Year ended March 31, 2008 08 TOENEC CORPORATION Greetings from the Top During our 90th fiscal year from April 1, 2007, to March 31, 2008, the Japanese likely to become wary of rising prices, and the economy is expected to lose its economy continued to recover gradually, characterized by increased exports and forward momentum. Moreover, reduced private investment and increasing cost capital investment as corporate profits overall improved despite some competitiveness indicate that TOENEC will continue to face difficult challenges discrepancies based on industry or scale of business. over the coming year. In our own industry, however, we continue to face difficult challenges as reduced Given these circumstances, we will promote initiatives for strengthening and public spending on both the national and municipal level has resulted in fewer increasing efficiency in our indoor, outdoor, and underground power line public works projects, and increasing cost competitiveness has reduced construction operations as well as in all our other business operations, even as we profitability of general contracting work even as material and outsourced labor continue our efforts to position ourselves strategically as a provider of indoor costs continue to rise. wiring, air conditioning, and information technology installation services. Given this situation, and in accordance with our current Midterm Business Plan as Moreover, the fiscal year started April 1, 2008, is the final year of our current adopted in April 2006, we are concentrating our management resources in core Midterm Business Plan, during which we intend to complete all our initiatives for business while focusing our efforts on increasing the efficiency of our construction promoting sustainable growth strategies, implementing a wide range of policies for methods even as we become more selective regarding the profitability of the growth, and ensuring stable profitability through sound business management. projects we accept and work to position ourselves strategically as the prime We look forward to your continued understanding and support. contractor. July 2008 As the upshot of this, orders received and net sales for the past year both showed slight declines, as we finished the year with a total of JY180.894 billion (down 4.5% YoY) in orders received and JY 192.732 billion (down 2.1% YoY) in net sales. In addition, we transferred our power transmission, transformation, and underground construction operations to C-Tech Corporation, a subsidiary of Chubu Electric Power Company, lncorporated, as of October 1, 2007. Thanks to major improvements in sales at our indoor wiring construction division as well as special profits realized through the transfer to C-Tech Corporation, we realized major increases in profitability, finishing the year with JY 7.392 billion (up 48.2% YoY) in operating profits and JY 5.752 billion (up 141.5% YoY) in net profit. Economic trends for the coming year include the prospect of softening profitability for export-oriented businesses due to the rising value of the Japanese yen, which combined with the effects of the sub prime loan crisis in the US is President expected to reduce capital investment. At the same time, individual consumers are Yasuhiro Noda 1 2 Non-consolidated Balance Sheet TOENEC CORPORATION 31st March, 2008 and 2007 Thousands of Thousands of Millions of Yen U.S. Dollars Millions of Yen U.S. Dollars 2008 2007 2008 2008 2007 2008 ASSETS LIABILITIES Current assets: Current liabilities: Short-term loans payable ..................................................................... 3,700 3,700 36,930 Cash and deposits .................................................................................... 23,985 21,320 239,391 Notes and accounts payable: ............................................................................... Marketable securities 14,012 1,002 139,856 Notes ................................................................................................. 6,519 7,554 65,066 Accounts ............................................................................................ 34,901 43,879 348,347 Notes and accounts receivable: 41,420 51,433 413,413 Notes .................................................................................................. 5,973 5,467 59,619 Advances received on uncompleted construction contracts ................. 3,453 3,580 34,467 .............................................................................................. Accounts 38,192 49,824 381,197 Accrued income taxes .......................................................................... 2,983 2,587 29,774 Others .................................................................................................. 1,388 1,514 13,849 Others ................................................................................................... 8,118 7,637 81,024 45,553 56,805 454,665 Total current liabilities ..................................................................... 59,674 68,937 595,608 Allowance for doubtful accounts .......................................................... (321) (347) (3,205) Non-current liabilities 45,232 56,458 451,460 Reserve for retirement benefits ............................................................ 33,618 35,384 335,539 Inventories ............................................................................................... 10,164 17,421 101,451 Reserve for directors' retirement benefits ............................................ 198 156 1,980 Deferred tax assets .................................................................................. 173 993 1,726 Others ................................................................................................... 9 10 93 Others ...................................................................................................... 8,143 7,303 81,280 Total non-current liabilities ............................................................. 33,825 35,549 337,612 Total current assets........................................................................... 101,709 104,497 1,015,164 Total liabilities ................................................................................. 93,499 104,487 933,220 Property, plant and equipment: NET ASSETS Buildings and structures........................................................................... 40,290 41,380 402,135 Owners' equity: Capital stock Machinery, vehicles and equipment ........................................................ 5,244 7,678 52,345 Authorized - 200,000,000 shares ......................................................................................................... Land 24,610 25,626 245,630 Issued - 96,649,954 shares ........................................................ 7,681 7,681 76,662 Construction in progress .......................................................................... 137 - 1,371 Capital surplus ..................................................................................... 6,839 6,839 68,262 70,281 74,684 701,481 Retained earnings ................................................................................. 50,227 45,415 501,316 Treasury stock ...................................................................................... (1,224) (1,190) (12,220) Accumulated depreciation ....................................................................... (31,861) (34,012) (318,010) ................................................ Total property, plant and equipment 38,420 40,672 383,471 Total owners equity .......................................................................... 63,522 58,745 634,020 Investments and other assets: Valuation and translation adjustments: .......................... Investment securities ............................................................................... 8,317 11,677 83,013 Valuation difference on available-for-sale securities 2,630 4,625 26,246 Deferred gain or losses on hedges ....................................................... 3,770 2,843 37,629 Deferred tax assets ................................................................................... 12,193 11,163 121,703 Others ...................................................................................................... 2,782 2,691 27,765 Total valuation and translation adjustment ...................................... 6,400 7,467 63,875 Total investments and other assets .................................................. 23,292 25,531 232,481 Total net assets ................................................................................. 69,922 66,212 697,895 ............................................................ Total assets ..................................................................................... 163,421 170,699 1,631,116 Total libilities and net assets 163,421 170,699 1,631,116 3 4 Non-consolidated Statement of Income TOENEC CORPORATION for the years ended 31st March, 2008 and 2007 Non-Consolidated Statement of Cash Flows TOENEC CORPORATION for the years ended 31st March, 2008 and 2007 Thousands of Thousands of Millions of Yen U.S. Dollars Millions of Yen U.S. Dollars 2008 2007 2008 2008 2007 2008 Net sales: Cash flows from operating activities Income before income taxes ................................................................. Construction contracts ........................................................................... 192,732 196,795 1,923,670 10,027 5,122 $100,080 Depreciation .........................................................................................