Annual Report

2010Year Ended March 31, 2010C o m p a ny P ro f i l e

Nippon Koei Co., Ltd. established in 1946, specializes in engineering consulting andelectric power engineering. Since its foundation, the Company has adhered to apolicy of contributing to society through technology.
Our engineering consulting services, provided by the Consulting Administration
Group, draws on the technical expertise of specialists in diverse fields. Since ourfirst overseas venture, a hydroelectric power project in Myanmar in 1954, we haveparticipated in a broad variety of sophisticated development projects worldwide.
The Engineering Administration Group spearheads the Company's electric powerengineering business. Here, we provide a complete engineering package, fromsurveys and designs to the installation of a wide range of equipment, including
power stations and substations, transmission lines, and end-user equipment. We are
active both in Japan and overseas.
Committed to responsible corporate citizenship, Nippon Koei and its employees
dedicate their efforts to creating comfortable living environments for people aroundthe world.

CONTENTS
Financial Highlights ....................................................................................................... 1
Consolidated Business Report for Fiscal 2009 (Fiscal Year Ended March 31, 2010) ....... 2
Consolidated Balance Sheets ....................................................................................... 12
Consolidated Statements of Income ............................................................................ 14
Consolidated Statements of Changes in Equity .......................................................... 15
Consolidated Statements of Cash Flows ..................................................................... 16
Notes to Consolidated Financial Statements .............................................................. 17
Non-consolidated Balance Sheets . .............................................................................. 38
Non-consolidated Statements of Operations .............................................................. 40
Non-consolidated Statements of Changes in Equity .................................................. 41
Notes to Non-consolidated Financial Statements . ..................................................... 42
Corporate Information ................................................................................................. 52
Major Nippon Koei Group Companies . ...................................................................... 54

Financial Highlights

Consolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended March 31

2010

2010

2009

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

¥65,096¥64,198$699,656

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

2,026

301

21,776

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

25.17

3.73

0.27

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

80,10077,582860,920

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

43,361

40,711

466,046

As of March 31

Non-Consolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended March 31

2010

2010

2009

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

¥47,006¥47,015$505,224

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

1,396

(188)

15,004

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

17.34(2.33)

0.19

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

69,03067,313741,939

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

38,00636,154408,491

As of March 31

Notes: 1. Per share amounts are based on the weighted average number of shares outstanding during each period.
2. The dollar amounts in this report represent translations of yen, for convenience only, at the rate of ¥93.04=US$1, the rate ofexchange at March 31, 20101

Co n so l i dated B u sine ss R ep o rt fo r Fi s c al 20 09( F i sca l Year En de d M arch 31, 2010)
1. Overview of Performance and Cash Flow
(1) Performance
Though exports showed favorable growth, little recovery was seen in the Japanese economy in the current yearwith production, personal consumer expenditures and corporate profits and the employment situation unable torecover to former levels and continuing to show little improvement.
These trends therefore show an economy unable to recover under its own steam and circumstances continue toremain harsh.
Among the economic circumstances surrounding the Nippon Koei Group, although the government granted a
supplementary budget including public works projects, the new administration which took power after thegeneral elections has made a drastic review of public works projects. Moreover, because Japan’s ODA (Official
Development Assistance) general account budget continued to shrink and private sector companies had weakequipment investment, the harsh economic climate remained bleak.
Amidst this economic climate, the Nippon Koei Group worked to unify and consolidate itself so as to optimize
business operations throughout the entire corporate group. It also intensified efforts to allocate businessresources to business operations with good prospects and boost measures taken in new business areas. Alongwith more sophisticated technical capacity and higher production, Nippon Koei took an even more rigorous
stance on risk management and worked to improve corporate quality in response to the changing businessenvironment.
As a result of these measures, business figures in the current year were mostly favorable with consolidated
orders increasing 5.6% over last year’s level to total 69,683 million yen primarily due to the fact that our
corporate affiliate Nippon Koei Latin America-Caribbean Co., Ltd. was added as a consolidated subsidiary in thecurrent year. Large-scale projects ordered in the previous year contributed to the rise in sales and overseas
consulting operations had increased business that at 65,096 million yen slightly exceeded results from theprevious year.
On the income side, the current year net income reached 2,026 million yen, up 574.0% over the previous year.
Business orders and sales per each business sector are given next.

Domestic Consulting Operations
An increase in IT public works projects in the IT (information technology) field such as design of disastercommunication network systems as well as river planning, soil environmental research surveys, and road/bridge
design work yielded a 5.9% increase in orders received over the previous year amounting to 36,651 million yen
but sales were substantially the same as the previous year level of 35,932 million yen.

Overseas Consulting Operations
Along with an increase in work such as surveys due to orders received from JICA (Japan International Cooperation
Agency), Nippon Koei Latin America-Caribbean Co., Ltd. that was added this year as a consolidated subsidiaryreceived orders that helped to reach a figure of 20,159 million yen or a 5.5% increase over the previous year. Sales
from large scale jobs from Iraq and Vietnam in the prior year contributed to sales of 16,723 million yen or a 14.5%
increase over the prior year.

Manufacturing Operations
Though new orders were received for computer control systems and water-wheel electrical generating
equipment mainly for hydroelectric plants, fewer orders were received for electrical transformer equipment so
overall orders received were about the same as the previous year at 8,620 million yen, and sales were 7,855
million yen, down 3.0% from the previous year.

Engineering Operations
An increase in distribution equipment investments for public power utilities helped increase electricaltransformer installation work including expansion and improvement of transformer substation so orders
received were 3,493 million yen, up 32.3% compared to the previous year. However, because some of theseorders relate to next year, the actual sales figure was 2,541 million yen, down 15.5% from the previous year.

2Real Estate Leasing
Sales for real estate leasing operations were 1,256 million yen which was the same level as the previous year.

Other Business Operations
Orders for other business operations, including software development and sales, were 760 million yen, down
14.8% from the previous year mainly because orders received from telecommunication firms for systemdevelopment work remained weak. Accordingly, sales also dropped 8.2% from the previous year reaching afigure of 789 million yen.

(2) Cash Flow
Cash and cash equivalents at the end of the current year were 6,237 million yen, which was down 360 million yen
compared to the end of the previous year. The main reasons for this drop were as follows.
Net cash provided by operating activities in the current year came to 1,443 million yen (vs. 5,703 million yen in theprevious year). This was mainly due to an increase of 2,402 million yen in income before income taxes and minority
interests to reach 3,591 million yen compared to the previous consolidated fiscal year, and an increase of 7,066 million
yen in trade accounts receivable and inventories to reach 2,554 million yen compared to the previous consolidated fiscal
year.
Net cash used in investing activities reached 817 million yen (vs. 1,512 million yen in previous year). This was primarily
due to purchases of investment securities declining 1,568 million yen compared to the previous consolidated fiscal year toreach 1,466 million yen; proceeds from sales of investment securities decreasing 1,194 million yen compared to theprevious consolidated fiscal year reaching a figure of 1,120 million yen; and purchases of property, plant and equipment
declining 272 million yen compared to the previous consolidated fiscal year to reach a figure of 335 million yen.
Net cash used in financing activities amounted to 1,114 million (vs. 2,407 million yen in the previous year). This was
mainly due to a decrease of 2,500 million yen in the net decrease in short-term borrowings compared to the previous
consolidated fiscal year, which resulted in no net increase/decrease, and repayments of long-term debt down 3,999 million
yen compared to the previous consolidated fiscal year reaching a figure of 191 million yen purchase of treasury stockincreasing by 203 million yen compared to the previous consolidated fiscal year to reach 228 million yen; and dividends
paid declining by 3 million yen compared to the previous consolidated fiscal year to reach 604 million yen.

Reference: Trends in cash flow related indicators

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

Fiscal Year
Ended March2006

Fiscal Year
Ended March2007

Fiscal Year
Ended March2008

Fiscal Year
Ended March2009

Fiscal Year
Ended March
2010

52.1

53.1

52.1

52.2

53.8

47.2

36.2

25.4

22.7

27.5

11.7
6.2

2.7
27.5

17.8
10.2

2.5
28.0

9.5
9.8

Capital-to-asset ratio: stockholders’ equity / total assets
Capital-to-asset ratio on market value basis: market capitalization / total assets
Interest-bearing debt-to-cash flow ratio: interest-bearing debts / cash flow
Interest coverage ratio: cash flow / interest payment
Notes: 1. All figures are calculated on the basis of consolidated financial figures.
2. Market capitalization is computed on the basis of the number of shares issued, excluding treasury stock.
3. Cash flow here signifies 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
This Consolidated
Fiscal YearBusiness Category

Change onPrevious Year(%)

(Millions of yen)

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

¥36,651
20,159
8,620
3,493
760
69,683

5.9
5.5
-1.5
32.3
-14.8
5.6

14,38133,734
2,454
2,059
20
¥52,648

5.3
11.3
45.3
86.0
-56.6
12.5

Notes: 1. A bove amounts include outstanding orders of 2,270 million yen at Nippon Koei Latin America-Caribbean Co., Ltd. a local
affiliate, which has been consolidated from the start of operations this fiscal year.
2. Above amounts do not include consumption tax.
3. Above amounts involve transactions with non-Group customers: These amounts do not include internal transactions
between Group segments or the transfer amounts involved.

(2) Sales PerformanceThis Consolidated
Fiscal YearBusiness Category

Change onPrevious Year(%)

(Millions of yen)Domestic consulting operations . ............................
Overseas consulting operations ..............................
Power equipment manufacturing operations ........
Electric power engineering operations . .................
Real estate leasing operations .................................
Other business operations .......................................
Total 2010 sales ....................................................

¥35,932
16,723
7,855
2,541
1,256
789
¥65,096

-1.2
14.5
-3.0
-15.5
-0.4
-8.2
1.4

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.

CustomerThis Consolidated
Fiscal Year
Amount(Millions of yen)Previous Consolidated
Fiscal Year

Proportion(%)

Amount(Millions of yen)

Proportion(%)

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

¥12,99320.0¥10,225

15.9

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

6,712

10.3

6,807

10.6

Japan International
Cooperation Agency . ........................

6,210

9.5

3,860

6.0

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3. Future Challenges(1) Management Policy
Taking the concept “Reform for Growth” as its theme, our company group is currently working hard to fulfill its
medium-term management planning (2008 fiscal year through 2010 fiscal year). Based on our management
policy “Act with sincerity and contribute to society through technology” the Nippon Koei Group is making anever ending effort to “earn high marks from both the customer and society while taking pride in being acompany employee” using the slogan “Challenging mind, Changing dynamics” as its guide. We will continue tofocus and unify with greater effort along our future course while providing high quality services and products byacting not just in terms of individual performance but also as an “organization” that obtains a fair profit via
customer satisfaction and in this way help our company group develop.
The business environment our group is facing can expect drastic cuts in the public work project budget alongwith ever harsher technical and price competition from other companies. However there are some positive signs
including budget increase of yen loan finance for a boost in ODA project funding, and a business recovery bypower companies reflecting greater spending in power company utility equipment investments, etc. Under thesecircumstances, our corporate group intends to make major efforts on the following critical points based on
medium-term management planning and pour its total strength into improved business results and sales figures.
(i)	We will mainly allocate our management resources to prospective businesses likely to perform well inmeeting market needs in fields relating to environmental technology, energy (including railways). We willtake aggressive measures to find new business opportunities where we can make optimum use of thecompany technology such as private investment projects, and enterprises that integrate and unify design,
procurement, and construction work.
(ii)	We will strive to boost our corporate group’s technical strength by challenging ourselves to make strong,
positive efforts at handling high value jobs demanding sophisticated technical capabilities while also
recruiting and training a highly qualified engineering staff.
(iii)	We will actively work to boost production efficiency in company divisions while sharing our group’s internal
knowledge and expertise to further advance the productivity of the group as a whole.
(iv)	We will create better labor welfare conditions that are a suitable match for job quality by a full andsubstantial health care management system, a good work-life balance (harmonizing work and private life)
and work performance compensation standards aimed at improving work motivation and ensuring atalented workforce serving as the backbone of our corporate group.
Our corporate group will pioneer new businesses and new fields, along with boosting our international
corporate competitiveness through active overseas business efforts, by strengthening collaborations between
business divisions and aggressive technical exchange. Moreover, besides effective use of internal regulatory
system and meticulous risk management, safety management, and quality control management, we will enforce
compliance with our corporate management base to a higher degree to establish our place as a leading company
trusted by both the customer and society as a whole.
In April 2010, the Nippon Koei Group merged with our consolidated subsidiary Nippon Koei Power Systems Co.,
Ltd. and has worked to fully integrate this new company and will strive to streamline group management to a yethigher level.
All of the above measures are aimed at yet higher company performance and attaining our medium-term
management planning goals.

5In the “Can Tho Bridge Construction Project” in the country of Vietnam, an accident occurred in September
2007 during construction in which a portion of the bridge girder collapsed. Construction was later
recommenced in August 2008, and finished in April 2010, and an opening ceremony was held.

(2) Basic Policy Governing Corporate Decision-makers on Financial Affairs andOperations
Our continuing policy on resisting corporate buyouts (hostile takeovers)
Our corporation has established basic guidelines (called “basic policy” from hereon) that regulate those who
make decisions that set policies on business operations and financial affairs.
1) Governance Principals
We believe our corporation shoulders a large social responsibility and is highly accountable to the public since it
functions not only as a construction consultant but also as it handles tasks mainly involving public utilities andpublic affairs. The Nippon Koei Group also has innate commercial brand appeal backed by highly wide-ranging
specialist knowledge, ample experience and company achievements. A relationship of deep mutual trust fostered
between management and interested parties that includes domestic and overseas customers, employees, andbusiness partners is indispensable to future understanding. A loss of this trust would mean no further gains incorporate value or stockholder profits.
In view of the damage posed by substantial acquisition of shares (or large-scale buyouts) of our corporate stock(called, “substantial acquisition of shares” hereafter) we believe necessary and ample information regardingthese acquisitions should be provided in advance to company stockholders before a bidder (called “bidder for
substantial acquisition of shares” from hereon) makes a takeover bid.
2) Preventing Undesirable Takeover
We believe it is to the advantage of both the Nippon Koei Group and its shareholders to ensure that the buying
up of a large quantity of shares conforms to fixed logical rules and therefore established a set of rules (called“Rules on Substantial Acquisition of Shares” from hereon) as part of our corporate policy (called “Policy on
Substantial Acquisition of Shares” from hereon) and that is intended to regulate the large scale acquisition ofcompany shares. These “Rules on Substantial Acquisition of Shares” are intended to apply to bidders attempting
to obtain control of 20% or more of the voting rights of a designated shareholder group or obtaining sufficient
shares to alter the balance that gave a group of shareholders control of 20% or more of voting rights. These rules
make it compulsory for a bidder to: a) provide the Nippon Koei Board of Directors in advance with all required
information in sufficient amounts including documents showing his/her exact intentions and, b) start buying theshares after the fixed period for evaluation by the Nippon Koei Board of Directors has elapsed.
Moreover, on May 12, 2008, the Nippon Koei Board of Directors decided to revise this Policy on Substantial
Acquisition of Shares that was first implemented in May 2006 and then continued by a board voting decision inJune 2007. These revisions were deemed necessary to make the Policy on Substantial Acquisition of Shares more
effective in securing profits for all shareholders and to boost corporate value, and in order to confirm that theserevisions and continuance of the Policy on Substantial Acquisition of Shares were the desire of the shareholders,
this matter was brought up at the 63rd Ordinary General Meeting of Stockholders on June 27, 2008 and received
the stockholders assent.
The details of this Policy on Substantial Acquisition of Shares were publicly announced on May 12, 2008 and theentire text is also available on the Nippon Koei Group website (http://www.n-koei.co.jp/).

6

3) Board of Directors Ruling on the System disclosed in 2) above
This Policy on Substantial Acquisition of Shares is in line with basic policy described above in 1), and does nothave the intent of maintaining the position of the corporate board of directors at the expense of the stockholders
in general.
a.	This policy is intended to allow shareholders to correctly decide whether to comply with the hostile takeover(corporate buyout) or not and also to protect against clear and apparent threats to shareholder profit andthe corporate value.
b.	In view of our goal to protect shareholder profits and corporate value, these rules on the substantial
acquisition of shares and provisions for enforcing countermeasures are deemed appropriate.
c.	These rules on the substantial acquisition of shares and provisions or conditions for enforcing
countermeasures are specific and clear in all cases, so that shareholders, investors and bidders (forsubstantial shares) are given an opportunity to sufficiently predict future events.
d.	Rulings on the appropriateness of enforcing, continuing, abolishing or amending these rules are made via
the general meeting of stockholders in order to reflect the intent of the shareholders.
e.	This policy establishes a prior condition whereby the board of directors must sufficiently confer with anindependently established ad hoc committee on whether to enforce countermeasures, and after giving
maximum consideration to the guidance and advice from this committee, the board of directors shall decide
whether or not to implement those countermeasures, and shall render a scheme sufficient to ensure thereasonableness and objectiveness of the board of director’s ruling.
f.	The ad hoc committee shall be able to obtain advice and guidance from an outside, independent specialist
whose fee is paid at corporate expense, and a scheme shall be established to ensure the ruling made by thead hoc committee is sufficiently fair and objective.
g.	This policy on rules for substantial acquisition of shares is not intended as a dead hand provision to prevent
hostile takeovers and can be abolished by a ruling made at the general meeting of stockholders or may beabolished by a ruling made by the board of directors made up of company officers appointed at the general
meeting of stockholders of the Nippon Koei Group.

4. Business Risks
The following are deemed as risks that might affect Nippon Koei Group’s future financial status or corporate
performance as of the date this report was submitted. These risks moreover are not limited to those listed below.

Uneven Annual Distribution of Performance Results
The primary operations of the Nippon Koei include construction consultancy and electric power engineering.
The construction consultancy operations entail mainly government and public agency projects whose orders areheavily weighted towards the end of the financial year (March). As a result, 70-80% of Group sales tend to occur
in the second half of the year.

Dependence on Major Customers
Our construction consultancy operations rely on foreign and national government contracts for some 90% its
sales. Sales performance on the domestic front tends to be affected by trends in government spending while ourinternational orders are a reflection of the Japanese ODA budget.

7

Since about 60-80% of our electric power engineering operations are for the Tokyo Electric Power Company(TEPCO), our sales performance is largely dictated by capital investments at TEPCO.

5. Operationally Significant Contracts
The Nippon Koei Board of Directors deliberated on a merger to take effect on April 1, 2010 with its consolidated
subsidiary, Nippon Koei Power Systems Co., Ltd., at a meeting on January 13, 2010, and the two companies
were then bound into a merger on the planned date of April 1, 2010.

(1) Objective of Merger
The present merger was implemented to promote the further streamlining of corporate group business
operations based on management goals towards unification and consolidation.

(2) Merger overview
1) Schedule
Board of directors gives assent to merger

Jan. 13, 2010

Merger contract concluded

Jan. 13, 2010

Appointed merger date (date takes effect)

Apr. 1, 2010

Merger officially registered

Apr. 7, 2010

2) Merger method
The absorption merger method was utilized with Nippon Koei as the continuing company and Nippon Koei
Power Systems Co., Ltd. was dissolved.
3) Merger ratio and merger cash grants
Nippon Koei holds all stock of Nippon Koei Power Systems Co., Ltd. and there is no arrangement on merger
ratios. Moreover, there is no issue of new stock, additional capital, or merger cash grants resulting from thismerger.
4) New share subscription rights and corporate bonds with share subscription rights for dissolved company
There were no new share subscription rights or corporate bonds with share subscription rights issued for
Nippon Koei Power Systems Co., Ltd.

(3) Name, main business operations and scope of merged company (current as ofMarch 31, 2010)
1) Name: Nippon Koei Power Systems Co., Ltd.
2) Main business operations: Manufacture of electrical equipment and construction work3) Current location: 1-22 Aza Doukyu, Morijuku, Sukagawa-shi, Fukushima, Japan4) Sales: 6,945 million yen5) Current year net profit: 358 million yen6) Common stock: 1,000 million yen
7) Net assets: 3,408 million yen8) Total assets: 8,014 million yen9) Number of employees: 257

6. Research and Development
The Nippon Koei Group puts its guiding philosophy to “act with sincerity and contribute to society throughtechnology” into practice by putting technology to work in creating a better world for all.

8

Overall Group research and development costs for the consolidated fiscal year under review amounted to 341
million yen.

Domestic and Overseas Consulting Operations
Research and development over a wide range of construction consulting services is conducted at our Central
Research Laboratory. We monitor research by means of adjusted return mapping in order to accelerate theresearch process and evaluate the results with an eye to practical application. The following R&D projects wereconducted during the consolidated fiscal year under review:(1) Research and development of advanced numerical analysis techniques andgeneral-purpose software applications
Research work was conducted on the development of geographical information and NK-GIAS hydrology
application software, automated design software for canal/dock management, research relating to practicalapplications of two- and three-dimensional hydraulic analysis, applied research in neural networks and othersoft computing technologies.

(2) Research and development relating to national disaster prevention
Research was also focused on uplift in ground surface due to the recovery of groundwater levels, development ofa risk assessment technique for tsunamis and storm surges, development of a method for assessing the impact oflandslides on tunnels, research to enhance systems designed to detect slope failure, development of acomprehensive river basin sediment control model as well as the study of earthquake fault and seismic load
design.

(3) Research and development for global warming measures
Research efforts involved developing: multi layer flow analysis techniques for CO2 aquifer storage, localized
weather prediction aimed at reducing water damage risk caused by seasonal fluctuations, seawater prevention
prediction and well water resource management technology, real-time information technology for disaster
information, and development of water environmental control simulator including the ecosystem.

(4) Research and development in performance verification and management support
systems
Research was carried out on dynamic crack propagation analysis of concrete structures, as well as developing a
project assessment model for social infrastructure improvements.

(5) Technical exchanges with overseas research institutes
Technical exchange activities were conducted with Asian Institute of Technology, the United Nations University,and Korean Electrical Power Research Authority.
Research and development costs paid in support of these operations totaled 215 million yen.

Manufacturing and Engineering Operations
R&D work in this field was mainly carried out by the Fukushima operation site (formerly, Nippon Koei Powersystems Co., Ltd.). Main R&D efforts for this fiscal year were as follows:(1) Developing modified down-sized monitor control panels
To meet needs for a lower cost, down-sized monitor control panel for use at power-feed substations of 275-kv or
less, an internal structure LAN was utilized for inter-machine connections as a cost reduction measure. The
overall structural design and the basic design of the IF board were completed in FY2009. The basic design for9the monitor control panel will proceed from hereon in sequence via consultation with the customer and is thenscheduled to shift to product development.

(2) Developing large-capacity IP type TC for 275-kv or lessOur customer (TEPCO) plans use of large-capacity IP telecontrol equipment for power-feed substations of 275kv or less. To secure this market we developed a large-capacity IP type TC based on equipment designed for
power distribution tasks. In FY2009, we completed the development and fabrication of the hardware as well as
creation of standard type data. From hereon, we will proceed to verify use as a simple in-house machine and areaiming to start receiving orders in the latter part of FY2010.

(3) Research on improving water-wheel performance
We reviewed the design of the new Runner which did not attain its target goals in the previous tests. Modeltesting performed after changing the number of vanes (blades) from 15 to 13 vanes, resulted in completion of a
new Runner II that successfully boosted waterwheel efficiency to 92.5%. These results brought our waterwheel
performance to a level competitive with those seen in models by major manufacturers.
In simultaneously implemented flow analysis, the analysis of the actual equipment was completed at Sawana
River power station of TEPCO for the proposal of the equipment modification, and evaluation of the next runnermodifications has been scheduled.
Research and development costs in support of these totaled 126million yen.

7. Analysis of Financial Status, Management Performance
An analysis of the Nippon Koei Group financial status, management performance as well as cash flow status forthe current consolidated fiscal year is described next.

(1) Analysis of financial status
Group consolidated assets at the end of the fiscal year under review amounted to 80,100 million yen which was
an increase of 2,518 million yen compared to the previous year. The main causes for this increase were an
increase in current assets of 2,195 million yen and an increase in fixed assets of 323 million yen. The main
reason for the increase in current assets was an increase in account receivables (trade note and trade accounts)of 2,554 million yen. The main reason for the increase in fixed assets was a drop of 801 million yen in tangible
fixed assets and intangible fixed assets, and an increase of 1,104 million yen in investment securities andinvestments in unconsolidated subsidiaries and associated companies from the current value of retained stock
holding accompanying the recovery of the stock market.
Consolidated liabilities at the end of the fiscal year under review on the other hand, decreased 132 million yen
compared to the previous year to reach a figure of 36,739 million yen. The main reason for the decrease was anincrease of 4,274 million yen in current liabilities, offset by a decrease of 4,406 million yen in long-term
liabilities. The main cause behind these increases and decreases was an increase of 3,916 million yen in longterm loans due for repayment within the year, as well as a drop of 4,139 million yen in long-term loans.
Equity at the end of this fiscal year increased 2,650 million yen compared to the previous year to reach a figureof 43,361 million yen. The main cause behind this increase was an increase of 1,531 million yen in retained
earnings, and also a decrease of 1,298 million yen in unrealized loss on available-for-sale securities.

(2) Analysis of Performance
Net sales in the current fiscal year increased 898 million yen (1.4%) over the previous year to reach a figure of
65,096 million yen.

10

Overseas consulting operations in particular increased 2,121 million yen (14.5%) over the previous year to reacha figure of 16,723 million yen. Sales from overseas consulting operations were in fact 25.7% of sales overall,increasing 3.0 point from 22.7% in the previous year.
Operating income for the current year increased by 1,639 million yen (94.9%) over the previous year reaching afigure of 3,367 million yen. The cost to sales ratio was 73.3% which was a decline of 2.5 points over the previous
year but the ratio of SG&A expenses to sales was 21.5% which was an increase of 0.03 points over the previous
year. This has resulted in the ratio of operating income to sales increasing of 2.5 points over the previous year.
Based on the above results, the income before income taxes and minority interests was 3,591 million yen. The
net income for the current year after deducting minority interests in net income and adjusting for corporate tax,
resident tax, and business tax was 2,026 million yen, which was an increase of 1,725 million yen over theprevious year.
The basic net income per share in the current year was 25.17 yen, increasing 21.44 yen from 3.73 yen in theprevious year.

Noriaki Hirose
President:

11

Co n so l i da ted B a lance S h eet s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
March 31, 2010 and 2009

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

ASSETS

2010

2010

2009

CURRENT ASSETS:
Cash and cash equivalents (Note 13) ..................

¥ 6,237

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

¥ 6,597$ 67,036

14

Receivables (Note 13) :Trade notes .........................................................

33

38

355

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

28,24825,689303,611

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

(107)

(179)

(1,150)Inventories (Note 4) .............................................

7,696

6,981

82,717

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

1,241

1,738

13,338Prepaid expenses and other current assets ........

1,557

1,832

16,735

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

44,90542,710482,642

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

13,644

13,644

146,647

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

19,863

19,788

213,489

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

2,272

2,230

24,420Furniture and fixtures .........................................

2,678

2,578

28,783

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

346

314

3,719

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

10

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

38,81338,554

417,165

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

(15,011)(14,234)(161,339)

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

23,802

24,320255,826

6,853

5,695

73,656and associated companies (Note 13).................

530

584

5,696

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

34

122

365

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

1,545

1,857

16,606

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

118

129

1,268

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

423

262

4,546

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

2,122

2,148

22,809Allowance for doubtful accounts ........................

(232)

(245)

(2,494)

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

11,393

10,552

122,452

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

¥80,100¥77,582$860,920

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

107

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 3 and 13) ..............
Investments in unconsolidated subsidiaries

See notes to consolidated financial statements.

12

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short‑term borrowings (Notes 6 and 13) ...........
Current portion of long-term debt
(Notes 6 and 13) .................................................
Payables (Note 13) :Trade notes .........................................................
Trade accounts ...................................................
Income taxes payable ..........................................
Advances received ................................................
Accrued bonuses ..................................................
Allowance for anticipated project loss . ..............
Other current liabilities .......................................
Total current liabilities ....................................
LONG-TERM LIABILITIES:Long-term debt (Note 6) ......................................
Liability for retirement benefits (Note 7) ...........
Deposits received (Note 8) . .................................
Deferred tax liabilities (Note 10) . .......................
Other liabilities ....................................................
Total long-term liabilities ................................

2010

2010

2009

¥ 8,000¥ 8,000$ 85,985

4,185

269

44,981

411
5,295
828
6,524
1,681
259
3,311
30,494

421
5,197
528
6,270
1,568
136
3,831
26,2204,417
56,911
8,899
70,12018,0672,784
35,588327,752

448
3,242
2,335
68
152
6,245

4,587
3,068
2,505
434
57
10,651

4,815
34,84525,097731
1,634
67,122

7,393
6,132
32,4007,393
6,132
30,86979,46065,907348,237(600)(1,898)(6,449)COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 12, 14 and 15)
EQUITY (Notes 9 and 16):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares in 2010 and 2009 .................
Capital surplus .....................................................
Retained earnings ................................................
Unrealized loss onavailable-for-sale securities ...............................
Deferred loss onderivatives under hedge accounting .................
Treasury stock—at cost
6,923,529 shares in 2010
and 6,081,506 shares in 2009 ............................
Total ..................................................................
Minority interests . ...............................................
Total equity . .....................................................
TOTAL ....................................................................

(7)

(75)

(2,245)43,073288
43,361(2,017)40,479232
40,711(24,129)
462,951
3,095
466,046¥80,100¥77,582$860,920

13

Co n so l i da ted S t atemen t s o f I n c o me
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2010 and 2009

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

2010

2010

2009

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

¥65,096¥64,198$699,656

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

47,734
17,362

48,69015,508513,048
186,608

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

13,995
3,367

13,7801,728

150,419
36,189

300
(125)
114

382
(184)
(409)

3,224
(1,344)
1,225

(26)
88
(181)
(8)

(279)
946
(1,945)
(86)

62
224

(54)
165
(175)
(182)
(191)
109
(539)

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

3,591

1,189

38,596

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

1,170
367
1,537

703
178
881

12,575
3,945
16,520MINORITY INTERESTS IN NET INCOME .....
NET INCOME .......................................................

28¥ 2,026

7
301

300
$ 21,776

OTHER INCOME (EXPENSES):Interest and dividend income .............................
Interest expense ...................................................
Foreign currency exchange gain (loss) ...............
Loss on disposal of property,
plant and equipment . ........................................
Gain on sales of investment securities . ..............
Loss on sales of investment securities ................
Loss on valuation of investment securities ........
Loss on valuation of inventories .........................
Other-net . .............................................................
Other income (expenses)-net . .........................

¥

U.S.Dollars(Note 1)Yen

PER SHARE OF COMMON STOCK (Note2. o.):Basic net income . ................................................
Cash dividends applicable to the year ................
See notes to consolidated financial statements.

14¥ 25.17
7.50

666
2,407

¥ 3.73
7.50

$

0.27
0.08

Co n so l i da ted S t atemen t s o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2010 and 2009

Thousands

Millions of Yen

Outstanding
Number of
Shares ofCommon Stock

BALANCE, APRIL 1, 2008 ����������������������������������
Net income �����������������������������������������������������������Cash dividends, ¥7.50 per share ��������������������������
Purchase of treasury stock ����������������������������������
Net change in the year �����������������������������������������
BALANCE, MARCH 31, 2009 �����������������������������
Adjustment of retained earnings
for a newly consolidated subsidiary �����������������
Net income �����������������������������������������������������������Cash dividends, ¥7.50 per share ��������������������������
Purchase of treasury stock ����������������������������������
Net change in the year �����������������������������������������
BALANCE, MARCH 31, 2010 �����������������������������

80,672

Common Stock¥7,393

Capital Surplus¥6,132Retained Earnings¥31,173

Unrealized Gain(loss) on
Available-for-sale
Securities¥ (125)

DeferredGain (loss) on
Derivatives
under Hedge
Accounting

Treasury Stock¥38¥(1,992)

Total¥42,619

301
(605)
(97)
(1,773)80,575

7,393

6,132

30,869¥6,132

301

(605)

(605)

(25)

(25)

(1,811)5(1,806)(2,017)40,479232

40,711

109

109

109

2,026

2,026

(604)

¥7,393¥42,846

301

2,026
(842)
79,733¥227

Total Equity

(25)
(38)

(1,898)

Minority Interests¥32,400

1,298

(7)

¥ (600)

¥ (7)

(604)

(604)

(228)

(228)

(228)

1,291

56

1,347

¥(2,245)¥43,073¥288¥43,361

Thousands of U.S.Dollars (Note 1)

Common Stock

BALANCE, MARCH 31, 2009 �����������������������������
Adjustment of retained earnings
for a newly consolidated subsidiary �����������������
Net income �����������������������������������������������������������Cash dividends, $0.08 per share ��������������������������
Purchase of treasury stock ����������������������������������
Net change in the year �����������������������������������������
BALANCE, MARCH 31, 2010 �����������������������������

$79,460

Capital Surplus$65,907

Retained Earnings$331,782

Unrealized Gain(loss) on
Available-for-sale
Securities

DeferredGain (loss) on
Derivatives
under Hedge
Accounting$(20,400)

Treasury Stock$(21,679)$65,907

Minority Interests$435,070$2,494

Total Equity$437,564

1,171

1,171

1,171

21,776

21,776

21,776(6,492)$79,460

Total$348,237

13,951(75)$ (6,449)$(75)(6,492)(6,492)(2,450)(2,450)(2,450)13,876601

14,477$(24,129)$462,951$3,095$466,046

See notes to consolidated financial statements.

15

Co n so l i da ted S t atemen t s o f C as h Fl ow s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2010 and 2009

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

OPERATING ACTIVITIES:2010

FINANCING ACTIVITIES:

2010

2009

Income before income taxes andminority interests . ..................................................

¥ 3,591¥1,189$ 38,596

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

(874)
1,088

(597)
1,121

(9,394)
11,694(Gain) loss on sales of property,
plant and equipment . ...........................................

(4)

25

(43)

Loss on disposal of property,
plant and equipment . ...........................................

25

27

269

Loss on sales of investment securities ...................

93

11

1,000

Changes in assets and liabilities,
net of effects from a newly consolidated
subsidiary:(Increase) decrease in tradeaccounts receivable �����������������������������������������

(1,854)

2,882(19,927)(Increase) decrease in inventories .....................
Decrease in trade accounts payable . .................

(700)
(41)

1,630
(634)

(7,524)(441)

Increase (decrease) in liability for
retirement benefits . .........................................

173

(12)

1,859

Other—net ...............................................................
Net cash provided by operating activities .......

(54)
1,443

61
5,703

(580)
15,509INVESTING ACTIVITIES:
Proceeds from sales of marketable securities .........

14

150

9

8

97

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

(335)

(607)

(3,601)

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

1,120

2,314

12,038Purchases of investment securities ..........................
Increase in other assets ............................................
Net cash used in investing activities ................

(1,466)(159)¥ (817)(3,034)(193)¥(1,512)(15,757)(1,708)$ (8,781)

16

2010

2010

2009

Net decrease in short-term borrowings ...................
Repayments of long-term debt .................................
Repayments of lease obligations ..............................
Purchase of treasury stock .......................................
Dividends paid ..........................................................
Other—net .................................................................
Net cash used in financing activities ..............

¥ (191)
(89)
(228)
(604)
(2)
(1,114)¥ 2,500(4,190)
(84)
(25)
(607)
(1)
(2,407)$ (2,053)(957)(2,451)(6,492)(20)(11,973)

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

15

(86)

161

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

(473)

1,698

(5,084)

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

113

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

6,597

4,899

70,905

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

¥ 6,237¥ 6,597$ 67,036

1,215

NON-CASH INVESTING AND FINANCING
ACTIVITIES:

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

See notes to consolidated financial statements.

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

Assets increased by consolidation of a subsidiarypreviously unconsolidated . ....................................
Liabilities increased by consolidation of a
subsidiary previously unconsolidated ...................

¥

113

$ 1,21590967

N o te s to C on solid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2010 and 2009

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in
conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form which ismore familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2009
financial statements to conform to the classifications used in 2010.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Nippon
Koei Co., Ltd. (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.
S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at therate of ¥ 93.04 to $1, the rate of exchange at March 31, 2010. Such translations should not be construed as
representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.	Consolidation —The consolidated financial statements as of March 31, 2010 include the accounts of
the Company and its ten significant (nine in 2009) subsidiaries (together, the “Group”).
Under the control concept, those companies in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated.
Investments in unconsolidated subsidiaries and associated companies are stated at cost. If the equity methodof accounting had been applied to the investments in these companies, the effect on the accompanying
consolidated financial statements would not be material.
Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets of theacquired subsidiaries at the date of acquisition.
Goodwill and negative goodwill are amortized using the straight-line method over 5 to 10 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is eliminated.

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

c.	Inventories —Work in process is stated at the lower of cost, mainly determined by the specificidentification cost method, or net selling value.
d.	Marketable and Investment Securities —Marketable and investment securities are classified andaccounted for, depending on management's intent, as follows:i) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent andability to hold to maturity are reported at amortized cost and ii) available-for-sale securities, which are notclassified as the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of
applicable taxes, in a separate component of equity.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method.
For other than temporary declines in fair value, investment securities are reduced to net realizable value by acharge to income.

17

e.	Property, Plant and Equipment —Property, plant and equipment are stated at cost. Depreciation ofproperty, plant and equipment is computed substantially by the declining-balance method at rates
based on the estimated useful lives of the assets, while the straight-line method is applied to buildings
acquired after April 1, 1998 and lease assets as well as other equipment for rent. The range of useful
lives is principally from 3 to 50 years for buildings and structures, from 2 to 15 years for machineryand 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.	Allowance for Doubtful Accounts —The allowance for doubtful accounts is stated in amounts
considered to be appropriate based on the companies’ past credit loss experience and an evaluationof potential losses in the receivables outstanding.
g.	Retirement and Pension Plans —The Group has contributory defined benefit pension plans andunfunded retirement benefit plans for the benefit of its employees.
Effective April 1, 2000, the Group adopted a new accounting standard for employees’ retirement benefits andaccounted for the liability for retirement benefits based on the projected benefit obligations and plan assets
at the balance sheet date. The transitional obligation of ¥2,016 million for the subsidiaries, determined as ofApril 1, 2000, is being amortized over mainly 15 years.
Unrecognized actuarial gain or loss is recognized by the straight-line method over mainly 13 years.
Unrecognized prior service costs are recognized by the straight-line method over mainly 13 years.
Retirement benefits for directors and corporate auditors are provided at the amount which would be
required if all directors and corporate auditors retired at the balance sheet date.

h.	Allowance for Anticipated Project Loss — The Group has made a provision for anticipated losses on
uncompleted project contracts.
i.	Leases —In March 2007, the Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ
Statement No.13, “Accounting Standard for Lease Transactions”, which revised the previous
accounting standard for lease transactions issued in June 1993. The revised accounting standard forlease transactions is effective for fiscal years beginning on or after April 1, 2008.
Under the previous accounting standard, finance leases that deemed to transfer ownership of the leased
property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as
operating lease transactions if certain “as if capitalized” information was disclosed in the note to the lessee’s
financial statements. The revised accounting standard requires that all finance lease transactions becapitalized to recognize lease assets and lease obligations in the balance sheet. In addition, the revised
accounting standard permits leases which existed at the transition date and did not transfer ownership of theleased property to the lessee to be measured at the obligations under finance leases less interest expense at
the transition date and recorded as acquisition cost of lease assets.
The Group applied the revised accounting standard effective April 1, 2008. In addition, the Company
accounted for leases which existed at the transition date and do not transfer ownership of the leased property
to the lessee as acquisition cost of lease assets measured at the obligations under finance leases at thetransition date.
All other leases are accounted for as operating leases.

j.	Accrued Bonuses —Bonuses to employees, directors and corporate auditors are accrued at the year
end to which such bonuses are attributable.
k.	Income Taxes — The provision for income taxes is computed based on the pretax income included in
the consolidated statements of income. The asset and liability approach is used to recognize deferred
tax assets and liabilities for the expected future tax consequences of temporary differences between
18

the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured byapplying currently enacted tax laws to the temporary differences.
l.	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 thebalance sheet date. The foreign exchange gains and losses from translation are recognized in the
consolidated statements of income.
m.	Revenue Recognition —If the outcome of a construction contract can be estimated reliably, thecontract revenue is recognized by the percentage-of-completion method which is measured byreference to the percentage of total cost incurred to date to estimated total cost.
All other construction projects, except the aforementioned, are recorded using the completedcontract method (including the partially completed-contract method).
n.	Derivatives and Hedging Activities —The Group uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange and interest rates. Foreign exchange forward contracts
and interest rate swaps are utilized by the Group to reduce foreign currency exchange and interest
rate risks. The Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions 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 are recognized in the income statement and b) for derivatives used forhedging purposes, if derivatives qualify for hedge accounting because of high correlation and effectivenessbetween the hedging instruments and the hedged items, gains or losses on derivatives are deferred until
maturity of the hedged transactions.
The foreign exchange forward contracts are measured at their fair value but the unrealized gains / losses aredeferred until the underlying transactions are completed.
The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are notremeasured at market value but the differential paid or received under the swap agreements are recognized
and included in interest expense or income.

o.	Per Share Information —Basic net income per share is computed by dividing net income available
to shareholders of common stock, by the weighted-average number of shares of common stock
outstanding for the period. The weighted-average numbers of shares of common stock for the years
ended March 31, 2010 and 2009 were 80,482,654 and 80,615,830, respectively.
Diluted net income per share of common stock is not disclosed because the Group has nothing which might
dilute the per share information for the years ended March 31, 2010 and 2009.
Cash dividends per share presented in the accompanying consolidated statements of income are dividends
applicable to the respective years including dividends to be paid after the end of the year.

p.	New Accounting Pronouncements
	Asset Retirement Obligations —In March 2008, the ASBJ published a new accounting standard for
asset retirement obligations, ASBJ Statement No.18 “Accounting Standard for Asset Retirement
Obligations” and ASBJ Guidance No.21 “Guidance on Accounting Standard for Asset Retirement
Obligations”. Under this accounting standard, an asset retirement obligation is defined as a legal
obligation imposed either by law or contract that results from the acquisition, construction,
development and the normal operation of a tangible fixed asset and is associated with the retirementof 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, theliability should be recognized when a reasonable estimate of asset retirement obligation can be made.
19

Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is
capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability.
The asset retirement cost is subsequently allocated to expense through depreciation over theremaining 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 are reflected as an increase or a decrease in the carrying amount of the liability and thecapitalized amount of the related asset retirement cost. This standard is effective for fiscal years
beginning on or after April 1, 2010 with early adoption permitted for fiscal years beginning on or
before March 31, 2010.
Accounting Changes and Error Corrections —In December 2009, ASBJ issued ASBJ Statement No. 24“Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No. 24“Guidance on Accounting Standard for Accounting Changes and Error Corrections”. Accounting
treatments under this standard and guidance are as follows;(1) Changes in Accounting Policies:
When a new accounting policy is applied with revision of accounting standards, a new policy is applied
retrospectively unless the revised accounting standards include specific transitional provisions. When therevised accounting standards include specific transitional provisions, an entity shall comply with the specifictransitional provisions.
(2) Changes in Presentations
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.
This accounting standard and the guidance are applicable to accounting changes and corrections of priorperiod errors which are made from the beginning of the fiscal year that begins on or after April 1, 2011.
Segment Information Disclosures —In March 2008, the ASBJ revised ASBJ Statement No. 17“Accounting Standard for Segment Information Disclosures” and issued ASBJ Guidance No.20“Guidance on Accounting Standard for Segment Information Disclosures”. Under the standard andguidance, an entity is required to report financial and descriptive information about its reportablesegments. Reportable segments are operating segments or aggregations of operating segments thatmeet specified criteria. Operating segments are components of an entity about which separate
financial information is available and such information is evaluated 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 internally for evaluating
operating segment performance and deciding how to allocate resources to operating segments. Thisaccounting standard and the guidance are applicable to segment information disclosures for the
fiscal years beginning on or after April 1, 2010.

20

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2010
Current:
Government and corporate bonds .....................
Total ................................................................
Non-current:
Marketable equity securities ..............................
Government and corporate bonds .....................
Other ....................................................................
Total ................................................................

2010

2009
¥
¥

¥4,994970
889¥6,85314
14¥4,000910
785¥5,695$53,676
10,426
9,554$73,656

The carrying amounts and aggregate fair values of marketable and investment securities at March 31, 2010 and2009 were as follows:
Millions of Yen

March 31, 2010
Securities classified as:
Available-for-sale:
Equity securities .................................
Debt securities . ...................................
Other ....................................................
Total ..................................................

Cost¥5,351967
1,112¥7,430

Unrealized
Gains

Unrealized

Losses¥339¥ 975143
230¥1,348

7
¥346

Fair
Value

¥4,715824
889¥6,428Millions of Yen

March 31, 2009
Securities classified as:
Available-for-sale:
Equity securities .................................
Debt securities . ...................................
Other ....................................................
Total ..................................................

Cost¥4,780981
1,369¥7,130

Unrealized
Gains

¥146

¥146

Unrealized

Losses¥1,258209583¥2,050

Fair
Value¥3,668772
786¥5,226

Thousands of U.S. Dollars

March 31, 2010

Cost

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

$57,512
10,393
11,952$79,857

Unrealized
Gains$3,64475$3,719Unrealized

Losses$10,479
1,537
2,472$14,488

Fair
Value

$50,677
8,856
9,555$69,088

21

Available-for-sale securities and held-to-maturity securities whose fair value was not readily determinable as ofMarch 31, 2009 were as follows. The similar information for 2010 is disclosed in Note 13.
Carrying amountMarch 31, 2009
Available-for-sale:
Equity securities ...............................................
Other ..................................................................
Held-to-maturity .................................................
Total ................................................................

Millions of Yen

¥332
1
151
¥484

Proceeds from sales of available-for-sale securities for the year ended March 31, 2009 were ¥1,160 million. Grossrealized gains and losses on these sales, computed on the moving average cost basis, were ¥165 million and ¥175
million, respectively, for the year ended March 31, 2009.
The information of available-for-sale securities which were sold during the year ended March 31, 2010 was asfollows:
Millions of Yen

March 31, 2010
Securities classified as:
Available-for-sale:
Equity securities ...............................................
Debt securities . .................................................
Other ..................................................................
Total ................................................................

Proceeds

Realized Gains

Realized Losses¥ 872

¥77

¥ 97

243
¥1,115

11
¥88

84
¥181

Thousands of U.S. Dollars

March 31, 2010
Securities classified as:
Available-for-sale:
Equity securities ...............................................
Debt securities . .................................................
Other ..................................................................
Total ................................................................

Proceeds

Realized Gains

Realized Losses$ 9,371$828$1,043

2,612$11,983

118
$946

902
$1,945The impairment losses on available-for-sale equity securities for the years ended March 31, 2010 and 2009 were
¥8 million ($86 thousand) and ¥182 million, respectively.
The carrying values of debt securities and other by contractual maturities for securities classified as availablefor-sale and held-to-maturity at March 31, 2010 were as follows:
Millions of Yen

Due after one year through five years . ..............
Due after ten years ..............................................
Total ................................................................

22¥ 1101,102¥1,212Thousands of
U.S. Dollars$ 1,182
11,844$13,026

4. INVENTORIESInventories at March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

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

2010
¥ 92
7,436
168
¥7,696

2009
¥ 96
6,676
209
¥6,9812010$ 98979,922
1,806$82,717

5. INVESTMENT PROPERTYOn November 28, 2008, the ASBJ issued ASBJ Statement No.20 “Accounting Standard for Investment Property
and Related Disclosures” and issued ASBJ Guidance No.23 “Guidance on Accounting Standard for Investment
Property and Related Disclosures”. This accounting standard and the guidance are applicable to investment
property and related disclosures at the end of the fiscal years ending on or after March 31, 2010. The Groupapplied the new accounting standard and guidance effective March 31, 2010.
The Group holds some rental properties such as office buildings and land in the metropolitan area. Net of rental
income and operating expenses for those rental properties was ¥881 million ($9,469 thousand) for the fiscal year
ended March 31, 2010.
In addition, the carrying amounts, changes in such balances and market prices of such properties are as follows.
Millions of Yen
Carrying amount
April 1, 2009

8,426

Decrease

Fair value
March 31,2010

(173)

8,253

March 31,2010

16,018

Thousands of U.S. Dollars
Carrying amount
April 1, 2009

90,563

Decrease(1,859)Fair value
March 31,2010

88,704

March 31,2010

172,163

Notes:
1) C arrying amount recognized in balance sheet is net of accumulated depreciation and accumulated
impairment losses, if any.
2) D ecrease during the fiscal year ended March 31, 2010 represents the recognition of depreciation of ¥173
million ($1,859 thousand).
3) F air value of properties as of March 31, 2010 is measured by the Group in accordance with its Real-estateAppraisal Standard.

23

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2010 and 2009 consisted of notes to banks. The annual interest rates
applicable to the short-term borrowings ranged from 0.630% to 0.637% and 0.930% to 0.997% at March 31, 2010
and 2009, respectively.
Long-term debt at March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2010
Unsecured loans from banks due seriallyto 2013 with interest rates ranging from1.250% to 1.670% . ..............................................
Unsecured loans from Fukushima Prefecturedue serially to 2009 without interest: .............
Obligation under finance leases ..............................
Total ................................................................
Less current portion .............................................
Long-term debt, less current portion . .................

2010

2009

¥4,433¥4,551$47,646

200
4,633(4,185)¥ 448

73
232
4,856
(269)
¥4,5872,150
49,796(44,981)$ 4,815

Annual maturities of long-term debt at March 31, 2010 for the five years and thereafter were as follows:Year Ending March 31

2011 ........................................................
2012 ........................................................
2013 ........................................................
2014 ........................................................
2015 and thereafter . ..............................
Total .................................................

Thousands of
U.S. Dollars

Millions of Yen
Long-term debt

Lease obligations

Long-term debt

Lease obligations¥4,118
118
118
79

¥ 67
48
35
23
27
¥200

$44,261
1,268
1,268
849

$ 720
516
377
247
290
$2,150¥4,433$47,646

The Group had commitment-line contracts of ¥8,000 million ($85,985 thousand) in total over three years withfinancial institutions in order to secure the stability of long-term funding. Each contract includes a financial
covenant. At March 31, 2010, the Group had utilized ¥8,000 million ($85,985 thousand) of the commitment-line.
In addition, the Group had overdraft contracts of ¥5,200 million ($55,890 thousand) in total. At March 31, 2010,
the Group had not utilized the overdraft.

Financial covenants
Short-term borrowings of ¥8,000 million and ¥4,000 million of current portion of long-term debt include
financial covenants, with which the Group is in compliance.
The major financial covenants are as follows:
If the Group fails to comply with the following covenants, creditors may require repayment of all debt.
(1) About ¥8,000 million of short-term borrowings
Shareholder’s equity of each fiscal year will not fall below 75% of the higher of the following:a. Shareholder’s equity of fiscal year immediately preceding the fiscal year; orb. Shareholder’s equity of fiscal year ending on March 31, 200824

(2) About ¥4,000 million of long-term debt
Net assets of each fiscal year will not fall below 75% of the higher of the following:a. Net assets of fiscal year immediately preceding the fiscal year; or
b. Net assets of fiscal year ending on March 31, 2005
(3) Ordinary income for each fiscal year will not be negative for two consecutive fiscal years.
At March 31, 2010, land, building and structures of ¥2,108 million ($22,657 thousand) were pledged as collateralfor long-term debt of ¥433 million ($4,654 thousand).

7. RETIREMENT AND PENSION PLANS
The Group has severance payment plans for employees, directors and corporate auditors.
Under most circumstances, employees terminating their employment are entitled to retirement benefits
determined based on the rate of pay at the time of termination, years of service and certain other factors. Suchretirement benefits are made in the form of a lump-sum severance payment from the Company or fromconsolidated subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments if thetermination is involuntary, by retirement at the mandatory retirement age, by death, or by voluntary retirement
at certain specific ages prior to the mandatory retirement age.
The liabilities for retirement benefits at March 31, 2010 and 2009 for directors and corporate auditors were ¥103
million ($1,107 thousand) and ¥114 million, respectively. The retirement benefits for directors and corporate
auditors are paid subject to the approval of the shareholders.
The liability for employees’ retirement benefits at March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

Projected benefit obligation .................................
Fair value of plan assets .......................................
Unrecognized actuarial loss .................................
Unrecognized transitional obligation ..................
Unrecognized prior service cost . .........................
Prepaid pension cost . ...........................................
Net liability . ......................................................

2010

2009

2010

¥(13,468)
7,520
2,642
638
(127)
344
¥ (3,139)¥(13,529)
6,130
4,181
779
(140)
375
¥ (2,954)$(144,755)
80,82528,397
6,857(1,365)3,697$ (33,738)

The components of net periodic benefit costs for the years ended March 31, 2010 and 2009 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2010
Service cost . ..........................................................
Interest cost ...........................................................
Expected return on plan assets ............................
Amortization of prior service cost .......................
Recognized actuarial loss .....................................
Amortization of transitional obligation . .............
Net periodic benefit costs .................................

¥ 907
303
(184)
(13)
497
135
¥1,6452009¥ 914
306
(232)
(13)
347
135
¥1,4572010$ 9,748
3,257(1,978)
(140)
5,343
1,451
$17,681Note:
The net periodic benefit costs above excludes required funding for the multi-employer pension plan amounting
to ¥831 million ($8,932 thousand) and ¥818 million at March 31, 2010 and 2009 respectively, for which plan
assets could not be allocated to each participating employer.

25

Assumptions used for the years ended March 31, 2010 and 2009 were set forth as follows:

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

2010

2009

2.50%
3.00%
13 years
13 years
15 years

2.50%
3.00%
13 years
13 years
15 years

Funded status of the multi-employer pension plan at March 31, 2009 (available information as of March 31,2010), to which contributions were recorded as net periodic retirement benefit costs, was as follow:
Millions of Yen

Fair value of plan assets .......................................

2009¥119,464

Pension benefit obligation recordedby pension fund ..................................................

183,702

Difference .........................................................

(64,238)

The Groups’ contribution percentage for multi-employer pension plan.......11.6%
Note:
1. The difference mainly resulted from prior service cost of ¥31,009 million and deficiency carried-forward of¥33,229 million.
2. Prior service cost is amortized over 20 years.
3. The Group expensed special contributions of ¥317 million in the consolidated statements of income in thefiscal year ended March 31, 2010.
4. The above contribution ratio does not conform to the actual ratio applied to the Group.

8. DEPOSITS RECEIVED
Deposits received from tenants amounted to ¥2,045 million ($21,980 thousand) at March 31, 2010 and ¥2,213
million at March 31, 2009.
At March 31, 2010, land, building and structures for rent of ¥1,567 million ($16,842 thousand) were pledged ascollateral for these deposits.

26

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. For companies that meet certain criteria suchas; (1) having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate
Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal
term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind)at any time during the fiscal year if the company has prescribed so in its articles of incorporation. The Company
meets all the above criteria.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the company so stipulate. The Companies Act provides certain limitations on theamounts available for dividends or the purchase of treasury stock. The limitation is defined as the amountavailable for distribution to the shareholders, but the amount of net assets after dividends must be maintained at
no less than ¥ 3 million.
(b) Increases / decreases and transfer of common stock, reserve and surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve(a component of retained earnings) or as additional paid-in capital (a component of capital surplus) dependingon the equity account charged upon the payment of such dividends until the total of 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 under certain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stockby resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amountavailable for distribution to the shareholders which is determined by specific formula.
Under the Companies Act, stock acquisition rights 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.

27

10. INCOME TAXESThe Company and its domestic subsidiaries were subject to Japanese national and local income taxes which, inthe aggregate, resulted in a normal effective statutory tax rate of approximately 39.5% for the years ended March
31, 2010 and 2009.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at March 31, 2010 and 2009 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2010

2010

2009

Deferred tax assets :Unrealized loss on available-for-salesecurities . ..........................................................
Accrued bonuses .................................................
Tax loss carryforwards . ......................................

¥ 396791
1,537

Liability for retirement benefits
for directors and corporate auditors ...............

8
791
2,357

$ 4,256
8,502
16,520

42

46

451

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

1,260
103
109
570
(2,791)¥2,017

1,192
54
110
570
(3,129)¥1,99913,543
1,107
1,172
6,126
(29,998)$21,679

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

¥ 214¥ 218$ 2,300

Unrealized gain on available-for-salesecurities . ..........................................................
Prepaid pension cost . .........................................
Other ....................................................................
Total ................................................................

13671¥ 421148
68¥ 434

1,462
763$ 4,525

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

¥1,596¥1,565$17,154¥A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying consolidated statements of income for the years ended March 31, 2010 and 2009 was as follows:2010
Normal effective statutory tax rate ......................
Per capita levy of local tax ....................................
Expenses not deductible for tax purposes ...........
Valuation allowance . ............................................
Other – net . ...........................................................
Actual effective tax rate ........................................

28

39.5%
3.6
1.4
(8.3)
6.6
42.8%

2009
39.5%
10.9
4.4
3.7
15.6
74.1%

As of March 31, 2010, the Company and certain subsidiaries had tax loss carryforwards aggregating
approximately ¥3,809 million ($40,939 thousand) which were available to be offset against taxable income ofthese companies in future years. These tax loss carryforwards, if not utilized, will expire as follows:
Years Ending March 31

2011 ......................................................................
2012 ......................................................................
2013 ......................................................................
2015 ......................................................................
2016 ......................................................................
2017 ......................................................................
Total ..................................................................

Millions of Yen

Thousands of
U.S. Dollars

17
7
3,534
133
98
20
¥3,809183
75
37,984
1,429
1,053
215
$40,939

11. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥341 million ($3,665 thousand) and ¥342 million forthe years ended March 31, 2010 and 2009, respectively.

12. LEASES(1) Lessee
The Group leases certain machinery, computer equipment and other assets.
The minimum rental commitments under noncancellable operating leases at March 31, 2010 and 2009, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2010
Due within one year . ............................................
Due after one year . ...............................................
Total ................................................................

2010

2009
¥0

¥1

$0

¥0

0
¥1

$0

(2) Lessor
The minimum rental commitments under noncancellable operating leases at March 31, 2010 and 2009, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2010

2009

2010

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

¥ 676¥ 678$ 7,266

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

3,233¥3,9093,909¥4,58734,748$42,01429

13. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESOn March 10, 2008, the ASBJ revised ASBJ Statement No. 10 “Accounting Standard for Financial Instruments”
and issued ASBJ Guidance No.19 “Guidance on Accounting Standard for Financial Instruments and Related
Disclosures”. This accounting standard and the guidance are applicable to financial instruments and related
disclosures at the end of the fiscal years ending on or after March 31, 2010 with early adoption permitted fromthe beginning of the fiscal years ending before March 31, 2010. The Group applied the revised accounting
standard and the new guidance effective March 31, 2010.
(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 the investment committee and it examines basic principles of transactions and each financial instrument.
(2) Nature and extent of risks arising from financial instruments
Receivables such as trade notes and trade accounts are exposed to customer credit risk. Although receivables inforeign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates, the position,
net of a portion of payables in foreign currencies, is hedged by using forward foreign currency contracts.
Marketable and investment securities, mainly held-to-maturity securities and equity instruments of customers
and suppliers of the Group, are exposed to the risk of market price fluctuations.
Payment terms of payables, such as trade notes and trade accounts, are less than one year.
Maturities of bank loans and lease obligation are less than eight years after the balance sheet date. Although apart of such bank loans are exposed to market risks from changes in variable interest rates, those risks are
mitigated by using derivatives of interest-rate swaps.
Derivatives mainly include forward foreign currency contracts and interest-rate swaps, which are used to
manage exposure to market risks from changes in foreign currency exchange rates of receivables, payables andinvestment securities, and from changes in interest rates of bank loans. Please see Note 14 for more detail about
derivatives.
(3) Risk management for financial instruments
Credit Risk Management
Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to
the contractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines,
which include monitoring of payment term and balances of major customers by each business administration
department to identify the default risk of customers in early stage. With respect to held-to-maturity financial
investment, the Group manages its exposure to credit risk by limiting its funding to high credit rating bonds inaccordance with in its internal guidelines. Please see Note 14 for the detail about derivatives.
The maximum credit risk exposure of financial assets is limited to their carrying amounts as of March 31, 2010.
Market risk management (foreign exchange risk and interest rate risk)
Foreign currency trade receivables and payables are exposed to market risk resulting from fluctuations inforeign currency exchange rates. Such foreign exchange risk is hedged principally by forward foreign currency
contracts.
Interest-rate swaps are used to manage exposure to market risks from changes in interest rates of loan payables.
Marketable and investment securities are managed by monitoring market values and financial position ofissuers on a regular basis.

30

Basic principles of derivative transactions have been approved by the investment committee based on theinternal guidelines which prescribe the authority and the limit for each transaction by the corporate treasury
department. Reconciliation of the transaction and balances with customers is made, and the transaction data
has been reported 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 maturity
dates. The Group manages its liquidity risk by concluding the commitment-line and overdraft contracts, alongwith adequate financial planning by the corporate treasury department.
(4) Concentration of credit risk
48.4% of total receivables is from three major customers of the Group as of March 31, 2010.
(5) Fair values of financial instruments
Fair values of financial instruments are based on quoted price in active markets. If quoted price is not available,
other rational valuation techniques are used instead. Also please see Note 14 for the detail of fair value forderivatives.
(a) Fair value of financial instruments
Millions of Yen

March 31, 2010

Carrying
amountFair value

Cash and cash equivalents
Receivables
Investment securities
Total¥ 6,237
28,281
6,574¥41,092¥ 6,237
28,281
6,574¥41,092

Short-term borrowings
PayablesLong-term debt
Total

¥ 8,000
5,706
4,633¥18,339¥ 8,000
5,706
4,648¥18,354

Unrealized
gain/loss¥15¥15

Thousands of U.S. Dollars

March 31, 2010

Carrying
amountFair value

Cash and cash equivalents
Receivables
Investment securities
Total$ 67,036
303,966
70,658$441,660$ 67,036
303,966
70,658$441,660

Short-term borrowings
PayablesLong-term debt
Total

$ 85,985
61,32849,796$197,109$ 85,985
61,32849,957$197,270

Unrealized
gain/loss

$161
$161

Cash and cash equivalents, receivables, payables and short-term borrowings
The carrying values of these approximate fair values because of their short maturities.

31

Investment securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for theequity instruments, and at the quoted price obtained from the financial institution for certain debt
instruments. The information of the fair value for the investment securities by classification is included in Note
3.
Long- term debt
The fair value of long-term debt is determined by discounting the cash flows related to the debt at the Group’s
assumed corporate borrowing rate.
Derivatives
The information of the fair value for derivatives is included in Note 14.
(b) Financial instruments whose fair value cannot be reliably determined
Carrying amountMarch 31, 2010

Millions of Yen

Investments in equity instruments that do nothave a quoted market price in an active market¥810

Thousands of
U.S. Dollars$8,706(6) Maturity analysis for financial assets and securities with contractual maturities
Millions of Yen

March 31, 2010
Cash and cash equivalents
Receivables
Investment securities
Held-to-maturity securities
Available-for-sale securities with
contractual maturities
Total

Due in one
year or lessDue after one
year throughfive years

Due after five
years throughten years

Due after
ten years¥ 6,237
28,281¥34,518¥ 10¥ 145

100
¥110

957
¥1,102Thousands of U.S. Dollars

March 31, 2010
Cash and cash equivalents
Receivables
Investment securities
Held-to-maturity securities
Available-for-sale securities with
contractual maturities
Total

Due in one
year or lessDue after five
years throughten years

Due after
ten years$ 67,036
303,966$371,002

Please see Note 6 for annual maturities of long-term debt.

32

Due after one
year throughfive years$ 107$ 1,558

1,075$1,182

10,286$11,84414. DERIVATIVESThe Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange andinterest rates. Foreign exchange forward contracts and interest rate swaps are utilized by the Group to reduce
foreign currency exchange and interest rate risks.
It is the Group’s policy to use derivatives only for the purpose of reducing risks, not for trading or speculative
purpose.
Because the counterparties to these derivatives are limited to domestic banks having high reputations, theGroup does not anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies which
regulate the authorization and credit limit amount.
As noted in Note 13, the Group applied ASBJ Statement No.10 “Accounting Standard for Financial Instruments”
and ASBJ Guidance No.19 “Guidance on Accounting Standard for Financial Instruments and Related
Disclosures”. The accounting standard and the guidance are applicable to financial instruments and related
disclosures at the end of the fiscal years ending on or after March 31, 2010; therefore, the required information
is disclosed only for 2010.

Derivative transactions to which hedge accounting is not applied at March 31, 2010
Millions of Yen

March 31, 2010
Foreign currency forward contracts:
Selling EURO ..................................
Interest rate swaps:(fixed rate payment, floating
rate receipt) ....................................

Contract
AmountContract
Amount due after
One Year

Fair
Value

Unrealized
Gain

¥631

¥631

¥11

¥11

¥140

¥   0

¥(1)

¥ 1

Thousands of U.S. Dollars

March 31, 2010
Foreign currency forward contracts:
Selling EURO ..................................
Interest rate swaps:(fixed rate payment, floating
rate receipt) ....................................

Contract
AmountContract
Amount due after
One Year

Fair
Value

Unrealized
Gain$6,782$6,782$118$118$1,505$$(11)

$ 11

0

33

Derivative transactions to which hedge accounting is applied at March 31, 2010
Millions of Yen
Hedgeditem

March 31, 2010
Foreign currency forward contracts:
Selling U.S.$ ....................................

Investment
securities

Interest rate swaps:(fixed rate payment, floating
rate receipt) ....................................

Current
portion of
long-term
debt

Contract
AmountContract
Amount due after
One Year

Fair
Value

¥ 399

¥399

¥(12)

¥4,000

¥   0

¥(30)

Thousands of U.S. Dollars
Hedgeditem

March 31, 2010
Foreign currency forward contracts:
Selling U.S.$ ....................................

Investment
securities

Interest rate swaps:(fixed rate payment, floating
rate receipt) ....................................

Current
portion of
long-term
debt

Contract
AmountContract
Amount due after
One Year

Fair
Value

$ 4,288$4,288$(129)$42,992$

$(322)

0

The following is the fair value information for foreign currency forward contracts to which hedge accounting is
not applied at March 31, 2009. Foreign currency forward contracts which qualify for hedge accounting are
excluded from the information below.
Millions of Yen

March 31, 2009

Contract
AmountForeign currency forward contracts:
Selling U.S.$ ....................................
Interest rate swaps:(fixed rate payment, floating
rate receipt) ....................................

Fair
Value

Unrealized
Loss

¥972

¥971

¥(1)

¥280

¥ (3)¥(3)

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

15. CONTINGENT LIABILITIESAt March 31, 2010, the Group had the following contingent liabilities:
Millions of Yen

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

34

¥201

Thousands of
U.S. Dollars$2,16016. SUBSEQUENT EVENTSAppropriations of Retained Earnings
On May 20, 2010, the following appropriation of retained earnings at March 31, 2010 was resolved by the Boardof Directors:
Thousands of
U.S. Dollars

Millions of Yen

Year-end cash dividends, ¥7.5 ($0.08) per share .................

¥598$6,427

17. SEGMENT INFORMATIONThe Group operates in the following segments:
Domestic consulting services in public and private sectors related to mainly infrastructure development;
Overseas consulting services related to mainly ODA funded development projects;
Manufacturing of products and appliances related to electric production and distribution systems;
Engineering services related to construction and maintenance of public and private electric power
facilities;
Real estate leasing sales of our Group’s real estate leasing operation;
Others software development and sales, staffing service and others
Information about business segments, geographic segments and sales to foreign customers of the Groupfor the years ended March 31, 2010 and 2009, is as follows:(1) Business Segments
a. Sales and Operating Income
Millions of Yen

2010
Real estateleasing

OthersConsoli-datedOverseas

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

¥35,932¥16,723¥7,855¥2,541¥1,256¥ 789Intersegment sales .................

207

44

82

1,948

138

1,396

¥(3,815)

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

36,13916,767

7,937

4,489

1,394

2,185

(3,815)65,096

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

35,67015,535

6,998

4,234

513

2,207

(3,428)61,729Operating income ..................

¥¥ 1,232¥ 939¥ 255¥ 881¥ (22)¥ (387) ¥ 3,367

469

Engineering

Eliminations/Corporate

Domestic

Manufacturing¥65,096b. T
 otal Assets, Depreciation and Capital Expenditures
Millions of Yen

2010
Manufacturing

Eliminations/Corporate

Consoli-dated¥1,519¥20,440¥80,100

58

488

1,387

38

525

Engineering

Real estateleasing

OthersDomestic

Overseas

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

¥28,425¥10,102¥7,073¥1,894¥10,647

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

351

61

235

7

187

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

270

61

148

7

1

35

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

2010
Overseas

Manufacturing

Engineering

Real estateleasing

OthersSales to customers ................. $386,199 $179,740

Domestic

Eliminations/Corporate

Consolidated$84,426$27,311$13,500$ 8,480

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

2,225

473

881

20,9371,483

15,005$(41,004)$699,656

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

388,424

180,21385,307

48,24814,98323,485(41,004)

699,656

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

383,383

166,971

75,21545,507

5,514

23,721(36,844)

663,467

Operating income .................. $ 5,041 $ 13,242$10,092$ 2,741$ 9,469$ (236) $ (4,160) $ 36,189

b. Total Assets, Depreciation and Capital Expenditures
Thousands of U.S. Dollars

2010
Domestic

Overseas

Total assets ............................. $305,514 $108,577

Manufacturing

Engineering

Real estateleasing$76,021$20,357 $114,435

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

3,773

656

2,526

75

2,010

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

2,902

656

1,591

75

11

Eliminations/Corporate

OthersConsolidated$16,326 $219,690 $860,920
623

5,245

14,908408

5,643

a. Sales and Operating Income
Millions of Yen

2009

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

Domestic

Overseas

Manufacturing¥36,367¥14,602¥8,101Eliminations/Corporate

Engineering

Real estateleasing

Others¥3,007¥1,262¥ 859¥64,198

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

122

7

159

1,922

194

1,346

¥(3,750)

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

36,48914,609

8,260

4,929

1,456

2,205

(3,750)Operating expenses ................

36,036

15,070

7,240

4,663

584

Operating income ..................

¥¥ (461)¥1,020¥ 266¥ 872453

Consolidated

64,1982,156(3,279)62,470¥¥ (471)¥ 1,728

Eliminations/Corporate

Consolidated

49b. Total Assets, Depreciation assets and Capital Expenditures
Millions of Yen

2009
Domestic

Overseas

Manufacturing

Engineering

Real estateleasing

OthersTotal assets .............................

¥26,817¥9,229¥6,649¥1,407¥10,591¥ 967¥21,922¥77,582

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

317

62

248

9

192

1

526

1,355

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

264

29

97

3

378

2

36

809

(2) Geographical Segments
The Group was located in Japan for the years ended March 31, 2010 and 2009, and is not subject to thedisclosure of market value information.

(3) Sales to Foreign Customers
Sales to foreign customers for the years ended March 31, 2010 and 2009 amounted to ¥16,710 million ($179,600
thousand) and ¥14,710 million, respectively.

36

37

Non-consolidated Balance Sheets
Nippon Koei Co., Ltd.
March 31, 2010 and 2009

Thousands of
U.S. Dollars (Note 1)

Million of Yen

ASSETS

2010

2010

2009

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

¥ 4,561

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

¥ 5,076$ 49,022

14

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

27

36

290

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

21,337

20,373229,331

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

(22)

(69)

(236)

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

4,164

3,919

44,755Inventories ‑ work in process .............................

3,664

2,932

39,381

Deferred tax assets (Note 9) ...............................

694

1,132

7,459

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

1,410

1,450

15,155

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

35,83534,863385,157

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

10,248

10,248110,146

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

16,266

16,279174,828

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

1,156

1,165

12,425

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

1,144

1,113

12,296

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

222

197

2,386

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

29,03629,002

312,081

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

(11,423)(10,956)(122,775)

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

17,61318,046

189,306

PROPERTY, PLANT AND
EQUIPMENT (Note 7):

INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 3) ...........................
Investments in and advances to subsidiaries
and associated companies (Note 4) .................
Deferred tax assets (Note 9) ...............................

6,710

5,509

72,120

6,156
204

6,388

66,165
2,193

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

2,535

2,530

27,245

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

(23)

(23)

(247)

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

15,582

14,404

167,476

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

¥69,030¥67,313$741,939

See notes to non-consolidated financial statements.

38

Thousands of
U.S. Dollars (Note 1)

Million of Yen

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short‑term borrowings (Note 5) ........................
Current portion of long-term debt (Note 5) ......
Payables:Trade notes ........................................................
Trade accounts ..................................................
Income taxes payable .........................................
Advances received ...............................................
Accrued bonuses .................................................
Allowance for anticipated project loss . .............
Other current liabilities........................................
Total current liabilities ...................................
LONG-TERM LIABILITIES:Long-term debt (Note 5) .....................................
Liability for retirement benefits (Note 6) ..........
Deposits received (Note 7) . ................................
Deferred tax liabilities (Note 9) . ........................
Total long-term liabilities ...............................

2010

2009

2010

¥10,100
4,048¥ 9,900
57$108,555
43,508

56
5,994
332
3,931
1,229
214
2,350
28,254

20
6,309
105
3,735
1,137
97
2,433
23,793602
64,424
3,568
42,251
13,2092,300
25,259303,676

67
368
2,335

720
3,955
25,097

2,770

4,078
416
2,505
367
7,366

29,772

7,393

7,393

79,460

COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 11 and 12)
EQUITY (Notes 8 and 13):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares in 2010 and 2009 ................
Capital surplus
Additional paid-in capital .................................
Other capital surplus ........................................
Retained earnings:
Legal reserve .....................................................
Retained earnings - unappropriated ................
Unrealized loss onavailable-for-sale securities .............................
Deferred loss onderivatives under hedge accounting ...............
Treasury stock—at cost
6,923,529 shares in 2010
and 6,081,506 shares in 2009 ...........................
Total equity . ....................................................

6,093
38

6,093
38

65,488408

1,546
25,7101,546
24,918

16,617276,333(592)(1,887)(6,363)(2,175)38,006(1,947)36,154(23,377)
408,491

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

¥69,030¥67,313$741,939

(7)

(75)

39

N o n - conso lida ted S ta temen t s o f Op erat i o n s
Nippon Koei Co., Ltd.
Years Ended March 31, 2010 and 2009

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2010

2010

2009

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

¥47,006
36,35910,647¥47,015
37,6309,385$505,224
390,789
114,435SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES(Note 10) . ............................................................
Operating income ...........................................

9,154
1,493

9,176
209

98,38816,047

550

586
(218)
(370)
161
(187)
(160)
225
37

5,911
(1,666)
1,344
634(1,945)
(64)
387
3,503
8,104

OTHER INCOME (EXPENSES):Interest and dividend income ............................
Interest expense ..................................................
Foreign currency exchange gain (loss) ..............
Gain on sales of investment securities . .............
Loss on sales of investment securities ...............
Loss on valuation of investment securities .......
Reversal of allowance for doubtful accounts ....
Other-net . ............................................................
Other income-net ............................................

59
(181)
(6)
36
326
754

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

2,247

246

24,151

INCOME TAXES (Note 9):
Current ................................................................
Deferred ...............................................................
Total income taxes ..........................................

593
258
851

242
192
434

6,374
2,773
9,147

NET INCOME (LOSS) .......................................

¥ 1,396(188)$ 15,004

(155)
125

U.S. Dollars(Note 1)Yen

PER SHARE OF COMMON STOCK (Note2. o.):Basic net income (loss) .......................................
Cash dividends applicable to the year ...............
See notes to non-consolidated financial statements.

40¥17.347.50(2.33)
7.50

$0.19
0.08

N o n - conso lida ted S ta temen t s o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd.
Years Ended March 31, 2010 and 2009

Thousands

Millions of Yen

Outstanding
Number of
Shares ofCommonStock

BALANCE, APRIL 1, 2008 ..........

80,672

Capital Surplus

Retained Earnings

CommonStock

Additional

Other

Paid-in
CapitalCapitalSurplus¥7,393¥6,093

Unrealized
Gain (loss)
on Available-

¥38

Legal
Reserve

Unappropriatedfor-sale
Securities¥1,546¥25,710¥ (119)DeferredGain (loss)
on

Treasury

Total

Derivatives

Stock

Equityunder Hedge
Accounting¥38¥(1,922) ¥38,777

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

(188)

(188)

Cash dividends, ¥7.50 per share . ...

(604)

(604)

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

(97)

(25)

Net change in the year ................
BALANCE, MARCH 31, 2009 ......

(1,768)80,575

7,393

6,093

38

1,546

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

(1,887)(1,947)

(604)

(604)

(842)

(228)
1,295

79,733¥7,393¥6,093¥38¥1,546¥25,710

36,154
1,396

Net change in the year ................
BALANCE, MARCH 31, 2010 .......

(25)(1,806)

1,396

Cash dividends, ¥7.50 per share . ...
Purchase of treasury stock ..........

24,918(38)¥ (592)

(7)

(228)
1,288

¥ (7) ¥(2,175) ¥38,006

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

Retained Earnings

CommonStock

BALANCE, MARCH 31, 2009 ......

$79,460

Additional
Paid-in
Capital

Other
CapitalSurplus$65,488

$408

Legal
Reserve

Unrealized
Gain (loss)

DeferredGain (loss)on
on AvailableDerivatives
for-sale
Unappropriatedunder Hedge
Securities
Accounting$16,617 $267,821 $(20,282)

Treasury
Stock

Total
Equity$(20,926) $388,586

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

15,00415,004

Cash dividends, $0.08 per share . ...

(6,492)(6,492)

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

(2,451)

Net change in the year ................
BALANCE, MARCH 31, 2010 ......

$79,460$65,488$408$16,617 $276,333(2,451)

13,919(75)

13,844$(6,363)$(75) $(23,377) $408,491

See notes to non-consolidated financial statements.

41

N o te s to No n- con solid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd.
Years Ended March 31, 2010 and 2009

1. BASIS OF PRESENTING NON-CONSOLIDATED FINANCIAL STATEMENTS
The accompanying non-consolidated financial statements have been prepared from the accounts maintained by
Nippon Koei Co., Ltd. (the “Company”) in accordance with the provisions set forth in the Corporate Act of Japanand in conformity with accounting principles generally accepted in Japan, which are different in certain respects
as to application and disclosure requirements of International Financial Reporting Standards.
As consolidated statements of cash flows and certain disclosures are presented in the consolidated financial
statements of the Company, non-consolidated statements of cash flows and certain disclosures are not presented
herein in accordance with accounting principles generally accepted in Japan.
In preparing these non-consolidated financial statements, certain reclassifications and rearrangements havebeen made to the Company’s financial statements issued domestically in order to present them in a form which
is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2009
financial statements to conform to the classifications used in 2010.
The non-consolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and have been made at the rate of ¥93.04 to $1, therate of exchange at March 31, 2010. Such translations should not be construed as representations that theJapanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Non-consolidation —The non-consolidated financial statements do not include the accounts of subsidiaries.
Investments in subsidiaries and associated companies are stated at cost.
b. Cash Equivalents —Cash equivalents are short-term investments that are readily convertible into cash andthat are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits and investment trusts, all of which mature or become due within
three months of the date of acquisition.
c. Inventories —Work in process is stated at the lower of cost, mainly determined by the specific identification
cost method, or net selling value.
d.	Marketable and Investment Securities —Marketable and investment securities are classified and accounted
for, depending on management’s intent, as follows:i) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent andability to hold to maturity are reported at amortized cost, ii) available-for-sale securities, which are notclassified as the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of
applicable taxes, reported in a separate component of equity and iii) investments in subsidiaries andassociated companies, are reported at cost.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method.
For other than temporary declines in fair value, investment securities are reduced to net realizable value by acharge to operations.
e. Property, Plant and Equipment —Property, plant and equipment are stated at cost. Depreciation ofproperty, plant and equipment is computed substantially by the declining-balance method at rates based on
the estimated useful lives of the assets, while the straight-line method is applied to buildings acquired after
April 1, 1998 and lease assets as well as other equipment for rent. The range of useful lives is principally from
3 to 50 years for buildings and structures, from 2 to 15 years for machinery and equipment, and from 2 to 20
years for furniture and fixtures. The useful lives for lease assets are the terms of the respective leases.
f. Allowance for Doubtful Accounts —The allowance for doubtful accounts is stated in amounts considered tobe appropriate based on the companies’ past credit loss experience and an evaluation of potential losses in
the receivables outstanding.

42

g. Retirement and Pension Plans —The Company has a contributory defined benefit pension plan andunfunded retirement benefit plan for the benefit of its employees.
Effective April 1, 2000, the Company adopted a new accounting standard for the employees’ retirement
benefits and accounted for the liability for retirement benefits based on projected benefit obligations andplan assets at the balance sheet date.
Unrecognized actuarial gain or loss is recognized by the straight-line method over 13 years.
Unrecognized prior service costs are recognized by the straight-line method over 13 years.
Retirement benefits for directors and corporate auditors are provided at the amount which would be
required if all directors and corporate auditors retired at the balance sheet date.
h. Allowance for Anticipated Project Loss —The Company has made a provision for anticipated losses on
uncompleted project contracts.
i. Accrued Bonuses —Bonuses to employees, directors and corporate auditors are accrued at the year end towhich such bonuses are attributable.
j

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

k. Leases —In March 2007, the ASBJ issued ASBJ Statement No.13, “Accounting Standard for Lease
Transactions”, which revised the previous accounting standard for lease transactions issued in June 1993.
The revised accounting standard for lease transactions is effective for fiscal years beginning on or after April
1, 2008.
Under the previous accounting standard, finance leases that deemed to transfer ownership of the leased
property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as
operating lease transactions if certain “as if capitalized” information was disclosed in the note to the lessee’s
financial statements. The revised accounting standard requires that all finance lease transactions becapitalized to recognize lease assets and lease obligations in the balance sheet. In addition, the revised
accounting standard permits leases which existed at the transition date and did not transfer ownership of theleased property to the lessee to be measured at the obligations under finance leases less interest expense at
the transition date and recorded as acquisition cost of lease assets.
The Company applied the revised accounting standard effective April 1, 2008. In addition, the Company
accounted for leases which existed at the transition date and do not transfer ownership of the leased property
to the lessee as acquisition cost of lease assets measured at the obligations under finance leases at thetransition date.
All other leases are accounted for as operating leases
l. Foreign Currency Transactions —All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet
date. The foreign exchange gains and losses from translation are recognized in the non-consolidated
statements of operations.
m. 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).

43

n. Derivatives and Hedging Activities —The Company uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange and interest rates. Foreign exchange forward contracts andinterest rate swaps are utilized by the Company to reduce foreign currency exchange and interest rate risks.
The Company does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions 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 are recognized in the statement of operations and b) for derivatives used
for hedging purposes, if 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.
The foreign exchange forward contracts are measured at their fair value but the unrealized gains / losses aredeferred until the underlying transactions are completed.
The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are notremeasured at market value but the differential paid or received under the swap agreements are recognized
and included in interest expenses or income.
o. Per Share Information —Basic net operations per share is computed by dividing net operations available toshareholders of common stock, by the weighted-average number of shares of common stock outstanding forthe period. The weighted-average numbers of shares of common stock for the years ended March 31, 2010
and 2009 were 80,482,654 and 80,615,830, respectively.
Diluted net operations per share of common stock is not disclosed because the Company has nothing whichmight dilute the per share information for the years ended March 31, 2010 and 2009.
Cash dividends per share presented in the accompanying non-consolidated statements of operations are
dividends applicable to the respective years including dividends to be paid after the end of the year.
p. New Accounting Pronouncements
Asset Retirement Obligations —In March 2008, the ASBJ published a new accounting standard for asset
retirement obligations, ASBJ Statement No.18 “Accounting Standard for Asset Retirement Obligations” andASBJ Guidance No.21 “Guidance on Accounting Standard for Asset Retirement Obligations”. Under thisaccounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law orcontract that results from the acquisition, construction, development and the normal operation of a tangible
fixed asset and is associated with the retirement of such tangible fixed asset. The asset retirement obligationis recognized as the sum of the discounted cash flows required for the future asset retirement and is recordedin the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonableestimate of the asset retirement obligation cannot be made in the period the asset retirement obligation isincurred, the liability should be recognized when a reasonable estimate of asset retirement obligation can be
made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is
capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The
asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful lifeof the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to
the timing or the amount of the original estimate of undiscounted cash flows are reflected as an increase or adecrease in the carrying amount of the liability and the capitalized amount of the related asset retirementcost. This standard is effective for fiscal years beginning on or after April 1, 2010 with early adoption
permitted for fiscal years beginning on or before March 31, 2010.
Accounting Changes and Error Corrections —In December 2009, the ASBJ issued ASBJ Statement No.24“Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No.24 “Guidanceon Accounting Standard for Accounting Changes and Error Corrections”. Accounting treatments under thisstandard and guidance are as follows;(1) Changes in Accounting Policies:
When a new accounting policy is applied with revision of accounting standards, a new policy is applied
retrospectively unless revised accounting standards include specific transitional provisions. When revised
accounting standards include specific transitional provisions, an entity shall comply with the specifictransitional provisions.

44

(2) Changes in Presentations
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.
This accounting standard and the guidance are applicable to accounting changes and corrections of priorperiod errors which are made from the beginning of the fiscal year that begins on or after April 1, 2011.

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2010
Current:
Government and corporate bonds .....................
Total ................................................................
Non-current:
Marketable equity securities ..............................
Government and corporate bonds .....................
Other ....................................................................
Total ................................................................

2010

2009
¥14
¥14

¥4,879941
890¥6,710¥3,851873
785¥5,509$52,440
10,114
9,566$72,120

4. I NVESTMENTS IN AND ADVANCES TO SUBSIDIARIES AND
ASSOCIATED COMPANIESInvestments in and advances to subsidiaries and associated companies as of March 31, 2010 and 2009 were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2010¥5,618538¥6,1562009¥5,636752¥6,388

2010$60,383
5,782$66,165

The value of the investment securities of subsidiaries and associated companies are measured at the originalacquisition costs, for the fair value of them cannot be reliably determined at March 31, 2010 since market value
and estimated future cash flow are not available.

45

5. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2010 and 2009 consisted of notes to banks and subsidiaries. The annualinterest rates applicable to the short-term borrowings ranged from 0.630% to 1.475% and 0.930% to 1.875% at
March 31, 2010 and 2009, respectively.
Long-term debt at March 31, 2010 and 2009 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2010
Unsecured loans from banks due serially to2010 with interest rates ranging from 1.515%
to 1.670% .............................................................
Obligation under finance leases ...........................
Total ................................................................
Less current portion .............................................
Long-term debt, less current portion . .................

¥ 4,000
115
4,115(4,048)¥67

2009¥4,000
135
4,135
(57)
¥4,0782010$ 42,992
1,236
44,228(43,508)$
720

The Company had commitment-line contracts of ¥8,000 million ($85,985 thousand) in total over three years withfinancial institutions in order to secure the stability of long-term funding. Each contract includes a financial
covenant. At March 31, 2010, the Company had utilized ¥8,000 million ($85,985 thousand) of the commitmentline. In addition, the Company had overdraft contracts of ¥5,200 million ($55,890 thousand) in total. At March
31, 2010, the Company had not utilized the overdraft.

Financial covenants
Short-term borrowings of ¥8,000 million and ¥4,000 million of current portion of long-term debt include
financial covenants, with which the Company is in compliance.
The major financial covenants are as follows:
If the Company fails to comply with the following covenants, creditors may require repayment of all debt.
(1) About ¥8,000 million of short-term borrowings
Shareholder’s equity of each fiscal year will not fall below 75% of the higher of the following:a. Shareholder’s equity of fiscal year immediately preceding the fiscal year; orb. Shareholder’s equity of fiscal year ending on March 31, 2008
(2) About ¥4,000 million of long-term debt
Net assets of each fiscal year will not fall below 75% of the higher of the following:a. Net assets of fiscal year immediately preceding the fiscal year; or
b. Net assets of fiscal year ending on March 31, 2005
(3) Ordinary income for each fiscal year will not be negative for two consecutive fiscal years.

6. RETIREMENT AND PENSION PLANS
Under most circumstances, employees terminating their employment are entitled to retirement benefits
determined based on the rate of pay at the time of termination, years of service and certain other factors.
Such retirement benefits are made in the form of a lump-sum severance payment from the Company andannuity payments from a trustee. Employees are entitled to larger payments if the termination is involuntary,by retirement at the mandatory retirement age, by death, or by voluntary retirement at certain specific ages
prior to the mandatory retirement age.
The liabilities for retirement benefits at March 31, 2010 and 2009 for directors and corporate auditors were
¥48 million ($516 thousand) and ¥48 million, respectively. The retirement benefits for directors and corporate
auditors are paid subject to the approval of the shareholders.

46

7. DEPOSITS RECEIVED
Deposits received from tenants amounted to ¥2,045 million ($21,980 thousand) at March 31, 2010 and ¥2,213
million at March 31, 2009.
At March 31, 2010, land, building and structures for rent of ¥1,567 million ($16,842 thousand) were pledged ascollateral for these deposits.

8. EQUITY
Japanese companies are subject to the Corporate Act of Japan (the “Corporate Act”). The significant provisions
in the Corporate Act that affect financial and accounting matters are summarized below:(a) Dividends
Under the Corporate Act, companies can pay dividends at any time during the fiscal year in addition to the yearend dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as; (1)having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and(4) the term of service of the directors is prescribed as one year rather than two years of normal term by its
articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time
during the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets all
the above criteria.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the company so stipulate. The Corporate 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 Corporate Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on
the equity account charged upon the payment of such dividends until the total of aggregate amount of legal
reserve and additional paid-in capital equals 25% of the common stock. Under the Corporate Act, the total
amount of additional paid-in capital and legal reserve may be reversed without limitation. The Corporate Act
also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained
earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Corporate Act also provides for companies to purchase treasury stock and dispose of such treasury stock byresolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amountavailable for distribution to the shareholders which is determined by specific formula.
Under the Corporate Act, stock acquisition rights, which were previously presented as a liability, are now
presented as a separate component of equity.
The Corporate 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.

47

9. INCOME TAXESThe Company is subject to Japanese national and local operations taxes which, in the aggregate, resulted in anormal effective statutory tax rate of approximately 39.5% for the years ended March 31, 2010 and 2009.
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at March
31, 2010 and 2009 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2010
Deferred tax assets :Unrealized loss on available-for-salesecurities . ..........................................................
Accrued bonuses .................................................
Tax loss carryforwards . ......................................
Liability for retirement benefits
for directors and corporate auditors ...............

2010

2009

¥ 387514¥ 450505$ 4,160
5,525

19

19

204

Liability for retirement benefits
for employees ....................................................

127

145

1,365

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

85
62
205
(150)
¥1,249

38
62
244
(331)
¥1,132

914
666
2,203
(1,612)$13,425

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

¥ 214¥ 218$ 2,300

Prepaid pension cost . .........................................

136

148

1,462

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

1¥ 351¥ 8981¥ 367¥ 76511$ 3,773$ 9,652

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying non-consolidated statements of operations for the years ended March 31, 2010 and 2009 was asfollows:

2010
Normal effective statutory tax rate ....................
Per capita levy of local tax ..................................
Expenses not deductible for tax purposes .........
Valuation allowance . ..........................................
Other – net . .........................................................
Actual effective tax rate ......................................

48

2009
39.5%
3.4
1.7
(8.1)
1.4
37.9%

39.5%
31.3
15.7
72.7
16.9
176.1%

10. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to operations were ¥214 million ($2,300 thousand) and ¥246 million
for the years ended March 31, 2010 and 2009, respectively.

11. LEASES(1) Lessee
The Company leases certain machinery, computer equipment and other assets.
The minimum rental commitments under noncancellable operating leases at March 31, 2010 and 2009, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2010
Due within one year . ............................................
Due after one year . ...............................................
Total ................................................................

2010

2009
¥0

$0

¥1
0
¥1

¥0

$0

(2) Lessor
The minimum rental commitments under noncancellable operating leases at March 31, 2009 and 2008 were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2010
¥ 676
3,233
¥3,909

2009
¥ 678
3,909
¥4,5872010$ 7,266
34,748$42,014

12. CONTINGENT LIABILITIESAt March 31, 2010, the Company had the following contingent liabilities:
Millions of Yen

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

¥634

Thousands of
U.S. Dollars$6,814

13. SUBSEQUENT EVENTSAppropriations of Retained Earnings
On May 20, 2010, the following appropriation of retained earnings at March 31, 2010 was resolved by the Boardof Directors:
Millions of Yen

Year-end cash dividends, ¥7.5 ($0.08) per share ................................

¥598

Thousands of
U.S. Dollars$6,42749

Merger of the Company and its Consolidated Subsidiary
The Nippon Koei Board of Directors deliberated on a merger to take effect on April 1, 2010 with its consolidated
subsidiary, Nippon Koei Power Systems Co., Ltd., at a meeting on January 13, 2010, and the two companies
were then bound into a merger on the planned date of April 1, 2010.
(1) Objective of Merger
The present merger was implemented to promote the further streamlining of corporate group business
operations based on management goals towards unification and consolidation.
(2) Merger overview
1) Schedule
Board of directors gives assent to merger
Merger contract concluded
Appointed merger date (date takes effect)
Merger officially registered

Jan. 13, 2010
Jan. 13, 2010
Apr. 1, 2010
Apr. 7, 2010

2) Merger method
The absorption merger method was utilized with Nippon Koei as the continuing company and Nippon Koei
Power Systems Co., Ltd. was dissolved.
3) Merger ratio and merger cash grants
Nippon Koei holds all stock of Nippon Koei Power Systems Co., Ltd. and there is no arrangement on merger
ratios. Moreover, there is no issue of new stock, additional capital, or merger cash grants resulting from thismerger.
4) New share subscription rights and corporate bonds with share subscription rights for dissolved company
There were no new share subscription rights or corporate bonds with share subscription rights issued for
Nippon Koei Power Systems Co., Ltd.
(3) Name, main business operations and scope of merged company (current as of March 31, 2010)
1) Name:
Nippon Koei Power Systems Co., Ltd.
2) Main business operations:
Manufacture of electrical equipment and construction work3) Current location:
1-22 Aza-Doukyu, Morijuku, Sukagawa-shi, Fukushima, Japan4) Sales:
6,945 million yen5) Current year net profit:
358 million yen6) Common stock:
1,000 million yen
7) Net assets:
3,408 million yen8) Total assets:
8,014 million yen9) Number of employees:
257

50

51

Co rp ora te In form atio n

Board of Directors, Officers and Corporate
Auditors
Chairperson
Yoshihiko Tsunoda*

Stock Information
Shares authorized

189,580,000

Shares issued

86,656,510

Stockholders of minimum tradable stock unit

7,621

As of March 31, 2010

President:
Noriaki Hirose*

Major Stockholders

Director and Executive Vice President:
Seijiro Usuda*

Share owned(thousands)

Percentage of
total owned

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

3,939

4.55

Meiji Yasuda Life Insurance
Company.

3,653

4.21

Credit Suisse Sec (Europe)
Ltd. Pb Sec Int Non-Tr Clt

3,383

3.90

Director and Managing Executive Officers:
Tamotsu Yoshida
Yoichi Abe

The Koei Employees’
Stockholders Association

2,469

2.85

The Master Trust Bank ofJapan, Ltd. (Trustee)

2,027

2.34

Director and Executive Officers:
Ryuichi Arimoto
Akira Mizukoshi

Japan Trustee Services Bank,
Ltd. (Trustee)

1,939

2.24

Mizuho Corporate Bank, Ltd.

1,911

2.20

Director:
Masahisa Naito

Tsukishima Kikai Co.,Ltd

1,843

2.13

CBNY DFA International Cap
Value Portfolio

1,366

1.58

Nippon Life Insurance
Company

1,349

1.56

Director and Senior Managing Executive Officer:
Katsumi Yoshida
Shoji Nishitani
Yutaka Murai

Corporate Auditors:
Kenichi Sakata
Koichi Kosumi
Mineo Enomoto

As of March 31, 2010

Executive Vice President:
Kaoru Ono
Managing Executive Officers:
Yoichi Kobayashi
Yoshiki Tamemitsu
Hiromichi Sekine
Executive Officers:
Kunio Kurokawa
Kiyotaka Mizushima
Noboru Takano
Masanao Nishimura
Takashi Seki
Yoshikimi Inoue
Hiroyuki Kasahara
Hiroyuki Akiyoshi*Representative Directors

52

As of June 29, 2010

Major Offices and Facilities

Major Businesses

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

Consulting Administration

Shin-Kojimachi Office
2 Kojimachi 4-chome, Chiyoda-ku,
Tokyo 102-0083, Japan
Hanzomon Office
5 Kojimachi 2-chome, Chiyoda-ku,
Tokyo 102-0083, Japan
Domestic Branch Offices
Tokyo, Sapporo, Sendai, Niigata, Nagoya, Osaka,
Hiroshima, Shikoku, Fukuoka
Research Facility
Research and Development Center in Tsukuba
Science City, Ibaraki
Overseas Offices
Jakarta, Manila, Nairobi, Hanoi, Colombo, New
Delhi, Vientiane , Middle East (Amman),Greater Mekong Subregion (Hanoi)

Field of activity• Water• 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

53

M a j o r N i pp on Ko ei Gro u p C o mp an i es

While mainly focused on technical consulting, electrical power engineering, and power generation, theNippon Koei Group is also active in a wide range of related fields. The various businesses peripheral
to the activities of Nippon Koei, the main company in the Group, are taken on by subsidiaries andaffiliates located both at home and abroad.
These related companies, together with the principle corporation, make up the Nippon Koei Group.
The various firms maintain close cooperation based on relationships of interdependence that enhance
the strength and cohesion of the Group as a whole.
As of March 2010, the total number of employees of the Group companies based in Japan came toabout 2700, of which over 1,000 were registered engineers. The Group truly has a wealth of highly
skilled technical experts.
The subsidiary companies that comprise the consolidated Nippon Koei Group are as follows:
Tamano Consultants Co., Ltd.
This company is headquartered in the city of Nagoya and provides engineering consulting services
centered on the Chubu Region. The company boasts the most highly regarded urban and regional
planning group in Japan.
Nippon Civic Consulting Engineers Co., Ltd.
This company provides consulting services centered on planning, design, and construction supervisionof underground structures such as urban tunnels. The company specializes in shield tunnelingtechnology and the development of new underground construction technology.
NEPCO Ltd.
This company provides services for geological disaster prevention. Services include landslideprediction and preventative activities such as hazard surveys, action planning, and construction ofprotective measures. NEPCO also manufactures and sells various types of equipment for landslide
monitoring and management.
KRI International Corporation
This company is established to enhance the think tank function required for the Nippon Koei Group’s
activities. KRI is responsible for providing survey, research, and consulting work for clients, bothwithin and outside the Group, on a contract basis. KRI is also responsible for education, training,and publishing activities.
Nippon Koei U.K. Co., Ltd.
This company provides engineering consulting services to enforce Nippon Koei’s overseas operation in
the primary fields of transportation, environment, water supply and wastewater.
Nippon Koei Latin America-Caribbean Co., Ltd.
This company provides engineering consulting services to enforce Nippon Koei’s operation in Latin
America.
Nippon Koei Power Systems Co., Ltd.*This company manufactures power generation equipment and systems and electronic equipment anddevices. A wholly owned subsidiary and the largest in the Group, it works in close partnership with
Nippon Koei on business projects.
Nikki Corporation
This company is responsible for real estate management, leasing, and insurance services for Nippon
Koei and other Group companies. It also sells, imports, and exports electrical power equipment andrents and leases various goods.
Koei System Inc.
This company develops software programs used in computer control applications, dispatches
personnel, and provides support and software development for office automation systems on aconsignment basis.
El Koei Co., Ltd.
This company is responsible for employment and staffing solution for Nippon Koei Group. The
company provides various fields of qualified human resources to support the activity of the Group
Companies.
* Nippon Koei Power Systems Co., Ltd. was merged into Nippon Koei Co., Ltd. on April 1, 2010.
54

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

Printed in Japan