Brief report on the Financial Statements for the period ending March, 2006 (consolidated)
May 18, 2006

Name of listed company:
DAI-DAN Co., Ltd.
Listed Stock Exchanges: Tokyo and Osaka
Code No.:1980
Location of Head Office: Osaka Pref.
(URL http://www.daidan.co.jp/)
Representative of Company: Toshikazu ANDO, President
Inquiries to be addressed to: Goh TAJIMA, Director & General Manager of General Administration Division
Tel. (06) 6441 - 8231

Date of Directors’ meeting on closing of accounts: May 18, 2006
Adoption of American Accounting Standards:
None

1. Consolidated performance for the period ending March, 2006 (From April 1, 2005 to March 31, 2006)(1) Consolidated management performance (Note: Amounts are indicated with figures less than 1 million yen discarded.)

Sales amount
Period ending
March 2006
Period ending
March 2005

Operating profit％

Million yen％

Million yen％

151,859-2.8-1,192−-713−

156,175

0.9

1,391

-13.6

1,412

4.4

Current net earningper share after
making potential
share adjustments

Shareholders'
capitalCurrent net profit
rate

Total capital
Ordinary profit
rate

Sales amount
Ordinary profit
rate

Current net
earnings per
share

Current net profit

Period ending
March 2006
Period ending
March 2005

Ordinary profit

Million yen

Million yen％

Yen SenYen Sen

％

％

％

-810

−

-18.06

−

-1.7

-0.5

-0.5

766

33.4

17.18

−

1.7

1.1

0.9

Note: 1) Investment profit or loss on equity method
End of March 2006 - million yen
End of March 2005 15 million yen
2) Interim average number of shares (consolidated) End of March 2006 44,972,761 shares
End of March 2005 44,566,892 shares
3) Changes in accounting procedures: None
4) Percentage indication of sales amount, operating profit, ordinary profit, and current net profit show increase or decrease
compared with previous period.

(2) Consolidated financial condition

Total assets

Shareholders' capitalMillion yen
Period ending
March 2006
Period ending
March 2005

Shareholders' capital rate Shareholders' capital per share

Million yen%

Yen Sen130,362

47,40236.4

1,054.55

136,540

46,11533.8

1,024.98

Note: Issued number of shares at the end of period (consolidated)

End of March 2006 44,950,183 shares
End of March 2005 44,990,535 shares(3) Consolidated cash flow condition

Cash flow on sales
activities

Cash flow on investment Cash flow on financial
activities
activities

Million yen
Period ending
March 2006
Period ending
March 2005

Million yen

Period end balance of cash
and equivalent items

Million yen

Million yen

1,072

1,824

-2,53923,139-8,744

4,921

406

22,712(4) Consolidation scope and items relating to application of equity method
Number of consolidated subsidiaries: 11
Number of non-consolidated subsidiaries with equity method applied: None
Number of affiliated company with equity method applied: None

(5) Consolidation scope and situation on changes in equity method application
Consolidated (new): None

(Excluded): None

Equity method (new): None

(Excluded): None

2. Estimated of consolidated performance for the period ending March 2007 (From April 1, 2006 to March 31, 2007)
Sales amount
Ordinary profit
Current net profit
Interim
Total period(Reference)

Million yen
62,000145,000

Million yen-1,0801,450Million yen
-740
780

① Estimated current net profit per share (for total period) 17.35 yen② Estimated amount of work order received (interim)
67,000 million yen③ Estimated amount of work order received (full year)
145,000 million yen* Since the performance is estimated based on the information available as of theannouncing date, actual results can be different from estimated ones due to various factors.
For the items of the above performance estimate, see the attached material for consolidation on page 5.

1

1. Situation of the Corporate Group
Our corporate group consists of the Company, 11 consolidated subsidiaries, and 1 non-consolidated subsidiary,
supervising, and execution of electrical, air conditioning, and plumbing/sanitation work. The position of our grouprelating to business and the systematic chart of our business are as follows:(1) POSITION OF OUR GROUP RELATING TO BUSINESS
Facility construction works
Electrical, air-conditioning, and plumbing/sanitation work
Part of the work of orders received by us is relegated to DAI-DAN Service Kanto Co., Ltd., DAI-DAN
Service Kansai Co., Ltd., DAIDEN Koji Co., Ltd., DAIDEN Koji Corp., Okayama DAIDEN Setsubi Co.,
Ltd., Kyushu DAIDEN Setsubi Co., Ltd., Kumamoto DAIDEN Setsubi Co., Ltd., and DAI-DAN
PHILIPPINES, INC. We sell facilities and equipment to MERINO O.D.D. SDN BHD. and offer technicalassistance to THAI O.D.D. CO., LTD.
Gas piping work
Kyo Gas Co., Ltd. executes the gas piping work for orders placed by Osaka Gas Co., Ltd. and receives only
a few orders from our company.

(2) Systematic chart of business

Customers(Designing, supervising, and executing facility construction works)

Electrical,
air-conditioning,plumbing/sanitation work
Consolidated
subsidiary
MERINO O.D.D.
SDN.BHD.

Sales offacilities andequipment

DAI-DAN Co., Ltd.

Electrical,
air-conditioning,plumbing/sanitation
work

Technical
assistanceConstruction facility work

Consolidated subsidiary
THAI O.D.D. CO., Ltd.
Works execution
Maintenance/management

Works execution and maintenance/management of
air conditioning

Works execution

Non-consolidated subsidiaryPFI Kyoto School Amenity Co., Ltd.

Electrical facility work
Consolidated subsidiaries
DAIDEN Koji Co., Ltd.
DAIDEN Koji Corp.

Works execution
Electrical, air-conditioning, plumbing/sanitation work

Consolidated subsidiaries

Gas piping work

DAI-DAN Service Kanto Co., Ltd.
DAI-DAN Service Kansai Co., Ltd.
Okayama DAIDEN Setsubi Co., Ltd.
Kyushu DAIDEN Setsubi Co., Ltd.
Kumamoto DAIDEN Setsubi Co., Ltd.
DAI-DAN PHILIPPINES, INC.

consolidated subsidiary
Kyo Gas Co., Ltd.

2

2. Management Policies(1) BASIC POLICY ON MANAGEMENT
Our company, as a general facility work company, enforces a basic management policy of “challenging tocreate a new value and contributing to the achievement of more favorable global environment and theprogress of society at all times” and provides customers with technologies and services, which are ahead of
their needs, thus working toward upgrading the corporate value. Furthermore, the company has an on-target
grasp of changes in the industrial structure and conducts the speedy and practical management with an eye
toward becoming a vigorous company.

(2) BASIC POLICY ON DISTRIBUTION OF PROFITS
Our basic policy is to consider the return of our profits by dividend to our shareholders as top-priority
management measures and endeavor to build a solid financial constitution, thus paying dividends stably andcontinuously to the shareholders.

(3) CONCEPT AND POLICY ON REDUCTIONS OF INVESTMENT UNITS
Regarding the reductions of investment units, we carried out studies on this issue on the basis of shareholders’benefits. As a result, we think that we are in no situation to implement the reductions of investment units atthe current moment in terms of the level of stock price, number of shareholders, liquidity, cost-effectiveness,and others. However, we will continue studies on this issue.

(4) MEDIUM- AND LONG-TERM MANAGEMENT STRATEGYAND ISSUES TO ADDRESSIn accordance with the medium-term management plan , which was completed in March 2006, we took avariety of measures below in order to secure earnings contributing to continuous development of theCompany through the effective use of management resources.
We stepped up proposal-oriented marketing operations through making use of technologies owned by theCompany to find new customers and further strengthen our ties with existing customers, thus challenging the
expansion of business. Above all, we focused on marketing operations to secure orders for renewal works
through capitalizing on our total facility engineering technologies for electrical, air conditioning, andplumbing/sanitation works and others. Furthermore, we are stepping up efforts to expand business in plant
projects and others with recent increases in private capital investments.
As to challenges to environmental issues, we not only worked toward providing technologies developed withconsideration given to reduction in environmental burdens such as resource saving and energy saving,recycling resources, cutting in construction wastes, and others, but also upgraded our ESCO business that
capitalized on our strengths as a total facility work contractor to push ahead with energy saving proposals.
Furthermore, as part of the enhancing scheme of our construction management system, we introduced the
Occupational Health and Safety Management System for Construction Industry in April 2005. Through theintroduction of this System, we made the safety awareness more thoroughly known to everyone involved in
the construction and, at the same time, achieved ensuring quality and cost cutting, thus working towardenhancing customer satisfaction as well as strengthening competitiveness.
It is regretted, however, that we could not accomplish our goal due to changes in environments surrounding
the Company at a greater-than-expected level, such as scaled-back public work projects and intensified
price-cutting competition.
Based on these circumstances, we develop a new medium-term management plan for the 80th Term ending inMarch 2009 to rebuild the “DAI-DAN with Proud Technologies” through not only carrying on the measuresthat have ever been implemented but also invigorating and upskilling human resources that are the greatest
management resource, thus aiming at securing earnings that enable continued development of the Company
and also establishing a structural basis for future growth.
In addition, we work for making the compliance known to all directors and staff of our Group and fulfilling
our social responsibilities.
Furthermore, we set the shareholder’s share operating income margin as our target management benchmark.

3

3. Management Record and Financial Standing(1) Management record
During the current term, economy in our country remained on an upturn regardless of the presence of causes forconcerns such as steep rises of crude oil and raw material prices, as corporate earnings turned up through restingon the rise in stock markets and steady export.
In the construction industry, however, even though private capital investment was strong, public investment
remained on the substantial decline. Furthermore, due to intensified price-cutting competition, the construction
business continued to be in a severe situation.
Under these circumstances, our corporate group made maximum concerted efforts to secure orders and profits.
As a result, the consolidated record for the current term was shown below.
The consolidated amount of work orders received of our corporate group declined 1.0% (dropped by 1,524
million yen) compared with the previous consolidated accounting year to 149,957 million yen. The amount ofwork completed declined 2.8% (dropped by 4,315 million yen) compared with the previous consolidated
accounting year to 151,859 million yen.
As for the profits, the operating profit declined 2,583 million yen compared with the previous consolidated
accounting year to minus 1,192 million yen and the ordinary profit declined 2,125 million yen compared withthe previous consolidated accounting year to minus 713 million yen. As a result, the net profit for the current
term declined 1,577 million yen compared with the previous consolidated accounting year to minus 810 million
yen.

(2) Financial standing
Status of cash flow
Cash and cash equivalent for the end of current consolidated accounting year (hereinafter referred to as “thefund”) increased 426 million yen compared with the end of previous consolidated accounting year to 23,139
million yen.
(Cash flow from sales activities)
Cash flow relating to sales activities for the current consolidated accounting year increased 1,072 million yen
thanks to improvement in the collection of accounts receivable, which increased 9,817 million yen on balance,compared with the decline of 8,744 million yen in fund for the previous consolidated accounting year.
(Cash flow from investing activities)
Cash flow relating to investing activities for the current consolidated accounting year increased 1,824 million
yen in fund thanks to revenues through the sell-off of fixed assets and others, which declined 3,096 million yen
on balance, compared with the increase of 4,921 million yen in fund for the previous consolidated accounting
year.
(Cash flow from financing activities)
Cash flow relating to financing activities for the current consolidated accounting year declined 2,539 million yen
in fund due to the paid amount of dividends and aggressive repayment of loans, which declined 2,946 million
yen on balance, compared with the increase of 406 million yen in fund for the previous consolidated accounting
year.
Trend of cash flow index group
Period ending

Period ending

Period ending

Period ending

Period ending

March 2002

March 2003

March 2004

March 2005

March 2006

Shareholders’ equity ratio

30.1%

31.8%

35.2%

33.8%

36.4%

Shareholders’ equity ratio at market value

13.5%

14.2%

21.6%

26.3%

30.1%

Number of debt redemption years-

2.0 years-−

9.9 years

Interest coverage ratio-

27.1 times-−

5.5 times

Shareholder’s equity ratio:
Shareholder’s equity/Total assets
Shareholders’ equity ratio at market value :Aggregate market value of shares/Total assets
Number of debt redemption years:
Interest-bearing debt/Operating cash flow
Interest coverage ratio:
Operating cash flow/Interest paid
∗ Indexes are all calculated by financial values on a consolidated basis.
∗ For the operating cash flow, the cash flow from sales activities (interest-paid and after reduction of corporatetax, etc.) recorded in the Statement of consolidated cash flow is used. The interest-bearing debt is subject toall debts, which bear interest, among those recorded in the Consolidated balance sheet. Furthermore, for theinterest paid, the amount of interest paid, which is recorded in the Statement of consolidated cash flow, is
used.

4

(3) Outlook for next term
In the construction industry, it is predicted that the overall investment in construction will show steady transition
with increasing corporate earnings, but the economy will continue to be in a severe situation due to intensified
price-cutting competition.
Regarding the outlook for the next term of our corporate group, we expect the consolidated amount of workorders received of 145,000 million yen, completed work of 145,000 million yen, ordinary profits of 1,450
million yen, and current net profit of 780 million yen.

(4) Business risk, etc.

1)

2)

3)

4)

5)

6)

7)

The following section describes risks that may have significant influence on the judgment of investors regarding
the business of our corporate group. In this connection, our corporate group will recognize the potential forthese risks to occur and then make effort to prevent the risks from occurring and deal with them if occurred.
Seasonal variation of performance
Our corporate group completes works with many concentrated in the second half of the accounting year, while
the selling expenses and general administrative expenses are almost evenly spent in the first and second halvesof the accounting year. Consequently, the group performance for the first half has a tendency to result in
operating loss.
Uncollectible accounts receivable
Depending on the rapid worsening of earnings or financial situation of customers, part of receivables, etc.
owned by our corporate group may become unrecoverable.
Steep rises of prices of materials and supplies
If it is hard to pass steeply risen prices of equipment and materials on to contract amounts, these prices can haveinfluence on our corporate group performance.
Occurrence of loss-making work
If any loss-making work occurs due to an unexpected increase of construction cost or else arising in the courseof construction, it can have influence on our corporate group performance.
Decline in values of owned assets due to their declined market prices
For immovable properties or securities owned by the Company, if they should be treated as shrinkage loss due
to decline in their market prices, that can have influence on our corporate group performance.
Disasters and accidents
Our corporate group executes construction on the basis of safety-first and exerts its utmost effort in quality
control. However, there may be cases where an unexpected disaster or accident in the course of construction
occurs resulting in compensation for damage, defect liability, or else and further has influence on theperformance.
Fluctuations in country risk and exchange rate
Our corporate group has been expanding its overseas business centering on Southeast Asian markets.
The group performance can be influenced by the occurrence of terrorism or political instability, unexpected
legislative modifications/amendments, worsening of market conditions, or exchange rate fluctuations.

54. Consolidated Financial Statements, etc.
(1) CONSOLIDATED BALANCE SHEET(in millions of yen)
By period

End of the current consolidated
accounting year
(As of March 31, 2006)

Component
ratio

AmountAccounts(Assets)

End of the previous consolidated
accounting year
(As of March 31, 2005)

Difference

Component
ratio

Amount%%Current assets
Cash on hand and in banks
Note receivables, completed work
accounts receivables
Securities

23,166

22,739426

54,87358,646-3,772

200

100

100

Incomplete work expenditures

22,36025,319-2959

Deferred tax reserves

1,619

915

704

Others

5,032

7,294

-2,262

Allowance for bad debts

-188

-251

63

Total current assets

107,064

82.1

114,764

84.1-7,700

Fixed assets
Tangible fixed assets
Buildings and structures
Machinery and equipment, andtransportation equipment
Tools and facilities

2,352

2,876

-524

26

42

-16

182

146

35

Land

1,140

1,920

-780

3,700

4,986

-1,286

2

3

-1

652

856

-203

655

860

-205

16,371

11,407

4,963

191

129

61

-

1,572

-1,572Others

2,948

3,664

-715

Allowance for bad debts

-568

-845

276

Total investments and other assets

18,942

15,9283,013

Total fixed assets

23,29717.9

21,776

15.9

1,521

Total assets

130,362100.0

136,540

100.0-6,178

Total tangible fixed assets
Intangible fixed assets
Consolidated adjustment account
OthersTotal intangible fixed assets
Investments and other assets
Investment securities
Long-term loans receivables
Deferred tax reserves6(in millions of yen)
By period
Accounts

End of the current consolidated
accounting year
(As of March 31, 2006)

Component
ratio

Amount(Liabilities)

End of the previous consolidated
accounting year
(As of March 31, 2005)

Amount%Difference

Component
ratio%

Current liabilities
Notes payable, work accounts payable

49,35356,525-7,172

Short-term loans payable

7,721

8,496

-775

145

915

-769

Incomplete work accounts received
Completed work compensation
reserves
Work loss reserves

12,322

12,316

5

92

76

15

1,573

592

981

Others

5,748

4,427

1,321

Corporate taxes, etc. payable

Total current liabilities

76,95659.0

83,35061.0-6,393Fixed liabilities
Long-term loans payable

2,253

3,264

-1,010Reserves for retirement benefits
Reserves for directors’ retirement
benefits
Deferred tax liability
OthersTotal fixed liabilities

2,360

3,216

-855

532

470

61

687
10
5,843

4.5

3
6,954

5.1

687
6
-1,110Total liabilities

82,80063.5

90,305

66.1-7,504

158

0.1

119

0.1

39

Capital stock

4,479

3.4

4,479

3.3

−

Capital surplus

4,782

3.7

4,782

3.5

0

Retained earnings
Evaluation difference of othersecurities
Currency translation adjustment
account

33,581
5,093

25.8
3.9

35,112
2,264

25.7
1.7

-1,531
2,829

-23

-0.0

-44

-0.0

20

-511

-0.4

-478

-0.4

-32

47,402

36.4

46,115

33.8

1,286

130,362100.0

136,540

100.0-6,178(Minority interest equity)
Minority interest equity(Shareholders’ equity)

Treasury stock
Total capital
Total liabilities, minority interest
equity and shareholders’ equity7(2) CONSOLIDATED PROFIT AND LOSS STATEMENT(in millions of yen)
By period
Accounts

Completed work amountCompleted work costCompleted work gross profit
Selling expenses and generaladministrative expenses
Operating profit or Operating loss (−)
Non-operating revenue
Interests received
Dividends received
Insurance claim received
Gain on foreign exchange
Consolidated adjustment account depreciation

Investment profit by equity method
OthersNon-operating expenses
Interest payable
Payment guarantee charge
OthersOrdinary profit or Ordinary loss (−)
Special profits
Profit on sales of fixed assets
Profit on sales of investments in securities
Profit gained by returning allowance forbad debts
Special losses
Loss on sales of fixed assets
Loss on retirement of fixed assets
Loss on sales of investments in securities
Evaluation loss on investments in securities

Evaluation loss on golf club membershiprights., etc.
Shrinkage loss
Special loss on overseas work
OthersCurrent net profit before tax adjustments,
etc. or Current net loss before tax
adjustments, etc. (−)
Corporate tax, residence tax and business
tax
Adjustment amounts such as for corporate taxes

Profit of minority interests
Current net profit or Current net loss (−)

Current consolidated accounting
year(From April 1, 2005
to March 31, 2006)

Previous consolidated accounting
year(From April 1, 2004
to March 31,2005)

Difference

AmountPercentage

AmountPercentage

151,859
143,639
8,220

%
100.0
94.6
5.4

156,175
144,316
11,859

%
100.0
92.4
7.6

-4,315-676-3,639

9,412

6.2

10,468

6.7-1,056-1,192
(707)
16
109
254
298
28
(229)
195
23
9
-713
(944)
647
261

-0.8
0.5

1,391
(285)
15
120
73
2
15
58
(264)
229
25
10
1,412
(995)
324
671

0.9
0.2

-2,583
(421)
1
-10
254
224
-2
-15
-29
(-35)
-33
-2
-0
-2,125
(-50)
323
-409

0.2

-0.5
0.6

35

0.2

0.9
0.6

-

(1,231)
247
43
0
139
-

0.8

135
658
8

(401)
134
118
2
8
109

35
0.2

(830)
113
-74
-2
130
-109
135
658
-19

28

-1,000

-0.7

2,006

1.3

-3,006

176

0.1

981

0.6

-804

-410
43
-810

-0.3
0.0
-0.5

227
30
766

0.2
0.0
0.5

-638
12
-1,5778

(3) STATEMENT OF CONSOLIDATED SURPLUS(in millions of yen)
By period
Accounts

Current consolidated accounting year

Previous consolidated accounting year

(From April 1,2005
to March 31,2006)(From April 1, 2004
to March 31,2005)

AmountAmount(Capital surplus)
Capital surplus balance at the
beginning of the period
Increase in capital surplus balance
Gain on disposal of treasury stock
Capital surplus balance at the end of
the term(Retained earnings)
Retained earnings balance at the
beginning of the period
Retained earnings increased amountNet profit for the current term

4,782

0

-

0

4,716

66

66

4,782

4,782

35,11235,056

-

766

766

Retained earnings decreased amount
Shareholders’ dividends
Directors’ bonuses
Current net loss
Retained earnings balance at the endof the term

719

709

1

1

810

1,531
33,5819-710
35,112

(4) Statement of consolidated cash flow
Accounts
I.

By period(in millions of yen)
Current consolidated accounting year
(From April 1, 2005
to March 31, 2006)
AmountCash flow on sales activities
Current net profit before tax adjustments, etc. or
Current net loss before tax adjustments, etc. (−)
Depreciation expenses
Consolidated adjustment account depreciation amount
Increased or decreased amount of allowance for bad debts
Increased or decreased amount of reserves for retirement
benefits and reserves for directors’ retirement benefits
Earned interest and dividends received
Interest paid
Investment profit or loss by equity method
Shrinkage loss
Evaluation loss on investments in securities
Profit or loss on sales of investments in securities
Profit or loss on sales of fixed assets
Loss on retirement of fixed assets
Increased or decreased amount of sales credits
Increased or decreased amount of incomplete work
expenditures
Increased or decreased amount of procurement credits
Increased or decreased amount of incomplete work
received amount
OthersSub-total
Received amount of interests and dividends
Paid interest amountPaid amount of corporate tax, etc.

Cash flow on sales activities
II. Cash flow on investment activities
Expenditures by depositing of time deposits
Revenue by pay back of time deposits
Expenditures by acquiring of securities
Revenue by sales of securities
Expenditures by acquiring of beneficial interest in trust
Revenue by redemption of beneficial interest in trust
Expenditures by acquiring of tangible fixed assets
Revenue by sales of tangible fixed assets
Expenditures by acquiring of investment securities
Revenue by sales of investment securities
Expenditures by loans
Revenue by recovery of loans
Expenditures by acquiring of other fixed assets
Revenue by sales of other fixed assets
Cash flow on investment activities
III. Cash flow on financial activities
Revenue by short-term loans
Expenditures by return of short-term loans
Revenue by long-term loans
Expenditures by return of long-term loans
Expenditures by acquiring of treasury stock
Revenue by sales of treasury stock
Paid amount of dividends
Paid dividend to minority interests
Cash flow on financial activities
IV. Translation difference relating to cash and cash
equivalents
V. Increased or decreased amount of cash and cash
equivalents
VI. Balance of cash and cash equivalents at the beginningof period
VII.Balance of cash and cash equivalents at the end of
period10Previous consolidated accounting year
(From April 1, 2004
to March 31, 2005)
Amount-1,000

2,006

377
1
-148

392
-2
-778

-793

-170

-126
195
135
139
-261
-400
43
3,822

-135
229
-15
8
-668
-189
118
-9,9982,957-4,018-7,172

7,194

5-1,673

4,290
2,064
126
-196
-921
1,072

-434
-8,136
136
-222
-522
-8,744

-0
-200
99
-413
1,796
-746
701
-115
56
-257
902
1,824

-0
10
-99
99
-534
3,196
-27
544
-246
1,677
-40
67
-187
461
4,921

20,313-20,626
1,962-3,434
-34
1
-719
-2
-2,53929,070-28,280
4,100-4,286
-37
550
-709
-0
406

69

11

426

-3,40522,712

26,11823,13922,712

BASIC IMPORTANT ITEMS FOR PRODUCING CONSOLIDATEDFINANCIAL STATEMENTS
1. ITEMS RELATING TO SCOPE OF CONSOLIDATION(1) Eleven (11) subsidiaries are included in the consolidated financial statements.
Names of major consolidated subsidiary companies
Since the names are described in “Section 1. Situation of the Corporate Group”, the description isomitted.
(2) Number of non-consolidated subsidiaries: One (1)The name of the non-consolidated subsidiary is described below.
PFI Kyoto School Amenity Co., Ltd.
(3) Reason to exclude the non-consolidated subsidiary from the scope of consolidated accounting
The total assets, completed work amount, current net profit/loss (worth the amount of the equity
method), earned surplus (worth the amount of the equity method), and others all have no significant
influence on the consolidated financial statements so that the company aforementioned is excluded
from the scope of consolidation.

2. ITEMS RELATING TO APPLICATION OF THE EQUITY METHOD(1) We have no non-consolidated subs idiaries or affiliates to which the equity method was applied.
(2) The following section shows non-consolidated subsidiaries or affiliates to which the equity method is
not applied.
PFI Kyoto School Amenity Co., Ltd.
(3) Reason not to apply the equity method
Since the company aforementioned has minor influence on the current net profit/loss, earned surplus,
and others and further is of no importance in terms of the overall performance, it is excluded from thescope of application of the equity method.

3. ITEMS RELATING TO THE ACCOUNTING YEAR AND OTHERS OFCONSOLIDATED SUBSIDIARIESOut of the consolidated subsidiaries, MERINO O.D.D. SDN. BHD, THAI O.D.D. CO., Ltd. and DAI-DAN
PHILIPPINES, INC. close their account for the term on December 31.
In order to produce consolidated financial statements for the term, we use financial statements as ofDecember 31. As for important transactions arising between December 31 and the consolidated accountclosing date for the term, we make adjustments required for the consolidated account.

4. ITEMS RELATING TO ACCOUNTING PROCEDURE BASIS(1) Valuation basis and method applied to important assets
1) Securities
Held-to-maturity bonds:
Depreciable cost method (Straight-line method)
Other securities
With market valueMarket price method based on the market price and others asof the consolidated account closing date(Valuation differences are treated according to full capital
direct accounting method, and sale cost is calculated according
to the moving average method.)With no market value
Cost method based on the moving average method
2) Derivative:
Market price method
3) Inventories
Incomplete work expenditures
Cost method based on the specific identification method
Materials and supplies
Lower-of-cost market method based on the moving averagemethod(2) Depreciation method applied to important depreciable assets
1) Tangible fixed assets
Our company and domestic consolidated subsidiary companies
Buildings (excluding accessory equipment)
Straight-line method
OthersDeclining balance method
Overseas consolidated subsidiary companies Straight-line method
Furthermore, the following section shows the depreciation periods of major assets.
Buildings and structures
15 to 50 years112) Intangible fixed assets
Straight-line method
Furthermore, as to software of the company’s own use, the straight-line method based on in-company
applicable period (i.e., five years) is applied.
(3) Recording basis applied to important allowances and reserves
1) Allowance for bad debts
In order to provide against bad debts due to failure in recovery of completed work accounts due,loans receivable, and others, we review the recoverability of general credits based on the pastactual percentage of credit losses and particular credits such as those having bad debts risk basedon individual cases, thus recording anticipated unrecoverable amount.
2) Allowance for completed work compensation
This is provided for the purpose of defect compensation for completed works. We record anamount for works to be compensated based on past results plus possibility of future compensation.
3) Work loss reserves
In order to provide against future loss caused by work orders received in hand, we record an
estimated amount of loss for works, which are highly likely to cause loss and the amount of which
can be reasonably estimated.
4) Reserves for retirement benefits
In order to prepare for the payment of retirement benefits of employees, we record an amount inaccordance with the estimates of debt obligations for retirement benefits and pension assets at theend of current consolidated accounting year.
As for differences on the mathematical calculation, we shall treat them using an amountproportioned by the specific identification method with a specified number of years (i.e., 10 years)
within the employees’ average remaining length of service at the time of the occurrence of thedifferences while in each consolidated accounting year, from the account settled for next
consolidated accounting year of the occurrence, by contrast, we batch process past service
obligation within the year of occurrence.
Furthermore, as of April 1, 2006, the Company shifted to the defined contribution pension system
based on the Defined-contribution Pension Law for part of the future service portion of thetermination allowance plan and applied the “Accounting concerning shifts between retirement
benefit schemes” (No. 1 of Corporate accounting standards).
5) Reserves for directors’ retirement benefits
In order to prepare for the payment of directors’ retirement benefits, we reserve and record an amountrequired to pay at the end of the period in accordance with the bylaws of the company.
(4) Important leases treating method
Financing leases other than those by which ownership rights of the leased property can be transferred to thelessee are treated in accordance with a method relating to ordinary leases.
(5) Important hedge accounting method
1) Hedge accounting method:

Preferential treatment has been adopted.

2) Hedging means and targets• Hedging means:• Hedging items:

Interest swap transactions
Interest expenses for long-term loans3) Hedging policy
In order to hedge risks associated with interest rate fluctuations, we have been using derivatives toprepare for interest expenses for long-term loans.
Furthermore, we do not hold derivatives for speculation purpose.
4) Evaluation method of hedging availability
Since the preferential treatment for interest swap transactions is adopted, the reference relating to
the evaluation of hedging availability is omitted(6) Other important items for the consolidated financial statements
1) Completed works amount recording basis
Work completion basis is adopted. For part of works, however, we adopt deferred payment
standards under Corporation Tax Law, thus counting the amount equivalent to profits
corresponding to uncollected amount in the completed work costs to reschedule the profits and toreturn it at the time of collection. Furthermore, our overseas consolidated-subsidiaries record thecompleted works amount on the work progressing basis.
Unearned profit returned amount
35 million yen
Unearned profit deducted amount48 million yen
Total-12 million yen
2) Accounting of consumption tax and others
They are treated in accordance with a method exclusive of tax.

12

5. ITEMS RELATING TO EVALUATION OF ASSETS AND LIABILITIES OFCONSOLIDATED SUBSIDIARIESThe evaluation method of assets and liabilities of consolidated subsidiaries is in accordance with total
market price evaluation method.

6. ITEMS RELATING TO DEPRECIATION OF CONSOLIDATED ADJUSTMENTACCOUNTThe consolidated adjustment account is depreciated by straight line method over 5 years.

7. ITEMS RELATING TO TREATMENT OF SURPLUS APPROPRIATIONACCOUNTS AND OTHERS
The consolidated surplus calculation is made basing on surplus appropriation decided during theconsolidated accounting year.

8. SCOPE OF FUNDS IN THE CONSOLIDATED CASH FLOW STATEMENT
Funds (cash and cash equivalents) listed in the consolidated cash flow statement include currency on hand,bank money, time deposits of which maturities come within 3 months after the acquisition date, andshort-term investments with no fixed maturity or redemption date, ease of cash-out, and taking a slight riskof price fluctuations.
(Changes in accounting)Accounting standards relating to the shrinkage loss of fixed assets
Since the current consolidated accounting year, we have applied the “Accounting standards relating to theshrinkage loss of fixed assets” (“Statement of position regarding the establishment accounting standards
relating to the shrinkage loss of fixed assets” (published on August 9, 2002 by the Business Accounting
Council)) and the “Application Guideline for accounting standards relating to the shrinkage loss of fixed
assets” (Business Accounting Standards Application Guideline No. 6 published on October 31, 2003 by theBusiness Accounting Standards Committee).
These changes resulted in an increase of 135 million yen in the current net loss before tax adjustments, etc.
Furthermore, the accumulated shrinkage loss was directly deducted from the amount of each asset under theamended regulations concerning consolidated financial statements.
(Changes in indication method)
Relating to consolidated profit and loss
Since the “insurance claim received” of non-operating revenues increased monetary significance for thecurrent consolidated accounting year, it is separately recorded.
Furthermore, the “insurance claim received (1 million yen)” for the previous consolidated accounting year
was recorded in the “Others” section.

13

NOTES[Relating to consolidated balance sheet](in millions of yen)
Current consolidated
accounting year

1. Accumulated amount of depreciation of tangible fixed
assets
2. Amount of transfer of endorsed notes receivable

Previous consolidated
accounting year

3,561

4,813

28

18

（Common stocks）

45,963,803 shares

45,963,803 shares

4. Number of treasury stocks
Number of treasury stocks owned by the consolidated
subsidiaries（Common stocks）

1,013,620 shares

973,268 shares

17–

Time deposit27

27

Investment securities

603

1,007

-

245

339

361

140

379

15,462
(536)

676
(135)

3. Issued number of stocks

5. Shares of non-consolidated subsidiaries, etc.
Investments securities
6. Pledged assets and secured liabilities(1) Assets given as security(2) Liabilities for the above
Work payable
Long-term loans expecting to return within 1
year.
Long-term loans
Liabilities of investing companies(Amount equivalent to investment ratio of ourcompany)

14

[Relating to consolidated profit and loss statement]
1. The following section describes important expense items and amount out of the selling and generaladministrative expenses.
(in millions of yen)
Current consolidated
accounting year

Previous consolidated
accounting year

2,956

3,464

233

434

79

79

1,136

1,206

Amount transferred from allowance for bad debts

881
-

916
35

Depreciation expenses

373

377

465

419

Selling costs and general administrative costs

465

419

3. Amounts transferred from allowance for bad debts,
included in evaluation loss on golf club membershiprights, etc.

-

67

Salaries and allowances to employees
Reserves for retirement benefits
Amount transferred from reserves for directors’
retirement benefits
Amount of computers
Communication and transportation expenses

2. Total expenditures for research and development(Breakdown)

4. Shrinkage loss
For the current consolidated accounting year, our corporate group recorded shrinkage loss for the asset
group listed in the table below.

Application
Idle assets

Category

Location

Shrinkage loss

Land and building

Tokorozawa City, Saitama
Pref.

48 million yen

Land and building

Ichikawa City, Chiba Pref.

21

Land and building

Kashiwa City, Chiba Pref.

14

Land and building, etc.

Others50

Total

135 million yen

Our corporate group conducts asset grouping based on whether or not it generates approximately independent
revenues. Business assets are grouped in units of business establishment by region in terms of management
accounting being used to keep track of the balance of these assets. Leased assets and idle assets are grouped byindividual object.
Due to falling land prices or else, we reduced the book values to the recoverable values and recorded thedecrease concerned as shrinkage loss (of 135 million yen) in the special losses. The shrinkage loss includes 69
million yen for land, 65 million yen for building, and 0 million yen for others.
Furthermore, we measured the recoverable values of the asset groups using the net amount of assets sold andevaluated them according to the amount evaluated by real-estate appraisal.
5. Special loss on overseas work
A large-scaled overseas work caused a substantial extension of construction work due to external factors, and it
turned out that we would have no chance to recover additional costs resulting from the said extension, which led
to loss amounting to 658 million yen. Consequently, we recorded it as special loss.

15

[Relating to consolidatedcash flow statement]
The following table shows the relationship between the balance of cash and cash equivalents at the end of full-year
period and the amount of accounts listed in the full-year consolidated balance sheet(in millions of yen)
Current consolidated
accounting year

Cash and deposit accounts
Securities accountTotal
Time deposits with time period more than 3 months
Securities other than add-on type bond investment
trustsCash and cash equivalent objects

Previous consolidated
accounting year

23,166

22,739200

100

23,366

22,840

-27

-27

-200

-100

23,13922,712[Relating to leases]
Since our company has gone through the electronic disclosing procedure according to the provision under 30-6 of
Article 27 of the Securities Exchange Law, the description of this subject is omitted.

16

5. Securities(Current consolidated accounting year)
1. Held-to-maturity bonds with market value (March 31, 2006)(in millions of yen)(Those whose market value isabove the amount in the
consolidated balance sheet)
Corporate bonds
Total

Amount in the consolidatedbalance sheet

Market value

Balance

200

200

0

200

200

0

2. Other securities with market value (March 31, 2006)(in millions of yen)
Acquisition cost

Amount in the
consolidatedbalance sheet

Balance

4,074

12,7498,674

Corporate bonds

2

4

1

Sub-total(Those whose amount inconsolidated balance sheet is
not above the acquisition
cost)
Stocks

4,077

12,753

8,676

834

792

-42

4,912

13,545

8,633(Those whose amount inconsolidated balance sheet isabove the acquisition cost)
Stocks
Bonds

Total

3. Other securities sold for the current consolidated accounting year
(From April 1, 2005 to March31, 2006)(in millions of yen)
Total of sale profit

Sale value
339

261

Total of sale loss
0

4. Contents of securities with no valuation at the market value and amount in the consolidated balance
sheet(March 31, 2006)(1) Held-to-maturity bonds
Unlisted foreign bonds
0 million yen
Discount bank debentures
99 million yen(2) Other securities
Unlisted stocks (excluding over counter stocks)
2,707 million yen(Note) For the other securities with no valuation at the market price, 139 million yen was treatedas shrinkage loss.

17

5. Estimated amount of redemption for other securities with maturity and held-to-maturity(March 31, 2006)(in millions of yen)Over 1 year and Over 5 years andOver 10 years
Within 1 year
within 10 years
within 5 years(Held-to-maturity bonds)
Corporate bonds

200

100

-

-

Corporate bonds

2

-

-

-

Total

203

100

-

-

(Other Securities)
Bonds(Previous consolidated accounting year)
1.Held-to-maturity bonds with market value (March 31, 2005)(in millions of yen)Amount in the consolidatedbalance sheet(Those whose market
value is above the amountin the consolidatedbalance sheet)
Corporate bonds
Total

Market value

200
200

Balance

201
201

1
1

2. Other securities with market value (March 31, 2005)(in millions of yen)
Acquisition cost(Those whose amount inconsolidated balance sheet
is above the acquisition
cost)
Stocks
Bonds
Corporate bonds
Sub-total(Those whose amount inconsolidated balance sheet
is not above theacquisition cost)
StocksTotal

Amount in the
consolidated balance
sheet

Balance

4,063

8,060

3,996

2
4,066

3
8,064

1
3,997

634
4,701

474
8,538

-160
3,837

3. Other securities sold for the current consolidated accounting year

Sale value
1,231(From April 1, 2004 to March 31, 2005)(in millions of yen)
Total of sale profit
Total of sale loss
671
1

18

4. Contents of securities with no valuation at the market value and amount in the consolidated balance
sheet(March 31, 2005)(1) Held-to-maturity bonds
Unlisted foreign bonds
0 million yen
Discount bank debentures
99 million yen(2) Other securities
Unlisted stocks (excluding over counter stocks)
2,668 million yen(Note) For the other securities with no valuation at the market price, 8 million yen was treated as
shrinkage loss.
5. Estimated amount of redemption for other securities with maturity and held-to-maturity(March 31, 2005)(in millions of yen)Over 1 year and Over 5 years andOver 10 years
Within 1 year
within 10 years
within 5 years(Held-to-maturity bonds)
Corporate bonds
100
200
−
−
(Other Securities)
Bonds
Corporate bonds
−
2
−
−
Total
100
202
−
−

19

6. Relating to Derivatives
Since our company has gone through the electronic disclosing procedure according to the provision under 30-6 of
Article 27 of the Securities Exchange Law, the description of this subject is omitted.

7. Relating to Retirement Benefits
1. Outline of adopted retirement benefits system
Our company has set up such systems as corporate pension fund system and termination allowance plan, which
are defined benefit systems.
The domestic consolidated subsidiaries have adopted the retirement benefit scheme including but not limited tothe approved retirement annuity system in addition to the termination allowance plan.
2. Items relating to retirement benefits obligation(in millions of yen)
End of the current consolidated
accounting year

End of the previous
consolidated accounting year

a. Retirement benefits liabilities-14,588-15,787

b. Pension fund

17,98913,485c. Unreserved retirement benefits liabilities (a + b)

3,400

-2,302d. Unrecognized differences on mathematical calculation-3,018

1,683

382

-618

f. Prepaid pension costs

2,743

2,597

g. Reverses for retirement benefits (e - f) (Note)-2,360-3,216e. Net amount in consolidated balance sheet (c +d)

Notes:

As for the domestic consolidated subsidiaries, in order to calculate retirement benefits liabilities
relating to the termination allowance, the simple method was adopted.

20

3. Items relating to retirement benefits(in millions of yen)
Current consolidated
accounting year

a. Service costs(Note 1)

Previous consolidated
accounting year

486

494

b. Interest costs

309

308

c. Expected operational profitsd. Processed amount of differences on actuarial
calculatione. Processed amount of past service liabilities (Note 2)

-260

-241

258

217

-755

–

f. Retirement benefits (a+b+c+d+e)

38

Total

38

779
779

Notes:(1) Retirement benefits of consolidated subsidiaries adopting an easy method are recorded in the “ a.
Service costs” section.
(2) Since we made a revision to the overall retirement benefit system in the current consolidated
accounting year, the past service liabilities (deduction in amount of liabilities) were incurred.
However, we batch processed them in the current consolidated accounting year.
4. Items relating to the basis of calculation of retirement benefits liabilities
Current consolidated
accounting year

Previous consolidated
accounting year

Period fixed amountbasis

Same as on the left

b. Discount rate

2.0%

Same as on the leftc. Expected operational profit rate

3.0%

Same as on the left

d. The number of years when amount of past service
liabilities is processed

Processed in a lumpin the occurrence
year.

Same as on the left

e. The number of years when differences on mathematical
calculation are processed.

10 years (Costs to beprocessed from next
consolidated
accounting year ofeach occurrence year,in accordance withthe straight-line
method based on thegiven number ofyears within average
residual service yearsof employees at thetime of theoccurrence.)

a. Method of period allocation for estimated amount of
retirement benefits

21

Same as on the left

8. Those Relating to Tax Effect Accounting
1. Contents of main causes for occurrence of deferred tax assets and deferred tax liabilities
End of the current consolidated accounting year
Deferred tax assets
Surplus of transferred reserves for
3,179
retirement benefits
Work loss reserves645
Reserve for bonuses
Repudiated reserves for directors’
retirement allowance
Repudiated evaluation loss on golfclub membership rights, etc.
Amount of loss carried forward
OthersDeferred tax asset sub-total
Amount of valuation reserves
Deferred tax asset total
Deferred tax liability
Profits from retirement benefits intrustEntertainment expenses included inincomplete work expenditures
Evaluation difference of securities
Reserve from fixed asset reduction
OthersDeferred tax liability total
Deferred tax asset net amount

257
218
64

(in millions of yen)
End of the previous consolidated accounting year
Deferred tax assets
Surplus of transferred reserves for
3,447
retirement benefits
Repudiated evaluation loss on real
1,131
estateWork loss reserves242
Reserve for bonuses
377-3,539Repudiated reserves for directors’
retirement allowance
Repudiated evaluation loss on golfclub membership rights, etc.
OthersDeferred tax asset sub-total
Amount of valuation reserves
Deferred tax asset total
Deferred tax liability
Profits from retirement benefits intrustEntertainment expenses included inincomplete work expenditures
Evaluation difference of securities-61-51-5,347932

Reserve from fixed asset reduction
OthersDeferred tax liability total
Deferred tax asset net amount

1,829
282
6,477
-198
6,279
-1,656
-37

192
55
613
6,060
-147
5,913
-1,656-65-1,573-63-65-3,4252,488

2. Contents of main items which became causes for critical difference where there is a critical difference
between the statutory effective tax rate and the burden rate of corporate taxes, etc. after application of tax
effect accounting.
Current consolidated accounting year
Since the current net loss is recorded, the description
relating to the breakdown is omitted.

Previous consolidated accounting year
Statutory effective tax rate
(Adjustment)
Items not included in deductible
expenses permanently, such asentertainment and social expenses, etc.
Items not included in gross revenue
permanently, such as dividends received,
etc.
Taxation per capita basis for inhabitanttax
Amount of adjustment of taxable income
not applicable to tax effect
OthersBurden rate of corporate taxes, etc. after
application of tax effect accounting

22

41.0%
18.5

-1.8

4.1
-1.8
1.0
61.0

9. Segment Information
1. Segment information by type of business
The current consolidated accounting year (April 1, 2005 to March 31, 2006) andthe previous consolidated accounting year (April 1, 2004 to March 31, 2005)
Since our corporate group is engaged in facility construction works, there are no business types other than this.
Accordingly, segment information by business type is not described.
2. Segment information by location
The current consolidated accounting year (April 1, 2005 to March 31, 2006) andthe previous consolidated accounting year (April 1, 2004 to March 31, 2005)
Since the total sales amount of all segments of "Japan" exceeds 90%, description of segment information by
location is omitted.
3. Overseas sales amountThe current consolidated accounting year (April 1, 2005 to March 31, 2006) andthe previous consolidated accounting year (April 1, 2004 to March 31, 2005)
Since overseas sales amount is less than 10% of the total consolidated sales, description of overseas sales isomitted.

10. Transactions with Related Parties
Non-applicable23