1-14-6 Kudan-kita Chiyoda-ku, Tokyo 102-8539, Japan
Telephone: +81 3 5276 2454 Facsimile: +81 3 5276 2656
http://www.n-koei.co.jp E-mail: info@n-koei.co.jp

Financial Report
Year ended June 30, 2019

Printed in Japan

Company Profile

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

CONTENTS
Financial Highlights ...................................................................................................................1
Consolidated Balance Sheet .......................................................................................................2
Consolidated Statement of Income and Comprehensive Income ............................................4
Consolidated Statement of Changes in Equity ..........................................................................5
Consolidated Statement of Cash Flows .....................................................................................6
Notes to Consolidated Financial Statements ............................................................................7
Consolidated Independent Auditor’s Report ...........................................................................41
Nonconsolidated Balance Sheet ...............................................................................................42
Nonconsolidated Statement of Income ...................................................................................44
Nonconsolidated Statement of Changes in Equity .................................................................45
Notes to Nonconsolidated Financial Statements ....................................................................46
Nonconsolidated Independent Auditor’s Report .....................................................................57
Significant Consolidated Subsidiaries .....................................................................................58

Financial Highlights

Consolidated
Thousands of
U.S. Dollars

Millions of Yen

2019

2018

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

¥108,589¥106,024$1,007,366

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

3,319

4,556

30,789Years Ended June 30

Yen

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

¥212.50

2019

U.S. Dollars¥294.12$1.97
Thousands of
U.S. Dollars

Millions of Yen

2019

2018

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

¥113,175¥113,890$1,049,910

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

60,20659,450558,523

As of June 30

2019

Nonconsolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended June 30

2019

2018

2019

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

¥68,014¥64,782$630,957

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

2,329

2,921

21,606Yen

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

¥149.16

U.S. Dollars¥188.56

Thousands of
U.S. Dollars

Millions of Yen
As of June 30

2019

$1.38

2018

2019

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

¥95,339¥95,809$884,447

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

53,86753,012499,717

Notes: 1.	In Japan, a company can establish its fiscal year in accordance with the Companies Act and other related laws andregulations. By resolution of the 68th General Shareholders’ Meeting held on June 27, 2013, the fiscal year of Nippon Koei
Co., Ltd., has been established as July 1 to June 30.
2.	Per share amounts are based on the weighted average number of shares outstanding during each year.
3.	The dollar amounts in this report represent translations of yen, for convenience only, at the rate of ¥107.795 to $1, theapproximate rate of exchange at June 30, 2019.

1

Co n s ol i d ated B alanc e S h eet
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
June 30, 2019

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 17) ..................
Receivables (Note 17):
Trade notes .........................................................
Trade accounts ...................................................
Unconsolidated subsidiaries andassociated companies ......................................
Other ...................................................................
Allowance for doubtful accounts ......................
Inventories (Note 7) .............................................
Prepaid expenses and other current assets ........
Total current assets ............................................
PROPERTY, PLANT AND
EQUIPMENT (Notes 8 and 9):
Land ......................................................................
Buildings and structures .....................................
Machinery and equipment ..................................
Furniture and fixtures .........................................
Lease assets ..........................................................
Construction in progress .....................................
Total ....................................................................
Accumulated depreciation ...................................
Net property, plant and equipment ...................

2019

2018

2019

¥12,663¥15,233$117,473

29
29,606

26
26,072

269
274,651

305
521
(203)
5,921
3,604
52,446

117
474
(83)
8,169
4,256
54,2642,829
4,833(1,883)54,92833,435486,535

16,035
14,831
3,956
4,872
185
6,142
46,021(16,138)
29,883

16,59817,153
3,895
5,008
154
2,958
45,766(18,142)
27,624

148,755
137,585
36,69945,197
1,716
56,979426,931(149,710)
277,221

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 6 and 17) ..............
Investments in and advances
to unconsolidated subsidiaries andassociated companies (Notes 10 and 17(5)(b)) ....
Trademarks ...........................................................
Goodwill (Note 5) .................................................
Receivables in bankruptcy ...................................
Deferred tax assets (Note 14) ..............................
Asset for retirement benefits ...............................
Other assets ..........................................................
Allowance for doubtful accounts ........................
Total investments and other assets ...................

4,001

5,846

37,117

5,494
3,154
8,193
15
1,503
3,943
4,712
(169)
30,846

5,001
3,162
8,186
16
1,512
4,080
4,377
(178)
32,00250,96729,25976,005
139
13,94336,57943,713(1,568)286,154

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

¥113,175¥113,890$1,049,910

2

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

LIABILITIES AND EQUITYCURRENT LIABILITIES:Current portion of long-term debt (Note 11 and 17) ...
Payables:Trade accounts ...................................................
Unconsolidated subsidiaries andassociated companies ......................................
Other ...................................................................
Income taxes payable ...........................................
Advances received ................................................
Unearned revenue ................................................
Accrued bonuses ..................................................
Allowance for anticipated project loss ................
Other current liabilities .......................................
Total current liabilities ......................................
LONG-TERM LIABILITIES:Long-term debt (Note 11 and 17) ........................
Provision for directors’
retirement benefits (Note 12) ............................
Allowance for environmental measures .............
Liability for retirement benefits (Note 12) .........
Deferred tax liabilities (Note 14) .........................
Other long-term liabilities ...................................
Total long-term liabilities ..................................

2019

2018

2019

¥2,120¥2,072$19,667

5,015

4,123

46,523

29
2,252
1,137
6,688
2,892
2,758
120
5,072
28,083

52
2,386
1,013
8,694
3,157
2,589
177
4,178
28,441

269
20,891
10,54862,044
26,82925,586
1,113
47,052
260,522

17,71418,965

164,330

30
34
3,818
2,819
471
24,886

32
34
3,874
2,767
327
25,999279
316
35,41926,151
4,370
230,865

7,438
6,489
47,864

7,415
6,466
45,52969,00160,198444,028

COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 16, 18 and 19)
EQUITY (Notes 13 and 21):
Common stock,authorized, 38,000,000 shares in 2019 and
38,000,000 shares in 2018; issued, 15,919,544
shares in 2019 and 15,905,049 shares in 2018 ....
Capital surplus .....................................................
Retained earnings ................................................
Treasury stock-at cost
235,268 shares in 2019and 364,422 shares in 2018 ...............................
Accumulated other comprehensive income:Unrealized gain on
available-for-sale securities .............................
Foreign currency translation adjustments .......
Defined retirement benefit plans ......................
Total ....................................................................
Noncontrolling interests ......................................
Total equity .........................................................

(787)(1,180)(7,301)456(3,064)694
59,0901,116
60,206

1,196(2,045)983
58,364
1,086
59,4504,230(28,424)
6,438
548,170
10,353
558,523

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

¥113,175¥113,890$1,049,910

See notes to consolidated financial statements.

3Consolidated Statement of Income and Comprehensive Income
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2019

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2019

2018

2019

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

¥108,589¥106,024$1,007,366

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

75,62732,96273,66432,360701,582
305,784

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (Note 15) .....
Operating income ............................................

27,851
5,111

25,7986,562

258,370
47,414OTHER INCOME (EXPENSES):Interest and dividend income ..............................
Interest expense ...................................................
Foreign currency exchange loss ..........................
Gain on sales of property,
plant and equipment ..........................................
Head office transfer cost .....................................
Equity in losses of associated companies ...........
Other-net ...............................................................
Other income-net .............................................

337
(277)
(164)

446
(223)
(149)

3,126
(2,570)(1,521)

781
—
(129)
(74)
474

1,284
(833)
—
78
603

7,245
—
(1,197)
(686)
4,397

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

5,585

7,165

51,811

INCOME TAXES (Note 14):
Current .................................................................
Deferred ................................................................
Total income taxes ...........................................

1,992
189
2,181

1,833
723
2,556

18,4801,753
20,233NET INCOME .......................................................

3,404

4,609

31,578NET INCOME ATTRIBUTABLE TO:
Owners of the parent ...........................................
Noncontrolling interests ......................................

3,319
85

4,556
53

30,789789

OTHER COMPREHENSIVE INCOME (LOSS) (Note 20) :Unrealized (loss) gain on
available-for-sale securities ...............................
Foreign currency translation adjustment ...........
Defined retirement benefit plans ........................
Share of other comprehensive income ofassociates accounted for using equity method ....
Total other comprehensive (loss) income .......

(740)
(933)
(290)

177
(242)
155

(6,865)(8,655)(2,690)(91)(2,054)

—
90

(844)
(19,054)COMPREHENSIVE INCOME .............................

¥1,350¥4,699$12,524TOTAL COMPREHENSIVE INCOME
ATTRIBUTABLE TO:
Owners of the parent ...........................................
Noncontrolling interests ......................................

¥1,264¥86¥4,681¥18$11,726$798
U.S. Dollars(Note 1)Yen

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

4¥212.50
75.00¥294.12
75.00

$1.97
0.70

Co n s ol i d ated S ta temen t o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2019

Thousands

Millions of Yen
Accumulated Other Comprehensive Income

BALANCE, JULY 1, 2017 ���������������������������������������������������������
Issuance of new shares ������������������������������������������������������������
Adjustment for change in scope of consolidation ������������������
Net income attributable to owners of the parent �������������������Cash dividends, ¥75.00 per share ��������������������������������������������
Purchase of treasury stock ������������������������������������������������������
Disposal of treasury stock �������������������������������������������������������
Retirement of treasury stock ���������������������������������������������������
Net change in the year �������������������������������������������������������������
BALANCE, JUNE 30, 2018 ������������������������������������������������������
Issuance of new shares ������������������������������������������������������������
Adjustment for change in scope of consolidation ������������������
Net income attributable to owners of the parent �������������������Cash dividends, ¥75.00 per share ��������������������������������������������
Purchase of treasury stock ������������������������������������������������������
Disposal of treasury stock �������������������������������������������������������
Retirement of treasury stock ���������������������������������������������������
Net change in the year �������������������������������������������������������������
BALANCE, JUNE 30, 2019 ������������������������������������������������������

Outstanding
Number of
Shares ofCommon Stock

Common Stock

Capital Surplus

15,439¥7,393¥7,241¥43,450¥(3,607)¥1,017¥(1,814)¥828¥54,508¥366¥54,874

10

22

22

—

—

—

—

—

44

—

44

Retained
Earnings

Unrealized
Gain (Loss) on
available-forsale securities

Treasury
Stock

Foreign
Currency
Translation
Adjustments

DefinedRetirement
Benefit Plans

Noncontrolling
Interests

Total

Total Equity

—

—

39

38

—

—

(22)

—

55

711

766

—

—

—

4,556

—

—

—

—

4,556

—

4,556

—

—

—

(1,192)

—

—

—

—

(1,192)—(1,192)

(6)

—

—

—

(26)

—

—

—

(26)

—

(26)

98

—

—

—

294

—

—

—

294

—

294

—

—

(836)

(1,323)

2,159

—

—

—

—

—

—

—

—

—

—

—

179

(209)

155

125

9

134

15,541

7,415

6,466

45,529(1,180)1,196(2,045)983

58,364

1,086

59,450

14

23

23

—

—

—

—

—

46

—

46

—

—

—

209

—

—

(17)

—

192

—

192

—

—

—

3,319

—

—

—

—

3,319

—

3,319

—

—

—

(1,193)

—

—

—

—

(1,193)—(1,193)

(3)

—

—

—

(8)

—

—

—

(8)

—

(8)

132

—

—

—

401

—

—

—

401

—

401

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(740)

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

15,684¥7,438¥6,489¥47,864¥(787)¥456¥(3,064)¥694¥59,090¥1,116¥60,206

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

BALANCE, JUNE 30, 2018 ������������������������������������������������������
Issuance of new shares ��������������������������������������������������������������
Adjustment for change in scope of consolidation ���������������������
Net income attributable to owners of the parent �������������������Cash dividends, $0.70 per share ����������������������������������������������
Purchase of treasury stock ������������������������������������������������������
Disposal of treasury stock �������������������������������������������������������
Retirement of treasury stock ���������������������������������������������������
Net change in the year �������������������������������������������������������������
BALANCE, JUNE 30, 2019 ������������������������������������������������������

Retained
Earnings

Unrealized
Gain (Loss) on
available-forsale securities

Treasury
Stock

Foreign
Currency
Translation
Adjustments

DefinedRetirement
Benefit Plans

Noncontrolling
Interests

Common Stock

Capital Surplus

Total$68,788$59,984$422,367$(10,947)$11,095$(18,971)$9,119$541,435$10,075$551,510

213

214

—

—

—

—

—

427

—

427

Total Equity

—

—

1,939

—

—

(158)

—

1,781

—

1,781

—

—

30,789————30,789—30,789——(11,067)

—

—

—

—

(11,067)—(11,067)

—

—

—

(74)

—

—

—

(74)

—

(74)

—

—

—

3,720

—

—

—

3,720

—

3,720

—

—

—

—

—

—

—

—

—

—

—

—

—

—

(6,865)(9,295)(2,681)(18,841)278(18,563)$69,001$60,198$444,028$(7,301)$4,230$(28,424)$6,438$548,170$10,353$558,523

See notes to consolidated financial statements.

5

Co n s ol i d ated S ta temen t o f C as h Fl ow s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 2019

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

OPERATING ACTIVITIES:
Income before income taxes ....................................
Adjustments for:
Income taxes – paid ..............................................
Depreciation and amortization ............................
Amortization of goodwill .......................................
Gain on sales of property, plant and equipment ...
Loss (gain) on sales of investment securities ........
Equity in losses of associated companies ..............
Increase in trade accounts receivable ................
Decrease in inventories ......................................
Increase in trade accounts payable .....................
Decrease in advanced received ..........................
Other - net .............................................................
Net cash (used in) provided
by operating activities ....................................

2019

2019

2018

¥5,585¥7,165$51,811(1,832)
1,710
482
(781)
13
129
(2,917)2,282
588(2,016)(134)(1,973)
1,668
474(1,284)(64)—(8,087)
3,797
160(2,079)(379)(16,995)
15,863
4,471(7,245)
121
1,197(27,061)
21,1705,455(18,702)(1,243)

3,109

(602)

FINANCING ACTIVITIES:

2019

2019

2018

Proceeds from long-term loans payable ..................
Repayments of long-term loans payable .................
Purchase of treasury stock .......................................
Disposal of treasury stock ........................................
Dividends paid ..........................................................
Other - net .................................................................

¥1,293(2,393)(8)
401(1,188)(42)¥—(2,100)(26)
294(1,193)(38)¥11,995(22,199)(74)
3,720(11,021)(390)

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

(1,937)(3,063)(17,969)

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

(310)

(22)

(2,876)NET (DECREASE) INCREASE IN
CASH AND CASH EQUIVALENTS .......................

(2,642)(2,710)(24,509)28,842

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

15,23317,083

141,315

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

72

860

667

¥12,663¥15,233$117,473

INVESTING ACTIVITIES:
Purchases of property, plant and equipment ..........

¥(3,686)¥(3,323)$(34,195)

Proceeds from sales of property,
plant and equipment ...............................................

1,846

2,339

17,125

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

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

559

2,858

5,186

See notes to consolidated financial statements.

Purchases of investment securities ..........................

(179)(1,592)(1,660)

Payment for purchase of a newly consolidated
subsidiary, net of cash acquired .............................

(2,686)(582)(24,918)

Payments of loans receivable ...................................
Other - net .............................................................

(600)
1,242

(791)
2,068

(5,566)
11,522

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

(3,504)

977(32,506)

6

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

N o tes to C on solid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Year ended June 30, 20191.	B A S I S O F P R E S E N TAT I O N O F C O N S O L I D AT E D F I N A N C I A L
STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in
conformity with accounting principles generally accepted in Japan, which are different in certain respects as tothe application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form that is morefamiliar to readers outside Japan. In addition, certain reclassifications have been made in the 2018 consolidated
financial statements to conform to the classifications used in 2019.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Nippon
Koei Co., Ltd. (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S.
dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rateof ¥107.795 to $1, the approximate rate of exchange at June 30, 2019. 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, 2019, include the accounts of theCompany and its 68 significant (62 in 2018) subsidiaries (collectively, the “Group”).
NIPPON KOEI LATIN AMERICA – CARIBBEAN, MEXICO S.DE R.L. DE C.V., NIPPON KOEI ENERGYEUROPE B.V. and QUADRANGLE DESIGN LIMITED were added in the scope of consolidation from thecurrent fiscal year due to their newly establishment. NIPPON KOEI MOZAMBIQUE, LIMITADA and KISHOKUROKAWA ARCHITECT & ASSOCIATES CO., LTD. were added in the scope of consolidation from thecurrent fiscal year due to their increased materiality. QUADRANGLE DESIGN LIMITED also acquired shares
of QUADRANGLE ARCHITECTS LIMITED on February 4, 2019, making it consolidated subsidiary as of thecurrent consolidated fiscal year.
Under the control and influence concept, those companies in which the Company, directly or indirectly, isable to exercise control over operations are fully consolidated, and those companies over which the Group
has the ability to exercise significant influence are accounted for by the equity method.
Investments in 5 (1 in 2018) associated companies are accounted for by the equity method. Investments in
the remaining unconsolidated subsidiaries and associated companies are stated at cost. If the equity methodof accounting had been applied to the investments in these companies, the impact on the accompanying
consolidated financial statements would not be significant.
Goodwill represents the excess of cost of an acquisition over the fair value of the net assets of the acquired
subsidiaries at the date of acquisition.
Goodwill is amortized using the straight-line method over its useful life, which is estimated as a reasonable
period (mainly 10 or 20 years) for which goodwill is expected to have an effect.
All significant intercompany balances and transactions have been eliminated in consolidation. All significant
unrealized profit included in assets resulting from transactions within the Group is also eliminated.

7

b.	Business Combinations — Business combinations are accounted for using the purchase method.
Acquisition-related costs, such as advisory fees or professional fees, are accounted for as expenses in the
periods in which the costs are incurred. If the initial accounting for a business combination is incomplete by
the end of the reporting period in which the business combination occurs, an acquirer shall report in its
financial statements provisional amounts for the items for which the accounting is incomplete. During themeasurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively
adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about
facts and circumstances that existed as of the acquisition date and that would have affected the measurementof the amounts recognized as of that date. Such adjustments shall be recognized as if the accounting for thebusiness combination had been completed at the acquisition date. The acquirer recognizes any bargain
purchase gain in profit or loss immediately on the acquisition date after reassessing and confirming that allof the assets acquired and all of the liabilities assumed have been identified after a review of the procedures
used in the purchase price allocation. A parent’s ownership interest in a subsidiary might change if the parent
purchases or sells ownership interests in its subsidiary. The carrying amount of noncontrolling interest is
adjusted to reflect the change in the parent’s ownership interest in its subsidiary while the parent retains its
controlling interest in its subsidiary. Any difference between the fair value of the consideration received or
paid and the amount by which the noncontrolling interest is adjusted is accounted for as capital surplus aslong as the parent retains control over its subsidiary.

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

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.
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.	Inventories — Work in process is stated at the lower of cost, mainly determined by the specificidentification cost method, or net selling value (see Note 7).

f.	Property, Plant, and Equipment — Property, plant, and equipment are stated at cost. Depreciation ofproperty, plant, and equipment of the Company and its consolidated subsidiaries is computed principally by
the straight-line method based on the estimated useful lives of the assets. The range of useful lives isprincipally from 3 to 63 years for buildings and structures, from 2 to 22 years for machinery and equipment,
and from 2 to 20 years for furniture and fixtures. The useful lives for lease assets are the terms of therespective leases.

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

8h.	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.

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

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

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

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

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

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

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

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

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

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

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

u.	Per Share Information — Basic net income per share is computed by dividing net income attributable toshareholders of common stock by the weighted-average number of shares of common stock outstanding forthe period.
Diluted net income per share of common stock is not disclosed because the Group had no securities
outstanding that might dilute the per share information for the years ended June 30, 2019 and 2018.
Cash dividends per share presented in the accompanying consolidated statement of income andcomprehensive income are dividends applicable to the respective years, including dividends to be paid after
the end of the fiscal year.

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

10

(3) Changes in Accounting Estimates:
A change in an accounting estimate is accounted for in the period of the change if the change affects that
period only and is accounted for prospectively if the change affects both the period of the change and future
periods.
(4) Corrections of Prior-Period Errors:
When an error in prior-period consolidated financial statements is discovered, those statements are restated.

Changes in Accounting Policies that are difficult to distinguish from Changes in Accounting
Estimates, and Changes in Accounting Estimates
Change in depreciation method for property, plant and equipment — The Group took the opportunity
provided by drawing up the Medium-term Management Plan, its first year is the current fiscal year, toinvestigate the status of property, plant and equipment usage. As a result, because it is expected that theeconomic benefit derived from property, plant and equipment assets will be consumed equally over its useful lifeat the Company and some of its domestic subsidiaries, from the current fiscal year the depreciation method forproperty, plant and equipment has been changed from the declining-balance method to the straight-line method,and costs have been allocated more appropriately.
Also, as a consequence of this change in the depreciation method, for certain property, plant and equipment
assets, upon consideration of the price at the time of retirement, the residual value has been changed to ¥1, amemorandum of value.
As a result of this change, the depreciation expenses for the current fiscal year decreased by ¥36 million ($334
thousand,) and each of operating income, ordinary income, and income before income taxes increased by ¥36
million ($334 thousand) from the amounts based on the previous method.
New Accounting Pronouncements
Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 30, 2018) and
Implementation Guidance on Accounting Standard for Revenue Recognition (ASBJ Guidance No.
30, March 30, 2018) — The International Accounting Standards Board (“IASB”) and Financial AccountingStandards Board of the United States of America (“FASB”) jointly developed a comprehensive accounting
standard for revenue recognition and issued Revenue from Contracts with Customers (IFRS No. 15, issued by
IASB and Topic 606 issued by FASB) in May 2014. Considering the situation that IFRS No. 15 has become
applicable from the fiscal year beginning on or after January 1, 2018, and Topic 606 from the fiscal year
beginning on or after December 15, 2017, ASBJ developed a comprehensive accounting standard for revenue
recognition and issued it together with implementation guidance.
ASBJ’s basic policy in developing the accounting standard for revenue recognition was to establish accounting
standards as a starting point to adopt basic principles of IFRS No. 15 from the viewpoint of comparability offinancial statements, which is one of benefits of maintaining consistency with IFRS No. 15, and to add
alternative treatments to the extent not to impair comparability in cases where previous practices and others inJapan should be considered.
The Group will not apply this accounting standard because it will voluntarily apply IFRS from the year ending
June 30, 2020. Therefore, the Group has not assessed the impact from application for the consolidated financial
statements.

11

3. CHANGES IN PRESENTATION
Changes following the adoption of Partial Amendments to Accounting Standard for Tax EffectAccounting — Effective from April 1, 2018, the Company applied Statement No. 28 Partial Amendments to
Accounting Standard for Tax Effect Accounting, issued by the ASBJ on February 16, 2018. Accordingly, itchanged its method of presenting “deferred tax assets” under “investments and other assets,” and “deferred tax
liabilities” under “long-term liabilities.” The Company also changed its explanatory notes regarding tax effectaccounting.
Consequently, previously stated amounts presented in the consolidated balance sheet for the previous fiscal year
were changed as follows: “deferred tax assets” under “current assets” decreased by ¥994 million and “deferred
tax liabilities” under “long-term liabilities” decreased by ¥617 million. Furthermore, “deferred tax assets” under“investments and other assets” increased by ¥377 million compared with the time before the change went into
effect, reflecting the offsetting of consolidated deferred tax assets and deferred tax liabilities.
The Company added details to the explanatory notes herein based on items 3 to 5 of the Partial Amendments to
Accounting Standard for Tax Effect Accounting, specifically in reference to tax effect-related accounting
standards and the exclusion of total valuation allowance in sections 8 and 9. Among these added details,
however, details related to the previous fiscal year have not been included in accordance with the transitional
treatment explained in item 7 of the Partial Amendments to Accounting Standard for Tax Effect Accounting.

4. ADDITIONAL INFORMATION
Employee Stock Ownership Plan (“ESOP”) Trust — The Company maintains an ESOP for a part of its
employees’ welfare programs which includes transfers of the Company’s own stock to the employees’
stockholders association through a trust.
(1) Overview of the transaction
At a meeting of the Board of Directors held on May 15, 2017, the Company resolved to reintroduce an ESOP
as a disposition-type employee shareholding incentive plan to provide the Group’s employees with incentives
to improve corporate value and enhance their welfare programs.
The Company also resolved to dispose of a part of treasury stock that the Company owns to an accountestablished in Trust & Custody Services Bank, Ltd. (the “Trust Account E”) by “third-party” allotment en bloc.
The ESOP is an incentive plan that distributes the profit of stock price rise for all the employees who join
“Nippon Koei Group employees’ stockholders association” (the “Employees’ Stockholders Association”.) To
initiate the ESOP, the Company concluded the “Stock Benefit Trust (disposition-type ESOP) Agreement;” thetrust established pursuant to the role of the agreement shall be referred to as the “ESOP Trust,” whereby theCompany is to act as administrator and the role of trustee is assigned to Mizuho Trust & Banking Co., Ltd.
(the “Trustee”.) The Trustee also concluded an agreement with Trust & Custody Services Bank, Ltd., underwhich the Trustee is to re-entrust management of security and other asset of the ESOP Trust to Trust &Custody Services Bank, Ltd.
The Trust Account E acquires shares of the Company that the Employees’ Stockholders Association is
expected to obtain over the five years after the trust is set up, and periodically sells its holdings to the
Employees’ Stockholders Association. If, by the time of the ESOP Trust’s termination, gains equivalent tocapital gains on sales of shares are accumulated within the ESOP Trust through sales of Company’s shares by
the Trust Account E to the Employees’ Stockholders Association, then those gains will be distributed as
residual assets to the Employees’ Stockholders Association enrollees who meet the requirements for eligible
beneficiaries. Furthermore, to guarantee funds borrowed by the Trustee that enable the Trust Account E toacquire Company’s shares, the Company is to repay any such remaining borrowings pursuant to a guarantee
agreement, in the event that there are any remaining borrowings equivalent to losses on sales of shares due
to a downturn in the price of Company’s shares up until termination of the ESOP Trust.
(2) The Company’s shares remaining in the ESOP
Shares of the Company remaining in the ESOP are recognized at the ESOP’s book value thereof (excluding
the amount of ancillary expenses) as treasury stock under net assets. The book value and number of shares ofsuch treasury stock were ¥686 million ($6,364 thousand) and 226 thousand shares, respectively, for the year
ended June 30, 2019.
(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 ¥728 million ($6,754
thousand) for the year ended June 30, 2019.

12

5. BUSINESS COMBINATIONBusiness combination by acquisition for the year ended June 30, 2019, was as follows:(1) Outline of the business combinationa. Name of acquired company and its business outline
Name of the acquired company: QUADRANGLE ARCHITECTS LIMITED
Architectural design businessBusiness outline:
b. Major reason for the business combination
The Company and BDP HOLDINGS LIMITED place “overseas expansion of Urban & Spatial business” as afocus area in the Medium-Term Management Plan “NK-Innovation 2021,” promoting business expansion
outside the U.K. as their growth strategy. QUADRANGLE ARCHITECTS LIMITED (hereinafter referred as“QUADRANGLE”) is a comprehensive architecture and interior design company having strengths inarchitectural design of commercial facilities, complex facilities, condominiums, etc., in Canada, with over
200 architects and interior designers. With QUADRANGLE in the Group, synergies are expected throughleveraging the company’s business in Canada, which shares many similarities in business with the U.K. andutilizing the strength of both companies enabling business expansion into the Canadian market. For
sustainable growth and further improvement of the corporate value of the Group, the Company will
accelerate its growth strategy of Urban & Spatial Development outside the U.K.
c. Date of business combination
February 4, 2019
d. Legal form of business combination
Share acquisition in consideration for cash
e. Name of the company after the combination
No changef. Ratio of voting rights acquired
49%
g. Basis for determining the acquirer
Determination of the acquirer is based on the facts that the Company acquired 49% of voting rights bymeans of share acquisition in consideration for cash as well as can exercise control over the decisions ofsignificant financial, operational and business policies based on contracts.
(2) The period for which the operations of the acquired company are included in the consolidated financial
statements
The operations of the acquired company for the five months from February 1, 2019 to June 30, 2019, were
included in the consolidated statement of income for the year ended June 30, 2019.

13

(3) Acquisition cost of the acquired company and related details of each class of consideration
Thousands ofCanadian Dollars

2019
C$34,265
C$34,265

Consideration for acquisition—Cash ....................
Acquisition cost ..............................................

Millions of Yen

2019¥2,841¥2,841Thousands of
U.S. Dollars

2019$26,356$26,356(4) Major acquisition-related costs
Advisory fees and commissions to
the lawyers and financial institutions: C$2,541 thousand (¥213 million ($1,976 thousand))(5) Amount of goodwill incurred, reasons for the goodwill incurred, and the method and period of amortization(a) Amount of goodwill incurred
C$11,133 thousand (¥923 million ($8,563 thousand))(b) Reasons for the goodwill incurred
Goodwill is incurred from expected excess earnings power in the future arising from further businessdevelopment.
(c) Method and period of amortization
The goodwill is amortized on a straight-line basis over 10 years.
(6) The assets acquired and the liabilities assumed at the acquisition date are as follows:
Thousands ofCanadian Dollars

Current assets .........................................................
Property, plant and equipment and intangible assets ..
Total assets acquired .....................................
Current liabilities ...................................................
Long-term liabilities ..............................................
Total liabilities assumed ...............................

2019
C$14,588
18,960
C$33,548
5,822
5,414
C$11,236

Millions of Yen

2019¥1,2101,572¥2,782
483
449
¥932

Thousands of
U.S. Dollars

2019$11,225
14,583$25,808
4,481
4,165$8,646

In addition, the amount allocated to intangible assets other than goodwill through the acquisition cost allocation
is C$15,846 thousand (¥1,314 million ($12,190 thousand)); mainly consisted of customer relationships
amounted C$7,881 thousand (¥654 million ($6,067 thousand) and will be amortized over 10 years.

14(7) Pro forma information (unaudited)
If this business combination had been completed as of July 1, 2018, the beginning of the current fiscal year, theimpact on the consolidated statement of income for the year ended June 30, 2019, would be as follows:
Thousands ofCanadian Dollars

Millions of Yen

2019
C$18,620(2,464)(3,205)(1,601)

Sales ........................................................................
Operating loss ...........................................................
Loss before income taxes .......................................
Net loss attributable to owners of the parent .......

Canadian Dollars

Per share of common stock:
Basic net loss ............................................................

C$(0.10)2019¥1,562
(207)
(269)
(134)
Yen

Thousands of
U.S. Dollars

2019$14,490(1,920)(2,495)(1,243)
U.S. Dollars¥(8.60)$(0.08)Outline of the method of calculation for the impact above:
The estimated impact on the consolidated financial results was calculated based on the difference in sales andprofit information calculated assuming the business combination had been completed at the beginning of the
fiscal year and it included in the consolidated financial results.
The information above is not necessarily indicative of actual future results, and also does not indicate actual
results of operation in the case that the business combination had been completed at the beginning of thecurrent fiscal year.

6. INVESTMENT SECURITIESInvestment securities as of June 30, 2019 and 2018, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2019
Noncurrent:
Marketable equity securities ...............................
Government and corporate bonds ......................
Other .....................................................................
Total .................................................................

¥4,0010
0¥4,001

2018¥5,077533
236¥5,8462019$37,11700$37,117

15

The costs and aggregate fair values of investment securities at June 30, 2019 and 2018, were as follows:
Millions of Yen

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

Cost¥2,865——¥2,865

Unrealized
Gains

Unrealized
Losses

¥982
—
—
¥982

¥322
—
—
¥322

Fair
Value

¥3,525——¥3,525

Millions of Yen

June 30, 2018
Securities classified as:
Available-for-sale:
Equity securities ..................................
Debt securities ......................................
Other .....................................................
Total ..................................................

Cost¥2,863568
236¥3,667

Unrealized
Gains

Unrealized
Losses¥1,778——¥1,778

¥16
¥35
—
¥51

Fair
Value

¥4,625533
236¥5,394

Thousands of U.S. Dollars

June 30, 2019

Cost

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

$26,578——$26,578

16

Unrealized
Gains$9,110——$9,110

Unrealized
Losses$2,987——$2,987

Fair
Value$32,701——$32,701

The proceeds and realized gains and losses of the available-for-sale securities, which were sold during
the years ended June 30, 2019 and 2018, were as follows:
Millions of Yen

June 30, 2019

Proceeds

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

Realized Gains¥—

Realized Losses

¥—
15
—
¥15

552

—
¥552

¥—
31
—
¥31

Millions of Yen

June 30, 2018

Proceeds

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

Realized Gains¥2,733——¥2,733

Realized Losses

¥437
—
—
¥437

¥373
—
—
¥373

Thousands of U.S. Dollars

June 30, 2019

Proceeds

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

Realized Gains

$—
5,121
—
$5,121

Realized Losses

$—
139
—
$139

$—
288
—
$288

7. INVENTORIESInventories at June 30, 2019 and 2018, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2019
Merchandise ...........................................................
Work in process ......................................................
Raw materials and supplies ...................................
Total .................................................................

¥30
5,709
182
¥5,921

2018
¥6
7,943
220
¥8,1692019$278
52,962
1,688$54,92817

8. INVESTMENT PROPERTYThe Group owns some rental properties, such as office buildings and land in the Tokyo metropolitan area. The
net of rental income and operating expenses for those rental properties was ¥732 million ($6,791 thousand) and¥404 million for the fiscal years ended June 30, 2019 and 2018, 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, 2018

Fair Value

Decrease¥2,300June 30, 2019¥(34)

June 30, 2019¥2,266¥5,402Millions of Yen
Carrying AmountJune 30, 2017

Fair Value

Decrease

June 30, 2018

¥2,326¥(26)

June 30, 2018

¥2,300¥5,241Thousands of U.S. Dollars
Carrying AmountJune 30, 2018$21,336

Decrease

Fair Value
June 30, 2019$(315)

June 30, 2019

$21,021$50,114

Notes:
1. Carrying amount recognized in the consolidated balance sheets is net of accumulated depreciation andaccumulated impairment losses, if any.
2. Decrease during both of the fiscal year ended June 30, 2018 and the fiscal year ended June 30, 2019, primarily
represents depreciation of buildings of stores for rent.
3. Fair value of properties was measured by the Group in accordance with the Real-Estate Appraisal Standard.
4. Investment property under construction is not included in the above table because it is difficult to measure
their fair value during an early phase of development. This amount in the consolidated balance sheet was¥1,484 million ($13,767 thousand) and ¥1,071 million for the fiscal years ended June 30, 2019 and 2018,
respectively.

9. REDUCTION ENTRY
In the case of the acquisition expenses of the Group that have been subsidized by the national government, theamount of such subsidies is offset against the acquisition cost of the corresponding property, plant andequipment.
The amount of reduction entry by accounts under property, plant and equipment at June 30, 2019 and 2018, was
as follows:
Thousands of
U.S. Dollars

Millions of Yen

2019
Buildings and structures .......................................
Machinery and equipment ....................................
Total .................................................................

18

¥19
167
¥186

2018
¥19
167
¥186

2019
$176
1,549
$1,725

10. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATEDSUBSIDIARIES AND ASSOCIATED COMPANIESInvestments in and advances to unconsolidated subsidiaries and associated companies at June 30, 2019 and2018, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2019¥3,2272,267¥5,494

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

2018¥3,331
1,670¥5,001

2019$29,936
21,031$50,967

11. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Long-term debt at June 30, 2019 and 2018, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2019
Unsecured loans from banks due seriallyto 2029 with interest rates ranging from0.250% to 4.250% .................................................
Obligation under finance leases ............................
Total .................................................................
Less current portion ..............................................
Long-term debt, less current portion .........

2019

2018

¥19,722112
19,834(2,120)¥17,714¥20,985
52
21,037(2,072)¥18,965$182,958
1,039
183,997(19,667)$164,330

Annual maturities of long-term debt at June 30, 2019, for the next five years and thereafter were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Years Ending June 30

2020 .........................................................
2021 .........................................................
2022 .........................................................
2023 .........................................................
2024 .........................................................
2025 and thereafter .................................
Total ..................................................

Long-Term Debt

Lease Obligations

Long-Term Debt

Lease Obligations¥2,083
2,285
6,014
2,299
2,149
4,892
¥19,722

¥38
30
21
16
6
1
¥112

$19,324
21,19855,79021,32819,93645,382$182,958

$353
278
195
148
56
9
$1,039The Group and four financial institutions have entered into overdraft contracts and a commitment line contract
by syndicated loan over three years. These commitment line contracts included restrictive financial covenants
for each financial institution.

19

12. RETIREMENT AND PENSION PLANS
The Company and certain consolidated subsidiaries have severance payment plans for employees and directors.
Under most circumstances, employees terminating their employment are entitled to retirement benefits
determined based on the rate of pay at the time of termination, years of service, and certain other factors. Suchretirement benefits are made in the form of a lump-sum severance payment from the Company or from certain
consolidated subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments if thetermination is involuntary, by retirement at the mandatory retirement age, by death, or by voluntary retirement
at certain specific ages prior to the mandatory retirement age.
The liabilities for retirement benefits at June 30, 2019 and 2018, for directors were ¥30 million ($278 thousand) and¥32 million, respectively. The retirement benefits for directors are paid subject to the approval of the shareholders.
(1) The changes in defined benefit obligation for the years ended June 30, 2019 and 2018, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2019¥15,718
1,155
109
(64)
(1,067)—¥15,8512018¥15,386
1,121
107
92
(1,050)62¥15,7182019$145,814
10,715
1,011(594)(9,898)—$147,048(2) The changes in plan assets for the years ended June 30, 2019 and 2018, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2019¥16,557
248
(400)
1,018
(811)
—
¥16,6122018¥15,500
311
381
1,126
(814)
53
¥16,557

2019$153,597
2,301(3,711)
9,444(7,524)—$154,107(3)	The changes in defined benefit obligation under the simplified method for the years ended June 30, 2019 and2018, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Balance at beginning of year .................................
Periodic benefit cost ..............................................
Benefits paid ...........................................................
Others .....................................................................
Balance at end of year ..................................
20

2019
¥632
51
(47)
—
¥636

2018
¥684
61
(112)
0
¥633

2019
$5,863473(436)—$5,900(4)	The reconciliation between the liability recorded in the consolidated balance sheet and the balances ofdefined benefit obligation and plan assets as of June 30, 2019 and 2018, was as follows (including the benefit
plans for which the simplified method was applied):Thousands of
U.S. Dollars

Millions of Yen

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

2019¥12,669(16,612)(3,943)
3,818

2018¥12,477(16,557)(4,080)3,874

2019$117,529(154,108)(36,579)
35,419

(125)

(206)

(1,160)

3,818
3,943

3,874
4,080

35,41936,579¥(125)¥(206)$(1,160)(5) The components of net periodic benefit costs for the years ended June 30, 2019 and 2018, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2019¥1,155
109
(248)
(112)
27
51
—
¥982

2018
¥1,121
107
(311)
(91)
28
61
9
¥924

2019
$10,715
1,011(2,301)(1,039)251473—$9,110(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, 2019 and 2018, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2019
Prior service cost ....................................................
Actuarial losses (gains) ..........................................
Total .................................................................

¥(27)
447
¥420

2018
¥(28)
(198)
¥(226)

2019$(251)
4,147$3,89621

(7)	Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect ofdefined retirement benefit plans as of June 30, 2019 and 2018, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2019
¥174
(1,174)¥(1,000)

2018¥201(1,621)¥(1,420)2019$1,614(10,891)$(9,277)(8) Plan assets
a. Components of plan assets
Plan assets as of June 30, 2019 and 2018, consisted of the following:2019
Debt investments ....................................................
Equity investments ................................................
Cash and cash equivalents .....................................
Others .....................................................................
Total .................................................................

38%
40
20
2
100%

2018
34%
44
19
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, 2019 and 2018, were set forth as follows:

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

2019
Principally 0.7%
1.5
90.0

2018
Principally 0.7%
2.0
90.0

(10) Multiemployer pension plan
The Company and certain consolidated subsidiaries participate in a multiemployer plan for which the Company
cannot reasonably calculate the amount of plan assets corresponding to the contributions made by theCompany. Therefore, it is accounted for using the same method as a defined contribution plan.
The Ministry of Health, Labor and Welfare approved exemption of returning the previous portion for thesubstitution part of employees’ pension funds. With this, the system was transferred from employees’ pension
plan to corporate pension plan.
The contributions to such multiemployer plan were ¥532 million ($4,935 thousand) and ¥512 million for theyears ended June 30, 2019 and 2018, respectively.

22

a. The funded status of the multiemployer plan as of June 30, 2019 and 2018, 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 ...................................................

2019¥79,6562018¥75,026

2019$738,958

63,109¥16,547

62,372¥12,654585,454$153,504

The net balance above is mainly the result of past service cost of ¥(7,900) million ($(73,287) thousand) for 2019and ¥(10,223) million for 2018, and surplus carried forward of ¥24,448 million ($226,801 thousand) for 2019,and ¥22,877 million for 2018. Past service cost under the plan is amortized on a straight-line basis over 15
years, and the special contributions of ¥380 million ($3,525 thousand) for 2019 and ¥366 million for 2018,
which are utilized for such amortization, were expensed in the consolidated statement of income andcomprehensive income of the Group.
b. The contribution ratio of the Group in the multiemployer plan for the years ended June 30, 2019 and 2018,
was as follows:2019
The contribution ratio of
the Group in the multiemployer plan ..............

13.5%

2018
13.6%

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

13. 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. Additionally, for companies that meet certain
criteria, including (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 being prescribed as one year rather than thenormal 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.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the company so stipulate. The Companies Act provides certain limitations on theamounts available for dividends or the purchase of treasury stock. The limitation is defined as the amountavailable for distribution to the shareholders, but the amount of net assets after dividends must be maintained at
no less than ¥3 million.
(b) Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve(a component of retained earnings) or as additional paid-in capital (a component of capital surplus), dependingon the equity account charged upon the payment of such dividends, until the 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.

23(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.

14. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, inthe aggregate, resulted in a normal effective statutory tax rate of approximately 30.6% and 30.9% for the years
ended June 30, 2019 and 2018, respectively.
The tax effects of significant temporary differences and tax loss carryforwards, which resulted in deferred tax
assets and liabilities at June 30, 2019 and 2018, are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2019
Deferred tax assets:
Investment in subsidiaries ...................................
Accrued bonuses ..................................................
Net defined benefit liability .................................
Liability for retirement benefits for directors ....
Allowance for anticipated project loss ................
Overdepreciation ..................................................
Loss on impairment of long-lived assets ............
Tax loss carryforwards .........................................
Other .....................................................................
Less valuation allowance .....................................
Total .................................................................

2019

2018

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

¥47
604
700
5
54
142
85
16
620
(304)
1,969

$167
5,548
7,514
232
343
1,995
789
2,003
7,069
(5,501)
20,159

827

742

7,672

747

758

6,930

564

265

5,232

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

200

528

1,855

943
208
3,489

842
88
3,223

8,748
1,930
32,367

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

¥(1,316)¥(1,254)$(12,208)

24

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, 2019,with the corresponding figures for 2018, is as follows:

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

2019
30.6%
2.5
1.8
5.5
(4.4)
2.2
2.5
—

2018
30.9%
1.9
2.4
4.0
(3.2)
1.5
2.0
0.8

(3.0)
1.3
39.0%

(1.0)
(3.6)
35.7%

At June 30, 2019, certain subsidiaries have tax loss carryforwards aggregating approximately ¥645 million($5,984 thousand), which are available to be offset against taxable income of such subsidiaries in future years.
These tax loss carryforwards, if not utilized, will expire as follows:
Millions of Yen

June 30, 2024 ..........................................................
June 30, 2025 ..........................................................
June 30, 2026 ..........................................................
June 30, 2027 ..........................................................
June 30, 2029 ..........................................................
Total .................................................................

Thousands of
U.S. Dollars

¥52
165
123
51
254
¥645

$483
1,531
1,141
473
2,356
$5,984

15. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥1,101 million ($10,214 thousand) and ¥913 million
for the years ended June 30, 2019 and 2018, respectively.

16. LEASES
LesseeThe minimum rental commitments under noncancelable operating leases at June 30, 2019 and 2018, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2019¥1,277
4,320¥5,5972018¥1,1483,351¥4,4992019$11,847
40,076$51,92325

17. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES(1) Group Policy for Financial Instruments
The Group uses financial instruments (mainly bank loans) based on its capital financing plan. Cash surpluses, ifany, are invested in low-risk financial assets. Derivatives are used not for speculative purposes, but to manage
exposure to financial risks as described in (2) below. To clarify the accountability for transactions, the Group set
up an investment committee that examines basic principles of transactions and each financial instrument.
(2) Nature and Extent of Risks Arising from Financial Instruments
Receivables, such as trade notes and trade accounts, are exposed to customer credit risk. Receivables in foreign
currencies are exposed to the market risk of fluctuation in foreign currency exchange rates. Marketable andinvestment securities, mainly held-to-maturity securities and equity instruments of customers and suppliers of
the Group, are exposed to the risk of market price fluctuations.
Payment terms of payables, such as trade notes and trade accounts, are less than one year. Long-term debt andobligation under finance leases are principally for the procurement of the funds necessary for investments infacilities and equipment.
Foreign-currency-denominated loans are exposed to the market risks from changes in interest rates and foreign
currency exchange rates. A portion of foreign-currency-denominated loans is hedged by using interest rate andcurrency swaps as derivative financial instruments. Please see Note 18 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 terms and balances of major customers by each business administration
department to identify the default risk of customers at an early stage. With respect to held-to-maturity financial
investments, the Group manages exposure to credit risk by limiting investments to high-credit-rated bonds inaccordance with its internal guidelines.
The maximum credit risk exposure of financial assets is limited to their carrying amounts as of June 30, 2019.
Market risk management
The Group uses interest rate and currency swaps as derivative financial instruments to manage its exposure tofluctuations in foreign exchange rates and interest rates of foreign-currency-denominated loans.
Investment securities are managed by monitoring market values and the financial position of issuers on aregular basis.
The basic principles of derivative transactions have been approved by the investment committee based on theinternal guidelines, which prescribe the authority and the limits for each transaction by the corporate treasury
department. Reconciliation of the transaction and balances with customers is made, and the transaction data isreported to the chief financial officer on a monthly basis.
Liquidity risk management
Liquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on its maturity
dates. The Group manages its liquidity risk by concluding commitment line and overdraft contracts, along withadequate financial planning by the corporate treasury department.

26

(4) Concentration of Credit Risk
27.9% of total receivables are from three major customers of the Group as of June 30, 2019.
(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, 2019

Carrying Amount

Unrealized
Gain/Loss

Fair Value

Cash and cash equivalents …………………………
Receivables ……………………………………………
Investment securities ………………………………
Total ………………………………………………

¥12,663
30,2583,525¥46,446¥12,663
30,2583,525¥46,446¥———¥—

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

¥19,722¥19,722¥19,642¥19,642

¥(80)
¥(80)

Derivatives ……………………………………………

¥(133)¥(133)¥—

Millions of Yen

June 30, 2018

Carrying Amount

Unrealized
Gain/Loss

Fair Value

Cash and cash equivalents ....................................
Receivables ............................................................
Investment securities ............................................
Total ................................................................

¥15,233
26,606
5,394¥47,233¥15,233
26,606
5,394¥47,233¥———¥—

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

¥20,985¥20,985¥20,789¥20,789¥(196)¥(196)

Derivatives ……………………………………………

¥6

¥6

¥—

Thousands of U.S. Dollars

June 30, 2019

Carrying Amount

Fair Value

Unrealized
Gain/Loss

Cash and cash equivalents …………………………
Marketable securities Receivables …………………
Investment securities ………………………………
Total ………………………………………………

$117,473
280,699
32,701$430,873$117,473
280,699
32,701$430,873

$—
—
—
$—

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

$182,958$182,958$182,216$182,216$(742)$(742)

Derivatives$(1,234)$(1,234)$—

Note: Long-term debt includes its current portion, and does not include obligation under finance leases.

27

Cash and cash equivalents, receivables, and payables
The carrying values of these financial instruments approximate fair value because of their short maturities.
Investment securities
The fair values of investment securities are measured at the quoted market price of the stock exchange for theequity instruments and at the quoted price obtained from the financial institution for certain debt instruments.
Fair value information for investment securities by classification is included in Note 6.
Long-term debt
The fair value of the “fixed rate” long-term debt is computed by applying a discount rate to the total of theprincipal and interest. The discount interest rate is based on the assumed interest rate if similar new debt wasentered into. The fair value of the “floating rate” long-term debt is assumed as the carrying value because theinterest rate of the debt reflects the current market interest rate and the Company’s credit score is stable.
A portion of the long-term debt qualified for integrated accounting treatment (special treatment andappropriated treatment) for interest rate and currency swaps is calculated by discounting the total amount of
the principal and interest, with the relevant interest rate and currency swaps to which the special integrated
accounting treatment has been applied, based on the reasonably estimated interest rate if similar new debt isentered into.
Derivatives
Fair value information for derivatives is included in Note 18.
The fair value of the derivatives, including interest rate and currency swaps under integrated accounting
treatment, is included in the fair value of the long-term debt, because the swaps are accounted for as part of thelong-term debt.
(b)The carrying amount of financial instruments whose fair values cannot be reliably determined is as follows:
Thousands of
U.S. Dollars

Millions of Yen

June 30, 2019 and 2018
Investments in equity instruments that
do not have a quoted market pricein an active market .............................................

2019¥3,705

2018¥3,783

2019$34,371

The impairment loss on investments in equity instruments that do not have a quoted market price in an active
market for the years ended June 30, 2019 and 2018, was ¥311 million ($2,885 thousand) and ¥154 million,
respectively.

28

(6) Maturity Analysis for Financial Assets and Securities with Contractual Maturities
Millions of Yen

June 30, 2019
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

Due afterten Years¥12,663
30,258

¥—
—

¥—

¥—

—

—

—
¥42,921

—
¥—

—

—

¥—

¥—

Millions of Yen

June 30, 2018
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

Due afterten Years¥15,233
26,606

¥—
—

¥—
—

¥—
—

—
¥41,839

—
¥—

—
¥—

—

¥—

Thousands of U.S. Dollars

June 30, 2019
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

Due afterten Years$117,473
280,699

$—
—

$—

$—

—

—

—
$398,172

—
$—

—

—

$—

$—

Please see Note 11 for annual maturities of long-term debt.

29

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

June 30, 2019

Transactions

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

Contract
Amount¥4,061

Contract
AmountDue after
One Year¥3,481Fair
Value

Unrealized
Gain¥(133)¥(133)

Millions of Yen

June 30, 2018

Transactions

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

Contract
Amount¥4,641

Contract
AmountDue after
One Year

Fair
Value

¥4,061

Unrealized
Gain

¥6

¥6

Thousands of U.S. Dollars

June 30, 2019

Transactions

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

Contract
AmountContract
AmountDue after
One Year

Fair
Value

$37,673$32,293$(1,234)

Unrealized
Gain$(1,234)

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

30

Derivative Transactions to Which Hedge Accounting is Applied
Millions of Yen

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

Hedge accounting method

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

HedgedItem

Contract
AmountContract
AmountDue after
One Year

Fair
Value

Long-term
debt¥2,707¥2,321(Note 1)Millions of Yen

June 30, 2018
Interest rate and currency
swaps:(fixed-rate payment,
floating-rate receipt)(Japanese yen payment,
U.S. dollars receipt)

Hedge accounting method

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

HedgedItem

Contract
AmountContract
AmountDue after
One Year

Fair
Value

Long-term
debt¥3,094¥2,707(Note 1)Thousands of U.S. Dollars

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

Hedge accounting method

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

HedgedItem

Contract
AmountContract
AmountDue after
One Year

Fair
Value

Long-term
debt$25,112$21,532(Note 1)

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

19. CONTINGENT LIABILITIESOn June 19, 2014, Nippon Civic Consulting Engineers Co., Ltd. (“NCC”), a consolidated subsidiary of theCompany, was sued by Osaka Prefecture for damages resulting from a project related to designing a shieldtunnel under tort liability. The amount of the damages claimed, which includes a 5% per annum delinquency
charge, was ¥750 million ($6,958 thousand). In addition, Osaka Prefecture expanded its claim to ¥8,643 million($80,180 thousand), which also includes a 5% per annum delinquency charge, via a written petition for theamendment of the claim dated February 29, 2016. NCC has concluded that it did not engage in an illegal act in
the course of the project and intends to contest the claims brought forth by Osaka Prefecture in court.
Due to the court petition by Osaka Prefecture, a decision was made to execute a provisional seizure concerning
the said claims in June 2014. Therefore, in July 2014, NCC deposited the money for release from a provisional
seizure of ¥750 million ($6,958 thousand) with the Legal Affairs Bureau, which is included in other assets underinvestments and other assets in the consolidated balance sheet.

3120. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income for the years ended June 30, 2019 and 2018, were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2019

2019

2018

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

¥(1,099)31(1,068)328¥(740)

¥193
61
254
(77)
¥177

$(10,196)
288(9,908)
3,043$(6,865)

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

¥(933)—(933)—¥(933)¥(242)—(242)—¥(242)$(8,655)—(8,655)—$(8,655)¥(336)
(84)
(420)
130
¥(290)

¥290
(64)
226
(71)
¥155

$(3,117)(779)(3,896)
1,206$(2,690)

¥(91)
¥(91)

¥—
¥—

$(844)$(844)¥(2,054)¥90$(19,054)

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

32

21. SUBSEQUENT EVENTS
a. Appropriations of Retained Earnings
On August 30, 2019, the following appropriation of retained earnings at June 30, 2019, was resolved by the
extraordinary Board of Directors’ meeting:Millions of Yen

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

¥1,193Thousands of
U.S. Dollars$11,067

The total amount of the dividends above includes ¥17 million ($158 thousand) in dividends on the Company’s
shares owned by “ESOP.”

b. Issuance of new shares as restricted stock compensation
The Company decided to issue new stocks as restricted stock compensation at the extraordinary Board of
Directors’ meeting held on September 26, 2019, as follows:
The Company aims to have the directors (not including outside directors; “Eligible Directors”) share benefits
and risks of stock price fluctuations with shareholders and further enhance their willingness to contribute toimproving stock prices and enhancing corporate value. Therefore, the Company decided, at the Board of
Directors held on August 14, 2017, to introduce a restricted stock compensation system (the “System”), which
will issue restricted stock to Eligible Directors.
Furthermore, the 73rd Annual General Meeting of Shareholders held on September 28, 2017, approved, under
the System, setting the total amount of monetary compensation claims payable to the Eligible Directors ascompensation related to restricted stock at a level where it does “not exceed an annual amount of ¥60 million.”
In addition, the total number of 50,000 shares, which are restricted stock to be allotted to Eligible Directors willbe the upper limit of the number of restricted shares to be allotted in each fiscal year, and the transfer restriction
period of restricted stock will be between one year to five years, determined by the Board of Directors.
(1) Payment date
October 25, 2019(2) Class and number of shares to be issued 13,514 shares of common stock of the Company¥3,125 per share(3) Issue price¥42,231,250(4) Total issue price of shares to be issued(5) Capitalization amount¥1,563 per share¥21,122,382(6) Total capitalization amount
Allotment of specified restricted stocks(7) Method of offer or allotment
In-kind contribution of monetary compensation claims(8) Method of contribution(9)   Allottees, number thereof and
13,514 shares to eight directors of the company (excluding  number of shares to be allotted
outside directors)
October 25, 2019 to October 24, 2022
(10) Transfer restriction period(11) Other	Issue of new shares to be allotted is conditioned on the securities
registration statement taking effect in accordance with the
Financial Instruments and Exchange Act.

c. Purchase of treasury shares
At the meeting of Board of Directors held on August 13, 2019, the Company resolved as follows regarding
matters concerning the acquisition of treasury shares in accordance with the provisions of Article 156 of theCompanies Act, which shall be applied mutatis mutandis pursuant to the provision of Paragraph 3 of Article 165of the same Act.
1. Reason for the acquisition of treasury shares
To raise the value per share of stock by improving capital efficiency and enhancing shareholder return.

33

2. Details of matters pertaining to the acquisition(1) Type of shares to be acquired
Common stock of the Company(2) Total number of shares available for acquisition
800,000 shares (upper limit) (5.1% of total issued shares (excluding treasury shares))(3) Total purchase price of shares¥2 billion (upper limit)(4) Acquisition period
From August 14, 2019 to June 30, 2020
(5) Acquisition method
Market purchase on the Tokyo Stock Exchange(i)   Plan to acquire up to 500,000 shares of the “(2) Total number of shares available for acquisition” throughthe Off-Auction Own Share Repurchase Trading (ToSTNeT -3) system.
(ii) Of the “2. (2) Total number of shares available for acquisition,” make a market purchase under the trust
method up to the number of shares after deducting the shares acquired pursuant to (i) in the preceding
paragraph.
3. Status of acquisition of treasury shares as of August 31, 2019(1) Type of shares acquired
Common stock of the Company(2) Total number of shares acquired
420,500 shares(3) Total purchase price of shares¥961 million(4) Acquisition period
From August 14, 2019 to August 31, 2019(5) Acquisition method
Market purchase on the Tokyo Stock Exchange

22. SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures,” and ASBJ
Guidance No. 20, “Guidance on Accounting Standard for Segment Information Disclosures,” an entity isrequired to report financial and descriptive information about its reportable segments. Reportable segments areoperating segments or aggregations of operating segments that meet specified criteria. Operating segments arecomponents of an entity about which separate financial information is available, and such information isevaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing
performance. Generally, segment information is required to be reported on the same basis as is used internallyfor evaluating operating segment performance and deciding how to allocate resources to operating segments.
(1) Outline of reportable segments
Reportable segments of the Company are determined as segments whose separate financial information isaccessible from among the constituent units of the Company and are periodically used by the Board of Directors
to determine the allocation of management resources and to evaluate achievements.
The Company has business headquarters separated by type of products and services. Each businessheadquarters formulates a comprehensive strategy based on the products and services and engages in
conducting business activities.
In line with the above, the Company is composed of segments divided by products and services, with eachbusiness headquarters serving as the foundation, and the six reportable segments are “Domestic Consulting
Operations,” “International Consulting Operations,” “Power Engineering Operations,” “Urban & Spatial
Development Operations,” “Energy Business Operations,” and “Real Estate Leasing Operations.”“Domestic Consulting Operations” engages in businesses within Japan, such as site surveying, planning,
evaluation/assessment, designing, construction management, operational advice in the fields of water resources
development, energy development, agricultural development, transportation, urban and regional development,
management of natural and social environment, etc.

34

“International Consulting Operations” engages in businesses outside of Japan, such as technical studies,planning, reviews, designing, construction supervision, operational advice in the fields of water resources
development, energy development, agricultural development, transportation, urban and regional development,social development, management of natural and social environment, etc.
“Power Engineering Operations” engages in manufacturing and sale of control devices and systems for power
generating and transforming stations, water turbines, power generators, voltage converters, electric powerrelated equipment such as line taps for power transmission and distribution networks. It also engages indesigning and implementation of various construction works for electric power and general electric facilities,
including construction for power generation/transformation/transmission/distribution and civil engineering.
“Urban & Spatial Development Operations” engages in urban and spatial development business that includes
urban planning and architectural design.
“Energy Business Operations” engages in research, development, design, construction, management, operation,
support, and system/technology development of power generation/energy management operations utilizing
distributed energy resources.
“Real Estate Leasing Operations” engages in the leasing of real estate within Japan.
(2) Methods of Measurement for the Amount of Sales, Profit (Loss), Assets, Liabilities, and Other Items for Each
Reportable Segment
Accounting treatments for reportable business segments closely match those shown in Note 2, “Summary of
Significant Accounting Policies.”
Inter-segment net sales and transfers are based on the third-party transaction prices.
In addition, from the beginning of the fiscal year ended June 30, 2019, the Company has adapted “Partial
Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No.28, February 16, 2018),
etc. The accounting standard is retrospectively applied to the segment assets as of June 30, 2018.
(3) Sales, Profit (Loss), Assets, Liabilities, and Other Items
Millions of Yen

2019
Reportable Segment
Domestic International
Power
Urban & Spatial
Consulting Consulting Engineering Development

Sales
Sales to external customers ... ¥49,593
743
Intersegment sales ........
Total sales ........... ¥50,336
Segment profit (loss) .....

EnergyBusiness

Real Estate
Leasing

Total

Others

Total

Reconciliations Consolidated¥24,92972¥25,001¥16,532505¥17,037¥15,360
141¥15,501

¥719
—
¥719

¥440 ¥107,573
165
1,626
¥605 ¥109,199¥1,016 ¥108,589
973
2,599
¥1,989 ¥111,188¥ — ¥108,589(2,599)—¥(2,599) ¥108,589

114
23,312

(392)
5,462

732
4,482

8,053
87,667(2,417)
5,636
41,033 128,700

(51)
5,585
(15,525) 113,175

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

4,977
20,591

575
23,181

2,047
10,639Other:
Depreciation ................

160

77

233

720

138

36

1,364

358

1,722

(12)

Amortization of goodwill ...

—

—

—

482

—

—

482

—

482

—

482

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

25

53

4

47

125

—

254

380

634

(411)

223

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

74

194

80

220

39

—

607

81

688

(411)

277

—

—

33

—

(139)

—

(106)

—

(106)

(23)

(129)

—

—

200

—

1,203

—

1,403

—

1,403

(23)

1,380

228

114

213

207

5

1

768

3,188

3,956

—

3,956

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

1,710

35

Millions of Yen

2018
Reportable Segment
Domestic International
Power
Urban & Spatial
Consulting Consulting Engineering Development

Sales
Sales to external customers ...

EnergyBusiness

Real Estate
Leasing

Total

Others

Total

Reconciliations Consolidated¥46,596430¥47,026¥28,89047¥28,937¥15,762270¥16,032¥13,040
27¥13,067

¥355
—
¥355

¥440 ¥105,083
165
939¥605 ¥106,022¥941 ¥106,024
1,030
1,969
¥1,971 ¥107,993¥ — ¥106,024(1,969)—¥(1,969) ¥106,024

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

4,141
19,6692,417
24,725

1,987
8,989

197
22,388

(53)
4,983

404
4,198

9,093
84,952(2,412)
39,673

6,681
124,62540(10,735)

6,721
113,890

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

179

82

245

640

120

38

1,304

385

1,689

(21)

1,668

Amortization of goodwill ...

—

—

—

474

—

—

474

—

474

—

474

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

22

55

4

42

3

—

126

322

448

(307)

141

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

54

152

52

167

42

—

467

63

530

(307)

223

—

—

—

—

—

—

—

—

—

—

—

—

—

—

—

632

—

632

—

632

—

632

155

166

214

179

48

—

762

2,785

3,547

—

3,547

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

Equity in profit ofassociated company ........
Investments in associates accounted
for using equity method ...........
Increase in property, plant,
and intangible assets .......

Thousands of U.S. Dollars

2019
Reportable Segment
Domestic International
Power
Urban & Spatial
Consulting Consulting Engineering Development

Sales
Sales to external customers ...

EnergyBusiness

Real Estate
Leasing

Total

Others

Total

Reconciliations Consolidated$460,068
6,893$466,961$231,263
668$231,931$153,365
4,685$158,050$142,493
1,308$143,801$6,670—$6,670$4,082 $997,941
1,531
15,085$5,613 $1,013,026$9,425 $1,007,366
9,026
24,111$18,451 $1,031,477$ — $1,007,366(24,111)—$(24,111) $1,007,366

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

46,171
191,020

5,334
215,047

18,99098,697

1,058
216,262(3,637)50,6706,791
41,57974,707813,275(22,423)
52,284
380,658 1,193,933(473)
51,811(144,023) 1,049,910

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

1,484

714

2,162

6,679

1,280

334

12,653

3,322

15,975(112)

15,863

Amortization of goodwill ...

—

—

—

4,471

—

—

4,471

—

4,471

—

4,471

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

232

492

37

436

1,160

—

2,357

3,525

5,882

(3,813)

2,069

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

686

1,800

742

2,041

362

—

5,631

752

6,383

(3,813)

2,570

—

—

306

—

(1,289)

—

(983)

—

(983)

(214)

(1,197)

—

—

1,855

—

11,160—13,015—13,015(213)

12,802

2,115

1,058

1,976

1,920

46

9

7,124

29,57536,699—36,699Intersegment sales ........
Total sales ...........
Segment profit (loss) .....

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

Note:
The differences between total amounts for reportable segments and amounts in the consolidated balance sheets
or consolidated statements of income and comprehensive income and the main details of these differences,which are related to difference adjustments at June 30, 2019 and 2018, were as follows:36

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 ....

2019¥109,199
1,989(2,599)2018¥106,022
1,971(1,969)2019$1,013,026
18,451(24,111)¥108,589¥106,024$1,007,366

ProfitThousands of
U.S. Dollars

Millions of Yen

Reportable segment total .......................................
Other loss ................................................................
Elimination of intersegment transactions ............
Nonoperating items ...............................................
Operating income in the consolidated
statements of income andcomprehensive income ...............................

2019¥8,053(2,417)
(51)
(474)

2018
¥9,093(2,412)
40
(159)

2019
$74,707(22,423)(473)(4,397)¥5,111¥6,562$47,414

AssetsThousands of
U.S. Dollars

Millions of Yen

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

2019¥87,667
41,033(15,525)2018¥84,952
39,673(10,735)

2019$813,275
380,658(144,023)¥113,175¥113,890$1,049,910

37

Other items
Millions of Yen

2019
Reportable
Segment

OthersReconciliations

Total¥1,364
482
254
607

¥358
—
380
81

¥(12)
—
(411)
(411)

¥1,710
482
223
277

(106)

—

(23)

(129)

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

1,403

—

(23)

1,380

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

768

3,188

—

3,956

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

Millions of Yen

2018
Reportable
Segment

Depreciation ........................................
Amortization of goodwill ....................
Interest income ...................................
Interest expense ..................................
Equity in profit ofassociated company ..........................

OthersReconciliations

Total¥1,304
474
126
467

¥385
—
322
63

¥(21)
—
(307)
(307)

¥1,668
474
141
223

—

—

—

—

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

632

—

—

632

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

762

2,785

—

3,547

Thousands of U.S. Dollars

2019
Reportable
Segment

OthersReconciliations

Total$12,653
4,471
2,357
5,631

$3,322—
3,525
752$(112)—(3,813)(3,813)$15,863
4,471
2,069
2,570

(983)

—

(214)

(1,197)

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

13,015—(213)

12,802

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

7,124

29,575—36,699Depreciation ........................................
Amortization of goodwill ....................
Interest income ...................................
Interest expense ..................................
Equity in profit (losses) of
associated company ..........................

Note:
The main reconciling items of interest income and expense are eliminations of corporate interest in accounting
for control.

38

The information about geographical areas at June 30, 2019 and 2018 was as follows:
Sales
Millions of Yen

2019
Japan

Asia

¥66,924¥16,091

Middle East

¥1,617

Latin
America

Africa¥3,882¥5,174

EuropeOther¥13,336¥1,565

Europe

Other

Total

¥108,589

Millions of Yen

2018
Japan

Asia

¥62,314¥18,634

Middle East

¥1,796

Latin
America

Africa¥3,780¥6,845¥12,221

¥434

Total

¥106,024

Thousands of U.S. Dollars

2019
Japan

Asia

$620,845$149,274

Middle East

$15,001

AfricaLatin
America

EuropeOther$36,013$47,999$123,716$14,518 $1,007,366

Total

Note:
Sales are classified by country or region based on the location of customers.
The information about major customers at June 30, 2019 and 2018 was as follows:
Millions of Yen

2019
Name of Customers

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

Sales

Related Segment Name

¥17,508
8,773
5,028

Domestic Consulting
International Consulting
Power Engineering

Millions of Yen

2018
Name of Customers

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

Sales

Related Segment Name

¥16,187
13,781
5,606

Domestic Consulting
International Consulting
Power Engineering

Thousands of U.S. Dollars

2019
Name of Customers

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

Sales$162,419
81,386
46,644

Related Segment Name

Domestic Consulting
International Consulting
Power Engineering

39The information about goodwill at June 30, 2019 and 2018 was as follows:
Goodwill
Millions of Yen

2019
Reportable Segment
Domestic International
Power
Urban & Spatial
Consulting Consulting Engineering Development

¥—
—

¥—
—

¥—
—

EnergyBusiness

Real Estate
Leasing

¥—
—

¥—
—

¥482
8,193

Total

¥482
8,193

Others¥——Elimination/
Consolidated
Corporate

¥—
—

¥482
8,193

Millions of Yen

2018
Reportable Segment
Domestic International
Power
Urban & Spatial
Consulting Consulting Engineering Development

¥—
—

¥—
—

¥—
—

EnergyBusiness

Real Estate
Leasing

¥—
—

¥—
—

¥474
8,186

Total

¥474
8,186

Others¥——Elimination/
Consolidated
Corporate

¥—
—

¥474
8,186

Thousands of U.S. Dollars

2019
Reportable Segment
Domestic International
Power
Urban & Spatial
Consulting Consulting Engineering Development

$—
—

40

$—
—

$—
—

$4,471
76,005

EnergyBusiness

Real Estate
Leasing

$—
—

$—
—

Total

$4,471
76,005

Others$——Elimination/
Consolidated
Corporate$——$4,471
76,005

41

Nonconsolidated Balance Sheet
Nippon Koei Co., Ltd.
June 30, 2019

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS

2019

2019

2018

CURRENT ASSETS:¥4,478¥6,484$41,542

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

19

26

176

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

18,826

16,449174,646

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

650

175

6,030

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

197

187

1,828

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

(126)

(4)

(1,169)

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

1,984

1,939

18,405Inventories (Note 4) .............................................

4,508

5,915

41,820Prepaid expenses and other current assets ........

1,762

2,083

16,346

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

32,29833,254

299,624

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

14,375

14,408133,355

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

11,595

13,932

107,565

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

2,358

2,320

21,875

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

2,121

2,052

19,676

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

5,926

2,913

54,975

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

87

93

807

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

36,46235,718338,253

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

(12,049)(13,761)(111,777)

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

24,413

21,957

226,476

Investment securities ...........................................

3,911

5,729

36,282

Investments in and advances tosubsidiaries and associated companies (Note 6) .....
Other assets ..........................................................

30,067

29,460278,927

4,742

5,504

43,991

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

(92)

(95)

(853)

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

38,62840,598358,347

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

¥95,339¥95,809$884,447

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

PROPERTY, PLANT AND
EQUIPMENT (Note 5):

INVESTMENTS AND OTHER ASSETS:

42

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

LIABILITIES AND EQUITY

2019

2018

2019

CURRENT LIABILITIES:
Short‑term borrowings (Note 7) .........................
Current portion of long-term debt (Note 7) .......
Payables:Trade accounts ...................................................
Subsidiaries and associated companies ...........
Other ...................................................................
Income taxes payable ...........................................
Advances received ................................................
Deposits received (Note 3.(1)) .............................
Accrued bonuses ..................................................
Allowance for anticipated project loss ................
Other current liabilities .......................................
Total current liabilities ......................................

¥6,4301,977¥5,7002,066$59,650
18,340

3,164
563
1,636
668
4,063
2,322
1,470
89
587
22,969

2,651
471
1,766
470
5,388
1,803
1,364
129
73
21,881

29,352
5,223
15,177
6,197
37,692
21,541
13,637826
5,445
213,080

LONG-TERM LIABILITIES:Long-term debt (Note 7) ......................................
Liability for retirement benefits (Note 2.h) ........
Allowance for environmental measures .............
Deferred tax liabilities (Note 9) ...........................
Other long-term liabilities ...................................
Total long-term liabilities ..................................

16,562
103
25
1,449
364
18,503

18,964
116
25
1,571
240
20,916

153,643
956
232
13,442
3,377
171,650

7,438

7,415

69,001

6,137

6,114

56,933

1,546
39,0281,546
37,891

14,342362,058

COMMITMENTS AND CONTINGENT
LIABILITIES (Note 10)
EQUITY (Notes 8 and 11):
Common stock;authorized, 38,000,000 shares in 2019and 38,000,000 shares in 2018;
issued, 15,919,544 shares in 2019
and 15,905,049 shares in 2018 ...........................
Capital surplus:
Additional paid-in capital ..................................
Retained earnings:
Legal reserve ......................................................
Retained earnings - unappropriated .................
Unrealized gain on
available-for-sale securities ..............................
Treasury stock—at cost
235,268 shares in 2019and 364,422 shares in 2018 ..............................
Total equity .........................................................

435

1,156

4,035

(717)
53,867(1,110)53,012(6,652)499,717

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

¥95,339¥95,809$884,447

See notes to nonconsolidated financial statements.

43

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, 2019

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2019

2019

2018

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

¥68,014¥64,782$630,957

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

49,33818,67646,443
18,339457,702173,255SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES ......................
Operating income ............................................

15,9652,711

14,8603,479

148,105
25,150

633
(273)
(128)

695
(228)
(107)

5,872
(2,533)(1,187)

459

1,279

4,258

(43)
648

(833)
166
972

(399)
6,011

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

3,359

4,451

31,161

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

835
195
1,030

796
734
1,530

7,746
1,809
9,555

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

¥2,329¥2,921$21,606

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

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.

44¥149.1675.00¥188.56
75.00

$1.38
0.70

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, 2019

Thousands

Millions of Yen

Outstanding
Number of
Shares ofCommonStockCapital Surplus

Retained Earnings

Unrealized
Gain (loss)

CommonAdditional

Stock

Paid-in
Capitalon
Other Capital
Surplus

¥835

Legal
Reserve¥1,546

Available-forUnappropriatedsale Securities¥37,486¥977

Treasury

Total

Stock

Equity¥(3,537)¥50,793

BALANCE, JULY 1, 2017 ................

15,439¥7,393¥6,093Issuance of new shares ...................

10

22

21

—

—

—

—

—

43

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

—

—

—

—

—

2,921

—

—

2,921

Cash dividends, ¥75.00 per share ...

—

—

—

—

—

(1,192)——(1,192)

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

(6)

—

—

—

—

—

—

(26)

(26)

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

98

—

—

—

—

—

—

294

294

Retirement of treasury stock ..........

—

—

—

(835)

—

(1,324)

—

2,159

—

Net change in the year ....................

—

—

—

—

—

—

179

—

179

BALANCE, JUNE 30, 2018 .............

15,541

7,415

6,114

—

1,546

37,891

1,156(1,110)53,012Issuance of new shares ...................

14

23

23

—

—

—

—

—

46

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

—

—

—

—

—

2,329

—

—

2,329

Cash dividends, ¥75.00 per share .....

—

—

—

—

—

(1,192)——(1,192)

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

(3)

—

—

—

—

—

—

(8)

(8)

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

132

—

—

—

—

—

—

401

401

Retirement of treasury stock ..........

—

—

—

—

—

—

—

—

—

Net change in the year ....................

—

—

—

—

—

—

(721)

—

(721)

BALANCE, JUNE 30, 2019 .............

15,684¥7,438¥6,137¥—¥1,546¥39,028¥435¥(717)¥53,867

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

Retained Earnings

Unrealized
Gain (loss)

CommonAdditional
Paid-in
Capital

Stock

Other
CapitalSurplus

Legal
Reserve

BALANCE, JUNE 30, 2018 .............

$68,788$56,719$—

Issuance of new shares ...................

213

214

—

—

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

—

—

—

Cash dividends, $0.70 per share ....

—

—

—

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

——

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

——

Retirement of treasury stock ..........

—Net change in the year ....................

—BALANCE, JUNE 30, 2019 .............

$69,001

Unappropriated$14,342 $351,510

on
Available-for-Treasury
Stock

Total
Equitysale Securities$10,724 $(10,298) $491,785

—

—

—

427

—

21,606——

21,606—(11,058)——(11,058)

—

—

—

—

(74)

(74)

—

—

—

—

3,720

3,720

—

—

—

—

—

—

—

—

—

—

—

(6,689)—(6,689)$56,933$—$14,342 $362,058$4,035$(6,652) $499,717

See notes to nonconsolidated financial statements.

45

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, 20191.	B ASIS OF PRESENTATION OF NONCONSOLIDATED FINANCIAL
STATEMENTS
The accompanying nonconsolidated financial statements have been prepared from the accounts maintained by
Nippon Koei Co., Ltd. (the “Company”) in accordance with the provisions set forth in the Japanese Financial
Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting
principles generally accepted in Japan, which are different in certain respects as to the application anddisclosure requirements of International Financial Reporting Standards.
As consolidated statements of cash flows and certain disclosures are presented in the consolidated financial
statements of the Company, nonconsolidated statements of cash flows and certain disclosures are not presented
herein in accordance with accounting principles generally accepted in Japan.
Effective for the year ended March 31, 2014, the Japanese Financial Instruments and Exchange Act and its
related accounting regulations were amended to allow an entity to not disclose certain designated footnote
information in its nonconsolidated financial statements if the entity prepares and discloses consolidated
financial statements. Accordingly, the Company has omitted disclosure of certain footnote information in theaccompanying nonconsolidated financial statements.
In preparing these nonconsolidated financial statements, certain reclassifications 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 2018 nonconsolidated financial statements to conform to the classifications used in 2019.
The nonconsolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and have been made at the rate of ¥107.795 to $1,
the approximate rate of exchange at June 30, 2019. Such translations should not be construed as representations
that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

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

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

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

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

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

46

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

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

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

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

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

unfunded retirement benefit plan for the benefit of its employees.

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

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

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

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

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

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

47

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

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

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

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

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

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

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

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

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

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

t. Per Share Information — Basic net income per share is computed by dividing net income attributable toshareholders of common stock with the weighted-average number of shares of common stock outstanding
for the period.

Diluted net income per share of common stock is not disclosed because the Company has nothing that might
dilute the per share information for the years ended June 30, 2019 and 2018.
Cash dividends per share presented in the accompanying nonconsolidated statement of income are dividends
applicable to the respective years, including dividends to be paid after the end of the fiscal year.

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

48

(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.

Changes in Accounting Policies that are difficult to distinguish from Changes in Accounting
Estimates, and Changes in Accounting Estimates
Change in depreciation method for property, plant and equipment — The Company took theopportunity provided by drawing up the Medium-term Management Plan, its first year is the current fiscal year,
to investigate the status of property, plant and equipment usage. As a result, because it is expected that theeconomic benefit derived from property, plant and equipment assets will be consumed equally over its useful lifeat the Company, from the current fiscal year the depreciation method for property, plant and equipment has
been changed from the declining-balance method to the straight-line method, and costs have been allocatedmore appropriately.
Also, as a consequence of this change in the depreciation method, for certain property, plant and equipment
assets, upon consideration of the price at the time of retirement, the residual value has been changed to ¥1, amemorandum of value.
As a result of this change, the depreciation expenses for the current fiscal year decreased by ¥15 million ($139
thousand,) and each of operating income, ordinary income, and income before income taxes increased by ¥15
million ($139 thousand) from the amounts based on the previous method.

3. CHANGES IN PRESENTATION(1) Change in accounting classification — “Deposits received” (¥2,322 million ($21,541 thousand) in thecurrent fiscal year and ¥1,803 million in the previous fiscal year), which was included in “other current
liability” in the non-consolidated statement of balance sheet in the previous fiscal year, is presented
separately due to its increased materiality.

(2) Changes following the adoption of Partial Amendments to Accounting Standard for Tax EffectAccounting — Effective from April 1, 2018, the Company applied Statement No. 28 Partial Amendments to

Accounting Standard for Tax Effect Accounting, issued by the ASBJ on February 16, 2018. Accordingly, itchanged its method of presenting “deferred tax assets” under “investments and other assets” and “deferred
tax liabilities” under “long-term liabilities.”
Consequently, previously stated amounts presented in the non-consolidated balance sheet for the previous
fiscal year were changed as follows: “deferred tax assets” under “current assets” decreased by ¥593 million.
Furthermore, “deferred tax liabilities” under “long-term liabilities” decreased by ¥593 million compared withthe time before the change went into effect, reflecting the offsetting of non-consolidated deferred tax assets.

49

4. INVENTORIESInventories at June 30, 2019 and 2018, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

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

2019¥4,329179¥4,5082018¥5,697218¥5,915

2019$40,160
1,660$41,820

5. REDUCTION ENTRY
In the case of the acquisition expenses of the Company that have been subsidized by the national government,
the amount of such subsidies is offset against the acquisition cost of the corresponding property, plant, andequipment.
The amount of reduction entry by accounts under property, plant, and equipment at June 30, 2019 and 2018,
was as follows:
Thousands of
U.S. Dollars

Millions of Yen

2019
Buildings and structures .......................................
Machinery and equipment ....................................
Total .................................................................

2019

2018
¥19
167
¥186

¥19
167
¥186

$176
1,549
$1,725

6. 	INVESTMENTS IN AND ADVANCES TO SUBSIDIARIES AND
ASSOCIATED COMPANIESInvestments in and advances to subsidiaries and associated companies as of June 30, 2019 and 2018, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2019¥27,026
3,041¥30,0672018¥26,704
2,756¥29,460

2019$250,716
28,211$278,927

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, 2019, since market value andestimated future cash flows are not available.

50

7. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at June 30, 2019 and 2018, consisted of loans from consolidated subsidiaries. The
annual interest rates applicable to the short-term borrowings ranged from 0.526% to 0.536% and 0.524% to0.536% at June 30, 2019 and 2018, respectively.
Long-term debt at June 30, 2019 and 2018, consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2019
Unsecured loans from banks due seriallyto 2026 with interest rates ranging from0.250% to 2.11656% .............................................
Obligation under finance leases ............................
Total .................................................................
Less current portion ..............................................
Long-term debt, less current portion .........

2019

2018

¥18,49049
18,539(1,977)¥16,562¥20,98545
21,030(2,066)¥18,964$171,530
455
171,985(18,340)$153,643

Annual maturities of long-term debt at June 30, 2019, for the five years and thereafter were as follows:
Thousands of
U.S. Dollars

Millions of Yen

Years Ending June 30

2020 .........................................................
2021 .........................................................
2022 .........................................................
2023 .........................................................
2024 .........................................................
2025 and thereafter .................................
Total ..................................................

Long-Term Debt

Lease Obligations

Long-Term Debt

Lease Obligations¥1,960
2,162
5,890
2,176
2,026
4,276
¥18,490

¥18
13
9
6
2
1
¥49

$18,183
20,05654,641
20,186
18,79539,668$171,529

$167
121
83
56
19
9
$455

The Company and four financial institutions have entered into overdraft contracts and a commitment line contract bysyndicated loan over three years. These commitment line contracts included restrictive financial covenants for eachfinancial institution.

51

8. 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. Additionally, for companies that meet certain
criteria, including (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 being prescribed as one year rather than thenormal 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.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the company so stipulate. The Companies Act provides certain limitations on theamounts available for dividends or the purchase of treasury stock. The limitation is defined as the amountavailable for distribution to the shareholders, but the amount of net assets after dividends must be maintained at
no less than ¥3 million.
(b) Increases/Decreases and Transfer of Common Stock, Reserve, and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve(a component of retained earnings) or as additional paid-in capital (a component of capital surplus), dependingon the equity account charged upon the payment of such dividends, until the 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.

52

9. INCOME TAXESThe Company is subject to Japanese national and local income taxes which, in the aggregate, resulted in anormal effective statutory tax rate of approximately 30.6% and 30.9% for the years ended June 30, 2019 and2018, respectively.
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at June30, 2019 and 2018, are as follows:
Thousands of
U.S. Dollars

Millions of Yen

2019

2019

2018

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

¥358
67
422
31
27
72
62
93
287
(626)
793

¥356
30
392
35
40
48
62
44
243
(555)
695

$3,321
622
3,915
288
250
668
575
863
2,662
(5,807)
7,357

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

746

758

6,921

Reserve for special account for advanced
depreciation of property ....................................

477

265

4,426

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

192
800
27
2,242

510
728
5
2,266

1,781
7,421
250
20,799Net deferred tax assets .......................................

¥(1,449)¥(1,571)$(13,442)

53

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, 2019, with the corresponding
figures for 2018, is as follows:

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

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

2018
30.9%
1.9
3.3
5.6
1.8
(4.4)
(1.7)
(3.0)
34.4%

10. CONTINGENT LIABILITIESAt June 30, 2019, the Company had the following contingent liabilities:
Millions of Yen

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

54

¥48
73

Thousands of
U.S. Dollars

$445
677

11. SUBSEQUENT EVENTS
a. Appropriations of Retained Earnings
On August 30, 2019, the following appropriation of retained earnings at June 30, 2019, was resolved by the
extraordinary Board of Directors’ meeting:Millions of Yen

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

¥1,193Thousands of
U.S. Dollars$11,067

The total amount of the dividends above includes ¥17 million ($158 thousand) in dividends on the Company’s
shares owned by “ESOP.”

b. Issuance of new shares as restricted stock compensation
The Company decided to issue new stocks as restricted stock compensation at the extraordinary Board of
Directors’ meeting held on September 26, 2019, as follows:
The Company aims to have the directors (not including outside directors; “Eligible Directors”) share benefits
and risks of stock price fluctuations with shareholders and further enhance their willingness to contribute toimproving stock prices and enhancing corporate value. Therefore, the Company decided, at the Board of
Directors held on August 14, 2017, to introduce a restricted stock compensation system (the “System”), which
will issue restricted stock to Eligible Directors.
Furthermore, the 73rd Annual General Meeting of Shareholders held on September 28, 2017, approved, under
the System, setting the total amount of monetary compensation claims payable to the Eligible Directors ascompensation related to restricted stock at a level where it does “not exceed an annual amount of ¥60 million.”
In addition, the total number of 50,000 shares, which are restricted stock to be allotted to Eligible Directors willbe the upper limit of the number of restricted shares to be allotted in each fiscal year, and the transfer restriction
period of restricted stock will be between one year to five years, determined by the Board of Directors.
October 25, 2019(1)    Payment date(2)    Class and number of shares to be issued 13,514 shares of common stock of the Company¥3,125 per share(3)    Issue price(4)    Total issue price of shares to be issued¥42,231,250¥1,563 per share(5)    Capitalization amount¥21,122,382(6)    Total capitalization amount(7)    Method of offer or allotment
Allotment of specified restricted stocks
In-kind contribution of monetary compensation claims(8)    Method of contribution(9)    Allottees, number thereof and
13,514 shares to eight directors of the company (excluding
outside directors)
number of shares to be allotted
October 25, 2019 to October 24, 2022
(10) Transfer restriction period(11) Other	Issue of new shares to be allotted is conditioned on the securities
registration statement taking effect in accordance with the
Financial Instruments and Exchange Act.

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c. Purchase of treasury shares
At the meeting of Board of Directors held on August 13, 2019, the Company resolved as follows regarding
matters concerning the acquisition of treasury shares in accordance with the provisions of Article 156 of theCompanies Act, which shall be applied mutatis mutandis pursuant to the provision of Paragraph 3 of Article 165of the same Act.
1. Reason for the acquisition of treasury shares
To raise the value per share of stock by improving capital efficiency and enhancing shareholder return.
2. Details of matters pertaining to the acquisition(1) Type of shares to be acquired
		 Common stock of the Company(2) Total number of shares available for acquisition
		 800,000 shares (upper limit) (5.1% of total issued shares (excluding treasury shares))(3) Total purchase price of shares		 ¥2 billion (upper limit)(4) Acquisition period
		 From August 14, 2019 to June 30, 2020
(5) Acquisition method
		 Market purchase on the Tokyo Stock Exchange
		 (i)   Plan to acquire up to 500,000 shares of the “(2) Total number of shares available for acquisition”
through the Off-Auction Own Share Repurchase Trading (ToSTNeT -3) system.
		 (ii) Of the “2. (2) Total number of shares available for acquisition,” make a market purchase under thetrust method up to the number of shares after deducting the shares acquired pursuant to (i) in thepreceding paragraph.
3. Status of acquisition of treasury shares as of August 31, 2019(1) Type of shares acquired
		 Common stock of the Company(2) Total number of shares acquired
		 420,500 shares(3) Total purchase price of shares		 ¥961 million(4) Acquisition period
		 From August 14, 2019 to August 31, 2019(5) Acquisition method
		 Market purchase on the Tokyo Stock Exchange

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Si g ni f i cant C on solid ated S u b s i d i ari es
Significant consolidated subsidiaries of each segment as of June 30, 2019 are as follows:

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

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

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

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

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

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

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1-14-6 Kudan-kita Chiyoda-ku, Tokyo 102-8539, Japan
Telephone: +81 3 5276 2454 Facsimile: +81 3 5276 2656
http://www.n-koei.co.jp E-mail: info@n-koei.co.jp

Financial Report
Year ended June 30, 2019

Printed in Japan