株式会社関電工
アニュアルレポート 2018 2018年 3月期

https://www.kandenko.co.jp/

This
corporate report is printed責任ある管理がされた森林からの材を含む
on Forest Stewardship Council (FSC)-certified
made並びにof woodfrom responsiblyを使用しています。
managed forests.
®認証紙」
このコーポレートレポートは、「FSCpaper「ベジタブルインク」
It was also printed using vegetable oil inks.

Integrated Report 2021

| Stock Information | (As of March 31, 2021)

Greetings

CONTENTS

Thank you for your interest in “KANDENKO INTEGRATED REPORT 2021.”

P01………………… Greetings/Table of Contents

We provide end-to-end engineering services ranging from planning, design and execution tomaintenance and renovation, regarding electrical work and information and communication work bymaking use of our proprietary technologies, expertise and methods in the fields of building
infrastructure, telecommunications infrastructure and electric power infrastructure.
Recently, we have been focusing on utilizing the technologies and expertise we have cultivated to dateto develop solar, wind power and other renewable energy power generation businesses, and expand
into railways, water supply and other social infrastructure fields, and also to develop robotic and IoTdriven technologies.
Furthermore, in order to facilitate the sustainable future development of the Company, which is a laborintensive company, we are striving to nurture human resources that can support our future by, forinstance, enhancing and strengthening our employee education, promoting the active participation of
women, and reforms for work practices and annual leave systems.

P03………………… Message from the President

Going forward, the Kandenko Group remains committed to pursuing thorough compliance andimproving safety and quality as the cornerstone of good management. We intend to devote all ourenergies to the creation of high corporate value and the formation of strong corporate structures, andcontribute to the enduring development of society as a partner that supports social infrastructure forsafe and comfortable daily living.

…………………
The sharesof commonof the Company
P09
Atstocka Glance

Principal Shareholders

are listed on the First Corporate
Section ofMotto,
the Tokyo
Corporate Philosophy andP11…………………

Stock Exchange.

Charter of Corporate Behavior………………… Value Creation Trajectory
P13 OnMarch 31, 2021, there were a total of

Number of
Shares held as ashares held percentage of total(in thousands) outstanding shares

Name…………………
P15
Creationtable
Process
12,388shareholders. Value
The following
lists

1 TEPCO Power Grid, Inc.
…………………
P17
Medium-Term
ManagementPlan
the 10 largest shareholders appearing on the
2 The Master Trust Bank of Japan, Ltd. (Trust Account)
P17 …………………
registerat that date. Growth Strategy Overview (Fiscal 2016-2020)
P18 ………………… Group Business Environment and3 Ultimate
CustodyDirection
Bank of Japan, Ltd. (Trust Account)
P19 ………………… Fiscal 2021-2023 Medium-Term Management Plan
4 Kandenko Group Employees Shareholding Association
P23 ………………… Business Review by Division
P23 ………………… Building Infrastructure Work
5 Mizuho Bank, Ltd.
P25 ………………… Social Infrastructure Work
6 STATE STREET BANK AND TRUST COMPANY 505001
P31 ………………… Research and Development Activities
P35 ………………… Sustainability
7 THE BANK OF NEW YORK, TREATY JASDEC ACCOUNT
P35 ………………… Environmental Conservation
8 GOVERNMENT OF NORWAY
P37 ………………… Coexisting with Society
P39 ………………… Safety and Quality Initiatives
9 JP MORGAN CHASE BANK 385781
P41 ………………… Employee Initiatives
10 Custody
P45 ………………… Roundtable Discussion with Outside
DirectorsBank of Japan, Ltd. (Trust Account 5)
Treasury stock…………………
P49
Corporate Governance0.50%(0.50%)
P53 ………………… Management Structure Individuals, otherForeign
13.91%
Numberof Shares Heldby Type of Shareholder (As of March
31, 2021)…………………
P57
Financial & Corporate Data
companies, etc.
(13.69%)16.92% stock
Treasury(16.42%)0.50%(0.50%)

94,75346.38

10,537

5.15

7,042

3.44

5,994

2.93

4,061

1.98

2,436

1.19

2,128

1.04

1,597

0.78

1,584

0.77

1,563

0.76

Stock-Related Information

Fiscal year-end

March 31

Total number ofshares issued
205,288,338 shares

Individuals, other
Ordinary general
June
Financial
13.91%
institutions
companies, etc.
meeting of shareholders(13.69%)18.41%
16.92%
To facilitatecommunication with its stakeholders, the KandenkoGroup conveys multifaceted information by means of(19.17%)(16.42%)
March 31 for the fiscal year-end dividend.
Record dates for
ForeignToolmapvarious tools. In addition Total
to thenumber
information
provided in this report, we
makepayments
available September
on our website
services,
dividend
30 forthe
theGroup’s
interim dividend.
ofsharesinformation.
issuedCSR activities, and other diverse
Note: Figures in parentheses show data as of March 31, 2020.

Financial
Japanese institutions
companies
18.41%
50.26%(19.17%)(50.22%)

Note: Figuresin parentheses
showResults
data as ofand
March 31, 2020.
Quarterly
Financial

Integrated
Japanesecompanies Report50.26%
Method of public(50.22%)205,288,338 shares

Record date

The date on which shares must be owned

The Company’s website: https://www.kandenko.co.jp/
for shareholders to exercise voting rights at

Reference Documents for
Financial Results

Securities Reportnotification

Financial information

Monthly Stock Price(Unit: Yen)

1,200

the general meeting of shareholders is March
31. If other votes are required, the record
date will be set and announced in advance.
Notification will be given electronically.
Corporate
Governance
ReportHowever,if wecannot issue
an electronic
notification, we will place a notice in the Nihon
KeizaiNon-financial
Shimbun, publishedin Tokyo. Kandenko’s
information
URL for public notices is as follows.
https://www.kandenko.co.jp/

Transfer agent

Hiroshi Yamaguchi

Toshio Nakama

Chairman and Director

President and Director

1,000

Editorial Policy(Unit: Yen)
This integrated report introduces various aspects of the Compa800
1,200

ny for the purpose of facilitating stakeholders’ understanding ofour businesses and medium- to long-term value creation.

600
1,000

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

From April 1, 2020 to March 31, 2021
(Includes
activities outside
this period)
Transferreports
agenton some
Sumitomo
Mitsui Trust
Bank, Limited

contact point(inquiries about stockrelated matters)

Stock Transfer Agency Department
2-8-4 Izumi, Suginami-ku, Tokyo 168-0063,
Japan
Tel: 0120-782-031 (toll-free)<Notes on proper use of the business result forecast>
8000
The Apr.
business
forecast
forward-looking
statements
herein are based on the information currently available
May result
June July
Aug. and
Sep. other
Oct. Nov.
Dec. Jan. Feb.
Mar.
and certain assumptions
deemed reasonable by the Company,
and thus actual results may differ significantly from these
600
2020
2021
forecasts due to a wide range of factors.
0

1

KANDENKO

Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
2020

2021

Integrated
Report2021 20212 100
Integrated
ReportIntegrated Report 2021

| Message from the President |Kandenko will pursue reform as a
future-creating Company.
Formulating a New Medium-Term
Management Plan Together with Our
Employees
Fiscal 2020 marked the final year of our five-year growthstrategy in which we completed all relevant initiatives
and also turned our attention to formulating a new
three-year Medium-Term Management Plan. Unlike theMedium-Term Management Plan that we have pursued
to date, this plan constitutes the first three years of theroadmap towards creating our ideal company in 2044,
our 100-year anniversary, and was formulated throughrepeated discussions involving employees in their 30s and
40s who will be responsible for the future of thecompany. If we look ahead twenty years or more, it isclear that our business portfolio will no longer be viable
in its current form. We have to start transforming ourbusiness right now in preparation for the diversificationin customer needs that will accompany the changes weare seeing in society, such as decarbonization, climatechange, and increasingly severe natural disasters. We
have announced a new slogan to go with the new
Medium-Term Management Plan, “Change! And Create
the Future from a New Starting Point” to inspire each
employee to recognize such reality and think forthemselves what to do about it. We consider changing

employee awareness to be an important initiative for us
to “change” in our path for the future.
In the face of a rapidly changing society, Kandenko’s
strength lies in providing value as a one-stop “assembler”
that exploits our own technologies and expertise andcombines a vast variety of products and the work
execution abilities of our business partners in an optimal
manner to meet customer needs. To do that, we have tobe able to boast a wide range of knowledge of rapidly
evolving advanced technologies and manufacturer
products, as well as a framework that remains constantly
close to customers and consistently capable of supportingand solving their challenges. As customer needs continue
to change in tune with the changing times, we want to
act aggressively and boldly to ensure we accurately
anticipate and grasp the changing trends.
Ever since the foundation of the Company, Kandenko
has been consistently involved in projects of a highly
public nature, such as maintaining and building electric
power infrastructure, and we have steadily built a strong
bond of trust with people in the society over many years.
We intend to continue keeping the stable supply ofelectric power while maintaining that trust and fulfillingsociety’s expectations for the Company.
At the same time, in terms of our operating
environment, we have to improve productivity more thanever as upper restrictions on working hours are set to be

Fiscal 2020 Business Results
Consolidated results (Billions of Yen)

Non-consolidated results (Billions of Yen)

Net sales of completed
construction contracts

New orders received¥507.5 (down 1.2% YoY)

Net sales of completed
construction contracts

486.3 (down 10.0% YoY)

Operating profit

24.7 (down 11.0% YoY)

Ordinary profit

25.9 (down 10.2% YoY)

Profit17.5 (down 9.7% YoY)

Operating profit

Ordinary profit¥556.0 (down 9.8% YoY)

30.0 (down 13.4% YoY)

31.0 (down 12.7% YoY)

President and Executive Officer

Toshio Nakama

3

KANDENKO

Profit attributable toowners of parent

20.1 (down 10.5% YoY)

Integrated Report 2021

4

Integrated Report 2021

| Message from the President |applied to the construction industry from April 2024. In
order to improve operational efficiency and further
reduce workloads, we will continue to maintain a systemthat supports power infrastructure and strive to realize ahealthier work-life balance for our employees.

Profitable Structures Created Under
Our Five-year Growth Strategy
In fiscal 2020, private construction investment declined
significantly in the wake of the COVID-19 pandemic thathas stubbornly persisted from the end of fiscal 2019, andcapital investment in electric power remained on acontracting trend. Against that backdrop, Kandenko’s
new orders received declined slightly year on year to¥507,522 million and net sales of completed construction
contracts also declined in all areas including electricalengineering, environmental facilities and systems, andrenovation work as the construction contracts brought
forward from fiscal 2019 decreased.
As a result, the Kandenko Group’s consolidated
business results for fiscal 2020 were as follows; net salesof completed construction contracts totaled ¥556,045
million (down 9.8% year on year), operating profit

totaled ¥30,041 million (down 13.4% year on year),ordinary profit stood at ¥31,043 million (down 12.7%
year on year), and profit attributable to owners of parent
amounted to ¥20,147 million (down 10.5% year on year).
Dampened appetite for capital investment in the faceof the COVID-19 pandemic hit electrical engineering,
environmental facilities and systems, and renovation work
especially hard, and, while there was less stagnation inlarge-scale new construction projects, we saw manycases of cancellations and postponements of renewal
projects and small-scale projects, resulting in a decline in
on-site operations. However, an increase in renewableenergy power generation work and information &communication work helped offset the overall decline tosome extent.
So far in fiscal 2021, information & communication
work, and electric power & civil engineering work havebeen supporting net sales of completed construction
contracts in the first quarter and generating a recovery in
profits. While net sales of completed construction
contracts for electrical engineering, environmental facilities
and systems, and renovation work still continue to decline,
new orders received have started to increase again.
Our fiscal 2021 business forecasts include new orders
received of ¥470,000 million (1.2% increase year on

year*). Consolidated forecasts include net sales ofcompleted construction contracts of ¥521,000 million(1.6% increase year on year*), operating profit of¥30,300 million (0.9% increase year on year), ordinary
profit of ¥31,300 million (0.8% increase year on year)
and profit attributable to owners of parent of ¥20,400
million (1.3% increase year on year).
Looking back at the growth strategy we had promoted
over the five years since fiscal 2016, while sales andprofits inevitably declined in the final fiscal year due tothe impact of the COIVD-19 pandemic that we had notpredicted when the plan was formulated, we did achievea record consolidated result in fiscal 2019. On the profit
front in particular, we have been able to maintain a levelof operating income in excess of ¥30 billion since fiscal
2018, and we believe that we have built a frameworkthat will enable us to overcome changes in the market
environment and maintain profits.
In our growth strategy, we promoted our initiative
based on the five items we identified as themes to focus
on, namely “a business base reinforcement strategy,” “abusiness field expansion strategy,” “measures tocontribute to a stable electric power supply,” “a humanresources strategy” and “an investment strategy to boost
work execution abilities.”

Among the above, regarding the business basereinforcement, our early collection of sales informationand strategic sales activities helped increase new orders
received. In addition, regarding our Social Infrastructure
Work division, I believe that we were able to win further
orders by introducing sales methods used in our General
Construction Work division that has served as the driverof our corporate growth to date.
In terms of expanding our business fields, while
renewable energy power generation work has been
increasing, we need to secure more interconnection line
work and strengthen our work execution abilities. Ourdevelopment of water supply, roads, and railway work
has not progressed sufficiently, so this is an issue for the
future.
In terms of contributing to a stable electric power
supply, transmission lines and power distribution lines
engineering work has been progressing strongly and we
responded swiftly on disaster recovery. However, ourconstruction frameworks remain tight against the
backdrop of increasing work volumes and we need to
improve productivity. This problem is linked to both
strategies of securing human resources and promoting
investment to boost work execution abilities. We will
focus on training construction personnel, which have

Fiscal 2021 Business Results (Forecast)
Consolidated results (Billions of Yen)

Non-consolidated results (Billions of Yen)

Net sales of completed
construction contracts

New orders received¥470.0 (up 1.2% YoY)

Net sales of completed
construction contracts

452.0 (up 2.0% YoY)

Operating profit

24.8 (up 0.3% YoY)

Operating profit

Ordinary profit

Profit attributable toowners of parent¥521.0 (up 1.6% YoY)

30.3 (up 0.9% YoY)

31.3 (up 0.8% YoY)

20.4 (up 1.3% YoY)

Ordinary profit

26.0 (up 0.3% YoY)

Profit17.6 (up 0.4% YoY)

Growth Strategy (Fiscal 2016-2020)

Becoming a 100-Year Company
supporting society
Strategic themes
Building community-based maintenance services
	Developing one-stop services and expanding renewal
construction frameworks

Net sales of completed construction contracts/operating profit (consolidated)
Net sales of completed construction contracts (Billions of Yen)
Operating profit (Billions of Yen)
616.1
563.5
556.0
507.2
470.9

26.3

29.2

30.0

34.6

30.0

	Pursuing initiatives for our renewable energy power
generation business
Enhancing working environments
Investing in increasing our work execution abilities

2016

2017

2018

2019

2020

*The above predicted year-on-year changes for new orders received and net sales of completed construction contracts are reference values calculated after applying the
Accounting Standard for Revenue Recognition, etc. to the fiscal 2020 results.

5

KANDENKO

Integrated Report 2021

6

Integrated Report 2021

| Message from the President |increased on the back of enhanced recruitment activities
over the past five years, and at the same time promotelabor-saving and manpower saving measures in onsite
construction activities and the thorough use of digitaltechnologies.

Toward the Three Years of “Change”
Focused on Productivity Innovation
As I mentioned earlier, we have formulated a new threeyear Medium-Term Management Plan (Fiscal 2021 to2023), which started in fiscal 2021. We set a three-year
span for the plan in order to be able to create aneffective growth story in the current uncertain
circumstances caused by the COVID-19 pandemic. Also,
after considering the impact of COVID-19, we believe it
is necessary to verify whether human resource
development in a remote environment can generate firm
outputs in terms of contributing to high-quality services
for customers in a specific span of time.

The Kandenko Group will unite in our quest to
challenge innovation with new ideas that are not simply
an extension of conventional models, and create value
for the future. That determined quest is clearly expressedin our slogan: Change! And Create the Future from a
New Starting Point. Through this Medium-Term
Management Plan, we will build a foothold for realizing
our management vision of “Becoming a 100-year
Company Supporting Society.”
Under this plan, we aim to achieve the targets of net
sales of ¥580.0 billion, operating profit of ¥36.0 billion,
ROE of 8% or higher, ROIC of 8% or higher, and adividend payout ratio of 30% or above, as businessresults for fiscal 2023 on a consolidated basis. We havealso set other fiscal 2023 targets to reduce energy
consumption by 30% compared to fiscal 2009 andincrease the percentage of renewable energy to at least
15% of total power consumption.
The operating profit target of ¥36.0 billion is same as
the initial profit target that we set for our growth strategy
that ended in fiscal 2020. We judged that we need toonce again try to clear that profit level now that we have

Key Policies in Our Medium-Term Management Plan

Productivity Innovation

Strengthen Foundations
for Future GrowthBusiness process reform and construction
technology innovation

Establish a presence in the fields
of decarbonization, disasterprevention, and BCP and
accelerate global expansion

Rebuild Earnings Base by Demonstrating
Our Comprehensive Strengths
Strengthen our proposal capabilities,
profit-generating capacity and work
execution abilities, and strengthen sales
expansion in growth areas

Promoting ESG
Management

Promote Sound
Management Activities
Instill a deep awareness of safety, quality,
and compliance, and ensure management transparency

7

KANDENKO

gone through the subsequent changes in our operating
environment and increases in employee numbers.
Based on a fundamental commitment to promote ESG
management, this plan focuses on five areas as key
policies, namely “productivity innovation,” “rebuild
earnings base by demonstrating our comprehensive
strengths,” “strengthen foundations for future growth,”“promote sound management activities,” and “reinforce“people first.””“Productivity innovation” and “rebuild earnings baseby demonstrating our comprehensive strengths” will bothbe directly linked to improving profit levels. We intend tovisualize and fundamentally review indirect operations
and reformulate our business processes as well as seek
to save labor, save manpower, and boost operational
efficiency at construction sites by introducing IoT, AI, androbotics, and utilizing prefabricated and modular units.
On the sales front, we intend to generate synergies byencouraging inter-departmental cooperation and provide
one-stop total solution services, while further enhancing
our proposal capabilities and focusing on our sales
development in growth areas.
In terms of strengthening foundations for future
growth, we intend to target the areas of decarbonization,
disaster prevention, and BCP, which are seen as strong
future growth areas, and enhance our presence in those
fields by developing initiatives for wind power generation,
VPP, data centers, and regional microgrids. The idea is topromote co-creation that utilizes external knowledge on
advanced technology development through open
innovation, industry-academia collaboration, andcollaboration with other companies.
Our expectations vis-à-vis employees through this new
Medium-Term Management Plan is for employees toactively pursue their own growth by rising to thechallenges posed by change and become recognized andappreciated by our customers and the people aroundthem. I hope that there will be multiple human resources
especially from among our young employees, who willplay a central role in the company going forward andhelp build a new era for Kandenko.

Expanding Value Provision that canHelp Solve Social Issues

Reinforce“People First”
Create systems that enable diverse human resources
to fully demonstrate their abilities, and develop
human resources to create the future

Kandenko has always sought to serve as a company that
promotes ESG management and is trusted by society. For
that aim, we have worked to implement environmental

conservation activities, ensure safety and quality,
thoroughly enforce compliance, and enhance corporate
governance, and we have also contributed to theachievement of the SDGs by consciously seeking to solve
social issues through our business activities.
Going forward, we intend to continue these existing
initiatives and also strive to enhance our ability to makeproposals that satisfy customers’ needs as they change inline with societal developments, and seek to create andprovide value that can ultimately help resolve social
issues. To this end, our corporate headquarters will takea leading role in actively disseminating our opinions on
ESG and SDGs and promoting initiatives that contributeto a sustainable future in all aspects of our sales
activities.
We also intend to further enhance our corporate
governance in order to become a company that is trusted
more deeply than ever before and recognized for itssocial significance. More specifically, we recognize thatthe role of outside directors, who bring objective
perspectives and a wealth of specialist knowledge to thetable, and ensuring diversity on the Board of Directors
will likely gain in importance going forward as we seek
to expand our business fields.
Kandenko strives to meet the expectations of ourshareholders and reward the efforts of our employees by
pursuing services that contribute to the development ofsociety and the growth of our customers’ businesses andincreasing our corporate value. We hope you are as
excited as we are about the future of the KandenkoGroup as we continue to challenge changes and pursue
our quest to become a 100-year company that coexists
and prospers together with all our stakeholders.

Integrated Report 2021

8

Integrated Report 2021

| At a Glance |Financial Information

Non-financial information
Operating profit

Net sales

Consolidated

556,045¥(Millions of Yen)

507,205

470,943

563,550

616,143

millionConsolidated

30,041¥(Millions of Yen)

556,045
26,397

Profitmillion30,012

2017

2018

2019

2020

2016

2017

2018

millionConsolidated

2019

2020

2016

10,154

persons(Persons)

30,041

17,591

2016

20,147¥

Consolidated(Millions of Yen)

34,69329,261

Number of employees

19,70319,05822,515

20,147

9,244

Non-consolidated

7,497

Number of new recruits

persons(Persons)

2018

2019

305

persons

106

Year-round recruitment

354

331

333
305

236
156

2020

106

100
Non-consolidated

486,327¥

million(Millions of Yen)

410,192

444,452

Non-consolidated

24,730¥

million493,128

486,327

21,921

24,843

27,77324,146

2017

2018

2019

2020

ROE

Consolidated

8.8

8.8

2018

2019

507,522

¥

%

8.5

2017

2020

New orders received

7.8

(%)

2016

million2016 2017 2018 2019 20202016

16,91917,08420172018

19,4082019

2020

Directors’ average attendance at Board of
Director’s meetings

Dividend / Consolidated

28

¥

99

(Yen)

7.8

24

26

28

28

Gold

2017

Non-consolidated

2018

2019

496,088

513,919

507,522

2020

2016

7.6

2017

2018

Dividend payout ratio / Consolidated

%

(%)

8.6

2019

2020

28.4

%

(%)

8.7

8.2

SilverBronze%Electricity usage
2016

Number of Skills Competitions winners

Electrical
Installations

15

27

30

Information
Network Cabling

2

6

10

Plumbing andHeating

3

5

3

20

(Millions of Yen)

506,0262016 2017 2018 2019 20202016 2017 2018 2019 2020

17,524

Dividend /Dividend payout ratio

million

9.3

474,452

2016 2017 2018 2019 2020

24,730
15,488

2016

74

74

(Millions of Yen)

(Millions of Yen)

540,202

17,524¥Non-consolidated

persons(Persons)(Persons)

10,003 10,154
9,571 9,818
7,202 7,350 7,497
6,729 6,976

2017

New graduates

Compared to fiscal 2010

24.7

%

(MWh)

23,141 23,116 22,559 22,502 23,643* In Electrical Installations, one first place winner and two second placewinners in the World Skills Competition.

8.9
7.6
23.2
2016

2017

2018

2019

25.7

27.0

25.4

2017

2018

2019

28.4

2020

2016 2017 2018 2019 2020
2016

9

KANDENKO

2017

2018

2019

2020

2016

2020

Integrated Report 2021

10

Integrated Report 2021

| Corporate Motto, Corporate Philosophy and Charter of Corporate Behavior |Kandenko is one of Japan’s leading firms in general
infrastructure works centering on electric works athome and abroad for 77 years since its establishment.
Imagine looking down from the air on the Marunouchi area in Tokyo, Japan’s finance and economic
center, and you will see that Kandenko was involved in the construction of most of the buildings
there. Not only in and around the capital, but throughout the nation, Kandenko has provided endto-end engineering services ranging from design and execution to maintenance and renovation,
regarding electrical, telecommunications, air conditioning and sanitation systems and other kinds ofbuilding infrastructure.
Upgrading electrical infrastructure, the main artery of cities is also an important business of ours.
From power plants to households, we play a part in stable energy supply to support urban functions.
Our mission is to protect the lives of people, the economy, and a safe and comfortable environment.
With incomparable experiences and excellent technological capabilities, Kandenko is committed tofulfilling this mission.
Delivering electricity with secure construction, we light buildings with high-quality facilities andlighten the spirits of the people living inside. Kandenko aims to be an exceptionally brilliant company
that illuminates the nation.

Kandenko Group Charter of Corporate Behavior

I. Principles of Corporate Behavior
The Kandenko Group acts in accordance with the following basic principles in order to contribute to the developmentof society through sound business activities based on thorough compliance and fulfill our responsibilities as acommitted member of society.
1. We strive to stay abreast of society’s needs at all times, pursue technological innovation that we have confirmed
to be fully effective and safe for society, and provide optimal services.
2. We commit to communicate broadly with our customers, local communities, shareholders, investors, business
partners, and other parties involved with the Kandenko Group, to disclose corporate information proactively andfairly, and promote highly transparent and open business activities.
3. We respect human rights in all aspects of our business activities and strive to ensure fair and transparent businessactivities that comply with relevant laws and regulations as well as social norms and their underlying ethos. We
aim to be a company that is worthy of society’s trust, not only by eliminating acts of collusion, etc., but also by
maintaining appropriate relationships with political parties, governmental authorities, and other organizations.
4. We thoroughly protect and manage all forms of information, including personal and customer information,across all aspects of our business activities.
5. As the globalization of our business progresses, we commit to comply with the laws of each country and regionin which we operate, and respect international norms and further take into account local cultures, customs, andstakeholder interests as well, and contribute to social and economic development through business activities
deeply rooted in relevant countries and communities.
6. We prioritize safety in all aspects of our business activities, respect the individual attributes, personalities, anddiversity of our employees, and strive to create comfortable and cheerful working environments.
7. To help tackle environmental issues, we will actively promote environmentally-conscious business activities, suchas renewable energy use, energy conservation, waste reduction, and recycling.

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 customers and seeking technological innovation,
Kandenko provides optimal services and facilities.

3 ···By working for human resource development and continual improvement,
Kandenko aims to be a future-oriented company.

8. We will take a resolute stand against antisocial forces and organizations that pose a threat to civic order andsafety, and eliminate all actions that could be suspected to derive from inappropriate relationships.
9. Top management will demonstrate leadership and work to familiarize all Group employees with the spirit of theCharter, while also striving to maintain a clear grasp of internal and external opinions and establish effective
systems for the Kandenko Group.
10. If inappropriate situations arise that run contrary to this Charter, top management will strive to resolve any issue
themselves, investigating the cause and taking action to prevent a reoccurrence. In addition, the top
management will promptly and accurately disclose information to society and impose strict penalties on relevant
parties, including themselves.

II. Employee Code of Conduct
All employees will strive to provide customers with ever-improving services in terms of high levels of safety, security,and quality through fair and appropriate business activities, to be constantly aware of their roles and responsibilities asa member of the Kandenko Group, and to conduct their daily work with a full understanding of the following matters:
1. Matters relating to compliance with laws and regulations
2. Matters relating to relationship with society
3. Matters relating to fair trading
4. Matters relating to information management
5. Matters relating to employee behavior and responsibilities
6. Matters relating to the creation of an even better corporate culture

11

KANDENKO

Integrated Report 2021

12

Integrated Report 2021

| Value Creation Trajectory |Net sales
Net sales(Millions(Millionsof yen)of yen)600,000
600,000

Since its founding in September 1944, Kandenko has conducted business in a wide range of fields withthe aim of ensuring the mutual prosperity of its customers and the communities where it works and finds
its purpose in this pursuit, and grown to become one of Japan’s leading general infrastructure companies.
This section presents the Company’s history of stably supplying electric power and supporting people’s
lives alongside postwar development in Japan.

500,000
500,000

Net sales/Operating profit
Net sales

Operating profit
400,000
400,000

Figures in and before fiscal 1998 show
non-consolidated net sales/operating profit.

OperatingOperatingprofitprofit(Millions(Millionsof yen)of yen)30,00030,000300,000
300,000

20,00020,000200,000
200,000

10,00010,000100,000
100,000

00019441944

1940

19501950

19551955

19601960

1950

19701970

1960

Company Establishment and Japan’s Postwar Recovery PeriodBusiness Development
September 1944
Kanto Denki Koji Co., Ltd., wasestablished.
Head office at 2 Tameikemachi, Akasaka
Ward (current Minato Ward), Tokyo

19651965

19751975

1970

19851985

1980

From Rapid Growth Period to Stable Growth Period
1958
Tokyo Tower
completed.

Late 1940’s
Large-scale transmission line
works gain momentum

19801980

19901990

19951995

20002000

1990

2000

September 1959
The Company provides
disaster recovery support
beyond its jurisdiction in thewake of the Isewan Typhoon

1981

Power distribution network in
Nepal upgraded.

1991
Tokyo Metropolitan GovernmentNo.1 Building completed.

20102010

20152015

20202020

2010

Transition from Showa to Heisei Era

1968

Kasumigaseki Building
completed as the firstskyscraper in Japan.

20052005

0Working to Realize a Sustainable Society
2012TOKYO SKY TREE®, the world’s
highest self-supporting
broadcast tower opened.

2019

Japan National Stadium completed.

Courtesy of Taisei Corporation

Strengthening our Fundamental Base

September 1984
March 1960

Around 1947

Transport of power poles by hand-drawn cart
November 1955

Introduced pillar-erecting vehicle for power
distribution line engineering work

13

KANDENKO

Built Technical Staff Training Center (current Education& Training Center) in Ibaraki prefecture
September 1960

February 1970

Listed on the First Section of the Tokyo Stock Exchange
1971

Moved head office to Yushima 4-chome, Bunkyo-ku, Tokyo

Introduced aerial work platform trucks for
power distribution line engineering work

October 1961

August 1973

Listed on the Second Section of the Tokyo Stock Exchange

Set our People First slogan

Company name changed to Kandenko Co., Ltd.
July 1986

The Company participated in the Japanese
Antarctic Research Expedition for the first time.
December 1988

Moved head office to newly constructedbuilding at Shibaura 4-chome,
Minato-ku, Tokyo (current location)
Formulated our Corporate Philosophy
Formulated our Corporate Motto “People First”

January 1990

December 2006

Started TV commercials

Formulated the Kandenko Group Charterof Corporate Behavior

July 1993

Set up the Tsukuba Technology
Research & Development Institute(currently Technology Research &Development Institute)

July 2015

Established Fukushima Division

October 2012

March 2016

Capital participation in Choshi Wind
Development Co., Ltd.
(started power generation business)

Formulated our growth strategy

October 1997

October 2014

Launched Kandenko website

Introduced regional headquarters system

April 2020

Achieved record high consolidated
business result

Integrated Report 2021

14

Integrated Report 2021

| Value Creation Process |We have now reached the stage where we have to rethink our society as a whole from multifaceted
perspectives, such as the global environment, human rights, culture, and values.
The social responsibility of companies has grown in line with these developments. Not only are companies
expected to simply respond to society’s needs, but they are also expected to develop businesses thatgenerate full-fledged energy savings, create safe and comfortable spaces that are attentive to both
environmental and human considerations, and develop a variety of different eco-friendly facilities.
Kandenko has always provided high-quality equipment and services from a long-term perspective in thefields of building infrastructure, telecommunications infrastructure, and electric power infrastructure aspart of our quest to promote a harmonious existence between people, nature, and cities. Going forward,
we would like to further enhance the unique knowledge and capabilities we have cultivated throughthese operations and help promote the development of a sustainable society.

Financial Capital
Total assets

Strengthsof theCompany

Experience

Free cash flow

Correcting long working hours

Damage to infrastructure due to natural disasters

Increase in cybercrime and accidents

Provision of comfortable living environments

Restoration of infrastructure damaged by natural disasters

Stable supply of electric power

Maintenance and updates for aging social infrastructure

Provision of stable communication services

Energy-saving initiatives for building infrastructure

OutputNew
business

Provide valuable services tocustomers through virtuous cycle

Research anddevelopment

Quality

Number of employees
Customerconfidence

Solutions cycle

Human Capital

10,154

Prevention of global warming

Financial
Net sales

Technology¥456.9 billion¥13.8 billion

Value to be Provided to Society

Arrival of an aging society

Business Cycle

Building infrastructure,social infrastructure business cycle

Input

Social Issues

Reduction of energy costs

Infrastructure
proposal

Cater to customer needs

Work oninfrastructure

Apply expertise

O&M

Link with customers

Technology
development

Meet customer needs¥556.0 billion

Provide expertise,
new construction methods

Work oninfrastructure

Technology
development

Solutions

Strategic
business

Infrastructure
proposal

Building infrastructure,social infrastructure

Data provision

O&M
Strategic
business

Expand businessNewbusiness

Create services¥1.5 billion¥30.0 billion
ROIC

7.2%
ROE

7.8%
Dividend payout ratio

28.4%

Anticipate
customer needsIntellectual Capital
R&D investment

Operating profit

Business Fields

Environmental, Social

Electrical engineering, environmental
facilities and systems, and renovation work

Power distribution line engineering work

Information & Communication WorkElectric Power & Civil Engineering Work

Energy consumption

The segment covers the design,
construction, maintenance, and renovationof electrical facilities, air-conditioning andsanitation work for various structures
including office buildings, department
stores, theaters, hospitals, and factories.

The segment covers installation andmaintenance work of power distributionlines that deliver electricity directly tohouseholds, stores, and other customers.

The segment is engaged in all types ofworks related to information andcommunication, including upgrades to
optical fiber cable networks, installation oftransmission base stations for mobile
communications, and construction of
networks for cable TV and municipalities.

The segment is engaged in electrical workin nuclear power plants, in addition towork on power stations and substations,and on transmission lines. Recently, thedivision covers the construction of wind
power plants and solar power plants, aswell as work on transmission line networks.

down 24.0%(compared to fiscal 2009)	Ratio of renewableenergy in consumed
power

4.2%

15

For details, see page 23
KANDENKO

Integrated Report 2021

16

Integrated Report 2021

| Growth Strategy Overview (Fiscal 2016-2020) || Group Business Environment and Ultimate Direction |Business Environment

Operating environment
Infrastructure development ahead of the Tokyo Olympic and Paralympic Games

Population

Declining population in Japan

Stable supply of electric power, response to large-scale disasters

Net sales (Billions of yen)
ROE (%)
8.8

8.8

Building community-based maintenance services
Developing one-stop services and expanding renewal construction frameworks
Pursuing initiatives for our renewable energy power generation business
Enhancing working environments

470.9
26.3

507.2
29.2

9.3
8.5

563.5

34.6

30.0

2017

2018

2019

Quantitative Plan

Qualitative Plan

While we achieved another record highperformance, growth has slowed in thewake of COVID-19, etc.

17

KANDENKO

	Increase orders for renovationand maintenance and BCP
construction

Disasters

Global warming, severe flood damage,frequent earthquakes

	Participate in new urban
development (smart cities, etc.)
	Promote globalization(strengthen overseas business)

Decarbonization

Transformation of retail cars into
electric vehicles

	Strengthen solution capability tohelp promote decarbonizationand energy conservation

EnergyTurning renewable energy into themain source of power

Strengthen sales andconstruction frameworks forrenewable energy work

2020

Achievements and issues

Big achievements primarily in existing businesses, such as
reinforcing our business base and providing a stable supplyof electric power. Issues include reinforcement of our
growth areas and further improvement of productivity.

Human resources strategy

Personnel numbers increased favorably thanks to stronger recruiting	Issues: Improvement of productivity by reforms for work practices and annual leavesystems and reviewing business processes

Investment strategy to boost
work execution abilities

	Steady progress on capital investment in business facilities, vehicles, and employee dormitories, etc.
Steady progress on securing funds to increase the volume of work	Issues: Developing labor-saving and manpower-saving technologies, using digitaltechnology to improve productivity

Business basereinforcement strategy	New orders received increased thanks to the early collection of sales information andstrategic sales activities
Profitability increased after instilling cost management methods
Issues: Providing one-stop services for electricity, air-conditioning and other building infrastructure

Business field
expansion strategy	New orders received for wind power generation and transmission line work outside
the Kanto region increased
Renewable energy power generation business and real estate business remained strong
Issues: Expansion of social infrastructure-related work (railways, roads, water supply)

Measures to contribute to astable electric power supply	Transmission lines and power distribution lines engineering work remained strong.
Responded swiftly to disaster recovery needs
Received steady orders for restoration work and other reconstruction-related work in Fukushima	Strengthen one-stop capabilities
for sales and construction

Ageing infrastructure

556.0

30.0

Developing a society in which people can lead energetic,
vital lives using digital technology (Society 5.0)

	Develop an environment inwhich diverse human resources
get to play an active role on thefront line, and promote digitaltechnology-driven productivity
innovation

Infrastructure

7.8
616.1

Investing in increasing our work execution abilities
2016

Society

Operating profit (Billions of yen)

Environment,
energyStrategic themes

Net sales/Operating profit/ROE (Consolidated)

Innovation

Becoming a 100-Year Company
supporting society

Structural change

Building infrastructure with higher energy-saving performance and longer service life

Ultimate Direction

Constructionindustry

Accelerated full-scale use of ICT, such as 3D data, automatedcontrol construction equipment, and surveys using drones.

Power transmission
technology

Shifting to practical use of wireless powertransmission and direct current power transmission

Strengthen cooperation withpartner companies
Research and develop newtechnologies and construction
methods
	Expand into new fields andbuild new business models

Integrated Report 2021

18

Integrated Report 2021

| Fiscal 2021-2023 Medium-Term Management Plan |The Kandenko Group intends to help solve social issues by accurately grasping changes inour business environment, such as the declining population, aging population, digitization,and decarbonization, and providing new value at the same time.
Furthermore, we intend to embrace the recent diversification of values and lifestyles andcreate an environment in which diverse human resources can demonstrate their abilities andfeel inspired in their work by pursuing reforms for work practices and annual leave systems
and productivity innovation.
As part of the Fiscal 2021-2023 Medium-Term Management Plan, with the aim of helping solve
social issues including the Sustainable Development Goals (SDGs) under ESG management
promotion, we intend to deepen our existing businesses, challenge innovation derived fromnew ideas rather than an extension of existing avenues, and strive to develop as the nextgeneration Kandenko Group that will continue to grow together with all our stakeholders.

Domestic
business

Building infrastructureNewbusiness

Overseasbusiness1%

2%

Becoming a green innovation company

O&M
Renewableenergy related
Smart gridOne-stopbuilding
infrastructureservice

Offshore wind power
Transmission lines
Storage batteries

Domestic
businessSmartcitiesRailways
Roads
Water supply

Domestic business(non-consolidated)

70%

10%

5%

12%

Decarbonization

44%

RenovationNewbusiness
Overseasbusiness

85%
Building infrastructure

Overseas
infrastructure

Local 5G

Social infrastructure(non-consolidated)(Group)Datacenters

Breakdown of
Fiscal 2020 sales

Domestic
business

Disasterprevention,
BCP

Building infrastructure(Group)Breakdown of
Fiscal 2044 sales

15%

Collaboration
Social infrastructure

Social infrastructure

41%*including overseas
affiliates*including power distribution
materials and overseas affiliates

NOW

100-yearanniversary

Fiscal 2021-2023 Medium-Term Management Plan

Create the Future
Change! And
from a New Starting Point
Key policies

1.

3. Strengthen foundations for future growth
19

KANDENKO

2. Rebuild earnings base by demonstrating our comprehensive strengths
4. Promote sound management activities 5. Reinforce “people first”

Productivity innovation

2044

2023
Net sales··························· ¥580.0 billion
Operating profit ···················· ¥36.0 billion

2023
GOALS

ROE ····································· 8% or above
ROIC ··································· 8% or above
Dividend payout ratio············· 30% or above
Energy consumption····· Down 30% (compared to fiscal 2009)
Ratio of renewable energy in consumed power····· 15% or higher
Integrated Report 2021

20

Integrated Report 2021

| Fiscal 2021-2023 Medium-Term Management Plan |Key policies

2021

2044

2023

100-yearanniversary

Our ultimate goal

Becoming a green
innovation company

1.

that incorporates peripheral domains
pertaining to our core building infrastructureand social infrastructure business.

Productivity
innovation

Key policy

Productivity Innovation

Key policy

3.
2.

Strengthen our proposal	Strengthen engineering and solution capabilities
in the fields of decarbonization and BCP

capabilities, profit-generating
capacity and work execution
abilities, and strengthen sales
expansion in growth areas

the fields ofdecarbonization, disasterprevention, and BCP and
accelerate global

Rebuild earnings base by demonstrating
our comprehensive strengths

	Strengthen one-stop sales and construction frameworks
by promoting collaboration between building
infrastructure and social infrastructure divisions
	Expand business to peripheral social infrastructure domains,such as railways, roads, water supply, and local 5G	Address the resilience of electric power andtelecommunications infrastructure
Participate in VPP, regional microgrid business
Full-scale implementation of BCP-related projects
Promote urban data center-related businesses
Enter O&M business utilizing ITEnter electric power infrastructure and transportation fields
	Participate in consulting and asset businesses(specified electricity utility, industrial parks, etc.)

4

Promote Sound Management Activities

Promote sound management activities
Key policy

5Instill awareness of safety, quality,
and compliance, and ensure
management transparency

Create systems that enable
diverse human resources to fully

Reinforce “people first”

Converting field operations to back-office tasks

	Increase orders for renewable energy-related work such as
offshore wind power and transmission line networks

expansion

4.
5.
KANDENKO

	Innovating construction technology using IoT, AI,
and robotics and prefabricated and modular units

3

Strengthen Foundations
for Future Growth

Reinforcing business processes by promoting DX

Business process reformand construction
technology innovation

Establish a presence in

Key policy

21

2

Rebuild Earnings Baseby Demonstrating
Our Comprehensive
Strengths

Key policy

Strengthen foundations
for future growth1

Reinforce “People First”

Reduce energy consumption
Establish thorough risk management and work rules

Promote diversity

demonstrate their abilities, and	Enhance educational programs and introduce VR/AR
for human resource development

develop human resources toPromote remote working

create the future

Develop and reinforce global human resources

Integrated Report 2021

22

Integrated Report 2021

| Business Review by Division |Building Infrastructure Work

DescriptionofBusiness

Electrical engineering, environmental facilities and systems, and renovation work

Electrical engineering work: Work on electrical facilities and equipment inside all typesof buildings and structures, building interiors, control equipment, and interior network
Environmental facilities and systems, and renovation work: Work on air conditioning
and sanitation systems as well as water, heat and disaster prevention systems
We have been anticipating major changes inmarket environments, such as carbon neutral
initiatives and the transformation of businessprocesses utilizing digital technologies anddeveloping sales activities that accurately
capture our customers’ latest needs. At thesame time, we have been focusing on
improving productivity and strengthening
our construction frameworks with the aim of“expansion of the scale as a businessdivision” and “generation of profit.”
Fiscal 2020 review and current developments

Nobuhiro Iida
Managing Director and Executive Officer,
Division Manager of Sales Division

CO MO RE YOTSUYA (Tokyo)

23

KANDENKO

After we launched our five-year growth strategy in fiscal
2016, electrical engineering, environmental facilities andsystems, and renovation work generated consistently
high levels of new orders received, and net sales ofcompleted construction contracts also increased for four
years in a row. However, in fiscal 2020, the final year of
the plan, both new orders received and net sales ofcompleted construction contracts declined year on year.
Our electrical engineering work segment steadily
secured urban redevelopment projects in major urban
areas and some active building investment andinfrastructure renovation contracts from client companies,
which enabled us to maintain new orders received at
fiscal 2019 levels. However, activity at our environmental
facilities and systems, and renovation work segment
stalled as projects were cancelled or postponed in thewake of the COVID-19 pandemic. Net sales of completed
construction contracts also declined compared to fiscal
2019 when we experienced a delivery rush ahead of theTokyo Olympics.
As a result, in fiscal 2020, new orders received totaled¥261,718 million, a decrease by ¥2,914 million or 1.1%
year on year, net sales of completed construction
contracts totaled ¥252,237 million, a decrease by¥44,288 million or 14.9% year on year, and construction
contracts brought forward as of March 31, 2021 totaled¥279,824 million, an increase by ¥9,481 million or 3.5%
year on year.
We are gradually seeing some results from our recent
focused sales strategy for developing business in majorurban areas outside of the Tokyo metropolitan area, asefforts for relationship building with general contractors
and client companies are progressing well andstrengthening of our cost management functions andengineering prowess has also been successful. We havealso determined to view national carbon-neutral initiatives

and other large changes in the market environment as
great business opportunities for expanding our renovation
work and have put in place structures to facilitate swift
technical proposals designed to meet the diverse needsof client companies in relation to initiatives such as
reduction of CO2 emissions, including forming renovation
teams at our sales bases in major urban areas.

Future business environment
Regarding the outlook for domestic private construction
investment going forward, the general view is that it willtake time to dispel the negative impacts of the COVID-19
pandemic primarily in areas such as retail, accommodation,
and air transport. However, plans are underway forseveral large-scale redevelopment projects in the Tokyo
area and we expect we will see some vigorous investment
interest in areas such as automobiles and semiconductors.
Against this backdrop and with a solid sales base in
the Tokyo metropolitan area, we are striving to use theknowledge we have amassed so far to make a thorougheffort to reduce costs, in order to achieve both“expansion of the scale as a business division” and“generation of profit.” We are also working to improve
productivity by pursuing greater operational efficiency
and digitalization, and securing and nurturing greater
work execution abilities.

Future business development based on our
Medium-Term Management Plan
In relation to the concept of our new Medium-Term
Management Plan, Change! And Create the Future froma New Starting Point, we have determined the following
three changes as keywords for our business division:changes in the way we work, changes in businessenvironments, and changes in customer needs.
Regarding the way we work, we have set up backoffice teams to support the creation and technicalexamination of project quotations and drawings, andintroduced a next-generation onsite production systemthat facilitates the onsite creation, management, anddirection of materials orders and construction plans using
tablets as mobile terminals. We also strongly promote
the use of prefabrication and modular unit construction
methods where materials processing, which used to be
conducted onsite, is done comprehensively in factories.
Through all of these efforts, we are seeking to reduce
onsite workloads and further improve onsite productivity.

New orders received

Demonstrate comprehensive strength with aneye on the future
We intend to help realize a sustainable society by
meticulously responding to customer needs relating to
the reduction of CO2 emissions, disaster prevention, and
BCP measures. In order to achieve our vision of becoming
a green innovation company by 2044, our 100-year
anniversary, we will strive to further improve our businessso we can provide considerable value and satisfaction tosociety. To this end, we intend to place the goal of
ensuring safety and quality at the heart of our businessactivities, proactively introduce advanced engineering anddigital technologies, and demonstrate the comprehensive
capabilities of the Kandenko Group.

Net sales of completed construction contracts(Millions of Yen)

251,469

With regard to our business environments, we expect
to see some large-scale real estate investments in majorurban areas, such as tenant buildings and commercial
complexes along with investment in the construction andexpansion of data centers and semiconductor-related
factories. As a result, we believe new orders in thesefields will become pillars of future business so we intend
to mobilize the full potential of our sales, costmanagement, construction, and management prowess tocompete for orders so that we can expand importantrenovation stock for the future.
Furthermore, in order to both ensure occupational
health and safety and provide safe, secure and highquality services, we will work to raise the level of groupwide work execution abilities by reviewing educational
programs to encourage young employees to acquire
practical skills more quickly, supporting recruitment andeducation for partner companies, and further promoting
year-round recruitment.
With regard to changes in customer needs, werecognize societal demands for environment and energyconscious infrastructure by introducing energy-saving
equipment and captive consumption renewable energy
power generation facilities, and for heightened
preparedness in the face of increasingly severe natural
disasters, including measures to secure power supplies forstrengthening business continuity capabilities. In order to
respond to these demands, we intend to further
strengthen our engineering technologies for infrastructure
renovation that we have cultivated to date so that we canprovide a complete array of infrastructure facilities thatbring comfort, safety, and security to our entire society.

(Millions of Yen)

263,342

265,741

264,633

296,525
266,520

261,718

252,237

235,040
203,627

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

Integrated Report 2021

24

Integrated Report 2021

| Business Review by Division |Social Infrastructure Work

DescriptionofBusiness

Information & Communication Work	Installation of optical fiber cables and related equipment for electric power
providers and telecommunications providers
Construction and maintenance of networks for cable TV and municipalities
Construction and maintenance of mobile communication base stations

Shinichi Miyauchi
Senior Managing Director and Executive Officer,
and Division Manager of Social Infrastructure Division

Information and communication networks
promote the development of industry andenrich human living through high-speed andlarge volume data transmission. The
Information & Communication Work division,
which is responsible for the installation andmaintenance of these networks, responds totechnology that is evolving on a daily basis andcontinues to respond to the needs of society.
Fiscal 2020 review and current developments
Looking at new orders received in fiscal 2020, in addition tosecuring a large-scale upgrading project for cable TV
infrastructure work, government construction work related
to GIGA schools and express ways as well as base work for
TEPCO Group and telecommunications providers remained
strong. This more than offset the decline in mobile
equipment work and 4K and 8K-related work in the wakeof the COVID-19 pandemic, and, as a result, the division’s
fiscal 2020 new orders received exceeded our original plan.
Meanwhile, while net sales of completed construction
contracts decreased, the structural reforms under the slogan
of “Build a Lean Organizational Structure” that we havevigorously pursued in recent years as a priority focus started
to bear fruit, leading to improved profitability.
25

KANDENKO

As a result, in fiscal 2020, we secured new orders receivedof ¥42,879 million, an increase by ¥4,133 million or 10.7%
year on year, and net sales of completed construction
contracts of ¥39,691 million, a decrease by ¥5,161 million or
11.5% year on year, and the construction contracts brought
forward as of March 31, 2021 totaled ¥18,834 million, an
increase by ¥3,188 million or 20.4% year on year.
Regarding more recent environment for orders received,
telecoms carriers are rapidly developing base stations for
fifth-generation (5G) mobile communication systems to makeup for the delays caused by the COVID-19 pandemic. New
carriers in particular are focusing on improving area coverage
ratios through swift infrastructure building, and we areplanning to expand our construction reach primarily at our
Tohoku and Kansai branches to accommodate those trends.
At the same time, we are working together with the PowerDistribution Lines Engineering Work division to develop our
one-stop solution packages that include, for example,
installation of radio antennas on the top of power poles,
with which we can demonstrate our technological capabilities
and expertise as an electrical engineering company.
In addition, while demands for works related to the shift
to Fiber-to-the-Home (FTTH) for independent cable TV
operators were previously focused on catering to increasingly
sophisticated 4K and 8K video services, the focus has also
started to be placed on high-speed and large volume
telecommunications services in response to the increase in
the number of people working from home, etc. in the wakeof the COVID-19 pandemic. We are responding appropriately
to these recent changing needs by using the technologicalcapabilities we have cultivated through infrastructurebuilding work for telecom carriers and proposing thecreation of optimal networks.

Future business development based on our
Medium-Term Management Plan
Our new Medium-Term Management Plan, launched in fiscal
2021, is a three-year initiative, guided by the slogan “Change!
And Create the Future from a New Starting Point” that seeks
to create a next-generation of Kandenko Group. Under thisslogan, the Information & Communication Work division willfurther improve productivity and strengthen profitability bybuilding the lean organizational structure that we have beenworking on for the past few years, while also responding tosocial changes and rapidly advancing technological innovation.
In order to accurately follow these ever-advancing
technological innovations and avoid missing any nascentsigns that could help improve profitability, we must keep
our antenna high in order to consistently capture anychanges, and strive to acquire advanced technologies. Whenit comes to the improvement of safety and quality as well
as streamlining of work execution, we must relinquish ourconventional methods and be prepared to embrace changeby, for instance, seeking to proactively incorporate and fully
utilize digitalization technologies for site management.

More specifically, we will strive to collect information andtrain ourselves by cooperating with telecommunications
equipment manufacturers both inside and outside Japanand through interaction between technicians, and we will
focus on developing and providing services that incorporate
the latest technologies, such as DX, IoT, or AI. At the sametime, we will seek to further improve productivity by
applying new concepts such as robotic process automation(RPA) to improve the efficiency of daily operations, andexpand contract volumes and strengthen our earnings baseby capturing new works and construction areas, such as
mobile infrastructure.
Furthermore, in order to strengthen our foundations for
future growth, we plan to develop new markets and expand
new orders received, targeting the construction of local 5G
infrastructure and provision of services for local authorities,
companies, cable TV operators, and other organizations.
Local 5G is currently in its technological infancy, but it isexpected to grow significantly going forward, so we arealso participating in proof of concept (PoC) trials in all
locations as construction of test and verification facilities iscurrently underway across Japan. Also, in September 2021,
NextCadix Ltd., which provides support software for
infrastructure operations to multiple cable TV operators,
became a Kandenko subsidiary. We believe this represents
an important step toward providing total solution services
that offer both hardware and software for cultivating a local
5G-related market for cable TV operators.
In fiscal 2021, the first year of the plan, net sales fromcompleted construction contracts remain strong thanks to anabundant amount of construction contracts brought forwardfrom the previous fiscal year. While new orders received foroverall cable TV work, which had been on an expanding
trend, are settling down in addition to the decrease in 4K
and 8K-related work, we intend to further improve our
profitability by persisting with structural reforms designed tocreate an even leaner organizational structure. Based on this,we will create a favorable cycle that leads to theimprovement of our competitive ability to secure new orders.

Creating value by helping realize a sustainable
society
Our Medium-Term Management Plan includes one key policy“promote sound management activities” and illustrates all thedifferent issues relating to ESG management. We at theInformation & Communication Work division are seeking toprovide new value that helps protect the environment by, forinstance, developing software technology that can remotely
monitor the condition of batteries used in communication
stations, facilitate preventive maintenance, and help conserve
resources and energy by using equipment right up until theend of its useful life. On the social side, we are actively

Eisaku Shimizu
Executive Managing Officer, Division Manager of Social Infrastructure
Division, and Head of Information & Communication Unitutilizing digitalization technologies, such as wearable cameras
and 360-degree cameras to improve the safety and qualityof work on construction sites. In terms of governance, we
continue to offer employee training designed to instill andentrench compliance awareness, and we are also working tostrengthen our risk management effort.
In future, Kandenko intends to help achieve the SDGs by
pursuing ESG management, and also help realize asustainable society by further expanding the development of“building infrastructure x social infrastructure” business
operations. Our role in that drive as the developer of
information and communication infrastructure will be to serve
as a central nervous system equipped with sensor functions
that are capable of capturing fresh needs and communicating
those needs internally as well as the function to grasp andshare situations that is vital to companywide value provision.
That will undoubtedly require us to continue thinking
about what can be done by the Information &Communication Work division and striving to achieve it, notonly by responding to the physical layer of optical andwireless technology evolution, but also to the developmentof software-driven logical layer. It will also become
increasingly important for us to transcend our organizationalframeworks and cooperate with divisions responsible forother works, not the Information & Communication Workdivision alone.
By rising to these challenges, we intend to successfully
create value that can help realize a sustainable society anddevelop together with all our stakeholders.

New orders received

Net sales of completed construction contracts(Millions of Yen)

(Millions of Yen)

44,64640,05135,548

Fiscal 2016

Fiscal 2017

Fiscal 2018

38,74542,87937,651

41,79044,852
39,691

31,596

Fiscal 2019

Fiscal 2020

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

Integrated Report 2021

26

Integrated Report 2021

| Business Review by Division |Social Infrastructure Work

DescriptionofBusiness

Power Distribution Line Engineering WorkWork on overhead power distribution lines: Construction and maintenance ofoverhead power distribution lines facilities involving power poles with power cables
Work on underground power distribution lines: Construction and maintenanceof underground distribution lines facilities involving power cables underground

Mitsuru Fujii
Managing Director and Executive Officer,and Acting Division Manager of Social Infrastructure Division

Our work on power distribution lines
supports the resilience of electric power
infrastructure and helps encourage the spreadof renewable energy. We intend to continue
to evolve our business with an eye on the
future, utilizing our leading construction
frameworks and technological capabilities inJapan to expand our growth base.
Fiscal 2020 review and current developments
New orders received in fiscal 2020 proceeded roughly
according to the initial plan but the final total for thebusiness year stood at ¥138,132 million, a decrease by¥13,507 million or 8.9% year on year, due to partial
downward adjustments linked to changes in accounting
standards applied from fiscal 2021.
Net sales of completed construction contracts stood at¥145,775 million, a decrease by ¥2,717 million or 1.8%
year on year. Sales declined slightly compared to fiscal
2019 when we conducted a considerable amount ofdisaster recovery work following the season’s typhoons.
However, sales have been steadily increasing over the
past five years as a whole. The majority of net sales ofcompleted construction contracts for our power
27

KANDENKO

distribution line engineering work is generated by orders
from the TEPCO Group, with orders from generalcustomers making up the remainder. However, in recent
years, orders from general customers have increased
considerably, rising nearly three times compared to three
years ago.
Construction contracts brought forward as of March
31, 2021 stood at ¥22,147 million, a decrease by ¥7,643
million or 25.7% year on year.
Looking at the current environment for new orders,the Electricity Business Act covering the electricity
industry is scheduled to be revised in 2023 based on the
Act of Partial Revision of the Electricity Business Act andOther Acts for Establishing Resilient and Sustainable
Electricity Supply Systems enacted in June 2020. The
revisions will make it mandatory for electric power
providers to systematically renew aged facilities. Thus, interms of our power distribution line engineering work,
we expect the TEPCO Group will need to conduct
renewal work on support materials and transformers, etc.
in the future to comply with the act and we will beseeking to actively secure those orders.
Meanwhile, the general work that we have been
focusing on as much as TEPCO work in recent years has
been enjoying a tailwind primarily from renewableenergy-related work and we are seeing orders expand inareas outside the Kanto region as well, utilizing ourexisting technologies. In such areas, in addition to orders
relating to the building of new self-operated solar power
generation facilities, we have also recently received
orders for building wind power generation facilities,
including power distribution lines inside windmills.
To be able to fulfill this work and further expand orders
in the renewable energy and 5G telecommunications fields
that the whole Social Infrastructure Work division istargeting, we are looking to better utilize our humanresources by pursuing collaborative work with segments
other than power distribution lines. To that end, we are
striving to nurture multi-skilled workers, promote interdepartmental human resource exchanges, and encourageacquisition of qualifications.

Mission of power distribution line engineering
work under Medium-Term Management Plan
The Power Distribution Line Engineering Work division islooking to further grow its fundamental business while
also embodying the new Medium-Term Management
Plan’s slogan, “Change! And Create the Future from a
New Starting Point” by using our technologies tocultivate new markets. We intend to focus on our basic
business around infrastructure renewal and long-term
maintenance for the TEPCO Group and construction
work for undergrounding of power lines as a publicproject, while also securing renewable energy-related

work, LED work, EV charger installation work, and otherwork designed to satisfy growing decarbonization needs
etc. to help form a new growth base for our business.
The biggest challenge with regard to fulfilling thismission for power distribution line engineering work andhelping achieve our targets will be maintaining andexpanding our work execution abilities. We intend toacquire the necessary work execution abilities by striving
to secure sufficient personnel, while also promoting themulti-skilled, fluid human resources as mentioned earlier,
and working to further increase efficiency throughproductivity innovation.
In terms of productivity innovation, we intend to
improve business processes by introducing AI into
administrative operations, and increase the visibility andefficiency of onsite management using mobile terminals
and wearable cameras. We intend to use ICT to analyze
the production efficiency of our onsite operations andassess the driving and operational data for aerial work
platform trucks, and use drones as a labor-saving
measure as well.
Meanwhile, as part of measures to reconstruct ourearnings base, we plan to secure volumes of construction
work in hand and build up orders received by negotiating
early with the TEPCO Group, acquire work bycooperating on design, and participate in power cableutility tunnel PFI projects in construction work forundergrounding of power lines, making proactive efforts
to expand operations.
In fiscal 2021, the first year of the new Medium-Term
Management Plan, we did have some concerns about
the impact of holding of the Tokyo Olympic andParalympic Games on our planned work as well as apotential slump in general work in the face of uncertainty
over future economic conditions in Japan. However, sofar, we are on track to achieve our targets for both neworders received and net sales of completed construction
contracts. We also intend to steadfastly pursue all themeasures described here to generate growth for fiscal
2022 and beyond.

Our aim is to become a green innovation company by
2044. As we seek to develop business based on our“building infrastructure x social infrastructure” business
operations, we will also be strengthening the resilience
response of our base business and its preparedness forintensifying natural disasters, and continuing to protect
electric power supply infrastructure. At the same time,
we will pursue greater technical and human resource
development in order to provide the infrastructure
equipment required to support future smart societies.
We want to use these initiatives to progress ourevolution into a division that can grow in tandem withsustainable development of society, and provide valuethat is not confined to the power distribution category.

Growing in tandem with sustainable
development of society
Going forward, we intend to focus our power distribution
line engineering work on environmental conservation aspart of ESG-management conscious initiatives and strive
to reduce CO2 emissions by operating parts mounted on
aerial platform vehicles using batteries and electrifying
hydraulic tools. We will also participate in projects
designed to help achieve a decarbonized society, such as
installing public roads with EV chargers, as part of ourbusiness development.
New orders received

Net sales of completed construction contracts(Millions of Yen)

140,632

Fiscal 2016

Main line infrastructure strengthening and renewal work

(Millions of Yen)

147,853

142,968

Fiscal 2017

Fiscal 2018

151,639

Fiscal 2019

138,132

138,557

136,633

138,992

Fiscal 2020

Fiscal 2016

Fiscal 2017

Fiscal 2018

148,493

145,775

Fiscal 2019

Fiscal 2020

Integrated Report 2021

28

Integrated Report 2021

| Business Review by Division |Social Infrastructure Work

DescriptionofBusiness

Electric Power & Civil Engineering WorkPower generation and transformation work: Work on power stations and substations, and renewableenergy power generation
Transmission lines work: Work on overhead transmission lines
Civil engineering work and underground lines work: Work on underground transmission lines, andcivil engineering work using C.C. Box technology
Nuclear power work: Regular inspections and maintenance of nuclear power plant facilities and equipment

Koichi Nakahito
Managing Director and Executive Officer,and Acting Division Manager of Social Infrastructure Division

The Electric Power & Civil Engineering Workdivision pursues future-oriented value
provision with renewable energy power
generation work as a new driver of growth.
We are committed to utilizing the work
execution abilities and technologicalcapabilities we have cultivated in each work
segment to expand our business domains
and contribute to society.
Fiscal 2020 review and current developments
Reviewing new orders received, while orders from theTEPCO Group decreased, the proportion of orders generated
by general customers (other than the TEPCO Group) rose to78.8% thanks to an increase in renewable energy power
generation work. Renewable energy power generation work
accounts for 41.6% of total orders and we are also seeing
an increase in the number of collaborative projects between
the three categories of power generation and transformation
work, transmission lines work, and civil engineering workand underground lines work, which is, in turn, contributing
to new orders received in each category. Orders for nuclear
power work also increased in fiscal 2020.
Major projects won during the year included newtransmission lines work, such as the 66kV Miyakoji Katsurao
29

KANDENKO

line in Fukushima Prefecture and construction work on the
Ashikawa Wind Farm and the Kamiyuchi Wind Farm under
the Northern Hokkaido Wind Power Generation Project inHokkaido, all of which helped boost new orders received
for fiscal 2020 to ¥64,792 million, an increase by ¥5,891
million or 10.0% year on year. Net sales of completed
construction contracts totaled just ¥48,623 million, adecrease by ¥1,707 million or 3.4% year on year, in fiscal
2020 following a bumper year for large-scale projects infiscal 2019. As of March 31, 2021, the construction
contracts brought forward remained at the high level of¥82,177 million, an increase by ¥16,168 million or 24.5%
year on year.
Going forward, renewable energy power generation work
is expected to increase further as Japan’s national policies
for achieving carbon neutrality by 2050 progress, withlarge-scale projects, such as offshore wind power
generation, already being planned. We plan to expand
orders by covering a wide range of construction fields frompower plants to independent transmission lines by exploiting
the strengths our competitors don’t possess, such as ourconstruction technology for building power transmission
towers and for power intake and transformer equipmentthat handles high voltage and large currents, and support
capabilities at the planning and design stages.
We are also focusing on improving profitability throughcost management as a means of strengthening our internalframeworks. Our efforts to gain a good grasp of work
progress and cost status using monthly actual versus
forecasted performance analysis have helped us successfully
highlight issues and plan and implement improvement
measures, and we are starting to see profitability
improvement effects. Regarding our large-scale projects, ourhead office is using web conferencing and othercommunication tools to respond to onsite needs andimplement follow-up measures in a timely manner. Suchsupport measures are providing a beneficial outcome andhaving a positive impact on our business results.

Renewable energy power generation work todrive growth
The trend toward carbon neutrality offers broader potential
growth for the Electric Power & Civil Engineering Workdivision and presents significant opportunities to contributeto society through business activities. We intend tostrengthen the technological capabilities and construction
frameworks required to expand our business domains
around renewable energy power generation work and to
give concrete shape to the new Medium-Term Management
Plan concept of “Change! And Create the Future from a
New Starting Point”
We also intend to help achieve the plan’s three-year
performance targets by securing renewable energy power
generation work projects, which tend to be large in scale, toTo help build a sustainable future

help boost new orders received and net sales from completed
construction projects, and steadily improving profits.
As part of initiatives to that end, our sales activities will
include collecting and analyzing sales information fromacross the division as early as possible in order to help us
respond to an increasingly complex order environment
caused by the formation of consortiums as power plants
grow in scale and an increase in the number of new
entrants. In terms of our construction frameworks, we
intend to maintain a high level of expertise and cover abroad range of work by encouraging greater multi-skilling
among our construction employees and extending efficient
onsite support. The key focus on the technology front will
be to expand our design capabilities. Our aim is to increase
orders by enhancing the engineering capabilities of eachwork division that are required for renewable energy power
generation work, and strengthening our response from theearly consulting and design stages. We will also work tofurther enhance the quality of construction and ourtechnological capabilities while handling multiple projects,
and thereby boost our competitive advantage.
In fiscal 2021, the first year of the Medium-Term
Management Plan, while renewable energy power generation
work is increasing, new orders received are expected todecrease on the back of declining investment by users into
extra high voltage power intake and transformer equipment
such as large-scale factories in the wake of the COVID-19
pandemic. However, net sales of completed construction
contracts are expected to increase thanks to a high level ofconstruction contracts brought forward.

Our response to ESG management and SDGs themes is
consistent with the Electric Power & Civil Engineering Workdivision’s mission to help solve environmental and social
problems through our business activities. We not only intend
to expand our renewable energy power generation work, but
to develop business in various other fields as well. As part ofour effort to accommodate the need to adjust electricity
supply and demand in order to support a smart society, we
are working to build cooperative relationships with battery
manufacturers and expand the work execution abilities of ourstorage battery work. We also intend to participate inhydrogen production projects that use renewable energy byutilizing our ability to respond to high-quality demands andinstrumentation technology cultivated by our Nuclear PowerWork division in nuclear plant construction and other works.
These initiatives should help boost the number of projects
generating comprehensive orders for all work categories. In
order to exert the comprehensive capabilities of the ElectricPower & Civil Engineering Work division, we need to refine
the expertise of each work segment and create a system thatallows us to respond to increasingly advanced requirements,
while proceeding with cross-divisional operations.
To help realize a sustainable future, we intend totransform ourselves from a conventional construction
contractor to a group of professionals who can provide total
project solutions spanning planning, design, construction,
operation, and maintenance.

Construction of wind power plant

Transmission line construction work

New orders received

Net sales of completed construction contracts(Millions of Yen)

64,792(Millions of Yen)

58,90150,184

51,82945,82442,299Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

36,41135,127

Fiscal 2016

Fiscal 2017

Fiscal 201850,331

Fiscal 2019

48,623Fiscal 2020

Integrated Report 2021

30

Integrated Report 2021

| Research and Development Activities |31

KANDENKO

FarStrengthen foundations
for future growth
Productivity
innovation

Technology
development todeepen existing businesses

Now

Senior Executive Managing Officer,
Division Manager of Strategy & Technology Development Division

The research and development division is an organization
responsible for the Company’s overall technical development
and improvement, and consists of the Technology
Development Unit established within the Strategy &Technology Development Division, with the Technology
Development Department and Technology Research &Development Institute as subordinate organizations. The
division supports and cooperates with worksites andcustomers, and sells development results to external parties
while advancing research and technology development for
expanding businesses and solving issues.
In fiscal 2020, we declared three key policies: security,
safety and disaster response; operational efficiency
improvement; and applying to business field expansion. We
worked hard to deepen existing technologies and, at thesame time, develop new technologies to satisfy the latest
needs of society, and those efforts are now bearing fruit.
Regarding our disaster response technologies, we havebeen strengthening our responses to floods and lightning
strikes in particular. In October 2020, we concluded acomprehensive industry-academia partnership agreementwith Tokyo Denki University to improve resilience. For our
first joint project, we have launched some research designed
to facilitate the swift restoration of electrical infrastructurethat has sustained flood damage.
Regarding our efforts to improve operational efficiency,
we have been focusing on systematizing construction work
and introducing robotic processes. In fiscal 2020, we
advanced the introduction of prefabrication technologies,
assisting tools, self-propelled wiring robots, and drones forwire cabling, which are already helping to improve
productivity and reduce onsite workloads. In addition, ourBluE measurement recording support system, which cantake onsite measurements and automatically complete
reports simultaneously using wireless Bluetooth-enabledcommunications, received positive reactions, so we started
selling it externally.
Our initiatives to expand our business domains centeraround the themes of decarbonization and resilience. We
are participating in various projects to help realize asustainable society and creating the stepping stones for new
business development. These projects include ademonstration project for the construction of virtual power
plant (VPP) that adjusts the power supply and demand balancethrough the remote and integrated control of small-scale

Contribute to two-way management

Near

Looking at the latest technological trends
and business environment, focus on
growth strategies for promoting our
trajectory toward becoming a 100-yearcompany supporting society and on
technology development areas that
contribute to society.

Toshiaki Makino

Overview of the research and development
division and its current initiatives

Socialcontribution

Technology Development Guidelines
Distance from existing businesses

The Research and Development Division is responsible
for expanding business domains as part of our quest
to become a 100-year company, while also
responding to the demands of society throughtechnological innovation, and creating new forms of
onsite earning power.
We support Kandenko’s vision for future value
creation based on the three key terms: digital androbotics, disaster prevention and BCP, anddecarbonization.

energy resources, a research project on wireless and directcurrent power supply, and a regional microgrid construction
project under the regional plan for building national
resilience in Isumi City, Chiba Prefecture.
Going forward, we will be looking to accelerate theaforementioned initiatives and generate positive results byapplying advanced technologies such as AI, IoT, and big data
analysis related to sensing and the creation of smart devices.

Direction of technology development in theMedium-Term Management Plan
The three years during the new Medium-Term Management
Plan (Fiscal 2021-2023) will be a period in which we take onchallenges for change in order to expand our businessdomains for the future, while also advancing productivity
innovation and restructuring our earnings base. The researchand development division’s mission under the plan requires
us to simultaneously promote technological developmentthat needs to be tackled right now and future-oriented
technological development. It also requires us to help
promote and contribute to two-way management that seeks
to both deepen our existing businesses and broaden ourbusiness domains.
Our implementation focus for fiscal 2021 is to conduct
research and development that creates additional onsite
earning power. To that aim, we intend to innovate ourconstruction technology to achieve sustainable growth basedon the three key phrases: digital and robotics, disasterprevention and BCP, and decarbonization. To powerfully
advance this pursuit, we established a new Technical Strategy
Team to compile onsite needs, which form the input of our
R&D, and established a system to manage the internal andexternal deployment of the products as output, which result
from our development activities. Going forward, thisorganization will operate as the core of our R&D activities,
strategically considering what are required in the field, what
we need to change and how, and how to instill a greaterawareness and penetration of our developed products.
The research and development division also provides
technical cooperation in relation to onsite issues by helping
investigate the cause of any problems and helping to design
and plan for any equipment that requires advanced
technology. We will use human resources who havesuccessfully overcome numerous difficulties as technology orskills experts, and strive to solve problems as a united AllKandenko entity in order to heighten customer trust.

Furthermore, in order to actively incorporate external
knowledge into the innovation of construction technology,
we are implementing an industry-academia collaboration
with universities and research institutes and promoting open
innovation through a framework that includes othercompanies. In addition to building win-win cooperative
relationships, we will also be working to fill any missing
gaps at our own company, increase development speed,
and respond to advanced technologies.
Another priority theme going forward will be thecreation, protection, and utilization of intellectual property.
In fiscal 2021, the research and development division
formulated an intellectual property strategy and set out apolicy for turning construction technology which contributes
to sustainable growth into intellectual property, and forprotecting rights and managing and using patents held. Asof March 2021, Kandenko held 175 patents. While thisnumber is significantly greater than for other firms in theindustry, we do have a shortage of patents in informationand communications, and air conditioning and sanitation
systems fields. Our patent holdings are still low in the fieldsof air conditioning, water supply and drainage, andenvironment, which relate to decarbonization, andinformation processing, which relates to digital and robotics.
We want to actively obtain patents in these fields as priority
exploratory areas and press ahead with preparations for adecarbonized society and digital society.
Fiscal 2021 Basic Policy on Technology Development Plan
1. Improve the quality of technology development for supporting
sustainable growth
2. Strengthen internal and external collaboration
3. P romote the creation, protection, and utilization of intellectual property2023

Long-termTime

Pursuing technological development to support
sustainable societies
Under the new Medium-Term Management Plan, we havedeclared “promoting ESG management” as a core policy
among our key policies and set environmental targets forenergy consumption and ratio of renewable energy inconsumed power, etc., while putting forward ourcontribution to the environment and society through ourbusiness activities as we aim to become a green innovationcompany by 2044, our 100th anniversary.
We recognize that this medium to long-term direction
requires the research and development division to support asustainable society and contribute to the SDGs throughtechnological development that contributes to decarbonization
and resilience. We believe that sensing technology inparticular will become increasingly important going forward.
Therefore, we intend to consider creating frameworks thatenable us to approach more customers, by evaluating andutilizing a variety of measured and quantified information inorder to develop our ideal “building infrastructure x social
infrastructure” business operations, while at the same timecooperating with all individual divisions.
In recent years, we have seen a gradual increase in thenumber of young employees in the research anddevelopment division. Given its greater familiarity withdigital technology, we expect this younger generation touse flexible ideas to capture global changes and create
innovations that will help generate future value.
Fiscal 2021 Intellectual Property Strategy
Intellectual Property Strategy
Looking at the latest business environment and technologicaltrends, focus on creation, protection, and utilization of
intellectual property that contribute to our growth strategy
toward becoming a 100-year company supporting society.

Priority Items

Digitalandrobotics

Construction
technology Disaster
Decarbonization

Disaster prevention and
BCP solution technologies
Energy management technologies
for a decarbonized society

Digital and robotic
technologies
Short-term

Technology development tomaintain growth andexpand businesses

prevention,
BCP

Open innovation
Promote the creation, protection,and utilization of intellectual property

Contribute

Achieving SDGs
(ESG management)

1. Creating intellectual property	Set priority areas: digital and robotics, disasterprevention and BCP, and decarbonization
	Turn onsite construction technology that has not yetmaterialized into intellectual property
2. Protecting intellectual property	Seek to further raise the bar by securing projects thatoffer high royalty revenues	Protect core technology rights and build a competitive
advantage in the industry
3. Utilizing intellectual property	Analyze intellectual property holdings on an intellectual
property map to clarify high-earning areas
Integrated Report 2021

32

Integrated Report 2021

| Research and Development Activities |Research and Development System
Based on our management plan for fiscal 2020, the Group focused on developing technologies related to “security, safetyand disaster response,” “operational efficiency improvement,” and “applying to business field expansion,” with a view to“develop technologies and reinforce profit-generating capacity through open innovation.” Of particular note, in October
2020, we concluded our first comprehensive partnership agreement with a university and focused on nurturing humanresources who would be responsible for our next-generation, centered around R&D activities. More specifically, this involves
countermeasures, as well as prediction methods using sensing technologies, for storms, floods, and earthquake disasters
that have become increasingly severe in recent years. We will continue to pursue strategic collaboration to enable ourGroup technologies to be widely utilized in society.
R&D expenses (Millions of Yen)

Technology Research & Development Institute
The Technology Research & Development Institute consistsof a research building, experiment building, and outdoor
testing site. In the laboratories of the experiment building,we conduct basic experiments to respond to new
construction technologies and conduct verification
experiments for development results. The institute also
houses special equipment, such as electron microscopes and
X-ray inspection equipment, to enable us to respond to any
kind of onsite technical issues. Recently, we have introduced
analysis systems, including various simulations, and we areworking to disseminate more reliable results by using thosesystems in combination with experimental validation.

1,381

1,428

1,522

Research on safety management DX
Part of our safety management involves holding tool box
meetings (TBM-KY) before work, most of which are left
up to site managers and workers. This can sometimes
lead to accidents caused by biased or insufficient
instructions. This research aims to uniformize safety
management technology by using AI to analyze pastsafety management databases, and supporting safety
management. We intend to introduce this development
result to our worksites to help reduce the burden on sitemanagers and also realize worksites that put human firstand are free from accidents.

Causes for most of electric shock accidents that haveoccurred so far were misperception or lack of ambientconfirmation. The approach sensor that we havedeveloped uses a completely new electroscopic theory to
focus on a person’s charged state. This approach sensor
was developed and commercialized together with Sanwa
Electric Instrument Co., Ltd. When an approach sensor isworn on a helmet and other equipment, the approachsensor gives alarm sound and flashes to signal danger if
any part of the body comes close to a live part. We hopeusing this approach sensor will help prevent electric shock
accidents and help create safe and secure worksites.

1,217

1,188

Fiscal 2016

Development of approach sensors

Examples of Initiatives

Development of methods for small diameter
curved piping

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2020

High-Voltage Laboratory
The High-Voltage Laboratory is made up of a test room,physical test room, working room, and outdoor watertank used for voltage resistance tests. In the test room,
we have large-scale experiment devices, including a 350
kV-AC voltage generator, a 1,800 kV-impulse voltage
generator, and a high current generator. We use thistesting equipment to test lightning damage and verify
countermeasures, and conduct voltage resistance tests on
products. We have received requests from manycustomers to use the facility because other companies in
the industry do not have any similar facilities.

Following the enforcement of the 2016 act to promote themovement of electricity supply from utility poles tounderground, we expected to see a rise in the number ofundergrounding projects, and we started developing somenew construction methods. One of those was the small
diameter curved piping method. The development tackled
the challenges of avoiding circumvention work in residential
piping work constructed through drilling and reducing thedrilling range on customer premises by developing a new
construction method together with TOMEC Corporation.
Since this method can perform buried piping work without
drilling, it not only solves the above problems, but also
improves working environments and greatly reduces theimpact on society. Having received favorable reviews duringonsite demonstrations, we plan to apply this newly
developed method to onsite work in fiscal 2021.
First process(roadway)(user)

Rokugo Branch Office

Development of Ecomix, environment-conscious
room temperature mixture
To date, we have seen the various materials included inroom temperature mixture to be used for temporary
repairs of asphalt pavement, but there have not been
many environment-conscious options. So, we developed
Ecomix, an ideal environment-conscious product for arecycling-based society that boosts the recycling of
construction by-products by using recycled materials as
its mains ingredients. It is the only product that boasts
an 80% recycling ratio and is ecomark certified. Ecomix
was developed jointly with Seikitokyu Kogyo Co., Ltd.
Sales have been gradually increasing following ourdecision to set its selling price similar to those of
conventional mixtures.

Pushjackingpipe

Onsite workstyle reform is a pressing issue, with theintroduction of DX and IT into business administration
being one of the urgent priorities. The systemdevelopment team tasked with specializing in this issueand developing solutions is based in the Rokugo branch
office. The office serves as a venue for encouraging
co-creation with partner companies involved in systemdevelopment, with multiple projects being pursued at thesame time. Thanks to these efforts, we have been able
to develop our BLuE measurement support system thatassists with compiling test records at the time of site
completion, and a power-outage simulation system that
reduces and streamlines the work required to compile
operational plans for working during power outages.

Ecomark certified product
Uses 50% or
higher recycled materials
Asphalt/concrete clods
17 131 009
Seikitokyu Kogyo Co., Ltd.

Second process(roadway)(user)

Pull laidpipe
Test room

33

KANDENKO

Integrated Report 2021

34

Integrated Report 2021

Key Management Policies for Fiscal 2021

| Environmental Conservation |Environment

SocialGovernance

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 healthysociety. This is also 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 tohave an environmental vision leading to the creation of a sustainable society. We will do our part toleave a safe, sound environment for future generations by implementing initiatives that reduce theburden on the environment.

Safety, Environment & Quality Committee

President

Basic Policy on the Environment

Head Office
Safety & Environment Division

To realize a sustainable society, the Company strives for
management in which business activities are in harmony
with nature from a long-term view in every situation as a
general infrastructure company.

Main department
Environment Department

Construction Headquarters

Responsible department

Sales Division
Social Infrastructure Division

Safety & Environment Department

Regional Headquarters

Responsible department

Activity Plan
1. W
 e will follow environmental and legal regulations
and reduce environmental risk to fulfill our corporatesocial responsibility.
2. To realize a low-carbon, recycling-based society, we will
work to conserve energy, save resources, promote recycling,
and prevent pollution through the development, design,and execution of environmentally-conscious technologies.
3. W
 e consider environmental conservation to be an
important management issue. We are committed tomaking continual improvements to our environmental
management system (EMS).
4. We will educate all employees who engage in ourbusiness operations about the environment and raise
their environmental awareness.
 e will build bridges of cooperation to regional society and
5. W
contribute to creating a society considerate of biodiversity.

Structure for Promoting the Environmental
Management System
To facilitate a deep review of its policies and initiatives in
the field of environmental conservation activities,
Kandenko appoints a Safety, Environment & Quality
Committee chaired by the company president. Under thecontrol of the Environment Department of Safety &Environment Division, the departments set up to promote
environmental activities are as follows: in theConstruction Headquarters, the Safety & Environment
Department; and in the Regional Headquarters, theSafety & Environment Team of the General Control
Department, and the Safety & Environment Group.
Regional Headquarters. We have also compiled andapplied an Environmental Management Manual thatcomplies with the ISO 14001 international standard to
help us promote our environmental management system
more effectively.
35

KANDENKOTokyo Sales Division
Kitakanto & Hokushinetsu Sales Division
Higashikanto Sales Division
Minamikanto & Tokai Sales Division
Nishikanto Sales Division
West Japan Sales Division

Regional Headquarters
Fukushima Division

3 Strengthen foundations for future growth/4 Promote sound management activities

Safety & Environment Team,
General Control Department

Responsible department
Safety & Environment Group

Initiatives to Reducethe Environmental Burden
Amid intensifying global environmental issues, we believethat we can contribute to protecting the soundbiodiversity of the ecosystem and realize a sustainable
society by implementing systematic and efficientenvironmental conservation measures in all aspects ofour business activities.
In addition to promoting environment-friendly
procurement, Kandenko’s initiatives for environmental
conservation include efforts to reduce the consumptionof resources and energy and measures to improveindustrial waste recycling rates and convert waste into
valuable resources. By ensuring strict compliance withenvironmental laws and regulations, we are also working
to eliminate environmental risk, enhance environmental
awareness, and further integrate environmental
conservation activities. As a corporate member of arecycling-based society, Kandenko seeks to create a richhuman environment and implement unceasing innovation,
contributing in this way to activities that conserve theglobal environment.

Examples of Initiatives
Achievement of ZEB Oriented appraisal standard
The Company has achieved the ZEB Oriented appraisal
standard in the renovation project of our Education &Training Center (Ushiku-shi, Ibaraki Prefecture). This is thesecond building in Japan to achieve the standard andmarks the first case as a renovated building.
ZEB stands for net zero energy buildings. The term
refers to buildings aimed at reducing annual energy
consumption to virtually zero by integrating energysaving technologies with energy-creating ones. A
nationwide campaign is now in progress to popularize
ZEB.
This “ZEB Oriented” is a newly-established appraisal
standard for large buildings that consume large amounts ofenergy. Through the renovation, the Education & Training
Center reduced energy consumption by as much as about
35% by adopting a high-efficiency air conditioning system,in addition to making about 1,000 glass windows doublepaned and laying insulating materials on the roof.

Power generation business
Generation of electricity from wind and solar power is inprogress as a way to utilize natural energy. Kandenko
has engaged in the design and construction of numerous
solar and wind power generation systems andparticipated in experimental studies of renewable energy
in and outside Japan. Leveraging our accumulated
technologies and expertise, we operate a power
generation business using renewable energy since fiscal
2012.
Power plants in operation (Excerpt)
Maximum output
ChoshiWind Power Plant
Yagi Wind Power Plant
Shiraoka
Solar Power Plant
Kaminokawa
Solar Power Plant
Sosa Solar Power Plant
Shin-Koga
Solar Power Plant
Ushikuma
Solar Power Plant
Kama
No.1 Solar Power Plant
Kama
No.2 Solar Power Plant
Maebashi
Biomass Power Plant
Kami Ketto
Hydroelectric Power Plant

13.5MW(9 windmills with acapacity of 1.5 MW each)

9.0MW(6 windmills with acapacity of 1.5 MW each)

Location
Choshi-shi, Chiba
Choshi-shi, Chiba

1.5MW Shiraoka-shi, Saitama
1.75MW

Kaminokawamachi,
Kawachi-gun, Tochigi

1.5MW

Sosa-shi, Chiba

1.5MW

Sakaimachi,
Sashima-gun, Ibaraki

1.5MW

Kama-shi, Fukuoka

13.75MWKama-shi, Iizuka-shi,
Fukuoka

5.0MW

Kama-shi, Fukuoka

 perational launch of Kami Ketto HydroelectricO
Power Plant
The Kami Ketto Hydroelectric Power Plant, which
Kandenko had been constructing in Tsunan-machi,
Nakauonuma-gun, Niigata Prefecture since 2016, wascompleted and started its operation in May 2020.
This power plant employs a mechanism to generate
electricity by effectively utilizing the drop from the checkdams in the middle of the Nakatsu River that joins the
Shinano River. It generates roughly 6,500MWh of power
per year. This is equivalent to the electricity consumed byapproximately 1,200 regular households, or an
approximate 3,000 ton reduction in CO2 emissions.
We adopted a water mill format for the plant’s
construction that enables us to contain the power plant’s
development in a more compact area. We also adopted
a design that helps conserve the surrounding naturalenvironment by, for instance, repurposing unuseddrainage tunnels that were built at the time of the dam’s
construction to discharge water.
We will continue to utilize the technology and expertise
we have cultivated as a general infrastructure company
engaged in the energy business to the utmost and engage
in further environmentally-conscious business activities.

6.75MW Maebashi-shi, Gunma
990kW

Tsunanmachi,
Nakauonuma-gun, Niigata
View of the check dam and Kami Ketto Hydroelectric Power Plant
Integrated Report 2021

36

Integrated Report 2021

Key Management Policies for Fiscal 2021

| Coexisting with Society |Environment

SocialKandenko believes that, as part of its social responsibility as
a company that is involved in supplying public utilities, it isour duty to devote all of our strength to the expedited
restoration of electrical infrastructure for the stable provisionof electric power in the event of a disaster. We would liketo take this opportunity to introduce initiatives we
implemented following the Great East Japan Earthquake.

Damage by

February
heavy snow in
2014
Gunma

Damage by

September heavy rain in
Kanto &
2015
TohokuMarch
2011

The Great
East Japan
Earthquake

April
2016

Damage by
Kumamoto
Earthquake(Indoor electricalengineering)

May
2012

Damage bytornado in
Northern
Kanto

August2016

Damage by
Typhoon No.9

SeptemberOctober
2019

Damage bytyphoons Faxai
and Hagibis

Damage by

September tornado in
Saitama &
2013
Chiba

37

KANDENKO

Social contribution activities

The Mount Fuji Reforestation Project was undertakenwith the goal of protecting the nearly untouched forest
ecosystem, fearing the loss of Mount Fuji’s rich forest
resources and the natural ecosystem. (Operated by theOrganization for Industrial, Spiritual and Cultural
Advancement (OISCA), a nonprofit foundation)
Kandenko has participated in these activities since2017, through which Kandenko employees and theirfamilies have assisted in efforts such as tree planting andthe installation of nets to prevent damage from feedingdeer. Participants come andlisten to talks on the naturalenvironment of Mount Fuji,
and raise their awareness ofenvironmental protection while
deepening their understandingof Mount Fuji.

Sponsoring the Japanese Para-Sports
Association

Sponsorship of the “All-Japan High School
Rugby Football Championship”

Courtesy of Japan Ground Self-Defense Forcerugby and the futures of the high school students whowill carry the rugby world forward.

The Mount Fuji Reforestation Project

The Japanese Para-Sports Association(JPSA) was established after theInternational Stoke Mandeville Games
were held in 1964, to encourage andpromote sports for people with disabilities
in Japan.
In support of the JPSA’s vision toward “a society
where everyone can enjoy the value of sports” and of“creating a vibrant, inclusive society,” Kandenko signed
an official partnership agreement with the association tofurther encourage and promote para-sports.
Moving forward, the Company will continue to support
para-sports to revitalize regional communities and ensure
pleasant and fulfilled lives.

Extensive power outages following
Typhoon Faxai
In September 2019, Typhoon Faxai with windspeeds of over 50 meters per second hit the
Kanto region and caused severe damage tothe electric power infrastructure. As a result,as many as 930,000 households suffered
power outages. Kandenko mobilized response
teams immediately to work on recovery
work, day and night, with concerted efforts.
The response teams made their way to thedisaster-stricken sites despite having tosurmount fallen trees and landslides, andstruggled to manage to deal with powerlines tangled with flying objects and downed
trees on power lines. Under these difficulties,
we worked hard to restore electricity as soon
as possible by drawing on the experiencesfrom past disasters and cooperating with the
Self-Defense Forces dispatched for disaster
relief operations.

Reinforce “people first”

Governance

Kandenko maintains that it “fulfills its duty of corporate social contribution and contributes to creatingricher human environments” as one part of our Corporate Philosophy, and we are dedicated to promoting
CSR management throughout the Group and contributing to the sustainable growth of society.

Responding after natural disasters occur

2 Rebuild earnings base by demonstrating our comprehensive strengths/5

We Are All Different picture book conveys
the importance of diversity:

Kandenko x Toshiaki Hirose Connection Support Project
Round 1
We are currently developing “Kandenko x Toshiaki Hirose
Connection Support Project” with the former captain of
the Japan national rugby team Toshiaki Hirose as our
new Corporate Communication Captain (CCC). In
November, we published a picture book entitled “We
Are All Different” as the project’s first initiative.
This picture book was created by gathering theopinions of project members, mainly young employees,
based on the theme of Mr. Hirose’s One Rugby
movement. The One Rugby movement seeks toencourage the communal spread and development ofmultiple types of rugby such as wheelchair rugby andtag rugby enjoyed by everyone according to individual
tastes and needs. The picture book seeks to convey theimportance of diversity in an easy-to-understand mannerby likening the way in which various animals use their
specific skills and traits to carry a tree fruit to a specificdestination to the sport of rugby where players carry theball forward as one team.
Based on the key message of“connecting individuality to create
an exciting future,” we willcontinue to scrum together with
our CCC Mr. Hirose andcontribute to building the field inwhich everyone can respect eachother’s individuality and play anactive role.
Updates on the book compilation and projectprogress are published on our website.
Click below to access more details.

Kandenko aims for social contribution through sports
promotion and has been sponsoring the “All-Japan HighSchool Rugby Football Championship” organized byassociations such as the All Japan High School Athletic
Federation and the Japan Rugby Football Union, since
the 97th Championship in 2017.
Through sponsoring this championship, held atHanazono Rugby Stadium, the representative symbol ofhigh school rugby, we support the development of Japan
Integrated Report 2021

38

Integrated Report 2021

Key Management Policies for Fiscal 2021

| Safety and Quality Initiatives |Environment

SocialGovernance

Basic approach
SafetyQuality
Basic Policy on Quality

Quality

Strengthen onsite risk management capabilityEnhance safety education (introduce highperformance safety sensing devices)Apply digital technologies to onsite risk
countermeasures mphasize and entrench work rules designed to facilitateE
the provision of high-quality infrastructure(providing thorough guidance to new and remote partnercompanies)
Conduct probing internal inspections

We pursue technological innovation that contributes to safety and security and provide top-quality services andinfrastructure across the whole equipment lifecycle from planning and proposal through to post-installation maintenance.

Activity guidelines
1.
2.
3.

Safety4.

Incorporating new COVID-19-inspired “systems” torealize risk-resistant, secure and safe worksites

Slogan4 Promote sound management activities

We will anticipate customer needs and use advanced technologies and sophisticated skills to provide a level of qualitythat will satisfy our customers.
We will continue to research and develop technologies and improve operations, and always create valuable products.
We, together with all our employees and organizations, will strive to consistently improve our quality management
systems in order to maintain and improve quality.
We will conduct education and training, improve technology and pass on skills, and promote reliable human resource
development.

Quality Management System
We establish quality management systems (QMS) in accordance with the ISO 9001 requirements based on our Basic Policy
on Quality, and seek to achieve sustainable growth.

ISO 9001 external authentication acquisition status

Systems to ensure fully working onsite PDCA cycle

Division/Office

Registration organization and registration number

Cost Management Division

Enhancing safety education

Sales Division

Kandenko Group safety promotion activities

Tokyo Sales Division
Kitakanto & Hokushinetsu
Sales Division
Higashikanto Sales Division
Minamikanto & Tokai Sales
Division

Systems to ensure fully working onsite PDCA cycle

Registration scope

Enhancing safety education

Design and construction of electricalinfrastructure
Design and construction of air conditioning,water supply and drainage, and sanitation
systems

Management System Assessment
CenterMSA-QS-4553

Nishikanto Sales Division
West Japan Sales Division

Registration date: September 1, 1997 (Valid through February 27, 2023)

Fukushima Division

Review safety management “framework”

Increase sensitivity to risk mainly among young people
Design, construction, and ancillary service ofIncrease sensitivity to risk through simulated disaster experiences
Improve safety administration
Use of remote technology

Plans designed with workers in mind

Online training

Rokkasho Office
Tokai OfficeEffective safety instructions and KY

Kashiwazaki-Kariwa OfficeKandenko Group safety promotion activities

Plan ( P )Tsuruga Officeelectricity, instrumentation, and machinery devices
involved in the construction, repair, and regularinspection of nuclear power plants, nuclear fuelRegistration Body for IS, Inc.
RB-Q11939

handling facilities, and related infrastructure

Fukushima Division
Registration date: February 16, 2001 (Valid through February 28, 2022)

Improve communication with affiliated companies
Action ( A )Do ( D )and business partners and support safety activities
Effective safety measures that reflect

Check ( C )39

KANDENKO

construction work opinions

Integrated Report 2021

40

Integrated Report 2021

Key Management Policies for Fiscal 2021

Training
Training is designed to equip Kandenko employees with the necessary skills commensurate with their positions, and to
improve the skills of all employees.
List of training systems

1. Personnel development

Young
employees

Follow-up introductory training

OJT: Guidance and training through workplace operationNew
employees

Training: Training for professional expertise and skills
Self-development: Support upskilling of employees,

Training Programs

environment that fosters human resources
3. Development of a human resources development
system (standardization of development methods)

Developmentof personnel

Continuous humanresourcesdevelopment
Developmentof human
resourcesdevelopment
system41

KANDENKO

Developmentof workplaceculture andenvironment

MOT training

Training for next
generation leaders

New employee
introductory training※ブレンディング研修 … 学習方法の効果的な組合せ

such as acquisition of qualifications
2. D evelopment of a workplace culture andProblem-solving capabilities

New team leader training

Presentations

Team
leaders

Logical thinking

An outline of specific initiatives is as follows.

New manager training

Training for heads of power
distribution sales offices

Training for overseas personnel

systems to develop excellent human resources.

Assistantsectionmanagers

Training for developing
overseas construction personnel

The Company has continuously worked to establish

2. W orkplace culture and environment that foster
human resourcesA workplace where everyone can learn from eachother and grow togetherA workplace where employees can speak andconsult with others frankly
A workplace where each employee can exert theirown abilities

Training for newly appointed
line managers
Upskill training for in-house lecturer

Outline of Initiatives
for Human Resources Development

Sectionmanagers

Technical Engineering

Instructor training

capabilities of each employee.

Department manager /branch head training

Sales

OJT leadership and promotion training

growth, the Company will develop and raise theDepartment
managers

Administration

Specialized
training(select)

Joint training(operations)

Joint training (special)

Assertive communication training

trusted by society and customers” necessary for sustained

1. P rofessional workforce trusted by society andcustomers
Human resources committed to a mission to live up
to the trust and expectations of customers andmake contributions to society
Human resources equipped with high skills necessary
to provide the best services and facilities
Human resources respecting diverse values to copewith changes in the times and ceaselessly striving forself-development and ingenuity

Name of training

Training for floor managers,
operations managers, and onsite managers

While continuously nurturing a “professional workforce

Personnel We Aspire to Be

Specialist training (level-specific)

Joint training (level-specific)

Entry-level toadvanced-level training

Level

Basic-special advanced training

Under the corporate motto of “People First,” the Company strives for “human resources development,”“reforms for work practices and annual leave systems,” and “creation of an open workplaceenvironment.” Through these measures, we work to realize a working environment where each
employee can take an active role by fully realizing their potential.

Basic Policy on Human Resources
Development

Reinforce “people first”

Governance

Basic-upskilling training

SocialEntry-level toadvanced-level training

Environment

Training for year-round new hires| Employee Initiatives |5On-the-job training (OJT)OJT training is a program whereby senior employees in
the workplace encourage junior employees to acquirebusiness abilities by providing guidance on practicalknowledge and skills in daily operations.
OJT training is also important as a way for expert
employees to pass on technologies and skills to young
employees.

ActionPlan

Improvement

Formulation of plans
Human
resourcesdevelopment
through OJT

Check

Do

Evaluation and validation

Implementation of training ore effective training
M
combinations
We offer a three-pronged training
structure: group seminars with ample
measures in place to prevent the
spread of COVID-19, e-learning, andonline training, along with on-the-job
training, which we can mix andmatch to ensure the most effective
and efficient human resources
development.

e-learning
pre-assignment++

Group seminars

e-learning
post-assignment

Parallel training

Online training

Hybrid training

Develop same content through groupseminars and online training sessions

Taken via PC using
web conferencing systems, etc.

Simultaneous group seminars and online
training sessions given by the same lecturer

Self-development
In acquiring national qualifications required for duties,
the Company provides various support to employees who
are willing to learn and grow on their own. Support
includes in-house seminars and bearing expenses forcorrespondence education programs, external workshops,
and examinations.

Examples of qualifications recommended by the Company

1st grade construction
managing engineer
Professional engineer andassociate professional engineer
First-class electrician

Third-class chief electricity
engineerFire defense equipment officer
Construction accounting
specialist

Integrated Report 2021

42

Integrated Report 2021

Key Management Policies for Fiscal 2021

| Employee Initiatives |Environment

SocialBasic policy
Leading and implementing reforms by managers
including executives
Shifting to a work-life balance mindset
Strengthening the occupational health system andencouraging self-care obligations

Priority items and issues to be addressed
Priority items
1. Proper
managementof work hours

3. Implementation oflabor management
education

2. Thorough management of
employees working long hours

5. Enhanced healthmanagement

Managers

4. Shift to well-balanced
work practices
Employees

Examples of Initiatives

K. Assertion

Initiatives to Promote Diversity

To create a workplace environment with greater
openness, Kandenko is currently engaging in “K.
Assertion” activities under the slogan of “Voice yourfindings and appreciate voices.” Assertion* is acommunication method to develop smooth relationships,
and the Company’s understanding of assertion is “torespect oneself and others, and frankly voice findings,
questions, and opinions.” Continuous promotion of thisactivity will encourage proactive communication among
employees and solidify relationships of trust. Also, theactivities will improve work quality and productivity as
they strengthen inter-organizational cooperation and aid
in preventing disasters and accidents.

In October 2018, Kandenko established a Diversity
Promotion Team. So that each employee can demonstrate
his or her capabilities irrespective of gender, nationality, age,or bodily features, we are working to develop vigorous
personnel and a workplace environment in conjunction with“reforms for work practices and annual leave systems” and“measures for human resources development.”
Also, by respecting the diverse ideas of employees, we
aim to raise corporate value and become a company thatwill continue to be trusted.

*A ssertions are communication skills to assert oneself properly withoutcausing distress in other persons. Generally, disparities in position makeit difficult to assert oneself, but using this skill enables frankcommunication based on mutual respect, without superiors imposing
their opinions on others or subordinates feeling timid. This provides
additional assurance to employees in the workplace that they areallowed to voice their questions and opinions.

Promoting the advancement of women(Outline of activities)
Formulating assertion through web conferencing
Expand awareness and awareness-raising activities byutilizing smart devices
Implementing practical assertion training at seminars,
etc.
Implementing assertion through practical operations
Superiors

Facilitatecommunication

Make a request

Issues to be addressed
Correcting long working hours

Speak out

Human resources development

Showappreciation
Listenattentively

Health management

Superiors

Subordinates

Operational improvement

Encourage and support promotion of various human resources
Proper management of work hours

Create an affable atmosphere
Interorganizational
cooperation

Facilitate acquisition of days off and vacations

Major initiatives
Scheduled grant of annual paid leave (10 days)(Average number of paid leave taken in fiscal 2020:
13.7 days)
Enhanced health care management based on
professional expertise
43

KANDENKO

Reinforce “people first”

Governance

Reforms of Work Practices and Annual
Leave Systems
To realize a company where each employee can work
energetically in every workplace, the Company promotes
various work practices and annual leave systems aiming
to shorten total working hours while enhancing thehealth management of employees.

5

Achievingan openworkplaceenvironment

Prevention ofdisasters andaccidents

Deterring power
harassment
Active communication

Improvement of work quality
Improvement of productivity

Promoting employment of persons with disabilities
To step up diversity promotion, we engage in initiatives for
employment and advancement of persons with disabilities.

We have formulated an action plan with the aim ofcreating an attractive workplace where diverse humanresources can play an active role while respecting eachother’s values and differences, and everyone cancontinue working with peace of mind. An overview of
the action plan and major initiatives are as follows.
Period of the Action Plan

April 1, 2021, to March 31, 2025 (four years)
Targets and Details of Initiatives

Double the number of women in managerial
positions four years from now at the end of fiscal
2024.
Details of initiatives
Introduce training on diverse management-classhuman resource development
Conduct training to raise awareness of opportunities
among female employees themselvesFormulate a policy for developing female technicaland engineering positions (role models)Consider policies for expanding the range of duties
for female employees
Raise paternity leave take-up rate to 30% or higher
Details of initiatives
Introduce e-learning to promote understanding ofchildcare leave
Create awareness-raising posters to promote maleparticipation in childcare
Create childcare leave interview sheet
Conduct PR activities featuring employees who havetaken childcare leaveBuild a papa-mama parenting community

Kandenko SunSun School Family Visit Day
In August 2021, we hosted our Kandenko SunSun School
as a bring your family to work event.
This event is part of our work-life balance initiatives
designed to promote communication between families
and workplaces and create a comfortable working
environment while also helping the families who support
our employees on a daily basis deepen theirunderstanding of our company’s business. This time, we
decided to hold the event online as a new initiative toenable people, including employees posted overseas, toparticipate from remote locations.
On the day of the event, 53 employees and theirfamilies participated in the event, which included an
online tour of the workplace including live links with ourhead office, offices, and electrical engineering work sites,
etc., a study group to learn about optical fiber
mechanisms while actually working on them, and otherprograms designed to encourage two-way
communication. We also screened a video message forchildren about dreams by Toshiaki Hirose, a former Japannational rugby team member who is also our Corporate
Communication Captain (CCC).

Participation in Science and Technology Challenge*
Since fiscal 2016, we have participated in the Science andTechnology Challenge—an initiative organized by theJapanese Cabinet Office and the Japan Business Federation—by actively supporting female students in their choice of
career paths in the fields of science and technology.

女子高校生・女子学生の理工系分野への選択

http://www.gender.go.jp/c-challenge/about_rikochalle/index.html(in Japanese)* Through initiatives led by the Gender Equality Bureau of the Cabinet
Office, the Science and Technology Challenge supports female students
interested in the fields of science and technology, who are taking on thechallenge of a related career path based on a clear vision of their future.

H eld Forum for Female Technical and Engineering Staff
We hold lectures and seminars with an aim of reforming
the awareness of female employees appointed at worksites
and to expand the range of their duties. The lectures andseminars also serve as a networking opportunity for them.
Held Seminar for Employees Taking Childcare Leave
We provide a venue for information exchange regarding childrearing
and casual communication among parenting employees. We
support them in balancing work and child-rearing through easing
their anxiety about returning to work and sharing problems.
C ompilation of Support for Work-Life Balance Handbook
As an aid to supporting employees’ work-life balance, thehandbook provides various information such as in-housesystems related to child-rearing and sends messages tobosses who are working with junior colleagues preparing
for maternity leave and child-rearing leave.
Integrated Report 2021

44

Integrated Report 2021

| Roundtable Discussion with Outside Directors |Environment

SocialGovernanceHajime Saito

Takashi Uchino

Miwako Ando

Outside Director

Outside Director

Outside Director

An external perspective on
Kandenko’s mission and challenges
Kandenko’s corporate image andculture from outside directors’
perspectives
Takashi Uchino: Kandenko’s corporate motto isPeople First, and its recruitment-focused
catchphrase is “Be the light that illuminates ournation.” As these words suggest, Kandenko is acompany that undertakes the major role andmission of developing and enhancing theinfrastructure that supports people’s lives,
industries, regions, and society as a whole. While
its activities are not often in the spotlight,
Kandenko’s efforts to swiftly restore power
45

KANDENKO

following major power outages primarily in Chiba
Prefecture caused by typhoon damage in
September 2019 is one recent memorable
example that was broadly reported in the media.
Kandenko is a general infrastructure company
with its core expertise in electric work thatboasts a rich track record and advanced
technological capabilities and work execution
abilities as one of Japan’s leading companies.
Going forward, Kandenko is expected to leadthe infrastructure building to support Japan’s
energy revolution as we work to achieve ournational target of carbon neutrality by 2050.
Hajime Saito: We have been hit by a string ofincreasingly severe disasters such as typhoons

and floods in recent years and, as Mr. Uchinosaid, Kandenko’s social role has been brought
further into the spotlight. In terms of corporate
performance, Kandenko’s earnings power has
improved in recent years, with the company
maintaining operating profit above ¥30 billion
yen in fiscal 2020 even in the face of the COVID19 pandemic, and I believe that strength stems
from Kandenko’s high-level construction,engineering, and technological capabilities thatguide and inspire onsite workers. A steady inflowof orders for data centers and information andcommunication infrastructure, for which needs
are expanding particularly strongly in the Tokyo
metropolitan area, is also helping to maintainhigh-profit levels.
Miwako Ando: I was appointed as an outside
director in June 2021. During my career, I spent
32 years as a public prosecutor and have beenteaching at the Hosei University Graduate Schoolof Law since retiring in 2017. I want to use mybackground to help advance Kandenko’s initiatives,
especially in the field of compliance. When I thinkof Kandenko, I think of a company that focuses
its business on onsite construction and also
greatly values the people who work there. I
believe this strong respect for its employees has
led to Kandenko’s determined sense of duty
towards society and its high degree oftechnological capabilities and work execution
abilities, and underpinned its strong performanceto date. Having said that, there is no denying thefact that, being involved in construction work,
Kandenko’s ratio of male employees remains
stubbornly high. As the company’s first female
director, I would like to help change thecompany’s corporate culture, even if only a little.
Uchino: As a labor-intensive company, wenaturally prioritize the safety and security of ouremployees, but we also focus on ensuring thesafety and security of our customers and society
through the maintenance of stable electricalinfrastructure. In my opinion, that commitment
forms the basis of this solid and dedicatedorganization’s corporate culture.
Saito: All Kandenko employees have a specialty
area, but its strength lies in a strong sense of
onsite teamwork. The pride and tensions backed
by these qualities, in turn, guarantee high-quality
construction, and both elements seem to be
deeply rooted as the companywide corporate
culture.

Recent changes in corporate
governanceUchino: Kandenko has been transforming its
governance in accordance with the Corporate
Governance Code by increasing the number ofoutside directors and other means. In addition toattending meetings of the Board of Directors, weoutside directors strive to strengthen governanceand improve the quality of management byconducting on-site inspections, holding hearings
with business executives, and exchanging opinions
regularly with Audit & Supervisory Board members
and the company chairman and president. One
specific reform involves our decision to change
the Compensation Advisory Committee into a
Nomination and Compensation Committee. Goingforward, we intend to help promote the reformoriented management required by the revised
Code, improve the functioning of the Board of
Directors, secure diversity among executives, andaddress sustainability issues.

Career Summary
Apr. 1982 Full-time lecturer, Department of Management, Gakushuin University Faculty of Economics
Apr. 1985 Assistant Professor, Department of Management, Gakushuin University Faculty of Economics
Apr. 1990 Professor, Department of Management, Gakushuin University Faculty of Economics (until Mar. 2019)
Apr. 1992 Planning Director, The Gakushuin School Corporation (until Mar. 1997)
Jun. 2013 Director, the Company (current)
Oct. 2013 Representative Director, Institute Of Management Studies, Japan (current)
Apr. 2019 Professor emeritus, Gakushuin University (current)

Ando: While I haven’t been on the Board for
long, I feel that the Board respects the opinionsof the outside directors during active discussions.
Chairman Hiroshi Yamaguchi, President Toshio
Nakama, and other internal executives all listen
attentively to our opinions, which reassures me
and makes it easier to speak my mind. I intend
to play an active role going forward in shaping
the compliance approach that I mentioned earlier
by conducting hearings on current circumstancesand giving appropriate advice. Also with regard
to risk management, the Board often touches onsafety and quality issues, so I feel I can apply my
specialist knowledge and experience in this area
as well.
Saito: One of the roles of the outside directors
is to point out any gaps with the outside worldthat might be difficult for internal managers topick up, and I believe the Board of Directors is a
Integrated Report 2021

46

Integrated Report 2021

| Roundtable Discussion with Outside Directors |Environment

SocialGovernancemanagement and human resources information
than ever before to enable outside directors toengage fully in the nomination procedures for
directors.

Expectation for new mediumterm management plan andissues in effective utilization ofhuman resources

Career Summary
Apr. 1979 Joined The Dai-Ichi Kangyo Bank, Limited
Apr. 2009	Managing Executive Officer and Head of Internal Audit Group of Mizuho Financial
Group, Inc.
Jun. 2009	Managing Director and Head of Internal Audit Group, Mizuho Financial Group, Inc.
Apr. 2010	Managing Director, Head of Risk Management Group,
Head of Human Resources Group, and Head of Compliance Group,
Mizuho Financial Group, Inc.
Apr. 2011 Deputy President & Executive Officer of Mizuho Securities Co., Ltd.
Jun. 2011 Deputy President and Deputy President & Executive Officer, Mizuho Securities Co., Ltd.
May 2015 Deputy President, Mizuho Capital Co., Ltd.
Apr. 2016 President, Mizuho Capital Co., Ltd. (until Apr. 2019)
Jun. 2019 Director, the Company (current)

good place to discuss those gaps. Kandenko is acompany that has been creating a culture in thesame industry and business area for many years,
so I think grasping any changes in the external
environment and responding to any gaps
between internal and external environments issomething that we outside directors and senior
management should tackle together.
Uchino: There is growing momentum for all
directors, including outside directors, to work
together to improve the company. I believe that
we are making solid progress on the invigorationof the Board that Ms. Ando talked about. The
Board is careful to allocate plenty of time toexchanging opinions and proactively incorporating
the recommendations of outside directors
regarding the operation and business planning of
the Kandenko Group as a whole. Board
discussions are much deeper now than they werein the past. However, we recognize that there is
still room for improvement in ensuring effective
governance, including increasing the ratio ofoutside directors on the Board of Directors anddefining the most effective approach for the
Nomination and Compensation Committee thatwas mentioned previously. In particular, we
probably need to see more effective sharing of47

KANDENKO

Saito: What is unique about this particular
medium-term management plan is management’s
decision to adopt a long-term perspective,
determine 2044 as its growth target, and backcast from there. I highly regard the plan as aground-breaking document for several otherreasons too. Instead of determining the plan’stargets with a top-down approach, the plan’screators were expanded to include employees intheir 30s and 40s who will become the next
generation of management and everyone shared
what they considered to be the key issues. A
lively debate of individual themes then ensued,
the results of which were compiled into the plan
we have today.
Uchino: The plan’s content is very ambitious andchallenging, and allowing the company’s
employees to take the lead in envisioning thefuture really illustrates Kandenko’s commitment
to change. We outside directors were also
consulted on various matters from the earlyplanning stage and gave advice, and so we reallyfeel this medium-term management plan was
created by everyone together.
Ando: I was very impressed when I heard
employees had taken the lead in formulating thismedium-term management plan. Employees canlaunch into the plan knowing their opinions wereincorporated and that they played a leading rolein formulating the content. I believe that will be
a powerful driving force in proceeding with theplan. It is difficult to inspect sites right now dueto the impact of the COVID-19 pandemic, butwhen it is once again possible, I am reallylooking forward to going to the sites and seeing
with my own eyes how onsite employees areproceeding with the medium-term management
plan.
Uchino: When checking the plan’s
implementation, we intend to focus on theoverall balance in the progress of Kandenko’s fivekey policy themes. We are especially aware that
nurturing human resources and reforming humanresources systems in an effort to reinforce ourpeople-first approach are extremely important
themes as the working population shrinks in theface of a declining birthrate and aging
population. In order to pass down the company’s
high technological capabilities and work
execution abilities, which lie at its core, andrespond effectively to any business expansion,
we need to rapidly pursue the creation of
workplace environments that seek to improve
productivity, introduce diverse work styles, andactively utilize diverse human resources, including
women.
Ando: Both men and women will have tochange their awareness if we are to utilize
female human resources more actively. For
example, while there may be an ingrained
prejudice that a certain job is too hard for
women, if the conditions and environment areright, there probably isn’t much that men can dothat women can’t. It is important to change ourcorporate culture to one that enables female
employees to build a career with confidence by
first giving women a chance and getting them tothe starting line, and then increasing the numberof female managers and core human resources
who can act as role models for other female
employees to follow suit.
Saito: Another point to make about humanresources is the need to attract and effectively
utilize talented people from outside the company.
In order to respond quickly to changes in the
future when building new foundations for
growth and introducing advanced technologies,
we need to invite external human resources with
the necessary knowledge and experience to join
the firm to help fill any gaps with the outside
world. I intend to check the status of progresson accepting and utilizing such external humanresources as part of the medium-term plan.

As for me personally, I intend to continue
attentively fulfilling my function of monitoring
company management and make every effort
to create opportunities for young employees toplay an active role.
Saito: The topic of the declining labor force wasmentioned earlier, but how do we manage andunite people in such an environment? I think
Kandenko will need to determine how to do thisgoing forward. Kandenko’s future potential will
expand greatly if it can combine its ability to
attract and coordinate people with its ability totransform business operations throughdigitalization, and focus on research anddevelopment to respond effectively to changes insocial infrastructure and technological innovation.
With that aim in mind, I would like to see
Kandenko sweep away internal barriers, build
strong networking capabilities, and pursue
initiatives to extend its external presence. I intend
to actively cooperate in this endeavor.
Ando: I have mentioned how I want to utilize
my knowledge and experience in my role as an
outside director, but I am still unfamiliar with mywork at Kandenko so I intend to study daily andwork hard to fulfill my responsibilities. I intend tovoice any simple questions I might have aboutareas outside the realm of my specialty and hopeto provide a fresh perspective that will help
improve corporate value.

Aspiration as a member ofKandenko and personal
ambitionsUchino: The first thing I would like to see
Kandenko do is strengthen its voice andpresence in general society. From theperspective of promoting ESG management, I
feel that it is necessary to get Kandenko’s
future potential across to society and instill
deeper recognition among people, and ensurethat recognition leads to strong evaluations inthe stock market in particular. Second, I would
like to see Kandenko break away from theindustry’s typical passive contractor culture. I
would really like Kandenko to successfullychange some parts of its nature through theimplementation of this medium-term
management plan, including its principle toobserve precedents and its vertically segmentedorganizational behavior. My third request
relates to the promotion of ESG management
designed to help build a sustainable
environment and society. We need to fully
consider how to turn the contents of the
management plan into concrete achievements.

Career Summary
Apr. 1985 Appointed as a Public Prosecutor
Jan. 2014 Chief Prosecutor of Tokushima District Public Prosecutors Office
Jul. 2015 Chief Prosecutor of Kumamoto District Public Prosecutors Office
Jul. 2016 Public Prosecutor of Supreme Public Prosecutors Office
Mar. 2017 Retired as a Public Prosecutor
Apr. 2017 Professor of Graduate School of Law of Hosei University (current)
Jun. 2019 Registered as an Attorney-at-Law (current)
Jun. 2021 Director, the Company (current)

Integrated Report 2021

48

Integrated Report 2021

| Corporate Governance |Environment

SocialGovernanceCorporate Governance System

Corporate 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

Gener al Meet ing of Shar eholder scontinued existence as a company with high value to its 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

Appointment, dismissal

ReportAppointment,
dismissal

ReportExchange, Kandenko implements a basic corporate governance policy that sets out its basic approach with theaim of enhancing the practical effectiveness of corporate governance.

ReportDecision-making, monitoring and oversight*Please see our website for more specific details. >>> https://www.kandenko.co.jp/company/governance

Board of Directors (Directors)

Outline of the Current Corporate
Governance System
Board of Directors
The Kandenko Board of Directors, which consists of 14
members including three outside directors, meetsregularly once a month, and additionally whenevernecessary, to discuss important business matters and toreach final decisions, taking account of the contributionsof the independent directors and other considerations.
The Board also oversees the execution of business by the
directors. A designated corporate department is in place
to provide support to the outside directors, for instanceby briefing them where necessary on items due to be
discussed at Board meetings. Important managerial
issues, including those that will be brought up at a Boardof Directors’ meeting, are discussed by the Management
Committee, which meets regularly each week andadditionally whenever necessary. In these ways, we strive
for rational corporate administration. Moreover, we haveintroduced an executive officer system, which separates
managerial oversight from business execution, toaccelerate the decision-making process and reinforce
business execution while enhancing the efficiency of thedirectors’ business execution system. To foster swift
responses to changes in the operating environment andinvigorate management, directors’ terms are limited to
one year from the time of appointment.

Audit & Supervisory Board Members
Kandenko has employed an Audit & Supervisory Board
Member system for some time. Five Audit & Supervisory
Board Members, including three from outside theCompany, conduct audits appropriately based on legal
requirements and Kandenko’s audit policy. The outside
members heighten our system’s independence andneutrality. They attend our Board of Directors’ meetingsand other important meetings, where they express their
independent and objective opinions. Audit & Supervisory
Board Members, including outside members, meet with
the Company’s directors on a regular and irregular basis
to ask about the state of the latter’s work. We provide
the Audit & Supervisory Board Members with the
Auditing Office to enable the complete and effective
fulfillment of their duties.
49

KANDENKO

Independent Accounting Auditor
Kandenko has appointed Inoue Audit Corporation as its
independent accounting auditor. The three CPAs who
audited Kandenko’s accounts are Masami Hiramatsu, Teruo
Hayashi, and Katsuhiro Suzuki, none of whom has audited
our accounts for over seven consecutive years. Four other
CPAs, one person who has passed the CPA examination,and one additional person assist with the account audit.

Internal Audit
For internal auditing, 12 staff of the Internal Audit Division
carries out the audit in accordance with the Internal
Control Enhancement Plan. The audit results are reported
to the Internal Control Committee and the Management
Committee, and as appropriate to the Board of Directors,
to enable any required remedial action to be taken.
Independent accounting auditors and the Internal Audit
Division report their findings at Audit & Supervisory Board
meetings and regularly discuss these matters with the
Audit & Supervisory Board Members, including outside
members. Opinions are exchanged whenever necessary sothat cooperation is ensured. While the Audit & Supervisory
Board Members (including outside members), independentaccounting auditors, and the Internal Audit Division carryout their audits, they receive regular reports on the stateof maintenance and operation of internal control fromeach division responsible for business execution.

Supervisionandoversight

Audit & Supervisory Board Members(Audit & Supervisory Board)

Decision-making,monitoring and oversight,
business execution

President /Director
responsible forbusiness

Appointment,
dismissal

ReportReportAudit,
reportManagement
Committee

Internal Control
Committee
Safety, Environment &Quality Committee

Auditing
OfficeReportAudit

Accountant audit

Independent
Accounting
AuditorBusiness execution

Directors,
executive officers(Division managers, department
managers, branch heads)

Outside Directors and Outside Audit &Supervisory Board Members
Currently, the Company has three outside directors andthree outside Audit & Supervisory Board Members. We
appoint outside directors and outside Audit & Supervisory
Board Members to fulfill monitoring and oversightfunctions and to enhance transparency, so in accordancewith the Companies Act and other regulations, we lookfor candidates whose experience and expertise outside
the Company will be useful to Kandenko, and who canoversee and audit the directors’ execution of duties froman independent and neutral standpoint. Regarding
outside Audit & Supervisory Board Members, the Audit& Supervisory Board meeting first agrees on thecandidates, the Board of Directors approves them, andthen they are presented at a general meeting ofshareholders for a vote. In the case of outside directors,
the Board of Directors nominates a number of outside
director candidates who meet the independence criteria

Audit

Audit by Audit & Supervisory Board Members

Internal Control
Division(Compliance consultations)

Employees

Affiliated companies

Integrated Report 2021

50

Integrated Report 2021

| Corporate Governance |listed below, giving due consideration to the practicaleffectiveness of its operations. For outside members of
the Audit & Supervisory Board, the Board of Directors
nominates a number of candidates with the ability toaudit the execution of business by the directors from a
position of independence and objectivity.

Independence Criteria for Outside Directors andOutside Audit & Supervisory Board Members
Kandenko considers candidates for outside director andoutside Audit & Supervisory Board Members to be
independent as long as they do not trigger any of thefollowing exclusion criteria:
1. T he candidate is or has been a business executive ofKandenko or a Kandenko’s subsidiary.
2. The candidate is a business executive of a major
shareholder of Kandenko (a shareholder with 10% ormore of the voting rights including indirect holdings)
or a business executive of a company of which
Kandenko is a major shareholder.
3. The candidate is a business executive of a major
creditor of Kandenko (a creditor who has providedloans of more than 1% of consolidated assets in themost recent fiscal year).
4. The candidate is a business executive of a major
business client of Kandenko (a client accounting for
more than 1% of consolidated net sales of completed
construction contracts in the most recent fiscal year)
or a business executive of a company of which
Kandenko is a major business client.
5. The candidate is a representative employee or an
employee of an accounting auditor of Kandenko.
6. The candidate is a person who has, or a member of agroup that has, received from Kandenko material
benefits or gifts of high value (more than ¥10 million
excluding corporate officers’ remuneration).
7. The candidate is a business executive of a company
with a reciprocal relationship with Kandenko throughoutside officers.
8. The candidate has a relative (a spouse or relative
within the second degree of kinship) to whom any of
1 to 6 above applies (restricted to officers and senior
employees).
9. The candidate has triggered any of 2 to 8 above inthe past five years.

Nomination and Compensation Committee
Kandenko established the Nomination and Compensation
Committee, the majority of whose members are
independent outside directors, to ensure transparent
procedures relating to the nomination and compensationof directors.
The outline of the committee is as follows.
Name:
Nomination and Compensation Committee
Composition:	Chairman (committee chair), President,
independent outside directors
Matters for discussion: Matters related to thecompensation of directors and Audit &Supervisory Board Members, and othermatters related to corporate governanceand compliance

Effectiveness evaluation
To secure the effectiveness of the Board of Directors, theCompany carries out self-evaluations by all directors andAudit & Supervisory Board Members after the end ofeach fiscal year regarding the effectiveness of the Boardof Directors. The content of the evaluation is analyzed andassessed by the Board of Directors. In the self-evaluation
51

KANDENKO

Environment

SocialGovernanceimplemented in April 2021, opinions were raised on
discussions by the Board of Directors, the composition of
the Board of Directors, and response to revisions of the
Corporate Governance Code, but the overall effectivenessof the Board of Directors in fiscal 2020 was judged tohave been secured.
The Company will continue to raise the effectivenessof the Board of Directors as a whole in light of these
opinions.

State of Progress of the Internal
Control System
Based on the Basic Policy for Enhancing the Internal
Control System adopted by the Board of Directors(enacted April 2006, revised May 2015), Kandenko has
established an Internal Control Committee chaired by thecompany president that discusses issues relating to theinternal control system. The Company also lays downinternal control regulations that set out the basic principles
of internal control and management regulations foraffiliated companies that set out relevant management
principles. Through these and other measures, Kandenko
has put in place a system to ensure appropriate businessconduct by the Company and by the corporate groupconsisting of Kandenko and its subsidiaries. Additionally,
to promote adaptation to the internal control reporting
system introduced in fiscal 2008 in accordance with the
Financial Instruments and Exchange Act, the Company has
set up a department in charge of reviewing internal
controls relating to financial reporting in order to promote
appropriate operation and evaluation and to ensure thecredibility of financial reporting.

Compliance System
To clarify important points in the Kandenko Group’sbusiness activities and encourage deeper inculcation ofcompliance, we have enacted the Kandenko Group
Charter of Corporate Behavior, and we are promoting its
establishment and raising the awareness of all Group
employees about the Charter. We have set up acompliance consultation point for employees and aninternal system where legal violations can be reported.
We are working to establish and maintain a corporate
culture of fairness and transparency.
In its attitude toward antisocial forces, the whole
Kandenko organization is committed to a resolute stancerejecting any action that could raise suspicion of an
inappropriate relationship. Backing this stance are theKandenko Group Charter of Corporate Behavior and theInternal Control Enhancement Plan adopted by the Internal
Control Committee, which form the basis for education,
training, and related activities to ensure compliance andpromote full awareness throughout the organization.

Risk Management Systemdevises countermeasures to match their degree of impact
and likelihood of occurrence. In addition to taking advancemeasures of this kind to prevent risk, Kandenko has
designated reporting channels and response systems inplace for the event of the risk materializing.
Additionally, the Internal Control Committee meets
periodically to check the operating status of the risk
management system and to analyze and evaluate risk
status and related matters, while the establishment of a
dedicated Internal Control Division serves to strengthen
the risk management system.
Described below are factors that could possibly have asignificant impact on decisions made by investors.
In recognizing that there is the potential for such risks
to occur, the Kandenko Group is undertaking efforts toavoid their occurrence as well as formulating
countermeasures in the event such risks occur.
Moreover, the statements described below regarding
the future reflect judgments made by the KandenkoGroup based information available up to the end of the
fiscal year ended March 31, 2021.

Changes in the business environment
In the event that significant changes occur in thebusiness environment, such as decreases in constructionrelated investments or capital investment in electric
power facilities and equipment exceeding projectedchanges, it is possible that the actual financial
performance or other results of the Company could be
affected. Sales to the TEPCO Group account for about
30% of the Kandenko Group’s sales.

Fluctuations in the cost of materials or labor costs
Should the cost of materials or labor costs increasesignificantly, and the increase cannot be reflected in thecontracted fees, it is possible that the actual financial
performance or other results of the Company could be
affected.

Work and related risks
If work undertaken by Kandenko turns out to beseriously defective or an accident occurs in the course ofwork, it is possible that the actual financial performanceor other results of the Company could be affected.

Credit risk of client company
In the construction industry, the contracted fee for eachtransaction is very large, and in many cases, the contract
is subject to the payment of a large construction fee atthe handover of the completed construction. Should theclient company suffer from a credit shortage before theCompany can receive payment of the construction fee, it
is possible that the actual financial performance or otherresults of the Company could be affected.

Asset holding risk
As it is necessary to have such assets as real estate andsecurities for business activities, should something
happen, such as a significant decline in the fair value ofthe held assets, or a dramatic drop in the profitability of
the real estate for business purposes, it is possible thatthe actual financial performance or other results of theCompany could be affected.

Liability for employees’ retirement benefits
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

Should the fair value of pension assets decline, or should
there be changes in the assumptions, such as the returnon investments or discount rate, used to calculate theliability 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 theConstruction Business Act, the Antimonopoly Act, and theIndustrial Safety and Health Act. Should there be anychanges, 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 otherresults of the Company could be affected.

Risk of information leakage
In the event that a large amount of damage is incurred
as a consequence of the theft of information due tocyberattacks or the falsification or loss of system data, it
is possible that the actual financial performance or otherresults of the Company could be affected.

Disaster risk
If business activities are interrupted or delayed due tothe occurrence of natural disasters, such as large-scale
earthquakes and typhoons, it is possible that the actual
financial performance or other results of the Company
could be affected.

A new virus pandemic
If COVID-19 causes damage to the health of Kandenko
employees, a delay in materials procurement, a decreasein construction capacity, or a delay in collecting payments
for construction projects, it is possible that the actual
financial performance or other results of the Company
could be affected.

Systems to Ensure Appropriate Business Conduct
by Kandenko and the Corporate Group Consistingof Kandenko and Its Subsidiaries
Kandenko has put in place a system to promote
information sharing with its subsidiaries, under which the
Kandenko Board of Directors receives reports onimportant matters relating to the business conduct ofsubsidiaries, including their accounting and internal
control operations.
Moreover, for the purpose of risk management at
subsidiaries, internal regulations are in place whose basic
aim is to prevent crisis situations in advance and tominimize the impact on business activities in the eventthat a crisis situation materializes. Additionally, Kandenko
provides advice and other support for the creation of risk
management systems at subsidiaries, and periodicallychecks and evaluates the status of risk management at
its subsidiaries.
By periodically receiving reports from its subsidiaries,
Kandenko is able to check their conduct of business,
ascertain the state of management operations at thesubsidiary, and offer advice and other measures to tackle
management issues.
In parallel, the Internal Audit Division carries out internal
audit of subsidiaries in accordance with the Internal
Control Enhancement Plan. The audit results are reported
to the Internal Control Committee and the Management
Committee, and as appropriate to the Board of Directors,
to enable any remedial action to be taken.
Integrated Report 2021

52

Integrated Report 2021

| Management Structure | (As of July 1, 2021)

Environment

SocialGovernanceDirectors
Chairman and Director

President and Executive Officer

Managing Director and Executive Officer

Managing Director and Executive Officer

Hiroshi Yamaguchi*

Toshio Nakama*Nobuhiro Iida

Hitoshi Sugizaki

Tenure as Director:—

Tenure as Director:
6 years

Administrative delegation,
jurisdiction, and responsibility
Division Manager of Sales Divisionin charge of Cost Management Division

Administrative delegation,
jurisdiction, and responsibility
Acting Division Manager of Corporate
Division and Head of Accounting & IT Unit

Tenure as Director:
1 yearTenure as Director:
1 yearHiroshi Yamaguchi was elected as a Director as he has experience,expertise, etc. gained through serving in positions that include Director andExecutive Officer of Tokyo Electric Power Company, Incorporated and Tokyo
Electric Power Company Holdings, which will contribute to management of
the Company.

Toshio Nakama was elected as a Director as he has experience, expertise,etc. gained through serving in positions that include President and Executive
Officer which will contribute to management of the Company.

Nobuhiro Iida was elected as a Director as he has knowledge of operationsin the areas of electric engineering, environmental facilities and systems aswell as experience, expertise, etc. gained through his service in posts that
include Division Manager of Minamikanto & Tokai Sales Division, BranchManager of the Kanagawa Branch, as well as Managing Director andExecutive Officer which will contribute to management of the Company.

Hitoshi Sugizaki was elected as a Director as he has knowledge of
operations in the area of administration and has experience, expertise, etc.
gained through his service in positions that include the head of accounting
and the IT unit in the Corporate Division as well as Managing Director andExecutive Officer which will contribute to management of the Company.

Executive Vice President and Executive Officer

Executive Vice President and Executive Officer

Managing Director and Executive Officer

Managing Director and Executive Officer

Shoichiro Kashiwabara*

Yuji Ueda

Mitsuru Fujii

Shinji Takahashi

Administrative delegation,
jurisdiction, and responsibility
Division Manager of Corporate Divisionin charge of Overall Operations andInternal Control Division

Administrative delegation,
jurisdiction, and responsibility
In charge of Overall Operations, Group
Business Department and International
Business Division

Administrative delegation,
jurisdiction, and responsibility
Acting Division Manager ofSocial Infrastructure Division in charge of
Safety & Environment Division

Administrative delegation,
jurisdiction, and responsibility
Division Manager of Minamikanto &Tokai Sales Division and Branch Manager
of Kanagawa Branch

Tenure as Director:
6 years

Tenure as Director:
3 years

Tenure as Director:—

Tenure as Director:—

Shoichiro Kashiwabara was elected as a Director as he has knowledge of
operations in the areas of administration as well as experience, expertise,etc. gained through serving in positions that include Executive Vice
President and Executive Officer which will contribute to management of theCompany.

Yuji Ueda was elected as a Director as he has experience, expertise, etc.
gained through serving in positions that include Managing Director of
TEPCO Energy Partner, Inc. as well as Managing Director and Executive
Officer of the Company which will contribute to management of theCompany.

Mitsuru Fujii was elected as a Director as he has knowledge of operationsin the area of power distribution as well as experience, expertise, etc.
gained through his service in positions that include the head of power
distribution unit in the Social Infrastructure Division which will contribute to
management of the Company.

Senior Managing Director and Executive Officer

Managing Director and Executive Officer

Managing Director and Executive Officer

Shinichi Miyauchi

Koji Tsuru

Koichi Nakahito

Administrative delegation,
jurisdiction, and responsibility
Division Manager of Social Infrastructure
Division

Administrative delegation,
jurisdiction, and responsibility
Division Manager of Tokyo Sales Division
and Branch Manager of Tokyo Branch

Tenure as Director:
2 years

Tenure as Director:
1 yearAdministrative delegation,
jurisdiction, and responsibility
Acting Division Manager of Social
Infrastructure Division in charge ofStrategy & Technology Development
Division

Shinji Takahashi was elected as a Director as he has knowledge of
operations in the areas of electric engineering, environmental facilities andsystems as well as experience, expertise, etc. gained through his service inposts that include Division Manager of Minamikanto & Tokai Sales Division
and Branch Manager of the Kanagawa Branch which will contribute to
management of the Company.

Tenure as Director:—
Shinichi Miyauchi was elected as a Director as he has knowledge in theoperation of the area of administration as well as experience, expertise, etc.
gained through serving in positions that include Senior Managing Directorand Executive Officer which will contribute to management of theCompany.

Koji Tsuru was elected as a Director as he has knowledge of operations in
the areas of electric engineering, environmental facilities and systems as well
as experience, expertise, etc. gained through his service in posts that include
Division Manager of Higashikanto Sales Division, Branch Manager of Chiba
Branch, as well as Managing Director and Executive Officer which willcontribute to management of the Company.

Koichi Nakahito was elected as a Director as he has experience, expertise,etc. gained through serving in positions that include General Manager ofEngineering Department and Executive General Manager of Tokyo Branchof TEPCO Power Grid, Incorporated which will contribute to managementof the Company.

* denotes Representative Directors

53

KANDENKO

Integrated Report 2021

54

Integrated Report 2021

| Management Structure |Environment

SocialGovernanceOutside Directors

Outside Audit & Supervisory Board Members
Outside Director

Outside Director

Outside Audit & Supervisory Board Member

Outside Audit & Supervisory Board Member

Takashi Uchino

Hajime Saito

Sumihito Okawa

Takashi Suetsuna

Tenure as Director:
8 years

Tenure as Director:
2 years

Tenure as Outside Audit &Supervisory Board Member:
13 yearsTenure as Outside Audit &Supervisory Board Member:
5 years

Takashi Uchino was elected as a Director as he has experience, expertise,etc. as a university professor and as a business administration expert which
will contribute to management of the Company.
Significant Concurrent Positions outside the Company:
Representative Director of Institute Of Management Studies, Japan

Hajime Saito was elected as a Director as he has experience, expertise, etc.
gained through serving in positions that include Director of Mizuho
Financial Group, Inc., Mizuho Securities Co., Ltd., etc. which will contributeto the management of the Company.

Sumihito Okawa was elected as an Audit & Supervisory Board Member as
he has experience and expertise, etc. gained through serving in positions
that include Audit & Supervisory Board Member of ANA HOLDINGS INC.
and ALL NIPPON AIRWAYS CO., LTD. which will contribute to the effective
auditing of the Company.

Outside Director

Miwako Ando

Outside Audit & Supervisory Board Member

Shoichi Muto

Tenure as Director:—

Takashi Suetsuna was elected as an Audit & Supervisory Board Member as
he has experience and expertise, etc. gained through serving in positions
that include senior official of administrative agencies as well as an outside
officer of Marubeni Corporation, Totetsu Kogyo Co., Ltd., JCR
Pharmaceuticals Co., Ltd., Aioi Nissay Dowa Insurance Co., Ltd., and Keikyu
Corporation which will contribute to the effective auditing of the Company.
Significant Concurrent Positions outside the Company:
Outside Director, Totetsu Kogyo Co., Ltd.
Outside Director, JCR Pharmaceuticals Co., Ltd.
Outside Auditor, Aioi Nissay Dowa Insurance Co., Ltd.
Outside Auditor, Keikyu Corporation

Tenure as Outside Audit &Supervisory Board Member:
2 years

Miwako Ando was elected as a Director as she has experience, expertise,etc. as a public prosecutor and as an attorney-at-law which will contributeto management of the Company.

Shoichi Muto was elected as an Audit & Supervisory Board Member as hehas experience and expertise, etc. gained through serving in positions at
Tokyo Electric Power Company Holdings which will contribute to theeffective auditing of the Company.

Significant Concurrent Positions outside the Company:
Professor of Graduate School of Law of Hosei University
Attorney-at-law

Full-time Audit & Supervisory Board Members

55

Full-time Audit & Supervisory Board Member

Full-time Audit & Supervisory Board Member

Toru Yukimura

Hidekazu Tanaka

Tenure as Audit & Supervisory Board Member:
1 yearTenure as Audit & Supervisory Board Member:
1 yearToru Yukimura was elected as an Audit & Supervisory Board Member as hehas knowledge in the areas of finance and accounting as well as experienceand expertise, etc. gained through his service as a business manager which
will contribute to the effective auditing of the Company.

Hidekazu Tanaka was elected as an Audit & Supervisory Board Member as
he has knowledge of operations in the areas of electric power, civilengineering and technology development as well as experience andexpertise, etc. gained through his service in positions that include Executive
Officer which will contribute to the effective auditing of the Company.

KANDENKO

Integrated Report 2021

56

Integrated Report 2021

| Consolidated 11-Year Financial Summary |(Millions of yen)

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Net sales

462,482441,786

447,741

437,930

436,682447,673

470,943507,205

563,550

616,143556,045

Operating profit

10,735

8,034

7,364

8,284

9,388

16,416

26,39729,26130,012

34,69330,041

2.3

1.8

1.6

1.9

2.1

3.7

5.6

5.8

5.3

5.6

5.4

Ordinary profit

11,634

9,070

8,301

9,089

10,336

17,077

27,34530,03130,79535,56531,043

Profit attributable to owners of parent

5,866

1,876

3,952

4,226

4,615

9,412

17,591

19,05819,70322,515

20,147

Comprehensive income

1,772

4,381

8,238

7,327

11,984

7,137

18,422

22,927

20,31915,68529,222

Total assets

353,342359,726

364,008359,933

366,177

407,681424,874

443,751459,854488,701

456,999

Total net assets

176,808

178,757

184,269

189,692

193,345

197,980

213,356

230,810

245,954

255,821

279,459

ROE (%)

3.9

1.1

2.2

2.3

2.5

4.9

8.8

8.8

8.5

9.3

7.8

ROA (%)

3.2

2.5

2.3

2.5

2.8

4.4

6.6

6.9

6.8

7.5

6.6

Equity ratio (%)

48.93

48.54

49.49

51.45

51.44

47.22

48.72

50.51

51.85

50.62

59.17

Net assets per share (yen)845.67854.31

881.41906.29922.05942.42

1,013.33

1,097.36

1,167.30

1,211.13

1,323.90

Earnings per share (yen)

28.69

9.18

19.34

20.69

22.59

46.07

86.11

93.31

96.46

110.23

98.64

Cash dividends per share (yen)

12.00

12.00

12.00

12.00

14.00

14.00

20.00

24.00

26.00

28.00

28.00

Net cash provided by (used in) operating activities

10,257

13,035

15,401

r2,2182,921

18,042

6,751

11,46928,251

29,155

12,873

Net cash provided by (used in) investing activities

r3,7991,583

r12,748

r5,8392,253

r7,101

r17,867

r10,015

r10,131

r13,481

r972

Net cash used in financing activities

r4,037

r5,423

r2,900

r4,540r3,74319,807r169

r7,857

r9,153

r7,151

r26,317

Cash and cash equivalents at end of period

41,53950,72550,55038,69740,15770,89959,61254,09963,06871,57957,187

Number of employees (persons)

8,769

8,746

8,732

8,821

8,839

8,915

9,244

9,571

9,818

10,003

10,154

For the fiscal years ended March 31

Operating profit ratio (%)

57

KANDENKO

Integrated Report 2021

58

Integrated Report 2021

| Consolidated Financial Statements |CONSOLIDATED BALANCE SHEETKANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESMARCH 31, 2020 AND 2021
(Millions of Yen)

(Thousands of U.S. Dollars)

2021

2020

(Millions of Yen)

2021

Assets(Thousands of U.S. Dollars)

2020

2021

2021

¥101,558¥88,832$800,288

Liabilities
Current liabilities

Current assets
Cash and deposits*3¥71,502*3¥58,478*3$526,828

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

197,793*3

192,200*3

1,731,531

Costs on construction contracts in progress

5,007

12,009Securities

11,406*5*511,11645,108*5

Current portion of convertible bond-type bonds withshare acquisition rights
Lease obligations

6,831

*3

7,402

*3

66,68420,019

–

–

573

595

5,360

8,562

3,976

35,819Advances received on construction contracts in progress

15,031

12,644113,909

203

158

1,423

5,035

45,360Other

14,8807,252

65,333

(610)

(544)

(4,900)312,433

278,5452,509,414

Provision for warranties for completed construction
Provision for loss on construction contracts

*5

5,021

*5

5,546

*5

49,963

Other

35,10425,797

232,405

Total current liabilities

192,907

144,952

1,305,873

Non-current liabilities

Non-current assets

Long-term borrowings

Property, plant and equipment*3*398,409*3

100,603*3

906,333

Machinery, vehicles, tools, furniture and fixtures*3

60,894*3

62,992*3

567,495*2, *360,051*2, *360,042*2, *3

540,918

Leased assets

2,963

3,361

30,279Construction in progress

1,578

633

5,702

Accumulated depreciation(111,777)(116,032)(1,045,333)

Total property, plant and equipment

112,119

111,601

1,005,414

5,901

5,804

52,288Deferred tax liabilities for land revaluation

7,881

*3

*2

6,585

7,249

*3

1,385

1,211

Lease obligations

Buildings and structures

Land

*3

Income taxes payable

5,451

Total current assets

Short-term borrowings

100,144

Raw materials and supplies

Allowance for doubtful accounts

Notes payable, accounts payable for construction
contracts and other

*2

6,573

65,306
12,477*2

59,216Retirement benefit liability

22,64015,836142,666

Other

1,654

1,542

13,891

Total non-current liabilities

39,97332,586

293,567

232,880

177,539

1,599,450

Share capital

10,264

10,264

92,468

Capital surplus

6,352

6,441

58,027Retained earnings

228,341

242,999

2,189,180

(587)

(588)

(5,297)244,370259,118

2,334,396

Valuation difference on available-for-sale securities

9,513

14,681

132,261

Deferred gains or losses on hedges

(305)

(245)

(2,207)

Total liabilities
Net assets
Shareholders’ equity

Intangible assets

Treasury shares
Investments and other assets
Investment securities

Total shareholders’ equity

39,757*1, *36,915*3*1, *3*3

7,524

423,198
70,900*3

67,783

Accumulated other comprehensive income

Revaluation reserve for land

*2

(5,221)*2(5,247)*2(47,270)

Allowance for doubtful accounts(663)(1,322)(11,909)

Remeasurements of defined benefit plans

(973)

2,110

19,009Total investments and other assets

58,246

61,048549,981

Total accumulated other comprehensive income

3,012

11,299101,792

176,267

178,453

1,607,684

8,438

9,042

81,459255,821

279,459

2,517,648

488,701¥456,999$ 4,117,108¥488,701¥456,999$4,117,108

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

59

46,975
7,870

12,236

Deferred tax assets
Other*1, *3KANDENKO¥

Non-controlling interests
Total net assets
Total liabilities and net assets
The accompanying notes are an integral part of financial statements.

Integrated Report 2021

60

Integrated Report 2021

| Consolidated Financial Statements |CONSOLIDATED STATEMENT OF INCOMECONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2020 AND 2021

KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2020 AND 2021
(Millions of Yen)

Net sales of completed construction contracts
Cost of sales of completed construction contracts

*1

2020

2021

2021

¥616,143¥556,045$5,009,414

555,215*1*2

26,234500,893*1

55,151

60,928Gross profit (loss) on completed construction contracts
Selling, general and administrative expenses(Thousands of U.S. Dollars)*225,1104,512,549
496,855*2

226,216

34,69330,041

270,639

Interest income

17

20

180

Dividend income

929

950

8,558

Other

338

396

3,567

1,285

1,368

12,324

Operating profit (loss)
Non-operating income

Total non-operating income

Profit (loss)

Interest expenses

198

205

1,846

Foreign exchange losses

50

–

–

Other

164

160

1,441

Total non-operating expenses

413

366

3,297

35,56531,043

279,666

–

846

7,621

Other

222

89

801

Total extraordinary income

222

936

8,432

(Thousands of U.S. Dollars)

2020

2021

2021

¥23,584¥20,818$187,549(6,083)

5,230

47,117

29

59

531

(1,845)

3,114

28,054

Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income*1(7,899)

*1

8,403

*1

75,702¥15,685¥29,222$263,261

14,67028,460256,396¥1,015¥762$6,864

Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable tonon-controlling interests

Non-operating expenses

Ordinary profit (loss)(Millions of Yen)

The accompanying notes are an integral part of financial statements.

Extraordinary income
Gain on sale of investment securities

Extraordinary losses

691

6,225

Loss on COVID-19–

Provision of allowance for doubtful accounts for
subsidiaries and associates

–

650

5,855

Other

1,296

387

3,486

Total extraordinary losses

1,296

1,729

15,576

Profit (loss) before income taxes

34,49030,251

272,531

Income taxes - current

11,7098,766

78,972

Income taxes - deferred

(802)

665

5,990

Total income taxes

10,906

9,432

84,972

Profit (loss)

23,584

20,818

187,549

Profit (loss) attributable to non-controlling interests

1,068

670

6,036

¥22,515¥20,147$181,504

Profit (loss) attributable to owners of parent*4*4

The accompanying notes are an integral part of financial statements.

61

KANDENKO

Integrated Report 2021

62

Integrated Report 2021

| Consolidated Financial Statements |CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEAR ENDED MARCH 31, 2020

YEAR ENDED MARCH 31, 2021
(Millions of Yen)

(Millions of Yen)

Shareholders’ equity

Balance at beginning of period

Share capital

Capital surplus

Retainedearnings¥10,264¥6,352¥211,314

Shareholders’ equity
TreasurysharesTotal shareholders’equity¥(586) ¥227,343

Balance at beginning of period

Changes during period

Share capital

Capital surplus

Retainedearnings¥10,264¥6,352¥228,341

Total shareholders’equity¥(587) ¥244,370

Changes during period

Changes in equity interest inconsolidated subsidiaries––

Changes in equity interest inconsolidated subsidiaries

89

89

Purchase of shares of
consolidated subsidiaries––

Purchase of shares of
consolidated subsidiaries

(0)

(0)

Dividends of surplus(5,719)(5,719)Dividends of surplus(5,514)(5,514)

Profit (loss) attributable toowners of parent

22,51522,515

Profit (loss) attributable toowners of parent

20,147

20,147

Reversal of revaluation
reserve for land

230

230

Reversal of revaluation
reserve for land

26

26

Purchase of treasury shares

0

Disposal of treasury shares

(0)

(0)

Purchase of treasury shares

00

Disposal of treasury shares

Net changes in items otherthan shareholders’ equity

Balance at end of period

0

–

0

17,027¥10,264¥6,352¥228,341(0)

17,026–89

14,658¥10,264¥6,441¥242,999

Total changes during period¥(587) ¥244,370

Balance at end of period

Accumulated other comprehensive income
Valuation difference Deferred gains
on available-for-sale or losses on
securities
hedgesBalance at beginning of period

(0)

(0)

0

0

(0)

14,747

Net changes in items otherthan shareholders’ equity

Total changes during period¥15,530

Revaluation
reserve for landplans¥(334) ¥(4,990) ¥883¥(588) ¥259,118

Accumulated other comprehensive income

Remeasurements Total accumulated Non-controlling Total net assetsinterestsof defined benefit other comprehensive

Valuation difference Deferred gains
on available-for-sale or losses on
securities
hedgesincome¥11,088¥7,521¥245,954

Changes during period

Balance at beginning of period¥9,513

Remeasurements Total accumulated Non-controlling Total net assets
Revaluationinterestsof defined benefit other comprehensive
reserve for landplansincome¥(305) ¥(5,221) ¥(973) ¥3,012¥8,438¥255,821(89)–

Changes during period

Changes in equity interest inconsolidated subsidiaries–

Purchase of shares of
consolidated subsidiaries–

Changes in equity interest inconsolidated subsidiaries–

Purchase of shares of
consolidated subsidiaries(0)

Dividends of surplus(5,719)Dividends of surplus(5,514)

Profit (loss) attributable toowners of parent

22,515

Profit (loss) attributable toowners of parent

20,147

Reversal of revaluation
reserve for land

230

Reversal of revaluation
reserve for land

26

Purchase of treasury shares(0)

Purchase of treasury shares(0)

Disposal of treasury shares

0

Disposal of treasury shares0

Net changes in items otherthan shareholders’ equity(6,017)29(230)(1,857)(8,076)916(7,159)Net changes in items otherthan shareholders’ equity

5,168

59

(26)

3,084

8,286

693

8,980

Total changes during period(6,017)29(230)(1,857)(8,076)

916

9,867

Total changes during period

5,168

59

(26)

3,084

8,286

603

23,638¥(305) ¥(5,221) ¥(973) ¥3,012¥8,438¥255,821¥(245) ¥(5,247) ¥2,110¥11,299¥9,042¥279,459

Balance at end of period¥9,513

The accompanying notes are an integral part of financial statements.

63

TreasurysharesKANDENKO

Balance at end of period¥14,681

The accompanying notes are an integral part of financial statements.

Integrated Report 2021

64

Integrated Report 2021

| Consolidated Financial Statements |CONSOLIDATED STATEMENT OF CASH FLOWSKANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2020 AND 2021

YEAR ENDED MARCH 31, 2021
(Thousands of U.S. Dollars)(Millions of Yen)

Shareholders’ equity

Balance at beginning of period

Share capital

Capital surplus

Retainedearnings$92,468$57,225$2,057,126

Total shareholders’
Treasury shares
equity$(5,288) $2,201,531

Changes during period
Changes in equity interest inconsolidated subsidiaries

801

801

Purchase of shares of
consolidated subsidiaries

(0)

(0)

Dividends of surplus(49,675)(49,675)

Profit (loss) attributable toowners of parent

181,504

181,504

234

234

Reversal of revaluation
reserve for land
Purchase of treasury shares

0

Disposal of treasury shares

(0)

(0)

0

0

Net changes in items otherthan shareholders’ equity–

801

132,054$92,468$58,027$2,189,180

Total changes during period
Balance at end of period(0)132,855$(5,297) $2,334,396

Accumulated other comprehensive income
Valuation difference Deferred gains
on available-for-sale or losses on
securities
hedgesBalance at beginning of period$85,702

Remeasurements Total accumulated Non-controlling Total net assets
Revaluationinterestsof defined benefit other comprehensive
reserve for landplansincome$(2,747) $(47,036) $(8,765) $  27,135$76,018$2,304,693

(801)

–

Changes during period
Changes in equity interest inconsolidated subsidiaries
Purchase of shares of
consolidated subsidiaries(0)

Dividends of surplus(49,675)

Profit (loss) attributable toowners of parent

181,504

Reversal of revaluation
reserve for land

234

Purchase of treasury shares(0)

Disposal of treasury shares0

Net changes in items otherthan shareholders’ equity

46,558531(234)

27,78374,6486,243

80,900Total changes during period

46,558531(234)

27,78374,648

5,432

212,954$(2,207) $(47,270) $19,009$101,792$81,459$2,517,648

Balance at end of period$132,261

The accompanying notes are an integral part of financial statements.

65

KANDENKO

Cash flows from operating activities
Profit (loss) before income taxes
Depreciation and amortization
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for loss on construction
contracts
Increase (decrease) in retirement benefit liability
Interest and dividend income
Interest expenses
Loss (gain) on sale of investment securities
Provision of allowance for doubtful accounts for subsidiaries
and associates
Decrease (increase) in trade receivables
Decrease (increase) in costs on construction contracts inprogress
Decrease (increase) in other inventories
Increase (decrease) in trade payables
Increase (decrease) in advances received on construction
contracts in progress
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes refund (paid)
Net cash provided by (used in) operating activities
Cash flows from investing activities
Net decrease (increase) in time deposits
Purchase of securities
Proceeds from sale and redemption of securities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of investment securities
Proceeds from sale and redemption of investment securities
Loan advances
Proceeds from collection of loans receivable
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Repayments of long-term borrowings
Redemption of convertible bond-type bonds with shareacquisition rights
Repayments of lease obligations
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)

2020

2021

2021

¥34,490
6,457
72¥30,251
7,246
(56)

$272,531
65,279
(504)

2,649

524

4,720

(2,397)
(946)
198
–

(2,447)
(971)
205
(846)

(22,045)(8,747)
1,846(7,621)

–

650

5,855

(13,331)

5,580

50,270(1,420)

290

2,612

(664)
2,776

416
(12,726)

3,747(114,648)(5)(2,386)(21,495)

8,090
35,970946(218)(7,543)29,155(438)
25,291
971(225)(13,163)
12,873(3,945)
227,846
8,747(2,027)(118,585)
115,972595(5,000)4,000(10,570)641(1,394)
22
(203)
307
(1,880)(13,481)

2,732
–
4,000
(5,758)323(1,412)
1,461
(990)
507
(1,835)(972)

24,612–
36,036(51,873)
2,909(12,720)
13,162(8,918)
4,567(16,531)(8,756)

45
(788)

560
(621)

5,045
(5,594)–(20,000)(180,180)(590)(5,719)(98)(7,151)(11)
8,511
63,068¥71,579(672)(5,514)(68)(26,317)24(14,391)
71,579¥57,187(6,054)(49,675)(612)(237,090)
216(129,648)
644,855$515,198*1*1

The accompanying notes are an integral part of financial statements.
Integrated Report 2021

66

Notes to Consolidated Financial Statements
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2020 AND 2021

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

4.Significant accounting policies(1) Evaluation methods for significant assets

Kandenko Co., Ltd. (the “Company”) and its consolidated subsidiaries(the “Companies”) maintain their accounting records and prepare
their financial statements in accordance with accounting principles
generally accepted in Japan, which are different in certain respects as
to the application and disclosure requirements of International
Financial Reporting Standards. The accompanying financial statements
have been compiled from the consolidated financial statements
prepared by the Company as required by the Financial Instruments
and Exchange Act of Japan.

For the convenience of readers, the accompanying consolidated
financial statements as of and for the year ended March 31, 2021
have been translated from yen amounts into U.S. dollar amounts at
the rate of ¥111 =U.S. $1.00, the exchange rate prevailing on March
31, 2021.
As permitted by the Financial Instruments and Exchange Act ofJapan, amounts of less than one million yen have been omitted. As aresult, the totals shown in the accompanying consolidated financial
statements (both in yen and in dollars) do not necessarily agree withthe sum of the individual amounts.

SIGNIFICANT MATTERS PROVIDING THE BASIS FOR THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
1. The scope of consolidation(1) Number of consolidated subsidiaries: 30
Names of the consolidated subsidiaries
Kawasaki Setsubi Kogyo Co., Ltd.
Kanko Facilities Co., Ltd.
Kanagawa K - Techno Co., Ltd.
Chiba K - Techno Co., Ltd.
Saitama K - Techno Co., Ltd.
Ibaraki K - Techno Co., Ltd.
Tochigi K - Techno Co., Ltd.
Gunma K - Techno Co., Ltd.
Tama K - Techno Co., Ltd.
Shizuoka K - Techno Co., Ltd.
HANDENKO CORPORATION
Kanko Power Techno Co., Ltd.
Kanagawa Power Techno Co., Ltd.
Chiba Power Techno Co., Ltd.
Saitama Power Techno Co., Ltd.
Ibaraki Power Techno Co., Ltd.
Tochigi Power Techno Co., Ltd.
Gunma Power Techno Co., Ltd.
Nishikanto Power Techno Co., Ltd.
Shizuoka Power Techno Co., Ltd.
Tower Line Solution Co., Ltd.
Sato Kensetsu Kogyo Co., Ltd.
NETSAVE Co., Ltd.
Tokyo Kouji Keibi Co., Ltd.
Bay Techno Co., Ltd.
KANKO SYOJI CO., LTD.
K asset management Co., Ltd.
Choshi Wind Development Co., Ltd.
Kama Solar Power Co., Ltd.
Maebashi Biomass Power Co., Ltd.

Among these subsidiaries, Tower Line Solution Co., Ltd., whichchanged its company name from Transmission Line Construction Co.,
Ltd. to the current name, conducted an absorption-type merger of
SYSTEC ENGINEERING Co., Ltd., a consolidated subsidiary, effective
October 1, 2020.

(2) Name of major non-consolidated subsidiary:
THAI KANDENKO CO., LTD.
(Reason for excluding from the scope of consolidation)
All of the non-consolidated subsidiaries are small in scale and haveno material impact on the consolidated financial statements in termsof total assets, net sales, profit or loss (amount corresponding toequity interest) and retained earnings (amount corresponding toequity interest).

2. Application of equity method(1) Number of non-consolidated subsidiaries and affiliatesthat are accounted for by the equity method: None
(2) Name of the major non-consolidated subsidiaries andaffiliates that are not accounted for by the equity
method:THAI KANDENKO CO., LTD.
(Reason for excluding from the scope of the equity method)
Non-consolidated subsidiaries and affiliates that are not accounted
for by the equity method have immaterial impact on the consolidated
financial statements in terms of profit or loss (amount corresponding
to equity interest) and retained earnings (amount corresponding toequity interest), and are not material, taken as a whole.

3. Accounting period of consolidated subsidiaries
The year-end date for consolidated subsidiaries is the same as theconsolidated year-end date.

67

KANDENKO(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
or losses, net of applicable taxes, are comprehensively reported
as a component of net assets and the cost of securities sold iscomputed 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 construction contracts in progress
		 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 amount based 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 that of the method provided in the Corporation Tax Act.
Useful lives of certain buildings are deemed as 30 years
although their useful lives based on the Corporation 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
over an estimated useful life (5 years).
(c) Leased assets
Leased assets related to finance lease transactions that do nottransfer ownership are depreciated using the straight-line method
based on the assumption that the useful life equals the leaseterm, and the residual value equals zero.

(3) Accounting policies for significant allowance andprovisions(a) Allowance for doubtful accounts
The allowance for doubtful accounts is provided for to theamount sufficient to cover possible losses on collection. It
consists of the estimated uncollectible amount with respect toidentified doubtful receivables and an amount calculated byapplying 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 forcompleted 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 be reasonably 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 isallocated by the straight-line basis (the expected benefit divided
by the total service years would be deemed as arising in eachperiod).
(b) Amortization of actuarial gains and losses
Actuarial gains and losses are amortized by the straight-line
method over a certain period (5 years) within the averageremaining years of service of the eligible employees commencing
with the following periods.

(5) Accounting policies for significant revenues andexpenses(a) Recognition of net sales of completed construction contracts
and costs of completed construction contracts
i. Construction contracts that the outcome of the construction
activity is deemed certain during the course of the activity atthe end of the year
		 Percentage-of-completion method (cost proportion method
shall be applied to estimate the percentage-of-completion ofsuch 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
Loans payable
Hedged items:(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 thehedging instruments with cumulative changes in cash flows on
the related hedged items. However, the evaluation of hedging
effectiveness is omitted for interest rate swaps to which the
exceptional accounting is applied.
Integrated Report 202168

(7) Method and period of amortization of goodwill
Goodwill is amortized by the straight-line method over the estimatedperiod that 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 the purchase date whose value is not subject tosignificant fluctuation risk.

(9) Other significant accounting policies for the preparationof consolidated financial statements
Accounting method for consumption taxes:
Consumption and local consumption taxes are accounted for by the
tax-exclusion method.

If the outcome of the construction activity is deemed certain during
the course of the activity, the percentage-of-completion method isapplied to recognize net sales of completed construction contracts
and cost of sales of completed construction contracts. The cost
proportion method is applied to estimate the percentage-ofcompletion, and assumptions used in this estimation is working
budget for which total construction revenue and total construction
cost were reasonably estimated. Net sales of completed construction
contracts calculated by the percentage-of-completion method in theyear ended March 31, 2021 is ¥289,468 million.
Total construction revenue and total construction cost on which
recognition of revenue by the percentage-of-completion method isbased were estimated using working budget reasonably estimated foreach construction contract, etc. as of March 31, 2021. However, inthe development of the working budget, since the situation changes
after the start of construction, including conclusion of an amendment
agreement, a change of construction specifications and additional
cost incurred during construction, the estimation of working budget
is subject to uncertainty. Although the working budget is reviewed(1) Outline
The International Accounting Standards Board (IASB) and US Financial
Accounting Standards Board (FASB) co-developed a newcomprehensive revenue recognition standard and published “Revenue
69

KANDENKO

These accounting standard and implementation guidance will beapplied from the beginning of the year ending March 31, 2022.

The effects of the application of the “Accounting Standard for
Revenue Recognition,” etc. on the consolidated financial statements
are currently under assessment.

timely and appropriately, any deviation from actual results in the
future may have impact on the Companies’ financial position andoperating results.

2.	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 be reasonably estimated. The balance of provision for loss on
construction contracts recorded as of March 31, 2021 is ¥5,546
million.
The estimated amount of losses is calculated based on working
budget reasonably estimated for each construction contract, etc. withtotal construction revenue deducted from total construction cost. In
the development of the working budget, since the situation changes
after the start of construction, including conclusion of an amendment
agreement, a change of construction specifications and additional
cost incurred during construction, the estimation of working budget
is subject to uncertainty. Although the working budget is reviewed
timely and appropriately, any deviation from actual results in the
future may have impact on the Companies’ financial position andoperating results.

ACCOUNTING STANDARDS, ETC. NOT YET EFFECTIVE· “ Accounting Standard for Revenue Recognition” (ASBJ Statement
No. 29, March 31, 2020, Accounting Standards Board of Japan)· “Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30, March 26, 2021, AccountingStandards Board of Japan)· “Implementation Guidance on Disclosures about Fair Value of
Financial Instruments” (ASBJ Guidance No. 19, March 31, 2020,
Accounting Standards Board of Japan)(2) Scheduled date of application(3) Effects of the application of this accounting standard, etc.

SIGNIFICANT ACCOUNTING ESTIMATES
1.	Recognition of net sales of completed construction
contracts calculated by the percentage-ofcompletion method

out in Japan up until present to be taken into consideration,
alternative treatment will be added to an extent that does not impair
financial statement comparability.

from Contracts with Customers” in May 2014 (International Financial
Reporting Standards (IFRS) No. 15 in IASB, Topic 606 in FASB). Given
that IFRS No. 15 will be applied from fiscal years starting on or afterJanuary 1, 2018 and Topic 606 from fiscal years starting after
December 15, 2017, the Accounting Standards Board of Japan (ASBJ)
developed comprehensive Accounting Standard on Revenue
Recognition and published it together with implementation guidance.
The fundamental policy for developing Accounting Standard on
Revenue Recognition by the ASBJ was that the accounting standard
would incorporate the fundamental policy of IFRS No. 15 as thestarting point from the perspective of comparability of financial
statements, which is one of the benefits of achieving consistency
with IFRS No. 15. For matters that require actual practice, etc. carried· “Accounting Standards for Fair Value Measurement” (ASBJ
Statement No. 30, July 4, 2019, Accounting Standards Board ofJapan)· “Accounting Standards for Measurement of Inventories” (ASBJ
Statement No. 9, July 4, 2019, Accounting Standards Board ofJapan)· “Accounting Standards for Financial Instruments” (ASBJ Statement
No. 10, July 4, 2019, Accounting Standards Board of Japan)· “Implementation Guidance on Accounting Standard for Fair Value
Measurement” (ASBJ Guidance No. 31, July 4, 2019, AccountingStandards Board of Japan)· “Implementation Guidance on Disclosures about Fair Value of
Financial Instruments” (ASBJ Guidance No. 19, March 31, 2020,
Accounting Standards Board of Japan)(1) Outline
The International Accounting Standards Board (IASB) and US Financial
Accounting Standards Board (FASB) have established the detailed
guidance with similar contents regarding fair value measurement(IFRS: IFRS No. 13 “Fair Value Measurement,” US AccountingStandards: Accounting Standards Codification (ASC) Topic 820 “Fair
Value Measurement”). Given the status, the Accounting Standards
Board of Japan (ASBJ) made efforts to ensure the consistency
between the Japanese standards and the international accounting
standards, mainly with regard to guidance and disclosure about fairvalue of financial instruments, and then published the “AccountingStandards for Fair Value Measurement,” etc.
The fundamental policy for developing fair value measurement by
the ASBJ was that the accounting standard would basicallyincorporate all the provisions of IFRS No. 13 with a use of theintegrated calculation method from the perspective of improving thecomparability of financial statements between companies in Japanand overseas. Other handling on individual matters are determinedby taking into consideration actual practice, etc. carried out in Japanup until present to an extent that does not impair financial statementcomparability.

(2) Scheduled date of application
These accounting standard and implementation guidance will beapplied from the beginning of the year ending March 31, 2022.

(3) Effects of the application of this accounting standard, etc.
The effects of the application of the “Accounting Standards for Fair
Value Measurement,” etc. on the consolidated financial statements
are currently unknown.

CHANGES IN PRESENTATIONNOTES TO CONSOLIDATED STATEMENT OF INCOME
Because the amount of “gain on sale of non-current assets” in“extraordinary income,” which was presented as a separate item inthe year ended March 31, 2020, is 10% or less of the total amountof extraordinary income, this item is included in “other” in“extraordinary income” from the year ended March 31, 2021. The
consolidated financial statements for the year ended March 31, 2020
have been reclassified to reflect this change in presentation.
As a result, ¥222 million, which was presented as “gain on saleof non-current assets” in “extraordinary income” in the consolidated
statement of income for the year ended March 31, 2020, has been
reclassified to “other.”

Because the amount of “loss on disaster,” “loss on retirement of
non-current assets” and “loss on valuation of investment securities”
in “extraordinary losses,” which were presented as a separate item inthe year ended March 31, 2020, is 10% or less of the total amountof extraordinary losses, these item are included in “other” in“extraordinary losses” from the year ended March 31, 2021. The
consolidated financial statements for the year ended March 31, 2020
have been reclassified to reflect this change in presentation.
As a result, ¥496 million, which was presented as “loss on
disaster” in “extraordinary losses,” ¥387 million, which waspresented as “loss on retirement of non-current assets” and ¥293
million, which was presented as “loss on valuation of investment
securities” in the consolidated statement of income for the year
ended March 31, 2020, have been reclassified to “other.”Integrated Report 2021

70

NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS*3. Assets pledged as collateral and secured obligations(1) Assets pledged as collateral provided by the Company’s subsidiaries and secured obligations(Application of “Accounting Standard for Disclosure of Accounting
Estimates”)
The “Accounting Standard for Disclosure of Accounting Estimates”(ASBJ Statement No. 31, March 31, 2020, Accounting Standards
Board of Japan) has been applied starting for the consolidated
financial statements for the year ended March 31, 2021, and notes tosignificant accounting estimates for the consolidated financial
statements are presented.
However, in accordance with the transitional treatment set forthin the proviso to paragraph 11 of this Standard, the details relating
to the year ended March 31, 2020 are not stated.

The amount of “loss (gain) on valuation of investment securities” and“loss on disaster” in “cash flows from operating activities,” whichwere presented as a separate item in the year ended March 31,
2020, is included in “other” from the year ended March 31, 2021
due to lower materiality. The consolidated financial statements forthe year ended March 31, 2020 have been reclassified to reflect thischange in presentation.
As a result, ¥293 million presented as “loss (gain) on valuationof investment securities” and ¥496 million presented as “loss on
disaster” in “cash flows from operating activities” in the consolidated
statement of cash flows for the year ended March 31, 2020, havebeen reclassified to “other.”

Millions of Yen
2021

2020
Cash and deposits
Notes receivable, accounts receivable from completed
construction contracts and other

¥

2021

1,627

¥[–]

¥1,809¥[–]$16,297

$[–]

77

[–]

83

[–]

747

[–]

Buildings and structures

1,257

[412]

1,183

[381]

10,657[3,432]

Machinery, vehicles, tools, furniture and fixtures

7,706[4,344]

7,174[3,994]64,630[35,981]

747

[–]

747

[–]

6,729

[–]

7

[–]

7

[–]

63

[–]

Total

¥11,423¥[4,756]¥11,005¥[4,375]$99,144$[39,414]

Short-term borrowings¥621¥[325]¥632¥[335]$5,693$[3,018]

Land
Investments and other assets – Other (lease deposits)

Long-term borrowings
Total

ADDITIONAL INFORMATION

Thousands of U.S. Dollars

7,881[4,273]

7,249[3,938]65,306[35,477]¥8,503¥[4,598]¥7,881¥[4,273]$71,000$[38,495]

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

Accounting estimates on the novel coronavirus disease
Major accounting estimates that may have impact on amounts ofassets/liabilities and revenue/expenses due to the spread of the novel
coronavirus disease (COVID-19) infections are allowance for doubtful
accounts, plan assets (retirement benefit accounting), deferred tax
assets and impairment loss.

Under the circumstances that it is uncertain when the COVID-19
pandemic will come to an end, as a result of carefully examining
available information such as past results and the current state, andaccounting standards, and making estimates based on assumptions
that are considered reasonable, impact of the accounting estimateson amounts in the consolidated financial statements for the year
ended March 31, 2021 and the year ending March 31, 2022 is
insignificant.

Millions of Yen

KANDENKO

2021

¥0

¥0

$0

Land

26

26

234

Investment securities

32

32

288

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

128

128

1,153

¥187

¥187

$1,684

Buildings and structures

Thousands of U.S. Dollars

2020

2021

2021

¥1,974¥2,880$25,94525

00*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“Enforcement Order of the Act on Revaluation of Land” (Cabinet Order 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 andpublished by the Commissioner of National Tax Agency as stipulated by the Article 2, Clause 4 of the “Enforcement Order of the Act on
Revaluation of Land.”(b) Date of revaluation:
March 31, 2002

71

Thousands of U.S. Dollars
2021

4. Contingent liabilities
The Company provides guarantees for the employees’ loans from financial institutions.

*1.	Amounts of non-consolidated subsidiaries and affiliates’ stocks included in investment securities

Investment securities (Investments in capital)

Millions of Yen
2020

Total

NOTES TO CONSOLIDATED BALANCE SHEETInvestment securities (Stocks)(2) Assets pledged as collateral for the loans of the investing company of the Company and its subsidiaries

Millions of Yen
Employees (housing loans)Thousands of U.S. Dollars

2020

2021

2021

¥858

¥692

$6,234*5.	Both costs on construction contracts in progress 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 construction contracts in progress corresponding to provision for loss on construction contracts
Millions of Yen

Thousands of U.S. Dollars

2020

2021

2021

¥229

¥91

$819

Integrated Report 2021

72

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

Thousands of U.S. Dollars

2020

2021

2021

¥5,571¥4,049$36,477

For the year ended March 31, 2020
1. Matters related to class and number of issued shares and class and number of treasury shares(Shares)
As of April 1, 2019

Increase

Decrease

As of March 31, 2020

Shares issued:*2. Principal accounts and amounts in selling, general and administrative expenses are as follows.

Common shares

Millions of Yen
Employees’ salaries and allowances

Thousands of U.S. Dollars

2020

2021

2021

¥12,280¥12,462$112,270

592

767

6,909

Retirement benefit expenses

205,288,338––

205,288,338

205,288,338––

205,288,338

Treasury shares:
Common shares
Total

1,029,325

489

47

1,029,767

1,029,325

489

47

1,029,767

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 demand for purchase.

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

Total

Thousands of U.S. Dollars

2. Matter related to dividends

2020

2021

2021

¥1,428¥1,522$13,711(1) Dividends paid
Resolution

Class of shares

Total dividends*4.	Loss on COVID-19 is mainly cooperation money for staying home paid to subcontractors as a result of suspension and postponement ofscheduled works due to effects of the issue of the declaration of a state of emergency and expenses for measures against the spread of
COVID-19 for employees as well as fixed costs incurred in overseas bases during the period of closure upon request of local governments(subsidies from local governments were deducted).

Ordinary general
meeting ofshareholders on June27, 2019

Common shares

Board of directors’
meeting on October
31, 2019

Common shares

NOTES TO CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Dividends per share

Record date

Effective date

¥2,655 million¥13.0

March 31, 2019

June 28, 2019

¥3,063 million¥15.0

September 30,
2019

December 5, 2019(2) Dividends whose record date fell in the year ended March 31, 2020, but whose effective date comes after March 31, 2020
*1. Reclassification adjustments and tax effects relating to other comprehensive income
Millions of Yen
2020

2021

2021

¥(8,800)¥8,364$75,351

Valuation difference on available-for-sale securities:
Gains (losses) arising during the year

35

(833)

(7,504)

Amount before income tax effect(8,765)

7,531

67,846

Income tax effect

2,681(2,301)(20,729)

Valuation difference on available-for-sale securities(6,083)

5,230

47,117

Reclassification adjustments

Resolution

Class of shares

Total dividends

Source ofdividend funds

Dividends per share

Record date

Effective dateOrdinary general
meeting ofshareholders on June
26, 2020

Common shares¥2,655 million

Retained earnings¥13.0

March 31, 2020

June 29, 2020

Thousands of U.S. Dollars

For the year ended March 31, 2021
1. Matters related to class and number of issued shares and class and number of treasury shares(Shares)

Deferred gains or losses on hedges
Gains (losses) arising during the year

(23)

16

144

Reclassification adjustments

63

59

531

Amount before income tax effect

40

76

684

Income tax effect

(11)

(16)

(144)

Total

Deferred gains or losses on hedges

29

59

531

Treasury shares:

Gains (losses) arising during the year
Reclassification adjustments
Amount before income tax effect
Income tax effectRemeasurements of defined benefit plans, net of tax
Total other comprehensive income
KANDENKO(2,135)
(523)

4,355
131

39,234
1,180(2,658)

4,487

40,423813(1,373)(12,369)(1,845)

3,114

28,054¥(7,899)¥8,403$75,702

Decrease

Increase

As of March 31, 2021

Shares issued:
Common shares

Common shares

Remeasurements of defined benefit plans:

73

As of April 1, 2020

Total

205,288,338––

205,288,338

205,288,338––

205,288,338

1,029,767

896

78

1,030,585

1,029,767

896

78

1,030,585

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 demand for purchase.

Integrated Report 2021

74

FINANCIAL INSTRUMENTS

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, 2020

Common shares¥ 2,655 million$23,918 thousand

¥13.0
$0.11

March 31, 2020

June 29, 2020

Board of directors’
meeting on October30, 2020

Common shares¥ 2,859 million$25,756 thousand

¥14.0
$0.12

September 30,
2020

December 4, 2020

1. Status of financial instruments(1) Policies on financial instruments(2) Dividends whose record date fell in the year ended March 31, 2021, but whose effective date comes after March 31, 2021
Resolution
Ordinary general
meeting ofshareholders on June29, 2021

Class of shares

Common shares

Total dividends¥ 2,859 million$25,756 thousand

Source ofdividend funds

Dividends per share

Retained earnings

¥14.0
$0.12

Record date

Effective date(2) Description of financial instruments and related risks
March 31, 2021

June 30, 2021

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

2020

2021

2021

¥71,502¥58,478$526,828

Time deposits with maturities of more than three months(7,922)(5,290)(47,657)

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

7,999

3,999

36,027¥71,579¥57,187

Cash and deposits

Cash and cash equivalents

The Companies manage surplus funds by investing in high security
financial instruments, primarily short-term deposits and debt securities
and raise funds through borrowings from banks and other financial
institutions and issuance of convertible bond-type bonds with shareacquisition rights.
Certain consolidated subsidiaries enter into derivative transactions
to hedge interest rate fluctuation risks arising from borrowings andthe Companies do not use derivative transactions for speculative
purposes.

$

515,198

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 held-tomaturity 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 borrowings are mainly used for operational funds and proceedsfrom convertible bond-type bonds with share acquisition rights andlong-term borrowings are mainly used for capital expenditures.
Floating rate borrowings are exposed to interest rate fluctuation risks,
but these risks 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 forevaluating the effectiveness of hedges are described in “SIGNIFICANT
MATTERS PROVIDING THE BASIS FOR THE PREPARATION OF
CONSOLIDATED FINANCIAL STATEMENTS, 4. Significant accounting
policies, (6) Significant hedge accounting method.”(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

75

KANDENKO

date controls and balance controls for each customer to mitigate
and quickly capture the collectability issues caused bydeterioration in the financial conditions.
Held-to-maturity securities are invested in debt securities
with high credit rating, therefore, exposed to minimum credit
risk.
The Companies enter into derivative transactions withfinancial 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 heldto-maturity debt securities, the accounting department regularly
monitors fair values and issuers’ (counterparties’) financial status,
considers the relationships with the counterparties, andcontinuously reviews the Company’s securities holdings.
Derivative transactions are executed and managed inaccordance with the nature and limits approved by the board of
directors of each company. 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 the liquidity
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 thederivative transactions described in “DERIVATIVE TRANSACTIONS”
does not represent the market risk of the derivative transactions.

Integrated Report 2021

76

2. Fair value of financial instruments

Thousands of U.S. Dollars
For the year ended March 31, 2021

Carrying amount and fair value of financial instruments, and differences between these values are as follows. The financial instruments whose fairvalues are deemed extremely difficult to determine are excluded from the table below. (See Note 2 below)
Millions of Yen(1) Cash and deposits
Allowance for doubtful accounts (*1)

Fair value

Difference¥71,502¥71,502¥–2) Available-for-sale securities(4)	Notes payable, accounts payable for construction contracts and other (*2)(541)
197,251

197,251–

12,025

12,024(0)

1,728,396

1,728,396–

1) Held-to-maturity securities

38,80138,801

0

2) Available-for-sale securities

377,945377,945–(4) Notes payable, accounts payable for construction contracts and other (*2)(800,288)(800,288)–(5) Short-term borrowings (*2)

(66,684)(66,684)–

34,926–(6) Current portion of convertible bond-type bonds with share acquisition rights (*2)

–

–

–

(101,558)–(7) Long-term borrowings (*2)

(65,306)(65,090)(207)(8) Derivative transactions (*3)$(3,099)$(3,099)$–(6,831)(6,831)–(19,850)(169)(7) Long-term borrowings (*2)

(7,881)(7,887)6(8) Derivative transactions (*3)¥(420)¥(420)¥–(*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, 2021
Carrying amount

Fair value

Difference¥58,478¥58,478¥–191,852

191,852–

1) Held-to-maturity securities

4,307

4,307

0

2) Available-for-sale securities

41,952

41,952–(4) Notes payable, accounts payable for construction contracts and other (*2)

(88,832)(88,832)–(5) Short-term borrowings (*2)

(7,402)(7,402)–

192,200(347)(3) Securities and investment securities

–

–

–

(7) Long-term borrowings (*2)

(7,249)(7,225)(23)(8) Derivative transactions (*3)¥(344)¥(344)¥–(6) Current portion of convertible bond-type bonds with share acquisition rights (*2)$–34,926(20,019)

Allowance for doubtful accounts (*1)

526,828

1,731,531(101,558)(6)	Current portion of convertible bond-type bonds with share acquisition rights (*2)

(1) Cash and deposits$

Difference(3) Securities and investment securities

197,793(5) Short-term borrowings (*2)(2) Notes receivable, accounts receivable from completed construction contracts and other526,828

Fair value(3,126)

Allowance for doubtful accounts (*1)

Carrying amount(3) Securities and investment securities
1) Held-to-maturity securities$(1) Cash and deposits(2) Notes receivable, accounts receivable from completed construction contracts and otherFor the year ended March 31, 2020(2) Notes receivable, accounts receivable from completed construction contracts and other

Carrying amount(*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 with short 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 orquotes from counterparty financial institutions. Negotiable certificates of deposit and jointly operated money trusts are stated at theircarrying amount as the fair value 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 borrowings
These are stated at their carrying amount as the fair value approximates the carrying amount because these are settled in a short period oftime.
(6) Current portion of convertible bond-type bonds with share acquisition rights
The fair value of convertible bond-type bonds with share acquisition rights is based on the prices presented by the counterparty financial
institutions.
(7) Long-term borrowings
The fair value of long-term borrowings is based on the present value of sum of principal and interest discounted using the borrowing rate
for similar new borrowings.
(8) Derivative transactions
As described in “DERIVATIVE TRANSACTIONS.”
2. The carrying amount of financial instruments whose fair values are deemed extremely difficult to determine
Millions of Yen
Unlisted stocks, etc.

Thousands of U.S. Dollars

2020

2021

2021

¥4,815¥5,722$51,549

Since 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.”

77

KANDENKO

Integrated Report 2021

78

3. Expected redemption amount of monetary receivables and securities with maturity dates after the consolidated year-end dateMillions of Yen

4.	Scheduled amount of repayment of short-term borrowings, convertible bond-type bonds with share acquisition rights and long-term borrowings
after the consolidated year-end dateMillions of Yen

For the year ended March 31, 2020

Cash and deposits
Notes receivable, accounts receivable from completed
construction contracts and other

Due after one year
through five years

Due after five years
through ten years

Due after ten years¥71,502

¥–

¥–

¥–

196,989804––

Short-term borrowings–

Current portion of
convertible bond-type bonds
with share acquisition rights

Securities and investment securities
Held-to-maturity securities (government/municipal bonds)

For the year ended March 31, 2020

Due within one year

10

–

–

Due within
one year

Held-to-maturity securities (corporate bonds)

5,000

–

–

–

Long-term borrowings

Held-to-maturity securities (other)

6,000

1,000

–

–

Total

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

1,000

–

–

–

¥280,501¥1,804¥–¥–

Due after
Due after
Due after
Due after
one year through two years through three years through four years throughtwo years
three years
four years
five years

Due after
five years¥6,831

¥–

¥–

¥–

¥–

¥–

20,000

–

–

–

–

–

–

632

642

1,339

619

4,647

¥26,831

¥632

¥642

¥1,339¥619¥4,647

Millions of Yen
For the year ended March 31, 2021

Millions of Yen

Due within
one year

For the year ended March 31, 2021

Cash and deposits
Notes receivable, accounts receivable from completed
construction contracts and other

Due within one year

Due after one year
through five years

Due after five years
through ten years

Due after ten years

Short-term borrowings¥58,478

¥–

¥–

¥–

191,902

298––

Securities and investment securities
–

–

–

–

Held-to-maturity securities (corporate bonds)

1,000

300

–

–

Held-to-maturity securities (other)

3,000

–

–

–

Available-for-sale securities with maturities (other)

1,000

–

–

–

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

Total¥255,381

¥598

¥–

Thousands of U.S. Dollars

Cash and deposits
Notes receivable, accounts receivable from completed
construction contracts and other

Due after
five years¥7,402

¥–

¥–

¥–

¥–

¥–

Current portion of
convertible bond-type bonds
with share acquisition rights

–

–

–

–

–

–

Long-term borrowings

–

642

1,339

619

618

4,028

¥7,402¥642¥1,339

¥619

¥618

¥4,028

Total

Thousands of U.S. Dollars
For the year ended March 31, 2021

¥–For the year ended March 31, 2021

Due after
Due after
Due after
Due after
one year through two years throughthree years
four years throughtwo years
three years
through four years
five years

Due within
one year
Short-term borrowings

Due within one year

Due after one year
through five years

Due after five years
through ten years

Due after ten years

Current portion of
convertible bond-type bonds
with share acquisition rights$526,828

$–

$–

$–

Long-term borrowings

1,728,846

2,684

–

–

Total

Due after
Due after
Due after
Due after
one year through two years through three years through four years throughtwo years
three years
four years
five years

Due after
five years$66,684

$–

$–

$–

$–

$–

–

–

–

–

–

–

–

5,783

12,063

5,576

5,567

36,288$66,684$5,783$12,063$5,576$5,567$36,288

Securities and investment securities
–

–

–

–

Held-to-maturity securities (corporate bonds)

9,009

2,702

–

–

Held-to-maturity securities (other)

27,027–––Available-for-sale securities with maturities (other)

9,009

–

–

–

$2,300,729$5,387$–$–

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

Total

79

KANDENKO

Integrated Report 2021

80

SECURITIES

2. Available-for-sale securities
Millions of Yen

1. Held-to-maturity securities

For the year ended March 31, 2020
Millions of Yen
For the year ended March 31, 2020

Securities whose fair value exceeds their carrying amount:
Government/municipal bonds
Corporate bonds
Other
Subtotal

Carrying amount

Fair value

Difference

¥–
–
–

¥–

¥–

–
–

–
–

¥–

¥–

¥–

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

¥10
4,999
7,015

¥9

¥(0)

4,999
7,015

(0)
–

Subtotal¥12,025¥12,025¥12,024¥12,024

¥(0)
¥(0)

Total

Carrying amount

Acquisition cost¥28,258––¥13,876¥14,382––––¥28,258¥13,876¥14,382

StocksBonds
Other¥5,667–1,000¥6,309¥(642)

–
1,000

–
–

Subtotal¥6,667¥34,926¥7,309¥21,185¥(642)¥13,740

Securities whose carrying amount exceeds their acquisition cost:
Stocks
Bonds
Other
Subtotal

Difference

Securities whose carrying amount does not exceed theiracquisition cost:

Total

Millions of Yen
For the year ended March 31, 2021

Millions of Yen
For the year ended March 31, 2021
Securities whose fair value exceeds their carrying amount:
Government/municipal bonds
Corporate bonds
Other
Subtotal

Carrying amount

Fair value

Difference

¥–
300
–

¥–

¥–

300
–

0
–

¥300

¥300

¥0

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

¥–
999
3,007

¥–

¥–

999
3,007

–
–

Subtotal¥4,007¥4,307¥4,007¥4,307

¥–
¥0

Total

Carrying amount

Acquisition cost¥37,939––¥16,286¥21,653––––¥37,939¥16,286¥21,653

StocksBonds
Other¥3,012–1,000¥3,393¥(381)

–
1,000

–
–

Subtotal¥4,012¥41,952¥4,393¥20,680¥(381)¥21,271

Securities whose carrying amount exceeds their acquisition cost:
Stocks
Bonds
Other
Subtotal

Difference

Securities whose carrying amount does not exceed theiracquisition cost:

Total

Thousands of U.S. Dollars
For the year ended March 31, 2021

Thousands of U.S. Dollars
For the year ended March 31, 2021
Securities whose fair value exceeds their carrying amount:
Government/municipal bonds
Corporate bonds
Other
Subtotal

Carrying amount

Fair value

Difference

$–
2,702
–

$–

$–

2,702
–

0
–

$2,702$2,702$0

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

$–
9,000
27,090

$–

$–

9,000
27,090––Subtotal$36,099$38,801$36,099$38,801

$–
$0

Total

81

KANDENKO

Carrying amount
Securities whose carrying amount exceeds their acquisition cost:
StocksBonds
Other

Acquisition cost

Difference$341,792––$146,720––$

195,072––$

341,792$146,720$

195,072

Stocks
Bonds
Other

$

27,135$30,567$(3,432)

–
9,009

–
9,009

–
–

Subtotal$36,144
377,945$$39,576$
186,306$(3,432)$191,630

Subtotal
Securities whose carrying amount does not exceed theiracquisition cost:

Total

Integrated Report 2021

82

RETIREMENT BENEFITS

3. Available-for-sale securities sold during the year
For the year ended March 31, 2020
Disclosure is omitted due to immateriality.

1. Overview of retirement benefit plans
Millions of Yen
For the year ended March 31, 2021
Sales amount

Total gain on sales

Total loss on sales

Stocks
Bonds
Other¥1,443
–
–

¥846
–
–

¥–
–
–

Total

¥1,443

¥846

¥–

Thousands of U.S. Dollars
For the year ended March 31, 2021
StocksBonds
Other

Sales amount

Total gain on sales

Total loss on sales$13,000––$7,621
–
–

$–
–
–

$13,000

Total$7,621$–

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 theeligible 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 multi-employer corporate 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 corporate pension fund, note on the multi-employer plan is omitted due to immateriality.
Certain consolidated subsidiaries use the simplified method in calculating retirement benefit liability and asset, and retirement benefit
expenses.

2. Defined benefit plans(1) Changes in defined benefit obligations
Millions of Yen
Balance at beginning of year

2020

2021

2021

¥64,919¥64,571$581,720

2,343

2,545

22,927

Current service cost

4.Impairment loss on securities
For the year ended March 31, 2020

For the year ended March 31, 2021

Of securities, ¥293 million was recognized as impairment loss (¥35
million of stocks of other securities, ¥258 million of investments incapital of subsidiaries and associates).

Interest cost

552

547

4,927

Actuarial gains and losses

882

(318)

(2,864)(4,186)(4,327)(38,981)

Past service cost

–

(118)

(1,063)

Other

59

–

–

¥64,571¥62,900

Benefit paid

Disclosure is omitted due to immateriality.

Balance at end of year

DERIVATIVE TRANSACTIONS

Thousands of U.S. Dollars

Balance at beginning of year

Interest rate-related

Deferral hedge

Interest rate swaps:
fixed payment, floatingreceipt

Primary hedged items
Long-term borrowings

Contract amount¥3,991 million

Contract amount due
after one year

Fair value¥3,703 million¥(420) million

83

5,603
35,306

Actuarial gains and losses(1,252)

3,919

3,554

3,597

32,405

Benefits paid

(3,072)(3,021)(27,216)

60

15

135

¥41,931¥47,064$424,000

Other

Millions of Yen

Hedge accounting
methodType of transactions

Primary hedged items

Contract amountContract amount due
after one year

Fair value

Deferral hedge

Interest rate swaps:
fixed payment, floating Long-term borrowings
receipt¥ 3,703 million$33,360 thousand¥ 3,406 million$30,684 thousand¥  (344) million$(3,099) thousand

KANDENKO$377,756

622(3) Reconciliation between ending balances of defined benefit obligations and plan assets and the retirement benefit liability
and retirement benefit asset reported on the consolidated balance sheet

For the year ended March 31, 2021

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

¥41,931

624

Contributions by the employer

Balance at end of year

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

2021¥42,017

Expected return on plan assets

For the year ended March 31, 2020

Thousands of U.S. Dollars
2021

2020

Derivative transactions to which hedge accounting is applied

Type of transactions

566,666(2) Changes in plan assets
Millions of Yen

Hedge accounting
method$

Funded defined benefit obligations
Plan assets

Thousands of U.S. Dollars
2021

2020

2021

¥44,260¥42,414(41,931)(47,064)$382,108(424,000)¥2,329¥(4,649)$(41,882)

20,31020,485

184,549

Net amount of liabilities and assets recognized inconsolidated balance sheet¥22,640¥15,836$142,666

Retirement benefit liability¥22,640¥15,836$142,666

Net amount of liabilities and assets recognized inconsolidated balance sheet¥22,640¥15,836$142,666

Unfunded defined benefit obligations

Integrated Report 2021

84

(4) Breakdown of retirement benefit expenses
Millions of Yen

Thousands of U.S. Dollars

2020

2021

2021

Current service cost
Interest cost
Expected return on plan assets
Actuarial gains and losses recognized in the year
Past service cost recognized in the yearOther¥2,343
552
(624)
(523)
–
217

¥2,545
547
(622)
154
(23)
275

$22,927
4,927(5,603)
1,387
(207)
2,477

Total

¥1,965¥2,876$25,909(5) Remeasurements of defined benefit plans
Remeasurements of defined benefit plans (before tax effect) consist of the following:

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

Thousands of U.S. Dollars

2020

2021

2021

Past service cost
Actuarial gains and losses

¥–
2,658

¥(94)(4,392)$(846)(39,567)

Total¥2,658¥(4,487)$(40,423)

2021

2020

2021

Deferred tax assets:¥6,987¥4,918$44,306

Depreciation

3,835

3,933

35,432

Accrued bonuses

3,426

3,493

31,468Provision for loss on construction contracts

1,544

1,702

15,333

Loss on valuation of assets

1,332

1,304

11,747

350

544

4,900

Retirement benefit liability

Allowance for doubtful accounts

Millions of Yen

Thousands of U.S. Dollars

Loss carry-forward
OthersSubtotal

166

1,495

1,940

17,477

20,06918,004

162,198(2,200)(2,303)(20,747)¥17,869¥15,700$141,441¥(4,186)¥(6,487)$(58,441)(1,162)(1,152)(10,378)

(129)

(48)

(432)

Valuation allowance
Total

180
2,412

Deferred tax liabilities:(6) Accumulated remeasurements of defined benefit plans

Valuation difference on available-for-sale securities

Accumulated remeasurements of defined benefit plans (before tax effect) consist of the following:
Millions of Yen

Thousands of U.S. Dollars

2020

2021

2021

Unrecognized past service cost
Unrecognized actuarial gains and losses

¥–
1,417

¥(94)(2,975)$(846)(26,801)

Total¥1,417¥(3,069)$(27,648)

Reserve for tax purpose reduction entry of non-current
assetsReserve for special depreciation
Others

(154)

(143)

(1,288)Total¥(5,632)¥(7,832)$(70,558)¥12,236¥7,868$70,882

Net deferred tax assets

Note: Except for above, deferred tax liabilities for land revaluation are recorded as follows:(7) Plan assets

Millions of Yen(a) Breakdown of plan assets
The ratio of each major category to total plan assets is as follows:

Deferred tax liabilities for land revaluation

2021

2020
General account
Bonds
Equities
Other

43%
35%
21%
1%

39%
35%
25%
1%

Total

100%

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 anticipated future long-term performance of individual asset classes that comprise the funds’ asset mix.

Thousands of U.S. Dollars

2020

2021

2021

¥6,585¥6,573$59,216

2.	Breakdown of items which caused the difference between the statutory tax rate and the effective tax rate
after adopting tax effect accounting
2020

2021

This note has been omitted as the difference between the statutory tax
rate and the effective tax rate after adopting tax effect accounting isimmaterial (5% or less of the statutory tax rate).

This note has been omitted as the difference between the statutory
tax rate and the effective tax rate after adopting tax effect accounting
is immaterial (5% or less of the statutory tax rate).

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

2020

2021

mainly 0.9%
mainly 1.5%

mainly 0.9%
mainly 1.5%

3. Defined contribution plans
The required amount of contribution to the defined contribution plans (including the multi-employer corporate pension fund accounted for in thesame manner) of the Companies was ¥1,703 million and ¥1,749 million ($15,756 thousand) for the years ended March 31, 2020 and 2021,
respectively.
85

KANDENKO

Integrated Report 2021

86

INVESTMENT AND RENTAL PROPERTIES

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

The Company and certain consolidated subsidiaries own real estate for rent in Tokyo and other areas. Rental income associated with real estate
for rent in the year ended March 31, 2020 was ¥729 million (major earnings from rent are included under net sales of completed construction
contracts, while significant rental expenses are posted under cost of sales of completed construction contracts). Rental income associated withreal estate for rent in the year ended March 31, 2021 was ¥812 million ($7,315 thousand) (major earnings from rent are included under net salesof completed construction contracts, while significant rental expenses are posted under cost of sales of completed construction contracts).
The amount of real estate for rent posted in the consolidated balance sheets, the change during the year, and the fair value were as follows:
Millions of Yen

Thousands of U.S. Dollars

Other(Note 1)

Total

Adjustments(Note 2)

Consolidated total(Note 3)

¥604,726¥11,417¥616,143¥–¥616,143

248

48,91749,165(49,165)–

Net sales:
Customers
Inter-segment
Total¥604,974¥60,334¥665,309¥(49,165)¥616,143

2021

2021

Segment profit¥32,556¥2,098¥34,655¥38¥34,693

Segment assets¥438,254¥77,772¥516,026¥(27,324)¥488,701¥20,020¥22,442$202,180

Other items:¥4,906¥1,693¥6,599¥(141)¥6,457

8,772

3,839

12,612(316)

12,295

2,421

(341)

(3,072)

Balance at the end of fiscal year¥22,442¥22,100$199,099

Fair value at the end of fiscal year¥27,244¥26,923$242,549

Change during the year

Engineering

2020
Amount posted in the consolidated balance sheets
Balance at the beginning of year

For the year ended March 31, 2020

Notes:
1. Amounts posted in the consolidated balance sheets represent the acquisition cost after the deduction of accumulated depreciation and accumulated impairment loss.
2.	In regard to the major components of changes in the year ended March 31, 2020, the main increase was new acquisitions (¥2,214 million). In regard to the major components of changes in theyear ended March 31, 2021, the main decrease was depreciation (¥420 million) ($3,783 thousand).
3.	Fair value at the end of the fiscal year is based on real estate appraisals performed by external appraisers for major real estate, and is measured with amounts calculated primarily based on themarket value of standard sites and the assessed value of inheritance tax by roadside land prices for other properties.

Depreciation
Increase in property, plant and equipment
and intangible assets

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, 2021

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 arecomponents of an entity 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 andothers. “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 by reportablesegment

Engineering

Other(Note 1)

Total

Adjustments(Note 2)

Consolidated total(Note 3)

¥544,968¥11,077¥556,045¥–¥556,045

Net sales:
Customers
Inter-segment
Total

221

38,881

39,102(39,102)–¥545,189¥49,958¥595,148¥(39,102)¥556,045

Segment profit¥28,025¥1,964¥29,989¥51¥30,041

Segment assets¥408,136¥74,683¥482,820¥(25,820)¥456,999¥5,527¥1,968¥7,496¥(249)¥7,246

5,775

2,026

7,801

(483)

7,317

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

The accounting treatment regarding the reportable business segments is the same as recorded in “SIGNIFICANT MATTERS PROVIDING THE BASISFOR THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS.” The profit of reportable segments is based on operating profit. Theintersegment profit and transfers are based on trading prices in the market.

87

KANDENKO

Integrated Report 2021

88

Thousands of U.S. Dollars
For the year ended March 31, 2021
Engineering

Other(Note 1)

Total

Adjustments(Note 2)

Consolidated total(Note 3)

$4,909,621$99,792$5,009,414$–$5,009,414

Net sales:
Customers

1,990

350,279

352,270(352,270)

–

Total

$4,911,612$450,072$5,361,693$(352,270)$5,009,414

Segment profit$252,477$17,693$270,171$459$270,639

Segment assets$3,676,900$672,819$4,349,729$(232,612)$4,117,108$49,792$17,729$67,531$(2,243)$65,279

52,027

18,252

70,279(4,351)

65,918Inter-segment

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

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.

(Related information)
For the year ended March 31, 2020
1. Information about products and services

For the year ended March 31, 2021
1. Information about products and services

Information is omitted as similar information is described in thesegment information.

Information is omitted as similar information is described in thesegment 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 inJapan accounted for more than 90% of net sales reported in the
consolidated statement of income.

(2) Property, plant and equipment

3. Information about major customers
Customer NameTokyo Electric Power
Company GroupNet sales¥182,471 million

Disclosure is omitted due to immateriality.

Disclosure is omitted due to immateriality.

(Information about amortization and unamortized balance of goodwill of each reportable segment)
For the year ended March 31, 2021
For the year ended March 31, 2020
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, 2020
For the year ended March 31, 2021
Not applicable.

Not applicable.

RELATED PARTY TRANSACTIONSTransactions 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, 2020

Information is omitted as net sales to external customers inJapan accounted for more than 90% of net sales reported in the
consolidated statement of income.

(2) Property, plant and equipment

Details of property, plant and equipment are omitted as amounts
of property, plant and equipment located in Japan accounted formore than 90% of all property, plant and equipment reported on
the consolidated balance sheet.

(Information about impairment loss in non-current assets of each reportable segment)
For the year ended March 31, 2020
For the year ended March 31, 2021

Type

Details of property, plant and equipment are omitted as amounts
of property, plant and equipment located in Japan accounted formore than 90% of all property, plant and equipment reported on
the consolidated balance sheet.

Customer Name

Net sales

Engineering

Tokyo Electric Power
Company Group¥  183,620 million$1,654,234 thousand

Tokyo Electric Power
Company Holdings,
Incorporated

Chiyoda-ku, Tokyo¥1,400,975 million

Electric powerbusiness(Held)
Direct  –%Indirect47.2%

Electric work
contract¥   80,000 million

General powertransmission anddistribution
business(Held)
Direct  46.4%
Indirect  0.3%

Electric work
contract

TEPCO Power Grid,
Incorporated

Chiyoda-ku, Tokyo

Name

Nature oftransaction

Tokyo Electric Power
Company Holdings,
Incorporated

Installation ofelectric work

Installation ofelectric work

Purchase of raw
materials

KANDENKO

Account

Balance at end of year

¥ 5,487 million¥  6,771 million

Notes receivable, accounts
receivable from completed
construction contracts andother
Advances received on
construction contracts inprogress¥    72 million

Notes receivable, accounts
receivable from completed
construction contracts andother¥30,232 million

Advances received on
construction contracts inprogress¥ 1,166 million

Notes payable, accounts
payable for construction
contracts and other¥ 2,453 million

Other affiliates

TEPCO Power Grid,
Incorporated

89

Amount of transaction

Related segment
Engineering

Relation to therelated party

Share capital

3. Information about major customers
Related segment

Ratio of voting
rights held

Location

Other affiliates

Type

Description ofbusinessName¥149,053 million¥ 34,016 million

Integrated Report 2021

90

PER SHARE INFORMATION

For the year ended March 31, 2021
Type

Name

Location

Share capital

Description ofbusiness

Ratio of voting
rights held

(Held)
Electric work–%
Direct 
contract
Indirect  47.2%

Tokyo Electric Power
¥ 1,400,975 million
Electric power
Company Holdings, Chiyoda-ku, Tokyo$12,621,396 thousand businessIncorporated
Other affiliates
TEPCO Power Grid,
Incorporated

Type

Name

Tokyo Electric Power
Company Holdings,
Incorporated

General powertransmission and¥   80,000 million
Chiyoda-ku, Tokyo$ 720,720 thousand distribution
business

Nature oftransaction

Installation ofelectric work

TEPCO Power Grid,
Incorporated

Purchase of raw
materials(Held)
Electric work
Direct  46.4%
contract
Indirect  0.3%

Yen
Net assets per share
Earnings per share
Diluted earnings per share

U.S. Dollars

2020

2021

2021

¥1,211.13
110.23101.35¥1,323.90
98.64–$11.92
0.88–

Notes:
1. Diluted earnings per share for the year ended March 31, 2021 has not been presented since there is no dilutive shares.
2. The basis of calculating earnings per share and diluted earnings per share is as follows:

Millions of Yen
Amount of transaction

8,084 million¥$ 72,828 thousand

Other affiliates
Installation ofelectric work

Relation to therelated party¥ 150,099 million$1,352,243 thousand¥ 34,003 million$ 306,333 thousand

Account

Balance at end of year

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥ 6,288 million$ 56,648 thousand

Advances received on
construction contracts inprogress¥    215 million$ 1,936 thousand

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥ 27,756 million$250,054 thousand

Advances received on
construction contracts inprogress¥   125 million$ 1,126 thousand

Notes payable, accounts
payable for construction
contracts and other¥  2,166 million$ 19,513 thousand

Earnings per share
Profit attributable to owners of parent
Amount not attributable to common shareholders
Profit attributable to owners of parent applicable tocommon shares

Thousands of U.S. Dollars

2020

2021

2021

¥22,515–¥20,147$181,504––

22,515

20,147

181,504

Thousands of Shares
2021

2020
Weighted average number of common shares during the year

204,258

204,258
Millions of Yen

Diluted earnings per share
Adjustment of profit attributable to owners of parent[Interest expenses, net of tax included in the above]

Notes:
1. Above transaction amounts do not include consumption taxes, while 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 on arm’s length basis through negotiations considering market price, etc.

Thousands of U.S. Dollars
2021

2020

2021
–
[–]

(13)
[(13)]–[–]

Thousands of Shares
2021

2020
Increase in common shares

17,754–[Convertible bond-type bonds with share acquisitionrights included in the above][17,754]

[–]

–

–

Overview of dilutive shares that are not included in thecomputation of diluted earnings per share because of
their anti-dilutive effect
3. The basis of calculating net assets per share is as follows:

Millions of Yen
Total net assets
Amount deducted from total net assets[Non-controlling interests included in the above]
Total net assets related to common shares

Thousands of U.S. Dollars

2020

2021

2021

¥255,821
8,438[8,438]247,382¥279,459
9,042[9,042]
270,417$2,517,648
81,459[81,459]2,436,189

Thousands of Shares
2021

2020
Number of common shares outstanding at end of year

91

KANDENKO

204,258

204,257

Integrated Report 2021

92

CONSOLIDATED SUPPLEMENTAL SCHEDULESSIGNIFICANT SUBSEQUENT EVENTS(Introduction of restricted share-based remuneration plan)
At the Board of Director’s meeting held on May 24, 2021, the Company resolved to revise the officer remuneration plan and to introduce a
restricted share-based remuneration plan (hereinafter the “Plan”) to the Company’s Directors, excluding Outside Directors (hereinafter “Eligible
Directors”) and also resolved to put forward a proposal related to the Plan at the 107th Annual General Meeting of Shareholders held on June29, 2021, and this proposal was approved and adopted at the 107th Annual General Meeting of Shareholders.

(Schedule of bonds)
Company name

Issue typeIssuance date

As of April 1,
2020

As of March 31,
2021

Interest rate (%)

Collateral

Maturity

Kandenko Co.,Ltd.

Euro-yenconvertible bondtype bonds withshare acquisitionrights due 2021,
subject to call

March 31,2016

¥ 20,019 million$180,351 thousand

–

–

None

March 31,
2021

Total

–

–

¥ 20,019 million$180,351 thousand

–

–

–

–

1. Purposes etc. for introducing the Plan
The amount of remuneration to Directors of the Company was approved and adopted to be not more than ¥780 million per year at the 93rd
Annual General Meeting of Shareholders, held on June 28, 2007.
To have the Eligible Directors share the merits and risks of share fluctuation with the shareholders, and to further enhance their willingness
to contribute to raising the share price and improving the corporate value, the Company has decided to newly pay to them remuneration for the
granting of shares with a restriction on transfer (“restricted shares”), within the aforementioned remuneration limit.

Note:
Information on convertible bond-type bonds with share acquisition rights is as follows:

Shares to be issued

Common shares

Issuance price of share acquisition rights

GratisIssuance price of shares¥  1,111.8$  10.01

Total issuance value¥ 20,100 million$181,081 thousand

2. Overview of the Plan
The Company shall provide monetary claims for the granting of restricted shares to the Eligible Directors based on the Plan and such amountshall be not more than ¥100 million per year (provided, however, that such amount excludes employee salaries of Directors concurrently serving
as employees). In addition, the total number of common shares newly issued or disposed of by the Company shall be 200,000 shares or lessannually (provided, however, that, if the Company performs a share split of the Company’s common shares (including allotment of the Company’scommon shares without contribution) or a consolidation of such shares, the relevant total number shall be reasonably adjusted as necessary inaccordance with the share split or consolidation ratio).
Eligible Directors shall pay in all of the monetary claims received from the Company under the Plan as property in kind to have commonshares of the Company issued or disposed of and receive them. The amount to be paid in per share shall be determined by the Board of Directors
based on the closing price of the Company’s common shares on the Tokyo Stock Exchange on the business day immediately before each date ofresolution by the Board of Directors where the issuance or disposal of restricted shares is to be resolved (if there is no closing price on such date,the closing price on the closest preceding trading day) and as an amount within the extent that it will not be particularly advantageous to Eligible
Directors who subscribe to the Company’s common shares. The specific timing of provision thereof and allocation to each Eligible Director shallbe decided by the Board of Directors upon its having been furnished with a report of the Compensation Advisory Committee.
The issuance or disposal of common shares of the Company (hereinafter the “Shares”) under the Plan shall be conditional that an agreementon the allotment of restricted shares shall be entered into between the Company and the Eligible Directors and include such provisions as (1)there shall be a prohibition on transfers, creation of security interest, or any other disposal of the Shares to third parties for a certain time period(hereinafter, the “Restricted Period”); and (2) in the event that certain circumstances arise, the Company shall acquire the Shares without
contribution. During the Restriction Period, the Shares shall be managed at dedicated accounts that Eligible Directors will open with Nomura
Securities Co., Ltd., to ensure that the Shares may not be the subject of transfers, creation of security interest, or any other disposal during the
Restriction Period.

Total issuance value of shares issued through the exercise of share acquisition rights¥

Grant ratio of share acquisition rights (%)

100

Exercise period of share acquisition rights

April 14, 2016 to March 17, 2021–    million

Upon the exercise of each of the share acquisition rights, the bonds relating to the share acquisition rights shall be contributed. The value of the bonds shall be the same as their face amount.

(Schedule of loans)
As of April 1, 2020

As of March 31, 2021

Average interest rate(%)

Short-term borrowings¥ 6,210 million$ 55,945 thousand¥ 6,770 million$ 60,990 thousand

0.6–

Current portion of long-term borrowings¥
621 million$ 5,594 thousand¥ 632 million$ 5,693 thousand

1.4–

Current portion of lease obligations¥
573 million$ 5,162 thousand

595 million¥$ 5,360 thousand––

Long-term borrowings (excluding current portion of
long-term borrowings)¥ 7,881 million$ 71,000 thousand¥ 7,249 million$ 65,306 thousand

1.62023 to 2033

Lease obligations (excluding current portion of leaseobligations)¥ 1,211 million$ 10,909 thousand¥ 1,385 million$ 12,477 thousand–

2022 to 2028

–

–

–

–

¥ 16,498 million$148,630 thousand¥ 16,632 million$149,837 thousand––

Other interest-bearing debt
Total

Due

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 amount equivalent to interest expense included in total lease payments are recorded on the consolidated balance sheet.
2. The repayment schedule of long-term borrowings and lease obligations (excluding current portion) for five years subsequent to March 31, 2021 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 borrowings

642 million¥$ 5,783 thousand¥ 1,339 million$ 12,063 thousand

619 million¥$ 5,576 thousand

618 million¥$ 5,567 thousand

Lease obligations¥
496 million$ 4,468 thousand¥
395 million$ 3,558 thousand¥
269 million$ 2,423 thousand¥
140 million$ 1,261 thousand(Schedule of Asset Retirement Obligations)
The amounts of asset retirement obligations as of April 1, 2020 and March 31, 2021 are less than 1% of the total liabilities and net assets as ofApril 1, 2020 and March 31, 2021. Therefore, the disclosure is omitted.
93

KANDENKO

Integrated Report 2021

94

OTHERS| Independent Auditors’ Report |Quarterly information for the year ended March 31, 2021
Cumulative period

Second quarter

Third quarter

Fourth quarter

Net sales¥ 120,435 million¥ 253,813 million¥ 389,903 million¥ 556,045 million$1,085,000 thousand $2,286,603 thousand $3,512,639 thousand $5,009,414 thousand

Profit before income taxes¥$¥ 13,556 million¥ 20,647 million¥ 30,251 million
7,009 million
63,144 thousand $ 122,126 thousand $ 186,009 thousand $ 272,531 thousand

Profit attributable to owners of parent

¥
$

¥
4,613 million
41,558 thousand $

Earnings per share¥22.59 ¥43.26 ¥66.34 ¥98.64$0.20 $0.38 $0.59 $0.88
Each quarter

Earnings per share

95

First quarter

KANDENKOFirst quarter¥ 13,551 million¥ 20,147 million
8,837 million
79,612 thousand $ 122,081 thousand $ 181,504 thousand

Second quarter

Third quarter

Fourth quarter¥22.59 ¥20.68 ¥23.08 ¥32.29$0.20 $0.18 $0.20 $0.29

Integrated Report 2021

96

97

KANDENKO

Integrated Report 2021

98

Integrated
ReportIntegrated
Report20212021

Greetings| Company Profile | (As of March 31, 2021)| Stock Information | (As of March 31, 2021)

Thank you for your interest in “KANDENKO INTEGRATED REPORT 2021.”
We provide end-to-end engineering services ranging from planning, design and execution tomaintenanceandoutline
renovation, regarding electrical work and information and communication work by
Company
websitemaking use of our proprietary technologies, expertise and methods inThe
the Company’s
fields of building
Company name telecommunications
Kandenko Co., Ltd.
infrastructure,
infrastructure and electric power infrastructure.
Recently, we have been focusing on utilizing the technologies and expertise we have cultivated to date
Established
September 1, 1944
to develop solar, wind power and other renewable energy power generation businesses, and expand
intoHeadrailways,
watersupplyandother social
infrastructure fields, and also to develop robotic and IoToffice
4-8-33
Shibaura,
Minato-ku,
Tokyo, Japandriven technologies.
Paid in capital in order¥10,264to
millionFurthermore,
facilitate the sustainable future development of the Company, which is a laborintensive
company,
wearestriving to nurture human resources that can support our future by, for
Total number of
205,288,338 sharesinstance,enhancing and strengthening our employee education, promoting the active participation ofshares issued
women, and reforms for work practices and annual leave systems.
Employees

are listed on the First Section of the Tokyo
Stock Exchange.
On March 31, 2021, there were a total of
12,388 shareholders. The following table lists
the 10 largest shareholders appearing on theregister at that date.

10,003 persons (consolidated),

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

introduction on our technologies and services, andthe latest news.

Tokyo Branch

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

https://www.kandenko.co.jp/

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

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

Saitama Branch

Omiya Center Building 9th Floor, 1-9-6 Sakuragicho,
Omiya-ku, Saitama-shi, Saitama, Japan

Ibaraki Branch

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

Tochigi Branch

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

Gunma Branch(in Japanese)

To shareholders and investors:
Treasury stock
0.50%(0.50%)(0.50%)

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-shi, Aichi, 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-shi, Hokkaido, Japan

Tohoku Branch

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

Nagano Branch

1629-32 Midoricho, Nagano-shi, Nagano, Japan

Overseas Offices

https://www.kandenko.co.jp/ir

Overseas Offices

Domestic Offices

Room1(A), University Paradise Condo, No.441, New
University Avenue Road, Bahan Township, Yangon,
MyanmarIndonesia Office

12th Floor, Summitmas II Building, Jl. Jend. Sudirman
Kav. 61-62, Jakarta 12190 Indonesia

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

10,537

5.15

3 Custody Bank of Japan, Ltd. (Trust Account)

7,042

3.44

4 Kandenko Group Employees Shareholding Association

5,994

2.93

5 Mizuho Bank, Ltd.

4,061

1.98

6 STATE STREET BANK AND TRUST COMPANY 505001

2,436

1.19

7 THE BANK OF NEW YORK, TREATY JASDEC ACCOUNT

2,128

1.04

8 GOVERNMENT OF NORWAY

1,597

0.78

9 JP MORGAN CHASE BANK 385781

1,584

0.77

10 Custody Bank of Japan, Ltd. (Trust Account 5)

1,563

0.76

Total number ofshares issued
205,288,338 shares

Individuals, other
Financial
13.91%
institutions(13.69%)18.41%(19.17%)

Note: Figures in parentheses show data as of March 31, 2020.

Financial
Japanese institutions
companies
18.41%
50.26%(19.17%)(50.22%)

Note: Figures in parentheses show data as of March 31, 2020.

Japanese companies
50.26%(50.22%)

Stock-Related Information
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
for shareholders to exercise voting rights at
the general meeting of shareholders is March
31. If other votes are required, the record
date will be set and announced in advance.

Method of public
notification

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

Transfer agent

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

Transfer agent
contact point

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)(Unit: Yen)

1,200

Toshio Nakama

Yangon Office

46.38(13.69%)Monthly Stock Price

President and Director

6F-1, No. 45, Section 1, Minchuan Eastern Road, Taipei,
Taiwan94,753

Individuals, otherTotal number ofshares issued
205,288,338 shares

Chairman and Director
Singapore Branch 1 Coleman Street, #10-5 The Adelphi,

Taiwan OfficeForeigncompanies, etc.
16.92%(16.42%)(in Japanese)

Hiroshi Yamaguchi

Singapore 179803

1 TEPCO Power Grid, Inc.

13.91%
Number of Shares Held by Type of Shareholder (As of March
31, 2021)

Foreigncompanies, etc.
16.92% stock
Treasury(16.42%)0.50%

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

Number of
Shares held as ashares held percentage of total(in thousands) outstanding sharesName

7,350Kandenko
persons (non-consolidated)
Going forward, theGroup remains committed to pursuing thorough compliance andimproving safety and quality as the cornerstone of good management. We intend to devote all ourenergiesto the creation of high corporate value and the formationof strong
corporate
The Company
sees its
website asstructures,
one of the andNetwork
contribute to the enduring development of society as a partnerthat supports
infrastructure
importantsources of social
information.
Please visitfor
ourwebsite where we post IR information, an
safe Domestic
and comfortabledaily living.
OfficesHead OfficePrincipal Shareholders

The shares of common stock of the Company

1,000(Unit: Yen)
800
1,200
600
1,000

(inquiries about stockrelated matters)

8000
Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.

600

2020

2021

0

1

KANDENKO
KANDENKO
99

Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
2020

2021

Integrated Report 2021

100