ANNUAL REPORT 2020 PHILOSOPHY To Create a Vibrant Environment for All Members of Society The Taisei Group creates “safe, secure, and attractive spaces” and “high value” in harmony with the nature, and strives to build a global society filled with dreams and hopes for the next generation. Taisei Spirit Action Guidelines for Taisei Personnel and the Taisei Group as a Whole We value diversity and, through open and active communication lines and ❶● Cultivating an open corporate culture Active and networks both internal and external to the Taisei Group, seek to cultivate Securing a pleasant working environment Transparent ❷● a transparent and active corporate culture in which all of our officers and Culture ❸● Respect for fundamental human rights employees are able to reach their full potential. and diversity Not limited to our understanding of society at large, we carefully take into ❹● Creating a vibrant environment for all account the needs of our clients and using all of the technology and members of society Value know-how at our disposal, together with our passion for innovation and ● Striving to create value Creation ❺ ingenuity, seek to construct innovative and valuable engineering projects ❻● Pursuing customer satisfaction that inspire and impress our clients. ❼ Ensuring and improving safety and quality We aim to instill within the Taisei Group the Japanese tradition of monozukuri ❽● Respect for traditions Evolution (precise, superb craftsmanship) and continually challenge ourselves to Promoting partnerships with subcon- of ❾● provide ever more valuable contributions to society and ensure our continued tractors and suppliers Tradition development and growth as a respected corporate group. ❿ Promoting environmental conservation and creation ⓫● Communication with local communities The Taisei Group engages in corporate activities as a group of ⓬ Conduct in the international community professionals who are cheerful, enthusiastic, sincere, and disciplined ⓭ Appropriate disclosure of information as corporate citizens. ⓮● Fulfilling social responsibilities Our Structure of Values and Policies Taisei Group Philosophy Taisei Spirit To Create a Vibrant Environment Active and Transparent Culture / Taisei Group Value Creation / Evolution of Tradition for All Members of Society Philosophy Key Concepts That All Taisei Group Officers and Objectives to be Pursued by the Taisei Group Employees Must Adhere to in Order to Pursue (Goals) and Realize the Taisei Group Philosophy Taisei Spirit Action Guidelines for Taisei Personnel and the Taisei Overall Overall Medium-term Business Plan Principles of Management (FY2018 – FY2020) Group as a Whole Conduct Perspective Shareholders / Local Customers Investors Suppliers Employees Communities WEB Our Structure of Values and Policies https://www.taisei.co.jp/english/profile/philosophy 1 TAISEI ANNUAL REPORT 2020 Editorial Policy CONTENTS This report is intended to help readers better understand the creation of our corporate value as a whole, such as corporate activities, financial statements, and management tasks in line with the Taisei Group Philosophy and the Action Guidelines for Taisei Personnel and About the Taisei Group the Taisei Group as a Whole. 03 This report comprehensively and concisely discloses our key 03 Message from the President ESG information that provides starting points for dialogues, including 05 Our History the Discussion between the President and an Expert, External 07 11-Year Financial and Non-Financial Summary Board Members’ Message, and SDGs dialogue, as well as our initiatives on sustainability. Further details about the initiatives related to ESG and 09 The Strategy for Sustainable Growth sustainability are available in the CSR section on Taisei Corporation’s 09 Value Creation Process of the Taisei Group official website WEB ① 11 Communication with Stakeholders Scope of Coverage 12 Overview of Medium-term Business Plan (FY2018 – FY2020) In principle this report covers the activities of Taisei Corporation and 13 Discussion between the President and an Expert the Taisei Group companies (consolidated subsidiaries) as of March 17 Talk on the SDGs 31, 2020, unless otherwise noted. 21 New Technology Contributing to SDGs Period of Coverage 23 Future Created by Technology The main subject of this report is the actual results for the fiscal year ended March 31, 2020 (April 1, 2019 to March 31, 2020). Some contents concern the data for the previous fiscal year or the most 25 ESG Section recent activities. Guidelines on Non-Financial Information Disclosure 25 Sustainability of the Taisei Group • GRI Sustainability Reporting Standards WEB ② 29 Environment Section • ISO26000: 2010 (International Organization for Standardization) • Realization of a Sustainable and Environmentally Friendly Society • Integrated Reporting Framework (International Integrated Reporting 35 Social Section Council: IIRC) • Ensuring Quality and Improving Technology • Environmental Reporting Guidelines (2018) • Guidance for Collaborative Value Creation (METI) • Technical Development for Realizing a Sustainable Society Third-Party Opinions and Third-Party Assurance on This Report • Promotion of Supply Chain Management • Kanji Tanimoto, DBA, Professor, School of commerce, Waseda university • Thorough Management of Occupational Health and Safety • “Independent Assurance Report” on the environment data and • Cultivation of Technical Staff and Securing Human Resources indices by Ernst & Young ShinNihon LLC • Realization of an Attractive Working Environment That Is Good to Work in Date of Issue • November 2020 • Promotion of Compliance 41 Governance Section Note Regarding Forward-Looking Statements • Corporate Governance This report has been produced in an environmentally friendly manner. • Management Members It is printed on lightweight paper to reduce the use of timber • External Board Members’ Message resources and transportation energy, using vegetable oil-based ink. • Risk Management / Compliance ESG Evaluation (As of July 1, 2020) 59 Business Section 59 Civil Engineering 61 Building Construction 63 Real Estate Development 65 Explanation and Analysis of Business Results 65 Explanation and Analysis of Business Results 69 Data Section 69 Consolidated Financial Statements 96 Independent Auditor’s Report 99 Non-Financial Data of the Taisei Group 101 Third-Party Opinion 102 Outline of the Company 103 Taisei Corporation Organization Chart 104 Overseas Network * INCLUSION OF TAISEI CORPORATION IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS ORINDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF TAISEI CORPORATION BY MSCIOR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES. WEB ① GRI WEB ② CSR https://www.taisei.co.jp/english/csr/performance/iso26000/gri/pdf/gri.pdf https://www.taisei.co.jp/english/csr/ TAISEI ANNUAL REPORT 2020 2 About the Taisei Group Message from the President Towards the Sustainable Development of the Society and the Company I, Yoshiro Aikawa, was inaugurated as President and Chief Executive Officer of Taisei Corporation in June 2020. Since assuming office as President, I have been feeling the great expectations towards our Group from our stakeholders. I am willing to fulfill my responsibilities by exercising leadership so that our Group can provide our stakeholders with the value, satisfaction, and excitement that exceeds their expectations and contribute to the development of the society. Current Business Environment and Medium-term Business Plan (FY2018 – FY2020) In recent years, the business environment surrounding our Group has been steady on the background of the followings: the demand for infrastructure development such as the recovery and reconstruction from the Great East Japan Earthquake for building national resilience of Japan; the increase in inbound demand; the projects related to the Tokyo 2020 Olympics and Paralympics Games; and the redevelopment projects in the Tokyo metropolitan area. Taisei Group’s FY2019 operating results achieved an increase in revenues from the steady progress of our present construction works, and maintained a high-level operating income in terms of profit. However, to our regret, FY2020 operating results are forecasted to be lower than the Management Numerical Targets for the final fiscal year of the current Medium-term Business Plan due to signifi-cant decreases in revenues and profits under the estimated impact by the spread of novel coronavirus (COVID-19) infection. The issue of COVID-19 completely overturns the funda- mental nature of corporate activities and social values, and forces to change the conventional business models. From now President and Chief Executive Officer, Representative Director and on, I assume that companies in this world will be sorted into two groups: Those can adapt to such changes and revolutions in the market environment and take it as a chance for further growth; and those cannot. To be a selected and sustainable company over the future, we would like to overcome this difficult situation with a flexible way of thinking unbounded to conventional customs, and with the ability to take action without hesitating changes. 3 TAISEI ANNUAL REPORT 2020 About the Taisei Group Strategy for Sustainable Growth ESG Section Business Section Explanation and Analysis of Data Section Message from Business Results the President Numerical management targets and business