Construction is the Company's core business, accounting for over 80% of contract awards. It is divided into the Building Construction, which handles construction of projects such as office buildings, production plants and condominium apartments, and Civil Engineering, which manages construction of projects such as dams, bridges and tunnels.

During the financial year ended March 31, 2006, Kajima was awarded contracts totaling ¥1,123 billion. Building construction accounted for 81.0%, and civil engineering 19.0%. Design and build contracts accounted for 48.7% of the entire construction business.

CANON INC. YAKO OFFICE

MARUITO Osaka Business Park (OBP)

Fullcast Stadium Miyagi Phase 2 Construction

Spending on domestic construction projects during the financial year ended March 31, 2006 is estimated at ¥30.8 trillion, and while investment in public construction projects continues to decline, privatesector investment in construction continues to rise, and is estimated to have again exceeded the previous year's level. An increasing number of people returning to central cities is driving strong demand for condominiums, and demand is considerable for high-rise office buildings as part of urban redevelopment projects. Privatesector investment is expected to continue to grow, and we anticipate demand for production and commercial facilities.

Domestic building construction contracts for the financial year ended March 31, 2006 totaled ¥910 billion, of which design and construction accounted for 56.8%. Kajima offers an integrated approach to design and build, incorporating expertise gained through numerous construction projects to create high-quality buildings. By involving itself in projects during the planning and design stage, the Company can draw on its experience and technology to propose constructive suggestions regarding the most appropriate construction methods, or ways to shorten the construction period, an aspect of its business that has won high praise from clients. Kajima's design and engineering capabilities have been fully utilized for such projects as large-scale housing complexes, production plants for flat panel displays and other electronic devices, and large-scale retail complexes, lowering costs and shortening construction periods. This approach also helps to strengthen our price competitiveness and increase earnings.

The Japanese economy remains strong, with capital investment expanding in a wide range of industries. At the same time, however, individual client needs are becoming more sophisticated and diversified, and the competitive environment for contracts is changing. Acknowledging this situation, Kajima will work concertedly to consistently recognize these needs, utilize its unique technological capabilities to provide the best value to clients, and continue to boost its share of building construction contracts. We will focus particularly on proposals for large-scale redevelopment projects with exceptional business potential, offering buildings with high levels of quality and added value, utilizing such leading-edge technology as environmentally friendly designs and sophisticated IT security systems. We will also utilize our dedicated project teams with specialized skills to obtain more contracts in a range of fields, including for medical-care facilities, hightech production facilities for electronic devices and other sophisticated devices, logistics centers and commercial facilities.

While expanding our business, we will also continue with efforts to enhance construction capabilities, as well as raise earning capacity by establishing a low-cost structure, and making further increases in productivity. In addition, Kajima is moving ahead with efforts to diversify its sources of revenue in such fields as private finance initiatives (PFI), engineering, renovation and environment-related business.

Hakkoda Tunnel

Kannagawa Hydropower Plant

Shin-Taishakugawa Hydroelectric Power Station

Investment in domestic civil engineering projects during the financial year ended March 31, 2006 is estimated at ¥22.7 trillion, of which ¥17.5 trillion is public-sector investment, and ¥5.2 trillion is from the private sector. Although private-sector investment is showing signs of recovery, public-sector investment (which accounts for the majority of civil engineering projects) has declined for seven consecutive years, and the government shows no signs of relaxing restraints on such spending. Moreover, fewer large-scale projects are moving forward, making the business environment for civil engineering even harsher.

Domestic civil engineering contracts for the fiscal year ended March 31, 2006 totaled ¥213 billion. Throughout the term, the Company offered technical, consulting and engineering capabilities, combined with a collective ability for management that is highly regarded by its clients.

Of particular note is a contract for renovation and enhancement of the runway tarmac and surrounding infrastructure of the international runway at Tokyo's Haneda Airport, awarded to a special purpose company (SPC) of which Kajima forms a part. This project follows the award during the previous financial year of a contract for construction of a new runway at the airport, in which the Company represented a consortium of companies. This project has drawn much attention as a PFI in the civil engineering field.

In environment-related business, Kajima was awarded a contract for the Summit Wind Power Kashima, in recognition of its efforts to lower the environmental burden.

In response to a new law enacted during the previous financial year designed to enhance and ensure the quality of public works projects, the Ministry of Land, Infrastructure and Transport has issued a series of new contract award guidelines emphasizing technical capabilities. The technical capabilities are now being evaluated more thoroughly than ever before, and major construction firms such as Kajima will likely enjoy an even greater competitive edge.

In response to this shift in the business environment, the Company set a target for contracts in its domestic civil engineering division of ¥240 billion for the financial year ending March 31, 2007. By actively and strategically pursuing a proposaloriented sales strategy fully utilizing the distinctive technologies it has acquired through its experience to date, Kajima should be able to succeed in the competition for contracts while securing profitability. We will also continue to aggressively pursue R&D and technological advancement to support the growth expected in particular areas of civil engineering that allow us to fully capitalize on our extensive capabilities, including large-scale urban development, environmental, renovation and PFI.