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1 ANNUAL REPORT 2013

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38 Years Ended March 31, 2012 and 2013 (except for per share figures) Thousands of U.S. Dollars* (except for per share figures) Change (%) Contract backlog at the beginning of the year... 1,607,390 1,663,458 $ 17,686, % New orders received during the year... 1,379,572 1,404,407 14,932, Net sales... 1,323,504 1,416,496 15,061, Contract backlog at the end of the year... 1,663,458 1,651,369 $ 17,558,416 (0.7) % Net income... 1,181 20,051 $ 213,195 1,592.3 % Per share (in yen and dollars) ,592.3 Cash dividends applicable to the year... 5,698 5,698 60, Per share (in yen and dollars) Net assets , ,300 3,650, Per share (in yen and dollars) Total assets... 1,494,696 1,543,095 16,407, * U.S. dollar amounts above and elsewhere in this Annual Report were translated from yen, for convenience only, at the rate of US $1 = 94.05, the approximate exchange rate at March 31, During the current term, the overall Japanese economy lacked strength as typifi ed by sluggish production and consumption mainly due to the slowdown of overseas economies and reactions to policy effects. In the second half of the fi scal year, however, the change of administration in Japan prompted the redressing of exchange rate levels and the recovery of stock prices, and this development and other factors combined to lead the Japanese economy to change its course and look for a road to recovery. In the domestic construction market, the business environment continued to be harsh as the competition to win orders remained fierce despite relatively strong demand. Orders and sales For the fi scal year ended March 31, 2013, orders stood at 1,404.4 billion yen, an increase of 1.8% year on year, due to rises in orders in the civil engineering business. Net sales in the year under review amounted to 1,416.4 billion yen, an increase of 7.0% year on year refl ecting increases in both the civil engineering and building construction businesses. Operating income, ordinary income and net income Operating income in the fi scal year ended March 31, 2013 totaled 35.6 billion yen, a decrease of 2.4% year on year despite lower selling, general and administrative expenses, due to a decrease in gross profi t refl ecting deteriorating profi tability emerging from multiple large-scale construction profi ts. Ordinary income in the fi scal year ended March 31, 2013 stood at 35.0 billion yen, an increase of 15.9% year on year, refl ecting improvement in non-operating income stemming from elimination of foreign exchange losses and other such factors. Net income for the fi scal year ended March 31, 2013 amounted to 20.0 billion yen, compared with net income of 1.1 billion yen for the previous fi scal year, due to higher extraordinary income stemming mainly from a decrease in impairment losses. During the fi scal year ending March 31, 2014, we expect to see a trend toward recovery throughout the year amid more positive business sentiment and increasingly robust consumer spending underpinned by government policy measures. The domestic construction market is likely to remain faced with a challenging operating climate due to prevailing supply-side risks that include potential for rising labor costs and intensifying competition, despite the likely prospect of heightened demand for real estate investment and corporate capital spending fueled in part by infl ationary expectations and an increased fl ow of funds targeting riskier investment. In consideration of the above-mentioned circumstances, we forecast consolidated net sales of 1,390 billion yen and consolidated operating income of 44 billion yen for the fi scal year ending March 31, In addition, we forecast consolidated ordinary income of 34 billion yen and consolidated net income of 18 billion yen for the fi scal year ending March 31, Furthermore, we forecast orders totaling 1,340 billion yen. 37 TAISEI ANNUAL REPORT 2013

39 The Company and the Affi liated Companies started their medium-term business plan with fi scal 2012 as its fi rst year and are implementing their strategies for each business and taking specifi c measures in accordance with the plan. Basic Policy 1. Fulfillment of social responsibilities on the construction industry 2. Establishment of a business structure for the creation of high-added value Business Issues (1) Construction business: Strengthening of the core business (2) Development/improvement of social infrastructure and Contribution to post-earthquake reconstruction (3) Overseas business: Establishment of an earnings structure (4) Strengthening of initiatives and expansion of business fields to create high-added value (5) Development/improvement of robust business foundations The Company and the Affi liated Companies will direct all their energies to projects for recovery from the Great East Japan Earthquake and countermeasures for deteriorating infrastructure, thus contributing to the future development and improvement of Japanese social infrastructure. The Affi liated Companies recognize the four items listed below as important issues to be addressed and will strive to achieve the business plan by tackling these issues. Due to growing demand for post-earthquake reconstruction, it is expected that in the future the labor market will continue to be tight while the prices of construction materials and machinery will rise sharply, and that market competition will become even fi ercer. The Affi liated Companies will, however, maintain and increase profi tability by enhancing their cost competitiveness, with a focus on enhancing their procurement capabilities. The Affi liated Companies are narrowing the number of overseas projects undertaken down to a level allowing appropriate risk management. In the years to come, they aim to consistently make a profi t from these projects by bolstering their profi t management system and focusing on the geographical regions and business sectors where they can make the most of their strengths. The Affi liated Companies will allocate their managerial resources to major affi liated companies inside and outside Japan appropriately so that they can respond to changes in their respective markets in a timely manner. They will also improve the Affi liated Companies profi t-making capabilities, mainly by applying the Company s procurement capabilities to those companies as well. The Affi liated Companies will strive to increase their internal reserves by improving, profi tability of the Company and the Affi liated Companies. They will also strive to strengthen their fi nancial structure by reducing interest-bearing debt through greater cash fl ow from operating activities. The numerical operating targets for the final year of the Medium-term Business Plan (the fiscal year ending March 31, 2015) Item Consolidated Non-consolidated Operating income 47 billion 36 billion Interest-bearing debt Less than 300 billion Less than 200 billion D/E ratio TAISEI ANNUAL REPORT

40 Years Ended March 31, 2012 and 2013 The Taisei Corporation Group s civil engineering sales in the year ended March 31, 2013 amounted to billion yen, an increase of 6.6% year on year, due to rising consolidated and non-consolidated sales. Civil engineering operating income for the fi scal year under review stood at 9.6 billion yen, a decrease of 26.4% year on year, affected by the deteriorating gross profi t ratio. The Taisei Corporation Group s building construction sales in the year ended March 31, 2013 amounted to billion yen, an increase of 7.4% year on year, due to rising consolidated and non-consolidated sales. Building construction operating income for the fi scal year under review stood at 19.2 billion yen, a decrease of 37.7% year on year, affected by the deteriorating gross profi t ratio. The Taisei Corporation Group s real estate development sales in the year ended March 31, 2013 amounted to billion yen, an increase of 1.3% year on year. Meanwhile, real estate development operating income of 5.6 billion yen was posted, compared with an operating loss of 8.7 billion yen for the fi scal year ended March 31, 2012, mainly due to a reversal of the evaluation loss on the Company s preferred shares posted in the previous fi scal year. Sales of the Taisei Corporation Group s other businesses in the fi scal year ended March 31, 2013 amounted to 12.0 billion yen, a decrease of 2.5% year on year. Operating income of other businesses for the fi scal year under review stood at 400 million yen, an increase of 41.8% year on year. Client Tokyo International Air Terminal Corporation Miyagi Prefecture DAIWA HOUSE INDUSTRY CO., LTD. TOKUSHUKAI MEDICAL CORPORATION West Nippon Expressway Company Limited Project Tokyo International Airport Passenger Terminal Building Extension work (Area E, F and D ( No.2)) Disaster-related wastes management (Kesennuma area of the Kesennuma Block) D Project-YOKOHAMA DAIKOKU New Construction (tentative name) Narita-Tomisato TOKUSHUKAI Hospital New Construction Construction work of the Shinmeishin Expressway Minoh tunnel East Client New Doha International Airport Steering Committee JAPAN POST Co., Ltd. Tokyo Metropolitan Government SURUGADAI KAIHATU TMK Japan Oil, Gas and Metals National Corporation Project New Doha International Airport Passenger Terminal Complex Marunouchi 2-choume Project (tentative name) Central Circular Shinagawa Route Shield Tunnel-2 Kanda-Surugadai 4-6 Project (tentative name) Namikata National LPG Storage Base Construction Project 39 TAISEI ANNUAL REPORT 2013

41 Years Ended March 31, 2012 and 2013 Millions of yen (except for per share figures) Thousands of U.S. Dollars* (except for per share figures) Revenue: Net sales: Construction... 1,517,770 1,467,070 1,289,809 1,079,139 1,171,927 1,254,291 $ 13,336,427 Real estate (including... other) 193, , , , , ,205 1,724,668 Total... 1,711,714 1,641,182 1,441,975 1,218,119 1,323,504 1,416,496 15,061,095 % change from previous year (8.6)% (4.1)% (12.1)% (15.5)% 8.7% 7.0% Costs and expenses Cost of sales... 1,567,091 1,545,918 1,318,593 1,100,022 1,206,014 1,304,677 13,872,164 Selling, general and administrative expenses 95,767 95,920 87,755 81,803 81,004 76, ,345 Total... 1,662,858 1,641,838 1,406,348 1,181,825 1,287,018 1,380,890 14,682,509 Operating income (loss)... 48,856 (656) 35,627 36,294 36,486 35, ,586 Income (loss) before income taxes and other... items 42,172 (38,449) 35,516 19,374 16,673 32, ,048 Income taxes... 13,878 (9,404) 14,462 8,514 15,480 12, ,834 Net income (loss)... 24,447 (24,401) 21,222 10,883 1,181 20,051 $ 213,195 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 1.4% (1.5)% 1.5% 0.9% 0.1% 1.4% 97.1% 100.0% 97.5% 97.0% 97.2% 97.5% 26.1% (21.8)% 25.3% 52.4% 482.5% 28.4% Financial position data: Current assets... 1,120,798 1,082, , , ,931 1,012,639 $ 10,767,028 Current liabilities... 1,003,741 1,074, , , , ,281 9,646,794 Net property and... equipment 244, , , , , ,076 2,191,132 Long-term debt , , , , , ,514 3,110,197 Shareholders equity , , , , , ,336 3,182,733 Net assets , , , , , ,300 3,650,186 Other data: New orders received... during the year Contract backlog at the... end of the year Shares issued... (thousands) 1,753,692 1,524,578 1,244,439 1,254,095 1,379,572 1,404,407 $ 14,932,557 1,885,554 1,768,950 1,571,414 1,607,390 1,663,458 1,651,369 17,558,416 1,064,803 1,064,803 1,090,622 1,140,269 1,140,269 1,140,269 *U.S. dollar amounts were translated from yen, for convenience only, at the rate of US $ 1 = TAISEI ANNUAL REPORT

42 Years Ended March 31, 2012 and 2013 Net Sales Net sales in the fi scal year ended March 31, 2013 amounted to 1,416.4 billion, a 7.0% increase compared with the previous fi scal year. Operating income, ordinary income and net income Operating income in the fiscal year ended March 31, 2013 totaled 35.6 billion yen, a decrease of 2.4% year on year despite lower selling, general and administrative expenses, due to a decrease in gross profit reflecting deteriorating profi tability emerging from multiple large-scale construction profi ts. Ordinary income in the fiscal year ended March 31, 2013 stood at 35.0 billion yen, an increase of 15.9% year on year, reflecting improvement in non-operating income stemming from elimination of foreign exchange losses and other such factors. Net income for the fiscal year ended March 31, 2013 amounted to 20.0 billion yen, compared with net income of 1.1 billion yen for the previous fi scal year, due to higher extraordinary income stemming mainly from a decrease in impairment losses. Assets The total assets for the fi scal year ended March 31, 2013 amounted to 1,543.0 billion yen, a year-on-year increase of 48.3 billion yen or 3.2%, mainly owing to a gain in investment securities amid stock market gains. Liabilities The total liabilities for the fi scal year ended March 31, 2013 stood at 1,199.7 billion yen, a year-on-year decrease of 2.2 billion yen or 0.2%, mainly due to a decline in interest-bearing debt related to fi nancing. Net Assets The total net assets for the fi scal year ended March 31, 2013 came to billion yen, a year-on-year increase of 50.6 billion yen or 17.3%, due to a higher valuation difference on available-for-sale securities resulting from stock market appreciation. Cash flow from operating activities The net cash provided by operating activities for the fi scal year ended March 31, 2013 stood at 73.0 billion yen, compared with billion yen for the fi scal year ended March 31, 2012, mainly a result of the Company generating 32.8 billion yen in income before income taxes. Cash flow from investing activities The net cash fl ow from investing activities for the fi scal year ended March 31, 2013 amounted to a negative 4.7 billion yen, compared with a negative 8.0 billion yen for the fi scal year ended March 31, 2012, due to the purchase of marketable and investment securities for the fi scal year under review. Cash flow from financing activities The net cash fl ow from fi nancing activities for the fi scal year ended March 31, 2013 amounted to a negative 46.5 billion yen, compared with a negative 58.8 billion yen for the fi scal year ended March 31, 2012, due to the repayment of interest-bearing debt in relation to fundraising during the fi scal year under review. As a result of the above-mentioned developments, cash and cash equivalents as at March 31, 2013 amounted to billion yen, an increase of 24.6 billion yen from March 31, The balance of interest-bearing loans payable in relation to fundraising as at March 31, 2013 stood at billion yen, a decrease of 40.1 billion yen from March 31, (times) Operating income (Billions of Yen) Interest and dividend income Interest expense Interest coverage Interest-bearing debt Net assets D/E ratio (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 ANNUAL REPORT 2013

43 Years Ended March 31, 2012 and 2013 Thousands of U.S. Dollars (Note 1) Current assets: Cash and time deposits (Notes 3, 4 and 6) , ,639 $ 2,835,077 Receivables:... Trade notes (Notes 4 and 7)... 17,407 12, ,037 Trade accounts (Note 4) , ,869 4,443,052 Loans Allowance for doubtful accounts... (1,112) (960) (10,207) Inventories: Development projects in progress, real estate (Note 6) , ,829 1,422,956 Raw materials and supplies... 10,250 5,375 57,150 Cost on uncompleted contract ,012 83, ,355 Deferred income taxes (Note 9)... 36,595 34, ,271 Prepaid expenses and other current assets (Note 7)... 52,267 58, ,922 Total current assets ,931 1,012,639 10,767,028 Property and equipment, at cost (Note 22): Land (Notes 6 and 11) , ,780 1,475,598 Buildings and structures (Notes 6 and 11) , ,108 1,521,616 Machinery and equipment (Note 6)... 57,960 57, ,973 Construction in progress , , ,722 3,612,142 Accumulated depreciation... (135,544) (133,646) (1,421,010) Net property and equipment , ,076 2,191,132 Investments and other assets : Investments in unconsolidated subsidiaries and affiliated companies... 13,052 3,288 34,960 Investment securities (Notes 4, 5 and 6) , ,083 2,701,574 Deferred income taxes (Note 9)... 38,277 11, ,458 Other assets (Note 6)... 81,982 62, ,372 Allowance for doubtful accounts... (15,191) (6,334) (67,347) Total investments and other assets , ,380 3,449,017 Total assets... 1,494,696 1,543,095 $ 16,407,177 The accompanying notes are an integral part of these balance sheets. TAISEI ANNUAL REPORT

44 Years Ended March 31, 2012 and 2013 Thousands of U.S. Dollars (Note 1) Current liabilities: Short-term borrowings (Notes 4 and 8) ,523 86,355 $ 918,182 Long-term debt due within one year (Notes 4 and 8)... 97,624 60, ,944 Trade payables: Notes (Notes 4 and 7)... 54,968 55, ,262 Accounts (Note 4) , ,074 4,572,823 Advances received and progress billings on uncompleted contracts , ,698 1,230,175 Allowance for losses on order received ,552 Income taxes payable... 4,885 1,039 11,047 Deposits received (Note 4)... 85,675 91, ,045 Allowance for losses on construction contracts... 24,084 31, ,568 Other current liabilities (Note 7)... 26,877 34, ,196 Total current liabilities , ,281 9,646,794 Long- term liabilities: Long-term debt (Notes 4 and 8) , ,966 2,466,411 Allowance for employees severance and retirement benefi ts (Note 12)... 31,860 33, ,628 Allowance for accrued severance indemnities to directors and corporate auditors ,540 Deferred income taxes for revaluation of land (Notes 9 and 20)... 5,922 5,696 60,564 Allowance for losses on investments in subsidiaries and affiliates... 1, ,401 Allowance for environmental spending ,275 Assets retirement obligation (Note 16)... 1,210 1,223 13,004 Other non-current liabilities... 20,927 18, ,373 Total long-term liabilities , ,514 3,110,196 Total liabilities... 1,202,094 1,199,795 12,756,990 Contingent liabilities and commitments (Note 19) Net assets (Notes 13 and 23): Shareholders equity : Common stock Authorized: 2,200,000,000 shares Issued: 1,140,268,860 shares , ,448 1,195,619 Capital surplus... 94,170 94,170 1,001,277 Retained earnings... 78,293 93, ,048 Less-Treasury stock, at cost... (197) (302) (3,211) Total shareholders equity , ,336 3,182,733 Accumulated other comprehensive income: Unrealized holding gains on securities, net of taxes... 9,943 45, ,368 Unrealized losses on hedging derivatives, net of taxes... (62) (208) (2,212) Revaluation reserve for land (Note 20)... (587) (960) (10,207) Foreign currency translation adjustments... (2,739) (2,569) (27,315) Total accumulated other comprehensive income... 6,555 42, ,634 Minority interests:... 1,333 1,770 18,820 Total net assets , ,300 3,650,187 Total liabilities and net assets... 1,494,696 1,543,095 $ 16,407, TAISEI ANNUAL REPORT 2013

45 Years Ended March 31, 2012 and 2013 Thousands of U.S. Dollars (Note 1) Revenue: Net sales (Note 18):... Construction... 1,171,927 1,254,291 $ 13,336,427 Real estate (including other) , ,205 1,724,668 1,323,504 1,416,496 15,061,095 Costs and expenses (Note 18): Cost of sales (Note 21)... 1,206,014 1,304,677 13,872,164 Selling, general and administrative expenses (Note 21)... 81,004 76, ,345 1,287,018 1,380,890 14,682,509 Operating income... 36,486 35, ,586 Other income (expense): Interest and dividend income... 3,171 3,295 35,035 Interest expense... (7,505) (6,312) (67,113) Miscellaneous Taxes... (365) (159) (1,691) Foreign exchange gains (losses)... (1,934) 2,710 28,814 Gains on sale of investment securities... 1, Gains on sale of property and equipment ,934 Losses on sale of investment securities... - (4) (43) Losses on investments in related companies... (1,570) - - Impairment losses on fi xed assets (Note 22)... (12,174) (1,402) (14,907) Losses on write-down of investment securities... (558) (170) (1,808) Losses on disposal of fi xed assets... (106) (200) (2,127) Other, net... (215) (1,000) (10,632) (19,813) (2,778) (29,538) Income before income taxes and other items... 16,673 32, ,048 Income taxes (Note 9): Current... (6,337) (3,623) (38,522) Deferred... (9,143) (8,776) (93,312) (15,480) (12,399) (131,834) Income before minority interests... 1,193 20, ,214 Minority interest in net income of consolidated subsidiaries... (12) (378) (4,019) Net income 1,181 20,051 $ 213,195 Yen U.S. Dollars (Note 1) Amounts per share of common stock: Net income (Note 23) $ Diluted net income (Note 23) Cash dividends applicable to the year The accompanying notes are an integral part of these statements. TAISEI ANNUAL REPORT

46 Years Ended March 31, 2012 and 2013 Thousands of U.S. Dollars (Note 1) Income before minority interest 1,193 20,429 $ 217,214 Other comprehensive income (Note 24) Unrealized holding gains on securities, net of taxes... 5,159 35, ,669 Unrealized gains (losses) on hedging derivatives, net of taxes (144) (1,531) Revaluation reserve for land Foreign currency translation adjustments ,350 Share of other comprehensive income of associates accounted for using equity method... (35) 99 1,053 Total other comprehensive income 6,469 36, ,541 Comprehensive income 7,662 56,501 $ 600,755 Comprehensive income attribute to: owners of the parent... 7,581 56, ,119 minority interests ,636 The accompanying notes are an integral part of these statements. 45 TAISEI ANNUAL REPORT 2013

47 Years Ended March 31, 2012 and 2013 Common stock Capital Surplus Retained earnings Treasury stock 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 Minority interests Balance at March 31, ,448 94,170 83,857 (193) 290,282 4,792 (138) (2,483) (3,064) (893) 1, ,598 Dividends (5,697) - (5,697) (5,697) Net income ,181-1, ,181 Sale of treasury stock... - (0) Acquisition of treasury stock (5) (5) (5) Reversal of revaluation reserve for land (1,048) - (1,048) - - 1,048-1, Changes other than shareholders equity, , , ,524 net... Balance at March 31, ,448 94,170 78,293 (197) 284,714 9,943 (62) (587) (2,739) 6,555 1, ,602 Dividends (5,697) - (5,697) (5,697) Net income ,051-20, ,051 Sale of treasury stock... - (0) Acquisition of treasury stock (106) (106) (106) Reversal of revaluation reserve for land (373) - (373) - 0 Changes other than shareholders equity, ,988 (146) , ,449 net... Balance at March 31, ,448 94,170 93,020 (302) 299,336 45,931 (208) (960) (2,569) 42,194 1, ,300 Total net assets Common stock Capital Surplus Retained earnings Treasury stock Thousands of U.S. Dollars (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 Minority interests Balance at March 31, 2012 $ 1,195,619 $ 1,001,277 $ 832,461 $ (2,095) $ 3,027,262 $ 105,720 $ (660) $ (6,241) $ (29,123) $ 69,696 $ 14,174 $ 3,111,132 Dividends (60,574) - (60,574) (60,574) Net income , , ,195 Sale of treasury stock Acquisition of treasury stock (1,127) (1,127) (1,127) Reversal of revaluation reserve for land ,966-3, (3,966) - (3,966) - 0 Changes other than shareholders equity, ,648 (1,552) - 1, ,904 4, ,550 net... Balance at March 31, 2013 $ 1,195,619 $ 1,001,277 $ 989,048 $ (3,211) $ 3,182,733 $ 488,368 $ (2,212) $ (10,207) $ (27,315) $ 448,634 $ 18,820 $ 3,650,187 The accompanying notes are an integral part of these statements. Total net assets TAISEI ANNUAL REPORT

48 Years Ended March 31, 2012 and 2013 Thousands of U.S. Dollars (Note 1) Cash flows from operating activities: Income before income taxes and other items 16,673 32,828 $ 349,048 Adjustments to reconcile income before income taxes and other items to net cash provided by operating activities: Depreciation and amortization... 8,002 6,866 73,004 Impairment losses on fi xed assets... 12,174 1,402 14,907 Interest and dividend income... (3,171) (3,295) (35,035) Interest expense... 7,505 6,312 67,113 Foreign exchange losses (Gains)... 1,934 (2,710) (28,814) losses (Gains) on write-down of investment securities... 12, ,264 losses (Gains) on sale of investment securities... (1,365) 4 43 Losses (Gains) on sale of property and equipment... (78) (464) (4,934) Losses on disposal of fixed assets ,127 Losses (gains) on write-down of real estate for sale... 5,772 3,229 34,333 Changes in assets and liabilities: Decrease (Increase) in trade receivables... (92,192) (45,069) (479,203) Decrease (Increase) in cost on uncompleted contract... (2,131) 27, ,538 Decrease (Increase) in inventories other than cost on uncompleted contract... 8,425 17, ,296 Increase (Decrease) in trade payables... 83,356 38, ,051 Increase (Decrease) in advances received and progress billings on uncompleted contracts... 31,761 (16,606) (176,566) Increase (Decrease)in allowance for doubtful accounts... (2,132) (9,012) (95,821) Increase (Decrease) in allowance for losses on construction contracts... 13,465 7,193 76,481 Increase (Decrease) in retirement benefi ts... 2,305 1,866 19,841 Increase (Decrease) in deposit received... 21,510 6,028 64,094 Other, net... (12,378) 1, , ,199 82, ,661 Cash received (paid) during the year for: Interest and dividends received... 3,100 3,619 38,480 Interest paid... (7,572) (6,373) (67,762) Income taxes paid... (2,627) (6,615) (70,335) Net cash provided by (used in) operating activities 105,100 73, ,044 Cash flows from investing activities: Decrease (Increase) in time deposits... (2,259) 1,753 18,639 Purchase of marketable and investment securities... (5,832) (11,627) (123,626) Proceeds from sale of marketable and investment securities... 5,170 6,521 69,335 Purchase of property, equipment and intangible assets... (6,722) (6,284) (66,816) Proceeds from sale of property, equipment and intangible assets... 1,947 4,193 44,583 Other, net... (399) 741 7,880 Net cash provided by(used in) investing activities (8,095) (4,703) (50,005) Cash flows from financing activities: Increase (Decrease) in short-term borrowings... (23,901) (16,168) (171,909) Payment for retirement by purchase of convertible bond... 0 (20,276) (215,587) Proceeds from long-term debt... 89, ,810 1,093,142 Repayment of long-term debt... (118,323) (106,818) (1,135,758) Cash dividends paid, including those to minority interest... (5,698) (5,697) (60,574) Other, net... (296) (402) (4,274) Net cash provided by (used in) fi nancing activities (58,822) (46,551) (494,960) Effect of exchange rate changes on cash and cash equivalents... (694) 2,783 29,590 Net increase (Decrease) in cash and cash equivalents... 37,489 24, ,669 Cash and cash equivalents at beginning of year , ,163 2,564,200 Cash and cash equivalents at end of year (Note 3) , ,773 $ 2,825,869 The accompanying notes are an integral part of these statements. 47 TAISEI ANNUAL REPORT 2013

49 Years Ended March 31, 2012 and 2013 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 of 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 fi ve items as applicable. Japanese GAAP requires that accounting policies and procedures applied to a parent company and its subsidiaries for 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 fi nancial 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, the following fi ve items should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP unless they are not material. a) Goodwill not subject to amortization 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) 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 but not required for fair presentation, is not presented in the accompanying consolidated fi nancial 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, 2013, 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. (a) Consolidation and equity method The consolidated fi nancial statements include the accounts of the Company and its subsidiaries which were 25 and 25 for the years ended March 31, 2012 and 2013, respectively. All signifi cant intercompany transactions and account balances were eliminated in consolidation. Investments in signifi cant affi liates, which were 7 and 7 companies for 2012 and 2013, respectively, 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 5 and 6 consolidated overseas subsidiaries for 2012 and 2013, respectively, whose fi scal years end on December 31. Signifi cant transactions, if any, in the period until ended March 31, 2012 and 2013 were adjusted in the respective consolidated fi nancial statements. (b) Valuation of Assets and Liabilities of Subsidiaries In the elimination of the investments in subsidiaries, the assets and 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 Signifi cant excesses of investment cost over net equity of consolidated subsidiaries and affi liated companies accounted for under the equity method are recognized as goodwill (negative goodwill, if credit balance), and goodwill is amortized principally the estimated useful life of years or less than twenty years on a straight-line basis. However, immaterial goodwill charged to income in the year of acquisition. Negative goodwill is credited 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 fl ows, cash on hand, readily available deposits and short-term highly liquid investments with maturities not exceeding three months at the date of purchase and with insignifi cant risks of change in value are considered to be cash and cash equivalents. TAISEI ANNUAL REPORT

50 Years Ended March 31, 2012 and 2013 (f) Marketable and Investment Securities Marketable and investment securities are classifi ed, 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 affi liated 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 moving-average cost. (g) Construction Contracts Contract revenue associated with construction contracts of which the outcome can be reliably estimated is accounted for using the percentage-of-completion method; other contract revenue is accounted for using the completed-contract method. The percentage of completion at the end of the reporting period is determined by the ratio 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-identification 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 fi nance 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. (k) Derivatives and Hedge Accounting Derivative fi nancial 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 fi nancial 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 reserve for probable losses from bad debt. It consists of the estimated uncollectible amount of certain identifi ed doubtful receivables and the amount estimated on the basis of the past default ratio for normal 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 fi nancial 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, funded noncontributory pension plans and unfunded lump-sum payment plans, under which all eligible employees are entitled to benefi ts 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 benefi ts at yearend based on estimated amounts of projected benefi t obligation and 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 to 10 years, which is not longer than an estimated average remaining service period of the employees when the costs are incurred. Unrecognized actuarial gains and losses are amortized from the subsequent fi nancial year using the straight-line method (some consolidated subsidiaries use the declining-balance method) over 1 to 10 years, which is not longer than an estimated average remaining service period of the employees when the gains or losses are incurred. As from April 1, 2013, the Company will transfer a part of the future service benefi t of the funded non-contributory pension plan to defi ned-contribution pension plan, based on the agreement of the Company and its labor union on December 25, TAISEI ANNUAL REPORT 2013

51 (o) Allowances for accrued severance indemnities to directors and corporate auditors of certain consolidated subsidiaries have been set up in accordance with each company s regulations. (p) Allowance for Warranty on Completed Contracts Allowance for warranty on completed contracts is provided as the amount estimated using an actual ratio of related losses during the past certain periods. (q) Allowance for Losses on Construction Contracts Allowance for losses on construction contracts is provided with respect to construction projects for which eventual losses are reasonably estimated. (r) Allowance for Losses on Order Received Allowance for losses on order received is provided with respect to orders (excluding construction contracts) for which eventual losses are reasonably estimated. (s) Allowance for Losses on Investments in Subsidiaries and Affiliates Allowance for losses on investments in subsidiaries and affi liates is provided for estimated losses from certain subsidiaries and affi liates in liquidation. (t) Allowance for Environmental Spending Allowance for environmental spending is provided based on estimated costs for disposal of Polychlorinated Biphenyl ( PCB ) waste, which is obligated to dispose by the Act on Special Measures Concerning Promotion of Proper Treatment of PCB Waste. (u) Net Income and Cash Dividends per Share Net income per share is calculated by dividing net income available to common shares by the weighted average number of common shares outstanding during the year. Diluted net income per share is calculated similarly, except that it includes the dilutive effect of the assumed exercise of securities. Cash dividends per share shown for each year represent dividends declared as applicable to the respective years. (v) Recognizing Appropriations of Retained Earnings In accordance with the customary practice in Japan, the appropriations are not accrued in the financial statements for the period to which they relate, but are recorded in the period in which they were resolved. Retained earnings at March 31, 2012 include amounts representing the year-end cash dividends, which were resolved at the shareholders meeting held on June 28, 2012 as described in Note 25. (w) Accounting Standard for Accounting Changes and Error Corrections The Company adopted ASBJ Statement No.24, Accounting Standard for Accounting Changes and Error Corrections, and ASBJ Guidance No.24, Guidance on Accounting Standard for Accounting Changes and Error Corrections (both issued by the ASBJ on December 4, 2009) for accounting changes and corrections of prior period errors which are made from the beginning of fi scal year ended March 31, (x) Reclassifications Certain prior year amounts have been reclassifi ed to conform to the current year presentation. These reclassifi cations have no impact on previously reported results of operations or retained earnings. (y) Change in accounting policy which is difficult to distinguish from the changes in accounting estimate Accompanying revisions in the Corporate Tax Law, the Company and its certain consolidated subsidiaries have changed their method of depreciation for tangible fi xed assets acquired on or after April 1, 2012, based on the revised Law. The effect of this change is immaterial on the fi nancial statements. (z) Accounting standards issued but not yet adopted From the viewpoint of improvement to fi nancial reporting and international convergence, the ASBJ has been deliberating the establishment of a revised accounting standard for retirement benefi ts, ASBJ Statement No.26, Accounting Standard for Retirement Benefi ts (issued on May 17, 2012) and ASBJ Guidance No. 25, Guidance on Accounting Standard for Retirement Benefi t (issued on May 17, 2013), which mainly focus on (a) how actuarial gains and losses and prior service cost should be accounted for, (b) how projected benefi t obligations and current service costs should be determined and (c) enhancement of disclosures. This revised accounting standard, though not yet adopted by the Company and its consolidated subsidiaries, will be introduced and made effective from the end of fi scal The resulting impacts on future consolidated fi nancial statements are being examined. (1) Cash and cash equivalents at March 31, 2012 and 2013 consisted of the following: Thousands of U.S. Dollars Cash and time deposits , ,639 $ 2,835,077 Less: Time deposits with maturities exceeding three months... (2,574) (866) (9,208) Cash and cash equivalents , ,773 $ 2,825,869 TAISEI ANNUAL REPORT

52 Years Ended March 31, 2012 and 2013 (1) Policies for using financial instruments The Company and its consolidated subsidiaries (hereafter referred as the Companies ) restrict investments to the low risk assets such as deposits, and raise funds by the indirect fi nance such as borrowings from bank as well as by the direct fi nance such as issuing corporate bonds or commercial papers. Derivative fi nancial instruments are employed mainly for hedging fl uctuation in interest rate and foreign currency exchange, and not used to speculate. Receivables: trade notes and trade accounts are exposed to the credit risks of customers. In order to reduce such risks, the Companies conduct strict credit examinations when orders are received, and afterward manage the receivables individually and make effort to direct reduction of credit risks early. For investment securities which are mainly held-to-maturity debt securities and shares held to keep the relationship with business partners, the Companies regularly monitor the fair values or fi nancial positions of the invested companies, and revise the portfolio (except for held-to-maturity debt securities) considering the relationship with them. Debts, trade payables: notes and accounts are debts mostly due within one year. Borrowings, commercial papers and bonds are primarily for working capital, and have maturity date of fi ve years or less. For variable interest rate borrowings or bonds, they are exposed to the interest rate fl uctuation risks. These risks are hedged by derivative transactions (interest rate swap contracts). The Companies primarily utilize derivative transactions related to interest rates in order to mitigate the fl uctuation risks in interest rates or to reduce fi nancing costs, and derivative transactions related to currency in order to mitigate the foreign exchange risks. These transactions are exposed to the fl uctuation risks in interest rates and the foreign exchange risks. However, the Companies are exposed to limited risks, because most of them are hedged by the corresponding transactions. They consider the credit risk to be little, because they conduct derivative transactions solely with reliable international fi nancial institutions. The derivative transactions are executed and managed by their Finance Department in accordance with the established policies and within the specifi ed limits on the amounts of derivative transactions allowed. (2) Fair Value of Financial Instruments (a) Book values of the fi nancial instruments included in the consolidated balance sheet, the fair values of said items as of March 31, 2012 and 2013, were as follows. Items for which it is extremely diffi cult to calculate the fair value were not included in the following table (see Note 2 below) Book Value Fair Value Difference [ASSETS] Cash and time deposits 243, ,737 - Receivables: Trade notes and Trade accounts 384, ,676 (103) Investment securities Debt securities intended to be held to maturity Available-for-sale securities 125, ,345 - [LIABILITIES] Trade payables: Notes and Accounts 447, ,521 - Short-term borrowings and Long term debt due within one year 200, ,196 (1,049) Deposits received 85,675 85,675 - Long-term debt 219, ,203 (4,102) Derivative fi nancial instruments (*) (95) (95) Book Value Fair Value Difference [ASSETS] Cash and time deposits 266, ,639 - Receivables: Trade notes and Trade accounts 430, ,933 (167) Investment securities Debt securities intended to be held to maturity Available-for-sale securities 183, ,971 - [LIABILITIES] Trade payables: Notes and Accounts 485, ,400 - Short-term borrowings and Long term debt due within one year 147, ,695 (589) Deposits received 91,703 91,703 - Long-term debt 231, ,614 (3,648) Derivative fi nancial instruments (*) (316) (316) - 51 TAISEI ANNUAL REPORT 2013