COMSYS1997

For Excellence in
Telecommunications

Annual Report
Fiscal Year Ended March 31, 1997

Profile

Financial Highlights

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Nippon COMSYS Corporation
Years ended March 31, 1996 and 1997
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Nippon COMSYS Corporation was founded in 1951 to assume the duties of the Construction
Division of Nippon Telegraph and Telephone Corporation (NTT). Since its establishment,

Millions of yen

COMSYS has been a leader in the telecommunications engineering field. A specialist
in communications and computer technology, COMSYS is striving to grow its
business to meet the 21st century, and to make a contribution to the development of theinformation-intensive society. We are fostering a corporate culture characterized by fresh
thinking and open communication, in which each employee can take pride, each employee
can thrive, and each employee can give full expression to his talents and capabilities. We area creative organization, working toward a better future.

Contract backlog at beginning of the year
New orders received during the year
Net sales
Contract backlog at end of year
Net income
Total assets
Shareholders’ equity

Thousands of
U.S. dollars

1996

1997

1997

(%)

¥ 47,576
186,180
180,629¥ 53,127
225,147
220,590$ 428,443
1,815,702
1,778,951

11.7%
20.9%
22.1%

53,127

57,684465,194

8.6%¥ 3,742
138,61059,277¥ 6,267
154,246
65,09650,5401,243,919
524,968

67.5%
11.3%
9.8%

$

Yen

Per share:
Net income
Cash dividends

Contents•••••

U.S. dollars¥32.91
9.75¥54.27
11.75

64.9%
20.5%

$0.44
0.09

Note: Yen figures have been converted from U.S. dollars at the rate of ¥124.00=US$1, rounded down, for convenience only, from an approximate
exchange rate of ¥124.10 to the dollar on March 31, 1997.

1

Corporate Information

35

Corporate Directory

36

225.1

34

93 94 95 96 97

93 94 95 96 97

93 94 95 96 97

186.2

Organization Chart

143.0

19

135.8

Financial Section

128.1

18

6.3

Board of Directors and Auditors

3.7

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10
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3.6

Review of Operations
NTT Construction
Domestic Construction and Engineering
International Operations
Information Systems

2.4

6

1.6

Corporate Citizenship

220.6

4

180.6

Toward the 21st Century-Our Vision of the Future

New Orders Received(¥ Billions)

152.2

2

136.0

Letter from the President

Net Income(¥ Billions)

Net Sales(¥ Billions)

125.8

Financial Highlights

Change1Letter from the President
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Environment
n fiscal 1996 (ended March 31, 1997), theI weakening of the yen in international exchange and extremely low interest rates were
expected to produce a recovery in private-sector
demand, chiefly capital investment and consumer
spending. However, troubles in the financial sector and the instability of the securities markets
prevented a full-scale recovery, and unfavorable
economic conditions persist.
This notwithstanding, and as the telecommunications industry moved forward with thecreation of the multimedia infrastructure for thehigh order, information-based society of the future, at the end of last year a final decision wasreached at last with regard to the splitting of NTT.
Telecommunications construction contractors,
therefore, can expect an intensification of competition together with increased requirements forbetter service and diversification of operations.
The accelerating growth of demand for Internet
services and mobile communications has brought
major changes to conditions in this market.
Responding promptly to these changes in thebusiness environment, Nippon COMSYS Corporation is engaged in a companywide effort tostrengthen technological expertise, marketing
capabilities, and cost competitiveness. We are
striving to increase orders from NTT, our biggest customer, and its subsidiaries and affiliates.
We are pursuing a drive to win contracts for
multimedia-related projects both at home in Japan and overseas, the latter primarily in Southeast Asia.

Performances a result of the above, total orders received
A rose 20.9 percent to ¥225.1 billion(US$1,815 million), and total revenues increased
22.1 percent to ¥220.5 billion (US$1,778 million). This was the first time the Company has
broken through the ¥200 billion ceiling. The substantial growth in these figures, on the heels of
double-digit growth in the previous term, canonly be seen as verification that the Company’s
policies were well chosen. This is particularly
true in view of the adverse business and economic conditions with which the Company is
faced.
The Company continued its thoroughgoingreevaluation of operations in all areas in this term
as well, most particularly the performance ofconstruction supervisors. This program, begun
last term, allowed us to improve operational efficiency, strengthen our subcontracting system,
reduce indirect expenses and general administrative expenses, and apply funds with greater
efficiency. The effects of these efforts were apparent in companywide performance, as operating income soared 59.0 percent to ¥13.5 billion(US$109 million), and net income jumped 67.4
percent to ¥6.2 billion (US$50 million).

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Outlook and Important Issues
s one of Japan’s largest general telecomA munications engineering construction contractors, COMSYS has established as the pillarof its operations contracts with NTT and its groupof companies. The better to respond to today’s
rapidly changing market trends, COMSYS isbringing its long years of experience in project
execution to bear on strengthening its technological capabilities. At the same time, the Company offers a full range of engineering and systems services, covering everything from projectplanning and execution to maintenance. Everyone at COMSYS is acutely conscious of the needto expand the scope of our operations, and to
reinforce our business base.
At present, telecommunications-related industries are enjoying rapid growth as a result of
public and private sector efforts to develop a highorder, information-based society and to internationalize data communications. However, competition among telecommunications firms is intensifying, and international user fees are trending downward. It is expected, therefore, that theneed for reductions in operating costs in this industry will become more pressing.
Looking forward to market conditions in the
coming term, we look for extremely large-scale
growth in the non-NTT market. COMSYS will
renew its efforts to enter new fields and to diversify its customer base. This will involve both
domestic projects in our strategic “CC Box”
(multi-use underground cable conduit) facilities,
LANs, and cable television operations, and theenergetic pursuit of overseas projects. The mostimportant issue facing COMSYS is the expansion of orders from sources other than the NTT
group.
In the coming term, COMSYS will further
strengthen its operations through enhancing technological and marketing capabilities, and by reducing costs. This will allow us to realize needed
improvement in the Company’s performance.

Dividends
policies are among the most imD ividend
portant issues with which this Company
must deal. We must strengthen our financial
structure against the need for future expansionof operations. To improve our return on equity,
we must consider our ability to pay dividends inlight of the Company’s performance in any given
term. Our basic policy is to give heavy weight toshareholder concerns in setting dividends.
In the current term, the Company was facedwith the responsibility to meet its obligations
with regard to dividends to holders of our fourthand fifth issues of notes with warrants. Also
taking performance in this term into consideration, we declared an ordinary dividend of ¥6
per share, a special dividend of ¥1 per share tocommemorate our 45th anniversary, and anotherspecial dividend of ¥4.75 per share, for a total of¥11.75 per share for the term.
As we strive to maintain and increase dividend levels through improved performance,
Nippon COMSYS Corporation requests the continued support of the company’s friends, clients,and shareholders.

Shozo Iwasaki
President3

Toward the 21st Century - Our Vision of the Future
1999. Next, COMSYS will improve profitability through enhanced productivity and emphasis on high-added value products and services, over the
five-year period covered by the plan seeking to raise gross profit per employee
by more than 30 percent. The Company will seek to increase the value oforders received from the NTT Group by 40 percent by upgrading technological expertise, thereby winning contracts for all phases of project execution,
including design. Diversification operations, including the domestic construction and engineering sector, information systems sector, and overseas
construction sector, will grow to account for 50 percent of total net sales. To
strengthen the Company’s research and development structure, R&D will beconsolidated at the newly constructed Technology Center. The Center’s mission is to remain abreast of technological advance and to enhance
project-execution efficiency through the development of original technology. Finally, the Company will strive to improve the work environment on
project sites, to combat construction work’s “3K” image — kiken (dangerous), kitanai (dirty), and kitsui (difficult).
COMSYS projects that Japan’s multimedia market will grow to ¥123 trillion (US$1,382 billion), including a video and computer software market of¥29 trillion (US$326 billion), a network service market of ¥23 trillion(US$258 billion), and a communications and computer terminal market of¥34 trillion (US$382 billion). As a result, demand for optical-fiber related
construction projects is forecast at ¥95 trillion (US$1,067 billion). COMSYS
is determined not just to play a role in the creation of these new and exciting
communications capabilities, but to become the leading firm in the field. In
this way, COMSYS will make a contribution to a higher quality of life, andto the enhanced business possibilities represented by these new telecommunications capabilities.

123

The opening of the 21st century will be characterized by explosive growth
in multimedia computing and communications, as the world sees the evolution of high order, information-based societies. For the telecommunicationsindustry, this will mandate development of the ability to transmit data in any
form, at any time, to any destination. The Ministry of Posts and Telecommunications has announced the Information Communications Infrastructure
Program, which projects the development of an optical fiber network serving the entire nation by the year 2010. COMSYS expects to be deeply
involved in the execution of this plan.
As high order, information-based societies emerge, telecommunications
will play an increasingly important part in the economic community. It is
predicted that economic expansion will accelerate as a result of the introduction of new and more diverse communications services. To clarify its
response to these trends, COMSYS has drafted a new medium-term management plan, which it calls the COMSYS ’90s II plan. Covering the latter
half of the 1990s, COMSYS ’90s II is based on the concept of continual
reevaluation of operations in light of emerging market developments, withparticular emphasis on the changes resulting from the advent of the multimedia era. At the same time, though, this plan does not depart fromCOMSYS’ basic policy of encouraging individual initiative in every
employee.
The principal objectives outlined under this plan are, first, to achieve
corporate growth through the expansion of diversification activities, with agoal of a 50 percent expansion of revenues generated by these operations by

23% Non-NTT¥123
trillion (2010)¥16 trillion (1990)

Sources of Construction
Contracts

The Growing
Multimedia Market

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77% NTT

1990

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2010

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Review of Operations

Corporate Citizenship

COMSYS is taking an active role in thecommunities that host it, fostering environmental awareness, sponsoring cultural events, andoffering disaster-preparedness training.
Mindful of the environmental effects of paper consumption, COMSYS has implemented apaperwork reduction program, with the objective of reducing the Company’s paper use. Paperwork reduction will also, of course, result inincreased administrative eff iciency, as approximately 40 percent of the forms used by the Company will be abolished.
Demonstrating its commitment to responsible conservation, COMSYS has published“Global Environmental Protection Regulations”
to govern all phases of the Company’s operations.
In 1995, the Company spearheaded a drive
to collect contributions to buy artificial limbs
for the disabled victims of Cambodia’s seeminglyinterminable wars. This drive, which broughtin ¥2,750,781, was born of our desire to makeeven a small contribution to rebuilding that
war-torn land, to bring a measure of relief toeven one person.
In December 1994, COMSYS provided support to the Japan Volunteer Center (JVC) for aholiday presentation of Handel’s Messiah at
Tokyo’s Showa Women’s College. JVC is one ofJapan’s premier volunteer organizations, withmembers from eight countries in Asia, Africa,and Central and South America.

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In September 1996, the Company held adisaster-preparedness day at its headquarters
and Tokyo region branches, the third to concentrate on earthquake response. The primary
theme of this training was preparation for actions needed on construction sites following amajor earthquake. The Company’s ham radio
club was again called upon to keep communications open, as they would be in an actual emergency. Evacuation and fire-fighting drills were
held in cooperation with local fire departments,
and the classroom training was held for key
personnel.
Another of the Company’s activities is supporting The Tokyo Philharmonic Orchestra, of
which COMSYS is a special member.
In 1984 the Tokyo Philharmonic gave performances in fifty cities in seven European
countries, and in 1989 toured twenty cities ineight European countries. In 1994, the Philharmonic performed in fifteen cities, mainly inGermany and England. These concerts haveearned the Tokyo Philharmonic a solid international reputation.
COMSYS is proud to be able to contributein this way to the culture and society of our hostregions. In this way, we return something to thecommunities that have made our existence andgrowth possible.

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Sales by Business Category

Information Systems
Overseas Construction

Domestic Construction and Engineering

4% 7%

17%

"Outside" Projects

36%2"Inside" Projects
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36%
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NTT Construction

72%

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NTT Construction

For instance, COMSYS expanded its capabilities in the cellular telephone field through thedevelopment, jointly with instrument makerUnico Systems, of a system for using anavigator’s sun shot for orienting cellular telephone antennas. In addition to preventing errors
in measurement, this new technology makes it
possible to complete cellular telephone station
construction in twenty to forty percent of the timepreviously required. The operator simply enters
latitude, longitude, and the time, then rotates thelight sensor toward the sun. An onboard computer then calculates true north. The entire process, from deployment of the equipment throughidentification of true north and orientation of theantenna, takes only 45 minutes.
As a result of these efforts, orders received
in this sector rose 19.8 percent to ¥157.1 billion(US$1,267 million), and construction revenuesrose 23.0 percent to ¥159.4 billion (US$1,285
million). Given the adverse business environment, this growth must be seen as a success.
Turning to the coming term, competition toachieve enhanced efficiency among telecommunications firms, including NTT and the NCCs
(new communications carriers), will worsen further, as the need for cost reductions continues topinch. In response, COMSYS will be striving to
improve operational eff iciency, strengthen its
subcontracting system, and develop versatiletechnicians who are competent across a broad
spectrum of technologies.

2

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129.6

111.1

99.3

89.9

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159.4

The long-term trend toward more intensecompetition in the fields of long-distance andmobile telephone services continues to bringfiercer competition for our most important customers, NTT and the NTT Group. This is driving
increases in operational efficiency and competitiveness, as the industry creates and expands atelecommunications infrastructure to support
multimedia and digital communications, and an
optical-fiber access network.
The NTT Construction sector of COMSYS,
in response to today’s rapid technological advance, is striving to gain and enhance expertisein cutting-edge technology. At present, theCompany is handling projects for NTT involving cellular telephones and other mobile communications, civil engineering, cable laying,switchboards, and electric power generation.
In response to the changes in NTT’s subcontracting policies, COMSYS is adjusting its own
structure. COMSYS has ties with approximately
200 subcontractors, organized in a “Safety Cooperation Group.” Each of these subcontractors
has an association with COMSYS spanning many
years. With the goal of reducing subcontracting
expenses, which make up approximately sixty
percent of total costs, and eliminating duplication of operations, COMSYS has reorganized thissubcontracting group during recent years.
COMSYS, as a comprehensive telecommunications contractor, is fully capable of meeting NTT’srequirements for increased efficiency, and is seeking to expand orders received through a vigorous marketing program.

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"Inside" Projects"Outside" Projects

72%of Total Revenue
Sales of NTT Construction(¥ Billions)

93 94 95 96 97489

Domestic Construction and Engineering

sectors will produce revenues of ¥50 billion by
f iscal 1999. COMSYS hopes through these operations to contribute to the development of amultimedia communications network in Japan.
The Ministry of Construction plans to lay
400,000 kilometers of underground cable runs
along national highways and city streets for the
purpose of installing optical fiber communications cables, cable TV power circuits, and similar equipment underground. The estimated costof the project is ¥40 trillion, and there is a strong
possibility that CC Boxes are the wave of the
future, as construction costs are one-third to onehalf those of previous methods.
The Company has a good deal of experience
in installing LANs for Universities and Government Agencies, and has developed a good dealof LAN-related software. COMSYS has wide experience in the installation of LAN hardware, as
well. Last April the General Systems Divisioncommenced 24-hour LAN support, including onsite maintenance, operation, and monitoring,
greatly enhancing the Division’s comprehensive
customer service system. Now the Division faces
the need to develop technology for integrated
networks with sound and video capabilities, andto develop the systems integration expertise to
design and install such systems.
COMSYS has completed a number of metropolitan cable-television related projects for
TITUS Communications and other firms. The
Company has been engaged in cable televisionprojects since the 1960s, and is currently riding
the second wave of cable TV popularity. Ourleading-edge construction technology has helped
us win many contracts for urban cable televisionprojects, and we expect this to become one of
the Company’s principal growth areas.

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3

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4. Tesities.
s facilcation20.9

17%
of Total Revenue

19.4

19.5

28.7

37.4

This sector handles projects for all domestic
non-NTT clients, including the Defense Agency,
the National Police Agency, and the NCCs. Operations center on telecommunications engineering projects, and include electrical facilities, theconstruction of buildings, “CC Box” (multi-use
underground cable conduit) facilities, and a wide
spectrum of other construction and engineering
activities.
The Domestic Construction and Engineering
sector is benef iting from the rapidly advancing
development of the high order, information-basedsociety, including the construction of an infrastructure to support multimedia communications
and international computerization. The construction of a second optical fiber cable route for NCCs
offering long-distance services, the connection ofregional NCCs to NTT’s telecommunications network, and rapid growth of demand for mobile
communications have brought vigorous facilities
construction, producing great changes in the environment surrounding this market.
Last year we designated our CC Box, cableTV, LAN, and similar operations as strategic businesses, strengthening systems and creating operational structures, while conducting a vigorous
marketing program. As a result of this responseto the growth in the market for multimedia technology, this sector saw substantial growth in orders received and revenues. The CC Box Promotion Off ice concentrated its marketing efforts on
the Ministry of Construction, while the Cable TV
Promotion Off ice targeted primarily broadcasters aff iliated with sogo shosha. The LAN Promotion Office focused its marketing program on
private sector firms. It is forecast that these three

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Sales of Domestic Construction
and Engineering (¥ Billions)4

93 94 95 96 97

10

11

1

International Operations

Since the Company’s first overseas projectin 1964, a project involving the laying of cables
for telecommunications trunk lines in Bangkok,
Thailand, COMSYS has pursued a vigorous andwell-planned overseas expansion program. The
Company has executed numerous projects related
to communications cables, civil engineering,switching, electric power, radio, and computerization in over 70 countries throughout Southeast Asia, the Middle East, Africa, and Latin
America.
Providing everything from consulting
through planning, project execution, maintenance, and facilities operation, the Company had
major projects under way this term in Thailand,
the Philippines, Malaysia, and other countries
throughout Southeast Asia. In this way, COMSYS
is contributing to the development of the region’s
infrastructure.
In June 1996 the Company established ajoint venture in Malaysia to facilitate full-scaleparticipation in the construction of thatcountry’s telecommunications infrastructure.
The new company, CMC Engineering SDN.
BHD., was established jointly with a Malaysian
telecommunications construction firm, andis capitalized at approximately ¥20 million.
In 1996 Malaysia launched its “Multimedia
Super Corridor,” an important feature of whichis the construction of a next-generation com-

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munications infrastructure. Malaysia is striving to join the ranks of the developed nations
by the year 2020, and CMC Engineering has set
the goal of reaching ¥2 billion in annual revenues
by 1999.
The progress of running projects in the Philippines and Thailand along with new contracts
for work in telecommunications infrastructure
construction particularly a contract in connection with Thailand’s “800,000 Telephone Line
Construction Project,” greatly boosted theperformance of this sector. Orders received
jumped 30.6 percent to ¥11.4 billion (US$92
million), and construction revenues rose 33.2
percent to ¥8.9 billion (US$71 million).
The Company’s overseas bases include
Thai Telecommunications Engineering Co.,
Ltd. (established in 1978), Thai COMSYS &Jackson Co., Ltd. (established in 1992),
COMSYS Philippines, Incorporated (established in 1994), and in Malaysia, CMC
Engineering SDN. BHD. (established in
1996). In addition, COMSYS has fostereda network of highly successful associates
in various countries, in cooperation withwhich it carries out research, design,
project execution, and consulting services.

2

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4.3

6.7

8.7

8.9

3

3.7

4%
of Total Revenue
Sales of Overseas
Construction(¥ Billions)

93 94 95 96 97
4

12

13

Construction Revenues for Last Three Years

In the coming year, COMSYS will strive tomaintain a stable volume of orders through its
local subsidiaries and joint ventures in Thailand,
the Philippines, and Malaysia. In our marketing,

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we will emphasize our high-tech capabilities
and advanced construction methods, striving
for further expansion of orders.

12Over ¥10,000 million
Over ¥1,000 million
Over ¥350 million
Over ¥150 million
Over ¥50 million

3

4Major overseas Projects Completed
l fiber itching
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1. An sion and sw n Vietisbatransm roject in ur
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2. An o the Philipp d
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Nigeria
Iraq
Iraq
KuwaitEgypt
ThailandTaiwanThailandSri Lanka
Nepal
Thailand
KuwaitEl Salvador
ZambiaTanzania

Overseas Projects in Progress (As of June 1997)
Philippines
ThailandThailand14

Ibadan new local line project
Installation of 58,000-line exchange equipment
Installation of telephone lines for 17 local exchanges
Relocation of Telecommunications Services along Fahaheel Expressway
Supply and installation of telecommunication cable network in Ismailia and Suez
Installation of digital exchange equipment
Installation of highway traffic control system
Metropolitan area local cable network: 24 exchanges
Installation of local telephone lines in the Badulla and Anuradhapura regions
Installation of microwave telecommunications system (inside and remote)
Fifth local cable network installation for TOT in Bangkok and provinces
Installation of digital loop coil system in Farwaniah Exchange
Installation of local telephone lines in La Preshita
Rehabilitation of telephone cable network in Lusaka
Rehabilitation of telecommunications network in Dar es Salaam

Installation of trunk lines and local cable network in Manila and the provinces
Seventh local cable network for TOT in Bangkok and the provinces
The Telephone Expansion Project to Overcome Short-Term Line Shortage/ B. E.1996-1998

15

Information Systems

The information systems sector is engaged
in the development of computer software, systems integration, and the sale of off ice equipment. This sector counts among its clients NTT,
NEC, and, in the public sector, national andlocal government agencies.
The office equipment market has been adversely affected by declining unit prices for
personal computers and other equipment. In
addition, competition among volume retailers
and other sales outlets has intensified, resulting in difficult market conditions.
Networks construction and systems integration are a pillar of the Company’s softwaredevelopment and sales operations. Depending on the customer’s requirements, COMSYS
can offer comprehensive systems integration
services, encompassing everything fromsmall utilities to total software solutions.
More than just the installation of communications networks, this sector offers a wide
spectrum of technological services, including
the development of systems and software.
Products include group ware systems, mobile
computing systems, a utility to solve the date

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problem at the turn of the century, corporate
network rebuilding services, systems integration, and, developed jointly with NTT and
Microsoft, an Internet access pack for small
and medium-sized off ices. A vigorous marketing program has produced healthy performance in terms of both orders received andrevenues.
In the coming term we will further expand
our software development operations to encompass network software and systems integration
suitable for the era of the Internet. Always anticipating customer requirements, we will seek
to increase orders through vigorous expansionof our solutions-oriented marketing program.

2

1

14.9

zes
io utili
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1. A T ed electionpehigh-s g software
n
YS.
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COMS
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evelopwork d2 . A t ware.
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3. A s .
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resoftwa

13.0

12.7

11.5

15.6

3

7%
of Total Revenue
Sales of Information
Systems (¥ Billions)
93 94 95 96 97

16

4

17

Board of Directors and Auditors

Financial Section

As of June 27, 1997

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President
Shozo Iwasaki

Executive Vice President
Hironobu Takeuchi

Senior Managing Director

Senior Managing Director

Koichi Kinoshita

Ryuichi Arano

Managing Director

Managing Director

Managing Director

Managing Director

Managing Director

Managing Director

Akihiro Shibata

Yoshimi Watanabe

Kiyoto Kuwabara

Michiaki Ono

Koji Miyata

Isao Iijima

Directors

Takuo Sue
Minoru Nakano
Takaaki Okayama
Masahide Kajiyama
Kensuke Yabuki
Yasunobu Sasaki
Ko TamaiStanding Auditors

Katsuhiko Tanikawa
Tadashi Matsumoto
Tatsuy a Sato
Kyoichi Suzuki
Syotaro Chikamoto
Teruji Mukai

18

Takashi Kato
Masaharu Ogawa
Auditors

Yuzo Hashimoto
Sadanori Okada

Financial Review

20

Selected Financial and Operating Data

23

Non-Consolidated Balance Sheets

24

Non-Consolidated Statements of Income

26

Non-Consolidated Statements of Shareholders' Equity

27

Non-Consolidated Statements of Cash Flows28

Notes to the Non-Consolidated Financial Statements

29

Report of Independent Certified Public Accountants

32

Summary of Consolidated Performance33

Financial Review

is some 72 percent of the Company’s total revenues,
virtually unchanged from the previous term. Of this,“outside” projects accounted for ¥79,306 million(US$639 million), and “inside” projects for ¥80,081
million (US$646 million).
The domestic construction and engineering sector
posted growth in net sales of 30.3 percent to ¥37,415
million (US$302 million). Coming as it does on theheels of a 48.0 percent jump in the previous fiscal year,
this reflects the success of our efforts to expand nonNTT operations. The overseas construction sector
achieved a 33.3 percent increase in revenues, to ¥8,925
million (US$72 million). The information systems sector, which posted double-digit revenue growth last year,
saw sales decline 4.8 percent to ¥14,863 million(US$120 million).

72%

1993

Construction Business
NTT Construction¥ 89,861
Domestic Construction and Engineering
19,467
Overseas Construction
3,738
Other BusinessInformation Systems
12,705¥125,771

Total

Thousands of
U.S. dollars

Millions of yen(Years ended March 31, 1993, 1994, 1995, 1996 and 1997)

1994

1995

1996

1997

1997

¥ 99,297
20,9444,274¥111,053
19,3928,729¥129,613
28,706
6,697¥159,387
37,415
8,925$1,285,379
301,734
71,975

11,522

13,03915,613

14,863

119,863¥136,037¥152,213¥180,629¥220,590$1,778,951

220.6

Note: Yen f igures have been converted from U.S. dollars at the rate of ¥124.00=US$1, rounded down, for convenience only, from anapproximate exchange rate of ¥124.10 to the dollar on March 31, 1997.

Revenues

152.2

136.0

125.8

180.6

Proportion of
Revenues fromNTT Market(¥ Billions, %)
74.0
73.0

Net sales

72.0
71.0

Percentage generated by NTT
Construction Projects

70.0

93 94 95 96 97

20

Japan’s economic recovery remained weak in fiscal 1996. However, the decline of the value of the yen
sparked an increase in exports, and the Japanese government kept interest rates at extremely low levels.
Capital investment was up in some industrial sectors,
and there was a transient surge in consumer spending
as people rushed to make major purchases before theincrease in the consumption tax. Despite these unsettled
conditions, net sales increased 22.1 percent to ¥220,590
million (US$1,779 million).
Revenues in the NTT construction sector grew 23.0
percent to ¥159,387 million (US$1,285 million). This

54.27

NTT Construction

93 94 95 96 97

Net Income per Share (¥)
Results of Operations

Cost of sales as a percentage of sales remained at
the 87 percent level. Revenue growth resulted in a 27.0
percent increase in gross prof it, to ¥27,890 million(US$225 million). Selling, general, and administrative expenses edged up 6.6 percent to ¥14,308 million(US$115 million), but as a percentage of gross profit
declined to 51.3 percent, a ten percentage-point improvement over the previous year. As a result, operating
income jumped 59.0 percent to ¥13,582 million(US$110 million).
Income before income taxes also showed substantial growth, rising 65.6 percent to ¥13,397 million(US$108 million), despite declines in interest and dividend income and other income. The effective income
tax rate was fairly steady at 53.2 percent, almost unchanged from last year’s from 53.8 percent. These
factors allowed net income to surge 67.5 percent to¥6,267 million (US$51 million). Net income per sharerose to ¥54.27 (US$0.44), and dividends were increasedto ¥11.75 (US$0.09).

93 94 95 96 97

Total Assets (¥ Billions)

154.3

36%

1.0

138.6

"Inside" Projects

Net income

37.69

36%

2.0

32.91

"Outside" Projects

17%

Operating income

116.6

Nippon COMSYS Corporation

3.0

105.5

Sales by Business Category
Domestic Construction
and Engineering

4.0

22.78

4% 7%

5.0

86.4

Information Systems
Overseas Construction

6.0

Operating Income and
Net Income as
Percent of Revenues
(%)

26.62

•
•
•
•
•

Financial Position

Cash and time deposits contracted a further 18.1
percent during this term, declining to ¥21,171 million(US$171 million), while the accumulated cost of construction in progress rose 8.2 percent to ¥18,375 million

93 94 95 96 97

21

Nippon COMSYS Corporation

Selected Financial and Operating Data

65.1

59.3

39.8

56.4

Years ended March 31, 1993, 1994, 1995, 1996 and 1997

Shareholders' Equity
and Return on Equity(¥ Billions, %)

31.6

10.0
8.0

Shareholders' equity

6.0
4.0

ROE

2.0

Dividends per Share (¥)

8.00

Cash Flows

Despite the 67.5 percent jump in net income, net
cash provided by operating activities sank to a negative figure of ¥1,832 million (US$15 million). This wasprimarily due to the increase in notes and accounts receivable, arising from the increase in net sales. Net cashused in investing activities, at ¥6,648 million (US$54
million), was less than half the total in the previous
year.
Proceeds from issuance of notes with warrants fellto zero for the term, while proceeds from the issuanceof convertible bonds rose from zero in the previous yearto ¥10,000 million (US$81 million). The Company
posted ¥335 million (US$3 million) in proceeds fromexercise of warrants. However, redemption of notes withwarrants in the amount of ¥7,016 million (US$57 million) was the major factor in a 68.6 percent decline in
net cash provided by financing activities, which fell to¥2,197 million (US$18 million). Cash and cash equivalents fell 14.7 percent to ¥36,582 million (US$295
million).

6.00

7.25

9.75

11.75

93 94 95 96 97(US$148 million). The Company reduced its marketable securities holdings by 9.4 percent to ¥15,411
million (US$124 million). Notes and accounts receivable grew 39.4 percent to ¥58,091 million (US$468
million), the ¥16,420 million (US$132 million) increase
more than offsetting the declines in other areas. Together with the growth in accumulated cost of
construction in progress, this produced 11.1 percent
growth in current assets, to ¥114,362 million (US$922
million). Current liabilities rose 23.3 percent to ¥57,388
million (US$463 million), chiefly as the result of higher
trade payables and income taxes. As a result of the foregoing, the current ratio declined from last year’s 2.2 to
2.0.
Investments and other assets were increased by 36.2
percent to ¥12,740 million (US$103 million). Total
property and equipment edged up 5.8 percent to¥26,247 million (US$212 million), after depreciation.
Total assets thus rose 11.3 percent to ¥154,246 million(US$1,244 million). Shareholders’ equity rose 9.8 percent to ¥65,096 million (US$525 million).

93 94 95 96 97

22

Thousands of
U.S. dollars

Millions of yen
1993

1994

1995

1996

1997

1997

Results of Operations:
Net sales
Operating income
Income before income taxes
Net income¥125,771
3,929
4,071
1,631

¥136,037
5,698
5,759
2,419

¥152,213
7,042
7,127
3,637

¥180,629
8,544
8,092
3,742

¥220,590
13,582
13,397
6,267$1,778,951
109,532
108,040
50,540Financial Position:
Total assets
Property and equipment
Long-term debt
Shareholders’ equity¥ 86,382
12,773
20,51031,556¥105,450
15,866
17,74239,821¥116,617
17,66425,08256,395¥138,610
24,81424,99559,277¥154,246
26,24725,12865,096$1,243,919
211,669
202,645524,968

Per Share of Common Stock (in yen and dollars):
Net income
Cash dividends
Shareholders’ equity¥ 22.786.00
430.18¥ 26.627.25
428.19¥ 37.70
8.00
539.08¥ 32.919.75
514.90¥ 54.2711.75
562.23$Financial Ratios:
Operating income to net sales
Net income to net sales
Capital ratio
Return on equity
Other Statistics:
New orders received during the year
Contract backlog at end of the year
Common stock price range (in yen):
High
Low

3.12%
1.30
36.5
5.4

4.19%
1.78
37.8
6.8

4.63 %
2.39
48.4
7.6

4.73 %
2.07
42.8
6.5

0.44
0.09
4.53

6.16%
2.84
42.2
10.1

¥128,073
57,030¥135,762
56,755¥143,034
47,576¥186,180
53,127¥225,147
57,684¥ 1,130901¥ 1,570930¥ 1,280
1,180¥ 1,450980¥ 1,560
1,190$1,815,702
465,194

Note: Yen f igures have been converted from U.S. dollars at the rate of ¥124.00=US$1, rounded down, for convenience only, from an approximate exchange
rate of ¥124.10 to the dollar on March 31, 1997.

23

Nippon COMSYS Corporation

Non-Consolidated Balance Sheets
As of March 31, 1996 and 1997

Thousands of
U.S. dollars (Note 2)

Millions of yen

ASSETS
Current Assets:
Cash and time deposits
Marketable securities (Note 3)
Notes and accounts receivable-trade
Inventories:
Accumulated cost of construction in progress
Other
Other current assets
Less: Allowance for doubtful receivables
Total current assets

1996

1997

1997

¥ 25,852
17,013
41,671¥ 21,171
15,41158,091$ 170,734
124,282
468,476

16,978
247
1,292
(105)

18,375
276
1,169
(131)

148,185
2,226
9,427(1,056)

102,948

114,362922,274

Investments and Other Assets:
Investment securities:
Subsidiaries and aff iliates
Other (Note 3)Long-term loans receivable:
Subsidiaries and aff iliates
Other
Other assets
Less: Allowance for doubtful receivables

1,087
2,263

1,053
4,985

8,492
40,202

522
2,403
3,083
(6)

356
2,769
3,597
(20)

2,871
22,33029,008(161)

Total investments and other assets

9,352

12,740102,742

Property and Equipment:
Land
Buildings and structures
Machinery and equipment
Construction in progress
Less: Accumulated depreciation
Total proper ty and equipment
Deferred Charges:
Discount on notes payable
Total defer red charges

14,696
10,4006,855—(7,137)

16,32010,5237,709
21(8,326)

131,61384,86362,169169(67,145)

24,814

26,247

211,669

1,496

897

7,234

1,496

897

7,234

¥138,610¥154,246$1,243,919

Millions of yen

LIABILITIES AND SHAREHOLDERS’ EQUITYCurrent Liabilities:
Short-term bank loans (Note 4)
Current portion of convertibles bonds (Note 4)
Current portion of notes with warrants (Note 4)
Accounts payable:
Trade
Other
Advances received on construction in progress
Income taxes payable
Warrants
Other current liabilities

1996

¥

1997

¥

440
—
9,867

1997

$

3,548
—
79,572

21,675
2,774
5,257
3,649
2,396
2,934

29,108
2,228
4,372
6,195
2,351
2,827

234,742
17,96835,25849,96018,96022,798

Total current liabilities

46,534

57,388462,806

Long-Term Liabilities:
Notes (Note 4)
Convertibles bonds (Note 4)
Notes with warrants (Note 4)
Accrued severance indemnities
Other long-term liabilities

15,128
—
9,867
6,663
1,141

15,12810,000—6,161
473

122,000
80,645—49,685
3,815

32,79931,762

256,145

16,895—
14,122
1,141
27,11959,277—
17,25014,521
1,271
32,05465,096—
139,113
117,105
10,250258,500
524,968¥138,610¥154,246$1,243,919

Total long-term liabilities
Contingent Liabilities (Note 5)
Shareholders’ Equity (Note 6):
Common stock, par value ¥50 per share:
Authorized—250,000 thousand shares
Issued—115,124 thousand shares (31st March, 1996)—115,782 thousand shares (31st March, 1997)
Additional paid-in capital
Legal reserve
Retained earnings
Total shareholders’ equity

See Notes to the Non-Consolidated Financial Statements.

24

440
393
7,016

Thousands of
U.S. dollars (Note 2)25

Nippon COMSYS Corporation

Nippon COMSYS Corporation

Non-Consolidated Statements of Income

Non-Consolidated Statements of Shareholders’ Equity

Years ended March 31, 1996 and 1997

Years ended March 31, 1996 and 1997

Thousands of
U.S. dollars (Note 2)

Millions of yen

Net Sales:
Construction contracts
Other
Cost of Sales:
Construction contracts
Other
Gross prof its
Selling, General and Administrative Expenses
Operating income

1996

1997

1997

¥165,016
15,613¥205,727
14,863$1,659,088
119,863

180,629

220,590

1,778,951

145,238
13,426

179,917
12,7831,450,943
103,089

158,664

192,700

1,554,032

21,96527,890224,919

13,421

14,308115,387

8,544

13,582

109,532

Common Stock:
Beginning of period
Add:
Conversion of convertible bonds
Exercise of warrants
End of period
Additional Paid-in Capital:
Beginning of period
Add:
Conversion of convertible bonds
Exercise of warrants
End of period

Other Income (Expenses):
Interest and dividend income
Interest expenses
Other, net (Note 7)
Income before Income Taxes
Income Taxes (Note 8)
Net Income

720
(30)
(1,142)
(452)

541
(7)
(719)
(185)

4,363
(57)
(5,798)(1,492)

8,092
4,350

13,3977,130

108,040
57,500¥ 3,742¥ 6,267

Yen

Per Share:
Net income
Cash dividends¥32.919.75$

50,540U.S. dollars (Note 2)¥54.27
11.75

$0.44
0.09

Legal Reserve:
Beginning of period
Add:
Transfer from retained earnings
End of period
Retained Earnings:
Beginning of period
Add/(deduct):
Net income
Transfer to legal reserve
Cash dividends
Bonuses to directors
End of period

See Notes to the Non-Consolidated Financial Statements.

See Notes to the Non-Consolidated Financial Statements.

26

Thousands of
U.S. dollars (Note 2)

Millions of yen

27

1996

1997

1997

¥16,869¥16,895$136,250

26
—

187
168

1,508
1,355

¥16,895¥17,250$139,113¥14,096¥14,122$113,887

26
—

187
212

1,508
1,710

¥14,122¥14,521$117,105¥ 1,049¥ 1,141$ 9,20292¥ 1,141130¥ 1,271

1,048$ 10,250¥24,381¥27,119$218,701

3,742
(92)
(837)
(75)

6,267
(130)
(1,122)(80)

50,540(1,048)(9,048)(645)¥27,119¥32,054$258,500

Nippon COMSYS Corporation

Nippon COMSYS Corporation

Non-Consolidated Statements of Cash Flows

Notes to the Non-Consolidated Financial Statements

Years ended March 31, 1996 and 1997

Millions of yen

Cash Flows from Operating Activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amor tization
Provision for accrued severance indemnities, less payments
Changes in assets and liabilities
Notes and accounts receivable-trade
Inventories
Other cur rent assets
Accounts payable
Advances received on construction in progress
Income tax payable
Employees’ saving deposits
Other liabilities
Other, net

Net cash used in investing activities

1997¥ 3,742¥ 6,267$ 50,540

1,950
265

2,135
(444)

17,218(3,580)(14,090)
2,120
(377)
10,264822
1,159(2,066)644
980(16,420)(1,426)
123
6,887
(885)
2,546
—
(107)
(508)

(132,419)(11,500)
992
55,540(7,137)
20,532—(863)(4,097)

5,413(1,832)(14,774)(10,491)(535)(3,246)(3,402)(26,177)(27,436)(11,026)(6,648)(53,613)

—
7,880
—
—
(40)
(837)

10,000—335(7,016)—(1,122)80,645—
2,702(56,581)—(9,048)

7,003

2,197

17,7181,390
41,475¥42,865(6,283)42,865¥36,582(50,669)
345,685$295,016

Net cash provided by financing activities

Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for:
Interest
Income taxes
Conversion of long-term debt to common stock(a) Basis of presenting non-consolidated financial statements
The accompanying non-consolidated financial statements have been preparedfrom accounts and records maintained in Japanese yen by Nippon COMSYS
Corporation (the “Company”) in accordance with accounting principles andpractices generally accepted in Japan, and from non-consolidated f inancial
statements filed with the Minister of Finance in Japan. Certain items presented
in the original financial statements have been reclassified, for the convenienceof readers outside Japan. The preparation of non-consolidated statementsof shareholders’ equity and cash flows are not required in Japan. They are,however, presented herein for the reader’s convenience.

1997

Cash Flows from Financing Activities:
Proceeds from issuance of convertible bonds
Proceeds from issuance of notes with warrants
Proceeds from exercise of warrants
Redemption of notes with warrants
Increase (decrease) in short-term bank loans
Cash dividends paid

Net Increase (Decrease) in Cash and Cash Equivalents
Cash and Cash Equivalents at Beginning of Year
Cash and Cash Equivalents at End of Year

1. Significant Accounting Policies

1996

Net cash provided by operating activities
Cash Flows from Investing Activities:
Expenditure for property and equipment(Increase) decrease in investments and other assets

Thousands of
U.S. dollars (Note 2)

¥

674
4,471
52

¥

678
6,526
374

$ 5,468
52,6293,016(c) Accumulated cost of construction in progress
In connection with (b) above, “accumulated cost of construction in progress”
is stated on an individual project basis.

(h) Accrued severance indemnities
Employees of the Company are usually entitled to lump-sum severance
indemnities determined by reference to their current basic rate of pay, lengthof service and conditions under which the termination occurs.
On 1st February, 1997, the Company established a contributory trusteed
employee pension fund, composed of a portion covering the benefits for theseverance indemnities and another portion covering social security benefits,
to which the Company and employees make contributions.
The Company’s policy for severance indemnities benefits is to contributeand charge to income normal costs as accrued on the basis of an accepted
actuarial method and prior service costs as amortized over 20 years.
The assets of the funds for the severance indemnities benefits at 31st March,
1997 were ¥15,609 million (U.S.$125,879 thousand).
Before the contributory trusteed employee pension fund was established,severance indemnities benef its had been accounted for and reserved as “accrued
severance indemnities” and funded through tax-qualified pension plans. On
its establishment, the all assets of the tax-qualified pension plans were transferred to the contributory trusteed employee pension fund, and the remainingbalance of “accrued severance indemnities” were/would be amortized in eachyears over 20 years.
As is customary practice in Japan, the Company has unfunded lump-sum
severance indemnities for directors and statutory auditors providing for 100
per cent. of the liability which would accrue if all directors and statutory auditors
terminated their services at the balance sheet date.

(d) Marketable securities and investment securities
Marketable securities (current) and inv estment securities (non-current) listed
on stock exchanges (excluding securities trading on over-the-counter markets)
are stated at the lower of cost or market, cost being determined by the periodic
average method. Other securities without market quotations on stock exchanges
and investments in subsidiaries and affiliates are stated at cost, determined by
the periodic average method.

(i) Warrants and discount on notes payable
Effective after 1st April, 1994, the warrants are accounted for separately fromthe notes and treated as a current liability for the purpose of balance sheets,and discount on notes payable arising from the issuance of notes with warrants
is included in deferred charges for the purpose of balance sheets and is/will beamortized by equal amounts over the periods up to maturity, in accordancewith accounting principle generally accepted in Japan.

(e) Inventories
Inventories (excluding (c) above) are stated at cost, by the moving averagemethod.

(j) Income taxes
Income taxes in Japan applicable to the Company are comprised of corporation tax, inhabitants’ taxes and enter prise tax. As is common practice in Japan,
enterprise tax is included under “selling, general, and administrative expenses”
in the statements of income.
Deferred income taxes pertaining to timing differences between financial
and tax reporting are not provided for.

(b) Point of sales—construction contracts
Construction contracts of the Company are accounted for by the “completed
contract method” under which “net sales” are recognized when the contracts
are completed. The accumulated cost of uncompleted construction is shown as“accumulated cost of construction in progress” and the related billings(advances receiv ed) on uncompleted construction contracts are shown as“advances received on construction in progress” in the accompanying balance
sheets.

(f) Depreciation
Depreciation of property and equipment is computed on the declining balancemethod, as prescribed by Japanese income tax laws, using estimated useful
lives of assets principally as follows:
Buildings and structures
8 to 65 years
Machinery and equipment 3 to 10 years(g) Allowance for doubtful receivables
Allowance for doubtful receivables is provided at the maximum amountpermitted to be charged to income under Japanese income tax laws plus anestimated amount of possible bad debts.

See Notes to the Non-Consolidated Financial Statements.

28

29

4. Shor t-Ter m Bank Loans and Long-Term Debt:(k) Net income and cash dividends per share
The computations of net income per Share shown in the non-consolidated statements of income are based on the weighted average number of Shares in issueduring the period. The number of Shares used for computing net income per
Share was 113,742 thousand and 115,480 thousand Share for the two years in
the period ended 31st March, 1997, respectively. Cash dividends per Shareare based on the cash dividends paid in respect to the relevant period.

Short-term bank loans are generally represented by 365-day notes with interest
rates principally of 1.625 per cent. at 31st March, 1996 and 1997, respectively.
At 31st March, 1996 and 1997, long-term debt consisted of the following:

31st March

2.1 per cent. yen secured convertible bonds
due 1997¥ 393 ¥—
2.625 per cent. U.S. dollar guaranteed notesdue 1996 with warrants
7,016—
1.125 per cent. U.S. dollar notes due 1998
with warrants
9,867
9,867
3.750 per cent. U.S. dollar notes due 1999
7,755
7,755
0.5 per cent. Swiss franc notes due 1999
7,373
7,373
0.3 per cent. yen unsecured convertible
bonds due 2003
— 10,000(l) Cash flow information
The Company considers marketable securities (current) and all time deposits
with original maturities of one year or less, which can be withdrawn at least at
face amount at any time without any penalties, to be cash equivalents.

2. U.S. Dollar Amounts
The accounts of the Company are maintained in Japanese yen. The accompanying non-consolidated financial statements have been presented in Japanese
yen and have also been presented in U.S. dollars by translating all Japanese
yen amounts using the rate of ¥124.00=U.S.$1. The presentation of such dollar
amounts is solely for the convenience of the readers and is not intended to
imply that yen amounts have been or could be converted, realized or settled indollars at that or at any other rate.

Current portion

3. Market Value Information of Securities

31st March

Thousands of
U.S. dollars
1997
Book
Marketvalue
value

Marketable securities:
Stocks
¥
1¥
1 ¥
2 ¥
2 $
16 $
16
Bonds and others 5,500 5,704 5,500 5,761 44,355 46,460
Investment securities:
Stocks
1,332
Bonds
8
Others
359

4,676
10
367

1,341
1,127
349

3,771
1,184
317

10,815
9,089
2,814

Thousands of
U.S. dollars
1997

$

—
—
79,57262,54059,46080,645¥32,404 ¥34,995
7,409
9,867

$282,217
79,572¥24,995 ¥25,128$202,645

Convertible bonds
At 31st March, 1997, unsecured convertible bonds consisted of the following:
The original amount issued at 24th, June, 1996
¥10,000 million
Balance as at 31st March, 1997
¥10,000 million
Interest rate
0.3%
Maturity date
31st March, 2003
Conversion period:
On and after
1st August, 1996
Up to and including
28th March, 2003
Conversion price:
At 31st March, 1997
¥1,435(U.S.$11.57)

At 31st March, 1996 and 1997, book value and market value of marketablesecurities and investment securities, as to which market value information isrequired to be disclosed, were as follows:
Millions of yen
1996
1997
Book Market Book
Market
value
value
value
value

Millions of yen
1996
1997

6. Shareholders’ Equity

Notes, warrants and notes with warrants
At 31st March, 1997, notes and notes with warrants consisted of the following:Notes (*1)
US$100,000,000

Notes (*1)
SF100,000,000

The Commercial Code of Japan (the “Commercial Code”) provides that an
amount of not less than 10 per cent. of the amount of cash dividends and bonuses
to directors paid be appropriated as leg al reserve until such reserve equals 25
per cent. of common stock. This reserve is not available for dividends but
may, subject to shareholders’ approval, be used to reduce deficits or may becapitalized subject to a resolution of the Board of Directors.
Under the Commercial Code, an amount equivalent to at least one-half ofproceeds from issues of Shares shall be accounted for as an addition to thecommon stock account with the minimum of ¥50 per share. The remaining
portion of the proceeds is accounted for as an addition to “additional paid-in
capital.”Notes with Warrants
US$100,000,000

Date of issue
30th March, 1995 7th September, 1995 3rd March, 1994
Interest rate
3.750%
0.5%
1.125%
Maturity date
30th March, 1999 7th September, 1999 3rd March, 1998
War rants exercisable:
On and after
10th April, 1995 21st September, 1995 17th March, 1994
Up to andincluding
16th March, 1999 31st August, 1995 24th February, 1998
Subscription price:
At 31st March,
1997¥1,146.4¥1,353¥1,338.9(U.S.$9.25)(U.S.$10.91)(U.S.$10.80)

7. Other Income and Expenses“Other, net” in “Other Income (Expenses)” consisted of the following:Notes: (*1) See note 1 (i) of the Notes to the non-consolidated financial
statements.

Years ended 31st March

The number of shares of common stock required for exercising of theabove warrants remaining unexercised at 31st March, 1997 at the current
subscription prices would have been approximately 21,241 thousand.
The conversion price of the above convertible bonds and subscription pricesof the above warrants are subject to adjustment under certain circumstances,including stock splits pursuant to the relevant agreement.
The Company entered into long-term forward foreign exchange contracts
with banks to hedge their payment of the aforementioned U.S. dollar notes
and notes with warrants. Consequently, the notes were translated at the contracted rate, and the resulting translation gains are defer red as “other longterm liability”, and amortized and credited to “interest expenses” each year
over the period up to maturity.

The number of shares of common stock required for conversion of theabove unsecured conv ertible bonds outstanding at 31st March, 1997 at thecurrent conversion price would have been approximately 6,969 thousand.

¥7,200 ¥10,758 ¥8,319 ¥11,035 $67,089 $88,992

30

31st March

Guarantee of loans borrowed by:Thai COMSYS and Jackson Co.,Ltd.
Thai Telecommunications Engineering
Co.,Ltd.
COMSYS-TTEC J.V.
Jackson-COMSYS J.V.
Other

Write-down of investment securities¥ —Expenses on issue of notes with warrants(174)
Expenses on issue of unsecured
convertible bonds—
Amortization of discounts onnote premium
(599)
Other
(369)

¥ (19)—$ (153)—(240)(1,935)(599)
139(4,831)
1,121¥(1,142)¥(719)$(5,798)

8. Income Taxes

5. Contingent Liabilities
Millions of yen
1996
1997

Thousands of
U.S. dollars
1997

The Company is subject to several Japanese taxes based on income which, inthe aggregate, resulted in normal statutory tax rates of approximately 52 per
cent. for each of the two years in the period ended 31st March, 1997.
The effective tax rates in the non-consolidated statements of income differ from the normal statutory tax rates due to such items as permanently nondeductible expenses and timing differences in recognizing certain income andexpense items for financial and tax reporting purposes.

At 31st March, 1996 and 1997, contingent liabilities consisted of the following:

30,411
9,548
2,557

Millions of yen
1996
1997

Thousands of
U.S. dollars
1997

9. Subsequent Event¥ 4,952¥ 5,252$ 42,355

3,894
4,311
—
1,254

4,510
4,595
2,379
1,931

36,37137,05619,185
15,573¥14,411¥18,667$150,540

On 27th June, 1997, the shareholders of the Company approved the following
appropriations of retained earnings:

Cash dividends
Transfer to legal reserve
Bonuses to directors

31

Millions of yen

Thousands of
U.S. dollars¥1,360150
75$ 10,968
1,210
605

Report of Independent Certified Public Accountants

Summary of Consolidated Performance

•
•
•
•
•

Nippon COMSYS Corporation and Consolidated Subsidiaries
Years ended March 31, 1996 and 1997

Millions of yen

Net sales
Operating income
Net income
Total assets
Shareholders’ equity

1997

1997

(%)

¥184,595
8,737
4,156
142,765
62,622¥221,636
13,733
6,831
158,839
68,979$1,787,387
110,750
55,0891,280,960
556,282

20.1%
57.2%
64.4%
11.3%
10.2%

Yen

Per share:
Net income
Cash dividends

公認会計士桜友共同事務所

T o t h e Board o f D i r e c t o r s ,N i p p o n COMSYS C o r p o r a t i o n

We ha veexamined
the non-consolidatedbalancesheetsof
Nippon COMSYS Cor poration as of 31st March, 1996 and 1997, andthe related non-consolidated statements of income, hareholders’e q u i t y a n d c a s h f l o w s f o r e a c h o f t h e t w o ye a r s i n t h e p e r i o d
e n d e d 3 1 s t M a r c h , 1 9 9 7 , a l l ex p r e s s e d i n J a p a n e s e y e n . O u re xaminations
were made in accordance with auditing standards
generall y accepted and applied in Japan and accordingly included such testsof the accounting records and such other auditing procedures as
w e considered necessary in the circumstances.
In our opinion, the accompan ying non-consolidated f inancials t a t e m e n t s p r e s e n t f a i r ly t h e f i n a n c i a l p o s i t i o n o f N i p p o n C O M S Y S
Cor poration at 31st March, 1996 and 1997, and the results of its
o p e r a t i o n s a n d c a s h f l o w s f o r e a c h o f t h e t wo y e a r s i n t h e p e r i o d
ended 31st March, 1997, in confor mity with accounting principles
generall y accepted in Japan applied on a consistent basis.

Change1996

8TH FLOOR NO.10 MORI BUILDING
1-18-1 TORANOMON MINAT O-KU
TOKYO 108 JAPANCERTIFIED PUBLIC ACCOUNTANTS

Thousands of
U.S. dollars¥36.54
9.75

U.S. dollars¥59.15
11.75

$0.48
0.09

Note: Yen f igures have been converted from U.S. dollars at the rate of ¥124.00=US$1, rounded down, for convenience only, from an approximate exchange
rate of ¥124.10 to the dollar on March 31, 1997.

220

Net Sales(¥ Billions)

Net Income(¥ Billions)

200

7.0
6.0
5.0

180

4.0

160

Consolidated

Consolidated
3.0

140

Non-Consolidated

2.0

Non-Consolidated

1.0

120

Masatoshi

Yo s h i n o

93 94 95 96 97

93 94 95 96 97
Eiji

Miyashita

H i d e o N i wa

C e r t if i e d

Pu b li c

Total Assets(¥ Billions)

Net Income per Share
(¥)

160

A c co u nt a nt s

60

140

50

To k y o , J a p a n
27th June, 1997
120

40

Consolidated

Consolidated
100

30

Non-Consolidated

Non-Consolidated
80

20

93 94 95 96 97

32

61.9%
20.5%

93 94 95 96 97

33

Organization Chart

Corporate Information

As of July 1, 1997

As of March 31, 1997

•
•
•
•
•

•
•
•
•
•

Head Office:23-14, Takanawa 3-chome, Minato-ku
Tokyo 108, Ja pan
Tel: (03) 3448-7031

Planning & Business Analysis Division

Nippon Telegra ph and Telephone Corporation (NTT)
Kokusai Denshin Denwa Co., Ltd. (KDD)
DDI Corporation
Tokyo Telecommunication Network Co., Inc. (TTNet)
Sharp Corporation
Japan Highway Public Corporation
Defense Facilities Administra tion Agency
RECRUIT Co., Ltd.
The Tokyo Electric Power Co., Inc.
Fuji Xerox Co., Ltd.
The Furukawa Electric Co., Ltd.
Sumitomo Electric Industries, Ltd.
Fujikura Ltd.
Hitachi Cable, Ltd.
NEC Corporation
Fujitsu Limited
Mitsubishi Corporation
Marubeni Corporation
Mitsui & Co., Ltd.
Sumitomo Corporation
Lucent Technologies
Telephone Organiza tion of Thailand (Thailand)
TelecomAsia Corporation Public Co., Ltd. (Thailand)
Thai Telephone & Telecommunication Public Co., Ltd. (Thailand)
Philippine Long Distance Telephone Co. (Philippines)
International Communications Corp., Inc. (Philippines)
Globe Telecom Inc. (Philippines)
Smart Communications Inc. (Philippines)

Overseas Division:

General Affairs Department

Tel: (03) 3448-7181
Fax: (03) 3440-5941

Public Relations Office

Managing Director’s Meeting

Branch Offices:
Hokkaido, Tohoku, Akita, Kantominami,
Kantonaka, Kantokita, Shinetsu, Niigata,
Tokai, Hokuriku, Kansai, Chugoku, Shikoku,
K yushu, Okinawa

Finance & Accounting Department

Auditing Department

Board of Directors

Personnel Department

Overseas Liaison Office:Bangkok, Thailand Tel: 308-2450

Employee Benefits Department

Establishment:

President

Human Resources Department

1951

Materials Control & Procurement Department

Paid in Capital:¥ 17,250 million

Executive Vice President

Stock listings:

Overseas Division

Main Clients:

Common stock-Tokyo, Osaka

Transfer Agent:
Statutory Auditors

Bank References:

The Mitsubishi Trust andBanking Corpora tion
Securities Department
4-5, Marunouchi 1-chome
Chiyoda-ku, Tokyo 100

Affiliate Liaison OfficeContracting Division

The Bank of Tokyo-Mitsubishi, Ltd.
The Mitsubishi Trust and Banking Corporation
The Dai-Ichi Kangyo Bank, Ltd.
The Industrial Bank of Japan, Limited
The Sanwa Bank, Limited
The Sumitomo Bank, Limited
The Fuji Bank, Limited

Hokkaido

Employees:
3,788

Safety & Quality Control Division

Engineering Division

Akita
TohokuNTT Project Division

Niigata
Hokuriku

Shinetsu

Information & Communications System Division

ChugokuKansaiKyushuShikoku

Tokai

Kantokita
Kantonaka
TOKY O
Kantominami

Head Office
BranchResearch & Development Center
Okinawa

Bangkok Liaison Office34

35

Corporate Directory
Nippon COMSYS Corporation
As of March 31,1997

Company Name
Consolidated Subsidiaries

Principal BusinessOkoshi Denken Co., Ltd.

Telecommunications engineeringand electrical engineering¥60 million

96.4 %

Tokyo Denwa Shisetsu Co., Ltd.

Design of telecommunications
facilities and civil engineering projects¥40 million

85.3

Major Non-Consolidated Subsidiaries
COMSYS Tusan Co., Ltd.

Sales of construction materials¥60 million

94

Nippo Kensetsu Kogyo Co., Ltd.

Civil engineering¥50 million

55

COMSYS Techno Co., Ltd.

Planning and consultation with regard
to information-processing technology¥50 million

100

COMSYS Business Service Co., Ltd.

Construction of telecommunications
facilities¥304 million

100

Construction of telecommunications
facilities¥54 million

35

Construction of telecommunications
facilities¥60 million

33

Technological consulting
and engineering services

B15,000 thousand

48

Thai COMSYS & Jackson Co., Ltd.

Technological consulting
and engineering services

B2,000 thousand

49

COMSYS Philippines, Inc.

Technological consulting
and engineering services

P3,125 thousand30

CMC Engineering SDN. BHD.

Technological consulting
and engineering services

RM500 thousand

59.2

Major Affiliates
Domestic:
Tokyo Tsuken Co., Ltd.

Nitto Tsuken Co., Ltd.

Overseas:
Thai Telecommunications
Engineering Co., Ltd.

Paid-in Capital

36

Percentage Owned (%)*This Company’s financial data is available on the Internet at URL http://www.comsys.co.jp/
Printed on paper cer tified as recycled by the Eco Mark Office of
the Japan Environment Association.

Nippon COMSYS Corporation
23-14, Takanawa 3-chome, Minato-ku, Tokyo 108, Japan
Telephone: 03-3448-7031

Printed in Japan