CORPORATEREPORT 2018

Introduction

Building a better,brighter future together
Total ICT Solutions: Contributing to the Realizationof a Brighter Future by Bringing People Together
and Forming Connections with Society*ICT is an acronym for Information and Communications Technology.

Editorial Policy
Period Coveredby the Report:

Organizations
Covered by theReport:Reference
Guidelines:
Issuance:
Next Issuance
Scheduled:

1

Corporate Report 2018

From April 1, 2017, to March 31, 2018
(However, in some cases, activities before
and after the coverage period are also
included in this report.)
Companies subject to consolidation of the
KYOWA EXEO Group(However, in some cases, KYOWA EXEOCORPORATION’s non-consolidated data areused instead of consolidated data.)
GRI “Sustainability Reporting Standards”
ISO26000 “Guidance on social responsibility”
July 2018
July 2019

KYOWA EXEO CORPORATION has been selected to be part of
the MSCI Japan ESG Select Leaders Index and the MSCIJapan Empowering Women Index (WIN), both of which areoffered by MSCI Inc.

*1. ‌MSCI Inc. (“MSCI”) is a provider of an extensive range of financial services,
including the calculation of stock indexes and portfolio analysis.
*2. ‌The selection of KYOWA EXEO CORPORATION to be part of the above-mentioned MSCI index, as well as the use of the logo, trademark, service mark andindex name of MSCI, does not indicate MSCI’s or its affiliates’ support, guarantee
and/or promotion of KYOWA EXEO CORPORATION. The MSCI index is an
exclusive asset of MSCI. MSCI, the MSCI index name and the MSCI logo are thetrademarks or service marks of MSCI or its affiliates.

CONTENTS
About KYOWA EXEO

3
5
7
13
21

Consolidated Financial Highlights

Milestones of the KYOWA EXEO Group
Greetings / Message from the President
Business Overview
KYOWA EXEO Group’s
Corporate Value Creation Process

23

SpecialFeature 1

 xtending Japanese Technologies
Eto the World

25

SpecialFeature 2

 esolving Social Issues by Gathering Various
R
Technologies Together

27

SpecialFeature 3

 espect of Diversity and Promoting
R
Equal Opportunities

29
31Management Systems

33
36
37

Corporate GovernanceCompliance
Risk Management

Involvement in the Environment

39
43
57
58

Environmental Management

Financial Section
Stock Information
Board of Directors

CSR Concept
Results and Plans of Major CSR Initiatives

Notice on forward-looking statements:
This Corporate Report 2018 contains forward-looking statements suchas the future business performance of KYOWA EXEO. As these statements are based on the information available at the time of the preparation of this report, the actual results might differ materially from thecontent described or suggested therein due to various factors. As thiscorporate report is not intended for the purpose of soliciting investment, all users of this report are advised to undertake decisions concerning investment at their own discretion.
The figures stated in units of ¥1 0 0 million and ¥1 million are rounded
down.

KYOWA EXEO CORPORATION
http://www.exeo.co.jp/overseas/index.html
29-20, Shibuya 3-chome, Shibuya-ku, Tokyo
150-0002, Japan

Corporate Report 20182

About KYOWA EXEO
Cultivating Technological Capabilities, Seeking
Affluence and Contributing to Society
The corporate philosophy of the KYOWA EXEO Group, which is the basic guideline
for our corporate social responsibility, includes cultivating technological capabilities,
seeking affluence and contributing to society. The corporate philosophy clearly answers the question: “Why does the KYOWA EXEO Group exist?” The utmost groundfor existence is the Group’s technological capabilities. Throughout its existence, theGroup has aimed to be a corporate group that always anticipates and pursues better
technologies at the forefront of leading-edge technologies. The technological capabilities cultivated through these efforts will help create more affluent living environments for people. The Group intends to be a valuable enterprise by contributing tosociety through activities in the pursuit of state-of-the-art technologies.

Corporate
Philosophy:

Corporate Data
Company Name

KYOWA EXEO CORPORATION

EstablishedMay 17, 1954

Paid-in Capital¥6,888 million (as of April 1, 2018)

Stock ListingFirst Section of the Tokyo Stock Exchange

Representatives

Fuminori Kozono, President
Tetsuya Funabashi, Vice President
Tsutomu Ota, Representative Director

Net Sales¥312.6 billion (consolidated)¥256.8 billion (non-consolidated) (as of March 31, 2018)

Number of
Employees

8,311 (consolidated)
3,749 (non-consolidated) (as of March 31, 2018)

Head Office29-20, Shibuya 3-chome, Shibuya-ku, Tokyo
TEL: +81-3-5778-1111 (switchboard)
URL: http://www.exeo.co.jp

West Japan
Head Office2-10, Uchihonmachi 2-chome, Chuo-ku, Osaka
TEL: +81-6-6350-4057

Number ofBusiness Offices

Branch offices: 15
Sales offices: 17

Major Banks

Mizuho Bank, Ltd., Sumitomo Mitsui Banking
Corporation, MUFG Bank, Ltd.

Independent
AuditorSeiyo Audit Corporation

Business Bases (As of July 1, 2018)
Domestic bases: (Head Office	West Japan
Head Office

Branches/

Offices)

15 Branches
Hokkaido Branch
Tohoku Branch
Ibaraki Branch
Chiba Branch
Minami Kanto Branch
Koshin Branch
Tokai Branch
Kansai Branch

Bases of Two Major Consolidated Subsidiaries

17 Sales Offices

Miyako Branch
Hyogo Branch
Hokuriku Branch
Shikoku Branch
Chugoku Branch
Kyushu Branch
Okinawa Branch

Iwate Office
Yamagata OfficeNiigata Office
Nagano Office
Ibaraki Office
Chiba Office
Saitama Office
Shizuoka Office
Wakayama Office

EXEO TECH CORPORATION

Matsuyama Office
Kochi Office
Yamaguchi Office
Kumamoto Office
Kitakyushu Office
Nagasaki Office
Oita Office
Minami-Kyushu OfficeDaiwa Densetsu Corporation:

Overseas Bases
Philippines
MG EXEO NETWORK, INC.
Thailand
EXEO ASIA COMPANY LIMITED

Consolidated Financial and Non-financial Highlights
Orders received (¥Billion)
324.1 325.0 340.0

Net sales (¥Billion)
298.8 312.6

335.0

Operating income (¥Billion) Profit attributable toowners of parent (¥Billion)
27.5
18.8
25.6
17.9
20.8
13.7

Net Sales by Segment(2017)

Urban
infrastructure¥74.5 billion

SYSTEM SOLUTIONS¥42.5 billion

13.6%

23.8%
Telecommunications
Infrastructure¥195.5 billion

62.6%
2016

2017

2018
(plan)

2016

2017

2018
(plan)

2016

2017

2018
(plan)

2016

2017

2018
(plan)

Note: R egarding the “2018 (plan),” the effects of the Company’s management integration with C-CUBE Corporation, Seibu Electric Industry Co., Ltd. and
NIPPON DENTSU CO., LTD., which is scheduled to be conducted as of October 1, 2018, on the relevant figures are not taken into consideration.

3

Corporate Report 2018

Note: ‌The figures are rounded to
the first decimal place.

Strength of the KYOWA EXEO Group
Drawing on the Group’s strengths of “Total Process,” “Total Solution” and “Nationwide Expansion,” we continue to provide high-quality services to meet diversifying customer needs through the concerted Group-wide power.

1

Total process coverage (end-to-end process management)
Planning and development

From Planning to
MaintenanceOperations and maintenance

Optical-fiber networks
Networks

SupportNationwide

Mobile (LTE-Advanced)

Total solutions

2

Group ofProfessionals
Who AreAcquainted with
Every Kind ofTechnology

Construction

3

Civil engineering, Reduction of above-street wiring
NI solutions, SI solutions
Renewable energy (solar power facilities), Eco business (wood biomass boilers)Electric and air-conditioning facilities for large buildings, data centers, etc.
Home ICT, smart house

One-stop construction services across Japan · Multiple-carrier migration and migration compatibility

1 Total Process

2 Total Solution

3 Nationwide Expansion

We respond to customers’ needs with onestop services from planning and development
to construction, operation and maintenance,
which are sustained by high engineering andtechnological capabilities.

We meet diversified customers’ needs by fully
drawing on the latest technologies in a wide
variety of fields such as telecommunications,civil engineering, electricity, network integration(NI) and system integration (SI).

We are prepared to meet every kind ofcustomer need, which can be covered byour operating bases and Group companies located throughout the nation.

Business Fields

Target portfolio (FY16–FY20 Medium-Term Management Plan)

Telecommunications
Infrastructure

FY15

Urban
infrastructure

Number of days of paid Turnover rate for employees Number of female
leave taken per employee with up to three years ofmanagement executives(Note 1)
(Note 1)
service (%) (Note 1)
11.8

14

12.6 13.3

Ratio of female
management 10
executives

6

2015

2016

2017

5

5

2015

2016

0.7%
2017

2015

7
1.1%

¥287.4 bn

FY20
Expansion of sales and businessdomains by development into new
domains

23%

Telecommunications facilities
Electricity supply
Urban civil engineering
Environmental engineering

Network Integration
System Integration

64%

13%
Urban
infrastructure2017¥400.0bn

Urban
infrastructure25%

Number of new graduates Number of employees Number of serious
CO2 emissions
employed (Note 1)with IT-related expert accidents (Notes 1 and 2) (t-CO2) (Note 1)
qualifications (Note 1)
Female

16
69

Male

14
73

15

259

270

280

2015

2016

2017

2015

6,457 6,536 6,572

3

80

0.8%

2016

50%

25%

Telecommunications
Infrastructure

SystemSolutions

Network engineering
Access engineering
Mobile engineering

SystemSolutions

Telecommunications
Infrastructure

SystemSolutions

2016

2017

2015

1

1

2016

2017

2015

2016

2017

Notes: 1. On a non-consolidated basis.
2. This pertains to the number of serious accidents as defined by the Company.
Corporate Report 20184

Milestones of the KYOWA EXEO Group
Since its foundation in May 1954 as Kyowa Densetsu Kaisha, Ltd.,KYOWA EXEO has continued to create “Linkages” in society.
Corporate History
May

1954

Jul.

1954

Company established as Kyowa Densetsu
Kaisha, Ltd.
Qualified to participate in telecommunications facility tenders for Nippon Telegraphand Telephone (now NTT)
Listed on the Second Section of the Tokyo
Stock Exchange
Began engaging in telecommunications
and electric power construction outsidethat for NTT
Listed on the First Section of the Tokyo
Stock Exchange
Changed company name to KYOWA
EXEO CORPORATION
Relocated head office to current addressin Shibuya-ku, Tokyo
Acquired Daiwa Densetsu Corp.
Acquired WAKO ENGINEERING CORP.

Feb. 1963
Sep. 1963
Feb. 1972
May

1991

Mar.

1999

Apr.
May

2004
2004

Apr. 2005
Sep. 2009
May

2010

Aug. 2011

Nov. 2011
Dec. 2014

Dec. 2015

Acquired KANAC Corp.
KANAC Corp. was converted into a wholly
owned subsidiary
Made Ikeno Tsuken Co., Ltd., a consolidated subsidiary
WAKO ENGINEERING CORP., Daiwa
Densetsu Corporation and Ikeno Tsuken
Co., Ltd., were converted into wholly
owned subsidiaries
ICOMSYSTECH Co., Ltd., was converted
into a wholly owned subsidiaryAID Holdings Inc. (the holding company of
ADVANCED INFORMATION DESIGN Co.,
Ltd.) was converted into a wholly owned
subsidiary
WHERE Inc. was converted into a wholly
owned subsidiary

1954~

1980~

1990~

1954

1982

Entered the SI business

1991

1986

Entered the environment business (Water
treatment)

1998
1999

Company established
as Kyowa Densetsu
Kaisha, Ltd.

Head Office of the Company
then located in Minato-ku, Tokyo Telecommunications line works

1963

Listed on the Second
Section of the Tokyo
Stock Exchange

1963

Started overseas
operations(Honduras)

1972

Listed on the First
Section of the Tokyo
Stock Exchange

Engineering works
adopting shield method

Publicized the change of the company
nameChanged company name to KYOWA
EXEO CORPORATIONEntered into the NI business.
Completed construction of the newcompany building in Shibuya (head office)1988
Net Sales:

Sewage treatment facilities using a
bio-module system¥100.0 Billion

Leap
Period1974
Net Sales:¥50.0 Billion

ReformPeriodUnder the trade name of
Kyowa Densetsu Kaisha, Ltd.,to the development
Foundation contributedof telecommunication facilities
Periodin line with Cooperation andHarmonization.

5

Corporate Report 2018

Entered other businesses
in the pursuit of businessexpansion.

¥312.6 Billion

Milestones of the KYOWA EXEO Group2017
Net Sales:

Fiscal 2020 Targets
Net Sales

Operating income¥400 Billion ¥30 Billion

2006
Net Sales:¥300.0 Billion

New
Focusing Group strengths
Foundation to take total solutions to
a new growth stage.
Period1997
Net Sales:¥200.0 Billion

GrowthPeriodUnder the name of
KYOWA EXEO CORPORATION,

Moved toward further
growth in the 21st century.

broke the mold and continually
ventured out to address
new challenges

2000~
2011

WAKO ENGINEERING CORP., Daiwa Densetsu Corporation andIkeno Tsuken Co., Ltd., were converted into wholly owned
subsidiaries

2016~
2016

Announced the Medium-Term Management Plan (FY2016–FY2020).

2016

Began full-scale operations in the Geo Solution Field (e.g., mesh network beacons).

2016

Began full-scale operations in the New Energy Field (e.g., “Energy Viewer”).

2017

Opened the MX Center for Excellence, a training center of MG EXEO Network Inc. in the Philippines.
Enhanced Collaboration in the ICT Solutions Field.

Appearance of the training center
opened in the Philippines

2017

Entered capital and business alliance with Nextgen, Inc.

2017

Started strategic collaboration with CA Technologies.

Kick-Off Ceremony of EXEO ASIA COMPANY LIMITED
From left, Mr. Otsubo (Director and Managing
Operating Officer of KYOWA EXEO CORPORATION),
Mr. Kusumoto (President and CEO of Net Chart Japan
Inc.), Mr. Pitak Numsapanan (President of Millennium
Plus One Co., Ltd.), Mr. Miyazawa (Chief Operating
Officer of KDTS Co., Ltd.) and Mr. Nobutani(Managing Director of S.E.C.T. COMPANY LIMITED)2017

The Company’s total services to support customers’ installation of the “Skype for Business”
communication platform were certified as Skype Operations Framework (SOF)–compliant.

2017

Started strategic collaboration with SecondXight, Inc.

2017

Entered capital and business alliance with Phone Appli Inc.

Announcement of management integration
From left, Mr. Hashimoto (President of
C-CUBE Corporation), Mr. Kozono (Presidentof KYOWA EXEO CORPORATION), Mr.
Kumamoto (President of Seibu ElectricIndustry Co., Ltd.) and Mr. Ue (President of
NIPPON DENTSU CO., LTD.)

2018

Started a joint venture business in Thailand.
Established EXEO ASIA COMPANY LIMITED.

2018

Awarded the FY 2017 Grand Prize for Excellence in Energy Efficiency and Conservation(Chairman Prize for ECCJ in the Product Category & Business Model Category).

2018

Announced a management integration with C-CUBE Corporation, Seibu Electric Industry
Co., Ltd. and NIPPON DENTSU CO., LTD.
Corporate Report 2018

6

TOP MESSAGE

Since its establishment in 1954, the KYOWA EXEO Group has promoted business activities drawing on its expertise in the creation of information communications infrastructure
as a core competence, and provided consistent and integrated services nationwide forthe installation of various information communications facilities and equipment.
Currently, in addition to establishing the information communications infrastructure, theGroup has produced many business results in the establishment and management of environmental and social infrastructure by harnessing our long-nurtured environmental, civilengineering and electrical facility technologies.
Furthermore, in the software development business we started in 1982, we have a trackrecord of developing solutions and applications that combine ICT and software, thereby
we will strive to offer a significant contribution to the advancement of the Internet ofThings (IoT) technologies.
The EXEO of the KYOWA EXEO Group is the Latin“exeo,”which refers to breaking themold and continually venturing out to address new challenges. Reaffirming the meaning of
the company name, we will continue to make flexible responses to a changing businessenvironment and provide total solutions in a wide range of business fields by gathering thestrength of the entire Group, thereby contributing to society as a corporation creating anaffluent living environment. With such an attitude as a pillar of our CSR management, we
will aim to achieve the sustainable growth of the Group.

7

Corporate Report 2018

Building a better, brighter future together

Greetings /Message from the President

KYOWA EXEO aims to be a true
“ICT Innovation & Engineering
Company.”
Fuminori Kozono
President
KYOWA EXEO CORPORATION

Contributing to the Sustainable Growth of Society
In recent years, the roles to be undertaken by companies
for international issues such as the preservation of the
global environment and respect for human rights havebecome increasingly important.
Taking such social trends into consideration, we aim tocreate value jointly with society and achieve sustainablegrowth by identifying and accommodating important
issues for our stakeholders and the KYOWA EXEO Groupin terms of the environment, society and governance(ESG).
Moreover, bearing in mind the Sustainable Development Goals (SDGs), which were adopted by the United
Nations in 2015, we will perform its corporate social
responsibility (CSR) through its primary businesses.

Business Results for Fiscal 2017
For fiscal 2017, we enjoyed an increase in net sales due
to considerable growth in the receipt of orders from theurban infrastructure business and the accelerated completion of abundant works that had been carried forwardfrom the previous fiscal year in the respective segments.
We also engaged in cost-cutting and other efficiency
improvement efforts, enabling us to attain record-highoperating income for the second consecutive year.
In the telecommunications infrastructure business, we
mainly strove to expand facility management operations
despite the downward tendency seen in the growth of
fixed telecommunications-related optical line connection
works. Moreover, in mobile telecommunications-related
works, we promoted the reinforcement and improvement of wireless phone base stations centering on majorurban areas for the new 4G frequency band to address
the increasing volume of traffic.
In the urban infrastructure business, given various
investments by the government and municipalities, aswell as redevelopment projects in the Tokyo metropolitanarea, which were actively executed throughout the year,
we addressed large-scale projects including construction
works for solar power generation facilities, the electricalequipment installation works for large-scale buildings
and the installation works for highway telecommunications facilities.
In the system solutions business, we worked to expand new businesses such as Business Process Man-

Corporate Report 20188

TOP MESSAGE

agement (BPM) solutions against a background ofvigorous ICT-related investments along with the arrival ofa full-fledged IoT era.
As a result, for fiscal 2017, the Group recorded orders
received amounting to ¥325.0 billion (flat year over year)
and achieved consolidated net sales of ¥312.6 billion (up
5% year over year) and operating income of ¥25.6 billion(up 23% year over year).

Tasks Addressed and Achievements in Fiscal 2017
Under the Group’s vision of the medium-term management plan (fiscal 2016 to 2020), “Focus Group strengths
to take total solutions to a new growth stage,” we endeavored to increase the earning power of the coretelecommunications infrastructure business through thecomplete execution of efficiency improvement efforts.
We also made efforts to restructure our business portfolio by expanding the urban infrastructure and systemsolutions businesses, both of which are growth engines,
through the combined use of existing technologies andservices in a unified manner across the Group.
Regarding the system solutions business on which wehave focused for several years, we promoted aggressive
marketing efforts in the solution fields of New Energy,
Geo Solution, Cloud Security and Global. In the New
Energy field, the “Energy Viewer,” of which services are

9

Corporate Report 2018provided in cooperation with Tepco Customer Service
Corporation Limited, was awarded the FY 2017 Grand
Prize for Excellence in Energy Efficiency and Conservation (Chairman Prize for ECCJ in the Product Category &Business Model Category), which is supported by the
Ministry of Economy, Trade and Industry. In the Geo
Solution field, we exhibited several advanced cases ofindoor positioning sensor network applications utilizing
the “EXBeacon” at trade fairs in Japan such as “CEATEC
JAPAN 2017.” In the Cloud Security field, we have beencertified as a partner (vendor) in Japan that provides
support for installing Microsoft Japan’s “Skype for Business” communication platform for corporations. In the
Global field, we established EXEO ASIA COMPANY
LIMITED, a joint venture, in January 2018 in Thailand,
which will start the ICT solution business in this country.
Favorable effects of these activities in the respective
solution fields have been emerging gradually.
Moreover, we proactively addressed diverse measures
to enhance productivity as well as promote work stylereforms. We also implemented the sharing of in-housesystem platforms via the modularization and/or digitization of business processes, as well as telework using ICT.
By the way, we have fantastic news. At the 44th
World Skills Competition held in October 2017 in Abu
Dhabi in the United Arab Emirates, Mr. Yoshiaki Shimizu,
our employee, won a gold medal as a representativefrom Japan in the information network cabling category.

Greetings /Message from the President

He was the fifth gold medalist of the Company at thisinternational competition, showing excellent performancethat proved our high technological capabilities to theworld. KYOWA EXEO will continue to develop talented
engineers and contribute to society with its high-quality
construction technologies.

Outlook for Fiscal 2018
We plan to achieve record-high profits in fiscal 2018 forthe third consecutive year.
In the telecommunications infrastructure business,telecommunications carriers are expected to continue tocurtail their capital investments. In such an adverse
business climate, as for fixed telecommunications-related investments, we will further address enhancing ourcost competitiveness by radically reviewing the Group
formation and other measures. As for mobile telecommunications-related works, we will strive to ensure stableprofits by efficiently completing abundant works thathave been carried forward relative to the reinforcement
and improvement of wireless phone base stations for the
4G frequency band mainly in urban areas.
In the urban infrastructure business, active investments are expected to continue in preparation for the
Tokyo Olympic and Paralympic Games to be held in
2020, including several redevelopment projects in theTokyo metropolitan area and various investments bymunicipalities and other entities. Under such circumstances, demand growth is expected for such works aslarge electrical equipment installation; countermeasuresfor 700-MHz reception difficulty in digital terrestrial televisions; maintenance of disaster prevention and adminis-

trative radio systems; and the undergrounding of power
cables. We will therefore focus on receiving orders in ourareas of expertise.
In the system solutions business, considering that
ICT-related investments are expected to become increasingly active in line with expansion of IoT, we willdevelop advanced ICT engineers. We will also promote
aggressive marketing activities in the SI business suchas BPM and other respective solution fields (New Energy, Geo Solution, Cloud Security and Global) to ensure the provision of high-value-added services tocustomers.
Furthermore, we will continue to positively address theenhancement of productivity and work style reforms, aswell as improve the efficiency of business operations
utilizing Robotic Process Automation (RPA) and implementing new work styles.
Meanwhile, we announced a management integration
with three other companies in the same trade in westernJapan when the annual financial results for fiscal 2017
were announced in May 2018. To ensure the mediumand long-term growth of the Group, it is essential to not
only promote the existing businesses but also expand into
the peripheral business areas for which our accumulated
technological expertise can be utilized. To achieve that,
we will actively consider M&A opportunities where synergies can be anticipated in the respective businesses.
While identifying business fields with future growthpotential and developing human resources to reinforce
our technological and marketing capabilities, we willaccumulate our strengths and aggressively invest managerial resources in growth business fields, thereby ensuring our sustainable growth and further strengthening ourbusiness foundations.
Corporate Report 201810

TOP MESSAGE

Management Integration with Three Other
Companies in the Same Trade in Western Japan.
As of October 1, 2018, the Company intends to conduct
a management integration with C-CUBE Corporation,
Seibu Electric Industry Co., Ltd., and NIPPON DENTSU
CO., LTD.
Cooperation with the three business partners started
in 2016 for telecommunication facilities works ordered by
the NTT Group in western Japan for order-receiving
activities in the form of a joint venture. Given the declining amount of capital investments relative to the NTT
Group’s fixed telecommunications business, we reached
a common understanding that, to utilize the strengths of
the four companies while flexibly responding to changes
in the business environment, it is necessary for theparties to promote the sharing of management resources and establish a construction system with higher
productivity adaptable to diversifying customer needs.
The four companies thus determined to execute themanagement integration.
In the telecommunications infrastructure business,
expected synergies include works for fixed- and mobilecomposite 5G-compliant communications, which arerequested by customers, that can be deployed nationwide and the development of a more effective construction system to cope with the decline in future work
volume and a shrinking workforce by consolidating themanagement resources of the four companies.

In the urban infrastructure business, coverage of the
Chubu and Kyushu regions, where the Company’sbusiness foundation was weak, will allow us to establish
substantially one-stop construction and maintenancesystems throughout the country. We believe this initiative
will enable us to pursue further business expansion
through the combination of the delivery channels of ourrespective partners and the construction systems at all
the Group companies.
In the system solutions business, in addition to collaboration in the IBM-related business, which is a common strength of NIPPON DENTSU and the Business
Solutions Headquarters of the Company, we believe themanagement integration could bring about a big opportunity to develop the system solutions business as thesecond pillar of the KYOWA EXEO Group, including thecross-selling of solution materials specific to the respective companies within the Group.
Furthermore, we recognize that it will be necessary to
improve productivity, reduce indirect costs and structure aleaner management system with measures such as theunification of business flows, the integration of indirect
operations and the commonization of information systems.

Distributing returns to shareholders
The KYOWA EXEO Group regards profit distribution toshareholders as an important managerial issue and has

Company name

C-CUBE Corporation

Seibu Electric Industry Co., Ltd.

NIPPON DENTSU CO., LTD.

Established

14 May,1954

3 Jul,1947

22 Oct,1947

Paid-in capital¥4,100 million¥1,600 million¥1,493.93 million

Representatives

President: Wataru Hashimoto

President: Toshihiko Kumamoto

Chairman and President: Toshiro Ue

Head Office

1-51, Monzen-cho, Naka-ku,
Nagoya-shi, Aichi

7-1, Hakataekihigashi 3-chome,
Hakata-ku, Fukuoka-shi, Fukuoka

21-1, Isoji 2-chome, Minato-ku,
Osaka-shi, Osaka

Business details· Telecommunications
construction business· Information service business· Telecommunications engineering business· Solution business· Others· Telecommunications facilities
engineering business· ICT solution business¥59.8 billion¥54.1 billion¥37.8 billion

1,916

1,268

909

Net sales(FY17)

Number of employees(as of March 31, 2018)

11 Corporate Report 2018

Greetings /Message from the President

a basic policy of ensuring stable dividends, while considering business results, the future business environment
and investments for ensuring financial strength andbusiness expansion.
Regarding dividends, we employ a dividend on equity(DOE) of 3% as an indicator of a stable dividend. Accordingly, the annual dividend per share for fiscal 2017was ¥50.
We have also decided to increase the annual dividend per share effective from fiscal 2018, with 3.5% of
the DOE as the benchmark percentage. Consequently,
we plan to set the annual dividend per share for fiscal
2018 at ¥64 (an interim dividend per share of ¥32 and a
year-end dividend per share of ¥32). As the management integration is scheduled to be conducted as of
October 1, 2018, the year-end dividend will be distributed based on the total of the Company’s shareholders’equity and that of the other three companies in the
management integration. We will inform you of thisissue as soon as the amount thereof is determined.

Regarding the purchase of treasury shares, we makeit a policy to flexibly conduct purchases in view of cash
flows and market conditions and plan to purchase ¥3.0
billion during the first half of fiscal 2018.
In addition, we will maintain a stable high level of returnon equity (ROE) by promoting the growth of income andenhancing capital efficiency and continue to seek greater
earnings per share (EPS).
Establishing a continuous cycle that starts with raising
the awareness of employees, which activates the organization and leads to offering services appreciated bycustomers and better business performance, will resultin the distribution of higher profits to shareholders. We
will strive to enhance corporate value through raisingbusiness performance and aggressively distributing
profits to shareholders.

Operation highlight
Orders received (¥billion)

Net sales (¥billion)

Operating income (¥billion)

340.0
324.1

335.0

325.0
312.6

2017

2018
(plan)

2016

2017

27.5

20.8

298.8

2016

25.6

2018
(plan)

2016

2017

2018
(plan)

Note: R egarding the “2018 (plan),” the effects of the Company’s management integration with C-CUBE Corporation, Seibu Electric Industry Co., Ltd. and NIPPON DENTSU CO., LTD., which isscheduled to be conducted as of October 1, 2018, on the relevant figures are not taken into consideration.
Corporate Report 201812

Business Overview

Linking all Communications.
We Contribute to Creating
an Affluent Society
with Two Types of Solutions.
The KYOWA EXEO Group works to contribute to
the realization of an affluent society and perform its
corporate social responsibility by providing highvalue-added ENGINEERING SOLUTIONS andSYSTEM SOLUTIONS.

ENGINEERING SOLUTIONS

Telecommunications Infrastructure
As broadband services are expanding toward the building of a safe and secure ICT society, the diversificationand sophistication of various technologies are underway. We provide consistent quality services from planning and design to construction, operation and maintenance for all types of communications equipment andfacilities throughout the country based on performanceover the years and excellent technologies.

To page 15

13 Corporate Report 2018

Building a better, brighter future together

Business Overview

SYSTEM SOLUTIONSUrban infrastructure
We are engaged in works related to redevelopment
projects toward 2020 in the Tokyo metropolitan areaand public works in line with the government’s initiatives for building national resilience, including the
installation of telecommunications (except for telecommunications carrier-related), electrical and airconditioning facilities and urban civil engineering
works. We are also working to establish social infrastructure toward the realization of a recycling-oriented
society by engaging in renewable energy (e.g., biomass) and other environment-related works and theconstruction of environmental plants.

To page 17

Drawing on our ICT technologies, we are offering totalsolutions in both the network integration (NI) field,
which provides the establishment, operation and maintenance of telecommunication network systems forcorporations from establishing LAN/WANs to cloudservices, and the system integration (SI) field, which isestablishing systems for corporations such as telecommunications carriers, financial institutions andmanufacturers.

To page 18

Corporate Report 201814

Business Overview

ENGINEERING
SOLUTION

Telecommunications Infrastructure

NTT Group

We are working to establish various telecommunications facilities for the NTT Group companies.
Access engineering:

Network engineering:

Mobile engineering:

We lay optical fiber cable networks, which are indispensable forhigh-speed communications
networking, and install the Fiber To
The Home (FTTH) system toprovide broadband services suchas the Internet to corporations andhouseholds. EXEO’s world-leading,high-quality construction technologies, which have won five gold
medals at the World Skills Competition, aresupporting
the everevolving
information
communications age.

We inspect, design, build, monitor

We provide total services to achieve
comfortable mobile communications
environments not only inside buildings where people gather but also
inside station premises and tunnels.
Our services include negotiations for
installation, prior investigations anddesign of wireless phone basestations, and we establish mobile
communications facilities in general,
conduct
qualitysurveys andprovidevarious typesof maintenance.

15 Corporate Report 2018

and operate networks using
leading-edge routers and servers.
We also design, construct andmaintain switchers, transmission
equipment and power equipment
at nationwide legacy facilities, allof which support today’s communications networks.

Handing down the technology
and contributing to society
Supporting the core business for KYOWA EXEO

Business Overview

Michio Sagawa, an employee of the Company, wasrecognized in 2015 by the Ministry of Health, Laborand Welfare as an outstanding skilled worker (mastercraftsman), in appreciation of his years of involvementin the wiring and installation works for information andcommunications facilities, which contributed to raising
the quality of telecommunications works, as well as in
the training of the Company’s employees and instructors, which produced many medalists at the National
Skills Competition.

Contributing to the development of the informationand communications industries overseas
NCC

We are also working to establish various
telecommunications facilities for new common
carriers (NCCs), or telecommunications carriers
other than the NTT group.
Telecommunications facilities

Since 1998, the Company has been providing foreign
engineers with lectures and facility tours for fostering
optical access installation engineers as part of the“BHN Human Resources Development Program”
hosted by the BHN Association, a nonprofit organization. We will continue to be actively engaged incontributing to the strengthening and enhancement oftechnical capabilities and the development of humanresources to promote the growth of information andcommunications industries at home and abroad.

We construct telecommunications facilities for new
common carriers (NCCs) such as the KDDI Group andthe Softbank Group.

Corporate Report 201816

Business Overview

ENGINEERING
SOLUTIONS

Urban infrastructure

Telecommunications facilities

Urban civil engineering

We construct telecommunications facilities for municipalities and government agencies, cable television companies, railway companies and othercustomers based on performanceover the years and excellent technologies.

We establish telecommunications facilities such as
manholes and underground conduits, rehabilitatebuilding structures and installelectricity cables underground.
We are establishing a social infrastructure with a consistent operational structure from design andconstruction to maintenance.

Electricity supply

Environmental engineering

We are providing a broad range of consistent services fromdesign and construction to maintenance for office buildings andcommercial buildings, as well as telecommunications, power
generation, air-conditioning and hygiene facilities nationwide.
We can handle various projects fromgeneral electrical work to intricate electric
power construction that requires highly
advanced technologies.
We are also contributing to society in energy-saving fields such as mega solar power
generation and LED lighting projects.

We utilize our waste treatment technologies for incineration and recycling facilities and our wood biomass
boilers and other such renewable energy technologies
and water treatment technologies forindustrial wastewater treatment facilities and sewage treatment facilities.
We offer such comprehensive
ecotechnologies with low environmental burden from planning, proposal and construction to operation.

17 Corporate Report 2018

Business Overview

SYSTEM SOLUTIONS

Network Integration (NI)

System Integration (SI)GlobalThe Group offers various types ofsolutions drawing on ICT technologies, including network systemengineering collaborated with cloudtechnology and services, as well as
wireless LAN solutions, video
solutions and IoT solutions utilizing
mesh network beacons.

To help customers solve their
management issues, we provide
system solution services tailored toa variety of customer needs, which
encompass everything from consulting to development, construction, maintenance and operation,
through the combination of optimal
solutions.

We are conducting business mainlyin Southeast Asia, including works
for communications facilities in thePhilippines led by MG EXEO
Network Inc., a Philippines-based
consolidated subsidiary of the Company established in 1991. In addition, EXEO ASIA COMPANY
LIMITED, a Thai-based consolidated
subsidiary of the Company, wasestablished in
January 2018
to provide local
Japaneseaffiliatedcorporations
with ICT
solutions.

Major solutions

Integrated cloud engineering
Unified telephone communication systems
Network and server solutions
Security solutions
Wireless LAN solutions
Monitoring camera and video solutions
EXBeacon solutions
IoT and sensing solutions
Energy conservation and smart energy solutions
Disaster prevention/mitigation and disaster response solutions
Home network solutions
Operation, monitoring and maintenance services
Business improvement solutions process analysis, BPM and RPM
System Of Engagement (SoE) solutions ESB, ETL and API
Development and operation efficiency improvement solutions DevOps
Monitoring solutions NW, servers and applications
Business support solutions MS-D365, MS-O365, AI
Cloud PBX solutions
Corporate Report 201818

Business Overview

KYOWA EXEO Group Structure(As of July 1, 2018)

KYOWA EXEO CORPORATION
Two Major Consolidated Subsidiaries
EXEO TECH CORPORATION

Daiwa Densetsu Corporation

Taking on the challenges for new growth with the integrated ICT

Developed with local communities based on the construction ofengineering capability that can address a diverse range of needs

communications infrastructure regarding new fields as new pillars of growth

EXEO TECH CORPORATION was established on July 1,
2015, through the management integration of WAKO
ENGINEERING Co., Ltd., and Ikeno Tsuken Co., Ltd.
Under its management philosophy of “While making swift
responses to environmental changes based on the spirit ofcustomer first, we provide support for information andcommunications services through our advanced technicalabilities and quality and optimal services, thereby contributing to the realization of an affluent society,” we will continue
to take on the challenges for new growth as a member ofthe KYOWA EXEO Group by seeking the expansion ofbusiness operations in such fields as environmental energy
and welfare solutions, etc.

Under its management philosophy of “Link Technologies,
Advances Together with Communities and Create the Future,”
Daiwa Densetsu Corporation endeavors to link people andsociety with its advanced technologies cultivated with confidence over long years and engages in business operations
together with local communities as a Tohoku-based company.
Its scope of business ranges from the installation of various
facilities to system design and operation, including the construction of social infrastructure in the fields of telecommunications works, civil engineering, electricity and mobile; thedevelopment of the NUTRIMATE food service management
system, which boasts a high market share among hospitals
nationwide; and proposals for ICT solutions. We will create
value for the future in all fields, such as disaster prevention,
welfare, medical care, health, education, agriculture andenergy, as a total solutions provider that contributes to society.

Company Name

EXEO TECH CORPORATION

Establishment

May 20, 1948

Company Name

Daiwa Densetsu Corporation

1-23, Heiwajima 4-chome, Ota-ku, Tokyo

Establishment

August 1, 1949

Representative Director and President: Yuki Sakuyama

Head Office

5-1, Omachi 2-chome, Aoba-ku, Sendai-shi

Representatives

Representative Director and President: Hideki Tohara

Head Office
Representatives
Paid-in Capital¥450 million

Business Outline

Communications infrastructure, ICT solutions,environmental and social innovations, etc.

Examples of expanding solution business

Installation of a smart meter

Paid-in Capital¥450 million

Business Outline

Communications infrastructure, ICT solutions,environmental and social innovations, etc.

Examples of expanding solution business

A Braille guide board with a multilingual voice guidanceInstallation ofa monitoring
cameraNUTRIMATE food service
management system

26 Other Consolidated Subsidiaries
Accessengineering

Shinyei Tsushin Co., Ltd., Suncrex Corporation, FUJI DENSETSU CO., LTD., Ecos Hokuei Corporation, SankyoTechno Co., Ltd., KANAC Corporation, K. Technos Co., Ltd., MG EXEO NETWORK, INC., Sigmax Co., Ltd.

Civil engineering

Exeo Infra Corporation, Infratechno Corporation

Networks

Exeo Network Corporation

Mobile telecommunications

Exeo Mobile Corporation, Toho Communications Co., Ltd., Yuaituken Corporation, Kyoei Densetsu Kogyo
Corporation, Denseisha Co., Ltd.

IT

ACCRESCO CO., LTD., ICOMSYSTECH CO., Ltd., ADVANCED INFORMATION DESIGN Co., Ltd.)Other

KYOWA SECURITY SYSTEM CORPORATION, Kyokuyoh Corporation, Shinwa Seisakusyo Corporation, Exeo
Butsuryuu Service Corporation, Exeo Business Corporation, ASAHI DENWA KOGYO CORPORATIONThe Group companies other than the above: 10 nonconsolidated subsidiaries and 11 affiliates

19 Corporate Report 2018

Overview of Group Companies
Access engineering

Mobile telecommunications

Suncrex Corporation

Exeo Mobile Corporation
Exeo Mobile Corporation’s primary objective is to provide customers with the safe and high-quality design, construction and maintenance of mobile telecommunications facilities and equipment at
all times. To this end, we are developing and reinforcing employees with multiple skills and management capabilities. In addition,
as a Group company that has several branches and technology
centers in all corners of the country, we have established anationwide one-stop construction management system in collaboration with the mobile-related departments/sections of KYOWA
EXEO’s Head Office and branch offices. We will also develop a
flexible operating system relative to the number of our works
under way and promote business improvement reforms to steadily
achieve our business plans through enhanced productivity.

Access engineering

Mobile telecommunications

MG EXEO Network Inc.

Denseisha Co., Ltd.

MG EXEO Network Inc. was established as a local joint venture of
the KYOWA EXEO Group in May 1991. It has engaged consistently
in the telecommunications infrastructure construction business in
the Philippines and celebrates its 27th anniversary this year.
We opened its training center in May 2017 to address training fordesign/construction technologies and safety so that local employees can improve their technological capabilities. Furthermore,
twice every year, several Philippine employees are dispatched toJapan for the training of promising employees and railway
telecommunications training.
The selected participants learn about the Group’s high technological capabilities in Japan and continue to take on challenges innew business fields, thereby contributing to development in thePhilippines.

Denseisha Co., Ltd. was founded in 1920 for the electrical works
business. After joining the KYOWA EXEO Group through subsequent changes, we early entered the software development
business based on our electricity and telecommunications
engineering services. Positioning the three fields of electrical
works, telecommunications infrastructure works and softwaredevelopment as mainstay pillars, we have become a powerful
ICT-related corporation. We will continue to take on the challenge
of being a choice company by creating an optimal relationshipbetween people and technology and contributing to society
under the management philosophy of “Ingenuity, Sincerity and
Enthusiasm.”

IT

Other

ACCRESCO CO., LTD.

Exeo Butsuryuu Service Corporation

ACCRESCO CO., LTD. offers consistent services ranging fromdevelopment to installation, operation and maintenance in all
domains from network to applications in the ICT solution field.
Our around-the-clock operation and maintenance services
support customers seamlessly every day.
Our network services support the operation, monitoring andmaintenance of customer networks ranging from their information
communications infrastructure to PBXs and terminals.
As for applications, we totally support customer requirement definitions, design, development and maintenance in a wide range offields.
“ACCRESCO” derives from a Latin term meaning “increase” and“getting big or grow.” We will strive for continuous businessgrowth by newly taking on challenges in the ICT field.

Business Overview

Suncrex Corporation was founded in 1964, but the current
company was established through a merger of three companies
in July 2003. Bearing in mind the creation and growth concepts
inscribed in the company name, all our employees attend to theirbusiness with diligence. Under the KYOWA EXEO Group’s visionof the medium-term management plan, “Focus Group strengths
to take total solutions to a new growth stage,” we will strive to be“a company that can accommodate any and every customer
request.” Such initiatives include works for access engineeringcommunication lines and works inside of houses, which comprise our core business; the construction work of information
communications facilities and equipment relative to NCC-related
works, railway telecommunications, LAN wiring and/or systemdevelopment; the solar power generation facilities-related business; and participation in the 5G-compliant mobile telecommunications-related business.

Exeo Butsuryuu Service Corporation’s basic principles are“Change toward an active organization” and “Challenge to new
initiatives.” According to these principles, we pursue a variety of
initiatives such as1) realizing simplified operations via automatic office processing
utilizing RPA2) p
 ushing forward with the expansion of trial businesses suchas the operation for work-related goods at the NTT DOCOMO Operations Headquarters of KYOWA EXEO3) e xploring a new business utilizing the Shin-kiba Logistics
Center effectively,
By implementing these measures in the pursuit of cost reduction
for the Group’s procurement of materials, we will continue to takeon the challenges as a member of Team EXEO.

Corporate Report 201820

Special
FeatureKYOWA EXEO Group’s Corporate Value Creation Process

KYOWA EXEO will contribute to the resolution of social issues through its
The KYOWA EXEO Group’s corporate philosophy includes cultivating technological capabilities,
to society. Under this philosophy and with its technological capabilities as a driver of growth, thenow, while reflecting the needs of the times. The Group’s technological capabilities now contributesocial issues at home and abroad. The KYOWA EXEO Group will continue to address social issues
businesses, thereby achieving sustainable growth with society.

realize a highly advanced ICT
Telecommunications Helpsociety through our telecommunications
Infrastructure
infrastructure businessTelecommunications Infrastructure BusinessSocial issues to be solved through thetelecommunications infrastructure business:

Major social issues:
Global warming
Labor shortage due to thedecline in domestic population
Energy problems
Urban concentration
Japan’s falling birthrate,
super aging population, etc.

Medium- to long-termbusiness environment:
Declining fixed-line
phonesLabor shortage in theconstruction industry
Social needs toward
the Tokyo Olympics andParalympics
Transition to the nextgeneration wirelesstechnology (5G)
Reinforcement ofdisaster management,etc.

21 Corporate Report 2018

Continued upgrading of broadband telecommunications
LTE-Advanced
5G)(LTE
Facilitates the operations that address the receptiondifficulty for the 700-MHz band
Expanding the demand for optical fiber access services
through 4K and 8K UHD (ultra-high definition) displays andthe Hikari Collaboration

Urban
infrastructure

Help realize a society where safety
and security are ensured throughour urban infrastructure business

Urban infrastructure businessSocial issues to be solved through the urban
infrastructure business:
Ensures a globally comparable level of landscape bypromoting the undergrounding of overhead power lines
Expanding public investments for building national
resilience (e.g., installation of monitoring cameras,
refurbishment of highways)
Renewal of aging waste disposal plants
Renewable energy sources, including biomass

SystemSolutions

Help realize a society that is friendly tothe environment and people throughour system solutions business

System Solutions BusinessSocial issues to be solved through the systemsolutions business:
Reform of industrial structures through the cloud, IoT, bigdata, etc.
Promotes the deepening of communication
Solutions for advanced security
ODA (Official Development Assistance)-related efforts toaddress the economic growth of Southeast Asia

Human Resources Are Our Chief Asset
KYOWA EXEO contributes to society through its hightechnological capabilities, which are underpinned by its
excellent human resources.
Therefore, we regard human resources as a chief asset, and set
as a principle that excellent human resources should beacquired and developed along with a conducive working
environment for our employees.

businesses (technologies) and strive for sustainable growth with society.
seeking affluence and contributing
Group has grown to be the way it issignificantly to the resolution ofand help solve them through its

Value offered for society:
Convenient andaffluent life
Safe and securesociety
Green-rich EarthContribution totechnologicaldevelopment

Support for restoration ofdisaster-afflicted areas
More disaster-resilient
infrastructure
Enhancement of energy
efficiency

Society
Shareholders and investors
Customers

Important issues for the KYOWA EXEO
Group to achieve sustainable growth

Employees

Developing human resources / developing
and handing down technologies

Special Feature

KYOWA EXEO Group’s

KYOWA EXEO Group’s Corporate Value Creation Process

Provisionof value to various
stakeholders

Creation of highly
productive employment
opportunities

1

Extending JapaneseTechnologies to theWorld
Go to P.23

Technological Capabilities
Special Feature

2

Resolving Social Issues
by Gathering Various
Technologies Together Go to P.25

Human resources
as a chief asset

Special Feature

3

Respect of Diversity
and Promoting Equal
Opportunities
Go to P.27
Corporate Report 2018

22

KYOWA EXEO Group’s Corporate Value Creation Process
SpecialFeature1 Extending Japanese Technologies to the WorldKYOWA EXEO’s global sustainable
contribution activities
According to the OECD’s “Economic Outlook for Southeast Asia, China and India 2018,” ASEAN countries arepoised to maintain its growth momentum, averaging 5.2% per year from 2018 to 2022, backed by robust domestic
consumption and investment, as well as a strong trade rebound. Meanwhile, the 2018 report focuses on fostering
economic growth through digitalization and suggests that increasing the number of Internet users and improving
infrastructure in every member country are important prerequisites for ASEAN’s sustainable growth.
The KYOWA EXEO Group has developed its global business to contribute to ensuring the comfortable lives ofpeople worldwide by making sophisticated “Japan Quality” technologies rooted in local communities. Pivoting
around our overseas base in the Philippines, where high growth rate among ASEAN countries has continued to beseen, and celebrating its 27th anniversary this year, we are nurturing ICT-related engineers in that country and developing globally prepared human resources who can safely install and manage safe, secure and high-quality telecommunications infrastructure not only in the Philippines but also in other Southeast Asian countries that urgently needsuch infrastructure. Leveraging our technological capabilities and human resources nurtured in Japan, we will further
contribute to creating a better society worldwide by developing telecommunications infrastructure that can fully
demonstrates the performance of Japanese information and communications products and excellent human resources capable of independently installing and managing such infrastructure.

Contribution to the international
community through MG EXEO’sbusiness activities

Masayuki Tomita
Operational Manager, Global Business Promotion Section,
Solutions Promotion Department, ICT Solutions Headquarters

MG EXEO contributing to the improvement of
the livelihood of the Philippine people

Making Japan Quality, which EXEO boasts of,rooted in Southeast Asia

MG EXEO was established in 1991 as a local joint venture of
the KYOWA EXEO Group, which undertakes telecommunications facilities works in the Philippines by drawing on
sophisticated, Japan Quality facilities technologies. Becoming
a consolidated subsidiary of the Company in 2012, it mainly
undertakes facilities works for leading telecommunications
carriers in the Philippines. In May 2014, MG EXEO received
an order for works for comprehensive services including new
installation and renovation of indoor wiring for households
and offices, as well as maintenance and management ofrelevant outdoor wiring and facilities, reinforcement and/or
repair works from PLDT Inc., a leading telecommunications
carrier in that country. As described above, MG EXEO’sbusiness operations have expanded successfully. At present,
MG EXEO has seven Japanese employees and more than
900 Philippine employees. MG EXEO continuously intends tocontribute to improving the livelihood of people through its
commitment to the telecommunications infrastructure construction business.

MG EXEO has focused on the development of Philippine
engineers, human resources as a chief asset. For example,
KYOWA EXEO has dispatched Japanese engineers whoseskill level is among the world’s top-rated to MG EXEO toupgrade the skill level of its engineers. In May 2017, its
training center was completed, providing a working environment to hand down Japan Quality technologies to local
engineers through consistent, comprehensive education on
safety knowledge and operational ethics and the mastery ofpractical skills, all of which are necessary for the onsite
operations of telecommunications works. We have beenhighly acclaimed from an executive of a local partner company, an investor in MG EXEO. He commented that promoting the “Technology” and “Safety and Security” concepts,
which represent the essence of Japan Quality, should inevitably contribute to Philippine industrial development. In the
future, Philippine engineers as trainers will be able to develop
useful human resources who have the potential to independently install and manage high-quality telecommunications
infrastructure.

23 Corporate Report 2018

Improving technology levels
to become the world’s best
Michio Sagawa (right)
Facility Manager, Central Engineering Training Center and Master Craftsman,Engineering Planning Section, Cable Engineering Department

Takashi Tamiya (left)
Section Manager, Engineering Planning Section, Cable Engineering Department, Section Manager,
Business Promotion Section and in Charge of Human Resources Development, Human Resources Division

KYOWA EXEO has made efforts to strengthen and improve
its technological capabilities and human resources development to provide high-quality works for the installation of
information and communications networks including thelaying of optical fiber cable networks. In October 2017, atthe 44th World Skills Competition held in Abu Dhabi in the
United Arab Emirates, Mr. Yoshiaki Shimizu, who participated as a representative from Japan in the information
network cabling category, won a gold medal.
The World Skills Competition is held biennially to encourage representative youth from different countries or regions
to compete using their technical skills to promote occupational training and skill enhancement in the participating
countries/regions, as well as to encourage international
exchange and goodwill among young skilled workers. The
National Skills Competition of Japan, which is the domestic
competition, is held each year in preparation for the biennial
World Skills Competition. As the national competition islimited to youth participation with an age limitation on entry
qualification, Mr. Shimizu competed at his last opportunity
given that he will age out. Participants have only one chance
to enter the World Skills Competition. Our employee’s entry

in the World Skills Competition was our first entrant following a five-year absence. During the period from the 38th
World Skills Competition when the information network
cabling category was newly established, through the 41st,
our employees won gold medals in this category for four
consecutive events. Although Mr. Shimizu must have beenstressed by the heavy peer pressure psychologically, hedemonstrated his self-confidence having won the intense
national competition, exhibiting fantastic skills accumulated
via routine operations and the effects of harsh, repeatedtraining, accomplishing impressive feat of winning a gold
medal. He was also awarded the Prime Minister’s Prize in
the Monozukuri Nippon Grand Awards.

Medalists getting involved in technological contributions in Japan and abroad

KYOWA EXEO Group’s Corporate Value Creation Process

Won a gold medal at the World Skills
Competition for the first time in three events.

Like other senior employee medalists, Mr. Shimizu is committed to improving the technical skills of young employees
serving as a trainer who helps develop entrants for the Skills
Competitions, as well as Philippine engineers of MG EXEO.
The training for nurturing competition entrants is done at acorner of the Central Engineering Training Center where new
employees receive the initial technical training after joining theCompany. Easy access to the entrants and medalists of the
Skills Competition has helped to stimulate and motivate new
employees. Moreover, the medalists lecture and appear ontalk shows at their alma mater and/or vocational technicalschools, during which a major theme is the circumstances
under which they won the gold medal and creating interest
among young people to become engineers. In addition, theysometimes go abroad as trainers when requested for technical guidance and/or training, thereby enhancing the Company’s international technological contribution. Some of theformer medalists, after serving as trainers, help to raise thetechnological capabilities of younger engineers at construction sites by demonstrating their excellent onsite capabilities.
KYOWA EXEO will continue to strengthen its technologicalcapabilities and develop excellent young engineers throughtheir entry in the World Skills Competition, as part of its social
contribution.

Mr. Yoshiaki Shimizu

Corporate Report 2018

24

KYOWA EXEO Group’s Corporate Value Creation Process
SpecialFeature2 Resolving Social Issues by Gathering Various Technologies Together

Resolving Social Issues
through IoT Technologies
At the Davos Forum 2017, an annual assembly of the World Economic Forum, a primary agenda item was the“4th Industrial Revolution,” in which all things are connected to Internet via “IoT,” and a variety of enormous data
accumulated via this mechanism are analyzed using AI systems for the development of new products and services. The Forum confirmed that the Internet, or a globally common infrastructure, is an engine that has changed
the existence of all social infrastructure and discussed the necessity of cutting-edge technologies that allow thecoexistence of sustainability and an industrial revolution, given such concerns as the huge consumption ofelectric power to operate the Internet.
The KYOWA EXEO Group has started the provision of the “EXBeacon Platform” (an IoT platform)-based solutions to collect positioning data on people and things and a variety of sensor data using “EXBeacon” (mesh network beacons), which employ Bluetooth Mesh specifications. In addition, we have implemented a full-scale
operation of the “EnergyViewer,” to enable smart and complete energy management utilizing IT separate from theprevious patience-type energy conservation. We will continue to take on the challenge of resolving various social
issues through our accumulated technologies, toward a society where people can live comfortably in an affluent
manner.

Shingo Fujishima (right)
Assistant Manager, Geo Solution Promotion
Section, Solutions Promotion Department,
ICT Solutions Headquarters

Takahiro Aoki (center)
WHERE,inc.
General Manager of administration section

Mr. Yasuhiro Shinozaki (left)
Qualcomm CDMA Technologies
Senior Manager, Marketing“EXBeacon Platform,” of which future
possibilities are expected as an IoT
networkDeveloped “EXBeacon” (mesh network
beacons)

Demonstration experiment at FARET TACHIKAWA
ART that extends an area of 5.9 hectares

In cooperation with WHERE, Inc., a subsidiary of the Group,
and Qualcomm, Inc., KYOWA EXEO originally developed“EXBeacon,” or a mesh network beacon (terminal) that
adopted CSRMesh, the so-called prototype of BluetoothMesh being Bluetooth’s new specifications. “EXBeacon” allows beacon terminals, which are small-powertransmitters of identifying signals, to be equipped with transmitting and receiving functions. With this unique feature,“EXBeacon” is expected to be broadly recognized as anindoor positioning infrastructure to measure the positions ofpeople and things, or as a sensor network to concentrate avariety of sensor data, and further as a “EXBeacon Platform”
being a basic unit of the IoT network to enable centralized
management of the failures and/or the remaining battery
level of each beacon.

FARET TACHIKAWA ART is a public art exhibition spaceestablished in a business zone near the Tachikawa-Kita
Station of the Tama Monorail with the cooperation of 92
artists from 36 countries. Tachikawa City, KYOWA EXEO
and WHERE conducted Japan’s first demonstration experiments to verify the practical utility of remote control andcentralized management with regard to the production ofguide applications utilizing beacons and the addition of theintercommunicative function on beacons (mesh network
beacons) of which separate management had been previously necessary.

25 Corporate Report 2018

“EnergyViewer,” a next-generation energy
conservation system, that opened the door
to smart energy management
EnergyViewer was awarded the FY 2017 Grand Prize
for Excellence in Energy Efficiency and Conservation

EnergyViewer helps create affluent
environments with small amounts of energy

Takanori Akutsu

Ms. Momoko Nagasaki

Manager, New Energy
Promotion Department,

President of Tepco Customer Service

ICT Solutions Headquarters

TCS’s Energy Management Service (EMS), a uniqueenergy conservation service utilizing IoT, which was
produced from the collaboration with Tepco Customer
Service Corporation Limited, was awarded the FY 2017
Grand Prize for Excellence in Energy Efficiency andConservation (Chairman Prize for ECCJ in the ProductCategory & Business Model Category). KYOWA EXEO’s“EnergyViewer” technology is employed for this service.
The power consumption of air-conditioning equipment is said to account for 30%–40% of electricity
usage. The EnergyViewer is an energy conservation
system that enables energy conservation for air-conditioning equipment through remote control from a cloudtype platform by connecting IoT devices such astemperature sensors. The system was originally developed by KYOWA EXEO, and was first implemented at
the Head Office of KYOWA EXEO in January 2018
followed by other Group companies.
In the future, we will extend our business from simple
energy conservation to raising special value by promoting the introduction of the IoT system capable of monitoring/controlling indoor environmental factors otherthan temperature, with the EnergyViewer’s application
as a platform, as well as by enhancing control automation drawing on AI and/or the deep learning method.

Contributing to the visualization of offices, factories,
warehouses, construction sites and so on.
To realize work style reforms and changes of the way ofworking, the availability and/or usage scenes are extending,centering on the application of “visualization of the way ofworking” such as the recognition of each employee’s presence in offices with free-address layouts; management ofmeeting rooms; room entrance/exit management; andmanagement of diverse things such as keys and USBs.
Moreover, the needs for visualization are expanding, encompassing the management of depositories of goods at plants
and/or warehouses; the visualization of employees’ behaviors; the “visualization of circumstances” such as indoor
environment management and the collection of machinesensor data; gate entrance/exit management at building/construction sites; and the “visualization of fields” such as the
management of the location/transfer of things. We will endeavor to create integrated services that contribute to thevisualization of all things by operating simultaneously diverse
applications on the “EXBeacon Platform.”

Tepco Customer Service Corporation Limited (TCS), a
power retail business company, is committed to its
mission of resolving social issues under the slogan of“Create affluent environments with small amounts ofenergy.” As a promising means to address this mission,
the provision of energy conservation service is necessary. Moreover, as our major customers are small- to
medium-sized business proprietors, “low cost,” “hasslefree easiness without requiring customer’s engagement”
and “ensuring comfort” are important conditions.
Although these requirements were difficult barriers toclear, the adoption of “EnergyViewer” enabled us tomeet the requirements. Accordingly, we could complete
the vital energy conservation service that satisfies andpleases many societal constituent members. At thesame time, this service has become a promising added
value for customers who use electricity provided by us.
I believe the effects and continuity are important
relative to the energy conservation service. We intend tocontinue to maintain our sound partnership with KYOWA
EXEO so that TCS’s EMS can grow sufficiently as
regards its content as a socially useful service for customers and citizens on an ongoing basis.

Smartphone

PC

KYOWA EXEO Group’s Corporate Value Creation ProcessAwarded the Grand Prize for Excellence inEnergy Efficiency and Conservation(Chairman Prize for ECCJ in the ProductCategory & Business Model Category).

Corporation Limited

ServerCloud

Beacons (moving)(fixed)Sensors⑥ Collection of machine sensor data
⑤ Indoor environment
management④ Location management forthings and mobile objects① Management ofdepositories of goods② Authorization ofentrance/exit associatedwith the visualization of
employees’ behaviors③G
 uidance of employees toward
their respective destinations

EXBeacon
Corporate Report 2018

26

KYOWA EXEO Group’s Corporate Value Creation Process
SpecialFeature3 Respect of Diversity and Promoting Equal Opportunities

Promoting diversity with intent to create
innovation and revitalize the organization
Diversity is drawing attention as the core source of executing a management strategy to raise profit-gaining capability by creating innovation and revitalizing the organization. In particular, the practice of diversity management
has been required in Japan as a pillar of innovating the previous homogeneous human resources strategy, as well
as of employing and retaining excellent human resources in view of shrinking workforce resulting from the declining birthrate and aging population. Against this background, the Ministry of Economy, Trade and Industry (METI)
report, which was released in March 2017, presented the Action Guidelines to be followed by corporations in
implementing the “Diversity 2.0” diversity management initiatives.
The KYOWA EXEO Group established the Diversity Promotion Office within the Human Resources Department
in October 2016. In October 2017, we enhanced the status of the Office to the Diversity Promotion Unit and it
now focuses on promoting and developing our diversity management.
As a consequence, we have carried out initiatives linked with Diversity 2.0. Such initiatives include the nurturing of a corporate culture associated with the raising of awareness of management executives and female employees; work style reforms that allow every employee including female employee to work with high levels of job
satisfaction; and active participation of human resources to ensure equal opportunities.

Foreign national engineers
actively participating in MG EXEO
Touching the “EXEO Spirit” through educational
training tours to JapanKYOWA EXEO offers one-week educational training tours
with MG EXEO’s excellent engineers twice every year. The
invited engineers are expected to address diverse matters bydirectly experiencing a variety of fields of KYOWA EXEO. This
project started in 2014, and almost 50 employees haveparticipated to date.
This training project intends to help the participants understand the thorough adherence of related parties of the KYO-

27 Corporate Report 2018

Masayuki Tomita
Operational Manager, Global Business Promotion Section,
Solutions Promotion Department, ICT Solutions Headquarters

WA EXEO Group to Japan Quality, which involves the precise,safe and secure progress of any work, and to fully understand the EXEO Spirit, which means the respect of every
employee’s personality. Such educational training tours
introduce routine actions or common practices in Japan,such as a variety of preparatory activities for safe work, forexample, everyday morning assembly, dress check, radio
gymnastic exercise and an individual group meeting, all ofwhich are put in practice before the start of daily operations
at the training center.
With these measures in place, the participants come tounderstand that the engineers themselves can be protectedfrom injury or accidents by adhering to this discipline, thereby
ensuring their stable earnings and livelihood. Furthermore,their acceptance and handing down of Japan Quality and the
EXEO Spirit to local employees lead to enhancing loyalty to
the Group and increasing the retention rate of MG EXEO’s
employees.
Meanwhile, there is a clear trend toward highly talented
and/or motivated people gaining appointment to leadership
positions regardless of gender in the Philippines. This also
applies in MG EXEO. As a result, many female employees arehighly motivated in a broad range of business fields not only
as field execution managers or field operators but also in
administrative departments such as design, general affairs
and accounting, which are back-end offices to support
engineers.

Diversity Promotion Unit established tofurther strengthen diversity management
Strengthening diversity management by assigning
representatives to promote women’s participation

Eiko Sakai (right)
Unit Leader, Diversity Promotion Unit, Human Resources Division

Takako Hamasaki (left)
Diversity Promotion Unit, Human Resources Division

tempted trials by considerably increasing the number oftelework terminals. The effects of reduced working hours
have emerged at fields and at several sales departments/
sections, and we have modified the relevant scheme toward
its full-scale implementation in the near future.
The greatest feature of the KYOWA EXEO Group’s diversity
promotion is that the leadership of and support by top management, as well as the development of managers and theformation of career ownership, for which the diversity of
employees can be leveraged, are steadily in progress. All theobjectives of our diversity promotion are just set forth in the
Diversity 2.0 Action Guidelines. Diversity promotion therefore
means establishing an environment that can create a new
growth driver, in which innovative ideas reflecting diverse characters and values will revitalize the organization.

KYOWA EXEO Group’s Corporate Value Creation Process

KYOWA EXEO established the Diversity Promotion Officewithin the Human Resources Department in October 2016.
To strengthen our diversity management, we extensively
established the Diversity Promotion Unit, a new organization
to reinforce our initiatives in October 2017. Since April 2018,an employee in charge of promoting the employment of persons with disabilities has been assigned as staff, forming athree-person system.
The Diversity Promotion Unit will promote its activities in linewith the catchphrases of “Nurturing of the corporate culture,”“Work style reforms” and “Active participation of humanresources.” As for nurturing of the corporate culture, we offer
top-down awareness-raising training sessions under the direction of top management and management executives. We willthus create workplaces and a corporate culture where every
employee will develop himself or herself by understanding themanagerial effects and necessity that would result from theenhanced diversity and the corporate management thatdraws on diversified human resources.
As for “Work style reforms” and “Active participation ofhuman resources,” led by female employees standing at theforefront, we discussed measures to promote women’s
participation and sharing necessary information through representatives assigned at every department and branch in February 2017 at brainstorming sessions over lunch to dialogue
with top management and through company-wide support.
An activity report meeting was held later in March 2018.
We will review and pick out key issues entailing some work
style reforms and active participation of human resourcesfrom the viewpoint of how female employees can performtheir work with enthusiasm and energy and make use of theresults for future activities in subsequent years. In addition,
we proceeded with some reforms toward strengthening oursystem to support early resumption of office of female employees at explanatory meetings on the simultaneous pursuitof raising children and taking care of the elderly while working.
Furthermore, as part of the work style reforms, we havepromoted the telework scheme aimed at providing a step
forward to realize more flexible ways of working and at-

Our team including a female engineer was therunner-up at a skills competition
Female engineers actively involved in field operations
KYOWA EXEO’s Cable Engineering Department dispatches entrants to enter
various skills competitions to improve the skill levels of the respective entrants. At the skills competition sponsored by the Tokyo Division of NIPPONTELEGRAPH AND TELEPHONE EAST CORPORATION, three entrants(Mses. Arimura, Matsuda and Takahashi) of Shinyei Tsushin Co., Ltd.,
participated and placed as the overall runners-up in the installation andmaintenance field in the access engineering category. Our female engineers affiliated with the Cable Engineering
Department actively participate in these skills competitions and work actively in the field. They will endeavor to meetcustomers’ expectations by utilizing high technological capabilities in future field operations.
Corporate Report 201828

CSR Concept

Performing Corporate Social Responsibility (CSR) through Its Business Activities
The KYOWA EXEO Group’s basic CSR policy is to materialize its corporate philosophy and perform its social
responsibility through its daily business activities. The Group seriously addresses promoting corporate governance, compliance and risk management and works to ensure sincere and highly transparent business operations to contribute to the sustainable growth of society.

Basic CSR Policy / CSR Promotion Systems
The corporate philosophy of the KYOWA EXEO Group, which is the basic guideline for our corporate social responsibility, includes cultivating technological capabilities, seeking affluence and contributing to society, and we work to
make integrity and transparency the fundamental norms of our management. To achieve this corporate philosophy,
we need to have engagement* with the stakeholders of the KYOWA EXEO Group, thereby extracting issues to besolved to create a better society together. We recognize that such efforts to achieve our corporate philosophy areindeed efforts toward CSR.
We also think that CSR is something that every member of the staff should put into practice throughout thebusiness process, rather than having a specific division responsible for CSR activities. Therefore, we launched the
CSR Committee chaired by the President and, under the Committee, assigned a person in charge of CSR to every
department or office and to every Group company to promote CSR activities on a Group-wide basis.
*Engagement: to discuss stakeholders’ concerns, the effects of corporate activities on local communities and other various issues through opportunities created by
the company’s involvement with its stakeholders

C SR Structure of
the KYOWA EXEO Group

Corporatephilosophy

Developmentof society

ENGINEERING
SOLUTIONS

Customers

Developmentof the KYOWA
EXEO GroupEngagement withstakeholders

Business partners

SYSTEM
SOLUTIONS

Guidelines for CSR activities

Shareholders and investors

Self-awareness of contribution to society as a company
Promotion of contribution to society and social contribution activities
through business activities
Securing safety and quality
Full information disclosure and communication
Adherence to corporate philosophy and respect for human rights
Environmental protection activities
Creation of workplaces conducive to satisfactory work

Employees

ComplianceCorporate governanceRisk management

Business operations with integrity and transparency as the norm

29 Corporate Report 2018

Group companies

Society/Environment

Building a better, brighter future together

Continuing to be a Company Trusted by All Stakeholders
While actively striving to ensure information disclosure, the KYOWA EXEO Group will engage in proactive communication withall our stakeholders to fulfill our corporate social responsibility and create a better society together.

Materiality Identification Process
The KYOWA EXEO Group has engaged in CSR activities centering on the seven core subjects set forth in the ISO26000
guidance on social responsibility. Based on these activities, to achieve further creation of value in cooperation with society andthe sustainable growth of the KYOWA EXEO Group, we identified important ESG (environment, society and governance)
subjects and their materiality to the Group and its stakeholders through the process described below. We will continue topromote CSR activities according to the materiality identified by implementing the PDCA (Plan-Do-Check-Act) cycle.

Extract issues tobe solved

Evaluate the issues andidentify materiality from thestandpoint of stakeholders
and the Group

Narrow down
the issues

Review andapproval by the
CSR Committee

Corporatephilosophy
Preserving the global environment and establishing
Environment (E) a recycling-oriented societyHigh

A business organization harmoniously coexisting withSociety (S) society through its businesses

Addressing climate change

Respect for human rights and principle thathuman resources are our chief asset
Securing safety and quality

Green procurement
A

Emphasis on return ofprofits and communications

Promoting environmental businesses
B

Governance (G)Improvement of customer satisfaction

High

Work style reforms(worker-friendly working
environments included)

High

A

Business operations with integrity andtransparency as the norm

High

Contributions to society and local communities

Corporate governance

B

Compliance
Risk management(increasing information security included)
Fair and impartial transactions
Group governanceA

B

CSR Concept

Identification of important subjects and their materiality

High

The charts’ A and B axes denote:
A: Materiality for stakeholders
B: Materiality for the KYOWA EXEO GroupHigh

Issues surrounding the Group (ISO26000)

Organizational
governance

Human rights

Labor practices

The environment

Fair operating
practices

ConsumerissuesCommunity involvementand development(Social circumstances / Social issues)
External evaluation (e.g., MSCI)

External environment (e.g., SDGs)

Guidelines (e.g., GRI)

Corporate Report 201830

Results and Plans of Major CSR Initiatives

ESG

Relevant
stakeholders

Materiality (important subjects)

Measures to be taken

Analyzing and evaluating the effectiveness of the Board of Directors
Reviewing the corporate governance guidelines
Reinforcement of corporate governance
Promotion of compliance

Analyzing the causes of recent conflicts and the measures taken to address them andspreading the results across the board to prevent the recurrence of such problems
Thorough adherence to social norms
Educating on and improving the awareness of laws and regulations and the Basic
Ethics of the KYOWA EXEO Group through compliance-promoting activities

All

Ensuring information security

Governance

Reduction of management risk
Appropriate risk management
Reinforcement of business continuity planning (BCP)
Enhancement of the internal controls of the Group companies
Group companies Reinforcement of group governance

Sharing issues with the Group companies’ top executives

Business partners Fair and impartial transactions

Ensuring compliance with the procurement policy
Respect for human rights and utilization of diversified human resources(Reinforcement of efforts to promote diversity)

Employees

Respect for human rights and principlethat human resources are our chiefassetWork style reforms

Creation of ideal working conditions (Promotion and reinforcement ofwork-life balance)

Development and cultivation of human resources

Society
Customers

Securing safety and quality

Ensure high awareness of quality and continue education
Improvement of customer satisfaction

Shareholders and investors Emphasis on return of profits and communications

Society

Elimination of serious accidents (personnel and facility)

Contribution to society and local
communities
Engagement in proactive information
disclosure

Thorough management of customer satisfaction and utilization of the feedback
Impartial, timely and appropriate information disclosure
Promotion of social contribution activities
Promotion of local community contribution activities
Effective provision of news releases and issuance of integrated reports

Reduction of power consumption

Reduction of CO2
emissions

Environment

All

Preserving the
globalenvironment andestablishing a
recycling-oriented
society

Utilization of green energy and forest preservation

Energy-saving
activities at offices
Promotion ofgreenery atbuildings
Promotion ofgreen
procurement

31 Corporate Report 2018

Reduction of gasoline consumption

Reduction of paper consumption
Promotion of rooftop greenery
Promotion of greenery on the premises
Enhancement of the green purchasing rate

Building a better, brighter future together[Rating (self)]

Results of efforts in fiscal 2017

Plan accomplished

Rating(self)

Plan almost accomplished

Efforts to be made in fiscal 2018

Disclosed evaluation results on the effectiveness of the Board of Directors
Updated the corporate governance guidelines
Disclosed the corporate governance report
Reconfirmed the basic policy of the internal control system
Provided education reflecting the latest laws and regulations and the recent problems and complaints
Designated a month to promote compliance and promoted the use of the whistleblowing system
Conducted compliance trainings (including those for executives)
Held two meetings of the Internal Control Committee
Held four meetings of the Compliance Committee

Continue current efforts

Provided trainings on information security reflecting on examples of accidents at other companies and countermeasures against cyberattacks
Implemented the PDCA cycle on risks regarding the management environment and business strategies by identifying and monitoring those risks
Implemented the PDCA cycle on business process risks by identifying and monitoring those risks
Identified disaster risks and provided trainings, such as large-scale disaster drills
Conducted internal audits of the Group companies
Held four meetings of the Information Security Committee
Held two meetings of the CSR Committee

Continue current efforts

Held various meetings at different levels
Held meetings of the Procurement Council to verify transparency and fair pricing
Established the Diversity Promotion Unit in October 2017
Achieved a ratio of new female graduates employed of 15.8%
Achieved a ratio of handicapped people employed of 2.0%

Opened a training center to develop local engineers in the Philippines in May 2017
As a representative of Japan, a Company employee won a gold medal at the 44th
World Skills Competition in the information network cabling category in October 2017
Carried out various trainings, such as new employee, technical and overseas trainings

Share issues to be solved and holdmeetings with three companies withwhich management integration is planned

Continue current efforts
 arget percentage of new femaleT
graduates employed: 25% or more
Target percentage of handicappedpeople employed: 2.2% or more
Target number of days of paid leave
taken: 14 days or more per person/year
Reduce total working hours
Establish an area-specific jobs system

Number of serious accidents occurred: one
Conducted safety- and quality-related measures (Continuation of the five-year slogan:
Return to the basics of a safety and quality-oriented culture)
Held monthly Group safety meetings to educate and promote efforts on accident prevention across the board

Target number of serious accidents occurred: zero
Fiscal 2018 slogan: Absolute Safety

Analyzed the results of surveys on customer satisfaction and provided feedback (PDCA)

Continue current efforts

Conducted business results presentations and IR meetings (197 meetings)

Continue current efforts

Responded to natural disasters by offering recovery and restoration efforts
Cleanup activities for regional communities, forest preservation efforts and hands-on learning opportunities, etc.
Issued the Corporate Report 2017, EXEO Reports and other documents
Provided updates on the Group through news releases and the TOPICS pages

Continue current efforts

Continue current efforts
Continue current efforts

Power consumption: 8.03 kWh/m²· Internally installed the Energy Viewer (our own energy-saving product)· Proactively purchased eco-friendly products· Conducted energy-saving campaigns, including Cool Biz, Warm Biz and switching off lights during lunch breaks

 educe power consumption byR
1% year over year
(to 7.95 kWh/m² or less)

Gasoline consumption: average 105 liters per car/month· Monitored the use of gasoline cards monthly · Switched to more fuel-efficient carsR educe gasoline consumption by 1% year
over year (to average 104 liters per car/month)

Won the FY2017 Grand Prize for Excellence in Energy Efficiency and Conservation· Awarded the Chairman Prize for ECCJ in the Product Category & Business Model Category, jointly with Tepco Customer Service Corporation
Deployed environmental businesses:· Solar power generation business (constructed and operated facilities for the Company and other companies)· Wood biomass business (constructed facilities for other companies)
Maintenance of EXEO’s forests (national forests) at five locations (15.37 ha) nationwide

Continue current efforts

Number of sheets of paper purchased: 49.06 million sheets· Promoted WiFi availability · Monitored and periodically reported the number of sheets of paper purchased at all-office meetings

 educe paper purchases by 1% yearR
over year (to 48.57 million sheets or less)Opened the Shonan Technology Center in October 2017, which was constructed with attention to the environment (a habitat for goshawks)· Securing greenery spaces, installing rooftop solar power equipment, etc.
Cultivation of plants on a rooftop area shaded by solar panels

Continue current efforts

Introduced and promoted the purchase of eco-friendly products (office supplies and PCs)
Monitored and periodically reported the purchase of eco-friendly products at all-office meetings· Ratio of purchasing eco-friendly products: 69.9%

Related SDGs

Results and Plans of Major CSR Initiatives

Encouraged employees to take paid leave: Annual paid leave taken: 13.3 days per person/year
Reduced total working hours

Plan unaccomplishedContinue current efforts
 arget ratio of purchasingT
eco-friendly products: 70% or more
Corporate Report 201832

Management Systems

Establishing Various Mechanisms to Promote Globally
the Overall Group
Corporate GovernanceEndeavoring to ensure transparent management by establishing sound management systems and strengthening internal controls
The KYOWA EXEO Group aims to maintain the full trust of shareholders and all other stakeholders by operating with integrity and a high standard of transparency. To this end, we are confident that it is one of the significant management issues
to establish and maintain an organizational structure and management systems through which corporate governance caneffectively function. Moreover, it is our basic CSR policy to make ongoing improvements to strengthen corporate governance mechanisms that are suitably tailored to the Group’s circumstances, including the assessment of structures formonitoring management in light of changes in social conditions, laws and other developments.

Promotion of internal control
The KYOWA EXEO Group works to thoroughly adhere to compliance, manage various risks and properly and efficiently
execute business operations. At the same time, to ensure the reliability of financial reporting, the Group has stipulated the
Basic Guideline for Establishing Internal Control Systems in accordance with the relevant provisions of the Companies Act
and addresses its appropriate and efficient operation.
The Internal Control Committee, which was established in April 2003, reviews the execution of duties by the directors tofurther promote reinforcing internal control systems.
In June 2014, the Risk Control Division was established to integrate compliance-related duties, which had been distributed among more than one department, thereby enabling the centralized management and treatment of compound risks.

To view the Basic Guideline for Establishing Internal Control Systems, visit

http://www.exeo.co.jp/company/cg.html
KYOWA EXEO’s Corporate Governance System
As of June 22, 2018

General meeting of shareholders

President
Management Council
Directions,Supervision

ReportOperating officers and organizational heads
Representatives of Group companies
Business and administrative departments and branches
Supervision

Consultation,Directions

Response,Report

Internal Control Committee
CSR Committee
Compliance Committee

Group companies

Information Security Committee

ReportDirections

Internal audit

ReportRisk Management DivisionInternal Audit Division
Legal OfficeInstructions

Credit Control Office

Collaboration

Information Security Management Office

Corporate Lawyer

33 Corporate Report 2018

ReportAudit

Independent Auditor

Nomination Committee
Compensation Committee

Appointment/Dismissal
Appointment/Dismissal
Appointment/Dismissal
Consultation
Audit
Board of Corporate Auditors Determination of the appropriateness
Board of Directorsof accounting audits
Statutory auditors
Directors
Response (12, including one independent officer)
Report (four, including one independent officer)
Report
Audit
ReportSupervision
ReportReportBuilding a better, brighter future together

An Interview with the Outside Directors (Independent Officers)
Ms. Kitai and Mr. Kanazawa, who have served as Outside Director (Independent Director) for fourand three years, respectively, talked about the Company’s corporate governance and evolution
regarding improvement of corporate value.

Ms. Kumiko Kitai

Mr. Kazuteru Kanazawa

Having had important positions with the central
government, she has served as Outside
Director (independent officer) of the Company
since June 2014. She also acts as a lawyer.

Having held managerial positions in JFE
Holdings, Inc. and other companies, he hasserved as Outside Director (independent
officer) of the Company since June 2015.

Corporate GovernanceKanazawa: KYOWA EXEO’s management team has engaged
consistently in efforts for corporate governance.
Because the Company already has achieved ahigh level of governance, I find no recent evolutionary progress in terms of governance.
I agree. KYOWA EXEO has made advanced efforts
Kitai:
for governance compared to other average companies, so there is no sudden change.
Kanazawa: Still, I recently have seen some changes. Companies must keep adapting to be in sync with changes in society and people’s way of thinking. To
promote the use of female workers, the Company
established the Diversity Promotion Unit under the
Human Resources Division, and it is headed by afemale employee. Moreover, it added advanced
measures to reform work practices, such as ensuring the same wage for the same labor and restricting long hours of work.
Kitai:
What I value highly is the “Directors’ Vector Meeting.” Separately from the Board of Directors’
meetings, members of the Board gather at thismeeting to exchange frank opinions about important strategies for each business division, thedirection of new businesses and other matters ofconcern. This meeting came about after an evaluation of the effectiveness of the Board of Directors
reflected the need for an opportunity to have afreer discussion between officers, whether they areinternal or external.
Kanazawa: I think these new attempts occurred because of
KYOWA EXEO’s corporate culture of addressing
issues in a sincere and serious manner. The vector
meeting system has greatly increased the effectiveness of deliberations at meetings of the Boardof Directors.

Management Systems

An evaluation of the effectiveness of theBoard of Directors led to the creation of thevector meeting system.

The “Zerohou” reporting system
immediately delivers accident reports
straight to the top-level management.
Kitai:

I think Kyowa Exeo’s whistleblowing system, whichis intended for the early solution of harassment andoverwork issues, is solid and basically operates
well. Meanwhile, I take every opportunity to stressthe importance of the prompt reporting of concerns regarding compliance and risk management.
Corporate Report 201834

Management Systems

Kanazawa: The Company refers to the start of the accident
reporting system as “Zerohou,” or the zerothreport, instead of the first report. The “Zerohou”
system enables all accidents to be reported immediately from the place of occurrence straight to the
top-level management. The Company engages inhundreds of construction works every day, which
poses the continuing danger of accidents. Indeed,
accidents do occur. In that case, if there is noreport from the site for some reason, problems
could arise later, which sometimes can be critical.
Therefore, the “Zerohou” system is very important.
Immediate reporting without hiding anything. EveryKitai:thing starts there.

We will continue to actively provide
suggestions from the viewpoint ofshareholders
Kitai:

With a big management integration planned for thefall, KYOWA EXEO now has even larger growthpotential. As mentioned in the previous report, themove to break the mold and address new challenges will be accelerated.

Kanazawa: It is essential to promote technological innovation.
For example, construction companies should
consider using more robots and artificial intelligence (AI), which are attracting growing attention
in the industrial society. In the future, a robot might
climb a utility pole to do work via remote control
from the Head Office in Shibuya. I would like thecompany to study, develop and test those possibilities.
Kitai:In terms of securing human resources, we suggested not only complying with the revised Labor
Contracts Act by converting a fixed-term labor contract to a labor contract without a fixed term but
also considering systems to ensure the employment of talented human resources. The areaspecific jobs system has been established as one
such system. I will continue to provide various
advice and suggestions to help the growth of theCompany.
Kanazawa: As an Independent Director, I will continue to provide
comments from the standpoint of shareholders andenhancing corporate value.

Major Activities of Outside Directors and Statutory Auditors in Fiscal 2017

Kumiko Kitai (Independent Director)

Kazuteru Kanazawa (Independent Director)

Ms. Kitai attended 14 out of 15 meetings of the Board of Directors held in fiscal 2017,
where she actively provided advice and recommendations to ensure the reasonability
and appropriateness of the Board of Directors’ decisions based on her extensive experience and knowledge accumulated as a lawyer and from holding important positions withthe central government.

Mr. Kanazawa attended 15 out of 15 meetings of the Board of Directors held in fiscal
2017, where he actively provided advice and recommendations to ensure the reasonability and appropriateness of the Board of Directors’ decisions based on his extensive
experience and knowledge accumulated through management of companies in theindustry other than that of KYOWA EXEO.

Kozo Meguro (Independent Auditor)

Haruhiko Yamada

Mr. Meguro attended 15 out of 15 meetings of the Board of Directors and 16 out of 16
meetings of the Board of Corporate Auditors held in fiscal 2017, and collected information on the status of business operations at the Company’s departments and its subsidiaries. On those occasions, he provided comments based on his extensive experienceand professional knowledge as a Certified Public Accountant.

Mr. Yamada attended 15 out of 15 meetings of the Board of Directors and 16 out of 16
meetings of the Board of Corporate Auditors held in fiscal 2017, and collected informationon the status of business operations at the Company’s departments and its subsidiaries. On
those occasions, he provided comments based on his experience in corporate management
and professional knowledge in financial and accounting matters.

Effectiveness Evaluation
To enhance the function of the Board of Directors and corporate value, KYOWA EXEO carries out self-evaluation and analysisof the effectiveness of its Board of Directors, with advice from an external organization.
Based on the results of a questionnaire completed by all Directors and Corporate Auditors, which was collected and analyzed by an external organization to ensure objectivity, as well as discussions at meetings of the Board of Directors, it was
confirmed that the Company’s Board of Directors has sufficient scale and structure and is appropriately operated to ensure
proper decision making on important managerial issues and supervision of the execution of duties.
Meanwhile, ideas and opinions were shared on the future configuration of the Board of Directors to promote new businessfields, globalization and governance reinforcement, as well as the need to enhance the Directors’ Vector Meeting, whichstarted in fiscal 2017 to discuss business strategies and direction and issues to be addressed at each division.
The Company’s Board of Directors will make continued efforts to enhance its function by holding adequate discussions
based on the effectiveness evaluation and related opinions to improve its effectiveness.

35 Corporate Report 2018

ComplianceIn the KYOWA EXEO Group, everybody on the management team maintains a high standard of ethics—integrity—when conducting business.
Furthermore, individual directors and employees make principled actions grounded in compliance to fulfill their social responsibility.

EXEO Group Basic Actions Declaration

Initiatives to Promote

Based on the EXEO Group Compliance Program, theofficers and employees of the Group presuppose compliance with not only laws and regulations but also corporate
ethics, including the spirit underlying those ethics, andpractice activities with high social value, thereby contributing
to society.
Given that a company is part of society, it is a prerequisite
for all stakeholders in a company, irrespective of whether
officers or employees of the company, to comply with laws
and corporate ethics when carrying out the company’sbusiness operations. Such compliance is also a matter ofcourse for us as individual members of society.
In addition, ensuring such compliance is indispensable forthe company to maintain the trust of society and the realization of the Group’s corporate philosophy of “Contributing toSociety.”
In light of the above, we shall prioritize without hesitation
laws and regulations and corporate ethics in case we areforced to select either earnings or ethics in our own activities.

Measures taken and Description
Whistle-blowing system
Regarding compliance-related concerns, the “Support
Desk” is the contact point for whistleblowers, and the“Lawyer Hot Line” is provided to enable direct consulting or communication with corporate
lawyers.
All employees of
the KYOWA EXEO
Group are provided
with “Compliance
Cards” to raise theirawareness of thecontact point for
whistleblowers andguidelines for use.
Compliance training for management executives

Compliance ManualGroup’s corporate philosophy, Basic Actions
Declaration, Basic Guideline for Establishing Internal
Control Systems, matters to be observed and so on

Compliance promotion and

Manuals by risk at each Group company
Compliance training materials, etc.

enhancement month

SystemFollow-up:

Development:

Evaluation oncompliance observance
Monitoring

Compliance planning
Compliance training
Support Desk
Lawyer Hot Line

October was designated as theannual Compliance Promotion
and Enhancement Month in 2010.
Various campaign measures suchas signage and meetings encourage in-depth understanding ofand raise awareness among
employees.

Corporate Governance / ComplianceTools:

Management Systems

More than once a year, we provide compliance training
by inviting lecturers for management executives, including the Chairman, President, General Managers of the
Head Office, Branch Managers and Presidents of theGroup companies.

Compliance program

Promoting System
Collaboration

Corporate lawyers (Lawyer Hot Line)KYOWA EXEO Group
Compliance Officer collaboration Guidance
Legal Unit, Risk Control Division(President of KYOWA EXEO)
Command(Support Desk)

Whistle-blowing system

Collaboration

KYOWA EXEO CORPORATION:

Compliance Committee
Advisory and (Harassment Investigation Committee)

Guidance andcontrolGroup Business Development Division[Departments
Responsible
and Branches] Compliance Promoter

Persons in Charge of
Promoting Compliance

Employees

Management andcontrol of thepromoting system

Group companies
Compliance Officer
at each company (President)

Guidance andoversight on the spot
and of trading units

Responsible compliance promoter
at each company

Referrals andconsulting

Employees of each Group company

Corporate Report 201836

Management Systems

Risk Management
Establishing the promoting system, the KYOWA EXEO Group actively addresses risk management in all
its business fields.

Basic Policy
The KYOWA EXEO Group’s basic policy for risk management is as follows:(1) We eliminate any factors that could impede the realization of the Group’s corporate philosophy or accomplishment of its business performance targets wherever possible so that the Group can continue to grow in a sound manner.
(2) In case of emergencies, we make the utmost effort to minimize any effect on the Group’s stakeholders and put forth measures
to prevent a recurrence and endeavor to restore trust in the Group.

Risk Management System

Risk management system

The KYOWA EXEO Group sets forth its basic rules on risk

President of KYOWA EXEO

management in the “Risk Management Rules” and conducts
risk management as detailed below.
Risk Management Division

Risk Management DivisionInternal Audit Division

Each Risk Management Division identifies, analyzes andResponsible persons for risk management

assesses any risks for which it is responsible at the Group

Heads of Head Office organization units and
Branch Managers of the Company andPresidents of subsidiaries

level and determines the policy of handling any risk that isrecognized as serious, which will be known to each person
responsible for risk management.
Responsible persons for risk management

Risk Management Category
Risk Management Category

Each responsible person for risk management formulates anaction plan for executing specific measures according to theworkplace circumstances in accordance with the policy of risk
management determined by the respective risk management

Businessrisk

divisions and manages the progress of the measures being taken.

Management
risk

Description of the Risk

Business
environment risk

Risk relating to changes in the
management and business environments

Management
strategy risk

Risk relating to the decision making
concerning management and businessstrategies, etc.

Business process risk

Risk relating to daily business operations

Internal Audit Division
Each Internal Audit Division performs internal audits to monitor

Risk relating to the occurrence of natural
disasters

Disaster risk

the status of measures being taken to address businessprocess risks at the respective divisions. If the measures do
not work effectively, the relevant division provides instructions

Business Process Risk Categories
Business Process Risk Categories

for improvement in collaboration with the related risk management division.

Compliance risk

Compliance with authority, Act of injustice

Employment risk

Employment and service, Equal treatment

Financial risk

Financial reporting, Credit agreement

Business process risks can be classified into the seven categories

Information risk

Information disclosure, Information leakage

listed in the table to the right. The risk management divisions

Safety and hygiene risk

Occupational safety, Hygiene and health

Quality assurance risk

Equipment accidents, Occurrence of defects

Environmental preservation risk

Environmental pollution, Resource conservation

System for Managing Business Process Risks

responsible for the respective business process risks provide
instruction and training in accordance with the relevant manuals byrisk category and using other means.

37 Corporate Report 2018

Utilization of the ISO-Compliant Management Systems
From among the business process risks, the Company
utilizes the ISO-compliant management systems to manage
the risks relating to quality assurance, environmental conservation, occupational health and safety and information
security. We formulate policies for managing these risks byusing the relevant risk assessment methods given in the ISO
management systems and implement the policies while
making ongoing improvements in the effectiveness andappropriateness of business operations.
The Company and major subsidiaries acquired a groupbased ISO certification and are committed to standardize
the management procedures by implementing ISO-compliant management systems in a unified manner across theGroup. Taking the opportunity of the ISO quality and environment management system updates with the 2015
revisions, we reviewed the management system certification
system which focuses on the internal rules in effect tostreamline the process.

ISO Management Systems of which certification has been acquired

Category

Applicable Standards Date of Registration

Quality Management
SystemJIS Q
9001:2015

February 22, 1999

Environment
Management System

JIS Q
14001:2015

May 12, 2000

Occupational Healthand Safety
Management System

BS-OHSAS
18001:2007

September 19, 2003

Information Security
Management System

JIS Q
27001:2014

November 10, 2004

Efforts to Ensure Information Security, etc.
As a necessary part of operating its business, the KYOWA EXEO Group handles important information, including data on
technologies and customers held by its customers and other parties. With the expansion of networking, as represented by the
spread of the cloud service and social networking service (SNS), it is increasingly important to ensure the appropriate management of information. Accordingly, we are strengthening our efforts regarding information security and the protection of personal
information.
Efforts to ensure information security

Risk Management

formation security accidents, and monitors and evaluates
the status of any improvements in overall security matters to enhance the Group’s information security on acontinuous basis.
Furthermore, the Group also provides all of its employees with information security training and simulation exercises to repel targeted e-mail attacks, while conducting
various kinds of security checkups every year.

Management Systems

The KYOWA EXEO Group has established a system for
managing information security by designating an officer
who assumes the overall responsibility for information
security, as well as providing a manager with the chief
responsibility and people working on information management at each business division. The Information Security Committee decides policies on group security,
discusses measures to prevent the recurrence of any in-

Efforts to protect personal information
The Company engages in a broad range of business operations and handles a large amount of personal information in
the process of carrying out these operations. In the recognition that appropriately managing such information is a corporate social responsibility, we are promoting efforts to ensure
the protection of private information under the Privacy Policy.
In response to the implementation of the Amended Act on
the Protection of Personal Information in May 2017, we

reviewed and enhanced our privacy management measuresby taking an inventory of personal information held and reviewing the management of records concerning the provisionand receipt of personal information.
To ensure the continued protection of personal informationin an appropriate manner, we have continually updated ourcertification of the Personal Information Protection Management System.

For the details of the KYOWA EXEO Privacy
Policy, visit:h t t p : / / w w w. e x e o . c o . j p / c o m p a n y / p p o l i c y. h t m l

Corporate Report 201838

Involvement in the Environment

While Promoting Resources Recycling and Effective Utilization of Resources,
Developing Environment Preservation Activities Toward the Prevention of
Global Warming and Other Concerns
Environmental Management
The Group works to reduce the environmental impact accompanying business activities,
and every employee acts with “what he/she can and he/she should do” in mind.

 asic Stance on Environment
B
Preservation Activities
Coexistence with the global environment is a social
responsibility of corporations and is a significant element increating a sustainable society.
The KYOWA EXEO Group engages in business activities
as a company that offers customer-satisfying solutions
based on its core IC networking technologies. The Group
therefore pays careful attention to coordination with theenvironment in its business activities and endeavors
to reduce the environmental impact that inevitably
accompanies such activities.

 fforts towards Environment
E
Preservation Activities
Environment preservation activities cannot be continued
without a strong awareness regarding the improvement ofenvironmental issues and persistent efforts. Meanwhile,
every employee of the Group is committed to environment
preservation activities with “what he/she can and he/sheshould do” in mind—always taking into account the effectsof business activities on global environment.

 tilization of the Environment
U
Management System
In promoting the environmental management system(ISO14001), of which certification has been continuously
obtained since May 2000, the Company works to reduce
the environmental impact on an ongoing basis throughcompanywide environment preservation activities according
to the PDCA cycle. The Company identifies predictableenvironmental risks, which are determined depending on
onsite working environments, the location conditions of thebuilding and other factors, sets up specific environmentrelated targets and extensively applies them to all the
departments at the Head Office and branches.

Participated in the “Mt. Fuji Beautification Latter-Term Cleanup Campaign”
In September 15, 2017, we participated in the “Mt. Fuji Beautification LatterTerm Cleanup Campaign” held by the Mt. Fuji Beautification Foundation.
From the Koshin Branch Office, 21 employees of the Company and Group
companies joined the campaign (of about 400 participants overall), conducting a cleanup activity centering on the rotary area on the fifth station on
Mt. Fuji.
About 110 kilograms of combustible and non-combustible garbage werecollected. The mountain climbing trail might look free of garbage, but if you
step out of it, you see a lot of garbage. To increase the awareness of tourists, we distributed packages of pocket tissue with a printed message toencourage climbers or tourists to bring back their garbage. Hoping for
better manners from the climbers and tourists visiting Mt. Fuji and to keep
the mountain worthy of pride at a global level for coming generations, wewould like to continue this cleanup activity.

39 Corporate Report 2018

Building a better, brighter future together

Environmental business
The Company contributes to promoting a recycling-oriented society through involvement in the design, construction and maintenance of renewable energy facilities, including solar power generation facilities and biomass boilers.
By effectively recycling waste or appropriately disposing of waste if it is not recyclable, we will continue to contribute topreserving the global environment and a society where we can live in security.
Western Japan Area

Eastern Japan Area

Solar power generation businessSolar power facilities of our own

Solar power facilities of other companies
Electricity generated

25

Panel installation capacity

215

GWh

(Electricity used by 5,240 households per year)

4

21

(940)

116

(4,300)MW

99

Wood biomass business
Thermal output (kW)Power generating output (kW)OutputOutput21,300
7,500

1,500

kW

13,800800

Energy recovery business

700

Recycling business

Throughput (ton/day)Throughput (ton/day)
Environmental Management451

per day

Corporate Report 2018

40

154

tons

per day25

Involvementin the Environment

747
296

kW

tons

129

FY 2017 Grand Prize for Excellence in Energy Efficiency and Conservation
KYOWA EXEO was awarded FY 2017 Grand Prize for Excellence in Energy Efficiency and Conservation(Chairman Prize for ECCJ in the Product Category & Business Model Category), jointly with Tepco Customer Service Corporation Limited for the energy-saving service using IoT provided by electricity retailers.

Involvement in the Environment

Fiscal 2017 Material Balance of the Company (Non-consolidated)
To make environment-friendly business activities effective and reduce the accompanying environmental load as much as possible, we strive
to understand and analyze the kinds of resources and energy sources that are used and the environmental load that has been produced.

INPUT
Total energy input

169,008 GJ

Electric power purchased

13,863 MWh

Solar power generation electricity output

63 MWhCity gas

103 km3

LPG

OUTPUT
Environment-friendly business activities

1 km3

Gasoline

1,057 kℓLight oil

177 kℓKerosene

15 kℓ

Water resource input

Company cars

Electricity sold23,531 MWh

Total greenhouse effect gas emissions

2,670 tons (CO2 conversion)

Electric power sourced

6,301 tons (CO2 conversion)

Fuel sourced

3,184 tons (CO2 conversion)

Waste sourced

6,210 tons (CO2 conversion)

Water resource sourced

Head office

72 km314 tons (CO2 conversion)

Power generation and electric power selling sourced

13,001 tons (CO2 conversion)

EXEO’s forests (Mori) sourced

38 tons (CO2 conversion)

Waste emissions and recycled volume

42,373 tons

Industrial waste emissions

4,584 tons

General waste emissions

112 tons

Total recycled volume

37,678 tons

Total displacement

72 km3Business offices

Initiatives toward Prevention of Global Warming and Preservation of Biodiversity
EXEO’s forests (Mori), which extending nationwide,
are groomed by employees’ hands
Embracing the opportunity of the Company’s 50th anniversary of its
foundation, forest preservation activity started and the Company
continues to maintain government-owned forests for up to 60 years.

Seizing the opportunity of the 50th anniversary of its foundation, the Company became strongly consciousof the prevention of global warming and contributing to local communities. Giving its approval to themaintenance enhancement campaign of forest resources, which was then promoted by the Forestry
Agency, the Company entered into a profit-sharing afforestation contract* with the Hokkaido, Tohoku,
Kansai, Kyushu, Chugoku and Kyushu regional forest offices regarding so-called corporate forests. The
Company named the forests “EXEO’s forests” and continues their maintenance activity, which also serves
as an occasion for social assembly and recreation among employees and their families.
*Profit-sharing afforestation contract: Agreement on the maintenance activities ofgovernment-owned forests (natural forests), which are premised on there being no logging.

Content of Activities
Five branches, of which the business area is located near
EXEO’s forests (Mori), regularly conduct forest preservationand cleaning activities such as maintenance of walking
trails, mowing of bottom weeds, cutting ivy and putting up
bird houses.
Forest exploration is also conducted as part of the recreation activities for employees and their families. Such events
are also used for enlightening activities to explain the importance of preventing global warming and biodiversity
preservation.

41 Corporate Report 2018

Chugoku Branch
Area

Absorbed and fixed CO2 volume(in terms of CO2 emitted by a person in a year)
6.5t

3.29ha(20 persons)

Kyushu BranchArea
5.36haAbsorbed and fixed CO2 volume(in terms of CO2 emitted by a person in a year)
15.4t(48 persons)Fiscal 2017 Initiatives Regarding the Prevention of Global Warming
As for the reduction of power consumption, power-saving
measures for equipment are taken including the conversion ofelectric appliances to energy-saving type ones and the enhanced
use of inverters for diverse equipment. In addition, companywide
initiatives mainly taken by the responsible person on each floor
Change in power consumption (per square meter)

Change in city gas consumption (at the Head Office building) (per square meter)(m3/m2)(kWh/m2)

6

16
12

9.72

5.4

5.0

5.0

Change in gasoline and light oil consumption (per travel distance)( /thousand km)

5.4

120

5

8.26

8.14

8.11

3.4

4

8.03

87.1

92.6

2013

2014

81.0

78.0

77.0

2015

2016

2017

80

3

8

40

2

4
0

include setting the energy-saving mode for PCs, removing
unnecessary lighting devices, turning off lights during lunchtime
hours and setting appropriate temperatures for air conditioners.
Moreover, every employee aggressively promotes electricitysaving activity in his/her daily actions.

1
2013

2014

2015

2016

2017

0

2013

2014

2015

2016

2017

0

Promotion of Recycling and Effective Utilization of Resources
The KYOWA EXEO Group proactively addresses abating volumes
and the appropriate treatment of waste, as well as promoting its
reuse as recycled resources in the pursuit of reduced waste
volume and complete recycling. The waste category covered bythis initiative is industrial waste produced from the construction
work of information and communication facilities and generalwaste discharged from offices.

Asphalt, concrete debris, electric wire trash, etc., are properly
treated via a sorting control for further reuse or recycling. Moreover, ongoing initiatives include the enhanced use of properamounts for work materials, requests for collection of packaging
materials to suppliers and guidance on the necessary steps toworkers for recycling via onsite patrols.

Change in industrial waste emissions (per value of finished work)

Change in general waste emissions (per person)(kg/¥million)(kg/person)

300

194.1

200

162.8

30

149.7

126.4

100
0

(tons)

40

254.6

45,000

25.3

2014

2015

2016

22.6

0

15.5

2013

2014

2015

0

2013

2014

2015

2016

2017

5.1t

Area

Absorbed and fixed CO2 volume(in terms of CO2 emitted by a person in a year)
8.4t

3.10ha(16 persons)(26 persons)

Chitose-shi,
Hokkaido

Environmental Management

1.14ha2017

Involvementin the Environment(in terms of CO2 emitted by a person in a year)

Kansai Branch
Area

2016

Hokkaido BranchAbsorbed and fixed CO2 volume

2.48ha16,46015,000

Tohoku BranchArea

26,014 25,957 24,102

30,000

16.8

20

2017

37,678

29.4

10
2013

Change in total recycled volume

Absorbed and fixed CO2 volume(in terms of CO2 emitted by a person in a year)
2.8t(9 persons)

Shiroishi-shi,
Miyagi

Kure-shi,
Hiroshima
Uto-shi,
Kumamoto

Nishinomiya-shi,
Hyogo

Nationwide
Area
15.37haAbsorbed and fixed CO2 volume(in terms of CO2 emitted by a person in a year)
38.2t(119 persons)

Corporate Report 201842

Financial Section

Financial Highlights (Consolidated)■Orders Received ■Net Sales■Gross Profit(¥Millions)(¥Millions)
318,513304,201

2014/3324,102

300,912301,446

287,437

298,825

325,029 312,669

300,438

2015/3

2016/32017/3

2018/3■Operating Income

2014/325,621

18,35818,412

2015/3

2016/32017/3

2016/32017/3

2018/3

2018/3

17,993
14,91026,44821,4092014/3

18,58918,512

2015/3

2016/32017/3

238,301

243,438(¥Millions)

263,632

217,091

13,789228,422

12,184
135,687

2016/3

2018/3■Total Assets ■Net Assets(¥Millions)

2015/3

2015/3

20,602■Profit attributable to owners of parent

2014/335,795(¥Millions)

20,873

20,734

12,26435,74038,480■Ordinary Income(¥Millions)

2014/343,35438,5432017/3

2018/3

2014/3

146,768

2015/3

151,241

2016/3

158,280

2017/3

176,1012018/3(¥Millions)

Orders Received
Net Sales
Gross Profit
Operating Income
Ordinary Income
Profit attributable to owners of parent
Total Assets
Net Assets

43 Corporate Report 20182014/3

2015/3

2016/32017/3

2018/3

304,201
318,513
38,543
20,73420,602
14,910217,091
135,687

301,446
300,91235,74018,35818,58912,264228,422
146,768

300,438
287,437
35,795
18,412
18,512
12,184
238,301
151,241

324,102
298,825
38,48020,873
21,40913,789243,438
158,280

325,029
312,669
43,35425,621
26,44817,993
263,632
176,101

Building a better, brighter future together

Trends by Segment (Consolidated)
Orders Received by Business Segment (Consolidated)(¥Millions)
324,102304,201

301,446

NTT group engineering

325,029

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS

300,438(¥Millions)

2014/3

2015/3

2016/32017/3

2018/3

2014/3

2015/3

2016/32017/3

2018/3

NTT group engineering

171,084

160,375

167,963

182,281

166,294

NCCs

37,35734,492

20,233

28,79531,836

Urban infrastructure

61,04173,57372,31572,774

84,145

SYSTEMSOLUTIONS

34,71733,00439,92640,25142,751

304,201

301,446

300,438

324,102

325,029

Total

Net Sales by Business Segment (Consolidated)(¥Millions)

NTT group engineering

318,513300,912

2014/3

2015/3

287,437

2016/3298,825

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS

312,669(¥Millions)

2017/3

2018/3

2014/3

2015/3

2016/32017/3

2018/3

NTT group engineering

173,544

162,729

160,587

168,336

167,418

NCCs

44,196

36,66923,24923,34528,138

Urban infrastructure

65,56067,90565,74967,36574,571

SYSTEMSOLUTIONS

35,21333,60837,851

39,77842,541

318,513300,912287,437

298,825

312,669

Total

Outstanding Orders by Business Segment (Consolidated)(¥Millions)

155,932

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS(¥Millions)

118,384
103,758

2014/3

2014/3

2015/3

2016/32017/3

2018/3

NTT group engineering

46,89344,53951,91565,86064,737

NCCs

10,489

8,313

5,296

10,745

14,444

Urban infrastructure

42,472

48,141

54,707

60,11569,690 YSTEMSSOLUTIONS

3,902

4,461

6,465

6,867

7,060

103,758

105,455

118,384

143,589

155,932

105,455

2015/3

2016/32017/3

2018/3

Total

Corporate Report 2018

Financial Section

NTT group engineering

143,589

44

Financial Section

Profitability Indices (Consolidated)■Gross Profit to Net Sales■Operating Income to Net Sales

(%)
12.1

2014/311.9

2015/3

12.5

12.9

13.9

(%)
8.2
6.5

2016/32017/3

2018/3■Ordinary Income to Net Sales

2014/3

8.5

2014/3

6.4

2015/3

2016/32017/3

4.7

2018/3

2018/3

2014/3

4.2

2015/3

2016/32017/3

2018/3

1.23

1.24

1.23

2016/32017/3

2018/3(%)(Times)

11.6

4.6

4.1

■Total Assets Turnover

10.8
8.7

8.9

8.2

7.1

1.53

1.35

7.1
5.5

5.2

2015/3

2016/3

5.7

2017/3Gross Profit to Net Sales (%)
Operating Income to Net Sales (%)
Ordinary Income to Net Sales (%)
Profit Attributable to Owners of Parent to Net Sales (%)
Return on Equity (%)
Return on Assets (%)
Total Assets Turnover (Times)

45 Corporate Report 20182017/3

5.8■Return on Equity ■Return on Assets

2014/3

2016/3

(%)

7.2
6.2

2015/3

7.0

6.4■Profit Attributable to Owners of Parent to Net Sales

(%)

6.5

6.1

2018/3

2014/3

2015/3

2014/3

2015/3

2016/32017/3

2018/3

12.1
6.5
6.5
4.7
11.6
7.1
1.53

11.9
6.1
6.2
4.1
8.7
5.5
1.35

12.5
6.4
6.4
4.2
8.2
5.2
1.23

12.9
7.0
7.2
4.6
8.9
5.7
1.24

13.9
8.2
8.5
5.8
10.8
7.1
1.23

Stability Indices (Consolidated)■Shareholders’ Equity to Total Assets■Current Ratio

(%)

(%)
62.3

64.0

64.8

63.3

66.6
206.3

2014/3

2015/3

2016/32017/3

2018/3

2014/3

2015/3■Fixed Assets Ratio

(%)

(%)

162.6

170.8

2014/3

2015/3

247.4

191.0

■Quick Assets to Current Liabilities

182.1

232.4

217.5

194.4

58.7

61.3

2018/3

2014/3

2015/3

2016/32017/366.6

64.0

2016/32017/3

2018/3

61.1

151.4

2016/32017/3■Interest Coverage Ratio■Debt Equity Ratio(Times)(%)

2018/3

10.8
9.9
8.1

738.6
619.3

187.0

234.4

90.7
2015/3

2016/32017/3

Shareholders’ Equity to Total Assets (%)
Current Ratio (%)
Quick Assets to Current Liabilities (%)
Fixed Assets Ratio (%)
Interest Coverage Ratio (Times)
Debt Equity Ratio (%)

2018/3

2014/3

2015/3

2016/32017/3

2018/3

2014/3

2015/3

2016/32017/3

2018/3

62.3
206.3
162.6
58.7
187.0
9.9

64.0
217.5
170.8
61.3
619.3
5.9

63.3
191.0
151.4
66.6
90.7
10.8

64.8
232.4
182.1
64.0
234.4
8.1

66.6
247.4
194.4
61.1
738.6
6.5

Corporate Report 2018

Financial Section

2014/3

6.5

5.9

46

Financial Section

Stock Price Indices (Consolidated)■Earnings Per Share■Book-value Per Share(¥)

189.42147.75

2014/3

1,842.97

145.24123.83125.902015/3

2016/32017/31,350.05

15.0

9.0

2015/3

1,482.82

2015/3

1,569.09

1,668.29

2016/32017/3

2018/3■Price Book-value Ratio(Times)10.4

2014/3

2018/3■Price Earnings Ratio

2014/3(¥)(Times)

1.5

11.1
1.0

9.9

2016/32017/3

2018/3■Cash Dividends Per Share0.9

2014/3

2015/31.0
0.8

2016/32017/3

2018/3■Payout Ratio ■Total Shareholder Return Ratio

(¥)

50.0

(%)
71.4

46.0
38.0

53.6

50.2

32.0
36.3

24.0

26.4
25.8

30.2

31.7

2016/32017/3

26.4

16.2
2014/3

2015/3

2016/3

Earnings Per Share (yen)Book-value Per Share (yen)Price Earnings Ratio (Times)
Price Book-value Ratio (Times)
Cash Dividends Per Share (yen)Payout Ratio (%)
Total Shareholder Return Ratio (%)

47 Corporate Report 20182017/3

2018/3

2014/3

2015/3

2018/3

2014/3

2015/3

2016/32017/3

2018/3147.751,350.05
9.0
1.0
24.0
16.2
36.3

123.83
1,482.82
10.4
0.9
32.0
25.8
50.2

125.901,569.09
9.9
0.8
38.0
30.2
71.4

145.24
1,668.29
11.1
1.0
46.0
31.7
53.6

189.42
1,842.97
15.0
1.5
50.0
26.4
26.4

Other Indices (Consolidated)■Selling, General and Administrative Expenses■Capital Expenditures(¥Millions)(¥Millions)
13,21517,80917,382

17,382

17,607

17,732

7,372

7,139
4,256

4,219

2014/3

2015/3

2016/32017/3

2018/3■Depreciation Expenses

2014/3

2015/3

2016/32017/3

2018/3■Interest-bearing Debt(¥Millions)(¥Millions)
3,001

3,251

3,272

2,660

16,2992,264
13,374

12,825

11,435

8,679

2014/3

2015/3

2016/32017/3

2018/3

7,988

7,903

8,074

8,311

2015/3

2016/32017/3

2018/3

2014/3

2015/3

2016/32017/3

2018/3■Number of employees(People)7,553

Selling, General and Administrative Expenses (¥Millions)
Capital Expenditures (¥Millions)
Depreciation Expenses (¥Millions)Interest-bearing Debt (¥Millions)
Number of employees (People)

2014/3

2015/3

2016/32017/3

2018/317,8097,372
2,264
13,374
7,553

17,382
4,219
2,660
8,679
7,988

17,382
13,215
3,001
16,2997,903

17,607
7,139
3,251
12,825
8,074

17,732
4,256
3,272
11,4358,311

Corporate Report 2018

Financial Section

2014/348

Financial Section

Consolidated Balance Sheets(¥Millions)

2014/3

2015/3

2016/32017/3

2018/3ASSETS
Current assets
Cash and deposits
Notes receivable, accounts receivable from completed construction contracts
Short-term investment securities
Costs on uncompleted construction contracts and other
Deferred tax assets
Other current assets
Allowance for doubtful accounts
Noncurrent Assets
Property, plant and equipment
Buildings and structures
Machinery, vehicles, tools, furniture and fixtures
Land
Other property and equipment
Intangible assets
goodwill
Other intangible assets
Investments and other assets
Investment securities
Net defined benefit asset
Other investments and other assets
Allowance for doubtful accounts
Total assets

137,656
10,29392,307
5,919
22,521
4,131
2,548
(65)
79,43450,767
17,5411,700
30,923
601
4,894
1,940
2,953
23,773
13,991
7,575
4,053(1,846)217,091

138,813
12,526
84,691
11,76522,010
4,976
2,903
(60)
89,60952,005
17,732
2,408
30,342
1,521
6,278
3,065
3,213
31,325
16,896
11,7744,474(1,819)228,422

137,950
16,244
93,05591
21,515
3,355
3,688
(1)
100,350
59,83020,615
4,043
34,370
801
6,477
1,983
4,494
34,043
17,777
13,467
4,161(1,363)
238,301

142,395
15,431
96,08063
24,159
3,733
2,927
(0)
101,04262,002
20,0744,710
36,197
1,021
4,414
1,053
3,360
34,626
17,093
14,5204,228(1,216)
243,438

156,280
26,09592,185
4,499
27,617
3,914
1,967
(1)
107,351
62,66421,003
4,542
36,602
516
3,909
658
3,251
40,777
19,833
17,9473,231(235)
263,632

LIABILITIESCurrent liabilities
Notes payable, accounts payable for construction contracts
Short-term loans payable
Income taxes payable
Advances received on uncompleted construction contracts
Provision for bonuses
Provision for directors’ bonuses
Provision for warranties for completed construction
Provision for loss on construction contracts
Provision for Loss on dissolved welfare pension fund
Other current liabilities
Noncurrent liabilities
Bonds payable
Long-term loans payable
Deferred tax liabilities
Provision for directors’ retirement benefits
Allowance for investment loss
Net defined benefit liability
Other noncurrent liabilities
Total liabilities

66,72035,089
7,550
5,441
1,971
1,039
142
359
824
123
14,178
14,683
—
5,367
3,532
397
48
4,456
881
81,40463,81935,193
2,180
1,964
2,248
1,049
173
296
5,456
123
15,134
17,834
—
5,974
5,732
262
17
4,682
1,163
81,65372,241
37,62913,336
2,562
3,255
1,124
138
907
258
76
12,952
14,818
—
2,413
5,557
244
95
4,809
1,697
87,06061,28336,606
826
4,142
3,457
1,242
129
57
507
—
14,31423,87410,000
1,390
5,244
257
206
4,925
1,851
85,15863,16134,802
1,012
5,004
3,574
1,421
126
58
290
—
16,87024,36910,000
10
7,293
272
42
5,070
1,680
87,531

NET ASSETS
Shareholders’ Equity
Capital stock
Capital surplus
Retained earnings
Treasury stock
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Subscription rights to shares
Non-controlling interests
Total net assets
Total liabilities and net assets

129,868
6,888
6,645
130,822(14,487)
5,446
3,631
21
1,794
175
195
135,687
217,091

134,696
6,888
6,879
137,957(17,029)
11,579
5,157
35
6,386
263
229
146,768
228,422

139,922
6,888
7,939
147,004(21,910)
10,821
4,121
28
6,671
241
255
151,241
238,301

147,333
6,888
7,978
156,477(24,011)
10,470
3,566
15
6,888
288
187
158,280
243,438

161,682
6,888
8,098
169,883(23,187)
13,891
5,198
11
8,681
285
242
176,101
263,632

49 Corporate Report 2018

Consolidated Statements of Income(¥Millions)

Net sales of completed construction contracts
Cost of sales of completed construction contracts
Gross profit on completed construction contracts
Selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividends income
Foreign exchange gains
Reversal of allowance for doubtful accounts
Land and house rent received
Gain on sales of non-current assets
Reversal of allowance for investment loss
Gain on exchange of investment securities
Other
Non-operating expenses
Interest expenses
Rent expenses
Loss on sales of noncurrent assets
Loss on retirement of noncurrent assets
Foreign exchange losses
Impairment loss

Provision of allowance for Loss on dissolved welfare pension fund

Other
Ordinary income
Extraordinary income
Gain on sales of noncurrent assets
Gain on bad debts recovered
Gain on sales of investment securities
Gain on abolishment of retirement benefit plan
Extraordinary loss
Reversal of allowance for doubtful accounts
Impairment loss
Income before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Net income
Profit (loss) attributable tonon-controlling interests
Profit attributable to owners of parent

2014/3
318,513279,969
38,54317,80920,734
1,083
20
173
73
122
146
—
—
—
547
1,215
51
—
163
—
—
318
123
558
20,602
3,797
2,238
1,559
—
—
571
571
—
23,828
8,837
76
8,914
14,914

2015/3300,912265,171
35,74017,382
18,358
1,254
26
243
438
—
146
—
—
—
399
1,024
52
—
313
—
—
208
—
449
18,589
1,180
1,180
—
—
—
—
—
—
19,769
6,823
669
7,493
12,276

2016/3
287,437
251,642
35,795
17,382
18,412
1,438
21
266
—
441
157
261
—
—
289
1,338
57
44
138
—
397
—
—
701
18,512
—
—
—
—
—
—
—
—
18,512
4,203
2,086
6,290
12,222

2017/3298,825
260,344
38,48017,607
20,873
1,936
4
315
—
111
572
437
—
203
290
1,400
49
185
516
45
143
—
—
458
21,409
1,471
—
—
1,262
209
2,159
—
2,159
20,721
7,719
(737)
6,982
13,7392018/3
312,669
269,315
43,354
17,732
25,621
1,398
4
403
—
34
401
114
170
—
269
571
33
105
57
68
169
—
—
137
26,448
—
—
—
—
—
—
—
—
26,448
8,018
375
8,393
18,054

4

11

37

(50)

61

14,91012,264

12,184

13,78917,993(¥Millions)

Net income
Other comprehensive income
Valuation difference on available-for-sale securities
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Comprehensive income
BreakdownComprehensive income attributable to owners of the parent
Comprehensive income attributable to non-controlling interests

2014/3
14,914

2015/3
12,276

2016/3
12,222

2017/3
13,7392018/318,054

735
29
—
765
15,680

1,526
36
4,592
6,154
18,430(1,035)
(18)
285
(769)
11,452

(554)
(30)
216
(368)
13,370

1,631
(10)
1,793
3,414
21,46915,65821

18,39733

11,42626

13,438(68)

21,41355
Corporate Report 2018

Financial Section

Consolidated Statements of Comprehensive Income

50

Financial Section

Consolidated Statements of Changes in Net Assets(¥Millions)Shareholders’ equity
Capital stock
Balance at the beginning of current period
Total changes of items during the period
Balance at the end of current period
Capital surplus
Balance at the beginning of current period
Changes of items during the period
Disposal of treasury stock
Increase (decrease) in cash and cash equivalents
resulting from merger and acquisition(consolidated
subsidiary and nonconsolidated subsidiary)
Total changes of items during the period
Balance at the end of current period
Retained earnings
Balance at the beginning of current period
Cumulative effects of changes in accounting policies
Changes of items during the period
Dividends from surplus
Profit attributable to owners of parent
Increase (decrease) in cash and cash equivalents
resulting from merger and acquisition(consolidated
subsidiary and nonconsolidated subsidiary)
Total changes of items during the period
Balance at the end of current period
Treasury stock
Balance at the beginning of current period
Changes of items during the period
Purchase of treasury stock
Disposal of the treasury stock
Acquisition of own shares via trust
Transfer of own shares via trust
Total changes of items during the period
Balance at the end of current period
Total shareholders’ equity
Balance at the beginning of current period
Cumulative effects of changes in accounting policies
Changes of items during the period
Dividends from surplus
Profit attributable to owners of parent

Purchase of treasury stock
Disposal of the treasury stock
Acquisition of own shares via trust
Transfer of own shares via trust
Increase (decrease) in cash and cash equivalents
resulting from merger and acquisition(consolidated
subsidiary and nonconsolidated subsidiary)
Total changes of items during the period
Balance at the end of current period
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders’equityTotal changes of items during the period
Balance at the end of current period
Foreign currency translation adjustment
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders’equityTotal changes of items during the period
Balance at the end of current period
Remeasurements of defined benefit plans
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders’equityTotal changes of items during the period
Balance at the end of current period
Total accumulated other comprehensive income
Balance at the beginning of current period
Change of items during the period
Net changes of items other than shareholders’equityTotal changes of items during the period
Balance at the end of current period
Subscription rights to shares
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of current period
Minority interests
Balance at the beginning of current period
Changes of items during the period
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of current period
Total net assets
Balance at the beginning of current period
Cumulative effects of changes in accounting policies
Changes of items during the period
Dividends from surplus
Profit attributable to owners of parent

Purchase of treasury stock
Disposal of treasury stock
Acquisition of own shares via trust
Transfer of own shares via trust
Increase (decrease) in cash and cash equivalents
resulting from merger and acquisition(consolidated
subsidiary and nonconsolidated subsidiary)
Net changes of items other than shareholders’ equity
Total changes of items during the period
Balance at the end of current period

51 Corporate Report 20182014/3

2015/3

2016/32017/3

2018/3

6,888
—
6,888

6,888
—
6,888

6,888
—
6,888

6,888
—
6,888

6,888
—
6,888

6,300

6,645

6,879

7,939

7,978

324

234

1,060

38

120

20

—

—

—

—

344
6,645

234
6,879

1,060
7,939

38
7,978

120
8,098

118,296—

130,822(2,352)

137,957—

147,00422

156,477—(2,429)14,910(2,776)
12,264(3,137)
12,184(4,338)13,789(4,588)17,993

44

—

—

—

—

12,525130,8229,487
137,957

9,047
147,004

9,450
156,477

13,405
169,883(12,408)(14,487)(17,029)(21,910)(24,011)(3,003)924——(2,079)(14,487)(3,002)460——(2,542)(17,029)(5,002)
2,057(2,600)664(4,880)(21,910)(3,002)167—
733(2,101)(24,011)

(3)
311
—
515
823
(23,187)

119,077—

129,868(2,352)

134,696—

139,922
22

147,333—(2,429)14,910(3,003)
1,249——(2,776)
12,264(3,002)694——(3,137)
12,184(5,002)
3,117(2,600)664(4,338)13,789(3,002)
206—
733(4,588)17,993
(3)
431
—
515

64

—

—

—

—

10,791
129,868

7,179
134,696

5,226
139,922

7,388
147,333

14,349161,682

2,895

3,631

5,157

4,121

3,566

736
736
3,631

1,525
1,525
5,157

(1,036)(1,036)
4,121

(554)
(554)
3,566

1,631
1,631
5,198

9

21

35

28

15

11
11
21

14
14
35

(7)
(7)
28

(12)
(12)
15

(4)
(4)
11

—

1,794

6,386

6,671

6,888

1,794
1,794
1,794

4,592
4,592
6,386

285
285
6,671

216
216
6,888

1,793
1,793
8,681

2,904

5,446

11,57910,821

10,470

2,542
2,542
5,446

6,132
6,132
11,579(758)(758)
10,821(350)(350)
10,4703,420
3,420
13,891

231

175

263

241

288

(56)
(56)
175

88
88
263

(22)
(22)
241

47
47
288

(3)
(3)
285

174

195

229

255

187

21
21
195

33
33
229

26
26
255

(68)
(68)
187

55
55
242

122,387—

135,687(2,352)

146,768—

151,24122

158,280—(2,429)14,910(3,003)
1,249——(2,776)
12,264(3,002)694——(3,137)
12,184(5,002)
3,117(2,600)664(4,338)13,789(3,002)
206—
733(4,588)17,993
(3)
431
—
515

64

—

—

—

—

2,507
13,299135,687

6,254
13,434
146,768

(754)
4,472
151,241

(371)
7,016
158,280

3,471
17,820176,101

Consolidated Statements of Cash Flows(¥Millions)

2015/3

2016/32017/3

2018/3

9,888
23,828
2,264
318
688
388
(4,705)
10
—
555
(470)
(193)
51
(2,074)(6,008)
1,581
4,343
(473)
308
(384)
—
—
—
(10)
20,015
195(52)(10,269)(7,477)(5,575)2,890(2,002)(3,233)309

23,167
19,769
2,660
208
849
(32)
—
(347)
—
4,631
(2,004)
(270)
52
(867)
8,095
877
(623)
(454)
277
189
—
—
—
44
33,055270(37)(10,121)(2,828)(3,434)
1,990
(612)
(738)
203

5,389
18,512
2,857
71
1,082
(514)
—
75
611
(5,197)(1,339)
(288)
57
(122)
(8,419)
487
(423)
2,438
1,006
(2,673)
(0)
—
—
483
8,705
288
(59)
(3,545)(13,907)(10,467)
1,533(2,137)(2,570)10

15,504
20,721
3,251
2,159
929
(148)
—
117
(850)
248
(399)
(319)
49
79
(3,127)(2,659)965(1,014)204
2,671(1,262)
(203)
(209)
390
21,595318(66)(6,343)(6,027)(5,761)901(2,416)
(443)
1,686

24,80026,448
3,272
0
395
(980)
—
179
0
(216)
(694)
(407)
33
(56)
3,892
(3,447)2,175(1,802)
118
2,327
0
—
—
285
31,523408(33)(7,098)(4,538)(3,214)352(1,010)
(429)
0

—

(361)

—

—

—

(17)
119
—
31
(905)
4,000
—
(340)
—
—
(3,003)
1,127——(2,429)
(259)
43
1,548
14,611—109—
16(12,343)(6,799)
—
(124)
—
(110)
(3,002)669——(2,777)
(199)
83
8,078
16,213

(30)
4
(298)
49
313
5,703
—
(708)
2,600
—
(5,002)
3,008(2,600)664(3,133)(218)(49)(8,254)24,291

(111)
1
44
72
(10,230)(12,306)
9,991(1,227)——(3,002)
153—
733(4,329)
(244)
(42)
(796)
16,037

(204)
1
1
(35)
(5,137)(100)—(1,093)
—
—
(3)
308
—
515
(4,581)(182)(23)
15,101
15,241

53

—

—

—

—

16,21324,291

16,037

15,241

30,343
Corporate Report 2018

Financial Section

Net cash provided by (used in) operating activities
Income before income taxes and minority interests
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for retirement benefits
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for warranties for completed construction
Increase (decrease) in provision for loss on construction contracts
Increase (decrease) in net defined benefit asset (liability)
Interest and dividends income
Interest expenses
Loss (gain) on sales of noncurrent assets
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in costs on uncompleted construction contracts and other
Decrease (increase) in other operating assets
Increase (decrease) in notes and accounts payable-trade
Increase (decrease) in advances received on uncompleted construction contracts
Increase (decrease) in other operating liabilities
Loss (gain) on sales of investment securities
Gain on exchange of investment securities
Gain on abolishment of retirement benefit plan
Other, net
Sub-totalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) investing activities
Purchase of property and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of investments in subsidiaries
resulting in change in scope of consolidation
Payments of loans receivableCollection of loans receivable
Decrease (increase) in time deposits and other
Other, net
Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
Proceeds from issuance of bonds
Repayment of long-term loans payable
Proceeds from long-term loans payable
Redemption of bonds
Purchase of treasury stock
Proceeds from sales of treasury stock
Acquisition of own shares via trust
Transfer of own shares via trust
Cash dividends paid
Other, net
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
Increase (decrease) in cash and cash equivalents resulting from merger
and acquisition(consolidated subsidiary and nonconsolidated subsidiary)
Cash and cash equivalents at the end of period

2014/352

Financial Section

Financial Highlights (Non-consolidated)■Orders Received ■Net Sales■Gross Profit(¥Millions)

268,514

268,356
247,358

235,305

2014/3

236,672
236,236

2015/3

241,884

243,546

227,521

2016/3

256,864(¥Millions)
27,69624,2072017/3

2018/3

2014/3

21,326

21,586

2015/3

2016/3■Operating Income■Ordinary Income(¥Millions)(¥Millions)

23,2202017/3

2018/3

19,41315,153
12,444

2014/3

10,012

10,073

2015/3

2016/3

11,21012,7472017/3

2018/3■Net Income

12,225

2014/3

2015/3

2016/32017/3200,289

205,965

2018/3■Total Assets ■Net Assets(¥Millions)(¥Millions)

17,120225,077
14,61913,235
10,334

185,730

188,122

9,399
95,754

2014/3

12,735
10,962

2015/3

2016/32017/3

2018/3

2014/3

102,552

2015/3103,958

2016/3

114,1292017/3

126,671

2018/3(¥Millions)

Orders Received
Net Sales
Gross Profit
Operating Income
Ordinary Income
Net Income
Total Assets
Net Assets

53 Corporate Report 20182014/3

2015/3

2016/32017/3

2018/3

235,305
247,358
24,207
12,444
12,747
10,334
185,730
95,754

236,236
236,672
21,326
10,012
10,962
13,235
188,122
102,552

241,884
227,521
21,586
10,073
12,7359,399
200,289
103,958

268,356
243,546
23,22011,21012,225
17,120205,965
114,129

268,514
256,864
27,69615,153
19,413
14,619225,077
126,671

Trends by Segment (Non-consolidated)
Orders Received by Business Segment (Non-consolidated)(¥Millions)
235,305

268,356
236,236

268,514

NTT group engineering

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS

241,884(¥Millions)

2014/3

2015/3

2016/32017/3

2018/3

2014/3

2015/3

2016/32017/3

2018/3

NTT group engineering

130,375

125,428

141,628

159,656

145,425

NCCs

35,866

33,662

19,79027,59730,909Urban infrastructure

47,23556,68757,40858,82568,802

SYSTEMSOLUTIONS

21,827

20,45823,05622,27623,376

235,305

236,236

241,884

268,356

268,514Total

Net Sales by Business Segment (Non-consolidated)(¥Millions)
247,358

256,864
236,672

NTT group engineering

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS

243,546
227,521(¥Millions)

2014/3

2015/3

2016/32017/3

2018/3

2014/3

2015/3

2016/32017/3

2018/3

NTT group engineering

131,193

127,237

132,765

146,591

146,674

NCCs

42,13435,582

22,536

22,64927,164

Urban infrastructure

52,15153,44451,35051,714

59,612

SYSTEMSOLUTIONS

21,87920,407

20,86922,59023,412

247,358

236,672

227,521

243,546

256,864

Total

Financial Section
Corporate Report 201854

Financial Section

Non-consolidated Balance Sheets(¥Millions)

2014/3

2015/3

2016/32017/3

2018/3ASSETS
Current assets
Cash and deposits
Notes receivable-trade
Accounts receivable from completed construction contracts
Short-term investment securities
Costs on uncompleted construction contracts
Finished goods
Raw materials and supplies
Short-term loans receivable
Prepaid expenses
Deferred tax assets
Other current assets
Allowance for doubtful accounts
Noncurrent assets
Property, plant and equipment
Buildings
Structures
Machinery and equipment
VehiclesTools, furniture and fixtures
Land
Lease assets
Construction in progress
Intangible assets
Software
Other intangible assets
Investments and other assets
Investment securities
Stocks of subsidiaries and affiliates
Long-term loans receivable from subsidiaries and associates
Claims provable in bankruptcy, claimed provable in rehabilitation and other
Long-term prepaid expenses
Prepaid pension cost
Other investments and other assets
Allowance for doubtful accounts
Total assets

109,286
8,489
106
72,095
5,919
15,213
—
47
3,434
242
2,595
1,201
(59)
76,44438,966
12,809
1,274
829
0
670
22,973
266
143
2,771
2,635
136
34,706
11,562
17,173
488
56
83
4,918
2,107
(1,684)
185,730

108,185
9,074
1,147
63,863
11,765
14,365
—
79
2,500
277
3,332
1,823
(46)
79,93639,372
12,733
1,191
1,169
0
590
22,459
223
1,003
3,003
2,159
844
37,56013,836
19,653
642
56
65
2,506
2,315
(1,517)
188,122

109,519
12,990772
74,48790
12,963
—
540
2,617
326
1,794
2,935
—
90,76947,541
15,219
1,849
2,547
0
690
26,671
253
310
4,315
2,921
1,394
38,912
14,417
19,891
—
56
186
3,611
1,914
(1,165)200,289

113,459
12,452
1,374
75,39763
14,571
405
737
3,722
336
1,956
2,442
—
92,50550,77914,673
2,230
3,421
0
550
29,263
205
432
3,207
2,704
502
38,51913,46919,987
—
55
118
4,095
1,831
(1,038)205,965

128,428
22,257488
76,342
4,499
17,466
568
689
2,576
392
2,003
1,143
—
96,64851,676
15,358
2,289
3,216
0
540
29,930
164
175
3,104
3,007
96
41,867
16,091
19,749
—
55
39
5,091
900
(61)
225,077

LIABILITIESCurrent liabilities
Accounts payable for construction contracts
Short-term loans payable
Lease obligations
Accounts payable-otherAccrued expenses
Income taxes payable
Advances received on uncompleted construction contracts
Deposits received
Provision for warranties for completed construction
Provision for loss on construction contracts
Other current liabilities
Noncurrent liabilities
Bonds payable
Long-term loans payable
Lease obligations
Deferred tax liabilities
Allowance for investment loss
Asset retirement obligations
Other noncurrent liabilities
Total liabilities

82,37534,663
7,500
113
1,277
6,683
3,453
1,457
25,638
98
729
758
7,601
—
5,367
177
1,837
48
—
169
89,976

78,21035,085
1,073
96
2,170
4,724
414
1,332
26,290
76
5,175
1,771
7,358
—
5,000
153
1,993
17
121
72
85,56991,40841,292
12,000
103
1,993
5,142
954
2,590
26,132
774
258
166
4,922
—
2,010
179
1,900
95
287
449
96,33077,96840,413
—
95
1,000
6,117
2,032
2,806
23,37121
356
1,751
13,86810,000
1,235
141
1,425
192
439
434
91,83684,55540,368
389
70
1,652
6,806
2,932
2,831
27,64545
275
1,538
13,85010,000
—
119
2,654
42
503
530
98,405NET ASSETS
Shareholders’ equity
Capital stock
Capital surplus
Legal retained earnings
Reserve for advanced depreciation of noncurrent assets
General reserve
Retained earnings brought forward
Treasury stock
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Subscription rights to shares
Total net assets
Total liabilities and net assets

92,291
6,888
7,139
1,547
1,348
74,60015,255(14,487)
3,287
3,287
175
95,754
185,730

97,745
6,888
7,373
1,547
2,088
74,60022,277(17,029)
4,544
4,544
263
102,552
188,122

100,186
6,888
8,433
1,547
2,151
74,60028,475(21,910)
3,530
3,530
241
103,958
200,289

110,915
6,888
8,471
1,547
2,363
74,60041,055(24,011)
2,924
2,924
288
114,129
205,965

121,890
6,888
8,592
1,547
2,362
74,60051,087(23,187)
4,495
4,495
285
126,671
225,077

55 Corporate Report 2018

Non-consolidated Statements of Income(¥Millions)

2015/3

2016/32017/3

2018/3

Net sales of completed construction contracts

247,358

236,672

227,521

243,546

256,864

Cost of sales of completed construction contracts

223,150

215,346

205,934

220,326

229,167

Gross profit on completed construction contracts

24,207

21,326

21,58623,22027,696

Selling, general and administrative expenses

11,763

11,313

11,51312,01012,543Operating income

12,444

10,012

10,073

11,21015,153Non-operating income

1,152

1,504

3,644

1,749

4,746

Interest income

33

33

43

37

40

Interest on securities

8

13

10

0

1

Dividends income

129

193

2,392

259

3,608

Land and house rent received

468

466

397

783

630

Foreign exchange gains

—

474

—

—

—

Reversal of allowance for doubtful accounts

305

168

—

—

—

Gain on sales of non-current assets

—

—

231

402

57

Other

208

155

569

266

407

848

554

982

734

485

Interest expenses

66

57

48

35

6

Interest on bonds

—

—

—

1

15

Rent expenses

152

202

137

260

164

Foreign exchange losses

—

—

400

150

170

Provision of allowance for investment loss

—

—

78

96

20

Bad debts expenses

17

—

—

—

—

Penalty for contract breach

86

—

—

—

—

Impairment loss

187

150

—

—

—

Other

339

144

318

190

107

Ordinary income

12,747

10,962

12,735

12,225

19,413Extraordinary income

3,709

6,669

—

10,750

—

571

—

—

2,148

—

Income before income taxes

15,885

17,632

12,73520,827

19,413

Income taxes-current

5,499

3,837

1,276

4,065

4,305

Income taxes-deferred

51

558

2,059

(358)

488

Total income taxes

5,550

4,396

3,336

3,707

4,794

Net income

10,334

13,235

9,399

17,12014,619Non-operating expenses

Extraordinary loss

Corporate Report 2018

Financial Section

2014/356

Stock Information(as of March 31, 2018)

Major Shareholders
Fiscal Year-End

March 31Annual Shareholders’MeetingJune 22, 2018

Japan Trustee Services Bank, Ltd.
(Trust Account)

11,020

11.51

Stock Listing

Tokyo Stock Exchange (First Section)

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

5,055

5.28

Ticker Code1951

ESOP Association of KYOWA EXEO CORPORATION

3,988

4.16

Authorized: 300,000,000 shares

Japan Trustee Services Bank, Ltd. (Sumitomo ElectricIndustries, Ltd., Retirement Benefit Trust Account reentrusted
by Sumitomo Mitsui Trust Bank, Limited)

3,766

3.93

BBH FOR MATTHEWS JAPAN FUND

2,875

3.00

Sumitomo Realty & Development Co., Ltd.

2,081

2.17

SUMITOMO LIFE INSURANCE COMPANY

2,000

2.09

Japan Trustee Services Bank, Ltd.
(Sumitomo Mitsui Trust Bank, Retirement Benefit Trust Account)

1,834

1.92

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

1,537

1.61

STATE STREET BANK AND TRUSTCOMPANY 505103

1,503

1.57

Common Stock

Number of shares Percentage of total
held (thousand) shares issued (%)

Issued: 117,812,419 shares
Total Number of 10,476
Shareholders
Transfer Agentand Registrar

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

Note: The Company holds 22,049 thousand shares of treasury stock although thoseshares are not included in the above table.
The percentage of total shares issued is calculated by excluding treasury stock.

Composition of Shareholders
Treasury stock
18.7%

Financial
institutions
32.8%
Securities
companies
1.1%
Other
corporations
8.5%

Individuals
and others
13.4%
Foreigncompanies
25.5%

Stock Price Range and Trading Volume on the Tokyo Stock Exchange
Stock Price
(¥)
3,000

1,800
Trading Volume(Million Shares)
600

20

15

10

5

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
2013

57 Corporate Report 2018

2014

2015

2016

2017

2018

0

Board of Directors (as of July 1, 2018)

Building a better, brighter future together

President Fuminori Kozono

Vice President Tetsuya Funabashi

Representative Director andExecutive Operating Officer Tsutomu Ota

Director and Executive
Operating Officer

Director and Executive
Operating Officer

Director and Managing
Operating Officer

Director and Managing
Operating Officer

Director and Managing
Operating Officer

Director

Director(Independent Director)

Director(Independent Director)

Director(Independent Director)

Standing Statutory
AuditorYoshiaki Matsuzaka

Yuki Sakuyama

Noritsugu Totani

Kumiko Kitai

Yasuo Otsubo

Kazuteru Kanazawa

Tomohiro Kurosawa

Yasushi Kohara
Managing
Operating Officers

Yoshiharu Takizawa

Statutory Auditor(Independent Auditor)

Kozo Meguro

Statutory Auditor(Independent Auditor)

Tomoko Aramaki

Genzaburo Oe
Eiichi Matsuda
Junichi Sato
Hiroshi Yamashita
Yuji Sato
Hideki Obara
Koichi Mino
Hideo Higuchi
Takashi Itamiya
Fumio Kumagai

Haruhiko Watanabe
Operating Officers

Masato Suwabe
Kyoji Okabe
Noriyuki Watabe
Makoto Shirakata
keijiro Shizukuishi
kosei Nakashima
Kazunori Yuasa
Hachizo Sato
Eiji Fujimaki
Masahito Oishibashi
Masahiro Kikuchi
Hiroshi Akiduki

Stock Information /Board of Directors

Standing Statutory
AuditorYuichi Koyama

Corporate Report 201858