ANNUAL REPORT
2001
Fiscal Year Ended March 31, 2001

CHIYODA CORPORATIONCONTENTS
1 Profile
2 A Message from The Management
4 Review of Operations
International Markets
Domestic & General Industries Markets
Technology Outlook
9 Main Projects
10 Financial Section
30 Corporate Directory
31 Board of Directors and Executive Officers
Corporate Data

BUSINESS HIGHLIGHTS

RasGas Onshore Expansion
ProjectPDVSA National Refinery
Project

Ningbo Huadong LPG
Cavern Storage Terminal
Project

Chiyoda received an order from Ras Laffan
Liquefied Natural Gas Co., Ltd. II (RasGas II)
for the RasGas Onshore Expansion Project.
The plant is to be built by a joint venturewith Mitsui & Co., Ltd., of Japan, andSnamprogetti S.p.A of Italy. The contract
was signed April 1, 2001, at Doha, Qatar.

March 2001 saw an order from PDVSA,
Venezuela's national oil company, for
upgrading existing refinery facilities. In
October, Chiyoda formed a four-company
consortium to bid on the project, andsigned the contract on March 12, 2001.
The project is financed by an untied loan
from the Japan Bank for International
Cooperation and is the result of direct ties
between Japan and Venezuela.

On April 9, 2001, one million construction
man-hours safety ceremony was held for
LPG cavern storage terminal project inNingbo, China. The project, which is being
built for BP Huadong LPG Co., Ltd. is bp’s
first large scale EPC project in China.

PROFILE
For more than 50 years, Chiyoda Corporation has constantly evolved to meet the fast-changing needs of its
diverse customers around the world.
As an integrated engineering and construction company with a solid foundation in the hydrocarbon
processing industry, Chiyoda has leveraged its extensive experience and far-reaching global network to give it anunrivalled advantage in today’s challenging times.
The Company, committed to continued development and regeneration, recently brought its technologicaland engineering expertise to bear on such fields as nonferrous metal processing, environmental preservation
systems, pharmaceutical manufacturing, fine chemicals, food processing, automated manufacturing systems, andaerospace development.
The trust Chiyoda has earned over the past five decades, combined with its vast global network of personal
contacts and deep reservoir of know-how, make it the engineering company of choice for customers worldwide.

Tung Ting Gas LNG Terminal
Project

TPS-4 Project for Teijin
Polycarbonate Singapore

Konica TAC Film Factory

Groundbreaking ceremonies marked thestart of the Tung Ting Gas LNG Terminal
Project for Tung Ting Gas Corporation in
Taiwan. Chiyoda has signed an agreementwith Taiwan's CTCI Corporation to jointly
execute the project, which is scheduled forcompletion in 2005. The project is the firstoverseas LNG receiving terminal for
Chiyoda.

A ground-blessing ceremony held May 24,
2001, marked the start of construction of
the TPS-4 Project for Teijin Polycarbonate
Singapore Pte. Ltd., even though thepreceding TPS-3 Project was not yet
finished. Since winning the bid for the first
TPS project in 1998, Chiyoda has earned areputation for fast, high-quality work,
which led to continuous orders for the ongoing projects.

Groundbreaking ceremonies for Konica's
L-2 factory were held January 24, 2001 in
Kobe. The new factory will produce Tri
Acetyl-Cellulose (TAC) film for liquid
crystal displays. Chiyoda earned the trustof Konica with the on-time completion of
the L-1 factory, which led to the current
order.

CHIYODA CORPORATION 1

A MESSAGE FROM THE MANAGEMENT
Summary of Business Activities in FY2001
FY2001 was the first year of our New Restructuring Plan.
It was also the year in which we carried out financial
restructuring and launched the new business strategies that
put us on track for the future. In other words, it was a year inwhich we released all the energy we had stored up over theyears to execute business reforms and build a strong
springboard into the new century. It was a banner year in
Chiyoda history.
The New Restructuring Plan announced in November
2000 comprises the following principal strategies:

Nobuo Seki President and CEO

Dear valued stakeholders:
For five decades in the latter half of the 20th century,
Chiyoda made substantial contributions to the developmentof the global economy through its engineering, which
covered many sectors. Among them, the Company wasespecially active in the field of energy, such as petroleum andgas. The final several years of the 20th century imposed very
tough business conditions on Chiyoda, but the Company also
found there were opportunities for it to learn and to build afoundation from which to soar into the new century.
The key words that will characterize societies andeconomies in the 21st century are: Clean Energy, theEnvironment, Globalization, and IT (information technology).
These key words have also been consistent keystones of ouroperations. Energy- and environment-related projects are ourcore business domains, and we have achieved technologicaladvantages through our intense concentration in these twoareas as well. Furthermore, we continued to pursue theoptimization of systems throughout the Company, adopting
advanced information technologies and employing a global
viewpoint. This helped us execute our projects in a timely andprofessional manner despite the tough business environment,
and resulted in complete customer satisfaction.
In fact, we feel certain the Chiyoda tradition of
professionalism that has supported our efforts thus far will
be even more valued in the coming years.

2 CHIYODA CORPORATION

1. Place special emphasis on fields wherein Chiyoda holds a
leading position.
2. Offer high-quality services by stimulating Group companies
and strengthening their synergism.
3. Foster alliances with excellent companies as a step toward
creating a new business model.
4. Strengthen our financial base through financial
restructuring and reduction of fixed expenses.
Concerning new orders for the year, the plant
construction market — in the fields where Chiyoda has
special competence, such as liquefied natural gas (LNG),
petrochemicals, and pharmaceuticals — showed signs ofrecovery, reversing the past trends of stagnant capital
investment seen in the first half of FY2000. As a result,consolidated new orders for the year ending March 31, 2001,
were ¥81,112 million in the domestic market (a 14%
increase) and ¥58,300 million from international markets(a 90% increase), bringing orders received to a total of¥139,412 million.
Chiyoda also pursued strategic alliances during the year.
With an eye toward entering the international environmental
engineering market, we established the Environmental
Engineering Corporation, a joint venture with Ebara
Corporation, Toyo Engineering Corporation, and Mitsui &Co., Ltd. We also entered into an alliance with NKK
Corporation in the energy-related engineering field. Other
alliances included agreements with two overseas engineeringand construction contractors. One was with Consolidated
Contractors Company (CCC) of Greece, which is particularly
strong in Middle East markets. The other was CTCI
Corporation of Taiwan, whose strengths lie in Chinese andEast Asian markets. These alliances have already produced
solid results in the form of new joint orders.

Consummation of our financial restructuring was
especially important. We wrote off our entire accumulated
deficit and laid the foundation for a newborn Chiyoda. We
declare unequivocally that we have now established ahealthy, transparent financial base — even by international
accounting standards — through third-party capital interest
increases and special liability exemptions.
Our shareholders, the financial institutions with which wedeal, and our esteemed clients have pledged indispensable
support so we are determined to execute our New
Restructuring Plan as scheduled. We are sure that these
supporters trust in our history of achievement and in
Chiyoda's future prospects as a global engineering
constructor.

Prospects for FY2002 and the Future
The prospects for a continuing flow of new orders seembright indeed. As the LNG market revived, the Company
received a new order in April 2001 for an LNG plant from Ras
Laffan Liquefied Natural Gas Co., Ltd. II (RasGas II) of Qatar.
Last year, we received an order from this project for FEED
(Front End Engineering and Design) and this year the order
was for EPC (Engineering, Procurement, and Construction).
The many FEED projects Chiyoda has received in recent years
will certainly lead to more EPC orders in FY2002. Projects for
petrochemical plants such as ethylene and its derivatives inboth Asian and Middle Eastern markets are expected to
become more active. We are confident that the Company's
efforts in these markets will bear fruit in the near future.
In executing all our projects, Chiyoda takes the greatest
possible care in terms of HSE (Health, Safety, andEnvironment), while still meeting requirements for highquality and tight schedules. Thus, as always, we make every
effort to create total value for our clients.

On the other hand, the market demands new kinds ofservices from Chiyoda. Although the Company believes that
services under EPC lump-sum contracts continue to be aneffective business strategy, in order to offer higher values toclients, Chiyoda must devise a completely new style ofengineering that can be added to conventional EPC project
methods. A step in that direction is what we call EPCm (EPC
+ management). In achieving EPCm business, we will workwith the plant owners from the planning stage, providing
management services that help optimize operations
throughout the entire plant life-cycle. This will be achieved bymaking full use of our technological prowess, project
management expertise, and advanced IT systems. Chiyoda
will pour managerial resources into the realization of the
EPCm business model in order to continue to offer our clients
every higher value and this will result in our gaining a varietyof EPC business opportunities.
The Company will pursue a fresh concept of what defines
an engineering company in this new century. This will entail
providing a wide range of services through marketing, projectplanning, and execution to support of plant operation andmaintenance. Achievement will come from integrating
business expertise not only from our Group companies but
also from alliance partners, flexible responses to our clients'
wants and needs, and maximum use of our global network.
June 28, 2001

Nobuo Seki
President and CEO

We are also convinced that the tremendous shift to clean
energy, a major trend of the 21st century, offers Chiyoda
significant opportunities. As a leader in meeting the needs ofthe times, Chiyoda has always concentrated its efforts ondeveloping and improving energy- and environmental-related
technologies. From this firm foundation, in tandem with theabundant know-how the Company has accumulated inadvanced processing technologies for gas and LNG fields,
Chiyoda is well positioned to develop new businesses in thearea of energy and environmental technology.

CHIYODA CORPORATION 3

REVIEW OF OPERATIONSINTERNATIONAL MARKETS

Bird’s-eye viewof the Oman LNG
complex, Qalhat,
Oman

Overview of the International Markets
Overall, the world engineering market has not
yet shown sufficient signs of activity. However,Southeast Asian countries saw an accelerating
recovery from their economic crises, which began in
1997. International gas and oil prices have remainedat relatively high levels, and gas- and oil-producing
countries, Chiyoda's major clients, are enjoying thebenefits. Consequently, an increasing number ofprojects is being planned in both Southeast Asia andoil-producing countries. The major oil companies
seem vigorous, and their investment appears to be
increasing. These encouraging indications have
gradually caused positive reactions among regional
and international investors, and Chiyoda sees signsof an increase in business opportunities worldwide.
Although these signs have yet to show sufficientstrength, Chiyoda achieved its target for new
contracts during the fiscal year.

LNG (Liquefied Natural Gas) Sector
Chiyoda made a significant achievement incompleting the Oman LNG Complex, which boasts
the world's largest ever LNG production capacity of
3.3 million tons per year per train (MMTY).
Completion of the first LNG train required just 38
months, and was finished within the contractual
deadline in December 1999. The second LNG train
took 42 months and was completed in April 2000,
two weeks ahead of schedule. Thanks to ourachievement with the Oman LNG Complex,
Chiyoda's outstanding performance in total quality
control of health, safety, and environmental (HSE)concerns as well as in project management is now
well recognized throughout the LNG industry. In
addition, Chiyoda's reputation was strengthened
during fiscal 2001 by a series of new contracts for
Front End Engineering Design (FEED) and ProjectSpecification (PS) from various eminent LNG ventures.
The first FEED contract Chiyoda received in
FY2001 came in April 2000 from Pertamina/bp forthe grass-roots Tangguh LNG project located in
Irian-Jaya, Indonesia. We were then awarded a PS
contract for a Sakhalin LNG project in October 2000
by Shell Global Solutions International B.V. (ShellGSI) on behalf of Sakhalin Energy Investment
Company. The contract was for a challenging worldclass LNG project on Sakhalin Island, Russia, where
the client envisions application of the Shell Double
MR process. This project is especially significant
because it is the first PS contract Chiyoda has everreceived from Shell-GSI, the leading technology
provider in the LNG industry.
Another significant PS contract also came in
October 2000. It was for the Oman LNG 3rd Train,
an expansion of the well-known Oman LNG Project.
Apparently Chiyoda's excellent performance on theoriginal Oman LNG complex was a major reason
why we were awarded the PS contract for the third
train expansion from Shell-GSI.
Chiyoda's services in developing LNG projects are
not only for major well-established clients, but also
for new LNG ventures in emerging markets
worldwide. For example, in November 2000, Union
Fenosa Gas of Spain awarded Chiyoda a FEED
contract for two trains in an LNG complex located in
the port of Damietta in Egypt. Due to government
deregulation in Spain, Union Fenosa Gas S.A., one of
Spain's leading power generation companies, will be
an LNG plant owner as well as an LNG buyer. Egypt,
the site of the Union Fenosa project, is expected tobe the next LNG export country due to the recent
discovery of large gas reserves there. Experts say
Egypt's current proven natural gas reserve is 40
trillion cubic feet and its anticipated reserves are
estimated at more than 100 trillion cubic feet.
Situated on the Mediterranean coast, Egypt is ideallylocated to export LNG to European markets.
We expect to receive contracts for the EPC phaseof several LNG projects during this fiscal year.
Chiyoda will maintain its leadership position among
LNG contractors by
meticulous examinationof every phase of LNG
project development andrelentless improvementin our competitivenessthrough cost reduction
and technologicaladvances.
A view of CCR reforming units
constructed in a Turkmenbashi refinery

4 CHIYODA CORPORATION

Hydrocarbon & Chemicals Sector
Middle East
Chiyoda is engaged in several major projects in
the Middle East, which remains a major area of
operations for the Company. During the fiscal year,
one large-scale petrochemical project was
successfully completed, three months ahead ofschedule. The project, an ethylene oxide/ethylene
glycol (EO/EG) plant in Saudi Arabia, clearly
demonstrated Chiyoda's superior capabilities in theexecution of large-scale plant engineering andconstruction.
We are currently seeking more projects in theregion, particularly in the fields of ethylene and its
derivatives, fertilizers, and gas-oriented
petrochemical projects, which are booming there.
Southeast Asia and China
In Southeast Asia, Thai Olefins Co., Ltd. awarded
Chiyoda a contract for its olefins plant expansion
project. Chiyoda is collaborating on the project with
Kellogg Brown & Root, Inc. (KBR), which owns the
ethylene technology.
Chiyoda also completed a world-class ethylene
plant for ExxonMobil Asia Pacific Pte. Ltd. in
Singapore. The project was a joint venture with KBR.
Southeast Asia is gradually recovering from its
economic crises and signs are that petrochemical
and refinery projects in the region have become
more active recently.
In China, Chiyoda garnered four petrochemical
project contracts between 1999 and 2001. We are
currently engaged in five on-going projects in thatcountry, including an underground LPG storage
terminal for BP Ningbo Huadong LPG Co., Ltd.
Chiyoda successfully completed a 225,000 T/Y
purified terephthalic acid (PTA) plant for SINOPEC in
China. We were in charge of engineering,procurement, and construction supervision for the
project.
Latin America
Chiyoda, in a joint venture with three othercompanies, signed a lump-sum turnkey contract
with Petróleos de Venezuela S.A. (PDVSA) for arefinery modernization project at PDVSA's Puerto La
Cruz refinery in Venezuela.
Several large projects are being planned in the
petroleum, gas, and petrochemical sectors in Latin
America, especially Mexico and Venezuela. Chiyoda
will actively pursue these projects.

Central Asia and Africa
Chiyoda completed two major projects inCentral Asia during the fiscal year. One was the
750,000 T/Y CCR reformer project for the Ministryof Oil and Gas Industries and Mineral Resources of
Turkmenistan. The other was a utility modernization
project for the ethylene plant of the state concern“Azerchimia” in Azerbaijan. These projects were thefirst EPC lump-sum turnkey projects financed by theJapan Bank for International Cooperation in those
two countries.
Oil-rich Central Asia represents important
markets to Chiyoda. To help secure our position
there, Chiyoda did two feasibility studies in antipollution fields for Azerbaijan.
Africa also offers important future markets.
Libya, for example, is an oil-rich nation, and Chiyoda
recently completed a feasibility study entitled "Studyon Effective Utilization of Natural Gas Resources in
Libya."
Outlook and Strategies
Fiscal 2001 saw the completion of Chiyoda's
financial and technical restructuring, and we also
met our objectives in terms of new contracts. Basedon these attainments, we are confident that
Chiyoda will achieve our new contract targets infiscal 2002 as well. Our confidence stems from ourselection and concentration approach, wherein weconcentrate on the projects in which Chiyoda candifferentiate itself from other contractors. The
Company will also continue to seek collaboration
successes with partners such as KBR for olefin
technology, CTCI in East Asia, CCC in the Middle
East, and Larsen & Toubro Limited in India. We arecommitted to the exploration of prosperous
markets, especially in Southeast Asia, the Middle
East, and Latin America. In addition, we will widen
our prospects by cultivating other potential markets.

A view of theprocess units areaof the Singapore
Olefins Project

CHIYODA CORPORATION 5

DOMESTIC & GENERAL
INDUSTRIES MARKETS

Gas & PowerLNG consumption has grown as a result of its
superiority in terms of environmental programs, andas a result, the Company received new orders forreceiving LNG-related facilities from major electric
power and gas companies. Also, Chiyoda isparticipating in a joint venture that received an orderfor the No.1 and No.2 increments of the Fukushima
Terminal from Japan LPG Storage Co., Ltd.

Pharmaceuticals & Medical

In August 2001,
Chiyoda completed
the expansion ofvaporization
facilities for the
LNG receiving
terminal at Futtsu
Power Plant ofTokyo ElectricPower Co., Inc.,
where Chiyoda has
been engaged inengineering andconstruction since1985 when weconstructed its firstgrass-roots
facilities.

In October 2000,
Chiyodacompleted a
research facility inOsaka for theJapan Health
ScienceFoundation, astate-of-the-art
storage bank forhuman and animalcells and genes.

Overview of the Domestic Markets
The domestic hydrocarbon sector showed basic
recovery trends overall. The Company achieved
substantial orders for equipment and facilities tohelp meet environmental regulations in the energy
sector as well as for pharmaceutical facilities andchemical plants, among others.

In the pharmaceuticals sector, Chiyoda was able
to capitalized upon our reputation for reliable
technology and upon our track record of successfulprojects to garner orders for new projects andexpansion projects in the field of pharmaceuticalfacilities. The new orders included a bulk
pharmaceutical multipurpose plant for Central GlassCo., Ltd. and a construction project for a
microbiological laboratory building for Meiji Seika
Kaisha, Ltd.

General Manufacturing
Petroleum Refining
In the domestic petroleum industry, excessive
production capacity has caused a continuing severebusiness environment. Nevertheless, rationalizationand improvements meant to strengthen
competitiveness; capital investment to boost energy
efficiency; and new and revamped equipment tohelp meet environmental regulations led to neworders for Chiyoda. Noteworthy new orders included
an ultra-deep desulfurization unit for gas oil for
Taiyo Oil Co., Ltd., and a flue gas de-SOx processunit employing our Catalytic SOx-Oxidation (CASOX)
process for Koa Oil Co., Ltd.

Petrochemicals & Chemicals
In order to overcome increasing international
competition, the domestic petrochemical industry
conducted a complete restructuring andrealignment, including integration andintensification of the Ethylene Center. In thisenvironment, Chiyoda received
new orders for a Bisphenol-A
production plant from
Mitsubishi Chemical
Corporation and an expansion
project for polycarbonate resin
production plant (No.3) for
Teijin Polycarbonate Singapore
Pte. Ltd.

6 CHIYODA CORPORATIONIn the general manufacturing sector, both
semiconductors and liquid crystal display (LCD)
industries showed substantial growth during thisfiscal year. Against this background, Chiyoda
continued to obtain new IT-related orders, including
a triacetyl-cellulose (TAC) film manufacturing plant(TAC films are a key material for polarizing filters
used in LCD panels) and a factory for X-ray films
used for medical purposes for Konica Corporation.
In addition, we received an order for a chocolate
factory from Fuji Oil Co., Ltd.

Automotive
In the North American market, which set records
for production and sales in the first half, Chiyoda
became the first Japanese company to receive anorder for overall management consulting operations
from a local North American company. The project isconstruction of an assembly plant for the Hummer II
project, a joint venture between General Motors(GM) and AM General, which makes military Jeeps.
We also completed the GMT-355 line plan for thetie-up project between Isuzu and the GM Truck
Division. From the Chrysler Division of Daimler
Chrysler, the Company received its first order for an
innovative conceptual study of the 2004 projectplan.
In March 2001, Chiyoda announced theestablishment of an independent affiliated company.

REVIEW OF OPERATIONS

It will be responsible for the joint venture with
Project Advisors International, Inc. of the UnitedStates and is called Chiyoda & PAC Co., Ltd.

Space Development
Since 1996, Chiyoda has been involved in thedevelopment of the International Space Station (ISS)for the National Space Development Agency ofJapan (NASDA). In fiscal 2000, Chiyoda executed
two major contracts to develop experimental
hardware for the Japan Experiment Module (JEM)
for the ISS; both were in their final stages. In
addition, Chiyoda received two new contracts from
NASDA for development of ISS hardware. The JEM
will be launched and put into operation in 2004.
The module will then be operated and used for 10
to 15 years, supported by the continuing
development of new hardware. Furthermore,
NASDA plans to open the JEM up to commercial
use. Therefore, the ISS-related market has begun ona firm basis, thanks to NASDA's initiative, andshould grow significantly with commercial use andthe involvement of the private sector.

Prospects and Strategies
In the chemical sector, we expect moreinvestments in comparatively large overseas facilities
by our Japanese customers. And in the fine chemicaland pharmaceutical sectors, investments in domestic
equipment and facilities seems to be improving.
Therefore, we anticipate substantial new orders inthese sectors.
In the domestic energy sector, the shift tocleaner energy caused by environmental concerns
and the need for equipment and facilities to meetenvironmental regulations serve to stimulate
investment in new facilities. Here, our track recordand proven technical prowess are tools we can use
in aggressive marketing activities aimed at procuring
new orders.

TECHNOLOGY OUTLOOKAdvanced Engineering & Solutions Service
Chiyoda inaugurated the Advanced Engineeringand Solutions Service (AES) Business Division in
August 2000. The AES Business Division is charged
with organically integrating engineering specialty
technologies such as Applied Mechanics & Materials
Engineering, Risk & Reliability Engineering,
Advanced Control & Simulation Engineering, andPlant IT Solutions Engineering, and creating a unique
Chiyoda service that provides advanced solutions fora plant's total life cycle. With AES, Chiyoda canmore effectively meet our clients' needs as anengineering solutions provider.

Integrated Project Engineering Systems(i-Plant 21™)
The successful application of information
technology (IT) is crucial for successful Project
Engineering execution in today’s highly competitivemarket. Chiyoda has established an IT platform
named i-Plant 21™ for use in the increasinglycompetitive EPC business.
i-Plant 21™ is an integrated and intelligent
project engineering system for use throughout aproject’s life cycle. It provides an uniform platform
to realize high-quality, low-cost project engineering
within a limited schedule.
The following figure shows the concept of
i-Plant 21™, which consists of seven major subsystems covering from front-end engineering toplant completion. It is electronically integrated andutilizes standardized data and work-flow.
Chiyoda's Integrated Project Engineering Systems

i-PLANT 21™
intelligent and integrated

i-DMS

i-FRONT

Project Document
Management

Front End Engineering

ENGINEERING

i-3D

i-ENG
Engineering Database

Integrated 3D Plant
DesignPROCUREMENTCONSTRUCTIONIn April 2001, Chiyoda completed Bayer’s researchcomplex in Kyoto. It performs a core function in Bayer’s
world research strategy.

i-PMS

i-MAT

i-FIELD

Project Management

Material Management

Construction Management

CHIYODA CORPORATION 7

REVIEW OF OPERATIONSTechnology Alliances & Development
In fiscal 2001, Chiyoda made several majorachievements in terms of its technology portfolio:
Polyolefins
Chiyoda was appointed one of bp’s licensing
agents to promote their renowned gas phasepolyethylene and polypropylene technology(collectively called the Innovene Process) in thedesignated regions. We are the only Japaneseengineering company to receive such a licensing
appointment from bp. This appointment adds to our
long-standing position as one of bp's core
contractors for EPC work, and proves that our manysuccessful projects with bp have led the firm torecognize Chiyoda's technological capabilities.
Caprolactam
DSM Fibre Intermediates B.V. of the Netherlands
established a business alliance with Chiyoda for its
caprolactam processes. In this alliance, Chiyoda willassist DSM in developing a new process byrendering the engineering services, as well as
collaborating on the execution of projects based on
the process. Our track record of successful projects
during our long-standing relationship with DSM led
to recognition of Chiyoda's technological capabilities
and development of this collaborative effort.

Chiyoda isconstructing a fluegas desulfurization
plant utilizing its
CT-121 technology
for Kobe Steel,Ltd.'s Kobe power
station, which will
have 700MW2units. Whencompleted in April
2004, the power
station will belargest coal-fired
power station in
Japan.

Flue Gas Desulfurization
Chiyoda focuses on the field of environmental
protection, which has now become of global
importance. As a concerned corporate citizen,
Chiyoda has a long history of developing
technologies to improve environmental friendliness.
In this field, we have commercialized a technology
called CT-121 — a limestone-gypsum wet processthat removes SOx from flue gases of boilers,
incinerators, and other such furnaces.
CT-121 is appreciated by our clients for its
superior performance, and has been installed in

8 CHIYODA CORPORATION

more than 30 projects worldwide.
Furthermore, with the mounting environmental
concern in the United States, Chiyoda has granted
an exclusive license to Black & Veatch Corporation
to promote, engineer, and construct CT-121
facilities in Canada and the U.S.
In addition to CT-121, Chiyoda developed
another effective flue gas desulfurization technology
called Catalytic SOx-Oxidation (CASOX). It wasdeveloped in collaboration with Hokuriku ElectricPower Company, and uses a catalytic reaction toremove SOx. The design is simple and the cost morethan reasonable, giving CASOX definite competitive
advantages. The first commercial application of thistechnology should go on line around the end of
2002.
Advanced High-Temperature Air Combustion
Technology for Steam Reforming Process
Development of an advanced steam reformer
incorporating high-temperature air combustion
technology is one of the project targets in thenational project (officially called HiCOT project) ofJapan subsidized by the Ministry of Economy, Tradeand Industry (METI), entrusted by New Energy andIndustrial Technology Development Organization(NEDO), and re-entrusted by Energy Conservation
Center, Japan (ECCJ). The project is being carriedout jointly by Chiyoda and Nippon Furnace Kogyo
Kaisha, Ltd. from fiscal year 1999 to 2003.
The research is expected to clarify the effect ofhigh-temperature air combustion and heat transfer
characteristics on a steam reformer. Burner location,
tube pitch, and other aspects of geometric design
will be the thrust of study. In addition, these data
will be summarized in a database and the control
factors of those characteristics will be evaluated.
Based on such data and evaluation, a practicaldesign method for the steam reformer, including
performance estimation and control technology, willbe established through computer simulation.
Superior Engineering Prizes
The Engineering Advancement Association ofJapan (ENAA) awarded the 20th Engineering
Achievement Award, which went to our projectteam, for development of the Gresik copper smelter
and refinery complex project in Indonesia. ENAA
also awarded a prize to the engineering team, which
included client and Chiyoda personnel, thatdeveloped the world’s first commercial plant for 13C
methane production utilizing LNG cold potential.

MAIN PROJECTS(April 2000 — March 2001)

International Markets
ClientProject

Location

New Contracts

Pertamina/bp
Shell Global Solutions International B.V. (Shell-GSI)
Shell Global Solutions International B.V. (Shell-GSI)
Union Fenosa Gas S.A.
Thai Olefins Co., Ltd.
Petróleos de Venezuela S.A. (PDVSA)
China National Blue Star Chemical Cleaning Corp.
————
————
Saudi Fertilizer Company
New Energy & Industrial Technology Development
Organization/Myanmar Petrochemical Enterprize

LNG Plant (FEED)LNG Plant (Project Specification)
LNG Plant (Project Specification)
LNG Plant (FEED)
Ethylene Plant
Refinery Modernization
Bisphenol A Plant
Petrochemical Plant
Petrochemical Plant
Debottlenecking of Urea Plant (Basic Engineering)

Indonesia
RussiaOman
Egypt
ThailandVenezuela
China
China
China
Saudi Arabia

Fertilizer Plant (Revamp)

Myanmar

Backlog of Contracts

P.T. Badak NGL
Teijin Polycarbonate Singapore Pte. Ltd.
BP Ninbo Huandong LPG Co., Ltd.

LNG Plant (DCS Retrofit)
Polycarbonate Plant No. 3
LPG Underground Storage Terminal

Indonesia
Singapore
China

Projects Completed

Oman LNG L.L.C.
Ras Laffan Liquefied Natural Gas Co., Ltd.
Abu Dhabi Gas Liquefaction Co., Ltd.
ExxonMobil Asia Pacific Pte. Ltd.
Shell Eastern Petroleum Pte. Ltd. (SEPL)SINOPEC International
State Concern “Azerchimia”
Ministry of Oil and Gas Industry andMineral Resources of Turkmenistan
Eastern Petrochemical Company (SHARQ)
Qatar Fuel Additives Co., Ltd. (QAFAC)
Teijin Polycarbonate Singapore Pte. Ltd.

LNG Complex
LNG Plant (FEED)
LP & BOG Capture Maximization (FEED)
Ethylene Plant
Condensate Spliter Unit
PTA Plant
Utility Modernization Project for Ethylene Plant

Oman
Qatar
U.A.E.
Singapore
Singapore
China
Azerbaijan

Hydrotreater and CCR Plant

Turkmenistan

Ethylene Glycol Plant
Methanol/MTBE Complex
Polycarbonate Resin Plant No. 2

Saudi Arabia
Qatar
Singapore

Domestic & General Industries Markets
ClientProject

Location

Taiyo Oil Co., Ltd.
Koa Oil Co., Ltd.

Ehime
Osaka

Japan LPG Storage Co., Ltd.
Mitsubishi Chemical Corp.
Fuji Oil Co., Ltd.
Shin-Higashi Nihon Sugar Manufacturing Corp.
Central Glass Co., Ltd.
Meiji Seika Kaisha, Ltd.
Konica Corp.
Konica Corp.
Kosei Kigyo
Nippon Mitsubishi Oil Corp.
Asahi Glass Company
Teijin Limited

Deep Hydrodesulfurization Plant
Sulphur Recovery Unit (SRU), Hydrogen Production
Unit (HPU), Catalyst Flue Gas Desulfurization
Unit (Cat. FGD)LPG Storage Terminal
Bisphenol A Plant
Chocolate Factory
Sugar Factory Revamping
Bulk Pharmaceutical Plant
Laboratory
TAC Film Products Plant
Medical Film Plant
Co-generation Plant with Heavy Duty Oil
Installation of Discharger for Coal Storage Terminal
Laboratory
Health Care Products Factory (Expansion)

Backlog of Contracts

The Okinawa Electric Power Co., Inc.
The Tokyo Electric Power Co., Inc.
The Tokyo Electric Power Co., Inc.
The Tokyo Electric Power Co., Inc.
Toho Gas Co., Ltd.
Kobe Steel, Ltd.
Kobe Steel, Ltd.
The Kansai Electric Power Co., Inc.
Japan Nuclear Fuel Limited
Japan Nuclear Fuel Limited
Kaihatsu Denki, Co., Ltd.
Mie Prefectural Government/Fuji Electric Co., Ltd.
Fresenius Medical Care Japan K.K.
Bayer Yakuhin, Ltd.
Nippon Shinyaku Co., Ltd.
Fujisawa Pharmaceutical Co., Ltd.
Oriental Land Co., Ltd.

Flue Gas Desulfurization Plant
LNG Process Piping work
LNG Facilities Controll System for Disaster Prevention
Expansion of LNG Facilities
LNG Process Piping Work
Flue Gas Desulfurization Plant (No. 1)
Flue Gas Desulfurization Plant (No. 2)
Flue Gas Desulfurization Plant
Vessels for Nuclear Fuel Reprocessing Plant
Utility Facilities
Ash Handling Facility
RDF Fired Power Plant
CAPD Bags Manufacturing Plant
Laboratory
Solid Dosage Plant
Finishing Facility
5 Ride-attractions for Theme Park

Okinawa
Chiba
Chiba
Kanagawa
Aichi
Hyogo
Hyogo
Kyoto
Aomori
Aomori
Kanagawa
Mie
Fukuoka
Kyoto
Kanagawa
ToyamaChiba

Projects Completed

Kansai International Airport Co., Ltd.
The Tokyo Electric Power Co., Inc.
Hokuriku Electric Power Company
Tokyo Gas Co., Ltd.
Konica Corp.
Department of Foreign Affairs and International Trade
Japan Health Science Foundation
Jyogashima Suisan Co., Ltd.

Expansion of Hydrant Facility
Reconstruction for LNG Facilities
Water Treatment Facility
LNG Process Piping Work
Enhancing of TAC Film Products Plant
Canadian Embassy Staff Quarters
Laboratory
Seafood Processing Factory

Osaka
Chiba
Fukui
Kanagawa
Hyogo
Tokyo
Osaka
Kanagawa

New Contracts

NagasakiFukuoka
Ibaragi
Chiba
Yamaguchi
Kanagawa
Hyogo
Yamanashi
Hokkaido
Yamaguchi
Chiba and Kashima
Yamaguchi

CHIYODA CORPORATION 9

FINANCIAL SECTIONCONSOLIDATED FIVE-YEAR FINANCIAL SUMMARY

Years ended March 31

Millions of Yen
2001

2000

1999

1998

1997

¥ 168,963¥ 312,234¥ 303,476¥ 445,350

For the Year:
Construction contracts ...................................................... ¥ 128,665
Cost of Construction contracts ..........................................

131,240

154,112308,703329,446

478,031

Income (loss) before income taxes and minority interests ...

(3,357)

1,553(10,534)(49,796)(50,305)

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

(4,607)698(11,623)(51,795)(53,320)

Total assets ....................................................................... ¥ 114,652¥ 153,099¥ 213,920¥ 257,746¥ 350,537

At Year-End:Total shareholders' equity..................................................

15,023

8,181

6,208

5,931

57,761

Working capital .................................................................

2,241(19,594)(22,942)(29,624)

20,945Current ratio (%)...............................................................

102.6

84.5

87.7

87.4

107.6

Long-term debt .................................................................

11,346

12,545

13,518

7,569

8,401

Per Common Share (Yen):
Net income (loss) ............................................................... ¥(20)

Shareholders' equity ..........................................................

81

¥

33

3

¥

(58)
25

¥

(265)
30

¥

(273)
296

Number of shares outstanding* (thousands)...................... ¥ 185,429

248,357

248,357

195,224

195,224

Other Statistics:* At year-end

10 CHIYODA CORPORATIONCONSOLIDATED FINANCIAL REVIEW

Operating Results
In fiscal 2001, ended March 31, 2001, revenues fromconstruction contracts on a consolidated basis totaled¥128,665 million (US$1,038 million), a decrease of 23.9%
from the previous year.
The cost of construction contracts decreased by 14.8%,
to ¥131,240 million (US$1,058 million).
Selling, general and administrative expenses decreased by¥3,745 million, to ¥11,259 million (US$908 million) throughthe reduction of fixed expenses.
Other income increased by ¥8,771 million, to ¥10,477
million (US$84 million) due primarily to gains on the
discharge of liabilities.
As a result, the loss before taxes and minority interests
was ¥3,357 million (US$27 million), down from an income of¥1,553 million (US$12.5 million) in the previous year, and the
net loss per common share amounted to ¥20 (US$0.16). In
light of this performance, the Company decided to forgo thepayment of dividends for fiscal 2001.
During the year, the Company was awarded a total of¥139,412 million (US$1,124 million) in contracts.
International contracts accounted for ¥58,300 million(US$470 million), or 41.8% of the total, with domestic
contracts making up the remaining ¥81,112 million (US$654
million). The backlog of contracts as of March 31, 2001,
stood at ¥164,250 million (US$1,325 million), with domestic
contracts accounting for ¥108,580 million (US$876 million) of
the total and international contracts for ¥55,669 million(US$449 million).

Financial Position
As of March 31, 2001, total assets amounted to¥114,652 million (US$925 million), ¥38,447 million lower
than those of the previous year. This decline was a ¥19,436
million fall in total current assets, ¥5,411 million fall in net
property, plant and equipment, and ¥13,600 million fall in
total investment and other assets. The fall in total current

assets was due mainly to liquidation of marketable securities.
Total investments and other assets decreased by ¥13,600
million to ¥19,464 million (US$157 million), mainly from adecrease in long-term receivables and long-term loans.
On the other side of the balance sheet, total current
liabilities decreased by ¥41,271 million, to ¥85,452 million(US$689 million), mainly because of reductions in short-termbank loans. As a result, the current ratio was up from theprevious fiscal year-end, to 102.6%.
Total shareholders’ equity rose by ¥6,842 million, to¥15,023 million (US$121 million). The shareholder’s equity
ratio was 13.1%, up from a year earlier. The accumulated
deficit as of March this year was entirely written off in June,
according to a resolution at the shareholders’ meeting, andoffset with the additional paid-in capital, a part of theshareholders’ equity.

Cash FlowsNet cash used in operating activities totaled ¥15,398
million (US$124 million), comprising ¥4,607 million (US$37
million) in net loss and ¥14,277 million (US$115 million) in
outflows from non-cash adjustments, and ¥3,486 million(US$28 million) provided by net changes in operating assets
and liabilities.
Net cash provided by investing activities amounted to¥31,446 million (US$254 million), up ¥10,730 million, due
primarily to proceeds from sales of investment securities of¥22,635 million (US$183 million).
Net cash used in financing activities totaled ¥16,082
million (US$130 million), comprising cash outflows for the
repayment of short-term bank loans and the repayment oflong-term debt, which offset inflows from proceeds fromlong-term debt and the issuance of common stock.
As a result, cash and cash equivalents, end of year,
increased by ¥627 million, to ¥33,913 million (US$273
million).

CHIYODA CORPORATION 11

CONSOLIDATED BALANCE SHEETS
Chiyoda Corporation and Consolidated Subsidiaries
Years Ended March 31, 2001 and 2000

Thousands of
U.S. Dollars(Note 1)ASSETS
Millions of Yen
2001

2000

2001

¥ 33,286$ 273,492

CURRENT ASSETS:
Cash and cash equivalents ...................................................................................... ¥ 33,913
Marketable securities (Note 5).................................................................................

25,321

Short-term investments...........................................................................................

1,731

1,460

13,960Notes and accounts receivable — trade (Notes 3 and 8) ..........................................

19,312

22,867

155,742

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

(148)

(182)

(1,194)

Costs and estimated earnings on long-term construction contracts (Note 4)............

12,9204,887

104,194

Costs of construction contracts in process (Note 4) .................................................

10,506

12,00584,726

Prepaid expenses and other (Notes 3, 7 and 8)........................................................

9,459

7,485

76,282

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

87,693

107,129707,202

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

2,703

3,937

21,798

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

6,609

10,07953,298

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

8,838

15,267

71,274

PROPERTY, PLANT AND EQUIPMENT (Note 8):

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

1

26

8

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

18,151

29,309146,378

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

(10,656)(16,403)(85,935)

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

7,495

12,90660,443

2,504

2,295

20,194INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 5) .................................................................................
Investments in and advances to unconsolidated subsidiaries andassociated companies (Notes 6 and 7).....................................................................

4,689

4,164

37,814Long-term loans .....................................................................................................

26

3,761

210

Long-term receivables (Note 7) ...............................................................................

13,526

17,403109,080

Other investments ..................................................................................................

5,995

6,843

48,347

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

(7,276)(2,319)(58,677)

Foreign currency translation adjustments ................................................................
Total investments and other assets..................................................................

917
19,46433,064

156,968

TOTAL....................................................................................................................... ¥ 114,652¥ 153,099$ 924,613

See notes to consolidated financial statements.

12 CHIYODA CORPORATION

Thousands of
U.S. Dollars(Note 1)

LIABILITIES AND SHAREHOLDERS' EQUITY
Millions of Yen
2001

2000

2001

CURRENT LIABILITIES:¥ 68,927$ 203,484

Current portion of long-term debt (Notes 8 and 11) ...............................................

Short-term bank loans (Notes 8 and 11).................................................................. ¥ 25,232
720

2,472

5,806

Notes and accounts payable — trade (Note 11) ......................................................

42,03836,596

339,016

Advance receipts on construction contracts ............................................................

8,269

9,588

66,685

Liability for financial support to subsidiaries ............................................................

1,000

Accrued expenses and other ...................................................................................

9,193

8,140

74,138

Total current liabilities .....................................................................................

85,452

126,723

689,129

Long-term debt (Notes 8 and 11) ............................................................................

11,346

12,54591,500Liability for retirement benefits (Note 9) ..................................................................

2,330

5,168

18,790

Other liabilities........................................................................................................

63

80

509

Total non-current liabilities..............................................................................

13,73917,793

110,799

MINORITY INTERESTS..............................................................................................

438

402

3,532

NON-CURRENT LIABILITIES:CONTINGENT LIABILITIES (Notes 3 and 14)
SHAREHOLDERS' EQUITY (Note 10):
Common stock, ¥50 par value —authorized, 650,000 thousand shares in 2001 and 780,000 thousand shares in 2000;
issued and outstanding, 185,429 thousand shares in 2001
and 248,357 thousand shares in 2000 ...................................................................

12,02820,38597,000Additional paid-in capital ........................................................................................

29,47323,654

237,685

Accumulated deficit ................................................................................................

(26,289)(35,858)(212,008)

Foreign currency translation adjustments ................................................................

(178)(1,435)

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

15,034

Treasury stock — at cost .........................................................................................

(11)

8,181

121,242

Total shareholders' equity ...............................................................................

15,023

8,181

121,153

TOTAL....................................................................................................................... ¥ 114,652¥ 153,099$ 924,613(89)

CHIYODA CORPORATION 13

CONSOLIDATED STATEMENTS OF OPERATIONS
Chiyoda Corporation and Consolidated Subsidiaries
Years Ended March 31, 2001 and 2000

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2001

CONSTRUCTION CONTRACTS (Notes 3 and 4)......................................................... ¥ 128,665

2000

2001

¥ 168,963$ 1,037,621

COST OF CONSTRUCTION CONTRACTS (Note 4) ....................................................

131,240

154,112

1,058,387

Gross profit (loss) ............................................................................................

(2,575)

14,851(20,766)

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 13)..........................

11,25915,00490,799Operating loss.................................................................................................

(13,834)(153)(111,565)Interest and dividend income (Note 3).....................................................................

1,149

1,236

9,266

(1,556)(12,589)

OTHER INCOME (EXPENSES):Interest expense......................................................................................................

(1,561)Gain on discharge of liabilities (Note 11) .................................................................

19,778Gain (loss) on sales of marketable and investment securities ...................................

(2,295)

159,500
4,962

Loss on devaluation of marketable securities ...........................................................

(18,508)(1,630)Equity in earnings of associated companies .............................................................

2,829

791

22,815

Foreign exchange gain (loss) ...................................................................................

673

(414)

5,427

Amortization of negative goodwill ..........................................................................

48

186

387

Reversal of allowance for financial support to subsidiaries .......................................

1,000

1,474

8,065

Additional retirement benefits paid to employees ...................................................

(2,847)(2,639)(22,960)

Provision for doubtful accounts...............................................................................

(5,027)(1,043)(40,540)

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

(2,019)(210)(16,282)

Other — net...........................................................................................................

(1,251)

163(10,089)

Other income — net .......................................................................................

10,477

1,706

84,492

INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS .................

(3,357)

1,553(27,073)

Current...................................................................................................................

1,220

756

9,839

Deferred .................................................................................................................

(16)

87

(130)

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

1,204

843

9,709

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

(46)

(12)

(371)

698

$ (37,153)

Gain on liquidation of subsidiaries ..........................................................................

386

INCOME TAXES (Note 12):NET INCOME (LOSS) ................................................................................................ ¥ (4,607)¥

Yen

NET INCOME (LOSS) PER COMMON SHARE (Note 2) ............................................. ¥See notes to consolidated financial statements.

14 CHIYODA CORPORATION(20)

U.S. Dollars

¥

3

$

(0.16)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Chiyoda Corporation and Consolidated Subsidiaries
Years Ended March 31, 2001 and 2000

BALANCE, APRIL 1, 1999.........................................

Thousands
Shares ofCommonStockCommonStockMillions of Yen
Additional
Paid-inAccumulated
CapitalDeficit248,357¥ 20,385¥ 23,654

Foreign
Currency
Translation
Adjustments

TreasuryStock¥ (37,831)

Adjustment of deficit for:
Adoption of deferred tax accounting method ....

348

Newly consolidated subsidiaries .........................

(57)

Liquidation of consolidated subsidiaries .............

150

Application of equity method ............................

840

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

698

Bonuses to directors...............................................

(6)

BALANCE, MARCH 31, 2000 ...................................

248,357

20,38523,654

Reverse stock split (Note 10)................................... (124,178)(14,176)

14,176

Transfer to deficit (Note 10) ...................................
Issuance of common stock (Note 10)......................

(14,176)
61,2505,819(35,858)
14,176

5,819

Net loss..................................................................

(4,607)

Increase in treasury stock .......................................

¥ (11)

Foreign currency translation adjustments................
BALANCE, MARCH 31, 2001 ...................................

¥ (178)
185,429¥ 12,028¥ 29,473¥ (26,289)¥ (178)¥ (11)

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

Additional
Paid-in
CapitalAccumulated
Deficit

BALANCE, MARCH 31, 2000 ...................................

$ 164,396$ 190,758$(289,178)

Reverse stock split (Note 10)...................................

(114,323)

Transfer to deficit (Note 10) ...................................
Issuance of common stock (Note 10)......................

114,323

46,927Net loss..................................................................

(37,153)

Increase in treasury stock .......................................

$ (89)

Foreign currency translation adjustments................
BALANCE, MARCH 31, 2001 ...................................

TreasuryStock114,323(114,323)

46,927

Foreign
Currency
Translation
Adjustments$(1,435)$ 97,000$ 237,685$(212,008)$(1,435)$ (89)

See notes to consolidated financial statements.

CHIYODA CORPORATION 15

CONSOLIDATED STATEMENTS OF CASH FLOWS
Chiyoda Corporation and Consolidated Subsidiaries
Years Ended March 31, 2001 and 2000

Thousands of
U.S. Dollars(Note 1)Millions of Yen
2001

OPERATING ACTIVITIES:
Income (loss) before income taxes and minority interests........................................... ¥ (3,357)
Adjustment for:
Income taxes paid.................................................................................................
(847)
Depreciation and amortization..............................................................................
1,751
Provision for (reversal of) allowance for doubtful
accounts—net .................................................................................................
4,923
Reversal of retirement benefits—net.....................................................................
(2,935)
Reversal of allowance for financial support tosubsidiaries ......................................................................................................
(1,000)Loss (gain) on sales of marketable and investment
securities—net .................................................................................................
2,295
Loss on devaluation of marketable securities.........................................................
Loss on devaluation of property, plant and equipment..........................................
2,019
Gain on discharge of liabilities .............................................................................. (19,778)
Foreign exchange (gain) loss—net ........................................................................
(245)
Bonuses to directors .............................................................................................
Equity in earnings of associated companies...........................................................
(2,829)Changes in operating assets and liabilities:(Increase) decrease in notes and accounts receivable and costs andestimated earnings on long-term construction contracts.................................
(4,478)Decrease in costs of construction contracts in process ......................................
1,499
Decrease in interest and dividend receivable.....................................................
2,342
Increase (decrease) in trade notes and accounts payable ..................................
5,442
Decrease in advance receipts on construction contracts....................................
(1,319)Other—net...........................................................................................................
1,119

2000

¥

1,553

2001

$

(27,073)

(604)
2,134

(6,831)
14,121(4,788)(1,784)39,702(23,669)(1,681)(8,065)(4,962)
1,630
210

18,50816,282(159,500)(1,976)

379
(6)
(791)

(22,815)

19,0306,206
432(23,068)(18,628)8,214(36,113)
12,08918,88743,887(10,637)
9,025

Total adjustments ........................................................................................

(12,041)(18,077)(97,105)

Net cash used in operating activities ............................................................

(15,398)(16,524)(124,178)

INVESTING ACTIVITIES:
Proceeds from sales of marketable securities .............................................................
Proceeds from sales of investment securities..............................................................
Purchases of property, plant and equipment .............................................................
Proceeds from sales of property, plant and equipment ..............................................
Proceeds from collections of long-term receivables....................................................
Other—net ...............................................................................................................

22,635
(213)
2,528
7,337
(841)

17,392734(1,101)
1,300
2,391

182,540(1,718)20,387
59,169(6,781)

Net cash provided by investing activities ......................................................

31,446

20,716

253,597

FINANCING ACTIVITIES:Net decrease in short-term bank loans ......................................................................
Proceeds from long-term debt...................................................................................
Repayments of long-term debt..................................................................................
Proceeds from issuance of common stock .................................................................
Other—net ...............................................................................................................

(34,903)
10,050(2,864)
11,638(3)(15,199)
2,437(4,621)(85)(281,475)
81,048(23,097)
93,854(24)

Net cash used in financing activities......................................................................

(16,082)(17,468)(129,694)

FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS

661

(967)

5,331

CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED SUBSIDIARIES,BEGINNING OF YEAR .................................................................................................

1,026

CASH AND CASH EQUIVALENTS OF EXCLUSION OF CONSOLIDATED SUBSIDIARIES,BEGINNING OF YEAR ...................................................................................................

(853)

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

627(14,070)

5,056

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

33,28647,356

268,436

CASH AND CASH EQUIVALENTS, END OF YEAR...................................................... ¥ 33,913¥ 33,286

See notes to consolidated financial statements.

16 CHIYODA CORPORATION$

273,492

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Chiyoda Corporation and Consolidated Subsidiaries
Years Ended March 31, 2001 and 2000

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in theJapanese Securities and Exchange Law and its related accounting regulations, and in conformity with accounting principles andpractices generally accepted in Japan, which are different in certain respects as to application and disclosure requirements ofInternational Accounting Standards. The consolidated financial statements are not intended to present the financial position,
results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries andjurisdictions other than Japan.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside
Japan. Also, certain reclassifications have been made to the 2000 financial statements in order for them to conform to theclassifications used in 2001. In accordance with accounting procedures generally accepted in Japan, certain comparative
disclosures are not required to be and have not been presented herein.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which the Company isincorporated and principally operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely forthe convenience of readers outside Japan and have been made at the rate of ¥124 to $1, the approximate rate of exchange at
March 31, 2001. 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 for the year ended March 31, 2001, include the accounts of the Company and its 32 (33 in
2000) significant subsidiaries (together, the "Group"). Under the control or influence concept, those companies in which the
Parent, directly or indirectly, has a control over operations are fully consolidated.
Investments in four associated companies are accounted for by the equity method. Investments in the remaining unconsolidated
subsidiaries and associated companies are stated at cost. If the equity method of accounting had been applied to the investmentsin these companies, the effect on the accompanying consolidated financial statements would not be material.
The excess of the cost of the Company's investments in consolidated subsidiaries and associated companies accounted for by theequity method over its equity in the net assets at the respective dates of acquisition, has been charged to income at the time ofacquisition as the amount involved was not material.
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. Construction Contracts
Revenues on construction contracts greater than ¥5 billion and having a construction duration of more than 18 months isrecognized on the percentage-of-completion method in the ratio of costs incurred to total estimated costs. Under this method,
related costs and estimated earnings in excess of progress billings are presented as a current asset.
Unbilled costs on the other contracts, which are accounted for by the completed-contract method, are stated as costs ofconstruction contracts in process.
Payments received in excess of costs and estimated earnings on the contracts, which are accounted for by the percentage-ofcompletion method, and costs incurred on the other contracts are presented as a current liability.
Costs of preparation work for unsuccessful proposals and other projects which are not realized are charged to income and areincluded in costs of construction contracts.
c. Cash and Cash Equivalents
Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk ofchanges in value. Cash equivalents include time deposits and short-term investments, all of which mature or become due within
three months of the date of acquisition.
d. Marketable and Investment Securities
Prior to April 1, 2000, marketable securities and other investment securities are, in principle, stated at cost as determined by themoving-average method. However, where its market value declines to less than half of the carrying value and such decline isdeemed to be other than temporary, the value of the securities is written down to market. Effective April 1, 2000, the Group
adopted a new accounting standard for financial instruments, including marketable and investment securities.
Under this standard, all applicable securities are classified as available-for-sale securities and stated at cost as determined by themoving-average cost method. However, where its market value declines to less than half of the carrying value and such decline isdeemed to be other than temporary, the value of the securities is written down to market.
The effect of adoption of the new accounting standard was to decrease marketable securities classified as current assets by¥25,321 million ($204,202 thousand) and increase investment securities by the same amount as of April 1, 2000.

CHIYODA CORPORATION 17

The new standard allows companies to delay the implementation of fair value reporting and continue to utilize the cost basis for
up to one year after the effective date. Effective April 1, 2001, available-for-sale securities will be reported at fair value, withunrealized gains and losses, net of applicable taxes, reported in a separate component of shareholders' equity. Had fair value
reporting been adopted as of March 31, 2001, available-for-sale securities, unrealized gains, deferred tax liabilities and minority
interests would have been increased (decreased) as follows:
Millions of Yen

Available-for-sale securities
Unrealized gains
Deferred tax liabilities
Minority interests

¥

550
40
29
2

Thousands of
U.S. Dollars$ 4,436323
234
16

Non-marketable securities are stated at cost determined by the moving-average method. For other than temporary declines infair value, non-marketable securities are reduced to net realizable value by a charge to income.
e. Allowance for Doubtful Accounts
The allowance for doubtful accounts is stated in amounts considered to be appropriate based on the Group's past credit loss
experience and an evaluation of potential losses in the receivables outstanding.
f. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed using the declining-balance method, except for thebuildings owned by the Company and leased property owned by a certain leasing subsidiary which are computed using thestraight-line method, based on the estimated useful lives of the assets. The range of useful lives is from 38 to 64 years forbuildings and from 2 to 15 years for machinery and equipment.
g. Other Assets
Intangible assets are carried at cost less accumulated amortization, which is calculated by the straight-line method over theirestimated useful lives. Software for internal use is amortized on a straight-line basis over its estimated useful life (5 years at the
maximum).
h. Retirement Benefits
Under the employees' retirement plans for the Company and certain consolidated subsidiaries, prior to April 1, 2000, the liability
for employees' retirement benefits was stated at the actuarial computed present value of severance payment costs for employees
eligible for severance payments at each balance sheet date, less the amount funded in the pension plan.
Effective April 1, 2000, the Company and domestic consolidated subsidiaries adopted a new accounting standard for employees'
retirement benefits and accounted for the liability for retirement benefits based on the projected benefit obligations and plan
assets at the balance sheet date.
The transitional obligation of ¥12,213 million ($98,492 thousand), determined as of the beginning of year, is being amortizedand charged to income over 15 years and presented as operating expense in the statements of operations. As a result, net
periodic benefit costs as compared with the prior method, decreased by ¥1,981 million ($15,976 thousand) and loss before
income taxes and minority interests decreased by ¥1,429 million ($11,524 thousand).
Retirement benefits to directors and corporate auditors are provided at the amount which would be required if all directors andcorporate auditors terminated at the end of each period.
i. Research and Development Costs
Research and development costs are charged to income when incurred.
j. Leases
All leases are accounted for as operating leases. Under Japanese accounting standards for leases, finance leases that deem totransfer ownership of the leased property to the lessee are to be capitalized, while other finance leases are permitted to beaccounted for as operating lease transactions if certain "as if capitalized" information is disclosed in the notes to the lessee's
consolidated financial statements.
k. Income Taxes
The provision for income taxes is computed based on the pretax income included in the consolidated statements of operations.
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 based of assets and liabilities. Deferred taxes are measured byapplying currently enacted tax laws to the temporary differences.
l. Foreign Currency Transactions
Prior to April 1, 2000, short-term receivables and payables denominated in foreign currencies were translated into Japanese yen
the current exchange rates prevailing at the respective balance sheet date, while long-term receivables and payables denominatedin foreign currencies were translated at the transaction date rates.
Effective April 1, 2000, the Company and domestic consolidated subsidiaries adopted a revised accounting standard for foreign
currency transactions. In accordance with the revised standard, 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 foreignexchange gains and losses from translation are recognized in the statement of operations to the extent that they are not hedged

18 CHIYODA CORPORATION

by forward exchange contracts. As a result of adopting the revised accounting standard for foreign currency transactions, loss
before income taxes and minority interests increased by ¥139 million ($1,121 thousand).
m. Foreign Currency Financial Statements
The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate
as of the balance sheet date except for shareholders' equity, which is translated at the historical rate. Prior to April 1, 2000,
differences arising from such translation were shown as "Foreign currency translation adjustments" as either an asset or liability
in the balance sheet. Effective April 1, 2000, such differences are shown as "Foreign currency translation adjustments" in a
separate component of shareholders' equity in accordance with the revised accounting standard for foreign currency transactions.
Revenue and expense accounts of consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate
as of balance sheet date.
n. Derivative Financial Instruments
The Company uses a variety of derivative financial instruments, including foreign currency forward contracts and currency options
as a means of hedging exposure to foreign currency risks. The Company does not enter into derivatives for trading or speculative
purposes.
Effective April 1, 2000, the Company adopted a new accounting standard for derivative financial instruments and a revised
accounting standard for foreign currency transactions. These standards required that: (a) all derivatives be recognized as either
assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the income
statement and (b) for derivatives used for hedging purposes, if derivatives qualify for hedge accounting because of highcorrelation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred
until maturity of the hedged transactions.
The foreign currency forward contracts are utilized to hedge foreign exchange risks. Certain assets and liabilities on construction
contracts denominated in foreign currencies are translated at the contracted rates if the forward contracts qualify for hedge
accounting.
Currency options are utilized to hedge foreign exchange risks. These options which qualify for hedge accounting are measured atmarket value at the balance sheet date and the unrealized gains or losses are deferred until maturity as other liability or asset.
The adoption of the new accounting standard for derivative financial instruments did not have a material effect on the
Company's consolidated financial statements.
o. Per Share Information
The computation of net income (loss) per share is based on the weighted average number of shares of common stock
outstanding during each year. The average number of common shares used in the computation was 185,429 thousand sharesfor 2001 and 248,357 thousand shares for 2000, respectively.
Fully diluted net income per share is not disclosed because of the Company's net loss position.

3. TRANSACTIONS WITH UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATED COMPANIES
Significant transactions with and balances due from unconsolidated subsidiaries and associated companies at March 31, 2001
and 2000, are summarized as follows:
Millions of Yen
2001
2000

Transactions:
Construction contract revenues................................................................................ ¥ 12,679
Interest and dividend income ...................................................................................
75
Due from:
Notes and accounts receivable—trade......................................................................
33
Short-term loans included in "Prepaid expenses and other" .....................................

¥

Thousands of
U.S. Dollars
2001

6,425
454

$ 120,250
605

685
130

266

The Company has guaranteed the indebtedness of certain unconsolidated subsidiaries and associated companies in the amountof ¥4,017 million ($32,395 thousand) at March 31, 2001.

4. CONSTRUCTION CONTRACTS
Costs and estimated earnings recognized with respect to construction contracts which are accounted for by the percentage-ofcompletion method at March 31, 2001 and 2000, are as follows:

CHIYODA CORPORATION 19

Millions of Yen
2001
2000

Costs and estimated earnings.................................................................................... ¥ 317,053
Amounts billed.......................................................................................................... (304,133)
Net ................................................................................................................ ¥ 12,920

Thousands of
U.S. Dollars
2001¥ 313,970(309,083)$ 2,556,879(2,452,685)

¥

$

4,887

104,194

Costs of construction contracts in process which are accounted for by the completed-contract method at March 31, 2001 and
2000, are as follows:
Millions of Yen
2001
2000

Thousands of
U.S. Dollars
2001

Costs incurred........................................................................................................... ¥ 32,872
Amounts billed..........................................................................................................
(22,366)¥

29,740(17,735)$

265,097(180,371)

Net ................................................................................................................ ¥ 10,506¥

12,005$84,726

5. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2001 and 2000, consisted of the following:
Millions of Yen
2001
2000

Current:
Equity securities .....................................................................................................
Government and corporate bonds .........................................................................
Trust fund investments ..........................................................................................
Total.....................................................................................................................

¥

25,205
3
113¥

25,321Thousands of
U.S. Dollars
2001

Non-current:
Equity securities ..................................................................................................... ¥Trust fund investments ..........................................................................................

2,502
2

¥

2,295

$

20,178
16

Total

2,504

¥

2,295

$

20,194..................................................................................................................... ¥Available-for-sale securities whose fair value is not readily determinable as of March 31, 2001, were as follows:
Carrying AmountThousands ofMillions of Yen
U.S. Dollars

Equity securities

¥

2,024

$16,323

Proceeds from sales of available-for-sale securities for the year ended March 31, 2001, were ¥22,542 million ($181,790
thousand). Gross realized gains and losses on these sales, computed on the moving average cost basis, were ¥2,308 million($18,613 thousand) and ¥4,665 million ($37,621 thousand), respectively.
The carrying amounts of marketable and debt securities and the related aggregate market values at March 31, 2000, excluding
those for certain securities for which market information was not available, were as follows:
Millions of Yen
Aggregate
Market Value

Unrealized
Gain (Loss)

Current ............................................................................................................... ¥ 24,097
Non-current ........................................................................................................
13¥ 20,553
14¥ (3,544)
1

Total¥ 20,567¥ (3,543)

Carrying
Amount................................................................................................................ ¥ 24,110

The difference between the above carrying value and the amounts shown in the accompanying consolidated balance sheets
principally consists of money management funds and non-marketable securities for which there is no readily-available market
from which to obtain or calculate the market value thereof.
20 CHIYODA CORPORATION

6. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARIES AND ASSOCIATEDCOMPANIES
Investments in and advances to unconsolidated subsidiaries and associated companies at March 31, 2001 and 2000, were as
follows:
Millions of Yen
2001
2000

Thousands of
U.S. Dollars
2001

Investments............................................................................................................... ¥Advances ..................................................................................................................

3,209
1,480

¥

3,139
1,025

$

25,87911,935

Total

4,689

¥

4,164

$

37,814..................................................................................................................... ¥7. LONG-TERM RECEIVABLES
Long-term receivables at March 31, 2001 and 2000, include receivables of ¥8,129 million ($65,556 thousand) and ¥15,440
million, respectively, from Nigerian National Petroleum Company ("NNPC") relating to services performed by the Company before
then 1998. The Company has negotiated payment terms with NNPC and has collected ¥7,337 million ($59,169 thousand) during
the year ended March 31, 2001, but the repayment schedule of the remaining balance is not determined due to the economicaland political circumstances in Nigeria.
The Company also has receivables and other assets in the amount of ¥6,351 million ($51,218 thousand) and ¥6,261 million as ofMarch 31, 2001 and 2000, respectively, from Karunaphuli Fertilizer Company Limited ("KAFCO"), a Bangladesh company, and its
related parties as follows. In March 2001, KAFCO, its shareholders and banks reached basic agreement about financial
restructuring under the supervision of the Bangladesh government and KAFCO has started making payments based on theschedule defined in the financial restructuring plan.
Thousands of
U.S. Dollars

Millions of Yen

Prepaid expenses and other ............................................................................................................. ¥Investments in and advances to unconsolidated
subsidiaries and associated companies..........................................................................................
Long-term receivables......................................................................................................................
Allowance for doubtful accounts .....................................................................................................

2,082
4,037
(647)

16,79032,557(5,218)

Total

5,704

$ 46,000............................................................................................................................................ ¥

232

$

1,871

8. SHORT-TERM BANK LOANS AND LONG-TERM DEBT
Short-term bank loans bear interest at rates ranging from 1.375% to 8.050% and from 1.500% to 2.625% at March 31, 2001
and 2000, respectively. Short-term bank loans at March 31, 2001 and 2000, consisted of the following:
Millions of Yen
2001
2000

Thousands of
U.S. Dollars
2001

Collateralized ............................................................................................................ ¥ 3,655
Uncollateralized ........................................................................................................
21,577¥

23,33245,595$29,476
174,008

Total¥

68,927$

203,484..................................................................................................................... ¥ 25,232

Long-term debt at March 31, 2001 and 2000, consisted of the following:

CHIYODA CORPORATION 21

Millions of Yen
2001
2000

Long-term loans from banks and insurance companies, maturing serially through 2010,
with interest rates ranging from 1.725% to 6.900% (2001) and from 0.710% to 7.700% (2000):
Collateralized ............................................................................................................ ¥ 1,146
Uncollateralized ........................................................................................................
10,920Total .....................................................................................................................
12,066
Current portion.........................................................................................................
(720)
Total

..................................................................................................................... ¥ 11,346

Thousands of
U.S. Dollars
2001

¥

1,476
13,541
15,017(2,472)$

9,242
88,06497,306(5,806)¥

12,545$91,500Subordinated loans in the amount of ¥10,000 million ($80,645 thousand) from The Bank of Tokyo-Mitsubishi, Ltd. was included
in 'Uncollateralized' at March 31, 2001 and 2000.
Annual maturities of long-term debt at March 31, 2001, was as follows:
Millions of Yen
Year Ending March 31
2002 ........................................................................................................................................... ¥720
2003 ...........................................................................................................................................
751
2004 ...........................................................................................................................................
238
2005 ...........................................................................................................................................
88
2006 and thereafter .......................................................................................................................
10,269Total........................................................................................................................................... ¥ 12,066

Thousands of
U.S. Dollars$ 5,806
6,056
1,919
710
82,815$ 97,306

The following assets were pledged as collateral for short-term debt at March 31, 2001:
Millions of Yen

Thousands of
U.S. Dollars

Prepaid expenses and other ............................................................................................................ ¥Land ...........................................................................................................................................
Buildings and structures—net of accumulated depreciation ............................................................

1,000
1,323
675

$ 8,065
10,670
5,444

Total

2,998

$ 24,179........................................................................................................................................... ¥The following assets were pledged as collateral for long-term debt at March 31, 2001:
Millions of Yen

Notes and accounts receivable—trade ............................................................................................ ¥Land ...........................................................................................................................................
Buildings and structures—net of accumulated depreciation ............................................................
Total........................................................................................................................................... ¥Thousands of
U.S. Dollars

591
519
983

$ 4,766
4,186
7,927

2,093

$ 16,879

9. RETIREMENT BENEFITS
Employees who terminate their services with the Company are, under most circumstances, entitled to receive lump-sum
retirement benefits based upon their rates of pay at the time of termination, years of service and certain other factors.
However, an employee who terminates at 50 years of ages or older with service of at least 20 years is entitled to receive anannuity from the trustee under the pension plan which covers such employees. If the annuity does not reach the level of total
retirement benefits due, the remainder would be paid by the Company.
Certain consolidated subsidiaries also have severance payment and pension plans similar to those of the Company.
Retirement benefits include retirement benefits to directors and corporate auditors in the amount of ¥534 million ($4,306
thousand) and ¥437 million for the years ended March 31, 2001 and 2000, respectively. The retirement benefits to directors andcorporate auditors are paid subject to the approval of the shareholders.
Effective April 1, 2000, the Company and domestic consolidated subsidiaries adopted a new accounting standard for employees'
retirement benefits.

22 CHIYODA CORPORATIONThe liability for employees' retirement benefits at March 31, 2001, consisted of the following:
Millions of Yen

Thousands of
U.S. Dollars

Projected benefit obligation ............................................................................................................ ¥ 31,008
Fair value of plan assets ..................................................................................................................
(16,854)
Unrecognized transitional obligation...............................................................................................
(11,372)
Unrecognized actuarial loss ............................................................................................................
(1,017)
Prepaid pension cost.......................................................................................................................
31$ 250,065(135,919)(91,710)(8,202)250

Net liability ..................................................................................................................................... ¥$ 14,484

1,796

The components of net periodic benefit costs are as follows:
Millions of Yen

Thousands of
U.S. Dollars

Service cost .................................................................................................................................... ¥Interest cost....................................................................................................................................
Expected return on plan assets .......................................................................................................
Amortization of transitional obligation............................................................................................

1,202
982
(841)
841

$

9,694
7,919
(6,782)
6,782

Net periodic benefit costs ............................................................................................................... ¥2,184$ 17,613

Assumptions used for the year ended March 31, 2001, are set forth as follows:
2000

Discount rate ............................................................................................................................................................ 3.0 %Expected rate of return on plan assets ...................................................................................................................... 5.0 %Recognition period of actuarial gain/loss ................................................................................................................... 13 years
Amortization period of transitional obligation ........................................................................................................... 15 years
Severance and pension expenses aggregated ¥1,719 million for the year ended March 31, 2000.

10. SHAREHOLDERS' EQUITY
The authorized number of shares was 570,000 thousand and 700,000 thousand shares of common stock with a par value of ¥50
per share as of March 31, 2001 and 2000, respectively, and 80,000 thousand shares of non-voting, non-cumulative preferredstock without par value as of March 31, 2001 and 2000.
Under the Commercial Code of Japan (the "Code"), at least 50% of the issue price of new shares, with a minimum of the parvalue thereof, is required to be designated as stated capital. The portion which is to be designated as stated capital is determinedby resolution of the Board of Directors. Proceeds in excess of the amounts designated as stated capital are to be credited toadditional paid-in capital.
Under the Code, amounts equal to at least 10% of the aggregate amount of cash dividends and certain other appropriations ofretained earnings associated with cash outlays applicable to each fiscal period must be set aside as a legal reserve until suchreserve equals 25% of stated capital. This reserve amount, which is included in accumulated deficit, totals ¥2,975 million($23,992 thousand) and ¥2,970 million as of March 31, 2001 and 2000, respectively, and is not available for dividends but may
be used to reduce a deficit or may be transferred to stated capital.
The Company may also transfer, upon approval of the shareholders, a portion of unappropriated retained earnings available fordividends to the capital stock account.
At a special meeting of the shareholders held on January 17, 2001, the shareholders approved a reduction in the authorized
number of shares of common stock by 130,000,000 shares to 650,000,000 shares. In addition, the shareholders approved a 2 to
1, reverse stock split whereby on February 20, 2001, a total of 124,178 shares were redeemed totaling ¥14,176 million($114,323 thousand).
At a Board of Directors meeting held on March 28, 2001, the Directors approved a transfer of ¥14,176 million ($114,323
thousand) from additional paid-in capital as a reduction in accumulated deficit in order to improve the financial stability of theCompany.
On March 30, 2001, the Company issued 61,250,000 shares to certain existing shareholders. The issue price was ¥190 per sharefor total proceeds of ¥11,638 million ($93,854 thousand), which were applied equally to common stock and additional paid-in
capital.

CHIYODA CORPORATION 23

11. GAIN ON DISCHARGE OF LIABILITIESA new restructuring plan was introduced in 2000. It consists of the three major initiatives. They are; 1) financial restructuring toreinforce our financial position and structure, 2) business Plan focusing on the core business areas, and 3) streamlining thecorporate operation by reducing fixed costs.
The Company requested and received approval from certain financial institutions and a company to waive repayment ofoutstanding liabilities to these entities which were classified as short-term bank loans, notes payable and long-term debt. The
discharge of these liabilities of ¥19,778 million ($159,500 thousand) was recorded as a gain in the statement of operations forthe year ended March 31, 2001.

12. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate,
resulted in normal effective statutory tax rates of approximately 42% for the years ended March 31, 2001 and 2000.
The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities
at March 31, 2001 and 2000, are as follows:
Millions of Yen
2001
2000

Deferred tax assets:
Tax loss carryforwards.............................................................................................. ¥ 41,960
Cost of construction contracts .................................................................................
5,725
Retirement benefits..................................................................................................
630
Loss on long-term construction contracts .................................................................
245
Write-off of accounts receivable...............................................................................
Allowance for doubtful accounts .............................................................................
2,807
Allowance for loss on investment.............................................................................
Loss on devaluation of costs of construction contracts in process .............................
365
Liability for financial support to subsidiaries..............................................................
Loss on devaluation of property, plant and equipment .............................................
1,489
Additional retirement benefits paid to employees.....................................................
657
Other.......................................................................................................................
3,630
Less valuation allowance .......................................................................................... (57,270)¥

44,388
2,321
2,147
734
701
671
581
425
420

Thousands of
U.S. Dollars
2001$

338,387
46,1695,081
1,976
22,6372,944

2,245(54,379)

12,008
5,298
29,274(461,855)

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

238

254

1,919

Deferred tax liabilities ..................................................................................................

44

57

354

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

194

¥

197

$

1,565

A reconciliation between the normal effective statutory tax rate for the years ended March 31, 2001 and 2000, and the actual
effective tax rates reflected in the accompanying consolidated statements of operations, is as follows:
2001

2000

Normal effective statutory tax rate...............................................................................................
Expenses not deductible for income tax purposes ........................................................................
Effect of taxation on dividends ....................................................................................................
Inhabitant taxes per capita levy ...................................................................................................
Foreign income taxes ..................................................................................................................
Valuation allowance for deferred tax assets .................................................................................
Equity in earnings of associated companies .................................................................................
Operating losses of subsidiaries ...................................................................................................
Lower income tax rates applicable to income in certain foreign countries ....................................

42 %
(4)
2
(2)
(7)
(84)
35
(17)
(1)

42 %
12
(8)
4
13
(28)
(22)
45
(4)

Actual effective tax rate...............................................................................................................

(36) %

54 %Under the current Japanese tax regulations, a net operating loss can be carried forward for five years and deducted from any
future taxable income. The Company and consolidated subsidiaries have a net operating loss carryforward of approximately¥99,918 million ($805,790 thousand) at March 31, 2001.

24 CHIYODA CORPORATION

13. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income were ¥399 million ($3,218 thousand) and ¥1,041 million for the years ended
March 31, 2001 and 2000, respectively.

14. LEASESIncome from equipment leases held by a subsidiary for the years ended March 31, 2001 and 2000, was ¥268 million ($2,161
thousand) and ¥340 million, respectively.
The Company and a subsidiary lease certain machinery, computer equipment, office space and other assets. Total rental
expenses under the above leases were ¥110 million ($887 thousand) and ¥93 million for the years ended March 31, 2001 and
2000, respectively.
Pro forma information of leased property under finance leases that do not transfer ownership of the leased property to the lessee
on an "as if capitalized" basis for the years ended March 31, 2001 and 2000, was as follows:Year Ended March 31, 2001

For Lessor
Millions of Yen
MachineryandEquipment

Other

Thousands of U.S. Dollars
MachineryandEquipment
Other
Total

Total

Acquisition cost ................................................... ¥Accumulated depreciation ...................................

975
756

¥

70
50

¥ 1,045
806

$

7,863
6,097

$

564
403

$

8,427
6,500

Net leased property ............................................. ¥

219

¥

20

¥

$

1,766

$

161

$

1,927

239

For Lessee
Millions of Yen
MachineryandEquipment

Other

Thousands of U.S. Dollars
MachineryandEquipment
Other
Total

Total

Acquisition cost ................................................... ¥Accumulated depreciation ...................................

369
163

¥

45
15

¥

414
178

$

2,976
1,315

$

363
121

$

3,339
1,436

Net leased property ............................................. ¥

206

¥

30

¥

236

$

1,661

$

242

$

1,903

Millions of Yen
Unearned
Lease Income(As Lessor)

Thousands of U.S. Dollars

Obligations
under
Finance Lease(As Lessee)

Unearned
Lease Income(As Lessor)

Obligations
under
Finance Lease(As Lessee)

Due within one year ..................................................................................... ¥Due after one year........................................................................................

138
146

¥

74
162

$ 1,113
1,177

$

597
1,306

Total

284

¥

236

$ 2,290$1,903......................................................................................................... ¥Year Ended March 31, 2000

Millions of Yen
Unearned
Lease Income(As Lessor)

Obligations
under
Finance Lease(As Lessee)

Due within one year................................................................................................................................... ¥Due after one year .....................................................................................................................................

248
300

¥

92
91

Total

548

¥

183

...................................................................................................................................................... ¥Depreciation expense for lessor, which is reflected in the accompanying consolidated statements of operations, computed by thestraight-line method was ¥176 million ($1,419 thousand) for the year ended March 31, 2001.
Depreciation expense for lessee, which is not reflected in the accompanying consolidated statements of operations, computed by

CHIYODA CORPORATION 25

the straight-line method was ¥110 million ($887 thousand) for the year ended March 31, 2001.
The amounts of unearned lease income and obligations, acquisition cost and depreciation under finance leases include theimputed interest income portion and interest expense portion, respectively.

15. DERIVATIVESThe Company enters into foreign exchange forward contracts and currency option contracts to hedge foreign exchange risk
associated with certain assets and liabilities on construction contracts denominated in foreign currencies. It is the Company's
policy to use derivatives only for the purpose of reducing foreign exchange risks associated with such assets or liabilities. The
Company does not hold or issue derivatives for trading purposes.
Because the counterparties to these derivatives are limited to major international financial institutions, the Company does not
anticipate any losses arising from credit risk.
The basic policies for the use of derivatives are approved by the management and the execution and control of derivatives arecontrolled by the Company's Financing Department. Each derivative transaction is periodically reported to the Company's
Accounting Department and executive officers.
Forward exchange contracted amounts which are assigned to associated assets or liabilities and are reflected on the balance sheet
at year end are not subject to the disclosure of market value information.
The total of forward exchange contracted amounts which were not reflected on the consolidated balance sheets and currency
option contracts as of March 31, 2000, were as follows:Year Ended March 31, 2000

Amount ofForeign
Currency

Foreign exchange forward contracts:
Buying forward:
U.S. dollars .......................................................................... 48,658 thousand
German marks..................................................................... 9,569 thousand
Singapore dollars ................................................................. 5,872 thousand
Other...................................................................................
Total ...........................................................................................
Selling forward:
U.S. dollars ..........................................................................
Other...................................................................................

8,186 thousand

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

Millions of Yen
Equivalent
Yen Valued at
Equivalent
Forward
Yen Valued at
Exchange Rate
Forwardas ofExchange Rate
March 31, 2000

¥

5,182
629
354
169

¥ 5,025
485
355
162

¥

6,334

¥ 6,027

¥

866
20

¥

853
20

¥

886

¥

873

Millions of Yen
Contract
AmountFair Value

Currency options contracts:
Call:
U.S. dollars.........................................................................................................................
(Option premiums on balance sheet) ..................................................................................

¥

3,804
(166)

¥

18

3,312
(166)

¥

49

Put:
U.S. dollars.........................................................................................................................
(Option premiums on balance sheet) ..................................................................................

¥All of the derivative contracts outstanding at March 31, 2001, are foreign exchange contracts which qualify for hedge accounting
and excluded from the above-mentioned market value information.

26 CHIYODA CORPORATION

16. SUBSEQUENT EVENT
The following proposed disposition of accumulated deficit of the Company at March 31, 2001, was approved at the shareholders
meeting held on June 28, 2001:
Millions of Yen

Thousands of
U.S. Dollars¥ 23,655
2,815
7,343

$190,766
22,702
59,217

Reversal of additional paid-in capital..............................................................................................
Reversal of legal reserve.................................................................................................................
Accumulated deficit to be carried forward .....................................................................................

17. SEGMENT INFORMATION
Information about foreign operations and sales to foreign customers of the Company and consolidated subsidiaries for the years
ended March 31, 2001 and 2000, was as follows:(1) Foreign Operations
Year Ended March 31, 2001

Millions of Yen
JapanConstruction contract revenue:
Outside customers.................. ¥ 120,186
Intersegment..........................
17,707

Asia¥6,902998

Europe¥North
America

Other

Subtotal

Eliminations(Corporate)

Consolidated

53
765¥1,52462¥ 128,665
19,532¥ (19,532)¥ 128,665

148,197(19,532)

128,665

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

137,893

7,900

818

1,586

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

151,224

7,261

816

1,612

¥

36

160,949(18,450)

142,499

Operating income (loss) ............. ¥(13,331)

¥ 639

2

¥ (26)¥ (36)¥ (12,752)¥ (1,082)(13,834)¥

Other income and expenses — net

10,477

Loss before income taxes andminority interests .....................

¥

Assets ...................................... ¥ 116,792¥7,281

¥ 143

¥ 344

EuropeThousands of U.S. Dollars
North
America
Other
Subtotal

Eliminations(Corporate)$55,661 $ 427
8,048
6,169

$12,290500$(157,516)

Total................................. 1,112,042

63,7096,596

12,7901,195,137(157,516)

1,037,621

Operating expenses ..................... 1,219,549

58,556

6,581

13,000$ 290

1,297,976(148,790)

1,149,186

15$ (210)$ (290)$ (102,839)$ (8,726)(111,565)

Year Ended March 31, 2001
Japan

Construction contract revenue:
Outside customers .................... $ 969,243
Intersegment ............................ 142,799

Asia

Operating income (loss) ............... $(107,507) $5,153

$

¥ 207

¥ 124,767(3,357)$1,037,621
157,516¥ (10,115) ¥ 114,652

Consolidated$1,037,621

Other income and expenses—net

84,492

Loss before income taxes andminority interests .......................

$ (27,073)

Assets ........................................ $ 941,871$58,718 $1,153$2,774$1,669$1,006,185$ (81,572) $ 924,613

CHIYODA CORPORATION 27

Year Ended March 31, 2000
Asia

EuropeMillions of Yen
NorthAmericaOther¥5,367
547

¥ 520
390

5,914

910

Japan

Construction contract revenue:
Outside customers.................. ¥ 161,075
Intersegment..........................
19,406
Total ..............................

180,481

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

181,553

Operating income (loss) ............. ¥ (1,072)¥

Subtotal

Eliminations(Corporate)¥2,00176¥ 168,963
20,419¥ (20,419)

2,077

189,382(20,419)

168,963(21,216)

169,116

797

(153)

5,908

923

1,918

¥

6

¥ (13)¥ 159¥ (30)

30¥ 168,963

190,332¥(950)

Consolidated¥

Other income and expenses — net

1,706

Income before income taxes andminority interests .......................
Assets ...................................... ¥ 153,614¥¥6,005¥ 427

Notes: 1. The Company and consolidated subsidiaries are summarized into fivesegments by geographic area based on the countries where the companies arelocated.
The segments consisted of the following countries in 2001 and 2000:
Asia:
Indonesia, Singapore, Philippines, Myanmar,
Malaysia
Europe:United Kingdom, Germany, Poland
North America: United States of America
Other:
Nigeria¥1,081¥ 418¥ 161,545¥

2. Corporate assets mainly consist of long-term loans and investment
securities of the Company. Corporate assets as of March 31, 2001 and
2000, were ¥2,661 million ($21,460 thousand) and ¥1,834 million,
respectively.

Year Ended March 31, 2001
Asia

Overseas sales (A) ...................................................................................
Consolidated sales (B) .............................................................................
(A)/(B) ...................................................................................................

Millions of Yen
The Near andMiddle East
Other

¥ 40,290¥ 18,640¥ 5,22831.31%

14.49%

4.06%

Year Ended March 31, 2001
Asia

Thousands of U.S. Dollars
The Near andMiddle East
Other

Overseas sales (A)....................................................................................... $324,919
Consolidated sales (B).................................................................................

$150,323

Year Ended March 31, 2000

Millions of Yen
The Near andMiddle East
Other

Asia

Overseas sales (A)....................................................................................... ¥ 44,038
Consolidated sales (B).................................................................................
(A)/(B) ....................................................................................................... 26.06%
Note: The Company and consolidated subsidiaries are summarized into threesegments by geographic area based on the countries where the companies
are located.
The segments consist of the following countries:
Year Ended March 31, 2001
Asia:
Singapore, Indonesia, China and others
The Near and Middle East: Oman, Saudi Arabia, Qatar and others
Other:
Azerbaijan and others

28 CHIYODA CORPORATION

1,553(8,446) ¥ 153,099$ 42,161¥ 35,722¥ 20,083

21.14%

11.89%

Total¥ 64,158
128,665
49.86%

Total$ 517,403
1,037,621

Total¥ 99,843
168,963
59.09%

Year Ended March 31, 2000
Asia:
China, Singapore, Thailand and others
The Near and Middle East: Qatar, Oman, Saudi Arabia and others
Other:
Poland, Turkmenistan, Azerbaijan,
United States of America and others

OPINION OF INDEPENDENT PUBLIC ACCOUNTANTS

INDEPENDENT AUDITORS' REPORTTo the Board of Directors and Shareholders of Chiyoda Corporation:
We have examined the consolidated balance sheets of Chiyoda Corporation and consolidated subsidiaries as ofMarch 31, 2001 and 2000, and the related consolidated statements of operations, shareholders' equity, and cash
flows for the years then ended, all expressed in Japanese yen. Our examinations were made in accordance withauditing standards, procedures and practices generally accepted and applied in Japan and, accordingly, included
such tests of the accounting records and such other auditing procedures as we considered necessary in thecircumstances.
In our opinion, the consolidated financial statements referred to above present fairly the financial position of
Chiyoda Corporation and consolidated subsidiaries as of March 31, 2001 and 2000, and the results of theiroperations and their cash flows for the years then ended in conformity with accounting principles and practices
generally accepted in Japan applied on a consistent basis.
As described in Note 7, the consolidated balance sheets at March 31, 2001 and 2000 include accounts receivableand other assets from Nigerian National Petroleum Corporation ("NNPC") and Karunaphuli Fertilizer Company
Limited ("KAFCO").
As discussed in Note 11, the Company has implemented a new restructuring plan, which includes a business plan
focusing on core business areas.
As discussed in Note 2, effective April 1, 2000, the consolidated financial statements have been prepared inaccordance with a new accounting standard for employees' retirement benefits.
Our examinations also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our
opinion, such translation has been made in conformity with the basis stated in Note 1. Such U.S. dollar amounts arepresented solely for the convenience of readers outside Japan.

June 28, 2001
The accompanying financial statements are not intended to present the financial position, results of operations andcash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions
other than Japan. The standards, procedures and practices to audit such financial statements are those which are
generally accepted and applied in Japan.
CHIYODA CORPORATION 29

CORPORATE DIRECTORY

MAIN OFFICEMAJOR SUBSIDIARIES AND AFFILIATED COMPANIESYokohama Head Office12-1, Tsurumichuo 2-chome, Tsurumi-ku,
Yokohama 230-8601, Japan
Tel: 81-45-521-1231 Fax: 81-45-503-0200

OVERSEAS
Chiyoda International Corporation
1177 West Loop South, Suite 680, Houston, TX
77027, U.S.A.
Tel: 1-713-965-9005 Fax: 1-713-965-0075

REGIONAL OFFICES
Sapporo, Sendai, Osaka, Mizushima,
Takamatsu, Okinawa

REPRESENTATIVE OFFICES
Chiyoda Abu Dhabi Representative Office
P.O. Box 43928 Clock Tower Office Floor
No.02 Suite No.0204 Al Najda Street,
Abu Dhabi, United Arab Emirates
Tel: 971-2-671-7161 Fax: 971-2-671-7162
Chiyoda Beijing Representative Office
Room No.616, China World Trade Center
No.1, Jianguomenwai Avenue, Beijing 100004,
China
Tel: 86-10-6505-2678 Fax: 86-10-6505-1118
Chiyoda Jakarta Representative Office
9th Floor, Mid-Plaza Bldg., Jalan Jenderal
Sudirman Kav. 10-11, Jakarta 10220, Indonesia
Tel: 62-21-570-7579 Fax: 62-21-570-6276
Chiyoda Shanghai Representative Office
Room 1501 CIMIC Tower, No.800 Shang
Cheng Rd. Pu Dong New Area, Shanghai,
200120, China
Tel: 86-21-6875-0034 Fax: 86-21-6875-0037
Chiyoda Singapore Representative Office
14 International Business Park, Jurong East,
Singapore 609922, The Republic of Singapore
Tel: 65-560-1274 Fax: 65-560-2563
Chiyoda Tehran Representative Office
2nd Floor, No.16, Mahtab St., Aftab St.,
Vanak Avenue, Tehran 19949, Iran
Tel: 98-21-803-6391, 805-8592
Fax: 98-21-805-8967
Singapore Human Resources Office
10 Anson Road #28-06A International Plaza
Singapore 079903, The Republic of Singapore
Tel: 65-324-0080 Fax: 65-324-0090

Chiyoda International Limited
4th Floor Dorland House, 20 Regent Street,
London SW1Y 4PH, U.K.
Tel: 44-20-7867-1221 Fax: 44-20-7867-1414
Chiyoda Singapore (Pte) Limited
14 International Business Park, Jurong East,
Singapore 609922, The Republic of Singapore
Tel: 65-563-3488 Fax: 65-567-5231
Chiyoda Asia Pacific (Pte) Limited
14 International Business Park, Jurong East,
Singapore 609922, The Republic of Singapore
Tel: 65-425-0368 Fax: 65-569-6102
Chiyoda Malaysia Sdn. Bhd.
15th Floor, Menara Maxisegar, Jalan Pandan
Indah, 4/2 Pandan Indah, 55100,
Kuala Lumpur, Malaysia
Tel: 60-3-4297-0988 Fax: 60-3-4297-0800
Chiyoda (Thailand) Limited
Bangkok Head Office
5th Floor, Dusit Thani Office Bldg., 946, Rama
IV Road, Bangkok 10500, Thailand
Tel: 66-2-236-8037 Fax: 66-2-236-6841
Sriracha Office
P.O. Box 7, Ao-Udom, Sriracha,
Cholburi 20230, Thailand
Tel: 66-38-352-315-8 Fax: 66-38-352-321
P.T. Chiyoda International Indonesia
7th Floor, ASPAC Kuningan Building JI. H.R.
Rasunasaid Kav., X-2 No.4 Jakarta 12950,
Indonesia
Tel: 62-21-252-1066 Fax: 62-21-252-1101
L&T-Chiyoda Limited
B.P. Estate, National Highway No.8, Chhani,
Baroda-391740, Gujarat State, India
Tel: 91-265-771003/772855
Fax: 91-265-774985
C&E Corporation
C&E Corporation Bldg., Meralco Avenue
Corner, General Araneta Street, Pasing City,
Metro Manila, Philippines
Tel: 63-2-636-1001~8
Fax: 63-2-636-1013/1022
Chiyoda Petrostar Ltd.
Al-Khobar Office
P.O. Box 31707, Al-Khobar 31952
The Kingdom of Saudi Arabia
Tel: 966-3-864-0839 Fax: 966-3-864-0986
Jeddah Head Office
P.O. Box 6188, Jeddah 21442
The Kingdom of Saudi Arabia
Tel: 966-2-647-0558 Fax: 966-2-647-1908

30 CHIYODA CORPORATION

Chiyoda Nigeria Limited
Lagos Head Office
Plot PC-12, 1st Floor, (All CO Plaza), Afribank
Street, Victoria Island, Lagos, Nigeria
Tel: 234-1-2613291 Fax: 234-1-2612565
Kaduna Branch Office
Kachia Road, 17KM, P.O. Box 1144, Kaduna,
Nigeria
Chiyoda & Public Works Co., Ltd.
No.1 (A), Thanthumar Road, 29 Ward
Thuwunna, Thingangyun Township, Yangon,
Union of Myanmar
Tel: 95-1-565615/579330 Fax: 95-1-579870
IN JAPAN
Chiyoda Kosho Co., Ltd.
Plant Engineering, Construction and
Maintenance, and Insuance Service
Chiyoda Keiso Co., Ltd.
Erectical and Instrumentation Engineering,
Equipment Supply, Installation and Maintenance
Chiyoda Techno Ace Co., Ltd.
Consulting, Engineering and Construction of
Pharmaceutical Plants, Laboratories andResearch Centers
U-Tech Consulting Co., Ltd.
Consulting for Industrial and Social, Regional
Development
IT Engineering Limited
IT Solutions and Software Development
Tokyo Plant Service Co., Ltd.
Plant Maintenance for LNG and Co-Gereration
Facilities
Environmental Engineering Corporation
Engineering and Construction for Environmental
Plants in Overseas Market
Chiyoda & PAC Co., Ltd.
Project Management, Engineering andInstallation of Automotive Plants
Arrow Business Consulting Corporation
Consulting Services for Finance and Accounting
Arrowhead International Corporation
Travel and Air Cargo Agent, Spare Parts Supply
Arrow Human Resources Co., Ltd.
Human Resources Supply and Training(As of September 1, 2001)

BOARD OF DIRECTORS ANDEXECUTIVE OFFICERSCORPORATE DATA

President & CEO
Nobuo Seki*

Established
January 20, 1948

Executive Vice Presidents
Akira Yamamura*John L. Rose*
Naotake Naritomi*

Number of Employees
2,916[Parent Company: 1,323]

Senior Managing Director
Hiizu Ichikawa*
Managing Directors
Atsuo Minamoto
Takashi Kubota
Hiroshi Kobayashi
Director
Albert J. Stanley
Corporate Auditors
Michihiko Kawana
Yoshio Ishiwata
Hideaki Fujioka
Senior Executive Officers
Yoshihiro Shirasaki
Akira Kadoyama
Hideo Nakatani
Hiroshi Shibata
Executive Officers
Madoka Koda
Wataru Shimono
Junichi Sakaguchi
Takashi Yamamoto

Main Business Activities
Planning, design, procurement, construction, commissioning,and operation assistance of public- and private-sector facilities
in such areas as gas, petroleum, petrochemicals, chemicals,coal, electric power, nonferrous metal processing,biochemistry, pharmaceutical manufacturing, medical
treatment, food processing, factory automation andcomputer-integrated manufacturing, theme parkdevelopment, space development, and distribution as well as
related facilities for pollution prevention, environmental
preservation and enhancement, and disaster prevention
Paid-in-Capital¥12,027,676,450
Capital Stock Issued
185,428,529 shares
Number of Shareholders
18,758Stock Exchange Listings
Tokyo, Osaka, Nagoya, Sapporo
Transfer Agent of Common Stock
The Mitsubishi Trust and Banking Corporation
4-5, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-0005,
Japan(As of March 31, 2001)* Representative Directors(As of June 28, 2001)

CHIYODA CORPORATION 31

Head Office12-1,Tsurumichuo 2-chome
Tsurumi-ku,Yokohama 230-8601,Japan
Tel:81-45-521-1231 Fax:81-45-503-0200;;;;

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