CORPORATEREPORT 2019

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 2019

From April 1, 2018, to March 31, 2019
(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 2019
July 2020

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

Consolidated Financial Highlights

5

Milestones of the KYOWA EXEO Group

7

Greetings /Message from the President

13

Business Overview
Special Features21

23

SpecialFeature 1

Globally Extending
the EXEO Quality

SpecialFeature 2

Opening the Way to
the Future by Utilizing
Digital Technology

25

KYOWA EXEO Group’s
Corporate Value Creation Process

27

KYOWA EXEO Group and SDGs

29

CSR Concept

31

Results and Plans of Major CSR Initiatives
Management Systems

33
36
37
Notice on forward-looking statements:
This Corporate Report 2018 contains forward-looking statements such as 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, theactual results might differ materially from the content 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 toundertake decisions concerning investment at their own
discretion.
The figures stated in units of ¥100 million and ¥1 million are
rounded down.

Corporate GovernanceCompliance
Risk Management

Involvement in the Environment

39

Environmental Management

43

Financial Section

57

Stock Information

58

Board of Directors

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

Corporate Report 20192

About KYOWA EXEO
Corporate Philosophy:

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 ground for existence is the Group’s technological capabilities. Throughout its existence, the Group has
aimed to be a corporate group that always anticipates and pursues better technologies at the forefront ofleading-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
to society through activities in the pursuit of state-of-the-art technologies.

Corporate Data
Company Name

KYOWA EXEO CORPORATION

EstablishedMay 17, 1954

Paid-in Capital¥6,888 million (as of April 1, 2019)

Stock ListingFirst Section of the Tokyo Stock Exchange

Representatives

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

Net Sales¥423.7 billion (consolidated)¥279.0 billion (non-consolidated) (as of March 31, 2019)

Number of
Employees

13,151 (consolidated)
3,804 (non-consolidated) (as of March 31, 2019)

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: 21

Major Banks

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

Independent
AuditorSeiyo Audit Corporation

Business Bases (As of July 1, 2019)
Domestic bases: (Head OfficeWest Japan
Head Office

Branches/

Offices)

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

21 Sales Offices

Kyoto Branch
Hyogo Branch
Hokuriku Branch
Shikoku Branch
Chugoku Branch
Kyushu Branch
Okinawa Branch

Iwate Office
Yamagata Office
Fukushima OfficeNiigata Office
Nagano Office
Ibaraki Office
Chiba Office
Saitama Office

Shizuoka Office
Mie Office
Gifu Office
Wakayama Office
Matsuyama Office
Kochi Office
Yamaguchi Office
Shimane Office

Philippines
MG EXEO NETWORK, INC.

Kumamoto Office
Kitakyushu Office
Nagasaki Office
Oita Office
Minami-Kyushu Office

Thailand
EXEO ASIA COMPANY LIMITED
Singapore
EXEO GLOBAL Pre. Ltd.

Bases of Five Major Consolidated Subsidiaries
EXEO TECH CORPORATION
Daiwa Densetsu Corporation
C-CUBE Corporation
Seibu Electric Industry Co., Ltd.
NIPPON DENTSU CO., LTD.

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

Net sales (¥Billion)

495.0

495.0

424.3

423.7

325.0

Operating income (¥Billion) Profit attributable toowners of parent (¥Billion)
40.2
31.7 32.0
25.6

312.6

21.8

17.9

2017

2018

2019
(plan)

2017

2018

2019
(plan)

2017

2018

2019
(plan)

2017

2018

2019
(plan)Net Sales by Segment(2018)SYSTEM SOLUTIONS¥73.4 billion

17.3%

Urban
infrastructure¥108.6 billion

Telecommunications
Infrastructure¥241.6 billion

57.1%

25.6%
Note: The figures are rounded to
the first decimal place.

3

Corporate Report 2019

About KYOWA EXEO

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

Network engineering

FY15

Urban
infrastructure

Urban
infrastructure

Ratio of female
management 14
executives

14

10
7

8
6
2016

2017

2018

2016

2017

2018

0.8%
2016

1.5%

¥287.4 bn

FY20
Expansion of sales and businessdomains by development into new
domains

23%

Telecommunications facilities
Electricity supply
Urban civil engineering
Environmental engineering

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)
12.6 13.3 13.3

64%

13%

Mobile engineering

2018¥500.0bn

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

Male

16

14

69

73

15

270

280

2016

2017

6,536 6,572 6,524

215

80

1.1%
2017

54%

21%

Telecommunications
Infrastructure

SystemSolutions

Access engineering

Network Integration
System Integration

Telecommunications
Infrastructure

SystemSolutions

Telecommunications
Infrastructure

SystemSolutions(FY16–FY20 Medium-Term Management Plan)

2018

2016

2017

2018

1

1

1

2016

2017

2018

2016

2017

2018

Notes: 1. On a non-consolidated basis.
2. This pertains to the number of serious accidents as defined by the Company.
Corporate Report 20194

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

Feb. 1963
Sep. 1963
Feb. 1972
May

1991

Mar.

1999

Aug. 2011

Nov. 2011
Dec. 2015
Oct.

2018

May. 2019

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 subsidiary
WHERE Inc. was converted into a wholly
owned subsidiary
C-CUBE Corporation, Seibu ElectricIndustry Co., Ltd. and NIPPON DENTSU
CO., LTD. was converted into a wholly
owned subsidiary
DeClout in Singapore was converted into awholly 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 2019

Entered other businesses
in the pursuit of businessexpansion.

¥423.7 Billion

Fiscal 2020 Targets
Net Sales

Operating income¥500 Billion ¥33 Billion

2006
Net Sales:¥300.0 Billion

New
Focusing Group strengths
Foundation to take total solutions to
a new growth stage.
Period1997

Milestones of the KYOWA EXEO Group2018
Net Sales:

Net Sales:¥200.0 Billion

GrowthPeriodMoved toward further
growth in the 21st century.

2000~
Under the name of
KYOWA EXEO CORPORATION,

broke the mold and continually
ventured out to address
new challenges

2009

KANAC Corp. was converted into a wholly owned subsidiary

2011

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

2014

AID Holdings Inc. (the holding company of ADVANCEDINFORMATION DESIGN Co., Ltd.) was converted into awholly owned subsidiary

2017~
Enhanced Collaboration in the ICT Solutions Field.
2017

Entered capital and business alliance with Nextgen, Inc.

2017

Started strategic collaboration with CA Technologies.

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.

2018 Awarded the FY 2017 Grand Prize for Excellence inEnergy Efficiency and Conservation(Chairman Prize for ECCJ in the Product Category &Business Model Category).
2018 Acquired C-CUBE Corporation, Seibu Electric Industry
Co., Ltd. and NIPPON DENTSU CO., LTD.

2018 Acquired Kohken Co., LTD., which engages
in anticorrosion paint operations.
2018 Acquired Leng Aik Engineering Pte. Ltd., an electricalengineering and general facility construction
company in Singapore, and its group companies.
From left, Ms. Tee Lea Cheng and Mr. Tan Seow Leng of LAE;
Mr. Fuminori Kozono (Chairman of KYOWA EXEO CORPORATION);
and Mr. Tan Cheok Perg and Mr. Tay Kuan Hwee of LAE.

2019 Established EXEO GLOBAL Pte. Ltd.
in Singapore to enhance global businessdevelopment.
—DeClout Limited of Singapore joined the KYOWA
EXEO Group.

Entrance of DeClout

2019 Established the Digital Transformation Strategic Division to promote
digital transformation.

Corporate Report 20196

TOP MESSAGE

Thank you for your understanding and continuing support for the overall business operations of
the KYOWA EXEO Group.
I assumed the post of President of KYOWA EXEO CORPORATION as of June 21, 2019.
Following the management integration with three other companies in western Japan, which wascompleted on October 1, 2018, the Group further solidified its strengths—“Total Process,”“Total Solution” and “Nationwide Construction Services”—based on its long-accumulated
technological capabilities. I intend to strive for Group-wide business development by leveraging
my experience in the information communications business to achieve innovation-conscious
operational reforms in response to the problems of our customers and society and to pursue
design thinking through enhanced cooperation among different departments while adhering to thesound traditions of the Group.
The EXEO of the KYOWA EXEO Group is the Latin “exeo,” which refers to breaking the moldand continually venturing out to address new challenges. Reaffirming the meaning of the company
name, we will continue to make flexible responses to a changing business environment andprovide total solutions in a wide range of business fields by gathering the strength of the entire
Group, thereby contributing to society as a corporation creating an affluent living environment.
With such an attitude as a pillar of our CSR management, we will aim to achieve the sustainablegrowth of the Group.

7

Corporate Report 2019

みんなを「つなぐ」と未来はもっと明るく楽しい

TOP MESSAGE

KYOWA EXEO aims to be a true
“ICT Innovation & Engineering
Company.”
President & CEO
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
have become increasingly important.
Taking such social trends into consideration, we aim
to create value jointly with society and achieve sustainable growth by identifying and accommodating important issues for our stakeholders and the KYOWA EXEO
Group in 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 comply with the Charter of Corporate Behavior put forward by the Keidanren (Japan Business Federation) and perform corporate social
responsibility (CSR) through our primary businesses.

Business Results, Initiatives andAchievements of Fiscal 2018
Our business environment in fiscal 2018 remained
successful as in the previous fiscal year. Market competition regarding new services started in thetelecommunications sector, as represented by the entry
of a telecom carrier into the financial business sector.
Moreover, the reinforcement and improvement of information communications networks and the user environment were promoted in line with the increased data
traffic due to the expanded use of smartphones andvarious smart devices. In the system solutions sector,
artificial intelligence (AI) and cloud technologies started
spreading in society in various business settings, thereby
drastically expanding the markets leveraging big data. In
the construction sector, ahead of the forthcoming Tokyo
Olympic and Paralympic Games 2020, the redevelopment business prospered in the Tokyo metropolitan area
and construction investment by municipalities throughout
the country continued at high levels associated withdiverse initiatives for regional revitalization, disaster prevention and mitigation projects.
Under such circumstances, the KYOWA EXEO Group
conducted management integration on October 1, 2018,with three other companies in western Japan, that is,
C-CUBE Corporation, Seibu Electric Industry Co., Ltd.
and NIPPON DENTSU CO., LTD. Furthermore, in the
Global sector, all group companies of Leng Aik Engineering Pte. Ltd., which engages in electrical engineering andgeneral facility construction in Singapore, were converted
into subsidiaries in November 2018, and EXEO GLOBAL
Corporate Report 20198

TOP MESSAGE

Pte. Ltd. was established in Singapore as a regional
headquarters in Asia.
The Group achieved record-high profits thanks to the
management integration with three companies in western Japan and overseas business development in the
Global sector in addition to the business expansion due
to the aforementioned activities.
In the telecommunications infrastructure business,
we mainly strove to increase the construction efficiency
mainly of fixed telecommunications-related optical line
connection works, and focused on swiftly completing
works to cope with the openings of wireless phonebase stations by major customers. We also addressed
aged facility restoration works and works to help facilities recover from typhoon disasters. Moreover, in mobile telecommunications-related works, we promoted
works relating to the reinforcement and improvement of
wireless phone base stations for the 4G frequency bandcountrywide.
In the urban infrastructure business, we received
orders for several large-scale work projects such ascountermeasures for 700-MHz reception difficulty indigital terrestrial televisions, electrical equipment installation for large buildings and the construction of waste
treatment facilities. Meanwhile, the three acquiredcompanies in western Japan addressed large-scale

9

Corporate Report 2019

orders for large public works; disaster prevention infrastructure works for municipalities and government
agencies; telecommunications facilities works for railway
companies; installation works for hydrogen supply
stations utilizing solar power generation; and electricalequipment installation works in Okinawa.
In the system solutions business, apart from various
system development projects that comprise the base of
the business, we worked to extend new solution fields,
including enterprise application integration (EAI) solutions. In addition, we received orders for various solutions targeting municipalities and educational
institutions, as well as for such works as educationrelated and IP private branch exchange (PBX) renewal
works. The NIPPON DENTSU group made group-wide
efforts in order-receiving activities such as the development of mission-critical and information systems, theprovision of security network-related implementation
services and the building of IT infrastructure systems.
Consequently, the group received orders for projects
such as large-scale SI projects, office computer replacement projects, works for high-speed broadband
services.
Furthermore, in the agri-business field, which theGroup entered as a new pillar of profits, the C-CUBE
group started sales of SWEET CUBE tomatoes withOperation highlight
Net sales (¥billion)

Operating income (¥billion)

495.0

495.0
424.3

2017

32.0

2018

2019
(plan)

25.6

423.7

325.0

31.7

TOP MESSAGE

Orders received (¥billion)

312.6

2018

2019
(plan)

2017high sugar content, which were produced by nextgeneration farms that leverage the latest ICT.
As a result, for fiscal 2018, the KYOWA EXEO
Group recorded orders received amounting to ¥424.3
billion (up 31% year over year) and achieved consolidated net sales of ¥423.7 billion (up 36% year overyear) and operating income of ¥31.7 billion (up 24%
year over year).
Following the management integration, the three acquired companies in western Japan promoted the reformof their business structure, work style reforms and theenhancement of their earning power.
In the system solutions business, the C-CUBE group
moved ahead with structural reform initiatives that focusedon the provision of various solutions for municipalities andeducational institutions, thereby enabling a base for sustainable growth by attaining record-high segment profit in
the second half of fiscal 2018.
Furthermore, as part of the work style reforms aimed
at promoting more flexible ways of working, the Seibu
Electric Industry group engaged in trials toward theimplementation of a telework scheme mainly for those
employees who assume the task of raising children andtaking care of the elderly while working.
The NIPPON DENTSU group continued to address
its four priority measures: Expansion of Orders Received, Promotion of Group-wide Collaboration, Human
Resource Development and Enhanced Utilization of IT.
The group thus made efforts to reinforce its businessbase and profit-earning capability through its commitment to these policies.

2018

2019
(plan)

2017

Outlook for Fiscal 2019
Following the management integration with threecompanies in western Japan, the KYOWA EXEO
Group reviewed the numerical targets in the current
Medium-Term Management Plan for the remaining two
years through fiscal 2020 and changed fiscal 2020
targets as follows: net sales of ¥500.0 billion, operating income of ¥33.0 billion, return on equity (ROE) of
8.5% and earnings per share (EPS) of ¥210. In the
future, we will endeavor to flexibly respond to changes
in the business environment and establish a solid management foundation by generating group synergies incooperation with the respective companies in westernJapan.
In the information communications sector, expansion is
expected in the development of information communications networks such as the works for fixed- and mobilecomposite 5G-compliant communications, which arerequested by customers, and the reinforcement of wireless phone base stations as a countermeasure against asurge in data traffic, although telecom carriers will continue
to curtail their capital investments over the medium to longterm. In addition, our new one-stop coverage system
nationwide will enable us to establish an efficient construction system by reviewing the Group formation so thatmanagement resources can be consolidated into areas
where disaster recovery and related works for Expo 2025
Osaka, Kansai, Japan are anticipated. Furthermore, we
expect ICT-related investments to continue rising in linewith the expansion of new IoT services that utilize AI, thecloud and big data.
Corporate Report 201910

TOP MESSAGE

In spite of concerns over labor shortage in the construction sector, in view of the forthcoming Tokyo Olympic and Paralympic Games 2020, various related works
for athletic arenas and in surrounding areas are reaching a peak in the Tokyo metropolitan area, and investments by municipalities throughout the country is
expected to continue steadily in line with various initiatives for regional revitalization, disaster prevention andmitigation projects.
In addition, we will strive for further business expansion by focusing on the establishment of the global
business and new key businesses.
In fiscal 2019, we will strive to generate group synergies in cooperation with the three companies in westernJapan and other subsidiaries in the telecommunications
carriers business. Moreover, we intend to strengthenmarketing activities in the urban infrastructure andsystem solutions businesses, both of which are positioned as growth businesses, to expand our businessand establish a solid management base.
On April 1, 2019, the Company established theDigital Transformation Strategic Division, a new organization aimed at promoting digital transformation (hereinafter, “DX”). DX refers to the pursuit of optimal solutionsin terms of products and services, as well as of therelevant business models and IT technology that supports such models, through operational reforms thatleverage data and digital technology. The trend toward
DX has been expanding rapidly in almost all industries,
and DX has therefore attracted attention as a new
growth domain in the system solutions sector.
The Digital Transformation Strategic Division will
pursue ideal business operations within the KYOWA
EXEO Group in cooperation with the respective departments/sections. The Division will also drive work stylereforms aimed at improving productivity by thoroughly
reviewing business processes and promoting digitalization. Subsequently, the Division will feed back theknowledge and know-how obtained during DX-related
activities to the respective departments in the form ofcase studies and best practices as reference for whencustomers implement DX. The Division thus assumes
the central position in expanding the new DX-based
solution business.
We have already launched several operational reforms on previously noted issues, including slip processing work to settle expenses; reporting fromconstruction worksites to KYOWA EXEO’s Head Office;and the implementation of video communication tools.
We will continue to promote these work style reforms
and focus on converting knowledge obtained therefrom
into value that can be provided to customers.

SDGs initiatives through business activities (KYOWA EXEO Group)
Achievement of a safe and secure society

1 through the infrastructure business
Achieve urban development tha t is sa f e andsecure for everybody, as
well as contributing tobuilding infrastructure thatis resilient to natural disasters

Global environment conservation and3 achievement of a recycling-oriented society
Promotion of recycling and effective utilization of
resources; achievement of a society for theprevention of global warming

11 Corporate Report 2019

To page 27

Achievement of an affluent society through the

2 solution businessR e s o lu t i o n o f s o c i a l i s s u e s a n dachievement of an affluent society
through IoT technology

Achievement of favorable communication with4 stakeholders

To meet the expectations of stakeholders,favorable communication will be strengthened toresolve issues

TOP MESSAGE

ESG and SDGs Initiatives
The KYOWA EXEO Group’s corporate philosophy
includes cultivating technological capabilities, seeking
affluence and contributing to society. Under this philosophy and with its technological capabilities as adriver of growth, the Group has grown to be the way it
is now, while reflecting the needs of the times. The
Group’s technological capabilities now contributesignificantly to the resolution of social issues at home
and abroad. The KYOWA EXEO Group will continue toaddress social issues and help solve them through its
businesses, thereby achieving sustainable growth withsociety. While we will continue to address the CSR
and ESG activities that we have been tackling, by
categorizing these activities in each item under theSDGs, we came to realize the diversity of value that
the KYOWA EXEO Group can provide to customers
and society.
You will understand that the CSR and ESG activities
in which the Group has engaged have solved manysocial issues. I personally have recognized anew that
our embodiment of the Group’s corporate philosophy ineveryday business has helped to solve a variety ofsocial issues.
Consequently, we have decided to disclose the“EXEO Group and SDGs” newsletter to students
wanting to join the Company, customers and our
in-house departments and periodically add news
sources and content. I am confident that we can earn
new orders if employees at the respective departments learn about the attractive, diversified businessactivities within the Group and take up such topics
when visiting customers.

Distributing Returns to Shareholders
The KYOWA EXEO Group regards profit distribution toshareholders as an important managerial issue and has
a basic policy of ensuring stable dividends, while considering business results, the future business environment and investments for ensuring financial strengthand business expansion.
Regarding dividends, we employ a dividend on equity(DOE) of 3.5% as the benchmark percentage. Accordingly, the annual dividend per share for fiscal 2018 was¥70.
For fiscal 2019, also applying a DOE of 3.5% as thebenchmark percentage, we plan to set the annual
dividend per share at ¥80 (an interim dividend per shareof ¥40 and a year-end dividend per share of ¥40).
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 ¥5.0
billion during the first half of fiscal 2019.
In addition, we will maintain a stable high level of ROE
by promoting the growth of income and enhancing
capital efficiency and continue to seek greater EPS.
Establishing a continuous cycle that starts with raising the awareness of employees, which activates theorganization and leads to offering services appreciatedby customers and better business performance, will
result in the distribution of higher profits to shareholders. We will strive to enhance corporate value throughraising business performance and aggressively distributing profits to shareholders.

Corporate Report 201912

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 through its businessactivities by providing high value-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 2019

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 201914

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 2019and 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,
the Softbank Group and the Rakuten Group.

Corporate Report 201916

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 2019

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 2019

18

事業概要

KYOWA EXEO Group Structure
KYOWA EXEO CORPORATION(As of July 1, 2019)

Five Major Consolidated Subsidiaries
C-CUBE Corporation

Insightful company that employs the best people to deliver advanced technology and exciting communications offerings
Since its foundation, C-CUBE Corporation has taken advantage of the latest technology to engage in a
broad range of businesses including telecommunications facilities works, general equipment works andinformation services.
Given the current transformation among industries toward collaboration between various fields utilizing ICT
infrastructure, the entire C-CUBE group will continue to take on challenges across the board to be an
insightful company that can employ the best people to deliver advanced technology and exciting
communications offerings by addressing business structure reforms.

Company Name C-CUBE Corporation
Establishment May 14, 1954
Head Office

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

Representative

Representative Director and President:
Hiroaki Kubozono

Paid-in Capital ¥4,100 million
Business
OutlineTelecommunications construction business,
information service business, etc.

Seibu Electric Industry Co., Ltd.

Aiming to further develop business via the dreams, wishes and pride of our employeesWith the Kyushu region as its home turf, Seibu Electric Industry Co., Ltd., engages in various businesses such as the mainstay
information and communications, ICT solution and social infrastructure businesses.
Seibu Electric Industry affiliated with the KYOWA EXEO Group in October 2018. We will endeavor to establish a construction
system adaptable to diversified customer needs with enhanced productivity. We will also take on the challenge of businessgrowth and development and proactively maximize synergies from the business integration.
With the beginning of a new era, Reiwa, as a turning point, we will strive to contribute to society by better leveraging ourstrengths. Moreover, we will aspire for further growth and development of our business while building on the dreams, wishes andpride of every employee.

Company Name Seibu Electric Industry Co., Ltd.
Establishment July 3, 1947
Head Office7-1, Hakataekihigashi 3-chome,
Hakata-ku, Fukuoka-shi, Fukuoka

Representative

Representative Director and President:
Toshihiko Kumamoto

Paid-in Capital ¥1,600 million
Business
OutlineTelecommunications engineering business,
ICT solution business, etc.

NIPPON DENTSU CO., LTD.

Becoming a company that contributes to a society where people can live safely
Since its foundation, NIPPON DENTSU CO., LTD., has contributed to creating a society where people can live safely through theconstruction of a telecommunications infrastructure and the development of its peripheral equipment. NIPPON DENTSU put its
management resources into product development at an early stage. Representative products that have enjoyed popularity include theinspection system for a leading manufacturer, the PIANO PHONE; vibration analysis systems; fee management systems; and theOresse reception system. Moreover, in our history of growth, we have always emphasized customer satisfaction, as represented by
the provision of information system maintenance and operational services nationwide.
In recent years, as part of our CSR efforts, we created an endowment system to support creative activities from the Kansai area inthe media art domain (artistic expression using digital technology) to support the fusion of art and ICT. In addition, we have started
the AI solution service business to provide diverse services related to AI, IoT and the cloud. Our challenging inaugural spirit has led tobusiness process reforms of customers by putting to use our own experience of installing Robotic Process Automation (RPA) tools,
the CB Series and the BPA Series. In the future, we intend to extend business with the concerted efforts of the NDK Group andcontinuously pursue sustainable growth as a company trusted by customers.

Company Name NIPPON DENTSU CO., LTD.
Establishment October 22, 1947
Head Office21-1, Isoji 2-chome, Minato-ku,
Osaka-shi, Osaka

Representative

Representative Director and Chairman:
Toshiro Ue

Paid-in Capital ¥1,493.93 million
Business
OutlineTelecommunications facilities engineeringbusiness and ICT solution business

EXEO TECH CORPORATION

Addressing challenges for new growth as a newly established company
As a major subsidiary dedicated to private-sector demand, EXEO TECH CORPORATION renewed its
corporate structure through management integration with Exeo Network Corporation and FUJI DENSETSU
CO., LTD. as of July 1, 2019.
Under its management philosophy of “While making swift responses to environmental changes based on
the spirit of customer first, we provide support for information and communications services through ouradvanced technical abilities and quality and optimal services, thereby contributing to the realization of anaffluent society,” we will continue to take on the challenges for new growth as a member of the KYOWA
EXEO Group with efforts to diversify business fields and expand business operations by fully optimizing theengineers and various product offerings of the three companies.

Company Name EXEO TECH CORPORATION
Establishment May 20, 1948
Head Office

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

Representative

Representative Director and President:
Yuki Sakuyama

Paid-in Capital ¥450 million
Business
OutlineCommunications infrastructure,
ICT solutions, environmental andsocial innovations, etc.

Daiwa Densetsu Corporation

Aiming for a future full of dreams as a company that develops with local communities
Daiwa Densetsu Corporation intends to address business improvement through its desire to change itself,
courage and determination by anticipating changes in the operating environment.
Daiwa Densetsu has constructed and maintained communications infrastructure facilities for 70 years as a
Tohoku-based company. The market share of the NUTRIMATE food service management system foruniversity hospitals nationwide is approaching 50%. We will further enhance Daiwa’s brand appeal bytransmitting the Daiwa group’s activities internally and externally, and endeavor to create our future as acompany that works with local communities primarily in the Tohoku region.

19 Corporate Report 2019

Company Name Daiwa Densetsu Corporation
Establishment August 1, 1949
Head Office

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

Representative

Representative Director and President:
Hideki Tohara

Paid-in Capital ¥450 million
Business
OutlineCommunications infrastructure,
ICT solutions, environmental andsocial innovations, etc.

All 72 Consolidated Subsidiaries
KYOWA EXEO GroupC-CUBE Group

Seibu Electric Industry GroupNIPPON DENTSU GroupAll 40 consolidated subsidiaries

All 17 consolidated subsidiaries

All 5 consolidated subsidiaries

All 10 consolidated subsidiaries

Major business outline of the subsidiaries

Major business outline of the subsidiaries

Major business outline of the subsidiaries

Major business outline of the subsidiaries

5 mobile telecommunications
subsidiaries

6 access engineeringsubsidiaries

2 networks
subsidiaries

1 access engineeringsubsidiaries

1 civil engineeringsubsidiaries

1 access engineeringsubsidiaries

1 networks
subsidiaries

2 civil engineeringsubsidiaries

17 IT
subsidiaries

5 civil engineeringsubsidiaries

2 IT
subsidiaries

1 electricity
subsidiary

2 othersubsidiaries

7 IT
subsidiaries

1 electricity
subsidiary

1 electricity
subsidiary

7 othersubsidiaries

1 electricity
subsidiary

1 othersubsidiaries

Business Overview

8 access engineeringsubsidiaries

17 nonconsolidated subsidiaries and 16 affiliates

Overview of Group Companies
Access engineering

IT

KANAC Corporation

DeClout Limited

KANAC Corporation has grown along with the developmentof postwar Japan since its foundation in September 1946. We
are an integrated engineering company dedicated totelecommunications facilities works, electrical equipment
installation works, civil engineering works, sales of materials,
manufacturing of equipment, etc.
We aim to realize our corporate philosophy of “becoming acaring company that provides comfortable lifestyles” via
forward-looking management that expands business areas,enhances technological capabilities, increases the types ofbusiness and ensures safety and security, while adhering toour mottos: the K3—“Kizuki (recognition),” “Kikubari (delicate
attention)” and Kizukai (solicitude)—and Omoiyari(Compassion). To this end, we will promote innovation
through concerted company-wide efforts as a “vigorous
corporation” and a “community-based corporation” that
contributes to the development of the Group and society.

DeClout Limited was converted into a wholly owned subsidiaryin April 2019 due to the completion of a TOB conducted by
EXEO GLOBAL Pte. Ltd., a regional headquarter company.
DeClout, with its head office in Singapore, sells IT
infrastructure featuring next-generation information
communications technologies and provides related services
with a goal of becoming a global market leader. DeClout also
provides a variety of businesses, including neutral hosting anddigital trade facilitation platform services through its
subordinate group companies on a global basis.
We will strive to contribute to further business growth of the
KYOWA EXEO Group by maximally leveraging our broadbusiness network.

Mobile telecommunications

IT

Denseisha Co., Ltd.

ADVANCED INFORMATION DESIGN Co., Ltd.

Denseisha Co., Ltd., has three business fields that are
positioned as mainstay pillars and will accelerate efforts topromote them. Regarding electrical works, the oldest pillar, westarted the maintenance and operation management services
of waste treatment facilities in fiscal 2018. We are also
participating in the reconstruction works of the Haneda Airport.
As for telecommunications infrastructure works for telecom
carriers, we will ensure a construction system to accommodate
the entry of new telecom carriers and 5G-related capital
investments.
In the SI business, we intend to further extend our businesswith existing semiconductor manufacturers. In June 2018, we
opened a new liaison office in Meguro-ku, Tokyo, through which
we intend to increase orders received in the Tokyo area andenhance regional manufacturing and development. In terms ofhuman resources, we will promote midcareer employment toensure the necessary number of engineers.
Among the three mainstay pillars, we will endeavor to deploy
cross-sectional human resources and mutual assistance. We
will also take on the challenge of tapping into new fields. We
therefore aim to be a choice company under the management
philosophy of “Ingenuity, Sincerity and Enthusiasm.”

Since its foundation in 1980, ADVANCED INFORMATIONDESIGN Co., Ltd. (AID), has engaged in system development
mainly for financial institutions, as well as for diverse industries
such as insurance, manufacturing, distribution, the public
sector, telecommunications and medicine. AID also has
proposed a broad range of application, network, security andmobile-related solutions, achieving good performance.
In the future, as a member of the KYOWA EXEO Group, we
will aim for further growth and development as a company
that can realize the IT solutions that customers truly desire byutilizing advanced IT technology and abundant know-how.

Corporate Report 201920

Special
Feature1

Globally Extending the EXEO Quality

From Asia to the World
Established EXEO GLOBALThe OECD Development Centre announced in its “Economic Outlook for Southeast Asia, China and India 2019” that ASEAN countries
are poised to maintain steady growth momentum, averaging 5.2% per year from 2019 to 2023.
The KYOWA EXEO Group has advanced its overseas strategy of covering the ASEAN countries by establishing MG EXEONETWORK, INC. (“MG EXEO”) and EXEO ASIA COMPANY LIMITED (“EXEO ASIA”), both of which are local joint ventures. In November
2018, the Group established EXEO GLOBAL Pte. Ltd. (“EXEO GLOBAL”) as a regional headquarters, in the global hub city ofSingapore. Moreover, the Group successively converted two leading local corporations into subsidiaries via an M&A and a TOB.
The Group will reinforce its structure to exert full-fledged global deployment to provide better urban infrastructure and systemsolutions not only in Japan but also overseas.

Fumitoshi Imaizumi
Operating Officer; Department Chief, Global Business
Department, ICT Solutions Headquarters;and Managing Director, President, EXEO GLOBAL Pte. Ltd.

Established EXEO GLOBAL, a regional
headquarters, in Singapore, a global hub city
During fiscal 2018, the KYOWA EXEO Group’s global
strategy entered a new stage. We reached the milestone ofestablishing a presence in the global hub city of Singapore.
We selected Singapore because of the easy access to thecapitals of the respective ASEAN countries via short flights
of approximately two hours, a low corporate tax rate and adesirable business environment in which to diversify investment. Moreover, the legal system has no restriction against
foreign capital, allowing 100% foreign investments. To
advance the Group’s global strategy, our presence in Singapore is essential.
In October 2018, the Group acquired all the shares of theLeng Aik Engineering Pte. Ltd. (“LAE”) group, which engages in electrical engineering and general facility construction,
converting it into a wholly owned subsidiary. The decisive

21 Corporate Report 2019

rationale for this acquisition was that the LAE group firmly
believes in “quality-first” corporate DNA and an immediateresponse corporate culture that enhances customer satisfaction. The KYOWA EXEO Group is also particular about
these features. Having the LAE group as a Group member
enables us to enter the urban infrastructure market, which is
rapidly expanding in the ASEAN countries.
Subsequently, toward the full-fledged deployment of its
global business, the KYOWA EXEO Group established
EXEO GLOBAL in Singapore in November 2018. EXEOGLOBAL is a regional headquarters that facilitates theoperational and strategic management of overseas subsidiaries. Through enhanced marketing activities including sales
promotion by top management and synergies among therespective subsidiaries, we have improved the Group-wide
structure to identify business problems faced by growthmarkets and turn them into good business opportunities.

Philippines

MG EXEO NETWORK, INC.
Thailand

EXEO ASIA COMPANY LIMITED

Singapore

EXEO GLOBAL Pre. Ltd.
Leng Aik Engineering Pte.Ltd.
DeClout Limited

In March 2019, EXEO GLOBAL converted DeClout Limited
into a wholly owned subsidiary through a takeover bid.
DeClout has three operating companies under its control:
Beaqon Pte. Ltd., which provides ICT solution, data centerand neutral hosting services; vCargo Cloud Pte. Ltd., which
engages in the digital trade facilitation platform business;and DeClout Investments Pte. Ltd., which is a corporate
venture capital. The DeClout group’s global operations
include not only the ASEAN region but also Africa andCentral Asia. In particular, EXEO GLOBAL has obtained theventure capital function of DeClout Investments, thereby
allowing the KYOWA EXEO Group to have a businessstructure that addresses the complete growth cycle discovering and cultivating promising start-up corporations anddeveloping them as subsidiaries within the Group. In the
future, we will accelerate the cycle of discovering and fostering promising corporations to realize our vision of B2B
networking for true global development.

Pursuing Group synergies to aim forbusiness models such as those in Japan
Although not much time has passed since the acquisition
was completed, it has already generated Group synergies.
In booming Singapore, many projects for data center
works have emerged in recent years. In view of such aloan from the Head Office in Tokyo to coach LAE staff on

Globally Extending the EXEO Quality

Moving toward true global deployment bymaking DeClout a subsidiary

processes from design to construction so that they can takeon the challenge of various construction work projects
including those of data centers. For example, regarding thecompetition for a data center extension project, our LAE
team, consisting of staff from the LAE group and Beaqon
who received guidance from the Tokyo Head Office, made acomprehensive presentation ranging from electrical equipment installation to system solutions. Although we areawaiting a debrief report on the selection, this presentation
was a product of Group-wide synergies and is a model for
future global deployment.
In several emerging countries, as in Japan, the number ofurban infrastructure and system solutions projects has been
increasing at an accelerating pace. To meet such market
needs, we must promote human resource development for
local employees through technology exchanges with theHead Office in Tokyo, which has accumulated substantial
expertise, as well as collaborations with local corporategroups, which can supplement the technologies that existing overseas subsidiaries lack or be converted into subsidiaries. In so doing, we need to develop business models as
in Japan to enable mutual synergies within a short period.
EXEO GLOBAL intends to contribute to the businessgrowth of the KYOWA EXEO Group and the creation of abetter society globally by continuously enhancing its global
development.

situation, seasoned employees have been dispatched on
Corporate Report 201922

Special
Feature2

Opening the Way to the Future by Utilizing Digital Technology

Launched New System that Addresses Digital
Transformation (DX) Across the Company

Digital transformation for corporations refers to the profound transformation of business performance and the targeted scope by
leveraging digital technologies. In the 2018 WHITE PAPER Information and Communications in Japan, the Ministry of Internal Affairs
and Communications pointed out that AI, IoT and other ICT are changing existing social and economic systems including infrastructure,
institutions, organizations and production methods, resulting in a major trend to create new systems. The likely future entails a variety
of fundamental changes in industry, including the deployment of new services that leverage the data collected from products (physicalgoods); cross-industrial collaboration utilizing automation technology and entries in different business sectors; and the transition ofsociety from “owning” to “as-needed utilization” resulting from the popularization of sharing services.
The KYOWA EXEO Group set forth “Improvement of productivity through the digitalization of operations and the fostering of highlyskilled IT human resources” as one of the basic policies of its new Medium-Term Management Plan, which was released in May 2019.
We have initiated the Digital Transformation Strategic Conference and assigned DX Promoting Leaders, who are hub-forming leadersin their respective organizations in conjunction with the Digital Transformation Strategic Division, the core entity that was establishedin April 2019. The Company has begun initiatives on various themes by establishing a structure to promote digital transformation via
concerted company-wide efforts.

Digital transformation addressedby the KYOWA EXEO Group

Masahiro Kikuchi
Operating Officer and Division Chief,
Digital Transformation Strategic Division

KYOWA EXEO’s DX has two objectives. One is to carry out
radical innovation concerning employees’ work styles andbusiness processes by thoroughly leveraging digital technology. In this context, the utilization of digital technology
includes reviewing relevant systems and modifying information systems from medium- and long-term perspectives.
The other is to cultivate our technological capabilities
through these activities and obtain valuable experience andknowledge. Contributing to the development of the humanresources who will be the next generation of the Group is an
important mission of the Division.
To early complete works, the number of which has increased given the steady business environment, stably andwith a high level of quality, and to cope with the labor

23 Corporate Report 2019shortage that has affected all industries, radical business
innovation using digital technology is a pressing management task. The setup of a new, DX-focused structure has
inspired the awareness of diverse problems and reformoriented ideas from diverse departments. We will strive to
conduct the aforementioned DX-related tasks as companywide activities not limited only to the Division.
We are confident the methods that helped us overcome
our issues or obstacles in advancing DX internally can beleveraged as added value in the solution business of theBusiness Solutions Headquarters and ICT Solutions Headquarters of the Company to help corporate customers
address operational and business reforms using digital technology.

Helping realize true work stylereforms with design thinking

Improving operational efficiency and quality by optimizing information
systems and utilizing new technologies such as AI and IoT
Shun Kanai (left)
Assistant Manager, Digital
Transformation Strategic Division

Opening the Way to the Future by Utilizing Digital Technology

We are using Office 365 throughout the
Shinjiro Mizuno (right)
Company as a tool that radically changes
Manager, Digital Transformation
the modality of communications. To faciliStrategic Divisiontate the introduction of the tool, we explain
it in an easy-to-understand manner conTsubasa Onodera (left)
cretely presenting actual scenes of usage
Digital Transformation Strategic
to ensure communications between workDivisionsites and the Head Office via the daily useof video calls, improve accessory tools and confirm usage
The so-called design thinking concept, which allows us toconditions. We intend to address these tasks in a multiconsider usability and ideal working conditions through thefaceted manner, ranging from the physical environment toeyes of each employee as a user, could be useful in conreviewing systems, including the perspective of the social
ducting work style and operational reforms using DX. We
movement theory such as the Telework Day to promotealready started an initiative to popularize this techniqueremote working.
within the Company from the viewpoint that DX could be
A customer who has introduced our EXBeacon platform
useful in developing businesses, including the processes ofcan digitalize conventional analog data using the indoor
creating prototypes via exchanged ideas and developing
positioning function to measure the position of targeted
high-precision products and services via repeated steps of
persons and things and then create a digital twin of theverification and improvement. Internal recognition and theoffice in combination with Office 365 digital information.
level of employees’ understanding have been improving little
We look forward to designing more efficient and easy-toby little, through such activities as the attendance of ouruse floor layouts and executing measures that inspire
management executives, for example, at a Design Thinking
communication based on the digital twin data.
workshop held at the site of a former restaurant.

ensure quality work-related services to ourcustomers.
Digital Transformation Strategic
Meanwhile, our review of basic design is
Divisionunderway to accommodate flexible andquick additions of functions to shared administrative operaWe will address the optimization and restructuring of IT
tions
such as attendance management and settlement ofsystem infrastructure, which supports the Group’s business,
expenses.
In addition, we will need to respond to the diverby incorporating the DX approach, not limited to the revisionsifyingwork
styles of Group employees, including those atof the conventional approach.
work-related departments who spend most of their day
To provide customers with various services such as workworking outdoors. The Division continues to hear from
related services, system integration, ICT solutions, quickly at
employees at the respective departments to identify optimal,high levels of quality, IT infrastructure has an important rolecross-sectional systems based on company-wide users’in supporting not only inter-department or inter-company
viewpoint.
cooperation within the Group but also broad collaboration
We have noticed that there are some unexpectedly
with corporate customers as service recipients and collabodangerous areas at our worksites. The ultimate work quality
rators. In addition to the swift and efficient provision ofof “Zero Accident” begins with our preparations to predict
services, we intend to develop an IT infrastructure as a
and avoid any such danger. We therefore intend to addressbase, on which workers can comfortably work, by optimizthese issues via operational reforms based on design
ing and restructuring the IT infrastructure with new technolothinking while maintaining an awareness of the viewpoint ofgies and innovative ideas.
employees who actually work in those areas.
The utilization of AI and IoT technologies at constructionWe would like to aggressively absorb and apply theand work-related departments is an important theme for theadvanced technologies necessary to exert work style orsafety improvement of various operations and the efficiency
operational reforms while considering, executing and conimprovement of construction inspections. We believe thatfirming the realization of DX.
safe and secure working conditions for all related parties will

Yukari Tanioka (right)

Corporate Report 2019

24

KYOWA EXEO Group’s
Corporate Value Creation Process
KYOWA EXEO will contribute to the resolution of social issues through its businesses(technologies) and strive for sustainable growth with society.
The KYOWA EXEO Group’s corporate philosophy includes cultivating technological capabilities, seeking affluence and contributing to society. Under this philosophy and with its technological capabilities as a driver of growth, the Group has grown to be theway it is now, while reflecting the needs of the times. The Group’s technological capabilities now contribute significantly to theresolution of social issues at home and abroad. The KYOWA EXEO Group will continue to address social issues and help solve
them through its businesses, thereby achieving sustainable growth with society.

Telecommunications Help realize a highly advanced ICT society throughour telecommunications infrastructure business
Infrastructure
Telecommunications 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
Cyber attacks, 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.

25 Corporate Report 2019

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 through our 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 to the environment
and people through our 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.

Value offered for society:
Convenient and affluent life
Safe and secure society
Green-rich EarthContribution to technological development
Creation of highly productive employment
opportunities
Support for restoration of disaster-afflicted
areas
More disaster-resilient infrastructure
Enhancement of energy efficiency

Sustainable
Corporate Value Creation
Provisionof value to various
stakeholders
Society
Shareholders and investors

Employees

Important issues for the KYOWA
EXEO Group to achievesustainable growth

Developing human resources /developing and handing down
technologies
KYOWA EXEO Group’s

Technological
Capabilities

KYOWA EXEO Group’s Corporate Value Creation Process

Customers

SpecialFeature1

Globally Extending
the EXEO Quality
Go to P.21

SpecialFeature2

Human resources
as a chief asset

Opening the Way to the Future
by Utilizing Digital Technology
Go to P.23

Corporate Report 2019

26

KYOWA EXEO Group and SDGs
KYOWA EXEO will contribute to the resolution of social issues through its businesses and strive for sustainable growth with society.
In recent years, the roles to be undertaken by companies for international issues such as the preservation of the global environment andrespect for human rights have become increasingly important. Taking such social trends into consideration, we consider them to beimportant issues for the KYOWA EXEO Group in 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 corporate social responsibility (CSR) through our primary businesses and aim to create value jointly with society and achievesustainable growth.

1. Achievement of a safe and secure society through the infrastructure business
Achieve urban development that is safe and secure for everybody, as wellas contributing to building infrastructure that is resilient to natural disasters
Contributing to the improvement of various kinds of infrastructure
Improving information communications infrastructure

Promoting “barrier-free”(Closer to communities and people by leveraging our technological capabilities)

We provide consistent quality services from planning and design to

We aim to create and help realize an environment where anybody canconstruction, operation and maintenance for all types of communications

live safely by accommodating barrier-free conditions, the norm of theequipment and facilities of telecom carriers, throughout the country

times. To help create welfare-based communities, we provide support

based on our performance over the years and excellent technologies.

from plan proposal and design to manufacturing of equipment,
construction and maintenance in aspects of both software and hardware.

Construction of an outdoor mobile phone Access engineering-related workbase station

Braille guide board with voice guidance inforeign languages

Station guidance chime

Establishing a variety of infrastructure facilities and equipment mainly in Southeast Asia
We engage in the infrastructure facilities business mainly in Southeast Asia. We contribute tocreating affluent communities by taking advantage of our sophisticated, Japanese-quality
Optical access works (The Philippines)<MG EXEO NETWORK, INC.>

technologies.

2. Achievement of an affluent society through the solution businessResolution of social issues and achievement of an affluent society
through IoT technology
Providing the environment for work style reforms and productivity improvement

Responding to food safety and food loss issues

Japan now faces various difficult situations such

We help hospitals to take risk countermeasures, including notification on

as a reduction in the productive-age population

contraindications and allergies, and improve efficiency in handling food materials

resulting from the declining birthrate and aging

and cooking/catering operations by providing tailored menu management focusing

population, the simultaneous pursuit of raisingchildren or taking care of the elderly and workon individual hospitalized patients. As for
Office 365 implementation service

school lunches, we provide relevant systems

style diversification. To address such difficult circumstances, we provide an environment thatthat excel in improving the efficiency of officehelps the interested parties to mitigate long working hours and improve operational efficiency.

processing, safety and cost performance.

Food service management system

Providing an ICT environment for high-quality education
Realizing an ICT environment in the field of education has become an urgent task because the Ministry of Education,
Culture, Sports, Science and Technology will introduce computer programming as a compulsory subject effective from2020. We provide an environment for everyone to receive affordable, quality ICT education regardless of gender.

27 Corporate Report 2019

Provision of educational
solutions, lesson assistance forteachers, lecture on operation of
ICT equipment, etc.

Sustainable Development Goals (SDGs)
The SDGs listed in the 2030 Agenda for Sustainable Development are a set of international
development goals from 2016 to 2030. The SDGs consist of 17 goals to realize a sustainable world.

3. Global environment conservation and achievement of a recycling-oriented society
Promotion of recycling and effective utilization of resources;
achievement of a society for the prevention of global warming
Increasing the ratio of renewable energy in the energy mix
Biomass business

Reducing hazardous chemical substances, as well as mitigating air, water and soil pollution
Focusing attention on “water,” an essential element for our lives, and the

We conduct field investigations, design and construction of wood

“waste” produced from our lives, we engage in the construction and operation

biomass boilers to enhance the utilization of wood biomass energy,of water treatment facilities for domestic and industrial wastewater and waste

which has drawn attention as a renewable source of energy.

treatment facilities. Through the business, we strive to reduce the discharge ofhazardous chemical substances, as well as the pollution of air, water and soil.

Biomass boiler in Kaneyama Town

Water treatment plant

Waste treatment facilities operated by Kinoumi
Area Treatment Facilities Association

Avoiding adverse effects on marine and coastal ecosystems
Substation
Wind farm on the sea

We have contributed considerably to constructing a social infrastructure of a new era

KYOWA EXEO Group and SDGs

Biomass boiler in Hachimantai City

Filter plant
Cable duct line

utilizing our long-cultivated underground civil engineering technology.
An example in this area is the horizontal directional drilling of submarine telecommuni-

Fisheries facilities
Water line to an isolated island
Communicationbase station

Sea water intake pipe

cations/power cables, which can bypass a long distance of seabed at places such as
fishing grounds and coral reef sanctuaries, preventing damage caused by pipes or cables.

Coral reef
Cable unloading duct line

Horizontal Directional Drilling (Earth Shuttle)

4. Achievement of favorable communication with stakeholders
To meet the expectations of stakeholders,favorable communication will be strengthened to resolve issues
With employeesWith society

Promoting diversity and work style reforms

Providing places for technical training

The KYOWA EXEO Group aims to nurture a corporate culture that recognizes diverse values regard-

We provide affordable, quality technical training forless of gender, nationality, or other features, in order to swiftly and flexibly respond to diversifying

everybody regardless of gender or nationality.

customer needs and committing to business development and improved performance. Accordingly, it
promotes Group-wide diversity as part of its innovation and work style reforms. The Group’s initiatives
along these lines havebeen recognized or
selected by the Ministry of
Health, Labour and Welfare
and other organizations.

Certified as an Eruboshi
company (highest grade) for
excellent childrais- advanced women’s particiing support
pation in the workplace
Obtained theKurumin mark for

Included in the Top
Hundred Telework
Pioneers by the Ministryof Internal Affairs andCommunications

Training center opened in the Philippines and scene of training
Corporate Report 201928

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

CSR 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 2019

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

Identification of important subjects and their materiality

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

Corporatephilosophy

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 201930

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

Governance

Ensuring information security
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

Elimination of serious accidents (personnel and facility)
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

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

Environment

All

Preserving the
globalenvironment andestablishing a
recycling-oriented
society

Reduction of CO2
emissionsUtilization of green energy and forest preservation

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

31 Corporate Report 2019

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)]

Plan accomplished

Results of efforts in fiscal 2018

Rating(self)

Plan almost accomplished

Efforts to be made in fiscal 2019

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

Continue current efforts

Held meetings of the Procurement Council to verify transparency and fair pricing

Continue current efforts

Achieved a ratio of new female graduates employed of 15.8%
Achieved a ratio of handicapped people employed of 2.38%
Encouraged employees to take paid leave: Annual paid leave taken: 13.3 days per person/year
Reduced total working hours
Included in the Top Hundred Telework Pioneers by the Ministry of Internal Affairs and Communications in November 2018

Target percentage of new female graduates employed:
25% or more
Target percentage of handicapped people employed:
2.2% or more
Target number of days of paid leave taken:
14 days or more per person/year
Reduce total working hours

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

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

Continue current efforts

Conducted business results presentations and IR meetings (230 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 2018, 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: 7.72 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

Reduce power consumption by
1% year over year
(to 7.64 kWh/m² or less)

Gasoline consumption: average 99.5 liters per car/month· Monitored the use of gasoline cards monthly · Switched to more fuel-efficient cars

Reduce gasoline consumption by 1% year over year
(to average 98.5 liters per car/month)

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

Reduce paper purchases by 1% year over year
(to 46.06 million sheets or less)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: 62.6%

Results and Plans of Major CSR Initiatives

Two KYOWA EXEO employees won a silver medal at the 56th National Skills
Competition of Japan in the information network cabling category in November 2018
Carried out various trainings, such as new employee, technical and overseas trainings

Plan unaccomplishedContinue current efforts
Target ratio of purchasing
eco-friendly products: 63% or more

Corporate Report 201932

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 can effectively 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 for monitoring management in light of changes in social conditions, laws and other developments.

Development of the internal control system and risk management system
The KYOWA EXEO Group works to thoroughly adhere to compliance, manage various risks and properly and efficiently executebusiness operations. At the same time, to ensure the reliability of financial reporting, the Group has stipulated the Basic Policy on Internal
Control Systems in accordance with the relevant provisions of the Companies Act and addresses its appropriate and efficient operation.
The Internal Control Committee, based on the Basic Guideline for Establishing Internal Control Systems, develops systems to ensurecompliance with laws and regulations, effective and efficient operations and reliable financial reporting, and grasps the overall operation
status of the internal control system while conducting its evaluation.
We have enhanced our risk management systems by establishing the Risk Control Division in June 2014 to integrate compliancerelated duties that had been distributed among more than one department and setting up the Business Risk Management Committee inJanuary 2019.
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, 2019

General meeting of shareholders

President
Management Council
Directions,Supervision

ReportConsultation,Directions

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

ReportInternal Control Committee
Compliance Committee
Business Risk Management Committee

Internal audit

Directions

ReportInstructions
Collaboration

Corporate Lawyer

CSR Committee

Risk Management Division

33 Corporate Report 2019

Response,Report

Information Security Committee

Group companies

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 Statutory Auditors (Independent Officers)
Two Outside Statutory Auditors (Independent Officers) exchanged views on the Company’s corporate governance andauditing systems that could contribute to the enhancement of corporate value.

Mr. Kozo Meguro

As a Certified Public Accountant, Mr. Meguro held important
positions in audit corporations and has served as Outside Statutory
Auditor (Independent Officer) of the Company since June 2014.

A listed company with thorough risk control

As a Certified Public Accountant and a Certified Public Tax Accountant,and other companies and has served as Outside Statutory Auditor(Independent Officer) of the Company since June 2018.

After the integration, the auditing system needs to achieve synergies
Meguro: Domestically, the three companies based in the western partof Japan have been integrated into the KYOWA EXEO Group to
pursue synergies. Overseas, too, the same vector must be
shared among the Group members while ensuring compliance.
Relentless discussions to achieve that are important.
Aramaki: The addition of the three companies’ presidents as Directors
has invigorated the Board of Directors. Of course, I realize that
this integration has come after a long period of discussions
and adjustments. Such effort enabled the smooth integration
to allow us to be ready to proceed to the next step.
Meguro: I met the statutory auditors of the three companies in the second
half of 2018. They all have well-organized auditing systems, andsome of the statutory auditors have professional backgrounds likeours. After the integration, we will see increasing opportunities forthe four companies to unite forces to execute duties. For theauditing system, the three companies and us at KYOWA EXEO will
be required to achieve synergies by sharing information in afunctional and appropriate manner and reflecting our judgments
and opinions in discussions by the Board of Directors.
Corporate Report 2019

Corporate Governanceboth risks and opportunities. To address these changes, theFull-Time Statutory Auditors have actively collected information
to ensure the appropriate audits of operations.
Aramaki: It is great that the Company provides Outside Statutory Auditorswith various opportunities to exchange opinions, including the
Vector Meetings. I would like to further my understanding of theCompany so that I can engage in deeper discussions.

Management Systems

Meguro: I am in my fifth year of service as a Part-Time Statutory Auditorof KYOWA EXEO. KYOWA EXEO has actively strengthened its
corporate governance. With Ms. Aramaki as a new female
outside officer, the Company is also engaged in thediversification of human resources.
Aramaki: A full year has passed since I took office. My impression about
KYOWA EXEO, a listed company, is that risk control is in effectthroughout the Company. I think the Company also pays goodattention to the opinions and advice of outside officers.
Meguro: Since I took office, the composition of the officers has changed
significantly. KYOWA EXEO has been active in recruiting
outside officers, encouraging professionals with a broader
range of knowledge to take part in the management of theCompany. As a result, a diverse range of questions are being
answered, not only about the basic meanings of technicalterms in IT and construction often heard at Board of Directors’
and other meetings but also on industrial trends, theCompany’s position in the industry, the advantages of its
strategies and expected risks. The culture of actively explaining
internal issues has gradually taken root in the Company.
Aramaki: The full-time officers of the Company are willing to be fully
accountable, not just working with outside officers to satisfy
the legal requirement. This struck me as excellent awarenessand the Company’s determination to maintain the corporate
governance it has established.
Meguro: The Company’s businesses, compared to five years ago, havechanged to include more international operations that involve

Ms. Tomoko Aramaki Ms. Aramaki held managerial positions in PARIS MIKI HOLDINGS Inc.

34

マネジメント体制

Aramaki: The number of subsidiaries of the KYOWA EXEO Grouphas increased significantly. We now face the newchallenge of establishing an auditing system that canensure Group governance. That is a difficult but
challenging task.

The KYOWA EXEO Group is to seek global recognition
Aramaki: Recently, the Company has actively engaged in theinternational expansion of businesses and large-scale M&As.
This trend is expected to continue. In this perspective, it isurgently required to develop human resources who have a
global mindset and can pursue those duties.
Meguro: I think the Statutory Auditors should be required to ensuretransparency domestically and internationally and to show theGroup’s commitment to abiding by the rules. I believe fulfillingsuch a role will help develop a strong team that can survive
any difficulties and that, in turn, will protect stakeholders,
including shareholders.
Aramaki: For the KYOWA EXEO Group to win global recognition, whatshould we be mindful of? Although we are in the position of
executing audits, not business operations, I will continue tooffer advice and suggestions based on my own experienceof having been involved in some international businesses
and M&As.
Meguro: The KYOWA EXEO Group has solid domestic achievements anda stable financial structure. Building on these advantages, for
the Group to achieve further growth, the Statutory Auditors are
expected to promote innovation from inside.
To this end, I will continue to offer advice and suggestions as
an Outside Statutory Auditor and Independent Officer.

Major Activities of Outside Directors and Statutory Auditors in Fiscal 2018

Kumiko Kitai (Independent Director)

Kozo Meguro (Independent Auditor)

Ms. Kitai attended 14 out of 15 meetings of the Board of Directors held in fiscal 2018,
where she actively provided advice and recommendations to ensure the reasonability andappropriateness of the Board of Directors’ decisions based on her extensive experienceand knowledge accumulated as a lawyer and from holding important positions with thecentral government.

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 2018, 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 experience and professional knowledge as a Certified Public Accountant.

Kazuteru Kanazawa (Independent Director)

Tomoko Aramaki (Independent Auditor)

Mr. Kanazawa attended 15 out of 15 meetings of the Board of Directors held in fiscal
2018, 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.

Ms. Aramaki attended 10 out of 11 meetings of the Board of Directors and 10* outof 11 meetings of the Board of Corporate Auditors held in fiscal 2018, 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 experience and professional knowledge as a Certified Public Accountant.

Yasushi Kohara (Independent Director)
Mr. Kohara attended 11* out of 11 meetings of the Board of Directors held in fiscal 2018,
where he actively provided advice and recommendations to ensure the reasonability andappropriateness of the Board of Directors’ decisions based on his extensive experienceand knowledge accumulated through management of companies in the industry otherthan that of KYOWA EXEO.

*Because she was appointed at the 64th Ordinary General Meeting of
Shareholders on June 22, 2018, her attendance at the meetings of theBoard of Directors and the Board of Statutory Auditors started thereafter.

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.
Through a previous effectiveness evaluation, we shared an awareness of the necessity of the Directors’ Vector Meeting todiscuss each division’s business strategies at an earlier stage and coordinate the directions thereof, thereby promoting efforts
to enhance the functions of the Board of Directors. We see that those efforts have been taking steady effect.
In addition, the Company increased the capacity of its Outside Directors by one so that Directors with a wider range ofexperience and knowledge now constitute the Board of Directors.
Based on the results of the most recent effectiveness evaluation, ideas and opinions were shared on the need to optimize
the configuration of the Board of Directors and how to better operate the Board of Directors for more active discussions tofurther reinforce corporate governance.
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 2019

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

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

SystemFollow-up:

Development:

Evaluation oncompliance observance
Monitoring

Compliance planning
Compliance training
Support Desk
Lawyer Hot Line

With October designated as
the annual Compliance
Promotion and Enhancement
Month, various campaign
measures such as signage andmeetings are conducted toraise awareness and encourage
an in-depth understanding ofcompliance.

Corporate Governance / ComplianceTools:
Compliance ManualManagement 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 201936

Management Systems

Risk Management
Basic Policy
The KYOWA EXEO Group’s basic policy for risk management is as follows:(1) When setting strategies and business performance targets and practicing efforts to achieve them, we seek integration ofstrategies and risk management by considering risk profiles, risk appetite, risk capacity and risk tolerance.
(2) By recognizing risks clearly at an earlier stage and promptly providing as many choices as possible for risk management,
we reduce the possibility of unachieved business targets, losses, accidents and failures.
(3) By monitoring risks on a regular basis, we address any deviation from intended performance swiftly and with consistency.
(4) With a grasp of our comprehensive and consistent risk portfolio, we seek optimum allocation of the Group’s resources.

Risk Management System
The KYOWA EXEO Group sets forth its basic rules on risk management in the “Risk Management Rules” and sets up risk
categories and corresponding Risk Management Divisions. In addition, the Group established and has been operating theBusiness Risk Management Committee as the Group-wide risk manager to identify and evaluate Group-level risks.
Risk Management System
Board of Directors
Supervision

Report<Management>Internal Control Committee<Risk Management Division>

Business Risk Management Committee

The Company’s Head Office staff unit

President
Management Council

Board of Statutory Auditors

Business Risk Managers

Group-wide risk manager

Heads of organizational units at the Company’s Head Office,branch managers and presidents of subsidiaries(2nd-tier risk manager)
Internal Audit Division(3rd-tier risk manager)(1st-tier risk manager)

Business Risk Management Committee

Support Divisionattend to and monitor the appropriateness and effectiveness ofmeasures taken to address risks and the status of correction.

As the Group-wide risk manager, the committee was established toprovide the risk management systems required to accomplish strategies

Risk Management Category

and business performance targets in the process of creating, maintaining

Risk Management Category Description of the Risk

and realizing value and to steadily provide the Group’s stakeholders withreasonable expectations that risks can be controlled to a tolerable amount.

Business Risk Manager (1st-tier Risk Manager)
As the 1st-tier risk managers, the Business Risk Managers set forth strategies thatare consistent with the KYOWA EXEO Group’s mission, vision and core values. In
addition, the managers develop concrete action plans and manage the progress
thereof to address risks according to the environments of their organizations andin line with the risk-addressing policies presented by the Support Division teams.

Support Division (2nd-tier Risk Manager)

Committee

Business
environment
Management risk
Business risk
Managementrisk
strategy risk

Risk relating to changes in the
management and businessenvironments
Business Risk
Risk relating to the decision
Management
making concerning management
Committee
and business strategies, etc.
Risk relating to daily businessBusiness process risk
operations
Risk relating to the occurrence ofDisaster risk—
natural disasters

Internal Audit Division (3rd-tier Risk Manager)
As the 3rd-tier risk manager, the Internal Audit Division conducts internal audits ofthe performance of the Business Risk Managers to identify problems and matters

As the 2nd-tier risk managers, the Support Division teams

to be improved, issues recommendations for improvement, provides the latest

provide guidelines for addressing the category of risks they

information on the matters to be improved and verifies the status of improvement.

37 Corporate Report 2019

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 andinformation security. We formulate policies for managing
these risks by using the relevant risk assessment methods
given in the ISO management systems and implement thepolicies while making ongoing improvements in theeffectiveness and appropriateness of business operations.
The Company and major subsidiaries acquired a groupbased ISO certification and are committed to standardize
the management procedures by implementing ISOcompliant management systems in a unified manner acrossthe Group. Taking the opportunity of the ISO quality andenvironment 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.
In addition, the KYOWA EXEO Group was awarded the
JMAQA AWARDS 2019 by the Japan Management
Association (JMA)—an ISO certification body for KYOWA
EXEO—for the visualization of the effects of ISO certification
by operating multiple management systems and taking theGroup’s unique approach.

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

JMAQA AWARDS 2019 Trophy

L e f t: Masami Nakamura, Chairman of JMA
Right: Takao Nonaka, MS Promotion Unit
Leader, KYOWA EXEO CORPORATION

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

and monitors and evaluates the status of any improvementsin overall security matters to enhance the Group’s
information security on a continuous basis.
Furthermore, the Group also provides all of its employeeswith information security training and simulation exercises torepel 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 andpeople working on information management at eachbusiness division. The Information Security Committee
decides policies on group security, discusses measures toprevent the recurrence of any information security accidents,

Efforts to protect personal information
The Company engages in a broad range of business operations
and handles a large amount of personal information in theprocess of carrying out these operations. In the recognition thatappropriately managing such information is a corporate social
responsibility, we are promoting efforts to ensure the protectionof 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 measures bytaking an inventory of personal information held and reviewing
the management of records concerning the provision andreceipt of personal information.
To ensure the continued protection of personal information in
an appropriate manner, we have continually updated ourcertification of the Personal Information Protection Management
System (the seventh update this year), for which the Company
received a letter of appreciation from the JIPDEC.

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 201938

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.

Basic Stance on Environment
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.

Utilization of the Environment
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.

PICK UP

Hirose River “Ichimannin” Cleanup Project
On September 29, 2018, some employees of theCompany participated in a cleanup activity in the Hirose
River basin in Sendai City, Miyagi Prefecture. With thetagline of “Ichimannin,” meaning 10,000 people, whichequals one percent of Sendai’s population of one million,
the cleanup project enjoyed the participation of nearly
2,000 people. Blessed with fine weather without being
influenced by a typhoon, we conducted a cleanup of theriver basin. The amount of garbage collected in this annual
cleanup project, which reached its 26th year, has been
declining each year. Why not visit the Hirose River basin tosee how clean it has become?

39 Corporate Report 2019

Efforts towards Environment
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.

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

Solar power generation businessSolar power facilities of our own

Eastern Japan Area

Solar power facilities of other companies
Electricity generated

25

Panel installation capacity

277

GWh

(Electricity used by 5,155 households per year)

5

20

(950)

142

(4,205)MW

135

Wood biomass business
Thermal output (MW)Power generating output (MW)OutputOutput

28
7

2.5

MW

21

0.8

Energy recovery business

1.7

Recycling business

Throughput (ton/day)Throughput (ton/day)

154

tons

451

tons

per day25

129

FY2017 Grand Prize for Excellence in Energy Efficiency and Conservation

Environmental Management

per day

Involvementin the Environment

747
296

MW

Offering modern energy service that’s affordable and reliable
The Company and Tepco Customer Service Corporation Limited were awarded the FY2017 Grand Prize for Excellence in Energy
Efficiency and Conservation— Chairman Prize for The Energy Conservation Center, Japan (ECCJ) in the Product Category & Business
Model Category—for the energy-saving service using IoT provided by electricity retailers.
This prize recognized the TCS’s Energy Management Service, an energy conservation service via control of air-conditioning
equipment, which helps solve common issues when small- to medium-sized business proprietors introduce energy conservation
measures—maintaining comfort, easy on-site operation and less barriers for introduction, as well as the Company’s cloud-type platform technology forenergy control, which enabled the TCS’s Energy Management Service.

Corporate Report 201940

Involvement in the Environment

Fiscal 2018 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

168,368 GJ

Electric power purchased

13,507 MWh

Solar power generation electricity output

62 MWhCity gas

169 km3

LPG

OUTPUT
Environment-friendly business activities

0 km3

Gasoline

1,057 kℓLight oil

177 kℓKerosene

4 kℓ

Water resource input

Company cars

Electricity generated and sold

25,318 MWh

Total greenhouse effect gas emissions

14,859 tons (CO2 conversion)

Electric power sourced

6,133 tons (CO2 conversion)

Fuel sourced

3,090 tons (CO2 conversion)

Waste sourced

5,616 tons (CO2 conversion)

Water resource sourced

Head office

72 km319 tons (CO2 conversion)

Waste emissions and recycled volume

38,080 tons

Industrial waste emissions

4,125 tons

General waste emissions

110 tons

Total recycled volume

33,844 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 2019

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 2018 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

5.0

5.0

8.26

8.14

8.11

8.03

120

4.1
3.4

4

7.72

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

5.4

5

8

92.6

81.0

78.0

77.0

77.1

2015

2016

2017

2018

80

3
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
2014

2015

2016

2017

2018

0

2014

2015

2016

2017

2018

0

2014

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.
Change in industrial waste emissions (per value of finished work)(kg/¥million)
300
200

194.1

162.8

149.7

175.5
126.4

0

Change in general waste emissions (per person)(tons)

40

45,000

30

2015

2016

2017

2018

0

16.8

2014

2015

2016

15.5

12.4

0

2014

2015

2016

2017

2018

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

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

Environmental Management

1.14ha2018

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

Kansai Branch
Area

2017

15,000

Hokkaido BranchAbsorbed and fixed CO2 volume

2.48ha33,84330,000 26,014 25,957 24,102

22.6

Tohoku BranchArea

37,678

29.4

10
2014

Change in total recycled volume(kg/person)

20

100

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.

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 201942

Financial Section

Financial Highlights (Consolidated)■Orders Received ■Net Sales■Gross Profit(¥Millions)(¥Millions)

58,337424,318 423,727

324,102

300,912301,446

2015/3

287,437

298,825

43,354

325,029 312,669

300,438

2016/32017/3

2018/3

2019/3■Operating Income

35,74035,795

2015/3

2016/338,4802017/3

2018/3■Ordinary Income(¥Millions)(¥Millions)

33,431

31,71626,44825,621
21,40920,87318,35818,412

2015/3

2016/3

2019/32017/3

2018/3

2019/3■Profit attributable to owners of parent

18,58918,512

2015/3

2016/32017/3

2018/3

2019/3■Total Assets ■Net Assets(¥Millions)(¥Millions)
416,483

40,219228,422
17,993
12,264

12,184

2015/3

2016/3

146,768

13,7892017/3

2018/3

2019/3

2015/3

238,301
151,241

2016/3

243,438
158,280

2017/3

261,305

267,811

176,1012018/3

2019/3(¥Millions)

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

43 Corporate Report 20192015/3

2016/32017/3

2018/3

2019/3

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
261,305
176,101

424,318
423,727
58,33731,71633,431
40,219416,483
267,811

Building a better, brighter future together

Trends by Segment (Consolidated)
Orders Received by Business Segment (Consolidated)(¥Millions)

NTT group engineering

424,318

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS(¥Millions)

324,102
301,446

2015/3325,029

2015/3

2016/32017/3

2018/3

2019/3

NTT group engineering

160,375

167,963

182,281

166,294

189,937

NCCs

34,492

20,233

28,79531,83639,009Urban infrastructure

73,57372,31572,774

84,145

123,303

SYSTEMSOLUTIONS

33,00439,92640,25142,751

72,067

301,446

300,438

324,102

325,029424,318

300,438

2016/32017/3

2018/3

2019/3Total

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

NTT group engineering

423,727

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS(¥Millions)

300,9122015/3

287,437

2016/3298,8252017/3

2015/3

2016/32017/3

2018/3

2019/3

NTT group engineering

162,729

160,587

168,336

167,418

203,634

NCCs

36,66923,24923,34528,13838,026

Urban infrastructure

67,90565,74967,36574,571

108,618

SYSTEMSOLUTIONS

33,60837,851

39,77842,54173,477300,912287,437

298,825

312,669

423,727

312,669

2018/3

2019/3

Total

Outstanding Orders by Business Segment (Consolidated)(¥Millions)196,613

NTT group engineering

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS

118,384
105,455

2015/3

2016/32017/3

2018/3

2019/3

2015/3

2016/32017/3

2018/3

2019/3

NTT group engineering

44,53951,91565,86064,737

66,293

NCCs

8,313

5,296

10,745

14,44420,200Urban infrastructure

48,141

54,707

60,11569,69094,841SYSTEMSOLUTIONS

4,461

6,465

6,867

7,060

15,278105,455

118,384

143,589

155,932

196,613

Total

Corporate Report 2019

Financial Section(¥Millions)

155,932
143,589

44

Financial Section

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

(%)
11.9

12.5

13.9

12.9

13.8

(%)
8.2

6.1

2015/3

2016/32017/3

2018/3

2019/3■Ordinary Income to Net Sales

2015/3

6.4

2016/37.5

7.0

2017/3

2018/3

2019/3■Profit Attributable to Owners of Parent to Net Sales

(%)

8.5

(%)

9.5

7.9

7.2
6.2

6.4
5.8

2015/3

2016/32017/3

2018/3

2019/3■Return on Equity ■Return on Assets

4.1

4.2

2015/3

2016/3

4.6

2017/3

2018/3

2019/3

1.23

1.24

1.23

1.25

2016/32017/3

2018/3

2019/3■Total Assets Turnover

(%)

18.3

(Times)

10.8
8.9

8.7

8.2

5.5

5.2

5.7

2015/3

2016/32017/311.9

1.35

2019/3

2015/3

7.1

2018/3Gross 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 20192015/3

2016/32017/3

2018/3

2019/3

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

13.8
7.5
7.9
9.5
18.3
11.9
1.25

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

(%)

(%)
64.0

63.3

66.6

64.8

63.4
232.4

217.5

247.4
211.3

191.0

2015/3

2016/32017/3

2018/3

2019/3

2015/3

2016/3■Quick Assets to Current Liabilities■Fixed Assets Ratio

(%)

(%)

170.8

2015/3

182.1

2017/366.6

64.0

2016/32017/3

2018/361.1

2019/3

66.2

171.5

151.4

2016/3

61.3

194.4

2017/3

2018/3

2019/3

2015/3■Interest Coverage Ratio■Debt Equity Ratio(Times)(%)

2018/3

10.8

2019/3

10.3
8.1

738.6
619.3

90.7
2015/3

6.5

5.9

2016/3

259.1

234.4
2017/3

2018/3

2016/32017/3

2018/3

2019/3

2015/3

2016/32017/3

2018/3

2019/3

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

63.4
211.3
171.5
66.2
259.1
10.3

Corporate Report 2019

Financial Section

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

2015/3

2019/346

Financial Section

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

390.25(¥)
2,343.43
1,842.97
1,482.82

1,569.09

1,668.29

189.42123.83125.902015/3

2016/3145.242017/3

2018/3

2015/3

2019/3■Price Earnings Ratio

2016/32017/3

2018/3

2019/3■Price Book-value Ratio(Times)(Times)

15.0

1.5
1.3

10.4

11.1
9.9

1.0

0.9

0.8

7.8

2015/3

2016/32017/3

2018/3

2019/3■Cash Dividends Per Share2015/3

2016/32017/3

2018/3

2019/3■Payout Ratio ■Total Shareholder Return Ratio

(¥)

70.0

(%)
71.4

46.0

50.0

53.6

50.2

38.0
32.0
26.4
30.2

25.8

31.7

25.7

26.4
17.9

2015/3

2016/32017/3

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 20192018/3

2019/3

2015/3

2016/32017/3

2018/3

2019/3

2015/3

2016/32017/3

2018/3

2019/3123.83
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

390.252,343.43
7.8
1.3
70.0
17.9
25.7

Other Indices (Consolidated)■Selling, General and Administrative Expenses(¥Millions)■Capital Expenditures
26,620(¥Millions)
13,215

17,382

17,382

17,607

17,732
7,139
4,219

2015/3

2016/32017/3

2018/3

2019/3■Depreciation Expenses

2015/3

2016/32017/3

4,256

3,887

2018/3

2019/3■Interest-bearing Debt(¥Millions)

4,725(¥Millions)

18,049

2,660

3,001

3,251

16,2993,272

12,825

11,435

8,679

2015/3

2016/32017/3

2018/3

2019/3

2015/3

2016/32017/3

2018/3

2019/3■Number of employees(People)13,151

7,988

7,903

8,074

8,311

2015/3

2016/32017/3

2018/3

2015/3

2016/32017/3

2018/3

2019/3

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

26,6203,887
4,725
18,04913,151

Corporate Report 2019

Financial Section

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

2019/348

Financial Section

Consolidated Balance Sheets(¥Millions)

2015/3

2016/32017/3

2018/3

2019/3ASSETS
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

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

152,365
26,09592,185
4,499
27,617—1,967(1)108,940
62,66421,003
4,542
36,602
516
3,909
658
3,251
42,365
19,833
17,947
4,819(235)
261,305

241,708
41,805
156,361895
38,401
—
4,403
(158)
174,774
97,95531,603
8,738
55,4032,209
14,762
10,2594,502
62,05637,917
16,2838,341(485)
416,483

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

63,81935,193
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
—
16,87022,042
10,000
10
4,966
272
42
5,070
1,680
85,204

114,406
59,265
13,069
7,498
5,487
3,744
420
86
344
—
24,48934,265
10,000
4,659
6,965
604
—
9,283
2,753
148,671

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

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
261,305

252,870
6,888
47,868204,647(6,534)
11,026
4,603
(65
6,488
355
3,559
267,811
416,483

49 Corporate Report 2019

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
Gain on step acquisitions
Other
Non-operating expenses
Interest expenses
Rent expenses
Loss on sales of noncurrent assets
Loss on retirement of noncurrent assets
Loss on valuation of investment securities
Foreign exchange losses
Impairment loss
Other
Ordinary income
Extraordinary income
Gain on sales of noncurrent assets
Gain on sales of investment securities
Gain on abolishment of retirement benefit plan
Gain on bargain purchase
Extraordinary loss
Impairment loss
Goodwill amortization
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

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
—
—
401
114
170
—
—
303
571
33
—
57
68
1
169
—
241
26,448
—
—
—
—
—
—
—
—
26,448
8,018
375
8,393
18,054

2019/3423,727
365,389
58,337
26,62031,716
2,468
16
537
—
—
295
592
—
—
346
679
753
48
—
4
118
106
—
135
340
33,431
18,313———18,313126—
126
51,617
11,943(658)
11,28440,333

11

37

(50)

61

113

12,264

12,184

13,78917,99340,219Consolidated Statements of Comprehensive Income

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

2016/3
12,222

2017/3
13,7392018/318,054

2019/340,333

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
21,469(625)(92)(2,193)(2,911)37,421

18,39733

11,42626

13,438(68)

21,41355

37,35467
Corporate Report 2019

Financial Section(¥Millions)

2015/3
12,27650

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
Changes in Stock exchange
Increase in treasury stock due to increase in consolidated subsidiaries
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
Change of scope of consolidation
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
Changes in Stock exchange
Increase in treasury stock due to increase in consolidated subsidiaries
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
Changes in Stock exchange
Increase in treasury stock due to increase in consolidated subsidiaries
Change of scope of consolidation
Change in equity due to additional acquisition of consolidated subsidiary 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
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’ equity
Total 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’ equity
Total 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’ equity
Total 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’ equity
Total 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
Changes in Stock exchange
Increase in treasury stock due to increase in consolidated subsidiaries
Change of scope of consolidation
Change in equity due to additional acquisition of consolidated subsidiary stock
Acquisition of own shares via trust
Transfer of own shares via trust
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 20192015/3

2016/32017/3

2018/3

2019/3

6,888
—
6,888

6,888
—
6,888

6,888
—
6,888

6,888
—
6,888

6,888
—
6,888

6,645

6,879

7,939

7,978

8,098

234
—
—
234
6,879

1,060
—
—
1,060
7,939

38
—
—
38
7,978

120
—
—
120
8,098

123
39,6397
39,77047,868130,822(2,352)

137,957—

147,00422

156,477—

169,883—(2,776)
12,264—
9,487
137,957(3,137)
12,184—
9,047
147,004(4,338)13,789—9,450
156,477(4,588)17,993—
13,405
169,883(5,433)40,219(21)
34,764
204,647(14,487)(17,029)(21,910)(24,011)(23,187)(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)(3,015)277
19,862(1,157)—685
16,653(6,534)

129,868(2,352)

134,696—

139,922
22

147,333—

161,682—(2,776)
12,264(3,002)
694
—
—
—
—
—
—
7,179
134,696(3,137)
12,184(5,002)
3,117
—
—
—
—
(2,600)664
5,226
139,922(4,338)13,789(3,002)
206
—
—
—
—
—
733
7,388
147,333(4,588)17,993
(3)
431
—
—
—
—
—
515
14,349161,682(5,433)40,219(3,015)400
59,502(1,157)
(21)
7
—
685
91,187
252,870

3,631

5,157

4,121

3,566

5,198

1,525
1,525
5,157

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

(554)
(554)
3,566

1,631
1,631
5,198

(594)
(594)
4,603

21

35

28

15

11

14
14
35

(7)
(7)
28

(12)
(12)
15

(4)
(4)
11

(76)
(76)
(65)

1,794

6,386

6,671

6,888

8,681

4,592
4,592
6,386

285
285
6,671

216
216
6,888

1,793
1,793
8,681

(2,193)(2,193)
6,488

5,446

11,57910,821

10,47013,891

6,132
6,132
11,579(758)(758)
10,821(350)(350)
10,4703,420
3,420
13,891(2,865)(2,865)
11,026

175

263

241

288

285

88
88
263

(22)
(22)
241

47
47
288

(3)
(3)
285

70
70
355

195

229

255

187

242

33
33
229

26
26
255

(68)
(68)
187

55
55
242

3,317
3,317
3,559

135,687(2,352)

146,768—

151,24122

158,280—

176,101—(2,776)
12,264(3,002)
694
—
—
—
—
—
—
6,254
13,434
146,768(3,137)
12,184(5,002)
3,117
—
—
—
—
(2,600)
664
(754)
4,472
151,241(4,338)13,789(3,002)
206
—
—
—
—
—
733
(371)
7,016
158,280(4,588)17,993
(3)
431
—
—
—
—
—
515
3,471
17,820176,101(5,433)40,219(3,015)400
59,502(1,157)
(21)
7
—
685
522
91,710267,811

Consolidated Statements of Cash Flows(¥Millions)

2016/3
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

2017/3
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

2018/324,80026,448
3,272
0
395
—
(980)
179
0
(216)
(694)
(407)
33
(56)
0
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)
02019/3
12,77051,617
4,725
135
1,201
(18,313)
50
419
28
(106)
(1,231)
(554)
48
(580)
(67)
(28,202)701(1,009)
9,240
198
4,528
—
—
—
356
23,187552(49)(10,920)(17,609)(2,757)698(1,079)
(484)
233

(361)

—

—

—

(16,961)

—
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

(358)
3,098
20
(20)
(4,924)4,130—(2,474)
1,260—(3,015)339—
685(5,425)(426)(113)(9,877)30,343

—

—

—

—

55

—
24,291—
16,037—
15,241—
30,343

20,94841,469Corporate Report 2019

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
Gain on bargain purchase
Increase (decrease) in allowance for doubtful accounts
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
Loss (gain) on sales of investment securities
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 change of scope of consolidation
Increase in cash and cash equivalents due to share exchange
Cash and cash equivalents at the end of period

2015/323,167
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

52

Financial Section

Financial Highlights (Non-consolidated)■Orders Received ■Net Sales■Gross Profit(¥Millions)
268,514

268,356
236,672
236,236

2015/3

241,884

227,521

2016/3

243,546

2017/3

287,206 279,060(¥Millions)

31,611
27,696

256,864

2018/3

2019/3■Operating Income

21,326

21,586

2015/3

2016/323,2202017/3

2018/3

2019/3■Ordinary Income(¥Millions)(¥Millions)

26,365

18,11915,153

10,012

10,073

19,413

11,21010,962

2015/3

2016/32017/3

2018/3

2019/3■Net Income

2015/3

12,735

12,225

2016/32017/3

2018/3

2019/3■Total Assets ■Net Assets(¥Millions)

19,897(¥Millions)

307,897

17,12014,61913,235

188,122200,289

205,965

223,073
197,990

9,399
102,552

2015/3

2016/32017/3

2018/3

2019/3

2015/3103,958

2016/3

114,1292017/3

126,671

2018/3

2019/3(¥Millions)

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

53 Corporate Report 20192015/3

2016/32017/3

2018/3

2019/3

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
14,619223,073
126,671

287,206
279,060
31,611
18,11926,36519,897
307,897
197,990

Trends by Segment (Non-consolidated)
Orders Received by Business Segment (Non-consolidated)(¥Millions)
287,206
268,356
236,236

2015/3

NTT group engineering

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS

268,514

241,884

2016/3(¥Millions)

2017/3

2018/3

2019/3

2015/3

2016/32017/3

2018/3

2019/3

NTT group engineering

125,428

141,628

159,656

145,425

137,235

NCCs

33,662

19,79027,59730,90932,080Urban infrastructure

56,68757,40858,82568,802

90,161SYSTEMSOLUTIONS

20,45823,05622,27623,376

27,729236,236

241,884

268,356

268,514287,206Total

Net Sales by Business Segment (Non-consolidated)(¥Millions)
279,060
236,672

2015/3

243,546

NTT group engineering

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS

256,864(¥Millions)

227,521

2016/32017/3

2018/3

2018/3

2015/3

2016/32017/3

2018/3

2019/3

NTT group engineering

127,237

132,765

146,591

146,674

146,174

NCCs

35,582

22,536

22,64927,16430,381

Urban infrastructure

53,44451,35051,714

59,61275,900SYSTEMSOLUTIONS

20,407

20,86922,59023,412

26,603

236,672

227,521

243,546

256,864

279,060

Total

Financial Section
Corporate Report 201954

Financial Section

Non-consolidated Balance Sheets(¥Millions)

2015/3

2016/32017/3

2018/3

2019/3ASSETS
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

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

126,425
22,257488
76,342
4,499
17,466
568
689
2,576
392
—
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)
223,073

138,390
14,563314
89,485—20,706
343
785
9,755
516
—
1,918
—
169,506
50,974
14,758
2,207
3,230
0
773
29,859
115
28
2,670
2,565
105
115,861
16,19992,256
—
55
28
6,360
1,016
(55)
307,897

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

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
11,847
10,000
—
119
651
42
503
530
96,402

98,26043,995
4,000
62
1,471
8,094
3,305
3,359
32,01174
264
1,621
11,646
10,000
—
69
943
—
562
70
109,906

NET ASSETS
Shareholders’ equity
Capital stock
Capital surplus
Legal retained earnings
Reserve for advanced depreciation of noncurrent assets
Reserve for special account for advanced depreciation of non-current 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

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
223,073

192,771
6,888
48,355
1,547
2,361
318
74,60065,234(6,534)
4,863
4,863
355
197,990
307,897

55 Corporate Report 2019

Non-consolidated Statements of Income(¥Millions)

2016/32017/3

2018/3

2019/3

Net sales of completed construction contracts

236,672

227,521

243,546

256,864

279,060

Cost of sales of completed construction contracts

215,346

205,934

220,326

229,167

247,449

Gross profit on completed construction contracts

21,326

21,58623,22027,696

31,611

Selling, general and administrative expenses

11,313

11,51312,01012,543

13,492

Operating income

10,012

10,073

11,21015,153

18,119Non-operating income

1,504

3,644

1,749

4,746

9,068

Interest income

33

43

37

40

105

Interest on securities

13

10

0

1

1

Dividends income

193

2,392

259

3,608

7,561

Land and house rent received

466

397

783

630

489

Foreign exchange gains

474

—

—

—

—

Reversal of allowance for doubtful accounts

168

—

—

—

—

Gain on sales of non-current assets

—

231

402

57

569

Other

155

569

266

407

341

554

982

734

485

822

Interest expenses

57

48

35

6

7

Interest on bonds

—

—

1

15

15

Loss on valuation of investment securities

—

—

—

—

96

Loss on valuation of shares of subsidiaries and associates

—

—

—

—

290

Rent expenses

202

137

260

164

129

Loss on retirement of non-current assets

—

—

—

28

95

Foreign exchange losses

—

400

150

170

—

Provision of allowance for investment loss

—

78

96

20

—

Impairment loss

150

—

—

—

—

Other

144

318

190

79

188

Ordinary income

10,962

12,735

12,225

19,41326,365Extraordinary income

6,669

—

10,750

—

—

—

—

2,148

—

363

Income before income taxes

17,632

12,73520,827

19,41326,002

Income taxes-current

3,837

1,276

4,065

4,305

5,974

Income taxes-deferred

558

2,059

(358)

488

129

Total income taxes

4,396

3,336

3,707

4,794

6,104

Net income

13,235

9,399

17,12014,61919,897

Non-operating expenses

Extraordinary loss

Corporate Report 2019

Financial Section

2015/356

Stock Information(as of March 31, 2019)

Major Shareholders
Fiscal Year-End

March 31Annual Shareholders’MeetingJune 22, 2018

Japan Trustee Services Bank, Ltd.
(Trust Account)

15,55013.81

Stock Listing

Tokyo Stock Exchange (First Section)

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

6,934

6.16

Ticker Code1951

Common Stock

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

ESOP Association of KYOWA EXEO CORPORATION

4,037

3.59

BBH FOR MATTHEWS JAPAN FUND

3,606

3.20

Authorized: 300,000,000 shares

SUMITOMO LIFE INSURANCE COMPANY

2,296

2.04

Issued: 117,812,419 shares

Sumitomo Realty & Development Co., Ltd.

2,081

1.85

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

1,834

1.63

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

1,721

1.53

JP MORGAN CHASE BANK 385151

1,608

1.43

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

1,500

1.33

Total Number of 19,734
Shareholders
Transfer Agentand Registrar

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

Note: The Company holds 5,201 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
4.4%
Financial
institutions
39.6%

Individuals
and others
19.1%

Securities
companies
1.3%

Foreigncompanies
24.5%

Other
corporations
11.1%

Stock Price Range and Trading Volume on the Tokyo Stock Exchange
Stock Price
(¥)
3,400

2,000
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
2014

57 Corporate Report 2019

2015

2016

2017

2018

2019

0

Board of Directors (as of July 1, 2019)

Building a better, brighter future together

ChairmanPresident & CEO

Director and Executive Operating Officer

Director and Executive Operating Officer

Director and Managing Operating Officer

Fuminori Kozono

Tetsuya Funabashi

Yoshiaki Matsuzaka

Noritsugu Totani

Yasuo Otsubo

Director and Managing Operating Officer

Director and Managing Operating Officer

Director and Managing Operating Officer

Director

Director

Tomohiro Kurosawa

Yuichi Koyama

Hideo Higuchi

Yuki Sakuyama

Hiroaki Kubozono

Director

Director

Director (Independent Director)

Director (Independent Director)

Director(Independent Director)*

Toshihiko Kumamoto

Toshiro Ue

Kazuteru Kanazawa

Yasushi Kohara

Naoko Iwasaki

Standing Statutory Auditor

Standing Statutory Auditor

Statutory Auditor (Independent Auditor)

Statutory Auditor (Independent Auditor)

Yoshiharu Takizawa

Kazuo Sato

Kozo Meguro

Tomoko Aramaki
Operating Officers

Koichi Mino

Masato Suwabe

Makoto Shirakata Hachizo Sato

Masahiro Kikuchi Yoshiaki Nanjyo

Mitsumasa Watanabe

Yuji Sato

Fumio Kumagai

Noriyuki Watabe

kosei Nakashima

Eiji Fujimaki

Hiroshi Akiduki

Fumiitoshi Imaizumi

Hideki Obara

Kyoji Okabe

Keijiro Shizukuishi

Kazunori Yuasa

Masahito Oishibashi Shinji Kojima

Mitsuhisa Iwai
Shinji Kumataka

Corporate Report 2019

Stock Information /Board of Directors

Managing Operating Officers

Eiichi Matsuda

58