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					Tobishima
Annual Report
   2006
   PROFILE

   Since its founding in 1883, Tobishima has worked to benefit society through the construction of
   notable projects, such as the Tokyo Aqua-line (Undersea Tunnel) and the Seto-Ohashi Bridge, which
   links Honshu and Shikoku islands. These projects demonstrate Tobishima’s advanced technologies —
   the fruit of our many years of experience — as well as the high quality of our completed projects.
   Recognized for the quality of our products and services and for the expertise of our staff, we are con-
   stantly developing and investing in new technologies and systems to
   support continuous improvement.
              Tobishima is also actively working to solve environmental prob-
   lems, to which end we have built a Total Environment Management
   System. We obtained blanket ISO 14001 certification, the international
   standard for environmental management systems, in July 1998, and
   adopted the Environment Accounting System in 2000 to evaluate envi-                                                The Surikamigawa Dam (Fukushima City)

   ronment protection activities quantitatively and calculate the costs
   involved over the whole Company.
              In overseas markets, the Company has long been involved in the improvement of social infra-
   structure through the construction of roads, ports, railways, and housing, particularly in Southeast
                                      and West Asia. Recently, we have contributed to social and economic
                                      development through the application of our technological expertise to the
                                      construction of social welfare and other facilities.
                                                  Now, we are working to establish a corporate culture ideally suited
                                      to the challenge of building the structures needed to give people around
                                      the world a better life.

The Project for Reconstruction of
Primary Schools and Junior High
Schools (Timor-Leste)


    Tobishima Corporation

   NON-CONSOLIDATED FINANCIAL HIGHLIGHTS
    Years ended March 31, 2006 and 2005

                                                                                                       Millions of Yen               Thousands of U.S. Dollars
                                                                                                    2006           2005                        2006
   For the Year:                      Net Sales                                                 ¥163,864 ¥179,026                         $1,394,947
                                      Loss before Income Taxes                                     3,405    8,713                             28,990
                                      Net Loss                                                     3,728    6,766                             31,736
   At Year-end :                      Total Assets                                              ¥166,255 ¥159,622                         $1,415,297
                                      Shareholders’ Equity                                        29,286    8,013                            249,302
                                      Common Stock                                                14,797    2,166                            125,964
                                      Preferred Stock                                             15,624   15,624                            133,006
   Per Share of                       (in yen and dollars):
    Common Stock:                     Net Loss                                                  ¥    20.72 ¥ 57.12                        $       0.176
                                      Shareholders’ Equity                                           (5.53) (175.94)                             (0.047)
                                      Note 1: U.S. dollar amounts here and elsewhere in this annual report are translated from yen at the rate of ¥117.47=US$1.00,
                                              the rate on March 31, 2006 for the reader’s convenience only.
                                      Note 2: The years included in the text are fiscal years, which run from April 1 through March 31 of the following year.




        Tobishima Corporation
MESSAGE               FROM THE                PRESIDENT



                                                                    comparable with that of any of the four leading general
                                                                    contractors in Japan.
                                                                        Moreover, the conversion into shares during the current
                                                                    period of convertible bonds with stock preemptive rights
                                                                    reached an aggregate of ¥26 billion as of June 30, 2006. We
                                                                    plan to leverage this greatly strengthened shareholders’ equity
                                                                    to eliminate our accumulated deficit. With this purpose in
                                                                    mind, we received shareholders’ approval of the reversal of
                                                                    the statutory reserve included in capital surplus at the Regular
                                                                    General Meeting of Shareholders held on June 29, 2006. The
                                                                    elimination of the accumulated deficit in question will also
                                                                    open the way to a resumption of dividend payments, as well
                                                                    as provide us with the funding leeway to retire preferred
It gives me great pleasure to announce the business perfor-         stocks, thereby enabling us to blunt the impact of share
mance of Tobishima Corporation for fiscal 2005, the business        dilution resulting from the conversion of outstanding pre-
term ended March 2006.                                              ferred shares to ordinary shares of common stock, as well as
     During the term, Tobishima received a favorable inflow         to reduce the preferred dividend payment amount.
of orders in the Japanese market, both from the government              By the end of the term to March 2006, Tobishima
sector for civil engineering work, and from the private sector      Corporation had fully adopted accounting standards for
for building construction. As a result, the value of orders         impairment of asset holdings, and thereby eliminated all
received reached ¥172.6 billion for a year-on-year increase of      factors that may give rise to extraordinary losses in the near
8%. At the profit level, too, an improvement was registered         future. From here onward, the management of the Company
over the previous business term, with operating income              will exert their utmost efforts to ensure that the bottom line is
meeting our start-of-term forecasts to reach ¥7.1 billion. The      firmly anchored within the black-ink zone. In accordance with
Company’s operating profit margin, at 4.3%, was one of the          our management philosophy, we will continue to work for the
highest in the industry. As these figures indicate, Tobishima’s     prosperity of our business partners and stakeholders, as well
core business operations recorded a firm performance in line        as of the Company itself. To achieve this, we will constantly
with our expectations.                                              pursue product and service quality at the highest level so as to
     As per our initial plans, we completed the process of          fully satisfy our customers.
write-down of tangible fixed assets (land and completed                 On behalf of the entire Company, I look forward to
buildings) through the recognition of ¥8.3 billion in impair-       enjoying the continued support of our shareholders and other
ment losses. As the result , the Company posted a net loss for      investors.
the term in the amount of ¥3.7 billion.
     As of the end of March 2006, the issuance in December
2005 of unsecured convertible bonds with stock preemptive
rights in the amount of ¥35 billion has resulted in partial
conversion into ordinary shares of the Company’s common
stock in the amount of ¥20 billion, thus raising shareholders’
equity to ¥29.3 billion and bringing the equity ratio to 17.6%.
     Total interest-bearing liabilities declined by ¥20.5 billion   June 2006
year-on-year, to ¥24.5 billion, bringing the ratio of interest-
bearing liabilities to monthly sales to 1.8 times. This means       Toshiaki Ikehara
that the soundness of Tobishima’s financial position is             President




                                                                                                         Tobishima Corporation   1
Tobishima Corporation and subsidiaries

CONSOLIDATED BALANCE SHEET
March 31, 2006




ASSETS                                                                                                       Thousands of
                                                                                           Millions of Yen    U.S. Dollars
Current Assets :                         Cash                                              ¥ 42,395          $ 360,901
                                         Receivables:
                                           Trade Notes                                         4,783             40,717
                                           Trade Accounts                                     62,651            533,334
                                           Other                                              23,193            197,439
                                         Construction Projects in Progress                     7,918             67,400
                                         Real Estate Held for Sale                             2,203             18,757
                                         Deferred Tax Assets                                   2,306             19,637
                                         Other Current Assets                                  1,546             13,160
                                         Less: Allowance for Doubtful Accounts                (1,705)           (14,518)
                                               Total Current Assets                          145,290          1,236,827




Non-Current Assets :                     Tangible Fixed Assets:
                                            Buildings and Structures                           8,760            74,572
                                            Machinery and Equipment                              313             2,667
                                            Tools, Furniture and Fixtures                        245             2,083
                                            Land                                               7,594            64,643
                                               Net Tangible Fixed Assets                      16,912           143,965
                                         Intangible Fixed Assets                               1,064             9,059




                                         Investments:
                                            Investments in Securities                         3,945     33,587
                                            Long-Term Loans Receivable                        5,462     46,493
                                            Other Investments                                 6,954     59,198
                                            Less: Allowance for Doubtful Accounts            (6,702)   (57,055)
                                               Total Investments                              9,659     82,223
                                               Total Non-Current Assets                      27,635    235,247
                                               Total Assets                                ¥172,925 $1,472,074
                                         See notes to consolidated financial statements.




  2   Tobishima Corporation
LIABILITIES AND                                                                                 Thousands of
SHAREHOLDERS’ EQUITY                                                          Millions of Yen    U.S. Dollars
Current Liabilities :     Short-Term Borrowings                                 ¥ 11,190        $    95,259
                          Notes and Accounts Payable                              69,198            589,068
                          Advance Receipts on Construction Projects in Progress    8,534             72,651
                          Deposits Received                                       17,748            151,084
                          Provision for Compensation for Warranty Obligations
                           on Completed Projects                                     596              5,073
                          Provision for Losses on Construction Projects              307              2,617
                          Other Current Liabilities                                1,942             16,531
                               Total Current Liabilities                         109,515            932,283


Long-Term Liabilities :   Convertible Bonds                                      15,000            127,692
                          Long-Term Borrowings                                   17,113            145,681
                          Liability for Retirement Benefits                       5,911             50,313
                          Other Long-Term Liabilities                               435              3,705
                                 Total Long-Term Liabilities                     38,459            327,391
                                 Total Liabilities                              147,974          1,259,674


Minority Interests:       Minority Interests                                        (932)             (7,939)


Shareholders’ Equity:     Common Stock—Authorized, 820,300 thousand Shares:
                           Issued, 341,972 thousand Shares                      14,797              125,964
                          Preferred Stock—Authorized, 116,700 thousand Shares:
                           Issued, 116,689 thousand Shares                      15,624               133,006
                          Capital Surplus                                       28,306               240,966
                          Accumulated Deficit                                  (32,640)             (277,858)
                          Unrealized Gain on Available-for-Sale Securities         135                 1,146
                          Foreign Currency Translation Adjustments                   1                    11
                          Treasury Stock—at Cost:
                           1,986 thousand Shares                                  (340)             (2,896)
                               Total Shareholders’ Equity                       25,883             220,339
                               Total Liabilities and Shareholders’ Equity    ¥172,925           $1,472,074




                                                                                Tobishima Corporation    3
Tobishima Corporation and subsidiaries

CONSOLIDATED STATEMENT                                                 OF        OPERATIONS
For the year ended March 31, 2006




                                                                                                                 Thousands of
                                                                                              Millions of Yen     U.S. Dollars
Operating Profit and Loss :              Operating Revenues:
                                           Sales—
                                              Completed Projects                              ¥162,789          $1,385,788
                                              Development of Real Estate                         1,312              11,172
                                                                                               164,101           1,396,960
                                             Cost of Sales—
                                               Completed Projects                               147,026          1,251,602
                                               Development of Real Estate                           926              7,887
                                                                                                147,952          1,259,489
                                             Gross Profit—
                                               Completed Projects                                15,763            134,186
                                               Development of Real Estate                           386              3,285
                                                                                                 16,149            137,471
                                         Selling, General and Administrative Expenses             9,116             77,599
                                               Operating Income                                   7,033             59,872

Non-Operating Income                     Non-Operating Income:
and Expenses :                             Interest and Dividends Income                              63                538
                                           Foreign Exchange Gain                                      89                756
                                           Reversal of Allowance for Doubtful Accounts               172              1,470
                                           Gain on Sale of Tangible Fixed Assets                     853              7,264
                                           Gain on Sale of Investment Securities                     202              1,717
                                           Gain on Early Redemption of Bonds                         200              1,700
                                           Other                                                     110                937
                                         Total Non-Operating Income                                1,689             14,382

                                         Non-Operating Expenses:
                                           Interest Expense                                        1,169              9,955
                                           Amortization of Transitional Obligation of
                                             Employees’ Retirement Benefits                         599              5,095
                                           Impairment Loss on Long-lived Assets                   8,343             71,026
                                           Other                                                  2,147             18,273
                                         Total Non-Operating Expenses                            12,258            104,349

                                         Loss before Income Taxes and Minority Interests          (3,536)           (30,095)
                                         Income Taxes:
                                            Current                                                310              2,639
                                            Deferred                                                18                156
                                         Minority Interests in Net Loss                             71                603
                                         Net Loss                                             ¥ (3,793)         $ (32,287)
                                         See notes to consolidated financial statements.




  4   Tobishima Corporation
   Tobishima Corporation and subsidiaries

   NOTES           TO      CONSOLIDATED FINANCIAL STATEMENTS
   For the year ended March 31, 2006




1. Basis of Presenting Consolidated Financial                         e) Depreciation of tangible fixed assets is computed by the
   Statements                                                            declining-balance method, while the straight-line method is
The accompanying consolidated financial statements have been             applied to buildings (except fixtures attached to buildings)
prepared from the accounts and records maintained by Tobishima           acquired after April 1, 1998. All overseas subsidiaries, as well
Corporation (the “Company”) in accordance with the provisions            as some domestic subsidiaries, have adopted the straight-line
set forth in the Japanese Commercial Code (the “Code”) and in            method. Useful lives of these assets held by the Company and
conformity with accounting principles generally accepted in              its domestic subsidiaries are in accordance with the regulations
Japan, which are different in certain respects as to application         stipulated in the Corporation Tax Law.
and disclosure requirements of International Financial Reporting      f) Intangible Fixed Assets are amortized using the straight-line
Standards.                                                               method. Useful lives of these assets are in accordance with
   A statement of cash flows is not required as a part of the basic      regulations stipulated in the Corporation Tax Law. Software
financial statements under the Code in Japan and, accordingly, is        for internal use is amortized by the straight-line method based
not presented herein.                                                    on an estimated useful life of five years.
   In preparing these consolidated financial statements, certain      g) Stock issue costs are amortized by the straight-line method
reclassifications and rearrangements have been made to the               over three years.
Company’s financial statements issued domestically in order to        h) Bond issue costs are amortized by the straight-line method
present them in a form which is more familiar to readers outside         over three years. However, during the current year, the
Japan. The information provided in the notes to the consolidated         remaining portion of conversion rights (from the Company’s
financial statements is limited to that required by the Code of          first issue of unsecured convertible bond) were exercised,
Japan and related regulations.                                           which resulted in amortization of the bond issue costs in
   The consolidated financial statements are stated in Japanese          lump-sum.
yen, the currency of the country in which the Company is incor-       i) Allowance for doubtful accounts is stated in amounts consid-
porated and operates. The translations of Japanese yen amounts           ered to be appropriate based on the Company’s past credit loss
into U.S. dollar amounts are included solely for the convenience         experience and an evaluation of potential losses in the receiv-
of readers outside Japan and have been made at the rate of               ables outstanding.
¥117.47 = US$1.00, the rate of exchange at March 31, 2006.            j) Provision for compensation for warranty obligations on com-
Such translations should not be construed as representations that        pleted projects is provided in an amount based on the
the Japanese yen amounts could be converted into U.S. dollars at         Company’s past experience, with an additional amount
that or any other rate.                                                  deemed necessary in the future for execution of warranty
                                                                         obligations regarding construction projects.
                                                                      k) Provision for losses on construction projects is provided in an
2. Summary of Significant Accounting Policies                            amount deemed necessary at term-end based on estimated
a) Scope of consolidation                                                losses on construction projects in the future and in accordance
   The Company has four consolidated subsidiaries: Environmental         with the stipulations of Article 43 of the Enforcement
   & Construction Solutions, Office-Network Co., Ltd.,                   Regulations of the Code.
   Shin-Nihon Sougo Sekkei Corporation and Tobishima Brunei           l) Provisions for employees’ retirement benefits are made based
   Sdn Bhd. The Company has a non-consolidated subsidiary                on projected benefit obligations and plan assets at the year
   named Tobishima Philippines, Inc., which is not included in           end. Unrecognized transitional obligation is amortized over 15
   the scope of consolidation as the business scale of the com-          years. Unrecognized prior service cost is amortized over five
   pany is small and its total assets, net sales, net income (pro-       years, within the remaining average service period of employ-
   portional portion of the Company’s equity stake) and retained         ees when recognized, using the straight-line method.
   earnings (proportional share of the Company’s equity owner-           Unrecognized actuarial loss is amortized over 10 years, within
   ship) are not material to the financial statements of the             the remaining average service period of employees when rec-
   Company on a consolidated basis.                                      ognized, using the straight-line method beginning with the
b) Scope of application of equity-method accounting                      following year of recognition.
   The Company’s non-consolidated subsidiary Tobishima                m) Consolidation goodwill represents the excess of the cost an
   Philippines, Inc. is stated at cost.                                  acquisition over the fair value of the net assets of acquired
c) Available-for-sale securities are reported at fair value, with        subsidiary at the date of acquisition.
   unrealized gains and losses, net of applicable taxes, reported            Consolidation goodwill is amortized on a straight-line
   in a separate component of shareholders’ equity. Non-                 basis over five years.
   marketable available-for-sale securities are stated at cost        n) Consumption tax is excluded from sales, cost of sales and
   determined by the moving-average cost method.                         expenses.
      For other than temporary declines in fair value, investment     o) Recognition of Sales
   securities are reduced to net realizable value by a charge to         Sales of completed projects are, in principle, recognized using
   income.                                                               the completed-construction method. However, large-scale
d) Real estate held for sale and construction projects in progress       projects with a contract amount of ¥300 million (US$2,554
   are stated at cost determined on a specific project basis.            thousand) or more and a construction period of 12 months or
                                                                         longer are recognized using the percentage of completion


                                                                                                         Tobishima Corporation   5
   method. Overseas consolidated subsidiaries have recognized         d) Notes receivable discounted
   sales of all of the projects utilizing the percentage of comple-         ¥1,561 million (US$13,287 thousand)
   tion method.                                                       e) Shareholders’ Equity has increased by ¥135 million
      Sales of completed projects, recorded based upon the per-          (US$1,146 thousand) as a result of revaluation of securities
   centage of completion method, amounted to ¥107,901 million            under fair value accounting in accordance with the stipula-
   (US$918,540 thousand).                                                tions of Article 124, Item 3 of the Enforcement Regulations of
                                                                         the Code.
3. Changes in Accounting Policies                                     f) Valuation allowance deducted from deferred tax assets:
Long-lived assets                                                        ¥26,968 million (US$229,575 thousand)
In August 2002, the Business Accounting Council (BAC) issued
a Statement of Opinion, “Accounting for Impairment of Fixed           5. Notes to Consolidated Statement of Operations
Assets,” and in October 2003 the Accounting Standards Board of        Net Loss per Share    ¥21.3 (US$0.18)
Japan (ASBJ) issued ASBJ Guidance No.6, “Guidance for
Accounting Standard for Impairment of Fixed Assets.” These            6. Other Information
new pronouncements were effective for fiscal years beginning on       Lawsuit against the Company demanding execution of guarantee
or after April 1, 2005. The Company and its consolidated sub-         obligations regarding voluntary liquidation of Nanatomi Co., Ltd.
sidiaries adopted the new accounting standard for impairment of       (“Nanatomi”).
fixed assets as of April 1, 2005.                                        The Company accepted the joint and several responsibility for
   The Company and its consolidated subsidiaries review its           the repayment of a maximum of ¥4,543 million (US$38,678
long-lived assets for impairment whenever events or changes in        thousand) based on conditions set for Nanatomi, the obligor,
circumstance indicate the carrying amount of an asset or asset        when it applied to the Tokyo District Court for the commence-
group may not be recoverable. An impairment loss would be rec-        ment of its voluntary liquidation on January 16, 1991.
ognized if the carrying amount of an asset or asset group exceeds        On April 22, 2002, Janome Sewing Machine Co., Ltd.
the sum of the undiscounted future cash flows expected to result      (“Janome”) sued the Company, to fulfill its obligations on the
from the continued use and eventual disposition of the asset or       joint and several guarantee of ¥4,543 million (US$38,678 thou-
asset group. The impairment loss would be measured as the             sand) to creditors. According to Janome, the Company had
amount by which the carrying amount of the asset exceeds its          claims of ¥4,788 million (US$40,759 thousand) for the voluntary
recoverable amount, which is the higher of the discounted cash        liquidation of Nanatomi. On June 30, 2003, Janome reduced the
flows from the continued use and eventual disposition of the          amount of its claim to ¥3,246 million (US$27,631 thousand).
asset or the net selling price at disposition.                           On December 20, 2004 the Tokyo District Court rejected the
   The effect of adoption of the new accounting standard for          claim by Janome against the Company. On December 27, 2004
impairment of fixed assets was to increase loss before income         Janome appealed against the decision to the Tokyo High Court.
taxes and minority interests for the year ended March 31, 2006           On May 25, 2005, the arguments were concluded at the Tokyo
by ¥ 8,343 million (US$71,026 thousand).                              High Court and the judges recommended that the parties reach an
   In addition, accumulated impairment losses are deducted            out-of-the-court settlement. On March 8, 2006, after a series of
directly from the related fixed assets.                               negotiations, the Company and Janome reached the out-of-court set-
                                                                      tlement under which the Company shall pay ¥500 million
4. Notes to Consolidated Balance Sheet                                (US$4,256 thousand) to Janome by March 31, 2006.
a) Accumulated Depreciation of Tangible Fixed Assets
      ¥10,832 million (US$92,210 thousand)                            7. Subsequent Events
b) Assets Pledged as Collateral                                       a) On May 9, 2006, ¥6,000 million (US$51,077 thousand) worth
   Cash in Bank                                                          of conversion rights (from the Company’s 2nd issue of unse-
      ¥5,812 million (US$49,474 thousand)                                cured convertible bond) were exercised. This automatically
   Trade Notes                                                           resulted, effective the same day, in an increase in the number
      ¥4,388 million (US$37,351 thousand)                                of shares issued and outstanding of 56,980,000 shares, an
   Real Estate Held for Sale                                             increase of ¥3,020 million (US$25,708 thousand) in the
      ¥1,828 million (US$15,559 thousand)                                Company’s paid-in capital, and an increase of ¥2,980 million
   Buildings and Structures, net of accumulated depreciation             (US$25,369 thousand) in the capital surplus (to be included in
      ¥2,579 million (US$21,951 thousand)                                the statutory reserve).
   Land                                                               b) At the board of directors meeting held on May 29, 2006, the
      ¥4,494 million (US$38,253 thousand)                                board resolved to reduce the Company’s paid-in capital with-
   Investments in Securities                                             out any payment to eliminate accumulated deficit and cancel
      ¥1,139 million (US$9,696 thousand)                                 preferred stock. This proposal was approved at the sharehold-
   Other Investments (Membership, etc.)                                  ers meeting held on June 29, 2006. Reduction in paid-in capi-
      ¥602 million (US$5,123 thousand)                                   tal shall amount to ¥27,921 million (US$237,688 thousand),
c) Contingent Liabilities                                                and the Company plans to set the deadline for creditors’
   Guaranteed debt ¥367 million (US$3,127 thousand)                      demurral period at August 7, 2006 and the effective date of
                                                                         the capital reduction at August 8, 2006.

     6   Tobishima Corporation
Tobishima Corporation   7
Tobishima Corporation

NON-CONSOLIDATED BALANCE SHEET
March 31, 2006




ASSETS                                                                                                Thousands of
                                                                                    Millions of Yen    U.S. Dollars

Current Assets :              Cash                                                  ¥ 42,087          $ 358,281
                              Receivables:
                                Trade Notes                                             4,776             40,657
                                Trade Accounts                                         63,238            538,335
                                Other                                                  23,445            199,586
                              Construction Projects in Progress                         7,752             65,989
                              Real Estate Held for Sale                                 2,204             18,757
                              Short-Term Loans                                          3,730             31,754
                              Deferred Tax Assets                                       2,307             19,639
                              Other Current Assets                                      1,451             12,350
                              Less: Allowance for Doubtful Accounts                    (1,661)           (14,140)
                                    Total Current Assets                              149,329          1,271,208




Non-Current Assets :          Tangible Fixed Assets:
                                 Buildings and Structures                                2,980            25,367
                                 Machinery and Equipment                                   311             2,643
                                 Tools, Furniture and Fixtures                             242             2,063
                                 Land                                                    4,618            39,312
                                    Net Tangible Fixed Assets                            8,151            69,385
                              Intangible Fixed Assets                                    1,030             8,773




                              Investments:
                                 Investments in Securities                             3,945     33,587
                                 Long-Term Deposit                                     1,765     15,027
                                 Long-Term Loans Receivable                              538      4,577
                                 Long-Term Receivables                                 3,400     28,944
                                 Other Investments                                     2,683     22,837
                                 Less: Allowance for Doubtful Accounts                (4,586)   (39,041)
                                    Total Investments                                  7,745     65,931
                                    Total Non-Current Assets                          16,926    144,089
                                    Total Assets                                    ¥166,255 $1,415,297
                              See notes to non-consolidated financial statements.




  8   Tobishima Corporation
LIABILITIES AND                                                                                 Thousands of
SHAREHOLDERS’ EQUITY                                                          Millions of Yen    U.S. Dollars

Current Liabilities :     Short-Term Borrowings                                 ¥ 10,990        $    93,556
                          Notes and Accounts Payable                              62,191            529,425
                          Advance Receipts on Construction Projects in Progress    8,535             72,654
                          Income Taxes Payable                                       512              4,354
                          Deposits Received                                       17,585            149,702
                          Provision for Compensation for Warranty Obligations
                            on Completed Projects                                    597              5,079
                          Provision for Losses on Construction Projects              307              2,617
                          Other Current Liabilities                                1,397             11,890
                                Total Current Liabilities                        102,114            869,277



Long-Term Liabilities :   Convertible Bond                                       15,000            127,692
                          Long-Term Borrowings                                   13,513            115,035
                          Liability for Retirement Benefits                       5,906             50,278
                          Other Long-Term Liabilities                               436              3,713
                                 Total Long-Term Liabilities                     34,855            296,718
                                 Total Liabilities                              136,969          1,165,995



Shareholders’ Equity:     Common Stock—Authorized, 820,300 thousand Shares:
                           Issued, 341,972 thousand Shares                      14,797              125,964
                          Preferred Stock—Authorized, 116,700 thousand Shares:
                           Issued, 116,689 thousand Shares                      15,624              133,006
                          Capital Surplus:
                             Additional Paid-In Capital                         28,297              240,884
                             Other Capital Surplus                                  10                   82
                          Retained Earnings:
                             Accumulated Deficit                               (29,572)             (251,737)
                          Unrealized Gain on Available-for-Sale Securities         135                 1,146
                          Treasury Stock—at Cost:
                           37,297 Shares                                            (5)                (43)
                               Total Shareholders’ Equity                       29,286             249,302
                               Total Liabilities and Shareholders’ Equity    ¥166,255           $1,415,297




                                                                                Tobishima Corporation    9
Tobishima Corporation

NON-CONSOLIDATED STATEMENT                                                         OF     OPERATIONS
For the year ended March 31, 2006




                                                                                                                    Thousands of
                                                                                                 Millions of Yen     U.S. Dollars

Operating Profit and Loss :         Operating Revenues:
                                      Sales—
                                         Completed Projects                                      ¥162,723          $1,385,235
                                         Development of Real Estate                                 1,141               9,712
                                                                                                  163,864           1,394,947
                                        Cost of Sales—
                                          Completed Projects                                       147,105          1,252,276
                                          Development of Real Estate                                   985              8,389
                                                                                                   148,090          1,260,665
                                        Gross Profit—
                                          Completed Projects                                        15,618            132,959
                                          Development of Real Estate                                   156              1,323
                                                                                                    15,774            134,282
                                    Selling, General and Administrative Expenses                     8,722             74,252
                                          Operating Income                                           7,052             60,030

Non-Operating Income                Non-Operating Income:
and Expenses :                        Interest and Dividends Income                                      72                612
                                      Foreign Exchange Gain                                              89                756
                                      Reversal of Allowance for Doubtful Accounts                       217              1,844
                                      Gain on Sale of Tangible Fixed Assets                             853              7,264
                                      Gain on Sale of Investments in Securities                         202              1,717
                                      Gain on Early Redemption of Bonds                                 200              1,700
                                      Other                                                              75                644
                                    Total Non-Operating Income                                        1,708             14,537

                                    Non-Operating Expenses:
                                      Interest Expense                                                1,075              9,147
                                      Amortization of Transitional Obligation of
                                        Employees’ Retirement Benefits                                 599              5,095
                                      Impairment Loss on Long-lived Assets                           8,343             71,026
                                      Other                                                          2,148             18,289
                                    Total Non-Operating Expenses                                    12,165            103,557

                                    Loss before Income Taxes                                         (3,405)           (28,990)
                                    Income Taxes:
                                       Current                                                         309              2,627
                                       Deferred                                                         14                119
                                    Net Loss                                                        (3,728)           (31,736)
                                    Deficit Brought Forward                                        (25,844)          (220,001)
                                    Accumulated Deficit at the End of Year                       ¥ (29,572)        $ (251,737)
                                    See notes to non-consolidated financial statements.




 10   Tobishima Corporation
   Tobishima Corporation

   NOTES            TO      NON-CONSOLIDATED FINANCIAL STATEMENTS
   For the year ended March 31, 2006




1. Basis of Presenting Non-Consolidated                                 c) Depreciation of Tangible Fixed Assets is computed by the
   Financial Statements                                                    declining-balance method while the straight-line method is
The accompanying non-consolidated financial statements have                applied to buildings (except fixtures attached to buildings)
been prepared from the accounts and records maintained by                  acquired after April 1, 1998. Useful lives of these assets are in
Tobishima Corporation (the “Company”) in accordance with the               accordance with regulations stipulated in the Corporation Tax
provisions set forth in the Japanese Commercial Code (the “Code”)          Law.
and in conformity with accounting principles generally accepted in      d) Intangible Fixed Assets are amortized using the straight-line
Japan, which are different in certain respects as to application and       method. Useful lives of these assets are in accordance with
disclosure requirements of International Financial Reporting               regulations stipulated in the Corporation Tax Law. Software
Standards.                                                                 for internal use is amortized by the straight-line method based
    A statement of cash flows is not required as a part of the basic       on an estimated useful life of five years.
financial statements under the Code in Japan and, accordingly, is       e) Stock issue costs are amortized by the straight-line method
not presented herein.                                                      over three years.
    In preparing these non-consolidated financial statements, certain   f) Bond issue costs are amortized by the straight-line method
reclassifications and rearrangements have been made to the                 over three years. However, during the current year, the
Company’s financial statements issued domestically in order                remaining portion of conversion rights (from the Company’s
to present them in a form which is more familiar to readers                first issue of unsecured convertible bond) were exercised,
outside Japan. The information provided in the notes to the non-           which resulted in amortization of the bond issue costs in
consolidated financial statements is limited to that required by the       lump-sum.
Code of Japan and related regulations.                                  g) Allowance for doubtful accounts is stated in amounts consid-
    The non-consolidated financial statements are stated in                ered to be appropriate based on the Company’s past credit loss
Japanese yen, the currency of the country in which the Company             experience and an evaluation of potential losses in receivables
is incorporated and operates. The translations of Japanese yen             outstanding.
amounts into U.S. dollar amounts are included solely for the con-       h) Provision for compensation for warranty obligations on com-
venience of readers outside Japan and have been made at the rate           pleted projects is provided in an amount based on the
of ¥117.47 = US$1.00, the rate of exchange at March 31, 2006.              Company’s past experience, with an additional amount
Such translations should not be construed as representations that          deemed necessary in the future for execution of warranty
the Japanese yen amounts could be converted into U.S. dollars at           obligations regarding construction projects.
that or any other rate.                                                 i) Provision for losses on construction projects is provided in an
                                                                           amount deemed necessary at term-end based on estimated
                                                                           losses on construction projects in the future and in accordance
2. Summary of Significant Accounting
                                                                           with the stipulations of Article 43 of the Enforcement
   Policies                                                                Regulations of the Code.
a) The non-consolidated financial statements do not include the         j) The Company has a non-contributory funded pension plan
   accounts of subsidiaries. Investments in subsidiaries are stated        covering substantially all of its employees. Provisions for
   at cost determined by the moving-average cost method.                   employees’ retirement benefits are made based on projected
       Available-for-sale securities are reported at fair value, with      benefit obligations and plan assets at the year end.
   unrealized gains and losses, net of applicable taxes, reported          Unrecognized transitional obligation is amortized over 15
   in a separate component of shareholders’ equity. Costs of               years. Unrecognized prior service cost is amortized over five
   securities sold are determined using the moving-average cost            years, within the remaining average service period of employ-
   method. Non-marketable available-for-sale securities are                ees when recognized, using the straight-line method.
   stated at cost determined by the moving-average cost method.            Unrecognized actuarial loss is amortized over 10 years, within
       For other than temporary declines in fair value, investment         the remaining average service period of employees when rec-
   securities are reduced to net realizable value by a charge to           ognized, using the straight-line method beginning with the
   income.                                                                 following year of recognition.
b) Real estate held for sale and construction projects in progress      k) All financing leases which do not transfer ownership of the
   are stated at cost determined on a specific project basis.              leased property to the lessee are accounted for as operating
                                                                           leases.
                                                                        l) Consumption tax is excluded from sales, cost of sales and
                                                                           expenses.




                                                                                                            Tobishima Corporation   11
m) Recognition of Sales                                                 c) Shareholders’ Equity has increased by ¥135 million (US$1,146
   Sales of completed projects are, in principle, recognized using         thousand) as a result of revaluation of securities under fair value
   the completed-construction method. However, large-scale                 accounting in accordance with the stipulations of Article 124,
   projects with a contract amount of ¥300 million (US$2,554               Item 3 of the Enforcement Regulations of the Code.
   thousand) or more and a construction period of 12 months or          d) A valuation allowance deducted from deferred tax assets:
   longer are recognized using the percentage of completion                ¥26,865 million (US$228,697 thousand)
   method.                                                              e) In addition to Fixed Assets presented in the balance sheet, the
      Sales of completed projects, recorded based upon the per-            Company leases and uses certain fixed assets such as computers
   centage of completion method, amounted to ¥108,155 million              and related peripheral equipment.
   (US$920,704 thousand).                                               f) Assets Pledged as Collateral
                                                                           Cash in Bank
3. Changes in Accouting Policies                                               ¥5,812 million (US$49,474 thousand)
Long-lived assets                                                          Trade Notes
In August 2002, the Business Accounting Council (BAC) issued a                 ¥4,388 million (US$37,351 thousand)
Statement of Opinion, “Accounting for Impairment of Fixed Assets,”         Real Estate Held for Sale
and in October 2003 the Accounting Standards Board of Japan                    ¥1,828 million (US$15,559 thousand)
(ASBJ) issued ASBJ Guidance No.6, “Guidance for Accounting                 Buildings and Structures, net of accumulated depreciation
Standard for Impairment of Fixed Assets.” These new pronounce-                 ¥2,579 million (US$21,951 thousand)
ments were effective for fiscal years beginning on or after April 1,       Land
2005. The Company adopted the new accounting standard for                      ¥4,296 million (US$36,573 thousand)
impairment of fixed assets as of April 1, 2005.                            Investments in Securities
   The Company reviews its long-lived assets for impairment when-              ¥1,139 million (US$9,696 thousand)
ever events or changes in circumstance indicate the carrying amount        Long-Term Deposit
of an asset or asset group may not be recoverable. An impairment               ¥21 million (US$178 thousand)
loss would be recognized if the carrying amount of an asset or asset       Other Investments (Membership, etc.)
group exceeds the sum of the undiscounted future cash flows                    ¥581 million (US$4,944 thousand)
expected to result from the continued use and eventual disposition of   g) Contingent Liabilities
the asset or asset group. The impairment loss would be measured as         Guaranteed debt ¥2,600 million (US$22,136 thousand)
the amount by which the carrying amount of the asset exceeds its        h) Notes receivable discounted
recoverable amount, which is the higher of the discounted cash flows           ¥1,561 million (US$13,287 thousand)
from the continued use and eventual disposition of the asset or the     i) Retirement Benefits
net selling price at disposition.                                          1) Employees’ Retirement Benefits
   The effect of adoption of the new accounting standard for impair-       Under a qualified retirement pension plan (defined benefit plan),
ment of fixed assets was to increase loss before income taxes for          employees terminating their employment are, in most circum-
the year ended March 31, 2006 by ¥8,343 million (US$71,026                 stances, entitled to pension payments based on their average pay
thousand).                                                                 during their employment, length of service and certain other
   In addition, accumulated impairment losses are deducted directly        factors.
from the related fixed assets.                                                 The Company has also joined an employees’ welfare fund for
                                                                           construction workers. As reasonable estimates are not available
4. Notes to Non-Consolidated Balance                                       for plan assets corresponding to the Company’s contribution, the
                                                                           Company posts an amount deemed necessary for contribution to
   Sheet
                                                                           the fund under benefit costs. The balance of the plan assets attrib-
a) Accumulated Depreciation of Tangible Fixed Assets
                                                                           utable to the Company amounted to ¥10,043 million (US$85,492
      ¥9,097 million (US$77,438 thousand)
                                                                           thousand) at year end. Additional retirement benefits were paid to
b) Short-Term Receivables Due from Affiliates
                                                                           employees taking early retirement.
      ¥4,773 million (US$40,633 thousand)
   Long-Term Receivables Due from Affiliates
      ¥900 million (US$76,615 thousand)
   Short-Term Payables Due to Affiliates
      ¥2,483 million (US$21,136 thousand)
   Long-Term Payables Due to Affiliates
      ¥1 million (US$9 thousand)




     12   Tobishima Corporation
2) The liability for employees’ retirement benefits at March          4) Assumptions used for the year ended March 31, 2006 were
31, 2006 consisted of the following:                                  set forth as follows:
                                                    Thousands of
                                  Millions of Yen   U.S. Dollars      Periodic Attribution of
Projected Benefit Obligation        ¥ (15,934)       $(135,641)        Projected Benefit Obligation; the Straight-Line
Fair Value of Plan Assets               2,762           23,516         Method
Unrecognized
                                                                     Discount Rate:                                   2.0%
 Transitional Obligation                5,387           45,857
                                                                     Expected Rate of Return on
Unrecognized Actuarial Loss             1,445           12,305
                                                                      Plan Assets                                        —
Unrecognized Prior Service Cost
                                                                     Amortization Period for Prior
 (Deduction in the Obligations)
                                                                      Service Cost                                  5 years
 (Notes 1,2)                             433             3,685
                                                                     Recognition Period of
Net Liability                       ¥ (5,907)        $ (50,278)
                                                                      Actuarial Gain/Loss                          10 years
                                                                     Amortization Period of
Note 1: As a result of revisions on internal regulations for          Transitional Obligation                      15 years
retirement benefits on July 1, 2000, the employees’ prior
service cost was recognized.                                       5. Notes to Non-Consolidated Statement of
Note 2: Obligations for retirement benefits under the
                                                                      Operations
Company’s qualified pension plan increased by ¥722 million
                                                                   a) Sales to Affiliates
(US$6,142 thousand) due to changes in the operation of work-
                                                                         ¥1,133 million (US$9,649 thousand)
ers’ welfare pension funds of the construction industry imple-
                                                                   b) Purchases from Affiliates
mented in April 2004. Relevant prior service obligations shall
                                                                         ¥16,687 million (US$142,050 thousand)
be amortized over five years beginning from the term follow-
                                                                   c) Non-Operating Transactions with Affiliates
ing that for which the obligations are recognized.
                                                                         ¥22 million (US$183 thousand)
                                                                   d) Net Loss per share
3) The components of net periodic benefit costs were as
                                                                         ¥20.72 (US$0.18)
follows:
                                                    Thousands of
                                  Millions of Yen   U.S. Dollars   6. Other Information
Service Cost                         ¥ 642             $ 5,469     Lawsuit against the Company claiming execution of guarantee
Interest Cost                          313               2,668     obligations regarding voluntary liquidation of Nanatomi Co., Ltd.
Expected Return on Plan Assets          —                   —      (“Nanatomi”).
Amortization of Transitional                                          The Company accepted the joint and several responsibility for
 Obligation                              599              5,095    the repayment of a maximum of ¥4,543 million (US$38,678 thou-
Recognized Actuarial Loss                309              2,628    sand) based on conditions set for Nanatomi, the obligor, when it
Amortization of Prior                                              applied to the Tokyo District Court for the commencement of its
 Service Cost-Credit (Note)               69                587    voluntary liquidation on January 16, 1991.
Contribution for Trusted                                              On April 22, 2002, Janome Sewing Machine Co., Ltd.
 Pension Fund                           399              3,397     (“Janome”) sued the Company to fulfill its obligations on the
Net Periodic Benefit Costs           ¥2,331            $19,844     joint and several guarantee of ¥4,543 million (US$38,678 thou-
                                                                   sand) to creditors. According to Janome, the Company had
Note: This amount is amortization of past service cost-credit      claims of ¥4,788 million (US$40,759 thousand) for the voluntary
referred to in note 2) The liability for employees’ retirement     liquidation of Nanatomi. On June 30, 2003, Janome reduced the
benefits.                                                          amount of its claim to ¥3,246 million (US$27,631 thousand).
                                                                      On December 20, 2004 the Tokyo District Court rejected the
                                                                   claim by Janome against the Company. On December 27, 2004
                                                                   Janome appealed against the decision to the Tokyo High Court.
                                                                      On May 25, 2005, the arguments were concluded at the
                                                                   Tokyo High Court and the judges recommended that the parties
                                                                   reach an out-of-the-court settlement. On March 8, 2006, after a
                                                                   series of negotiations, the Company and Janome reached the out-
                                                                   of-count settlement under which the Company shall pay ¥500
                                                                   million (US$4,256 thousand) to Janome by March 31, 2006.




                                                                                                     Tobishima Corporation    13
7. Subsequent Events
a) The following proposed disposition of accumulated deficit for
   the year ended March 31, 2006, was approved at the share-
   holders meeting held on June 29, 2006.
                                                           Thousands of
                                         Millions of Yen   U.S. Dollars
Disposition of Accumulated Deficit
   Accumulated Deficit                    ¥ 29,572           $251,737
   Transfer from Other Capital
    Surplus                                      10                  82
   Reversal of Statutory Reserve
    Included in Capital Surplus               28,297             240,884
   Accumulated Deficit Carried
    Forward                               ¥ 1,265            $ 10,771

Appropriation of Other Capital Surplus
  Gain on Disposal of Company
    Shares in Treasury                    ¥      10          $       82
  Transfer to Accumulated Deficit                10                  82
  Other Capital Surplus Carried
    Forward                               ¥      —           $       —

b) On May 9, 2006, ¥6,000 million (US$51,077 thousand) worth
   of conversion rights (from the Company’s 2nd issue of unse-
   cured convertible bond) were exercised. This automatically
   resulted, effective the same day, in an increase in the number
   of shares issued and outstanding of 56,980,000 shares, an
   increase of ¥3,020 million (US$25,708 thousand) in the
   Company’s paid-in capital, and an increase of ¥2,980 million
   (US$25,369 thousand) in the capital surplus (to be included in
   the statutory reserve).
c) At the board of directors meeting held on May 29, 2006, the
   board resolved to reduce the Company’s paid-in capital with-
   out any payment to eliminate accumulated deficit and cancel
   preferred stock. This proposal was approved at the sharehold-
   ers meeting held on June 29, 2006. Reduction in paid-in capi-
   tal shall amount to ¥27,921 million (US$237,688 thousand),
   and the Company plans to set the deadline for creditors’
   demurral period at August 7, 2006 and the effective date of
   the capital reduction at August 8, 2006.




     14   Tobishima Corporation
Tobishima Corporation   15
CORPORATE DIRECTORY

Board of Directors               Representative Director             Directors                      Corporate Auditors
Chairman and                     Yoshihiro Inoue                     Kotaro Masaki                  •Standing Auditors
Representative Director                                              Kazuhiko Tomura                Etsujiro Furuita
Yoshiharu Tomimatsu                                                  Yoshimi Miyayama               Masato Ikeo
                                                                     Yoshio Daicho                  •Auditor
President and
Representative Director                                                                             Kinsuke Obuse
Toshiaki Ikehara                                                                                    Yoshihiro Toji

Executive Officers                        Managing Executive Officers                   Executive Officers
Chairman                                  Juzo Wakisaka                                 Kanetoshi Takayama
Yoshiharu Tomimatsu                       Kaichi Hirayama                               Tomokichi Yamatani
                                          Chikatsu Hayakawa                             Toshinori Adachi
Vice Chairman                             Katsuji Hiramatsu                             Itsuo Ootsuka
Masahiro Niijima                          Yoshimi Miyayama                              Akio Mitsue
Chief Executive Officer                   Kenji Matsuda                                 Motoaki Suzuki
Toshiaki Ikehara                          Yasunori Oguni                                Mitsuhiro Okada
                                          Yoshio Daicho                                 Minoru Takano
Executive Vice Presidents                 Mikio Tashiro                                 Masahiro Sasabe
Yoshihiro Inoue                           Tetsuo Wada                                   Yasuhiro Nakagomi
Kotaro Masaki                                                                           Masafumi Maruyama
Toshimichi Okubo                                                                        Shigeki Hirano
Senior Managing Executive
Officers
Hidehiro Sadakane
Kazuhiko Tomura
Itsuji Koreishi

International Operations                Pakistan Office                             Shareholder Information
Division                                H. No. 22, St. No. 27,                      Year of Establishment:            March 1947
2, Sanban-cho, Chiyoda-ku               F 6/2, Islamabad, Pakistan                                    (Predecessor founded in 1883)
Tokyo 102-8332, Japan                   Phone: 051-2822802                          Paid-In Capital:      ¥30,421,223,741
Phone: 03-5214-7741                        Fax: 051-2822639                         Authorized Shares:
   Fax: 03-3262-3255                    Afghanistan Office                             Common Stock 820,300,000 shares
Overseas Offices                        H. No. 2, Lane No. D, St. No. 10,              Class A
Brunei Office                           Wazir Akbar Khan Area,                          Preferred Stock   4,300,000 shares
Unit 6, 2nd floor, Block J              Kabul, Afghanistan                             Class B
Abdul Razak Complex                     Phone: 020-2300220                              Preferred Stock   3,300,000 shares
Gadong BE 2719                                                                         Class C
                                        Overseas Subsidiaries                           Preferred Stock 109,100,000 shares
Bandar Seri Begawan
Negara Brunei Darussalam
                                        Tobishima (Brunei) Sdn. Bhd.                Issued and Outstanding Shares:
                                        Unit 6, 2nd floor, Block J                     Common Stock 341,972,056 shares
Phone: 02-425946
                                        Abdul Razak Complex                            Class A
  Fax: 02-422041
                                        Gadong BE 3519                                  Preferred Stock   4,300,000 shares
Philippine Office                       Bandar Seri Begawan
2A 2F., Classical Condominium,                                                         Class B
                                        Negara Brunei Darussalam                        Preferred Stock   3,300,000 shares
No. 112 H.V. Dela Costa St.,            Phone: 02-425946
Salcedo Village, Makati,                                                               Class C
                                          Fax: 02-422041                                Preferred Stock 109,089,000 shares
Metro Manila, Philippines
Phone: 02-8135857
                                        Tobishima Philippines Inc.                  Note: The increase in common stock issued and
                                        2A 2F., Classical Condominium,              outstanding from exercise of conversion rights
   Fax: 02-8133052
                                        No. 112 H.V. Dela Costa St.,                during the reporting period is as follows.
Indonesia Office                        Salcedo Village, Makati,                      Exercise of conversion rights (¥5.0 billion)
Wisma Nusantara Bldg., 12F.,                                                          relating to the 1st issue of unsecured
                                        Metro Manila, Philippines                     convertible bond on February 16, 2005:
Jl. M.H. Thamrin No. 59,                Phone: 02-8135857                             49,695,310 shares
Jakarta 10350, Indonesia                   Fax: 02-8133052                            Exercise of conversion rights (¥20.0 billion)
Phone: 021-337374                                                                     relating to the 2nd issue of unsecured
    Fax: 021-331916                     Employees by Occupation                       convertible bond on December 8, 2005:
                                        (As of March 31, 2006)                        160,668,771 shares
East Timor Office
No. 108, Kampung Bebonuk, Comoro        Administrative Officers     354             Shareholders:
P. O. BOX 439, Dili, East Timor         Civil Engineers             788               Common Stock                          39,965
Phone: 0390-321622                      Building Engineers          474               Class A
   Fax: 0390-312018                     Mechanical Engineers         40                Preferred Stock                                1
                                        Electrical Engineers         18               Class B
                                        Other Equipment Engineers    48                Preferred Stock                                1
                                        Total                     1,722               Class C
                                                                                       Preferred Stock                                5
 16   Tobishima Corporation
Tobishima Corporation
Head Office
2, Sanban-cho, Chiyoda-ku, Tokyo 102-8332, Japan
Telephone: (03) 5214-8200
Facsimile: (03) 3262-7683




                                                   Printed in Japan

				
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