CORPORATE REPORT 2016

Building a better, brighter future
Total ICT Solutions: Contributing to the Realization of a Brighter Future*ICT is an acronym for Information and Communications Technology.

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 clearlyanswers the question: “Why does the KYOWA EXEO Group exist?” The utmost ground for existence is the Group’s technologicalcapabilities. Throughout its existence, the Group has aimed to be a corporate group that always anticipates and pursues better technologies at the forefront of leading-edge technologies. The technological capabilities cultivated through these efforts will
help create more affluent living environments for people. The Group intends to be a valuable enterprise by contributing 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, 2016)

Stock ListingFirst Section of the Tokyo Stock Exchange

Representatives

Kunio Ishikawa, Chairman
Fuminori Kozono, President

Net Sales¥287.4 billion (consolidated)¥227.5 billion (non-consolidated) (as of March 31, 2016)

Number of
Employees

7,903 (consolidated)
3,632 (non-consolidated) (as of March 31, 2016)

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

West Japan Head
Office6-13, Kyomachibori 3-chome, Nishi-ku, Osaka
TEL: +81-6-6459-1581

Number ofBusiness Offices

Branch offices: 15
Sales offices: 16

Major Banks

Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation, The Bankof Tokyo-Mitsubishi UFJ, Ltd.

Independent
Auditor

Kudan Audit Corporation

Editorial Policy
Period Covered by
the Report:
Organizations
Covered by theReport:Reference
Guidelines:
Issuance:
Next Issuance
Scheduled:

1

Corporate Report 2016

From April 1, 2015, to March 31, 2016
(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 EXEO CORPORATION’s non-consolidated data are used instead of consolidated data.)
GRI “Sustainability Reporting Guideline Version 4”
Ministry of Environment “Environmental Reporting Guidelines (Fiscal 2012 Version)”
ISO26000 “Guidance on social responsibility”
July 2016
July 2017

togetherby Bringing People Together and Forming Connections with Society

CONTENTS
Milestones of the KYOWA EXEO Group3

CSR Concept

Consolidated Financial Highlights

5Management Systems

Greetings / Message from the President

7

Corporate GovernanceBusiness Overview

13

Special Feature Corporate Value of the KYOWA EXEO Group 23
SpecialFeature1

25
New Value Createdby the Cloud/Security Field

SpecialFeature2

26
New Value Createdby the New Energy Field

SpecialFeature3

New Value Createdby the Global Field

SpecialFeature4

New Value Created28
by the Geo Solution Field

Compliance
Risk Management

29
31
33
35

Involvement in the Environment
Environmental Management

Financial Section
Stock Information
Board of Directors

37
41
55
56

27

Notice on forward-looking statements:
This Corporate Report 2014 contains forward-looking statements such as the future business performance of KYOWA EXEO. As thesestatements are based on the information available at the time of the preparation of this report, the actual results might differ materiallyfrom the content described or suggested therein due to various factors. As this corporate report is not intended for the purpose of soliciting investment, all users of this report are advised to undertake decisions concerning investment at their own discretion.
The figures stated in units of ¥100 million and ¥1 million are rounded down.
KYOWA EXEO CORPORATION

http://www.exeo.co.jp/overseas/index.html
29-20, Shibuya 3-chome, Shibuya-ku, Tokyo 150-0002, Japan
Corporate Report 20162

Milestones of the KYOWA EXEO Group
Since its foundation in May 1954 as
Kyowa Densetsu Kaisha, Ltd.,KYOWA EXEO has continued to

1997

1990

create “Linkages” in society.

Net Sales: ¥200 Billion
1988

1970 - 1980
1974

Net Sales: ¥50 Billion

1960

May 1954
Company established as
Kyowa Densetsu Kaisha, Ltd.

1955
Started coaxial cabling
work.
1956
Started telex work.

Corporate
History

May
Jul.
Feb.
Sep.
Feb.
Apr.
Jun.
May
Apr.
Mar.
Apr.
May
Apr.
Sep.
May
Aug.

1954
1954
1963
1963
1972
1982
1986
1991
1998
1999
2004
2004
2005
2009
2010
2011

Nov. 2011
Dec. 2014

Dec. 2015

3

Corporate Report 2016

Feb. 1963
Listed on the Second Section of
the Tokyo Stock Exchange

1963
Started overseas work
(Honduras)
Started service tunnel(communications tunnel) work
adopting the shield tunnelingmethod.

May 1991
Changed company name to
KYOWA EXEO CORPORATION

Feb. 1972
Listed on the First Section of
the Tokyo Stock Exchange
1975
Started establishing a railway
communications network inside
Tehran Province in Iran.

1954

Net Sales: ¥100 Billion

1982
Branched out into thesoftware business
1983
Started developing billingsystems.
1986
Entered the environment
business (Water treatment)
1988
Acquired a construction technology
evaluation statement from the Ministerof Construction for the developmentof a rainfall storage penetration system
1983
Started optical fiber work.
1986
Started CATV work.

Company established as Kyowa Densetsu Kaisha, Ltd.
Qualified to participate in telecommunications facility tenders for Nippon Telegraph and Telephone (now NTT)
Listed on the Second Section of the Tokyo Stock Exchange
Began engaging in telecommunications and electric power construction outside that for NTT
Listed on the First Section of the Tokyo Stock Exchange
Branched out into the software businessEntered the environment businessChanged company name to KYOWA EXEO CORPORATIONEntered into the NI business.
Relocated head office to current address in Shibuya-ku, Tokyo
Acquired Daiwa Densetsu Corp.
Acquired WAKO ENGINEERING CORP.
Acquired KANAC Corp.
KANAC Corp. was converted into a wholly owned subsidiary
Made Ikeno Tsuken Co., Ltd., a consolidated subsidiary
WAKO ENGINEERING CORP., Daiwa Densetsu Corporation and Ikeno
Tsuken Co., Ltd., were converted into wholly owned subsidiaries
ICOMSYSTECH Co., Ltd., was converted into a wholly owned subsidiaryAID Holdings Inc. (the holding company of ADVANCED INFORMATION DESIGN Co., Ltd.) was converted into a wholly owned
subsidiary
WHERE Inc. was converted into a wholly owned subsidiary

May 2000
Acquired ISO14001
certification
Apr. 2001
Merged with Showa
Technos Corp.
Nov. 2001
Instituted a complianceprogramSep. 2003
Acquired OHSAS18001
certification

Feb. 1999
Acquired ISO9001
certification
Mar. 1999
Completed construction of
the new company building in
Shibuya (head office)1994
Developed the Air Traffic
Control System

2001
Started developing an
Administrative Organ
Accounting System.
Started developing a“Work Management
System.”1998
Entered into the NI business.

2000
Started the dioxincountermeasure-compliant
incinerator business1999
Developed the Social
Insurance System
Developed SOA solutions.

2001
Entered into the livestock
excreta disposal business.

1990
Entered the food plant
wastewater treatment
business and riverpurification business
1994
Acquired a construction
technology evaluation
statement from the Ministerof Construction for thedevelopment of a highefficiency river purification
system2002
Acquired the ash fusionbusiness from Niigata
Engineering Co., Ltd.

2001
Started IMT (FOMA) work.

1992
Started work on PDC (mova)
1995
Started workon the C·C·Box.
1996
Started Internet compliant
system establishment work.

Mobile phone base station

2002
Shifted the B FLET’S
work to full scale.

2011 - 20142000 - 2010

Apr. 2004
Acquired Daiwa Densetsu
Corp.

Jan. 2006
Acquired the ISMS
certification

May 2004
Acquired WAKO
ENGINEERING CORP.

Mar. 2006
Obtained the Privacy
Mark.

Apr. 2005
Acquired KANAC Corp.

Nov. 2007
Won a gold medal atthe 39th World Skills
Competitions in Shizuoka,
Japan (second consecutive
championship).

2002
Started customer
services.
2003
Sold an Internet videoconference system

2002
Entered into theinstallation of solar
power generation
facilities.
2003
Completed the first bio
plant (Iwate Prefecture)
2005
Operated the thermitestyle dual-side ash fusion
furnace business in afull-scale

2003
Started analog antenna
exchange work compliant
with ground digital
broadcasting.
2004Entered into the KDDI aubase station construction
business full scale.
Started to reestablish therailway communication
network along with thequadruple track extensionof private railway lines in
Tokyo
2006
Started work on thenext-generation network(NGN).
Shifted the MNP work to
full scale.

Business Topics

Sep. 2009KANAC Corp. wasconverted into a wholly
owned subsidiary
Tokyo Integrated
Engineering Center(TEC) started operation(Heiwajima).
Oct. 2009
Won a gold medal at the40th World Skills
Competitions in Calgary,
Canada (third consecutive
championship).
May 2010
Made Ikeno Tsuken
Co., Ltd., a consolidated
subsidiary

2009
Entered into an SOA
service agreement with theTokyo Stock Exchange.

2006Entered into the woodbiomass boiler business.
 tarted long-term
S
comprehensive businessconsignment services at
general waste treatmentsites (Tochigi Prefecture)
2010
First general waste
incinerator completed(Aomori Prefecture)

2009
Started WiMAX work.
2010
Shifted the regional
intranet establishment
business to full scale.
Started LTE work.
Shifted the analoganalog antenna
exchange work
compliant with grounddigital broadcasting tofull scale.

System Solutions

Environmental/
Social Infrastructure

Aug. 2011
WAKO ENGINEERING CORP.,
Daiwa Densetsu Corporation
and Ikeno Tsuken Co., Ltd.,
were converted into wholly
owned subsidiaries
Oct. 2011
Won a gold medal at the 41stWorld Skills Competition in
London (fourth consecutive
championship).
Nov. 2011
ICOMSYSTECH Co., Ltd.,was converted into a wholly
owned subsidiary

May 2014
A ceremony was held tocelebrate the Company’s
60th anniversary.
Dec. 2014
AID Holdings Inc. (theholding company of
ADVANCEDINFORMATION DESIGN
Co., Ltd.) was converted
into a wholly owned
subsidiary.
Feb. 2015
Started the introductionof electric vehicles.

Nov. 2013
Won a gold medal at the 51st
National Skills Competition in
Chiba (for the fifth time).
May 2014
Formed a capital andbusiness alliance with
Eponet, Inc. and WHERE,
Inc.

2011
Received the IBM
Excellent Partner Award
Japan 2010
Authorized as a Core
Business Partner of NTT
DATA CORPORATION
2012
Stated selling theAdaptive Biz Service.
2013
Newly established the
ICT Solution businessheadquarters.

2012Shifted the installation of
the mega solar power
generation facilities tofull scale.
Started selling electricity.

2011Entered into the Softbank
mobile project.
Engaged in the Great
East Japan Earthquake
recovery work.

Started A−XGP work.

June 2015
Acquired the Kuruminmark, which certifies acompany as providing
active parenting support.
December 2015
WHERE, Inc. wasconverted into a wholly
owned subsidiary.

Milestones of the
KYOWA EXEO Group2006

Net Sales: ¥300 Billion

Jun. 2005
Won a gold medal at the 38th
World Skills Competitions in
Helsinki, Finland

2015 - 2016

December 2015
Began full-scale operationof the cloud integrationengineering business.
January 2016
Began full-scale operationof the geospatial business.

Electric vehicle andcharging equipment

March 2016
Started selling the survival
power supply, a portablesmart power supply.

2014
 aunched EXTravel, anLintegrated application forsightseeing and disasterprevention
Started collaboration
with NIPPONSYSTEMWARE CO.,LTD.
Launched EXRescue, asystem for facilitating
disaster responses

Survival power supply

February 2016
11 solar power generation
facilities in operation
nationwide

2013
Installation of woodbiomass boiler equipment
completed (Kaneyamamachi, Yamagata
Prefecture)2014
Large-scale recycling
center completed(Higashimurayama City,
Tokyo)
Commenced the work
for installation of
charging equipment forelectric vehicles

2012
Started the Platinum Band
Project (900 MHz).
2014
Conducted construction
work for the postdisaster restoration of Izu
Oshima.
 G EXEO NETWORK
M
INC., a local subsidiaryin the Philippines, received
an order for andcommenced a large
access-engineering work
project.

EXEO Matsue Solar Farm

March 2016
Completed a large-scalecleaning plant inWakayama.

Kinoumi Clean Center2015
Began full-scale
LTE-Advanced work .

Communications
Infrastructure

Corporate Report 20164

Consolidated Financial and Non-financial Highlights

Financial Information(Billions of yen)

2011

2012

2013

2014

2015

2016 (plan)

Orders received

288.5

317.8

304.2

301.4

300.4

305.0

Net sales

273.1

301.3

318.5

300.9

287.4

300.0

Operating income

8.9

18.0

20.7

18.3

18.4

20.0

Profit attributable to owners of parent

7.8

11.3

14.9

12.2

12.1

13.3

Capital expenditures

1.9

3.3

7.3

4.2

13.2

—

Depreciation expenses

2.9

2.3

2.2

2.6

3.0

—

Total assets

181.2

200.4

217.0

228.4

238.3

—

Net assets

113.4

122.3

135.6

146.7

151.2

—

8.1

9.9

13.3

8.6

16.2

—

Net cash provided by (used in) operating activities

16.4

7.1

9.8

23.1

5.3

—

Net cash provided by (used in) investing activities

-4.5

-2.1

-7.4

-2.8

-13.9

—

Net cash provided by (used in) financing activities

-17.5

-3.0

-0.9

-12.3

0.3

—

Cash and cash equivalents

12.3

14.6

16.2

24.2

16.0

—

Operating results (Fiscal year):

Financial position (at year-end)

Interest-bearing Debt
Cash flows (Fiscal year)(¥)

Per share of common stock:
EPS

74.9

109.2

147.7

123.8

125.9

140.4

Cash dividend

20.0

22.0

24.0

32.0

38.0

46.0
(%)

Financial indicators:
Operating Income to Net Sales

3.3

6.0

6.5

6.1

6.4

6.7

ROE (Note 2)

7.2

9.6

11.6

8.7

8.2

—

ROA (Note 3)

4.2

5.9

7.1

5.5

5.2

—

Equity ratio

62.4

60.9

62.3

64.0

63.3

—

Notes: 1. Amounts less than ¥100 million were truncated.
2. ROE=Profit attributable to owners of parent÷Total shareholders’ equity (yearly average)
3. ROA=Profit attributable to owners of parent÷Total assets (yearly average)

Non-Financial Information
2011

2012

2013

2014

2015

7,872

7,521

7,553

7,988

7,903

Number of new graduates employed (Note 1)

92

66

61

73

85

Number of days of paid leave taken per employee (Note 1)

11.1

10.1

10.0

11.2

11.8

Turnover rate for employees with up to three years of service (%) (Note 1)

2

1

5

3

5

Number of employees with IT-related expert qualifications (Note 1)

167

190

219

232

259

5,082

6,343 (Note 2)

6,888 (Note 2)

6,478

6,457

Number of employees

CO2 emissions (t-CO2) (Note 1)

Notes: 1. On a non-consolidated basis.
2. These increases are attributable to the change in emission coefficients for power companies that was released by the Ministry of the Environment.

5

Corporate Report 2016

Building a better, brighter future together

317.8
288.5

Net sales (¥Billion)

304.2 301.4 300.4 305.0

301.3

Consolidated Financial andNon-financial Highlights

Orders received (¥Billion)

Net Sales by Segment

318.5

300.9

273.1

287.4

300.0
SYSTEM
SOLUTIONS¥36.6 billion(12.7%)

Environmental andSocial Infrastructure¥38.8 billion(13.5%)NTT Group¥160.5 billion(55.9%)

2011

2012

2013

2015

2014

2016
(plan)

Operating income (¥Billion)

2011

2012

2013

2014

2015

2016
(plan)

Profit attributable to owners of parent(¥Billion)

20.7

Multi-carriers¥51.3 billion(17.9%)EPS (¥)

147.7

140.4

20.0
18.3

18.0

18.4

123.8 125.9

14.9
12.2

11.3

13.3

109.2

12.1
74.9

7.8

8.9

2011

2012

2013

2014

2015

2016
(plan)

Number of new graduates employed(Foreign students, Male/Female)
FemaleMale% of foreign citizens

2011

2012

2013

2014

2015

2016
(plan)

Number of employees with IT-related
expert qualifications
259

2011

6,888

190
4.9

71

14
52

16

13

2014

6,343

219
16

2013

2015

2016
(plan)

CO2 emissions (t-CO2)

232

21

2012

6,478

6,457

2014

2015

5,082

167

69
57

48

1.1

2.7

2.4

0.0
2011

2012

2013

2014

2015

2011

2012

2013

2014

2015

2011

2012

2013

Corporate Report 20166

We will pool
into providing
help create an
Greetings
Since its establishment in 1954, the KYOWA

to offer a significant contribution to the advance-

EXEO Group has promoted business activities

ment of the Internet of Things (IoT) technologies.

drawing on its expertise in the creation of informa-

The EXEO of the KYOWA EXEO Group is thetion communications infrastructure as a core

Latin “exeo,” which refers to breaking the moldcompetence, and provided consistent and inte-

and continually venturing out to address new

grated services nationwide for the installation ofchallenges. Reaffirming the meaning of the com-various information communications facilities andpany name, we will continue to make flexible re-equipment.

sponses to a changing business environment andCurrently, in addition to establishing the infor-provide total solutions in a wide range of businessmation communications infrastructure, the Group

fields by gathering the strength of the entire

has produced many business results in the estab-Group, thereby contributing to society as a corpo-

lishment and management of environmental andration creating an affluent living environment. Withsocial infrastructure by harnessing our long-nur-such an attitude as a pillar of our CSR manage-

tured environmental, civil engineering and electri-

ment, we will aim to achieve the sustainable

cal facility technologies.

growth of the Group.

Furthermore, in the software development business we started in 1982, we have a track recordof developing solutions and applications thatcombine ICT and software, thereby we will strive

7

Corporate Report 2016

Fuminori Kozono
President
KYOWA EXEO CORPORATION

Message from the President

Business Results for Fiscal 2015
Although an unexpected decline in the receipt of orders
for NCC (new common carrier)-related works resulted
in a year-on-year decrease in net sales for fiscal 2015,
operating income increased slightly from the previous
year due to measures taken to increase productivity,
including cost-cutting efforts.
In the telecommunications infrastructure business,
NTT-related works performed steadily. A decline in
fixed telecommunications-related works was modified
by the receipt of orders for maintenance works andthe refurbishment of aging facilities, and mobile
telecommunications-related works achieved higher sales
than planned, mainly due to an increase in the receipt
of orders related to LTE-Advanced, the so-called fourthgeneration standard of wireless telecommunication.
Meanwhile, order receipts and net sales of NCC-related
works declined significantly, which resulted in a year-onyear decrease in overall sales of the telecommunications
infrastructure business segment. The environmental andsocial infrastructure business enjoyed an increase in sales
from the previous year, as we received orders for the
installation of electrical equipment, the undergrounding ofoverhead power lines in association with redevelopment
projects in the Tokyo metropolitan area and for a large
environmental-related project. The system solutions
business benefitted from the contribution to sales fromADVANCED INFORMATION DESIGN Co., Ltd., whichbecame a subsidiary in fiscal 2014.

Greetings /Message from the President

all of the Group’s efforts
total solutions, so as toaffluent living environment.

As a result, for fiscal 2014, the Group recorded
orders received amounting to ¥300.4 billion (100%year over year), and achieved consolidated net sales of¥287.4 billion (down 4% year over year) and operating
income of ¥18.4 billion (100% year over year).

Tasks Addressed and Achievements in Fiscal 2015
In fiscal 2015, despite the sales decline, we secured thesame level of income as the previous year. This was due
to measures taken to enhance productivity, including thereorganization of the Group, the consolidation of bases
and the improvement of business operations throughBusiness Process Re-engineering (BPR). In addition,
we expanded the range of businesses other than thoserelated to the telecommunications carriers by acquiring
orders for highway-related communications work, theinstallation of electrical equipment in association withredevelopment projects in the Tokyo metropolitan
area and the construction of biomass boilers, which is
expected to grow from now.
Regarding the system solutions business on which
we have focused for several years, we have promoted
aggressive marketing efforts in the business fields
where the Group’s strengths can be exploited, including
new energy, geo services and cloud security. In thegeo services field, we consolidated WHERE Co.,
Ltd., a company with expertise in geo applications
development and spatial positioning technology, as awholly owned subsidiary to reinforce the operation of
Corporate Report 20168

Message from the President

the geospatial business, a promising area for future
growth.

Medium-Term Management Plan
Under the former medium-term management plan forfiscal 2013 to fiscal 2015 aimed at increasing sales andincome and earnings per share (EPS) in line with themedium-term vision “Developing total ICT solutions on
a group-wide basis to create value and build a solidbase for growth,” we engaged in efforts to expand
the business lineup and enhance the productivity andefficiency of business operations. By setting up the
ICT Solutions Headquarters, we launched the systemsolutions business, a new business field with high growthpotential, and we made aggressive marketing efforts
to expand the business lineup in the existing businessfields. In addition, we strived to enhance productivity
through the integrated application of Group resources
as well as the elimination and consolidation of the Group
companies. However, although we achieved record net
sales and operating income in fiscal 2013, the plan’s
first year, the growth of net sales and income did notcontinue thereafter due to declining capital investments
by telecommunications carriers. Accordingly, theexpansion of businesses outside the telecommunications
carrier-related sector became our ongoing agenda.
With the recognition of these tasks to be tackled,
we formulated the new medium-term management
plan with its first year being fiscal 2016. In anticipationof increasingly active investments related to the 2020
Tokyo Olympic and Paralympic Games, we deemed it
appropriate to draw up a growth scenario for a longer
span and prepared the new plan for five years insteadof the three years typical of conventional medium-termplans. A change in the segmentation of businesses was

9

Corporate Report 2016

also made, including a separate description of the NCCrelated business, to enable a better grasp of the growthof businesses other than the telecommunications carrierbusiness.
Under the new medium-term vision “Focus Group
strengths to take total solutions to a new growth stage,”
we set business performance targets for fiscal 2020. We
aim for net sales of ¥400 billion, operating income of ¥30
billion, ROE of 10% and EPS of ¥200 or more. On a net
sales basis, we aim to achieve a business portfolio of
50% in the telecommunications carrier business; 25% in
the urban infrastructure business, which consists of noncarrier telecommunications, environmental and social
infrastructure; and 25% in the system solutions business.
Toward these targets, although they might be high,we will further strengthen the measures we have taken
to develop the solution business into the second pillarof the Group’s businesses and ensure higher earnings
therefrom. In addition, we will upgrade the managementof human resources and the group structure to continue
to raise the efficiency of existing businesses. Meanwhile,
we will actively promote the M&As of companies thatcan generate synergies, which will be combined withthe variety of technical services that we offer, suchas building telecommunications infrastructure anddeveloping systems, to provide new solution businesses
that can address radically changing market needs.

Outlook for Fiscal 2016
Partly because fiscal 2016 has the advantage that it
began with a record amount of outstanding work, weplan to achieve increases in net sales and income again.
In the telecommunications infrastructure business,telecommunications carriers have tended to curtailtheir capital investments, but they are expected toGreetings /Message from the President

Medium-Term Management Plan (FY16–FY20)
To successfully complete the plan, we will focus Group efforts to push forward with our operations, and establish a management base that is robust to changes in the business environment.
Mediumterm Vision

Focus Group strengths to take total solutions to
a new growth stage

Under this vision, we will push forward our various endeavors based on the following five basic strategies
Achievements and targets

Basic Policies
1.Reorganize business portfolio, fostering solutions
into second core business
2.Expand engineering peripheral businesses bycombining existing technologies and services
3.Expand business through M&A and alliances
4.Bolster profitability by increasing productivity
through business improvement and implementing
thorough efficiency measures
5.Increase shareholder value by boosting capitalefficiency

FY20

Net sales
Operating

400.0bn¥30.0bn¥income(Operating income margin 7.5%)

ROE

10%
Over¥200

EPS

ROE: return on equity EPS: earnings per share

Target portfolio

SystemSolutions

Telecom carriers

64 %

13%
FY15
Urban
infrastructure

23%¥287.4bn

Telecom carriers

SystemSolutions25%
Expansion of sales and businessdomains by development into new
domains50%
FY20¥400.0bn

Urban
infrastructure25%

Corporate Report 201610

Message from the President

continue steady investments to upgrade base stationequipment to accommodate the increasing volume
of mobile traffic and the new frequency band. In theurban infrastructure business, growing demand is
expected for the installation of electrical equipment
and the undergrounding of overhead power lines inassociation with redevelopment projects in the Tokyo
metropolitan area. ICT investments by municipalities arealso expected in line with the governmental initiatives
for building national resilience and other policies. In
the system solutions business, we can see growing
business opportunities, such as the cloud, big data and
IoT, which could lead to revolutionary social changes.
Under these business circumstances, our priority
in fiscal 2016, the first year of the new medium-term
management plan, is to promote active marketing efforts
to bring the system solutions business into full bloom
after the periods of seeding and burgeoning and growit into a new pillar of generating earnings. In the newenergy field, we will expand the range of business related
to the liberalization of the electricity markets. In the geo
service field, we will reinforce our involvement in the“geospatial” business, which is a combination of spatial
positioning via beacons and mapping information, while
continuing to offer applications that provide sightseeing
information and support for disaster management. In the“cloud/security” field, we will engage aggressively in the“cloud integration engineering” business in partnershipwith Microsoft Japan Co., Ltd. We are providing
employee training to develop 2,000 Microsoft cloudengineers nationwide, and from among them the top 50
engineers initially were to be qualified as advanced cloudengineers. However, more than 70 have qualified in justthe two months since the training started. Therefore,
the target number of advanced cloud engineers has
been revised upward to 200, and increased by fourfolds. Taking advantage of our capability to provide

11 Corporate Report 2016

one-stop services nationwide, we will actively promote
the “cloud integration engineering” business by
combining a technology for building the cloud service
and a technology for building the telecommunications
infrastructure. In the global field, through MG EXEO
Network Inc., a consolidated subsidiary based in thePhilippines, we will promote the expansion of businessin the telecommunications and ICT markets in Southeast
Asia, which are expected to achieve rapid growth.
Trials are being conducted in Indonesia for the startup
of business with careful attention to the business
opportunities and risks in the market.
To raise productivity, we will make continued costcutting efforts through such measures as Business
Process Re-engineering (BPR) for the improvement ofbusiness operations and sharing of system foundations.
We will also conduct projects across the businessdivisions to explore potential markets for providing highvalue-added customer service, while continuing to
improve the quality, cost and delivery time of our services.

Distributing returns to shareholders
The KYOWA EXEO Group regards profit distribution toshareholders as an important managerial issue and has
a basic policy of stable dividends, while consideringbusiness results, the future business environment andinvestments for ensuring financial strength and businessexpansion.
Beginning with the second half of fiscal 2015, wehave employed a dividend on equity (DOE) of 3% as anindicator of a stable dividend. Accordingly, the annual
dividend per share for fiscal 2015 was ¥38, up ¥6 fromthe previous fiscal year, and we plan to further increase
the annual dividend per share for fiscal 2016 by ¥8 to¥46.

Greetings /Message from the President

We also plan to purchase ¥3.0 billion in shares oftreasury stock in fiscal 2016. The recent level of thetotal return ratio—the sum of dividends paid and sharebuybacks as a proportion of consolidated net income—should be high enough to fully satisfy our shareholders.
In addition, we will strive to ensure a stable high levelof return on equity (ROE) by promoting the growth ofincome and enhancing capital efficiency.
Establishing a continuous cycle that starts withraising 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 through raisingbusiness performance and aggressively distributing
profits to shareholders.

Operation highlight3500
Net sales (¥billion)

Orders received (¥billion)

3500
Operating income (¥billion)

3250

301.4

300.4

305.0
3000

3200

300.9

300.0
287.4

2900

18.3

18.4

2014

2015

20.0

2750
2600
2500
2300

2250

2014

2015

2016
(plan)

2000

2014

2015

2016
(plan)

2000

2016(plan)

Corporate Report 201612

Business Overview

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

ENGINEERING SOLUTIONS

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

To page 15

13 Corporate Report 2016

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
total solutions in both the network integration (NI)field, which is establishing LAN/WANs and Internet
environments, and the system integration (SI) field,
which is establishing systems for corporations
such as communications carriers, financial institutions and manufacturers.

To page 18

Corporate Report 201614

Business Overview

ENGINEERING
SOLUTION

Telecommunications Infrastructure

NTT Group

We are working to establish various telecommunications facilities for the NTT Group companies.
Access engineering:
We lay optical fiber cable networks,
which are indispensable for highspeed communications networking,and install the Fiber To The Home
(FTTH) system to provide broadband
services such as the Internet tocorporations and households. EXEO’s
world-leading, high-quality construction technologies, which have won
the gold medal at the World Skills
Competition four consecutive years,
are supporting theever-evolving
information
communications age.

15 Corporate Report 2016

Network engineering:

Mobile engineering:

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.

and operate next-generation networks (NGNs) using leading-edge
routers and servers. We also design,
construct and maintain switchers,transmission equipment and power
equipment at nationwide legacy facilities, all of which support today’scommunications networks.

Handing down the technology andcontributing 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

Establishing various telecommunications facilities for
new common carriers (NCCs)
Telecommunications facilities
We construct telecommunications facilities for new
common carriers (NCCs) such as the KDDI Group andSince 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.

the Softbank Group.

Corporate Report 201616

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 for industrial 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 2016

Business Overview

SYSTEM SOLUTIONS

Network Integration (NI)

System Integration (SI)GlobalThe Group offers various types ofservices such as designing, constructing and operating servers andLANs for corporations, and improves server/Internet environments
and security.

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, bydrawing on the latest technologies
such asservice-oriented architecture(SOA) and our
powerfulsolutions.

Since 1963, the Company has been
involved in overseas works in nearly 100
nations. Currently, we are conducting
business mainly in Southeast Asia,
including works for communications
facilities in the Philippines led by MG
EXEO Network Inc., a Philippines-based
consolidated subsidiary of the Company.

Major solutions

Countries to which we have sent engineers since 1992
( Local corporations/ Locations to which our engineers were sent)

 Network and server solutions
Wireless LAN solutions
Security solutions
Cloud solutions
Sound (e.g., IP-PBX) solutions
Video solutions
Smart sensing solutions
Energy management solutions
Disaster prevention/mitigation and disaster response solutions
Home network solutions
Operation, monitoring and maintenance services
SOA solutions EAI/ESB, BPM, BRMS, ETL/BI, etc.
Business support solutions Adaptive Biz Service (ABS)
Customer-specific billing solutions
Facility and equipment management solutions

Financial solutions

Corporate Report 201618

Business Overview

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

Total Process
We respond to customers’
needs with one-stop
services from planning anddevelopment to construction,
operation and maintenance,
which are sustained by highengineering and technologicalcapabilities.

Total Solution
We meet diversified
customers’ needs byfully drawing on the latest
technologies in a wide
variety of fields such as
telecommunications, civilengineering, electricity,
network integration (NI)and system integration(SI).

From Planningto Maintenance

Nationwide Expansion

Group ofProfessionals Who
Are Acquainted
with Every Kind ofTechnology

SupportNationwide

We are prepared to meet
every kind of customer
need, which can becovered by our operatingbases and Group
companies locatedthroughout the nation.

Total Process (through-process construction)

Planning and development

Construction

Operation and maintenance

SYSTEM SOLUTIONS

Total Solution

ENGINEERING SOLUTIONS

Optical access network
Next-generation network (NGN)
Mobile (LTELTE-Advanced)

Underground installation of electricity cables
NI solutions and SI solutions
renewable energy (solar light, etc.) eco businessElectric equipment
Home ICT and Smart Houses

Nationwide operation, multiple carrier compliant and migration-compliant

19 Corporate Report 2016

Group Structure(As of July 1, 2016)

KYOWA EXEO CORPORATION
T w o M a j o r C o n s ol i d a t e d S u b s i d i a r i e s
Daiwa Densetsu Corporation

EXEO TECH CORPORATION

27 Other Consolidated Subsidiaries

Developed with local communities based on the construction ofcommunications infrastructure regarding new fields as new pillars of growth

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

Since it was established in 1949, Daiwa Densetsu Corporation
Group, with the construction of information and communications
infrastructure as its core business, has contributed to promoting
optical access and ICT in Tohoku and to restoration and recovery
in such areas as those devastated by the Great East Japan
Earthquake. The self-developed NUTRIMATE food service management system has earned a growing share mainly in the market for university hospitals. While improving the efficiency ofconstruction of information and communications infrastructure
toward 2020, we will continue to seek to contribute to local communities as a member of the KYOWA EXEO Group based on ourpillars of growth which is the solution business centering on NUTRIMATE and electrical and public works backed by high expertise and quality accumulated through the construction ofcommunications infrastructure.

Company Name

EXEO TECH CORPORATION

Company Name

Daiwa Densetsu Corporation

Establishment

May 20, 1948

Establishment

August 1, 1949

Head Office

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

Head Office

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

Representatives

Representative Director and President: Yuki Sakuyama

Representatives

Representative Director and President: Hideki Tohara

Paid-in Capital¥450 million

Paid-in Capital¥450 million

Business Outline

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

Business Outline

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

Examples of expanding solution business

Installation of a smart meter

Business Overview

Taking on the challenges for new growth with the integrated ICT
engineering capability that can address a diverse range of needs

Examples of expanding solution business

A Braille guide board with amultilingual voice guidance

NUTRIMATE food service management system

27 Other Consolidated Subsidiaries
Accessengineering

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

Civil engineering

Exeo Infra Corporation, Infratechno Corporation

Networks

Exeo Network Corporation, Multimedia Engineering Co., Ltd.

Mobile telecommunications

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

IT

ACCRESCO CO., LTD., ICOMSYSTECH CO., Ltd., AID Holdings Inc. (the holding company of ADVANCED INFORMATIONDESIGN Co., Ltd.)Other

KYOWA SECURITY SYSTEM CORPORATION, Kyokuyoh Corporation, Shinwa Seisakusyo Corporation, Exeo
Butsuryuu Service Corporation, Exeo Business Corporation, ASAHI DENWA KOGYO CORPORATIONThe Group companies other than the above: 11 nonconsolidated subsidiaries and 9 affiliates
Corporate Report 201620

Business Overview

Overview of Group Companies
Access engineering
Suncrex Corporation
Although founded in 1964, Suncrex Corporation became what it
is today upon the merger of three companies in July 2003. The
company name “Suncrex” contains the meanings of “creation”
and “growth” which are the basic spirits shared by all employees. Under the KYOWA EXEO Group’s new vision, “Focus
Group strengths to take total solutions to a new growth stage,”
we conduct access engineering for communications lines andinstallation works within customers’ houses as the core business. We also engage in various other works, trying to be an“all-round player,” including the construction of information andcommunications facilities, such as NCC-related works, railway
communications, LAN wiring and system development, as well
as works related to the installation of solar power equipment
and transmission lines for smart meters.

Networks
Exeo Network Corporation
The world of information and communications services undergoes changes day by day. The unprecedented development of business through ICT solutions is now common. At
this time of great change, three companies that had long
been involved in network engineering merged to become
Exeo Network Corporation, a large-scale company with nationwide business bases, on July 1, 2015. Armed with hightechnological expertise and a nationwide network for offering engineering works, Exeo Network Corporation will address the needs of the changing times to expand thebusiness boundaries of the Group as a member of team
EXEO, thereby contributing to society.

IT
ADVANCED INFORMATION DESIGN
Co., Ltd. (AID)
Since its establishment in 1980, AID has accumulated experience and accomplished achievements chiefly in the field of financial system development. In 2020, when its 40th anniversary will
be held, we aim to attain net sales of ¥10.0 billion by maintaining
and expanding the financial system business which is a corestrength of AID, exploring new customers, expanding the stocktype business with recurring income from our own products andservices and promoting nearshore development.
We will reinforce our technological capacity and competitiveness by exploring new business opportunities and utilizing synergies with the Group companies, while deepening collaboration
with local communities to help revitalize them, thereby broadening the range of AID businesses to establish a foundation for further growth for the next generation.

21 Corporate Report 2016

Civil engineering
Exeo Infra Corporation
As a leading company in the field of civil engineering for telecommunications equipment, Exeo Infra Corporation has accumulated highly advanced civil engineering capabilities, withwhich it serves as a contractor of civil engineering works for
the Group. Toward 2020 when the Tokyo Olympic and Paralympic Games will be held, Exeo Infra Corporation not only
plans to meet the demand for higher reliability of telecommunications infrastructure, but also to make flexible adjustments topossible changes in the business environment resulting fromchanges in the management system of the Group operations.
We always explore business opportunities to expand the domain of business into peripheral business areas, thereby offering an added level of safety quality, services and proposals inconstructing infrastructure for redevelopment of the Tokyo
metropolitan area and the governmental initiative of building
national resilience.

Mobile telecommunications
Exeo Mobile Corporation
Exeo Mobile Corporation makes it a top priority to provide
customers with safe and high-quality designing, constructing
and maintenance services on a continuing basis. Accordingly,
we focus on employee training for the acquisition of multiple
skills and management capabilities. Since we have branches
and technology centers throughout Japan, we, as a member
company of the KYOWA EXEO Group, ensure ongoing collaboration with the mobile divisions at the head and branch offices of KYOWA EXEO CORPORATION to enable one-stop
construction management around the nation with flexible adjustments according to the volume of works, while promoting
business improvements to steadily enhance productivity andachieve the targets set out in its business plan.

Other
KYOWA SECURITY SYSTEMCORPORATIONKYOWA SECURITY SYSTEM CORPORATION has engaged
for 33 years in the traffic control and security services for the
KYOWA EXEO Group. With the increasingly active redevelopment projects and social infrastructure construction toward 2020, when the Tokyo Olympic and Paralympic Games
will be held, demand for security services is expected to increase. After 2020, a move toward the construction of safety- and security-oriented social infrastructure is expected toaccelerate. With the top priority remaining the security services of the Group, we will explore new business opportunities, such as security services for facilities, while acquiring
adequate staff and raising the quality thereof, to expand therange of our business operations and grow into a company
that can offer comprehensive security services.

Business Bases
Domestic bases:(As of July 1, 2016)(

Branches/

Offices)

Overseas Bases

Nishi-Nippon Head Office: 6-13, Kyomachibori 3-chome, Nishi-ku, Osaka-shi, Osaka

Philippines
MG EXEO NETWORK, INC.

Hokkaido Branch: 2-20, Minami 21-jo Nishi 7-chome, Chuo-ku, Sapporo-shi, Hokkaido

12th Floor, DPC Place, 2322 Don Chino Roces Ave.
Ext., 1231 Makati City, Philippines

Head Office: 29-20, Shibuya 3-chome, Shibuya-ku, Tokyo

Tohoku Branch: 5-1, Omachi 2-chome, Aoba-ku, Sendai-shi, Miyagi■Ibaraki Branch: 1486 , Kasahara-cho , Mito-shi , Ibaraki■Chiba Branch: 1081-2,Yoshihashi Yachiyo-shi ,Chiba
Business Overview

Minami Kanto Branch: 12-1 Kanagawahoncho, Kanagawa-ku, Yokohama-shi, Kanagawa
Koshin Branch: 602-2, Ochiai-cho, Kofu-shi, Yamanashi
Tokai Branch: Nishiki SIS Bldg., 10-33, Nishiki 3-chome, Naka-ku, Nagoya-shi, Aichi
Kansai Branch: 6-13, Kyomachibori 3-chome, Nishi-ku, Osaka-shi, Osaka
Miyako Branch: 539-20, Omiya Nishiiru Monzen-cho, Oike-dori, Chukyo-ku, Kyoto-shi, Kyoto
Hyogo Branch: 1-13, Ekiminami-dori 2-chome, Hyogo-ku, Kobe-shi, Hyogo
Hokuriku Branch: Kanazawa Fit Building, 53-1 Futakuchi-machi-Ni, Kanazawa-shi, Ishikawa
Shikoku Branch: 148-20, Hayashi-cho, Takamatsu-shi, Kagawa
Chugoku Branch: 7-11, Ogawachi-machi 2-chome, Nishi-ku, Hiroshima-shi, Hiroshima
Kyushu Branch: 7-8, Tamagawa-machi, Minami-ku, Fukuoka-shi, Fukuoka
Okinawa Branch: 30-52, Oroku 1-chome, Naha-shi, Okinawa
Iwate Office: 5-7, Honcho-dori 2-chome, Morioka-shi, Iwate
Yamagata Office: 9-10, Minami Yonban-cho, Yamagata-shi, Yamagata
Niigata Office: Cosmo Shinano, 4-27 Shinano-machi, Chuo-ku, Niigata-shi, Niigata
Nagano Office: NTT Kurita Building No. 1, 2423, Inaba, Nagano-shi, Nagano
Ibaraki Office: 1486 Kasahara-cho, Mito-shi, Ibaraki
Chiba Office: Chiba West Building, 24-9 Shinmachi, Chuo-ku, Chiba-shi, Chiba
Saitama Office: NTT Shirahata, 1-23, Shirahata 5-chome, Minami-ku, Saitama-shi, Saitama
Wakayama Office: 5-29-1, Fukiya-cho, Wakayama-shi, Wakayama
Matsuyama Office: Sumitomo Seimei Matsuyama Ichibancho Building, 15-2,
Ichibancho 1-chome, Matsuyama-shi, Ehime■Kochi Office: 993-1 , Kera ,Kochi-shi ,Kochi
Yamaguchi Office: 19-2, Ekiminami-machi, Hofu-shi, Yamaguchi
Kumamoto Office: 27-23, Egoe 1-chome, Minami-ku, Kumamoto-shi, Kumamoto
Kitakyushu Office: 1320-13, Aza Otsuka, Oaza Maeda, Yahatahigashi-ku, Kitakyushu-shi, Fukuoka
Nagasaki Office: NTT WEST Higashi Nagasaki Building, 823 Tanaka-machi, Nagasaki-shi, Nagasaki
Oita Office: NTT Harashin Building, 5-1, Harushinmachi, Oita-shi, Oita
Minami-Kyushu Office: 6, Kasuga-cho 4-chome, Kagoshima-shi, Kagoshima

Bases of Two Major Consolidated Subsidiaries
EXEO TECH CORPORATION
4-1-23, Heiwajima, Ota-ku, Tokyo

Daiwa Densetsu Corporation:
5-1, Omachi 2-chome, Aoba-ku, Sendai-shi, Miyagi

Corporate Report 201622

Special Feature Corporate Value of the KYOWA EXEO GroupThe KYOWA EXEO Group Makes Use
As represented by the Sustainable Development Goals (SDGs) and the Paris Agreement, social issues todevelop solutions based on highly advanced technologies and global collaboration. The KYOWA EXEO
solving social issues, thereby achieving the sustainable growth of itself and society.

KYOWA EXEO Group’ s

Major social issues:
Global warming
Water risk
Energy problems
Urban concentration
Japan’s fallingbirthrate, super aging
population, etc.

Strict corporate
governanceMedium- to long-term businessenvironment:

Urban
infrastructurebusiness

Needs of the times

Declining fixed-line phones
Labor shortage in theconstruction industry
Social needs toward the Tokyo

Olympics and Paralympics
Transition to the next-generation

wireless technology (5G)
Reinforcement of disastermanagement, etc.

Telecommunications
Infrastructure
Business
Promoting CSR
management

Telecommunications Infrastructure Business

Urban infrastructure businessSocial issues to be solved
through the telecommunications
infrastructure business:

Social issues to be solved through the urban
infrastructure business: ontinued upgrading of broadband telecomCmunications (LTELTE-Advanced
5G) acilitates the operations that address theFreception difficulty for the 700-MHz band

23 Corporate Report 2016

 xpanding the demand for optical fiber accessE
services through 4K and 8K UHD (ultra-highdefinition) displays and the Hikari Collaboration

 nsures a globally comparable level of landscape byE
promoting the undergrounding of overhead power lines
 xpanding public investments for building nationalE
resilience (e.g., installation of monitoring cameras,
refurbishment of highways)
R enewal of aging waste disposal plants
R enewable energy sources, including biomass

of Its Strengths to Solve Social Issues
be solved are increasingly clear at the global level. To address these issues, it is increasingly important toGroup makes use of its accumulated expertise and the synergies of the Group companies to contribute toImportant issues for the KYOWA EXEO Group to achieve sustainable growthTechnological Capabilities

Developing human resources /developing and handing down
technologies
Value offered for society:
Convenient and affluent life
Green-rich EarthOffering value

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

Medium- andlong-term growthstrategies

SystemSolutions
Business

Special Feature
Corporate Value of the KYOWA EXEO Group

Safe and secure society

Pick
Up!!
Our activities in the four focus areas:
The KYOWA EXEO Group pursues various strategies bycapitalizing on its technological capabilities accumulated
Cloud/
Security
Field

New Energy
Fieldover 60 years to achieve sustainable
development while accommodatingchanges in the business environment.
The Group’s current activities in thefour focus areas to create “new value”

Global Field

Geo Solution
Field

for the benefit of society are describedin the following pages.

System Solutions Business

Orders received (¥billion)

Social issues to be solved through the systemsolutions business:12

 eform of industrial structures through the cloud, IoT,R
big data, etc.
Promotes the deepening of communication
 olutions for advanced security including the manageS
ment of the My Number system
 DA (Official Development Assistance)-related effortsO
to address the economic growth of Southeast Asia

10.0

9
6

5.1

3
0

2015

2016
(plan)
Corporate Report 201624

Special Feature

Corporate Value of the KYOWA EXEO Group

1 New Value Createdby the Cloud Security Area
▶ Thin client, virtualization▶ Security foundations▶ M2M, IoT

Orders received (¥billion)

3.3
2.2

2015

2016
(plan)

The cloud service enables the storage of data and software on the Internet,
instead of on a computer or other terminals, and access to such data andsoftware from various locations. Because the use of the cloud can save time,raise the efficiency of business operations and achieve other cost-reduction
targets, it has been drawing attention as a growth strategy across the nation.
For example, teleworking is one of the benefits of the cloud service. People
who once had to take child-care or nursing-care leave might now be able tocontinue working at home.
Although the cloud service may be growing, it cannot create new value
unless the service becomes fully usable through enhancements in the quality
and security of telecommunications, which is the issue that can be best addressed by the KYOWA EXEO Group. For more than 60 years, we have accumulated technological expertise by engaging in the construction of
telecommunications infrastructure through the ages of analog and digitalcommunication. We now focus on the field of “cloud integration engineering,”
a combination of the cloud technology and our expertise in telecommunications infrastructure, to solve various social issues. By taking full advantage ofour capabilities accumulated to ensure greater safety and security of society,we will continue to realize new and valuable forms of communication.

! For instance

Telecommunications Infrastructure
Technology × Cloud Technology

Reinforcing the Cloud Integration Engineering Capability
Partnership with Microsoft Japan
By combining our technological advantages in all aspects of theconstruction of telecommunications facilities with Microsoft’s cloudservice, we are strengthening the effort to offer a one-stop cloud
integration engineering service across the nation. Microsoft’s ideaof changing the society through Mobile and Cloud has been united
with KYOWA EXEO’s wish to create a better society through thebusiness of constructing information and communications to realize a partnership aimed at creating new value in society.

MCSA stands for Microsoft Certified Solutions Associate.

25 Corporate Report 2016

Conventional telecommunications
infrastructure business fieldporation in the United States and other countries.
MCSE stands for Microsoft Certified Solutions Expert.

soft Corporation in the United States and other countries.

Cloud business field

Notes: Office 365 is a registered trademark or a trademark of Microsoft Cor-

Notes: Skype for Business is a registered trademark or a trademark of Micro-

Cloud integration engineering

Japan’s leading group of cloud engineers
Engineers account for 90% of the entire workforce of the KYOWA
EXEO Group, and many of them have already acquired high-level
qualifications. As a new initiative, we launched the “Exeo Top Gun”
team consisting of selected engineers, and about 70 of them haveacquired Microsoft Office 365 and cloud-related MCSE and MCSA
certifications so far. We will encourage employees outside theteam to acquire the certifications, aiming to increase the number ofcloud engineers to 2,000 Group-wide by fiscal 2018 to become
one of Japan’s largest groups of cloud engineers.

Exploring the field of corporate communications
By leveraging its accumulated experience in constructing nextgeneration network, voice and public Wi-Fi networks for telecommunications carriers, the KYOWA EXEO Group has embarked on
the corporate communications business by offering proposals toconstruct and support the introduction of Skype for Business forcorporate clients.

Office365

Groupware

Storage

Mail

Cloud PBX

Certified
IoT
Big Data
Server processing analysis

Cloud platform

Azure

Internet
Carrier IP-NW
Fiber
Fiber
optic LTE optic
cablescablesIoT-NW
Sensors

PSTN
LTE

MobileiPhone Android
Unifiedcommunication,
Thin clientFocus four areas

2 New Value Createdby the New Energy Area
▶ Local power companies▶ Power Producers and Suppliers (PPS)▶ Batteries

Orders received (¥billion)

2.1
0.9

2015

2016
(plan)! For instance

Challenges for Energy
Management

Launched Energy Viewer into the Market
Challenges for energy management
To utilize our technology for energy conservation, we launched
the sales of the “Energy Viewer,” an energy management system
for small and medium-sized corporate power users in the springof 2016. Until then, technology was limited to the visualization of
power consumption and actions beyond that were the responsibility of power management officers. Without the effort of theseofficers, no sustainable effect of energy conservation had been
ensured. The Energy Viewer system visualizes what action canbe taken according to the status of power use, ensuring sustainable energy-saving effects without a burden on power management officers.
Taking advantage of the Group’s technological strengths
The Energy Viewer system achieves automated control over the
power consumed through air-conditioners, which is said to account for 30% to 40% of the power consumption. As we engage
in the construction of communications equipment, we have theadvantages of providing one-stop solutions that include theSpecial Feature
Corporate Value of the KYOWA EXEO Group

The Paris Agreement, which was adopted at the COP21 conference in December 2015, sets out a policy of virtually eliminating greenhouse-effect gas
emissions in the second half of the 21st century. Responding to this global
move, the Japanese government lays out a national goal of achieving 17%
energy conservation by fiscal 2030. The concept of “energy management” is
one of the policies that captured growing attention. Instead of repeating conventional ways of stringent control over the use of energy, the idea of “energy
management” promotes smarter forms of saving energy to generate greater
effects using advanced information technology.
To promote the national move to save energy, the KYOWA EXEO Group
has started an attempt to control power consumption using its communications technology. If the Group’s technology enables the optimization of energy management according to the status of power supply, it will maximize theefficiency of energy consumption, achieving energy conservation and cost
reduction simultaneously. New forms of energy conservation, beyond theconventional methods, can be created through the use of advanced information technology. By exploiting our expertise in the new business field of “energy conservation,” we will continue to tackle challenges to realize a society
where many people can live in comfort.

installation of equipment and control over air-conditioning devices
made by different manufacturers. In addition, the expertise of aconstruction company can be used effectively to minimize costsin the process of equipment construction and to ensure the construction of an optimal energy management network using cloudservers.
Maximizing the use of data accumulated through connections with various systems
The current Energy Viewer system addresses the energy management of air-conditioning devices alone, but connecting thesystem to the sensors of other equipment, such as lighting devices and automatic doors, will expand its possibilities so that not
only power conservation is achieved, but also the value of aspace is enhanced. “Connections” with other systems will enable
the accumulation of various data, which not only serve to promote energy conservation but might also produce new business
opportunities. With the aim of bringing happiness to everyone,
the KYOWA EXEO Group’s IoT actions have already begun.

Major functions of Energy Viewer

SENSINGVISUALIZEACTION

COST CUTTING

Corporate Report 201626

Special Feature

Corporate Value of the KYOWA EXEO Group

3 New Value Createdby the Global Area
▶ Okinawa▶ International▶ Support projects, etc.

Orders received (¥billion)

3.8

1.8

2015

2016
(plan)

Although Japan is a super aging society without parallel in the world, facing
the social issue of a declining population, population growth is expected inother parts of Asia where the improvement of infrastructure has been gradually under way to ensure a better living environment. The economic growth ofSoutheast Asia has attracted attention, with a projection for the combined
GDP of Indonesia, Thailand and the Philippines reaching US$2,400 billion in2020 compared with US$1,500 billion in 2012. The Internet population also
has been on the rise. In the Philippines, for example, the number of Internet
users more than doubled in 2014 from four years earlier.
The KYOWA EXEO Group has already engaged in global business operations aimed at providing people around the globe with better and more comfortable living environments. Based on our business facility in the Philippines,
which has been operating for 25 years, we will nurture ICT engineers andglobal human resources within the Philippines to provide safe, secure andhigh-quality telecommunications infrastructure to the nations of Southeast
Asia. Backed up by the Japanese government, a range of information andcommunications devices from Japan are now in use in Southeast Asia. It is
one of the missions of the KYOWA EXEO Group to construct a communications infrastructure that makes those devices perform 100% at local sites.
We will capitalize on our technological and human resources to contribute tocreating a better social environment in the world.

! For instanceUtilizing Japanese Technologies
for the World

Overseas Social Contribution Activities through MG EXEO Network
Profile of MG EXEO Network
MG EXEO Network Inc., a joint venture with a local company established in 1991, has long served local communities within thePhilippines by undertaking works for constructing communications facilities using advanced technologies from Japan. Having
become a consolidated subsidiary of the KYOWA EXEO Group in
2012, the venture has mainly engaged in the installation works
for leading telecommunications carriers in the Philippines. Havinggrown to a workforce of eight Japanese and about 500 local employees, MG EXEO Network contributes to enhancing the standard of living of the Filipino people through involvement with theconstruction of communications infrastructure.
Received orders from PLDT for access engineering andmaintenance work
In May 2014, MG EXEO Network received orders from the Philippine Long Distance Telephone Company (“PLDT”), the largest
telecommunications carrier in the Philippines, for installation andrefurbishment works for communications lines within generalhouseholds and offices across the provinces of Batangas andLaguna, where PLDT offers service, as well as works for the
maintenance and refurbishment of related outdoor wiring andequipment. We believe this remarkable accomplishment is due tothe recognition of the high-quality achievements of MG EXEO
Network and the relationships of trust that have been establishedwith its customers.

27 Corporate Report 2016

Taking the EXEO quality to Southeast Asia
There are two aspects to “quality.” One concerns “technology,”
such as the ease of connection, and the other concerns “safety
and security.” To ensure the highest technological quality, we provide opportunities such as technology training so that theGroup’s advanced technologies can be acquired by the Filipino
employees. A training center is slated to open in fiscal 2016,
which will be available for customers as well. Another aspect of
quality, or safety and security, refers to the labor environment for
local employees. We tailor the compliance rules to suit the local
customs and culture to provide a safe and secure working environment where all employees can work in comfort.

Focus four areas

4 New Value Createdby the Geo Solution Area
▶ EXTravel (outdoors, indoors,

educational and tourist spot versions)▶ Beacon positioning

Orders received (¥billion)

0.8
0.2
2015

2016
(plan)! For instance

Mobilizing Technologies to Make
Dreams Come True

Full-Scale Involvement in the Geospatial Business Has Begun
Expanding the geospatial possibilities in partnership with WHERE
The KYOWA EXEO Group has started full-scale involvement in
the geospatial business by making WHERE, Inc., into a consolidated subsidiary, which the Group had held a capital and business alliance. WHERE is a distributor of geo applications withexpertise in positioning engines. Combining the KYOWA EXEO
Group’s construction technology of communications with the positioning engine technology of WHERE will realize geospatial services in a dynamic and speedy manner, creating new value insociety.

for everyone, even those who have a baby stroller, walk witha cane or are in a wheelchair regardless of indoors or outdoors. Here lies an opportunity for the Group’s geospatial
business. Combining the positioning technology of beacons,or electric wave transmitters that are installable anywhere,with the Group’s expertise accumulated through the tourist/
disaster prevention application will ensure that all kinds ofpeople can travel in a seamless motion even if they are insidea building where accurate positional information is not available via a global positioning system (GPS).

Seamless move becomes an ordinary thing
Toward the 2020 Tokyo Olympic and Paralympic Games, we
see growing demand for services using “positional information.” For example, when you want to know how to get to an
Olympic game venue, it is necessary to identify the best route

The Group’s technologies will open up the great
potential of next-generation beacons
The Group’s accumulated technologies and development capabilities have enabled the development of next-generation beacons for mesh networking. These beacons exchange information
with each other, which enables easier management of positional information over a more extensive area than with ordinary beacons. For example, it is difficult to monitor the status
of individual beacons for any failure or other problems if they
are distributed over an extensive area. However, the introduction of next-generation beacons will enable the centralized
monitoring of the beacon status, providing a more stablespatial infrastructure. Next-generation beacons have the potential of realizing people’s dreams and creating new value.
By utilizing all our available technologies for the geospatial
business, we will create integrated services for ensuring a
comfortable living environment.

Image of Services
Station/Street/Indoors(around Tokyo Station)

Stadium

Navigable in a broad
area within an airport

Navigation for complex connection
between stations and traveling in a broadindoor (underground) space underground

Navigable to yourseat in a stadium

The navigation service enables a seamless move for connection between stations by taking routes inan underground space, which is complicated not only for foreigners visiting Japan and senior citizens
but also for many other people and for traveling to your destination inside or outside a building.

Realization of a stress-free and universal society

Airport

Corporate Report 2016

Special Feature
Corporate Value of the KYOWA EXEO Group

According to a survey by the Ministry of Internal Affairs and Communications,Internet users in Japan account for more than 80% of the entire population
and approximately 47% of them use the Internet via smartphones. It is also
expected that the IoT will grow explosively with the number of things connected to the Internet reaching 530 in 2020, possibly creating various formsof new value. Among them, the field of “geospatial,” which is one of the initiatives of the Japanese government, has attracted attention as the technology provides solutions by combining indoor and outdoor spatial positioning
and mapping information. The combined use of geospatial information as
well as information and communications technologies is considered to provide effective solutions to many social issues.
The KYOWA EXEO Group has already offered the “EXTravel” service,
which provides information on tourism and disaster prevention using a geo
application, a smartphone application offering service based on positional information. Starting with Nikko City, the EXTravel application has been officially adopted by Daigoji in Kyoto, Ebina, Fujisawa, Fuefuki and Higashihiroshima
Cities, offering the service to ensure safety and security for not only tourists
but also people living there. We will continue to explore the unlimited rangeof business opportunities via the geospatial technology we hold so that newforms of value for enhancing society can be created.

28

CSR Concept

Performing Corporate Social Responsibility (CSR) through Its Primary Businesses
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 Structure of

The KYOWA EXEO Group will,through its business activities,
conduct environment-friendly
management and contribute to thepreservation of environment andsustainable growth of society inorder to realize the corporate
philosophy.

the KYOWA EXEO Group
Corporatephilosophy
Development
Developmentof the KYOWA
of society
EXEO Group

ENGINEERING
SOLUTIONSThe corporate philosophy of the KYOWA

SYSTEM
SOLUTIONS

EXEO Group, which is the basic guideline forour corporate social responsibility, includes
cultivating technological capabilities, seeking
affluence and contributing to society, and wework to make integrity and transparency thefundamental norms of our management.
We recognize that efforts to achieve ourcorporate philosophy are indeed efforts toward CSR, and we are working to promote

Guidelines for CSR activities

Self-awareness of contribution to society as a company
Promotion of contribution to society and social contribution
activities through business activities
Establishment of a culture of 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

ComplianceCorporate governanceRisk management

Business operations with integrity and transparency as the norm

CSR.

Our Themes to Be Addressed in Fiscal 2016 (Classification by ISO26000 Standards)
Core themes in
the ISO26000

Major
stakeholders

Our themes

Promotion of compliance

Organizational
governanceAll(Corporate
philosophy)(Basic ethics)(Actionguidelines)

Measures to be taken
Educating on and improving the awareness of laws and regulations and the Basic Ethics of the
KYOWA EXEO Group through compliance-promoting activities
Thorough adherence to social norms
Building information security literacy to eliminate information leakage accidents
Reduction of management risk

Appropriate risk management
Reinforcement of business continuity planning (BCP)
Enhancement of the internal controls of the Group subsidiaries

Human rights

29 Corporate Report 2016

Employees

Principle that human resources are our chief asset,
Fermentation of the Connection Culture

Respect for human rights and utilization of diversified human resources (Reinforcement ofefforts to promote diversity)Building a better, brighter future together

CSR Promotion Systems (Relationships with All Stakeholders)
Rather than having a specific division responsible
for CSR activities, at the KYOWA EXEO Group, we
recognize that CSR is something that every member of the staff should put into practice throughout
the business process. In 2009, we reorganized the
CSR Promotion Division that until then had beentasked with promoting CSR, and we establishedthe new CSR Activities Division as the department
responsible for disseminating information about
activities.
In 2010, we launched the CSR Committee,
chaired by the President, with meetings held
whenever necessary. Moreover, as a lower-level
organization of the CSR Activities Division, a staff
member in charge of CSR is assigned to every department or office and to every Group company
so that there is a group-wide system of CSR
promotion.

CSR Committee

Secretariat (CSR Activities Division)
Staffers in charge (a staff member in charge of CSR is assigned to every
department or office and to every Group company)of CSR

Customers
Organizational
consideration

Business
partners

Employees
Labor practiceGroup companies
Environment
Fair business practiceAll
Business partners

ConsumerissuesCustomers
Shareholders and investors

Participation in anddevelopment ofcommunities▶P.1

CSR Concept

Major
stakeholders

Fair businesspractice

Corporatephilosophy

Participation inand establishmentof communities

Labor
practice

Basic Ethics▶P.33

Society/
Environment

Basic Actions Declaration ▶P.33

Group
companies

Environment
Human rights*The ISO26000 standard provides organizations including
companies with the best international guidance on socially
responsible behavior and possible actions.

Core themes in
the ISO26000

ConsumerissuesShareholders
and investors

Continuing to be a Company Trusted
by All Stakeholders
In addition to striving to ensure ever-greater
information disclosure, the KYOWA EXEO Groupwill engage in proactive communication with all our
stakeholders in order to fulfill our corporate social
responsibility. Effective from fiscal 2011, theGroup’s relationships with various stakeholders areclassified based on the seven core themes set
forth in the ISO26000* standard.

(chaired by the President of KYOWA EXEO)

Employees

Our themes

Measures to be taken

Principle that human resources are our chief
asset,Fermentation of the Connection Culture
Development of group businesses andimprovement of consolidated operating results
Promotion of environment-friendly management
Ensuring transparency and the fair competition principle
Return to the basics of a safety andquality-oriented culture
Improvement of customer satisfaction
Emphasis on return of profits and communications

Development and cultivation of human resources
Creation of ideal working conditions (Promotion and reinforcement of work-life balance)

Contribution to society and local communities
Society
Improvement of social evaluation

Promotion of reorganization to raise the consolidated competitive edge
Environmental preservation activities toward the prevention of global warming (Promotion of energy-saving activities)
Ensure compliance with the procurement policy
Ensure high awareness of quality and continue education
Elimination of serious accidents (physical for employees and at equipment/facilities)
Thorough management of customer satisfaction
Enhancement of IR activity for impartial and fair information disclosure
Promotion of social contribution activities
Promotion of local community contribution activities
Verification of external questionnaires, Compliance with the ISO26000
standards, Issuance of integrated reports

Corporate Report 201630

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 effectivelyfunction. 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.

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

http://www.exeo.co.jp/overseas/management/cg.html

KYOWA EXEO’s Corporate Governance System

As of June 24, 2016

General meeting of shareholders

President
Management Council
Directions,Supervision

ReportAudit

Consultation,Directions

Response,Report

Operating officers and organizational heads
Representatives of Group companies

Internal Control Committee

Business and administrative departments and branches
Supervision
ReportCompliance Committee

Group companies

Information Security Committee

ReportDirections

CSR Committee

ReportRisk Management DivisionInternal Audit Division
Legal Office
Credit Control Office

31 Corporate Report 2016

Information Security Management OfficeInstructions
Collaboration

Corporate Lawyer

Internal audit

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 theOutside Directors(Independent Officers)

We asked Ms. Kitai and Mr. Kanazawa, who serve as Outside Directors (independent officers) of the Company, to talk about the corporate governanceof KYOWA EXEO and the enhancement of its corporate value.

Kazuteru Kanazawa

Kumiko Kitai

Mr.

Ms.

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

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

The corporate culture is characterized bysincerity and diligence.
Active discussions take place at Board meetings.

Corporate GovernanceKanazawa: The Company aims to double the numberof female employees in managerial positions by 2020. I
think it is important that the viewpoints of female officers are reflected in corporate management and thatManagement Systems

Systems are in place to ensure that various senses ofvalue are reflected in the management of the Company
and that any problems will be solved as early as possible.

●

Kitai: Regarding the issues of labor and legal affairs
and compliance, I have delivered opinions and asked
questions at the meetings of the Board of Directors.
The implementation of the revised Companies Act andJapan’s Corporate Governance Code seems to have
had a significant effect on the way the Company’s
Board of Directors is operated.
Kanazawa: I agree. Corporate governance reflects thebasic concept for corporate management. The Company’s management team seems to engage in theirduties with sincerity and in earnest. Active discussions
are often observed at the meetings of the Board of Directors, and I feel that the discussions have becomericher at every meeting.
Kitai: Regarding the matters of managerial importancementioned in Japan’s Corporate Governance Code,the Company has continually improved the methods tosupply and explain information. Attention to such details is paid in a sincere and diligent manger, which truly
represents the corporate culture of KYOWA EXEO.

the management is synchronized with society.
Kitai: Female employees are working actively not onlyat the workplace for software development but also at
the construction site for communications facilities. The
Company’s workplace climate features the recognitionof diversity irrespective of gender and other differences.
According to a report on the whistleblowing system, I
think that the Company has a good system to ensurethat any problems, such as harassment and overwork,
can be detected and solved as early as possible.
Kanazawa: The role of an independent officer is, after
all, to act from the perspective of the shareholders. As
independent officers, we are required to take part in the
management of the Company and provide suggestions
from the viewpoint of the shareholders and based on
our own professional knowledge.

Act fairly and squarely, and sometimes break the shell.
Kitai: The new medium-term management plan has
been announced. I expect the Company to make continued efforts to build a firm business foundation basedon its highly advanced technological capacity, andsometimes to break the shell and take on new challenges.
Kanazawa: I think that the value of a company lies ingenerating profits and returning them to its stakeholders. It is important to generate profits by conducting
business in a fair and square manner. Ensuring compliance or corporate governance achieves that. Fromsuch a perspective, we shall fulfill our duties.

Corporate Report 201632

Management Systems

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
Based on the EXEO Group Compliance Program, the officers and employees of the Group presuppose compliance with not only
laws and regulations but also corporate ethics, including the spirit underlying those ethics, and practice 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’s business operations.
Such compliance is also a matter of course for us as individual members of society.
In addition, ensuring such compliance is indispensable for thecompany to maintain the trust of society and the realization of theCompliance programGroup’s corporate philosophy of “Contributing to Society.”
In light of the above, we shall prioritize without hesitation laws
and regulations and corporate ethics in case we are forced to
select either earnings or ethics in our own activities.
From time to time, we will improve the EXEO Group Compliance Program in accordance with or in anticipation of social

Tools:● Compliance ManualGroup’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.

circumstances, thereby fostering a spirit of compliance with laws
Systemand corporate ethics.
We set out the matters described below as the basic ethics ofthe KYOWA EXEO Group and reconfirm that it is our eternal andunchanging responsibility to ensure that our actions toward our
stakeholders, including customers, business partners and share-

Follow-up:

Development:● Evaluation on● Compliance planningcompliance observance● Monitoring● Compliance training

holders, are based on these ethics, thereby endeavoring to● Support Desk
● Lawyer Hot Linerealize the Group’s corporate philosophy.

Basic Ethics of the KYOWA EXEO Group
1. Matters to be observed in business activities(1) Relationships with customers
Elimination of accidents; assurance of quality; improvement of and respect for technologies; transparent
transactions; appropriate inducement; confidentiality(2) Relationships with industries and business partners
Fair competition; compliance with industry-specific laws and regulations; impartial transactions; fairtransactions
2. Matters to be observed regarding societyManagement with responsibility; information disclosure; control of insider information; protection of theenvironment; ensuring the security of society; resolute attitude against antisocial forces
3. Matters to be observed internally at the company
Respect for human rights; ensuring the physical safety of employees; conservation of company assets;
appropriate accounting procedures; observance of authority; maintenance of discipline

33 Corporate Report 2016

Promotion Systems and Activities

Initiatives to Promote

The Company instituted a compliance program in November
2001 and extensively applied the program to Group
companies in March 2003. Consequently, the group-wide
EXEO GROUP Compliance System was established.
To promote compliance, the formulation of the EXEO
Group Compliance Manual and the establishment of a
dedicated promotional department followed. Compliancetraining is given to employees of the Group companies on
an ongoing basis.
Employees must take compliance training two or moretimes a year. The training includes basic training for new
employees and brush-up training on specific matters tocomply with when conducting business activities.

Measures taken and Description
Whistle-blowing system
Regarding compliance matters, the “Support Desk” is thecontact point for whistleblowers, and the “Lawyer Hot Line”
is provided to enable direct consulting or communication
with corporate lawyers.
In 2015, “Compliance Cards” were distributed to raise theawareness of compliance.

Promoting System

KYOWA EXEO CORPORATION:

Command

Advisory andcollaboration

Guidance
Legal Office,Risk Management Division(Support Desk)

Compliance Committee(Harassment Investigation Committee)

Corporate lawyers (Lawyer Hot Line)KYOWA EXEO Group
Compliance Officer(President of KYOWA EXEO)

Compliance training for management executives
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.

Responsible Compliance
Promoter
Persons in Charge of
Promoting Compliance
Employees

Collaboration

Group Business Development Division[Departments and Branches]

Compliance

Whistle-blowing system

Management Systems●

Collaboration

Guidance andcontrolManagement andcontrol of thepromoting system

Guidance andoversight on the spot
and of trading units

Referrals andconsulting

Compliance promotion and enhancement month
October was designated as the annual Compliance Promotion
and Enhancement Month in 2010. Various campaign measures
such as signage and meetings encourage in-depth
understanding of and raise awareness among employees.

Group companies
Compliance Officer at each company (President)
Responsible compliance promoter at each company
Employees of each Group company

Corporate Report 201634

Management Systems

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

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

Risk Management System

Risk management system

The KYOWA EXEO Group sets forth its basic rules on risk

Presiden of KYOWA EXEO

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

Internal Audit Division

Risk Management Division
The Company's Head Office staff organizations

Risk Management Division
Responsible persons for risk management

Each Risk Management Division identifies, analyzes andHeads of Head Office organization units and
Branch Managers of the Company andPresidents of subsidiaries

assesses any risks for which it is responsible at the Grouplevel and determines the policy of handling any risk that isrecognized as serious, which will be known to each person
responsible for risk management.
Responsible persons for risk management

Risk Management Category
Risk Management Category

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

Businessrisk

divisions and manages the progress of the measures being taken.
Internal Audit Division

Management
risk

Description of the Risk

Business
environment risk

Risk relating to changes in the
management and businessenvironments

Management
strategy risk

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

Business process risk

Risk relating to daily business
operations
Risk relating to the occurrence of
natural disasters

Disaster risk

Each Internal Audit Division performs internal audits to monitor
the status of measures being taken to address businessprocess risks at the respective divisions. If the measures do
not work effectively, the relevant division provides instructions
for improvement in collaboration with the related risk manage-

Business Process Risk Categories
Business Process Risk Categories
Compliance risk

Compliance with authority, Act of injustice

Employment risk

Employment and service, Equal treatment

Financial risk

Financial reporting, Credit agreement

Business process risks can be classified into the seven cat-

Information risk

Information disclosure, Information leakage

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

Safety and hygiene risk

Occupational safety, Hygiene and health

Quality assurance risk

Equipment accidents, Occurrence of defects

Environmental risk

Environmental pollution, Resource conservation

ment division.

System for Managing Business Process Risks

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

35 Corporate Report 2016

Utilization of the ISO-Compliant Management Systems
From among the business process risks, the Company
utilizes the ISO-compliant management systems to manage
the risks relating to quality assurance, environmental conservation, occupational health and safety and information
security. We formulate policies for managing these risks byusing the relevant risk assessment methods given in the ISO
management systems and implement the policies while
making ongoing improvements in the effectiveness andappropriateness of business operations.
The Company and major subsidiaries acquired a groupbased ISO certification and are committed to standardize themanagement procedures by implementing ISO-compliant
management systems in a unified manner across the Group.

ISO Management Systems of which certification has been acquired

Category

Applicable Standards Period of Validity (until)

Quality Management
SystemJIS Q
9001:2008

September 14, 2017

Environment
Management System

JIS Q
14001:2004

September 14, 2017

Occupational Healthand Safety
Management System

BS-OHSAS
18001:2007

September 14, 2017

Information Security
Management System

JIS Q
27001:2014

September 18, 2017

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

Management Systems

information security accidents, and monitors and evaluates the status of any improvements in overall security
matters to enhance the Group’s information security on acontinuous basis.
The Group also provides all of its employees withinformation security training, while conducting various
kinds of security checkups.

●

The KYOWA EXEO Group has established a system for
managing information security by designating an officer
who assumes the top responsibility for information
security, as well as providing a manager with the chief
responsibility and people working on information management at each business division. The Information
Security Committee decides policies on group security,
discusses measures to prevent the recurrence of any
Efforts to protect personal information
The Company engages in a broad range of business operations and handles a large amount of personal informationand specific personal information in the process of carryingout these operations. In the recognition that appropriately
managing such information is a corporate social responsibility, we are promoting efforts to ensure the protection ofprivate information under the Privacy Policy.
In response to the implementation of the Act on the Useof Numbers to Identify a Specific Individual in an

Administrative Procedure, the so-called My Number Act, in
October 2015, we reorganized our management system forthe protection of personal information by designating those
who take the overall responsibility for and engage in theadministrative work for handling those numbers.
To ensure the continued protection of personal information in an appropriate manner, we have continually updated
our certification of the Personal Information Protection Management System.

▶
For the details of the KYOWA EXEO Privacy

Policy, visit:h t t p : / / w w w. e x e o . c o . j p / c o m p a n y / p p o l i c y. h t m l

Corporate Report 201636

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.

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.

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 through companywide environment
preservation activities according to the PDCA cycle. The
Company identifies predictable environmental risks, which are
determined depending on onsite working environments, thelocation conditions of the building and other factors, sets up
specific environment-related targets and extensively applies themto all the departments at the Head Office and branches.

PICK UP!

Joined the Clean the Ota River Campaign
The Clean the Ota River Campaign took place on July 26, 2015, hosted
by the Clean the Ota River Committee. About 70 employees from theCompany’s Chugoku Branch and Group companies participated in the
campaign, collecting about 20 bags of empty cans and other garbage toclean the riverbed along the Ota River in Hiroshima City.
This cleanup event has been conducted as one of the river preservation campaigns in July every year with the tagline “Let’s make the Ota
River famous for clear streams.” The Company will continue to join the
campaign as one of its environmental preservation and community contribution efforts.

37 Corporate Report 2016

Building a better, brighter future together

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 tomaintain government-owned forests for up to 60 years.

Seizing the opportunity of the 50th anniversary of its foundation, theCompany became strongly conscious of the prevention of global
warming and contributing to local communities. Giving its approval tothe maintenance 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” andcontinues 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.

Degree of environmental contribution of EXEO’s forests (Mori), achievement in fiscal 2015

(According to the Forestry Agency Report)

Degree of environmental contribution: One year (effects for the period ofApril 2015–March 2016 converted in the respective units shown below)

Area
Absorbed and fixed CO2(ha) Watershed pondage or water Sediment runoff prevention
quality purification volume volume (in terms of a 10-ton
volume (in terms of CO2
emitted by a person in a year)(in terms of 2-L PET bottles)
truck loading 5.5 m3)

Term of contract

RegionLocation

60 years(1/2005–3/2065)

KyushuKarimawashi-yama government-owned
forest, Uto-shi, Kumamoto Prefecture

5.36

3,711 m3
(1,855,283 bottles)

70 m3(13 trucks)

15.4 t(48 persons)

21 years(2/2005–3/2026)

Kansai

Kitayama government-owned forest,
Nishinomiya-shi, Hyogo Prefecture

1.14

465 m3(232,646 bottles)

14 m3(3 trucks)

2.8 t(9 persons)

60 years(8/2006–3/2066)

Hokkaido

Chitose government-owned forest,
Chitose-shi, Hokkaido Prefecture

3.10

1,181 m3
(590,623 bottles)

40 m3(7 trucks)

8.4 t(26 persons)

22 years(10/2006–3/2028)

TohokuFubosan government-owned forest,
Shiroishi-shi, Miyagi Prefecture

2.48

656 m3(328,134 bottles)

20 m3(4 trucks)

5.1 t(16 persons)

20 years(3/2007–3/2027)

Chugoku

Noroyama government-owned forest,
Kure-shi, Hiroshima Prefecture

3.29

1,664 m3
(831,819 bottles)

40 m3(7 trucks)

6.5 t(20 persons)

15.37

7,677 m3
(3,838,505 bottles)

184 m3(34 trucks)

38.2 t(119 persons)Total

Use of Green Energy●Development of the solar power generation business
To promote the use of green energy, the Company has been
involved in the solar power generation business and will continue

11 plants in operation
across Japan
with a capacity of
approximately 12 MW

Environmental Management

nvolvementin the Environment

to do so.

Ishioka-shi, Omitama-shi,
Ibaraki Ibaraki(as of March 31, 2016)

Matsue-shi,
ShimaneAmagasaki-shi,
Hyogo

Hokuto-shi,
YamanashiNirasaki-shi,
Yamanashi
Kofu-shi,
Yamanashi

Fuchu-shi,
Tokyo

Minamiboso-shi,
Chiba

Takamatsu-shi,
KagawaCorporate Report 2016

38

Involvement in the Environment

Fiscal 2015 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

OUTPUT

Total energy input

169,144 GJ

Electric power purchased
Solar power generation electricity output

60 MWhCity gas

81 km3LPG

2 km3

Gasoline

1,101 kℓLight oil

167 kℓKerosene

12 kℓ

Water resource input

Environment-friendly business activities

Electricity sold

8,890 MWh

Total greenhouse effect gas emissions

10,303 tons (CO2 conversion)

12,249 MWh

62 km3Company cars

Head officeElectric power sourced

6,264 tons (CO2 conversion)

Fuel sourced

3,207 tons (CO2 conversion)

Waste sourced

5,789 tons (CO2 conversion)

Water resource sourced

12 tons (CO2 conversion)

Power generation and electric power selling sourced

4,931 tons (CO2 conversion)

EXEO’s forests (Mori) sourced

38 tons (CO2 conversion)

Waste emissions and recycled volume

29,338 tons

Industrial waste emissions

3,213 tons

General waste emissions

Business offices

168 tons

Total recycled volume

25,957 tons

Total displacement

62 km3

The Company’s CSR initiatives (nonconsolidated; environment/society-related), fiscal 2015 targets and full-year results of activities and fiscal 2016 activity targets
Measures taken①Reduction in power
consumption
Set power consumption
management targets.
Work to precisely grasp themonthly management of
power consumption values

Reduction
in CO2emissions ②Reduction in gasoline used

Reductionin general
waste

Content of specific initiative

Fiscal 2015 targets and full-year results of activities
Activity targets
1) Reduction in power used
Against fiscal 2009:
A 1% reduction every year for five consecutive years toward a cumulative total
of 5% or more in accordance with the Energy Conservation Law has alreadybeen achieved, but we continue to set a target of a 1% reduction year over year.
[Target: 8.18 kWh/m2](On the basis of medium-term planning based on the revised
Energy Conservation Law)
Monthly management of total power consumption
Turning off lights during break time, room temperature setting andeconomy in electricity
2) Restriction on peak power used
Enhanced use of "Cool Biz" and "Warm Biz" ambient-temperature
Voluntary targets are set to meet the government’s electricity-saving request in summer
compliant wear
Against fiscal 2010:
Review of conversion to energy-saving equipment and devices at their
Hokkaido Electric Power's jurisdiction
7.0%
new installation or renewal (e.g., air conditioners, PCs, LED lights)
Tokyo Electric Powers' jurisdiction
13.0%
Kansai and Kyushu Electric Powers' jurisdictions
10.0%
Other Electric Powers' jurisdictions
6.0%

Review reduction in thenumber of vehicles owned
Implement gasoline
card-based management
measures

Gasoline card control (monthly management of amounts used)
Purchase and renewal of vehicles with good fuel efficiency
Study on partial introduction of hybrid and idling-stop vehicles
Eco-driving education
Reduction in the number of vehicles owned
Expanded introduction of "telematics" (Already introduced by the
Tohoku and Kyushu branches)
Promoted introduction of electric vehicles

Gasoline used
A 1% reduction year over year [Target: 1,361 thousand l]③Use of green energy
Promote the use of solar
power generation systems,
etc.

Review of implementing solar power generation systems oncompany-owned buildings
Continued participation in the solar power generation business
Maintenance of EXEO's forests

Planned plant installations:
June 2015: Ishioka-shi, Ibaraki Prefecture
834kW
July 2015: Omitama-shi, Ibaraki Prefecture 1,175kW
August 2015: Amagasaki-shi, Hyogo Prefecture
126kW
January 2015: Matsue-shi, Shimane Prefecture 2,200kW④Reduction in paper consumption
Take paperless-oriented
initiatives to reduce paper
consumption volume

Investigated the status of paper use(Data on the volume of paper used at all-in-one printers are managed)
Promoted storage via the digitization of materials

romotion of rooftop
Initiatives of ⑤Pgreening
promotinggreenery of ⑥Promotion of greenery withinbuildings
the premises

Improvement of the green purchasingratio

39 Corporate Report 2016

Investigated the status of paper use
Abolish the use of the file meter. For all-in-one printers, paper consumption is managed by recording the number of pieces of paper used.
Promote storage via the digitization of materials
Reduce the volume of documents for use at conferences; Promote the paperless officeStudied the possibility targeted at permanently owned company assets
Continue voluntary efforts at each office/center
Studied the possibility at parking lots on company-owned premises
Target ratio of purchasing eco-products
Set the target ratios of purchasing eco-products (except those used for
The fiscal 2015 target has not been achieved, so the target remains the same.
construction/installation)[Target: 61.8%]

Fiscal 2015 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

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.

Change in power consumption (per square meter) Change in city gas consumption (at the Head Office building) (per square meter) Change in gasoline and light oil consumption (per travel distance)（kWh/m2）
16
12

10.63

(m3/m2)

9.53

9.72

8.14

8.26

8
4
0

2011

2012

2013

2014

2015

6
5
4
3
2
1
0

5.1

5.4

4.0

5.0

5.0

( /thousand km)
120

94.6

93.5

2011

2012

87.1

92.6

2013

2014

81.0

80
40
2011

2012

2013

2014

0

2015

2015

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

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

Change in industrial waste emissions (per value of finished work) Change in general waste emissions (per person) Change in total recycled volume
254.6

300
200

40

194.1

184.1

162.8

107.2

35.2

32.9
25.3

30

29.4

30,00022.6

26,01425,9572014

2015

16,46010,00010
2011

20,00020,533 19,103

20

100
0

(tons)(kg/person)(kg/¥million)

2012

2013

2014

2015

0

2011

Results of activities

2012

2013

2014

2015

0

2011

2012

2013

Fiscal 2016 activity targets

2) Restriction on peak power used
Against fiscal 2010:
Hokkaido Electric Power's jurisdiction
18.0%
Tokyo Electric Powers' jurisdiction
10.8%
Kansai Electric Powers' jurisdiction+ 1.7%
Kyushu Electric Powers' jurisdiction
16.5%
Other Electric Powers' jurisdictions+ 5.7%

1) Restriction on peak power used
Voluntary targets based on the government’s expectation of electricity saving insummerAgainst fiscal 2010:
Tokyo Electric Powers' jurisdiction
13.0%
Kansai Electric Powers' jurisdiction
12.0%
Other Electric Powers' jurisdictions
10.0%

Gasoline used [1,268 thousand l]( 8% year over year Fiscal 2014: 1,374 thousand l)

Gasoline used
A 1% reduction year over year [Target; 1,255 thousand l]Power generation started at five locations:
June 2015: Ishioka-shi, Ibaraki Prefecture
834kW
July 2015: Omitama-shi, Ibaraki Prefecture 1,175kW
July 2015: Amagasaki-shi, Hyogo Prefecture
126kW
November 2015: Matsue-shi, Shimane Prefecture 2,200kW
February 2016: Nirasaki-shi, Yamanashi Prefecture 1,177kW

Planned plant installations:
April 2016: Kumage-gun, Yamaguchi Prefecture 1,246kW
July 2016: Nirasaki-shi, Yamanashi Prefecture 1,272kW
October 2016: Togane-shi, Chiba Prefecture 2,600kW
October 2016: Kofu-shi, Yamanashi Prefecture 1,092kW

Number of pieces of paper purchased [50.17 million]( 4% year over year Fiscal 2014: 52.24 million)K oshin Branch Office. (1) Continued the hydroponic cultivation of leaf vegetables
using LEDs. (2) Continued the cultivation of shiitake mushrooms (200 mushroomlogs). (3) Continued the cultivation of plants at a rooftop area shaded by solar panels.
Kansai Branch office. July 2015: Greening of the space on the inside of the outerwalls at the Hyogo Technology Center
Target ration of purchasing eco-products [53.8%](Group companies except the Company 64.5% the entire Group 58.3%)

Environmental Management

1) Power used
A 1% reduction year over year [Target: 8.06 kWh/m2]

nvolvementin the Environment21) Power used [8.14kWh/m ]1.4% year over year Fiscal 2014 (full year): 8.26 kWh/m2N umber of pieces of paper purchased A 1% reduction year over year [Target: 49.67 million]
Promote storage via the digitization of materials
Reduce the volume of documents for use at conferences; Promote the paperless officeContinue voluntary efforts at each office/center
Target ratio of purchasing eco-products
The fiscal 2015 target has not been achieved, so the target remains the same.
[Target: 61.8%]
Corporate Report 201640

Financial Section

Financial Highlights (Consolidated)■Orders Received ■Net Sales■Gross Profit(¥Millions)(¥Millions)
317,862

288,532

318,513

301,319

273,134

304,201

300,912301,446

36,113

287,437

38,543

300,438

35,74035,795

2015/3

2016/3

18,58918,512

2015/3

2016/326,806

2012/3

2013/3

2014/3

2015/3

2016/3

2012/3

2013/3■Operating Income■Ordinary Income(¥Millions)(¥Millions)
20,73420,602
18,35818,046

18,412

18,119

9,178

8,919

2012/3

2013/3

2014/3

2015/3

2016/3

2012/3

2013/3■Profit attributable to owners of parent■Total Assets ■Net Assets(¥Millions)(¥Millions)

14,91012,264

11,313

12,184

7,856

2012/3

2014/3

200,412

2014/3

2015/3

2016/3217,091

228,422238,301

181,291

113,4112013/3

2014/3

2012/3

122,387

2013/3

135,687

2014/3

146,768

2015/3

151,241

2016/3(¥Millions)

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

41 Corporate Report 20162012/3

2013/3

2014/3

2015/3

2016/3

288,532
273,134
26,806
8,919
9,178
7,856
181,291
113,411317,862
301,319
36,11318,04618,11911,313
200,412122,387

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

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

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

Building a better, brighter future together

Trends by Segment (Consolidated)
Orders Received by Business Segment (Consolidated)(¥Millions)
317,862
288,532

304,201

301,446

Telecommunications infrastructure (NTT group engineering)
Telecommunications infrastructure (Non-NTT telecom engineering)
Environmental and social infrastructure
SYSTEM-SOLUTIONS

300,438(¥Millions)

2012/3

2013/3

2014/3

2015/3

2016/3

2012/3

2013/3

2014/3

2015/3

2016/3

Telecommunications infrastructure(NTT group engineering)

171,061

178,869

171,084

160,375

167,963

Telecommunications infrastructure(Non-NTT telecom engineering)

64,07568,83866,934

67,68551,506

Environmental and social
infrastructure

28,991

37,65931,883

41,57842,527

SYSTEM-SOLUTIONS

24,40432,49434,29931,80738,443

288,532

317,862304,201

301,446

300,438

Total

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

Telecommunications infrastructure (NTT group engineering)
Telecommunications infrastructure (Non-NTT telecom engineering)
Environmental and social infrastructure
SYSTEM-SOLUTIONS

318,513
301,319

300,912273,134

2012/3

2013/3

2014/3

2015/3

287,437

2016/3(¥Millions)

2012/3

2013/3

2014/3

2015/3

2016/3

Telecommunications infrastructure(NTT group engineering)

166,199

173,321

173,544

162,729

160,587

Telecommunications infrastructure(Non-NTT telecom engineering)

56,11463,801

77,25969,13951,349Environmental and social
infrastructure

26,39931,795

33,11736,537

38,840SYSTEM-SOLUTIONS

24,42032,401

34,59232,506

36,661

273,134

301,319

318,513300,912287,437

Total

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

118,384

117,996
105,455(¥Millions)

2012/3

2013/3

2014/3

2015/3

2016/3

2012/3

2013/3

2014/3

2015/3

2016/3

Telecommunications infrastructure(NTT group engineering)

43,85449,352

46,89344,53951,915

Telecommunications infrastructure(Non-NTT telecom engineering)

24,81230,301

20,051

18,653

18,738Environmental and social
infrastructure

28,16834,03132,796

37,83841,525SYSTEM-SOLUTIONS

4,218

4,310

4,016

4,424

6,205

101,054

117,996

103,758

105,455

118,384

Total

Corporate Report 2016

Financial Section

103,758

101,054

Telecommunications infrastructure (NTT group engineering)
Telecommunications infrastructure (Non-NTT telecom engineering)
Environmental and social infrastructure
SYSTEM-SOLUTIONS

42

Financial Section

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

(%)

(%)
12.0

12.1

11.9

12.5
6.0

9.8

6.5

6.1

6.4

3.3

2012/3

2013/3

2014/3

2015/3

2016/3

2012/3

2013/3

2014/3

2015/3

2016/3■Ordinary Income to Net Sales■Profit Attributable to Owners of Parent to Net Sales

(%)

(%)

6.0

6.5

6.2

4.7
3.8

6.4

4.1

4.2

2015/3

2016/32.9
3.4

2012/3

2013/3

2014/3

2015/3

2016/3

2012/3

2013/3■Return on Equity ■Return on Assets■Total Assets Turnover(%)(Times)2014/3

11.6
9.6

8.7

7.2

8.2

1.44

1.58

1.53

1.35

1.23

7.1
5.9

5.5

5.2

2015/3

2016/3

4.2

2012/3

2013/3

2014/3Gross 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)

43 Corporate Report 20162012/3

2013/3

2014/3

2015/3

2016/3

2012/3

2013/3

2014/3

2015/3

2016/3

9.8
3.3
3.4
2.9
7.2
4.2
1.44

12.0
6.0
6.0
3.8
9.6
5.9
1.58

12.1
6.5
6.5
4.7
11.6
7.1
1.53

11.9
6.1
6.2
4.1
8.7
5.5
1.35

12.5
6.4
6.4
4.2
8.2
5.2
1.23

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

(%)

(%)
62.4

60.9

64.0

62.3

63.3
215.0

2012/3

2013/3

2014/3

2015/3

2016/3

2012/3

206.3

2013/3

2014/3

2015/3■Quick Assets to Current Liabilities■Fixed Assets Ratio

(%)

(%)

164.3

157.8

162.6

170.8

2012/3

2013/3

2014/3

2015/3

217.5

206.4

191.0

57.7

56.2

58.7

61.3

2012/3

2013/3

2014/3

2015/3

2016/3

66.6

151.4

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

2016/3

10.8
9.9
7.6
6.7

619.3

5.9

289.7
117.5
187.0
2013/3

2014/3

2015/3

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

2016/3

2012/3

2013/3

2014/3

2015/3

2016/3

2012/3

2013/3

2014/3

2015/3

2016/3

62.4
215.0
164.3
57.7
289.7
6.7

60.9
206.4
157.8
56.2
117.5
7.6

62.3
206.3
162.6
58.7
187.0
9.9

64.0
217.5
170.8
61.3
619.3
5.9

63.3
191.0
151.4
66.6
90.7
10.8

Corporate Report 2016

Financial Section

2012/390.7

44

Financial Section

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

147.75

1,569.09

1,482.82
123.831,350.05

125.901,199.86

109.25

1,084.44

74.96

2012/3

2013/3

2014/3

2015/3

2012/3

2016/3

2013/3■Price Earnings Ratio■Price Book-value Ratio(Times)(Times)

9.9

10.4
9.2

9.0

1.0

9.9
0.8

0.7

2012/3

2013/3

2014/3

2015/3

2016/3■Cash Dividends Per Share

2012/338.0

2014/3

2015/3

2016/3

50.2

46.5

24.0

36.3

2014/3

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 (%)

45 Corporate Report 2016

0.8

71.4

25.8
20.1

2013/3

0.9

63.5

26.7

2012/3

2016/3

(%)

32.0

20.0

2013/3

2015/3■Payout Ratio ■Total Shareholder Return Ratio

(¥)

22.0

2014/3

2015/3

2016/3

2012/3

2013/330.2

16.2
2014/3

2015/3

2016/3

2012/3

2013/3

2014/3

2015/3

2016/374.96
1,084.44
9.9
0.7
20.0
26.7
63.5

109.25
1,199.86
9.2
0.8
22.0
20.1
46.5

147.751,350.05
9.0
1.0
24.0
16.2
36.3

123.83
1,482.82
10.4
0.9
32.0
25.8
50.2

125.901,569.09
9.9
0.8
38.0
30.2
71.4

Other Indices (Consolidated)■Selling, General and Administrative Expenses■Capital Expenditures(¥Millions)(¥Millions)
13,215
17,886

18,067

17,80917,382

17,382

7,372
4,219

3,360
1,964

2012/3

2013/3

2014/3

2015/3

2016/3

2012/3

2013/3■Depreciation Expenses■Interest-bearing Debt(¥Millions)(¥Millions)

2014/3

2015/3

2016/3

3,001

2,947
2,660
2,308

16,2992,264
13,374
9,908

8,679

8,178

2012/3

2013/3

2014/3

2015/3

2016/3

7,988

7,903

2015/3

2016/3

2012/3

2013/3

2014/3

2015/3

2016/3■Number of employees(People)
7,872

7,553

2013/3

2014/3

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

2012/3

2013/3

2014/3

2015/3

2016/3

17,886
1,964
2,947
8,178
7,872

18,067
3,360
2,308
9,908
7,521

17,8097,372
2,264
13,374
7,553

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

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

Corporate Report 2016

Financial Section

2012/3

7,521

46

Financial Section

Consolidated Balance Sheets(¥Millions)

2012/3

2013/3

2014/3

2015/3

2016/3ASSETS
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
Deferred tax assets
Other investments and other assets
Allowance for doubtful accounts
Total assets

116,010
5,849
76,311
6,515
21,799
2,971
2,632
(68)
65,28047,736
16,975887
29,319
553
4,938
3,294
1,644
12,605
6,872
―
617
7,363
(2,248)181,291

131,906
8,306
86,245
6,315
24,082
4,037
2,995
(77)
68,50547,707
16,528727
29,364
1,087
4,658
2,621
2,036
16,139
9,847
―
916
6,820
(1,444)200,412

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

138,813
12,526
84,691
11,76522,010
4,976
2,903
(60)
89,60952,005
17,732
2,408
30,342
1,521
6,278
3,065
3,213
31,325
16,896
11,774―4,474(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

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 asset retirement
Provision for Loss on dissolved welfare pension fund
Other current liabilities
Noncurrent liabilities
Long-term loans payable
Deferred tax liabilities
Provision for retirement benefits
Provision for directors' retirement benefits
Allowance for investment loss
Net defined benefit liability
Other noncurrent liabilities
Total liabilities

53,95731,025
1,237
3,809
4,400
562
105
704
246
―
―
11,864
13,922
6,310
1,042
4,875
410
102
―
1,182
67,87963,91635,553
3,563
6,663
1,662
1,029
127
405
269
101
―
14,54014,107
5,694
2,131
4,705
392
93
―
1,090
78,024

66,72035,089
7,550
5,441
1,971
1,039
142
359
824
―
123
14,178
14,683
5,367
3,532
―
397
48
4,456
881
81,40463,81935,193
2,180
1,964
2,248
1,049
173
296
5,456
―
123
15,134
17,834
5,974
5,732
―
262
17
4,682
1,163
81,65372,241
37,62913,336
2,562
3,255
1,124
138
907
258
―
76
12,952
14,818
2,413
5,557
―
244
95
4,809
1,697
87,060

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

112,170
6,888
6,230
109,067(10,016)
1,002
1,002
―
―
217
19
113,411
181,291

119,077
6,888
6,300
118,296(12,408)
2,904
2,895
9
―
231
174
122,387
200,412

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

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

139,922
6,888
7,939
147,004(21,910)
10,821
4,121
28
6,671
241
255
151,241
238,30147 Corporate Report 2016

Consolidated Statements of Income(¥Millions)

Net sales
Cost of sales
Gross profit
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
Other
Non-operating expenses
Interest expenses
Loss on sales of noncurrent assets
Loss on retirement of noncurrent assets
Foreign exchange losses
Impairment loss
Provision for bonuses
Loss on liquidation of subsidiaries

Provision of allowance for Loss on dissolved welfare pension fund
Other
Ordinary income
Extraordinary income
Gain on negative goodwill
Gain on reversal of subscription rights to shares
Gain on sales of noncurrent assets
Gain on bad debts recovered
Extraordinary loss
Reversal of allowance for doubtful accounts
Income before income taxes and minority interests
Income taxes-current
Income taxes-deferred
Total income taxes
Net income
Profit attributable to non-controlling interests
Profit attributable to owners of parent

2012/3

2013/3

2014/3

2015/3

2016/3

273,134
246,327
26,806
17,886
8,919
1,310
37
284
―
―
181
―
806
1,051
60
―
84
―
196
―
―
―
709
9,178
2,863
2,660
203
―
―
―
―
12,041
4,199
145
4,344
7,697
(158)
7,856

301,319
265,205
36,11318,06718,046
1,845
39
170
364
―
186
―
1,084
1,772
59
―
224
―
545
265
231
―
445
18,119
―
―
―
―
―
―
―
18,1198,192(1,405)
6,786
11,332
19
11,313

318,513279,969
38,54317,80920,734
1,083
20
173
73
122
146
―
547
1,215
51
163
―
―
318
―
―
123
558
20,602
3,797
―
―
2,238
1,559
571
571
23,828
8,837
76
8,914
14,914
4
14,910300,912265,171
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
11
12,264287,437
251,642
35,795
17,382
18,412
1,438
21
266
―
441
157
261
289
1,338
57
138
―
397
―
―
―
―
745
18,512
―
―
―
―
―
―
―
18,512
4,203
2,086
6,290
12,22237
12,184

Consolidated 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

2013/3

2014/3

2015/3

2016/3

7,697

11,332

14,914

12,276

12,222

371
―
―
371
8,068

1,892
22
―
1,915
13,247

735
29
―
765
15,680

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

8,219
(150)

13,21433

15,65821

18,39733

11,42626
Corporate Report 2016

Financial Section(¥Millions)

2012/348

Financial Section

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

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

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

49 Corporate Report 20162012/3

2013/3

2014/3

2015/3

2016/3

6,888
―
6,888

6,888
―
6,888

6,888
―
6,888

6,888
―
6,888

6,888
―
6,888

6,097

6,230

6,300

6,645

6,879

133

69

324

234

1,060

―

―

20

―

―

133
6,230

69
6,300

344
6,645

234
6,879

1,060
7,939

103,315―

109,067―

118,296―

130,822(2,352)

137,957―(2,103)7,856(2,084)
11,313(2,429)14,910(2,776)
12,264(3,137)
12,184

―

―

44

―

―

5,752
109,067

9,228
118,296

12,525130,8229,487
137,957

9,047
147,004(10,758)(10,016)(12,408)(14,487)(17,029)(2,691)
3,464
―
―
(31)
741
(10,016)(3,000)608―――(2,392)(12,408)(3,003)924―――(2,079)(14,487)(3,002)460―――(2,542)(17,029)(5,002)
2,057(2,600)664―(4,880)(21,910)

105,543―

112,170―

119,077―

129,868(2,352)

134,696―(2,103)7,856(2,691)
3,597
―
―
(31)

(2,084)
11,313(3,000)678―――(2,429)14,910(3,003)
1,249
―
―
―

(2,776)
12,264(3,002)694―――(3,137)
12,184(5,002)
3,117(2,600)
664
―

―

―

64

―

―

6,627
112,170

6,906
119,077

10,791
129,868

7,179
134,696

5,226
139,922

639

1,002

2,895

3,631

5,157

363
363
1,002

1,892
1,892
2,895

736
736
3,631

1,525
1,525
5,157

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

―

―

9

21

35

―
―
―

9
9
9

11
11
21

14
14
35

(7)
(7)
28

―

―

―

1,794

6,386

―
―
―

―
―
―

1,794
1,794
1,794

4,592
4,592
6,386

285
285
6,671

639

1,002

2,904

5,446

11,579

363
363
1,002

1,901
1,901
2,904

2,542
2,542
5,446

6,132
6,132
11,579(758)(758)
10,821

361

217

231

175

263

(143)
(143)
217

13
13
231

(56)
(56)
175

88
88
263

(22)
(22)
241

5,687

19

174

195

229

(5,668)(5,668)
19

155
155
174

21
21
195

33
33
229

26
26
255

112,232―

113,411―

122,387―

135,687(2,352)

146,768―(2,103)7,856(2,691)
3,597
―
―
(31)

(2,084)
11,313(3,000)678―――(2,429)14,910(3,003)
1,249
―
―
―

(2,776)
12,264(3,002)694―――(3,137)
12,184(5,002)
3,117(2,600)
664
―

―

―

64

―

―

(5,448)
1,179
113,411

2,070
8,976
122,387

2,507
13,299135,687

6,254
13,434
146,768

(754)
4,472
151,241

Consolidated Statements of Cash Flows(¥Millions)

2013/3

2014/3

2015/3

2016/3

16,435
12,041
2,947
196
215
(201)
93
47
―
―
(322)
60
―
6,951
3,931
836
(4,579)612
485(2,442)
20,875321(56)(4,704)(4,523)(1,545)
496
(590)
(36)
317

7,160
18,119
2,308
545
678
(796)
(169)
466
―
―
(209)
59
―
(9,842)(2,214)(3)
4,516(2,738)1,810(145)
12,385208(60)(5,373)(2,160)(2,359)
426
(430)
(565)
720

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

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

5,389
18,512
2,857
71
1,082
(514)
―
75
(5,197)(1,339)
(288)
57
(122)
(8,419)
487
(423)
2,438
1,006
(2,061)
482
8,705
288
(59)
(3,545)(13,907)(10,467)
1,533(2,137)(2,570)10(3,752)

―

―

(361)

―

(173)
236
―
522
(17,533)(2,015)(1,114)5,000(15,180)(2,691)829――(2,104)(258)(10)(5,631)
17,634
301

(267)
125
―
190
(3,038)
2,450
(739)
―
―
(3,000)580――(2,083)
(244)
32
1,993
12,304
313

(17)
119
―
31
(905)
4,000
(340)
―
―
(3,003)
1,127――(2,429)
(259)
43
1,548
14,611
―

―
109
―
16
(12,343)(6,799)
(124)
―
(110)
(3,002)669――(2,777)
(199)
83
8,078
16,213
―

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

―

―

53

―

―

12,304

14,611

16,21324,291

16,037
Corporate Report 2016

Financial Section

Net cash provided by (used in) operating activities
Income before income taxes and minority interests
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in provision for retirement benefits
Increase (decrease) in provision for bonuses
Increase (decrease) in provision for loss on construction contracts
Increase (decrease) in net defined benefit asset (liability)
Interest and dividends income
Interest expenses
Loss (gain) on sales of noncurrent assets
Decrease (increase) in notes and accounts receivable-trade
Decrease (increase) in costs on uncompleted construction contracts and other
Decrease (increase) in other operating assets
Increase (decrease) in notes and accounts payable-trade
Increase (decrease) in advances received on uncompleted construction contracts
Increase (decrease) in other operating liabilities
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
Payments into time deposits and other
Other, net
Net cash provided by (used in) financing activities
Net increase (decrease) in short-term loans payable
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 (decrease) in cash and cash equivalents resulting from merger
and acquisition(consolidated subsidiary and nonconsolidated subsidiary)
Cash and cash equivalents at the end of period

2012/350

Financial Section

Financial Highlights (Non-consolidated)■Orders Received ■Net Sales■Gross Profit(¥Millions)(¥Millions)
243,418

247,358
227,593
235,305

218,527 200,061

236,672
236,236

241,885

227,521

23,33924,207

2013/3

2014/3

21,326

21,586

2015/3

2016/318,3202012/3

2013/3

2014/3

2015/3

2016/3

2012/3■Operating Income■Ordinary Income(¥Millions)(¥Millions)12,444

11,956

11,347
10,012

12,735
10,962

10,073
7,259

6,651

2012/3

12,747

2013/3

2014/3

2015/3

2016/3■Net Income

2012/3

2013/3

2014/3

2015/3

185,730

188,122

2016/3■Total Assets ■Net Assets(¥Millions)(¥Millions)
13,235

172,435

200,289

153,493
10,334

9,399

7,274

84,53389,06895,754

102,552

103,958

4,466

2012/3

2013/3

2014/3

2015/3

2016/3

2012/3

2013/3

2014/3

2015/3

2016/3(¥Millions)

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

51 Corporate Report 20162012/3

2013/3

2014/3

2015/3

2016/3

218,527
200,061
18,320
6,651
7,259
4,466
153,493
84,533

243,418
227,593
23,33911,347
11,956
7,274
172,435
89,068235,305
247,358
24,207
12,444
12,747
10,334
185,730
95,754

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

241,885
227,521
21,586
10,073
12,7359,399
200,289
103,958

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

243,418

235,305

236,236

241,885

218,527

Telecommunications infrastructure (NTT group engineering)
Telecommunications infrastructure (Non-NTT telecom engineering)
Environmental and social infrastructure
SYSTEM-SOLUTIONS(¥Millions)

2012/3

2013/3

2014/3

2015/3

2016/3

2012/3

2013/3

2014/3

2015/3

2016/3

Telecommunications infrastructure(NTT group engineering)

124,821

132,355

130,375

125,428

141,628

Telecommunications infrastructure(Non-NTT telecom engineering)

55,52859,66059,783

58,132

43,842

Environmental and social
infrastructure

21,86329,88623,48432,391

33,467

SYSTEM-SOLUTIONS

16,31321,517

21,661

20,28422,946

218,527

243,418

235,305

236,236

241,885

Total

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

247,358
227,593236,672

227,521

Telecommunications infrastructure (NTT group engineering)
Telecommunications infrastructure (Non-NTT telecom engineering)
Environmental and social infrastructure
SYSTEM-SOLUTIONS

200,061(¥Millions)

2012/3

2013/3

2014/3

2015/3

2016/3

2012/3

2013/3

2014/3

2015/3

2016/3

Telecommunications infrastructure(NTT group engineering)

119,991

126,691

131,193

127,237

132,765

Telecommunications infrastructure(Non-NTT telecom engineering)

46,26555,07969,832

61,03843,407

Environmental and social
infrastructure

17,18024,606

24,581

28,17330,598SYSTEM-SOLUTIONS

16,624

21,21521,751

20,222

20,749200,061

227,593247,358

236,672

227,521

Total

Financial Section
Corporate Report 201652

Financial Section

Non-consolidated Balance Sheets(¥Millions)

2012/3

2013/3

2014/3

2015/3

2016/3ASSETS
Current assets
Cash and deposits
Notes receivable-trade
Accounts receivable from completed construction contracts
Short-term investment securities
Costs on uncompleted construction contracts
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 investment loss
Allowance for doubtful accounts
Total assets

91,3754,259
154
56,7496,506
14,072
113
6,850
214
1,817
690
(54)
62,11834,80912,855
408
101
1
536
20,547
352
6
1,370
1,201
169
25,937
4,326
17,263
1,634
229
133
3,362
1,116
(162)
(1,966)
153,493

106,015
5,662
231
67,312
6,315
16,212
314
6,032
235
2,511
1,252
(63)
66,41935,05912,407434
94
0402
20,795
416
508
1,823
1,004
818
29,536
7,418
17,144
1,599
58
108
3,941
890
―
(1,624)
172,435

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

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

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

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
Provision for asset removal
Other current liabilities
Noncurrent liabilities
Long-term loans payable
Lease obligations
Deferred tax liabilities
Allowance for investment loss
Asset retirement obligations
Other noncurrent liabilities
Total liabilities

61,69029,027
1,000
130
749
4,982
2,778
3,707
18,209
372
181
―
551
7,269
6,296
249
381
102
―
239
68,96075,83534,511
3,500
160
1,292
6,458
4,542
1,228
22,959
62
245
101
775
7,531
5,694
287
1,375
93
―
80
83,367

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

78,21035,085
1,073
96
2,170
4,724
414
1,332
26,290
76
5,175
―
1,771
7,358
5,000
153
1,993
17
121
72
85,56991,40841,292
12,000
103
1,993
5,142
954
2,590
26,132
774
258
―
166
4,922
2,010
179
1,900
95
287
449
96,330

NET ASSETS
Shareholders' equity
Capital stock
Capital surplus
Legal retained earnings
Reserve for advanced depreciation of noncurrent assets
General reserve
Retained earnings brought forward
Treasury stock
Valuation and translation adjustments
Valuation difference on available-for-sale securities
Subscription rights to shares
Total net assets
Total liabilities and net assets

83,273
6,888
6,738
1,547
325
72,300
5,483(10,010)
1,042
1,042
217
84,533
153,493

86,141
6,888
6,814
1,547
323
74,6008,375(12,408)
2,695
2,695
231
89,068172,435

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

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

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

53 Corporate Report 2016

Non-consolidated Statements of Income(¥Millions)

2013/3

2014/3

2015/3

2016/3

Net sales

200,061

227,593247,358

236,672

227,521

Cost of sales

181,740

204,254

223,150

215,346

205,934

Gross profit

18,32023,33924,207

21,326

21,586

Selling, general and administrative expenses

11,66911,991

11,763

11,313

11,513Operating income

6,651

11,347

12,444

10,012

10,073Non-operating income

1,198

1,563

1,152

1,504

3,644

Interest income

37

41

33

33

43

Interest on securities

14

14

8

13

10

Dividends income

241

133

129

193

2,392

Land and house rent received

478

473

468

466

397

Foreign exchange gains

―

446

―

474

―

Reversal of allowance for doubtful accounts

―

―

305

168

397

Reversal of allowance for investment loss

77

171

―

―

―

Other

348

284

208

155

403

590

954

848

554

982

Interest expenses

49

72

66

57

48

Foreign exchange losses

―

―

―

―

400

Bad debts expenses

28

14

17

―

―

Loss on disposal of equipment and materials

8

118

―

―

―

Loss on disposal of fixed assets

13

177

―

―

121

Rent expenses

126

157

152

202

137

Penalty for contract breach

―

―

86

―

―

Impairment loss

―

280

187

150

―

Other

364

133

339

144

275

7,259

11,956

12,747

10,962

12,735Extraordinary income

203

―

3,709

6,669

―

Extraordinary loss

―

―

571

―

―

Income before income taxes

7,462

11,956

15,885

17,632

12,735

Income taxes-current

2,790

5,297

5,499

3,837

1,276

Income taxes-deferred

206

(615)

51

558

2,059

Total income taxes

2,996

4,681

5,550

4,396

3,336

Net income

4,466

7,274

10,334

13,235

9,399

Non-operating expenses

Ordinary income

Corporate Report 2016

Financial Section

2012/354

Stock Information(as of March 31, 2016)

Major Shareholders
Fiscal Year-End

March 31Annual Shareholders’MeetingJune 24, 2016

Japan Trustee Services Bank, Ltd.
(Trust Account)

6,239

5.30

Stock Listing

Tokyo Stock Exchange (First Section)

5,766

4.89

Ticker Code

1951

Japan Trustee Services Bank, Ltd. (Sumitomo ElectricIndustries, Ltd., Retirement Benefit Trust Account reentrusted
by Sumitomo Mitsui Trust Bank, Limited)
ESOP Association of KYOWA EXEO CORPORATION

3,877

3.29

Common Stock

Authorized: 300,000,000
sharesIssued: 117,812,419 shares

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

3,806

3.23

Sumitomo Realty & Development Co., Ltd.

2,081

1.77

SUMITOMO LIFE INSURANCE COMPANY

2,000

1.70

THE BANK OF NEW YORK MELLON SA/NV 10

1,936

1.64

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

1,834

1.56

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

1,590

1.35

NORTHERN TRUST CO.（AVFC）RE NVI01

1,489

1.26

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

Total Number of 10,914
Shareholders
Transfer Agentand Registrar

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

Note: In addition to the above, treasury stock of 20,341,000 shares (17.27%) is held by theCompany.

Composition of Shareholders

Individuals
and others
15.08%

Financial
institutions
30.28%
Securities
companies
1.50%

Foreigncompanies
27.16%

Other
corporations
8.71%

Treasury stock
17.27%

Stock Price Range and Trading Volume on the Tokyo Stock Exchange
Stock Price
(¥)
1,500

1,000
Trading Volume(Million Shares)
500

20

15

10

5

1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3

2011

55 Corporate Report 2016

2012

2013

2014

2015

2016

0

Board of Directors (as of June 23, 2016)
Building a better, brighter future together

Chairman Kunio Ishikawa

President Fuminori Kozono

Director and Executive
Operating Officer

Director and Executive
Operating Officer

Director and Managing
Operating Officer

Director and Managing
Operating Officer

Director and Managing
Operating Officer

Takashi Sakai

Tsutomu Ota

Yoshiaki Matsuzaka

Noritsugu Totani

Yasuo Otsubo

Director and Managing
Operating Officer

Director

Director(Independent Director)

Director(Independent Director)

Standing Statutory
AuditorKumiko Kitai

Kazuteru Kanazawa

Haruhiko Watanabe

Tomohiro Kurosawa

Yuki Sakuyama

Managing
Operating Officers

Standing Statutory
Auditor

Statutory Auditor(Independent Auditor)

Yoshiharu Takizawa

Kozo Meguro

Statutory Auditor

Haruhiko Yamada

Corporate Report 2016

Stock Information /Board of Directors

Hisamitsu Hoshi
Genzaburo Oe
Eiichi Matsuda
Junichi Sato
Hiroshi Yamashita
Yuji Sato
Yuichi Koyama

Operating Officers

Kazuyuki Kaihatsu Kazuo Sato
Atsuo Yuhara Takayuki Yamada
Hideyuki Goto Yutaka Motohashi
Masafumi Yoshihara Masato Suwabe
Hideki Obara Koichi Mino
Hideo Higuchi Kyoji Okabe
Fumio Kumagai Takashi Itamiya56

To help you better understand thecorporate activities of the KYOWA EXEO
Group, we are providing an integratedversion issue of the Annual Report andthe CSR Report.

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