Annual Report

2011

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

Year Ended March 31, 2011

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

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

CONTENTS
Financial Highlights ....................................................................................................... 1
Consolidated Business Report for Fiscal 2010 (Fiscal Year Ended March 31, 2011) ....... 2
Consolidated Balance Sheets ....................................................................................... 10
Consolidated Statements of Income ............................................................................ 12
Consolidated Statements of Changes in Equity .......................................................... 13
Consolidated Statements of Cash Flows ..................................................................... 14
Notes to Consolidated Financial Statements .............................................................. 15
Non-consolidated Balance Sheets . .............................................................................. 38
Non-consolidated Statements of Operations .............................................................. 40
Non-consolidated Statements of Changes in Equity .................................................. 41
Notes to Non-consolidated Financial Statements . ..................................................... 42
Corporate Information ................................................................................................. 52
Major Nippon Koei Group Companies . ...................................................................... 54

Financial Highlights

Consolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended March 31

2011

2010

2011

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

¥65,807¥65,096$791,425

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

1,207

2,026

14,516

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

15.16

25.17

0.18

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

74,74180,100898,870

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

43,69843,361

525,532

As of March 31

Non-Consolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended March 31

2011

2010

2011

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

¥48,426¥47,006$582,393

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

3,160

1,396

38,004

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

39.67

17.34

0.48

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

66,76369,030802,922Equity ������������������������������������������������������������������

40,33538,006

485,087

As of March 31

1

Co n so l i dated B u sine ss R ep o rt fo r Fi s c al 2010
( F i sca l Year En de d M arch 31, 2011)
1. Overview of Performance
The Japanese economy came to a standstill in the current year due to a decline in consumer spending and fewer
public works projects on top of stagnate exports to emerging markets. The massive earthquake and tsunami thatstruck northeastern Japan on March 11, taking thousands of lives, as well as the subsequent nuclear accident arealso expected to take toll on Japan’s economy.
While the Nippon Koei Group’s overseas consulting and power-related operations remained healthy, thanks toJapan’s increased Official Development Assistance (ODA) budget for yen-loan-financed projects as well as anincrease in distribution equipment investments for public power utilities, the overall outlook for the futureremains bleak as more companies compete for fewer public works projects.
Working against this backdrop during the last fiscal year of its medium-term management plan aimed at“reform for growth,” the Group has focused on more promising business areas. These areas have included
railways, environment and energy as well as new business models for small hydroelectric generation.
We also boosted our technological capabilities via employee professional development initiatives and improved
productivity while implementing ongoing risk and earnings management improvement measures for overseas
consulting operations.
Consolidated orders received during the year dropped 13.1% below last year’s level to total 60,532 million yen
while year-on-year sales remained virtually flat at 65,807 million yen.
Net income fell sharply by 40.4% on a year-on-year basis to hit 1,207 million yen owing to loss from a natural
disaster.
The performance for each business segment is outlined below.

Domestic Consulting Operations
While performance was up for consulting operations related to park management and maintenance as well as
data sharing services using the Intelligent Transport Systems (ITS), sales dwindled in operations related to dam
and river facility engineering, soil quality and geo-environmental assessment, in addition to public sector IT
infrastructure development. As a result, orders fell 16.6% below the previous year’s figure to total 30,550 million
yen while sales were down 5.9% year on year to total 31,938 million yen. In the final analysis segment loss
amounted to a total of 827 million yen.

Overseas Consulting Operations
Although orders were up in the railway industry (our key market) along with an increase in environmental
management projects aimed at fighting global warming and climate change, overall orders declined 24.0% to hit
15,329 million yen due mainly to a delay in a large-scale yen-loan project. Sales remained flat at 15,960 million yen
while segment profit totaled 1,311 million yen.

Power Engineering Operations
Orders were up for the power equipment manufacturing as well as electrical transformer installation and othercivil engineering operations. The spike in orders was fueled by public power utilities’increased investments incomputer control systems and electrical transformer installation work that included expansions and upgrades totransformer substations. The electrical system consulting operations saw a big increase in orders for disastercommunication network system design and overseas thermal power plant consulting services. This rising demandbrought orders up 13.8% year on year to total 14,630 yen. Sales also rose 20.3% year on year to reach 15,742
million yen while segment profit totaled 1,606 million yen.

2

Real Estate Leasing
Sales from our real estate leasing operations remained about the same as the previous year at 1,262 million yen
while segment profit totaled 779 million yen.

2. Future Challenges
At Nippon Koei Group we “act with sincerity and contribute to society through technology.” It’s the philosophy
behind everything we do. Just as our slogan says, Nippon Koei is a company that is continually “Challenging
mind, Changing dynamics.”
These two statements sum up our commitment to maintaining the highest technological standards. That
commitment is the driving force that enables us to maintain our position as a major player in the domestic
arena who is steadily making inroads into the quickly growing global market via a road map for sustainablegrowth. Over the next ten years we will make the dream of global operations driven by a multi domestic strategy
a reality. Each of our operational bases throughout the world will forge an operational foundation best suited toits local environment and market while working together to build a strong global network upon which the entire
Group can rest. Our priorities and specific measures are as outlined below.
(1) Step up efforts for global expansion and implementation of multi domestic strategy(2) Place more emphasis on promising businesses(3) Explore and develop new business models(4) Develop and implement core technologies for key business areas(5) Improve productivity
Dark clouds continue to loom over the business horizon. Although public work projects in Japan are expected to
grow in the short-run, the long-term outlook is cloudy. Once the Japanese government’s first supplementarybudget to fund quick reconstruction of areas affected by the March 11 disaster is spent, we expect Japan’s public
works project budget to shrink under the weight of the government’s financial burdens.
The nuclear accident in Fukushima will have major impact on power companies’ bottom lines and trigger
cutbacks in capital investments, making the overall business climate even stormier.
Working against this backdrop, the Nippon Koei Group is doing everything it can to aid recovery efforts in thewake of the devastating March 11 earthquake. We went to work on reconstruction immediately after theearthquake struck. Leveraging the infrastructure engineering expertise of our entire Group, we will continue tohelp earthquake-hit areas rise from the rubble with safe, disaster-resistant communities.
Regulatory compliance is built into the very foundation of Nippon Koei. We will continue to build on thatfoundation via effective use of our internal regulations as well as meticulous risk, safety, and quality control
management to firmly establish our place as a leading company that is trusted by the public.
In May 2011, the Nippon Koei merged with our consolidated subsidiary NEPCO Ltd., and has worked to fully
integrate this company as we work to make group management more streamlined than ever.

Noriaki Hirose
President:

3

3. Analysis of Financial Status, Management Performance
Here is an analysis of the Nippon Koei Group financial status, management performance as well as cash flow
status for the current consolidated fiscal year.

(1) Analysis of Financial Status
Our consolidated assets as of the end of the fiscal year under review amounted to 74,741 million yen, a 5,359
million yen drop from the preceding year.
The primary cause for the drop was a 5,724 million yen decrease in current assets and a 365 million yen increasein fixed assets.
The decrease in current assets was due primarily to a 1,080 million yen decrease in cash and cash equivalents, a
3,926 million yen decrease in accounts receivables (trade notes and trade accounts) as well as a 794 million yen
decrease for work in process.
The increase in fixed assets was due primarily to a 518 million yen decrease in tangible and intangible fixed
assets, a 670 million yen increase in investment securities, and a 198 million yen increase in long-term deferred
tax assets.
On the downside, consolidated liabilities at the end of the fiscal year under review decreased 5,696 million yen
compared to the previous year to reach a figure of 31,043 million yen.
The main reason for the decline was a drop of 5,523 million yen in current liabilities, as well as a decrease of 173
million yen in long-term liabilities.
The decrease in current liabilities was due primarily to a 601 million yen dip in accounts payables a 4,017
million yen drop in current portion of long-term debt, and a 708 million yen decline in advances received.
The decline in long-term liabilities was due primarily to a 162 million yen decrease in long-term debt a 127
million yen increase in liability for retirement benefits and a 150 million yen decrease in deposits received.
Equity (net assets) at the end of this fiscal year increased 337 million yen compared to the previous year to reach
43,698 million yen.
The main cause behind this uptick was an increase of 605 million yen in retained earnings coupled with a 212
million yen decrease in unrealized loss on available-for-sale securities.

(2) Analysis of Performance
Net sales in the current fiscal year increased 711 million yen (1.1%) over the previous year to reach a total of
65,807 million yen.
Sales for the Power Engineering segment in particular increased 2,661 million yen (20.3%) over the previous
year to reach a total of 15,742 million yen. Sales from the segment accounted for 23.9% of overall sales, up 3.8
percentage points from the previous year.
Operating income totaled 2,703 million yen, down 664 million yen (19.7%) from the previous year. The cost to
sales ratio was 74.5%, up 1.2 points over the previous year, while the ratio of SG&A expenses to sales was 21.4%,
down 0.1 percentage points from the previous year. These results brought the ratio of operating income to sales
down 1.1 points year on year to 4.1%.

4

All this added up to income before income taxes and minority interests totaling 2,261 million yen, in addition to
net income totaling 1,207 million yen, down 819 million yen (40.4%) from the previous year.
The basic net income per share came to 15.16 yen, down 10.01 yen year on year from 25.17 yen.

(3) Analysis of Cash Flow Status
Cash and cash equivalents at the end of the current year totaled 5,157 million yen, down 1,080 million yen compared tothe end of the previous year. The factors behind this decrease are described below.
Net cash flow from operating activities came to 5,965 million yen (vs. 1,443 million yen for the previous year). This drop
was due to a 1,330 million yen year-on-year decline that brought income before income taxes and minority interests down
to 2,261 million yen, as well as a 7,314 million yen year-on-year dip that brought trade accounts receivable andinventories down to 4,760 million yen.
Cash flow from investing activities totaled 2,137 million yen (vs. expenditures of 817 million yen previous year). Thisjump was due primarily to a year-on-year increase of 856 million yen for purchases of investment securities totaling 2,322
million yen as well as a 336 million yen year-on-year increase in expenditures for purchases of property, plant andequipment totaling 671 million yen.
Cash flow from financing activities amounted to 4,847 million (vs. expenditures of 1,114 million yen in the previous year).
This 3,927 million yen year-on-year increase totaling 4,118 million yen came from the repayments of long-term debt.
The table below shows trends in cash flow-related indicators for the Group.
Reference: Trends in cash flow-related indicators

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

Fiscal Year
Ended March2007

Fiscal Year
Ended March2008

Fiscal Year
Ended March2009

Fiscal Year
Ended March2010

Fiscal Year
Ended March
2011

53.1

52.1

52.2

53.8

58.1

36.2

25.4

22.7

27.5

32.0

2.7
27.5

17.8
10.2

2.5
28.0

9.5
9.8

1.6
52.3

Capital-to-asset ratio: stockholders’ equity / total assets
Capital-to-asset ratio on market value basis: market capitalization / total assets
Interest-bearing debt-to-cash flow ratio: interest-bearing debts / cash flow
Interest coverage ratio: cash flow / interest payment
Notes: 1. All figures are calculated on the basis of consolidated financial figures.
2. Market capitalization is computed on the basis of the number of shares issued, excluding treasury stocks.
3. Cash flow here means operating cash flow.
4. Interest-bearing debt here comprises all debts included in the balance sheet on which interest is paid.

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

Change onPrevious Year(%)

(Millions of yen)

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

¥30,550
15,32914,63023
60,532

-16.6
-24.0
13.8
-25.2
-13.1

11,292
31,907
5,438¥48,637

-21.4
-5.4
20.0
-7.6

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

(2) Sales PerformanceThis Consolidated
Fiscal YearBusiness Category

Change onPrevious Year(%)

(Millions of yen)Domestic consulting operations . ............................
Overseas consulting operations ..............................
Power engineering operations ................................
Real estate leasing operations .................................
Other business operations .......................................
Total 2011 sales ....................................................

¥31,938
15,96015,742
1,262
905¥65,807

-5.9
1.0
20.3
0.4
-11.7
1.1

Notes: 1. Figures above do not include consumption tax.
2. Sales to major customers as a proportion to total sales are given as follows.

CustomerThis Consolidated
Fiscal Year
Amount(Millions of yen)

Proportion(%)

Previous Consolidated
Fiscal Year
Amount(Millions of yen)

Proportion(%)

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

¥10,659

16.2¥12,993

20.0

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

8,414

12.8

6,712

10.3

Japan International
Cooperation Agency . ........................

6,832

10.4

6,210

9.5

6

5. Research and Development
You can see the Nippon Koei Group’s philosophical commitment to “act with sincerity and contribute to society
through technology” behind everything it does. Nippon Koei is putting technology to work with an eye tocreating a better world for everyone.
Overall Group research and development costs for the consolidated fiscal year under review amounted to 326
million yen.

Domestic and Overseas Consulting and Other Operations
Research and development over a wide range of construction consulting services is conducted at Research &Developing Laboratory. We monitor research by means of adjusted return mapping in order to accelerate theresearch process and evaluate the results with an eye to practical application. The following R&D projects wereconducted during the consolidated fiscal year under review:(1) Research and development of advanced numerical analysis techniques andgeneral-purpose software applications
R&D work was conducted on the development of automated design software for canal/dock management,
geographical information and NK-GIAS hydrology application software, as well as research relating to practicalapplications of two- and three-dimensional hydraulic analysis.

(2) Research and development relating to national disaster prevention
R&D work also focused on ground surface uplift due to the recovery of groundwater levels, development of arisk assessment technique for tsunamis and storm surges, development of a method for assessing the impact oflandslides on tunnels, research to enhance systems designed to detect slope failure, development of acomprehensive river basin sediment control model as well as the study of earthquake fault and seismic load
design.

(3) Research and development for climate change measures
Research efforts involved developing multi layer flow analysis techniques for CO2 aquifer storage, localized
weather prediction aimed at reducing water damage risk caused by seasonal fluctuations, simulations designed
to help prevent groundwater salinization and groundwater resource management technology, real-time disaster
information IT, development of an ecosystem and water environment management simulator, as well as
techniques for monitoring and preserving biodiversity in the context of global warming.

(4) Research and development in performance verification and management support
systems
Research was carried out on a dynamic crack propagation analytical model for concrete structures, as well as aproject assessment model for social infrastructure improvements.

(5) Technical exchanges with overseas research institutes
Technical exchange activities were conducted with the Asian Institute of Technology, the United Nations
University, the Korean Electrical Power Research Authority, and National Cheng Kung University in Taiwan.
Research and development costs to support these activities totaled 218 million yen.

Power Engineering Operations
R&D work in this area was mainly carried out at the Fukushima operations site. Main R&D efforts for thisconsolidated fiscal year included:7

(1) Development of modified down-sized monitor control panels
The panel is designed to meet the need for a lower cost, down-sized monitor control panel for use at power-feed
substations in the 275 kV class or below. We worked on developing smaller monitor control panels that utilize aninternal structure LAN for inter-machine data transmission, e.g. between a monitor control panel and aninterface panel for substation control.

(2) Development of a 275 kV or less large-capacity IP type TC
TEPCO has plans to use large-capacity Internet Protocol (IP) telecontrol (TC) equipment for power-feed
substations of 275 kV or less. Working with an eye to securing future orders, we focused on developing a largecapacity IP type TC based on equipment designed for power distribution substations.

(3) Research on improving water turbine performance
We conducted computational fluid dynamics (CFD) and model tests for a Francis turbine with a specific speedof 200 m/kW. Better turbine performance will enable us to capitalize on the rising demand predicted for thesmall to medium hydropower plant market.
We plan to design a model turbine and complete a prototype runner during fiscal year 2011.

(4) Research on commercial application of hybrid servo governor
We conducted research and development on a cost-effective, easy-to-maintain governor (a device used forcontrolling turbine speed). The governor incorporates a hybrid servo system, which is driven by the rotation of
the pump to open and close a hydraulic cylinder, in the turbine’s operating mechanism.

(5) Basic smart grid research
The smart grid is an effective way to deliver electricity over networks consisting of solar and other distributed
power systems. A growing number of power companies and related industries are investing in smart grid
research. Our research efforts have been focused on discovering specific areas and business models that offer us
the greatest potential.
Research and development costs to support these activities totaled 108 million yen.

8

6. Business Risks
The following are deemed as risks that might affect Nippon Koei’s future financial status or corporate
performance as of the date this report was submitted. These risks moreover are not limited to those listed below.

Uneven Annual Distribution of Performance Results
The primary operations of Nippon Koei include domestic and overseas construction consultancy and powerengineering. The domestic construction consultancy operations entail mainly government and public agency
projects whose orders come in as a cluster towards the end of the financial year (March). As a result, 70-80% ofGroup sales tend to occur in the second half of the year.

Dependence on Major Customers
Our domestic and overseas construction consultancy operations rely on foreign and national government
contracts for some 90% of its sales. Sales performance on the domestic front tends to be affected by trends ingovernment spending while our international orders are a reflection of the Japanese ODA budget.
Since about 50-70% of our power engineering operations are for the Tokyo Electric Power Company (TEPCO),
our sales performance is largely dictated by capital investments at TEPCO.

9

Co n so l i da ted B a lance S h eet s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
March 31, 2011 and 2010

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

ASSETS

2011

2011

2010

CURRENT ASSETS:¥ 5,157¥ 6,237$ 62,020

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

189

33

2,273

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

24,16628,248290,631

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

(44)

(107)

(529)

Inventories (Note 4) .............................................

6,863

7,696

82,538Deferred tax assets (Note 11) ..............................

1,309

1,241

15,743

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

1,541

1,557

18,533

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

39,18144,905471,209Land . ...................................................................

13,986

13,644

168,202

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

20,012

19,863

240,673

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

2,375

2,272

28,563

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

2,679

2,678

32,219Lease assets ..........................................................

286

346

3,440

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

6

10

72

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

39,34438,813473,169

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

(15,685)(15,011)(188,635)

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

23,65923,802

284,534

7,523

6,853

90,475and associated companies (Note 15) .................

530

530

6,374

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

26

34

313

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

1,238

1,545

14,889Receivables in bankruptcy ..................................

121

118

1,455

Deferred tax assets (Note 11) ..............................

621

423

7,468

Other assets ..........................................................

2,038

2,122

24,510Allowance for doubtful accounts ........................

(196)

(232)

(2,357)

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

11,901

11,393

143,127

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

¥74,741¥80,100$898,870

Cash and cash equivalents (Note 15) ..................
Receivables (Note 15):PROPERTY, PLANT AND
EQUIPMENT (Notes 5, 6 and 9):

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 3 and 15) ..............
Investments in unconsolidated subsidiaries

See notes to consolidated financial statements.

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

Millions of Yen

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short‑term borrowings (Notes 6 and 15) ...........
Current portion of long-term debt
(Notes 6 and 15) .................................................
Payables (Note 15):
Trade notes .........................................................
Trade accounts ...................................................
Income taxes payable ..........................................
Advances received ................................................
Accrued bonuses ..................................................
Allowance for anticipated project loss . ..............
Allowance for loss from a disaster ......................
Other current liabilities .......................................
Total current liabilities ....................................
LONG-TERM LIABILITIES:Long-term debt (Note 6) . ....................................
Liability for retirement benefits (Note 7) ...........
Allowance for environmental measures..............
Asset retirement obligations (Note 8) .................
Deposits received (Note 9) . .................................
Deferred tax liabilities (Note 11) . .......................
Negative goodwill ................................................
Total long-term liabilities ................................

2011

2011

2010

¥ 8,000¥ 8,000$ 96,212

168

4,185

2,020

401
4,704
517
5,816
1,717
92
63
3,493
24,971

411
5,295
828
6,524
1,681
259

4,823
56,572
6,218
69,946
20,6491,106
758
42,009300,3133,311
30,494

286
3,369
83
53
2,185
68
28
6,072

448
3,242

2,335
68
42
6,245

3,440
40,517998
637
26,278818
337
73,0257,393
6,132
33,0057,393
6,132
32,40088,91273,746396,933(2,304)(2,245)(27,709)110

COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 12, 14 and 15)
EQUITY (Notes 9 and 16):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares in 2011 and 2010 .................
Capital surplus .....................................................
Retained earnings ................................................
Treasury stock—at cost
7,170,987 shares in 2011
and 6,923,529 shares in 2010 ............................
Accumulated other comprehensive loss:
Unrealized loss onavailable-for-sale securities .............................
Deferred loss onderivatives under hedge accounting ...............
Foreign currency translation adjustments .......
Total ....................................................................
Minority interests ................................................
Total equity . .....................................................

(812)

(600)

(9,765)26(3)43,437261
43,698(7)
43,073288
43,361313(37)522,393
3,139
525,532

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

¥74,741¥80,100$898,870

11

Consolidated Statement of Income and Comprehensive Income,Consolidated Statement of Income
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2010

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

2011

2011

2010

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

¥65,807¥65,096$791,425

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

49,016
16,79147,734
17,362589,489
201,936SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (Note 12) . ......
Operating income ............................................

14,0882,703

13,995
3,367

169,428
32,508

285
(95)
(152)

300

(125)
114

3,428
(1,143)(1,828)OTHER INCOME (EXPENSES):Interest and dividend income .............................
Interest expense ...................................................
Foreign currency exchange (loss) gain ...............
Loss on disposal of property,
plant and equipment . ........................................
Gain on sales of investment securities ...............
Loss on sales of investment securities ................
Loss on valuation of investment securities ........
Loss from a natural disaster (Note 13) ...............
Other-net . .............................................................
Other (expenses) income-net ..........................

(9)
19
(577)
(69)
156
(442)

(108)
229

(26)
88
(181)
(8)

(6,939)
(830)

1,875

62

224

(5,316)

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

2,261

3,591

27,192

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

1,183
(150)
1,033

1,170

367
1,537

14,227(1,804)
12,423NET INCOME BEFOREMINORITY INTERESTS . .................................

1,228

2,054

14,769MINORITY INTERESTS IN NET INCOME .....
NET INCOME .......................................................

21
1,207

28
2,026

253
14,516MINORITY INTERESTS IN NET INCOME .....
NET INCOME BEFORE MINORITY
INTERESTS ........................................................

21

253

1,228

14,769(212)(2,550)

33
(4)
(183)

397
(48)
(2,201)COMPREHENSIVE INCOME (Note 18) ............

¥ 1,045$ 12,568

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

¥ 1,025¥20$ 12,327$
241

OTHER COMPREHENSIVE INCOME(LOSS) (Note 18) :Unrealized loss onavailable-for-sale securities ...............................
Deferred gain onderivatives under hedge accounting .................
Foreign currency translation adjustment . .........
Total other comprehensive income (loss) . .........

U.S.Dollars(Note 1)Yen

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

12¥ 15.16
7.50¥ 25.17
7.50

$

0.18
0.09

Co n so l i da ted S t atemen t s o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2010

Thousands

Millions of Yen
Accumulated other comprehensive income (loss)

BALANCE, APRIL 1, 2009 ���������������������������
Adjustment of retained earnings
for a newly consolidated subsidiary ����������
Net income ����������������������������������������������������Cash dividends, ¥7.50 per share �������������������
Purchase of treasury stock ���������������������������
Net change in the year ����������������������������������
BALANCE, MARCH 31, 2010 ����������������������
Net income ����������������������������������������������������Cash dividends, ¥7.50 per share �������������������
Other retained earnings ��������������������������������
Purchase of treasury stock ���������������������������
Net change in the year ����������������������������������
BALANCE, MARCH 31, 2010 ����������������������

Outstanding
Number of
Shares ofCommon Stock

Common Stock

Capital Surplus

80,575¥7,393¥6,132Retained
Earnings¥30,869¥(2,017)

DeferredGain (loss) on
Derivatives
under Hedge
Accounting

Foreign
Currency
Translation
Adjustments

Total¥(1,898)¥40,479

6,132

2,026

2,026

2,026

(604)

(604)

(604)

(228)

(228)

32,400(2,245)

1,298

(7)

1,291

56

1,347

(600)

(7)

43,073288

43,361

1,207

1,207

1,207

(598)

(598)

(598)

(4)

(4)

(4)

(3)

(62)

(62)

(179)

(27)

(206)

¥(3)

¥43,437¥261¥43,698(59)¥7,393¥6,132¥40,711109(247)
79,486¥232

Total Equity

109

(228)
7,393

Minority Interests

109

(842)
79,733

Unrealized Gain(loss) on
Available-for-sale
Securities

Treasury
Stock¥33,005¥(2,304)

(212)

33

¥ (812)¥26

Thousands of U.S.Dollars (Note 1)
Accumulated other comprehensive income (loss)

BALANCE, MARCH 31, 2010 ����������������������
Net income ����������������������������������������������������Cash dividends, $0.09 per share �������������������
Other retained earnings ��������������������������������
Purchase of treasury stock ���������������������������
Net change in the year ����������������������������������
BALANCE, MARCH 31, 2011 ����������������������

Common Stock

Capital Surplus$88,912$73,746

Retained
Earnings

TreasuryStock$389,657$(26,999)

Unrealized Gain(loss) on
Available-for-sale
Securities$(7,216)

DeferredGain (loss) on
Derivatives
under Hedge
Accounting

Foreign
Currency
Translation
Adjustments$(84)$3,464

Total Equity$521,480

14,516

14,516

14,516(7,192)(7,192)(7,192)(710)$73,746

Minority Interests$518,016(48)$88,912

Total$396,933$(27,709)(2,549)397$(9,765)

$313

(48)

(48)

(37)

(747)

(747)

(2,152)(325)(2,477)$(37)$522,393$3,139$525,532

See notes to consolidated financial statements.

13

Co n so l i da ted S t atemen t s o f C as h Fl ow s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2010

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

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

2011

FINANCING ACTIVITIES:

2011

2010

¥2,261¥3,591$27,192(1,550)
1,010

(874)
1,088
(4)

(18,641)
12,147

Loss on disposal of property, plant andequipment ...........................................................

7

25

84

Loss on adjustment for changes of accounting
standard for asset retirement obligations .........

36

Loss on sales of investment securities .................

558

Adjustments for:
Income taxes – paid ..............................................
Depreciation and amortization ............................
Gain on sales of property, plant and equipment .

433
93

6,711

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

3,927(1,854)47,228Decrease (Increase) in inventories . ...................
Decrease in trade accounts payable . .................
Increase in liability for retirement benefits ......
Other—net
Net cash provided by operating activities

833
(601)
128
(644)
5,965

(700)
(41)
173
(54)
1,443

10,018(7,228)
1,539(7,745)71,738INVESTING ACTIVITIES:
14

2011

2010
¥ (191)
(89)
(228)
(604)
(2)
(1,114)$(49,525)

(68)
(59)
(598)
(4)
(4,847)

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

(61)

15

(734)

NET DECREASE IN CASH
AND CASH EQUIVALENTS ...................................

(1,080)(473)(12,989)¥(4,118)

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

(818)
(710)
(7,192)(47)(58,292)

113

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

6,237

6,597

75,009CASH AND CASH EQUIVALENTS,
END OF YEAR . .......................................................

¥5,157¥6,237$62,020

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

¥ 113(8,070)Liabilities increased by consolidation of a
subsidiary previously unconsolidated ...................

90

1,120

10,138

Increase in liability due to changes of accounting
standard for assets retirement obligations ............

(1,466)(159)¥ (817)(27,925)(24)$ (25,701)

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

15

9

180

Purchases of property, plant and equipment ..........

(671)

(335)

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

843

Purchases of investment securities ..........................
Increase in other assets ............................................
Net cash used in investing activities . ..............

(2,322)(2)¥ (2,137)

14

Repayments of long-term debt
Repayments of lease obligations
Purchase of treasury stock
Dividends paid
Other—net
Net cash used in financing activities

2011

NON-CASH INVESTING AND FINANCING
ACTIVITIES:

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

See notes to consolidated financial statements.

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

¥

53

$

637

N o te s to C on solid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2011 and 2010

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set
forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in
conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements of International Financial Reporting Standards.
Under Japanese GAAP, a consolidated statement of income and comprehensive income is required from thefiscal year ended March 31, 2011 and has been presented herein. Accordingly, accumulated other comprehensive
income is presented in the consolidated balance sheet and the consolidated statement of changes in equity. In
addition, “net income before minority interests” is disclosed in the consolidated statement of income andcomprehensive income from the year ended March 31, 2011.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the consolidated financial statements issued domestically in order to present them in a form which ismore familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2010
financial statements to conform to the classifications used in 2011.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Nippon
Koei Co., Ltd. (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.
S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at therate of ¥ 83.15 to $1, the rate of exchange at March 31, 2011. Such translations should not be construed as
representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa.	Consolidation —The consolidated financial statements as of March 31, 2011 include the accounts of
the Company and its ten significant (ten in 2010) subsidiaries (together, the “Group”).
Nippon Koei Power Systems Co., Ltd. was merged with the Company on April 1, 2010 and excluded from theGroup, from the fiscal year ended March 31, 2011. NKLAC, Inc. was established in 2010 and included in theGroup from the fiscal year ended March 31, 2011.
Under the control concept, those companies in which the Company, directly or indirectly, is able to exercise
control over operations are fully consolidated.
Investments in unconsolidated subsidiaries and associated companies are stated at cost. If the equity methodof accounting had been applied to the investments in these companies, the effect on the accompanying
consolidated financial statements would not be material.
Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets of theacquired subsidiaries at the date of acquisition.
Goodwill and negative goodwill which occurred before March 31, 2010 are amortized using the straight-line
method over 5 to 10 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is eliminated.

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

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

15d.	Marketable and Investment Securities —Marketable and investment securities are classified andaccounted for, depending on management’s intent, as follows:i) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent
and ability to hold to maturity are reported at amortized cost and ii) available-for-sale securities,
which are not classified as the aforementioned securities, are reported at fair value, with unrealized
gains and losses, net of applicable taxes, in a separate component of equity.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. For
other than temporary declines in fair value, investment securities are reduced to net realizable value by acharge to income.

e.	Property, Plant and Equipment —Property, plant and equipment are stated at cost. Depreciation ofproperty, plant and equipment is computed substantially by the declining-balance method at rates
based on the estimated useful lives of the assets, while the straight-line method is applied to buildings
acquired after April 1, 1998 and lease assets as well as other equipment for rent. The range of useful
lives is principally from 3 to 50 years for buildings and structures, from 2 to 15 years for machineryand equipment, and from 2 to 20 years for furniture and fixtures. The useful lives for lease assets are
the terms of the respective leases.
f.	Allowance for Doubtful Accounts —The allowance for doubtful accounts is stated in amounts
considered to be appropriate based on the companies’ past credit loss experience and an evaluationof potential losses in the receivables outstanding.
g.	Retirement and Pension Plans —The Group has contributory defined benefit pension plans andunfunded retirement benefit plans for the benefit of its employees.
Effective April 1, 2000, the Group adopted a new accounting standard for employees’ retirement
benefits and accounted for the liability for retirement benefits based on the projected benefit
obligations and plan assets at the balance sheet date. The transitional obligation of ¥2,016 million forthe subsidiaries, determined as of April 1, 2000, is being amortized over mainly 15 years.
Unrecognized actuarial gain or loss is recognized by the straight-line method over mainly 13 years.
Unrecognized prior service costs are recognized by the straight-line method over mainly 13 years.
Retirement benefits for directors and corporate auditors are provided at the amount which would be
required if all directors and corporate auditors retired at the balance sheet date.
h.	Allowance for Anticipated Project Loss —The Group has made a provision for anticipated losses on
uncompleted project contracts.
i.	Asset Retirement Obligations— In March 2008, the ASBJ published the accounting standard for
asset retirement obligations, ASBJ Statement No.18 “Accounting Standard for Asset Retirement
Obligations” and ASBJ Guidance No.21 “Guidance on Accounting Standard for Asset Retirement
Obligations”. Under this accounting standard, an asset retirement obligation is defined as a legal
obligation imposed either by law or contract that results from the acquisition, construction,
development and the normal operation of a tangible fixed asset and is associated with the retirementof 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, theliability 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 the amount of the liability.
The asset retirement cost is subsequently allocated to expense through depreciation over theremaining 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 are reflected as an increase or a decrease in the carrying amount of the liability and thecapitalized amount of the related asset retirement cost. This standard was effective for fiscal years
beginning on or after April 1, 2010.
16

The Group applied this accounting standard effective April 1, 2010. The effect of this change was todecrease income before income taxes and minority interests by ¥36 million ($ 433 thousand).
j.	Leases —In March 2007, the Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ
Statement No.13, “Accounting Standard for Lease Transactions”, which revised the previous
accounting standard for lease transactions issued in June 1993. The revised accounting standard forlease transactions was effective for fiscal years beginning on or after April 1, 2008.
Under the previous accounting standard, finance leases that deemed to transfer ownership of theleased property to the lessee were capitalized. However, other finance leases were permitted to beaccounted for as operating lease transactions if certain “as if capitalized” information was disclosed
in the note to the lessee’s financial statements. The revised accounting standard requires that all
finance lease transactions be capitalized to recognize lease assets and lease obligations in the balance
sheet. In addition, the revised accounting standard permits leases which existed at the transition dateand did not transfer ownership of the leased property to the lessee to be measured at the obligations
under finance leases less interest expense at the transition date and recorded as acquisition cost oflease assets.
The Group applied the revised accounting standard effective April 1, 2008. In addition, the Company
accounted for leases which existed at the transition date and do not transfer ownership of the leased
property to the lessee as acquisition cost of lease assets measured at the obligations under financeleases at the transition date.
All other leases are accounted for as operating leases.
k.	Accrued Bonuses —Bonuses to employees, directors and corporate auditors are accrued at the year
end to which such bonuses are attributable.
l.	Allowance for Environmental Measures —The Group has made a provision for treatment of PCB
Wastes based on Act on Special Measures concerning Promotion of Proper Treatment of PCB Wastes.
m.	Allowance for Loss from a Disaster —The Group has made a provision for rehabilitation ofproperty, plant and equipment which were damaged by the Great East Japan Earthquake.
n.	Income Taxes —The provision for income taxes is computed based on the pretax income included in
the consolidated statements of income. The asset and liability approach is used to recognize deferred
tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured byapplying currently enacted tax laws to the temporary differences.
o.	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 thebalance sheet date. The foreign exchange gains and losses from translation are recognized in the
consolidated statements of income and comprehensive income.
p.	Revenue Recognition —If the outcome of a construction contract can be estimated reliably, thecontract revenue is recognized by the percentage-of-completion method which is measured byreference to the percentage of total cost incurred to date to estimated total cost.
All other construction projects, except the aforementioned, are recorded using the completedcontract method (including the partially completed-contract method).
q.	Derivatives and Hedging Activities —The Group uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange. Foreign exchange forward contracts are utilized by theGroup to reduce foreign currency exchange. The Group does not enter into derivatives for trading or
speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as
follows: a) all derivatives are recognized as either assets or liabilities and measured at fair value, andgains or losses on derivative transactions are recognized in the income statement and b) for17

derivatives used for hedging purposes, if derivatives qualify for hedge accounting because of highcorrelation and effectiveness between the hedging instruments and the hedged items, gains or losses
on derivatives are deferred until maturity of the hedged transactions.
The foreign exchange forward contracts are measured at their fair value but the unrealized gains /losses are deferred until the underlying transactions are completed.
r.	Per Share Information —Basic net income per share is computed by dividing net income available
to shareholders of common stock, by the weighted-average number of shares of common stock
outstanding for the period. The weighted-average numbers of shares of common stock for the years
ended March 31, 2011 and 2010 were 79,639,800 and 80,482,654, respectively.
Diluted net income per share of common stock is not disclosed because the Group has nothing whichmight dilute the per share information for the years ended March 31, 2011 and 2010.
Cash dividends per share presented in the accompanying consolidated statements of income andcomprehensive income are dividends applicable to the respective years including dividends to be paid
after the end of the year.
s. New Accounting Pronouncements
Accounting Changes and Error Corrections —In December 2009, ASBJ issued ASBJ Statement No.
24 “Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No. 24“Guidance on Accounting Standard for Accounting Changes and Error Corrections”. Accounting
treatments under this standard and guidance are as follows;(1) Changes in Accounting Policies:
When a new accounting policy is applied with revision of accounting standards, the new policy isapplied retrospectively unless the revised accounting standards include specific transitional
provisions. When the revised accounting standards include specific transitional provisions, an entity
shall comply with the specific transitional provisions.
(2) Changes in Presentations:
When the presentation of financial statements is changed, prior period financial statements arereclassified in accordance with the new presentation.
(3) Changes in Accounting Estimates:
A change in an accounting estimate is accounted for in the period of the change if the change affects
that period only, and is accounted for prospectively if the change affects both the period of thechange and future periods.
(4) Corrections of Prior Period Errors:
When an error in prior period financial statements is discovered, those statements are restated.
This accounting standard and the guidance are applicable to accounting changes and corrections ofprior period errors which are made from the beginning of the fiscal year that begins on or after April
1, 2011.

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2011 and 2010 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2011
Non-current:
Marketable equity securities ...............................
Government and corporate bonds ......................
Other .....................................................................
Total .................................................................

18¥5,967
1,027
529¥7,523

2010¥4,994970
889¥6,853

2011$71,762
12,351
6,362$90,475

The carrying amounts and aggregate fair values of marketable and investment securities at March 31,
2011 and 2010 were as follows:
Millions of Yen

March 31, 2011

Unrealized
Gains

Cost

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

¥6,731947
744¥8,422

Unrealized

Losses¥377
26¥1,42791
215¥1,733

¥403

Fair
Value

¥5,681882
529¥7,092Millions of Yen

March 31, 2010

Unrealized
Gains

Cost

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

¥5,351967
1,112¥7,430

Unrealized

Losses

¥339
7

¥346

¥ 975
143
230
¥1,348

Fair
Value¥4,715824
889¥6,428

Thousands of U.S. Dollars
Unrealized
Gains

March 31, 2011

Cost

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

$ 80,950
11,3898,948$101,287

Unrealized

Losses$4,534313$4,847$17,162
1,094
2,586$20,842

Fair
Value

$68,322
10,6086,362$85,292

The information of available-for-sale securities which were sold during the year ended March 31, 2011 and 2010
was as follows:
Millions of Yen

March 31, 2011
Securities classified as:
Available-for-sale:
Equity securities ................................................
Debt securities . ..................................................
Other ...................................................................
Total .................................................................

Proceeds

Realized Gains¥ 275

Realized Losses

¥ 6

425

8

335
¥1,035

5
¥19

¥517
60

¥577

19

Millions of Yen

March 31, 2010
Securities classified as:
Available-for-sale:
Equity securities ................................................
Debt securities . ..................................................
Other ...................................................................
Total .................................................................

Proceeds

Realized Gains

Realized Losses

¥ 872

¥77

¥ 97

243
¥1,115

11
¥88

84
¥181

Thousands of U.S. Dollars

March 31, 2011
Securities classified as:
Available-for-sale:
Equity securities ................................................
Debt securities . ..................................................
Other ...................................................................
Total .................................................................

Proceeds

Realized Gains

Realized Losses$ 3,307

$ 72

5,111

96

4,029
$12,447

61$229$6,218721$6,939The impairment losses on available-for-sale equity securities for the years ended March 31, 2010 were ¥8 million.
The carrying values of debt securities and other by contractual maturities for securities classified as availablefor-sale at March 31, 2011 were as follows:
Millions of Yen

Due after ten years .................................................
Total .................................................................

Thousands of
U.S. Dollars¥1,020¥1,020$12,267$12,267

4. INVENTORIESInventories at March 31, 2011 and 2010 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

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

2011
¥ 43
6,642
178
¥6,863

2010
¥ 92
7,436
168
¥7,6962011$ 517
79,8802,141$82,538

5. INVESTMENT PROPERTYOn November 28, 2008, the ASBJ issued ASBJ Statement No. 20 “Accounting Standard for Investment Property
and Related Disclosures” and issued ASBJ Guidance No.23 “Guidance on Accounting Standard for Investment
Property and Related Disclosures”. This accounting standard and the guidance were applicable to investment
property and related disclosures at the end of the fiscal years ending on or after March 31, 2010. The Groupapplied the new accounting standard and guidance effective March 31, 2010.
The Group holds some rental properties such as office buildings and land in the metropolitan area. Net of rental
income and operating expenses for those rental properties was ¥779 million ($9,369 thousand) for the fiscal year
ended March 31, 2011.

20

In addition, the carrying amounts, changes in such balances and market prices of such properties are as follows.
Millions of Yen
Carrying amount
April 1, 2010

Decrease

8,253

Fair value
March 31,2011(95)

March 31,2011

8,158

15,359Millions of Yen
Carrying amount
April 1, 2009

8,426

Decrease

Fair value
March 31,2010(173)

March 31,2010

8,253

16,018

Thousands of U.S. Dollars
Carrying amount
April 1, 2010

99,254

Decrease

Fair value
March 31,2011(1,143)

March 31,2011

98,111

184,714

Notes:
1) C arrying amount recognized in balance sheet is net of accumulated depreciation and accumulated
impairment losses, if any.
2) D ecrease during the fiscal year ended March 31, 2011 represents the recognition of depreciation of ¥95
million ($1,143 thousand).
3) F air value of properties as of March 31, 2011 is measured by the Group in accordance with its Real-estateAppraisal Standard.

6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2011 and 2010 consisted of notes to banks. The annual interest rates
applicable to the short-term borrowings ranged from 0.511% to 0.555% and 0.630% to 0.637% at March 31, 2011
and 2010, respectively.
Long-term debt at March 31, 2011 and 2010 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2011
Unsecured loans from banks due seriallyto 2010 with interest rates ranging from1.515% to 1.670% . ...............................................
Loan from bank due seriallyto 2013 with interest rate of 1.250% ...................
Obligation under finance leases ...............................
Total .................................................................
Less current portion ..............................................
Long-term debt, less current portion . ..................

2010

2011

¥4,000
¥315
139
454
(168)
¥286

433
200
4,633
(4,185)¥ 448$3,7881,672
5,460(2,020)$3,44021

Annual maturities of long-term debt at March 31, 2011 for the five years and thereafter were as follows:Year Ending March 31

2012 .........................................................
2013 .........................................................
2014 .........................................................
2015 .........................................................
2016 and thereafter . ...............................
Total ..................................................

Thousands of
U.S. Dollars

Millions of Yen
Long-term debt

Lease obligations

Long-term debt

Lease obligations

¥118
118
79

¥ 50
35
24
18
12
¥139

$1,419
1,419
950

$ 601
421
290
216
144
$1,672¥315$3,788The Group had a commitment-line contract of ¥8,000 million ($96,212 thousand) over three years with financial
institutions in order to secure the stability of long-term funding. The contract included a restrictive financial
covenant. At March 31, 2011, the Group had utilized ¥8,000 million ($96,212 thousand) of the commitment-line.
In addition, the Group had overdraft contracts of ¥7,000 million ($84,185 thousand) in total. At March 31, 2011,
the Group had not utilized the overdraft.

Financial covenants
Short-term borrowings of ¥8,000 million includes financial covenants, with which the Group is in compliance.
The major financial covenants are as follows:
If the Group fails to comply with the following covenants, creditors may require repayment of all debt.
(1) Shareholder’s equity of each fiscal year will not fall below 75% of the higher of the following:a. Shareholder’s equity of fiscal year immediately preceding the fiscal year; orb. Shareholder’s equity of fiscal year ending on March 31, 2008
(2) Ordinary income for each fiscal year will not be negative for two consecutive fiscal years.
At March 31, 2011, land, building and structures of ¥2,067 million ($24,859 thousand) were pledged as collateralfor long-term debt of ¥315 million ($3,788 thousand).

7. RETIREMENT AND PENSION PLANS
The Group has severance payment plans for employees, directors and corporate auditors.
Under most circumstances, employees terminating their employment are entitled to retirement benefits
determined based on the rate of pay at the time of termination, years of service and certain other factors. Suchretirement benefits are made in the form of a lump-sum severance payment from the Company or fromconsolidated subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments if thetermination is involuntary, by retirement at the mandatory retirement age, by death, or by voluntary retirement
at certain specific ages prior to the mandatory retirement age.
In addition, the group completely transitioned from the approved pension plan to the defined benefit corporate
pension plan in October 2010.
The liabilities for retirement benefits at March 31, 2011 and 2010 for directors and corporate auditors were ¥90
million ($1,082 thousand) and ¥103 million, respectively. The retirement benefits for directors and corporate
auditors are paid subject to the approval of the shareholders.

22The liability for employees’ retirement benefits at March 31, 2011 and 2010 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

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

2011¥(13,548)
7,795
2,032
543
331
432
¥ (3,279)2010¥(13,468)
7,520
2,642
638
(127)
344
¥ (3,139)2011$(162,934)
93,74624,437
6,530
3,981
5,195
$ (39,435)

The components of net periodic benefit costs for the years ended March 31, 2011 and 2010 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2011
¥ 916
301
(185)
(10)
402
135
¥1,559

2010
¥ 907
303
(184)
(13)
497
135
¥1,645

2011$11,016
3,620(2,225)
(120)
4,834
1,624
$18,749Note:
The net periodic benefit costs above excludes required funding for the multi-employer pension plan amounting
to ¥850 million ($10,222 thousand) and ¥831 million at March 31, 2011 and 2010 respectively, for which plan
assets could not be allocated to each participating employer.
Assumptions used for the years ended March 31, 2011 and 2010 were set forth as follows:

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

2011
2.50%
2.50%
13 years
13 years
15 years

2010
2.50%
3.00%
13 years
13 years
15 years

Funded status of the multi-employer pension plan at March 31, 2010 (available information as of March 31,2011), to which contributions were recorded as net periodic retirement benefit costs, was as follow:
Millions of Yen

Fair value of plan assets ........................................
Pension benefit obligation recordedby pension fund ...................................................
Difference ..........................................................

2010¥142,729
172,380¥ (29,651)

The Groups’ contribution percentage for multi-employer pension plan.......11.1%
Note:
1. The difference mainly resulted from prior service cost of ¥(29,236) million, adjustment of asset valuation of¥(15,252) million and surplus of ¥14,836 million.

23

2. Prior service cost is amortized over 20 years.
3. The Group expensed special contributions of ¥327 million in the consolidated statement of income andcomprehensive income in the fiscal year ended March 31, 2011.
4. The above contribution ratio does not conform to the actual ratio applied to the Group.

8. ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the year ended March 31, 2011 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2011
Balance at beginning of year .................................
Additional previsions associated withthe acquisition of property,
plant and equipment . ..........................................
Reconciliation associated with passage of time . .
Balance at end of year ...........................................

¥50

2011
$601

2

24

1

12

¥53

$637

9. DEPOSITS RECEIVED
Deposits received from tenants amounted to ¥1,878 million ($22,586 thousand) at March 31, 2011 and ¥2,045
million at March 31, 2010.
At March 31, 2011, land, building and structures for rent of ¥1,499 million ($18,028 thousand) were pledged ascollateral for these deposits.

10. EQUITY
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant
provisions in the Companies Act that affect financial and accounting matters are summarized below:(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to theyear-end dividend upon resolution at the shareholders meeting. For companies that meet certain criteria suchas; (1) having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate
Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal
term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind)at any time during the fiscal year if the company has prescribed so in its articles of incorporation. The Company
meets all the above criteria.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the company so stipulate. The 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 total of aggregate amount of legal
reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total
amount of additional 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 be transferred among the accounts under certain conditions upon resolution of the shareholders.

24(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 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.

11. INCOME TAXESThe Company and its domestic subsidiaries were subject to Japanese national and local income taxes which, inthe aggregate, resulted in a normal effective statutory tax rate of approximately 39.5% for the years ended March
31, 2011 and 2010.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at March 31, 2011 and 2010 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2011

2011

2010

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

¥ 536
844
1,433

¥ 396
791
1,537

$ 6,446
10,15017,234

37

42

445

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

1,333
37
110
681
(2,675)¥2,336

1,260
103
109
570
(2,791)¥2,017

16,031
445
1,323
8,190
(32,170)$28,094

Reserve for deferred gains on saleof property . ........................................................
Prepaid pension cost . ..........................................
Other .....................................................................
Total .................................................................

¥ 209
171
93
¥ 473

¥ 214
136
71
¥ 421

$ 2,5142,057
1,118$ 5,689

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

¥1,863¥1,596$22,405

Deferred tax liabilities :25

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying consolidated statement of income and comprehensive income for the years ended March 31,
2011 and 2010 was as follows:

2011
39.5%
5.5
2.3
(5.9)
4.3
45.7%

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

2010
39.5%
3.6
1.4
(8.3)
6.6
42.8%

As of March 31, 2011, certain subsidiaries had tax loss carryforwards aggregating approximately ¥3,502 million($42,118 thousand) which were available to be offset against taxable income of these companies in future years.
These tax loss carryforwards, if not utilized, will expire as follows:
Years Ending March 31

Millions of Yen

2012 ........................................................................
2013 ........................................................................
2015 ........................................................................
2016 ........................................................................
2017 ........................................................................
2018 ........................................................................
Total .................................................................

¥

7
3,196
133
98
1
67
¥3,502Thousands of
U.S. Dollars$

84
38,437
1,600
1,179
12
806
$42,118

12. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥326 million ($3,921 thousand) and ¥341 million forthe years ended March 31, 2011 and 2010, respectively.

13. LOSS FROM A NATURAL DISASTER
Loss from a natural disaster caused by the Great East Japan Earthquake in March, 2011 consisted of thefollowing:
Millions of Yen

2011
Removal Cost and Repair Expenses......................
Provision of Allowance for Loss from a Disaster . .
Total .................................................................

26

¥ 6
63
¥69

Thousands of
U.S. Dollars

2011
$ 72
758
$830

14. LEASES(1) Lessee
The minimum rental commitments under noncancellable operating leases at March 31, 2011 and 2010, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2011

2011

2010

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

¥0¥0(2) Lessor
The minimum rental commitments under noncancellable operating leases at March 31, 2011 and 2010, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2011
¥ 697
2,761
¥3,458

2010
¥ 676
3,233
¥3,9092011$ 8,382
33,205$41,587

15. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURESOn March 10, 2008, the ASBJ revised ASBJ Statement No.10 “Accounting Standard for Financial Instruments”
and issued ASBJ Guidance No.19 “Guidance on Accounting Standard for Financial Instruments and Related
Disclosures”. This accounting standard and the guidance are applicable to financial instruments and related
disclosures at the end of the fiscal years ending on or after March 31, 2010 with early adoption permitted fromthe beginning of the fiscal years ending before March 31, 2010. The Group applied the revised accounting
standard and the new guidance effective March 31, 2010.
(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 the investment committee and it examines basic principles of transactions and each financial instrument.
(2) Nature and extent of risks arising from financial instruments
Receivables such as trade notes and trade accounts are exposed to customer credit risk. Although receivables inforeign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates, the position,
net of a portion of payables in foreign currencies, is hedged by using forward foreign currency contracts.
Marketable and investment securities, mainly held-to-maturity securities and equity instruments of customers
and suppliers of the Group, are exposed to the risk of market price fluctuations.
Payment terms of payables, such as trade notes and trade accounts, are less than one year.
Maturities of bank loans and lease obligation are less than seven years after the balance sheet date.
Derivatives mainly include forward foreign currency contracts, which are used to manage exposure to market
risks from changes in foreign currency exchange rates of receivables and payables and investment securities.
Please see Note 16 for more detail about derivatives.

27

(3) Risk management for financial instruments
Credit Risk Management
Credit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to
the contractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines,
which include monitoring of payment term and balances of major customers by each business administration
department to identify the default risk of customers in early stage. With respect to held-to-maturity financial
investment, the Group manages its exposure to credit risk by limiting its funding to high credit rating bonds inaccordance with in its internal guidelines. Please see Note 16 for the detail about derivatives.
The maximum credit risk exposure of financial assets is limited to their carrying amounts as of March 31, 2011.
Market risk management (foreign exchange risk and interest rate risk)
Foreign currency trade receivables and payables are exposed to market risk resulting from fluctuations inforeign currency exchange rates. Such foreign exchange risk is hedged principally by forward foreign currency
contracts.
Marketable and investment securities are managed by monitoring market values and financial position ofissuers on a regular basis.
Basic principles of derivative transactions have been approved by the investment committee based on theinternal guidelines which prescribe the authority and the limit for each transaction by the corporate treasury
department. Reconciliation of the transaction and balances with customers is made, and the transaction data
has been reported 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 maturity
dates. The Group manages its liquidity risk by concluding the commitment-line and overdraft contracts, alongwith adequate financial planning by the corporate treasury department.
(4) Concentration of credit risk
43.1% of total receivables is from three major customers of the Group as of March 31, 2011.
(5) Fair values of financial instruments
Fair values of financial instruments are based on quoted prices in active markets. If quoted price is not available,
other rational valuation techniques are used instead. Also please see Note 16 for the detail of fair value forderivatives.
(a) Fair value of financial instruments
Millions of Yen

March 31, 2011

Carrying
amountFair value

Investment securities
Total¥ 5,157
24,355(44)
24,311
7,092¥36,560

24,311
7,092¥36,560

Short-term borrowings
PayablesTotal¥ 8,000
5,105¥13,105¥ 8,000
5,105¥13,105

Cash and cash equivalents
Receivables
Allowance for doubtful accounts

28¥ 5,157

Unrealized
gain/loss

Millions of Yen

March 31, 2010

Carrying
amountFair value

Cash and cash equivalents
Receivables
Investment securities
Total¥ 6,237
28,281
6,574¥41,092¥ 6,237
28,281
6,574¥41,092

Short-term borrowings
PayablesLong-term debt
Total

¥ 8,000
5,706
4,633¥18,339¥ 8,000
5,706
4,648¥18,354

Unrealized
gain/loss¥15¥15

Thousands of U.S. Dollars

March 31, 2011

Carrying
amountFair value

Investment securities
Total$ 62,020
292,904(529)
292,375
85,292$439,687

292,375
85,292$439,687

Short-term borrowings
PayablesTotal$ 96,212
61,395$157,607$ 96,212
61,395$157,607

Cash and cash equivalents
Receivables
Allowance for doubtful accounts

Unrealized
gain/loss$ 62,020

Cash and cash equivalents, receivables, payables and short-term borrowings
The carrying values of these financial instruments approximate fair values 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. The information of the fair value for the investment securities by classification is included in Note
3.
Long- term debt
The fair value of long-term debt is determined by discounting the cash flows related to the debt at the Group’s
assumed corporate borrowing rate.
Derivatives
The information of the fair value for derivatives is included in Note 16.
(b) Financial instruments whose fair value cannot be reliably determined
Carrying amountThousands of
U.S. Dollars

Millions of Yen

March 31, 2011 and 2010
Investments in equity instruments that do nothave a quoted market price in an active market
Investments in debt instruments that do nothave a quoted market price in an active market

2011
¥816
¥145

2011

2010
¥810

$9,814$1,74429

(6) Maturity analysis for financial assets and securities with contractual maturities
Millions of Yen

March 31, 2011
Cash and cash equivalents
Receivables
Investment securities
Available-for-sale securities with
contractual maturities
Total

Due in one
year or lessDue after one
year throughfive years

Due after five
years throughten years

Due after
ten years¥ 5,157
24,354¥1,020¥1,020¥29,511
Thousands of U.S. Dollars

March 31, 2011
Cash and cash equivalents
Receivables
Investment securities
Available-for-sale securities with
contractual maturities
Total

Due in one
year or lessDue after one
year throughfive years

Due after five
years throughten years

Due after
ten years$ 62,020
292,892$12,267$12,267$354,912

Please see Note 6 for annual maturities of long-term debt.

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

Derivative transactions to which hedge accounting is not applied
Millions of Yen

March 31, 2011
Foreign currency forward contracts:
Selling EURO .....................................

Contract
Amount¥1,567

Contract
Amount due after
One Year

Fair
Value

¥936

Unrealized
Gain

¥44

¥33

Thousands of U.S. Dollars

March 31, 2011
Foreign currency forward contracts:
Selling EURO .....................................
30

Contract
Amount$18,845

Contract
Amount due after
One Year$11,257

Fair
Value

$529

Unrealized
Gain

$397

Millions of Yen

March 31, 2010

Contract
AmountForeign currency forward contracts:
Selling U.S.$ .......................................
Interest rate swaps:(fixed rate payment, floating
rate receipt).......................................

Fair
Value

Unrealized
Gain

¥631

¥11

¥11

¥140

¥ (1)

¥ 1

Derivative transactions to which hedge accounting is applied
Millions of Yen
Hedgeditem

March 31, 2011
Foreign currency forward contracts:
Selling U.S.$........................................

Contract
AmountInvestment
securities

Contract
Amount due after
One Year

¥755

Fair
Value

¥755

¥43

Thousands of U.S. Dollars
Hedgeditem

March 31, 2011
Foreign currency forward contracts:
Selling U.S.$........................................

Contract
AmountInvestment
securities

Contract
Amount due after
One Year$9,080$9,080

Fair
Value

$517

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

17. CONTINGENT LIABILITIESAt March 31, 2011, the Group had the following contingent liabilities:
Millions of Yen

Thousands of
U.S. Dollars

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

¥161$1,936

Guarantees of bank credit line of an
unconsolidated subsidiary . .................................................

¥ 93$1,11818. COMPREHENSIVE INCOME
For the year ended March 31, 2010
Total comprehensive income for the year ended March 31, 2010 was the following:
Millions of Yen

2010
Total comprehensive income attributable to:
Owners of the parent ...........................................

¥3,317

Minority interests . ...............................................
Total comprehensive incomes . ..................

28¥3,34531

Other comprehensive income for the year ended March 31, 2010 consisted of the following:
Millions of Yen

2010
Other comprehensive income:Unrealized gain on
available-for-sale securities ...............................
Deferred loss on derivatives
under hedge accounting ....................................
Total other comprehensive income ...........

¥1,298(7)¥1,291

19. SUBSEQUENT EVENTSAppropriations of Retained Earnings
On May 20, 2011, the following appropriation of retained earnings at March 31, 2011 was resolved by the Boardof Directors:
Millions of Yen

Year-end cash dividends, ¥10.0 ($0.12) per share ................

¥795

Thousands of
U.S. Dollars$9,561

20. SEGMENT INFORMATION
For the year ended March 31, 2011 and 2010
In March 2008, the ASBJ revised ASBJ Statement No. 17 “Accounting Standard for Segment Information
Disclosures” and issued ASBJ Guidance No.20 “Guidance on Accounting Standard for Segment Information
Disclosures”. Under the standard and guidance, an entity is required to report financial and descriptive
information about its reportable segments. Reportable segments are operating segments or aggregations ofoperating segments that meet specified criteria. Operating segments are components of an entity about which
separate financial information is available and such information is evaluated 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 internally for evaluating operating segment
performance and deciding how to allocate resources to operating segments. This accounting standard and theguidance are applicable to segment information disclosures for the fiscal years beginning on or after April 1,
2010.
The segment information for the year ended March31, 2010 under the revised accounting standard is also
disclosed hereunder as required.

(1) Description of reportable segments
The Group’s reportable segments are those for which separate financial information is available and regular
evaluation by the Company’s management is being performed in order to decide how resources are allocatedamong the Group. Therefore, the Group consists of the Domestic, Overseas, Power Engineering and Real estateleasing segments. Domestic consists of consulting services in public and private sectors related to mainly
infrastructure development. Overseas consists of consulting services related to mainly ODA funded development
projects. Power Engineering consists of manufacturing of products and appliances related to electric production
and distribution systems and engineering services related to construction and maintenance of public and private
electric power facilities. Real estate leasing consists of sales of our Group’s real estate leasing operation.

(2) Methods of measurement for the amount of sales, profit (loss), assets, liabilities
and other items for each reportable segment
The accounting policies of each reportable segment are consistent to those disclosed in Note 2, “Summary of
Significant Accounting Policies”.

32(3) Information about products and services
The information about sales, profit (loss), assets, liabilities and other items at March 31, 2011 and 2010 were as
follows:
Millions of Yen

2011
Reportable segment
Domestic

Overseas

Power
Engineering

Real estateleasing

Total

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

¥31,938
328¥15,960
9¥15,742161¥ 1,262128¥64,902626

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

32,266

15,96915,903¥ (827)¥ 1,311¥ 1,606¥

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

¥25,653¥ 9,166

Other:
Depreciation .........................
Interest income ....................

¥

¥

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

216
185

68
13

Others

¥

Total

905
6

¥ 65,807
632

1,390

65,528911

66,439779¥ 2,869¥ (168) ¥2,701¥ 9,166¥10,590¥54,575¥51,168¥105,743

¥

¥

¥

¥

¥

219
17

176
23

679
238

331
419

1,010
657

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

281

51

62

123

517

149

666

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

60

74

182

116

432

420

852

Reconciliations

Consolidated¥65,807
¥

(632)
(632)

65,807(3)¥ 2,698¥(31,002)

74,741¥(572)¥ 1,010
85

(571)

95

¥

852

Thousands of U.S. Dollars

2011
Reportable segment

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

Domestic

Overseas

Power
Engineering

Real estateleasing

Total$384,101
3,945$191,942
109$189,321
1,936$ 15,177
1,539$780,541
7,529

OthersTotal$ 10,884 $ 791,425
72
7,601

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

388,046

192,051

191,257

16,716

788,070

10,956

799,026

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

$ (9,946)$ 15,767$ 19,314$ 9,369$ 34,504$ (2,021) $32,483

Reconciliations

Consolidated$791,425$ (7,601)(7,601)

791,425(36)$ 32,447$(372,844)$898,870$$308,515$110,235$110,235$127,359$656,344$615,370 $1,271,714

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

$ 2,598$818$ 2,634$ 2,116$ 8,166$ 3,981 $12,147

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

2,225

156

204

277

2,862

5,039

7,901

$ (6,879)

1,022Interest expense ...................

3,379

614

746

1,479

6,218

1,792

8,010

(6,867)

1,143

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

722

890

2,189

1,394

5,195

5,052

10,247$ 12,147

10,24733

Millions of Yen

2010
Reportable segment
Domestic

Overseas

Power
Engineering

Real estateleasing

Total

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

¥33,927324¥15,806
10¥13,081209¥ 1,257
137¥64,071680

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

34,251

15,816

13,290¥537¥ 1,276¥ 1,166¥

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

¥29,731¥10,103

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

¥

¥

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

260

61

OthersTotal¥ 1,02574¥ 65,096
754

1,099

65,8501,394

64,751884¥ 3,863¥ (219) ¥ 3,644¥11,274¥10,647¥61,755¥50,830¥112,585

¥

¥

¥

¥

335

¥ 1,088

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

155

9

244
32

188
24

753
220

277

497

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

191

76

76

29

372

164

536

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

120

58

155

1

334

188

522

Reconciliations

Consolidated¥65,096
¥

(754)
(754)

65,096¥ 3,644¥(32,485)¥80,100¥ 1,088

¥

(412)

85

(411)

125
522

Note:
The followings are differences between total amounts for reportable segments and amounts in the consolidatedbalance sheets or consolidated statements of income and comprehensive income and main details of thesedifferences, which related to difference adjustments at March 31, 2011 and 2010:

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 ...........

2011¥65,528
911
(632)

2010
¥64,751
1,099
(754)

2011
$788,070
10,956(7,601)¥65,807¥65,096$791,425

ProfitThousands of
U.S. Dollars

Millions of Yen

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

2011¥2,869
(168)
(3)

2010
¥3,863(219)

2011$34,504(2,021)(36)¥2,698¥3,644$32,447

AssetsThousands of
U.S. Dollars

Millions of Yen

Reportable segment total ......................................
Other property .......................................................
Elimination of intersegment transactions . ..........
Total assets in the consolidated balance
sheet . ................................................................
34

2011¥54,575
51,168(31,002)2010¥61,755
50,830(32,485)2011$656,344
615,370(372,844)¥74,741¥80,100$898,870

Other items
Millions of Yen

2011
Reportablesegment

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

OthersReconciliations

¥679
313
14
238
517

¥331

432

420

419
149

¥(572)
(571)

Total

¥1,010
313
14
85
95
852

Thousands of U.S. Dollars

2011
Reportablesegment$8,166
3,764

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

OthersReconciliations$3,981

Total$12,147
3,764

168

168

6,218

5,039
1,792

5,195

5,052

2,862

$(6,879)

1,022(6,867)

1,143

10,247

Millions of Yen

2010
Reportablesegment

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

¥753
312

OthersReconciliations

¥335

Total

¥1,088
312

14

14

372

277
164

334

188

220

¥(412)

85

(411)

125

522

Note:
The reconciliatory main items of interest income and expense are eliminations of corporate interest inaccounting for control.
The information about geographical areas at March 31, 2011 was as follows:

Sales
Millions of Yen

2011
Japan

Asia

¥48,636¥10,427

Middle East

¥1,017

Africa¥1,794

LatainAmerica¥3,603

Other

¥330

Total

¥65,80735

Thousands of U.S. Dollars

2011
Japan

Asia

Middle East

$584,919$125,400$12,231

LatainAmerica

Africa$21,575

Other$43,331

Total$3,969$791,425

The information about major customers at March 31, 2011 was as follows:
Millions of Yen

2011
Name of Customers

Sales

Related Segment Name

¥ 10,659
8,414
6,832

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

Domestic
Power Engineering

Overseas

Thousands of U.S. Dollars

2011
Name of Customers

Sales

Related Segment Name

$128,190
101,191
82,165

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

Domestic
Power Engineering

Overseas

The information about goodwill and negative goodwill at March 31, 2011 was as follows:
Millions of Yen

2011
Reportable Segment
Domestic

Overseas

Power
Engineering

Real estateleasing

OthersTotal

Elimination/
Corporate

Consolidated

Amortization of Goodwill ...

¥ 313

¥ 313

¥ 313

Goodwill at March 31, 2011 .

1,238

1,238

1,238

Amortization of Negative
Goodwill . ........................

14

14

14

Negative Goodwill at
March 31, 2011 ................

28

28

28

Thousands of U.S. Dollars

2011
Reportable Segment
Domestic

Overseas

Power
Engineering

Real estateleasing

Total

OthersElimination/
Corporate

Consolidated

Amortization of Goodwill ...

$3,764$3,764$3,764

Goodwill at March 31, 2011 .

14,88914,88914,889Amortization of Negative
Goodwill . ........................

168

168

168

Negative Goodwill at
March 31, 2011 ................

337

337

337

36

37

Non-consolidated Balance Sheets
Nippon Koei Co., Ltd.
March 31, 2011 and 2010

Thousands of
U.S. Dollars (Note 1)

Million of Yen

ASSETS

2011

2011

2010

CURRENT ASSETS:¥ 3,590¥ 4,561$ 43,175

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

189

27

2,273

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

17,81821,337214,287

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

(2)

(22)

(24)

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

1,650

4,164

19,844Inventories ‑ work in process ..............................

4,518

3,664

54,336

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

865

694

10,403

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

1,620

1,410

19,482

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

30,24835,835363,776

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

11,884

10,248142,922

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

18,085

16,266

217,498

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

2,016

1,156

24,245

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

2,143

1,144

25,773

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

6

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

184

222

2,213

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

34,31829,036

412,724

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

(14,193)(11,423)(170,692)

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

20,125

17,613242,032

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

PROPERTY, PLANT AND
EQUIPMENT (Note 8):

73

INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 3) ............................
Investments in and advances to subsidiaries
and associated companies (Note 4) ..................
Deferred tax assets (Note 10) ..............................

7,395

6,710

88,936

6,078
308

6,156
204

73,097
3,704

Other assets ..........................................................

2,631

2,535

31,642

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

(22)

(23)

(265)

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

16,39015,582

197,114TOTAL ....................................................................

¥66,763¥69,030$802,922

See notes to non-consolidated financial statements.

38

Thousands of
U.S. Dollars (Note 1)

Million of Yen

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short‑term borrowings (Note 5) .........................
Current portion of long-term debt (Note 5) .......
Payables:Trade notes .........................................................
Trade accounts ...................................................
Income taxes payable ..........................................
Advances received ................................................
Accrued bonuses ..................................................
Allowance for anticipated project loss . ..............
Allowance for loss from a disaster ......................
Other current liabilities .......................................
Total current liabilities ....................................
LONG-TERM LIABILITIES:Long-term debt (Note 5) . ....................................
Liability for retirement benefits (Note 6) ...........
Allowance for environmental measures .............
Asset retirement obligations (Note 7) .................
Deposits received (Note 8) . .................................
Total long-term liabilities ................................

2011

2011

2010

¥10,550
154¥10,100
4,048$126,879
1,852

401
3,814
340
3,902
1,429
53
63
2,862
23,568

56
5,994
332
3,931
1,229
214

4,823
45,8694,089
46,927
17,186637
758
34,420283,440

2,350
28,254

240
317
74
44
2,185
2,860

2,335
2,770

2,886
3,812
890
529
26,27834,395

7,393

7,393

88,912

67
368

COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 13 and 14)
EQUITY (Notes 9 and 16):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares in 2011 and 2010 .................
Capital surplus:
Additional paid-in capital . ................................
Other capital surplus .........................................
Retained earnings:
Legal reserve ......................................................
Retained earnings - unappropriated . ...............
Unrealized loss onavailable-for-sale securities ...............................
Deferred loss onderivatives under hedge accounting .................
Treasury stock—at cost
7,170,987 shares in 2011
and 6,923,529 shares in 2010 ............................
Total equity........................................................

6,093
38

6,093
38

73,277457

1,546
28,271

1,546
25,71018,593339,999

(798)

(592)

(9,597)

26

(7)

313

(2,234)40,335(2,175)38,006(26,867)
485,087

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

¥66,763¥69,030$802,922

39

N o n - conso lida ted S ta temen t s o f I n c o me
Nippon Koei Co., Ltd.
Years Ended March 31, 2011 and 2010

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2011

2011

2010

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

¥48,426
36,067
12,359¥47,006
36,35910,647$582,393
433,758
148,635SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (Note 11) . ......
Operating income ..................................................

10,342
2,017

9,154
1,493

124,378
24,257

335
(133)
(76)
15
(577)

550
(155)
125
59
(181)
(6)

4,029
(1,600)(914)
180(6,939)OTHER INCOME (EXPENSES):Interest and dividend income .............................
Interest expense ...................................................
Foreign currency exchange (loss) gain ...............
Gain on sales of investment securities ...............
Loss on sales of investment securities ................
Loss on valuation of investment securities ........
Loss from a natural disaster (Note 12) ...............
Gain on extinguishment of
tie-in shares (Note 15) .......................................
Reversal of allowance for doubtful accounts .....
Other-net . .............................................................
Other income-net .............................................

2,338
20
109
1,962

36
326
754

28,118241
1,311
23,596

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

3,979

2,247

47,853

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

880
(61)
819

593
258
851

10,583(734)
9,849

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

¥ 3,160¥ 1,396$ 38,004

(69)

(830)

U.S. Dollars(Note 1)Yen

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

40¥ 39.67
7.50¥ 17.34
7.50

$

0.48
0.09

N o n - conso lida ted S ta temen t s o f C h an ges i n E q u i t y
Nippon Koei Co., Ltd.
Years Ended March 31, 2011 and 2010

Thousands

Millions of Yen

Outstanding
Number of
Shares ofCommonStock

BALANCE, MARCH 31, 2009 .......

80,575

Capital Surplus

Retained Earnings

CommonStock

Additional

Other

Paid-in
CapitalCapitalSurplus¥7,393¥6,093

Unrealized
Gain (loss)
on Available-

¥38

Legal
Reserve

Unappropriatedfor-sale
Securities¥1,546¥24,918¥(1,887)

DeferredGain (loss)
on

Treasury

Total

Derivatives

Stock

Equityunder Hedge
Accounting¥(1,947) ¥36,154

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

1,396

1,396

Cash dividends, ¥7.50 per share .....

(604)

(604)

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

(842)

(228)

Net change in the year ................
BALANCE, MARCH 31, 2010 .......

79,733

7,393

6,093

38

1,546

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

(592)

(7)

(2,175)(599)(59)¥7,393¥6,093¥38¥1,546¥28,271

38,006(599)(247)
79,486

(228)
1,288
3,160

Net change in the year ................
BALANCE, MARCH 31, 2011 .......

(7)

3,160

Cash dividends, ¥7.50 per share .....
Purchase of treasury stock . .........

25,710

1,295

(59)

(206)

33

(173)

¥ (798)¥26¥(2,234) ¥40,335

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

Retained Earnings

CommonStock

BALANCE, MARCH 31, 2010. ......

$88,912Additional
Paid-in
Capital

Other
CapitalSurplus$73,277

$457

Legal
Reserve

Unrealized
Gain (loss)

DeferredGain (loss)on
on AvailableDerivatives
for-sale
Unappropriatedunder Hedge
Securities
Accounting$18,593 $309,200$(7,120)

Treasury
Stock

Total
Equity$(84) $(26,158) $457,077

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

38,00438,004

Cash dividends, $0.09 per share .....

(7,205)(7,205)Purchase of treasury stock . .........

(709)

Net change in the year ................
BALANCE, MARCH 31, 2011 .......

$88,912$73,277$457$18,593 $339,999(709)(2,477)397(2,080)$(9,597)$313 $(26,867) $485,087

See notes to non-consolidated financial statements.

41

N o te s to No n- con solid ated Fi n an c i al S t atemen t s
Nippon Koei Co., Ltd.
Years Ended March 31, 2011 and 2010

1. BASIS OF PRESENTING NON-CONSOLIDATED FINANCIAL STATEMENTS
The accompanying non-consolidated financial statements have been prepared from the accounts maintained by
Nippon Koei Co., Ltd. (the “Company”) in accordance with the provisions set forth in the Corporate Act of Japanand in conformity with accounting principles generally accepted in Japan, which are different in certain respects
as to application and disclosure requirements of International Financial Reporting Standards.
As consolidated statements of cash flows and certain disclosures are presented in the consolidated financial
statements of the Company, non-consolidated statements of cash flows and certain disclosures are not presented
herein in accordance with accounting principles generally accepted in Japan.
In preparing these non-consolidated financial statements, certain reclassifications and rearrangements havebeen made to the Company’s financial statements issued domestically in order to present them in a form which
is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2010
financial statements to conform to the classifications used in 2011.
The non-consolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and have been made at the rate of ¥83.15 to $1, therate of exchange at March 31, 2011. Such translations should not be construed as representations that theJapanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Non-consolidation —The non-consolidated financial statements do not include the accounts of subsidiaries.
Investments in subsidiaries and associated companies are stated at cost.
b. Business Combination —In October 2003, the Business Accounting Council (the “BAC”) issued a Statementof Opinion, “Accounting for Business Combinations”, and in December 2005, the ASBJ issued ASBJ
Statement No.7, “Accounting Standard for Business Divestitures” and ASBJ Guidance No.10, “Guidance for
Accounting Standard for Business Combinations and Business Divestitures”. This accounting standard forbusiness combinations allowed companies to apply the pooling of interests method of accounting only whencertain specific criteria were met such that the business combination was essentially regarded as a unitingof-interests. For business combinations that did not meet the uniting-of-interests criteria, the businesscombination was considered to be an acquisition and the purchase method of accounting was required. This
standard also prescribed the accounting for combinations of entities under common control and for joint
ventures.
In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ
Statement No.21, “Accounting Standard for Business Combinations.” Major accounting changes under therevised accounting standard are as follows: (1) The revised standard requires accounting for businesscombinations only by the purchase method. As a result, the pooling of interests method of accounting is nolonger allowed. (2) The current accounting standard accounts for the research and development costs to be
charged to income as incurred. Under the revised standard, in-process research and development (IPR&D)
acquired in a business combination is capitalized as an intangible asset. (3) The previous accounting
standard provided for a bargain purchase gain (negative goodwill) to be systematically amortized over a
period not exceeding 20 years. Under the revised standard, the acquirer recognizes the bargain purchase gainin profit or loss immediately on the acquisition date after reassessing and confirming that all of the assets
acquired and all of the liabilities assumed have been identified after a review of the procedures used in thepurchase allocation. This standard was applicable to business combinations undertaken on or after April 1,2010 with early adoption permitted for fiscal years beginning on or after April 1, 2009.
The Company merged with Nippon Koei Power Systems Co., Ltd on April 1, 2010 and accounted for themerger as a common control transaction.
c. Cash Equivalents —Cash equivalents are short-term investments that are readily convertible into cash andthat are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits and investment trusts, all of which mature or become due within
three months of the date of acquisition.

42

d. Inventories —Work in process is stated at the lower of cost, mainly determined by the specific identification
cost method, or net selling value.
e.	Marketable and Investment Securities —Marketable and investment securities are classified and accounted
for, depending on management's intent, as follows:i) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent andability to hold to maturity are reported at amortized cost, ii) available-for-sale securities, which are notclassified as the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of
applicable taxes, reported in a separate component of equity and iii) investments in subsidiaries andassociated companies, are reported at cost.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method.
For other than temporary declines in fair value, investment securities are reduced to net realizable value by acharge to operations.
f. Property, Plant and Equipment —Property, plant and equipment are stated at cost. Depreciation ofproperty, plant and equipment is computed substantially by the declining-balance method at rates based on
the estimated useful lives of the assets, while the straight-line method is applied to buildings acquired after
April 1, 1998 and lease assets as well as other equipment for rent. The range of useful lives is principally from
3 to 50 years for buildings and structures, from 2 to 15 years for machinery and equipment, and from 2 to 20
years for furniture and fixtures. The useful lives for lease assets are the terms of the respective leases.
g. Allowance for Doubtful Accounts —The allowance for doubtful accounts is stated in amounts considered tobe appropriate based on the companies' past credit loss experience and an evaluation of potential losses in
the receivables outstanding.
h. Retirement and Pension Plans —The Company has a contributory defined benefit pension plan andunfunded retirement benefit plan for the benefit of its employees.
Effective April 1, 2000, the Company adopted a new accounting standard for the employees' retirement
benefits and accounted for the liability for retirement benefits based on projected benefit obligations andplan assets at the balance sheet date.
Unrecognized actuarial gain or loss is recognized by the straight-line method over 13 years.
Unrecognized prior service costs are recognized by the straight-line method over 13 years.
Retirement benefits for directors and corporate auditors are provided at the amount which would be
required if all directors and corporate auditors retired at the balance sheet date.
i. Allowance for Anticipated Project Loss —The Company has made a provision for anticipated losses on
uncompleted project contracts.
j. Asset Retirement Obligations —In March 2008, the ASBJ published the accounting standard for asset
retirement obligations, ASBJ Statement No.18 “Accounting Standard for Asset Retirement Obligations” andASBJ Guidance No.21 “Guidance on Accounting Standard for Asset Retirement Obligations”. Under thisaccounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law orcontract that results from the acquisition, construction, development and the normal operation of a tangible
fixed asset and is associated with the retirement of such tangible fixed asset. The asset retirement obligationis recognized as the sum of the discounted cash flows required for the future asset retirement and is recordedin the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonableestimate of the asset retirement obligation cannot be made in the period the asset retirement obligation isincurred, 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 the amount of the liability. The
asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful lifeof 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 are reflected as an increase or adecrease in the carrying amount of the liability and the capitalized amount of the related asset retirementcost. This standard was effective for fiscal years beginning on or after April 1, 2010.
The Company applied this accounting standard effective April 1, 2010. The effect of this change was todecrease income before income taxes and minority interests by ¥30 million ($361thousand).

43

k. Leases —In March 2007, the ASBJ issued ASBJ Statement No.13, “Accounting Standard for Lease
Transactions”, which revised the previous accounting standard for lease transactions issued in June 1993.
The revised accounting standard for lease transactions was effective for fiscal years beginning on or after
April 1, 2008.
Under the previous accounting standard, finance leases that deemed to transfer ownership of the leased
property to the lessee were capitalized. However, other finance leases were permitted to be accounted for as
operating lease transactions if certain “as if capitalized” information was disclosed in the note to the lessee’s
financial statements. The revised accounting standard requires that all finance lease transactions becapitalized to recognize lease assets and lease obligations in the balance sheet. In addition, the revised
accounting standard permits leases which existed at the transition date and did not transfer ownership of theleased property to the lessee to be measured at the obligations under finance leases less interest expense at
the transition date and recorded as acquisition cost of lease assets.
The Company applied the revised accounting standard effective April 1, 2008. In addition, the Company
accounted for leases which existed at the transition date and do not transfer ownership of the leased property
to the lessee as acquisition cost of lease assets measured at the obligations under finance leases at thetransition date.
All other leases are accounted for as operating leases.
l. Accrued Bonuses —Bonuses to employees, directors and corporate auditors are accrued at the year end towhich such bonuses are attributable.
m. Allowance for Environmental Measures —The Company has made a provision for treatment of PCB Wastes
based on Act on Special Measures concerning Promotion of Proper Treatment of PCB Wastes.
n. Allowance for Loss from a Disaster —The Company has made a provision for rehabilitation of property,
plant and equipment which were damaged by the Great East Japan Earthquake.
o. Income Taxes —The provision for income taxes is computed based on the pretax income included in thestatements of operations. The asset and liability approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws
to the temporary differences.
p. Foreign Currency Transactions —All short-term and long-term monetary receivables and payables
denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet
date. The foreign exchange gains and losses from translation are recognized in the non-consolidated
statements of operations.
q. Revenue Recognition —If the outcome of a construction contract can be estimated reliably, the contract
revenue is recognized by the percentage-of-completion method which is measured by reference to thepercentage of total cost incurred to date to estimated total cost.
All other construction projects, except the aforementioned, are recorded using the completed-contract
method (including the partially completed-contract method).
r. Derivatives and Hedging Activities — The Company uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange. Foreign exchange forward contracts are utilized by theCompany to reduce foreign currency exchange. The Company does not enter into derivatives for trading or
speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as
follows: a) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains
or losses on derivative transactions are recognized in the statement of operations and b) for derivatives used
for hedging purposes, if 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.
The foreign exchange forward contracts are measured at their fair value but the unrealized gains / losses aredeferred until the underlying transactions are completed.

44

s. Per Share Information —Basic net operations per share is computed by dividing net operations available toshareholders of common stock, by the weighted-average number of shares of common stock outstanding forthe period. The weighted-average numbers of shares of common stock for the years ended March 31, 2011
and 2010 were 79,639,800 and 80,482,654, respectively.
Diluted net operations per share of common stock is not disclosed because the Company has nothing whichmight dilute the per share information for the years ended March 31, 2011 and 2010.
Cash dividends per share presented in the accompanying non-consolidated statements of operations are
dividends applicable to the respective years including dividends to be paid after the end of the year.
t. New Accounting Pronouncements
Accounting Changes and Error Corrections —In December 2009, the ASBJ issued ASBJ Statement No. 24“Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No. 24 “Guidanceon Accounting Standard for Accounting Changes and Error Corrections”. Accounting treatments under thisstandard and guidance are as follows;(1) Changes in Accounting Policies:
When a new accounting policy is applied with revision of accounting standards, the new policy is applied
retrospectively unless the revised accounting standards include specific transitional provisions. When therevised accounting standards include specific transitional provisions, an entity shall comply with the specifictransitional provisions.
(2) Changes in Presentations:
When the presentation of financial statements is changed, prior period financial statements are reclassified
in accordance with the new presentation.
(3) Changes in Accounting Estimates:
A change in an accounting estimate is accounted for in the period of the change if the change affects that
period only, and is accounted for prospectively if the change affects both the period of the change and future
periods.
(4) Corrections of Prior Period Errors:
When an error in prior period financial statements is discovered, those statements are restated.
This accounting standard and the guidance are applicable to accounting changes and corrections of priorperiod errors which are made from the beginning of the fiscal year that begins on or after April 1, 2011.

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2011 and 2010 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2011
Non-current:
Marketable equity securities .................................
Government and corporate bonds ........................
Other .......................................................................
Total .................................................................

2010¥5,862
1,004
529¥7,395¥4,879941
890¥6,7102011$70,499
12,075
6,362$88,936

4. I NVESTMENTS IN AND ADVANCES TO SUBSIDIARIES AND
ASSOCIATED COMPANIESInvestments in and advances to subsidiaries and associated companies as of March 31, 2011 and 2010 were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2011¥6,01860¥6,0782010¥5,618538¥6,156

2011$72,375722$73,09745

The value of the investment securities of subsidiaries and associated companies are measured at the originalacquisition costs, for the fair value of them cannot be reliably determined at March 31, 2011 since market value
and estimated future cash flow are not available.

5. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2011 and 2010 consisted of notes to banks and subsidiaries. The annualinterest rates applicable to the short-term borrowings ranged from 0.511% to 1.475% and 0.630% to 1.475% at
March 31, 2011 and 2010, respectively.
Long-term debt at March 31, 2011 and 2010 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2011
Unsecured loans from banks due seriallyto 2010 with interest rates ranging from1.515% to 1.670% . ...............................................
Loan from bank due seriallyto 2013 with interest rate of 1.250% ...................
Obligation under finance leases ............................
Total .................................................................
Less current portion ..............................................
Long-term debt, less current portion . ..................

2011

2010
¥4,000

¥315
79
394
(154)
¥240

$3,788950
4,738(1,852)$2,886115
4,115(4,048)¥ 67

Annual maturities of long-term debt at March 31, 2011 for the five years and thereafter were as follows:Year Ending March 31

2012 .........................................................
2013 .........................................................
2014 .........................................................
2015 .........................................................
2016 and thereafter . ...............................
Total ..................................................

Thousands of
U.S. Dollars

Millions of Yen
Long-term debt

Lease obligations

Long-term debt

Lease obligations

¥118
118
79

¥36
22
12
5
4
¥79

$1,419
1,419
950

$433
265
144
60
48
$950

¥315

$3,788The Company had a commitment-line contract of ¥8,000 million ($96,212 thousand) over three years withfinancial institutions in order to secure the stability of long-term funding. The contract included a restrictive
financial covenant. At March 31, 2011, the Company had utilized ¥8,000 million ($96,212 thousand) of thecommitment-line. In addition, the Company had overdraft contracts of ¥7,000 million ($84,185 thousand) intotal. At March 31, 2011, the Company had not utilized the overdraft.

Financial covenants

Short-term borrowings of ¥8,000 million includes financial covenants, with which the Company is incompliance.
The major financial covenants are as follows:
If the Company fails to comply with the following covenants, creditors may require repayment of all debt.
(1) Shareholder’s equity of each fiscal year will not fall below 75% of the higher of the following:a. Shareholder’s equity of fiscal year immediately preceding the fiscal year; orb. Shareholder’s equity of fiscal year ending on March 31, 2008
(2) Ordinary income for each fiscal year will not be negative for two consecutive fiscal years.

46

At March 31, 2011, land, building and structures of ¥2,067 million ($24,859 thousand) were pledged as collateralfor long-term debt of ¥315 million ($3,788 thousand).

6. RETIREMENT AND PENSION PLANS
Under most circumstances, employees terminating their employment are entitled to retirement benefits
determined based on the rate of pay at the time of termination, years of service and certain other factors. Suchretirement benefits are made in the form of a lump sum severance payment from the Company and annuity
payments from a trustee. Employees are entitled to larger payments if the termination is involuntary, by
retirement at the mandatory retirement age, by death, or by voluntary retirement at certain specific ages prior tothe mandatory retirement age.
In addition, the group completely transitioned from the approved pension plan to the defined benefit corporate
pension plan in October 2010.
The liabilities for retirement benefits at March 31, 2011 and 2010 for directors and corporate auditors were ¥27
million ($325 thousand) and ¥48 million, respectively. The retirement benefits for directors and corporate
auditors are paid subject to the approval of the shareholders.

7. ASSET RETIREMENT OBLIGATIONS
The changes in asset retirement obligations for the year ended March 31, 2011 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2011
Balance at beginning of year .................................
Additional previsions associated withthe acquisition of property,
plant and equipment . ..........................................
Reconciliation associated with passage of time . .
Balance at end of year ...........................................

¥41

2011
$493

2

24

1

12

¥44

$529

8. DEPOSITS RECEIVED
Deposits received from tenants amounted to ¥1,878 million ($22,586 thousand) at March 31, 2011 and ¥2,045
million at March 31, 2010.
At March 31, 2011, land, building and structures for rent of ¥1,499 million ($18,028 thousand) were pledged ascollateral for these deposits.

9. EQUITY
Japanese companies are subject to the Corporate Act of Japan (the “Corporate Act”). The significant provisions
in the Corporate Act that affect financial and accounting matters are summarized below:(a) Dividends
Under the Corporate Act, companies can pay dividends at any time during the fiscal year in addition to the yearend dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as; (1)having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and(4) the term of service of the directors is prescribed as one year rather than two years of normal term by its
articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time
during the fiscal year if the company has prescribed so in its articles of incorporation. The Company meets all
the above criteria.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if thearticles of incorporation of the company so stipulate. The Corporate 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.

47

(b) Increases / decreases and transfer of common stock, reserve and surplus
The Corporate Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (acomponent of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on
the equity account charged upon the payment of such dividends until the total of aggregate amount of legal
reserve and additional paid-in capital equals 25% of the common stock. Under the Corporate Act, the total
amount of additional paid-in capital and legal reserve may be reversed without limitation. The Corporate Act
also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained
earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.
(c) Treasury stock and treasury stock acquisition rights
The Corporate Act also provides for companies to purchase treasury stock and dispose of such treasury stock byresolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amountavailable for distribution to the shareholders which is determined by specific formula.
Under the Corporate Act, stock acquisition rights, which were previously presented as a liability, are now
presented as a separate component of equity.
The Corporate 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.

10. INCOME TAXESThe Company is subject to Japanese national and local operations taxes which, in the aggregate, resulted in anormal effective statutory tax rate of approximately 39.5% for the years ended March 31, 2011 and 2010.
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at March
31, 2011 and 2010 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2011

2011

2010

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

¥ 522
695

¥ 387
514

$ 6,278
8,358

11

19

132

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

115

127

1,383

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

21
62
464
(316)
¥1,574

85
62
205
(150)
¥1,249

253
746
5,580
(3,800)$18,930

Deferred tax liabilities:
Reserve for deferred gains onsale of property ....................................................
Prepaid pension cost . ............................................
Other .......................................................................
Total .................................................................
Net deferred tax assets .......................................

¥ 209
171
22
¥ 402
¥1,172

¥ 214
136
1
¥ 351
¥ 898

$ 2,5142,057
264$ 4,835$14,095

48

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying non-consolidated statements of income for the years ended March 31, 2011 and 2010 was asfollows:

2011

2010
39.5%
1.9
1.1
2.0
(22.8)(1.1)
20.6%

Normal effective statutory tax rate .......................
Per capita levy of local tax .....................................
Expenses not deductible for tax purposes ............
Valuation allowance . .............................................
Gain on extinguishment of tie-in shares ..............
Other – net . ............................................................
Actual effective tax rate .........................................

39.5%
3.4
1.7
(8.1)
1.4
37.9%

11. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to operations were ¥319 million ($3,836 thousand) and ¥214 million
for the years ended March 31, 2011 and 2010, respectively.

12. LOSS FROM A NATURAL DISASTER
Loss from a natural disaster caused by the Great East Japan Earthquake in March, 2011 consisted of thefollowing:
Millions of Yen

Thousands of
U.S. Dollars

2011
¥ 6
63
¥69

Removal Cost and Repair Expenses .....................
Provision of Allowance for Loss from a Disaster . .
Total .................................................................

2011
$ 72
758
$830

13. LEASES(1) Lessee

The minimum rental commitments under noncancellable operating leases at March 31, 2011 and 2010, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2010

2010

2009

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

¥0¥0(2) Lessor

The minimum rental commitments under noncancellable operating leases at March 31, 2011 and 2010 were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2010
¥ 697
2,761
¥3,458

2009
¥ 676
3,233
¥3,9092010$ 8,382
33,205$41,58749

14. CONTINGENT LIABILITIESAt March 31, 2011, the Company had the following contingent liabilities:
Millions of Yen

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

Thousands of
U.S. Dollars¥254$3,055

15. BUSINESS COMBINATION
Nippon Koei Power Systems Co., Ltd. was merged with the Company on April 1, 2010.
The details of this merger are as follows:
1. Names of combined parties and description of businessCompany name
Description of businessNippon Koei Co., Ltd
Engineering consulting and electric power engineering(The “Company”)
Nippon Koei Power Systems Co., Ltd

Manufacture of electrical equipment and construction work

2. Legal structure of the business combination
This is the merger with the Company as a surviving company and Nippon Koei Power Systems Co., Ltd. as
a company that ceases to exist.
3. Name of company after business combination
There is no change to the Company name.
4. Summary of transaction
The Nippon Koei Board of Directors deliberated on a merger to take effect on April 1, 2010 with its
consolidated subsidiary, Nippon Koei Power Systems Co., Ltd., at a meeting on January 13, 2010, and thetwo companies were then bound into a merger on the planned date of April 1, 2010.
The present merger was implemented to promote the further streamlining of corporate group business
operations based on management goals towards unification and consolidation.
5. Summary of accounting procedure
The Company accounted as common control transaction, based on ASBJ Statement No.21, “AccountingStandard for Business Combinations” and ASBJ Guidance No.10, “Guidance for Accounting Standard forBusiness combinations and Business Divestitures”.

16. SUBSEQUENT EVENTSAppropriations of Retained Earnings
On May 20, 2011, the following appropriation of retained earnings at March 31, 2011 was resolved by the Boardof Directors:
Millions of Yen

Year-end cash dividends, ¥10.0 ($0.12) per share ...............................

50

¥795

Thousands of
U.S. Dollars$9,561

51

Co rp ora te In form atio n

Board of Directors, Officers and Corporate
Auditors
Chairperson
Yoshihiko Tsunoda*

Stock Information
Shares authorized

189,580,000

Shares issued

86,656,510

Stockholders of minimum tradable stock unit

7,052

As of March 31, 2011

President:
Noriaki Hirose*

Major Stockholders

Director and Executive Vice President:
Seijiro Usuda *Share owned(thousands)

Percentage of
total owned

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

3,699

4.26

Meiji Yasuda Life Insurance
Company.

3,530

4.07

CSSEL SPECIAL CSTDY AC
EXCL FBO CUS

3,280

3.78

Director and Managing Executive Officers:
Tamotsu Yoshida
Yoichi Abe

Japan Trustee Services Bank,
Ltd. (Trustee)

2,774

3.20

The Koei Employees'
Stockholders Association

2,728

3.14

Director and Executive Officers:
Ryuichi Arimoto
Akira Mizukoshi
Noboru Takano

The Master Trust Bank ofJapan, Ltd. (Trustee)

2,154

2.48

Mizuho Corporate Bank, Ltd.

1,911

2.20

Tsukishima Kikai Co.,Ltd

1,843

2.12

CBNY DFA INTL SMALL CAP
VALUE PORTFOLIO

1,470

1.69

Nippon Life Insurance
Company

1,349

1.55

Director and Senior Managing Executive Officers:
Katsumi Yoshida
Shoji Nishitani
Yutaka Murai

Director:
Masahisa Naito
Corporate Auditors:
Kenichi Sakata
Koichi Kosumi
Mineo Enomoto

As of March 31, 2011
Besides the above, the Company owns thousands of shares of treasury stock
7170 (8.3%)

Managing Executive Officers:
Yoichi Kobayashi
Yoshiki Tamemitsu
Hiromichi Sekine
Executive Officers:
Kunio Kurokawa
Kiyotaka Mizushima
Masanao Nishimura
Takashi Seki
Yoshikimi Inoue
Hiroyuki Kasahara
Hiroyuki Akiyoshi
Haruyoshi Takura
Naoki Honjo*Representative Directors

52

As of June 29, 2011

Major Offices and Facilities

Major Businesses

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

Consulting Administration

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

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

53

M a j o r N i pp on Ko ei Gro u p C o mp an i es

While mainly focused on technical consulting, electrical power engineering, and power generation, theNippon Koei Group is also active in a wide range of related fields. The various businesses peripheral
to the activities of Nippon Koei, the main company in the Group, are taken on by subsidiaries andaffiliates located both at home and abroad.
These related companies, together with the principle corporation, make up the Nippon Koei Group.
The various firms maintain close cooperation based on relationships of interdependence that enhance
the strength and cohesion of the Group as a whole.
As of March 2011, the total number of employees of the Group companies based in Japan came toabout 2780, of which over 1,200 were registered engineers. The Group truly has a wealth of highly
skilled technical experts.
The subsidiary companies that comprise the consolidated Nippon Koei Group are as follows:
Tamano Consultants Co., Ltd.
This company is headquartered in the city of Nagoya and provides engineering consulting services
centered on the Chubu Region. The company boasts the most highly regarded urban and regional
planning group in Japan.
Nippon Civic Consulting Engineers Co., Ltd.
This company provides consulting services centered on planning, design, and construction supervisionof underground structures such as urban tunnels. The company specializes in shield tunnelingtechnology and the development of new underground construction technology.
NEPCO Ltd. *This company provides services for geological disaster prevention. Services include landslideprediction and preventative activities such as hazard surveys, action planning, and construction ofprotective measures. NEPCO also manufactures and sells various types of equipment for landslide
monitoring and management.
KRI International Corporation
This company has been established to enhance non-engineering consulting works of the Nippon Koei
Group’s activities. KRI provides the consulting services mainly in the fields of economic and industrial
development including finance and management, education and human resources development, andregional and community development.
Nippon Koei U.K. Co., Ltd.
This company provides engineering consulting services to enforce Nippon Koei’s overseas operation in
the primary fields of transportation, environment, water supply and wastewater.
Nippon Koei Latin America-Caribbean Co., Ltd.
This company has been established to enhance Nippon Koei’s operation in Latin America andCaribbean and provides consulting engineering and technical services for various development sectors
in the region.
NKLAC, Inc.
This company has been incorporated in Panama in order to promote further localization of Nippon
Koei’s operation in Latin America and Caribbean region.
Nikki Corporation
This company conducts real estate management, leasing, and insurance services for Nippon Koei andother Group companies. It also sells, imports, and exports electrical power equipment and rents andleases various goods.
Koei System Inc.
This company develops software programs used in computer control applications, dispatches
personnel, and provides support and software development for office automation systems on aconsignment basis.
El Koei Co., Ltd.
This company conducts employment and staff supply for Nippon Koei Group. The company provides
various fields of qualified human resources to support the activity of the Group Companies.
* NEPCO Ltd. was merged into Nippon Koei Co., Ltd. on May 1, 2011.
54

Annual Report

2011

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

Year Ended March 31, 2011

Printed in Japan