Integrated Report

KYUDENKO REPORT

2021

1. Introduction

Contents

Corporate Philosophy
3. CSR/Corporate GovernanceCorporate Philosophy/
Action Guidelines/Charter of Behavior

02

Basic Concept of CSR

34

Risk Management and Compliance

03

34

Message from the President

Workplace and Labor Environment/
Coexistence with Local Communities

35

Track and Field Team36

Initiatives for Safety37

Corporate Governance38

Message from the Outside Directors

42Management Team of Kyudenko

45

Growth Trajectory of Kyudenko

07

2. Vision and Strategy
Value Creation Process

09

Long-term Vision11

Mid-term Management Plan

13

Initiatives for Reforming Construction
Capability

15

Initiatives for Reforming Productivity

17

Initiatives for Reforming Governance

19

Special Feature
Environmental Management of the
Kyudenko Group21

Promoting Diversity

23

Business of Kyudenko

25

Performance by Business Category
Electrical work

26

HVAC and sanitary facility work

27

Power distribution line work

28

Renewable energy generation plant work 29
Renewable energy generation business

30

Overseas business

31

PPP/PFI business

32

Olive business

33

Financial and Non-financial Highlights

47

10-year Financial Summary

49

Report on Financial Results andFinancial Analysis

51

Consolidated Balance Sheet

53

Consolidated Statement of Income

54

Consolidated Statement of Cash Flows

55

Corporate Profile

56

Stock Information

57

List of Reference for Key Information

58

Editorial Policy
This report aims to create an opportunity for dialogue withshareholders, investors and other stakeholders, providingthem with the Kyudenko Group’s initiatives for enhancing its
corporate value over the medium to long term. We haveedited this report to provide an easy-to-understand overview
of our business model, business activities, growth strategies,
and non-financial initiatives, with specific examples. We hope
this report will help you better understand our Group.

Applicable Period and Scope

Disclaimer
The financial results forecasts, future outlook, strategies, targets, etc. contained in this report, excluding those related to past or current facts,are forward-looking statements and are based on plans, expectations, and judgements on the basis of the information currently available to theCompany and certain assumptions considered to be reasonable. Therefore, please note that actual results may differ from these forecasts andother forward-looking statements due to changes in economic conditions and various other uncertain factors.

Kyudenko Corporation

We contribute to society through providing agreeable
environmental solutions.

2

 e keep challenging for sustainable development throughW
our engineering strength and create a new value.

3

 e aim to create a mutual respecting environment inW
Kyudenko which utilize and develop
employees’ personality.

Action Guidelines

4. Data Section

Period: April 2020 to March 2021
Including some activities before and after this period.
Scope: Kyudenko Group
Including some reports of Kyudenko alone.

01

1

1. Introduction

1. Introduction

(1)
(2)
(3)
(4)

We will create the future environment with a new perspective
We will enhance technological force with creativity and ingenuity
We will appropriately accept and respond to customers’ voice

We will embrace teamwork in work(5) We will create a vibrant and bright workplace

Kyudenko Charter of Behavior
As an integrated utilities engineering service, we will create an environment that aims for ideal harmony of “people”,“environment”, and “technology”, and as a beneficial company that is trusted by society, we will respect human rights,
comply with the spirit of relevant laws, regulations, and international rules, and act voluntarily to fulfill our
responsibilities with a good social conscience, based on the following ten principles.
1. We will engage in the research and development of technologies that meet the requirements of society and customers to enhanceservice, safety, quality, and value, pay due consideration to the protection of personal information and customers’ information, andprovide integrated utilities that will earn our customers’ satisfaction and trust.
2. We will engage in fair, transparent, and free competition, conduct appropriate transactions, and maintain healthy, normal relationships
with politicians and governments.
3. We will disclose accurate corporate information proactively, fairly, and in a timely manner with the aim of practicing corporate
management that is open to all both within and outside the Company.
4. We will give our employees relaxing and enriched lives, ensure safe, comfortable, and open workplaces, and create a corporate culturethat is bright and vibrant, and respects the character, individuality, and diversity of our employees.
5. Recognizing engagement in environmental issues as a common challenge for all humanity and an important mission in our corporate
activity, we will act voluntarily and proactively.
6. We will make active contributions to society as a good corporate citizen and strive to exist in harmony with local communities.
7. We will resolutely confront any anti-social forces or organizations that pose a threat to the order and safety of civic society.
8. In our international business activities, we will comply with international rules and local laws and regulations, respect local culture andcustoms, strive to forge friendships and goodwill, and develop businesses that will contribute to the growth and prosperity of those
local regions.
9. Recognizing that their role is to realize the spirit of this Charter, top management will set an example for others, thoroughly disseminate
the Charter among all concerned parties, constantly listen to feedback from within and outside the Company, establish effective internal
systems, and strive for the thorough observation of corporate ethics.
10. In the event of a situation that runs counter to this Charter, top management themselves will make their willingness to solve theproblem clear within and outside the Company, strive to solve the problem and prevent recurrences, disclose information to thecommunity swiftly and with accuracy, pursue accountability, and, having clarified authorities and responsibilities, impose strict
penalties, including on themselves.

KYUDENKO REPORT 2021

02

1. Introduction

Message from the President

Naofumi Sato
Representative Director and PresidentGroup is contributing to the spread of clean energy throughthe construction of renewable energy generation plants. We
will take advantage of our construction track record andbusiness expertise going forward to contribute to realizing acarbon-free society by expanding our businesses into theenvironmental field, such as the recycling and reuse of solar
panels.
Our third contribution is “to maintain and develop local
public infrastructure”. The businesses of the KyudenkoGroup have always been closely connected to its local
communities. Such connections include the stable supply ofelectricity through the construction and maintenance ofpower distribution channels in the power distribution divisionand the maintenance and development of regional
infrastructure through facility work and urban development,
primarily in the electrical and HVAC and sanitary facility works
divisions. We hope to further advance our technologies andexpertise and evolve into a company that provides total

support for entire regions by expanding our business frommerely building basic infrastructure to also providing local
public services and engaging in smart city and otherinitiatives to create comfortable communities.
Our most important management resource for therealization of these Three Contributions is our people.
Based on our corporate philosophy of “aiming to create amutual respecting environment in Kyudenko which utilize anddevelop employees’ personality”, we will continue to invest
actively in the growth and development of the Company andthe elevation of employees’ abilities. In addition, based on
our corporate philosophy of “keep challenging for sustainable
development through our engineering strength and create a
new value”, we will conduct investments for the creation of
new value, such as the development of cutting-edge
technologies and tools, primarily in the Technology
Development Department, which is the Group’s R&D division,and the DX Promotion Department.

1. Introduction

With our gaze on our
100th anniversary in 2044,
we will aim for sustainable growthand medium- to long-term
enhancement of corporate value.

Endorsing TCFD Recommendations and Setting Medium- to Long-term Environmental Management Goals
As stated above, based on our Corporate Philosophy of“contributing to society through providing agreeable
environmental solutions”, the Kyudenko Group is engaging insustainability initiatives through the Three Contributions set
out in the Long-term Vision. As part of those efforts, weannounced our endorsement of the Task Force on Climaterelated Financial Disclosures (TCFD) recommendations in
December 2021 and set medium- to long-term targets forthe reduction of the Group’s own emissions of greenhousegases. The specifics of the medium- to long-term targets are“the reduction of CO2 emissions intensity per sales ofcompleted construction by at least 50% (compared to 2013)by 2030” and “the realization of carbon neutrality by 2050”.
Going forward, to achieve these medium- to long-termtargets, based on the TCFD recommendations, we will
analyze the risks and opportunities of climate change on
business and disclose information on financial impact.

In Response to the COVID-19 Pandemic
I would first like to offer my sincere condolences to thefamilies of those who have lost their lives to COVID-19 andmy prayers for the swift recovery of all those who havecontracted the virus. I would also like to convey my gratitude
and respect to those who are devoting their efforts to thetreatment of the afflicted and to preventing the further spreadof the disease.
Even as progress has been made in vaccinations, the virus
still shows no signs of abating. The Kyudenko Group has put
special measures in place with an emphasis on ensuring thesafety of our employees and their families and on thecontinuity of our business, in our continued efforts to keep
the impact of the pandemic on management to a minimum.
Specific measures include constant mask-wearing, avoiding
the three Cs (closed spaces, crowded places, and closecontact settings), and refraining from non-essential andnon-urgent outings, as well as remote work andteleconferences. These are all basic countermeasuresagainst the virus, but thanks to the conscious behavior of ouremployees, we have been able to contain the spread of thevirus. On the other hand, we have also been deploying sales
activities toward our customers in anticipation of the times
when we will be living with COVID-19 and in the post-COVID
era. Such activities include proposals for air-conditioning andventilation equipment.
We envisage that business activities that coexist with thevirus in this way will continue for at least the next few years.
All of our employees will unite as one and press forward withour business activities so we can benefit people’s lives bycreating comfortable environments, even in this era of the
new normal.

Progress of Mid-term Management Plan (2020-2024)
Overview of the 1st Year of the Mid-term Management Plan
The current Mid-term Management Plan sets out numericaltargets for FY2024, the final year of the plan, of 500.0 billion
yen in sales and 50.0 billion yen in ordinary profit.
FY2020, the first fiscal year of the Plan, was a year ofdramatic changes in the business environment, in which we
faced the unprecedented circumstances of a prolonged
pandemic.
The impact was felt in both orders received andconstruction work. When the state of the emergency
declaration issued in early spring made it difficult to call on
customers, the number of small to medium orders received
through community-based sales activities declined in the firstquarter in particular. In addition, customers, particularly thosein service industries such as travel and accommodation andin the manufacturing industry, delayed and reviewed theircapital spending plans, resulting in a downturn in large
orders as well. In construction work, there was a need for
new ways of working and construction management with theprevention of the spread of infections in mind. In addition,
hotels and commercial facilities operated by Groupsubsidiaries experienced major declines in demand. Even insuch a business environment, these elements had beenfactored into the plans for the year, and while sales fellslightly short of the plan, profits were able to exceed theplan.

Transition of Business Performance and Forecast for the year ending March 31, 2022 (Consolidated)

Sustainability Initiatives
Based on our Corporate Philosophy, the Kyudenko Group
has set out its Long-term Vision toward its 100th anniversary
in 2044 and is engaging in sustainability initiatives. The Longterm Vision acts as a bridge that links our Corporate
Philosophy and Action Guidelines with the Mid-termManagement Plan (2020-2024), which has been formulated
as a milestone toward the realization of the Long-term Vision.
With an eye on various social reforms and megatrends
envisaged in the years leading to 2044, we had defined ourroles in creating a sustainable society (which we call the“Three Contributions”). The first of these is “to solve social
problems”, the second is “to realize a carbon-free society”,
and the third is “to maintain and develop local public
infrastructure”.
I will now explain these three contributions in turn. The firstis “to solve social problems”. The Kyudenko Group has

03

Kyudenko Corporation(unit: million yen, lower row is the ratio to sales)

leveraged its technological capabilities as a facility work
company to solve various social problems through theconstruction of energy-saving and clean energy facilities anddisaster-resistant infrastructure. This is based on our
corporate philosophy of “contributing to society throughproviding agreeable environmental solutions”. Going forward,
we will continue to leverage the technological capabilities of
the Group to address problems faced by local communities
and society as a whole, such as the demographic changes,
including the declining birthrate and increasing aged
population in Japan, and global food problems, as ourcontribution to the enrichment of people’s lives.
Our second contribution is “to realize a carbon-freesociety”. As is the case in other countries, demand forrenewable energies is also increasing in Japan for therealization of a global carbon-free society. The Kyudenko

The year ended
March 31, 2020

The year ended March 31, 2021
Results

Plan

The year ending March 31, 2022

Progress

Sales

428,939

391,901

413,000(100.0%)(100.0%)(100.0%)Gross profit

60,09356,631

56,400(14.0%)(14.5%)(13.7%)

Operating profit

36,022

32,99832,000(8.4%)(8.4%)(7.7%)

Ordinary profit

38,64335,90634,000(9.0%)(9.2%)(8.2%)

Profit attributable to owners ofparent26,24525,04222,500(6.1%)(6.4%)(5.4%)

Orders507,025

325,158

374,800

Year-on-yearcomparison

Plan

94.9%

410,000

100.4%

60,000103.1%

35,000105.6%

37,700111.3%

25,50086.8%

393,000(100.0%)(14.6%)(8.5%)(9.2%)(6.2%)

104.6%
105.9%
106.1%
105.0%
101.8%
120.9%KYUDENKO REPORT 2021

04

1. Introduction

Message from the President
The Mid-term Management Plan sets out three reforms as
the pillars of its main theme of “the establishment of amanagement foundation for sustainable growth” and seeks
to create a strong and muscular corporate structure throughthe swift and steady execution of those reforms.

Initiatives in the 2nd Year of the Mid-term Management
Plan
We selected “Adaptation to environmental changes andrealization of recovery” as the theme for FY2021, the second
year of the Mid-term Management Plan, and engaging in thefollowing as a priority with numerical targets of 410.0 billion
yen in sales and 35.0 billion yen in operating profit.
Firstly, we are pursuing the strengthening and expansionof the order base to address last year’s decline in orders. The
sales and technology divisions have banded together to rollout sales activities aimed at large-scale projects in Japan,such as the Tenjin Big Bang project in our hometown
Fukuoka, orders for which will start to come in earnest fromthis fiscal year, and large-scale redevelopment projects in themetropolitan area, and at orders for projects that had been
postponed until this fiscal year and later due to the impact of
COVID-19. In addition, we will rebuild our awareness of andmethods for engaging in community-based sales with theaim of expanding small and medium-sized projects.
Next is the deepening of measures to improve profit
margins. In addition to continuing with existing measures to05

Kyudenko Corporation

New Initiatives Implemented in FY2020
From among the initiatives contained in the Mid-termManagement Plan, I would like to present three new
initiatives that we implemented this fiscal year.
The first is the establishment of a new Green Innovation
Business Unit, which aims to open up new business fields inthe environmental business. The second initiative is theundertaking of M&As and capital and operational alliances
aimed at the further expansion of business scope and the
expansion of business fields. The third initiative is to promote
diversity with the aim of sustainable growth.
1. Establishment of new Green Innovation Business Unit
This new business unit was established in July 2021 to serveas the engine for accelerating the development of new
business fields. The movement towards carbon neutrality isaccelerating. Seeing the realization of a carbon-free society
as a growth opportunity, in addition to orders andconstruction of renewable energy generation plants, which
we already engaged in, we will strive to strengthen ourbusiness in the areas of energy conservation and creation.
2. M&As and capital and operational alliances
We see operational alliances with other companies andM&As as options for the expansion of business fields. Whileaffinity with the Kyudenko Group will be a major deciding
factor, we plan to aggressively pursue projects from which a
synergy effect can be expected. As such, to accelerate ourinitiatives toward the development of new business fields andthe further expansion of our business scope, we haveconducted M&As, capital and operational alliances, andbusiness investments with the following three companies.
[Acquisition of Chuorika Kougyo Co., Ltd.]
100-year-old Chuorika Kougyo is a company that installs
disaster prevention systems. The main aims of this M&A are
to expand our business field and prevent the exodus ofprofits associated with disaster prevention. We recognize thegrowing importance of the business of the Chuorika KougyoGroup, which delivers safety and peace of mind amid thefrequency of natural disasters of recent years. Chuorika
Kougyo working with the Kyudenko Group, which is
responsible for infrastructure, with each side leveraging theirrespective strengths, will make it possible to achieve further
development while contributing to society.
[Capital and operational alliance with Central General
Development Co., Ltd.]
Central General Development has a track record in the realestate business in regional urban areas, particularly in thearea of the condominium development. The main aims of thiscapital and operational alliance are to expand orders received
and accumulate expertise in construction in thecondominium segment. The Kyudenko Group has completed
only a few construction projects in the condominium
segment, so it will use this alliance to build a relationship with

1. Introduction

The following is a description of the progress being madein these individual reforms.
Firstly, in terms of “reform of construction capability”,
efforts to secure human resources, with a focus onengineers, are proceeding according to plan. In addition, in
the area of human resources development, primarily ofyounger employees, we have launched training support withthe use of digital tools while at the same time strengthening
OJT efforts across the entire workplace. In the belief that thedevelopment of human resources who will shoulder the
future is our most important challenge, we are working tobuild training programs quickly and to cultivate a workplaceculture in which our young people can have dreams, a senseof achievement, and confidence in themselves.
Next is “reform of productivity”. With the new DX
Promotion Department established in October 2020 at thecenter, we have identified multiple issues involved in the
pursuit of operational streamlining and labor-saving andformed a task force to devise solutions to those issues andundertake initiatives to accomplish those solutions. In July
2021, we were certified as a “DX-certified operator” by the
Ministry of Economy, Trade and Industry, which has allowed
us to promote ourselves to external parties as a company
that is prepared to promote DX. While our current focus is on
improving operational efficiency with the use of digitaltechnologies, in the future, we hope to create unprecedented
business models and value, with which we will offer newvalue to customers and society.
The third reform is “reform of governance”. In April 2021,
we combined the legal division that was in charge ofpreventive law and compliance with the internal control
division, which was in charge of ensuring theappropriateness of operations and risk management, to form
the Business Administration Department. By performing
these tasks centrally, we are striving to strengthen ourinternal check functions and enhance governance.
Other initiatives we are pursuing include deepening
measures to improve profit margins, which is an ongoing
initiative from the previous Mid-term Management Plan,
strengthening and expanding the order base, and thedevelopment of new business fields. In particular, regarding
measures to improve profit margins, with the thoroughapplication of front loading and other various measures,
profit margins are showing improvement. We will continue todeepen these initiatives with the aim of even further
improvement of profit margins.

improve profit margins, Head Office’s Technology
Management Department is using digital technologies tocentralize the management of worksites from the perspectiveof company-wide optimization and to share information
about construction works and costs, with the aims of Head
Office and the worksites working together for construction
management and the enhancement of profits. We believethat we will be able to meet the numerical targets for thisfiscal year by properly implementing these initiatives. In doingso, given the continued buoyant order environment, including
the Tenjin Big Bang project and other large-scale projects in
Kyushu and large-scale redevelopment projects in themetropolitan area in FY2022 and onward, if we are able towin substantial orders from these projects, it will be possible
to achieve the Mid-term Management Plan’s numericaltargets of 500.0 billion yen in sales and 50.0 billion yen in
ordinary profit.

Central General Development with the aim of capturingassociated businesses.
[Business investment in JEPLAN, INC.]
Using a technology called chemical recycling, the first of its
kind in the world to be successfully commercialized, JEPLAN
engages in new recycling businesses with recycled PET thatis of equivalent quality to petroleum-derived PET. Its
businesses include making clothes from clothes and PET
bottles from PET bottles. We made this investment decisionin the belief that the Kyudenko Group’s technologicalcapabilities and expertise in the areas of renewable energies
and energy conservation would work extremely well withJEPLAN’s initiatives for the reduction of CO2 emissions at its
plants, etc.
3. Promoting diversity
There are requirements for companies to employ people,
such as mandatory employment of persons with disabilities
under the Act to Facilitate the Employment of Persons with
Disabilities and the establishment of action plans under the
Act on the Promotion of Female Participation and Career
Advancement in the Workplace, but I believe that the major
premise behind these requirements is a call on companies tocreate workplaces in which all employees can demonstrate
their abilities to the maximum. On that basis, I believe that
we need to accept and understand the various differences inour people as their individual characters and connect theinnovations born from those differences to the sustainablegrowth of the Company. Nothing new will be created if we
persist only with approaches that are confined toconventional concepts or precedents and biased thinking. To
increase our competitiveness, we need to add different waysof thinking and diverse perspectives. The promotion ofdiversity is essential to this.
With this approach, we established the Diversity Promotion
Preparation Office in July 2021 and commenced initiatives tothat end. Specifically, our first step was to establish our Basic
Policy on Promoting Diversity, which we have communicatedto all employees to raise awareness. At the same time, we
streamed a video in which I conveyed my own thoughts on
this challenge. Going forward, we will proceed withimprovements to physical workplaces and awareness-raisingamong employees and management aimed at creating
appealing workplace environments and a stock-take ofexisting operations aimed at expanding the range of
employees’ individual duties.
The commitment of all employees, including executives, isimportant to the promotion of diversity. We will make Groupwide efforts in this regard, including the communication of
information and training to help employees understand andtake fully on board the reasons why we are promoting
diversity and what will result from it.

To Our Stakeholders
In this era of growing uncertainty, there will come a time
when companies will be increasingly called on to prove thesignificance of their existence. For this very reason, we will
convey firmly to all our stakeholders the directions in which
the Kyudenko Group is heading, such as the Long-term
Vision and Mid-term Management Plan built on our corporate

philosophy, and conduct our business activities withunwavering determination.
I hope that all our stakeholders, including shareholders
and investors, will hold expectations of the Kyudenko Groupand continue to offer their unwavering support.

KYUDENKO REPORT 2021

06

1. Introduction

Growth Trajectory of Kyudenko
SalesPower distribution line work
Ordinary profit

Electrical work

HVAC and sanitary facility work

Solar power plant work

(FY 2024: renewable energy business, etc.)

Others2020
COVID-19 pandemic

500.0

billion yen
Ordinary profit(Million Yen)

500,000

75,000

Origin of our logo

Sales

408.1

Our logo is based on the letter “K”, the initial of Kyudenko, and represents a corporate image
that aims at an optimal harmony of“People = red”,“Environment = green” and“Engineering Skill = blue”.
The cuboid extending toward the upper right direction symbolizes our will to pursue dynamic growth.

billion yen
2016
Introduction of negative interest rates
The 2016 Kumamoto Earthquake

60,000400,000

1991
Collapse of the bubble
economy1986~1991
Bubble economy

2012
Abenomics
1995
Great HanshinAwaji Earthquake

Sales

315.9

billion yen

2011Great East Japan Earthquake

300,000

2007
Postal service privatization

Sales

215.0

45,0002008
Global financial
crisisbillion yen

200,000

30,000

Sales

105.1

billion yen

15,000100,000

0
(FY)

0

1980

1985
1980s

1981 Started sales activities for public seweragesystem works
1986 Worked on full-fledged underground distribution
line work
1987 Issued the first series of unsecured convertible
bond of 10 billion yen
1988 Introduced high voltage indirect hot-line work
technique1989 Changed the company name to Kyudenko
Corporation

07

Kyudenko Corporation

1990

1995
1990s

1994 Marked the 50th Anniversary
1997 Obtained ISO9001 Certification
1999 Obtained ISO14001 Certification

2000

2005
2000s
2004 Delisted from the Osaka Exchange
2008 Introduced the Executive Officer System
2008 Established Tokyo Head Office

2010

2015

2020 2021(plan)

2010s onward2024(target)2012 Newly established Kyudenko Academy
2012 Established Tohoku regional office2012 Established local subsidiaries in Southeast Asia
2015 Issued the second series of unsecured convertible
bond of 10 billion yen
2019 Marked the 75th Anniversary
2020 Published the Mid-term Management Plan
[2020-2024]

KYUDENKO REPORT 2021

08

1. Introduction

Sales(Million Yen)

2. Vision and Strategy

Value Creation Process
Requests from Society

Sources of Value Creation

Business Activities

Main Invested Capital

FY2021 Management Policy

Mid-term Management Plan 2020-2024

The 100th Anniversary

Adaptation to environmental
changes and realization ofrecoveryEstablish a management foundation
for sustainable growth~Realization of the three reforms~

I. Solve social problems

Numerical plan

Numerical plan

Sales.........................410.0 billion yen
Operating profit..........35.0 billion yen

Sales.........................500.0 billion yen
Ordinary profit.............50.0 billion yen

Through community-based business
operations, we aim to be a company that iscontinually chosen by customers.

Orders.......................393.0 billion yen

ROIC.............................. over 10.0 %Intellectual capital (FY2020 results)

Key measures

Financial capital (FY2020 results)
ratio 60.0%• Equity
10.0%• ROIC
12.1%
ROE• Rating
A-[R&I] etc.
•We ensure optimal allocationofmanagement resources by focusing not
only on the structure of our profit and loss
statement but also our balance sheet.

Manufacturing capital (FY2020 results)of patents held
• Number
22 patents in Japan

Expectations
and Requests
fromStakeholders

We promote streamlining of operations andlabor-saving by using cutting-edge
technologies developed by the Technology
Development Department (R&D division)and the DX Promotion Department. In
addition, we endeavor to increase orders
received and create new businesses using
unique technologies.

Human capital (FY2020 results)
Over
10,000 Group employees• 410
new recruits (non-consolidated)• etc.


Approximately 80% of Group employees
are engineers or technicians with a highlevel of expertise. As human resources are
essential and the greatest management
resources in expanding our business scope,
we will continue to engage in active
recruitment of people.

Social relationship capital (FY2020 results)
with local communities• Coexistence
1 community program, dedicating•

contributing activities to the local community
1 sports class by the Kyudenko Track and(Video streaming in 2021)
Field Team
Promotingcommunication with
shareholders and investors
A total of over 200 individual
meetings with investors
4 briefings for individual
investors etc.

We will establish the Kyudenko brandsupported and trusted by shareholders,customers, local communities, and otherstakeholders and realize appropriate andefficient corporate management.

INPUT• Secure orders and construction of large-scale projects inJapan• Expand small- and medium-sized projects

Deepen measures to improve profit margins• Re-enforcement of measures to improve profit margins• Strengthen cost management and construction support by
the Technology Management Department

Strengthen human resource development• Strengthen OJT for young employees• Introduce digital education support tools

Promote DX• Improve operations and review processes• Research and study of BIM and advanced technologies

Strengthen governance• Implement measures to prevent recurrence of fraud• Further enhance compliance education

Differentiation Strategy of Kyudenko

Kyudenko Corporation

Reform of construction capability• Strengthen hiring of engineers based on a long-term
workforce plan
• Reduce the turnover rate of young engineers by reviewing
technical education• Review the construction management system bystrengthening and utilizing the Technology Management
Department 
etc.

II. Realize a carbon-free society
OUTCOME

Contribute to the realization of a carbon-freesociety through clean energy

Reform of productivity• Review the company-wide and departmental training
systems• Achieve optimal personnel rotation for the entire company• Promote rationalization and labor saving through the use of
cutting-edge technology and IT 
etc.

Reform of governance• Implement measures to prevent recurrence of fraud• Strengthen and thoroughly implement a governance system
based on the Kyudenko Corporate Governance Guidelines

INPUT

III.	Maintain and develop local
public infrastructure

Contribute to the maintenance anddevelopment of local infrastructure throughstable power supply, facility works, urban
development, etc.

(1) Leverage technology as an integrated utilities engineering company...........Have the engineering strength for both electrical works and HVAC
and sanitary facility works(2) Robust operating bases in the Kyushu area...................................................Realize fine-tuned services through community-based business
operations(3) Expansion of business areas..........................................................................Expand business scope in the metropolitan and Kansai areas(4) Recruitment and development of human resources......................................Based on the idea that its people are the greatest assets, hiresteadily even during difficult times(5) Renewable energy generation plant construction work.................................Build tight connections with partners in other industries based on its
excellent project development and construction capabilities(6) Diverse business models................................................................................(1) Proposal and original contract type: Community-based business
operations(2) Sub-contract type: Construction work for large-scale development
projects in urban areas(3) Capital participation type: Renewable energy development across Japan

2021
09

(Ordinary profit ratio of over 10.0%)

The three reforms

Strengthen and expand the order base

1 international patent etc.

Contribute to the realization of affluent life
by leveraging our engineering strength andtaking on the challenge of solving various
social problems
2. Vision and Strategy

business locations in Japan• 110
100 sites of renewable• Overenergy generation plants etc.

Long-term Vision

2024

2044
KYUDENKO REPORT 2021

10

2. Vision and Strategy

Long-term Vision: Make Next — To Create Smiles for the FutureWith an eye on future megatrends and with our corporate philosophy as a pillar of our business, theKyudenko Group has formulated its long-term vision with a focus on seizing business opportunities andexpanding business in the expected social environment 100 years after its foundation (2044). We have also
defined our role in creating a sustainable society (which we call the “Three Contributions”) and our basic
stance to achieve the vision.
We will instill and pass on this long-term vision as the “Kyudenko-ism” philosophy company-wide, andmake improvements to it as we evolve with the times and in response to changes in our surrounding
environment.

Identification of Megatrends
Megatrends(1) Advent of adecentralized energy
society
Utility 3.0
Local energy

Carbon-free society
RE100(3) Demographic change
and diversified working
stylesBusiness opportunities(1) Localized EMS needs(2) Enter urban development business, such as smart cities(3) Roll out local services that include not only power distribution
line and facility work, but also electricity sales business, service
water, waste water, telecommunications, waste treatment, etc.
(4) Battery recycling factory, recycling business(5) New business opportunities as an environmental restorationcompany(1) With the increase in demand for the renewable energy
business, opportunities will expand where we can takeadvantage of our accumulated experience and businessexpertise in renewable energy construction(2) Companies with the goal of procuring 100% renewableenergy will increase(1) Focus more on the renewable energy business field (e.g., wind
power and biomass power)(2) Provide complete service that includes installation, maintenance, removal, and disposal of renewable energy facilities(3) Establish technology to reuse/recycle solar panel waste, andtranslate to business(4) New business opportunities as an environmental restorationcompany(1) Securing human resources will become more difficult(2) Increase of foreign workers in Japan(3) Reduction of construction market(4) Influx of people into urban areas and depopulation of ruralareas(1) Acceleration of locally self-sufficient decentralized energy due
to depopulation of rural areas associated with population
decline and spread of renewable energy, storage batteries, etc.
(2) Maintenance of infrastructure in depopulated areas of Kyushu(3) Carrying out projects to resolve challenges such as the increaseof foreign workers in Japan, shortage of workers in the
agriculture and livestock industry, and increasing aged
population(4) Proactively roll out businesses outside Japan with a focus on
Asia

Population decline and aging
societyFreelancing(4) Advancement of digitaltechnology
Use of AI and robots
AR, VR, etc.

(1) Construction drawings will be prepared by AI(2) A large portion of manufacturing work will be carried out
by robots(3) Education and training with AR/VR will be possible(1) AI-based design and construction management(2) Construction at worksites performed by robots(3) Improvement of virtual education/training and safety management with AR/VR(4) Creation of new businesses using digital technology

When formulating our long-term vision, we envisioned

characteristics of the Kyudenko Group. We also believe it

what kind of businesses we could do in the future by

will help boost employee motivation since employees willleveraging our technology and expertise.

be able to see how their day-to-day tasks address global

While this is an ambitious goal that lays out where wesocial and environmental problems by picturing where wewant to be in the long term by our 100th anniversary inwant to be as a company.

2044, we believe it is achievable by leveraging the uniqueInvolvement in Projects that Solve Social
Problems

Example: Kyudenko plant factory model

We will actively participate in projects and businesses where we can leverage ourstrengths, such as our engineering strength, to address problems faced by local
communities and society as a whole, such as the declining birthrate and increasing
aged population in Japan and global food problems.
Specific examples• Revitalization of agriculture and livestock production

Solar power
generation
system

LED lighting

Powerdistribution
facilities(plant factories, livestock farms)

Water
treatment
systemSubstationequipment

Expansion of Renewable Energy andEnergy Conservation, and Entry into
Recycling Business

Indoor wiring
Power source control
systemExpansion of renewableenergy sources such as
wind and biomass

Provision of solar panel life
cycle service that includes
recycling of solar panels
Solar power generation

We will expand the renewable energy field, such as wind and biomass power, andcontribute to realizing a carbon-free society by expanding our businesses into theenvironmental field, such as the recycling and reuse of solar panels.

• New renewable energy sources such as wind and biomass• Control services for energy storage, EMS, etc.
• Recycling and reuse of solar panel waste, etc.

Recycling andreuse of solar
panelsWind power
generation

Specific examples

ZEB ZEH
Biomass power Biomass power
generation
generation(wood)(garbage)Control services for energy storage,
EMS, etc.
Development of energy-saving
systems, etc.

Carbon-free society

Corporate Philosophy

To Create Smiles for the Future

The role we will play to createa sustainable society
Three Contributions
Solve social
problems

I. Solve social problems

Contribute to the realization of affluent life byleveraging our engineering strength and taking on thechallenge of solving various social problems

II. Realize a carbon-free society

Contribute to the realization of a carbon-free society
through clean energy

Sustainable
society
Maintain andRealize adevelop local publiccarbon-free
infrastructuresociety

III. M aintain and develop local public
infrastructure

Contribute to the maintenance and development of local
infrastructure through the stable supply of electricity,
facility work, urban development, etc.

Basic stance to achieve our vision
Contribute to realizing a circular society
Balance both social value and economic
value by solving social problems throughcorporate activities (practice CSV management)

Explore and enrich our engineering strength	Expand and strengthen a wide range of technology fields thatmeet customers’ expectations
Create new value through DX	Improve efficiency and sophistication of construction at worksites
and create new businesses with digital technology
Promote diversity
Create an appealing company full of diverse employees
Reinforce alliances	Develop technological innovations and create businesses by promoting open innovation

Targets we should achieve, priority issues, and specificMid-term Management Plan 2024 measures to be taken by 2024 to realize our long-term vision

Building Local Infrastructure andProviding Public Services
We will evolve into a company that provides total support for local communities’
energy infrastructure and services by expanding our business from merely building
basic infrastructure such as electricity, waterworks, and telecommunications to also
providing local public services and engaging in smart city and other initiatives tocreate comfortable communities.
Specific examples• Smart city
• PFI, concession• Power transmission• Public services such as water supply and sewerage, and waste treatment facilities• Telecommunication infrastructure• Disaster prevention infrastructure facilities

Introducing Digital Technology
We will improve sophistication, save labor, and increase efficiency in operations,education, and training related to construction at worksites, including design andconstruction management, by introducing cutting-edge technologies such as AI and
IoT, and create new businesses and business models that leverage digital technology.
Specific examples• Preparing construction drawings with BIM/CIM• Improving operational efficiency with AI construction management systems• Supporting worksites with drones• Implementing powered suits• Virtual training with VR goggles• Services to support health and watch over the elderly

Step

Pursue electrical, HVAC, andpower distribution line work.

Local energy facility
company

Step

Build wastewater and waste
treatment facilities

Local utility company

Step

Participate in smart city andother town planning initiatives

Local town planningcompany

Step

Supply energy and provide public
services to local communities

Local comprehensive
service company

1
2
3
4

Design and construction management using AI•AI Surveying andConstruction Management
Drones•Preparation of construction
drawings (AI, BIM/CIM)•AI Construction
Management System

Kyudenko Corporation

On-site construction by robot•Drones for materialtransport•Remote operation(construction equipment
and work vehicles)•Robots and powered suits
for construction work

Advancement of business operations
and creation of new business throughdigital technology•Detection and diagnosis ofsigns of failure•Collection, storage andanalysis of building andequipment data
•Health Support Services

New business creation using digital technology

11

Expand to other countries to help
solve hunger problems

HVAC & temperature
control equipment• Support for foreign workers (shared houses, vocational schools)• Services for the elderly (health support, nursing care facilities)

Our Long-term Vision Based on Megatrends

Long-term Vision

Establish a business model that spans
the Japanese market

Creating service packages that leverage ourstrengths, such as electrical, HVAC and sanitaryfacility work, and power distribution line work.

2. Vision and Strategy(2) Increased
environmental
awareness

Environment and its impact(1) Transition from large-scale to local small-scale powertransmission and distribution networks(2) The electricity market will go from a monopolistic to a freemarket(3) Increase in renewable energy generation(4) Increase in importance of developing technology to store
electricity(5) Increase in need for EMS know-how

Future Businesses•Construction Management
Training Using AR Smart Glasses•Virtual hands-on training facilities(e.g., Kyudenko Academy)•Training on the installation of
power distribution lines
using VR goggles

AR/VR virtual experiential education and training

KYUDENKO REPORT 2021

12

2. Vision and Strategy

Mid-term Management Plan
Policy and Direction
the growth should be the top priority. As we secure andmaintain the volume of orders for electrical, HVAC, andsanitary facility works commensurate with our current
construction capability, we will make our utmost efforts tocreate a “strong and muscular corporate structure” thatcan win the competition even in an economic recession.
Specifically, we will work on three reforms. “Reform of
construction capability” will secure engineers who support
core businesses, review construction management
methods, and assign engineers to appropriate positions.
“Reform of productivity” will improve quality and costcompetitiveness, which are the source of our competitiveedge, and promote work style reform. “Reform ofgovernance” will work for the creation of a clean and highly
transparent corporate culture. Through the three reforms,
we aim for dramatic growth and development by the final
year of this Mid-term Management Plan and by thesubsequent 100th anniversary (2044).

FY2020 was the first fiscal year of the Mid-termManagement Plan. It was a year of dramatic changes inthe business environment, in which we faced theunprecedented situation of a prolonged COVID-19
pandemic. In response, the Group selected “Verify, Reflect,and Rebuild” as the theme for FY2020, and carried out
specific initiatives for the “Three reforms” and “Issues
continuing from the previous Mid-term Plan”.
In FY2021, the second year of the plan, we expect
further delays in customers’ capital investment plans due
to ongoing high uncertainty about the future, and are also

Specific initiatives and relevance to the SDGs
ESG

Mid-term Management Plan FY2020 - FY2024

Reform of governance
Implement measures to prevent recurrence of fraudStrengthen and thoroughly implement a governance system
based on the Kyudenko Corporate Governance Guidelines

Issues continuing from the previous Mid-term Plan
(1) Deepen measures to improve profit margins(2) Strengthen and expand the order base of the domestic facility work
industry(3) Strengthen the profitability of power distribution line work
(4) Develop new business areas(5) Create an attractive workplace environment(6) Improve corporate value

Summary of the 1st Year

Reform of productivity
Assembled a task force, with the DX Promotion Department playing the centralroleIdentified rationalization and labor-saving issues

Ensuring construction
quality and safety- Maintain a stable power supply through the construction of
power distribution lines- Increase productivity- Promote research and development of advanced technologies
and IT (promotion of labor saving and rationalization)- Eliminate significant work-related injuries

Continuing stable
recruitment andpromoting humanresource development- Strengthen hiring of engineers (diversify recruitment)- Reconstruct a development plan that leads to dreams, a senseof achievement, and confidence- Develop executives and next-generation leaders

Reform of governanceE stablished Business Administration Department in April 2021
C
 ontinued measures to prevent recurrence of fraudSocialOngoing issuesP rofit margin is in an uptrend thanks to thoroughly implementing margin
improvement measures
S mall- and medium-sized projects in community-based sales activities are in a
downtrend

Priority Initiatives in the 2nd year
FY2021 theme:- Reduce the turnover rate of young engineers

Creating a fulfilling and - Secure holidays and reduce overtime work through thoroughrewarding work
work style reforms
environment- Promote diversity
Strengthening andGovernance implementing
compliancemanagement

Adaptation to environmental changes andrealization of recovery
Strengthen and expand the order baseS ecure orders and construction of large-scale projects in JapanE xpand small- and medium-sized projects
E nforce measures to improve profit margins
S trengthen cost management and construction support by the Technology
Management Department

Improve operations and review processesR esearch and study of BIM and advanced technologies

Strengthen governanceImplement measures to prevent recurrence of fraudF urther enhance compliance education- Implement measures to prevent recurrence of fraud- Strengthen and thoroughly implement a governance system
based on the Kyudenko Corporate Governance Guidelines

Numerical targets for the final year (consolidated)

Road map of sales plan

Target for the
final year:(Billion Yen)
Plan forFY2024

Deepen measures to improve profit margins

Promote DX

Kyudenko Corporation

Enhance energy-saving - Expand the renewable energy power generation business- Expand energy services (ES) businessand energy-creating- Strengthen Kyudenko EMS business (Indonesia)
technologies

S ecuring human resources is going smoothly for the most partD eliberated on the development of an HR development systemS trengthen OJT for young employeesI ntroduce digital education support tools

13

SDGs

revitalization, etc.)

Environment

Reform of construction capability

Strengthen human resource development

Create a strong andmuscular corporate
cultureSpecific initiatives in the Mid-term Management Plan

(Participation in waterworks, waste treatment plants, airports/
Promotion of anenvironment-conscious ports, public facilities, etc.)- Develop new business areas (real estate, agricultural
town planning

Realization of the three reforms

Reform of productivity
Review the company-wide and departmental training systems
Achieve optimal personnel rotation for the entire company
Promote rationalization and labor saving through the use of
cutting-edge technology and IT
Realize business reforms

Key challenges- Strengthen initiatives for concessions, PPP and PFI businesses

Establish a management foundation for sustainable growth

Reform of construction capability
Strengthen hiring of engineers based on a long-term workforce
plan
Reduce the turnover rate of young engineers by reviewing
technical education
Establish a system to ensure the timely and optimal deploymentof all technicians
Review the construction management system by strengthening
and utilizing the Technology Management Department
Promote multifunctional workers

concerned that price wars will intensify due to the fall indemand. However, with increased appetite to invest in theenvironment to realize a carbon-free society, we anticipate
a growth in investments related to renewable energy.
Considering this environmental background and themassive drop in orders in FY2020, we selected“Adaptation to environmental changes and realization ofrecovery” as the theme for FY2021, the second year of the
Mid-term Management Plan, and are driving forwardbusinesses with a focus on priority initiatives.

2. Vision and Strategy

The Kyudenko Group reviewed and analyzed theachievements of the previous Mid-term Management Plancovering five years up to FY2019, sorted out whatchallenges the Group should continue to work on, and has
formulated the new Mid-term Management Plan as a goal
to be achieved by FY2024 in the process of a long-term
strategy based on the Corporate Philosophy. We expect
the COVID-19 pandemic to start gradually winding downin the second half of FY2021, so the impact of thepandemic is not reflected in the Mid-term Management
Plan, including the targets of the final fiscal year. While weare committed to the achievement of its targets, we may
review the Mid-term Management Plan if necessary.
The main theme of this Mid-term Management Plan is“Establish a management foundation for sustainablegrowth - Realization of the three reforms -”. Based on theachievements and lessons of the previous Mid-termManagement Plan, we recognize that for the renewed
growth of the Kyudenko Group, creating a base to support

Summary of the 1st Year and Priority Initiatives in the 2nd Year

500.0

Sales

50.0

	Electrical workand HVAC andsanitary works

334.0	Renewableenergy and ES
business, etc.

81.0

OthersOrdinary profit
Ordinary profit ratio

Return on invested capital (ROIC)

Final year for theprevious
Mid-term Plan:
428.9 billion yen

67.8(Solar power: 59.3)

Breakdown	Power
distribution lines

500.0 billion yen
81.0
391.9 billion yen(Solar power: 17.0)

Plan:
410.0 billion yen

61.5(Solar power: 54.5)

191.0

35.0

50.0
Over 10.0%

Over 10.0%

157.7
149.1

129.9

143.0
116.0

46.9

45.8

26.7
2019

19.5
2020

50.0
35.0
2021

2022

2023

2024

Mid-term Management Plan (2020-2024)
Renewable energy and ES business, etc.
Electrical work
HVAC and sanitary facility work
Power distribution line work

OthersKYUDENKO REPORT 2021

14

2. Vision and Strategy

Initiatives for Reforming Construction Capability— Further Strengthening Human Resource Development
The Kyudenko Group’s corporate philosophy is to “aim to create a mutual respecting environment in
Kyudenko which utilize and develop employees’ personality”. Based on this, we have established a policy on
developing human resources — our most important management resource — and formulated the Human
Resource Development Charter to instill the policy in all employees.
In line with our conviction that people are one of our most valuable assets, we provide employees
opportunities to improve their capabilities and demonstrate the results of their training to advance theCompany and ensure every employee has a rewarding job and achieves self-actualization, with the aim offurther growing employees and advancing the Company further.

Securing Human Resources
Hiring of new graduates

Human Resource Development Charter

Recruitment results (Kyudenko, non-consolidated)

Purpose of human resource development
To nurture and bring out the potential of people, one of our mostvaluable assets

The purpose is to develop and improve capabilities to advance the Company and ensure that every employee
has a rewarding job and achieves self-actualization.
Furthermore, by allowing employees to demonstrate the results of training, we will strive to grow employees
further and advance the Company.

Human resource development methods and details
Build character and develop skills through work experience andeducation

The basis of human resource development is systematic OJT by supervisors and more experienced colleagues
at the workplace, supplemented with group training sessions (off-JT) and self-development.
This will instill employees with the knowledge, skills, and techniques they need to perform their duties, thedesire to take on challenges, healthy character traits, and greater insight. In this way, we will cultivate
well-balanced employees.

Evaluation of human resource development
FY2017FY2018FY2019FY2020

FY2021

371

412

362

360

410

Total jobs
Engineers/technicians

344

384

342

336

386

Engineers

185

189

186

194

200

Technicians

159

195

156

142

186

Evaluate human resource development efforts fairly

We will conduct fair evaluations of employees who make an effort to train subordinates and new employees,
and of employees who make an effort to grow themselves, and encourage further efforts.

Responsibility of managers and employees

Objectives of introduction

To help facilitate OJT throughout the entire workplace by,(1) Contributing to enhancing the self-development of employees and improving cost and time
efficiency for instructors(2) Establishing and providing a stable training environment and standardized contents (and level)(3) Fostering communication between instructors and employees(4) Centrally managing state of learning, skills, etc.

Managers and employees will train and support their subordinates and other young employees with both loveand sternness, with the recognition that they bear the responsibility to pass on and foster knowledge, skills,
and techniques.

Stance of employees
Continue to take on challenges, bearing the responsibility for theirown growth

Bearing responsibility for their own growth, employees will continue to take on the challenge of performing
work without being satisfied with their current state and developing their skills, in accordance with our mission
to live up to the trust and expectations of customers and contribute to society.

The Kyudenko Group has always carried out human resource
development with a focus on OJT. In today’s ever-changing world, we
believe that companies must change their methods to train and develop
talent to be more in line with the times, while continuing to carry out theconventional OJT. This fiscal year (FY2021), we reexamined our OJT
system for young employees to strengthen human resource
development as part of our efforts to reform our construction capability.
Areas we are strengthening
1. Enhance the “elder system”.
(1) Make use of the entire workplace in the training ofyoung employees, and incorporate OJT matters into
internal rules.
(2) Establish an “OJT Supporter” to assist and oversee
elders (senior colleagues who play a mentor-like role).
2. We will introduce a learning management system thatutilizes digital tools to provide support for both young
employees and instructors to increase their skill levels.

Kyudenko Corporation

Moreover, supervisors, OJT Supporters, and elders canprovide instruction to other employees via the system. The
system also meets the needs of young employees as itenables participants to exchange information and specificgroups to communicate.
Using training tools like this will help us to centrally
manage the skills of engineers, enhance and standardize
skill levels, and prevent overdependence on individual
experts.

Train and support with the responsibility to develop subordinatesand other young employees

Strengthen OJT for Young Employees

15

Since October 2021, we have been gradually
implementing a learning management system (LMS)—a
digital training support tool to enable more systematic skill
improvement and career development.
LMS is a system that provides e-learning and otherstudy materials, and integrates and manages attendance,scores, and other information. Since it can be usedanytime and anywhere, LMS has little impact on the
training environment of participants’ departments, and oneof its advantages is that the contents are the same
company-wide.

2. Vision and Strategy

The Kyudenko Group has actively recruited engineers andtechnicians. We are proud that the number of our graduate
recruits is ranked number one in the industry, surpassing
other electrical and HVAC work companies and leading
general contractors. Efforts to secure human resources
are going smoothly on the whole: At the start of the fiscal
year (April 2021), a total of 410 people joined theCompany, around 390 of whom are engineers andtechnicians.

Learning Management System (LMS) Digital Training Support ToolOJT structure
In the workplace

WorkplaceOJT Supporter Supervisor

Elder

Young employee

Outside the workplace

Employees inotherdepartments
Seniorcolleagues

Roles
Position

In April 2021, we started an employee engagement survey
using the engagement measurement tool Wevox as an
initiative to improve engagement.
The results of the survey allowed us to visualize thestrengths and weaknesses of individual departments andthe Company as a whole, and enabled managers andexecutives to learn about employees’ sense ofachievement in their work, how rewarding they feel theirwork is, their stress levels, their relationship withsupervisors and colleagues, and other matters throughnumerical data. Executives will review their own
management practices and improve their management

skills through the process of considering and implementing
improvement measures. And by following up at the optimal
timing with employees who exhibit consistently low
engagement or whose level of engagement has suddenly
dropped, we will help reduce low motivation and employee
turnover.
Furthermore, by making improvements and engaging in
dialogue to solve problems that would hinder the
improvement of engagement, we hope to increase thenumber of employees who are enthusiastic about theirwork, and strengthen trust between the Company andemployees.

Objectives of introduction
External
parties

Other young employees

Initiatives to Improve Engagement

Role

Build a stronger relationship of trust between the Company and employees
To improve performance and reduce employee turnover by increasing the number of employees who are enthusiastic about their work and creating a workplace where such employees can fully demonstrate their ability totake on bold challenges.

(1) Assists and shares information with
OJT
supervisors on training new employees
 versees and supports elders and new
Supporter (2) O
employees

Elder

(1) P
 rovides mental support, assistance inself-examination, and help with duties in the
training of new employees.

Support and improve executives’ management skills
Executives will review their own management practices basedon survey results, and proactively make improvements andengage in dialogue.

Follow up on those with low engagement
We will build a system to identify those with low motivation andthose with potential mental wellbeing issues based on survey
results, and carry out follow-up in a timely manner.

KYUDENKO REPORT 2021

16

2. Vision and Strategy

Initiatives for Reforming Productivity — Promoting DX
The Kyudenko Group has established a department to facilitate DX in order to achieve “reform of
productivity”, one of the three reforms in the Mid-term Management Plan, and formulated a basic frameworkfor promoting DX. We believe there are three conditions for successful DX—strong commitment from theexecutive team including the President, delegation of authority to working-level managers, and the
involvement of all employees. The entire Group will devote every effort to meeting these conditions.

DX Initiatives of the Kyudenko Group

Main Initiatives

Strategy: The Basic Plan for DX Promotion

Increase Kyudenko’s competitive advantage by leveraging
digital technology.
Create new work styles and improve employee
productivity
Fundamentally reexamine work processes, and shapethem into their ideal forms with digital technology
Collaborate with companies and departments to recruitand develop talent who can carry out digitaltransformation

1. Accelerate the plan with a DX Promotion Task Force
2. Create an internal digital environment
3. Reevaluate processes and reform operations with digitaltechnology
4. Promote the use of the latest technology
5. Establish a system and develop talent to support
digitalization
Promote theuse of the latest
technology

We will facilitate streamlining and labor-saving with
cutting-edge technology and information technology,
and transform work processes, the organization, andeven the corporate culture by verifying the essence ofand fundamentally reexamining each process.
The DX Promotion Department will devote every
effort to initiatives to accomplish new plans toimprove the competitiveness of the Kyudenko Group.

Establish system
anddevelop talentReexamine
processes andreform operations

We will accelerate the four pillars of the plan under the strong leadership of the DX Promotion Task
Force, which is composed of the general managers of every division at the Head Office.

The Kyudenko Group’s DX VisionD

Apr. 2022

ves

iati

it
X In

Creationof new value

Business
expansion
DX

Further strengthening ofintegrated utility works

Integrated
utility DX

Examination of work processes and formulationof ideal work processes

Operationalinnovation DX

Establishment of internal infrastructure,
data maintenance, digitalization

Digitalization ofprocesses
Digitalization of
data

Apr. 2023

Apr. 2024

Apr. 2025

Kyudenko Corporation

Certified as a “DX-certified operator” by the Ministry of Economy, Trade and Industry
On July 1, 2021, we were certified as a DX-certified operator by
the Ministry of Economy, Trade and Industry. The DX Certification
program certifies and announces companies that are ready totransform their business using digital technology. We expect thecertification and public announcement by the national government
will help boost awareness of the Group’s brand.
When we were certified on July 1, 2021, there were 141 DXcertified operators.

Cyber security system
Information security is an important issue in business today. Taking
information security measures not only protects one’s own
company, but it is also essential in terms of fulfilling a company’ssocial responsibly.
We will formulate a cyber security policy that considers cybersecurity risks and complies with our Management Policy so thatthe management can convey our organization-wide policy internallyand externally. By announcing this policy to the public and showing
our stance as a company to stakeholders and society as a whole,
we will increase the public’s trust in us.

Formulate cybersecurity policy

Management

MonitorReportBuild risk
management
system
Implement PDCA
cycle and disclose
measures

Ascertain status of
measures

Mid-term Management Plan 2024

Please refer to the Company’s website for details on the basic DX promotion framework.
https://www.kyudenko.co.jp/approach/digital_transformation/(Japanese)

17

HVAC control AI

Disclose internally andexternallyIn accordance with the Mid-term Management Plan, we
will invest 15.0 billion yen in DX initiatives with the aim oftransforming the way we work through digitalization at theworking-level and creating new business models to boost
competitiveness.

Basic DX promotion framework
Apr. 2021

Cloud

DX initiatives to accomplish the Mid-term Management Plan

DX investment plan:
15.0 billion yen

Oct. 2020

Under the concept of “providing comfortable spaces”, we areconducting R&D on a heat source control system in which AI
would automatically analyze a wide range of information including
heat source equipment features, outside temperature data, andin-store events, thereby enabling optimal energy-efficient operation.
The system is being developed jointly with a company that has
expertise in AI control. We plan to start offering the service tocustomers in October 2022.
By saving labor through AI control and setting ourselves apartfrom the competition by bringing about new innovations, we hope
to expand proposal-based sales and maintenance contracts.

Stakeholders(e.g. shareholders, customers, business partners)

The Kyudenko Group will drive operational reforms andthe use of digital technologies to not only increase
operational efficiency but also create unprecedented
business models and value, and strive to improve
productivity further by offering new value to customers
and society.
At the current stage, we are working to improve
operational efficiency by using digital technology andreexamining operations we have been carrying out so far.
Looking ahead to transforming our corporate culture, inthe future, we would like to also strengthen our corporate
structure and profitability to enable us to beat thecompetition in Japan and around the globe in order toadapt to Society 5.0, where cyber and physicalspaces will be highly integrated.

As a measure to support work at the worksite, we are researchinga system that would enable supervisors to see and hear whatworkers are doing even if away from the worksite by using helmetmounted smart devices and wearable cameras. We plan to launcha prototype in March 2022.
The purpose of the system is to prevent work-related accidents
and mistakes. Going forward, we plan to combine this with AI
cameras and smart glass to not only provide remote support but
also further improve safety through measures such as issuing
warnings in times of danger.

AI-based HVAC control

Strongleadership
Create aninternal digital
environment

Remote monitoring of worksites

2. Vision and Strategy

Vision: The Basic Policy on DX Promotion

Business
partners

Outsourcing
serviceproviders

KYUDENKO REPORT 2021

18

2. Vision and Strategy

Initiatives for Reforming Governance — Strengthening GovernanceIn order to establish the “Kyudenko Brand” that is supported and trusted by stakeholders, including
shareholders, customers and local communities, and to realize appropriate and efficient corporate
management, the Kyudenko Group upholds corporate governance as one of its important management
issues. As such, we have made it our basic stance to work to thoroughly ensure compliance with laws,
regulations and corporate ethics, earnestly work to sustainably improve corporate value, and fulfill our
corporate social responsibility.
We have established the “Kyudenko Corporate Governance Guidelines” to practice appropriate andefficient corporate management, and are working to realize optimal corporate governance.

Kyudenko Governance System
The Company has set “Reform of Governance” as apriority theme in the Mid-term Management Plan, and is
working to strengthen the governance system. As part ofthese efforts, in April 2021, we combined the legal division,
which handled preventative law and compliance, with theinternal control division, which was in charge of risk
management and ensuring appropriateness of operations,to form the Business Administration Department. Carryingout the previously separate operations centrally will serveto strengthen our internal check function and enhance ourgovernance arrangements.

We conducted an evaluation of the Board of Directors
based on a questionnaire distributed to all board members
from February to March 2021.
The purpose of the evaluation is to regularly verify
whether the Board of Directors is functioning properly, andtake appropriate measures such as correcting problems
and enhancing strengths in order to ensure the board
carries out its role and responsibilities effectively.
Based on the results, issues and points for improvement
are identified and shared to improve the effectiveness of
the Board of Directors going forward.

Comparison of previous and new organizational structure

FY2020 results of Board of Directors effectiveness evaluation

After change

Before change

Results of evaluation of Board of
Directors effectiveness (FY2020)

President’s Office

General Affairs Division

Business Administration
Department

Secretarial Department
Internal Control Department

Results ofquestionnaire

Thanks to continued improvements such as allocating moretime for discussion at board meetings and distributing
materials before meetings, the evaluation of the board was
relatively high in terms of how meetings were run. In
addition, explaining important agenda items to Outside
Directors beforehand made for more active discussions.

IssuesSome commented that there is room to improve thediversity of the Board of Directors. And with regard to
training of Directors, some commented that knowledge
outside members’ expertise and education to improve
interpersonal skills is needed, such as legal knowledge andthe minimum liberal arts knowledge required of an officer.

Improvement
measures

A woman was elected to the Board of Directors at theGeneral Meeting of Shareholders in June 2021—
marking a first step towards improving diversity. Goingforward, we will deliberate on the composition of theBoard of Directors with more diversity in mind, including
creating a skills matrix.

General Affairs Department
Legal Department

Internal Control Department
Legal Department

Compliance
Implement measures to prevent recurrence of fraud
Ensuring compliance has always been one of the Group’s
main pillars of management. “Reform of Governance” hasbeen positioned as a priority theme in the Mid-termManagement Plan, and we are working to thoroughly
strengthen the governance system to eradicate fraud.
Reflecting on serious incidents of misconduct that
occurred in the past, we have thoroughly enhanced
compliance education and are carrying out measures toensure the prevention of recurrence. We are working tobuild a system where misconduct is not tolerated, cannot
be carried out, and is exposed when it does occur.
Furthermore, along with establishing the Kyudenko
Charter of Behavior, the President announced our
Declaration to Stop Misconduct, a powerful message that
forms the foundation for the system, which pledges that
we will “ensure compliance in all business activities”.
We will continue to make Group-wide efforts to ensure
misconduct never happens again and that the preventative
measures we have formulated do not fade away.

Directors are elected fairly, taking into consideration
diversity, which includes the balance, gender, andnationality of the members of the Board of Directors. At
the General Meeting of Shareholders held on June 2021,
we increased the number of Outside Directors by one tostrengthen the oversight function and diversity of theBoard of Directors.
New Director: Hiroko Shibasaki
Careersummary,etc.

Reasonsforappointment

19

FY2020In the past, auditing focused on inspection. Prevention,assessment, and improvement efforts were lacking, andwe had entered the following year without satisfactorily
verifying the effectiveness of improvement measures.
Considering this and other issues, we reevaluated our
auditing practices with the following four goals in order tofocus on deliberating on effective improvement measures.

Outside Directors

Apr. 2012 Executive Officer and General Manager of Fukuoka Chuo Branch,
TOKIO MARINE & NICHIDO FIRE INSURANCE CO., LTD.
Apr. 2015 Managing Executive Officer, TOKIO MARINE & NICHIDO FIRE
INSURANCE CO., LTD.
Apr. 2018 Advisor, TOKIO MARINE & NICHIDO FIRE INSURANCE CO., LTD.
(retired in March 2019)
Jun. 2019 Outside Director, Audit and Supervisory Committee Member,
MAZDA MOTOR CORPORATION (to the present)
Due to her extensive experience in sales and corporate management in otherindustries, we expect that she will contribute to the decision-making of importantmanagement matters, oversight of execution of business, and other duties by
providing valuable and appropriate advice and suggestions at the Board of Directors
and other meetings with new perspectives as an Outside Director of the Company.

Kyudenko Corporation

Internal Directors

10

We are working to build a system where misconduct is
not tolerated, cannot be carried out, and is exposed
when it does occur.

Preventative measures
1. Enhance compliance awareness
2. Enhance internal check functions
3. Review outsourcing order schemes
4. T horoughly prevent misconduct in outsourcing service providers
5. S trengthen whistleblowing systems andtighten internal disciplinary actions

Reevaluation of internal audits — consolidation and reorganization

FY2021

Internal Directors“We will ensure compliance in all business activities”.

Internal Control

Composition of the Board of Directors
Management structure

President’s Declaration to Stop Misconduct (excerpt)

2. Vision and Strategy

Strengthening the organization(establishment of Business Administration Department)

10
Outside Directors
Female2

3

Percentage of Outside Directors

Percentage of Outside Directors

16.6%

23.1%

 onsolidate and reorganize by switching to audit
Csampling to ensure enough time is allocated todeliberating on improvement measuresNarrow down priority audit matters to carry out more
focused auditingAnalyze root causes, formulate effective improvement
measures, and follow up, with the Head Office taking theleadReevaluate discussion and reporting methods in theInternal Control Committee to ensure improvement
measures are rolled out company-wide
To improve the sophistication and efficiency of auditseven further going forward, we will deliberate on matterssuch as strengthening coordination between and definingroles for self-audits and internal audits, cooperating withaudits by Audit & Supervisory Board Members, andfacilitating system audits using DX.

Relationship between self-audits and internal audits in the
Kyudenko Group: Three Lines of Defense
1st Line

2nd Line

3rd Line

Internal audit
Manage/supportBusiness
officesAffiliatedcompanies
under branch
officesAffiliatedcompanies
under Head
OfficeSelf-audit

Manage/supportManage/supportBranchOffices

Head
OfficeSelf-audit

Internal
audit

Business
Administration
Department

Manage/support
Self-audit

Internal audit
Manage worksite
operations

Monitor state of operations
management, provide support,
etc.

Internal audit* Based on “Practical Guidelines for Group Governance System”, Ministry of
Economy, Trade and Industry
In order to build and operate an internal control system, the introduction andproper operation of “Three Lines of Defense” comprising the First Line (Business
Division), Second Line (Corporate Division), and Third Line (Internal Audit Division)
should be deliberated on.

KYUDENKO REPORT 2021

20

2. Vision and Strategy

Special Feature

Environmental Management of the Kyudenko GroupIn response to the global trend of reducing greenhouse gases to combat climate change, theKyudenko Group contributes to the environment by constructing and operating renewable energy
generation plants and making energy-saving proposals for general facility work.
In July 2021, we established the Green Innovation Business Unit — a new organization that
consolidates our renewable energy businesses such as solar power and wind power generation. The
movement towards carbon neutrality is accelerating. Viewing the realization of a carbon-free society
as a growth opportunity, this new division will work with the existing Sales Division and Technology
Division to centrally operate the business.
Today facility work is our main business, but in the future, we hope to evolve into a company thatprovides comprehensive support for local energy infrastructure and services by expanding intobusinesses such as smart city and other town planning initiatives, local energy supply, and public
services.

Main Initiatives in FY2021
Setting medium- to long-term environmental management goals
We have set the following medium- to long-term goals to realize a carbon-free society.
Reduce CO2 emissions intensity per sales of completed construction by at least 50% by 2030
(compared to 2013)
Achieve carbon neutrality by 2050
Endorsement of TCFD recommendations
The Kyudenko Group announced its endorsement of the Task Force on Climaterelated Financial Disclosures (TCFD) recommendations. Going forward, we will
analyze the risks and opportunities that climate change presents for ourbusinesses, and disclose information on its financial impacts.
Investment in JEPLAN, INC.
In August 2021, we acquired a stake in JEPLAN, a company that operates an environmental consulting
business and recycling technology business for recycling apparel, plastics, and other materials.
Leveraging our technological capabilities and expertise, we will introduce renewable energy and energysaving technology in JEPLAN’s plant, and further facilitate environmentally friendly town planning.

Photo: Nanatsujima Mega Solar Power Plant (Kagoshima Prefecture)

Construction work of renewable energy generation plant

Kushima Wind Power Generation
Plant (Miyazaki Prefecture)

Kyudenko EMS

Outline of PPA solar power generation business scheme

Users(e.g., large-scale consumers of electricity, local governments)

Power generation business SPC
Kyudenko EMS

EV charging center

Off-site PPA(made up of users, Kyudenko, and others)
On-site PPA

Prompted by the Act on Special Measures Concerning
Procurement of Electricity from Renewable Energy Sources
by Electricity Utilities (also known as the “FIT law”) that went
into effect in 2012, the Kyudenko Group took orders andconstruction of solar power plants into full swing with a focus
on mega solar facilities. Total orders received have exceeded
600.0 billion yen so far. Anticipating the reduction of mega
solar facilities due to FIT in the near future, we are striving toacquire solar power work through PPAs.
And in addition to solar power, we have also been focusing
on wind and biomass power since early on, and are involvedin the construction and operation of wind and biomass
power generation facilities.

Kirishima Wood Biomass Power
Generation Plant (Kagoshima Prefecture)

Energy service
We establish joint SPCs with energy suppliers or othercompanies to provide comprehensive services for urban
redevelopment projects, hospitals, factories, etc.
— everything from supplying energy to installing andoperating highly efficient heat source equipment — thereby
minimizing energy costs and conserving energy.
The Kyudenko Group will carry out installation of heatsource equipment, substations, and other equipment andfacilities to capture the demand for subsequent maintenancework over the long term.

Power usage in one day of users that installed Kyudenko EMS

ESP business company (SPC)
Energy supply

Kyudenko

Electricity, city gas, etc.

CompanyA

High-efficiency
system installation

21

Kyudenko Corporation

Company
C

Transmission anddistribution system

Kyudenko EMS

Customers
Urban
redevelopment

Solar power source
Conventional demand
Solar power
generation

DC converter

Storage battery powersource(charge-discharge)

Kyudenko EMS adjusts renewableenergy power output in line withthe load curve instead of relying on
the weather.

Load curve

Solar + storage battery
charge/discharge

Hospital

Heat source equipment,
substation equipment, etc.
Factory

Energy management
and maintenance

Charge/discharge
loss: around 20%
Lead storage
batteries

Facility operations

Miyazaki Medical Association Hospital(Miyazaki Prefecture)

Output from renewable energy such as solar power and wind poweris subject to extreme fluctuation. Kyudenko EMS is an energy
management system that can convert it into a stable form forutilization.
This system that we developed was given a grant by the Ministry of
the Environment of Japan in 2016, and we established our first
demonstration facility outside Japan in Sumba Island, Indonesia.
Indonesia has many populated remote islands, but electrical power isSolar power generation demonstration facility
mostly provided by diesel generators and the lack of electricity has
on Sumba Islandhindered industrial development. The island’s power grid is extremely
fragile and cannot take on unstable generated power, so the national and local governments have high hopes forthe attempt to stabilize renewable energy with Kyudenko EMS.
The facility went online in January 2018, and today it transmits around 200 kWh of power to the microgrid
seven hours per day.
One of the main features of Kyudenko EMS is that it can reduce demand for commercial power sources since
it enables control of a renewable energy source. Furthermore, even if commercial energy sources are lost
temporarily due to disaster, electricity can be supplied independently with solar power and storage batteries. In
addition, since it uses long-life lead-acid batteries, the batteries do not need to be replaced for as long as around15 years.
After our positive results overseas, we are now focusing efforts on
implementing the system in Japan.

Outline of business scheme

CompanyB

2. Vision and Strategy

Kyudenko Group’s Environmental Business

etc.

Battery charge anddischarge controller

Renewable energy source controlledwith solar + storage batteries

Powerinverter

New demand
Discharge yesterday’s
surplus from storage
batteries

Commercial
power source

Major users

Discharge
today’ssurplus fromstoragebatteries* Adjusting the renewable energy
source against load fluctuations
can cut peak demand.

00:00

24:00

* Power usage in one day of major users that installed Kyudenko EMSKYUDENKO REPORT 2021

22

2. Vision and Strategy

Special Feature

Promoting Diversity
Turning the strength of diverse human resources into organizational strength

Please refer to the Company’s website for details.

https://www.kyudenko.co.jp/approach/diversity/(Japanese)

Basic Policy on Promoting Diversity
Under the philosophy that people are our greatest management resource and based on our Corporate Philosophy
and Charter of Behavior, we will work to promote diversity with the goal of attaining the vision outlined below in orderto create new value and increase our competitiveness by respecting diversity and leveraging it as an organizational
strength. Through these efforts, we will also contribute to achieving the Sustainable Development Goals (SDGs).

VisionCorporate Philosophy
1. We contribute to society through providing agreeable
environmental solutions.
2. We keep challenging for sustainable development throughour engineering strength and create a new value.
3. We aim to create a mutual respecting environment in
Kyudenko which utilize and develop employees’ personality.

Charter of Behavior
1.
4. We will give our employees relaxing and enriched lives,
ensure safe, comfortable, and open workplaces, andcreate a corporate culture that is bright, vibrant, andrespects the character, individuality, and diversity of
our employees.
10.

1. Create a corporate culture that respects
and leverages diversity
We will create a corporate culture where
everyone respects and accepts diversity, which
includes gender, age, presence of disabilities,
race, abilities, values, and sexual minorities, andleverage it as an organizational strength.
2. Develop and facilitate the active
participation of diverse talent
We will recruit, train, and promote diverse
human resources, and provide support for awide range of career and skill development.
3. Create a fulfilling, rewarding, andappealing work environment
We will create a work environment where
people will want to work and continue working— one where every person can demonstrate
their full potential and where a wide range of
flexible work styles are possible — and work to
improve engagement.
Video expressing the President’s commitment
What about specific initiatives?

Basic Policy on Promoting Diversity

Relation to SDGs

23

Kyudenko Corporation

We will establish the Diversity Promotion Preparation Office, and drive initiatives.

Initiatives to Promote the Active Participation of Women
In accordance with the Act on the Promotion of
Female Participation and Career Advancement in the
Workplace, the Kyudenko Group has formulated an
action plan to create a comfortable work environment
for women to ensure they can fully demonstrate theirpotential in the workplace. As of April 2021, thepercentage of female employees in department
manager positions and above was 1.8%. We aim todouble this to 3.6% by the end of FY2025, the end of
the action plan period. In line with the plan, we are
striving to enable women to fully demonstrate theirpotential in the workplace.

Action plan (KPI)
Plan period

From April 1, 2021 to March 31, 2026 (5 years)

Targets(1) Double percentage of female employees in department manager positions and above(2) Attain teleworking rate of 20% per month

Percentage of women in managerial positions and above (as of April 1, 2021)
Current

Target(as of April 1, 2021)

March 31, 2026

1.8%

3.6%

2. Vision and Strategy

With the business environment undergoing drastic changes such as the reduction of the workforce due tothe declining birthrate and increasing aged population, globalization and diversifying values, the KyudenkoGroup views the promotion of diversity as an important management issue and is carrying out efforts
accordingly.
Although we have been engaging in individual initiatives such as promoting the active participation of
women and accelerating the hiring of disabled people, in July 2021, we established the Diversity
Promotion Preparation Office — a specialized organization dedicated to promoting a diverse workforce.
We convey our vision of where we want to be through messages from the President using videos andinternal newsletters, and carry out initiatives to promote understanding and encourage a change ofawareness.
Furthermore, we identify current problems and challenges through means such as employeequestionnaires, and deliberate and carry out measures accordingly. Recognizing the empowerment of
women as a particularly urgent issue that needs to be addressed, we will assemble a cross-departmental
team that will engage in efforts such as creating a workplace environment that encourages greater
participation of women and aiding career development by increasing support to balance work and homeand other measures.
By maximizing the capabilities of diverse talent and respecting a wide range of individual perspectives
and values, and leveraging them as an organizational strength to generate unprecedented innovation, we
will increase our competitiveness and achieve sustainable growth.

Promotion of Non-Japanese Employees to Managerial Positions
Currently, we have 14 employees who are non-Japanesecitizens, including exchange students. Going forward, we
will engage in recruitment activities through universities
and job-seeking media to increase the number of nonJapanese employees, and work to develop their skills
and advance their careers through internal training tocreate candidates for the next generation of executives.
Although we do promote people to middle
management positions regardless of nationality inaccordance with internal standards, at present, we
expect that it will take time to promote non-Japaneseemployees to middle management positions and above
as they are currently undergoing the training process.
Therefore, although we have not set specific targets forthe promotion of non-Japanese employees tomanagement positions, going forward, we will facilitate
the promotion of non-Japanese employees to corepersonnel through not only developing current employees
but also carrying out proactive and meticulous
recruitment activities.

Current number of non-Japanese employees
Regular employees

Non-regular employees

11

10

10

5

5

5

2020.32021.32021.10

9

8

7

3

3

2017.32018.3

4
2019.3

Promotion of Mid-career Hires to Managerial Positions
We carry out mid-career hiring of engineers andsales representatives with extensive practicalexperience whose skills can be utilized immediately
to further strengthen our technological and sales
capabilities. One example of our mid-career hiring
efforts is “referral recruitment”, an initiative launched
in FY2020 that utilizes employees’ network ofcontacts to prevent mismatching of personality,
suitability, and so on.
As of October 2021, the percentage of midcareer hires in middle management positions andabove was 10.6%. We aim to increase this by theend of FY2025.

Percentage of mid-career hires in managerial positions and above(as of October 1, 2021)

Current

Target(as of October 1, 2021)

March 31, 2026

10.6%

Above current

KYUDENKO REPORT 2021

24

Electrical work

2. Vision and Strategy

Business of Kyudenko“A leading company ofintegrated utilities engineering service”
As an integrated utilities engineering service company that supports every aspect of day-to-day life, we areengaged in various fields of work on a daily basis. By utilizing the expertise we have accumulated thus far, weconstantly aim for a higher stage and work on reform and innovation. We will continue to engage in our activities ineach line of business, aiming to be a company indispensable to society and local communities.

Masahiro Satake

General Manager, Electrical Engineering Department

By leveraging our superb engineering strength and abundant expertise atvarious sites, the electrical work department offers facilities that satisfy ourcustomers, such as facilities for commercial buildings, office buildings,
hospitals, factories, and educational facilities, as well as base stations formobile phone operators and disaster management wirelesscommunication systems for local governments. In addition, we provide
solutions to our customers’ problems, from proposals to construction
tailored to their needs, not only for construction and expansion ofbuildings but also for renewal works of existing facilities. We offer safe andreliable services, supporting our customers through after-sales service
after the construction is complete, providing preventive maintenanceservices and responding promptly to their requests.
At the moment, we are in a buoyant business environment in terms oforder acquisition, characterized by the Tenjin Big Bang project in our
hometown Fukuoka, large-scale projects in the Kyushu prefectures, largescale redevelopment projects in the metropolitan area and other projects.
We will ensure fine-tuned construction management from order acquisition
to completion of construction.

Business strategy

Power
distribution
line work
45.7 billion yen

Others14.5
billion yen

4%

Measures to be executed

Further improve profit
margins• Make sure that strategy meetings and construction study meetings take place at each stage, from the start ofsales activities to the completion of construction• Offer seamless support for cost management and working process management, with the involvement of the
Head Office• Always apply front loading and avoid increasing workload and costs during the construction period

Strengthen construction
capability• To develop the skills of young employees at an early stage, establish a job rotation system for education to allow
young employees to comprehensively understand design, estimation, and construction management• Develop multifunctional workers who have a wide range of techniques and technical skills

Strengthen and expand
the order base

• Form a dedicated team to secure orders and construction of large-scale projects in Japan• Endeavor to strengthen the order base by forming a team at the Head Office, consisting of professionals wellversed in hotels, logistics facilities, apartments, etc.
• Increase renewal work orders by utilizing the list of buildings already constructed (big data)

2. Vision and Strategy

Business strategy

11%

Transition of Business Performance [Excluding Renewable Energy Work]FY2020HVAC andsanitary
facility work
124.2
billion yen

32%

Sales

391.9

billion yen
Renewable energy
generation
plant work 15 %58.4 billion yen

Electrical
work
207.2
billion yen

53%

Sales

150.2 billion yen

Orders140.5 billion yen

Kyudenko Corporation

Orders (Billion Yen)

(down 5.9% year on year)(down 8.9% year on year)

180.0
146.9

157.1 159.6

150.2

165.0

164.1 162.1

154.2

140.5

Segment overview

Sales decreased by 5.9% year on year to 150.2 billion yen.
Orders received decreased by 8.9% year on year to 140.5
billion yen.
For FY2021, we forecast that sales will be 165.0 billion yen(up 9.8% year on year) and orders received will be 180.0 billion
yen (up 28.1% year on year).

2017

2018

2019

2020

2021

(Forecast)

2017

2018

2019

2020

2021

(Forecast)

Major Construction Projects

Japan National Stadium
Photo courtesy of Taisei Corporation

25

Sales (Billion Yen)

BOSS E·ZO FUKUOKA(C)SoftBankHAWKS

Kagoshima City Chuo-cho Block 19/20
Redevelopment Project

KYUDENKO REPORT 2021

26

HVAC and sanitary facility work

Hideyuki Aratsu

General Manager, HVAC and Plumbing Engineering Department

Power distribution line work

The HVAC and plumbing department not only provides a comfortableliving environment in terms of air and water but also safety and security ofthe environment through installation of HVAC equipment, plumbing
systems, and sanitation and disaster-proof equipment in a wide range ofbuildings, such as office buildings, hospitals, hotels, and factories.
While focusing on general HVAC and sanitary facilities, we work to meetthe demand for diversifying technologies, such as environmentally friendly,
large-scale heat source equipment and equipment related to energy
services, renewable energy, and the environment. We thereby aim at all
times to develop businesses that can respond to the trust of ourcustomers.
We will press forward with our business activities, seeing as business
opportunities the increasing needs for energy saving towards therealization of a carbon-free society and other trends.

Measures to be executed

Business strategy

Further improve
profit margins• Share information on target projects between the sales and technology divisions, including the Head Office, andoffer seamless support for quality, working process, and cost management, with the involvement of the Head
Office• To improve productivity, further strengthen initiatives for front loading, such as prior discussion using BIM

Optimal assignment of personnel andproductivity improvement through theuse of digital technologies
Strengthen construction
capability

Increase order volume• Receive orders for interconnecting line works related to renewable energy plant construction (in cooperation
with the Green Innovation Business Unit)• Increase orders received for underground distribution line works in response to the progress of the Ministry ofLand, Infrastructure, Transport and Tourism’s plan to remove utility poles• Strengthen the involvement of the Head Office in large-scale projects and work to realize timely and optimal
assignment of personnel• Accelerate the digitalization of existing operations and improve efficiency of engineers’ work

Productivity improvement
through digitalization• Utilize mobile devices to centralize worksite management operations (safety patrol systems, etc.)• Start developing a system to improve efficiency and accelerate labor saving in existing operations• Redesign the position-based training programs (for young employees, mid-level employees, senior executive
candidates, etc.) to realize early development of personnel• Organize a team at the Head Office dedicated to the construction management of hotels, logistics facilities,
factories, etc. and offer on-target support to worksites

Strengthen construction
capability•E nhance safety and construction quality education for technicians (elimination of undue burdens and needlessworks)• Fundamentally review education for engineers (focus on early development and further development of abilities)• Acquisition of technical skills and development of human resources by a dedicated group, with the aim ofreceiving orders for 66kV power cable works

Transition of Business Performance [Excluding Renewable Energy Work]

Sales

122.8 billion yen

Orders118.5 billion yen

Sales (Billion Yen)

Transition of Business Performance

Orders (Billion Yen)

(down 8.8% year on year)
150.2(down 6.2% year on year)

Segment overview

Sales decreased by 8.8% year on year to 122.8 billion yen.
Orders received decreased by 6.2% year on year to 118.5
billion yen.
For FY2021, we forecast that sales will be 132.0 billion yen(up 7.5% year on year) and orders received will be 137.0 billion
yen (up 15.6% year on year).

126.4

134.7

122.8

132.0

126.4

120.2

137.0

101.0

2017

Sales

45.7 billion yen

Orders45.6 billion yen

118.5

Sales (Billion Yen)

Orders (Billion Yen)

(down 2.4% year on year)(down 4.0% year on year)

46.6 47.7 46.9

45.7 46.0

46.5 47.4 47.5

45.6 46.0

2017

2020

2017

2020

Segment overview

2018

2019

2020

2021

(Forecast)

2017

2018

2019

2020

2021

Sales decreased by 2.4% year on year to 45.7 billion yen.
Orders received decreased by 4.0% year on year to 45.6
billion yen.
For FY2021, we forecast that sales will be 46.0 billion yen (up0.5% year on year) and orders received will be 46.0 billion yen(up 0.8% year on year).

(Forecast)

2018

2019

2021

(Forecast)

2018

2019

2021

(Forecast)

Work Scenes

Major Construction Projects

Kyudenko Corporation

Measures to be executed

2. Vision and Strategy

Business strategy

27

General Manager, Power Distribution Department

Business Strategy

Business strategy

SAKURA MACHI Kumamoto

Yasuhiro Miyoshi

As a company that undertakes contracted works from Kyushu ElectricPower Transmission and Distribution Co., Inc., the power distribution
department engages in the installation and maintenance of overhead
distribution equipment, installation of drop wires and meters, andinstallation of communication cables and related devices to build anautomatic control system for distribution lines. Specifically, in case of
power outages due to typhoons and other natural disasters, we conduct
recovery works day and night, fulfilling a social mission and largely
contributing to the local community.
In the future, underground distribution lines are expected to become
more prevalent to secure safe and comfortable spaces for pedestrians,
prevent urban disasters, and improve urban landscapes. As a company
that engages in underground distribution line works, we will promptly
respond to such requests from society.

Nippon Seinenkan

Seibu Railway Ikebukuro
Head Office Building

KYUDENKO REPORT 2021

28

Renewable energy generation plant work

Yujiro Kishida

Deputy General Manager, Green Innovation Business Unit

Renewable energy generation businessSolar power is a promising renewable energy source that is also costeffective. Kyudenko has worked to construct solar power generation
systems since 1992, and has been offering services that support
customers, including proposal of a construction method suitable for thelocation to be installed, management such as proper maintenance after
installation, and proposal of attached equipment. In recent years, we haveworked on the construction of not only solar power plants but also
generation plants of various renewable energy, such as wind power andbiomass.
We will press forward with our business by seeing as a business
opportunity the global social challenge of realizing a carbon-neutral/
carbon-free society by 2050.

Business Strategy

We construct, own, and operate solar power and wind
power generation plants and engage in the business ofselling electricity using the FIT scheme. We also jointly
participate in the business of generating and selling
solar power, wind power, and biomass power throughequity investment and anonymous partnership.
This business is characteristic in that it is rooted in thelocal community and is expected to yield stable profitsand cash flows without being affected by the economy.
We will continue this business model, which hassignificantly differentiated us from other companies inthe same industry.

Investment in Solar Power and Wind Power Generation Plants and Business Performance
Investment in solar power plants

Sales (Billion Yen) (Sales of other business)
Solar power (Operated by the Group)Wind power (Operated by the Group)

Measures to be executed

Increase orders for biomass
and wind power generation• Strengthen proposal activities and cooperation with biomass business operators• For specific projects, exchange information and consult with stakeholders, such as local governments,
developers, and general contractors

Increase orders for solar power
generation and search for new
business opportunities• Increase orders for solar power generation based on a PPA model• Establish a proposal scheme to increase carport solar power orders, and make sales proposals accordingly

Strengthen energy services• Establish a business scheme through alliances with energy supply companies, etc.
• Increase design and consulting projects by Japan Energy Consulting

5.1
4.2
1.0

3.2

4.4

0.9

Deals operated by the Group
4.8

4.8

0.8

0.8

Number of
power plants

0.9

4.2

3.5

4.0

4.0

Orders58.4 billion yen(down 11.9% year on year)

49

92MW

87MW

Under construction

—

—

—

Plan

—

—

—

Total

49

92MW

87MW

Deals through investment in equity
2016

Sales (Billion Yen)

Orders (Billion Yen)(Figures in brackets below represent
solar power generation work)(Figures in brackets below represent
solar power generation work)

20.4 billion yen(down 88.6% year on year)

66.4
51.7

57.0

[59.3]

178.9[176.5]

58.4[54.5][48.3][45.1]

Segment overview

Sales decreased by 11.9% year on year to 58.4 billion yen.
Orders received decreased by 88.6% year on year to 20.4
billion yen.
For FY2021, we forecast sales of 55.0 billion yen (down 6.0%
year on year) and orders received of 30.0 billion yen (up 46.8%
year on year) for solar power generation work.

2017

2018

[50.7]

46.0[45.3]

20.4 30.0[18.2]
2018

2019

2020

2021

(Forecast)

2017

2018

2019

2020

2021

(Forecast)

0.0

1.0
0.1 0.0
0.9
2016

1.3

1.4

1.6

2017

2018

2019

2020

261

336

278

233
110

29

Kyudenko Corporation

Renatosu Soma Solar Park

131

540MW

156MW

Under construction

5

687MW

141MW

Plan

—

—

—

Total

54

1,227MW

297MW

Investment in wind power plants

Number of
power plants(as of March 31, 2021)

5

38MW

38MW

Under construction

—

—

—

Plan

—

—

—

Total

5

38MW

38MW

Deals through investment in equity
Number of
power plants

38

38

38

72

85

92

92

92

2016

2017

2018

2019

2020

Generation capacity Generation capacity(the entire operation) (that equal to the equity)

In operation

148

38

Kushima Wind Power Generation Plant

49

206

75
38

In operation

Deals operated by the Group

1.2

Operation output (MW) (Plants in operation only)
Solar power (Operated by the Group)Wind power (Operated by the Group)
Solar/wind power (Equity investment)

185

0.1

0.1

0.1

Generation capacity Generation capacity(the entire operation) (that equal to the equity)

1.5

1.6

1.4

1.9

53.7

Number of
power plants

2020

Profit (Billion Yen) (Operated by the Group: operating profit, equity investment: non-operating income)Solar power (Operated by the Group)Wind power (Operated by the Group)
Solar/wind power (Equity investment)
3.2
3.1
2.9

0.7

2017

2019

55.0

Major Construction Projects

Nanatsujima Mega Solar Power Plant

Generation capacity Generation capacity(the entire operation) (that equal to the equity)

In operation

Transition of Business Performance

Sales

(as of March 31, 2021)

2. Vision and Strategy

Business strategy

Generation capacity Generation capacity(the entire operation) (that equal to the equity)

In operation

5

145MW

50MW

Under construction

1

7MW

2MW

Plan

1

15MW

3MW

Total

7

167MW

55MW

KYUDENKO REPORT 2021

30

Overseas business

PPP/PFI business

Kyudenko launched its overseas business in 1979 and has since participated in many projects in regions including
Asia, Africa, the Middle East, and Europe, building up a track record in construction work.
Despite a period of temporary stagnation from the 1990s, we established the International Business Division in2011 and decided to make a foray into Southeast Asia, which continues to have one of the highest growth rates
in the world.
Currently, over 800 employees work in eight countries and regions: Singapore, Malaysia, Vietnam, Thailand,
Indonesia, Myanmar, Bangladesh, and Taiwan. We develop businesses in a wide range of fields, including facility
work such as electrical, HVAC and plumbing, plant engineering business, environmental analysis business, EMS,
and renewable energy business.

Applying the expertise accumulated as an integrated utilities
engineering service company to a new field

Market Environment
increase the proportion of renewable energy in their power
supply by cancelling construction plans for thermal power
generation plants, taking financial measures, andfacilitating investment.
In Taiwan, where the FIT scheme has been introduced,
we are participating in a solar power generation projectthat integrates aquaculture with solar power generation. In
addition, we are proposing solar power generation projects
based on a PPA model to major Japanese companies inSoutheast Asia, where there is demand for renewableenergy.

Major Overseas Subsidiaries
Asia Projects Engineering Pte. Ltd.
(APECO)
Established: 1969
Stake: 82.09%
Number of employees[as of March 31, 2021]: 446 in total(of which 445 are locally employed)
Main line of business: EPC works for various
plants, maintenance, district air conditioning
works, etc.

Pipe network(in Jurong Island)

Kyudenko Malaysia Sdn. Bhd.
Established: 2012
Stake: 100.0%
Number of employees[as of March 31, 2021]: 54 in total(of which 46 are locally employed)
Main line of business: Design andconstruction of electrical, HVAC, machinery,fire prevention facilities, sanitary,architectural, and civil engineering; solar
power and other green power generation
facilities

Kyulien Environment Improving Co., Ltd.

Established: 1985 Stake: 100.0%
Number of employees[as of March 31, 2021]: 256 in total(of which 254 are locally employed)
Main line of business: Environmental analysis,design and construction of electrical facilities

SUGU2 Floating Solar Power
Generation Plant

NICHIKON(MALAYSIA) SDN. BHD.

© FUMITO SUZUKI

What Is PPP/PFI?
A public-private partnership (PPP) is a scheme where thepublic and private sectors work together to provide public
services. A private finance initiative (PFI) is a typicalmethod of PPP. PFI aims to provide public services
efficiently and effectively by using the private sector’s funds
and expertise in the design, construction, maintenance,
management and operation of public facilities and having
the private sector take the lead in providing public
services.
PPP/PFI businesses became prevalent in Japan after
the PFI Act took effect in 1999. Leveraging themanagement expertise and engineering strengthestablished as a community-based provider of integrated
utilities engineering services, the Kyudenko Groupparticipates in a number of PPP/PFI projects, which areconsidered as new methods of social capital developmentin public works.

Dejima Messe Nagasaki was established in an aim to takeadvantage of Nagasaki’s past of communicating
information to the world, and create a new platform forinteraction in a city that brings about and nurturesinteraction. With the Convention Hall that allows sociallydistanced seating arrangements and the installation oflarge-capacity, high-speed communication lines, the facility

Established: 2013
Stake: 49.0%
Number of employees[as of March 31, 2021]: 42 in total(of which 38 are locally employed)
Main line of business: Design and constructionof electrical, HVAC, machinery, fire prevention
facilities, sanitary, architectural, and civilengineering; solar power and other green
MMC TOOLS
power generation facilities(THAILAND) CO., LTD.

31

Kyudenko Corporation

Indonesia Representative Office(Convention Hall, etc.)

ClientEstablished: 2018
Number of employees[as of March 31, 2021]: 3 in total(of which 2 are locally employed)
Main line of business: Business development
for stable renewable energy supply

Participated as a representative company

15 projects

Participated as a constituent company

27 projects

Participated as a cooperating company

5 projects

Total

47 projects

is available not only for online conferences but also esports
and other special events. The adjacent Hilton Nagasakihas 200 guest rooms, the Executive Lounge, a fitness
gym, hot baths, and other facilities, and is expected tocontribute significantly to an increase in the guest
population as a new landmark hotel of Nagasaki.

Daikin Vietnam(1) MICE SPC
Kyudenko (Thailand) Co., Ltd.

Orders for PPP/PFI projects (as of March 2021)

Project Example

Kyudenko Vietnam Co., Ltd.
Established: 2012
Stake: 100.0%
Number of employees[as of March 31, 2021]: 52 in total(of which 45 are locally employed)
Main line of business: Design andconstruction of electrical, HVAC, sanitary, andenergy saving facilities; solar power andother green power generation facilities

Marine Messe Fukuoka Hall B

2. Vision and Strategy

Significant restrictions have been imposed on businessactivities in Southeast Asian countries, marked bylockdowns caused by globally rampant COVID-19. The
pandemic shows no sign of ending, and there is no
denying that the future outlook remains unclear. As
Japanese companies, our main customers, review theircapital investment plans, we need to keep a close eye on
how the situation develops.
Meanwhile, in response to the global trend towards acarbon-free society in the renewable energy field,
Southeast Asian countries are making national efforts toInvestment
style
Solar power generation
demonstration facility in Sumba
IslandProject
periodNagasaki MICE
Co., Ltd.
PFI projectcontract(Representative
company: Kyudenko)

20 years(2) Hotel SPC(hotel, tenants, etc.)

ClientM&H Nagasaki
Hotel LLC

Investment
style

Anonymous
partnershipcontract

Project
period50 years

KYUDENKO REPORT 2021

32

Olive business3. CSR/Corporate Governance

Basic Concept of CSR
Kyudenko Group’s CSR
The Group believes its CSR is to contribute to society based on corporate governance through the creation of acomfortable environment as well as to practice the “Corporate Philosophy” for the purpose of sustainable growthof Kyudenko. The Corporate Philosophy represents the purpose of businesses and the reason of existence ofKyudenko, and all business activities of the Company are based on this Corporate Philosophy.
In order to practice the Philosophy, specific issues from long-term, medium-term and annual perspectives areincorporated into the “Long-term Vision”, “Mid-term Management Plan” and “Basic Management Policy for the
Fiscal Year”, respectively, and these plans are regarded as “implementation of philosophy”.

Corporate
Philosophy

Role as a Community-based Company

High Global Reputation
Our olive oils are highly recognizedby olive oil tasters in the world andthey are also served on JR Kyushu’s
Cruise Train “Seven Stars inKyushu”.

Tourist Farm “Amakusa Olive Orchard AVILO”
Amakusa Olive Orchard AVILO opened in July 2014. The
orchard serves not only as a production farm that grows
olives and extracts olive oil but also a sightseeing facility
where local people and tourists can learn about, enjoy,
and experience olives. The orchard has welcomed
approximately 80 thousand visitors to date, presenting
them the charm of olives.

33

Olive House on the Hill
(interactive facility)

Bell of Peace(observation deck)

Photo spot

Olive oil extraction byhand (for a fee)

Guided tour of theorchard (for a fee)

Olive oil tasting

Kyudenko Corporation

Action Guidelines

Creating a sixth industry model within a local community

Long-term Vision

Mid-term Management Plan

Implementation ofphilosophy

Production
Grow olives in our own orchard

Processing

Harvest fruit from mid-September
to mid-October every year

Basic Management Policy for the fiscal yearIR
information

Sales

Environmental
Quality control
Workplace and Coexistence
activities andand customer creation of comfortablelaborwith local
satisfaction
environment communities
environment

Specific CSR initiatives

3. CSR/Corporate GovernanceThe decline of the primary industry is one of the majorsocial problems Japan is faced with. We, as a communitybased company, therefore wondered if there was any way
we could play a part in revitalizing the primary industry— specifically by turning the industry into the sixth industry
and creating a business model that seamlessly
incorporates production, processing, and sales. We thus
set an eye on olives since we saw a potential in them as a
tourism resource. Olives can be used for a wide range offood products and cosmetics, embody a lovely image ofan orchard tree in the Mediterranean region and are also
considered as a symbol of peace. The olive business waslaunched in Amakusa City, Kumamoto Prefecture in
February 2010.
Adhering to our long-term vision, we will continue toaddress various problems in society and local communities
and contribute to the realization of affluent life through ourolive business.

Consistent value

CSR management

Extract olive oil in the orchard
within 24 hours

Sell at stores

Future Priority Initiatives
In FY2021, the harvest volume dropped significantly due
to the early arrival of the rainy season and an increase in
rainfall. Sales also declined because of the cancellation ofvarious events caused by the spread of COVID-19.
Meanwhile, our product scored 90 points in Flos Olei
2021, which lists the top 500 olive oils in the world, andreceived the gold award in an international competition
held in Japan in 2021. This resulted in well-known
restaurants and hotels adopting our olive oil, meaning that
our reputation for quality is steadily growing.
Going forward, we will endeavor to enhance the AVILO
brand by developing directly managed olive orchards tostrengthen production capabilities and developing
products in collaboration with olive orchards across
Kyushu.
While the pandemic shows no sign of ending at the
moment, we will work to expand our sales channels byengaging in public relations activities to increase thevisibility of our online shop, collaborating with excellent
restaurants and companies, exporting our products, andstrengthening wholesale sales to food processing
companies.

Risk Management and Compliance
At Kyudenko Group, we have in place Emergency Management Regulations that prescribe our approach and organizational
structure for tackling emergency situations. The regulations serve as a guide to help the Company cope with various kindsof risks that keep growing with the changing business environment and prevent those risks from materializing, and in theevent of an emergency that would substantially affect our business operation, to allow the Company to fulfill its social
responsibility while securing the safety of our employees as a top priority. We are also working to cultivate a complianceconscious corporate culture across the Group by setting up Compliance Committee headed by the President, establishingCompliance Manual, and creating whistleblower contact points, among others.

Measures against COVID-19

Whistleblowing system

To prevent the spread of
COVID-19, we set up an
emergency response
headquarters and havebeen implementing special
measures to secure thehealth and safety of ouremployees and their family members and to ensure
continuation of business, such as by adopting remote
working, staggered working hours to avoid the rush hourcommuting, and actively using web conferencing, among
other measures. We also organized workplacevaccinations so as to give shots to not only the Group’s
employees and their family members but also to those
who belong to our subcontracting companies and theirfamilies.
In accordance with guidelines to prevent infection, theAct on Special Measures against Novel Influenza, etc., andother laws and regulations, the Company has put in place
regulations concerning basic preventive measures innormal times, actions to be taken in case an employee isconfirmed positive, as well as measures needed to preventthe spread of infection.

The Company has in place a whistleblowing system wherestakeholders both within and outside the Company canreport or consult on unlawful conduct or harassment andother significant wrongdoing. Business Administration
Department serves as the internal contact point, while thelegal counsel of the Company accepts reports andconsultations from outside the Company.
Business Administration Department, the secretariat ofthis system, manages and keeps personal information of
the whistleblowers and content of the reports or
consultations in strict confidentiality, and prohibits any
unfair treatment due to whistleblowing. Upon receipt of areport or consultation, we immediately work to grasp its
content and check whether or not it constitutes an issue,
and take corrective measures if necessary.

KYUDENKO REPORT 2021

34

3. CSR/Corporate Governance

Workplace and Labor Environment/Coexistence with Local Communities
Initiatives for Work Style Reform

Initiatives for Childcare Support

The Kyudenko Group defines work style reform as a“reform for the Company and its employees to growtogether, aiming to create new values and realize aprosperous life”. Since FY2017, with the Promotion
Committee for Work Style Reform established directly
under the President, we have strived to work in timeeffective ways with the goal of eliminating long working
hours by incorporating innovative technologies and ideas
unhindered by existing modes.
Eliminating long working hours is not the sole purposeof work style reform. We believe it is important to drive thecreation of new technologies and improve operational
efficiency through work style reform, aiming to improve
productivity. This will result in eliminating long working
hours, which will in turn enable further improvement in pay.
By making these efforts, we strive to grow into a company
that generates sustainable profits so that employees canenjoy economic affluence.

The Company’s childcare support system, introduced in
1992, is a system that exceeds the standards of theChildcare and Family Care Leave Act.
So far, all female employees who gave birth and areraising children have used this system and are thriving
upon their return, balancing childcare and work. In
addition, as one of the initiatives to promote work-lifebalance, we have introduced an “accumulated annual paid
leave system”, which allows employees to accumulate 10
days per year, a maximum of 40 days of annual paid leave,
which will expire in two years. Employees are making useof these leave days on various occasions, such as forattending children’s school events, nursing children, andtaking childcare support leave due to spouse’s childbirth.

Promoting Health and Productivity Management

The Kyudenko Academy, a training institution, hosted online a
Seminar to Support Employees Returning from Childcare Leave,targeting female employees who are currently on childcare leave.
The Seminar sought to serve as a platform for attendees to sharewith fellow mothers the vague anxiety for a new life of balancing
work with parenting
and to learn to bementally prepared forthe return, andthereby help themmake a smooth startand immediately begin
playing a full part intheir workplace.

Coexistence with Local Communities
A community program,dedicating contributing activities
to the local community
We designate a certain period in midOctober every year as a community
program period, dedicating
contributing activities to the local
community. During the period, theentire Group engages in contribution
activities rooted in the community,
such as cleaning activity utilizing its
expertise in working in high places
and facility checks at welfare facilities.
This year marked the 53rd round ofsuch activities, which have become
familiar as a core of the KyudenkoGroup’s social contribution activities.

35

Kyudenko Corporation

Building relationship with thelocal communities
We received congratulatory lettersfrom staff and pupils of the schools
where we provided HVAC andsanitary facility works as part of the
project to install/upgrade air
conditioning equipment in Miyazaki
municipal elementary schools. As
these letters suggest, we believe that
Kyudenko Group’s ultimate goal is tomake people happy by providing a
comfortable environment for the local
communities.
The Company will seek to continue
growing while deepening ties withthe local community through its
business activities.

International contribution
Kyudenko’s Head Office hosts andoperates the Honorary Consulate of
the Republic of Indonesia in Fukuoka
and the Japan-Indonesia Friendship
Association of Kyushu. We alsosponsor an international student
support system and engage involunteer activities in cooperation
with NGOs.

History
Backed by a 68-year history since its establishment, theKyudenko Track and Field Team trains daily aiming to win
the Men’s and Women’s All Japan Industrial Teams Ekiden
and produce Olympics athletes, with the purpose of“enhancing the corporate image of Kyudenko”, “boosting
employee morale”, and “contributing to society”, based on
close ties with the local community.
In the past, the Kyudenko Track and Field Team has
produced Japan national team members of the Olympics
and World Athletics Championships and many otherinternational games. In addition, the Team has participatedin the All Japan Industrial Teams Men’s Ekiden (Gunma)
held on January 1 for 46 consecutive years (the longest
record of all participating teams) and has participated in
the All Japan Industrial Teams Women’s Ekiden (Miyagi) 29
times. We will continue to work hard to produce more
Japan national team members and win the Men’s andWomen’s All Japan Industrial Teams Ekiden.
Major achievements in recent years
2019

Marathon Grand
Championship

All Japan Industrial
2020 Teams Women’s
EkidenMarathon (Shohei Otsuka, 4th place)
2:11:58
8th prize; earned a seed
2:17:15

2020

Fukuoka International
MarathonMarathon (Shohei Otsuka, 2nd place)
2:07:38

2021

Japan National
Championships

High jump (Tomohiro Shinno, 2nd place)
2m30cm

3. CSR/Corporate GovernanceWe consider our employees’ health to be an importantmanagement resource, and in FY2018, we established the“Health and Productivity Management Declaration”. We
actively initiate support for our employees’ proactive healthpromotion activities and promote organizational healthactivities in order to raise employee awareness of “putting
health first” as well as achieving “a work environment withpeace of mind” and “creating a happy and agreeable work
environment”.

Seminar to support employees returningfrom childcare leave

Track and Field Team

Contributing to the Local Community
Web-streaming of Kyudenko Sports Class forChildrenTaking part in citizens’ marathon and hosting
training camps

As part of our social contribution activities, we hold Sports
Class for Children every year. This year, due to the spreadof COVID-19, we made and posted video programs online
instead of holding the event. The programs feature lecturesby the members of the Kyudenko Track and Field Team on
running. Please view the videos on Kyudenko’s official
YouTube channel.

Members take part in citizens’ marathons to interact withpeople in the local community and hold training camps inlocations that are supportive of the Company. This year inspring, the women’s team camped in Shimabara city,where they were warmly welcomed by the mayor and thecitizens.

Supporting academic
researchers
Since 2000, the Company has been
supporting and offering grants toresearchers belonging to universities
or research institutions who are
engaged in study in a discipline
relevant to the Company’s fields ofbusiness. We have supported a totalof 51 researchers to date.

KYUDENKO REPORT 2021

36

3. CSR/Corporate GovernanceInitiatives for Safety

Corporate Governance
Safety and Health Policy

Application for the Selection of New Market Segment

Safety is a company’s most important social responsibility that deserves the highest
priority. With the basic philosophy of “Safety takes precedence over everything;
Safety and health are the foundation for management and a major premise of allactivities”, the Kyudenko Group ensures all employees thoroughly implement‘thinking and practicing’ safety on their own to prevent accidents and takes initiatives
for eliminating accidents.
At the beginning of each fiscal year, the Group formulates the Basic Plan for Safety
and Health Management. To carry out and operate the plan in an appropriatemanner, the Group runs a PDCA cycle, voluntarily and continuously, based on the
Occupational Safety and Health Management System (OSHMS). We aim to raise thelevel of safety and health across the Company through effective implementation anddevelopment of safety and health activities.

On July 9, 2021, the Company received from the Tokyo Stock Exchange, Inc. (TSE) the primary screening results for thelisting criteria of the new market segment, and confirmed that it fulfilled the requirements for listing on the Prime Market.
Based on the results, the Board of Directors of the Company has resolved at its meeting held on November 25, 2021, toselect and apply for listing on the Prime Market, which is scheduled to be introduced on April 4, 2022.
The Company will proceed with the prescribed procedures related to the application for the selection of the new market
segment in accordance with the schedule set forth by TSE.

[Reference] Listing criteria

Liquidity

Please refer to the Company’s website for details on the Basic Plan for Safety
and Health Management.
https://www.kyudenko.co.jp/approach/safety/plan.html (Japanese)

GovernanceConducting and Supporting Courses on Laws and Regulations
education in accordance with the Rules on Special
Education for Safety and Health at its worksites acrossJapan.
We are working tobuild work structuresthat match the needof each site, including
the use of web-based
special education.

Safety Management Activities to Prevent Accidents
Handbook on Work Safety Practices available
as smartphone app

Activities to increase workers’ ability to sense
dangerWe have converted the Handbook on Work Safety
Practices, a booklet that workers used to carry every day
during work, into a smartphone app. The app is available
from application stores to our subcontracting firms, so therules regarding works are now shared by all workers on
our worksites.
We plan to add more functions to the app, such asimages and videos explaining working sequences or
examples of past accidents. We believe that such
upgrades will enable the app to help prevent accidents atwork or mistakes in working sequences and also pass on
skills to younger workers.

To prevent accidents, it is important for workers to gain
knowledge on safety and health through lectures, but it isequally important to increase their ability to sense danger.
At Kyudenko Academy, a training institution, we train
employees using the Hazard Experience Training Facility inorder to raise their safety awareness and improve theability to avoid hazards by experiencing hazards that canoccur in the field.
By integrating this with education at the “Safety Heritage
Facility”, a place designed to pass on valuable lessons
from the past accidents, we expect that safety and healthactivities will be invigorated further.
Hazard Experience Training Facility

Safety Heritage Facility

Financial status
and businessperformance

Initial listing

Number of shareholders

At least 800

At least 800

5,736

Number of tradable shares

At least 20,000 units

At least 20,000 units

378,716 units

Tradable share market capitalization

At least 10.0 billion yen

At least 10.0 billion yen

140.9 billion yen

Market capitalization

At least 25.0 billion yen—

263.6 billion yen

Daily average trading value—

20 million yen

460 million yen

Tradable share ratio

At least 35%

At least 35%

53.4%

Governance CodeFull application of the revised Code covering higher standards

Need to adapt to the revised CodeBusiness performance• Total profit for the recent two years: at least 2.5 billion yenor• Sales: at least 10.0 billion yen; and market capitalization: atleast 100.0 billion yen• Total profit for the recent two years: 74.5
billion yen• Sales: 391.9 billion yen
Market capitalization: 263.6 billion yen

Financial status (shareholder equity)

At least 5.0 billion yen

221.7 billion yen

At the meeting of the Board of Directors held on December 22, 2021, the Company adopted a resolution articulating its
policy to change from a company with Audit & Supervisory Board to a company with Audit and Supervisory Committee.
The change will take place on the condition that the relevant proposal submitted to the 94th Annual General Meeting of
Shareholders scheduled in June 2022 is approved.
Amendments to the Articles of Incorporation, appointment of officers, and other details concerning the change will beannounced without delay when decisions are made.

Purpose of the change

Schedule for change

By changing to a company with Audit and Supervisory
Committee--a governance structure in which Audit andSupervisory Committee Members who have voting rights
on the Board of Directors oversee the legality and adequacyof the Directors’ execution of duties — we aim to further
strengthen the oversight function of the Board of Directors
and to further enhance the corporate governance system.

We will seek approval for a proposal to make necessary
amendments to the Articles of Incorporation relating to thechange, among others, at the 94th Annual General
Meeting of Shareholders scheduled in June 2022, andthereafter proceed with the change.

Company with Audit & Supervisory Board (current state)

Company with Audit and Supervisory Committee (after transition)

Board of Directors

Audit & Supervisory
Board

Company with Audit & Supervisory Board

Board of Directors

Audit and Supervisory
Committee

Company with Audit and Supervisory Committee

Auditing body• Audit & Supervisory Board• Audit and Supervisory Committee

Composition of
the auditing body• Three (3) or more Audit & Supervisory Board Members, majority ofwhich are Outside Audit & Supervisory Board Members• Appointment of full-time member(s) is a requirement.

• Three (3) or more Audit and Supervisory Committee Members, majority ofwhich are Outside Audit and Supervisory Committee Members• Appointment of full-time member(s) is voluntary.

Election method• Audit & Supervisory Board Members are elected, separately from
Directors, at the General Meeting of Shareholders.

• Audit and Supervisory Committee Members are elected, separately from
Directors who are not Audit and Supervisory Committee Members, at theGeneral Meeting of Shareholders.

Dismissal method• Dismissed at the General Meeting of Shareholders (special resolution)• Dismissed at the General Meeting of Shareholders (special resolution)• Directors: one (1) year (Two years under the Companies Act. The
Company sets a shorter term under its Articles of Incorporation.)• Audit & Supervisory Board Members: four (4) years (shortening of term
is not permitted.)• Audit & Supervisory Board Members do not have voting rights on the
Board of Directors.

• Directors who are not Audit and Supervisory Committee Members: one (1)year (statutory)• Audit and Supervisory Committee Members: two (2) years (shortening of term
is not permitted.)• Audit and Supervisory Committee Members have voting rights on the Boardof Directors.
• Audit and Supervisory Committee Members have the right to state an opinion
on the election/dismissal, resignation, and remuneration of Directors who are
not Audit and Supervisory Committee Members.
• Elect at least one (1) member who has ample knowledge and expertise infinance and accounting on the Audit and Supervisory Committee. [CG Code]Other• Elect at least one (1) member who has ample knowledge and expertisein finance and accounting on the Audit & Supervisory Board. [CG Code]

Kyudenko Corporation

Positive

Resolution for the Change to a Company with Audit and Supervisory Committee

Term of office

37

Kyudenko data

Continued listing

3. CSR/Corporate Governance

The Industrial Safety and Health Act stipulates that whenan employer assigns workers to dangerous or harmful jobsprescribed in the Ordinance of the Ministry of Health,Labour and Welfare, it must provide special education on
safety/health pertaining to such jobs.
The Rules on Special Education for Safety and Healthset out subjects, hours and other details of special
education, and require that lecturers have sufficientknowledge and experience in the subject.
At the Kyudenko Group, we train seasoned specialist
staff to become instructors who provide statutory

Prime Market

Item

KYUDENKO REPORT 2021

38

3. CSR/Corporate Governance

Current Corporate Governance System (as of December 2021)
The Company adopts the organizational form of a company with Audit & Supervisory Board under the Companies
Act and establishes a system where the Audit & Supervisory Board, a body independent from execution ofoperations, monitors and oversees the Board of Directors and Directors. By introducing the Executive Officer
system, we separate the “decision-making and oversight function” and the “execution of operations function” of
the Board of Directors to reinforce corporate governance as well as to practice efficient and speedy management.
In addition, the Executive Officers who execute operations are conferred with necessary authorities to draw a clear
line between the “oversight responsibility” of Directors and the “execution responsibility” of Executive Officers.
The Company also aims to enhance corporate governance by building an “internal control system” aimed atsecuring and maintaining the harmony of risk management, efficiency, and compliance in operations.
As mentioned on page 38, we are planning to transition to a company with Audit and Supervisory Committee,
provided that the transition is approved at the Annual General Meeting of Shareholders to be held in June 2022.
We will discuss the details of amendments to the Articles of Incorporation, officer candidates, and other matterspertaining to the change going forward.

System for execution of operations andoversight function of the Board of Directors

Organization form: Company with Audit & Supervisory Board
Number of Directors (of which, Outside Directors)
Number of Audit & Supervisory Board Members(of which, Outside Audit & Supervisory Board Members)

Number of
Independent Directors/
Audit & Supervisory
Board Members

Directors
Audit & Supervisory Board Members

3 persons
3 personsRemuneration Advisory Committee
In order to ensure transparency in decision-making, andindependence and objectivity of the functions of the Boardof Directors, the Company establishes a Remuneration
Advisory Committee consisting of three or more Directors
including Independent Outside Directors to prepare a“proposal to be submitted to shareholders’ meeting
concerning revision of total annual remuneration for
Directors and total annual remuneration for Audit &Supervisory Board Members”, which is submitted to theGeneral Meeting of Shareholders upon resolution by the
Board of Directors. The Committee also deliberates on“determination of individual annual basic remuneration for
Directors”, “assessment and revision of incentive portionof remuneration for Directors”, “revision of individual annual
basic remuneration for Executive Officers by position” and“assessment and revision of target management regarding
incentive portion of remuneration for Executive Officers”,
which are submitted to the Board of Directors.

Nomination Advisory Committee
In order to ensure transparency in decision-making, andindependence and objectivity of the functions of the Boardof Directors, the Company establishes a Nomination
Advisory Committee consisting of three or more Directors
including Independent Outside Directors to stipulatematters on nomination of candidates for Directors andAudit & Supervisory Board Members and dismissal of
Directors, election of the Director to whom representative
authority is granted, and election and dismissal of Executive
Officers, which are submitted to the Board of Directors.

Corporate governance system
General Meeting of Shareholders
Election

Election

Election
Audit

Accounting Auditor

Board of Directors

Audit & Supervisory Board
Cooperation
Auditors’ Office

Accounting audit

ReportReportNomination
Advisory Committee

Remuneration
Advisory Committee

Appointment and oversight

Audit

Representative Director and PresidentInternal Control Committee
Cooperation

Cooperation

Compliance Committee

Preliminary consideration/
arrangement

Cooperation
ReportManagement Meeting

Director and Executive Officer in charge
Business Administration Report
Department

Internal
audit

Development of compliance system
Compliance education
Risk management

Divisions, offices, branch offices,and business offices

Group companies

Audit

39

Kyudenko Corporation

Execution of operations

ReportAudit & Supervisory Board Members attend the Board of
Directors meetings and other important meetings to
express objective and fair opinions for overallmanagement, and continuously conduct validation audits,
including audit on legality in the execution of operations by
Directors and the appropriateness of risk management
measures, in accordance with audit policies and plans
stipulated by the Audit & Supervisory Board. They also
study the status of operations and assets of thesubsidiaries to monitor and supervise the overall Group.
The Audit & Supervisory Board receives reports onimportant matters for audit to be discussed or resolved,
and is held at least every three months in principle, andwhenever necessary. The Audit & Supervisory Board has
three Outside Audit & Supervisory Board Members, ofwhich three are designated as Independent Audit &Supervisory Board Members. The Company elects
members with ample expertise in finance and accounting
to its Audit & Supervisory Board. The Auditors’ Office isestablished to assist duties of Audit & Supervisory Board
Members and the Audit & Supervisory Board, anddesignated employees are assigned to the Office so that
efficient audit activities by Audit & Supervisory Board
Members can be conducted. The Audit & Supervisory
Board receives an advance notice on personnel transfer ofdesignated employees from the Director responsible forhuman resources, etc., and may request for change of thedesignated employees by submitting the reason.

Internal audit
The Business Administration Department that is
responsible for conducting internal audits, reviews andevaluates whether management activities of eachdepartment/division are performed according to the
management policy, and audits whether such activities areappropriately processed according to internal rules suchas regulations, administrative authority, and manuals toreport the audit results to the Internal Control Committee
chaired by the Representative Director and President. The
Directors in charge, etc., who receive the report of theinternal audit results formulate a measure for improvement,
and submit it to the Board of Directors, etc., as necessary.

Outside Directors/Audit & Supervisory Board Members(as of December 2021)

The number of Directors of the Company is 13, of which
three are elected as Independent Outside Directors. The
Independent Outside Directors, as directors who do not
engage in the execution of operations, give advice onmanagement policies and management improvement,
oversee management and conflict of interest, and reflect
opinions of stakeholders to the Board of Directors. In
addition to legal requirements, the Company establishes
and discloses its own “Independence Standards for
Outside Directors/Audit & Supervisory Board Members”,
and the Independent Outside Directors are elected basedon the Independence Standards.
The number of Audit & Supervisory Board Members isfive, of which three are elected as Outside Audit &Supervisory Board Members. Outside Audit & Supervisory
Board Members account for more than half of Audit &Supervisory Board Members. Although independence is
not required for Outside Audit & Supervisory Board
Members, the independence is evaluated if necessary
based on the independence standards mentioned above.
In order for Outside Directors/Audit & Supervisory Board
Members to properly execute their roles and operations,the holding of concurrent positions as officers of otherlisted companies shall be limited to the minimum extent,
and their concurrent positions are described in the

The Business Administration Department not only gives
advice and recommendations to audited bodies but also
requests them to submit a report for improvement
measures, and conducts a follow-up audit as necessary.

Accounting audit
The Company has concluded an audit contract foraccounting audits with Ernst & Young ShinNihon LLC.
There is no special interest between the Company and
Ernst & Young ShinNihon LLC or the Engagement
Partners.
The Company has also concluded an audit contract forinternal control pursuant to the Financial Instruments andExchange Act.

Compliance system
The Compliance Committee is established to determine
the basic policy and activities for compliance, prepareplans, confirm the implementation method, and discuss
measures, etc.
The Business Administration Department serves as adivision in charge of compliance to formulate and amend
Compliance Regulations and manuals, continuously
conduct compliance education, as well as manage andoperate a compliance desk that allows officers andemployees to make a report directly. Any information
received at this compliance desk is investigated, analyzed
and organized, and then reported to the Compliance
Committee chaired by the Representative Director andPresident as well as the Board of Directors. Regulations
regarding compliance provide for confidentiality of personal
information concerning provision of information and thereporting party, and the information provided, as well as
prohibition of unfair treatment for provision of informationand the reporting party. The Regulations on the Protectionof Personal Information are also established with a basic
policy which encourages active and proactive initiatives byclarifying procedures for protection of personal information,
ensuring a responsible system and offering education for
employees in line with “Act on the Protection of Personal
Information”, “Basic Policy on the Protection of Personal
Information”, “Cabinet Order to Enforce the Act on theProtection of Personal Information”, and guidelines byministries and agencies.

3. CSR/Corporate Governance

The Company adopts the Executive Officer system where
the Board of Directors determines important matters andoversees execution of operations, while the Executive
Officers engage in the execution of operations based on
decisions made by the Board of Directors.
The Articles of Incorporation stipulate that the number of
Directors of the Company shall be 15 or less; the electionof Directors shall be adopted by a majority vote of theshareholders in attendance who hold one-third or more of
the voting rights of shareholders entitled to exercise voting
rights; and such election shall not be made by cumulative
voting. The Company has three Outside Directors, ofwhich three are designated as Independent Directors.
The Company, in principle, holds a meeting of the Boardof Directors every month, and also establishes the
Remuneration Advisory Committee and the Nomination
Advisory Committee, consisting of Directors including
Independent Outside Directors, as advisory bodies tosecure transparency in decision-making andindependence and objectivity of functions of the Board of
Directors. The Management Meeting, a subordinate bodyof the Board of Directors, is held once a week to discuss
the process and details of the management judgments
concerning matters which require prior discussion andmatters on important business execution to be deliberated
at the meetings of the Board of Directors.
The Compliance Committee and Internal Control
Committee are also established to supplement thefunctions of the Board of Directors. The Meeting of Branch
Office General Managers is established as a body to makereports on execution of operations, raise management
issues, discuss measures to be taken, and facilitate thesharing of information concerning the management policy
and plans, and is held 11 times a year.

Directors
Audit & Supervisory
Board Members

13 persons(3 persons)
5 persons(3 persons)

System of audit by Audit & Supervisory
Board Members

Corporate Governance Report and notice of general
meeting of shareholders. The Company has entered into
an agreement with all Outside Directors and Outside Audit& Supervisory Board Members to limit their liability fordamages pursuant to Article 423, Paragraph 1 of theCompanies Act to the amount stipulated by laws andregulations.
Independence Standards for Outside Directors/Audit & Supervisory Board Members
An Outside Director or Outside Audit & Supervisory Board Member (hereinafter referred to as “Outside Director/Audit & Supervisory Board Member”) is determined
to be independent by the Company if none of the following attributes applies to:The Outside Director/Audit & Supervisory Board Member himself/herself, his/her
spouse, or his/her relative within the second degree of kinship:
1

A person who is an executive of the Company or a group company of the Company or was an
executive of the Company or a group company of the Company within the past 10 years prior to
his/her appointment as an Outside Director/Audit & Supervisory Board Member.

2

A person who is an executive of a corporation that is a business partner of the Company, and inany of the most recent three past fiscal years of the Company, has made payments to the Company representing more than 2% of non-consolidated net sales of the Company in that fiscal year;
or a person who is an executive of a financial institution, which provides indispensable financing to
the Company, and cannot be easily replaced because of the Company’s reliance on the financing
from such institution.

3

A person who is an executive of a corporation of which the Company is a business partner, and inany of the most recent three past fiscal years of the Company, has received payments from theCompany representing more than 5% of nonconsolidated net sales of such corporation in its
most recent fiscal year.

4

A person who received remuneration exceeding 10 million yen directly from the Company in anyof the most recent three past fiscal years of the Company for providing professional services concerning law, accounting, tax affairs, or consulting services to the Company (excluding compensation as a Director or an Audit & Supervisory Board Member of the Company) (If the recipient ofsuch remuneration is an organization, a person who is affiliated with such organization)

5

A person who belongs to an organization or an entity that received a donation or aid exceeding
10 million yen per year on average over the most recent three past fiscal years of the Company.

6

A person who is an executive of a corporation, etc. that is a shareholder of the Company which
substantially owns 10% or more of the voting rights of the Company.

KYUDENKO REPORT 2021

40

3. CSR/Corporate Governance

Message from the Outside Directors
Establishment and Implementation of“Kyudenko Corporate Governance Guidelines”

Disclosure of Information to and Communication
with Shareholders and Investors

The Company established the “Kyudenko Corporate
Governance Guidelines” to achieve sustainable growthand improve corporate value over the long term throughthe realization of its Corporate Philosophy, to earn the
support of all of its stakeholders, and to conduct corporate
management in an appropriate and efficient manner,
towards the goal of implementing the best
corporate governance practices.

Disclosure system

Please refer to the Company’s website for details.
https://www.kyudenko.co.jp/ir/governance/
cg_guideline.html (Japanese)

Incentive Matters

Internal Control System
The Company has in place a system to secure compliancewith laws and regulations and the Articles of Incorporationin the execution of duties by Directors, andappropriateness of the operations of theCompany and its Group companies.
Please refer to the Company’s website for details.
https://www.kyudenko.co.jp/ir/governance/internal_control.html (Japanese)

Our Initiatives Concerning the
Corporate Governance Code
The Company is working to improve its corporate
governance. As a company listed on the Tokyo Stock
Exchange (TSE), the Company aims to achieve sustained
growth and increase its corporate value in the medium- tolong-term by observing each of the principles of the
Corporate Governance Code set forth in TSE’s Securities
Listing Regulations and disclosing pertinent
information.
Please refer to the Company’s website for details.
https://www.kyudenko.co.jp/ir/governance/
cg_efforts.html (Japanese)

41

Kyudenko Corporation

Director (part-time)
Career summary

The Company fully realizes that disclosing corporate
information to investors in a timely and appropriate mannerconstitutes a fundamental part of a healthy securities
market, and strives for the enhancement of internal
systems to appropriately disclose corporate information
speedily, accurately and fairly in accordance with the Fair
Disclosure Rule.

June 1996
June 1998
June 2001
June 2002

Director, TOYOTA MOTOR CORPORATION
Director, TOYOTA MOTOR KYUSHU, INC. (part-time)
Managing Director, TOYOTA MOTOR CORPORATION
Representative Director and President, TOYOTA MOTOR
KYUSHU, INC.
June 2008 Representative Director and Chairman, TOYOTA MOTOR
KYUSHU, INC.
June 2011 Advisor to TOYOTA MOTOR KYUSHU, INC.
June 2011 Director, the Company (to the present)

Enhancement of Communication
The IR activities of the Company are conducted mainly by
the Finance Division in cooperation with the Business
Administration Department, Corporate Strategic Planning
Division, and General Affairs Division to promote
communication with stakeholders including shareholders.
The IR activities are promoted to ensure transparency ofcorporate activities and enhance the soundness ofmanagement by disclosing financial statements, securities
reports, and other documents for which disclosure isrequired by the stock exchange as well as important facts
to shareholders and investors in a timely and appropriatemanner, in addition to publishing the Group’s management
policy, business activities, compliance activities, social
contribution activities, and various other information on thewebsite.
Representative Director and President and Officer
responsible for finance hold a financial results briefing foranalysts and institutional investors twice a year, andmaterials for the briefing are disclosed on the Company’s
website. The Company also holds individual briefings andresponds to interviews for analysts, institutional investors
and individual investors as necessary.
The outcome of such financial results briefings andindividual briefings is reported at the Management
Meeting, which Independent Outside Directors also attend,
and the Board of Directors meeting to share theinformation with Directors and Audit & Supervisory Board
Members.
The Company formulates disclosure policies onshareholder communications and discloses information on
the Company’s website accordingly. With regard to the
management of insider information, the Company has
established the Regulations on the Restriction of Insider
Trading and is training all officers and employees on thismatter to ensure rigorous control of information.
Communication with shareholders and investors is
restricted during the silent period, or the several weeks
prior to the release of financial results.
IR activities (FY2020)
Financial results briefing

2 times

Conference with overseas investors

3 times

Briefings for individual investors

4 times

Individual meetings, other

209 times

It is ten years since I first assumed the position of Outside
Director. In that time, Kyudenko’s sales have grown from
more than 200 billion yen to more than 400 billion yen,and, as a leading company of the region in both name anddeed, the company is making major contributions to thedevelopment of the Kyushu region.
Last year, it launched a Mid-term Management Plan toestablish a management foundation for sustainable growthover the next five years. As an Outside Director, I hope toleverage my own experience in an automotive company toattend Board of Directors meetings, as well as
Management Meetings, where I will actively voice myopinions and give forward-looking suggestions, in my own
efforts to achieve the Mid-term Management Plan.
I will focus on whether or not the measures being
considered are truly from the customers’ perspective andwhether or not they will be for the benefit of the company
and for society (profitability and public benefit), give advice
from multiple angles, and do my best to assist Kyudenko
to survive and win amid ever-intensifying competition andto develop in a sustainable way.
My impression is that the effectiveness of Kyudenko’s
Board of Directors has been higher than ever in recent
times. As the company has grown in size, the matters
being put to the Board of Directors have become morediverse. They are fully discussed at the Management
Meeting, where important decisions are made, before
resolutions and reports are made at the Board of Directors
meetings. An environment has been established to make iteasier for the members of the Board of Directors to
discuss proposals, with briefings given on the details andcourse of the discussions in the Management Meeting andthe Investment and Loan Committee when the matters arepresented to the Board.
Governance reform is extremely important for
Kyudenko’s sustainable growth. To place compliance at
the center of management and firmly embed “safety first”
as the company’s corporate culture, in addition to situation
reports on compliance breaches and serious accidents, I
believe that it is crucial to investigate the true causes ofsuch incidents and actively raise preventative measures at
the Board of Directors meetings, discuss them frommultiple angles among all members, and take effective
measures from a management perspective.

Company-wide efforts are currently underway toestablish the management foundations for accomplishing
the Mid-term Management Plan. The key points to achievetargets are to make the various issues that transcend
divisions visible and to share those issues among thedivisions. It is vital to foster a workplace culture in which all
members come together as one to think about solutions
to issues and actively take action. In the process of setting
lofty goals and overcoming various difficulties to achieve
those goals, the members and the organization will growstrong and robust. To establish a strong corporate
foundation, it is extremely important to work in a goalmanagement style.

3. CSR/Corporate GovernanceWith regard to remuneration for Directors, the“performance-based remuneration system for Directors” isintroduced. Under this system, for a part (25%) of thebasic amount of annual remuneration of Directors
determined by their positions to be paid as compensationfor execution of operations, a variable amount dependingon the achievement level of “consolidated operating profit”
is added to or deducted from the monthly remuneration of
the following year within the scope of the total amount of
remuneration resolved at the General Meeting of
Shareholders. Such an increase/decrease in remuneration
for Directors based on the incentives is not applicable for
Outside Directors.
The Kyudenko Officers Shareholding Association wasestablished as part of the incentives that reflect theCompany’s medium- to long-term performance andpotential risk in officer remuneration and for the purpose ofletting the officers share value with shareholders. As
members of the Association, Directors and Audit &Supervisory Board Members purchase shares of theCompany at more than a certain rate of the amount ofannual base remuneration.

Akiyoshi Watanabe

It could be said that Kyudenko will have achieved
sustainability when it has become a strong, robust
company that has earned respect from its customers andsociety by putting its Corporate Philosophy into practiceon the basis of CSR management when it reaches its
100th anniversary in 2044. The economic and social
environments will undergo major transformations toward
the realization of a circular society. Countries all over theworld are considering their responses toward therealization of carbon neutrality by 2050. This represents
major opportunities for future business development andgrowth for Kyudenko, which has long included power
generation from renewable energies such as solar,
biomass, and wind power and energy conservation
measures as part of its business.
The promotion of DX will be extremely important for thetransformation of business and the creation of new
business. I look forward to Kyudenko’s new DX Promotion
Department making major contributions to the creation of
new value. Transforming operational processes with theaim of efficient, high-quality operations and increasing the
productivity of existing operations to secure humanresources for new business by making significant use ofAI, robots, drones, and other technologies to respond to
declining birth rates and aging populations, and realizing
on-site work in which older employees and women canflourish are just some of the ways in which I hope that theCompany will actively use DX as a means for business
transformation and create a variety of innovations.
I hope it will continue to step up steadily every year with
its vision toward the 100th anniversary constantly in mind.

KYUDENKO REPORT 2021

42

3. CSR/Corporate Governance

Message from the Outside Directors

Specifically, various innovations have been introduced toallow Outside Directors such as myself to understand thematters being presented, such as briefings on the courseof discussions in the various bodies, and mattersconcerning compliance and safety are being deliberated
on appropriately at the Board of Directors meetings. Ifthemes related to CSR, a fundamental component ofmanagement, continue to be raised widely and discussed,
I believe that it will lead to even further improvements ineffectiveness. In addition, once the effects of the
COVID-19 pandemic have been contained, I hope that wewill be given opportunities to tour work sites and training
facilities. Watching what is happening on the work sites
and seeing with our own eyes things that cannot be fully
understood from documents alone will enable us to makerecommendations and comments from an outside
perspective.
The Mid-term Management Plan, which started lastyear, has “the establishment of a management foundation
for sustainable growth” as its main theme. Under this Plan,
the company is making efforts to achieve the threereforms. I am focusing on reform of governance and, inparticular, the strengthening of compliance. The Business
Administration Department, which is a merger of the legal
division and the internal control division, has been

43

Kyudenko Corporation

Sumio Kuratomi

Hiroko Shibasaki

Director (part-time)

Director (part-time)

Career summary

Career summary

June 2008 Director and Executive Officer, General Manager, City
Development Business Div., NISHI-NIPPON RAILROAD CO., LTD.
June 2011 Director and Managing Executive Officer, General Manager,
Corporate Planning Div., NISHI-NIPPON RAILROAD CO., LTD.
June 2013 Representative Director and President, NISHI-NIPPON RAILROAD
CO., LTD.
June 2016 Representative Director and President Executive Officer,
NISHI-NIPPON RAILROAD CO., LTD.
June 2016 Director, the Company (to the present)
April 2021 Representative Director and Chairman, NISHI-NIPPON RAILROAD
CO., LTD. (to the present)

April 2012 Executive Officer and General Manager of Fukuoka Chuo
Branch, TOKIO MARINE & NICHIDO FIRE INSURANCE CO., LTD.
April 2015 Managing Executive Officer, TOKIO MARINE & NICHIDO FIRE
INSURANCE CO., LTD.
April 2018 Advisor, TOKIO MARINE & NICHIDO FIRE INSURANCE CO., LTD.
June 2019 Outside Director, Audit and Supervisory Committee Member,
MAZDA MOTOR CORPORATION (to the present)
June 2021 Director, the Company (to the present)

engaged in initiatives for organizations and systems,
including the reinforcement of check functions and thereview of internal audits. It is also undertaking highly
detailed employee education. I consider it important thatthese kinds of initiatives keep spiraling up.
I am also focused on initiatives concerning the active
participation of “people”, who will shoulder the threereforms. I understand that Kyudenko has long beenproactive in the area of securing and developing humanresources. Further initiatives have commenced as part ofits reforms, such as strengthening OJT programs foryoung people and launching an employee engagement
survey. These initiatives, which will help to create a more
fulfilling workplace for employees and strengthen therelationship of trust with employees, are, I believe,
essential to sustainable growth and, in turn, tosustainability over a 100 year.
Kyudenko has set out its Long-term Vision toward its
100th anniversary. To realize that vision, I believe that it isimportant to share concrete images of the vision whileworking toward it.
In that process, I expect that the promotion of DX will
present both a major challenge and an opportunity. I havealways felt that there was compatibility and affinity
between Kyudenko’s business and DX. Efforts areunderway, with the newly established dedicateddepartment, the DX Promotion Department the year
before, at the center. The company’s certification as a
“DX-certified operator” by the Ministry of Economy, Tradeand Industry this year has shown external parties that
Kyudenko is a company that is prepared to promote DX. I
have great expectations that Kyudenko will go beyond
productivity enhancements and operational efficiency
improvements to engage in contributions toward therealization of the SDGs and in value creation through thecreation of new business models.

I am Hiroko Shibasaki, and I am honored to have been
appointed as Outside Director at the Annual General
Meeting of Shareholders in June this year.
With the revision of the Corporate Governance Code inJune 2021, the demonstration of the functions of theBoard of Directors, the diversity of core personnel, andresponses to issues associated with sustainability were
strengthened.
The first priorities for “establishing a foundation” in the
Company’s Mid-Term Management Plan are (1) securing
and developing human resources and developing
workplace environments, (2) the provision of new value
through the promotion of digital technologies, and (3) the
fostering and thorough embedding of complianceawareness. I believe one of my own missions is to help
connect these three themes while raising effectiveness.
Priority (1) is a matter that needs to be emphasized. For
example, remote work and remote meetings became
commonplace around the world during the COVID-19
pandemic. Initially, there were many problems, such as
productivity, employees’ sense of fairness, and personnel
evaluations, and I thought that it would be difficult for them
to become firmly established. In fact, however, they havecreated surprising effects and efficiencies. We haveentered an age of exploring and putting into practice new
ways of working with new ideas. This is not merely amatter of shortening work hours through digitalization. I
believe that, through digital technologies, we will see theemergence of organizations that are able to respondswiftly to emergencies and create fulfilling and rewarding
work environments.
Coming from a non-life insurance company background,for many years, I worked in a job that dealt squarely withdisasters and risks. In recent years, in particular, there has
been a spate of major disasters such as torrential rainfall,and I experienced the Kumamoto earthquake while I was
the executive officer responsible for the Kyushu region. At
that time, I often heard that an earthquake in Kumamoto
was unforeseeable. However, given the climate change ofrecent years, I felt keenly that organizations must be
developed in a way that did not consider any kind of
emergency as unforeseeable, and that are able to makeemergencies top priority while also balancing them witheveryday operations. This challenge is progressing greatly
with innovations in digital technology.
And while the world is moving rapidly toward
digitalization, it is “people” who will lead that charge andpromote it. I hope to proactively draw up a vision for ourown future, for what kind of structure, what kind ofcompany we want to become by the 100th anniversary in
2044.

For many years, I defined “sales (work)” as “solving
customers’ issues”, and I took great joy from that everyday.
To that end, I have always thought that, if each individualrefines their own quality and grows toward their own goals,
becoming a person who exerts a favorable impact on
those around them, and contributing to the team,
ultimately, they will be able to contribute to the growth anddevelopment of the company. It is a matter of quality andquantity being two sides of the same coin. This way of
thinking is my personal cornerstone, and it is how I hope
to remain in the future.

3. CSR/Corporate Governance

It is six years since I became an Outside Director of
Kyudenko in 2016.
Until recently, many of the proposals for the Board of
Directors meetings had already been discussed andconsidered at the Board’s subordinate organization, theManagement Meeting, before being put to the Board, andso the discussions at the Board of Directors meetings
seemed a little quiet to me. Lately, however, those
discussions have become livelier, and the Board’s
effectiveness is increasing every year.

Message from the Outside Directors

In this day and age, the management environment ingeneral is changing at a rapid pace, due to carbon
neutrality, ESG, SDGs, DX, and diversity. There are many
grand themes around that cannot be solved with theknowledge we have accumulated to date alone. Whilefeeling anxiety and unrest about environmental challenges
on a global scale, on the other hand, the process ofsolving each of those challenges one by one presents
many business opportunities, and we can see glimpses ofa kind, shining future for people, animals, and the planet
up ahead. With the wisdom and ingenuity of eachindividual, Kyudenko’s operations will play a part in thatprocess, and I am delighted to be able to lend my support
to its efforts.
I have been attending the Board of Directors meetings
since June, where the individual responsible officers
provide careful explanations, including the background, in
response to questions and opinions voiced about theindividual proposals, without being fixated on conventional
thinking. I sense Kyudenko’s traditions in such sincere
responses. Going forward, I will strive to learn more about
the daily operations and intentions of Kyudenko’s
employees and to discover questions and issues from adifferent perspective. I will work hard to be able to stand in
the shoes of shareholders to provide new realizations
about whether the company is predicting the future andgiving shape to the correct path toward that future in linewith its Corporate Philosophy and Mid-term Management
Plan, and whether it is actively taking on new challenges,
while also protecting its longstanding culture.
It is my earnest hope that Kyudenko will create asustainable future for the local community as a company
that represents Kyushu and of which Kyushu can beproud.

KYUDENKO REPORT 2021

44

3. CSR/Corporate GovernanceManagement Team of Kyudenko
Directors

Matsuji Nishimura

Naofumi Sato

Hiroko Shibasaki

Director and Chairman

Representative Director and President

Director (part-time)

Hideki Takei

Kazuyuki Ishibashi

Representative Director
Vice President Executive Officer

Director
Vice President Executive Officer

Representative, Tokyo Head Office

Responsible for overall operations, corporate
strategic planning, and DX promotion

Yasuhiro Yamamoto

Director
Vice President Executive Officer

Director
Senior Managing Executive Officer

General Manager, Green Innovation Business
Unit.
Responsible for overall technology and overall
sales

General Manager, Sales Div.

Yasuhiro Kashima

Keizo Fukui

Director
Managing Executive Officer

Director
Managing Executive Officer

Responsible for the President’s Office, humanresources and labor affairs, and generalaffairs

Responsible for business administration (legal,
compliance, and internal control) and financeIsamu Ogata

Shinji Kato

Audit & Supervisory Board Member

Audit & Supervisory Board Member

Yukinori Michinaga

Toru Yoshizako

Audit & Supervisory Board Member(part-time)

Audit & Supervisory Board Member(part-time)

3. CSR/Corporate Governance

Masaaki Jono

Audit & Supervisory Board Members

Hidetoshi Soeda
Audit & Supervisory Board Member(part-time)

Kazuhiro Suyama

Takahiro Hokahori

Director
Managing Executive Officer

Director
Senior Executive Officer

General Manager, Technology Div.
Responsible for procurement

General Manager, Electric Power Div.
Responsible for safety

Akiyoshi Watanabe

Sumio Kuratomi

Director (part-time)

Director (part-time)

Executive Officers (excluding those who concurrently serve as Directors)
Senior Managing
Executive Officers
Managing Executive
Officers
Senior Executive
Officers
Executive Officers

45

Kyudenko Corporation

Saiji Ueda, Tadatsugu Kitagawa
Hidehiro Furukawa, Tomoyuki Oshima
Katsuhisa Kinoshita, Yasuyoshi Takenaka, Ryoji Manabe
Noriaki Shibata, Yoichi Sato, Masakiyo Amakawa, Shuichi Tokunaga,
Satoshi Kobayashi, Takanori Kibe, Tomoyuki Soeda, Eiji Funatsu,
Hideaki Ushijima, Kenji Morita, Hitoshi Yasukawa, Akira Shirouzu, Yujiro Kishida

KYUDENKO REPORT 2021

46

4. Data section

Financial and Non-financial Highlights
Profitability

Non-financial information

Sales (consolidated) (unit: million yen)
428,939

408,143
311,346

341,771

Operating profit (consolidated) (unit: million yen)
Operating profit ratio (consolidated) (unit: %)360,872

391,901

9.0

9.6

9.0

8.1

30,732

34,72636,747

8.4

36,022

8.4

Profit attributable to owners of parent (consolidated) (unit: million yen)
Ratio of profit attributable to owners of parent (consolidated) (unit: %)
6.5

7.0

6.5

5.7

32,998

Number of employees (consolidated) (unit: persons)

6.4

6.1

8,976

22,29725,296

26,691

26,245

9,287

9,843

9,954

10,018Results of periodic recruitment (non-consolidated) (unit: persons)Engineers Technicians
Salespersons, administrative staff, etc.

10,198

Number of mid-career recruitment (unit: persons)and their ratio (unit: %) (non-consolidated)

416

412
371

362

25,042360
15.5

2017.32018.32019.32020.32021.32016.32017.32018.32019.32020.32021.3

ROIC (consolidated) (unit: %)Orders (consolidated) (unit: million yen)

16.7

405,903

325,158

11.9

13.0

13.2

13.1

2017.32018.32019.32020.32021.32016.3

11.7

17.8

16.8

15.6

2017.32018.32019.32020.32021.32016.32017.32018.32019.32017.32018.32019.32020.32021.3

Number of female employees (unit: persons)and their ratio (unit: %) (non-consolidated)

14.0

12.1

10.0

8.1

477

2016.3

63

60

2019.32020.3

9.1

2017.42018.42019.42020.42021.4 2022.4 (plan)

2016.32017.32018.336
2021.3

ROE (consolidated) (unit: %)507,025
363,564 377,769 384,757

2016.3

14.2

111
47

2016.313.3

152

17,901

25,197

29.1

27.9
431

2020.32021.32016.32017.32018.32019.32020.3

8.2

494

8.4

8.4

8.6

8.7

Number of women in managerial positions (unit: persons)and their ratio (unit: %)1.7
1.7(non-consolidated)
1.2

527

539

558

575

1.0

0.9

7

7

2016.32017.3

1.0

8

16

16

2020.32021.3

Average age of employees (non-consolidated) (unit: years of age)
Number of employees by age (non-consolidated) (unit: persons)
10 to 19 20 to 29
60 and above

30 to 39

40 to 49

50 to 59

40.4

40.1

39.5

38.8

38.7

38.7

5,725

5,870

6,095

6,195

6,287

6,353

2016.32017.32018.32019.32020.32021.392021.32016.32017.32018.32019.32020.32021.32018.32019.3

SafetyOperating activities

Investing activities

Free cash flow
38,22230,01614,187
10,776Equity capital (consolidated) (unit: million yen)
Equity ratio (consolidated) (unit: %)60.0

26,05426,08626,185

9,184

42.4

14,755(2,820)(13,597)
2016.3(3,763)(17,951)2017.3

4,951(3,830)(11,298) (12,136)
2018.32019.32020.346.6

139,88149.7

161,44950.5

180,317

Interest-bearing debt (consolidated) (unit: million yen)Re-employment rate of retired employees (non-consolidated) (unit: %)53.1

Engineers Technicians Salespersons, administrative staff, etc.
Average for all retired employees

36,12894.7

31,986
195,61186.0

219,807
20,07819,18974.6

17,854

100.0
81.6
82.1

100.0
92.1
76.9

88.9
81.8
75.0

85.2
84.2

80.3

83.8

86.0

82.0

85.7
84.6

84.2

78.4

(4,232)2021.3

0.3

66.7

2017.32018.32019.32020.32021.32016.32017.32018.32019.32020.3

Number of participants Academy WEB Number of training held Academy
169

25

22

25

23

17

4,872
956
3,916

199

191

200

70
5,667
1,134
4,533

95
5,970
1,488
4,482

76
5,635
1,237
4,398

80
5,974
1,128
4,846

2017.32018.32019.32020.32021.32016.3 2017.3 2018.3 2019.3 2020.3 2021.3

50
2,882
896
1,986

2021.32016.3

WEB

74

0.3

0.3

61
0.2
13

2016.3

Number of training held at Kyudenko Academy (unit: times)
and number of participants (unit: persons)
204

0.4

0.4

81.8

15,772

111,172

Number of employees posted overseas (unit: persons)and their ratio (unit: %)(non-consolidated)

4. Data section

Cash flows (consolidated) (unit: million yen)2016.32017.32018.32019.32020.32021.3Returns to shareholders/Investment index
Cash dividends and dividend ratio (consolidated)(unit: cash dividends/ yen, dividend ratio/ %)
26.7

25.2

27.0

Net profit per share (consolidated) (unit: yen)

28.3
327.22

21.4
16.5

100

90

100

Net assets per share (consolidated) (unit: yen)100

356.89375.17370.00353.489.7

3,102.61

272.4570

Average number of paid leave days taken per person(non-consolidated) (unit: days)
10.8

1,693.45

1,995.00

2,269.48

2,534.46

2,761.07

7.0

7.3

2016.32017.3

8.5

8.3

2018.32019.345

2016.347

2017.32018.32019.3

Kyudenko Corporation

2020.32021.32016.32017.32018.32019.32020.32021.32016.32017.32018.32019.32020.32021.32020.32021.3KYUDENKO REPORT 2021

48

4. Data section

10-year Financial Summary
Financial item
(Unit: million yen)

2012.32013.32014.32015.32016.32017.32018.32019.32020.32021.3

246,660

239,282

279,310

315,949

311,346

341,771

360,872

408,143

428,939

391,901

Operating profit

1,821

4,371

7,136

16,75725,19730,732

34,72636,74736,022

32,998

Ordinary profit

3,278

5,744

8,908

18,16327,55132,18737,34239,92438,64335,906

Profit attributable to owners of parent

1,351

2,882

3,681

11,517

17,901

22,29725,296

26,691

26,24525,042

Capital investment

7,046

6,034

14,226

7,606

6,127

7,469

4,245

4,353

4,148

3,586

Depreciation and amortization

3,303

3,631

4,305

5,262

5,475

5,449

5,512

6,074

5,961

5,739

Research and development costs

263

275

313

288

255

235

286

326

290

254

Cash flows from operating activities

6,267

4,871

12,767

19,117

10,77614,18730,016

26,054

38,222

9,184

Cash flows from investing activities(622)(6,103)(14,456)(11,816)(13,597)(17,951)(3,830)(11,298)(12,136)(4,232)

Free cash flow

5,645

(1,231)(1,688)7,300(2,820)(3,763)

26,185

14,75526,086

4,951

733

730

733

1,190

2,295

3,732

5,635

7,108

7,099

7,086

Net assets

92,72095,95094,438104,658

113,199

141,503

164,139

182,176

197,442

221,741

Total assets

195,393

211,944

225,727

254,861

261,985

300,261

324,919357,271368,482

366,532

8,619

15,96625,31933,93931,98636,12820,07819,18917,854

15,772

Sales

Cash dividends paid

Interest-bearing debt

(Unit: yen)

18.41

39.46

51.95

174.54272.45327.22356.89375.17370.00353.48

Net assets per share

1,251.69

1,300.23

1,405.38

1,555.33

1,693.45

1,995.00

2,269.48

2,534.46

2,761.07

3,102.61

Cash dividends per share

10

10

13

25

45

70

90

100

100

100

Operating profit ratio (%)

0.7

1.8

2.6

5.3

8.1

9.0

9.6

9.0

8.4

8.4

Net profit margin (%)

0.5

1.2

1.3

3.6

5.7

6.5

7.0

6.5

6.1

6.4

Gross profit margin (%)

7.7

9.1

9.1

11.7

14.5

15.2

15.7

14.8

14.0

14.5

Return on equity (ROE) (%)

1.5

3.1

3.9

11.9

16.7

17.8

16.8

15.6

14.0

12.1

Return on asset (ROA) (%)

0.6

1.4

1.6

4.7

6.9

7.9

8.1

7.8

7.2

6.8

Return on invested capital (ROIC) (%)

1.0

2.5

3.9

8.5

11.9

13.0

13.2

13.1

11.7

10.0

Equity ratio (%)

47.0

44.8

41.1

40.3

42.4

46.6

49.7

50.5

53.1

60.0

Total asset turn over (times)

1.1

1.1

1.2

1.3

1.2

1.2

1.1

1.1

1.2

1.1

Payout ratio (%)

54.3

25.3

25.0

14.3

16.5

21.4

25.2

26.7

27.0

28.3

Kyudenko Corporation

KYUDENKO REPORT 2021

4. Data section

49

Net profit per share50

4. Data section

Report on Financial Results and Financial Analysis
March 31, 2020 due to an ultra-large-scale project inrenewable energy and also due to the postponement ofsome project orders.
Sales decreased by 30,175 million yen (7.4% decrease)to 377,331 million yen as compared to the fiscal year
ended March 31, 2020, reflecting the drop from the highlevel achieved in the previous fiscal year thanks to anumber of near-completion, large-scale projects, as wellas the delay in the start and progress of some of the largescale renewable energy projects in the fiscal year ended
March 31, 2021.
Segment income (operating profit) decreased by 3,284
million yen (9.7% decrease) to 30,485 million yen ascompared to the fiscal year ended March 31, 2020, owing
to the decline in sales.
Other business
Sales decreased by 6,861 million yen (32.0% decrease) to
14,570 million yen as compared to the fiscal year ended
March 31, 2020, due to factors such as a decline in sales
business of construction-related materials and equipment
and facility management business.
Segment income (operating profit) increased by 293
million yen (14.1% increase) to 2,371 million yen ascompared to the fiscal year ended March 31, 2020, owing
to the decline in depreciation and amortization in the
power generation business.

(1) Overview of financial results for the year ended
March 31, 2021

(2) Overview of financial position as of March 31, 2021
Overview of assets, liabilities and net assets
AssetsCurrent assets decreased by 3,695 million yen to 212,574
million yen as compared to March 31, 2020, as a result offactors such as a decrease in notes and accounts
receivable.
Fixed assets increased by 1,745 million yen to 153,957
million yen as compared to March 31, 2020, as a result offactors such as an increase in investments in securities.
As a result, total assets decreased by 1,950 million yen
to 366,532 million yen as compared to March 31, 2020.
Liabilities
Current liabilities decreased by 17,361 million yen to125,361 million yen as compared to March 31, 2020, as aresult of factors such as a decrease in notes and accounts
payable.
Long-term liabilities decreased by 8,887 million yen to19,429 million yen as compared to March 31, 2020, as aresult of factors such as a decrease in liability for retirement
benefits.

(3) Overview of cash flows for the year ended March
31, 2021
Cash and cash equivalents (hereinafter referred to as“Cash” as of March 31, 2021 decreased by 5,164 million
yen to 49,800 million yen as compared to March 31, 2020.
Cash flows from operating activities
Cash provided by operating activities was 9,184 million
yen (a decrease of 29,038 million yen in cash inflow ascompared to the fiscal year ended March 31, 2020). Thiswas mainly due to profit before income taxes and notes
and accounts receivable on completed construction
contracts collected exceeding notes and accounts
payable on construction contracts settled and increase ininventories.
Cash flows from investing activities
Cash used in investing activities was 4,232 million yen (adecrease of 7,903 million yen in cash outflow as comparedto the fiscal year ended March 31, 2020). This was mainly
due to purchase of investments in securities and purchaseof property and equipment.
Cash flows from financing activities
Cash used in financing activities was 10,064 million yen (adecrease of 1,185 million yen in cash outflow as comparedto the fiscal year ended March 31, 2020). This was mainly
due to cash dividends paid.
(4) Future outlook
At this time, when the future remains highly uncertain, wein the construction industry foresee further postponementof customers’ capital investment plans and worry thatprice competition may become even tougher in the face offalling demand. Meanwhile, there is a growing appetite forenvironment-related investment with an eye to the coming
carbon-free society, and we therefore anticipate a rise ininvestment related to renewable energy.
In recognition of such circumstances and in view of the
deep plunge in orders received in FY2020, the Group has
set “Adaptation to environmental changes and realizationof recovery” as the theme for FY2021, the second year of

the Mid-term Management Plan, and plans to address thefollowing priority issues.
Towards “strengthening and expanding the order baseof the domestic facility work industry”, our sales andtechnology divisions will work in unity to win large scaleorders such as the Tenjin Big Bang in Fukuoka and various
redevelopment projects in the metropolitan area, etc., or
the projects for which order has been postponed in
FY2020. Meanwhile, in an effort to boost orders for small
and medium-sized projects, which are on a downward
trend, we will restructure the perception and methods ofcommunity-based sales activities.
To “deepen measures to improve profit margins”, we willreinforce existing measures to improve profit margins. At
the same time, the Head Office’s Technology Management
Department will centrally manage each worksite using
digital technologies, with a view to achieving total
optimization and sharing of information on construction
works and costs on a company-wide basis. With these
efforts, we aim to boost profits and realize construction
management that brings Head Office and the worksites
together.
As for the “strengthening of human resource
development” under the “reform of construction
capability”, we will make improvements to the regulations
concerning OJT in order to reinforce the elder system,
including by designating OJT Supporters who will assist
both the elders and the young employees and manage theprogress of OJTs. With the use of digital tools to support
training, we also plan to centrally manage the skills held by
each engineer so as to raise and standardize the technicalability of all workers and thereby avoid situations where a
job can only be performed by certain skilled workers.
Towards the “promotion of DX” under the “reform of
productivity”, we aim to carry it through, with multiple
projects dedicated to specific goals towards thestreamlining and labor-saving of operations and a task
force in place.
With regard to the “reform of governance,” we combined
the legal division that had been in charge of preventive law
and compliance with the internal control division that used
to look after the appropriateness of the operations and risk
management to form the Business Administration
Department. With the new department that seamlessly
performs all of these duties, we aim to strengthen the
check function and upgrade governance.

(unit: million yen, lower row is the ratio to sales)

Gross profit
Operating profit
Ordinary profit
Profit attributable to owners of parent

Net profit per share

51

Kyudenko Corporation

Results

428,939

391,901(100.0%)(100.0%)60,09356,631(14.0%)(14.5%)

36,022

32,998(8.4%)(8.4%)

38,64335,906(9.0%)(9.2%)

26,24525,042(6.1%)(6.4%)

370.00 yen

Year-on-yearcomparison
91.4%
94.2%
91.6%
92.9%
95.4%

353.48 yen

Plan413,000(100.0%)56,400(13.7%)

32,000(7.7%)

34,000(8.2%)

22,500(5.4%)

Progress
94.9%

Current assets
AssetsSales(unit: million yen, lower row is the ratio to sales)

The year ended March 31, 2021

103.1%
105.6%

Fixed assets
Total assets

100.4%

Current liabilities
Liabilities

The year ended
March 31, 2020

Long-term liabilities
Total liabilities

111.3%
Total net assets

317.59 yen

4. Data section

In the fiscal year ended March 31, 2021, we faced asignificant change in the business environment with theunprecedented challenge of the COVID-19 pandemic.
The Group felt its impact on the orders received as wellas construction works. In terms of orders received, we
saw a decline in small and medium-sized projects in thefirst quarter, due to the declaration of the state of
emergency in the spring that made it difficult for us to pay
visits to our clients. Large scale project orders also
dropped, as customers — mainly in tourism, hospitality
and other services industry and also manufacturingindustry — postponed or reconsidered their capital
investment plans. Such decline in demand has been
spurring fierce price competition. In terms of construction
works, we were compelled to adopt new ways of working
or managing construction works that take into
consideration the prevention of the spread of infections.
Notably, some of our large-scale works in renewableenergy projects saw a delay in the start and progress ofworks, which led to sluggish sales. In businesses otherthan facility works, hotels and commercial facilities run by
our Group subsidiaries were hit by a huge drop in demand.
In such a business environment, the Group defined
FY2020, the initial year of the Mid-term Management Plan
(covering the five years from FY2020 to FY2024), as a year
to “Verify, Reflect, and Rebuild.” Under this theme, theGroup worked to “strengthen human resource
development,” a challenge that concerns all of the threereforms, namely, the “reform of construction capability”,“reform of productivity”, and “reform of governance”. In
addition, we thoroughly verified and reviewed our pastengagements in the issues of “improving profit margins”
and “increasing orders received”, which have been carriedforward from the previous mid-term management plan, as
well as “thorough countermeasures against serious
misconduct” that happened in the past, and poured in all
our efforts to lay a foundation on which to accomplish thegoals of the new plan (i.e., rebuilding strategies andconcrete measures).
Results by business segment are as follows.
Facility work
The value of orders received decreased by 181,866 million
yen (35.9% decrease) to 325,158 million yen as comparedto the fiscal year ended March 31, 2020 reflecting the dropfrom the high figure recorded in the fiscal year ended

As a result, total liabilities decreased by 26,249 million
yen to 144,790 million yen as compared to March 31,
2020.
Net assets
Total net assets increased by 24,298 million yen to
221,741 million yen as compared to March 31, 2020, as aresult of factors such as the recording of profit attributableto owners of parent.

Total liabilities and net
assetsMarch 31, 2020

March 31, 2021

216,269

212,574(58.7%)(58.0%)

152,212

153,957(41.3%)(42.0%)

368,482

366,532(100.0%)(100.0%)142,723

125,361(38.7%)(34.2%)

28,316

19,429(7.7%)(5.3%)

171,039

144,790(46.4%)(39.5%)

197,442

221,741(53.6%)(60.5%)

368,482

366,532(100.0%)(100.0%)

Increase/decrease

Major reason for increase/decrease(3,695)

Raw materials and supplies +13,433
Notes receivable, accounts receivable on completed construction
contracts and other accounts receivable (9,041)

1,745

Investments in securities +7,163
Deferred tax assets (3,032)(1,950)(17,361)(8,887)

Notes payable, accounts payable on construction contracts andother accounts payable (10,024)
Advances received on uncompleted construction contracts (8,058)

Liability for retirement benefits (6,663)(26,249)
24,298Retained earnings +17,958(1,950)KYUDENKO REPORT 2021

52

4. Data section

Consolidated Balance Sheet

Consolidated Statement of Income(Unit: million yen)March 2020

March 2021

Assets55,85150,905

Notes receivable, accounts receivable
on completed construction contracts
and other accounts receivable

139,746

130,705

Short-term investments

1,007

—

Costs of uncompleted
construction

7,285

5,910

Merchandise

1,527

1,040

Raw materials and supplies

1,145

14,579Other current assets

9,723

9,451

(18)
216,269(18)
212,574

Fixed assets
Property and equipment

FY2020377,33173,58463,55927,894

23,593

Short-term borrowings

1,799

1,774

Income taxes payable

6,257

7,145

23,44015,381

12

60

Other current liabilities

9,734

13,845

Total current liabilities

142,723

125,361Long-term liabilities

Construction contracts

407,506

Other

21,432

14,570Total net sales

428,939

391,901

Construction contracts

351,520324,266

Other

17,325

11,003

Total cost of sales

368,845

335,269

Construction contracts

55,98653,064

Other

4,106

3,567

Total gross profit

60,09356,631

Selling, general and administrative expenses

24,071

23,633Operating profit

36,022

32,998

Cost of sales

Gross profit

Non-operating incomeLong-term debt

11,89010,140

Lease obligations

3,016

2,711

Interest income

66

91

Dividend income

662

723

685

694

1,117

1,054

Rent income

323

313

Other

570

884

3,426

3,760

Equity in earnings of affiliates

Buildings and structures

69,34670,681

Provision for retirement benefits for
directors and audit and supervisoryboard members

Machinery, vehicles, tools,
furniture and fixtures

40,70940,771

Liability for retirement benefitsLand

28,911

28,887

Other long-term liabilities

2,357

2,225

Leased assets

7,043

7,190

Total long-term liabilities

28,316

19,429Interest expenses

385

411

144,790Extra retirement payments

60

90

Provisions of allowance for doubtful accounts of subsidiary

92

236

Compensation expenses

129

—

Other

137

115

772

1,061

Accumulated depreciation(64,158)(67,894)

Total property andequipment

82,62580,698Goodwill
Other intangible assets
Total intangible assets

182

—

1,465

1,729

1,648

1,729

Investments and other assets

63,194Long-term loans receivable

1,209

1,256

Asset for retirement benefits

847

554

300

10,7144,051

171,039

Net assets
Shareholders’ equity
Common stock

12,561

12,561

Capital Surplus

12,982

12,987Retained earnings

177,642

195,601

Treasury stock
Total shareholders’ equity

56,030Investments in securities

Total liabilities

337

(8)

(8)

203,179

221,141

Gain on investments in partnership

Total non-operating income
Non-operating expenses

Total non-operating expenses
Ordinary profit

804

853

38,64335,906Extraordinary income
Gain on sales of property and equipment

655

Gain on sales of investments in securities

241

1,294

Total extraordinary income

247

1,350

Loss on disposal and sales of fixed assets

172

184

Loss on sales of investments in securities

0

66

294

133

Extraordinary loss

Accumulated othercomprehensive loss
Unrealized holding gain on
securities
Unrealized loss on hedging
instruments

745

3,998

Impairment loss on investments in securities

(540)

(381)

Penalty—89

Total extraordinary loss

467

472

Deferred tax assets

6,539

3,507

Translation adjustments

212

105

Profit before income taxes

38,42336,784

Other

4,844

4,781

(7,985)(5,057)

Income taxes – current

11,805

11,337(7,567)(1,334)

Income taxes – deferred

295

258

1,831

1,933

Total income taxes

12,10011,596

Profit26,322

25,188

197,442

221,741

Allowance for doubtful
accounts
Total investments and otherassetsTotal fixed assets
Total assets

Kyudenko Corporation(1,534)(1,764)Retirement benefit liability
adjustments
Total accumulated othercomprehensive loss

67,93871,530Non- controlling interests

152,212

153,957

Total net assets

368,482

366,532

Total liabilities and net assets

368,482

366,532

4. Data section

Construction in progress

Intangible assets

53

FY2019Net sales

Notes payable, accounts payable on construction
contracts and other accounts payable
Electronically recorded
obligations

Advances received on uncompleted
construction contracts
Provision for loss on
construction contracts(Unit: million yen)March 2021

Current liabilities

Cash on hand and in banks

Total current assets

March 2020
Liabilities

Current assets

Allowance for doubtful
accounts(Unit: million yen)

Profit attributable to non-controlling interests
Profit attributable to owners of parent

76

145

26,24525,042KYUDENKO REPORT 2021

54

4. Data section

Consolidated Statement of Cash Flows

Corporate Profile
Corporate Profile
Corporate Name

Kyudenko Corporation

Established

December 1, 1944

Head Office

Kagoshima Branch Office

Head Office

1-23-35 Nanokawa, Minamiku, Fukuoka city,
815-0081 JAPAN
Tel: +81-92-523-1691
Fax: +81-92-524-3269

Tokyo Head Office

Kumamoto Branch Office

Fukuoka Branch Office

Nagasaki Branch Office

Kitakyushu Branch Office

Saga Branch Office

Oita Branch OfficeKansai Branch OfficeMiyazaki Branch Office

Okinawa Branch Office(Unit: million yen)

FY2019FY2020Cash flows from operating activities

Capital12,561 million yen

Major Offices

Profit before income taxes

38,42336,784

Number of Employees(Consolidated) 10,198 (Non-consolidated) 6,353

Depreciation and amortization

5,961

5,739

(13)

233

(3,319)(3,343)

Construction Business
LicenseApproved by Minister of Land, Infrastructure,
Transport and Tourism (Sp.29) No.1659

1248(Decrease) increase in allowance for doubtful accounts
Decrease in liability for retirement benefits and provision for retirement benefits for directors and audit and supervisory board members
Increase in provision for loss on construction contracts
Gain on investments in partnership(1,117)(1,054)

Interest and dividend income

(729)

(814)

Interest expenses

385

411

Foreign exchange loss (gain)

46

(60)

Equity in earnings of affiliates

(306)

(431)

Loss (gain) on sales of property and equipment, net

25

(29)

Loss on disposal of fixed assets

140

157

Electrical Contracting Work
Telecommunications
Engineering
Firefighting Facilities Work
Plumbing Work
Machinery, Equipment, andFacility Work
Water Supply Facilities Work
Sanitation Facilities Work

[Japan]Uku Project Development
OfficeCivil Engineering BusinessArchitectural andConstruction Business
Paving Work
Scaffolding and Excavation
Business
Steel Structure WorkInterior Finishing BusinessImpairment loss on investments in securities

294

133

Gain on sales of investments in securities(240)(1,228)Decrease in notes and accounts receivable on completed construction contracts

11,011

8,915(Increase) decrease in costs of uncompleted construction contracts(2,302)

1,374

71(12,964)

Decrease in notes and accounts payable on construction contracts(7,981)(14,206)

Construction work

Increase (decrease) in advances received on uncompleted construction contracts

10,678(8,043)

Meikousha Co., Ltd.

Electrical and plumbing work

26

(11)

Kakusokukeisou Co., Ltd.

Electrical work

1,566

4,020

Jinnouchikoumuten Co., Ltd.

Civil engineering, power transmission line, and electrical work

Facility maintenance and inspection

Electrical and plumbing work

Setsubihoshu center Co., Ltd.

Decrease (increase) in inventories

Increase (decrease) in long-term accounts payable
Increase in consumption taxes, net

Kyudenko Group (major subsidiaries)(as of March 31, 2021)

Regional Headquarters in South East Asia
Kyudenko South East Asia Pte. Ltd.

Regional Headquarters for Subsidiaries in South East Asia

Maintenance of buildings and environmental facilities

(976)

3,706

Subtotal

51,657

19,335

Fukuto densetsu Co., Ltd.

Electrical, telecommunications, and facility work

Interest and dividend income received

762

793

Chikugo densetsu Co., Ltd.

Electrical and telecommunications work

Material sales

Interest expenses paid

(385)

(411)

Fukusetsu Co., Ltd.

HVAC and plumbing work

Q-mast Co., Ltd.

(13,812)(10,533)

Electrical, HVAC and plumbing work

Sales of industrial materials, machinery, and equipment forelectric and HVAC facility

Income taxes paid

Kitasetsu Co., Ltd.

9,184

Electrical work

Manufacture and sales of high-efficiency lighting equipment

38,222

Oita densetsu Co., Ltd.

Rearun Co., Ltd.

Net cash provided by operating activities

Fusokogyo Co., Ltd.

Facility work and air conditioning equipment sales(1,014)(1,137)

Miyaei Co., Ltd.

Electrical and plumbing work

921

Minamikyushu densetsu Co., Ltd.

Electrical work

954

Kaei densetsu, Co., Ltd.

Electrical work

(3,998)(2,945)

Kyukinsetsubikogyo Co., Ltd

Facility work

Proceeds from sales of property and equipment

279

103

Yuei densetsu Co., Ltd.

Electrical work

Payments of disposal of property, plant and equipment

(78)

(4)

Kuma densetsu Co., Ltd.

Purchase of investments in securities(8,649)(6,458)

Electrical, plumbing, firefighting facilities, and telecommunications
work

Proceeds from sales of investments in securities

1,076

6,534

Higo-setubi Co., Ltd.

HVAC and plumbing work

Real estate sales, rental and management

—

(47)

Choei Co., Ltd.

Electrical, plumbing, machinery, equipment, and facility work

Kyushudenko home, Co., Ltd.

Payments of long-term loans receivable

(381)

(167)

Chohoku densetsu Co., Ltd.

Electrical, plumbing, telecommunications, water supply facilities, andfirefighting facilities work

Collection of long-term loans receivable

222

93

Kyusetsukougyou Co., Ltd.

Facility and plumbing work

Software development

Other, net(546)(1,124)

Ariake densetsu Co., Ltd.

Electrical, telecommunications, civil engineering, and plumbing work

Automation technology Co., Ltd.

(12,136)(4,232)

Kyutie Co., Ltd.

Electrical work

Syoueidensetsu Co., Ltd.

Electrical facility work

Net increase (decrease) in short-term borrowings

3(5)

Sanyudensetsu Co., Ltd.

Proceeds from long-term debt—

55

Electrical facility, telecommunications, firefighting facilities, andplumbing work

Kyukousogosetsubi Co., Ltd.

Facility work

Repayments of long-term debt

(1,963)(1,769)Ergotech Co., Ltd.

Facility work

(998)

(0)

Koteradengyo Co., Ltd.

Electrical facility work

Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of property and equipment

Payments for sale of subsidiaries’ shares resulting in changes in scope of consolidation

Net cash used in investing activities
Cash flows from financing activities

Purchase of treasury stock
Cash dividends paid

Management of “Bayside Place Hakata”

Electrical, plumbing, HVAC and sanitary facility work, and consulting
services on construction technology*In September 2021, Chuorika Kougyo Co., Ltd. joined the Kyudenko Group.

Kyudenko Malaysia Sdn. Bhd.

Design and construction works of electrical, HVAC and sanitary facility,and environmental energy

Kyudenko (Thailand) Co., Ltd.

Design and construction works of electrical, HVAC facility, andconsulting service on energy saving

Repayments to non-controlling shareholders

(22)

(21)

Purchase of subsidiaries’ shares not resulting in changes in scope of consolidation

(46)

(1)

Kyulien Environment Improving
Co., Ltd.

Environmental measurement and analysis, and design andconstruction of electrical, plumbing, and sanitary facility

Other, net(1,125)(1,232)

Net cash used in financing activities(11,250)(10,064)

(2)

(51)

54,96449,800Cash and cash equivalents at the end of the year

Kyudenko Corporation

Others

Kyudenko Vietnam Co., Ltd.

Electrical and plumbing work—

Temporary staffing service, fee-charging employment placement
service, education consulting, events, and banquet business

Management of a golf course, “HOKUZAN Country Club”

Ryuhou Engineering Corporation(61)

Temporary staffing service
Portal Co., Ltd.

Bayside place hakata Co., Ltd.

—

Increase (decrease) in cash and cash equivalents resulting from changes in accounting period of consolidated subsidiaries

Building information and telecommunication system, and researchand development

plants, EPC work, and district cooling facilities

8(5,164)

Construction, purchase and sale of real estate, lease brokerage,
non-life insurance agency

Management of a business hotel, “Hotel Urbic Kagoshima”

Proceeds from share issuance to non-controlling shareholders

54,964

Power generation business and electricity sales business using
solar power

kyudenko hokuzan kanko Co., Ltd.

HVAC work

14,833Natori mega solar kyudenko green
kikaku limited liability partnership

Three in Co., Ltd.

Facility, plumbing, and electrical work

Seiwakougyou Co., Ltd.

40,192

Supply of electricity generated by solar power, real estate
management and other related business

Remote medical image diagnosis support service using
telecommunication system

Kawachikougyou Co., Ltd.

(4)

Net increase (decrease) in cash and cash equivalents

Kagoshima solar farm, Co., Ltd.

Net medical center Co., Ltd(7,084)(4)

Cash and cash equivalents at the beginning of the year

Supply of electricity generated by solar power, real estate
management and other related business

Data conversion of blueprints and documents, printing, copying,bookbinding, business card printing(7,099)Effect of exchange rate changes on cash and cash equivalents

Power generation
Shibushi mega solar power
generation Co., Ltd.

Kyudenko friendly Co., Ltd.

Cash dividends paid to non-controlling shareholders

Asia Projects Engineering Pte. Ltd. Construction, installation, and maintenance work for Power, Oil & Gas

4. Data section

Other, net

Fukuoka densetsu.Co., Ltd.

Cash flows from investing activities

55(as of March 31, 2021)

KYUDENKO REPORT 2021

56

4. Data section

Stock Information
Stock Information
Fiscal year

List of Reference for Key Information(as of March 31, 2021)

Every year from April 1 to March 31
in the following year

Status of shares(as of March 31, 2021)

Total number of authorized shares

250,000,000 shares

Total outstanding shares

70,864,961 shares

Annual general meeting of Held every year in Juneshareholders

Number of shareholders

6,224

Record date of dividends
payment

Major shareholders(as of March 31, 2021)

Method of public notice

Stock exchange listing

Year-end March 31
Interim September 30
Electronic public notice will be posted on the
Company’s website (https:// www.kyudenko.co.jp).
However, if an electronic public notice cannot bemade due to an accident or other unavoidable reason,
it will be posted on the Nihon Keizai Shimbun.
First Section of Tokyo Stock Exchange
Fukuoka Stock Exchange

Number of shares held
(thousand shares)

Name

Custody Bank of Japan, Ltd. (trust account)

3,620

5.10

THE NISHI-NIPPON CITY BANK, LTD.

3,249
3,133
1,974
1,586
1,448

4.58
4.42
2.78
2.23
2.04

1,397

1.97

The Bank of Fukuoka, Ltd.

JPX-Nikkei Index 400

Securities code

1959

THE BANK OF NEW YORK MELLON 140044

Category of business

Construction

SSBTC CLIENT OMNIBUS ACCOUNT

Trading unit of shares

100 shares

Shareholder registryadministrator

Sumitomo Mitsui Trust Bank, Limited
1-4-1 Marunouchi, Chiyoda-ku, Tokyo

NORTHERN TRUST CO. (AVFC) RE MONDRIANINTERNATIONAL SMALL CAP EQUITY FUND,L.P.

Office of administrator

Stock Transfer Agency Business Planning Dept.,
Sumitomo Mitsui Trust Bank, Limited
https://www.smtb.jp/personal/procedure/agency/(Mailing address)
2-8-4 Izumi, Suginami-ku, Tokyo, 168-0063(Contact number)Phone 0120-782-031 (toll-free in Japan)[Weekdays 9:00-17:00]

22.55
6.43

The Master Trust Bank of Japan, Ltd. (trust
account)

Stock index

Kyudenko Employees Shareholding Association

1,300

Kyudenko Labor UnionManagement strategy

based on a consolidated payout ratio target of 25%, comprehensively
considering the business environment, performance, and financial
condition.

Details of Mid-term Management Plan

Business of Kyudenko

1.83

Business features andstrengths
Performance by Business Category(as of March 31, 2021)

Individuals and others
Other domestic corporations
5,756
104
9,946 thousand shares (14.0%) 21,937 thousand shares (31.0%)

Foreign individuals
273
15,551 thousand shares (22.0%)

Financial institutions
Securities companies
60
30
Treasury stock 1
23,193 thousand shares (32.7%) 235 thousand shares (0.3%) 0 thousand shares (0.0%)

2017.32018.32019.32020.32021.32022.3(forecast)Interim dividends

30 yen40 yen50 yen50 yen50 yen50 yenYear-end
dividends

40 yen50 yen50 yen50 yen50 yen50 yenTotal

70 yen90 yen

100 yen 100 yen 100 yen 100 yen

Rating and Investment Information,
Inc. (R&I)

Ratingissuer rating

A-

CSR > CSR management > Kyudenko CSR structure
https://www.kyudenko.co.jp/csr/management/system.html

Value Creation Process

Initiatives for Safety

Workplace and Labor Environment

Kyudenko initiatives > Initiatives for safety
https://www.kyudenko.co.jp/approach/safety/index.html

CSR > Workplace and labor environment
https://www.kyudenko.co.jp/csr/workplace/index.html

Relationship with

CSR > Coexistence with local communities

stakeholders

https://www.kyudenko.co.jp/csr/local_symbiosis/index.html

Coexistence with Local Communities

Kyudenko initiatives > social contribution andenvironmental activities
https://www.kyudenko.co.jp/approach/philanthropy/

Corporate GovernanceIR information > Corporate governanceCorporate governancehttps://www.kyudenko.co.jp/ir/governance/

Message from the Outside Directors

Trend of stock price/volume
Kyudenko stock priceIR information > Performance trend
https://www.kyudenko.co.jp/ir/trend.html

corporate value(as of March 31, 2021)
Name of rating

Business fields
https://www.kyudenko.co.jp/service/

Basic Concept of CSR

Trend of dividends

Name of rating institution

Corporate information > Greetings
https://www.kyudenko.co.jp/company/greeting.html

Creating and increasing

Initiatives for Safety

Rating information

https://www.kyudenko.co.jp/company/philosophy.html

Investment in Business and Human
Resources and Financial Strategies

Note: Shareholding ratio is calculated excluding treasury stock (364 shares).

Distribution of shares

Corporate information > Corporate Philosophy

4. Data section

With respect to profit distribution, we will strive to maintain a soundfinancial position and make appropriate returns to shareholders whilestrengthening our management base to improve performance andsecuring internal reserves necessary for further business expansion.
With respect to dividends, we will meet the expectations of ourshareholders by maintaining continuous and stable dividend payment,

Corporate Philosophy

Company website containing related information
https://www.kyudenko.co.jp/company/(Japanese)

Message from the President

Policy on dividends of surplus and trend of dividends
Policy on dividends of surplus

Corporate Philosophy

Information found in this report

Shareholding ratio(%)

15,9804,560

Kyushu Electric Power Company, Incorporated

Contents

Nikkei 225 stock price(Yen)

Financial and Non-financial Highlights

(Yen)

6,000

30,0004,000

20,0002,000

10,00000

IR information > Financial results(securities reports and financial results)
https://www.kyudenko.co.jp/ir/financial/

Financial data
Data Section

IR information > Performance trend
https://www.kyudenko.co.jp/ir/trend.html

Volume(Thousand shares)

1,200
600
0
4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
2015
2017
2018
2019
2020
2021
2016

57

Kyudenko Corporation(year)KYUDENKO REPORT 2021

58

Kyudenko Corporation
1-23-35 Nanokawa, Minamiku, Fukuoka city, 815-0081 JAPAN
Tel: +81-92-523-1691 Website: https://www.kyudenko.co.jp/