4, Kojimachi 5-chome, Chiyoda-ku, Tokyo 102-8539, Japan
http://www.n-koei.co.jp E-mail: info@n-koei.co.jp

Financial Report
Year ended June 30, 2015

Printed in Japan

Company Profile

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

CONTENTS
Financial Highlights .................................................................................................................. 1
Consolidated Business Report for Fiscal Year Ended June 30, 2015 .......................................... 2
Consolidated Balance Sheet .................................................................................................... 10
Consolidated Statement of Income and Comprehensive Income ......................................... 12
Consolidated Statement of Changes in Equity ....................................................................... 13
Consolidated Statement of Cash Flows .................................................................................. 14
Notes to Consolidated Financial Statements ......................................................................... 15
Nonconsolidated Balance Sheet .............................................................................................. 44
Nonconsolidated Statement of Income .................................................................................. 46
Nonconsolidated Statement of Changes in Equity ................................................................ 47
Notes to Nonconsolidated Financial Statements ................................................................... 48
Corporate Information ............................................................................................................ 59
Consolidated Subsidiaries ....................................................................................................... 61

Financial Highlights

Consolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended June 30

2015

2014

2015

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

¥81,840¥79,193$667,864

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

4,261

2,998

34,772

Net income per share (yen/dollars) .....................

56.01

39.61

0.46

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

84,11076,145686,388

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

52,982

47,835432,365

As of June 30

Nonconsolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended June 30

2015

2014

2015

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

¥60,471¥59,308$493,480

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

5,714

2,199

46,630Net income per share (yen/dollars) .....................

75.11

29.05

0.61

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

73,391

68,439598,915

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

48,69143,536397,348

As of June 30

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 ¥122.54 = US$1, the rateof exchange at June 30, 2015.

1

Consolidated Business Report for Fiscal Year Ended June 30, 2015
1. Overview of Performance and Cash Flows(1) Performance
During the fiscal year under review (from July 1, 2014 to June 30, 2015), the Japanese economy was on amoderate recovery path due to signs of recovery in personal consumption and private investment in plant andequipment as a result of the government’s economic policies and monetary easing, despite weak movement inpublic works projects.
With regard to the business environment of Nippon Koei Co., Ltd. (the “Company”) and its subsidiaries(together, the “Group”), our Domestic Consulting Operations and Power Engineering Operations both
performed strongly, backed by factors including disaster prevention and disaster mitigation business based on
the Fundamental Plan for National Resilience, maintenance and management business for facilities under thePlan for Extending the Lifespan of Infrastructure, an increase in demand for preparation of facilities for the
Tokyo Olympics, investment aimed at putting in place distribution networks for electric power companies, andan increase in demand for renewal and new construction of hydroelectric power generation facilities taking
advantage of the Feed-in Tariff (“FIT”) Scheme. In our International Consulting Operations, the market
performed steadily. Contributing factors included acceleration of government-led infrastructure exports to meetdevelopment demand among emerging markets in Asia and other parts of the world, reflecting the maintenanceof a certain volume of Official Development Assistance (“ODA”) projects by Japan despite changes in content, as
well as support owing to strong demand for private investment in development.
Under such circumstances, based on the Medium-Term Management Plan (from April 2012 to June 2015), theGroup aggressively engaged in the important initiatives mentioned below, and steady results were achieved
during the fiscal year under review, which is the final fiscal year of the plan. The initiatives are, “Development
and management of overseas bases, and introduction of multi-domestic management,” “Enhancement ofexisting business sectors and expansion of business domains,” “Exploration of new business models including
new initiatives in project management,” and “Enhancement of work-life balance.” The Company wasaggressively trying to extend business domains thorough the activities, such as, an aggressive effort intended toacquire overseas companies for further global expansion, acquisition of the business from Kisho Kurokawa
Architect & Associates Co., Ltd. with the aim of full-scale entry into the area of urban development andarchitecture, and establishment of KOEI Energy Co., Ltd. in order for further expansion of the regenerated
energy business, especially hydroelectric power generation.
As a result, for the fiscal year ended June 30, 2015, while orders received were ¥87,573 million, down 5.3% yearon-year, net sales were ¥81,840 million, up 3.3% year-on-year.
In terms of profit, operating income was ¥4,502 million, up 5.8% year-on-year. Net income was ¥4,261 million,
up 42.1% year-on-year, which includes gain on sales of property, plant and equipment held by the Company.

Domestic Consulting Operations
Although consulting-related business for reconstruction following the Great East Japan Earthquake decreased,
in which the Company has continuously engaged, steady results were obtained in certain key business areas,such as disaster prevention and mitigation including measures against tsunami and earthquake resistance, andmaintenance and management projects for long-life and functional preservation at public facilities, by making
condensed efforts for order-receiving from the above priority areas.
Compared to the previous fiscal year, which showed significant growth, orders received were ¥45,057 million,
down 3.4% year-on-year, and net sales were slightly higher year-on-year, recording ¥41,846 million. Ordinary
income was ¥2,728 million, up 8.0% year-on-year.

International Consulting Operations
The Group continued on its drive for global expansion through the activities, such as, accommodating thedemand for infrastructure development in Southeast Asian countries including Myanmar, Southwest Asian
countries, Latin America, the Middle East and Africa, improving organizational structures including overseas
business hub functions, and participating in the development projects intended to improve urban functions inrelation to ongoing urbanization in developing countries.
However, orders received were ¥28,890 million, down 3.8% year-on-year, partially due to delayed timing of2

signing of contracts for certain large-scale projects. Net sales were ¥20,174 million, slightly lower than theprevious fiscal year. Ordinary income was ¥606 million, up 22.8% year-on-year.

Power Engineering Operations
Despite the competitive environment intensified due to cost reductions in capital expenditures and repairs at the
major electric power companies, which are the Company’s mainstay customers, the Company was successful inreceiving orders for the projects, such as, countermeasures against deteriorating facilities at electric powercompanies and renewal-related projects for hydroelectric power generation facilities to take advantage of the
FIT Scheme, by aggressively promoting enhancement of cost competitiveness and cultivation of new customers.
The Company also established a business model for the small-scale hydroelectric power generation business,and successfully created a foundation for future business expansion.
Although orders received were ¥13,596 million, down 14.1% as compared to the previous fiscal year in whichlarge-scale contracts of private sector projects were concluded, net sales were ¥17,858 million, up 26.0% year-onyear, mainly due to contributions from the large-scale projects. As a result, along with contribution from cost
reductions, ordinary income significantly increased, and reached to ¥2,801 million, up 123.0% year-on-year.

Real Estate Leasing Operations
Net sales in the Real Estate Leasing Operations were ¥821 million, down 27.1% year-on-year, mainly due todisposal of its certain property, plant and equipment by sale. Ordinary income was ¥591 million, also down
30.2% year-on-year.

(2) Cash Flows
Cash and cash equivalents at the end of the fiscal year under review was ¥11,673 million, an increase of ¥3,208 million
from the end of the previous fiscal year. The primary factors were as follows.
Net cash provided by operating activities was ¥882 million (a net inflow of ¥1,340 million during the previous fiscal year).
This cash inflow was primarily due to income before income taxes and minority interests of ¥7,564 million, an increase of¥3,002 million compared to the end of the previous fiscal year, which was partially offset by an increase in trade accounts
receivable by ¥2,668 million.
Net cash provided by investing activities was ¥2,702 million (a net outflow of ¥4,559 million during the previous fiscal
year). This cash inflow was primarily due to proceeds from sales of property, plant and equipment.
Net cash used in financing activities was ¥746 million (a net inflow of ¥62 million during the previous fiscal year). This
cash outflow was primarily due to a payment of cash dividends.
Trends in cash flow indicators for the Group are as follows.
(Reference) Trends in Cash Flow-related Indicators

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

Fiscal Year
Ended March2012

Fiscal Year
Ended March2013

Fiscal Period
Ended June2013

Fiscal Year
Ended June2014

Fiscal Year
Ended June
2015

54.5

55.0

60.8

62.4

62.6

27.4

34.5

39.2

50.0

43.7

—
—

3.1
73.7

0.2
1,519.0

1.8
29.3

1.9
18.0

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 fiscal year ended March 31, 2012, were negative
as indicated by “—.”
6.	Due to the change of the fiscal year-end, the consolidated fiscal period ended June 30, 2013 is an irregular 3-monthaccounting period. Accordingly, the interest-bearing debt-to-cash flow ratio and interest coverage ratio are based on cash
flows and interest payments for the 3-month period.

3

2. Production, New Orders and Sales(1) New Orders
For the fiscal year ended
June 30, 2015

Business Segment

Change onPrevious Year

(Millions of yen)

New Orders
Domestic consulting operations ..............................
International consulting operations (Note.1) .........
Power engineering operations .................................
Other business operations .......................................
Total new orders ..................................................
Outstanding orders
Domestic consulting operations ..............................
International consulting operations .......................
Power engineering operations .................................
Other business operations .......................................
Total orders on hand ...........................................

(%)¥45,057
28,89013,59630
87,573

-3.4
-3.8
-14.1
131.6
-5.3

27,974
51,4289,908
6¥89,316

2.4
16.3
-11.7
85.8
7.9

Notes: 1.	Includes ¥1,205 million, ¥427 million, and ¥246 million for NIPPON KOEI VIETNAM INTERNATIONAL CO., LTD.,
PHILKOEI INTERNATIONAL, INC., and PT. INDOKOEI INTERNATIONAL, respectively, as the amounts of outstandingorders at the beginning of consolidation for these companies, which were consolidated from the fiscal year under review.
2. The above amounts are exclusive of consumption taxes, etc.
3. The above amounts are for outside customers, and do not include inter-segment transactions or transfers.

(2) Sales Performance
For the fiscal year ended
June 30, 2015

Business Segment

Change onPrevious Year

(Millions of yen)Domestic consulting operations ..............................
International consulting operations .......................
Power engineering operations .................................
Real estate leasing operations .................................
Other business operations .......................................
Total sales ..............................................................

(%)¥41,846
20,174
17,858821
1,141¥81,840

0.1
-3.7
26.0
-27.1
0.7
3.3

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

Customer
Ministry of Land, Infrastructure,
Transport and Tourism .....................
Tokyo Electric Power
Company, Incorporated ....................
Japan International
Cooperation Agency ..........................

4

This Consolidated
Fiscal Year
Amount(Millions of yen)Previous Consolidated
Fiscal Period

Proportion(%)

Amount(Millions of yen)

Proportion(%)¥14,845

18.1¥16,632

21.0

7,675

9.4

6,028

7.6

6,756

8.3

9,004

11.4

3. Future Challenges(1) Management Policy
To achieve further increases in corporate value, the Group formulated a new Long-Term Management Strategy(spanning six years from July 2015 to June 2021) in February 2015.
The Group, under the mission of realizing the value contained in the management philosophy of “Act withintegrity & Contribute to society through technology and engineering,” has defined the specific goals of theGroup in the Group Vision of “To provide services that are of value in building safe and reliable social
infrastructure and comfortable living space.”
Under the Long-Term Management Strategy, based on the Group Vision, the Group will continue the fusion of
consulting and engineering to evolve into a global company. Accordingly, the Group has defined its businesstargets for the fiscal year ending June 30, 2021, to be net sales of ¥140.0 billion, operating income of ¥14.0
billion, and a return on equity (“ROE”) of 10%.
To realize the Long-Term Management Strategy targets, the Group has positioned the next three years (from July
2015 to June 2018) as an important period to serve as a springboard for the future. Therefore, it has formulated
the “Medium-Term Management Plan (NK-AIM: Advance Globally, Make Intense Efforts in Japan, Demonstrate
our True Merit).”
Under the Medium-Term Management Plan (“Plan”), based on the fundamental principles of “Sustainable longterm growth of existing business operations” and “Growth due to new business operations,” the Group will
engage in the three key challenges of “Further enhancement of global expansion,” “Further expansion ofbusiness fields and improvement of profitability by intensifying existing mainstay businesses,” and“Demonstrating merit of aggregated technological strength toward establishment of new business domains.”
As companywide measures to realize these goals, the Group will actively engage in “Development of nextgeneration fundamental technologies and further improvement of productivity,” “Securing human resources andenhancing its development,” and “Promotion of collaboration and enhancement of corporate governance.”
In terms of numerical targets, for the fiscal year ending June 30, 2018, the final fiscal year of the Plan, targets
are set at net sales of ¥100.0 billion, operating income of ¥6.4 billion, and ROE of 7.5%.
Under the Plan, for the next fiscal year (from July 2015 to June 2016), which will be the first fiscal year of thePlan, the following key strategic business challenges and companywide measures will be implemented.
1) Key strategic business challenges
In the Domestic Consulting Operations, the Company will expand its business domain and share by defining
priority businesses, proceed with restructuring of the operational processes for higher profitability, and enhance
active utilization of alliances.
In the International Consulting Operations, the Company will secure a stable business foundation throughexpansion of share in the Japanese ODA, expand its business scale in urban development business and PublicPrivate Partnership (“PPP”) business, and further strengthen its locally-based structures for order-receiving andconstruction.
In the Power Engineering Operations, the Company will increase cost competitiveness and strengthen sales andmarketing capabilities, enhance cooperation within the group (e.g. fusion and cooperation among the businessareas of consulting, products and construction), promote product and technology development, and reinforce
the mechanical and electromechanical consulting division.
In the new operations, the Company will focus on entering new markets and make investments in, such as,
formulation of asset holding-type business both in Japan and overseas, and promotion of the small-scalehydroelectric power generation business. The Company will also work to establish an urban space business by
exploring the areas of urban development and architecture.
2) Companywide measures to support its growth
For “Development of next-generation fundamental technologies and further improvement of productivity,” theCompany will proceed to develop its technologies with taking global environmental change into account,develop fundamental technologies for the next-generation of Smart Society, make use of the external cuttingedge technologies, refine project management method, secure product quality and increase profitability through5

improvement of production processes, and secure and develop human resources who are expected to work with
next-generation technology.
For “Securing human resources and enhancing its development,” the Company will adopt the limitation of work
locale to support various work styles, organize a system of career paths and reestablish training systems,
implement personnel rotations with considering a personal career formulation as well as business strategy,
optimize evaluation systems, and implement appropriate compensation system.
For “Promotion of collaboration and enhancement of corporate governance,” the Company will establish
companywide marketing functions, improve the workplace especially through construction of new headquarters
building, and establish a structure of corporate governance in order for establishment of a highly transparent
management structure.

(2) Basic Policy Governing Corporate Decision-Makers on Financial Affairs and Operations
Our basic policy governing corporate decision-makers on financial affairs and operations (GovernancePrinciples) is as detailed below.
1) Governance Principles
As a publicly listed company allowing its shares to be traded freely, we believe that whether or not we will sell sharesin response to a particular person’s attempt to acquire a large number of shares (an attempt to acquire a large
number of shares) should be determined ultimately by our shareholders.
However, we are proud of our company’s track record as a good corporate citizen. The Company has been charged
with fulfilling a social mission and public works projects, including construction consulting. The power of our brandis backed by a wide range of technological expertise, years of experience, and a rock-solid performance record. It
would be impossible to manage the Company, improve its corporate value, or bring profit to its shareholders without
a good understanding of everything the brand stands for or without the relationship of mutual trust that has been
built between the Company and its customers, employees, suppliers, and other stakeholders in Japan and abroad.
We believe that, in the event of a takeover bid, any party attempting to acquire a large number of shares (the bidder)should provide shareholders with all the information necessary for them to make a sound decision.
2) Special measures for realization of the Basic Policy
At the Company, we implement the following special measures in line with the Governance Principles describedin 1) above(i) Medium-term goals
Our medium-term goals and specific measures under our Medium-Term Management Plan are as described in
the section entitled “(1) Management Policy.”(ii) Enhancing corporate governanceWorking to boost the corporate value of the Company and the Group as a whole, we are continually improving
corporate governance by strengthening management oversight, ensuring transparency, and establishing a systemthat will enable us to quickly perform our operations. We also focus on compliance as well as risk management
to enhance the effectiveness of internal controls and have adopted a corporate auditor system. The Board of
Directors provides oversight of our operations, while the Board of Corporate Auditors audits the directors’
activities.
3) Preventing an undesirable takeover in accordance with the Basic Policy
In line with the Governance Principles described in 1) above, we maintain an anti-takeover policy (hereinafter
the “Policy on Substantial Acquisition of Shares”) that is intended to prevent undesirable control over decisions
on our financial and operational policies.
The Policy on Substantial Acquisition of Shares generally applies to any bidder attempting to acquire a large
number of Nippon Koei shares in a bid to control 20% or more of the voting rights held by a certain group ofshareholders or acquiring enough shares to change the balance of power to ensure that a certain group ofshareholders has 20% or more of the voting rights. The Policy requires the bidder to (1) provide the Board of
Directors with all relevant information including written notification 6 declaring his/her exact intentions inadvance, and (2) begin purchasing shares only after the elapse of a tender assessment period to be specified by

6

the Company’s Board of Directors.
The Policy on Substantial Acquisition of Shares was first introduced upon resolution by the Board of Directors
in May 2006, after which the Board voted to partially revise and continue it in June 2007. The Policy was laterpartially revised upon approval of shareholders at the 63rd general shareholders’ meeting held in June 2008, andwas again partially revised upon approval of shareholders at the 66th general shareholders’ meeting held in June
2011 and at the 69th general shareholders’ meeting held in September 2013.
The details of the Policy on Substantial Acquisition of Shares have been made available on the Company website(http://www.n-koei.co.jp/).
4) Board of Directors’ decision concerning the measures described in 2) and 3) above and the reason
The measures described in 2) above are in line with the Governance Principles described in 1) above, since they
were implemented for the purpose of enhancing corporate value and carried out in the common interests of ourshareholders. These measures emphasize protecting the interests of our shareholders over protecting thecorporate directors from being replaced.
The measures described in 3) above (the Policy on Substantial Acquisition of Shares) are in line with theGovernance Principles described in 1) above. It protects the interests of our shareholders over protecting thecorporate directors from being replaced in the following ways:a. The Policy on Substantial Acquisition of Shares meets the three basic requirements set forth in the Guidelines
Regarding Takeover Defense for the Purposes of Protection and Enhancement of Corporate Value andShareholders’ Common Interests published by the Ministry of Economy, Trade and Industry (METI) and theMinistry of Justice on May 27, 2005. It also incorporates a June 30, 2008, report entitled “Proper Role of
Takeover Defense Measures in Light of Changes in Various Environments” published by METI’s Corporate
Value Study Group.
b. The Policy enables our shareholders to make an informed decision on whether a takeover would be beneficial,prevents any apparent infringement on the Company’s corporate value and is in the best interest of Nippon
Koei and its shareholders.
c. The Rules on Substantial Acquisition of Shares and the necessary conditions for taking countermeasures arereasonable in light of our aim to maintain and enhance the Company’s corporate value and protect theinterests of its shareholders.
d. The Rules on Substantial Acquisition of Shares and the necessary conditions for taking countermeasures areconcrete and clear enough to make it possible for the shareholders, investors and potential bidders to makefair predictions about the future.
e. The policy was enacted by a vote of the shareholders at a shareholders’ meeting. The Company’s Board of
Directors can convene a shareholders’ meeting to verify the shareholders’ intentions to implement a
countermeasure or not. Decisions about whether to maintain, rescind or alter the policy, made in the form ofa resolution to be voted on at a general shareholders’ meeting, will ensure that the wishes of the shareholders
are reflected in company policy.
f. The policy establishes objective and clear conditions for taking countermeasures. It also establishes priorconditions needed to implement countermeasures, requiring that the Company’s Board of Directors consult
its independently established ad hoc committee in advance concerning the initiation of countermeasures.
Only after carefully considering the recommendations of the committee will the Board make its final decision
on implementing counter-takeover measures. The Policy on Substantial Acquisition of Shares ensures that all
decisions of the Board regarding countermeasures are objective and reasonable.
g. The policy empowers the ad hoc committee to seek the advice of independent experts at the Company’s
expense. The policy goes to such great lengths that it leaves no room for doubt about the fairness andobjectivity of the ad hoc committee’s recommendations.
h. The Policy on Substantial Acquisition of Shares is not intended to be a dead-hand takeover defense and may
be abolished subject to a vote at the Company’s shareholders’ meeting or at a Board of Directors’ meeting
comprised of directors elected at a shareholders’ meeting. It is not a slow-hand takeover defense either, since
the term of the Company’s Board members is one year.

74. Business Risks
The following are matters that could significantly affect the judgment of investors, from among matters related to
Overview of Performance and Cash Flows and Financial Section, etc. stated in the Consolidated Business Report.
Items related to future events within the text are the Group’s judgment as of June 30, 2015.

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

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

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

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

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

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

(1) Analysis of Financial Status
Total assets under review amounted to ¥84,110 million, up ¥7,965 million over the previous year.
The main causes for this increase were a ¥8,071 million increase in current assets, a ¥2,063 million decrease inproperty, plant and equipment, and a ¥1,957 million increase in investments and other assets.
The increase in current assets was due primarily to a ¥3,208 million increase in cash and cash equivalents, a¥2,726 million increase in receivables, as well as a ¥1,657 million increase in inventories.
The decrease in property, plant and equipment was due primarily to a ¥3,330 million decrease in buildings andstructures.
The increase in investments and other assets was due primarily to a ¥594 million increase in investment
securities, a ¥417 million increase in investments in and advances to unconsolidated subsidiaries and associatedcompanies, and a ¥750 million increase in deposit money, included in other assets under investments and otherassets.

8

Meanwhile, liabilities amounted to ¥31,128 million, up ¥2,818 million over the previous year.
The main causes for this increase were an increase of ¥3,937 million in current liabilities, despite a ¥1,119
million decrease in long-term liabilities.
The increase in current liabilities was due primarily to a ¥2,380 million increase in payables, a ¥666 million
increase in income taxes payable, and a ¥1,068 million increase in advances received.
The decrease in long-term liabilities was due primarily to a ¥1,119 million decrease in net defined benefit
liability, a ¥1,129 million decrease in deposits received, and a ¥1,091 million increase in deferred tax liabilities.
Equity increased by ¥5,147 million from the previous year to ¥52,982 million.
The main causes of this increase were an increase of ¥3,403 million in retained earnings, a ¥294 million increasein unrealized gain on available-for-sale securities, and a ¥1,187 million increase in defined retirement benefit
plans.

(2) Performance Analysis
Net sales for the fiscal year under review amounted to ¥81,840 million, an increase of ¥2,647 million (up 3.3%)
from the previous fiscal year.
Operating income totaled ¥4,502 million, an increase of ¥246 million (up 5.8%) from the previous year. The costof sales ratio decreased 1.4 points from the previous fiscal year to 73.4%, while the ratio of selling, general andadministrative expenses to net sales was up 1.3 points to 21.1%. These results brought the ratio of operating
income to net sales to 5.5%, an increase of 0.1 points.
The net amount of other income and expenses resulted in an excess earning of ¥3,062 million, due primarily to a
¥2,628 million proceeds in gain on sales of property, plant and equipment.
As a result of the above, income before income taxes and minority interests totaled ¥7,564 million, and net
income amounted to ¥4,261 million, an increase of ¥1,263 million (up 42.1%) from the previous fiscal year.
Net income per share was ¥56.01, an increase of ¥16.40 from ¥39.61 in the previous fiscal year.

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

President:
Ryuichi Arimoto9

Co n s ol i d ated B a lanc e S h eet
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
June 30, 2015

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 18) ..................
Receivables (Note 18):
Trade notes .........................................................
Trade accounts ...................................................
Unconsolidated subsidiaries andassociated companies ......................................
Other ...................................................................
Allowance for doubtful accounts .....................
Inventories (Note 6) ............................................
Deferred tax assets (Note 15) .............................
Prepaid expenses and other current assets ........
Total current assets ............................................
PROPERTY, PLANT AND
EQUIPMENT (Notes 7, 8 and 12):Land ......................................................................
Buildings and structures .....................................
Machinery and equipment ..................................
Furniture and fixtures .........................................
Lease assets ..........................................................
Construction in progress .....................................
Total ....................................................................
Accumulated depreciation ...................................
Net property, plant and equipment ...................

2015

2014

2015

¥11,673¥ 8,465$ 95,259

21
16,17879
13,693

171
132,022

609
347
(12)
11,768
1,423
2,814

27
645
(27)
10,111
1,449
2,308

4,970
2,832
(98)
96,034
11,612
22,96444,82136,750365,766

17,333
17,869
2,693
2,672
270
251

17,247
21,199
2,486
2,676
265
9

141,448
145,822
21,97721,8052,203
2,048

41,088(16,563)

43,882(17,294)

335,303(135,164)

24,525

26,588200,139

8,881

8,287

72,474

1,896

15,472996
9,940
24,571(2,970)INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 5 and 18) ..............
Investments in and advances
to unconsolidated subsidiaries andassociated companies (Notes 9 and 18(5)(b)) ..
Goodwill ...............................................................
Receivables in bankruptcy ...................................
Deferred tax assets (Note 15) ..............................
Other assets ..........................................................
Allowance for doubtful accounts ........................
Total investments and other assets ...................

122
1,218
3,011
(364)

1,479
233
123
1,404
1,623
(342)

14,764

12,807

120,483

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

¥84,110¥76,145$686,388

See notes to consolidated financial statements.

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

Millions of Yen

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short‑term borrowings (Note 10) .......................
Current portion of long-term debt (Note 10) .....
Payables:Trade notes .........................................................
Trade accounts ...................................................
Unconsolidated subsidiaries andassociated companies ......................................
Other ...................................................................
Accrued expenses .................................................
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 10) ....................................
Provision for directors’
retirement benefits (Note 11) ............................
Allowance for environmental measures .............
Liability for retirement benefits (Note 11) .........
Asset retirement obligations (Note 13) ...............
Deposits received (Note 12) .................................
Deferred tax liabilities (Note 15) .........................
Other liabilities ....................................................
Total long-term liabilities ................................

2015
¥

2014

2015
$

204

¥100
181

465
3,983

303
2,973

3,795
32,504

132
2,992
1,952
1,509
8,655
2,844
111
3,571
24,466

104
1,784
1,601
843
7,587
2,529
205
3,920
20,5291,077
24,417
15,92912,31470,63023,209906
29,141
199,657

1,583

1,768

12,918

59
34
2,129
34
469
2,111
243
6,662

59
34
3,248
54
1,598
1,020
7,781

481
278
17,374278
3,827
17,227
1,983
54,366

7,393
6,209
39,7707,393
6,209
36,36760,331
50,669324,547(3,205)(3,344)(26,155)

1,665

COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 17, 19 and 20)
EQUITY (Notes 14 and 22):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares on June 30, 2015 and 2014 ....
Capital surplus .....................................................
Retained earnings ................................................
Treasury stock—at cost
10,370,910 shares on June 30, 2015
and 10,793,274 shares on June 30, 2014 ..........
Accumulated other comprehensive income:Unrealized gain on
available-for-sale securities .............................
Deferred loss onderivatives under hedge accounting ...............
Foreign currency translation adjustments .......
Defined retirement benefit plans ......................
Total ....................................................................
Minority interests .................................................
Total equity .......................................................

1,659

1,365

13,539(100)
918
52,644338
52,982

(176)
(14)
(269)
47,531
304
47,835(816)
7,492
429,6072,758
432,365

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

¥84,110¥76,145$686,38811

Consolidated Statement of Income and Comprehensive Income
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2015

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2015
NET SALES ...........................................................
COST OF SALES ...................................................
Gross profit ......................................................
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (Note 16) .....
Operating income ............................................
OTHER INCOME (EXPENSES):Interest and dividend income .............................
Interest expense ...................................................
Gain on sales of property,
plant and equipment ..........................................
Foreign currency exchange gain (loss) ...............
Head office transfer cost .....................................
Other-net ...............................................................
Other income-net .............................................
INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS ...................................
INCOME TAXES (Note 15):
Current .................................................................
Deferred ................................................................
Total income taxes ...........................................
NET INCOME BEFOREMINORITY INTERESTS....................................
MINORITY INTERESTS IN NET INCOME .....
NET INCOME .......................................................
MINORITY INTERESTS IN NET INCOME .....
NET INCOME BEFOREMINORITY INTERESTS ...................................
OTHER COMPREHENSIVE INCOME (Note 21):
Unrealized gain on
available-for-sale securities ...............................
Deferred gain onderivatives under hedge accounting .................
Foreign currency translation adjustment ...........
Defined retirement benefit plans ........................
Total other comprehensive income .....................
COMPREHENSIVE INCOME .............................
TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owners of the parent ...........................................
Minority interests .................................................

2015

2014

¥81,840
60,05521,785¥79,193
59,253
19,940$667,864
490,085
177,779

17,283
4,502

15,6844,256

141,040
36,739

441
(48)

342
(45)

3,599
(392)

2,628
527
(549)
63
3,062

3
(130)
136
306

21,446
4,301(4,480)514
24,988

7,564

4,562

61,727

2,374
892
3,266

1,340
190
1,530

19,373
7,280
26,653

4,298
37
4,261
37

3,032
34
2,998
34

35,074302
34,772
302

4,298

3,032

35,074

295

477

2,407

176
76
1,187
1,734
¥6,032

10
9
694
1,190
¥4,222

1,436
620
9,687
14,150$49,224¥5,984¥48¥4,186¥36$48,833$391
U.S. Dollars(Note 1)Yen

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

12¥56.01
10.00¥39.617.50$0.460.08

Co n s ol i d ated S t atemen t o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2015

Thousands

Millions of Yen
Accumulated Other Comprehensive Income

BALANCE, JUNE 30, 2013 �����������������������������
Net income ������������������������������������������������������Cash dividends, ¥2.00 per share ���������������������
Purchase of treasury stock �����������������������������
Disposal of treasury stock ������������������������������
Net change in the year ������������������������������������
BALANCE, JUNE 30, 2014
(JULY 1,2014, as previously reported) ������
Cumulative effect of accounting change �������
BALANCE, JULY 1, 2014 (as restated) ���������
Adjustment for newly consolidated subsidiaries ���Net income ������������������������������������������������������Cash dividends, ¥7.50 per share ���������������������
Purchase of treasury stock ���������������������������������
Disposal of treasury stock ������������������������������
Net change in the year ������������������������������������
BALANCE, JUNE 30, 2015 �����������������������������

Outstanding
Number of
Shares ofCommon Stock

Common Stock

Capital Surplus

75,571¥7,393¥6,209Retained
Earnings¥33,523

TreasuryStock¥(3,435)

Unrealized
Gain onAvailable-forSale Securities

Deferred Loss on
Derivatives
under Hedge
Accounting¥ 890¥(186)

Foreign
Currency
Translation
Adjustments

DefinedRetirement
Benefit Plans¥ (21)¥(963)

2,998¥43,410

(54)

428

145

75,863

7,393

6,209

36,367(3,344)

7,393

6,209

35,722

¥261

(154)

(154)

(54)

(54)

145

145

475

10

7

694

1,186

43

1,229

1,365

(176)

(14)

(269)

47,531

304

47,835(645)(3,344)¥43,671
2,998

(645)
75,863

Total Equity

2,998

(154)
(136)

Minority
Interests

Total

1,365

(176)

(14)

366

(269)

(645)

46,886304

47,190

214

55

269

(152)

4,261

4,261

4,261

(579)

(579)

(579)

(22)

(11)

(11)

(11)

445

150

150

150

294
76,286¥7,393¥6,209¥39,770¥(3,205)¥1,659

176
¥

66

1,187

1,723

(21)

1,702

¥(100)¥ 918¥52,644¥338¥52,982

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

BALANCE, JUNE 30, 2014
(JULY 1,2014, as previously reported) ������
Cumulative effect of accounting change �������
BALANCE, JULY 1, 2014 (as restated) ���������
Adjustment for newly consolidated subsidiaries ���Net income ������������������������������������������������������Cash dividends, $0.06 per share ���������������������
Purchase of treasury stock �����������������������������
Disposal of treasury stock ����������������������������������
Net change in the year ���������������������������������������
BALANCE, JUNE 30, 2015������������������������������

Common Stock

Capital Surplus$60,331$50,669

Retained
Earnings$296,777

TreasuryStock$(27,289)

Unrealized
Gain onAvailable-forSale Securities

Deferred Loss on
Derivatives
under Hedge
Accounting$11,139$(1,436)

Foreign
Currency
Translation
Adjustments$ (114)

DefinedRetirement
Benefit Plans$(2,195)(5,264)(1,241)$2,4801,746

Total Equity$390,362(5,264)

449

2,195

34,772

34,772

34,772(4,725)(4,725)(4,725)

(90)

(90)

(90)

1,224

1,224

1,224

2,400
$50,669$387,882(5,264)

2,987$60,331

Minority
Interests

Total$324,547$(26,155)$13,539

1,436
$

539

9,687

14,062(171)

13,891$ (816)$ 7,492$429,607$2,758$432,365

See notes to consolidated financial statements.

13

Co n s ol i d ated S t atemen t o f C as h Fl ow s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2015

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

OPERATING ACTIVITIES:
Income before income taxes andminority interests ....................................................
Adjustments for:
Income taxes – paid ..............................................
Depreciation and amortization ............................
Gain on sales of property, plant and equipment....
Head office transfer cost ......................................

2015¥ 7,564

2015

2014

¥ 4,562$ 61,727(1,610)1,408(2,628)549(1,038)997(3)(13,139)
11,490(21,446)
4,480(2,668)(1,407)
929
(332)
741
(1,664)882(5,178)
1,907
835
(38)
(1,740)
1,036
1,340

(21,772)(11,482)
7,581(2,709)6,047(13,579)
7,198

Changes in assets and liabilities, net of effects
from newly consolidated subsidiaries:
Increase in trade accounts receivable ................
(Increase) decrease in inventories .....................
Increase in trade accounts payable ....................
Decrease in net defined benefit liability ............
Increase (decrease) in advance received ...........
Other—net .............................................................
Net cash provided by operating activities....
INVESTING ACTIVITIES:
Proceeds from sales of property,
plant and equipment ...............................................
Purchases of property, plant and equipment ..........
Proceeds from sales and redemption of
investment securities ..............................................
Purchases of investment securities ..........................
Proceeds for purchase of newly consolidated
subsidiaries, net of cash acquired ..........................
Increase in other assets ............................................
Net cash provided by (used in)investing activities ..........................................
See notes to consolidated financial statements.

14

5,095

4

41,578(1,256)(4,328)(10,250)

1,370(1,116)

1,060
(949)

11,180(9,107)43(1,434)(346)

351(11,702)¥ 2,702¥(4,559)$ 22,050

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

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

2015

2015

2014

¥ (100)

¥

$

(816)

(130)
(53)
(11)
150
(580)
(22)

90
300
(180)
(44)
(54)
145
(194)
(1)

Net cash (used in) provided byfinancing activities ..........................................

(746)

62

(6,088)FOREIGN CURRENCY
TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS ................

104

8

849

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

2,942(3,149)24,009CASH AND CASH EQUIVALENTS OF
NEWLY CONSOLIDATED SUBSIDIARIES,BEGINNING OF YEAR ..........................................

266

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

8,465

11,614

69,079CASH AND CASH EQUIVALENTS,
END OF YEAR .........................................................

¥11,673¥ 8,465$95,259(1,061)
(432)
(90)
1,224
(4,733)
(180)

2,171

N o tes to C on solid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year Ended June 30, 2015

1.	B A S I S O F P R E S E N TAT I O N O F C O N S O L I D AT E D F I N A N C I A L
STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and inaccordance with accounting principles generally accepted in Japan, which are different in certain respects as tothe application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form which ismore familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2014
consolidated financial statements to conform to the classifications used in 2015.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Nippon
Koei Co., Ltd. (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S.
dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rateof ¥122.54 to $1, the rate of exchange at June 30, 2015. Such translations should not be construed as
representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.	Consolidation — The consolidated financial statements as of June 30, 2015, include the accounts of theCompany and its 14 significant (11 in 2014) subsidiaries (together, the “Group”).
For the year ended June 30, 2015, the Company added NIPPON KOEI VIETNAM INTERNATIONAL CO.,LTD., and PT. INDOKOEI INTERNATIONAL to the scope of consolidation due to their increased materiality.
PHILKOEI INTERNATIONAL, INC., newly became a consolidated subsidiary from an associated company
not accounted for by the equity method as a result of the additional acquisition of stocks.
Under the control concept, those companies in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated.
Investments in unconsolidated subsidiaries and associated companies are stated at cost. If the equity methodof accounting had been applied to the investments in these companies, the effect on the accompanying
consolidated financial statements would not be material.
Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets of theacquired subsidiaries at the date of acquisition.
Goodwill 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 also 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 — Work in process is stated at the lower of cost, mainly determined by the specificidentification cost method, or net selling value.

d.	Investment Securities — Investment securities are classified and accounted for, depending on
management’s intent, as follows:(1) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent andability to hold to maturity are reported at amortized cost and (2) available-for-sale securities, which are notclassified as the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of
applicable taxes, in a separate component of equity.

15

Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For
other-than-temporary declines in fair value, investment securities are reduced to net realizable value by acharge to income.

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

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

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

h.	R etirement and Pension Plans — The Group has contributory defined benefit pension plans andunfunded retirement benefit plans for the benefit of its employees.
Effective April 1, 2000, the Group adopted a new accounting standard for retirement benefits and accounted
for the liability for retirement benefits based on the projected benefit obligations and plan assets at theconsolidated balance sheet date. The projected benefit obligations are attributed to periods on a straight-line
basis. Actuarial gains and losses are amortized on a straight-line basis over mainly 13 years within the
average remaining service period. Past service costs are amortized on a straight-line basis over mainly 13
years within the average remaining service period. The transitional obligation of ¥2,016 million for thesubsidiaries, determined as of April 1, 2000, is being amortized over 15 years.
In May 2012, the Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ Statement No. 26,“Accounting Standard for Retirement Benefits” and ASBJ Guidance No. 25, “Guidance on AccountingStandard for Retirement Benefits,” which replaced the accounting standard for retirement benefits that had
been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000, and the otherrelated practical guidance, and were followed by partial amendments from time to time through 2009.
(a) Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to berecognized in profit or loss are recognized within equity (accumulated other comprehensive income),
after adjusting for tax effects, and any resulting deficit or surplus is recognized as a liability (liability for
retirement benefits) or asset (asset for retirement benefits).
(b) The revised accounting standard does not change how to recognize actuarial gains and losses and past
service costs in profit or loss. Those amounts are recognized in profit or loss over a certain period nolonger than the expected average remaining service period of the employees. However, actuarial gains andlosses and past service costs that arose in the current period and have not yet been recognized in profit orloss are included in other comprehensive income, and actuarial gains and losses and past service costs
that were recognized in other comprehensive income in prior periods and then recognized in profit orloss in the current period, are treated as reclassification adjustments (see Note 21).
(c) The revised accounting standard also made certain amendments relating to the method of attributing
expected benefit to periods, the discount rate, and expected future salary increases.
This accounting standard and the guidance for (a) and (b) above are effective for the end of annual periods
beginning on or after April 1, 2013, and for (c) above are effective for the beginning of annual periods
beginning on or after April 1, 2014, or for the beginning of annual periods beginning on or after April 1,

16

2015, subject to certain disclosure in March 2015, both with earlier application being permitted from the
beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of thisaccounting standard to consolidated financial statements in prior periods is required.
The Group has applied the revised accounting standard and guidance for retirement benefits for (a) and (b)above, effective June 30, 2013, and for (c) above, effective July 1, 2014.
With respect to (c) above, the Group changed the method of attributing the expected benefit to periods froma straight-line basis to a benefit formula basis and the method of determining the discount rate from using
the period which approximates the expected average remaining service period to using a single weighted
average discount rate reflecting the estimated timing and amount of benefit payment, and recorded the effectof (c) above as of July 1, 2014, in retained earnings. As a result, liability for retirement benefits as of July 1,
2014, increased by ¥985 million ($8,038 thousand), and retained earnings as of July 1, 2014, decreased by¥645 million ($5,264 thousand). There was no significant effect on profit or loss and basic net income pershare for the year ended June 30, 2015.
Hitherto, retirement benefits for directors and Audit & Supervisory Board members were provided at theamount which would be required if all directors and Audit & Supervisory Board members retired at thebalance sheet date. However, the Group abolished benefit pension plans for directors and Audit &Supervisory Board members. The balance in the consolidated balance sheet is the estimated amount for
directors and Audit & Supervisory Board members who have belonged to the Group since when the plans
were effective.

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

j.	Asset Retirement Obligations — In March 2008, ASBJ issued ASBJ Statement No. 18, “AccountingStandard for Asset Retirement Obligations” and ASBJ Guidance No. 21, “Guidance on Accounting Standard
for Asset Retirement Obligations.” Under this accounting standard, an asset retirement obligation is defined
as a legal obligation imposed either by law or contract that results from the acquisition, construction,
development and the normal operation of a tangible fixed asset and is associated with the 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 adjustment to the carrying amount of the liability and thecapitalized amount of the related asset retirement cost.

k.	Employee Stock Ownership Plan — In December 2013, the ASBJ issued ASBJ Practical Issues Task Force(PITF) No. 30, “Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees etc.
through Trusts.” This PITF is effective for the beginning of annual periods beginning on or after April 1,
2014, with earlier application permitted from the beginning of annual periods first ending after the date ofissuance of this PITF, and applied retrospectively.
In accordance with the PITF, upon the transfer of treasury stock to the employee stockownership trust (the“Trust”) by the entity, any difference between the book value and fair value of the treasury stock shall berecorded in capital surplus. At year-end, the entity shall record (1) the entity stock held by the Trust as
treasury stock in equity, (2) all other assets and liabilities of the Trust on a line-by-line basis, and (3) aliability/asset for the net of (i) any gain or loss on delivery of the stock by the Trust to the employee
shareholding association, (ii) dividends received from the entity for the stock held by the Trust, and (iii) any
expenses relating to the Trust.
The Group applied this PITF effective July 1, 2014, retrospectively. As the method previously used by theGroup is identical to those of the above PITF, there is no effect from this accounting change.

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

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

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

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

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

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

s.	Derivatives and Hedging Activities — The Group uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange. Foreign exchange forward contracts are utilized by the Groupto reduce its exposures to fluctuations in foreign currency exchange rates. The Group does not enter into
derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as follows: (1) all derivatives are recognized
as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions arerecognized in the consolidated statement of income and comprehensive income and (2) for derivatives used
for hedging purposes, if such derivatives qualify for hedge accounting because of high correlation andeffectiveness between the hedging instruments and the hedged items, gains or losses on derivatives aredeferred until maturity of the hedged transactions.

18Foreign exchange forward contracts are measured at fair value but the unrealized gains/losses are deferred
until the underlying transactions are completed.

t.	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 June 30, 2015 and2014, were 76,077,020 and 75,693,610, respectively.
Diluted net income per share of common stock is not disclosed because the Group had no securities
outstanding which might dilute the per share information for the years ended June 30, 2015 and 2014.
Cash dividends per share presented in the accompanying consolidated statement of income andcomprehensive income are dividends applicable to the respective years including dividends to be paid after
the end of the fiscal year.

u.	Accounting Changes and Error Corrections — In December 2009, the ASBJ issued ASBJ Statement No.
24, “Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No. 24,“Guidance on Accounting Standard for Accounting Changes and Error Corrections.” Accounting treatments
under this standard and guidance are as follows:(1) Changes in Accounting Policies:
When a new accounting policy is applied following revision of an accounting standard, the new policy isapplied retrospectively unless the revised accounting standard includes specific transitional provisions, inwhich case the entity shall comply with the specific transitional provisions.
(2) Changes in Presentation:
When the presentation of financial statements is changed, prior-period financial statements are reclassified
in accordance with the new presentation.
(3) Changes in Accounting Estimates:
A change in an accounting estimate is accounted for in the period of the change if the change affects that
period only and is accounted for prospectively if the change affects both the period of the change and future
periods.
(4) Corrections of Prior-Period Errors:
When an error in prior-period financial statements is discovered, those statements are restated.

3. CHANGES IN PRESENTATION(1)	“Income taxes for prior periods” (¥(5) million ($(41) thousand) in the current fiscal year and ¥(0) million in
the previous fiscal year), which was presented separately in the consolidated statement of operations andcomprehensive income until the previous fiscal year, is included in “Income Taxes – Current” due to its
decreased materiality.
(2)	“Gain (loss) on sales of investment securities” (¥1 million ($8 thousand) in the current fiscal year and ¥(10)
million in the previous fiscal year), which was presented separately in the consolidated statement of cash
flows until the previous fiscal year, is included in “Other-net” due to its decreased materiality.

4. ADDITIONAL INFORMATION
Employee Stock Ownership Plan Trust (“ESOP”) — The Company maintains an the Employee Stock
Ownership Plan for a part of its employees’ welfare programs which includes transfers of the Company’s own
stock to the employees’ stockholders association through a trust.
(1) Overview of the transaction
At the meeting of the Board of Directors held on February 12, 2013, the Company resolved to introduce an
ESOP as a trust-type employee shareholding incentive plan to provide the Group’s employees with incentives
to improve medium- to long-term corporate value, enhance their welfare programs and encourage capital
participation as a shareholder, thereby increasing the morale of the employees and promoting continued
growth of the Group.

19Under the trust-type employee shareholding incentive plan, the Company establishes the ESOP at a trustbank. The ESOP preliminarily acquires the total number of the Company’s common shares expected to beacquired by the employees’ stockholders association over five years in advance from the Company by thirdparty allotment, using borrowings as funds.
Subsequently, the ESOP sells these Company shares to the employees’ stockholders association on acontinual basis. If the ESOP has accumulated gains on sale of the Company shares when the ESOP is
terminated, the ESOP’s proceeds equivalent to the accumulated gains are distributed to eligible beneficiaries.
The Company guarantees obligations for the ESOP’s borrowing of funds to acquire the Company’s common
stock. Therefore, if the ESOP has accumulated losses upon sale of the Company shares when the ESOP is
terminated, the ESOP’s outstanding debt equivalent to the accumulated losses is repaid by the Company inaccordance with a warranty clause included in the loan agreement, and there is no burden on the employees.
(2) The Company’s shares remaining in the ESOP
Shares of the Company remaining in the ESOP are recognized at the ESOP’s book value thereof (excluding
the amount of ancillary expenses) as treasury stock under net assets. The book value and number of suchtreasury stock were ¥313 million ($2,554 thousand) and 930 thousand shares for the year ended June 30,
2015, and ¥463 million and 1,375 thousand shares for the year ended June 30, 2014.
(3) Book value of borrowings posted through the application of the gross price method
Book value of borrowings posted through the application of the gross price method was ¥520 million ($4,244
thousand) and ¥390 million for the years ended June 30, 2015 and 2014, respectively.

5. INVESTMENT SECURITIESInvestment securities as of June 30, 2015 and 2014, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2015
Non-current:
Marketable equity securities ...............................
Government and corporate bonds ......................
Other .....................................................................
Total .................................................................

2015

2014

¥7,473
1,408¥8,881$60,984
11,490¥7,447800
40¥8,287$72,474

The costs and aggregate fair values of investment securities at June 30, 2015 and 2014, were as follows:
Millions of Yen

June 30, 2015
Securities classified as:
Available-for-sale:
Equity securities ..................................
Debt securities ......................................
Other .....................................................
Total ...................................................

20

Cost

Unrealized
Gains

Unrealized
LossesFair
Value¥4,683
1,068¥2,294195¥36¥6,941
1,263¥5,751¥2,489¥36¥8,204

Millions of Yen

June 30, 2014

Unrealized
Gains

Cost

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

¥5,171550
48¥5,769Unrealized
Losses¥2,033
110

¥44
5
9
¥58

¥2,143

Fair
Value¥7,160655
39¥7,854

Thousands of U.S. Dollars
Unrealized
Gains

Unrealized
LossesFair
Value

June 30, 2015

Cost

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

$38,216
8,716$18,721
1,591

$294

$56,643
10,307$46,932$20,312$294$66,950

The proceeds, realized gains and realized losses of the available-for-sale securities which were soldduring the years ended June 30, 2015 and 2014, were as follows:
Millions of Yen

June 30, 2015
Securities classified as:
Available-for-sale:
Equity securities ................................................
Debt securities ....................................................
Other ...................................................................
Total .................................................................

Proceeds

Realized Gains

Realized Losses¥1,140

¥18

¥20

48
¥1,188¥18¥20

Millions of Yen

June 30, 2014
Securities classified as:
Available-for-sale:
Equity securities ................................................
Debt securities ....................................................
Other ...................................................................
Total .................................................................

Proceeds

Realized Gains

Realized Losses

¥ 444

¥ 9

¥37

591
¥1,035

53
¥62

38
¥75

21

Thousands of U.S. Dollars

June 30, 2015

Proceeds

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

Realized Gains

Realized Losses$9,303

$147

$163

392
$9,695$147$163

The carrying values of debt securities and other by contractual maturities for securities classified as availablefor-sale at June 30, 2015, were as follows:
Millions of Yen

Thousands of
U.S. Dollars

¥500
¥500

Due after 10 years ..................................................
Total .................................................................

$4,080$4,0806. INVENTORIESInventories at June 30, 2015 and 2014, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

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

22

2015
¥0
11,399369¥11,768

2014
¥0
9,800
311
¥10,1112015$0
93,023
3,011$96,034

7. INVESTMENT PROPERTYOn November 2008, the ASBJ issued ASBJ Statement No. 20, “Accounting Standard for Investment Property and
Related Disclosures” and issued ASBJ Guidance No. 23, “Guidance on Accounting Standard for Investment
Property and Related Disclosures.”
The Group owns some rental properties such as office buildings and land in the Tokyo metropolitan area. The
net of rental income and operating expenses for those rental properties was ¥591 million ($4,823 thousand) and¥846 million for the years ended June 30, 2015 and 2014, respectively.
In addition, the carrying amounts, changes in such balances and market prices of such properties are as follows:
Millions of Yen
Carrying AmountJune 30, 2014

¥6,045Decrease

Fair Value
June 30, 2015¥(2,667)¥3,378June 30, 2015

¥6,900Millions of Yen
Carrying Amount
July 30, 2013

¥6,470Decrease¥(424)

Fair Value
June 30, 2014

¥6,045June 30, 2014¥12,769

Thousands of U.S. Dollars
Carrying AmountJune 30, 2014

$49,331

Decrease$(21,764)

Fair Value
June 30, 2015

$27,567

June 30, 2015

$56,308

Notes:
1. Carrying amount recognized in the consolidated balance sheets is net of accumulated depreciation andaccumulated impairment losses, if any.
2. Decrease during the fiscal year ended June 30, 2014, primarily represents transfers to assets for own use of¥395 million ($3,223 thousand). Decrease during the fiscal year ended June 30, 2015, primarily represents
sales of land and buildings for rental apartments and stores for rent of ¥2,566 million ($20,940 thousand).
Furthermore, gain on sales of land and buildings for rental apartments and stores for rent was ¥2,628 million($21,446 thousand).
3. Fair value of properties was measured by the Group in accordance with the Real-Estate Appraisal Standard.

8. REDUCTION ENTRY
Due to the acquisition expenses of the Group that have been subsidized by the national government, the amountof such subsidies, ¥147 million ($1,200 thousand), is offset against the acquisition cost of the machinery andequipment.

23

9.	I N V E S T M E N T S I N A N D A D VA N C E S T O U N C O N S O L I D AT E D
SUBSIDIARIES AND ASSOCIATED COMPANIESInvestments in and advances to unconsolidated subsidiaries and associated companies at June 30, 2015 and2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2015
¥ 981
915
¥1,896

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

2014
¥ 924
555
¥1,4792015$ 8,005
7,467$15,472

10. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at June 30, 2014 consisted of notes to banks and a loan from an unconsolidated
subsidiary. The annual interest rate applicable to the short-term borrowings was 0.739% at June 30, 2014.
Long-term debt at June 30, 2015 and 2014, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2015
Unsecured loans from banks due seriallyto 2023 with interest rates ranging from
0.680% to 0.870% .................................................
Obligation under finance leases ............................
Total .................................................................
Less current portion ..............................................
Long-term debt, less current portion ....................

2015

2014

¥1,690
97
1,787
(204)
¥1,583¥1,820
129
1,949
(181)
¥1,768$13,791792
14,583(1,665)$12,918

Annual maturities of long-term debt at June 30, 2015, for the next five years and thereafter were as follows:
Years Ending June 30

2016 .........................................................
2017 .........................................................
2018 .........................................................
2019 .........................................................
2020 .........................................................
2021 and thereafter .................................
Total ..................................................

Thousands of
U.S. Dollars

Millions of Yen
Long-Term Debt

Lease Obligations

Long-Term Debt

Lease Obligations

¥164
266

¥40
30
19
7
1

$1,338
2,171
2,171
3,557
1,110
3,444
$13,791

$327
245
155
57
8

266
436
136
422

¥1,690¥97$792

The Group had a commitment line contract of ¥10,000 million ($81,606 thousand) over three years withfinancial institutions in order to secure stable long-term funding. The contract included a restrictive financial
covenant. At June 30, 2015, the Group had not utilized the commitment line. In addition, the Group had
overdraft contracts of ¥24,500 million ($199,935 thousand) in total. At June 30, 2015, the Group had not utilized
the overdraft.

24

11. RETIREMENT AND PENSION PLANS
The Company and certain consolidated subsidiaries have severance payment plans for employees, directors andAudit & Supervisory Board members.
Under most circumstances, employees terminating their employment are entitled to retirement benefits
determined based on the rate of pay at the time of termination, years of service and certain other factors. Suchretirement benefits are made in the form of a lump-sum severance payment from the Company or from certain
consolidated subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments if thetermination is involuntary, by retirement at the mandatory retirement age, by death, or by voluntary retirement
at certain specific ages prior to the mandatory retirement age.
The liabilities for retirement benefits at June 30, 2015 and 2014, for directors and Audit & Supervisory Board
members are ¥59 million ($481 thousand) and ¥59 million, respectively. The retirement benefits for directors
and Audit & Supervisory Board members are paid subject to the approval of the shareholders.
(1) The changes in defined benefit obligation for the years ended June 30, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2015
Balance at beginning of year
(as previously reported) .......................................
Cumulative effect of accounting change...............
Balance at beginning of year (as restated)............
Current service cost ...............................................
Interest cost ............................................................
Actuarial (gains) losses ..........................................
Benefit paid ............................................................
Past service cost .....................................................
Balance at end of year ...........................................

2014¥14,277985
15,262
1,099
105
(71)
(1,166)¥15,229¥13,722
13,722
966
216
292
(987)
68
¥14,2772015$116,509
8,038
124,547
8,969
857
(580)
(9,515)$124,278(2) The changes in plan assets for the years ended June 30, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year .................................
Expected return on plan assets .............................
Actuarial losses .......................................................
Contributions from the employer .........................
Benefit paid ............................................................
Balance at end of year ...........................................

2015¥11,723
234
1,374
1,462
(961)
¥13,832

2014¥10,064
201
864
1,437
(843)
¥11,7232015$ 95,667
1,910
11,212
11,930(7,842)$112,87725

(3)	The changes in defined benefit obligation under the simplified method for the years ended June 30, 2015 and2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2015
¥692
68
(29)
¥731

2014
¥648
58
(14)
¥692

2015
$5,647555(237)$5,965(4)	Reconciliation between the liability recorded in the consolidated balance sheet and the balances of defined
benefit obligation and plan assets as of June 30, 2015 and 2014, was as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2015¥11,858(13,832)(1,974)
4,103

2014¥10,954(11,723)
(769)
4,017

2015
$ 96,768(112,877)(16,109)33,483

2,129

3,248

17,374

2,129

3,248

17,374¥ 2,129¥ 3,248$ 17,374(5) The components of net periodic benefit costs for the years ended June 30, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

26

2015
¥1,099
105
(234)
196
28
101
68
56
¥1,419

2014
¥ 966
216
(201)
361
22
135
58
27
¥1,5842015$ 8,969857(1,910)
1,599
229
824
555
457
$11,580

(6)	A mounts recognized in other comprehensive income (before income tax effect) in respect of defined
retirement benefit plans for the years ended June 30, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Prior service cost ....................................................
Actuarial losses .......................................................
Recognized transition obligation ..........................
Total ........................................................................

2015
¥ 28
1,642
101
¥1,7712014¥ (46)
933
135¥1,0222015$ 228
13,400824$14,452(7)	Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect ofdefined retirement benefit plans as of June 30, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2015
¥283
(1,639)

2014
¥312
2
101
¥415

¥(1,356)2015$2,309(13,375)$(11,066)(8) Plan assets
a. Components of plan assets
Plan assets as of June 30, 2015 and 2014, consisted of the following:

2015
Debt investments ..................................................
Equity investments ..............................................
Cash and cash equivalents ...................................
Others ...................................................................
Total ......................................................................

34%
46
17
3
100%

2014
35%
44
18
3
100%

b. Method of determining the expected rate of return on plan assets
The expected rate of return on plan assets is determined considering the long-term rates of return which are
expected currently and in the future from the various components of the plan assets.
(9) Assumptions used for the years ended June 30, 2015 and 2014, are set forth as follows:

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

2015
Principally 0.7%
2.0
90.0

2014
Principally 1.5%
2.0
80.0

27

(10) Multiemployer pension plan
The Company and certain consolidated subsidiaries participate in a multi-employer plan for which the Company
cannot reasonably calculate the amount of plan assets corresponding to the contributions made by theCompany. Therefore, it is accounted for using the same method as a defined contribution plan.
The contributions to such multi-employer plan were ¥562 million ($4,586 thousand) and ¥887 million for theyears ended June 30, 2015 and 2014, respectively.
a. The funded status of the multi-employer plan as of June 30, 2015 and 2014, was as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2015¥179,786

2014¥162,1162015$1,467,162

199,166¥(19,380)

188,180¥(26,064)

1,625,314$(158,152)* This item was presented as “Pension benefit obligation recorded by pension fund” as of June 30, 2014.
The net balance above is mainly caused by past service cost of ¥22,129 million ($180,586 thousand) for 2015and ¥23,463 million for 2014, and a deficiency brought forward of ¥2,600 million ($21,218 thousand) for 2015and ¥6,400 million for 2014. Past service cost under the plan is amortized on a straight-line basis over 15 years,
and the special contributions of ¥280 million ($2,285 thousand) for 2015 and ¥337 million for 2014, which areutilized for such amortization, were expensed in the consolidated statement of income of the Group.
b. The contribution ratio of the Group in the multi-employer plan for the years ended June 30, 2015 and 2014, was
as follows:2015
The contribution ratio of the Group in
the multi-employer plan ....................................

2014

12.8%

12.6%

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

12. DEPOSITS RECEIVED
Liabilities secured by collateral at June 30, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Deposits received from tenants .............................

2015
¥

2014
¥1,3332015$

Property, plant and equipment pledged as collateral at June 30, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Land, building and structures for rent .................

28

2015
¥

2014
¥1,2862015$

13. ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the years ended June 30, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2015
Balance at beginning of year .................................
Reconciliation associated withpassage of time .....................................................
Reduction associated with sale .............................
Reduction associated with meeting
asset retirement obligations ................................
Balance at end of year ...........................................

2014
¥54

¥55

4
(3)

2

¥55

(3)
¥54

2015
$441
32
(24)
$449

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

29

15. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, inthe aggregate, resulted in normal effective statutory tax rates of approximately 34.4% and 36.8% for the years
ended June 30, 2015 and 2014, respectively.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at June 30, 2015 and 2014, are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2015
Deferred tax assets:
Accrued bonuses ..................................................
Tax loss carryforwards .........................................
Liability for retirement benefits for directors
and Audit & Supervisory Board members .......
Liability for retirement benefits
for employees .....................................................
Allowance for anticipated project loss ................
Loss on impairment of long-lived assets ............
Head office transfer cost .....................................
Overdepreciation ..................................................
Other .....................................................................
Less valuation allowance .....................................
Total .................................................................
Deferred tax liabilities:
Reserve for deferred gains on saleof property ..........................................................
Unrealized gain on available-for-salesecurities .............................................................
Other .....................................................................
Total .................................................................
Net deferred tax assets .......................................

2015

2014

¥ 915
91

¥ 854
310

$ 7,467
743

20

21

163

703
37
67
87
230
645
(562)
2,233

1,170
71
72
43
692
(440)
2,793

5,737
302
547
710
1,877
5,263
(4,586)
18,223

839

170

6,847

790

716
74
960
¥1,833

6,447
604
13,898$ 4,325

74
1,703
¥ 530

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in theaccompanying consolidated statement of income and comprehensive income for the year ended June 30, 2015,
with the corresponding figures for 2014, is as follows:

Normal effective statutory tax rate .......................
Per capita levy of local tax .....................................
Expenses not deductible for tax purposes ............
Foreign income tax ...................................................
Tax credit .................................................................
Valuation allowance ...............................................
Effect of reduction of income tax rates ondeferred tax assets and deferred tax liabilities ...
Other – net ..............................................................
Actual effective tax rate .........................................
30

2015
34.4%
1.8
1.1
5.6
(2.7)
2.2

2014
36.8%
2.9
1.9
8.0
(0.5)
(20.3)

1.7
(0.9)
43.2%

2.4
2.3
33.5%

New tax reform laws enacted in 2015 in Japan changed the normal effective statutory tax rate for the fiscal year
beginning on or after July 1, 2015, to approximately 33.1% and for the fiscal year beginning on or after July 1,
2016, to approximately 32.3%. The effect of these changes was to decrease deferred tax assets by ¥184 million($1,502 thousand) and deferred tax liabilities by ¥137 million ($1,118 thousand) and to increase accumulated
other comprehensive income for unrealized gain on available-for-sale securities by ¥52 million ($424 thousand)and defined retirement benefit plans by ¥27 million ($220 thousand) in the consolidated balance sheet as of June30, 2015, and to increase income taxes—deferred in the consolidated statement of income and comprehensive
income for the year then ended by ¥126 million ($1,028 thousand).
At June 30, 2015, certain subsidiaries have tax loss carryforwards aggregating approximately ¥231 million($1,885 thousand) which are available to be offset against taxable income of these companies in future years.
These tax loss carryforwards, if not utilized, will expire as follows:
Millions of Yen

June 30, 2017 ..........................................................
June 30, 2019 ..........................................................
June 30, 2020 ..........................................................
June 30, 2023 ..........................................................
Total .................................................................

Thousands of
U.S. Dollars

¥92
35
65
39
¥231

$751
286
530
318
$1,885

16. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥595 million ($4,856 thousand) and ¥403 million forthe years ended June 30, 2015 and 2014, respectively.

17. LEASES(1) Lessee
The minimum rental commitments under noncancelable operating leases at June 30, 2015 and 2014, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2015
¥ 413
961
¥1,374

2014
¥2
3
¥5

2015
$ 3,370
7,842$11,212(2) Lessor
The minimum rental commitments under noncancelable operating leases at June 30, 2015 and 2014, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2015
¥
¥

2014
¥ 333
955
¥1,288

2015
$
$

31

18. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The Group uses financial instruments (mainly bank loans) based on its capital financing plan. Cash surpluses, ifany, are invested in low-risk financial assets. Derivatives are used, not for speculative purposes, but to manage
exposure to financial risks as described in (2) below. To clarify the accountability for transactions, the Group set
up an investment committee that examines basic principles of transactions and each financial instrument.
(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables such as trade notes and trade accounts are exposed to customer credit risk. Although receivables inforeign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates, the position,
net of a portion of payables in foreign currencies, is hedged by using forward foreign currency contracts.
Marketable and investment securities, mainly held-to-maturity securities and equity instruments of customers
and suppliers of the Group, are exposed to the risk of market price fluctuations.
Payment terms of payables, such as trade notes and trade accounts, are less than one year.
Derivatives mainly include forward foreign currency contracts, which are used to manage exposure to market
risks from changes in foreign currency exchange rates of receivables and payables and investment securities.
Please see Note 19 for more details about derivatives.
(3) Risk Management for Financial Instruments
Credit Risk Management
Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to
the contractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines,
which include monitoring of payment term and balances of major customers by each business administration
department to identify the default risk of customers at an early stage. With respect to held-to-maturity financial
investments, the Group manages exposure to credit risk by limiting investments to high credit rating bonds inaccordance with its internal guidelines.
The maximum credit risk exposure of financial assets is limited to their carrying amounts as of June 30, 2015.
Market risk management (foreign exchange risk and interest rate risk)
Foreign currency trade receivables and payables are exposed to market risk resulting from fluctuations in foreign
currency exchange rates. Such foreign exchange risk is hedged principally by forward foreign currency contracts.
Investment securities are managed by monitoring market values and the financial position of issuers on a regularbasis.
The basic principles of derivative transactions have been approved by the investment committee based on theinternal guidelines which prescribe the authority and the limits for each transaction by the corporate treasury
department. Reconciliation of the transaction and balances with customers is made, and the transaction data isreported to the chief financial officer on a monthly basis.
Liquidity risk management
Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on its maturity
dates. The Group manages its liquidity risk by concluding commitment line and overdraft contracts, along withadequate financial planning by the corporate treasury department.

32

(4) Concentration of Credit Risk
23.8% of total receivables are from two major customers of the Group as of June 30, 2015.
(5) Fair Values of Financial Instruments
Fair values of financial instruments are based on quoted prices in active markets. If a quoted price is notavailable, another rational valuation technique is used instead.
(a) Fair value of financial instruments
Millions of Yen

June 30, 2015

Carrying
AmountFair Value

Unrealized
Gain/Loss

Cash and cash equivalents
Receivables
Investment securities
Total¥11,673
17,1438,204¥37,020¥11,673
17,1438,204¥37,020¥¥PayablesTotal¥7,572¥7,572¥7,572¥7,572¥¥Millions of Yen

June 30, 2014

Carrying
AmountFair Value

Unrealized
Gain/Loss

Cash and cash equivalents
Receivables
Investment securities
Total¥8,465
14,417
7,854¥30,736¥8,465
14,417
7,854¥30,736¥¥PayablesTotal¥5,164¥5,164¥5,164¥ 5,164¥¥Thousands of U.S. Dollars

June 30, 2015

Carrying
AmountFair Value

Unrealized
Gain/Loss

Cash and cash equivalents
Receivables
Investment securities
Total$95,259
139,897
66,950$302,106$95,259
139,897
66,950$302,106$$PayablesTotal$61,793$61,793$61,793$ 61,793$33

Cash and cash equivalents and receivables
The carrying values of these financial instruments approximate fair value because of their short maturities.
Investment securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for theequity instruments and at the quoted price obtained from the financial institution for certain debt instruments.
Fair value information for investment securities by classification is included in Note 5.
PayablesThe carrying values of these financial instruments approximate fair value because of their short maturities.
Derivatives
Fair value information for derivatives is included in Note 19.
(b) Carrying amount of financial instruments whose fair values cannot be reliably determined
Thousands of
U.S. Dollars

Millions of Yen

June 30, 2015 and 2014
Investments in equity instruments that do nothave a quoted market price in an active market
Investments in debt instruments that do nothave a quoted market price in an active market

2015

2014

2015

¥1,512¥1,212$12,339

¥ 145

¥ 145

$1,183

The impairment loss on investments in equity instruments that do not have a quoted market price in an active
market for the year ended June 30, 2015, was ¥37 million ($302 thousand).
(6) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen

June 30, 2015
Cash and cash equivalents
Receivables
Investment securities
Available-for-sale securities with
contractual maturities
Total

Due in one
Year or Less

¥11,673
17,143¥28,476

Due after one Yearthrough five Years

Due after five Years
through ten Years

¥

¥

¥

¥

Due afterten Years

¥500
¥500

Millions of Yen

June 30, 2014
Cash and cash equivalents
Receivables
Investment securities
Available-for-sale securities with
contractual maturities
Total

34

Due in one
Year or Less

¥8,465
14,417¥22,256

Due after one Yearthrough five Years

Due after five Years
through ten Years

¥

¥

¥

¥

Due afterten Years

¥550
¥550

Thousands of U.S. Dollars

June 30, 2015
Cash and cash equivalents
Receivables
Investment securities
Available-for-sale securities with
contractual maturities
Total

Due in one
Year or Less

Due after one Yearthrough five Years

Due after five Years
through ten Years$95,259
139,897$$$232,381$$

Due afterten Years$4,080$4,080Please see Note 10 for annual maturities of long-term debt.

19. DERIVATIVESThe Group uses derivative financial instruments to manage its exposure to fluctuations in foreign exchange.
Foreign exchange forward contracts are utilized by the Group to reduce foreign currency exchange risk.
It is the Group’s policy to use derivatives only for the purpose of reducing risks, not for trading or speculative
purposes.
Because the counterparties to these derivatives are limited to highly reputable domestic banks, the Group does
not anticipate any losses arising from credit risk.
Derivative transactions entered into by the Group have been made in accordance with internal policies which
regulate authorization and credit limit amount.

Derivative Transactions to Which Hedge Accounting Is Not Applied
Millions of Yen

June 30, 2015
Foreign currency forward contracts:
Selling British Pounds .......................
Foreign currency forward contracts:
Buying U.S. Dollars ............................

Contract
AmountContract
Amount Due after
One Year

Fair
Value

Unrealized
Gain

¥691

¥

¥(78)

¥(78)

¥658

¥

¥ (4)

¥ (4)

Thousands of U.S. Dollars

June 30, 2015
Foreign currency forward contracts:
Selling British Pounds .......................
Foreign currency forward contracts:
Buying U.S. Dollars ............................

Contract
AmountContract
Amount Due after
One Year

Fair
Value

Unrealized
Gain$5,639$$(637)$(637)$5,370$$ (33)$ (33)

Millions of Yen

June 30, 2014
Foreign currency forward contracts:
Selling Euros ......................................

Contract
Amount

¥416

Fair
Value

¥136

Unrealized
Gain

¥136

35

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

20. CONTINGENT LIABILITIESAt June 30, 2015, the Group had the following contingent liabilities:
Thousands of
U.S. Dollars

Millions of Yen

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

¥69

$563

On June 19, 2014, Nippon Civic Consulting Engineers Co., Ltd (“NCC”), one of the consolidated subsidiaries, wassued by Osaka prefecture for damages resulting from a project related to designing a shield tunnel due toliability for tort. The amount of the damages claimed, which includes a 5% per annum delinquency charge, is¥750 million ($6,120 thousand). NCC has concluded that it did not engage in an illegal act in the course of the
project and intends to contest the claims brought forth by Osaka prefecture in court.
Due to the court petition by Osaka Prefecture, a decision was made to execute a provisional seizure concerning
said claims. Therefore, NCC deposited the money for release from a provisional seizure of ¥750 million ($6,120
thousand), which is included in other assets under investments and other assets of the consolidated balance
sheet, in July 2014 with the Legal Affairs Bureau.

3621. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended June 30, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2015

2015

2014

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

¥722
(353)
369
(74)
¥295

¥717
13
730
(253)
¥477

$5,892(2,881)
3,011(604)$2,407

Deferred gain (loss) on derivatives under hedge
accounting:
Gains arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal¥(87)
355
268
(92)
¥176

¥15
15
(5)
¥10

$(710)
2,897
2,187
(751)
$1,436

¥76

¥9

$620

76

9

620

¥76

¥9

$620

Defined retirement benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effectTotal¥1,446
325
1,771
(584)
¥1,187

¥504
518
1,022
(328)
¥694

$11,800
2,652
14,452(4,765)$9,687

Total other comprehensive income¥1,734¥1,190$14,150

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

37

22. SUBSEQUENT EVENTSAppropriations of Retained Earnings
On August 12, 2015, the following appropriation of retained earnings at June 30, 2015, was resolved by the
Board of Directors:
Millions of Yen

Year-end cash dividends, ¥10 ($0.08) per share ...................

Thousands of
U.S. Dollars¥772$6,300

The total amount of the dividends above includes ¥9 million ($73 thousand) in dividends on the Group’s shares
owned by the ESOP.

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

(1) Description of Reportable Segments
The Group’s reportable segments are those for which separate financial information is available and regular
evaluation by the Company’s management is being performed in order to decide how resources are allocatedamong the Group. Therefore, the Group’s reportable segments consist of the Domestic, International, PowerEngineering and Real Estate Leasing segments. Domestic consists of consulting services in public and private
sectors related mainly to infrastructure development in Japan. International consists of consulting services
related mainly to development projects funded by Official Development Assistance (“ODA”). Power Engineering
consists of manufacturing of products and appliances related to electric production and distribution systems
and engineering services related to construction and maintenance of public and private electric power facilities.
Real Estate Leasing consists of transactions within the Group’s real estate leasing operation.

(2)	Methods of Measurement for the Amount of Sales, Profit (Loss), Assets,
Liabilities and Other Items for Each Reportable Segment
The accounting policies of each reportable segment are consistent with those disclosed in Note 2, “Summary of
Significant Accounting Policies.”38

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

2015
Reportable Segment
Power
Real EstateEngineering
Leasing

Total

Others

Total

Reconciliations¥1,1412¥81,840
755¥(755)

Consolidated

Domestic

International

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

¥41,846
371¥20,174
23

Total sales ......................
Segment profit (loss) ............

42,217

20,19718,093945

81,452

1,143

82,595(755)

81,840¥2,728¥606¥2,801¥591¥6,726¥(1,244)¥5,482¥(5)¥5,477

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

¥18,153¥20,893¥9,314¥4,241¥52,601¥37,873¥90,474¥(6,364)¥84,110

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

¥170

¥79

¥223

¥100

¥572

¥836

¥1,408

Amortization of goodwill .....

233

47

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

27

44

4

3

78

231

309

¥(231)

78

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

46

129

53

6

234

46

280

(231)

49

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

109

102

415

12

638

1,166

1,804

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

¥17,858
235

¥821
124

¥80,699
753

280¥81,840¥1,408

280

280

1,804

Millions of Yen

2014
Reportable Segment
Reconciliations

Consolidated

OthersTotal¥78,060
788¥1,1338¥79,193
796

1,250

78,8481,141

79,989(796)

79,193¥1,256¥846¥5,122¥(575)¥4,547¥(4)¥4,543¥17,832¥7,839¥7,691¥52,707¥34,094¥86,801¥(10,656)¥76,145

¥169

¥58

¥233

¥145

¥605

¥392

¥997

309

8

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

38

19

4

9

70

198

268

¥(217)

51

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

40

100

42

14

196

66

262

(217)

45

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

141

81

179

2

403

4,126

4,529

Power
Real EstateEngineering
Leasing

Domestic

International¥41,817454¥20,947¥14,170210¥1,126
124

42,271

20,947

14,380

Segment profit (loss) ............

¥2,526¥494

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

¥19,345

Other:
Depreciation .........................
Amortization of goodwill .....

Sales
Sales to customers ...............
Intersegment sales ...............
Total sales ......................

Total

317

¥79,193¥(796)

¥997

317

317

4,529

39

Thousands of U.S. Dollars

2015
Reportable Segment

Sales
Sales to customers ...............
Intersegment sales ...............

Domestic

International

Power
Real EstateEngineering
Leasing$341,488
3,028$164,632
188$145,732
1,918$6,700
1,012

344,516

164,820

147,650

7,712

Others

Total

Reconciliations$658,552
6,146$9,31215$667,864
6,161$(6,161)

664,698

9,327

674,025(6,161)

Total

Consolidated$667,864
667,864

Total sales ......................
Segment profit (loss) ............

$22,262$4,945$22,858$4,823$54,888$(10,152) $44,736$(40) $44,696

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

$148,139$170,500$76,008$34,609$429,256$309,066$738,322$(51,934) $686,388

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

$1,387$645$1,820$816$4,668$6,822$11,490$11,490

Amortization of goodwill .....

1,901

384

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

220

359

33

25

637

1,885

2,522

$(1,885)

637Interest expense ...................

375

1,053

433

49

1,910

375

2,285

(1,885)400

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

890

832

3,387

98

5,207

9,515

14,722

2,285

2,285

2,285

14,722Note:
The differences between total amounts for reportable segments and amounts in the consolidated balance sheets
or consolidated statements of income and comprehensive income and the main details of these differences,which are related to difference adjustments at June 30, 2015 and 2014, were as follows:

Net sales
Thousands of
U.S. Dollars

Millions of Yen

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

2015¥81,452
1,143
(755)

2014
¥78,848
1,141
(796)

2015
$664,698
9,327(6,161)¥81,840¥79,193$667,864

ProfitThousands of
U.S. Dollars

Millions of Yen

Reportable segment total .......................................
Other loss ................................................................
Elimination of intersegment transactions ............
Non-operating items ..............................................
Operating income in the consolidated
statements of income and comprehensive
income ............................................................

40

2015
¥6,726(1,244)
(5)
(975)

2014
¥5,122
(575)
(4)
(287)

2015
$54,888(10,152)(40)(7,957)¥4,502¥4,256$36,739

Assets
Thousands of
U.S. Dollars

Millions of Yen

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

2015¥52,601
37,873(6,364)

2014¥52,707
34,094(10,656)2015$429,256
309,066(51,934)¥84,110¥76,145$686,388

Other items
Millions of Yen

2015
Reportable
Segment

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

OthersReconciliations

¥572
280
78
234

¥ 836

638

1,166

231
46

¥(231)
(231)

Total

¥1,408
280
78
49
1,804

Millions of Yen

2014
Reportable
Segment

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

OthersReconciliations

¥605
317
70
196

¥ 392

403

4,126

198
66

¥(217)
(217)

Total

¥ 997
317
51
45
4,529

Thousands of U.S. Dollars

2015
Reportable
Segment

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

Others$4,668
2,285
637
1,910

$6,822

5,207

9,515

1,885
375

Reconciliations$(1,885)(1,885)

Total$11,490
2,285
637
400
14,722Note:
The main reconciling items of interest income and expense are eliminations of corporate interest in accounting
for control.

41

The information about geographical areas at June 30, 2015, was as follows:

Sales
Millions of Yen

2015
Japan

Asia

¥60,203¥12,670

Middle East

¥1,447

Africa¥3,443

Latin
AmericaOther¥3,896

¥181

Total

¥81,840

Thousands of U.S. Dollars

2015
Japan

Asia

$491,293$103,395

Middle East

$11,808

Africa$28,097

Latin
AmericaOther$31,794$1,477

Total$667,864

Note:
Sales are classified by country or region based on the location of customers.
The information about major customers at June 30, 2015, was as follows:
Millions of Yen

2015
Name of Customers

Ministry of Land, Infrastructure, Transport and Tourism ..
Tokyo Electric Power Company, Incorporated .....................
Japan International Cooperation Agency .............................

Sales

Related Segment Name

¥14,845
7,675
6,756

Domestic
Power Engineering
International

Thousands of U.S. Dollars

2015
Name of Customers

Ministry of Land, Infrastructure, Transport and Tourism ..
Tokyo Electric Power Company, Incorporated .....................
Japan International Cooperation Agency .............................

42

Sales

$121,144
62,63355,133

Related Segment Name

Domestic
Power Engineering
International

43

Nonconsolidated Balance Sheet
Nippon Koei Co., Ltd.
June 30, 2015

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS

2015

2015

2014

CURRENT ASSETS:¥8,155¥ 5,539$66,550

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

18

76

147

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

11,967

10,79897,658

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

755

36

6,161

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

242

549

1,975

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

(8)

(6)

(65)

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

1,607

1,286

13,114Inventories (Note 5) .............................................

8,237

7,198

67,219Deferred tax assets (Note 11) ..............................

1,099

980

8,968

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

1,884

1,517

15,375

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

33,95627,973

277,102

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

15,21915,137

124,196

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

15,59918,951

127,297

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

2,344

2,174

19,128

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

2,162

2,245

17,643

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

251

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

122

131

996

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

35,697

38,638291,308

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

(14,815)(15,712)(120,899)

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

20,882

22,926

170,409

8,772

8,140

71,585

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

PROPERTY, PLANT AND
EQUIPMENT (Notes 7 and 9):

2,048

INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 4) ............................
Investments in and long-term loans to
subsidiaries and associated companies (Note 6) ......

6,963

6,501

56,822Other assets ..........................................................

2,970

3,051

24,237

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

(152)

(152)

(1,240)Total investments and other assets .................

18,553

17,540151,404

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

¥73,391¥68,439$598,915

See notes to nonconsolidated financial statements.

44

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short‑term borrowings (Note 8) .........................
Current portion of long-term debt (Note 8) .......
Payables:Trade notes .........................................................
Trade accounts ...................................................
Subsidiaries and associated companies ...........
Other ...................................................................
Accrued expenses .................................................
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 8) ......................................
Liability for retirement benefits (Note 2.h) ........
Allowance for environmental measures .............
Asset retirement obligations ................................
Deposits received (Note 9) ...................................
Deferred tax liabilities (Note 11) .........................
Total long-term liabilities ................................

2015

2015

2014

¥ 3,700
189¥ 6,480160$ 30,194
1,542

465
2,593
538
2,575
1,376
1,174
4,726
2,205
85
2,629
20,879

303
2,164
359
1,396
787
149
4,495
1,580
171
3,119
20,376

3,795
21,1604,390
21,014
11,2299,580
38,567
17,994694
21,454
170,385

1,556
188
25
29
469
1,554
3,821

1,738
216
25
50
1,598
900
4,527

12,698
1,534
204
237
3,827
12,682
31,182

7,393

7,393

60,331

6,093
115

6,093
115

49,723938

1,546
35,0501,546
30,497

12,616
286,029

1,629

1,342

13,294

COMMITMENTS AND CONTINGENT
LIABILITIES (Note 12)
EQUITY (Notes 10 and 13):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares on June 30, 2014 and 2015 ....
Capital surplus:
Additional paid-in capital ..................................
Other capital surplus .........................................
Retained earnings:
Legal reserve ......................................................
Retained earnings - unappropriated .................
Unrealized gain on
available-for-sale securities ...............................
Deferred loss onderivatives under hedge accounting .................
Treasury stock—at cost
10,370,910 shares on June 30, 2015
and 10,793,274 shares on June 30, 2014 ..........
Total equity .......................................................

(3,135)
48,691(3,274)43,536(25,583)
397,348

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

¥73,391¥68,439$598,915

(176)

45

N o n conso lida ted S t atemen t o f I n c o me
Nippon Koei Co., Ltd.
Year ended June 30, 2015

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2015

2015

2014

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

¥60,471
44,25016,221¥59,308
44,478
14,830$493,480
361,107132,373

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

13,0303,191

11,733
3,097

106,333
26,040

2,607
(68)
286

960
(77)
(175)

21,275(555)
2,334

OTHER INCOME (EXPENSES):Interest and dividend income ..............................
Interest expense ...................................................
Foreign currency exchange gain (loss) ...............
Gain on sales of property,
plant and equipment ..........................................
Head office transfer cost .....................................
Other-net ...............................................................
Other income-net .............................................

2,628
(549)
92
4,996

212
920

751
40,771

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

8,187

4,017

66,811

INCOME TAXES (Note 11):
Current .................................................................
Deferred ................................................................
Total income taxes ...........................................

1,797
676
2,473

703
1,115
1,818

14,664
5,517
20,181NET INCOME .......................................................

¥ 5,714¥ 2,199$ 46,630

21,446(4,480)U.S. Dollars(Note 1)Yen

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

46¥75.1110.00¥29.05
7.50

$

0.61
0.08

N o n conso lida ted S t atemen t o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd.
Year ended June 30, 2015

Thousands

Millions of Yen

Outstanding
Number of
Shares ofCommonStock

BALANCE, JULY 1, 2013 ................

75,571

Capital Surplus

Retained Earnings

CommonStock¥7,393

Additional

Other

Paid-in
CapitalCapitalSurplus¥6,093¥115

Legal
Reserve¥1,546

Unrealized
Gain onDeferred
Loss onAvailable-

Derivatives

Unappropriatedfor-sale
Securities

under Hedge
Accounting¥28,453¥ 884

Treasury

Total

Stock

Equity¥(186) ¥(3,365) ¥40,933

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

2,199

2,199

Cash dividends, ¥2.00 per share ......

(155)

(155)

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

(136)

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

428

(54)
145

Net change in the year ....................
BALANCE, JUNE 30, 2014
(JULY 1, 2014, as previously
reported) ........................................

75,863

7,393

6,093

115

1,546

Comulative effect ofaccounting change ........................
BALANCE, JULY 1, 2014(as restated) ...................................

30,497

458

10

1,342

(176)

7,393

6,093

115

1,546

145
468

(3,274)(582)
75,863(54)

43,536(582)

29,915

1,342

(176)

(3,274)42,954

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

5,714

5,714

Cash dividends, ¥7.50 per share ....

(579)

(579)

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

(22)

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

445

(11)
150
287

Net change in the year ....................
BALANCE, JUNE 30, 2015 .............

76,286¥7,393¥6,093¥115¥1,546¥35,050

176

(11)
150
463

¥1,629¥¥(3,135) ¥48,691

Unrealized
Gain onDeferred
Loss onAvailablefor-sale

Derivatives
under Hedge

Securities

Accounting$10,952$(1,436) $(26,718) $355,280

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

BALANCE, JUNE 30, 2014
(JULY 1, 2014, as previously
reported) ........................................

$60,331

Additional

Other

Paid-in
CapitalCapitalSurplus$49,723$938

Comulative effect ofaccounting change ........................
BALANCE, JULY 1, 2014(as restated) ...................................

Retained Earnings

Legal
Reserve

Unappropriated$12,616 $248,874

Treasury
Stock(4,750)$60,331$49,723$938$12,616 $244,124

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

46,630Cash dividends, $0.06 per share ....

(4,725)

Total
Equity(4,750)$10,952$(1,436) $(26,718) $350,530
46,630(4,725)Purchase of treasury stock .............

(89)

(89)

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

1,224

1,224

2,342

Net change in the year ....................
BALANCE, JUNE 30, 2015 .............

$60,331$49,723$938$12,616 $286,029$13,294

1,436
$

3,778
$(25,583) $397,348

See notes to nonconsolidated financial statements.

47

N o tes to No nco nso lid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd.
Year Ended June 30, 2015

1.	B ASIS OF PRESENTATION OF NONCONSOLIDATED FINANCIAL
STATEMENTS
The accompanying nonconsolidated financial statements have been prepared from the accounts maintained by
Nippon Koei Co., Ltd. (the “Company”) in accordance with the provisions set forth in the Japanese Financial
Instruments and Exchange Act and its related accounting regulations and in accordance with accounting
principles generally accepted in Japan, which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards.
As consolidated statements of cash flows and certain disclosures are presented in the consolidated financial
statements of the Company, nonconsolidated statements of cash flows and certain disclosures are not presented
herein in accordance with accounting principles generally accepted in Japan.
Effective for the year ended March 31, 2014, the Japanese Financial Instruments and Exchange Act and its
related accounting regulations were amended to allow an entity to not disclose certain designated footnote
information in its nonconsolidated financial statements if the entity prepares and discloses consolidated
financial statements. Accordingly, the Company has omitted disclosure of certain footnote information in theaccompanying nonconsolidated financial statements.
In preparing these nonconsolidated financial statements, certain reclassifications and rearrangements have been
made to the Company’s nonconsolidated financial statements issued domestically in order to present them in aform which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in
the 2014 nonconsolidated financial statements to conform to the classifications used in 2015.
The nonconsolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and have been made at the rate of ¥122.54 to $1,
the approximate rate of exchange at June 30, 2015. Such translations should not be construed as representations
that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

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

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

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

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

d. Investment Securities — Investment securities are classified and accounted for, depending on
management’s intent, as follows:(1) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent andability to hold to maturity, are reported at amortized cost; (2) available-for-sale securities, which are notclassified as the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of
applicable taxes, reported in a separate component of equity and (3) investments in subsidiaries andassociated companies are reported at cost.

Nonmarketable available-for-sale securities are stated at cost determined by the moving-average method. For
other-than-temporary declines in fair value, investment securities are reduced to net realizable value by acharge to income.

e. Property, Plant and Equipment — Property, plant and equipment are stated at cost. Depreciation ofproperty, plant and equipment is computed substantially by the declining-balance method at rates based on
the estimated useful lives of the assets, while the straight-line method is applied to buildings acquired after
April 1, 1998, and lease assets as well as other equipment for rent. The range of useful lives is principally48

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

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

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

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

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

Effective April 1, 2000, the Company adopted a new accounting standard for employees’ retirement benefits
and accounted for the liability for retirement benefits based on the projected benefit obligations and plan
assets at the balance sheet date. The projected benefit obligations are attributed to periods on a straight-line
basis. Actuarial gains and losses are amortized on a straight-line basis over 13 years within the averageremaining service period. Past service costs are amortized on a straight-line basis over 13 years within the
average remaining service period. Accounting treatments for unrecognized actuarial gains and losses andunrecognized past service costs in the nonconsolidated financial statements are different from those in the
consolidated financial statements.
In May 2012, the Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ Statement No. 26,“Accounting Standard for Retirement Benefits” and ASBJ Guidance No. 25, “Guidance on AccountingStandard for Retirement Benefits,” which replaced the accounting standard for retirement benefits that had
been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000, and the otherrelated practical guidance, and were followed by partial amendments from time to time through 2009.
(a)	Under the revised accounting standard, actuarial gains and losses and past service costs that are yet to berecognized in profit or loss are recognized within equity (accumulated other comprehensive income),
after adjusting for tax effects, and any resulting deficit or surplus is recognized as a liability (liability for
retirement benefits) or asset (asset for retirement benefits).
(b)	The revised accounting standard does not change how to recognize actuarial gains and losses and past
service costs in profit or loss. Those amounts are recognized in profit or loss over a certain period nolonger than the expected average remaining service period of the employees. However, actuarial gains andlosses and past service costs that arose in the current period and have not yet been recognized in profit orloss are included in other comprehensive income, and actuarial gains and losses and past service costs
that were recognized in other comprehensive income in prior periods and then recognized in profit orloss in the current period, are treated as reclassification adjustments.
(c)	The revised accounting standard also made certain amendments relating to the method of attributing
expected benefit to periods, the discount rate, and expected future salary increases.
(d)	Treatment in the nonconsolidated financial statements		In the nonconsolidated financial statements, the new requirements for (a) and (b) above would not beapplied, with the current requirements remaining applicable.
This accounting standard and the guidance for (a) and (b) above are effective for the end of annual periods
beginning on or after April 1, 2013, and for (c) above are effective for the beginning of annual periods
beginning on or after April 1, 2014, or for the beginning of annual periods beginning on or after April 1,
2015, subject to certain disclosure in March 2015, both with earlier application being permitted from the
beginning of annual periods beginning on or after April 1, 2013. However, no retrospective application of thisaccounting standard to nonconsolidated financial statements in prior periods is required.
The Company has applied the revised accounting standard and guidance for retirement benefits for (a) and(b) above effective June 30, 2013, and for (c) above, effective July 1, 2014.

49

With respect to (c) above, the Company changed the method of attributing the expected benefit to periods
from a straight-line basis to a benefit formula basis and the method of determining the discount rate fromusing the period which approximates the expected average remaining service period to using a single
weighted average discount rate reflecting the estimated timing and amount of benefit payment, and recorded
the effect of (c) above as of July 1, 2014, in retained earnings. As a result, asset for retirement benefits as ofJuly 1, 2014, decreased by ¥887 million ($7,238 thousand), and retained earnings as of July 1, 2014,
decreased by ¥582 million ($4,749 thousand). There was no significant effect on profit or loss and basic net
income per share for the year ended June 30, 2015.
Hitherto, retirement benefits for directors and Audit & Supervisory Board members were provided at theamount which would be required if all directors and Audit & Supervisory Board members retired at thebalance sheet date. However, the Company abolished benefit pension plans for directors and Audit &Supervisory Board members. The balance in the nonconsolidated balance sheet is the estimated amount for
directors and Audit & Supervisory Board members who have belonged to the Company since when the plans
were effective. Such amount is included in liability for retirement benefits in the nonconsolidated balance
sheets for the years ended June 30, 2015 and 2014, and was ¥27 million ($220 thousand) for both years.

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

j. Asset Retirement Obligations — In March 2008, the ASBJ issued ASBJ Statement No. 18, “AccountingStandard for Asset Retirement Obligations” and ASBJ Guidance No. 21, “Guidance on Accounting Standard
for Asset Retirement Obligations.” Under this accounting standard, an asset retirement obligation is defined
as a legal obligation imposed either by law or contract that results from the acquisition, construction,
development and 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 the asset retirement obligation can be made. Upon initial recognition of a liability for an asset
retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related
fixed asset by 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 adjustment to the carrying amount of the liability and thecapitalized amount of the related asset retirement cost.

k. Employee Stock Ownership Plan — In December 2013, the ASBJ issued ASBJ Practical Issues Task Force(PITF) No. 30, “Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees etc.
through Trusts.” This PITF is effective for the beginning of annual periods beginning on or after April 1,
2014, with earlier application permitted from the beginning of annual periods first ending after the date ofissuance of this PITF, and applied retrospectively.

In accordance with the PITF, upon the transfer of treasury stock to the employee stockownership trust (the“Trust”) by the entity, any difference between the book value and fair value of the treasury stock shall berecorded in capital surplus. At year-end, the entity shall record (1) the entity stock held by the Trust as
treasury stock in equity, (2) all other assets and liabilities of the Trust on a line-by-line basis, and (3) aliability/asset for the net of (i) any gain or loss on delivery of the stock by the Trust to the employee
shareholding association, (ii) dividends received from the entity for the stock held by the Trust, and (iii) any
expenses relating to the Trust.
The Company applied this PITF effective July 1, 2014, retrospectively. As the method previously used by theCompany is identical to those of the above PITF, there is no effect from this accounting change.
The note regarding the transfer of treasury stock to the employees’ stockholders association is omitted in thissection because it is provided as additional information in the footnotes to the consolidated financial
statements.

l. Research and Development Costs — Research and development costs are charged to income as incurred.
m. Leases — In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease
50

Transactions,” which revised the previous accounting standard for lease transactions. The revised accounting
standard for lease transactions was effective for fiscal years beginning on or after April 1, 2008.

Under the previous accounting standard, finance leases that deemed to transfer ownership of the leased
property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as
operating lease transactions if certain “as if capitalized” information was disclosed in the notes to the lessee’s
financial statements. The revised accounting standard requires that all finance lease transactions becapitalized to recognize lease assets and lease obligations in the balance sheet. In addition, the revised
accounting standard permits leases which existed at the transition date and do not transfer ownership of theleased property to the lessee to be measured at the amount of obligation under finance leases less interest
expense at the transition date and recorded as acquisition cost of lease assets.
The Company applied the revised accounting standard effective April 1, 2008. In addition, the Company
accounted for leases which existed at the transition date and do not transfer ownership of the leased property
to the lessee as acquisition cost of lease assets measured at the amount of obligation under finance leases at
the transition date.
All other leases are accounted for as operating leases.

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

o. Allowance for Environmental Measures — The Company has made a provision for the treatment of PCB
wastes based on the Act on Special Measures concerning Promotion of Proper Treatment of PCB Wastes.

p. Income Taxes — The provision for income taxes is computed based on the pretax income included in thenonconsolidated 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.

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

r. Revenue Recognition — If the outcome of a construction contract can be estimated reliably, the contract

revenue is recognized by the percentage-of-completion method, which is measured by reference to thepercentage of total cost incurred to date to estimated total cost.
All other construction projects, except the aforementioned, are recorded using the completed-contract
method (including the partially completed-contract method).

s. Derivatives and Hedging Activities — The Company uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange. Foreign exchange forward contracts are utilized by theCompany to reduce its exposures to fluctuations in foreign currency exchange rates. The Company does notenter into derivatives for trading or speculative purposes.

Derivative financial instruments are classified and accounted for as follows: (1) all derivatives are recognized
as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions arerecognized in the nonconsolidated statement of income and (2) for derivatives used for hedging purposes, if
such derivatives qualify for hedge accounting because of high correlation and effectiveness between thehedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of thehedged transactions.
Foreign exchange forward contracts are measured at fair value but the unrealized gains/losses are deferred
until the underlying transactions are completed.

t. 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 June 30, 2015 and2014, were 76,077,020 and 75,693,610, respectively.

Diluted net income per share of common stock is not disclosed because the Company has nothing that might
dilute the per share information for the years ended June 30, 2015 and 2014.

51

Cash dividends per share presented in the accompanying nonconsolidated statement of income are dividends
applicable to the respective years, including dividends to be paid after the end of the fiscal year.

u. Accounting Changes and Error Corrections — In December 2009, the ASBJ issued ASBJ Statement No.
24, “Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No. 24,“Guidance on Accounting Standard for Accounting Changes and Error Corrections.” Accounting treatments
under this standard and guidance are as follows:(1) Changes in Accounting Policies: When a new accounting policy is applied following revision of an
accounting standard, the new policy is applied retrospectively unless the revised accounting standard
includes specific transitional provisions, in which case the entity shall comply with the specific transitional
provisions.
(2) Changes in Presentation: When the presentation of financial statements is changed, prior-period financial
statements are reclassified in accordance with the new presentation.
(3) Changes in Accounting Estimates: A change in an accounting estimate is accounted for in the period of
the change if the change affects that period only and is accounted for prospectively if the change affects boththe period of the change and future periods.
(4) Corrections of Prior-Period Errors: When an error in prior-period financial statements is discovered, thosestatements are restated.

3. CHANGE IN PRESENTATION“Income taxes for prior periods” (¥(6) million ($(49) thousand) in the current fiscal year and ¥(1) million in theprevious fiscal year), which was presented separately in the nonconsolidated statement of operations until theprevious fiscal year, is included in “Income Taxes – Current” due to its decreased materiality.

4. INVESTMENT SECURITIESInvestment securities as of June 30, 2015 and 2014, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2015
Non-current:
Marketable equity securities ...............................
Government and corporate bonds ......................
Other .....................................................................
Total .................................................................

2014¥7,364
1,408¥8,772¥7,345756
39¥8,1402015$60,095
11,490$71,585

5. INVENTORIESInventories at June 30, 2015 and 2014, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

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

52

2015
¥7,868369¥8,2372014¥6,888310¥7,198

2015$64,208
3,010$67,218

6.	INVESTMENTS IN AND LONG-TERM LOANS TO SUBSIDIARIES AND
ASSOCIATED COMPANIESInvestments in and advances to subsidiaries and associated companies as of June 30, 2015 and 2014, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

Investments ............................................................
Long-term loans .....................................................
Total .................................................................

2015¥5,8691,094¥6,963

2014¥5,732769¥6,501

2015$47,8948,928$56,822

The value of the investment securities of subsidiaries and associated companies is measured at the originalacquisition costs, as their fair value cannot be reliably determined at June 30, 2015, since market value andestimated future cash flows are not available.

7. REDUCTION ENTRY
Due to the acquisition expenses of the Company that have been subsidized by the national government,
the amount of such subsidies, ¥147 million ($1,200 thousand), is offset against the acquisition cost of themachinery and equipment.

8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at June 30, 2015 and 2014, consisted of loans from subsidiaries. The annual interest
rates applicable to the short-term borrowings ranged from 0.684% to 0.720% and 0.720% to 0.739% at June30, 2015 and 2014, respectively.
Long-term debt at June 30, 2015 and 2014, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2015
Unsecured loans from banks due seriallyto 2023 with interest rates ranging from
0.680% to 0.870% .................................................
Obligation under finance leases ............................
Total .................................................................
Less current portion ..............................................
Long-term debt, less current portion ....................

¥1,690
55
1,745
(189)
¥1,5562014¥1,820
78
1,898
(160)
¥1,738

2015$13,791449
14,240(1,542)$12,69853

Annual maturities of long-term debt at June 30, 2015, for the five years and thereafter were as follows:
Period Ending June 30

Thousands of
U.S. Dollars

Millions of Yen
Long-Term Debt

Lease Obligations

Long-Term Debt

Lease Obligations

¥164
266
266
436
136
422
¥1,690¥25
20
82$1,338
2,171
2,171
3,557
1,110
3,444
$13,791

$205
163
65
16

2016 .........................................................
2017 .........................................................
2018 .........................................................
2019 .........................................................
2020 .........................................................
2021 and thereafter .................................
Total ..................................................

¥55

$449

The Company had a commitment-line contract of ¥10,000 million ($81,606 thousand) over three years withfinancial institutions in order to secure the stability of long-term funding. The contract included a restrictive
financial covenant. At June 30, 2015, the Company had not utilized the commitment-line. In addition, theCompany had overdraft contracts of ¥24,500 million ($199,935 thousand) in total. At June 30, 2015, theCompany had not utilized the overdraft.

9. DEPOSITS RECEIVED
Liabilities secured by collateral at June 30, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Deposits received from tenants .............................

2015
¥

2014
¥1,3332015$

Property, plant and equipment pledged as collateral at June 30, 2015 and 2014, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Land, building and structures for rent .................

54

2015
¥

2014
¥1,2862015$

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

55

11. INCOME TAXESThe Company is subject to Japanese national and local income taxes which, in the aggregate, resulted in normal
effective statutory tax rates of approximately 34.4% and 36.8% for the years ended June 30, 2015 and 2014,
respectively.
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at June30, 2015 and 2014, are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2015
Deferred tax assets:
Accrued bonuses ..................................................
Tax loss carryforwards .........................................
Liability for retirement benefits for directors
and Audit & Supervisory Board members .......
Liability for retirement benefits
for employees .....................................................
Allowance for anticipated project loss ................
Allowance for doubtful accounts ........................
Loss on impairment of long-lived assets ............
Head office transfer cost .....................................
Overdepreciation ..................................................
Deferred loss on derivatives
under hedge accounting ....................................
Investment in subsidiaries ...................................
Other .....................................................................
Less valuation allowance .....................................
Total .................................................................
Deferred tax liabilities:
Reserve for deferred gains onsale of property ..................................................
Unrealized gain on available-for-salesecurities .............................................................
Prepaid pension ...................................................
Other .....................................................................
Total .................................................................
Net deferred tax assets .......................................

56

2015

2014

¥701

¥516
208

$5,721

9

9

74

52
28
52
50
87
229

65
59
54
54
43

424
228
424
408
710
1,869

338
387
(635)
1,298

92
347
317
(500)
1,264

2,758
3,158
(5,182)
10,592

839

170

6,847

776

704

6,333

133
5
1,753
¥(455)

304
5
1,183
¥81

1,085
41
14,306$(3,714)

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in theaccompanying nonconsolidated statement of income for the year ended June 30, 2015, with the corresponding
figures for 2014, was as follows:

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

2015
34.4%
1.0
0.9
2.4
2.2
(10.1)

2014
36.8%
2.1
1.8
8.3
10.2
(15.3)

(0.1)
(0.5)
30.2%

1.8
(0.4)
45.3%

New tax reform laws enacted in 2015 in Japan changed the normal effective statutory tax rate for the fiscal year
beginning on or after July 1, 2015, to approximately 33.1% and for the fiscal year beginning on or after July 1,
2016, to approximately 32.3%. The effect of these changes was to decrease deferred tax assets by ¥44 million($359 thousand) and deferred tax liabilities by ¥104 million ($849 thousand) and to increase unrealized gain on
available-for-sale securities by ¥51 million ($416 thousand) in the nonconsolidated balance sheet as of June 30,
2015, and to decrease income taxes—deferred in the nonconsolidated statement of income for the year thenended by ¥8 million ($65 thousand).

12. CONTINGENT LIABILITIESAt June 30, 2015, the Company had the following contingent liabilities:
Millions of Yen

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

¥ 69
474
25

Thousands of
U.S. Dollars

$563
3,868
204

13. SUBSEQUENT EVENTSAppropriations of Retained Earnings
On August 12, 2015, the following appropriation of retained earnings at June 30, 2015, was resolved by the
Board of Directors:
Millions of Yen

Year-end cash dividends, ¥10 ($0.08) per share ..................................

¥772

Thousands of
U.S. Dollars$6,300

The total amount of the dividends above includes ¥9 million ($73 thousand) in dividends on the Company’s
shares owned by the employee stock ownership plan trust.

57

58

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

Stock Information
Shares authorized

189,580,000

Shares issued

86,656,510

Stockholders of minimum tradable stock unit

Director and President:
Ryuichi Arimoto*

5,018

As of June 30, 2015

Director and Executive Vice President:
Asao Yamakawa
Akira Mizukoshi
Noboru Takano*

Major Shareholders
Share owned

Percentage of
total owned

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

3,699,263

4.27

Director and Managing Executive Officer:
Hiroyuki Akiyoshi
Takashi Seki

Meiji Yasuda Life Insurance
Company.

3,529,522

4.07

The Master Trust Bank ofJapan, Ltd. (trust a/c)

3,204,000

3.70

Director and Executive Officer:
Naoki Honjo
Hiroshi Tanaka

The Koei Employees’
Stockholders Association

3,157,078

3.64

Japan Trustee Services Bank,
Ltd. (Trustee)

2,244,000

2.59

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

Japan Trustee Services Bank,
Ltd. (Trust Account No.4)

2,196,000

2.53

Mizuho Corporate Bank, Ltd.

1,910,634

2.20

Tsukishima Kikai Co.,Ltd

1,843,000

2.13

CBNY DFA INTL SMALL CAP
VALUE PORTFOLIO

1,433,000

1.65

CREDIT SUISSESECURITIES (EUROPE)
LIMITED PB OMNIBUS
CLIENT ACCOUNT

1,308,363

1.51

Audit & Supervisory Board Member:
Toshiaki Shimizu
Izumi Arai (Outside)
Mineo Enomoto (Outside)
Senior Managing Executive Officer:
Takashi Karasaki
Hiromichi Sekine
Managing Executive Officer:
Yoshikimi Inoue
Masanao Nishimura
Haruyoshi Takura

As of June 30, 2015
Besides the above, the Company owns 9,440,910 shares of treasury stock(10.89%)

Executive Officer:
Hiroyuki Kasahara
Masanobu Sakamoto
Takayasu Tsuyusaki
Shuichi Ueda
Yasushi Sugo
Akichika Ishibashi
Noriaki Yoshida
Haruhiko Kanai
Kevin Tynes
Akimitsu Arai
Hitoshi Nagasaki
Hiroaki Shinya
Hiroshi Matsuda
Hideyuki Sakunaka*Representative Directors

As of September 29, 201559

Major Offices and Facilities

Major Businesses

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

Consulting Administration

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

Field of activity• Water Resources• Energy• Urban & Regional Development• Transportation• Agriculture & Rural Development• Environment• Climate Change• Information & Communication Technology• Geosphere Engineering• Project and Program Management•	Public Private Partnership/Private FinanceInitiative
Services•	Preliminary investigation, Planning, Feasibility
studies, Assessment, Detailed design,
Construction supervision , Operation andmaintenanceEngineering Administration
Field of activity•	Electrical and civil works for electric power
facilities (generation, transmission, substation,
distribution schemes and wiring of buildings)•	Electric power utilities (turbines, generators,
transformers, control deices andcommunications equipment)• Electric equipment and devices• Safety equipment•	Skin electric thermo-system heaters (SECTheaters)• Factory automation equipment
Services•	Surveys, Studies, Planning, Design, Construction,
Installation, Sale60

Co n s ol i d ated S u bsid iari es
While mainly focused on engineering consulting, electrical power engineering, and power generation, the Nippon Koei
Group is also active in a wide range of related fields. The various businesses peripheral to the activities of Nippon Koei, themain company in the Group, are taken on by subsidiaries and associated companies located both at home and abroad.
These related companies, together with the principle corporation, make up the Nippon Koei Group.
The various firms maintain close cooperation based on relationships of interdependence that enhance the strength andcohesion of the Group as a whole.
As of June 2015, the total number of employees of the Group companies came to about 3,320.
The consolidated subsidiaries 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 supervision of undergroundstructures such as urban tunnels. The company specializes in shield tunneling technology and the development of newunderground construction technology.
El Koei Co., Ltd.
This company conducts employment and staff supply for Nippon Koei Group. The company provides various fields ofqualified human resources to support the activity of the Group Companies.
KRI International Corporation
This company has been established to enhance non-engineering consulting works of the Nippon Koei Group’s activities.
KRI provides the consulting services mainly in the fields of economic and industrial development including finance andmanagement, education and human resources development, and regional and community development.
Nippon Koei U.K. Co., Ltd.
This company provides engineering consulting services to enforce Nippon Koei’s overseas operation.
Nippon Koei Latin America-Caribbean Co., Ltd.
This company has been established to enhance Nippon Koei’s operation in Latin America and Caribbean and provides
consulting engineering and technical services for various development sectors in the region.
Nippon Koei LAC, Inc.
This company has been incorporated in Panama in order to promote further localization of Nippon Koei’s operation in
Latin America and Caribbean region.
Nippon Koei LAC do Brasil Ltda.
This company has been incorporated in Brasil in order to promote further localization of Nippon Koei’s operation in Latin
America.
Nippon Koei India Pvt. Ltd.
This company has been established to enhance Nippon Koei’s operation in India and provides consulting engineering andtechnical services for various development sectors focusing on projects in India and other developing countries.
Nippon Koei Vietnam International Co., Ltd.
This company has been established to enhance Nippon Koei’s operation in Vietnam and surrounding countries in the
Greater Mekong Subregion and provides consulting services for various development sectors in the region.
Philkoei International, Inc.
This company has been incorporated in the Philippines by Nippon Koei Co., Ltd. and Filipino investors and providing
consulting engineering and technical services for various development sectors focusing on projects in the Philippines andother overseas countries.
PT. Indokoei International
This company has been incorporated in Indonesia by Nippon Koei Co., Ltd. and Indonesian partner company and provides
the services of engineering and management consultancy to clients in Indonesia as well as overseas.
Koei System Inc.
This company develops software programs used in computer control applications, dispatches personnel, and provides
support and software development for office automation systems on a consignment basis.
Nikki Corporation
This company conducts real estate management, leasing, and insurance services for Nippon Koei and other Group
companies. It also sells, imports, and exports electrical power equipment and rents and leases various goods.

61

4, Kojimachi 5-chome, Chiyoda-ku, Tokyo 102-8539, Japan
http://www.n-koei.co.jp E-mail: info@n-koei.co.jp

Financial Report
Year ended June 30, 2015

Printed in Japan