CORPORATEREPORT 2017

Introduction

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

Editorial Policy
Period Coveredby the Report:

Organizations
Covered by theReport:Reference
Guidelines:

Issuance:
Next Issuance
Scheduled:

1

Corporate Report 2017

From April 1, 2016, to March 31, 2017
(However, in some cases, activities before
and after the coverage period are also
included in this report.)
Companies subject to consolidation of the
KYOWA EXEO Group(However, in some cases, KYOWA EXEOCORPORATION’s non-consolidated data areused instead of consolidated data.)
GRI “Sustainability Reporting Guideline
Version 4”
Ministry of Environment “Environmental
Reporting Guidelines (Fiscal 2012 Version)”
ISO26000 “Guidance on social responsibility”
July 2017
July 2018

KYOWA EXEO CORPORATION has been selected to be part of
the MSCI Japan ESG Select Leaders Index offered by MSCI Inc.

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

CONTENTS
Management Systems

About KYOWA EXEO
Consolidated Financial Highlights

Milestones of the KYOWA EXEO Group
Greetings / Message from the President
Business Overview
	KYOWA EXEO Group’s
Corporate Value Creation Process
SpecialFeature 1	Addressing Social Issues through Its Businesses<Building a Safe and Secure Community>

SpecialFeature 2

Initiatives for Promoting Diversity in Line with Our
Principle that Human Resources Are Our Chief Asset

3
5
7
13

Corporate Governance

21

Financial Section

Compliance
Risk Management

Involvement in the Environment
Environmental Management

Stock Information

23

31
33
35

Board of Directors

37
41
55
56

26

<Promoting the Active Involvement of Female Employees>
CSR Concept
Results and Plans of Major CSR Initiatives

27
29

Notice on forward-looking statements:
This Corporate Report 2014 contains forward-looking statements suchas the future business performance of KYOWA EXEO. As these statements are based on the information available at the time of the preparation of this report, the actual results might differ materially from thecontent described or suggested therein due to various factors. As thiscorporate report is not intended for the purpose of soliciting investment, all users of this report are advised to undertake decisions concerning investment at their own discretion.
The figures stated in units of ¥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 20172

About KYOWA EXEO
Cultivating Technological Capabilities, Seeking
Affluence and Contributing to Society
The corporate philosophy of the KYOWA EXEO Group, which is the basic guideline for our
corporate social responsibility, includes cultivating technological capabilities, seeking affluence and contributing to society. The corporate philosophy clearly answers the question:“Why does the KYOWA EXEO Group exist?” The utmost ground for existence is the Group’s
technological capabilities. Throughout its existence, the Group has aimed to be a corporategroup that always anticipates and pursues better technologies at the forefront of leadingedge 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
Philosophy:

Corporate Data
Company Name

KYOWA EXEO CORPORATION

EstablishedMay 17, 1954

Paid-in Capital¥6,888 million (as of April 1, 2017)

Stock ListingFirst Section of the Tokyo Stock Exchange

Representatives

Fuminori Kozono, President
Tsutomu Ota, Representative Director

Net Sales¥298.8 billion (consolidated)¥243.5 billion (non-consolidated) (as of March 31, 2017)

Number of
Employees

8,074 (consolidated)
3,734 (non-consolidated) (as of March 31, 2017)

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

West Japan
Head Office

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

Number ofBusiness Offices

Branch offices: 15
Sales offices: 17

Major Banks

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

Independent
AuditorSeiyo Audit Corporation

Business Bases (As of July 1, 2017)
Domestic bases: (Head OfficeWest Japan
Head Office

Branches/

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

Bases of Two Major Consolidated Subsidiaries

Offices)

17 Sales Offices

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

EXEO TECH CORPORATION

Matsuyama Office
Kochi Office
Yamaguchi Office
Kumamoto Office
Kitakyushu Office
Nagasaki Office
Oita Office
Minami-Kyushu Office

Iwate Office
Yamagata OfficeNiigata Office
Nagano Office
Ibaraki Office
Chiba Office
Saitama Office
Shizuoka Office
Wakayama OfficeDaiwa Densetsu Corporation:

Overseas Bases
Philippines
MG EXEO NETWORK, INC.

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

300.4

324.1 330.0

Net sales (¥Billion)

Operating income (¥Billion) Profit attributable toowners of parent (¥Billion)

320.0
287.4 298.8

18.4

20.8

23.0
12.1

13.7

Net Sales by Segment

15.7
Urban
infrastructure¥67.3 billion

SYSTEM SOLUTIONS¥39.7 billion

13.3%

22.5%
Telecommunications
Infrastructure¥191.6 billion

64.1%
2015

2016

2017
(plan)

2015

2016

2017
(plan)

2015

2016

2017
(plan)

2015

2016

2017
(plan)
Note: ‌The figures are rounded to
the first decimal place.

3

Corporate Report 2017

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

1

Total Process (through-process construction)
Planning and development

From Planning to
MaintenanceOperation and maintenance

Optical access network
Next-generation network (NGN)Group ofProfessionals
Who AreAcquainted with
Every Kind ofTechnology

SupportNationwide

Mobile (LTETotal Solution

2

Construction

3

LTE-Advanced)

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

Nationwide operation, multiple carrier compliant and migration-compliant

1 Total Process

2 Total Solution

3 Nationwide Expansion

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

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

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

Business Fields

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

Telecommunications
Infrastructure
Network engineering

11.2

11.8

¥287.4 bn

5

bn

25%

5

3

¥400.0Urban
infrastructure

Turnover rate for employees with up Number of serious
to three years of service (%) (Note 1) accidents (Notes 1 and 2)

12.6

FY20
Expansion of sales and businessdomains by development into new
domains

23%

Telecommunications facilities
Electricity supply
Urban civil engineering
Environmental engineering

System Integration

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

FY15

Urban
infrastructure

Network Integration

64%

13%
Urban
infrastructure

50%

25%

Telecommunications
Infrastructure

SystemSolutions

Access engineering
Mobile engineering

SystemSolutions

Telecommunications
Infrastructure

SystemSolutions

Number of employees with IT-related CO2 emissions(t-CO2) (Note 1)
expert qualifications (Note 1)

232

3

259

270

2015

2016

6,478 6,457 6,536

2
1

2014

2015

2016

2014

2015

2016

2014

2015

2016

2014

2014

2015

2016

Notes: 1. On a non-consolidated basis.
2. This pertains to the number of serious accidents as defined by the Company.
Corporate Report 20174

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

1970
1990

1960

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.

1955
Started coaxial cabling
work.
1956
Started telex work.

Corporate History
1954

Jul.

1954

Feb. 1963
Sep. 1963
Feb. 1972
Apr.
Jun.
May

1982
1986
1991

Apr.
Mar.

1998
1999

Apr.
May
Apr.
Sep.

2004
2004
2005
2009

May

2010

Aug. 2011
Nov. 2011
Dec. 2014

Dec. 2015

5

Corporate Report 2017

Net Sales:

1974
Net Sales:May

Net Sales:

1988

1954

May 1954
Company established as
Kyowa Densetsu Kaisha, Ltd.

1997

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 theTokyo Stock Exchange
Began engaging in telecommunications andelectric 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 addressin 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., wereconverted 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¥50

BillionFeb. 1972
Listed on the First Section of
the Tokyo Stock Exchange

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

1975
Started establishing a railway
communications network inside
Tehran Province in Iran.
1983
Started optical fiber work.
1986
Started CATV work.

¥100

BillionMay 1991
Changed company name to
KYOWA EXEO CORPORATION¥200

BillionMay 2000
Acquired ISO14001
certification
Apr. 2001
Merged with Showa
Technos Corp.
Nov. 2001
Instituted a complianceprogram

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
1998
Entered into the NI business.
1999
Developed the Social
Insurance System
Developed SOA solutions.

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
system

Sep. 2003
Acquired OHSAS18001
certification

2001
Started developing an
Administrative Organ
Accounting System.
Started developing a“Work Management
System.”2000
Started the dioxincountermeasure-compliant
incinerator business
2001
Entered into the livestock
excreta disposal business.
2002
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.

Mobile phone base station

1996
Started Internet compliant
system establishment work.

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

2000

2011

2016

2015

2017

2006
Net Sales:

Apr. 2004
Acquired Daiwa Densetsu
Corp.
May 2004
Acquired WAKO
ENGINEERING CORP.
Apr. 2005
Acquired KANAC Corp.
Jun. 2005
Won a gold medal at the 38th
World Skills Competitions in
Helsinki, Finland

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¥300

BillionAug. 2011
WAKO ENGINEERING CORP.,
Daiwa Densetsu Corporation
and Ikeno Tsuken Co., Ltd.,
were converted into wholly
owned subsidiaries

Jan. 2006
Acquired the ISMS
certification
Mar. 2006
Obtained the Privacy
Mark.
Nov. 2007
Won a gold medal atthe 39th World Skills
Competitions in Shizuoka,
Japan (second consecutive
championship).
Sep. 2009KANAC Corp. wasconverted into a wholly
owned subsidiary
Tokyo Integrated
Engineering Center(TEC) started operation(Heiwajima).

May 2010
Made Ikeno Tsuken
Co., Ltd., a consolidated
subsidiary

2006
Entered into the woodbiomass boiler business.
Startedlong-term
comprehensive businessconsignment services at
general waste treatmentsites (Tochigi Prefecture)

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

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

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

2009
Started WiMAX work.

Nov. 2011
ICOMSYSTECH Co., Ltd.,was converted into a wholly
owned subsidiary
Nov. 2013
Won a gold medal at the 51st
National Skills Competition in
Chiba (for the fifth time).

Oct. 2009
Won a gold medal at the40th World Skills
Competitions in Calgary,
Canada (third consecutive
championship).

2010
First general waste
incinerator completed(Aomori Prefecture)

Oct. 2011
Won a gold medal at the 41stWorld Skills Competition in
London (fourth consecutive
championship).

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.

Urban
Infrastructure

Communications
Infrastructure

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

2014

Launched
EXTravel, an
integrated application forsightseeing and disasterprevention
Started collaboration withNIPPON SYSTEMWARE
CO., LTD.
Launched EXRescue, asystem for facilitating
disaster responses
2015
Began full-scale operationof the cloud integrationengineering business.

2013
Installation of wood biomass
boiler equipment completed(Kaneyama-machi,
Yamagata Prefecture)2014
Large-scale recycling
center completed(Higashimurayama City,
Tokyo)
Commenced the work
for installation of
charging equipment forelectric vehicles
2015
Completed a large-scalecleaning plant in Wakayama.

Kinoumi Clean Center

2012
Started the Platinum Band
Project (900 MHz).
2014
Conducted construction
work for the post-disaster
restoration of Izu Oshima.
 G EXEO NETWORK INC.,
M
a local subsidiary in thePhilippines, received anorder for and commenced
a large access-engineering
work project.
2015
Began full-scale
LTE-Advanced work.

Milestones of the KYOWA EXEO Group2010
May 2016
Formulated the MediumTerm Management Plan
(FY2016–FY2020).
Acquired certification as an“Eruboshi” company (topclass) based on the Act ofPromotion of Women’sParticipation andAdvancement in the
Workplace.

Oct. 2016
Won a gold medal at the 54th
National Skills Competition.
Nov. 2016
Announced the KYOWA EXEO
Labor and Management Joint
Declaration for Work Style
Reforms.

2016
Began full-scale
operations in the Geo
Solution Field.
Began full-scale
operations in the New
Energy Field.
Feb. 2017
Entered capital andbusiness alliance with
Nextgen, Inc.
Mar. 2017
Acquired certification as apartner for Microsoft
Japan’s Skype Operations
Framework.

2016
Undergrounding of overhead
power lines began in earnest.
Mar. 201716 solar power generation
facilities in operation
nationwide

EXEO Matsue Solar Farm

Apr. 2016
Participated in therestoration work after the2016 Kumamoto
Earthquake
Jul. 2016
Launched the “EXEO Hikari”
optical access service.

Corporate Report 2017

6

TOP MESSAGE

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

7

Corporate Report 2017

Building a better, brighter future together

Greetings /Message from the President

The first year of the current medium-term management
plan ended successfully by exceeding our income target;
we will push for an even higher record income by
expanding the spectrum of our businesses.
Fuminori Kozono
President
KYOWA EXEO CORPORATIONBusiness Results for Fiscal 2016
For fiscal 2016, the first year of the medium-term management plan, we enjoyed an increase in net sales dueto the favorable receipt of orders from telecommunications carriers, particularly the NTT Group. We also engaged in cost-cutting and other efforts to enhance
productivity, enabling us to attain record-high operating
income beyond the plan’s target.
Results for the urban infrastructure business slightly
exceeded those of the previous year, as we received
orders for the installation of electrical equipment, theundergrounding of overhead power lines in association
with redevelopment projects in the Tokyo metropolitan
area and urban civil engineering works, such as watersupply and sewage systems, although we failed toreceive an order for a large environment-related work.
Results for the system solutions business also slightly
exceeded those of the previous year, but some problems
remain such as the increased cost for system development

and the sluggish growth of new businesses. Meanwhile,the telecommunications infrastructure business enjoyedsignificantly better results than the previous fiscal year.
Contributing factors included the favorable progress of
NTT-related works; an increase in fixed telecommunications–related works mainly due to greater demand forhikari-collaboration and the receipt of orders for the
refurbishment of aging facilities; significantly increasedorder receipts for mobile telecommunications–related
works due to the advanced placement of orders fornegotiation and consulting works related to LTE-Advanced; and the rapid recovery of order receipts for
NCC-related works during the second half of the year.
As a result, for fiscal 2016, the Group recorded orders
received amounting to ¥324.1 billion (up 8% year overyear) and achieved consolidated net sales of ¥298.8
billion (up 4% year over year) and operating income of¥20.8 billion (up 13% year over year).

Corporate Report 20178

TOP MESSAGE

Tasks Addressed and Achievements in Fiscal 2016
In fiscal 2016, despite our move to expand the range ofbusinesses other than those related to the telecommunications carriers, we failed to receive an order for a largescale project and had lower-than-planned growth in new
businesses despite their steady development. Meanwhile, the telecommunications carrier business performed well, and continued measures such as thoseenhancing productivity led to record-high operating
income.
Regarding the system solutions business on which wehave focused for several years, we have promoted
aggressive marketing efforts in four business fields: newenergy, geo services, cloud security and global. In the
new energy field, we commenced a service offeringsystems to calculate electricity charges and manage
customers via the cloud for power producers and suppliers (“PPSs”) and launched “Energy Viewer,” an energy
management system for air-conditioning equipment
targeted at corporate power users and “survival power
supply,” which can be divided to make it portable. In thegeo service field, we received many inquiries regarding“EXBeacon,” or mesh network beacons that constitute afoundation for the Internet of Things (IoT), which we
exhibited at trade fairs in Japan. The beacons wereimmediately adopted by several governments and companies. In the cloud security field, we have been certified
as one of the six partners (vendors) in Japan that provide
support for installing Microsoft Japan’s Skype for Business Online. In addition, we formed a capital and business alliance with Nextgen, Inc., which has highly
advanced capabilities for technology development in the
VoIP* field, to expand our lineup of services and delivery
channels. In the global field, MG EXEO Network Inc., aconsolidated subsidiary of the KYOWA EXEO Group,
received a high rating from Philippine Long Distance Telephone Company (“PLDT”), the largest telecommunications carrier in the Philippines, for its track record ofvarious telecommunications works in the Philippines. As
a result, MG EXEO Network received an order for works
for comprehensive services in central Manila, in addition
to the works it is currently in charge of in two of thecountry’s provinces.
At the 54th National Skills Competition held in October 2016, a Company employee, Yoshiaki Shimizu,

won a gold medal in the information network cabling
category. PICK UP It was the Company’s sixth gold
medal and the first in the last three competitions. Weview this positive development as an example of ourlongstanding human resource development efforts toenhance the Company’s technical prowess in the construction of information and communication networks,
which is one of KYOWA EXEO’s strengths since establishment. We will continue to develop engineers with hightechnical capabilities, with which we will contribute tosociety. Mr. Shimizu also will represent Japan in the 44th
World Skills Competition to be held in October 2017 in
Abu Dhabi in the United Arab Emirates. We anticipate his
excellent performance in the competition toward winninga gold medal as a representative of both Japan and
KYOWA EXEO.

Outlook for Fiscal 2017
Fiscal 2017 is the second year of the current mediumterm management plan. To achieve a further leap forward, we will improve the various measures we havetaken so far, thereby promoting the establishment of firm
foundations for future growth.
In the telecommunications infrastructure business,telecommunications carriers have tended to curtail theircapital investments, but they are expected to continue
steady investments to upgrade base station equipment
to address the increasing volume of traffic in urban areas
and the new frequency band, amid growing need forhigh-speed and large-volume communications. In theurban infrastructure business, demand growth is expected to continue for the installation of electrical equipment
and the undergrounding of overhead power lines in association with redevelopment projects in the Tokyo metropolitan area. Active investments in preparation for the
Tokyo Olympic and Paralympic Games and inboundtourists are also expected. In the system solutions business, services that could lead to revolutionary changes in
the corporate world and society, such as the IoT, artificial
intelligence (AI) and the cloud have been expanding
steadily.
Under these business circumstances, we will increase
the earning power of our existing businesses during thecurrent fiscal year, while promoting active marketing
efforts to grow the system solutions business into a new*VoIP (Voice over Internet Protocol) is a group of technologies for the delivery of voice communications over Internet Protocol (IP) networks, such as the Internet and intranets.

9

Corporate Report 2017

Greetings /Message from the President

PICK UP

A gold medal was won in the information network cabling
category at the 54th National Skills Competition.
At the 54th National Skills Competition held October
21–24, 2016, in Yamagata Prefecture, KYOWA EXEO
employees Yoshiaki Shimizu, Takuya Ota and Naoyuki
Makino participated in the information network cabling
category, and won a gold medal, a silver medal and an
Outstanding Effort Award, respectively.
In the information network cabling category, participants competed on the technical ability to build an information wiring system in settings simulating the insideof a building and its premises and the inside of ahouse. For two days, participants competed in termsof speed in forming ends of metal cables and fusion
splicing optical fibers, and worked on five tasks, including wiring work in simulated conditions, such as in ahouse and a building premises.
Mr. Shimizu, who won a gold medal, will compete asa representative of Japan in the information network
cabling category of the 44th World Skills Competition
to be held in Abu Dhabi, United Arab Emirates, in October 2017.

Corporate Report 201710

TOP MESSAGE

pillar of generating earnings. As part of the efforts in thesystem solutions business, we will strive to expand
orders for “Energy Viewer” and the “survival power supply,” as well as offer various IoT solutions using “EXBeacon.” In the cloud security field for which growing need is
expected, we will actively promote our cloud service
building business by combining our proven networkbuilding and system development technologies to help
companies enhance productivity and efficiency as well as
promote work style reforms. In the global field, throughMG EXEO Network Inc., a consolidated subsidiary basedin the Philippines, we will push forward with the expansion of business in the telecommunications and ICT
markets in Southeast Asia, which are expected toachieve rapid growth. In April 2017, we decided to invest
in a company that constructs in-building base stations
for mobile phones and leases them to telecommunications carriers. Although we will have to conduct due
diligence on the company before concluding a formal
contract, we will use this business opportunity we acquired in Vietnam, which is experiencing remarkableeconomic growth, to look into the possibility of businessexpansion in the market while also contributing to thedevelopment of the country’s telecommunications environment.
In our activities to raise productivity, onsite improvement efforts on a continuous basis have been producing
effects steadily. We will also continue cross-sectional
projects undertaken by our business divisions and system

11 Corporate Report 2017

departments to improve business operations via Business Process Re-engineering (BPR) and promote cost
reductions through the sharing of system platforms. To
ensure the provision of high-value-added services to customers, we will make continued efforts to improve thequality, cost and delivery time of our services.
To ensure the medium- and long-term growth of theCompany, it is essential to not only promote the existing
businesses but also expand into the peripheral businessareas for which accumulated technological expertise canbe utilized. To achieve that, we will actively consider M&A
opportunities. While identifying business fields with significant growth potential and developing human resources
to reinforce our technological and marketing capabilities,
we will accumulate our strengths and aggressively invest
managerial resources in growth business fields, thereby
ensuring our sustainable growth and further strengthening our business foundations.

Distributing returns to shareholders
The KYOWA EXEO Group regards profit distribution toshareholders as an important managerial issue and has abasic policy of stable dividends, while considering business results, the future business environment and investments for ensuring financial strength and businessexpansion.
Regarding dividends, we employ a dividend on equity(DOE) of 3% as an indicator of a stable dividend. Accordingly,

Greetings /Message from the President

Establishing a continuous cycle that starts with raisingawareness of employees, which activates the organization and leads to offering services appreciated by customers and better business performance, will result in the
distribution of higher profits to shareholders. We will strive
to enhance corporate value through raising businessperformance and aggressively distributing profits toshareholders.

the annual dividend per share for fiscal 2016 was ¥46,
and we plan to increase the annual dividend per share forfiscal 2017 by ¥4 to ¥50.
Regarding the purchase of treasury shares, we make ita policy to flexibly conduct purchases in view of cash
flows and market conditions, and will consider them on acontinuous basis.
In addition, we will maintain a stable high level of returnon equity (ROE) by promoting the growth of income andenhancing capital efficiency, and continue to seek greater
earnings per share (EPS).

Operation highlight
Orders received (¥billion)

324.1

Net sales (¥billion)

Operating income (¥billion)

330.0
320.0

300.4

298.8

18.4

287.4

2015

2016

2017
(plan)

2015

2016

23.0
20.8

2017
(plan)

2015

2016

2017
(plan)

Corporate Report 201712

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 2017

Building a better, brighter future together

Business Overview

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

To page 17

Drawing on our ICT technologies, we are offering totalsolutions in both the network integration (NI) field,
which is establishing LAN/WANs and Internet environments, and the system integration (SI) field, which isestablishing systems for corporations such as communications carriers, financial institutions and manufacturers.

To page 18

Corporate Report 201714

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 2017

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
and contributing to society
Supporting the core business for KYOWA EXEO

Business Overview

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

Contributing to the development of the informationand communications industries overseas
NCC

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

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

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

Corporate Report 201716

Business Overview

ENGINEERING
SOLUTIONS

Urban infrastructure

Telecommunications facilities

Urban civil engineering

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

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

Electricity supply

Environmental engineering

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

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

17 Corporate Report 2017

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 201718

Business Overview

KYOWA EXEO Group Structure(As of July 1, 2017)

KYOWA EXEO CORPORATION
T wo M a j or Consolidated Subsidiaries
Daiwa Densetsu Corporation

EXEO TECH CORPORATION

26 Other Consolidated Subsidiaries

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

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., and is
now in its third year.
Under its management philosophy of “While making
swift responses to environmental changes based on thespirit of customer first, we provide support for informationand communications services through our advanced
technical abilities and quality and optimal services, thereby
contributing to the realization of affluent society,” we willcontinue to take on the challenges for new growth as amember of the KYOWA EXEO Group by seeking the expansion of business operations in such fields as the environmental energy and welfare solutions, etc.

Daiwa Densetsu Corporation Group will make continued efforts to raise the efficiency of its core business in the construction of information and communications infrastructure,
while continuing to promote work style reforms to create abetter working environment where every employee canshowcase his or her talents with high levels of job satisfaction and creativity.
As a member of the KYOWA EXEO Group, we will continue to strengthen our alliance with the Group and enhance
our marketing systems. With excellent technological capabilities and quality standards cultivated over long years in
the fields of electrical facilities, civil engineering, mobile, ICT
and solutions, we will create value as a total solutions provider to contribute to the local communities.

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

Examples of expanding solution business

KYOWA EXEO CORPORATION
Installation of a smart meter

T wo M a j or Consolidated Subsidiaries

A Braille guide board with a multilinEXEO TECH CORPORATION
gual voice guidance

NUTRIMATE food service management system

Daiwa Densetsu Corporation

26 Other Consolidated Subsidiaries
Accessengineering

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

Civil engineering

Exeo Infra Corporation, Infratechno Corporation

Networks

Exeo Network Corporation

Mobile telecommunications

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

IT

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

KYOWA SECURITY SYSTEM CORPORATION, Kyokuyoh Corporation, Shinwa Seisakusyo Corporation, Exeo
Butsuryuu Service Corporation, Exeo Business Corporation, ASAHI DENWA KOGYO CORPORATIONThe Group companies other than the above: 9 nonconsolidated subsidiaries and 10 affiliates

19 Corporate Report 2017

Overview of Group Companies
Access engineering

Mobile telecommunications

Shinyei Tsushin Co., Ltd.

Kyoei Densetsu Kogyo Corporation
Kyoei Densetsu Kogyo Corporation conducts the engineeringbusiness mainly for communications systems and facilities formobile phones, wireless systems and equipment for governmental administration offices, and electrical equipment installation
works for general customers mainly in the Kansai and Hokuriku
areas. With “customer first” and “safety first” as a motto, we offer
one-stop services from negotiations for installing base stations to
the design, construction and maintenance thereof as an integrated engineering company for wireless communications. From theviewpoint that human resources are our assets, we emphasize
the development of human resources and seek continued business development by securing stable business income and exploring collaborative business opportunities in all areas of wirecommunications services.

Access engineering

Mobile telecommunications

Sankyo-Techno Co., Ltd.

Toho Communications Co., Ltd.

Sankyo-Techno Co., Ltd., has conducted pioneering efforts inthe construction of optic fiber communication facilities and optical communication user facilities with a number of digital communication engineers and strives to be the “true ICT engineering
company” that is highly evaluated by customers for its highly reliable engineering technologies. For further business expansion in
fiscal 2017, we will focus on realizing 1) the highest net sales; 2)
the lowest expenditures and 3) zero accidents involving personnel or equipment. As a member of Team EXEO, we will take on
the challenge toward the realization of the Group’s vision: “Focus
Group strengths to take total solutions to a new growth stage.”

Business Overview

Since its establishment in 1985, Shinyei Tsushin Co., Ltd., hasengaged in the creation of information communications infrastructure as an access engineering member of the KYOWA
EXEO Group with the installation of fixed telecommunications
equipment, such as fiber optic cables, as a core business.
Through our high-quality standards and reliable techniques andknowledge accumulated for years, we not only construct andmaintain information and communications equipment for railway
communications, CATV, LAN, WiFi and others but also conduct
works to install surveillance cameras and countermeasures forthe 700-MHz reception difficulty in digital terrestrial televisions.
Toward the IoT age where all things are connected to the Internet, we will make full use of our highly reliable technological capabilities to contribute to innovations in the ICT society.

Established in 1959, Toho Communications Co., Ltd., is based in
Hokkaido where it has a long history and tradition as a wirelessfacility construction company. While inheriting the trust relationship with customers and accumulated expertise, we are tapping
into new business fields and developing engineers with multiple
skills. Our strength lies in offering one-stop services from negotiations for construction to the designing, building and maintenanceof facilities. Centering on mobile communications, we operate
nationwide, offering adjustment, construction and maintenanceservices in relation to various wireless facilities for governmental
administration offices. As a member of Team EXEO, we will continue to contribute to society by aggressively promoting our engineering solution business.

IT

Other

ICOMSYSTECH CO., Ltd.

Exeo Business Corporation

From its establishment in 1973 until today, ICOMSYSTECH CO.,Ltd., has developed various kinds of systems in conjunction with
its philosophy: “A Fusion of Wisdom and Computers.” With all
kinds of things connected to the Internet, the age of IoT has arrived, enabling people to benefit from comfortable and highspeed communications services. However, even in this age, ourfocus remains on the realization of a people-friendly computersociety. We must not only enhance convenience but also contribute to the creation of a safe and secure society. To this end, weare continually stepping up our knowledge and technical capabilities to incorporate the latest technologies. We will make continued endeavors to become a company that “contributes tosociety and is loved by society.”

Exeo Business Corporation started operations in July 2003 as aprovider of shared services for the KYOWA EXEO Group. Currently, the company provides 31 companies, mainly the KYOWA
EXEO Group members, with common operational tasks, such asaccounting, salary and welfare, trainings and assistance in applying for a qualification to bid. As the business environment is becoming increasingly severe, we will contribute to the further
development of the KYOWA EXEO Group by capitalizing on our
accumulated expertise in shared services, achieving further cost
reductions and enhancement of business quality, and nurturing
specialists in shared services.

Corporate Report 2017

20

KYOWA EXEO Group’s Corporate Value Creation Process

KYOWA EXEO will contribute to the resolution of social issues
The KYOWA EXEO Group’s corporate philosophy includes cultivating technological capabilities, seekingof growth, the Group has grown to be the way it is now, while reflecting the needs of the times. The Group’s
The KYOWA EXEO Group will continue to address social issues and help solve them through its businesses,

KYOWA EXEO Group’s

Global warming
Water risk
Energy problems
Urban concentration‌ apan’s falling birthrate,
J
super aging population, etc.

Medium- to long-termbusiness environment:
Declining fixed-line phones
Labor shortage in theconstruction industry
 ocial needs toward the TokyoS
Olympics and Paralympics
 ransition to the next-generationTwireless technology (5G)
Reinforcement of disastermanagement, etc.

Ensuring safety and security in people’s daily lives
and in times of disaster

Major social issues:

Human Resources
KYOWA EXEO contributes
capabilities, which are
Therefore, we regard
principle that excellent
developed along with a

21 Corporate Report 2017

through its businesses and strive for sustainable growth with society.
affluence and contributing to society. Under this philosophy and with its technological capabilities as a drivertechnological capabilities now contribute significantly to the resolution of social issues at home and abroad.
thereby achieving sustainable growth with society.
Important issues for the KYOWA EXEO Group to achieve sustainable growthTechnological Capabilities

Developing human resources / developing andhanding down technologies

Create a community where
highly advanced ICT society is realized through our
telecommunications infrastructure businessSpecial Featureα1Creating a community where a+highly advanced ICT society is

Convenience

realized to offer convenience of life
as well as high safety and security.
Go to P. 23

Urban infrastructureα+Create a community that isresilient to disasters
through our urban infrastructure business

Environment

Contributing to the construction of
infrastructure that is resilient tonatural disasters to create a community where everyone can live in

KYOWA EXEO Group’s Corporate Value Creation Process

Telecommunications
Infrastructure

safety and security.
Go to P. 24

System Solutionsα+Create a community that isfriendly to the environment
and people through oursystem solutions business

Are Our Chief Assetto society through its high technologicalunderpinned by its excellent human resources.
human resources as a chief asset, and set as ahuman resources should be acquired andconducive working environment for our employees.

Disasterprevention

Making full use of IoT technologies to create new value forbuilding a safe, secure andaffluent society.

Special Featureα+Power ofemployees

2

Go to P. 25

Working to promote diversity
as a management strategy forrevitalizing the organization.
Go to P. 26

Corporate Report 2017

22

KYOWA EXEO Group’s Corporate Value Creation Process
SpecialFeature 1

Addressing Social Issues through Its Businesses <Building a Safe and Secure Community>

Telecommunications
Infrastructure
Business

SystemSolutions
Business

Creating a community where a highly
advanced ICT society is realized tooffer convenience of life as well as
high safety and security.

Urban
infrastructurebusiness

Telecommunications Infrastructure BusinessSocial issues to be solved through the telecommunications infrastructure business:C‌ ontinued upgrading of broadband telecommunications (LTELTE-Advanced
5G)F‌ acilitates the operations that address thereception difficulty for the 700-MHz band‌Expanding the demand for optical fiber accessservices through 4K and 8K UHD (ultra-high definition) displays and the Hikari Collaboration

Makoto Tamura
Facility Construction Section, Mobile Infrastructure Engineering Department,
NTT DOCOMO Operations Headquarters

The “connecting” quality that only Team
EXEO can offer

Enhancing the telecommunications environment with theGroup’s “connecting” technologies, thereby contributing
to the realization of a highly advanced ICT societyWith Japan’s declining birthrate and aging population
becoming an increasingly serious issue like no other inthe world, many social problems, such as a labor shortage, growing medical costs and an increasing nursing
care burden, are getting recognized. To address theseissues, the use of highly advanced information andcommunication technology (ICT) has attracted attention. New ICTs, such as the Internet of Things (IoT), bigdata and artificial intelligence (AI), are being used in distributing data to create new value and solve problems.
By making full use of the “connecting” technologies of
the KYOWA EXEO Group, we contribute to realizing asociety supported by advanced ICTs.

23 Corporate Report 2017

Now that LTE-Advanced works are nearing an end inTokyo, transition to 5G is about to start in anticipation of
the Tokyo Olympic and Paralympic Games. The 5G
works often are complicated because they require theaddition of new equipment at existing base stations.
To accomplish the complicated 5G works, not only
technological excellence but also teamwork becomes
important. How can we conduct the works without affecting the frequencies used by customers, while ensuring safety at work? This mission is shared by all themembers of Team EXEO who participate in the works
to ensure the quality that can earn customer satisfaction. To achieve that, we must create a workplace
where there is a free exchange of ideas between employees and partner companies and no gender differences among jobs at the worksite.
“Being connected” is taken for granted in today’s society. While ensuring that, we believe our mission is tooffer a better telecommunications environment to realize
a highly advanced ICT society. Through our advanced
technologies, we will continue to take part in “creating afuture society” where a high level of convenience andaffluence is attained.

Telecommunications
Infrastructure
Business

SystemSolutions
Business

Contributing to the construction of
infrastructure that is resilient to natural
disasters to create a community where
everyone can live in safety and security.

Urban
infrastructurebusiness

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

Motoo Nonogaki (right)
Kenji Watanabe (left)
Civil Engineering Section, Civil Engineering Headquarters

Combining accumulated expertise with newtechnologies to enhance infrastructure with afocus on safety and security
A large proportion of Japan’s social infrastructure, including roads, tunnels and bridges, will be 50 years orolder over the next 20 years, as many of them wereconstructed during the period of high economic growth.
The Japanese government has taken measures to prepare for the deterioration of such social infrastructure. In
addition, measures to minimize damage from disasters
and ensure the safety and security of people are underway, such as the undergrounding of power cables. The
KYOWA EXEO Group combines its traditionally accumulated expertise in civil engineering works with themore recent “connecting” technologies to contribute to
the enhancement of the social infrastructure.

Joining forces under the EXEO brand to promote
the undergrounding of power poles and cables
Tokyo Prefecture is promoting a project to undergroundpower poles and cables in Tokyo as part of its efforts toenhance the social infrastructure. The project is intended not only to enhance the appearance of the streets
but also to minimize obstructions to emergency vehicles, and it is also important in terms of preventing disasters and minimizing their impact. However, works forthe undergrounding of power poles and lines are noteasy. In the ground, there are lifeline utilities, such as

gas and water supply pipes. And since these pipes
were laid long ago, sometimes the pipes are found atdifferent positions than those indicated on the old schematics. In addition, as these works are usually conductedlate at night, we care about having good communication with the people in the neighborhood.
What enables us to continually undertake these newworks is a fusion of our traditional knowledge in civil engineering works and our latest technologies. Completing a work is not the end goal; we extract anything
good from the experience and hand it down to the future generations. That attitude is the EXEO brand. This
has led us to make proposals that include positive outcomes beyond the works themselves, which has been
received favorably by customers. Our mission is tocomplete every work problem-free to ensure a safe andsecure society and to continue to be a backseat playerthat underpins society. Under the EXEO brand, we willcontinue to contribute to the enhancement of the social
infrastructure based on safety and security.

Corporate Report 2017

24

KYOWA EXEO Group’s Corporate Value Creation Process

Special Feature 1
Addressing Social Issues through Its Businesses <Building a Safe and Secure Community>

Telecommunications
Infrastructure
Business

SystemSolutions
Business

Making full use of IoT technologies
to create new value for building asafe, secure and affluent society.

Urban
infrastructurebusiness

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

Hiroyuki Watabe
New Energy Promotion Department
ICT Solutions Headquarters

Creating new value with the most advanced“connecting” technologies, thereby contributing tobuilding a safe, secure and affluent society
Statistics from the Japan Meteorological Agency showthat each year, about one-tenth of the earthquakes
throughout world occur in Japan. Moreover, there aremany other societal problems to address such as theglobal issue of climate change and the issue of a declining population distinct to Japan for which work style reforms have been encouraged. To help solve these
problems, the KYOWA EXEO Group has created new
solutions, such as the combined use of “connecting”
technologies and geospatial information, thereby contributing to building a safe, secure and affluent society.

Providing society with unlimited possibilities of new value
Our mission is to create the kind of value that has notappeared yet in society to help solve social issues, and,by doing so, to expand the businesses of the KYOWA

25 Corporate Report 2017

EXEO Group. Among such value we have created,“EXBeacon,” or next-generation beacons for mesh networking, has attracted particular attention. These
beacons are Bluetooth-compliant and can exchange information with each other to form a mesh network. For
example, these beacons can save labor by enabling
one to easily locate a single parcel in a huge warehouse. We also offer a smartphone application called“EXTravel,” which is not only convenient in that it provides foreign tourists visiting Japan with sightseeing information but also useful for disaster prevention by
navigating such tourists promptly to evacuation areas in
the event of emergencies.
New solutions we have offered also include the “Energy Viewer,” an energy management system that enables the visualization of energy consumption, thereby
contributing to reducing the environmental burden, andthe “survival power supplies,” which are not only portable and environment-friendly but also have communication functions. These solutions surfaced through theunited and persistent efforts of our development andSales Section to create new value. We will continue toseek ways to utilize our “connecting technologies sothat we can offer new value leading to the resolution ofsocial issues.

Special
Feature 2

Initiatives for Promoting Diversity in Line with Our Principle that Human Resources
Are Our Chief Asset <Promoting the Active Involvement of Female Employees>

Working to promote diversity
as a management strategy forrevitalizing the organization.
KYOWA EXEO Group’s Corporate Value Creation Process

Eiko Sakai (right)
Takako Izumi (left)
Diversity Promotion Section
Human Resources Division

Initiating efforts to promote women’s participation as
an introduction to diversity management
The KYOWA EXEO Group has long been active in promoting diversity. To do so more efficiently and systematically, we established the Diversity Promotion Office within
the Human Resources Department in October 2016.
To accommodate increasingly diverse customer
needs in a speedy and flexible fashion, promote thegrowth of the Group’s businesses and enhance the performance thereof, we, as Team EXEO, will promote diversity as part of the efforts to achieve innovations andwork style reforms aimed at establishing a corporate
culture where a diverse set of values is accepted regardless of gender, nationality and other demographics.
As the first step, we will focus on deepening the understanding of diversity
promotion. Why do weneed diversity management now? What are
the benefits to our business? So that each
employee can develop
an understanding of diversity, we will carry out
seminars and educational trainings at all offices.
We also have beenworking to promotewomen’s participation,

which is a key element for promoting the utilization ofdiverse human resources. Although our female employees account for only 7% of the total workforce, we are
discussing measures to promote women’s participationand sharing necessary information through representatives assigned at every department and branch in February 2017. Promoting women’s participation is notintended to provide preferential treatment for female
employees but rather is a step forward to realize more
flexible ways of working. By tackling issues to be addressed, such as raising children and/or taking care of
the elderly while working, having a deeper understanding of LGBT (lesbian, gay, bisexual and transgender)and utilizing employees with foreign nationalities, we aretaking a forward-looking approach to diversity promotion for a better future of the KYOWA EXEO Group.
There is no end to diversity promotion. At Team
EXEO, we will continue united efforts to promote diversity so that innovative ideas reflecting diverse charactersand values will revitalize the organization and develop aculture oriented toward acting for change.

Corporate Report 201726

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
The KYOWA EXEO Group will, through its business activities, conduct environment-friendly management and contribute to the preservation of environment and sustainable growth of society in order torealize the corporate philosophy.
The corporate philosophy of the KYOWA EXEO Group, which is the basic guideline for our corporate social responsibility, includes cultivating technological capabilities, seeking affluence and contributing to society, and we work to
make integrity and transparency the fundamental norms of our management.
We recognize that efforts to achieve our corporate philosophy are indeed efforts toward CSR, and we are working
to promote CSR.

CSR Structure of
the KYOWA EXEO Group
Corporatephilosophy

Developmentof society

ENGINEERING
SOLUTIONS

Developmentof the KYOWA
EXEO GroupSYSTEM
SOLUTIONS

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
Securing safety and quality
Full information disclosure and communication
Adherence to corporate philosophy and respect for human rights
Environmental protection activities
Creation of workplaces conducive to satisfactory work

ComplianceCorporate governanceRisk management

Business operations with integrity and transparency as the norm

27 Corporate Report 2017

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 been tasked with promoting CSR, and we established the 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
an organization under the CSR Activities Division, a staff member in charge of CSR is assigned to every department or officeand to every Group company so that there is a group-wide system of CSR promotion.

Continuing to be a Company Trusted by All Stakeholders
In addition to striving to ensure ever-greater information disclosure, the KYOWA EXEO Group will engage in proactive communication with all our stakeholders in order to fulfill our corporate social responsibility. Effective from fiscal 2011, the Group’s relationships with various stakeholders are classified based on the seven core themes set forth in the ISO26000* standard.
*The ISO26000 standard provides organizations including companies with the best international guidance on socially responsible behavior and possible actions.

CSR Committee(chaired by the President of KYOWA EXEO)

Secretariat (CSR Activities Division)
CSR Concept

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

Customers
ConsumerissuesOrganizational
consideration

Business
partners

Shareholders
and investors

Fair businesspractice

Corporatephilosophy

Participation inand establishmentof communities

▶P.3

Labor
practice
Basic Ethics ▶P.33

Society/
Environment

Basic Actions Declaration ▶P.33

Group
companies

Environment
Human rights

Employees

Corporate Report 201728

Results and Plans of Major CSR Initiatives

Core themes in the
ISO26000

Major stakeholders

Our objectives (goals)

Measures to be taken

Analyzing the causes of recent conflicts and the measures taken to address them andspreading the results across the board to prevent the recurrence of such problems
Reinforcement of corporate governance
Promotion of compliance

Organizational
governanceThorough adherence to social norms
Educating on and improving the awareness of laws and regulations and the Basic
Ethics of the KYOWA EXEO Group through compliance-promoting activities

All(Corporate Philosophy)(Basic Ethics)(Action Guidelines)

Ensuring information security

Appropriate risk management

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

Respect for human rights and utilization of diversified humanresources (Reinforcement of efforts to promote diversity)

Human rights
Employees

Principle that human resources are ourchief asset
Work style reforms

Development and cultivation of human resources

Labor practice

Fair business practiceConsumer issues

Group companies

Maximization of Group value

Development of group businesses and improvement ofconsolidated operating results

Business partners

Ensuring transparency and the faircompetition principle

Thoroughly impartial transactions in accordance with the“Procurement Policy including Green Procurement”

Customers

Shareholders and investors

Participation in anddevelopment ofcommunities

Creation of ideal working conditions (Promotion andreinforcement of work-life balance)

Society

Return to the basics of a safety andquality-oriented culture

Elimination of serious accidents
Ensure high awareness of quality and continue education

Improvement of customer satisfaction

Thorough management of customer satisfaction and utilization of the feedback

Emphasis on return of profits and communications

Promotion of IR activity for impartial and fair information disclosure

Contribution to society and local
communities

Promotion of social contribution activities

Improvement of social evaluation

Promotion of local community contribution activities
Effective provision of news releases and issuance ofintegrated reports

Reduction of power consumption
Reduction of CO2
emissions

Environment

All

Promotion ofenvironmentfriendly
management

Utilization of green energy and forest preservation
Energy-saving
activities at offices
Promotion ofgreenery at buildings
Promotion of green procurement

29 Corporate Report 2017

Reduction of gasoline consumption

Reduction of paper consumption

Promotion of rooftop greenery
Promotion of greenery on the premises
Enhancement of the green purchasing rate

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

Results of efforts in fiscal 2016

Plan accomplished

Rating(self)

Plan almost accomplished

Efforts to be made in fiscal 2017

Reconfirmed the basic policy of the internal control system and disclosed the corporate governance report
Provided education reflecting the latest laws and regulations and the recent problems and complaints
Designated a month to promote compliance and promoted the use of the whistleblowing system
Held two meetings of the Internal Control Committee
Held four meetings of the Compliance Committee

Continue current efforts

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

Continue current efforts

Acquired the certification as an “Eruboshi” company (top class) based on the Act ofPromotion of Women’s Participation and Advancement in the Workplace
Achieved a ratio of new female graduates employed of 16.1%
Achieved a ratio of handicapped people employed of 2.03%
Recognized under the 2017 Certified Health and Productivity Management Organization
Recognition Program for the large enterprise category (White 500)
Encouraged employees to take paid leave: Annual paid leave taken: 12.6 days per person/year

Target percentage of new female graduates
employed: 25% or more
Target percentage of handicapped people
employed: 2.4% or more
Target number of days of paid leave taken: 13
days or more per person/year
Participation as a representative of Japan in the
44th World Skills Competition to be held in Abu
Dhabi, United Arab Emirates in the information
network cabling category

Reorganized the Group companies
Unified our business systems and provided support for enhancing financial strength
Exchanged human resources among the Group companies

Continue current efforts

Ensured compliance with the procurement policy
Held meetings of the Procurement Council to verify transparency and fair pricing

Continue current efforts

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

Target number of serious accidents occurred: zero

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

Continue current efforts

Conducted business results presentations and IR meetings (158 meetings)

Continue current efforts

Undertook works for the restoration of areas affected by the 2016 Kumamoto Earthquake and contributed relief donations thereto
Conducted cleanup activities for welfare facilities and regional communities, provided
opportunities for hands-on learning and made donations through secondhand books

Continue current efforts

Issued the Corporate Report 2016, EXEO Reports and other documents
Provided updates on the Group through news releases and the TOPICS pages

Continue current efforts

Continue current efforts

Power consumption: 8.11 kWh/m2- Introduced the Energy Viewer (our own product) and other energy-saving devices.
- Conducted energy-saving campaigns, including Cool Biz, Warm Biz and switching off
lights during lunch breaks.

Reduce power consumption by 1% year overyear (to 8.03 kWh/m2 or less)

Gasoline consumption: 1,286,000 liters- Monitored gasoline consumption- Introduced eco-cars

Reduce gasoline consumption by 1% year overyear (to 109 liters or less per car/month)

Continued operations of and facility management for the solar power generation
business (Five new plants added, increasing the total number to 16)
Maintenance of EXEO’s forests at five locations (15.37 ha) nationwide
Number of sheets of paper purchased: 51.18 million sheets- Promoted the paperless office- Promoted WiFi availability

Results and Plans of Major CSR Initiatives

Won a gold medal at the 54th National Skills Competition in the information network cabling category(Qualified to participate as a representative of Japan in the 44th World Skills Competitionin the same category)
Carried out various trainings, such as new employee, technical and overseas trainings

Plan unaccomplishedContinue current efforts
Reduce paper purchases by 1% year over year
(to 50.67 million or less)Hydroponic cultivation of leaf vegetables using LEDs
Cultivation of plants on a rooftop area shaded by solar panels
Greening of the space on the inside of the outer walls at the Hyogo Technology Center

Continue current efforts

Ratio of eco-friendly office supplies purchased: 55.8%

Target ratio of purchasing eco-friendly office supplies: 60% or more

Continue current efforts

Corporate Report 201730

Management Systems

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

Promotion of internal control
The KYOWA EXEO Group works to thoroughly adhere to compliance, manage various risks and properly and efficiently execute business operations. At the same time, to ensure the reliability of financial reporting, the Group has stipulated the Basic
Guideline for Establishing Internal Control Systems in accordance with the relevant provisions of the Companies Act 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 Control Division was established to integrate compliance-related duties, which had been distributed
among more than one department, thereby enabling the centralized management and treatment of compound risks.
To view the Basic Guideline for Establishing Internal Control Systems, visit

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

KYOWA EXEO’s Corporate Governance System
As of June 23, 2017

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 2017

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

Major Activities of Outside Directors and Statutory Auditors in Fiscal 2016
Kumiko Kitai (Independent Director)

Kazuteru Kanazawa (Independent Director)

Ms. Kitai attended 14 out of 15 meetings of the Board of Directors held in fiscal 2016,
where she actively provided advice and recommendations to ensure the reasonability andappropriateness of the Board of Directors’ decisions based on her extensive experienceand knowledge accumulated as a lawyer and from holding important positions with thecentral government.

Mr. Kanazawa attended 15 out of 15 meetings of the Board of Directors held in fiscal
2016, where he actively provided advice and recommendations to ensure the reasonability
and appropriateness of the Board of Directors’ decisions based on his extensive experience and knowledge accumulated through management of companies in the industry
other than that of KYOWA EXEO.

Kozo Meguro (Independent Auditor)

Haruhiko Yamada

Mr. Meguro attended 15 out of 15 meetings of the Board of Directors and 16 out of 16
meetings of the Board of Corporate Auditors held in fiscal 2016, and collected informationon the status of business operations at the Company’s departments and its subsidiaries.
On those occasions, he provided comments based on his extensive experience and professional knowledge as a Certified Public Accountant.

After assuming the office of Statutory Auditor of the Company, Mr. Yamada attended 11 out of 11
meetings of the Board of Directors and 11 out of 11 meetings of the Board of Corporate Auditors
held in fiscal 2016, and collected information on the status of business operations at the Company’s
departments and its subsidiaries. On those occasions, he provided comments based on his experience in corporate management and professional knowledge in financial and accounting matters.

Messages from the Outside Auditors
Outside Auditor (Independent Auditor)

Kozo Meguro
ProfileMr. Meguro has extensive expertise in financial
and accounting matters accumulated as a
Certified Public Accountant and through his
experience as a representative partner at PricewaterhouseCoopers Aarata.

Seeking further growth under the spirit of
EXEO: breaking the mold and continually
venturing out to address new challenges

Haruhiko Yamada

On the status and future of the Company’s
corporate governanceCorporate GovernanceOutside Auditor

Management Systems

I think that the Company is making solid and steady progress
toward the targets set forth in the 2020 Medium-Term Management Plan. Partly due to the implementation of the revisedCompanies Act and Japan’s Corporate Governance Code, theoverall corporate governance of the Company has been reinforced. The discussions at the meetings of the Board of Directors have been increasingly active, often with an exchange of ideas to confirm or solve problems from strategic viewpoints andcovering a broad range of topics, including compliance and risk management. At the meetings of the Board of Corporate Auditors, the active exchange of opinions with management takes place based on information previously collected. The reinforcement of corporate governance is the basis for the continual growth and enhanced corporate value of the Group, which will
never be automatically achieved and requires an active mindset and efforts to take on business challenges.
I believe that its atmosphere for encouraging diverse activities and exploring new business possibilities, along with the Company’s solid corporate culture, play a key role in achieving further growth of the Company based on highly advanced technological capabilities.

In addition to attending various meetings, I have exchanged
ideas with the managerial staff at the Company and the Group
companies and visited many business sites in the field. Throughthis research, I have the impression that every employee engages seriously and steadily in his/her duties with a recognition ofand pride in the value of the Company’s contribution to society,which is to help enhance people’s living environment by offering
total solutions including the IoT in the construction of informationand communications infrastructure, and I strongly feel that a sound corporate culture has been nurtured.
Regarding corporate governance, efforts to enhance the management structure and systems and internal controls havebeen progressing steadily toward the realization of highly transparent and sound management based on compliance with respect for the rights and positions of all stakeholders, including shareholders. In particular, the Board of Directors, at meetings
also attended by Outside Directors and Auditors, is working effectively to make appropriate decisions to ensure the sustainablegrowth and enhance the corporate value of the Company. In addition, efforts to strengthen risk management have resulted in
the appropriate disclosure of not only the financial information but also the management and disclosure of non-financial information, including risks regarding management, which is reflected in management actions.
To make decisions and manage projects as the Company taps into new business fields, I think it is necessary to step up efforts to improve governance, and I would like to provide constructive ideas for that purpose from the standpoint of an Outside
Auditor.
ProfileMr. Yamada has extensive experience in managing companies in the telecommunications
and travel industries, as well as professional
knowledge in financial and accounting matters,
accumulated through his experience of holding
managerial positions, including serving as an officer at an NTT Group company and President &CEO of NTT Travel Service Co., Ltd.

Corporate Report 201732

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 shareholders, are based on these ethics, thereby endeavoring toFollow-up:

Development:● Evaluation on● Compliance planningcompliance observance● Monitoring● Compliance training● 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; fair transactions

2 Matters to be observed regarding societyManagement with responsibility; information disclosure; control of insider information; protection of the environment; 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 2017

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.
Promoting System

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

KYOWA EXEO CORPORATION:

Command

Advisory andcollaboration

Guidance
Legal Unit,
Risk Control 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.

Compliance

Whistle-blowing system

Responsible Compliance
Promoter
Persons in Charge of
Promoting Compliance
Employees

Collaboration

Group Business Development Division[Departments and Branches]

Management Systems

Collaboration

Guidance andcontrol

Compliance promotion and enhancement monthManagement andcontrol of thepromoting system

Guidance andoversight on the spot
and of trading units

Referrals andconsulting

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 201734

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

President of KYOWA EXEO

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

Risk Management DivisionInternal Audit Division

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

assesses any risks for which it is responsible at the Group

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

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

Risk Management Category
Risk Management Category

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

Businessrisk

divisions and manages the progress of the measures being taken.

Management
risk

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

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

Description of the Risk

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

Disaster risk

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

Business Process Risk Categories
Business Process Risk Categories

for improvement in collaboration with the related risk management division.

Compliance risk

Compliance with authority, Act of injustice

Employment risk

Employment and service, Equal treatment

Financial risk

Financial reporting, Credit agreement

Business process risks can be classified into the seven 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 preservation risk

Environmental pollution, Resource conservation

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 2017

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 Date of Registration

Quality Management
SystemJIS Q
9001:2008

February 22, 1999

Environment
Management System

JIS Q
14001:2004

May 12, 2000

Occupational Healthand Safety
Management System

BS-OHSAS
18001:2007

September 19, 2003

Information Security
Management System

JIS Q
27001:2014

November 10, 2004

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

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

the recurrence of any information security accidents, andmonitors and evaluates the status of any improvements inoverall security matters to enhance the Group’s information
security on a continuous basis.
Furthermore, the Group also provides all of its employeeswith information security training, while conducting various
kinds of security checkups every year.

Management Systems

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

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

▶
For the details of the KYOWA EXEO Privacy

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

Corporate Report 201736

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.

‌
Utilizationof 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!

Fukuyama Technology Center of Chugoku BranchParticipated in the Volunteer Road Campaign
Since July 2013, the gardening club members working at the Fukuyama
Technology Center, including those who serve associated companies, havecleaned the streets around the center and grown roses planted in the street
gardens. In addition, all the people working at the center participate in thestreet cleanups after a morning meeting twice a month. As a result, we were
given a signboard showing our participation in the Ministry of Land, Infrastructure, Transport and Tourism’s Volunteer Support Program, dubbed as“Volunteer Road.”
The Volunteer Road is the ministry’s scheme to seek the active participation of citizens in road maintenance by offering support to street greening,cleaning and beautification activities conducted by civic or other groups.
We will continue to emphasize these activities and continue them as partof our involvement in environmental preservation and contributions to the local communities.

37 Corporate Report 2017

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 to maintain government-owned forests for up to 60 years.

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

Degree of environmental contribution of EXEO’s forests (Mori), achievement in fiscal 2016

(According to the Forestry Agency Report)

Degree of environmental contribution: One year (effects for the period ofApril 2016–March 2017 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

Content of Activities
Five branches, of which the business area is located near EXEO’sforests (Mori), regularly conduct forest preservation and cleaning
activities such as maintenance of walking trails, mowing of bottom weeds, cutting ivy and putting up bird houses.

Hokkaido Branch

Environmental Management

Chitose-shi,
Hokkaido

Involvementin the Environment

Kansai Branch

Chugoku Branch

Forest exploration is also conducted as part of the recreation
activities for employees and their families. Such events are also
used for enlightening activities to explain the importance of preventing global warming and biodiversity preservation.

Shiroishi-shi,
MiyagiUto-shi,
Kumamoto

Kyushu Branch

Kure-shi,
Hiroshima

Nishinomiya-shi,
Hyogo

Tohoku Branch

Corporate Report 201738

Involvement in the Environment

Fiscal 2016 Material Balance of the Company (Non-consolidated)
To make environment-friendly business activities effective and reduce the accompanying environmental load as much as possible, we strive
to understand and analyze the kinds of resources and energy sources that are used and the environmental load that has been produced.

INPUT
Total energy input

OUTPUT

170,768 GJ

Electric power purchased

Environment-friendly business activities

Electricity sold

16,305 MWh

Total greenhouse effect gas emissions

4,767 tons (CO2 conversion)

Electric power sourced

6,270 tons (CO2 conversion)

Fuel sourced

3,303 tons (CO2 conversion)

Waste sourced

4,236 tons (CO2 conversion)

13,346 MWh

Solar power generation electricity output

61 MWhCity gas

101 km3

LPG

1 km3

Gasoline

1,096 kℓLight oil

191 kℓKerosene

15 kℓ

Water resource input

Company cars

Head office

65 km3

Water resource sourced

13 tons (CO2 conversion)

Power generation and electric power selling sourced

9,017 tons (CO2 conversion)

EXEO’s forests (Mori) sourced

38 tons (CO2 conversion)

Waste emissions and recycled volume27,261 tons

Industrial waste emissions

3,036 tons

General waste emissions

123 tons

Total recycled volume

24,102 tons

Total displacement

65 km3Business offices

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
to do so.

16 plants in operation
across Japan
with a capacity of
approximately 19 MW

Ishioka-shi, Omitama-shi,
Ibaraki Ibaraki(as of March 31, 2017)

Matsue-shi,
ShimaneAmagasaki-shi,
Hyogo
Kumage-gun,
Yamaguchi
Takamatsu-shi,
Kagawa39 Corporate Report 2017

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

Fuchu-shi,
Tokyo

Minamiboso-shi,
Chiba

Togane-shi,
ChibaFiscal 2016 Initiatives Regarding the Prevention of Global Warming
As for the reduction of power consumption, power-saving
measures for equipment are taken including the conversion ofelectric appliances to energy-saving type ones and the enhanced
use of inverters for diverse equipment. In addition, companywide
initiatives mainly taken by the responsible person on each floor
Change in power consumption (per square meter)

6

16

9.53

9.72

5.1

5.4

5.0

5.0

5.4

Change in gasoline and light oil consumption (per travel distance)( /thousand km)
120

5

8.26

8.14

8.11

4

93.5

87.1

92.6

2013

2014

81.0

78.0

2015

2016

80

3

8

40

2

4
0

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

12

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

1
2012

2013

2014

2015

2016

0

2012

2013

2014

2015

2016

0

2012

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

200

Change in general waste emissions (per person)(kg/person)(kg/¥million)
300

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.

40

254.6
194.1

184.1

162.8

(tons)

25.3

29.4
22.6

149.7

0

20,000

2013

2014

2015

2016

0

24,102

16,46010,00010
2012

19,103

16.8

20
100

26,014 25,957

30,00032.9

30Change in total recycled volume

2012

2013

2014

2015

2016

0

2012

2013

2014

2015

2016

Clean Center, regional waste treatment facilities with waste power
generation capability for the prevention of global warming

Kinoumi Clean Center completed in February 2016

Environmental Management

From construction to operation and management of the Kinoumi

Involvementin the Environment

PICK UP!

The Company received a design-build, performance-based order for the construction of a facility that incinerates burnable waste, from among the general waste discharged from Kinokawa-shi, Kainan-shi and Kimino-cho of Wakayama
Prefecture, and utilizes the resulting thermal energy to generate power and a facility that collects, shreds and sorts therecyclable waste from Kinokawa-shi and Kimino-cho to generate resources. The construction was completed in February 2016, and in March the facilities commenced operations, after which we concluded a long-term comprehensive
contract with a regional facility management association to operate and manage the facilities for 15 years. Currently, weare contributing to the regional waste treatment business through the stable operation of the facilities.
The Kinoumi Clean Center consists of a facility for promoting energy collection from waste incineration with an incineration capacity of 135 tons per day and a power generating capacity of 1,950 kilowatts and a facility for promoting
materials recycling by collecting, shredding and sorting recyclable waste with a sorting capacity of 17 tons per day.
We will continue to contribute to promoting a recycling-oriented society with a focus on the waste treatment business.

Corporate Report 201740

Financial Section

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

317,862

318,513

301,319304,201

2013/3324,102

300,912301,446

2014/3

287,437

298,825

36,11338,543

300,438

2015/3

2016/32017/3■Operating Income

2013/3

2014/338,48035,74035,795

2015/3

2016/3

18,58918,512

2015/3

2016/32017/3

238,301

243,438

2017/3■Ordinary Income(¥Millions)(¥Millions)
20,873

20,73418,046

2013/3

2014/318,35818,412

2015/3

2016/3

18,1192017/3■Profit attributable to owners of parent(¥Millions)

2013/3(¥Millions)
13,78912,264200,412

12,184

122,387

2013/3

2014/3

2014/3■Total Assets ■Net Assets

14,91011,313

2015/3

21,40920,602

2016/32017/3

2013/3217,091

135,687

2014/3

228,422

146,768

2015/3

151,241

2016/3

158,280

2017/3(¥Millions)

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

41 Corporate Report 20172013/3

2014/3

2015/3

2016/32017/3317,862
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

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

Building a better, brighter future together

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

NTT group engineering

324,102304,201

301,446

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS

300,438(¥Millions)

2013/3

2014/3

2015/3

2016/32017/3

2013/3

2014/3

2015/3

2016/32017/3

NTT group engineering

178,869

171,084

160,375

167,963

182,281

NCCs

33,54337,35734,492

20,233

28,795

Urban infrastructure

72,131

61,04173,57372,31572,774SYSTEM-SOLUTIONS

33,31834,71733,00439,92640,251

317,862304,201

301,446

300,438

324,102Total

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

NTT group engineering

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS

318,513
301,3192013/3300,912

2014/3

2015/3

287,437

2016/3298,825(¥Millions)

2017/3

2013/3

2014/3

2015/3

2016/32017/3

NTT group engineering

173,321

173,544

162,729

160,587

168,336

NCCs

31,22844,196

36,66923,24923,345

Urban infrastructure

63,61865,56067,90565,74967,365SYSTEM-SOLUTIONS

33,15035,21333,60837,851

39,778301,319

318,513300,912287,437

298,825

Total

Outstanding Orders by Business Segment (Consolidated)(¥Millions)
143,589

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS

103,758

2014/3(¥Millions)

105,455

2015/3

2016/32017/3

2013/3

2014/3

2015/3

2016/32017/3

NTT group engineering

49,352

46,89344,53951,91565,860NCCs

17,328

10,489

8,313

5,296

10,745

Urban infrastructure

46,99142,472

48,141

54,707

60,115SYSTEM-SOLUTIONS

4,324

3,902

4,461

6,465

6,867

117,996

103,758

105,455

118,384

143,589

Total

Corporate Report 2017

Financial Section

118,384

117,996

2013/3

NTT group engineering

42

Financial Section

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

(%)

(%)
12.0

12.1

11.9

12.5

12.9
6.0

2013/3

2014/3

2015/3

2016/32017/3

2013/3

6.5

2014/3

6.4

6.1

2015/3

2016/37.0

2017/3■Ordinary Income to Net Sales■Profit Attributable to Owners of Parent to Net Sales

(%)

(%)
7.2
6.0

2013/3

6.5

2014/3

6.2

6.4

2015/3

2016/34.7
3.8

2017/3

2013/3

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

4.6
4.1

4.2

2015/3

2016/32017/3

1.23

1.24

2016/32017/3

11.6
9.6

8.7

8.2

8.9

1.58

1.53

1.35

7.1
5.9

2013/3

2014/3

5.5

5.2

2015/3

2016/3Gross 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 20175.7

2017/3

2013/3

2014/3

2015/3

2013/3

2014/3

2015/3

2016/32017/3

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

12.9
7.0
7.2
4.6
8.9
5.7
1.24

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

(%)

(%)
60.9

2013/362.3

2014/364.0

2015/3

64.8

63.3

2016/32017/3

206.4

206.3

2013/3

2014/3■Quick Assets to Current Liabilities■Fixed Assets Ratio

(%)

(%)

157.8

162.6

170.8

2013/3

2014/3

2015/3

232.4

217.5
191.0

2015/3

58.7

61.3

182.1

56.2

2017/3

2013/3

2014/3

2015/3

2016/32017/366.6

64.0

2016/32017/3

151.4

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

(%)

10.8
9.9
8.1

7.6
619.3

5.9

234.4
117.5
187.0
2014/390.7
2015/3

2016/3

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

2013/32017/3

2014/3

2015/3

2016/32017/3

2013/3

2014/3

2015/3

2016/32017/3

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

64.8
232.4
182.1
64.0
234.4
8.1

Corporate Report 2017

Financial Section

2013/344

Financial Section

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

147.75145.24123.83(¥)
1,482.82

125.901,350.05

109.25

2013/3

1,199.86

2014/3

2015/3

2016/3

2013/32017/3

2014/3■Price Earnings Ratio■Price Book-value Ratio(Times)(Times)

10.4
9.2

9.0

2014/3

2015/3

2015/3

2016/32017/3

11.1
1.0

9.9
0.8

2013/3

1,668.29

1,569.09

2016/32017/3■Cash Dividends Per Share2013/3

2014/30.9

2015/31.0
0.8

2016/32017/3■Payout Ratio ■Total Shareholder Return Ratio

(¥)

(%)
71.4

46.0
38.0
32.0
22.0

36.3

24.0

25.8
20.1

2013/3

2014/3

2015/3

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 2017

53.6

50.2

46.5

2016/32017/330.2

31.7

2016/32017/316.2

2013/3

2014/3

2015/3

2013/3

2014/3

2015/3

2016/32017/3109.25
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

145.24
1,668.29
11.1
1.0
46.0
31.7
53.6

Other Indices (Consolidated)■Selling, General and Administrative Expenses■Capital Expenditures(¥Millions)(¥Millions)
13,21518,067

17,80917,382

17,382

17,607

7,372
4,219

3,360

2013/3

2014/3

2015/3

2016/32017/3■Depreciation Expenses

2013/3

7,139

2014/3

2015/3

2016/32017/3■Interest-bearing Debt(¥Millions)(¥Millions)
3,001

3,251

2,660
2,308

16,2992,264
13,3749,908

2013/3

2014/3

2015/3

2016/32017/3

7,988

7,903

8,074

2015/3

2016/32017/3

2013/3

12,825
8,679

2014/3

2015/3

2016/32017/3■Number of employees(People)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)

2013/3

2014/3

2015/3

2016/32017/318,067
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

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

Corporate Report 2017

Financial Section

7,521

46

Financial Section

Consolidated Balance Sheets(¥Millions)

2013/3

2014/3

2015/3

2016/32017/3ASSETS
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

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

142,395
15,431
96,08063
24,159
3,733
2,927
(0)
101,04262,002
20,0744,710
36,197
1,021
4,414
1,053
3,360
34,626
17,093
14,520―4,228(1,216)
243,438

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
Bonds payable
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

63,91635,553
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
87,06061,28336,606
826
4,142
3,457
1,242
129
57
507
―
―
14,31423,87410,000
1,390
5,244
―
257
206
4,925
1,851
85,158NET 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

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
238,301

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

47 Corporate Report 2017

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
Gain on exchange of investment securities
Other
Non-operating expenses
Interest expenses
Rent expenses
Loss on sales of noncurrent assets
Loss on retirement of noncurrent assets
Foreign exchange losses
Impairment loss
Provision for bonuses
Loss on liquidation of subsidiaries

Provision of allowance for Loss on dissolved welfare pension fund

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

2013/3
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

2014/3
318,513279,969
38,54317,80920,734
1,083
20
173
73
122
146
―
―
547
1,215
51
―
163
―
―
318
―
―
123
558
20,602
3,797
2,238
1,559
―
―
571
571
―
23,828
8,837
76
8,914
14,914
4
14,9102015/3300,912265,171
35,74017,382
18,358
1,254
26
243
438
―
146
―
―
399
1,024
52
―
313
―
―
208
―
―
―
449
18,589
1,180
1,180
―
―
―
―
―
―
19,769
6,823
669
7,493
12,276
11
12,264

2016/3
287,437
251,642
35,795
17,382
18,412
1,438
21
266
―
441
157
261
―
289
1,338
57
44
138
―
397
―
―
―
―
701
18,512
―
―
―
―
―
―
―
―
18,512
4,203
2,086
6,290
12,22237
12,1842017/3298,825
260,344
38,48017,607
20,873
1,936
4
315
―
111
572
437
203
290
1,400
49
185
516
―
143
―
―
―
―
504
21,409
1,471
―
―
1,262
209
2,159
―
2,159
20,721
7,719
(737)
6,982
13,739(50)
13,789(¥Millions)

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

2013/3
11,332

2014/3
14,914

2015/3
12,276

2016/3
12,222

2017/3
13,739

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

(554)
(30)
216
(368)
13,37013,21433

15,65821

18,39733

11,42626

13,438(68)
Corporate Report 2017

Financial Section

Consolidated Statements of Comprehensive Income48

Financial Section

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

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

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

49 Corporate Report 20172013/3

2014/3

2015/3

2016/32017/3

6,888
―
6,888

6,888
―
6,888

6,888
―
6,888

6,888
―
6,888

6,888
―
6,888

6,230

6,300

6,645

6,879

7,939

69

324

234

1,060

38

―

20

―

―

―

69
6,300

344
6,645

234
6,879

1,060
7,939

38
7,978

109,067―

118,296―

130,822(2,352)

137,957―

147,004
22(2,084)
11,313(2,429)14,910(2,776)
12,264(3,137)
12,184(4,338)13,789

―

44

―

―

―

9,228
118,296

12,525130,8229,487
137,957

9,047
147,004

9,450
156,477(10,016)(12,408)(14,487)(17,029)(21,910)(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)(3,002)167―
733(2,101)(24,011)

112,170―

119,077―

129,868(2,352)

134,696―

139,92222(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(4,338)13,789(3,002)
206
―
733

―

64

―

―

―

6,906
119,077

10,791
129,868

7,179
134,696

5,226
139,922

7,388
147,333

1,002

2,895

3,631

5,157

4,121

1,892
1,892
2,895

736
736
3,631

1,525
1,525
5,157

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

(554)
(554)
3,566

―

9

21

35

28

9
9
9

11
11
21

14
14
35

(7)
(7)
28

(12)
(12)
15

―

―

1,794

6,386

6,671

―
―
―

1,794
1,794
1,794

4,592
4,592
6,386

285
285
6,671

216
216
6,888

1,002

2,904

5,446

11,57910,821

1,901
1,901
2,904

2,542
2,542
5,446

6,132
6,132
11,579(758)(758)
10,821(350)(350)
10,470

217

231

175

263

241

13
13
231

(56)
(56)
175

88
88
263

(22)
(22)
241

47
47
288

19

174

195

229

255

155
155
174

21
21
195

33
33
229

26
26
255

(68)
(68)
187

113,411―

122,387―

135,687(2,352)

146,768―

151,24122(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(4,338)13,789(3,002)
206
―
733

―

64

―

―

―

2,070
8,976
122,387

2,507
13,299135,687

6,254
13,434
146,768

(754)
4,472
151,241

(371)
7,016
158,280

Consolidated Statements of Cash Flows(¥Millions)

2014/3

2015/3

2016/32017/3

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
611
(5,197)(1,339)
(288)
57
(122)
(8,419)
487
(423)
2,438
1,006
(2,673)
(0)
―
―
483
8,705
288
(59)
(3,545)(13,907)(10,467)
1,533(2,137)(2,570)10

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

―

―

(361)

―

―

(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
―

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

―

53

―

―

―

14,611

16,21324,291

16,037

15,241
Corporate Report 2017

Financial Section

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

2013/350

Financial Section

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

268,356

243,418

247,358
227,593
235,305

2013/3

2014/3

236,672
236,236

2015/3

241,884

227,521

2016/3

243,546

2017/323,33924,207

2013/3

2014/3■Operating Income■Ordinary Income(¥Millions)(¥Millions)12,444
11,347

2013/3

11,956

11,2102014/3

10,012

10,073

2015/3

2016/3

2013/32017/3■Net Income

21,326

21,586

2015/3

2016/3

12,747

12,73523,2202017/3

12,225

10,962

2014/3

2015/3

2016/32017/3200,289

205,965■Total Assets ■Net Assets(¥Millions)

17,120(¥Millions)
172,435

185,730

188,122

13,235
10,334

9,399
89,0687,274

2013/3

2014/3

2015/3

2016/32017/3

2013/395,754

2014/3

102,552

2015/3103,958

2016/3

114,1292017/3(¥Millions)

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

51 Corporate Report 20172013/3

2014/3

2015/3

2016/32017/3

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

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

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

Trends by Segment (Non-consolidated)
Orders Received by Business Segment (Non-consolidated)(¥Millions)
243,418

268,356
235,305

236,236

NTT group engineering

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS

241,884(¥Millions)

2013/3

2014/3

2015/3

2016/32017/3

2013/3

2014/3

2015/3

2016/32017/3

NTT group engineering

132,355

130,375

125,428

141,628

159,656

NCCs

32,20135,866

33,662

19,79027,597

Urban infrastructure

57,091

47,23556,68757,40858,825SYSTEM-SOLUTIONS

21,76921,827

20,45823,05622,276

243,418

235,305

236,236

241,884

268,356

Total

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

247,358

227,593236,672

243,546

NTT group engineering

NCCs

Urban infrastructure

SYSTEM-SOLUTIONS

227,521(¥Millions)

2013/3

2014/3

2015/3

2016/32017/3

2013/3

2014/3

2015/3

2016/32017/3

NTT group engineering

126,691

131,193

127,237

132,765

146,591

NCCs

30,064

42,13435,582

22,536

22,649Urban infrastructure

49,25552,15153,44451,35051,714SYSTEM-SOLUTIONS

21,582

21,87920,407

20,86922,590227,593247,358

236,672

227,521

243,546

Total

Financial Section
Corporate Report 201752

Financial Section

Non-consolidated Balance Sheets(¥Millions)

2013/3

2014/3

2015/3

2016/32017/3ASSETS
Current assets
Cash and deposits
Notes receivable-trade
Accounts receivable from completed construction contracts
Short-term investment securities
Costs on uncompleted construction contracts
Finished goods
Raw materials and supplies
Short-term loans receivable
Prepaid expenses
Deferred tax assets
Other current assets
Allowance for doubtful accounts
Noncurrent assets
Property, plant and equipment
Buildings
Structures
Machinery and equipment
VehiclesTools, furniture and fixtures
Land
Lease assets
Construction in progress
Intangible assets
Software
Other intangible assets
Investments and other assets
Investment securities
Stocks of subsidiaries and affiliates
Long-term loans receivable from subsidiaries and associates
Claims provable in bankruptcy, claimed provable in rehabilitation and other
Long-term prepaid expenses
Prepaid pension cost
Other investments and other assets
Allowance for doubtful accounts
Total assets

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

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

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
Bonds payable
Long-term loans payable
Lease obligations
Deferred tax liabilities
Allowance for investment loss
Asset retirement obligations
Other noncurrent liabilities
Total liabilities

75,83534,511
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
96,33077,96840,413
―
95
1,000
6,117
2,032
2,806
23,371
21
356
―
1,751
13,86810,000
1,235
141
1,425
192
439
434
91,836NET 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

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

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

53 Corporate Report 2017

Non-consolidated Statements of Income(¥Millions)

2014/3

2015/3

2016/32017/3

Net sales

227,593247,358

236,672

227,521

243,546

Cost of sales

204,254

223,150

215,346

205,934

220,326

Gross profit

23,33924,207

21,326

21,58623,220

Selling, general and administrative expenses

11,991

11,763

11,313

11,51312,010Operating income

11,347

12,444

10,012

10,073

11,210Non-operating income

1,563

1,152

1,504

3,644

1,749

Interest income

41

33

33

43

37

Interest on securities

14

8

13

10

0

Dividends income

133

129

193

2,392

259

Land and house rent received

473

468

466

397

783

Foreign exchange gains

446

―

474

―

―

Reversal of allowance for doubtful accounts

―

305

168

―

―

Reversal of allowance for investment loss

171

―

―

―

―

Gain on sales of non-current assets

―

―

―

231

402

Other

284

208

155

569

266

954

848

554

982

734

Interest expenses

72

66

57

48

35

Interest on bonds

―

―

―

―

1

Rent expenses

157

152

202

137

260

Foreign exchange losses

―

―

―

400

150

Provision of allowance for investment loss

―

―

―

78

96

Bad debts expenses

14

17

―

―

―

Loss on disposal of equipment and materials

118

―

―

―

―

Loss on disposal of fixed assets

177

―

―

―

―

Penalty for contract breach

―

86

―

―

―

Impairment loss

280

187

150

―

―

Other

133

339

144

318

190

11,956

12,747

10,962

12,735

12,225Extraordinary income

―

3,709

6,669

―

10,750Extraordinary loss

―

571

―

―

2,148

Income before income taxes

11,956

15,885

17,632

12,73520,827

Income taxes-current

5,297

5,499

3,837

1,276

4,065

Income taxes-deferred

(615)

51

558

2,059

(358)

Total income taxes

4,681

5,550

4,396

3,336

3,707

Net income

7,274

10,334

13,235

9,399

17,120Non-operating expenses

Ordinary income

Corporate Report 2017

Financial Section

2013/354

Stock Information(as of March 31, 2017)

Major Shareholders
Fiscal Year-End

March 31Annual Shareholders’MeetingJune 23, 2017

Japan Trustee Services Bank, Ltd.
(Trust Account)

6,085

5.17

Stock Listing

Tokyo Stock Exchange (First Section)

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

5,838

4.96

Ticker Code

1951

5,766

4.89

Common Stock

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

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

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

Total Number of 9,952
Shareholders
Transfer Agentand Registrar

Sumitomo Mitsui Trust Bank,
Limited 1-4-1, Marunouchi,
Chiyoda-ku, Tokyo, JapanESOP Association of KYOWA EXEO CORPORATION

4,043

3.43

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

2,621

2.23

Sumitomo Realty & Development Co., Ltd.

2,081

1.77

SUMITOMO LIFE INSURANCE COMPANY

2,000

1.70

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

1,834

1.56

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

1,613

1.37

NORTHERN TRUST CO.(AVFC) RE NVI01

1,506

1.28

Note: In addition to the above, treasury stock of 22,353,000 shares (18.97%) is held by theCompany.

Composition of Shareholders

Individuals
and others
14.14%

Financial
institutions
33.03%
Securities
companies
0.93%

Foreigncompanies
24.35%

Other
corporations
8.58%

Treasury stock
18.97%

Stock Price Range and Trading Volume on the Tokyo Stock Exchange
Stock Price
(¥)
1,800

1,200
Trading Volume(Million Shares)
600

20

15

10

5

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3
2012

55 Corporate Report 2017

2013

2014

2015

2016

2017

0

Board of Directors (as of July 1, 2017)

Building a better, brighter future together

Representative Director andExecutive Operating Officer

President Fuminori Kozono

Tsutomu Ota

Director and Executive
Operating Officer

Director and Executive
Operating Officer

Director and Managing
Operating Officer

Director and Managing
Operating Officer

Director and Managing
Operating Officer

Yoshiaki Matsuzaka

Noritsugu Totani

Yasuo Otsubo

Tomohiro Kurosawa

Yuichi Koyama

Director

Director(Independent Director)

Director(Independent Director)

Standing Statutory
AuditorStanding Statutory
AuditorKumiko Kitai

Kazuteru Kanazawa

Haruhiko Watanabe

Yoshiharu Takizawa

Yuki Sakuyama

Managing
Operating Officers

Kozo Meguro

Statutory Auditor

Atsuo Yuhara Masato Suwabe
Masafumi Yoshihara Kyoji Okabe
Hideo Higuchi Takashi Itamiya
Fumio Kumagai Noriyuki Watabe
Kazuo Sato Makoto Shirakata
Takayuki Yamada keijiro Shizukuishi
Yutaka Motohashi kosei Nakashima

Stock Information /Board of Directors

Statutory Auditor(Independent Auditor)

Genzaburo Oe
Eiichi Matsuda
Junichi Sato
Hiroshi Yamashita
Yuji Sato
Hideki Obara
Koichi Mino
Hiroaki Kubozono

Operating Officers

Haruhiko Yamada

Corporate Report 201756