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/

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Corporate Report 2020

Kandenko is one of Japan’s leading firms in general
infrastructure works centering on electric works athome and abroad for 76 years since its establishment.
| Kandenko Network |Head Office

Imagine looking down from the air on the Marunouchi area in Tokyo, Japan’s finance andeconomic center, and you will see that Kandenko was involved in the construction of mostof the buildings there. Not only in and around the capital but throughout the nation,
Kandenko has provided end-to-end engineering services ranging from design and execution
to maintenance and renovation, regarding electrical, telecommunications, air conditioning
and sanitation systems and other kinds of building infrastructure.
Upgrading electrical infrastructure, the main artery of cities is also an important businessof 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 comfortableenvironment. With incomparable experiences and excellent technology, Kandenko is committed to fulfilling this mission.
Delivering electricity with secure construction, we light buildings with high-quality facilities and lighten the spirits of the people living inside. Kandenko aims to be an exceptionallybrilliant company that illuminates the nation.

1

KANDENKO

Divisions

Tokyo
Sales Division, Social Infrastructure Division, Tokyo Sales Division, Kitakanto &Hokushinetsu Sales Division, Higashikanto Sales Division, Minamikanto & Tokai Sales
Division, Nishikanto Sales Division, West Japan Sales Division, Fukushima Division

Branches

Tokyo Branch, Kanagawa Branch, Chiba Branch, Saitama Branch, Ibaraki Branch,
Tochigi Branch, Gunma Branch, Yamanashi Branch, Shizuoka Branch, Tama Branch,
Kansai Branch, Nagoya Branch, Kyushu Branch, Hokkaido Branch, Tohoku Branch,
Nagano Branch

Branches,
Representative
OfficesTokyo: 19, Kanagawa: 13, Chiba: 11, Saitama: 10, Ibaraki: 10, Tochigi: 7, Gunma: 5,
Niigata: 2, Toyama: 1, Ishikawa: 1, Fukui: 1, Yamanashi: 2, Shizuoka: 5, Kyoto: 1,
Hyogo: 1, Hiroshima: 1, Kumamoto: 1, Miyazaki: 1, Kagoshima: 1, Okinawa: 1,
Hokkaido: 4, Aomori: 2, Akita: 1, Yamagata: 1, Fukushima: 2, Nagano: 1

Corporate Report 20202

Corporate Report 2020

CONTENTS

Corporate
Philosophy

P01………………… Cover Story

P02………………… Kandenko Network

P03

………………… Corporate Motto & Corporate
Philosophy / Editorial Policy

P05………………… History

Based on respect for humanity, Kandenko fulfills its duty of corporatesocial contribution and contributes to creating richer human environments.

P07………………… At a Glance

P09………………… Message from the Management

By anticipating the needs of customers and seeking technologicalinnovation, Kandenko provides optimal services and facilities.

P12………………… Growth Strategy

P15………………… Business Model

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

P17………………… Business Review by Division
P17 ……………… General Construction WorkP19 ……………… Information & Communication Work
P21 ……………… Power Distribution Line Engineering Work

“People First”

Corporate
Motto

1
2
3

P23

Greetings………………

Electric Power & Civil Engineering Work

P25………………… Research and Development Activities

P29………………… Environmental Initiatives

P31………………… Employee Initiatives

Thank you for your interest in “KANDENKO

P35………………… Coexistence with Society

CORPORATE REPORT 2020.”

P37………………… Corporate Governance

Since its founding in 1944, Kandenko has grown by

P45………………… Financial Section

conducting business in a wide range of fields, with

P83………………… Company Profile

the aim of ensuring the mutual prosperity of its
customers and the communities where it works andTool map

finds its purpose in this pursuit.

To facilitate communication with its stakeholders, the Kandenko Group conveys multifaceted information by means of

Kandenko will make a long-lasting contribution tovarious tools. In addition to the information provided in this report, we make available on our website the Group’s services,

society as a partner in social infrastructure.

CSR activities, and other diverse information.

The Company’s website: https://www.kandenko.co.jp/
Corporate Report
Quarterly Financial Results andReference Documents for
Financial Results

Securities Report

Financial information

Kiyoshi Goto

Toshio Nakama

Chairman and Director

President and Director

Editorial Policy
This integrated report introduces various aspects of the Company for the purpose of facilitating stakeholders’ understanding ofour businesses and medium- to long-term value creation.

Corporate Governance ReportNon-financial information

Reporting Period
From April 1, 2019 to March 31, 2020
(Includes reports on some activities outside this period)<Notes on proper use of the business result forecast>
The business result forecast and other forward-looking statements herein are based on the information currently available
and certain assumptions deemed reasonable by the Company, and thus actual results may differ significantly from these
forecasts due to a wide range of factors.

3

KANDENKO

Corporate Report 20204

Corporate Report 2020

2019

History2012

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 andfinds its purpose in this pursuit, and grown to become one of Japan’s leading general infrastructurecompanies.
This section presents the Company’s history of stably supplying electric power and supporting people’s
lives alongside postwar development in Japan.

TOKYO SKY TREE®, theworld’s highest selfsupporting broadcast tower
opened.

1991
Tokyo Metropolitan
Government No.1 Building
completed.

Courtesy of Taisei Corporation

1981

September 1959
Late 1940’s
Large-scale transmission
line works gain momentum

Japan National Stadium
completed.

Power distribution network
in Nepal upgraded.

2019
Disaster recovery work in
typhoon-stricken Boso
Peninsula

The Company provides disasterrecovery support beyond its
jurisdiction in the wake of the
Isewan Typhoon

July 1986

2017

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

Pacific Century Place
Jakarta completed.

1978
New Tokyo International
Airport (current Narita
International Airport) opened.

1958
1947

Tokyo Tower
completed.

Transport of power polesby hand-drawn cart

Net Netsalessales(Millions(Millionsof yen)of yen)September 1984

700,000
700,000

40th anniversary of establishment
The Company name is changed
to Kandenko Co., Ltd., and thecompany flag and emblem arealso changed.

Photo courtesy of Narita International Airport

Net sales/Operating profit

1968

Net sales

Kasumigaseki Building
completed as the firstskyscraper in Japan.

600,000
600,000

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

September 1944
Kanto Denki Koji Co., Ltd., wasestablished.
Head office at 2 Tameikemachi,
Akasaka Ward (current Minato
Ward), Tokyo

500,000
500,000

400,000
400,000

営業利益
Operating profit（百万円）(Millions of yen)

30,00030,000300,000
300,000

20,00020,000200,000
200,000

10,00010,000100,000
100,000

0

1944
1944
5

0

0

KANDENKO

1950
1950

1955
1955

1960
1960

1965
1965

1970
1970

1975
1975

1980
1980

1985
1985

1990
1990

1995
1995

2000
2000

2005
2005

2010
2010

2015
2015

0

2019
2019
Corporate Report 20206

Corporate Report 2020

| At a Glance |Financial Information

Non-financial information

Net sales

Consolidated

Operating profit

616,143¥(Millions of Yen)

470,943447,673507,205

563,550

million616,143

Consolidated

34,693¥(Millions of Yen)

Profitmillion
34,69329,261

26,397

Consolidated

Number of employees

22,515¥

million(Millions of Yen)

Consolidated

10,003(Persons)

19,05817,591

19,70322,515

8,915

9,244

2016

2017

2018

2019

2015

2016

2017

2018

2019

persons

2016

2017

2018

333

persons

Year-round recruitment

229

74

persons(Persons)(Persons)

354

7,350
6,976 7,202
6,660 6,729

2015

New graduates

10,0039,571 9,818

9,412

2015

7,350

(Persons)

30,012

16,416persons Non-consolidated

Number of new recruits

331

333

236
156

2019

100
Non-consolidated

540,202¥

million(Millions of Yen)

398,495

410,192

27,773¥

Non-consolidated

million(Millions of Yen)

444,452

493,128

540,20221,921

19,408¥Non-consolidated

million(Millions of Yen)

24,843562015 2016 2017 2018 201927,7732015 2016 2017 2018 201974

74

2015 2016 2017 2018 20192015 2016 2017 2018 201924,146
15,48812,642

16,91917,08420172018

19,408

7,480

2015

2016

2017

2018

2019

ROE

Consolidated

9.3

2017

2018

513,919

¥

%

8.8

2016

2019

New orders received

(%)

8.8

2015

8.5

2015

2016

2019

Directors’ average attendance at Board of
Director’s meetings

Dividend /Dividend payout ratio
Dividend / Consolidated

million

28

¥

98

(Yen)

9.3

24

26

28

4.9
506,026
474,452

496,088

513,919

14

Electricity usage

431,5042016

Non-consolidated

2017

2018

2019

2015

8.9

2016

2017

Dividend payout ratio / Consolidated

%

(%)

2018

2019

25.4

8.7

8.2

8.9

30.4
23.2

Compared to fiscal 2014

%

(%)

8.6

Gold

SilverBronze%Electrical
Installations

14

26

30

Information
Network Cabling

2

6

9

Plumbing andHeating

2

3

3

20

(Millions of Yen)

2015

Number of Skills Competitions winners

25.7

27.0

2017

2018

Compared to fiscal 2010

(4.4 )(28.4 )
%

%

(MWh)

23,018 23,141 23,116 22,559 22,502* In Electrical Installations, one first place winner and two second placewinners in the World Skills Competition.

25.4

4.3
2015

2016

2017

2018

2019

2015 2016 2017 2018 2019
2015

7

KANDENKO

2016

2017

2018

2019

2015

2016

2019

Corporate Report 20208

Corporate Report 2020

| Message from the Management |Kandenko will sustainably grow as a
100-Year Company supporting society.
Message from New President Kandenko and My Mission
I am Toshio Nakama. I have just assumed the position of
President and Executive Officer of Kandenko, succeeding
the former President Yoshimi Morito. I will do my best to
further develop the Kandenko Group. I am grateful foryour continued guidance and support.
I joined the Company in 1982 at the age of 22, andsupervised electrical engineering work mainly in building
construction sites for 15 years until 37. As a sitemanager, I gave work instructions to workers based on
drawings and oversaw worksites at my discretion. After
that, I chaired the labor union for four years.
Then I was assigned to the sales division and worked
as a salesperson of electrical engineering, environmental
facilities and systems, and renovation work for 12 years
until I was appointed General Manager of Saitama
Branch at the age of 53. At engineering worksites, I
often made decisions about what to do at my own
discretion. As a salesperson, I found it very important tocoordinate with other departments and divisions andlearned that how critical a teamwork is. I appreciatedsales information provided by a lot of customers, which

helped me build a long lasting network that has
supported me until today. For two years when I served
as General Manager of Saitama Branch, I operated
corporate division sites, an experience that taught me
how to see the organization from a cross-sectional
perspective.
In 2015, I assumed Division Manager of Sales Division
responsible for supervising Electrical Engineering,
Environmental Facilities and Systems, and Renovation
Work as a whole. Since then, I have operated business toreceive more orders by utilizing strengths of work
execution and sales abilities under the five-year growthstrategy originally formulated by then President Hiroshi
Mizue and taken over by the former President Yoshimi
Morito.
This year marks the 76th anniversary of Kandenko’s
foundation. In its history, the Company has expanded its
business both in segments and areas, though two factors
have remained unchanged: it is a contracting businessand a labor-intensive industry. Our contracting businesshas been able to grow as a result of winning orders
based on the trust of customers, which was built up by
our predecessors who worked hard every day, rain orshine, to provide the customers with services they

Fiscal 2019 Business Results
Consolidated results (Billions of Yen)

Non-consolidated results (Billions of Yen)

Net sales of completed
construction contracts

New orders received¥513.9 (up 3.6% YoY)

Net sales of completed
construction contracts

540.2 (up 9.5% YoY)

Operating profit

Ordinary profit¥616.1 (up 9.3% YoY)    34.6 (up 15.6% YoY)

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KANDENKO

Profit attributable toowners of parent    27.7 (up 15.0% YoY)

Ordinary profit    28.8 (up 14.7% YoY)

Profit    19.4 (up 13.6% YoY)    35.5 (up 15.5% YoY)

President and Executive Officer

Toshio Nakama

Operating profit    22.5 (up 14.3% YoY)

Corporate Report 202010

Corporate Report 2020

| Message from the Management |needed. In the face of hardships, such as landslide, flood,
wind or storm damage, they rushed to customers in
response to their requests and difficulties and solved the
problems while ensuring safety. Such professionalism, orKandenko’s DNA, must be passed down to younger
employees to further develop the trust of customers andeventually to achieve sustainable growth.
I recognize that I am tasked with putting initiatives
under the growth strategy into motion, developing
human resources capable of supporting future social
infrastructure in Japan, strengthening the system,
maintaining and continuing the provision of services, andensuring business stability and growth to fulfill our social
responsibility. Bearing these missions in mind, I will
devote myself to leading the management of theCompany.

Results of Operations in Fiscal 2019and Progress of the Growth Strategy
When we look back at the business environment
surrounding Kandenko in fiscal 2019, although reduced
electric power-related investment continued, domestic
construction investment remained at high levels on the backof a number of large-scale redevelopment projects
especially in the Tokyo metropolitan area, along with theconstruction demand of logistics facilities in response to thegrowing e-commerce.
Under such circumstances, the Company conductedstrategic sales activities based on early collection of sales
information and in-depth and multifaceted analysis,
worked to squeeze operational unit costs and thoroughly
reduce administrative overhead expenses by further
spreading cost management methods, and sought tosecure contracts and generate profits.
As part of initiatives to improve customer confidence,
we endeavored to raise safety-first and complianceawareness. We also developed IT-based worksite support
systems and prefab technology, and promoted
technological development to cater to customer needs
and support business field expansion, in an effort tosupport business activities.
As a result, new orders received on a non-consolidated
basis amounted to ¥513,919 million, a 3.6% increase
year on year, achieving the level of ¥500,000 million,
and the Kandenko Group’s consolidated business result
for fiscal 2019 was as follows: net sales of completed
construction contracts of ¥616,143 million (9.3% increase

year on year), operating profit of ¥34,693 million (15.6%
increase year on year), ordinary profit of ¥35,565 million(15.5% increase year on year), profit attributable toowners of parent of ¥22,515 million (14.3% increase year
on year), which were record-high business results inrevenue and profit.
The spread of the novel coronavirus (COVID-19)
infection had a slight impact on our business result for
fiscal 2019. Some worksites of electrical engineering
work were suspended in April and May 2020, but from aperspective of maintaining essential lifelines for society,
we have proceeded with projects of information &communication work, power distribution line engineering
work, and electric power & civil engineering work asscheduled, thoroughly taking infection prevention
measures.
We see that no major change will be needed to plans
related to large-scale projects for the time being, but

Key Management Policies for Fiscal 2020
Focus on initiatives toimprove customer confidence

Non-consolidated results (Billions of Yen)

Net sales of completed
construction contracts

New orders received¥510.0 (down 0.8% YoY)

Net sales of completed
construction contracts

490.0 (down 9.3% YoY)

Operating profit¥560.0 (down 9.1% YoY)    30.0 (down 13.5% YoY)

Operating profit
Ordinary profit

Reinforce profit-generating capacity
and ability to win orders

Develop technologies to support
business activities evelop technologies and reinforce profitD
generating capacity through open innovation

11

KANDENKO    19.2 (down 14.7% YoY)

Reinforce “people first”
principle to motivate staff and energize the workplace    30.6 (down 14.0% YoY)
Ordinary profit

Profit attributable toowners of parent    24.5 (down 11.8% YoY)

Profit    25.5 (down 11.6% YoY)    16.6 (down 14.5% YoY) ocus on safety education to strengthen riskFmanagement
Emphasize and entrench work rules
 onduct business activities putting profitC
generating firstConduct strategic sales activities and focus onprogress management
Maintain work execution abilities and improve
productivity at the worksite

Fiscal 2020 Business Results (Forecast)
Consolidated results (Billions of Yen)

expect capital investment to shrink especially of electricalengineering, environmental facilities and systems, andrenovation work, as corporate earnings are negatively
affected going forward.
In the medium term, the expansion of remote workand satellite offices caused by the COVID-19 pandemic
has a possible impact on construction demand for officebuildings and the number of construction contracts for
new buildings in urban areas. Meanwhile, reconstruction
demand in buildings built in and after the rapid economic
growth period for replacement is expected to remainstrong. We need to further drive renovation demand bycapitalizing on customer needs for increasing andreinforcing facilities to address building energy efficiency
measures and business continuity planning (BCP)
requirements.
In February 2016, the Kandenko Group formulated andhas since promoted a five-year growth strategy that

Progress with structural reformof business einforce human resources development
RPromote reforms for work practices and annual
leave systems
Create an open and free workplace ffer a one-stop service for more types of work andOprocess
Extensively utilize digital technologies

Corporate Report 202012

Corporate Report 2020

| Message from the Management |comprises the five strands of “a business basereinforcement strategy,” “a business field expansion
strategy,” “measures to contribute to a stable electric
power supply,” “a human resources strategy” and “aninvestment strategy to boost work execution abilities.”
Over the past four years, each strategy has made steadyprogress, as various initiatives have produced outcomes.
In particular regarding work execution abilities, we haveincreased the number of employees to approximately
7,500 by hiring more than 300 new employees eachyear, and established a workforce of more than 40,000
people by building close relationships with business
partners. In order to maintain the level of construction
volume commensurate with this size of workforce, wehave reinforced business base by enhancing proposal
capabilities and price competitiveness.
As a result, we expanded net sales of completed
construction contracts about 1.4 times and more thandoubled operating profit compared to four years ago.
Fiscal 2020 is the final year of our growth strategy.
Taking into account a certain impact of COVID-19, we
forecast consolidated business results for fiscal 2020 as
follows: net sales of completed construction contracts of¥560,000 million (9.1% decrease year on year), operating
profit of ¥30,000 million (13.5% decrease year on year),ordinary profit of ¥30,600 million (14.0% decrease year
on year) and profit attributable to owners of parent of¥19,200 million (14.7% decrease year on year).
This year, putting finishing touches on each strategy,
we will push forward with initiatives toward the next
step.

Vision toward becoming a 100-Year
Company
Fiscal 2020 is the final year of our growth strategy thatstarted in fiscal 2016 as the roadmap to our vision “100Year Company Supporting Society.” We have made good
progress so far, posting record-high profit, but still need to
expand growth fields, such as railways, water and roads, aswell as new business fields. Based on such challenges, theKandenko Group has started developing the next MediumTerm Management Plan for the period from fiscal 2021 to

13

KANDENKO

fiscal 2023. In formulating the plan, people of all ages at
the Group ranging from young employees to officers are
first working together to consider what the KandenkoGroup should be like as a 100-year Company 24 years laterin 2044. Then, we will continue considering what weshould be like in three years’ time and what we should
work on in the meantime to realize our vision on its 100th
anniversary. In this context, the next Medium-Term
Management Plan is expected to play an integral part inrealizing the vision.
As for our future image as a provider of social
infrastructure 24 years later, an important factor is toenhance the Company’s capabilities in engineering toconduct business based on high proposal capabilities andcontribute to society. At the same time, we need to fully
discuss how to maintain technologies and skills we havelong cultivated as a general infrastructure company andexert our strengths.
As for management issues in the future, as labor
shortage is getting severer without doubt, it is necessary
to significantly reduce workload by utilizing robots andintroducing industrialized processes at worksites. In theface of a decline in the working-age population in Japan,
there is an option of hiring more foreign workers but
electric engineers are required to acquire a national
qualification, which is a problem that we need toovercome.
Meanwhile, as for overseas business expansion, we arehelping Japanese companies build their production sites,and engaging in local infrastructure development mainlyin Southeast Asia such as Singapore, Malaysia, Thailand,
Vietnam and Taiwan. Given the declining population in
Japan, it is necessary to boost sales by seeking growth
opportunities in overseas markets. Currently, our overseas
sales still make up a small part of our net sales ofcompleted construction contracts but we see a significant
growth potential.
There are a variety of challenges for the KandenkoGroup to address, but its future is promising and bright.
We will draw up a long-term vision to make strong
progress, by incorporating opinions of young employees
responsible for the next generation.

Company Contributing to
Sustainability
We understand that our business, supporting social
infrastructure, itself makes direct contribution tosustainability. In order to spread such awareness groupwide, we have linked the management plan for fiscal 2020
with the Sustainable Development Goals (SDGs) that wereadopted by the United Nations and are intended to beachieved by 2030.
Specifically, we selected 8 out of the 17 SDGs, namely“Good Health and Well-being,” “Gender Equality,”“Affordable and Clean Energy,” “Decent Work andEconomic Growth,” “Industry, Innovation andInfrastructure,” “Reduced Inequality,” “Sustainable Cities
and Communities,” and “Climate Action,” and linked
them to each of our five key management policies which
are pillars of the management plan. By clarifying thedefinitions like this, we aim to raise awareness groupwide that we will solve social issues and contribute tosustainability through business.
As I mentioned earlier, through the five-year growthstrategy, we have continued hiring more than 300

employees each year and our workforce has increased toapproximately 7,500 people. That is to say, approximately
1,500 employees have worked for the Group for five
years or shorter, and it is necessary to let themunderstand how Kandenko is solving social issues
through its business.
For Kandenko, addressing SDGs does not only meanrequirements for a company to fulfill but growth
opportunities for it to take. We think that our solution tosocial issues includes renovation proposal to help improveenergy efficiency of building infrastructure and meet BCP
requirements in preparation for natural disasters that are
getting more destructive and more frequent year by year.
We will maintain stable growth by enhancing proposal
capabilities, work execution abilities and human resource
abilities to exist as a company contributing tosustainability. At the same time, by practicing ESG(Environment, Social and Governance) management, we
will fulfill our responsibility as a “preferred company,”
ensure the fairness and transparency of management andachieve both corporate value and social value.

Corporate Report 202014

Corporate Report 2020

| Business Model |We provide end-to-end engineering services ranging from planning, design and execution to maintenance and renovation,
regarding electrical work and information and communication work by making use of our proprietary technologies, expertiseand methods in the fields of building infrastructure, telecommunications infrastructure and electric power infrastructure.
Through its safe and high-quality facilities and services, Kandenko will make a long-lasting contribution to society as a partnerin social infrastructure.

Business Fields

Social issues
Reduction of energy costs
Prevention of global warming amage to infrastructure due to naturalDdisasters
Arrival of an aging society

Value to be Provided to Society

Electrical Engineering, Environmental Facilities and Systems, and Renovation WorkPower Distribution Line Engineering Work

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

The segment covers installation andmaintenance work of power distribution linesthat deliver electricity directly to households,
stores, and other customers.

Information & Communication WorkElectric Power & Civil Engineering Work

The segment is engaged in all types of works
related to information and communication,
including upgrades to optical fiber cable networks,
installation of transmission base stations formobile communications, and construction of
networks for cable TV and municipalities.

The segment is engaged in electrical work innuclear power plants, in addition to work on power
stations and substations, and on transmission lines.
Recently, the division covers the construction ofwind power plants and solar power plants, as well
as work on transmission line networks.

Correcting long working hours
Increase in cybercrime and accidentsetc.

 rovision of comfortable living
P
environments
Stable supply of electric powerProvision of stable communication services
Restoration of infrastructure damaged bynatural disasters
Maintenance and updates for aging
social infrastructure
Energy-saving initiatives for building
infrastructure

Corporate Motto“People First”
Corporate Philosophy
1. Based on respect for humanity, Kandenko
fulfills its duty of corporate social
contribution and contributes to creatingricher human environments.
2. By anticipating the needs of customers andseeking 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.

For details, see page 17

Strengthsof theCompany

Technology

Experience

Researchanddevelopment

Quality

Customerconfidence

Corporate GovernanceFor details, see page 37

15

KANDENKO

Corporate Report 202016

Corporate Report 2020

| Business Review by Division |Building Infrastructure Work

DescriptionofBusiness

General Construction WorkElectrical engineering work: Work on electrical facilities and equipment inside alltypes of 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

General Construction Work has driven Kandenko’s
growth in recent years by capitalizing on capital
investment demand primarily in the Tokyo
metropolitan area. We are focusing on expanding
renovation work and improving worksite
productivity, while enhancing human resource
measures in anticipation of future trends.
Results of operations in fiscal 2019Nobuhiro Iida
Managing Director and Executive Officer,
Division Manager of Sales Division

In fiscal 2019, we won large-scale projects including new
construction work for Chuo University Tama Campus
communal building (Tokyo), electrical renewal work for
the Courthouse of Tokyo High Court, Tokyo District
Court, and Tokyo Summary Court (Tokyo), and work onelectrical facilities and equipment for a new building of
Osaka Rosai Hospital (Osaka). As a result, new orders
received decreased 0.4%, or ¥1,107 million from theprevious fiscal year, to ¥264,633 million, maintaining a
result on par with the previous year.
Net sales of completed construction contracts
increased both for new construction work and renovation
work. Net sales of completed construction contracts intotal increased 11.3%, or ¥30,005 million, to ¥296,525
million, achieving a significant growth for five consecutive
years. Major projects completed during the year include
Shibuya PARCO new construction work (Tokyo), newJapan National Stadium maintenance work (Tokyo) andYokohama Grangate new construction work (Kanagawa
Prefecture).
Construction contracts brought forward as of March
31, 2020 amounted to ¥270,342 million, a decrease of¥31,892 million, or 10.6% year on year.

Initiatives to sustain growth in the future
The division is conducting business utilizing its businessbase that the Company has built centered on the Kantoarea, accounting for the largest part of the Company’sorders received, net sales of completed construction
contracts and profits. About 60% of the orders received
are redevelopment projects and factory construction
projects subcontracted by general constructors, while theremainder is direct orders from property owners.
Over the past five years, the division has kept growing
due to the strong domestic demand, and in particular,
won a large number of contracts including Olympicsrelated construction works and redevelopment projects
in the Tokyo metropolitan area. However, as large-scale
17

KANDENKO

new construction work projects in and around Tokyo
have been completed one after another and competition
for new orders becomes fiercer, in order to sustain thegrowth, we are required to expand our business areas to
the whole country and types of work to those otherthan electric works. Maintaining the current market sharein the Tokyo metropolitan area, we will work together
with the Social Infrastructure Work division to exert thecomprehensive power in order to win orders in othermetropolitan areas including Nagoya, Osaka and Kyushu.
In recent years, we have focused on expanding
renovation work, and the Renovation Department has
taken the initiative in further developing processes
including proposal capability enhancement. This type ofmanagement has produced results as the division is
growing in renovation work. Recently, as many buildings
are aging, demand has been increasing for maintenance,
upgrading, renovation of facilities. We will expand ourbusiness by further enhancing our engineering capabilities
and proposing cutting-edge and best solutions that cater
to customer needs such as building energy efficiency
measures and BCP requirements.
In fiscal 2020, both new orders received and net salesof completed construction contracts are expected todecrease due to a slowdown in capital investment
affected by the spread of COVID-19. To make up for thedecrease in earnings, the division will expand the targetof orders to include logistics facilities and data centers.
At worksites, we will take thorough infection prevention
measures, secure steady progress in construction works,
and implement efficiency improvement measures,
including enhancing mobility of human resources.

Promoting worksite reform to address humanresource risk
As the super-aging of Japan’s population accelerates, fewer
people are choosing to work in the construction industry. It
is becoming increasingly difficult for the industry players,
including Kandenko, to secure young workers who will bear
the future of the industry.
To secure excellent talents who support our work
execution abilities and technological capabilities, we arepromoting company-wide reforms for work practices andannual leave systems, aiming to create a work
environment where employees can enjoy working andachieve an ideal work-life balance. In April 2024, the Act
to Overhaul Laws to Promote Workplace Reform will beapplicable to the construction industry, requiring

New orders received

SDGs as growth opportunities
We recognize that initiatives of Electrical Engineering
Work and Environmental Facilities and Systems, andRenovation Work are closely related to SDGs such as“Affordable and Clean Energy,” “Industry, Innovation andInfrastructure,” “Sustainable Cities and Communities,”and “Climate Action.”
Our experience in building and maintaining electricalinfrastructure and technological capabilities we havedeveloped to date are indispensable to realize a“decarbonized society” that solves the SDGs, such as
establishing renewable energy and distributed power
supply systems, enhancing data centers andtelecommunication infrastructure, and restructuring
supply chains. We recognize promoting business
operation by fully utilizing this strength will present asignificant growth opportunity going forward. As
customers’ needs for capital investment to achieve SDGs
are growing, we stand a good chance of taking thisopportunity and further growing by working together
with the Social Infrastructure Work division.
We will proactively introduce advanced engineering
technologies, information and communication
technologies, and digital technologies, strengthen
collaboration with internal and external bodies, and thus
ensure that these growth opportunities will help us
enhance corporate value in the future.

Net sales of completed construction contracts(Millions of Yen)

(Millions of Yen)

251,469

263,342

265,741

Fiscal 2016

296,525
266,520

264,633
235,040

224,170

Fiscal 2015

compliance with the upper limit on overtime work. We
will not only comply with regulations on paid holidays
and working rules, but also improve production efficiency
at worksites by introducing worksite support tools andutilizing the prefab unit technology for materials. Office
workers will also be encouraged to thoroughly digitize
paperwork, outsource a part of their duties and utilize
Robotic Process Automation (RPA) to spend the freed-up
time on worksite support, in an effort to reduce
workload at worksites as much as possible.
We are committed to our mission to build electricalinfrastructure in society and responsible for maintaining
and continuing our business despite changes of times.
Kandenko will inculcate in its employees the pride thatcomes with the mission, while promoting the creation ofa fulfilling and attractive workplace. In this way, we willcontinue to exist as a company needed by society andbecome a preferred company by both customers andstudents.

Fiscal 2017

Fiscal 2018

Fiscal 2019202,815

203,627

Fiscal 2015

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

Corporate Report 202018

Corporate Report 2020

| Business Review by Division |Social Infrastructure Work

DescriptionofBusiness

Information & Communication Work

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

Shinichiro Kitayama
Executive Vice President and Executive Officer,
and Division Manager of Social Infrastructure Division

In the Information & Communication Work sector, weneed to keep up with and spread fast-evolving
technological innovation, including 5G communication.
Keeping an eye on changes in society brought about
by COVID-19, the division will open up future
possibilities by taking advantage of unique strengths.
Results of operations in fiscal 2019
During fiscal 2019, overall performance of the division was
solid, due to large-scale updating work for a cable
television operator and a significant increase in orders of
public office projects for upgrading work of highway
telecommunications networks, as well as newly-enteredwork on electrical infrastructure for mobile communication
providers. Profitability has steadily improved owing to theresults of ongoing structural reforms that we started two
years ago.
New orders received increased ¥3,196 million, or 9%
year on year, to ¥38,745 million. Net sales of completed
construction contracts increased ¥3,061 million, or 7.3%
19

KANDENKO

year on year, to ¥44,852 million owing to steadyprogress in increased construction work in hand, marking
the fourth consecutive year of growth.
Construction contracts brought forward as of March
31, 2020, amounted to ¥15,646 million, a decrease by¥6,107 million, or 28.1% year on year.

Eisaku Shimizu

Impact of COVID-19 and focus targets

Executive Managing Officer, Division Manager of Social Infrastructure
Division, and Head of Information & Communication Unit

The Information & Communication Work division
primarily engages in laying and maintaining optical fiber
cables for electric power providers andtelecommunications providers; building and maintaining
networks for cable TV and municipalities; and building
and maintaining transmission base stations. Sales are
divided almost equally among these three businesses.
As for the recent business environment, the supply ofsome parts for base stations was affected by the spreadof COVID-19, but we are making steady progress inconstruction works, taking infection prevention measures.
In terms of orders received, as capital investment related
to information and communication is on the rise due tothe new lifestyle caused by the pandemic, and thepromotion of work-style reforms, and an increase in thenumber of construction works is anticipated.
Meanwhile, as commercial services of fifth-generation
mobile communication systems (5G) started to launch inphases in March 2020, we see an increase in construction
works, including antenna installation of transmission basestations for mobile communication. In the market withmany competitors including engineering companies
affiliated to major telecommunication providers,
Kandenko aims to be a top runner by steadily gaining ashare in the field in which the Company has abundant
expertise with the help of the Power Distribution LineEngineering Work division, by focusing on the fact thatmany base stations are installed on power poles for 5G
network, and making proposals for development ofequipment to install wireless units on power poles andconstruction works of antenna installation on the top of
power poles. At the same time, the division is conducting
sales activities to win orders from new mobile
communication providers by promoting our capability of
one-stop total service from construction work andnegotiation about places of antenna installation, such asbuildings and power poles, through creation of amaintenance system after construction, which helps
customers accelerate their service delivery.
Meanwhile, the division focuses on sales activities of aconstruction work that helps independent cable TV

operators to shift to Fiber-to-the-Home (FTTH). Recently
the priority is placed on construction works in responseto an increase in telecommunication traffic caused by
COVID-19, but the shift to FTTH is inevitable given futurebusiness trends including offering 4K/8K satellite
broadcasting service. We intend to continuously conduct
sales activities by promoting our capabilities ofcompleting construction work for a large-scale FTTH
project in a short time.
In fiscal 2020, we expect net sales of completed
construction contracts to decrease compared to theprevious year when a large-scale construction project
was completed, but new orders received to be flat year
on year. Especially during this fiscal year, as the GIGA
School Program proposed by the Ministry of Education,
Culture, Sports, Science and Technology was included in
the supplementary budget, we see urgent demand forwork on electrical infrastructure including thedevelopment of network environment, for which we willproactively win orders.

Future direction and risks/opportunities
A slowdown of the economy will have a big impact on
the capital investment trend. Demand of the Information& Communication Work segment is no exception, though
the impact is relatively small. This is because in recent
years it has become indispensable for customers to use
information and communication technologies in operating
their business, and technological innovation isaccelerating, urging them to maintain and continue
investment in those technologies. Capitalizing on thissustained demand, the Information & Communication
Work division will improve net sales of completed
construction contracts and establish a structure to makegood contribution to profitability.
Furthermore, the COVID-19 pandemic has caused
information and communication to play moresophisticated and various roles. It is a pressing issue toincrease and develop human resources capable ofkeeping up with the latest trend in technologicalinnovation and making proposals based on it. Therefore,
we will focus on the development of such humanresources by proactively engaging in alliance and researchand development with telecommunication equipment
manufacturers dealing with advanced technologies.
We have accumulated a wealth of expertise andtechnologies through building networks for a variety ofcustomers including electric power providers,
telecommunications providers, cable TV providers andmunicipalities. Currently by taking advantage of them,
we are not only implementing construction works oftelecommunications infrastructure, but also design andmaintain networks and propose solutions using newtechnologies according to each customer’s characteristics,
thus establishing a lasting and close relationship as thecustomer’s partner. We will make efforts to provide
customers with new value in cutting-edge fields such as
AI and DX as well and achieve further growth going
forward.

Toward achieving sustainable society
From a perspective of SDGs, the Information &Communication Work division is related to “Industry,Innovation and Infrastructure” and “Sustainable Cities
and Communities” as common goals with otherbusinesses of the Company. The division also works ondiversity for the goal “Gender Equality” with manyfemale employees active in maintenance of informationand telecommunication equipment and devices.
We aim to create value by continuing to think what
information and communication can do to realize asustainable society and thus open up possibilities for the
future. As a provider of infrastructure supporting leadingedge information and telecommunication, we willcontribute to the development of industries and affluent
lives and share prosperity with all stakeholders.

New orders received

Net sales of completed construction contracts(Millions of Yen)

(Millions of Yen)

44,64640,05135,54831,860Fiscal 2015

38,74537,651
27,876

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

Fiscal 2015

41,79044,852

31,596

Fiscal 2016

Fiscal 2017

Fiscal 2018

Fiscal 2019

Corporate Report 202020

Corporate Report 2020

| Business Review by Division |Social Infrastructure Work

DescriptionofBusiness

New orders received

Power Distribution Line Engineering Work

(Millions of Yen)

Work 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

139,234

140,632

Fiscal 2015

Fiscal 2016

151,639

147,853

142,968

Fiscal 2017

Fiscal 2018

Fiscal 2019

Net sales of completed construction contracts(Millions of Yen)

The Power Distribution Line Engineering Workdivision has Japan’s leading operational
abilities and technology. We will reinforce
profit-generating capacity and ability to win
orders, maintain stable growth and makefurther evolution to achieve a smart society.
Results of operations in fiscal 2019
In fiscal 2019, new orders received for overhead power
distribution lines were ¥110,249 million, an increase by¥10,065 million, or 10.0% year on year, as the division
steadily received orders from the TEPCO Group andrecovery work increased for repairing damage caused bytyphoons. As public projects were put off ahead of the
Olympic Games, underground power distribution lines
saw a slight fall in new orders received, which amounted
to ¥41,390 million, a decrease by ¥1,394 million, or
3.3% year on year. As a result, new orders received forPower Distribution Line Engineering Work as a wholecame to ¥151,639 million, an increase by ¥8,670 million,
or 6.1% year on year.
Net sales of completed construction contracts
continued to achieve year on year growth at ¥148,493
million, an increase by ¥9,500 million, or 6.8% year on
year owing to solid performance in overhead power
distribution lines and underground power distributionlines. Profit was also solid.
We secured construction contracts brought forward asof March 31, 2020, of ¥29,790 million, an increase by¥3,146 million, or 11.8% year on year.

Direction to expand business and outlook
Power Distribution Line Engineering Work is the division
engaged in the construction and maintenance of electric
power facilities. More than 90% of sales come from thework we receive from the TEPCO Group, but we areworking to receive orders from general customers inrecent years. In fiscal 2019, net sales of completed
construction contracts to general customers, especiallyfor construction works related to renewable energies,
increased to ¥11,700 million. It is significant growthcompared to that of about ¥3,000 million three years
ago.
Renewable energy-related works is projected to growunder the theme of building a decarbonized society and
21

KANDENKO

strengthening resilience of electric systems. In the longer
term, we will see a shift from the conventional largescale system power supply by thermal power and nuclear
power generation, to distributed power supply by
renewable energies and rechargeable batteries.
In the short run, however, the Bill for the Act of Partial
Revision of the Electricity Business Act and Other Acts
for Establishing Resilient and Sustainable Electricity Supply
Systems, enacted in June 2020, makes it mandatory forelectric power providers to make systematic renewal ofaged facilities, and related initiatives will be promoted
under the revised Electricity Business Act scheduled to be
enforced in 2023. Therefore, our stance for the time
being is that we allocate human resources toinfrastructure renewal works in this core business whileworking to develop new technologies and work
execution abilities and expand construction works related
to renewable energies.
We expect new orders received and net sales ofcompleted construction contracts for fiscal 2020 to bealmost flat year on year. The spread of COVID-19 had no
major impact on sales activities for project orders until
the first half of fiscal 2020. Aiming to maintain electric
power infrastructure, we have continued operations atworksites without suspension, taking thorough infection
prevention measures. However, the situation remains
unpredictable as there are concerns over postponementof construction work of undergrounding of power lines
due to the postponed Olympic Games and decreased
capital investment in electric power facilities caused by adecrease in electricity demand.
Under such circumstances in this fiscal year, we will
win orders of infrastructure renewal works as mentioned
earlier, work to expand construction works related torenewable energies, focus on improving productivity of
our core business and thus reinforce profit-generating
capacity. More specifically, we will negotiate securing thevolumes of construction work in hand with the TEPCOGroup, adjust process management and workforce
accordingly and thus generate profit. In terms of humanresources, a high turnover and hiring difficulty especiallyat business partners are pressing issues to address. We
will take measures by 2024 when the Act to Overhaul
Laws to Promote Workplace Reform will become
applicable to the construction industry.

138,419

138,557

136,633

138,992

Fiscal 2015

Fiscal 2016

Fiscal 2017

Fiscal 2018

148,493

Mitsuru Fujii
Executive Managing Officer, Division Manager of Social Infrastructure
Division, and Head of Power Distribution Department

Avoiding human resource risks and gaining
opportunities
Looking at the business environment surrounding PowerDistribution Line Engineering Work, social infrastructureis aging, and therefore opportunities come to companies
capable of getting over constraints on human resources
and meeting demand for renewal of facilities. Only
companies capable of passing down technologies tofuture generations while maintaining work execution
abilities, will survive.
We will actively introduce diversity to avoid risks of labor
shortage and gain growth opportunities. By extending theemployment period for seniors so that they can exercise theirpotential, creating a working environment where female
workers can work comfortably, and facilitating developmentof power suits and power-assist arms that reduce theworkload at worksites, we will support female and senior
employees at worksites with technologies. Given a possible
deregulation in the future, it is necessary to consider hiring
more non-Japanese workers.
The Social Infrastructure Work division as a whole isworking to increase flexibility and mobility of humanresources by fostering multiskilled workers. For example,
engineers in the Power Distribution Line Engineering Workdivision are required to learn necessary skills to handle
construction management for a wind power generation
system.

Fiscal 2019

resource measures, introduce advanced technologies,
work on resilience and achieve a decarbonized society.
We also recognize that improving productivity atworksites contributes to reducing CO2 emissions by
shortening the work time on aerial work platform trucks,
and are working to produce effects.
As mentioned earlier, a shift from conventional largescale system power supply by thermal power and nuclear
power generation to distributed power supply by
renewable energies and rechargeable batteries, is arequisite to realize a smart society. We will work on theshift by further driving growth business going forward.
We will expand our business framework from “power
distribution line construction” to “energy infrastructure”
and evolve ourselves into a growing division as thesociety develops sustainably.

Growing with sustainable development ofsocietyBusiness activities of Power Distribution Line Engineering
Work are related to SDGs, such as “Good Health andWell-being,“ “Affordable and Clean Energy,” “Decent
Work and Economic Growth,“ “Industry, Innovation andInfrastructure,” “Sustainable Cities and Communities,“and “Climate Action,” through initiatives to take humanFirst-aid repair work of power pole damaged by typhoon

Corporate Report 202022

Corporate Report 2020

| Business Review by Division |Social Infrastructure Work

New orders received

Electric Power & Civil Engineering Work58,901(Millions of Yen)

50,184

51,829Fiscal 2017

Fiscal 2018

42,299DescriptionofBusiness

36,239Power generation and transformation work: Work on power stations andsubstations, and renewable energy power generation
Transmission lines work: Work on overhead transmission lines
Civil engineering work and underground lines work: Work on undergroundtransmission lines, and civil engineering work using C.C. Box technology
Nuclear power work: Regular inspections and maintenance of nuclear power plantfacilities and equipment

Fiscal 2015

Fiscal 2016

Net sales of completed construction contracts(Millions of Yen)

45,824The Electric Power & Civil Engineering Workdivision aims to expand orders by capitalizing
on needs for redevelopments in urban areas
and for replacement of aging social
infrastructure and focusing on its specialty
business fields. In recent years, the division has
been focusing on renewable energy power
generation work and growing rapidly.
Results of operations in fiscal 2019
Major projects we won during fiscal 2019 include
construction work of Northern Hokkaido Wind Power
Generation Project - Hamasato Wind Farm (Hokkaido
Prefecture) and utility tunnel work for the change inpower systems of Yachiyodai Electric Power Substation(Chiba Prefecture). Orders of power generation andtransformation work, especially for renewable energy
power generation work, jumped year on year and ordersof nuclear power work also increased. As a result, neworders received amounted to ¥58,901 million, an increaseby ¥7,071 million, or 13.6% year on year.
Net sales of completed construction contracts
increased to ¥50,331 million, an increase by ¥4,507
million, or 9.8% year on year, as a result of growth inpower generation and transformation work, civilengineering work and underground lines work, andnuclear power work.
Construction contracts brought forward as of March
31, 2020, came to ¥66,008 million, an increase by¥8,569 million, or 14.9% year on year, maintaining ahigh level.

Taking advantage of an end-to-end framework
to win orders from targets
The business handled by the Electric Power & Civil
Engineering Work division is classified into four groups:
power generation and transformation work; transmission
lines work; civil engineering work and underground lines
work; and nuclear power work. Nonetheless, withrespect to orders from customers other than the TEPCOGroup (from general customers), many works areundertaken as joint projects based on cooperation acrossthe three types of works excluding nuclear power work.
The proportion of orders from the TEPCO Group has
been on a decline, accounting for only 25.2% in neworders received during fiscal 2019. In other words, thedivision receives about three-quarters of orders fromgeneral customers.
23

KANDENKO

In securing orders from general customers, our main
target is power producers using renewable energy. We
undertake types of work from the construction of power
plants to establishment of transmission line networks.
Another priority target is power intake and transformer
equipment for large factories that are known as extrahigh-voltage consumers, and we engage in collaborative
sales activity with the Electrical Engineering,
Environmental Facilities and Systems, and Renovation
Work division.
Our competitive edge lies in an end-to-end frameworkfrom power generation and transmission/transformation
facilities to power distribution line networks. Other
differentiators include our construction technology
capable of managing high-voltage current and ability to
not only undertake construction but also provide support
from the design stage.

Renewable energy power generation grew,
improving profitability
We are focusing on winning orders for renewable energy
power generation work and for replacement of aging
social infrastructure, while continuously working to
improve profitability through cost management.
Orders received for renewable energy power
generation work grew rapidly, exceeding ¥22,500 million
for fiscal 2019. Driven by the Japanese government’s
renewable energy policy setting a target of the powersource composition ratio at 22% to 24% to be achievedby 2030, renewable energy power generation work is
anticipated to continue growing.
As for replacement of aging social infrastructure, we
aim to win orders centered on public office projects andneed to improve quantity survey abilities and securetalents that hold high technical evaluation scores.
Improving profitability through cost management,
especially for profit improvement of large-scale projects,
contributed to the improvement of results for fiscal 2019.
We expect COVID-19 to have impacts on the results
for fiscal 2020: there are concerns over suspension andpostponement of construction of power intake andtransformer equipment, due to reduced investment fromextra-high-voltage consumers following the deteriorationof corporate earnings. This possible decrease in orders
will be offset by renewable energy power generation
work, with new orders received forecast to be ¥62,000
million. Net sales of completed construction contracts are
expected to fall slightly year on year at ¥47,000 million,

Fiscal 201936,41135,127

Fiscal 2016

Fiscal 201750,331

29,383

Shuichi Yamaguchi
Senior Executive Managing Officer, Division Manager of Social
Infrastructure Division, and Head of Power Engineering Unit

Fiscal 2015

Fiscal 2018

Fiscal 2019

but we will strive to improve profitability by continuing
improvement measures in large-scale projects.

Electric Power & Civil Engineering Work - risks
and opportunities, SDGs
One of the risks posed to this division is that, as skilledemployees are aging, there is a shortage of employees in
the middle-layer who can help develop young employees.
The situation is the same in business partners, potentiallyleading to the cessation of the transfer of technologythat ensures the safety and quality of construction
works. To counter this, we promote active roles of senior
employees in the workforce, introduce and implementhuman resource development from a long-term
perspective, and create a workplace by enhancing
mobility of human resources and using them more
flexibly.
As for opportunities for the division, social
infrastructure is aging in various ways and there is thedemand is increasing for replacement of electric power
facilities. To take advantage of such opportunities toexpand orders, we will strengthen necessary engineeringand design abilities by learning advanced cases throughseconding employees to a consulting firm andcollaborating with general construction companies, andacquire technologies and knowledge.
Regarding the connection between the management
plan and SDGs the Company is working on, there are
four SDGs items closely related to the division: “Gender
Equality” through promotion of women’s active
participation, “Life Below Water” to which we contribute
through construction of water and sewage facilities,“Affordable and Clean Energy” that is directly related torenewable energy, and “Industry, Innovation andInfrastructure” in creating resilient infrastructure.
We will continue to contribute to solving social issues
by utilizing the comprehensive power of Electric Power &Civil Engineering Work, while raising awareness ofcreating a sustainable future.

Construction of wind power plant

Construction of electric power substation

Corporate Report 202024

Corporate Report 2020

| Research and Development Activities |Message from the Officer in Charge
The Research and Development Division that
supports technology is the core organization forvalue creation, the key to securing a competitiveedge in the market and contributing to sustained
growth of the business. Its efforts will strengthen
coordination with parties outside Kandenko andexpand its business fields in the future.

Toshiaki Makino
Executive Managing Officer, Division Manager of Strategy & Technology
Development Division, and Head of Technology Development Unit

Overview of the research and development
division and its current initiatives
The research and development division is an organization
responsible for the Company’s overall technicaldevelopment and improvement, and consists of theTechnology Development Unit established within theStrategy & Technology Development Division, with theTechnology Development Department and Technology
Research & Development Institute as subordinate
organizations. The division supports and cooperates withworksites and customers, and sells development results
to external parties while advancing research andtechnology development for expanding businesses andsolving issues.
The research and development division adopted“technology development to improve safety, quality, andoperational efficiency,” “technology development tocater to customer needs,” and “technology development
to support business field expansion” as its key policies infiscal 2019. The division achieved steady results underthese policies. Continuing with those policies, the division
will advance its initiatives further in fiscal 2020, with“security, safety and disaster response,” “operational
efficiency improvement” and “contribution to businessfield expansion” as additional core policies.

Fiscal 2020 Basic Policy on Technology Development

Future direction for technology development
the Company should aim at

Fiscal 2020 Basic Policy on Technology Development“Develop technologies and reinforce profit-generating capacity through open innovation”

Construction technology

Digital technology

Industry-academia-government collaboration

Disaster prevention + BCP
Measures against earthquakes and flood damage

Automation of worksite operations
Applying work-supporting robots and drones

Technologies for decarbonization measures
Improving renewable energy efficiency, monitoring systems

Visualizing operations at worksites and facilities

Improvement of worksite operation efficiency

MR application, diagnosis of IoT facilities

Prefabrication (EPS, etc.) and BIM application

VPP verification, air conditioning field

Energy management

EMC technology

Systematizing construction operations

Providing development results internally and externally

Measures against various lightning damage and EMC measures

Adding BLuE functions and applying AI

Power failure and restoration simulation, new ground systems, etc.

(1) Security, safety and disaster response(2) Operational efficiency improvement(3) Applying to business field expansion

Promote technology development that contributes to sustainable development from three perspectives

25

KANDENKO

Regarding safety, there are two viewpoints, one forprotecting employees from dangers and the other forprotecting social infrastructure from disasters. As an
initiative from the former viewpoint, the divisiondeveloped a sensor for preventing approaches to an AC
voltage source to safely execute operations in whichelectricity is handled. As an initiative from the latter
viewpoint, the division is advancing the development ofearthquake-resistant devices for transformers and otherelectrical facilities, and research on the restoration ofsubmerged electrical facilities toward the goal of realizing
facilities that are resistant to disasters.
The research and development division’s themes in thearea of operational efficiency improvement are IT
utilization, robot application and prefabrication. The
division is aiming to realize the practical application ofconcepts, such as a worksite support scheme utilizing IT
devices including tablet terminals mounted with the“BLuE” measurement and record support system, robots
for inspection and wiring in the ceiling space, and drones
for transporting burdens. In addition, the division is
focusing on developing a way to reduce burdens atworksites by advancing a prefabricated construction
method in which material processing, wiring and othertasks traditionally performed at worksites are completed
at the Company’s factories in advance. The divisionbelieves that those innovations will be effective forpreventing infection with COVID-19 and other diseases,
which is anticipated to remain a possibility atconstruction worksites.
For business field expansion, the research anddevelopment division is undertaking various experiments
through mutual collaborations between the Technology
Development Unit and the Strategic Business Unit,
recognizing its responsibility to sow seeds for new
businesses for the Company’s future. The division has
been promoting open innovation since 2019, focusing
more on industry-academia-government collaboration,exchanges with companies in different industries, andjoint development with startups, and making proactive
use of outside knowledge.

Aging and a shortage of young people accompanying
Japan’s population decline and the transformation of thesocial structure caused by COVID-19 are assumed to haveparticularly large influence among changes in conditions
surrounding the Company’s businesses. How to deal withthose changes is an important issue that has a serious
bearing on the continuation of businesses. The researchand development division will keep pursuing IT utilization,
robot application and prefabrication mentioned earlier inconnection with operational efficiency improvement, as
labor-saving technologies that promote the advancementof senior and female employees at construction
worksites. Furthermore, the division thinks it can realize
remote work, whose introduction to construction
worksites has been considered to be difficult, by applying
mixed reality technologies and avatar robots.
Another critical issue in future technology development
is the departure from a mindset about existing businessfields. Making the most of the expertise of individual
researchers has been the Company’s conventional
approach to development. However, development
themes, such as initiatives in the fields of environment
and energy, are becoming increasingly complicated thesedays. Looking deep into expertise is no longer sufficient
for addressing these issues. Development under a project
structure, in which many researchers keep business field
expansion in mind and cooperate with their counterpartsin and outside the Company, will be indispensable forthe division.
Regarding risks in the Company’s businesses, we findit necessary to estimate and address the effects ofintensifying natural disasters and a customer confidence
decline due to accidents resulting in injury or death andfacility accidents, in addition to the effects of amanpower shortage. The research and development
division will gain clues for developing new technologies
in the course of its attempt to think out ways to support
responses to those risks and take active part in the
support.

Toward developing and surviving with society
The Company has launched initiatives focused on“Affordable and Clean Energy,” “Industry, Innovation andInfrastructure,” “Sustainable Cities and Communities,”and “Climate Action” as its response to SDGs through its
business activities. Among these, the research anddevelopment division will intentionally focus on the fields
of future environment and energy, and proactively
contribute to solving social issues related to “Affordable
and Clean Energy” and “Climate Action.” The Company
views response to SDGs as its corporate social
responsibility and a condition for its survival. At the sametime, the Company considers them as doors to growth
opportunities.
The Company’s strength lies in its worksites, where it
can grasp needs in society and verify development
results. Solving problems faced by these worksites from atechnological standpoint is an important role for the
research and development division. Meanwhile, there is
still large room for improvement from perspectives suchas sufficiently applying the strength of worksites,
grasping all needs and establishing development results
firmly. Furthermore, the value of our development results,
intellectual properties, etc. deserves higher evaluation.
We feel we must make appeals and disseminate
information more effectively for winning such evaluation.
While establishing systems for improving these points,
Kandenko will develop itself with society as an attractive
company by striving for research and technology
development of higher value.

R&D expenses (Millions of Yen)

1,093

Fiscal 2015

1,188

1,217

Fiscal 2016

Fiscal 2017

1,381

1,428

Fiscal 2018

Fiscal 2019

Corporate Report 202026

Corporate Report 2020

| Research and Development Activities |Examples of Initiatives

Research and Development System
To respond to issues at the worksite and customer needs, the Kandenko Group is focusing on four key areas: technology
development to support the improvement of productivity at worksites; technology development to enhance safety andlabor-saving; technology development to cater to customer needs; and technology development to support business field
expansion. In fiscal 2019, our R&D was guided by the idea of “aim to improve productivity at worksites by strengthening
internal and external coordination.” In particular, as technologies to contribute to improving safety, quality and operational
efficiency, we actively promoted the development of worksite-support systems utilizing IT, the development of maintenancetechnologies using the advanced technology of mixed reality (MR), and the development of technologies that contribute toimproving the credibility of customer facilities. At the same time, we worked to strengthen technology development
through collaborations with parties in industry, government, and academia, as well as with group companies.
Consolidated R&D expenses in fiscal 2019 totaled ¥1,428 million. Please note that R&D expenses are not broken
down by business segment.

Technology Research & Development InstituteHigh-Voltage Laboratory

The Technology Research & Development Instituteconsists of a research building, experiment building, andoutdoor testing site. In the laboratories of the experimentbuilding, we conduct basic experiments to establish new
systems and construction technologies, experiment totest the strengths of materials and tools and conduct
verification tests for development results. The institutealso houses an anechoic chamber, shielded room,
blackout curtain device, and other experimental
equipment utilized for developing construction
technology for electrical facilities, communication
facilities, and air conditioning and environment facilities.

The High-Voltage Laboratory is made up of a testroom, physical test room, working room, andoutdoor water tank used for voltage resistance tests.
In the test room, we have large-scale experimentdevices, including a 350 kV-AC voltage generator, a
1,800 kV-impulse voltage generator, and a highcurrent generator.

Development of “shoe chain electric overhead wiring
machine”

Development of “measurement and record
support system”
Time and efforts needed for extensive pre-completionmeasurement and recording tasks are a problem atelectrical engineering worksites. To address the problem,
we developed the “BLuE” measurement and record
support system. BLuE connects a measurement device
and a tablet PC wirelessly, and automatically prepares areport the moment the measurement is complete. We
will raise operational efficiency further in the future,making the system compatible with a greater variety ofmeasurement devices and developing a fully automatic
measurement and record system that uses a combinationof drones and automated guided vehicles (AGVs).
Correct
measuredvaluesMeasurement

We have been using hydraulically-operated shoe chain
reeling and cabling machines for cabling and removing
wires in transmissions lines work. However, thesemachines are heavy and highly inconvenient fortransportation, and have a large number of components
and a complex structure that hinder the maintenancework. They also have difficulties in low-speed cablingunder the condition of low wire tension. In response tothese problems, we developed a motor overhead wiring
machine with less weight, and improved maintainability
and operational control capacity in cooperation withgroup companies. We will use this machine to improve
work efficiency and safety at transmission lines work.

Work
reduction

Measurement andautomatic entry
Completion

Development of “storage cell remote monitoring
system”

Record sheet
preparation

Development of “abnormal heat generation
detection system”
As a measure for preventing fires attributable to abnormal
heat generated by electrical facilities, we developed the“Thermo MR” wearable system, which enables visualconfirmation of a temperature distribution by laying it overa real vision using an MR smart glass integrated with an
infrared camera worn on the head. We will use thissystem to enhance work safety, in addition to realizing theearly detection of sites where abnormal heat is generated
through regular inspections and periodic patrols.

Aging causes the functions of storage cells used as
emergency backup power supplies in information andcommunication facilities to decline. For this reason,storage cells require periodic inspections. Greater laborand time needed to inspect the facilities in remote areas
including mountainous regions have been a problem. To
address this, we developed a system that enables thereal-time grasp of functional declines caused by aging byautomatically and periodically collecting data on voltages,
currents, temperatures and internal resistance. Thissystem makes the timing of storage cell replacement
predictable, in addition to enhancing work efficiency. We
will use the system to increase the credibility of customer
facilities.

Warning:Abnormaltemperature

27

KANDENKO

Corporate Report 202028

Corporate Report 2020

| Environmental Initiatives |The human race has enjoyed many benefits of industrial and economic development, but these benefits
have come at the cost of global warming, pollution, and ecological destruction. A great burden has thus
been placed on the global environment.
Coexistence with the natural environment, the foundation of our existence, is essential for any
healthy society. This 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
to have 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.

Activity Plan
1. W
 e will follow environmental legal regulations andreduce environmental risk to fulfill our corporate social
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 development, design, andexecution 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.
5. W
 e will build bridges of cooperation to regional society andcontribute 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.

29

KANDENKO

Main department
Environment Department

Construction Headquarters

Responsible department

Sales Division
Social Infrastructure Division

Safety & Environment Department

Regional Headquarters

Responsible department

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

Regional Headquarters
Fukushima Division

Safety & Environment Team,
General Control Department

Responsible department
Safety & Environment Group

Initiatives to Reducethe Environmental Burden

Examples of Initiatives
Achievement of “ZEB Oriented” appraisal
standard
The Company’s Education & Training Center, whose
renovation was completed in March 2019, became thesecond building in Japan and the first renovated building
to receive the “ZEB Oriented” certification.
“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 amountsof energy. Through the renovation, the Education &Training Center reduced energy consumption by as muchas about 35% by adopting a high-efficiency air
conditioning system, in addition to making about 1,000
glass windows double-paned 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. The Company
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

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 consumption of
resources and energy and measures to improve industrial
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.

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

13.5 MW

(9 windmills with acapacity of 1.5 MW each)

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

Location
Choshi-shi, Chiba
Choshi-shi, Chiba

1.5 MW Shiraoka-shi, Saitama

 perational launch of Kami Ketto HydroelectricO
Power Plant
The Kami Ketto Hydroelectric Power Plant, which theCompany had constructed in Nakauonuma-gun, Niigata
Prefecture, began operation in May 2020 following its
completion.
This power plant is a run-of-the-river hydroelectric
power plant that makes effective use of a drop at theKami Ketto Sand Control Dam that has existed on
Nakatsu River in the Shinano River system. Itscharacteristics include construction next to the sandcontrol dam built in 1961, the installation of a sandelimination shaft as a measure against landslides in
addition to a shaft for power generation, and minor
effects on the river environment thanks to a drainage
tunnel built at the time of dam construction used as aflood control channel (to reduce a low-water section).
The power plant is scheduled to generate about 6,500
MWh of electricity per year, which corresponds to annual
power consumption by about 1,200 ordinary households.
The generated power is planned for sales over a long
period (20 years under a feed-in tariff system).

Kaminokawamachi,
Kawachi-gun, Tochigi
1.5 MW
Sosa-shi, Chiba
Sakaimachi,
1.5 MW
Sashima-gun, Ibaraki

1.75 MW

1.5 MW

Kama-shi, Fukuoka

13.75 MWKama-shi, Iizuka-shi,
Fukuoka

5.0 MW

Kama-shi, Fukuoka

6.75 MW Maebashi-shi, Gunma
990 kW

Tsunanmachi,
Nakauonuma-gun, Niigata

Corporate Report 202030

Corporate Report 2020

| Employee Initiatives |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.

Training Programs
OJT training

Basic Policy on Human Resources
Development
While continuously nurturing a “professional workforce
trusted by society and customers” necessary for sustained

Personnel We Aspire to Be
1. P rofessional workforce trusted by society andcustomers

growth, the Company will develop and raise theHuman resources committed to a mission to live up

capabilities of each employee.

to the trust and expectations of customers and

OJT training is a program whereby senior employees in theworkplace encourage junior employees to acquire businessabilities by providing guidance on practical knowledge 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.
(Status of implementation)O JT leadership training (Held 12 times, attended by 196
employees)
O JT promotion training (Held 9 times, attended by 71 employees)

ActionPlan

Improvement

Formulation of plans
Human
resourcesdevelopment
through OJT

Check

Do

Evaluation and validation

Implementation of training

make contributions to society

Outline of Initiatives
for Human Resources Development
The Company has continuously worked to establish
systems to develop excellent human resources.
An outline of specific initiatives is as follows.
1. Personnel development
OJT: Guidance and training through workplace operation
Group seminars: Training for professional expertise and skills
Self-development: Support upskilling of employees,
such as acquisition of qualifications
2. D evelopment of a workplace culture andenvironment that fosters human resources
3. Development of a human resources development
system (standardization of development methods)

Developmentof personnel

Continuous humanresourcesdevelopment
Developmentof human
resourcesdevelopment
system31

KANDENKO

Developmentof workplaceculture andenvironment

Human resources equipped with high skills necessaryGroup seminars

to provide the best services and facilities

Group seminars are held for the purpose of equipping
employees of the Company with the necessary skillscommensurate with their positions.
We seek to upskill each employee by classifying theminto new employees, mid-level employees, and employees
in managerial positions.

Human resources respecting diverse values to copewith changes in the times and ceaselessly striving forself-development and ingenuity
 orkplace culture and environment that foster
2. W
human resourcesA workplace where everyone can learn from eachother and grow togetherA workplace where employees can speak andconsult with others frankly(Status of implementation)
Implementing level-based trainingImplementing blending education (e-learning andgroup seminars)
Giving feedback of training results to workplace

Category

Level

Division

Duties related to construction,
sales, and administration

New employee training

Specialized training
Duties related toconstruction

Duties related to sales

Introductory training
Technical training

A workplace where each employee can exert their

1 - 2 years

Basic training

own abilities

3 - 4 years

Intermediate training

New salesperson training
Salesperson basic training
Design training,
estimation training, etc.

5 - 7 years

Advanced training

8 - 10 years

Special advanced training

Team leader level

Team leader training

Assistant section manager level

Assistant section manager training

Section manager level

Section manager training

Department manager and deputy
department manager level

Training for next generation leaders

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.

Salesperson specialized
training

Examples of qualifications recommended by the Company

1st grade construction managing engineer
Professional engineer and associate professional engineer
First-class electrician
Third-class chief electricity engineer
Fire defense equipment officer
Construction accounting specialist
Corporate Report 202032

Corporate Report 2020

| Employee Initiatives |Reforms for 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.

Basic policy
Leading and implementing reforms by managers
including executives
Shifting to a work-life balance mindset
Strengthening the industrial insurance 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

K. Assertion

Initiatives to Promote Diversity

To create a workplace environment with greater
openness, the Company 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.

Inclusion of LGBT

(Outline of activities)
Issuing messages from executives on a regular basis
Making activities known internally and raising awarenessby displaying posters and distributing leaflets
Implementing practical assertion training at group seminars,
etc.

The Company has been promoting the Project toPromote Female Advancement as an action plan tofurther promote the advancement of female employees
since fiscal 2016. An overview and major initiatives ofthe project are as follows.

Implementing assertion through practical operations

Speak out

Human resources development

Showappreciation
Listenattentively

Health management

Superiors

Subordinates

Encourage and support promotion of various human resources

Create an affable atmosphere

Proper management of work hours

Interorganizational
cooperation

Facilitate acquisition of days off and vacations

Major initiatives
Scheduled grant of annual paid leave (5 days)(Average number of paid leave taken in fiscal 2019: 10.7
days)
Enhanced health care management based on professional
expertise
33

KANDENKO

Achievingan openworkplaceenvironment

Prevention ofdisasters andaccidents

We take up LGBT at workplace training to educate andraise awareness on the issue.

Promoting the advancement of women

Deterring power
harassment
Active communication

Improvement of work quality
Improvement of productivity

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.

Period of the Action Plan

April 1, 2016, to March 31, 2021

Basic Policies of Initiative

Issues to be addressed

Operational improvement

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

A fourfold or more increase (32 or more people) in the numberof women in managerial positions to the end of fiscal 2020.

Make a request

Correcting long working hours

Promoting employment of persons with disabilities

Action Target

Superiors

Facilitatecommunication

Held for the first time, the event was organized for the
purpose of helping the families of Kandenko employees
deepen their understanding of the Company’s business as well
as fostering communication among the employees and theirfamilies.
A total of 88 employees and their families gathered at its
Head Office, and the Company’s one-day employee pass wasgiven to each child. At the event, they participated in various
kinds of programs, including riding an aerial work platformtruck, exchanging business cards in the workplace, andattending a lecture on the South Pole given by an ex-Antarctic
expedition veteran.

Improvement in Workplace Culture and Awareness
Create a workplace culture and awareness thatappropriately values and rewards people who work hardregardless of gender.
 xpansion of Assigned Duties and Development ofE
Professional Abilities
Roll out initiatives to expand the range of duties assigned
to female employees, for instance by promoting theadvancement of women at engineering worksites, andcreate an environment in which employees can take theinitiative in developing their professional skills.
Enhanced Support for Work-Life Balance
Achieve a workplace environment that supports both male andfemale employees who continue working while raising children.
Examples of Initiatives

Held “Kandenko SunSun School”
In August 2019, the Company hosted “Kandenko SunSun
School”—a Bring Your Family to Work event.

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.

Held 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 regardingchildrearing and casual communication to parenting employees.
We support them in balancing work and child-rearing througheasing their anxiety about returning to work and sharing problems.
Compilation 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.

Corporate Report 202034

Corporate Report 2020

| CSR Report – Coexistence with Society |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
Kandenko 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.

March
2011

The Great
East Japan
Earthquake

May
2012

Damage bytornado in
Northern
Kanto
Damage by

September tornado in
Saitama &
2013
Chiba

Damage by

February
heavy snow in
2014
Gunma

Damage by

September heavy rain in
Kanto &
2015
TohokuApril
2016

Damage by
Kumamoto
Earthquake(Indoor electricalengineering)

35

KANDENKO

Social contribution activities
The Mount Fuji Reforestation Project
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.

The 97th Championship, the 98th Championship, the 99th
Championship

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

“The MICHINOKU Future Fund”
August2016

Damage by
Typhoon No.9

September- Damage by
October typhoons Faxai
and Hagibis
2019

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 infrastructure. As a result, asmany 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.

Sponsored events

Activities in the past
Participants

Activities

May 2018363
persons

Installing nets to prevent feeding damage
from deer, planting trees

May 2019

252
persons

Repairing nets to prevent damage fromfeeding deer, forest thinning

Sponsorship of the “All-Japan High School
Rugby Football Championship”
Kandenko aims for social contribution through sports
promotion and serves as an Official Partner in sponsoring
the “All-Japan High School Rugby FootballChampionship” organized by associations such as the All
Japan High School Athletic Federation and the Japan
Rugby Football Union.
Through sponsoring this championship, held atHanazono Rugby Stadium, the representative symbol ofhigh school rugby, we support the development of Japan
rugby and the futures of the high school students whowill carry the rugby world forward.

Courtesy of Japan Ground Self-Defense Force

Charitable Foundation, The
MICHINOKU Future Fund provides
full funding for enrollment fees andtuition fees of children who losttheir parents in the Great East
Japan Earthquake to continue their education after
graduating high school (university, junior college, andtechnical school), with no repayment required. This fundwas established by three private companies in 2011 andhas been operated by four companies since April 2013.
Kandenko has participated in the fund since fiscal
2016 and made regular donations. We believe that
supporting children in holding on to their dreams andgoals without giving up on their education will help to
support the process of recovery.

“KIDS EARTH FUND”
Since its establishment in 1988,
KIDS EARTH FUND has
sponsored and carried out the
distribution of art supplies,
picture books, and donations
for children throughout theworld who suffer from theresults of disease, war, anddisasters.
The fund conducts “Kids
Helping Kids” activities anduses proceeds to support
children afflicted by poverty
who are unable to afford
schooling.
Kandenko supports these“Kids Helping Kids” activities
by publishing pictures drawn
by children in its corporate
calendar.
Corporate Report 202036

Corporate Report 2020

| Corporate Governance |Corporate Governance System

Corporate Governance
As Kandenko’s operating environment changes dramatically, we are working to make management more efficientand transparent while ensuring the fairness of business execution. We realize that Kandenko’s continued existence as

Gener al Meet ing of Shar eholder s

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.
Appointment, dismissal

Basic Corporate Governance Policy

ReportAppointment,
dismissal

ReportIn keeping with the content and the spirit of the Corporate Governance Code established by the Tokyo Stock
Exchange, Kandenko implements a basic corporate governance policy that sets out its basic approach with the aim ofReportDecision-making, monitoring and oversightenhancing the practical effectiveness of corporate 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 the37

KANDENKO

Auditing Office to enable the complete and effective
fulfillment of their duties.

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 theaccount audit.

Supervisionandoversight

Decision-making,monitoring and oversight,
business execution

President /Director
responsible forbusiness

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 from

Appointment,
dismissal

ReportReportAudit,
reportManagement
Committee

Internal Control
Committee
Safety, Environment &Quality Committee

Internal Audit
For internal auditing, 12 staff of the Internal Audit
Division carries out the audit in accordance with theInternal Control Enhancement Plan. The audit results arereported to the Internal Control Committee and theManagement Committee, and as appropriate to theBoard of Directors, to enable any required remedialaction 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 whenevernecessary so that cooperation is ensured. While the
Audit & Supervisory Board Members (including outside
members), independent accounting auditors, and theInternal Audit Division carry out their audits, they receive
regular reports on the state of maintenance andoperation of internal control from each division
responsible for business execution.

Audit

Audit by Audit & Supervisory Board Members

Audit & Supervisory Board Members(Audit & Supervisory Board)

Auditing
OfficeReportAudit

Accountant audit

Independent
Accounting
AuditorBusiness execution

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

Internal Control
Division(Compliance consultations)

Employees

Affiliated companies

Corporate Report 202038

Corporate Report 2020

| Corporate Governance |an 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
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.
Compensation Advisory Committee
The Company established an arbitrary advisory committee
in January 2019 to secure transparency in the process ofdetermining directors’ compensation.
The outline of the committee is as follows.
Compensation Advisory Committee
Name:
Composition:	Chairman (Chair of the Committee),President, independent outside directors,
Chair of the Audit & Supervisory Board,and independent outside Audit &Supervisory Board Members
Matters for deliberation and discussion: Matters related
to the compensation of directors and Audit& Supervisory Board Members, and other
39

KANDENKO

matters related to corporate governanceand compliance
Effectiveness evaluation
To secure the effectiveness of the Board of Directors, theCompany carries out self-evaluation 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
and assessed by the Board of Directors. In the selfevaluation implemented in April 2020, opinions wereraised on discussions by the Board of Directors, thecomposition of the Board of Directors, and business
management under the COVID-19 crisis, but the overall
effectiveness of the Board of Directors in fiscal 2019 was
judged to have 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 theInternal Control Committee, which form the basis foreducation, training, and related activities to ensurecompliance and promote full awareness throughout theorganization.

Risk Management System
The Kandenko Group operates a set of internal regulations
on risk management. Having categorized and defined risks
relating to business operations item by item, Kandenko
devises countermeasures to match 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, 2020.
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
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
the Construction Business Act, the Antimonopoly Act,and the Industrial Safety and Health Act. Should there
be any changes, such as the revision or repeal of legal
regulations, or the enactment of new legal regulations,or if changes are made to criteria for their application oradministrative sanctions are handed down based on thelegal regulations, it is possible that the actual financial
performance or other results of the Company could be
affected.
Spread of COVID-19
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 theInternal Control Enhancement Plan. The audit results arereported to the Internal Control Committee and theManagement Committee, and as appropriate to theBoard of Directors, to enable any remedial action to betaken.

Corporate Report 202040

Corporate Report 2020

| Management Structure | (As of July 1, 2020)
Directors
Chairman and Director

Vice Chairman and Director

Senior Managing Director and Executive Officer

Managing Director and Executive Officer

Kiyoshi Goto*

Yoshimi Morito*

Shinichi Miyauchi

Yuji Ueda

Tenure as Director:
9 years

Tenure as Director:
6 years

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

Administrative delegation,
jurisdiction, and responsibility
Deputy Executive General Manager ofSales Division in charge of Strategy &Technology Development Division, Group
Business, and International Business
Division

Tenure as Director:
1 yearKiyoshi Goto was elected as a Director as he has experience and expertise,etc. gained through serving in positions that include Chairman and Directorof the Company which will contribute to management of the Company.
Significant Concurrent Positions outside the Company:
President of Japan Electrical Construction Association

Yoshimi Morito was elected as a Director as he has experience andexpertise, etc. gained through serving in positions that include President
and Executive Officer which will contribute to management of theCompany.

Shinichi Miyauchi was elected as a Director as he has knowledge in theoperation of the area of administration as well as his experience andexpertise, etc. gained through serving in positions that include Division
Manager of Cost Management Division, and Managing Director andExecutive Officer.

Tenure as Director:
2 years
Yuji Ueda was elected as a Director as he has experience and 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.

President and Executive Officer

Executive Vice PresidentManaging Director and Executive Officer

Managing Director and Executive Officer

Toshio Nakama*

Shigenori Takaoka*

Koji Tsuru

Nobuhiro Iida

Tenure as Director:
5 years

Jurisdiction and responsibility
In charge of Overall Operations, Social
Infrastructure Division and Fukushima
Division

Administrative delegation
Division Manager of Tokyo Sales Division
and Branch Manager of Tokyo Branch

Administrative delegation
Division Manager of Sales Division

Tenure as Director:
5 years

Toshio Nakama was elected as a Director as he has knowledge in theoperation of the area of electrical engineering, environmental facilities andsystems, and renovation as well as his experience and expertise, etc. gained
through serving in positions that include Executive Vice President andExecutive Officer which will contribute to management of the Company.

Shigenori Takaoka was elected as a Director as he has knowledge in theoperation of the area of power distribution as well as his experience andexpertise, etc. gained through serving in positions that include Executive
Vice President of the Company which will contribute to management of
the Company.

Tenure as Director:—

Koji Tsuru was elected as a Director as he has knowledge of operations in
the areas of electric engineering, environmental facilities and systems aswell as experience and expertise, etc. gained through his service in posts
that include Division Manager of Higashikanto Sales Division and BranchManager of Chiba Branch which will contribute to management of theCompany.

Executive Vice President and Executive Officer

Executive Vice President and Executive Officer

Managing Director and Executive Officer

Shoichiro Kashiwabara*

Shinichiro Kitayama

Hitoshi Sugizaki

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

Administrative delegation
Division Manager of Social Infrastructure
Division

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

Tenure as Director:
6 years

Tenure as Director:—

Tenure as Director:—

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 and expertise, etc. gained through his service in posts
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:
5 years

Shoichiro Kashiwabara was elected as a Director as he has knowledge inthe operation of the area of administration as well as his experience andexpertise, etc. gained through serving in positions that include Executive
Vice President and Executive Officer which will contribute to managementof the Company.

Shinichiro Kitayama was elected as a Director as he has knowledge in theoperation of the area of electric power & civil engineering as well as his
experience and expertise, etc. gained through serving in positions that
include Executive Vice President and Executive Officer which will contributeto 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 and expertise,etc. gained through his service in positions that include the head ofaccounting and the IT unit in the Corporate Division which will contributeto management of the Company.

* denotes Representative Directors

41

KANDENKO

Corporate Report 202042

Corporate Report 2020

| Management Structure | (As of July 1, 2020)
Outside Directors

Outside Audit & Supervisory Board Members
Outside Director

Outside Director

Outside Audit & Supervisory Board Member

Outside Audit & Supervisory Board Member

Takashi Uchino

Masataka Ishizuka

Sumihito Okawa

Takashi Suetsuna

Tenure as Director:
7 years

Tenure as Director:
5 years

Tenure as Outside Audit &Supervisory Board Member:
12 yearsTenure as Outside Audit &Supervisory Board Member:
4 years

Takashi Uchino was elected as a Director as he has experience andexpertise, 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:
Professor emeritus at Gakushuin University

Masataka Ishizuka was elected as a Director as he has experience andexpertise, etc. gained through serving as Director of Central Japan Railway
Company and JR TOKAI AGENCY CO., LTD. which will contribute to
management of the Company.
Significant Concurrent Positions outside the Company:
Curator of GRANSHIP convention center, Shizuoka Cultural Foundation

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

Hajime Saito

Outside Audit & Supervisory Board Member

Shoichi Muto

Tenure as Director:
1 yearTakashi 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:
1 yearHajime Saito was elected as a Director as he has experience and expertise,etc. gained through serving in positions that include Director of Mizuho
Financial Group, Inc. and Mizuho Securities Co., Ltd., etc. which willcontribute to the 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.

Full-time Audit & Supervisory Board Members

43

Full-time Audit & Supervisory Board Member

Full-time Audit & Supervisory Board Member

Toru Yukimura

Hidekazu Tanaka

Tenure as Audit & Supervisory Board Member:—

Tenure as Audit & Supervisory Board Member:—

Toru 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

Corporate Report 202044

Corporate Report 2020

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

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

453,623

462,482441,786

447,741

437,930

436,682447,673

470,943507,205

563,550

616,143

9,477

10,735

8,034

7,364

8,284

9,388

16,416

26,39729,26130,012

34,693

2.1

2.3

1.8

1.6

1.9

2.1

3.7

5.6

5.8

5.3

5.6

Ordinary profit

10,484

11,634

9,070

8,301

9,089

10,336

17,077

27,34530,03130,79535,565

Profit attributable to owners of parent

5,428

5,866

1,876

3,952

4,226

4,615

9,412

17,591

19,05819,70322,515

−

1,772

4,381

8,238

7,327

11,984

7,137

18,422

22,927

20,31915,685

Total assets

378,150

353,342359,726

364,008359,933

366,177

407,681424,874

443,751459,854488,701

Total net assets

177,536

176,808

178,757

184,269

189,692

193,345

197,980

213,356

230,810

245,954

255,821

ROE (%)

3.2

3.9

1.1

2.2

2.3

2.5

4.9

8.8

8.8

8.5

9.3

ROA (%)

2.8

3.2

2.5

2.3

2.5

2.8

4.4

6.6

6.9

6.8

7.5

Equity ratio (%)

45.96

48.93

48.54

49.49

51.45

51.44

47.22

48.72

50.51

51.85

50.62

Net assets per share (yen)850.04845.67854.31

881.41906.29922.05942.42

1,013.33

1,097.36

1,167.30

1,211.13

Earnings per share (yen)

26.54

28.69

9.18

19.34

20.69

22.59

46.07

86.11

93.31

96.46

110.23

Cash dividends per share (yen)

14.00

12.00

12.00

12.00

12.00

14.00

14.00

20.00

24.00

26.00

28.00

Net cash provided by (used in) operating activities

12,236

10,257

13,035

15,401

r2,2182,921

18,042

6,751

11,46928,251

29,155

Net cash provided by (used in) investing activities

r9,763

r3,7991,583

r12,748

r5,8392,253

r7,101

r17,867

r10,015

r10,131

r13,481

Net cash used in financing activities

r4,400r4,037

r5,423

r2,900

r4,540r3,74319,807r169

r7,857

r9,153

r7,151

Cash and cash equivalents at end of period

39,142

41,53950,72550,55038,69740,15770,89959,61254,09963,06871,579Number of employees (persons)

8,665

8,769

8,746

8,732

8,821

8,839

8,915

9,244

9,571

9,818

10, 003

For the fiscal years ended March 31

Net sales
Operating profit
Operating profit ratio (%)

Comprehensive income

45

KANDENKO

Corporate Report 202046

Corporate Report 2020

| Consolidated Financial Statements |CONSOLIDATED BALANCE SHEETKANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESMARCH 31, 2019 AND 2020
(Millions of Yen)

(Thousands of U.S. Dollars)

2020

2019

(Millions of Yen)

2020

Assets

2019

2020

2020

¥98,783¥101,558$Liabilities
Current liabilities

Current assets
Cash and deposits*3¥62,586*3¥71,502*3$655,981

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

184,424*3

197,793*3

1,814,614

Costs on construction contracts in progress

12,00911,999Securities

9,986

*5

*5

11,406110,174*5

104,642

Raw materials and supplies

4,787

5,451

50,009Other

11,98014,880136,513

Notes payable, accounts payable for construction
contracts and other
Short-term borrowings*3

Current portion of convertible bond-type bonds withshare acquisition rights

Allowance for doubtful accounts
Total current assets

(494)

(610)

(5,596)285,269

312,433

2,866,357

Non-current assets*3

Machinery, vehicles, tools, furniture and fixtures

*3

Land

92,813*3

59,651*3

59,983*2, *3*2, *3

98,409*3

60,894*3

60,051*2, *3902,834

525

573

5,256

Income taxes payable

4,249

8,562

78,550

Advances received on construction contracts in progress

15,03615,031

137,899

Lease obligations

Provision for loss on construction contracts

24,86235,104

322,055

Total current liabilities

152,994

192,907

1,769,788

20,040––Non-current liabilities*3*2

39,973366,724

213,900

232,880

2,136,513

Share capital

10,264

10,264

94,165

Capital surplus

6,352

6,352

58,275Retained earnings

211,314228,341

2,094,871

(586)

(587)

(5,385)

227,343244,370

2,241,926

15,5309,513

87,275

(334)

(305)

(2,798)

Total property, plant and equipment

107,665

112,119

1,028,614

5,662

5,901

54,137

Total liabilities
Net assets
Shareholders’ equity

Treasury shares

Investments and other assets

Total shareholders’ equity

6,467
(705)

Allowance for doubtful accounts

61,257

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

¥

*3

6,915
(663)
58,246364,743
112,256*3

60,41260,906(1,025,477)

*3

6,585

11,110*2

Total non-current liabilities(111,777)

Other

1,211
*2

72,302

15,174(109,940)

12,236*3

550,926

Accumulated depreciation

8,053

6,686

7,881

207,706

14,477

Deferred tax assets

*3

981

Lease obligations
Deferred tax liabilities for land revaluation

8,503

1,654

1,578

*1, *346,064

Other

22,6402,331

39,757

5,021

1,862
*5

1,792

Construction in progress*1, *32,372*522,902

27,18347,442

203

211
*5

Other

2,963

*1, *362,669Retirement benefit liability

2,825

Investment securities*3

558,660

Leased assets

Intangible assets

6,831

183,660

Long-term borrowings

Buildings and structures*3

20,019Convertible bond-type bonds with share acquisition rights

Property, plant and equipment

6,953

931,724–

Provision for warranties for completed construction

47(Thousands of U.S. Dollars)

63,440(6,082)534,366

174,585

176,267

1,617,128

459,854¥488,701$ 4,483,495

Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Revaluation reserve for landRemeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets*2(4,990)883*2(5,221)(973)*2(47,899)(8,926)

11,088

3,012

27,633

7,521

8,438

77,412245,954

255,821

2,346,981¥459,854¥488,701$4,483,495

The accompanying notes are an integral part of financial statements.
Corporate Report 2020

48

Corporate Report 2020

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

KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2019 AND 2020

KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2019 AND 2020
(Millions of Yen)

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

*1

2019

2020

2020

¥563,550¥616,143$5,652,688

507,874*1*2

25,663555,215

5,093,715*1

60,92855,675Gross profit (loss) on completed construction contracts
Selling, general and administrative expenses(Thousands of U.S. Dollars)*2

26,234558,972
240,678*2

30,012

34,693

318,284

Interest income

17

17

155

Dividend income

878

929

8,522

Other

339

338

3,100

1,235

1,285

11,788Operating profit (loss)(Millions of Yen)

2019

2020

2020

¥20,636¥23,584$216,366

Valuation difference on available-for-sale securities

244(6,083)(55,807)

Deferred gains or losses on hedges

137

29

266

Remeasurements of defined benefit plans, net of tax(698)(1,845)(16,926)

Profit (loss)
Other comprehensive income

Non-operating income

Total non-operating income
Non-operating expenses
Interest expenses

224

198

1,816

Foreign exchange losses

18

50

458

Other

209

164

1,504

Total non-operating expenses

452

413

3,788

30,79535,565326,284

Ordinary profit (loss)(Thousands of U.S. Dollars)

Total other comprehensive income
Comprehensive income

*1

(317)

*1

(7,899)*1(72,467)¥20,319¥15,685$143,899

19,394

14,670134,587¥924¥1,015$9,311Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable tonon-controlling interests
The accompanying notes are an integral part of financial statements.

Extraordinary income
Gain on sales of non-current assets

*4

74

*4

222

2,036

*4

Gain on sales of investment securities

22

–

–

Total extraordinary income

96

222

2,036

–

496

4,550

Loss on retirement of non-current assets

820

387

3,550

Loss on valuation of investment securities

–

293

2,688

Other

165

119

1,091

Total extraordinary losses

986

1,296

11,889Profit (loss) before income taxes

29,90434,490316,422

Income taxes - current

7,395

11,709107,422

Income taxes - deferred

1,872

(802)

(7,357)

Total income taxes

9,268

10,906

100,055

Profit (loss)

20,636

23,584

216,366

932

1,068

9,798

¥19,703¥22,515

Extraordinary losses
Loss on disaster

Profit (loss) attributable to non-controlling interests
Profit (loss) attributable to owners of parent$

206,559

The accompanying notes are an integral part of financial statements.

49

KANDENKO

Corporate Report 202050

Corporate Report 2020

| Consolidated Financial Statements |CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEAR ENDED MARCH 31, 2019YEAR ENDED MARCH 31, 2020
(Millions of Yen)

(Millions of Yen)

Shareholders’ equity

Balance at beginning of period

Capital stock

Capital surplus¥¥

10,264

6,351

Shareholders’ equity

Retainedearnings¥ 196,568

Treasuryshares¥

Total shareholders’equity(585) ¥ 212,599

Balance at beginning of period

Changes during period

Capital stock

Capital surplus¥¥

10,264¥ 211,314

Treasuryshares¥

Total shareholders’equity(586) ¥ 227,343

Changes during period

Purchase of shares of
consolidated subsidiaries(0)

Purchase of shares of
consolidated subsidiaries

(0)

–

–

Dividends of surplus(5,106)(5,106)

Dividends of surplus(5,719)(5,719)Profit (loss) attributable toowners of parent

19,703

19,703

Profit (loss) attributable toowners of parent

22,51522,515

Reversal of revaluation
reserve for land

148

148

Reversal of revaluation
reserve for land

230

230

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

–
¥

10,264¥

0

14,7456,352¥ 211,314(0)¥

14,744–

Total changes during period(586) ¥ 227,343

Balance at end of period¥

10,264¥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)

17,026

Net changes in items otherthan shareholders’ equity

Total changes during period¥15,286¥

Revaluation
reserve for land(471) ¥

(4,842) ¥

plans

17,0276,352¥ 228,341

Valuation difference Deferred gains
on available-for-sale or losses on
securities
hedgesincome

1,573

0

¥

(587) ¥ 244,370

Accumulated other comprehensive income

Remeasurements Total accumulated Non-controlling Total net assetsinterestsof defined benefit other comprehensive¥11,546¥

6,665¥ 230,810

Changes during period

Balance at beginning of period¥

15,530¥Remeasurements Total accumulated Non-controlling Total net assets
Revaluationinterestsof defined benefit other comprehensive
reserve for landplansincome(334) ¥(4,990) ¥

883

¥

11,088¥

7,521¥ 245,954

Changes during period

Purchase of shares of
consolidated subsidiaries(0)

Purchase of shares of
consolidated subsidiaries–

Dividends of surplus(5,106)

Dividends of surplus(5,719)Profit (loss) attributable toowners of parent

19,703

Profit (loss) attributable toowners of parent

22,515

Reversal of revaluation
reserve for land

148

Reversal of revaluation
reserve for land

230

Purchase of treasury shares(0)

Purchase of treasury shares(0)

Disposal of treasury shares

0

Disposal of treasury shares

0399

Net changes in items otherthan shareholders’ equity

856

15,143

Total changes during period

7,521¥ 245,954

Net changes in items otherthan shareholders’ equity

243

¥

15,530

The accompanying notes are an integral part of financial statements.

KANDENKO

137

243

Total changes during period
Balance at end of period

51

6,352

Retainedearnings

137¥(334) ¥

(148)

(689)

(148)

(689)

(4,990) ¥

883

(457)

856

(457)
¥

11,088¥Balance at end of period(6,017)29(6,017)
¥

9,513

¥

(230)

(1,857)(8,076)29(230)(1,857)(8,076)(305) ¥(5,221) ¥(973) ¥

3,012

916

¥

(7,159)

916

9,867

8,438

¥ 255,821

The accompanying notes are an integral part of financial statements.

Corporate Report 202052

Corporate Report 2020

| Consolidated Financial Statements |CONSOLIDATED STATEMENT OF CASH FLOWSKANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2019 AND 2020

YEAR ENDED MARCH 31, 2020
(Thousands of U.S. Dollars)(Millions of Yen)

Shareholders’ equity

Balance at beginning of period

Capital stock

Capital surplus$$

94,16558,275Retainedearnings$ 1,938,660

Total shareholders’
Treasury shares
equity$(5,376) $ 2,085,715

Changes during period
Purchase of shares of
consolidated subsidiaries––

Dividends of surplus(52,467)(52,467)

Profit (loss) attributable toowners of parent

206,559

206,559

Reversal of revaluation
reserve for land

2,110

2,110

Purchase of treasury shares

0

Disposal of treasury shares

(0)

(0)

0

0

(0)

156,201

Net changes in items otherthan shareholders’ equity–

Total changes during period
Balance at end of period$94,165$

0

156,21158,275$ 2,094,871$(5,385) $ 2,241,926

Accumulated other comprehensive income
Valuation difference Deferred gains
on available-for-sale or losses on
securities
hedgesBalance at beginning of period$ 142,477$

Remeasurements Total accumulated Non-controlling Total net assets
Revaluationinterestsof defined benefit other comprehensive
reserve for landplansincome(3,064) $ (45,779) $

8,100$ 101,724$69,000$ 2,256,458

Changes during period
Purchase of shares of
consolidated subsidiaries–

Dividends of surplus(52,467)

Profit (loss) attributable toowners of parent

206,559

Reversal of revaluation
reserve for land

2,110

Purchase of treasury shares(0)

Disposal of treasury shares0

Net changes in items otherthan shareholders’ equity(55,201)(55,201)

Total changes during period
Balance at end of period$87,275The accompanying notes are an integral part of financial statements.

$

266

(2,110)(17,036)(74,091)266(2,110)(17,036)(74,091)(8,926) $

27,633(2,798) $ (47,899) $

8,403

$

(65,678)

8,403

90,522

77,412$ 2,346,981

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 valuation of investment securities
Loss (gain) on sales of investment securities
Loss on disaster
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 (paid) refund
Net cash provided by (used in) operating activities
Cash flows from investing activities
Net decrease (increase) in time deposits
Purchase of securities
Proceeds from sales and redemption of securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of investment securities
Proceeds from sales and redemption of investment securities
Loan advances
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
Proceeds from long-term borrowings
Repayments of long-term borrowings
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)

2019

2020

2020

¥29,904
6,188
(240)

¥34,490
6,457
72$316,422
59,238
660

(842)

2,649

24,302(2,438)
(895)
224
–
(22)
–
(21,289)(2,397)
(946)
198
293
–
496
(13,331)(21,990)(8,678)
1,816
2,688
–
4,550
(122,302)

14,054(1,420)(13,027)

335
9,079

(664)
2,776

(6,091)
25,467(2,473)

(5)

(45)

3,782
35,367895(244)(7,767)28,251

7,300
35,970946(218)(7,543)29,15566,972330,000
8,678(2,000)(69,201)
267,47770(4,000)5,000(8,660)
636
(827)
79
(860)
386
(1,956)(10,131)595(5,000)4,000(10,570)641(1,394)
22
(203)
307
(1,880)(13,481)5,458(45,871)
36,697(96,972)
5,880(12,788)
201(1,862)
2,816(17,247)(123,678)(2,325)651(1,740)(563)(5,106)(69)(9,153)
2
8,969
54,099¥63,068

45
–
(788)
(590)
(5,719)(98)(7,151)(11)
8,511
63,068¥71,579

412–(7,229)(5,412)(52,467)(899)(65,605)(100)
78,082578,605$656,688*1*1

The accompanying notes are an integral part of financial statements.

53

KANDENKO

Corporate Report 2020

54

Notes to Consolidated Financial Statements
KANDENKO CO., LTD. AND CONSOLIDATED SUBSIDIARIESYEARS ENDED MARCH 31, 2019 AND 2020

BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
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, 2020
have been translated from yen amounts into U.S. dollar amounts at
the rate of ¥109 =U.S. $1.00, the exchange rate prevailing on March
31, 2020.
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(2) Name of major non-consolidated subsidiary:(1) Number of consolidated subsidiaries: 31

THAI KANDENKO CO., LTD.

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.
Transmission Line Construction Co., Ltd.
Sato Kensetsu Kogyo Co., Ltd.
SYSTEC ENGINEERING 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.

55

KANDENKO(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.

4.Significant accounting policies(1) Evaluation methods for significant assets(a) Securities
i. Held-to-maturity securities
		 Amortized cost method (straight-line method)

ii. Available-for-sale securities
		 Securities with market quotations:		 Stated at market value at the end of the year (Unrealized gains
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.).

(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		 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.

(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.

Corporate Report 202056

(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.

(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
from Contracts with Customers” in May 2014 (IFRS No. 15 in IASB,
Topic 606 in FASB). Given that IFRS No. 15 will be applied from fiscal
years starting on or after January 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. carriedout 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.

(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 Standard for
Revenue Recognition,” etc. on the consolidated financial statements
are currently under assessment.

57

KANDENKO

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

(9) Other significant accounting policies for the preparationof consolidated financial statements(3) Effects of the application of this accounting standard, etc.

Accounting method for consumption taxes:
Consumption and local consumption taxes are accounted for by the
tax-exclusion method.

The effects of the application of the “Accounting Standards for Fair
Value Measurement,” etc. on the consolidated financial statements
are currently unknown.

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 31, 2020, 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· “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(International Financial Reporting Standards (IFRS): “Fair Value
Measurement” (IFRS No. 13), US Accounting Standards: AccountingStandards 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 Japanesestandards and the international accounting standards, mainly withregard to guidance and disclosure about fair value of financial
instruments, and then published the “Accounting Standards 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.

The development was performed with reference to the provisions ofparagraph 125 of IAS No. 1.

(2) Scheduled date of application· “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ
Statement No. 31, March 31, 2020, Accounting Standards Board ofJapan)(1) Outline
Regarding “main reasons for estimation uncertainty” that is required
to be disclosed pursuant to paragraph 125 of “Presentation of
Financial Statements” of the International Accounting Standards (IAS)
No. 1 (hereinafter, “IAS No. 1”), which was published in 2003 by theInternational Accounting Standards Board (IASB), there were anumber of requests for disclosing the said information in the form ofnotes under the Japanese Standards as it is considered highly useful
information for users of financial statements. In response to thoserequests, the Accounting Standards Board of Japan (ASBJ) developed
and published the accounting standard for disclosure of accounting
estimates (hereinafter, the “Accounting Standard”).
As a basic policy for the development of the AccountingStandard, the ASBJ did not enhance individual notes, but presented
principles (purpose of disclosure), while leaving each entity to decide
specific disclosure contents according to the purpose of disclosure.

The accounting standard will be applied from the end of the year
ending March 31, 2021.
· “Accounting Standard for Accounting Policy Disclosures, Accounting
Changes and Error Corrections” (ASBJ Statement No. 24, March 31,
2020, Accounting Standards Board of Japan)(1) Outline
In response to the proposal for considering the enhancement of theinformation in the notes relating to the “accounting principles andprocedures adopted if the provisions of relevant accounting standards,
etc. are not apparent,” the ASBJ made necessary revisions and thenpublished them as an accounting standard for accounting policy
disclosures, accounting changes and error corrections.
With respect to the enhancement of the information in the notes
relating to the “accounting principles and procedures adopted if theprovisions of relevant accounting standards, etc. are not apparent,”
the provisions of the annotations of the Accounting Principles (Note1-2) shall be succeeded so that it would not have the effect on actual
practice, etc, if the provisions of the relevant accounting standards,
etc. are apparent.

(2) Scheduled date of application
The accounting standard will be applied from the end of the year
ending March 31, 2021.

CHANGES IN PRESENTATIONNOTES TO CONSOLIDATED STATEMENT OF INCOME
Because the amount of “foreign exchange losses,” which was
included in “other” in “non-operating expenses” in the year ended
March 31, 2019, is greater than 10% of the total amount of nonoperating expenses, this item is presented as a separate item fromthe year ended March 31, 2020. The consolidated financial
statements for the year ended March 31, 2019 have been reclassified
to reflect this change in presentation.
As a result, ¥227 million, which was presented in “other” in“non-operating expenses” in the consolidated statement of income
for the year ended March 31, 2019, has been reclassified to ¥18
million of “foreign exchange losses” and ¥209 million of “other.”

Because the amount of “impairment loss” in “extraordinary losses,”
which was presented as a separate item in the year ended March 31,
2019, is 10% or less of the total amount of extraordinary losses, thisitem is included in “other” in “extraordinary losses” from the year
ended March 31, 2020. The consolidated financial statements for theyear ended March 31, 2019 have been reclassified to reflect thischange in presentation.
As a result, ¥165 million, which was presented as “impairment
loss” in “extraordinary losses” in the consolidated statement ofincome for the year ended March 31, 2019, has been reclassified to“other.”Corporate Report 202058

NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS
The amount of “impairment loss” in “cash flows from operating
activities,” which was presented as a separate item in the year ended
March 31, 2019, is included in “other” from the year ended March
31, 2020 due to lower materiality. The consolidated financial
statements for the year ended March 31, 2019 have been reclassified
to reflect this change in presentation.

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

As a result, ¥165 million of “impairment loss” and ¥3,616 millionof “other,” which were presented in “cash flows from operating
activities” in the consolidated statement of cash flows for the year
ended March 31, 2019, has been reclassified to ¥3,782 million of“other.”

2019

2020

2020

¥0

¥0

$0

Land

26

26

238

Investment securities

32

32

293

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

129

128

1,174

¥188

¥187

$1,715

Buildings and structures

Total

NOTES TO CONSOLIDATED BALANCE SHEET

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

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

Millions of Yen

Millions of Yen
Investment securities (Stocks)

Thousands of U.S. Dollars

Thousands of U.S. Dollars

2019

2020

2020

¥1,675¥1,974$18,110

82

25

229

Investment securities (Investments in capital)

Employees (housing loans)*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

Thousands of U.S. Dollars

2019

2020

2020

¥1,013¥858$7,871*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

2019

2020

2020

¥43

¥229

$2,100

NOTES TO CONSOLIDATED STATEMENT OF INCOME*1. Provision for loss on construction contracts included in cost of sales of completed construction contracts
Millions of Yen*3. Assets pledged as collateral and secured obligations(1) Assets pledged as collateral which the Company’s subsidiaries provide and secured obligations
Millions of Yen

Notes receivable, accounts receivable from completed
construction contracts and other
Buildings and structures
Machinery, vehicles, tools, furniture and fixtures
Land
Investments and other assets – Other (lease deposits)
Total

2020

2020

2020

2020

¥5,571$51,110*2. Principal accounts and amounts in selling, general and administrative expenses are as follows.

¥1,471¥[–]¥1,627¥[–]$14,926

$[–]

94

[–]

77

[–]

706

[–]

1,351

[444]

1,257

[412]

11,532[3,779]

Employees’ salaries and allowances
Retirement benefit expenses

8,243[4,693]

7,706[4,344]70,697[39,853]

744

[–]

747

[–]

6,853

[–]

7

[–]

7

[–]

64

[–]

¥11,911¥[5,137]¥11,423¥[4,756]$104,798$[43,633]

Short-term borrowings¥588¥[314]¥621¥[325]$5,697$[2,981]

Long-term borrowings

8,503[4,598]

7,881[4,273]72,302[39,201]¥9,092¥[4,912]¥8,503¥[4,598]$78,009$[42,183]

Total

2019
¥1,118
Thousands of U.S. Dollars

2019
Cash and deposits

Millions of Yen

2020¥11,958¥12,280$112,660

553

592

5,431

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

Thousands of U.S. Dollars

2019

2020

2020

¥1,381¥1,428$13,100*4. Breakdown of gain on sales of non-current assets
Millions of Yen
Land

KANDENKO

Thousands of U.S. Dollars
2020

2019

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

59

Thousands of U.S. Dollars

Thousands of U.S. Dollars

2019

2020

2020

¥74

¥222

$2,036

Corporate Report 2020

60

NOTES TO CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME(2) Dividends whose record date fell in the year ended March 31, 2019, but whose effective date comes after March 31, 2019

*1. Reclassification adjustments and tax effects relating to other comprehensive income
Millions of Yen

Thousands of U.S. Dollars

2019

2020

2020

¥382

¥(8,800)$(80,733)

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

Class of shares

Total dividends

Source ofdividend funds

Dividends per share

Record date

Effective dateOrdinary general
meeting ofshareholders on June27, 2019

Common shares¥2,655 million

Retained earnings¥13.0

March 31, 2019

June 28, 2019

For the year ended March 31, 2020
1. Matters related to class and number of issued shares and class and number of treasury shares

Reclassification adjustments

(16)

35

321

Amount before income tax effect366(8,765)(80,412)

Income tax effect

(121)

2,681

24,596

Valuation difference on available-for-sale securities

244(6,083)(55,807)

Gains (losses) arising during the year

10

40

366

Income tax effect

126

(11)

(100)

Total

Deferred gains or losses on hedges

137

29

266

Treasury shares:

Gains (losses) arising during the year(153)

(2,135)(19,587)

Reclassification adjustments

(853)

(523)

(4,798)Deferred gains or losses on hedges(1,006)(2,658)(24,385)

Income tax effect

308

813

7,458

Remeasurements of defined benefit plans, net of tax(698)(1,845)(16,926)¥(317)¥(7,899)$(72,467)

Total other comprehensive income

NOTES TO CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended March 31, 2019
1. Matters related to class and number of issued shares and class and number of treasury shares(Shares)
As of April 1, 2018

Increase

Decrease

Decrease

Increase

As of March 31, 2020

Total

205,288,338––

205,288,338

205,288,338––

205,288,338

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 repurchase requests.

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

Class of shares

Total dividends

Dividends per share

Record date

Effective dateOrdinary general
meeting ofshareholders on June27, 2019

Common shares¥ 2,655 million$24,357 thousand

¥13.0
$0.11

March 31, 2019

June 28, 2019

Board of directors’
meeting on October
31, 2019

Common shares¥ 3,063 million$28,100 thousand

¥15.0
$0.13

September 30,
2019

December 5, 2019

As of March 31, 2019(2) Dividends whose record date fell in the year ended March 31, 2020, but whose effective date comes after March 31, 2020

Shares issued:
Common shares
Total

205,288,338––

205,288,338

205,288,338––

205,288,338

Treasury shares:
Common shares
Total

1,028,555

851

81

1,029,325

1,028,555

851

81

1,029,325

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

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$24,357 thousand

Retained earnings

¥13.0
$0.11

March 31, 2020

June 29, 2020

NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS

2. Matter related to dividends(1) Dividends paid

*1. Relationship between the balance of cash and cash equivalents at the end of the year and the amount on the consolidated balance sheet
Class of shares

Ordinary general
meeting ofshareholders on June27, 2018

Common shares

Board of directors’
meeting on October
31, 2018

Common shares

KANDENKO

Common shares

Common shares

Amount before income tax effectResolution(Shares)
As of April 1, 2019
Shares issued:

Remeasurements of defined benefit plans:

61

Resolution

Total dividends

Dividends per share

Record date

Effective dateMillions of Yen¥2,451 million¥2,655 million

¥12.0

¥13.0

March 31, 2018

September 30,
2018

June 28, 2018

December 5, 2018

Thousands of U.S. Dollars
2020

2019

2020

¥62,586¥71,502$655,981

Time deposits with maturities of more than three months(8,517)(7,922)(72,678)

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

8,999

7,999

73,385¥63,068¥71,579$656,688

Cash and deposits

Cash and cash equivalents

Corporate Report 2020

62

FINANCIAL INSTRUMENTS
1. Status of financial instruments(1) Policies on financial instruments
The Companies manage surplus funds by investing in high security
financial instruments, primarily short-term deposits and debt securities
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.

(2) Description of financial instruments and related risks
Notes receivable, accounts receivable from completed construction
contracts and other, trade receivables, are exposed to customer credit
risk. Securities and investment securities, primarily consist of 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 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
date controls and balance controls for each customer to mitigate

63

KANDENKO

2. Fair value of financial instruments
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.

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
For the year ended March 31, 2019(1) Cash and deposits(2) Notes receivable, accounts receivable from completed construction contracts and other
Allowance for doubtful accounts (*1)

Carrying amount

Fair value

Difference¥62,586¥62,586¥–183,990

183,990–

11,032

11,032(0)

184,424(434)(3) Securities and investment securities
1) Held-to-maturity securities
2) Available-for-sale securities(4)	Notes payable, accounts payable for construction contracts and other (*2)

43,846

43,846–(98,783)(98,783)–(5) Short-term borrowings (*2)

(6,953)(6,953)–(6)	Convertible bond-type bonds with share acquisition rights (*2)(20,040)(20,540)499(7) Long-term borrowings (*2)

(8,503)(8,490)(13)(8) Derivative transactions (*3)¥(460)¥(460)¥–(*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, 2020
Carrying amount

Fair value

Difference¥71,502¥71,502¥–

197,251

197,251–

1) Held-to-maturity securities

12,025

12,024(0)2) Available-for-sale securities

34,92634,926–(1) Cash and deposits(2) Notes receivable, accounts receivable from completed construction contracts and other
Allowance for doubtful accounts (*1)

197,793(541)(3) Securities and investment securities(101,558)(101,558)–(5) Short-term borrowings (*2)

(6,831)(6,831)–(4) Notes payable, accounts payable for construction contracts and other (*2)(6) Current portion of convertible bond-type bonds with share acquisition rights (*2)(20,019)(19,850)(169)(7) Long-term borrowings (*2)

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

Corporate Report 202064

Thousands of U.S. Dollars

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

For the year ended March 31, 2020
Carrying amount$655,981(1) Cash and deposits(2) Notes receivable, accounts receivable from completed construction contracts and other

Fair value

For the year ended March 31, 2019

Difference$655,981$–

1,814,614

Cash and deposits(4,963)

Allowance for doubtful accounts (*1)

Due after one year
Due within one year
through five years

1,809,642

1,809,642–

1) Held-to-maturity securities

110,321110,311(0)2) Available-for-sale securities

320,422

320,422–(4) Notes payable, accounts payable for construction contracts and other (*2)(931,724)(931,724)–(5) Short-term borrowings (*2)(62,669)(62,669)–(6) Current portion of convertible bond-type bonds with share acquisition rights (*2)(183,660)(182,110)(1,550)(7) Long-term borrowings (*2)

(72,302)(72,357)

55(8) Derivative transactions (*3)$(3,853)$(3,853)$–(3) Securities and investment securities

Notes receivable, accounts receivable from completed
construction contracts and other

¥–

¥–

¥–

184,260

163

–

–

–

10

–

–

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

5,000

–

–

–

Held-to-maturity securities (other)

5,000

1,000

–

–

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

2,000

–

–

–

¥258,847¥1,173¥–¥–Millions of Yen
For the year ended March 31, 2020

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
Please refer to “DERIVATIVE TRANSACTIONS.”
2. The carrying amount of financial instruments whose fair values are deemed extremely difficult to determine

Unlisted stocks, etc.

Due after ten years¥62,586(*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

Due after five years
through ten years

Thousands of U.S. Dollars

2019

2020

2020

¥4,563¥4,815$44,174

Due within one year

Due after one year
through five years

Due after five years
through ten years

Due after ten years¥71,502

¥–

¥–

¥–

196,989

804

–

–

10

–

–

–

5,000

–

–

–

Held-to-maturity securities (other)

6,000

1,000

–

–

Available-for-sale securities with maturities (other)

1,000

–

–

–

¥280,501¥1,804¥–¥–

Cash and deposits
Notes receivable, accounts receivable from completed
construction contracts and other
Securities and investment securities
Held-to-maturity securities (government/municipal bonds)
Held-to-maturity securities (corporate bonds)

Total

Thousands of U.S. Dollars
For the year ended March 31, 2020

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$655,981

$–

$–

$–

1,807,238

7,376

–

–

Securities and investment securities
91

–

–

–

Held-to-maturity securities (corporate bonds)

45,871–––

Held-to-maturity securities (other)

55,045

9,174

–

–

Available-for-sale securities with maturities (other)

9,174

–

–

–

$2,573,403$16,550$–$–

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

Total

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.”

65

KANDENKO

Corporate Report 202066

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, 2019
Due within
one year

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

Millions of Yen
For the year ended March 31, 2019

¥–

¥–

¥–

¥–

¥–

Convertible bond-type bonds
with share acquisition rights–

20,000––––Long-term borrowings

–

621

632

642

1,339

5,267

¥6,953¥20,621

¥632

¥642

¥1,339¥5,267

Total

Millions of Yen
For the year ended March 31, 2020
Due within
one year
Short-term borrowings

Due after
five years¥6,831

¥–

¥–

¥–

¥–

¥–

20,000

–

–

–

–

–

Current portion of
convertible bond-type bonds
with share acquisition rights
Long-term borrowings
Total

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

¥

–

632

642

1,339

619

4,647

26,831

¥632

¥642

¥1,339¥619¥4,647

Thousands of U.S. Dollars
For the year ended March 31, 2020
Due within
one year
Short-term borrowings
Current portion of
convertible bond-type bonds
with share acquisition rights
Long-term borrowings
Total$62,669

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$–

183,486

1. Held-to-maturity securities

Due after
five years¥6,953

Short-term borrowings

SECURITIES

Carrying amount

Fair value

¥–
–
–

¥–

¥–

–
–

–
–

¥–

¥–

¥–

Government/municipal bonds
Corporate bonds
Other

¥10
4,999
6,022

¥9

¥(0)

4,999
6,022

(0)
–

Subtotal¥11,032¥11,032¥11,032¥11,032

¥(0)
¥(0)

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

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

Fair value

¥–
–
–

¥–

¥–

–
–

–
–

¥–

¥–

¥–

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)

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

Due after
five years

Difference

Difference

Securities whose fair value does not exceed their carrying
amount:

$–

$–

$–

$–

–

–

–

–

–

5,798

5,889

12,284

5,678

42,633$246,155$5,798$5,889$12,284$5,678$42,633

Total

Thousands of U.S. Dollars
For the year ended March 31, 2020
Carrying amount

Fair value

$–
–
–

$–

$–

–
–

–
–

$–

$–

$–

Government/municipal bonds
Corporate bonds
Other

$91
45,86264,357

$82

$(0)

45,86264,357(0)–

Subtotal$110,321$110,321$110,311$110,311

$(0)
$(0)

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

Difference

Securities whose fair value does not exceed their carrying
amount:

Total

67

KANDENKO

Corporate Report 2020

68

2. Available-for-sale securities
Millions of Yen
For the year ended March 31, 2019
Carrying amount

Acquisition cost

Difference¥41,556––¥18,998––¥22,557––¥41,556¥18,998¥22,557

Stocks
Bonds
Other

¥290
–
2,000

¥341
–
2,000

¥(51)––

Subtotal¥2,290¥43,846¥2,341¥21,340¥(51)¥22,505

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

3. Available-for-sale securities sold during the year
For the year ended March 31, 2019

For the year ended March 31, 2020

Disclosure is omitted due to immateriality.

Disclosure is omitted due to immateriality.

4.Impairment loss on securities
For the year ended March 31, 2019

For the year ended March 31, 2020

Not applicable.

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).

Securities whose carrying amount does not exceed theiracquisition cost:

Total

DERIVATIVE TRANSACTIONS
Derivative transactions to which hedge accounting is applied
Interest rate-related
For the year ended March 31, 2019

Millions of Yen
For the year ended March 31, 2020
Securities whose carrying amount exceeds their acquisition cost:
Stocks
Bonds
Other
Subtotal

Carrying amount

Acquisition cost

Difference¥28,258––¥13,876––¥14,382––¥28,258¥13,876¥14,382

Securities whose carrying amount does not exceed theiracquisition cost:
StocksBonds
Other¥5,667–1,000¥6,309–1,000¥(642)––

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

Total

Hedge accounting
methodType of transactions

Primary hedged items

Contract amountContract amount due
after one year

Fair value

Deferral hedge

Interest rate swaps:
fixed payment, floatingreceipt

Long-term borrowings¥4,270 million¥3,991 million¥(460) million

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

For the year ended March 31, 2020
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¥ 3,991 million$36,614 thousand¥ 3,703 million$33,972 thousand¥  (420) million$(3,853) thousand

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

Thousands of U.S. Dollars
For the year ended March 31, 2020
Securities whose carrying amount exceeds their acquisition cost:
Stocks
Bonds
Other
Subtotal

Carrying amount

Acquisition cost

Difference$259,247––$127,302––$131,944––$259,247$127,302$131,944$51,990–
9,174$57,880–
9,174$(5,889)––$61,165$67,055$194,357$(5,889)$126,055

Securities whose carrying amount does not exceed theiracquisition cost:
Stocks
Bonds
Other
Subtotal
Total

69

KANDENKO$320,422

Corporate Report 2020

70

RETIREMENT BENEFITS(4) Breakdown of retirement benefit expenses
Millions of Yen

1. Overview of retirement benefit plans
The Companies have funded and unfunded defined benefit plans and defined contribution plans to prepare for retirement benefits to employees.
Defined benefit pension plans (funded plans) offer retirement lump-sum payments or pensions according to the salary and service period of 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.

¥2,199¥2,343$21,495

567

552

5,064

Expected return on plan assets

(614)

(624)

(5,724)

Actuarial gains and losses recognized in the year

(853)

(523)

(4,798)

Other

195

217

1,990

Total

¥1,495¥1,965$18,027(5) Remeasurements of defined benefit plans
Remeasurements of defined benefit plans (before tax effect) consist of the following:
Millions of Yen(1) Changes in defined benefit obligations
Millions of Yen

Thousands of U.S. Dollars

2019

2020

2020

¥66,508¥64,919$595,587

2,199

2,343

21,495Interest cost

567

552

5,064

Actuarial gains and losses

(38)

882

8,091

(4,318)(4,186)(38,403)

Current service cost

Benefit paid

–

59

541

¥64,919¥64,571$592,394

Other
Balance at end of year

(2) Changes in plan assets
Millions of Yen

Thousands of U.S. Dollars
2020

2019

2020

¥41,320¥42,017$385,477

Expected return on plan assets

614

624

5,724

Actuarial gains and losses(191)(1,252)(11,486)

Contributions by the employer

3,454

3,554

32,605

Benefits paid

(3,178)(3,072)(28,183)

(2)

60

(550)

¥42,017¥41,931$384,688

Balance at beginning of year

Other
Balance at end of year

(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
Millions of Yen¥44,260$406,055(42,017)(41,931)(384,688)¥2,852¥2,329$21,366

20,04920,310186,330

Net amount of liabilities and assets recognized inconsolidated balance sheet¥22,902¥22,640$207,706

Retirement benefit liability¥22,902¥22,640$207,706

Net amount of liabilities and assets recognized inconsolidated balance sheet¥22,902¥22,640$207,706

Unfunded defined benefit obligations

71

2020

¥44,869

Plan assets

KANDENKO

Actuarial gains and losses

Thousands of U.S. Dollars

2019

2020

2020

¥1,006¥2,658$24,385(6) Accumulated remeasurements of defined benefit plans
Accumulated remeasurements of defined benefit plans (before tax effect) consist of the following:
Millions of Yen
Unrecognized actuarial gains and losses

Thousands of U.S. Dollars

2019

2020

2020

¥(1,241)¥1,417$13,000(7) Plan assets(a) Breakdown of plan assets
The ratio of each major category to total plan assets is as follows:
2020

2019
General account

41%

43%

Bonds

35%

35%

Equities

23%

21%

Other

1%

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.

(8) Assumptions used in actuarial calculations
Major assumptions used in actuarial calculations
2019

2020

Discount rate

mainly 0.9%

mainly 0.9%

Expected return rate on plan assets

mainly 1.5%

mainly 1.5%

Thousands of U.S. Dollars
2020

2019
Funded defined benefit obligations

2020

Interest cost

Current service cost

2. Defined benefit plans

Balance at beginning of year

Thousands of U.S. Dollars
2020

2019

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 ¥1,654 million and ¥1,703 million ($15,623 thousand) for the years ended March 31, 2019 and 2020,
respectively.

Corporate Report 2020

72

DEFERRED TAX ACCOUNTINGINVESTMENT AND RENTAL PROPERTIES

1. Breakdown of major factors that caused deferred tax assets and liabilities

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, 2019 was ¥629 million (significant 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, 2020 was ¥729 million ($6,688 thousand)(significant 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).
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
2020

2019

2020

Deferred tax assets:¥7,062¥6,987$64,100

Depreciation

3,689

3,835

35,183

Accrued bonuses

3,269

3,426

31,431732

1,544

14,165

1,415

1,332

12,220

Balance at the beginning of year

Allowance for doubtful accounts

344

350

3,211

Change during the year

460

2,421

22,211

Loss carry-forward

197

180

1,651

Balance at the end of fiscal year¥20,020¥22,442$205,889

1,879

2,412

22,128Fair value at the end of fiscal year¥22,903¥27,244$249,944

18,592

20,069184,119(2,244)(2,200)(20,183)¥16,347¥17,869$163,935¥(6,867)¥(4,186)$(38,403)(1,049)(1,162)(10,660)

(210)

(129)

(1,183)Retirement benefit liability

Provision for loss on construction contracts
Loss on valuation of assets

OthersSubtotal
Valuation allowance
Total
Deferred tax liabilities:
Valuation difference on available-for-sale securities
Reserve for tax purpose reduction entry of non-current
assetsReserve for special depreciation
Others

(168)

(154)

(1,412)Total¥(8,296)¥(5,632)$(51,669)¥8,051¥12,236$112,256

Net deferred tax assets

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

Millions of Yen
Deferred tax liabilities for land revaluation

Thousands of U.S. Dollars

2019

2020

2020

¥6,686¥6,585$60,412

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

73

2019

2020

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

KANDENKO

Millions of Yen

Thousands of U.S. Dollars

2019

2020

2020

¥19,560¥20,020$183,669

Amount posted in the consolidated balance sheets

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 main components of changes in the year ended March 31, 2019, the main increase was new acquisitions (¥1,029 million). In regard to the main components of changes in theyear ended March 31, 2020, the main increase was new acquisitions (¥2,214 million)($20,311 thousand).
3.	Fair value at the end of the fiscal year is based on real estate appraisals carried out 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.

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
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.

Corporate Report 2020

74

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

Thousands of U.S. Dollars
For the year ended March 31, 2020

Millions of Yen
Engineering

Other(Note 1)

Total

Adjustments(Note 2)

Consolidated total(Note 3)

$5,547,944$104,743$5,652,688$–$5,652,688

For the year ended March 31, 2019
Engineering

Other(Note 1)

Total

Adjustments(Note 2)

Consolidated total(Note 3)Customers

Net sales:
Customers

Net sales:¥551,976¥11,574¥563,550¥–¥563,550

2,275

448,779

451,055(451,055)

–

Total

$5,550,220$553,522$6,103,752$(451,055)$5,652,688

Inter-segment180

41,806

41,987(41,987)–

Total¥552,156¥53,381¥605,537¥(41,987)¥563,550

Segment profit$298,678$19,247$317,935$348$318,284

Segment profit¥27,861¥2,080¥29,941¥70¥30,012

Segment assets$4,020,678$713,504$4,734,183$(250,678)$4,483,495¥459,854

Other items:$45,009$15,532$60,541$(1,293)$59,238

80,47735,220115,706(2,899)112,798

Inter-segment

Segment assets¥410,645¥73,794¥484,440¥(24,585)

Depreciation

Other items:
Depreciation
Increase in property, plant and equipment
and intangible assets¥4,337¥2,040¥6,378¥(189)¥6,188

7,781

3,526

11,307(1,555)

9,752

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, 2020
Engineering

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)–

Total¥604,974¥60,334¥665,309¥(49,165)¥616,143

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

Segment assets¥438,254¥77,772¥516,026¥(27,324)¥488,701¥4,906¥1,693¥6,599¥(141)¥6,457

8,772

3,839

12,612(316)

12,295Net sales:
Customers
Inter-segment

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

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, 2019
1. Information about products and services

For the year ended March 31, 2020
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(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.

3. Information about major customers
Customer NameTokyo Electric Power
Company Group75

KANDENKO

Net sales¥172,851 million

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.
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.

3. Information about major customers
Related segment

Customer Name

Net sales

Related segment

Engineering

Tokyo Electric Power
Company Group¥  182,471 million$1,674,045 thousand

Engineering

Corporate Report 202076

(Information about impairment loss in non-current assets of each reportable segment)
For the year ended March 31, 2019
For the year ended March 31, 2020
Disclosure is omitted due to immateriality.

For the year ended March 31, 2020
Type

Disclosure is omitted due to immateriality.

Other affiliates
TEPCO Power Grid,
Incorporated

Disclosure is omitted due to immateriality.

(Information about gain on bargain purchase of each reportable segment)
For the year ended March 31, 2019
For the year ended March 31, 2020
Not applicable.

Location

Share capital

Description ofbusinessType

Not applicable.

RELATED PARTY TRANSACTIONSNameTokyo Electric Power
Company Holdings,
Incorporated

Nature oftransaction

Installation ofelectric work

Amount of transaction

6,771 million¥$ 62,119 thousand

Transactions between the Company and related parties
The parent company and major shareholders (limited to companies) of the Company

Other affiliates

For the year ended March 31, 2019
Name
Tokyo Electric Power
Company Holdings,
Incorporated

Location
Chiyoda-ku, Tokyo¥1,400,975 million

Other affiliates

Type

TEPCO Power Grid,
Incorporated

Chiyoda-ku, Tokyo

Name

Nature oftransaction

Tokyo Electric Power
Company Holdings,
Incorporated

Installation ofelectric work

Description ofbusiness

Share capital¥

Electric powerbusiness

General powertransmission and80,000 million
distribution
business

TEPCO Power Grid,
Incorporated

Purchase of raw
materials

77

KANDENKO

Relation to therelated party(Held)
Direct–%Indirect47.6%

Electric work
contract(Held)
Direct46.4%
Indirect0.3%

Electric work
contract

Amount of transaction

Account

Balance at end of year

¥ 5,304 million¥ 7,288 million

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

Notes receivable, accounts
receivable from completed
construction contracts andother¥27,279 million

Advances received on
construction contracts inprogress¥

Notes payable, accounts
payable for construction
contracts and other¥ 2,273 million

Other affiliates
Installation ofelectric work

Ratio of voting
rights held

¥142,700 million¥ 33,962 million

TEPCO Power Grid,
Incorporated

Installation ofelectric work

Purchase of raw
materials¥ 149,053 million$1,367,458 thousand¥ 34,016 million$ 312,073 thousand

Relation to therelated party(Held)
Electric work
Direct–%contract
Indirect47.2%

General powertransmission and¥   80,000 million
Chiyoda-ku, Tokyo$ 733,944 thousand distribution
business

Transactions between related parties

Type

Ratio of voting
rights held

Tokyo Electric Power
¥ 1,400,975 million
Electric power
Company Holdings, Chiyoda-ku, Tokyo$12,852,981 thousand businessIncorporated(Information about amortization and unamortized balance of goodwill of each reportable segment)
For the year ended March 31, 2020
For the year ended March 31, 2019
Disclosure is omitted due to immateriality.

Name(Held)
Electric work
Direct46.4%
contract
Indirect0.3%

Account

Balance at end of year

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥ 5,487 million$ 50,339 thousand

Advances received on
construction contracts inprogress¥     72 million$ 660 thousand

Notes receivable,accounts receivable fromcompleted construction
contracts and other¥ 30,232 million$277,357 thousand

Advances received on
construction contracts inprogress¥ 1,166 million$ 10,697 thousand

Notes payable, accounts
payable for construction
contracts and other¥  2,453 million$ 22,504 thousand

Notes:
1. Above transaction amounts do not include consumption taxes and above balances at the end of the year include consumption taxes.
2. Terms and conditions of the transactions and its policies
Terms and conditions for construction orders and purchase of raw materials are determined based on arm’s length basis through negotiations considering market price, etc.

58 million

957 million

Corporate Report 2020

78

CONSOLIDATED SUPPLEMENTAL SCHEDULESPER SHARE INFORMATION(Schedule of bonds)
Yen

Net assets per share
Earnings per share
Diluted earnings per share

Company name

Issue typeIssuance dateKandenko Co.,Ltd.

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

March 31,
2016–

U.S. Dollars

2019

2020

2020

¥1,167.30
96.46
88.78

¥1,211.13
110.23101.35$11.111.01
0.92

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

Millions of Yen
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

2019

2020

2020

¥19,703–¥22,515$206,559––

19,70322,515

206,559

Total–

As of April 1,
2019

As of March 31,
2020

Interest rate (%)

Collateral

Maturity¥ 20,019 million$183,660 thousand¥ 20,040 million$183,853 thousand (¥ 20,019 million)($183,660 thousand)

–

None

March 31,2021

¥ 20,019 million$183,660 thousand¥ 20,040 million$183,853 thousand (¥ 20,019 million)($183,660 thousand)

–

–

–

Notes:
1. 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¥  1,126.5$  10.33

Total issuance value¥ 20,100 million$184,403 thousand

Thousands of Shares
2020

2019
Weighted average number of common shares during the year

204,258

204,259
Millions of Yen

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

Thousands of U.S. Dollars
2020

2019

2020
(13)
[(13)](13)[(13)]¥

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.

(119)[(119)]

Thousands of Shares

2. The redemption schedule for five years subsequent to March 31, 2020 is summarized as follows:

Due within one year

Due after one year
through two years

Due after two years
through three years

Due after three years
through four years

Due after four years
through five years¥ 20,000 million$183,486 thousand

–

–

–

–

2020

2019
Increase in common shares

17,51317,754[Convertible bond-type bonds with share acquisitionrights included in the above][17,513][17,754]––

Overview of dilutive securities that are not included in
the computation of diluted earnings per share becauseof their anti-dilutive effectTotal issuance value of shares issued through the exercise of share acquisition rights

3. Figures in parentheses for balance at end of current period are scheduled redemption amounts within one year.

2. 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

2019

2020

2020

¥245,954
7,521[7,521]
238,432¥255,821
8,438[8,438]247,382$2,346,981
77,412[77,412]2,269,559

Thousands of Shares
2020

2019
Number of common shares outstanding at end of year

204,259

204,258

SIGNIFICANT SUBSEQUENT EVENTS
Not applicable.
79

KANDENKO

Corporate Report 202080

| Independent Auditors’ Report |(Schedule of loans)
As of April 1, 2019

As of March 31, 2020

Average interest rate(%)

Short-term borrowings¥ 6,165 million$ 56,559 thousand¥ 6,210 million$ 56,972 thousand

0.7–

Current portion of long-term borrowings¥
788 million$ 7,229 thousand¥ 621 million$ 5,697 thousand

1.4–

Current portion of lease obligations¥
525 million$ 4,816 thousand

573 million¥$ 5,256 thousand––

Long-term borrowings (excluding current portion of
long-term borrowings)¥ 8,503 million$ 78,009 thousand¥ 7,881 million$ 72,302 thousand

1.62023 to 2033

Lease obligations (excluding current portion of leaseobligations)¥    981 million$ 9,000 thousand¥ 1,211 million$ 11,100 thousand–

2021 to 2027

–

–

–

–

¥ 16,963 million$155,623 thousand¥ 16,498 million$151,357 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 redemption schedule of long-term borrowings and lease obligations (excluding current portion) for five years subsequent to March 31, 2020 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

632 million¥$ 5,798 thousand

642 million¥$ 5,889 thousand¥ 1,339 million$ 12,284 thousand

619 million¥$ 5,678 thousand

Lease obligations¥
438 million$ 4,018 thousand¥
339 million$ 3,110 thousand¥
238 million$ 2,183 thousand¥
116 million$ 1,064 thousand(Schedule of Asset Retirement Obligations)
The amounts of asset retirement obligations as of April 1, 2019 and March 31, 2020 are less than 1% of the total liabilities and net assets as ofApril 1, 2019 and March 31, 2020. Therefore, the disclosure is omitted.

OTHERS
Quarterly information for the year ended March 31, 2020
Cumulative period

Second quarter

Third quarter

Fourth quarter

Net sales¥ 126,490 million¥ 278,993 million¥ 427,978 million¥ 616,143 million$1,160,458 thousand $2,559,568 thousand $3,926,403 thousand $5,652,688 thousand

Profit before income taxes¥$¥ 15,715 million¥ 22,588 million¥ 34,490 million
7,471 million
68,541 thousand $ 144,174 thousand $ 207,229 thousand $ 316,422 thousand

Profit attributable to owners of parent

¥
$

¥
4,781 million
43,862 thousand $

Earnings per share¥23.41 ¥48.65 ¥70.83 ¥110.23$0.21 $0.44 $0.64 $1.01
Each quarter

Earnings per share

81

First quarter

KANDENKOFirst quarter¥ 14,467 million¥ 22,515 million
9,936 million
91,155 thousand $ 132,724 thousand $ 206,559 thousand

Second quarter

Third quarter

Fourth quarter¥23.41 ¥25.24 ¥22.18 ¥39.40$0.21 $0.23 $0.20 $0.36

Corporate Report 202082Corporate Report 2020

| Company Profile | (As of March 31, 2020)
Company outline| Stock Information | (As of March 31, 2020)
The Company’s website

are listed on the First Section of the Tokyo

Company name

Kandenko Co., Ltd.

Established

September 1, 1944

Head office

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

Paid in capital¥10,264 million

the 10 largest shareholders appearing on the

Total number ofshares issued

205,288,338 sharesregister at that date.

Employees

10,003 persons (consolidated),
7,350 persons (non-consolidated)

Network

Stock Exchange.
10,654 shareholders. The following table lists

Head Office

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

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
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

94,753,552

46.38

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

9,363,400

4.58

3 Mizuho Bank, Ltd.

6,761,839

3.31

4 Japan Trustee Services Bank, Ltd. (Trust Account)

5,879,600

2.87

5 Kandenko Group Employees Shareholding Association

5,680,025

2.78

6 STATE STREET BANK AND TRUST COMPANY 505001

2,841,052

1.39

7 Japan Trustee Services Bank, Ltd. (Trust Account 9)2,651,200

1.29

8 JP MORGAN CHASE BANK 385151

2,144,550

1.04

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

1,834,400

0.89

10 SSBTC CLIENT OMNIBUS ACCOUNT

1,755,269

0.85

Individuals, otherhttps://www.kandenko.co.jp/ir

Foreigncompanies, etc.
16.42%(13.40%)(in Japanese)

Overseas Offices

Domestic Offices(13.78%)

Total number ofshares issued
205,288,338 shares
Total number ofshares issued
205,288,338 shares

Individuals, other
Financial
13.69%
institutions(13.78%)19.17%(22.59%)Note: Figures in parentheses show data as of March 31, 2019.

Financial
Japanese institutions
companies
19.17%
50.22%(22.59%)(49.73%)

Note: Figures in parentheses show data as of March 31, 2019.

Japanese companies
50.22%(49.73%)Monthly Stock Price

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

Overseas Offices

1,000Singapore Branch 1 Coleman Street, #10-5 The Adelphi,
Singapore 179803

800
1,200

Taiwan Office

6F-1, No. 45, Section 1, Minchuan Eastern Road, Taipei,
Taiwan600
1,000

Yangon Office

Room1(A), University Paradise Condo, No.441, New
University Avenue Road, Bahan Township, Yangon,
Myanmar(Unit: Yen)

Indonesia Office

12th Floor, Summitmas II Building, Jl. Jend. Sudirman
Kav. 61-62, Jakarta 12190 Indonesia(inquiries about stockrelated matters)

8000
Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.
600

2019

Shares held as apercentage of total
outstanding shares

1 TEPCO Power Grid, Inc.

13.69%
Number of Shares Held by Type of Shareholder (As of March
31, 2020)

Foreigncompanies, etc.
16.42%
Treasury stock(13.40%)0.50%

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

Shizuoka Branch

Number ofshares held

Name

On March 31, 2020, there were a total of

The Company sees its website as one of theimportant sources of information. Please visit our
website where we post IR information, an
introduction on our technologies and services, andthe latest news.

Domestic Offices

Principal Shareholders

The shares of common stock of the Company

2020

0
Apr. May June July Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.

83

KANDENKO

2019

2020

Corporate Report 202084