1-14-6 Kudan-kita Chiyoda-ku, Tokyo 102-8539, Japan
Telephone: +81 3 5276 2454 Facsimile: +81 3 5276 2656
http://www.n-koei.co.jp E-mail: info@n-koei.co.jp

Financial Report
Year ended June 30, 2017

Printed in Japan

Company Profile

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

CONTENTS
Financial Highlights .................................................................................................................. 1
Consolidated Business Report for Fiscal Year Ended June 30, 2017 .......................................... 2
Consolidated Balance Sheet .................................................................................................... 12
Consolidated Statement of Income and Comprehensive Income ......................................... 14
Consolidated Statement of Changes in Equity ....................................................................... 15
Consolidated Statement of Cash Flows .................................................................................. 16
Notes to Consolidated Financial Statements ......................................................................... 17
Nonconsolidated Balance Sheet .............................................................................................. 48
Nonconsolidated Statement of Income .................................................................................. 50
Nonconsolidated Statement of Changes in Equity ................................................................ 51
Notes to Nonconsolidated Financial Statements ................................................................... 52
Corporate Information ............................................................................................................ 64
Significant Consolidated Subsidiaries .................................................................................... 66

Financial Highlights

Consolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended June 30

2017

2016

2017

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

¥101,338¥81,866$902,386

Net income attributable to owner of the parent ...

3,288

1,824

29,279Yen

Net income per share ...........................................

¥213.39

U.S. Dollars¥119.12$1.90
Thousands of
U.S. Dollars

Millions of Yen

2017

2016

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

¥113,866¥100,990$1,013,945

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

54,87451,460488,638

As of June 30

2017

Nonconsolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended June 30

2017

2016

2017

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

¥61,734¥60,327$549,724

Net income attributable to owner of the parent ...

2,302

1,678

20,499Yen

Net income per share ...........................................

¥149.38

U.S. Dollars¥109.62

Thousands of
U.S. Dollars

Millions of Yen
As of June 30

2017

$1.33

2016

2017

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

¥96,276¥83,674$857,311

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

50,793

48,113452,297

Notes: 1. Per share amounts are based on the weighted average number of shares outstanding during each year.
2.	The dollar amounts in this report represent translations of yen, for convenience only, at the rate of ¥112.30 to $1, theapproximate rate of exchange at June 30, 2017.
3.	The Company conducted a share consolidation at a rate of one share for every five common shares on January 1, 2017. The
figures for “Net income per share” are amounts on the assumption that the Company conducts the share consolidation at
the beginning of previous fiscal year.

1Consolidated Business Report for Fiscal Year Ended June 30, 2017
1. Overview of Performance and Cash Flows(1) Performance
During the fiscal year under review (from July 1, 2016 to June 30, 2017), Japan’s economy continued on amoderate recovery path with signs of private consumption picking up against the background of steady
improvements in employment and income. On the other hand, while recovering, the outlook for overseas
economies continued to be uncertain, with a growing sense of the risk of economic downturns in the emerging
markets of China and other Asian countries, as well as uncertainty about the economic policies of the UnitedStates and Europe.
The business environment of Nippon Koei Co., Ltd. (the “Company”) and its subsidiaries (together, the “Group”)
continued to be stable, and each business segment saw steady demand. The Group undertook measures fordisaster prevention and mitigation and measures to prevent deterioration of infrastructure for public works
projects in the Domestic Consulting Operations, promoted strategic exporting of infrastructure systems in theInternational Consulting Operations, and renewed power distribution equipment in the Power Engineering
Operations. On the other hand, demand for architectural designs in the UK stalled in the Urban & Spatial
Development Operations, being affected by Brexit.
Under these circumstances, based on the Medium-Term Management Plan “NK-AIM” (from July 2015 to June2018), with the fundamental principles of “Sustainable growth of three core businesses,” “Generation andexpansion of new businesses,” and “Autonomy and collaboration,” the Group tackled the three focus themes of“Further advance of global expansion,” “Further expansion of business fields and improvement of profitability
by intensifying existing core businesses,” and “Demonstrating the true merits of aggregated technologies forestablishment of new business domains.” Moreover, as companywide measures to achieve these goals, the Group
actively advanced “Development of next-generation core technologies and further improvement of technicalstrengths and productivity,” “Strengthening of human resource recruitment and training,” and “Promotion ofcollaboration and enhancement of corporate governance.”
As a result of the above, the Group performance was favorable during the fiscal year ended June 30, 2017. Thiswas mainly due to the acceptance of more than one order for large-scale projects in the field of transportation,and consolidation of the balance sheet of BDP HOLDINGS LIMITED, and its subsidiaries (together, “BDP”)
from the end of the previous fiscal year. Order received increased 33.8% year on year to ¥117,442 million(¥87,768 million excluding the impact of foreign exchange fluctuations and outstanding orders of BDP in theprevious fiscal year). Net sales were up 23.8% year on year to ¥101,338 million, operating income increased
15.7% year on year to ¥5,464 million, ordinary income grew 36.5% year on year to ¥5,958 million, and profit
attributable to owners of parent increased 80.3% to ¥3,288 million.

Domestic Consulting Operations
The Domestic Consulting Operations worked to increase its business areas and market shares by specifying
significant businesses, improving quality of service and profitability by restructuring work procedures, andeffectively entering into alliances.
As a result, orders received increased 9.4% year on year to ¥48,265 million. Net sales increased 6.7% year on
year to ¥43,516 million and ordinary income increased 11.3% year on year to ¥3,300 million.

International Consulting Operations
With the strength of region-based operating systems, the International Consulting Operations secured a stablebusiness foundation through the expansion of the share of Official Development Assistance (ODA) projects andexpanding business scale by urban development and Public-Private Partnership (“PPP”) businesses.
As a result, orders received increased 44.0% year on year to ¥41,573 million. Net sales increased 11.0% year on
year to ¥24,492 million and ordinary income increased 363.5% year on year to ¥1,772 million.

Power Engineering Operations
In the Power Engineering Operations, the Company worked to increase cost competitiveness through strict cost
reductions, strengthening sales and marketing capabilities through proposing cost reduction plans, enhancing
fusion and cooperation among the business areas of consulting, products, and construction, promoting the2

development of products and technology, and reinforcing and expanding the mechanical and electromechanicalconsulting division.
Nonetheless, orders received were less than those in the previous fiscal year due to delays in concluding largescale projects. On the other hand, selling, general and administrative expenses increased as a result of
reinforcing staff to deal with the expanding water power generation market.
As a result, orders received decreased 4.3% year on year to ¥14,087 million. Net sales increased 0.3% year on
year to ¥17,578 million and ordinary income decreased 12.4% year on year to ¥2,650 million.

Urban & Spatial Development Operations
The Urban & Spatial Development Operations strove to expand the scope of business in the urban development
and architectural design area by growing businesses within the UK through BDP and collaborating as a group in
the Asian region.
As a result, the Group achieved orders received of ¥13,461 million, net sales of ¥14,347 million and ordinary
income of ¥58 million.
BDP became a consolidated subsidiary of the Company in the previous fiscal year, in which only the balance
sheets in the Urban & Spatial Development Operations was consolidated. Subsequently, BDP’s statement ofincome started to be consolidated from the current fiscal year.

Real Estate Leasing Operations
The Real Estate Leasing Operations saw a decline in rental revenue from the headquarters building due toreconstruction in the current year.
As a result, net sales decreased 7.9% year on year to ¥474 million and ordinary income increased 4.3% year on
year to ¥401 million.

(2) Cash Flows
Cash and cash equivalents at the end of the fiscal year was ¥17,083 million, an increase of ¥7,682 million fromthe end of the previous fiscal year. The primary factors were as follows.
Net cash provided by operating activities was ¥6,377 million (a net inflow of ¥380 million during the previous
fiscal year). This cash inflow was primarily due to profit before income taxes of ¥5,194 million, and an increasein advances received.
Net cash used in investing activities was ¥4,173 million (a net outflow of ¥17,705 million during the previous
fiscal year). This cash outflow was primarily due to the acquisition of investment securities.
Net cash provided by financing activities was ¥4,846 million (a net inflow of ¥15,199 million during the previous
fiscal year). This cash inflow was primarily due to an inflow from long-term loans payable.
(Reference) Trends in Cash Flow-related Indicators

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

Fiscal Year
Ended June2013

Fiscal Year
Ended June2014

Fiscal Year
Ended June2015

Fiscal Year
Ended June2016

Fiscal Year
Ended June
2017

60.8

62.4

62.6

50.6

47.9

39.2

50.0

43.7

23.6

43.3

0.2
1,519.0

1.8
29.3

1.9
18.0

46.1
7.1

3.6
31.7

Notes: 1. All figures are calculated on the basis of consolidated financial figures.
2. Market capitalization is computed on the basis of the number of shares issued, excluding treasury stocks.
3. Cash flow here means operating cash flow.
4. Interest-bearing debt here comprises all debts included in the consolidated balance sheet on which interest is paid.

32. Production, New Orders and Sales(1) New Orders
Millions of yen%

2017
Reportable Segment
New Orders
Domestic ...................................................................
International (Note 1) ..............................................
Power Engineering ...................................................
Urban & Spatial Development (Note 2) ..................
Others .......................................................................
Total new orders ..................................................
Impact of Foreign Exchange Fluctuations
Domestic ...................................................................
International .............................................................
Power Engineering ...................................................
Urban & Spatial Development ................................
Real estate leasing ....................................................
Others .......................................................................
Total impact of foreign exchange fluctuations ....
Outstanding Orders
Domestic ...................................................................
International .............................................................
Power Engineering ...................................................
Urban & Spatial Development ................................
Others .......................................................................
Total outstanding orders ....................................

Order Amount

Change fromthe previous fiscal year

¥48,265
41,57314,087
13,461
56
117,442

9.4
44.0
(4.3)
(17.2)(13.7)
12.9

2,178(174.1)(1,679)499(117.0)31,33371,368
9,707
13,68925¥126,122

9.8
32.2
(4.9)
(15.8)(50.3)
15.7

Notes: 1.	The outstanding orders at the beginning of consolidation for System Science Consultants Inc., which was consolidated
from the fiscal year is included.
2. This refers to the outstanding orders as of April 1, 2016 of BDP HOLDINGS LIMITED and its Subsidiaries that became
consolidated subsidiaries from the previous fiscal year.
3. The above amounts are exclusive of consumption taxes, etc.
4. The above amounts are for outside customers, and do not include intersegment transactions or transfers.
5. From the fiscal year under review, the impact of foreign exchange fluctuations is listed separately from orders received, andthe year for comparison is also reclassified.

4

(2) Sales Performance
Millions of yen%

2017
Reportable Segment

Change fromthe previous fiscal year

Sales Amount

Domestic ...................................................................
International .............................................................
Power Engineering ...................................................
Urban & Spatial Development ................................
Real estate leasing ....................................................
Others .......................................................................
Total sales ...............................................................

¥43,516
24,492
17,57814,347474
931¥101,338

6.7
11.0
0.3
(7.9)
(4.9)
23.8

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

Millions of yen%

Millions of yen

2017
Name of Customers
Ministry of Land, Infrastructure,
Transport and Tourism .....................
Japan International
Cooperation Agency ..........................
TEPCO Power Grid, Incorporated ......

Sales Amount

%

2016

Proportion of
sales

Sales Amount

Proportion of
sales¥14,671

14.5¥13,604

16.6

9,582
9,148

9.0
9.5

7,643
8,148

10.0

9.3

3. Future Challenges(1) Management Policy
The Group, under the mission of realizing the value contained in the management philosophy of “Act withintegrity & Contribute to society through technology and engineering,” has defined the specific goals of theGroup in the Group Vision of “To provide services that are of value in building safe and reliable social
infrastructure and comfortable living space.”
The Group has defined its business targets for the fiscal year ending June 30, 2021, to be net sales of ¥140
billion, operating income of ¥14 billion, and a return on equity (“ROE”) of 10% based on the Long-Term
Management Strategy (spanning six years from July 2015 to June 2021) formulated in February 2015.
With a view to realizing its long-term management strategy, the Group has identified the three-year period from
July 2015 to June 2018 as an important one for making strides toward the future, and it has produced and is
progressing its Medium-Term Business Plan NK-AIM (the “AIM” in the title standing for Advancing in the world,
intensify in Japan and demonstrating Merit).
From the term ending June 2018, which is the last year of the Medium-Term Management Plan NK-AIM, theGroup will tackle the three focus themes of “further progressing global development,” “further expanding
business scope and raising profitability through intensification of the core businesses,” and “demonstrating thetrue value of comprehensive technological capacity with a view to creating new business domains.” Inaccordance with the fundamental policy directions of “sustained growth of the three core businesses,” “creationand expansion of new business operations,” and “autonomy and collaboration.”5

As whole-of-company measures to realize these, the group will proactively advance “development of nextgeneration core technologies and further rises in productivity,” “enhancing securing and training personnel
resources” and “promoting collaboration and strengthening corporate governance.”
The business environment of the Group continued to be stable, and each business segment saw steady demand.
The Group undertook measures for disaster prevention and mitigation, and measures to prevent deterioration of
infrastructure for public works projects in the Domestic Consulting Operations, promoted strategic exporting of
infrastructure systems in the International Consulting Operations, and renewed power distribution equipmentin the Power Engineering Operations.
The key business strategy themes and whole-of-company initiatives under the Medium-Term Business Plan
NK-AIM for the year ended June 30, 2018 are as follows:a. Key strategic business challenges
In the Domestic Consulting Operations, the Company will work to increase its business areas and market sharesby specifying significant businesses, improving quality of service and profitability by restructuring work
procedures, and effectively entering into alliances.
In the International Consulting Operations, the Company will improve business strategy function, strengthen
production structures through securing human treasures and strengthening training and technology, improvefunction of the Group companies and intensifying collaboration with the Group companies and provide theoperational basis for managing risks.
In the Power Engineering Operations, the Company will increase cost competitiveness and strengthen sales
capabilities, enhance cooperation within the Group regarding the business developed from demand-side,business areas of water power generation, and operation and maintenance, promote the development of
products and technology, and expand the mechanical and electromechanical consulting business.
In the Urban & Spatial Development Operations, the Company will strive to strengthen the business structuresof BDP, expanding its business outside the UK and group linkages in the Asian region. It will also seek to further
expand business through the transfer across all group companies of the Building Information Modeling (“BIM”)
technology owned by BDP.
With regard to new business, it will promote the development of an asset holding business and participating in
the concession business that corresponds to the privatization of the infrastructure business. It also works to
structure new business model through participation in the energy business generally (e.g. renewable energy,
power storage business) and privatized business such as water supply, harbor and ports, etc.
b. Companywide measures to support its growth
To pursue the “development of next-generation core technologies and further rises in productivity,” the groupwill work to develop technology that gives consideration to global environmental change, develop coretechnologies for next-generation smart society, improve technical services, raise project management to a higher
level, and ensure quality and improve productivity by improving production processes.
In order to “secure human treasures and strengthen training,” the group will work on promotion of work-lifebalance, revamping the personnel system, restructuring the company training program and reinforcing
recruiting activity.
In pursuit of “promoting collaboration and strengthening corporate governance,” the group will work tostrengthen the provisions for workplaces especially with regard to the refurbishment of the head office building,inner communications, compliance and risk management and governance the Group companies.

6

(2) Basic Policy Governing Corporate Decision-Makers on Financial Affairs and Operations
Our basic policy governing corporate decision-makers on financial affairs and operations (“GovernancePrinciples”) is as detailed below.
a. Governance Principles
The Company believes that the people who control the assets and the commercial decisions of the Company ought tobe people who understand the sources of the Company’s corporate value and who make it possible for the Company
to continually raise its corporate value and through it the profits that are shared by the stockholders. As an entity
whose shares are listed on securities exchanges, the Company respects the free trading of its shares in the markets,and does not as a rule deny even large-scale buying of the Company’s stock by specific persons, provided that it isattributable to the growth and surety of the Company’s corporate value and through it the profits that are shared by
the stockholders. The Company believes that whether or not the selling of the Company’s shares happens in response
to a large-scale act of purchasing is a decision that should ultimately be left up to shareholders of the Company.
However, it cannot be said for certain that there are no individuals among those attempting to carry out a large-scale
act of purchasing of shares of the Company who do not contribute to the corporate value of the Company, andfurthermore to the common interest of shareholders when looking at the purposes and goals of said action; suchindividuals would include those who bring forth a tangible infringement upon the corporate value of the Company
and furthermore the common interest of shareholders, individuals presenting the threat of coercing shareholders to
conduct the sale of shares, individuals presenting the threat of destroying relationships of trust existing between
clients, employees, business partners, and other related parties, individuals whose conditions for purchase do notentail a sufficient reflection of the corporate value of the Company, and individuals who do not provide information
sufficient enough for shareholders to make a decision.
The Company was founded in 1946. Since then, the Company has been expanding businesses relating to theestablishment of social capital, with its construction consulting business and electric power engineering businessconstituting predominant businesses. As a company with an extremely “high level” communality and one with a greatsocial mission, there is a need for the Company to conduct sustainable development going forward as well. Moreover,
the Company possesses branding power backed by a rich collection of experience and track records, and has acquireda high level of trust with clients such as the government, regional public organizations, and others. Technologicalprowess of the Company is something supported by the high level of specialization of employees within the Group,business partners, and other related individuals, as well as by our broad-ranging know-how. In managing theCompany, it is a necessity to expand business while simultaneously maintaining and developing relationships of trust
cultivated between domestic and overseas clients, employees, business partners and other related entities, but only
after sufficiently understanding that the source from which the corporate value of the Company comes is constitutedby those aspects. The Company believes that only through such efforts would one then be able to begin contributing
to the improvement of our corporate value and to the interest of shareholders.
In view of these circumstances, when it comes to individuals attempting to carry out large-scale acts of purchasing, amechanism is necessary that entails allowing for said acts of purchasing to commence only after a certain period ofassessment has passed, for the purpose of judging the necessity of consideration regarding opinions formed by theboard of directors of the company and regarding alternative solutions, as well as consideration regarding the
invoking of countermeasures, by means of providing of necessary information beforehand that is sufficient enoughfor shareholders to make a decision. Moreover, the Company believes that including with respect to the above
example, individuals attempting to conduct large-scale acts of purchasing that do not contribute to the corporate
value of the Company and furthermore the common interest of shareholders without understanding the source of theCompany’s corporate value are individuals unsuited to control decisions on company financial administration andbusiness policy, and that it is necessary for us to secure the corporate value of the Company and furthermore thecommon interests of shareholders by taking substantial and necessary countermeasures against large-scale acts ofpurchasing conducted by individuals attempting to conduct large-scale acts of purchasing that do not contribute to
the corporate value of the Company and furthermore the common interest of shareholders.

7b. An overview of special initiatives that contribute to the realization of effective utilization of resources,
the formation appropriate corporate grouping, and other such basic policies(a) Strategic business promotion based on mid-to-long term plans
Initiatives concerning strategic business promotion based on mid-to-long term plans of the Company are as
described in the above item titled “(1) Management Policy”.
(b) Strengthening of corporate governance frameworks
In order to further increase the corporate value of the Group, the Company has made the basic mindset
comprising of the strengthening of supervisory functions together with the securing of transparency, theestablishment of a speedy operational execution framework, and the endeavoring toward enhancement ofcorporate governance.
In terms of institutional design, the Company has chosen a company with a board of company auditors (as wellas one with a board of directors and one with a board of accounting auditors). Moreover, the Company has
established a committee for advisory on appointments, compensation and other matters that includes
independent directors as comprising members, and together with increasing fairness and transparency inmanagement, has separated management monitoring and supervisory functions from operational executivefunctions, in an effort to bring about the clarification of responsibility and increasing in the speed of “decision
making”.
c. Overview of initiatives serving to prevent control by unsuitable individuals in the context of the Basic
PolicyAs an initiative serving to prevent the control of decisions on financial administration and business policy of theCompany by unsuitable individuals in the context of the Basic Policy in item a. above, the Company has set up a
policy for responses to large-scale acts of purchasing for shares of the Company (“Takeover Defense Measure”).
Here is an overview of the Takeover Defense Measure. Large-scale purchasers attempting to carry out large-scale
acts of purchasing, such as that of shares for the purpose of controlling a ratio of more than 20% of the voting
rights of specific shareholder groups, or more specifically large-scale acts of purchasing where the result would
be the acquiring of a ratio of more than 20% of the voting rights of specific shareholder groups, would be
subject to: (a) the provision of necessary and sufficient information to the board of directors beforehand,including the submission of letters of intent, and (b) the commencement of large-scale acts of purchasing taking
place after a certain period of assessment by the board of directors at the Company has passed.
The Takeover Defense Measure introduced at the Company by means of a resolution passed at a board of
directors meeting held in May 2006. The measures continued after a partial amendment took place resulting
from a resolution passed at a board of directors meeting held in June 2007. After that, the measure wascontinued after obtaining approval for partial amendments by shareholders through a resolution at the 63rd
Ordinary General Meeting of Shareholders in June 2008, a resolution at the 66th Ordinary General Meeting of
Shareholders in June 2011, a resolution at the 69th Ordinary General Meeting of Shareholders in September
2013, and a resolution at the 72nd Ordinary General Meeting of Shareholders in September 2016.
Details on Takeover Defense Measures can be found in their entirety online at our website (https://www.n-koei.
co.jp/).
d. Board of Directors’ decision concerning the measures described in b. and c. above and the reason
The measures described in b. above are in line with the Governance Principles described in a. above, as they
were implemented for the purpose of enhancing corporate value and carried out in the common interests of ourshareholders. These measures emphasize protecting the interests of our shareholders over protecting thecorporate directors from being replaced.
The measures described in c. above (the Policy on Substantial Acquisition of Shares) are in line with theGovernance Principles described in a. above. It protects the interests of our shareholders over protecting thecorporate directors from being replaced in the following ways:

8

(a)	T he Policy on Substantial Acquisition of Shares meets the three basic requirements set forth in the
Guidelines Regarding Takeover Defense for the Purposes of Protection and Enhancement of Corporate Valueand Shareholders’ Common Interests published by the Ministry of Economy, Trade and Industry (METI) andthe Ministry of Justice on May 27, 2005. It also incorporates the June 30, 2008, report entitled “Proper Roleof Takeover Defense Measures in Light of Changes in Various Environments” published by METI’s Corporate
Value Study Group.
(b)	T he Policy enables our shareholders to make an informed decision on whether a takeover would be
beneficial, prevents any apparent infringement on the Company’s corporate value and is in the best interestof the Company and its shareholders.
(c)	The Rules on Substantial Acquisition of Shares and the necessary conditions for taking countermeasures arereasonable in light of our aim to maintain and enhance the Company’s corporate value and protect theinterests of its shareholders.
(d)	The Rules on Substantial Acquisition of Shares and the necessary conditions for taking countermeasures areconcrete and clear enough to make it possible for the shareholders, investors and potential bidders to makefair predictions about the future.
(e)	The policy was enacted by a vote of the shareholders at a shareholders’ meeting. The Company’s Board of
Directors can convene a shareholders’ meeting to verify the shareholders’ intentions to implement a
countermeasure or not. Decisions about whether to maintain, rescind or alter the policy, made in the form ofa resolution to be voted on at a general shareholders’ meeting, will ensure that the wishes of the shareholders
are reflected in company policy.
(f)	The policy establishes objective and clear conditions for taking countermeasures. It also establishes priorconditions needed to implement countermeasures, requiring that the Company’s Board of Directors consult
its independently established ad hoc committee in advance concerning the initiation of countermeasures.
	Only after carefully considering the recommendations of the committee will the Board make its final
decision on implementing counter-takeover measures. The Policy on Substantial Acquisition of Shares
ensures that all decisions of the Board regarding countermeasures are objective and reasonable.
(g)	The policy empowers the ad hoc committee to seek the advice of independent experts at the Company’s
expense. The policy goes to such great lengths that it leaves no room for doubt about the fairness andobjectivity of the ad hoc committee’s recommendations.
(h)	The Policy on Substantial Acquisition of Shares is not intended to be a dead-hand takeover defense and may
be abolished subject to a vote at the Company’s shareholders’ meeting or at a Board of Directors’ meeting
comprised of directors elected at a shareholders’ meeting. It is not a slow-hand takeover defense either, as
the term of the Company’s Board members is one year.

4. Business Risks
The following are matters that could significantly affect the judgment of investors from matters related to
Overview of Performance and Cash Flows and Financial Section, etc. stated in the Consolidated Business Report.
Items related to future events within the text are the Group’s judgment as of June 30, 2017.

(1) Uneven Annual Distribution of Performance Results
The primary operations of the Group include the Domestic and International Consulting Operations, the PowerEngineering Operations, and Urban & Spatial Development Operations. In particular, the Domestic Consulting
Operations entail national and local government projects whose orders come in as a cluster toward the end of
their fiscal year (March). As a result, most of the Group’s sales tend to occur during the period from January
through March.

(2) Dependence on Major Customers
Our Domestic and International Consulting Operations highly rely on national and local government contracts andprojects based on the Japanese ODA budget for sales. Sales performance on the domestic front tends to be affectedby trends in government spending, while our international orders are a reflection of the Japanese ODA budget.
As a large percentage of our Power Engineering Operations are for TEPCO Power Grid, Incorporated, our sales
performance is largely dictated by capital investments of TEPCO Power Grid, Incorporated.

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

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

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

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

(1) Analysis of Financial Status
Total assets at the end of the fiscal year under review amounted to ¥113,866 million, up ¥12,876 million from theend of the previous fiscal year.
In the Assets section, current assets were ¥54,798 million, an increase of ¥8,644 million from the end of theprevious fiscal year. This was due primarily to an ¥8,419 million increase in cash and deposits.
Non-current assets were ¥59,068 million, up ¥4,232 million from the end of the previous fiscal year. This wasdue primarily to an increase in investment securities.
In the Liabilities section, current liabilities were ¥30,341 million, a decrease of ¥12,767 million from the end of
the previous fiscal year. This decrease was mainly attributable to a ¥16,000 million decrease in short-term loans
payable.
Non-current liabilities were ¥28,651 million, an increase of ¥22,229 million from the end of the previous fiscal
year. This increase was mainly attributable to a ¥20,141 million increase in long-term loans payable.
Net assets amounted to ¥54,874 million, an increase of ¥3,414 million from the end of the previous fiscal year.
The primary factors behind this increase were a profit of ¥3,288 million attributable to owners of parent, ¥772
million in cash dividends paid, an increase of ¥1,025 million of valuation difference on available-for-salesecurities, and a ¥1,512 million decrease in foreign currency translation adjustments.
As a result, the shareholders’ equity ratio decreased 2.7% from the end of the previous fiscal year to 47.9%.

(2) Performance Analysis
Net sales for the current fiscal year were ¥101,338 million, that was a ¥19,472 million increase year on year
(23.8% increase).
Operating income for the current fiscal year was ¥5,465 million, which was a ¥741 million increase year-on-year(15.7% increase). The ratio of cost of sales to net sales was 69.5%, improved by 3.2 points year-on-year. The ratioof selling, general and administrative expenses to net sales was 25.1%, that was higher than the previous year by
3.6 points. As a result, the ratio of operating income to net sales was 5.4%, worsened by 0.4 points year-on-year.
The net of the other income and expenses resulted in an excess expenses of ¥271 million, due primarily to theloss on support to subsidiaries and associates of ¥433 million, and impairment losses of ¥226 million.
Income before income taxes was ¥5,194 million, and net income attributable to owners of the parent, which wasafter subtracting current income taxes, deffered income taxes and net income attributable to noncontrollinginterests from income before income taxes, was ¥3,288 million, which increased ¥1,464 million year-on-year(80.3% increase).

10

The Company conducted a share consolidation at a rate of one share for every five shares on January 1, 2017.
The figures for “Net income per share” are amounts on the assumption that the Company conducts the shareconsolidation at the beginning of previous fiscal year, and Basic net income per share for the current fiscal year
was ¥213.39, which was a ¥94.27 increase from the amount of ¥119.12 for the previous fiscal year.

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

President:
Ryuichi Arimoto11

Co n s ol i d ated B alanc e S h eet
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
June 30, 2017

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 17) ..................
Receivables (Note 17):
Trade notes .........................................................
Trade accounts ...................................................
Unconsolidated subsidiaries andassociated companies ......................................
Other ...................................................................
Allowance for doubtful accounts ......................
Inventories (Note 6) .............................................
Deferred tax assets (Note 14) ..............................
Prepaid expenses and other current assets ........
Total current assets ............................................
PROPERTY, PLANT AND
EQUIPMENT (Notes 7, 8 and 9):
Land ......................................................................
Buildings and structures .....................................
Machinery and equipment .................................
Furniture and fixtures .........................................
Lease assets ..........................................................
Construction in progress .....................................
Total ....................................................................
Accumulated depreciation ...................................
Net property, plant and equipment ...................

2017

2016

2017

¥17,083¥9,401$152,119

16
17,95433
17,157

142
159,875

131
408
(7)
11,984
1,234
5,995
54,798534618(9)12,601
995
4,824
46,154

1,167
3,633
(62)
106,714
10,98853,385487,961

17,64916,151
2,614
4,988
177
253
41,832(17,296)
24,536

17,332
18,685
2,662
5,299
170
82
44,230(19,669)
24,561

157,159
143,820
23,27744,417
1,576
2,253
372,502(154,016)
218,486

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 5 and 17) ..............
Investments in and advances
to unconsolidated subsidiaries andassociated companies (Notes 10 and 17(5)(b)) ....
Trademarks ...........................................................
Goodwill ...............................................................
Receivables in bankruptcy ...................................
Deferred tax assets (Note 14) ..............................
Asset for retirement benefits ...............................
Other assets ..........................................................
Allowance for doubtful accounts ........................
Total investments and other assets ...................

8,672

6,423

77,222

4,156
3,355
8,686
16
1,149
3,392
5,275
(169)
34,532

3,771
3,985
10,313
16
1,154
4,773
(160)
30,27537,00829,87577,346142
10,23230,205
46,973(1,505)
307,498

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

¥113,866¥100,990$1,013,945

12

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short‑term borrowings (Note 11) .......................
Current portion of long-term debt (Note 11 and 17) ...
Payables:Trade notes .........................................................
Trade accounts ...................................................
Unconsolidated subsidiaries andassociated companies ......................................
Other ...................................................................
Income taxes payable ...........................................
Advances received ................................................
Unearned revenue ................................................
Accrued bonuses ..................................................
Allowance for anticipated project loss ................
Other current liabilities .......................................
Total current liabilities ......................................
LONG-TERM LIABILITIES:Long-term debt (Note 11 and 17) ........................
Provision for directors'
retirement benefits (Note 12) ............................
Allowance for environmental measures .............
Liability for retirement benefits (Note 12) .........
Deferred tax liabilities (Note 14) .........................
Other long-term liabilities ...................................
Total long-term liabilities ..................................

2017

¥

2017

2016

$

1,788

¥16,000
301

309
3,659

424
4,556

2,752
32,582

55
1,881
1,050
10,798
3,551
3,175
55
4,020
30,341

139
1,801
809
8,182
4,288
2,137
59
4,412
43,108490
16,7509,350
96,15331,621
28,272490
35,796
270,178

21,4481,307

190,988

46
34
3,964
2,859
300
28,651

46
34
2,555
1,917
563
6,422

410
303
35,29825,4592,671
255,129

7,393
7,241
43,4507,393
6,209
40,822

65,83364,479386,90915,922

COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 16, 18 and 20)
EQUITY (Notes 13, 22.b and 23):
Common stock,authorized, 38,000,000 shares in 2017 and
189,580,000 shares in 2016; issued, 17,331,302
shares in 2017 and 86,656,510 shares in 2016 ...
Capital surplus .....................................................
Retained earnings ................................................
Treasury stock—at cost
1,891,831 shares in 2017
and 9,816,140 shares in 2016 ............................
Accumulated other comprehensive income:Unrealized gain (loss) on
available-for-sale securities .............................
Foreign currency translation adjustments .......
Defined retirement benefit plans ......................
Total ....................................................................
Noncontrolling interests ......................................
Total equity .........................................................

(3,607)(3,020)(32,119)

1,017(1,814)828
54,508366
54,874

(8)
(302)
29
51,123337
51,460

9,056(16,153)
7,373
485,3783,260
488,638TOTAL ....................................................................

¥113,866¥100,990$1,013,945

See notes to consolidated financial statements.

13

Consolidated Statement of Income and Comprehensive Income
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2017

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2017

2017

2016

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

¥101,338¥81,866$902,386

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

70,40030,93859,50622,360626,892
275,494SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (Note 15) .....
Operating income ............................................

25,473
5,465

17,637
4,723

226,830
48,664

420
(195)
41

343
(59)
(952)

3,740
(1,736)365

OTHER INCOME (EXPENSES):Interest and dividend income ..............................
Interest expense ...................................................
Foreign currency exchange gain (loss) ...............
Loss on impairment oflong-lived assets (Note 7 and 24) ......................
Head office transfer cost .....................................
Loss on support to subsidiaries andassociates (Note 19) ...........................................
Other-net ...............................................................
Other expenses-net ..........................................

(226)
(106)

(237)

(2,012)
(944)

(433)
228
(271)

214
(691)

(3,856)2,030(2,413)

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

5,194

4,032

46,251

INCOME TAXES (Note 14):
Current .................................................................
Deferred ................................................................
Total income taxes ...........................................

1,866
5
1,871

1,508
671
2,179

16,61645
16,661NET INCOME .......................................................

3,323

1,853

29,590NET INCOME ATTRIBUTABLE TO:
Owners of the parent ...........................................
Noncontrolling interests ......................................

3,288
35

1,824
29

29,279311

OTHER COMPREHENSIVE INCOME (LOSS) (Note 21) :Unrealized gain (loss) on
available-for-sale securities ...............................
Foreign currency translation adjustment ...........
Defined retirement benefit plans ........................
Total other comprehensive income (loss) .......

1,026(1,509)800
317(1,667)(223)(889)(2,779)9,136(13,437)
7,124
2,823

COMPREHENSIVE INCOME (LOSS) ...............

¥3,640¥(926)$32,413TOTAL COMPREHENSIVE INCOME (LOSS)ATTRIBUTABLE TO:
Owners of the parent ...........................................
Noncontrolling interests ......................................

¥3,601¥39¥(934)¥8$32,066$347
U.S. Dollars(Note 1)Yen

PER SHARE OF COMMON STOCK (Note 2.t and 22):
Basic net income ..................................................
Cash dividends applicable to the year ................
See notes to consolidated financial statements.

14¥213.3975.00¥119.12
10.00

$1.90
0.67

Co n s ol i d ated S ta temen t o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2017

Thousands

Millions of Yen
Accumulated Other Comprehensive Income

BALANCE, JULY 1, 2015 ���������������������������������������������������������
Net income attributable to owners of the parent �������������������Cash dividends, ¥10.00 per share ��������������������������������������������
Purchase of treasury stock ���������������������������������������������������������
Disposal of treasury stock �������������������������������������������������������
Net change in the year �������������������������������������������������������������
BALANCE, JUNE 30, 2016 ������������������������������������������������������
Adjustment for newly consolidated subsidiaries �������������������
Net income attributable to owners of the parent �������������������Cash dividends, ¥75.00 per share ��������������������������������������������
Purchase of treasury stock ������������������������������������������������������
Disposal of treasury stock �������������������������������������������������������
Share Consolidation ����������������������������������������������������������������
Net change in the year �������������������������������������������������������������
BALANCE, JUNE 30, 2017 ������������������������������������������������������

Outstanding
Number of
Shares ofCommon Stock

Common Stock

Capital Surplus

76,286¥7,393¥6,209Retained
Earnings¥39,770

Unrealized
Gain (Loss) on
available-forsale securities

TreasuryStock¥(3,205)¥1,659Foreign
Currency
Translation
Adjustments¥(100)

DefinedRetirement
Benefit Plans

¥918

1,824

¥52,644

(9)

575

194

76,840

7,393(3,020)¥52,982
1,824

(772)

(772)

(9)

(9)

194

194

(1,667)(202)¥(889)(2,758)(1)(2,759)

(8)

(302)

29

51,123337

51,4606,209

40,822

312

112

424

424

3,288

3,288

3,288

(772)
(62)
330

¥338

Total Equity

1,824

(772)
(21)

Noncontrolling
Interests

Total

720

(772)

(772)

(1,456)(1,456)(1,456)

869

1,589

1,589

(61,669)
15,439¥7,393¥7,241¥43,450¥(3,607)

1,025(1,512)

799

312

29

341

¥1,017¥(1,814)¥828¥54,508¥366¥54,874

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

BALANCE, JUNE 30, 2016 ������������������������������������������������������
Adjustment for newly consolidated subsidiaries �����������������������
Net income attributable to owners of the parent �������������������Cash dividends, $0.67 per share ����������������������������������������������
Purchase of treasury stock ������������������������������������������������������
Disposal of treasury stock �������������������������������������������������������
Share Consolidation �������������������������������������������������������������������
Net change in the year ����������������������������������������������������������������
BALANCE, JUNE 30, 2017 ������������������������������������������������������

Common Stock

Capital Surplus$65,833$55,2892,778

Retained
Earnings$363,508

TreasuryStock$(26,892)

Unrealized
Gain (Loss) on
available-forsale securities$(71)

Foreign
Currency
Translation
Adjustments$(2,689)

DefinedRetirement
Benefit Plans$258$3,000Total Equity$458,236

997

3,775

3,775

29,27929,2796,412$64,479$455,236

Noncontrolling
Interests

29,279(6,875)$65,833

Total$386,909(6,875)(6,875)(12,965)(12,965)(12,965)

7,738

14,15014,150$(32,119)

9,127(13,464)

7,115

2,778

260

3,038

$9,056$(16,153)$7,373$485,378$3,260$488,638

See notes to consolidated financial statements.

15

Co n s ol i d ated S ta temen t o f C as h Fl ow s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2017

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

OPERATING ACTIVITIES:
Income before income taxes ....................................
Adjustments for:
Income taxes – paid ..............................................
Payments for head office transfer cost ................
Depreciation and amortization ............................
Loss on impairment oflong-lived assets (Note 7 and 24) .......................
Amortization of goodwill .......................................
Gain on sales of property, plant and equipment ...
Gain on sales of investment securities ..................
Loss on support to subsidiaries and associates ....
Head office transfer cost ......................................

2017

2017

2016

¥5,194¥4,032$46,251(1,503)
(218)
1,720

(2,679)
(668)
1,268

(13,384)(1,941)
15,316

(2)
(343)

2,012
5,548
(18)
(276)
3,856
944

226
623
(2)
(31)
433
106

237

Changes in assets and liabilities, net of effects
from newly consolidated subsidiaries:(Increase) decrease in trade accounts receivable ......
Decrease (Increase) in inventories .....................
(Decrease) increase in trade accounts payable ...
Increase (decrease) in advanced received .........
Other—net .............................................................
Net cash provided by operating activities .......

(316)
868
(1,098)
1,915(1,540)
6,377

1,797
(906)
312
(394)
(2,274)380(2,814)
7,729(9,777)
17,053(13,713)56,786INVESTING ACTIVITIES:
Purchases of property, plant and equipment ..........
Proceeds from sales and redemption of
investment securities ..............................................
Purchases of investment securities ..........................
Payments of loans receivable ...................................
Increase in other assets ............................................
Net cash used in investing activities ................

16¥(1,086)¥(1,198)$(9,671)

FINANCING ACTIVITIES:2017

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

¥(16,000)
23,547(2,008)(1,456)
1,589
(773)
(53)

¥16,000
(164)
(9)
194
(771)
(51)

$(142,476)
209,679(17,881)(12,965)
14,150(6,883)(472)

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

4,846

15,19943,152

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

(125)

(146)

(1,113)NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS ............................................

6,925(2,272)

61,666

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

757

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

9,401

11,67383,713

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

¥17,083¥9,401$152,119See notes to consolidated financial statements.

532(1,519)(880)(1,220)(4,173)891(2,182)(1,411)(13,805)(17,705)

4,737(13,526)(7,836)(10,863)(37,159)

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2017

2016

6,740

N o tes to C on solid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2017

1.	B A S I S O F P R E S E N TAT I O N O F C O N S O L I D AT E D F I N A N C I A L
STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in
conformity with accounting principles generally accepted in Japan, which are different in certain respects as tothe application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form that is morefamiliar to readers outside Japan. In addition, certain reclassifications have been made in the 2016 consolidated
financial statements to conform to the classifications used in 2017.
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 the rateof ¥112.30 to $1, the approximate rate of exchange at June 30, 2017. 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 June 30, 2017, include the accounts of theCompany and its 58 significant (57 in 2016) subsidiaries (together, the “Group”).
System Science Consultants Inc. was added in the scope of consolidation from the current fiscal year due totheir increased materiality.
BDP HOLDINGS LIMITED and its subsidiaries (together, “BDP”) changed its fiscal year-end from December
31 to June 30, which is the same as the consolidated fiscal year-end, in the current fiscal year. As theCompany acquired all of the shares of BDP HOLDINGS LIMITED on April 1, 2016, income for the period
from April 1, 2016 to June 30, 2016 of BDP was adjusted in the Consolidated Statement of Income andComprehensive Income. Therefore, income for BDP from April 1,2016 to June 30,2017 was consolidated in
the consolidated fiscal year ended June 30, 2017. Financial amounts of BDP for the period from April 1, 2016
to June 30, 2016, included net sales of ¥3,262 million ($29,047 thousand), operating income of ¥87 million($775 thousand), income before income taxes of ¥140 million ($1,247 thousand) and foreign currencytranslation adjustment of ¥(2,355) million ($(20,971) thousand).
Under the control concept, those companies in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated.
Investments in unconsolidated subsidiaries and associated companies are stated at cost. If the equity methodof accounting had been applied to the investments in these companies, the impact on the accompanying
consolidated financial statements would not be significant.
Goodwill represents the excess of cost of an acquisition over the fair value of the net assets of the acquired
subsidiaries at the date of acquisition.
Goodwill is amortized using the straight-line method over its useful life, which is estimated as a reasonable
period for which goodwill is expected to have an effect. In addition, the amortization period of goodwill
related to the acquisition of BDP HOLDINGS LIMITED is 20 years and started amortization from the current
fiscal year.
All significant intercompany balances and transactions have been eliminated in consolidation. All significant
unrealized profit included in assets resulting from transactions within the Group is also eliminated.

b.	Cash Equivalents — Cash equivalents are short-term investments that are readily convertible into cash andexposed to insignificant risk of changes in value.

17

Cash equivalents include time deposits and investment trusts, both of which mature or become due within
three months of the date of acquisition.

c.	Inventories — Work in process is stated at the lower of cost, mainly determined by the specificidentification cost method, or net selling value (see Note 6).

d.	Investment Securities — Investment securities are classified and accounted for, depending on
management’s intent, as follows:(1) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent andability to hold to maturity, are reported at amortized cost; and (2) available-for-sale securities, which are 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.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For
other-than-temporary declines in fair value, investment securities are reduced to net realizable value by acharge to income.

e.	Property, Plant and Equipment —Property, plant and equipment are stated at cost. Depreciation ofproperty, plant and equipment of the Company and its consolidated domestic subsidiaries 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, structures acquired after April 1,
2016, and lease assets, as well as other equipment for rent. In addition, the straight-line method is principally
applied to the property, plant and equipment of consolidated foreign subsidiaries. The range of useful lives isprincipally from 3 to 50 years for buildings and structures, from 2 to 15 years for machinery and equipment,
and from 2 to 20 years for furniture and fixtures. The useful lives for lease assets are the terms of therespective leases.

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

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

h.	R etirement and Pension Plans — The Group has contributory defined benefit pension plans andunfunded retirement benefit plans for the benefit of its employees.
Effective April 1, 2000, the Group adopted a new accounting standard for retirement benefits and accounted
for the liability for retirement benefits based on the projected benefit obligations and plan assets at theconsolidated balance sheet date. The projected benefit obligations are attributed to periods on a straight-line
basis. Actuarial gains and losses are amortized on a straight-line basis over mainly 13 years within the
average remaining service period. Past service costs are amortized on a straight-line basis over mainly 13
years within the average remaining service period.
Hitherto, retirement benefits for directors were provided at the amount that would be required if all directors
retired at the balance sheet date. However, the Group abolished benefit pension plans for directors. Thebalance in the consolidated balance sheet is the estimated amount for directors who have belonged to theGroup since the plans were effective.

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

18

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

k.	Employee Stock Ownership Plan — In accordance with PITF No. 30, “Practical Solution on Transactionsof Delivering the Company’s Own Stock to Employees etc. through Trusts,” upon transfer of treasury stock to
the employee stockownership trust (the “Trust”) by the entity, any difference between the book value and fairvalue of the treasury stock is recorded in capital surplus. At year-end, the Company records (1) the Company
stock held by the Trust as treasury stock in equity, (2) all other assets and liabilities of the Trust on a line-byline basis, and (3) a liability/asset for the net of (i) any gain or loss on delivery of the stock by the Trust to theemployee shareholding association, (ii) dividends received from the entity for the stock held by the Trust, and(iii) any expenses relating to the Trust.

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

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

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

p.	Income Taxes — The provision for income taxes is computed based on pretax income included in the
consolidated statement of income and comprehensive income. The asset and liability approach is used torecognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured byapplying currently enacted income tax rates to the temporary differences.
The Company applied ASBJ Guidance No. 26, “Guidance on Recoverability of Deferred Tax Assets,” effective
April 1, 2016. There was no impact from this for the year ended June 30, 2017.

19

q.	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 consolidatedbalance sheet date. The foreign exchange gains and losses from translation are recognized in the
consolidated statement of income and comprehensive income.

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

s.	Derivatives and Hedging Activities — The Group uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange and interest rates. Interest rate and currency swaps are utilized
by the Group to reduce the risks of foreign currency exchange and interest rate. The Group does not enter
into derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as follows: (1) all derivatives are recognized
as either assets or liabilities and measured at fair value; and gains or losses on derivative transactions arerecognized in the consolidated statement of income and comprehensive income; (2) for derivatives used forhedging purposes, if such derivatives qualify for hedge accounting because of high correlation andeffectiveness between the hedging instruments and the hedged items, gains or losses on derivatives aredeferred until maturity of the hedged transactions.
Interest rate and currency swaps that qualify for hedge accounting and meet specific matching criteria are
not remeasured at market value but the differential paid or received under the swap agreements is
recognized and included in interest expense or income.

t.	Per Share Information — Basic net income per share is computed by dividing net income attributable toshareholders of common stock by the weighted-average number of shares of common stock outstanding forthe period.
Diluted net income per share of common stock is not disclosed because the Group had no securities
outstanding that might dilute the per share information for the years ended June 30, 2017 and 2016.
Cash dividends per share presented in the accompanying consolidated statement of income andcomprehensive income are dividends applicable to the respective years, including dividends to be paid after
the end of the fiscal year.
On January 1, 2017, the Company effected a share consolidation at a rate of one share for every five commonshares based on the resolution of the 72nd Ordinary General Meeting of Shareholders held on September 29,
2016. To provide basic net income per share figures on a basis comparable to the year ended June 30, 2017,
the weighted-average number of shares of common stock has been restated to reflect the impact of the shareconsolidation for prior years.
On the other hand, the number of common stock and treasury stock as of June 30, 2016, and cash dividends
per share for the year ended June 30, 2016 have not been restated to reflect the share consolidation.

u.	Accounting Changes and Error Corrections — Under ASBJ Statement No. 24, “Accounting Standard for
Accounting Changes and Error Corrections” and ASBJ Guidance No. 24, “Guidance on Accounting Standard
for Accounting Changes and Error Corrections,” accounting treatments are required as follows:(1) Changes in Accounting Policies:
When a new accounting policy is applied following revision of an accounting standard, the new policy isapplied retrospectively unless the revised accounting standard includes specific transitional provisions, inwhich case the entity shall comply with the specific transitional provisions.

20

(2) Changes in Presentation:
When the presentation of consolidated financial statements is changed, prior-period consolidated financial
statements are reclassified in accordance with the new presentation.
(3) Changes in Accounting Estimates:
A change in an accounting estimate is accounted for in the period of the change if the change affects that
period only and is accounted for prospectively if the change affects both the period of the change and future
periods.
(4) Corrections of Prior-Period Errors:
When an error in prior-period consolidated financial statements is discovered, those statements are restated.

3. CHANGES IN PRESENTATION(1)	“Unearned revenue” (¥3,551 million ($31,621 thousand) in the current fiscal year and ¥4,288 million in theprevious fiscal year), which was presented separately in the consolidated statement of income andcomprehensive income in the previous fiscal year, is included in “Other Income (expenses) — Other net” dueto its decreased materiality.
(2)	“Gain on sales of investment securities” (¥31 million ($276 thousand) in the current fiscal year and ¥343
million in the previous fiscal year), which was presented separately in the consolidated statement of income
and comprehensive income in the previous fiscal year, is included in “Other Income (expenses) — Other net”
due to its decreased materiality.
(3)	“Decrease in net defined benefit liability” (¥2,562 million ($22,814 thousand) in the current fiscal year and¥(889) million in the previous fiscal year), which was presented separately in the consolidated statement ofcash flows in the previous fiscal year, is included in “Other-net” under “Operating Activities” due to its
decreased materiality.
(4)	“Proceeds from sales of property, plant, and equipment” (¥8 million ($71 thousand) in the current fiscal yearand ¥4 million in the previous fiscal year), which was presented separately in the consolidated statement ofcash flows in the previous fiscal year, is included in “Increase in other assets” under “Investing Activities” dueto its decreased materiality.
(5)	“ (Payment for) proceeds from purchase of newly consolidated subsidiaries, net of cash acquired” (norecognition in the current fiscal year and ¥(13,821) million in the previous fiscal year), which was presented
separately in the consolidated statement of cash flows in the previous fiscal year, is included in “Increase inother assets” under “Investing Activities” due to its decreased materiality.

4. ADDITIONAL INFORMATION
Employee Stock Ownership Plan Trust (“ESOP”) — The Company maintains an Employee Stock
Ownership Plan for a part of its employees’ welfare programs which includes transfers of the Company’s own
stock to the employees’ stockholders association through a trust.
(1) Resolved at the meeting of the Board of Directors held on February 12, 2013
a. Overview of the transaction
At a meeting of the Board of Directors held on February 12, 2013, the Company resolved to introduce an
ESOP as a trust-type employee shareholding incentive plan to provide the Group’s employees with incentives
to improve medium- to long-term corporate value, enhance their welfare programs, and encourage capital
participation as shareholders, thereby increasing the morale of the employees and promoting continued
growth of the Group.
Under the trust-type employee shareholding incentive plan, the Company establishes the ESOP at a trustbank. The ESOP preliminarily acquires the total number of the Company’s common shares expected to beacquired by the employees’ stockholders association over five years in advance from the Company by thirdparty allotment using borrowings as funds.
Subsequently, the ESOP sells these Company’s shares to the employees’ stockholders association on acontinual basis. If the ESOP has accumulated gains on sale of the Company shares when the ESOP is
terminated, the ESOP’s proceeds equivalent to the accumulated gains are distributed to eligible beneficiaries.
The Company guarantees obligations for the ESOP’s borrowing of funds to acquire the Company’s common

21stock. Therefore, if the ESOP has accumulated losses upon sale of the Company’s shares when the ESOP is
terminated, the ESOP’s outstanding debt equivalent to the accumulated losses is repaid by the Company inaccordance with a warranty clause included in the loan agreement, and there is no burden on the employees.
However, the ESOP was terminated in January 2017.
b. The Company’s shares remaining in the ESOP
Shares of the Company remaining in the ESOP are recognized at the ESOP’s book value thereof (excluding
the amount of ancillary expenses) as treasury stock under net assets. The book value and number of shares ofsuch treasury stock were not applicable due to the termination of the ESOP during the year ended June 30,
2017, and was ¥120 million and 71 thousand shares, respectively, for the year ended June 30, 2016.
c. Book value of borrowings posted through the application of the gross price method
Book value of borrowings posted through the application of the gross price method was not applicable due tothe termination for the year ended June 30, 2017, and was ¥260 million for the year ended June 30, 2016.
(Note) The Company conducted a share consolidation at a rate of one share for every five common shares on
January 1, 2017. The number of shares of treasury stock are amounts on the assumption that theCompany conducts the share consolidation at the beginning of the previous fiscal year.
(2) Resolved at the meeting of the Board of Directors held on May 15, 2017a. Overview of the transaction
At a meeting of the Board of Directors held on May 15, 2017, the Company resolved to reintroduce an ESOP
as a disposition-type employee shareholding incentive plan to provide the Group’s employees with incentives
to improve corporate value and enhance their welfare programs.
The Company also resolved to dispose of a part of treasury stock that the Company owns to an accountestablished in Trust & Custody Services Bank, Ltd. (the “Trust Account E”) by “third party” allotment en bloc.
The ESOP is an incentive plan that distributes the profit of stock price rise for all the employees who join
“Nippon Koei Group employees’ stockholders association” (the “Employees’ Stockholders Association”). To
initiate the ESOP, the Company concluded the “Stock Benefit Trust (disposition-type ESOP) Agreement” , thetrust established pursuant to the role of the agreement shall be referred to as the “ESOP Trust”, whereby theCompany is to act as administrator and the role of trustee is assigned to Mizuho Trust & Banking Co., Ltd.
(the “Trustee”). The Trustee also concluded an agreement with Trust & Custody Services Bank, Ltd., underwhich the Trustee is to re-entrust management of security and other asset of the ESOP Trust to Trust &Custody Services Bank, Ltd.
The Trust Account E acquires shares of the Company that the Employees’ Stockholders Association is
expected to obtain over the five years after the trust is set up, and periodically sells its holdings to the
Employees’ Stockholders Association. If, by the time of the ESOP Trust’s termination, gains equivalent tocapital gains on sales of shares are accumulated within the ESOP Trust through sales of Company’s shares by
the Trust Account E to the Employees’ Stockholders Association, then those gains will be distributed as
residual assets to the Employees’ Stockholders Association enrollees who meet the requirements for eligible
beneficiaries. Furthermore, to guarantee funds borrowed by the Trustee that enable the Trust Account E toacquire Company’s shares, the Company is to repay any such remaining borrowings pursuant to a guarantee
agreement, in the event that there are any remaining borrowings equivalent to losses on sales of shares due
to a downturn in the price of Company’s shares up until termination of the ESOP Trust.
b. The Company’s shares remaining in the ESOP
Shares of the Company remaining in the ESOP are recognized at the ESOP’s book value thereof (excluding
the amount of ancillary expenses) as treasury stock under net assets. The book value and number of shares ofsuch treasury stock was ¥1,381 million ($12,297 thousand) and 455 thousand shares, respectively, for theyear ended June 30, 2017.
c. Book value of borrowings posted through the application of the gross price method
Book value of borrowings posted through the application of the gross price method was ¥1,426 million($12,698 thousand) for the year ended June 30, 2017.

22

5. INVESTMENT SECURITIESInvestment securities as of June 30, 2017 and 2016, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2017
Non-current:
Marketable equity securities ...............................
Government and corporate bonds ......................
Other .....................................................................
Total .................................................................

2017

2016

¥7,599738
335¥8,672$67,667
6,572
2,983$77,222¥5,1191,235
69¥6,423The costs and aggregate fair values of investment securities at June 30, 2017 and 2016, were as follows:
Millions of Yen

June 30, 2017
Securities classified as:
Available-for-sale:
Equity securities ..................................
Debt securities ......................................
Other .....................................................
Total ...................................................

Cost¥5,369568
336¥6,273

Unrealized
Gains

Unrealized
Losses¥1,65424¥204¥1,678

¥204

Fair
Value

¥6,819592
336¥7,747

Millions of Yen

June 30, 2016
Securities classified as:
Available-for-sale:
Equity securities ..................................
Debt securities ......................................
Other .....................................................
Total ...................................................

Cost

Unrealized
Gains

Unrealized
LossesFair
Value¥4,867
1,141

¥738
50

¥760
32

¥4,845
1,159¥6,008¥788¥792¥6,004

Thousands of U.S. Dollars

June 30, 2017

Cost

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

$47,809
5,058

Unrealized
Gains

Unrealized
Losses$14,728214$1,817$60,720
5,272$14,942$1,817$68,984

2,992$55,859

Fair
Value

2,992

23

The proceeds, realized gains and losses of the available-for-sale securities which were sold during theyears ended June 30, 2017 and 2016, were as follows:
Millions of Yen

June 30, 2017

Proceeds

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

Realized Gains

Realized Losses

¥2
530

¥1
30

¥

¥532

¥31

¥

Millions of Yen

June 30, 2016

Proceeds

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

Realized Gains

Realized Losses

¥891

¥343

¥

¥891

¥343

¥

Thousands of U.S. Dollars

June 30, 2017

Proceeds

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

Realized Gains

Realized Losses

$17
4,720

$9
267

$

$4,737$276$

6. INVENTORIESInventories at June 30, 2017 and 2016, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2017
Merchandise ...........................................................
Work in process ......................................................
Raw materials and supplies ...................................
Total .................................................................

24¥0
11,728256¥11,9842016¥0
12,254347¥12,6012017$0
104,434
2,280$106,714

7. LONG-LIVED ASSETSThe Group reviewed its long-lived assets for impairment as of June 30, 2017. As a result, the Group recognized
an impairment loss of ¥226 million ($2,012 thousand) as loss on impairment of long-lived assets for assets to bedisposed and idle assets. The carrying amount of the assets to be disposed were written down to the recoverable
amount, which is zero, because they are to be demolished for redevelopment. The carrying amount of the idle
assets were written down to the memorandum value because future cash flows are not expected. No impairment
loss was recognized in 2016.

8. INVESTMENT PROPERTYOn November 2008, the ASBJ issued ASBJ Statement No. 20, “Accounting Standard for Investment Property and
Related Disclosures” and ASBJ Guidance No. 23, “Guidance on Accounting Standard for Investment Property
and Related Disclosures.”
The Group owns some rental properties such as office buildings and land in the Tokyo metropolitan area. The
net of rental income and operating expenses for those rental properties was ¥401 million ($3,571 thousand) and¥385 million for the fiscal years ended June 30, 2017 and 2016, respectively.
In addition, the carrying amounts, changes in such balances and market prices of such properties are as follows:
Millions of Yen
Carrying AmountJune 30, 2016

¥3,330Decrease

Fair Value
June 30, 2017¥(1,004)¥2,326

June 30, 2017¥5,242Millions of Yen
Carrying AmountJune 30, 2015

¥3,378Decrease¥(48)

Fair Value
June 30, 2016

¥3,330June 30, 2016

¥6,784

Thousands of U.S. Dollars
Carrying AmountJune 30, 2016

$29,653

Decrease$(8,941)

Fair Value
June 30, 2017

$20,712June 30, 2017

$46,679

Notes:
1. Carrying amount recognized in the consolidated balance sheets is net of accumulated depreciation andaccumulated impairment losses, if any.
2. Decrease during the fiscal year ended June 30, 2016, primarily represents depreciation of buildings of storesfor rent. Decrease during the fiscal year ended June 30, 2017, primarily represents removal of headquarters
office from rental properties due to the launch of its reconstruction and transfer from rental properties toassets for development.
3. Fair value of properties was measured by the Group in accordance with the Real-Estate Appraisal Standard.
4. During the fiscal year ended June 30, 2017, investment property under construction (¥1,050 million in the
consolidated balance sheet) is not included in the above table because it is difficult to measure their fair value
during an early phase of development.

25

9. REDUCTION ENTRY
In the case of the acquisition expenses of the Group that have been subsidized by the national government, theamount of such subsidies is offset against the acquisition cost of the corresponding property, plant andequipment.
The amount of reduction entry by accounts under property, plant and equipment at June 30, 2017 and 2016, was
as follows:
Thousands of
U.S. Dollars

Millions of Yen

2017
Buildings and structures .......................................
Machinery and equipment ....................................
Total .................................................................

2016

¥19
167
¥186

¥19
167
¥186

2017
$169
1,487
$1,656

10. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATEDSUBSIDIARIES AND ASSOCIATED COMPANIESInvestments in and advances to unconsolidated subsidiaries and associated companies at June 30, 2017 and2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2017¥1,8192,337¥4,1562016¥1,862
1,909¥3,771

2017$16,198
20,810$37,008

11. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The annual interest rate applicable to the short-term borrowings was 0.474% at June 30, 2016.
Long-term debt at June 30, 2017 and 2016, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2017
Unsecured loans from banks due seriallyto 2026 with interest rates ranging from0.250% to 1.988% .................................................
Obligation under finance leases ............................
Total .................................................................
Less current portion ..............................................
Long-term debt, less current portion .........

26¥23,174
62
23,236(1,788)¥21,448

2016¥1,526
82
1,608
(301)
¥1,3072017$206,358
552
206,910(15,922)$190,988

Annual maturities of long-term debt at June 30, 2017, for the next five years and thereafter were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Years Ending June 30

Long-Term Debt

Lease Obligations

Long-Term Debt

Lease Obligations¥1,760
2,060

6,611

¥28
17
10
5
2

$249
151
89
45
18

8,574

0

¥23,174¥62$15,673
18,344
17,65819,46658,86976,348$206,358

2018 .........................................................
2019 .........................................................
2020 .........................................................
2021 .........................................................
2022 .........................................................
2023 and thereafter .................................
Total ..................................................

1,983
2,186

0

$552

The Group and five financial institutions have concluded overdraft contracts and a commitment line contract bysyndicated loan over three years. (During the fiscal year ended June 30, 2016, the Group had concluded acommitment line with a financial institution in order to procure the funds for the acquisition of stock of BDP
HOLDINGS LIMITED). These commitment line contracts included restrictive financial covenants for eachfinancial institution.

12. RETIREMENT AND PENSION PLANS
The Company and certain consolidated subsidiaries have severance payment plans for employees and directors.
Under most circumstances, employees terminating their employment are entitled to retirement benefits
determined based on the rate of pay at the time of termination, years of service and certain other factors. Suchretirement benefits are made in the form of a lump-sum severance payment from the Company or from certain
consolidated subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments if thetermination is involuntary, by retirement at the mandatory retirement age, by death, or by voluntary retirement
at certain specific ages prior to the mandatory retirement age.
The liabilities for retirement benefits at June 30, 2017 and 2016, for directors were ¥46 million ($410 thousand)and ¥46 million, respectively. The retirement benefits for directors are paid subject to the approval of theshareholders.
(1) The changes in defined benefit obligation for the years ended June 30, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year .................................
Current service cost ...............................................
Interest cost ............................................................
Actuarial losses .......................................................
Benefits paid ...........................................................
Balance at end of year ..................................

2017¥15,253
1,096
106
69
(1,138)¥15,3862016¥15,229
1,096
105
46
(1,223)¥15,2532017$135,824
9,760
944
614
(10,134)$137,008

27

(2) The changes in plan assets for the years ended June 30, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2017¥13,362
267
1,225
1,528
(882)
¥15,500

2016¥13,832
277(1,228)1,491(1,010)¥13,3622017$118,985
2,378
10,90813,606(7,854)$138,023(3)	The changes in defined benefit obligation under the simplified method for the years ended June 30, 2017 and2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year .................................
Periodic benefit cost ..............................................
Benefits paid ...........................................................
Others .....................................................................
Balance at end of year ..................................

2017
¥663
58
(40)
3
¥684

2016
¥731
57
(104)
(21)
¥663

2017
$5,904516(356)
27$6,091(4)	Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined
benefit obligation and plan assets as of June 30, 2017 and 2016, was as follows (including the benefit plans
for which the simplified method was applied):Thousands of
U.S. Dollars

Millions of Yen

Funded defined benefit obligation ........................
Plan assets ..............................................................
Total .................................................................
Unfunded defined benefit obligation ....................
Net liability arising from defined
benefit obligation .................................................
Liability for retirement benefits ............................
Asset for retirement benefits .................................
Net liability arising from defined
benefit obligation .......................................

28

2017
¥12,167(15,553)(3,386)
3,958

2016¥11,910(13,362)(1,452)
4,007

2017$108,344(138,495)(30,151)
35,244

572

2,555

5,093

3,964
3,392

2,555

35,29830,205¥572¥2,555$5,093

(5) The components of net periodic benefit costs for the years ended June 30, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Service cost .............................................................
Interest cost ............................................................
Expected return on plan assets .............................
Recognized actuarial (gains) losses ......................
Amortization of prior service cost ........................
Periodic benefit cost under simplified method ....
Others .....................................................................
Net periodic benefit costs ............................

2017¥1,096
106
(267)
(28)
26
58
36
¥1,0272016¥1,096
105
(277)
(68)
28
57
34
¥975

2017
$9,760944(2,378)
(250)
232
516
321
$9,145(6) A mounts recognized in other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans for the years ended June 30, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2017
Prior service cost ....................................................
Actuarial (gains) losses ..........................................
Total .................................................................

2016

¥(28)
(1,126)¥(1,154)

¥(28)
1,343
¥1,3152017$(249)(10,027)$(10,276)(7)	Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect ofdefined retirement benefit plans as of June 30, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Unrecognized prior service cost ............................
Unrecognized actuarial (gains) losses ..................
Total .................................................................

2017
¥229
(1,423)¥(1,194)

2016
¥256
(297)
¥(41)

2017
$2,039(12,671)$(10,632)(8) Plan assets
a. Components of plan assets
Plan assets as of June 30, 2017 and 2016, consisted of the following:2017
Debt investments ....................................................
Equity investments ................................................
Cash and cash equivalents .....................................
Others .....................................................................
Total .................................................................

34%
44
19
3
100%

2016
38%
40
20
2
100%

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

29

(9) Assumptions used for the years ended June 30, 2017 and 2016, were set forth as follows:

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

2017
Principally 0.7%
2.0
90.0

2016
Principally 0.7%
2.0
90.0

(10) Multiemployer pension plan
The Company and certain consolidated subsidiaries participate in a multiemployer plan for which the Company
cannot reasonably calculate the amount of plan assets corresponding to the contributions made by theCompany. Therefore, it is accounted for using the same method as a defined contribution plan.
The contributions to such multi-employer plan were ¥499 million ($4,443 thousand) and ¥510 million for theyears ended June 30, 2017 and 2016, respectively.
a. The funded status of the multi-employer plan as of June 30, 2017 and 2016, was as follows:
Thousands of
U.S. Dollars

Millions of Yen

Plan assets ............................................................
Sum of actuarial liabilities of pension planand minimum actuarial reserve ........................
Net balance ...................................................

2017¥193,485

2016¥198,2942017$1,722,930

190,067¥3,418

198,590¥(296)

1,692,494$30,436

The net balance above is mainly the result of past service cost of ¥(19,253) million ($(171,443) thousand) for2017 and ¥(20,812) million for 2016, surplus of ¥2,155 million ($19,190 thousand) for 2017, and ¥14,356
million for 2016, and a deficiency brought forward of ¥20,516 million ($182,689 thousand) for 2017 and ¥6,160
million for 2016. Past service cost under the plan is amortized on a straight-line basis over 15 years, and thespecial contributions of ¥354 million ($3,152 thousand) for 2017 and ¥280 million for 2016, which are utilized
for such amortization, were expensed in the consolidated statement of income and comprehensive income of
the Group.
b. The contribution ratio of the Group in the multi-employer plan for the years ended June 30, 2017 and 2016,
was as follows:2017
The contribution ratio of the Group in
the multi-employer plan ...................................

13.1%

The ratios above do not represent the actual actuarial liability ratio of the Group.

30

2016
13.1%

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

31

14. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, inthe aggregate, resulted in normal effective statutory tax rates of approximately 30.9% and 33.1% for the years
ended June 30, 2017 and 2016, respectively.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at June 30, 2017 and 2016, are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2017
Deferred tax assets:
Investment in subsidiaries ...................................
Accrued bonuses ..................................................
Net defined benefit liability .................................
Liability for retirement benefits for directors ....
Allowance for anticipated project loss ................
Overdepreciation ..................................................
Loss on impairment of long-lived assets ............
Head office transfer cost .....................................
Deferred relief on pension contributions ...........
Tax loss carryforwards .........................................
Other .....................................................................
Less valuation allowance .....................................
Total .................................................................

2017

2016
¥47
889
190
15
17
139
140

¥45
656
801
15
18
494
60

39
21
466
(276)
1,687

174

29
66

387
(489)
2,256

2017

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

32

2017

2016

760

347
187
4,149
(2,458)15,022Thousands of
U.S. Dollars

Millions of Yen

Deferred tax liabilities:
Reserve for deferred gains on saleof property ..........................................................
Unrealized gain on available-for-salesecurities .............................................................
The valuation differencesby using the full fair value method ...................
Other .....................................................................
Total .................................................................

$419
7,916
1,692
134
151
1,238
1,247

793

451

6,768
4,016

8
2,163

1,182
49
2,024

8,406
71
19,261¥(476)¥232$(4,239)944

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in theaccompanying consolidated statement of income and comprehensive income for the year ended June 30, 2017,with the corresponding figures for 2016, is as follows:

Normal effective statutory tax rate .......................
Per capita levy of local tax .....................................
Expenses not deductible for tax purposes ............
Foreign income tax ..................................................
Tax credit .................................................................
Valuation allowance .................................................
Amortization of goodwill ..........................................
Income taxes for prior periods ..............................
Effect of reduction of income tax rates ondeferred tax assets and deferred tax liabilities ...
Lower income tax rates
applicable to certain foreign subsidiaries ...........
Other – net ..............................................................
Actual effective tax rate .........................................

2017
30.9%
2.6
4.2
9.2
(5.2)
(4.3)
3.9
(1.7)

2016
33.1%
3.4
2.0
13.6
(2.9)
1.5
2.5

0.1

1.2

(1.8)
(1.9)
36.0%

(0.4)
54.0%

At June 30, 2017, certain subsidiaries have tax loss carryforwards aggregating approximately ¥306 million($2,725 thousand) which are available to be offset against taxable income of such subsidiaries in future years.
These tax loss carryforwards, if not utilized, will expire as follows:
Millions of Yen

June 30, 2019 ..........................................................
June 30, 2020 ..........................................................
June 30, 2023 ..........................................................
June 30, 2025 ..........................................................
Total .................................................................

Thousands of
U.S. Dollars

¥35
65
39
167
¥306

$312
579
347
1,487
$2,725

15. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥700 million ($6,233 thousand) and ¥568 million forthe years ended June 30, 2017 and 2016, respectively.

16. LEASES
LesseeThe minimum rental commitments under noncancelable operating leases at June 30, 2017 and 2016, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2017
¥961
3,016
¥3,9772016¥1,042
2,801¥3,843

2017$8,557
26,857$35,41433

17. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The Group uses financial instruments (mainly bank loans) based on its capital financing plan. Cash surpluses, ifany, are invested in low-risk financial assets. Derivatives are used not for speculative purposes, but to manage
exposure to financial risks as described in (2) below. To clarify the accountability for transactions, the Group set
up an investment committee that examines basic principles of transactions and each financial instrument.
(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables, such as trade notes and trade accounts, are exposed to customer credit risk. Receivables in foreign
currencies are exposed to the market risk of fluctuation in foreign currency exchange rates. Marketable andinvestment securities, mainly held-to-maturity securities and equity instruments of customers and suppliers of
the Group, are exposed to the risk of market price fluctuations.
Payment terms of payables, such as trade notes and trade accounts, are less than one year. Long-term debt andobligation under finance leases are principally for the procurement of the funds necessary for investments infacilities and equipment.
Foreign-currency denominated loans are exposed to the market risks from changes in interest rates and foreign
currency exchange rates. A portion of foreign-currency denominated loans is hedged by using interest rate andcurrency swaps as derivative financial instruments. Please see Note 18 for more details about derivatives.
(3) Risk Management for Financial Instruments
Credit Risk Management
Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to
the contractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines,
which include monitoring of payment terms and balances of major customers by each business administration
department to identify the default risk of customers at an early stage. With respect to held-to-maturity financial
investments, the Group manages exposure to credit risk by limiting investments to high-credit rated bonds inaccordance with its internal guidelines.
The maximum credit risk exposure of financial assets is limited to their carrying amounts as of June 30, 2017.
Market risk management
The Group uses interest rate and currency swaps as derivative financial instruments to manage its exposure tofluctuations in foreign exchange rates and interest rates of foreign-currency denominated loans.
Investment securities are managed by monitoring market values and the financial position of issuers on aregular basis.
The basic principles of derivative transactions have been approved by the investment committee based on theinternal guidelines which prescribe the authority and the limits for each transaction by the corporate treasury
department. Reconciliation of the transaction and balances with customers is made, and the transaction data isreported to the chief financial officer on a monthly basis.
Liquidity risk management
Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on its maturity
dates. The Group manages its liquidity risk by concluding commitment line and overdraft contracts, along withadequate financial planning by the corporate treasury department.

34

(4) Concentration of Credit Risk
20.5% of total receivables are from three major customers of the Group as of June 30, 2017.
(5) Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is notavailable, another rational valuation technique is used instead.
(a) Fair value of financial instruments
Millions of Yen

June 30, 2017

Carrying Amount

Fair Value

Unrealized
Gain/Loss

Cash and cash equivalents …………………………
Receivables ……………………………………………
Investment securities ………………………………
Total ………………………………………………

¥17,083
18,502
7,747¥43,332¥17,083
18,502
7,747¥43,332¥¥

Long-term debt (Note) ………………………………
Total ………………………………………………

¥23,174¥23,174¥22,992¥22,992¥(182)¥(182)

Derivatives ……………………………………………

¥53

¥53

¥

Millions of Yen

June 30, 2016

Carrying Amount

Fair Value

Cash and cash equivalents ....................................
Receivables ............................................................
Investment securities ............................................
Total ................................................................

¥9,401
18,332
6,004¥33,737¥9,401
18,332
6,004¥33,737

Short-term borrowings ………………………………
Payables ………………………………………………
Total ………………………………………………

¥16,000
6,920¥22,920¥16,000
6,920¥22,920

Unrealized
Gain/Loss

¥

¥
¥
¥

Thousands of U.S. Dollars

June 30, 2017

Carrying Amount

Fair Value

Unrealized
Gain/Loss

Cash and cash equivalents …………………………
Receivables ……………………………………………
Investment securities ………………………………
Total ………………………………………………

$152,119
164,755
68,985$385,859$152,119
164,755
68,985$385,859$$

Long-term debt (Note) ………………………………
Total ………………………………………………

$206,358$206,358$204,737$204,737$(1,621)$(1,621)

Derivatives ……………………………………………

$472

$472

$

Note: Long-term debt includes its current portion, and does not include obligation under finance leases.

35

Cash and cash equivalents, receivables and payables
The carrying values of these financial instruments approximate fair value because of their short maturities.
Investment securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for theequity instruments and at the quoted price obtained from the financial institution for certain debt instruments.
Fair value information for investment securities by classification is included in Note 5.
Long-term debt
The fair value of the “fixed rate” long-term debt is computed by applying a discount rate to the total of theprincipal and interest. The discount interest rate is based on the assumed interest rate if similar new debt wasentered into. The fair value of the “floating rate” long-term debt is assumed as the carrying value because theinterest rate of the debt reflects the current market interest rate and the Company’s credit score is stable.
A portion of the long-term debt qualified for integrated accounting treatment (special treatment andappropriated treatment) for interest rate and currency swaps is calculated by discounting the total amount of
the principal and interest, with the relevant interest rate and currency swaps to which the special integrated
accounting treatment has been applied, based on the reasonably estimated interest rate if similar new debt isentered into.
Derivatives
Fair value information for derivatives is included in Note 18.
The fair value of the derivatives including interest rate and currency swaps under integrated accounting
treatment is included in the fair value of the long-term debt, because the swaps are accounted for as part of thelong-term debt.
(b) Carrying amount of financial instruments whose fair values cannot be reliably determined
Thousands of
U.S. Dollars

Millions of Yen

June 30, 2017 and 2016
Investments in equity instruments that
do not have a quoted market pricein an active market .............................................
Investments in debt instruments that
do not have a quoted market pricein an active market .............................................

2017

2017

2016

¥2,599¥2,137$23,143

¥145

¥145

$1,291

The impairment loss on investments in equity instruments that do not have a quoted market price in an active
market for the year ended June 30, 2017 and 2016, was ¥18 million ($160 thousand) and ¥100 million,
respectively.

36

(6) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen

June 30, 2017
Cash and cash equivalents ...................
Receivables ...........................................
Investment securities
Available-for-sale securities with
contractual maturities .....................
Total ...............................................

Due in one
Year or Less

Due after one Yearthrough five Years

Due after five Years
through ten Years

Due afterten Years¥17,083
18,502¥¥¥

¥35,585

¥

¥

¥

Millions of Yen

June 30, 2016
Cash and cash equivalents ...................
Receivables ...........................................
Investment securities
Available-for-sale securities with
contractual maturities .....................
Total ...............................................

Due in one
Year or Less

Due after one Yearthrough five Years

Due after five Years
through ten Years

Due afterten Years¥9,401
18,333¥¥¥

¥27,734

¥

¥

500
¥500

Thousands of U.S. Dollars

June 30, 2017
Cash and cash equivalents ...................
Receivables ...........................................
Investment securities
Available-for-sale securities with
contractual maturities .....................
Total ...............................................

Due in one
Year or Less

Due after one Yearthrough five Years

Due after five Years
through ten Years

Due afterten Years$152,119
164,755

$

$

$

$316,874

$

$

$

Please see Note 11 for annual maturities of long-term debt.

37

18. DERIVATIVESThe Group uses derivative financial instruments to manage its exposure to fluctuations in foreign exchange rates
and interest rates. The derivatives used by the Group is interest rate and currency swaps.
It is the Group’s policy to use derivatives only for the purpose of reducing market risks associated with liabilities,
and not for trading or speculative purposes.
Because the counterparties to these derivatives are limited to highly reputable domestic banks, the Group does
not anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies which
regulate authorization and credit limit amounts.
Derivative Transactions to Which Hedge Accounting is Not Applied
Millions of Yen

June 30, 2017

Transactions

Interest rate and currency swaps:(fixed rate payment, floating ratereceipt)(Japanese yen payment, U.S. dollars Off-market
receipt)transactions

Contract
AmountDue after
One YearContract
Amount¥5,221¥4,641Fair
Value

Unrealized
Gain

¥53

¥53

Thousands of U.S. Dollars

June 30, 2017

Transactions

Interest rate and currency swaps:(fixed rate payment, floating ratereceipt)(Japanese yen payment, U.S. dollars Off-market
receipt)transactions

Contract
AmountContract
AmountDue after
One Year$46,492$41,327

Fair
Value

Unrealized
Gain

$472

$472

The above transaction was not applicable for the year ended June 30, 2016.
Notes:
1. T he fair value of derivative transactions is measured at the quoted price obtained from the financial
institution.
2. T he contact 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.
Derivative Transactions to Which Hedge Accounting is Applied
Millions of Yen

June 30, 2017
Interest rate and currency
swaps:(fixed rate payment,
floating rate receipt)(Japanese yen payment,
U.S. dollars receipt)

38

Hedge accounting method

Integrated treatment of interest
rate and currency swaps(Special treatment,
Appropriated treatment)

HedgedItem

Contract
AmountContract
AmountDue after
One Year

Fair
Value

Long-term
debt¥3,481¥3,094(Note1)

Thousands of U.S. Dollars

June 30, 2017
Interest rate and currency
swaps:(fixed rate payment,
floating rate receipt)(Japanese yen payment,
U.S. dollars receipt)

HedgedItem

Contract
AmountContract
AmountDue after
One Year

Fair
Value

Long-term
debt$30,997$27,551(Note1)Hedge accounting method

Integrated treatment of interest
rate and currency swaps(Special treatment,
Appropriated treatment)

The above transaction was not applicable for the year ended June 30, 2016.
Notes:
1. The above interest rate and currency swaps which qualify for hedge accounting and meet specific matching
criteria are not remeasured at market value but the differential paid or received under the swap agreements is
recognized and included in interest expense or income. In addition, the fair value of such interest rate andcurrency swaps is included in that of long-term debt.
2. 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.

19. LOSS ON SUPPORT TO SUBSIDIARIES AND ASSOCIATES
Loss on support to subsidiaries and associates for the years ended June 30, 2017 and 2016, consisted of thefollowing:Thousands of
U.S. Dollars

Millions of Yen

June 30, 2017 and 2016
Bad debt expenses ..................................................
Subsidiary support costs .......................................

2017

2016
¥373
60

2017
$3,322534

20. CONTINGENT LIABILITIESAt June 30, 2017, the Group had the following contingent liabilities:
Thousands of
U.S. Dollars

Millions of Yen

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

¥40

$356

On June 19, 2014, Nippon Civic Consulting Engineers Co., Ltd. (“NCC”), a consolidated subsidiary of theCompany, was sued by Osaka Prefecture for damages resulting from a project related to designing a shieldtunnel due to liability for tort. The amount of the damages claimed, which includes a 5% per annum delinquency
charge, was ¥750 million ($6,679 thousand). In addition, Osaka Prefecture expanded its claim to ¥8,643 million($76,963 thousand), which also includes a 5% per annum delinquency charge, by a written petition for theamendment of the claim dated February 29, 2016. NCC has concluded that it did not engage in an illegal act in
the course of the project and intends to contest the claims brought forth by Osaka Prefecture in court.
Due to the court petition by Osaka Prefecture, a decision was made to execute a provisional seizure concerning
the said claims in June 2014. Therefore, in July 2014, NCC deposited the money for release from a provisional
seizure of ¥750 million ($6,679 thousand) with the Legal Affairs Bureau, which is included in other assets underinvestments and other assets in the consolidated balance sheet.

3921. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended June 30, 2017 and 2016, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2017
Unrealized gain (loss) on available-for-salesecurities:
Gains (Losses) arising during the year ...............
Reclassification adjustments to profit or loss ....
Amount before income tax effect ........................
Income tax effect ..................................................
Total .................................................................

2017

2016

¥1,508
(30)
1,478
(452)
¥1,026¥(2,115)(343)(2,458)791¥(1,667)$13,428(267)
13,161(4,025)$9,136¥(1,509)¥(223)$(13,437)

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

(1,509)(223)(13,437)¥(1,509)¥(223)$(13,437)

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

¥1,155
(1)
1,154
(354)
¥800

¥(1,274)(41)(1,315)426¥(889)$10,285(9)10,276(3,152)$7,124

Total other comprehensive income (loss) ........

¥317¥(2,779)$2,823

22. PER SHARE INFORMATIONOn January 1, 2017, the Company effected a share consolidation at a rate of one share for every five sharesbased on the resolution of the 72nd Ordinary General Meeting of Shareholders held on September 29, 2016.

a. Basic net income per share
Basic net income per share figures have been restated to reflect the impact of the share consolidation for theyear ended June 30, 2016. The weighted-average number of shares of common stock for the years ended June30, 2017 and 2016, were 15,410,873 and 15,308,881 respectively after retroactive adjustment.

b. Number of shares and cash dividends per share
Number of common stock and treasury stock as of June 30, 2016, and cash dividends per share for the year
ended June 30, 2016 have not been restated to reflect a share consolidation.
Assuming the share consolidation was effected at the beginning of the year ended June 30, 2016 (July 1, 2015),
shares and per share figures would have been as follows:40

Cash dividends per share applicable to the year ....

2017
¥75.00Common stock issued ............................................
Treasury stock ........................................................

17,331,302 shares
1,891,831 shares

2016¥50.0017,331,302 shares
1,963,228 shares

23. SUBSEQUENT EVENTS
a. Retirement of treasury shares
At the meeting of the Board of Directors held on August 14, 2017, the Company resolved to retire treasury sharesin accordance with the provisions of Article 178 of the Companies Act.
(1) Contents of the Resolution by the Board of Directors for the Retirement of Treasury Shares
1) Type of shares to be retired
Common stock of the Company
2) Total number of shares to be retired
1,436,731 shares
3) Scheduled date for retirement
August 31, 2017
(2) The Total Number of Issued Shares after the above Retirement will be 15,894,571 Shares.

b. Appropriations of Retained Earnings
On August 14, 2017, the following appropriation of retained earnings at June 30, 2017, was resolved by the
Board of Directors:
Millions of Yen

Year-end cash dividends, ¥75 ($0.67) per share....................

¥1,192Thousands of
U.S. Dollars$10,614

The total amount of the dividends above includes ¥34 million ($303 thousand) in dividends on the Company’s
shares owned by the ESOP.

24. SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures” and ASBJ Guidance
No. 20, “Guidance on Accounting Standard for Segment Information Disclosures,” an entity is required to reportfinancial and descriptive information about its reportable segments. Reportable segments are operating
segments or aggregations of operating segments that meet specified criteria. Operating segments arecomponents of an entity about which separate financial information is available, and such information isevaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing
performance. Generally, segment information is required to be reported on the same basis as is used internallyfor evaluating operating segment performance and deciding how to allocate resources to operating segments.
(1) Description of Reportable Segments
The Group’s reportable segments are those for which separate financial information is available and regular
evaluation by the Company’s management is being performed in order to decide how resources are allocatedamong the Group. Therefore, the Group’s reportable segments consist of the Domestic, International, PowerEngineering, Urban & Spatial Development and Real Estate Leasing segments. Domestic consists of consulting
services in public and private sectors related mainly to infrastructure development in Japan. International
consists of consulting services related mainly to development projects funded by Official Development
Assistance (“ODA”). Power Engineering consists of product manufacturing related to power generation and41

distribution systems and engineering services related to construction and maintenance of public and private
electric power facilities. Urban & Spatial Development consists of urban planning and architectural design. Real
Estate Leasing consists of transactions within the Group’s real estate leasing operations.
(2) Methods of Measurement for the Amount of Sales, Profit (Loss), Assets, Liabilities and Other Items for Each
Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “Summary of
Significant Accounting Policies.”(3) Information about Sales, Profit (Loss), Assets, Liabilities and Other Items
Millions of Yen

2017
Reportable Segment

Sales
Sales to customers ........
Intersegment sales ........
Total ....................
Segment profit (loss) .....
Segment assets .............
Other:
Depreciation ................

Power
Urban & Spatial Real EstateEngineering Development
Leasing

Total

Others

Total

Domestic

International¥43,516462¥43,978¥24,492
18¥24,510¥17,578236¥17,814¥14,34740¥14,387¥474 ¥100,407
150
906¥624 ¥101,313

3,300
19,307

1,772
22,395

2,650
7,869

58
22,396

401
5,776

8,181
77,743(2,213)44,451

5,968
122,194

158

72

243

760

39

1,272

448

1,720

¥931 ¥101,338
3909¥934 ¥102,247

Reconciliations Consolidated¥¥101,338(909)¥(909) ¥101,338(10)(8,328)

5,958
113,866
1,720

623

623

4

47

112

316

428

(263)

165

137

53

155

397

61

458

(263)

195

114

218

151

720

682

1,402

Amortization of goodwill ...
Interest income ............

22

39

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

52

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

237

623

623

1,402

Millions of Yen

2016
Reportable Segment

Sales
Sales to customers ........
Intersegment sales ........
Total ....................
Segment profit (loss) .....
Segment assets .............
Other:
Depreciation ................

Power
Urban & Spatial Real EstateEngineering Development
Leasing

Domestic

International¥40,778
408¥41,186¥22,07113¥22,084¥17,523
248¥17,771

2,965
18,893382
19,102

3,024
8,990

163

72

252

¥

Total

Others

Total

Reconciliations Consolidated¥80,887793¥81,680

¥979
3
¥982

¥81,866
796¥82,662¥(796)¥(796)¥81,866

¥

¥515
124
¥639

23,887

385
4,192

6,756
75,064(2,373)49,033

4,383
124,097(18)(23,107)

4,365
100,990

58

545

723

1,268

¥81,866

1,268

Amortization of goodwill ...
Interest income ............
Interest expense ............
Increase in property, plantand intangible assets .......

42

21

25

4

50

331

381

(267)

114

44

137

57

238

88

326

(267)

59

82

65

313

462

750

1,212

2

1,212

Thousands of U.S. Dollars

2017
Reportable Segment
Total

Reconciliations Consolidated$902,386
8,094$910,480$$902,386(8,094)$(8,094) $902,386(19,707)53,143395,823 1,088,103(89)
53,054(74,158) 1,013,945

15,31615,316

OthersDomestic

International

Power
Urban & Spatial Real EstateEngineering Development
Leasing

Sales
Sales to customers ........ $387,498
4,114
Intersegment sales ........
Total .................... $391,612$218,094
160$218,254$156,527
2,102$158,629$127,756
356$128,112$4,221
1,336$5,557$894,096
8,068$902,164$8,29026$8,316

Segment profit (loss) .....

Total

Segment assets .............

29,386
171,923

15,779199,421

23,59870,071

516
199,431

3,571
51,43472,850692,280

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

1,407

641

2,164

6,768

347

11,327

Amortization of goodwill ...

5,548

5,548

3,989

5,548

5,548

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

196

347

36

418

997

2,814

3,811

(2,342)

1,469

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

463

1,220

472

1,380

3,535

543

4,078

(2,342)

1,736

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

2,110

1,015

1,941

1,345

6,411

6,073

12,484

12,484Note:
The differences between total amounts for reportable segments and amounts in the consolidated balance sheets
or consolidated statements of income and comprehensive income and the main details of these differences,which are related to difference adjustments at June 30, 2017 and 2016, were as follows:
Net sales
Thousands of
U.S. Dollars

Millions of Yen

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

2017
¥101,313
934
(909)

2016
¥81,680
982
(796)

2017
$902,164
8,316(8,094)¥101,338¥81,866$902,386

ProfitThousands of
U.S. Dollars

Millions of Yen

Reportable segment total .......................................
Other loss ................................................................
Elimination of intersegment transactions ............
Nonoperating items ...............................................
Operating income in the consolidated
statements of income andcomprehensive income ...............................

2017¥8,181(2,213)
(10)
(493)

2016
¥6,756(2,373)
(18)
358

2017
$72,850(19,707)(89)(4,390)¥5,465¥4,723$48,66443

Assets
Thousands of
U.S. Dollars

Millions of Yen

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

2017¥77,743
44,451(8,328)

2016¥75,064
49,033(23,107)2017$692,280
395,823(74,158)¥113,866¥100,990$1,013,945

Other items
Millions of Yen

2017
Reportable
Segment

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

OthersReconciliations¥1,272
623
112
397

¥448

720

682

316
61

¥(263)
(263)

Total

¥1,720
623
165
195
1,402

Millions of Yen

2016
Reportable
Segment

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

OthersReconciliations

¥545

¥723

50
238

331
88

462

750

Total

¥1,268¥(267)
(267)

114
59
1,212

Thousands of U.S. Dollars

2017
Reportable
Segment

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

Others$11,327
5,548
997
3,535

$3,989

6,411

6,073

2,814
543

Reconciliations$(2,342)(2,342)

Total$15,316
5,548
1,469
1,736
12,484Note:
The main reconciling items of interest income and expense are eliminations of corporate interest in accounting
for control.

44

The information about geographical areas at June 30, 2017, was as follows:
Sales
Millions of Yen

2017
Japan

Asia

¥60,583¥15,660

Middle East

¥2,168Latin
America

Africa¥3,943¥5,291

EuropeOther¥13,340

¥353

Total

¥101,338

Thousands of U.S. Dollars

2017
Japan

Asia

$539,475$139,448

Middle East

$19,305

Africa$35,111

Latin
America$47,115

EuropeOther$118,789$3,143

Total$902,386

Note:
Sales are classified by country or region based on the location of customers.
The information about major customers at June 30, 2017, was as follows:
Millions of Yen

2017
Name of Customers

Ministry of Land, Infrastructure, Transport and Tourism ...
Japan International Cooperation Agency ..................................
TEPCO Power Grid, Incorporated ...............................................

Sales

Related Segment Name

¥14,671
9,582
9,148

Domestic
International
Power Engineering

Thousands of U.S. Dollars

2017
Name of Customers

Ministry of Land, Infrastructure, Transport and Tourism ...
Japan International Cooperation Agency ..................................
TEPCO Power Grid, Incorporated ...............................................

Sales$130,641
85,32581,460Related Segment Name

Domestic
International
Power Engineering

45

The information about goodwill at June 30, 2017, was as follows:
Goodwill
Millions of Yen

2017
Reportable Segment

Amortization of goodwill ……
Goodwill at June 30, 2017 ……

Domestic

International

¥

¥

Power
Urban & Spatial
Engineering Development

¥

¥623
8,686

Real Estate
Leasing

¥

Total

¥623
8,686

OthersElimination/
Corporate¥¥

OthersElimination/
Corporate

Consolidated

¥623
8,686

Thousands of U.S. Dollars

2017
Reportable Segment
Domestic

Amortization of goodwill ……
Goodwill at June 30, 2017 ……

International

$

$

Power
Urban & Spatial
Engineering Development$

$5,54877,346

Real Estate
Leasing$

Total$5,54877,346$$Consolidated$5,54877,346The information about loss on impairment of long-lived assets at June 30, 2017, was as follows:
Loss on impairment of long-lived assets
Millions of Yen

2017
Reportable Segment

Loss on impairment oflong-lived assets ……………

Domestic

International

¥

¥

Power
Urban & Spatial
Engineering Development¥¥Real Estate
Leasing

¥48

Total

¥48

Others¥178

Elimination/
Corporate¥Consolidated¥226

Thousands of U.S. Dollars

2017
Reportable Segment

Loss on impairment oflong-lived assets ……………

46

Domestic

International

$

$

Power
Urban & Spatial
Engineering Development$$Real Estate
Leasing

$427

Total

$427

OthersElimination/
Corporate

Consolidated$1,585$

$2,012

47

Nonconsolidated Balance Sheet
Nippon Koei Co., Ltd.
June 30, 2017

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS

2017

2017

2016

CURRENT ASSETS:¥11,637¥3,241$103,624

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

16

33

142

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

10,101

10,081

89,947

Subsidiaries and associated companies ...........

123

597

1,095

Other ...................................................................

160

420

1,425

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

(1)

(3)

(9)

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

1,672

2,060

14,889Inventories (Note 4) .............................................

7,723

8,284

68,771

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

841

603

7,489

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

2,206

1,892

19,644

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

34,47827,208307,017

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

15,45815,219137,649

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

13,881

16,423

123,606

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

2,328

2,355

20,730Furniture and fixtures .........................................

2,058

2,180

18,326

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

253

73

2,253

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

116

122

1,034

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

34,09436,372

303,598

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

(13,401)(15,590)(119,333)

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

20,693

20,782

184,265

Investment securities ...........................................

8,553

6,320

76,162

Investments in and advances tosubsidiaries and associated companies (Note 7) .....

26,896

25,696

239,501

Other assets ..........................................................

5,808

3,820

51,720Allowance for doubtful accounts ........................

(152)

(152)

(1,354)

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

41,10535,684

366,029

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

¥96,276¥83,674$857,311

Cash and cash equivalents ...................................
Receivables:

PROPERTY, PLANT AND
EQUIPMENT (Note 5 and 6):

INVESTMENTS AND OTHER ASSETS:

48

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

LIABILITIES AND EQUITY

2017

2017

2016

CURRENT LIABILITIES:
Short‑term borrowings (Note 8) .........................
Current portion of long-term debt (Note 8) .......
Payables:Trade notes .........................................................
Trade accounts ...................................................
Subsidiaries and associated companies ...........
Other ...................................................................
Income taxes payable ...........................................
Advances received ................................................
Accrued bonuses ..................................................
Allowance for anticipated project loss ................
Other current liabilities .......................................
Total current liabilities ......................................

¥5,6501,778¥19,875
291$50,312
15,833

309
2,357
364
1,363
560
5,526
2,192
8
1,935
22,042

424
2,205
543
1,378
245
4,611
1,582
10
1,742
32,906

2,752
20,9883,241
12,137
4,987
49,207
19,51971
17,231
196,278

LONG-TERM LIABILITIES:Long-term debt (Note 8) ......................................
Liability for retirement benefits (Note 2.h) ........
Allowance for environmental measures .............
Deferred tax liabilities (Note 10) .........................
Other long-term liabilities ...................................
Total long-term liabilities ..................................

21,442
143
25
1,599
232
23,441

1,290
161
25
938
241
2,655

190,935
1,273
223
14,2392,066
208,736

7,393

7,393

65,833

6,093
835

6,093
115

54,256
7,435

1,546
37,486

1,546
35,956

13,767
333,802

COMMITMENTS AND CONTINGENT
LIABILITIES (Note 12)
EQUITY (Notes 9, 13.b and 14):
Common stock;authorized, 38,000,000 shares in 2017
and 189,580,000 shares in 2016;
issued, 17,331,302 shares in 2017and 86,656,510 shares in 2016 ...........................
Capital surplus:
Additional paid-in capital ..................................
Other capital surplus .........................................
Retained earnings:
Legal reserve ......................................................
Retained earnings - unappropriated .................
Unrealized gain on
available-for-sale securities ..............................
Treasury stock—at cost
1,891,831 shares in 2017
and 9,816,140 shares in 2016 ...........................
Total equity .........................................................

977

(40)

8,700

(3,537)50,793(2,950)48,113(31,496)452,297

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

¥96,276¥83,674$857,311

See notes to nonconsolidated financial statements.

49

N o n conso lida ted S t atemen t o f I n c o me
Nippon Koei Co., Ltd.
Year ended June 30, 2017

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2017

2017

2016

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

¥61,734¥60,327$549,724

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

44,384
17,35043,84816,479395,227
154,497

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ......................
Operating income ............................................

14,3582,992

13,203
3,276

127,854
26,643

616
(208)
60

569
(73)
(622)

5,485
(1,852)534

OTHER INCOME (EXPENSES):Interest and dividend income ..............................
Interest expense ...................................................
Foreign currency exchange gain (loss) ...............
Loss on impairment oflong-lived assets (Note 5) ...................................
Head office transfer cost .....................................
Loss on support to subsidiaries andassociates (Note 11) ...........................................
Other-net ...............................................................
Other income (expenses)-net ...........................

(1,995)

(224)

(106)

(237)

(433)
361
66

302
(61)

3,216
588

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

3,058

3,215

27,231

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

781
(25)
756

863
674
1,537

6,955
(223)
6,732

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

¥2,302¥1,678$20,499(3,856)

U.S. Dollars(Note 1)Yen

PER SHARE OF COMMON STOCK (Note 2.t and 13):
Basic net income ..................................................
Cash dividends applicable to the year ................
See notes to nonconsolidated financial statements.

50¥149.38
75.00

(944)

¥109.62
10.00

$1.33
0.67

N o n conso lida ted S t atemen t o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd.
Year ended June 30, 2017

Thousands

Millions of Yen

Outstanding
Number of
Shares ofCommonStock

BALANCE, JULY 1, 2015 ................

76,286

Capital Surplus

Retained Earnings

Unrealized
Gain (loss)

CommonStock

Additional
Paid-in
Capital¥7,393¥6,093on
Other Capital
Surplus

¥115

Legal
Reserve¥1,546

Available-forUnappropriatedsale Securities¥35,050¥1,629Treasury

Total

Stock

Equity¥(3,135)¥48,691

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

1,678

1,678

Cash dividends, ¥10.00 per share ...

(772)

(772)

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

(21)

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

575

(9)
194
(1,669)Net change in the year ....................
BALANCE, JUNE 30, 2016 .............

76,840

7,393

6,093

115

1,546

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

(40)

(772)
330

Share Consolidation .......................

(61,669)720(1,456)(1,456)

869

1,589

¥(3,537)¥50,793

Treasury
Stock

Total
Equity1,017
15,439¥7,393¥6,093¥835¥1,546

48,113(772)

Net change in the year ....................
BALANCE, JUNE 30, 2017 .............

(2,950)

2,302

(62)

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

194(1,669)2,302

Cash dividends, ¥75.00 per share .....
Purchase of treasury stock .............

35,956(9)¥37,486

¥977

1,017

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

Retained Earnings

CommonStock

BALANCE, JUNE 30, 2016 .............

$65,833

Additional
Paid-in
Capital

Other
CapitalSurplus$54,256$1,025

Legal
Reserve

UnappropriatedUnrealized
Gain (loss)on
Available-forsale Securities$13,767 $320,178$(356) $(26,269) $428,434

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

20,49920,499Cash dividends, $0.67 per share ....

(6,875)(6,875)Purchase of treasury stock .............
Disposal of treasury stock ..............

6,410(12,965)(12,965)

7,738

14,148

Share Consolidation .......................
9,056

Net change in the year ....................
BALANCE, JUNE 30, 2017 .............

$65,833$54,256$7,435$13,767 $333,802

9,056$8,700 $(31,496) $452,297

See notes to nonconsolidated financial statements.

51

N o tes to No nco nso lid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd.
Year ended June 30, 2017

1.	B ASIS OF PRESENTATION OF NONCONSOLIDATED FINANCIAL
STATEMENTS
The accompanying nonconsolidated financial statements have been prepared from the accounts maintained by
Nippon Koei Co., Ltd. (the “Company”) in accordance with the provisions set forth in the Japanese Financial
Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting
principles generally accepted in Japan, which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards.
As consolidated statements of cash flows and certain disclosures are presented in the consolidated financial
statements of the Company, nonconsolidated statements of cash flows and certain disclosures are not presented
herein in accordance with accounting principles generally accepted in Japan.
Effective for the year ended March 31, 2014, the Japanese Financial Instruments and Exchange Act and its
related accounting regulations were amended to allow an entity to not disclose certain designated footnote
information in its nonconsolidated financial statements if the entity prepares and discloses consolidated
financial statements. Accordingly, the Company has omitted disclosure of certain footnote information in theaccompanying nonconsolidated financial statements.
In preparing these nonconsolidated financial statements, certain reclassifications and rearrangements have been
made to the Company’s nonconsolidated financial statements issued domestically in order to present them in aform which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in
the 2016 nonconsolidated financial statements to conform to the classifications used in 2017.
The nonconsolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and have been made at the rate of ¥112.30 to $1,
the approximate rate of exchange at June 30, 2017. 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. Nonconsolidation — The nonconsolidated financial statements do not include the accounts of subsidiaries.
Investments in subsidiaries and associated companies are stated at cost.

b. Cash Equivalents — Cash equivalents are short-term investments that are readily convertible into cash andexposed to insignificant risk of changes in value.

Cash equivalents include time deposits and investment trusts, both of which mature or become due within
three months of the date of acquisition.

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

d. Investment Securities — Investment securities are classified and accounted for, depending on
management’s intent, as follows:(1) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent andability to hold to maturity, are reported at amortized cost; (2) available-for-sale securities, which are 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; and (3) investments in subsidiaries and associatedcompanies are reported at cost.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For
other-than-temporary declines in fair value, investment securities are reduced to net realizable value by acharge to 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, structures acquired after April 1, 2016, and lease assets, as well as other equipment for rent.

52

The range of useful lives is principally from 3 to 50 years for buildings and structures, from 2 to 15 years formachinery and equipment, and from 2 to 20 years for furniture and fixtures. The useful lives for lease assets
are the terms of the respective leases.

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

g. Allowance for Doubtful Accounts — The allowance for doubtful accounts is stated in amounts

considered to be appropriate based on the Company’s past credit loss experience and an evaluation ofpotential losses in the receivables outstanding.

h. Retirement and Pension Plans — The Company has a contributory defined benefit pension plan andunfunded retirement benefit plan for the benefit of its employees.

Effective April 1, 2000, the Company adopted a new accounting standard for employees’ retirement benefits
and accounted for the liability for retirement benefits based on the projected benefit obligations and plan
assets at the balance sheet date. The projected benefit obligations are attributed to periods on a straight-line
basis. Actuarial gains and losses are amortized on a straight-line basis over 13 years within the averageremaining service period. Past service costs are amortized on a straight-line basis over 13 years within the
average remaining service period. Accounting treatments for unrecognized actuarial gains and losses andunrecognized past service costs in the nonconsolidated financial statements are different from those in the
consolidated financial statements.
Hitherto, retirement benefits for directors were provided at the amount that would be required if all directors
retired at the balance sheet date. However, the Company abolished benefit pension plans for directors. Thebalance in the nonconsolidated balance sheet is the estimated amount for directors who have belonged to theCompany since when the plans were effective. Such amount is included in liability for retirement benefits inthe nonconsolidated balance sheets for the years ended June 30, 2017 and 2016, and is ¥14 million ($125
thousand) and ¥14 million, respectively.

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

j. Asset Retirement Obligations —An asset retirement obligation is recorded for a legal obligation imposed

either by law or contract that results from the acquisition, construction, development and normal operationof a tangible fixed asset and is associated with the retirement of such tangible fixed asset. The asset
retirement obligation is recognized as the sum of the discounted cash flows required for the future asset
retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be
made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the asset
retirement obligation is incurred, the liability should be recognized when a reasonable estimate of the asset
retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation,
an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by theamount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation
over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period.
Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash flows arereflected as an adjustment to the carrying amount of the liability and the capitalized amount of the related
asset retirement cost.

k. Employee Stock Ownership Plan —In accordance with the PITF No. 30, “Practical Solution on

Transactions of Delivering the Company’s Own Stock to Employees etc. through Trusts,” upon the transfer oftreasury stock to the employee stockownership trust (the “Trust”) by the entity, any difference between thebook value and fair value of the treasury stock shall be recorded in capital surplus. At year-end, the Company
records (1) the Company stock held by the Trust as treasury stock in equity, (2) all other assets and liabilitiesof the Trust on a line-by-line basis, and (3) a liability/asset for the net of (i) any gain or loss on delivery of thestock by the Trust to the employee shareholding association, (ii) dividends received from the entity for thestock held by the Trust, and (iii) any expenses relating to the Trust.

53

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

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

o. Allowance for Environmental Measures — The Company has made a provision for the treatment of

Polychlorinated Biphenyl (“PCB”) Wastes based on the Act on Special Measures concerning Promotion of
Proper Treatment of PCB Wastes.

p. Income Taxes — The provision for income taxes is computed based on the pretax income included in thenonconsolidated statement 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 income tax rates to the temporary differences.
The Company applied ASBJ Guidance No. 26, “Guidance on Recoverability of Deferred Tax Assets,” effective
April 1, 2016. There was no impact from this for the year ended June 30, 2017.

q. 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 thenonconsolidated balance sheet date. The foreign exchange gains and losses from translation are recognizedin the nonconsolidated statement of income.

r. Revenue Recognition — If the outcome of a construction contract can be estimated reliably, the contract
revenue is recognized by the percentage-of-completion method, which is measured by reference to thepercentage of total cost incurred to date to estimated total cost.

All other construction projects, except the aforementioned, are recorded using the completed-contract
method (including the partially completed-contract method).

s. Derivatives and Hedging Activities — The Company uses derivative financial instruments to manage its
exposure to fluctuations in foreign exchange. Interest rate and currency swap are utilized by the Company toreduce its exposure to reduce the risks of foreign currency exchange rates and interest rates. The Company
does not enter into derivatives for trading or speculative purposes.

Derivative financial instruments are classified and accounted for as follows: (a) all derivatives are recognized
as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions arerecognized in the nonconsolidated statement of income; (b) for derivatives used for hedging purposes, if
derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging
instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedgedtransactions.

54

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

t. Per Share Information — Basic net income per share is computed by dividing net income attributable toshareholders of common stock with the weighted-average number of shares of common stock outstanding
for the period.

Diluted net income per share of common stock is not disclosed because the Company has nothing that might
dilute the per share information for the years ended June 30, 2017 and 2016.
Cash dividends per share presented in the accompanying nonconsolidated statement of income are dividends
applicable to the respective years, including dividends to be paid after the end of the fiscal year.
On January 1, 2017, the Company effected a share consolidation at a rate of one share for every five commonshares based on the resolution of the 72nd Ordinary General Meeting of Shareholders held on September 29,
2016. To provide basic net income per share figures on a basis comparable to the year ended June 30, 2017,
the weighted-average number of shares of common stock has been restated to reflect the impact of the shareconsolidation for prior years.
On the other hand, number of common stock and treasury stock as of June 30, 2016, and cash dividends per
share for the year ended June 30, 2016 have not been restated to reflect a share consolidation.

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

3. CHANGE IN PRESENTATION“Gain on sales of investment securities” (¥30 million ($267 thousand) in the current fiscal year and ¥342 million
in the previous fiscal year), which was presented separately in the non-consolidated statement of income in theprevious fiscal year, is included in “Other Income (expenses) — Other net” due to its decreased materiality.

55

4. INVENTORIESInventories at June 30, 2017 and 2016, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

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

2017¥7,469254¥7,723

2016¥7,938346¥8,284

2017$66,509
2,262$68,771

5. LONG-LIVED ASSETSThe Company reviewed its long-lived assets for impairment as of June 30, 2017. As a result, the Company
recognized an impairment loss of ¥224 million ($1,995 thousand) as loss on impairment of long-lived assets for
assets to be disposed and idle assets. The carrying amount of the assets to be disposed were written down to therecoverable amount, which is zero, because they are to be demolished for redevelopment. The carrying amountof the idle assets were written down to the memorandum value because future cash flows are not expected. No
impairment loss was recognized in 2016.

6. REDUCTION ENTRY
In the case of the acquisition expenses of the Company that have been subsidized by the national government,
the amount of such subsidies is offset against the acquisition cost of the corresponding property, plant andequipment.
The amount of reduction entry by accounts under property, plant and equipment at June 30, 2017 and 2016, was
as follows:
Thousands of
U.S. Dollars

Millions of Yen

2017
Buildings and structures .......................................
Machinery and equipment ....................................
Total .................................................................

2017

2016
¥19
167
¥186

¥19
167
¥186

$169
1,487
$1,656

7.	INVESTMENTS IN AND ADVANCES TO SUBSIDIARIES AND
ASSOCIATED COMPANIESInvestments in and advances to subsidiaries and associated companies as of June 30, 2017 and 2016, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2017¥24,456
2,440¥26,8962016¥23,648
2,048¥25,6962017$217,774
21,727$239,501

The value of the investment securities of subsidiaries and associated companies is measured at the originalacquisition costs, as their fair value cannot be reliably determined at June 30, 2017, since market value andestimated future cash flows are not available.

56

8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at June 30, 2017 and 2016, consisted of loans from consolidated subsidiaries. The
annual interest rates applicable to the short-term borrowings ranged from 0.524% to 0.684% and 0.474% to0.684% at June 30, 2017 and 2016, respectively.
Long-term debt at June 30, 2017 and 2016, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2017
Unsecured loans from banks due seriallyto 2026 with interest rates ranging from0.250% to 1.988% .................................................
Obligation under finance leases ............................
Total .................................................................
Less current portion ..............................................
Long-term debt, less current portion .........

2017

2016

¥23,174
46
23,220(1,778)¥21,442¥1,526
55
1,581
(291)
¥1,290$206,358410
206,768(15,833)$190,935

Annual maturities of long-term debt at June 30, 2017, for the five years and thereafter were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Years Ending June 30

2018 .........................................................
2019 .........................................................
2020 .........................................................
2021 .........................................................
2022 .........................................................
2023 and thereafter .................................
Total ..................................................

Long-Term Debt

Lease Obligations

Long-Term Debt

Lease Obligations¥1,760
2,060
1,983
2,186
6,611
8,574
¥23,174

¥18
12
9
5

$15,673
18,344
17,65819,46658,86976,348$206,358

$160
107
80
45

2
0

¥46

18
0

$410

The Company and five financial institutions have concluded overdraft contracts and a commitment line contract bysyndicated loan over three years. (During the fiscal year ended June 30, 2016, the Company had concluded a commitmentline with a financial institution in order to procure the funds for the acquisition of stock of BDP HOLDINGS LIMITED).
These commitment line contracts included restrictive financial covenants for each financial institution.

57

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

5810. INCOME TAXESThe Company is subject to Japanese national and local income taxes which, in the aggregate, resulted in normal
effective statutory tax rates of approximately 30.9% and 33.1% for the years ended June 30, 2017 and 2016,
respectively.
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at June30, 2017 and 2016, are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2017
Deferred tax assets:
Investment in subsidiaries ...................................
Allowance for doubtful accounts ........................
Accrued bonuses ..................................................
Liability for retirement benefits for employees .....
Liability for retirement benefits for directors ....
Allowance for anticipated project loss ................
Unrealized loss on available-for-sale securities ...
Overdepreciation ..................................................
Loss on impairment of long-lived assets ............
Head office transfer cost .....................................
Other .....................................................................
Less valuation allowance .....................................
Total .................................................................

2017

2016

¥356
47
649
40

¥354
48
463
45
4
3
16
355
48
29
208
(705)
868

4

2
43
117
251
(475)
1,034

760

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

431
597
4
1,792
¥(758)

2,234(4,230)
9,207

2017

2016

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

383
1,042

Thousands of
U.S. Dollars

Millions of Yen

2017$3,170
419
5,779
356
36
18

793

6,768

362
48
1,203
¥(335)

3,838
5,316
35
15,957$(6,750)59

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in theaccompanying nonconsolidated statement of income for the year ended June 30, 2017, with the corresponding
figures for 2016, is as follows:

Normal effective statutory tax rate .......................
Per capita levy of local tax .....................................
Expenses not deductible for tax purposes ............
Foreign income tax ................................................
Valuation allowance ...............................................
Special Tax Credit ..................................................
Income taxes for prior periods ..............................
Income not included for tax purposes ..................
Effect of reduction of income tax rates ondeferred tax assets and deferred tax liabilities .....
Other – net ..............................................................
Actual effective tax rate .........................................

2017
30.9%
2.7
6.5
8.0
(7.5)
(7.7)
(2.9)
(4.7)

2016
33.1%
2.6
2.2
8.6
3.4
(3.6)
3.2
(2.3)
(0.7)
1.3
47.8%

(0.6)
24.7%

11. LOSS ON SUPPORT TO SUBSIDIARIES AND ASSOCIATES
Loss on support to subsidiaries and associates for the years ended June 30, 2017 and 2016, consisted of thefollowing:Thousands of
U.S. Dollars

Millions of Yen

June 30, 2017 and 2016
Bad debt expenses ..................................................
Subsidiary support costs .......................................

2017

2017
$3,322
534

2016
¥373
60

12. CONTINGENT LIABILITIESAt June 30, 2017, the Company had the following contingent liabilities:
Millions of Yen

Guarantees of bank loans related to employees ..................................
Refundment bonds of subsidiaries ......................................................
Performance bond of a subsidiary .......................................................

60

¥40
138
48

Thousands of
U.S. Dollars

$356
1,229
427

13. PER SHARE INFORMATIONOn January 1, 2017, the Company effected a share consolidation at a rate of one share for every five commonshares based on the resolution of the 72nd Ordinary General Meeting of Shareholders held on September 29,
2016.

a. Basic net income per share

Basic net income per share figures has been restated to reflect the impact of the share consolidation for theyear ended June 30, 2016. The weighted-average number of shares of common stock for the years ended June30, 2017 and 2016, were 15,410,873 and 15,308,881 respectively after retroactive adjustments.

b. Number of shares and cash dividends per share

Number of common stock and treasury stock as of June 30, 2016, and cash dividends per share for the year
ended June 30, 2016 have not been restated to reflect the share consolidation.
Assuming the share consolidation was effected at the beginning of the year ended June 30, 2016 (July 1, 2015),
shares and per share figures would have been as follows:

Cash dividends per share applicable to the year ....

2017
¥75.00Common stock issued ............................................
Treasury stock ........................................................

17,331,302 shares
1,891,831 shares

2016¥50.0017,331,302 shares
1,963,228 shares

61

14. SUBSEQUENT EVENTS
a. Retirement of treasury shares
At the meeting of the Board of Directors held on August 14, 2017, the Company resolved to retire treasury sharesin accordance with the provisions of Article 178 of the Companies Act.
(1) Contents of the Resolution by the Board of Directors for the Retirement of Treasury Shares
1) Type of shares to be retired
Common stock of the Company
2) Total number of shares to be retired
1,436,731 shares
3) Scheduled date for retirement
August 31, 2017
(2) The Total Number of Shares Issued after the above Retirement will be 15,894,571 Shares.

b. Appropriations of Retained Earnings
On August 14, 2017, the following appropriation of retained earnings at June 30, 2017, was resolved by the
Board of Directors:
Millions of Yen

Year-end cash dividends, ¥75 ($0.67) per share ...................

¥1,192Thousands of
U.S. Dollars$10,614

The total amount of the dividends above includes ¥34 million ($303 thousand) in dividends on the Company’s
shares owned by “ESOP”.

62

63

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

Stock Information
Shares authorized

38,000,000

Shares issued

17,331,302

Stockholders of minimum tradable stock unit

4,877

As of June 30, 2017

Major Shareholders

Director and President:
Ryuichi Arimoto*Share owned

Percentage of
total owned

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

739,852

4.27

The Koei Employees’
Stockholders Association

735,815

4.25

Japan Trustee Services Bank,
Ltd. (Trust Account)

725,300

4.18

Meiji Yasuda Life Insurance

705,904

4.07

Mizuho Securities Co.,Ltd.

600,000

3.46

The Master Trust Bank ofJapan, Ltd. (Trust Account)

537,600

3.10

Director:
Hiizu Ichikawa (Outside)
Kazumasa Kusaka (Outside)

GOVERNMENT OF NORWAY

522,878

3.02

Trust & Custody Services
Bank, Ltd. (Trust Account E)

455,100

2.63

Audit & Supervisory Board Member:
Toshiaki Shimizu
Izumi Arai (Outside)
Yoshiko Koizumi (Outside)

Mizuho Bank, Ltd.

382,126

2.20

Tsukishima Kikai Co.,Ltd368,600

2.13

Director and Senior Managing Executive Officer:
Hiroyuki Akiyoshi*
Director and Managing Executive Officer:
Takayasu Tsuyusaki
Haruhiko Kanai
Director and Executive Officer:
Hideyuki Sakunaka
Hiroaki Shinya
Yasushi Hirusaki

As of June 30, 2017

Senior Managing Executive Officer:
Takashi Karasaki
Yoshikimi Inoue
Masanao Nishimura
Takashi Seki
Managing Executive Officer:
Haruyoshi Takura
Hiroyuki Kasahara
Shuichi Ueda
Executive Officer:
Masanobu Sakamoto
Yasushi Sugo
Noriaki Yoshida
Kevin Tynes
Akimitsu Arai
Hitoshi Nagasaki
Hiroshi Matsuda
Toshikazu Kambara
Hiroshi Yokota
Hiroyuki Yamate
Ken Nishino
Noriyuki Nakashima*Representative Directors

64

As of September 28, 2017

Besides the above, the Company owns 1,436,731 shares of treasury stock(8.29%)

Major Offices and Facilities

Major Businesses

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

Consulting Administration

Kudan Office
1-14-6 Kudankita, Chiyoda-ku,
Tokyo 102-8539, Japan
Shin-Kojimachi Office
4-2 Kojimachi, Chiyoda-ku,
Tokyo 102-0083, Japan
Domestic Branch Offices
Tokyo, Sapporo, Sendai, Fukushima, Niigata,
Nagoya, Osaka, Hiroshima, Shikoku, Fukuoka
Research Facility
Research and Development Center in Tsukuba
Science City, Ibaraki
Overseas Offices
Jakarta, Manila, Hanoi, Ho Chi Minh, Bangkok,
Vientiane, Phnom Penh, Yangon, Naypyidaw,
Singapore, New Delhi, Dhaka, Colombo, Amman,
Baghdad, Tunis, Rabat, Nairobi, Lima

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

65

Si g ni f i cant C on solid ated S u b s i d i ari es
While mainly focused on engineering consulting, electrical power engineering, and power generation, the Nippon Koei
Group is also active in a wide range of related fields. The various businesses peripheral to the activities of Nippon Koei, themain company in the Group, are taken on by subsidiaries and associated companies located both at home and abroad.
These related companies, together with the principle corporation, make up the Nippon Koei Group.
The various firms maintain close cooperation based on relationships of interdependence that enhance the strength andcohesion of the Group as a whole.
As of June 2017, the total number of employees of the Group companies came to about 4,566.
The consolidated subsidiaries are as follows:

Domestic Consulting Operations
Tamano Consultants Co., Ltd.
This company is headquartered in the city of Nagoya and provides engineering consulting services centered on the Chubu
Region. The company boasts the most highly regarded urban and regional planning group in Japan.
Nippon Civic Consulting Engineers Co., Ltd.
This company provides consulting services centered on planning, design, and construction supervision of undergroundstructures such as urban tunnels. The company specializes in shield tunneling technology and the development of newunderground construction technology.
El Koei Co., Ltd.
This company conducts employment and staff supply for Nippon Koei Group. The company provides various fields ofqualified human resources to support the activity of the Group Companies.

International Consulting Operations
KRI International Corporation
This company has been established to enhance non-engineering consulting works of the Nippon Koei Group’s activities.
KRI provides the consulting services mainly in the fields of economic and industrial development including finance andmanagement, education and human resources development, and regional and community development.
System Science Consultants Inc.
This company provides the consulting services in the socio-economic sector to enforce Nippon Koei’s overseas operation.
Nippon Koei U.K. Co., Ltd.
This company provides engineering consulting services to enforce Nippon Koei’s overseas operation.
Nippon Koei Latin America-Caribbean Co., Ltd.
This company has been established to enhance Nippon Koei’s operation in Latin America and Caribbean and provides
consulting engineering and technical services for various development sectors in the region.
Nippon Koei LAC, Inc.
This company has been incorporated in Panama in order to promote further localization of Nippon Koei’s operation in
Latin America and Caribbean region.
Nippon Koei LAC do Brasil Ltda.
This company has been incorporated in Brasil in order to promote further localization of Nippon Koei’s operation in Latin
America.
Nippon Koei India Pvt. Ltd.
This company has been established to enhance Nippon Koei’s operation in India and provides consulting engineering andtechnical services for various development sectors focusing on projects in India and other developing countries.
Nippon Koei Vietnam International Co., Ltd.
This company has been established to enhance Nippon Koei’s operation in Vietnam and surrounding countries in the
Greater Mekong Subregion and provides consulting services for various development sectors in the region.
Philkoei International, Inc.
This company has been incorporated in the Philippines by Nippon Koei Co., Ltd. and Filipino investors and providing
consulting engineering and technical services for various development sectors focusing on projects in the Philippines andother overseas countries.
PT. Indokoei International
This company has been incorporated in Indonesia by Nippon Koei Co., Ltd. and Indonesian partner company and provides
the services of engineering and management consultancy to clients in Indonesia as well as overseas.

66

Power Engineering Operations
Koei System Inc.
This company develops software programs used in computer control applications, dispatches personnel, and provides
support and software development for office automation systems on a consignment basis.

Urban & Spatial Development Division
BDP HOLDINGS LIMITEDBUILDING DESIGN PARTNERSHIP LIMITEDIn a bid to bolster urban space business, the Nippon Koei Group made BDP Holdings Limited (BDP) its wholly-owned
subsidiary in April 2016. BDP has engaged in architectural design, structural analysis, and facility design since its
foundation of 1961.

OthersNikki Corporation
This company conducts real estate management, leasing, and insurance services for Nippon Koei and other Group
companies. It also sells, imports, and exports electrical power equipment and rents and leases various goods.

671-14-6 Kudan-kita Chiyoda-ku, Tokyo 102-8539, Japan
Telephone: +81 3 5276 2454 Facsimile: +81 3 5276 2656
http://www.n-koei.co.jp E-mail: info@n-koei.co.jp

Financial Report
Year ended June 30, 2017

Printed in Japan