Taisei Annual Report 2017 Taiseitaisei Annual Annual Report Report 2017 20172 116

6.2㎜

［ Inquiries ］ TAISEI CORPORATION ANNUAL REPORT 2017 CSR Promotion Section, Corporate Communication Department, Corporate Planning Ofﬁce TAISEI 2017 REPORT ANNUAL

E-mail : [email protected] URL : http:// www.taisei.co.jp

1708.2000.T.S

005_0356501372908.indd 1-3 2017/08/21 10:15:23 Overseas Network (As of August 1, 2017)

Overseas Business Offices Overseas Subsidiaries / Affiliated Companies TAIPEI OFFICE Zone B, 6F, No. 16, Sec. 4, Nan-Jing E. Road, PT.PP-TAISEI INDONESIA CONSTRUCTION PLAZA OLEOS Taipei, Taiwan R. O. C. 18th Floor JI. TB Simatupang No.53, Pasar Minggu Jakarta

TEL. 886-2-2578-5656 FAX. 886-2-2578-3300 Selatan, 12520, Indonesia Snapshot TAISEI TEL. 62-21-2278-3906 FAX. 62-21-2278-3903 MIDDLE EAST OFFICE Corner Abdullah Bin Jassim St. United Bank Bldg. 4th Floor, Facing QNB Bldg, Doha - Qatar, PO BOX TAISEI (THAILAND) CO., LTD. 9th Floor, Thanapoom Tower, 47366 1550 New Petchburi Road, Kwaeng Makkasan, Khet Rachtavee, TEL. 974-4443-4174 FAX. 974-4443-7176 Bangkok 10400, THAILAND TEL. 66-2-207-0330 FAX. 66-2-207-0332 KUALA LUMPUR OFFICE 9-3, 9th Floor, Faber Imperial Court, Jalan Sultan Ismail, 50250 Kuala Lumpur, MALAYSIA VINATA INTERNATIONAL J/V CO., LTD. (Vinata Head Office) TEL. 60-3-2070-6155 FAX. 60-3-2070-6010 3F, Song Da Bldg., Pham Hung Rd, My Dinh 1, Nam Tu Liem Management Strategy Dist., Hanoi, S.R. VIETNAM JAKARTA OFFICE PLAZA OLEOS 18th Floor JI. TB Simatupang TEL. 84-24-3553-3839, -3840 FAX. 84-24-3553-3788 No.53, Pasar Minggu Jakarta Selatan, 12520, Indonesia TEL. 62-21-2278-3902 FAX. 62-21-2278-3903 CSCEC-TAISEI CONSTRUCTION, LTD. (Head Office) 4thFloor, Building No. 8, Foreign Culture Creativity Park, 19 CSR INDIA OFFICE #602, 6th Floor, Tower B, Global Business Park, Chegongzhuang Xi Road, Haidian District, BEIJING, P.R.C. 10048 M.G. Road, Gurgaon, Haryana-122002, India TEL. 86-10-6845-1267 FAX. 86-10-6845-1266 TEL. 91-124-466-9800 FAX. 91-124-466-9888 (Hochiminh City Branch Office) 7th FL, VIETNAM CHAMBER PAKISTAN OFFICE Office-A, 5th Floor, Block-A, Saudi Pak OF COMMERCE AND INDUSTRY TOWER,171 Vo Thi Sau St., Tower, 61-A, Jinnah Ave., Islamabad, Pakistan District3, Hochiminh City, S.R.VIETNAM TEL. 92-51-8316620 FAX. 92-51-8316629 TEL. 84-28-3932-1765 FAX. 84-28-3932-1764

VIETNAM OFFICE (Hanoi) Room No.410, 4th Floor, V-Tower, (Shanghai Branch) 3rd Floor No.6419 SanLuLu, Pudong Xin Qu, Governance Report 649 Kim Ma Street, Ngoc Khanh Ward, Ba Dinh District, Hanoi, Shanghai, P.R.C. 200120 S.R.VIETNAM TEL. 86-21-6209-9757 FAX. 86-21-6209-9758 TEL. 84-24-3553-5032,-5033 FAX. 84-24-3553-5002 TAISEI PHILIPPINE CONSTRUCTION INCORPORATED 23rd VIETNAM OFFICE (Hochiminh City) VIETNAM CHAMBER OF Floor, BDO Equitable Bank Tower, Paseo de Roxas, Salcedo COMMERCE AND INDUSTRY, Hochiminh City Branch Building Village, Makati City, PHILIPPINES 7th FL, 171 Vo Thi Sau St., Ward7, District-3, Hochiminh City, TEL. 63-2-886-0670 FAX. 63-2-886-0663

S.R.VIETNAM Social Report TEL. 84-28-3932-1759 FAX. 84-28-3932-1758 PT. INDOTAISEI INDAH DEVELOPMENT (Chikanpeck Office) Kawasan Industri Indotaisei, Kota Bukit Indah Sector IA, Block B THAILAND OFFICE 9th Floor, Thanapoom Tower, 1550 New Karihurip, Cikampek, Karawan, Jawa Barat, INDONESIA Petchburi Road, Kwaeng Makkasan, Khet Rachtavee, Bangkok TEL. 62-264-351-003 FAX. 62-264-351-026 10400, THAILAND TEL. 66-2-207-0330 FAX. 66-2-207-0332 TAISEI MYANMAR CO., LTD. 2nd Floor Tokyo Enterprise Building, No.32, Pyay Road, 61/2 miles, Hlaing Township, Yangon, PHILIPPINE OFFICE 23F Tower 6789, 6789 Ayala Avenue,1227 MYANMAR Makati City, Metro Manila, PHILIPPINES TEL. 95-1-654-838 Environmental Report TEL. 63-2-528-3117 FAX. 63-2-528-3117

MYANMAR OFFICE 2nd Floor, Tokyo Enterprise Building, No.32, Pyay Road, 61/2 miles, Hlaing Township, Yangon, Myanmar DiverseTEL./FAX. human 95-1-654-838 resources Tokyo Outer Ring Road Shinjuku Line Intersection Point Construction Site To Create a Vibrant Environment for (scheduled for completion in August 2018) NumberSRI ofLANKA OFFICE No.177, 3rd Floor,Number Galle Road, of Colombo foreign female03, employees: Sri Lanka 2,243 national employees: 718 Client/designer: Bureau of Transportation, Tokyo Metropolitan Government All Members of Society TEL. 94-11-2446194 FAX. 94-11-2446198 (as of March 2017)

Photo: From left to right, technical intern trainee and Corporate DataFinancial In the Taisei Group, diverse human resources are playing active roles at The Taisei Group creates “safe, secure, and attractive spaces” and NORTH AFRICA OFFICE 25th, Rd. No.10, Station Sqr., Maadi, from Vietnam, Chinese female engineer, and many workplaces. In addition to employees, including female employees Japanese male engineer “high value” in harmony with the nature, and strives to build a global Cairo, Arab Republic of Egypt and foreign national employees, all persons involved, including workers with ● Both the female and male engineers are Taisei society filled with dreams and hopes for the next generation. constructionTEL. 20-2-2378-3609 skills who are engagedFAX. 20-2-2380-1362 in Monozukuri (precise, superb Corporation employees craftsmanship), acknowledge diversity and pursue the Group philosophy of “To CreateISTANBUL a Vibrant OFFICE Environment Barbaros for Mah. All SeyitMembers Ahmet of Deresi Society.” Sok. Bahar Sitesi Yani, 34662 Altunizade - Uskudar Istanbul, TURKEY TEL. 90-216-651-8160 FAX. 90-216-651-8180 1 TAISEI ANNUAL REPORT 2017 TAISEITAISEI ANNUAL ANNUAL REPORT REPORT 2017 20172 116

091_0356501372908.indd005_0356501372908.indd すべてのページ4-116 2017/07/312017/08/21 9:25:53 10:15:24 Diverse human resources Tokyo Outer Ring Road Shinjuku Line Intersection Point Construction Site Number of Number of foreign (scheduled for completion in August 2018) female employees: 2,243 national employees: 718 Client/designer: Bureau of Transportation, Tokyo (as of March 2017) Metropolitan Government Photo: From left to right, technical intern trainee In the Taisei Group, diverse human resources are playing active roles at from Vietnam, Chinese female engineer, and many workplaces. In addition to employees, including female employees Japanese male engineer

and foreign national employees, all persons involved, including workers with ● Both the female and male engineers are Taisei construction skills who are engaged in Monozukuri (precise, superb Corporation employees craftsmanship), acknowledge diversity and pursue the Group philosophy of “To Create a Vibrant Environment for All Members of Society.”

TAISEI ANNUAL REPORT 2017 2

010_0356501372908.indd 2 2017/08/03 14:27:42 History of Tackling Challenges Takes Shape Since its foundation, the Taisei Group has been boldly facing challenging tasks, such as completion of Japan’s first subway line, which went from Ueno to Asakusa in Tokyo and constructed solely with the expertise of Japanese engineers, with the aim of contributing to the development of a safe and secure society. Taisei Corporation’s history of tackling challenges has been passed down as a legacy based on the trust and track record we have cultivated.

3 TAISEI ANNUAL REPORT 2017

010_0356501372908.indd 3 2017/08/03 14:27:42 ©Taisei Corporation, Azusa Sekkei Co., Ltd. and Kengo Kuma and Associates Joint Venture Note: This perspective photo shows images for illustrative purpose only and that may differ from the actual construction. Vegetation shows an image about 10 years after completion of the stadium.

Mori-no Stadium (Stadium in Forest) Design Works and Construction Works of to be Inherited for 100 years New National Stadium Japan (scheduled for completion in November 2019) By leveraging technologies and know-how Taisei Corporation has cultivated, Client: JAPAN SPORT COUNCIL we will construct a robust and long-lasting stadium featuring high durability, Contractor: Taisei Corporation, Azusa Sekkei Co., Ltd., and Kengo Kuma and Associates Joint long service life, easy maintenance, use of natural energy, and restricting Venture areas of use according to the scale of events held there. We will create a stadium open to everyone as a “big tree of life” that takes root deep in the ground, connected to the greenery of the historic Meiji Jingu Shrine Outer Garden, with an eye on 100 years into the future.

TAISEI ANNUAL REPORT 2017 4

010_0356501372908.indd 4 2017/08/03 14:27:42 Passing on Legacies Built with Taisei’s Cultivated Technologies to the Next Generation

Reliable technologies broaden future potential. We believe that technological innovation generates great possibilities and creates a society filled with hope. Taisei Corporation will continue its efforts to develop new technologies to entrust the prosperous future to the next generation.

5 TAISEI ANNUAL REPORT 2017

010_0356501372908.indd 5 2017/08/03 14:27:44 Number of orders received The New Head Office Building of Kinki Sangyo Credit Union for ZEB-seeking buildings: 4 (as of March 2017) (scheduled for completion in January 2019) Taisei Corporation has been working to achieve energy-saving building Client: Kinki Sangyo Credit Union construction throughout the life cycle from design, construction, and to Designer: Taisei Corporation operation, and achieved a zero energy balance on a single building basis We will achieve Japan’s first-ever ZEB Ready (a 100% energy-saving building) for the first time in Japan in the ZEB urban-style high-rise building of 60 meters tall or higher. Demonstration Building within its Technology Center in 2015. In July 2016, the Company renovated Taisei Sapporo Building to make it ZEB Ready*, and has already received orders to construct four ZEB-seeking buildings. We will continue to proactively conduct proposal activities to promote market-oriented ZEB.

*A building with more than 50% energy savings compared to modern standard buildings (see p.18) TAISEI ANNUAL REPORT 2017 6

010_0356501372908.indd 6 2017/08/03 14:27:45 Contents

Taisei Snapshot Strategic Report

TAISEI Snapshot Management Strategy 1 To Create a Vibrant Environment for 15 Interview with the President All Members of Society The Taisei Group will contribute to the sustainable development of society by resolving social challenges and build its own strengths to advance to the next stage. 3 History of Tackling Challenges Takes Shape

20 Message from External Members of the Board 21 Members of the Board, Audit & Supervisory Board Members, Chairman and Executive Officers, Executive Fellows 25 Business Overview

©Taisei Corporation, Azusa Sekkei Co., Ltd. and Kengo Kuma and Associates Joint Venture Note: This perspective photo shows images for illustrative purpose only and that may differ from the actual construction. Vegetation shows an image about 10 years after completion of the stadium. Civil Building Real Estate ■ Engineering ■ Construction ■ Development 5 Passing on Legacies Built with Taisei’s Cultivated Technologies to the Next Generation

31 Activities of Group Companies 9 History of the Taisei Group 11 The Taisei Group in Numbers 13 Value Creation Process of the Taisei Group

Scope of Reporting Editorial Policy Reporting period: From April 1, 2016 to March 31, 2017 in the main This annual report (published on August 31, 2017) is published to Target organizations: Taisei Corporation and consolidated subsidiaries enable stakeholders to obtain an overall view of the Taisei Group’s Scope of result data: ● Finance: Taisei Corporation and consolidated corporate value creation, including corporate activities that conform to subsidiaries the Taisei Group Philosophy and the Group Action Guidelines, financial ● ESG: Taisei Corporation, key group reporting, and management issues. companies, and overseas companies This report discloses our various CSR activities for fiscal 2016, while securing objectivity and transparency by drawing on a variety of Reference Guidelines reporting-related guidelines. The report outlines the Group Action ● Environmental Reporting Guidelines (2012 Edition) Guidelines and basic principles for actions governing those activities, ● GRI “Sustainability Reporting Guidelines 4th Edition” as well as how these guidelines and principles are promoted; highlights ● ISO 26000: 2010 (International Organization for Standardization) the results of various measures; and, presents an analysis of key ● Integrated Reporting Framework (International Integrated Reporting performance indicators (KPI). Moreover, detailed information not Council, or “IIRC”) presented in this report is presented in the Taisei Corporation website. http://www.taisei.co.jp/english/index.html Third Party Assurance and Opinions ● Third Party Assurance Report: Environmental information assurance by Ernst & Young Sustainability Co., Ltd.

Note Regarding Forward-Looking Statements Opinions and predictions, etc., expressed in this report are based on the judgment of the Company at the time of preparation of this document. Therefore, please be aware that there is a possibility that the results of the actual target values, etc., could be different from the stated future estimates, due to changes in various factors.

This report has been produced in an environmentally friendly manner. It is printed on lightweight paper to reduce the use of timber resources and transportation energy, using vegetable oil-based ink.

7 TAISEI ANNUAL REPORT 2017

011_0356501372908.indd 7 2017/08/17 11:35:06 Strategic Report ESG Initiatives

CSR

33 OUR STORY 43 The Taisei Group CSR Snapshot TAISEI 47 Focus on The Source of Taisei Corporation’s Value Stakeholder Dialogue That Takes on Social Challenges through its Business Activities Business Activities and a Sustainable Society

“Technologies” Management Strategy

Presented below are our prioritized themes 49 Governance Report and solution technologies we engage in each 59 Social Report field to resolve social challenges. 67 Environmental Report CSR ● Taisei Technology Center 75 Table of Comparisons for ISO 26000 and GRI Guidelines

● Environment Division

● Design Division ● Nuclear Facilities Division Basic Information ● Engineering Division

39 Major Projects Financial and Corporate Data 77 11-Year Financial and Non-Financial Summary 79 Explanation and Analysis of Business Results Governance Report 85 Consolidated Financial Statements 114 Corporate Profile 116 Overseas Network Social Report

Composition of Communication Materials ● Japanese ● English

Financial Information Non-Financial Information

Website General corporate activities ● ● http://www.taisei.co.jp/english/

IR Information: To Our Shareholders and Investors ● ● CSR Activities: Corporate Social Responsibility (CSR) ● http://www.taisei.co.jp/english/ir/ http://www.taisei.co.jp/english/csr/ Environmental Report

Publications TAISEI ANNUAL REPORT 2017 ●

TAISEI CORPORATE REPORT 2017 ●

Security Report ● Taisei Circle (Shareholder Newsletter) ● Corporate Governance Report ●

Data Book ● ● Taisei Technology Center Report, etc. ● Financial and Corporate DataFinancial

Assessment by External Agency ● Incorporated into the world’s leading SRI indices (As of July 2017) MSCI Japan ESG Select Leaders Index and the MSCI Japan Empowering Women Index (WIN) FTSE4Good Index and FTSE Blossom Japan Index Morningstar Socially Responsible Investment index

THE INCLUSION OF Taisei Corporation IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX Taisei Corporation is a member of the FTSE4Good Index, an equity NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF Taisei Corp. BY MSCI OR ANY OF ITS index series that is designed to facilitate investment in companies AFFILIATES. that meet globally recognized corporate responsibility standards. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKSOF MSCI OR ITS AFFILIATES. TAISEI ANNUAL REPORT 2017 8

011_0356501372908.indd 8 2017/08/17 11:35:07 History of the Taisei Group Since its foundation in 1873, each employee of Taisei Corporation has contributed to building the Company’s trust and track record by channeling their dreams and passions to each single project. With the pride in having supported Japan’s modernization and development, Taisei Corporation will continue to strive towards a better future.

1960 to 2009 Received the First Imperial Invention Award in the Construction and Civil Engineering Field Following the success of the 1964 Tokyo Olympic Games, Japan achieved rapid economic development and Taisei Corporation also developed new technologies successively. Taisei Truss, Taisei’s unique three-dimensional truss structure, was awarded the Imperial Invention Award, which is given to the best invention of the year, in 1967. In 1997, Taisei was awarded again the Imperial Invention Award for the spherical shield production process, a tunneling method developed jointly with IHI Corporation, as Japan’s first civil engineering technology to receive the award.

1964 1994 The main building of Hotel New Otani, Japan’s first Kannongawa River water-conveyance conduit skyscraper constructed in time to accommodate (Original client: Kawasaki City, Client: Japan Sewage visitors to the 1964 Tokyo Olympics Works Agency), for which the spherical shield production process (horn industrial method) was 1991 adopted for the first time in the world Tokyo Metropolitan Government Main Building No. 1, a symbolic building towering over the From the foundation new city center in the global city of Tokyo to 1959 Became the First Construction Company to List Shares on the Stock Exchange 2001 Sapporo Dome adopted the world’s first hovering Kihachiro Okura, the founder, engaged in the construction and stage to enable it to host both indoor football and operation of buildings, in addition to pursuing direct import baseball games businesses, undertaking a series of pioneering projects. In 1946, the Company changed its corporate name to Taisei Corporation, becoming a non-family-controlled company, a rarity for construction companies at the time. In 1956, Taisei Corporation became the first company in the construction industry to list shares on the stock exchange.

1873 1927 The founder, Kihachiro Okura, Completed construction of Asia’s first subway, founded several companies, the Tokyo Underground Railroad connecting contributing to the modernization Ueno to Asakusa of Japan

109.0 127.7 135.9 106.8 86.5 35.0 14.9 46.9 41.4 43.6 66.7 55.5 49.4 59.8 48.9 55.1 57.6 48.8 (0.6) 35.6 36.2 36.4 35.6 53.7 70.4 117.4 140.8 1956 1990 2000 2010 2016 Operating Income (Billions of Yen) (FY)

9 TAISEI ANNUAL REPORT 2017

011_0356501372908.indd 9 2017/08/17 11:35:09 Highlights of Business Activities for FY2016 to 2010 2016 March 2017 p.61 Formulation of TAISEI VISION 2020 Established The Taisei Foundation to support

In 2010, we reestablished a philosophy structure for the Group that is clear-cut, academic research Snapshot TAISEI easy-to-understand, and sharable, allowing Taisei Group directors and employees to have a sense of group unity. Also, the “Taisei Vision 2020” was formulated as the long-term vision within the new philosophy structure to serve as the way to achieve our envisioned future 10 years hence. February 2017 p.54 Held the Souyu-kai Convention to celebrate the milestone of 100 years since the establishment of Souyu-kai (the organization of Taisei’s

main cooperating companies) Management Strategy

December 2016 p.3 ｜ 4 2010 Started construction work for the New National Stadium Japan Tokyo International Airport (Haneda) Runway D adopted the world’s first hybrid structure that combines a December 2016 reclaimed land portion with a jetty portion CSR Taisei Sapporo Building ZEB Ready * Renewal received the Kitaguni 2016 Energy Conservation and Sumitomo Fudosan Roppongi Grand Tower. New Energy Grand Prize Completed a high-rise building of about 230 m (the effective energy use tall, housing three functions of commercial category) for FY2016. office space, residential space, and retail space, in an extensive area of about 27,000 m2 that is adjacent to Roppongi-itchome Station on the Tokyo Metro Namboku Line Governance Report

November 2016 Ranked first in the “ranking of patent assets scale for the 2012 general contractor industry” of Patent Result Co., Ltd. JP Tower was built to replace the old Tokyo Station Central Post Office that was completed in 1934, preserving part of the historic building October 2016 p.63 Social Report Received the Special Encouragement Prize in “Ikumen Company Award”

2013 October 2016 p.69 Bosphorus Strait Crossing Railway Tunnel, Turkey. Certified as among the Climate A The undersea tunnel was constructed by the List companies that have achieved Environmental Report immersed tunnel method to form the world’s deepest the highest performance in the immersed tunnel, in one of the most rapid ocean CDP 2016 Climate Change Report. currents in the world.

September 2016 The fourth “Arc lighting”, Japan’s first electrical street lighting built in 1882 by the founder Kihachiro Okura, was relit. Financial and Corporate DataFinancial

109.0 127.7 135.9 106.8 86.5 35.0 14.9 46.9 41.4 43.6 66.7 55.5 49.4 59.8 48.9 55.1 57.6 48.8 (0.6) 35.6 36.2 36.4 35.6 53.7 70.4 117.4 140.8 1956 1990 2000 2010 2016 (FY)

*A building with more than 50% energy savings compared to modern standard buildings (see p.18) TAISEI ANNUAL REPORT 2017 10

011_0356501372908.indd 10 2017/08/17 11:35:12 The Taisei Group in Numbers

Business Overview

Net Sales by Segment Operating Income by Segment Constructs infrastructure such as tunnels, (Consolidated) (Consolidated) Civil bridges, roads, and dams, and builds social Real Estate Others Real Estate Others Engineering infrastructure that supports citizens’ lives and Development ¥13.0 billion Development ¥1.2 billion industries with high technological capabilities ¥121.7 billion 0.8% ¥13.3 billion 0.8% 7.8% 9.3% Civil Civil Engineering Engineering Builds a secure and comfortable environment ¥449.4 billion ¥55.1 billion and highly convenient facilities through 28.8% 38.6% constructing and renovating buildings such as Building Building Building airports, office buildings, commercial facilities, Construction Construction Construction factories, and hospitals, the housing business, ¥977.7 billion ¥73.3 billion and research and development and engineering 62.6% 51.3% technologies that contribute to a low-carbon and recycling society Number of Employees by Segment (Consolidated) Proposes urban renewal by fully utilizing Real Estate Others Real Estate accumulated methods and knowhow with Development 149 regard to diverse business schemes such as 2,014 1.1% Development redevelopment, PFI, property management, 14.4% and condominium sales projects Civil ● Net sales and operating income Engineering include intersegment transaction. 3,907 Composition percentages are 28.0% figures calculated from simple Provides optimum solutions at every phase, Building sum totals. Others such as contract research, technology Construction 7,907 provision, and environmental measurements 56.5%

Non-Financial Highlights

Number of Employees (Consolidated) / Number of Female Managers (Non-Consolidated) Frequency Rates*1*2 ■Male ■Female Female managers (People) 16,000 1.2 13,701 13,748 13,977 1.00 2,016 2,038 2,243 11,685 11,710 11,734 0.8 8,000 62 0.59 0.59 53 0.4 39

0 0 2014 2015 2016 (FY) 2014 2015 2016 (FY)

2 3 Number of Patent Applications Filed* Total CO2 Emissions*

(Cases) （103t-CO2） 400 400 333 337 332 300 316 311 300 300

200 200

100 100

0 0 2014 2015 2016 (FY) 2014 2015 2016 (FY)

*1 The targets of frequency rates are set on the basis of all accidents entailing days off work including a small and medium sized employers and self-employed workers. *2 The Target organizations include Taisei Corporation, TAISEI ROTEC CORPORATION, Taisei-Yuraku Real Estate Co., Ltd., TAISEI U-LEC CO., LTD., TAISEI SETSUBI CO., LTD., SEIWA RENEWAL WORKS CO., LTD., and TAISEI HOUSING CORPORATION. 3 * For target organization of CO2 emissions, please refer to p.74. 11 TAISEI ANNUAL REPORT 2017

011_0356501372908.indd 11 2017/08/17 11:35:12 Consolidated Financial Highlights

Orders Received Net Sales Operating Income Net Income Attributable to Owners of Parent TAISEI Snapshot TAISEI ¥1,655.0 billion ¥1,487.2 billion ¥140.8 billion ¥90.5 billion

Orders Received Net Sales 受注高売上高 Down 0.1% YoY ¥1,655.0 billion Down 3.8% YoY ¥1,487.2 billion (Billions of Yen) (Billions of Yen) 2,000 2,000 1,765.7 1,645.8 1,671.0 1,655.0 1,573.2 1,545.8 1,533.4 1,487.2 Management Strategy 1,500 1,404.4 1,500 1,416.4 1,379.5 1,323.5

1,000 1,000 CSR 500 500

0 0 2011 2012 2013 2014 2015 2016 (FY) 2011 2012 2013 2014 2015 2016 (FY)

Operating Income Net Income Attributable to Owners of Parent / Return on equity (ROE) 営業利益当期純利益／ ROE ■ Net income attributable to owners of parent ROE Governance Report (Billions of Yen) Up 19.9% YoY ¥140.8 billion (Billions of Yen) (%) 160 160 Up 17.5% YoY ¥90.5 billion 24.0 140.8 Up 1.4 points YoY 16.7%

120 117.4 120 16.7 18.0 15.3 90.5 80 70.4 80 77.0 12.0 8.9 8.8 53.7 Social Report 6.3 40 36.4 35.6 40 32.0 38.1 6.0 20.0 0.4 0 0 1.1 0 2011 2012 2013 2014 2015 2016 (FY) 2011 2012 2013 2014 2015 2016 (FY)

Interest-Bearing Debt / Debt to Equity Ratio Payout Ratio

■ Interest-bearing debt Debt to equity ratio Environmental Report (Billions of Yen) (Times) (%) 600 Down 6.5% YoY ¥238.1 billion 2.0 600 Up 1.2 points YoY 25.5% Down 0.1 points YoY 0.4 times 482.3 450 419.2 1.5 450 1.3 379.0 316.4 300 273.2 1.0 50 1.0 254.6 238.1 0.8 28.4 25.5 21.3 23.9 24.3 150 0.5 25 and Corporate DataFinancial 0.5 0.5 0.4

0 0 0 2011 2012 2013 2014 2015 2016 (FY) 2011 2012 2013 2014 2015 2016 (FY)

TAISEI ANNUAL REPORT 2017 12

011_0356501372908.indd 12 2017/08/17 11:35:12 Value Creation Process of the Taisei Group Taisei Group Philosophy

Expansion of “To Create a Vibrant global energy demand Environment for Global energy demand is expected to grow by 30% All Members of by 2040. Global Source: “World Energy Outlook 2016” environmental by the International Energy Society” issues Agency (IEA) Global temperatures are expected to rise by up to 4.8 degrees Celsius by 2100. Source: IPCC’s RCP 8.5 scenario from the fifth Assessment Management Strategy Report “To promote conversion to a business ImproveImprove financial financial structure for creation of higher added value” health andhealth raise and raise corporatecorporate value value World population ContributingContributing to Solving to Solving growth Shareholders/Shareholders/ GlobalGlobal Challenges Challenges World population is projected to The Taisei Group’s grow to 9.6 billion by 2050. InvestorsInvestors Speci cSpeci c social challenges, social challenges, such as such as Source: The official United Nations Important Initiatives SustainableSustainable Development Development Goals (SDGs) Goals (SDGs)and and population estimates the Paristhe Agreement Paris Agreement have been have set been out setas out as global commonglobal common goals to goals be achieved. to be achieved. The The Ensure Design and Taisei GroupTaisei willGroup contribute will contribute to realization to realization of of quality and engineering Develop Create Createa safe, a safe, safe and secure a sustainablea sustainable and better and worldbetter to world resolve to resolve improving ＞ secure,secure, and and technologies ＞＞ society comfortablecomfortable these challenges.these challenges. ＞＞ Clients/Clients/ Focusing on resolving ＞ End-UsersEnd-Users infrastructureinfrastructure social challenges, The Taisei Group’s Procurement Strengths and anticipating the needs of Strategy, work Technologies implementation

society, and responding planning, SustainableSustainable Development Development ＞

and ＞

to changes in the ＞ Work-Site Capabilities throughthrough Value Value Creation Creation business environment development

Challenge-Tackling

＞

＞ Capabilities ＞ Operation SuppliersSuppliers and management; SustainableSustainable

Develop harmonyharmony and and

next- maintenance Promote

Renovation and ＞＞＞ and preservation beneﬁtbeneﬁt Decline in labor generation demolition diversity force due to technologies domestic population decrease Production-age population is projected Develop to decline from 77.28 million in 2015 next- ObjectivesObjectives to be toPursued be Pursued to 45.29 million in 2065. generation EmployeesEmployees by theby Taisei the Taisei Group Group Source: Population Projections engineers for Japan (2017 By seekingBy seeking to achieve to achieve the Taisei the Group Taisei Group Projections) Self-realizationSelf-realization Philosophy,Philosophy, the Taisei the Group Taisei willGroup create will safe,create safe,

Promotion of Creating value through dialogue with stakeholders Creating value through dialogue with stakeholders by doingby workdoing that work that women’s participation secure secureand attractive and attractive spaces, spaces, and high and value high value CSR Management remainsremains on on in harmonyin harmony with the with nature, the nature,as well asas wellstrive as strive and advancement in the the mapthe map workplace in Japan “Seeking to realize the Taisei Group to buildto a buildglobal a societyglobal society lled with lled dreams with dreams Labor force participation rate of Philosophy (Form Aimed For)” and hopesand forhopes the nextfor the generation. next generation. women in 2015 was 49.6% (the rate for men was 70.3%). Source: Actual Situation of Working Women in 2015, published by the Aging of social Ministry of Health, Labour and Welfare infrastructure The percentage of road bridges (bridge length of 2m or longer) aged 50 years or more is projected to increase from 16 % in 2013 to 65% in 2033. Source: “Basic Plan on Building Long-life Infrastructure” by the Ministry of Land, Infrastructure, Transport and Tourism

13 TAISEI ANNUAL REPORT 2017

011_0356501372908.indd 13 2017/08/17 11:35:13 The Taisei Group strives to maximize the value created through dialogue with stakeholders, and aims to achieve sustainable development together with society by proactively getting involved in social challenges which the Group needs to resolve through its businesses.

Taisei Group Philosophy Snapshot TAISEI

Global temperatures are Management Strategy expected to rise by up to 4.8 degrees Celsius by 2100. Source: IPCC’s RCP 8.5 scenario from the fifth Assessment Management Strategy Report “To promote conversion to a business ImproveImprove financial financial structure for creation of higher added value” health andhealth raise and raise

corporatecorporate value value CSR World population ContributingContributing to Solving to Solving growth Shareholders/Shareholders/ GlobalGlobal Challenges Challenges World population is projected to The Taisei Group’s grow to 9.6 billion by 2050. InvestorsInvestors Speci cSpeci c social challenges, social challenges, such as such as Source: The ofﬁcial United Nations Important Initiatives SustainableSustainable Development Development Goals (SDGs) Goals (SDGs)and and population estimates the Paristhe Agreement Paris Agreement have been have set been out setas out as global commonglobal common goals to goals be achieved. to be achieved. The The Ensure Design and Taisei GroupTaisei willGroup contribute will contribute to realization to realization of of quality and engineering Develop Create Createa safe, a safe, safe and secure a sustainablea sustainable and better and worldbetter to world resolve to resolve improving ＞ secure,secure, and and technologies ＞＞ society ＞ comfortablecomfortable these challenges.these challenges. ＞ Clients/Clients/ Governance Report Focusing on resolving ＞ End-UsersEnd-Users infrastructureinfrastructure social challenges, The Taisei Group’s Procurement Strengths and anticipating the needs of Strategy, work Technologies implementation

society, and responding planning, SustainableSustainable Development Development ＞

and ＞

to changes in the ＞ Work-Site Capabilities throughthrough Value Value Creation Creation business environment development

Challenge-Tackling

＞

＞ Capabilities

＞ Operation SuppliersSuppliers SustainableSustainable Develop and management;

harmonyharmony and and Social Report

next- maintenance Promote

Promotion of Creating value through dialogue with stakeholders Creating value through dialogue with stakeholders by doingby workdoing that work that secure secureand attractive and attractive spaces, spaces, and high and value high value

women’s participation Environmental Report CSR Management remainsremains on on in harmonyin harmony with the with nature, the nature,as well asas wellstrive as strive and advancement in the the mapthe map workplace in Japan “Seeking to realize the Taisei Group to buildto a buildglobal a societyglobal society lled with lled dreams with dreams Labor force participation rate of Philosophy (Form Aimed For)” and hopesand forhopes the nextfor the generation. next generation. women in 2015 was 49.6% (the rate for men was 70.3%). Source: Actual Situation of Working Women in 2015, published by the Aging of social Ministry of Health, Labour and Welfare infrastructure The percentage of road bridges (bridge length of 2m or longer) aged 50 years or more is projected to increase from 16 % in 2013 to 65% in 2033. Source: “Basic Plan on Building

Long-life Infrastructure” by the and Corporate DataFinancial Ministry of Land, Infrastructure, Transport and Tourism

TAISEI ANNUAL REPORT 2017 14

011_0356501372908.indd 14 2017/08/17 11:35:13 Interview with the President

The Taisei Group will contribute to the sustainable development of society by resolving social challenges and build its own strengths to advance to the next stage.

Yoshiyuki Murata President and Chief Executive Officer, Representative Director

Towards Moving on to the Final Stage of the Medium-term Business Plan (2015-2017)

With strong confidence regarding “Deep Cultivation of the Construction Industry, Our Core Business,” the Taisei Group will strive to achieve growth in the “energy” and “overseas business” areas, in addition to the five target fields.

Looking back on Fiscal 2016 What does the Group aim to achieve by its We began undertaking the construction work for the main basic policy of “Deep Cultivation of the arena of the new National Stadium Japan last December. Construction Industry, Our Core Business”? Taisei Corporation, having constructed the old National No matter how the world changes, including changes in Stadium Japan, has strong feelings towards the new demographic structure, the Taisei Group believes that National Stadium, and we deeply appreciate the honor of becoming a company that is trusted by clients and chosen receiving the order for its construction work. For the next for our primary business is a prerequisite for achieving three years, we will make the most of the benefit of getting sustainable growth. To this end, there are two points on involved in the project from the design phase and which deep cultivation is necessary. Firstly, we need to endeavor to build a legacy that we can be proud of for solidly deal with challenges for which there is much work future generations. to do towards resolving them based on the experience and

■ Basic Policies [Medium-term Business Plan (FY2015–2017)]

Aims Management Tasks

● To obtain high customer satisfaction by ❶ Strategic initiatives for target projects ensuring quality and safety ❷ Active contribution to enhancement of social infrastructure Deep Cultivation of ● To achieve stable and sustainable growth ❸ Promotion of next generation technological ● To promote conversion to a business development the Construction structure for creation of higher added value ❹ Establishment of next generation business

Industry, Our Core ● To obtain high trust and evaluation from models for target fields Business all stakeholders ❺ Strengthen domestic construction business ❻ Construct the basis for healthy growth of overseas projects ❼ Increase the Group strength ❽ Evolution of management infrastructure

15 TAISEI ANNUAL REPORT 2017

012_0356501372908.indd 15 2017/08/10 9:58:58 results we have earned. For instance, we will make greater metropolitan area. However, these measures are not efforts to improve our technological capabilities, increase sufficient to address the looming labor shortage. Therefore, productivity by utilizing ICT, and implement work-style the Taisei Group intends to ride out the extremely busy reforms. Secondly, we will cultivate our primary business period by implementing measures to improve productivity, more deeply for the future. Specifically, we will seek to such as strengthening work-site capabilities, utilizing ICT, TAISEI Snapshot TAISEI build a high value-added business structure by deepening and work-style reforms. During busy times, we need to be exchanges with companies in the construction industry, as more cautious about the risk of quality problems and take well as in other industries, both in Japan and abroad. measures to prevent them. Since any error may lead to an incident that would have a major impact on society, we will What are the achievements in the five steadily implement a quality management process. target fields? Of the five target fields, we received steady orders for How do you see the outlook for the seismic resistance, etc., in the renewal and replacement domestic market after the Tokyo 2020 Olympic Management Strategy field. In the nuclear power field, we won safety measure and Paralympic Games? work orders for the decommissioning and restart of There are projects for which order placement has been nuclear power plants. In the environment field, we set up postponed to avoid the current busy period, and we thus the ZEB Demonstration Building within the Taisei anticipate that a certain level of construction demand will

Technology Center, and our trailblazing effort led to winning continue for some time after the Tokyo 2020 Olympic and CSR orders for new ZEB-seeking buildings. In the engineering Paralympic Games. Although the outlook for the subsequent field, our efforts have yielded results in winning orders in period is unclear, orders from the growth industry of the time the pharmaceuticals and food production facility area, have kept the construction industry going. backed by a wealth of achievements. In the urban The strength of the construction industry is that there is development field, orders are increasing steadily in central always a growth industry in any given time, even if the Tokyo, as well as in regional cities such as winning orders growth rate of the overall economy slows. Even so, since for large-scale urban redevelopment projects in Sapporo competition for winning orders will intensify in a given

and Kumamoto. In addition to these five target fields, the growth industry, the important thing for us is to earn higher Governance Report Taisei Group will strive to achieve growth by focusing on evaluation ratings from clients than other companies in the energy, which still poses serious social challenges, and the industry, regardless of the order-taking environment. overseas business related to infrastructure export. With the increase in clients with limitations on construction timeframes and costs in recent years, we What are short-term risks faced by the Group have been receiving an increasing number of orders for and their countermeasures? one-stop solutions from design to construction. We believe

Considering that a labor shortage is expected to occur that the background behind this is a higher evaluation for Social Report from 2018 to 2019 due to a jump in business in the run-up general contractors’ technological capabilities in the to the Tokyo 2020 Olympic and Paralympic Games, we are project-planning phase, such as proposals for shortening developing a thoroughgoing production system as our construction periods and reducing costs, in addition to focused challenge for the current fiscal year. In recent their construction capabilities. We see this as a very years, we have been implementing human resources significant change in the long history of the construction management, such as strengthening recruitment, including industry, and we will work to build a competitive advantage mid-career employment and transferring employees from in the future market by steadily improving evaluations from

regional branches to our offices and branches in the Tokyo clients in design and construction projects. Environmental Report

■ Numerical Targets in Fiscal 2017, the Final Year of the Medium-term Business Plan (2015–2017) Business and Financial Targets Capital Policy and Guidelines for Return to Shareholders March 31, 2018 March 31, 2018

Consolidated Non-Consolidated Consolidated

Net sales ¥1,610 billion ¥1,310 billion Target Revised Target

Operating income 125 billion 109 billion Dividend payout 25% or more 25.8% and Corporate DataFinancial

Net income* 87 billion 76 billion ROE 8.0% or more 14.8%

Interest-bearing debt Less than 260 billion ―

*Consolidated net income is presented as net income attributable to owners of parent.

TAISEI ANNUAL REPORT 2017 16

012_0356501372908.indd 16 2017/08/10 9:58:58 Responses to ESG Challenges

The Taisei Group works group-wide towards implementing measures to strengthen corporate governance, easing busyness and promoting women’s active participation and advancement in the workplace. Agreeing with the concept of ESG investment, the Taisei Group proactively discloses non-financial information.

Why does Taisei disclose the ESG information? In addition to improving efficiency in construction work ESG investment, which takes into account information as mentioned above, by taking this opportunity, we are related to the environment (E), social issues (S), and focusing on productivity improvements by utilizing ICT, corporate governance (G), is growing rapidly. It is obvious such as the introduction of Office365, a tool for improving that companies with appropriate policies and initiatives for information and operational efficiency, in the entire Group, social responsibility and higher levels of corporate to improve the working environment. governance functions will achieve medium- and long-term growth. Taisei Corporation will proactively disclose ESG How is progress on the promotion of women’s information, in addition to financial information, through the active participation and its results? TAISEI ANNUAL REPORT. In 2015, Taisei Corporation was honored with the second As for our ESG initiatives, we place priority on Empowerment Grand Prize* in recognition of its efforts to strengthening corporate governance. As a company proactively expand the job categories of female employees, engaged in the development of safe and secure which led to a significant increase in the number of female infrastructure, we must prevent at all costs any incident employees working at construction sites and as sales that would lead to the loss of public trust. persons. In recent years, Taisei Corporation has been To this end, we discuss measures to strengthen supporting women’s active participation and advancement company-wide risk management at the Board of Directors in the workplace by taking various approaches involving meetings, and conduct active exchange of opinions with male employees as well, such as promoting childcare Audit & Supervisory Board members and audit corporation. support for male employees by providing a five-day paid With respect to appropriate implementation of childcare leave towards achieving a 100% rate of childcare compliance, we consider it important to persistently leave for men, and holding seminars for male superiors communicate the necessity to each employee to ensure who play a significant role in female employees’ skill compliance clear of improper accounting, etc. development. Of the skilled construction engineers working in the What are measures implemented to ease construction industry, the percentage of female engineers is employee busyness at construction sites? still only about 1%. If more female employees of general We have figured that the high busyness level of employees contractors work at construction sites, it will encourage the working at construction sites is attributable to inefficiency hiring of skilled female workers at cooperating companies. in operations of those sites. We will review matters to Taisei Corporation will thus promote the creation of a pleasant determine if there is any inefficiency in the conventional working environment for both male and female employees. approach to work, and will push through work-style reforms with the “courage to change.”

■ Sustainable Development Goals (SDGs）

SDGs are new goals defined and adopted by the United Nations in 2015 by building on the Millennium Development Goals (MDGs) that expired at the end of 2015. 17 GOALS TO TRANSFORM OUR WORLD SDGs, comprising 17 goals and 169 targets to be achieved by 2030 to build a truly sustainable world, require active involvement by countries as well as corporations.

SDGs are global goals set in the United Nations’ “The 2030 Agenda for Sustainable Development”

*Empowerment Grand Prize: Prize awarded to an organization taking unique and ingenious initiatives aimed to promote women’s active participation in the workplace and improve productivity.

17 TAISEI ANNUAL REPORT 2017

012_0356501372908.indd 17 2017/08/10 9:58:58 Taisei’s Initiatives for the UN’s SDGs to Be Achieved by 2030

Taisei Corporation has set out “TAISEI i-Innovation” to promote productivity improvement. As a pioneer in ZEB buildings, we will embark on the development of next generation

energy-saving technology. Snapshot TAISEI

How is Taisei Corporation going to contribute to What are your recognition and initiatives for SDGs as a construction company? environmental challenges? One major goal to which the Taisei Group can possibly make Taisei Corporation takes seriously the fact that it is exerting a significant contribution is “Build resilient infrastructure,” various effects on the global environment, such as which is one of the 17 goals of the SDGs. Specific measures consumption of resources and energy, while conducting its are “promotion of greater national resilience,” “recovery from primary construction business. Management Strategy the Great East Japan Earthquake,” and “promotion of We will thus contribute to forming a sustainable society i-Construction.” by working to reduce the environmental impact, which is Taisei Corporation has regarded the development of safe inevitably generated during the course of business and highly reliable infrastructure, working on the recovery of activities, as much as possible, and by reducing the disaster-hit areas, and building a disaster-resilient nation as its environmental impact of buildings after delivery, and CSR social responsibilities in the construction industry, and has regeneration of the natural environment. worked group-wide towards resolving these social To this end, Taisei Corporation has focused efforts on challenges. developing environmental technology, including energy- Regarding the “promotion of i-Construction,” the saving technology and ecosystem conservation government’s Council on Investments for the Future held in technology. As for energy-saving technology, in particular, September 2016 set out a goal of achieving a 20 percent Taisei Corporation built the ZEB Demonstration Building increase in construction site productivity by 2025. In order within its facility ahead of other companies in the industry, to meet that goal, Taisei collectively termed the initiatives successfully demonstrating the achievement of zero annual Governance Report for productivity improvement and technological innovation primary energy balance. In the course of performing the as “TAISEI i-Innovation” and has started deploying it zero energy balance demonstration, we also developed throughout the Group from April 2017. the T-ZEB Simulator, a tool that can calculate the cost in a We are working to improve productivity by promoting short time by optimally combining element technologies. TAISEI i-Innovation both from the aspects of hardware, As a pioneer in ZEB buildings, we will promote the which generates results immediately, and software, ranging penetration of market-oriented ZEB. Social Report from promotion of the utilization of BIM*1 and CIM*2 to the Taisei Corporation will work on the development of cutting-edge technological innovation. technologies, centering on energy-related technologies, with In this manner, Taisei Corporation intends to contribute the intention of contributing to society through ZEB, as well as to increasing the momentum for the achievement of technologies in the energy field. For instance, in addition to SDGs, which are universal guidelines for building a the development of fuel cells, we will pursue the development

sustainable society. of CO2 containment technology to reduce the environmental impact, and radioactive waste disposal technology.

■ ZEB (Net Zero Energy Building) Environmental Report

New Definition of ZEB Taisei Corporation’s Road Map for ZEB Penetration with Government’s Target As the definition of ZEB for its Sophisticated quantitative judgment criteria ZEB shift released by the ANRE on December Developing 17, 2015, the agency specified the ZEB technologies Popularizing and spreading and cost savings tailored market-oriented ZEB following ZEB levels. attainment proposals Complete the Building achieving an energy consumption reduction of 100% T-ZEB Simulator or more

Building achieving an energy

2015 2016 2017 2020 2030 and Corporate DataFinancial consumption reduction of 75% or more Strategic Energy Plan—April 2014 Cabinet decision Building achieving an energy consumption reduction of 50% Promoting ZEB in new public buildings Promoting ZEB upgrade or more averaged for new buildings

*1 BIM: Building Information Modeling. It is a process of building three-dimensional computer models of buildings and utilizing the information obtained from model creation in the entire lifecycle process of buildings, including designing, construction and maintenance. *2 CIM: Construction Information Modeling is designed to boost the efficiency of a series of construction production systems by introducing three-dimensional models from the investigation and design phases and interfacing them with three-dimensional models in each phase of construction and maintenance. TAISEI ANNUAL REPORT 2017 18

012_0356501372908.indd 18 2017/08/10 9:58:58 To Our Stakeholders

Manufacturing of grand architectural structures is the result of the accumulation of good day-to-day work processes. Taisei Corporation will further contribute to the building of a sustainable society by leveraging its unique strengths.

What do you attach importance to in Lastly, may I have your message promoting businesses? to stakeholders? I take pride that we at Taisei Corporation are engaged in Taisei Corporation has achieved growth by winning the great work that excites each employee in their day-to-day trust of various stakeholders including clients and work process towards manufacturing grand architectural shareholders. I have long experience in carrying out structures that will remain on the map, and be etched in construction management at construction sites, and I still employee’s lives. The Taisei Group Philosophy of “To vividly remember things from those days, such as the Create a Vibrant Environment for All Members of Society” sense of fulfillment I felt when we managed to pull off a is our statement on the ideals of a construction company difficult process, and the excitement of seeing clients’ from the perspective of the relationship with society. happy faces after successful completion of a challenging Although it was in 1990 that Taisei Corporation put this construction work project. philosophy into words, we valued the idea behind this I firmly believe that a company can become a trusted philosophy since long before that time. We will continue company only if it fulfills social responsibilities, in addition our relentless effort to pass it on to our future generations. to pursuing profit. Taisei Spirit of “Active and Transparent Culture,” “Value Based on the knowledge obtained through the Creation,” and “Evolution of Tradition”, which crystallize the dialogue with stakeholders, Taisei Corporation will Company’s common values based on the Group contribute to resolving social challenges both in Japan and philosophy, are also enduring assets which Taisei abroad through technology to bring the Company to the Corporation will continue to value. Taisei Corporation has next stage. Also, we will provide new value to stakeholders been known to have an “active and transparent culture.” It by taking advantage of our unique strengths cultivated has a nice ring to it, but we need to work to create an over the course of the Company’s history. environment that fosters the exchange of opinions among employees, to ensure that it will not end up being merely a pie in the sky idea.

Occurrence of Violation of Anti-Monopoly Act by TAISEI ROTEC CORPORATION Taisei Corporation had always guided its group companies under the policy of never violating the Anti-Monopoly Act. Unfortunately, however, violation of the Act occurred at TAISEI ROTEC CORPORATION, a major group company of Taisei Corporation. Taking the incident sincerely and seriously, Taisei Corporation will further ensure compliance in the entire Group, including TAISEI ROTEC, and will strive to prevent similar misdeeds and recover public trust as soon as possible.

19 TAISEI ANNUAL REPORT 2017

012_0356501372908.indd 19 2017/08/10 9:59:02 Message from External Members of the Board

Proactively Contributing to the Improvement of Information Transmission Capability for Stakeholders TAISEI Snapshot TAISEI We might call last year the “First Year of ESG Investment,” with the rapid growth in the balance of ESG investment. Among the ESG investment criteria, expectations from capital markets and various stakeholders have been increasing year after year for the roles of external Board Members, who play a part in corporate governance of a company, which has given me a renewed determination to work hard to fulfill my duties and responsibilities. In my opinion, the essence of corporate governance is information disclosure.

External Board Member That is to say, a company has established its corporate governance only after it Toru Tsuji has not only created rules and implemented initiatives for corporate governance, Management Strategy but also disclosed the information and made commitments related to it. Biography Since the formulation of the Corporate Governance Basic Policy in 2015, 1961.04 Joined Marubeni-Iida Co., Ltd. 1991.06 Member of the Board of Marubeni Corporation I have attended Taisei Corporation’s Board of Directors meetings, and have 1995.06 Managing Executive Officer, Member of the Board come to evaluate that the Company appropriately implements the policy. Going CSR 1996.04 Managing Executive Officer, Representative Director forward, I expect that the Company will skillfully communicate its initiatives and 1997.06 Senior Managing Executive Officer, Representative Director results externally. 1999.04 President and Chief Executive Officer, Representative Director General contractors, as well as integrated trading companies, where I have 2003.04 Chairman of the Board, Representative Director 2004.04 Chairman of the Board, Member of the Board spent most of my career, are regarded to have unclear management structures 2008.04 Corporate Advisor, Member of the Board from the viewpoint of outsiders, including overseas investors. I will thus utilize my 2008.06 Corporate Advisor 2011.06 Member of the Board of Taisei Corporation past experience and proactively contribute to Taisei Corporation’s improvement of [Present Position] information transmission capability. Governance Report

Providing Highly Practicable Supervision and Advice from the Viewpoint of All Stakeholders to Contribute to Taisei Corporation’s Sustainable Social Report Value Creation Duties of external Board Members are to provide highly practicable supervision and advice to management and executive officers from an independent standpoint, as well as appropriately evaluating business results. In the past few years, Taisei Corporation has conducted active discussion on objectives to be pursued, such as improvements to profitability and financial External Board Member position, and improvements to shareholder returns and annual employee Fumio Sudo compensation, and the Company has effectively delivered results in each of Environmental Report these objectives. Biography In the meantime, there are signs that the business environment surrounding 1964.04 Joined Kawasaki Steel Corporation 1994.06 Member of the Board of Kawasaki Steel corporations is likely to change drastically in various industries both in Japan Corporation 1997.06 Managing Executive Officer, and abroad. It suggests the importance of constant study on medium- and Member of the Board 2000.06 Executive Vice President, long-term strategy, and of the capability to respond to more detailed and Representative Director 2001.06 President and Chief Executive Officer, sincere corporate governance codes, and I believe these factors will determine Representative Director 2002.09 Member of the Board of JFE Holdings, Inc. the fate of corporations. (Part-time) 2003.04 President and Chief Executive Officer, With a full awareness of the difficulty of these matters and the huge Representative Director of JFE Steel Corporation 2005.04 President and Chief Executive Officer, and Corporate DataFinancial Representative Director of JFE Holdings, Inc. responsibilities of external Board Members, I faithfully perform duties from the 2010.04 Director standpoint of all stakeholders with a strong sense of commitment to helping 2010.06 Honorary Advisor 2011.06 Member of the Board of Taisei Corporation Taisei Corporation’s sustainable Value Creation. [Present Position]

TAISEI ANNUAL REPORT 2017 20

012_0356501372908.indd 20 2017/08/10 9:59:05 Members of the Board, Audit & Supervisory Board Members, Chairman and Executive Officers, Executive Fellows (As of July 1, 2017)

Members of the Board

Takashi Yamauchi Chairman, Representative Director Yoshiyuki Murata President, Representative Director 1969.06 Joined the Company 1977.04 Joined the Company 1999.06 Executive Officer 2011.04 Executive Officer 2002.04 Managing Executive Officer 2013.04 Managing Executive Officer 2004.06 Senior Managing Executive Officer 2013.06 Managing Executive Officer, 2005.06 Senior Managing Executive Officer, Member of the Board Member of the Board 2015.04 President and Chief Executive Officer, 2007.04 President and Chief Executive Officer, Representative Director Representative Director [Present Position] 2015.04 Chairman, Representative Director [Present Position]

Kazuhiko Dai Representative Director Shigeyuki Sakurai Representative Director 1974.04 Joined the Company 1979.04 Joined the Company 2007.04 Executive Officer 2011.04 Executive Officer 2010.04 Managing Executive Officer 2013.04 Managing Executive Officer 2011.04 Senior Managing Executive Officer 2013.06 Managing Executive Officer, 2013.06 Senior Managing Executive Officer, Member of the Board Member of the Board 2015.04 Senior Managing Executive Officer, 2015.04 Executive Vice President, Representative Director Representative Director 2017.04 Executive Vice President, Representative Director 2017.04 Executive Vice President, Chief of Marketing & Sales Division (Integrated); Representative Director Chief of Marketing & Sales (Civil Engineering) Division; Chief of Business Administration Division In charge of Safety Administration [Present Position] [Present Position]

Masahiro Sakai Director Shigeyoshi Tanaka Director 1977.04 Joined the Company 1979.04 Joined the Company 2012.04 Executive Officer 2011.04 Executive Officer 2013.04 Managing Executive Officer 2013.04 Managing Executive Officer 2013.06 Managing Executive Officer, 2015.04 Senior Managing Executive Officer Member of the Board 2015.06 Senior Managing Executive Officer, 2015.04 Senior Managing Executive Officer, Member of the Board Member of the Board 2017.04 Executive Vice President, 2017.04 Executive Vice President, Member of the Board Member of the Board Chief of Civil Engineering Division Deputy Chief of Marketing & Sales Division [Present Position] (Integrated), Supervising Marketing Sales (Building Construction) Divisions [Present Position]

Norihiko Yaguchi Director Yasushi Yoshinari Director 1978.04 Joined the Company 1979.04 Joined the Company 2012.04 Executive Officer 2011.04 Executive Officer 2015.04 Managing Executive Officer 2015.04 Managing Executive Officer 2015.06 Managing Executive Officer, 2015.06 Managing Executive Officer, Member of the Board Member of the Board 2017.04 Senior Managing Executive Officer, Chief of Medical & Welfare Business Division Member of the Board [Present Position] Chief of Architecture & Engineering Division (Integrated); Chief of Building Construction Division [Present Position]

Toru Tsuji External Board Member Fumio Sudo External Board Member 1961.04 Joined Marubeni-Iida Co., Ltd. 1964.04 Joined Kawasaki Steel Corporation 1991.06 Member of the Board of Marubeni Corporation 1994.06 Member of the Board of Kawasaki Steel Corporation 1995.06 Managing Executive Officer, Member of the Board 1997.06 Managing Executive Officer, Member of the Board 1996.04 Managing Executive Officer, Representative Director 2000.06 Executive Vice President, Representative Director 1997.06 Senior Managing Executive Officer, 2001.06 President and Chief Executive Officer, Representative Director Representative Director 1999.04 President and Chief Executive Officer, 2002.09 Member of the Board of JFE Holdings, Inc. (Part-time) Representative Director 2003.04 President and Chief Executive Officer, 2003.04 Chairman of the Board, Representative Director Representative Director of JFE Steel Corporation 2004.04 Chairman of the Board, Member of the Board 2005.04 President and Chief Executive Officer, 2008.04 Corporate Advisor, Member of the Board Representative Director of JFE Holdings, Inc. 2008.06 Corporate Advisor 2010.04 Director 2011.06 Member of the Board of Taisei Corporation 2010.06 Honorary Advisor [Present Position] 2011.06 Member of the Board of Taisei Corporation [Present Position] Atsuko Nishimura External Board Member 1979.04 Joined Ministry of Foreign Affairs of Japan 1995.07 Director, Non-Proliferation of Weapons-Related Resources, Foreign Policy Bureau 1997.06 Director, First Africa Division, Middle Eastern and African Affairs Bureau 1999.08 Minister/Counsellor of Permanent Mission of Japan to the United Nations 2001.06 Minister of Embassy of Japan in Belgium 2004.09 Professor of Tohoku University Graduate School of Law 2008.06 Administrative Vice President of the Japan Foundation 2012.04 Advisor of Japan Oil, Gas and Metals National Corporation 2014.04 Ambassador Extraordinary and Plenipotentiary to Grand Duchy of Luxembourg 2016.07 Ambassador Extraordinary and Plenipotentiary for Women, Human Rights and Humanitarian Affairs 2017.06 Member of the Board of Taisei Corporation [Present Position]

21 TAISEI ANNUAL REPORT 2017

012_0356501372908.indd 21 2017/08/10 9:59:08 Audit & Supervisory Board Members

Misao Akune Audit & Supervisory Board Member (Full-Time) Takashi Matsuyama Audit & Supervisory Board Member (Full-Time) 1973.04 Joined the Company 1975.04 Joined the Company 2003.07 General Manager of Accounting Dept., 2008.04 General Manager of Auditing Department Business Administration Div.; 2015.06 Audit & Supervisory Board Member of the Snapshot TAISEI Project Manager of Accounting Dept. Company 2004.04 Executive Officer [Present Position] 2007.04 Managing Executive Officer 2007.06 Managing Executive Officer, Member of the Board 2010.04 Senior Managing Executive Officer, Representative Director 2015.04 Member of the Board 2015.06 Audit & Supervisory Board Member of the Company [Present Position]

Terunobu Maeda External Audit & Supervisory Board Member Shigeru Morichi External Audit & Supervisory Board Member 1968.04 Joined Fuji Bank, Ltd. 1966.04 Joined Japan National Railways

1995.06 Director 1987.03 Professor of Civil Engineering, School of Management Strategy 1997.05 Managing Director Engineering, Tokyo Institute of Technology 2001.05 Vice-president 1996.04 Professor of Social Infrastructure Engineering, Graduate School of Engineering, University of Tokyo 2002.01 Director of Mizuho Holdings, Inc. 2004.04 Professor, National Graduate Research Institute 2002.04 President and Chief Executive Officer, Director for Policy Studies 2003.01 President and Chief Executive Officer of 2004.04 Vice Chairman, The Institution For Transport Policy Mizuho Financial Group Studies 2009.04 President Emeritus President, The Institute For Transport Policy Studies 2011.06 Audit & Supervisory Board Member of Taisei 2011.04 Director of Policy Research Center; Academic Corporation Fellow; Adjunct Professor CSR [Present Position] 2012.06 Audit & Supervisory Board Member of Taisei Corporation [Present Position]

Kiwamu Miyakoshi External Audit & Supervisory Board Member Kunitoshi Saito External Audit & Supervisory Board Member 1977.04 Joined National Police Agency 1977.04 Joined Board of Audit of Japan 1987.04 First Secretary, Embassy of Japan in Germany, 2009.12 Director General of 3rd Bureau, Board of Audit Ministry of Foreign Affairs 2011.05 Director General of 5th Bureau, Board of Audit 1998.03 Police Commissioner, 2013.03 Secretary General, Board of Audit Tokushima Prefectural Police 2016.06 Audit & Supervisory Board Member of Taisei 2004.07 Auditor-Secretary, Corporation Hanshin Expressway Company Limited [Present Position] 2005.09 Police Commissioner, Ibaraki Prefectural Police 2010.03 Chief of Police, Chugoku District

2011.03 Chief of Police, Kanto District Governance Report 2012.06 Audit & Supervisory Board Member of Taisei Corporation [Present Position]

Notes 1: Toru Tsuji, Fumio Sudo and Atsuko Nishimura are External Directors as defined by the Companies Act,Article 2-XV. 2: Terunobu Maeda, Shigeru Morichi, Kiwamu Miyakoshi and Kunitoshi Saito are External Audit & Supervisory Board Members as defined by the Companies Act, Article 2-XVI. 3: Toru Tsuji, Fumio Sudo, Atsuko Nishimura, Terunobu Maeda, Shigeru Morichi, Kiwamu Miyakoshi and Kunitoshi Saito are independent directors in accordance with the rules of Tokyo Stock Exchange and Nagoya Stock Exchange. Social Report Environmental Report Financial and Corporate DataFinancial

TAISEI ANNUAL REPORT 2017 22

012_0356501372908.indd 22 2017/08/10 9:59:09 Chairman

Takashi Yamauchi

Executive Officers

President and Chief Executive Officer Yoshitaka Inoue Yoshiyuki Murata Chief of International Operations Headquarters

Yasushi Yoshinari Executive Vice Presidents Chief of Medical & Welfare Business Division Kazuhiko Dai Chief of Marketing & Sales Division (Integrated); Tetsuya Shibayama Chief of Marketing & Sales (Civil Engineering) Division; Chief of Proposal & Solutions Division; In charge of Safety Administration In charge of Olympic Projects

Junichi Ikeguchi Hiroshi Shirakawa Chief of Marketing & Sales (West Japan) Division Chief of Yokohama Branch

Shigeyoshi Tanaka Tsuyoshi Nakanishi Chief of Civil Engineering Division Chief of Engineering Division

Shigeyuki Sakurai Masaharu Okada Chief of Business Administration Division Chief of Marketing & Sales (Building Construction) Division III Masahiro Sakai Deputy Chief of Marketing & Sales Division (Integrated), Masao Yoshikawa Supervising Marketing & Sales (Building Construction) Divisions In charge of Marketing & Sales (Building Construction), Marketing & Sales Division (Integrated)

Senior Managing Executive Officers Hiroshi Suzuki Yoshinobu Shigeji Chief of International Marketing & Business Development Division In charge of Marketing & Sales (Building Construction), Marketing & Sales Division (Integrated) Takeshi Kagata Deputy Chief, In charge of Civil Engineering, Kansai Branch Katsuyuki Kanai Chief of Urban Development Division Jirou Taniyama Deputy Chief of Civil Engineering Division; Tamotsu Umehara General Manager of Civil Engineering Department Chief of Tokyo Branch Yoshiro Aikawa Takeo Horinouchi Chief of Marketing & Sales (Building Construction) Chief of Marketing & Sales Promotion Division Division II

Haruhiko Kono Keiji Hirano Chief of Design Division Chief of Corporate Planning Office

Shoji Kondo Masaaki Ito Chief of Nagoya Branch Chief of Tohoku Branch

Norihiko Yaguchi Tatsuhiko Matsui Chief of Architecture & Engineering Division (Integrated); Chief of Taisei Technology Center Chief of Building Construction Division Hiroshi Tsuchiya Takao Kanai Chief of Marketing & Sales (Building Construction) Division I Chief of Kansai Branch Susumu Morita General Manager of Energy Business Strategy Department Managing Executive Officers Noriaki Kon Kazuhiko Hombu Chief of Sapporo Branch In charge of Technology; In charge of Energy & Environment Tetsuya Hanyu Masahiro Oshima In charge of Marketing & Sales (Building Construction), Marketing & Sales Division (Integrated) Deputy Chief of Marketing & Sales (Civil Engineering) Division; In charge of Olympic Projects

Satoru Tsutae Deputy, in charge of Civil Engineering, International Operations Headquarters; Deputy Chief of International Marketing & Business Development Division, in charge of Civil Engineering

23 TAISEI ANNUAL REPORT 2017

012_0356501372908.indd 23 2017/08/10 9:59:09 Executive Officers Shunichi Sonoda Atsuo Ogawa Deputy Chief of Marketing & Sales (Building Construction) Division III; In charge of Technology Snapshot TAISEI General Manager of Marketing & Sales Department Nobuyuki Hayashi Makoto Ohta General Manager of Design Department, Civil Engineering Division General Manager of Construction Engineering Department, Civil Engineering Division; Shimpei Oguchi General Manager of International Projects Management Department Deputy Chief of Marketing & Sales (West Japan) Division Yasumitsu Sakurai Taku Yamamoto Deputy Chief of Architecture & Engineering Division (Integrated); In charge of Marketing & Sales (International Building General Manager of International Projects Management Construction), Marketing & Sales Division (Integrated) Department; Management Strategy General Manager of Profit Achievement Ratio (PAR) Atsushi Yamamoto Management Section Deputy Chief of Business Administration Division Satoshi Imamura Masatoshi Yamakami Chief of Nuclear Facilities Division Deputy Chief, in charge of Civil Engineering, Tohoku Branch;

General Manager of Civil Engineering Department Toru Inaba CSR Deputy, in charge of Building Construction & Engineering, Kyo Murai International Operations Headquarters Chief of Procurement Division Yasushi Kamezawa Shun Kitano Chief of Environment Division Chief of Safety Administration Division Yoshihiro Teramoto Hiroshi Kimura Chief of Kyusyu Branch Chief of Chugoku Branch Shinsaburo Sawa Jo Iwata

Deputy Chief of Marketing & Sales (Building Construction) Governance Report Chief of Chiba Branch Division I; General Manager of Marketing & Sales Department Fumihiko Sudoh Chief of Kanto Branch Shinji Kawamura Deputy Chief of Marketing & Sales (West Japan) Division Yuichi Kitaguchi In charge of New National Stadium Project, Tokyo Branch Masahiko Okada General Manager of Secretarial Department Hiroshi Harada

In charge of Chuo Shinkansen Project, Tokyo Branch Yoshio Abe Social Report Deputy Chief of Marketing & Sales (Civil Engineering) Division; Atsushi Suzuki General Manager of Marketing & Sales Department Chief of Mechanical & Electrical Division

Executive Fellows

Osamu Hosozawa Deputy Chief of Design Division Environmental Report Kazuyuki Shimamura In charge of Energy & Environment

Toshihiko Tsuka General Manager of Information Planning Department Financial and Corporate DataFinancial

TAISEI ANNUAL REPORT 2017 24

012_0356501372908.indd 24 2017/08/10 9:59:09 Business Overview

Overview of Segment ● The figures include intersegment transaction. Sales / Operating margin Civil Sales Operating income ■ Sales (Billions of Yen) ● Operating margin (%) Engineering ¥449.4 billion ¥55.1 billion 471.0 455.7 449.4 (Down 1.4% YoY) (Up 8.8% YoY) ▶Operating margin: 12.3% 11.1 12.3 7.0 Sales in the Civil Engineering segment decreased 1.4% year on year, to ¥449.4 billion reflecting lower sales in the Company and its consolidated subsidiaries, while operating income 2014 2015 2016 (FY) rose 8.8% to ¥55.1 billion due to an improvement in gross profit margin.

Business Environment Actively Participating in National-Level Projects and Contributing to Social Infrastructure improvement The domestic market has continued to enjoy a boom, and Taisei Corporation has steadily been acquiring work orders, mainly for large projects such as the Linear Chuo Shinkansen Southern Alps Tunnel, facilities related to the Tokyo 2020 Olympic and Paralympic Games, and the Tokyo Gaikan Expressway. In addition, the Company is actively participating in electrical power-related work, such as restarts of nuclear power plants and thermal power plant projects, and national-level projects including post-earthquake reconstruction work. Overseas, the Japanese government is expanding major infrastructure export projects, and the Company will promote expansion of our overseas business to exploit these opportunities.

Executive Vice Presidents, Looking Ahead and Key Strategies Member of the Board; Chief of Civil Engineering Division Aiming to Become Number One in More Respects and Achieve Higher Recognition and Presence in the Market Shigeyoshi Tanaka In the Civil Engineering Division, we have been making efforts towards challenges specified as: 1) production capacity expansion; 2) profitability enhancement; and 3) overseas business earnings stabilization. Opportunities and Risks To expand production capacity, it is essential to secure and develop diverse human resources and allocate the right people in the right places. We seek to raise 〈Opportunities〉 productivity by utilizing ICT equipment in CIM [cf. Column on the right-hand page], A growing number of projects and introducing energy-saving and automation technologies. In addition, the requiring advanced technologies Company has implemented specific measures aimed at reducing total working hours

An increasing amount of in an effort to achieve work-style reforms. While discussions have been underway construction work on energy within the government on the upper limit of overtime work, the construction industry has launched new initiatives designed to improve productivity and reform work styles. field projects, including restarts We work to boost productivity by distinguishing between things that should be of nuclear power plants and changed and things that should not. thermal power plant projects In an effort to enhance our profitability, we bolster our procurement capabilities by An increasing number of overseas maximally leveraging the Company’s size and devise price-competitive work large infrastructure projects implementation plans by deploying our technological capabilities. 〈Risks〉 With regard to overseas business earnings stabilization, we established the Production capacity decline due International Project Management Dept., which implements thorough earnings to workforce shortage management to stabilize earnings, in January 2017. We will continue to engage in order acquisition activities with a focus on regions and fields where our strengths can Occurrence of an incident be leveraged, as well as focusing on human resource development with an eye on that would have a significant the future. social impact Through the endeavors discussed above, we aim to become number one in more respects and achieve higher recognition and presence in the market.

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012_0356501372908.indd 25 2017/08/10 9:59:09 Major Projects

1 2 TAISEI Snapshot TAISEI Management Strategy

3 4 CSR

Photo courtesy: East Nippon Expressway Company Limited

5 6 Governance Report Social Report

1Yagiri Box Culvert Construction (No. 10) of Tokyo Gaikan Expressway (Matsudo-Ichikawa City, Chiba Prefecture) Client: Ministry of Land, Infrastructure, Transport and Tourism. Kanto Regional Development Bureau 2Tajiri Work for Tokyo Gaikan Expressway (Ichikawa City, Chiba Prefecture) Client: East Nippon Expressway Company Limited, Kanto Branch 3Outer Circular Highway (OCH) to the City of Colombo Project Northern Section 1 from Kadawatha to Kaduwela (Greater Colombo Urban Transport Development Project) Client: THE GOVERNMENT OF DEMOCRATIC SRI LANKA MINISTRY OF PORTS AND HIGHWAYS, ROAD DEVELOPMENT AUTHORITY 4Hitachi LNG Terminal (Hitachi City, Ibaraki Prefecture) Client: Tokyo Gas Engineering Solutions Corporation 5Land Preparation (First Phase) at the Area of Nobiru Northern Hills (Higashimatsushima City, Miyagi Prefecture) Client: Urban Renaissance Agency 6Construction of the Intake of Tunnel Outlet Facility in Redevelopment of Amagase Dam (Uji City, Kyoto Prefecture) Client: Ministry of Land, Infrastructure, Transport and Tourism. Kinki Regional Development Bureau Environmental Report

Column We developed a unique construction information modeling (CIM) system, enabling centralized management of all construction work Improving construction site productivity and taking measures to overcome workforce shortages are our most pressing issues, and we have achieved improvements in productivity, quality, and safety through the application of ICT and robotics. The Company developed T-CIM®, a unique construction information modeling (CIM*) system that integrates

the construction system using information and communication and Corporate DataFinancial technologies with three-dimensional models for use at our civil engineering work sites. We have introduced T-CIM® at several civil engineering work sites for earthmoving work and construction of dams and bridges from the current fiscal year, enabling us to implement centralized management of all construction work information. Diagram of T-CIM®

*CIM: Construction Information Modeling is designed to boost the efficiency of a series of construction production systems by introducing three-dimensional models from the investigation and design phases and interfacing them with three-dimensional models in each phase of construction and maintenance. TAISEI ANNUAL REPORT 2017 26

012_0356501372908.indd 26 2017/08/10 9:59:14 Overview of Segment ● The figures include intersegment transaction. Sales / Operating margin Building Sales Operating income ■ Sales (Billions of Yen) ● Operating margin (%) Construction ¥977.7 billion ¥73.3 billion 1,017.2 1,015.4 977.7 (Down 3.7% YoY) (Up 30.1% YoY) ▶Operating margin: 7.5% 7.5 Sales in the Building Construction segment declined 3.7% 5.6 2.4 year on year, to ¥977.7 billion reflecting lower sales in the Company, while operating income jumped 30.1% to ¥73.3 2014 2015 2016 (FY) billion due to an improvement in gross profit margin.

Business Environment Participating in National-Level Projects and Responding to Social Issues Construction work for national-level projects, large-scale redevelopment projects, and construction of accommodation facilities for the Tokyo 2020 Olympic and Paralympic Games are steadily underway, and our work order acquisition environment is projected to be favorable going forward. With the sharp rise in construction work volume that will occur mainly in Tokyo from the current fiscal year to the fiscal year 2019, our urgent task will be to strengthen our production system. With a view to the necessity of addressing the social issue of ensuring a stable power supply, we established the Power Plant Construction Planning Dept. from the current fiscal year, and will contribute proactively to the improvement of social infrastructure.

Looking Ahead and Key Strategies Senior Managing Executive Officer, Working on Focused Challenges towards Achieving Further Growth and Member of the Board; Seeking to Become the Number One Player in the Industry by Developing Chief of Architecture & Engineering Division (Integrated); a Production System to be Passed Down to the Next Generation Chief of Building Construction Division The Building Construction Division will work on four priority challenges: Norihiko Yaguchi 1) strengthening of our production system; 2) enhancement of profitability; 3) complete elimination of accidental deaths and serious quality defects; and 4) stabilization of profitability in our overseas business. In particular, we are placing the utmost priority on the strengthening of our production system in the run-up to the peak period of Opportunities and Risks construction work starting from the second half of the current fiscal year. We established the Productivity Promotion Dept. [cf. Column on the right-hand page] 〈Opportunities〉 from the current fiscal year to make a company-wide effort to enhance productivity Development of new original improvement technologies to expand production capacity, work on smooth starts technologies and enhancement of and progress project management through front loading of projects, and promote application track record strengthening the collaboration with Souyu-kai (organization set up for key suppliers).

Development of a new production To achieve profitability enhancement, we will work to further improve procurement system and its succession to capabilities and production capacity, and promote the development of price- competitive work implementation plans. future generation With regard to the complete elimination of accidental deaths and serious quality Risks 〈〉 defects, we will work to eliminate accidental deaths by enhancing employees’ ability to Production capacity potentially identify danger and actively watching out for each other. In addition, we will steadily deteriorating due to workforce implement our quality management process so as never to cause serious quality defects. shortages To achieve the stabilization of profitability in overseas business, we established

Losing opportunities to receive the International Projects Management Dept. in January 2017. We strive to generate orders due to occurrence of a stable business earnings by conducting risk assessment of project prior to acceptance, thoroughly implementing profit management by using a new work-related accident or performance indicator, and ensuring implementation of process management at quality defect construction sites. In addition, we will enhance organizational strength and promote operational improvement and reform of our overseas business to develop the structure for healthy growth with a view to the post-Olympic period. We will work on the above-mentioned priority challenges and promote the development of next-generation technologies (planning technologies, work implementation technologies) going forward. In addition, we will proactively work towards reducing total work hours, which is one of the measures for work–style reforms, and promote the provision of guidance for encouraging enrollment in social insurance programs, for which the Company started strict implementation in April 2017. Taisei Corporation will further step up collaboration with group companies to enhance the total strength of the Taisei Group. Through this, the Company will build a production system to be passed on to the next generation and aim to become the number one player in the industry.

27 TAISEI ANNUAL REPORT 2017

012_0356501372908.indd 27 2017/08/10 9:59:14 Major Projects

1 2 TAISEI Snapshot TAISEI

3 4 Management Strategy CSR

5 6 7 Governance Report Social Report

1Sumitomo Fudosan Roppongi Grand Tower (Minato-ku, Tokyo) Client: Cooperative for Urban Renewal of Roppongi 3-chome East District 2BLUE HARBOR TOWER Minato Mirai (Yokohama City, Kanagawa Prefecture) Client: Okada Building Co., Ltd. 3Taichung Tiipao Condominium (Taiwan) Client: Run Long Construction Co., Ltd., Hontai Life Insurance Co., Ltd., Jaysanlyn Real-Estate & Development Co., Ltd. 4Okura House (Chuo-ku, Tokyo) Client: Chuo Building Co., Ltd. 5GINZA PLACE (Chuo-ku, Tokyo) Client: SAPPORO REAL ESTATE CO., LTD., Tsuzureya Co., Ltd. 6SAITAMA RED CROSS HOSPITAL (Saitama City, Saitama Prefecture) Client: JAPANESE RED CROSS SOCIETY 7Tsumura Shizuoka Plant (Fujieda City, Shizuoka Prefecture) Client: TSUMURA & CO. Environmental Report Column Newly established Productivity Promotion Dept. to address the urgent task of strengthening the production system Taisei Corporation established the Productivity Promotion Dept. in the Architecture & Engineering Division (Integrated) with the aim of introducing a new production method and improving the productivity and working environment. In the Productivity Promotion Dept., we will work to further promote the introduction of ICT to construction sites, and reform production processes by developing production technologies that will enhance productivity through collaboration with other departments. To cite an example, the Productivity Promotion Dept. will collaborate with the BIM* Promotion Office, newly established in the Engineering Div., to further promote front loading of the and Corporate DataFinancial incorporation of productivity improvement technologies from the design phase, as well as digital mock-ups. Digital mock-up of production facilities

*BIM: Building Information Modeling. It is a process of building three-dimensional computer models of buildings and utilizing the information obtained from model creation in the entire lifecycle process of buildings, including designing, construction and maintenance.

TAISEI ANNUAL REPORT 2017 28

012_0356501372908.indd 28 2017/08/10 9:59:17 Overview of Segment ● The figures include intersegment transaction. Sales / Operating margin Real Estate Sales Operating income ■ Sales (Billions of Yen) ● Operating margin (%) Development ¥121.7 billion ¥13.3 billion 143.4 (Down 4.6% YoY) (Up 41.1% YoY) 127.6 121.7 ▶Operating margin: 10.9% 10.9 8.5 7.4 Sales in the Real Estate Development segment fell 4.6% year on year, to ¥121.7 billion reflecting lower sales in the Company and its consolidated subsidiaries, while 2014 2015 2016 (FY) operating income expanded 41.1% to ¥13.3 billion due to an improvement in gross profit margin.

Business Environment Supporting Large-Scale Development Projects that Continue to Boom and Promoting Development Projects in which Taisei Serves as Developer In central Tokyo, the boom in large development projects is continuing on the back of the nation’s infrastructure development for the Tokyo 2020 Olympic and Paralympic Games, as well as the Japanese government’s growth strategy involving the National Strategic Special Zones, among others. In the Urban Development Division, while tackling various challenges, we provide strong support for customers’ development plans and serve as developer to implement development projects.

Looking Ahead and Key Strategies Promoting the Urban Development Business and Facility Administration Senior Managing Executive Officer; Operations by Leveraging Know-How and Experience Chief of Urban Development Division Katsuyuki Kanai Taisei Corporation has been involved in approximately 20% of all the nation’s city center redevelopment projects, the key field for urban redevelopment. In large private sector development projects, such as the (Tentative Name) Toranomon 2-10 Project [(Image) 1 on the right-hand page], for which construction work started in May 2016, Opportunities and Risks the Company is serving as developer. We will continue to provide support to the promotion of operations in many areas centering on the Tokyo metropolitan area, and 〈Opportunities〉 conduct large-scale development business by leveraging our know-how. Needs for reconstruction of aged In addition, we have a leading track record in PFI projects, a new method of buildings constructed during developing public facilities. The Ehime Prefectural Central Hospital [(Image) 2 on the Japan’s high-economic growth era right-hand page] opened in December 2014. This is the fourth year that Taisei

Developing various development Corporation has been delivering management services for the facility since its plans by accumulating and opening. Considering that the long-term management of facility operation is essential to ensure stable earnings in the PFI projects, as well as projects in which Taisei utilizing sophisticated serves as developer, we newly established the Property Management Business Dept. development skills in April 2017, and will make further efforts for our property management business. 〈Risks〉 Investment in overseas development projects

Deterioration in profitability of New Businesses projects due to spike in work costs Taking on the Challenge of New Business Fields Following the (tentative name) Vinata Towers Project [(Image) 6 on the right-hand page], Taisei Corporation is proactively working to enlarge our development areas in Southeast Asia to achieve continuous growth into the future. In addition, the Company will take on the challenge of new business fields such as area management [cf. Column on the right-hand page] and concessions*. Furthermore, the Company will take the initiative in the Group’s housing business, such as conducting contracted activities to promote fireproofing for areas with densely built timber housing, and respond to the requests of our customers and the needs of society by accumulating and utilizing yet higher levels of development skill.

*Concession: Refers to an arrangement in which a public-sector entity, such as a government entity, sells the operation rights for an airport or water supply business, for example, to a private-sector enterprise while retaining ownership. Concessions allow the central government or municipality to achieve a reduced funding burden for infrastructure maintenance and development, and provide private-sector enterprises with the commercial opportunity of running the infrastructure. 29 TAISEI ANNUAL REPORT 2017

012_0356501372908.indd 29 2017/08/10 9:59:17 Joint Development PFI

1 2 3 TAISEI Snapshot TAISEI

(Tentative Name) Toranomon 2-10 Project Ehime Prefectural Central Hospital Construction and Maintenance Service Client: Hotel Okura Co., Ltd. Client: Ehime Hospital Partners for the New Omiya Ward Office Designer: Toranomon 2-10 Planning Design JV Project owner: Ehime Prefecture Client: OMIYA CROSS POINT CO., Ltd. Location: Minato-ku, Tokyo Designer: Taisei Corporation – Nikken Sekkei JV Project owner: Saitama City Scheduled completion: 2019 Location: Matsuyama City, Ehime Prefecture Designer: Kume Sekkei – Coelacanth K&H Architects – Taisei Corporation JV Taisei will acquire the office floors in the high-rise Year completed: 2014

Location: Saitama City, Saitama Prefecture Management Strategy building constructed under the Hotel Okura Tokyo This PFI project involves the provision of Scheduled completion: 2019 Main Building Reconstruction Project through a maintenance and administration services for special purpose company (SPC) set up jointly with Ehime Prefectural Central Hospital until March This PFI project involves the construction of a Hotel Okura Co., Ltd., etc. We will promote the 2033. The project delivers high-quality hospital complex facility that houses the ward office as office leasing business through the SPC. management services efficiently and consistently well as a library and community space, and the by leveraging the know-how and ingenuity of the provision of maintenance and administration private sector. services for the facility for 20 years. Our distinctive building design and proposal for rejuvenating the CSR community were evaluated highly.

Development Redevelopment Overseas Real Estate Development

4 5 6 Governance Report

Ochanomizu Sola City Meguro Station Front Redevelopment (Tentative Name) Vinata Towers Project Client: Surugadai Development Special-Purpose Company Project Client: DT Development Vietnam LLC Designer: Taisei Corporation Client: Meguro Station Front Area Urban Redevelopment Design and construction: VINATA INTERNATIONAL J/V Location: Chiyoda-ku, Tokyo Association LTD. CO. (Overseas subsidiary)

Year completed: 2013 Designer: Taisei Corporation – Takenaka Corporation Location: Vietnam Social Report Design JV Scheduled completion: 2018 (stage 1) This development project carried out by Taisei Shinagawa-ku, Tokyo applies all of our expertise such as planning, Location: This is a development project in Hanoi being designing, leasing and PM expertise. Employing Scheduled completion: 2017 undertaken jointly by Daiwa House Industry Co., cutting-edge seismic base isolation and This urban redevelopment project is in the area in Ltd. and Taisei. Under phase 1 of the project, a environmental technologies, the building has a front of Meguro Station where JR Yamanote Line 256-unit serviced apartment is being constructed high occupancy rate. and other lines link. with Japanese expats as the main target. After a group of companies including Taisei won the bid for the project (cooperation), we formed a consensus among landowners and leaseholders, and consulted with the administration with the aim of developing a “forest,” offices, commercial

buildings, and residential buildings that are open to Environmental Report the local community.

Column

Contributing to Value Improvement in Urban Areas and Creating New Business Opportunities through Area Management 16 companies and universities based in, or have sales bases in, Nishi-Shinjuku established the General Incorporated Association Shinjuku Subcenter Area Environmental Improvement Committee, which is promoting revitalization of the entire area, while making full use of roads and public open spaces. Through such area management, we will promote efforts to contribute to improving the value of the entire area, including buildings, while deepening cooperation with the and Corporate DataFinancial administration and the community.

Community revitalization event in the Nishi- Shinjuku area

TAISEI ANNUAL REPORT 2017 30

012_0356501372908.indd 30 2017/08/10 9:59:19 Activities of Group Companies

Contributing to the Formation of a Society Where People Can Live with Peace of Mind Taisei Group companies share the Group Philosophy “To Create a Vibrant Environment for All Members of Society” and the Group Action Guidelines, and contribute to the formation of a society where people can live with peace of mind and good health.

Main Domestic Group Companies Pavement and civil engineering Giving Consideration to the Environment and Contributing to TAISEI ROTEC CORPORATION Extending the Life of Infrastructure

Sales ¥93.8 billion TAISEI ROTEC CORPORATION has refurbished its asphalt mixtures plants Number of in Fukuoka and Asahikawa into environmentally-friendly plants with employees 963 consideration to energy saving and the surrounding environment. In Established 1961 addition, the company is conducting activities to extend pavement life http://www.taiseirotec.co.jp/english/ through the development and application of “relaxphalt pavement” and the “inject method,” which feature high durability.

Rising construction demand for the Tokyo 2020 Olympic and Paralympic Games Representative Director and Opportunities Full-scale launch of renewal work projects for expressways President and Risks Risk of a decrease in production capacity due to workforce shortages owing to Yoshinori Nishida low birthrate and aging society

Real estate development and facility management Providing New Services and Added Value Based on Taisei-Yuraku Real Estate Co., Ltd. the Stock-Type Society

Sales ¥94.3 billion Taisei-Yuraku Real Estate Co., Ltd. focuses on the renewal business for Number of buildings and condominiums suffering from age-related degradation, with employees 1,358 an eye on the upcoming stock-type society. We leverage our know-how Established 1971 cultivated in the real estate business, and our strength of being well- http://www.taisei-yuraku.co.jp/ informed about buildings as their management company, and provide asset value-enhancing renewal services from energy-saving facility replacement and facility functionality improvements to design profile Representative Director and upgrading, in order to meet the diversifying needs of society. President Hiroyuki Hamanaka Opportunities An expanding renewal market due to aging deterioration in existing buildings. Growing energy-saving needs for becoming environmentally friendly and Risks Risk of a workforce shortage owing to a tightening labor market environment

Construction of housing complexes TAISEI U-LEC CO., LTD. A Construction Company Creating Comfortable Residential Space

Sales ¥36.3 billion TAISEI U-LEC CO., Ltd. has been engaged in the construction of wall-type Number of precast concrete (PCa) condominiums since its foundation. The company’s employees 445 PCa construction method is an environment-friendly construction method Established 1963 which enables reduction in the volume of veneer frames used by about http://www.u-lec.com/ 70% compared to the conventional method of construction. We aim to become a company continuing to contribute to society by spreading the use of the PCa construction method. Representative Director and President Expansion of demand for the construction of geriatric health services facilities Opportunities with the aging of society Takaaki Kobayashi and Risks Risk of a decrease in construction demand for rental condominiums due to a population decline General building services construction TAISEI SETSUBI CO., LTD. Aiming to Remain an Enterprise Trusted by Society

Sales ¥35.5 billion TAISEI SETSUBI CO., LTD. devises creative solutions, while anticipating the Number of needs of the times, and enables reduction of environmental load by employees 372 generating energy through photovoltaic power generation and appropriate Established 1965 control of energy-saving equipment through BEMS. We will fulfill our social http://www.taisei-setsubi.jp/ responsibility as an enterprise by seeking to achieve a “natural and earth- friendly environment” appropriate to the living environment.

Representative Director and Expansion of needs for measures to adapt to climate change Opportunities Expansion of the renewal market due to the aging of existing building facilities President and Risks Risk of a deterioration in production capacity due to a shortage of engineers Masahiro Kodama and skilled construction laborers

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012_0356501372908.indd 31 2017/08/10 9:59:21 TAISEI Snapshot TAISEI

Order-made individual housing construction TAISEI HOUSING CORPORATION Contributing to Society by Building Safe and Comfortable Housing

Sales ¥22.6 billion TAISEI HOUSING CORPORATION succeeded the philosophy and Number of technologies of the wall type reinforced concrete housing “Palcon,” which employees 454 was developed by Taisei Corporation, by applying its technologies to single-

Established 1997 family house building, and strives to advance the penetration of houses Management Strategy resistant to earthquakes and other natural disasters. It has been 48 years http://www.palcon.jp/ since the market rollout of “Palcon” housing, and we will continue to contribute to society by providing valuable housing in which customers can Representative Director and live securely, safely, and comfortably over a long period of time. President Order increase due to the revitalization of the existing housing/renovation market Shinichi Hirajima CSR Opportunities Expansion of needs for products resistant to natural disasters, which occur and Risks more frequently and are growing in intensity Risk of a decrease in new single-family house buildings due to declining birthrate and aging society General engineering including foundation works SEIWA RENEWAL WORKS CO., LTD. Contributing to Building a Safe Social Infrastructure

Sales ¥22.5 billion Since its founding in 1956, SEIWA RENEWAL WORKS CO., LTD., while Number of seeing its mission as contributing to building a safe social infrastructure, employees 150 has been meeting the needs of society. Going forward, the company will

Established 1956 seek to remain an enterprise that constantly contributes to society on the Governance Report basis of its sophisticated skills and reliable quality, by leveraging its http://www.seiwarw.co.jp/ characteristics as a composite engineering company that has fundamental, machinery, environmental, and renewal business lines. Representative Director and President Opportunities Expansion of the renewal market due to aging of social infrastructure Makoto Imasaka and Risks Risk of production capacity declining due to workforce shortages

Overseas Subsidiary Social Report Thailand Providing High-Quality Construction Services by Leveraging the TAISEI (THAILAND) CO., LTD. Total Strength of the Taisei Group

Sales ¥1.6 billion* Since its founding in 1984, TAISEI (THAILAND) CO., LTD. has been engaged Number of in construction of plants for Japanese companies, distribution warehouses, employees 83 hotels, and commercial facilities. We meet customers’ needs by providing Established 1984 integrated services to meet their requirements in the entire construction work process, from the business planning stage and design and implementation to after-sales services, and deliver high-quality construction services. We will contribute to the development of society and industry in Thailand by Environmental Report Representative Director and providing the advanced technologies of Taisei Corporation. President Mutsuhiro Yanai Expansion of capital investment by Japanese companies due to economic Opportunities recovery and improvement of the investing environment and Risks Risk of a downturn in the manufacturing industry, mainly in the automobile industry, due to economic stagnation

Vietnam VINATA INTERNATIONAL J/V CO., LTD. Myanmar TAISEI MYANMAR CO., LTD.

China CSCEC-TAISEI CONSTRUCTION, LTD. and Corporate DataFinancial Philippine TAISEI PHILIPPINE CONSTRUCTION INCORPORATED Indonesia PT. INDOTAISEI INDAH DEVELOPMENT

*January to December, 2016

TAISEI ANNUAL REPORT 2017 32

012_0356501372908.indd 32 2017/08/10 9:59:21 OUR STORY

The Source of Taisei Corporation’s Value That Takes on Social Challenges through its Business Activities

To live up to the Taisei Group Philosophy of “To Create a Vibrant Environment for All Members of Society,” it is important to face social challenges squarely and resolve them firmly. The foundation of our technologies is our commitment not only to “Technologies” customers but also to end-users farther down the supply chain. Presented below are our prioritized themes and solution technologies we engage in each field to resolve social challenges.

Taisei Improving Quality and Work Site Efficiency by Using New Technology Technologies and Distributing / Offering a Vision of Center Future Construction through Technological Innovation

innovative new technologies through verification under various conditions, as well as distribute and offer a vision of future construction that is led by technological innovation to a broader spectrum of society through demonstrations and experiments. Among other things, toward the achievement of “Urban-Style ZEB®,” which is expected to contribute greatly to global warming prevention and energy solutions, we adopt cutting-edge lighting and air conditioning systems at the ZEB Demonstration Building within the Taisei Technology Center to advocate enhanced office worker comfort and a next-generation office for intellectual productivity improvements. The building has gained much attention since its completion, receiving more than 10,000 visitors domestically and internationally, including the then-Minister of the Managing Executive Officer Chief of Taisei Technology Center Environment Yoshio Mochizuki, and the Governor of Kanagawa Tatsuhiko Matsui Prefecture Yuji Kuroiwa. We currently conduct research in the fields of materials, structure, disaster resistance/prevention, environment, energy, Undertaking Activities from Research and ground, hydraulic engineering, biology and soil, and Development to Demonstration by development in the field of advanced technologies such as Promoting the Expansion of Facilities automation, robot utilization and analysis technologies, as well as in the field of production technologies such as ICT/IoT/ Originally created as the Technology Research Department in AI-based and BIM/CIM-based technologies. 1958, Taisei Technology Center has broadened the scope of its research in response to the needs of the times, and developed a number of ground breaking new technologies and construction methods primarily in the building construction and civil engineering businesses. Under the current facilities expansion plan, implemented in 2012, the Center has installed the Urban Net Zero Energy Building (ZEB) Demonstration Building, tsunami wave making systems, large seismic testers and the like, which now enable us to evaluate the performance of newly developed

technologies. We will pursue the faster establishment of more Taisei Technology Center (Yokohama City, Kanagawa)

33 TAISEI ANNUAL REPORT 2017

012_0356501372908.indd 33 2017/08/10 9:59:23 Contributing to Productivity Improvements ICT-driven information-based construction system and a three-dimensional structure model on computer, centralizes through Innovative Technologies various construction information, and organizes construction Energy-saving and labor-saving construction could be records automatically. considered one of the important challenges ahead in the In addition to the above, in automation and robot utilization construction business. Construction demand has shown the technologies, an autonomous control-type unmanned highest growth in recent years as a result of national-level construction system, “T-iROBO Series,” which can make its projects such as restoration activities in disaster-hit areas, the own decisions and work using multiple sensors equipped on Tokyo 2020 Olympic and Paralympic Games and national the construction machine, has been developed to apply at resilience, as well as the Linear Chuo Shinkansen project, which construction work sites. makes a labor shortage in the construction industry a serious issue at the moment. We therefore are proactively developing energy-saving and labor-saving technologies that contribute to more efficient construction. “T-Mark. Navi®” is a marking survey navigation system that achieves more efficient and labor-saving survey work. Based on a combination of an eyeglass-based wearable device and a dedicated surveying device, “T-Mark. Navi®” allows the user to perform surveys unaided in 40 minutes, which previously took a pair of workers an hour. Survey navigation system “T-Mark. Navi®” (Left) Autonomic cleaning robot “T-iROBO® Cleaner” (Right) “T-CIM®” is an independently developed CIM system for construction information integration, which integrates an

Creating New Value by Mobilizing awareness, etc.) with those of the outside, the team operates so that we can bring a new relationship with the outside, learn Wisdom Inside and Outside the Company new values, perspectives, and methodologies, import new To further accelerate an initiative to create value for the future, ideas and flexibility, and cultivate an environment that creates we are committed to open innovation activities. A team sustainable innovation. exclusively in charge of open innovation activities, formed in In anticipation of moving one step beyond by considering 2016 within the Taisei Technology Center, is now running its how the construction industry will change and how it should be, operations in full swing. the Taisei Technology Center will proactively work on advanced Particularly in an effort to enhance quality, quantity, and technology development speed in technology development, the team promotes in the new construction business matching in which our needs are disclosed to the industry toward the public in an extensive search of prospective alliance partners, realization of “TAISEI and holds lecture meetings with outside experts with the i-Innovation” that objective of changing mentalities and sharing information promotes productivity inside the company. A website has been set up to gain more improvements in the entire exposure to prospective alliance partners and to strengthen construction production and expand Co-Creation networks. By combining the system using ICT, IoT, and Promoting business matching in extensive resources of all executives and employees (human resources/ AI technologies. search of prospective alliance partners connections, information, technologies, values, ideas, agenda Web See our website for more details of our Taisei Open Innovation Laboratory (T. O. I. Lab) http://www.taisei.co.jp/oi/index.html

■New Experiment Facilities Introduced under Taisei ■Application of Large Fuel Cells to Smart Communities Technology Center Facilities Expansion Plan

Wind noise simulator Floor impact sound experiment facilities

In 2017 we will start demonstrations and experiments to apply In January 2017 we launched “wind noise simulator” (Left) and electricity and heat, which are generated from large solid oxide “floor impact sound experiment facilities” (Right) operations to fuel cells placed in the Taisei Technology Center, as energy for evaluate wind noise and the effect of countermeasures for floor smart communities for the first time in Japan. impact sound for the first time in the industry.

TAISEI ANNUAL REPORT 2017 34

012_0356501372908.indd 34 2017/08/10 9:59:24 Environment Contributing to Achieving a Sustainable Society as a Division Pioneer in Providing Environmental Solutions

Taking on Various Social Challenges Based on an “Environmental” Approach In 1997 Taisei Corporation set up a department to deal exclusively with environmental matters before any other peer companies. Founded in 2009, the current Environment Division has two functions: “To respond to societal demand” and “to promote environmental management”, not only from within the boundaries of civil engineering and building construction, rather from an environmental perspective. In an effort to achieve a low carbon society as part of the function “to respond to societal demand,” we pursue the “penetration of market-oriented ZEB” based on the performance record of ZEB Demonstration Building, which Executive Officer Chief of Environment Division became Japan’s first-ever single building to achieve zero Yasushi Kamezawa annual energy consumption. With large next-generation fuel cells installed at the Taisei Technology Center to accommodate energies between multiple buildings, we are also working toward the achievement of a smart community that would storage activities, and final disposal of decontaminated soil for reduce carbon emissions for an entire area, envisioned to be the future in Fukushima Prefecture. the size of a city block, in our technology development and In respect of the function “to promote environmental sales activities. Furthermore, the “T-Root® Construction management,” we were accredited by CDP, an international

Method,” which was developed for soft ground, is employed NPO, in its evaluation of CO2 emissions reduction initiatives as in construction of large solar power plants in tsunami-hit areas an A-lister, or the top level among 500 Japanese companies. in the Tohoku Region in Japan. We believe our efforts across the supply chain involving group In the biodiversity conservation field, we are committed to companies and the disclosure of highly reliable environmental developing “Ikimono (living creatures) Concierge®” (see p.71), data with third-party endorsement have been well received. which has received acclaim from many of our external parties, Climate change could have a serious impact on the including receiving the Good Design Award, as well as a new ecosystem and human society over the years to come. Based plant selection tool, “Mori (forest) ConciergeTM.” on our belief that the greatest mission in our time is to leave a In the field of contamination countermeasures for soil and beautiful Earth for future generations, we have announced ground water to achieve a recycling society, a technology to “TAISEI Green Target 2020/2050” (see p.68) as the medium- visualize contamination status in 3D has been developed in to long-term environmental targets. Toward achieving those preparation for i-Construction. We are also actively involved in targets, we will make every effort across the board. national projects such as decontamination work, interim

■JS Hakata Watanabe Building (To be completed in 2018) ■Pioneering Initiatives for Soil and Ground Water Solutions

In March 2017, the building became the first-ever tenant office To visualize the contamination level of soil, 10m lattices are building in Japan to earn a “ZEB Ready*” certificate and the top color-coded at one meter depth intervals (Left). A technology to grade (★★★★★) in the Buildings Energy-Efficiency Labelling reduce the volume of contaminated soil by extracting cesium System (BELS) led by the Ministry of Land, Infrastructure, using an alkaline agent (Right). Transport and Tourism. *A building with more than 50% energy savings compared to modern standard buildings (see p.18)

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012_0356501372908.indd 35 2017/08/10 9:59:26 Creating and Supporting a Sustainable Society; Design Division Providing for “What-Ifs” with Constantly Forward-Looking Design Technologies

Providing Maximum “Safety and Security” for the World in All Ages The Design / Construction Administration Division was created in 1925. Its catalyst was the 1923 Great Kanto Earthquake, based on the idea that as a construction company we should design and construct in a consistent way to fulfill social responsibilities. The Division has since evolved side by side with the Company’s growth, and now has established a structure that satisfies increasingly complex and diversified societal needs, with highly professional teams of interior design, environmental design, urban planning, BIM promotion, etc. Earthquake response is one of our most important themes in Japan, the land of earthquakes. The Design Division has Senior Managing Executive Officer Chief of Design Division visited disaster sites at times of major earthquakes to check Haruhiko Kono damage, assess building availability, and plan recovery measures. Based on such experience, we have developed our aseismic / damping / base isolation technologies, for example, improving the earthquake resistance of nonstructural elements assessment under the “Building Energy Saving Act,” buildings (ceilings etc.) and base isolation at semiconductor factories that fail to meet energy efficiency standards can no longer be before any other peer companies, and deployed them in constructed. The Buildings Energy-Efficiency Labelling System various projects in an effort to support customers’ business (BELS) is also gradually prevailing. With environment and continuity from a technological standpoint. energy awareness rising among customers, the Design For instance, for the business continuity at an existing Division will play an increasingly important role. super high rise buildings in operation that meet earthquake In 2016 we registered the Construction Administration resistance standards, we adopted “the T-RESPO construction Department, specializing in construction administration, as an method” at Shinjuku Center Building, and confirmed its office of first-class architects, and boosted its independence effectiveness as a long-period ground motion countermeasure and expertise in an effort to respond to the needs of the times at the time of the Great East Japan Earthquake. For this and societal demand. method, we have developed the “T-S Oil Damper” (switching- We believe the designer’s mission is always to accept type oil damper for base isolation) applicable to any building, challenges presented by customers, discover the essence, whether it is new or existing, and offering earthquake and deliver optimal solutions. Being aware of this mission, countermeasure technologies according to customer needs. each one of us aims to enhance our design capabilities and to We also promote energy-saving designs to achieve ZEB. become a creative and intelligent group that can unite as a Starting from this year, in accordance with the suitability team to demonstrate our capabilities.

■T-RESPO Construction Method (Damping Construction ■ZEB Demonstration Building’s Annual Energy Balance Method for Existing Super High Rise Buildings) Annual energy Annual energy consumption 0 production

Typical building 100% Power Ultimate energy saving generation ZEB Demonstration –75% 25% 25% Building Net zero balance Production Consumption 0

Urban-style ZEB’s characteristics include achieving single-building- A long-period ground motion countermeasure method using based net zero balance of annual energy consumption in urban high-performance oil dampers for existing super high rise areas with many constraints, such as limited hours of sunlight. We buildings, which enables construction work at occupied buildings have successfully saved significant amounts of energy by without having to reinforce columns or beams. combining technologies and developing new technologies.

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012_0356501372908.indd 36 2017/08/10 9:59:29 Nuclear Facilities Contributing to Stable Power Supplies by Providing Division Greater Safety and Security at Nuclear Power Facilities

Removing Anxiety over Nuclear Power Plants Using Reliable Technologies, from Safety Assessments to Decommissioning Work After the Great East Japan Earthquake, the principal business activities of the Nuclear Facilities Division, whose history has spanned a half century since its foundation in 1968, now include restart of nuclear power plants, decommissioning of the Fukushima Daiichi Nuclear Power Plant, and decontamination and interim storage related operations. Under the new regulatory requirements, which were carried out in 2013, a decision to decommission six more reactors in Executive Officer nuclear power plants around Japan was made and full-scale Chief of Nuclear Facilities Division decommissioning operations began. Decommissioning Satoshi Imamura operations are long-running business activities requiring nearly 30 years to complete, from the preparation phase including contamination status research to dismantling of buildings, etc. It is important for safety operations in decommissioning to reduce human exposure to radiation. In addition to this, alkaline cleaning method through technology demonstration technologies to research contamination status, to dismantle business activities for the Ministry of the Environment. buildings safely, and to reduce, classify, and control radioactive An initiative toward improving the safety of nuclear power waste are needed. generation is needed more than anything else. According to We believe the use of ICT is also essential to perform the government’s basic energy plan, nuclear power is these tasks. We will streamline remote control and volume considered a key base load power and its 2030 target ratio is reduction work, and control waste by using ICT in an effort to set at 20-22%, which indicates the necessity of the restart of develop decommissioning technologies with greater safety nuclear power plants. We are therefore committed to safety and security. assessments for restarts. We are also working on new safety One of the critical challenges is countermeasures for assessment methods, as nuclear power plants need to be contaminated water and soil generated from the Fukushima continuously assessed for improved safety after the restart. Nuclear Accident. Due to the massive volume, the government Furthermore, with new projects being planned for nuclear leads the promotion of recycling soil removed during power facilities other than nuclear power plants, and new fast decontamination work and of technology development for reactors, etc., we will actively participate in such projects from recycling and volume reduction. We are working on reducing the planning stage, commit to their realization, and contribute levels of radioactive materials in decontaminated soil using an to a stable power supply.

■Assessment Technology for Ground and Structure ■Decontamination Support System “T-DECOS” Stability during Earthquakes

Nuclear reactor building

Turbine building

We have developed a system that can control huge volumes of An analysis model that reflects rock classifications accurately is information by entering data into tablet PCs at decontamination created to precisely analyze stress and strain to be generated on work sites and transmitting it to offices, which contributes to rocks and weak layers when earthquakes occur, and assess the expedited work via ICT. stability of foundation ground for nuclear facilities and peripheral slopes in detail.

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012_0356501372908.indd 37 2017/08/10 9:59:30 Engineering In Response to Changing Times, Increasing Added Value Division and Contributing to Sophistication of Industries

Achieving Optimal Features for Users in Both Hardware and Software Engineering at a construction company is intended to add value by achieving various goals in the most appropriate form at facilities, or in businesses where people, materials, equipment, machinery, information, etc. are intermingled and compounded. To this end, it is necessary to consider buildings, resources, businesses, environment, impact on society, and other matters according to the needs of the times and incorporate them in a balanced manner. Our engineering field activities started in 1968. Initially, we primarily resolved customer problems regarding the optimal configuration of production equipment, material handling Managing Executive Officer Chief of Engineering Division equipment, and about saving energy, based on building use Tsuyoshi Nakanishi units such as factories and logistics facilities. Subsequently, however, in a bid to make facilities the way they inherently should be, we ventured to deal with software issues, including appropriate facilities operations, and streamlining logistics systems inside and outside facilities. The engineering field has needs after an earthquake, for example, we offer a proposal expanded in scope and now includes production facilities, from the planning stage to prevent the collapse of cargo in logistics facilities, aquariums, energy and infrastructure automatic high rised warehouses by combining various base facilities, hospitals, information systems, etc. Especially, in life isolation and vibration control technologies. To energy and science fields such as pharmaceuticals and food, we labor saving needs, we grasp operations properly and accommodate customer requests in all phases including the propose from the planning stage to introduce a system of planning of production facilities, design and construction, streamlining transport inside facilities. Regarding aging production equipment, material handling equipment, and the facilities, we review a number of options, including rebuilding, planning of information systems. extension, repairs, and integration based on a diagnosis of the Customer problems and requests have become further facilities, and provide economical consulting services for diversified in recent years, thus incorporating business reconstructing in accordance with the latest sanitation codes. expansion, business continuity, energy saving, and environment We are aware that the mission of the Engineering Division is consciousness into the requirements for facility construction to understand problems from the user’s point of view in an and for commercialization has become important. ever-evolving society, and find optimal solutions by integrating a We are contributing to the stable supply of high-quality, number of relevant functions. We will continue to support the safe and secure goods by dealing with these diversified needs building of facilities and businesses with higher added value. in the planning and proposal stages. As for business continuity

■Constructing High-Quality Pharmaceutical ■Our Efforts on Technology to Speed Up Production Facilities Supply Chain Recovery

Our record of over 40 years in constructing pharmaceutical Our automatic hi-rack vibration control device and seismic isolator production facilities is the best in the industry. We are working can control the drop of goods and products following earthquakes together with our customers to apply our experience and so that shipment recovery will be expedited. We can calculate knowledge. Through appropriately automated production optimal configuration requirements using simulation analysis. processes, we speed up production and save labor in an effort to achieve enhanced productivity.

TAISEI ANNUAL REPORT 2017 38

012_0356501372908.indd 38 2017/08/10 9:59:32 Major Projects (Overseas Projects)

1 2 3

4 6

7 8

1(Tentative Name) Vinata Towers Project, Vietnam 2Outer Circular Highway (OCH) to the City of Colombo Project Northern Section 1 from Kadawatha to Kaduwela (Greater Colombo Urban Transport Development Project), Republic of Sri Lanka 3Taiwan Coal Landing Pier 4Indus Highway Project (N-55) Kohat Tunnel and Access Roads, Pakistan 5Singapore Downtown Line (907) 6Bosphorus Strait Crossing Railway Tunnel, Turkey 7New Doha International Airport Terminal Building, Qatar 8The Palace Condominium, Taiwan

39 TAISEI ANNUAL REPORT 2017

013_0356501372908.indd 39 2017/08/08 21:12:10 9 10 Snapshot TAISEI Management Strategy Management Strategy

11 12 CSR Governance Report

13 14 16 Social Report

15 Environmental Report Financial and Corporate DataFinancial

9Djibouti Palace Kempinski Hotel ⓾Sri Lanka Southern Expressway ⓫Jimah Power Station, Malaysia ⓬Hanoi, Vietnam No.2 Terminal Building Noi Bai International Airport ⓭Taichung Cheng Ching Hospital, New Building (Jing Yi Building), Taiwan ⓮Taiwan Highwealth Construction, New Taipei City, Linkou District Linlin Section Condominiums ⓯Bangkok Ring Road Cable- stayed Bridge, Thailand ⓰Almas Tower, Dubai

TAISEI ANNUAL REPORT 2017 40

013_0356501372908.indd 40 2017/08/08 21:12:20 Major Projects (Domestic Projects)

1 2 4

5 8 10

11 6

7 9 12 13

1The Otemachi Tower 2Honokuni Toyohashi Arts Theater PLAT 3Todoroki Athletics Stadium, Main Stand 4TOKYO SQUARE GARDEN 5YOKU MOKU AOYAMA SHOP 6TSURUMI Children's Hospice 7Earth Environmental Service Co., Ltd. Saito Research and Training Institute (T-CUBE) 8Midosuji Utility Conduit 9Namikata National LPG Stockpiling Base ⓾Box Culvert Construction of Ken-OExpressway (Okegawa-Kitamoto District No.1) ⓫Ishikari LNG storage tank ⓬⓭G.IToya

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013_0356501372908.indd 41 2017/08/08 21:12:28 Corporate Social Responsibility of the Taisei Group towards Realizing Sustainability

Under its Taisei Group Philosophy of “To Create a Vibrant Environment for All Members of Society,” the Taisei Group strives to build safe and secure local communities and makes efforts to resolve social challenges in earnest, thereby contributing to building a sustainable society.

Taisei Group Philosophy Taisei Group Taisei Spirit Philosophy To Create a Vibrant Environment for "Active and Transparent Culture" All Members of Society Taisei Spirit "Value Creation" "Evolution of Tradition" Objectives to be Pursued by the Taisei Group (Goals) Key concepts for the Taisei Group to pursue the Taisei Group Philosophy

Overall Overall TAISEI VISION 2020 Principles of Management Conduct Perspective Taisei Group Medium-term Business Plan

Action Guidelines for Taisei Personnel and the Taisei Group as a Whole Individual Policies

( 1 ) Cultivating an open corporate culture ● Quality Policy ● Information Disclosure Policy ( 2 ) Securing a pleasant working environment ● Health and Safety Policy ● Risk Management Policy ( 3 ) Respect for fundamental human rights and diversity ● Environmental Policy ● Policy on Intellectual Property ( 4 ) Creating a vibrant environment for all members of society ● Taisei Agenda ● Procurement Policy ( 5 ) Striving to create value ● Declaration of Biodiversity ● Human Rights Policy ( 6 ) Pursuing customer satisfaction Preservation ● Fundamental Corporate Governance Policy ( 7 ) Ensuring and improving safety and quality ● Policy on the Protection ● Fundamental Policy to ( 8 ) Respect for traditions of Personal Information Enhance Operational Compliance Systems ( 9 ) Promoting partnerships with subcontractors and suppliers ● Policy on Business Continuity ● IR Policy (10) Promoting environmental conservation and creation in Times of Disaster ● Social Media (11) Communication with local communities (12) Conduct in the international community (13) Appropriate disclosure of information (14) Fulfilling social responsibilities *Observing the Charter of Corporate Behavior of the Nippon Keidanren

The Taisei Group CSR p.43 Focus on Stakeholder Dialogue p.47 Governance Report p.49 Social Report p.59 Environmental Report p.67 Table of Comparisons for p.75 ISO 26000 and GRI Guidelines

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014_0356501372908.indd 42 2017/08/10 10:11:16 The Taisei Group CSR

CSR & Our Structure of Values and Policies

To Share the Group’s Common Philosophy and Values In 2010, the Taisei Group rebuilt its structure of values and policies. All officers and employees of the Taisei Group share the Taisei Spirit, and carry out corporate activities based on the Group Action Guidelines and Individual Policies in the Overall Principles of Conduct, and the long-term vision and Medium-term Business Plan in the Overall Management Perspective. We will contribute to the sustainable development of society by offering new value to our stakeholders through solving social issues.

Revision of KPI In FY2011, we identified CSR issues and KPIs PDCA for KPI derived from both our Overall Management Perspective including our Medium-term Business Plan, and our Overall Principles of Conduct including Overall Principles Overall Management our Group Action Guidelines and have been striving of Conduct The CSR issues Action Guidelines for Perspective to improve them through a PDCA (plan-do-check- Taisei Personnel and KPI Taisei Group Medium-term act) cycle. the Taisei Group as a Whole ISO26000 Business Plan Individual Policies In FY2016, we partially revised our KPIs in TAISEI VISION 2020 accordance with changes in the global social environment and in our business activities.

Process for Identifying Important Factors (Materiality)

To identify important factors, the Taisei ● Respect for human rights, prohibition ● Development of a safe and secure society of discrimination ● Ensuring quality and improvement of technology Corporation reevaluated the CSR issues ● Development of local communities ● Technological development and and KPI identified with reference to ● Promotion of compliance corporate governance for the next generation ● Thorough risk management ● Cultivation of next generation engineers SDGs and ISO 26000 from the dual ● Promotion of supply chain management ● Promotion of diversity perspectives of the importance to ● Thorough management of labor safety ● Establishing corporate governance and welfare ● Protecting intellectual property stakeholders and the importance of the ● Support for employment and ● Proper management and use of information impact on Taisei Group management. career formation ● Mitigation of and adaptation to climate change ● Dialog with and information disclosure ● Sustainable use of resources to stakeholders ● Response to environmental risks ● Creating a workplace where it is easy KPIs to work Importance to stakeholders ● Conservation of biodiversity and contributions to the environment

Importance of impact on Taisei Group management

System for Promoting CSR Diagram of CSR Promotion System Taisei Corporation’s CSR Committee (5 board members and officers) deliberates Members of President CSR Committee the Board CSR activities and obtains the implementation status of initiatives. The CSR Promotion Section provides training and guidance on CSR, and Compliance Committee Corporate Communication The CSR Department of exchanges opinions with the various Technology Committee Procurement Corporate Planing Office Committee＊1 departments and Group companies to CSR Promotion Section promote CSR activities. Central Safety Committee Environment Committee Each Group The Risk Management Committee Department Companies Souyu-kai＊2 Central Labor Affairs Committee etc.

*1 Composed of the Corporate Planning Office, Safety Administration Division, Building Construction Division, Civil Engineering Division and Procurement Division *2 The organization of the Taisei Corporation’s main cooperating companies

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014_0356501372908.indd 43 2017/08/10 10:11:16 CSR Management TAISEI Snapshot TAISEI ISO 26000 and CSR Activity Report The Taisei Group implements CSR management in line with ISO 26000, the international standard for corporate social responsibility at organizations. We will promote the Overall Principles of Conduct and Overall Management Perspective in an integrated manner and we will aim for the sustainable development of society and to improve corporate value through our business activities.

G p.49 1. Organization Governance 2. Fair Operating Practices

“Overall Principles of Conduct” Basic Conceptual Approaches (1)-(14) “Overall Principles of Conduct” Basic Conceptual Approaches (9)(12)-(14) In order to secure the trust of society and at the same time to develop as a Taisei Group recognizes corporate ethics and compliance as the sustainable corporation, the Taisei Group regards swift, accurate, fair and fundamentals of our business operations. We not only make this clear in Management Strategy transparent decision-making in management as the fundamental idea for our Action Guidelines to Taisei personnel and the Taisei Group as a whole, corporate governance. but also engage in a variety of measures to encourage self-awareness of each and every executive and employee on this matter. “Overall Management Perspective” “Overall Management Perspective” Medium-term Business Plan (2015-2017) Management Goals Medium-term Business Plan (2015-2017) Management Goals ■ Developing the business foundation CSR Establishing corporate governance for the next-generation ■ Developing the business foundation Establishing corporate governance for the next-generation

S p.59 3. Consumer Issues 4. Community Involvement and Development

“Overall Principles of Conduct” Basic Conceptual Approaches (4)-(7) “Overall Principles of Conduct” Basic Conceptual Approaches (8)(11) The Taisei Group aims to contribute to society as a whole and to develop Taisei Group, as a good corporate citizen, will build sound relationships with sustainably as a corporate group. local communities and promote dialog and harmony with society. We will For such purposes, we will continue to provide our customers and also contribute to the development of society as a whole. society as a whole with ensured quality in our products and services as well as such technologies as necessary for the resolution of social issues. Governance Report “Overall Management Perspective” “Overall Management Perspective” Medium-term Business Plan (2015-2017) Management Goals Medium-term Business Plan (2015-2017) Management Goals

■ Actively contributing to improving infrastructures ■ Actively contributing to improving infrastructures Participating in development of the major infrastructures for public Actively contributing to earthquake disaster reconstruction projects security, safety and convenience ■ Establishing next-generation business models in the focused fields Participating in projects for a steady supply of electricity Promoting introduction of smart communities in large-scale redevelopment ■ Promoting the development of nextgeneration technologies projects, etc. Upgrading technologies for earthquake-related problems ■ Improving the total strength of the Taisei Group Strengthening joint cooperation among the Group for urban housing renewal and development of new renewal technologies for infrastructures Social Report

5. Human Rights 6. Labor Practices

“Overall Principles of Conduct” Basic Conceptual Approaches (1)-(3) “Overall Principles of Conduct” Basic Conceptual Approaches (1)-(3) At the Taisei Group, we create a corporate climate with good Taisei’s basic concept on our Health and Safety Policy is that all work- communication and respect for basic human rights and diversity. We do related accidents are preventable. not condone discrimination based on ethnicity, religious beliefs, gender, Safety must be our top priority as a member of the construction nationality, social position, disability, or sexual orientation. It is a matter of industry. To this end, we call for a safety first posture in the workplace, basic policy to respect cultures and customs and to comply with local endeavoring to provide a safe, anxiety-free working environment. laws at our overseas businesses.

“Overall Management Perspective” “Overall Management Perspective” Environmental Report Medium-term Business Plan (2015-2017) Management Goals Medium-term Business Plan (2015-2017) Management Goals

■ Developing the business foundation ■ Strengthening domestic construction projects Promoting diversity management to support further active roles of women, Improving construction capabilities foreigners,and elderly Strengthening safety management systems Nurturing and improving human resources ■ Developing the business foundation Utilizing ICT E p.67 7. The Environment

“Overall Principles of Conduct” Basic Conceptual Approaches (10) “Overall Management Perspective” The taisei Group is formulating Environmental Policies aimed at the Medium-term Business Plan (2015-2017) Management Goals Financial and Corporate DataFinancial formation of an environmentally friendly society. We will determine ■ Actively contributing to improving infrastructures objectives and measures for taking action, strive for “preservation Actively contributing to earthquake disaster reconstruction projects and creation of the environment” and promote “advanced ■ Promoting the development of next-generation technologies environmental business.” Upgrading environment & smart community related technologies ■ Establishing nextgeneration business models in the focused fields Strengthening biodiversity offset management proposals

TAISEI ANNUAL REPORT 2017 44

014_0356501372908.indd 44 2017/08/10 10:11:16 Taisei Corporation KPIs (FY)

ESG ISO26000 CSR issues KPIs 2014 2015 2016 results / targets 2017targets

1. Organization ● Corporate governance and ● Participation rate of training 87.9 94.1 96.3 / 100 100 Governance internal controls for the Taisei Group philosophy and policies

● Risk management ● Rate of participation 100 100 100 / 100 100 in the Large-Scale Disaster Drill (%)

2. Fair Operating ● Promotion of compliance ● Compliance training participation rate (%) 92.3 90.8 100 / 100 100 Practices

● Intellectual Property protection, ● Number of training regarding 32 30 22 / 30 20 G management and Utilization intellectual property rights (times)

● Information security Measures ● Number of times education in information security 19 26 16 / 15 14 implemented in all companies*1 (times)

2 ● Number of major information security accidents* (cases) 0 4 0/0 0

● Supply Chain Management ● Average implementation rate of companies where ーー 62.6 / 70.0 70.0 CSR activity survey was conducted (%)

3.Consumer Issues ● Ensuring Quality and Improving ● Customer satisfaction (Civil Engineering) (%) ーー 80 / 100 100 Customer Satisfaction ● Customer satisfaction (Building Construction) (%) ーー 90 / 100 100

● Obtaining rights to technologies ● Number of patent applications filed (cases) 297 307 304 / 290 250 that solve social issues

● Number of patent rights registered (cases) 249 192 232 / 200 200

● Development and providing ● Number of media announcements regarding technical 61 58 59/70 70 technologies to solve social issues development and application projects (cases)

4. Community ● Contributions to local communities ● Expenditures on social contribution activities ーー 653 / 1,266 1,100 Involvement and (millions of yen) Development

5. Human Rights ● Respect for human rights and diversity ● Rate of attendance at human rights training (%) 100 93.8 93.8 / 100 100

● Rate of employment of handicapped persons (%) 2.07 2.08 2.05 / 2.00 2.00 S ● Number of female managers (people) 39 53 62 / 53 70

● Number of female engineers (people) ーー 584 / 578 610

3 6.Labor Practices ● Creating a pleasant workplace ● Turnover rate of employees within 3 years of hiring* (%) 6.90 4.00 5.0 / ー 4.5 or below

● Rate of paid leave utilization (%) 32.4 34.6 37.3 / 35.0 40.0

● Average overtime hours per month (hours) ーー 38.4 / 35.0 35.0

● Rate of return to work after childcare leave (%) 93.8 100 100 /9 5 95

● Rate of taking childcare leave by males (%) ーー 42.9 / 100 100

● Toward human Resource skill ● Training hours per person (hours) 43.8 44.6 44.7 / 43.0 43.0 development

● Improving of the Health and safety Standards ● Number of fatal accidents (cases) 4 2 1 / 0 0

7.The Environment ● Mitigate and Adapt to Climate Change ● Improve reduction rate of CO2 emissions at the 37.5 41.7 38.9 / 35 or above 37 or above operation stage of buildings (%)

● Improve reduction rate of CO2 emissions at the 56.8 52.7 51.9 / 45 or above 47 or above construction stage on building construction sites and civil engineering sites (%)

● Effectively Utilize Resources ● Decrease construction waste final disposal (%) 4.8 4.7 3.5 / 4.0 or below 4.0 or below

● Conserve Biodiversity ● Promote biodiversity related technologies (cases) ーーー 30 or above E ● Reduce Environmental Risks ● Non-occurrence of environmental accidents (cases) ーーー 0

● Improve electronic manifest diffusion rate (%) 91.6 93.9 94.7 / 90 or above ー

● Reduction of environmental impact by ● Rate of green procurement (%) 36.1 28.7 30.8 / 30 or above ー supply chain

● Promote Development of Technologies ● Promote media presentations on research, development 41 39 30 / 20 or above 20 or above and promotion of environmental technologies (cases)

● Promote Environmental Activities ● Promote adoption of ZEB (Zero Energy Building) (cases) ーーー 10 or above

*1 and 2 are the totals for our 8 major Group companies. *3 The turnover rate of new graduates in general and expert positions within 3 years of hiring

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014_0356501372908.indd 45 2017/08/10 10:11:17 Group Company KPIs

TAISEI ROTEC CORPORATION (FY) ESG ISO26000 CSR issues KPIs 2014 2015 2016 results / targets 2017targets G 2. Fair Operating Practices ● Promotion of compliance ● Compliance training participation rate (%) 100 100 100 / 100 100

3. Consumer Issues ● Maintenance and improvement of quality ● Ratio of achievement of target score in 43.0 50 42.8 / 50 50 construction evaluation TAISEI Snapshot TAISEI (number achieved / total number) (%) S 6. Labor Practices ● Creating a pleasant workplace ● Rate of taking refreshment leave 53.2 88.2 89.5 / 100 100 (Acquisition time limit 2 years) (%)

1 ● Improvement in health and safety standards ● Frequency rates* 0.5 0.3 0.81 / 0.5 or below 0.5 or below

7. The Environment ● Sustainable resource usage ● Number of times training for prevention of industrial ー 9 9/9 9 E waste accidents was implemented (times)

Taisei-Yuraku Real Estate Co., Ltd. (FY) ESG ISO26000 CSR issues KPIs 2014 2015 2016 results / targets 2017targets

1. Organization Governance ● Risk management ● Rate of participation in the Large-Scale Disaster Drill (%) 100 100 100 / 100 100 Management Strategy

G 2. Fair Operating Practices ● Promotion of compliance ● Participation rate for e-learning on compliance (%) ー 100 100 / 100 100

● Activities for information security ● Rate of implementation of Information security measures (%) 100 100 100 / 100 100

S 6. Labor Practices ● Toward skill development ● Participation rate for training (%) 98.6 99.0 99.8 / 100 100 2 7. The Environment ● Provision of environmentally friendly technologies ● Rate of reduction of electrical power usage (office) (%) 8.4 8.1 8.2 / 1.5 0.1*

E ● Number of projects proposing improvement in energy 47 65 81 / 40 50 CSR efficiency at customers’ facilities (cases)

TAISEI U-LEC CO., LTD. (FY) ESG ISO26000 CSR issues KPIs 2014 2015 2016 results / targets 2017targets G 2. Fair Operating Practices ● Promotion of compliance ● Compliance training participation rate (%) ー 97.2 100 / 100 100

3. Consumer Issues ● Thoroughgoing quality control ● Rate of return of customer questionnaires (%) 81 87 72 / 75 80

6. Labor Practices ● Thoroughgoing occupational safety ● Number of fatal accidents (cases) 0 0 0 / 0 0 S management system

1 ● Frequency rates* 0.00 0.55 0.60 / 0.7 or below 0.7 or below Governance Report

7. The Environment ● Sustainable resource usage ● Rate of recycling of construction waste (%) 96.8 98.2 95.9 / 98 or above 98 or above E ● Rate of use of Electronic Manifest System (%) 99.4 99.4 99.6 / 98 or above 98 or above

TAISEI SETSUBI CO., LTD. (FY) ESG ISO26000 CSR issues KPIs 2014 2015 2016 results / targets 2017targets

2. Fair Operating Practices ● Promotion of compliance ● Compliance training participation rate (%) 100 100 100 / 100 100 G ● Activities for information security ● Number of major information security accidents (cases) 0 0 0 / 0 0

1 6. Labor Practices ● Thoroughgoing occupational safety ● Frequency rates* 0.99 0.00 0.56 / 0 0 Social Report S management system

7. The Environment ● Promotion of technological development ● Percentage of energy efficiency proposals to customers (%) 98.7 70.8 56.2 / 100 100 E ● Comprehensive environmental activities ● Attendance rate of environmental education (%) 87 95.7 82.4 / 100 100

TAISEI HOUSING CORPORATION (FY) ESG ISO26000 CSR issues KPIs 2014 2015 2016 results / targets 2017targets

3. Consumer Issues ● Improvement in customer satisfaction ● Customer satisfaction surveys 95 95 97 / 100 100

(promoter survey) (%) Environmental Report S 4. Community Involvement ● Contributions to local communities ● Number participating in 20 23 20 / 20 20 or above and Development social responsibility activities (people)

7. The Environment ● Response to climate change ● Rate of use of Electronic Manifest System (%) 99.2 98.3 99.4 / 99.5 99.5 E ● Sustainable resource usage ● Rate of mixed waste in construction waste (%) 10.8 11.8 11.5 / 12 12

SEIWA RENEWAL WORKS CO., LTD. (FY) ESG ISO26000 CSR issues KPIs 2014 2015 2016 results / targets 2017targets

1. Organization Governance ● Risk management ● Rate of participation in the Large-Scale Disaster Drill (%) 100 100 ー / 100 100 G 2. Fair Operating Practices ● Promotion of compliance ● Compliance training participation rate (%) ー 100 100 / 100 100 Financial and Corporate DataFinancial 6. Labor Practices ● Creating a pleasant workplace ● Numbers taking nursing leave and caregiving leave (people) 2 3 4 / 4 5

● Thoroughgoing occupational safety Number of labor accidents (4 or more days off work) (cases) 1 1 2 / 0 0 S ● management system 3. Consumer Issues ● Development and providing ● Number of technical proposals submitted (cases) 11 11 10 / 12 12 E 7. The Environment technologies to solve social issues

*1 Frequency rates are total of figures from January 2015 to December 2016. *2 FY2013 is used as the base year until FY2016 and FY2015 is used as the base year from FY2017 and beyond.

TAISEI ANNUAL REPORT 2017 46

014_0356501372908.indd 46 2017/08/10 10:11:17 Focus on Stakeholder Dialogue Business Activities and a Sustainable Society The United Nations has adopted sustainable development goals (SDGs) to be achieved by 2030. During these changing times, we sought the opinion of experts who have profound insight into CSR regarding social challenges that Taisei Corporation is expected to work on going forward and their social background.

Promoting Corporate Governance that Looking ahead ten years from now, it would be expected Exhibits the Good Relationship between that Taisei Corporation start working proactively on risks Sustainability of Companies and Society related to human rights risks in supply chain.

Chief Executive Officer, Sustainability Forum Japan CCaSS Leader and Managing Director, EY Japan Toshihiko Goto Keiichi Ushijima

Corporate governance efforts by In the construction industry, where vast Japanese companies tend to be numbers of skilled workers are focused on organizational employed via many layers of frameworks, such as Board of subcontractors, companies will be held Directors’ meetings and the general responsible for understanding the meeting of shareholders. However, I actual working conditions of those believe what is important is the workers throughout their entire supply content of corporate governance and, chain, even at the subcontractor levels. in particular, the content of the corporate governance policies. NPOs both in Japan and abroad are stepping up their oversight on With today’s rapidly changing society, there will possibly be human rights issues to prepare for the Tokyo 2020 Olympic and significant differences in thinking as to how a general contractor Paralympic Games. Therefore, it is important that companies should be run going forward, compared to that up to now. demonstrate their understanding of these issues, and take steps to In dramatically changing environments, companies need to have address them. One of the first actions a company can take is to check policies and long-term goals that clearly show how they are going to whether there are any human rights abuse cases or potential risks in respond to changes in social situations and maintain sustainability. their supply chains, as these would attract negative international In this respect, corporate governance demonstrates the good attention. For example, the heavy use of migrant workers or foreign relationship between corporate sustainability and society. intern programs would raise concerns about fair labor and wages. Corporate governance is also extremely important for companies Procuring wood products from overseas would also raise concerns from the viewpoint of making a commitment to medium- and about illegal logging and land rights issues in developing nations. long-term targets, and strategies and directions. Taisei Corporation’s human-centric philosophy of, “Putting my work Taisei Corporation has established long-term targets for 2050 to on the map”, is a driver for its employees’ engagement to make adapt to climate change. In addition to these, I expect the Company to concerted efforts in creating legacies together in Japan and overseas. formulate broad long-term targets, including responses to climate My suggestion would be that Taisei make the most of this philosophy, change, and contribute to the building of a sustainable society. and share this human-centric core value to expand business in a way G Sthat advances a social mission all can take pride in. Toshihiko Goto Keiichi Ushijima Chief executive officer, Sustainability Forum Japan; Director and Supreme Mr. Ushijima joined Hitachi, Ltd. In 2002, and was responsible for managing advisor, Japan Sustainable Investment Forum; Board member, Global CSR / Sustainability Strategy for the Hitachi Group since 2005. He promoted Compact Network Japan, etc. the integration of CSR and management strategy, and worked hard to Serves as chair and member of multiple committees, including realize the Company’s philosophy and Group vision. Since 2014, Mr. national committee member for ISO/TC207, SCI, SC4; member of the Ushijima has been the Japan Area CCaSS Leader at EY Japan, to conduct judging committee for the Environmental Communication Awards; research and advise on incorporating sustainability concepts into global convener of the working group to develop a platform for disclosing business practices. environmental information.

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014_0356501372908.indd 47 2017/08/10 10:11:17 TAISEI Snapshot TAISEI

Making Contributions by Leveraging the Expecting a Contribution to the Management Strategy Strengths and Technologies in the Achievement of the UN’s Goal for Environmental Field “Building Resilient Infrastructure”

Chief Researcher, Daiwa Institute of Research Executive Director, CSO Network Japan CSR Mariko Kawaguchi Kaori Kuroda

Following the introduction of the In 2015, the United Nations adopted Stewardship Code, ESG investment the Paris Agreement and the has been increasing rapidly. As a sustainable development goals result, investors, such as pension (SDGs) to be achieved by 2030, funds and asset managers, are more providing the major directions and

actively engaged in dialogue with course of action for human society. Governance Report companies than before. Of the SDGs have set 17 goals and 169 environmental (E), social (S) and targets, and many of the challenges governance (G) criteria, I think the urgent task for Taisei Corporation, are interrelated. “Build a resilient infrastructure”, one of the goals, operating in the construction industry, is to address environmental involves not only building of infrastructure but also a wide range issues. of challenges, such as poverty, climate change, and biodiversity. In conducting dialogue with investors, companies need to Therefore, it is important to contribute to the achievement of goals

proactively disclose what kind of value they can deliver to society, by taking a comprehensive view of two or more goals. For areas Social Report and with what kind of technologies. Technologies for preserving that often experience abnormal weather conditions due to climate natural capital, in particular, lead to earning high marks from change, for instance, disaster-prevention measures and regional investors. Preserving forests, securing water, and building community support will also be important tasks. SDGs have set a infrastructure resistant to extreme weather conditions, such as slogan: “Leave no one behind.” I expect Taisei Corporation to work floods caused by climate change, are becoming increasingly to contribute to the achievement of SDGs with an eye on important challenges with a view to the global environment going “transforming the world,” a common idea underlying SDG’s 17 goals. forward, and it is expected that there will be increasing cases where Taisei Corporation, with its many environment-related technologies, Environmental Report will need to play active roles. I expect that Taisei will formulate long-term targets and lead the way in the industry in efforts to solve social challenges including environmental issues through the Econstruction business and build a sustainable society. CSR Mariko Kawaguchi Kaori Kuroda Ms. Kawaguchi Joined Daiwa Securities Co., Ltd., in 1986, and served in Following a career in the private sector, Ms. Kuroda worked for the Center 2010 as General Manager for corporate social responsibility (CSR) in Daiwa on Japanese Economy and Business at the Columbia University School of Securities Group Inc.’s Corporate Communication Department. She returned Business and The Asia Foundation Japan Office, before assuming her

to the Daiwa Institute of Research in July 2011, and became a chief current post in 2004. She also served as a Japanese non-governmental and Corporate DataFinancial researcher, focusing on environmental, social and governance (ESG) organization (NGO) expert for developing ISO 26000 (ISO Standard for investment, CSR, and ethical consumption, and is also a board member of Social Responsibility), a member of the Sustainable Development Goals Global Compact Network Japan, the chief executive and secretary general (SDGs) Promotion Roundtable Meeting, and a councilor of Sustainable of the Sustainable Investment Forum Japan, a councilor of Plan Japan, and Development Solutions Network (SDSN) Japan. a chartered member of the Securities Analysts Association of Japan.

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Foundations for Sustainable Development

Corporate Governance and Internal Controls

■ Basic Policy for Governance and Management Systems ■ Ensuring Credibility of Financial Reporting Taisei Corporation (the “Company”) has established this Internal controls on financial reporting based on the Financial Fundamental Corporate Governance Policy*1 in order to Instruments and Exchange Act are recognized as one of the achieve sustainable development and improvement in the most important issues for a corporation. We have set up the mid- to long-term value of the Company and its subsidiaries internal systems including daily monitoring to ensure the and affiliates (collectively, the “Taisei Group”) in accordance credibility of the financial reporting disclosed to the public. with the philosophy of the Taisei Group, being "to create a The effectiveness of the system is evaluated by the Audit vibrant environment for all members of society" (the “Taisei Department and audited by KPMG AZSA LLC. The results are Group Philosophy”) and the so-called “Taisei Spirit”, which disclosed in the Internal Control Report and in the Audit embodies our commitment to “Active and Transparent Report of Internal Controls. We will fulfill our social Culture”, "Value Creation" and "Evolution of Tradition." responsibility as a corporation by continuing to ensure the In line with the basic policy, the Taisei Corporation’s Board effectiveness of these internal controls. (including three External Members of the Board) gives its undivided In order to continue to operate the internal control systems attention to important management decisions and the supervision relating to financial reporting in a sound manner, we are also of corporate affairs. In addition, the Company has established publishing messages from the President, implementing several committees of the Board, and introduced a system of e-learning, and other campaigns to raise awareness among Executive Officers. In addition, the Audit & Supervisory Board officers and employees. (including four External Audit & Supervisory Board Members), operating independently of the Board and the operating divisions, ■ Promotion of Internal Controls works in close collaboration with the Accounting Auditors and Auditing Departments, the in-house Auditing Department, to At Taisei Corporation, the Board has established a “Basic Policy implement independent and effective audits and to strengthen the for Development of a System for Ensuring Appropriate Business 2 auditing system across the whole Group. Operations”* to ensure the credibility of financial reporting and systems for conducting operations in an appropriate and Effectiveness of Board of Directors efficient manner as a Group. Through these systems, we will ■ deliver improved risk management and compliance. In FY2016, Taisei Corporation conducted an evaluation of the The Company implemented a range of measures in effectiveness of the Board by means of self-evaluation by the FY2016, such as organizing two training sessions led by a Members of the Board and Audit & Supervisory Board lawyer on the topic of “Responsibilities and Roles of Executive Members, followed by deliberations by the Board with Officers.” reference to an overall evaluation by the External Members of ➡ Please refer to p.52 for Risk Management and p.55-56 for Compliance. the Board and a third-party opinion from a lawyer. Ｗｅｂ Please refer to http://www.taisei.co.jp/english/profile/Fundamental_ The results of the evaluation indicated that the Board is Corporate_Governance_Policy.pdf for Fundamental Corporate Governance Policy at Taisei Corporation and the functioning effectively overall, that proposals were accurately Corporate Governance Report submitted to the Stock Exchange. explained and deliberated, and that the comments of External Members of the Board and Audit & Supervisory Board Members were taken into account. A desire for discussion regarding the state of Group governance and medium- to long-term management strategy were among other opinions noted. In light of this evaluation, the Company will work to further enhance the operations of the Board.

KPIs Spreading and Consolidating the Taisei Group Philosophy Corporate Planning Department, Corporate Planning Office Participation rate of training for the Taisei Group philosophy and policies To spread and consolidate the Group Philosophy while connecting it to social demands and in-house initiatives, we have operated annual e-learning courses about the Group Philosophy since FY2011. In FY2016, after reconfirming the significance and composition of the Group Philosophy, we conducted a training course on the theme of the relationship between improvements in corporate value required by 96.3% ESG investment and the Group Philosophy.

*1 Formulated in November 2015 *2 Formulated in May 2006. Final revision in April 2015.

49 TAISEI ANNUAL REPORT 2017

015_0356501372908.indd 49 2017/08/10 10:23:03 Governance system TAISEI Snapshot TAISEI General Meeting of Shareholders ❶❶ Appoint Appoint Appoint Collaborate Audit Prior Consultation and Reporting Accounting Auditors Audit & Supervisory Board Members / ❼❼ Audit & Supervisory Board ❹❹ Members of the Board / Board ❷❷ Committees of the Board ❸❸ Audit & Supervisory Appoint / Supervise Board Members’ Department ❺❺ Collaborate President and Report / Advice

Collaborate Chief Executive Of cer

Auditing Department ❻❻ Operations Committee Special Committee Internal Audit ❽❽ ❾❾ Audit Management Strategy

Support Operating Division Operating Division Operating Division Group Companies Collaborate

General Meeting of Shareholders (held on June 29, 2017) Audit & Supervisory Board Members /

❶ ❹ CSR The Company shall endeavor to dispatch the convocation notice of its Audit & Supervisory Board (convened 14 times in FY2016 ) General Meeting of Shareholders at least three weeks prior to the As an entity independent of the Board and the Operating Divisions, and scheduled date of such General Meeting of Shareholders in order to in accordance with the Audit Policy established by the Audit & provide its shareholders time to sufficiently consider the agenda of such Supervisory Board, the Audit & Supervisory Board Members audit the General Meeting of Shareholders and exercise their voting rights performance of the Member of the Board including attending the appropriately. In addition, prior to dispatching each notice, the Company meetings of the Board and hearing of reports on business conditions shall announce electronically the information relevant to such General from the Members of the Board. Meeting of Shareholders through the TDnet system and its official website. The Audit & Supervisory Board Members and the Chief Executive Officer, the Auditing Department and the Accounting Auditors hold ❷ Members of the Board / Board (convened 13 times in FY2016) regular meetings to arrive at mutual understanding and to improve the The Board, entrusted by the shareholders, shall pursue activities for the effectiveness of the audits. common benefit of the Company and its shareholders, and shall be Governance Report responsible for maintaining an efficient and effective corporate governance ❺ Audit & Supervisory Board Members’ Department structure to facilitate the growth of the Company in a sustainable manner In order to assist the Audit & Supervisory Board Members in the and improve its corporate value in the mid- to long-term. performance of their duties, the Audit & Supervisory Board Members’ For the purpose of fulfilling the responsibility described in the Department has been set up independently of the Board as a dedicated preceding paragraph, the Board shall exercise its supervisory function organization to support the Audit & Supervisory Board Members with the of the Company's overall operating activities, thus ensuring collection of appropriate information and other tasks. appropriateness, fairness, and transparency for the management, and shall make decisions regarding the execution of material business Auditing Department decisions as provided for in the laws and regulations, the Articles of ❻ Incorporation, the Board Regulations, and the Application Standards Based on the annual auditing plan, the Auditing Department also Social Report for the Board Regulations of the Company. conducts internal audits of administrative and management systems, Nomination of a prospective Member of the Board and election of as well as the legality and rationality of the management of corporate an Executive Officer shall be determined by the Board after the affairs at all in-house departments and Group companies. completion of deliberations by the Executive Personnel Committee established within the Board. ❼ Accounting Auditors At least two (2) of the Members of the Board shall be Independent The Accounting Auditors submit reports on the audit plan and the audit External Members of the Board in order to ensure that the independent results to the Audit & Supervisory Board, the Accounting Department and objective oversight of the execution of the Board’s operations may and other internal control departments as needed. be effectively carried out. To ensure the external accounting auditors conduct fair and appropriate audits, the management of the Company, Audit & ❸ Committees of the Board Supervisory Board Members and the Auditing Department shall have

meetings on a regular and as-needed basis, and exchange their Environmental Report For the purpose of expediting deliberations and decision-makings by opinions with the external accounting auditors. Further, the Board shall the Board, the Company has established the following committees respond appropriately if external accounting auditors detect dishonest within the Board: 1) the Executive Personnel Committee responsible for practices and request that appropriate action be taken, or indicate deliberating on the personnel related matters of the Members of the errors or problems. Board and Executive Officers; 2) the Remuneration Committee responsible for deliberating on the remuneration of the Members of the Operations Committee Board and Executive Officers; 3) the Finance Committee responsible ❽ for deliberating on the potential acquisition and holding of significant We have set up a range of operations committees including the assets; 4) the CSR Committee responsible for deliberating on matters Technology Committee, the Central Safety Committee, the Environment to enhance the entire Group's CSR-based business management. Committee, the Risk Management Committee, the Central Labor Affairs Committee, and the Overseas Business Strategy Committee to deliberate matters that involve consultations with the President. Financial and Corporate DataFinancial ❾ Special Committee We have set up the Compliance Committee chaired by an external expert as a Special Committee to respond to consultations with the President and we endeavor to reinforce the promotion of compliance.

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■ Remuneration for Officers Remuneration for the Members of the Board is determined Amounts of Remuneration and Others Paid to Members of from a comprehensive perspective that includes the scale, the Board and Audit & Supervisory Board Member content, and performance of our business, as well as External Members of the Board and Total External Audit & Supervisory Board Member individual job specifications and responsibilities. Based on a Category Number of Number of resolution passed at the 146th Annual General Meeting of Payees Amount Paid Payees Amount Paid Shareholders on June 27, 2006, the sum total of monthly Member of the remuneration for the Members of the Board shall not exceed Board 10 582 2 26 ¥70 million. Based on a resolution passed at the 134th Annual Audit & Supervisory General Meeting of Shareholders on June 29, 1994, the sum Board Member 6 108 4 45 total of monthly remuneration for Audit & Supervisory Board Members shall not exceed ¥12 million. Further, where remuneration for the Members of the Board is Appointment of External Officers concerned, the system of remuneration shall reflect performance In order to improve corporate governance, Taisei Corporation appoints and will be determined by the Board after deliberation by the seven external officers (External Members of the Board and External Audit & Supervisory Board Members). All seven officers meet the Remuneration Committee, which carries out preliminary reviews standards for independence determined by stock exchanges and are ahead of board meetings, while remuneration for Audit & registered as independent officers based on the regulations for listing Supervisory Board Members shall be determined upon marketable securities on the Tokyo Stock Exchange. consultation with the Audit & Supervisory Board.

Major Activities of External Members of the Board and External Audit & Supervisory Board Members

Classification Name Major activities

He attended all the board meetings held in the current fiscal year. Based on the deep insights obtained from his experience as a manager in a different industry and from his neutral position and Member of the Board Toru Tsuji view as an external member of the board, he offered useful opinions to the Company’s management in order to establish an internal control system and strengthen corporate governance.

He attended 12 out of a total of 13 board meetings held during the current fiscal year. Based on the deep insights obtained from his experience as a manager in a different industry and from his neutral Member of the Board Fumio Sudo position and view as an external member of the board, he offered useful opinions to the Company’s management in order to establish an internal control system and strengthen corporate governance.

He attended all of the board meetings and audit & supervisory board meetings held during the Audit & Supervisory Terunobu Maeda current fiscal year. He offered his opinions as and when appropriate based on his broad Board Member knowledge of finance and accounting.

He attended 12 out of a total of 13 board meetings held in the current fiscal year and 13 of a total of Audit & Supervisory Shigeru Morichi 14 audit & supervisory board meetings held during the same period. He offered his opinions as and Board Member when appropriate based on the deep insights obtained from his experience as a university professor.

Audit & Supervisory He attended all of the board meetings and audit & supervisory board meetings held during the current Board Member Kiwamu Miyakoshi fiscal year. He offered his opinions as and when appropriate based on the deep insights obtained from his experience as a police officer.

He attended all of the board meetings and audit & supervisory board meetings held during the current Audit & Supervisory Kunitoshi Saito fiscal year since assuming the position of external audit & supervisory board member at the 156th Board Member Annual General Meeting of Shareholders on June 29, 2016. He offered his opinions as and when appropriate based on the deep insights obtained from his experience at the Board of Audit of Japan.

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Risk Management

■ Company-Wide Risk Management ■ Initiatives for Business Continuity Planning (BCP) At Taisei Corporation, we have formulated a Risk Management Taisei Corporation has established the Policy on Business Policy *1 and built systems to implement risk management Continuity in Times of Disaster*3 to meet its responsibilities as

across the whole company in order to respond to risk a general construction company supporting the infrastructure Management Strategy escalation following changes in the business environment. for economic activities. We aim to become a company earning In terms of handling risk management, we identify and the trust of society by contributing to business continuity at select risks that influence business activities every year. central and local governments and corporations while Depending on their importance, we classify them into maintaining our business functions in time of disaster.

categories such as “important company-wide risk” or “risk The Company has recently enhanced bases to serve as CSR within the jurisdiction of head office”. As well as preparing backup locations in case head and branch offices are countermeasures, we also implement pragmatic risk damaged in a disaster in order to further ensure solid base management by clarifying supervisory roles and jurisdictions functions in time of disaster. among the departments. At head office, we strengthened our disaster response Specifically, information on incidents and accidents with capabilities by enhancing our employee dormitory “Premier the potential to have a serious impact on the management of Hatsudai” and other facilities and setting them up as new the corporation is centralized at the CRO*2 Secretariat. We backup locations for head office. implement effective risk management across the whole In addition, we update our Business Continuity Planning company including measures to prevent any reoccurrence by (BCP) annually in order to fulfill the duties noted above, sharing this information with the Risk Management including reinforcement of our crisis management system Governance Report Committee and the Risk Management Council. overseas in FY2015, and acquiring new certifications related to the BCP (Certification of Organizations Contributing to Company-Wide Risk Management System National Resilience). President 平時 Thanks to these efforts, we were able to swiftly respond to

CRO requests for reconstruction and supplies from our business Countermeasures and partners during the Kumamoto Earthquake that occurred in Incident / accident response Prevention of Reoccurrence April 2016. Social Report

Risk Management Committee

CRO Secretariat Risk Management Council

Head Of ce Risk Management Promotion Committee

Head Of ce Branch Of ces Branch Of ces Risk Management Promotion Committee

Premier Hatsudai Delivery of supplies after the ➡ Please refer to the business risks on p.84 for the main issues that may have a Kumamoto Earthquake major impact on investor decisions. Environmental Report Ｗｅｂ Please refer to http://www.taisei.co.jp/english/profile/Risk_Management. pdf for the Risk Management Policy and http://www.taisei.co.jp/english/ profile/Business_Continuity.pdf for the Policy on Business Continuity in Times of Disaster. TOPICS Acquired Newly Launched “Certification of Organizations Contributing to National Resilience”

Taisei Corporation acquired the “Certification of Organizations Contributing to National Resilience (Resilience Certification)” in the first round of a newly launched government program that recognizes and supports Financial and Corporate DataFinancial outstanding disaster prevention and mitigation measures by private-sector companies. A total of 44 companies acquired the program’s first certification. The certification is granted to business operators who support the advancement of national resilience and take active business continuity measures in its promotion. Taisei Corporation received certification in recognition of work through its BCP and other initiatives.

*1 Formulated in September 2004 *2 CRO: Chief Risk Management Officer *3 Formulated in November 2005

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Stakeholder Dialog and Information Disclosure

■ Information Disclosure Policy activities at Taisei Corporation, we also report on key business and ESG (Environment, Society, Governance) To deliver sustainable development and to earn the trust of initiatives on the shareholder newsletter. society as a corporation, it is vital to make timely and accurate disclosures to stakeholders concerning important information about corporate activities. Taisei Corporation established the Information Disclosure Policy*1 and stated principles for ensuring appropriate information disclosure and transparency in the basic policies of corporate governance. These policies form the basis for our practice of timely and appropriate information disclosure.

Ｗｅｂ Please refer to http://www.taisei.co.jp/english/profile/Disclosure.pdf for Information Disclosure Policy.

■ Dialog with Shareholders and Investors In order to achieve sustainable growth and improve corporate value in the medium- to long-term, Taisei Corporation established the IR Policy*2 regarding structures and initiatives to promote constructive dialog and discussions with shareholders. http://www.taisei.co.jp/english/index.html To make the dialog with shareholders and investors more constructive, the opinions and content of our discussions with stakeholders are fed back to the management ranks. IR Policy We also carried out IR activities overseas for the first time last year. 1. Fundamental policy for communications and meetings with shareholders and investors We strive for fair information disclosure via our website The IR Section is the contact point for requests for communications and meetings with where we publish explanatory material with commentary, shareholders and investors, and, as a general rule, an appropriate officer(s) and employee(s) selected by the officers specified in sub-section 2(1) (the “Responsible summaries of the President’s speeches and the main Officers”) shall communicate with such shareholders and investors as appropriate. In question and answer sessions (Japanese and English) in such instances, participation of the management of the Company in any communications addition to the Medium-term Business Plan and materials or meetings will be considered if it is necessary based on the nature of the request. distributed at results briefings. 2. Guidelines for the Implementation of the IR policy We also strive to promote constructive dialog (1) Nomination of and the Responsible Officers through business report briefings by the President and (2) Policies for inter-departmental cooperation of the Company to question answer session at the annual general meeting facilitate communications and meetings of shareholders, the main venue for important dialog (3) Methods of communicating with shareholders and investors other than communications and meetings with shareholders. (4) Appropriate reporting of the communications and meetings with shareholders In addition, we disclose information to overseas investors and investors in English in our annual reports and on our English website. (5) Policy for the management of insider information in communications and meetings In order to further deepen understanding of the corporate

TOPICS Implementation of First IR Activities Overseas Taisei Corporation carried out its first IR activities overseas last year, with the President personally visiting overseas institutional investors and holding meetings with institutional investors from London and Edinburgh. Dialog at the meetings covered a wide variety of topics, from the outlook for Japan’s construction market after the Tokyo 2020 Olympic and Paralympic Games and the problem of the shortage of skilled construction workers, to shareholder returns. We will continue to deepen our dialog with a broad range of shareholders and investors, including continued IR activities overseas.

*1 Formulated in May 2006 *2 Formulated in November 2015

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Stakeholder Engagement

Opportunities for Dialog with Major Stakeholders Major Stakeholder Responsibilities of Taisei Corporation Opportunities for Dialog Related Pages

Improve financial health and raise corporate value ● General meeting of shareholders p.53 Management Strategy ● Raise corporate value ● Publish the Taisei Circle shareholder newsletter, the TAISEI CORPORATE Shareholders, ● Secure stable profits and appropriate returns REPORT, TAISEI ANNUAL REPORT, Corporate Governance Report ★ Investors ● Disclose timely and appropriate corporate information (once a year respectively) ★ ● Implement appropriate corporate governance and internal ● Organize results briefings (twice a year), teleconferences controls ● Carry out IR activities overseas (once a year) p.53

Creating a safe, secure, and comfortable society ● Conducted customer satisfaction survey with 77.3% response rate p.59 ● Provide good-quality, safe and secure construction (Building Construction), 100% implementation rate for construction projects products and related services (Civil Engineering) CSR ● Support customer business continuity at times of disaster ● TAISEI QUALITY activities p.59 Clients, End-Users ● Provide appropriate information about construction ● Publish WEB.LIBRARY.TAISEI, the Taisei information magazine, and products and related services solutions for earthquake countermeasures on Taisin Net ★ ● Manage customer information appropriately ● Organize step up forums on healthcare management, seminars on earthquake resistance ★ ● Publish TAISEI CORPORATE p.57

Sustainable harmony and benefit ● Organize CSR Procurement briefings p.58 ● Fair and impartial transaction ● Conduct CSR Procurement survey p.58 ● Collaborate and cooperate toward productivity, safety ● Cooperate with the Taisei Health, Safety, and p.65 improvement and environmental protection Environment Cooperation Association Suppliers p.55 (cooperating ● Improve working conditions at construction sites ● Conduct compliance training for specialized contractor owners (conducted at all 12 branches in Japan in January 2017) companies, p.55 specialist ● Conduct compliance training for new employees of Souyu-kai member subcontractors) companies (once a year/38 participants in FY2016) ● Distribute the Information Security Pocket Book, Governance Report the Human Rights Handbook ★ ★ ● Free use of personal computer security diagnostic website ● Taisei Occupational Health and Safety Management System (TAISEI OHSMS) p.65

Self-realization by putting my work on the map. ● Corporate Ethics Helpline p.62-64 ● Sustain and secure employment ● Consultation desks (mental health, nursing care) p.55 ● Respect for human rights and diversity ● Implement training p.62-64 Employees ● Provide a pleasant working environment ● Consultation between labor and management (7,592 persons) p.62-64 ● rain and utilize human resources ● Taisei Occupational Health and Safety Management System (TAISEI OHSMS) p.62-64 ● Employee satisfaction surveys for union members ー (every 2 years, 2016 evaluation result: 82.1%) p.65

Capacity building* ● Guided tours of the Technology Center and construction sites

● Support, dialog, and cooperation for activities aimed at ● Conduct dialog Social Report resolving social issues ● Jointly hold Satoyama Preservation Project with Metropolitan Tokyo, NPO The Environment, p.71 Society, Future ● Cooperation in social contribution areas environmental research associations, and Tokyo Greenship Action (twice a year)* ● Create employment ● Taisei Corporation Public Trust of Funds for Generations ★ ● Build good relations with local community Natural and Historic Environments p.61 ★ ● Pay taxes ● Operating Galerie Taisei p.61 ★ ● Establishing the Taisei Foundation p.61

Ｗｅｂ Please refer to http://www.taisei.co.jp/ (Japanese) for items with ★ such as WEB.LIBRARY.TAISEI and Taisin Net. Environmental Report TOPICS Deepening Ties with Souyu-kai Souyu-kai, the organization of our main cooperating companies, which originated as Harusame- kai at its launch in 1917, counts 691 companies among its members as of March 2017. The Souyu-kai Convention was held at the Hotel Okura Tokyo in February 2017 to celebrate the 100th anniversary since the establishment of Souyu-kai and to build strong cooperative relationships for the future. Approximately 200 people attended from Taisei Corporation, including Chairman of the Board Takashi Yamauchi and President Yoshiyuki Financial and Corporate DataFinancial Murata, along with some 400 Souyu-kai members. In his address, President Murata said that he would continue to place great value on the relationship between Taisei Corporation and Souyu-kai, and that he hoped to see the Taisei Spirit of “Active and Transparent Culture,” “Value Creation,” and “Evolution of Tradition” realized in each branch and worksite.

*Capacity building: An activity to form, improve, and build organizational capabilities and basic capacity.

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A Corporation Trusted by Society

Promotion of Compliance

■ Compliance Policy and Systems ■ Raising Awareness of Compliance The Group Action Guidelines for the Taisei Group state that in In order to raise awareness of compliance, Taisei Corporation order to fulfill its social responsibilities, the Taisei Group shall systematically implements education and training for all adhere to laws and regulations, etc. (laws and ordinances, officers and employees, as well as specialized contractors. bylaw, administrative guidance, customs and other social We also endeavor to strengthen group compliance by rules, and various company rules and regulations). organizing periodic conferences for staff who are responsible for The guidelines also state that the company must act in good legal affairs at the domestic Group companies as a system for faith and fulfill contracts and promises with customers, suppliers, information sharing and exchange of opinions regarding issues or the local community in all sincerity. This is the basis of related to legal affairs. compliance for all officers and employees of the Taisei Group. As indicated in the diagram below, each department at Taisei Organization Description Corporation has deployed managers, promoters, and Taisei ● Publish the Compliance newsletter (13 times a year). The themes Corporation ● Implement e-learning (4 times a year) implementers to install the in-house compliance promotion system ● Organize conferences for staff with responsibility for legal affairs at ten and to strengthen compliance based on the opinions and Group company Group companies in Japan (once a year) recommendations of the Compliance Committee. ● Guidance on KPI establishment to six companies in Japan 4 Specialized ● Compliance training at the Safety Conference* Compliance Promotion System contractors (once a year / 12 branch offices) Souyu-kai President ● Promote CSR procurement (see p.58)

CP*1 Committee *4 A conference that aims to inform specialty constructors about safety management. Administrative Structure

Head Ofﬁce Business Administration Div. Secretariat Whistle-blowing and Consultation System CP General Manager CP General Promoter ■ (Chief of Business (General Manager of CP Promotion Section*2 Administration Division) General Affairs Department) At Taisei Corporation, we have set up the Corporate Ethics Helpline, a system for whistle-blowing and consultation where Implementation Structure acts contravene laws and ordinances or the Group Action

Head Ofﬁce Branches Guidelines. We have established consultation desks in-house Division CP Manager(Chief of Division) Division CP Manager(Chief of Branch) and at an external organization (a law firm). Based on the Division CP Promoter (General Manager In Charge of Administration) Division CP Promoter(Administrative Manager) Whistleblower Protection Act, all information about the 3 3 CP Implementers* CP Implementers* (All Department General Managers) (All Department General Managers) whistleblower is treated as confidential and any adverse action

All Executives and Employees All Executives and Employees as a direct result of any whistle-blowing is prohibited. Since April 2016, we are accepting anonymous tips in order to nip a *1 CP: abbreviation of compliance wide range of illegal activities in the bud. *2 Promotes and embeds compliance awareness among officers and employees. Also functions as a secretariat for the Compliance Committee *3 All heads of departments are appointed compliance implementers. The heads of each department educate and inform all officers and employees in their own departments about compliance. ➡ Please refer to p.50 for detailed information about the Committee.

KPIs Improvement in Compliance Awareness Compliance Promotion Section, General Affairs Department, Business Administration Division

Compliance training participation rate In FY2016, we used the e-learning format to organize four compliance training courses for all officers and employees on the topics of Fraudulent Conduct Related to Contracts and Construction, Violation of the Antimonopoly Act, Fraudulent Accounting, and Information Leaks. We have achieved a participation rate of 100%. 100%

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■ Initiatives to Ensure Fair Subcontracts and ■ Verification of Compliance with Laws and Regulations (Guidance) Eliminate Anti-Social Forces In order to ensure the legitimacy of bids, Taisei Corporation Taisei Corporation has adopted Promoting Partnerships operates an in-house system whereby the heads of branch

with Supply Chains in its Group Action Guidelines, and offices confirm, produce the documents, and keep all bids on Management Strategy stipulates that relationships of fairness and mutual trust be file. Every year, the legal department verifies the legitimacy of built with suppliers and that transactions be conducted on bids and checks compliance with the Construction Business an equal footing. Act, Antimonopoly Act and the Subcontractors Protection Act. Furthermore, we have set out Measures for Dealing with The results are reported to the in-house Auditing Department.

Anti-Social Forces and Organizations, stipulating that we will take CSR a resolute stance against anti-social forces and will not comply with illegitimate demands. In order to eliminate anti-social forces, we have included a condition in our contracts, including the basic contract for specialized sub-contractors, declaring that the supplier is not an anti-social force and that if revealed otherwise, the contract may be cancelled without notice.

Intellectual Property Protection, Management and Utilization Governance Report

■ Practicing Intellectual Property Policy and Intellectual Property Strategy In addition, we conduct training to ensure that employees are fully informed about this policy and utilize intellectual Taisei Corporation has formulated an Intellectual Property property strategically in order to strengthen our Policy*, based on which we practice our Intellectual Property competitiveness and improve our corporate value.

Strategy. We strategically manage and utilize all intellectual Ｗｅｂ Please refer to http://www.taisei.co.jp/english/profile/Intellectual_Property.pdf property including patents, copyright, construction and for Policy on Intellectual Property. Social Report business know-how to promote management that is focused

on intellectual property. Regarding management of intellectual Intellectual Property Course Content property, we intend to improve operational efficiency through 1. Basic knowledge building a search function for our own patents and preparing a about the Patent Act database for managing patents. 2. Secrets of patent creation We have tightened the handling of classified information 3. Introduction to construction and we have established Rules for Handling Intellectual and civil engineering patents Property Information in order to prevent leaks of technical 4. Examples of infringement 5. Trademark branding At a training course know-how or other confidential business information. We also

6. Introduction to search tools Environmental Report take measures to reduce the risk of infringing the intellectual property rights of third parties, such as making technical departments and business departments thoroughly aware of other companies’ patent information.

KPIs Practice Intellectual Property Strategy Intellectual Property Department, Taisei Technology Center Number of training regarding In FY2016, we conducted 22 intellectual property courses for technical departments in head office intellectual property rights and Corporate DataFinancial and operational departments in branch offices, including the utilization of application rights and a series of awareness campaigns about infringement. 22 times

*Formulated in January 2007. Partly revised in 2012.

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Information Security Measures

■ Appropriate Information Management and Management Rules ■ Appropriate Information Management and Measures to Prevent Information Leakage Taisei Corporation has formulated policies and action guidelines in order to protect and make appropriate use of Under the slogan “ICT Safety First!,” Taisei Corporation company information. implements a range of information security measures. We have systematically built rules and regulations Together with all Group companies, specialized constructors, concerning company-wide information security systems and and other partner companies, we aim for zero incidents information management. We established Taisei-SIRT in order related to information security. to strengthen the system for responding to security incidents* We have been promoting a tighter involving electronic information. We have been actively information security environment at involved in the Nippon CSIRT Association since joining in overseas business offices and March 2013. construction sites since FY2016. We have summarized the minimal rules to be followed in a pamphlet, and ・Policy on the Protection of Personal Information conducted education and instruction ・Code of Conduct on the Use of Social Media for all officers and employees as well as specialized constructors and other Ｗｅｂ Please refer to http://www.taisei.co.jp/english/profile/Protection_of_Personal.pdf Information security for Policy on the Protection of Personal Information and http://www.taisei.co.jp/ partner companies. pocketbook english/profile/social_media.pdf for Code of Conduct on the Use of Social Media.

Overall Perspective on the System of Information Control Rules ■ Robust Customer Information Management

Group action guidelines Organizational basic rules To manage information required by customers based on the Basic rules of Standard for establishing emergency Guidelines for Managing Customer Information, we set information disclosure response headquarters, etc. Basic rules regarding business security levels according to the confidentiality level of each continuity during disasters project, transmitting information to the relevant in-house 1st layer Basic rules regarding control of company information departments, and implementing appropriate customer 2nd layer Regulations regarding handling company information information management.

3rd layer Rules Rules Rules Rules Rules Standard for regarding regarding regarding regarding regarding implementing control of protection of management storage of control of information Improving Information Security Levels across customer personal of intellectual documents insider security for ■ information information property information, electronic information and prevention information the Construction Industry of insider trading We aim to improve information security levels across the 4th layer Guidelines, manuals, etc. whole construction industry, not only Taisei Corporation, by Guidebooks (regulation guidelines) providing partners and other companies in the same industry with free access to a personal computer security diagnostic website jointly developed with a security vendor.

KPIs Raising Awareness of Information Security Corporate Planning Section, Information Planning Department, Corporate Planning Office Number of major information security accidents We conducted 16 courses on company-wide information security at eight companies in the Taisei Group and there were no material information security accidents announced outside the Company.

0cases

*Electronic information security incidents: Incidents and accidents including information leaks that threaten information security or have an impact on business operation.

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Supply Chain Management

■ Procurement Policy and System ■ Future Initiatives Taisei Corporation adopted Promoting Partnerships with In addition to conducting CSR procurement briefings at over- Supply Chains and formulated the Procurement Policy* as seas construction sites, we will visit the Souyu-kai member

part of the Group Action Guidelines to promote CSR companies that accept foreign technical intern trainees and Management Strategy procurement activities with cooperating companies and confirm the actual conditions under which they are accepted. across the whole supply chain. In this manner, we aim to improve the quality of the supply We have established the CSR Procurement Committee chain by carrying out targeted CSR procurement activities. composed of the Corporate Planning Department, the

Corporate Communication Department, the Safety CSR Administration Division, the Building Construction Division, Human Resources Development Aimed at Overseas the Civil Engineering Division, and the Procurement Division Transfer of Japan’s Advanced Construction Technologies as the structure for promoting the concept of CSR in Taisei Corporation actively accepts foreign technical procurement activities. intern trainees, whom specialist contractors ➡ Please refer to p.68 for the article about green procurement. (cooperating companies) employ, at specified model Ｗｅｂ Please refer to http://www.taisei.co.jp/english/profile/procurement_policy.pdf for the Procurement Policy. sites. Especially for the Vietnamese technical intern trainees, we visit, inspect and evaluate the local sending organizations, and make recommendations ■ CSR Procurement Initiatives in FY2016 to the specialist contractors together with the partner Governance Report As noted in stakeholder dialog, CSR procurement initiatives are supervising groups. The purpose of this activity is to growing in importance amid increasing social concerns in promote the overseas transfer of Japan’s recent years about the risk of human rights violations in the construction technologies and to address and aid supply chain. the issue of the shortage of skilled construction In FY2016, we began creating a framework for voluntary workers for specialist contractors. CSR procurement activities by formulating procurement policies at major Group companies. We also carried out briefings on the significance of CSR Results of 2nd CSR Procurement Activity Survey Social Report procurement for the first time in approximately three years for Civil Engineering Building Total the Souyu-kai member companies, who are our main Construction cooperating companies, and conducted a CSR activity survey. Number of companies surveyed 74 449 523 Internally, we carried out briefings for international branch Number of companies offices and the Procurement Division as part of our awareness responding 60 272 332 campaign on CSR procurement. Response rate 81.1% 60.6% 63.5% ➡ Please refer to p.47-48 for the article about stakeholder dialog Implementation rate★ 67.2% 61.6% 62.6%

★ Implementation rate In order to ensure that cooperating companies understand our CSR procurement guidelines and carry out CSR activities in line with the guidelines, we conduct CSR

activity surveys about whether or not they are carrying out specific measures. The Environmental Report percentage of total survey items for which the response is “measures taken” is called the “implementation rate,” and we request all of our cooperating companies to continue to improve their implementation rate.

KPIs Promotion of CSR Procurement CSR Promotion Section, Corporate Communication Department, Corporate Planning Office Average implementation rate of companies According to the CSR activity survey implemented in 2016, the implementation rate of CSR activities where CSR activity survey was conducted: and Corporate DataFinancial at cooperating companies based on the procurement guidelines established by Taisei Corporation was 62.6%. We will continue to carry out awareness campaigns with the aim of improving the implementation rate in the future. 62.6%

*Formulated in April 2013

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Our Pride in Quality

Ensuring Quality and Improving Customer Satisfaction

■ Quality Policy and System ■ Provision of High-Quality Construction Products and Related Services Under the slogan of “ensuring and improving safety and quality” stated in the Group Action Guidelines, Taisei Group Establishment of Specialized Construction Auditing Office formulates the “Quality Policy,”* which governs our corporate To ensure higher quality and safety, and objective construction activities. We obtained ISO 9001 certification in 1996 for the auditing in design and building projects, Taisei Corporation first time in the Japanese construction industry. We operate established the office of first-class architects which specializes in and establish a quality management system covering from construction auditing operations. The office started its operations design and construction to after handover in order to provide in FY2016 with 70 experts in design, structure and facilities who customers with construction products and after-sales service are dedicated to construction auditing under the basic policy that with safety and comfort. Additionally, in conjunction with the “customer satisfaction and trust shall be secured by providing quality management system, “TAISEI QUALITY” activities have ‘high-quality construction products and related services’ meeting been implemented since 2009 to ensure thorough awareness the demands of customers and society.” and application of the quality management standards and procedures within the entire Group. We also conduct Utilization of Cloud Services and Smart Devices at customer satisfaction interviews and surveys to ensure proper Construction Sites quality management and eliminate any defects caused by Taisei Corporation has been using the “Kensetsu Site” cloud quality, in cooperation with the relevant departments. service provided by Mitsubishi Corporation (currently MC Data

Ｗｅｂ Please refer to http://www.taisei.co.jp/english/profile/Quality.pdf for the Plus) since 2003 to manage and share plans and documents Quality Policy. at branches and on-site offices with the aim of improving productivity at increasingly complex construction sites. In 2012, we developed the “Field Pad,” an app for iPhones and iPads for the purpose of improving operations and enhancing quality control in construction management, leading to labor-saving in labeling and organizing photographic construction records. Users of these apps include not only officers and employees at Taisei Corporation, but also employees of cooperating companies and others involved in construction. Currently, approximately 30,000 users take advantage of these apps to access the latest plans and information on documents regardless of time or place.

A Poster of “Taisei Quality”

KPIs Implementation of Customer Satisfaction Surveys Civil Engineering Division / Building Construction Division Customer Satisfaction Rate Customer Satisfaction Rate (Civil Engineering) (Building Construction) The customer satisfaction rate on surveys conducted by the Civil Engineering Division after building handover was 80%. The customer satisfaction rate for the Building Construction Division, the rate was 90%. The results of surveys are reflected in follow-up 80% 90% construction meetings to eliminate complaints in concerted efforts among the headquarters and branches.

*Formulated in July 2005.

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■ Hitozukuri (development of human resources) for Monozukuri (precise, superb craftsmanship) Educational Supporter System (Civil Engineering Division) Building Meister System / HQ Staff’s Coaching System Under the “educational supporter system” introduced in 2009, (Building Construction Division) educational supporters appointed from among employees with The “meister system” and the “HQ staff’s coaching system” experience as construction site managers check the progress were put into practice from 2009 as part of the “TAISEI of OJT education of young employees and provide support and QUALITY” activities to promote the acquisition of skills and Management Strategy guidance. The Civil Engineering Division strengthens expertise in order to securely pass along our technologies and employees’ management capability to reinforce productivity and know-how, with the aim of strengthening productivity and the the production system, in addition to “improvement of the construction management system. working environment” and “securing of human resources.” The employees appointed as meister and the executive

Specifically, under the goal of “increasing the employees’ staff of the Building Construction Division, with abundant CSR capabilities at production sites,” on-site experience, make actual the “On the Job Training (OJT) visits to the sites and provide education” is introduced and education and guidance on the operated to enhance the skills and quality/site capabilities of process management and other management, design, capabilities through OJT, in close estimation, negotiation and OJT education provided by contact with the young and OJT education provided by action, among others. an educational supporter middle-aged employees. a meister Governance Report Development and Provision of Technologies for Social Issues

■ Policy on Research and Development Activities ■ Results of Research and Development Activities Under the basic policy of the Medium-term Business Plan We actively pursue the protection and utilization of intellectual (2015-2017), the Taisei Group implements technological property assets, such as inventions and brands associated development aimed at stable and sustainable growth, as well with our research and development, based on our intellectual Social Report as obtaining high customer satisfaction by ensuring quality property strategy. Our rate of registration of patent and safety. applications is very high at 90%, compared to the actual rate In carrying out technological development, we actively of registration of 71.5% for all types of industry in 2015. promote alliances with various research university research We contribute significantly to the dissemination of organizations, companies in different industries, and other Japanese research and development activities overseas, companies in the same industry, etc., in order to enhance including the publication of 21 papers overseas in FY2016. investment efficiency in technological developments and to We aim to contribute to society through the development meet increasingly advanced and diverse technical needs. of new technologies based on the unity of our business ➡ Please refer to p.91 for the Medium-term Business Plan (2015-2017) Basic Policy. strategy, our research and development strategy, and our intellectual property strategy, through technological support for Environmental Report Trend in Research and Development Expenditure our construction sites, and through our utilization of intellectual 2013 2014 2015 2016 assets, etc. Research and development costs ¥9.5 billion ¥10.6 billion ¥10.9 billion ¥11.1 billion

KPIs Obtaining Rights to Technologies that Solve Social Issues Intellectual Property Department, Taisei Technology Center Number of Number of The Taisei Technology Center implements technological patent rights registered Patent Applications Filed and Corporate DataFinancial development and obtains the rights to technologies to solve social issues. In FY2016, 41 construction sites were visited to identify patentable technologies at these construction sites and 232 304 obtained the rights to them.

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015_0356501372908.indd 60 2017/08/10 10:23:14 ISO26000 Community Involvement and Development

For the Benefit of Community and Society

Contributions to Local Communities

Promotion of Social Contribution Activities Grants from the Taisei Corporation Public Trust of Funds for ■ Natural and Historic Environments Taisei Corporation sets forth “communication with the local For 24 years, we have granted subsidies of ¥15 million each communities” under the Group Action Guidelines to establish year (for a total 532 grants) to projects conducive to the a good relationship with the local communities and contribute preservation of the natural environment and others that are the to the development of the society as a good corporate citizen. common property of present and future humanity. Taisei Corporation carries out various social contribution activities such as environmental beautification activities at the headquarters, the Technology Center and individual branches Held Workshop: “Gene-Con Girls! — Experience ‘Putting my work on the map.’” (including construction sites). At construction sites in particular, we implement a range of social contribution activities including We took part in the “Summer Riko-challe” organized by the environmental beautification activities, participating in and Cabinet Office and others for junior and senior high school sponsoring local events, and holding visits to worksites. students during their summer vacation. We conducted activities Through these social contribution activities, we hope to deepen such as site visits, design workshops, and exchange events understanding of the Company among local residents as well with science and engineering professionals to communicate the as to contribute to the development of the local community as significance of science and engineering studies and the appeal one of its members. of science and engineering careers.

■ Examples of Social Contribution Activities Establishment of the Taisei Foundation We established the Taisei Foundation in March 2017 in order to support the researchers who are realizing the Taisei Group Philosophy, “to create a vibrant environment for all members of society.” The Taisei Foundation will endeavor to play a role in 3D design workshop Future Session improving Japan’s construction technologies by supporting new technological fields for the next generation (disaster Supporting “Giving Back to Borneo Project” through prevention and mitigation technologies, ZEB technologies, Automatic Vending Machines with Donation Function compact city and smart community technologies, etc.). We have installed automatic vending machines with a donation function at construction sites and other locations, and are Operation of Galerie Taisei donating part of the proceeds to the NPO Borneo Conservation The purpose of Galerie Taisei is to spread construction culture Trust Japan. We support activities for the protection of Borneo by exhibiting architecture and paintings by Le Corbusier, whose elephants, which are in danger of extinction due to the works have been inscribed on the World Heritage List. Two reduction of Borneo’s tropical rainforest. exhibits were held in 2016. (The gallery is currently closed due to relocation.)

KPIs Promotion of Social Contribution Activities CSR Promotion Section, Corporate Communication Department, Corporate Planning Office Expenditures on social contribution activities Taisei Corporation belongs to KEIDANREN’s 1% Club and carries out various social contribution activities as a member of the local community. In FY2016, our social contribution spending amounted to ¥653 million. We will continue to implement ongoing social contribution activities that contribute to the development of local 653millions of yen communities.

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Creating a Workplace

Where Everyone Enjoys Their Work Snapshot TAISEI Respect for Human Rights and Diversity

■ Our Human Rights Policy and System ■ Human Rights Promotion Activities The Taisei Group has developed the Human Rights Policy*1 with In FY2016, we provided e-learning training for all employees reference to international human rights standards such as the and training for employees according to their number of years

Universal Declaration of Human Rights, the eight fundamental on the job. In addition, some of the content was translated Management Strategy conventions of the International Labour Organization (ILO) and into English and Chinese and used as material for training the ISO 26000, as well as the International Code of Conducts to conducted for local staff employed at overseas business sites. prohibit child labor, compulsory labor and discrimination in employment and occupation and guarantee the right of ■ Promotion of Diversity Management

association and the right to bargain collectively. CSR In addition, the “Taisei Human Rights Awareness As one of the issues addressed in the Medium-term Business Promotion Committee” continually engages in efforts including Plan, we aim to encourage diversity management, focusing on the creation and review of basic policies and activity plans. creating a workplace in which employees are able to take the Ｗｅｂ Please refer to http://www.taisei.co.jp/english/profile/Human_Rights_Policy. most active possible role, taking pdf for the details of the Human Rights Policy. advantage of their diversity in terms of sex, nationality, disability, values, ■ Consultation Services for Human Rights and Monitoring Diversity Management the way of working and career. Selection 100 Taisei Corporation has established a whistle-blowing system

(helpline) and consultation services in each department in the Governance Report Company in order to prevent abuses of human rights and Main Initiatives to Promote Diversity harassment from occurring. We respond appropriately to resolve problems by investigating the facts while giving Diversity of characteristics consideration to the protection of whistle-blowers.

Female employees Non-Japanese employees Employment of Senior Personnel, Employees ■ ⃝Active employment in ⃝Establishment of Who Have Left the Company after Childcare or careers with promotions consultation desks

Nursing-care Leave, and Physically Challenged Persons ⃝Expanding fields of employment ⃝Creation of handbook for receiving Social Report ⃝Implementation of career departments development training We worked to enhance the reemployment system for senior personnel with a wealth of knowledge, experience and skills to let Senior personnel Physically challenged employees them pass on their know-how to the next generation and continue to ⃝Preparation of ⃝Consideration according play an active role, and have reemployed 663 personnel in FY2016. reemployment system that provides to disability, consultation services fulfilling work ⃝Use of tools to support active In addition, we have started a job return system in FY2008 to participation reemploy personnel who have resigned due to unavoidable circumstances such as childcare or nursing care so that they can Diversity of working styles return to the workplace, and have reemployed 24 employees to date. Approximately 130 physically challenged employees work at Environmental Report Taisei Corporation (an employment rate of 2.04% in FY2016). These ⃝“Working style reform” ⃝Enhancement of ⃝ Support for male employees take an active role in various fields thanks to measures through use of ICT in support framework to employees’ that consider individual disabilities, such as sign language daily operations balance childcare/ participation in nursing care and work childcare interpretation, use of UDTalk*2, and the establishment of a consultation desk.

KPIs Human Rights Promotion Activities Human Resources Department, Business Administration Division Rate of Attendance at We provide e-learning and group training for all employees by incorporating human rights training in Human Rights Training and Corporate DataFinancial the basic education system for each layer and department of the employees. In FY2016, we held 31 group training sessions, with 1,253 employees taking part in the training. We also implement human rights promotion activities such as human rights education programs, including talks from external 93.8% speakers, and solicitation of human rights essays and slogans.

*1 Formulated in October 2005 *2 UDTalk: A software application for the hearing impaired that can convert speech to text using a smart device

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Workplace Environment of Employees

Creating a Pleasant Workplace ＷEB

■ Toward the Realization of Work-Life Balance List of Initiatives Promoting Work-Life Balance Promoted items Content of activities We are pursuing a number of measures to create a fulfilling Shorter workplace for each and every employee. Recently, we have ● Implementation of campaigns to achieve target for the number of working hours holidays and leave days taken per year been striving towards the realization of work-life balance ● Implementation of business improvement activities through through efforts to reduce working hours focusing on both labor-management cooperation by establishing the shorter working hours conference in April 2015 tangible and intangible aspects such as increasing operational ● Promotion of working style reform by utilizing ICT efficiency with use of smart devices. Childcare ● Promotion of childcare leave taken by male employees by support establishing five paid leave days for childcare Labor-Management Relations ● Implementation of childcare support programs to support smooth ■ leave and return to work, meetings for employees on childcare leave, consultation sessions on finding daycare services, seminars for Taisei Corporation has a union shop agreement with its fathers, and work-life balance seminars employees union, and all 7,592 employees, except for ● Creation of a temporary day-care center during training and seminars in consideration of employees who are raising children management, belong to the union. The Company conducts

various surveys and dialogs between labor and management Nursing-care ● Provision of information by implementing nursing-care seminars every year for the purpose of facilitating labor- management support nationwide ● Individual consulting meetings with outside organizations on relations and the business activities of the Company. Changes nursing-care in working conditions are listed as items determined in ● Three-person meetings for employees who are facing nursing-care advance through discussion between labor and management. Vacations ● Promotion of taking of annual paid leave, refreshment leave and long-service leave Health of Employees ■ Others ● Salary increase and revised allowances to support employees who are getting married and having and raising children In order to enable employees to manage their mental ● Enhancement of the welfare program and physical health, we encourage workers who

displayed symptoms in a health checkup to seek Ｗｅｂ Please refer to http://www.taisei.co.jp/english/csr/annual_report_online2017/ medical attention. We also ensure that overworked csr/index.html employees meet with a physician. Furthermore, we encourage the taking of stress checks, carry out Line Care Training for management employees, and Initiatives for Childcare Support prepare a broad support system in collaboration with We have targeted making the childcare leave specialized organizations and industrial physicians. usage rate by male employees 100% as one of our working style reform measures, and are involving the employees’ assigned departments Health Management Initiatives and their supervisors in this company-wide Taisei Corporation was recognized under effort. In addition to joining the Ikuboss the 2017 Certified Health and Corporate Alliance in April 2017, we have Productivity Management Organization received the Ikumen Enterprise Award 2016 Recognition Program (White 500) and a recognition based on the Act on established by the Ministry of Economy, Advancement of Measures to Support Raising Trade and Industry in FY2017. Next-Generation Children.

KPIs Improving Retention Rate of Young Employees Human Resources Department, Business Administration Division Turnover rate of employees within 3 years* of hiring We strive to eliminate mismatching of employees and jobs through measures such as providing detailed job descriptions during the recruitment screening process and conducting construction site visits. We also work to retain employees by striving to create a pleasant working environment, including holding interviews with young employees after they join the Company, and introducing a 5.0% mentorship program on a trial basis.

*Percentage of new graduates hired on general and specialized career tracks who resigned within 3 years of employment.

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Toward Human Resources Skill Development

■ Support for Career-Building ■ Support for Qualification Acquisition We provide employees with comprehensive training in each Taisei Corporation helps all employees improve skills in their phase after joining the Company to develop human resources area of work, by supporting their acquisition of

with specialty and creativity. qualifications, in order to develop engineers and managers Management Strategy with strong specializations. Outline of Human Resources Development System Examples of Support for Qualification Acquisition Career Construction work Civil engineering work utilization period Career ● First-class architect ● Professional engineer formation period CSR Basic ● First-class building operation and ● First-class civil engineering works formation period management engineer execution managing engineer When entering ● First-class plumbing work operation and ● Chief concrete engineer the Company management engineer ● Certified chief managing engineer ● Building mechanical and electrical engineer for dam construction

Design International

Year/Age 1st year- 3rd year- 30s- 40s- ● First-class architect ● Licensed architect ● First-class architect in structural design ● Professional engineer ● First-class architect in facility design ● Project management professional Introduction training Mental development Career Power-up ● US licensed architect ● APEC architect / engineer for new employees training vision training management training Development Engineering Governance Report Training for Internal Training for business Global training I Global training II/III newly appointed ● The Association for Real Estate ● Professional engineer training leaders (Basic/Advanced) general managers Securitization certified master ● First-class plumbing work ● Redevelopment planner operation and management engineer ● Department training (Annual training, support for quali cation acquisitions, etc.) ● Professional engineer First-class electrical work ● Real estate notary operation and management engineer

External Dispatch to external training Administration (graduate schools in Japan, overseas universities, training public of ces, training institutes, overseas companies, etc.) ● Construction industry accountant ● Registered real-estate broker Social Report

TOPICS Environmental Report Working style Reform through Use of ICT in Daily Operations Social issues including risks to employee health due to long working hours have recently come to the fore. In order to resolve these issues, Taisei Corporation is promoting working style reform through ICT solutions such as utilization of the Field Pad app. In May 2016, we introduced the Office 365 cloud service, to create a business environment “that can be safely used by anyone, anytime, anywhere, with any device.” We have promoted use and spread of the service, and results of an in-house survey showed that an average of eight hours could be saved per month. Financial and Corporate DataFinancial The Taisei Group will continue seeking to enhance its vibrant workplace environment with the aim of realizing work-life balance.

➡ Please refer to p.59 for details on Field Pad.

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Workplace Environment at Construction Sites Improving Health and Safety Standards

■ Health and Safety Policy and OHSMS System ■ Safety Education Support for Specialist Contractors (Cooperating Companies) Based on the ideal of “Safety First,” Taisei Corporation works hard to ensure safety in a tangible form day to day in concerted efforts among its Taisei Corporation cooperates closely with the “Taisei Health, employees, group companies and cooperating companies. We are Safety, and Environment Cooperation Association,” which consists committed to this under the “Health and Safety Policy,”* which the of cooperating companies all over Japan, to prevent accidents President indicates by systematizing and organizing the “Taisei and damage. Members of the Association work to prevent Occupational Health and Safety Management System” (TAISEI OHSMS), accidents and damage by participating in the “Safety Conference to eliminate accidents and damage and prevent third-party accidents. (January)” and the “Safety Promotion Conference (June)” held by TAISEI OHSMS is established based on the safety and health Taisei Corporation each year, and by using educational and management techniques and know-how which Taisei Corporation has instructional material for health and safety management such as accumulated over many years. Using this system as a platform, the the journal “Cooperation” and the “Collection of Accident Cases.” PDCA (plan-do-check-act) cycle is properly implemented to improve health and safety standards. In addition, we work to prevent accidents and damage by conducting risk assessment and taking necessary measures to reduce risk, based on the results of audits of the actions under the “Health and Safety Management Policy.” We also carry out thorough construction site patrols and safety education for construction workers in order to The President’s patrol The award ceremony ensure health and safety management based on TAISEI OHSMS. TAISEI OHSMS ■ Establishment of Various Foremen Systems Head of ce Branches Construction sites In the civil engineering field, the system for rewards for excellent civil Health and Branch Health and Safety Construction Health Safety Management policy Management Plan and Safety Plan engineering skilled workers, under which a reward is paid to the Construction Site President’s Health and Manager’s workers with excellent construction skills who contribute to Safety Policy Management Policy construction work at the sites of Taisei Corporation, is introduced to improve the overall capabilities, including quality, safety and skills. Central Safety Committee Branch Safety Committee In the building construction field, a system for the highest quality · Targets · Branch targets · Health and Safety · Action priorities · Action priorities Management Policy foremen was newly established and has been put into operation upon · Health and Safety

Speci c causes of danger and harm and speci c items to be addressed · Management priorities, other Management Plan partial revision of the first-class foremen system during FY2015 to · Emergency Response Plan · Basic Construction further improve the foremen’s construction management capability, · Head of ce plan · Branch action plan Work Plan including quality, skills and safety to strengthen the production system.

Accident (Guidance) (Guidance) Time for information certification / database Amount of Start of Implementation and operation Implementation and operation Implementation and operation Category Name of system Number of Subject payment certified system Accident Accident persons analysis (Warning) analysis (Warning) Accident System for reward Annually Prevention of Prevention of response Civil to excellent civil ¥2,000 (each January reoccurrence reoccurrence Skilled workers engineering engineering skilled per day December) / who meet the 1, 2013 workers (BMT*) 502 workers specified Internal audits / guidance Construction site patrols On-site inspections / remediation System for requirements Building first-class foremen ¥1,000 Each April / including April construction (partially revised) per day 770 foremen qualifications 1995

analytical information Records / storage Records / storage Records / storage Building System for highest ¥3,000 Each April / All over Japan November Accident investigation and construction quality foremen per day 43 foremen 2015 System review *BMT: Best Meister of Taisei As of March , 2017

KPIs Improvement of the Health and Safety Standards Safety Administration Department, Safety Administration Division

Number of Fatal Accidents The Company set a target of “achievement of zero fatal accidents” in 2016, but regretfully one fatal accident occurred. For 2017, we have again set a target of “zero fatal accidents,” and will promote various measures aimed at “shifting from recurrence-prevention safety management to preventive safety management.” 1cases

*Formulated in July 2005. Final revision in November 2009.

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Health and Safety Initiatives at Construction Sites

We are pursuing worksite-led activities in order to improve health and safety levels at the “(Tentative Name) Jingumae Plan” construction site in Harajuku, Tokyo, where we are constructing a high-rise building with 23 floors above ground and 3 basement floors.

Promoting Activities Led by Foremen Management Strategy Specialized contractors (cooperating companies) are involved in work on construction sites in a wide range of fields until the building is completed. An average of about 40 foremen, who are the leaders from each cooperating company, along with some 400 skilled construction workers, enter this construction site each day. In order to preserve safety at a worksite where CSR different companies are involved depending on the stage of work, and new skilled construction workers join the site each day, it is vital that everyone share an awareness of safety and engage in efforts collectively. We have therefore organized a Foremen’s Council that cross over company borders at this worksite, and formulated the council’s slogan, “Dedicated Wholeheartedly to Progress.” We are implementing initiatives under four sub-committees, namely environment, safety, vehicles, and publicity, in order to work as one to realize zero accidents and zero damage. Illustration of Tokyo Branch Emphasizing Unity while Maintaining Alertness (Tentative Name) Jingumae Plan construction site after completion

The Foremen’s Council engages in various activities such as conducting Governance Report safety patrols from various perspectives depending on the day of the week, promoting the “point-and-call” practice, which is an effective safety check, and practicing individual danger prediction activities at morning assemblies. In addition to constantly maintaining a sense of alertness on the site, we also create innovative ways to ensure that safety measures quickly become familiar without being simply rote, such as publishing the Jingumae Newspaper, a tabloid-type paper that Collective safety prayer with Poster promoting enables all construction workers to share an understanding of the project Foremen’s Council “point-and-call”

status, and putting up manga-style posters. We further strengthen the Social Report sense of unity by creating plenty of opportunities for deeper, direct communication among construction workers, such as by holding occasional fireworks, sports festivals, barbecues, and cultural exchanges among construction workers of different nationalities. Fostering a Culture of Preventing Accidents and Damages before They Happen Promoting use of workplace The repetition of these processes fostered a culture where workers can accident example sheets freely speak their minds to each other. This produced a virtuous circle, whereby a higher level of awareness among all employees is reflected in improvement activities, such as when active communication leads workers to caution each other and prevent trouble before it occurs. In Environmental Report addition, the openness of the workplace boosts the morale of construction workers and facilitates smooth coordination among cooperating companies, thus promoting work efficiency as well as safety. Jingumae Newspaper Cultural exchange event

⃝ Osamu Kubota, Construction Site Manager, (Tentative Name) Jingumae Plan Construction Site, Tokyo Branch

Skilled construction workers are the leading figures at a construction worksite. What the site manager says does not have any effect unless it penetrates to each and every person working on Financial and Corporate DataFinancial site. Through activities led by the foremen, we can surely achieve zero accidents and zero damage if everyone thinks of this place as “their site” and considers fellow workers as “their family.” Creating that environment is an important job for the site manager.

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For Our Global Environment

Environmental Management Activities

■ Formulation of New Environmental Policies The Taisei Group endeavors to conserve and create the environment through our core business of the construction industry, and promotes environmental management aimed at realizing a sustainable society. Taisei Corporation operates an environmental management system (EMS) in compliance with ISO14001:2015, and we revised our “Environmental Policy”*1 for the first time in six years in order to promote environmental management better in line with our business by responding to changes in the situation surrounding the Company based on identified risks and opportunities. Based on the Environmental Policy, we work to reduce various environmental risks and impacts by setting specific environmental management targets (Taisei Agenda), and practice activities aimed at forming sustainable social infrastructure.

Environmental Management System Organization Chart Taisei Corporation Environmental Management President Internal and external issues and needs Environment Committee Environment Committee Administration Meeting, Environment Management Group Meeting, Climate Environmental risks, social issues Change WG, Resource Recycling WG, Biodiversity WG, Stakeholder needs Energy Efficiency Promotion Committee, Taisei High temperatures / insufficient water / concentrated Central Safety Committee*2 heavy rain / environmental pollution / loss of natural Corporation Group Environmental Promotion Conference resources / rapid increase in cost of building materials and equipment / urbanization / deterioration Specific environmental Companywide EMS Administration Bureau, Internal Business plan and in labor and living environment / environmental laws, representative environmental audit team environmental policy regulations, and taxes / changing demand for based on buildings and infrastructure / large scale disasters / Group philosophy evaluation by society Head office / Environment Committee and EMS Administration Branch office organizations Bureau of each department

PDCA of EMS Environmental Policy Setting issues and KPIs Management review Taisei Agenda Improvement initiatives Under the group philosophy of “Creating a Vibrant Environment for All EMS Implementation Plan Members of Society”, Taisei Corporation, through its construction activities, A strives for development of high-quality social infrastructure and P improvement of the living environment in harmony with nature. Moreover, realizing a sustainable society is a challenge common to all Developing and humankind, and a mission to be accomplished as a company. deploying With these environmental management principles as a guide, Taisei technology Environmentally Corporation and its group companies actively strive for “environmentally Performance evaluation friendly initiatives friendly society”. C D 1. Development in Technology Cooperating with supply chain We will develop environmental technologies, propose to customers Collaborating with stakeholders consideration for global environment and reduction of environmental impact through all construction lifecycle stage, and together with customers, create safe, comfortable and attractive spaces with exceptional value. Providing value to stakeholders 2. Collaboration with Supply Chain Creating sustainable business opportunities We will collaborate with our supply chain at each stage of the planning, procurement and construction activities to reduce environmental impact and to develop sustainable social infrastructure. 3. Cooperation with Stakeholders Realizing a sustainable environmentally friendly society We will promote communication with local communities, governments, domestic or foreign NGOs/NPOs, and other organizations, to disclose information and to resolve environmental issues actively. We recognize “Risks and Opportunities” appropriately and utilize Environmental Management System (EMS) based on ISO14001 practically, Low Carbon Recycling Nature Co-existing Society Oriented Society Society to fulfill all above.

*1 Formulated in July 2005. Final revision in April 2017. *2 Central Safety Committee: Since FY2012, environmental incidents are investigated and discussed by the Central Safety Committee.

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Taisei Agenda Results in FY2016 on the Taisei Agenda, which comprises our environmental management targets, and targets for FY2017 are as follows.

Challenges Targets Targets for FY2016 Results for FY2016 Targets for FY2017

Improve reduction rate of CO2 emissions at the operation Not less than 35% compared 38.9% Not less than 37% compared stage of buildings ★ with fiscal 1990 level KPI with fiscal 1990 level KPI Improve reduction rate of CO2 emissions at the Not less than 45% compared 51.9% Not less than 47% compared construction stage on building construction sites and civil with fiscal 1990 level 23.3% per unit with fiscal 1990 level Mitigate and adapt to engineering sites ★ Not less than 17% compared Not less than 18% compared climate change with fiscal 1990 level (Intensity) with fiscal 1990 level (Intensity) Management Strategy KPI KPI Improve reduction rate of energy consumption in offices Not less than 12% compared 19.1% Not less than 17% compared with fiscal 2010 level (Intensity) with fiscal 2010 level (Intensity) Promotion of initiatives for adaptation strategy 3 or more cases 3 cases － Decrease construction waste final disposal★ Final Disposal Rate: Not more 3.5% Final Disposal Rate: Not more than 4.0% KPI than 4.0% KPI Reduce mixed waste weight rate of new building Mixed Waste Weight Rate: Not 14.6% Mixed Waste Weight Rate: Not CSR Effectively utilize construction projects more than 25% more than 25% resources Minimize the decrease index of construction waste Intensity Reduction Index: Less 0.7 processing amount in civil engineering construction than 1.0 Intensity Reduction Index: Less projects than 1.0 Support and practice activities & trainings to preserve Activities / Trainings: 16 for head office Activities / Trainings: natural environment ★ 6 or more (Headquarters), 1 or more for each 6 or more (Headquarters), 1 or more (Each branch) branch office 1 or more (Each branch) Conserve biodiversity Promote biodiversity related technologies Promotions: 30 or more 42 cases Promotions: 30 or more KPI Promote biodiversity offsets initiative Promotions: 3 or more 6 cases Promotions: 3 or more Manage construction waste, polluted soils, industrial Non-occurrence of Non-occurrence of Non-occurrence of wastewater, harmful and/or chemical substances, environmental accidents environmental accidents environmental accidents radioactive materials* appropriately KPI Governance Report Reduce environmental Implement environmental management procedures in risks construction sites, based on “Operation Manual for Prioritized Environmental Issues” Improve electronic manifest diffusion rate ★ 90% or more KPI 94.7% － Carry out environmental education Programs: 3 or more 5 times Programs: 3 or more Reduce environmental Increase green procurement rate 30.8% impact in the ★ 30% or more KPI － supply chain Increase green procurement items at the design stage Items / Project: 9 or more 9.8 items Items / Project: 9 or more of buildings Promote development Promote media presentations on research, development Media Presentations: 20 or 30 cases Media Presentations: 20 or

of technologies and promotion of environmental technologies more KPI more KPI Social Report 4 Promote environmental Put into practice eco-model projects ★ Projects: 26 or more 27 projects Projects: 26 or more activities Promote adoption of ZEB (Zero Energy Building) ★ Promotions: 10 or more 26 cases Promotions: 10 or more KPI

Taisei Corporation has set KPI targets in connection with environmental management in the construction industry and important business-related environmental risks and efforts toward meeting the United Nations’ sustainable opportunity creation in the FY2017 Taisei Agenda, and is development goals (SDGs) such as improving urban resilience. making efforts to meet those targets. We have included the symbols for strongly related SDGs on We also continue to work on response to restoration and the Taisei Agenda, which is posted throughout the Company. recovery in areas hit by major disasters as an item in our

everyday management. Environmental Report We recognize the close affinity between promotion of

Medium- to Long-term Environmental Target TAISEI Green Target 2020 TAISEI Green Target 2050

● Reduction in predicted CO2 emissions in the building operation stage compared ● Reduction in predicted CO2 emissions in the building operation stage compared with 1990 (and aim for popularization of urban-style energy creation buildings as with 1990 (and popularization of urbanstyle ZEBs as top runner architecture) 40% top runner architecture) Aim for 80% ● Reduction in CO2 emissions in the construction stage compared with 1990 50% ● Reduction in CO2 emissions in the construction stage compared with 1990 Aim for 80%

● Aim for final disposal rate of construction waste of 3% or less ● Aim for final disposal rate of construction waste of 0

● Aim for a recycling index for construction by-products of 80 or more ● Aim for a recycling index for construction by-products of 100 and Corporate DataFinancial

● Use and expansion of biodiversity evaluation methods ● Aim for development of social infrastructure that co-exists with nature ● Participation in and promotion of biodiversity offsets ● Aim to realize society that increases biodiversity

★Targets included in Taisei Corporation’s “Eco-First Commitments” certified by Japan’s Minister of the Environment

* Radioactive materials: Target item since FY2017

● KPI Key Performance Indicator TAISEI ANNUAL REPORT 2017 68

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Mitigate and Adapt to Climate Change

CO2 emissions in the construction stage (Non-consolidated) Prediction of CO2 emissions in the building operation stage and Emissions by site Emissions by site reduction percentage (Non-consolidated) 2 Emissions per unit floor area CO emissions 1990 criterion ● CO2 emissions ■Calculated value based on 1990 criterion Emissions per unit floor area ● 3 2 kg-CO2 /mil. yen 3 2 (10 t-CO ) （） (10 t-CO2) ■Predicted CO2 emissions (kg-CO2 /year.m ) 450 Construction stage emissions 453 300 150 56 60 Construction stage emissions intensity 274 Target value 229 225 38 211 100 36 40 206 186 195 32 84 300 Target value 200 23 250 231 240 46 216 15 209 226 12 50 37 40 34 20 51 16 13 12 29 ■Office 21 25 20 150 103 143 122 113 100 0 0 ■Construction site 108 219219 2012 2013 2014 2015 2016 （FY） (civil engineering) Predicted CO emissions increased as target calculation range expanded from FY2016. Construction site ・ 2 ■ 97 92 92 106 (building) 88 ● Predicted CO2 reduction percentage 0 0 （%） ■Scope1 0 ■Scope2 118 124 128 138 2016 ■Scope3 163 Target value 35.0 150 73 67 20 76 71 Target value 25 65 18 35.3 37.5 38.9 37.0 22 22 43.6 41.7 22 40 Emissions by scope 2012 2013 2014 2015 2016 2017 （FY） 2012 2013 2014 2015 2016 2017 （FY）

3 Reducing the estimated CO2 emissions (10 t-CO2) Scope 3 (upstream) Scope 1 and 2 Scope 3 (downstream) at the stage of building operation helps GHG protocol criteria*1 Category 1 – 8 1,900 Category 11 and 12 4,100 209 reduce the CO2 emissions in Category 11 Industry organization criteria*2 22 － (use of products sold) in Scope 3 based *1 Global standard for calculation and reporting of Greenhouse Gas (GHG) emissions (URL: http://www.ghgprotocol.org/) on the GHG protocol criteria. *2 Calculation range criteria set by the Japan Federation of Construction Contractors

■ Recognized as a Climate Calculation Standards for CO2 Emissions “A List Company” by CDP Objective Item Calculation Method & Standard Classification by Classification into civil engineering and building construction (sites), offices (excluding development projects and others), business type and factories In FY2016, Taisei Corporation CO2 emissions Scope 1: CO2 emissions associated with the combustion of fossil fuels 3 was recognized by CDP* on its Scope Scope 2: Indirect CO2 emissions associated with the use of electricity, steam, and chilled and hot water classification Scope 3: CO2 emissions associated with the transport of construction waste off construction sites and

“A List,” which evaluates initiatives the outward and return transport of soil from construction (off-site emissions) by companies to address climate CO2 emissions CO2 emission coefficient: Calculated using the emission coefficient in accordance with the Act to Rationalize the Use of Diesel, Heavy Oil, and Energy and the Act on Promotion change. This is the highest of of Global Warming Countermeasures. For offices, the actual emission coefficient for FY2015 according to the electrical power company is used. eight levels on the evaluation, Electrical power: Calculated using the 2015 emission coefficient on the user end announced by the Federation of Electrical Power Industries of Japan (before reflecting the Kyoto credit), and, of 500 Japanese companies 0.534t-CO2/Mwh. City gas: Calculated using the standard calorific value of the gas supply company and the emission

surveyed, 22 received recognition. Material flow-related coefficient of the Act on Promotion of Global Warming Countermeasures. 2 Estimated CO2 emissions Calculated using the “Energy Efficiency Plan” for each of 44 projects, each with a total floor area of 300 m The Company works to promote environmental and reduction rate in the or more and with a total area of about 910,000 m2, of Taisei Corporation building construction projects. management across the entire Group, by building operation stage CO2 emissions and participating in the CDP Supply Chain Program with reduction rate in the CO2 emissions at Taisei Corporation construction sites and percentage of CO2 emissions reduced from FY1990 emissions. In some cases, temporary or special construction that has a major effect on the date continuity has been excluded from the calculation. six major Group companies who are our business Prevention of global warming construction stage

partners, and by identifying and analyzing risks and ・ Energy Efficiency Plan: A plan that summarizes the measures for the efficient use of energy such as building thermal insulation, air conditioning facilities, etc., which is required to be submitted when designing buildings with a total floor area of 300 2m or more in opportunities related to climate change. accordance with the Act on the Rational Use of Energy.

KPIs Contribution to realizing Low Carbon Society Environment Division

Improve reduction rate of CO2 emissions at Taisei Corporation is working to reduce the estimated CO2 Improve reduction rate of CO2 emissions the construction stage on building emissions at the stage of building operations by promoting ZEB at the operation stage of buildings construction sites and civil engineering sites and implementing environmentally friendly designs. We have also set intensity targets (emissions per construction turnover) for CO2 emissions at the construction stage, and all construction sites 38.9% 51.9% throughout Japan are striving to reduce environmental impact and CO2 emissions during construction.

*3 CDP: A not-for-profit organization based in the U.K. that sends questionnaires on environmental strategies, GHG emissions, etc., to leading companies around the world and

analyzes and evaluates their answers, and publishes the results to investors. ● The calculated total values may not be consistent with the total values due to data rounding ● Third-party assured values (independent assurance report on p.74) are indicated with the mark. 69 TAISEI ANNUAL REPORT 2017

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Effectively Utilize Resources

Quantity of Construction Waste (Non-Consolidated) Construction Waste Treatment Breakdown (Non-Consolidated) (103t) ■Quantity recycled ■Quantity of intermediate processing ■Quantity of direct ﬁnal disposal (excluding sludge and waste not attributable to Taisei Corporation) ( ) is the quantity excluding polluted mud and waste not originating from the Company （103t） Sale of valuable materials, wide-area certi cation, 3,000 2,695 on-site use, etc.

（1,709） 179 Resource Management Strategy 2,415 35 2,355 recovery 2,284 （1,658） amoun 2,500 2,236 （25）（1,489） Recycled （1,522） 797 （1,503） 43 1,415 43 22 Recycling amount 17 （270）（24） 597（9） 636 （20） facility 1,599 2,000 （14）（234） 1,237 666 （250） 835 （227）（276） 1,500

Recycling 184 CSR Intermediate 1,775 treatment 1,000 1,863 amount 1,554 （1,414） 1,676 （1,415） Intermediate

Amount generated 1,658 234 （1,215） 1,426 treatment residue （1,281）（1,207） Final 50 500 disposal amount 59 Direct nal disposal amount 9 0 Contracted disposal amount 1,479 2012 2013 2014 2015 2016 （FY）

Adoption of Green Procurement Items Emissions and Recycling Rate by Construction Waste Category (Non-Consolidated) 3 (Construction Design: Non-Consolidated) Unit: 10 t Building construction Civil Governance Report Other items Equipment items Construction waste engineering Total Recycling rate New construction Demolition Subtotal ●Rooftop greening, etc. ●LED lighting fixtures Concrete remnants 233 180 651 832 1,065 100.0% 10% ●Automatic water faucets Asphalt and concrete remnants 59 41 42 83 142 100.0% Structural items ●Water-saving 12% ●Recycled steel material toilet bowl Construction site sludge 408 277 57 334 742 ー ●Ultra-high-strength Breakdown of ●Automatic flushing concrete, etc. specified items system and Mixed waste 11 27 14 40 51 71.1% in the water-saving urinal 60% with automatic Wood scrap 20 7 7 14 34 98.3% 18% design stage flushing system ●High-efficiency Metal scrap 80 67 41 108 188 99.9% transformers, etc. Architectural items Miscellaneous 31 68 93 161 193 69.8%

●Ceramic tiles Social Report ●Thermal insulation sashes 843 667 905 1,572 2,415 and doors, etc. Total ー

■ Reducing Environmental Impact in the Supply Chain Calculation Standard for Quantity of Construction Waste Objective Item Calculation Method & Standard Taisei Corporation sets targets to manage the adoption of [Civil engineering, building Construction by-products (waste and valuable resources) construction (sites), and factories] emitted at the sites of the Taisei Group’s individual construc- green procurement items during the design of buildings based Calculation of construction and tion projects, joint venture construction for which Taisei industrial waste emissions Group is the representative, and factories owned by Taisei

on the “Taisei Corporation Green Procurement Guidelines.” In Material flow-related Group. FY2016, we adopted 9.8 green procurement items per project Results for adoption of green Calculated the quantities based on the design specifications procurement items by Eco Sheet CASBEE introduced to buildings designed by (compared to the target of 9 or more items). We also organize Taisei Corporation study groups on SDGs and supply chain management for Final disposal rate (%) (final disposal quantity / quantity arising) × 100 (excluding construction sludge and quantities not attribut- Environmental Report procurement departments. able to Taisei Corporation)

Resource recycling Recycle rate = 100 - final disposal rate

KPIs Promotion of 3R* Activities and Green Procurement Environment Division In FY2016, the final disposal rate for construction waste excluding sludge and quantities not Decrease construction waste final attributable to Taisei Corporation was 3.5%. We also operate the “Taisei Corporation Green disposal Procurement Guidelines” for the purpose of adopting materials and equipment and applying and Corporate DataFinancial construction methods with low environmental impact. In FY2016, the green procurement rate was 30.8%, based on procurement data for 91 items. 3.5% ➡As for the green procurement quantity of main construction materials, please refer to the material flow on p.74 or our website.

*3R: Reduce / Reuse / Recycle ● The calculated total values may not be consistent with the total values due to data rounding. ● Third-party assured values (independent assurance report on p.74) are indicated with the mark. TAISEI ANNUAL REPORT 2017 70

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Conserve Biodiversity

■ Support and Practice Activities & Trainings to Preserve Natural Environment 1 Taisei Corporation is continuously working to develop technologies to create a society with rich biodiversity. We are developing a wide range of proposals using those technologies, from planning and construction of facilities to support for operation and management after completion. At Sapporo Dome, our technologies were adopted from the planning stage with the aim of creating an environment that can be used by diverse living creatures. In order to verify that they can actually inhabit the environment, long-term monitoring of living creatures has 2 been implemented and demonstrated from the planning stage to the present day. The store of knowledge acquired in the process has been used in developments such as the biodiversity communication tool “Ikimono (living creatures) Concierge,” and is shared broadly with society through various environmental awareness plans and activities conducted by Sapporo Dome Co., Ltd. Taisei Corporation cooperated and participated in the “2nd Expedition to Find the Living Creatures of Sapporo Dome - Let’s Observe the Birds and Insects that Live in the Dome” (organized by Sapporo Dome Co., Ltd.), a nature observation event for elementary school students and their parents held at Sapporo Dome on August 1, 2016.［Images 1 2 ］ 3 4 After an explanation by Taisei Corporation employees about environmental measures taken during construction, participants wandered around the grounds of Sapporo Dome accompanied by biology specialists, looking for birds and insects and touching the natural surroundings with their own hands in this program implemented to teach the value of biodiversity.［ Images 3 4 ］

■ Environmental Contribution Activities and Environmental Education

The Taisei Group carries out initiatives for employees and their 5 families to help them better understand the importance of the connection of the construction business and social life with the natural environment. We implement various environmental activities and education, including volunteer activities that have continued for more than 10 years, and support for NGOs working to protect small animals and forests.

● Volunteer activities to protect rural communities (Tokyo Greenship Action)［ Image 5 ］ ● Volunteer activities to make dormouse nest boxes［Image 6 ］

● Support for “animal pathways” for small animals

● Environmental contribution activities by volunteer employees “TAISEI 1ton CLUB”［Image 7 ］ (Support for forest conservation activities in the Philippines by REDD+ 6 7 project)

● Seminars on the environment (Specialists are invited to give talks on topics such as eco-life overseas)

● E-learning on the environment for all employees (Environmental management targets and initiatives as an Eco First Corporation)

71 TAISEI ANNUAL REPORT 2017

016_0356501372908.indd 71 2017/08/10 10:36:27 TAISEI Snapshot TAISEI

Reduce Environmental Risks

■ Risk Management at Construction Sites and Offices ■ Complaints on Construction Sites and Responses Taken Proportion of Observation Items Portion of Complaint Types

■Education and training, etc. ■Site planning

12% 22% Management Strategy Others 23% Noise 39%

Others 12％ Water pollution 5% Water CSR ■Laws and Pollution regulations, Dus 6% Control, etc. etc. 66% 3％ Vibrations 13% Trafﬁc Prevention of obstruction health 15% impairment Waste due to management Types Response measures (examples) asbestos Industrial 43％ 5％ Safety and Construction material recycling In response to complaints about the noise of a compressor that was set up at a Health Act 16％ Noise designated place outside the building in order to do chipping work inside a building, 10％ Law for promotion of the location of the compressor was changed. effective utilization of resources 11％

In response to complaints about the location where dump trucks and other work Governance Report Traffic vehicles waited in the vicinity of the site, the specialist contractor was directed not obstruction At Taisei Corporation, Site Environmental Patrols are implemented to have trucks on standby, and the site was checked regularly. by the environmental departments at head office and branches to In response to complaints from the neighborhood about noise and vibration during blasting and digging of tunnels, a measuring device was set up and the measure- survey compliance with environmental laws and regulations on Vibrations ments checked regularly to ensure that the noise was below the control values construction sites throughout the Company. Corrective actions agreed upon in discussion with customers. and preventative measures are taken in response to observations In response to comments that the dust produced on the construction site was Dust carried outside the site on the workers’ shoes, the number of mats where workers in order to achieve continuous improvement. could wipe their feet was increased after cleaning up the dust.

At construction sites, we provide our employees and In response to an incident in which water used to rinse paint was released into subcontractors with environmental education based on the Water storm drains and polluted water flowed into a river, measures were taken to pre- Social Report pollution vent recurrence, including thorough implementation of education and appropriate “Operation Manual for Prioritized Environmental Issues” to processing across the Company. help them understand the importance of environmental management and prevent environment-related accidents, Taisei Corporation takes the appropriate measures regarding through measures such as sharing cases leading to environ- complaints related to the environment reported to its mental accidents, raising awareness of the proper manage- construction sites, etc., and maintains records and reports ment of harmful chemicals such as asbestos and PCBs, and using communication sheets based on the EMS procedures thoroughly implementing appropriate management and and communicates across the relevant departments and processing of contaminated soil. companywide when necessary. In FY2016, no accidents or legal violations related to the We also strive to respond appropriately to opinions

environment occurred. received from citizen groups and other organizations. Environmental Report

KPIs Proper Management of Construction Waste Environment Division In order to ensure the proper processing of construction waste, Taisei Corporation has been promoting the use of the electronic manifest (waste transmittal form) in cooperation with outsourcing companies for Improve electronic manifest diffusion rate waste processing, collection and transport companies, and waste disposal companies, and has worked and Corporate DataFinancial to improve the rate of use. Since we have achieved our initial goal of increasing use, the electronic manifest has become a matter for everyday management starting in FY2017, but we are continuing our efforts to 94.7% ensure proper management of waste, including digitalization of subcontracts for industrial waste processing and promotion of the electronic manifest within the Taisei Group.

TAISEI ANNUAL REPORT 2017 72

016_0356501372908.indd 72 2017/08/10 10:36:27 ISO26000 Environmental

Promote Development of Technologies ＷEB

■ Technologies and Initiatives That Are Useful for Solving Environmental Issues

Technologies and initiatives to reduce risks and solve issues concerning the environment are developed and deployed at various stages of the Taisei Group’s business activities, from planning and design to construction, operation, and demolition, and these contribute to reducing the impact on the global environment. Environmental risks and issues influence each other and are profoundly interrelated in various fields such as low carbon, resource recycling, and co-existence with nature (biodiversity). For that reason, the development and deployment of environmentally friendly technologies in any one of these fields contributes to reducing the environmental impact in all, and Taisei Corporation has an important role to play as a socially responsible company involved in the Ｗｅｂ See our website for more details of our environment-related technologies. formation of social capital. http://www.taisei.co.jp/english/environment/

Promote Environmental Activities

■ Implementation of CO2 Zero Action and Eco Model Project ■ ZEB (Zero Energy Building) Proposals

Taisei Corporation has been implementing “CO2 Zero Action,” Starting with the construction of Japan’s first urban Net Zero an initiative to reduce environmental impact in the construction Energy Building, the “ZEB Demonstration Building,” Taisei stage, at all construction sites in Japan and at some Corporation has worked to spread and expand ZEB as an construction sites overseas together with many companies in industry top runner by realizing ZEB in customers’ buildings, the supply chain. In addition, construction sites that carry out among other measures. particularly advanced initiatives are selected as “Eco Model We will continue our Projects,” and further CO2 reduction activities are implemented. efforts to contribute to achieving Japan’s CO2 reduction targets by widely promoting the shift to ZEB in buildings of various purposes, including tenant buildings. Taisei Corporation Technology Center “Eco Model Project” icon for site ZEB Demonstration Building indication

KPIs Providing Environmentally Friendly Technologies Environment Division Taisei Corporation pursues research and development for the prevention of global warming, effective Promote media presentations on utilization of resources, and conservation of biodiversity. In FY2016, we made 30 media research, development and promotion of environmental technologies announcements about environment-related technology and projects that apply it. Main examples include technologies and systems related to ZEB and smart communities, earthquake resistance and seismic isolation technologies and technologies to analyze and evaluate earthquake response, 30Projects purification technologies for contaminated soil or water, and solar lighting systems.

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016_0356501372908.indd 73 2017/08/10 10:36:30 TAISEI Snapshot TAISEI Material Flow and Third-Party Assurance ＷEB

Material Flow of Taisei Group

2 7 Others 26 7 Main Group Companies 12 0.5 18 Steel 132 Gasoline 60 111 Cement Of ces 638 Heavy oil 262 2.0 34 Kerosene 1.4 Fossil fuel Electricity Main construction Water (103KL) Factories (106kWh) materials (103m3) Aggregates (103t)

Construction sites 1,979 Taisei Corporation Management Strategy Diesel (sites) Ready mixed concrete 2,338 1 11 4,833 Taisei Corporation ■ (Consumption) (Non-consolidated) ■7 Main Group Companies INPUT Civil engineering Building Offices CSR Construction

2 OUTPUT 12 8 22 (Quantity discharged) 7 Main Group Companies 7 Main Group Companies 352 121 23 Of ces 219 Scope3 138 67 Factories 71 Scope2

CO2 CO2 by Scope Construction waste Water Governance Report (103t-CO2) (103t-CO2) (103t) (103m3)

26 Construction sites Scope1 Taisei Corporation Taisei Corporation (sites) 2,415 8,172

■Taisei Corporation ■7 Main Group Companies 77

Ｗｅｂ For details on material flow, environmental accounting and third-party assurance, please refer to our website. Social Report Calculation Standard for Material Flow Data

objective Item Calculation Method & Standard Classification by business type Classification into civil engineering and building construction (sites), offices (excluding development projects and others), and factories

CO2 emissions Scope classification Scope 1: CO2 emissions associated with the combustion of fossil fuels Scope 2: Indirect CO2 emissions associated with the use of electricity, steam, and chilled and hot water Scope 3: CO2 emissions associated with the transport of construction waste off construction sites and the outward and return transport of soil from construction (off-site emissions)

CO2 emissions CO2 emission coefficient: Calculated using the emission coefficient in accordance with the Act to Rationalize the Use of Diesel, Heavy Oil, and Energy and the Act on Promotion of Global Warming Countermeasures. For offices, the actual emission coefficient for FY2015 according to the electrical power company is used. Electrical power: Calculated using the 2015 emission coefficient on the user end announced by the Federation of Electrical Power Industries of Japan (before reflecting the Kyoto credit), 0.534t-CO2 / Mwh. City gas: Calculated using the standard calorific value of the gas supply company and the emission coefficient of the Act on Promotion of Global Warming Countermeasures. [Offices and Factories] Energy-related and The annual quantities purchased and used by the offices and factories of the Taisei Group are calculated in monthly units. water consumption

[Civil Engineering and building construction Calculated for each company based on the Taisei Group environmental data manual. Consumption in a two-month period in FY2016 Environmental Report

Material flow-related (sites)] Energy-related and water consumption is sampled at 193 construction sites to calculate the consumption per unit of construction turnover (basic unit). Annual consumption is calculated by multiplying this basic unit by the construction turnover for the year. For civil engineering, this calculation is performed for each construction type. [Civil Engineering and building construction The quantities of the main construction materials and other materials purchased directly through individual construction of Taisei (sites)] Calculation of the main construction Corporation and joint venture construction for which Taisei Corporation is the representative. The same calculation method applies to materials and other materials (concrete the consumption of concrete formworks and alternative formworks. formworks and alternative formworks) purchased. [Civil engineering, building construction Construction by-products (waste and valuable resources) emitted at the sites of the Taisei Group individual construction projects, joint (sites), and factories] Calculation of venture construction for which Taisei Group is the representative, and factories owned by Taisei Group. construction and industrial waste emissions

Data indicated with the mark are the same data as some of those indicated with the mark among data disclosed online in the “CSR Report: Environment.” Of the said, data indicated with the mark (which are the same data as that indicated with the mark online) are subject to third-party assurance by Ernst & Young Sustainability Co., Ltd., whose “Independent Assurance Report” is given below. http://www.taisei.co.jp/english/csr/annual_report_online2017/csr/environment/assurance/index.html ● Organization covered: the Taisei Group (Taisei Corporation, TAISEI ROTEC CORPORATION, Taisei-Yuraku Real Estate Co., Ltd., TAISEI U-LEC CO., LTD., TAISEI SETSUBI CO., Financial and Corporate DataFinancial LTD., TAISEI HOUSING CORPORATION, SEIWA RENEWAL WORKS CO., LTD., and J-FAST Co., Ltd.), which are all within Japan only. Environmental data cover more than 90% of the sales made by the entire Taisei Group. ・ Calculation standard: Calculated based on in-house standards and the Taisei Group’s environmental data calculation manual for the management of environmental information, complying with the Act on the Rational Use of Energy, the Act on Promotion of Global Warming Measures, the Waste Disposal and Public Cleansing Act, and the GHG Protocol, etc. In calculation of CO2 emissions, Taisei Corporation uses the value of the fuel consumption of the Japan Construction Mechanization Association, from which the fat content is excluded. ● Energy-related: Fossil fuels (heavy oil, diesel, gasoline, kerosene), electrical power, city gas, and LPG consumption and their energy-equivalent values.

TAISEI ANNUAL REPORT 2017 74

016_0356501372908.indd 74 2017/08/10 10:36:31 Table of Comparisons for ISO 26000 and GRI Guidelines (As of July 1, 2017)

The following chart is a comparison table of required disclosure categories under “ISO 26000 (guidelines regarding social responsibilities: seven core subjects)” and the GRI “Sustainability Reporting Guidelines 4th Edition (G4),” and publicized content in this report and the website of Taisei Corporation. We are currently working on transition to the GRI standards.

ISO26000 GRI Guidelines

Core subjects and issues Reference Page Items Reference Page Items Reference Page Items Reference Page

6.2 Organization Governance Strategy and Analysis Market Presence Equal Remuneration for Women and Men 6.2.3 42-58 G4-1 15-19 EC5 ─ LA13 ─ 6.3 Human Rights G4-2 13-14,25,27,29,43-46,67 EC6 ─ Supplier Assessment for Labor Practices 6.3.3 Issue 1 62 Organizational Profile Indirect Economic Impacts LA14 58 6.3.4 Issue 2 62 G4-3 114 EC7 ─ LA15 45,58 6.3.5 Issue 3 62 G4-4 7-8,11,13-14 EC8 ─ Labor Practices Grievance Mechanisms 6.3.6 Issue 4 63 G4-5 114 Procurement Practices LA16 ─ 6.3.7 Issue 5 62-63 G4-6 Japan (majority of earnings) EC9 ─ Society(Human Rights) 6.3.8 Issue 6 64 G4-7 11,114 Environment Investment 6.3.9 Issue 7 63 G4-8 11,114,Web (corporate information) Materials HR1 58 6.3.10 Issue 8 62 G4-9 9-12,114 EN1 Web (group material flow) HR2 62 6.4 Labor Practices G4-10 9-12,77-78 EN2 ─ Non-Discrimination 6.4.3 Issue 1 62 G4-11 63 Energy HR3 ─ 6.4.4 Issue 2 63 G4-12 58 EN3 Web (group material flow) Freedom of Association and Collective 6.4.5 Issue 3 ─ G4-13 N/A EN4 ─ Bargaining 6.4.6 Issue 4 63-66 G4-14 42-44,52,72 EN5 ─ HR4 58 6.4.7 Issue 5 63-66 G4-15 7-8,18,42-44 EN6 ─ Child Labor 6.5 The Environment G4-16 N/A EN7 ─ HR5 58,62 6.5.1 Issue 1 67-68 Identified Material Aspects and Boundaries Water Forced or Compulsory Labor 6.5.2 Issue 2 67-68 G4-17 7-8 EN8 Web (group material flow) HR6 58,62 6.5.3 Issue 3 72-73 G4-18 7-8 EN9 ─ Security Practices 6.5.4 Issue 4 70 G4-19 43 EN10 HR7 ─ 6.5.5 Issue 5 69 ─ G4-20 42-48 Biodiversity Indigenous Rights 6.5.6 Issue 6 71 G4-21 42-48 EN11 HR8 ─ 6.6 Fair Operating Practices ─ G4-22 N/A EN12 Assessment 6.6.3 Issue 1 55-56 ─ G4-23 N/A EN13 71 HR9 45,62 6.6.4 Issue 2 55-56 Stakeholder Engagement Supplier Human Rights Assessment 6.6.5 Issue 3 55-56 EN14 ─ G4-24 54 Emissions HR10 58 6.6.6 Issue 4 58 G4-25 54 EN15 45,69,74,Web (group material flow) HR11 45,58 6.6.7 Issue 5 56-57 G4-26 53-54 Human Rights Grievance Mechanisms 6.7 Consumer Issues EN16 45,69,74,Web (group material flow) G4-27 47-48,53-54 HR12 ─ 6.7.3 Issue 1 59-60 EN17 45,69,74,Web (group material flow) Report Profile Society(Society) 6.7.4 Issue 2 59-60 EN18 69 G4-28 7 Local Communities 6.7.5 Issue 3 60 EN19 69,Web (group material flow) G4-29 7 SO1 61 Web (social contribution activities list) 6.7.6 Issue 4 EN20 Web (group material flow) , ─ G4-30 7 SO2 6.7.7 Issue 5 EN21 Web (group material flow) ─ ─ G4-31 7,Back cover Anti-corruption 6.7.8 Issue 6 59-60 Effluents and Waste G4-32 75,Web (third-party assurance) SO3 55 58 6.7.9 Issue 7 EN22 Web (group material flow) , ─ G4-33 Web (third-party assurance) SO4 45 54-55 58 6.8 Community Involvement and Development EN23 70,Web (group material flow) , , Governance EN24 SO5 55,58 6.8.3 Issue 1 61,Web (social contribution activities list) ─ G4-34 43,49-50,83-84 EN25 Web (group material flow) Public Policy 6.8.4 Issue 2 61,Web (social contribution activities list) G4-35 43,20-24 EN26 SO6 ─ 6.8.5 Issue 3 61,Web (social contribution activities list) ─ G4-36 43 Products and Services Anti-competitive Behavior 6.8.6 Issue 4 ー G4-37 43 EN27 45 69 73 SO7 56 6.8.7 Issue 5 61,Web (social contribution activities list) , , G4-38 49-51,83-84 EN28 70 Compliance 6.8.8 Issue 6 ー G4-39 49-51 Compliance SO8 55-56,Web (environmental accounting) 6.8.9 Issue 7 ー G4-40 49-51 EN29 31,68 Supplier Assessment for Impacts on 7.6 Enhancing credibility regarding social responsibility G4-41 49-51 Transport Society 7.6.1 Issue 1 G4-42 43 ー EN30 SO9 58 7.6.2 Issue 2 Web (third-party assurance) G4-43 43 ─ Overall SO10 45-46,58 7.6.3 Issue 3 G4-44 43 ー EN31 Web (environmental accounting) Grievance Mechanisms for Impacts on G4-45 43-46 Supplier Environmental Assessment Society G4-46 43-46 EN32 58 SO11 ─ G4-47 52 EN33 45 58 Society(Product Responsibility) G4-48 43 , Environmental Grievance Mechanisms Customer Health and Safety G4-49 43 EN34 72 PR1 59 G4-50 ─ Social PR2 ─ G4-51 51 Employment Product and Service Labeling G4-52 51 LA1 45 62-63 Web (personnel data) PR3 ─ G4-53 , , ─ LA2 PR4 ─ G4-54 ─ ─ LA3 45 Web (personnel data) PR5 45-46,54,59 G4-55 , ─ Labor/Management Relations Marketing Communications Ethics and Integrity LA4 63 PR6 N/A G4-56 42-44 55-56 , Occupational Health and Safety PR7 N/A G4-57 55 LA5 63 Customer Privacy G4-58 55 LA6 11 45-46 77-78 PR8 45-46,57 Disclosure of Management Approach , , LA7 Compliance DMA 42-48 ─ LA8 63 PR9 ─ Economic Training and Education FS6 ─ Economic Performance LA9 45 FS7 ─ EC1 9-14,45,59 LA10 60,64 FS8 ─ EC2 25,27,29,52,84 LA11 ─ FS10 ─ EC3 ─ Diversity and Equal Opportunity FS11 ─ EC4 ─ LA12 2,11,77-78

75 TAISEI ANNUAL REPORT 2017

016_0356501372908.indd 75 2017/08/10 10:36:31 Financial and Corporate Data

The corporate information of Taisei Corporation is provided, including an outline of the Company and overseas network.

11-Year Financial and Non-Financial Summary p.77 Explanation and Analysis of Business Results p.79 Medium-term Company Management Strategy and Issues to Be Dealt with p.83 Risk Information p.84 Consolidated Financial Statements p.85 Independent Auditor’s Report p.113 Corporate Profile p.114 Overseas Network p.116

TAISEI ANNUAL REPORT 2017 76

017_0356501372908.indd 76 2017/08/08 21:16:48 11-Year Financial and Non-Financial Summary TAISEI CORPORATION and Consolidated Subsidiaries Years ended March 31, 2007 through 2017

Financial Highlights (Consolidated) Thousands of U.S. Dollars*1 Millions of Yen Millions of Yen (except for per (except for per share figures) (except for per share figures) share figures) March 31, 2007 March 31, 2008 March 31, 2009 March 31, 2010 March 31, 2011 March 31, 2012 March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 2017 March 31, 2017 Revenue: Net sales: Construction contracts ¥ 1,673,576 ¥ 1,517,770 ¥ 1,467,070 ¥ 1,289,809 ¥ 1,079,139 ¥ 1,171,927 ¥ 1,254,291 ¥ 1,321,289 ¥ 1,404,530 ¥ 1,394,677 ¥ 1,342,455 $ 11,965,906 Real estate development and other 199,749 193,944 174,112 152,166 138,980 151,577 162,205 212,184 168,740 151,212 144,798 1,290,650 Total 1,873,325 1,711,714 1,641,182 1,441,975 1,218,119 1,323,504 1,416,496 1,533,473 1,573,270 1,545,889 1,487,253 13,256,556 % change from previous year 7.4% (8.6)% (4.1)% (12.1)% (15.5)% 8.7% 7.0% 8.3% 2.6% (1.7%) (3.8%)

Costs and expenses: Cost of sales 1,708,751 1,567,091 1,545,918 1,318,593 1,100,022 1,206,014 1,304,677 1,402,446 1,425,295 1,348,302 1,260,968 11,239,576 Selling, general and administrative expenses 106,901 95,767 95,920 87,755 81,803 81,004 76,213 77,254 77,558 80,119 85,462 761,761 Total 1,815,652 1,662,858 1,641,838 1,406,348 1,181,825 1,287,018 1,380,890 1,479,700 1,502,853 1,428,421 1,346,430 12,001,337 Operating income (loss) 57,673 48,856 (656) 35,627 36,294 36,486 35,606 53,773 70,417 117,468 140,823 1,255,219 Income (loss) before income taxes 48,698 42,172 (38,449) 35,516 19,374 16,673 32,828 46,593 66,980 117,797 135,190 1,205,009 Income taxes 20,248 13,878 (9,404) 14,462 8,514 15,480 12,399 14,120 28,755 40,996 44,793 399,260 Net income (loss) attributable to owners of parent ¥ 26,222 ¥ 24,447 ¥ (24,401) ¥ 21,222 ¥ 10,883 ¥ 1,181 ¥ 20,051 ¥ 32,089 ¥ 38,177 ¥ 77,045 ¥ 90,566 $ 807,256

Per share data of common stock (in yen and dollars): Net assets ¥ 365.72 ¥ 318.12 ¥ 239.87 ¥ 262.15 ¥ 253.94 ¥ 255.60 ¥ 299.84 ¥ 335.42 ¥ 418.61 ¥ 442.67 ¥ 496.60 $ 4.426 Net income (loss) attributable to owners of parent 24.64 22.97 (22.93) 19.74 9.58 1.04 17.60 28.17 33.52 65.85 78.57 0.700 Cash dividends 6.00 6.00 5.00 5.00 5.00 5.00 5.00 6.00 8.00 16.00 20.00 0.178 Financial ratios: Net income (loss) attributable to owners of parent as a percentage of total revenue 1.4% 1.4% (1.5)% 1.5% 0.9% 0.1% 1.4% 2.1% 2.4% 5.0% 6.1% Total costs and expenses as a percentage of total revenue 96.9% 97.1% 100.0% 97.5% 97.0% 97.2% 97.5% 96.5% 95.5% 92.4% 90.5% Dividends paid as a percentage of net income 24.4% 26.1% --- % 25.3% 52.2% 482.3% 28.4% 21.3% 23.9% 24.3% 25.5% Financial position data: Current assets ¥ 1,200,945 ¥ 1,120,798 ¥ 1,082,037 ¥ 912,895 ¥ 847,467 ¥ 982,931 ¥ 1,012,639 ¥ 1,076,213 ¥ 1,136,497 ¥ 1,112,305 ¥ 1,223,572 $ 10,906,248 Current liabilities 1,161,870 1,003,741 1,074,229 894,026 808,052 921,196 907,281 946,097 984,762 927,777 986,994 8,797,522 Net property, plant and equipment 270,682 244,594 236,705 238,534 232,000 212,639 206,076 181,051 169,973 177,529 175,983 1,568,616 Long-term liabilities 276,923 291,550 248,400 250,083 235,607 219,101 292,514 268,802 258,373 211,767 202,271 1,802,933 Shareholders' equity 266,636 283,135 252,905 274,779 290,282 284,714 299,336 327,067 370,140 437,533 485,396 4,326,553 Net assets 421,731 373,988 284,713 297,179 290,598 292,602 343,300 384,166 492,114 521,278 570,814 5,087,922 Other data: New orders received during the year ¥ 1,875,127 ¥ 1,753,692 ¥ 1,524,578 ¥ 1,244,439 ¥ 1,254,095 ¥ 1,379,572 ¥ 1,404,407 ¥ 1,645,896 ¥ 1,765,743 ¥ 1,671,061 ¥ 1,655,036 $ 14,752,082 Contract backlog at the end of year 1,843,576 1,885,554 1,768,950 1,571,414 1,607,390 1,663,459 1,651,370 1,763,793 1,956,266 2,081,438 2,249,221 20,048,320 Shares issued (thousands) 1,064,803 1,064,803 1,064,803 1,090,622 1,140,269 1,140,269 1,140,269 1,140,269 1,171,269 1,171,269 1,146,753

*1 U.S. dollar amounts were translated from yen, for convenience only, at the rate of US $1=¥112.19

Non-Financial Highlights*2

March 31, 2007 March 31, 2008 March 31, 2009 March 31, 2010 March 31, 2011 March 31, 2012 March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 2017 Number of employees (people) 16,052 15,460 15,260 14,461 14,039 13,776 13,569 13,599 13,701 13,748 13,977 Male (people) ------11,685 11,710 11,734 Female (people) ------2,016 2,038 2,243 Japanese (people) ------12,971 12,970 13,259 Non-Japanese (people) ------730 778 718 Frequency rates*2*3 ------0.89 1.00 0.59 0.59 4 3 CO2 emissions* (10 t-CO2) ------333 337 332 Number of patent applications*2 (cases) 164 208 209 219 233 275 304 283 300 316 311

*2 The Target organizations include TAISEI CORPORATION, TAISEI ROTEC CORPORATION, Taisei-Yuraku Real Estate Co., Ltd., TAISEI U-LEC CO., LTD., TAISEI SETSUBI CO., LTD., SEIWA RENEWAL WORKS CO., LTD., and TAISEI HOUSING CORPORATION. *3 The targets of frequency rates are set on the basis of all accidents entailing days off work including a small and medium sized employers and self-employed workers. *4 For target organization of CO2 emissions, please refer to p.74.

77 TAISEI ANNUAL REPORT 2017

017_0356501372908.indd 77 2017/08/08 21:16:49 Thousands of U.S. Dollars*1

Millions of Yen Millions of Yen (except for per Snapshot TAISEI (except for per share figures) (except for per share figures) share figures) March 31, 2007 March 31, 2008 March 31, 2009 March 31, 2010 March 31, 2011 March 31, 2012 March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 2017 March 31, 2017 Revenue: Net sales: Construction contracts ¥ 1,673,576 ¥ 1,517,770 ¥ 1,467,070 ¥ 1,289,809 ¥ 1,079,139 ¥ 1,171,927 ¥ 1,254,291 ¥ 1,321,289 ¥ 1,404,530 ¥ 1,394,677 ¥ 1,342,455 $ 11,965,906 Real estate development and other 199,749 193,944 174,112 152,166 138,980 151,577 162,205 212,184 168,740 151,212 144,798 1,290,650 Total 1,873,325 1,711,714 1,641,182 1,441,975 1,218,119 1,323,504 1,416,496 1,533,473 1,573,270 1,545,889 1,487,253 13,256,556 % change from previous year 7.4% (8.6)% (4.1)% (12.1)% (15.5)% 8.7% 7.0% 8.3% 2.6% (1.7%) (3.8%) Management Strategy Costs and expenses: Cost of sales 1,708,751 1,567,091 1,545,918 1,318,593 1,100,022 1,206,014 1,304,677 1,402,446 1,425,295 1,348,302 1,260,968 11,239,576 Selling, general and administrative expenses 106,901 95,767 95,920 87,755 81,803 81,004 76,213 77,254 77,558 80,119 85,462 761,761 Total 1,815,652 1,662,858 1,641,838 1,406,348 1,181,825 1,287,018 1,380,890 1,479,700 1,502,853 1,428,421 1,346,430 12,001,337 Operating income (loss) 57,673 48,856 (656) 35,627 36,294 36,486 35,606 53,773 70,417 117,468 140,823 1,255,219

Income (loss) before income taxes 48,698 42,172 (38,449) 35,516 19,374 16,673 32,828 46,593 66,980 117,797 135,190 1,205,009 CSR Income taxes 20,248 13,878 (9,404) 14,462 8,514 15,480 12,399 14,120 28,755 40,996 44,793 399,260 Net income (loss) attributable to owners of parent ¥ 26,222 ¥ 24,447 ¥ (24,401) ¥ 21,222 ¥ 10,883 ¥ 1,181 ¥ 20,051 ¥ 32,089 ¥ 38,177 ¥ 77,045 ¥ 90,566 $ 807,256

Per share data of common stock (in yen and dollars): Net assets ¥ 365.72 ¥ 318.12 ¥ 239.87 ¥ 262.15 ¥ 253.94 ¥ 255.60 ¥ 299.84 ¥ 335.42 ¥ 418.61 ¥ 442.67 ¥ 496.60 $ 4.426 Net income (loss) attributable to owners of parent 24.64 22.97 (22.93) 19.74 9.58 1.04 17.60 28.17 33.52 65.85 78.57 0.700 Cash dividends 6.00 6.00 5.00 5.00 5.00 5.00 5.00 6.00 8.00 16.00 20.00 0.178 Financial ratios: Governance Report Net income (loss) attributable to owners of parent as a percentage of total revenue 1.4% 1.4% (1.5)% 1.5% 0.9% 0.1% 1.4% 2.1% 2.4% 5.0% 6.1% Total costs and expenses as a percentage of total revenue 96.9% 97.1% 100.0% 97.5% 97.0% 97.2% 97.5% 96.5% 95.5% 92.4% 90.5% Dividends paid as a percentage of net income 24.4% 26.1% --- % 25.3% 52.2% 482.3% 28.4% 21.3% 23.9% 24.3% 25.5% Financial position data: Current assets ¥ 1,200,945 ¥ 1,120,798 ¥ 1,082,037 ¥ 912,895 ¥ 847,467 ¥ 982,931 ¥ 1,012,639 ¥ 1,076,213 ¥ 1,136,497 ¥ 1,112,305 ¥ 1,223,572 $ 10,906,248 Current liabilities 1,161,870 1,003,741 1,074,229 894,026 808,052 921,196 907,281 946,097 984,762 927,777 986,994 8,797,522 Net property, plant and equipment 270,682 244,594 236,705 238,534 232,000 212,639 206,076 181,051 169,973 177,529 175,983 1,568,616 Long-term liabilities 276,923 291,550 248,400 250,083 235,607 219,101 292,514 268,802 258,373 211,767 202,271 1,802,933 Social Report Shareholders' equity 266,636 283,135 252,905 274,779 290,282 284,714 299,336 327,067 370,140 437,533 485,396 4,326,553 Net assets 421,731 373,988 284,713 297,179 290,598 292,602 343,300 384,166 492,114 521,278 570,814 5,087,922 Other data: New orders received during the year ¥ 1,875,127 ¥ 1,753,692 ¥ 1,524,578 ¥ 1,244,439 ¥ 1,254,095 ¥ 1,379,572 ¥ 1,404,407 ¥ 1,645,896 ¥ 1,765,743 ¥ 1,671,061 ¥ 1,655,036 $ 14,752,082 Contract backlog at the end of year 1,843,576 1,885,554 1,768,950 1,571,414 1,607,390 1,663,459 1,651,370 1,763,793 1,956,266 2,081,438 2,249,221 20,048,320 Shares issued (thousands) 1,064,803 1,064,803 1,064,803 1,090,622 1,140,269 1,140,269 1,140,269 1,140,269 1,171,269 1,171,269 1,146,753 Environmental Report

March 31, 2007 March 31, 2008 March 31, 2009 March 31, 2010 March 31, 2011 March 31, 2012 March 31, 2013 March 31, 2014 March 31, 2015 March 31, 2016 March 31, 2017 Number of employees (people) 16,052 15,460 15,260 14,461 14,039 13,776 13,569 13,599 13,701 13,748 13,977 Male (people) ------11,685 11,710 11,734 Female (people) ------2,016 2,038 2,243 Japanese (people) ------12,971 12,970 13,259 Non-Japanese (people) ------730 778 718 Frequency rates*2*3 ------0.89 1.00 0.59 0.59 and Corporate DataFinancial 4 3 CO2 emissions* (10 t-CO2) ------333 337 332 Number of patent applications*2 (cases) 164 208 209 219 233 275 304 283 300 316 311

TAISEI ANNUAL REPORT 2017 78

017_0356501372908.indd 78 2017/08/08 21:16:49 Explanation and Analysis of Business Results TAISEI CORPORATION and Consolidated Subsidiaries Years ended March 31, 2016 and 2017

Millions of Yen Thousands of U.S. Dollars* (except for per share figures) (except for per share figures)

2016 2017 2017 Change (%) Contract backlog at the beginning of the year ¥ 1,956,266 ¥ 2,081,438 $ 18,552,794 6.4% New orders received during the year 1,671,061 1,655,036 14,752,082 (1.0) Net sales 1,545,889 1,487,253 13,256,556 (3.8) Contract backlog at the end of the year ¥ 2,081,438 ¥ 2,249,221 $ 20,048,320 8.1%

Net income attributable to owners of parent ¥ 77,045 ¥ 90,566 $ 807,256 17.5% Per share (in yen and dollars) 65.85 78.57 0.700 19.3 Cash dividends applicable to the year 18,719 22,907 204,180 22.4 Per share (in yen and dollars) 16.00 20.00 0.178 25.0 Net assets 521,278 570,814 5,087,922 9.5 Per share (in yen and dollars) 442.67 496.6 4.426 12.2 Total assets 1,660,822 1,760,079 15,688,377 6.0

* U.S. dollar amounts above and elsewhere in this Annual Report were translated from yen, for convenience only, at the rate of US $1=¥112.19, the approximate exchange rate at March 31, 2017.

Status of Results

The Japanese economy during this fiscal year continued to recover Under these circumstances, the Company and its affiliated overall as capital investment has been moderately bouncing back companies reported consolidated results of its operations as follows: responding to strong corporate performance, and consumer Orders received of 1,655.0 billion yen, 1.0% decrease spending has been gradually picking up. compared to the previous fiscal year, net sales of 1,487.3 billion In the domestic construction market, both government and yen, 3.8% decrease, operating income of 140.8 billion yen, 19.9% private investments in construction were steady, allowing the increase, and net income attributable to owners of parent of 90.6 construction industry to maintain a solid business environment. billion yen,17.5% increase compared to the previous fiscal year.

Major new orders received during FY ended March 2017

Client Project

JAPAN SPORT COUNCIL New National Stadium Development Project (2nd Period) ➡ p.3-4

Hotel Okura Co.,Ltd. (Tentative Name) Toranomon 2-10 Project ➡ p.30 1 East Nippon Expressway Company Limited Construction Work of the Tokyo Outer Ring Road at Oizumi South Mitsui Fudosan Co., Ltd. Toyosu 2nd District 2-1 Project (Towers A and C) Construction of Wide-area Balancing Reservoir under the Loop Route No.7 Tokyo Metropolitan Government (Shakujii River Section)

Major projects completed during FY ended March 2017

Client Project

Okada Building Co.,Ltd. (Tentative Name) MM59th Town Area B Block Development Plan ➡ p.28 2 Cooperative for Urban Renewal of Roppongi 3-chome East District Urban Renewal of Roppongi 3-chome East District ➡ p.28 1

JAPANESE RED CROSS SOCIETY Construction of SAITAMA RED CROSS HOSPITAL ➡ p.28 6

Urban Renaissance Agency Land Preparation (First Phase) at the Area of Nobiru Northern Hills ➡ p.26 5 Ministry of Land, Infrastructure, Transport and Construction of the Intake of Tunnel Outlet Facility in Redevelopment Tourism Kinki Regional Development Bureau of Amagase Dam ➡ p.26 6

79 TAISEI ANNUAL REPORT 2017

017_0356501372908.indd 79 2017/08/08 21:16:49 Results according to reporting segment, etc., are as follows (the 3. Real Estate Development results for reporting segments include internal transactions between In the real estate sales market, while demand was strong in the segments). condominium market mainly for properties in central Tokyo as sales prices remained high due to the rising cost of land, some

1. Civil Engineering properties in the suburbs took a long time to sell. The building Snapshot TAISEI In our Group, net sales decreased by 1.4% compared with the leasing market was robust, amid improvement in the vacancy previous consolidated fiscal year to ¥449.4 billion, due to a rate as corporate demand related to relocation and expansion of decrease in net sales for both the Company and its consolidated floor space continued to flourish and the average rent continued subsidiaries. Also, operating income increased by 8.8% year on to climb. year to ¥55.1 billion, due to an improvement in gross profit margin. In our Group, net sales decreased by 4.6% compared with the previous consolidated fiscal year to ¥121.7 billion, due to a 2. Building Construction decrease in sales for both the Company and its consolidated In our Group, net sales decreased by 3.7% compared with the subsidiaries. Also, operating income increased by 41.1% year on

previous consolidated fiscal year, to ¥977.7 billion, due to a year to ¥13.3 billion, due to an increase in gross profit margin. Management Strategy decrease in net sales for the Company. Also, operating income increased by 30.1% year on year to ¥73.3 billion, due to an increase 4. Other in gross profit margin. In our Group, net sales decreased by 12.2% compared with the previous consolidated fiscal year to ¥13.0 billion, and operating

income increased by 27.5% year on year to ¥1.2 billion. CSR

(Consolidated) Orders received

Millions of Yen 2016 2017 Name of reporting segment, etc.:

Civil engineering ¥ 444,462 ¥ 427,594

Building construction 1,101,915 1,101,472 Governance Report Real estate development 112,201 115,337

Others 12,482 10,630

Total ¥ 1,671,061 ¥ 1,655,035

(Consolidated) Sales

Millions of Yen

2016 2017 Social Report Name of reporting segment, etc.:

Civil engineering ¥ 433,924 ¥ 422,847

Building construction 978,176 938,548

Real estate development 121,305 115,225

Others 12,482 10,630

Total ¥ 1,545,889 ¥ 1,487,252

Note: In Orders received and Sales, transactions between segments have been eliminated. Environmental Report Financial and Corporate DataFinancial

TAISEI ANNUAL REPORT 2017 80

017_0356501372908.indd 80 2017/08/08 21:16:49 Explanation and Analysis of Business Results TAISEI CORPORATION and Consolidated Subsidiaries Years ended March 31, 2016 and 2017

Cash Flows 1. Cash Flows from Operating Activities 2. Cash Flows from Investing Activities Income before income taxes of ¥135.1 billion was earned in this A balance of excess revenue of ¥6.2 billion was recorded for this term, which, together with an increase in deposits received and consolidated fiscal year due to the sales of investment securities, etc. other factors, resulted in a balance of excess revenue of ¥218.1 (expenditure of ¥25.0 billion in the previous consolidated fiscal year). billion for this consolidated fiscal year (excess revenue in the previous consolidated fiscal year was ¥95.3 billion). 3. Cash Flows from Financing Activities A balance of expenditure of ¥60.0 billion was incurred in this consolidated fiscal year due to cash dividends paid and acquisition of treasury stock, etc. (expenditure of ¥35.1 billion in the previous consolidated fiscal year). Cash Flows Status

（Billions of Yen）■ Cash flows from operating activities 300.0 ■ Cash flows from investing activities ■ Cash flows from financing activities Increase / decrease in cash and cash equivalents 218.1 200.0 163.0 138.7

95.3 100.0 88.5 73.0 24.6 16.0 24.0 34.5 6.2 0 (4.7) (13.9) (30.4) (25.0)(35.1) (46.5) (17.2) (68.8) (60.0) (100.0) 2012 2013 2014 2015 2016 (FY)

As a result of the above, cash and cash equivalents at the end of billion year on year). In addition, of the balance of interest-bearing this consolidated fiscal year was ¥534.7 billion (an increase of loans associated with procurement of finance at the end of this ¥163.0 billion compared with the end of the previous consolidated consolidated fiscal year, non-recourse loans were ¥3.5 billion (a fiscal year), and the balance of interest-bearing loans associated decrease of ¥1.6 billion year on year). with procurement of finance was ¥238.1 billion (a decrease of ¥16.5

Analysis of Financial Position and Business Results 1. Overview 2. Financial Position Although the business results for this consolidated fiscal year did (1) Assets not achieve the predictions at the beginning of the fiscal year for net As a result of an increase in cash and time deposits, total assets sales, predictions were achieved for orders received, operating increased by 6.0% or ¥99.2 billion compared with the end of the income, and net income attributable to owners of parent. Also, as previous consolidated fiscal year to ¥1.7600 trillion. net income attributable to owners of parent increased by ¥13.5 billion from the previous consolidated fiscal year to ¥90.5 billion, (2) Liabilities ROE (return on equity) increased by 1.4% to 16.7%. Total liabilities increased by 4.4% or ¥49.7 billion compared with Despite an increase of ¥1.1892 trillion in liabilities due to an the end of the previous consolidated fiscal year to ¥1.1892 increase in deposits received, net assets increased to ¥570.8 billion trillion, due to an increase in deposits received. due to posting of net income attributable to owners of parent, and the ratio of capital to assets increased by 1.1% compared with the end of the previous consolidated fiscal year to 32.3%. Also, as a result of a decrease in interest-bearing loans associated with procurement of finance by ¥16.5 billion to ¥238.1 billion (including non-recourse loans of ¥3.5 billion, down ¥1.6 billion), the D/E ratio improved 0.1 points to 0.4 times.

81 TAISEI ANNUAL REPORT 2017

017_0356501372908.indd 81 2017/08/08 21:16:49 (3) Net Assets (2) Operating Income Net assets increased by 9.5% or ¥49.5 billion to ¥570.8 billion Operating income increased by 19.9% to ¥140.8 billion compared with the end of the previous consolidated fiscal year, compared with the previous consolidated fiscal year, due to an due to posting of net income attributable to owners of parent, increase in gross profit resulting from an increase in gross margin

etc., despite carrying out an acquisition and cancellation of rates in all segments. Snapshot TAISEI treasury stock. (3) Net Income Attributable to Owners of Parent 3. Business Results Net income attributable to owners of parent increased by 17.5% (1) New Orders and Net Sales to ¥90.5 billion compared with the previous fiscal year, due to the Despite an increase in Real Estate Development, new orders increase in operating income, offsetting deterioration of received have decreased in Building Construction, decreasing extraordinary loss (income) due to losses incurred in relation to the overall by 1.0% compared with the previous consolidated fiscal year Anti-Monopoly Act. to ¥1.6550 trillion.

Also, net sales decreased in all segments, decreasing by 3.8% to Management Strategy ¥1.4872 trillion, compared with the previous consolidated fiscal year. CSR

Dividend Policy The Company has made it a basic policy to pay long-term stable The Articles of Incorporation of the Company permit an interim dividend to Shareholders. The Company tries to reinforce internal dividend to be allocated, in accordance with Paragraph 5 of Article reserve for the future business operation, and returns the profit to 454 of the Companies Act, with dividends allocated twice every the Shareholders by way of a special dividend and the like when year, at the middle and at the end of the fiscal year. These the business performance of the Company is well. dividends are decided at the General Meeting of Shareholders for

Comprehensively taking into account both achievement of the end of term and the Board meeting for the interim dividend. Governance Report much greater performance than the initial plan, and business Also, it is the policy to utilize retained earnings to promote surroundings in the future, etc., it has been decided to increase next generation technology development, etc. the dividend by ¥4 compared with the previous term and the last At the Board meeting on May 12, 2017, acquisition of treasury dividend forecast, or a dividend of ¥20 per year per ordinary share stock, the maximum limitation of which is 40 million shares (¥25.0 is allocated (of which ¥8 is allocated as an interim dividend). billion), was resolved in order to increase shareholder returns and to improve the capital efficiency.

Total dividend amount and dividend per share Social Report Millions of Yen Yen

Total dividend amount Dividend per share

Resolution meeting date:

Board meeting, November 11, 2016 ¥ 9,162 ¥ 8.00

General Meeting of Shareholders, June 29, 2017 13,744 12.00

Note: The dividends on retained at the record date of this term are as shown above. Environmental Report Financial and Corporate DataFinancial

TAISEI ANNUAL REPORT 2017 82

017_0356501372908.indd 82 2017/08/08 21:16:49 Medium-term Company Management Strategy and Issues to Be Dealt with

Although we expect the market environment to remain strong for a while, the outlook is unclear beyond the Tokyo 2020 Olympic and Paralympic Games in light of the decreasing population and financial constraints, and securing and nurturing employees in the construction business is deemed to be a major challenge. Under these circumstances, we are implementing the “Medium-term Business Plan (2015-2017),” and are working with full force toward achieving the management goals listed below. A case of violation of the Anti-Monopoly Act occurred at our group company TAISEI ROTEC CORPORATION. We consider this to be a grave and serious matter, and will strive to prevent recurrence and to restore trust at an early stage by implementing even more rigorous compliance across the Group, including TAISEI ROTEC CORPORATION.

Medium-term Business Plan (FY2015-2017)

Basic Policies Deep Cultivation of the Construction Industry, Our Core Business

Aims

• To obtain high customer satisfaction by ensuring quality and safety • To achieve stable and sustainable growth • To promote conversion to a business structure for creation of higher added value • To obtain high trust and evaluation from all stakeholders

Management Tasks

1. Strategic initiatives for target projects 1. Participation in National Projects 2. Participation in large scale private sector projects 3. Participation in overseas infrastructure export 2. Active contribution to enhancement of social infrastructure 1. Participation in the main infrastructure development for the safety, security, and convenience of the people 2. Participation in projects for stable electrical power supply 3. Active contribution to earthquake reconstruction projects 3. Promotion of next generation technological development 1. Development of construction technologies for the next generation 2. More advanced technologies for dealing with earthquakes 3. Development of technologies for differentiation in fields such as environment, nuclear power, etc. 4. Establishment of next generation business models for target fields 1. Renewal and replacement field 2. Nuclear power field 3. Environmental field 4. Engineering field 5. Urban development field 5. Strengthen domestic construction business 1. Improvement in construction capabilities 2. Strengthen the quality and safety management systems 3. Expansion of design and construct projects 4. Improvement in procurement power 6. Construct the basis for healthy growth of overseas projects 1. Construct systems with a view towards participation in overseas infrastructure exports 2. Promotion of business in areas and fields with good prospects 3. Strengthen the business systems of overseas companies 7. Increase the Group strength 1. Promote Group housing strategy 2. Development of new renewal technologies for seismic retrofit of infrastructure, etc. 3. Strengthening cooperation among group companies in connection with sales, procurement, and construction 8. Evolution of management infrastructure 1. Establishment of corporate governance for the next generation 2. Promotion and improvement of a solid financial foundation 3. Training and strengthening of human resources 4. Promotion of diversity management 5. Utilization of ICT

83 TAISEI ANNUAL REPORT 2017

017_0356501372908.indd 83 2017/08/08 21:16:49 Risk Information

The main items of risk for the business of this Group which are considered to have the potential to have an important effect on the decisions of investors are as follows. The Group recognizes the possibility of occurrence of these risks, and intends to take measures to avoid these risks, and deal with them when they occur. Matters described relating to the future are the judgment of the Group as of the end of this consolidated financial year. TAISEI Snapshot TAISEI

1. Trends in the Construction and Real Estate Markets 7. Fluctuations in Interest Rates If the construction or real estate markets suddenly shrink or if the If interest rates suddenly increased, our results could be affected. competitive environment becomes severe, it could affect out results. 8. Defects on Construction Products or Services 2. Risks Associated with Overseas Projects If we become liable for a large amount of compensation based on We carry out projects in many countries throughout the world, so liability for defects caused by the Group's work or product liability, terrorism, war, violence, etc., could occur, the circumstances in our results could be affected.

the country could worsen, there could be sudden fluctuations in Management Strategy the economic situation, there could be large fluctuations in the 9. Ancillary Related Project Risks exchange rates, and changes in laws and regulations could The Group operates ancillary projects associated with PFI change without notice, and if it is not possible to hedge these projects, leisure projects, as well as civil engineering, building, and risks through the contract, our results could be affected. real estate development projects. The project period for most of

these is long, so if the project environment changes greatly in the CSR 3. Customer Credit Risk future, our results could be affected. Normal contracts in the construction industry involve a large contract amount in a single transaction, and in most cases 10. Legal Controls over the Civil Engineering and Building contracts are concluded on the condition that a large amount of Construction Business the construction fee is paid when the constructed object is The civil engineering business and the building construction handed over. Therefore, if the customer runs into credit problems business are subject to legal controls such as the Construction before the construction fee is received, it could affect out results. Industry Act, the Building Standard Act, the Industrial Safety and Health Act, and the Anti-Monopoly Act, etc., and if these laws or

4. Fluctuations in Material and Equipment Prices regulations were amended or abolished, or if new laws or regulations Governance Report If the price of raw materials suddenly increases, and if it is difficult to were enacted, and if we were subjected to administrative disciplinary reflect this in the contract amount, our results could be affected. action in accordance with these laws or regulations, our results could be affected. 5. Asset Holding Risks Assets such as real estate and tradable securities, etc., are held 11. Occurrence of a Major Accident out of necessity for sales activities, so our results could be If a major accident involving human injury or loss or life or damage affected by fluctuations in the present market price. to a structure occurs in the civil engineering or building construction fields, our results could be affected. Social Report 6. Retirement Benefit Obligations If there are changes in the assumptions for calculating the 12. Large Scale Natural Disaster, etc., Risk retirement benefit obligations, such as a drop in the value of If a large scale earthquake, a large scale natural calamity such as retirement assets, investment yield, discount rate, etc., our results wind or water damage, etc., or if an infectious disease became an could be affected. epidemic, our results could be affected. Environmental Report Financial and Corporate DataFinancial

TAISEI ANNUAL REPORT 2017 84

017_0356501372908.indd 84 2017/08/08 21:16:49 Consolidated Balance Sheets TAISEI CORPORATION and Consolidated Subsidiaries March 31, 2016 and 2017

Thousands of U.S. Dollars Millions of Yen (Note 1) ASSETS 2016 2017 2017

Current assets:

Cash and time deposits (Notes 3 and 4) �� ¥374,193 ¥535,592 $4,773,973

Notes and accounts receivable, trade (Note 4) �� 443,635 420,131 3,744,817

Cost on uncompleted contracts �� 84,549 67,053 597,673

Cost on development projects in progress �� 107,771 102,743 915,795

Other inventories �� 4,009 3,462 30,858

Deferred income tax assets (Note 8) �� 28,072 28,046 249,987

Other current assets �� 70,430 66,843 595,801

Allowance for doubtful accounts �� (354) (298) (2,656)

Total current assets �� 1,112,305 1,223,572 10,906,248

Fixed assets:

Property, plant and equipment:

Buildings and structures (Notes 6, 9 and 20) �� 124,111 123,479 1,100,624

Machinery, vehicles, tools, furniture and fixtures (Notes 6 and 20) �� 53,814 55,071 490,873

Land (Notes 6, 17 and 20) �� 121,155 119,826 1,068,063

Construction in progress �� 255 922 8,218

299,335 299,298 2,667,778

Accumulated depreciation �� (121,806) (123,315) (1,099,162)

Net property plant and equipment �� 177,529 175,983 1,568,616

Intangibles �� 4,875 5,085 45,325

Investments and other assets:

Investment securities (Notes 4, 5 and 6) �� 321,320 309,015 2,754,390

Net defined benefit asset (Note 10) �� 10,944 10,778 96,069

Deferred income tax assets (Note 8) �� 628 3,029 26,999

Other assets (Note 6) �� 36,484 35,082 312,702

Allowance for doubtful accounts �� (3,263) (2,465) (21,972)

Total investments and other assets �� 366,113 355,439 3,168,188

Total fixed assets �� 548,517 536,507 4,782,129

Total assets �� ¥ 1,660,822 ¥ 1,760,079 $ 15,688,377

The accompanying notes are an integral part of these balance sheets.

85 TAISEI ANNUAL REPORT 2017

018_0356501372908.indd 85 2017/08/08 21:18:11 Thousands of U.S. Dollars Millions of Yen (Note 1) LIABILITIES AND NET ASSETS 2016 2017 2017 TAISEI Snapshot TAISEI Current liabilities: Notes and accounts payable, trade (Note 4) �� ¥442,758 ¥424,494 $3,783,706 Short-term loans (Notes 4, 6 and 7) �� 54,341 71,417 636,572 Current portion of long-term debt (Notes 4 and 7) �� 65,000 53,554 477,351 Income taxes payable �� 23,633 31,139 277,556 Advances received and progress billings on uncompleted contracts (Note 14) �� 160,172 175,689 1,565,995 Deposits received (Note 4) �� 120,205 171,132 1,525,377 Allowance for warranty on completed contracts �� 3,316 3,391 30,226

Allowance for losses on construction contracts �� 22,117 15,666 139,638 Management Strategy Allowance for losses on order received �� 43 15 134 Other current liabilities �� 36,192 40,497 360,967 Total current liabilities �� 927,777 986,994 8,797,522 CSR Long- term liabilities: Long-term debt (Notes 4, 6 and 7) �� 136,161 113,928 1,015,491 Deferred income tax liabilities (Note 8) �� 8,262 11,351 101,177 Deferred income tax liabilities for revaluation of land (Notes 8 and 17) �� 4,189 4,184 37,294 Retirement benefits for directors and corporate auditors �� 412 432 3,851 Allowance for losses on investments in subsidiaries and affiliates �� 40 66 588 Allowance for environmental protection �� 119 90 802 Allowance for losses on Anti-Monopoly Act (Note 18) �� — 11,036 98,369

Net defined benefit liability (Note 10) �� 43,926 41,262 367,787 Governance Report Other long-term liabilities �� 18,658 19,922 177,574 Total long-term liabilities �� 211,767 202,271 1,802,933 Total liabilities �� 1,139,544 1,189,265 10,600,455

Net assets (Notes 11 and 21): Shareholders’ equity:

Common stock Social Report Authorized: 2,200,000,000 shares Issued (Note 23): 1,146,752,860 shares �� 122,742 122,742 1,094,055 Capital surplus �� 104,465 85,150 758,980 Retained earnings �� 210,721 278,614 2,483,412 Less: Treasury stock, at cost (Note 23) �� (395) (1,110) (9,894) Total shareholders’ equity �� 437,533 485,396 4,326,553 Accumulated other comprehensive income: Unrealized holding gains on securities, net of taxes �� 85,161 82,463 735,030 Environmental Report Deferred losses on hedging derivatives, net of taxes (Note 13) �� (214) (158) (1,408) Revaluation reserve for land (Note 17) �� 177 773 6,890 Foreign currency translation adjustments �� (2,158) (2,969) (26,464) Remeasurements of defined benefit plans, net of taxes (Note 10) �� (2,624) 3,275 29,191 Total accumulated other comprehensive income �� 80,342 83,384 743,239 Non-controlling interests: �� 3,403 2,034 18,130 Total net assets �� 521,278 570,814 5,087,922 Total liabilities and net assets �� ¥ 1,660,822 ¥ 1,760,079 $ 15,688,377 Financial and Corporate DataFinancial

TAISEI ANNUAL REPORT 2017 86

018_0356501372908.indd 86 2017/08/08 21:18:11 Consolidated Statements of Income TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

Thousands of U.S. Dollars Millions of Yen (Note 1) 2016 2017 2017 Revenue: Net sales (Note 15): Construction contracts �� ¥ 1,394,677 ¥ 1,342,455 $ 11,965,906 Real estate development (and other) �� 151,212 144,798 1,290,650 1,545,889 1,487,253 13,256,556 Costs and expenses (Note 15): Cost of sales (Note 19) �� 1,348,302 1,260,968 11,239,576 Selling, general and administrative expenses (Note 19) �� 80,119 85,462 761,761 1,428,421 1,346,430 12,001,337 Operating income �� 117,468 140,823 1,255,219

Other income (expenses): Interest and dividend income �� 3,652 3,913 34,878 Interest expenses �� (2,796) (2,157) (19,226) Taxes and dues �� (727) (758) (6,756) Litigation settlement �� — (955) (8,513) Foreign exchange gains (losses) �� (4,771) 2,276 20,287 Investment gain on equity method �� 4,448 1,379 12,292 Gains on sales of investment securities �� 19 2,878 25,653 Gains on sales of property and equipment �� 67 552 4,920 Gains on return of assets from retirement benefits trust �� 4,021 — — Impairment losses on fixed assets (Note 20) �� (3,018) (685) (6,106) Losses on Anti-Monopoly Act (Note 18) �� — (11,640) (103,753) Other, net �� (566) (436) (3,886) 329 (5,633) (50,210) Income before income taxes �� 117,797 135,190 1,205,009 Income taxes (Note 8): Current �� (33,332) (45,506) (405,615) Deferred �� (7,664) 713 6,355 (40,996) (44,793) (399,260) Net income �� 76,801 90,397 805,749 Net loss attributable to non-controlling interests �� 244 169 1,507 Net income attributable to owners of parent �� ¥77,045 ¥90,566 $807,256

U.S. Dollars Yen (Note 1) Amounts per share of common stock: Net income (Note 21) �� ¥ 65.85 ¥ 78.57 $ 0.700 Diluted net income (Note 21) �� — — — Cash dividends applicable to the year �� 16.00 20.00 0.178

The accompanying notes are an integral part of these statements.

87 TAISEI ANNUAL REPORT 2017

018_0356501372908.indd 87 2017/08/08 21:18:11 Consolidated Statements of Comprehensive Income TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

Thousands of U.S. Dollars Millions of Yen (Note 1) 2016 2017 2017 TAISEI Snapshot TAISEI

Net income �� ¥ 76,801 ¥ 90,397 $ 805,749

Other comprehensive income (Note 22):

Unrealized holding gains on securities, net of taxes �� (26,048) (2,691) (23,986)

Deferred gains (losses) on hedging derivatives, net of taxes �� (3) 2 18

Revaluation reserve for land �� 233 — — Management Strategy

Foreign currency translation adjustments �� (342) (404) (3,601)

Remeasurements of defined benefit plans, net of taxes �� (12,574) 5,923 52,794

Share of other comprehensive income of associates accounted for by the equity method �� (402) (438) (3,904) CSR

Total other comprehensive income �� (39,136) 2,392 21,321

Comprehensive income �� ¥ 37,665 ¥ 92,789 $ 827,070

Comprehensive income attribute to:

Owners of parent �� ¥ 38,026 ¥ 93,014 $ 829,076

Non-controlling interests �� (361) (225) (2,006) Governance Report The accompanying notes are an integral part of these statements. Social Report Environmental Report Financial and Corporate DataFinancial

TAISEI ANNUAL REPORT 2017 88

018_0356501372908.indd 88 2017/08/08 21:18:11 Consolidated Statements of Changes in Net Assets TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

Millions of Yen Millions of Yen Deferred gains Total Unrealized (losses) on Remeasurements accumulated Total holding gains on hedging Foreign currency of defined benefit other Common Retained shareholders’ securities, net of derivatives, Revaluation translation plans, net of comprehensive Non-controlling Total net stock Capital surplus earnings Treasury stock equity taxes net of taxes reserve for land adjustments taxes income interests assets

Balance at March 31, 2015 �� ¥ 122,742 ¥104,464 ¥ 143,290 ¥(356) ¥ 370,140 ¥111,199 ¥(4) ¥(70) ¥ (1,486) ¥9,974 ¥119,613 ¥ 2,361 ¥ 492,114 Cumulative effect of changes in accounting policies �� — — — — — — — — — — — — — Restated balance at beginning of year �� 122,742 104,464 143,290 (356) 370,140 111,199 (4) (70) (1,486) 9,974 119,613 2,361 492,114 Dividends �� — — (11,699) — (11,699) — — — — — — — (11,699) Net income attributable to owners of parent �� — — 77,045 — 77,045 — — — — — — — 77,045 Sale of treasury stock �� — 1 — 1 2 — — — — — — — 2 Acquisition of treasury stock �� — — — (40) (40) — — — — — — — (40) Retirement of treasury stock �� — — — — — — — — — — — — — Reversal of revaluation reserve for land �� — — (31) — (31) — — (10) — — (10) — (41) Changes of scope of consolidation �� — — 97 — 97 — — — — — — — 97 Changes of scope of equity method �� — — 2,019 — 2,019 7 (255) 24 — (19) (243) — 1,776 Changes other than shareholders’ equity, net �� — — — — — (26,045) 45 233 (672) (12,579) (39,018) 1,042 (37,976) Balance at March 31, 2016 �� ¥ 122,742 ¥ 104,465 ¥ 210,721 ¥(395) ¥ 437,533 ¥85,161 ¥(214) ¥ 177 ¥ (2,158) ¥(2,624) ¥80,342 ¥ 3,403 ¥ 521,278 Cumulative effect of changes in accounting policies �� — — 12 — 12 — — — — — — — 12 Restated balance at beginning of year �� 122,742 104,465 210,733 (395) 437,545 85,161 (214) 177 (2,158) (2,624) 80,342 3,403 521,290 Dividends �� — — (22,032) — (22,032) — — — — — — — (22,032) Net income attributable to owners of parent �� — — 90,566 — 90,566 — — — — — — — 90,566 Sale of treasury stock �� — 0 — 1 1 — — — — — — — 1 Acquisition of treasury stock �� — — — (20,031) (20,031) — — — — — — — (20,031) Retirement of treasury stock �� — (19,315) — 19,315 — — — — — — — — — Reversal of revaluation reserve for land �� — — (596) — (596) — — 596 — — 596 — — Changes of scope of consolidation �� — — 14 — 14 — — — — — — — 14 Changes of scope of equity method �� — — (71) — (71) (2) — — — — (2) — (73) Changes other than shareholders’ equity, net �� — — — — — (2,696) 56 — (811) 5,899 2,448 (1,369) 1,079 Balance at March 31, 2017 �� ¥ 122,742 ¥85,150 ¥ 278,614 ¥ (1,110) ¥ 485,396 ¥82,463 ¥ (158) ¥ 773 ¥ (2,969) ¥3,275 ¥83,384 ¥ 2,034 ¥ 570,814

Thousands of U.S. Dollars (Note 1) Thousands of U.S. Dollars (Note 1) Deferred gains Total Unrealized (losses) on Remeasurements accumulated Total holding gains on hedging Foreign currency of defined benefit other Common Retained shareholders’ securities, net of derivatives, Revaluation translation plans, net of comprehensive Non-controlling Total net Stock Capital surplus earnings Treasury stock equity taxes net of taxes reserve for land adjustments taxes income interests assets Balance at March 31, 2016 �� $ 1,094,055 $ 931,144 $ 1,878,250 $ (3,522) $ 3,899,927 $ 759,078 $(1,907) $1,578 $ (19,235) $ (23,389) $ 716,125 $ 30,332 $ 4,646,384 Cumulative effect of changes in accounting policies �� — — 107 — 107 — — — — — — — 107 Restated balance at beginning of year �� 1,094,055 931,144 1,878,357 (3,522) 3,900,034 759,078 (1,907) 1,578 (19,235) (23,389) 716,125 30,332 4,646,491 Dividends �� — — (196,381) — (196,381) — — — — — — — (196,381) Net income attributable to owners of parent �� — — 807,256 — 807,256 — — — — — — — 807,256 Sale of treasury stock �� — 0 — 9 9 — — — — — — — 9 Acquisition of treasury stock �� — — — (178,545) (178,545) — — — — — — — (178,545) Retirement of treasury stock �� — (172,164) — 172,164 — — — — — — — — — Reversal of revaluation reserve for land �� — — (5,312) — (5,312) — — 5,312 — — 5,312 — — Changes of scope of consolidation �� — — 125 — 125 — — — — — — — 125 Changes of scope of equity method �� — — (633) — (633) (18) — — — — (18) — (651) Changes other than shareholders’ equity, net �� — — — — — (24,030) 499 — (7,229) 52,580 21,820 (12,202) 9,618 Balance at March 31, 2017 �� $ 1,094,055 $ 758,980 $ 2,483,412 $ (9,894) $ 4,326,553 $ 735,030 $ (1,408) $ 6,890 $ (26,464) $29,191 $ 743,239 $ 18,130 $ 5,087,922

The accompanying notes are an integral part of these statements.

89 TAISEI ANNUAL REPORT 2017

018_0356501372908.indd 89 2017/08/08 21:18:12 Millions of Yen Millions of Yen Deferred gains Total Unrealized (losses) on Remeasurements accumulated Total holding gains on hedging Foreign currency of defined benefit other Common Retained shareholders’ securities, net of derivatives, Revaluation translation plans, net of comprehensive Non-controlling Total net Snapshot TAISEI stock Capital surplus earnings Treasury stock equity taxes net of taxes reserve for land adjustments taxes income interests assets

Changes of scope of equity method �� — — 2,019 — 2,019 7 (255) 24 — (19) (243) — 1,776 CSR Changes other than shareholders’ equity, net �� — — — — — (26,045) 45 233 (672) (12,579) (39,018) 1,042 (37,976) Balance at March 31, 2016 �� ¥ 122,742 ¥ 104,465 ¥ 210,721 ¥(395) ¥ 437,533 ¥85,161 ¥(214) ¥ 177 ¥ (2,158) ¥(2,624) ¥80,342 ¥ 3,403 ¥ 521,278 Cumulative effect of changes in accounting policies �� — — 12 — 12 — — — — — — — 12 Restated balance at beginning of year �� 122,742 104,465 210,733 (395) 437,545 85,161 (214) 177 (2,158) (2,624) 80,342 3,403 521,290 Dividends �� — — (22,032) — (22,032) — — — — — — — (22,032) Net income attributable to owners of parent �� — — 90,566 — 90,566 — — — — — — — 90,566 Sale of treasury stock �� — 0 — 1 1 — — — — — — — 1 Acquisition of treasury stock �� — — — (20,031) (20,031) — — — — — — — (20,031) Governance Report Retirement of treasury stock �� — (19,315) — 19,315 — — — — — — — — — Reversal of revaluation reserve for land �� — — (596) — (596) — — 596 — — 596 — — Changes of scope of consolidation �� — — 14 — 14 — — — — — — — 14 Changes of scope of equity method �� — — (71) — (71) (2) — — — — (2) — (73) Changes other than shareholders’ equity, net �� — — — — — (2,696) 56 — (811) 5,899 2,448 (1,369) 1,079 Balance at March 31, 2017 �� ¥ 122,742 ¥85,150 ¥ 278,614 ¥ (1,110) ¥ 485,396 ¥82,463 ¥ (158) ¥ 773 ¥ (2,969) ¥3,275 ¥83,384 ¥ 2,034 ¥ 570,814 Social Report

Thousands of U.S. Dollars (Note 1) Thousands of U.S. Dollars (Note 1) Deferred gains Total Unrealized (losses) on Remeasurements accumulated Total holding gains on hedging Foreign currency of defined benefit other Common Retained shareholders’ securities, net of derivatives, Revaluation translation plans, net of comprehensive Non-controlling Total net Stock Capital surplus earnings Treasury stock equity taxes net of taxes reserve for land adjustments taxes income interests assets Balance at March 31, 2016 �� $ 1,094,055 $ 931,144 $ 1,878,250 $ (3,522) $ 3,899,927 $ 759,078 $(1,907) $1,578 $ (19,235) $ (23,389) $ 716,125 $ 30,332 $ 4,646,384 Cumulative effect of changes in accounting policies �� — — 107 — 107 — — — — — — — 107 Restated balance at beginning of year �� 1,094,055 931,144 1,878,357 (3,522) 3,900,034 759,078 (1,907) 1,578 (19,235) (23,389) 716,125 30,332 4,646,491 Environmental Report Dividends �� — — (196,381) — (196,381) — — — — — — — (196,381) Net income attributable to owners of parent �� — — 807,256 — 807,256 — — — — — — — 807,256 Sale of treasury stock �� — 0 — 9 9 — — — — — — — 9 Acquisition of treasury stock �� — — — (178,545) (178,545) — — — — — — — (178,545) Retirement of treasury stock �� — (172,164) — 172,164 — — — — — — — — — Reversal of revaluation reserve for land �� — — (5,312) — (5,312) — — 5,312 — — 5,312 — — Changes of scope of consolidation �� — — 125 — 125 — — — — — — — 125 Changes of scope of equity method �� — — (633) — (633) (18) — — — — (18) — (651)

Changes other than shareholders’ equity, net �� — — — — — (24,030) 499 — (7,229) 52,580 21,820 (12,202) 9,618 and Corporate DataFinancial Balance at March 31, 2017 �� $ 1,094,055 $ 758,980 $ 2,483,412 $ (9,894) $ 4,326,553 $ 735,030 $ (1,408) $ 6,890 $ (26,464) $29,191 $ 743,239 $ 18,130 $ 5,087,922

TAISEI ANNUAL REPORT 2017 90

018_0356501372908.indd 90 2017/08/08 21:18:12 Consolidated Statements of Cash Flows TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

Thousands of U.S. Dollars Millions of Yen (Note 1) 2016 2017 2017 Cash flows from operating activities: Income before income taxes �� ¥117,797 ¥ 135,190 $ 1,205,009 Depreciation and amortization �� 5,991 6,268 55,870 Impairment losses on fixed assets �� 3,018 685 6,106 Increase (decrease) in allowance for doubtful accounts �� (1,239) (854) (7,612) Increase (decrease) in allowance for losses on construction contracts �� (19,119) (6,451) (57,501) Increase (decrease) in net defined benefit liability �� (12,811) (2,662) (23,728) Increase (decrease) in allowance for losses on Anti-Monopoly Act �� — 11,036 98,369 Interest and dividend income �� (3,652) (3,913) (34,878) Interest expenses �� 2,796 2,156 19,217 Foreign exchange losses (gains) �� 4,771 (2,276) (20,287) Write-down of investment securities �� 304 217 1,934 Gain (Loss) on sale of marketable and investment securities �� (18) (2,787) (24,842) Write-down of cost on development projects in progress �� 2,043 1,371 12,220 Losses (gains) on sales of property and equipment �� (67) (552) (4,920) Investment gain on equity method �� (4,448) (1,378) (12,283) Decrease (increase) in trade receivables �� 47,085 23,431 208,851 Decrease (increase) in cost on uncompleted contract �� (7,243) 17,490 155,896 Decrease (increase) in inventories other than cost on uncompleted contract �� (13,909) 3,091 27,551 Decrease (increase) in other current assets �� 28,305 3,346 29,825 Decrease (increase) in net defined benefit asset �� 25,864 167 1,489 Decrease (increase) in investment and other assets �� 5,938 1,406 12,533 Increase (decrease) in trade payables �� (46,801) (18,138) (161,672) Increase (decrease) in advances received and progress billings on uncompleted contracts �� 22,460 15,540 138,515 Increase (decrease) in deposits received �� (21,806) 50,937 454,024 Decrease (Increase) in other current liabilities �� 7,553 4,977 44,362 Other, net �� (18,319) 13,722 122,311 124,493 252,019 2,246,359 Cash received (paid) during the year for: Interest and dividend received �� 4,435 8,139 72,547 Interest paid �� (2,973) (2,338) (20,840) Income taxes paid �� (30,595) (39,662) (353,525) Net cash provided by (used in) operating activities �� 95,360 218,158 1,944,541

Cash flows from investing activities: Decrease (increase) in time deposits �� (1,319) 1,652 14,725 Purchase of marketable and investment securities �� (17,257) (2,097) (18,692) Proceeds from sale of marketable and investment securities �� 2,811 9,912 88,350 Purchase of property, equipment and intangible assets �� (10,222) (7,227) (64,418) Proceeds from sale of property, equipment and intangible assets �� 487 4,155 37,035 Other, net �� 429 (99) (881) Net cash provided by (used in) investing activities �� (25,071) 6,296 56,119

Cash flows from financing activities: Increase (decrease) in short-term borrowings �� (2,734) 17,076 152,206 Proceeds from long-term borrowings �� 31,100 32,950 293,698 Repayment of long-term borrowings �� (48,710) (54,975) (490,017) Proceeds from long-term non-recourse loans payable �� 1,500 — — Repayment of long-term non-recourse loans payable �� (100) (1,600) (14,262) Issue of bonds �� 9,956 — — Redemption of bonds �� (15,000) (10,000) (89,135) Acquisition of treasury stock �� (40) (20,031) (178,545) Cash dividends paid, including those to minority interest �� (11,699) (22,032) (196,381) Other, net �� 555 (1,449) (12,915) Net cash provided by (used in) financing activities �� (35,172) (60,061) (535,351)

Effect of exchange rate changes on cash and cash equivalents �� (2,310) (1,382) (12,319) Net increase (decrease) in cash and cash equivalents �� 32,807 163,011 1,452,990 Cash and cash equivalents at beginning of year �� 337,166 371,731 3,313,406 Increase (decrease) in cash and cash equivalents resulting from change in scope of consolidation �� 1,758 45 401 Cash and cash equivalents at end of year (Note 3) �� ¥ 371,731 ¥ 534,787 $ 4,766,797

The accompanying notes are an integral part of these statements.

91 TAISEI ANNUAL REPORT 2017

018_0356501372908.indd 91 2017/08/08 21:18:12 Notes to Consolidated Financial Statements TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

1. Basis of Presenting Consolidated Financial Statements The accompanying consolidated financial statements of Taisei Corporation (the “Company”) and its consolidated subsidiaries (collectively the “Group”) have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Law and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.

The accompanying consolidated financial statements have been reformatted and translated into English (with some expanded Snapshot TAISEI descriptions) from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Law. Certain supplementary information, included in the statutory Japanese language consolidated financial statements but not required for fair presentation, is not presented in the accompanying consolidated financial statements. The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers outside Japan, using the prevailing exchange rate at March 31, 2017, which was ¥ 112.19 to U.S. $ 1. The translations should not be construed as representations of what the Japanese yen amounts have been, could have been, or could in the future be when converted into U.S. dollars at this or any other rate of exchange.

2. Summary of Significant Accounting Policies Management Strategy (a) Consolidation and equity method The Company prepares the consolidated financial statements including the accounts of the Company and those of its majority-owned subsidiaries, whether directly or indirectly controlled. The consolidated financial statements include the accounts of 29 subsidiaries for the year ended March 31, 2017 (29 subsidiaries for the year ended March 31, 2016). KYOUTAN CONSTRUCTION Co., LTD. is included in the scope of consolidation because the company became more significant on the consolidated financial statements. SHINSAI BRIDGE LLC. is excluded from the scope of consolidation because of liquidation.

Exclusion of certain small-scale subsidiaries from the scope of consolidation does not have material impact on the consolidated financial CSR statements. All significant intercompany transactions, account balances and unrealized gains or losses have been eliminated in consolidation.

The financial statements of non-consolidated subsidiaries, and investments in affiliated companies in which the Group does not have control but has the ability to exercise significant influence, are accounted for by the equity method. The financial statements in 19 subsidiaries, mainly consist of TOKYO ACADEMIC SERVICE Co., Ltd. and EHIME HOSPITAL PERTNERS Co., Ltd. are accounted for by the equity method for the year ended March 31, 2017. 2 non-consolidated subsidiaries newly established are included in the scope of equity method. Investments in 41 affiliated companies are also accounted for by the equity method for the year ended March 31, 2017 (43 affiliated companies for the year ended March 31, 2016). 1 affiliated company that was newly established is included in the scope of equity method. 1 affiliated company the Group sold its shares partly and other 2 affiliated companies that were liquidated are excluded from the scope of

consolidation. Governance Report Exclusion of certain small-scale non-consolidated subsidiary (TAISEI-TEHRAN BERKELEY ENGINEERING AND CONSTRUCTION COMPANY) from the scope of equity method does not have material effect on the consolidated financial statements. All consolidated subsidiaries other than 9 consolidated overseas subsidiaries have the same balance sheet date, March 31, corresponding with that of the Company. As for the 9 consolidated overseas subsidiaries whose fiscal year ends are December 31, their financial statements as of December 31 are used in the preparation of the consolidated financial statements. Significant transactions, if any, in the period from January 1 to March 31 have been adjusted in the consolidated financial statements.

(b) Valuation of Assets and Liabilities of Subsidiaries In the elimination of the investments in subsidiaries, the assets and liabilities of the subsidiaries including the portion allocated to non-

controlling interests are recorded based on their fair value at the time the Company acquired control of the respective subsidiaries. Social Report

(c) Goodwill Significant excesses of investment cost over net equity of consolidated subsidiaries and affiliated companies accounted for by the equity method are recognized as goodwill (negative goodwill, if credit balance), and amortized principally over the estimated useful lives or less than twenty years on a straight-line basis. However, immaterial goodwill is charged to income in the year of acquisition. Negative goodwill is credited to income upon occurrence.

(d) Foreign Currency Translation Receivables and payables denominated in foreign currencies are translated into Japanese yen at year-end exchange rates. The resulting exchange gains and losses are reflected in the consolidated statements of income. All revenues and expenses associated with foreign currencies are translated at rates of exchange prevailing when such transactions are made. The financial statements of consolidated foreign subsidiaries and affiliated companies under the equity method are translated into

Japanese yen at exchange rates prevailing at the respective year-end dates except for shareholders’ equity accounts, which are translated Environmental Report at historical rates. The resulting foreign currency translation adjustments are presented in accumulated other comprehensive income in the net assets section of the consolidated balance sheets.

(e) Cash and Cash Equivalents in the Consolidated Statements of Cash Flows In preparing the consolidated statements of cash flows, cash on hand, eadilyr available deposits and short-term highly liquid investments with maturities not exceeding three months at the date of purchase and with insignificant risks of change in value are considered to be cash and cash equivalents.

(f) Securities Securities held by the Group are classified into (a) debt securities intended to be held to maturity (hereafter “held-to-maturity debt securities”), (b) equity securities issued by subsidiaries and affiliated companies, and (c) all other securities that are not classified in any of the categories above (hereafter “available-for-sale securities”). Financial and Corporate DataFinancial Held-to-maturity debt securities are stated at amortized cost. Equity securities issued by subsidiaries and affiliated companies that are not consolidated or accounted for by the equity method are stated at moving-average cost. Available-for-sale securities with available fair market values are stated at fair market value. Unrealized gains and losses on available-for-sale securities, net of applicable income taxes are reported as a separate component of accumulated other comprehensive income in the net assets section. Realized gains and losses on sales of such securities are computed using moving-average cost. Other securities with no available fair market value are stated at moving- average cost.

TAISEI ANNUAL REPORT 2017 92

018_0356501372908.indd 92 2017/08/08 21:18:12 Notes to Consolidated Financial Statements (cont.) TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

(g) Revenue Recognition of Construction Revenue associated with construction contracts of which the outcome can be reliably estimated is accounted for by the percentage-of- completion method; otherwise contract revenue is accounted for by the completed-contract method. The percentage of completion at the end of the reporting period is determined by the percentage of the cost incurred to the estimated total costs.

(h) Inventories The Company and its certain subsidiaries develop real estate projects on their own account. Cost on development projects in progress are mainly stated at the lower of cost based on the specific-identification cost method or net realizable value. For this purpose, the cost includes the purchase cost of land, incidental costs, direct development costs and (in relation to certain developments by one of the subsidiaries) interest expenses. Cost on uncompleted contracts is mainly stated at cost based on the specific-identification cost method.

(i) Property, plant and Equipment Property, plant and equipment except for buildings and structures are recorded at cost and depreciated principally by the declining-balance method over the standard useful lives prescribed in the Corporation Tax Law. Buildings and structures are principally depreciated by the straight-line method.

(j) Accounting for Lease Transactions Finance leases, except for certain immaterial or short-term finance leases in which ownership is not transferred to lessee, are capitalized. Capitalized leased assets whose ownership is transferred to lessee are depreciated by the same method of depreciation applied to property, plant and equipment. Capitalized leased assets whose ownership is not transferred to lessee are depreciated to a residual value of zero by the straight-line method over a useful life period corresponding to the lease contract period.

(k) Derivatives and Hedge Accounting Derivative financial instruments are stated at fair value and changes in fair value are recognized as gains or losses unless derivative financial instruments are used for hedging purposes. If derivative financial instruments are used as hedges and meet certain hedging criteria, the Company and its consolidated domestic subsidiaries defer recognition of gains or losses resulting from changes in fair value of the derivative financial instruments until related losses or gains on hedged items are recognized. If interest rate swap contracts are used as hedge and meet certain hedging criteria, net amounts to be paid or received under the interest rate swap contracts are added to or deducted from the interest on liabilities for which the swap contract were executed.

(l) Income Taxes The Company and its wholly owned domestic subsidiaries apply the system of consolidated tax returns. The Company computes the provision for income taxes based on the pretax income included in the consolidated statement of income and recognizes deferred tax assets and liabilities for expected future tax consequences of temporary differences between the financial statement basis and the tax basis of assets and liabilities.

(m) Allowance for Doubtful Accounts Allowance for doubtful accounts is provided to reserve for probable losses from bad debt. It consists of the estimated uncollectible amount of certain identified doubtful receivables and the amount estimated on the basis of the past default ratio for normal receivables.

(n) Allowance for Warranty on Completed Contracts Allowance for warranty on completed contracts is provided as the amount estimated using an actual ratio of related losses during the past certain periods.

(o) Allowance for Losses on Construction Contracts Allowance for losses on construction contracts is provided with respect to construction projects for which eventual losses are reasonably estimated.

(p) Allowance for Losses on Order Received Allowance for losses on order received is provided with respect to orders (excluding construction contracts) for which eventual losses are reasonably estimated.

(q) Retirement Benefits for Directors and Corporate Auditors Retirement benefits for directors and corporate auditors of certain consolidated subsidiaries have been set up in accordance with each company’s regulations.

(r) Allowance for Losses on Investments in Subsidiaries and Affiliates Allowance for losses on investments in subsidiaries and affiliates is provided for estimated losses from certain subsidiaries and affiliates in liquidation.

(s) Allowance for Environmental Protection Allowance for environmental Protection is provided based on estimated costs for disposal of Polychlorinated Biphenyl (“PCB”) waste, which is obligated to dispose by the Act on Special Measures Concerning Promotion of Proper Treatment of PCB Waste.

(t) Allowance for Losses on Anti-Monopoly Act Allowance for losses on Anti-Monopoly Act is provided based on estimated payment for penalties under the Anti-Monopoly Act.

(u) Accounting Method for Retirement Benefit Net defined benefit liability is provided for severance and retirement benefits for employees and executive officers of the Company’s certain consolidated subsidiaries based on estimated amounts of projected benefit obligations and plan assets at the year-end. In calculating projected benefit obligations, the method of attributing estimated amounts of retirement benefits to the period until this fiscal year is based on the benefit formula basis. Past service costs are amortized using the straight-line method (some consolidated subsidiaries use the declining-balance method) over 1-10 years, which is not longer than an average remaining service period of the employees when the costs are incurred. Actuarial gains and losses are amortized from the subsequent fiscal year (some consolidated subsidiaries amortize actuarial gains and losses from the current fiscal year) using the straight line method (some consolidated subsidiaries use the declining balance method) over 1-10 years, which is not longer than an estimated average remaining service period of the employees when the gains or losses are incurred.

93 TAISEI ANNUAL REPORT 2017

018_0356501372908.indd 93 2017/08/08 21:18:12 (v) Net Income and Cash Dividends per Share Net income per share is calculated by dividing net income available to common shares by the weighted average number of common shares outstanding during the year. Cash dividends per share shown for each year represent dividends declared as applicable to the respective years.

(w) Reclassifications Snapshot TAISEI Certain prior year amounts have been reclassified to conform to the current year presentation. These reclassifications have no impact on previously reported results of operations or retained earnings.

(x) Change in Accounting Policy · Application of Implementation Guidance on Recoverability of Deferred Tax Assets Effective from the fiscal year ended March 31, 2017, the Group adopted “Implementation Guidance on Recoverability of Deferred Tax Assets (the “Guidance”)” (ASBJ Guidance No. 26, March 28, 2016) and revised part of accounting method on recoverability of deferred income tax assets. The Company and its domestic subsidiaries followed the provisional treatments in article 49 (4) of the Guidance. The differences between deferred income tax assets and liabilities at the beginning of the fiscal year ended March 31, 2017 that were computed in accordance with article 49 (3) and those at the end of the fiscal year ended March 31, 2016 were adjusted to retained earnings and other comprehensive income at the beginning of the fiscal year ended March 31, 2017. The impact on the consolidated financial statements is Management Strategy immaterial. · Changes in depreciation method Effective from the fiscal year ended March 31, 2017, the Group adopted “Practical Solution on a change in depreciation method due to Tax Reform 2016” (ASBJ PITF No. 32, June 17, 2016) in associated with the amendments to the Japanese Corporation Tax laws. According to this adoption, the Group changed the depreciation method of building facilities and structures acquired after April 1, 2016 from declining- balance method to straight-line method. The impact on the consolidated financial statements is immaterial. CSR

3. Cash and Cash Equivalents Cash and cash equivalents at March 31, 2016 and 2017 consisted of the following: Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Cash and time deposits �� ¥ 374,193 ¥ 535,592 $ 4,773,973 Less: Time deposits with maturities exceeding three months �� (2,462) (805) (7,176) Cash and cash equivalents �� ¥ 371,731 ¥ 534,787 $ 4,766,797 Governance Report

4. Financial Instruments (1) Policies for using financial instruments The Group restricts investments to the low risk assets such as deposits, and raise funds by the indirect finance such as loans from bank as well as by the direct finance such as issuing corporate bonds or commercial papers. Derivative financial instruments are employed mainly for hedging fluctuation in interest rate and foreign currency exchange, and not used to speculate.

Receivables: trade notes and trade accounts are exposed to the credit risks of customers. In order to reduce such risks, the Group conducts Social Report strict credit examinations when orders are received, and afterward manage the receivables individually and make effort to detect reduction of credit risks early. For investment securities which are mainly held-to-maturity debt securities and shares held to keep the relationship with business partners, the Group regularly monitors the fair values or financial positions of the invested companies, and revises the portfolio timely (except for held-to-maturity debt securities) considering the relationship with them. Debts, trade payables: notes and accounts are debts mostly due within one year. Loans, commercial papers and bonds are primarily for working capital, and have maturity dates of five years or less. Although the loans or bonds issued at variable rates are exposed to interest rate fluctuation risk, the risk is hedged by derivative transactions (interest rate swap contracts). The Group primarily utilizes derivative transactions related to interest rates in order to mitigate the fluctuation risk in interest rates or to reduce financing costs, and derivative transactions related to currency in order to mitigate the foreign exchange risk. These transactions are exposed to the fluctuation risk in interest rates and the foreign exchange risk. However, the Group is exposed to limited risk, because most of them are hedged by the corresponding transactions. They consider the credit risk to be low, because they conduct derivative transactions Environmental Report solely with reliable international financial institutions. The Group executes and manages derivative transactions in accordance with internal rules. Their Finance Departments are responsible for conducting, evaluating transactions and managing related risks. Financial and Corporate DataFinancial

TAISEI ANNUAL REPORT 2017 94

018_0356501372908.indd 94 2017/08/08 21:18:12 Notes to Consolidated Financial Statements (cont.) TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

(2) Fair Value of Financial Instruments (a) ‌Book values of the financial instruments included in the consolidated balance sheet, the fair values of said items as of March 31, 2016 and 2017, were as follows. Items for which it is extremely difficult to calculate the fair value were not included in the following table (see “Note 2” below).

Millions of Yen 2016 Book Value Fair Value Difference ASSETS Cash and time deposits �� ¥ 374,193 ¥ 374,193 ¥— Notes and accounts receivable, trade �� 443,635 443,621 (14) Investment securities Debt securities intended to be held to maturity �� 682 703 21 Available-for-sale securities �� 249,879 249,879 — LIABILITIES Notes and accounts payable, trade �� 442,758 442,758 — Short-term loans �� 109,081 109,492 (411) Deposits received �� 120,205 120,205 — Bonds �� 50,000 50,817 (817) Long-term loans �� 95,114 96,306 (1,192) [Derivative financial instruments (*)] �� (2) (2) —

Millions of Yen 2017 Book Value Fair Value Difference ASSETS Cash and time deposits �� ¥ 535,592 ¥ 535,592 ¥— Notes and accounts receivable, trade �� 420,131 420,131 — Investment securities Debt securities intended to be held to maturity �� 570 584 14 Available-for-sale securities �� 243,869 243,869 — LIABILITIES Notes and accounts payable, trade �� 424,494 424,494 — Short-term loans �� 114,701 114,960 (259) Deposits received �� 171,132 171,132 — Bonds �� 40,000 40,526 (526) Long-term loans �� 82,945 83,850 (905) [Derivative financial instruments (*)] �� 22 22 —

Thousands of U.S. dollars 2017 Book Value Fair Value Difference ASSETS Cash and time deposits �� $ 4,773,973 $ 4,773,973 $— Notes and accounts receivable, trade �� 3,744,817 3,744,817 — Investment securities Debt securities intended to be held to maturity �� 5,081 5,205 124 Available-for-sale securities �� 2,173,714 2,173,714 — LIABILITIES Notes and accounts payable, trade �� 3,783,706 3,783,706 — Short-term loans �� 1,022,382 1,024,690 (2,308) Deposits received �� 1,525,377 1,525,377 — Bonds �� 356,538 361,226 (4,688) Long-term loans �� 739,326 747,393 (8,067) [Derivative financial instruments (*)] �� 196 196 —

(*) Note: ‌The assets and liabilities are reported as net amounts. Any items for which the total becomes a net liability are indicated in parentheses.

95 TAISEI ANNUAL REPORT 2017

018_0356501372908.indd 95 2017/08/08 21:18:12 Note 1: The calculation method of the fair values of financial instrument and securities, derivative transactions ASSETS ∙ Cash and time deposits and Notes and accounts receivable, trade The fair values of these financial instruments are almost equivalent to the book value, due to the short term settlements; although, the fair value of receivables due after one year are based on the present values of discounted cash flows reflecting the interest rate, the estimated

collection terms and credit risks with respect to each receivables categorized by collection terms. Snapshot TAISEI · Investment securities The fair values of marketable securities are based on the quoted market value, and bonds are based on the market value, the price indicated by a third party such as broker or the present value of discounted cash flows. See the notes on “5. Securities” for notes pertaining to securities categorized by the purposes for which they are held.

LIABILITIES ∙ Notes and accounts payable, trade, Short-term loans and Long term loans due within one year, Commercial papers and Deposits received The fair values of these financial instruments are almost equivalent to the book value, due to the short term settlements; although, the fair value of long-term loans due within one year is based on the same method as that for long-term loans. ∙ Long-term loans The fair value of long-term loans is based on the present value of discounted cash flows by the interest rate which may be applicable when the same kind of loans is conducted. Management Strategy ∙ Bonds The fair value of marketable bonds is based on the quoted market value, otherwise the fair value of nonmarketable bonds are based on the present value of discounted cash flows by the interest rate reflecting the estimated redemption terms and issuer’s credit risk.

[Derivative financial instruments] See the notes on “13. Derivative Transactions”. CSR Note 2: Financial instruments for which it is deemed to be extremely difficult to calculate the fair value Nonmarketable securities (book value amount to ¥ 70,759 million and ¥ 64,576 million ($ 575,595 thousand) at March 31, 2016 and 2017, respectively) are not included in the Assets Investment securities–Available-for-sale securities above, as it is extremely difficult to calculate the fair values because they have no quoted market prices and the future cash flows cannot be estimated.

Note 3: Scheduled redemption amounts after the consolidated balance sheet date for monetary claims and securities with period of maturities as of March 31, 2016 and 2017 were as follows: Millions of Yen 2016 Due after one year but Due after five years but Due within one year within five years within ten years Governance Report Time deposits �� ¥ 373,739 ¥— ¥— Receivables: Trade notes and trade accounts �� 441,687 1,949 — Investment securities Debt securities intended to be held to maturity Government bonds �� 112 300 270 Available-for-sale securities

Government bonds �� 25 271 — Social Report Others �� 30 — — Total �� ¥ 815,593 ¥ 2,520 ¥ 270

Millions of Yen 2017 Due after one year but Due after five years but Due within one year within five years within ten years Time deposits �� ¥ 535,125 ¥— ¥— Receivables: Trade notes and trade accounts �� 420,127 4 — Environmental Report Investment securities Debt securities intended to be held to maturity Government bonds �� 148 178 244 Available-for-sale securities Government bonds �� 26 245 — Others �� — — — Total �� ¥ 955,426 ¥ 427 ¥ 244 Financial and Corporate DataFinancial

TAISEI ANNUAL REPORT 2017 96

018_0356501372908.indd 96 2017/08/08 21:18:12 Notes to Consolidated Financial Statements (cont.) TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

Thousands of U.S. Dollars 2017 Due after one year but Due after five years but Due within one year within five years within ten years Time deposits �� $ 4,769,810 $— $— Receivables: Trade notes and trade accounts �� 3,744,781 35 — Investment securities Debt securities intended to be held to maturity Government bonds �� 1,319 1,587 2,175 Available-for-sale securities Government bonds �� 232 2,184 — Others �� — — — Total �� $ 8,516,142 $ 3,806 $ 2,175

Note 4: See the notes on “7. Short-term Loans and Long-term Debt” for notes pertaining to the aggregate annual maturities of long term debt after the consolidated balance sheet date.

5. Securities (1) ‌Following tables summarized acquisition costs, book values and fair values of securities with fair values available as of March 31, 2016 and 2017: (a) Held-to-maturity debt securities: ∙ Securities with fair values exceeding book values Millions of Yen 2016 Type Book value Fair value Difference Government bonds �� ¥ 682 ¥ 703 ¥ 21

Millions of Yen Thousands of U.S. Dollars 2017 2017 Type Book value Fair value Difference Book value Fair value Difference Government bonds �� ¥ 570 ¥ 584 ¥ 14 $ 5,081 $ 5,205 $ 124

∙ Securities with book values exceeding fair value Millions of Yen 2016 Type Book value Fair value Difference Government bonds �� ¥ — ¥ — ¥ —

Millions of Yen Thousands of U.S. Dollars 2017 2017 Type Book value Fair value Difference Book value Fair value Difference Government bonds �� ¥ — ¥ — ¥ — $ — $ — $ —

(b) Available-for-sale securities: ∙ Securities with book values exceeding acquisition costs Millions of Yen 2016 Type Book value Acquisition cost Difference Equity securities �� ¥ 239,171 ¥ 113,612 ¥ 125,559 Government bonds �� 296 286 10 Others �� 1,216 742 474 Total �� ¥ 240,683 ¥ 114,640 ¥ 126,043

Millions of Yen Thousands of U.S. Dollars 2017 2017 Type Book value Acquisition cost Difference Book value Acquisition cost Difference Equity securities �� ¥ 227,878 ¥ 107,689 ¥ 120,189 $ 2,031,179 $ 959,881 $ 1,071,298 Government bonds �� 271 264 7 2,415 2,353 62 Others �� 1,045 641 404 9,315 5,713 3,602 Total �� ¥ 229,194 ¥ 108,594 ¥ 120,600 $ 2,042,909 $ 967,947 $ 1,074,962

97 TAISEI ANNUAL REPORT 2017

018_0356501372908.indd 97 2017/08/08 21:18:12 ∙ Securities with acquisition cost exceeding book values Millions of Yen 2016 Type Book value Acquisition cost Difference

Equity securities �� ¥ 9,182 ¥ 12,524 ¥ (3,342) Snapshot TAISEI Government bonds �� 1 1 (0) Others �� 13 14 (1) Total �� ¥ 9,196 ¥ 12,539 ¥ (3,343)

Millions of Yen Thousands of U.S. Dollars 2017 2017 Type Book value Acquisition cost Difference Book value Acquisition cost Difference Equity securities �� ¥ 14,562 ¥ 16,328 ¥ (1,766) $ 129,798 $ 145,539 $ (15,741) Government bonds �� 0 0 (0) 0 0 (0) Management Strategy Others �� 114 114 (0) 1,016 1,016 (0) Total �� ¥ 14,676 ¥ 16,442 ¥ (1,766) $ 130,814 $ 146,555 $ (15,741)

(2) Total sales of available-for-sale securities and the related gains and losses for the years ended March 31, 2016 and 2017 were as follows: Millions of Yen CSR 2016 Type Equity securities Others Total Total amount of available-for-sale securities sold �� ¥ 185 ¥ 12 ¥ 197 Gains on sales of available-for-sale securities �� 11 8 19 Losses on sales of available-for-sale securities �� 1 — 1

Millions of Yen Governance Report 2017 Type Equity securities Others Total Total amount of available-for-sale securities sold �� ¥ 6,999 ¥ 30 ¥ 7,029 Gains on sales of available-for-sale securities �� 2,878 0 2,878 Losses on sales of available-for-sale securities �� 90 — 90 Social Report

Thousands of U.S. Dollars 2017 Type Equity securities Others Total Total amount of available-for-sale securities sold �� $ 62,385 $ 268 $ 62,653 Gains on sales of available-for-sale securities �� 25,653 0 25,653 Losses on sales of available-for-sale securities �� 802 — 802 Environmental Report (3) Impairment losses on securities The Group recognized impairment losses on the following securities for the years ended March 31, 2016 and 2017 were as followings: Thousands of Millions of Yen U.S. Dollars Type 2016 2017 2017 Write-down of investment securities �� ¥ 304 ¥ 217 $ 1,934 Financial and Corporate DataFinancial

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018_0356501372908.indd 98 2017/08/08 21:18:12 Notes to Consolidated Financial Statements (cont.) TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

6. Pledged Assets (1) The following assets were pledged as liabilities at March 31, 2016 and 2017: Secured liabilities Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Long-term non-recourse loans payable �� ¥ 4,550 ¥ 2,950 $ 26,295 Long-term loans �� 1,600 1,600 14,261 Non- recourse bonds payable �� 500 500 4,457 Short-term non-recourse loans payable �� 100 100 891 Short-term loans �� 630 — — Total �� ¥ 7,380 ¥ 5,150 $ 45,904

Asset pledged Millions of Yen Thousands of U.S. Dollars 2016 2017 2017

Land �� ¥8,143 ¥ 6,311 $ 56,253

Buildings and structures (net of accumulated depreciation) �� 6,103 1,236 11,017

Machinery, vehicles, tools, furniture and fixtures (net of accumulated depreciation) �� 20 7 62 Total �� ¥ 14,266 ¥ 7,554 $ 67,332

(2) ‌The following assets were pledged principally as collateral for loans of companies which were not consolidated at March 31, 2016 and 2017: Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Investment securities �� ¥ 2,105 ¥ 3,173 $ 28,282 Other assets �� 1,589 1,593 14,200 Total �� ¥ 3,694 ¥ 4,766 $ 42,482

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018_0356501372908.indd 99 2017/08/08 21:18:12 7. Short-term Loans and Long-term Debt Short-term loans at March 31, 2016 and 2017 mainly consisted of short-term notes and overdrafts from banks. The weighted average interest rates of short-term loans at March 31, 2016 and 2017 were 0.6% and 0.5%, respectively.

The Group has had no difficulty in renewing such notes and overdraft facility agreements, when they considered such renewal advisable. TAISEI Snapshot TAISEI Long-term debt at March 31, 2016 and 2017 consisted of the following: Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Bonds and notes: Issued by the Company: 0.80% yen bonds due in 2016 �� ¥10,000 ¥— $— 1.58% yen bonds due in 2017 �� 10,000 10,000 89,134 1.146% yen bonds due in 2018 (*1) �� 500 500 4,457

0.66% yen bonds due in 2018 �� 10,000 10,000 89,134 Management Strategy 0.67% yen bonds due in 2020 �� 10,000 10,000 89,134 0.527% yen bonds due in 2022 �� 10,000 10,000 89,134 Loans, principally from banks and insurance companies: Secured loans (*2) �� 7,380 5,150 45,905

Unsecured loans �� 142,474 121,079 1,079,232 CSR Capital lease �� 807 753 6,712 201,161 167,482 1,492,842 Amount due within one year �� (65,000) (53,554) (477,351) Total long-term debt (due after one year) �� ¥ 136,161 ¥ 113,928 $ 1,015,491 (*) Notes 1: This bonds are non-recourse liabilities for the Group. 2: ‌These loans as of March 31, 2016 and 2017 include ¥ 4,650 million and ¥ 3,050 million ($ 27,186 thousand) of non-recourse loans payable for the Group, respectively.

The annual interest rates applicable to long-term loans due within one year averaged 1.3% and 1.1% as of March 31, 2016 and 2017, respectively, and the annual interest rates applicable to long-term loans due after one year averaged 0.9% and 0.7% as of March 31, 2016 Governance Report and 2017. The aggregate annual maturities of long-term debt (including current portion) at March 31, 2017 were summarized as follows: Year ending March 31, Millions of Yen Thousands of U.S. Dollars 2018 �� ¥53,554 $477,351 2019 �� 27,804 247,830 2020 �� 24,807 221,116 2021 �� 30,848 274,962 Social Report 2022 �� 11,941 106,435 2023 and thereafter �� 18,528 165,148 Total �� ¥ 167,482 $ 1,492,842

The Company has a commitment line provided by co-financing consisting of several correspondent financial institutions for the purpose of securing financing in case of an emergency. The commitment line amounts as of March 31, 2016 and 2017 were ¥ 50,000 million and ¥ 50,000 million ($ 445,673 thousand), respectively, although there was no amount of corresponding loans as of March 31, 2016 and 2017. Environmental Report Financial and Corporate DataFinancial

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018_0356501372908.indd 100 2017/08/08 21:18:12 Notes to Consolidated Financial Statements (cont.) TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

8. Income Taxes Taxes on income consist of corporation, enterprise and inhabitants taxes.

The following table summarized the significant differences between the statutory tax rate and the Company’s effective tax rate for financial statement purposes for the year ended March 31, 2016 and 2017.

2016 2017 Statutory tax rate �� 33.1% 30.9%

Permanent differences: Non-deductible expenses �� 2.8 3.8 Non-taxable income �� (1.8) (0.4) Per capita inhabitant tax and others �� 0.5 0.4 Changes in valuation reserve �� (0.2) 0.3 Effect of enacted changes in tax laws and rates on Japanese tax �� 2.1 0.0 Share of profit of entities accounted for using equity method �� (1.3) (0.3) Others �� (0.4) (1.6) Effective tax rate �� 34.8% 33.1%

Significant components of deferred income taxes at March 31, 2016 and 2017 were as follows: Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Deferred income tax assets: Disallowed portion of expenses and losses: Net defined benefit liability �� ¥38,420 ¥37,312 $332,579 Inventories �� 18,567 15,020 133,880 Accrued bonuses �� 5,261 6,979 62,207 Fixed assets �� 5,035 4,991 44,487 Advances received �� 832 2,276 20,287 Others �� 9,563 8,522 75,961 Tax loss carryforward �� 160 519 4,626 Unrealized profits �� 7,433 7,497 66,824 Sub-total �� 85,271 83,116 740,851 Valuation allowance �� (4,065) (3,861) (34,415) Total �� 81,206 79,255 706,436

Deferred income tax liabilities: Unrealized holding gains on securities �� (37,525) (36,347) (323,977) Gains on securities contribution to employee retirement benefit trust �� (17,711) (17,711) (157,866) Net defined benefit asset �� (4,471) (4,272) (38,079) Others �� (1,061) (1,201) (10,705) Total �� (60,768) (59,531) (530,627) Net total �� ¥20,438 ¥19,724 $175,809

In addition to the deferred income taxes shown above, deferred tax liabilities concerning revaluation of land amounting to ¥ 4,189 million at March 31, 2016 and ¥ 4,184 million ($ 37,294 thousand) at March 31, 2017 were included in the consolidated balance sheets.

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018_0356501372908.indd 101 2017/08/08 21:18:12 9. Investment and Rental Property (1) ‌The Company and certain consolidated subsidiaries hold some office buildings for entr in Tokyo and other areas. The rental income on office buildings for rent was ¥ 2,696 million and ¥ 2,708 million ($ 24,138 thousand) at the year ended on March 31, 2016 and 2017, respectively. Rental income is mainly booked in Net sales: Real estate development and other, and rental cost is mainly booked in Cost of sales. TAISEI Snapshot TAISEI (2) ‌The amounts of investment and rental property which booked in consolidated balance sheets, the amounts of increase or decrease, and fair value at March 31, 2016 and 2017 were as follows: Millions of Yen 2016 Book value Fair value April 1, 2015 Increase (decrease) March 31, 2016 March 31, 2016 ¥ 51,138 ¥ 10,192 ¥ 61,330 ¥ 69,220

Millions of Yen Management Strategy 2017 Book value Fair value April 1, 2016 Increase (decrease) March 31, 2017 March 31, 2017 ¥ 61,330 ¥ (4,637) ¥ 56,693 ¥ 63,452 CSR Thousands of U.S. Dollars 2017 Book value Fair value April 1, 2016 Increase (decrease) March 31, 2017 March 31, 2017 $ 546,662 $ (41,332) $ 505,330 $ 565,576

Note 1: The carrying amount is stated at cost of acquisition less accumulated depreciation and impairment losses. Note 2: ‌The main reasons of increase for the years ended March 31, 2016 were the amounts regarding the change in scope of consolidation ¥ 7,686 million and purchases of fixed assets ¥ 3,474 million. The main reasons of decrease for the years ended March 31, 2017

were the amounts regarding the liquidation of consolidated subsidiary ¥ 2,968 million ($ 26,455 thousand). Governance Report Note 3: ‌The book value at March 31, 2016 and 2017 included asset retirement obligations of ¥ 226 million and ¥ 219 million ($ 1,952 thousand), respectively. Note 4: ‌The fair value of investment and rental property as of March 31, 2016 and 2017 were mainly calculated by the Company according to the appraisal standard of real-estate (including those which were adjusted by the land price index, if any).

10. Employees’ Severance and Retirement Benefits 1. ‌The Company and its main consolidated subsidiaries have adopted the defined-benefit pension plans and defined-contribution pension

plans. The defined-benefit pension plans adopted consist of defined-benefit corporate pension plans and lump-sum payment plans. Social Report Liabilities and expenses for severance and retirement benefits of the Company and its consolidated domestic subsidiaries are determined based on amounts obtained by actuarial calculations. The Company may also pay additional retirement benefits which are not subject to actuarial calculation. The Company has established a retirement benefit trust.

2. Defined-benefit pension plans (1) Movement in retirement benefit obligations Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Balance at beginning of the year �� ¥ 149,626 ¥ 147,980 $ 1,319,013

Current service cost �� 6,011 6,224 55,477 Environmental Report Interest cost �� 1,527 937 8,352 Actuarial loss (gain) �� 4,682 1,561 13,914 Benefits paid �� (11,765) (11,050) (98,494) Past service costs �� (25) (122) (1,087) Other �� (2,076) 112 998 Balance at end of the year �� ¥ 147,980 ¥ 145,642 $ 1,298,173

Some of the consolidated subsidiaries use simplified method for the calculation of retirement benefit obligations. Retirement benefit expenses in the consolidated subsidiaries applying simplified method are recorded in current service cost.

and Corporate DataFinancial

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018_0356501372908.indd 102 2017/08/08 21:18:13 Notes to Consolidated Financial Statements (cont.) TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

(2) Movements in plan assets Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Balance at beginning of the year �� ¥ 129,686 ¥ 114,998 $ 1,025,029 Expected return on plan assets �� 1,786 1,568 13,976 Actuarial loss (gain) �� (8,743) 5,884 52,447 Contributions paid by the employer �� 1,209 1,039 9,261 Benefits paid �� (7,333) (6,870) (61,235) Other �� (1,607) (1,462) (13,032) Balance at end of the year �� ¥ 114,998 ¥ 115,157 $ 1,026,446

(3) Reconciliation from retirement benefit obligations and plan assets to net defined benefit liability (asset) Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Funded retirement benefit obligations �� ¥145,375 ¥142,938 $1,274,071 Plan assets �� (114,998) (115,158) (1,026,455) 30,377 27,780 247,616 Unfunded retirement benefit obligations �� 2,605 2,704 24,102 Net total at year-end �� 32,982 30,484 271,718

Net defined benefit liability �� 43,926 41,262 367,787 Net defined benefit asset �� (10,944) (10,778) (96,069) Net total at year-end �� ¥32,982 ¥30,484 $271,718

(4) Retirement benefit costs Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Current service cost �� ¥6,011 ¥6,225 $55,486 Interest cost �� 1,527 937 8,352 Expected return on plan assets �� (1,786) (1,568) (13,976) Net actuarial loss amortization �� 733 5,480 48,846 Past service costs amortization �� (1,765) (1,393) (12,416) Other �� (7) 53 472 Total retirement benefit costs for the year �� ¥4,713 ¥9,734 $86,764

(5) Remeasurements of defined benefit plans Items recorded in remeasurements of defined benefit plans, before tax were as follows: Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Past service costs �� ¥(1,740) ¥ (1,271) $ (11,329) Actuarial gains and losses �� (16,714) 9,803 87,379 Total balance at March 31, 2016 and 2017 �� ¥ (18,454) ¥8,532 $76,050

(6) Accumulated remeasurements of defined benefit plans Items recorded in accumulated remeasurements of defined benefit plans (before considering tax effect) were as follows: Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Unrecognized past service costs �� ¥ (8,476) ¥ (7,205) $ (64,221) Unrecognized actuarial gains and losses �� 12,217 2,414 21,517 Total balance at March 31, 2016 and 2017 �� ¥3,741 ¥ (4,791) $ (42,704)

103 TAISEI ANNUAL REPORT 2017

018_0356501372908.indd 103 2017/08/08 21:18:13 (7) Plan assets 2016 2017 ( i ) Plan assets comprise: Equity securities �� 40% 45%

Bonds �� 22 20 Snapshot TAISEI General accounts �� 20 19 Special accounts �� 3 3 Short-term assets �� 3 1 Other �� 12 12 Total �� 100% 100%

The retirement benefit trust established for corporate pension plans accounted for 33% and 36% of total plan assets, for the fiscal year ended March 31, 2016 and 2017, respectively.

( ii ) Long-term expected rate of return Current and target asset allocations, historical and expected returns on various categories of plan assets have been considered in Management Strategy determining the long-term expected rate of return.

(8) Actuarial assumptions The principal actuarial assumptions at March 31, 2016 and 2017 were as follows: 2016 2017 CSR Discount rate The Company and its consolidated domestic subsidiaries �� 0.4∼1.5 0.5∼1.5 Consolidated overseas subsidiaries �� 5.0∼9.0 5.7∼8.5 Long-term expected rate of return �� 1.0∼3.5 0.8∼3.5

3. Defined-contribution pension plans Amount payable for defined-contribution pension plans of the Company and its consolidated subsidiaries were ¥ 2,330 million and ¥ 2,436 million ($ 21,713 thousand), for the fiscal year ended March 31, 2016 and 2017, respectively. Governance Report 11. Net Assets Net assets comprise three subsections; which are shareholders’ equity, accumulated other comprehensive income and non-controlling interests. Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated as common stock. However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half of the price of the new shares as additional paid-in capital, which is included in capital surplus. Under the Japanese Corporate Law (“the Law”), when a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying consolidated balance sheets. Under the Law, appropriations of legal earnings reserve and additional paid-in capital generally require a resolution of the shareholders’ Social Report meeting. Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, however, all additional paid-in capital and all legal earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends. The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of the Company in accordance with the Law. The number of treasury stock owned by the Company, consolidated subsidiaries and affiliated companies adopting the equity method as of March 31, 2016 and 2017 were 1,371 thousand shares and 1,408 thousand shares, respectively.

12. Lease Transactions Environmental Report Operating leases (a) Lessee Future minimum lease payments as of March 31, 2016 and 2017 were as follows: Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Due within one year �� ¥4,245 ¥4,327 $38,569 Due after one year �� 23,432 23,360 208,218 Total �� ¥ 27,677 ¥ 27,687 $ 246,787

(b) Lesser and Corporate DataFinancial Future minimum lease receipts as of March 31, 2016 and 2017 were as follows: Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Due within one year �� ¥4,277 ¥3,913 $34,878 Due after one year �� 23,472 20,325 181,166 Total �� ¥ 27,749 ¥ 24,238 $ 216,044

TAISEI ANNUAL REPORT 2017 104

018_0356501372908.indd 104 2017/08/08 21:18:13 Notes to Consolidated Financial Statements (cont.) TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

13. Derivative Transactions (1) Derivative transactions of the Company and its consolidated subsidiaries as of March 31, 2016 and 2017 were as follows:

( i ) Derivative transactions which were not accounted for by the hedge accounting · Currency-related transactions

(a) Over-the counter transactions Millions of Yen 2016 Contract amount Due after Unrealized gain Forward foreign exchange contract (long commitment) Total one year Fair value (loss) to buy US dollar �� ¥ 35,002 ¥ — ¥ 2 ¥ 2

Millions of Yen 2017 Contract amount Due after Unrealized gain Forward foreign exchange contract (long commitment) Total one year Fair value (loss) to buy Qatari Riyal �� ¥ 6,558 ¥ — ¥ 23 ¥ 23

Thousands of U.S. Dollars 2017 Contract amount Due after Unrealized gain Forward foreign exchange contract (long commitment) Total one year Fair value (loss) to buy Qatari Riyal �� $ 58,454 $ — $ 205 $ 205

Note: Fair value was determined at the quoted price obtained from the counterparty financial institutions.

( ii ) Derivative transactions which were accounted for by the hedge accounting as of March 31, 2016 and 2017 were as follows: ∙ Currency related transactions Main items hedged by forward foreign exchange contracts are accounts payable for construction contracts.

Millions of Yen 2016 Contract amount Forward foreign exchange contract (short commitment) Total Due after one year Fair value to sell US dollar �� ¥ 35 ¥ — ¥ (3) to sell Euro �� 14 — (1) Total �� ¥ 49 ¥ — ¥ (4)

Millions of Yen 2017 Contract amount Forward foreign exchange contract (short commitment) Total Due after one year Fair value to sell Euro �� ¥ 17 ¥ — ¥ (0)

Thousands of U.S. Dollars 2017 Contract amount Forward foreign exchange contract (short commitment) Total Due after one year Fair value to sell Euro �� $ 152 $ — $ (0)

Note: Fair value was determined at the quoted price obtained from the counterparty financial institutions.

105 TAISEI ANNUAL REPORT 2017

018_0356501372908.indd 105 2017/08/08 21:18:13 ∙ Interest Rate-Related Derivatives: Main items hedged by interest rate swap contracts are long-term debts. The following interest rate swaps are used as hedges. The net amounts to be paid or received are added to or deducted from interests.

Special treatment of swap

Millions of Yen Snapshot TAISEI 2016 Contract amount Total Due after one year Fair value Interest rate swaps receive floating rate, pay fixed rate �� ¥ 100,910 ¥ 70,590 ¥ —

Millions of Yen 2017 Contract amount Management Strategy Total Due after one year Fair value Interest rate swaps receive floating rate, pay fixed rate �� ¥ 64,590 ¥ 36,400 ¥ —

Thousands of U.S. Dollars 2017 CSR Contract amount Total Due after one year Fair value Interest rate swaps receive floating rate, pay fixed rate �� $ 575,720 $ 324,450 $ — Note: ‌Fair value of interest rate swaps was included in the corresponding hedged long-term debt (long-term debt due within one year was considered as short-term debt) as those interest rate swaps were recorded as an adjustment to the corresponding hedged long-term debt under the special treatment.

14. Related Party Transactions

The Company had no transaction with related individuals, including shareholders and directors, for the year ended March 31, 2017. Governance Report Information for the year ended March 31, 2016 is as follows: Millions of yen

(a) Name 2016 (b) Attribution Transactions during the year ended March 31, 2016 Balance at the end of the year (c) Capital (Million yen) (d) ‌Equity ownership percentage of the Description of Company transaction Amount Account Amount (a) ‌Assets contribution to retirement Partial reimbursement ¥ 21,969 — ¥ — benefit trust of assets Social Report (b) Assets of corporate pension plan (c) — (d) —

The Company’s consolidated subsidiaries had no transaction with related individuals, including shareholders and directors, for the year ended March 31, 2016. Information for the year ended March 31, 2017 is as follows: Millions of yen

(a) Name 2017 (b) Attribution Transactions during the year ended March 31, 2017 Balance at the end of the year (c) Capital (Million yen) (d) ‌Equity ownership percentage of the Description of Company transaction Amount Account Amount Environmental Report (a) Takashi Yamauchi House renovation ¥ 19 — ¥ — (b) The director of the Corporation work by Taisei (c) — Housing Co., Ltd. (d) 0.02% (a) Hajime Tanabe Housing construction ¥ 66 Advances received ¥ 20 (b) ‌Close relative of the director of the by Taisei Housing and progress billings Corporation Co., Ltd. on uncompleted (c) — contracts (d) — Financial and Corporate DataFinancial

TAISEI ANNUAL REPORT 2017 106

018_0356501372908.indd 106 2017/08/08 21:18:13 Notes to Consolidated Financial Statements (cont.) TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

Thousands of U.S. Dollars

(a) Name 2017 (b) Attribution Transactions during the year ended March 31, 2017 Balance at the end of the year (c) Capital (Million yen) (d) ‌Equity ownership percentage of the Description of Company transaction Amount Account Amount (a) Takashi Yamauchi House renovation $ 169 — $ — (b) The director of the Corporation work by Taisei (c) — Housing Co., Ltd. (d) 0.02% (a) Hajime Tanabe Housing construction $ 588 Advances received $ 178 (b) ‌Close relative of the director of the by Taisei Housing and progress billings Corporation Co., Ltd. on uncompleted (c) — contracts (d) —

Notes 1. Consumption taxes were not included in the transaction amounts. 2. Transaction conditions and policies to decide transaction conditions (1) ‌The purchase price of land was determined on an arm’s length basis considering the market price. The amount of transaction above represents the price on the contract for sales of real estate. (2) ‌Transaction condition including the contract price was determined properly on an arm’s length basis as in the case of other general transactions. The amount of transaction above represents the contract price on the construction contract.

15. Segment Information (1) Segment information (a) General information on reportable segments Each reportable segment of the Group is a business unit in the Group, whose discrete financial information is available. Reportable segments are reviewed periodically at the Board of Directors Meeting in order to determine distribution of management resources and evaluate business result of each reportable segment.

The headquarters in the head office are established by the products of construction and the services. Each headquarter proposes comprehensive domestic and oversea strategies with respect to products and services, and operates its business activities.

The Group consists of segments identified by products and services based on the headquarters, and identifies the three segments, “Civil engineering,” “Construction contracts,” and “Real estate development” as reportable segments: “Civil engineering” delivering construction of civil engineering, etc.; “Construction contracts” delivering construction of building and housing, etc.; “Real estate development” delivering purchase, sale and rental of land and buildings, etc.

(b) Basis of measurement of net sales, profit or loss and other material items on reportable segment The accounting methods for each reportable segment are the same as that set forth in the “Summary of Significant Accounting Policies”. The profit (loss) of a reportable segment is based on the operating income (loss) before amortization of goodwill in Consolidated Statements of Income. In addition, conditions of intersegment transactions and transfers are determined by considering market prices as in the case of other general transactions.

Assets of the Group are not allocated to the segments. However, the corresponding depreciation expenses are allocated to the segments according to the rational bases such as the usage of assets.

(c) Information of net sales, profit or loss and other material items on reportable segment Segment information as for the years ended March 31, 2016 and 2017 are as follows:

Millions of Yen 2016 Reportable segments Civil Construction Real estate engineering contracts development Others Total Adjustments Consolidated Net sales: Customers �� ¥ 433,924 ¥978,176 ¥ 121,306 ¥ 12,483 ¥ 1,545,889 ¥— ¥ 1,545,889 Intersegment �� 21,788 37,307 6,333 2,351 67,779 (67,779) — Total �� 455,712 1,015,483 127,639 14,834 1,613,668 (67,779) 1,545,889 Operating income �� ¥50,717 ¥56,400 ¥9,434 ¥943 ¥117,494 ¥(26) ¥117,468

Depreciation and amortization �� ¥2,694 ¥2,119 ¥1,160 ¥94 ¥6,067 ¥(76) ¥5,991 Increase (decrease) in allowance for losses on construction contracts �� ¥(2,290) ¥(16,829) ¥— ¥— ¥(19,119) ¥— ¥(19,119)

Notes 1. ‌“Others” presented businesses such as incidental business to the construction business, leisure business, and other service businesses, which are not included in reportable segments. 2. Adjustment amount of operating income was ¥ (26) million ($ (231) thousand), which included intersegment elimination. 3. Segment operating income was adjusted against operating income of Consolidated Statement of Income.

107 TAISEI ANNUAL REPORT 2017

018_0356501372908.indd 107 2017/08/08 21:18:13 Millions of Yen 2017 Reportable segments Civil Construction Real estate engineering contracts development Others Total Adjustments Consolidated Snapshot TAISEI Net sales: Customers �� ¥ 422,847 ¥ 938,549 ¥ 115,226 ¥ 10,631 ¥ 1,487,253 ¥— ¥ 1,487,253 Intersegment �� 26,609 39,167 6,540 2,398 74,714 (74,714) — Total �� 449,456 977,716 121,766 13,029 1,561,967 (74,714) 1,487,253 Operating income �� ¥55,200 ¥73,373 ¥13,310 ¥1,201 ¥143,084 ¥(2,261) ¥140,823

Depreciation and amortization �� ¥2,926 ¥2,305 ¥1,113 ¥91 ¥6,435 ¥(167) ¥6,268 Increase (decrease) in allowance for losses on construction contracts �� ¥(6,664) ¥213 ¥— ¥— ¥(6,451) ¥— ¥(6,451) Management Strategy

Thousands of U.S. Dollars 2017 Reportable segments Civil Construction Real estate engineering contracts development Others Total Adjustments Consolidated CSR Net sales: Customers �� $ 3,769,026 $ 8,365,710 $ 1,027,061 $94,759 $ 13,256,556 $— $ 13,256,556 Intersegment �� 237,178 349,113 58,294 21,374 665,959 (665,959) — Total �� 4,006,204 8,714,823 1,085,355 116,133 13,922,515 (665,959) 13,256,556 Operating income �� $492,022 $654,007 $118,638 $10,705 $1,275,372 $(20,153) $1,255,219

Depreciation and amortization �� $26,081 $20,545 $9,921 $811 $57,358 $(1,488) $55,870 Increase (decrease) in allowance for

losses on construction contracts �� $(59,399) $1,898 $— $— $(57,501) $— $(57,501) Governance Report

Notes 1. ‌“Others” presented businesses such as incidental business to the construction business, leisure business, and other service businesses, which are not included in reportable segments. 2. Adjustment amount of operating income was ¥ (2,261) million ($ (20,153) thousand), which included intersegment elimination. 3. Segment operating income was adjusted against operating income of Consolidated Statement of Income.

(2) Related information (a) Information about products and services The information about products and services is included in “(c) Information of net sales, profit or loss and other material items on reportable

segment” of “(1) Segment information” for the years ended March 31, 2016 and 2017. Social Report

(b) Information about geographic areas ∙ Net sales The information about net sales was not presented for the years ended March 31, 2016 and 2017 since sales to unaffiliated customers in Japan accounted for more than 90% of sales of Consolidated Statement of Income.

∙ Property, plant and equipment The information about property, plant and equipment was not presented for the years ended March 31, 2016 and 2017 since the amounts of property, plant and equipment that located in Japan accounted for more than 90% of the amounts of property, plant and equipment of Consolidated Balance Sheet.

(c) Information about major customers The information about major customers was not presented for the years ended March 31, 2016 and 2017 since net sales to any customer Environmental Report were less than 10% of the amounts of sales of Consolidated Statement of Income.

(d) Information about impairment losses on fixed assets of reportable segment for the years ended March 31, 2016 and 2017 is as follows: Millions of Yen 2016 Reportable segments Elimination Construction Real estate and/or Civil engineering contracts development Others corporate Total Impairment losses on fixed assets �� ¥ 780 ¥ 2,044 ¥ 215 ¥ — ¥ (21) ¥ 3,018 Financial and Corporate DataFinancial

TAISEI ANNUAL REPORT 2017 108

018_0356501372908.indd 108 2017/08/08 21:18:13 Notes to Consolidated Financial Statements (cont.) TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

Millions of Yen 2017 Reportable segments Elimination Construction Real estate and/or Civil engineering contracts development Others corporate Total Impairment losses on fixed assets �� ¥ 74 ¥ — ¥ 666 ¥ — ¥ (55) ¥ 685

Thousands of U.S. Dollars 2017 Reportable segments Elimination Construction Real estate and/or Civil engineering contracts development Others corporate Total Impairment losses on fixed assets �� $ 660 $ — $ 5,936 $ — $ (490) $ 6,106

(e) ‌There is no information about amortization and unamortized balance of goodwill of reportable segment for the years ended March 31, 2017. Information for the year ended March 31, 2016 is as follows: Millions of Yen 2016 Reportable segments Elimination Construction Real estate and/or Civil engineering contracts development Others corporate Total Amortization of goodwill �� ¥ — ¥1 ¥ — ¥ — ¥ — ¥1 Unamortized balance of goodwill �� ¥ — ¥ — ¥ — ¥ — ¥ — ¥—

(f) Information about gains on negative goodwill of reportable segment Information about gains on negative goodwill for the years ended March 31, 2016 and 2017 is not applicable.

16. Contingent Liabilities and Commitment The Group was contingently liable as guarantors for borrowings of companies, which were not consolidated, with the amount of ¥ 1,037 million and ¥ 686 million ($ 6,115 thousand) at March 31, 2016 and 2017, respectively.

In addition, the Group was contingently liable to invest in the specific purpose company for their repayment and other obligations of borrowings with the amount of ¥ 15,680 million and ¥ 15,680 million ($ 139,763 thousand) at March 31, 2016 and 2017, respectively. The amounts indicate their shares of the additional investment obligations.

17. Revaluation Reserve for Land In the year ended March 31, 2002, certain consolidated domestic subsidiaries executed revaluation of their land for business in accordance with the Law Concerning Revaluation of Land (the “Law”). As a result of this revaluation, deferred income taxes concerning the differences between the amounts after revaluation and the book values before revaluation were stated in the assets and liabilities in the consolidated balance sheets. The differences between these amounts, net of taxes, were stated as “Revaluation reserve for land” in “Accumulated other comprehensive income”. The revaluation was executed in accordance with the method prescribed in the Article 2, Items 3, 4 and 5 of the Law on November 30, 2001 and March 31, 2002. One of the consolidated subsidiaries, which was merged with another consolidated subsidiary on December 1, 2001, executed the revaluation on November 30, 2001. Excess amount of the book values of the revaluated land over the fair values as of March 31, 2016 and 2017 was ¥ 4,815 million and ¥ 3,702 million ($ 32,998 thousand), respectively (including the excess amount of ¥ 1,005 million and ¥ 26 million ($ 232 thousand) related to investment and rental property at March 31, 2016 and 2017, respectively).

18. Losses on Anti-Monopoly Act Allowance for losses on Anti-Monopoly Act amounted to 11,036 million ($ 98,369 thousand) and losses on Anti-Monopoly Act amounted to ¥ 11,640 million ($ 103,753 thousand) for the year ended March 31, 2017.

The consolidated subsidiary of the company (TAISEI ROTEC CORPORATION) recognized the estimated penalties mentioned above at the fiscal year ended March 31, 2017.

19. Research and Development Expenses Research and development expenses, which were included in selling, general and administrative expenses and cost of sales, amounted to ¥10,999 million and ¥ 11,165 million ($ 99,519 thousand) for the years ended March 31, 2016 and 2017, respectively.

109 TAISEI ANNUAL REPORT 2017

018_0356501372908.indd 109 2017/08/08 21:18:13 20. Impairment Losses on Fixed Assets Impairment losses on fixed assets for the years ended March 31, 2016 and 2017 consisted of the following: 2016 Use Type of assets Location

Assets for business use Land and Building and Machinery and equipment and others Chiba and others (16 lots) Snapshot TAISEI Assets reclassified from business purpose to trading purpose Land and Building and others Yamanashi and others (12 lots) Dormant assets Land and Building and others Shizuoka and others (6 lots)

2017 Use Type of assets Location Assets for business use Building and Machinery and equipment and others Kumamoto and others (6 lots) Assets reclassified from business purpose to trading purpose Land and Building Kanagawa and others (5 lots) Dormant assets Land Osaka and others (5 lots) Management Strategy The Company and its consolidated domestic subsidiaries grouped their fixed assets based on units, for which decisions for investments were made. Book values of the fixed assets listed above were reduced to recoverable amounts and impairment losses were recognized as follows: Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 CSR Assets for business use Buildings and structures �� ¥102 ¥45 $401 Land �� 348 — — Machinery and equipment �� 67 29 259 Others �� 106 0 0 Subtotal �� 623 74 660 Assets reclassified from business purpose to trading purpose Buildings and structures �� 541 402 3,583

Land �� 1,565 208 1,854 Governance Report Others �� 2 — — Subtotal �� 2,108 610 5,437 Dormant assets Buildings and structures �� 154 — — Land �� 113 1 9 Others �� 20 — —

Subtotal �� 287 1 9 Social Report Total �� ¥ 3,018 ¥ 685 $ 6,106

The recoverable amount of the fixed assets for the years ended March 31, 2016 and 2017 were their net realizable values mainly based on amounts determined by valuations made in accordance with real estate appraisal standards.

21. Per Share Data Net assets per share and net income per share as of and for the years ended March 31, 2016 and 2017 were as follows: Yen U.S. Dollars

2016 2017 2017 Environmental Report Net assets per share ¥ 442.67 ¥ 496.60 $ 4.426 Net income per share �� 65.85 78.57 0.700 Diluted net income per share �� — — —

Diluted net income per share for the years ended March 31, 2016 and 2017 were not presented because the Company had no shares with dilutive effects.

Calculation bases for basic net income per share for the years ended March 31, 2016 and 2017 were as follows: Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Financial and Corporate DataFinancial Basic Net income per share Net income attributable to owners of parent �� ¥77,045 ¥ 90,566 $ 807,256 Net income not available to common stock holders �� — — — Net income attributable to owners of parent available to common stock �� 77,045 90,566 807,256 Average common stock outstanding (in thousands share) �� 1,169,933 1,152,619 —

TAISEI ANNUAL REPORT 2017 110

018_0356501372908.indd 110 2017/08/08 21:18:13 Notes to Consolidated Financial Statements (cont.) TAISEI CORPORATION and Consolidated Subsidiaries Years Ended March 31, 2016 and 2017

22. Comprehensive Income Recycling adjustments and tax effects for each component of other comprehensive income were as follows: Millions of Yen Millions of Yen Thousands of U.S. Dollars 2016 2017 2017 Unrealized holding gains on securities Amount incurred �� ¥(41,527) ¥ (2,910) $ (25,938) Recycling �� (9) (959) (8,548) Before Tax �� (41,536) (3,869) (34,486) Tax effect �� 15,488 1,178 10,500 Unrealized holding gains on securities, net of taxes �� (26,048) (2,691) (23,986)

Deferred gains or losses on hedging derivatives Amount incurred �� (9) (1) (9) Recycling �� 5 4 36 Before Tax �� (4) 3 27 Tax effect �� 1 (1) (9) Unrealized gains or losses on hedging derivatives, net of taxes �� (3) 2 18

Revaluation reserve for land Tax effect �� 233 — —

Foreign currency translation adjustments Amount incurred �� (337) (423) (3,770) Recycling �� (5) 19 169 Foreign currency translation adjustments, net of taxes �� (342) (404) (3,601)

Remeasurements of defined benefit plans Amount incurred �� (17,450) 4,445 39,620 Recycling �� (1,004) 4,087 36,429 Before Tax �� (18,454) 8,532 76,049 Tax effect �� 5,880 (2,609) (23,255) Remeasurements of defined benefit plans, net of taxes �� (12,574) 5,923 52,794

Share of other comprehensive income of associates accounted for by the equity method Amount incurred �� (402) (438) (3,904) Total other comprehensive income �� ¥(39,136) ¥2,392 $21,321

111 TAISEI ANNUAL REPORT 2017

018_0356501372908.indd 111 2017/08/08 21:18:13 23. Subsequent Event (1) Acquisition of treasury stock The Company resolved the item related to the acquisition of treasury stock at the board of directors held on May 12, 2017, in accordance with the article 156 of the Japanese Corporate Law (the “Law”), which is applicable as replacement of the article 165, paragraph 3 of the law, as detailed below. TAISEI Snapshot TAISEI

( i ) Reason of acquisition of treasury stock The Company decided to acquire its treasury stock in order to enhance the shareholders’ value per share and to improve the capital efficiency.

( ii ) Details (a) Type of stock to be acquired: Common stock of the Company (b) Number of stocks to be acquired: Up to 40,000,000 stocks (3.49% of the total outstanding stocks excluding treasury stock) (c) Total cost of acquisition: Up to ¥25,000 million ($ 222,836 thousand) (d) Period of Acquisition: From May 15, 2017 to September 30, 2017

( iii ) Other Management Strategy The Company plans to retire all of the acquired treasury stock by the resolve at the board of directors in accordance with the article 178 of the Law.

(2) Change in the Company’s share-trading unit and consolidation of shares At the board of directors’ meeting held on May 12, 2017, pursuant to article 195, paragraph 1 of the Japanese Companies Law, the CSR Company resolved to change the Company’s share-trading unit and concluded to submit a proposal on the consolidation of shares to the ordinary general meeting of shareholders held on June 29, 2017. The proposal was approved at the said meeting of shareholders.

( i ) Change in share-trading unit (a) Purpose of change Japanese stock exchanges have announced the “Action Plan for Consolidating Trading Units” aimed at standardizing the trading units of common stock of all listed domestic corporations at 100 shares by October 1, 2018. As a corporation listed on the Tokyo Stock Exchange and Nagoya Stock Exchange, the Company respected the objective of the plan and decided to change the share-trading unit of stock from 1,000 to 100 shares. Governance Report (b) Details of change The Company will change share-trading unit for common stock from 1,000 to 100 shares on October 1, 2017.

( ii ) Consolidation of shares (a) Purpose of consolidation Associated with the change mentioned in “( i ) Change in share-trading unit,” the Company resolved to consolidate its shares (5 shares into one share) to maintain its investment unit at the level considered to be desirable by the stock exchanges, ¥50,000 or more and less than ¥500,000, and adjust its investment unit at adequate level from the point of view of medium to long term share price fluctuation.

(b) Details of consolidation Social Report ∙ Type of stock to be consolidated Common stock

∙ Consolidation method and ratio The Company will consolidate every 5 shares into one share on October 1, 2017 based on information of shareholder registry as of September 30, 2017.

∙ Decrease in number of shares due to the consolidation Number of outstanding shares before consolidation (As of March 31, 2017) 1,146,752,860 shares Decrease in number of shares due to consolidation 917,402,288 shares

Number of outstanding shares after consolidation 229,350,572 shares Environmental Report (Note) ‌“Decrease in number of shares due to consolidation” and “Number of outstanding shares after consolidation” are theoretical amounts calculated by multiplying number of outstanding shares before consolidation by consolidation ratio.

(c) Treatment of fractional shares less than one share If any fractional shared less than one share exists after consolidation, the Company will dispose all of them in accordance with article 235 of Japanese Companies Law. The proceeds from the sale shall be distributed to the shareholders in proportion to their ownership interests.

(3) Cash dividends The following appropriation of retained earnings at March 31, 2017 was approved at the annual meeting of the Company’s shareholders held

on June 29, 2017. and Corporate DataFinancial Millions of Yen Thousands of U.S. Dollars Cash dividends, ¥12 ($ 0.107) per share �� ¥ 13,744 $ 122,506

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018_0356501372908.indd 112 2017/08/08 21:18:13 Independent Auditor’s Report

113 TAISEI ANNUAL REPORT 2017

018_0356501372908.indd 113 2017/08/08 21:18:13 Outline of the Company

Corporate Data (As of March 31, 2017)

Name TAISEI CORPORATION Domestic Network Sapporo Established December 28, 1917

Paid-in capital ¥122.7 billion Snapshot TAISEI Number of employees 8,415 people (non-consolidated) Tohoku (Sendai) Hokushinetsu (Niigata) Representative Yoshiyuki Murata, Kanto (Saitama) President and Chief Executive Officer Head Office Head office Shinjuku Center Building, 25-1, Nagoya Tokyo Kyoto International Operations Nishi-Shinjuku 1-chome, Shinjuku-ku, Headquarters (Shinjuku, Tokyo) Tokyo, 163-0606, JAPAN Kobe TEL. 81-3-3348-1111 (main number) Chiba Number of Head Office, 15 Branch Offices, offices Technology Center, 46 domestic Yokohama Technology Center (Yokohama) Management Strategy offices, 12 overseas offices Kansai (Osaka) Subsidiaries 29 consolidated subsidiaries, Shikoku (Takamatsu) 43 affiliated companies accounted for Head Office by the equity-method Chugoku (Hiroshima) Branch Office Kyushu (Fukuoka) Technology Center

Overseas Network CSR

CSCEC-TAISEI CONSTRUCTION, LTD. (Head Ofﬁce)

ISTANBUL PAKISTAN INDIA CSCEC-TAISEI CONSTRUCTION, LTD. NORTH AFRICA (Shanghai Branch) TAIPEI

TAISEI MYANMAR CO., LTD Governance Report MYANMAR TAISEI PHILIPPINE CONSTRUCTION INCORPORATED MIDDLE EAST PHILIPPINE SRI LANKA VINATA INTERNATIONAL J/V LTD.CO.VIETNAM (Head Ofﬁce) KUALA LUMPUR VIETNAM (Hanoi) PT. PP-Taisei VINATA INTERNATIONAL J/V LTD. CO. VIETNAM Indonesia Construction (Hochiminh City Branch Ofﬁce) JAKARTA VIETNAM (Hochiminh City)

PT. INDOTAISEI TAISEI (THAILAND) CO., LTD INDAH DEVELOPMENT THAILAND Social Report

Share Information (As of March 31, 2017)

Status of Shares Major Shareholders (Top 10):

Number of Shares Authorized 2,200,000,000 Number of Ratio of Number of Shares Issued 1,146,752,860 Shares held Shares held Name of Shareholder (Unit: Thousand shares) (%) Number of Shareholders 88,322 Japan Trustee Services Bank, Ltd. (Trust Account) 72,183 6.30 Environmental Report Distribution of shares [Status according to ownership] The Master Trust Bank of Japan, Ltd. Financial institutions Securities companies Overseas corporations, etc. (Trust Account) 67,624 5.90 355,676,000 shares 27,894,000 shares 368,325,000 shares (31.02%) (2.43%) (32.12%) Retirement Benefit Trust in Mizuho Trust (Mizuho Bank, Ltd.Account) 39,289 3.43 Taisei Associates’ Shareholding Plan 26,251 2.29 Taisei Employees’ Shareholding Plan 21,271 1.86 Ordinary companies Individuals, others Japan Trustee Services Bank, Ltd. 84,545,000 shares 310,310,000 shares (Trust Account No.5) 20,932 1.83 (7.37%) (27.06%) State Street Bank West Client-Treaty 505234 18,051 1.58

Stock Listings Tokyo, Nagoya GOVERNMENT OF NORWAY 15,537 1.36 and Corporate DataFinancial Code 1801 Japan Trustee Services Bank, Ltd. Transfer Agent Mizuho Trust & Banking Co., Ltd. (Trust Account No.1) 15,455 1.35 1-2-1, Yaesu, Chuo-ku, Japan Trustee Services Bank, Ltd. Tokyo 103-8670, Japan (Trust Account No.7) 15,417 1.35

Note: Treasury stock (1,408,179 shares) are excluded in calculating the Ratio of Shares held.

TAISEI ANNUAL REPORT 2017 114

019_0356501372908.indd 114 2017/08/03 19:02:50 TAISEI CORPORATION Organization Chart (As of July 1, 2017)

Secretarial Dept. ★ Auditing Dept. Engineering Planning Dept. Industrial Affairs Dept. Engineering Solution Dept. Energy Business Strategy Dept. Engineering Div. Life-science Proposal Dept. Corporate Planning Dept. Life-science Project Dept. Corporate Planning Office Corporate Communication Dept. Industrial Facilities Project Dept. Information Planning Dept. Project Management Dept. Human Resources Dept. Technology Strategy Dept. General Affairs Dept. Business Administration Div. Legal Dept. International Projects Management Dept.

Accounting Dept. Power Plant Construction Planning Dept. Finance Dept. Productivity Promotion Dept. Safety Administration Dept. Building Construction Dept. Safety Administration Div. Subcontractor Relations Dept. Building Construction Div. Technology Control Dept. Environmental Administration Dept. Estimate Dept. Planning & Administration Dept. Mechanical & Electrical Div. Mechanical & Electrical Dept. Environmental Technology Innovation Dept. Environment Div. Sustainable Solution Dept. Operations Planning Dept. Geo-Environmental Technology Dept. Architectural Design Depts. Structural Engineering Depts. Technology Planning Dept. Structural Planning Dept.

Intellectual Property Dept. Architecture & Engineering Div.(Integrated) M&E Engineering Depts. Urban Engineering Research Dept. Taisei Technology Center M&E Planning Dept. Infrastructure Technology Research Dept. Design Div. Planning & Design Dept. Advanced Technology Development Dept. Quality Management & Technology Dept. Production Engineering Technology Dept. Construction Administration Dept. Planning Dept. International Projects Dept. Structural Engineering Dept. Nuclear Facilities Dept. President Nuclear Facilities Div. Advanced Analysis Technology Dept. Specific Project Dept. Civil Engineering Dept. Civil Engineering Dept. Environmental Engineering Dept. Construction Engineering Dept. Marketing & Sales Promotion Dept. Machinery Dept. Planning & Business Promotion Dept. Design Dept. Marketing & Sales Promotion Div. Civil Engineering Div. Real Estate Information Dept. Estimate Dept. Life Cycle Care Promotion Dept. Project Analysis & Information Dept. Customer Satisfaction Dept. Next Generation Project Dept. Project Solutions Dept. International Projects Management Dept. Proposal & Solutions Div. Business Solutions Dept. Coordination & Analysis Dept. Projects Information Analysis & Strategy Dept. Procurement Dept.Ⅰ Marketing & Sales (Building Construction) Div.Ⅰ Marketing & Sales Depts. Procurement Div. Procurement Dept.Ⅱ Procurement Dept.Ⅲ Marketing & Sales (Building Construction) Div. Marketing & Sales Depts. Ⅱ Planning & Administration Dept. Marketing & Sales (Building Construction) Div. Ⅲ Marketing & Sales Depts.

Medical & Welfare Business Div. Marketing & Sales Depts.

Marketing & Sales Div.(Integrated) Planning & Management Dept. Administration Dept. Project Development Dept.Ⅰ Safety Administration & Environmental Dept. Project Development Dept.Ⅱ Marketing & Sales Depts. PPP Projects Dept. Urban Development Div. Building Construction Dept. Urban Redevelopment Dept.Ⅰ Branch Design Dept. Urban Redevelopment Dept.Ⅱ Civil Engineering Dept. Development Business Dept. Reconstruction Project Dept. Property Management Business Dept. ＊(Civil Engineering) ＊ Tohoku Branch Marketing & Sales (Civil Engineering)Div. Marketing & Sales Depts. International Business Strategy Dept. Planning & Business Promotion Dept. Risk Management Dept. Marketing & Sales (West Japan) Div. Marketing & Sales Depts. Administration Dept. Project Engineering & Promotion Dept. International Operations Headquarters Safety Administration & Environmental Dept. Building Construction & Engineering Dept. International Marketing & Business Development Div. Marketing & Business Development Depts. Civil Engineering Dept. International Business Promotion Depts. Nuclear Facilities Projects Dept.

Sales Mindset/Skills Training Dept. ★

Audit & Supervisory Board Member Audit & Supervisory Board Members' Dept.

115 TAISEI ANNUAL REPORT 2017

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［ Inquiries ］ TAISEI CORPORATION ANNUAL REPORT 2017 CSR Promotion Section, Corporate Communication Department, Corporate Planning Ofﬁce TAISEI 2017 REPORT ANNUAL

E-mail : [email protected] URL : http:// www.taisei.co.jp

1708.2000.T.S

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