SECURITIES REPORT. (Report under Section 1, Article 24 of the Securities and Exchange Law)

Transcription

1 SECURITIES REPORT (Report under Section 1, Article 24 of the Securities and Exchange Law) Fiscal Year (41st Term) (from January 1, 2003 to December 31, 2003) CTI Engineering Co., Ltd. ( ) 9-11, Nihonbashi-honcho 4-chome, Chuo-ku, Tokyo

2 41st Term from January 1, 2003 to December 31, 2003 SECURITIES REPORT 1. This securities report is the one obtained by attaching the table of contents to the paginating data on the securities report compiled under Article 24 Section 1 of the Securities and Exchange Law, which was submitted on March 30, 2004 through the Electronic Disclosure for Investors Network (EDINET) stipulated in Article 27 Section 30.2 of the Law, and by outputting and printing the data. 2. This report does not include documents attached to the securities report submitted using the method mentioned above, but the audit reports are inserted at the end of this report. (The above mentioned audit reports are omitted from the English translation.) CTI Engineering Co., Ltd.

3 Contents Page 41st Term SECURITIES REPORT [Cover]... 1 Part1: CORPORATE INFORMATION... 2 CHAPTER 1: General Changes in Major Management Indices Chronology Business Contents Situation of Subsidiary Situation of employees... 6 CHAPTER 2: BUSINESS SITUATION Outline of Results Production, orders received and sales Our tasks ahead Important agreement related to the management Research and development activities CHAPTER 3: FACILITIES & EQUIPMENT Outline of Investment into Facilities and Equipment Major facilities and equipment New Construction or Removal Plan for Equipment CHAPTER 4: STATUS OF THE COMPANY Status of Shares Acquirement of Treasury Stocks Dividend Policy Change in Stock Price Executive Management CHAPTER 5: STATUS OF ACCOUNTING Consolidated Financial Statements and Other Materials Non-Consolidated Financial Statements and Other Materials Chapter 6: Shareholder Related Information Chapter 7: Reference Part2: SURETY COMPANY S INFORMATION... 63

4 Cover Document submitted Securities report Legal basis Section 1, Article 24 of the Securities and Exchange Law Recipient of document Director of the Kanto Local Finance Bureau Date of submission March 30, 2004 Fiscal Year 41st term (from January 1, 2003 to December 31, 2003) Company name CTI Engineering Co., Ltd. Representative Kazuya Oshima, Representative Director & President Address of Head Office 9th Chuo Bldg., 9-11, Nihombashi-honcho 4-chome, Chuo-ku, Tokyo Telephone Contact Konomu Uchimura, Managing Director Address for Inquiries 9th Chuo Bldg., 9-11, Nihombashi-honcho 4-chome, Chuo-ku, Tokyo Telephone Contact Konomu Uchimura, Managing Director Place Available for Public Inspection Osaka Office of CTI Engineering Co., Ltd. (2-15, Otemae 1-chome, Chuo-ku, Osaka) Tokyo Stock Exchange, Inc. (2-1, Nihombashi Kabutocho, Chuo-ku, Tokyo) Note: This document has been translated from the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail.

5 Part1: CORPORATE INFORMATION CHAPTER 1: General 1. Changes in Major Management Indices (1) Consolidated Management Indices of the Company Fiscal year 37th term 38th term 39th term 40th term 41st term Fiscal year-end December 1999 December 2000 December 2001 December 2002 December 2003 Sales amount Ordinary profit Net income Net assets Total assets (million (million (million (million (million 31,066 31,071 28,957 27,749 1,895 1,998 2,001 1, ,384 14,688 15,514 16,270 31,184 32,257 32,958 30,898 Net assets per share ( 1, , , , Net income per share ( Net income per share after adjustment of potential shares ( Net worth ratio (%) Profit ratio of net worth (%) Price earnings ratio (times) Cash flow from operating business activities (million 1,734 2,359 2, Cash flow from investment activities Cash flow from financial activities Closing balance of cash and cash equivalents (million (million (million 71, ,872 8,189 9,941 10,973 9,206 Number of employees (plus average number of temporary employees) (persons) ( ) 1,105 (345) 1,042 (364) 1,029 (372) 1,029 (371) Note: 1. Preparation of Consolidated Financial Statements started from the 38th term. 2. Sales amount does not include consumption tax 3. Net income per share after adjustment of potential shares is not entered after the 38th term because no potential shares have been issued.

6 (2) Non-Consolidated Management Indices of the Company Fiscal year 37th term 38th term 39th term 40th term 41st term Fiscal year-end December 1999 December 2000 December 2001 December 2002 December 2003 Sales amount Ordinary profit Net income Capital stock (million (million (million (million 31,759 30,198 30,339 28,305 26,801 1,941 1,858 1,873 1,944 1, ,025 3,025 3,025 3,025 3,025 Number of outstanding shares (shares) 14,159,086 14,159,086 14,159,086 14,159,086 14,159,086 Net assets Total assets (million (million 14,188 14,353 14,605 15,414 16,161 29,360 30,767 31,870 32,349 30,363 Net assets per share ( 1, , , , , Cash Dividend per share (Interim dividend per share) ( ( ) ( ) ( ) ( ) ( ) Net income per share ( Net income per share after adjustment of potential shares ( Net worth ratio (%) Profit ratio of net worth (%) Price earnings ratio (times) Divided Payout ratio (%) Number of employees (plus average number of temporary employees) (persons) 1,077 (330) 1,056 (339) 989 (360) 979 (372) 978 (371) Note: 1. Sales amount does not include consumption tax. 2. The Company implemented stock splits at a ratio of 1 for 1.1 shares on February 19, Net income per share is calculated as if the stock split had been implemented at the beginning of the term. 3. The cash dividend per share for the 37th term includes a dividend of 2 yen paid in commemoration of the Company obtaining a listing on the First Section of the Tokyo Stock Exchange. Those for the 38th and 40th terms each include a special dividend of 1 yen. That for the 41st term includes a dividend of 1 yen paid in commemoration of the 40th anniversary of the Company s foundation. 4. Net income per share after adjustment of potential shares is not entered after the 37th term because no potential shares have been issued. 5. From the 38th term, number of working employees is entered as the number of employees.

7 2. Chronology Date Outline April 1963 Established Kensetsu Giken KK in Ginza-nishi (Ginza 3-chome at present), Chuo-ku, Tokyo to conduct engineering consulting business April 1963 Started business at the Head Office and Osaka Office in Minami-ku (Chuo-ku at present), Osaka at the same time as company establishment February 1964 Changed trading name to KK Kensetsu Gijutsu Kenkyujo (= CTI Engineering Co., Ltd.) December 1964 Registered at the Ministry of Construction as a construction consultant (No ) June 1967 Opened Fukuoka Liaison Office (Fukuoka Office at present) in Fukuoka-shi, Fukuoka April 1969 Moved the Head Office to Nihonbashi-koamicho, Chuuo-ku, Tokyo September 1973 Moved the Head Office to Nihonbashi-honcho, Chuo-ku, Tokyo January 1975 Opened Overseas Project Office (Overseas Department at present) in the Head Office to increase the number of oversea project orders April 1976 Opened Sendai Liaison Office (Sendai Office at present) in Sendai, Miyagi September 1976 Opened Nagoya Liaison Office (Nagoya Office at present) in Nakamura-ku, Nagoya April 1977 Opened Hiroshima Liaison Office (Hiroshima Branch Office at present) in Hiroshima-shi, Hiroshima July 1980 Opened Okinawa Liaison Office (Okinawa Branch Office at present) in Urazoe-shi, Okinawa April 1983 Opened Niigata Liaison Office (Niigata Branch Office at present) in Niigata-shi, Niigata and Takamatsu Liaison Office (Takamatsu Branch Office at present) in Takamatsu-shi, Kagawa December 1983 Established CTI Chousasekkei KK to be exclusively engaged in construction management projects April 1985 Opened Nagasaki Liaison Office (Nagasaki Branch Office at present) in Nagasaki-shi, Nagasaki June 1988 Opened Sapporo Liaison Office (Sapporo Branch Office at present) in Chuo-ku, Sapporo and Yokohama Liaison Office (Yokohama Branch Office at present) in Naka-ku, Yokohama July 1989 Opened Front Department to be in charge of hydraulic model experiments for dams, rivers and erosion control September 1990 Opened Fukui Liaison Office (Fukui Branch Office at present) in Fukui-shi, Fukui April 1991 Opened Tokyo Office in Nihonbashi-honcho, Chuo-ku, Tokyo in preparation for larger-scale business April 1994 Opened CM Headquarters in the Head Office to participate in Construction Management (CM) business acting as an agent in construction projects ranging from planning and design through to selection of constructor and construction control April 1994 Opened Shizuoka Liaison Office (Shizuoka Branch Office at present) in Shizuoka-shi, Shizuoka June 1994 Registered over-the-counter stock with the Japan Securities Dealers Association April 1995 Opened Kagoshima Branch Office in Kagoshima-shi, Kagoshima August 1996 Changed organization of the Front Dept. and opened Tsukuba Research Center in Tsukuba-shi, Ibaragi October 1996 Stock listed on the Second Section of the Tokyo Stock Exchange May 1997 Opened Kobe Branch Office in Chuo-ku, Kobe-shi September 1997 Opened Kanazawa Branch Office in Kanazawa-shi, Ishikawa September 1997 Constructed the Company s own building, which focuses on environment-consciousness, in Chuo-ku, Fukuoka as the first base-isolated building in Kyushu March 1998 Promoted Sendai Branch and Nagoya Branch to Sendai Office and Nagoya Office respectively April 1999 Established CTI Engineering International Co., Ltd. to isolate overseas operations making it independent of other operations April 1999 Assigned the goodwill of the overseas division to the CTI Engineering International April 1999 Opened Aomori Branch Office in Aomori-shi, Aomori and Okayama Branch Office in Okayama-shi, Okayama June 1999 Stock listed on the First Section of the Tokyo Stock Exchange December 1999 Established Management Techno Co., Ltd. to be exclusively engaged in management businesses April 2000 Opened Management Business Department to be in charge of management business April 2000 Opened Yamanashi Branch Office in Kofu-shi, Yamanashi, Gifu Branch Office in Gifu-shi, Gifu, Shiga Branch Office in Otsu-shi, Shiga and Nara Branch Office in Nara-shi, Nara March 2001 With its main purposes being geological and related environmental activities, CTI Geo-Environment Co., Ltd. was established. April 2001 Construction of the Company s own environmentally friendly headquarters in Omiya City (presently Saitama City), Saitama Prefecture. November 2001 With its main purposes being environmental investigation activities, the CTI Environmental Techno. Co., Ltd. was established. April 2003 CTI Academy Co., Ltd. was established to specialize in training, the conducting of seminars, and other businesses.

8 3. Business Contents The Company s group consists of CTI Engineering Co., Ltd. (hereinafter the Company ) and other subsidiaries all of which are engaged in engineering consulting business related to public works for rivers, dams, roads, environment and information, etc. In the settlement of the current term, there is one consolidated subsidiary and no affiliated company carried by the equity method. Descriptions of the Company s group businesses, including the Company and other related companies, are shown as follows: (i) Domestic operations Consulting engineering services including planning, research, feasibility studies, design, client support, construction supervision, management for operation and maintenance for public works in Japan as well as incidental system development, maintenance and supporting of general clerical works make up the main areas of the Company s domestic business operations. (ii) Overseas operations Consulting engineering services for overall public works projects including project finding, formulation of master plans, planning, research, feasibility studies, design, construction supervision and management for operation and maintenance in overseas market make up the main areas of Company s overseas business operations. The Company is in charge of these services together with its subsidiary CTI Engineering International Co., Ltd. The above description can be shown in the business chart below. Domestic client Overseas client Submission of deliverables Submission of deliverables Submission of deliverables Our company Consulting engineering services for public works Planning, research feasibility studies, design, client support, construction supervision and management for operation and maintenance System development and maintenance Supporting of general clerical works Outsourcing of a part of services Submission of deliverables Outsourcing of clerical works Outsourcing of a part of services Submission of deliverables * Management Techno Co. Ltd. * CTI Geo-Environment Co., Ltd. * CTI Chousasekkei * CTI Environment Techno Co., Ltd. * CTI Ground Planning Co., Ltd. * TEC Consultants CTI Academy Co., Ltd. CTI Meitsu Fukuoka Consolidated subsidiary CTI Engineering International Co., Ltd. Consulting engineering business for overall public works projects Planning, research feasibility studies design, construction supervision and management for operation and maintenance Note: Subsidiaries marked with asterisks are excluded from consolidation range due to a lower degree of importance concerning scale.

9 4. Situation of Subsidiary Company name Address Capital (thousand Major business contents Voting right ratio (%) Relation contents Consolidated subsidiary CTI Engineering International Co., Ltd. Chuo-ku, Tokyo 100,000 Engineering consulting for overseas market 70.0 Receiving orders for engineering consulting services in overseas markets with the Company. The Company guarantees some debts. 5. Situation of employees (1) Situation of consolidated Subsidiary Number of employees (persons) 1,029(371) Note: Number of employees shows the number of regular workers. For temporary employees, the average number of additional temporary workers for the year is shown in ( ). (2) Situation of the Company Number of employees (persons) Age on average (years old) Average length of employment (years) Average yearly wage ( 978(371) ,294,046 Note: 1. Number of employees shows the number of regular workers. For temporary employees, the average number of additional temporary workers for the year is shown in ( ). 2. The average yearly wage contains bonus and extra wages. (3) Situation of labor union At the submitting company, a labor union has been organized as follows: (i) Name: Kensetsugiken Roudou Kumiai (ii) Umbrella organization: National Federation of Construction Engineering Worker s Unions for Japan (iii) Number of union members: 622 (as of December 31, 2003) (iv) Other: There is no matter in particular to be mentioned, and labor-management relations are maintained in a stable manner based on mutual trust.

10 CHAPTER 2: BUSINESS SITUATION 1. Outline of Results (1) Results During the current consolidated fiscal year, the Japanese economy saw the employment situation continue to be harsh, but corporate earnings and capital investments started to show signs of recovery. In the construction consulting industry, investments in public utilities generally remained sluggish reflecting the difficulties facing the national and local governments in terms of budgets, and the industry continued to experience difficulties such as falling unit order prices. On the other hand, an increasing number of clients adopted the proposal method (contracts based on technological proposals), prompting the selection of contractors through technological competition. Given these circumstances, because the proposal method will lead to the stable acceptance of orders in the future, the CTI Engineering Group further stepped up efforts related to this method, thus increasing the ratio of orders secured using it. A look at the details of orders accepted indicates that the environment and information sectors grew, while the Group s business showed new developments, such as the increase in construction management and other project implementation management services. Orders accepted in these new areas include the Isawa Dam Construction Management Services and Comprehensive Consulting Services for Municipal Mergers (Nagaoka Area Voluntary Merger Council). In addition, the CTI Engineering Group used the proposal method to receive an order from the Cabinet Office for undertaking on contract the operation of PFI seminars held at various locations nationwide, and this exemplifies the positive response to the Group s active PFI-related efforts. All of the social infrastructures developed during the period of rapid economic growth will soon be requiring renovation. In order to take steps for this, asset management is being introduced in various sectors, and in response to this move, the CTI Engineering Group actively developed sales activities based on technological proposals to ensure rational operation and maintenance, while also extending the life of social infrastructures, thereby increasing the number of orders received. Furthermore, the challenge was taken up of entering new technological areas and receiving orders for various projects, including an investigation regarding the restoration of Japan s oldest existing suspension bridge and the first studies in Japan concerning methods for removing dams. Due to the fall of unit order prices caused by intensifying competition and other factors, however, the number of orders received remained sluggish. As a result, the value of orders received, including that for CTI Engineering International Co., Ltd., a consolidated subsidiary of CTI Engineering, fell by 6.9% YOY, to 26,607 million yen, with income from completed services down by 4.2% YOY, to 27,749 million yen. Ordinary profits decreased by 12.3%, to 1,756 million yen, and the current net income dropped by 5.9% YOY to 885 million yen. Initial profit plans were largely fulfilled, however. (2) Cash Flow At the end of the current consolidated fiscal year, cash and cash equivalent (hereinafter referred to as capital ) decreased by 1,767 million yen YOY, to 9,206 million yen. The cash flow position for the current consolidated fiscal year and the responsible factors are as follows: (Cash flow from sales activities) Capital obtained from sales activities totaled 240 million yen, a 88.2% decline YOY. Net income before income taxes and other adjustments of 1,677 million yen is used as a basis, and this decline is mainly attributed

11 to a decrease of 335 million yen in the retirement benefit reserve, an increase of 184 million yen in trade receivables, and the payment of corporation income taxes, etc. amount to 1,069 million yen. (Cash flow from investment activities) Capital used as a result of investment activities totaled 100 million yen, a 71.2% decrease YOY. This is largely attributed to an expenditure of 106 million yen for the acquisition of software and other intangible fixed assets. (Cash flow from financial activities) Capital used as a result of financial activities totaled 1,872 million yen, a 198.8% increase YOY. This is largely attributed to a repayment of 1,477 million yen for long-term borrowings.

12 2. Production, orders received and sales The Company s group is engaged in a single business as engineering consulting and incidental services. The Company does not have business categories other than this, and its statements below are shown with a single segment. (1) Production results Category Current consolidated fiscal year (From January 1, 2003 to December 31, 2003) Change from the same term in previous year (%) Engineering consulting 27, Total 27, Note: The amounts are calculated according to the sales prices. (2) Order receiving situation Category Current consolidated fiscal year (From January 1, 2003 to December 31, 2003) Orders received (million Change from the same term in previous year (%) Orders in hand (million Change from the same term in previous year (%) Engineering consulting 26, , Total 26, , Note: The amounts are calculated according to the sales prices. (3) Sales results 1) Sales results Category Current consolidated fiscal year (From January 1, 2003 to December 31, 2003) Change from the same term in previous year (%) Engineering consulting 27, Total 27, Note: The amounts are calculated according to the sales prices. 2) Sales results by client In the current consolidated fiscal year, the clients representing at least 10% of the total sales results are as follows: Client Previous consolidated fiscal year (From January 1, 2002 to December 31, 2002) Amount Ratio (%) Current consolidated fiscal year (From January 1, 2003 to December 31, 2003) Amount Ratio (%) National Government 9, ,

13 3. Our tasks ahead In the draft government budget for fiscal 2004, public works expenditures decreased by 3.3% compared to the initial budget for fiscal 2003, and local autonomous bodies are also faced with financial difficulties. Therefore, it is projected that price competition will further intensify in the construction consulting industry. Meanwhile, an increasing number of local autonomous bodies are adopting the proposal method, and it is certain that technological competition will also expand steadily. In addition, a shift in the focus of services from hardware to software is under way, and it is expected that needs for project implementation management services, which typifies this shift, will grow further in the future. Given this situation, the CTI Engineering Group will aggressively advance the following policies: (1) Clarification and strengthening of business development strategies Clarification and strengthening of strategies for key and new areas, as well as those for further development with particular emphasis on making an all-out effort to maintain the Group s market share in the key areas (2) Organizational reinforcement for winning the competition over price and technology Organizational restructuring, personnel reallocation and hiring of additional engineers for improved technological capabilities and service quality (3) Realization of lower-cost structure Further reductions in personnel, outsourcing, and other expenses By implementing these policies, the CTI Engineering Group will increase the number of its engineers and realize a low-cost structure, while also ending the decline in the number of orders received, thereby achieving a U-shaped recovery in business performance and establishing a firm foundation for future sustainable growth. 4. Important agreement related to the management Not applicable. 5. Research and development activities The CTI Group have been expanding services both in Japan and overseas, while focusing primarily on consulting services related to the construction industry. In this respect, the group endeavor research and development activities without placing the foundry between Japan and overseas. Specifically, research regarding management projects and national land and culture were conducted as part of strategic research, and priority investments were made regarding issues that fit into this approach. During the current consolidated fiscal year, the CTI Engineering Group invested a total of 555 million yen, chiefly in the research and development topics listed below, to energetically promote research and development. (1) Strategic research - Research and development of management business - Research in national land and culture (new public management, asset management for social infrastructures, urban renewal, comprehensive disaster prevention, technology to protect cultural assets from disasters, utilization of IT for society, and international business models) (2) Research in commercialization (environmental rehabilitation and cleanup, municipal mergers, consolidation of dam projects, and commercialization of disaster prevention) (3) Research and studies (support of recovery from disasters, water quality protection measures, rationalization of water management, predictions concerning ecosystems, etc.)

14 CHAPTER 3: FACILITIES & EQUIPMENT 1. Outline of Investment into Facilities and Equipment To enhance the client-focused sales activities and to improve the service-performing environment, the Company s group invested 93 million yen in facilities and equipment. In the current consolidated fiscal year, the Company has not made any investment into or sold or removed any facilities or equipment that would seriously affect production capacity.

15 2. Major facilities and equipment Major facilities and equipment of the Company s group are as shown below. (1) Company submitting the report Establishment (location) Head Office (Chuo-ku, Tokyo) Tokyo Head Office (Chuo-ku, Tokyo) Kanto Office (Urawa-ku, Saitama) Research Center Tsukuba (Tsukuba-shi, Ibaraki) Yono Dormitory (Chuo-ku, Saitama) Kyushu Office (Chuo-ku, Fukuoka) Business line General administration facilities Buildings and structures Machinery and delivery equipment Book value Land (area: m 2 ) Others As of December 31, 2003 Total Office Office 1,092 0 Office and laboratory facilities Welfare facilities Office (1,978) 1,937 (50,605) 820 (1,565) 1,025 (1,136) 46 1, , , ,660 Number of employees (persons) 67 (3) 252 (132) 148 (47) Note: 1. Land area of Research Center Tsukuba includes the area of 14,895 m2 leased from a party other than the consolidated company. 2. The number of temporary employees is given in ( ) with the average additional number for the year. 35 (26) ( ) 129 ( ) (2) Subsidiaries in Japan Not applicable. (3) Subsidiaries out of Japan Not applicable. 3. New Construction or Removal Plan for Equipment year. There are no plans for any construction or removal of major equipment at the end of this consolidated fiscal

16 CHAPTER 4: STATUS OF THE COMPANY 1. Status of Shares (1) Total Number of Shares, etc. (i) Total Number of Shares Type Total number of shares to be issued (shares) Common stock 40,000,000 Total 40,000,000 (ii) Number of Shares Issued Type Issued shares as of the end of the fiscal year (shares) (December 31, 2003) Issued shares as of the date for submission (shares) (March 30, 2004) Common stock 14,159,086 14,159,086 Listed stock exchanges or securities dealers association at which the Company s stock is registered Tokyo Exchange Section Stock First Total 14,159,086 14,159,086 Details (2) Stock options, etc. Not applicable. (3) Change in total number of shares issued and capital stock Date Increase/decrease in the total number of shares issued (shares) Increase/decrease Total number of in capital shares issued (shares) Capital Increase/decrease in capital reserve Capital reserve February 19, 1999 (Note) 1,287,189 14,159,086 3,025 4,122 Note: Increase due to stock splits at a ratio of 1 for 1.1 shares

17 (4) Shareholders Category Number of shareholders (persons) Number of shares held (units) Government and local public entities Financial institutions Distribution of shares (Number of shares per unit: 100 shares) Securities companies Other corporations Foreign corporations etc. Individuals included in foreign corporations, etc. Individuals etc. As of December 31, 2003 Total Shares below a unit (shares) ,891 3,092 40,905 1,426 10,974 2, , ,940 65,086 Shareholdin g ratio (%) Note: 1. Among treasury stocks (4,516 stocks), 45 units are counted as Individuals etc. and 16 stocks are counted as Shares below a unit in the table above. Note that, however, 4,516 is the number indicated on the shareholders list. The number of stocks actually held is 4,416 stocks as of December 31, Other corporations and Shares below a unit in the table above include 231 units of shares and 72 shares held by the Securities Custody and Transfer Organization respectively. (5) Major shareholders Name CTI Engineering Employees Stocksharing Association The Master Trust Bank of Japan, Ltd. (trust account) Address 9th Chuo Bldg., 9-11, Nihonbashihoncho 4-chome, Chuo-ku, Tokyo 11-3, Hamamatsucho 2-chome, Minatoku, Tokyo Number of shares held (thousand) As of December 31, 2003 Ratio of the number of shares held against the number of shares issued (%) 2, Sumitomo Life Insurance Company 8-11, Harumi 1-chome, Chuo-ku, Tokyo UFJ Trust Bank Limited 4-3, Marunouchi 1-chome, Chiyoda-ku, Tokyo Mizuho Corporate Bank, Ltd. 8-12, Harumi 1-chome, Chuo-ku, Tokyo UFJ Bank Limited Shiteitan State Street Trust and Banking Corp. Nihon Life Insurance 21-24, Nishiki 3-chome, Naka-ku, Nagoya 3-1, Toranomon 4-chome, Minato-ku, Tokyo 2-2, Yurakucho 1-chome, Chiyoda-ku, Tokyo Daiichi Life Insurance 8-12, Harumi 1-chome, Chuo-ku, Tokyo Japan Trustee Services Bank, Ltd. (trust account) 18-11, Harumi 1-chome, Chuo-ku, Tokyo Total 5, Note: 676,000 of the shares held by The Mater Trus Bank of Japan, Ltd. (trust account), all of the shares held by State Street Trust and Banking Corp. (Shiteitan ) and 234,000 of the shares held by The Japan Trustee Services Bank, Ltd. (trust account) are related to trust operations.

18 (6) Voting rights (i) Issued Shares Category Number of shares (stock) Number of voting rights (votes) Nonvoting shares As of December 31, 2003 Shares with limited voting rights (Treasury stocks, etc.) Shares with limited voting rights (Others) Shares with complete voting rights (Treasury stocks) (Treasury stocks, etc) Ordinary stocks 4,400 Shares with complete voting rights (Others) Ordinary stocks 14,089, ,896 Shares below a unit Ordinary stocks 65,086 Total number of shares issued 14,159,086 Voting rights of total shareholders 140,896 Details Note: 1. Included in Shares with complete voting rights (others) are 23,100 shares (231 votes) registered in the name of the Japan Securities Depository Center, Inc. 2. Included in Shares below a unit are 16 treasury stocks held by the Company. (ii) Treasury Stocks, etc. Name of owners CTI Engineering Co., Ltd. Number of shares held in Address of owners its own name (shares) 9th Chuo Bldg., 9-11, Nihonbashi-honcho 4-chome, Chuo-ku, Tokyo Number of shares held disguised ownership (shares) As of December 31, 2003 Ratio of the shares Total number held against the total of shares held number of shares (shares) issued (%) 4,400 4, Total 4,400 4, Note: In addition to above, there are 100 stocks (one vote) which should be owned by us according to the shareholders list but are not actually owned by us. These stocks are included in Others under Shares with complete voting rights in the table of Issued Shares above. (7) Contents of the stock option system Not applicable.

19 2. Acquirement of Treasury Stocks (1) Purchase of the Company s Own Shares through a Resolution by the Regular General Meeting of Shareholders or the Meeting of the Board of Directors (i) State of treasury stocks acquired during the previous resolution period Not applicable. (ii) Resolutions relative to acquired treasury stocks at this ordinary general meeting of shareholders Not applicable. (2) State of Decrease in Capital Stock, Purchase of the Treasury Stock Relative to Write-Offs with Net Profit As Set Forth in Articles of Incorporation or of Callable Stocks (i) State of treasury stocks acquired during the previous resolution period Not applicable. (ii) Resolutions relative to acquired treasury stocks at this ordinary general meeting of shareholders Not applicable. 3. Dividend Policy Management at CTIE believes that long-term growth and the payment of stable dividends conform with the expectations of our shareholders. Also, because CTIE s business is engineering consulting, the company has a highly public profile. Not only is stable management thus essential, but the company must also maintain an appropriate level of internal reserves. In commemoration of its 40th anniversary, the Company will pay a dividend of 12 yen per share for the current fiscal year, and this consists of an ordinary dividend of 11 yen and a commemorative dividend of 1 yen. Internal reserves, meanwhile, are being applied to advance investments in new technological fields such as operations for responding to new implementation systems for public works projects. 4. Change in Stock Price (1) Highest and lowest stock prices for the past five fiscal years Fiscal year 37th term 38th term 39th term 40th term 41st term Fiscal year end December 1999 December 2000 December 2001 December 2002 December 2003 Highest ( 1, Lowest ( Note: The highest and lowest stock prices are those marked on the Second Section of the Tokyo Stock Exchange until May 31, 1999 and are on the First Section of the Tokyo Stock Exchange from June 1, (2) Highest and lowest stock prices by month for the past six months Month July 2003 August 2003 September 2003 October 2003 November 2003 December 2003 Highest ( Lowest ( Note: The highest and lowest stock prices are those marked on the First Section of the Tokyo Stock Exchange.

20 5. Executive Management Board menber position Chairman & Representative Director President & Representative Director Senior Managing Director Managing Director Company position Administrator, Tokyo Head Office Name Date of birth Career Yumio Ishii December 4, 1935 Kazuya Oshima July 8, 1946 Tetsuzo Okada November 28, 1945 Hiroaki Nakaya February 24, 1940 April 1959 April 1963 June 1975 May 1982 June 1988 Joined Civil Engineering Research Laboratory Joined CTI Engineering General Manager, Water Resources Div. I Director & Member of the Board Managing Director March 1991 Senior Managing Director and Tokyo Office Branch Administrator March 1994 Vice President & Representative Director March 1995 President & Representative Director March 2003 Chairman & Representative Director (present post) April 1969 Joined CTI Engineering April 1991 General Manager, Water Resources Div. II, Tokyo Office April 1994 Chief, Human Intelligence Dept., Tokyo Office March 1995 Director & Member of the Board April 1997 Deputy Branch Administrator, Tokyo Office March 1998 Managing Director April 1999 Tokyo Office (Tokyo Head Office at present) Branch Administrator March 2000 Senior Managing Director March 2001 Vice President March 2002 Vice President & Representative Director March 2003 President & Representative Director (present post) April 1970 Joined Shin-Nihon Gijutsu Consultant Corp. July 1976 Joined CTI Engineering April 1991 General Manager, Highway & Bridges Div. II Osaka Office April 1995 Deputy Chief, Road & Traffic Dept. Osaka Office March 1997 Director & Member of the Board and Chief, Road & Traffic Dept. Tokyo Office April 1999 Deputy Branch Administrator, Tokyo Office March 2000 Managing Director and Chief, Headquarters Business Development Dept. March 2003 Senior Managing Director and Administrator of Tokyo Head Office (present post) April 1963 Joined the Ministry of Construction July 1967 Transferred to Science and Technology Agency October 1972 Transferred to Prime Minister s Office June 1974 Transferred to National Land Agency July 1979 Transferred to Okinawa Development Agency April 1986 Joined Kagawa Prefectural Office April 1988 Joined Hyogo Prefectural Office April 1990 Joined CTI Engineering March 1993 Director & Member of the Board April 1993 Deputy Chief, Headquarters Research & Development Dept. March 1994 Chief, Headquarters Quality Management Dept. April 1997 Chief, Construction Management Headquarters March 1999 Managing Director and Branch Administrator of Fukuoka Office April 2002 President & Representative Director of Management Techno Co., Ltd. (present post) Number of shares held (thousand)

21 Board menber position Managing Director Managing Director Managing Director Managing Director Managing Director Company position Branch Administrator, Osaka Office Branch Administrator, Kyushu Office Chief, Headquarters Research & Development Dept. Chief, Headquarters Business Development Dept. General Manager, Headquarters Operation Development Dept. Name Date of birth Career April 1968 Joined CTI Engineering April 1990 General Manager, Urban & Regional Planning Div. Human Intelligence Dept. April 1993 General Affairs Div. General Manager, Tokyo Office April 1997 General Manager, General Affairs Div., Hiroshi Ide November 12, 1943 Headquarters Management Dept. March 1998 Director & Member of the Board March 1999 Chief, Headquarters Management Dept. March 2000 Managing Director (present post) April 2001 Branch Administrator of Tohoku Office March 2003 Branch Administrator of Osaka Office (present post) April 1964 Joined the Ministry of Construction April 1982 Manager of Ryumon Dam Works, Kyushu Region Construction Bureau, Ministry of Construction April 1987 Supervisor of the Waterways Development Planning Section, Kanto Region Construction Bureau, Ministry of Construction July 1989 Planning Division Manager, Kyushu Region Construction Bureau, Ministry of Construction Mizuho Imamura June 7, 1940 April 1991 Joined Okayama Prefectural Office May 1993 Joined Water Resources Development Public Corporation May 1995 Joined Kyushu Kensetsu Kosaikai January 2002 Joined CTI Engineering as Chief Engineer of Headquarters Research & Development Dept. March 2002 Managing Director (present post) April 2002 Branch Administrator of Kyushu Office (present post) April 1970 Joined the Ministry of Construction Kazunori Yoshioka January 4, 1946 December 1983 July 1991 July 1994 June 1995 April 1997 July 1998 July 2002 March 2003 April 1974 April 1994 Reiichi Abe November 4, 1949 April 1997 April 1999 March 2000 March 2003 April 1974 April 1993 April 1997 Yoshihito Sabase December 23, 1949 March 1999 March 2000 April 2000 March 2003 Manager of Ryumon Dam Works, Kyushu Region Construction Bureau, Ministry of Construction Policy Planner, Minister s Secretariat, Ministry of Construction Manager of the 2nd National Road Division, Road Bureau, Ministry of Construction Manager of River Planning Division, River Bureau, Ministry of Construction Director, Shikoku Construction Bureau, Ministry of Construction Joined the Japan Institute of Construction Engineering Joined CTI Engineering, Chief Engineer of Headquarters Research & Development Dept. Managing Director and Chief of Headquarters Research & Development Dept. (present post) Joined CTI Engineering General Manager, Water Resources Div. I, Water Resources Dept., Tokyo Office Chief, Water Resources Dept., Tokyo Office Deputy Branch Administrator, Osaka Office Director & Member of the Board Managing Director and Chief of Headquarters Business Development Dept. (present post) Joined CTI Engineering General Manager, Information Technology Div., Human Intelligence Dept., Tokyo Office Chief, Information & Construction Management Headquarters Tokyo Office Chief, Construction Management Headquarters Director & Member of the Board Management Business Dept. Branch Administrator Managing Director and General Manager of Headquarters Operation Development Dept. (present post) Number of shares held (thousand)

22 Board menber position Managing Director Director & Member of the Board Director & Member of the Board Director & Member of the Board Director & Member of the Board Director & Member of the Board Company position Chief, Headquarters Management Dept. Branch Administrator, Chugoku Office Branch Administrator, Chubu Office Branch Administrator, Tohoku Office Chief, Headquarters Quality Management Dept. Deputy Administrator, Tokyo Head Office Name Date of birth Career Konomu Uchimura March 11, 1950 Keiichi Koya October 1, 1949 Ken Kamitakahara February 2, 1944 Koji Nukazawa December 9, 1947 Kazuo Murata September 26, 1951 Yasuki Komatsu October 15, 1951 April 1974 Joined CTI Engineering April 1994 General Manager, Water Resources Div. II, Water Resources Dept., Tokyo Office April 1997 Chief, Human Intelligence Dept., Tokyo Office April 1999 Deputy Branch Administrator, Tokyo Office March 2000 Director & Member of the Board April 2001 Chief, Headquarters Management Dept. (present post) March 2003 Managing Director (present post) April 1974 Joined CTI Engineering April 1994 General Manager, Environment & Systems Engineering Div., Water Resources Dept. Osaka Office April 1997 Chief, Water Resources Dept. Osaka Office April 1999 Deputy Branch Administrator, Fukuoka Office March 2000 Director & Member of the Board (present post) March 2004 Branch Administrator, Chugoku Office (present post) April 1968 Joined CTI Engineering April 1991 General Manager, Water Resources Div. I, Tokyo Office April 1996 Deputy Chief, Engineering and Development Dept. April 2000 Deputy Branch Administrator, Tohoku Office March 2001 Director & Member of the Board (present post) April 2001 Deputy Branch Administrator, Tokyo Head Office November President & Representative Director, CTI 2001 Environment Techno Co., Ltd. March 2003 Branch Administrator of Chubu Office of CTI Engineering (present post) April 1972 Joined Ministry of Construction April 1988 Manager, Yamagata Works Office, Tohoku Region Construction Bureau, Ministry of Construction April 1992 Manager, Second Research Dept., ACTEC April 1996 Manager, Waterways Division, Kyushu Region Construction Bureau, Ministry of Construction April 1997 Joined Water Resources Development Public Corporation May 1999 Joined Civil Engineering Research Laboratory May 2001 Joined CTI Engineering as Chief Engineer, Headquarters Research & Development Dept. March 2002 Director & Member of the Board (present post) April 2002 Chief of Headquarters Quality Management Dept. March 2003 Branch Admiistrator of Tohoku Office (present post) April 1978 Joined CTI Engineering April 1997 General Manager, Water Resources Div. V, Water Resources Dept. Tokyo Office April 1999 Chief, Water Resources Dept., Tokyo Office April 2001 Deputy Branch Administrator, Tokyo Head Office March 2003 Director & Member of the Board and Chief of Headquarters Quality Management Dept. (present post) April 1976 Joined CTI Engineering April 1998 General Manager, Road Planning Div., Road and Traffic Dept., Tokyo Office April 1999 Chief, Road and Traffic Dept., Tokyo Office April 2001 Deputy Branch Administrator, Tokyo Head Office March 2003 Director & Member of the Board (present post) April 2003 Deputy Administrator, Tokyo Head Office (present post) Number of shares held (thousand)

23 Name of office Name of position Name Date of birth Career Statutory Auditor Nobuo Imanishi November 19, 1943 Auditor Yoshio Hata September 12, 1937 Auditor Kunihiro Horiuchi April 24, 1943 Auditor Tomoo Araki January 1, 1936 April 1967 Joined CTI Engineering April 1991 General Manager, Water Resources Div., Osaka Office April 1994 Chief, Water Resources Dept., Osaka Office March 1996 Director & Member of the Board April 1997 General Manager, Hiroshima Branch, Osaka Office October 2000 Deputy Chief of Headquarters Research & Development Dept. April 2001 Chief of Dam & Geotechnical Promotion Headquarters March 2003 Statutory Auditor (present post) April 1962 Joined Civil Engineering Research Laboratory April 1963 Joined CTI Engineering April 1990 General Manager, Information Technology Div. Human Intelligence Dept. January 1995 General Manager, Accounting Div., Headquarters Management Dept. April 1996 Deputy Chief, Headquarters Management Dept. March 2000 Statutory Auditor March 2003 Auditor (present post) April 1968 April 1992 April 1996 Appointed as Public Prosecutor Public Prosecutor of Tokyo High Public Prosecutor s Office Public Prosecutor of the Supreme Public Prosecutor s Office June 1997 Opened Horiuchi General Law Office (present post) April 1999 Professor at the Law Department, Tokai University (present post) March 2000 Auditor, CTI Engineering (present post) April 1965 Appointed as Assistant Judge April 1974 Prosecutor of Tokyo District Public Prosecutor s Office April 1981 Judge of Tokyo District Court April 1989 Judge of Tokyo High Court June 1993 Director of Tokyo Legal Affairs Bureau March 1996 Director of Toyama District and Domestic Relations Courts February 1998 General Judge of Tokyo High Court January 2001 Registered as attorney (Tokyo Daiichi Law Office) (present post) March 2001 Auditor, CTI Engineering (present post) April 2001 Professor at the Law Department, Ryutsu Keizai University (present post) Number of shares held (thousand) Total 436 Note: The two auditors -- Kunihiro Horiuchi and Tomoo Araki -- are outside auditors as set forth in Section 1, Article 18 of the Act Concerning Exceptions to the Commercial Code related to audit of joint-stock companies.

24 CHAPTER 5: STATUS OF ACCOUNTING 1. Preparation of the Consolidated Financial Statements and Non-consolidated Financial Statements (1) The Company s consolidated financial statements are prepared in accordance with the Regulations on the terminology, forms and method of preparation of consolidated financial statements (Ordinance of Ministry of Finance No.28 of 1976, hereinafter referred to as the Regulations on Consolidated Financial Statements ). The Company s consolidated financial statements for the previous consolidated fiscal year (January 1 to December 31, 2002) were prepared in accordance with the old Regulations on Consolidated Financial Statemets. The Company s consolidated financial statements for the current consolidated fiscal year (January 1 to December 31, 2003) were prepared in accordance with the revised Regulations on Consolidated Financial Statemets. (2) The Company s non-consolidated financial statements are prepared in accordance with the Regulations on the terminology, forms and method of preparation of financial statements (Ordinance of Ministry of Finance No. 59, 1963, hereinafter referred to as the Regulations on Financial Statements ). The Company s non-consolidated financial statements for the previous business year (January 1 to December 31, 2002) were prepared in accordance with the old Regulations on Financial Statemets. The Company s nonconsolidated financial statements for the current business year (January 1 to December 31, 2003) were prepared in accordance with the revised Regulations on Financial Statemets. 2. Audit Certificate In accordance with the provision of article of the Securities and Exchange Low, the consolidated financial statements and the financial statements for the previous consolidated fiscal year (from January 1, 2002 to December 31, 2002), the previous fiscal year (from January 1, 2002 to December 1, 2002), the current consolidated fiscal year (from January 1, 2003 to December 31, 2003) and the current fiscal year (from January 1, 2003 to December 31, 2003) were audited by Chuo Aoyama Audit Corporation. The Company received their audit reports for each fiscal year. [The above mentioned audit reports, which are inserted at the end of the Japanese original, are omitted from the English translation.]

25 1. Consolidated Financial Statements and Other Materials (1) Consolidated Financial Statements (i) Consolidated Balance Sheet I Current assets Category (Assets) Note No. Previous Consolidated Fiscal Year (as of December 31, 2002) Amount Ratio (%) Current Consolidated Fiscal Year (as of December 31, 2003) Amount 1. Cash and bank deposits 5,750 6, Notes receivable and other receivables Marketable Securities 5,223 2, Prepaid expenses 8,379 8, Deferred tax assets Others Allowance for doubtful accounts Total current Assets 20, , II Fixed assets (1) Tangible fixed assets 1. Buildings and structures 4,786 4,673 Accumulated depreciation 1,805 2,981 1,901 2, Machinery and transportation equipment Accumulated depreciation Land 4,581 4, Others Accumulated depreciation Total tangible fixed assets 7, , (2) Intangible fixed assets 1. Others Total intangible fixed assets (3) Investments and other assets 1. Investment in securities * Long-term loans receivable Others 2,324 2, Deferred tax assets 1,399 1, Allowance for doubtful accounts Total investments and other assets 4, , Total fixed assets 12, , Total assets 32, , Ratio (%)

26 Previous Consolidated Fiscal Year (as of December 31, 2002) Current Consolidated Fiscal Year (as of December 31, 2003) Category Note No. Amount Ratio (%) Amount Ratio (%) (Liabilities) I Current liabilities 1. Accounts payable Short-term borrowings 1, Accrued income taxes Advances received 9,138 9, Reserve for bonuses Others 991 1,163 Total current liabilities 14, , II Fixed liabilities 1. Reserve for retirement benefit 2,788 2, Reserve for directors retirement benefits Others Total fixed liabilities 3, , Total liabilities 17, , (Minority interest) Minority interest (Capital) I Capital *3 3, , II Capital surplus 4, , III Profit surplus 8, , IV Unrealized gains or losses on other securities V Treasury stocks * Total Shareholders equity 15, , Total of liabilities, minority interest and shareholders 32, , equity