full Annual Report 2006 (PDF 3.2MB)

Annual Report 2006For the year ended March 31, 2006C R E D I B I L I T Y A N D T R U S T

ProfileKajima is one of Japan’s largest listed construction, real estate development,architectural design and engineering firms, with 166 years of experience.Headquartered in Tokyo, we have 12 domestic branch offices throughoutJapan, with over 9,200 employees and more than $15 billion in consolidatedrevenues. Kajima also operates in more than 20 countries around the world, insuch regions as North America, Europe, the Middle East, Africa and Asia.We are dedicated to providing our customers with full satisfaction from theplanning and design phases through construction, operation and maintenanceof facilities, by supplying total solutions in a timely manner. Kajima is also wellknown for developing new technologies and construction methods at its extensivein-house R&D facilities. In 2005, we held a total of 1,913 patents, enablingus to overcome technologically difficult challenges.With an eye on the dynamic changes underway in the business and socialenvironments, Kajima will continue to fulfill and exceed expectations, and earntrust by working in close cooperation with stockholders, customers and localcommunities. We are confident we can achieve a brighter future for all.ContentsFinancial Highlights(Consolidated and Non-Consolidated) 1Message from the Management 2Kajima Group Medium-Term Business Plan(Financial Year to March 2007—Financial Year toMarch 2009) 4Our Strength 6Our Technology 8Our Responsibilities 10Domestic OperationsConstruction Business 12Building Construction 13Civil Engineering 14Domestic OperationsReal Estate Development 16Other Business 18Overseas OperationsOverseas Construction & Real Estate Development 20Overseas Building Construction & Real EstateDevelopment 21Directly Managed, Overseas Civil Engineering 22Selected Financial Data 24Summary and Forecast of BusinessPerformance 26Financial Section 28Corporate Data 54Board of Directors, Corporate Auditors, andExecutive Officers 55Corporate Organization 56Principal Subsidiaries and Affiliates in Japan 57Overseas Network 58Corporate History 59Foward-Looking StatementsThis Annual Report includes forward-looking statements that represent Kajima’s assumptions and expectationsin light of currently available information. These statements reflect industry trends, clients’ situations and otherfactors, and involve risks and uncertainties which may cause actual performance results to differ from those discussedin the forward-looking statements in accordance with changes in the domestic and overseas businessenvironment.

Financial Highlights (Consolidated and Non-Consolidated)KAJIMA Corporation and Consolidated SubsidiariesFor the years ended March 31 2006 2005 2006(Thosands ofConsolidated: (Millions of Yen) U.S. Dollars)Revenues ¥1,775,274 ¥1,687,380 $15,173,282Net Income 22,507 13,220 192,368Total Assets 1,905,965 1,817,730 16,290,299Total Stockholders’ Equity 297,921 219,742 2,546,333Per Share: (Yen) (U.S. Dollars)Basic Net Income ¥21.19 ¥12.28 $0.181(Thosands ofNon-Consolidated: (Millions of Yen) U.S. Dollars)Revenues ¥1,341,282 ¥1,296,227 $11,463,948Net Income 18,585 10,976 158,846Total Assets 1,547,154 1,510,848 13,223,538Total Stockholders’ Equity 306,671 237,991 2,621,120Contract Awards 1,374,000 1,484,455 11,743,590Total Contract Backlog 1,612,500 1,579,783 13,782,051Financial HighlightsPer Share: (Yen) (U.S. Dollars)Basic Net Income ¥17.54 ¥10.25 $0.150Cash Dividends 6.00 6.00 0.051Notes: 1. The U.S. dollar amounts included herein are presented solely for convenience of the reader. Such dollar amounts have been translated from yen at theapproximate exchange rate in Tokyo on March 31, 2006, of ¥117.00=U.S.$1. The translations should not be construed as representations thatJapanese yen have been, could have been or could in the future be converted into U.S. dollars at that or any other rate.2. Basic net income per share is computed by dividing net income attributable to common stockholders by the weighted-average number of commonshares outstanding for the years ended March 31, 2006 and 2005, respectively.1

Message from the ManagementCredibility and TrustOur Credibility and TrustMessage from the Management2Mitsuyoshi NakamuraPresident, Representative DirectorSadao UmedaChairman, Representative DirectorThe Japanese construction industry during the financial year to March 2006 wasmarked by a large-scale transformation of the business environment, exemplifiedby such factors as a shift in the demand structure, and more intense competitionresulting from reform of construction-related laws. In the domestic constructionmarket, capital investment increased in the private sector prompted by the economicrecovery, although investment in public works fell at an even greater pace,making the struggle for contracts fiercer than ever. We have entered an era inwhich the management capabilities of Kajima and other companies in the industryare truly being put to the test.Another distinctive feature of the times is a greater awareness of corporate socialresponsibility (CSR) in terms of ensuring compliance, contributing to society andthe environment, emphasizing and enhancing quality and safety, and other measures.We are now in an age when society demands that all companies raise theirawareness of CSR to levels higher than ever before, and act on their own initiative.Kajima has adapted its structure to face this new era, restructuring our top managementaround the chairman and president positions. We have also restructuredour Board of Directors and introduced an executive officer system, enhancing thespeed of management decision-making and strengthening oversight functionsfor operations.

Our Credibility and TrustMessage from the Management3Our earnings for the financial year to March 2006 exceeded initial targets, theresult of a concerted effort throughout the Company during the final year towardthe goals of our three-year medium-term business plan. We launched a new businessplan in the current financial year, covering the period through March 2009,the first in a series of growth strategies in an era of new competition. Through thisplan, we will strive to further enhance earnings capacity and corporate value, andachieve greater growth.Kajima's long history dates back to its establishment in 1840. While preserving thetraditions and trust we have built over many years, we have sought to ensure aflexible and nimble company that can adapt quickly to the changing times, with anunshakeable resolve to remain a leader in the construction industry.We wish to offer our appreciation to our shareholders and all stakeholders, andthank you for your continued support.Sadao UmedaChairman, Representative DirectorMitsuyoshi NakamuraPresident, Representative Director

Kajima GroupMedium-Term Business Plan (Financial Year to March 2007—Financial Year to March 2009)Announced on May 18, 2006Credibility and TrustOur Credibility and TrustMedium-Term Business Plan4Our goals for the three-year medium-term businessplan ended in the financial year to March 2006were to secure consolidated recurring profit ofmore than ¥42.0 billion and reduce our level ofinterest-bearing debt. As a result of our efforts toenhance business profitability, improve our financialposition, strengthen earnings capacity and diversifysources of earnings, we exceeded this figure, andachieved nearly all targets in our initial plan.The basic principles of the new medium-term businessplan, launched in April 2006 and extendingthrough the financial year to March 2009,are “Focus on client orientation” and “Ensurecorporate ethics.”In executing our business, we emphasize workingwith the client, to maintain the level of trustworthinessexpected of the Kajima Group. We will significantlyenhance our efforts with regard to quality,safety and the environment, while respecting andfully enforcing compliance and CSR based on selfdisciplinedcorporate ethics.Through such company-wide efforts, we will realizea corporate culture filled with the spirit of challenge,achieve a higher earnings capacity, and raise ourcorporate value by fostering vigorous and enthusiasticemployees, as we seek to make furtherstrides in our development.I. Earnings Targets (Financial Year toMarch 2009)Our target is to establish a structure capable ofmaintaining a stable level of consolidated recurringprofit of more than ¥60.0 billion annually,raising profitability to an even higher level. At thesame time, we will maintain a proactive stancewith regard to return of profit to investors andstakeholders, and by cutting interest-bearing debtand enhancing shareholders’ equity, achieve adebt/equity ratio of around 1.00.II. Business StrategiesDeeply cultivate our mainstay construction business,and strengthen technology and marketing•To further boost competitiveness in the coredomestic construction business, we will enhanceour sales capability to win contracts through aproject proposal capacity that respects the growingsophistication and diversification of customerneeds, and through our advanced technologyand engineering capabilities, thereby boostingearning capacity.•We will pursue synergistic effects in the constructionbusiness through proactive expansion of thereal estate development business, strengtheningthe environment and private finance initiative (PFI)businesses, and expanding the constructionrelatedfield, seeking to enhance the earningscapacity of the Kajima Group.Principal measures for these strategies are asfollows.1. ConstructionDomestic Construction Business•We will strengthen our project proposal capacityand competitiveness through efforts to ensurecloser cooperation between sales, design andconstruction, and by enhancing our productionplanning and estimate functions at the time ofreceipt of the contract. In particular, we will bolsterthe business framework by sector, such as forelectronic devices and healthcare.•Responding to the growth of comprehensive evaluationsystems as a result of laws related to thepromotion of quality maintenance for public

works, we will improve our technological proposalcapability and price competitiveness by exertingour comprehensive capabilities.•We will enhance our construction supervisionstructure, as well as develop and strengthensubcontractors, suppliers and other affiliatedcompanies, to build a production structure thatgives ample consideration to quality, safety andthe environment.Overseas Construction Business•We will improve our risk management structure,and focus on selective business promotion, carefullychoosing regions and projects that allow us toensure the superiority of the Kajima Group.•In civil engineering, we will continue to enhancestructures and personnel in areas with growingmarkets such as Asia and the Middle East, andattain stable profit generation.III. Management FoundationImplement rapid reform, and increase the level ofsocietal trust and our standing•We will restructure our operational, organizationaland personnel structure in accordance withchanges in the business environment, and seek tofurther increase efficiency and corporate competitivenessthrough such measures as focusing onresearch and development.•We will establish Office of Internal Control, and willdevelop and strengthen our internal control systemthrough a company-wide risk managementstructure. We will also ensure strict observance ofcompliance, and work toward sound and efficientmanagement. We will strengthen the functionsof Office of Corporate Social Responsibility witha framework directly under the President,and expand fulfillment of the Company’ssocial responsibility.Our Credibility and TrustMedium-Term Business Plan52. Real Estate DevelopmentDomestic Real Estate Development Business•As the second source of earnings following thedomestic construction business, we will workaggressively in this business to generate new,high-quality projects by cultivating our expertise,and further strengthening cooperation with theconstruction division.Overseas Real Estate Development Business•We will pursue healthy and vigorous businessdevelopment tailored to the special characteristicsof each region, such as the distribution warehousedevelopment business, which is growing stronglyin North America, and the leasing business inSoutheast Asia.

AkihabaFeature ArticleStrengthOur StrengthFeature Article 1: Akihabara Crossfield1: Akihabara CrossfieldKajima Leads Development of a New Type of IT Facility Where People and Information IntersectAkihabara Crossfield was established in Akihabara (Chiyoda-ku, Tokyo), internationally known as “Electric Town,” aplace to find cutting-edge multimedia and other technology. Kajima, along with two partner companies, developedthe project from start to finish, handling everything from design and construction to management and operation.Drawing on its technical abilities and collective strength, Kajima took the initiative in proposing a development solutionincorporating both hardware and software in the heart of the city, helping to establish a new business model.So what exactly is Akihabara Crossfield?6An Important Transportation HubAkihabara lies approximately two kilometers north of TokyoStation, practically in the center of Tokyo. It is a major transportationhub, with access by six railway and subway linesfrom three stations. The starting point for the new TsukubaExpress, opened in August 2005, it provides a 45-minutelink between Tokyo and Tsukuba Science City, a concentrationof a wide range of research centers.The Akihabara BrandAkihabara Crossfield is at the northern end of JR AkihabaraStation, situated on a 1.57-hectare area of land on the westside of the Japan Railway (JR) Yamanote Line. The mainbuildings in the complex are the Akihabara Daibiru Building(31 stories) completed in March 2005, and the AkihabaraUDX Building (22 stories) completed in March 2006. Theorigin of the project is “Tokyo Plan 2000,” part of the Tokyogovernment's plan to create a global center for the IT industryin Akihabara, taking advantage of the district's uniquecharacteristics. As part of this project, the former site of theKanda produce market and national railway (Akihabarafreight yard) was redeveloped.The concept for the project was “crossing of peopleand information,” providing collaboration between industryand academia, an information network, and visitordrawing power.Collaboration of Industry and AcademiaAkihabara Daibiru Building contains 16 organizations andinstitutes for collaboration between industry and academia.All of the tenants were selected for their “creation of the ITindustry,” and include such institutions as the University ofTokyo, the National Institute of Advanced Industrial Scienceand Technology (AIST), the University of Tsukuba, and theJapan Patent Attorneys Association (JPAA).The University of Tokyo Graduate School of InformationScience and Technology has established its CreativeAkihabara Daibiru

a UDX Building(22 stories) completed in March 2006Akihabara UDX BuildingOur StrengthFeature Article 1: Akihabara CrossfieldAkihabara Crossfield area overviewAkihabara Daibiru BuildingInformatics Department at the complex. The University ofTsukuba has opened a graduate school of law, enhancingits lectures on intellectual property rights. Tsukuba ScienceCity's AIST Institute seeks to become a base for providinginformation on findings of leading-edge research. Kajimahas also established a new R&D facility (satellite lab) withinthe complex.The Akihabara UDX Building was designed as a facility toattract visitors, containing a multi-functional event hall,restaurants and cafés, and parking for about 800 vehicles.The office space on the upper floors is occupied by manyIT-related companies.Integration with “Electric Town”The city’s plan to use IT to attract visitors to the entire areais also moving forward, with the vision of a theme park forleading-edge technology. Examples include a museum forvisitors to conduct experiments with everyday science,demonstrations around town of new technologies andproducts currently in development, and street performancesusing robots and scientific instruments. The project is beingcoordinated by Professor Kenichiro Senoh of the Universityof Tokyo's Research Center for Advanced Science andTechnology, who hopes that the project's links with ElectricTown will make the district a place people want to visit on adaily basis.Akihabara Crossfield is more than just a sophisticated, multifunctionalfacility. It has also been designed to be a gatewayto the district. A pedestrian deck, the “Akiba Bridge,”links the area in front of JR Akihabara Station with the twohigh-rise buildings, providing a smooth flow of peopleto Electric Town. An IT industry facility where peoplegather and enjoy themselves is an important aspect of theproject concept.Akihabara changes and evolves with each technologicalrevolution. Kajima is playing a major role as the area isreborn as a center for a more highly specialized IT industry.7uilding(31 stories) completed in March 2005

Feature ArticleTechnologyOur TechnologyFeature Article 2: Technology2: Kajima’s Disaster Prevention TechnologyProtects Businesses from Disaster RiskWith the globalization of markets and increasing complex supply chains, a company’s business continuity management(BCM) strategies in preparing for disaster have become a vital management issue. This is especially true inJapan, where over 20% of the world’s major earthquakes occur. This earthquake-prone country has suffered fromquakes many times, with the loss of much life and property. Kajima develops earthquake resistance and other disasterprevention technologies that support its clients’ BCM strategies, protecting them from damage caused byearthquakes, as well as fire, lightning and other causes.8Kajima’s Cutting-Edge Earthquake ResponseTechnology Provides Safety and SecurityEvaluating Earthquake Risk, and Sensing When a MajorTremor Is ImminentAs Japan is a country with frequent earthquakes, earthquakeresistance standards have been strengthened followingnumerous disasters. Researching the degree of earthquakerisk for a specific location, however, and the level ofdamage that can be expected in the event of an earthquakerequires several weeks and enormous expense. To overcomethese challenges, Kajima has developed a systemthat allows for easy, instant evaluations with an ordinarypersonal computer. The program forecasts the likelihood ofa major earthquake occurring in a specified location, thencompares and analyzes data on the building's constructionwith that of other structures in the area, providing an estimateof the degree of damage that can be expected, aswell as the cost.180Base isolation for overbuildingsIf an organization receives a warning even half a minute orso prior to a major tremor, it can take preventive measures,such as evacuation to safe areas, and emergency shutdownsof equipment to protect them from damage. TheCompany has developed its own unique early warning systemthat combines the system provided by the JapanMeteorological Agency with more detailed information onfoundations and structures, giving pinpoint predictions as tohow many seconds remain before a tremor shakes a particularplace or building. We are currently exploring practicalways to utilize this system.Buildings That Will Not Collapse, and Systems ThatMinimize ShakingOne of the hard-learned lessons from the Hanshin-AwajiEarthquake 11 years ago in 1995 was that nearly 90% ofthe fatalities resulted from crushing or suffocation causedby falling furniture or the collapse of old, fragile buildings.Buildings that did not collapse faced severed lifelines, withwrecked interiors and major damage from the fall of com-Winchor method for settinglaminated rubber bearings withwing-shaped plates

130Provided structural responsecontrol systems for more thanbuildingsOur TechnologyFeature Article 2: TechnologyNiigata Bandaijima Building withstructural response control system"HiDAX"Hokuriku Gakuen with baseisolation systemSeigakuin with the Parallel FrameSeismic Reinforcement Methodputers and other equipment. Facilities such as hospitals,and the schools serving as evacuation centers lost much oftheir infrastructure, causing serious problems. To lessensuch damage, it is necessary first of all to ensure that abuilding does not collapse, and at the same time provide asystem that minimizes shaking.Kajima’s research and development division has developedthe HiDAX system, which controls shaking using hydraulicdampers, base isolation systems for ordinary buildings, aswell as earthquake resistance reinforcement and base isolationmethods that can be completed without disruptingbusiness operations. The Company has already providedstructural response control systems for more than 130buildings, and base isolation for over 180 buildings, excludingsingle-family residences.The effectiveness of Kajima’s base isolation technologywas clearly demonstrated during the Niigata-ken Chuetsuearthquake, a magnitude 6.8 quake that occurred in lateOctober 2004. The buildings of Hokuriku Academy, aneducational institution in Nagaoka, Niigata Prefecture thatutilized the Company's base isolation structure, not onlyescaped intact but also saw no damage done to equipmentor other internal fixtures. Another success was the NiigataBandaijima Building in Niigata City, which provided a perfectexample of the superior performance of a structural responsecontrol structure and the HiDAX system. Guests and employeesof the hotel on the top floors of the building reported thatthey felt almost no shaking during the earthquake.Providing Is PreventingKajima also provides a wide range of other disaster controltechnologies, including the Water Screen Fire DisasterPrevention System, a fire control system that produces acurtain of water and allows for safe evacuation during a fire,and the Faraday earth system, which protects an entirebuilding and its electronic equipment from lightning strikes.After the 1994 Northridge earthquake in California, an officialin Los Angeles declared that the city must accept thecost of preparing for a future disaster. The loss of life, or theshock to the local economy, is not an area for cost controlmeasures. The Company will continue to develop disastercontrol technology in an effort to provide greater safetyand security.High-performance hydraulicdamper “HiDAX”9

Feature ArticleResponsibilitiesOur ResponsibilitiesFeature Article 3: Protecting the Environment3: Protecting the EnvironmentWhat We Can Do Now to Help Prevent Global WarmingHumans have consumed a huge amount of energy in the relatively short period of a century or so. The result is thatenergy resources are being depleted, and we are experiencing global warming due to the effect of greenhouse gases.Wangari Maathai, Kenya’s Deputy Minister of Environment, Natural Resources and Wildlife, and winner of the 2004Nobel Peace Prize, has characterized this situation with the Japanese word “mottainai” (“what a waste”). Many peoplein Japan, to more effectively use limited resources, practice the “4R principle” (3R + 1) of Reduce, Reuse, Recycle andRepair/Restore.In this feature, Kajima introduces its environmental efforts, in line with the 4R principle.10Reduce Building Energy ConsumptionReuse Existing BuildingsThe Kyoto Protocol obliges Japan to reduce its collectivegreenhouse gas emissions by 6% compared to 1990 levelsby 2012. As part of its effort to make building more energyefficient, Kajima makes environment-conscious proposalsusing the Comprehensive Assessment System for BuildingEnvironmental Efficiency (CASBEE) system. For example,the amount of lighting can be reduced by allowing in naturallight during the day while controlling the heat throughenergy saving double layer glass windows and window louvers.Kajima also developed the hybrid natural ventilationsystem that draws cool outside air during the spring or fallseason, and can also reduce usage of the air conditioningsystem. The Company made 99 building designs for suchenergy-efficient buildings during the financial year to March2006. As a result, the amount of carbon dioxide generatedin the operation of these buildings has been lowered by32,826 tonnes per year, with a projected reduction benefitof 1,148,910 tonnes on average over the 35-year life ofthe buildings.32,826Building in Japan are torn down and rebuilt on averageevery 35 years, more for social or physical reasons thanbecause of functional capacity. Japan, however, is graduallytransforming itself from a flow-oriented society in whichnew buildings are continually constructed into a stockorientedsociety that properly maintains high-quality assetsover a long period of time. One example is the DaVinciGinza Building, which has received the Building andEquipment Life Cycle Association (BELCA) Prize. Kajimadesigned and constructed this office building more than 40years ago, but rather than being demolished due to age, itwas renovated and reused. The building was of courseimproved in terms of safety and functionality, such as adaptationfor IT and strengthening against earthquakes, andwas also made more energy efficient by replacing the heatingand cooling system. The simple and elegant facade wasrestored to its original splendor, while the interior structurewas reborn as a modern office building.tonnes per year,with a projected CO2 reduction benefit

99buildingswith energy-efficient building designduring the financial year to March 2006Our ResponsibilitiesFeature Article 3: Protecting the EnvironmentRecently renovated DaVinci GinzaBuildingExterior panels are produced atthe factory, reducing the amountof tropical wood used for moldingforms.Recycle Construction Materials at Job SitesIndustrial waste generated by the construction industryaccounts for 20% of such waste in Japan. To minimize thewaste generated at project sites, Kajima promotes the “3Rprinciple” of Reduce, Reuse and Recycle. Packaging isreduced as much as possible, materials are processed atplants to the correct size needed at the site to reduce theamount of on-site finishing, and other methods have beenrevised, with a significant benefit. Small, steady efforts onsitecontinue, including reuse of construction materials astemporary material, and recycling of waste products incooperation with manufacturers and waste processors.These efforts also help to reduce carbon dioxide emissions.Restore the Natural EnvironmentBiodiversity and ecosystems in Japan are growing morefragile. In an effort to protect biodiversity, in August 2005the Company formulated the Kajima EcosystemConservation Guidelines, the first policy guidelines of theirtype in the industry. The construction industry exists in adirect relationship with biodiversity, and has a significantimpact on it. In this respect, Kajima feels that it cancontribute significantly to biodiversity.An embankment panel suitable forcrabs inhabiting the areaWe believe that it is the responsibility of the constructionindustry to protect natural beauty and a rich biodiversity,supporting both environmental conservation and economicdevelopment. For example, with land that was contaminatedin the past and is no longer in use, we can clean thesoil employing the latest decontamination technology, orremove it entirely, so that the land can be reutilized. In addition,during construction of factories and other structures,and during urban redevelopment projects, we proactivelyplan and conduct activities to restore local environmentsand conserve ecosystems, such as building regulatingreservoirs and embankments to support a wide diversityof life.The Company’s environmental business is wide-rangingand varied, including reusable energy sources such as windpower generation and biogas, a clean development mechanism(CDM) project in Malaysia, and other initiatives. Werefuse to forget the spirit of “mottainai,” as we strive to protectthe environment, and pursue economic conservationactivities aimed at lessening the environmental burden.Kajima’s Environmental Report can be found online at:http://www.kajima.co.jp/csr/environment/index.html11

Review of OperationsReview of OperationsDomestic Construction Business12Domestic OperationsConstruction BusinessConstruction is the Company’s core business,accounting for over 80% of contract awards. It isdivided into the Building Construction, whichhandles construction of projects such as officebuildings, production plants and condominiumapartments, and Civil Engineering, which managesconstruction of projects such as dams, bridgesand tunnels.During the financial year ended March 31, 2006,Kajima was awarded contracts totaling ¥1,123billion. Building construction accounted for81.0%, and civil engineering 19.0%. Design andbuild contracts accounted for 48.7% of the entireconstruction business.Tokyo BuildingAkasaka Yagenzaka NorthRedevelopment ProjectOmarugawa Hydraulic Power Plant, Upper DamNihonbashi Mitsui Tower

Building ConstructionMarket Conditions: Private-SectorInvestment Reaches New HeightsSpending on domestic construction projectsduring the financial year ended March31, 2006 is estimated at ¥30.8 trillion, andwhile investment in public constructionprojects continues to decline, privatesectorinvestment in construction continuesto rise, and is estimated to have againexceeded the previous year’s level. Anincreasing number of people returning tocentral cities is driving strong demand forcondominiums, and demand is considerablefor high-rise office buildings as part ofurban redevelopment projects. Privatesectorinvestment is expected to continueto grow, and we anticipate demand forproduction and commercial facilities.Performance: Integrated ApproachHelping to Make InroadsDomestic building construction contractsfor the financial year ended March 31,2006 totaled ¥910 billion, of which designand construction accounted for 56.8%.Kajima offers an integrated approach todesign and build, incorporating expertisegained through numerous constructionprojects to create high-quality buildings. Byinvolving itself in projects during the planningand design stage, the Company candraw on its experience and technology topropose constructive suggestions regardingthe most appropriate constructionmethods, or ways to shorten the constructionperiod, an aspect of its business thathas won high praise from clients. Kajima’sdesign and engineering capabilities havebeen fully utilized for such projects aslarge-scale housing complexes, productionplants for flat panel displays and otherelectronic devices, and large-scale retailcomplexes, lowering costs and shorteningconstruction periods. This approach alsohelps to strengthen our price competitivenessand increase earnings.CANON INC. YAKO OFFICEMARUITO Osaka Business Park(OBP)Fullcast Stadium MiyagiPhase 2 ConstructionStrategies for GrowthThe Japanese economy remains strong,with capital investment expanding in a widerange of industries. At the same time, however,individual client needs are becomingmore sophisticated and diversified, and thecompetitive environment for contracts ischanging. Acknowledging this situation,Kajima will work concertedly to consistentlyrecognize these needs, utilize its uniquetechnological capabilities to provide thebest value to clients, and continue to boostits share of building construction contracts.We will focus particularly on proposals forlarge-scale redevelopment projects withexceptional business potential, offeringbuildings with high levels of quality andadded value, utilizing such leading-edgetechnology as environmentally friendlydesigns and sophisticated IT security systems.We will also utilize our dedicatedproject teams with specialized skills toobtain more contracts in a range of fields,including for medical-care facilities, hightechproduction facilities for electronicdevices and other sophisticated devices,logistics centers and commercial facilities.While expanding our business, we will alsocontinue with efforts to enhance constructioncapabilities, as well as raise earningcapacity by establishing a low-cost structure,and making further increases in productivity.In addition, Kajima is movingahead with efforts to diversify its sources ofrevenue in such fields as private financeinitiatives (PFI), engineering, renovation andenvironment-related business.Review of OperationsDomestic Construction Business13

Civil EngineeringReview of OperationsDomestic Construction Business14Market Conditions: CompetitionFierce as Public-Sector InvestmentContinues to FallInvestment in domestic civil engineeringprojects during the financial year endedMarch 31, 2006 is estimated at ¥22.7 trillion,of which ¥17.5 trillion is public-sectorinvestment, and ¥5.2 trillion is from the privatesector. Although private-sectorinvestment is showing signs of recovery,public-sector investment (which accountsfor the majority of civil engineering projects)has declined for seven consecutiveyears, and the government shows nosigns of relaxing restraints on such spending.Moreover, fewer large-scale projectsare moving forward, making the businessenvironment for civil engineering evenharsher.Performance: Kajima Continues toReceive Several Important ContractsDomestic civil engineering contracts for thefiscal year ended March 31, 2006 totaled¥213 billion. Throughout the term, theCompany offered technical, consulting andengineering capabilities, combined with acollective ability for management that ishighly regarded by its clients.Of particular note is a contract for renovationand enhancement of the runway tarmacand surrounding infrastructure of theinternational runway at Tokyo’s HanedaAirport, awarded to a special purposecompany (SPC) of which Kajima forms apart. This project follows the award duringthe previous financial year of a contract forconstruction of a new runway at the airport,in which the Company represented aconsortium of companies. This project hasdrawn much attention as a PFI in the civilengineering field.Hakkoda TunnelKannagawa Hydropower PlantShin-Taishakugawa HydroelectricPower StationIn environment-related business, Kajimawas awarded a contract for the SummitWind Power Kashima, in recognition of itsefforts to lower the environmental burden.Strategies for GrowthIn response to a new law enacted duringthe previous financial year designed toenhance and ensure the quality of publicworks projects, the Ministry of Land,Infrastructure and Transport has issued aseries of new contract award guidelinesemphasizing technical capabilities. Thetechnical capabilities are now being evaluatedmore thoroughly than ever before,and major construction firms such asKajima will likely enjoy an even greatercompetitive edge.In response to this shift in the businessenvironment, the Company set a target forcontracts in its domestic civil engineeringdivision of ¥240 billion for the financial yearending March 31, 2007. By actively andstrategically pursuing a proposalorientedsales strategy fully utilizing thedistinctive technologies it has acquiredthrough its experience to date, Kajimashould be able to succeed in the competitionfor contracts while securing profitability.We will also continue to aggressivelypursue R&D and technological advancementto support the growth expected inparticular areas of civil engineering thatallow us to fully capitalize on our extensivecapabilities, including large-scale urbandevelopment, environmental, renovationand PFI.

Review of OperationsDomestic Construction Business15Kansai International Airport, Phase 2 ProjectPrincipal Domestic Works Awarded to the Company duringthe Financial Year Ended March 31, 2006Principal Domestic Works Completed by the Company duringthe Financial Year Ended March 31, 2006ClientWorksClientWorks1. Toppan Printing Co., Ltd. Mie Factory No. 22. Chubu Electric Power Co., Inc. Shin Nagoya Thermal PowerStation Group 83. Meisei Gakuen Meisei University, Faculty ofPhisical Science and Engineering,Tower A & B4. Global REIT Partners C Tokyo Bay Maihama Hotel5. Toho Gas Co., Ltd. Toho Gas, Chita MidorihamaFactory, LNG Tank No. 21. Mitsui Fudosan Co. Ltd. Nihonbashi Mitsui Tower2. Hokuriku Electric Power Company Shika Nuclear Power Plant Unit 2Construction3. Canon Inc. CANON INC. YAKO OFFICE4.Tohan Co., Ltd.Tohan, Okegawa SCM Center5. Japan Railway Construction, Hakkoda Tunnel, the TohokuTransport and Technology Agency Shinkansen Line

Review of OperationsReview of OperationsReal Estate Development16Domestic OperationsReal Estate DevelopmentThe real estate development business utilizes avariety of development and financing schemes tomaximize asset efficiency. It includes the sales andleasing of property, related fee-based businesses,as well as property development for which sophisticatedtechnology is the main selling point. Thedevelopment expertise in real estate operationsalso helps Kajima to win construction contracts.Tokyo Station Yaesu Area Development ProjectMejiro PlaceAkihabara UDX Building

Market Conditions: Prices InchUpward on Strong Demand asConstruction BoomsThe appraised value of land in Tokyo as ofJanuary 2006 rose for the first time in 15years, with prime areas rising at an especiallyrapid rate as the real estate industryoverall enjoyed a boom period.prevailing market conditions. Our majortransactions during the financial yearended March 31, 2006 were a sale of theItalian Cultural Institute and an agreementto sell the Musashi Kosugi Twin Towercondominium en bloc to an investor uponits completion of construction scheduledin 2008.Review of OperationsReal Estate DevelopmentThe business environment for condominiumsand office buildings continues torecover. The market for office buildingshas been strong over the last few years,supported by robust demand in centralTokyo, but during the financial year endedMarch 31, 2006 demand began pickingup in such other major metropolitan areasas Osaka, Nagoya, Fukuoka and Sendai.Occupancy rates have reached high levels.In the condominium market, the large supplyof new units in the Tokyo metropolitanarea continued, with more than 80,000units a year added for the seventh consecutiveyear. This strong market has beensupported by strong demand from secondgenerationbaby boomers starting to havefamilies and retiring first-generation babyboomers looking for condominiums, andmarket conditions were favorable overall.Performance: Kajima’s Quality KeepsIt Ahead of the CompetitionKajima’s real estate development businessshowed strong performance, despitefierce competition. Results were wellabove initial targets, with contract awardstotaling ¥153 billion.The office leasing business maintained anoccupancy rate greater than 95% for the58 buildings it manages, including fulloccupancy at the Akihabara UDX Buildingcompleted in March 2006.In the investment properties business,Kajima decides to either hold or sell acertain portion of a high-earnings portfolio,carefully monitoring and weighing theShirokane TowerToranomon 4-chome ProjectMasterview ResidenceIn the condominium business, Kajimalisted some 1,400 units (of which nearly allwere sold), mainly upscale condominiumsin such prime residential areas asToranomon (Minato-ku), Mejiro (Toshimaku),and Shirokane (Minato-ku). TheCompany sold nearly 100% of its units forsale, drawing praise for its fundingschemes, technological capabilities andproduct planning.Strategies for GrowthThe real estate development business isgenerating strong earnings, and Kajimawill continue to work to develop a distinctivebusiness, employing sophisticateddevelopment schemes focusing on urbancenters and transportation hubs,and utilizing the technological andinformation-gathering capabilities of theconstruction division. We will also expandrevenue opportunities by making full useof off-balance-sheet financing and othermeasures, enhancing investment efficiency,and strengthening the Company’sfinancial position.We will continue to focus on acquiringselect tenants for large-scale officedevelopments currently in progress,mainly Tokyo Station Yaesu and theToranomon 4-chome Project. In the condominiummarket, Kajima will focus onsales efforts in Ikejiri and Koraku. We willalso work to develop and expand ourfee-based businesses, including assetand property management, brokerageand consulting services.17

Review of OperationsReview of OperationsOther BusinessDomestic OperationsOther BusinessOther business comprises a wide variety of construction-relatedand peripheral businesses, includingengineering, environmental and design, as wellas finance, property management and other services.Other business operations are mainly handledthrough subsidiaries and affiliates.Architectural DesignMarket Conditions and BusinessPerformance: Number of ContractsIncreasingThe architectural design business received608 design contracts totalling ¥4.2 billionduring the financial year ended March 31,2006, and 1,344 consulting contracts.18University of Tokyo Communication PlazaImprovement in the economy led to anincrease in contracts for commercial facilities,and large-scale distribution centers.Greater capital investment led to anincrease in orders for production facilities,as plants were merged and restructuredboth in Japan and overseas. The numberof contracts for condominium design,which previously were declining, hasbegun to increase again as high-rise residentialbuildings are built throughout thecountry. However, contracts for largescaleoffice buildings are decreasing infavor of small- and medium-sized buildings,resulting in a decline in contractsfor office designs in the architecturaldesign business.IKEA FunabashiKanagawa Institute of TechnologyFaculty of Information TechnologyStrategies for GrowthWe anticipate a number of PFI projects tobe launched, mainly for large-scale hospitalsand educational/cultural facilities. In anticipationof these projects we are strengtheninginternal collaboration, and enhancingproject planning and other aspects of proposals.There has been an increase in contractsfor technology-oriented proposalsintegrating comprehensive evaluation,design and construction, for which Kajima

is responding with an expansion of applicationsfor the Parallel Frame SeismicReinforcement Method for external seismicretrofitting, the Water Screen Fire DisasterPrevention System, transparent magneticresonance imaging (MRI) rooms, as well asa host of construction technologies.in particular on winning contracts for R&Dfacilities related to the life sciences, anarea that is expected to grow significantlyin the future, and take proactive measureswith regard to facilities related to theagribio business, and the project and constructionmanagement businesses.Review of OperationsOther BusinessLarge-scale logistics centers have expandedfrom the Tokyo area nationwide withthe rise of investment funds and growth inInternet-related business. Commercialfacilities are also becoming larger and integrated,while large-scale retailers andlogistic centers, faced with fierce pricecompetition, demand lower costs for existinglevels of quality. The Company isresponding to these needs with technologiesthat integrate procurement and constructionmethods, such as the newlydeveloped, non-fabricated steel frame(HeCT) method.Engineering BusinessMarket Conditions and BusinessPerformance: Kajima Exceeds ItsTargetsThe value of contracts awarded in theengineering business reached ¥73 billion,significantly exceeding targets once again,and contributing strongly to earnings.Contracts in this business are mainly forthe design and construction of productionfacilities, and optimal systems for productionand distribution. The main reasons forthe rise were increases in construction oflarge-scale pharmaceutical productionfacilities.Strategies for GrowthKajima is making effective investments ofmanagement resources in engineering, afield where it can fully capitalize on its collectiveability in project planning, technologicalcapabilities and other areas. We will focusPharmaceutical manufacturingprocessToyama Green Food Recycle, Inc.’s“Metakles” facilityEnvironmental BusinessMarket Conditions and BusinessPerformance: Growth in Constructionof Remediation and FermentationFacilitiesAs a relatively new field, the environmentrelatedmarket cuts across industries andbusiness sectors, and competition isfierce. Nevertheless, Kajima was awardedcontracts totaling ¥47 billion, far exceedinginitial targets. The main areas ofgrowth were construction of remediationfacilities to clean contaminated soil, andcomprehensive contracts for “METAKLES”methane fermentation facilities, and windgeneratedpower installations. At the sametime, maturing markets have led to a gradualdecline in orders for rural communitysewerage and waste disposal facilities.Strategies for GrowthKajima will concentrate on the four areasthat generate the most order volume(waste disposal and recycling, soil remediation,water treatment, and renewableenergy sources) while remaining sensitiveto market trends and continuing to pursuethe development of unique technologies.We will also focus on diversifying revenuesources by developing in such areas asenvironmental surveys and consulting,water supply and sewerage systems, PFIsfor waste material, and the clean developmentmechanism (CDM) business.19

Review of OperationsReview of OperationsOverseas Operations20Overseas OperationsOverseas Construction & Real Estate DevelopmentKajima has undertaken construction and real estatedevelopment projects in more than 50 countriesaround the world. We have a permanent presencein 21 countries, and temporary project offices in13 countries in addition to permanent offices.Revenues from overseas operations during thefinancial year ended March 31, 2006 amounted to¥269 billion, a rise of 14.2% year on year.Yokogawa Park,Texas, United StatesKajima’s overseas activities consist of businessconducted through local subsidiaries and suchconstruction projects managed directly by theInternational Division in Tokyo as numerous officialdevelopment assistance (ODA), yen-loan-financedand other government assistance projects, andlarge-scale civil engineering projects. Kajima’sregional subsidiaries are located in the countrieswhere continuing businesses are establishedthrough their design, construction and real estatedevelopment entities, providing a business networkthat allows the Company to make full use of itscollective strength, and offer a global service.Marina Mandarin Hotel SingaporeOne George Street Building, SingaporeDubai Metro Project,the United Arab Emirates

Overseas Building Construction & Real Estate DevelopmentMarket Conditions and BusinessPerformance: Kajima Group PerformsStrongly Overall1. Kajima U.S.A. Inc. (KUSA)KUSA manages the construction and realestate development business in NorthAmerica and Hawaii. It achieved recordhighearnings during the financial yearended March 31, 2006.The construction division was awardedcontracts totaling $0.8 billion for the entiregroup, with strong business activity inHawaii particularly notable. KUSAacquired the Austin Company, and isworking to enhance earnings and improveefficiency throughout the group.The real estate development businesscontinued to perform strongly, bolsteredby distribution warehouse projects.San Luis Obispo CountyGovernment CenterCalifornia, United Stateslocal government and developers. InThailand and Malaysia, earnings arebeing boosted with the reemergence ofJapanese manufacturers.The real estate development business isrecording strong earnings from leasingand management of office buildings,hotels, shopping malls and otherproperties, and has begun consideringnew investments.4. Chung-Lu Sino-Kajima ConstructionCo., Ltd. (Sino-Kajima)Sino-Kajima manages the constructionbusiness in Taiwan.Sino-Kajima undertook numerous projectsfor buildings, such as high-rise condominiumswith advanced seismic control technology,as well as production facilities forelectronic devices and other equipment.Review of OperationsOverseas Operations212. Kajima Kona Holdings, Inc. (KKH)The Hualalai Resort, with the FourSeasons Hotel as the core, has maintaineda reputation as one of Hawaii’sleading resorts. With the particularly strongperformance in the residential developmentsegment, KKH achieved record-highearnings during the financial year endedMarch 31, 2006. Following the successfulperformance, we entered into an agreementwith an investor in March 2006 andsold the hotel and golf operation business,housing business, and fixed assets inJune 2006.3. Kajima Overseas Asia Pte Ltd (KOA)KOA manages the construction andreal estate development business inSoutheast Asia.KOA’s construction business in Singaporecontinued to receive contracts forlarge-scale construction projects fromHung Sheng Tiipao CondominiumTaipei, TaiwanJVC Business Park London, UK5. Kajima Europe B.V. (KE)KE manages the construction and realestate development business in Europe.The construction business, once focusedon the United Kingdom, has been restructuredby concentrating on completingongoing construction projects in theUnited Kingdom, and expanding businessin Poland and the Czech Republic.The real estate development businesscontinues to focus on private financeinitiative (PFI) projects, office buildingsin the United Kingdom, and resortdevelopment in France.6. Kajima (Shanghai) Construction Co.,Ltd. (Kajima Shanghai)Kajima Shanghai manages the constructionbusiness in and around Shanghai,focusing on construction of productionplants for Japanese manufacturers.

Directly Managed, Overseas Civil EngineeringReview of OperationsOverseas Operations22The Global Construction MarketEnvironment: Brightening Prospectsfor InvestmentInvestment in construction is acceleratingthroughout the world as conditionsbrighten with the continued strength of theU.S. and Chinese economies, and theeconomic recovery in Japan.In Taiwan, India and other regions in Asia,many new infrastructure projects, includingsubways, roads, bridges, dams andairports, are being launched in linewith economic development. In the oilproducingregions of the Middle East andNorth Africa, the rising price of crude oilhas produced a flood of oil money drivingactive investment in construction of officebuildings, hotels, and other transport andenergy-related infrastructure. In Africa, theJapanese government is planning toincrease ODA to developing countries.Those market environments are brighteningthe prospects for global constructioninvestment.Dhauliganga HE Project Stage I:Civil Works for Dam and PartHead Race Tunnel (Lot—I), IndiaCivil Engineering Projects: BusinessExpansion ContinuesIn response to these market conditions,Kajima is taking a proactive stance withregard to overseas business development,making overseas civil engineering businessan important item on the agenda inits new three-year medium-term businessplan launched in April 2006 and extendingthrough the financial year to March 2009.Specifically, the Company will pursuea policy of focusing on the Japanesegovernment’s ODA grants and yen-basedloan projects, while at the same timepursuing large-scale, international tenderprojects financed by national or regionalgovernments, state-owned companies, orthe World Bank or other internationalfinancial institutions.Kajima will make efforts to build strategicalliances with powerful overseas partnersand subcontractors to enhance the competitivenessin the world market. We willalso pursue projects in such a way as tomaximize our technical expertise andcomprehensive capabilities.Keelung River Yuanshantze FloodDiversion Project, Taiwan

Review of OperationsOverseas OperationsThe Industrial Ring Road Project, Thailand23Principal Overseas Works Awarded to the Company duringthe Financial Year Ended March 31, 2006ClientWorks1. Dubai Municipality, the United Arab Design ConstructionEmiratesCommissioning and Maintenanceof Dubai Metro Project2. Sewerage Services Department, Construction of Sewage TreatmentMinistry of Energy, Water and Plant Project (Phase 2: Package 3),Communication, Government of MalaysiaMalaysia3. Ethiopian Roads Authority The Project for Rehabilitation ofTrunk Road, Phase III, Ethiopia4. Port of Rijeka Authority RIJEKA Gateway Project,Redevelopment of the Port ofRijeka, Zagreb Pier Extension,CroatiaPrincipal Overseas Works Completed by the Company duringthe Financial Year Ended March 31, 2006ClientWorks1. Water Resources Agency, Keelung River Yuanshantze FloodMinistry of Economic AffairsDiversion Project, Taiwan2. National Hydroelectric Power Dhauliganga HE Project Stage-I —Corporation Ltd.Civil Works for Dam and PartHead Race Tunnel(Lot—I), IndiaPrincipal Overseas Works Awarded to the ConsolidatedSubsidiaries during the Financial Year Ended March 31, 2006ClientWorksUnited States1. KC Rainbow Development LLC Moana Pacific Condominium, WestTower and East Tower2. Kam Sang Co Ltd Embassy Suites HotelEurope1. Electrolux Olawa Washing Machine Factory,PolandAsia1. Richmond Hotel Pte Ltd St. Regis Hotel & Residence JointDevelopment, Singapore2. Senayan Trikarya Sempana Senayan Square Office Tower 2,IndonesiaPrincipal Overseas Works Completed by the ConsolidatedSubsidiaries during the Financial Year Ended March 31, 2006ClientWorksUnited States1. Research Corp. of University of Hawaii University of Hawaii John A. BurnsSchool of Medicine2. San Luis Obispo County San Luis Obispo CountyGovernment CenterEurope1. Kajima Europe (PFI) HSE HQ Office, UK2. JVC UK JVC Business Park, UKAsia1. Capitaland Commercial Pte Ltd One George Street Bldg., Singapore2. Auamarina Hotel Pte Ltd Marina Mandarin Hotel SingaporeA&A Works3. Hung Sheng Construction Co Ltd Tiipao Condominium, Taiwan4. Toppan CFI (Taiwan) Co., Ltd. Tainan No. 2 Plant

Selected Financial DataKAJIMA Corporation and Consolidated SubsidiariesFor the years ended March 31 2006 2005 2004 2003 2002 2006(Thousands ofConsolidated: (Millions of Yen) U.S. Dollars)Revenues ¥1,775,274 ¥1,687,380 ¥1,621,760 ¥1,874,802 ¥2,060,353 $15,173,282Net Income (Loss) 22,507 13,220 (4,474) 10,111 (41,153) 192,368Selected Financial DataTotal Assets 1,905,965 1,817,730 1,870,279 2,024,226 2,226,712 16,290,299Total Stockholders’ Equity 297,921 219,742 216,509 159,017 180,220 2,546,333Short-Term Borrowings, Commercial Paperand Long-Term Debt 458,506 475,820 543,263 594,592 674,153 3,918,855(Thousands ofNon-Consolidated: (Millions of Yen) U.S. Dollars)Revenues ¥1,341,282 ¥1,296,227 ¥1,172,432 ¥1,458,086 ¥1,550,317 $11,463,948Contract Awards 1,374,000 1,484,455 1,178,155 1,139,509 1,200,432 11,743,590Net Income (Loss) 18,585 10,976 (14,492) 8,515 (47,794) 158,84624Total Assets 1,547,154 1,510,848 1,586,815 1,680,439 1,826,910 13,223,538Total Stockholders’ Equity 306,671 237,991 236,473 184,011 206,013 2,621,120Short-Term Borrowings, Commercial Paperand Long-Term Debt 288,152 325,050 383,884 399,800 452,889 2,462,838Per Share: (Yen) (U.S. Dollars)Cash Dividends ¥6.00 ¥6.00 ¥5.00 ¥5.00 ¥7.00 $0.051(Thousand Shares)Number of Shares Issued 1,057,312 1,057,312 1,057,312 961,312 961,312Note: The U.S. dollar amounts included herein are presented solely for convenience of the reader. Such dollar amounts have been translated from yen at theapproximate exchange rate in Tokyo on March 31, 2006, of ¥117=U.S.$1. The translations should not be construed as representations that Japanese yenhave been, could have been or could in the future be converted into U.S. dollars at that or any other rate.

Selested Financial Data25

Summary and Forecast of Business PerformanceSummary and Forecast of Business Performance26Business Performance1. Summary of Business Performance for theFinancial Year from April 1, 2005 to March 31, 2006OVERVIEWThe global economy during the subject financial year continued tobe strong overall, particularly the United States and China. TheJapanese economy continued to show a steady recovery trend,with sustained increases in private capital expenditures, anda pickup in personal spending stemming from improvements inhiring and income conditions.In the domestic construction market, private-sector constructionincreased amid expansion in corporate earnings androbust demand for real estate, although public-sector constructioncontinued to decline due to the government’s tight financialposition.The Kajima Group’s consolidated results for the subjectfinancial year are as follows.Consolidated construction contract awards totaled ¥1,462.7billion, down 9.7% year on year, due to declines at the Companyand its consolidated overseas subsidiaries. Non-consolidatedconstruction contract awards amounted to ¥1,212.3 billion, adecline of 9.5% year on year. This represents an aggregate valueof ¥301.3 billion from civil engineering works (down 12.3% yearon year) and ¥911.0 billion from building construction works(down 8.5%).Consolidated revenues increased 5.2% year on year to¥1,775.2 billion, due mainly to the increase in revenues from theCompany’s construction business.In terms of earnings, as a result of the increase in grossprofit and other factors, operating income was up 18.3% year onyear to ¥55.7 billion. Net income, despite an extraordinary loss of¥6.0 billion for business restructuring in accordance with a fundamentalreview of the construction business in the UnitedKingdom, increased 70.3% year on year to ¥22.5 billion.SEGMENT PERFORMANCE(a) Construction OperationsConsolidated revenues rose to ¥1,512.6 billion, up 10.0% fromthe previous financial year, due to the increase in completed constructionprojects.Consolidated gross profit on completed projects rose to¥115.0 billion, up 12.1% from a year earlier, due mainly to theincrease in gross profit on the Company’s construction projects.The Company’s gross profit margin on completed constructionprojects remained on par with the previous financial year at 9.1%.Consolidated operating income climbed to ¥40.5 billion, up49.4% from a year earlier, due to the rise in the gross profit oncompleted construction projects and other factors.(b) Real Estate OperationsDespite an increase in revenues at overseas consolidated subsidiaries,total consolidated revenues from real estate operationsfell 26.1% compared with the previous financial year, to ¥150.8billion. This decline was mainly attributable to the posting of revenuesfrom a large-scale development project in the previousfinancial year, and the subsequent decline for the financial yearunder review. Consolidated operating income from real estateoperations decreased 13.5% to ¥16.8 billion.(c) Other OperationsOther segments, consisting mainly of the processing and sale ofconstruction materials, design/engineering business and propertymanagement services, reported consolidated revenues of ¥111.7billion (up 4.1% year on year) and consolidated operating incomeof ¥1.1 billion, up 81.6% from a year earlier.2. Declaration of DividendsKajima plans to declare an ordinary annual payout of ¥6.0 pershare (including a semiannual payout of ¥3.0 per share), in linewith the initial plan.3. Business Performance Forecast for the FinancialYear Ending March 31, 2007Regarding the outlook for the Japanese economy, we expect theeconomic recovery to continue for the foreseeable future, drivenby private domestic demand.In the domestic construction market, while private capitalexpenditures are spreading to non-manufacturing industriesand local regions, competition will likely intensify due to a fallin the volume of construction projects in the public sector andother factors.Considering these business conditions, our forecasts for thefinancial year ending March 31, 2007, are as follows.Revenues are projected to rise to ¥1,800 billion, up 1.4%from the preceding financial year.In terms of earnings, despite an expected fall in gross profitin the construction business, we anticipate an increase in grossprofit in real estate operations and other businesses, alongsideimproved earnings in the construction business of overseas consolidatedsubsidiaries. Consequently, we forecast net income of¥35 billion (up 55.5%).The above projections/forecasts are based on informationavailable as of the release of this document and are subject torisks and uncertainties that may cause the actual results to vary.

Risk FactorsInvestors should consider the following risk factors before makingany decision concerning the Group. Forward-looking statementscontained herein are based on judgments made as of March 31,2006. The Group companies seek to mitigate, as much as practicallypossible, the impact that these various risks and uncertaintiesmay have on their business performance by removing,diversifying and/or hedging them.(1) Changes in Market ConditionsShould market conditions change beyond what we currentlyassume (e.g., steep declines in construction demand, upsurgesin construction material prices, major fluctuations of real estatemarkets), the Group’s business performance and financial conditionsmay turn out to be materially different from our projectionsand forecasts.(2) Fluctuations of Interest Rates and Foreign Exchange RatesInterest rate spikes and/or foreign exchange volatility may causethe Group’s business performance and financial conditions todiffer from our projections and forecasts.(7) Legal RestrictionsThe Group companies operate in the construction industry wherethe companies are required to comply with various statutesincluding Construction Business Act, Building Standard Act, RealEstate Business Transaction Act, Land Use Planning Act, UrbanPlanning Act and Antitrust Law. Should there be changes to orabolitions of the above laws, the imposition of new legal constraints,or changes to the applicable standards, the Group’sbusiness performance and financial conditions may turn out to bematerially different from our projections and forecasts.Summary and Forecast of Business Performance(3) Asset Value FluctuationsShould the prices of assets owned by the Group (e.g., real estatefor sale and marketable securities) or the cash flow from theincome-producing properties drop substantially, the Group’sbusiness performance and financial conditions may turn out to bematerially different from our projections and forecasts.27(4) Changed Political/Economic Conditions of ForeignCountriesThe Group companies conduct business in foreign countriesincluding the United States and countries in Europe and Asia.Should political/economic conditions or the legal systems inthese countries change beyond what we currently assume, theGroup’s business performance and financial conditions may turnout to be materially different from our projections and forecasts.(5) Changes Affecting PFI ProjectsShould changes beyond what we currently assume occur thataffect private finance initiative (PFI) projects during the course oftheir long-term operation, the Group’s business performance andfinancial conditions may turn out to be materially different fromour projections and forecasts.(6) Deferred Income Tax AssetsAlthough we expect deferred income tax assets outstanding as ofMarch 31, 2006 to be fully utilized to offset the Group’s futuretaxable income, changes in tax laws may partially prevent theGroup from doing so.

Consolidated Balance SheetsKAJIMA Corporation and Consolidated SubsidiariesConsolidated Balance Sheets28

Consolidated Balance Sheets29

Consolidated Statements of IncomeKAJIMA Corporation and Consolidated SubsidiariesConsolidated Statements of Income30

Consolidated Statements of Stockholders , EquityKAJIMA Corporation and Consolidated SubsidiariesConsolidated Statements of Stockholders' Equity31

Consolidated Statements of Cash FlowsKAJIMA Corporation and Consolidated SubsidiariesConsolidated Statements of Cash Flows32

Notes to Consolidated Financial StatementsKAJIMA Corporation and Consolidated SubsidiariesYears Ended March 31, 2006 and 2005Notes to Consolidated Financial Statements33

Notes to Consolidated Financial Statements34


















Independent Auditors , Report52

Corporate DataCORPORATE DATANETWORK IN JAPANCorporate Data54Company NameKajima CorporationHead Office2-7, Motoakasaka 1-chome,Minato-ku, Tokyo 107-8388, JapanTel: 81-3-3404-3311Established 1840Incorporated 1930Paid-in Capital¥81,447 millionNumber of Employees 9,234(As of March 31, 2006)Common StockAuthorized: 2,500,000,000 sharesIssued: 1,057,312,022 sharesNumber of Stockholders72,352 (As of March 31, 2006)Transfer AgentThe Chuo Mitsui Trust & Banking Co., Ltd.Independent AuditorsDeloitte Touche TohmatsuListingsCommon stock is listed on the Tokyo, Osaka,and Nagoya stock exchanges.Business DomainConstruction (Civil Engineering and BuildingConstruction), Real Estate Development,Architectural Design, Engineering, and OtherChairman, Representative DirectorSadao UmedaSapporo BranchSapporo Kitasanjo Building,1-4, Kitasanjonishi 3-chome,Chuo-ku, Sapporo 060-0003, JapanTel: 81-11-231-5181Tohoku Branch1-27, Futsukamachi, Aoba-ku,Sendai 980-0802, JapanTel: 81-22-261-7111Kanto Branch30th Floor, L.A. Tower11-2, Shintoshin, Chuo-ku,Saitama 330-6030, JapanTel: 81-48-601-5100Tokyo Civil Engineering Branch3-8, Motoakasaka 1-chome,Minato-ku, Tokyo 107-8477, JapanTel: 81-3-3404-5511Tokyo Architectural Construction Branch3-8, Motoakasaka 1-chome,Minato-ku, Tokyo 107-8477, JapanTel: 81-3-3404-5517Yokohama Branch4-51, Ohta-cho, Naka-ku,Yokohama 231-0011, JapanTel: 81-45-651-1751Hokuriku Branch3-4, Bandai 1-chome,Niigata 950-8550, JapanTel: 81-25-243-3761Nagoya Branch2-14, Shinsakaemachi,Naka-ku, Nagoya 460-0004, JapanTel: 81-52-961-6121Kansai BranchMARUITO OBP Building,2-22, Shiromi 2-chome,Chuo-ku, Osaka 540-0001, JapanTel: 81-6-6946-3311Shikoku Branch1-3, Kamei-cho,Takamatsu 760-0050, JapanTel: 81-87-839-3111Hiroshima Branch6-13, Nakamachi,Naka-ku, Hiroshima 730-0037, JapanTel: 81-82-247-1611Kyushu Branch12-10, Hakataekimae 3-chome,Hakata-ku, Fukuoka 812-8513, JapanTel: 81-92-441-0211International Division28th Floor, Shinjuku Park Tower Building,7-1, Nishishinjuku 3-chome,Shinjuku-ku, Tokyo, 163-1028, JapanTel: 81-3-5324-5810Number of District, Satellite andProject Offices:Approx. 1,800President, Representative DirectorMitsuyoshi NakamuraScope of Consolidation195 subsidiaries and affiliatesAs of June 29, 2006 (except where noted)

Board of Directors, Corporate Auditors, and Executive OfficersBOARD OF DIRECTORSEXECUTIVE OFFICERSChairman,Representative DirectorSadao UmedaPresident,Representative DirectorMitsuyoshi NakamuraRepresentative DirectorsMasaru KawaiNaoki AtsumiOsamu MinamitaniDirector, Senior AdvisorShoichi KajimaDirectorsKazuhito AmikuraSuguru AkiyamaSeiichiro TomiokaHiroshi KanekoYoshihiro NakahoraHiroshi IshikawaCORPORATE AUDITORSTatsuo HatanakaAkira AokiKinro NakamuraHiroshi ArakiShigeru KoboriPresidentMitsuyoshi NakamuraExecutive Vice PresidentsMasaru KawaiNaoki AtsumiOsamu MinamitaniSenior Executive OfficersKazuhito AmikuraSuguru AkiyamaSeiichiro TomiokaHiroshi KanekoYoshihiro NakahoraHiroshi IshikawaKinji OhashiYukihiro OmikaAkira OkamotoTakahiko NishioNoboru IkebataSeisuke NakanoKunio YanagisawaManaging Executive OfficersMitsuhiro HirataKomao YasudaHiroaki HoshinoKaoru SomeyaYasuo MorimitsuTakaji MineoTeruaki MurataAtsushi HattoriTeruaki YamaguchiToshio YamamotoTakashi HashikawaKenichi KotaniMotomichi IshikawaTakashi HinagoTakashi MommaSeigo AkanumaToru KidoExecutive OfficersSusumu TsuchiyaKimitsugu KudoYoshiomi IchihashiMasanobu SumiyoshiAkira HayashiTamiharu TashiroNobuyoshi OkabeYukio HayashiMasaaki YamamotoHideo IshiiKenryo NagataToshio HasegawaToru NaitoYoshikazu OshimiToshio YagiTakashi FukamiYoshinori IshikawaMasaru OzakiTadashi FujimuraFuminori OhtakeMasao OkaBoard of Directors, Corporate Auditors, and Executive Officers55As of June 29, 2006

Corporate OrganizationCorporate Organization56As of June 1, 2006

Principal Subsidiaries and Affiliates in JapanDesign & ConsultingIlya CorporationKobori Research Complex Inc.Armo Architects & EngineersARTES CorporationEngineering & Risk Services CorporationRetec Engineering Inc.Procurement & ConstructionTaiko Trading Co., Ltd.Chemical Grouting Co., Ltd.Kajima Road Co., Ltd.Japan Sea Works Co., Ltd.Nippon Foundation Engineering Co., Ltd.Chuo Industries Co., Ltd.Kajima Regional Engineering Support &Services EastKajima Mechatro Engineering Co., Ltd.Kajima Aquatech CorporationKajima Regional Engineering Support &Services WestGrout Trading Co., Ltd.KRC Co., Ltd.Clima-Teq Co., Ltd.Kyowa Kensetsu Kogyo Co., Ltd.Real Estate ManagementKajima Tatemono Sogo Kanri Co., Ltd.Kajima Tokyo Development CorporationEast Real Estate Co., Ltd.Kajima Tohoku Kosan Co., Ltd.Kajima Yaesu Kaihatsu Co., Ltd.Niigata Bandaijima Building Co., Ltd.Finance & InsuranceKatabami Kogyo Co., Ltd.Kajima Leasing CorporationSales & ServicesKajima Service Co., Ltd.Creative Life CorporationEnvironment Management CorporationHuman Life Services Co., Ltd.Act Technical Support Inc.Plus Alpha, Ltd.Toshi Kankyo Engineering Co., Ltd.Act Engineering Inc.Public Relations Officer CorporationTechno Wave CorporationToyama Green Food Recycle, Inc.Green Materials Recycle CorporationPM Square Co., Ltd.CultureKajima Institute Publishing Co., Ltd.Kajimavision Productions Co., Ltd.Yaesu Book Center Co., Ltd.Hotel & LeisureAzuma Kanko Kaihatsu Co., Ltd.Hotel Kajima no MoriKajima Resort CorporationAtema Kogen Resort Inc.Nasu Resort CorporationShinrinkohen Golf ClubKajima Karuizawa Resort Inc.Principal Subsidiaries and Affiliates in Japan57

Overseas NetworkDISTRICT OFFICESPRINCIPAL SUBSIDIARIES AND AFFILIATESOverseas NetworkTaiwan District OfficePhilippine District OfficeAsian Regional OfficeThai District OfficeSingapore District OfficeMyanmar District OfficeMalaysia District OfficeVietnam District OfficeIndonesia District OfficeIndia District OfficeSri Lanka District OfficeEgypt District OfficeTanzania District OfficeTurkey District OfficeChina District OfficePoland District OfficeNORTH AMERICA/HAWAIIUnited StatesKajima U.S.A. Inc.Kajima Capital of America, Inc.Kajima International Inc.Kajima Real Estate Development Inc.Kajima Construction Services, Inc.Hawaiian Dredging Construction Company, Inc.The Austin CompanyKajima Associates, Inc.Industrial Developments International, Inc.Commercial Developments International, Inc.Kajima Development CorporationKUD International LLCEast West Development CorporationKajima Kona CompanyEUROPENetherlandsKajima Europe B.V.ASIASingaporeKajima Overseas Asia Pte LtdKajima Design Asia Pte LtdIndonesiaP.T. Kajima IndonesiaP.T. Senayan Trikarya SempanaThailandThai Kajima Co., Ltd.Ramaland Development Co., Ltd.MalaysiaKajima (Malaysia) Sdn. Bhd.VietnamKajima Overseas Asia Pte Ltd, VietnamDistrict Office58United KingdomKajima Europe U.K. Holding Ltd.Kajima Construction Europe (U.K.) Ltd.Kajima Design Europe Ltd.Kajima Property Holdings Ltd.PhilippinesKajima Philippines Inc.Hong KongKajima Overseas Asia Pte Ltd, Hong KongDistrict OfficeFranceKajima Europe S.A.S.TaiwanChung-Lu Sino-Kajima Construction Co., Ltd.PolandKajima Europe B.V., Poland BranchChinaKajima (Shanghai) Construction Co., Ltd.Czech RepublicKajima Europe B.V., Czech Branch

Corporate History1840 Iwakichi Kajima founds a carpentry business in Edo(present-day Tokyo)1860 Kajima pioneers the first Western-style building in Yokohama(Ei-Ichiban Kan)1880 Kajima Gumi is established1891 Begins construction on the Usui Railway Line1899 Begins railway construction projects in Korea and Taiwan1918 Begins constructing the Tanna Tunnel (17-year project)1923 Participates in reconstruction work following the Great KantoEarthquake1860 Ei-Ichiban Kan1918 Tanna TunnelCorporate History1924 Completes Japan’s first concrete dam (Ohmine Dam)1930 Incorporates (issues stock, capitalized at ¥3 million)1945 Begins support of postwar reconstruction1949 Founds the Kajima Technical Research Institute(the first research facility in Japan’s construction industry)1950 Pioneers the first joint venture with Morrison-Knudsenof the United States1957 Completes Japan’s first nuclear reactor1959 Begins construction of the Tokaido Shinkansen (Bullet Train) Line1924 Ohmine Dam1957 Nuclear reactor1961 Lists its stock on the Tokyo and Osaka stock exchanges1963 Attains the world’s No. 1 construction company ranking(by total contract value)Constructs facilities for the Tokyo Olympic GamesCompletes the New Tanna Tunnel for the Shinkansen591964 Establishes Kajima International Inc. (KII) in Los Angeles1968 Completes Japan’s first high-rise building(the Kasumigaseki Building)1969 The Kajima Design Division wins the bid to construct the newSupreme Court Building in Tokyo1971 Completes the 47-story Keio Plaza Hotel(Japan’s first super-high-rise hotel), in Tokyo’s Shinjuku district1963 New Tanna Tunnel1968 Kasumigaseki Building1978 Introduces company total quality controlCompletes the International Trade Center in Berlin1982 Receives the Deming Prize1983 Establishes Chung-Lu Sino-Kajima Construction Co., Ltd. in Taiwan1984 Completes the New Kokugikan Sumo Arena in Tokyo1987 Establishes Kajima Europe B.V. (KE) in the Netherlands1988 Establishes Kajima Overseas Asia Pte Ltd (KOA) in SingaporeCompletes the Seikan Tunnel in Japan (world’s longest tunnel)1994 Completes the Kansai International Airport1974 Shinjuku skyline1984 New Kokugikan Sumo Arena1995 Renovates the Suez Canal tunnel1997 Completes the Tokyo Wan AqualineObtains ISO 9000s1998 Completes the Akashi Kaikyo BridgeObtains ISO 14000s1999 Celebrates the 160th anniversary of its establishment2003 Completes the Shiodome Tower in Tokyo2006 Completes Akihabara Crossfield in Tokyo1998 Akashi Kaikyo Bridge2003 Shiodome Tower

2-7, Motoakasaka 1-chome,Minato-ku, Tokyo 107-8388, JapanTel: 81-3-3404-3311Fax: 81-3-3470-1444, 1445URL: http://www.kajima.co.jp/welcome.htmlInquiries: ir@ml.kajima.comPrinted in Japan

full Annual Report 2006 (PDF 3.2MB)

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