Annual Report 2017
For the year ended March 31, 2017

Lighting up the future together

ProfileYour Partner in
Social Infrastructure

CONTENTS

Kandenko Co. Ltd. aims for the mutual prosperity of its

from design and execution to maintenance andshareholders, customers, and the communities where it

renovation of electrical, telecommunications, and otherworks, and finds its purpose in this pursuit. We conduct

kinds of work. We are also active in the renewablebusiness in a wide range of fields and have grown into

energy field, where the execution expertise we haveone of the largest general infrastructure companies inaccumulated in the fields of solar and wind power

Japan.

serves us well.

In fields such as building infrastructure,technology front, nurture its human resources, andinfrastructure, Kandenko uses its independently

build a sounder financial structure while making adeveloped technologies, expertise, and work methods

long-lasting contribution to society as a partner into provide end-to-end engineering services ranging

social infrastructure.

The Kandenko Group04

Consolidated Financial Highlights

05

Medium-Term Management Plan

06

Message from the Management

08

Business Review by Division
Electrical Engineering, Environmental Facilities
and Systems, and Renovation Work 08
Information & Communication Work 09
Power Distribution Line Engineering Work 10
Electric Power & Civil Engineering Work 11

Kandenko will continue to innovate on thetelecommunications infrastructure, and electric power

02

12

Topics19

Research and Development Activities

20

Corporate Governance24

Environmental Initiatives

27

Financial Section
Consolidated 10-Year Financial Summary 28
Financial Position 29
Consolidated Balance Sheet 30

Corporate Motto"People First"
Corporate Philosophy

1. Based on respect for humanity, Kandenko fulfills its duty of corporate social
contribution and contributes to creating richer human environments.
2. By anticipating the needs of its customers and seeking technologicalinnovation, Kandenko provides optimal services and facilities.
3. By working for human resource development and continuous improvement,
Kandenko aims to be a future-oriented company.

Consolidated Statement of Income 32
Consolidated Statement ofComprehensive Income 33

Here we present the online commercial ‘Lighting Up,’ which we

Consolidated Statement of
Changes in Equity 34

are currently broadcasting.

Consolidated Statement of Cash Flows 37

Based around the key phrase “Lighting up the future

Notes to Consolidated Financial Statements 38

together,” this commercial depicts in images how actual
structures take shape out of a design on paper, spreading lightthroughout the city. In this way, it communicates the importanceIndependent Auditors’ Report 66

67

Company Profileand value of Kandenko’s work to support the vital infrastructure

History 67

of electric power.

Stock Information 68
Board of Directors and Audit &Supervisory Board Members / Network 69

Annual Report 2017

1

The Kandenko GroupThe Kandenko Group consists of Kandenko Co., Ltd. and 24 consolidated subsidiaries whose businesses comprise facility
installation, electrical equipment sales, real estate and leasing operations, and electric power generation. The positions of thesebusinesses within the Group and the business segment to which they belong are explained below.

Facility Installation Business
The business areas of Kandenko Co., Ltd., and its subsidiaries are as

carries out design and estimation operations. Kandenko outsources partfollows: facility installation works in the electrical, plumbing, and otherof its engineering work, its worksite security, and design and estimation

sectors are the business field of Kandenko Co., Ltd., Kawasaki Setsubi

operations to these subsidiaries.

Kogyo Co., Ltd., Kanko Facilities Co., Ltd., Kanagawa K-Techno Co.,

Kandenko, Transmission Line Construction Co., Ltd., and SYSTEC

Ltd., Chiba K-Techno Co., Ltd., Saitama K-Techno Co., Ltd., Ibaraki

ENGINEERING K.K. receive orders for electrical works from the Tokyo

K-Techno Co., Ltd., Tochigi K-Techno Co., Ltd., Gunma K-Techno Co.,Electric Power Company (TEPCO) Group.

Ltd., Tama K-Techno Co., Ltd., Shizuoka K-Techno Co., Ltd.,

From the fiscal year ended March 31, 2017, the following entities

HANDENKO CORPORATION, Kanko Power Techno Co., Ltd., Kanagawa

have been included in the consolidated accounts in view of theirPower Techno Co., Ltd., Saitama Power Techno Co., Ltd., Transmission

accounting significance: Kanagawa Power Techno Co., Ltd. and Saitama

Line Construction Co., Ltd., Sato Kensetsu Kogyo Co., Ltd., SYSTECPower Techno Co., Ltd., which were established on April 1, 2016; andENGINEERING K.K., and NETSAVE Co., Ltd. Tokyo Kouji Keibi Co., Ltd.,

Sato Kensetsu Kogyo Co., Ltd., all of whose shares were acquired onundertakes worksite security operations and Bay Techno Co., Ltd.,

October 27, 2016, and its subsidiary SYSTEC ENGINEERING K.K.

Other Businesses
Kandenko Co., Ltd. operates in the real estate and electric power

In addition to the above, effective April 1, 2016, the affiliate TEPCO

generation businesses; KANKO SYOJI CO., LTD., in the electricalspun off its fuel and thermal power generation business, its generalequipment sales business; K Asset Management Co., Ltd., in the real

power distribution business, and its electric power retail business as theestate and leasing businesses; and Choshi Wind Development Co., Ltd.,

separate companies TEPCO Fuel & Power, Inc., TEPCO Power Grid, Inc.,and Kama Solar Power Co., Ltd., in the electric power generation

and TEPCO Energy Partner Incorporated, respectively, under a holding

business. Kandenko Co., Ltd., purchases from KANKO SYOJI CO., LTD.,

company system, changing its name accordingly to Tokyo Electric Powerpart of the materials and other supplies required for installation work,

Company Holdings, Inc. At the same time, all shares of Kandenko held

and leases from K Asset Management Co., Ltd., land and buildings as

by Tokyo Electric Power Company Holdings, Inc., were transferred to thewell as vehicles and other equipment.

latter’s wholly owned subsidiary, TEPCO Power Grid, Inc. This means

Kandenko and Choshi Wind Development Co., Ltd., sell electric
power to the TEPCO Group.

that, from the consolidated fiscal year ended March 31, 2017,
Kandenko’s affiliates consist of two companies: Tokyo Electric Power
Company Holdings, Inc., and TEPCO Power Grid, Inc.

2

Kandenko Group Structure
The businesses mentioned above are arranged in a schematic diagram below showing the Kandenko Group’s structure.
(As of March 31, 2017)●: Consolidated subsidiaries■ : Affiliates

Clients
TEPCO Group
Other clients■ Tokyo Electric Power Company Holdings, Inc. ・TEPCO Fuel & Power, Inc.
■ TEPCO Power Grid, Inc.

Installation
work

・TEPCO Energy Partner, Incorporated

Real estate
rentalElectricity
sales

Sales ofReal estate rental/
electrical equipment
Leasing

Electricity
sales

Kandenko
Facility installation business and other businesses
Installation
work

Installation
work

Worksite safety &security

Designestimation

Facility installation business

Other businesses● Kawasaki Setsubi Kogyo Co., Ltd.

● HANDENKO CORPORATION● Kanko Facilities Co., Ltd.

● Kanko Power Techno Co., Ltd.

● Kanagawa K-Techno Co., Ltd.

● Kanagawa Power Techno Co., Ltd.

● Chiba K-Techno Co., Ltd.

● Saitama Power Techno Co., Ltd.

● Saitama K-Techno Co., Ltd.

● Transmission Line Construction Co., Ltd.

● Ibaraki K-Techno Co., Ltd.

● Sato Kensetsu Kogyo Co., Ltd.

● Tochigi K-Techno Co., Ltd.

● SYSTEC ENGINEERING K.K.

● Gunma K-Techno Co., Ltd.

● NETSAVE Co., Ltd.

● Tama K-Techno Co., Ltd.

● Tokyo Kouji Keibi Co., Ltd.

● Shizuoka K-Techno Co., Ltd.

● Bay Techno Co., Ltd.

Sales ofelectricalequipment

Sales of electrical equipment● KANKO SYOJI CO., LTD.

Real estate
rental/Leasing● K Asset Management Co., Ltd.

Real estate and leasing
Power generation● Choshi Wind Development Co., Ltd.
● Kama Solar Power Co., Ltd.

Kandenko Group

Technique and skill competition held at our Education & Training Center

Annual Report 20173

Consolidated Financial Highlights

Kandenko Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2016 and 2017
Millions of yen

2016

2017

Reference:
2017(Kandenko, non-consolidated)¥ 447,673¥ 470,943¥ 410,192

Operating profit

16,416

26,397

21,921

Ordinary profit

17,077

27,34522,861

Profit attributable to owners of parent*

9,412

17,591

15,488Comprehensive income

7,137

18,422−

Total assets

407,681424,874

361,674

Total net assets

197,980

213,356

187,312Equity ratio (%)

47.22

48.72

51.79

Net assets per share (yen)942.42

1,013.33

916.99Earnings per share (yen)

46.07

86.11

75.82

Cash dividends per share (yen)

14.00

20.00

−

Number of employees (persons)

8,915

9,244

6,729

Net sales*In the column for Kandenko’s non-consolidated results, the figure indicates profit.

Operating Profit

470,943447,673(Millions of yen)
20,00015,00020,000400,000

9,412

16,416436,682

437,930

30,000447,741

600,000(Millions of yen)
26,397(Millions of yen)

Profit Attributable to Owners of Parent
17,591Net Sales

4

2015

2016

2017

0

2013

2014

9,388
2015

2016

2017

4,615

2014

4,226

2013

5,000

3,952

0

8,284

10,000200,000

7,364

10,000

0

2013

2014

2015

2016

2017

Medium-Term Management Plan

The Kandenko Group has set out a new management plan based on the growth strategy it formulated with the stated objectiveof achieving high profitability and a resilient corporate structure for sustained growth.

Outline of the management plan

- Achieve greater efficiencies in Group management

In 2016, the Kandenko Group set out a growth strategy designed to- Expand orders for renovation work

achieve high profitability and a resilient corporate structure forsustained growth. The strategy contained a number of strands: a- Reorganize sales and work execution systems in
air conditioning and plant facility workbusiness base reinforcement strategy, a business field expansion- Reorganize overseas business systems

strategy, measures to contribute to a stable electric power supply, a- Work to assist disaster recovery in the Fukushima area

human resources strategy, and an investment strategy to enhance
work execution capabilities. Since then, the Group has moved
forward with customer-focused sales activities and cost cutting toboost price competitiveness, combined with initiatives to expand
business into the field of social infrastructure networks and todevelop business in renewable energy generation and other sectors.
As a result, business results for fiscal 2016 were positive.
In terms of profit specifically, we succeeded in meeting ouroriginal plan targets one year ahead of schedule. Looking ahead,
lively construction demand is forecast, particularly from theinfrastructure upgrades and large-scale redevelopment projects
expected in the lead-up to the Tokyo Olympics and Paralympics.
Changes in our business environment are also projected to result
from growth in corporate capital stocks, innovation in energy
systems, and other factors. We intend to take advantage of these
conditions to further expand our business fields.
Under the fiscal 2017 management plan, formulated toreflect this situation, we will continue to push forward with a- Strengthen the ability to provide a recovery andreconstruction response following large-scale natural
disasters (contribution to stable electric power supply)
3. Construction of a new business model, expansion ofbusiness fields- Strengthen sales systems to win orders for social
infrastructure network projects not limited to specific areasand sectors- Expand orders for undergrounding power lines to eliminate
power masts and cables- Expand business in electric power infrastructure work in
new operating areas- Promote renewable energy power generation business andreal estate business4. Fostering employees and technology that will sustain
the Company in the future- Reinforce human resource development system

range of policies. These are aimed especially at driving structural- Recruit required human resources

reform and constructing a new business model around the- Develop technology to support workplace safety,
labor saving, and cost reduction

concept of establishing an unbeatable presence as a general
infrastructure company to set new records in businessperformance. In this way, we aim to accelerate our progress along
the path of sustained growth.

Key policies for fulfillingthe management plan
1. Thoroughgoing compliance, improved of safety
and quality- Ensure compliance with ethical, safety, andquality behavior- Eliminate accidents involving staff and equipment- Upgrade the Group's governance system
2. Structural reform, profit growth- Strengthen price competitiveness through operational
efficiencies and cost reduction

5. Infusing the Company with vigor and liveliness- Promote reforms for work practices and annual leave systems- Create a supportive workplace environment- Build a company that fosters the development ofeach individual employee

Numerical targets
Consolidated

Billions of yen

Net sales
Operating profit

2017
510.0
29.0

2018
555.0
30.0

2019
600.0
33.0

Non-consolidated
New orders received
Net sales
Operating profit

500.0
442.0
24.3

530.0
480.0
25.5

570.0
520.0
27.5

Annual Report 20175

Message fro m th e M a nagement

Kiyoshi Goto
Chairman and Director

Fiscal 2016 Business Environment

OutlookIn fiscal 2016, ended March 31, 2017, the Japanese economy

Looking ahead, it is projected that ongoing business rationalization

followed a path of gradual recovery on the strength of positive

within the TEPCO Group will mean continued downward pressure on

corporate results and continuing improvement in the employment

investment in electric power facilities. On the other hand, with thesituation. The improving trend was also driven by emerging signs ofconstruction of facilities for the Tokyo Olympics and Paralympics

a pickup in consumer spending and other factors.

moving into full swing, and numerous large-scale redevelopment

As a result, private-sector construction investment showedprojects planned in the greater Tokyo area, construction investment

a rising trend on the back of demand for the construction of large-

in the Japanese market is expected to continue to show

scale office and commercial facilities, especially in the greater Tokyo

solid development.

area. Investment in electric power facilities also showed an overall

In response to these conditions, Kandenko will pursue the growth

positive development, albeit with some impact apparent from the fullstrategy that it formulated as the roadmap to its vision of a "100-Yearliberalization of electric power retailing.

Company Supporting Society." In line with this strategy, we will focus

In response to these conditions, Kandenko worked to roll out
locally focused sales activities matched to customer needs and to
attract new customers. These initiatives were coupled with companywide efforts to cut costs to strengthen price competitiveness.

efforts across the Company to implement the key management policies
outlined below.
First, we will emphasize the customer perspective in rollingout services offering total solutions, from design and execution to

As a result, we succeeded in posting favorable businessmaintenance and renovation. As part of this drive to boost orders andresults for the period under review, as detailed in the table onachieve profit, we will concurrently further enhance cost management

page 7. In terms of profits, we reached a record level of profit

and procurement functions.

attributable to owners of parent, while the profit targets set by the6

Yoshimi Morito
President and Director

Second, to respond to the ongoing reform of Japan’s energy

growth strategy, launched at the start of the fiscal year under review,

systems as a general infrastructure group, we will further expand

were fulfilled one year ahead of schedule.

our sales and execution systems, to win orders for electric powerBy building a solidly established corporate brandthat customers trust, we will further accelerate
our progress along the path of sustained growth.
infrastructure work. Additionally, we will draw on the technology and

Fiscal 2016 Business Results

expertise built up over time in a targeted drive to expand our range ofConsolidated results (Billions of yen)business fields, by pursuing initiatives in the social infrastructure sector
not limited to specific areas or industries.

Net sales¥ 470.9 (up5.2% YoY)

Operating profit

26.4 (up 60.8% YoY)

among young and mid-level employees, as well as training programs

Ordinary profit

27.3 (up 60.1% YoY)

to reinforce technical skills and abilities, will be among the initiatives

Profit attributable to owners of parent

17.6 (up 86.9% YoY)

In addition, on-the-job training to contribute to skill development

designed to build the human resources on which the future depends. 		
Concurrently, we will introduce reforms to work practices and annual leavesystems as well as measures to promote female advancement as we work
to build a company that fosters the development of each employee.
In parallel, we will continue to push ahead aggressively withefforts to promote workplace safety and labor-saving measures, expand
our business domains, and develop technology that accurately reflects
increasingly diverse customer needs.
Going forward, Kandenko will continue working to further improve

Non-consolidated results

New orders received¥ 474.5 (up 10.0% YoY)

Net sales

410.2 (upOperating profit

21.9 (up 73.4% YoY)

Ordinary profit

22.9 (up 72.1% YoY)

Profit15.5 (up 107.1% YoY)

2.9% YoY)

the safety and quality that are at the heart of our management approach,while ensuring full compliance and devoting our best energies to building
a solidly established corporate brand that customers trust. In this way,
we are committed to meeting the expectations of our valued shareholders.

Fiscal 2017 Business Results (Forecast)
Consolidated results (Billions of yen)

¥ 510.0 (up8.3% YoY)

Operating profit

29.0 (up9.9% YoY)

Ordinary profit

29.6 (up8.2% YoY)

Profit attributable to owners of parent

18.7 (up6.3% YoY)

New orders received¥ 500.0 (up5.4% YoY)¥8 and a year-end dividend of ¥12 (which includes a special dividend of

Net sales

442.0 (up7.8% YoY)¥4), for a total annual dividend of ¥20 per share.

Operating profit

24.3 (up 10.9% YoY)

Ordinary profit

25.3 (up 10.7% YoY)

Profit16.5 (upBasic Policy on Sharing Profits: Dividends
for Fiscal 2016 and 2017
Our basic policy emphasizes maintenance of a stable shareholder return
as well as twice-yearly payment of an interim and a year-end dividend.
By actively reflecting profit growth in the dividend, we work to ensure
appropriate shareholder return.
For fiscal 2016, the dividend consists of an interim dividend of

For fiscal 2017, we plan to pay a regular annual dividend of ¥24
per share (an interim dividend ¥12 and a year-end dividend ¥12), up ¥4from the dividend for fiscal 2016.

Net sales

Non-consolidated results

6.5% YoY)

Annual Report 20177

Business results by type of work

200,000

2015

DescriptionofBusiness

251,469

2014

224,170
202,815

217,182
195,170

226,677
191,2272013

250,000

Electrical Engineering,
Environmental Facilities
and Systems, andRenovation Work

(Millions of yen)

300,000

181,820
187,387

Business Review by Division

Net sales

203,627

New orders received

150,000

100,000

50,000

0

2016

2017

Electrical Engineering Work: Work on electrical facilities and equipment inside all types of buildings
and structures, building interiors, and control equipment
Environmental Facilities and Systems, and Renovation Work: Work on air conditioning as wellas water, heat and disaster prevention systems

In the segment covering electrical engineering, environmental facilities andsystems, and renovation work, we worked to increase the volume of orders
received through a range of initiatives. These included finely targeted sales
activities based on advance gathering and analysis of market information, andthe presentation of renovation solutions that promote energy saving and a longer
lifespan. Other initiatives pursued in parallel included a further drive toward costmanagement and upgrading of worksite support systems.
As a result, we surpassed our performance of the previous fiscal year, withnew orders received up 12.2% to ¥251,469 million and net sales up 0.4% to¥203,627 million.

Notre Dame Yokohama Minatomirai

Sophia University, Sophia Tower

8

Business results by type of work
New orders received

Net sales(Millions of yen)

31,86027,876

31,59640,05130,08032,65035,56933,23840,00031,21031,50750,000

2015

2016

2017

30,000Information &Communication Work

20,00010,0000

DescriptionofBusiness

2013

2014

Develop proposals for and carry out installation and maintenance of information andtelecommunications systems, lay optical fiber cables for telecommunications providers, install opticaltransmission equipment, build and maintain transmission base stations for mobile communications,build and maintain networks for cable TV and municipalities, and maintain telecommunications facilities
for electric power providers

In the segment covering information and communication work, we worked tosecure orders from cable television operators for large-scale updating in
preparation for the next generation of high-definition (4K/8K) broadcasting,and from mobile telephone operators for upgrading base stations to boost
telecommunications quality and speed. We also reinforced our sales andwork execution systems to secure internal LAN projects.
As a result, we succeeded in improving our performance comparedwith the previous fiscal year, with new orders received increasing by 25.7%
to ¥40,051 million and net sales rising by 13.3% to ¥31,596 million.

Installing a wireless telecommunications antenna

Updating cable television facilities

Annual Report 20179

Business results by type of work
New orders received

139,234
138,419

140,632
138,557

130,700
128,742

2016

2017

100,000

50,0000

DescriptionofBusiness

135,650
133,910150,000

Power Distribution
Line Engineering Work

(Millions of yen)

200,000
156,945
156,900

Business Review by Division

Net sales

2013

2014

2015

Construction and maintenance of TEPCO’s electric power facilities

In the segment covering engineering work on overhead and undergroundpower distribution lines, we worked to enhance productivity throughflexible deployment of execution capabilities to match work volume. We
also targeted reduced unit costs by closely monitoring earnings andexpenditures at each branch office. Additionally, we strove to expand thedivision’s range of business through sales development activities aimed
at general customers.
As a result, new orders received increased by 1.0% to ¥140,632
million and net sales grew by 0.1% to ¥138,557 million.

Work on overhead power distribution lines using indirect live-line techniques
Installing a joint utility tunnel for electric power lines10

Business results by type of work
New orders received

Net sales(Millions of yen)

36,411

36,23929,38331,00432,62935,07832,68136,44630,59140,00042,29950,00030,000Electric Power & Civil
Engineering Work

20,00010,0000

DescriptionofBusiness

2013

2014

2015

2016

2017

Power Generation and Transformation Work: Work on power stations and substations, and wind
power generation
Transmission Lines Work: Work on overhead transmission lines
Civil Engineering Work and Underground Lines Work: Work on underground transmission lines,
and civil engineering work using C.C. Box technology
Nuclear Power Work: Conduct regular inspections and maintenance of nuclear power plant facilities
and equipment

This segment covers power generation and transformation, overhead andunderground power transmission lines, civil engineering, and nuclear andwind power generation. In the area of projects related to wind and solar
power generation and other renewable energies, orders received showed asolid development. Meanwhile, solutions-based sales activities bringing
together the division’s full range of capabilities were targeted at securingcontracts in social infrastructure sectors such as water supply, gas,and railways.
As a result, we succeeded in boosting performance compared with theprevious fiscal year, with new orders received rising by 16.7% to ¥42,299
million and net sales increasing by 23.9% to ¥36,411 million.

Connecting underground transmission cables

Stringing overhead power lines in the grounds of a substation

Annual Report 201711

Topics: Projects by Kandenko

1

2

10

Nakagami Hospital (Okinawa)

12

Yale-NUS College (Singapore)

Nakanoshima Festival Tower West (Osaka)

Hosei University Fujimi Gate (Tokyo)

45

Hyogo Prefectural Kobe Children's Hospital (Hyogo)

Yamazaki Baking Creation Center (Chiba)
839Maruha Nichiro Corporation, New Ishinomaki Plant (Miyagi)

Yokohama Nomura Building (Kanagawa)

MOA Museum of Art (Shizuoka)

11

Weather radar stations (Myanmar)

11
1

10
6

NGK Insulators, Ltd., Ishikawa Plant (Ishikawa)

6

9
7

12

8

3
7

4

2

5

Mitsui Fudosan Logistics Park Komaki (Aichi)
12

Annual Report 201713

Topics

Grand opening of Tokyo Garden Terrace Kioicho
The Kioicho district in Tokyo’s Chiyoda Ward takes its name from several feudal lords whose residences were located there during the
Edo Period. July 2016 saw the grand opening here of Tokyo Garden Terrace Kioicho.
The new complex contains a number of elements such as Kioi Tower, an office and hotel block with state-of-the-art function; Kioi
Residence, a block of 135 high-spec apartments; and the Classic House at Akasaka Prince, which has restaurants and a wedding hall,among other facilities. Kandenko carried out the electrical work for these buildings.
One of the buildings, the Classic House at Akasaka Prince, has been restored to its appearance in 1930, the year it was built.
When installing the lighting the technology and expertise accumulated by Kandenko over many years came into play, ensuring thatthe elegance of former times was preserved for the present without damaging the building’s precious and historically valuablefabric.

14

Grand opening of Kyobashi EdograndTokyo Station is the gateway to Tokyo, and Kyobashi is a district just to its east that has been a thriving commercial quarter since theEdo Period. Kyobashi Edogrand is a new local landmark that had its grand opening in November 2016.
The new facility comprises three elements: the Meijiya Kyobashi Building, renovated to retain its original appearance from thetime of its construction in 1933; a contrastingly designed low-rise shopping zone; and a super high-rise office facility, one of thelargest of its kind in the area, whose anti-quake design includes Japan’s first wind-resistant structure. While carrying on the district’s
Edo Period traditions, the new complex promises to become a new business focus and a place where many different types of people
can come together.
Making maximum use of our accumulated technology and expertise, we intend to continue supporting the creation of newcityscapes as a general infrastructure company.

Annual Report 201715

Topics

Works on weather radar stations in Myanmar:
Contributing to disaster prevention infrastructure
The Republic of the Union of Myanmar, which lies in the western part of the Indochinese Peninsula, has a coastline of about 2,400 km
along the Bay of Bengal and the Andaman Sea and is crisscrossed by a network of rivers, large and small. Accordingly, it suffers fromflooding together with the cyclones that strike in most years.
To gather information quickly and accurately on the emergence, path, strength and other details of cyclones, it is essential for thecountry to have a radar observation network that covers most of its territory, including the coastal strip. However, its aging radar
stations ceased to operate, leaving the country with no functioning system.
In response to this situation, the Japan International Cooperation Agency (JICA) put forward, as part of its program of official
development assistance, a plan to install updated meteorological observation facilities. Kandenko was one of the participating companies.
The plan envisaged the installation of weather radar stations at three locations—the capital city of Yangon, Kyaukpyu on the Bayof Bengal, and Mandalay in the country's geographical center—combined with a nationwide network of 30 automatic weather stations.
Kandenko was responsible mainly for the electrical work connected with the construction of the stations. In a country where someregions still lack electricity, a water supply, the Internet, and other social infrastructure, Kandenko was careful to draw up a detailed
work plan taking account of the lead time for importing materials and equipment, and took measures to reinforce coordination withlocal staff. As a result, operations progressed steadily and were completed successfully in March 2017, slightly more than three years
after receipt of the contract.

Myanmar
Kyaukpyu ●●Mandalay

Yangon●Bay of Bengal

Andaman Sea

Yangon weather radar station

16

Kyaukpyu weather radar station during construction

Energy-saving promoted in renovations of lighting
equipment at Tokyu Corporation’s Yukigaya-Otsuka Train Depot
Kandenko is reinforcing initiatives to win orders for social
infrastructure projects, such as railway, gas, and watersupply. This is part of the Kandenko Group’s drive to achieve
its growth strategy by expanding its business fields.
As a result of these initiatives, we recently won andexecuted an order for renovation of the lighting equipment at
Tokyu Corporation’s Yukigaya-Otsuka Train Depot. The
project involved replacing the existing mercury lamps with
LED lamps for energy saving and long life.
In executing the project, to avoid disrupting therailway’s operations, we were required to work in the limited
period between the railway’s last evening service and the firstmorning service, combining safety with speed. Accordingly,
we drew up a work plan based on a detailed advance survey
and carried out replacement work in a number of locations
simultaneously. Thanks to these and other measures toensure the efficiency of operations, we completed the work
successfully and received a highly positive assessment fromthe customer.

Annual Report 201717

Topics

Completion of a new building for our Fukushima
Headquarters
In September 2016, we completed a new building for our Fukushima Headquarters, the base for our disaster recovery andreconstruction activities in Fukushima Prefecture.
This will allow us to expand our work execution and sales capabilities with a view to further reconstruction and development in
the Fukushima area.
In addition, affiliate and associate companies that were previously dispersed across the prefecture will now use our existingbuilding as their base. This should allow us to strengthen relations with them and result in enhanced functioning of our headquarters.
Thus far, more than 500,000 Kandenko Group employees have participated in recovery and reconstruction operations in the Fukushima
area. Going forward, we are committed to using the new headquarters building as a center for continued Group-wide efforts to assist
with locally focused reconstruction and development.

Projects executed by Fukushima Headquarters

Eurus Fukushima Kawauchi Solar Park (Kawauchi Village, Futaba District, Fukushima Prefecture)

18

Naraha Remote Technology Development Center (Naraha Town, Futaba District, Fukushima Prefecture)

Research and Development Activities

To respond to customer requirements and worksite issues, the Kandenko Group is focusing on the key areas of technology
development to answer customer needs, as well as technology development to contribute to worksite safety, labor saving, andcost reduction, and to support the expansion of business fields.
In fiscal 2016, we moved forward aggressively with development in a number of specific areas: technology to improve
the lifespan and reliability of customer facilities, technology to introduce new operational techniques and robots that contributeto work safety and labor saving, and we applied technology for use with railways, port and harbor installations, and othersocial infrastructure.
R&D expenses amounted to ¥1,188 million (consolidated) in fiscal 2016, and the main results are detailed below. (R&D
expenses are not broken down by segment.)

Facility Installation BusinessResearch to expand the range of application of the small-bore
tunnel drilling method
To respond to situations where, for instance, there is insufficient space
to install launch and reception shafts because of densely packed
underground installations or issues with noise and vibration, wedeveloped an ultra-compact small-bore tunnel-drilling device that canoperate even in restricted spaces. This method enables electric power
conduits to be laid from within existing manholes. It has also allowed
expansion of the range of application of the small-bore tunnel drilling
method, for instance, for use in gas works and in work to inject antiquake reinforcement material into railway embankments and cuttings.
Going forward, we
will propose thismethod for adoption
at customer facilities
with a view toincreasing orders forcivil engineeringAnti-quake reinforcement work for railway tracks using
related projects.
small-bore tunnel drilling method

Research to improve operational efficiency of drones
Drones are compact unmanned aerial vehicles. We have tested in the field
their potential applicability and effectiveness for use at heights that are
difficult for people to access, in hazardous locations, or across large siteareas, where they can be used to
execute work, inspect facilities,
carry and fit machine parts. Goingforward, we intend to carry out
further technology development
to ensure the safety of work and to
improve operational efficiency
by using drones.
Drone used for work on overhead power
distribution lines

Development of a cable modem control system
Kandenko sells to cable television operators a range of overseasproduced large cable modem termination systems (CMTSs) forInternet/telephone service. However, as the range included no control
systems suitable for use in Japan, we developed a control systemthat reflected Japanese domestic needs. This system has a functionthat controls the CMTS and the cable modem fitted in the user’s
residence, configures a telecommunication service for each user
contract, and monitors the communication status. Going forward,
we will take advantage of the system to promote CMTS sales andimprove the reliability of customer facilities.

Improvement of a steel pipe column assembly tool
The steel pipe column assembly tool is a specialized tool that is used
when a prefab steel pipe column is assembled by hand. However,current models were heavy and involved a high workload. In response,
we worked to reduce weightand introduce electric operation
to come up with an improved
assembly tool with outstanding
operability. Going forward, we will
use this tool to ensure safety andimprove efficiency in the manual
Steel pipe column assembly toolerection of steel pipe columns.

Other Businesses
Development of a technique for status diagnosis throughanalysis of wind turbine monitoring data
To facilitate preventive maintenance for wind turbines, we developed atechnique for status diagnosis that analyzes a range of monitoring data
to detect changes in status and discover advanced signs of malfunction.
Going forward, we will carry out further technology development withthe aim of systematizing the data acquisition required for preventive
maintenance and increasing the use and reliability of wind turbines.

Annual Report 201719

Corporate GovernanceCorporate Governance
As Kandenko’s operating environment changes dramatically, we are working to make management more efficient and transparent
while ensuring the fairness of business execution. We realize that Kandenko’s continued existence as a company with high value toits stakeholders depends on a robust corporate governance system. We are therefore unstinting in our efforts to strengthen
corporate governance.

Basic Corporate Governance Policy
In keeping with the content and the spirit of the Corporate Governance Code established by the Tokyo Stock Exchange, Kandenko
implements a basic corporate governance policy that sets out its basic approach with the aim of enhancing the practical effectivenessof corporate governance.

Outline of the Current Corporate Governance System

Audit & Supervisory Board members with the Auditing Office to enable thecomplete and effective fulfillment of their duties.

Board of Directors
The Kandenko Board of Directors, which consists of 15 members including

Independent Accounting Auditor

two outside directors, meets regularly once a month, and additionallyKandenko has appointed Inoue Audit Corporation as its independentwhenever necessary, to discuss important business matters and to reachaccounting auditor. The three CPAs who audited Kandenko’s accounts are

final decisions, taking account of the contributions of the independent

Masami Hiramatsu, Teruo Hayashi, and Katsuhiro Suzuki, none of whom

directors and other considerations. The Board also oversees the execution

has audited our accounts for over seven consecutive years. Six other CPAs

of business by the directors. A designated corporate department is inand one additional person assist with the account audit.

place to provide support to the outside directors, for instance by briefingthem where necessary on items due to be discussed at Board meetings.

Internal Audit

Important managerial issues, including those that will be brought up at a

For internal auditing, the 18-strong staff of the Internal Audit Division

Board of Directors' meeting, are discussed by the Management Committee,

carries out the audit in accordance with the Internal Control Enhancement

which meets regularly each week and additionally whenever necessary. In

Plan. The audit results are reported to the Internal Control Committee andthese ways, we strive for rational corporate administration. Moreover, we

the Management Committee, and as appropriate to the Board of Directors,

have introduced an executive officer system, which separates managerial

to enable any required remedial action to be taken.

oversight from business execution, to accelerate the decision-making

Independent accounting auditors and the Internal Audit Division

process and reinforce business execution while enhancing the efficiency

report their findings at the Audit & Supervisory Board meeting andof the directors’ business execution system. To foster swift responses

regularly discuss these matters with the Audit & Supervisory Board

to changes in the operating environment and invigorate management,

members, including outside members. Opinions are exchanged wheneverdirectors’ terms are limited to one year from the time of appointment.

necessary so that cooperation is ensured. While the Audit & Supervisory
Board members (including outside members), independent accounting

Audit & Supervisory Board Members

auditors, and the Internal Audit Division carry out their audits, they receive

Kandenko has employed an Audit & Supervisory Board member systemregular reports on the maintenance and state of internal control from eachfor some time. Five Audit & Supervisory Board members, including threedivision responsible for business execution.

from outside the Company, conduct audits appropriately based on legal

20

requirements and Kandenko’s audit policy. The outside members heighten

Outside Directors and Outside Audit & Supervisory Board Members

our system’s independence and neutrality. They attend our Board of

Currently, the Company has two outside directors and three outside Audit

Directors' meetings and other important meetings, where they express their& Supervisory Board members. We appoint outside directors and outside

independent and objective opinions. Audit & Supervisory Board members,

Audit & Supervisory Board members to fulfill audit and oversight functions

including outside members, meet with the Company’s directors on a regularand to enhance transparency, so in accordance with the Companies Act andand irregular basis to ask about the state of the latter’s work. We provide theother regulations, we look for candidates whose experience and expertiseCorporate Governance System

General Meeting of Shareholders
Appointment, dismissal

ReportReportReportDecision-making, supervision and oversight

Board of Directors (Directors)
Supervisionandoversight

Audit

ReportAppointment,
dismissal

Audit & Supervisory
Board member

Audit & Supervisory
Board
Audit & Supervisory Report
Board members(

Decision-making,supervision and oversight,
business execution

Appointment,
dismissal)

Management Committee
Audit,
reportPresident /Director responsible
for business

Internal Control
Committee

Auditing Office

Safety, Environment &Quality Committee

ReportAudit

Accountant audit

Independentaccounting auditor

Business execution

Directors, executive officers(

Division managers,
department managers, branch heads)

Internal
Control Division(Compliance consultations)

Employees

Affiliated companies

outside the Company will be useful to Kandenko, and who can oversee and

Board of Directors nominates a number of outside director candidates who

audit the directors’ execution of duties from an independent and neutral

meet the independence criteria listed below, giving due consideration to

standpoint. Regarding outside Audit & Supervisory Board members,

the practical effectiveness of its operations. For outside members of thethe Audit & Supervisory Board meeting first agrees to the candidates,

Audit & Supervisory Board, the Board of Directors nominates a number

the Board of Directors approves them, and then they are presented atof candidates with the ability to audit the execution of business by thea shareholders’ meeting for a vote. In the case of outside directors, thedirectors from a position of independence and objectivity.

Annual Report 201721

Corporate GovernanceIndependence Criteria for Independent Outside Directors
Kandenko considers outside director candidates to be independent as longCompliance System

as they do not trigger any of the following exclusion criteria:

To clarify important points in the Kandenko Group’s business activities

1. The candidate is or has been a business executive of Kandenko or aand encourage deeper entrenchment of compliance, we have enacted theKandenko’s subsidiary.

Kandenko Group Charter of Corporate Behavior, and we are promoting its

2. The candidate is a business executive of a major shareholder of

establishment and raising the consciousness of all Group employees

Kandenko (a shareholder with 10% or more of the voting rights

about the Charter. We have set up a compliance consultation point forincluding indirect holdings) or a business executive of a company of

employees and an internal system where legal violations can be reported.

which Kandenko is a major shareholder.

We are working to establish and maintain a corporate culture of fairness

3. The candidate is a business executive of a major creditor of Kandenko(a creditor who has provided loans of more than 1% of consolidated
assets in the most recent fiscal year).

and transparency.
In its attitude to antisocial forces, the whole Kandenko organizationis committed to a resolute stance rejecting any action that could raise

4. The candidate is a business executive of a major business client ofsuspicion of an inappropriate relationship. Backing this stance are theKandenko (a client accounting for more than 1% of consolidated

Kandenko Group Charter of Corporate Behavior and the Internal Control

net sales in the most recent fiscal year) or a business executive of aEnhancement Plan adopted by the Internal Control Committee, which form

company of which Kandenko is a major business client.

the basis for education, training, and related activities to ensure compliance

5. The candidate is a representative employee or an employee of anand promote full awareness throughout the organization.

accounting auditor of Kandenko.
6. The candidate is a person who has, or a member of a group that has,received from Kandenko material benefits or gifts of high value (morethan ¥10 million excluding corporate officers’ remuneration).
7. The candidate is a business executive of a company with a reciprocal
relationship with Kandenko through outside officers.

Risk Management System
The Kandenko Group operates a set of internal regulations on risk
management. Having categorized and defined risks relating to business
operations item by item, Kandenko devises countermeasures to match

8. The candidate has a relative (a spouse or relative within the second

their degree of impact and likelihood of occurrence. In addition to taking

degree of kinship) to whom any of 1 to 6 above applies (restricted toadvance measures of this kind to prevent risk, Kandenko has designatedofficers and senior employees).

reporting channels and response systems in place for the event of

9. The candidate has triggered any of 2 to 8 above in the past five years.

risk materializing.

State of Progress of the Internal Control System

check the operating status of the risk management system and to analyze

Based on the Basic Policy for Enhancing the Internal Control Systemof a dedicated Internal Control Division serves to strengthen the risk

adopted by the Board of Directors (enacted April 2006, revised May 2015),

management system.

Additionally, the Internal Control Committee meets periodically toand evaluate risk status and related matters, while the establishment

Kandenko has established an Internal Control Committee chaired by the

Described below are factors that could possibly have a significant

company president that discusses issues relating to the internal control

impact on decisions made by investors. In recognizing that there is thesystem. The Company also lays down internal control regulations that set

potential for such risks to occur, the Kandenko Group is undertaking efforts

out the basic principles of internal control and management regulations forto avoid their occurrence as well as formulating countermeasures in theaffiliated companies that set out relevant management principles. Throughevent such risks occur.

these and other measures, Kandenko has put in place a system to ensure

Moreover, the statements described below regarding the future reflectappropriate business conduct by the Company and by the corporate group

judgments made by the Kandenko Group based on what was known up to

consisting of Kandenko and its subsidiaries. Additionally, to promote

the end of the fiscal year ended March 31, 2017.

adaptation to the internal control reporting system introduced in 2008 in
accordance with the Financial Instruments and Exchange Act, the Company

Changes in the Business Environment

has set up a department in charge of reviewing internal controls relating to

In the event that significant changes occur in the business environment,

financial reporting in order to promote appropriate operation and evaluationsuch as decreases in construction-related investments or capital investment

and to ensure the credibility of financial reporting.

in electric power facilities and equipment exceeding projected changes, it ispossible that the actual financial performance or other results of theCompany could be affected. Sales to the TEPCO Group account for about
40% of the Kandenko Group’s sales.

22Fluctuations in the Cost of Materials or Labor Costs
increase cannot be reflected in the contracted fees, it is possible that

Systems to Ensure Appropriate BusinessConduct by Kandenko and the Corporate Group
Consisting of Kandenko and Its Subsidiaries

the actual financial performance or other results of the Company

Kandenko has put in place a system to promote information sharing with its

could be affected.

subsidiaries, under which the Kandenko Board of Directors receives reports

Should the cost of materials or labor costs increase significantly, and theon important matters relating to the business conduct of subsidiaries,

Work and Related Risks
If work done by Kandenko turns out to be seriously defective or an

including their accounting and internal control operations.
Moreover, for the purpose of risk management at subsidiaries,

accident occurs in the course of work, it is possible that the actual financial

internal regulations are in place whose basic aim is to prevent crisis

performance or other results of the Company could be affected.

situations in advance and to minimize the impact on business activities
in the event that a crisis situation materializes. Additionally, Kandenko

Credit Risk of Client Company

provides advice and other support for the creation of risk management

In the construction industry, the contract fee for one transaction is very

systems at subsidiaries, and periodically checks and evaluates the status oflarge, and in many cases, a condition of concluding the contract is thatrisk management at its subsidiaries.

payment of the large sum of the construction fee is to be made when

By periodically receiving reports from its subsidiaries, Kandenko is

the handover of the construction project is completed. Should the client

able to check their conduct of business, ascertain the state of managementcompany suffer from a credit shortage before the Company can receive

operations at the subsidiary, and offer advice and other measures to tackle

payment of the construction fee, it is possible that the actual financial

management issues.

performance or other results of the Company could be affected.

In parallel, the Internal Audit Division carries out internal audit ofsubsidiaries in accordance with the Internal Control Enhancement Plan.

Asset Holding Risk

The audit results are reported to the Internal Control Committee and the

As it is necessary to have such assets as real estate and securities forManagement Committee, and as appropriate to the Board of Directors, tobusiness activities, should something happen, such as a significant decline

enable any required remedial action to be taken.

in the value of the held assets, or a dramatic drop in the profitability of thereal estate for business purposes, it is possible that the actual financial
performance or other results of the Company could be affected.

Liability for Employees’ Retirement Benefits
Should the value of pension assets decline, or should there be changes in
the assumptions, such as the return on investments or discount rate, used
to calculate the liability for employees’ retirement benefits, it is possiblethat the actual financial performance or other results of the Company could
be affected.

Legal Regulations
The Company is subject to legal regulations, including the Construction
Business Act, the Antimonopoly Act and the Industrial Safety and HealthAct. Should there be any changes, such as the revision or repeal of legal
regulations, or the enactment of new legal regulations, or if changes are
made to criteria for their application or administrative sanctions are handed
down based on the legal regulations, it is possible that the actual financial
performance or other results of the Company could be affected.

Annual Report 201723

Environmental Initiatives
The human race has enjoyed many benefits of industrial and economic development, but these benefits have come at the cost of
global warming, pollution, and ecological destruction. A great burden has thus been placed on the global environment.
Coexistence with the natural environment, the foundation of our existence, is essential for any healthy society. This isalso a theme that we must continually keep in mind in our business activities.
At Kandenko, we take the long-term view that it is corporate management’s vital social responsibility to have anenvironmental vision leading to the creation of a sustainable society. We will do our part to leave a safe, sound environment for
future generations by implementing initiatives that reduce the burden on the environment.

Basic Policy on the Environment

Structure for Promoting Environmental Preservation

Our Philosophy

To facilitate a deep review of its policies and initiatives in the field of

As a member of a recycling-based society, Kandenko will help to constructenvironmental conservation activities, Kandenko appoints a Safety,

a rich human environment, and through unceasing innovations, will help toEnvironment & Quality Committee chaired by the company president.

conserve the global environment.

Under the control of the Environmental Department of Safety, Environment
and Quality Division, the departments set up to promote environmental

Activity Plan

activities are as follows: in the Construction Headquarters, the

1. We consider environmental conservation to be an important management

Safety, Environment & Quality Promotion Group; and in the Regional

issue. We are committed to making continual, incremental improvements

Headquarters, the General Affairs Department, General Affairs Team and theto our environmental management system (EMS).

Safety, Environment & Quality Promotion Group.

2. While engaged in activities to save resources, conserve energy, promote
recycling, and prevent pollution, we will reduce the volume of waste
produced by our businesses.
3. We will follow legal regulations and agreements and enact our own

Environmental Education
We believe that in promoting environmental activities such as energy

environmental standards to promote environmental conservation.

conservation, the reduction of CO2 emissions, and proper disposal of

4. We will educate our employees about the environment and raise theirindustrial waste, each employee’s correct understanding and concern forenvironmental awareness.
5. We will build bridges of cooperation to regional society and seek
harmony with society as a whole.

environmental issues is critical, so we carry out environmental education
for people of all ranks.
Kandenko encourages employees to take the Certification Test forEnvironmental Specialists (Eco Test), which is organized by the Tokyo

Environmental Management System

Chamber of Commerce and Industry. People who pass the test have a broad

In accordance with its basic environmental policy, Kandenko has built anconservation initiatives among their colleagues and in their communities,

EMS that covers the entire Company, and has been engaged in making

making this qualification valuable to both the individual and the Company.

continuous improvements to the system and carrying forward proactive
environmental conservation activities.
To promote environmental conservation activities, Kandenko’s
head office, regional headquarters, branches, and representative offices
have cooperated as one in constructing an EMS that complies with ISO
140001 standards. Seeking a fair and just assessment from a third party,
we acquired ISO 140001 certification for our branches in Tokyo, Saitama,
Chiba, Kanagawa, Shizuoka and Nagoya.

24

knowledge of the environment and can voluntarily lead environmental

Initiatives to Reduce the Environmental Burden

Promoting Green Purchasing
Kandenko engages in green purchasing activities with respect toGiven the increasing seriousness of global environmental issues, wematerials used at its offices and worksites, including stationery, officebelieve that we can contribute to protecting the healthy biodiversity of the

supplies, office machinery, furnishings, and uniforms. To prioritize

ecosystem and realize a sustainable society by implementing systematicpurchasing of environment-friendly eco-products, Kandenko bases its

and efficient environmental conservation measures in all aspects of ourinitiatives on a set of green purchasing guidelines.

business activities.

Electric Energy-saving Initiatives

In addition to promoting environment-friendly procurement,
Kandenko’s initiatives for environmental conservation include efforts to

Kandenko is rolling out a service known as Kandenko Eco-Business

reduce consumption of resources and energy and measures to improveto respond to the many and diverse needs of customers in the field ofindustrial waste recycling rates and convert waste into valuable resources.

environmental burden reduction. Covering customer facilities such as

By ensuring strict compliance with environmental laws and regulations, weelectric power, air conditioning and sanitation systems, IT networks,

are also working to eliminate environmental risk, enhance environmental

and security systems, it offers a one-stop service from inspection,awareness, and further integrate environmental conservation activities. As adiagnosis, and planning to design, installation, and maintenance tocorporate member of a recycling-based society, Kandenko seeks to create a

promote energy saving and CO2 reduction at customer facilities.

rich human environment and implement unceasing innovation, contributing

Kandenko’s business bases are fitted with an energy-savingin this way to activities that conserve the global environment.

office lighting control system that uses daylight sensors to detect thestrength of daylight from windows and personnel sensors to detect

Concrete Initiatives

human movement, and then adjusts the amount of artificial light

Introducing Green Electric Powersaving facilities such as LED lighting, ice-based thermal storage air

Kandenko is one of the first in the industry

conditioning systems, and its hot-water supply system for industrial

to participate in a Green Electric Poweruse: EcoCute Q.

provided accordingly. Kandenko has additionally introduced energy-

Fund, which promotes the use of natural

Kandenko’s other energy-saving activities include switching off

energy sources. To receive a green electricunnecessary lighting and avoiding wasteful air conditioning settings

power supply, the Company entered intothat result in excessive cooling or heating of indoor spaces.

a 15-year contract effective from April

Meeting room that exclusively uses LED lighting (head office)2002 with Japan Natural Energy Company
Limited based on a Green Energy
Certification System.
In fiscal 2016, Kandenko was awarded a Green Energy Certificate
for using 1,000,000 kWh of natural energy. This is equivalent to about
34.0% of the electric power consumption of the Kandenko head officebuilding supplied from natural energy sources.

Ice-based thermal storage air conditioning system (Ibaraki Branch)
Kandenko’s hot-water supply system for industrial use: EcoCute Q(Kawasaki Representative Office)Annual Report 201725

Environmental Initiatives
Vehicle Energy-Saving Initiatives
Kandenko employs a large vehicle fleet consisting mainly of work vehicles suchas aerial work platform trucks and other vehicles to transport materials andequipment. To raise the fuel efficiency of all vehicles, employees have worked inconcert to promote eco-driving.
Concurrently, Kandenko is promoting the introduction of electric vehicles,
which have outstanding environmental performance features such as no CO2emissions during operation, and hybrid vehicles, which have excellent
fuel efficiency.

Electric aerial
platform truck

Electric vehicles and a high-speed charging equipment (behind of the vehicle on the right)

Resource Conservation Initiatives
At representative offices and other business bases, leftover work

Additionally, Kandenko implements water-saving measures in thematerials, outdated facilities, and any other disused materials are

day-to-day use of restrooms and other facilities, while recycled watercollected. Kandenko contributes to resource conservation by sorting

produced by collecting and purifying rainwater and wastewater is usedand storing these materials, then converting them for reuse, recyclingat the head office for flushing toilets.

them into new products, or reutilizing them in some other way. The

Concurrently, to protect forestry resources, we use recycled

sorting of waste materials at representative offices, which is essential

paper and paper that supports forest management, work to cut the use

for reducing waste emissions and ensuring efficient use of resources,of photocopying paper, promote the use of paper-free projectors at

unites the staff of each office in concerted efforts.

meetings, and take other steps to promote resource conservation.

Sorting and storage at an office
Collecting rainwater

Sorting and storing industrial waste

26

Financial Section
28

Consolidated 10-Year Financial Summary

34

Consolidated Statement of Changes in Equity

29

Financial Position

37

Consolidated Statement of Cash Flows

30

Consolidated Balance Sheet

38

Notes to Consolidated Financial Statements

32

Consolidated Statement of Income

66

Independent Auditors’ Report

33

Consolidated Statement of Comprehensive Income

Annual Report 201727

Consolidated 10-Year Financial Summary(Millions of yen)

For the fiscal years ended March 31
Net sales

2009

2010

2011

2012

2013

2014

2015

2016

¥ 468,608 ¥ 473,804 ¥ 453,623 ¥ 462,482 ¥ 441,786 ¥ 447,741 ¥ 437,930 ¥ 436,682 ¥ 447,673

2017¥ 470,943

Operating profit

6,457

8,858

9,477

10,735

8,034

7,364

8,284

9,388

16,416

26,397

Ordinary profit

7,276

9,854

10,484

11,634

9,070

8,301

9,089

10,336

17,077

27,345

Profit attributable to ownersof parent

4,865

5,586

5,428

5,866

1,876

3,952

4,226

4,615

9,412

17,591

–

–

–

1,772

4,381

8,238

7,327

11,984

7,137

18,422

Total assets

373,674

379,093378,150

353,342359,726

364,008359,933

366,177

407,681424,874

Total net assets

173,171

172,487

177,536

176,808

178,757

184,269

189,692

193,345

197,980

213,356

Equity ratio (%)

45.84

44.57

45.96

48.93

48.54

49.49

51.45

51.44

47.22

48.72

Net assets per share (yen)837.07826.08850.04845.67854.31

881.41906.29922.05942.42

1,013.33

Earnings per share (yen)

23.78

27.30

26.54

28.69

9.18

19.34

20.69

22.59

46.07

86.11

Cash dividends per share (yen)

12.00

12.00

14.00

12.00

12.00

12.00

12.00

14.00

14.00

20.00

Net cash provided by (used in)operating activities

23,153

16,947

12,236

10,257

13,035

15,401(2,218)2,921

18,042

6,751

Net cash provided by (used in)investing activities

2,439(9,825)(9,763)(3,799)1,583(12,748)(5,839)2,253(7,101)(17,867)

Net cash used infinancing activities(1,887)(3,519)(4,400)(4,037)(5,423)(2,900)(4,540)(3,743)19,807(169)

Cash and cash equivalents at endof period

37,50341,06039,142

41,53950,72550,55038,69740,15770,89959,612

Number of employees (persons)

7,893

8,513

8,665

8,769

8,746

8,732

8,821

8,839

8,915

9,244

Comprehensive income

28

2008

Financial Position
Analysis of Consolidated Financial Position

Cash Flows

Total assets at the end of the fiscal year under review increased ¥17,193

In the consolidated fiscal year under review, cash and cash equivalents

million over the previous fiscal year to ¥424,874 million.

(henceforth “funds”) decreased by ¥11,286 million year on year to ¥59,612
million. This reflected net outflows of funds from both investing activities

Assetsand financing activities, which offset the positive contribution fromDue mainly to increases of ¥9,283 million in notes receivable, accounts

operating activities.

receivable from completed construction contracts and other, total current
assets grew by ¥8,564 million over the previous fiscal year-end.

Cash Flows from Operating Activities

Primarily reflecting increases of ¥4,936 million in property, plant

In the fiscal year under review, cash flows from operating activities addedand equipment, ¥2,573 million in intangible assets, and ¥1,773 million in¥6,751 million to funds (down ¥11,291 million from the previous fiscal

investment securities, total non-current assets rose by ¥8,629 million fromyear). Factors making a positive contribution to funds, including chiefly

the end of the previous fiscal year.

¥27,118 million in profit before income taxes, outweighed negative factors
such as an increase of ¥7,245 million in notes and accounts receivable-

Liabilities

trade and ¥9,535 million in income taxes paid.

Mainly because of an increase of ¥3,234 million in short-term loans
payable, total current liabilities grew by ¥2,477 million over the previous

Cash Flows from Investing Activities

fiscal year-end.

During the fiscal year under review, funds decreased by ¥17,867 million

Total non-current liabilities declined by ¥659 million from the end ofdue to investing activities (down ¥10,765 million from the previous fiscal

the previous fiscal year. This was primarily because of a decrease of ¥2,695

year). Here, ¥9,000 million in proceeds from redemption of securities was

million in net defined benefit liability, which offset an increase of ¥2,014

outweighed by ¥11,999 million for the purchase of securities and ¥7,290

million in long-term loans payable.

million for the purchase of property, plant and equipment.

Total liabilities rose by ¥1,817 million year on year to ¥211,518
million.

Cash Flows from Financing Activities
During the fiscal year under review, financing activities decreased funds by

Net Assets¥169 million (down ¥19,977 million from the previous fiscal year). ThisDue mainly to a ¥13,881 million expansion in retained earnings, total net

primarily reflected ¥3,268 million in cash dividends paid, which offset

assets climbed by ¥15,375 million year on year to ¥213,356 million.

income of ¥2,357 million from a net increase in short-term loans payable.

Accordingly, net assets per share and equity ratio were ¥1,013.33
and 48.72%, respectively (compared with ¥942.42 and 47.22% in theprevious fiscal year).

Annual Report 201729

Consolidated Balance Sheet
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESMARCH 31, 2016 AND 2017
(Millions of Yen)

(Thousands of U.S. Dollars)
2017

2016

2017

AssetsCurrent assets
Cash and deposits*3

Notes receivable, accounts receivable from completed
construction contracts and other*3¥

Securities
Costs on uncompleted construction contracts

77,360*3

129,855*3¥

33,899*3

139,139*3

14,9993,999*560,07330,900*5$

536,366
1,242,312
133,919*5

275,892

Raw materials and supplies

4,149

4,552

40,642

Deferred tax assets

6,535

6,852

61,178

Other

5,056

12,843

114,669

Allowance for doubtful accounts

(655)

(598)

(5,339)260,200

268,764

2,399,678

Total current assets

Non-current assets
Property, plant and equipment
Buildings and structures*3

85,438*3

88,570*3790,803

Machinery, vehicles, tools, furniture and fixtures*3

51,759*3

54,567*3

487,205Land*258,803*2, *360,278*2, *3538,196

Leased assets

2,349

2,414

21,553

Construction in progress

353

760

6,785

Accumulated depreciation(105,064)(108,013)(964,401)

Total property, plant and equipment

93,64098,577880,151

2,749

5,323

47,526

Intangible assets

Investments and other assets
Investment securities

39,765*1, *3

Deferred tax assets
Other

5,797

*3

*1, *3

5,326

6,281

6,213

*3

370,883
47,553*3

55,473

Allowance for doubtful accounts

(753)

(869)

(7,758)

Total investments and other assets

51,09052,209466,151

147,480

156,110

1,393,839

424,874$ 3,793,517

Total non-current assets
Total assets
The accompanying notes are an integral part of financial statements.

30

41,539*1, *3¥

407,681¥(Millions of Yen)

(Thousands of U.S. Dollars)
2017

2016

2017

Liabilities
Current liabilities
Notes payable, accounts payable for construction
contracts and other
Short-term loans payable

¥

7,686

*3

¥

85,28082,398
10,920*3$*3735,696
97,500

Lease obligations

395

425

3,794

Income taxes payable

6,260

5,375

47,991

Advances received on uncompleted construction
contracts

19,08819,600175,000

Provision for warranties for completed construction

974

1,226

10,946

Provision for loss on construction contracts

2,391

*5

4,050

*5

*5

36,160Other

21,235

21,792

194,571

Total current liabilities

143,312

145,789

1,301,687

20,10020,080179,285

Non-current liabilities
Convertible bond-type bonds with subscription rights tosharesLong-term loans payable

5,567

*3

Lease obligations
Deferred tax liabilities for land revaluation

7,581

*3

795

662
6,830

*2

*3

6,789

*2

67,6877,098*260,616

Net defined benefit liability

30,96428,269252,401

Other

2,263

2,213

19,758

Total non-current liabilities

66,38865,728586,857

209,700

211,518

1,888,553

Capital stock

10,264

10,264

91,642

Capital surplus

6,349

6,350

56,696

Retained earnings

168,576

182,458

1,629,089

(565)

(575)

(5,133)

184,624

198,496

1,772,285

12,46012,418110,875

(575)

(522)

(4,660)Total liabilities
Net assets
Shareholders’ equity

Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for land

(5,302)*2(4,861)*2*2(43,401)

Remeasurements of defined benefit plans

1,309

1,460

13,035

Total accumulated other comprehensive income

7,891

8,494

75,839

5,464

6,364

56,821

197,980

213,356

1,904,964

424,874$ 3,793,517

Non-controlling interests
Total net assets
Total liabilities and net assets¥

407,681¥

The accompanying notes are an integral part of financial statements.

Annual Report 201731

Consolidated Statement of Income
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2016 AND 2017
(Millions of Yen)
2017

2016
Net sales of completed construction contracts
Cost of sales of completed construction contracts¥

Gross profit (loss) on completed construction contracts
Selling, general and administrative expenses¥

447,673
409,491*1, *2(Thousands of U.S. Dollars)

21,765

470,943421,208*1, *2$ 4,204,848
3,760,785*1, *2

49,73438,182*3

201723,337*3444,053
208,366*3

16,416

26,397

235,687

Interest income

40

44

392

Dividend income

712

766

6,839

Insurance premiums refunded cancellation

21

230

2,053

Other

298

352

3,142

Total non-operating income

1,071

1,394

12,446

Interest expenses

110

213

1,901

Financing expenses

130

–

–

Other

170

232

2,071

Total non-operating expenses

410

446

3,982

17,077

27,345244,151

–

135

1,205

1,324

34

303

28

–

–

1,353

170

1,517

114

269

2,401

1,025

101

901

42

27

241

Total extraordinary losses

1,182

397

3,544

Profit (loss) before income taxes

17,248

27,118242,125

Income taxes - current

6,777

8,243

73,598

Income taxes - deferred

419

627

5,598

Total income taxes

7,196

8,871

79,205

Profit (loss)

10,052

18,246

162,910

640

655

5,848

Operating profit (loss)
Non-operating income

Non-operating expenses

Ordinary profit (loss)
Extraordinary income
Gain on bargain purchase
Gain on sales of investment securities
Other
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Impairment loss

*5

Other

Profit (loss) attributable to non-controlling interests
Profit (loss) attributable to owners of parent
The accompanying notes are an integral part of financial statements.

32

¥

9,412

¥

17,591$

157,062

Consolidated Statement of Comprehensive Income
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2016 AND 2017
(Millions of Yen)
2017

2016
Profit (loss)¥(Thousands of U.S. Dollars)¥

10,052

201718,246$

162,910

Other comprehensive income
Valuation difference on available-for-sale securities(2,983)

(40)

(357)

Deferred gains or losses on hedges

(243)

53

473

Revaluation reserve for land

379

–

–

Remeasurements of defined benefit plans, net of tax

(66)

163

1,455

Total other comprehensive income
Comprehensive income(2,914)

*1

¥

7,137

176

*1

¥

18,422

1,571

*1

$

164,482

Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests

17,753

6,530
¥

607

¥

669

158,508$

5,973

The accompanying notes are an integral part of financial statements.

Annual Report 201733

Consolidated Statement of Changes in Equity
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEAR ENDED MARCH 31, 2016
(Millions of Yen)
Capitalstock
Balance at beginning ofcurrent period¥

Shareholders’ equity
Retained
Treasury
earnings
sharesCapitalsurplus10,264

¥

6,268

¥

162,347¥

Total shareholders’equity(553)¥

178,327

Changes of items during period
Purchase of shares of
consolidated subsidiaries

8080

Dividends of surplus(2,451)(2,451)

Profit (loss) attributableto owners of parent

9,412

9,412

Reversal of revaluation
reserve for land

(732)

(732)

Purchase of treasury shares
Disposal of treasury shares

–

(12)

(12)

–

–

(12)

6,296

Net changes of items otherthan shareholders’ equity
Total changes of items during period
Balance at end of current period–¥

10,264

Valuation difference
on available-forsale securities
Balance at beginning ofcurrent period¥

15,402

80
¥

6,349

6,228
¥

168,576

¥

(565)

¥

184,624

Accumulated other comprehensive income
Deferred gains
Remeasurements Total accumulated Non-controlling
Revaluationinterests
or losses onof defined benefit other comprehensive
reserve for land
hedgesincome
plans
¥

(332)

¥

(6,414)

¥

1,385

¥

10,040¥4,976

Total net assets¥

193,345

Changes of items during period
Purchase of shares of
consolidated subsidiaries

80

Dividends of surplus(2,451)

Profit (loss) attributableto owners of parent

9,412

Reversal of revaluation
reserve for land

(732)

Purchase of treasury shares(12)

Disposal of treasury shares–

Net changes of items otherthan shareholders’ equity(2,941)

(243)

1,111

(75)

(2,149)487(1,661)

Total changes of items during period(2,941)

(243)

1,111

(75)

(2,149)

487

4,634

Balance at end of current period¥

12,460

The accompanying notes are an integral part of financial statements.

34

¥

(575)

¥

(5,302)

¥

1,309

¥

7,891

¥

5,464

¥

197,980

YEAR ENDED MARCH 31, 2017
(Millions of Yen)
Capitalstock
Balance at beginning ofcurrent period¥

Shareholders’ equity
Retained
Treasury
earnings
sharesCapitalsurplus10,264¥

6,349¥ 168,576¥

Total shareholders’equity(565)¥ 184,624

Changes of items during period
Purchase of shares of
consolidated subsidiaries

(0)

(0)

Dividends of surplus(3,268)(3,268)

Profit (loss) attributableto owners of parent

17,591

17,591

Reversal of revaluation
reserve for land

(440)

(440)

Purchase of treasury shares
0

Disposal of treasury shares

(10)

(10)

0

0

(10)

13,872(575)¥ 198,496

Net changes of items otherthan shareholders’ equity–

Total changes of items during period
Balance at end of current period¥

10,264

Valuation difference
on available-forsale securities
Balance at beginning ofcurrent period¥

12,460¥013,8816,350¥ 182,458¥

Accumulated other comprehensive income
Deferred gains
Remeasurements Total accumulated Non-controlling
Revaluationinterests
or losses onof defined benefit other comprehensive
reserve for land
hedgesincome
plans
¥

(575)

¥

(5,302)

¥

1,309

¥

7,891

¥

5,464

Total net assets¥ 197,980

Changes of items during period
Purchase of shares of
consolidated subsidiaries(0)

Dividends of surplus(3,268)

Profit (loss) attributableto owners of parent

17,591

Reversal of revaluation
reserve for land

(440)

Purchase of treasury shares(10)

Disposal of treasury shares0

Net changes of items otherthan shareholders’ equity

(42)

53

440

151

603

900

1,503

Total changes of items during period

(42)

53

440

151

603

900

15,375

6,364¥ 213,356

Balance at end of current period¥

12,418

¥

(522)

¥

(4,861)

¥

1,460

¥

8,494

¥

The accompanying notes are an integral part of financial statements.

Annual Report 201735

YEAR ENDED MARCH 31, 2017
(Thousands of U.S. Dollars)
Capitalstock
Balance at beginning ofcurrent period$

Capitalsurplus91,642$

56,687

Shareholders’ equity
Retained
Treasury
earnings
sharesTotal shareholders’equity$ 1,505,142$ 1,648,428$(5,044)

Changes of items during period
Purchase of shares of
consolidated subsidiaries

(0)

(0)

Dividends of surplus(29,178)(29,178)

Profit (loss) attributableto owners of parent

157,062

157,062

Reversal of revaluation
reserve for land

(3,928)(3,928)Purchase of treasury shares
0

Disposal of treasury shares

(89)

(89)

0

0

(89)

123,857(5,133)$ 1,772,285

Net changes of items otherthan shareholders’ equity–

Total changes of items during period
Balance at end of current period

Balance at beginning ofcurrent period$

91,642$

0123,937

56,696$ 1,629,089$

Valuation difference
on available-forsale securities

Accumulated other comprehensive income
Deferred gains
Remeasurements Total accumulated Non-controlling
Revaluationinterests
or losses onof defined benefit other comprehensive
reserve for land
hedgesincomeplans

Total net assets$$$ 1,767,678

111,250(5,133)$(47,339)$

11,687$70,455$48,785

Changes of items during period
Purchase of shares of
consolidated subsidiaries(0)

Dividends of surplus(29,178)

Profit (loss) attributableto owners of parent

157,062

Reversal of revaluation
reserve for land

(3,928)Purchase of treasury shares(89)

Disposal of treasury shares0

Net changes of items otherthan shareholders’ equity

(375)

473

3,928

1,348

5,383

8,035

13,419Total changes of items during period

(375)

473

3,928

1,348

5,383

8,035

137,276

56,821$ 1,904,964

Balance at end of current period$

110,875

The accompanying notes are an integral part of financial statements.

36$(4,660)$(43,401)$

13,035$75,839$

Consolidated Statement of Cash Flows
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2016 AND 2017
(Millions of Yen)
2017

2016
Cash flows from operating activities
Profit (loss) before income taxes
Depreciation and amortization
Impairment loss
Gain on bargain purchase
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for loss on
construction contracts
Increase (decrease) in net defined benefit liability
Interest and dividend income
Interest expenses
Loss (gain) on sales of investment securities
Decrease (increase) in notes and accounts receivable - trade
Decrease (increase) in costs on uncompleted
construction contracts
Decrease (increase) in other inventories
Increase (decrease) in notes and accounts payable - trade
Increase (decrease) in advances received on uncompleted
construction contracts
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes (paid) refund
Net cash provided by (used in) operating activities
Cash flows from investing activities
Net decrease (increase) in time deposits
Purchase of securities
Proceeds from sales and redemption of securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of investment securities
Proceeds from sales and redemption of investment securities
Purchase of shares of subsidiaries resulting in change inscope of consolidation
Payments of loans receivableCollection of loans receivable
Other, net¥

Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of convertible bond-typebonds with subscription rights to shares
Repayments of lease obligations
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period*1¥(Thousands of U.S. Dollars)¥

17,248
4,320
1,025
–
(940)

2017
27,118
4,774
101
(135)
(51)

$

242,125
42,625901(1,205)
(455)

(733)

1,654

14,767(2,341)(752)
110(1,309)(385)(2,323)
(811)
213
(34)
(7,245)(20,741)(7,241)
1,901(303)(64,687)(12,639)

4,227

37,741(1,492)
1,355

(403)
(3,831)(3,598)(34,205)

7,223

(215)

(1,919)8,397
19,087754(110)(1,688)18,042(7,328)15,709811(233)(9,535)
6,751(65,428)
140,258
7,241(2,080)(85,133)
60,276(2,570)(1,000)2,000(7,869)
161
(495)
3,537

(2,000)(11,999)
9,000(7,290)142(1,340)45(17,857)(107,133)
80,357(65,089)
1,267(11,964)401–(2,445)(21,830)(1,100)
30
203

(0)
33
(2,011)(0)294(17,955)(7,101)(17,867)(159,526)

(506)
4,364
(1,088)

2,357
2,036
(702)

21,044
18,178(6,267)

20,100––(558)(2,451)(51)
19,807(7)30,741
40,15770,899(532)(3,268)
(60)
(169)
(1)
(11,286)
70,89959,612(4,750)(29,178)(535)(1,508)(8)(100,767)
633,026$ 532,250

*1

¥

*1

The accompanying notes are an integral part of financial statements.

Annual Report 201737

Notes to Consolidated Financial Statements
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2016 AND 2017

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
Kandenko Co., Ltd. (the “Company”) and its consolidated subsidiaries (thefinancial statements as of and for the year ended March 31, 2017 have been“Companies”) maintain their accounting records and prepare their financialtranslated from yen amounts into U.S. dollar amounts at the rate of ¥112

statements in accordance with accounting principles generally accepted=U.S.$1.00, the exchange rate prevailing on March 31, 2017.

in Japan, which are different in certain respects as to the application andAs permitted by the Financial Instruments and Exchange Act of

disclosure requirements of International Financial Reporting Standards.

Japan, amounts of less than one million yen have been omitted. As a result,

The accompanying financial statements have been compiled from thethe totals shown in the accompanying consolidated financial statements

consolidated financial statements prepared by the Company as required by(both in yen and in dollars) do not necessarily agree with the sum of thethe Financial Instruments and Exchange Act of Japan.

individual amounts.

For the convenience of readers, the accompanying consolidated

SIGNIFICANT MATTERS PROVIDING THE BASIS FOR THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
1. The scope of consolidation(1) Number of consolidated subsidiaries: 24

in the scope of consolidation from the year ended March 31, 2017 inconsideration of their importance.

Names of the consolidated subsidiaries(2) Name of major non-consolidated subsidiary:

Kawasaki Setsubi Kogyo Co., Ltd.

THAI KANDENKO CO., LTD.

Kanko Facilities Co., Ltd.
Kanagawa K - Techno Co., Ltd.

(Reason for excluding from the scope of consolidation)

Chiba K - Techno Co., Ltd.

All of the non-consolidated subsidiaries are small in scale and have no

Saitama K - Techno Co., Ltd.

material impact on the consolidated financial statements in terms of total

Ibaraki K - Techno Co., Ltd.

assets, net sales, net income (amount corresponding to equity interest) andTochigi K - Techno Co., Ltd.

retained earnings (amount corresponding to equity interest).

Gunma K - Techno Co., Ltd.
Tama K - Techno Co., Ltd.
Shizuoka K - Techno Co., Ltd.
HANDENKO CORPORATION
Kanko Power Techno Co., Ltd.

2. Application of equity method(1) Number of non-consolidated subsidiaries and affiliatesthat are accounted for by the equity method: None

Kanagawa Power Techno Co., Ltd.
Transmission Line Construction Co., Ltd.

(2) Name of the major non-consolidated subsidiaries andaffiliates that are not accounted for by the equity method:

Sato Kensetsu Kogyo Co., Ltd.

THAI KANDENKO CO., LTD.

Saitama Power Techno Co., Ltd.

SYSTEC ENGINEERING Co., Ltd.
NETSAVE Co., Ltd.

(Reason for excluding from the scope of the equity method)Tokyo Kouji Keibi Co., Ltd.

Non-consolidated subsidiaries and affiliates that are not accounted for by

Bay Techno Co., Ltd.

the equity method have immaterial impact on the consolidated financial

KANKO SYOJI CO., LTD.

statements in terms of net income (amount corresponding to equity

K asset management Co., Ltd.

interest) and retained earnings (amount corresponding to equity interest),

Choshi Wind Development Co., Ltd.

and are not material, taken as a whole.

Kama Solar Power Co., Ltd.
Among these subsidiaries, Kanagawa Power Techno Co., Ltd. and Saitama
Power Techno Co., Ltd., which were established on April 1, 2016, Sato

The year-end date for consolidated subsidiaries is the same as theKensetsu Kogyo Co., Ltd., whose shares were acquired by the Company

consolidated year-end date.

on October 27, 2016, and SYSTEC ENGINEERING Co., Ltd., which isa subsidiary of Sato Kensetsu Kogyo Co., Ltd., have been included

38

3. Accounting period of consolidated subsidiaries

4. Significant accounting policies(1) Evaluation methods for significant assets(a) Securities
i. Held-to-maturity securities
Amortized cost method (straight-line method)
ii. Available-for-sale securities
Securities with market quotations:
Stated at market value at the end of the year (Unrealized gains orlosses, net of applicable taxes, are comprehensively reported as acomponent of net assets and the cost of securities sold is computed
using the moving-average method.).
Securities without market quotations:
Stated at cost determined by the moving-average method.
(b) Derivatives
Fair value method(c) Inventories
i. Costs on uncompleted construction contracts
Stated at cost determined by the specific cost method.
ii. Raw materials and supplies
Stated at cost determined by the moving-average method (Balance
sheet amounts are determined by writing down the carrying amountbased on declining profitability.)(2) Depreciation methods of significant depreciable assets(a) Property, plant and equipment (excluding leased assets)
Depreciated mainly by the declining-balance method
Useful life and residual value are determined on the same basis as thatof the method provided in the Corporate Tax Act.
Useful lives of certain buildings are deemed as 30 years although
their useful lives based on the Corporate Tax Act are longer
than 30 years.
(b) Intangible assets (excluding leased assets)
Straight-line method
Software for internal use is amortized by the straight-line method overan estimated useful life (5 years).
(c) Leased assets
Leased assets related to finance lease transactions that do not transfer
ownership are depreciated using the straight-line method based on theassumption that the useful life equals the lease term, and the residual
value equals zero.

(3) Accounting policies for significant allowance and provisions(a) Allowance for doubtful accounts
The allowance for doubtful accounts is provided for to the amountsufficient to cover possible losses on collection. It consists of the estimateduncollectible amount with respect to identified doubtful receivables and an
amount calculated by applying the percentage of actual losses on collection
experienced in the past to remaining receivables.

(b) Provision for warranties for completed construction
To provide for possible future expenses under warranties for completed
construction contracts, provision for construction contracts completed
during the year is provided based on future estimated amount.
(c) Provision for loss on construction contracts
To provide for future losses on construction orders, provision for
estimated losses is provided for uncompleted construction contracts at
the end of the year that are likely to incur losses and the amount can bereasonably estimated.

(4) Accounting method relating to retirement benefits(a) Method of attributing expected retirement benefit to periods
Method of attributing expected retirement benefit to periods is allocatedby the straight-line basis (the expected benefit divided by the total
service years would be deemed as arising in each period).
(b) Amortization of actuarial gains and losses and past service cost
Past service costs are being amortized as incurred by the straight-line
method over a certain period (5 years) within the average remaining
years of service of the eligible employees.
Actuarial gains and losses are amortized by the straight-line
method over a certain period (5 years) within the average remaining
years of service of the eligible employees commencing with thefollowing periods.

(5) Accounting policies for significant revenues and expenses(a) Recognition of revenues and costs of completed construction contracts
i. Construction contracts that the outcome of the construction activity isdeemed certain during the course of the activity at the end of the year
Percentage-of-completion method (cost proportion method shallbe applied to estimate the percentage-of-completion of such
construction contract)ii. Other construction contracts
Completed-contract method(6) Significant hedge accounting method(a) Hedge accounting method
The Companies use the deferral hedge accounting method. However,
the exceptional accounting is used for interest rate swaps that meet
specified matching criteria.
(b) Hedging instruments and hedged items
Hedging instruments: Interest rate swaps
Hedged items:

Loans payable(c) Hedging policy
In accordance with internal approval procedures for derivativetransactions, interest rate fluctuation risks related to the hedged items
are hedged to a certain degree.
(d) Method for evaluating the effectiveness of hedges
The Companies evaluate the effectiveness of their hedging activities
by comparing cumulative changes in cash flows on the hedging
instruments with cumulative changes in cash flows on the related

Annual Report 201739

omitted for interest rate swaps to which the exceptional accounting(9) Other significant accounting policies for the preparationof consolidated financial statements

is applied.

Accounting method for consumption taxes:

hedged items. However, the evaluation of hedging effectiveness is

Consumption and local consumption taxes are accounted for by the tax-(7) Method and period of amortization of goodwill

exclusion method.

Goodwill is amortized by the straight-line method over the estimated periodthat the benefits are expected to be received, not exceeding 20 years.

(8) Cash and cash equivalents in the consolidated
statements of cash flows
Cash and cash equivalents include cash in hand, readily available deposits
and short-term investments with maturities of three months or less from thepurchase date whose value is not subject to significant fluctuation risk.

CHANGES IN PRESENTATION
Consolidated statement of income
Because the amount of “insurance premiums refunded cancellation,” which
was included in “other” in “non-operating income” in the year ended March
31, 2016, has exceeded 10% of the total amount of non-operating income,this item is presented as a separate item from the year ended March 31, 2017.
The consolidated financial statements for the year ended March 31, 2016
have been reclassified to reflect this change in presentation.
As a result, ¥319 million, which was presented in “other” in “nonoperating income,” has been reclassified to ¥21 million of “insurance
premiums refunded cancellation,” and ¥298 million of “other.”
Because the amount of “loss on retirement of non-current assets,” which
was included in “other” in “extraordinary losses” in the year ended March
31, 2016, has exceeded 10% of the total amount of extraordinary losses,
this item is presented as a separate item from the year ended March 31,
2017. The consolidated financial statements for the year ended March 31,
2016 have been reclassified to reflect this change in presentation.
As a result, ¥156 million, which was presented in “other” in“extraordinary losses,” has been reclassified to ¥114 million of “loss onretirement of non-current assets,” and ¥42 million of “other.”

40

ADDITIONAL INFORMATION“Implementation Guidance on Recoverability of Deferred Tax Assets”(Accounting Standards Board of Japan (“ASBJ”) Guidance No. 26, March 28,2016) has been applied effective from the year ended March 31, 2017.

NOTES TO CONSOLIDATED BALANCE SHEET*1. Amounts of non-consolidated subsidiaries and affiliates’ stocks included in investment securities
Millions of Yen

Thousands of U.S. Dollars
2017

2016
Investment securities (Stocks)

¥

¥

826

Investment securities (Investments in capital)

2017
1,377

$

12,29482–732*2. The Company revalued its land held for business use in accordance with the “Act on Revaluation of Land” (the Act No. 34, March 31, 1998) and recorded
revaluation reserve for land in the net assets section.
(a) Method of revaluation:
Revaluation was made by reasonably adjusting the market value of standard sites as stipulated by the Article 2 Clause 1 of the “Ordinance for
Enforcement of the Act on Revaluation of Land” (Ordinance No. 119, March 31, 1998) and value determined by the method for calculating taxable land
price of land holding tax in accordance with the Article 16 of the Land-holding Tax Act as defined and published by the Commissioner of National Tax
Agency as stipulated by the Article 2 Clause 4 of the “Ordinance for Enforcement of the Act on Revaluation of Land.”(b) Date of revaluation:
March 31, 2002
Millions of Yen

Thousands of U.S. Dollars
2017

2016
Difference between the fair value of the revalued land at end ofyear and its book value after revaluation¥¥(4,627)2017(3,478)$(31,053)*3. Assets pledged as collateral and secured obligations(1) Assets pledged as collateral which the Company’s subsidiaries provide and secured obligations
Millions of Yen

Thousands of U.S. Dollars
2017

2016
Cash and deposits

¥

1,380

¥

[–]

¥ 1,969

¥

2017
[–]

$ 17,580$[–]

Notes receivable, accounts receivable from completed
construction contracts and other

175

[–]

57

[–]

508

[–]

Buildings and structures

546

[546]

831

[609]

7,419

[5,437]

Machinery, vehicles, tools, furniture and fixtures

5,662[5,662]

6,669[6,669]59,544[59,544]

–

[–]

558

[–]

4,982

[–]

Land

7

[–]

7

[–]

62

[–]

Total

¥

7,772

¥ [6,209]¥ 10,094¥ [7,279]$ 90,125$[64,991]

Short-term loans payable

¥

746

¥

¥

¥

$ 7,946$ [5,366]

Investments and other assets – Other (lease deposits)

Long-term loans payable
Total

¥

[746]

890

[601]

4,967

[4,967]

6,941[6,173]

61,973[55,116]

5,713¥ [5,713]¥ 7,832¥ [6,775]$ 69,928$[60,491]

Note: The figures in the brackets show factory foundation mortgaged assets and related obligations.

Annual Report 201741

(2) Assets pledged as collateral for the loans of the investing company of the Company and its subsidiaries
Millions of Yen

Thousands of U.S. Dollars
2017

2016
Buildings and structures

¥

–

Land

2017

¥

1

$

8

26

–

232

Investment securities

44

44

392

Investments and other assets – Other (long-term loans receivable)

130

130

1,160

Total

¥

174

¥

201

$

1,794

4. Contingent liabilities
The Company provides guarantees of the employees’ loans from financial institutions.
Millions of Yen

Thousands of U.S. Dollars
2017

2016
Employees (housing loans)

¥

1,581

¥

2017
1,356

$

12,107*5. Both costs on uncompleted construction contracts relating to construction contracts that are likely to incur losses and provision for loss on construction
contracts are presented without offsetting.
		

Amount of costs on uncompleted construction contracts corresponding to provision for loss on construction contracts
Millions of Yen

Thousands of U.S. Dollars
2017

2016
¥

16

2017

¥

106

$

946

NOTES TO CONSOLIDATED STATEMENT OF INCOME*1. Provision for loss on construction contracts included in cost of sales of completed construction contracts
Millions of Yen

Thousands of U.S. Dollars
2017

2016
¥

1,849

¥

2017
3,165

$

28,258*2. The value of inventories at the year-end represents the value after writing down of the book value in accordance with the declining in profitability of assets,
and the following loss on valuation of inventories is included in cost of sales of completed construction contracts
Millions of Yen

Thousands of U.S. Dollars
2017

2016
¥

75

¥

2017
163

$

1,455

*3. Principal accounts and amounts in selling, general and administrative expenses
Millions of Yen

Thousands of U.S. Dollars
2017

2016
Employees’ salaries and allowances
Retirement benefit expenses

42¥

10,541762¥

2017
10,948699$

97,7506,241

4. Total amount of research and development expenses included in general and administrative expenses and manufacturing costs
Millions of Yen

Thousands of U.S. Dollars
2017

2016
¥

1,093

¥

2017
1,188

$

10,607*5. Impairment loss
The Companies recorded impairment losses for the following asset groups.

Location

For the year ended March 31, 2016
Purpose of Use
TypeTochigi prefecture and others

Idle assets

Number of assets

Land

27

Idle assets that impairment losses were recognized were grouped by individual properties.
The book value of the above asset group was reduced to the respective recoverable amount, due to decline in land prices of the idle assets. The decline
was recorded as impairment losses of ¥1,025 million in extraordinary losses.
The recoverable amount of the asset group was measured at the net sales price, primarily based on the market value of standard sites and the assessedvalue of inheritance tax by roadside land prices.

For the year ended March 31, 2017
Disclosure is omitted due to immateriality.

NOTES TO CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME*1. Reclassification adjustments and tax effects relating to other comprehensive income
Millions of Yen

Thousands of U.S. Dollars
2017

2016

2017

Valuation difference on available-for-sale securities:
Losses arising during the year¥

(3,718)

¥

(37)

$

(330)

Reclassification adjustments(1,094)

(24)

(214)

Amount before income tax effect(4,812)

(62)

(553)

Income tax effect

1,829

21

187

Valuation difference on available-for-sale securities(2,983)

(40)

(357)

(243)

53

473

379

–

–

Deferred gains or losses on hedges
Gains (losses) arising during the year
Revaluation reserve for land
Income tax effectRemeasurements of defined benefit plans:
(156)

653

5,830

Reclassification adjustments

(0)

(429)

(3,830)

Amount before income tax effect

(156)

224

2,000

90

(61)

(544)

Gains (losses) arising during the year

Income tax effectTotal other comprehensive income

163

(66)

Remeasurements of defined benefit plans, net of tax¥(2,914)

¥

176

1,455
$

1,571

Annual Report 201743

NOTES TO CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended March 31, 2016
1. Matters related to class and number of issued shares and class and number of treasury shares(Shares)
As of April 1, 2015

Increase

Decrease

As of March 31, 2016

Shares issued:
Common shares
Total

205,288,338––

205,288,338

205,288,338––

205,288,338

993,773

15,869–1,009,642

993,773

15,869–1,009,642

Treasury shares:
Common shares
Total

Note: Increase in number of common shares in treasury shares is due to repurchase of shares less than one unit.

2. Matter related to dividends(1) Dividends paid
Resolution

Class of shares

Total dividends

Dividends per share

Record date

Effective dateOrdinary general
meeting ofshareholders on
June 26, 2015

Common shares¥1,225 million¥6.0

March 31, 2015

June 29, 2015

Board of directors’
meeting on
October 30, 2015

Common shares¥1,225 million¥6.0

September 30, 2015

December 4, 2015

(2) Dividends whose record date fell in the year ended March 31, 2016, but whose effective date comes after March 31, 201644

Resolution

Class of shares

Total dividends

Ordinary general
meeting ofshareholders on
June 29, 2016

Common shares¥1,634 million

Source of dividend funds Dividends per share

Retained earnings¥8.0

Record date

Effective date

March 31, 2016

June 30, 2016

For the year ended March 31, 2017
1. Matters related to class and number of issued shares and class and number of treasury shares(Shares)
As of April 1, 2016

Increase

Decrease

As of March 31, 2017

Shares issued:
Common shares
Total

205,288,338––

205,288,338

205,288,338––

205,288,338

1,009,642

11,075937

1,019,780

1,009,642

11,075937

1,019,780

Treasury shares:
Common shares
Total

Notes:
1. Increase in number of common shares in treasury shares is due to repurchase of shares less than one unit.
2. Decrease in number of common shares in treasury shares is due to the sales of shares less than one unit in response to repurchase requests.

2. Matter related to dividends(1) Dividends paid
Resolution

Class of shares

Total dividends

Dividends per share

Record date

Effective dateOrdinary general
meeting ofshareholders on
June 29, 2016

Common shares¥1,634 million$14,589 thousand

¥8.0
$0.07

March 31, 2016

June 30, 2016

Board of directors’
meeting on
October 31, 2016

Common shares¥1,634 million$14,589 thousand

¥8.0
$0.07

September 30, 2016 December 5, 2016

(2) Dividends whose record date fell in the year ended March 31, 2017, but whose effective date comes after March 31, 2017
Resolution

Class of shares

Total dividends

Ordinary general
meeting ofshareholders on
June 27, 2017

Common shares¥2,451 million$21,883 thousand

Source of dividend funds Dividends per share

Retained earnings

¥12.0
$0.10

Record date

Effective date

March 31, 2017

June 28, 2017

NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS*1. Relationship between the balance of cash and cash equivalents at the end of the year and the amount on the consolidated balance sheet
Millions of Yen

Thousands of U.S. Dollars
2017

2016
Cash and deposits¥

77,360¥2017
60,073$536,366

Time deposits with maturities of more than three months(9,461)(11,461)(102,330)

Short-term investments with maturities of three months or lessfrom the purchase date

2,999

10,99998,205

Cash and cash equivalents¥

70,899¥59,612$532,250

Annual Report 201745

FINANCIAL INSTRUMENTS
1. Status of financial instruments(1) Policies on financial instruments
The Companies manage surplus funds by investing in high security
financial instruments, primarily short-term deposits and debt securities andraise funds through borrowings from banks and other financial institutions
and issuance of convertible bond-type bonds with subscription rights
to shares.
Certain consolidated subsidiaries enter into derivative transactions
to hedge interest rate fluctuation risks arising from borrowings and theCompanies do not use derivative transactions for speculative purposes.
(2) Description of financial instruments and related risks
Notes receivable, accounts receivable from completed construction
contracts and other, trade receivables, are exposed to customer credit
risk. Securities and investment securities, primarily consist of heldto-maturity debt securities and shares of companies with business
relationship, are exposed to market price fluctuation risks.
Notes payable, accounts payable for construction contracts andother, trade payables, are due within one year. Proceeds from shortterm loans payable are mainly used for operational funds requirement
and proceeds from convertible bond-type bonds with subscription
rights to shares and long-term loans payable are mainly used forcapital expenditures. Floating rate borrowings are exposed to interest
rate fluctuation risks, but are hedged by using derivative transactions(interest rate swaps).
Derivative transactions are interest rate swaps used as hedging
instruments, in order to hedge interest rate fluctuation risks forborrowings. Details of hedge accounting including hedging instruments
and hedged items, hedging policy and method for evaluating theeffectiveness of hedges are described in “SIGNIFICANT MATTERS
PROVIDING THE BASIS FOR THE PREPARATION OF CONSOLIDATEDFINANCIAL STATEMENTS, 4. Significant accounting policies (6)Significant hedge accounting method.”46(3) Risk management system for financial instruments(a) Credit risk management (risks that counterparties may default)
For trade receivables, the sales administration division regularly
monitors major counterparties’ credit status, and performs due date
controls and balance controls for each customer to mitigate and quickly
capture the collectability issues caused by deterioration in the financial
conditions.
Held-to-maturity securities are invested in debt securities withhigh credit rating, therefore, exposed to minimum credit risk.
The Companies enter into derivative transactions with financial
institutions with high credit rating in order to mitigate credit risk.
(b) Market risk management (fluctuation risks in market prices
and interest rates)
Interest rate swaps are used to mitigate interest rate fluctuation
risks for borrowings. As for securities, and investment securities,
except for held-to-maturity debt securities, the accounting
department regularly monitors fair values and issuers’(counterparties’) financial status, considers the relationships
with the counterparties, and continuously reviews the Company’s
securities holdings.
Derivative transactions are executed and managed inaccordance with the nature and limits approved by the boardof directors of the subsidiaries. The executed transactions are
periodically reported to the board of directors.

(c) Liquidity risk management associated with financing activities(payment default risks)
The accounting department prepares and updates a monthly
management plan of funds as necessary to manage theliquidity risk.

(4) Supplementary explanation on fair value of financial instruments
Fair value of financial instruments is measured based on the quoted
market price, if available, or reasonably assessed value if a quoted
market price is not available. Fair value of financial instruments, forwhich a quoted market price is not available, is calculated based on
certain assumptions, and the fair value might differ if different
assumptions are used. In addition, the contract amount of the derivativetransactions described in “DERIVATIVE TRANSACTIONS” does not
represent the market risk of the derivative transactions.

2. Fair value of financial instruments
Carrying amount and fair value of financial instruments, and differences between these values are as follows. The financial instruments whose fair values are
deemed extremely difficult to determine are excluded from the table below. (See Note 2 below)
Millions of Yen

For the year ended March 31, 2016
Carrying amount(1) Cash and deposits¥(2) Notes receivable, accounts receivable from completed construction contracts and other77,360Fair value¥

77,360Difference¥–

129,855

Allowance for doubtful accounts (*1)(529)
129,326

129,326–

1) Held-to-maturity securities

3,009

3,009

(0)

2) Available-for-sale securities

37,41037,410–(4) Notes payable, accounts payable for construction contracts and other (*2)(85,280)(85,280)–(5) Short-term loans payable (*2)

(7,686)(7,686)–(6) Convertible bond-type bonds with subscription rights to shares (*2)

(20,100)(20,450)350(7) Long-term loans payable (*2)

(5,567)(5,585)17(3) Securities and investment securities(8) Derivative transactions (*3)

¥

(575)

¥

(575)

¥

–

(*1) The amount of allowance for doubtful accounts related to notes receivable, accounts receivable from completed construction contracts and other is deducted.
(*2) The value of liabilities is shown in parenthesis.
(*3) The value of assets and liabilities arising from derivative transactions is shown at net value and with the amount in parenthesis indicating the net liability position.

Millions of Yen

For the year ended March 31, 2017
Carrying amount(1) Cash and deposits¥

60,073

Fair value¥

60,073Difference¥–

139,139(2) Notes receivable, accounts receivable from completed construction contracts and other(529)

Allowance for doubtful accounts (*1)

138,610

138,610–

1) Held-to-maturity securities

15,04815,047(0)2) Available-for-sale securities

37,511

37,511–(4) Notes payable, accounts payable for construction contracts and other (*2)(82,398)(82,398)–(5) Short-term loans payable (*2)

(10,920)(10,920)–(6) Convertible bond-type bonds with subscription rights to shares (*2)(20,080)(21,720)

1,639(7) Long-term loans payable (*2)

(7,581)(7,595)

13(3) Securities and investment securities(8) Derivative transactions (*3)

¥

(522)

¥

(522)

¥

–

Annual Report 201747

Thousands of U.S. Dollars

For the year ended March 31, 2017
Carrying amount(1) Cash and deposits$

536,366

Fair value$

536,366

Difference$–

1,242,312(2) Notes receivable, accounts receivable from completed construction contracts and other(4,723)

Allowance for doubtful accounts (*1)

1,237,589

1,237,589–

1) Held-to-maturity securities

134,357

134,348(0)2) Available-for-sale securities

334,919

334,919–(4) Notes payable, accounts payable for construction contracts and other (*2)(735,696)(735,696)–(5) Short-term loans payable (*2)

(97,500)(97,500)–(6) Convertible bond-type bonds with subscription rights to shares (*2)(179,285)(193,928)

14,633(7) Long-term loans payable (*2)

(67,687)(67,812)116(3) Securities and investment securities(8) Derivative transactions (*3)$

(4,660)$(4,660)$–(*1) The amount of allowance for doubtful accounts related to notes receivable, accounts receivable from completed construction contracts and other is deducted.
(*2) The value of liabilities is shown in parenthesis.
(*3) The value of assets and liabilities arising from derivative transactions is shown at net value and with the amount in parenthesis indicating the net liability position.

Notes:
1. The calculation methods for the fair value of financial instruments, marketable securities and derivative transactions(1) Cash and deposits
Deposits are stated at their carrying amount as the fair value approximates the carrying amount because of the short maturity.
(2) Notes receivable, accounts receivable from completed construction contracts and other
The fair value of these instruments is stated at the net present value by maturity group which is discounted considering the credit risk. The fair value withshort maturity approximates the carrying amount.
(3) Securities and investment securities
The fair value of stocks is calculated by quoted market price and the fair value of debt securities is calculated by quoted market price or quotes fromcounterparty financial institutions. Negotiable certificates of deposit and jointly operated money trusts are stated at their carrying amount as the fairvalue approximates the carrying amount because of the short maturity.
		

Information by holding purpose is described in “SECURITIES.”(4) Notes payable, accounts payable for construction contracts and other, and (5) Short-term loans payable
These are stated at their carrying amount as the fair value approximates the carrying amount because of the short maturity.
(6) Convertible bond-type bonds with subscription rights to shares
The fair value of convertible bond-type bonds with subscription rights to shares is based on the prices presented by the counterparty
financial institutions.
(7) Long-term loans payable
Fair value of long-term loans payable is based on the present value of sum of principal and interest discounted using the borrowing rate for similar new
borrowings. The fair value of long-term loans payable with variable interest rates subject to the exceptional accounting of interest rate swaps iscalculated by discounting the sum of principal and interest that were recognized together with the interest rate swaps, with the reasonably estimated rate
which would be applied if a similar new borrowing were entered into.
(8) Derivative transactions
Please refer to “DERIVATIVE TRANSACTIONS.”48

2. The carrying amount of financial instruments whose fair values are deemed extremely difficult to determine
Millions of Yen

Thousands of U.S. Dollars
2017

2016
Unlisted stocks, etc.

¥

2017

¥

3,345

3,979

$

35,526Since no quoted market price is available, it is extremely difficult to estimate future cash flows and it is deemed extremely difficult to determine their fair value,
these financial instruments are not included in “(3) Securities and investment securities.”
3. Expected redemption amount of monetary receivables and securities with maturity dates after the consolidated year-end dateMillions of Yen

For the year ended March 31, 2016

Cash and deposits

Due within one year

Due after one year
through five years

Due after five years
through ten years

Due after ten years

¥

¥

¥

¥

Notes receivable, accounts receivable from completed construction
contracts and other77,360–––129,738

117

–

–

–

10

–

–

Securities and investment securities
Held-to-maturity securities (government/municipal bonds)
Held-to-maturity securities (corporate bonds)
Held-to-maturity securities (other)
Available-for-sale securities with maturities (other)
Total

¥

3,000

–

–

–

–

–

–

–

1,000

–

–

–

211,099

¥

127

¥

–

¥

–
Millions of Yen

For the year ended March 31, 2017

Cash and deposits

Due within one year

Due after one year
through five years

Due after five years
through ten years

Due after ten years

¥

¥

¥

¥

Notes receivable, accounts receivable from completed construction
contracts and other

60,073–

132,652

6,486

–
–

–
–

Securities and investment securities
–

10

–

–

Held-to-maturity securities (corporate bonds)

8,000

–

–

–

Held-to-maturity securities (other)

6,000

1,000

–

–

Held-to-maturity securities (government/municipal bonds)

1,000

Available-for-sale securities with maturities (other)
Total

¥

207,726

–
¥

7,496

–
¥

–

–
¥

–

Thousands of U.S. Dollars

For the year ended March 31, 2017

Cash and deposits

Due within one year

Due after one year
through five years

Due after five years
through ten years

Due after ten years

$

$

$

$

Notes receivable, accounts receivable from completed construction
contracts and other536,366–

1,184,392

57,910––––

Securities and investment securities
–

89

–

–

Held-to-maturity securities (corporate bonds)

71,428–––

Held-to-maturity securities (other)

53,571

8,928

–

–

Held-to-maturity securities (government/municipal bonds)

8,928

Available-for-sale securities with maturities (other)
Total

$

1,854,696–$

66,928

–
$

–

–
$

–

Annual Report 201749

4. Scheduled amount of repayment of short-term loans payable, convertible bond-type bonds with subscription rights to shares and long-term loans payable
after the consolidated year-end dateMillions of Yen

For the year ended March 31, 2016

Short-term loans payable

Due within one year

Due after one year
through two years

Due after two years Due after three years Due after four years
Due after five years
through three years through four years through five years

¥

¥

¥

7,686

–

–

¥

–

¥

–

¥

–

Convertible bond-type bonds
with subscription rights toshares––––

20,000–Long-term loans payable

–

662

773

708

543

2,880

Total

¥

7,686

¥

662

¥

773

¥

708

¥

20,543¥

2,880
Millions of Yen

For the year ended March 31, 2017

Short-term loans payable

Due within one year

Due after one year
through two years

Due after two years Due after three years Due after four years
Due after five years
through three years through four years through five years

¥

¥

¥

10,920

–

–

¥

–

¥

–

¥

–

Convertible bond-type bonds
with subscription rights toshares–––

20,000––Long-term loans payable

–

1,582

1,029

658

342

3,968

Total

¥

10,920

¥

1,582

¥

1,029

¥

20,658

¥

342

¥

3,968

Thousands of U.S. Dollars

For the year ended March 31, 2017

Short-term loans payable

Due after one year
through two years

Due after two years Due after three years Due after four years
Due after five years
through three years through four years through five years

$

$

$

97,500

–

–

$

–

$

–

$

–

Convertible bond-type bonds
with subscription rights toshares–––178,571––

Long-term loans payable–

14,125

9,187

5,875

3,053

35,428Total

50

Due within one year$

97,500$14,125

$

9,187

$

184,446

$

3,053

$

35,428SECURITIES
1. Held-to-maturity securities
Millions of Yen

For the year ended March 31, 2016
Carrying amountMarket value

Difference

Securities whose market value exceeds their carrying amount:
Government/municipal bonds

¥

–

¥

–

¥

–

Corporate bonds

–

–

–

Other

–

–

–

Subtotal

¥

–

¥

–

¥

–

¥

10

¥

9

¥

(0)

Securities whose market value does not exceed their carrying
amount:Government/municipal bonds
Corporate bonds
Other
Subtotal
Total

2,999

2,999

–

–

(0)
–

¥

3,009

¥

3,009

¥

(0)

¥

3,009

¥

3,009

¥

(0)

Millions of Yen

For the year ended March 31, 2017
Carrying amountMarket value

Difference

Securities whose market value exceeds their carrying amount:
Government/municipal bonds

¥

¥

–

¥

¥

–

–

–

Other
Subtotal––

Corporate bonds

–

–

–

¥

10

¥

–

–

¥

–

9

¥

(0)

Securities whose market value does not exceed their carrying
amount:Government/municipal bonds¥

Corporate bonds

7,999

7,999

Other

7,038

7,038

Subtotal
Total

(0)
–

¥

15,048¥15,047¥(0)¥

15,048¥15,047¥(0)
Thousands of U.S. Dollars

For the year ended March 31, 2017
Carrying amountMarket value

Difference

Securities whose market value exceeds their carrying amount:
Government/municipal bonds

$

–

$

–

$

–

Corporate bonds

–

–

–

Other

–

–

–

Subtotal

$

–

$

–

$

–

$

89

$

80

$

(0)

Securities whose market value does not exceed their carrying
amount:Government/municipal bonds
Corporate bonds

71,41971,419Other62,83962,839Subtotal
Total

(0)
–

$

134,357$

134,348$(0)$134,357$

134,348$(0)

Annual Report 201751

2. Available-for-sale securities
Millions of Yen

For the year ended March 31, 2016
Carrying amount

Acquisition cost

Difference

Securities whose carrying amount exceeds their acquisition cost:
Stocks¥33,560¥14,873

Bonds

–

–

Other

–

–

Subtotal¥

18,687––¥33,560¥14,873¥

18,687

¥

2,849

¥

3,524

¥

(674)

Securities whose carrying amount does not exceed their acquisition
cost:
Stocks
Bonds

–

–

–

Other

1,000

1,000

–

Subtotal
Total

¥

3,849

¥

4,524

¥

(674)

¥

37,410¥19,398¥18,012Millions of Yen

For the year ended March 31, 2017
Carrying amount

Acquisition cost

Difference

Securities whose carrying amount exceeds their acquisition cost:
Stocks¥

33,842¥

15,636

Bonds

–

–

Other

–

–

Subtotal¥

18,205––¥33,842¥

15,636¥18,205

¥

2,669

¥

2,917

¥

(248)

Securities whose carrying amount does not exceed their acquisition
cost:
Stocks

–

Bonds

1,000

Other
Subtotal
Total

–

–

1,000

–

¥

3,669

¥

3,917

¥

(248)

¥

37,511¥

19,553¥

17,957
Thousands of U.S. Dollars

For the year ended March 31, 2017
Carrying amount

Acquisition cost

Difference

Securities whose carrying amount exceeds their acquisition cost:
Stocks$

302,160$

139,607$

162,544

Bonds

–

–

–

Other

–

–

–

Subtotal$

302,160$

139,607$

162,544$

23,830$26,044$(2,214)

Securities whose carrying amount does not exceed their acquisition
cost:
Stocks
Bonds

–

–

Other

8,928

8,928

Subtotal
Total

52

–
–

$

32,758$34,973$(2,214)$

334,919$

174,580$

160,330

3. Available-for-sale securities sold during the year
Millions of Yen

For the year ended March 31, 2016
Sales amount
Stocks

¥

Bonds

¥

–

Other
Total

Total gain on sales

2,537

2,537

Total loss on sales
¥

–

–
¥

1,324

–

–
¥

1,324

15
–

¥

15

For the year ended March 31, 2017
Disclosure is omitted due to immateriality.

4. Impairment loss on securities
For the year ended March 31, 2016

For the year ended March 31, 2017

Disclosure is omitted due to immateriality.

Disclosure is omitted due to immateriality.

Annual Report 201753

DERIVATIVE TRANSACTIONS
Derivative transactions to which hedge accounting is applied
Interest rate-related
For the year ended March 31, 2016
Hedge accounting method

Type of transactions

Primary hedged items

Contract amountLong-term loans payable¥3,411 million

Deferral hedge

Interest rate swaps :fixed payment, floatingreceipt

Long-term loans payable(forecasted transaction)¥1,468 million

Contract amount due after
one year

Fair value¥4,804 million¥(575) million

Notes:
1. Calculation method for fair value:
Fair value is based on the prices presented by the counterparty financial institutions.
2. Since interest rate swaps are difficult to be classified by hedged items, the totals for “contract amount due after one year” and “fair value” are shown above.

Hedge accounting method

Type of transactions

Primary hedged items

Contract amountContract amount due after
one year

Fair value

Exceptional accounting of
the interest rate swaps

Interest rate swaps :fixed payment, floatingreceipt

Long-term loans
payable¥518 million¥419 million(Note)

Note: The fair value of interest rate swaps subject to the application of the exceptional accounting is recognized together with long-term loans payable, which is designated as the hedged item, therefore their fair value isincluded in the fair value of the relevant long-term loans payable.

For the year ended March 31, 2017
Hedge accounting method

Type of transactions

Primary hedged items

Contract amountContract amount due after
one year

Fair value

Deferral hedge

Interest rate swaps :fixed payment, floatingreceipt

Long-term loans
payable¥ 4,804 million$42,892 thousand¥ 4,540 million$40,535 thousand¥ (522) million$(4,660) thousand

Primary hedged items

Contract amountContract amount due after
one year

Fair value

Long-term loans
payable¥ 1,149 million$10,258 thousand¥ 1,018 million$ 9,089 thousand(Note)

Note: Calculation method for fair value:
Fair value is based on the prices presented by the counterparty financial institutions.

Hedge accounting method

Type of transactions

Exceptional accounting Interest rate swaps :of the interest rate fixed payment, floatingreceiptswaps

Note: The fair value of interest rate swaps subject to the application of the exceptional accounting is recognized together with long-term loans payable, which is designated as the hedged item, therefore their fair value isincluded in the fair value of the relevant long-term loans payable.

54

RETIREMENT BENEFITS
1. Overview of retirement benefit plans
The Companies have funded and unfunded defined benefit plans and defined contribution plans to prepare for retirement benefits to employees. Defined
benefit pension plans (funded plans) offer retirement lump-sum payments or pensions according to the salary and service period of the eligible employees.
Retirement lump-sum payment plans (unfunded plans) offer retirement lump-sum payments according to the salary and service period of the eligible
employees. When employees retire, the Companies may provide them with additional retirement benefits, etc.
Certain consolidated subsidiaries participate in a multi-employer welfare benefit pension fund, which is accounted for in the same manner as defined
contribution plans because it is impracticable to reasonably estimate an amount of plan assets for the contributions made by the subsidiaries. In addition,
regarding the multi-employer welfare benefit pension fund, note on the multi-employer plan is omitted due to immateriality.
Certain consolidated subsidiaries use the simplified method in calculating net defined benefit liability and retirement benefit expenses.

2. Defined benefit plans(1) Changes in defined benefit obligations
Millions of Yen
Balance at beginning of year
Current service cost
Interest cost
Actuarial gains and losses
Benefit paid
Increase accompanying with new consolidation
Decrease accompanying with transfer to defined contribution plans
Balance at end of year¥

72,683
2,234
632
(252)
(5,245)–(46)
70,005¥70,005
2,244
607
(390)
(5,197)670–
67,940Thousands of U.S. Dollars
2017$
625,044
20,035
5,419(3,482)(46,401)
5,982–$
606,607

39,040
585
263
3,246
(3,855)388
239,670Thousands of U.S. Dollars
2017$
348,571
5,223
2,348
28,982(34,419)3,464
17$354,196

2017

2016
¥

¥

(2) Changes in plan assets
Millions of Yen
2017

2016
Balance at beginning of year
Expected return on plan assets
Actuarial gains and losses
Contributions by the employer
Benefits paid
Increase accompanying with new consolidation
Other
Balance at end of year¥

39,534
592
(409)
3,239
(3,917)––39,040¥¥¥(3) Reconciliation between ending balances of defined benefit obligations and plan assets and the net defined benefit liability and net
defined benefit asset reported on the consolidated balance sheet
Millions of Yen
2017

2016
Funded defined benefit obligations
Plan assets¥¥

Unfunded defined benefit obligations
Net amount of liabilities and assets recognized in consolidated balance sheet
Net defined benefit liability
Net amount of liabilities and assets recognized in consolidated balance sheet¥¥¥

50,558(39,040)
11,517
19,44730,96430,96430,964¥¥¥¥¥

48,490(39,670)
8,819
19,44928,26928,26928,269Thousands of U.S. Dollars
2017$
432,946(354,196)$
78,741
173,651$
252,401$
252,401$
252,401

Annual Report 201755

(4) Breakdown of retirement benefit expenses
Millions of Yen
Current service cost
Interest cost
Expected return on plan assets
Actuarial gains and losses recognized in the year
Past service cost recognized in the year
Other
Total

Thousands of U.S. Dollars
2017

2016
¥

2,234
632
(592)
(12)
12
218
2,491

¥

¥

2017
2,244
607
(585)
(441)
12
262
2,099

¥

$

20,035
5,419(5,223)(3,937)
107
2,339
18,741$(5) Remeasurements of defined benefit plans
Remeasurements of defined benefit plans (before tax effect) consist of the following:
Millions of Yen
Past service cost
Actuarial gains and losses
Total

Thousands of U.S. Dollars
2017

2016
¥

(12)
169
156

¥

¥

2017
(12)
(212)
(224)

¥

$

(107)
(1,892)(2,000)$(6) Accumulated remeasurements of defined benefit plans
Accumulated remeasurements of defined benefit plans (before tax effect) consist of the following:
Millions of Yen
Unrecognized past service cost
Unrecognized actuarial gains and losses
Total

¥

25
(1,876)(1,851)¥Thousands of U.S. Dollars
2017

2016
¥

2017
12
(2,088)(2,076)

¥

$
$

107
(18,642)(18,535)(7) Plan assets(a) Breakdown of plan assets
The ratio of each major category to total plan assets is as follows:
2017

2016
General account
Bonds
Equities
Other
Total

43%
35%
21%
1%
100%

42%
35%
22%
1%
100%

(b) Method of determining the long-term expected rates of return on plan assets
Expected return rate on plan assets is determined by considering the current and anticipated future portfolio of plan assets and current and anticipatedfuture long-term performance of individual asset classes that comprise the funds’ asset mix.

(8) Assumptions used in actuarial calculations
Major assumptions used in actuarial calculations
Discount rate
Expected return rate on plan assets

2016
mainly 0.9%
mainly 1.5%

2017
mainly 0.9%
mainly 1.5%

3. Defined contribution plans
The required amount of contribution to the defined contribution plans (including the multi-employer welfare benefit pension fund accounted for in the samemanner) of the Companies was ¥1,646 million and ¥1,627 million ($14,526 thousand) for the years ended March 31, 2016 and 2017, respectively.

56

DEFERRED TAX ACCOUNTING
1. Breakdown of major factors that caused deferred tax assets and liabilities
Millions of Yen

Thousands of U.S. Dollars
2017

2016

2017

Deferred tax assets:
Net defined benefit liability

¥

9,557

¥

8,708

$

77,750Depreciation and amortization

3,652

3,656

32,642

Provision for loss on construction contracts

738

1,253

11,187

Allowance for doubtful accounts

425

422

3,767

Loss carry-forward

119

255

2,276

Others

7,485

7,730

69,017

21,97822,026

196,660(2,176)(2,908)(25,964)

Subtotal
Valuation allowance
Total

¥

19,801¥

19,118$

170,696¥(5,482)¥(5,463)$(48,776)

Deferred tax liabilities:
Valuation difference on available-for-sale securities
Reserve for advanced depreciation of non-current assets(997)(1,019)(9,098)Reserve for special depreciation

(455)

(373)

(3,330)

Others

(85)

(171)

(1,526)Total
Net deferred tax assets¥(7,021)¥(7,028)$(62,750)¥

12,779¥12,089$107,937

Note: Except for above, deferred tax liabilities for land revaluation are recorded as follows:

Millions of Yen
Deferred tax liabilities for land revaluation¥

Thousands of U.S. Dollars
2017

2016
(6,830)¥2017(6,789)$(60,616)

2. Breakdown of items which caused the difference between the statutory tax rate and the effective
tax rate after adopting tax effect accounting
2017

2016
Statutory tax rate

33.1%

30.9%

(Adjustments)
Expenses not deductible for tax purposes

2.5%

1.5%

Non-taxable dividend income(0.5%)(0.3%)Per capita levy of inhabitant taxes

1.2%

1.0%

Increase in valuation allowance

0.8%

1.2%

Reversal of revaluation reserve for land

(1.7%)(0.6%)

Adjustment of deferred tax assets at end of year resulting
from tax rate changes

6.2%

–%

Others-net

0.1%(1.0%)

41.7%

32.7%

Effective tax rate after adopting tax effect accounting

Annual Report 201757

SEGMENT INFORMATION, ETC.
(Segment information)
1. Outline of reportable segment information
Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of anentity about which separate financial information is available and such information is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance.
The Companies engage in facility installation work, sales of electrical equipment, rental of real estate, leasing, sales of electrical power and others.
“Engineering” is determined to be the reportable segment.
“Engineering” includes business related to electrical work, plumbing work and various other work on facilities.

2. Method of measurement for the amounts of net sales, profit or loss, assets and other items byreportable segment
The accounting treatment regarding the reportable business segments are the same as recorded in “SIGNIFICANT MATTERS PROVIDING THE BASIS FOR THE
PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS”. The profit of reportable segments is based on operating profit. The intersegment profit andtransfers are based on trading prices in the market.

58

3. Net sales, profit or loss, assets and other items by reportable segments
Millions of Yen

For the year ended March 31, 2016
Other
(Note 1)Engineering

Adjustments(Note 2)

Total

Consolidated total(Note 3)

Net sales:
Customers¥

437,231¥

10,442

Total¥

439,479¥

45,390

Segment profit
Segment assets¥

15,149

¥

1,527

¥

16,677

¥

(260)

¥

16,416¥

370,723¥

59,124¥

429,848¥(22,166)¥

407,681

¥

3,545

¥

880

¥

4,426

¥

(105)

¥

4,320

Inter-segment

2,247

¥

447,673¥484,869

34,947¥–¥(37,195)

37,195¥447,673¥447,673(37,195)–

Other items:
Depreciation and amortization
Increase in property, plant and equipment andintangible assets

2,990

2,859

5,849

(226)

5,622

Notes:
1. The “Other” segment is a business segment which is not included in the reportable segment and includes electrical equipment sales business, real estate business, lease business and power generation business.
2. Adjustments in segment profit, segment assets and other items are elimination of internal transactions between segments.
3. Segment profit is adjusted with operating profit presented in the consolidated statement of income.

Millions of Yen

For the year ended March 31, 2017
Other
(Note 1)Engineering

Adjustments(Note 2)

Total

Consolidated total(Note 3)

Net sales:¥

461,451

Total¥

Segment profit
Segment assets

Customers

¥

9,491

¥

470,943

461,646¥

35,174¥¥24,982

¥

1,468

¥

378,006

¥

¥

3,718

¥

195

Inter-segment¥–

496,820¥¥

26,45160,936

¥

1,127

¥

25,682¥

470,943(25,877)¥

470,943

¥

(54)

¥

26,397438,942¥(14,068)¥

424,874

4,845

¥

(71)

¥

4,774

25,877(25,877)–

Other items:
Depreciation and amortization
Increase in property, plant and equipment andintangible assets

6,837

5,337

12,175(243)

11,932Thousands of U.S. Dollars

For the year ended March 31, 2017
Engineering

Other(Note 1)

Total

Adjustments(Note 2)

Consolidated total(Note 3)

Net sales:
Customers$ 4,120,098

$

1,741

Inter-segment

84,741$ 4,204,848

229,303

231,044$(231,044)–$ 4,204,848–

314,053$ 4,435,892$ (231,044)$ 4,204,848

$

$

Total

$ 4,121,839$

Segment profit$

223,053$

13,107$

Segment assets$ 3,375,053$

544,071$ 3,919,125$ (125,607)$ 3,793,517$$

10,062$$$

236,169(482)

235,687

Other items:
Depreciation and amortization
Increase in property, plant and equipment andintangible assets

33,196
61,04447,651

43,258
108,705(633)(2,169)42,625
106,535

Notes:
1. The “Other” segment is a business segment which is not included in the reportable segment and includes electrical equipment sales business, real estate business, lease business and power generation business.
2. Adjustments in segment profit, segment assets and other items are elimination of internal transactions between segments.
3. Segment profit is adjusted with operating profit presented in the consolidated statement of income.

Annual Report 201759

(Related information)
For the year ended March 31, 2016

For the year ended March 31, 2017

1. Information about products and services

1. Information about products and services

Information is omitted as similar information is described in the segment

Information is omitted as similar information is described in the segment

information.

information.

2. Information about geographical region

2. Information about geographical region(1) Net sales(1) Net sales

Information is omitted as net sales to external customers in Japan

Information is omitted as net sales to external customers in Japanaccounted for more than 90% of net sales reported in the consolidated

accounted for more than 90% of net sales reported in the consolidated

statement of income.

statement of income.

(2) Property, plant and equipment(2) Property, plant and equipment

Details of property, plant and equipment are omitted as amounts of

Details of property, plant and equipment are omitted as amounts ofproperty, plant and equipment located in Japan accounted for more

property, plant and equipment located in Japan accounted for morethan 90% of all property, plant and equipment reported on thethan 90% of all property, plant and equipment reported on the

consolidated balance sheet.

consolidated balance sheet.

3. Information about major customers

60

3. Information about major customers

Customer Name

Net sales

Related segment

Customer Name

Net sales

Related segment

Tokyo Electric Power
Company, Incorporated¥165,459 million

Engineering

Tokyo Electric Power
Company Group¥172,871 million

Engineering

Customer Name

Net sales

Related segment

Tokyo Electric Power
Company Group

$1,543,491 thousand

Engineering(Information about impairment loss in non-current assets of each reportable segment)
Millions of Yen

For the year ended March 31, 2016
Engineering
Impairment loss

¥

1,025

Other (Note)¥

Corporate/elimination
0

¥

Total

–

¥

1,025

Note: “Other” is related to real estate business.

For the year ended March 31, 2017
Disclosure is omitted due to immateriality.

(Information about amortization and unamortized balance of goodwill of each reportable segment)
For the year ended March 31, 2016

For the year ended March 31, 2017

Disclosure is omitted due to immateriality.

Disclosure is omitted due to immateriality.

(Information about gain on bargain purchase of each reportable segment)
For the year ended March 31, 2016

For the year ended March 31, 2017

Not applicable.

Disclosure is omitted due to immateriality.

(RELATED PARTY TRANSACTIONS)Transactions between related parties
Transactions between the Company and related parties
The parent company and major shareholders (limited to companies) of the Company
For the year ended March 31, 2016
Type

Name

Location

Capital stock

Description ofbusiness

Ratio of voting
rights held

Relation to the related
party

Other affiliates

Tokyo Electric Power
Company, Incorporated

Chiyoda-ku, Tokyo¥1,400,975 million

Electric powerbusiness(Held)
Direct 46.6%
Indirect 1.2%

Electric work contract

Type

Name

Nature of transaction

Other affiliates

Tokyo Electric Power
Company, Incorporated

Installation ofelectric work

Purchase of
raw materials

Amount of transaction

Account

Balance at end of year

¥30,614 million¥156,541 million

Notes receivable,accounts receivable fromcompleted construction
contracts and other
Advances received on
uncompleted construction
contracts¥

Notes payable, accounts
payable for construction
contracts and other¥ 2,208 million¥ 38,344 million

281 million

Annual Report 201761

For the year ended March 31, 2017
Type

Name

Location

Capital stock

Description ofbusiness

Ratio of voting
rights held

Tokyo Electric Power
Company Holdings,
Incorporated

Chiyoda-ku, Tokyo¥ 1,400,975 million$12,508,705 thousand

Electric powerbusiness(Held)
Direct–% Electric work contract
Indirect 47.8%

TEPCO Power Grid,
Incorporated¥
Chiyoda-ku, Tokyo$

80,000 million
714,285 thousand

General powertransmission anddistribution
business(Held)
Direct 46.6% Electric work contract
Indirect 0.3%

Name

Nature of transaction

Amount of transaction

Other affiliates

Type

Tokyo Electric Power
Company Holdings,
Incorporated

Installation ofelectric work

¥ 12,631 million$ 112,776 thousand

Other affiliates

TEPCO Power Grid,
Incorporated

Installation ofelectric work

Purchase of
raw materials¥ 146,793 million$1,310,651 thousand¥ 35,587 million$ 317,741 thousand

Relation to the related
party

Account

Balance at end of year

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥ 7,376 million$ 65,857 thousand

Advances received on
uncompleted
construction contracts¥$

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥ 22,753 million$203,151 thousand

Advances received on
uncompleted
construction contracts¥$

Notes payable, accounts
payable for construction
contracts and other¥ 1,839 million$ 16,419 thousand

132 million
1,178 thousand

626 million
5,589 thousand

Notes:
1. Above transaction amounts do not include consumption taxes and above balances at the end of the year include consumption taxes.
2. Terms and conditions of the transactions and its policies
Terms and conditions for construction orders and purchase of raw materials are determined based on arm’s length basis through negotiations considering market price, etc.
3. On April 1, 2016, Tokyo Electric Power Company, Incorporated, which was previously classified as “other affiliates,” transferred its fuel and thermal power generation business, general power transmission anddistribution business, and retail electricity business through company splits to TEPCO Fuel & Power, Incorporated, TEPCO Power Grid, Incorporated, and TEPCO Energy Partner, Incorporated, respectively. In this way,
the company introduced a holding company system and changed its trade name to Tokyo Electric Power Company Holdings, Incorporated. All the Company’s shares held by Tokyo Electric Power Company Holdings,
Incorporated were transferred to and succeeded by the said company’s wholly owned subsidiary TEPCO Power Grid, Incorporated. Accordingly, in the year ended March 31, 2017, other affiliates of the Company
became the two companies of Tokyo Electric Power Company Holdings, Incorporated and TEPCO Power Grid, Incorporated.

62

PER SHARE INFORMATION
Yen

U.S. Dollars
2017

2016
Net assets per share¥

942.42¥

2017
1,013.33$

9.04

Earnings per share

46.07

86.11

0.76

Diluted earnings per share

46.06

79.34

0.70

Notes:
1. The basis of calculating earnings per share and diluted earnings per share is as follows:

Millions of Yen

Thousands of U.S. Dollars
2017

2016

2017

Earnings per share
Profit attributable to owners of parent

¥

9,412

¥

17,591$

157,062

Amount not attributable to common shareholders

–

–

–

Profit attributable to owners of parent applicable tocommon shares

9,412

17,591

157,062

Thousands of Shares
2017

2016
Weighted average number of common shares during the year

204,273204,286

Millions of Yen

Thousands of U.S. Dollars
2017

2016

2017

Diluted earnings per share
Adjustment of profit attributable to owners of parent

–

(13)

(116)

[Interest expenses, net of tax included in the above][–][(13)][(116)]

Thousands of Shares
2017

2016
Increase in common shares

47

17,256[Convertible bond-type bonds with subscription rights toshares included in the above][47][17,256]

Overview of dilutive securities that are not included in thecomputation of diluted earnings per share because of theiranti-dilutive effect––

2. The basis of calculating net assets per share is as follows:

Millions of Yen
2017

2016
Total net assets¥

Thousands of U.S. Dollars

197,980¥2017
213,356$

1,904,964

Amount deducted from total net assets

5,464

6,364

56,821[Non-controlling interests included in the above][5,464][6,364][56,821]

Total net assets related to common shares

192,516

206,991

1,848,133

Thousands of Shares
2017

2016
Number of common shares outstanding at end of year

204,278

204,268

SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.

Annual Report 2017

63

CONSOLIDATED SUPPLEMENTAL SCHEDULES(Schedule of bonds)
Company name

Issue typeIssuance dateKandenko Co.,Ltd.

Euro-yenconvertiblebond-type bonds
with subscription
rights to sharesdue 2021, subject
to call

March 31,
2016

Total

–

–

As of April 1,
2016

As of March 31,
2017Interest rate (%)

Collateral

Maturity¥ 20,100 million¥ 20,080 million$179,464 thousand $179,285 thousand

–

None

March 31,2021

¥ 20,100 million¥ 20,080 million$179,464 thousand $179,285 thousand

–

–

–

Notes:
1. Information on convertible bond-type bonds with subscription rights to shares is as follows:

Shares to be issued

Common shares

Issuance price of subscription rights to shares

GratisIssuance price of shares¥$

Total issuance value¥ 20,100 million$179,464 thousand

Total issuance value of shares issued through the exercise of subscription rights to shares¥

Grant ratio of subscription rights to shares (%)

100

Exercise period of subscription rights to shares

April 14, 2016 to March 17, 2021

1,159
10.34

–

millionUpon the exercise of each of the subscription rights to shares, the bonds relating to the subscription rights to shares shall be contributed. The value of the bonds shall be the same as their face amount.

2.The redemption schedule for five years subsequent to March 31, 2017 is summarized as follows:64

Due within one year

Due after one year
through two years

Due after two years
through three years

Due after three years
through four years

Due after four years
through five years

–

–

–

¥ 20,000 million$178,571 thousand–

(Schedule of loans)
As of April 1, 2016

As of March 31, 2017

Short-term loans payable¥ 7,134 million$ 63,696 thousand¥ 10,122 million$ 90,375 thousand

0.7–

Current portion of long-term loans payable¥$

552 million
4,928 thousand¥$

798 million
7,125 thousand

2.0–

Current portion of lease obligations¥$

395 million
3,526 thousand¥$

425 million
3,794 thousand––

Long-term loans payable (excluding current portion of
long-term loans payable)¥ 5,567 million$ 49,705 thousand¥ 7,581 million$ 67,687 thousand

2.2

2018 to 2032

Lease obligations (excluding current portion of leaseobligations)

¥
$

¥
$

795 million
7,098 thousand–2018 to 2024

–

–

–

–

¥ 14,311 million$ 127,776 thousand¥ 19,723 million$ 176,098 thousand––

662 million
5,910 thousand

Other interest-bearing debt
Total

Average interest rate (%)

Maturity

Notes:
1. Interest rates and balances at the end of the year are used to calculate average interest rate. The average interest rate of lease obligations has not been presented since lease obligations before deducting the amountequivalent to interest expense included in total lease payments are recorded on the consolidated balance sheet.
2. The redemption schedule of long-term loans payable and lease obligations (excluding current portion) for five years subsequent to March 31, 2017 is summarized as follows:

Due after one year
through two years

Due after two years
through three years

Due after three years
through four years

Due after four years
through five years

Long-term loans payable¥ 1,582 million$ 14,125 thousand¥$

1,029 million
9,187 thousand¥$

658 million
5,875 thousand¥$

342 million
3,053 thousand

Lease obligations

¥
$

¥
$

245 million
2,187 thousand¥$

161 million
1,437 thousand¥$

43 million
383 thousand

325 million
2,901 thousand(Schedule of Asset Retirement Obligations)
The amounts of asset retirement obligations as of April 1, 2016 and March 31, 2017 are less than 1% of the total liabilities and net
assets as of April 1, 2016 and March 31, 2017. Therefore, the disclosure is omitted.

OTHERS
Quarterly information for the year ended March 31, 2017
Cumulative period

First quarter

Second quarter

Third quarter

Fourth quarter

Net sales¥ 105,726 million¥ 218,317 million¥ 313,760 million¥ 470,943 million$ 943,982 thousand $ 1,949,258 thousand $ 2,801,428 thousand $ 4,204,848 thousand

Profit before income taxes¥$

6,880 million
61,428 thousand¥ 13,108 million¥ 16,991 million¥ 27,118 million$ 117,035 thousand $ 151,705 thousand $ 242,125 thousand

Profit attributable to owners of parent¥$

4,485 million
40,044 thousand¥$

8,626 million
77,017 thousand¥$

11,199 million
99,991 thousand

Earnings per share

¥
$

21.96
0.19

¥
$

42.23
0.37

¥
$

54.82
0.48

Each quarter
Earnings per shareFirst quarter
¥
$

21.96
0.19

Second quarter
¥
$

20.27
0.18

¥ 17,591 million$ 157,062 thousand¥$

Third quarter
¥
$

12.59
0.11

86.11
0.76
Fourth quarter

¥
$

31.29
0.27

Annual Report 201765

Independent Auditors’ Report66Company Profile
HistoryTime
Sep. 1944

Notes
Kyoritsu Kogyo Co., Ltd., and seven other companies merge to rationalize their electrical engineering work. Kanto Haiden Co., Ltd. joins the new group to form
Kanto Denki Koji Co., Ltd., an electrical engineering company with capital of ¥3 million and a head office at 2 Tameike, Akasaka Ward, Tokyo. Eight regional
branches are established in Kanagawa, Saitama, Chiba, Gunma, Tochigi, Ibaraki, Yamanashi, and Numazu (now Shizuoka), and operations begin.

Mar. 1948
Oct. 1949
Jan. 1959
Sep. 1960
July 1961
Oct. 1961
May 1962
Jan. 1970
Feb. 1970

The Tama Branch is established.

May 1970
Aug. 1970
Apr. 1971
June 1973
Apr. 1974
June 1976
July 1979
Oct. 1981
Sep. 1984
Nov. 1984
Jan. 1985
May 1985
July 1987
Dec. 1988
Apr. 1990
July 1991
July 1993
July 1994
July 1995
July 1997

The air-conditioning duct business (now the environmental facilities and systems and renovation business) is launched.

Oct. 1997
July 1998
Nov. 2000
Aug. 2001
Dec. 2001
May 2003
June 2004
Apr. 2008
Oct. 2012
Mar. 2013
Oct. 2014
July 2015
Mar. 2016
Apr. 2016
Oct. 2016

In accordance with the Construction Business Act, the Company receives ministerial registration No. 250, which it renews every two years.
The Osaka (now Kansai) Branch is established.
The head office moves to 4-1-18 Yushima, Bunkyo Ward, Tokyo.
The Company invests in Oyo Denki Co., Ltd. (now KANKO SYOJI CO., LTD.).
The Company’s stock is listed on the Second Section of the Tokyo Stock Exchange (capital: ¥350 million).
Kanto Sekizai Kogyo Co., Ltd. (now K Lease Co., Ltd.) is established.
The Sendai (now Tohoku) Branch is established.
The Shinetsu (now Nagano) Branch is established.
The civil engineering business is launched.
The Company’s stock listing moves to the First Section of the Tokyo Stock Exchange (capital: ¥1,700 million).
The Sapporo (now Hokkaido) Branch is established.
The Company invests in Dai-ichi Kigyo Co., Ltd. (now Kanko Power Techno Co., Ltd.).
The Comprehensive Education Center (now the Education & Training Center) is established.
Due to revision of the Construction Business Act, the Company receives ministerial permit (Special – 49) No. 3885, which it currently renews every five years.
The Company receives ministerial permit (Ordinary – 51) No. 3885, which it currently renews every five years.
The nuclear energy-related business is launched.
The Singapore Office is established.
The Company name is changed to Kandenko Co., Ltd.
Kanko Fudousan Kanri Co., Ltd. (now K Asset Management Co., Ltd.) is established.
The Company invests in Tokyo Kouji Keibi Co., Ltd.
The Company’s first issue of unsecured convertible bonds (¥10 billion) takes place.
Kanko Maintenance Service Co., Ltd. (now Kanko Facilities Co., Ltd.) is established.
The head office moves to 4-8-33 Shibaura, Minato Ward, Tokyo (its present location).
The Nagoya Branch is established.
The Kyushu Branch is established.
The Tsukuba Technology Research & Development Institute (now the Technology Research & Development Institute) is established.
Bay Techno Co., Ltd. is established.
The Niigata Branch is established.
The Chuo (now Tokyo) Branch is established.
Ibaraki K-Techno Co., Ltd., Tochigi K-Techno Co., Ltd., Gunma K-Techno Co., Ltd., Yamanashi K-Techno Co., Ltd. (now Tama K-Techno Co., Ltd.), and Shizuoka
K-Techno Co., Ltd., are established.
Kanagawa K-Techno Co., Ltd., Chiba K-Techno Co., Ltd., and Saitama K-Techno Co., Ltd., are established.
NETSAVE Co., Ltd. is established.
The Taiwan Branch is established.
In accordance with the Building Lots and Buildings Transaction Business Act, the Company receives a Building Lots and Building Transactions Business License(1) No. 80352 from the governor of Tokyo, which it renews every five years.
The Company invests in Hankyu Denki Koji Co., Ltd. (now HANDENKO CORPORATION).
The Company invests in Transmission Line Construction Co., Ltd.
The Company invests in Kawasaki Setsubi Kogyo Co., Ltd. (listed on the Second Section of the Nagoya Stock Exchange).
The Company invests in Choshi Wind Development Co., Ltd. (and launches the power generation business).
Kama Solar Power Co., Ltd. is established.
The regional headquarters system is introduced, and power line engineering work is put under the head office’s direct jurisdiction.
The Fukushima Headquarters is established.
The Kanko Fudousan Kanri Co., Ltd. absorbs K Lease Co., Ltd. in a merger operation and changes its trading name to K Asset Management Co., Ltd.
The Company issues ¥20 billion of euro-yen convertible bond-type bonds with subscription rights to shares due 2021.
Kanagawa Power Techno Co., Ltd. and Saitama Power Techno Co., Ltd. are established.
The Company invests in Sato Kensetsu Kogyo Co., Ltd. (indirect ownership of the latter’s subsidiary Systec Engineering)

Annual Report 201767

Stock Information (As of March 31, 2017)
The shares of common stock of theCompany are listed on the First

Principal Shareholders

Section of the Tokyo Stock Exchange.
On March 31, 2017, there were a totalof 8,712 shareholders.
The following table lists the 10
largest shareholders appearing on theregister at that date.

Name

Shares held as a percentage
of total outstanding shares

1

TEPCO Power Grid, Inc.

94,753,552

46.15

2

Japan Trustee Services Bank, Ltd. (Trust Account)

10,391,000

5.06

3

Mizuho Bank, Ltd.

8,121,839

3.95

4The Master Trust Bank of Japan, Ltd. (Trust Account)

7,683,000

3.74

5Kandenko Group Employees Shareholding Association

5,965,079

2.90

6Japan Trustee Services Bank, Ltd. (Trust Account 9)2,644,000

1.28

7Japan Trustee Services Bank, Ltd. (Trust Account 5)

1,644,000

0.80

8EVERGREEN

1,483,000

0.72

9The Nomura Trust and Banking Co., Ltd. (Investment Trust Account)

1,402,000

0.68

10

STATE STREET BANK AND TRUST COMPANY 505001

1,342,784

0.65

135,430,254

65.97

Total

Number of Shares Held by Type of Shareholder

Stock-Related Information

Treasury stock
0.50%(0.49%)

Fiscal year-end

March 31

Ordinary general
meeting of shareholders

June

Record dates for
dividend payments

March 31 for the fiscal year-end dividend.
September 30 for the interim dividend.

Record date

The date on which shares must be owned forshareholders to exercise voting rights at the general
meeting of shareholders is March 31. If other votes
are required, the record date will be set andannounced in advance.

Method of public
notification

Notification will be given electronically. However, if
we cannot issue an electronic notification, we willplace a notice in the Nihon Keizai Shimbun,
published in Tokyo. Kandenko’s URL for public
notices is as follows.
http://www.kandenko.co.jp/index.html

Transfer agent

Sumitomo Mitsui Trust Bank, Limited
1-4-1 Marunouchi, Chiyoda-ku,
Tokyo 100-8233, Japan

Transfer agent contact
point (inquiries about
stock-related matters)

Sumitomo Mitsui Trust Bank, Limited
Stock Transfer Agency Department
2-8-4 Izumi, Suginami-ku, Tokyo 168-0063, Japan
Tel: 0120-782-031 (toll-free)

Individuals,
other14.82%(14.89%)Foreigncompanies, etc.
13.57%(12.20%)Total number of shares issued
205,288,338 shares

Note: Figures in parentheses show
data as of March 31, 2016

Financial
institutions
21.43%(22.54%)

Japanesecompanies
49.68%(49.88%)Monthly Stock Price(Unit : Yen)
1,200

1,000

800

600

0

68

Number ofshares held

Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
2016
2017

Board of Directors and Audit & Supervisory Board Members (As of June 27, 2017)
ChairmanKiyoshi Goto

Senior Managing
Director

Hiroshi Nomura

Vice Chairman

Hiroshi Mizue

Shinichirou Kitayama

Hiroyuki Kaneko

President and Executive
Officer

Yoshimi Morito

Senior Managing
Directors
and Executive Officers

Shuichi Yamaguchi

Sumihito Okawa(outside)

Executive Vice
Presidents

Shigenori Takaoka

Toru Yukimura

Takashi Suetsuna(outside)

Shoichiro Kashiwabara

Shigeru Nagaoka

Takehiro Yamaguchi(outside)

Toshio Nakama

Eimei Shimura

Executive Vice Presidents
and Executive Officers

Kenichi Takahashi

Directors (outside)

Audit & Supervisory Board
Members

Haruhiko Terauchi

Takashi Uchino
Masataka Ishizuka

Network
Domestic Offices

Overseas Offices

Head Office

4-8-33 Shibaura, Minato-ku, Tokyo, JapanTokyo Branch

4-8-33 Shibaura, Minato-ku, Tokyo, Japan

Kanagawa Branch 1-1-8 Hiranuma, Nishi-ku, Yokohama, Japan
Chiba Branch

2-1-24 Shinjuku, Chuo-ku, Chiba, Japan

Saitama Branch

3-22-15 Negishi, Minami-ku, Saitama, Japan

Ibaraki Branch

2-7-14 Jonan, Mito-shi, Ibaraki, Japan

Tochigi Branch

91-1 Imaizumicho, Utsunomiya-shi, Tochigi, Japan

Gunma Branch

215-6 Furuichimachi, Maebashi-shi, Gunma, Japan

Yamanashi Branch

4-12-25 Chuo, Kofu-shi, Yamanashi, Japan

Shizuoka Branch

8-12 Yoneyamacho, Numazu-shi, Shizuoka, Japan

Tama Branch

2-24-6 Myojincho, Hachioji-shi, Tokyo, Japan

Kansai Branch

Nakanoshima Festival Tower 20th Floor,
2-3-18 Nakanoshima, Kita-ku, Osaka, Japan

Nagoya Branch

Nagoya Toho Building 6th Floor,
1-2-7 Sakae, Naka-ku, Nagoya, Japan

Kyushu Branch

Yakuin Business Garden 4th Floor,
1-1-1 Yakuin, Chuo-ku, Fukuoka, Japan

Hokkaido Branch

Takeda Resona Building 3rd Floor,
4-1-2 Kitaichijo Nishi, Chuo-ku, Sapporo, Japan

Tohoku Branch

Sendai Daiichi Seimei Tower Building,
4-6-1 Ichibancho, Aoba-ku, Sendai, Japan

Nagano Branch

1629-32 Midoricho, Nagano, Japan

Singapore
Branch6001 Beach Road, #20-03/04 Golden Mile Tower,
Singapore 199589

Taiwan Branch

6F-1, No. 45, Section 1, Minchuan Eastern Road,
Taipei, Taiwan

Yangon Branch

BLK-31, Room 21, 2nd Floor, Shwe Ohn Pin Apartment,
Yanshin Road, Yankin Township, Yangon, Myanmar

Indonesia
Representative
Office5th Floor, Summitmas II Building, Jl. Jend. Sudirman
Kav. 61-62, Jakarta 12190 Indonesia

Annual Report 2017

69

KANDENKO CO., LTD. Annual Report 2017 For the year ended March 31, 2017

http://www.kandenko.co.jp/en/

This annual report is printed on Forest Stewardship CouncilⓇ (FSC)-certified paper made of wood from responsibly managed forests.
It was also printed using vegetable oil inks.

Printed in Japan