Financial Highlights. Supporting modern society and environmental protection through technical development. Contents. Net Income.

Transcription

1 1-25-1, Nishi-Shinjuku, Shinjuku-ku,Tokyo , Japan Phone: S N

2 Profile Financial Highlights Yearss Ended En n March 31, and Supporting modern society and environmental protection through technical development Contents a track record of outstanding construction project achievements in Message from the Management 2 Japan and overseas. Our corporate beginnings coincided with Japan s Year in Review 4 development as a modern nation, and as people s aspirations and society s Financial Section expectations have changed through the years, we too have adapted and Six-Year Summary 6 grown to become a recognized leader in the construction industry. Financial Review 7 Consolidated Balance Sheets 8 $ 18,898,545 1,244,439 1,254,095 15,082, Net sales... Contract backlog at the end of the year... 1,441,975 1,218,119 14,649,657 (15.5) 1,571,414 1,607,390 $ 19,331,209 $ Net income... Per share (in yen and dollars) , Net assets... Per share (in yen and dollars) , ,598 3,494,864 (2.2) (3.1) Total assets... 1,501,290 1,395,493 16,782,838 (7.0) 13 Notes to Consolidated Financial Statements 14 the need is stronger than ever for historic preservation, environmental protection, and the creation of attractive private and public spaces. Independent Auditors Report new technologies and method needed to meet the demands of this modern Organization 39 society. Corporate Data 40 (51.5) * U.S. dollar amounts above and elsewhere in this Annual Report were translated from yen, for convenience only, at the rate of US $1 = 83.15, the approximate exchange rate at March 31,. Net Sales Net Income 2007 Board of Directors, Corporate Auditors and Executive Officers (48.7) % 5,698 Consolidated Statements of Cash Flows principles, our research and development activities are helping create the 130,884 5, Supported by Taisei s strong financial base and sound management 10, % Consolidated Statements of Changes in Net Assets As the world enters the second century of modern urban construction, 21,222 (11.2) % Cash dividends applicable to the year... Per share (in yen and dollars) hydroelectric power stations, tunnels, and initiatives in developing nations. Change (%) 1,571,414 Consolidated Statements of Comprehensive Income on some of the world s most significant infrastructure projects, including 1,768, environmental solutions and housing. We have been primary contractor (except for per share figures) Contract backlog at the beginning of the year... New orders received during the year... Consolidated Statements of Operations international operations, real estate development, engineering, U.S. Dollars* In the 138 years since its establishment, Taisei Corporation has developed Our expertise extends to building construction, civil engineering, (except for per share figures) , ,712 1, , , , ,500 2,000 (Billions of Yen) (Billions of Yen) TAISEI CORPORATION ANNUAL REPORT 1

3 Six-Year Message Summary from the Management Six-Year Summary Basic Management Policy The Taisei Group shares among its directors and employees a common set of three core values referred to as the Taisei Spirit, guided by its Group Ideal to create a vibrant environment for all members of society. With a commitment to openness, the creation of value and the evolution of traditions, The Taisei Group works diligently to create safe and attractive spaces as well as work and living environments of exceptional value with the aim of providing products and services that are in harmony with nature. The Taisei Group also strives to support the creation of a wholesome global society that will benefi t all of humanity and be fi lled with hopes and dreams for the next generation. Medium-term Business Plan Taisei Corporation and the Taisei Group have positioned efforts to secure profi ts in a shrinking market as their principal business issue. In this context, steps were taken to formulate and implement a medium-term business plan, which covers the three-year period from fiscal 2009 to fiscal. Taking into consideration the very real prospect that construction demand will continue to contract, the Company readdressed its most pressing issues as of February and identified efforts to increase profi tability and improve its fi nancial strength as matters of immediate concern. Operating Results In fi scal, the fi scal year ended March 31,, economic growth in newly emerging nations was generally fi rm. Developed countries, on the other hand, failed to achieve a self-sustaining recovery with the overall pace of expansion considered moderate. On the domestic front, the Japanese economy continued to experience a mild recovery. This positive upswing, however, lacked power and depth. The scale of Japan s construction market contracted throughout the fiscal year under review. This was attributable to a variety of factors including the slump in domestic economic activity and the value of the yen which continued to hover at a high level. Weak operating conditions were exacerbated by cutbacks in corporate-sector capital expenditure and the persistent downturn in public-sector works. Overseas, construction markets were robust reflecting domestic demand growth in China and India and generally fi rm economic conditions throughout Asia and other regions. Under these circumstances, the Taisei Group continued to pursue its medium-term business plan, which covers the three-year period from fi scal 2009 to fi scal. In tackling the basic business issue of securing profi ts in a shrinking market, the Taisei Group recorded operating results for fi scal as follows. Orders and Net Sales In the fi scal year under review, orders were mainly supported by growth in Taisei Coropration s civil engineering projects As a result, the level recorded by the Taisei Group edged up 0.8% compared with the previous fi scal year to 1,254.0 billion. Net sales, on the other hand, fell across all business segments contracting in overall terms 15.5% year on year to 1,218.1 billion. Operating Income, Recurring Income and Net Income From an operating income perspective, results were impacted by the drop in gross profi t refl ecting the decline in net sales. Despite this downturn, operating income climbed 1.9% compared with the previous fiscal year to 36.2 billion. This was largely attributable to successful efforts to reduce costs, which led to lower selling, general and administrative expenses. Turning to recurring income, results were affected by an increase in exchange losses. Taking into consideration the deterioration in other expenses, recurring income contracted 13.3% year on year to 24.0 billion. In the fi scal year under review, net income dropped 48.7% compared with the previous fi scal year to 10.8 billion. This was mainly due to the decline in gains on sale of investment securities as well as the absence of the gains on negative goodwill recorded in the previous fi scal year. Outlook In fi scal, the fi scal year ending March 31, 2012, potential exists for the Japanese economy to enter a period of negative growth. This is attributable to the residual effects of a temporary stoppage in certain production activities and a drop in overall consumer confidence both due to the Great East Japan Earthquake. Business Issues In its medium-term business plan formulated in May 2009, the Taisei Group identifi ed the following fi ve business issues: (1) To restructure overseas business operations; (2) To thoroughly identify, assess and prioritize project risks in a pre-contract stage; (3) To select business fields and focus corporate resources on priority fields; (4) To upgrade project production system; and (5) To improve financial strength. In reconfirming its immediate priorities amid current operating conditions, the Taisei Group has consolidated business issues one to four under the overarching goal of increasing profi tability. While pursuing this increase in profi tability, every effort will also be directed toward to improving financial strength. Increasing Profitability 1. To restructure overseas business operations - Secure and increase earnings from existing construction projects in progress - Establish a new profi t management structure and system 2. To adhere strictly to risk management on an individual project basis - Tighten credit exposure management and project risk screening at the order stage - Bolster the project management function 3. To enhance price competitiveness by increasing productivity and reducing costs - Further reinforce procurement and purchasing capabilities - Reduce fi xed costs including personnel expenses 4. To allocate management resources on a priority basis to key fi elds (overseas, engineering, nuclear power and the environment) and to nurture human resources Improving Financial Strength 1. To promote asset liquidity aimed at enhancing capital effi ciency 2. To improve the balance of construction funding 3. To reduce interest-bearing liabilities The domestic construction market is expected to benefi t from reconstruction demand following the recent earthquake. In overall terms, however, demand is forecast to remain weak owing to the diffi cult conditions that continue to permeate the Japanese economy. Despite the large number of uncertainties that cloud the European and U.S. economies, the overseas construction market is anticipated to remain fi rm on the back of sound economic performance by China and other newly emerging nations. Based on the aforementioned, the Company is expected to witness several new order opportunities. Under these circumstances, consolidated net sales, operating income, recurring income and net income are forecast to total 1,340.0 billion, 37.0 billion, 27.0 billion and 12.0 billion, respectively, in the fi scal year ending March 31, Orders received are estimated to reach 1,370.0 billion. 2 TAISEI CORPORATION ANNUAL REPORT TAISEI CORPORATION ANNUAL REPORT 3

4 Six-Year in Summary Review Six-Year Summary The Taisei Corporation Group s operations are broadly divided into two three segments:civil engineering, Building construction and Real estate development. Other business includes such businesses as real estate management, business incidental to the construction business, leisure, and other service businesses, which were not included in reportable segments. Civil engineering The Taisei Group recorded net sales in this segment of billion, down 30.6% compared with the previous fi scal year. This was largely attributable to the drop in both Taisei Corporation and consolidated subsidiary sales. Refl ecting the deterioration in gross profi t, the Taisei Group incurred an operating loss of 600 million. This was compared with operating income totaling 5.0 billion in the fi scal year ended March 31,. Building construction The Taisei Group recorded net sales in this segment of billion, 7.3% lower than the previous fiscal year. This mainly refl ected the downturn in both Taisei Corporation and the Taisei Group s results. Buoyed by an improvement in the profi t margin of Taisei Corporation for this segment, operating income climbed 21.3% year on year to 35.4 billion. Real estate development The real estate development segment includes trading of real estate, construction/sales of condominiums, and real estate leasing. In the real estate sales market, the ratio of contracts to condominiums sold hovered at a high level against the backdrop of a positive balance between demand and supply as well as the favorable fl ow-on effects from tax relief enhancements for housing loans. Meanwhile, in the real estate leasing market, operating conditions remained harsh. For the fiscal year under review, corporate-sector offi ce demand failed to expand. Vacancy rates remained high while rents continued to decline. Under these circumstances, the Taisei Group reported a decrease in results in the real estate segment due to the substantial drop in Taisei Corporation s revenues. Segment net sales contracted 16.7% compared with the previous fi scal year totaling 79.1 billion. From a profit perspective, operating income was virtually zero due mainly to deterioration in the gross profit margins at Taisei Corporation and YURAKU REAL ESTATE CO., LTD. This was compared with operating income of 2.1 billion in the fiscal year ended March 31,. Other business Other business includes such businesses as real estate management, business incidental to the construction business including the provision of research and technology under contract and environmental measurement as well as leisure operations and other services, which were not included in reportable segments. In the property management and other businesses, continued emphasis was placed on the reduction of costs. Amid changes in existing management companies and the review of existing management company arrangements and specifications, competition among participating fi rms remained intense. This led to an overall diffi cult operating environment. Accounting for the aforementioned factors, the Taisei Group recorded net sales this segment of 55.3 billion, down3.8% compared with the previous fiscal year. Operating income contracted 4.7% year on year to 1.6 billion. Major Projects Orders received Project Nagoya Station New Building (Tentative Name) project (Aichi) Tokyo Outer Ring Road, Tajiri Area project (Tokyo) (Tentative Name) Kanda Surugadai 4-6 Construction project (Tokyo) Tokyo Electron Miyagi Ltd. New Factory Construction Project (Miyagi) Horonobe Underground Research Institution Construction project, Phase Construction, Operation & Maintenance and Research Support Affair (Hokkaido) Completed projects Project Tokyo International Airport Runaway D (Tokyo) New construction of facilities and buildings for the Futako Tamagawa-Higashi District Redevelopment Project Block III (Phase 1) (Tokyo) New construction of facilities and buildings for the Akasaka 4-chome Yagenzaka-Minami Area Urban Redevelopment Project (Tokyo) New construction of the Sendai Trust Tower (Miyagi) Yas Island Development, Phase 1, Zone R, Zone Name: Roads, Junctions, Bridges and Transportation Southern Tunnel Crossing (UAE) Client Central Japan Railway Co. / JR Central Building Co., Ltd. East Nippon Expressway Co., Ltd. Surugadai Development S.P.C. (S.P.C.: Specific Purpose Company) Tokyo Electron Miyagi Ltd. Horonobe Geo-Frontier PFI Co., Ltd. Client Ministry of Land, Infrastructure and Transport and Tourism, Kanto Regional Development Bureau Futako Tamagawa-Higashi District Redevelopment Association Akasaka 4-chome Yagenzaka-Minami Area Urban Redevelopment Association MORI TRUST CO., LTD. ALDAR Properties PJSC Projects carried over to the next fiscal year Project Client New Doha International Airport Passenger Terminal Complex (Qatar) New Doha International Airport Steering Committee The construction of the East unique share of East-West Motorway (Algeria) The National Motorways Agency (Ministry of Public Works) Marunouchi 2-chome Project (Tokyo) Japan Post Network Co., Ltd. Bosphoras Tube Crossing Tunnels and Stations Project, Turkey [Marmaray Project] (Turkey) The Republic of Turkey, The Ministry of Transportation, Railways, Harbours and Airports (Tentative Name) Otemachi 1-6 Planning, Construction Project (Tokyo) Tokyo Prime Stage Ltd. 4 TAISEI CORPORATION ANNUAL REPORT TAISEI CORPORATION ANNUAL REPORT 5

5 Six-Year Summary Years Ended March 31, and Financial Section Financial Review Years Ended March 31, and Millions of yen (except for per share figures) * (except for per share figures) Revenue: Net sales: Construction... 1,543,289 1,673,576 1,517,770 1,467,070 1,289,809 1,079,139 $ 12,978,220 Real estate (including... other) 200, , , , , ,980 1,671,437 Total... 1,743,994 1,873,325 1,711,714 1,641,182 1,441,975 1,218,119 14,649,657 % change from previous year 2.1% 7.4% (8.6)% (4.1)% (12.1)% (15.5)% Costs and expenses Cost of sales... 1,576,103 1,708,751 1,567,091 1,545,918 1,318,593 1,100,022 13,229,368 Selling, general and administrative expenses 112, ,901 95,767 95,920 87,755 81, ,800 Total... 1,688,820 1,815,652 1,662,858 1,641,838 1,406,348 1,181,825 14,213,168 Operating income (loss)... 55,174 57,673 48,856 (656) 35,627 36, ,489 Income (Loss) before income taxes and other... items 50,098 48,698 42,172 (38,449) 35,516 19, ,001 Income taxes... 19,064 20,248 13,878 (9,404) 14,462 8, ,393 Net income (loss)... 28,363 26,222 24,447 (24,401) 21,222 10,883 $ 130,884 Per share of common stock (in yen and dollars): Net assets $ Net income (loss) (22.93) Cash dividends Financial ratios: Net income (loss) as a percentage of total... revenue Total costs and expenses as a percentage of total revenue Dividends paid as a percentage of net income 1.6% 1.4% 1.4% (1.5)% 1.5% 0.9% 96.8% 96.9% 97.1% 100.0% 97.5% 97.0% 22.6% 24.4% 26.1% (21.8)% 25.3% 52.4% Financial position data: Current assets... 1,078,787 1,200,945 1,120,798 1,082, , ,467 $ 10,192,026 Current liabilities... 1,084,333 1,161,870 1,003,741 1,074, , ,052 9,718,004 Net property and... equipment 292, , , , , ,000 2,790,138 Long-term debt , , , , , ,607 2,833,518 Shareholders equity , , , , , ,282 3,491,064 Net assets , , , , ,598 3,494,864 Other data: New orders received... during the year Contract backlog at the... end of the year Shares issued (thou... sands) 1,773,996 1,875,127 1,753,692 1,524,578 1,244,439 1,254,095 $ 15,082,321 1,841,774 1,843,576 1,885,554 1,768,950 1,571,414 1,607,390 19,331,209 1,064,803 1,064,803 1,064,803 1,064,803 1,090,622 1,140,269 *U.S. dollar amounts were translated from yen, for convenience only, at the rate of US $ 1 = Operations In fiscal, the fi scal year ended March 31,, economic growth in newly emerging nations was generally firm. Developed countries, on the other hand, failed to achieve a self-sustaining recovery with the overall pace of expansion considered moderate. On the domestic front, the Japanese economy continued to experience a mild recovery. This positive upswing, however, lacked power and depth. The scale of Japan s construction market contracted throughout the fiscal year under review. This was attributable to a variety of factors including the slump in domestic economic activity and the value of the yen which continued to hover at a high level. Weak operating conditions were exacerbated by cutbacks in corporate-sector capital expenditure and the persistent downturn in public-sector works. Overseas, construction markets were robust reflecting domestic demand growth in China and India and generally firm economic conditions throughout Asia and other regions. Under these circumstances, the Taisei Group continued to pursue its medium-term business plan, which covers the three-year period from fi scal 2009 to fi scal. In tackling the basic business issue of securing profits in a shrinking market, the Taisei Group recorded operating results for fiscal as follows. Net Sales Net sales in the fi scal year ended March 31, amounted to 1,218.1 billion, a 15.5% decrease compared with the previous fiscal year. Operating Income, Recurring Income and Net Income From an operating income perspective, results were impacted by the drop in gross profit reflecting the decline in net sales. Despite this downturn, operating income climbed 1.9% compared with the previous fiscal year to 36.2 billion. This was largely attributable to successful efforts to reduce costs, which led to lower selling, general and administrative expenses. Turning to recurring income, results were affected by an increase in exchange losses. Taking into consideration the deterioration in other expenses, recurring income contracted 13.3% year on year to 24.0 billion. In the fi scal year under review, net income dropped 48.7% compared with the previous fiscal year to 10.8 billion. This was mainly due to the decline in gains on sale of investment securities as well as the absence of the gains on negative goodwill recorded in the previous fiscal year. Financial Positions Assets Total assets as of March 31, stood at 1,395.4 billion, a decrease of billion, or 7.1%, compared with the end of the previous fiscal year. This was mainly attributable to the decline in accounts receivable on completed works refl ecting progress in receivables collection. Liabilities Total liabilities contracted 99.2 billion, or 8.2%, compared with March 31, and amounted to 1,104.8 billion. In addition to the drop in deposits received, this largely reflected the decline in interest-bearing liabilities relating to fi nancing. Net Assets Net assets stood at billion as of March 31,. This was 6.5 billion, or 2.2%, lower than the end of the previous fiscal year. Despite the contribution of the net income for the period, net assets declined as a result of such factors as the decrease in unrealized holding gains on securities, net of taxes reflecting falling stock prices. Cash Flows Cash Flows from Operating Activities Net cash provided by operating activities totaled billion, up from 16.0 billion in the previous fiscal year. This was primarily attributable to the upturn in cash flows as a result of improved balance in constructionrelated activities. Cash Flows from Investing Activities Net cash used in investing activities amounted to 3.9 billion for the fi scal year under review. This was compared with net cash provided by investing activities of 40.8 billion in the previous fiscal year. The major cash outfl ows for the period were purchase of investment securities and purchase of property and equipment. Cash Flows from Financing Activities Net cash used in fi nancing activities for the fiscal year ended March 31, amounted to 64.7 billion, up from 46.3 billion in the previous fi scal year. The major cash outflow was the repayment of interest-bearing liabilities relating to financing. Taking into account each of the aforementioned activities, cash and cash equivalents as of March 31, stood at billion, an increase of 47.7 billion compared with the end of the previous fi scal year. In addition, the balance of interest-bearing liabilities relating to fi nancing was billion, down 58.7 billion compared with the previous fi scal year-end. Operating Income and Interest Coverage (times) Operating income (Billions of Yen) Interest and dividend income Interest expense Interest coverage Interest-bearing debt Net assets D/E ratio Interest-Bearing Debt and Net Assets Cash Flows (times) (Billions of Yen) Net cash provided by operating activities (Billions of Yen) Net cash provided by (used in) investing activities Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Note: Net increase (decrease) in cash includes the effect of exchange rate changes, not the increase by newly consolidated and excluded subsidiaries TAISEI CORPORATION ANNUAL REPORT TAISEI CORPORATION ANNUAL REPORT 7

6 Consolidated Balance Sheets March 31, and (Note 1) ASSETS Current assets: Cash and time deposits (Notes 3, 4 and 6) , ,996 $ 2,453,349 Receivables:... Trade notes (Note 4)... 13,471 24, ,026 Trade accounts (Note 4) , ,476 3,228,815 Loans Allowance for doubtful accounts... (676) (504) (6,061) Inventories: Development projects in progress, real estate (Note 6) , ,281 1,795,322 Raw materials and supplies... 10,899 10, ,465 Cost on uncompleted contract , ,596 1,306,025 Deferred income taxes (Note 8)... 39,315 37, ,203 Prepaid expenses and other current assets... 50,752 45, ,257 Total current assets , ,467 10,192,026 Property and equipment, at cost (Note 21): Land (Note 6) , ,185 1,866,326 Buildings and structures (Note 6) , ,663 1,835,995 Machinery and equipment (Note 6)... 62,414 60, ,648 Construction in progress , , ,952 4,425,159 Accumulated depreciation... (139,899) (135,952) (1,635,021) Net property and equipment , ,000 2,790,138 (Note 1) LIABILITIES AND NET ASSETS Current liabilities: Short-term borrowings (Notes 4 and 7) , ,425 $ 1,520,445 Commercial papers (Note 4) 29, Long-term debt due within one year (Notes 4 and 7)... 90, ,002 1,322,934 Trade payables (Note 4): Notes... 62,995 60, ,446 Accounts , ,039 3,656,512 Advances received and progress billings on uncompleted contracts , ,304 1,206,302 Income taxes payable... 4,473 1,126 13,542 Deposits received (Note 4)... 87,591 64, ,714 Allowance for losses on construction contracts... 11,867 10, ,721 Other current liabilities... 36,228 30, ,388 Total current liabilities , ,052 9,718,004 Long-term debt (Notes 4 and 7) , ,607 2,833,518 Allowance for employees severance and retirement benefits (Note 11)... 27,821 29, ,562 Allowance for accrued severance indemnities to directors and corporate auditors ,733 Deferred income taxes for revaluation of land (Notes 8 and 19)... 7,762 7,736 93,037 Allowance for losses on investments in subsidiaries and affiliates ,668 Allowance for environmental spending ,428 Assets retirement obligation (Notes 15) ,202 14,456 Other non-current liabilities... 22,538 21, ,568 Total long-term debt , ,843 3,569,970 Total liabilities... 1,204,111 1,104,895 13,287,974 Contingent liabilities and commitments (Note 18) Investments and other assets : Investments in unconsolidated subsidiaries and affiliated companies... 12,789 13, ,727 Investment securities (Notes 4, 5 and 6) , ,810 2,186,530 Deferred income taxes (Note 8)... 46,557 49, ,562 Other assets (Note 6) ,521 89,513 1,076,525 Allowance for doubtful accounts... (22,317) (17,933) (215,670) Total investments and other assets , ,026 3,800,674 Total assets... 1,501,290 1,395,493 $ 16,782,838 The accompanying notes are an integral part of these statements. Net assets (Notes 12 and 22): Shareholders equity : Common stock Authorized: 2,200,000,000 shares Issued: 1,140,268,860 shares , ,448 1,352,351 Capital surplus... 83,901 94,170 1,132,531 Retained earnings... 78,605 83,857 1,008,503 Less-Treasury stock, at cost... (175) (193) (2,321) Total shareholders equity , ,282 3,491,064 Accumulated other comprehensive income: Unrealized holding gains on securities, net of taxes... 16,213 4,792 57,631 Unrealized losses on hedging derivatives, net of taxes... (63) (138) (1,660) Revaluation reserve for land (Note 19)... (2,540) (2,483) (29,862) Foreign currency translation adjustments... (2,635) (3,064) (36,849) Total accumulated other comprehensive income... 10,975 (893) (10,740) Minority interests:... 11,425 1,209 14,540 Total net assets , ,598 3,494,864 Total liabilities and net assets... 1,501,290 1,395,493 $ 16,782,838 8 TAISEI CORPORATION ANNUAL REPORT TAISEI CORPORATION ANNUAL REPORT 9

7 Consolidated Statements of Operations Years Ended March 31, and Financial Section Consolidated Statements of Comprehensive Income Years Ended March 31, and (Note 1) Revenue: Net sales (Note 17):... Construction... 1,289,809 1,079,139 $ 12,978,220 Real estate (including other) , ,980 1,671,437 1,441,975 1,218,119 14,649,657 Costs and expenses (Note 17): Cost of sales (Note 20)... 1,318,593 1,100,022 13,229,368 Selling, general and administrative expenses (Note 20)... 87,755 81, ,800 1,406,348 1,181,825 14,213,168 Operating income... 35,627 36, ,489 (Note 1) Income before minority interest - 10,860 $ 130,607 Other comprehensive income - Unrealized holding gains on securities, net of taxes... - (11,503) (138,340) Unrealized losses on hedging derivatives, net of taxes... - (79) (950) Foreign currency translation adjustments... - (376) (4,522) Share of other comprehensive income of associates accounted for using equity method... - (67) (806) Total other comprehensive income (Note 23) - (12,025) (144,618) Comprehensive income (Note 23) - (1,165) (14,011) Other income (expense): Interest and dividend income... 3,438 3,283 39,483 Interest expense... (9,435) (8,678) (104,366) Miscellaneous Taxes... (769) (2,116) (25,448) Foreign exchange losses... (381) (4,040) (48,587) Gains on sale of investment securities... 15,302 1,259 15,141 Gains on negative goodwill... 12, Losses on investments in related companies... (1,087) (826) (9,934) Impairment losses on fixed assets (Note 21)... (3,088) (3,206) (38,557) Write-down of investment securities... (502) (2,522) (30,331) Allowance for doubtful accounts... (15,213) - - Bad debts expenses... (4,745) - - Other, net... 3,513 (74) (889) (111) (16,920) (203,488) Income before income taxes and other items... 35,516 19, ,001 Comprehensive income attribute to: owners of the parent... - (1,041) (12,520) minority interests... - (124) (1,491) The accompanying notes are an integral part of these statements. Income taxes (Note 8): Current... (4,303) (2,009) (24,161) Deferred... (10,159) (6,505) (78,233) (14,462) (8,514) (102,394) Income before minority interests... 21,054 10, ,607 Minority interest in net income of consolidated subsidiaries Net income 21,222 10,883 $ 130,884 Yen (Note 1) Amounts per share of common stock: Net income (Note 22) $ Diluted net income (Note 22) $ Cash dividends applicable to the year The accompanying notes are an integral part of these statements. 10 TAISEI CORPORATION ANNUAL REPORT TAISEI CORPORATION ANNUAL REPORT 11

8 Consolidated Statements of Changes in Net Assets Years Ended March 31, and Financial Section Consolidated Statements of Cash Flows Years Ended March 31, and Total shareholders equity Unrealized holding gains on securities, net of taxes Unrealized losses on hedging derivatives, net of taxes Revaluation reserve for land Foreign currency translation adjustments Total accumulated other comprehensive income Common stock Capital Surplus Retained earnings Treasury stock Minority interests Total net assets Balance at March 31, ,448 79,438 61,178 (159) 252,905 5,887 (410) (1,546) (1,532) 2,399 29, ,713 Increase by share exchanges , , ,467 Dividends ,789) - (4,789) (4,789) Net income ,222-21, ,222 Sale of treasury stock... - (4) Acquisition of treasury stock (24) (24) (24) Reversal of revaluation reserve for land (994) - (994) - - Changes other than shareholder's equity, , (1,103) 9,570 (17,984) (8,414) net... Balance at March 31, 112,448 83,901 78,605 (175) 274,779 16,213 (63) (2,540) (2,635) 10,975 11, ,179 Increase by share exchanges , , ,254 Dividends (5,574) - (5,574) (5,574) Net income ,883-10, ,883 Sale of treasury stock Acquisition of treasury stock (21) (21) (21) Reversal of revaluation reserve for land (57) - (57) Changes other than shareholder's equity, (11,421) (75) - (429) (11,925) (10,216) (22,141) net... Balance at March 31, 112,448 94,170 83,857 (193) 290,282 4,792 (138) (2,483) (3,064) (893) 1, ,598 (Note 1) Unrealized losses on Unrealized hedging holding gains derivatives, on securities, net of net of taxes taxes Total shareholders equity Revaluation reserve for land Foreign currency translation adjustments Total accumulated other comprehensive income Common Capital Retained Treasury Minority Total net stock Surplus earnings stock interests assets Balance at March 31, $ 1,352,351 $ 1,009,032 $ 945,340 $ (2,104) $ 3,304,619 $ 194,985 $ (758) $ (30,548) $ (31,690) $ 131,989 $ 137,402 $ 3,574,010 Increase by share exchanges , , ,319 Dividends (67,035) - (67,035) (67,035) Net income , , ,884 Sale of treasury stock Acquisition of treasury stock (253) (253) (253) Reversal of revaluation reserve for land (686) - (686) Changes other than shareholder's equity, (137,354) (902) - (5,159) (143,415) (122,862) (266,277) net... Balance at March 31, $ 1,352,351 $ 1,132,531 $ 1,008,503 $ (2,321) $ 3,491,064 $ 57,631 $ (1,660) $ (29,862) $ (36,849) $ (10,740) $ 14,540 $ 3,494,864 The accompanying notes are an integral part of these statements. (Note 1) 2009 Cash flows from operating activities: Income before income taxes and other items 35,516 19,374 $ 233,001 Adjustments to reconcile income before income taxes and other items to net cash provided by operating activities: Depreciation and amortization... 9,171 8, ,465 Impairment losses on fixed assets... 3,088 3,206 38,557 Interest and dividend income... (3,438) (3,283) (39,483) Interest expense... 9,435 8, ,366 Foreign exchange losses ,040 48,587 Write-down of investment securities ,522 30,331 Gains on sale of investment securities... (15,302) (1,259) (15,141) Losses (Gains) on sale of property and equipment... (3,261) Gains on negative goodwill... (12,856) - - Changes in assets and liabilities: Decrease in trade receivables... 42, ,202 1,217,102 Decrease in cost on uncompleted contract... 84,910 1,099 13,217 Decrease in inventories other than cost on uncompleted contract... 9,106 3,056 36,753 Decrease in trade payables... (114,710) (4,788) (57,583) Decrease in advances received and progress billings... (19,150) (2,366) (28,455) on uncompleted contracts... 14,757 (4,552) (54,744) Increase (decrease) in allowance for doubtful accounts... (2,261) (1,246) (14,985) Decrease in allowance for losses on construction contracts... 3,167 1,747 21,010 Increase in retirement benefits... (3,452) (23,252) (279,639) Decrease in deposit received... (13,631) 16, ,852 Other, net... 24, ,915 1,550,391 Cash received (paid) during the year for: Interest and dividends received... 3,646 3,679 44,245 Interest paid... (9,750) (8,568) (103,042) Income taxes paid... (2,090) (5,132) (61,720) Net cash provided by (used in) operating activities 16, ,894 1,429,874 Cash flows from investing activities: Decrease in time deposits... 1, ,330 Purchase of marketable and investment securities... (5,623) (6,468) (77,787) Proceeds from sale of marketable and investment securities... 46,324 7,353 88,431 Purchase of property, equipment and intangible assets... (6,255) (5,538) (66,603) Proceeds from sale of property, equipment and intangible assets... 5, ,925 Other, net... (325) (268) (3,223) Net cash provided by(used in) investing activities 40,871 (3,902) (46,927) Cash flows from financing activities: Decrease in short-term borrowings... (29,799) (33,614) (404,257) Decrease in commercial papers... (956) (29,990) (360,673) Proceeds from long-term debt... 94,314 97,974 1,178,280 Repayment of long-term debt... (104,733) (93,192) (1,120,770) Cash dividends paid, including those to minority interest... (4,789) (5,574) (67,035) Other, net... (340) (355) (4,270) Net cash provided by financing activities (46,303) (64,751) (778,725) Effect of exchange rate changes on cash and cash equivalents... (1,987) (2,496) (30,019) Net increase in cash and cash equivalents... 8,583 47, ,203 Cash and cash equivalents at beginning of year , ,929 1,875,274 Decrease in cash and cash equivalents resulting from change of scope of consolidation... (1,003) - - Cash and cash equivalents at end of year (Note 3) , ,674 $ 2,449,477 The accompanying notes are an integral part of these statements. 12 TAISEI CORPORATION ANNUAL REPORT TAISEI CORPORATION ANNUAL REPORT 13

9 Notes to Consolidated Financial Statements Years Ended March 31, and 1. Basis of Presenting Consolidated Financial Statements The accompanying consolidated fi nancial statements of Taisei Corporation (the Company ) and its consolidated subsidiaries have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Law and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan ( Japanese GAAP ), which are different in certain respects as to application and disclosure requirements from International Financial Reporting Standards. The accounts of consolidated overseas subsidiaries have been prepared in accordance with either International Financial Reporting Standards or U.S. generally accepted accounting principles, with adjustments for the specifi ed six items as applicable. Japanese GAAP requires that accounting policies and procedures applied by a parent company and its subsidiaries to similar transactions and events under similar circumstances should, in principle, be unifi ed for the preparation of the consolidated fi nancial statements. Japanese GAAP, however, as a tentative measure, allows a parent company to prepare consolidated financial statements using foreign subsidiaries fi nancial statements prepared in accordance with either International Financial Reporting Standards or U.S. generally accepted accounting principles. In this case, adjustments for the following six items are required in the consolidation process so that their impacts on net income are accounted for in accordance with Japanese GAAP unless the impact is not material. a) Goodwill not subject to amortization 2. Summary of Significant Accounting Policies (a) Consolidation and equity method The consolidated fi nancial statements include the accounts of the Company and its subsidiaries which were 34 and 28 for the years ended March 31, and, respectively. All signifi cant intercompany transactions and account balances were eliminated in consolidation. Investments in signifi cant affi liates, which were 9 companies for and,were accounted for by the equity method. The consolidated fi nancial statements are required to include the accounts of the Company and signifi cant companies which are controlled by the Company through substantial ownership of more than 50% of the voting rights or through ownership of high percentage of the voting rights, even if it is equal to or less than 50%, and existence of certain conditions evidencing controls by the Company of decisionmaking body of such companies. Investments in signifi cant affi liated companies, of which the Company has ownership of 20% or more but less than or equal to 50%, and of 15% or more and less than 20% and can exercise signifi cant infl uences over operating fi nancial policies of investees, have been accounted for by the equity method. All consolidated subsidiaries have the same balance sheet date, March 31, corresponding with that of the Company, except for 7 and 6 consolidated overseas subsidiaries for and, respectively, whose fi scal years end on December 31. Signifi cant transactions, if any, in the period until ended March 31, and were adjusted in the respective consolidated fi nancial statements. Effective for the year ended March 31,, the Company and its consolidated subsidiaries adopted ASBJ Statement No.16, Accounting Standard for equity method and ASBJ Guidance No.24, Guidance on Accounting Standard for equity method (both issued by the ASBJ on March 3, 2008). This change has no impact on the consolidated fi nancial statements. (b) Valuation of Assets and Liabilities of Subsidiaries In the elimination of the investments in subsidiaries, the assets and b) Actuarial gains and losses of defined-benefit retirement plans recognized outside profit or loss c) Capitalized expenditures for research and development activities d) Fair value measurement of investment properties, and revaluation of property, plant and equipment and intangible assets e) Retrospective treatment of a change in accounting policies f) Accounting for net income attributable to minority interests The accompanying consolidated fi nancial statements have been reformatted and translated into English (with some expanded descriptions) from the consolidated fi nancial statements of the Company prepared in accordance with Japanese GAAP and fi led with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Law. Certain supplementary information included in the statutory Japanese language consolidated fi nancial statements is not presented in the accompanying consolidated financial statements. The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers outside Japan, using the prevailing exchange rate at March 31,, which was to U.S. $1. The translations should not be construed as representations of what the Japanese yen amounts have been, could have been, or could in the future be when converted into U.S. dollars at this or any other rate of exchange. liabilities of the subsidiaries, including the portion attributable to minority shareholders, are recorded based on their fair value at the time the Company acquired control of the respective subsidiaries. (c) Goodwill Significant excesses of investment cost over net equity of consolidated subsidiaries and affiliated companies accounted for under the equity method are recognized as goodwill(negative goodwill, if credit balance), and they are amortized principally over fi ve years or less than twenty years on a straight-line basis for the years ended March 31, and, respectively. However goodwill charged to income in the year if the goodwill is immaterial. Negative goodwill are charged to income upon occurrence. (d) Foreign Currency Translation Receivables and payables denominated in foreign currencies are translated into Japanese yen at year-end exchange rates. The resulting exchange gains and losses are refl ected in the consolidated statements of income. All revenues and expenses associated with foreign currencies are translated at rates of exchange prevailing when such transactions are made. The fi nancial statements of consolidated foreign subsidiaries and affi liated companies under the equity method are translated into Japanese yen at exchange rates prevailing at the respective year-end dates except for shareholders equity accounts, which are translated at historical rates. The resulting foreign currency translation adjustments are presented in Accumulated other comprehensive income in the net assets section of the consolidated balance sheets. (e) Cash and cash equivalents in the Consolidated Statements of Cash Flows In preparing the consolidated statements of cash flows, cash on hand, readily-available deposits and short-term highly liquid investments with maturities of not exceeding three months at the time of purchase and with insignifi cant risks of change in value are considered to be cash and cash equivalents. (f) Marketable and Investment Securities Marketable and investment securities are classified, depending on management s intent, as (a) securities held for trading purposes (hereafter, trading securities ), (b) debt securities intended to be held to maturity (hereafter, held-to-maturity debt securities ), (c) equity securities issued by subsidiaries and affiliated companies, and (d) all other securities that are not classifi ed in any of the above categories (hereafter, available-for-sale securities ). Held-to-maturity debt securities are stated at amortized cost. Equity securities issued by subsidiaries and affiliated companies that are not consolidated or accounted for using the equity method are stated at moving-average cost. Available-for-sale securities with available fair market values are stated at fair market value. Unrealized gains and losses on these securities are reported, net of applicable income taxes, as a separate component of Accumulated other comprehensive income in the net assets section. Realized gains and losses on sale of such securities are computed using moving-average cost. Debt securities with no available fair market value are stated at amortized cost, net of an amount considered not collectible. Other securities with no available fair market value are stated at movingaverage cost. (g) Construction Contracts Effective from the year ended March 31,, the Company and its consolidated domestic subsidiaries adopted the Accounting Standard for Construction Contracts (Accounting Standards Board of Japan ( ASBJ ) Statement No.15, issued on December 27, 2007) and the Guidance on Accounting Standard for Construction Contracts (ASBJ Guidance No.18, issued on December 27, 2007). Contract revenue associated with construction contracts of which the outcome can be reliably estimated is accounted for by the percentage-of-completion method; otherwise contract revenue is accounted for by the completed-contract method. The percentage of completion at the end of the reporting period is determined by the percentage of the cost incurred to the estimated total costs. (h) Real Estate Business The Company and its certain subsidiaries develop real estate projects on their own account. Real estate inventories, including work in process of development, are mainly stated at the lower of cost based on the specific-identifi cation cost method or net realizable value. For this purpose, the cost includes the purchase cost of land, incidental costs, direct development costs and (in relation to certain developments by one of the subsidiaries) interest expense. Revenues from sales are recognized when titles of properties sold are transferred to customers. (i) Property and Equipment Property and equipment except for buildings are recorded at cost and depreciated principally by the declining-balance method using standard useful lives prescribed in the Corporation Tax Law. Buildings are principally depreciated using the straight-line method. (j) Accounting for lease transactions as lessee Finance leases, except for certain immaterial or short-term finance leases which do not transfer ownership are capitalized and depreciated using the straight-line method over lease periods, supporting estimated residual values to be zero. However, as permitted, finance leases commencing prior to April 1, 2008 which do not transfer ownership have been accounted for as operating lease with disclosure of certain as if capitalized information (to be referred to Note 13). (k) Derivatives and Hedge Accounting Derivative financial instruments are stated at fair value and changes in fair value are recognized as gains or losses unless derivative fi nancial instruments are used for hedging purposes. If derivative fi nancial instruments are used as hedges and meet certain hedging criteria, the Company and its consolidated domestic subsidiaries defer recognition of gains or losses resulting from changes in fair value of the derivative financial instruments until related losses or gains on hedged items are recognized. However, in cases where forward foreign exchange contracts are used as hedges and meet certain hedging criteria, forward foreign exchange contracts and hedged items are accounted for in the following manner: (1) If a forward foreign exchange contract is executed to hedge an existing foreign currency receivable or payable, a) the difference, if any, between the Japanese yen amount of the hedged foreign currency receivable or payable translated using the spot rate at the inception date of the contract and the book value of the receivable or payable is recognized in the income statement in the period which includes the inception date, and b) the discount or premium on the contract (that is, the difference between the Japanese yen amount of the contract translated using the contracted forward rate and that translated using the spot rate at the inception date of the contract) is recognized over the term of the contract. (2) If a forward foreign exchange contract is executed to hedge a future transaction denominated in a foreign currency, the future transaction will be recorded using the contracted forward rate, and no gains or losses on the forward foreign exchange contract are recognized. Also, if interest rate swap contracts are used as hedge and meet certain hedging criteria, net amounts to be paid or received under the interest rate swap contracts are added to or deducted from the interest on liabilities for which the swap contract were executed. (l) Allowance for Doubtful Accounts Allowance for doubtful accounts is provided to cover probable losses on collection. It consists of an estimated uncollectible amount of certain identifi ed doubtful receivables and an amount calculated applying percentages of losses on collection in the past to the rest of the receivables. (m) Income Taxes The Company and its wholly owned domestic subsidiaries apply the system of consolidated tax returns. The Company computes the provision for income taxes based on the pretax income included in the consolidated statement of income and recognizes deferred tax assets and liabilities for expected future tax consequences of temporary differences between the financial statement basis and the tax basis of assets and liabilities. (n) Severance and Retirement Benefits The Company and certain consolidated subsidiaries provide two types of severance and retirement benefi t plans for employees, unfunded lump-sum payment plans and funded non-contributory pension plans, under which all eligible employees are entitled to benefits based on the level of wages and salaries at the time of retirement or termination, length of service and certain other factors. The Company and its consolidated subsidiaries provided allowance for employees severance and retirement benefits at yearend based on estimated amounts of projected benefit obligation and fair value of the plan assets at that date. Past service costs are amortized using the straight-line method (some consolidated subsidiaries use the declining-balance method) over 1~10 years, which is not longer than an estimated average remaining service period of the employees. 14 TAISEI CORPORATION ANNUAL REPORT TAISEI CORPORATION ANNUAL REPORT 15