KYOWA EXEO CORPORATION · Major Banks Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd. Independent Auditor Kudan Audit Corporation To

CORPORATE REPORT

Cultivating Technological Capabilities,

Seeking Affluence and

Contributing to Society

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

Friendly to Humans, Society and the Earth: Linking

“Communications” with the Latest Technology.

The KYOWA EXEO Group Continues to Create “Linkages”

in Society as a Social Service Company for Information and

Communications Technology (ICT).

Corporate Report 20121

Create

“Linkages”

in Society

2Corporate Report 2012

Fixed line of communications (access) Metal

Mobile communication network (mobile)

Fixed communication network (network) Analog Digital

H

is t o r y

May 1954Company established as Kyowa Densetsu Kaisha, Ltd.

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

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

Apr. 1990Entered the food plant wastewater treatment business and river purification business

May 1991Changed company name to KYOWA EXEO CORPORATION

Mobile phone base station

Feb. 1983Started optical fiber work throughout Japan

Mar. 1993Started the PDC (MOVA) service

Dec. 1963Implemented the shield tunneling method for service tunnel (communications tunnel) work (Shirogane)

Feb. 1963Started overseas work (Honduras)

Jul. 1956Started Japan’s first telex work (Osaka Central Telegraph Office)

Milestones of the KYOWA EXEO GroupSince its foundation in May 1954 as Kyowa Densetsu Kaisha, Ltd.,

KYOWA EXEO has continued to create “Linkages” in society.

1954 1960 1970 1980 1990

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

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

Nov. 2011 ICOMSYSTECH Co., Ltd., was converted into a wholly owned subsidiary

May 1954 Company established as Kyowa Densetsu Kaisha, Ltd.

Jul. 1954 Qualified to participate in telecommunications facility tenders for Nippon Telegraph and Telephone (now NTT)

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

Sep. 1963 Began engaging in telecommunications and electric power construction outside that for NTT

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

Apr. 1982 Branched out into the software business

Jun. 1986 Entered the environment business

May 1991 Changed company name to KYOWA EXEO CORPORATION

Mar. 1999 Relocated head office to current address in Shibuya-ku, Tokyo

Apr. 2004 Acquired Daiwa Densetsu Corp.

May 2004 Acquired WAKO ENGINEERING CORP.

Apr. 2005 Acquired KANAC Corp.

Sep. 2009 KANAC Corp. was converted into a wholly owned subsidiary

Corporate History

Year ended September 1988: Achieved annual net sales of

¥100 billion

Year ended September 1974:Achieved annual net sales of

¥50 billion

Jun. 1986Entered the environment business: Sales activity started mainly in the water treatment field

Apr. 1982Branched out into the software business

Aug. 1988Acquired a construction technology evaluation statement from the Minister of Construction for the development of a rainfall storage penetration system

Apr. 1983Developed a detailed telephone charges statement system


Optical fiber

2nd generation 3rd generation 3.5th generation 3.9th generation

IP NGN

Feb. 1999Acquired ISO9001 certification (Head Office, etc.)

May 2000Acquired ISO14001 certification

Apr. 2001Merged with Showa Technos Corp.

Nov. 2001Instituted a compliance program

Sep. 2003Acquired OHSAS18001 certification

Apr. 2001Developed the Administrative Organ Accounting System

Apr. 2000Started the dioxin-countermeasure-compliant incinerator business

Jun. 2001Completed a livestock waste discharge and purification facility; Full-fledged entry into the livestock excreta disposal business

Jan. 2002Made progress on work for the B FLET’S high-speed communication broadband

Oct. 2001Started full-fledged IMT (FOMA) service

Oct. 2001Entered the Type 2 telecommunications carriers registry data center business; Developed the i-mode-compliant “Work Management System”

Apr. 2004Acquired Daiwa Densetsu Corp.

May 2004Acquired WAKO ENGINEERING CORP.

May 2004Celebrated the 50th anniversary of foundation

Apr. 2005Acquired KANAC Corp.

Jun. 2003Sold an Internet video conference system

May 2003Completed the first bio plant (Iwate Prefecture)

Apr. 2005Aggressively marketed the thermite-style dual-side ash fusion furnace

Apr. 2003Started analog-analog antenna exchange work compliant with ground digital broadcasting

Mar. 2004Telephone communications via the FOMA format became available at all subway stations in all 23 wards in Tokyo

Sep. 2006Started work for the next-generation network (NGN)

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

Oct. 2009Won a gold medal at the 40th World Skills Competitions in Calgary, Canada Feb. 2011

Received the IBM Excellent Partner Award Japan 2010

Jun. 2011Authorized as a Core Business Partner of NTT DATA CORPORATION

Mar. 2011Started Great East Japan Earthquake recovery work

Oct. 2011Won a gold medal at the 41st World Skills Competitions in London

Nov. 2011ICOMSYSTECH Co., Ltd., was converted into a wholly owned subsidiary

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

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

Jul. 2009Entered into a system engineering service agreement with Tokyo Stock Exchange

Mar. 2006Started sales of a wood biomass boiler system

Aug. 2006Started long-term comprehensive business consignment services at general waste treatment sites (Tochigi Prefecture)

Oct. 2010First general waste incinerator completed (Aomori Prefecture)

Oct. 2006Increased works related to mobile phone number portability

Mar. 2009Started operation of EDI-SO, or Electronic Data Interchange—Service Order Process Management System

Mar. 2010Expanded the regional intranet establishment business

Dec. 2010Started the LTE (Xi) service

Jan. 2006Acquired the ISMS certification

Nov. 2007Won a gold medal at the 39th World Skills Competitions in Shizuoka, Japan

Mar. 1999Relocated head office from Akasaka to current address in Shibuya-ku, Tokyo, as the construction of the company building was completed

Apr. 1999Developed the Social Insurance System

Apr. 1999Deployed system-coordinating solutions

Oct. 1996Started Japan’s pioneering Internet-compliant OCN establishment work (Chiyoda-ku)

Jan. 1997Acquired ISO9001 certification (Overseas Division)

Jun. 1994Acquired a construction technology evaluation statement from the Minister of Construction for the development of a high-efficiency river purification system

Jul. 1995Started Japan’s pioneering work for C·C·Box on national route No. 1

Apr. 1994Developed the Air Traffic Control System


Since its foundation in May 1954 as Kyowa Densetsu Kaisha, Ltd.,

KYOWA EXEO has continued to create “Linkages” in society.

2000 20122010

Year ended March 1997: Achieved annual net sales of

¥200 billion

Year ended March 2006: Achieved annual net sales of

¥300 billion

Jun. 2002Acquired the ash fusion business from Niigata Engineering Co., Ltd.

Mar. 2004Entered in the KDDI au base station construction business

Apr. 2004Started to reestablish the railway communication network along with the quadruple track extension of private railway lines in Tokyo

Feb. 2005Started the KDDI Metal Plus service

Sep. 2009KANAC Corp. was converted into a wholly owned subsidiary

Feb. 2009Started the UQ WiMAX service

Apr. 2011Started next-generation PHS work

Apr. 2012Upon receiving a permit for a 900-MHz zone, started the Platinum Band Project

Co

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Environmental/Social InfrastructureS

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Corporate Data

Company Name KYOWA EXEO CORPORATION

Established May 17, 1954

Paid-in Capital ¥6,888 million (as of April 1, 2012)

Stock Listing First Section of the Tokyo Stock Exchange

Representatives Kunio Ishikawa, PresidentFuminori Kozono, Vice President

Net Sales ¥273.1 billion (consolidated)¥200.0 billion (non-consolidated) (as of March 31, 2012)

Number of Employees

7,872 (consolidated)3,543 (non-consolidated) (as of March 31, 2012)

Head Office 29-20, Shibuya 3-chome, Shibuya-ku, TokyoTEL: +81-3-5778-1111 (switchboard)URL: http://www.exeo.co.jp

West Japan Head Office

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

Number of Business Offices

Branch offices: 14Sales offices: 14

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

Independent Auditor

Kudan Audit Corporation

To help you better understand the corporate activities of the KYOWA EXEO Group, we are providing an integrated-version issue of the Annual Report and the CSR Report.


The KYOWA EXEO Group contributes to creating an earth-friendly society through its environment business.

The KYOWA EXEO Group contributes to creating a comfortable society by taking advantage of its state-of-the-art technologies.

1 From Restoration to Revival and to RevitalizationUtilize the capabilities of the KYOWA EXEO Group for the future of afflicted areas. � 19

2 Initiatives toward CreatingA Symbiotic Environmental Society �� 21

3 Preparing for the Smartphone EraCreating a connected society �� 23

4 Cultivating EmployeesThat can think onsite �� 25

CSR Concept �� 27

Management Systems

Corporate Governance �� 29

Compliance �� 30

Risk Management �� 31

Involvement in the Environment

Environmental Management �� 33

Financial Section �� 37

Board of Directors �� 52

Stock Information �� 53

Editorial Policy �� 54

Business Overview �� 7

Consolidated Financial Highlights �� 11

Message from the President �� 13

Interview with the President �� 15

Social Contribution through Business ActivitiesFeatures

The KYOWA EXEO Group focuses its efforts on “cultivating human resources” who can contribute to society.

One year has passed since the Great East Japan Earthquake. The KYOWA EXEO Group continues moving ahead from reconstruction to revitalization hand-in-hand with the people in the devastated areas.

C o n t e n t s


Internet

ENGINEERING SOLUTIONS

Telecommunications Infrastructure

Overview by Segment

As broadband services are expanding toward the building of a safe and secure ICT

society, the diversification and sophistication of various technologies are under way. We

provide consistent quality services from planning and design to construction, operation

and maintenance for all types of communications equipment and facilities throughout

the country based on performance over the years and excellent technologies.

NTT Group EngineeringBuilding Telecommunications Facilities for NTT Group Companies

Access engineering: We lay optical fiber cable networks, which are indispensable for high-speed communication networking, and provide broadband services such as the Internet to corporations and ordinary homes. Network engineering: We build next-generation networks (NGNs) using leading-edge routers and servers. We also design, construct and maintain switchers, transmission equipment and power equipment of legacy facilities, all of which support today’s communications networks. Mobile engineering: We provide installations, negotiations and investigations for wireless phone base stations, mobile communications facilities and quality surveys toward the realization of comfortable mobile communications environments.

Non-NTT Telecom EngineeringEstablishing various telecommunications facilities for customers other than the NTT Group companies, as well as providing network integration services

Telecommunications facilities: We construct telecommunications facilities for new common carriers (NCCs) such as the KDDI Group and the Softbank Group, municipalities, cable television companies, railway companies and other customers. Network integration: We provide various services including constructing LANs and WANs for corporations and ordinary homes, improvement of server/Internet environments and security.

Home Communications cables Ground digital broadcasting CATV

Communications tunnels (underground conduits, service tunnels) Underground installation of electricity cables Wireless base station Railway communications

Home networking

Switching, transmission and power equipment

Mobile communications

Antennas and base stations for mobile

terminals

The KYOWA EXEO Group works to contribute to the realization of an affluent society and perform its corporate

social responsibility by providing high-value-added ENGINEERING SOLUTIONS and SYSTEM SOLUTIONS.

Linking all Communications.

We Contribute to Creating an Affluent Society with Two Types of Solutions.

Business Overview


Internet

We develop the electrical and engineering technologies that we have accumulated in building telecommunications infrastructure facilities to improve the social infrastructure including electrical and air-conditioning equipment, new energy facilities, urban civil engineering structures and environmental plants.

To help customers solve their management issues, we provide system solution services tailored to a variety of customer needs, which encompass everything from consulting to development, construction, maintenance and operation, by drawing on the latest technologies such as service-oriented architecture (SOA) and our powerful solutions.

Electrical and air-conditioning equipment: We install electrical and air-conditioning equipment for facilities such as office buildings, data centers and factories.

New energy: We construct solar and wood biomass power generation facilities.

SOA: We provide BPM and SOA solutions to swiftly cope with changes in the business environment such as the integration of data and processes by linking disparate systems within and/or among companies. Billing: We provide billing solutions such as customer-specific billing systems to flexibly adapt to market changes and/or business expansion.

Urban civil engineering: We install underground installation of electricity cables for the purpose of disaster prevention, safety and landscaping countermeasures.

Environmental plants: We construct waste treatment and water treatment facilities.

Communications systems/Public and common interest-related systems: We develop communication software products for telecommunications carriers, and we handle orders from large system integrators through government agencies for financial systems. Application development: We develop WEB applications based on technologies amassed internally, as well as Android-related applications.

Office buildingsFactories and other

facilities Wireless LANs Information security Seismic isolation solutions Digital signage

Water supply and sewage systems

Microwave transmissions

Environmental and Social Infrastructure:

SYSTEM SOLUTIONS

Software developmentLAN/WAN/IP network

establishment

Electrical/air-conditioning equipment and solar

power generation facilities

Environmental preservation facilities (water treatment, waste treatment and new

energy facilities)

Linking all Communications.

We Contribute to Creating an Affluent Society with Two Types of Solutions.

Create “Linkages” in Society

Business O

verview


Drawing on the Group’s strengths of “Total Process,” “Total Engineering” and “Nationwide Expansion,”

we continue to provide high-quality services to meet diversifying customer needs through the concerted

Group-wide power.

We respond to customers’ needs with one-stop services from planning and development to construction, operation and maintenance, which are sustained by high engineering and technological 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).

Total Engineering Nationwide Expansion

Total Process

We are prepared to meet every kind of customer need, which can be covered by our operating bases and Group companies located throughout the nation.

Nationwide operation, multiple carrier compliant and migration-compliant

Optical access network

Next-generation network (NGN)

Mobile (Speeding up) 2G 3G LTE

Underground installation of electricity cables

NI solutions and SI solutions

New energy (solar light, etc.) eco business

Electric and air-conditioning equipment

Home ICT and Smart Houses

Total Process (through-process construction)

Planning and development Construction Operation and maintenance

Strength of the KYOWA EXEO Group

Group of Professionals Who

Are Acquainted with Every Kind of

Technology

From Planning to Maintenance

Support Nationwide

Total engineering (Unified construction)

EN

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Business Overview


KYOWA EXEO CORPORATION

35 Other Consolidated Subsidiaries

WAKO ENGINEERING CORP. Daiwa Densetsu Corporation Ikeno Tsuken Co., Ltd.

Three Major Consol idated Subsidiar ies

Group Structure

Business Bases

Bases of Three Major Consolidated Subsidiaries

WAKO ENGINEERING CORP.:1-23, Heiwajima 4-chome, Ota-ku, Tokyo

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

Ikeno Tsuken Co., Ltd.:9-4, Kishimachi 1-chome, Kita-ku, Tokyo

Access engineering

Shinyei Tsushin Co., Ltd., Suncrex Corporation, FUJI DENSETSU CO., LTD., Ecos Hokuei Corporation, Sankyo-Techno Co., Ltd., Umex Chugoku Corporation, KANAC Corporation, K. Technos Co., Ltd., WAKO CTEC Co., Ltd., WAKO Itech Co., Ltd., Technos Co., Ltd., Sigmax Co., Ltd., Vertec Co., Ltd., EUNice Co., Ltd.

Civil engineering Exeo Infra Corporation, Infratechno Corporation

NetworksKyowa Synax Corporation, DAITOH INDUSTRY CO., LTD., Shinkyo Engineering Co., Ltd., Sanko Denwa Kogyo Co., Ltd., Multimedia Engineering Co., Ltd.

Mobile tele-communica-tions

Exeo Sanko Corporation, E Net Corporation, Toho Communications Co., Ltd., Yuaituken Corporation, Kyoei Densetsu Kogyo Corporation, Denseisya Corporation

IT ACCRESCO CO., LTD., ICOMSYSTECH CO., Ltd.

OtherKYOWA SECURITY SYSTEM CORPORATION, Kyokuyoh Corporation, Shinwa Seisakusyo Corporation, Exeo Butsuryuu Service Corporation, Exeo Business Corporation, ASAHI DENWA KOGYO CORPORATION

Thailand56/8 Moo 1 Soi Chaengwattana 14 Chaengwattana Road, Thungsonghong, Laksi, Bangkok 10210, THAILAND

Philippines 9/F Floor, DPC Place Building 2322 Chino Roces Ave. 1231 Makati City, Philippines

Overseas Bases

Domestic bases:

Hokkaido Branch: 2-20, Minami 21-jo Nishi 7-chome, Chuo-ku, Sapporo-shi, Hokkaido Iwate Office: 5-7, Honcho-dori 2-chome, Morioka-shi, Iwate

Tohoku Branch: 5-1, Omachi 2-chome, Aoba-ku, Sendai-shi, Miyagi Yamagata Office: 9-10, Minami Yonban-cho, Yamagata-shi, Yamagata

Kita-Kanto Branch: 1486 Kasahara-cho, Mito-shi, Ibaraki Niigata Office: Cosmo Shinano, 4-27 Shinano-machi, Chuo-ku, Niigata-shi, Niigata

Koshin Branch: 602-2, Ochiai-cho, Kofu-shi, Yamanashi Nagano Office: Nagano Central Building, 12-1, Minami Chitose 2-chome, Nagano-shi, Nagano

Minami Kanto Branch: 12-1 Kanagawahoncho, Kanagawa-ku, Yokohama-shi, Kanagawa Chiba Office: Chiba West Building, 24-9 Shinmachi, Chuo-ku, Chiba-shi, Chiba

Tokai Branch: Nishiki SIS Bldg., 10-33, Nishiki 3-chome, Naka-ku, Nagoya-shi, Aichi Kanto Naka Office: NTT Shirahata, 1-23, Shirahata 5-chome, Minami-ku, Saitama-shi, Saitama

Kansai Branch: 6-13, Kyomachibori 3-chome, Nishi-ku, Osaka-shi, Osaka Matsuyama Office: Sumitomo Seimei Matsuyama Ichibancho Building, 15-2, Ichibancho 1-chome, Matsuyama-shi, EhimeMiyako Branch: 539-20, Omiya Nishiiru Monzen-cho, Oike-dori, Chukyo-ku, Kyoto-shi, Kyoto

Hyogo Branch: 1-13, Ekiminami-dori 2-chome, Hyogo-ku, Kobe-shi, Hyogo Okayama Office: 498-1, Niwase, Kita-ku, Okayama-shi, Okayama

Hokuriku Branch: Kanazawa Fit Building, 53-1 Futakuchi-machi-Ni, Kanazawa-shi, Ishikawa Yamaguchi Office: 19-2, Ekiminami-machi, Hofu-shi, Yamaguchi

Shikoku Branch: 136, Mitani-cho, Takamatsu-shi, Kagawa Kumamoto Office: 27-23, Egoe 1-chome, Minami-ku, Kumamoto-shi, Kumamoto

Chugoku Branch: 7-11, Ogawachi-machi 2-chome, Nishi-ku, Hiroshima-shi, Hiroshima Kitakyushu Office: 1320-13, Aza Otsuka, Oaza Maeda, Yahatahigashi-ku, Kitakyushu-shi, Fukuoka

Kyushu Branch: 7-8, Tamagawa-machi, Minami-ku, Fukuoka-shi, Fukuoka Nagasaki Office: NTT WEST Higashi Nagasaki Building, 823 Tanaka-machi, Nagasaki-shi, Nagasaki

Okinawa Branch: 30-52, Oroku 1-chome, Naha-shi, Okinawa Oita Off ice: NTT Harashin Building, 5-1, Harushinmachi, Oita-shi, Oita

Minami-Kyushu Office: 6, Kasuga-cho 4-chome, Kagoshima-shi, Kagoshima

( Branches/ Offices)

Head Office: 29-20, Shibuya 3-chome, Shibuya-ku, TokyoNishi-Nippon Head Office: 6-13, Kyomachibori 3-chome, Nishi-ku, Osaka-shi, Osaka

(As of September 1, 2012)

(As of July 1, 2012)


Business O

verview


(Billions of yen)

2009 2010 2011

Operating results (Fiscal year):

Orders received 276.2 273.7 288.5

Net sales 271.2 282.2 273.1

Operating income 13.8 12.3 8.9

Income before income taxes 13.6 13.4 12.0

Net income 8.3 7.7 7.8

Financial position (at year-end)

Total assets 180.1 196.9 181.2

Property and equipment 45.2 48.4 47.7

Noncurrent liabilities 25.3 9.6 13.9

Net assets 105.3 112.2 113.4

Cash flows (Fiscal year)

Net cash provided by (used in) operating activities 10.9 0.6 16.4

Net cash provided by (used in) investing activities 10.6 1.5 4.5

Net cash provided by (used in) financing activities 4.0 3.6 17.5

(¥)

Per share of common stock:

Net income (EPS) 79.7 75.5 74.9

Diluted net income 73.8 69.7 74.8

Cash dividend 20.0 20.0 20.0

(%)

Financial indicators:

Operating income margin 5.1 4.4 3.3

ROE (Note 2) 8.6 7.6 7.2

ROA (Note 3) 4.7 4.1 4.2

Equity ratio 55.4 53.9 62.4

Notes: 1. Amounts less than ¥100 million were truncated.2. ROE = Net income ÷ Total shareholders’ equity (yearly average)3. ROA = Net income ÷ Total assets (yearly average)

271.2 273.1282.2

2009 2010 2011

Net sales (¥Billion)

13.8

12.3

8.9

5.14.4

3.3

2009 2010 2011

Operating income (¥Billion)

Operating income margin (%)

Operating income Operating income margin

276.2 273.7288.5

2009 2010 2011

Orders received (¥Billion) Net Sales by Segment

Business Results for Fiscal 2009 through Fiscal 2011

SYSTEM SOLUTIONS¥13.1 billion(4.8%)

Telecommunications Infrastructure (NTT Group)¥166.1 billion(60.8%)

Telecommunications Infrastructure (Multi-carriers)¥67.4 billion(24.7%)

Environmental and Social Infrastructure¥26.3 billion(9.7%)

¥273.1billion

Note: Amounts less than ¥100 million are truncated.

Consolidated Financial Highlights


Based on our medium-term vision (fiscal 2010–2012), we will promote aggressive business

expansion and thoroughly enhance efficiency, aiming to increase revenues and income.

Expand businesses and achieve new growth as an ICT solutions and services enterprise.

Medium-term

vision2010–2012

Strive to achieve a V-shaped recovery and upward momentum

Thoroughly enhance efficiency and promote expansion of non-NTT businesses

(Billions of yen)

2011 2012Actual results Plan Comparison with 2011

Orders received 288.5 283.0 98%Net sales 273.1 286.0 105%Gross profit on sales 26.8 (9.8%) 30.7 (10.7%) 115%Selling, general and administrative expenses 17.8 (6.5%) 19.1 (6.7%) 107%Operating income 8.9 (3.3%) 11.6 (4.1%) 130%Ordinary income 9.1 (3.4%) 12.3 (4.3%) 134%Net income 7.8 (2.9%) 7.5 (2.6%) 95%

Notes:1. Amounts less than ¥100 million are truncated. 2. Parentheses include the ratio relative to net sales.

Thoroughly enhance efficiency

Expand Non-NTT businesses

Enhance efficiency and quality of construction

Integrate and share operational bases and resources

Improve productivity of the Group

Adopt multi-carriers (NCC, etc.)

Expand environmental and social infrastructure (solar energy, etc.)

Expand system solutions

(synergies with Icom Systech Co., Ltd., etc.)

Promote M&A

Numerical targets Fiscal 2012 plan (consolidated)

Basic Policy for Fiscal 2012

1

2

Notes:1. Amounts less than ¥100 million are truncated. 2. Parentheses include the ratios of non-NTT businesses.

2010 2011

273.1

2008 2009

271.2

Net sales( Non-NTT/ NTT) (¥Billion) Operating income margin (%)

2012 (plan)

(42%) (39%)(35%)

(38%)

4.4

5.1

6.6

3.3

4.1

288.0 286.0282.2

(47%)(47%)(39%)

Business Plan for Fiscal 2012


Consolidated Financial Highlights


Message from the President


The KYOWA EXEO Group, since its establishment in 1954, has promoted business activities drawing on its core competence in professional technologies for establishing information communications facilities and equipment. We have offered consistent integrated services nationwide from planning, design, construction and management to maintenance for all facilities related to the information communications infrastructure.

As for our recent business results, we have established not only an information communications infrastructure but also an environmental and social infrastructure harnessing our long-nurtured environmental, civil engineering and electrical facility technologies. We also have developed many sophisticated software products. By offering various high-value-added solutions through these activities, the KYOWA EXEO Group has been contributing to

society as a corporation creating an affluent living environment.

The Kyowa of the KYOWA EXEO Group refers to cooperation, harmony and the bonds between persons and the Latin exeo, meaning “stand out” or “get out of something,” thereby conveying our commitment to breaking the mold and venturing out into new challenges.

Under the corporate vision of expanding businesses as an information communications technology (ICT) solutions and services enterprise and achieving new growth, we will strive to capitalize on business opportunities, aiming for continual growth, with an emphasis on bonds and ties among people and the spirit of pursuing innovation and tackling challenges.

We will contribute to the creation of

an affluent living environment through

continuous growth.

Kunio IshikawaPresident KYOWA EXEO CORPORATION

Message from

the President


We will expand new businesses and promote the rationalization of management, aiming to achieve a V-shaped recovery.

Under the basic policy “Expand businesses and achieve new growth as an ICT solutions and services enterprise,” the KYOWA EXEO Group launched its medium-term management plan in fiscal 2010. In fiscal 2011, the second year of the plan, orders received progressed steadily due to our aggressive sales activities to ¥288.5 billion (up 5% from the previous fiscal year), whereas net sales decreased 3% to ¥273.1 billion and operating income declined 28% to ¥8.9 billion due to the impact of the Great East Japan Earthquake, a temporary rise in unprofitable construction and initial expenses for reinforcing a structure to expand new fields.

We had steady results that can lead to growth for

the next fiscal year. For the restoration work of our telecommunications infrastructure suspended by the Great East Japan Earthquake, KYOWA EXEO CORPORATION (the “Company”) sent as many as 15,000 persons a day to the Tohoku region for the two months immediately after the occurrence of the earthquake. Our employees have been highly motivated to help with the restoration. It was confirmed that all our employees have a sense of mission as part of a corporation engaging in the telecommunications construction industry, for which we felt proud of them. Especially when our employees executed the high power antenna installation construction work at the 40-meter-high base station in order to secure communications for workers at the Fukushima Daiichi nuclear power plant despite lingering anxiety about radiation contamination and strong aftershocks, our customers expressed much appreciation, which we believe has contributed to further strengthening people’s trust in the Company.

For the expansion of new businesses as well, the Company posted steady business results. Although the

Please explain the business performance and results of the KYOWA EXEO Group (the “Group”) for fiscal 2011.

Although net sales and operating income decreased, we had steady business results that will lead to growth for the next fiscal year.

A

Q

2011 2012(Plan)

2010

273.7288.5 283.0

2011 2012(Plan)

2010

282.3273.1

286.0

2011 2012(Plan)

2010

12.4

8.9

11.6

Net sales (¥billion) Operating income (¥billion)Orders received (¥billion)

Antenna installation construction

Interview with the President


Company’s dependence on NTT is an advantage, there is a risk of an uneven revenue structure. With a goal of expanding non-NTT businesses as a medium-term goal of the KYOWA EXEO Group, in fiscal 2011, we expanded orders received in NCC businesses 1.7 times above the previous fiscal year. Also, the environmental and social infrastructure businesses including that for mega solar energy expanded steadily.

In addition, we aggressively promoted M&A. In the engineering solution field, the Company made its three major subsidiaries—WAKO ENGINEERING CORP., Daiwa Densetsu Corporation and Ikeno Tsuken Co., Ltd.—wholly owned subsidiaries. Furthermore, toward expansion of the system solution business, the Company made Icom Systech Co., Ltd., a software house, its wholly owned subsidiary. These measures helped reinforce the Group structure, which was a significant benefit.

Reflecting on the business results of the current fiscal year, we would like to utilize these results for our growth in the next fiscal year.

For fiscal 2012, we forecast that orders received will decrease 2% year over year to ¥283.0 billion but that net sales will increase 5% to ¥286.0 billion and operating income will advance 30% to ¥11.6 billion. With regard to orders received, we predict a decrease in construction work for restoration from the earthquake, which will, however, be offset to the level of the previous fiscal year by the expansion of non-NTT businesses.

As to net sales and operating income, we intend to achieve increases in revenues by increasing construction work including orders from the previous fiscal year and eliminating unprofitable construction work, which was

concentrated in the previous fiscal year, and through thorough efforts to enhance managerial efficiency.

Although the external environment shows a decreasing trend of NTT’s capital investment in fixed communications facilities, we predict a medium- to long-term increase in demand for mobile communications. Specifically, there will be larger demand for traffic control measures associated with the dissemination of smart phones, the expansion of LTE and other high-speed mobile communications services, the reorganization of platinum band and other frequency bands and Wi-Fi or other such data offloading.

We also predict that our business opportunities will expand to such fields as ICT, new energy, disaster prevention, damage alleviation and restoration demand.

In fiscal 2012, with a strong commitment to achieving a V-shaped recovery of business results and recovering growth momentum, we will focus on the expansion of non-NTT businesses and thorough improvement of the efficiency of Group management, thereby making a structure that can generate profits.

The KYOWA EXEO Group regards profit distribution to shareholders as an important managerial issue and holds a basic policy of stable and continuous profit distribution to shareholders based on a sound financial foundation. We plan to pay ¥20 per share in fiscal 2012, the same as in fiscal 2011. About the purchase of treasury stock, we set a limit of 2 million shares of treasury stock for fiscal 2012 in addition to 3.5 million shares for fiscal 2011. The dividend payout ratio for fiscal 2012 will be approximately 50%, which should be a satisfactory standard for shareholders. We will implement appropriate profit distribution to shareholders while aggressively investing in growth fields and M&A.

Please explain your forecast of the Group’s business results for fiscal 2012.

We will increase revenues and income and strive to achieve a V-shaped recovery.A

Q Please explain your policies regarding profit distribution to shareholders.

We aim for stable and continuous profit distribution to shareholders based on a sound financial foundation.

A

Q

Dividend per Share Purchase of Treasury Stock

2012(Plan)

2011201020092007 20082006

Dividend Dividend Payout Ratio

¥18

17.9%

¥20

20.3%

¥20

22.6%

¥20

25.1%

¥20

26.5%

¥20

27.8%

¥20

26.7%

2012(Plan)

2011201020092007 20082006

Number of Shares Purchased Treasury Stock Holding Ratio

6.7%

9.9% 10.0% 10.2% 10.2%

11.7%

10.0%

Purchased 4 million shares

Purchased 2.97 million shares

Purchased 3.50 million shares

Set the limit of 2 million shares

to purchase

Interview w

ith the President


0% 20% 40% 60% 80% 100%

Other companies'

average

2008

2009

2010

2011

9%

12%

15%

28%

22%

51%

55%

58%

47%

54%

30%

25%

19%

20%

8%

3%

2%

6%

4%

32%

Very satis�ed Satis�ed Not satis�ed Dissatis�edAre you satisfied with your current work and work environment?

We will strengthen solidarity among employees and fulfill our social responsibility through our business activities.

A corporation has a mission to convert its corporate

philosophy into tangible forms. The KYOWA EXEO Group’s

corporate philosophy consists of “Nurturing technological

expertise,” “seeking affluence” and “contributing to society.”

We would like to fulfill our social responsibility by converting

the Group’s philosophy into tangible forms through our

business activities.

The KYOWA EXEO Group is not a telecommunications

service operator or a manufacturer or a retailer of products.

We are a solutions and services provider that addresses

clients’ requests fully utilizing each employee’s technological

expertise. Our business activities for almost 90,000 projects

and construction works are the fruit of the concentration of

the know-how and technologies of our employees and the

organization.

The KYOWA EXEO Group has been striving to nurture

human resources because developing employees’

technological expertise links to the “fruit,” that is, the higher

quality and safety of projects and construction works,

thereby contributing to society. Also, the importance

of each employee’s own pursuit of affluence shouldn’t

be forgotten. If the working environment is not good or

employees are not motivated, their morale will decline

and it will be hard to obtain good results. The Company

Please explain the Group’s CSR concept and specific measures for that.

By converting the Group’s philosophy into tangible forms, we will fulfill our social responsibility.

A

Q

Employee Satisfaction Survey

*Other companies’ average: Diamond Weekly (May 17, 2008, edition),

Questionnaire __ 1,000 full-time workers nationwide (answered by 700 men and 300 women)

Interview with the President


conducts employee satisfaction surveys on a continuous

basis. The satisfaction ratio of 67% in 2008 improved to

76% three years later. By deepening the linkage between

the Company and its employees and further improving our

employee welfare benefit plans, we would like to make a

work environment where each employee can maintain high

work ethics and feel rewarded. Such a work environment

will lead to the affluent lifestyles of employees and their

families, which, I think, has been and will be reflected in the

employee satisfaction surveys. Given our efforts to make the

Company’s foundation one where employees can work with

satisfaction, the quality of our solutions and services will

improve, through which we will contribute to the continuous

growth of society.

The “Connection Culture” that I ordinarily mention is an

attempt to recover the spirit of KYOWA’s inception—

“Cooperate and unite.” While working at the KYOWA EXEO

Group, it is important to create a corporate culture of trying

to know about the other person and his/her situation. By

nurturing a spirit that does not hesitate to sacrifice “Me”

for “We,” thereby maintaining a good balance between

competition and harmony; a solid trust relationship among

employees to the extent that the sense of camaraderie is

called “too strong”; and an atmosphere that fosters sincere

appreciation of coworkers’ success, we think we can

achieve a strong corporation. By disseminating such a spirit

throughout the Group, individuals, organizations and Group

companies will cooperate and new businesses and value are

created.

Although we don’t know how much “Connection Culture”

has been contributing to business results, the creation of

connections, I think, will result in a positive cycle: “Can enjoy

working for the Company Become passionate toward

work Good business results Appreciated by customers

Feel rewarded and work becomes more enjoyable.”

Employees being highly motivated and satisfied are important

for a corporation.

By employees uniting and working together through

“Connection Culture,” we would like to fulfill our social

responsibility through our business activities.

Please explain about the “Connection Culture” that President Ishikawa advocates.

We think new value will be created by knowing each other and through mutual cooperation.

A

Q

Positive cycle created by nurturing “Connection Culture”

Can enjoy working for the Company

Good business results (Contribute to society)

Become passionate toward work

(Motivation for work goes up)

Appreciated by customers

Interview w

ith the President


On March 11, 2011, as short as 10 minutes after the occurrence of the Great East Japan Earthquake, the Company launched a disaster countermeasure headquarters headed by the President as the General Manager. We hurried and confirmed the safety of our employees and tried to determine the amount of damage to the company building, while striving to grasp the damage to the telecommunications infrastructure. We quickly launched emergency restoration measures such as opening emergency telecommunications lines and the recovery of power sources at wireless base stations. From immediately after the disaster, not only our employees in charge of the Tohoku region but also those in charge of other regions were sent to disaster sites and worked on emergency

recovery construction work. By May 15, 2011, two months after the disaster, a total of 15,000 persons a day were working at the afflicted sites. Employees who did not go to the actual sites engaged in the procurement of materials and equipment, fuels and food supply. The Group companies nationwide and their employees worked hard as one to support restoration from the disaster.

In June 2011, when the emergency restoration measures were completed, to move on toward revitalization from restoration/recovery, we installed the Tohoku Area Disaster Restoration Promotion Office headed by the President to promote reinforcement of the telecommunications infrastructure, which has been operated to date.

Installed Tohoku Area Disaster Restoration Promotion OfficeEstablished an in-house structure toward full-scale restoration and recovery

Utilize the capabilities of the KYOWA EXEO Group for the future of afflicted areas.

From Restoration to Revival and to Revitalization

Board of Directors

President

Vice President

Organization chart of KYOWA EXEO CORPORATION (As of July 1, 2012)

Kyushu Branch Office

Shikoku Branch Office

Tokai Branch Office

Minam

i Kanto Branch Office

Tohoku Branch Office

West Japan Head Office

Group Business Development Division

Corporate Planning Division

Accounts & Finance Division

General Affairs Division

Chugoku Branch Office

Kansai Branch Office

Koshin Branch Office

Kita Kanto Branch Office

Hokkaido Branch Office

IT Promotion Division

Audit Division

Procurement Division

Human Resources Division

NTT Operations Headquarters

Electrical & Telecoms Engineering/Environmental Projects Headquarters

Safety & Quality Control Headquarters

Home Network Business Promotion Department

Business Solutions Headquarters

Civil Engineering Headquarters

Communications & Business Network Headquarters

NTT DOCOMO Operations Headquarters

Tohoku Area Disaster Restoration Promotion Office

Social Contribution through Business ActivitiesFeature 1


What is under-bridge cabling passage work?

Before the earthquake:

After the earthquake:

The status of under-bridge cables attached underneath the bridge

The Ohtsuchi Ohashi Bridge from which the attached conduits and cables were removed

The area in which I was in charge of work was completely destroyed by the tsunami; even the town hall was displaced by the flooding. As the drawings of the bridge had been destroyed, we had difficulty collecting and drawing up preparatory materials for the excavation below the bridge. We made careful preparations including a magnetic exploration to identify any hidden obstacles such as the foundation of the bridge that might hinder our excavation efforts for the tunnel below the channel. Fortunately, we completed the works for all three bridges entrusted to the Group according to the construction schedule without interruption or reworking. I believe this successful completion is a product of the Group’s technological capabilities. Following the Great East Japan Earthquake, highly disaster-resistant communications facilities have been in demand everywhere. We at the KYOWA EXEO Group will accept the challenge to address this need Group-wide.

Aiming to establish solid facilities that facilitate communications even in a disaster

Fig. A Fig. B

Communications cables

Communications cables

A tunnel for underground cables was excavated under the river to prepare for future flooding disasters, with the work intended to raise the reliability of communication facilities

Usually, communications cable conduits are fixed underneath a bridge to sustain communications equipment. However, in the aforementioned project, a

small tunnel of 400–500 mm in diameter was excavated deep below the channel to accommodate the conduit (Fig. B). This under-bridge cabling passage

protects the communications equipment by preventing the communications cables from being washed away even if the bridge is damaged by flooding.

VOICE

From Restoration to Revival and to Revitalization

Toyohiro Ono, Project Manager, Civil Engineering Section,

Civil Engineering Headquarters

Ohtsuichi Ohashi Bridge

Namiita Bridge

Ohfunato

Miyako

Minamisanrikucho

Azumabashi Bridge

Ohzuchi

Iwate Prefecture

Ohtsuchi Station

Kirikiri Station

Namiita SeacoastShizugawa

Station

Yamada Line

Miyagi Prefecture

EXEO Group took charge of restoring three of those bridges. The tunneling distance for jacking at the Ohtsuchi Ohashi Bridge (Iwate Prefecture)—the longest of the nine bridges—was 245.1 m, and the level of difficulty was high.

Following the Great East Japan Earthquake last year, many bridges were destroyed by the tsunami and the communications cable conduits that hang under bridges were also damaged, rendering communications impossible for some time.

To prepare for future disasters, at our optical networking facility project between Miyako and Ohfunato we adopted the so-called under-bridge cabling passage method instead of laying conduit alongside a bridge. With this method, a small-diameter conduit tunnel of 400–500 mm was excavated under the channel of the river to bury the cables and enhance the reliability of communication facilities.

NTT suffered earthquake damage to its equipment at nine bridges in Iwate and Miyagi prefectures. The KYOWA


Seeking Affluence, andContributing to

Society

Features


Water treatment

technology

Work for underground installation of

electricity cables

Waste treatment

technology

Renewable energy technology

Solar power generation

facilities

EXEO’s Environmental

Businesses

The incineration, ash fusion furnace and recycling facilities that are designed by the Company help resolve waste disposal issues at many municipalities.

This business contributes to improving social infrastructure and environmental protection by laying power and communications cables inside the common utility ducts buried underground and removing electricity poles on roads.

Drawing on the technological capabilities of a plant manufacturer that the Company acquired, we are engaged in constructing renewable energy facilities such as wood biomass boilers and garbage fermentation facilities

We are active in submitting installation proposals for power generation systems on rooftops or other sites at customer facilities, as well as construction proposals for mega solar systems.

Our advanced water treatment technology addresses diversified water-related issues including the provision of water supply/sewerage treatment systems, water disposal facilities in isolated villages and the treatment of wastewater discharged from industrial establishments or factories.

After the construction work

Before the construction work

Eco-friendly construction methods, products, examples of work, and research and development addressed by the Company

Waste treatment technology

Water treatment technology

Others

Waste treatment facilities, ash fusion furnace facilities, methane fermentation facilities, recycling facilities, disassembly business of waste treatment facilities and wood biomass boilers

Sewerage treatment facilities, final disposal site leachate treatment facilities, rainfall storage penetration facilities and lake purification facilities

Work for underground installation of electricity cables and solar power generation facilities

The KYOWA EXEO Group has been committed to environmental improvement in its own business activities and the provision of construction methods and products with less environmental load for more than 20 years in efforts to reduce its environmental impact. This approach is aimed at preserving the global environment and contributing to the creation of a society in which people can live with a sense of safety. In fiscal 2011, the Group promoted the provision of various eco-friendly technologies in different fields, including waste treatment technologies for incineration and recycling facilities, renewable energy

technologies for wood biomass boilers and solar power generation systems, and water treatment technologies for industrial wastewater and sewage treatment facilities. The Group intends to contribute to the environmental preservation of overall society and a recycling-oriented society by actively involving itself in social environment improvement businesses. Such a pioneering approach includes flood control, renewal and preservation of the water cycle, and the underground installation of electricity cables using common utility ducts.

Initiatives toward environmental business

A Symbiotic Environmental Society

Initiatives toward Creating

Social Contribution through Our BusinessesFeature 2


Endeavoring to contribute to the reduction of CO2 emissions through the propagation of solar power generation systems

Following the nuclear accident at Fukushima triggered by the Great East Japan Earthquake that occurred on March 11, 2011, as well as concern about the possible shortage of the electric power supply, people’s interest in power generation via renewable energy has been rising. In particular, from the viewpoint of protecting the global environment, the implementation of solar power generation systems has been expanding in Japan due to fewer CO2 emissions.

The KYOWA EXEO Group is reviewing its environmental countermeasures and system performance evaluation along with the introduction of solar power generation systems at its own facilities. At the same time, we are active in submitting installation proposals for power generation systems on rooftops or other sites at customer facilities, as well as construction proposals for mega solar systems.

The solar power generation system implemented at the Tokyo Integrated Engineering Center (Ota-ku, Tokyo) is expected to generate annual electricity output of approximately 60 MWh, which will account for about 5% of the electricity consumed by the Center. Three different types of photovoltaic battery modules—the silicon single-crystal type with high power generating efficiency, the thin-film module compound (CIS) type and the easily bendable, amorphous thin-film type—were arranged (see the photo at right) to monitor and record operating data such as the

power generation efficiency of various types of modules. The results are used not only for appropriate proposals to customers intending to implement solar power generation systems but also for our initiative to reduce CO2 emissions.

A “system to purchase electricity from renewable energy sources at a fixed price” by power companies was enforced in July 2012. In response to this new policy, we installed a solar power generation system on the rooftop of the Fuchu Technology Center (Fuchu, Tokyo) of which the maximum output capacity is 100 kW.

We will positively propose the enhanced use of solar power generation systems to contribute to the prevention of global warming and the reduction of CO2 emissions.

(Kg)

0

1.0

0.8

0.6

0.4

0.2

Charcoal thermal

Petroleum thermal

Nuclear

Solar

Wind

Geotherm

al

Hyd

raulic

LNG

thermal

Power generation type

Solar power generation facilities on the rooftop of the Tokyo Integrated Engineering Center

Solar power generation facilities on the rooftop of the Fuchu Technology Center

CO2 emissions by power supply

Single crystal type for 40 kW

Compound type for 10 kW

Amorphous thin-film type for 2.52 kW

Note: CO2 emissions per 1 kW/h; Pre-pared from data issued by the Agency for Natural Resources and Energy

Sota Maki, Manager, Corporate Sales Section, Electrical & Telecoms Engineering Department, Electrical & Telecoms Engineering / Environmental Projects Headquarters

VOICE

Initiatives toward Creating

Social contribution by disseminating solar power generation facilities

I’m in charge of sales of solar power generation facilities mainly to private companies. Until last year, my sales activity was to promote the implementation of solar power generation facilities from the viewpoint of corporate PR or CSR. With the system to purchase electricity from renewable energy sources by power companies starting in July 2012, inquiries have increased rapidly. As solar light is a renewable energy source and solar power generation systems emit only small amounts of CO2, I expect such facilities to be increasingly used in the future.

As a salesperson, I struggle to achieve my sales targets, but I take pride in increasing my sales performance by contributing to society with the reduction in CO2 emissions.


Seeking Affluence, andContributing to

Society

Features


*Platinum bandRadio wave frequency band of 700–900 MHz. This band has features suitable for mobile phones such as huge transmittable data volume, a wide coverage area and the capability to bypass obstacles.

Changes in and projections for the number of smartphone subscribers

(Source: MM Research Institute, Ltd.)

(Unit: 10,000 contracts) (Unit: %)

0 0

14,000 100

80

60

40

20

12,000

10,000

8,000

6,000

4,000

2,000

2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3

Number of smartphone subscriptions Number of feature phone subscriptions Ratio of smartphone subscriptions to total

Projections

In Japan, the use of smartphones and tablet terminals has been spreading rapidly. The data traffic of smartphones is estimated to be 10–20 times more voluminous than that of conventional mobile phones (feature phones). Consequently, coping with the surge in traffic volume is a pressing issue in the ICT society.

One measure to address the traffic volume is the active introduction of high-speed mobile communications services such as LTE, WiMAX and A-XGP, which are being aggressively promoted by telecommunications carriers. In addition, a radio wave frequency called Platinum band* has been newly allocated for mobile phones to address frequency reorganization in response to the rise in traffic volume.

The KYOWA EXEO Group is endeavoring to establish

quickly a variety of mobile-related telecommunications infrastructure solutions including the construction of base stations in relation to the enhanced high-speed mobile communications services and frequency reorganization, as well as the enforcement of equipment related to such construction.

In recent years, the so-called data offload measure to let the boost in traffic go to fixed-line communications networks via Wi-Fi and other means has been promoted nationally. The Group conducted Wi-Fi spot works for about 20,000 stations during fiscal 2011.

The KYOWA EXEO Group thus endeavors to contribute to creating an easy-to-link comfortable society by installing the necessary infrastructure facilities to cope with the boost in traffic volume.

Putting the infrastructure in place to quickly handle the explosive traffic volume

Creating a connected society

Preparing for the Smartphone Era

Technical Term



“Long-Term Evolution (LTE)” refers to the next-generation high-speed mobile communications technology called 3.9th generation. It features high speed, high capacity and low delay. The communication speed is said to be 5–10 times faster than conventional services and will soon be almost equivalent to optical fiber lines.

LTE-related processes have increased rapidly for the mobile works undertaken by the Group. Compared with the installation of new base stations, which prevailed conventionally, the ratio of joint installation of LTE functions beside existing stations has increased. In other words, the work refers to processes such as the extension of facilities to wireless base stations that are already running and various performance tests, which require us to take absolute care of unexpected contingencies such as service interruption.

Drawing on both the innovative LTE technology and the previous mobile telecommunications technology, our engineers work day and night by taking appropriate measures so that every user can comfortably use smartphones.

Improving the telecommunications environment with LTE works so that smartphones can be comfortably used

Natsuki Yamashita, Facility Construction Section,

Mobile Infrastructure Engineering

Department, NTT DOCOMO

Operations Headquarters

2010 2011 2012

NTT docomo

KDDI

Soft Bank

e Access

LTE services of the respective telecommunications carriersOverview of mobile work

VOICE

Base station

Preparing for the Smartphone Era

Toward realizing a more convenient and comfortable mobile society

Smartphones are increasingly a part of our everyday lives. Given the rapid proliferation of

different types of mobile telecommunications services, we are engaged in relevant works to

improve the mobile environment for users as early as possible.

At home, in an underground mall, in a subway station and at any and all other places,

our lives will be made increasingly convenient and comfortable in the forthcoming mobile

society. I feel that my job is worthwhile as I am contributing to society by fulfilling that.

If you feel that your life has been improved thanks to mobile terminal services and the

ease of making phone calls, that could be due to improvements from our recent projects.

Negotiations for installing stations,

design, construction, maintenance, etc.:

LTE processes are prevalent

Installation of servers, etc., and reinforcement of

equipmentPutting optical

access networks in place Optical fiber

In-station facilities of telecommunications carriers


Servers, etc.


Seeking Affluence, and


Features


Iwai: I’m in charge of planning and operating employees’ training sessions for the Group overall. So, I’m always thinking about the ideal employee image desired by the Company and how we should cultivate people. My present task is to set up a mechanism to organizationally change every employee’s ideal self-image from an employee who does not willingly engage a spirit of risk to an employee with a mind-set to address challenges. The Human Resources Development Dept. determines a rough outline for enhancing an individual’s strengths and requests that the staff in charge at each business department provide the content for technical training.

Nakayama: Well, as what each employee needs to learn technically differs depending on the department, the decisions on the content and actual materials for the training are entrusted to the dedicated staff in charge of human resources development. In my job, a major task is to teach the fixed standards that are described in the approach “Make that in this manner.” But this way of teaching is not at all effective in cultivating employees’ readiness.

Iwai: Of course, manuals are neatly prepared for the respective methods and procedures. In the field, however, onsite conditions differ. Therefore, every employee must

think about how to address his/her job on the spot using his/her own onsite capabilities.

Nakayama: Previously, a passive attitude of doing only what was instructed by a superintendent was enough. From now, however, such a negative attitude with minimum voluntary action is inadequate. As today’s employees show less capability for problem solving than their predecessors, we would like to develop employees who can think for themselves and take voluntary actions on their own judgment. We have won four gold medals over the past four years in the World Skills Olympics. The training behind “thinking power” was vital in cultivating the participants for these Olympic competitions. Although it is difficult to provide sufficient training for

Cultivating employees who have composite skills supported by onsite capabilities

The KYOWA EXEO Group’s core asset is its employees. The Group is actively creating a new corporate culture of accumulating skills and improving its technological capabilities and organizational strengths with the aim of being a valuable enterprise for customers and society. The General Manager of the Human Resources Development Dept., Personnel Division, and the Person Responsible for Education and Cultivation at the Central Technology Training Center share their views on the Group’s human resources activity.

Mitsuhisa Iwai, Unit Leader of Human Development Unit, Human Resources Division

That can think onsite

Cultivating Employees

Scene of training

Takuya Nakayama,

Central Technology Training Center,Cable Engineering Department,NTT Operations Headquarters



Iwai: I personally feel that employees could previously share time by working with similar workers sent from Group companies and cooperative companies under the control of the head of a project. Accordingly, there was a climate for developing employees (or have employees grow together) naturally on the spot. However, in recent years, the construction period has been increasingly shortened and the scale of work has been reduced. In addition, the need for enhanced efficiency improvement means that workers have fewer opportunities to work with the same crew. I think these trends create poor interpersonal relations within the work crew. The present business environment no longer allows us to enjoy an ideal work environment where workers are trained gradually while learning from those more experienced.Another serious issue is that we don’t know what other

on-the-spot judgments in actual work situations, we attempt to provide sufficient time for employees who participate in the Skills Olympics at their training so that they can be core personnel in the field.

Iwai: The results at the Skills Olympics are an achievement to be proud of for the Group employees’ spirit of addressing challenges. I am confident that we can establish a new employee image with a spirit to address challenges and shift our corporate culture to a teamwork focus that will ensure sustainable corporate growth in the future. With these thoughts in mind, we at the Group are now addressing measures to ferment the “Connection Culture”—a culture intended to promote exchanges of excellent know-how and human resources beyond the framework of our departments.

departments do, in effect. Given the multi-skill and multi-task business environment, it is increasingly important for us to have close collaboration with other departments. If such traditional human resources development becomes impossible, we will have to intentionally nurture a corporate climate of developing human resources as a companywide mechanism. As part of this approach, we have started a new type training for mutual understanding of other departments’ technical content, which is called “Collaborative Training.”

Nakayama: You are right. As Mr. Iwai says, the present situation is that at the end of most efficiency improvement efforts, we are obliged to give the instruction: “Do everything according to the baseline instructions and nothing more.” In other words, we have no room to consider something other than the pressing issue. I believe that creating a different mechanism is important to avoid falling into this trap. In this regard, the concept of the “Connection Culture”, which President Ishikawa recommended with the phrase “Let’s learn more about others and other departments,” is encouraging and significant. I remember that I had no time to consider other business operations when I joined the Company because I was so busy mastering my own duties. I envy today’s newcomers because they have opportunities to visit and compare different business activities under the current training system. Furthermore, the exchange of human resources has been institutionalized horizontally and vertically without being limiting to the technical aspects, thanks to vigorous interdepartmental exchanges.

Iwai: Despite the regular trial and error that occurs every year, let’s work together to create a worthwhile working environment in which employees can be successfully developed and work in a climate of cooperation and coordination.

Nakayama: Let’s work together!

Creating a culture of cultivating human resources


Seeking Affluence, and


Features


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.

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 a fundamental

norm of our management. We recognize that efforts

to achieve the corporate philosophy are indeed efforts

toward CSR, and we are working to promote CSR.

Specifically, we are working toward high-quality

business operations by putting in place internal control

systems based on the promotion of compliance and the

development of risk management in all business fields.

CSR Structure of

the KYOWA EXEO Group

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 a lower-level organization of the CSR Activities Division, a staff member in charge of CSR is assigned to every department or office and to every Group company, so that there is a group-wide system of CSR promotion. Environmental

protection activities

Promoting social contributions through primary businesses

Community and social contribution

activities

CSR Committee (chaired by the President)

Staffers in charge of CSR (a staff member in charge of CSR is assigned to every

department or office and to every Group company)

Secretariat (CSR Activities Division)

Corporate philosophy

ENGINEERING SOLUTIONS

SYSTEM SOLUTIONS

Guidelines for CSR activitiesSelf-awareness of contribution to society as a companyPromotion of contribution to society and social contribution activities through business activitiesEstablishment of a culture of safety and qualityFull information disclosure and communicationAdherence to corporate philosophy and respect for human rightsEnvironmental protection activitiesCreation of workplaces conducive to satisfactory work

Compliance Corporate governance Risk management

Business operations with integrity as the norm

Development of society

Development of the KYOWA EXEO Group

Performing Corporate Social Responsibility (CSR) through Its Primary Businesses

CSR Promotion Systems

Basic CSR Policy

The KYOWA EXEO Group works toward realizing its corporate philosophy by contributing to environmental conservation and to the sustainable growth of society through its business activities.

CSR Concept


Basic Actions Declaration

Corporate philosophy

Basic Ethics

Customers

Business partners

Society/Environment

Participation in and establishment

of communities

Environment

Human rights

Labor practice

Fair business practice

Consumer issues

Organizational consideration

Shareholders and investors

Group companies

Employees

We place a high priority on returns to our shareholders and investors, and we work to ensure continuous, stable dividends.

In addition to contributing to society through our business activities, we carry out proactive initiatives in a variety of community contribution activities.

We work to ensure two-way communication with our customers through events and seminars.

We believe that our collaborating companies are indispensable partners.

We aim to maximize the Group value through specialization and comprehensive power.

Based on the belief that human resources are our chief asset, we aim for Group employees and companies to develop together.

Return to shareholdersAnnouncement of business resultsDisclosure of IR informationExplanatory meetings for analysts

Social contribution activitiesLocal community contribution activitiesEXEO's afforestation

Procurement Advisory CouncilGreen Procurement

Promotion of a work-life balanceRespect for diversityFermentation of the Connection CultureEducation and training

Firm rooting of the safety and quality cultureExhibitions at events and forumsProactive information disclosure

Improvement of operating efficiencyManagement supportRaising technological capabilitiesImprovement of the worksite environment

Relationships with All Stakeholders (Classification by ISO26000 standards)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.


CS

R C

oncep

t


The KYOWA EXEO Group aims to maintain the full trust of shareholders and all other stakeholders by operating with integrity and a high standard of transparency. To this end, we are confident that it is one of the significant management issues to establish and maintain an organizational structure and management systems through which corporate governance can effectively function. Moreover, it is our basic CSR policy to make ongoing improvements to strengthen corporate governance mechanisms that are suitably tailored to the Group’s circumstances, including the assessment of structures for monitoring management in light of changes in social conditions, laws and other developments.

Promotion of internal controlThe KYOWA EXEO Group works to thoroughly adhere to compliance, manage various risks and properly and efficiently execute business operations. At the same time, to ensure the reliability of financial reporting, the Group has stipulated the Basic Guideline for Establishing Internal Control Systems in accordance with the relevant provisions of the Companies Act and addresses its appropriate and efficient operation.

In August 2011, the Compliance Committee, chaired by the President, was established to further promote reinforcing internal control operations.

Endeavoring to ensure transparent management by establishing sound management systems and

strengthening internal controls

KYOWA EXEO’s Corporate Governance System

Establishing Various Mechanisms to Promote Globally the Overall Group

Corporate Governance

Corporate auditorsBoard of Corporate Auditors

DirectorsBoard of Directors

Nomination CommitteeInternal Control CommitteeCompensation CommitteeIndependent Auditor

General meeting of shareholders

Group companies

Internal Audit Division

Committees

CSR CommitteeCompliance Committee

Process Management Committee

President

Management Council

Operating officers and organizational heads

Business and administrative departments and branches

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

To view the Basic Guideline for Establishing Internal

Control Systems, visit

Management Systems


In 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.

Basic Stance on Compliance

—EXEO Group Basic Actions Declaration—

Individual directors and employees of the Group make principled actions grounded in compliance, the guiding force of our business activities, in the practice of our business activities; engage in socially trusted management; and perform their social and legal responsibilities. They promote compliance toward the realization of the corporate philosophy of “Contributing to Society,” in accordance with the “EXEO Group Basic Actions Declaration,” a code of conduct of the Group.

Flow chart of compliance fulfillment

Basic Ethics of the KYOWA EXEO Group

Matters to be observed in business activities

Relationships with customersElimination of accidents; assurance of quality; technical improvement; confidentiality; transparent transactions; appropriate inducement

Relationships with industriesFair competition; compliance with industry-specific laws and regulations

Relationships with business partnersImpartial transactions; fair transactions; respect of counterparty’s technologies

Matters to be observed regarding employees

Respect for human rights; ensuring the physical safety of employees

Matters to be observed regarding society

Relationships with securities markets and the mass mediaInformation disclosure; control of insider information

Relationships with the public at largeManagement with responsibility; resolute attitude against antisocial forces; protection of the environment; ensuring the security of society

Matters to be observed internally at the company

Conservation of company assets; observance of authority; appropriate accounting procedures; maintenance of discipline

Compliance

Fulfillment of economic responsibilities

Risk avoidance

Achievement of business plans

Day-to-day operations

Compliance (actions with integrity)

Fulfillment of social responsibilities

Fulfillment of legal responsibilities


Com

pliance/Risk M

anagement

Manag

ement S

ystem


Establishing the promoting system, the KYOWA EXEO Group actively addresses risk management in all its

business fields.

Measures taken Description

Whistle-blowing system

Establishing the Support Desk regarding compliance and the Lawyer Hot Line for direct consulting or communicating with corporate lawyers

Compliance training Conducting basic training for new employees and brush-up training with specific themes to be observed in business activities

Compliance training for management executives

Conducting training for management executives (e.g., Chairman, President, General Managers of the Head Office, Branch Managers, Presidents of the Group companies) by inviting outside experts as lecturers

Evaluation on compliance observance

Inspecting the observance status of compliance plans, which have been prepared by the respective branches and Group companies, as well as the relevant laws and regulations, for evaluation; compliance mind-set of each employee is checked in terms of his/her level of understanding

Compliance promotion and enhancement month

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

Promotion Systems and Activities

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. Compliance training is given to employees of the Group companies on an ongoing basis.

Initiatives to Promote

Basic Stance on Risk Management

To realize further business expansion and new growth as

an ICT solution service company, the KYOWA EXEO Group

strives to appropriately control risk factors by reducing ex-

posure to risks and adverse effects for risk that might occur

in overall business activities. Meanwhile, it is necessary for

the Group to minimize the economic loss and/or damage in

case of exposure to any risk. The Group’s risk management

is set up based on such recognition.

Promoting System

Risk Management

Guidance and control

CollaborationM

anagement of

compliance system

establishm

ent conditions

Oversight on the spot and of trading units

Whistle-blow

ing

Referrals and question

Group companies

Group Compliance Officer (President of KYOWA EXEO)

[Departments and Branches]

Support Desk at the Legal unit,

General Affairs Division.

Responsible Compliance Promoter

Persons in Charge of Promoting Compliance

KYOWA EXEO employees

Group Business Development Division

Relevant departments for referrals

Compliance Officer at each company (President)

Responsible compliance promoter at each company

Employees of each Group company

Lawyer Hot Line

KYOWA EXEO CORPORATION:

Management Systems


President

Internal audit organizationAudit Division

Responsible persons for risk management

Heads of Head Office organization units and Branch Managers

Management Planning Division (for management risk)

Safety and Quality Management Group (for process risk)

General Affairs Division (for disaster risk)

Risk management organizations

Information Security Committee

Committee members (Responsible Information Managers)

Committee secretariat

Committee chairman

Deputy committee chairman

Jun. 2004 Implemented an information management systemEstablished the Information Security Committee

Jul. 2006 Assigned the Chief Information Security Officer (CIO) at the Information Security Committee

May 2009 Extended the information management system to the Group companies

Improved group-wide security

Thoroughly executed employee training toward enhanced awareness of information security

Upgraded antivirus measures

Reinforced e-mail service countermeasures

Enhanced inspections of private-use personal computers at home

Business risk

Management risk

Business environment risk Risk in the business environment Issues shall be solved by establishing a task force and/or holding a business

strategy conference to find the best solutions, according to the instructions of management.Management

strategy riskRisk in decision making for management strategies or business strategies

Process risk Risk in daily business operations General manager of each department or branch manager shall be responsible for taking measures to reduce the risk concerned.

Disaster risk Risk of various disasters such as earthquakes, fires and typhoons

The Disaster Countermeasure Rules shall be stipulated to cope with the risk. Meanwhile, disaster prevention-related capital investment and disaster exercises shall be proactively made.

Credit riskRisk of uncollectible credits with regard to transactions with new customers and long-term and large-sum projects

The Credit Control Office was established in January 2006. The office examines and determines the appropriate scale of trading by customer to prevent trading problems and minimize risk damage. The office also holds the Extended Order Study Committee, consisting of the heads of related organization units, which meets as required.

Risk Management System

The KYOWA EXEO Group takes appropriate risk control measures after grasping and analyzing various risks surrounding the Group management to conduct sound business activities.

In accordance with the Risk Management Rules, which provide for basic guidelines regarding risk management, the Group classifies various risks as shown below, and works to streamline and sophisticate management methods and systems depending on the characteristics of the respective risks. The Process Management Committee was established to ensure appropriate risk status monitoring and take cross-sectional responses, as well as for lateral, intra-organizational information exchanges concerning risk management.

Furthermore, the Audit Division formulates an audit plan every year and conducts audits to check whether improvement measures or actions have been taken appropriately from an independent standpoint. The audit

results are reported to the management and to conferences at which the heads of organizational units attend according to the plan-do-check-act (PDCA) cycle.

Initiatives to Promote

Promoting Information Security

—Initiatives at the Information Security Committee—

The KYOWA EXEO Group established the Information

Security Committee in June 2004 to handle diverse

requests for security-related requests from customers. The

committee is committed to bolstering protective measures

with regard to information security related accidents and

incidents.

Risk management system

Information Security Committee

Major initiatives taken in fiscal 2011 were as follows:

Timing


Com

pliance/Risk M

anagement

Manag

ement S

ystem


Social contribution

Customer satisfaction

Environment preservation

activities

Basic Stance on Environment Preservation Activities

Coexistence with the global environment is a social responsibility of corporations and is a significant element in creating 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 the environment in its business activities and endeavors to reduce the environmental impact that inevitably accompanies such activities. Meanwhile, every employee of the Group is committed to environment preservation activities with “what he/she can and he/she should do” in mind—always taking into account the effects of business activities on global environment.

Promotion of an Environmental 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, the location conditions of the building and other factors, sets up specific environment-related targets and extensively applies them to all the departments at the Head Office and branches.

Environmental Education

Environment preservation activities cannot be achieved without low-key efforts for the activities and strong consciousness of every employee regarding the improvement of environmental issues. Consequently, the Head Office and branches prepare their respective plans and conduct environmental education programs so that all the employees can understand the importance of environmental preservation and voluntarily and positively participate in such activities in their daily lives. With this approach, precise knowledge and consciousness of environmental issues and preservation initiatives have been steadily disseminated among employees.

The educational training courses in fiscal 2011 were as follows: In-house environmental auditors’ training for the purpose of obtaining qualification as in-house auditors; in-house environmental auditors’ brush-up training for the purpose of upgrading skills as auditors; environmental operation training for the purpose of mastering knowledge of promoting environmental activities; and basic environmental management training mainly targeting new employees. A total of 578 persons attended the course lectures.

Number of qualified persons as in-house environmental auditors and participants in various training courses

Training course name Target Fiscal 2009 Fiscal 2010 Fiscal 2011 Description

In-house environmental auditors’ training

Prospective in-house auditors

100 97 48Qualification as in-house auditors

In-house environmental auditors’ brush-up training

In-house auditors

171 304 187Enhancing skills of in-house auditors

Environmental operation training

Regular employees

306 200 202Mastering knowledge of environmental activities

Industrial waste training

Regular employees

60 32 4Mastering knowledge of industrial waste

Basic environmental management training

New employees, etc.

180 132 127Basic knowledge of environmental MS

Total 817 765 578

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.

Environmental Management

While Promoting Resources Recycling and Effective Utilization of Resources, Developing Environment Preservation Activities Toward the Prevention of Global Warming and Other Concerns

MS Operating Committee

Responsible MS managerResponsible auditing staff

Each department Each department Each department

Responsible environmental promoter Responsible environmental promoter Responsible environmental promoter

IC networking technologies

Business Environment

President

Fiscal 2009 Fiscal 2010 Fiscal 2011

In-house environmental auditors 915 895 870



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 by this initiative is industrial waste produced from the construction work of information and communication facilities and general waste discharged from offices.

Asphalt, concrete debris, electric wire trash, etc., are properly

treated via a sorting control for further reuse or recycling. Moreover, ongoing initiatives include the enhanced use of proper amounts for work materials, requests for collection of packaging materials to suppliers and guidance on the necessary steps to workers for recycling via onsite patrols.

The Company’s recycling rate is maintained as high as 89.3% due to these initiatives.


Total industrial waste emissions

(tons)2,010 2,566 1,957

Industrial waste emissions per value of finished work

(kg/¥ million) 601 273 1,072


Total general waste emissions

(tons)283 279 232

General waste emissions per person

(kg/person)33.8 36.1 35.2


Recycled industrial waste (tons)

28,811 17,961 20,202

Recycled general waste (tons)

425 359 331

Total recycled waste (tons)

29,236 18,320 20,533

Change in industrial waste emissions Change in general waste emissions Change in total recycled volume

0

1,200

900

600

300

2007 2008 2009 2010 2011 0

40

30

20

10

2007 2008 2009 2010 2011 0

30,000

20,000

10,000

2007 2008 2009 2010 2011

Industrial waste emissions per value of finished work (kg/¥ million) General waste emissions per person (kg/person) Total recycled waste (tons)

Fiscal 2011 Initiatives Regarding the Prevention of Global Warming

As for the reduction of power consumption, power-saving measures for equipment are taken including the conversion of electric appliances to energy-saving type ones and the enhanced use of inverters for diverse equipment. In addition, companywide initiatives mainly taken by the responsible person on each floor

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


Total power consumption

(thousand kWh)14,876 14,753 12,460

Power consumption per square meter

(kWh/m2)10.96 10.69 10.63


Total city gas consumption(thousand m3)

38.3 35.1 50.0

City gas consumption per square meter

(m3/m2)3.7 3.4 4.8


Total gasoline and light oil

consumption (kl)2,325 2,343 1,615

Gasoline and light oil consumption per travel

distance (l/thousand km)104.0 101.0 101.0

Change in power consumption Change in city gas consumption (at the Head Office building) Change in gasoline and light oil consumption

0

16

12

8

4

2007 2008 2009 2010 2011 0

5

4

3

2

1

2007 2008 2009 2010 2011 0

120

80

40

2007 2008 2009 2010 2011

Power consumption per square meter (kWh/m2) City gas consumption per square meter (m3/m2) Gasoline and light oil consumption per travel distance (l/thousand km)


Involvement in the Environm

entE

nvironmental M

anagement


Measures takenContent of

specific initiative

Fiscal 2011 targets and full-year results of activities Fiscal 2012 activity targetsFiscal 2011 targets Full-year results of activities

Reduction in CO2 emissions

①Reduction in power consumption:

Set power consumption management targets

Work to precisely grasp monthly management of power consumption values

(on the basis of medium- and long-term planning based on the revised Energy Conservation Law)

Monthly management of total power consumption

Turning off lights during break time, room temperature setting, economy in electricity

Enhanced use of “Cool Biz” and “Warm Biz” ambient-temperature-compliant wear

Review of conversion to energy-saving equipment and devices at their new installation or renewal (e.g., air conditioners, PCs, LED lights)

Improvement of 1% or more in power used against fiscal 2010

1% reduction against the previous fiscal year (target) 10.58 kWh/ m2

Power used Fiscal 2010: 10.69 kWh/m2

Fiscal 2011: 9.16 kWh/m2

Reduction rate: 16.2%(Against the target set forth in the Energy Conservation Law; 1% reduction every year for five years from fiscal 2009; passed)

Economy in electricity

Against the previous fiscal year: 1.0% reduction(target) 9.07 kWh/ m2

Restriction on peak power used[Summer] Large-lot customers

Against the previous fiscal year

15% reduction must be achieved

Other small-lot customers

Against the previous fiscal year

15% reduction targeted

[Winter] Kansai jurisdiction

10% Kyushu jurisdiction

5% Tokyo jurisdiction

5% Other jurisdictions

5%

Restriction on peak power used[Summer] Tokyo Tohoku Electric Power’s jurisdictionLarge-lot customers: 23% Small-lot customers: 21% Tokyo Other than Tohoku Electric Power’s jurisdictionSmall-lot customers: 16%

[Winter] Kansai jurisdiction 13% Kyushu jurisdiction 13% Tokyo jurisdiction 12% Other jurisdictions 7%

Restriction on peak power used[summer] against fiscal 2010

10% reduction target[winter] against fiscal 2010

5% reduction target

②Reduction in gasoline used:

Review reduction in the number of vehicles owned

Implement gasoline card-based management measures

Gasoline card control (monthly management of amounts used)

Purchase and renewal of vehicles with good fuel consumption

Study on partial introduction of hybrid/idling-stop/electric vehicles

Eco-driving education

Reduction in the number of vehicles owned

Against the previous fiscal year:

3.0% reduction(target) 98.0 l/thousand km

Fiscal 2010: 98.2 l/thousand km

Fiscal 2011: 94.9 l/thousand km (expected) Reduction rate: -3.4%


3.0% reduction(target) 92.0 l/thousand km

③Use of green energy:

Promote the use of solar power generation systems, etc.

Review of implementing solar power generation systems on company-owned buildings

To be implemented at two operating bases

TEC Building (February 2011; 50 kW installed)April 2011: 3 kW installed

To be implemented at one operating base:An electricity-sales demonstration system (100 kW) will be implemented at the Fuchu Technology Center.

CO2 emissions

(total of the above items ①-③)


Reduction of 1% or more

Fiscal 2010: 5,975 t-CO2

Fiscal 2011: 5,082 t-CO2

Reduction rate: 14.9%


1% reduction

Reduction in general waste

④Reduction in paper consumption:

Take paperless-oriented initiatives to reduce paper consumption volume

Actual inventory of paper materials, reduction in stored volume of paper materials and reduction in the file meter (fm)-converted volume Simultaneous campaign to designate a day to destroy documents (once per month)


4% reduction(target) 20,759 fm

End of August 2010: 21,624 fm

End of March 2012: 18,327 fm Reduction rate: 15.2%


4% reduction(target) 17,594 fm

Initiatives of promoting greenery of buildings

⑤Promotion of rooftop greening

Studying targets regarding permanently owned company assets

To be studied at the target facility on a case-by-case basis

①Late June 2011Planted several kinds of twiners on the rooftop and at the entrance of the Kansai Branch Building

②Late June 2011Planted several kinds of twiners on the rooftop of the Showa Annex Building

③Mid-June 2011Planted three kinds of sweet potatoes on the rooftop of the Kyushu Branch Building

To be studied at the target facility on a case-by-case basis

April 2012: Fuchu Technology Center

⑥Promotion of greenery within the premises

Studying possible implementation of measures at parking lots on company-owned premises

Fiscal 2011 Initiatives Regarding the Prevention of Global Warming



Content of Activities

Five branches, of which the business area is located near EXEO’s forests (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.

Degree of environmental contribution of EXEO’s forests (Mori)

Term of contract Region LocationArea (ha)

Degree of environmental contribution: One year (effects for the period of April 2011–March 2012 converted in the respective units shown below)

Watershed pondage or water quality purification volume

(in terms of 2-L PET bottles)

Sediment runoff prevention volume (in terms of a 10-ton

truck loading 5.5 m3)

Absorbed and fixed CO2 volume (in terms of CO2

emitted by a person in a year)

60 years(1/2005–3/2065)

Kyushu Karimawashi-yama government-owned forest, Uto-shi, Kumamoto Prefecture

5.363,715 m3

(1,858,000 bottles)70 m3 (13 trucks) 15 tons (48 persons)

21 years(2/2005–3/2026)

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

1.14465 m3

(233,000 bottles)14 m3 (3 trucks) 3 tons (9 persons)

60 years(8/2006–3/2066)

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

3.101,181 m3


22 years(10/2006–3/2028)

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

2.48656 m3


20 years(3/2007–3/2027)

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

3.291,664 m3


Total 15.377,681 m3

(3,842,000 bottles)184 m3 (34 trucks) 38 tons (119 persons)

EXEO’s forests (Mori), which extending

nationwide, are groomed by employees’ hands

*Profit-sharing afforestation contract: Agreement on the maintenance activities of government-owned forests (natural forests), which are premised on there being no logging.

(According to the Forestry Agency Report (Source: 24-Rin-Koku-Gyo No. 72 issued by the Forestry Agency)

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.

Initiatives toward Prevention of Global Warming and Preservation of Biodiversity

Chitose-shi, Hokkaido

Shiroishi-shi, Miyagi

Nishinomiya-shi, HyogoKure-shi, HiroshimaUto-shi, Kumamoto

Hokkaido Branch Office

Tohoku Branch Office

Chugoku Branch Office Kansai Branch Office

Kyushu Branch Office

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 conscious of the prevention of global warming and contributing to local communities. Giving its approval to the maintenance enhancement campaign of forest resources, which was then promoted by the Forestry Agency, the Company entered into a profit-sharing afforestation contract* with the Hokkaido, Tohoku, Kansai, Kyushu, Chugoku and Kyushu regional forest offices regarding so-called corporate forests. The Company named the forests “EXEO’s forests” and continues their maintenance activity, which also serves as an occasion for social assembly and recreation among employees and their families.


Involvement in the Environm

entE

nvironmental M

anagement


Financial Highlights (Consolidated)

■Orders Received ■Net Sales ■Gross Profit

■Operating Income ■Ordinary Income

■Net Income ■Total Assets ■Net Assets

(¥Millions)

0

120,000

240,000

360,000

2012/32011/32010/32009/32008/3

(¥Millions)

0

15,000

30,000

45,000

2012/32011/32010/32009/32008/3

(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3

Orders Received 297,899 286,233 276,289 273,788 288,532Net Sales 287,744 288,017 271,230 282,264 273,134Gross Profit 36,298 36,960 31,295 30,299 26,806Operating Income 16,400 18,871 13,867 12,390 8,919Ordinary Income 17,203 19,489 14,425 13,246 9,178Net Income 10,685 9,388 8,378 7,780 7,856Total Assets 176,955 179,555 180,128 196,918 181,291Net Assets 95,573 101,878 105,307 112,232 113,411

(¥Millions)

0

8,000

16,000

24,000

2012/32011/32010/32009/32008/3

(¥Millions)

0

4,000

8,000

12,000

2012/32011/32010/32009/32008/3

(¥Millions)

0

8,000

16,000

24,000

2012/32011/32010/32009/32008/3

(¥Millions)

0

80,000

160,000

240,000

2012/32011/32010/32009/32008/3

Financial Section


(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3

Telecommunications infrastructure (NTT group engineering)

183,600 187,601 169,583 164,562 166,199

Telecommunications infrastructure (Non-NTT telecom engineering)

56,355 58,932 60,240 82,447 67,411

Environmental and social infrastructure 32,219 28,429 29,798 23,782 26,399

SYSTEM-SOLUTIONS 15,569 13,054 11,608 11,471 13,123

Total 287,744 288,017 271,230 282,264 273,134

Net Sales by Business Segment (Consolidated)

(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3


38,725 36,609 36,287 38,992 43,854


13,992 15,213 26,962 19,215 27,636



Total 84,766 82,982 87,732 85,634 101,054

Outstanding Orders by Business Segment (Consolidated)

(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3


188,852 185,484 169,261 164,421 171,061


59,679 60,153 71,988 72,442 75,811



Total 297,899 286,233 276,289 273,788 288,532

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



(¥Millions)

0

280,000

350,000

210,000

140,000

70,000

2012/32011/32010/32009/32008/3

(¥Millions)

0

280,000

350,000

210,000

140,000

70,000

2012/32011/32010/32009/32008/3

(¥Millions)

0

80,000

100,000

60,000

40,000

20,000

2012/32011/32010/32009/32008/3

Orders Received by Business Segment (Consolidated)

Trends by Segment (Consolidated)


Financial S

ection


■Return on Equity ■Return on Assets ■Total Assets Turnover

2008/3 2009/3 2010/3 2011/3 2012/3

Gross Profit to Net Sales (%) 12.6 12.8 11.5 10.7 9.8Operating Income to Net Sales (%) 5.7 6.6 5.1 4.4 3.3Ordinary Income to Net Sales (%) 6.0 6.8 5.3 4.7 3.4Net Income to Net Sales (%) 3.7 3.3 3.1 2.8 2.9Return on Equity (%) 12.3 10.2 8.6 7.6 7.2Return on Assets (%) 5.9 5.3 4.7 4.1 4.2Total Assets Turnover (Times) 1.58 1.62 1.51 1.50 1.44

(%)

0.0

8.0

12.0

16.0

4.0

2012/32011/32010/32009/32008/3

(Times)

0.0

1.0

1.5

2.0

0.5

2012/32011/32010/32009/32008/3

Profitability Indices (Consolidated)

■Gross Profit to Net Sales ■Operating Income to Net Sales

■Ordinary Income to Net Sales ■Net Income to Net Sales

(%)

0.0

3.0

6.0

9.0

2012/32011/32010/32009/32008/3

(%)

0.0

5.0

10.0

15.0

2012/32011/32010/32009/32008/3

(%)

0.0

3.0

6.0

9.0

2012/32011/32010/32009/32008/3

(%)

0.0

2.0

3.0

4.0

1.0

2012/32011/32010/32009/32008/3

Financial Section


Stability Indices (Consolidated)

■Shareholders’ Equity to Total Assets ■Current Ratio

■Quick Assets to Current Liabilities ■Fixed Assets Ratio ■Fixed Assets to (Shareholders’ Equity + Long-term Liabilities)

■Interest Coverage Ratio ■Debt Equity Ratio

(%)

0.0

40.0

60.0

80.0

20.0

2012/32011/32010/32009/32008/3

(%)

0.0

100.0

200.0

300.0

2012/32011/32010/32009/32008/3

2008/3 2009/3 2010/3 2011/3 2012/3

Shareholders’ Equity to Total Assets (%) 50.1 53.3 55.4 53.9 62.4Current Ratio (%) 215.1 232.8 240.9 177.9 215.0Quick Assets to Current Liabilities (%) 170.4 181.4 189.3 133.5 164.3Fixed Assets Ratio (%) 62.2 55.6 61.0 59.8 57.7Fixed Assets to (Shareholders’ Equity + Long-term Liabilities) (%) 48.6 44.7 48.6 54.8 51.4Interest Coverage Ratio (Times) — 949.8 672.2 6.7 289.7Debt Equity Ratio (%) 18.6 17.0 17.7 19.2 6.7

Note : Interest Coverage Ratio for FY 2008/3 is not stated due to negative operating cash flow.

(%)

0.0

100.0

200.0

300.0

2012/32011/32010/32009/32008/3

(Times)

0.0

400.0

800.0

1,200.0

2012/32011/32010/32009/32008/3

(%)

0.0

60.0

90.0

30.0

2012/32011/32010/32009/32008/3

(%)

0.0

20.0

40.0

2012/32011/32010/32009/32008/3


Financial S

ection


Per Share Data (Consolidated)

■Number of Shares Outstanding at end of period ■Net Income per Share

■Net Assets per Share ■Operating Cash Flow per Share

■Cash Dividends per Share

(¥)

0.0

40.0

80.0

120.0

2012/32011/32010/32009/32008/3

(Thousand shares)

0

50,000

100,000

150,000

2012/32011/32010/32009/32008/3

2008/3 2009/3 2010/3 2011/3 2012/3

Number of Shares Outstanding at end of period (Thousand shares) 106,112 106,060 102,625 103,292 104,361

Net Income per Share (¥) 98.42 88.50 79.75 75.58 74.96

Net Assets per Share (¥) 836.10 903.15 973.13 1,027.98 1,084.44

Operating Cash Flow per Share (¥) (14.60) 164.34 104.60 5.97 156.82

Cash Dividends per Share (¥) 20.0 20.0 20.0 20.0 20.0

(¥)

0.0

400.0

800.0

1,200.0

2012/32011/32010/32009/32008/3

(¥)

0.0

10.0

20.0

30.0

2012/32011/32010/32009/32008/3

(¥)

-100.0

0.0

100.0

200.0

2012/32011/32010/32009/32008/3

Financial Section


Other Indices (Consolidated)

■Selling, General and Administrative Expenses

■Number of Consolidated Subsidiaries

■Depreciation Expenses

■Price Earnings Ratio

■Price Book-value Ratio

(Number)

0

30

45

60

15

2012/32011/32010/32009/32008/3

(¥Millions)

0

8,000

16,000

24,000

2012/32011/32010/32009/32008/3

2008/3 2009/3 2010/3 2011/3 2012/3

Selling, General and Administrative Expenses (¥Millions) 19,897 18,088 17,428 17,908 17,886

Depreciation Expenses (¥Millions) 2,632 2,554 2,992 3,039 2,947

Number of Consolidated Subsidiaries (Number) 45 43 38 37 39

Price Earnings Ratio (Times) 7.8 9.0 9.7 11.0 9.9

Price Book-value Ratio (Times) 0.9 0.9 0.8 0.8 0.7

(¥Millions)

0

1,200

2,400

3,600

2012/32011/32010/32009/32008/3

(Times)

0.0

10.0

20.0

2012/32011/32010/32009/32008/3

(Times)

0.0

1.0

2.0

2012/32011/32010/32009/32008/3


Financial S

ection


Consolidated Balance Sheets

(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3

ASSETSCurrent assets 121,733 126,317 119,239 133,466 116,010

Cash and deposits 6,576 6,317 6,136 17,185 5,849Notes receivable, accounts receivable from completed construction contracts 80,931 72,127 70,917 82,462 76,311Short-term investment securities 8,902 20,001 16,630 499 6,515Costs on uncompleted construction contracts and other 18,886 21,097 19,404 25,617 21,799Deferred tax assets 4,202 4,227 3,329 3,451 2,971Other current assets 2,502 2,748 3,021 4,372 2,632Allowance for doubtful accounts (268) (202) (199) (122) (68)

Noncurrent assets 55,221 53,238 60,889 63,452 65,280Property, plant and equipment 37,309 38,138 45,228 48,447 47,736

Buildings and structures 12,252 12,239 18,166 17,777 16,975Machinery, vehicles, tools, furniture and fixtures 1,904 1,472 1,218 1,067 887Land 23,117 23,333 25,429 29,179 29,319Other property, plant and equipment 35 1,092 413 422 553

Intangible assets 3,510 3,244 2,932 2,435 4,938Goodwill — — — 98 3,294Other intangible assets 3,510 3,244 2,932 2,337 1,644

Investments and other assets 14,401 11,854 12,729 12,569 12,605Investment securities 7,106 5,440 6,379 7,001 6,872Long-term loans receivable 1,854 1,266 — — —Deferred tax assets 1,518 701 924 495 617Other investments and other assets 5,783 7,115 7,444 7,468 7,363Allowance for doubtful accounts (1,862) (2,670) (2,019) (2,396) (2,248)

Total assets 176,955 179,555 180,128 196,918 181,291

LIABILITIESCurrent liabilities 56,589 54,263 49,494 75,033 53,957

Notes payable, accounts payable for construction contracts 33,455 28,729 28,722 35,482 31,025Income taxes payable 3,015 5,120 3,738 4,419 3,809Advances received on uncompleted construction contracts 4,392 5,087 2,948 3,787 4,400Provision for bonuses 489 449 424 435 562Provision for directors’ bonuses 180 193 75 87 105Provision for warranties for completed construction 276 369 201 154 704Provision for loss on construction contracts 107 214 257 350 246Other current liabilities 14,670 14,098 13,125 30,317 13,101

Noncurrent liabilities 24,792 23,413 25,326 9,653 13,922Convertible bond-type bonds with subscription rights to shares 15,000 15,000 15,000 — —Long-term loans payable — — 2,450 2,139 6,310Deferred tax liabilities 313 723 852 1,411 1,042Provision for retirement benefits 5,820 5,515 4,469 4,367 4,875Provision for directors’ retirement benefits 699 736 410 423 410Allowance for investment loss 349 283 373 104 102Negative goodwill 403 204 385 — —Other noncurrent liabilities 2,205 949 1,385 1,205 1,182

Total liabilities 81,382 77,677 74,821 84,686 67,879

NET ASSETSShareholders’ Equity 88,427 95,537 99,215 105,543 112,170

Capital stock 6,888 6,888 6,888 6,888 6,888Capital surplus 5,953 5,959 6,009 6,097 6,230Retained earnings 84,023 91,184 97,590 103,315 109,067Treasury stock (8,438) (8,494) (11,272) (10,758) (10,016)

Accumulated other comprehensive income 293 250 652 639 1,002Valuation difference on available-for-sale securities 293 250 652 639 1,002

Subscription rights to shares 77 181 272 361 217Minority interests 6,774 5,908 5,167 5,687 19

Total net assets 95,573 101,878 105,307 112,232 113,411Total liabilities and net assets 176,955 179,555 180,128 196,918 181,291

Financial Section


Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3

Net sales 287,744 288,017 271,230 282,264 273,134Cost of sales 251,446 251,056 239,934 251,965 246,327Gross profit 36,298 36,960 31,295 30,299 26,806Selling, general and administrative expenses 19,897 18,088 17,428 17,908 17,886Operating income 16,400 18,871 13,867 12,390 8,919Non-operating income 1,526 1,232 880 2,218 1,310

Interest income 204 266 118 70 37Dividends income 123 173 136 191 284Land and house rent received — — 111 126 181Commission fee — — 93 — —Reversal of allowance for doubtful accounts 213 — — — —Amortization of negative goodwill 367 266 199 — —Other 618 525 221 1,830 806

Non-operating expenses 724 615 322 1,362 1,051Interest expenses 19 18 19 92 60Provision of allowance for investment loss — — 85 — —Bad debts expenses 99 103 33 — —Impairment loss — — — 90 196Loss on valuation of investment securities 75 — — — —Loss on retirement of noncurrent assets 103 — — — —Loss on sales of noncurrent assets — — — 51 167Foreign exchange losses 288 262 — — —Other 138 231 184 1,127 626

Ordinary income 17,203 19,489 14,425 13,246 9,178Extraordinary income 171 277 — 517 2,863

Gain on revision of retirement benefit plan — — — 517 —Gain on negative goodwill — — — — 2,660Gain on reversal of subscription rights to shares — — — — 203

Extraordinary loss — 3,006 776 315 —Loss on disaster — — — 315 —

Income before income taxes and minority interests 17,374 16,759 13,649 13,449 12,041Income taxes-current 4,020 6,849 4,406 4,683 4,199Income taxes-deferred 2,299 1,133 611 633 145Total income taxes 6,319 7,983 5,017 5,316 4,344

Income before minority interests 11,054 8,776 8,631 8,132 7,697Minority interests in income (loss) 369 (612) 253 352 (158)Net income 10,685 9,388 8,378 7,780 7,856

(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3

Income before minority interests — — — 8,132 7,697Other comprehensive income

Valuation difference on available-for-sale securities — — — (32) 371Total accumulated other comprehensive income — — — (32) 371

Comprehensive income — — — 8,099 8,068BreakdownComprehensive income attributable to owners of the parent — — — 7,767 8,219Comprehensive income attributable to minority interests — — — 332 (150)


Financial S

ection


Consolidated Statements of Changes in Net Assets

(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3Shareholders’ equity

Capital stockBalance at the beginning of current period 6,888 6,888 6,888 6,888 6,888Changes of items during the period — — — — —

Total changes of items during the period — — — — —Balance at the end of current period 6,888 6,888 6,888 6,888 6,888

Capital surplusBalance at the beginning of current period 5,866 5,953 5,959 6,009 6,097Changes of items during the period

Disposal of treasury stock 87 5 50 87 133Total changes of items during the period 87 5 50 87 133

Balance at the end of current period 5,953 5,959 6,009 6,097 6,230Retained earnings

Balance at the beginning of current period 75,537 84,023 91,184 97,590 103,315Changes of items during the period

Dividends from surplus (2,199) (2,228) (2,127) (2,054) (2,103)Net income 10,685 9,388 8,378 7,780 7,856Change of scope of consolidation — — 154 — —Total changes of items during the period 8,485 7,160 6,405 5,725 5,752

Balance at the end of current period 84,023 91,184 97,590 103,315 109,067Treasury stock

Balance at the beginning of current period (5,354) (8,438) (8,494) (11,272) (10,758)Changes of items during the period

Purchase of treasury stock (3,290) (75) (3,297) (1) (2,691)Disposal of treasury stock 206 19 519 546 3,464Change of scope of consolidation — — — (30) (31)Total changes of items during the period (3,083) (56) (2,778) 514 741

Balance at the end of current period (8,438) (8,494) (11,272) (10,758) (10,016)Total shareholders’ equity

Balance at the beginning of current period 82,937 88,427 95,537 99,215 105,543Changes of items during the period

Dividends from surplus (2,199) (2,228) (2,127) (2,054) (2,103)Net income 10,685 9,388 8,378 7,780 7,856Purchase of treasury stock (3,290) (75) (3,297) (1) (2,691)Disposal of treasury stock 293 25 569 634 3,597Change of scope of consolidation — — 154 (30) (31)Total changes of items during the period 5,489 7,110 3,677 6,327 6,627

Balance at the end of current period 88,427 95,537 99,215 105,543 112,170Accumulated other comprehensive income

Valuation difference on available-for-sale securitiesBalance at the beginning of current period 1,541 293 250 652 639Changes of items during the period

Net changes of items other than shareholders’ equity (1,248) (42) 401 (12) 363

Total changes of items during the period (1,248) (42) 401 (12) 363Balance at the end of current period 293 250 652 639 1,002

Total accumulated other comprehensive incomeBalance at the beginning of current period 1,541 293 250 652 639Changes of items during the period

Net changes of items other than shareholders’ equity (1,248) (42) 401 (12) 363

Total changes of items during the period (1,248) (42) 401 (12) 363Balance at the end of current period 293 250 652 639 1,002

Subscription rights to sharesBalance at the beginning of current period — 77 181 272 361Changes of items during the period

Net changes of items other than shareholders’ equity 77 103 90 89 (143)

Total changes of items during the period 77 103 90 89 (143)Balance at the end of current period 77 181 272 361 217

Minority interestsBalance at the beginning of current period 6,657 6,774 5,908 5,167 5,687Changes of items during the period

Net changes of items other than shareholders’ equity 117 (866) (740) 520 (5,668)

Total changes of items during the period 117 (866) (740) 520 (5,668)Balance at the end of current period 6,774 5,908 5,167 5,687 19

Total net assetsBalance at the beginning of current period 91,136 95,573 101,878 105,307 112,232Changes of items during the period

Dividends from surplus (2,199) (2,228) (2,127) (2,054) (2,103)Net income 10,685 9,388 8,378 7,780 7,856Purchase of treasury stock (3,290) (75) (3,297) (1) (2,691)Disposal of treasury stock 293 25 569 634 3,597Change of scope of consolidation — — 154 (30) (31)Net changes of items other than shareholders’ equity (1,053) (805) (248) 596 (5,448)

Total changes of items during the period 4,436 6,305 3,429 6,924 1,179Balance at the end of current period 95,573 101,878 105,307 112,232 113,411

Financial Section


Consolidated Statements of Cash Flows

(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3

Net cash provided by (used in) operating activities (1,583) 17,434 10,989 614 16,435

Income before income taxes and minority interests 17,374 16,759 13,649 13,449 12,041

Depreciation and amortization 2,632 2,554 2,992 3,039 2,947

Impairment loss — 166 — — —

Amortization of goodwill (324) (236) (192) — —

Gain on negative goodwill — — — (278) (2,660)

Increase (decrease) in allowance for doubtful accounts (433) 741 (650) 188 (201)

Increase (decrease) in provision for retirement benefits (359) (305) (1,018) (854) 93

Interest and dividends income (327) (440) (255) (262) (322)

Interest expenses 19 18 19 92 60

Decrease (increase) in notes and accounts receivable-trade (4,138) 8,803 1,029 (9,263) 6,951

Decrease (increase) in costs on uncompleted construction contracts and other 866 (2,210) 1,751 (2,902) 3,931

Decrease (increase) in other assets (1,448) (1,371) 975 (1,409) 836

Increase (decrease) in notes and accounts payable-trade (1,078) (4,725) 59 5,269 (4,579)

Increase (decrease) in advances received on uncompleted construction contracts (1,065) 695 (2,076) (156) 612

Increase (decrease) in other liabilities (5,669) (1,038) 37 (2,766) 532

Other, net 539 2,107 308 402 630

Sub-total 6,587 21,518 16,630 4,548 20,875

Interest and dividends income received 340 439 257 262 321

Interest expenses paid (20) (18) (16) (91) (56)

Income taxes paid (8,491) (4,505) (5,881) (4,104) (4,704)

Net cash provided by (used in) investing activities (5,690) (4,057) (10,600) (1,535) (4,523)

Purchase of property, plant and equipment (2,713) (3,022) (8,963) (3,449) (1,545)

Proceeds from sales of property, plant and equipment 18 282 168 746 496

Purchase of intangible assets (2,036) (1,018) (714) (387) (590)

Purchase of investment securities (701) (683) (611) (675) (36)

Proceeds from sales of investment securities 298 550 251 — —

Purchase of investments in subsidiaries resulting in change in scope of consolidation — — — — (3,752)

Payments of loans receivable (1,496) (429) — — —

Collection of loans receivable 1,186 337 324 315 236

Other, net (246) (72) (1,055) 1,915 667

Net cash provided by (used in) financing activities (5,051) (2,531) (4,095) (3,650) (17,533)

Net increase (decrease) in short-term loans payable 242 (170) (992) (892) (2,015)

Repayment of long-term loans payable (8) (30) — (1,041) (1,114)

Proceeds from long-term loans payable — 55 2,450 50 5,000

Redemption of bonds — — — (180) (15,180)

Purchase of treasury stock (3,290) — (3,297) (3) (2,691)

Proceeds from sales of treasury stock 293 — — 677 829

Cash dividends paid (2,197) (2,228) (2,127) (2,054) (2,104)

Cash dividends paid to minority shareholders (91) (95) (82) (68) (72)

Other, net — (63) (45) (138) (185)

Effect of exchange rate change on cash and cash equivalents (19) (15) (1) (22) (10)

Net increase (decrease) in cash and cash equivalents (12,345) 10,829 (3,706) (4,594) (5,631)

Cash and cash equivalents at beginning of period 27,776 15,431 26,261 22,229 17,634

Increase (decrease) in cash and cash equivalents resulting from change of scope of consolidation — — (325) — 301

Cash and cash equivalents at end of period 15,431 26,261 22,229 17,634 12,304


Financial S

ection


Financial Highlights (Non-consolidated)

■Orders Received ■Net Sales ■Gross Profit

■Operating Income ■Ordinary Income

■Net Income ■Total Assets ■Net Assets

(¥Millions)

0

80,000

160,000

240,000

2012/32011/32010/32009/32008/3

(¥Millions)

0

10,000

20,000

30,000

2012/32011/32010/32009/32008/3

(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3

Orders Received 234,965 230,410 222,980 204,678 218,527Net Sales 223,932 231,671 216,315 213,973 200,061Gross Profit 25,637 27,487 22,783 21,495 18,320Operating Income 11,319 14,493 10,019 9,201 6,651Ordinary Income 11,597 14,632 10,582 9,753 7,259Net Income 7,085 7,109 6,494 5,624 4,466Total Assets 143,973 149,393 152,090 159,787 153,493Net Assets 69,508 74,327 76,294 80,599 84,533

(¥Millions)

0

5,000

10,000

15,000

2012/32011/32010/32009/32008/3

(¥Millions)

0

3,000

6,000

9,000

2012/32011/32010/32009/32008/3

(¥Millions)

0

5,000

10,000

15,000

2012/32011/32010/32009/32008/3

(¥Millions)

0

60,000

120,000

180,000

2012/32011/32010/32009/32008/3

Financial Section


(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3


143,939 153,004 134,267 123,041 119,991


44,353 48,674 50,816 64,745 52,946



Total 223,932 231,671 216,315 213,973 200,061

Net Sales by Business Segment (Non-consolidated)

(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3


149,736 150,515 134,288 122,680 124,821


48,317 49,844 63,502 54,580 62,450



Total 234,965 230,410 222,980 204,678 218,527

(¥Millions)

0

200,000

250,000

150,000

100,000

50,000

2012/32011/32010/32009/32008/3

(¥Millions)

0

200,000

250,000

150,000

100,000

50,000

2012/32011/32010/32009/32008/3

Orders Received by Business Segment (Non-consolidated)

Trends by Segment (Non-consolidated)




Financial S

ection


Other Indices (Non-consolidated)

■Capital Expenditures ■Depreciation Expenses

■Selling, General and Administrative Expenses ■Dividend Payout Ratio

■Percentage of Stock Held by Foreigners

(¥Millions)

0

1,000

2,000

3,000

2012/32011/32010/32009/32008/3

(¥Millions)

0

4,000

8,000

12,000

2012/32011/32010/32009/32008/3

2008/3 2009/3 2010/3 2011/3 2012/3

Capital Expenditures (¥Millions) 2,768 3,194 9,011 3,272 1,553Depreciation Expenses (¥Millions) 1,916 1,953 2,459 2,457 2,362Selling, General and Administrative Expenses (¥Millions) 14,317 12,993 12,763 12,294 11,669Dividend Payout Ratio (%) 30.6 29.8 32.4 36.6 47.1Percentage of Stock Held by Foreigners (%) 19.9 14.6 17.3 16.6 17.4

(¥Millions)

0

6,000

12,000

18,000

2012/32011/32010/32009/32008/3

(%)

0.0

50.0

100.0

2012/32011/32010/32009/32008/3

(%)

0.0

8.0

16.0

24.0

2012/32011/32010/32009/32008/3

Financial Section


Non-consolidated Balance Sheets

(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3ASSETSCurrent assets 98,191 105,102 100,115 105,593 91,375

Cash and deposits 5,224 4,856 5,061 15,720 4,259Notes receivable-trade 514 285 173 201 154Accounts receivable from completed construction contracts 63,824 58,585 56,592 61,896 56,749Short-term investment securities 8,902 20,001 16,630 499 6,506Costs on uncompleted construction contracts 12,916 14,394 13,433 15,148 14,072Raw materials and supplies 19 141 340 43 113Short-term loans receivable 2,726 2,786 4,666 7,649 6,850Prepaid expenses 243 265 226 202 214Deferred tax assets 3,142 3,109 2,322 2,210 1,817Other current assets 903 850 842 2,115 690Allowance for doubtful accounts (226) (173) (172) (94) (54)

Noncurrent assets 45,781 44,290 51,974 54,193 62,118Property, plant and equipment 25,288 26,486 33,604 34,877 34,809

Buildings 8,409 8,650 14,302 13,446 12,855Structures 495 477 551 470 408Machinery and equipment 189 131 121 85 101Vehicles 11 15 14 2 1Tools, furniture and fixtures 1,057 844 726 642 536Land 15,089 15,314 17,525 19,952 20,547Lease assets — 61 342 270 352Construction in progress 35 991 20 7 6

Intangible assets 3,138 2,871 2,582 1,981 1,370Software 2,873 2,661 2,379 1,764 1,201Other intangible assets 264 210 203 216 169

Investments and other assets 17,355 14,932 15,787 17,334 25,937Investment securities 4,538 3,360 4,096 3,951 4,326Stocks of subsidiaries and affiliates 6,872 6,771 7,001 9,118 17,263Long-term loans receivable 2,585 2,180 1,698 1,630 1,634Claims provable in bankruptcy, claims provable in rehabilitation and other 489 484 73 134 229Long-term prepaid expenses 238 212 183 157 133Prepaid pension cost 2,009 2,526 2,637 2,769 3,362Deferred tax assets 789 365 — — —Other investments and other assets 2,005 1,999 2,183 1,811 1,116Allowance for investment loss — (720) (288) (237) (162)Allowance for doubtful accounts (2,174) (2,247) (1,798) (2,002) (1,966)

Total assets 143,973 149,393 152,090 159,787 153,493

LIABILITIESCurrent liabilities 57,587 59,388 57,277 76,201 61,690

Notes payable 322 108 484 485 —Accounts payable for construction contracts 32,781 28,909 29,058 32,615 29,027Short-term loans payable — — — 500 1,000Lease obligations — 15 86 91 130Convertible bond-type bonds with subscription rights to shares — — — 15,000 —Accounts payable-other 2,796 1,728 1,590 720 749Accrued expenses 5,983 6,322 5,586 5,303 4,982Income taxes payable 2,117 3,836 3,185 3,565 2,778Advances received on uncompleted construction contracts 3,122 4,114 2,479 2,127 3,707Deposits received 9,746 13,140 13,960 14,653 18,209Provision for directors’ bonuses 101 118 — — —Provision for warranties for completed construction 267 354 181 118 372Provision for loss on disaster — — — 145 —Provision for loss on construction contracts 89 151 223 207 181Other current liabilities 259 589 440 666 551

Noncurrent liabilities 16,877 15,677 18,518 2,986 7,269Convertible bond-type bonds with subscription rights to shares 15,000 15,000 15,000 — —Long-term loans payable — — 2,450 1,904 6,296Lease obligations — 49 280 202 249Deferred tax liabilities — — 117 499 381Provision for directors’ retirement benefits 321 343 — — —Allowance for investment loss 349 283 369 104 102Other noncurrent liabilities 1,205 0 301 275 239

Total liabilities 74,464 75,066 75,796 79,187 68,960

NET ASSETSShareholders’ equity 68,888 73,719 75,358 79,498 83,273

Capital stock 6,888 6,888 6,888 6,888 6,888Capital surplus 5,953 5,959 6,009 6,035 6,738Legal retained earnings 1,547 1,547 1,547 1,547 1,547Reserve for reduction entry of noncurrent assets 134 173 171 313 325General reserve 54,630 59,500 64,200 68,900 72,300Retained earnings brought forward 8,173 8,145 7,813 6,541 5,483Treasury stock (8,438) (8,494) (11,272) (10,727) (10,010)

Valuation and translation adjustments 541 425 663 739 1,042Valuation difference on available-for-sale securities 541 425 663 739 1,042

Subscription rights to shares 77 181 272 361 217Total net assets 69,508 74,327 76,294 80,599 84,533Total liabilities and net assets 143,973 149,393 152,090 159,787 153,493


Financial S

ection


Non-consolidated Statements of Income

(¥Millions)

2008/3 2009/3 2010/3 2011/3 2012/3

Net sales 223,932 231,671 216,315 213,973 200,061

Cost of sales 198,295 204,183 193,531 192,477 181,740

Gross profit 25,637 27,487 22,783 21,495 18,320

Selling, general and administrative expenses 14,317 12,993 12,763 12,294 11,669

Operating income 11,319 14,493 10,019 9,201 6,651

Non-operating income 884 833 901 1,565 1,198

Interest income 39 39 36 38 37

Interest on securities 125 233 94 43 14

Dividends income 227 261 235 256 241

Land and house rent received 111 127 251 408 478

Gain on sales of investment securities 95 — — — —

Reversal of allowance for doubtful accounts 101 — 98 — —

Other 183 170 185 817 426

Non-operating expenses 606 695 338 1,012 590

Interest expenses 62 49 24 51 49

Provision of allowance for doubtful accounts — 73 — — —

Bad debts expenses 99 72 33 102 28

Provision of allowance for investment loss — — 85 — —

Loss on debt waiver of subsidiaries and affiliates — 70 58 — —

Foreign exchange losses 288 262 — — —

Loss on valuation of investment securities 65 — — — —

Rent expenses — — — 141 126

Other 92 167 137 716 385

Ordinary income 11,597 14,632 10,582 9,753 7,259

Extraordinary income 171 219 432 — 203

Extraordinary loss — 2,362 234 196 —

Income before income taxes 11,768 12,489 10,781 9,557 7,462

Income taxes-current 2,040 4,843 3,180 3,491 2,790

Income taxes-deferred 2,643 537 1,106 440 206

Net income 7,085 7,109 6,494 5,624 4,466

Financial Section


President

Kunio Ishikawa

Director and Executive Operating Officer

Terutaka Sakai

Director and Managing Operating Officer

Yoshiharu Yamazaki

Statutory Auditor

Kazuteru Kanazawa


Takayuki Watanabe

Director

Kazufumi Watanabe

Statutory Auditor

Akira Yamada

Kenjiro TsunodaHaruhiko WatanabeYoshiharu TakizawaSeiji FujikakeTeru SuzukiToshimitsu Kiribayashi

Operating Officers

Yoshimichi TakayabuAkira GoharaShigeru TanakaTsuneto HinoharaNaoe TakedaMakoto Nakagawa

Hiroshi SatoHisamitsu HoshiKazuyuki KaihatsuAtsuo YuharaGenzaburo Oe

Managing Operating Officers

Yukio SanoTsutomu OtaTakashi Shikano


Akira Yabiki

Director

Hisashi Yazawa


Takashi Sakai

Standing Statutory Auditor

Hideo Oshima


Toshio Tsuda

Standing Statutory Auditor

Yuji Sugita

Director

Yoshiaki Matsuzaka

Vice President

Fuminori Kozono

With stakeholders

Board of Directors

(as of June 22, 2012) Create “Linkages” in Society

Financial Section/Board of Directors


Number of shares held (thousand)

Percentage of total shares issued (%)

Japan Trustee Services Bank, Ltd. (Trust Account)

8,597 7.30

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

8,135 6.91

Japan Trustee Services Bank, Ltd. (Sumitomo Electric Industries, Ltd., Retirement Benefit Trust Account re-entrusted by The Sumitomo Trust & Banking Co., Ltd.)

5,766 4.89

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

5,747 4.88

ESOP Association of KYOWA EXEO CORPORATION 3,651 3.10

Trust & Custody Services Bank, Ltd., as trustee for Fujikura Ltd. Retirement Benefit Trust Account re-entrusted by Mizuho Trust & Banking Co., Ltd.

2,930 2.49

Mizuho Bank, Ltd. 2,748 2.33

JUNIPER 2,342 1.99

GOLDMAN, SACHS & CO. REG 2,149 1.82

SUMITOMO LIFE INSURANCE COMPANY 2,000 1.70

Note: Effective April 1, 2012, The Sumitomo Trust & Banking Co., Ltd., merged with The Chuo Mitsui Trust and Banking Co., Ltd., and Chuo Mitsui Asset Trust and Banking Company, Limited, and its name has changed to Sumitomo Mitsui Trust Bank, Limited.

Fiscal Year-End March 31

Annual Shareholders’ Meeting

June 22, 2012

Stock Listing Tokyo Stock Exchange (First Section)

Ticker Code 1951

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

Total Number of Shareholders

11,100

Transfer Agent and Registrar

Sumitomo Mitsui Trust Bank, Limited1-4-1, Marunouchi, Chiyoda-ku, Tokyo, Japan

0

500

1,000

1,500

0

10

20

30

40

50

Trading Volume (Million Shares)

3211211109876543211211109876543211211109876543211211109876543211211109876542007 2009 2010 2011 20122008

Stock Price (¥)

Stock Price Range and Trading Volume on the Tokyo Stock Exchange

Composition of Shareholders

Major Shareholders

Financial institutions44.67%

Securities companies0.90%

Other corporations9.59%

Foreign companies17.38%

Individuals and others17.47%

Treasury stock9.99%

Stock Information

(as of March 31, 2012)


Editorial Policy

Period Covered by the Report: From April 1, 2011, to March 31, 2012

(However, in some cases, activities before and after the

coverage period are also included in this report.)

Organizations Covered by the Report: Companies subject to consolidation of the KYOWA EXEO Group

(However, in some cases, KYOWA EXEO CORPORATION’s

non-consolidated data are used instead of consolidated data.)

Reference Guidelines: GRI “Sustainability Reporting Guideline 3rd Version 2006”

Ministry of Environment “Environmental Reporting Guidelines

(Fiscal 2007 Version)”

ISO26000 “Guidance on social responsibility”

Issuance: August 2012

Next Issuance Scheduled: August 2013

KYOWA EXEO CORPORATION

http://www.exeo.co.jp/overseas/index.html

29-20, Shibuya 3-chome, Shibuya-ku, Tokyo 150-0002, Japan

Notice on forward-looking statements:

This Corporate Report 2012 contains forward-looking statements such as the future business

performance of KYOWA EXEO. As these statements are based on the currently available information at

the time of the creation of the report, the actual results may differ materially from the content described

or suggested therein due to various factors. As this corporate report is not intended for the purpose of

soliciting investment, all users of this report are advised to undertake decisions concerning investment at

their own discretion.

The figures stated in units of ¥100 million and ¥1 million are rounded down.


Stock Information/Editorial Policy


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

Documents

KYOWA EXEO CORPORATION · Major Banks Mizuho Bank, Ltd., Sumitomo Mitsui Banking Corporation, The Bank of Tokyo-Mitsubishi UFJ, Ltd. Independent Auditor Kudan Audit Corporation To