment, water supply and wastewater.
Nippon Civic Consulting Engineers Co., Ltd.
This company provides consulting services centered on planning, design, and construction supervisionof underground structures such as urban tunnels. The company specializes in shield tunnelingtechnology and the development of new underground construction technology.
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.
48

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

Annual Report 2007
Year Ended March 31, 2007

Printed in Japan