Financial Report
Year ended June 30, 2020

Company Profile

Nippon Koei Co., Ltd. is Japan’s leading engineering consultant. In terms ofhuman resources, we have the largest number of engineers and specialists in
the industry capable of solving the most sophisticated and complex issues
which nations face. Our business activities cover five market areas: namely,
domestic infrastructure market, international infrastructure market, electric
power engineering market, urban & spatial development market, andparticipant in energy business.

CONTENTS
Financial Highlights ...................................................................................................................1
Consolidated Balance Sheet .......................................................................................................2
Consolidated Statement of Income and Comprehensive Income ............................................4
Consolidated Statement of Changes in Equity ..........................................................................5
Consolidated Statement of Cash Flows .....................................................................................6
Notes to Consolidated Financial Statements ............................................................................7
Consolidated Independent Auditor’s Report ...........................................................................41
Nonconsolidated Balance Sheet ...............................................................................................44
Nonconsolidated Statement of Income ...................................................................................46
Nonconsolidated Statement of Cost of Sales ..........................................................................47
Nonconsolidated Statement of Changes in Equity .................................................................48
Notes to Nonconsolidated Financial Statements ....................................................................49
Nonconsolidated Independent Auditor’s Report .....................................................................60
Significant Consolidated Subsidiaries .....................................................................................63

Financial Highlights

Consolidated
Thousands of
U.S. Dollars

Millions of Yen

2020

2019

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

¥112,214¥108,589$1,043,123

Net income attributable to owner of the parent ....

2,727

3,319

25,350Years Ended June 30

Yen

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

¥180.30

2020

U.S. Dollars¥212.50$1.68
Thousands of
U.S. Dollars

Millions of Yen

2020

2019

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

¥130,216¥113,175$1,210,467

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

59,47160,206552,833

As of June 30

2020

Nonconsolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended June 30

2020

2019

2020

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

¥69,432¥68,014$645,429

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

2,527

2,329

23,491Yen

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

¥167.07

U.S. Dollars¥149.16

Thousands of
U.S. Dollars

Millions of Yen
As of June 30

2020

$1.55

2019

2020

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

¥106,240¥95,339$987,590

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

53,44553,867496,816

Notes: 1.	In Japan, a company can establish its fiscal year in accordance with the Companies Act and other related laws andregulations. By resolution of the 68th General Shareholders’ Meeting held on June 27, 2013, the fiscal year of Nippon Koei
Co., Ltd., has been established as July 1 to June 30.
2. Per share amounts are based on the weighted average number of shares outstanding during each year.
3.	The dollar amounts in this report represent translations of yen, for convenience only, at the rate of ¥107.575 to $1, theapproximate rate of exchange at June 30, 2020.

1

Co n s ol i d ated B alanc e S h eet
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
June 30, 2020

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS

2020

2019

2020

CURRENT ASSETS:
Cash and deposits ................................................
Notes and accounts receivable - trade ................
Work in process (Note 12) ...................................
Other .....................................................................
Allowance for doubtful accounts ........................
Total current assets ............................................

¥16,003
39,048
1,725
4,948
(308)
61,416¥13,147
29,938
5,709
3,855
(203)
52,446$148,761
362,984
16,03545,996(2,863)570,913

NON-CURRENT ASSETS:PROPERTY, PLANT AND
EQUIPMENT
Buildings and structures (Note 8) .......................
Accumulated depreciation .................................
Buildings and structures, net ............................
Machinery and equipment (Note 8) ....................
Accumulated depreciation .................................
Machinery and equipment, net ........................
Furniture and fixtures ........................................
Accumulated depreciation ................................
Furniture and fixtures, net ...............................
Land .....................................................................
Lease assets .........................................................
Accumulated depreciation ................................
Lease assets, net ................................................
Construction in progress ....................................
Total property, plant and equipment ................

24,574(9,009)15,565
4,313(2,811)
1,502
5,267(4,015)
1,252
16,108
4,555
(831)
3,724
2,605
40,756

14,831(9,409)5,422
3,956(2,704)
1,252
4,872(3,955)917
16,035
185
(70)
115
6,142
29,883

228,436(83,746)
144,690
40,093(26,131)
13,962
48,961(37,323)
11,638
149,737
42,343(7,725)34,61824,216
378,861

INTANGIBLE ASSETS
Goodwill ...............................................................
Other .....................................................................
Total intangible assets .......................................

7,398
4,735
12,133

8,193
5,308
13,501

68,77144,016
112,787

INVESTMENTS AND OTHER ASSETS
Investment securities (Note 9) ............................
Long-term borrowings .........................................
Deferred tax assets ...............................................
Asset for retirement benefits ...............................
Other (Note 18) ....................................................
Allowance for doubtful accounts ........................
Total investments and other assets ...................
Total non-current assets ..................................

6,501
981
1,542
4,080
2,965
(158)
15,91168,800

7,229
2,276
1,503
3,943
2,563
(169)
17,34560,72960,432
9,119
14,33437,92727,562(1,468)147,906
639,554

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

¥130,216¥113,175$1,210,467

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

Millions of Yen

LIABILITIES AND EQUITY

2020

2019

2020

CURRENT LIABILITIES:
Notes and accounts payable - trade ...........................
Short-term borrowings (Note 10) .......................
Current portion of long-term borrowings ..........
Income taxes payable ...........................................
Advances received ................................................
Provision for bonuses ..........................................
Provision for directors’ bonuses ..........................
Allowance for anticipated project loss (Note 12) ....
Provision for business structure improvement ....
Other .....................................................................
Total current liabilities ......................................

¥5,72413,000
2,781
1,266
8,009
2,201
52
497
93
11,87745,500¥5,037
—
2,083
1,137
6,688
1,973
91
120
—
10,95428,083$53,209
120,846
25,852
11,76974,45020,460
483
4,620
865
110,407422,961

NON-CURRENT LIABILITIES:Long-term borrowings .........................................
Deferred tax liabilities .........................................
Lease obligations .................................................
Provision for directors’ retirement benefits .......
Allowance for environmental measures .............
Liability for retirement benefits ..........................
Other .....................................................................
Total non-current liabilities ...............................
Total liabilities ..................................................

14,922
2,586
3,079
18
34
3,814
792
25,24570,745

17,639
2,819
74
30
34
3,818
472
24,88652,969138,713
24,03928,622167
316
35,454
7,362
234,673
657,634

7,459
6,510
49,2087,438
6,489
47,864

69,33860,517457,430(2,416)
60,761(787)
61,004(22,460)
564,825

298(3,486)673(2,515)
1,225
59,471456(3,064)694(1,914)
1,116
60,2062,770(32,405)
6,256(23,379)
11,387552,833¥130,216¥113,175$1,210,467

EQUITY:
Common stock,authorized, 38,000,000 shares in 2020
and 38,000,000 shares in 2019;
issued, 15,933,058 shares in 2020
and 15,919,544 shares in 2019 ............................
Capital surplus .....................................................
Retained earnings ................................................
Treasury stock-at cost
861,023 shares in 2020
and 235,268 shares in 2019 ...............................
Total shareholders’ equity ..................................
Accumulated other comprehensive income:Unrealized gain on
available-for-sale securities .............................
Foreign currency translation adjustments .......
Defined retirement benefit plans ......................
Total Accumulated other comprehensive income ....
Noncontrolling interests ......................................
Total equity .........................................................
TOTAL ................................................................
See notes to consolidated financial statements.

3Consolidated Statement of Income and Comprehensive Income
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2020

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2020

2019

2020

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

¥112,214¥108,589$1,043,123

COST OF SALES (Note 12) ..................................
Gross profit ......................................................

78,76233,45275,62732,962

732,159
310,964

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (Note 14) ....
Operating income ............................................

28,861
4,591

27,851
5,111

268,287
42,677OTHER INCOME:
Interest income ....................................................
Dividend income ..................................................
Gain on sales of investment securities ................
Equity in earnings of associated companies ......
Gain on valuation of derivatives .........................
Other .....................................................................
Total other income ...........................................

197
143
187
63
118
243
951

223
114
—
—
4
1,080
1,421

1,831
1,329
1,738
586
1,097
2,259
8,840

OTHER EXPENSES:Interest expense ...................................................
Loss on valuation of investment securities ........
Equity in losses of associated companies ...........
Foreign currency exchange loss ..........................
Other .....................................................................
Total other expenses ........................................

433
149
—
234
122
938

277
311
129
164
66
947

4,025
1,385
—
2,175
1,134
8,719

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

4,604

5,585

42,798

INCOME TAXES:
Current .................................................................
Deferred ................................................................
Total income taxes ...........................................

1,940
(163)
1,777

1,992
189
2,181

18,034(1,515)
16,519NET INCOME .......................................................

2,827

3,404

26,279NET INCOME ATTRIBUTABLE TO:
Owners of the parent ...........................................
Noncontrolling interests ......................................

2,727
100

3,319
85

25,350929

OTHER COMPREHENSIVE INCOME (LOSS) (Note 19) :Unrealized loss onavailable-for-sale securities ...............................
Foreign currency translation adjustment ...........
Defined retirement benefit plans ........................
Share of other comprehensive income (loss) of
associates accounted for using equity method ....
Total other comprehensive loss .......................

(159)
(439)
(21)

(740)
(933)
(290)

(1,478)(4,081)
(195)

59
(560)

(91)
(2,054)549(5,205)COMPREHENSIVE INCOME .............................

¥2,267¥1,350$21,074

TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owners of the parent ...........................................
Noncontrolling interests ......................................

¥2,143¥124¥1,264¥86$19,921$1,153
U.S. Dollars(Note 1)Yen

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

4¥180.30
75.00¥212.50
75.00

$1.68
0.70

Co n s ol i d ated S ta temen t o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2020

Thousands

Millions of Yen
Accumulated Other Comprehensive Income

BALANCE, JULY 1, 2018 ���������������������������������������������������
Issuance of new shares ������������������������������������������������������
Adjustment for change in scope of consolidation ������������Cash dividends, ¥75.00 per share ��������������������������������������
Net income attributable to owners of the parent �������������
Purchase of treasury stock ������������������������������������������������
Disposal of treasury stock �������������������������������������������������
Net change in the year �������������������������������������������������������
BALANCE, JUNE 30, 2019 ������������������������������������������������
Issuance of new shares ������������������������������������������������������
Adjustment for change in scope of consolidation ������������Cash dividends, ¥75.00 per share ��������������������������������������
Net income attributable to owners of the parent �������������
Purchase of treasury stock ������������������������������������������������
Disposal of treasury stock �������������������������������������������������
Net change in the year �������������������������������������������������������
BALANCE, JUNE 30, 2020 ������������������������������������������������

Outstanding
Number of
Shares ofCommon Stock

Common Stock

Capital Surplus

15,541¥7,415¥6,466¥45,529

14

23

23

—

—

—

—

209

—

—

—

(1,193)

—

—

—

(3)

—

—

Total
Accumulated
Other
Comprehensive
IncomeTotal
Shareholders’EquityUnrealized
Gain onAvailable-forSale Securities¥(1,180)¥58,230¥1,196¥(2,045)

¥983

—

46

—

—

—

—

209

—

(17)

—

(17)

—

192

—

(1,193)

—

—

—

—

—

(1,193)

3,319

—

3,319

—

—

—

—

—

3,319

—

(8)

(8)

—

—

—

—

—

(8)

Retained
Earnings

Treasury
Stock

Foreign
Currency
Translation
Adjustments

DefinedRetirement
Benefit
Plans

Noncontrolling
Interests

Total Equity¥134¥1,086¥59,450

—

—

46

132

—

—

—

401

401

—

—

—

—

—

401

—

—

—

—

—

—

(740)

(1,002)(289)(2,031)30(2,001)

15,684

7,438

6,489

47,864(787)

61,004456(3,064)694(1,914)

1,116

60,206

14

21

21

—

—

42

—

—

—

—

—

42

—

—

—

(190)

—

(190)

—

(19)

—

(19)

11

(198)

—

—

—

(1,193)—(1,193)

—

—

—

—

—

(1,193)

—

—

—

2,727

—

2,727

—

—

—

—

—

2,727

(749)

—

—

—

(2,002)(2,002)

—

—

—

—

—

(2,002)

123

—

—

—

373

373

—

—

—

—

—

373

—

—

—

—

—

—

(158)

(403)

(21)

(582)

98

(484)

15,072¥7,459¥6,510¥49,208¥(2,416)¥60,761¥298¥(3,486)¥673¥(2,515)¥1,225¥59,471

Noncontrolling
Interests

Total Equity

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

BALANCE, JUNE 30, 2019 ������������������������������������������������
Issuance of new shares ��������������������������������������������������������
Adjustment for change in scope of consolidation ���������������Cash dividends, $0.70 per share ����������������������������������������
Net income attributable to owners of the parent �������������
Purchase of treasury stock ������������������������������������������������
Disposal of treasury stock �������������������������������������������������
Net change in the year �������������������������������������������������������
BALANCE, JUNE 30, 2020 ������������������������������������������������

DefinedRetirement
Benefit Plans

Total
Accumulated
Other
Comprehensive
Income$(28,482)$6,451$(17,792)$10,374$559,665

—

—

—

—

—

392

(1,766)

—

(177)

—

(177)

102

(1,841)(11,090)

—

—

—

—

—

(11,090)

Total
Shareholders’EquityUnrealized
Gain onAvailable-forSale Securities$(7,316)$567,083$4,239

—

—

392

—

(1,766)——(11,090)———

25,350—25,350

—

—

—

—

—

25,350———(18,611)(18,611)

—

—

—

—

—

(18,611)

—

—

—

3,467

3,467

—

—

—

—

—

3,467

—

—

—

—

—

(1,469)(3,746)(195)(5,410)911(4,499)$69,338$60,517$457,430$(22,460)$564,825$2,770$(32,405)$6,256$(23,379)$11,387$552,833

Retained
Earnings

Treasury
Stock

Common Stock

Capital Surplus$69,142$60,321$444,936

196

196

—
—

Foreign
Currency
Translation
Adjustments

See notes to consolidated financial statements.

5

Co n s ol i d ated S ta temen t o f C as h Fl ow s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2020

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

OPERATING ACTIVITIES:
Income before income taxes ....................................
Adjustments for:
Depreciation and amortization ............................
Amortization of goodwill ......................................
(Gain) Loss on sales of investment securities .....
Loss on valuation of investment securities ...................
Equity in (earnings) losses of associated companies ....
Gain on sales of property, plant and equipment ....
Increase in allowance for doubtful accounts ......
Increase in provision for bonuses ........................
Increase (Decrease) in allowance for anticipated project loss ....
Interest and dividend income ...............................
Interest expenses ...................................................
Gain on derivatives ...............................................
Increase in trade accounts receivable ..................
Decrease in inventories ........................................
Increase in trade accounts payable ......................
Decrease in accounts payable-other ....................
Increase (Decrease) in advanced received ...........
(Decrease) Increase in accrued consumption taxes ....
Other - net .............................................................
Subtotal ...............................................................
Interest and dividend income received ................
Interest expenses paid ..........................................
Income taxes paid .................................................
Net cash provided by operating activities ..............

2020

2019

2020

¥4,604¥5,585$42,798

2,508
538
(187)
149
(63)
(2)
94
287
377
(340)
433
(115)
(9,323)
3,918
735
(273)
1,318
(664)
747
4,741
322
(428)
(1,814)
2,821

1,710
482
13
311
129
(781)
114
131
(57)
(337)
277
(4)
(2,917)
2,282
588
(181)
(2,016)
478
(786)
5,021
186
(266)
(1,832)
3,109

23,314
5,001(1,738)
1,385
(586)
(19)
874
2,668
3,505
(3,161)
4,025(1,069)(86,665)
36,421
6,832(2,538)12,252(6,172)
6,945
44,072
2,993(3,978)(16,863)
26,224INVESTING ACTIVITIES:Net decrease (increase) in time deposits .................
Purchase of property, plant and equipment ............
Proceeds from sales of property,
plant and equipment ...............................................
Purchase of intangible assets .......................................
Proceeds from sales of investment securities ...............

2020

2020

2019

¥(793)(6,677)¥680(3,686)$(7,372)(62,068)

35

1,846

325

(288)

(159)

(2,677)

725

559

6,739

subsidiary, net of cash acquired .................................

—(2,686)—

Purchase of shares of subsidiaries and associates ....
Payments of loans receivable ...................................
Other - net .................................................................
Net cash used in investing activities ................

(100)
(8)
(7,464)(600)
542(3,504)(930)(73)(69,384)

Net increase in short-term borrowings ....................
Repayments of long-term borrowings .....................
Repayments of lease obligations ..............................
Disposal of treasury stock ........................................
Purchase of treasury stock .......................................
Dividends paid ..........................................................
Other - net .................................................................

¥13,000(2,475)(736)
374(2,002)(1,191)(32)¥—(2,393)
(32)
401
(8)
(1,188)1,283$120,846(23,007)(6,842)
3,477(18,610)(11,071)(298)

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

6,938(1,937)64,495

EFFECT OF EXCHANGE RATE CHANGE
ON CASH AND CASH EQUIVALENTS .................

(268)

(310)

(2,492)NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS .......................

2,027(2,642)

18,843

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

12,663

15,233

117,713

INCREASE IN CASH AND CASH
EQUIVALENTS FROM NEWLYCONSOLIDATED SUBSIDIARIES ........................

81

72

753

CASH AND CASH EQUIVALENTS,
END OF YEAR (Note 5) ..........................................

¥14,771¥12,663$137,309

Payment for purchase of a newly consolidated(358)(3,328)FINANCING ACTIVITIES:

See notes to consolidated financial statements.

6

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

N o tes to C on solid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2020

1.	B A S I S O F P R E S E N TAT I O N O F C O N S O L I D AT E D F I N A N C I A L
STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in
conformity with accounting principles generally accepted in Japan, which are different in certain respects as tothe application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications have been made in the 2019consolidated financial statements to conform to the classifications used in 2020.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Nippon
Koei Co., Ltd. (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S.
dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rateof ¥107.575 to $1, the approximate rate of exchange at June 30, 2020. Such translations should not be construed
as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.	Consolidation — The consolidated financial statements as of June 30, 2020, include the accounts of theCompany and its 69 significant (68 in 2019) subsidiaries (collectively, the “Group”).
PT. Cikaengan Tirta Energi was added in the scope of consolidation from the current fiscal year due to theirincreased materiality.
Under the control and influence concept, those companies in which the Company, directly or indirectly, isable to exercise control over operations are fully consolidated, and those companies over which the Group
has the ability to exercise significant influence are accounted for by the equity method.
Investments in 5 (5 in 2019) associated companies are accounted for by the equity method. Investments in
the remaining unconsolidated subsidiaries and associated companies are stated at cost. If the equity methodof accounting had been applied to the investments in these companies, the impact on the accompanying
consolidated financial statements would not be significant.
Goodwill represents the excess of cost of an acquisition over the fair value of the net assets of the acquired
subsidiaries at the date of acquisition.
Goodwill is amortized using the straight-line method over its useful life, which is estimated as a reasonable
period (mainly 10 or 20 years) for which goodwill is expected to have an effect.
All significant intercompany balances and transactions have been eliminated in consolidation. All significant
unrealized profit included in assets resulting from transactions within the Group is also eliminated.

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

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

7

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

e.	Property, Plant, and Equipment —Property, plant, and equipment are stated at cost. Depreciation ofproperty, plant, and equipment of the Company and its consolidated subsidiaries is computed principally by
the straight-line method based on the estimated useful lives of the assets. The range of useful lives isprincipally from 2 to 50 years for buildings and structures, from 2 to 20 years for machinery and equipment,
and from 2 to 20 years for furniture and fixtures. The useful lives for lease assets are the terms of therespective leases.

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

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

h.	R etirement and Pension Plans — The Group has contributory defined benefit pension plans andunfunded retirement benefit plans for the benefit of its employees.
The Group accounts for the liability for retirement benefits based on the projected benefit obligations andplan assets at the consolidated balance sheet date. The projected benefit obligations are attributed to periods
on a straight-line basis. Actual gains and losses and past service costs are amortized and recognized in profit
or loss over 13 years.
Hitherto, retirement benefits for directors were provided at the amount that would be required if all directors
retired at the consolidated balance sheet date. However, the Group terminated benefit pension plans for
directors. The balance in the consolidated balance sheet is the estimated amount for directors who havebelonged to the Group since the plans were effective.

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

j.	Provision for business structure improvement —The Group has made a provision for anticipatedexpenses or losses relating to business structure improvement implemented at some consolidated
subsidiaries.

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

8l.	Employee Stock Ownership Plan — In accordance with Practical Issues Task Force (“PITF”) No. 30,“Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees etc. throughTrusts,” upon transfer of treasury stock to the employee stockownership trust (the “Trust”) by the entity, any
difference between the book value and fair value of the treasury stock is recorded in capital surplus. At yearend, the Company records (1) the Company stock held by the Trust as treasury stock in equity, (2) all otherassets and liabilities of the Trust on a line-by-line basis, and (3) a liability/asset for the net of (i) any gain orloss on delivery of the stock by the Trust to the employee shareholding association, (ii) dividends received
from the entity for the stock held by the Trust, and (iii) any expenses relating to the Trust.

m. Research and Development Costs — Research and development costs are charged to income as incurred.
n. Leases — Finance lease transactions are capitalized to recognize lease assets and lease obligations in the
consolidated balance sheet. All other leases are accounted for as operating leases.
Subsidiaries adopting International Financial Reporting Standards (IFRS) have applied International
Financial Reporting Standard 16 “Leases” from the current fiscal year.
(See Changes in Accounting Policies)o.	Accrued Bonuses — Bonuses to employees, directors, and Audit & Supervisory Board members are
accrued at the end of the year to which such bonuses are attributable.

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

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

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

s.	Revenue Recognition — During the progress of operation, the percentage-of-completion method is applied
when the extent of progress toward completion, total costs on and total revenue from the contract are
reliably estimated. The stage of completion is determined using the cost-to-cost method.

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

9

u.	Per Share Information — Basic net income per share is computed by dividing net income attributable toshareholders of common stock by the weighted-average number of shares of common stock outstanding forthe period.
Diluted net income per share of common stock is not disclosed because the Group had no securities
outstanding that might dilute the per share information for the years ended June 30, 2020 and 2019.
Cash dividends per share presented in the accompanying consolidated statement of income andcomprehensive income are dividends applicable to the respective years, including dividends to be paid after
the end of the fiscal year.

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

w.	A ccounting method for consumption taxes — Consumption tax and local consumption tax are
accounted for by the tax-exclusion method.

Changes in Accounting Policies
Application of IFRS 16 “Leases” — Subsidiaries adopting International Financial Reporting Standards(IFRS) have applied International Financial Reporting Standard 16 “Leases” (hereinafter referred to as “IFRS16”) from the current fiscal year. Accordingly, the lessee shall, in principle, record all leases on the balance sheet
in assets and liabilities.
As a result, at the end of the current fiscal year ended June 30, 2020, “Property, plant and equipment” increasedby ¥3,552 million ($33,019 thousand), “Current portion of long-term borrowings” of current liabilities increasedby ¥649 million ($6,033 thousand), and “Long-term borrowings” of non-current liabilities increased by ¥2,957
million ($27,488 thousand).
The impact on the consolidated statement of income and per share information for the current fiscal year ended
June 30, 2020 is immaterial.

10New Accounting Pronouncements
Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31, 2020) and
Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No.
30, March 31, 2020) — The International Accounting Standards Board (“IASB”) and Financial AccountingStandards Board of the United States of America (“FASB”) jointly developed a comprehensive accounting
standard for revenue recognition and issued Revenue from Contracts with Customers (IFRS No. 15, issued by
IASB and Topic 606 issued by FASB) in May 2014. Considering the situation that IFRS No. 15 has become
applicable from the fiscal year beginning on or after January 1, 2018, and Topic 606 from the fiscal year
beginning on or after December 15, 2017, ASBJ developed a comprehensive accounting standard for revenue
recognition and issued it together with implementation guidance.
ASBJ’s basic policy in developing the accounting standard for revenue recognition was to establish accounting
standards as a starting point to adopt the basic principles of IFRS No. 15 to ensure comparability with entities
reporting under IFRS and to add alternative treatments that would not impair comparability with previous
practices and others in Japan.
The Group will not apply this accounting standard because it will voluntarily apply IFRS from the year ending
June 30, 2021. Therefore, the Group has not assessed the impact from application for the consolidated financial
statements.

3. CHANGES IN PRESENTATIONIn the consolidated financial statements, reclassifications and rearrangements which were made in 2019 werechanged in 2020 in order to conform to the financial statements disclosed in Japan in accordance with Japanesegenerally accepted accounting principle.

4. ADDITIONAL INFORMATION
Employee Stock Ownership Plan (“ESOP”) Trust — The Company maintains an ESOP for a part of its
employees’ welfare programs which includes transfers of the Company’s own stock to the employees’
stockholders association through a trust.
(1) Overview of the transaction
At a meeting of the Board of Directors held on May 15, 2017, the Company resolved to reintroduce an ESOP
as a disposition-type employee shareholding incentive plan to provide the Group’s employees with incentives
to improve corporate value and enhance their welfare programs.
The Company also resolved to dispose of a part of treasury stock that the Company owns to an accountestablished in Trust & Custody Services Bank, Ltd. (the “Trust Account E”) by “third-party” allotment en bloc.
The ESOP is an incentive plan that distributes the profit of stock price rise for all the employees who join
“Nippon Koei Group employees’ stockholders association” (the “Employees’ Stockholders Association”.) To
initiate the ESOP, the Company concluded the “Stock Benefit Trust (disposition-type ESOP) Agreement;” thetrust established pursuant to the role of the agreement shall be referred to as the “ESOP Trust,” whereby theCompany is to act as administrator and the role of trustee is assigned to Mizuho Trust & Banking Co., Ltd.
(the “Trustee”.) The Trustee also concluded an agreement with Trust & Custody Services Bank, Ltd., underwhich the Trustee is to re-entrust management of security and other asset of the ESOP Trust to Trust &Custody Services Bank, Ltd.
The Trust Account E acquires shares of the Company that the Employees’ Stockholders Association is
expected to obtain over the five years after the trust is set up, and periodically sells its holdings to the
Employees’ Stockholders Association. If, by the time of the ESOP Trust’s termination, gains equivalent tocapital gains on sales of shares are accumulated within the ESOP Trust through sales of Company’s shares by
the Trust Account E to the Employees’ Stockholders Association, then those gains will be distributed as
residual assets to the Employees’ Stockholders Association enrollees who meet the requirements for eligible
beneficiaries. Furthermore, to guarantee funds borrowed by the Trustee that enable the Trust Account E toacquire Company’s shares, the Company is to repay any such remaining borrowings pursuant to a guarantee
agreement, in the event that there are any remaining borrowings equivalent to losses on sales of shares due
to a downturn in the price of Company’s shares up until termination of the ESOP Trust.

11(2) The Company’s shares remaining in the ESOP
Shares of the Company remaining in the ESOP are recognized at the ESOP’s book value thereof (excluding
the amount of ancillary expenses) as treasury stock under net assets. The book value and number of shares ofsuch treasury stock were ¥313 million ($2,910 thousand) and 103 thousand shares at June 30, 2020, ¥686
million and 226 thousand shares at June 30, 2019, respectively.
(3) Book value of borrowings posted through the application of the gross price method
Book value of borrowings posted through the application of the gross price method was ¥345 million ($3,207
thousand) at June 30, 2020 and ¥728 million at June 30, 2019, respectively.

The impact of COVID-19 on accounting estimates — COVID-19 has a broad impact on the economy andbusiness activities, and it is difficult to predict the future spread of COVID-19 and when it ends.
The Company makes accounting estimates, including impairment of fixed assets, based on the assumption thatthe impact of COVID-19 will not continue beyond June 30, 2021 on the basis of the external information
currently available. However, the timing of the end of COVID-19 and other factors may affect the future financial
position and results of operations.

5. CASH AND CASH EQUIVALENTS
The relationship between cash and deposits in the consolidated balance sheet and cash and cash equivalents inthe consolidated statement of cash flow at June 30, 2020 and 2019 was as follows:
Thousands of
U.S. Dollars

Millions of Yen

Cash and deposits ..................................................

2020¥16,0032019¥13,147

2020$148,761

Time deposits with maturities of more than
three months ........................................................

(1,123)(389)(10,439)

ESOP trust special deposit ....................................
Cash and cash equivalents ...........................

(109)¥14,771(95)¥12,663(1,013)$137,309

6. INVESTMENT SECURITIESThe costs and aggregate fair values of investment securities at June 30, 2020 and 2019, were as follows:
Millions of Yen

June 30, 2020
Securities classified as:
Available-for-sale:
Equity securities ..................................
Debt securities ......................................
Other .....................................................
Total....................................................

12

Cost

¥3,106——¥3,106

Unrealized
Gains

¥796
—
—
¥796

Unrealized
Losses

¥360
—
—
¥360

Fair
Value

¥3,542——¥3,542

Millions of Yen

June 30, 2019

Unrealized
Gains

Cost

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

Unrealized
Losses

¥982
—
—
¥982

¥2,865——¥2,865

¥322
—
—
¥322

Fair
Value

¥3,525——¥3,525

Thousands of U.S. Dollars
Unrealized
Gains

June 30, 2020

Cost

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

$28,873——$28,873

Unrealized
Losses$7,399——$7,399$3,347——$3,347

Fair
Value$32,925——$32,925

The proceeds and realized gains and losses of the available-for-sale securities, which were sold during
the years ended June 30, 2020 and 2019, were as follows:
Millions of Yen

June 30, 2020
Securities classified as:
Available-for-sale:
Equity securities ................................................
Debt securities ....................................................
Other ...................................................................
Total .................................................................

Proceeds

¥724
—
—
¥724

Realized Gains

¥187
—
—
¥187

Realized Losses

¥—
—
—
¥—

Millions of Yen

June 30, 2019
Securities classified as:
Available-for-sale:
Equity securities ................................................
Debt securities ....................................................
Other ...................................................................
Total .................................................................

Proceeds

¥—
552
—
¥552

Realized Gains

¥—
15
—
¥15

Realized Losses

¥—
31
—
¥31

13

Thousands of U.S. Dollars

June 30, 2020

Proceeds

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

Realized Gains$6,730——$6,730Realized Losses$1,738——$1,738$———$—

7. INVESTMENT PROPERTYThe Group owns some rental properties, such as office buildings and land in the Tokyo metropolitan area. The
net of rental income and operating expenses for those rental properties was ¥377 million ($3,505 thousand) and¥732 million for the fiscal years ended June 30, 2020 and 2019, respectively.
In addition, the carrying amounts, changes in such balances, and market prices of such properties are as follows:
Millions of Yen
Carrying AmountJune 30, 2019

Fair Value

Increase¥2,266

June 30, 2020

¥2,261

June 30, 2020

¥4,527¥9,085

Millions of Yen
Carrying AmountJune 30, 2018

Fair Value

Decrease¥2,300June 30, 2019¥(34)

June 30, 2019¥2,266¥5,402Thousands of U.S. Dollars
Carrying AmountJune 30, 2019

$21,064

Increase$21,018

Fair Value
June 30, 2020

$42,082

June 30, 2020

$84,453

Notes:
1. Carrying amount recognized in the consolidated balance sheets is net of accumulated depreciation andaccumulated impairment losses, if any.
2. Increase during the fiscal year ended June 30, 2020, primarily represents completion of a building which wasunder construction and was not included in the above table at June 30, 2019. The carrying amount of newly
recorded building is ¥2,296 million ($21,340 thousand) at June 30, 2020. Decrease during the fiscal year ended
June 30. 2019, primarily represents depreciation of buildings of stores for rent.
3. Fair value of properties was measured by the Group in accordance with the Real-Estate Appraisal Standard.

14

8. REDUCTION ENTRY
In the case of the acquisition expenses of the Group that have been subsidized by the national government, theamount of such subsidies is offset against the acquisition cost of the corresponding property, plant andequipment.
The amount of reduction entry by accounts under property, plant and equipment at June 30, 2020 and 2019,were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2020
Buildings and structures .......................................
Machinery and equipment ....................................
Total .................................................................

2020

2019

¥9
148
¥157

$84
1,375
$1,459

¥28
167
¥195

9. INVESTMENTS IN TO UNCONSOLIDATED SUBSIDIARIES AND
ASSOCIATED COMPANIESInvestments in to unconsolidated subsidiaries and associated companies at June 30, 2020 and 2019, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

Investments ............................................................

2020¥2,5072019¥3,227

2020$23,30515

10. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The annual interest rate applicable to the short-term borrowings was ranged from 0.330% to 0.350% at June 30,
2020.
Long-term debt at June 30, 2020 and 2019, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2020
Unsecured loans from banks due seriallyto 2029 with interest rates ranging from0.250% to 9.460%
Obligation under finance leases ............................
Total long-term debt ......................................
Less current portion of long-term borrowings .....
Less current portion of lease obligations .............
Long-term debt, less current portion .........

2020

2019

¥17,703
3,784
21,487(2,781)(705)¥18,001¥19,722112
19,834(2,083)(38)¥17,713$164,565
35,175
199,740(25,852)(6,553)$167,335

Annual maturities of long-term debt at June 30, 2020, for the next five years were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Years Ending June 30

Long-Term Borrowings

Lease Obligations

Long-Term Borrowings

Lease Obligations¥2,781
5,640
2,308
2,158
2,158

¥705
51
45
23
6

$25,852
52,42921,45520,06020,060$6,554
474
418
214
56

2021 .........................................................
2022 .........................................................
2023 .........................................................
2024 .........................................................
2025 .........................................................

The Group and four financial institutions have entered into overdraft contracts and a commitment line contract
by syndicated loan over three years. This commitment line contracts included restrictive financial covenants foreach financial institution. The unused portion of these agreements at June 30, 2020 and 2019, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2020

2019

2020

Total amount of medium-term commitment lines
and overdraft limits .............................................

¥36,500¥36,500$339,298

Balance of borrowings ...........................................
Balance of unused portion ....................................

13,000¥23,500—¥36,500

120,846$218,452

16

11. RETIREMENT AND PENSION PLANS
The Company and certain consolidated subsidiaries have severance payment plans for employees and directors.
Under most circumstances, employees terminating their employment are entitled to retirement benefits
determined based on the rate of pay at the time of termination, years of service, and certain other factors. Suchretirement benefits are made in the form of a lump-sum severance payment from the Company or from certain
consolidated subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments if thetermination is involuntary, by retirement at the mandatory retirement age, by death, or by voluntary retirement
at certain specific ages prior to the mandatory retirement age.
The liabilities for retirement benefits at June 30, 2020 and 2019, for directors were ¥18 million ($167 thousand)and ¥30 million, respectively. The retirement benefits for directors are paid subject to the approval of theshareholders.
(1) The changes in defined benefit obligation for the years ended June 30, 2020 and 2019, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year .................................
Current service cost ...............................................
Interest cost ............................................................
Actuarial losses (gains) ..........................................
Benefits paid ...........................................................
Others .....................................................................
Balance at end of year ..................................

2020¥15,851
1,194
116
176
(1,004)72¥16,4052019¥15,718
1,155
109
(64)
(1,067)—¥15,8512020$147,348
11,0991,078
1,636(9,333)670$152,498(2) The changes in plan assets for the years ended June 30, 2020 and 2019, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2020¥16,612
254
81
1,084
(763)
50
¥17,3182019¥16,557
248
(400)
1,018
(811)
—
¥16,6122020$154,422
2,361
753
10,077(7,093)465$160,985(3)	The changes in defined benefit obligation under the simplified method for the years ended June 30, 2020 and
2019, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2020
¥636
57
(46)
¥647

2019
¥632
51
(47)
¥636

2020
$5,912530(428)$6,01417

(4)	The reconciliation between the liability recorded in the consolidated balance sheet and the balances ofdefined benefit obligation and plan assets as of June 30, 2020 and 2019, was as follows (including the benefit
plans for which the simplified method was applied):Thousands of
U.S. Dollars

Millions of Yen

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

2020¥13,271(17,318)(4,047)
3,781

2019¥12,669(16,612)(3,943)
3,818

2020$123,365(160,985)(37,620)
35,147

(266)

(125)

(2,473)

3,814
4,080

3,818
3,943

35,45437,927¥(266)¥(125)$(2,473)(5) The components of net periodic benefit costs for the years ended June 30, 2020 and 2019, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2020¥1,194
115
(254)
30
38
57
¥1,1802019¥1,155
109
(248)
(112)
27
51
¥982

2020
$11,099
1,069(2,361)279
353
530$10,969(6) A mounts recognized in other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans for the years ended June 30, 2020 and 2019, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2020
Prior service cost ....................................................
Actuarial losses .......................................................
Total .................................................................

2019
¥(38)
65
¥27

¥(27)
447
¥420

2020
$(353)
604$251(7)	Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect ofdefined retirement benefit plans as of June 30, 2020 and 2019, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Unrecognized prior service cost ............................
Unrecognized actuarial gains ................................
Total .................................................................
18

2020
¥136
(1,109)¥(973)

2019¥174(1,174)¥(1,000)2020$1,264(10,309)$(9,045)

(8) Plan assets
a. Components of plan assets
Plan assets as of June 30, 2020 and 2019, consisted of the following:2020
Debt investments ....................................................
Equity investments ................................................
Cash and cash equivalents .....................................
Others .....................................................................
Total .................................................................

2019

37%
40
20
3
100%

38%
40
20
2
100%

b. Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return, which are
expected currently and in the future from the various components of the plan assets.
(9) Assumptions used for the years ended June 30, 2020 and 2019, were set forth as follows:

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

2020
Principally 0.7%
1.5
90.0

2019
Principally 0.7%
1.5
90.0

(10) Multiemployer pension plan
The Company and certain consolidated subsidiaries participate in a multiemployer plan for which the Company
cannot reasonably calculate the amount of plan assets corresponding to the contributions made by theCompany. Therefore, it is accounted for using the same method as a defined contribution plan.
The Ministry of Health, Labor and Welfare approved exemption of returning the previous portion for thesubstitution part of employees’ pension funds. With this, the system was transferred from employees’ pension
plan to corporate pension plan.
The contributions to such multiemployer plan were ¥555 million ($5,159 thousand) and ¥532 million for theyears ended June 30, 2020 and 2019, respectively.
a. The funded status of the multiemployer plan as of June 30, 2020 and 2019, was as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2020¥81,5142019¥79,6562020$757,741

63,463

63,109589,942¥18,051¥16,547$167,799

The net balance above is mainly the result of past service cost of ¥(5,432) million ($(50,495) thousand) for 2020and ¥(7,900) million for 2019, and surplus carried forward of ¥23,483 million ($218,294 thousand) for 2020,and ¥24,448million for 2019. Past service cost under the plan is amortized on a straight-line basis over 15
years, and the special contributions of ¥397 million ($3,690 thousand) for 2020 and ¥380 million for 2019,
which are utilized for such amortization, were expensed in the consolidated statement of income andcomprehensive income of the Group.

19b. The contribution ratio of the Group in the multiemployer plan for the years ended June 30, 2020 and 2019
was as follows:2020
The contribution ratio of the Group in
the multiemployer plan ....................................

2019

13.6%

13.5%

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

12. ALLOWANCE FOR ANTICIPATED PROJECT LOSS
(1) Work in process and allowance for anticipated project loss relating to construction contract estimated loss
were recorded in debit side and in credit side respectively without offsetting.
The amount of work in process corresponding to allowance for anticipated project loss at June 30, 2020 and
2019, are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2020
Work in process ......................................................

2019
¥44

¥44

2020
$409

(2) Provision (Reversal) of allowance for anticipated project loss included in cost of sales for the years
ended June 30, 2020 and 2019, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Provision (Reversal) of allowance for anticipated project loss ....

2020
¥377

2019
(¥57)

2020
$3,505

13. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, inthe aggregate, resulted in a normal effective statutory tax rate of approximately 30.6% for the years ended June30, 2020 and 2019.
The tax effects of significant temporary differences and tax loss carryforwards, which resulted in deferred tax
assets and liabilities at June 30, 2020 and 2019, are as follows:20

Thousands of
U.S. Dollars

Millions of Yen

2020
Deferred tax assets:
Investment in subsidiaries ...................................
Accrued bonuses ..................................................
Net defined benefit liability .................................
Liability for retirement benefits for directors ....
Allowance for anticipated project loss ................
Overdepreciation ..................................................
Loss on impairment of long-lived assets ............
Tax loss carryforwards .........................................
Other .....................................................................
Less valuation allowance .....................................
Total .................................................................

2020

2019

¥178
549
812
21
152
274
93
347
1,085
(1,183)
2,328

¥18
598
810
25
37
215
85
216
762
(593)
2,173

$1,655
5,103
7,548
195
1,413
2,547
865
3,226
10,086(10,997)
21,641

878

827

8,162

1,223

747

11,369

87

564

809

Deferred tax liabilities:
Net defined benefit asset .....................................
Reserve for deferred gains on saleof property ..........................................................
Reserve for special account for advanced
depreciation of property ....................................
Unrealized gain on available-for-salesecurities .............................................................
The valuation differencesby using the full fair value method ...................
Other .....................................................................
Total .................................................................

130

200

1,208

797
257
3,372

943
208
3,489

7,409
2,389
31,346

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

¥(1,044)¥(1,316)$(9,705)

21

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in theaccompanying consolidated statement of income and comprehensive income for the year ended June 30, 2020,
with the corresponding figures for 2019, is as follows:

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

2020
30.6%
3.0
1.7
4.4
(5.6)
12.1
2.9
(1.0)

2019
30.6%
2.5
1.8
6.5
(4.4)
2.2
2.5
—

(3.7)

(3.0)

(4.7)
(1.1)
38.6%

(1.1)
1.4
39.0%

At June 30, 2020, certain subsidiaries have tax loss carryforwards aggregating approximately ¥1,074 million($9,984 thousand), which are available to be offset against taxable income of such subsidiaries in future years.
These tax loss carryforwards, if not utilized, will expire as follows:
Millions of Yen

June 30, 2024 ..........................................................
June 30, 2025 ..........................................................
June 30, 2026 ..........................................................
June 30, 2027 ..........................................................
June 30, 2028 ..........................................................
June 30, 2030 ..........................................................
Total .................................................................

Thousands of
U.S. Dollars

¥52
119
81
51
254
517
¥1,074

$484
1,106
753
474
2,361
4,806
$9,984

14. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES(1) The main breakdown of selling, general and administrative expenses for the years ended June 30, 2020 and
2019, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Salaries and allowance ..........................................
Provision for bonuses ............................................
Retirement benefit expenses .................................

2020¥9,023
2,514
506

2019
¥8,755
2,257
431

2020
$83,876
23,3704,704(2) Research and development costs charged to income were ¥1,195 million ($11,109 thousand) and ¥1,101
million for the years ended June 30, 2020 and 2019, respectively.

2215. LEASES
Lessee(1) Finance Lease
Finance Lease transactions, except for those which meet the conditions that the ownership of the leased assets
have been transferred to the lessee.
a. The content of leased assets:
Buildings and structures, Furniture and fixturesb. Depreciation method of leased assets:
Please refer to “2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES e. Property, Plant, andEquipment”.
(2) Operating lease
The minimum rental commitments under noncancelable operating leases at June 30, 2020 and 2019, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2020
Due within one year ...............................................
Due after one year ..................................................
Total .................................................................

¥3
9
¥12

2019
¥1,277
4,320¥5,597

2020
$28
84
$112

16. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The Group uses financial instruments (mainly bank loans) based on its capital financing plan. Cash surpluses, ifany, are invested in low-risk financial assets. Derivatives are used not for speculative purposes, but to manage
exposure to financial risks as described in (2) below. To clarify the accountability for transactions, the Group set
up an investment committee that examines basic principles of transactions and each financial instrument.
(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables, such as trade notes and trade accounts, are exposed to customer credit risk. Receivables in foreign
currencies are exposed to the market risk of fluctuation in foreign currency exchange rates. Marketable andinvestment securities, mainly held-to-maturity securities and equity instruments of customers and suppliers of
the Group, are exposed to the risk of market price fluctuations.
Payment terms of payables, such as trade notes and trade accounts, are less than one year. Long-term debt andobligation under finance leases are principally for the procurement of the funds necessary for investments infacilities and equipment.
Foreign-currency-denominated loans are exposed to the market risks from changes in interest rates and foreign
currency exchange rates. A portion of foreign-currency-denominated loans is hedged by using interest rate andcurrency swaps as derivative financial instruments. Please see Note 17 for more details about derivatives.

23

(3) Risk Management for Financial Instruments
Credit Risk Management
Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to
the contractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines,
which include monitoring of payment terms and balances of major customers by each business administration
department to identify the default risk of customers at an early stage. With respect to held-to-maturity financial
investments, the Group manages exposure to credit risk by limiting investments to high-credit-rated bonds inaccordance with its internal guidelines.
The maximum credit risk exposure of financial assets is limited to their carrying amounts as of June 30, 2020.
Market risk management
The Group uses interest rate and currency swaps as derivative financial instruments to manage its exposure tofluctuations in foreign exchange rates and interest rates of foreign-currency-denominated loans.
Investment securities are managed by monitoring market values and the financial position of issuers on aregular basis.
The basic principles of derivative transactions have been approved by the investment committee based on theinternal guidelines, which prescribe the authority and the limits for each transaction by the corporate treasury
department. Reconciliation of the transaction and balances with customers is made, and the transaction data isreported to the chief financial officer on a monthly basis.
Liquidity risk management
Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on its maturity
dates. The Group manages its liquidity risk by concluding commitment line and overdraft contracts, along withadequate financial planning by the corporate treasury department.
(4) Concentration of Credit Risk
24.8% of total receivables are from three major customers of the Group as of June 30, 2020.
(5) Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is notavailable, another rational valuation technique is used instead.

24

(a) Fair value of financial instruments
Millions of Yen

June 30, 2020

Carrying Amount

Fair Value

Unrealized
Gain/Loss¥16,003¥—

Investment securities ………………………………
Total ………………………………………………

¥16,003
39,048(308)
38,7403,542¥58,285

38,7403,542¥58,285——¥—

Short-term borrowings ………………………………
Long-term borrowings (Note) ………………………
Total ………………………………………………

¥13,000
17,703¥30,703¥13,000
17,655¥30,655

¥—
(48)
¥(48)

Derivatives ……………………………………………

¥(98)

¥(98)

¥—

Cash and deposits ……………………………………
Notes and accounts receivable - trade ……………
Allowance for doubtful accounts …………………

Millions of Yen

June 30, 2019

Carrying Amount

Fair Value

Unrealized
Gain/Loss¥13,147¥—

Investment securities ............................................
Total ................................................................

¥13,147
29,938(203)
29,735
3,524¥46,406

29,735
3,524¥46,406——¥—

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

¥19,722¥19,722¥19,642¥19,642

¥(80)
¥(80)

Derivatives ……………………………………………

¥(133)¥(133)¥—Cash and deposits .................................................
Notes and accounts receivable - trade .................
Allowance for doubtful accounts .........................

25

Thousands of U.S. Dollars

June 30, 2020

Carrying Amount

Fair Value

Unrealized
Gain/Loss$148,761$—

Investment securities ………………………………
Total ………………………………………………

$148,761
362,984(2,863)360,12132,926$541,808

360,12132,926$541,808——$—

Short-term borrowings ………………………………
Long-term borrowings (Note) ………………………
Total ………………………………………………

$120,846
164,565$285,411$120,846
164,118$284,964$—(447)$(447)

Derivatives ……………………………………………

$(911)$(911)$—Cash and deposits ……………………………………
Notes and accounts receivable - trade ……………
Allowance for doubtful accounts …………………

Note: Long-term borrowings includes its current portion.
Cash and deposits, Notes, Accounts receivable – trade and Short-term borrowings
The carrying values of these financial instruments approximate fair value because of their short maturities.
Investment securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for theequity instruments and at the quoted price obtained from the financial institution for certain debt instruments.
Fair value information for investment securities by classification is included in Note 6.
Long-term borrowings
The fair value of the “fixed rate” long-term borrowings is computed by applying a discount rate to the total of
the principal and interest. The discount interest rate is based on the assumed interest rate if similar new
borrowings was entered into. The fair value of the “floating rate” long-term borrowings is assumed as the
carrying value because the interest rate of the borrowings reflects the current market interest rate and theCompany’s credit score is stable.
A portion of the long-term borrowings qualified for integrated accounting treatment (special treatment andappropriated treatment) for interest rate and currency swaps is calculated by discounting the total amount of
the principal and interest, with the relevant interest rate and currency swaps to which the special integrated
accounting treatment has been applied, based on the reasonably estimated interest rate if similar new
borrowings is entered into.
Derivatives
Fair value information for derivatives is included in Note 17.
The fair value of the derivatives, including interest rate and currency swaps under integrated accounting
treatment, is included in the fair value of the long-term borrowings, because the swaps are accounted for as partof the long-term borrowings.

26

(b) The carrying amount of financial instruments whose fair values cannot be reliably determined is as follows:
Thousands of
U.S. Dollars

Millions of Yen

2020

June 30, 2020 and 2019
Investments in equity instruments that
do not have a quoted market pricein an active market .............................................

2020

2019

¥2,959¥3,705$27,506

The impairment loss on investments in equity instruments that do not have a quoted market price in an active
market for the years ended June 30, 2019 was ¥311million.
(6) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen

June 30, 2020
Cash and deposits ................................
Notes and accounts receivable - trade ....
Investment securities
Available-for-sale securities with
contractual maturities .....................
Total ...............................................

Due in one
Year or Less

Due after one Yearthrough five Years

Due after five Years
through ten Years

Due afterten Years¥16,003
39,048

¥—
—

¥—
—

¥—
—

—

—

—

—

¥55,051

¥—

¥—

¥—

Millions of Yen

June 30, 2019
Cash and deposits ................................
Notes and accounts receivable - trade ....
Investment securities
Available-for-sale securities with
contractual maturities .....................
Total ...............................................

Due in one
Year or Less

Due after one Yearthrough five Years

Due after five Years
through ten Years

Due afterten Years¥13,147
29,938

¥—
—

¥—
—

¥—
—

—

—

—

—

¥43,085

¥—

¥—

¥—

Thousands of U.S. Dollars

June 30, 2020
Cash and deposits ................................
Notes and accounts receivable - trade ....
Investment securities
Available-for-sale securities with
contractual maturities .....................
Total ...............................................

Due in one
Year or Less

Due after one Yearthrough five Years

Due after five Years
through ten Years

Due afterten Years$148,761
362,984

$—
—

$—
—

$—
—

—

—

—

—

$511,745

$—

$—

$—

Please see Note 10 for annual maturities of long-term borrowings.

27

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

June 30, 2020

Transactions

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

Contract
Amount¥3,481

Contract
AmountDue after
One Year

Fair
Value

¥2,901¥(98)

Unrealized
Gain

¥(98)

Millions of Yen

June 30, 2019

Transactions

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

Contract
Amount¥4,061

Contract
AmountDue after
One Year¥3,481

Fair
Value¥(133)

Unrealized
Gain¥(133)

Thousands of U.S. Dollars

June 30, 2020

Transactions

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

Contract
AmountContract
AmountDue after
One Year

Fair
Value

$32,359$26,967$(911)

UnrealizedGain$(911)

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

28

Derivative Transactions to Which Hedge Accounting is Applied
Millions of Yen

June 30, 2020
Interest rate and currency
swaps:(fixed-rate payment,
floating-rate receipt)(Japanese yen payment,
U.S. dollars receipt)

Hedge accounting method

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

HedgedItem

Contract
AmountContract
AmountDue after
One Year

Fair
Value

Long-term
debt¥2,321¥1,934(Note1)Millions of Yen

June 30, 2019
Interest rate and currency
swaps:(fixed-rate payment,
floating-rate receipt)(Japanese yen payment,
U.S. dollars receipt)

Hedge accounting method

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

HedgedItem

Contract
AmountContract
AmountDue after
One Year

Fair
Value

Long-term
debt¥2,707¥2,321(Note1)Thousands of U.S. Dollars

June 30, 2020
Interest rate and currency
swaps:(fixed-rate payment,
floating-rate receipt)(Japanese yen payment,
U.S. dollars receipt)

Hedge accounting method

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

HedgedItem

Contract
AmountContract
AmountDue after
One Year

Fair
Value

Long-term
debt$21,576$17,978(Note1)

Notes:
1. The above interest rate and currency swaps, which qualify for hedge accounting and meet specific matching
criteria are not remeasured at market value, but the differential paid or received under the swap agreements is
recognized and included in interest expense or income. In addition, the fair value of such interest rate andcurrency swaps is included in that of long-term debt.
2. The contract amounts of derivatives, which are shown in the above table, do not represent the amounts
exchanged by the parties and do not measure the Group’s exposure to credit or market risk.

18. CONTINGENT LIABILITIESOn June 19, 2014, Nippon Civic Consulting Engineers Co., Ltd. (“NCC”), a consolidated subsidiary of theCompany, was sued by Osaka Prefecture for damages resulting from a project related to designing a shieldtunnel under tort liability. The amount of the damages claimed, which includes a 5% per annum delinquency
charge, was ¥750 million ($6,972 thousand). In addition, Osaka Prefecture expanded its claim to ¥8,643 million($80,344 thousand), which also includes a 5% per annum delinquency charge, via a written petition for theamendment of the claim dated February 29, 2016. NCC has concluded that it did not engage in an illegal act in
the course of the project and intends to contest the claims brought forth by Osaka Prefecture in court.
Due to the court petition by Osaka Prefecture, a decision was made to execute a provisional seizure concerning
the said claims in June 2014. Therefore, in July 2014, NCC deposited the money for release from a provisional
seizure of ¥750 million ($6,972 thousand) with the Legal Affairs Bureau, which is included in other assets underinvestments and other assets in the consolidated balance sheet.

2919. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended June 30, 2020 and 2019, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2020

2020

2019

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

¥(416)
187(229)
70¥(159)¥(1,099)31(1,068)328¥(740)$(3,867)
1,738(2,129)651$(1,478)

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

¥(439)—(439)—¥(439)¥(933)—(933)—¥(933)$(4,081)—(4,081)—$(4,081)

¥(95)
68
(27)
6
¥(21)

¥(336)
(84)
(420)
130
¥(290)$(883)
632(251)
56$(195)

¥59
¥59

¥(91)
¥(91)

$549
$549

¥(560)¥(2,054)$(5,205)

Defined retirement benefit plans:
Adjustments arising during the year ...................
Reclassification adjustments to profit or loss ....
Amount before income tax effect ........................
Income tax effect ..................................................
Total .................................................................
Share of other comprehensive income (loss) in
associates accounted for using equity method:
Gains (Losses) arising during the year ...............
Total .................................................................
Total other comprehensive loss .........................

20. SUBSEQUENT EVENTS
a. Appropriations of Retained Earnings
On August 31, 2020, the following appropriation of retained earnings at June 30, 2020, was resolved by the
extraordinary Board of Directors’ meeting:Millions of Yen

Year-end cash dividends, ¥75 ($0.70) per share ...................

¥1,138

Thousands of
U.S. Dollars$10,579

The total amount of the dividends above includes ¥8 million ($74 thousand) in dividends on the Company’s
shares owned by “ESOP.”

30

b. Issuance of new shares as restricted stock compensation
The Company decided to issue new stocks as restricted stock compensation at the extraordinary Board of
Directors’ meeting held on September 29, 2020, as follows:
The Company aims to have the directors (not including outside directors; “Eligible Directors”) share benefits
and risks of stock price fluctuations with shareholders and further enhance their willingness to contribute toimproving stock prices and enhancing corporate value. Therefore, the Company decided, at the Board of
Directors held on August 14, 2017, to introduce a restricted stock compensation system (the “System”), which
will issue restricted stock to Eligible Directors.
Furthermore, the 73rd Annual General Meeting of Shareholders held on September 28, 2017, approved, under
the System, setting the total amount of monetary compensation claims payable to the Eligible Directors ascompensation related to restricted stock at a level where it does “not exceed an annual amount of ¥60 million.”
In addition, the total number of 50,000 shares, which are restricted stock to be allotted to Eligible Directors willbe the upper limit of the number of restricted shares to be allotted in each fiscal year, and the transfer restriction
period of restricted stock will be between one year to five years, determined by the Board of Directors.
(1) Payment date
October 28, 2020
(2) Class and number of shares to be issued 14,996 shares of common stock of the Company¥2,880 per share(3) Issue price¥43,188,480(4) Total issue price of shares to be issued(5) Capitalization amount¥1,440 per share¥21,594,240(6) Total capitalization amount
Allotment of specified restricted stocks(7) Method of offer or allotment
In-kind contribution of monetary compensation claims(8) Method of contribution(9)   Allottees, number thereof and
14,996 shares to eight directors of the company (excluding  number of shares to be allotted
outside directors)
October 28, 2020 to October 27, 2023
(10) Transfer restriction period(11) Other	Issue of new shares to be allotted is conditioned on the securities
registration statement taking effect in accordance with the
Financial Instruments and Exchange Act.

c. Recording of compensation provision
Flaws were found in facilities related to completed projects in which the Group was in charge of design. It is
probable that the responsibility for the flaws lied with the Group. The Group plans to record ¥485 million($4,508 thousand) as compensation provision for the estimated cost of the repair work in the fiscal year ended
June 30, 2021.

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

31

(1) Outline of reportable segments
Reportable segments of the Company are determined as segments whose separate financial information isaccessible from among the constituent units of the Company and are periodically used by the Board of Directors
to determine the allocation of management resources and to evaluate achievements.
The Company has business headquarters separated by type of products and services. Each businessheadquarters formulates a comprehensive strategy based on the products and services and engages in
conducting business activities.
In line with the above, the Company is composed of segments divided by products and services, with eachbusiness headquarters serving as the foundation, and the six reportable segments are “Domestic Consulting
Operations,” “International Consulting Operations,” “Power Engineering Operations,” “Urban & Spatial
Development Operations,” “Energy Business Operations,” and “Real Estate Leasing Operations.”“Domestic Consulting Operations” engages in businesses within Japan, such as site surveying, planning,
evaluation/assessment, designing, construction management, operational advice in the fields of water resources
development, energy development, agricultural development, transportation, urban and regional development,
management of natural and social environment, etc.
“International Consulting Operations” engages in businesses outside of Japan, such as technical studies,planning, reviews, designing, construction supervision, operational advice in the fields of water resources
development, energy development, agricultural development, transportation, urban and regional development,social development, management of natural and social environment, etc.
“Power Engineering Operations” engages in manufacturing and sale of control devices and systems for power
generating and transforming stations, water turbines, power generators, voltage converters, electric powerrelated equipment such as line taps for power transmission and distribution networks. It also engages indesigning and implementation of various construction works for electric power and general electric facilities,
including construction for power generation/transformation/transmission/distribution and civil engineering.
“Urban & Spatial Development Operations” engages in urban and spatial development business that includes
urban planning and architectural design.
“Energy Business Operations” engages in research, development, design, construction, management, operation,
support, and system/technology development of power generation/energy management operations utilizing
distributed energy resources.
“Real Estate Leasing Operations” engages in the leasing of real estate within Japan.
(2) Methods of Measurement for the Amount of Sales, Profit (Loss), Assets, Liabilities, and Other Items for Each
Reportable Segment
Accounting treatments for reportable business segments closely match those shown in Note 2, “Summary of
Significant Accounting Policies.”
Inter-segment net sales and transfers are based on the third-party transaction prices.

32

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

2020
Reportable Segment
Domestic
Consulting

Sales
Sales to external customers ���Urban & Spatial
International
Power
Consulting Engineering Development

EnergyBusiness

Real Estate
Leasing

Total

OthersTotal¥51,333
532¥51,865¥24,50956¥24,565¥15,747463¥16,210¥18,161103¥18,264¥1,188—¥1,188¥451 ¥111,389
156
1,310
¥607 ¥112,699¥825 ¥112,214
815
2,125
¥1,640 ¥114,339

Segment assets ��������������

5,155
24,049521
25,8101,030
11,630731
26,807

(445)
9,589

377
5,838

7,369
103,723(2,975)56,365

4,394
160,088

Other:
Depreciation ������������������

188

199

254

1,328

146

55

2,170

353

2,523

Amortization of goodwill ���

—

—

—

538

—

—

538

—

538

Interest income �������������

27

55

2

39

125

1

249

443

692

Interest expense ������������

92

216

97

355

38

—

798

101

899

Equity in profit (losses)of associated company ���

—

—

44

—

28

—

72

—

72

Investments in associates accounted
for using equity method ����������

—

—

241

—

1,289

—

1,530

—

1,530

Increase in property, plant,
and intangible assets ������

352

277

353

4,183

1,149

831

7,145

4,492

11,637

Intersegment sales ��������
Total sales ��������������
Segment profit (loss) �����

Millions of Yen

2019
Reportable Segment
Domestic
Consulting

Sales
Sales to external customers ���Urban & Spatial
International
Power
Consulting Engineering Development

EnergyBusiness

Real Estate
Leasing

Total

OthersTotal¥49,593743¥50,336¥24,92972¥25,001¥16,532505¥17,037¥15,360
141¥15,501

¥719
—
¥719

¥440
165
¥605

¥107,573
1,626¥109,199¥1,016973¥1,989¥108,589
2,599¥111,188

Segment assets ��������������

4,977
20,591

575
23,181

2,047
10,639114
23,312

(392)
5,462

732
4,482

8,053
87,667(2,417)41,033

5,636
128,700

Other:
Depreciation ������������������

160

77

233

720

138

36

1,364

358

1,722

Intersegment sales ��������
Total sales �������������
Segment profit (loss) �����

Amortization of goodwill ���

—

—

—

482

—

—

482

—

482

Interest income �������������

25

54

4

47

124

0

254

380

634

Interest expense ������������

74

194

80

220

39

—

607

81

688

Equity in profit (losses)of associated company ���

—

—

33

—

(139)

—

(106)

—

(106)

Investments in associates accounted
for using equity method ����������

—

—

200

—

1,203

—

1,403

—

1,403

Increase in property, plant,
and intangible assets ������

228

114

213

207

5

1

768

3,188

3,956

33

Thousands of U.S. Dollars

2020
Reportable Segment
Domestic
Consulting

Sales
Sales to external customers ���Urban & Spatial
International
Power
Consulting Engineering Development

EnergyBusiness

Real Estate
Leasing

Total

Total

Others$477,183
4,946$482,129$227,832
520$228,352$146,382
4,304$150,686$168,822
957$169,779$11,043—$11,043$4,192 $1,035,454
1,451
12,178$5,643 $1,047,632$7,669 $1,043,123
7,576
19,754$15,245 $1,062,877

Segment assets ��������������

47,920223,556

4,843
239,925

9,575
108,111

6,795
249,193(4,137)
89,1383,505
54,26968,501
964,192(27,655)
40,846523,960 1,488,152

Other:
Depreciation ������������������

1,748

1,850

2,361

12,345

1,357

511

20,172

3,281

23,453

Amortization of goodwill ���

—

—

—

5,001

—

—

5,001

—

5,001

Interest income �������������

251

511

19

363

1,162

9

2,315

4,118

6,433

Interest expense ������������

855

2,008

902

3,300

353

—

7,418

940

8,358

—

—

409

—

260

—

669

—

669

—

—

2,240

—

11,983—

14,223—

14,223

3,272

2,575

3,281

38,885

10,681

7,725

66,41941,757108,176

Intersegment sales ��������
Total sales ��������������
Segment profit (loss) �����

Equity in profit (losses)of associated company ���Investments in associates accounted
for using equity method ����������
Increase in property, plant,
and intangible assets ������

Note:
The differences between total amounts for reportable segments and amounts in the consolidated balance sheets
or consolidated statements of income and comprehensive income and the main details of these differences,which are related to difference adjustments at June 30, 2020 and 2019, were as follows:
Net sales
Thousands of
U.S. Dollars

Millions of Yen

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

2020
¥112,699
1,640(2,125)

2019¥109,199
1,989(2,599)2020$1,047,632
15,245(19,754)¥112,214¥108,589$1,043,123

ProfitThousands of
U.S. Dollars

Millions of Yen

Reportable segment total .......................................
Other loss ................................................................
Elimination of intersegment transactions ............
Income before income taxes in the
consolidated statementof income and comprehensive income ....

34

2020
¥7,369(2,975)210

2019¥8,053(2,417)(51)

2020$68,501(27,655)
1,952¥4,604¥5,585$42,798

Assets
Thousands of
U.S. Dollars

Millions of Yen

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

2020¥103,723
56,365(29,872)2019¥87,667
41,033(15,525)2020$964,192
523,960(277,685)¥130,216¥113,175$1,210,467

Other items
Millions of Yen

2020
Reportable
Segment

OthersReconciliations

Total¥2,170
538
249
798

¥353
—
443
101

¥(15)
—
(495)
(466)

¥2,508
538
197
433

72

—

(9)

63

Investments in associates accounted
for using equity method ...................

1,530

—

(32)

1,498

Increase in property, plant, andintangible assets ................................

7,145

4,492

—

11,637

Depreciation ........................................
Amortization of goodwill ....................
Interest income ...................................
Interest expense ..................................
Equity in profit (losses) of
associated company ..........................

Millions of Yen

2019
Reportable
Segment

OthersReconciliations

Total

Depreciation ........................................
Amortization of goodwill ....................
Interest income ...................................
Interest expense ..................................

¥1,364
482
254
607

¥358
—
380
81

¥(12)
—
(411)
(411)

¥1,710482
223277

Equity in profit ofassociated company ..........................

(106)

—

(23)

(129)

Investments in associates accounted
for using equity method ...................

1,403

—

(23)

1,380

Increase in property, plant, andintangible assets ................................

768

3,188

—

3,956

35

Thousands of U.S. Dollars

2020
Reportable
Segment

OthersReconciliations

Total

Depreciation ........................................
Amortization of goodwill ....................
Interest income ...................................
Interest expense ..................................
Equity in profit (losses) of
associated company ..........................

$20,172
5,001
2,315
7,418

$3,281—4,118
940$(139)—(4,602)(4,333)$23,314
5,001
1,831
4,025

670

—

(84)

586

Investments in associates accounted
for using equity method ...................

14,222—(297)

13,925

Increase in property, plant, andintangible assets ................................

66,41941,757—108,176Note:
The main reconciling items of interest income and expense are eliminations of corporate interest in accounting
for control.
(4) Related information[Information about geographical areas]

36

The information about geographical areas at June 30, 2020 and 2019 was as follows:
Sales
Millions of Yen

2020
Japan

United Kingdom(Note 3)

Asia

¥68,545¥11,901¥18,910MiddleEast

Africa¥1,996¥3,017

Latin
America¥3,203

EuropeOther¥1,361¥3,281

Europe

Other

Total

¥112,214

Millions of Yen

2019
Japan

United Kingdom(Note 3)

Asia

¥66,924¥11,897¥16,091

MiddleEast¥1,617

AfricaLatin
America¥3,882¥5,174¥1,439¥1,565

Total¥108,589

Thousands of U.S. Dollars

2020
Japan

United Kingdom(Note 3)

Asia$637,183$110,629$175,784

MiddleEast

Africa$18,554$28,046

Latin
America$29,775

Total

EuropeOther$12,652$30,500 $1,043,123

Note:
1. Sales are classified by country or region based on the location of customers.
2. Method of classifying countries or regions, and primary countries or regions attributable to each area:(1) Method of classifying countries or regions: By geographical proximity.
(2) Primary countries or regions attributable to each area, excluding Japan (2020):
Asia: Vietnam, India, Bangladesh
Middle East: Iraq, UAE, Palestine
Africa: Kenya, Mozambique, Senegal,
Latin America: Peru, El Salvador, Panama
Europe: Ireland, Netherlands, Sweden
Other: Canada, Ukraine, Maldives
3. Changes in presentation—“United Kingdom” (¥11,901 million ($110,629 thousand) in the current fiscal yearand ¥11,897 million in the previous fiscal year), which was included in “Europe” in the previous fiscal year, ispresented separately due to its increased materiality.

37

Property, plant and equipment
Millions of Yen

2020
Japan

Asia

¥33,617¥3,028Middle East

Latin
America

Africa

¥8

¥5

¥518

EuropeOther¥3,295

¥285

Total

¥40,756

Thousands of U.S. Dollars

2020
Japan

Asia

$312,498$28,148

Middle East

$74

Africa$46

Latin
America$4,815

EuropeOther$30,630$2,650Total$378,861

Note:
1. (1) Method of classifying countries or regions: By geographical proximity.
(2) Primary countries or regions attributable to each area, excluding Japan(2020):
Asia: Indonesia, India, Philippines
Middle East: UAE
Africa: Mozambique, Kenya, Cape Verde
Latin America: Peru, Panama, Brazil
Europe: United Kingdom, Ireland, Netherlands
Other: Canada
2. Property, plant and equipment was not disclosed in the previous fiscal year, because more than 90% of
Property, plant and equipment was located within Japan at June 30, 2019.
[Information about major customers]
The information about major customers at June 30, 2020 and 2019 was as follows:
Millions of Yen

2020
Name of Customers

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

Sales

RelatedSegmentName¥19,127
6,223
4,336

Domestic Consulting
International Consulting
Power Engineering

Millions of Yen

2019
Name of Customers

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

Sales

RelatedSegmentName¥17,508
8,773
5,028

Domestic Consulting
International Consulting
Power Engineering

Thousands of U.S. Dollars

2020
Name of Customers

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

38

Sales

$177,802
57,84840,307

RelatedSegmentName

Domestic Consulting
International Consulting
Power Engineering[Information on Impairment Loss of Non-Current Assets by Reportable Segment]
There is no relevant information for years ended June 30, 2020 and 2019.
[Information on goodwill by Reportable Segment]
Amortization of goodwill for the years ended June 30, 2020 and 2019 and the balance of goodwill at June 30,
2020 and 2019 were as follows:
Goodwill
Millions of Yen

2020
Reportable Segment
Domestic International
Power Urban & Spatial Energy Real EstateConsulting Consulting Engineering Development Business Leasing

Amortization of goodwill ���Goodwill at June 30, 2020

¥—
—

¥—
—

¥—
—

¥538
7,398

¥—
—

¥—
—

Total

¥538
7,398

Others¥——Elimination/
Consolidated
Corporate

¥—
—

¥538
7,398

Millions of Yen

2019
Reportable Segment
Domestic International
Power Urban & Spatial Energy Real EstateConsulting Consulting Engineering Development Business Leasing

Amortization of goodwill ���Goodwill at June 30, 2019

¥—
—

¥—
—

¥—
—

¥482
8,193

¥—
—

¥—
—

Total

¥482
8,193

Others¥——Elimination/
Consolidated
Corporate

¥—
—

¥482
8,193

Thousands of U.S. Dollars

2020
Reportable Segment
Domestic International
Power Urban & Spatial Energy Real EstateConsulting Consulting Engineering Development Business Leasing

Amortization of goodwill ���Goodwill at June 30, 2020

$—
—

$—
—

$—
—

$5,001
68,771

$—
—

$—
—

Total

$5,001
68,771Others$——Elimination/
Consolidated
Corporate$——$5,001
68,771[Information on Gain on Bargain Purchase by Reportable Segment]
There is no relevant information for years ended June 30, 2020 and 2019.

39

22. RELATED PARTY INFORMATION
Transactions with related parties for the year ended June 30, 2019 was as follows:
Share capital

Type

Name ofcompany

Location

Millionsof YenThousandsof U.S.
Dollars
Business

Percentage
of voting Relationships Details ofrights, etc. with Related
theheld (%)
Partiestransaction
Loan
Advances(note)South
PT.CIKAENGAN Jakarta,
Subsidiaries
TIRTA ENERGI Republic ofIndonesia

349

3,244

Hydroelectric
power
generation
business

Direct90.0

Construction
and operation ofCollection ofa hydroelectricloans(note)
power plant inIndonesia
Receivedinterest(note)

Transaction amountMillionsof YenThousandsof U.S.
Dollars

1,580

14,687

980

9,110

18

167

Balance at end of period

Account

Millionsof yenThousandsof U.S.
Dollars

1,380

12,828Long-term
loans
receivable

Note: The interest rate is reasonably determined based on the loan agreement, taking into account market
interest rates.
There is no relevant information for the year ended June 30, 2020

40

41

42

43

Nonconsolidated Balance Sheet
Nippon Koei Co., Ltd.
June 30, 2020

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS

2020

2019

2020

CURRENT ASSETS:
Cash and deposits ................................................
Accounts receivable - trade (Note 13)..................
Work in process ....................................................
Short-term loan receivables (Note 13) ................
Current portion of long-term receivables (Note 13) ....
Other (Note 13) ....................................................
Allowance for doubtful accounts ........................
Total current assets ............................................

¥4,242
26,892
970
2,463
284
2,886
(285)
37,452¥4,573
19,377
4,329
1,984
249
1,912
(126)
32,298$39,433
249,984
9,017
22,8962,640
26,828(2,650)348,148

NON-CURRENT ASSETS:PROPERTY, PLANT AND
EQUIPMENT
Buildings (Note 7) ................................................
Accumulated depreciation .................................
Buildings, net .....................................................
Structures (Note 7) ..............................................
Accumulated depreciation .................................
Structures, net ....................................................
Machinery and equipment (Note 7) ...................
Accumulated depreciation .................................
Machinery and equipment, net .........................
Furniture and fixtures .........................................
Accumulated depreciation .................................
Furniture and fixtures, net ................................
Land . .....................................................................
Construction in progress .....................................
Other, net ..............................................................
Total property, plant and equipment ................

20,447(6,936)
13,511
755
(675)
80
2,318
(2,022)296
2,438(1,783)655
14,375172
129
29,218

10,822(7,450)
3,372
774
(673)
101
2,262
(1,991)271
2,121(1,820)301
14,3755,926
67
24,413

190,072(64,476)
125,596
7,018(6,275)743
21,548(18,796)
2,752
22,663(16,574)
6,089
133,628
1,599
1,199
271,606

INTANGIBLE ASSETS
Leasehold interests in land ..................................
Software ...............................................................
Other .....................................................................
Total intangible assets .......................................

628
329
89
1,046

628
358
47
1,033

5,838
3,058
827
9,723

INVESTMENTS AND OTHER ASSETS
Shares of subsidiaries and associates .................
Long-term loans receivablefrom subsidiaries and associates ......................
Prepaid pension costs ..........................................
Other .....................................................................
Allowance for doubtful accounts ........................
Total investments and other assets ...................
Total non-current assets ..................................

27,10327,026

251,945

4,347
2,757
4,409
(92)
38,52468,788

3,041
2,612
5,008
(92)
37,59563,04140,40925,62940,985(855)
358,113639,442TOTAL ....................................................................

¥106,240¥95,339$987,590

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

Millions of Yen

LIABILITIES AND EQUITY

2020

2019

2020

CURRENT LIABILITIES:
Accounts payable ‑ trade (Note 13) .....................
Short-term borrowings (Note 9 and 13) .............
Current portion of long-term borrowings ..........
Provision for bonuses ..........................................
Provision for directors’ bonuses ..........................
Allowance for anticipated project loss ................
Other (Note 13) ....................................................
Total current liabilities ......................................

¥4,003
19,710
2,161
947
52
472
9,355
36,700¥3,593
6,430
1,959
924
91
89
9,883
22,969$37,211183,221
20,088
8,803
483
4,388
86,963
341,157

NON-CURRENT LIABILITIES:Long-term borrowings .........................................
Deferred tax liabilities .........................................
Allowance for environmental measures .............
Liability for retirement benefits ..........................
Other ......................................................................
Total non-current liabilities ...............................
Total liabilities...................................................

13,980
1,318
25
91
681
16,09552,795

16,531
1,449
25
103
395
18,503
41,472

129,956
12,252
232
846
6,331
149,617490,774

7,459

7,438

69,338

6,158

6,137

57,244

1,546

1,546

14,3712,770
1,920
22,367
13,30541,9082,772
1,920
22,367
11,96940,57425,74917,848207,920
123,681389,569(2,346)53,179(717)
53,432(21,808)494,343

266
53,445435
53,8672,473
496,816¥106,240¥95,339$987,590

EQUITY:
Common stock,authorized, 38,000,000 shares in 2020
and 38,000,000 shares in 2019;
issued, 15,933,058 shares in 2020
and 15,919,544 shares in 2019 ............................
Capital surplus:
Additional paid-in capital .....................................
Retained earnings:
Legal reserve ........................................................
Other retained earnings
Reserve for tax purpose reduction entry
of non-current assets ........................................
Reserve for market development ........................

General reserve ................................................
Retained earnings brought forward ...............
Total retained earnings ......................................
Treasury stock-at cost
861,023 shares in 2020
and 235,268 shares in 2019 ...............................
Total shareholders’ equity ..................................
Unrealized gain on
available-for-sale securities ...............................
Total equity .......................................................
TOTAL ....................................................................
See notes to nonconsolidated financial statements.

45

N o n conso lida ted S t atemen t o f I n c o me
Nippon Koei Co., Ltd.
Year ended June 30, 2020

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2020

2020

2019

NET SALES (Note 13) .........................................

¥69,432¥68,014$645,429

COST OF SALES (Note 13) ..................................
Gross profit ......................................................

51,68017,75249,33818,676

480,409
165,020SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (Note 12 and 13) ....
Operating income ............................................

16,1391,613

15,9652,711

150,026
14,994OTHER INCOME:
Interest income (Note 13) ....................................
Dividend income (Note 13) .................................
Other (Note 13) ....................................................
Total other income ...........................................

163
1,499
624
2,286

137
489
788
1,414

1,515
13,934
5,802
21,251OTHER EXPENSES:Interest expense (Note 13) ...................................
Loss on valuation of investment securities ........
Foreign currency exchange loss ..........................
Other .....................................................................
Total other expenses ........................................

243
314
143
63
763

273
311
128
54
766

2,259
2,919
1,329
586
7,093

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

3,136

3,359

29,152

INCOME TAXES:
Current .................................................................
Deferred ................................................................
Total income taxes ...........................................

665
(56)
609

835
195
1,030

6,182
(521)
5,661

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

¥2,527¥2,329$23,491
U.S. Dollars(Note 1)Yen

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

46¥167.0775.00¥149.16
75.00

$1.55
0.70

N o n conso lida ted S t atemen t o f C o s t o f S al es
Nippon Koei Co., Ltd.
Year ended June 30, 2020

Millions of
Yen

Ratio(%)

2020

Millions of
Yen

Ratio(%)

Thousands of
U.S. Dollars

Note: The main breakdown is as follows:

2020

2019

Thousands of
U.S. Dollars

Millions of Yen

2020

2019

2020

¥20,310¥20,367$188,799

3,661

4,292

34,032

Materials costs¥1,6693.5¥1,762

3.7$15,515

Outsourcing expenses

Labour costs

19,19739.7

18,51438.6

178,452

Travel and transportation expenses

Expenses(Note)

27,45556.8

27,693

57.7

255,217

Report Preparation Fee

999

1,093

9,287

Total expenses in the current period

48,321100

47,969100

449,184

Rent expenses

828

814

7,697

Beginning Work in process

4,329

5,698

40,242

Depreciation

348

317

3,235

Total

52,65053,667489,426

The Company uses cost accounting based on job-order cost system.

970

4,329

9,017

¥51,680¥49,338$480,409

Ending Work in process
Cost of sales47

N o n cons olid ated S t atemen t o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd.
Year ended June 30, 2020

Thousands
Outstanding
Number of
Shares ofCommonStock

BALANCE, JULY1, 2018 ........................................
Issuance of new shares ..........................................
Cash dividends, ¥75.00 per share ..........................
Provision of reserve for tax purpose reduction entry of non-current assets ....
Reversal of reserve for tax purpose reduction entry of non-current assets ....
Net income .............................................................
Purchase of treasury stock ....................................
Disposal of treasury stock .....................................
Net change in the year ...........................................
BALANCE, JUNE 30, 2019 ....................................
Issuance of new shares ..........................................
Cash dividends, ¥75.00 per share ..........................
Provision of reserve for tax purpose reduction entry of non-current assets ....
Reversal of reserve for tax purpose reduction entry of non-current assets ....
Net income .............................................................
Purchase of treasury stock ....................................
Disposal of treasury stock .....................................
Net change in the year ...........................................
BALANCE, JUNE 30, 2020 ....................................

Millions of Yen
Capital Surplus

Retained Earnings
UnappropriatedCommonStock

Additional
Paid-in
CapitalLegal Reserve¥1,546

Reserve for Tax
Purpose Reduction
Entry of NonCurrent Assets

Reserve forMarketDevelopment

General Reserve¥2,319¥1,920¥22,367

Retained
Earnings
brought
forward

Total Retained
Earnings¥11,285¥39,437

TreasuryStock¥(1,110)

Total
Shareholders’EquityUnrealized
Gain onAvailable-forSale
Securities¥51,857¥1,156

Total
Equity15,541¥7,415¥6,114¥53,012

14

23

23

—

—

—

—

—

—

—

46

—

46

—

—

—

—

—

—

—

(1,192)(1,192)—(1,192)—(1,192)

—

—

—

—

480

—

—

(480)

—

—

—

—

—

—

—

—

—

(27)

—

—

27

—

—

—

—

—

—

—

—

—

—

—

—

2,329

2,329

—

2,329

—

2,329

(3)

—

—

—

—

—

—

—

—

(8)

(8)

—

(8)

132

—

—

—

—

—

—

—

—

401

401

—

401

—

—

—

—

—

—

—

—

—

—

—

(721)

(721)

15,684

7,438

6,137

1,546

2,772

1,920

22,367

11,96940,574(717)

53,432435

53,867

14

21

21

—

—

—

—

—

—

—

42

—

42

—

—

—

—

—

—

—

(1,193)(1,193)—(1,193)—(1,193)

—

—

—

—

1,080

—

—

(1,080)

—

—

—

—

—

—

—

—

—

(1,082)

—

—

1,082

—

—

—

—

—

—

—

—

—

—

—

—

2,527

2,527

—

2,527

—

2,527

(749)

—

—

—

—

—

—

—

—

(2,002)(2,002)—(2,002)

123

—

—

—

—

—

—

—

—

373

373

—

373

—

—

—

—

—

—

—

—

—

—

—

(169)

(169)

15,072¥7,459¥6,158¥1,546¥2,770¥1,920¥22,367¥13,305¥41,908¥(2,346)¥53,179¥266¥53,445

Total
Shareholders’EquityUnrealized
Gain onAvailable-forSale
Securities$496,693$4,044

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

UnappropriatedCommonStock

BALANCE, JUNE 30, 2019 .......................................
Issuance of new shares ..........................................
Cash dividends, $0.70 per share ............................
Provision of reserve for tax purpose reduction entry of non-current assets ....
Reversal of reserve for tax purpose reduction entry of non-current assets ....
Net income .............................................................
Purchase of treasury stock ....................................
Disposal of treasury stock .....................................
Retirement of treasury stock .................................
Net change in the year ...........................................
BALANCE, JUNE 30, 2020 ....................................
See notes to nonconsolidated financial statements.

48

Retained Earnings

Additional
Paid-in
CapitalLegal Reserve$14,371

Reserve for Tax
Purpose Reduction
Entry of NonCurrent Assets

Reserve forMarketDevelopment

General Reserve$25,768$17,848$207,920

Retained
Earnings
brought
forward

Total Retained
Earnings$111,261$377,168

TreasuryStock$(6,665)

Total
Equity$69,142$57,048$500,737

196

196

—

—

—

—

—

—

—

392

—

392

—

—

—

—

—

—

(11,090)(11,090)—(11,090)—(11,090)———

10,040——(10,040)

—

—

—

—

—

—

—

—

(10,059)——

10,059

—

—

—

—

—

—

—

—

—

—

—

23,491

23,491—

23,491—

23,491

—

—

—

—

—

—

—

—

(18,610)(18,610)—(18,610)

—

—

—

—

—

—

—

—

3,467

3,467

—

3,467

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(1,571)(1,571)$69,338$57,244$14,371$25,749$17,848$207,920$123,681$389,569$(21,808)$494,343$2,473$496,816

N o tes to No nco nso lid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd.
Year ended June 30, 2020

1.	B ASIS OF PRESENTATION OF NONCONSOLIDATED FINANCIAL
STATEMENTS
The accompanying nonconsolidated financial statements have been prepared from the accounts maintained by
Nippon Koei Co., Ltd. (the “Company”) in accordance with the provisions set forth in the Japanese Financial
Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting
principles generally accepted in Japan, which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards.
As consolidated statements of cash flows and certain disclosures are presented in the consolidated financial
statements of the Company, nonconsolidated statements of cash flows and certain disclosures are not presented
herein in accordance with accounting principles generally accepted in Japan.
Effective for the year ended March 31, 2014, the Japanese Financial Instruments and Exchange Act and its
related accounting regulations were amended to allow an entity to not disclose certain designated footnote
information in its nonconsolidated financial statements if the entity prepares and discloses consolidated
financial statements. Accordingly, the Company has omitted disclosure of certain footnote information in theaccompanying nonconsolidated financial statements.
In preparing these nonconsolidated financial statements, certain reclassifications have been made in the 2019
nonconsolidated financial statements to conform to the classifications used in 2020.
The nonconsolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and have been made at the rate of ¥107.575 to $1,
the approximate rate of exchange at June 30, 2020. Such translations should not be construed as representations
that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

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

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

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

c. Investment Securities — Investment securities are classified and accounted for, depending on
management’s intent, as follows:(1) Held-to-maturity debt securities, which are expected to be held to maturity with the positive intent andability to hold to maturity, are reported at amortized cost; (2) available-for-sale securities, which are notclassified as the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of
applicable taxes, in a separate component of equity; and (3) investments in subsidiaries and associatedcompanies are reported at cost.
Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For
other-than-temporary declines in fair value, investment securities are reduced to net realizable value by acharge to income.

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

e. Property, Plant, and Equipment — Property, plant and equipment are stated at cost. Depreciation ofproperty, plant, and equipment is computed principally by the straight-line method based on the estimateduseful lives of the assets. The range of useful lives is principally from 2 to 50 years for buildings, 2 to 40 years
for structures, 2 to 15 years for machinery and equipment, and 2 to 20 years for furniture and fixtures. The
useful lives for lease assets are the terms of the respective leases.

49

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

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

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

h. Retirement and Pension Plans — The Company has a contributory defined benefit pension plan and.

unfunded retirement benefit plan for the benefit of its employees.

The Company accounts for the liability for retirement benefits based on the projected benefit obligations andplan assets at the nonconsolidated balance sheet date. The projected benefit obligations are attributed toperiods on a straight-line basis. Actual gains and losses and past service costs are amortized and recognizedin profit or loss over 13 years.
Hitherto, retirement benefits for directors were provided at the amount that would be required if all directors
retired at the nonconsolidated balance sheet date. However, the Company terminated benefit pension plansfor directors. The balance in the nonconsolidated balance sheet is the estimated amount for directors who
have belonged to the Company since the plans were effective.

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

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

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

k. Employee Stock Ownership Plan — In accordance with Practical Issues Task Force (“PITF”) No. 30,“Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees etc. throughTrusts,” upon the transfer of treasury stock to the employee stockownership trust (the “Trust”) by the entity,
any difference between the book value and fair value of the treasury stock shall be recorded in capitalsurplus. At year-end, the Company records (1) the Company’s stock held by the Trust as treasury stock inequity, (2) all other assets and liabilities of the Trust on a line-by-line basis, and (3) a liability/asset for the netof (i) any gain or loss on delivery of the stock by the Trust to the employee shareholding association, (ii)
dividends received from the entity for the stock held by the Trust, and (iii) any expenses relating to the Trust.

l. Research and Development Costs — Research and development costs are charged to income as incurred.
m. Leases — Finance lease transactions are capitalized to recognize lease assets and lease obligations in thenonconsolidated balance sheet. All other leases are accounted for as operating leases.

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

50

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

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

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

q. Foreign Currency Transactions — All short-term and long-term monetary receivables and payables

denominated in foreign currencies are translated into Japanese yen at the exchange rates at thenonconsolidated balance sheet date. The foreign exchange gains and losses from translation are recognizedin the nonconsolidated statement of income.

r. Revenue Recognition — During the progress of operation, the percentage-of-completion method is applied

when the extent of progress toward completion, total costs on and total revenue from the contract are
reliably estimated. The stage of completion is determined using the cost-to-cost method.

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

Derivative financial instruments are classified and accounted for as follows: (a) all derivatives are recognized
as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions arerecognized in the nonconsolidated statement of income; (b) for derivatives used for hedging purposes, if
derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging
instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedgedtransactions.
Interest rate and currency swaps that qualify for hedge accounting and meet specific matching criteria are
not remeasured at market value but the differential paid or received under the swap agreements is
recognized and included in interest expense or income.

t. Per Share Information — Basic net income per share is computed by dividing net income attributable toshareholders of common stock with the weighted-average number of shares of common stock outstanding
for the period.
Diluted net income per share of common stock is not disclosed because the Company has nothing that might
dilute the per share information for the years ended June 30, 2020 and 2019.
Cash dividends per share presented in the accompanying nonconsolidated statement of income are dividends
applicable to the respective years, including dividends to be paid after the end of the fiscal year.

u. Accounting Changes and Error Corrections — Under ASBJ Statement No. 24, “Accounting Standard for
Accounting Changes and Error Corrections,” and ASBJ Guidance No. 24, “Guidance on Accounting Standard
for Accounting Changes and Error Corrections,” accounting treatments under this standard and guidance areas follows:(1) Changes in Accounting Policies:
When a new accounting policy is applied following revision of an accounting standard, the new policy isapplied retrospectively unless the revised accounting standard includes specific transitional provisions, inwhich case the entity shall comply with the specific transitional provisions.
(2) Changes in Presentation:
When the presentation of financial statements is changed, prior-period financial statements are reclassified
in accordance with the new presentation.

51

(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.

v. Accounting method for consumption taxes — Consumption tax and local consumption tax are
accounted for by the tax-exclusion method.

3. CHANGES IN PRESENTATIONIn the nonconsolidated financial statements, reclassifications and rearrangements which were made in 2019were changed in 2020 in order to conform to the financial statements disclosed in Japan in accordance withJapanese generally accepted accounting principle.

4. ADDITIONAL INFORMATION
Employee Stock Ownership Plan (“ESOP”) Trust — For more information about this note, please refer
to“Notes to Consolidated Financial Statements- 4.Additional Information”.

The impact of COVID-19 on accounting estimates — COVID-19 has a broad impact on the economy andbusiness activities, and it is difficult to predict the future spread of COVID-19 and when it ends.
The Company makes accounting estimates, including impairment of fixed assets, based on the assumption thatthe impact of COVID-19 will not continue beyond June 30, 2021 on the basis of the external information
currently available. However, the timing of the end of COVID-19 and other factors may affect the future financial
position and results of operations.

5. PROPERTY,PLANT AND EQUIPMENT
The book value and changes in such balances for the year ended June 30, 2020 are as follows:
Millions of Yen

Buildings ...................................
Structures .................................
Machinery and equipment ......
Vehicles .....................................
Tools, furniture and fixtures ....
Land ..........................................
Leased assets ............................
Construction in progress .........
Total ...................................

52

Book value atbeginning of period

Increase

Decrease

Depreciation¥3,372
101
271
18
301
14,37549
5,926¥24,413¥10,519
20
114
8
470
—
90
4,317
¥15,538

¥29
31
2
0
15
—
—
10,071¥10,148

¥351
10
87
7
101
—
29
—
¥585

Book value at Accumulated Acquisition cost
end of period depreciation at end of period¥13,511
80
296
19
655
14,375110
172¥29,218¥6,936
675
2,022
76
1,783
—
58
—
¥11,550¥20,447
755
2,318
95
2,438
14,375
168
172¥40,768

Thousands of U.S. Dollars
Book value atbeginning of period

Increase

Decrease

Buildings ...................................
$31,346 $97,783
Structures .................................
939
185
2,519
Machinery and equipment ......
1,060
Vehicles .....................................
75
167
2,798
Tools, furniture and fixtures ....
4,369
Land ..........................................
—
133,628
Leased assets ............................
837
455
55,087
40,130Construction in progress .........
Total ................................... $226,939 $144,439

$270
288
19
0
139
—
—
93,618$94,334

Depreciation

Book value at Accumulated Acquisition cost
end of period depreciation at end of period$3,263 $125,596 $64,476 $190,072
93
743
6,275
7,018
808
2,752
18,796
21,548
65
177
706
883
939
6,089
16,574
22,663— 133,628— 133,628
270
1,022
540
1,562
—
1,599
—
1,599
$5,438 $271,606 $107,367 $378,973

Increase and decrease during the fiscal year ended June 30, 2020, primarily were related to construction of a
new head office. These changes were increase of buildings ¥9,048 million ($84,109 thousand), increase of tools,
furniture and fixtures ¥324 million ($3,012 thousand) and decrease of construction in process ¥10,040 million($93,330 thousand).

6. 	INTANGIBLE ASSETS
The book values and changes in such balances for the year ended June 30, 2020 were as follows:
Millions of Yen
Book value at beginningof period

Leasehold interests in land ................
Telephone subscription right .............
Right to use water facilities ...............
Software ..............................................
Software development in progress ....
Patent right ����������������������������������������
Total .............................................

¥628
47
0
358
—
0
¥1,033

Increase

¥—
—
—
129
47
—
¥176

Decrease

Depreciation

Book value at
end of period

¥—
—
0
152
—
0
¥152

¥628
45
0
329
44
—
¥1,046

Depreciation

Book value at
end of period

$—
—
0
1,413
—
0
$1,413$5,838
418
0
3,058
409
—
$9,723

¥—
2
—
6
3
—
¥11

Thousands of U.S. Dollars
Book value at beginningof period

Leasehold interests in land ................
Telephone subscription right .............
Right to use water facilities ...............
Software ..............................................
Software development in progress ....
Patent right ����������������������������������������
Total .............................................

$5,838
437
0
3,328
—
0
$9,603

Increase

$—
—
—
1,199
437
—
$1,636

Decrease

$—
19
—
56
28
—
$103

53

7. REDUCTION ENTRY
In the case of the acquisition expenses of the Company that have been subsidized by the national government,
the amount of such subsidies is offset against the acquisition cost of the corresponding property, plant, andequipment.
The amount of reduction entry by accounts under property, plant, and equipment at June 30, 2020 and 2019,were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2020
Buildings and structures .......................................
Machinery and equipment ....................................
Total .................................................................

¥9
148
¥157

2020

2019

$84
1,375
$1,459

¥28
167
¥195

8. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATED COMPANIESInvestments in subsidiaries and associated companies as of June 30, 2020 and 2019, were as follows:
Millions of Yen

June 30, 2020
Investment in affiliated companies .......................
Total .................................................................

Carrying
Amount¥—¥—Fair Value¥—¥—

Unrealized
Gain/Loss¥—¥—

Millions of Yen

June 30, 2019
Investment in affiliated companies .......................
Total .................................................................

Carrying
Amount¥916¥916

Fair Value
¥735
¥735

Unrealized
Gain/Loss¥(181)¥(181)

Thousands of U.S. Dollars

June 30, 2020
Investment in affiliated companies .......................
Total .................................................................

Carrying
Amount$—$—Fair Value$—$—

Unrealized
Gain/Loss$—$—

The carrying amount of investments in subsidiaries and associated companies whose fair values cannot be
reliably determined is as follows:54Thousands of
U.S. Dollars

Millions of Yen

June 30, 2020 and 2019
Investment in subsidiaries that do nothave a quoted market price in an active market ....
Investments in affiliated companies that do nothave a quoted market price in an active market ....
Total .................................................................

2020

2020

2019

¥26,313¥25,320$244,601

790¥27,103790¥26,1107,344$251,945

9. BORROWINGSThe Company and four financial institutions have entered into overdraft contracts and a commitment line
contract by syndicated loan over three years. This commitment line contracts included restrictive financial
covenants for each financial institution. The unused portion of these agreements at the end of the fiscal year was
as follows:
Thousands of
U.S. Dollars

Millions of Yen

2020
Total amount of medium-term commitment
lines and overdraft limits......................................
Balance of borrowings ...........................................
Balance of unused portion ....................................

2020

2019

¥36,500
13,000¥23,500$339,298
120,846$218,452¥36,500—¥36,500

10. ALLOWANCE AND PROVISION
The balances and changes for the year ended June 30, 2020 were as follows:
Millions of Yen

Allowance for doubtful accounts ..........................
Provision for bonuses ............................................
Provision for directors’ bonuses ............................
Allowance for anticipated project loss ..................
Provision for environmental measures .....................

Balance at
beginning of period
¥218
924
91
89
25

Increase

Decrease

¥164
947
52
436
—

¥5
924
91
53
—

Balance at
end of period
¥377
947
52
472
25

Thousands of U.S. Dollars

Allowance for doubtful accounts ..........................
Provision for bonuses ............................................
Provision for directors’ bonuses ............................
Allowance for anticipated project loss ..................
Provision for environmental measures .....................

Balance at
beginning of period$2,026
8,589
846
827
232

Increase

Decrease$1,524
8,803
483
4,054
—

$46
8,589
846
493
—

Balance at
end of period$3,504
8,803
483
4,388
232

55

11. INCOME TAXESThe Company is subject to Japanese national and local income taxes which, in the aggregate, resulted in anormal effective statutory tax rate of approximately 30.6% for the years ended June 30, 2020 and 2019.
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at June30, 2020 and 2019, are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2020
Deferred tax assets:
Investment in subsidiaries ...................................
Allowance for doubtful accounts ........................
Accrued bonuses ..................................................
Liability for retirement benefits
for employees .....................................................
Allowance for anticipated project loss .................
Overdepreciation ..................................................
Loss on impairment of long-lived assets ............
Loss on valuation of investment securities ........
Other .....................................................................
Less valuation allowance .....................................
Total .................................................................

2020

2019

¥596
115
301

¥358
67
422

$5,540
1,069
2,798

28
145
170
62
93
281
(847)
944

31
27
72
62
93
287
(626)
793

260
1,348
1,580
576
865
2,613
(7,874)
8,775

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

1,223

746

11,369Reserve for special account for advanced
depreciation of property ....................................

—

477

—

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

117
844
78
2,262

192
800
27
2,242

1,088
7,846
724
21,027

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

¥(1,318)¥(1,449)$(12,252)

56

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in theaccompanying nonconsolidated statement of income for the year ended June 30, 2020, with the corresponding
figures for 2019, is as follows:

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

2020
30.6%
2.8
2.1
4.1
7.0
(8.2)
(1.4)
(12.9)
(4.7)
19.4%

2019
30.6%
2.6
2.0
4.7
2.1
(7.3)
—
(3.6)
(0.4)
30.7%

12. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The ratio of selling expenses to the total selling, general and administrative expenses for years ended June 20,
2020 and 2019, were 21% and 22%, respectively. The ratio of general and administrative expenses to the total
selling, general administrative expenses for years ended June 20, 2020 and 2019, were 79% and 78%,
respectively.
Thousands of
U.S. Dollars

Millions of Yen

Salaries and allowance ........................................
Rent expenses on real estate ...............................
Provision for bonuses ..........................................
Provision for directors’ bonuses.............................
Retirement benefit expenses ................................
Provision of allowance for doubtful accounts ....
Depreciation .........................................................

2020¥4,310
1,794
7
52
386
159
393

2019
¥4,390
1,577
300
91
341
119
339

2020
$40,065
16,677
65
483
3,588
1,478
3,653

13. TRANSACTIONS WITH AFFILIATED COMPANIES(1) The amount relating to transactions with affiliated companies in nonconsolidated statement of income foryears ended June 30, 2020 and 2019, were follows:
Thousands of
U.S. Dollars

Millions of Yen

Sales
Cost of purchased goods
Selling, general and administrative expenses
Non-operating income
Non-operating expenses

2020
¥511
3,057
899
1,716
20

2019
¥565
3,166
1,043
716
19

2020
$4,75028,417
8,357
15,952
186

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(2) The balance of receivables and payables to affiliated companies at June 30, 2020 and 2019, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Short-term account receivables ..........................
Short-term account payables ..............................

2020¥3,4447,200

2019¥2,912
7,333

2020$32,015
66,930(3) The Company had the following contingent liabilities at June 30, 2020 and 2019:
Thousands of
U.S. Dollars

Millions of Yen

Refundment bonds of a subsidiary .....................
Performance bond of subsidiaries ......................

2020
¥501
101

2019
¥48
73

2020
$4,657939

14. SUBSEQUENT EVENTS
a. Appropriations of Retained Earnings
On August 31, 2020, the following appropriation of retained earnings at June 30, 2020, was resolved by the
extraordinary Board of Directors’ meeting:Millions of Yen

Year-end cash dividends, ¥75 ($0.70) per share ...................

¥1,138

Thousands of
U.S. Dollars$10,579

The total amount of the dividends above includes ¥8 million ($74 thousand) in dividends on the Company’s
shares owned by “ESOP.”

b. Issuance of new shares as restricted stock compensation
The Company decided to issue new stocks as restricted stock compensation at the extraordinary Board of
Directors’ meeting held on September 29, 2020, as follows:
The Company aims to have the directors (not including outside directors; “Eligible Directors”) share benefits
and risks of stock price fluctuations with shareholders and further enhance their willingness to contribute toimproving stock prices and enhancing corporate value. Therefore, the Company decided, at the Board of
Directors held on August 14, 2017, to introduce a restricted stock compensation system (the “System”), which
will issue restricted stock to Eligible Directors.
Furthermore, the 73rd Annual General Meeting of Shareholders held on September 28, 2017, approved, under
the System, setting the total amount of monetary compensation claims payable to the Eligible Directors ascompensation related to restricted stock at a level where it does “not exceed an annual amount of ¥60 million.”
In addition, the total number of 50,000 shares, which are restricted stock to be allotted to Eligible Directors willbe the upper limit of the number of restricted shares to be allotted in each fiscal year, and the transfer restriction
period of restricted stock will be between one year to five years, determined by the Board of Directors.

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(1)    Payment date
October 28, 2020(2)    Class and number of shares to be issued 14,996 shares of common stock of the Company(3)    Issue price¥2,880 per share¥43,188,480(4)    Total issue price of shares to be issued(5)    Capitalization amount¥1,440 per share¥21,594,240(6)    Total capitalization amount
Allotment of specified restricted stocks(7)    Method of offer or allotment(8)    Method of contribution
In-kind contribution of monetary compensation claims
14,996 shares to eight directors of the company (excluding(9)    Allottees, number thereof andnumber of shares to be allotted
outside directors)
October 28, 2020 to October 27, 2023
(10) Transfer restriction period(11) Other	Issue of new shares to be allotted is conditioned on the securities
registration statement taking effect in accordance with the
Financial Instruments and Exchange Act.

c. Recording of compensation provision
A flaw was found in the facility related to the completed project in which the Company was in charge of design.
It is probable that the responsibility for the flaw lied with the Company. The Company plans to record ¥280
million ($2,603 thousand) as compensation provision for the estimated cost of the repair work in the fiscal year
ended June 30, 2021.

59

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Si g ni f i cant C on solid ated S u b s i d i ari es
Significant consolidated subsidiaries of each segment as of June 30, 2020 are as follows:

Domestic Consulting Operations
Tamano Consultants Co., Ltd.
Nippon Civic Consulting Engineers Co., Ltd.
El Koei Co., Ltd.

International Consulting Operations
Koei Research & Consulting Inc.
Nippon Koei Latin America-Caribbean Co., Ltd.
Nippon Koei LAC, Inc.
Nippon Koei India Pvt. Ltd.
Nippon Koei Vietnam International Co., Ltd.
Philkoei International, Inc.
PT. Indokoei International
Myanmar Koei International Ltd.

Power Engineering Operations
Koei System Inc.
Sankoh Machinery Co., Ltd. (Equity method affiliate)

Urban & Spatial Development Operations
BDP Holdings Limited
Building Design Partnership Limited
Quadrangle Architects Limited
Kisho Kurokawa Architect & Associates Co., Ltd.

Energy Business Operations
Koei Energy Co., Ltd.
Nippon Koei Energy Europe B.V.
Ironmont Hydro Pte. Ltd.
PT. Cikaengan Tirta Energi
PT. Arkora Hydro (Equity method affiliate)
Ohkura Masudama Hydropower Co., Ltd. (Equity method affiliate)
Powersource Philippines Distributed Power Holdings, Inc. (Equity method affiliate)
Flexible Energy Service Co., Ltd. (Equity method affiliate)

Real Estate Leasing Operations and Others
Nikki Corporation
DSI Co., Ltd.

63

5-4 Kojimachi, Chiyoda-ku, Tokyo 102-8539, Japan
Telephone: +81 3 5276 2454 Facsimile: +81 3 5276 2656
http://www.n-koei.co.jp E-mail: info@n-koei.co.jp

Printed in Japan