Annual Report

2008
Year Ended March 31, 2008

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

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

CONTENTS
Financial Highlights ....................................................................................................... 1
Consolidated Business Report for Fiscal 2007 . ............................................................ 2
Consolidated Balance Sheets ....................................................................................... 18
Consolidated Statements of Income ............................................................................ 20
Consolidated Statements of Changes in Equity .......................................................... 21
Consolidated Statements of Cash Flows ..................................................................... 22
Notes to Consolidated Financial Statements .............................................................. 23
Non-consolidated Balance Sheets . .............................................................................. 40
Non-consolidated Statements of Income .................................................................... 42
Non-consolidated Statements of Changes in Equity .................................................. 43
Notes to Non-consolidated Financial Statements . ..................................................... 44
Corporate Information ................................................................................................. 54
Major Nippon Koei Group Companies . ...................................................................... 56

Financial Highlights

Consolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended March 31

2008

2008

2007

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

¥67,119¥67,053$669,917

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

1,725

1,465

17,218Net income per share (Yen/Dollars) ....................

20.80

17.47

0.21

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

81,83782,788816,818

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

42,84644,389427,647

As of March 31

Non-Consolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended March 31

2008

2008

2007

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

¥49,929¥49,787$498,343

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

774

801

7,725

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

9.33

9.55

0.09

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

70,83971,453707,047

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

38,77741,088387,035

As of March 31

Notes: 1. Per share amounts are based on the weighted average number of shares outstanding during each period.
2. The dollar amounts in this report represent translations of yen, for convenience only, at the rate of ¥100.19=US$1, the rateof exchange at March 31, 2008.

1

Co n so l i dated B usine ss Rep o rt fo r Fi s c al 20 07( F i sca l Year Ende d M arch 31, 20 08)
1. Overview of Performance and Cash Flow
(1) Performance
The Japanese economy steadily plodded along the road to recovery during the year under review. Whileconsumer spending remained stagnant, private sector capital investments were buoyed by rising corporate
profits. Despite this progress, the impact of the US subprime mortgage crisis during the latter half of the year
has cast a dark shadow over the outlook for the future.
The Nippon Koei Group managed to weather a harsh business climate during the year under review asinvestments by power companies and funding for public works projects as well as Official Development
Assistance (ODA) continued to dry up amid fierce price competition in the market.
Working against this backdrop, the Group sought to enhance management efficiency through initiatives aimed
at optimizing operations as a whole in line with our “integration/concentration” policy. Group-wide efforts weremade to boost orders and cut costs by trimming expenses. These initiatives as well as a concerted effort toleverage the combined strength of our various segments and group companies were all implemented with an eye
to making our corporate foundation strong enough to withstand whatever stormy business climate may lie
ahead.
Consolidated orders received during the year amounted to 68,605 million yen, up 7.5% from the preceding term,
while sales totaling 67,119 million yen were about the same as the previous year.
While operating income amounted to only 2,307 million yen, down 14.0% from the previous term, current net
income reached 1,725 million yen, a 17.8% jump from the previous year due to the recovery in performance ofconsolidated subsidiaries.
Performance for individual Group sectors is outlined below.

Domestic Consulting Operations
While performance was up in such fields as environmental assessment, road project planning/design, riverproject dam redevelopment, and quake-proofing/maintenance/replacement designed to increase social capital,
orders remained on almost an even par with the preceding term at 37,065 million yen as did sales at 37,204
million yen.

Overseas Consulting Operations
Performance was buoyed by contracts for large projects financed by the Japanese government’s yen loans,including a railway project in Vietnam and a water-power generation project in Indonesia. Orders for the term
amounting to 20,007 million yen were up a whopping 43.5% year-on-year. Sales also sales increased 9.3% to16,370 million yen.

Manufacturing Operations
Orders for computer-controlled systems, etc. fell off in the wake of the damage done to the Kariwa atomic power
plant in Kashiwazaki by the Niigata-Chuetsu Earthquake. Reluctance by the power company, which is still
repairing damage to the plant, to make any capital investments drove equipment orders down to 7,443 million
yen, 19.9% below the previous term’s figure. Sales also declined 13.8% to 8,259 million yen.

Engineering Operations
Due to limited capital spending by power companies in the wake of the Niigata-Chuetsu Earthquake, work ontransformers that was part of the construction of more substations and repairs to existing substations also2

slowed down considerably. Overall construction work orders declined 11.6% year-on-year, reaching a total of
3,346 million yen. Sales remained almost the same, at 3,297 million yen.

Real Estate Leasing
Sales from our Group’s real estate leasing operations in the year under review remained about the same as theprevious year at 1,261 million yen.

Other Business Operations
Orders from other business operations, including software development/sales, increased 16.0% from theprevious year to reach 744 million yen, while sales rose 11.4% to total 728 million yen.

(2) Cash Flow
Although the Group earned 2,437 million yen before income taxes during the period under review, accounts receivable
were up. Annual net cash flow from operational activities came to 1,737 million yen (vs. 4,680 million yen for thepreceding year).
Cash flow from investment activities, tangible assets increased due to the completion of a new building to house aconsolidated subsidiary. This and other investment activities brought about a net cash outflow of 2,512 million yen for theyear (vs. 1,415 million yen in net outflow for the year before).
There was an increase in short-term loans to finance the construction of the above-mentioned building as well as thepurchase of treasury stocks. The net cash flow from these activities for the year was 322 million yen (vs. a negative 2,757
million yen for the preceding term).
We closed the fiscal year with a balance of 4,899 million yen, a cash and cash equivalent decline of 599 million yen below
the previous year’s figure.
The table below shows trends in cash flow-related indicators for the Group:

Reference: Trends in Cash Flow-related Indicators

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

Fiscal Year
Ended March
2004

Fiscal Year
Ended March2005

Fiscal Year
Ended March2006

Fiscal Year
Ended March2007

Fiscal Year
Ended March
2008

59.0

47.2

52.1

53.1

52.1

30.8

31.6

47.2

36.2

25.4

—
—

34.3
2.8

11.7
6.2

2.7
27.5

17.8
10.2

Capital-to-asset ratio: stockholders’ equity / total assets
Capital-to-asset ratio on market value basis: market capitalization / total assets
Interest-bearing debt-to-cash flow ratio: interest-bearing debts / cash flow
Interest coverage ratio: cash flow / interest payment
Notes: 1. All figures are calculated on the basis of consolidated financial figures.
2. Market capitalization is computed on the basis of the number of shares issued, excluding treasury stocks.
3. Cash flow here means operating cash flow.
4. Interest-bearing debt here comprises all debts included in the balance sheet on which interest is paid.
5. The interest-bearing debt-to-cash flow and interest coverage ratios for the term ended March 2004 were negative as
indicated with a “-.”3

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

Change onPrevious Year(%)

(Millions of yen)

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

¥37,065
20,007
7,443
3,346
744
68,605

2.5
43.5
-19.9
-11.6
16.0
7.5

15,43025,787
1,036
1,473
16
¥43,742

-0.9
16.4
-44.1
3.4
6.7

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

(2) Sales PerformanceThis Consolidated
Fiscal YearBusiness Category

Change onPrevious Year(%)

(Millions of yen)Domestic consulting operations . ............................
Overseas consulting operations ..............................
Power equipment manufacturing operations ........
Electric power engineering operations . .................
Real estate leasing operations .................................
Other business operations .......................................
Total FY2007 sales ...............................................

¥37,204
16,370
8,259
3,297
1,261
728
¥67,119

-0.1
9.3
-13.8
-2.0
0.1
11.4
0.1

Notes: 1. Status of production is not stated due to the difficulty of defining consolidated group production performance.
2. Transactions between businesses are offset and eliminated.
3. Amounts above do not include consumption tax.
4. Sales to major customers as a proportion to total sales are as follows.

CustomerThis Consolidated
Fiscal Year
Amount(Millions of yen)

Proportion(%)

Previous Consolidated
Fiscal Year
Amount(Millions of yen)

Proportion(%)

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

¥11,039

16.4¥9,834

14.7

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

7,549

11.2

8,001

11.9

4

3. Future Challenges(1) Future Challenges
The Nippon Koei Group has formulated a new medium-term management plan for fiscal 2008 through 2010.
Equipped with this plan and our philosophy to “act with sincerity and contribute to society through technology,”
we aim to be a company that is regarded highly by our employees, customers and the community at large, acompany that is, as our slogan says, forever “Challenging mind, Changing dynamics. ” We are committed topursuing a strategy of even greater concentration/integration while providing quality products and services thatwill meet our customers’ needs. While we could never forge a path to this goal individually, by pulling together
and working as a “team” we can move forward together to reap the profits that lie within our collective grasp.
We continue to operate in a harsh business environment. The market is shrinking and competition is becoming
keener everyday. The key to success lies in our ability to leverage our wide range of technologies to expand ourbusiness. Given these circumstances we will continue to work together and make every effort to improve our
performance, in light of the following priority policies set forth under our new medium-term management plan:(i)	Management resources will primarily be allocated to promising businesses that meet market needs. This
includes businesses related to environment and energy (including railways). We will be vigilant in seizing
new business opportunities, including private investment projects as well as the full spectrum of generalcontracting, from design and procurement to construction, while working to maximize the impact our
technologies have in each of these fields.
(ii)	We will continue to recruit and train top-notch engineering professionals with an eye to further sharpening
the Group’s technological edge as we take on challenging businesses that pose an opportunity for adding
value or which require the employment of our advanced technological abilities.
(iii)	We will leverage the Group’s collective knowledge and know-how to improve the productivity of eachindividual operation as well as the productivity of the Group as a whole.
(iv)	Our employees are the lifeblood of our Group. We will work to sustain this important resource by improving
working conditions and benefits as well as rewarding performance in an effort to boost motivation andsecure the best human resources available. We will specifically increase wages, implement measures to help
employees balance their work and private life, and enhance our health care benefit system.
The Nippon Koei Group is committed to improving corporate governance and strengthening internal controls.
Compliance lies at the heart of good corporate management. While the executives and employees of our Groupalready act in strict accordance with the Charter of Corporate Responsibility, we will make even greater efforts
to ensure stricter standards compliance for more effective management. These efforts will go hand in hand with
our ongoing work to develop a system of reliable and accurate financial reporting that form part of the internal
control system we look forward to fully implementing in the near future.
Implementation of these policies will lead to better performance and the goals of our new medium-term
management plan.
On September 26, 2007, part of a bridge being constructed in Vietnam under our Company’s supervision (theCau Can Tho Bridge Construction Project), collapsed, resulting in a number of injuries. This accident occurred
when the temporary structure supporting the bridge superstructure (the left bank side) while underconstruction, collapsed. Immediately after the accident, Nippon Koei established an emergency headquarters
and has been working with Vietnamese government agencies and others to make every possible effort to rescue

5the victims. The Vietnamese government appointed a committee to investigate the accident and determine its
cause. Nippon Koei has sent a team of experts to assist the committee with its investigation. We have also
assembled a panel of experts from various fields and a technical support team to find the cause behind theaccident and prevent the occurrence of a similar accident in the future. The Nippon Koei Group has made all of
its resources available to deal with this terrible tragedy. It is extremely unfortunate that this accident was related
to a project that is a symbol of friendship between Japan and Vietnam. We are determined to do everything
possible to deal with this disaster and find out its cause in an effort to prevent such an accident from ever
happening again.

(2) Basic Policy Governing Corporate Decision-makers on Financial Affairs andOperations
On maintaining the anti-takeover policy (takeover defense)
The Nippon Koei Board of directors voted at their May 12, 2008 meeting to revise Company policy regarding thelarge-scale acquisition of Company shares (Policy on Substantial Acquisition of Shares), which was introducedin May 2006 and adopted in June 2007.
Revisions to the Policy on Substantial Acquisition of Shares were considered in light of making the policy more
appropriate and better suited to maintaining and enhancing corporate value. Since the decision to revise thepolicy was made in the common interest of the shareholders, we considered it only proper to seek theshareholders’ approval on keeping and revising the Policy on Substantial Acquisition of Shares. The issue wasbrought up at the 63rd ordinary general meeting of shareholders held on June 27, 2008 and approved.
1. Establishment and Justification for Rules on Substantial Acquisition of Shares
The Board of Directors believes that, as long as Nippon Koei is a publicly traded company, any decision on
selling a large number of shares to an individual buyer should be left in the hands of the shareholders.
We are proud of our company’s long track record as a good corporate citizen. We have been charged withfulfilling a great social mission and much of Nippon Koei’s work involves non-profit activities and public works
project, including construction consulting. The power of our brand is backed by a wide range of technologicalknow-how, years of experience, and a rock-solid performance record. It would be impossible to manage ourCompany, improve its corporate value, or bring profit to its shareholders without an understanding of
everything the brand stands for or devoid of the relationship of trust that has been built up between our
Company and its customers, employees, suppliers, and other stakeholders in Japan and abroad. Nippon Koei
believes its IR activities provide shareholders and general investors with a clear window on how we arrive at afair price for our shares. When any party suddenly tries to buy a huge number of shares at the establishedpurchase price, the shareholders should be given all the information they need from the potential buyer as wellas the Nippon Koei Board of Directors to determine whether or not the established share purchase price is fairor not. The prospective buyer’s plans for managing the Company and the potential impact of a takeover on thecompany’s bottom line as well as its relationship with the employees, affiliates, customers, suppliers and otherstakeholders should be made clearly known to the shareholders so they can make an informed decision onwhether to keep their shares or not. Shareholders should also seriously consider the opinions of the Nippon
Koei Board of Directors in the event of a takeover.
In consideration of everything mentioned above, our Board has concluded that in the event of a takeover bid, theshareholders should be given all the information they need to make a sound decision. When providing such6

information, the Board of Directors will contemplate an opinion about the takeover in light of the advice,
opinions, or recommendations from independent specialists, etc., as well as an in-house ad hoc committee (to be
defined below). Once the Board has formed its opinion it will inform the shareholders. If deemed necessary, theBoard shall enter into negotiations with the potential buyer for better terms or present our shareholders with analternative proposal.
This process is designed to ensure that our shareholders seriously consider every aspect of a takeover bid (andany alternative proposal from the Board) in light of the Board’s opinion so they can make an informed decision.
Ensuring that the buying of a large amount of shares is done according to a fixed set of reasonable rules
reflecting the reasons already stated is both in the interest of Nippon Koei and its shareholders. The Board of
Directors has set forth the following rules for providing relevant information in the event of a takeover bid(Rules on Substantial Acquisition of Shares).
We will set up an ad hoc committee to introduce the Rules on Substantial Acquisition of Shares. The committee
will ensure that the series of procedures spelled out in the Rules on Substantial Acquisition of Shares arefollowed objectively and rationally, and that the measures deemed appropriate to protect the common interestsof our Company and its shareholders are formed objectively and rationally. The committee will also serve toprevent the Board of Directors from making any rash judgments or applying the Rules on Substantial
Acquisition of Shares arbitrarily. The ad hoc committee will be comprised of three or more persons elected fromamong our Company’s external directors and auditors, who act independently of the management that is incharge of running the Nippon Koei Groups business operations, so that the committee may pass fair andimpartial judgments.
2. Rules on Substantial Acquisition of Shares
The Rules on Substantial Acquisition of Shares 1) clearly defines a takeover bid through the major acquisition ofCompany shares, 2) stipulates that any party attempting to acquire a large number of shares, submit a written
notification to the Board of Directors in advance declaring their exact intentions, and 3) opens shares topurchasing only after the elapse of an assessment period to be specified by the Nippon Koei Board of Directors.
The details of the rules are as follows:(1) Scope
The Rules on Substantial Acquisition of Shares shall be applied to any acquiring party (“the bidder”) attempting
to acquire a large number of shares Note 1 in the Company in a bid to control 20% or more of the voting rights Note 2
by a certain group of shareholders Note 3 or acquiring enough shares to change the balance of power to ensure thata certain group of shareholders have 20% or more of the voting rights (this type of acquisition, whether it be atender offer through the purchase of shares over the open market or any other takeover bid, excluding instancesin which our Board of Directors has given its prior consent, shall be hereinafter referred as a “substantial
acquisition”).
(2) Submission of a written declaration of intent
When a party engages in a substantial acquisition of our Company’s shares, it must first submit a written
declaration of its intention (Declaration of Intention) to the Nippon Koei Group president in accordance with
the Rules on Substantial Acquisition of Shares. The Declaration of Intention shall include the bidder’s name andaddress, the laws under which it has been incorporated, the name of its representative, and its contact address
in Japan, as well as an outline of its acquisition proposal.

7

When a Declaration of Intention has been submitted by a bidder, Nippon Koei will disclose the information
regarding the bidder’s offer at an appropriate time and in full accordance with all securities and exchange laws,
ordinances and regulations regarding timely disclosure.
(3) Provision of information
Nippon Koei will provide an initial list of information to be submitted by a potential acquirer within 10 businessdays from receiving a Declaration of Intention from the bidder. The bidder must provide the Board withinformation sufficient enough (“necessary information”) for our shareholders to make a sound judgment and for
our Board to form a reasonable opinion on the tender offer. While the contents of this necessary information
may vary depending on the bidder and its intentions, it shall generally include:i.	A bidder profile (including the nature of its current operations and its experience with operations similar to
those of the Nippon Koei Group);ii.	The purpose, method, and details of the proposed acquisition (including, in the case of acquiring a large
percentage of our Company shares, the bidder’s reasons for setting an upper limit for the number of shares
to be bought, and its plans for changing the capital structure of the Company afterwards);iii.	How the bidder calculated the purchase price for our Company shares and how they will fund theiracquisition;iv.	Policies and plans related to management, business operations, financial aspects, capital, dividends, assets,etc. the bidder plans to implement should it takeover the Company’s operations (“Post Acquisition
Management Policy”).
v.	Policies concerning stakeholders in the Nippon Koei Group, including customers, suppliers, surrounding
communities, and employees, the bidder intends to implement in the event it takes over Company
operations.
The Board of Directors shall carefully examine and consider the information the bidder has initially provided
and consider the opinions and advice of the ad hoc committee, independent specialists, etc. If the Board finds
the information submitted to be insufficient to make a sound judgment that is in the best interest of theCompany and its shareholders, it shall request the bidder to furnish it with more information until it believes
that it has obtained all the necessary information.
When the Board deems that it has been provided with all the necessary information, it will send the bidder word
to that effect, and disclose the information related to the acquisition when most appropriate and in accordancewith all relevant securities and exchange laws, ordinances and regulations. Whenever the Board of Directors
believes a decision should be left up to the shareholders, it will inform them of all or part of the necessary
information it has been provided in a timely manner.
(4) Assessment period
Once the bidder has furnished all the Necessary Information, the Board shall be given a period of between 60
and 90 days (depending on the complexity of the issues involved) to assess the tender offer. The assessment
period shall begin from the day the bidder was notified that it had provided all the necessary information.
During this period (“assessment period”) the Board of Directors shall assess and consider the proposal, conduct
negotiations, form an opinion, and if necessary, formulate an alternative plan. Acquisition of shares may
commence once the assessment period has elapsed.

8

The assessment period may be extended up to 30 days, if the ad hoc committee so advises in order for the Board
to initiate countermeasures. When the Board decides to extend the assessment period, it must notify the bidderof the new assessment period deadline and the reason for the extension. Nippon Koei will disclose the new
deadline and reason for the extension to the public when appropriate and in full accordance with all relevant
securities and exchange laws, ordinances and regulations.
The Nippon Koei Board of Directors will use the assessment period to fully examine and assess all the necessary
information provided as well as hear advice from independent experts, etc. The Board will give carefulconsideration to the advice, opinions, and recommendations of the ad hoc committee before forming an
opinion. Once the board has formed an opinion, it will announce it to the public. If necessary, the Board of
Directors may negotiate with the bidder to secure better terms and conditions, or present the shareholders withan alternative proposal.
3. Responding to a Takeover Bid(1) When the bidder observes our Rules on Substantial Acquisition of Shares
Even if the Board of Directors is opposed to a takeover bid, it may not initiate any counter measure when thebidder acts in accordance with relevant rules. In such cases the Board is restricted to expressing their objectionsin an attempt to dissuade the shareholders from accepting the offer or presenting the shareholders with analternative proposal. The shareholders in this instance will decide for themselves whether or not to accept thebidder’s offer to buy their shares in light of the Board’s opinion about the proposal (and in some cases, its
alternative proposal), etc.
When the Board of Director’s believes that a takeover, even if it is in accordance with the rules, will damage
Nippon Koei’s corporate value Note 4, it is obliged to fulfill its duty as a responsible manager and take appropriate
countermeasures in the best interest of the company and its shareholders. The Board of Directors reserves theright to initiate countermeasures, such as the allocation of equity warrants at no charge, as specified under theCompany Law and other regulations as well as Nippon Koei’s articles of incorporation. The Board of Directors,
after thorough assessment, will determine the most appropriate countermeasures to take. Allocation of equity
warrants at no charge is one possible countermeasure outlined in the Addendum. When equity warrants are
granted gratis, conditions for exercising this guaranteed right within a specified period may be established sothat the allocation works as an effective countermeasure. This includes the condition that only thoseshareholders who do not belong to the certain group of shareholders whose ratio of voting rights is at or above a
specific ratio be allowed to exercise the right.
(2) When the bidder does not observe the Rules on Substantial Acquisition of Shares
When the bidder does not observe the Rules on Substantial Acquisition of Shares, Nippon Koei reserves theright to take measures preventing the takeover in the best interest of the Company and its shareholders. Afterconsidering all possibilities, the Board will select the most appropriate countermeasure. Allocation of equity
warrants at no charge is one possible countermeasure outlined in the Addendum. When equity warrants are
granted gratis, conditions for exercising this guaranteed right within a specified period may be established sothat the allocation works as an effective countermeasure. This includes the condition that only thoseshareholders who do not belong to the certain group of shareholders whose ratio of voting rights is at or above a
specific ratio be allowed to exercise the right.

94. Who Decides When to Initiate/End a Countermeasure?
(1) Who decides to initiate a countermeasure?
In cases (1) or (2) described in “Responding to a Takeover Bid,” the Board will objectively determine when it isnecessary to take countermeasures in accordance with the procedure outlined below.
Before initiating any countermeasure, the Board of Directors will consult with the ad hoc committee todetermine if there is a real need to take countermeasures. In assessing whether or not there is a need to adopt
countermeasures, the committee may obtain, at the Company’s cost, advice from independent experts, etc. (i.e.
financial advisers, certified public accountants, lawyers, consultants and other specialists).
Once the ad hoc committee has advised the Board of Directors on whether or not to take countermeasures, theBoard will disclose to the public information related to the committee’s advice that it considers appropriate aswell as in full accordance with all securities and exchange laws, ordinances and regulations regarding
disclosure.
After hearing the advice of the ad hoc committee, the Board will render its decision on implementing
countermeasures in careful consideration of the necessary information. The Board will specifically consider who
the bidder is, what it has proposed, and what impact a takeover will have on Nippon Koei’s corporate value
before coming to a decision that is in the best interests of the company and its shareholders. In reaching its final
conclusion, the Board will seek the advice of outside experts, etc. and seriously consider the recommendationsof the ad hoc committee.
When the Board of Directors decides to implement countermeasures, Nippon Koei will inform the public of thedetails regarding the decision when appropriate and in full accordance with all securities and exchange laws,
ordinances and regulations regarding disclosure.
(2) Who decides to end a countermeasure?
Whenever a countermeasure adopted by the Board of Director’s is no longer needed due to a change incircumstances or because the ad hoc committee has withdrawn its recommendation on taking countermeasures,or for some other reason, the Board may determine to cease the countermeasure or in light of newrecommendations from the committee, alter its details.
When the Board of Directors decides to end a countermeasure or modify it, it will publicly disclose its decision
when appropriate and in full accordance with all securities and exchange laws, ordinances and regulations
regarding disclosure.
5. Expiration, abolishment, and revisions
The shareholders at the 63rd ordinary general meeting voted to keep the Policy on Substantial Acquisition of
Shares which was initially set to expire on May 12, 2008. The shareholders approved the policy and resolved thatit remain in force until the end of the last general shareholders meeting held in the fiscal year ending within
three (3) years after the end of the 63rd general shareholders meeting.
The Policy on Substantial Acquisition of Shares may be abolished at any time prior to its expiration subject to avote on a resolution to terminate the policy at a general meeting of shareholders or through a vote by the Boardof Directors.
The Policy on Substantial Acquisition of Shares may be revised at any time on an as needed basis. The policy
exists to serve the best interests of both the company and its shareholders by maintaining the integrity of thebrand and its corporate values. Future changes in the law, trends in judicial decisions, as well as approaches to10

takeovers taken by exchanges and other public organizations may prompt a need for the Board of Directors to
adopt counter-takeover measures tailored to a whole new set of circumstances.
The Policy on Substantial Acquisition of Shares may be changed subject to a resolution adopted at theCompany’s general meeting of shareholders. Modifications to the Policy on Substantial Acquisition of Shares
may also be made at a meeting of the Board of Directors so long as it does not compromise the best interests ofthe shareholders. Whenever there is a change (revision, repeal, replacement) to the laws and ordinances cited in
the Policy on Substantial Acquisition of Shares, the policy shall be amended or revised to incorporate these legal
changes without the consent of the Company’s shareholders or Board of Directors, so long as the changes are
not inconsistent with the spirit and intent of the original policy provisions and terms.
6. Measures to enhance our takeover defenses(1) Maintaining and enhancing corporate value is everyone’s business
The Policy on Substantial Acquisition of Shares enables our shareholders to make an informed decision onwhether a hostile takeover would be beneficial. Aiming to serve the best interest of the Company and its
shareholders, the policy clearly spells out the Rules on Substantial Acquisition of Shares for bidders to follow
and the necessary conditions before our Board of Directors can implement countermeasures. This has all been
done to secure and enhance Nippon Koei’s corporate value and in the best interest of the Company and its
shareholders.
We believe the Rules on Substantial Acquisition of Shares and the necessary conditions for taking
countermeasures are reasonable in light of our aim to maintain and enhance the Company’s corporate value andin protecting the interests of its shareholders. They do not place any undue restrictions on takeovers that could
enhance corporate value and benefit the shareholders.
(2) Advance disclosure
We believe that both the details of the Rules on Substantial Acquisition of Shares and the details on thenecessary conditions for taking countermeasure are concrete and clear enough to make it possible for theshareholders, investors and potential bidders to make fair predictions about the future.
(3) The shareholders come first
The Policy on Substantial Acquisition of Shares was originally planned to remain in force until the close of thisgeneral meeting of shareholders when shareholders would have the opportunity to vote on its survival. The
Company’s shareholders and Board have always reserved the right to rescind or revise the policy at any timethrough a resolution subject to a vote at the Company’s general meeting of shareholders or Board of Directors.
We believe, decisions about whether to introduce, maintain, rescind or alter the policy, made in the form of aresolution to be voted on at a general meeting of shareholders as described above, will ensure that the wishes ofthe shareholders are reflected in Company policy.
(4) Ensuring that our Board makes objective and reasonable decisions
The Policy on Substantial Acquisition of Shares objectively establishes clear and necessary conditions for
implementing countermeasures, eliminating virtually all room for arbitrary decisions by the Board.
In introducing the Policy on Substantial Acquisition of Shares, our Company established an ad hoc committee
independent of management. The policy establishes prior conditions needed to implement countermeasuresrequiring that our Board consult the committee in advance concerning the initiation of countermeasures. Only

11

after carefully considering the recommendations of the committee will the board make its final decision on
implementing counter-takeover measures.
We believe the Policy on Substantial Acquisition of Shares ensures that all decisions of the Board regarding
countermeasures are objective and reasonable.
(5) Obtaining opinions of third party experts
Whenever a potential bidder emerges, our policy empowers the ad hoc committee to seek the advice ofindependent experts (financial advisers, certified public accountants, lawyers, consultants, and other specialists)
at the Company’s expense. The policy goes to such great lengths that it leaves no room for doubt about thefairness and objectivity of the ad hoc committee’s recommendations.
(6) Against the dead-hand
The Policy on Substantial Acquisition of Shares may be abolished subject to a vote at the Company’s general
meeting of shareholders or of a Board meeting comprised of directors elected by at general meeting ofshareholders. It is possible for a bidder who has acquired a large amount of Company shares to elect a board of
sympathetic directors at a general meeting of shareholders who will then abolish the policy. In other words, thePolicy on Substantial Acquisition of Shares is not a dead-hand takeover defense (i.e. a takeover defense thatcannot be abolished or stopped even when a general meeting of shareholders of the company concerned has
resolved to change a majority of the directors on the Board).
7. Impact on shareholders and investors(1) How the Rules on Substantial Acquisition of Shares impact shareholders and investors
The Rules on Substantial Acquisition of Shares aims to give shareholders all the information they need to makean informed decision in the event of a takeover bid. That includes the opinions of the Company’s current
custodians, the Board of Directors. It also ensures that the shareholders will be guaranteed a Boardrecommended alternative should they find the takeover bid to be disadvantageous. These rules enable
shareholders to make sound judgments about whether or not it would be beneficial to acquiesce in the face of aparticular tender offer or fight it. The Rules on Substantial Acquisition of Shares squarely upholds theshareholders’ interests, and gives them the tools they need to make the right investment decision when it comesto a takeover bid.
(2) Impact of countermeasures
When a bidder does not observe the Rules on Substantial Acquisition of Shares, or when a hostile takeover bid
threatens Nippon Koei’s corporate value, the Board may initiate countermeasures. These countermeasures are
permissible under the Company Law and other regulations as well as Nippon Koei’s articles of incorporation forthe purpose of protecting the Company and its shareholders’ interests. No countermeasure may impair the legal
rights or the financial integrity of the shareholders (excluding the bidder that has violated the Rules on
Substantial Acquisition of Shares).
When equity warrants are granted gratis as a countermeasure, shareholders will not need to apply for equity
warrants. Those shareholders who are included or recorded on the final version of the Company’s list ofshareholders or its list of beneficial owners as of the allocation date will automatically become holders of equity
warrants as of the date the gratis equity warrants were issued. Shareholders who have not transferred theirshares as planned but want to acquire their equity warrants, must complete the transfer by the allocation date,12

which is to be determined by our Board at a later time and announced publicly.
The company will send shareholders who have received equity warrants free of charge, instructions (in a form
prescribed by the company, including a signed oath stating that the shareholder is not the bidder) and otherdocuments needed to exercise the rights guaranteed by the equity warrants. These shareholders will be issued
ordinary certificates of our Company shares once they return the above-mentioned documents by the specified
deadline and contribute an amount to be determined by the Board. Should the shareholder not exercise the rightguaranteed by the equity warrant by the specified deadline, the said right will lapse and the value of the shares
held by the shareholder will be diluted since other shareholders have exercised their rights.
A decision to allocate gratis equity warrants may later be rescinded as provided for in 4 (2) above. The Board
may cancel the allocation before the official date of allocation and any time between the date the equity
warrants are first allocated and the day before they expire. In these cases, no dilution of the per-share value will
occur. Investors who have traded Company shares on the assumption that a dilution would take place might
suffer a loss corresponding to fluctuations in the share price.
Note 1: Share:
Share shall be as defined under Article 27-23 (1) of the Financial Instruments and Exchange Law.
Note 2: Ratio of voting rights:
(i) This shall mean the ratio of shares held by the said group of shareholders as defined in (i) of Note 3 (i.e.
“Holding Ratio of Share Certificates, etc.” as defined in Article 27-23 (4) of the Financial Instruments andExchange Law). In calculating the said ratio, the number of shares held by the co-holder (s) (i.e. the number ofshares as defined in the same paragraph of the abovementioned law; the same applies hereafter), or (ii) in thecase where a certain group of shareholders is as defined in (ii) of Note 3, the ratio of share certificates held byboth the bidder and associated parties (i.e. the ratio of shares provided for under Article 27-2 (8) of the Financial
Instruments and Exchange Law). In calculating the holding ratio of share certificates, the total number of voting
rights (as defined in Article 27-2 (8)-(i) of the same law) and the total number of shares issued may be obtained
from the Company’s most recent financial statements, semiannual report, or share buyback report.
Note 3: Certain group of shareholders:(i) Shall mean a holder (as defined under Article 27-23 (1) of the Financial Instruments and Exchange Law,
including any holder specified in Article 27-23 (3) of the same law, the same applies hereafter) of a Company
share certificate (as defined in Article 27-23 (1) of the same law) and his/her/its co-holder (i.e. any co-holder as
defined in Article 27 -23 (5) of the same law, including any co-holder specified in Article 27-23 (6) of the samelaw; the same applies hereafter), or (ii) a party attempting to buy (referring to buying as provided for under
Article 27-2 (1) of the same law, including the buying on the financial product market of an exchange) Company
share certificates (as defined in Article 27-2 (1) of the same law) and any associated party (defined as “Persons inSpecial Relationship” in Article 27-2 (7) of the same law).
Note 4: Acquisitions that impair corporate value:
A takeover bid that impairs the Company’s corporate value or seriously harms the interests of its shareholders asa whole means share purchases that fall under any of the following categories (i) through (viii) below:(i)	The acquisition of Company shares without any intention of truly participating in the Company’s
management but rather for the sole purpose of driving the share price up with an eye to eventually selling itback at a higher price;13

(ii)	A strategic takeover bid in which the bidder intends to gut the Company, i.e. gaining control of the Board
only to transfer its rights and interests, including intellectual property rights and know-how, main businessconnections, including the very customers that are the lifeblood of the Company, to the bidder or its groupcompanies;(iii)	The bidder is attempting a leveraged buyout in which it intends to sell Company assets in order to repay thedebt used to finance the takeover;(iv)	When a bidder tries to acquire Company shares with the aim of replacing existing management for the sole
purpose of selling off expensive assets, etc. that are not used in current Company operations, including realestate and securities, and then using the profits from the disposal of these assets, etc. to pay high dividends
that will artificially drive the share price up with the intention of dumping the shares at the inflated value
for a profit;(v)	When a bidder’s takeover offer (including, but not limited to, the amount, kind, or other details of theacquisition price, time and method of acquisition, legality as well as feasibility) is reasonably deemed to be
woefully insufficient or inappropriate in light of the Company’s corporate value;(vi)	When a bidder tries to acquire Company shares using a two-stage acquisition strategy (in which the bidder
doesn’t offer to buy all shares in the first stage but offers a less than fair price, or vague terms and conditionsin the second stage), or other strategy that could possibly force shareholders to sell their shares, before they
had the opportunity to make an informed decision or simply coerce them into selling their shares;(vii)	When all reasonable signs indicate that a takeover will have a negative impact on the Company’s present or
future corporate value and is not likely to be in the best interest of the shareholders, customers, employees,
business connections, and other stakeholders; and(viii)	When the bidder, upon reasonable grounds or by public standards, is deemed to be an unsuitable custodianby the controlling majority of Company shareholders.
Addendum
Gratis Allocation of Equity Warrants
1. Criteria for issuing free equity warrants
Those shareholders included on the final version of the list of Company shareholders or on its list of beneficial
owners as of the day appointed by the Board of Directors as the allocation day, will be allocated equity warrants
in the ratio of one (1) ordinary share in the Company (excluding those held by the Company) held by eachshareholder to one (1) equity warrant.
2. Type and number of shares to be issued as equity warrants
The maximum number of shares permitted to be issued as equity warrants is the difference between the total
number of outstanding ordinary shares as of the date of allocation and the number of ordinary shares that havealready been issued (excluding the number of ordinary shares owned by the Company as of the aforementioneddate). The number of shares to be issued for each warrant (hereinafter “numbers of shares per warrant”) shall beseparately determined by the Board of Directors. (The number of shares issued may be adjusted within areasonable range when necessary, such as in the case of a share split or consolidation.)
3. Total number of equity warrants to be allocated
The total number of equity warrants to be allocated is to be determined by the Board of Directors. The Board

14

may allocate equity warrants a multiple number of times.
4. Amount to be paid when exercising equity warrants
The amount of money to be paid when exercising a warrant shall be the per-share price of the company’s
ordinary shares (hereinafter “exercising price”) multiplied by the number of shares to be exchanged. The exact
exercising price which shall be at least one (1) yen is to be specified by the Board of Directors.
5. Restriction on transferring equity warrants
Equity warrants may only be transferred with the approval of the Board of Directors.
6. Conditions for exercising equity warrants
Any group of shareholders acting in concert with one another whose combined shareholdings would give them
20% or more of the voting rights shall not be permitted to exercise these equity warrants, in addition to otherconditions on exercising these equity warrants. The details of these conditions are to be worked out by the
Board separately.
7. Equity warrant expiration
The equity warrants’ expiration and issue dates, increases in capital stock and capital reserves when equity
warrants are exercised, as well as other related matters are to be determined by the Board of Directors
separately.
The Board of Directors may specify that equity warrants be issued on the basis of a certain reason as provided
for in Article 236-7 (1) of the Company Law. In such an instance the provisions set forth in the preceding
paragraphs may be revised when necessary.

4. Business Risks
Uneven Annual Distribution of Business Results
The primary operations of the Group include construction consultancy and electric power engineering. The
construction consultancy operations entail mainly government and public agency projects whose orders come in
as a cluster towards the end of the financial year (March). As a result, 70-80% of Group sales tend to occur in thesecond half of the year.

Dependence on Major Customers
Our construction consultancy operations rely on foreign and national government contracts for some 90% its
sales. Sales performance on the domestic front tends to be affected by trends in government spending while ourinternational orders are a reflection of the Japanese ODA budget.
Since about 70-80% of our electric power engineering operations are for the Tokyo Electric Power Company(TEPCO), our sales performance is largely dictated by capital investments at TEPCO.

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

6. Research and Development
The Nippon Koei Group puts its guiding philosophy to “act with sincerity and contribute to society throughtechnology” into practice by putting technology to work in creating a better world for all.
Overall Group research and development costs for the consolidated fiscal year under review amounted to 258
million yen.

15

Domestic and Overseas Consulting Operations
Research and development in a wide range of construction consulting services is conducted at our Central
Research Laboratory. We monitor research by means of adjusted return mapping in order to accelerate theresearch process and evaluate the results with an eye to practical application. The following R&D projects wereconducted during the consolidated fiscal year under review:(1) Research and development of advanced numerical analysis techniques andgeneral-purpose software applications
Research work was conducted on the development of NK-GIAS hydrology application software, research
relating to practical applications of two- and three-dimensional hydraulic analysis, applied research in neutral
networks and other soft computing technologies, as well as the development of software for the evaluation ofearthquake-resistant properties and ultimate load-bearing capacity of superannuated structures.

(2) Research and development relating to national disaster prevention
Research was also focused on commercializing a technique to prevent manhole flotation due to groundliquefaction, development of a numerical analysis model for tsunami and storm surges, development of amethod for assessing the impact of landslides on tunnels, research to enhance systems designed to detect slope
failure, as well as development of regional-scale sediment disaster prediction and risk assessment techniques.

(3) Research and development relating to environmental preservation
Research was conducted on a CO2 aquifer storage technique, analysis of saltwater intrusion as well as theimpact of saltwater intrusion on tidal variability(4) Research and development in performance verification and management support
systems
Research was carried out on dynamic crack propagation analysis of concrete structures, as well as developing a
project assessment model for social infrastructure improvements.

(5) Technical exchanges with overseas research institutes
Technical exchange activities were conducted with Tongji University of China and the United Nations University.
Research and development costs paid in support of these operations totaled 169 million yen.

Manufacturing and Engineering Operations
Research and development for these businesses is conducted primarily by Nippon Koei Power Systems Co., Ltd.
Research and development activities during the consolidated fiscal period under review consisted primarily of
the following:(1) Research and development related to railway disaster prevention
Research in railway protection focused on determining whether the detection fence and the foundation of thestructure used for the falling rock monitoring system were suited to the task.

(2) Research and development to ensure safe power facilities
Work in this area focused on the development of an improved ultra-high voltage electroscope to ensure safe
power facility operations.

16

Research and development costs in support of these operations totaled 89 million yen.

7. Analysis of Financial Condition and Management Performance
Here is an analysis of our Group’s finances and performance for the consolidated fiscal year under review:(1) Analysis of financial condition(i) Assets, liabilities, and equity
Our consolidated assets as of the end of the term under review amounted to 81,837 million yen, a 951 million
yen drop from the preceding term. The primary cause for the drop was a 1,346 million yen decrease in fixed
assets despite a 396 million yen increase in current assets. The increase in current assets was due primarily to a
1,376 million yen increase in accounts receivable (trade) as well as decreases in inventories by 688 million yen
and a decrease in cash and cash equivalents of 599 million yen. Fixed assets decreased mainly because
investments in securities were cut by 1,771 million yen as the market softened despite a total 404 million yen
increase in tangible and intangible fixed assets mainly due to the completion of a new company building for ourconsolidated subsidiary, Tamano Consultants Co., Ltd.
Consolidated liabilities as of the end of the term stood at 38,991 million yen, up 592 million yen year-on-year.
This increase occurred mainly due to a 5,711 million yen increase in current liabilities and a 5,119 million yen
decrease in fixed liabilities. These increases were primarily triggered by the transfer of long-term loans due
within the year, amounting to 4,000 million yen, to short-term loans.
Equity as of the end of the term under review amounted to 42,846 million yen, down 1,543 million yen from theprevious term. This decrease took place mainly because unrealized gain on available-for-sale securities
decreased by 1,654 million yen and purchases of treasury stock diminished equity by 855 million yen despite a
1,096 million yen increase in retained earnings.
(ii) Cash flow
Cash flow in the consolidated fiscal year under review is outlined in the section entitled “(2) Cash flow” under“1. Overview of Performance and Cash Flow” in “Consolidated Business Report.”(2) Analysis of performance
Net sales in the year under review amounted to 67,119 million yen, increasing 66 million yen over the figure forthe previous year.
Operating income totaled 2,536 million yen, up 222 million yen from the previous year, as a result of an
improved sales-profit ratio due to reduction in production costs. The ratio of operating income to sales rose 0.3% year-on-year to reach 3.8%.
Other income resulted in a loss of 99 million yen, a decrease of 426 million yen from the previous year.
Income before taxes and minority interests came to 2,437 million yen, and net income came to 1,725 million
yen, up 260 million yen from the previous year.

Noriaki Hirose
President:

17

Co n so l i da ted B a lance S h eet s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
March 31, 2008 and 2007

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

ASSETS

2008

2008

2007

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

¥ 4,899

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

¥ 5,498$ 48,897

40

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

67

79

669

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

28,54327,155284,889

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

(189)

(273)

(1,886)Inventories (Note 4) .............................................

8,611

9,299

85,947

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

1,662

1,652

16,588Prepaid expenses and other current assets ........

1,855

1,602

18,514

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

45,44845,052453,618

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

13,333

13,152133,077

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

19,762

18,433

197,245

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

2,331

2,423

23,266

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

2,615

2,685

26,101PROPERTY, PLANT AND
EQUIPMENT (Notes 5,6 and 8):68

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

38,041

36,761

379,689

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

(13,679)(13,265)(136,531)

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

24,362

23,496

243,158

6,920

8,691

69,069subsidiaries and associated companies ............

559

550

5,579

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

52

148

519

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

2,169

2,482

21,649Receivables in bankruptcy ..................................

132

136

1,317

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

230

251

2,296

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

2,209

2,228

22,048

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

(244)

(246)

(2,435)

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

12,027

14,240120,042TOTAL ....................................................................

¥81,837¥82,788$816,818

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

See notes to consolidated financial statements.

18

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

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

2008

2007

2008

¥ 5,500
4,190¥ 3,500190$ 54,896
41,821

557
5,695
451
6,103
1,291
136
4,456
28,379

604
5,989
409
6,761
1,097
123
3,995
22,6685,559
56,842
4,501
60,914
12,8861,357
44,476283,252

4,624
3,080
2,671
101
136
10,612

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

46,15230,742
26,6591,008
1,358
105,919

7,393
6,132
31,1737,393
6,132
30,07773,79061,204
311,139

(125)

1,529

(1,248)COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 12, 13 and 14)
EQUITY (Notes 9 and 15):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares in 2008 and 2007 .................
Capital surplus .....................................................
Retained earnings ................................................
Unrealized gain (loss) on
available-for-sale securities ...............................
Deferred gain (loss) on
derivatives under hedge accounting .................
Treasury stock—at cost
5,984,122 shares in 2008
and 2,840,445 shares in 2007 ............................
Total ..................................................................
Minority interests . ...............................................
Total equity . .....................................................
TOTAL ....................................................................

38

379

(1,992)
42,619227
42,846(1,137)43,994395
44,389(19,882)
425,3822,265
427,647¥81,837¥82,788$816,818

19

Co n so l i da ted S tatemen t s o f I n c o me
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2008 and 2007

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

2008

2008

2007

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

¥67,119¥67,053$669,917

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

50,89016,22951,13915,914507,935
161,982

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

13,693
2,536

13,6002,314

136,670
25,312

299
(172)
(485)

226
(170)
(16)

2,984
(1,717)(4,841)

(29)
303
62

(40)
231
255

(289)
3,024
619

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

(170)

(77)
(99)

(46)
57
327

(768)
(988)

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

2,437

2,641

24,324

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

497
195
692

497
655
1,152

4,961
1,946
6,907

MINORITY INTERESTS IN NET INCOME .....
NET INCOME .......................................................

20¥ 1,72524¥ 1,465

199$ 17,218

U.S.Dollars(Note 1)Yen

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

20¥ 20.80
7.50¥ 17.47
7.50$ 0.210.07

Co n so l i da ted S tatemen t s o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2008 and 2007

Thousands

Millions of Yen

Outstanding
Number of
Shares ofCommon Stock

BALANCE, APRIL 1, 2006 ����������������������������������
Reclassified balance asof March 31, 2006 (Note 2.h)�����������������������������
Adjustment of retained earnings
for a newly consolidated subsidiary������������������
Net income �����������������������������������������������������������Cash dividends, ¥10.00 per share ������������������������
Bonuses to directors ��������������������������������������������
Purchase of treasury stock ����������������������������������
Net change in the year �����������������������������������������
BALANCE, MARCH 31, 2007 �����������������������������
Net income �����������������������������������������������������������Cash dividends, ¥7.50 per share ��������������������������
Purchase of treasury stock ����������������������������������
Net change in the year �����������������������������������������
BALANCE, MARCH 31, 2008 �����������������������������

83,881

Common Stock¥7,393

Capital Surplus¥6,132Retained Earnings

Unrealized Gain on
Available-for-sale
Securities¥29,505¥1,965

DeferredGain (loss) on
Derivatives
under Hedge
Accounting

Treasury Stock¥(1,115)

Total

Minority Interests¥43,880¥43,880
¥372

(12)

(12)

(12)

1,465

1,465

(841)

(841)

(841)

(40)

(40)

(40)

(22)

(22)

(436)
7,393

6,132

30,077

1,529(1,137)23(413)

43,994395

44,389

1,725

1,725

(629)

(629)

(629)

(855)
¥7,393¥6,132

(22)

(436)

1,725
(3,144)80,672

372

1,465

(65)
83,816

Total Equity¥31,173(1,654)¥38¥(125)¥38¥(1,992)

(855)

(855)

(1,616)(168)(1,784)¥42,619¥227¥42,846

Thousands of U.S.Dollars (Note 1)

Common Stock

BALANCE, MARCH 31, 2007 �����������������������������
Net income �����������������������������������������������������������Cash dividends, $0.07 per share ��������������������������
Purchase of treasury stock ����������������������������������
Net change in the year �����������������������������������������
BALANCE, MARCH 31, 2008 �����������������������������

$73,790

Capital Surplus$61,204

Retained Earnings

Unrealized Gain on
Available-for-sale
Securities$300,200$15,261

DeferredGain (loss) on
Derivatives
under Hedge
Accounting

Treasury Stock$(11,349)

17,218(6,279)$73,790$61,204$311,139(16,509)$379$(1,248)

$379

Total

Minority Interests$439,106$3,942

Total Equity$443,048

17,21817,218(6,279)(6,279)(8,533)(8,533)(8,533)(16,130)(1,677)(17,807)$(19,882)$425,382$2,265$427,647

See notes to consolidated financial statements.

21

Co n so l i da ted S tatemen t s o f C as h Fl ow s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2008 and 2007

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

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

2008

2007

¥ 2,437¥ 2,641

2008

FINANCING ACTIVITIES:$ 24,324

Net decrease (increase) in short-termborrowings ..............................................................

¥2,000¥(1,700)$19,962

Repayments of long-term debt .................................
Purchase of treasury stock .......................................
Dividends paid ..........................................................
Other—net .................................................................

(191)
(855)
(630)
(2)

(191)
(22)
(842)
(2)

(1,906)(8,534)(6,288)(20)

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

322(2,757)

3,214

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

(146)

7

(1,457)NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS ............................................

(599)

515

(5,978)Adjustments for:
Income taxes – paid ................................................
Depreciation and amortization ..............................

(459)
1,160

(347)
1,188

(4,581)
11,578Gain on sales of property,
plant and equipment . ...........................................

(3)

(5)

(30)

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

29

40

289

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

(303)

(231)

(3,024)

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

(1,375)447(13,724)

Decrease in inventories . .....................................

688

968

6,867

(Decrease) increase in tradeaccounts payable . ............................................

(341)

161

(3,404)

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

122

(267)

1,218

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

(218)
1,737

85
4,680

(2,176)
17,337

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

39

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

27

Purchases of property, plant and equipment ..........
Proceeds from sales of investment securities . ........
Purchases of investment securities ..........................

(1,756)
1,491(2,167)Purchases of investments in a consolidated
subsidiary ................................................................

(113)

Increase in other assets ............................................
Net cash used in investing activities ................

(33)¥(2,512)

22

2008

2008

2007

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

214

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

5,498

4,769

54,875

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

¥4,899¥ 5,498$48,897

NON-CASH INVESTING AND
FINANCING ACTIVITIES:INVESTING ACTIVITIES:

See notes to consolidated financial statements.

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

389

Assets increased by consolidation of a subsidiarypreviously unconsolidated . ....................................

13

269

(249)
1,292
(2,272)(17,527)
14,882(21,629)

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

(1,128)(199)¥(1,415)(328)$(25,072)

¥

341
547

N o te s to C onsolidated Fin an c i al S t atemen t s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2008 and 2007

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Law (formerly, the Japanese Securities and Exchange
Law) and its related accounting regulations and in conformity with accounting principles generally accepted inJapan, which are different in certain respects as to application and disclosure requirements of International
Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form which ismore familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2007
financial statements to conform to the classifications used in 2008.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Nippon
Koei Co., Ltd. (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into
U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at therate of ¥ 100.19 to $1, the rate of exchange at March 31, 2008. Such translations should not be construed as
representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.	Consolidation —The consolidated financial statements as of March 31, 2008 include the accounts of theCompany and its nine significant (nine in 2007) subsidiaries (together, the “Group”).
Under the control or influence concept, those companies in which the Company, directly or indirectly, is able
to exercise control over operations are fully consolidated.
Investments in unconsolidated subsidiaries and associated companies are stated at cost. If the equity methodof accounting had been applied to the investments in these companies, the effect on the accompanying
consolidated financial statements would not be material.
Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets of theacquired subsidiaries at the date of acquisition.
Goodwill is amortized using the straight-line method over 5 to 10 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is eliminated.

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

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

23

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

f.	Long-lived Assets —The Group reviews its long-lived assets for impairment whenever events or changes incircumstance indicate the carrying amount of an asset or asset group may not be recoverable. An
impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of
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.	Retirement and Pension Plans —The Group has contributory defined benefit pension plans andunfunded retirement benefit plans for the benefit of its employees.
Effective April 1, 2000, the Group adopted a new accounting standard for employees’ retirement benefits andaccounted for the liability for retirement benefits based on the projected benefit obligations and plan assets
at the balance sheet date. The transitional obligation of ¥2,016 million for the subsidiaries, determined as ofApril 1, 2000, is being amortized over 15 years. Unrecognized actuarial gain or loss are recognized by thestraight-line method over 13 years.
The Group changed its period of unrecognized actuarial gain or loss from primarily 15 years to 13 years infiscal 2008 as the employees’ remaining service period was shortened. Unrecognized amortization of priorservice cost, are recognized by the straight-line method over 13 years.
Retirement benefits for directors and corporate auditors are provided at the amount which would be
required if all directors and corporate auditors retired at the balance sheet date.

h.	Presentation of Equity —On December 9, 2005, Accounting Standards Board of Japan (the “ASBJ”)
published a new accounting standard for presentation of equity. Under this accounting standard, certain
items which were previously presented as liabilities or assets, as the case may be, are now presented ascomponents of equity. Such items include stock acquisition rights, minority interests, and any deferred gainor loss on derivatives accounted for under hedge accounting. This standard was effective for fiscal years
ending on or after May 1, 2006. The balances of such items as of March 31, 2006 were reclassified as
separate components of equity as of April 1, 2006 in the consolidated statement of changes in equity.

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

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

k.	Bonuses to directors and corporate auditors —Bonuses to directors and corporate auditors are accruedat the year end to which such bonuses are attributable.

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

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

n.	Revenue Recognition —Revenues and gross profits on long-term contracts which have not less than a twoyear contract period and not less than ¥1 billion contract amount are recognized by the percentage-ofcompletion method, measured by the percentage of estimated total construction costs (cost to cost method).
Revenues and gross profits on long-term contracts in the Manufacturing and Engineering business segments
which have not less than a one year contract period and not less than ¥300 million contract amount are also
recognized by the percentage-of-completion method.
All other construction projects, except the aforementioned, are recorded using the completed-contract
method.

o.	Derivatives and Hedging Activities —The Group uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange and interest rates. Foreign exchange forward contracts andinterest rate swaps are utilized by the Group to reduce foreign currency exchange and interest rate risks. The
Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as
follows: a) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains
or losses on derivative transactions are recognized in the income statement and b) for derivatives used forhedging purposes, if derivatives qualify for hedge accounting because of high correlation and effectivenessbetween the hedging instruments and the hedged items, gains or losses on derivatives are deferred until
maturity of the hedged transactions.
The foreign exchange forward contracts are measured at their fair value but the unrealized gains / losses aredeferred until the underlying transactions are completed.
The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are notremeasured at market value but the differential paid or received under the swap agreements are recognized
and included in interest expenses or income.

p.	Per Share Information —Basic net income per share is computed by dividing net income available toshareholders of common stock, by the weighted-average number of shares of common stock outstanding forthe period. The weighted-average numbers of shares of common stock for the years ended March 31, 2008
and 2007 were 82,934,469 and 83,845,738, respectively.
Diluted net income per share of common stock is not disclosed because it is anti-dilutive.
Cash dividends per share presented in the accompanying consolidated statements of income are dividends
applicable to the respective years including dividends to be paid after the end of the year.

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

25

Lease Accounting —On March 30, 2007, the ASBJ issued ASBJ Statement No.13, “Accounting Standard forLease Transactions”, which revised the existing accounting standard for lease transactions issued on June 17,
1993. The revised accounting standard for lease transactions is effective for fiscal years beginning on or after
April 1, 2008 with early adoption permitted for fiscal years beginning on or after April 1, 2007.
LesseeUnder the existing accounting standard, finance leases that deem to transfer ownership of the leased
property to the lessee are to be capitalized, however, other finance leases are permitted to be accounted for as
operating lease transactions if certain “as if capitalized” information is disclosed in the note to the lessee’s
financial statements. The revised accounting standard requires that all finance lease transactions shall becapitalized recognizing lease assets and lease obligations in the balance sheet.
LessorUnder the existing accounting standard, finance leases that deem to transfer ownership of the leased
property to the lessee are to be capitalized, however, other finance leases are permitted to be accounted for as
operating lease transactions if certain “as if capitalized” information is disclosed in the note to the lessor’s
financial statements. The revised accounting standard requires that all finance leases that deem to transfer
ownership of the leased property to the lessee shall be recognized as lease receivables, and all finance leases
that deem not to transfer ownership of the leased property to the lessee shall be recognized as investments inlease.
Construction Contracts —Under the current Japanese GAAP, either the completed-contract method or thepercentage-of-completion method is permitted to account for construction contracts. On December 27, 2007,
the ASBJ published a new accounting standard for construction contracts. Under this accounting standard,
the construction revenue and construction costs should be recognized by the percentage-of-completion
method, if the outcome of a construction contract can be estimated reliably. When total construction
revenue, total construction costs and the stage of completion of the contract at the balance sheet date can bereliably measured, the outcome of a construction contract can be estimated reliably. If the outcome of aconstruction contract cannot be reliably estimated, the completed-contract method shall be applied. When it
is probable that total construction costs will exceed total construction revenue, an estimated loss on thecontract should be immediately recognized by providing for loss on construction contracts. This standard isapplicable to construction contracts and software development contracts and effective for fiscal years
beginning on or after April 1, 2009 with early adoption permitted for fiscal years beginning on or before
March 31, 2009 but after December 27, 2007.
Asset Retirement Obligations —On March 31, 2008, the ASBJ published a new accounting standard for
asset retirement obligations. Under this accounting standard, an asset retirement obligation is defined as alegal obligation imposed either by law or contract that results from the acquisition, construction,
development and the normal operation of a tangible fixed asset and is associated with the retirement of suchtangible fixed asset. The asset retirement obligation is recognized as the sum of the discounted cash flows
required for the future asset retirement and is recorded in the period in which the obligation is incurred if areasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be madein the period the asset retirement obligation is incurred, the liability should be recognized when a reasonableestimate of asset retirement obligation can be made. Upon initial recognition of a liability for an asset
retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related
fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense
through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its
present value each period. Any subsequent revisions to the timing or the amount of the original estimate ofundiscounted cash flows are reflected as an increase or a decrease in the carrying amount of the liability andthe capitalized amount of the related asset retirement cost. This standard is effective for fiscal years
beginning on or after April 1, 2010 with early adoption permitted for fiscal years beginning on or before
March 31, 2010.

26

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2008 and 2007 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2008
Current:
Government and corporate bonds .....................
Total ................................................................
Non-current:
Marketable equity securities ..............................
Government and corporate bonds .....................
Other ....................................................................
Total ................................................................

2008

2007
¥
¥

¥5,555223
1,142¥6,92040
40¥7,301240
1,150¥8,691$55,445
2,226
11,398$69,069

The carrying amounts and aggregate fair values of marketable and investment securities at March 31, 2008 and2007 were as follows:
Millions of Yen

March 31, 2008
Securities classified as:
Available-for-sale:
Equity securities .................................
Debt securities . ...................................
Other ....................................................
Total ..................................................

Cost¥5,08074
1,479¥6,633

Unrealized
Gains

Unrealized

Losses

¥673
2
21
¥696

¥531
10
358
¥899

Fair
Value

¥5,22266
1,142¥6,430Millions of Yen

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

Cost¥4,476113
1,120¥5,709Unrealized
Gains¥2,5967
36¥2,639Unrealized

Losses

¥105
4
8
¥117

Fair
Value

¥6,967116
1,148¥8,231Thousands of U.S. Dollars

March 31, 2008

Cost

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

$50,704739
14,761$66,204

Unrealized
Gains$6,71720
210$6,947

Unrealized

Losses$5,300100
3,573$8,973

Fair
Value$52,121659
11,398$64,178

27

Available-for-sale securities and held-to-maturity securities whose fair value was not readily determinable as ofMarch 31, 2008 and 2007 were as follows:
Carrying amountThousands of
U.S. Dollars

Millions of Yen

2008
Available-for-sale:
Equity securities ...............................................
Other ..................................................................
Held-to-maturity .................................................
Total ................................................................

2008

2007
¥332
1
157
¥490

¥334
1
164
¥499

$3,31410
1,567$4,891

Proceeds from sales of available-for-sale securities for the years ended March 31, 2008 and 2007 were ¥1,181
million ($11,788 thousand) and ¥1,005 million, respectively. Gross realized gains on these sales, computed on themoving average cost basis, were ¥303 million ($3,024 thousand), for the year ended March 31, 2008 and grossrealized gains and losses on these sales were ¥231 million and ¥17 million, respectively for the year ended March
31, 2007.
The carrying values of debt securities and other by contractual maturities for securities classified as availablefor-sale and held-to-maturity at March 31, 2008 were as follows:
Million of Yen

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

Thousands of
U.S. Dollars

¥146
101
197
¥444

$1,4571,008
1,967$4,432

4. INVENTORIESInventories at March 31, 2008 and 2007 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

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

2008
¥ 225
8,063
323
¥8,611

2007
¥ 225
8,753
321
¥9,2992008$ 2,246
80,4773,224$85,947

5. LONG-LIVED ASSETSThe Group reviewed its long-lived assets for impairment as of March 31, 2007 and, as a result, recognized an
impairment loss of ¥46 million as other expense on idle properties, rest homes and assets used for business due
to a substantial decline in their fair market value.
Asset grouping is based on the nature of the Group’s business and the classification for its management
accounting, and as for idle assets, each individual unit is considered as a group.
No impairment loss was recognized in 2008.

28

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2008 and 2007 consisted of notes to banks. The annual interest rates
applicable to the short-term borrowings ranged from 1.179% to 1.192% and 1.032% to 1.750% at March 31, 2008
and 2007, respectively.
The Company had commitment-line contracts of ¥8,000 million ($79,848 thousand) in total over three years withfinancial institutions in order to secure the stability of long-term funding. Each contract includes a restrictive
financial covenant. At March 31, 2008, the Company had utilized ¥5,500 million ($54,896 thousand) of thecommitment-line.
Long-term debt at March 31, 2008 and 2007 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2008
Unsecured loans from banks due seriallyto 2013 with interest rates ranging from1.250% to 1.775% . ..............................................
Unsecured loans from Fukushima Prefecturedue serially to 2009 without interest: ..............
Total ................................................................
Less current portion .............................................
Long-term debt, less current portion . .................

2007

2008

¥8,669¥8,786$86,526

145
8,814(4,190)¥4,624

218
9,004
(190)
¥8,814

1,447
87,973(41,821)$46,152

Annual maturities of long-term debt at March 31, 2008 for the five years and thereafter were as follows:Year Ending March 31

Millions of Yen

2009 .......................................................................
2010 .......................................................................
2011 .......................................................................
2012 .......................................................................
2013 .......................................................................
2014 and thereafter . .............................................
Total ................................................................

¥4,190
191
4,118
118
118
79
¥8,814

Thousands of
U.S. Dollars$41,821
1,906
41,102
1,178
1,178
788
$87,973

At March 31, 2008, land, building and structures of ¥2,201 million ($21,968 thousand) were pledged as collateralfor short-term borrowings and long-term debt of ¥669 million ($6,677 thousand).

7. RETIREMENT AND PENSION PLANS
The Group has severance payment plans for employees, directors and corporate auditors.
Under most circumstances, employees terminating their employment are entitled to retirement benefits
determined based on the rate of pay at the time of termination, years of service and certain other factors. Suchretirement benefits are made in the form of a lump-sum severance payment from the Company or fromconsolidated subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments if thetermination is involuntary, by retirement at the mandatory retirement age, by death, or by voluntary retirement
at certain specific ages prior to the mandatory retirement age.

29

The liabilities for retirement benefits at March 31, 2008 and 2007 for directors and corporate auditors were ¥128
million ($1,278 thousand) and ¥117 million, respectively. The retirement benefits for directors and corporate
auditors are paid subject to the approval of the shareholders.
The liability for employees’ retirement benefits at March 31, 2008 and 2007 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

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

2008

2007

2008

¥(13,683)
7,738
2,475
911

¥(13,313)
8,512
1,046
1,080

$(136,571)
77,23324,703
9,093

(153)
240
¥ (2,952)(167)(1,527)2,395$ (29,464)¥ (2,842)

The components of net periodic benefit costs for the years ended March 31, 2008 and 2007 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2008
Service cost . ..........................................................
Interest cost ...........................................................
Expected return on plan assets ............................
Amortization of prior service cost .......................
Recognized actuarial loss .....................................
Amortization of transitional obligation . .............
Net periodic benefit costs .................................

¥ 914
296
(255)
(13)
205
135
¥1,282

2007
¥ 956
299
(231)
180
135
¥1,3392008$ 9,123
2,954(2,545)
(130)
2,047
1,347
$12,796

Assumptions used for the years ended March 31, 2008 and 2007 were set forth as follows:

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

2008

2007

2.50%
3.00%
13 years
13 years
15 years

2.50%
3.00%
13 years
13 years
15 years

Subsidiaries offered early retirement programs to their employees and paid special retirement benefits of ¥170
million in the year ended March 31, 2007.

8. DEPOSITS RECEIVED
Deposits received from tenants amounted to ¥2,381 million ($23,765 thousand) at March 31, 2008.
At March 31, 2008, land, building and structures for rent of ¥1,707 million ($17,038 thousand) were pledged ascollateral for these deposits.

30

9. EQUITY
Since May 1, 2006, Japanese companies have been subject to the Corporate Law of Japan (the “Corporate Law”),
which reformed and replaced the Commercial Code of Japan. The significant provisions in the Corporate Law
that affect financial and accounting matters are summarized below:(a) Dividends
Under the Corporate Law, companies can pay dividends at any time during the fiscal year in addition to the yearend dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as; (1)having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and(4) the term of service of the directors is prescribed as one year rather than two years of normal term by its
articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time
during the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets all
the above criteria.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the company so stipulate. The Corporate Law provides certain limitations on theamounts available for dividends or the purchase of treasury stock. The limitation is defined as the amountavailable for distribution to the shareholders, but the amount of net assets after dividends must be maintained at
no less than ¥ 3 million.
(b) Increases / decreases and transfer of common stock, reserve and surplus
The Corporate Law requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on
the equity account charged upon the payment of such dividends until the total of aggregate amount of legal
reserve and additional paid-in capital equals 25% of the common stock.
Under the Corporate Law, the total amount of additional paid-in capital and legal reserve may be reversed
without limitation. The Corporate Law also provides that common stock, legal reserve, additional paid-in
capital, other capital surplus and retained earnings can be transferred among the accounts under certain
conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Corporate Law also provides for companies to purchase treasury stock and dispose of such treasury stockby resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amountavailable for distribution to the shareholders which is determined by specific formula. Under the Corporate Law,
stock acquisition rights, which were previously presented as a liability, are now presented as a separate
component of equity. The Corporate Law also provides that companies can purchase both treasury stockacquisition rights and treasury stock.
Such treasury stock acquisition rights are presented as a separate component of equity or deducted directlyfrom stock acquisition rights.

10. INCOME TAXESThe Company and its domestic subsidiaries were subject to Japanese national and local income taxes which, inthe aggregate, resulted in a normal effective statutory tax rate of approximately 39.5% for the years ended March
31, 2008 and 2007.

31

The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at March 31, 2008 and 2007 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2008
Deferred tax assets :Unrealized loss on available-for-salesecurities . .........................................................
Accrued bonuses .................................................
Tax loss carryforwards . ......................................
Liability for retirement benefits
for directors and corporate auditors ...............

¥

80

2007

2008

¥

$

798

2,473

1
884
3,108

52

47

519

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

1,188

1,138

11,857

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

55
114
532
(3,088)¥2,20450
122
578(3,695)¥2,233

549
1,138
5,310
(30,821)$21,998

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

¥ 223¥ 229$ 2,226

1

1,005

798

7,965

24,683

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

94¥ 41372¥1,306938$ 4,122

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

¥1,791¥ 927$17,876

95

10
948

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying consolidated statements of income for the years ended March 31, 2008 and 2007 was as follows:

2008
Normal effective statutory tax rate ......................
Per capita levy of local tax ....................................
Expenses not deductible for tax purposes ...........
Valuation allowance . ............................................
Other – net . ...........................................................
Actual effective tax rate ........................................

39.5%
5.5
2.6
(24.2)
5.0
28.4%

2007
39.5%
5.0
2.6
(10.7)
7.2
43.6%

As of March 31, 2008, the Company and certain subsidiaries had tax loss carryforwards aggregating
approximately ¥5,924 million ($59,128 thousand) which were available to be offset against taxable income ofthese companies in future years. These tax loss carryforwards, if not utilized, will expire as follows:32

Years Ending March 31

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

Millions of Yen

¥

33
915
1,379
3,597
¥5,924

Thousands of
U.S. Dollars

$

329
9,133
13,76435,902$59,128

11. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥258 million ($2,575 thousand) and ¥218 million forthe years ended March 31, 2008 and 2007, respectively.

12. LEASES(1) Lessee
The Group leases certain machinery, computer equipment and other assets.
Total rental expense include finance leases, where the ownership of the property is not deemed to transfer to thelessee, in the amount of ¥75 million ($749 thousand) and ¥80 million for the years ended March 31, 2008 and2007, respectively.
Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligations underfinance leases, depreciation expense and interest expense of finance leases that do not transfer ownership of theleased property to the lessee on an “as if capitalized” basis for the years ended March 31, 2008 and 2007 was asfollows:
Millions of Yen

2008
Furniture
andFixtures

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

Other

¥407
170
¥237

Total

¥24
13
¥11

¥431
183
¥248

Millions of Yen

2007
Furniture
andFixtures

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

¥315
181
¥134

Other

Total

¥20
10
¥10

¥335
191
¥144

33

Thousands of U.S. Dollars

2008
Furniture
andFixturesOther$4,062
1,696$2,366

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

Total

$240
131
$109

$4,302
1,827$2,475

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

Millions of Yen

2008

2008

2007

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

¥ 69

¥ 55

$ 689Due after one year . ...............................................
Total ................................................................

185
¥254

90
¥145

1,846
$2,535

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

Millions of Yen

2008

2008

2007

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

¥73

¥75

$729

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

6
¥79

5
¥80

60
$789

Leased properties less than ¥3 million are excluded from the above pro forma information because they wereimmaterial.
The minimum rental commitments under noncancellable operating leases at March 31, 2008 and 2007, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2008

2008

2007

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

¥1

¥1

$10

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

1
¥2

2
¥3

10
$20

(2) Lessor
The minimum rental commitments under noncancellable operating leases at March 31, 2008 and 2007, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2008

2007

2008

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

¥ 680¥ 682$ 6,787

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

4,588¥5,2685,268¥5,95045,793$52,58034

13. DERIVATIVESThe Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange andinterest rates. Foreign exchange forward contracts and interest rate swaps are utilized by the Group to reduce
foreign currency exchange and interest rate risks.
It is the Group’s policy to use derivatives only for the purpose of reducing risks, not for trading or speculative
purpose.
Because the counterparties to these derivatives are limited to domestic banks having high reputations, theGroup does not anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies which
regulate the authorization and credit limit amount.
Derivative transactions which are qualified for hedge accounting, are not subject to the disclosure of market
value information.
The Group had the following derivatives contracts outstanding at March 31, 2008 and 2007:
Millions of Yen

2008
Contract
AmountInterest rate swaps:(fixed rate payment, floating
rate receipt) ....................................

¥420

Fair
Value

2007
Unrealized
Loss

¥(4)

Contract
Amount

¥(4)

¥560

Fair
Value

Unrealized
Loss

¥(6)

¥(6)

Thousands of U.S. Dollars

2008
Contract
AmountInterest rate swaps:(fixed rate payment, floating
rate receipt) .....................................

$4,192

Fair
Value

Unrealized
Loss

$(40)

$(40)

The contract amounts of derivatives which are shown in the above table do not represent the amounts
exchanged by the parties and do not measure the Group’s exposure to credit or market risk.

14. CONTINGENT LIABILITIESAt March 31, 2008, the Group had the following contingent liabilities:
Thousands of
U.S. Dollars

Millions of Yen

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

¥289$2,885

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

110

1,098

35

15. SUBSEQUENT EVENTSAppropriations of Retained Earnings
On May 20, 2008, the following appropriation of retained earnings at March 31, 2008 was resolved by the Boardof Directors:
Thousands of
U.S. Dollars

Millions of Yen

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

¥605$6,03916. SEGMENT INFORMATIONThe Group operates in the following segments:
Domestic consulting services in public and private sectors related to mainly infrastructure development;
Overseas consulting services related to mainly ODA funded development projects;
Manufacturing of products and appliances related to electric production and distribution systems;
Engineering services related to construction and maintenance of public and private electric power
facilities;
Real estate leasing sales of our Group’s real estate leasing operation;
Others software development and sales, staffing service and others
Effective April 1, 2007, the Group changed its industry segmentation from Domestic, Overseas, Manufacturing,Engineering and Others to Domestic, Overseas, Manufacturing, Engineering, Real estate leasing and Others
because Real estate leasing segmentation has become continuously material in terms of operational income andtotal assets.
The effect of the change was to increase sales and operating income of Real estate leasing by ¥1,469 million and¥906 million, respectively and decrease sales and operating income of Others by ¥1,469 million and ¥906
million, respectively.
Information about business segments, geographic segments and sales to foreign customers of the Groupfor the years ended March 31, 2008 and 2007, is as follows:(1) Business Segments
a. Sales and Operating Income
Millions of Yen

2008
Manufacturing

Engineering

Real estateleasing

Eliminations/Corporate

OthersConsolidated

Domestic

Overseas

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

¥37,204¥16,370¥8,259¥3,297¥1,261¥ 728Intersegment sales .................

271

3

82

1,651

208

1,311

¥(3,526)

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

37,475

16,373

8,341

4,948

1,469

2,039

(3,526)

67,119Operating expenses..................

36,11916,228

7,588

4,683

563

1,968

(2,566)64,583Operating income ...................

¥ 1,356

¥ 753

¥ 265

¥ 906

¥

¥ (960)¥ 2,536

36

¥

145

71

¥67,119

b. T
 otal Assets, Depreciation and Capital Expenditures
Millions of Yen

2008
Manufacturing

Engineering

Real estateleasing

Domestic

Overseas

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

¥28,918¥10,327¥7,193¥2,023¥11,164

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

205

43

224

6

263

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

1,454

49

136

11

Eliminations/Corporate

Consolidated¥861¥21,351¥81,837

1

666

1,408

1

281

1,932

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

2008
Domestic

Overseas

Sales to customers ................. $371,334 $163,390

Eliminations/Corporate

Manufacturing

Engineering

Real estateleasing

Others$82,433$32,907$12,586$ 7,267

Consolidated$669,917

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

2,705

30

819

16,4792,076

13,085 $(35,194)

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

374,039

163,420

83,252

49,386

14,662

20,352(35,194)

669,917

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

360,505

161,973

75,736

46,741

5,619

19,643(25,612)644,605

1,447$ 7,516$ 2,645$ 9,043

Operating income ................. $ 13,534 $$

709 $ (9,582) $ 25,312

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

2008
Domestic

Overseas

Total assets ............................. $288,632 $103,074

Manufacturing

Engineering

Real estateleasing$71,794$20,192 $111,428

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

2,046

429

2,236

60

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

14,512

489

1,357

110

Eliminations/Corporate

OthersConsolidated$8,594 $213,104 $816,818

2,625

10

6,647

14,05310

2,805

19,283a. Sales and Operating Income
Millions of Yen

2007
Manufacturing

Engineering

OthersEliminations/Corporate

Consolidated

Domestic

Overseas

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

¥37,224¥14,972¥9,578¥3,365¥1,914

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

229

7

63

1,477

1,504

¥(3,280)

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

37,453

14,979

9,641

4,842

3,418

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

36,361

14,613

8,822

4,746

2,484

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

¥ 1,092

¥

¥ 819

¥

¥ 934

¥ (993)¥ 2,314366

96¥67,05337

b. T
 otal Assets, Depreciation , Loss on impairment of long-lived assets and Capital
Expenditures
Millions of Yen

2007
Manufacturing

Engineering

Eliminations/Corporate

OthersConsolidated

Domestic

Overseas

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

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

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

164

38

254

4

292

683

1,435

15

31

46

3

93

457

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

194

38

119

10

(2) Geographical Segments
The Group was located in Japan for the years ended March 31, 2008 and 2007, and is not subject to thedisclosure of market value information.

(3) Sales to Foreign Customers
Sales to foreign customers for the years ended March 31, 2008 and 2007 amounted to ¥16,401 million ($163,699
thousand) and ¥14,976 million, respectively.

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

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

38

¥520
34
(297)
(250)

39

Non-consolidated Balance Sheets
Nippon Koei Co., Ltd.
March 31, 2008 and 2007

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS

2008

2008

2007

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

¥ 3,319

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

¥ 3,691$ 33,127

40

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

31

39

309

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

22,94821,621

229,045

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

(39)

(38)

(389)

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

3,643

3,896

36,361Inventories ‑ work in process .............................

3,817

3,810

38,098Deferred tax assets (Note 10) .............................

1,044

1,427

10,420Prepaid expenses and other current assets .......

1,374

1,310

13,714

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

36,13735,796360,685

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

9,937

9,756

99,182

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

16,22916,243

161,982

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

1,200

1,180

11,977

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

1,096

1,077

10,939Total .................................................................

28,462

28,256

284,080

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

(10,462)(9,989)(104,421)

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

18,00018,267

179,659

PROPERTY, PLANT AND
EQUIPMENT (Note 5, 8):

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

6,710

8,454

66,973

7,512
2,506

6,444
2,516

74,97825,012

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

(26)

(24)

(260)

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

16,702

17,390166,703

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

¥70,839¥71,453$707,047

See notes to non-consolidated financial statements.

40

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

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

2008

2007

2008

¥ 7,000
4,000¥ 4,800$ 69,867
39,924

37
6,527
115
3,044
904
58
3,215
24,900

12
6,396
103
3,376
742
5
2,631
18,065369
65,146
1,148
30,382
9,023
579
32,090248,528

4,000
457
2,671
34
7,162

8,000
539
2,857
904
12,30039,924
4,561
26,660339
71,484

7,393
6,131

7,393
6,131

73,79061,194

1,546
25,7101,546
25,565

15,431
256,613

(119)

1,520

(1,188)COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 12 and 13)
EQUITY (Notes 9 and 14):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares in 2008 and 2007 ................
Capital surplus ....................................................
Retained earnings:
Legal reserve .....................................................
Retained earnings - unappropriated ................
Unrealized gain (loss) on
available-for-sale securities .............................
Deferred gain (loss) on
derivatives under hedge accounting ...............
Treasury stock—at cost
5,984,122 shares in 2008
and 2,840,445 shares in 2007 ...........................
Total equity . ....................................................
TOTAL ...................................................................

38

379

(1,922)
38,777(1,067)41,088(19,184)
387,035¥70,839¥71,453$707,04741

N o n - cons olida ted S ta temen t s o f I n c o me
Nippon Koei Co., Ltd.
Years Ended March 31, 2008 and 2007

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2008

2008

2007

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

¥49,929
39,651
10,278¥49,787
39,8909,897$498,343
395,758
102,585

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

8,997
1,281

8,797
1,100

89,79912,786

482

299

407
(179)
(21)
228

4,811
(1,936)(4,292)
2,984

1
24
182

(32)
13
124
540

10
239
1,816

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

1,463

1,640

14,602

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

130
559
689

181
658
839

1,298
5,579
6,877

801

$ 7,725

OTHER INCOME (EXPENSES):Interest and dividend income ............................
Interest expense ..................................................
Foreign currency exchange loss .........................
Gain on sales of investment securities . .............
Loss on impairment of long-lived
assets (Note 5) ...................................................
Reversal of allowance for doubtful accounts ....
Other-net . ............................................................
Other income-net ............................................

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

(194)
(430)

¥

774

¥

U.S. Dollars(Note 1)Yen

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

42¥ 9.33
7.50¥ 9.55
7.50

$

0.09
0.07

N o n - cons olida ted S ta temen t s o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd.
Years Ended March 31, 2008 and 2007

Thousands

Millions of Yen
CapitalSurplus

Outstanding
Number of
Shares ofCommonStock

BALANCE, APRIL 1, 2006 ..........

83,881Retained Earnings

Unrealized

CommonStockGain on
Additional
Paid-in
Capital¥7,393¥6,131

Legal
Reserve¥1,546

Available-for-DeferredGain (loss) on
Derivatives

under Hedge
Unappropriated sale Securities
Accounting¥25,643¥1,949Treasury

Total

Stock

Equity¥(1,045) ¥41,617

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

801

801

Cash dividends, ¥10.00 per share . .

(839)

(839)

Bonuses to directors ..................
Purchase of treasury stock ..........

(40)

Net change in the year . ..............
BALANCE, MARCH 31, 2007 . ....

(40)

(65)

(22)

(22)

(1,067)41,088(429)
83,816

7,393

6,131

1,546

25,565

(429)

1,520

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

774

774

Cash dividends, ¥7.50 per share ....

(629)

(629)

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

(3,144)(855)

Net change in the year . ..............
BALANCE, MARCH 31, 2008 . ....

80,672¥7,393¥6,131¥1,546¥25,710(855)(1,639)¥38(1,601)¥ (119)¥38¥(1,922) ¥38,777

Thousands of U.S. Dollars (Note 1)
CapitalSurplusRetained Earnings

CommonStock

Additional
Paid-in
CapitalBALANCE, MARCH 31, 2007 . ....

$73,790$61,194

Legal
Reserve

Unrealized
Gain onAvailable-for-

Unappropriated sale Securities$15,431 $255,165

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

7,725

Cash dividends, $0.07 per share ....

(6,277)

DeferredGain (loss) on
Derivatives
under Hedge
Accounting$15,171

7,725(6,277)(8,534)

Net change in the year . ..............
$73,790$61,194$15,431 $256,613

Total
Equity$(10,650) $410,101

Purchase of treasury stock ..........
BALANCE, MARCH 31, 2008 . ....

Treasury
Stock(8,534)(16,359)$379(15,980)$(1,188)$379$(19,184) $387,035

See notes to non-consolidated financial statements.

43

N o te s to N on- consolid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd.
Years Ended March 31, 2008 and 2007

1. BASIS OF PRESENTING NON-CONSOLIDATED FINANCIAL STATEMENTS
The accompanying non-consolidated financial statements have been prepared from the accounts maintained by
Nippon Koei Co., Ltd. (the “Company”) in accordance with the provisions set forth in the Corporate Law ofJapan or the Commercial Code of Japan and in conformity with accounting principles generally accepted inJapan, which are different in certain respects as to application and disclosure requirements of International
Financial Reporting Standards.
As consolidated statements of cash flows and certain disclosures are presented in the consolidated financial
statements of the Company, non-consolidated statements of cash flows and certain disclosures are not presented
herein in accordance with accounting principles generally accepted in Japan.
In preparing these non-consolidated financial statements, certain reclassifications and rearrangements havebeen made to the Company’s financial statements issued domestically in order to present them in a form which
is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2007
financial statements to conform to the classifications used in 2008.
The non-consolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and have been made at the rate of ¥ 100.19 to $1,
the rate of exchange at March 31, 2008. Such translations should not be construed as representations that theJapanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Non-consolidation —The non-consolidated financial statements do not include the accounts of subsidiaries.
Investments in subsidiaries and associated companies are stated at cost.
b. Cash Equivalents —Cash equivalents are short-term investments that are readily convertible into cash andthat are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits and investment trusts, all of which mature or become due within
three months of the date of acquisition.
c. Inventories —Work in process is stated at cost, determined by the specific identification cost method.
d.	Marketable and Investment Securities —Marketable and investment securities are classified and accounted
for, depending on management’s intent, as follows:i) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent andability to hold to maturity are reported at amortized cost and ii) available-for-sale securities, which are notclassified as the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of
applicable taxes, reported in a separate component of equity.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method.
For other than temporary declines in fair value, investment securities are reduced to net realizable value by acharge to income.
e. Property, Plant and Equipment —Property, plant and equipment are stated at cost. Depreciation iscomputed by the declining-balance method at rates based on the estimated useful lives of the assets, while
the straight-line method is applied to buildings acquired after April 1, 1998, as well as certain buildings andequipment for rent. The range of useful lives is principally from 3 to 50 years for buildings and structures,from 2 to 15 years for machinery and equipment, and from 2 to 20 years for furniture and fixtures.
f. Long-lived Assets —The Company reviews its long-lived assets for impairment whenever events or changes
in circumstance 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 the44

asset 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. Retirement and Pension Plans —The Company has a contributory defined benefit pension plan andunfunded retirement benefit plan for the benefit of its employees.
Effective April 1, 2000, the Company adopted a new accounting standard for the employees’ retirement
benefits and accounted for the liability for retirement benefits based on projected benefit obligations andplan assets at the balance sheet date.
Unrecognized actuarial gain or loss are recognized by the straight-line method over 13 years.
The Company changed its period of unrecognized actuarial gain or loss from 15 years to 13 years in fiscal
2008 as the employees’ remaining service period was shortened. Unrecognized amortization of prior service
cost, are recognized by the straight-line method over 13 years.
Retirement benefits for directors and corporate auditors are provided at the amount which would be
required if all directors and corporate auditors retired at the balance sheet date.
h. Presentation of Equity —On December 9, 2005, Accounting Standards Board of Japan (the “ASBJ”)
published a new accounting standard for presentation of equity. Under this accounting standard, certain
items which were previously presented as liabilities or assets, as the case may be, are now presented ascomponents of equity. Such items include stock acquisition rights and any deferred gain or loss onderivatives accounted for under hedge accounting. This standard was effective for fiscal years ending on orafter May 1, 2006. The balances of such items as of March 31, 2006 were reclassified as separate componentsof equity as of April 1, 2006 in the non-consolidated statement of changes in equity.
i. Allowance for Anticipated Project Loss —The Company has made a provision for anticipated losses on
uncompleted project contracts.
j. Leases —Under Japanese accounting standards for leases, finance leases that deem to transfer ownership ofthe leased property to the lessee are to be capitalized, while other finance leases are permitted to beaccounted for as operating lease transactions if certain “as if capitalized” information is disclosed in thenotes to the lessee’s financial statements. All other leases are accounted for as operating leases.
k. Bonuses to directors and corporate auditors —Bonuses to directors and corporate auditors are accrued at
the year end to which such bonuses are attributable.
l. Income Taxes —The provision for income taxes is computed based on the pretax income included in thestatements of income. The asset and liability approach is used to recognize deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to thetemporary differences.
m. Foreign Currency Transactions —All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet
date. The foreign exchange gains and losses from translation are recognized in the non-consolidated
statements of income.
n. Revenue Recognition —Revenues and gross profits on long-term contracts which have not less than a twoyear contract period and not less than ¥1 billion contract amount are recognized by the percentage-ofcompletion method, measured by the percentage of estimated total construction costs (cost to cost method).
Revenues and gross profits on long-term contracts in the Manufacturing and Engineering business segments
which have not less than a one year contract period and not less than ¥300 million contract amount are also
recognized by the percentage-of-completion method, measured by the percentage of costs incurred to date toestimated total construction costs (cost to cost method).

45

All other construction projects, except the aforementioned, are recorded using the completed-contract
method.
o. Derivatives and Hedging Activities —The Company uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange and interest rates. Foreign exchange forward contracts andinterest rate swaps are utilized by the Company to reduce foreign currency exchange and interest rate risks.
The Company does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as
follows: a) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains orlosses on derivative transactions are recognized in the income statement and b) for derivatives used forhedging purposes, if derivatives qualify for hedge accounting because of high correlation and effectivenessbetween the hedging instruments and the hedged items, gains or losses on derivatives are deferred until
maturity of the hedged transactions.
The foreign exchange forward contracts are measured at their fair value but the unrealized gains / losses aredeferred until the underlying transactions are completed.
The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are notremeasured at market value but the differential paid or received under the swap agreements are recognized
and included in interest expenses or income.
p. Per Share Information —Basic net income per share is computed by dividing net income available toshareholders of common stock, by the weighted-average number of shares of common stock outstanding forthe period. The weighted-average numbers of shares of common stock for the years ended March 31, 2008
and 2007 were 82,934,469 and 83,845,738, respectively.
Diluted net income per share of common stock is not disclosed because it is anti-dilutive.
Cash dividends per share presented in the accompanying non-consolidated statements of income are
dividends applicable to the respective years including dividends to be paid after the end of the year.
q. New Accounting Pronouncements
Measurement of Inventories —Under generally accepted accounting principles in Japan, inventories are
currently measured either by the cost method, or at the lower of cost or market. On July 5, 2006, the ASBJ
issued ASBJ Statement No.9, “Accounting Standard for Measurement of Inventories”, which is effective forfiscal years beginning on or after April 1, 2008 with early adoption permitted. This standard requires thatinventories held for sale in the ordinary course of business be measured at the lower of cost or net selling
value, which is defined as the selling price less additional estimated manufacturing costs and estimateddirect selling expenses. The replacement cost may be used in place of the net selling value, if appropriate. The
standard also requires that inventories held for trading purposes be measured at the market price.
Lease Accounting —On March 30, 2007, the ASBJ issued ASBJ Statement No.13, “Accounting Standard forLease Transactions”, which revised the existing accounting standard for lease transactions issued on June 17,
1993. The revised accounting standard for lease transactions is effective for fiscal years beginning on or after
April 1, 2008 with early adoption permitted for fiscal years beginning on or after April 1, 2007.
LesseeUnder the existing accounting standard, finance leases that deem to transfer ownership of the leased
property to the lessee are to be capitalized, however, other finance leases are permitted to be accounted for as
operating lease transactions if certain “as if capitalized” information is disclosed in the note to the lessee’s
financial statements. The revised accounting standard requires that all finance lease transactions shall becapitalized recognizing lease assets and lease obligations in the balance sheet.
LessorUnder the existing accounting standard, finance leases that deem to transfer ownership of the leased
property to the lessee are to be capitalized, however, other finance leases are permitted to be accounted for as
operating lease transactions if certain “as if capitalized” information is disclosed in the note to the lessor’s

46

financial statements. The revised accounting standard requires that all finance leases that deem to transfer
ownership of the leased property to the lessee shall be recognized as lease receivables, and all finance leases
that deem not to transfer ownership of the leased property to the lessee shall be recognized as investments inlease.
Construction Contracts —Under the current Japanese GAAP, either the completed-contract method or thepercentage-of-completion method is permitted to account for construction contracts. On December 27, 2007,
the ASBJ published a new accounting standard for construction contracts. Under this accounting standard,
the construction revenue and construction costs should be recognized by the percentage-of-completion
method, if the outcome of a construction contract can be estimated reliably. When total construction
revenue, total construction costs and the stage of completion of the contract at the balance sheet date can bereliably measured, the outcome of a construction contracts can be estimated reliably. If the outcome of aconstruction contract cannot be reliably estimated, the completed-contract method shall be applied. When it
is probable that total construction costs will exceed total construction revenue, an estimated loss on thecontract should be immediately recognized by providing for loss on construction contracts. This standard isapplicable to construction contracts and software development contracts and effective for fiscal years
beginning on or after April 1, 2009 with early adoption permitted for fiscal years beginning on or before
March 31, 2009 but after December 27, 2007.
Asset Retirement Obligations —On March 31, 2008, the ASBJ published a new accounting standard for asset
retirement obligations. Under this accounting standard, an asset retirement obligation is defined as a legal
obligation imposed either by law or contract that results from the acquisition, construction, development andthe normal operation of 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 reasonableestimate 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 reasonableestimate of asset retirement obligation can be made. Upon initial recognition of a liability for an asset
retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related
fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense
through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its
present value each period. Any subsequent revisions to the timing or the amount of the original estimate ofundiscounted cash flows are reflected as an increase or a decrease in the carrying amount of the liability andthe capitalized amount of the related asset retirement cost. This standard is effective for fiscal years
beginning on or after April 1, 2010 with early adoption permitted for fiscal years beginning on or before
March 31, 2010.

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2008 and 2007 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2008
Current:
Government and corporate bonds .....................
Total ................................................................
Non-current:
Marketable equity securities ..............................
Government and corporate bonds .....................
Other ....................................................................
Total ................................................................

¥
¥

2008

2007
40
40

¥5,384183
1,143¥6,710

¥
¥

40
40

¥7,110194
1,150¥8,454$53,738
1,827
11,408$66,973

Market values for investment securities in subsidiaries and associated companies were not available.

47

4. I NVESTMENTS IN AND ADVANCES TO SUBSIDIARIES AND
ASSOCIATED COMPANIESInvestments in and advances to subsidiaries and associated companies as of March 31, 2008 and 2007 were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2008¥5,586
1,926¥7,512

2007¥5,464980¥6,444

2008$55,754
19,224$74,978

5. LONG-LIVED ASSETSThe Company reviewed its long-lived assets for impairment as of March 31, 2007, as a result, recognized
an impairment loss of ¥32 million as other expense on idle properties and rest homes and assets used forbusiness due to a substantial decline in their fair market value.
Asset grouping is based on the nature of the Company’s business and the classification for its management
accounting, and as for idle assets, each individual unit is considered as a group.
No impairment loss was recognized in 2008.

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2008 and 2007 consisted of notes to banks. The annual interest rates
applicable to the short-term borrowings ranged from 1.179% to 1.192% and 1.032% to 1.750% at March 31,
2008 and 2007, respectively.
The Company had commitment-line contracts of ¥8,000 million ($79,848 thousand) in total over three years
with financial institutions in order to secure the stability of long-term funding. Each contract includes a
restrictive financial covenant. At March 31, 2008, the Company had utilized ¥5,500 million ($54,896 thousand)of the commitment-line.
Long-term debt at March 31, 2008 and 2007 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2008
Unsecured loans from banks due serially to2010 with interest rates ranging from 1.515%
to 1.775% ...........................................................
Less current portion ...........................................
Long-term debt, less current portion . ...............

¥8,000(4,000)¥4,0002007

2008¥8,000$79,848¥8,000$39,924(39,924)

7. RETIREMENT AND PENSION PLANS
Under most circumstances, employees terminating their employment are entitled to retirement benefits
determined based on the rate of pay at the time of termination, years of service and certain other factors.
Such retirement benefits are made in the form of a lump-sum severance payment from the Company andannuity payments from a trustee. Employees are entitled to larger payments if the termination is involuntary,by retirement at the mandatory retirement age, by death, or by voluntary retirement at certain specific ages
prior to the mandatory retirement age.
The liabilities for retirement benefits at March 31, 2008 and 2007 for directors and corporate auditors were
¥48 million ($479 thousand) and ¥52 million, respectively. The retirement benefits for directors and corporate
auditors are paid subject to the approval of the shareholders.

48

8. DEPOSITS RECEIVED
Deposits received from tenants amounted to ¥2,381 million ($23,765 thousand) at March 31, 2008.
At March 31, 2008, land, building and structures for rent of ¥1,707 million ($17,038 thousand) were pledged ascollateral for these deposits.

9. EQUITY
Since May 1, 2006, Japanese companies have been subject to the Corporate Law of Japan (the “Corporate Law”),
which reformed and replaced the Commercial Code of Japan. The significant provisions in the Corporate Law
that affect financial and accounting matters are summarized below:(a) Dividends
Under the Corporate Law, companies can pay dividends at any time during the fiscal year in addition to the yearend dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as; (1)having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and(4) the term of service of the directors is prescribed as one year rather than two years of normal term by its
articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time
during the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets all
the above criteria.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the company so stipulate. The Corporate Law provides certain limitations on theamounts available for dividends or the purchase of treasury stock. The limitation is defined as the amountavailable for distribution to the shareholders, but the amount of net assets after dividends must be maintained at
no less than ¥ 3 million.
(b) Increases / decreases and transfer of common stock, reserve and surplus
The Corporate Law requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on
the equity account charged upon the payment of such dividends until the total of aggregate amount of legal
reserve and additional paid-in capital equals 25% of the common stock. Under the Corporate Law, the total
amount of additional paid-in capital and legal reserve may be reversed without limitation. The Corporate Law
also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained
earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Corporate Law also provides for companies to purchase treasury stock and dispose of such treasury stockby resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amountavailable for distribution to the shareholders which is determined by specific formula.
Under the Corporate Law, stock acquisition rights, which were previously presented as a liability, are now
presented as a separate component of equity.
The Corporate Law also provides that companies can purchase both treasury stock acquisition rights andtreasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or
deducted directly from stock acquisition rights.

49

10. INCOME TAXESThe Company is subject to Japanese national and local income taxes which, in the aggregate, resulted in anormal effective statutory tax rate of approximately 39.5% for the years ended March 31, 2008 and 2007.
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at March
31, 2008 and 2007 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2008

2007

2008

78



$

584
356

¥ 651
743

5,829
3,553

19

21

190

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

162

193

1,617

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

23
66
219
(153)
¥1,354

2
72
229
(160)
¥1,751

230
659
2,185
(1,528)$13,514

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

¥ 223¥ 229$ 2,226

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

¥

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

779

994

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

95

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

26¥ 344¥1,010948
6¥1,229¥ 522259$ 3,433$10,081

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying non-consolidated statements of income for the years ended March 31, 2008 and 2007 was asfollows:

2008
Normal effective statutory tax rate ....................
Per capita levy of local tax ..................................
Expenses not deductible for tax purposes .........
Valuation allowance . ..........................................
Other – net . .........................................................
Actual effective tax rate ......................................

2007
39.5%
5.6
2.9
(0.5)
(0.4)
47.1%

39.5%
4.9
2.5
2.3
2.0
51.2%

As of March 31 , 2008, the Company had tax loss carryforwards aggregating approximately ¥898 million ($8,963
thousand) which were available to be offset against taxable income of the Company in future years. These tax
loss carryforwards, if not utilized, will expire mostly in 2010.

50

11. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥186 million ($1,856 thousand) and ¥137 million forthe years ended March 31, 2008 and 2007, respectively.

12. LEASES(1) Lessee
The Company leases certain machinery, computer equipment and other assets.
Total rental expense include finance leases, where the ownership of the property was not deemed to transfer tothe lessee, in the amount of ¥54 million ($539 thousand) and ¥44 million for the years ended March 31, 2008
and 2007, respectively.
Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligations underfinance leases, depreciation expense and interest expense of finance leases that do not transfer ownership of theleased property to the lessee on an "as if capitalized" basis for the years ended March 31, 2008 and 2007, was asfollows:
Millions of Yen

2008
Furniture
andFixtures

Other

¥261
131
¥130

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

Total

¥24
12
¥12

¥285
143
¥142

Millions of Yen

2007
Furniture
andFixtures

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

Other

¥221
120
¥101

Total

¥19
9
¥10

¥240
129
¥111

Thousands of U.S. Dollars

2008
Furniture
andFixtures

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

Other$2,605
1,308$1,297

Total

$240
120
$120

$2,845
1,428$1,417

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

Millions of Yen

2008
Due within one year . ............................................
Due after one year . ...............................................
Total ................................................................

2007
¥ 50
96
¥146

¥ 40
75
¥115

2008
$ 499958$1,45751

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

Millions of Yen

2008
¥49
5
¥54

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

2008

2007

$489
50
$539

¥40
4
¥44

Depreciation expense and interest expense, which are not reflected in the accompanying non-consolidated
statements of income, were computed by the straight-line method and the interest method, respectively. Leased
properties less than ¥3 million are excluded from the above pro forma information because they are immaterial.
The minimum rental commitments under noncancellable operating leases at March 31, 2008 and 2007 were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2008
Due within one year . ............................................
Due after one year . ...............................................
Total ................................................................

2008

2007
¥1
1
¥2

¥1
2
¥3

$10
10
$20

(2) Lessor
The minimum rental commitments under noncancellable operating leases at March 31, 2008 and 2007 were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2008
¥ 680
4,588
¥5,268

2007
¥ 682
5,268
¥5,9502008$ 6,787
45,793$52,580

13. CONTINGENT LIABILITIESAt March 31, 2008, the Company had the following contingent liabilities:
Millions of Yen

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

¥1,103Thousands of
U.S. Dollars$11,009

14. SUBSEQUENT EVENTSAppropriations of Retained Earning
On May 20, 2008, the following appropriation of retained earnings at March 31, 2008 was resolved by the Boardof Directors:
Millions of Yen

Year-end cash dividends, ¥7.5 ($0.07) per share ................................
52

¥605

Thousands of
U.S. Dollars$6,03953

Co rp ora te Inform ation

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

189,580,000

Shares issued

86,656,510
7,881

As of March 31, 2008

Major Stockholders

Director and Executive Vice Presidents:
Yoshihiko Tsunoda*
Seijiro Usuda*
Kaoru Ono
Director and Senior Managing Executive Officers:
Naoki Ariga
Shigemichi Hatao
Director and Managing Executive Officers:
Katsumi Yoshida
Shoji Nishitani
Akikazu Tokumasu
Director and Executive Officers:
Tamotsu Yoshida
Yoichi Abe
Koichi Tanuma
Director:
Masahisa Naito

Share owned(thousands)

Percentage of
total owned

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

3,939

4.55

Mizuho Corporate Bank, Ltd.

3,820

4.41

Meiji Yasuda Life Insurance
Company.

3,652

4.21

Morgan Stanley & Co.
International Ltd.

3,487

4.02

The Koei Employees’
Stockholders Association

2,270

2.62

The Master Trust Bank ofJapan, Ltd. (Trustee)

1,789

2.06

Japan Trustee Services Bank,
Ltd. (Trustee)

1,613

1.86

CBNY DFA International Cap
Value Portfolio

1,372

1.58

Nippon Life Insurance
Company

1,349

1.56

Tsukishima Kikai Co.,Ltd

1,300

1.50

As of March 31, 2008

Corporate Auditors:
Kenichi Sakata
Koichi Kosumi
Mineo Enomoto
Managing Executive Officers:
Hiroaki Ozasa
Hajime Tanimura
Executive Officers:
Yoichi Kobayashi
Teruyuki Kita
Yutaka Murai
Akio Katayama
Yoshiki Tamemitsu
Kunio Kurokawa
Hiromichi Sekine
Akira Mizukoshi

54

Shares authorized
Stockholders of minimum tradable stock unit

President:
Noriaki Hirose**Representative Directors

Stock Information

As of June 27, 2008

Major Offices and Facilities

Major Businesses

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

Consulting Administration

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

Field of activity• Natural and social environment• Water supply and urban sanitation• Information technology• Urban and regional development• River and sabo sediment and debris-flow control)
engineering• Water resources• Dams• Groundwater• Highway and Bridges• Airports• Ports and coastal engineering• Landslide protection• Agriculture• Electric power
Services• Preliminary investigation• Planning• Feasibility studies• Assessment• Detailed design• Construction supervision• Operation and maintenanceEngineering Administration
Field of activity• Electrical and civil works for electric power
facilities (generation, transmission, substation,
distribution schemes and wiring of buildings)• Electric power utilities (turbines, generators,
transformers, control deices andcommunications equipment)• Electric equipment and devices• Safety equipment• Skin electric thermo-system heaters (SECTheaters)• Factory automation equipment
Services• Surveys, studies, planning, design, construction,
installation and sale55M a j o r N i p pon Koei Gro u p C o mp an i es

While mainly focused on technical consulting, electrical power engineering, and power generation, theNippon Koei Group is also active in a wide range of related fields. The various businesses peripheral
to the activities of Nippon Koei, the main company in the Group, are taken on by subsidiaries andaffiliates located both at home and abroad.
These related companies, together with the principle corporation, make up the Nippon Koei Group.
The various firms maintain close cooperation based on relationships of interdependence that enhance
the strength and cohesion of the Group as a whole.
As of March 2008, the total number of employees of the Group companies based in Japan came toabout 2600, of which over 1,000 were registered engineers. The Group truly has a wealth of highly
skilled technical experts.
The subsidiary companies that comprise the consolidated Nippon Koei Group are as follows:
Tamano Consultants Co., Ltd.
This company is headquartered in the city of Nagoya and provides engineering consulting services
centered on the Chubu Region. The company boasts the most highly regarded urban and regional
planning group in Japan.
Nippon Civic Consulting Engineers Co., Ltd.
This company provides consulting services centered on planning, design, and construction supervisionof underground structures such as urban tunnels. The company specializes in shield tunnelingtechnology and the development of new underground construction technology.
NEPCO Ltd.
This company provides services for geological disaster prevention. Services include landslideprediction and preventative activities such as hazard surveys, action planning, and construction ofprotective measures. NEPCO also manufactures and sells various types of equipment for landslide
monitoring and management.
KRI International Corporation
Established to enhance the think tank function required for the Nippon Koei Group's activities, KRI
is responsible for providing survey, research, and consulting work for clients, both within and outside
the Group, on a contract basis. KRI is also responsible for education, training, and publishingactivities.
Nippon Koei U.K. Co., Ltd.
This company provides engineering consulting services to enforce Nippon Koei’s overseas operation in
the primary fields of transportation, environment, water supply and wastewater.
Nippon Koei Power Systems Co., Ltd.
This company manufactures power generation equipment and systems and electronic equipment anddevices. A wholly owned subsidiary and the largest in the Group, it works in close partnership with
Nippon Koei on business projects.
Nikki Corporation
This company is responsible for real estate management, leasing, and insurance services for Nippon
Koei and other Group companies. It also sells, imports, and exports electrical power equipment andrents and leases various goods.
Koei System Inc.
This company develops software programs used in computer control applications, dispatches
personnel, and provides support and software development for office automation systems on aconsignment basis.
El Koei Co., Ltd.
This company is responsible for employment and staffing solution for Nippon Koei Group. The
company provides various fields of qualified human resources to support the activity of the Group
Companies.
56

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

Printed in Japan