Annual Report

2009

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, 2009

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 2008 . ............................................................ 2
Consolidated Balance Sheets ....................................................................................... 18
Consolidated Statements of Income ............................................................................ 20
Consolidated Statements of Changes in Equity .......................................................... 21
Consolidated Statements of Cash Flows ..................................................................... 22
Notes to Consolidated Financial Statements .............................................................. 23
Non-consolidated Balance Sheets . .............................................................................. 40
Non-consolidated Statements of Operations .............................................................. 42
Non-consolidated Statements of Changes in Equity .................................................. 43
Notes to Non-consolidated Financial Statements . ..................................................... 44
Corporate Information ................................................................................................. 54
Major Nippon Koei Group Companies . ...................................................................... 56

Financial Highlights

Consolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended March 31

2009

2009

2008

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

¥64,198¥67,119$653,548

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

301

1,725

3,064

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

3.73

20.80

0.08

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

77,582

81,837

789,800

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

40,71142,846414,445

As of March 31

Non-Consolidated
Thousands of
U.S. Dollars

Millions of Yen
Years Ended March 31

2009

2009

2008

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

¥47,015¥49,929$478,622

Net income (loss) .................................................

(188)

774

(1,914)

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

(2.33)

9.33(0.02)

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

67,31370,839685,259

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

36,154

38,777368,055

As of March 31

Notes: 1. Per share amounts are based on the weighted average number of shares outstanding during each period.
2. The dollar amounts in this report represent translations of yen, for convenience only, at the rate of ¥98.23=US$1, the rate ofexchange at March 31, 20091

Co n so l i dated B u sine ss R ep o rt fo r Fi s c al 20 08( F i sca l Year En de d M arch 31, 20 09)
1. Overview of Performance and Cash Flow
(1) Performance
The Japanese economy was hit hard by the downturn in the global economy that was triggered by the U.S.
subprime mortgage crisis during the year under review. This has seriously impacted everything frommanufacturing to consumer spending, employment, and stock prices. Today dark clouds continue to loom overthe economy horizon and the outlook for the years to come remains less than sunny.
The Nippon Koei Group managed to weather a harsh business climate during the year under review asinvestments by power companies (distribution sector) and funding for public works projects as well as Official
Development Assistance (ODA) continued to dry up amid fierce price competition in the market.
Working against this backdrop during the first fiscal year of our medium-term management plan (from 2008 to2010), the Group sought to enhance management efficiency through initiatives aimed at optimizing operations
as a whole while remaining keenly focused on our “integration/concentration” policy. We stepped up efforts toallocate corporate resources to more promising as well as new business areas. These initiatives as well as aneffort to boost our technological capability and productivity were all implemented with an eye to making ourcorporate foundation strong enough to withstand any storm that lies ahead.
Despite these initiatives, consolidated orders during the year dropped 3.8% below last year’s level to total 65,997
million yen. This drop was largely due to declining sales of domestic consulting operations which were affectedby the issue related to tax revenues earmarked for road projects. Sales were down 4.4% from the previous year,
totaling 64,198 million yen, with revenues from some of the orders for overseas consulting operations being
carried over to the next fiscal year.
Ordinary Profit income amounted to 1,641 million yen, down 28.9% from the previous year, due to declined
sales and foreign exchange losses suffered as a result of the steep appreciation of the yen. Net income fell
sharply by 82.6% on a year-on-year basis to reach 301 million yen due to a loss on revaluation of investments insecurities, a loss on revaluation of inventories resulting from the change in accounting standards, as well as areversal of some of our differed tax assets.
The performance for individual Group sectors is outlined below.

Domestic Consulting Operations
While performance was up for public sector IT infrastructure development, local revitalization, as well as
projects designed to enhance public safety and security such as erosion and sediment control, sales dwindled inoperations related to road and bridge engineering. As a result, orders fell 6.7% below the previous year’s figure tototal 34,598 million yen. Year-on-year sales remained virtually flat at 36,367 million yen.

Overseas Consulting Operations
Although we were awarded contracts for large projects backed by Japanese government yen loans, including waterpower generation projects in Indonesia and Paraguay, orders fell short of last year’s astronomical level, dipping
4.5% on a year-on-year basis to total 19,113 million yen. Sales were down 10.8% to 14,602 million yen as revenues
from a large-scale irrigation project in Indonesia and other projects were carried over to the next fiscal year.

Manufacturing Operations
Contracts for large projects in computer-controlled systems and civil engineering measuring systems broughtorders up 17.6% year on year to reach 8,753 million yen. Sales remained unchanged from the previous year at
8,101 million yen.

Engineering Operations
Due to limited capital spending by power companies in the wake of the damage done to the Kariwa atomic
power plant in Kashiwazaki by the Niigata-Chuetsu Earthquake, work on transformers that was part of the2

construction of more substations and repairs to existing substations slowed down considerably. Overall
construction work orders declined 21.1% year on year, reaching a total of 2,640 million yen. Sales also fell 8.8%
to hit 3,007 million yen.

Real Estate Leasing
Sales from our Group’s real estate leasing operations in the year under review remained about the same as theprevious year at 1,262 million yen.

Other Business Operations
Thanks to steady systems development orders for communications companies, orders from other business
operations, including software development/sales, were up 19.9% year on year to reach 891 million yen, whilesales rose 18.1% to total 859 million yen.

(2) Cash Flow
Cash and cash equivalents (hereinafter “funds”) as of the end of the fiscal year under review increased by 1,698 million
yen year on year to total 6,597 million yen. The factors behind this increase are described below.
Annual net cash flow from operational activities came to 5,703 million yen (vs. 1,737 million yen for the preceding year).
Negative factors that led to a decrease in funds, such as a decline in accounts payable, were offset by factors leading to anincrease in funds. Specifically, accounts receivable were down and inventory assets were down, resulting in a gain of
4,511 million yen, although net income before income taxes during the period under review decreased by 1,248 million
yen from the end of the previous consolidated fiscal year, to 1,188 million yen.
Cash flow from investment activities amounted to a negative 1,512 million yen (vs. 2,512 million yen in net outflow for
the year before) due to the acquisition of fixed assets and investment securities.
Cash flow from financial activities amounted to a negative 2,407 million yen (vs. 322 million yen in net inflow for the year
before) due to repayment of long-term loans.
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 March2005

Fiscal Year
Ended March2006

Fiscal Year
Ended March2007

Fiscal Year
Ended March2008

Fiscal Year
Ended March
2009

47.2

52.1

53.1

52.1

52.2

31.6

47.2

36.2

25.4

22.7

34.3
2.8

11.7
6.2

2.7
27.5

17.8
10.2

2.5
28.0

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.

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

Change onPrevious Year(%)

(Millions of yen)

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

¥34,598
19,113
8,754
2,640
892
65,997

-6.7
-4.5
17.6
-21.1
19.9
-3.8

13,66230,298
1,688
1,107
48
¥46,803

-11.5
17.5
63.0
-24.9
203.5
7.0

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

(2) Sales PerformanceThis Consolidated
Fiscal YearBusiness Category

Change onPrevious Year(%)

(Millions of yen)Domestic consulting operations . ............................
Overseas consulting operations ..............................
Power equipment manufacturing operations ........
Electric power engineering operations . .................
Real estate leasing operations .................................
Other business operations .......................................
Total FY2008 sales ...............................................

¥36,367
14,602
8,101
3,007
1,261
860
¥64,198

-2.2
-10.8
-1.9
-8.8
0.0
18.1
-4.4

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

CustomerThis Consolidated
Fiscal Year
Amount(Millions of yen)Previous Consolidated
Fiscal Year

Proportion(%)

Amount(Millions of yen)

Proportion(%)

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

¥10,225

15.9¥11,039

16.4

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

6,807

10.6

7,549

11.2

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

3,860

6.0

5,430

8.1

4

3. Future Challenges(1) Management Policy
The operations of the Nippon Koei Group are built upon technology. We are committed to living up to ourphilosophy to “act with sincerity and contribute to society through technology.” We take pride in our
technological expertise and work to earn the respect of our employees, customers and the community at large.
Just as our slogan says, Nippon Koei is a company that is continually “Challenging mind, Changing dynamics.”
Today’s business climate is one of the harshest on record. The market is shrinking and the competition is
becoming keener everyday. These dark clouds have not been without a silver lining. There have been somepositive developments in the economy such as the scheduled implementation of pump-priming measures,increased funding for ODA projects, and the economic recovery of power companies. After surveying thesituation in light of these circumstances, we have charted a road map for the future that will enable us to
improve performance as we move forward together to overcome the hurdles that lie ahead. This road map
includes the following priority policies set forth under our new medium-term management plan:(i)	Management resources will primarily be allocated to promising businesses that meet market needs. This
includes businesses related to environment and energy (including railways). We will be vigilant in seizing
new business opportunities, including private investment projects as well as the full spectrum of generalcontracting, from design and procurement to construction, while working to maximize the impact our
technologies have in each of these fields.
(ii)	We will continue to recruit and train top-notch engineering professionals with an eye to further sharpening
the Group’s technological edge as we take on challenging businesses that pose an opportunity for adding
value or which require the employment of our advanced technological abilities.
(iii)	We will leverage the Group’s collective knowledge and know-how to improve the productivity of eachindividual operation as well as the productivity of the Group as a whole.
(iv)	Our employees are the lifeblood of our Group. We will work to sustain this most important resource byimproving working conditions and benefits as well as rewarding performance in an effort to boost
motivation and attract the best of the best. Specifically, we will increase wages, implement measures to help
employees balance their work and private life, and enhance our health care benefit system.
The Nippon Koei Group is committed to ensuring and strengthening risk management and internal controls inorder to be better prepared for sudden changes and increasing uncertainties in our operating environment.
Compliance lies at the heart of good corporate management. We continue to ensure thorough compliance with
our Charter of Corporate Responsibility and Code of Conduct as well as safety and quality standards in every
aspect of our corporate activities. We do all this with an eye to establishing ourselves as an industry leader thatis trusted by our customers as well as the community at large.
These policies are the pathways to better performance and the goals of our new medium-term management plan.
We would like to take this opportunity to follow up on the accident that occurred during construction of the Can
Tho Bridge in Vietnam in September 2007. The Vietnamese government released a final report by the national
investigation committee in July 2008. According to the report, the major cause of the collapse was the unevensettlement of the upstream foundation for the scaffolding that was set up for construction of the upper sectionof the bridge. Unfortunately it is almost impossible to predict the occurrence of this kind of uneven settling of asingle foundation framework during the design process.
After the release of the final report, the construction of the bridge was resumed. We will step up our efforts toensure safety in light of the lessons learned from the accident.

5(2) Basic Policy Governing Corporate Decision-makers on Financial Affairs andOperations
Our basic policy governing corporate decision-makers on financial affairs and operations (GovernancePrincipals) is as detailed below.
1) Governance Principals
We are proud of our company’s track record as a good corporate citizen. We have been charged with fulfilling agreat social mission and much of Nippon Koei’s work involves non-profit activities and public works projects,
including construction consulting. The power of our brand is backed by a wide range of technological expertise,years of experience, and a rock-solid performance record. It would be impossible to manage Nippon Koei,
improve its corporate value, or bring profit to its shareholders without an understanding of everything the brandstands for or devoid of the relationship of trust that has been built up between Nippon Koei and its customers,
employees, suppliers, and other stakeholders in Japan and abroad.
We believe that, in the event of a takeover bid, any party attempting to acquire a large number of shares (bidder)should provide shareholders with all the information necessary for them to make a sound decision.
2) Preventing Undesirable Takeover
Ensuring that the buying of a large amount of shares is done according to a fixed set of reasonable rules is in theinterest of both Nippon Koei and its shareholders. In line with the basic policy, we have stipulated a set rules forproviding relevant information in the event of a takeover bid (“Rules on Substantial Acquisition of Shares”) as
part of our policy regarding the large-scale acquisition of Nippon Koei shares (“Policy on Substantial
Acquisition of Shares”).
The Rules on Substantial Acquisition of Shares shall be applied to any bidder attempting to acquire a large
number of Nippon Koei shares in a bid to control 20% or more of the voting rights held by a certain group ofshareholders or acquiring enough shares to change the balance of power to ensure that a certain group ofshareholders have 20% or more of the voting rights. The Rules require the bidder to (a) provide the Board of
Directors with all relevant information including a written notification declaring his/her exact intentions inadvance, and (b) begin purchasing shares only after the elapse of a tender assessment period to be specified by
the Nippon Koei Board of Directors.
The Board of Directors voted at their May 12, 2008 meeting to revise the Policy on Substantial Acquisition of
Shares The policy was first introduced in May 2006 after which the Board voted to continue it in June 2007.
Revisions to the Policy on Substantial Acquisition of Shares were considered in light of making the policy more
appropriate and better suited to maintaining and enhancing corporate value. Since the decision to revise thepolicy was made in the common interest of the shareholders, we considered it only proper to seek theshareholders’ approval on keeping and revising the Policy on Substantial Acquisition of Shares. The issue wasbrought up at the 63rd Ordinary General Meeting of Shareholders held on June 27, 2008 and approved.
The Policy on Substantial Acquisition of Shares is as described below.
1. Establishment and Justification for Rules on Substantial Acquisition of Shares
The Board of Directors believes that, as long as Nippon Koei is a publicly traded company, any decision on
selling a large number of shares to an individual buyer should be left in the hands of the shareholders.
We are proud of our company’s long track record as a good corporate citizen. We have been charged withfulfilling a great social mission and much of Nippon Koei’s work involves non-profit activities and public works
project, including construction consulting. The power of our brand is backed by a wide range of technologicalknow-how, years of experience, and a rock-solid performance record. It would be impossible to manage ourCompany, improve its corporate value, or bring profit to its shareholders without an understanding of
everything the brand stands for or devoid of the relationship of trust that has been built up between our
Company and its customers, employees, suppliers, and other stakeholders in Japan and abroad. Nippon Koei

6believes its IR activities provide shareholders and general investors with a clear window on how we arrive at afair price for our shares. When any party suddenly tries to buy a huge number of shares at the establishedpurchase price, the shareholders should be given all the information they need from the potential buyer as wellas the Nippon Koei Board of Directors to determine whether or not the established share purchase price is fairor not. The prospective buyer’s plans for managing the Company and the potential impact of a takeover on thecompany’s bottom line as well as its relationship with the employees, affiliates, customers, suppliers and otherstakeholders should be made clearly known to the shareholders so they can make an informed decision onwhether to keep their shares or not. Shareholders should also seriously consider the opinions of the Nippon
Koei Board of Directors in the event of a takeover.
In consideration of everything mentioned above, our Board has concluded that in the event of a takeover bid, theshareholders should be given all the information they need to make a sound decision. When providing suchinformation, the Board of Directors will contemplate an opinion about the takeover in light of the advice,
opinions, or recommendations from independent specialists, etc., as well as an in-house ad hoc committee (to be
defined below). Once the Board has formed its opinion it will inform the shareholders. If deemed necessary, theBoard shall enter into negotiations with the potential buyer for better terms or present our shareholders with analternative proposal.
This process is designed to ensure that our shareholders seriously consider every aspect of a takeover bid (andany alternative proposal from the Board) in light of the Board’s opinion so they can make an informed decision.
Ensuring that the buying of a large amount of shares is done according to a fixed set of reasonable rules
reflecting the reasons already stated is both in the interest of Nippon Koei and its shareholders. The Board of
Directors has set forth the following rules for providing relevant information in the event of a takeover bid(Rules on Substantial Acquisition of Shares).
We will set up an ad hoc committee to introduce the Rules on Substantial Acquisition of Shares. The committee
will ensure that the series of procedures spelled out in the Rules on Substantial Acquisition of Shares arefollowed objectively and rationally, and that the measures deemed appropriate to protect the common interestsof our Company and its shareholders are formed objectively and rationally. The committee will also serve toprevent the Board of Directors from making any rash judgments or applying the Rules on Substantial
Acquisition of Shares arbitrarily. The ad hoc committee will be comprised of three or more persons elected fromamong our Company’s external directors and auditors, who act independently of the management that is incharge of running the Nippon Koei Groups business operations, so that the committee may pass fair andimpartial judgments.
2. Rules on Substantial Acquisition of Shares
The Rules on Substantial Acquisition of Shares 1) clearly defines a takeover bid through the major acquisition ofCompany shares, 2) stipulates that any party attempting to acquire a large number of shares, submit a written
notification to the Board of Directors in advance declaring their exact intentions, and 3) opens shares topurchasing only after the elapse of an assessment period to be specified by the Nippon Koei Board of Directors.
The details of the rules are as follows:(1) Scope
The Rules on Substantial Acquisition of Shares shall be applied to any acquiring party (“the bidder”) attempting
to acquire a large number of shares Note 1 in the Company in a bid to control 20% or more of the voting rights Note 2
by a certain group of shareholders Note 3 or acquiring enough shares to change the balance of power to ensure thata certain group of shareholders have 20% or more of the voting rights (this type of acquisition, whether it be atender offer through the purchase of shares over the open market or any other takeover bid, excluding instancesin which our Board of Directors has given its prior consent, shall be hereinafter referred as a “substantial
acquisition”).

7

(2) Submission of a written declaration of intent
When a party engages in a substantial acquisition of our Company’s shares, it must first submit a written
declaration of its intention (Declaration of Intention) to the Nippon Koei Group president in accordance with
the Rules on Substantial Acquisition of Shares. The Declaration of Intention shall include the bidder’s name andaddress, the laws under which it has been incorporated, the name of its representative, and its contact address
in Japan, as well as an outline of its acquisition proposal.
When a Declaration of Intention has been submitted by a bidder, Nippon Koei will disclose the information
regarding the bidder’s offer at an appropriate time and in full accordance with all securities and exchange laws,
ordinances and regulations regarding timely disclosure.
(3)Provision of information
Nippon Koei will provide an initial list of information to be submitted by a potential acquirer within 10 businessdays from receiving a Declaration of Intention from the bidder. The bidder must provide the Board withinformation sufficient enough (“necessary information”) for our shareholders to make a sound judgment and for
our Board to form a reasonable opinion on the tender offer. While the contents of this necessary information
may vary depending on the bidder and its intentions, it shall generally include:i.	A bidder profile (including the nature of its current operations and its experience with operations similar to
those of the Nippon Koei Group);ii.	The purpose, method, and details of the proposed acquisition (including, in the case of acquiring a large
percentage of our Company shares, the bidder’s reasons for setting an upper limit for the number of shares
to be bought, and its plans for changing the capital structure of the Company afterwards);iii.	How the bidder calculated the purchase price for our Company shares and how they will fund theiracquisition;iv.	Policies and plans related to management, business operations, financial aspects, capital, dividends, assets,etc. the bidder plans to implement should it takeover the Company’s operations (“Post Acquisition
Management Policy”).
v.	Policies concerning stakeholders in the Nippon Koei Group, including customers, suppliers, surrounding
communities, and employees, the bidder intends to implement in the event it takes over Company
operations.
The Board of Directors shall carefully examine and consider the information the bidder has initially provided
and consider the opinions and advice of the ad hoc committee, independent specialists, etc. If the Board finds
the information submitted to be insufficient to make a sound judgment that is in the best interest of theCompany and its shareholders, it shall request the bidder to furnish it with more information until it believes
that it has obtained all the necessary information.
When the Board deems that it has been provided with all the necessary information, it will send the bidder word
to that effect, and disclose the information related to the acquisition when most appropriate and in accordancewith all relevant securities and exchange laws, ordinances and regulations. Whenever the Board of Directors
believes a decision should be left up to the shareholders, it will inform them of all or part of the necessary
information it has been provided in a timely manner.
(4) Assessment period
Once the bidder has furnished all the Necessary Information, the Board shall be given a period of between 60
and 90 days (depending on the complexity of the issues involved) to assess the tender offer. The assessment
period shall begin from the day the bidder was notified that it had provided all the necessary information.
During this period (“assessment period”) the Board of Directors shall assess and consider the proposal, conduct
negotiations, form an opinion, and if necessary, formulate an alternative plan. Acquisition of shares may
commence once the assessment period has elapsed.
The assessment period may be extended up to 30 days, if the ad hoc committee so advises in order for the Board8to initiate countermeasures. When the Board decides to extend the assessment period, it must notify the bidderof the new assessment period deadline and the reason for the extension. Nippon Koei will disclose the new
deadline and reason for the extension to the public when appropriate and in full accordance with all relevant
securities and exchange laws, ordinances and regulations.
The Nippon Koei Board of Directors will use the assessment period to fully examine and assess all the necessary
information provided as well as hear advice from independent experts, etc. The Board will give carefulconsideration to the advice, opinions, and recommendations of the ad hoc committee before forming an
opinion. Once the board has formed an opinion, it will announce it to the public. If necessary, the Board of
Directors may negotiate with the bidder to secure better terms and conditions, or present the shareholders withan alternative proposal.
3. Responding to a Takeover Bid(1) When the bidder observes our Rules on Substantial Acquisition of Shares
Even if the Board of Directors is opposed to a takeover bid, it may not initiate any counter measure when thebidder acts in accordance with relevant rules. In such cases the Board is restricted to expressing their objectionsin an attempt to dissuade the shareholders from accepting the offer or presenting the shareholders with analternative proposal. The shareholders in this instance will decide for themselves whether or not to accept thebidder’s offer to buy their shares in light of the Board’s opinion about the proposal (and in some cases, its
alternative proposal), etc.
When the Board of Director’s believes that a takeover, even if it is in accordance with the rules, will damage
Nippon Koei’s corporate value Note 4, it is obliged to fulfill its duty as a responsible manager and take appropriate
countermeasures in the best interest of the company and its shareholders. The Board of Directors reserves theright to initiate countermeasures, such as the allocation of equity warrants at no charge, as specified under theCompany Law and other regulations as well as Nippon Koei’s articles of incorporation. The Board of Directors,
after thorough assessment, will determine the most appropriate countermeasures to take. Allocation of equity
warrants at no charge is one possible countermeasure outlined in the Addendum. When equity warrants are
granted gratis, conditions for exercising this guaranteed right within a specified period may be established sothat the allocation works as an effective countermeasure. This includes the condition that only thoseshareholders who do not belong to the certain group of shareholders whose ratio of voting rights is at or above a
specific ratio be allowed to exercise the right.
(2) When the bidder does not observe the Rules on Substantial Acquisition of Shares
When the bidder does not observe the Rules on Substantial Acquisition of Shares, Nippon Koei reserves theright to take measures preventing the takeover in the best interest of the Company and its shareholders. Afterconsidering all possibilities, the Board will select the most appropriate countermeasure. Allocation of equity
warrants at no charge is one possible countermeasure outlined in the Addendum. When equity warrants are
granted gratis, conditions for exercising this guaranteed right within a specified period may be established sothat the allocation works as an effective countermeasure. This includes the condition that only thoseshareholders who do not belong to the certain group of shareholders whose ratio of voting rights is at or above a
specific ratio be allowed to exercise the right.
4. Who Decides When to Initiate/End a Countermeasure?
(1) Who decides to initiate a countermeasure?
In cases (1) or (2) described in “Responding to a Takeover Bid,” the Board will objectively determine when it isnecessary to take countermeasures in accordance with the procedure outlined below.
Before initiating any countermeasure, the Board of Directors will consult with the ad hoc committee todetermine if there is a real need to take countermeasures. In assessing whether or not there is a need to adopt
countermeasures, the committee may obtain, at the Company’s cost, advice from independent experts, etc. (i.e.
financial advisers, certified public accountants, lawyers, consultants and other specialists).

9

Once the ad hoc committee has advised the Board of Directors on whether or not to take countermeasures, theBoard will disclose to the public information related to the committee’s advice that it considers appropriate aswell as in full accordance with all securities and exchange laws, ordinances and regulations regarding
disclosure.
After hearing the advice of the ad hoc committee, the Board will render its decision on implementing
countermeasures in careful consideration of the necessary information. The Board will specifically consider who
the bidder is, what it has proposed, and what impact a takeover will have on Nippon Koei’s corporate value
before coming to a decision that is in the best interests of the company and its shareholders. In reaching its final
conclusion, the Board will seek the advice of outside experts, etc. and seriously consider the recommendationsof the ad hoc committee.
When the Board of Directors decides to implement countermeasures, Nippon Koei will inform the public of thedetails regarding the decision when appropriate and in full accordance with all securities and exchange laws,
ordinances and regulations regarding disclosure.
(2) Who decides to end a countermeasure?
Whenever a countermeasure adopted by the Board of Director’s is no longer needed due to a change incircumstances or because the ad hoc committee has withdrawn its recommendation on taking countermeasures,or for some other reason, the Board may determine to cease the countermeasure or in light of newrecommendations from the committee, alter its details.
When the Board of Directors decides to end a countermeasure or modify it, it will publicly disclose its decision
when appropriate and in full accordance with all securities and exchange laws, ordinances and regulations
regarding disclosure.
5. Expiration, abolishment, and revisions
The shareholders at the 63rd ordinary general meeting voted to keep the Policy on Substantial Acquisition of
Shares which was initially set to expire on May 12, 2008. The shareholders approved the policy and resolved thatit remain in force until the end of the last general shareholders meeting held in the fiscal year ending within
three (3) years after the end of the 63rd general shareholders meeting.
The Policy on Substantial Acquisition of Shares may be abolished at any time prior to its expiration subject to avote on a resolution to terminate the policy at a general meeting of shareholders or through a vote by the Boardof Directors.
The Policy on Substantial Acquisition of Shares may be revised at any time on an as needed basis. The policy
exists to serve the best interests of both the company and its shareholders by maintaining the integrity of thebrand and its corporate values. Future changes in the law, trends in judicial decisions, as well as approaches totakeovers taken by exchanges and other public organizations may prompt a need for the Board of Directors to
adopt counter-takeover measures tailored to a whole new set of circumstances.
The Policy on Substantial Acquisition of Shares may be changed subject to a resolution adopted at theCompany’s general meeting of shareholders. Modifications to the Policy on Substantial Acquisition of Shares
may also be made at a meeting of the Board of Directors so long as it does not compromise the best interests ofthe shareholders. Whenever there is a change (revision, repeal, replacement) to the laws and ordinances cited in
the Policy on Substantial Acquisition of Shares, the policy shall be amended or revised to incorporate these legal
changes without the consent of the Company’s shareholders or Board of Directors, so long as the changes are
not inconsistent with the spirit and intent of the original policy provisions and terms.
6. Measures to enhance our takeover defenses(1) Maintaining and enhancing corporate value is everyone’s business
The Policy on Substantial Acquisition of Shares enables our shareholders to make an informed decision onwhether a hostile takeover would be beneficial. Aiming to serve the best interest of the Company and its

10shareholders, the policy clearly spells out the Rules on Substantial Acquisition of Shares for bidders to follow
and the necessary conditions before our Board of Directors can implement countermeasures. This has all been
done to secure and enhance Nippon Koei’s corporate value and in the best interest of the Company and its
shareholders.
We believe the Rules on Substantial Acquisition of Shares and the necessary conditions for taking
countermeasures are reasonable in light of our aim to maintain and enhance the Company’s corporate value andin protecting the interests of its shareholders. They do not place any undue restrictions on takeovers that could
enhance corporate value and benefit the shareholders.
(2) Advance disclosure
We believe that both the details of the Rules on Substantial Acquisition of Shares and the details on thenecessary conditions for taking countermeasure are concrete and clear enough to make it possible for theshareholders, investors and potential bidders to make fair predictions about the future.
(3) The shareholders come first
The Policy on Substantial Acquisition of Shares was originally planned to remain in force until the close of thisgeneral meeting of shareholders when shareholders would have the opportunity to vote on its survival. The
Company’s shareholders and Board have always reserved the right to rescind or revise the policy at any timethrough a resolution subject to a vote at the Company’s general meeting of shareholders or Board of Directors.
We believe, decisions about whether to introduce, maintain, rescind or alter the policy, made in the form of aresolution to be voted on at a general meeting of shareholders as described above, will ensure that the wishes ofthe shareholders are reflected in Company policy.
(4) Ensuring that our Board makes objective and reasonable decisions
The Policy on Substantial Acquisition of Shares objectively establishes clear and necessary conditions for
implementing countermeasures, eliminating virtually all room for arbitrary decisions by the Board.
In introducing the Policy on Substantial Acquisition of Shares, our Company established an ad hoc committee
independent of management. The policy establishes prior conditions needed to implement countermeasuresrequiring that our Board consult the committee in advance concerning the initiation of countermeasures. Only
after carefully considering the recommendations of the committee will the board make its final decision on
implementing counter-takeover measures.
We believe the Policy on Substantial Acquisition of Shares ensures that all decisions of the Board regarding
countermeasures are objective and reasonable.
(5) Obtaining opinions of third party experts
Whenever a potential bidder emerges, our policy empowers the ad hoc committee to seek the advice ofindependent experts (financial advisers, certified public accountants, lawyers, consultants, and other specialists)
at the Company’s expense. The policy goes to such great lengths that it leaves no room for doubt about thefairness and objectivity of the ad hoc committee’s recommendations.
(6) Against the dead-hand
The Policy on Substantial Acquisition of Shares may be abolished subject to a vote at the Company’s general
meeting of shareholders or of a Board meeting comprised of directors elected by at general meeting ofshareholders. It is possible for a bidder who has acquired a large amount of Company shares to elect a board of
sympathetic directors at a general meeting of shareholders who will then abolish the policy. In other words, thePolicy on Substantial Acquisition of Shares is not a dead-hand takeover defense (i.e. a takeover defense thatcannot be abolished or stopped even when a general meeting of shareholders of the company concerned has
resolved to change a majority of the directors on the Board).

11

7. Impact on shareholders and investors(1) How the Rules on Substantial Acquisition of Shares impact shareholders and investors
The Rules on Substantial Acquisition of Shares aims to give shareholders all the information they need to makean informed decision in the event of a takeover bid. That includes the opinions of the Company’s current
custodians, the Board of Directors. It also ensures that the shareholders will be guaranteed a Boardrecommended alternative should they find the takeover bid to be disadvantageous. These rules enable
shareholders to make sound judgments about whether or not it would be beneficial to acquiesce in the face of aparticular tender offer or fight it. The Rules on Substantial Acquisition of Shares squarely upholds theshareholders’ interests, and gives them the tools they need to make the right investment decision when it comesto a takeover bid.
(2) Impact of countermeasures
When a bidder does not observe the Rules on Substantial Acquisition of Shares, or when a hostile takeover bid
threatens Nippon Koei’s corporate value, the Board may initiate countermeasures. These countermeasures are
permissible under the Company Law and other regulations as well as Nippon Koei’s articles of incorporation forthe purpose of protecting the Company and its shareholders’ interests. No countermeasure may impair the legal
rights or the financial integrity of the shareholders (excluding the bidder that has violated the Rules on
Substantial Acquisition of Shares).
When equity warrants are granted gratis as a countermeasure, shareholders will not need to apply for equity
warrants. Those shareholders who are included or recorded on the final version of the Company’s list ofshareholders or its list of beneficial owners as of the allocation date will automatically become holders of equity
warrants as of the date the gratis equity warrants were issued. Shareholders, who have not transferred theirshares as planned but want to acquire their equity warrants, must complete the transfer by the allocation date,
which is to be determined by our Board at a later time and announced publicly.
The company will send shareholders who have received equity warrants free of charge, instructions (in a form
prescribed by the company, including a signed oath stating that the shareholder is not the bidder) and otherdocuments needed to exercise the rights guaranteed by the equity warrants. These shareholders will be issued
ordinary certificates of our Company shares once they return the above-mentioned documents by the specified
deadline and contribute an amount to be determined by the Board. Should the shareholder not exercise the rightguaranteed by the equity warrant by the specified deadline, the said right will lapse and the value of the shares
held by the shareholder will be diluted since other shareholders have exercised their rights.
A decision to allocate gratis equity warrants may later be rescinded as provided for in 4 (2) above. The Board
may cancel the allocation before the official date of allocation and any time between the date the equity
warrants are first allocated and the day before they expire. In these cases, no dilution of the per-share value will
occur. Investors who have traded Company shares on the assumption that a dilution would take place might
suffer a loss corresponding to fluctuations in the share price.
Note 1: Share:
Share shall be as defined under Article 27-23 (1) of the Financial Instruments and Exchange Law.
Note 2: Ratio of voting rights:(i) This shall mean the ratio of shares held by the said group of shareholders as defined in (i) of Note 3 (i.e.
“Holding Ratio of Share Certificates, etc.” as defined in Article 27-23 (4) of the Financial Instruments andExchange Law). In calculating the said ratio, the number of shares held by the co-holder (s) (i.e. the number ofshares as defined in the same paragraph of the abovementioned law; the same applies hereafter), or (ii) in thecase where a certain group of shareholders is as defined in (ii) of Note 3, the ratio of share certificates held byboth the bidder and associated parties (i.e. the ratio of shares provided for under Article 27-2 (8) of the Financial
Instruments and Exchange Law). In calculating the holding ratio of share certificates, the total number of voting

12

rights (as defined in Article 27-2 (8)-(i) of the same law) and the total number of shares issued may be obtained
from the Company’s most recent financial statements, semiannual report, or share buyback report.
Note 3: Certain group of shareholders:(i) Shall mean a holder (as defined under Article 27-23 (1) of the Financial Instruments and Exchange Law,
including any holder specified in Article 27-23 (3) of the same law, the same applies hereafter) of a Company
share certificate (as defined in Article 27-23 (1) of the same law) and his/her/its co-holder (i.e. any co-holder as
defined in Article 27 -23 (5) of the same law, including any co-holder specified in Article 27-23 (6) of the samelaw; the same applies hereafter), or (ii) a party attempting to buy (referring to buying as provided for under
Article 27-2 (1) of the same law, including the buying on the financial product market of an exchange) Company
share certificates (as defined in Article 27-2 (1) of the same law) and any associated party (defined as “Persons inSpecial Relationship” in Article 27-2 (7) of the same law).
Note 4: Acquisitions that impair corporate value:
A takeover bid that impairs the Company’s corporate value or seriously harms the interests of its shareholders asa whole means share purchases that fall under any of the following categories (i) through (viii) below:(i)	The acquisition of Company shares without any intention of truly participating in the Company’s
management but rather for the sole purpose of driving the share price up with an eye to eventually selling itback at a higher price;(ii)	A strategic takeover bid in which the bidder intends to gut the Company, i.e. gaining control of the Board
only to transfer its rights and interests, including intellectual property rights and know-how, main businessconnections, including the very customers that are the lifeblood of the Company, to the bidder or its groupcompanies;(iii)	The bidder is attempting a leveraged buyout in which it intends to sell Company assets in order to repay thedebt used to finance the takeover;(iv)	When a bidder tries to acquire Company shares with the aim of replacing existing management for the sole
purpose of selling off expensive assets, etc. that are not used in current Company operations, including realestate and securities, and then using the profits from the disposal of these assets, etc. to pay high dividends
that will artificially drive the share price up with the intention of dumping the shares at the inflated value
for a profit;(v)	When a bidder’s takeover offer (including, but not limited to, the amount, kind, or other details of theacquisition price, time and method of acquisition, legality as well as feasibility) is reasonably deemed to be
woefully insufficient or inappropriate in light of the Company’s corporate value;(vi)	When a bidder tries to acquire Company shares using a two-stage acquisition strategy (in which the bidder
doesn’t offer to buy all shares in the first stage but offers a less than fair price, or vague terms and conditionsin the second stage), or other strategy that could possibly force shareholders to sell their shares, before they
had the opportunity to make an informed decision or simply coerce them into selling their shares;(vii)	When all reasonable signs indicate that a takeover will have a negative impact on the Company’s present or
future corporate value and is not likely to be in the best interest of the shareholders, customers, employees,
business connections, and other stakeholders; and(viii)	When the bidder, upon reasonable grounds or by public standards, is deemed to be an unsuitable custodianby the controlling majority of Company shareholders.

13Addendum
Gratis Allocation of Equity Warrants
1. Criteria for issuing free equity warrants
Those shareholders included on the final version of the list of Company shareholders or on its list of beneficial
owners as of the day appointed by the Board of Directors as the allocation day, will be allocated equity warrants
in the ratio of one (1) ordinary share in the Company (excluding those held by the Company) held by eachshareholder to one (1) equity warrant.
2. Type and number of shares to be issued as equity warrants
The maximum number of shares permitted to be issued as equity warrants is the difference between the total
number of outstanding ordinary shares as of the date of allocation and the number of ordinary shares that havealready been issued (excluding the number of ordinary shares owned by the Company as of the aforementioneddate). The number of shares to be issued for each warrant (hereinafter “numbers of shares per warrant”) shall beseparately determined by the Board of Directors. (The number of shares issued may be adjusted within areasonable range when necessary, such as in the case of a share split or consolidation.)
3. Total number of equity warrants to be allocated
The total number of equity warrants to be allocated is to be determined by the Board of Directors. The Board
may allocate equity warrants a multiple number of times.
4. Amount to be paid when exercising equity warrants
The amount of money to be paid when exercising a warrant shall be the per-share price of the company’s
ordinary shares (hereinafter “exercising price”) multiplied by the number of shares to be exchanged. The exact
exercising price which shall be at least one (1) yen is to be specified by the Board of Directors.
5. Restriction on transferring equity warrants
Equity warrants may only be transferred with the approval of the Board of Directors.
6. Conditions for exercising equity warrants
Any group of shareholders acting in concert with one another whose combined shareholdings would give them
20% or more of the voting rights shall not be permitted to exercise these equity warrants, in addition to otherconditions on exercising these equity warrants. The details of these conditions are to be worked out by the
Board separately.
7. Equity warrant expiration
The equity warrants’ expiration and issue dates, increases in capital stock and capital reserves when equity
warrants are exercised, as well as other related matters are to be determined by the Board of Directors
separately.
The Board of Directors may specify that equity warrants be issued on the basis of a certain reason as provided
for in Article 236-7 (1) of the Company Law. In such an instance the provisions set forth in the preceding
paragraphs may be revised when necessary.
3) Board Decision Concerning the Measures Described in 2) Above
The Policy on Substantial Acquisition of Shares is in line with the basic policy described in 1) above. It protects
the interests of our shareholders over protecting the corporate directors from being replaced in the following
ways:a.	The policy enables our shareholders to make an informed decision on whether a hostile takeover would be
beneficial, prevents any apparent infringement on Nippon Koei’s corporate value and is in the best interestof Nippon Koei and its shareholders.

14b.	The Rules on Substantial Acquisition of Shares and the necessary conditions for taking countermeasures arereasonable in light of our aim to maintain and enhance Nippon Koei’s corporate value and protect theinterests of its shareholders.
c.	The Rules on Substantial Acquisition of Shares and the necessary conditions for taking countermeasure areconcrete and clear enough to make it possible for the shareholders, investors and potential bidders to makefair predictions about the future.
d.	Decisions about whether to introduce, maintain, rescind or alter the policy, made in the form of a resolution
to be voted on at a general meeting of shareholders, will ensure that the wishes of the shareholders arereflected in company policy.
e.	The policy establishes prior conditions needed to implement countermeasures requiring that the Nippon
Koei Board consult its independently established ad hoc committee in advance concerning the initiation ofcountermeasures. Only after carefully considering the recommendations of the committee will the board
make its final decision on implementing counter-takeover measures. The Policy on Substantial Acquisitionof Shares ensures that all decisions of the Board regarding countermeasures are objective and reasonable.
f.	The policy empowers the ad hoc committee to seek the advice of independent experts at the Nippon Koei’s
expense. The policy goes to such great lengths that it leaves no room for doubt about the fairness andobjectivity of the ad hoc committee’s recommendations.
g.	The Policy on Substantial Acquisition of Shares is not intended to be a dead-hand takeover defense and may
be abolished subject to a vote at the company’s general meeting of shareholders or at a Board meeting
comprised of directors elected at a general meeting of shareholders.

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

Dependence on Major Customers
Our construction consultancy operations rely on foreign and national government contracts for some 90% its
sales. Sales performance on the domestic front tends to be affected by trends in government spending while ourinternational orders are a reflection of the Japanese ODA budget.
Since about 60-80% of our electric power engineering operations are for the Tokyo Electric Power Company(TEPCO), our sales performance is largely dictated by capital investments at TEPCO.

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

6. Research and Development
The Nippon Koei Group puts its guiding philosophy to “act with sincerity and contribute to society throughtechnology” into practice by putting technology to work in creating a better world for all.
Overall Group research and development costs for the consolidated fiscal year under review amounted to 342
million yen.

15

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

(2) Research and development relating to national disaster prevention
Research was also focused on uplift in ground surface due to the recovery of groundwater levels, development ofa risk 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 environmental preservation
Research was conducted on a CO2 aquifer storage technique, analysis of saltwater intrusion and the impact ofsaltwater intrusion on tidal variability, as well as development of an ecosystem and water environment
management simulator.

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

(5) Technical exchanges with overseas research institutes
Technical exchange activities were conducted with the United Nations University and Asian Institute ofTechnology.
Research and development costs paid in support of these operations totaled 246 million yen.

Manufacturing and Engineering Operations
Research and development for these businesses is conducted primarily by Nippon Koei Power Systems Co., Ltd.
Research and development activities during the consolidated fiscal period under review consisted primarily of
the following:(1) Research on improving water turbine performance
We began development work on a high performance Francis turbine in 2007. We designed and developed an
improved runner and conducted performance tests based on the results of performance tests on previous
runners conducted by École Polytechnique Fédérale de Lausanne (EPFL) in Switzerland, to which the testing ofwater turbine models has been outsourced.

(2) Research on improving secondary distribution valves for governors
This fiscal year we completed the development design and manufacture of secondary distribution valves forhydraulic governors using an existing governor and established our own proprietary design and manufacturing
technology.
Research and development costs in support of these operations totaled 96 million yen.

16

7. Analysis of Financial Status and Management Performance
Here is an analysis of our Group’s finances and performance for the consolidated fiscal year under review:(1) Analysis of financial status(i) Assets, liabilities, and equity
Our consolidated assets as of the end of the fiscal year under review amounted to 77,582 million yen, a 4,255
million yen drop from the preceding year. The primary cause for the drop was a 2,738 million yen decrease incurrent assets and a 1,517 million yen decrease in fixed assets. The decrease in current assets was due primarily
to a 2,882 million yen decrease in accounts receivable (trade) as well as a 1,386 million yen decreases in work inprogress. Fixed assets decreased mainly because investments in securities were cut by 1,199 million yen as themarket declined.
Consolidated liabilities as of the end of this fiscal year stood at 36,871 million yen, down 2,119 million yen year
on year. This decrease occurred mainly due to a 2,159 million yen decrease in current liabilities and a 39 million
yen increase in fixed liabilities. The increase and decreases were primarily due to the repayment of long-termloans due within the year, amounting to 4,000 million yen, as well as a 2,500 million yen increase in short-termloans and a 634 million yen decrease in notes and accounts payable.
Equity as of the end of the fiscal year under review amounted to 40,711 million yen, down 2,135 million yen
from the previous year. This decrease was mainly due to a 304 million yen decrease in retained earnings and a
1,773 million yen decrease in unrealized gain on available-for-sale securities.
(ii) Cash flow
Cash flow in the consolidated fiscal year under review is outlined in the section entitled “(2) Cash flow” under“1. Overview of Performance and Cash Flow” in “II. Consolidated Business Report.”(2) Analysis of Performance
Net sales for the year under review dropped by 2,920 million yen, or 4.4%, year on year to 64,198 million yen.
Sales for overseas consulting operations, in particular, fell sharply by 1,767 million yen, or 10.8%, to 14,602
million yen since revenues from large irrigation projects were carried over to the next fiscal year. Sales foroverseas consulting operations accounted for 22.8% of overall sales, declining 1.6 percentage points from theprevious fiscal year’s 24.4%.
Operating income totaled 1,728 million yen, down 807 million yen from the previous year. Although the cost to
sales ratio remained unchanged from the previous year at 75.8%, the ratio of SG&A expenses to sales fell by 1.1
points from the previous year to 21.5% due to declined sales. This has brought the ratio of operating income tosales down 1.1 points year on year to 2.7%.
Other income resulted in a loss of 87 million yen since the amount of foreign exchange losses arising from theappreciation of the yen and a loss from the sale of investment securities exceeded the amount of income frominvestments such as dividends earned. As a result, operating income decreased by 666 million yen year on year
to total 1,641 million yen.
There was also an extraordinary loss of 452 million yen for the fiscal year under review. The primary factors forthis loss included a loss due to impairment of investment securities as a result of the slowdown in the stock
market as well as a revaluation loss on inventory assets of consolidated subsidiaries.
All this added up to income before taxes and minority interests totaling 1,189 million yen, and net income
totaling 301 million yen, down 1,424 million yen from the previous year. Net income per share came to 3.73 yen,down 17.7 yen year on year from 20.80 yen.

Noriaki Hirose
President:

17

Co n so l i da ted B a lance S h eet s
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
March 31, 2009 and 2008

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

ASSETS

2009

2009

2008

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

¥ 6,597

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

14¥ 4,899$ 67,159
143

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

38

67

387

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

25,68928,543

261,519

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

(179)

(189)

(1,822)Inventories (Note 4) .............................................

6,981

8,611

71,068Deferred tax assets (Note 9) ................................

1,738

1,662

17,693

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

1,832

1,855

18,649Total current assets ............................................

42,71045,448434,796

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

13,644

13,333

138,899

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

19,78819,762

201,446

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

2,230

2,331

22,702

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

2,578

2,615

26,245

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

314

PROPERTY, PLANT AND
EQUIPMENT (Notes 5 and 7):

3,196Construction in progress .....................................
Total ....................................................................

38,55438,041

392,488

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

(14,234)(13,679)(144,905)

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

24,32024,362

247,583

5,695

6,920

57,976

subsidiaries and associated companies ............

584

559

5,945

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

122

52

1,242

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

1,857

2,169

18,905

Receivables in bankruptcy ..................................

129

132

1,313

Deferred tax assets (Note 9) ................................

262

230

2,667

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

2,148

2,209

21,867

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

(245)

(244)

(2,494)

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

10,552

12,027

107,421

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

¥77,582¥81,837$789,800

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

See notes to consolidated financial statements.

18

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short‑term borrowings (Note 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 . ..............
Other current liabilities (Note 9) ........................
Total current liabilities ....................................
LONG-TERM LIABILITIES:Long-term debt (Note 5 ) .....................................
Liability for retirement benefits (Note 6) ...........
Deposits received (Note 7) . .................................
Deferred tax liabilities (Note 9) . .........................
Other liabilities ....................................................
Total long-term liabilities ................................

2009

2009

2008

¥ 8,000269¥ 5,500
4,190$ 81,442
2,738

421
5,197
528
6,270
1,568
136
3,831
26,220

557
5,695
451
6,103
1,291
136
4,456
28,3794,286
52,906
5,375
63,83015,963
1,385
39,000266,925

4,587
3,068
2,505
434
57
10,651

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

46,697
31,23325,501
4,418
580
108,429

7,393
6,132
30,8697,393
6,132
31,17375,26262,425314,252(1,898)(125)(19,322)

COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 11, 12 and 13)
EQUITY (Notes 8 and 14):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares in 2009 and 2008 .................
Capital surplus .....................................................
Retained earnings ................................................
Unrealized gain (loss) on
available-for-sale securities ...............................
Deferred gain (loss) on
derivatives under hedge accounting .................
Treasury stock—at cost
6,081,506 shares in 2009
and 5,984,122 shares in 2008 ............................
Total ..................................................................
Minority interests . ...............................................
Total equity . .....................................................

(2,017)40,479232
40,711(1,992)
42,619227
42,846(20,533)
412,084
2,362
414,446

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

¥77,582¥81,837$789,800

38

19

Co n so l i da ted S t atemen t s o f I n c o me
Nippon Koei Co., Ltd. and Consolidated Subsidiaries
Years Ended March 31, 2009 and 2008

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

2009

2009

2008

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

¥64,198¥67,119$653,548

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

48,69015,50850,89016,229495,674
157,874

SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES (Note 10) . ....
Operating income ............................................

13,7801,728

13,693
2,536

140,283
17,591

382
(184)
(409)

299
(172)
(485)

3,889
(1,873)(4,164)

(54)
165
(175)
(182)
(191)

(29)
303

(550)
1,680
(1,782)(1,853)(1,944)OTHER INCOME (EXPENSES):Interest and dividend income .............................
Interest expense ...................................................
Foreign currency exchange loss ..........................
Loss on disposal of property,
plant and equipment . ........................................
Gain on sales of investment securities . ..............
Loss on sales of investment securities ................
Loss on valuation of investment securities ........
Loss on valuation of inventories .........................
Reversal of allowance for doubtful accounts .....
Other-net . .............................................................
Other income (expenses)-net . .........................

(3)

109
(539)

62
(74)
(99)

1,110
(5,487)

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

1,189

2,437

12,104

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

703
178
881

497
195
692

7,157
1,812
8,969

7
301

20
¥ 1,725

71$ 3,064

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

¥

U.S.Dollars(Note 1)Yen

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

20¥ 3.73
7.50¥ 20.80
7.50

$

0.04
0.08

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, 2009 and 2008

Thousands

Millions of Yen

Outstanding
Number of
Shares ofCommon Stock

BALANCE, APRIL 1, 2007 ����������������������������������
Net income �����������������������������������������������������������Cash dividends, ¥10.00 per share ������������������������
Purchase of treasury stock ����������������������������������
Net change in the year �����������������������������������������
BALANCE, MARCH 31, 2008 �����������������������������
Net income �����������������������������������������������������������Cash dividends, ¥7.50 per share ��������������������������
Purchase of treasury stock ����������������������������������
Net change in the year �����������������������������������������
BALANCE, MARCH 31, 2009 �����������������������������

83,816

Common Stock¥7,393

Capital Surplus¥6,132Retained Earnings

Unrealized Gain on
Available-for-sale
Securities¥30,077¥1,529DeferredGain (loss) on
Derivatives
under Hedge
Accounting

Treasury Stock¥(1,137)

Total¥43,994

1,725
(629)

7,393

6,132

31,173(1,654)

38

(125)

38

(1,773)¥7,393¥6,132¥30,869

1,725

(629)

(629)
(855)

(1,616)(168)(1,784)(1,992)

42,619227

42,846

301

301

(605)

(605)

(25)

(25)

(25)

(1,811)5(1,806)¥(2,017)¥40,479¥232¥40,711¥(38)¥(1,898)¥44,389

(855)

(605)
(97)

Total Equity

(855)

301

80,575

¥395

1,725

(3,144)80,672

Minority Interests

Thousands of U.S.Dollars (Note 1)

Common Stock

BALANCE, MARCH 31, 2008 �����������������������������
Net income �����������������������������������������������������������Cash dividends, $0.08 per share ��������������������������
Purchase of treasury stock ����������������������������������
Net change in the year �����������������������������������������
BALANCE, MARCH 31, 2009 �����������������������������

$75,262

Capital Surplus$62,425

Retained Earnings

Unrealized Gain on
Available-for-sale
Securities$317,347$(1,273)

DeferredGain (loss) on
Derivatives
under Hedge
Accounting$387

Treasury Stock$(20,279)

3,064(6,159)(18,049)$75,262$62,425$314,252$(19,322)

Total

Minority Interests$433,869$2,311

Total Equity$436,180

3,064

3,064

(6,159)(6,159)

(254)

(254)

(254)

(18,436)51(18,385)$(20,533)$412,084$2,362$414,446$(387)

See notes to consolidated financial statements.

21

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, 2009 and 2008

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

OPERATING ACTIVITIES:2009

FINANCING ACTIVITIES:

2009

2008

Income before income taxes andminority interests . ..................................................

¥ 1,189¥2,437$ 12,104

Adjustments for:
Income taxes – paid ................................................
Depreciation and amortization ..............................

(597)
1,121

(459)
1,160

(6,078)
11,412Gain on sales of property,
plant and equipment . ...........................................

25

(3)

255

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

27

29

275

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

11

(303)

112

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

2,882(1,375)29,339Decrease in inventories . .....................................
Decrease in trade accounts payable . .................

1,630
(634)

688
(341)

16,594(6,454)(Decrease) increase in liability for
retirement benefits . .........................................

(12)

122

(122)

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

61
5,703

(218)
1,737

621
58,058INVESTING ACTIVITIES:
39

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

8

27

81

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

(607)
2,314
(3,034)(1,756)
1,491(2,167)(6,179)23,557(30,887)

Purchases of investments in a consolidated
subsidiary ................................................................
Increase in other assets ............................................
Net cash used in investing activities ................
See notes to consolidated financial statements.

22

(113)
(193)
¥(1,512)(33)¥(2,512)(1,965)$(15,393)

Thousands of
U.S.Dollars (Note 1)

Millions of Yen

2009

2009

2008

Net decrease in short-term borrowings ...................
Repayments of long-term debt .................................
Repayments of lease obligations ..............................
Purchase of treasury stock .......................................
Dividends paid ..........................................................
Other—net .................................................................

¥2,500(4,190)
(84)
(25)
(607)
(1)

¥2,000¥ (191)
(855)
(630)
(2)

$25,450(42,655)
(855)
(255)
(6,179)(10)

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

(2,407)322(24,504)

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

(86)

(146)

(875)

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

1,698

(599)

17,286

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

4,899

5,498

49,873

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

¥6,597¥4,899$67,159

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, 2009 and 2008

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.
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 2008
financial statements to conform to the classifications used in 2009.
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 ¥ 98.23 to $1, the rate of exchange at March 31, 2009. 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, 2009 include the accounts of theCompany and its nine significant (nine in 2008) subsidiaries (together, the “Group”).
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 is amortized using the straight-line method over 5 to 10 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material
unrealized profit included in assets resulting from transactions within the Group is eliminated.

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

c.	Inventories —Prior to April 1, 2008, inventories were stated at cost, determined by specific identification
cost method. In July 2006, the Accounting Standards Board of Japan (the “ASBJ”) issued ASBJ Statement
No.9, “Accounting Standard for Measurement of Inventories”. This standard requires that inventories held
for sale in the ordinary course of business be measured at the lower of cost or net selling value, which isdefined as the selling price less additional estimated manufacturing costs and estimated direct selling
expenses. The replacement cost may be used in place of the net selling value, if appropriate. The standard
was effective for fiscal years beginning on or after April 1, 2008 with early adoption permitted.
The Group applied this new accounting standard for measurement of inventories effective April 1, 2008. The
effect of this change was to increase operating income by ¥22 million ($224 thousand) and decrease income
before income taxes and minority interests by ¥169 million ($1,720 thousand).

23

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

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

f.	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 evaluation of 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 andaccounted for the liability for retirement benefits based on the projected benefit obligations and plan assets
at the balance sheet date. The transitional obligation of ¥2,016 million for the subsidiaries, determined as ofApril 1, 2000, is being amortized over 15 years. Unrecognized actuarial gain or loss are recognized by thestraight-line method over 13 years.
The Group changed its period of unrecognized actuarial gain or loss from primarily 15 years to 13 years infiscal 2008 as the employees’ remaining service period was shortened. Unrecognized prior service costs arerecognized by the straight-line method over 13 years.
Retirement benefits for directors and corporate auditors are provided at the amount which would be
required if all directors and corporate auditors retired at the balance sheet date.

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

i.	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 is effective for fiscal years beginning on or after April
1, 2008 with early adoption permitted for fiscal years beginning on or after April 1, 2007.
Under the previous accounting standard, finance leases that deem to transfer ownership of the leased
property to the lessee were to be capitalized. However, other finance leases were permitted to be accounted
for as operating lease transactions if certain “as if capitalized” information is disclosed in the note to thelessee’s financial statements. The revised accounting standard requires that all finance lease transactions
should be capitalized to recognize lease assets and lease obligations in the balance sheet. In addition, therevised accounting standard permits leases which existed at the transition date and do not transfer ownershipof 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 of lease 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

24

to the lessee as acquisition cost of lease assets measured at the obligations under finance leases the transition
date.
This change has no effect on profit and loss.
All other leases are accounted for as operating leases.

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

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

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

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

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

o.	Per Share Information —Basic net income per share is computed by dividing net income available toshareholders of common stock, by the weighted-average number of shares of common stock outstanding forthe period. The weighted-average numbers of shares of common stock for the years ended March 31, 2009
and 2008 were 80,615,830 and 82,934,469, respectively.

25

Diluted net income per share of common stock is not disclosed because the Group has nothing which might
dilute the per share information for the years ended March 31, 2009 and 2008.
Cash dividends per share presented in the accompanying consolidated statements of income are dividends
applicable to the respective years including dividends to be paid after the end of the year.

p.	New Accounting Pronouncements Construction Contracts —Under the current Japanese GAAP, either
the completed-contract method or the percentage-of-completion method is permitted to account for
construction contracts. On December 27, 2007, the ASBJ published a new accounting standard forconstruction contracts. Under this accounting standard, the construction revenue and construction costs
should be recognized by the percentage-of-completion method, if the outcome of a construction contract canbe estimated reliably. When total construction revenue, total construction costs and the stage of completionof the contract at the balance sheet date can be reliably measured, the outcome of a construction contract
can be estimated reliably. If the outcome of a construction contract cannot be reliably estimated, thecompleted-contract method shall be applied. When it is probable that total construction costs will exceed
total construction revenue, an estimated loss on the contract should be immediately recognized by providing
for loss on construction contracts. This standard is applicable to construction contracts and softwaredevelopment contracts and effective for fiscal years beginning on or after April 1, 2009 with early adoption
permitted for fiscal years beginning on or before March 31, 2009 but after December 27, 2007.
Asset Retirement Obligations —On March 31, 2008, the ASBJ published a new accounting standard for
asset retirement obligations, ASBJ Statement No.18 “Accounting Standard for Asset Retirement Obligations”
and ASBJ 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 acquision, 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 is effective for fiscal years beginning on or after April 1, 2010 with early adoption
permitted for fiscal years beginning on or before March 31, 2010.

26

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2009 and 2008 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2009
Current:
Government and corporate bonds .....................
Total ................................................................
Non-current:
Marketable equity securities ..............................
Government and corporate bonds .....................
Other ....................................................................
Total ................................................................

2009

2008

¥
¥

14
14

$
$

¥4,000910
785¥5,695¥5,555223
1,142¥6,920143
143$40,7219,264
7,991$57,976

The carrying amounts and aggregate fair values of marketable and investment securities at March 31, 2009 and2008 were as follows:
Millions of Yen

March 31, 2009
Securities classified as:
Available-for-sale:
Equity securities .................................
Debt securities . ...................................
Other ....................................................
Total ..................................................

Cost¥4,780981
1,369¥7,130

Unrealized
Gains

Unrealized

Losses¥146¥1,258209583¥2,050

¥146

Fair
Value

¥3,668772
786¥5,226

Millions of Yen

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

Cost¥5,08074
1,479¥6,633

Unrealized
Gains

¥673
2
21
¥696

Unrealized

Losses

¥531
10
358
¥899

Fair
Value

¥5,22266
1,142¥6,430Thousands of U.S. Dollars

March 31, 2009

Cost

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

$48,661
9,987
13,937$72,585

Unrealized
Gains$1,486$1,486

Unrealized

Losses$12,806
2,128
5,935$20,869

Fair
Value

$37,341
7,859
8,002$53,202

27

Available-for-sale securities and held-to-maturity securities whose fair value was not readily determinable as ofMarch 31, 2009 and 2008 were as follows:
Carrying amountThousands of
U.S. Dollars

Millions of Yen

2009
Available-for-sale:
Equity securities ...............................................
Other ..................................................................
Held-to-maturity .................................................
Total ................................................................

2009

2008
¥332
1
151
¥484

$3,38010
1,537$4,927

¥332
1
157
¥490

Proceeds from sales of available-for-sale securities for the years ended March 31, 2009 and 2008 were ¥1,160
million ($11,809 thousand) and ¥1,181 million, respectively. Gross realized gains on these sales, computed on themoving average cost basis, were ¥165 million ($1,680 thousand), for the year ended March 31, 2009 and grossrealized gains on these sales were ¥303 million, respectively for the year ended March 31, 2008.
The carrying values of debt securities and other by contractual maturities for securities classified as availablefor-sale and held-to-maturity at March 31, 2009 were as follows:
Millions of Yen

Due in one year or less .......................................
Due after one year through five years . ..............
Due after ten years ..............................................
Total ................................................................

Thousands of
U.S. Dollars

¥

14
109
900
¥1,023

$

143
1,110
9,161
$10,414

4. INVENTORIESInventories at March 31, 2009 and 2008 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

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

2009
¥ 96
6,676
209
¥6,9812008¥ 2258,063
323¥8,6112009$ 97767,9632,128$71,068

Asset grouping is based on the nature of the Group’s business and the classification for its management
accounting, and as for idle assets, each individual unit is considered as a group.
No impairment loss was recognized in 2009 and 2008.

5. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2009 and 2008 consisted of notes to banks. The annual interest rates
applicable to the short-term borrowings ranged from 0.930% to 0.997% and 1.179% to 1.192% at March 31, 2009
and 2008, respectively.

28

Long-term debt at March 31, 2009 and 2008 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

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

2009

2008

¥4,551¥8,669$46,330

73
232
4,856
(269)
¥4,587

145

743
2,362
49,435(2,738)$46,697

8,814(4,190)¥4,624

Annual maturities of long-term debt at March 31, 2009 for the five years and thereafter were as follows:Year Ending March 31

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

Thousands of
U.S. Dollars

Millions of Yen
Long-term debt

Lease obligations

Long-term debt

Lease obligations¥ 191
4,118
118
118
79
¥4,624

¥ 78
55
37
24
38
¥232

$ 1,945
41,922
1,201
1,201
804
$47,073$ 794
560
377
244
387
$2,362The Group had commitment-line contracts of ¥8,000 million ($81,442 thousand) in total over three years withfinancial institutions in order to secure the stability of long-term funding. Each contract includes a financial
covenant. At March 31, 2009, the Group had utilized ¥8,000 million ($81,442 thousand) of the commitment-line.

Financial covenants
Short-term borrowings of ¥8,000 million and ¥4,000 million of long-term debt include financial covenants, withwhich 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) About ¥8,000 million of short-term borrowings
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) About ¥4,000 million of long-term debt
Net assets of each fiscal year will not fall below 75% of the higher of the following:a. Net assets of fiscal year immediately preceding the fiscal year; or
b. Net assets of fiscal year ending on March 31, 2005
(3) Ordinary income for each fiscal year will not be negative for two consecutive fiscal years.
At March 31, 2009, land, building and structures of ¥2,153 million ($21,918 thousand) were pledged as collateralfor short-term borrowings and long-term debt of ¥551 million ($5,609 thousand).

29

6. 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.
The liabilities for retirement benefits at March 31, 2009 and 2008 for directors and corporate auditors were ¥114
million ($1,161 thousand) and ¥128 million, respectively. The retirement benefits for directors and corporate
auditors are paid subject to the approval of the shareholders.
The liability for employees’ retirement benefits at March 31, 2009 and 2008 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 . ......................................................

2009

2008

2009

¥(13,529)
6,130
4,181
779
(140)
375
¥ (2,954)¥(13,683)
7,738
2,475
911
(153)
240
¥ (2,952)$(137,728)
62,40542,564
7,930(1,425)3,818$ (30,072)

The components of net periodic benefit costs for the years ended March 31, 2009 and 2008 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2009
Service cost . ..........................................................
Interest cost ...........................................................
Expected return on plan assets ............................
Amortization of prior service cost .......................
Recognized actuarial loss .....................................
Amortization of transitional obligation . .............
Net periodic benefit costs .................................

¥ 914
306
(232)
(13)
347
135
¥1,4572008¥ 914
296
(255)
(13)
205
135
¥1,2822009$ 9,305
3,115(2,362)
(132)
3,533
1,374
$14,833Note:
The net periodic benefit costs above excludes required funding for the multi-employer pension plan amounting
to ¥818 million ($8,327 thousand) and ¥798 million at March 31, 2009 and 2008 respectively, for which plan
assets could not be allocated to each participating employer.
Assumptions used for the years ended March 31, 2009 and 2008 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 ...
30

2009

2008

2.50%
3.00%
13 years
13 years
15 years

2.50%
3.00%
13 years
13 years
15 yearsFunded status of the multi-employer pension plan at March 31, 2008 (available information as of March 31,2009), to which contributions were recorded as net periodic retirement benefit costs, was as follow:
Millions of Yen

Fair value of plan assets .......................................

2008¥141,971

Pension benefit obligation recordedby pension fund ..................................................

179,858

Difference .........................................................

(37,887)

The Groups’ contribution percentage for multi-employer pension plan.......... 11.1%
Note:
1. The difference mainly resulted from prior service cost of ¥33,761 million.
2. Prior service cost is amortized over 20 years.
3. The Group expensed special contributions of 311 million in the consolidated statements of income in thefiscal year ended March 31, 2009.
4. The above contribution ratio does not conform to the actual ratio applied to the Group.

7. DEPOSITS RECEIVED
Deposits received from tenants amounted to ¥2,213 million ($22,529 thousand) at March 31, 2009 and ¥2,381
million at March 31, 2008.
At March 31, 2009, land, building and structures for rent of ¥1,635 million ($16,645 thousand) were pledged ascollateral for these deposits.

8. EQUITY
Since May 1, 2006, Japanese companies have been 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

31

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 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.

9. 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, 2009 and 2008.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax
assets and liabilities at March 31, 2009 and 2008 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2009
Deferred tax assets :Unrealized loss on available-for-salesecurities . ..........................................................
Accrued bonuses .................................................
Tax loss carryforwards . ......................................
Liability for retirement benefits
for directors and corporate auditors ...............

¥

8

2008

2009

¥

$

81

2,357

80
798
2,473

46

52

468

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

1,192

1,188

12,135

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

54
110
570
(3,129)¥1,99955
114
532(3,088)¥2,204

550
1,120
5,803
(31,855)$20,350

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

¥ 218¥ 223$ 2,219

791

8,053

23,995

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

148

95

1,507

68
¥ 43494¥ 413692$ 4,418

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

¥1,565¥1,791$15,932

32

1

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying consolidated statements of income for the years ended March 31, 2009 and 2008 was as follows:2009
Normal effective statutory tax rate ......................
Per capita levy of local tax ....................................
Expenses not deductible for tax purposes ...........
Valuation allowance . ............................................
Other – net . ...........................................................
Actual effective tax rate ........................................

39.5%
10.9
4.4
3.7
15.6
74.1%

2008
39.5%
5.5
2.6
(24.2)
5.0
28.4%

As of March 31, 2009, the Company and certain subsidiaries had tax loss carryforwards aggregating
approximately ¥5,510 million ($56,093 thousand) which were available to be offset against taxable income ofthese companies in future years. These tax loss carryforwards, if not utilized, will expire as follows:
Years Ending March 31

2010 ......................................................................
2011 ......................................................................
2012 ......................................................................
2015 ......................................................................
Total ..................................................................

Millions of Yen

915
629
3,595
371
¥5,510Thousands of
U.S. Dollars

9,315
6,403
36,5983,777$56,093

10. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥342 million ($3,482 thousand) and ¥258 million forthe years ended March 31, 2009 and 2008, respectively.

11. LEASES(1) Lessee
The Group leases certain machinery, computer equipment and other assets.
Total rental expense includes finance leases where the ownership of the property is not deemed to transfer to thelessee in the amount of ¥85 million ($865 thousand) and ¥75 million for the years ended March 31, 2009 and2008, respectively.
Leased properties less than ¥3 million are excluded from the above pro forma information because they wereimmaterial.
Pro forma information for the year ended March 31,2008
Pro forma information for the years ended March 31, 2008 of leased property such as acquisition cost,
accumulated depreciation, obligations under finance leases, depreciation expense, and interest expense offinance leases that do not transfer ownership of the leased property to the lessee on an “as if capitalized” basis
was as follows:
Millions of Yen

2008
Furniture
andFixtures

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

¥407
170
¥237

Other

Total

¥24
13
¥11

¥431
183
¥248
33

Obligations under finance leases:
Millions of Yen

2008
Due within one year . ............................................

¥ 69

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

185
¥ 254

Depreciation expense and interest expense under finance leases:
Millions of Yen

2008
Depreciation expense . ..........................................

¥73

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

6¥79

The minimum rental commitments under noncancellable operating leases at March 31, 2009 and 2008, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2009

2009

2008

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

¥1

¥1

$10

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

¥1

1
¥2

$10

(2) Lessor
The minimum rental commitments under noncancellable operating leases at March 31, 2009 and 2008, were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

2009

2008

2009

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

¥ 678¥ 680$ 6,902

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

3,909¥4,587

4,588¥5,26839,795$46,697

12. DERIVATIVESThe Group uses derivative financial instruments to manage its exposures to fluctuations in foreign exchange andinterest rates. Foreign exchange forward contracts and interest rate swaps are utilized by the Group to reduce
foreign currency exchange and interest rate risks.
It is the Group’s policy to use derivatives only for the purpose of reducing risks, not for trading or speculative
purpose.
Because the counterparties to these derivatives are limited to domestic banks having high reputations, theGroup does not anticipate any losses arising from credit risk.

34

Derivative transactions entered into by the Group have been made in accordance with internal policies which
regulate the authorization and credit limit amount.
Derivative transactions which are qualified for hedge accounting, are not subject to the disclosure of market
value information.
The Group had the following derivatives contracts outstanding at March 31, 2009 and 2008:
Millions of Yen

2009
Contract
AmountForeign currency forward contracts:
Selling U.S.$ ....................................
Interest rate swaps:(fixed rate payment, floating
rate receipt) ....................................

Fair
Value

2008
Unrealized
Loss

¥972

¥971

¥(1)

¥280

¥ (3)¥(3)

Contract
Amount

¥420

Fair
Value

Unrealized
Loss

¥(4)

¥(4)

Thousands of U.S. Dollars

2009

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

Contract
AmountFair
Value

Unrealized
Loss$9,895$9,885$(10)$2,850$ (31)$(31)

Foreign currency forward contracts which qualify for hedge accounting for the years ended March 31, 2009 are
excluded from the disclosure of market value information.
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.

13. CONTINGENT LIABILITIESAt March 31, 2009, the Group had the following contingent liabilities:
Millions of Yen

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

¥236

Thousands of
U.S. Dollars$2,40335

14. SUBSEQUENT EVENTSAppropriations of Retained Earnings
On May 20, 2009, the following appropriation of retained earnings at March 31, 2009 was resolved by the Boardof Directors:
Thousands of
U.S. Dollars

Millions of Yen

Year-end cash dividends, ¥7.5 ($0.08) per share .................

¥605$6,15915. SEGMENT INFORMATIONThe Group operates in the following segments:
Domestic consulting services in public and private sectors related to mainly infrastructure development;
Overseas consulting services related to mainly ODA funded development projects;
Manufacturing of products and appliances related to electric production and distribution systems;
Engineering services related to construction and maintenance of public and private electric power
facilities;
Real estate leasing sales of our Group’s real estate leasing operation;
Others software development and sales, staffing service and others
Information about business segments, geographic segments and sales to foreign customers of the Groupfor the years ended March 31, 2009 and 2008, is as follows:(1) Business Segments
a. Sales and Operating Income
Millions of Yen

2009
Real estateleasing

Consoli-datedOverseas

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

¥36,367¥14,602¥8,101¥3,007¥1,262¥ 859Intersegment sales .................

122

7

159

1,922

194

1,346

¥(3,750)

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

36,48914,609

8,260

4,929

1,456

2,205

(3,750)64,198Operating expenses ................

36,036

15,070

7,240

4,663

584

2,156

(3,279)62,470Operating income ..................

¥¥ (461)¥1,020¥ 266¥ 872¥¥ (471)¥ 1,728

Eliminations/Corporate

Consoli-dated453

Engineering

Eliminations/Corporate

Domestic

Manufacturing

Others49¥64,198b. T otal Assets, Depreciation and Capital Expenditures
Millions of Yen

2009
Domestic

Overseas

Manufacturing

Engineering

Real estateleasing

OthersTotal assets .............................

¥26,817¥9,229¥6,649¥1,407¥10,591¥ 967¥21,922¥77,582

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

317

62

248

9

192

1

526

1,355

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

264

29

97

3

378

2

36

809

36

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

2009
Eliminations/Corporate

Overseas

Manufacturing

Engineering

Real estateleasing

OthersSales to customers ................. $370,223 $148,651$82,470$30,612$12,847$8,745

Domestic

Consolidated$653,548

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

1,242

71

1,618

19,566

1,975

13,702$(38,174)

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

371,465

148,72284,08850,17814,822

22,447(38,174)

653,548

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

366,853

153,41573,70447,470

5,945

21,948(33,379)

635,956

Operating income .................. $ 4,612 $(4,693)$10,384$ 2,708$ 8,877$ 499$ (4,795) $ 17,592

OthersEliminations/Corporateb. Total Assets, Depreciation and Capital Expenditures
Thousands of U.S. Dollars

2009
Engineering

Total assets ............................. $273,002$93,953$67,688$14,324 $107,818

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

3,227

631

2,525

92

1,955

10

5,354

13,794

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

2,688

295

987

31

3,848

20

367

8,236

Domestic

Real estateleasing

Consolidated

Overseas

Manufacturing$9,844 $223,170 $789,799

a. Sales and Operating Income
Millions of Yen

2008
Manufacturing

Engineering

Real estateleasing

Eliminations/Corporate

OthersConsolidated

Domestic

Overseas

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

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

271

3

82

1,651

208

1,311

¥(3,526)

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

37,475

16,373

8,341

4,948

1,469

2,039

(3,526)

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

36,11916,228

7,588

4,683

563

1,968

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

¥ 1,356¥¥ 753¥ 265¥ 906¥¥ (960)¥ 2,536

145

71¥67,119b. Total Assets, Depreciation assets and Capital Expenditures
Millions of Yen

2008
Manufacturing

Engineering

Real estateleasing

Eliminations/Corporate

OthersConsolidated

Domestic

Overseas

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

¥28,918¥10,327¥7,193¥2,023¥11,164¥861¥21,351¥81,837

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

205

43

224

6

263

1

666

1,408

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

1,454

49

136

11

1

281

1,932

Note:
As discussed in Note 2.c., effective April 1, 2008, the Group applied ASBJ Statement No.9, “Accounting Standard
for Measurement of Inventories”. The effect of this change was to increase operating income of Domestic by¥15 million ($ 153 thousand) and operating income of Manufacturing by ¥6 million ($ 61 thousand) for the year
ended March 31, 2009.

37

(2) Geographical Segments
The Group was located in Japan for the years ended March 31, 2009 and 2008, and is not subject to thedisclosure of market value information.

(3) Sales to Foreign Customers
Sales to foreign customers for the years ended March 31, 2009 and 2008 amounted to ¥14,710 million ($149,751
thousand) and ¥16,401 million, respectively.

38

39

Non-consolidated Balance Sheets
Nippon Koei Co., Ltd.
March 31, 2009 and 2008

Thousands of
U.S. Dollars (Note 1)

Million of Yen

ASSETS

2009

2009

2008

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

¥ 5,076

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

14¥ 3,319$ 51,675
143

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

36

31

366

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

20,373

22,948207,401

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

(69)

(39)

(702)

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

3,919

3,643

39,896Inventories ‑ work in process .............................

2,932

3,817

29,848Deferred tax assets (Note 9) ...............................

1,132

1,044

11,524

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

1,450

1,374

14,761

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

34,86336,137354,912Land .....................................................................

10,248

9,937

104,327

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

16,27916,229165,723

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

1,165

1,200

11,860Furniture and fixtures ........................................

1,113

1,096

11,331

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

197

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

29,002

28,462295,246

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

(10,956)(10,462)(111,534)

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

18,04618,000183,712PROPERTY, PLANT AND
EQUIPMENT (Note 7):

2,005

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

5,509

6,710

56,083

6,388
2,530

7,512
2,506

65,03125,755

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

(23)

(26)

(234)

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

14,404

16,702

146,635

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

¥67,313¥70,839$685,259

See notes to non-consolidated financial statements.

40

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 . .............
Other current liabilities........................................
Total current liabilities ...................................
LONG-TERM LIABILITIES:Long-term debt (Note 5) .....................................
Liability for retirement benefits (Note 6) ..........
Deposits received (Note 7) . ................................
Deferred tax liabilities (Note 9) . ........................
Total long-term liabilities ...............................

2009

2009

2008

¥ 9,90057¥ 7,000
4,000$100,784
580

20
6,309
105
3,735
1,137
97
2,433
23,793

37
6,527
115
3,044
904
58
3,215
24,900204
64,227
1,069
38,023
11,575987
24,768242,217

4,078
416
2,505
367
7,366

4,000
457
2,671
34
7,162

41,515
4,235
25,501
3,736
74,987

7,393
6,131

7,393
6,131

75,26262,415

1,546
24,918

1,546
25,71015,739253,670(1,887)(119)(19,210)

COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 11 and 12)
EQUITY (Notes 8 and 13):
Common stock,authorized, 189,580,000 shares; issued,
86,656,510 shares in 2009 and 2008 ................
Capital surplus ....................................................
Retained earnings:
Legal reserve .....................................................
Retained earnings - unappropriated ................
Unrealized gain (loss) on
available-for-sale securities .............................
Deferred gain (loss) on
derivatives under hedge accounting ...............
Treasury stock—at cost
6,081,506 shares in 2009
and 5,984,122 shares in 2008 ...........................
Total equity . ....................................................

(1,947)36,154(1,922)
38,777(19,821)368,055

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

¥67,313¥70,839$685,25938

41

N o n - conso lida ted S ta temen t s o f Op erat i o n s
Nippon Koei Co., Ltd.
Years Ended March 31, 2009 and 2008

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2009

2009

2008

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

¥ 47,015
37,6309,385¥49,929
39,651
10,278$ 478,622
383,081
95,541SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES(Note 10) . ............................................................
Operating income ...........................................

9,176
209

8,997
1,281

93,413
2,128

586

482
(194)
(430)
299

5,966
(2,219)(3,767)
1,639

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

(218)
(370)

161
(187)
(160)

(1,904)(1,629)

225
37

(2)
1
26
182

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

246

1,463

2,504

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

242
192
434

130
559
689

2,464
1,954
4,418

NET INCOME (LOSS) .......................................

(188)

774

(1,914)¥

U.S. Dollars(Note 1)Yen

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

42(2.33)
7.50

2,290
376

¥ 9.33
7.50(0.02)
0.08

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, 2009 and 2008

Thousands

Millions of Yen
CapitalSurplus

Outstanding
Number of
Shares ofCommonStock

BALANCE, APRIL 1, 2007 ..........

83,816

Retained Earnings

CommonStockGain on
Additional
Paid-in
Capital¥7,393

Unrealized¥6,131

Legal
Reserve¥1,546

Available-for-DeferredGain (loss) on
Derivatives

under Hedge
Unappropriated sale Securities
Accounting¥25,565¥1,520

Treasury

Total

Stock

Equity¥(1,067) ¥41,088

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

774

774

Cash dividends, ¥10.00 per share ...

(629)

(629)

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

(3,144)(855)

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

80,672

7,393

6,131

1,546

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

(119)

38

(1,922)(604)¥7,393¥6,131¥1,546¥24,918

38,777(604)(25)(1,768)80,575(855)(1,601)
(188)

(97)

Net change in the year ................
BALANCE, MARCH 31, 2009 .......

38

(188)

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

25,710(1,639)¥(38)¥(1,887)(25)(1,806)¥(1,947) ¥36,154

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

CommonStock

Additional
Paid-in
CapitalBALANCE, MARCH 31, 2008 ......

$75,262$62,415

Legal
Reserve

Unrealized
Gain onAvailable-for-DeferredGain (loss) on
Derivatives

under Hedge
Unappropriated sale Securities
Accounting$15,739 $261,731 $ (1,211)$387

Treasury
Stock

Total
Equity$(19,566) $394,757

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

(1,914)(1,914)

Cash dividends, $0.08 per share . ...

(6,147)(6,147)Purchase of treasury stock ..........

(255)

Net change in the year ................
BALANCE, MARCH 31, 2009 ......

(17,999)$75,262$62,415$15,739 $253,670 $(19,210)$(387)(255)(18,386)$(19,821) $368,055

See notes to non-consolidated financial statements.

43

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, 2009 and 2008

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 Japanor the Commercial Code of Japan and 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 2008
financial statements to conform to the classifications used in 2009.
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 ¥ 98.23 to $1, therate of exchange at March 31, 2009. Such translations should not be construed as representations that theJapanese yen amounts could be converted into U.S. dollars at that or any other rate.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Non-consolidation —The non-consolidated financial statements do not include the accounts of subsidiaries.
Investments in subsidiaries and associated companies are stated at cost.
b. Cash Equivalents —Cash equivalents are short-term investments that are readily convertible into cash andthat are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits and investment trusts, all of which mature or become due within
three months of the date of acquisition.
c. Inventories —Work in process is stated at cost, determined by the specific identification cost method.
d.	Marketable and Investment Securities —Marketable and investment securities are classified and accounted
for, depending on management’s intent, as follows:i) held-to-maturity debt securities, which are expected to be held to maturity with the positive intent andability to hold to maturity are reported at amortized cost and ii) available-for-sale securities, which are notclassified as the aforementioned securities, are reported at fair value, with unrealized gains and losses, net of
applicable taxes, reported in a separate component of equity.
Non-marketable available-for-sale securities are stated at cost determined by the moving-average method.
For other than temporary declines in fair value, investment securities are reduced to net realizable value by acharge to operations.
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 from30 to 45 years for buildings and structures, from 5 to 14 years for machinery and equipment, and from 3 to
15 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 tobe appropriate based on the companies' past credit loss experience and an evaluation of potential losses in
the receivables outstanding.

44

g. Retirement and Pension Plans —The Company has a contributory defined benefit pension plan andunfunded retirement benefit plan for the benefit of its employees.
Effective April 1, 2000, the Company adopted a new accounting standard for the employees’ retirement
benefits and accounted for the liability for retirement benefits based on projected benefit obligations andplan assets at the balance sheet date.
Unrecognized actuarial gain or loss are recognized by the straight-line method over 13 years.
The Company changed its period of unrecognized actuarial gain or loss from 15 years to 13 years in fiscal
2008 as the employees’ remaining service period was shortened. Unrecognized prior service costs arerecognized by the straight-line method over 13 years.
Retirement benefits for directors and corporate auditors are provided at the amount which would be
required if all directors and corporate auditors retired at the balance sheet date.
h. Allowance for Anticipated Project Loss —The Company has made a provision for anticipated losses on
uncompleted project contracts.
i. Bonuses to directors and corporate auditors —Bonuses to directors and corporate auditors are accrued at
the year end to which such bonuses are attributable.
j

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.

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 is effective for fiscal years beginning on or after April
1, 2008 with early adoption permitted for fiscal years beginning on or after April 1, 2007.
Under the previous accounting standard, finance leases that deem to transfer ownership of the leased
property to the lessee were to be capitalized. However, other finance leases were permitted to be accounted
for as operating lease transactions if certain “as if capitalized” information is disclosed in the note to thelessee’s financial statements. The revised accounting standard requires that all finance lease transactions
should be capitalized to recognize lease assets and lease obligations in the balance sheet. In addition, therevised accounting standard permits leases which existed at the transition date and do not transfer
ownership of the leased property to the lessee to be measured at the obligations under finance leases lessinterest 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 the transition
date.
This change has no effect in profit and loss.
All other leases are accounted for as operating leases
l. 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.
m. Revenue Recognition —Revenues and construction costs on long-term contracts which have not less than a
two year contract period and not less than ¥1 billion contract amount are recognized by the percentage-ofcompletion method, measured by the percentage of estimated total construction costs (cost to cost method).

45

Revenues and construction costs on long-term contracts in the Manufacturing and Engineering businesssegments which have not less than a one year contract period and not less than ¥300 million contract amountare also recognized by the percentage-of-completion method, measured by the percentage of costs incurred
to date to estimated total construction costs (cost to cost method).
All other construction projects, except the aforementioned, are recorded using the completed-contract
method.
n. Derivatives and Hedging Activities —The Company uses derivative financial instruments to manage its
exposures to fluctuations in foreign exchange and interest rates. Foreign exchange forward contracts andinterest rate swaps are utilized by the Company to reduce foreign currency exchange and interest rate risks.
The Company does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments and foreign currency transactions are classified and accounted for as
follows: a) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains orlosses on derivative transactions are recognized in the operations statement and b) for derivatives used forhedging purposes, if derivatives qualify for hedge accounting because of high correlation and effectivenessbetween the hedging instruments and the hedged items, gains or losses on derivatives are deferred until
maturity of the hedged transactions.
The foreign exchange forward contracts are measured at their fair value but the unrealized gains / losses aredeferred until the underlying transactions are completed.
The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are notremeasured at market value but the differential paid or received under the swap agreements are recognized
and included in interest expenses or income.
o. 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, 2009
and 2008 were 80,615,830 and 82,934,469, 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, 2009 and 2008.
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.
p. New Accounting Pronouncements
Construction Contracts —Under the current Japanese GAAP, either the completed-contract method or thepercentage-of-completion method is permitted to account for construction contracts. On December 27, 2007,
the ASBJ published a new accounting standard for construction contracts. Under this accounting standard,
the construction revenue and construction costs should be recognized by the percentage-of-completion
method, if the outcome of a construction contract can be estimated reliably. When total construction
revenue, total construction costs and the stage of completion of the contract at the balance sheet date can bereliably measured, the outcome of a construction contracts can be estimated reliably. If the outcome of aconstruction contract cannot be reliably estimated, the completed-contract method shall be applied. When it
is probable that total construction costs will exceed total construction revenue, an estimated loss on thecontract should be immediately recognized by providing for loss on construction contracts. This standard isapplicable to construction contracts and software development contracts and effective for fiscal years
beginning on or after April 1, 2009 with early adoption permitted for fiscal years beginning on or before
March 31, 2009 but after December 27, 2007.
Asset Retirement Obligations —On March 31, 2008, the ASBJ published a new accounting standard for asset
retirement obligations, 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 acquision, construction, development and the normal operation of a tangible46

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 is effective for fiscal years beginning on or after April 1, 2010 with early adoption
permitted for fiscal years beginning on or before March 31, 2010.

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2009 and 2008 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2009
Current:
Government and corporate bonds .....................
Total ................................................................
Non-current:
Marketable equity securities ..............................
Government and corporate bonds .....................
Other ....................................................................
Total ................................................................

¥
¥

2009

2008
14
14

¥3,851873
785¥5,509

$
$

143
143

$39,204
8,887
7,992$56,083¥5,384183
1,143¥6,7104. I NVESTMENTS IN AND ADVANCES TO SUBSIDIARIES AND
ASSOCIATED COMPANIESInvestments in and advances to subsidiaries and associated companies as of March 31, 2009 and 2008 were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2009¥5,636752¥6,3882008¥5,586
1,926¥7,512

2009$57,375
7,656$65,031

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

47

5. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings at March 31, 2009 and 2008 consisted of notes to banks. The annual interest rates
applicable to the short-term borrowings ranged from 0.930% to 0.997% and 1.179% to 1.192% at March 31,
2009 and 2008, respectively.
Long-term debt at March 31, 2009 and 2008 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2009
Unsecured loans from banks due serially to2010 with interest rates ranging from 1.515%
to 1.775% .............................................................
Obligation under finance leases ...........................
Total ................................................................
Less current portion .............................................
Long-term debt, less current portion . .................

¥4,000
135
4,135
(57)
¥4,0782008¥8,0008,000(4,000)¥4,0002009$40,721
1,374
42,095(580)$41,515

The Company had commitment-line contracts of ¥8,000 million ($81,442 thousand) in total over three years withfinancial institutions in order to secure the stability of long-term funding. Each contract includes a financial
covenant. At March 31, 2009, the Company had utilized ¥8,000 million ($81,442 thousand) of the commitmentline.

Financial covenants
Short-term borrowings of ¥8,000 million and ¥4,000 million of long-term debt include financial covenants, withwhich the Company is in compliance.
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) About ¥8,000 million of short-term borrowings
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) About ¥4,000 million of long-term debt
Net assets of each fiscal year will not fall below 75% of the higher of the following:a. Net assets of fiscal year immediately preceding the fiscal year; or
b. Net assets of fiscal year ending on March 31, 2005
(3) Ordinary income for each fiscal year will not be negative for two consecutive fiscal years.

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.
Such retirement benefits are made in the form of a lump-sum severance payment from the Company andannuity payments from a trustee. Employees are entitled to larger payments if the termination is involuntary,by retirement at the mandatory retirement age, by death, or by voluntary retirement at certain specific ages
prior to the mandatory retirement age.
The liabilities for retirement benefits at March 31, 2009 and 2008 for directors and corporate auditors were
¥48 million ($489 thousand) and ¥48 million, respectively. The retirement benefits for directors and corporate
auditors are paid subject to the approval of the shareholders.

48

7. DEPOSITS RECEIVED
Deposits received from tenants amounted to ¥2,213 million ($22,529 thousand) at March 31, 2009 and ¥2,381
million at March 31, 2008.
At March 31, 2009, land, building and structures for rent of ¥1,635 million ($16,645 thousand) were pledged ascollateral for these deposits.

8. EQUITY
Since May 1, 2006, Japanese companies have been subject to the Corporate Act of Japan (the “Corporate Act”),
which reformed and replaced the Commercial Code of Japan. 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.
(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.

49

9. 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, 2009 and 2008.
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities at March
31, 2009 and 2008 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2009

2009

2008

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

¥ 450
505

584
356

$ 4,581
5,141

19

19

193

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

145

162

1,476

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

38
62
244
(331)
¥1,132

23
66
219
(153)
¥1,354

387
631
2,484
(3,369)$11,524Deferred tax liabilities:
Reserve for deferred gains onsale of property .................................................

¥ 218¥ 223$ 2,219

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

148

95

1,507

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

1¥ 367¥ 76526¥ 344¥1,01010$ 3,736$ 7,788¥

78

A reconciliation between the normal effective statutory tax rate and the actual effective tax rate reflected in theaccompanying non-consolidated statements of operations for the years ended March 31, 2009 and 2008 was asfollows:

2009
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 ......................................

2008
39.5%
31.3
15.7
72.7
16.9
176.1%

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

As of March 31, 2009, the Company had tax loss carryforwards aggregating approximately ¥1,269 million($12,919 thousand) which were available to be offset against taxable operations of the Company in future years.
These tax loss carryforwards, if not utilized, will expire mostly in 2015.

50

10. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to operations were ¥246 million ($2,504 thousand) and ¥186 million
for the years ended March 31, 2009 and 2008, respectively.

11. LEASES(1) Lessee
The Company leases certain machinery, computer equipment and other assets.
Total rental expense include finance leases, where the ownership of the property was not deemed to transfer tothe lessee, in the amount of ¥64 million ($652 thousand) and ¥54 million for the years ended March 31, 2009
and 2008, respectively.
Leased properties less than ¥3 million are excluded from the above pro forma information because they wereimmaterial.

Pro forma information for the ended March 31,2008
Pro forma information of leased property such as acquisition cost, accumulated depreciation, obligations underfinance leases, depreciation expense and interest expense of finance leases that do not transfer ownership of theleased property to the lessee on an “as if capitalized” basis was as follows:
Millions of Yen

2008
Furniture
andFixtures

Other

¥261
131
¥130

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

Total

¥24
12
¥12

¥285
143
¥142

Obligations under finance leases:
Millions of Yen

2008
¥ 50
96
¥146

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

Depreciation expense and interest expense under finance leases:
Millions of Yen

2008
Depreciation expense . ..........................................
Interest expense ....................................................
Total ................................................................

¥49
5
¥54

51

Depreciation expense and interest expense, which are not reflected in the accompanying non-consolidated
statements of operations, were computed by the straight-line method and the interest method, respectively.
Leased properties less than ¥3 million are excluded from the above pro forma information because they are
immaterial.
Thousands of
U.S. Dollars

Millions of Yen

2009
Due within one year . ............................................
Due after one year . ...............................................
Total ................................................................

2009

2008
¥1

¥1
1
¥2

¥1

$10
$10

(2) Lessor
The minimum rental commitments under noncancellable operating leases at March 31, 2009 and 2008 were as
follows:
Thousands of
U.S. Dollars

Millions of Yen

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

2009
¥ 678
3,909
¥4,587

2008
¥ 680
4,588
¥5,2682009$ 6,90239,795$46,697

12. CONTINGENT LIABILITIESAt March 31, 2009, the Company had the following contingent liabilities:
Millions of Yen

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

¥859

Thousands of
U.S. Dollars$8,745

13. SUBSEQUENT EVENTSAppropriations of Retained Earnings
On May 20, 2009, the following appropriation of retained earnings at March 31, 2009 was resolved by the Boardof Directors:
Millions of Yen

Year-end cash dividends, ¥7.5 ($0.08) per share ................................

52

¥605

Thousands of
U.S. Dollars$6,15953

Co rp ora te In form atio n

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

189,580,000

Shares issued

86,656,510
7,620

As of March 31, 2009

Major Stockholders

Director and Executive Vice President:
Yoshihiko Tsunoda*
Seijiro Usuda*
Kaoru Ono
Director and Senior Managing Executive Officer:
Naoki Ariga
Shigemichi Hatao
Katsumi Yoshida
Shoji Nishitani
Director and Managing Executive Officers:
Tamotsu Yoshida
Director and Executive Officers:
Yoichi Abe
Ryuichi Arimoto
Director:
Masahisa Naito
Corporate Auditors:
Kenichi Sakata
Koichi Kosumi
Mineo Enomoto

Share owned(thousands)

Percentage of
total owned

The Bank of Tokyo-Mitsubishi
UFJ, Ltd.

3,939

4.55

Mizuho Corporate Bank, Ltd.

3,820

4.41

Meiji Yasuda Life Insurance
Company.

3,652

4.21

Credit Suisse Sec (Europe)
Ltd. Pb Sec Int Non-Tr Clt

3,180

3.67

Japan Trustee Services Bank,
Ltd. (T4G)

3,097

3.57

The Koei Employees’
Stockholders Association

2,380

2.75

The Master Trust Bank ofJapan, Ltd. (Trustee)

1,704

1.97

Japan Trustee Services Bank,
Ltd. (T)

1,635

1.89

CBNY DFA International Cap
Value Portfolio

1,400

1.62

Nippon Life Insurance
Company

1,349

1.56

As of March 31, 2009Managing Executive Officers:
Teruyuki Kita
Yutaka Murai
Executive Officers:
Yoichi Kobayashi
Yoshiki Tamemitsu
Kunio Kurokawa
Hiromichi Sekine
Akira Mizukoshi
Kiyotaka Mizushima
Noboru Takano

54

Shares authorized
Stockholders of minimum tradable stock unit

President:
Noriaki Hirose**Representative Directors

Stock Information

As of June 26, 2009

Major Offices and Facilities

Major Businesses

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

Consulting Administration

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

Field of activity• Natural and social environment• Water supply and urban sanitation• Information technology• Urban and regional development• River and sabo sediment and debris-flow control)
engineering• Water resources• Dams• Groundwater• Highway and Bridges• Airports• Ports and coastal engineering• Railroad• Landslide protection• Agriculture• Electric power
Services• Preliminary investigation• Planning• Feasibility studies• Assessment• Detailed design• Construction supervision• Operation and maintenanceEngineering Administration
Field of activity• Electrical and civil works for electric power
facilities (generation, transmission, substation,
distribution schemes and wiring of buildings)• Electric power utilities (turbines, generators,
transformers, control deices andcommunications equipment)• Electric equipment and devices• Safety equipment• Skin electric thermo-system heaters (SECTheaters)• Factory automation equipment
Services• Surveys, studies, planning, design, construction,
installation and sale55M a j o r N i 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 2009, the total number of employees of the Group companies based in Japan came toabout 2600, of which over 1,000 were registered engineers. The Group truly has a wealth of highly
skilled technical experts.
The subsidiary companies that comprise the consolidated Nippon Koei Group are as follows:
Tamano Consultants Co., Ltd.
This company is headquartered in the city of Nagoya and provides engineering consulting services
centered on the Chubu Region. The company boasts the most highly regarded urban and regional
planning group in Japan.
Nippon Civic Consulting Engineers Co., Ltd.
This company provides consulting services centered on planning, design, and construction supervisionof underground structures such as urban tunnels. The company specializes in shield tunnelingtechnology and the development of new underground construction technology.
NEPCO Ltd.
This company provides services for geological disaster prevention. Services include landslideprediction and preventative activities such as hazard surveys, action planning, and construction ofprotective measures. NEPCO also manufactures and sells various types of equipment for landslide
monitoring and management.
KRI International Corporation
Established to enhance the think tank function required for the Nippon Koei Group’s activities,
KRI is responsible for providing survey, research, and consulting work for clients, both within andoutside the Group, on a contract basis. KRI is also responsible for education, training, and publishingactivities.
Nippon Koei U.K. Co., Ltd.
This company provides engineering consulting services to enforce Nippon Koei’s overseas operation in
the primary fields of transportation, environment, water supply and wastewater.
Nippon Koei Power Systems Co., Ltd.
This company manufactures power generation equipment and systems and electronic equipment anddevices. A wholly owned subsidiary and the largest in the Group, it works in close partnership with
Nippon Koei on business projects.
Nikki Corporation
This company is responsible for real estate management, leasing, and insurance services for Nippon
Koei and other Group companies. It also sells, imports, and exports electrical power equipment andrents and leases various goods.
Koei System Inc.
This company develops software programs used in computer control applications, dispatches
personnel, and provides support and software development for office automation systems on aconsignment basis.
El Koei Co., Ltd.
This company is responsible for employment and staffing solution for Nippon Koei Group. The
company provides various fields of qualified human resources to support the activity of the Group
Companies.
56

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 2008 . ............................................................ 2
Consolidated Balance Sheets ....................................................................................... 18
Consolidated Statements of Income ............................................................................ 20
Consolidated Statements of Changes in Equity .......................................................... 21
Consolidated Statements of Cash Flows ..................................................................... 22
Notes to Consolidated Financial Statements .............................................................. 23
Non-consolidated Balance Sheets . .............................................................................. 40
Non-consolidated Statements of Operations .............................................................. 42
Non-consolidated Statements of Changes in Equity .................................................. 43
Notes to Non-consolidated Financial Statements . ..................................................... 44
Corporate Information ................................................................................................. 54
Major Nippon Koei Group Companies . ...................................................................... 56

Annual Report

2009

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, 2009

Printed in Japan