Integrated Report 2019 01 As a Member of the Tokyu Group

Integrated Report

Corporate Communication Group, Corporate Planning Department, Corporate Strategy Division 1-16-14 Shibuya, Shibuya-ku, Tokyo 150-8340, Japan TEL : +81-3-5466-5008 FAX : +81-3-5466-5069 E-mail : [email protected] www.tokyu-cnst.co.jp Contents

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Story of Value Creation Initiatives for Value Creation

As a Member of the Tokyu Group 02 Message from the President 12 History of Tokyu Construction Group 04 Financial and Capital Strategies 18 Strengths of Tokyu Construction Group Material Issues (Materiality) in (Source of Value Creation) 06 “Our Ideals for 2026 — The Company We Hope to Be in 2026” 20 Value Creation Process 08 Tokyu Construction Group’s Ideal Vision of Financial and Non-Financial Highlights 10 “Our Ideals for 2026 — The Company We Hope to Be in 2026” 22 Mid-Term Management Plan 2018-2020: Shinka 2020 Urban Solution Business 24 At a Glance (Business Overview) 28 Overview by Business 30 Civil Engineering Business 30 Building Construction Business 32 Real Estate Business 34 International Business 36 Special Feature: SHIBUYA SCRAMBLE SQUARE Phase I (East Wing) 38

Editorial Policy Tokyu Construction started issuing its “Integrated Report” in the fiscal year that ended in March 2017 (FYE Mar. 2017). This report allows us to consolidate our financial and non-financial information to inform our investors on how to contribute to society and the environment by improving our corporate value through our businesses with both a medium- and long-term perspective. Reporting period April 2018 to March 2019 *Part of the report includes information before and after the fiscal year 2018. Scope of report Tokyu Construction Co., Ltd. and its domestic and overseas affiliates Reference sources International Integrated Reporting Council (IIRC)’s “International Integrated Reporting Framework,” Ministry of Economy, Trade and Industry’s “Guidance for Collaborative Value Creation,” Ministry of the Environment’s “Environmental Reporting Guidelines 2012,” GRI’s “G4 Sustainability Reporting Guidelines” and Japanese Standards Association’s “ISO 26000: 2010 Guidance on Social Responsibility” P40 P58

Foundation That Corporate Data Supports Value Creation 10-year Main Consolidated Financial and Non-Financial Data 58 Corporate Governance 40 Financial Overview 60 Board of Directors 44 Company Profile 64 Risk Management 46 Stock Information 65 Compliance 48 Human Resources 50 Occupational Safety (Health and Safety) 53 Quality Control 54 Consideration for the Environment 55 Social Initiatives 57

The figures shown in this report are calculated based on the accounting standards as of March 2019, which include our projections and/ or forecasts. Please be noted that as they were forecasted based on our available information at the time of the publication, they contain some uncertainties. TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 01 As a Member of the Tokyu Group

As a member of the Tokyu Group, each of us employees of Tokyu Construction will contribute to corporate activities and society with an awareness of our responsibilities to the Tokyu brand, based on our group philosophy, so that we will be trusted and cherished by customers, investors, and society as a whole.

Tokyu Group Slogan Toward a Beautiful Age

Beauty is the guiding principle and standard of value for Tokyu Group as it meets the challenges of the future. For all of us in the Tokyu Group, the beauty we aspire to is a universal beauty deeply impressing anyone who encounters it, regardless of a person’s age or culture. We aim to create beauty in harmony with people, their communities, and the natural environment. With beauty as our touchstone, the Tokyu Group’s goal is to create beautiful living environments, which reflect our desire to serve our customers by refining our products and services, raising quality, and promoting good health. We are making every effort to realize this vision, and moreover, we aspire to play an active role in creating a more harmonious society, overflowing with kindness and consideration, so that all people may find genuine happiness and express an individual lifestyle. Our slogan, “Toward a beautiful age,” expresses the commitment of all of us in the Tokyu Group to continually pursue beauty, and proclaims our determination to lead the way in creating beautiful living environments.

Corporate Mission Statement We will help each person realize his or her dream by creating comfortable living environments that allow peace of mind Philosophy Management Policy Management that rises to the challenge/Management that makes the best use of employees/Management that values customers/Management that is fair and open Principles of Conduct Independence/Speed/Teamwork/Reliability

Brand Message Town Value-up Management The origin of Tokyu Construction lies in urban development such as Tama Garden City and the towns in areas surrounding Tokyu train lines. From this perspective, we will be involved in the life cycle of towns over many years, from planning proposals to new construction, renovation, and rebuilding. Accordingly, we will think not in terms of single buildings but of whole towns from the standpoint of customers and residents, and we will always strive to create new value.

Deepening and Evolving Vision in the Pursuit of Genuine Value Tokyu Construction Striving to respond to diversifying customer needs and providing the best solutions, we will enhance the quality of our business. Developing better technology and services, we will pursue new business opportunities in order to keep our capabilities evolving. Continuing a tradition of contributing to society in its role as a general contractor, Tokyu Construction is dedicated to the pursuit of genuine value.

02 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 03 Business philosophy that guides Tokyu Business philosophy that guides Tokyu Construction and its employees in all activities Construction in society The significance of Tokyu that should be maintained when Values establishing a management system for the Construction continuous development of Tokyu The attitude that should be taken when working as Construction an employee of Tokyu the vision An action plan to realize Criteria for action and behavior of employees of Construction Tokyu Type of company we seek to Type become in 2020 by customers, Genuine value that can be shared employees and stakeholders TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. CorporateCorporate hilosophhilosoph (specific criteria)(specific criteria) ission Stateent anaeent oli Code of Condut Code of Condut riniples of Condut *“Shinka” is a key word to express our vision of “deepening and evolving in the pursuit of genuine value.” our vision of “deepening and evolving in the to express *“Shinka” is a key word VisionVision Shina Shina nnual anaeent olinnual anaeent oli Pursue innovative management from a global perspective. Pursue innovative management from each employee. best from individuality and encourage the Value Meet current market expectations and develop new ones. market expectations and develop Meet current Manage in harmony with the natural environment. Through these means, we will fulfill our corporate social responsibilities. these means, we will fulfill our corporate social Through Fulfill your responsibilities. Collaborate to enhance each other’s abilities. each other’s responsibilities. Collaborate to enhance Fulfill your Reinvent yourself with a global awareness. We shall strive to create beautiful living environments, in which each person can in which each environments, beautiful living shall strive to create We happiness in a harmonious society. pursue individual and synergies Group Tokyu independently and in collaboration to raise Work establish a trusted and beloved brand. idteridter anaeent lan and anaeent lan and We hold the following shared vision as hold the following shared We Group. and support the Tokyu to create we work together

Brand Message Business Model Philosophy Please visit our website for details. (https://www.tokyu-cnst.co.jp/company/vision.html) PROFILE/Corporate Philosophy and Vision CORPORATE Tokyu Group Group Tokyu Tokyu Construction’s Construction’s Tokyu Mission Statement Management Policy Town Value-up Management

Principles of Conduct

History of the Tokyu Construction Group

Despite emerging late as a general contractor, we have gradually built a business foundation driven by Japan’s era of high economic growth, and have developed into a safe and comfortable urban development partner alongside the development of the Tokyu Group. We will continue to contribute to society as “a general contractor that continues to embody Shinka,” while advancing the technologies and know-how of construction industries in response to environmental changes and market needs, and accelerating our endeavors in new business domains.

1946 Social Trends Tokyo Construction Industry Co., Ltd., was established 1964 1989 1998 Tokyo Olympics Consumption tax introduced Financial System Reform Act 1954 established Absorbed as the Construction Industry 1970 1991 Expo ’70 held in Bubble economy burst 2001 Department of TOKYU LAND CORPORATION Osaka 1995 September 11 terrorist attacks in US 1973 Great Hanshin-Awaji Earthquake 2002 Oil crisis 2002 FIFA World Cup Korea/Japan 1959 TOKYU CONSTRUCTION CO., LTD. founded

Establishment of Business Foundation Growth of Railway and Urban Civil Engineering

Our origin was the development of Tokyu Tama Garden In the civil engineering field, we gained a foothold in the creation and construction of City. We created a vast area of 5,000 hectares, ranging railways, expanding to projects outside the Group to include private and government from Kajigaya to Chuo-rinkan construction, and improving our technologies in both sectors.

1960 General Civil Engineering Accumulated vast technolo- Construction technology that allows for railway lines to be gies and know-how related elevated or put underground while trains are still running Land readjustment project to subway construction at Nogawa First District

1969 Railway Civil Engineering 1966 Railway Civil Engineering 1991 Railway Civil Engineering Start of Shin-Tamagawa Multi-level crossing con- Multi-level crossing Line construction struction from Toyoko construction of Tokyu A complicated and difficult project, 1966 Railway Civil Engineering Line Naka-meguro to Ikegami Line where all lines were moved under- Toritsu-daigaku (The “STRUM Method,” Extension of the Den- ground following the Metropolitan (Tokyu Traveler our representative railway en-toshi Line between Highway No. 3 Plan, and we also Construction Method) technology) Mizonokuchi and constructed the foundations of highway piers, railway tunnels, and Nagatsuta common grooves

Development of Building Technology Completed very rapid construction to lay the cornerstone of “Tokyu, the Railway Construction Company” In the building construction field, we improved our tech- 1961 Railway Civil Engineering nical capabilities for building Ito to Shimoda railway super high-rise, large span, construction and large-space structures (Izukyu opened) through projects in which we participated as a joint venture partner, while taking charge of 1971 Building Construction 1972 Building Construction construction work associated with urban development Keikyu Hotel Narita Hangar, Japan (Hotel Pacific Tokyo) Airlines Received many orders for Obtained full-scale shielding government construction technology through water and such as highways related sewage construction ordered Full-Scale Expansion Overseas to the Tokyo Olympics by local governments Built hotels, resorts, homes, etc., of Tokyu Group companies and widely expanded overseas based on the “Pacific Rim Concept”

1984 Overseas Palau Pacific Resort 1972 Other Institute of Technology 1964 General Civil Engineering 1967 General Civil Engineering As a latecomer, we promoted research in unique fields such Highway No. 4 road Tamagawa main line as acoustics, vibration, and soil construction construction quality (Metropolitan Expressway (Bureau of Sewerage Tokyo Public Corporation) Metropolitan Government)

04 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 05 Tokyu Tokyu of Urban Know-how Teamwork Capabilities Development Group’s Total Total Group’s Other 東急株式会社 Overseas © Strengths of Tokyu of Tokyu Strengths Construction Railway Civil Engineering 2019 2019 Jakarta Mass Rapid Project Transit Integrated business for work in reconstruction of the area projects Ofunato Station around Urban development with the Construction Management Method Building Construction Building Construction General Civil Engineering 2018 2018 2019 Building Construction - General Civil Engineering General Civil Engineering General Civil Engineering SHIBUYA STREAM SHIBUYA Route246 Shibuya Station East Exit Pedestrian bridge. Phase I SCRAMBLE SQUARE SHIBUYA (East Wing) Ginza Line Shibuya Sta. Metro Tokyo of Shibuya Sta. East Exit. Infrastructure Exit. underpass Shibuya Sta. West Exit. Pedestrian bridges of Shibuya Sta. West Railway Civil Engineering 2014 Restoration work of Sanriku Railway Kita- Rias Line contributed to earth We with quake reconstruction GRS integrated bridges, a new technology TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. 2011 East Japan Earthquake Great 2013 Games Olympic 2020 Tokyo awarded 2015 Goals and Sustainable Development adopted Paris Agreement Other 2017 Redevelopment of Shibuya Station Area PPP/Concession Business Management of public sewerage system, Hamamatsu in theOur first domestic project water and sewage field Evolution of Urban Development Know-How Building Construction Building Construction Building Construction 2005 Act Postal Service Privatization established 2006 Revised Antimonopoly Act enforced 2008 Global financial crisis Railway Civil Engineering up Management - 2011 2012 2011 2010 Shibuya Hikarie Futako Tamagawa rise Futako Tamagawa Seismic reinforcement Seismic reinforcement of elevated bridge of Line Gakugei- Toyoko daigaku Station First application of the “Combination Hoop Method” for in narrow seismic reinforcement spaces. It has now evolved into the “Combination Panel Method” We advance the technology we have cultivated in response to environmental changes and to environmental advance the technology we have cultivated in response We business addition to our core market needs, taking on new business domains in Development plan of Tama- plaza Station area The company was split and a new Tokyu Construction was started in October was started in October Construction and a new Tokyu The company was split “a company brand message to have been and to be our declared 2003. We the genuine value of the town.” committed to developing 2004 Value Town - Building Construction Building Construction Building Construction the Recession 2001 2000 1999 Challenges during CERULEAN TOWER Bldg. SHIBUYA MARK CITY SHIBUYA Q FRONT In the midst of an unprec edented business crisis, we completed one difficult after another in project urban areas Strengths of Tokyu Construction as “a Group” (Value Creation Source)

Throughout the history of Tokyu Construction, we have utilized three strengths cultivated by our Group to contribute towards sustainable society demanded by the times in various regions, including redevelopment of the area around Shibuya Station.

The construction industry is a labor-intensive industry. Therefore, “teamwork” forms the foundation of our business and is also a factor we are most aware of, as we had experienced rapid growth while being a latecomer in the construction industry field. It is through “reliability” that our customers choose us as their partner for building the future. We have built up “reliability” through “teamwork,” which we have always stated as the most important management issue since the establishment of Tokyu Construction. We will continue to improve our “teamwork,” which has been passed down from generation to generation, into “core competencies” as human resources and organizational capabilities. pisode ETokyu Construction started with 138 employees, a number that expanded rapidly to over 2,000 in under 10 years. As Tokyu Construction is a grouping of diverse human resources full of vitality through mid-career employment, we have always placed the most emphasis on “teamwork” in terms of management. In the four guidelines set forth by our first president, Noboru Goto, when establishing the company, he under- lined the importance that, “construction work is done through the teamwork of various people involved. The infinitely repeated efforts, wherein each individual actively works toward the same goal, builds trust from customers and the community.” In addition, urban development and railway construction carried out by Tokyu Construction has consequently strengthened our bonds that go beyond the boundaries of civil engineering and building construction. This DNA is passed down from one generation to the next. Our culture of collab- Teamwork oration between civil engineering and building construction has become our unique strength. In our various large-scale We have refined our human resources projects so far, including in Shibuya, we have utilized these and organizational capabilities into strengths to contribute to urban development. “core competencies” by utilizing our unique corporate culture and teamwork, in which civil engineering and building construction have cooperated with each other as one team since our establishment.

Our corporate DNA, which was announced as the “first” of the “four guidelines” set forth by our first president, Noboru Goto, in 1969, and has been passed down from one generation to the next since our founding.

06 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 07 - - - A road lined with beautiful trees A road TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. than half a century has evolved in various areas, such asthan half a century has evolved in various areas, Shibuya Station, and around of the area redevelopment for sustainablehas been used for new value creation opment know-how accumulated over the span of more towns demanded by the times. harmony with the environment. Our current urban devel Our current harmony with the environment. town’s life cycle, with an emphasis on ease of living and life cycle, with an emphasis on ease town’s customers and residents, having long been involved in thecustomers and residents, in our business activities. sider the value of the entire town from the perspective of town from sider the value of the entire Group, and have the potential to demonstrate great synergies synergies demonstrate great and have the potential to Group, beyond the framework of a construction contractor to con built through various activities have become a unique asset of the various activities have built through Tama Hills into an ideal planned community. After that, we went ideal planned community. Hills into an Tama The relationships with local communities and our group companies and our group with local communities The relationships and railway construction, in order to turn the vast wilderness of theand railway construction, in order development while feeding that growth back into the Tokyu brand. back into the Tokyu that growth development while feeding - ment from site preparation and land readjustment to building, road, land readjustment and site preparation ment from - the Tokyu Group, we have grown uniquely and worked to achieve mutual uniquely and worked to achieve we have grown Group, the Tokyu the foundation of our business by consistently conducting urban develop in Japan and overseas. By responding to local needs and working outside of to local needs By responding in Japan and overseas. - Construction was responsi period, Tokyu economic growth rapid During Japan’s business development Group’s as part of the Tokyu ble for construction business that was started by the Tokyu Group in 1959. As a member of the Group, we laid in 1959. As a member of the Group, Group that was started by the Tokyu The origin of our brand message, “Town Value-up Management,” dates back to the Value-up The origin of our brand message, “Town sector project postwar private the largest City, Garden Tama development of Tokyu In collaboration with Tokyu Group com Group In collaboration with Tokyu panies, we have further strengthened brand,” which is known for the “Tokyu a safe and comfortable livingproviding make this value one of We environment. our competitive strengths. Tokyu Group’s Group’s Tokyu Capabilities Total Know-How of Urban Development Construction lies in The origin of Tokyu Garden the urban development of Tama For many years, we have provided City. know-how to enhance the value of the the perspective of cus town from entire tomers and residents. Strengths of Tokyu Construction as “a Group” “a as Construction Tokyu of Strengths Source) Creation (Value Value Creation Process

Inrease apital for further value reation

Strenths of ternal nvironent Tou Capital o Do e Create Value Servies rovided Value rovided to Staeholders Constrution

Chanes in Customers and End Users Soial nvironent uan ission and Vision Optimal solutions centered on • Shrinking working-age Capital • Tokyu Group Philosophy population due to construction services in declining birthrate and • Tokyu Construction Corporate Philosophy and Vision • A group of professionals with response to customer needs aging population Infrastruture a high level of awareness of • Population concentrating Teaor resident perspectives and [Corporate Philosophy] Developent in urban areas urban development Mission Management Principles Construction and maintenance of Japanese and • Increasing awareness of • A culture that emphasizes Statement Policy of Conduct disaster preparedness caused a strong willingness to overseas structures, Shareholders and Investors such as railways, roads by more natural disasters contribute to society and a [Vision] and tunnels Long-term, sustainable • Work-style reform sense of unity Deepenin and volvin in • Evolution of digital technology corporate (stock) value (AI, IoT, robots, etc.) the ursuit of enuine Value improvement Tokyu Construction • Population growth, infrastruc- Soial and ture development, and See p. 02 for details improvement of living stan- elationship dards in developing countries Capital • Advancement of global Employees warming • Connections with the Tou Tokyu Group companies ran Developent Demonstration of abilities and roups Total and areas along Tokyu railways Tou Constrution Value Chain Construction and mainte- improvement in working • Strong relationship with nance of domestic and Capailities • Advanced technical and proposal abilities for environment customers overseas commercial construction business in urban areas facilities, hotels, offices, Chanes in the • Collaboration with • Providing comprehensive solutions that go houses, etc. usiness nvironent regional superior general beyond the construction contracting business, contractors and subcontractors using connections with the Tokyu Group and • Increasing labor shortages regional superior general contractors Partner Companies (decrease in skilled construction workers, rapid aging of society) [Direction for Strengthening our Value Chain] Promotion of co-creation with partner companies and • Growing need for Intelletual Expanding Demonstrating Enhancing productivity improvement Capital Business Total Capabilities suppliers, as well as long-term Functionality (digitalization and modular- Domains of the Group and continuous growth ization of building materials) noho • Urban development ability eal state ental • Qualitative change in See p. 24 for details demand from new construc- of ran • Highly advanced construc- Improving the building tion to renovation (increased Developent tion technology cultivated value of profitable Local Community demand for maintenance in railway construction real estate (offices, and repairs caused by aging commercial facilities, Increase in local value through houses, etc.) infrastructure) Tokyu Brand construction services and Synergy urban development

Finanial Capital Tou roup rand oer Global Environment • Stable financial base Energy saving and effective • Identifying true customer needs and providing Conession • High capital efficiency value using Group companies’ strengths and areas use of resources in the of expertise Stable operation of urban construction process infrastructure, including • Increasing mutual value among Tokyu Group water and sewage companies through business and activities Energy saving throughout the conducted with local communities building life cycle

anaeent ase that Supports Value Creation Corporate overnane is anaeent Copliane See p. 40 for details See p. 46 for details See p. 48 for details

08 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Inrease apital for further value reation Story of Value Creation

Strenths of ternal nvironent Tou Capital o Do e Create Value Servies rovided Value rovided to Staeholders Constrution

Deepenin and volvin in Initiatives for Value Creation • Evolution of digital technology corporate (stock) value (AI, IoT, robots, etc.) the ursuit of enuine Value improvement Tokyu Construction • Population growth, infrastruc- Soial and ture development, and See p. 02 for details improvement of living stan- elationship dards in developing countries Capital • Advancement of global Employees warming • Connections with the Tou Tokyu Group companies ran Developent Demonstration of abilities and roups Total and areas along Tokyu railways Tou Constrution Value Chain Construction and mainte- improvement in working • Strong relationship with nance of domestic and Capailities • Advanced technical and proposal abilities for environment customers overseas commercial construction business in urban areas facilities, hotels, offices, Chanes in the • Collaboration with • Providing comprehensive solutions that go houses, etc. usiness nvironent regional superior general beyond the construction contracting business, contractors and subcontractors using connections with the Tokyu Group and • Increasing labor shortages regional superior general contractors Partner Companies (decrease in skilled construction workers, Foundation That Supports Value Creation rapid aging of society) [Direction for Strengthening our Value Chain] Promotion of co-creation with partner companies and • Growing need for Intelletual Expanding Demonstrating Enhancing productivity improvement Capital Business Total Capabilities suppliers, as well as long-term Functionality (digitalization and modular- Domains of the Group and continuous growth ization of building materials) noho • Urban development ability eal state ental • Qualitative change in See p. 24 for details demand from new construc- of ran • Highly advanced construc- Improving the building tion to renovation (increased Developent tion technology cultivated value of profitable Local Community demand for maintenance in railway construction real estate (offices, and repairs caused by aging commercial facilities, Increase in local value through houses, etc.) infrastructure) Tokyu Brand construction services and Synergy urban development

anaeent ase that Supports Value Creation Corporate overnane is anaeent Copliane See p. 40 for details See p. 46 for details See p. 48 for details

TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 09 Financial and Non-Financial Highlights

Financial Highlights (Consolidated)

rders reeived et sales C eissions ner onsued (Head office, branch offices, laboratories and factories)

2 (Millions of yen) (Millions of yen) (t-CO2) (Fuel oil conversion: ℓ/m ) 400,000 400,000 80,000 40 300,000 300,000 60,000 30

200,000 200,000 40,000 20

100,000 100,000 20,000 10

0 FYE Mar. FYE Mar. FYE Mar. FYE Mar. FYE Mar. 0 FYE Mar. FYE Mar. FYE Mar. FYE Mar. FYE Mar. 0 FYE Mar. FYE Mar. FYE Mar. FYE Mar. FYE Mar. 0 FYE Mar. FYE Mar. FYE Mar. FYE Mar. FYE Mar. 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

■ Workplaces ■ Office

peratin inoe peratin inoe arin eturn on euit Constrution produts enerated elin rate ident freuen rate (Millions of yen) (%) (%) (10,000 t) (%) 25,000 15 30 100 100 1.20 20,000 12 75 75 20 0.80 15,000 9 50 50 10,000 6 10 0.40 25 25 5,000 3

0 FYE Mar. FYE Mar. FYE Mar. FYE Mar. FYE Mar. 0 0 FYE Mar. FYE Mar. FYE Mar. FYE Mar. FYE Mar. 0 FYE Mar. FYE Mar. FYE Mar. FYE Mar. FYE Mar. 0 0 FYE Mar. FYE Mar. FYE Mar. FYE Mar. FYE Mar. 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

■ Operating income Operating income margin ■ Volume of construction by-products generated Recycling rate Safety index: √ (Frequency rate x Strength rate) *Consumption by-products are generated during construction work. *The frequency rate is an index that shows the frequency of industrial accidents This includes recycled resources and waste. that caused injury and/or death per one million total extended working hours. The Strength rate is an index that shows the scale of industrial accidents that caused workdays lost per thousand total extended working hours.

Total apital uit ratio Dividends per share aout ratio uer of eploees ploent rate for people ith disailities (Millions of yen) (%) (Yen) (%) (Persons) (%) 100,000 60 40 40 3,000 3.0 75,000 45 30 30 2,000 2.0 Legal employment rate 2.2% 50,000 30 20 20 1,000 1.0 25,000 15 10 10

0 FYE Mar. FYE Mar. FYE Mar. FYE Mar. FYE Mar. 0 0 FYE Mar. FYE Mar. FYE Mar. FYE Mar. FYE Mar. 0 0 FYE Mar. FYE Mar. FYE Mar. FYE Mar. FYE Mar. 0 FYE Mar. FYE Mar. FYE Mar. FYE Mar. FYE Mar. 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

■ Total capital Equity ratio ■ Dividends per share Payout ration ■ Male ■ Female

10 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Non-Financial Highlights (Non-Consolidated)

rders reeived et sales C eissions ner onsued (Head office, branch offices, laboratories and factories) Story of Value Creation 2 (Millions of yen) (Millions of yen) (t-CO2) (Fuel oil conversion: ℓ/m ) 400,000 400,000 80,000 40 300,000 300,000 60,000 30

200,000 200,000 40,000 20

100,000 100,000 20,000 10

■ Workplaces ■ Office

Total apital uit ratio Dividends per share aout ratio uer of eploees ploent rate for people ith disailities (Millions of yen) (%) (Yen) (%) (Persons) (%) 100,000 60 40 40 3,000 3.0 75,000 45 30 30 Corporate Data 2,000 2.0 Legal employment rate 2.2% 50,000 30 20 20 1,000 1.0 25,000 15 10 10

■ Total capital Equity ratio ■ Dividends per share Payout ration ■ Male ■ Female

TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 11 Message from the President

We will do our utmost to become a corporate group that can cope with the changing business environment by improving teamwork and enhancing the problem-solving skills of each individual.

Mitsuhiro Terada Representative Director, President

12 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 13 - - - - - TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. Our company is a part of the Tokyu Group, whose core Group, Our company is a part of the Tokyu teamwork can easily be where have an environment We The Characteristics of Our Company The Characteristics ground section between Shibuya Station and Daikanyama Station ground 1,200 workers engaged in the work Line), approximately Toyoko (Tokyu and a half hours after the three within a limited time span of roughly the passing of the last train, completing work without incident before arrival of the first train. In the railway diversion work conducted in 2013 to complete the under mation of our human resources and organization, in order order in organization, and resources mation of our human and capabilities of our employees, to elicit the motivation our company. of growth and lead to the sustainable workpany for 40 years, including 20 years at construction Due to this expe sites and division which supervises the field. corporate culture, about our unique rience, I feel strongly helps each other, which includes teamwork in which everyone in thewas reflected This along with an open atmosphere. all of our a survey targeting “employee engagement survey,” to be “a strength employees, which showed our company’s sense of unity at the workplace.” competitivebusiness is a railway business boasting a strong For example,advantage in the field of railway construction. of work that otherdiversion of railway tracks is one of the types Such uniqueconstruction companies often struggle to execute. utilized in a variety of contexts. technology and know-how are building construction as our civil engineering and fostered, In thedivisions often work together in railway construction. diversion of railway tracks, we use the STRUM method*, which combines various technologies, and also requires excellent teamwork in addition to technological know-how. Although it is difficult for outsiders to notice this, we con advantage. sider it to be our great in order to become a corporate group that is capable of that is capable of to become a corporate group in order adapting to the changes that are boldly and smoothly put it more To environment. expected in our business experience it means to convert our employees’ simply, I this perspective, “true value.” From and knowledge into the transfor is to be encouraging role consider my biggest Where is Good Teamwork Strength Members Join Hands its 60thIn November 2019, our company will celebrate Within this period, I have worked for the com Anniversary. - - - - -

Furthermore, our company has adopted the concept of our company Furthermore, Aspiration and Vision New Management Structure New Management Problem-solving Skills at Work Sites Skills at Work Problem-solving I am strongly aware that the enhancement of problem-solving aware I am strongly Our company defines such skills challenge. skills is an urgent independently,” as “skills to discover and solve problems the origin are is no doubt that human resources and there of “Shinka (true value).” While it is necessary to enhance the skills that can support the competitivenessproblem-solving divi of our company at every site, including our indirect Imperativeness to Enhance sions, I believe, in particular that enhancing problem-solving construction sites, is an urgent skills at work sites, which are Our company has identified carrying out safety-first matter. by custom of the quality required operations, realization management,ers, implementation of environment-friendly of costs as the and reduction of productivity, improvement skills at workfive elements for enhancing problem-solving each of these ele strengthen sites, and we will thoroughly stable. to make our company more ments in order “a general contractor that continues to embody Shinka” what it means to as our corporate vision. In this regard, demonstrate “Shinka,” in terms of deepening and evolving in the pursuit of true value, is to “deepen” the technology and know-how that our company has accumulated thus far, while also “evolving” the capabilities of our employees, I was appointed as the new president in June 2019. In fiscal new president I was appointed as the the lead Imamura, took Mr. president, year 2018, the former Plan (2018-2020): Management the “Mid-Term in promoting far exceeded our ini that results Shinka 2020” and achieved Upon My Appointment as President Upon My Appointment tial forecast, in which orders received had been restrained in had been restrained received orders in which tial forecast, we In particular, construction capacity. consideration of our highs in net sales, operating income,had achieved all-time income since the company split in 2003. On and ordinary that we may not concerned greatly the other hand, we are not determined be able to keep up with the times if we are Ideals for 2026—The to achieve “Our to intensify our efforts was formulated Hope to Be in 2026,” which Company We certain are as changes in the business environment last year, Olympic Games. to accelerate following the 2020 Tokyo with the implementation to proceed in order Therefore, strategies atof our medium- to long-term management rapid pace, Vice will focus on Chairman Imamura a more as a stable cash flow, leading these strategies to create will take charge chairman of the Strategy Meeting, while I in terms of accelerating business, our core of strengthening experience work the construction business, as I have much work together and will ing at construction work sites. We construction business to enhance the make balanced efforts management our medium- to long- term and promote asstrategies, and I will lead company-wide management, the president. Message from the President

In addition, we have been steadily accumulating achieve- However, the most serious issue is a significant drop in ments in terms of constructing super high-rise buildings construction supply capacity, due to a labor shortage in Shibuya (including SHIBUYA MARK CITY, Cerulean resulting from a large number of retiring senior workers. Tower, Shibuya Hikarie, SHIBUYA STREAM, and SHIBUYA In the next decade, the number of construction workers in SCRAMBLE SQUARE), all of which are landmarks. The area Japan is expected to decrease by roughly one million. This surrounding Shibuya Station is considered to be one of the value is equal to 20% to 30% of the total number of indi- most complicated in Japan, not only because of the tech- viduals, which means that we must increase productivity by nology of high-rise buildings, but also due to the intersec- more than 20%, and that competition for securing human tion of numerous railway lines; an environment surrounded resources will be severe. by many different types of infrastructure including the In addition, considering depopulation, a reduction Metropolitan Expressway, national roads and rivers; and it is in demand for new construction is unavoidable over the a place where extremely large numbers of people visit. We medium to long term, although demand for maintenance are confident that the construction know-how particularly and repair of deteriorating infrastructure will certainly rise. In in Shibuya that we have cultivated by taking part in a wide other words, our company is strongly required to adapt to range of projects, such as station renovation work and the a “recurring-revenue” business model, which taps demand development of underground tunnels, surrounding roads for renovation, maintenance, and repair, in place of the and plazas, is best of all. As a person who possesses much current “spot-revenue” business model, which is based on experience at these kinds of work sites, I understand the contracts for new construction. “Our Ideals for 2026—The difficulties inherent in organizing a team and completing a Company We Hope to Be in 2026” is also a management large project. Accordingly, we aim to become a corporate strategy that aims to realize a corporate group that can group that embodies true value through a vital corporate cope with such changes in the business environment. culture, by giving consideration to the employees who are working at the front line. “Our Ideals for 2026—The *STRUM method (Shifting Track Right Upper/Under Method) Company We Hope to Be in 2026” Refer to page 20 for This is a construction method in which a new track is prepared directly above A corporate group that can cope with the details. or under an existing track, without installation of a temporary track during the changing environment and embodies true construction process, in order to elevate the track or move it underground. value through a vital corporate culture This method does not require a site for a temporary track system, nor suspen- sion of railway operations, as the work is conducted between the departure of the last train and the arrival of the first train. Due to the requirement that a large number of people must work together in a short period of time, this Progress of “Mid-Term Management method requires both careful planning and excellent management. Plan (2018-2020): Shinka 2020” Contribute to Improving the Value of “The Mid-Term Management Plan (2018-2020): Shinka the Tokyu Brand 2020” is one of the three steps to realize “Our Ideals for 2026—The Company We Hope to Be in 2026.” The plan Our company has “the Tokyu Brand” as an additional advan- progressed steadily in fiscal year 2018, the first year of tage over other general contractors. At present, our sales the plan. ratio of the Tokyo Group is between 10% and 20%. However, As for “reinforcing the domestic construction business,” we benefit substantially from the Tokyu brand image with we restructured our organization based on a custom- respect to railway construction and urban development, in er-centered perspective, in order to more integrally link addition to feelings of security and trust toward the brand. sales and construction, and made efforts to strengthen our However, our company does not wish to lean too much on company’s relationship with customers as their business the Tokyu brand, and aims to further increase the brand’s partner. In addition, in order to grow our building renova- value by enhancing cohesiveness and demonstrating Group tion business, we have consolidated this business in the synergies as “One Tokyu,” through participation in the metropolitan area in to our subsidiary TOKYU RENEWAL above-mentioned large-scale redevelopment project, railway Co., Ltd., and are obtaining positive results. constructions, and other projects of Shibuya Station and As for “promoting the diversification of revenue along Tokyu train lines, as a member of the Tokyu Group. sources,” the acquisition of profitable real estate has progressed more rapidly than expected. We also have received an order for large-scale railway improvement Business Environment and Management Strategies work, as an ODA project in Myanmar in the international business. In the PPP (public-private partnerships)/conces- Background of “Our Ideals for 2026— sion business, we are participating in the sewerage system business in Hamamatsu City and the Sendai Airport man- The Company We Hope to Be in 2026” agement service, and are promoting the creation of local networks in collaboration with various companies. There are many redevelopment plans in the domestic con- As a result of these efforts, both net sales and profit struction market, and when infrastructure investment for exceeded our estimates on a consolidated basis, return national resilience is also considered, demand is unlikely on equity remained high at 18%, and further progress was to fall sharply following the 2020 Tokyo Olympic Games. made in terms of accumulating core capital.

14 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 15 - TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. For example, regions along the Tokyu train lines such train lines such along the Tokyu For example, regions Promotion of the Urban Solution Business Promotion Our unique business model, the “Urban Solution accurately embodies our medium- to Business,” more long-term strategy “Our Ideals for 2026—The Company we will make Hope to Be in 2026.” In this strategy, We the necessary solutions through reinforcing toward efforts active alliances and M&A, in addition to enhancing coop is which Group, eration with each company of the Tokyu our main advantage, and also construct a comprehensive value chain that includes collecting information, making designing and construction, tenant leasing, proposals, in order maintenance and management, and renovation, to expand income opportunities for our Group. the Line, where as the Den-en-toshi Line and the Toyoko many has the geographical advantage, have Group Tokyu apartments and office buildings, and medium-scale rental in these areas potential demand for value improvement of Shibuya. has risen sharply following the redevelopment expect the demand for small and satellite offices to We just adjacent to that are areas in neighboring also increase that we can stimulate new demand believe Shibuya. We solutions, after grasping the meticulous by providing hope to establish a unique local needs and issues. We those of other from business model that is differentiated ------and waste materials, and will engage in more and will engage in more and waste materials, 2 In addition, we will make efforts toward adopting a more adopting a more toward In addition, we will make efforts As mentioned earlier, the domestic construction mar As mentioned earlier, in prevalent In addition, the aging of workers is more we expect of labor shortage, tackle the problem To As for non-financial items, we are engaged in initiatives engaged we are As for non-financial items, thorough efforts to increase employee awareness regard employee awareness to increase efforts thorough ing the environment in fiscal year 2019. On the other hand, in fiscal year 2019. ing the environment the number of work at work sites, such as work-style reforms still long working hours, are days and controlling site closure as we have yet to achieve our targets In addition, midway. working to enhance commu we are for accident frequency, nication at work sites to prevent disasters. to prevent nication at work sites ing ability to meet various needs, such as land utilization, value, by utilizing of property and improvement renovation, which is Group, power of the Tokyu the comprehensive construc we plan to secure our advantage. Furthermore, long-term perspective, a medium- to from tion resources of cooperation (alliance/M&A) with reinforcement through superior general contractors and subcontractors in local of labor shortage. to solve the problem in order regions, ods to enhance problem-solving skills at work sites.ods to enhance problem-solving style by enhancing our proposal-mak receiving active order tion, in which the construction industry is transformed from ation, in which the construction industry is transformed from into manpower, operation requiring traditional labor-intensive factoriesa capital-intensive operation that utilizes production is also expanding the acquisition Our Group and machinery. factory qualifications in order concrete of authorized precast and adopting advanced technologies, productivity, to improve meth as well as new construction and robotics, such as AI, IoT, tion industry, such as a worsening labor shortage, a grow tion industry, and expansion in productivity, ing need for improvement of demand for renovation. to long term, ket will gradually decline over the medium a spot-revenue and demand is also expected to shift from business model. business model to a recurring-revenue and the the construction industry than in other industries, num of a large labor shortage will intensify with retirement generation. As this is the baby boom ber of workers from competition in a common issue for other industries as well, workers will intensify, young persons and foreign recruiting originating raising the possibility of industrial restructuring the securing of human resources. from by making productivity to improve advancements in efforts industry the entire Currently, full use of advanced technology. in design efficiency improvements is taking steps towards and construction work via BIM/CIM, as well as adoption of utilizes ICT in the constructioni-Construction, which thoroughly In addition, modularization of construction process. production concrete) of the PC (precast materials, such as introduction quality, method, which contributes to labor saving, improved of these efforts, is expanding. As a result and stable supply, of an operational revolu we expect to see the rapid progress We will implement strategies in accordance with the Mid- will implement strategies in accordance We Plan (2018-2020): Shinka 2020 in fiscal Management Term in the construc year 2019, in consideration of major trends Direction of Strategies Based on the Direction Business Environment CO to reduce Message from the President

companies, by establishing a construction system that is operations, in order to contribute to the SDGs, which repre- capable of handling small- to medium-sized projects of sent common sustainable development goals, worldwide. varying scales, including demand for renovation, while at The starting point of our company was a construction the same time acquiring human resources who possess project to develop Tama Garden City and extend a railway know-how that our company does not currently have, such into the vicinity. We are a general contractor who has devel- as tenant leasing. oped buildings and social infrastructure that are directly linked to the lives of local people, by continuing to work for urban development as a member of the Tokyu Group, which ESG runs a local-oriented life industry. A large number of people, including employees, customers, partner companies, users, Helping Solve Social Issues Through and local residents, are connected to our business, and the scope of our social responsibility is wide in extent. our Business Operations As for providing satisfactory workplaces for our employees, it is imperative that we improve the situation with As a construction company that is engaged in business respect to long working hours. Although the standards globally, our company has identified eight SDG goals regarding overtime work limits for the construction indus- that are closely related to our business. We are undertak- try provides a five-year grace period, we will increase the ing initiatives to solve these goals through our business pace of our improvement. Through cooperation between

Important social issues to be given priority by our Group within the framework of the SDGs

Human Provide rewarding workplaces for a diverse workforce resources Foster human resources who can contribute to society in a sustainable way

Contribute to urban development that ensures safe, secure and comfortable living Society Provide optimum construction solutions and create services Improve efficiency of production processes through technological innovation

Reduce greenhouse gases and promote resource and energy conservation Environment Reduce and recycle construction by-products Develop green engineering and create environmentally-friendly designs

16 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 17 - - Representative Director, Director, Representative President TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. Outlook for Fiscal Year 2019 Outlook for Fiscal Year

Promoting Initiatives and Medium- to long-Term and Medium- to long-Term Initiatives Promoting 2020 Reforms to Achieve the Goals of Fiscal Year to plateau. In fiscal expected In the short term, earnings are to decrease projected are year 2019, both sales and profit of temporary including the drop-out for various reasons, projects, factors, such as the acquisition of design change a construction projects, of many low-profit the progress strategic orders resulting from in profitability reduction 2020, in fiscal year and cost escalation. However, received, Management Plan, which is the last year of the Mid-Term in order orders, we will focus on acquiring highly profitable and contribute to the stable growth to achieve our targets In addition, we will do our utmost toward of our company. that can cope with the changing a corporate group realizing our construction while reforming business environment, divisions, as and rationalizing our indirect system production a medium- well as developing a business foundation from to long-term perspective, and securing and training of our the sustainable growth employees who will realize we kindly ask our stakeholders for their Finally, company. continued encouragement and support. actively transmitting messages to elicit the motivation and actively transmitting capabilities of our employees. of Governance the Diversity Reinforcing for each to clarify the management responsibility In order in a our management structure fiscal year and construct our company has fixed the term of direc flexible manner, fulfill a they will As for outside directors, tors to one year. of the appropriateness function to ensure checking strong regarding their expertise business operations, and reflect and other the management of companies in the same management. Furthermore, industries, into our company’s our company invited for the first time a starting this year, as a lawyer possessing expertise female outside director expect We industry. estate and work experience in the real an through will be revitalized of Directors that the Board issues exchange of diverse opinions on the management a significant our company is facing, and this will make corpo our company’s of contribution to the improvement rate value. ------and other greenhouse gases, is an and other greenhouse 2 Furthermore, we changed the employee satisfac we changed Furthermore, In addition, as an increasing number of small- and number of In addition, as an increasing problems to environmental responding Furthermore, sures also lead to the creation of business opportunities, and of also lead to the creation sures and the development of businesses toward we make efforts in environmental technologies that contribute to a reduction Building) renovations. Energy such as ZEB (Zero burden, important task, given that our company provides a safe and that our company provides important task, given believe that such mea We comfortable living environment. lems at each workplace were also brought to light, we also brought lems at each workplace were to solve these issues. I will also started a training program employee engagement, by to improve put forth efforts ished the conventional practice of assigning newly hired newly hired ished the conventional practice of assigning and established civil engineers to work sites right away, a ten-month training an educational system that provides members to to assign these staff While we desire program. engineers,of shortage current a to due away right sites work the that no variance exists in to ensure we made this reform the employees as they are quality of our human resources, in the future. who will form the foundation of our company In the building construction business, new employees are as their training assigned to work sites in the first year, to placed in pairs, in order period. These employees are train and receive friendly rivalry, through stimulate growth on-site work experience. In addition, we have ing through to cul established a mechanism for incorporating measures tivate extensive experience and multifaceted perspectives, of work by occupational category, by ensuring a rotation engaged in designing such as making employees who are work experience on-site work for a certain period of time. and voluntarily demonstrating strategies and targets, ny’s in the to make improvements his/her abilities,” in order of this survey, the company-wide results Through future. such as a high our strengths, able to reconfirm we were satisfaction rate for “contribution to society and rewarding work” and “a sense of unity at the workplace.” As prob We take steps to enhance the capabilities of every We our top priority for this to be employee, as we recognize deal training. For example, we put a great human resource a into the education of young engineers, from of effort we abol year, medium- to long-term perspective. This past Enhancing the Capabilities of Enhancing the Capabilities of Every Employee tion survey that we had previously conducted into an tion survey that we had previously to solve as a measure “employee engagement survey,” This survey is undertaken to issues in the organization. the level of employee engagement, and visualize measure willingness to contribute to in terms of “each employee’s understanding the compa our company by appropriately medium-sized subcontractors have been going out of medium-sized subcontractors years, we labor shortage in recent business due to the consultations that offers have established a counter to part of our efforts business succession, as regarding hiring support. provide CO mainly by reducing the Work Style Reform Department, which was newly Style Reform Department, which the Work year 2018, and our business units, we established in fiscal this initiative. promote will strongly Financial and Capital Strategies

We will strive to strengthen our core construction business, make active growth investments to diversify revenue sources, and reinforce a financial foundation that can tolerate risks.

Masatoshi Shimizu Director, Senior Executive Officer General Manager, Business Administration Division

Review of Fiscal Year 2018 consolidated net sales exceeded our targets. Accordingly, the The construction industry’s market environment was plan is progressing smoothly as a whole. healthy, due to strong demand for construction related to the 2020 Tokyo Olympic Games and firm capital invest- Response to Higher Construction Costs ment. Construction costs were on an upward trend but in To cope with the rise in costs for building materials, etc., we line with our outlook. In these circumstances, the Group’s are striving to reduce costs through upfront procurement, gross profit margin dropped due to the worsening of profit proposals for alternative construction methods, etc., and from some projects. However, our Group launched the conducting slide negotiations in accordance with contract Mid-Term Management Plan (2018-2020): Shinka 2020, and conditions and other measures. We judge whether or not increased completed construction sales through the prog- to receive orders based on costs including the increase ress of large-scale construction projects and expanded in personnel expenses for skilled construction workers. In renovation projects. addition, we will conduct the modulization of construction As a result, fiscal 2018 consolidated net sales totaled materials (the precast concrete construction method) for ¥331.4 billion (up 3.3% year on year), operating income saving labor, promote investment in technological devel- came to 21.9 billion yen (up 2.7% year on year), and ordinary opment, and establish an organization for intensively income was 22.9 billion yen (up 3.6% year on year), marking supporting work sites at the time construction starts, when a record high since the company split. On the other hand, burdens are significant, to enhance productivity. We revised profit attributable to owners of the parent was 15.5 billion the conditions for payment to subcontractors, which are yen (down 3.8% year on year), due mainly to higher tax important partner companies for operating our business, in expenses, etc. Orders received came to 285.4 billion yen the expectation that manpower-based construction capacity (down 4.7% year on year) in the wake of large-scale projects will become a significant competitive advantage. In addi- ordered in the previous fiscal year by the Tokyu Group and tion, we actively offer services for supporting restructuring, activities for receiving orders while we considered our con- integration, and succession of business, while businesses struction capacity. are discontinued and the number of new employees is decreasing due to the aging of employers and a shortage of Progress of the Mid-Term Management Plan successors in the construction industry. As for the “diversification of revenue sources,” a focus of the Mid-Term Management Plan, we acquired five investment Investment Strategy properties. While it is expected that demand will change Our Group plans to invest a total of about 90 billion yen in qualitatively from a spot-revenue to recurring-revenue business our domestic construction business, new business domains, model, the renovation business expanded more significantly management foundation, organizations, and human than planned. In enhancing our management and financial resources in the nine years from fiscal year 2018, in order to foundations, we steadily accumulated consolidated core cap- achieve “Our Ideals for 2026—The Company We Hope to ital. Furthermore, consolidated operating income margin and Be in 2026.” The ongoing Mid-Term Management Plan calls

18 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 for investment of 6 billion yen in the domestic construction As for strategically held shares, the significance of business, 16.5 billion yen in the strategical businesses (the their holdings is examined and confirmed by the Board of real estate business, the PPP/concession business, other Directors every year, as it checks whether we can receive new businesses, etc.), and 1.5 billion yen in our manage- sufficient benefits with respect to capital cost. The shares ment foundation, organizations, and human resources. As no longer worth holding will be sold and decreased in

for the real estate business, we plan to invest a total of 10 principle, after considering the situations of issuing com- Story of Value Creation billion yen and have already invested 4.4 billion yen, with the panies, market trends, etc. In the examination in the previ- progress rate exceeding the plan. In selecting investment ous fiscal year, it was confirmed that all of the listed shares properties, we set original criteria for improving profitability we held remained worthwhile, but shares of an unlisted through renovation that utilizes the characteristics of the company deemed no longer worth holding were sold. construction business and choosing areas while anticipating demand for the replacement of old buildings with new ones Shareholder Returns after assessing risks sufficiently. As for shareholder returns in fiscal year 2018, we decided As for the PPP/concession business, the management to pay a term-end dividend of 20 yen per share and an and operation of public facilities are being entrusted to interim dividend of 10 yen, for an annual dividend of 30 the private sector due to a lack of engineers in the public yen per share (a consolidated payout ratio of 20.6%), sector to manage these facilities. In light of this trend, we under the basic policy of achieving a consolidated payout plan to participate in projects following those of Sendai ratio of 20% or over, which was set considering neces- Airport and the sewerage system business of Hamamatsu sary core capital. Earnings are estimated to decline in City, in which we are already engaged. In addition, we will fiscal year 2019, but the annual dividend is to remain at seize opportunities to invest in value chain development, 30 yen. Recognizing that the decline in performance is Initiatives for Value Creation in order to proceed with the urban solutions business in temporary and will not significantly affect the formation cooperation with each company of the Tokyu Group. of a sound financial foundation, which is our goal, we will keep the dividend amount unchanged from the view- Capital Policy point of returning profit to shareholders consistently and We have been accumulating core capital steadily due to our continuously. healthy performance. We aim to increase consolidated core In addition, our equity ratio is already comparable to capital to over 150 billion yen while keeping ROE over 10% other companies’ at 35%. Accordingly, we will flexibly exceeding equity capital costs. This core capital amount is a discuss responsive return measures, including the payout necessary financial foundation for expanding investment in ratio and share buybacks, after securing a core capital real estate for medium- to long-term growth and tolerating amount of 110 billion yen at the end of fiscal year 2020. risks accompanying flexible M&As, etc. This amount is comparable to those of other semi-major general contractors. Foundation That Supports Value Creation

et sales Total apital uity ratio (Millions of yen) (Millions of yen) (%) 400,000 100,000 75 80,000 60 300,000 60,000 45 200,000 40,000 30 100,000 20,000 15

0 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 0 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 0 (Forecast) Total capital Equity ratio

rdinary inoe et inoe Diidend per share ayout ratio (Millions of yen) (yen) (%) Corporate Data 25,000 40 40 20,000 30 30 15,000 20 20 10,000 10 10 5,000

0 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 0 FY03/15 FY03/16 FY03/17 FY03/18 FY03/19 FY03/20 0 (Forecast) (Forecast) Ordinary income Profit attributable to owners of parent company Dividend per share Payout ratio *Graphs above represent the consolidated figures.

TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 19 Material Issues (Materiality) for Realizing “Our Ideals for 2026—The Company We Hope to Be in 2026”

In formulating “Our Ideals for 2026—The Company We Hope to Be in 2026” and our mid-term management plans, we put together a list of the most important long-term social issues for the Tokyu Construction Group, and identified issues of materiality through discussions with the CSR Committee. To realize “Our Ideals for 2026— The Company We Hope to Be in 2026,” we are determined to deal with these social issues in the Mid-Term Management Plan: Shinka 2020 through our business activities.

Process of Identifying Materiality

STEP Identifying Social Issues 1 Among the United Nations’ Sustainable Development Goals (SDGs), we have identified eight goals related to important social issues to be given priority by our Group. Important social issues to be given priority by our Group within the framework of the SDGs

Human Provide rewarding workplaces for a diverse workforce resources Foster human resources who can contribute to society in a sustainable way

Reduce greenhouse gases and promote resource and energy conservation Environment Reduce and recycle construction by-products Develop green engineering and create environmentally-friendly designs

To help realize the 17 SDGs promoted by the United Nations, we considered potential solutions through our businesses and the expertise of the Group. We then identified eight goals that, when achieved, will help solve issues through our business activities.

STEP CSR Committee Deliberation

The CSR Committee consists of the directors, auditors, and the President serving as chairman. The 2 members have discussed our Group’s social responsibilities in terms of 1) the characteristics of Tokyu Construction, 2) the characteristics of a general contractor, 3) soundness of management, and 4) social and stakeholder needs.

Comments from participants The development of towns resilient to future natural disasters and the improvement of old infrastructure are important missions for the construction industry. We will carry on the tradition of manufacturing, constantly strengthen our problem-solving skills with new ideas and engineering, and continue sustainable development as an enterprise to help realize a sustainable society. We will contribute to solving global issues such as climate change, as a member of the global community. The most important issue is finding human resources in a business environment where the working population is decreasing. We hope to contribute to a sustainable society by improving the job satisfaction of diverse employees. Management will continue to carry out these missions and enhance governance through dialogue with stakeholders.

20 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 21

Innovation of Challenges in New Enhance Management Human Resources Enhance Domestic Construction Business and Financial and Organization Business Domains Foundations Basic Policy - - - - Risks Lack of engagement with investors Delays in addressing Delays in addressing changing public needs Delays in enhancing the construction business and the diversification of sources revenue risks of Increasing disasters due to climate change Delays in securing and training human with high resources levels of expertise Lost investment oppor estate Deteriorating real markets and volatile economies in Southeast and South Asia of business risk Failure management Delays in the improve Difficulties of securing due to volume of days off contracts and problems diversi with addressing fied employee needs social Lags in addressing and customer needs of industrial Occurrence and labor accidents (in etc.) quality, safety, Insufficient communica tion within workplaces from due to stress overwork and a lack of employees mid-career for Delayed measures subcontractors Lack of in-house sources of unique innovation to Delays in responding stock markets tunities ment of business management and in and training recruiting human resources - - - -

Opportunities TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. Try to obtain more orders orders to obtain more Try business PPP/concession for tain and expand business M&As scale through tion and environmental improvement Maintain high earning capacity and enhance financial foundations Communicate our non-financial value Utilize an affiliated renova Utilize an affiliated Form partnerships with other companies and main Expand the needs of climate change mitiga Develop technologies for and mitigating preventing disasters Develop technologies for infrastructure renewing specialized human Acquire resources investment Increase capacity Continued economic in Southeast and growth South Asian countries specialized human Acquire risk and improve resources management Promote personnel system personnel system Promote reform work-style reform Promote Understand and address employee needs the number of Increase qualified workers Enhance problem-solving skills of Regenerate a culture safety organization Restructure a customer-centered from perspective and understand customer and address needs head office Restructure functions (enhance functions to develop company-wide optimum measures) investment oppor Create tunities for the systematic innovation of construction production tion business company and the wooden restructure construction business ------Material Issues rate value tion, and high-rise building construction projects) Risk management in con estate, interna struction, real Enhance sustainable corpo Changing public needs systems, diverse order (more of private-sector introduction initiatives: PPP/concession business, etc.) mar Risk of shrinking future of awareness Increased global environment Expanding businesses in economies of the emerging Southeast and South Asia mainly ODA projects (acquire construc in railways and road tional and new businesses tivity and cost Commoditized market of the construction structure industry Concern about supply due to lack of skilled workers etc. and lower productivity, amid continued construction demand of construction Improvement system through production innovation, etc. (promo IoT, tion of “Shinka” x ICT) Acceleration of qualitative change of construction investment (flow consumption to stock maintenance model needs) and environmental Diversification of individuality (consciousness, work style, lifestyle) long working hours Address and social demands for work- style reform Dealing with fewer applicants for general contractors complex and Increasingly diverse social needs and customer demand for safety, produc environment, quality, Strengthening corporate Strengthening to diversify revenue structure estate, interna in real sources etc. businesses, new and tional Communication difficulties among generations and prob the handing lems regarding down of skills due to stress overwork and lack of from workers in their 30s mid-career ket due to depopulation and weak economic growth Society Governance Environment Category Human resources - - - - Based on the results of discussions, we identified material issues to be prioritized by the Group and considered and considered by the Group to be prioritized material issues of discussions, we identified results Based on the policies of our management strategies. in four basic reflected risks, which were both opportunities and Identifying Materiality Identifying Social Issues Respective material issues are reflected in four basic policies of our management strategies (“Our Ideals”) reflected Respective material issues are 3 Enhance corporate gover nance compliance Ensure risk management Ensure Measures against climate Measures change Realize an energy-saving society Realize society in harmony with nature recycling Build a resource society Establish a society with national resilience Pursue the principle of safe production Transform to cope with processes the declining working-age population Improve working environ Improve ment and job satisfaction and Develop a safe, secure comfortable living environ ment quality ty-first and improve Diversification and active Diversification and active participation of workers and for human rights respect STEP “Our Ideals for 2026” of the Tokyu Construction Group

“Our Ideals for 2026—The Company We Hope to Be in 2026”

We will do our utmost to deliver true value based on a vibrant corporate culture, with the aim of becoming a corporate group that can cope with the changing environment. We have the management and financial foundations in place to withstand business risks, and build a highly profitable business portfolio that is not solely reliant on the domestic construction business. Four Basic Policies

Human Resources and Domestic Construction Management and Financial New Business Domains Organization Business Foundations Bolstering individual Honing our problem-solving Taking on challenges and Shoring up our capabilities and making skills to ensure safety, enhance amassing achievements in management and financial work more rewarding for quality, reduce environmental new business domains foundations each member of the Tokyu impacts, boost profitability Construction Group and lower sales costs We aim to be a company where By continuing to hone our While maintaining our core Learning from past mistakes, we each and every employee can problem-solving skills, we strive construction business, we will will shore up our management find meaning in their work, a to ensure safety, enhance quality, anticipate the changing times as and financial foundations in reason for existence, and a reduce environmental impact, we take on challenges and gen- preparation for changes in the sense that they are contributing boost profitability, and lower sales erate achievements in a variety operating environment. At the to society. costs, thereby providing better of business domains same time, we will meet share- value to customers. In addition, holder expectations by steadily we aim to achieve growth in the increasing corporate value Core Competency Japanese construction market by preparing for growing needs and showcasing our strengths.

Strategies for Realizing Our Vision

Acquire real estate rental properties to Expand paprika business Work-style stabilize profits ¥150 billion or more reform Create new businesses Enhance Business domains Initiatives in the PPP/concession business core Secure risk tolerance Expand New capital against risky Business Domains Enhance Domestic investment assets Bolstering Innovation Evaluation capability Construction Business of human Enhance problem-solving skills Compatibility resources and Establish business partner relations Business develop- organization Focus on renovation, wooden con- ments in Southeast struction, railroads, etc. and South Asia 10% or more Corporate Seek opportunities for alliances and High Create higher ROE culture Diversity M&As with other companies ROE exceeding reform equity capital costs Business areas

Innovation of Human Enhancing Domestic Challenges in New Enhancing Our Management Resources and Organization Construction Business Business Domains and Financial Foundations The core competency of our Endeavor to reform con- Promote overseas operations While reflecting on our Group is our human resources struction production system in Southeast and South Asia past oversights, we aim to (enhanced productivity and improve corporate gover- We will improve human re- In real estate business, use of ICT) by improving nance as well as strengthen sources training to enhance acquire profitable properties problem-solving skills the structure of risk manage- the capabilities of every with stable yields expected to ment and our compliance employee as well as reform Enhance relationships as lead to stable profits system our personnel system and business partners with clients Expand PPP/concession and work style and subcontractors Pursue an appropriate size paprika businesses that are of core capital that can We will make work highly re- Focus on fields with growing mostly unaffected by the respond to increased risks warding by transforming our demand (renovations, mid- shrinking domestic construc- due to stronger and wider corporate culture in which sized wooden construction, tion market investment operations employees can fully leverage etc.) and advantageous fields Early preparation of their capabilities (such as railroad construction) By maintaining higher ROE seed-sowing to obtain new compared to equity capital As a result, we will raise our Aggressively pursue oppor- business and create new costs, we will always enhance core competencies to a level tunities, alliances, and M&As value corporate value and secure of capability that other com- with other companies shareholder profits over the panies cannot easily emulate medium to long term

22 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 23 -

/¥0.1 2 billion billion billion A billion 7.0% 100% or more or more 3 /¥0.1 billion)) 2 0.10 or less ¥350 billion ¥150 billion ¥ Closed for 8 10% or more 17 70 days/4 weeks 90 Fiscal Year 2026 Fiscal Year 20.0 ton-CO ¥ ¥ billion (down 32%) /¥0.1 2 Building construction Building renewal construction building Wooden Civil engineering New business areas Total: ¥ Total: - 6.3% 100% BBB % or more 0.10 or less ¥312 billion ¥110 billion 13% or more days/4 weeks Closed for 7 to 8 Fiscal Year 2020 Fiscal Year 23.2 ton-CO billion (down 22%) illion or ore in FY2017) /¥0.1 billion 2 （ BB 0.43 95% 6.6% 18.1% 4 weeks Emission Survey Report” issued by Nikkenren (Japan Federation of Emission Survey Report” issued by Nikkenren or ore 2 ¥92.6 billion ¥331.4 billion peratin Fiscal Year 2018 Fiscal Year Fisal ear Fisal ear noe arin (down 42%) % Closed for 7 to 8 days/ 17.2 ton-CO Civil engineering and building construction businesses (including woodenmid-sized and renovations construction) Real estate, PPP/concession busi nesses, and other new businesses (paprika business, etc.) etc. Employee training, ICT, % Consolidated sales % % /¥0.1 billion) (The reduction rate is compared to that of FY1990. (29.6 ton-CO rate is compared /¥0.1 billion) (The reduction TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. 2 /¥0.1 billion 2 0.2 95% 6.7% 22.2% 4 weeks % % ¥78.9 billion ¥320.7 billion Fiscal Year 2017 Fiscal Year Closed for 4 to 5 days/ 23.9 ton-CO (Introduced from FY2018) from (Introduced illion (down 19%)(FY2014-16 average) Investment plan Domestic construction business New business areas Management foundations, and human organization resources KPI peratin emissions (*5) 2 Fisal ear Fisal ear % noe arin Safety index (*4) CO Consolidated operating income margin Consolidated sales ROE Consolidated core capital Employee engagement survey (*1) No. of days worksites closed (*2) are Customer satisfaction (*3) % Consolidated sales % (Frequency rate x Strength rate) rate x Strength (Frequency Society Partner Targets Customers Employees companies Shareholders S S G ・ % % E ESG Sales, composition ratio, and operating income margin Sales, composition ratio, and operating - illion - Basic Policy Taking on challenges Taking and amassing achievements in new business domains Shoring up our management and financial foundations Honing our prob Bolstering individual capabilities and making work more for each rewarding member of the Tokyu Construction Group lem-solving skills safety, to ensure enhance quality, environmen reduce tal impact, boost and lower profitability sales cost

peratin Fisal ear Fisal ear % noe arin

% Consolidated sales % Construction Contractors) Specific energy consumption (base unit) per construction sales of our parent company Tokyu Construction (ton-CO company consumption (base unit) per construction sales of our parent Specific energy “Motivation Cloud” engagement rating by Link and Motivation Inc. The survey covers all employees of the entire Tokyu Construction Group, including subsidiaries. “BB” is the fifth highest level on a scale of 11. Construction Group, Tokyu survey covers all employees of the entire “Motivation Cloud” engagement rating by Link and Motivation Inc. The FY2018 (excluding the offices in which application is difficult) company) starting from Construction (the parent covers new worksites of Tokyu Our target Average 95% during FY2014-16 we can also order.”): definitely happy to order/Yes, we are sectors (answering “Yes, company) in private Construction (the parent Rate of customer satisfaction for Tokyu company): Construction (the parent Safety index of Tokyu The standard value of Tokyu Construction (the parent company) in FY1990 is calculated based on the figures recorded in FY1990 in the “CO in FY1990 in recorded company) in FY1990 is calculated based on the figures Construction (the parent value of Tokyu The standard Quantitative Targets of “Our Ideals for 2026—The Company We Hope to Be in 2026” Hope We 2026—The Company Ideals for of “Our Targets Quantitative In principle, investment will be made with our will discuss the optimal way of capital. We core raising funds by considering our management etc. and financial situation, market environment, Amount of total investment We plan to invest around ¥90 billion for the plan to invest around We Our Ideals for coming nine years to realize Hope to Be in 2026 2026—The Company We in the fields of domestic construction and new our as well as strengthening business areas and management foundations, organization, human resources Our Ideals Resilience to the Changing Environment Maximize Value True

Vital Culture Progress of KPIs for the Realization of Goals in Fiscal Year 2018 in Fiscal Year the Realization of Goals of KPIs for Progress *5: *1: *2: *3: *4: ment,” as well as monitoring of our human resource and organizational reforms. reforms. and organizational of our human resource ment,” as well as monitoring In order to complete the Mid-Term Management Plan (2018-2020): Shinka 2020, and achieve “Our Ideals for 2026,” we have Shinka 2020, and achieve “Our Ideals Management Plan (2018-2020): to complete the Mid-Term In order of “employee engage of an indicator the introduction initiatives in fiscal year 2018, including steadily with various proceeded Mid-Term Management Plan (2018-2020): Shinka 2020

The Mid-Term Management Plan (2018-2020): Shinka 2020, which was formulated in March 2018, refers to the final process for actualizing our corporate vision of being “a general contractor that continues to embody Shinka,” which was established in 2011 for the milestone of 2020, as well as the start of efforts to achieve “Our Ideals for 2026—The Company We Hope to Be in 2026.” Urban Solutions Business

The Urban Solutions Business was developed by putting our plans into practice, while considering the changes in our business environment from 2020, as well as the strengths of our Group. Changes in the Environment Surrounding the Construction Industry

Intensifying labor shortage

While investment in construction remains at a high level, Current it is imperative to secure engineers, due to the aging of situation skilled construction workers combined with a low number of young workers.

From 2020, many employees of the baby boom generation will retire. Accordingly, it will be essential to secure engi- Outlook neers and skilled construction workers, in order to maintain 1 our supply capacity.

Shrinking demand for new construction Environment Increase in demand for renovation

The social infrastructure constructed during or after Japan’s Surrounding Current high-growth period is deteriorating, and there is also pressure situation to make facilities earthquake-resistant and environmentally the Construction friendly. Accordingly, the demand for renovation is growing.

Industry From 2020, the proportion of deteriorated social infrastructure will 2 increase rapidly, and the need for environmentally friendly facilities Outlook will continue to grow. Accordingly, the shift from a spot-revenue business model to a recurring-revenue business model will accelerate.

Growing need to enhance productivity

The utilization of ICT at construction sites, as well as the Current adoption of construction methods to improve produc- situation tivity, etc., is progressing in order to cope with a current and future shortage of skilled workers, etc.

From 2020, the modularization of construction materials and the utilization of ICT at construction sites will prog- Outlook ress rapidly, along with the transformation of construc- 3 tion production systems.

24 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 25 - - - 14 12 FY03/33 Roughly67% Roughly50% Roughly64% Roughly58% Roughly24% 10 08 FY03/23 Roughly9% Roughly43% Roughly34% Roughly43% Roughly32% 06 04 FY03/13 Roughly2% Roughly8% Roughly18% Roughly20% Roughly25% - 02 2000 bridges Tunnels Precast concrete construction method Modularization of construction materials Manufacture reinforced concrete construction parts at concrete reinforced Manufacture and join various parts together at construc a factory, number of on-site in the required Enables a reduction of of costs, and a stable supply workers, a reduction parts building high-quality concrete tion sites Roads and Wharf walls Sewer pipes Breakdown of infrastructure more than 50 years old ment facilities River manage The proportion of aging social infrastructure that was original of aging social infrastructure The proportion ly established after Japan’s period of rapid economic growth period ly established after Japan’s in a at a rapid pace, which is expected to result is growing further expansion of demand for maintenance and repairs. 98 - 96 94 esidentialesidential on- on- residential residential 18 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. 13.1 13.1 92 All industries (29 years old or younger) All industries (55 years old or older) Construction industry (29 years old or younger) Construction industry (55 years old or older) 17 12.6 12.6 Breakdown of construction industry worker by age group Breakdown of construction 16 12.7 12.7 1990 (%) 35 30 25 20 15 10 15 Promoting the diversification of revenue sources by expanding strate sources by expanding diversification of revenue Promoting the gic businesses of foundations in support management and financial Shoring up our heightened profitability 11.8 11.8 Compared with other industries, the aging population is having a more pronounced pronounced with other industries, the aging population is having a more Compared 10% workers aged up to 29 comprise roughly where impact on the construction industry, than 30%. and workers aged 55 and above comprise more of the total workforce, 3: 4: 14 9.9 9.9 Source: “Construction Investment Outlook” issued by the Ministry of Land, Infrastructure, Transport and Tourism Transport “Construction Investment Outlook” issued by the Ministry of Land, Infrastructure, Source: - - 13 11.0 11.0 12 9.0 9.0 i-Construction

11 8.5 8.5 10 8.4 8.4 Building renovation demand (10,000 persons) 09 7.87.8 workers 9 6 3 0 The Ministry of Land, Infrastructure, Transport and Transport The Ministry of Land, Infrastructure, the utilization of ICT in construction promotes Tourism surveying and mea ranging from processes production to design, construction, and inspections surements at construction sites by leveraging productivity Improve and ICT measurements for technology such as drones for construction required required 15 12 Number of (Trillion yen) (Trillion additionally Renovation demand is expected to continue expanding, construction, on non-residential centered going forward, responses, and environmental with earthquake-resistance etc., acting as tailwinds.

in 2025 25 workers employed Number of Source: “Toward Revitalization and Evolution: Long-Term Vision for Construction Industry” issued by Nikkenren (Japan Federation of Construction Contractors) Vision for Construction Industry” issued by Nikkenren Revitalization and Evolution: Long-Term “Toward Source: 18 Construction Cost Management 16 Adoption of digital solutions in 2025 Construction Planning / Process Control Factory Manufacture workers required required 14 Number of radual ontration 12 Analysis 10 08 ae of 2014 BIM/CIM Design / Structure / Facilities 06 Basis / Implementation planning 04 Renovation Operation / Maintenance 02 2013 Design and Planning Growth projection for skilled construction workers Growth projection for skilled 00 Stage Domestic construction investment 98 Project Planning Demolition 2012 0 Facilitates consensus-building between construction- in players, and contributes to an improvement related the efficiency of design and construction work Centralization of three-dimensional informationCentralization of three-dimensional on building shapes and attributes 20 40 (Trillion yen) (Trillion 80 60 Transforming our human resources and organization to elicit employee organization to elicit employee human resources and our Transforming capabilities motivation and Reinforcing the domestic construction business with a customer- domestic construction Reinforcing the problem-solving skills centered perspective and Demand for new construction is expected to peak over this means that new the medium to long term; however, rather than a construction will enter a gradual downtrend, sharp decline. Even after factoring in productivity improvements, it is projected that the domestic construc that the domestic it is projected improvements, Even after factoring in productivity tion industry will require between 2.93–3.15 million skilled workers in FY2025. At the same tion industry will require 1.3 million workers over the same peri is expected to decline by roughly time, the workforce od, due to the exit from the workforce of a large number of baby boomers, along with other of a large the workforce od, due to the exit from workers. factors, raising the possibility of a shortage of between 770,000–990,000 Basic Policy 1: 2: - methods business New construction Robots (spot-revenue businesses) (spot-revenue Increase recurring-revenue recurring-revenue Increase Construction subcontracting Tokyu Tokyu Group AI Subcontractors network Tokyu Construction Tokyu Tokyu Construction Tokyu Group Group cooperation IoT through early adoption of cutting-edge technology through Customers Regional superior general contractors, etc. Enhance the sophistication of the construction industry Secure construction resources via resources construction Secure collaboration with other companies. Utilize the comprehensive Utilize the comprehensive Tokyu Tokyu capabilities of the Tokyu Group. capabilities of the Tokyu Construction - - - Enhancement of on-site capabilities operational reforms through Utilization of the comprehensive Utilization of the comprehensive Group of the Tokyu strengths Expansion and diversification of our business portfolio Strengthening collaborations with collaborations Strengthening and superior contractors regional subcontractors Innovate operations through investment in and early Innovate operations through a medium- from adoption of cutting-edge technology, to long-term perspective, and aim for further improve ment of on-site capabilities. Strengthen our proposal and project origination capa and project our proposal Strengthen Target a business portfolio that is resilient to a business portfolio that is resilient Target by actively engag changes in the environment, recurring-revenue ing in businesses with a strong aspect, such as renovation to various needs, such as utilizationbilities to respond values property and increasing of land, renovations, Secure construction resources from a medium- to from construction resources Secure with alliances long-term perspective, by proceeding and M&A Ⅳ Ⅲ Ⅰ Ⅱ

Securing construction Changing from the currentReceiving orders Transformation of construction spot-revenue model to a resources more actively recurring-revenue model more actively production systems

Increase in Growing need to Intensifying labor shortage Strategic Direction Considering Changes in the Business Environment Considering Changes Strategic Direction

renovation demand enhance productivity Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. ing changes in the business environment. environment. ing changes in the business We established the medium- to long-term strategic vision that we should pursue, based on three perspectives regard that we should pursue, based on three medium- to long-term strategic vision established the We Urban Solutions Business Urban Mid-Term Management Plan (2018-2020): Shinka 2020 Shinka (2018-2020): Plan Management Mid-Term 26 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 27 - - capability Renovation Construction Tokyu Renewal Tokyu Engage in M&A spe of renovation Enhance on-site capability through operational reforms cialists and other business operators Handle all aspects renovations, through long- and ensure term contact with customers - management Tokyu Group Tokyu Strengthen coop Strengthen eration with Tokyu companies Group Toshio Imamura Toshio Director, Representative Vice Chairman Maintenance and - - - Ensure continuous interactions with customers Ensure TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. Tokyu Group Tokyu Tenant leasing Tenant Hire human Hire with resources leasing property expertise coop Strengthen eration within the Group Tokyu Leasing expertise Leverage the comprehensive capabilities of the Leverage the comprehensive to support all aspects, through Group Tokyu operation Areas to strengthen going forward to strengthen Areas Tokyu Tokyu capabilities Design and construction Construction Enhance on-site capability through operational reforms Form alliances with superior regional contractors and partners, and engage in M&A Secure partners to take Secure on small-scale projects difficult for that are Construction to Tokyu handle Flexible construction - - Tokyu Group functions Group Tokyu Property Property proposals construction bilities other Proposal capa Proposal Make joint pro posals with Tokyu companies Group human Hire with resources leasing property expertise than design and In addition to design and construction, make regarding proposals utilization property (leasing, etc.) - - Ensure interactions with Ensure customers from upstream customers from networks and customer eral contractors and engage in M&A Consolidate the local information of various Tokyu companies Group Form alliances with local top-tier gen Project sourcing Project Local information Collect information on the challenges and needs of local compa nies and landowners Going forward, our Group will carry out work in its “Urban Solutions our Group Going forward, I intend to As chairman of the Strategy Meeting established this year, Tokyu Construction functions Construction Tokyu Business overview by step Required actions As the construction arm of the Tokyu Group, Tokyu Construction has grown has grown Construction Tokyu Group, As the construction arm of the Tokyu management” as a key player in infrastruc by engaging in “infrastructure Message from Vice ChairmanMessage from Imamura ture development for railways, buses, and roads in urban development development for railways, buses, and roads ture Garden Tama including the development of Shibuya and Tokyu projects, City. solutions, and establish a comprehensive necessary Business” to, reinforce alliances and M&A, and utilizing good value chain, by actively promoting with local governments and companies, based on the charac relationships even after to achieve sustainable growth in order teristics of each region, Olympic Games. the 2020 Tokyo to accelerate practical operations in the Urban Solutions Business in order generate stable medium- and long-term cash flow. General picture of the urban solutions business and necessary actions solutions business and necessary of the urban General picture Our Original Business Model for Generating Stable Cash Flow Model for Generating Stable Our Original Business Fleshing out the Urban Solutions Business Solutions out the Urban Fleshing pany collaboration, but by reinforcing necessary solutions and establishing a comprehensive value chain. a comprehensive necessary solutions and establishing but by reinforcing pany collaboration, these initiatives. companies by steadily implementing a unique business model unlike other intend to establish We We will aim to shore up the Tokyu Construction Group’s overall earning capacity by not only strengthening Group com Group by not only strengthening overall earning capacity Group’s Construction up the Tokyu will aim to shore We At a Glance (Business Overview)

Our Group focuses on civil engineering and building construction as core businesses. We are also working on new pillars of strategical businesses including real estate and international businesses to increase competitiveness and diversify revenue sources. We aim to enhance our corporate value in a sustainable manner through the development of a stable management foundation.

Orders Received Construction Sales Civil Engineering Tokyu Group Tokyu Group ¥14.4 billion ¥12.7 billion 18.6% 18.1% Business Total Total

We establish national land infrastruc- ¥77.7 ¥70.3 billion billion ture that ensures safety and security in people’s daily lives. Furthermore, we are proactively engaged in environment-related fields. Other Other Breakdown of Breakdown of • Railways, roads, tunnels, bridges, and ¥63.3 billion ¥57.6 billion other construction, reconstruction work Orders Received 81.4% Construction Sales 81.9% after earthquakes, etc. Civil Engineering Civil Engineering 29.6% 22.8%

Orders Received Construction Sales Building Tokyu Group Tokyu Group ¥20.1 billion ¥56.9 billion 10.9% 23.9% Construction Total Total Business ¥185.2 ¥238.2 billion billion We engage in community-based urban development throughout Japan, such as development of Tama Breakdown of Other Breakdown of Other ¥165.1 billion ¥181.3 billion Garden City and redevelopment in Orders Received Construction Sales Shibuya. 89.1% 76.1% Building Building • Construction of commercial facilities, hotels, offices, housing, factories, hospi- Construction Construction tals, and distribution centers, renovation and wooden building construction 70.4% 77.2%

*The pie chart represents the amount of construction business (non-consolidated) for the fiscal year ended March 31, 2019 (including overseas).

Business Domains and Strategies

Large scale Development properties (high difficulty)

Real Estate Business Investment properties (low difficulty)

We pursue an area strategy in such places as the areas surrounding stations along Tokyu train lines. This is done in cooperation with Tokyu Group companies, focusing on acquisition of prop- J-REIT Major developers erties and on the rental business by taking advantage of the characteristics of our core construction business. • Rental business, equivalent exchange business, etc. Business domain we focus on: Real estate rental (such as office buildings Major Achievements and rental apartments) Private or operating Small- to medium-sized companies funds, new developers

Conversion office Small and medium scale “Crescent Hills Minami Aoyama” Strategies • Focusing on asset investment with the major business domain Conversion office being the real estate rental business Part of “Kojimachi Crystal City West Building” • Acquiring investment properties with high investment yields (which is owned under condominium ownership) through our unique measures to increase added value, such as Facility name “THE MOCK-UP” renovation and seismic reinforcement

28 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 29 FYE FYE Mar. 2019 Mar. 2019 FYE FYE Mar. 2018 Mar. 2018 Operation of a public sewage treatment plant (for the in Seien area) Hamamatsu City FYE FYE Mar. 2017 Mar. 2017 Profit Margin Profit Margin FYE FYE Mar. 2016 Mar. 2016 FYE FYE Gross Profit/Profit Margin Profit/Profit Gross Margin Profit/Profit Gross Mar. 2015 Mar. 2015 0 0 Gross Profit Gross Profit 8,000 6,000 4,000 2,000 10,000 30,000 20,000 10,000 (Millions of yen) (Millions of yen) Major Achievements FYE FYE Mar. 2019 Mar. 2019 FYE FYE PPP/concession business Paprika business Figures above are for Tokyu Construction only (including overseas for Tokyu above are Figures affiliates) for both Civil Engineering and Building Construction. Mar. 2018 Mar. 2018 Other Businesses PPP/concession business in the our efforts redoubling are We and the paprika business as new business domains. • • * TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. FYE FYE Mar. 2017 Mar. 2017 Net Sales Net Sales FYE FYE Mar. 2016 Mar. 2016 FYE FYE Mar. 2015 Mar. 2015 - 0 0 60,000 40,000 20,000 80,000 200,000 100,000 300,000 (Millions of yen) (Millions of yen) Mass Rapid Transit Mass Rapid Transit System in Jakarta 1 1 2 Major Achievements 2 Major Achievements Major Achievements Development of railways and roads, construction of high rise Development of railways and roads, buildings and factories tivated, we engage in business in Southeast and South Asian Myanmar, Indonesia, countries, including Thailand, Singapore, and Bangladesh. Vietnam, International Business Making the most of the skills and know-how that we have cul • Rebuilding work of pedestrian bridges on National Route Rebuilding work of pedestrian bridges East Exit (the Ministry of Land, 246 near Shibuya Station’s and Tourism) Transport Infrastructure, FLIGHT OF DREAMS construction work (Central Japan International Airport Co., Ltd.) New construction work for the Shibuya Station South (TOKYU CORPORATION) District Project for constructing a new building name) Project (Tentative (Mitsui Fudosan Residential Office for the Shibuya Ward Co., Ltd.) Sumida River rain water trunk line No. 3 (Bureau of No. 3 (Bureau Sumida River rain water trunk line Government) Metropolitan Sewerage, Tokyo National Route 45 roadwork in the northern in part National Route 45 roadwork Land, Infrastructure, of Miyako City (the Ministry of and Tourism) Transport Overview of Each Business

Civil Engineering Business

We are enhancing our on-site capabilities by proactively utilizing three-dimensional data. We will strengthen the civil engineering business by steadily implementing measures to receive more orders in our focus areas. Yushi Tsukui Director, Senior Executive Officer General Manager, Civil Engineering Division

Current Status and Issues In the civil engineering business, our company is pursuing a our efforts towards enhancing on-site capabilities. business strategy based on three policies in the Mid-Term Meanwhile, we are focused on mountain tunnels, shields, Management Plan: “Enhancing on-site capabilities,” “Enhancing caissons, and high elevated bridges in general civil engineering domestic construction business,” and “Taking on challenges in projects (for such clients as government and municipal offices, new domains”. In fiscal year 2018, the first year of the management including the Ministry of Land, Infrastructure, Transport and plan, profit exceeded our initial estimate thanks to temporary Tourism, and the Tokyo Metropolitan Government, as well as improvement factors, and we are steadily working on medium-to Japan Railway Construction, Transport and Technology Agency long-term measures in order to continuously achieve results. and Nippon Expressway Company (NEXCO)). We receive orders With the aim of improving operational efficiency and produc- strategically, by not only taking advantage of our experience tivity, we are endeavoring to foster greater employee awareness, regarding related construction projects, but also obtaining the and facilitate more active communication toward work-style professional experience of our civil engineers required for bidding. reform. In particular, we are enhancing our on-site capabilities by Although achieving good results in new business domains proactively utilizing three-dimensional data, which will markedly often takes time, we are steadily employing a bold approach. improve the capabilities of our employees to remain aware of We believe that the knowledge we have acquired through construction conditions and issues at work sites. the airport and sewerage system concession businesses can Regarding railway construction in which our company special- be of great use in future privatization projects. izes, railway companies continue to vigorously make capital invest- We will work steadily on each measure and enhance the ments, and we are striving to receive orders from these companies civil engineering business as a whole, while boosting the on a stable basis, and to maintain and expand revenue through capabilities of our human resources and organization.

Business Strategies Plan and Direction Major Progress in Fiscal Year 2018

• Pursue safety, quality, environmental friend- • Promoted the use of ICT, and enhanced our core operations utilizing three-dimensional data liness, productivity, and cost reductions • Improved operational efficiency by adopting logical approaches Enhancing on-site • Improve operational efficiency and • Developed human resources through an enriched ten-month-long training program for capabilities productivity new employees • Build a system to increase employee satisfaction • Increased communication with subcontractors, systematically secured our labor force, • Enhance co-creation with subcontractors and provided them recruiting support • Enrich civil engineering for railways • Participated in a railway project from the planning phase Enhancing domestic • Enhance general civil engineering • Focused on receiving orders for urban civil engineering projects involving shields and construction business caissons, and large-scale projects for mountain tunnels

• Enhance international business • Engaged centrally in a transportation-related infrastructure construction project supported by • Enhance the PPP/concession business Official Development Assistance (ODA) of the Japanese government; increased the number • Expand business through collaborative of workers in order to expand the project’s scale work and M&A • Participated centrally in concession projects for waterworks, sewerage systems, and roads as an Taking on challenges operator; cultivated knowledge of project management by taking part in Japan’s first sewerage in new domains system concession project (for the sewage treatment plant for the Seien area of Hamamatsu City) • Promoted the Private Finance Initiative( PFI) Promotion Group to the New Business Development Department from April 2019, in order to carry out measures at an accelerated pace • Targeted projects for large-scale updates, maintenance and repair, and inspections, and put together concrete proposals

30 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Topics on Business Strategies 1 2 3 Improvement of operational Start of the Infrastructure Participation in Japan’s first efficiency of employees at Asset Management (IAM) sewerage system privatiza- work sites Promotion Group tion project as an operator

We have applied a theoretical approach We have established a new depart- In April 2018, a special purpose company Story of Value Creation called the Theory of Constraints (TOC), ment that promotes infrastructure asset (SPC) set up by five companies, including which leads to overall optimization by iden- management (IAM), with a view toward Tokyu Construction, was entrusted with tifying constraints impeding overall opera- the possibility of full-scale entry into operation of the sewage treatment plant tional flow and eliminating stagnation points the IAM business. This department will for the Seien area in Hamamatsu City for in the operational process, to each work site, support the maintenance, management, the next 20 years, which represents the first under the support of the Work Style Reform and renewal of infrastructure construction sewerage system privatization project in Department at the head office. projects such as railways and roads, and Japan. Our company proactively devotes In order to improve operational effi- apply effective and efficient maintenance ourselves to the PPP/concession business ciency, the manager oversees the opera- and management technology to society, in the recurring-revenue area, which is tional processes in which each subordinate from a medium- to long-term perspec- confronted with issues such as aging infra- is engaged through visualization with sticky tive. As a first step, we have launched structure, shrinking financial resources, and notes, determines priorities, and clearly allo- “iTOREL,” a system for inspecting and shortages of public civil engineers, and in cates tasks to each staff to ensure that they examining the full cross sections of tun- which proactive adoption of the vitality of are focused on their own duties. In addition, nels, utilizing cutting-edge robot technol- the private sector is expected, in an effort we also visualize tacit knowledge in order to ogy and AI-based diagnostic technology. to diversify revenue sources. share know-how. Initiatives for Value Creation

F O C U S

Proactive Use of ICT for the Further Prosperity of Shibuya Foundation That Supports Value Creation — i-Construction in Urban Civil Engineering

A variety of technologies, such as ICT and model, in which a time axis is also added with the development and prosperity of Building and Construction Information to the 3D model, has contributed to swifter Shibuya. We will accumulate experience Modeling/Management (BIM/CIM), are being consensus building with the parties involved. through this redevelopment project, including used proactively in the construction industry We are making preparations for a project the locations of underground pipes, in UiM, through an approach called i-Construction, at the West Exit of Shibuya Station, with the which is a digital twin, in order to pass our led by the Ministry of Land, Infrastructure, proactive use of UiM in mind. We will steadily business experience down to the employees Transport and Tourism. Our company is and reliably propel the project forward, who will be working at our company 50 to 100 utilizing these technologies in the Shibuya maintaining the project schedule, by grasping years from now. We have been, and will con- redevelopment project. potential construction risks as expeditiously as tinue to remain open to proactively adopting Conventional methods, which employ only possible in cyberspace, which is a digital twin new technologies toward the further creation two-dimensional drawings to share construc- that reproduces real-world conditions, and of future prosperity in Shibuya. tion plans and related information, are inade- applying the identified risks to the real world. quate for the complex project of redeveloping Our company has been thriving, together *UiM: Urban information Modeling/Management Shibuya, in which the civil engineering division and building construction division must simultaneously engage in their respective construction operations in close proximity, while maintaining city functions in the area. Accordingly, since 2013, our company has been engaged in an effort to integrate the

BIM of the building construction business Corporate Data and the CIM of the civil engineering business, and based on a concept called UiM*, we have rendered the entire city of Shibuya in Left: 4D-CIM model at the Tokyo three-dimensions, and have been using this Metro Ginza Line idea to study the redevelopment of Shibuya. Above: UiM model at the West Especially in the projects involving the Tokyo Exit of Shibuya Station Metro Ginza Line at the East Exit of Shibuya Station and SHIBUYA STREAM, construction planning in 3D space and using the 4D-CIM

TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 31 Overview of Each Business

Building Construction Business

By adopting a customer-centered perspective, strengthening our human resources and organization, and leveraging ICT and labor-saving construction methods, we will create a business foundation that is capable of coping with the changing business environment. Motoyuki Takagi Director, Senior Managing Executive Officer General Manager, Building Construction Division

Current Status and Issues In preparation for a harsh business environment, fiscal plan formulation at the start of on-site construction proj- year 2018 is the first year in which a plan for reorganizing ects that require significant workloads, has already started both sales and construction work was executed, with the producing results. Currently, efforts are being made to aim of constructing a customer base that will not be influ- optimize the flow of business processes from the sales enced by economic fluctuations and price competition. In phase of construction to building completion, and effi- the beginning, there were challenges that accompanied ciency is being further improved. the change in the organizational structure. However, we Furthermore, in order to strengthen our sales capabil- believe that the new organization was able to achieve a ities, the number of sales personnel among construction smooth start by addressing these challenges one by one. engineers has been increased by roughly 50%, and a fur- Along with the start of the new organization, the mea- ther increase is planned. Although this is not a measure sures for achieving “Our Ideals for 2026—The Company that will produce immediate effects, it is hoped that it will We Hope to Be in 2026” were also implemented. lead to a nurturing of sales personnel, in order to meet Although progress rates vary and it will take time for the future needs of customers. the effects of some measures to become apparent, they In the future, in response to demands for the elimina- are progressing smoothly as a whole. For example, the tion of long working hours and work-style reform, we will newly established work site support group, which aims to proactively apply BIM and adopt labor-saving construc- improve operational efficiency and quality by allocating tion methods, with the aim of further labor saving. resources and front-loading tasks such as construction

Business Strategies Plan and Direction Major Progress in Fiscal Year 2018

• Organizational strengthening of upstream • Increase in the ratio of design and construction projects (up approximately Enhanced operations sales through the integration of sales and 5% year on year) construction • Increase of projects involving participation of the construction division from with a customer- • Nurturing human resources and strengthen- the sales stage (up approximately 10% year on year) centered perspective ing engineering capabilities in response to • Proposal for and adoption of our unique TQ-MIX* construction method customer needs

• Adoption of more labor-saving construction • Labor saving due to front-loading utilization of Building Information methods, and strengthening of the support Modeling (BIM) Increased on-site system to improve productivity • Leveling of on-site operations through the work site support group capabilities • Improvement of on-site management (safety, • Sharing of cases of labor-saving construction methods and support for the quality, environment, process, and cost) proactive adoption of such methods • Strengthening of the renovation business • Greater-than-expected business results in the initial year of business con- (concentration of this business in the subsidi- centration, thanks to mutual cooperation ary TOKYU RENEWAL CO., LTD.) • Combination of our Group’s building health monitoring technology and Taking on challenges • Focus on the mid-sized wooden construc- each company of the Tokyu Group in new domains tion business • Stimulating demand with the “MOC+” brand (This expresses our Group’s desire to • Expanding support for international business contribute to the creation of comfortable urban spaces by utilizing timber (moku).) • Support for receiving orders for overseas high-rise buildings

*See P.33 “Topics on Business Strategies- 1 ” for details

32 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Topics on Business Strategies 1 2 3 Adoption of our unique Development of a conveying Provision of solution services to framing method through robot to tackle the labor cope with changes in demand strengthened upstream sales shortage issue for the recurring-revenue busi- (TQ-MIX framing method) ness model Story of Value Creation The “TQ-MIX framing method” is our In order to address the worsening labor In cooperation with the companies of the original RCS framing method, in which shortage problem, we have engaged Tokyu Group, namely TOKYU RENEWAL a framework is constituted by reinforced in the joint development of a convey- CO., LTD., its communications Inc., and concrete pillars and steel beams. By taking ing robot for work sites, with the aim TOKYU FACILITY SERVICE CO., LTD., advantage of the strengths of each material, of improving operational efficiency by our company is planning to develop and it is possible to build high-quality, low-cost roughly 30%. This robot can flexibly adjust release a new solution service for disaster buildings with long span spaces that display to the ever-changing environment at a prevention and business continuity, called increased rigidity and reduced horizontal construction site, and can easily be used “Dr. BC Push.” We provide building seismic shaking. Thanks to sales from the by skilled on-site construction workers. structure assessment services, a variety of upstream stage, proposals that matched We are developing this robot for practical information, and one-stop support for the customer needs were adopted, and we use, with specs that allow it to deal with management and operation of buildings have received orders. This framing method steps in corridors, and prevent malfunc- in normal circumstances, at times of is expected to be applied to the constructions even in harsh working environments, earthquakes, and during the subsequent tion of large-scale warehouse facilities for the distribution of goods, the demand for with dust, etc. recovery period. In addition to supporting which is expected to remain strong. business continuity for building owners and facility managers, we will make efforts to meet the demand for renovation work. Initiatives for Value Creation

Disaster prevention Comprehensively supporting three stages to and business conti- enhance security and safety of facilities nuity solution At times of earthquakes and Normal circumstances During the recovery period Dr. BC Push other natural disasters

Understanding of the condition Structural damage Recovery support for of the building structure and assessment in times of 4D-DOCTOR facilities age-related deterioration earthquake disasters

Information around building Disaster-related information of Information on neighboring such as rainfall, heat stroke iTSCOM TV PUSH neighboring local governments local governments, etc. and train service (earthquake, heavy rain, landslide, etc.)

Evacuation instructions Building management BC building Building management using to tenants using the to support business the information above management information above continuity

F O C U S

Labor saving through promotion of BIM* application at work sites Foundation That Supports Value Creation In order to promote front-loading during to improve the efficiency and safety of to reduce the burden of on-site quantita- construction work and streamline on-site the operations. In addition, it can ensure tive calculations, etc., to achieve a further operations, we have started distributing a the consistency of multiple drawings, streamlining of business operations. structural model that supports BIM (“first such as architectural design, structural, model”) at each work site, at the start and equipment plans, and prevent losses *BIM stands for Building Information of construction. The distributed model in profit due to operational rework. Modeling, and is a solution for utilizing is utilized at the site as a construction Furthermore, it is possible to check the information in a building database produced BIM, and applied to an examination of suitability of work in detail, and build a by adding data regarding attributes, such the construction plan, etc. Visualizing the consensus with the client and designers in as cost, finishing details, and management information, to a three-dimensional digital work procedure with BIM, and sharing three dimensions, thereby improving the model of a building constructed on a com- it with employees and on-site skilled speed of decision-making. puter during various types of construction construction workers makes it possible to In the future, we plan to utilize the processes, including design, construction, select the optimal procedure, and helps quantitative information provided by BIM maintenance, and management.

Front-loading during construction work (on-site distribution of a structural model that supports BIM)

Construction step model

Coordination of steel frame and equipment data Maintenance and management

Finishing details and Corporate Data Rebar Arrangement Details

Distribution Shop Drawing (detailed floor plans, building frame drawings, cross-section plans)

VR and MR

Structural model that supports BIM (“first model”) Application of “first model” at work sites

TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 33 Overview of Each Business

Real Estate Business

We will establish a stable medium to long- term revenue base by acquiring rental properties, while utilizing our characteristics and strengths as a general contractor and expanding it as a strategical business. Junichi Omuro General Manager, Real Estate Division

Current Status and Issues According to the Mid-Term Management Plan that The Real Estate Division will actively acquire invest- started in April last year, the real estate business ment properties, including mainly office buildings, was recognized as one of the strategical businesses commercial facilities , and rental apartments, to own for diversifying revenue sources, the “Real Estate them in the medium and long term. The purpose is to Division,” which specializes in the rental of real estate, secure revenue from real estate rental. It is possible was established. We aim to expand the real estate to boost profitability and participate in projects that business by establishing new investment criteria and are difficult for other companies to join by utilizing the management systems. characteristics and strengths of our company, a gen- Last fiscal year, development of the organization’s eral contractor and a member of the Tokyu Group that bases and the staffing system of the new business divi- focuses on Shibuya and areas along the Tokyu Line. sion was basically completed a good start. While prices For example, in order to rent out our properties, we are skyrocketing and yield is declining in the real estate are proceeding with renovations for aseismic reinforce- investment market, we acquired investment properties ment and for legal compliance purposes, conversions (five buildings) worth 4.4 billion yen in the first fiscal year, into small offices. We will continue such activities by as we aim to invest 10 billion yen over the three years of drawing on our characteristics. the Mid-Term Management Plan.

Business Strategies Plan and Direction Major Progress in Fiscal Year 2018

Secure and develop skilled staffs • Recruited specialized personnel from the Tokyu Group in charge of acquiring investment • Developed a staffing system for recruiting mid-career workers and Obtaining the properties others, which made a good start know-how to Develop an information network • Doubled the volume of information on investment property listings, through acquire investment the utilization of the information network of the Tokyu Group, etc. properties • Streamlined the information-gathering process, through the cementing of relations with trust banks, brokerage firms, management companies for our existing investment properties, etc. Maximize profits from existing • Implemented renovations for improving the value of each building investment properties • Maintained a high occupancy rate through enhanced leasing Streamlining our portfolio Carry on an appropriate portfolio • Acquired five investment properties strategy • Proceeded with renovations that improved the functions and value of each building

34 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Topics for the Division

Our Company’s Investment Properties We acquire office buildings and commercial facilities to own them in the medium and long term and try to improve their value in order to develop high-quality spaces. *The areas we focus on: Shibuya, five wards in central Tokyo, and areas along the Tokyu Line Story of Value Creation

Chiyoda Dogenzaka Bldg. MCC Kanda-iwamoto-cho Bldg. (Shibuya) (five wards in central Tokyo)

Positioning “Shibuya,” which is the We proceeded with the acquisition base of the Tokyu Group, as the area of this kind of office building that we focus on most, we acquired this would be occupied by start-up property to own it and contribute firms, and small and medium-sized to the development of the area. real estate whose total floor area (Acquired in March 2018) is around 300 tsubo. (Acquired in March 2019)

F O C U S Initiatives for Value Creation

Our Renovation of Rental Properties

We buy office buildings, conduct aseismic reinforcement and correct them in accordance with the Building Standards Act by utilizing our strengths as a general contractor. Afterward, we renovate them to construct small offices and operate the properties to be rented, under the assumption that we will hold them in the medium and long term. IVY WORKS

We renovated this building, which is favorably located three minutes on foot from Sendagaya Station on the JR Chuo-Sobu Line and had been occupied by a design company, to transform it into an office building for creators. We created a property that offers creative lifestyles in an urban center, where the four seasons can be enjoyed. Foundation That Supports Value Creation We built a running station on the first floor. On the rooftop, we con- Location: Sendagaya, Shibuya Ward structed a garden for barbecuing. We Site area: 315.84 m2 adopted a customization plan for the Building structure: SRC structure, 6 stories above ground office sections on the second to sixth Total floor area: 947.41 m2 floors, so as to offer ideal creative Building completion: 1974 offices and showrooms. Acquired in: 2016 Before After

Portfolio of our investment properties Inner: Rental area ratio Governance in the Real Estate Business Outer: Rent ratio

% % % % [Real Estate Transaction Review Board] % % % % We review each property after inviting staff from specialized departments, including the Corporate Planning Department, the Legal Department, and Corporate Data Uses Areas the Finance & Accounting Department, and real estate experts from outside the company. Properties are risky assets that could affect our business performance according to market conditions. As we % % will expand our acquisitions, we review % % them every quarter to check the condi- Offices Shops Land Five wards in central Tokyo Shibuya tions of each one and the outcomes of Areas along the Tokyu Line the real estate business.

TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 35 Overview of Each Business

International Business

We shall strengthen our ODA projects and endeavor to construct high-rise buildings as we fortify our business structure and manage the risks distinctively to overseas markets. Shigehiko Shibusawa Executive Officer General Manager, International Division

Current Status and Issues The international business is one of the target businesses In these ways, we have contributed to the develop- for diversifying sources of revenue in the Mid-Term ment of social infrastructure in each country with our Management Plan. We are focusing on ODA projects for advanced technology. In order to have a continuation of the development of infrastructure which including railways ODA projects, we dispatched expertise from our engi- and roads from the Japanese government in Southeast neering section in Japan to strengthen the ODA busi- and South Asia. We are also expanding our construction ness structure. business to non-Japanese private sector companies and In addition, we shall not limit ourselves to Japanese fac- shall actively participate in the tendering of high-rise build- tory projects but also participate in other building construc- ing construction. Currently, we have branch offices in six tion projects by engaging local staff and working closely countries, namely Thailand, Singapore, Indonesia, Myanmar, with local contractors so as to strengthen the bidding Vietnam, and Bangladesh. We have joint ventures with local process such as tendering for high-rise building projects. corporations in Thailand, Indonesia, and Myanmar as well. As for the risks unique to overseas markets, we have forti- For ODA projects, we have successfully completed a fied our risk management by enhancing head office functions. depot for Mass Rapid Transit System in Dhaka, the cap- In addition to the on-site experience and achievements ital city of Bangladesh and development of Mass Rapid accumulated so far, we will facilitate the involvement of Transit System in Jakarta, the capital of Indonesia for the more experienced national staff and expand our business first time. We are currently constructing a road on a newly by leveraging a small number of Japanese employees. built bridge and carrying out large scale upgrading of existing intercity railways in Myanmar.

Business Strategies Plan and Direction Major Progress in Fiscal Year 2018

Beside our forte in railways construc- • First Mass Rapid Transit in Jakarta, and first contracted work by a tion, we shall expand our target proj- Japanese contractor in Bangladesh. Both projects were evaluated highly. ODA projects ects into development of roads and • Current ongoing ODA projects in Vietnam (construction of an elevated other transportation infrastructure expressway in Hanoi) and Myanmar (construction of a road on a bridge and large-scale upgrades to railroads in Yangon)

Increase the rate of successful bidding • Local incorporated companies are encouraged to secure more tenders for non-Japanese projects from non-Japanese companies Private sector • To support other Japanese companies, including developers, who have projects the intention to expand their business overseas and get established in the local market

Select our potential projects in order to • In order to embrace the challenge of big scale projects, we collaborate enhance our project portfolio with influential local partners for business venture and construction High-rise building projects

36 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Topics on Business Strategies 1 2 3 Construction of an elevated road Construction of a depot for Construction of a large-scale for building of a bridge across railcars in Bangladesh railway spanning 116 km in the Bago River in Myanmar Myanmar

This is part of a project for building a large This is the first ODA project for con- Our company was awarded a project to Story of Value Creation bridge, which will serve as a route for structing a depot for railcars in the upgrade the existing railway of 116 km living and logistics in the Yangon district. Bangladeshi capital of Dhaka, The main (located the farthest from Yangon) between The groundbreaking ceremony was held works consist of three types of soil Yangon and Taungoo (about 267 km) in in February 2019. Upon completion, it is and ground improvement works and October 2018. The This project is part of expected to relieve traffic congestion, embankment construction. Despite the Yangon – Mandalay Railway Improvement improve the safety of users, enhance terrorist attack in July 2016, we took Project Phase One (total spanning about distribution productivity and contribute to the development of the Myanmar strict security measures while providing 620 km) connecting Myanmar’s largest economy. Prior to this work, we have high quality and managed to complete commercial city of Yangon with Naypyidaw, constructed the New Thaketa Bridge in the work successfully in October 2018. the capital, and Mandalay, the second Yangon City which was opened in August It would not have been possible without largest commercial city. 2018 as the first ODA project in Myanmar. the support from the head office divi- With this experience, we have been sions and teamwork from the local staff, successfully awarded this project and which were rated highly by the client. therefore created a continuous growing environment for Japanese and local staff. Initiatives for Value Creation

Our construction zone

F O C U S

Construction of Mass Rapid Transit, Jakarta Foundation That Supports Value Creation

The capital of Indonesia, Jakarta, is operation, we exercised a high-level of densely populated. The increasing vol- safety control, including measures for pre- ume of road traffic to the city center has venting falling objects, etc. resulted in severe congestion and pollu- This project involved a total man- tion and development of a railway net- power of about 1,800 people. We have work poses an important challenge for successfully completed the project with the government. With assistance from support from Japanese and local staff by Japan, construction on Indonesia’s first building a trusting relationship despite mass rapid transit system began in differences in cultures and customs. November 2013 and took about five and This not only strengthens the ability of a half years. Services started operating in Japanese staff but deepens their experi- March 2019. ence for future overseas projects. In this project, our company was in charge of the CP101 elevated span and the CP102 span (a total of 5.9 km), including three stations and the railcars depot with an area of 8 ha. We adopted a construction method that suited the conditions whereby there was no free space beneath bridges and without blocking existing roads. In the construction of an

elevated prestressed concrete box-girder Corporate Data bridge, it was technically difficult to build a steeply curved bridge, in particular with a bending radius of 180 m based on the balanced cantilever method. As the construction took place above expressways and major roads in

TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 37 Feature Article Project to Construct the New East Tower in the Shibuya Station District (SHIBUYA SCRAMBLE SQUARE)

The ever-changing area around Shibuya Station is being redeveloped, report- edly on a once-in-a-century scale. Tokyu Construction is building another new landmark in Shibuya following SHIBUYA STREAM, which started operation in September 2018 —

Overview of Work [Building Summary] Project name: Phase I of SHIBUYA SCRAMBLE SQUARE (East Tower) Owned by: TOKYU CORPORATION East Japan Railway Company Tokyo Metro Co., Ltd. Construction site: 2-24-12, Shibuya, Shibuya-ku, Tokyo Usage: Offices, shops, observation facilities, parking spaces, etc. Total floor area:Approx. 181,000 m2 Number of floors:47 stories above ground, 7 underground Height: Approx. 230 m Scheduled opening: November 1, 2019

Overall Roadmap for Redevelopment Project in Shibuya

Tokyu Construction contributes to creating value that opens up the future of Shibuya by not only engaging in the construction of facilities representing Shibuya, such as SHIBUYA109, but also serving as a driving force of this ambitious once-in-a-century project, as a “general contractor in Shibuya.”

2008 – 2027 Mega project around Planned completion 1960s – 1989 2000 2019 2020 Shibuya Station Shibuya Bunkamura SHIBUYA MARK Shibuya Station District East Tower Use of a new platform at Ginza redevelopment CITY (SHIBUYA SCRAMBLE SQUARE) Line Shibuya Station to start

2008 2020 2027

1979 1999 2001 2012 2018 2020 SHIBUYA109 QFRONT Cerulean Tower Shibuya Hikarie Shibuya Station South District 2020 Tokyo Olympic (SHIBUYA STREAM) and Paralympic Games

38 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 39 - - - - Keep in mind that we are taking on a challenge of develop taking are Keep in mind that we to the fullest Focus on what you should do with tenacity is not the limits once the job is identified. What matters the (Excerpts from of your abilities but lack of tenacity. engineer) Doko, a Japanese teachings of Toshio ing the area around Shibuya Station. Few other projects in other projects Shibuya Station. Few around ing the area as difficult. the world are Policy of Project Manager Policy of Project Slogan No.1 must-see destination in Shibuya, Japan’s the future create To Manager Motto of Project Kento Takeuchi in 1989 Construction Joined Tokyu with the of such duties as discussion and coordination was in charge Takeuchi Mr. even in the bidding stage, as the chief and budget management, client, procurement, Hikarie, which was completed in 2012. He has been of Shibuya engineer of the project in the Shibuya Station East Tower to Construct the New participating in the Project in by utilizing that experience, even to as “the project”) referred District (hereinafter The manager. as a whole as project the project the planning phase, and supervised above directly building an ultra-high-rise structure requires is difficult because it project every he has been making However, Group. Tokyu Shibuya Station, the home of the himself. by inspiring the team and to bring success to the project effort TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. Therefore, we are striving to be as innovative as possible and striving to be as innovative as possible are we Therefore, Bringing success to this project with teamwork and the execution power of each member! Bringing success to this project We are struggling to carry in and out necessary materials and struggling are We including lim equipment. This is due to multifarious constraints, along which items can be ited space, a small number of routes work only at night. moved, and time limitations that allow us to We started off use part of the upper floors as construction yards. In addition, we have devel with working on the surroundings. which compre oped and adopted a new system, “DandALL,” and carrying-outhensively manages the schedule of carrying-in items in time. Information to move the required items, in an effort time in real shared on the carrying-in and carrying-out of items is that workerswith workers via tablet devices or smartphones the “wasted time”carry with them, significantly cutting down on will be utilizedof waiting for items to be carried in. This system at work sites. productivity as ICT that improves continuously, the future power creates Construction’s Tokyu new landmark is being built in Shibuya, 230-meter-tall A roughly fusing a number of people and a multitude of technologies, will the project The experience obtained through such as ICT. become capabilities to be utilized in a plethora of worksites, of our company. the future creating where workers from a number of subcontractors work and workers from where for raising a ridgepole. The council fosters planning a ceremony the prime teamwork at each work site by cooperating with autonomy there. contractor while respecting Capability Third Management of carrying-in and carrying-out – On-the-dot distribution of items – ------ects daily at peak periods. The information and communica original management tion technology (ICT) of our company’s the entering and leaving of staff. controls system, “TcPass,” Committee,” which consists of the the “Foreman’s Furthermore, of of subcontractors serving as the personnel in charge foremen to manage the duties of work site management, plays a key role Duties of the “Supervisor Council” include workers. respective of managing work at each floor serving as the body in charge Second Capability Management of construction projects devoted to proj Over 2,000 skilled construction workers are tion have been united and shaped. The ultimate goal of each among the workers involved. has been shared project First Capability Cooperation that transcends the boundary between civil engineering and building construction including Our company engages in a number of projects, at Shibuya Station’s STREAM and land readjustment SHIBUYA of Tokyu of the collective strength take advantage East Exit. We Construction to cooperate beyond the boundary between the civil engineering division and the building construction division to the workers presented that opportunities are by making sure information. Although such and share operations to coordinate cooperation is said to be difficult to achieve, we have succeeded between the divisions due to a in facilitating smooth coordination civil engineering and building construc where corporate culture ect” is the most crucial point for propelling the project smoothly the project ect” is the most crucial point for propelling because This has elevated the difficulty of the project forward. the safety of users. Still, we us to ensure it additionally requires using our know- the proposal forward have successfully brought that users can take” and “carrying out how of “securing routes the operation construction work in a way that does not hinder our experience with of railways” that we have cultivated through of our three I will introduce Shibuya Hikarie and other projects. execute this kind of proposal. capabilities required trian pathways within the building, considering that “securing trian pathways within the building, considering for users of Shibuya Station to take during the proj safe routes where in Japan and is surrounded by JR train lines, the Tokyo by JR train lines, the Tokyo in Japan and is surrounded where as Ginza Line, and National Route 246 above ground, Metro Toyoko Fukutoshin Line and the Tokyu Metro well as the Tokyo levels. The Shibuya River also flows Line on the underground establishing pedes the site. Our company proposed through What Tokyu Construction, which knows Shibuya What Tokyu inside and out, has done so far imposes an array of con in the project Our work environment above Shibuya straints, because it is being conducted directly the most number of visitors of any receives Station. The area tion projects expands. A majority of our engineers decided to join our decided to join our expands. A majority of our engineers tion projects construction want to “engage in large-scale company because they The experience with that contribute to urban development.” projects young engineers, which I will bring a positive facet to our this project in the as workers who will play pivotal roles grow expect will help them at our company. future The experience gained through this project will become one of our company’s strong points strong company’s one of our will become this project through gained experience The with coordination it also requires but is not just large-scale, The project manner underway in a complex projects redevelopment a host of other the capability of That means that both of Shibuya Station. in the vicinity essential. are and “team work” execute their own duties to each staff keeping staff manager is as project been bearing in mind What I have motivated. With office and branch offices, I was the support of the head that facilitates communication between an environment able to create been involved in our company have Nearly 90 engineers from staffs. a first-hand feeling many of whom have likely experienced the project, on a team. This work experience will of the importance of working as the scale of construc of our company become one of the strengths Voice Corporate Governance

Our Fundamental Approach to and higher medium- to long-term corporate value. It Corporate Governance is crucial that we foster a strong corporate governance structure to achieve these goals, hence we are always At Tokyu Construction, we have a corporate philosophy striving to make improvements that will result in more based on our mission statement, management policy, effective and efficient corporate governance. and principles of conduct that describes the type of We have also come up with the “Tokyu Construction company we seek to become. To make this vision a Corporate Governance Basic Policy,” which includes reality, we are working to contribute to society through our fundamental approach to corporate governance, as our business activities and achieve sustained growth well as establishing relevant standards, etc.

Corporate Governance Structure

Sareoder eetng

Appointment / Dismissal Appointment / Dismissal Appointment / Dismissal Report

Report Audit Appointment / Dismissal ontng oard o Corporate dtor oard o Dretor dtor Cooperation Report Nomination / Consultation ppontent and Reneraton Cottee Audit / Investigation Cooperation dtor Oe Direction Report oernane Cottee Direction Interna Contro Oe Dretor, redent Report Management Audit Supervision Inetgator

anageent Cottee anageent eetng Con o ne Unt anager (Operational Decision Making) (Execution Management) (Business Unit Monitoring) Monitoring

Audit ead Oe R anageent Con, Order Reeed Con Oerea Order Con, Rea tate Tranaton Con, ne Inetent Con

ne eton Don anageent Cottee Internal Audit Don

ead Oe Don rane and Don Sdare ete Oer

Recent Initiatives for Enhancing Corporate Governance FY 2004 FY 2010 FY 2015 FY 2016 FY 2017 FY 2019 Number of directors in the Articles of No more than 20 No more than 12 Directors Incorporation Independent outside 1 2 3 director Number of corporate auditors in the Articles No more than 5 Corporate of Incorporation auditors Independent outside 3 auditor Female officers 1 (independent outside director) Remuneration for officers Introduction of stock-based remuneration plan Appointments and Establishment of committee Remunerations Committee Governance Committee Establishment of committee

40 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 41 ------TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. Linked in the “Corporate Governance Report (PDF)” (Available in Linked in the “Corporate Governance Report (PDF)” (Available Japanese) porate Governance) for details. https://www.tokyu-cnst.co.jp/company/governance.html Address of the Code of Corporate Governance Address Visit the following website (Company Information/Cor * ing the selection and compensation of directors, directors, ing the selection and compensation of and auditors and executive officers, the Appointments mainly of Compensations Committee is composed the autonomy, to ensure independent outside directors of of the Board objectivity and accountability functions the appointment and compensa regarding Directors tion of company directors. [Governance Committee] on gen of Directors As an advisory body to the Board eral issues of corporate governance, the Governance Committee is composed mainly of outside directors and outside auditors. This committee works to ensure corporate gover in thorough sustained improvements nance practices, as well as corporate value. sion-making documents related to the area for which to the area related sion-making documents the to understand in order he or she is responsible making on important issues and of decision process each audi Additionally, monitor business operations. business into relevant tor also conducts investigations business receives necessary, operations and, if deemed of subsidiaries and audits the execution from reports to the directors. results reporting duties, directors’ also assigned to the members are Dedicated staff operations. Office to support these Auditor’s [Accounting Auditors] 2019, our financial audit was carried out In FYE March Matsuo Hiroaki by two certified public accountants, both members of Ernst & Inoue, who are and Hiroto also have six other certi ShinNihon LLC. We Young in involved staff fied public accountants and 15 other financial auditing. [Appointments and Compensations Committee] regard of Directors As an advisory body to the Board participates in Board of Directors meetings and other of Directors participates in Board and checks over important deci important meetings ------7 people Inside directors

Chairman 4 people Outside directors Corporate Governance Structure Percentage of outside directors 36% of outside directors Percentage [Establishment of Management Meeting] on important management discuss and decide To policies and issues, the Management Meeting, com [Audit Committee and Corporate Auditors] The Audit Committee consists of five corporate audi [Executive Officers] expedite decision making in business operations To the functions of each division, the and strengthen appoints 31 full-time executive offi of Directors Board serve one-year terms. cers who, like directors, and one executive officer and posed of seven directors is convened as Director, the Representative by chaired needed (51 times during FY 2018). outside tors (all independent officers including three auditors), with outside auditors possessing expertise as lawyers and/or certified public accountants, or possessing extensive knowledge and experience as to audit former employees of administrative organs, for compliance in management practices. Each auditor Composition of the Board of Directors Composition of the Board dent officers). Directors serve a one-year term to clarify serve a one-year term to dent officers). Directors and to for each fiscal year management responsibilities management structure. responsive build a dynamic and with comprising corporate managers Outside directors and experience as well as lawyers extensive knowledge estate experience in the real with expertise and work much-needed perspective in delibera industry provide a sound management structure tion of issues and offer out their responsibili carrying are directors to ensure ties appropriately. [Board of Directors] [Board members consists of eleven of Directors The Board indepen and three directors (including four outside Corporate Governance

Analysis and Evaluation of the Board From the standpoint of diversity, Ms. Kahori of Directors’ Effectiveness Yoshida, who is a female director, was appointed at the Shareholder’s Meeting held on June 25, 2019. At Tokyu Construction, our Corporate Governance Basic Policy specifies that a report on whether the Support Systems for Outside Officers Board of Directors is functioning appropriately is evalu- For outside directors, a system has been set up to com- ated and made public every year. municate and share information, including conducting In FY 2018 in cooperation with outside consultants, advance briefings on the agenda items of the Board of all of the Board’s directors and auditors answered an Directors, in consideration of their urgency and impor- anonymous questionnaire and were interviewed indi- tance. For outside auditors, a system has been set vidually about the effectiveness of their work so that all up to communicate and share information, including members could express their opinions freely. assigning dedicated staff members to the Audit Office Regarding the issues that were highlighted by the and conducting advance briefings on the agenda items survey, the Governance Committee discussed them, of the Board of Directors. and the Board of Directors reviewed them to test their effectiveness. The outline is as follows: Standard for Independence of Outside In general, the evaluation was positive in terms of Directors and Outside Corporate Auditors the Board’s effectiveness. The issues identified in the Please visit the following website (Company previous evaluation were also found to be consistently Information/Corporate Governance).

improved. However, since some comments were made *Linked in the “Policy and Standards on Corporate Governance, etc. regarding ensuring the diversity of the Board of Directors, (PDF)” (Available in Japanese).” among others, we will continue to endeavor to enhance https://www.tokyu-cnst.co.jp/company/governance.html the Board’s effectiveness based on this evaluation.

Reason for Appointment of Outside Officers/Board Meeting Attendance Rate (As of FY 2018)

Inde- Attendance Rate Name pendent Reason for Appointment Board of Directors Audit Committee Officer Meetings

Mr. Otsuka has been reelected as an outside director due to his rich management experience and broad insights as corporate manager, as well Hiroshi Otsuka as our expectations that he will contribute to the management using his 15/15 times — opinions from the viewpoint of one familiar with the railway business.

Mr. Kubota has been reelected as an outside director due to his rich management experience and broad insights as corporate manager, as well as Yutaka Kubota our expectations that he will contribute to the Company’s management 15/15 times — using his opinions from the viewpoint of one familiar with the railway and construction businesses.

Mr. Tomoe is the representative director of Tokyu Corporation, a core company of the Tokyu Group. He has been reelected as an outside director due to his rich management experience and broad insights as Masao Tomoe corporate manager, as well as our expectations that he will contribute 12/12 times — to the Company’s management using his opinions from the viewpoint of one familiar with the overall knowledge of business administration.

Ms. Yoshida has been elected as an outside auditor due to our expectations that she will contribute to the Company’s management using her Kahori Yoshida opinions based on her expertise as a lawyer and work experience in the * * real estate industry.

Mr. Onda has been elected as an outside auditor with the expectation Isao Onda that he will use his expertise as a certified public accountant (CPA) and 15/15 times 5/5 times certified tax accountant for our auditing work.

Mr. Sato has been elected as an outside auditor due to his expertise as a Youichi Saito lawyer. 15/15 times 5/5 times

Mr. Kato has been elected as an outside auditor due to his rich experi- Yoshikazu Kato ence in administrative agencies and broad insights accumulated through- 12/12 times 4/4 times out his career.

Note: *indicates that the information is not available since the director has been newly elected.

42 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 43 - - - - - 44 (13) 225 (13) 269 (26) Amount (Millions of yen) (FY 2018) 9 (2) 5 (3) 14 (5) Officers Number of TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. Compensation for corporate auditors is decided Compensation for corporate auditors is The amount of stock-based compensation statesThe amount of stock-based compensation is determined by a resolu Director With regard to shares for which the objective of of for which the objective to shares With regard As of end of FY 2018, we have 10 directors (three outside) and five outside) (three As of end of FY 2018, we have 10 directors outside). auditors (three no compensation. receives One of the outside directors The above amount includes the amount of expenses recorded for the The above amount includes the amount of expenses recorded review of ¥16 million, under the stock-based compen fiscal year under was re which (excluding outside directors), sation plan for directors Meeting held on June 26, 2018. solved at the 15th Regular Shareholder’s Category Directors and Directors Corporate Auditors’ Compensation (Outside directors) Directors auditors) (Outside auditors Corporate (Remarks) 1. 2. 3. lated as described above. discussions within the Audit Committee. through ment for corporate auditors is within ¥96 million.ment for corporate as expenses, based on the stock- the amount recorded at the 15th plan that was resolved based remuneration held on June 26, 2018, Meeting Regular Shareholder’s The number of directors the foregoing. separately from compensation is seven. eligible for stock-based who are meeting after the Appointments and tion of the Board with the Compensations Committee, which consults on the has discussed and reported of Directors, Board of the compensation amount calcu appropriateness Total (Outside officers) Total review, by carefully examining whether a certain level examining whether by carefully review, relative to the construction is obtained from of profit holding cost, using indices for several fiscal years in the of such reviews, Based on the results past and future. meeting whether or each year we confirm at the Board not the significance of such holding has been verified, taking into account factors such while comprehensively prospects. as economic rationale and future holding is not met and the significance of holding with the sale can no longer be verified, we proceed their to reduce in principle, in order of such shares, holdings, after taking into consideration factors such as the situations at the issuing companies as well as market trends. (¥30 million for outside directors, excluding employees directors, (¥30 million for outside and the annual pay serving as directors) concurrently ------Meanwhile, with respect to individual shares, each to individual shares, Meanwhile, with respect Basic compensation comprises fixed compensa Stock-based compensation has been introduced, with Stock-based compensation has been introduced, Remuneration for corporate auditors consists of Remuneration for corporate auditors consists Meet of the Shareholder’s the resolution Regarding Policy Regarding Strategic Shareholdings Policy Regarding Policy for Determining Compensation for Directors

We acquire and hold shares issued by our partner com and hold shares acquire We Strategic Shareholdings panies with a view toward contributing to improve panies with a view toward ments in our corporate value, through the receipt of the receipt ments in our corporate value, through for construction work under favorable terms, by orders to maintain good relations relationships strengthening with such companies. year we conduct a short-term review using indices year we conduct a short-term review examining by carefully fiscal year, for the most recent relative to capital sufficient benefits are whether there in the is a risk of a decrease cost, and whether there also conduct a medium- to long-term price. We share ee payment rates, and consists of basic compensation ee payment rates, and remuneration. (monetary) and stock-based The amount of compensation for our directors is based for our directors The amount of compensation specified in our company including on the standards status, as well as employ their position and operational Compensation and Incentive Systems Compensation for Officers tion according to position and variable compensation, tion according calculated byamong which variable compensation is of each di multiplying the monthly fixed compensation by an evaluation-based allocation coefficient, and rector coefficientother factors. The evaluation-based allocation assess is determined by taking into account qualitative such as thements of business performance evaluations, operating income of each division in charge. the aim of providing incentives for the enhancement the aim of providing and aligningof medium- to long-term corporate value, and shareholders. the economic values of the directors excluding outside given each year to directors, Points are to their of Japan, according and nonresidents directors Trust, and pay Benefit positions, by utilizing the Board ments in the form of shares and money are made upon and money are ments in the form of shares being equivalent to one share. with one point retirement, for officers, at ing on the amount of basic remuneration Meeting held on June 25, the 5th Regular Shareholder’s compensation was passed 2008, the amount of director noting that “the annual payment is within ¥360 million fixed compensation paid in the form of money. fixed compensation paid in the form Board of Directors (As of June 25, 2019)

1 Tsuneo Iizuka 2 Toshio Imamura 3 Mitsuhiro Terada Representative Director, Chairman Representative Director, Vice Chairman Representative Director, President

Apr. 1971 Joined TOKYU CONSTRUCTION CO., LTD. Apr. 1974 Joined TOKYU CORPORATION (“Tokyu”) Apr. 1979 Joined TOKYU CONSTRUCTION CO., LTD. Oct. 2003 Executive Officer of the Company Jun. 2007 Director of Tokyu Jun. 2010 Executive Officer of the Company Jun. 2004 Senior Executive Officer of the Company Jun. 2008 Managing Executive Director of Tokyu Apr. 2012 Senior Executive Officer of the Company Jun. 2006 Director, Senior Executive Officer of the Company Apr. 2011 Senior Managing Executive Director of Tokyu Jun. 2012 Director, Senior Executive Officer of the Company Apr. 2008 General Manager, Civil Engineering Division of the Apr. 2014 Representative Director & Vice President of Tokyu Apr. 2013 General Manager, Civil Engineering Division of the Company Company Jun. 2015 Representative Director, Senior Executive Vice Apr. 2016 Director, Senior Managing Executive Officer of the Company Jun. 2009 Representative Director, Senior Managing Execu- President of Tokyu Apr. 2018 Representative Director, Senior Executive Vice tive Officer of the Company Apr. 2018 Counselor of the Company President of the Company Apr. 2010 Representative Director, President of the Company Jun. 2018 Representative Director, President of the Company Jun. 2019 Representative Director, President of the Company Jun. 2018 Representative Director, Chairman of the Company Jun. 2019 Representative Director, Vice Chairman of the (to present) (to present) Company (to present)

4 Kazushige Asano 5 Motoyuki Takagi 6 Masatoshi Shimizu Representative Director, Senior Executive Vice President Director, Senior Managing Executive Officer Director, Senior Executive Officer

Apr. 1974 Joined TOKYU CONSTRUCTION CO., LTD. Apr. 1979 Joined TOKYU CONSTRUCTION CO., LTD. Apr. 1982 Joined TOKYU CONSTRUCTION CO., LTD. Jun. 2005 Director, Executive Officer of the Company Apr. 2011 Executive Officer of the Company Apr. 2012 Executive Officer of the Company Jun. 2008 Executive Officer of the Company Apr. 2016 Senior Executive Officer of the Company Apr. 2017 Senior Executive Officer of the Company Apr. 2011 Senior Executive Officer of the Company General Manager, Building Construction Division of General Manager, Business Administration Division the Company of the Company (to present) Jun. 2012 Representative Director, Senior Executive Officer of the Company Jun. 2016 Director, Senior Executive Officer of the Company Jun. 2017 Director, Senior Executive Officer of the Company (to present) Apr. 2013 General Manager, Sales & Marketing Division of Apr. 2018 General Manager, Building Construction Division, the Company in charge of Institute of Technology and Wooden Build- ing Construction Division of the Company (to present) Apr. 2014 Representative Director, Senior Managing Execu- tive Officer of the Company Jun. 2018 Director, Senior Managing Executive Officer of the Apr. 2018 In charge of Sales & Real Estate Division of the Company (to present) Company (to present) Jun. 2019 In charge of International Division of the Company Jun. 2018 Representative Director, Senior Executive Vice (to present) President of the Company (to present) 7 Yushi Tsukui Director, Senior Executive Officer

Apr. 1981 Joined TOKYU CONSTRUCTION CO., LTD. 6 5 4 7 10 14 15 16 13 12 Apr. 2015 Executive Officer of the Company Apr. 2018 Senior Executive Officer of the Company General Manager, Civil Engineering Division of the Company (to present) 1 3 2 9 8 11 Jun. 2018 Director, Senior Executive Officer of the Company (to present)

44 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 45 - - - - Executive General Manager of Human Resources Human Resources Executive General Manager of Headquarters of Tokyu Senior Managing Executive Director of Tokyu Senior Managing Executive Director Full-time Auditor of the Company (to present) MEXT ment Bureau, Auditor of the Company (to present) Managing Executive Director of Tokyu Managing Executive Director Executive Officer of the Company and Develop Research Deputy Director-General, Remote Sensing Specially Appointed Counselor, Center of Japan (to present) Technology Director of Tokyu Director (to present) of the Company Director Office of the Internal Control General Manager, Company General for Science, Technol Counselor to Director Cabinet Office ogy and Innovation Policy, Division, Cabinet Satellite of Technology Director Cabinet Intelligence and Intelligence Center, Office, Cabinet Secretariat Research Joined TOKYU CORPORATION (“Tokyu”) Joined TOKYU CORPORATION of Tokyu & Vice President Director Representative (to present) CO., LTD. Joined TOKYU CONSTRUCTION tion Division, Research Promotion Bureau, Ministry of Edu Ministry Bureau, Promotion tion Division, Research (“MEXT”) Sports, Science and Technology cation, Culture, Agency Exploration of Japan Aerospace Vice President Director & Senior Managing Executive Officer of Tokyu & Senior Managing Executive Officer of Director Cabinet Office Agency, Joined the Science and Technology Coopera and Industrial Environment of Research Director

Outside Director Full-time Auditor Auditor 2014 2014 2016 2018 2011 2012 2010 2017 2007 2018 2010 2008 2015 1976 2017 1981 2001 Masao Tomoe Masao Satoshi Hashimoto Kato Yoshikazu

10 13 16 Jun. 2015 Jul. 2012 Apr. Apr. Jun. Jun. Apr. Apr. Jul. Nov. Jun. Jun. Apr. Jul. Apr. Apr. Apr. Apr. 1982 Apr. Jul. TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD.

Representative Director, President of Sotetsu Home Co., Ltd. President Director, Representative Member of Crime Victim Support Center of Daini Bar Association Tokyo Member of Discipline Committee of Daini Tokyo Bar Association (to present) Committee of Member of Legal Apprenticeship (to present) Bar Association Daini Tokyo Auditor of the Company (to present) Passed National Bar Examination Representative Director, President of Sotetsu Real President Director, Representative Estate Sales Co., Ltd. of Sagami Managing Director of Sotetsu President Director, Representative Construction Co., Ltd. (to present) of the Company Director CO., LTD. Joined TOKYU CONSTRUCTION of Department General Affairs General Manager, Nagoya Branch, Wide Manager, Division and Area of the & Quality Department Environment Safety, Company of the Company Auditor and Head of Secretariat Full-time Auditor of the Company (to present) and Completed training of legal apprenticeship as attorney registered Joined Sagami Railway Co., Ltd. (“Sagami”) Joined Sagami Railway Co., Ltd. Director of Sagami Director of Sotetsu Real President Director, Representative Estate Co., Ltd. Auditor Full-time Auditor Outside Director 2015 2016 2016 2005 2001 2002 2011 2015 1980 2003 2009 2012 2007 1970 1998 2000 Youichi Saito Youichi Atsuyoshi Maeno Yutaka Kubota Yutaka 9 15 12 Sep. Apr. Jun. Oct. Mar. Jun. Jun. Jun. Apr. Oct. Jan. Jun. Sep. Apr. Jun. May 2000 Nov.

- Executive Director of Ernst & Young ShinNihon LLC ShinNihon of Ernst & Young Executive Director (“EY ShinNihon”) Advisor of EY ShinNihon & CEO of GTM President Director, Representative Institute Inc. Research Auditor of the Company (to present) of GTM Research President Director, Representative Institute Inc. (to present) Director of the Company (to present) Director Joined Recruit Cosmos Co., Ltd. Passed the bar examination T&T Part Law Firm (current Takagi Joined Yoshiko as Lawyer Registered ners Law Office) (to present) Member of the Operation Committee for Housing Bar Dispute Examination Meeting, Daini Tokyo Association (to present) Joined Keisei Electric Railway Co., Ltd. (“Keisei”) Joined Keisei Electric Railway Co., of Keisei Managing Director of Keisei Senior Managing Director of Keisei Vice President Director, Representative of Keisei President Director, Representative of Keisei Chairman Director, Representative Advisor of Keisei (to present) of the Company Director Joined EIKO Accounting Corporation as Certified Public Accountant Registered Tax Accountant as Certified Registered Partner of Century Audit Corporation (“Century”) of Century Director Corporation ShinNihon Audit of Ernst & Young Executive Director Special member of the Chuo Construction Project Special member of the Chuo Construction Project Dispute Examination Committee, the Ministry of Land, (to present) and Tourism Transport, Infrastructure, Honorary Advisor of Keisei Electric Rail Co., Ltd. (to present) Honorary Advisor of Keisei Electric Rail Representative Director, Senior Managing Director of Keisei Senior Managing Director Director, Representative Passed second stage examination of CPA examination Passed second stage examination of CPA

Auditor Outside Director Outside Director 2008 2010 2011 2012 2015 2019 1996 2010 2011 2012 1958 1992 1995 1997 1998 2004 2008 2010 1977 1977 1990 1993

Isao Onda Kahori Yoshida Hiroshi Otsuka Hiroshi 8 14 11 Sep. Oct. 1973 Sep. Apr. Jun. Dec. Jun. Apr. Sep. Dec. Apr. 2018 Nov. Apr. Jun. Jun. Jun. 1996 Jun. Jun. Jun. Jun. Jun. Jun. 2018 Sep. Dec. Jul. Jun. Jun. 2002 Risk Management

Basic Approach to Risk Management/ We also have a framework in place for preventing Risk Management System the occurrence of risks and promptly responding to risks that have materialized, primarily by establishing We have long been engaged in the development of a regulations and guidelines pertaining to factors such framework for identifying and responding to risks, and as safety and health, the environment, quality, compli- are seeking to strengthen risk management for the ance, business continuity during large-scale disasters, purpose of shoring up our management and financial management of personal information and information foundations, based on the policies under the mid-term security, and through the utilization of management management plan, in order to respond to changes in the systems. In addition, regarding individual operations business environment. such as construction orders, real estate transactions Specifically, the Management Meeting and other and other business investments, we have established meetings are held periodically to identify social and the “Head Office Risk Management Council,” “Orders economic trends, and to discuss measures in response Received Council,” “Overseas Orders Council,” “Real to major management risks. In addition, with regard Estate Transaction Council” and “Business Investments to the risks of each business, management monitors Council” as cross-departmental structures for reviewing business operations primarily through the Council of risks beforehand. Business Unit Managers, and provides prompt instructions in response to major business risks.

Flow of Discussion of Major Risks assessing and evaluating risks comprehensively, and identifying risks. During the discussions of material In preparation for discussions of major management risks, measures are developed from a comprehensive risks, management discusses measures to be taken in and long-term perspective, and concrete response response to major risks through developing a shared measures are taken from a strategic perspective at the language for our risk models and risk definitions, Strategies Meeting and other meetings, as needed.

1 Risk models 2 Risk definitions 3 Evaluation criteria

Develop a shared language for our risk models and risk definitions to Quantitatively and qualitatively eval- ensure a comprehensive understanding of risks uate the effects on management

4 Identification of major risks 5 Discussion of response

Discuss measures to respond Identify and prioritize major risks to major risks from a long-term, according to the evaluation strategic perspective

46 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 BCP training carried out in Business Continuity Management September 2018 involving a

scenario of a large earthquake Story of Value Creation (BCM) along the Nankai Trough.

We came up with a business continuity plan (BCP) We established the emer- in 2008, in preparation for large-scale disasters, and gency response department received a certification for “Construction Company at the head office in Shibuya, and conducted training on Continuity Capacity During Disasters” from the MLIT verifying the safety of individuals and business conti- Kanto Regional Development Bureau in 2009. We have nuity, along with our Osaka renewed this certification every two years since. and Nagoya Branches, and six subcontractors. Our efforts in business continuity include establishing a training plan based on our BCP and having executives participate in training and workshops alongside other staff. This allows us to notice and review relevant issues and implement a PDCA cycle, which is then reflected in our BCP. Initiatives for Value Creation In BCM, in order to secure a working environment for our employees, we are refining internal systems by distributing emergency supplies, such as food and drink that would be required during blackouts and/or phone line congestion, in line with Tokyo Metropolitan regulations. In addition, as our head office is located opposite Shibuya Station, one of Japan’s major transportation hubs, we are a part of a council comprising Shibuya Ward Office staff and local businesses who are responsible for helping people unable to return home in the case of infrastructure – especially access to disaster re- of a disaster. We regularly participate in emergency drills sponse routes that are essential for search and rescue. run by the Shibuya Ward Office and this council and To do so, we have entered into an agreement to work Foundation That Supports Value Creation support these efforts as a member of the community. alongside national and prefectural government agen- Furthermore, we intend to fulfill our social responsi- cies and infrastructure companies in the case of a disas- bilities by doing our utmost to ensure early restoration ter, as well as with our subcontractors.

Information Security and accidents, and to respond to the trust of society We have established our Basic Policy on Information and our clients. In addition, we revised our Information Security in order to protect business-related information Security Guidelines in March 2019, and are conducting assets from threats such as information leakage incidents e-learning sessions based on these Guidelines.

Basic Policy on Information Security (established on March 31, 2013)

1 3 In managing information, establish a management system to Establish operational systems for promoting information secu- Corporate Data ensure the security of information assets, and regularly review rity measures, and clarify the roles and persons in charge. the system and make improvements as necessary. 4 Demand clear responsibility, based on the employee regula- 2 Conduct balanced information security measures from all as- tions or contracts regarding violations of this basic policy as pects, including physical, personnel and IT, and implement well as related rules and regulations. measures to prevent the occurrence of issues such as informa- 5 Conduct regular reviews to identify and resolve problems, in tion leakage, while promptly responding to any problems that order to ensure that this basic policy as well as related rules may occur. and regulations are disseminated, implemented and maintained, and that improvements are made continuously.

TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 47 Compliance

Tokyu Group’s Compliance In January 2002, we established the Group’s compliance guidelines as the basic principles of action related Compliance management is not only intended to pre- to compliance for all officers and employees of the vent corporate scandals, but is also indispensable for Tokyu Group. Based on these guidelines, each Group us to remain as a brand that is preferred by custom- company conducts its own activities, in accordance with ers, through enhancement of our corporate value. The its business structure and corporate culture, in an effort Tokyu Group has been proactively promoting compli- to promote compliance. ance-related activities since it made compliance one of the basic stances of the Group’s management in The Tokyu Group’s Compliance Guidelines (Available in Japanese) April 2000. https://www.tokyu-cnst.co.jp/company/pdf/20190704compliance.pdf

Basic Approach to Compliance Construction’s company culture, we have created action guidelines and norms which we seek to imprint We consider compliance with corporate ethics and on our staff through the use of training materials, laws to be non-negotiable and the most fundamental including online learning. part of CSR but realize that we need to create systems and offer thorough staff training in order to completely Compliance Promotion Structure eliminate violations caused by lack of knowledge or (1) Compliance Officer awareness. In order to make our understanding of The officer in charge of the Internal Control Office acts “always doing what should be done” a part of Tokyu as the compliance officer, and performs the following roles as the chief officer of “risk management through compliance management” at the Company. Guidelines for Action/Compliance Code 1 Focus on risk management (i) Formulation of Compliance Code, etc. 2 Ensuring safety (ii) Establishment of structure for “risk management 3 Sales activities with an understanding of customer needs through compliance management” 4 Provision of high-quality designs and construction work (iii) Reporting of status to the Board of Directors, etc. 5 Appropriate responses to various “voices” from customers and neighbors 6 Fair and transparent decision-making (2) Internal Control Office 7 Protection of company assets The Internal Control Office is in charge of promoting 8 Timely, appropriate and fair information disclosure, and public relations activities and overseeing “risk management through compliance 9 Prohibition of insider trading management,” and plays the following roles in promot- 10 Strict compliance with the law and fair transactions ing compliance. 11 Rejection of relations with antisocial forces 12 Optimal procurement activities (i) Ensure awareness of Compliance Code, etc., 13 Appropriate rule management and foster awareness on compliance 14 Appropriate business operations and internal control (ii) Implement surveys on the status of practice 15 Respect for intellectual property regarding the Compliance Code, etc., and make 16 Appropriate document management improvements 17 Protection of confidential information (iii) Respond to consultations regarding the 18 Ensuring reliability and safety of information systems Compliance Code, etc., and respond to cases of 19 Ensuring healthy and safe work environments violations of the Compliance Code, etc. 20 Distinction between private and public matters, moderation of entertainment and gifts (iv) Plan and implement training on compliance and risk management 21 Organization of a favorable work environments 22 Responsible business operations and continuous improvements (v) Monitor the practice status at each division, branch, business unit and subsidiary, etc. (imple- 23 Corporate activities that consider the environmental impact mentation of audit) 24 Social contribution activities as a corporate citizen

48 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 (3) The Manager in Charge of Compliance/ compliance management,” we will gradually and contin- The Person Responsible for Compliance uously raise awareness and conduct training, such as: (i)

In order to ensure the effectiveness of compliance in training for the employees in each department, with the Story of Value Creation each department, the general manager of each division, aim of raising their awareness (organized by the Internal branch and business unit, and other line managers who Control Office); (ii) personnel training to raise awareness directly report to the President, as well as the presidents by including lectures on compliance in level-specific of subsidiaries are appointed as “the managers in charge training organized by the Personnel Department, etc. of compliance,” and the general manager of the general (organized by the Personnel Department ) and (iii) more affairs division at each division, branch, business unit, etc., practical voluntary training at each workplace, centered the general managers of the Corporate Strategy Division on case studies and discussions tailored to the actual and Business Administration Division and the general situations (organized by each department). managers of the general affairs divisions of subsidiaries are In addition, in order to ensure that compliance aware- appointed as “the person responsible for compliance.” ness takes root within the Company, we conduct online These managers in charge of compliance and persons learning and training upon promotions, with content responsible for compliance cooperate with the Internal that varies according to position. There has recently Control Office in working to develop and improve the been an increase in the number of cases abroad in Initiatives for Value Creation compliance structure in each department, while evalu- which the bribery of foreign public officials has been ating the status of practice regarding compliance each exposed, and it is not sufficient to pay attention only to year, and reflecting the results of each evaluation in the domestic developments. As such, from FY 2016, we have improvement plan for the following year. introduced the overseas compliance program, which includes publication of the Compliance Code in foreign Education and Training of Employees languages for overseas offices, and regulations aimed In order to ensure that our officers and employees fully at preventing violations such as bribery of foreign public understand the importance of “risk management through officials and cartels.

Whistleblowing System meeting (consultations and reporting can be carried out Foundation That Supports Value Creation anonymously). We provide a whistleblowing system, in accordance with We encourage our employees to consult with the the Compliance Consultation and Reporting Regulations, Compliance Consultation and Reporting Desk when they with the aim of detecting possible compliance violations do not know what to do, or feel even slightly that there early, and internally rectifying them swiftly. may be a problem, on compliance issues. Points of contact for whistleblowing have been estab- In addition, at overseas bases, we have set up Over- lished internally, as well as externally through a law seas Consultation and Reporting Desks that support confirm. Employees (including temporary staff) can consult sultation requests in the official language of each country, and report via phone, email, document or face-to-face as well as in English.

Prevention of Corruption and other prohibited acts such as cartels, in conducting business abroad, and will promulgate this policy among our System officers and employees, as well as business partners. The managers in charge of compliance and persons There is a growing risk of penalties involving huge fines be- responsible for compliance cooperate with the Internal ing imposed on corporations and individuals, due to tighter Corporate Data Control Office in working to prevent corruption, while international regulations and so-called competition laws that evaluating the status of practice regarding prevention regulate the bribery of foreign public officials, and the like over- each year, and reflecting the results of each evaluation in seas, as well as acts that distort market competition. Based on the improvement plan for the following year. this recognition, we have established the Overseas Compli- ance Program, which includes a top message and basic policy, Basic Policy Regarding Overseas Compliance with a view toward responding to such risks, and began its im- Our Group (which includes the Company and its subsidiar- plementation in April 2016. For the purpose of implementing ies) has established the following basic policy, with a view this program at overseas bases, we conducted training in FY toward preventing bribery of public officials, and the like, 2018 for 49 national staff members who work locally.

TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 49 Human Resources

Basic Approach to Increasing Job other and individual work satisfaction unifies the orga- Satisfaction in the Workplace nization into one that is highly productive.” As well as respecting human rights, enhancing the employment The Tokyu Construction’s corporate vision is summed environment and promoting diversity, we are also up in the word “Shinka,” which reflects our desire to working to increase the ability and job satisfaction of be a general contractor that is always “deepening and each employee in the Tokyu Construction Group and is evolving in the pursuit of genuine value.” In this vision, working to become a company that helps its employ- we define “an organization of true value” to be one ees learn about the meaning of work and their exis- where “employees with shared values respect each tence and contribute to society through work.

Creating a Favorable Work Environment Our Action Plan Based on Act on Advancement of Achieving Work-life Balance Measures to Support Raising Next-Generation Children People have diverse values regarding work-life balance. (Available in Japanese) We respect our employees’ right to choose diverse https://www.tokyu-cnst.co.jp/csr/human_resources/action_plan.html lifestyles, based on the premise that they will fulfill their responsibilities and duties as employees. We are striving Initiatives for Work-style Reform to improve our personnel system, primarily by examining In April 2018, we newly established the “Work Style the status of taking child/nursing care leave, using the Reform Department.” By cooperating with the Civil opinions of those who have taken such leave as a refer- Engineering Division and the Building Construction ence, because we consider it essential to establish working Division, we are pushing forward with initiatives aimed conditions that allow employees to have such a choice. at work-style reforms, such as establishing a five-day In addition, we are formulating an action plan to work week at work sites. In July 2018, we introduced a enable employees to fully exercise their abilities, by flex-time system, a teleworking system, work intervals creating a comfortable working environment where and other systems, not only for office workers but also they are able to balance work and child rearing. for employees at work sites.

Trends in actual number of days work sites are closed (by business of civil engineering/building construction)

As of March 2019 2019 target 2020 target 2021 target Closed for 6 days/4 weeks Closed for 8 days/4 weeks Civil engineering 97% Closed for 6 days/4 weeks 70% or more Closed for 8 days/4 weeks Closed for 6 days/4 weeks 100% Closed for 8 days/4 weeks 100% Building construction 64% 60% or more * Excluding work sites to which application is difficult

Employee Engagement hinder the improvement of employee engagement, In November 2018, we conducted an “employee we aim to create an organization that provides both engagement survey” for all employees of the Group. job satisfaction and a pleasant working environment The results of this survey made it possible to visual- for employees, by continuing improvement activities ize our organizational status, including the strengths according to the condition of the organization. and weaknesses of the organization across the entire company and in each department, and the respective Trends/Strengths of the Entire Tokyu Construction Group organizational issues were reported to corporate man- ■ High level of satisfaction toward contributing to agers as well as general managers, group leaders, work society and having rewarding work site managers and others who are responsible for the ■ A large number of employees feel a sense of unity, organization. To resolve organizational issues that can with shared goals at the workplace Engagement Rating* What is employee engagement? FY 2018 FY 2020 target FY 2026 target Generally speaking, the term employee engagement refers to “the concept of mutual trust/contribution between the company and em- BB BBB A ployees, as well as mutual attachment.” However, at Tokyu Construc- tion, employee engagement is defined as “each employee’s willingness *Evaluation using “Motivation Cloud” of Link and Motivation Inc. BB to contribute by proactively demonstrating his or her potential through is the fifth rating from the top out of all 11 ratings, BBB is the fourth a proper understanding of the company’s strategies and goals.” rating from the top and A is the third rating from the top.

50 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 51 - - - - Officer Career Period for Passing Down to the Next Generation Pass down skills, know-how and personal network Professional Professional [Passing down] • Main 3

[Lead] Officer Main 2 Lead the Entire Company Lead the entire company from a high perspective • Main 1 Main 3 C4 C3 Work Site Main 2 Work C3 – Main 1 5 years or more of continuous employment 5 years or more Main 2 [Demonstrate] 5th and 6th year Main career track Main career C2 C2 – Main 1 Improve expertise, change career Period for Contributing to Business Performance 2nd to 5th year TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. C1 Human Resource Development Human Resource According to the Master Plan According • Expand influence to others, based on multilateral roles • Rotation of young employees Work Site Main 1 Work Half a year after joining the Company year or later since joining the Company Selection of mentors among employees in the third Young employees in C2 and below Young In our corporate vision, “an employee of true value” isIn our corporate vision, who develops his or her career defined as “an individual with high aspirations setting challenges by proactively aim to develop human We and a spirit of independence.” professional with a high level of expertise and resources ambition and perseverance. By creat ism, pride, passion, development master plan” based ing a “human resource combining on-the-job on this vision, and comprehensively training, self-development support, training and group accord development support and other programs career in developing an environment stage, we are ing to career or her full poten which each employee can flower into his to who can respond tial, and evolve into human resources changes in the operating environment. ------C4 - Aim [Master] C3 tance to go overseas de of career Support early realization velopment (self-assessment system) Corporate reform utilizing the ideas/ Corporate reform motivation of young employees Eliminate psychological resis Foster overseas human resourc es over the medium-term Identify/appoint the necessary human resources self-development Promote Support early acquisition of qualifications professional explore to opportunities Provide suitability of career manage duties/gain Broaden ment perspective Cultivate/support for a sense of medium-term over the career Support for smooth initial intro duction Gain basic knowledge and skills step-by-step of improve Cultivate awareness of new early turnover Prevent employees Gain basic knowledge and skills common to each job category awareness Play a role/cultivate Gain necessary skills/knowledge for performing duties Respond to the changing environ ment and diversity of employees for the Foster human resources management next generation of ment and independence - Match self-determination with job duties Decide on career after the main career track Period for Broadening Skills and Making Career Decisions Career Making and Skills Broadening for Period • • Career position Career C2 Name [Learn] C1 Periodic Transfer System Periodic Transfer Rotations Intra-/Inter-divisional Planning System Career e-voice System Overseas Trainee Program Overseas Trainee Internal Job Posting System Remote Education Support for Acquisition of Support Program Qualifications Training by Job Category Training by Theme Training for Management Selective Training Development Human Resource Genera Young Cross-Departmental tion Project Overseas Internship Program Career Enhancement Sheet Enhancement Career New Employee Mentor System Level by Career Training Roles of Main to Reinforce Training and Officers Track Career Training Instructor System Training Card Master On-the-job Training Understand internal operations Period for Practical Understanding/Gaining Knowledge Know one’s own intentions, motivation and values own intentions, motivation Know one’s • • 7 8 9 3 4 5 6 1 2 16 17 18 19 12 13 14 15 10 11

- -

Self- skills ment devel Career Career solving training training Level of support opment promotion Category develop problem- Selection/ On-the-job Off-the-job Off-the-job Qualification/ and work role recruitment Specific Implementation Measures Stage of career tinue to implement corporate culture reforms that make reforms corporate culture tinue to implement human possible. Needless to say, such value creation the respect of true value. We the source are resources and expect our human diverse values of individuals, various attributes, to play active who possess resources, a fair personnel through positions, in appropriate roles also working to enhance our training are system. We “evolution (step-up),” by to enable in order program utilizing the individuality of each employee. In order to maximize true value in the construction to maximize true value In order “(unique) social value” it is necessary to create industry, con and Construction can provide,” that “only Tokyu Human Resource Development Human Resource Human Resources

Education and Training Programs for Engineers Fostering Human Resources for Future Management In order to raise our technical level, we provide various In order to improve the organizational issues revealed in opportunities, including on-the-job and off-the-job training, the employee engagement survey conducted from last to improve the skills of our engineers. In addition, we also year, we provide management skills training for manag- actively support employees in the acquisition of qualifica- ers, as well as support for activities toward organizational tions such as architects and management engineers, in order improvement. In addition, as our unique initiative, we have to meet participation requirements in biddings, etc., and been running a “Young Generation Project” to make use enhance corporate evaluation (business evaluation points). of the flexible ideas and ability to take action of our young In the Civil Engineering Division, new employees in the civil employees, to enhance in-house and external communi- engineering field take part in a 10-month training program cation. We also have been continuing the activities of the consisting of a practical curriculum, with the aim of becoming “Shinka Management School,” where employees in various capable of responding to work site situations before being positions voluntarily partic- assigned to a work site. In the Building Construction Division, ipate to gain the necessary new employees are assigned to work sites in pairs during the knowledge in business and first-year training period, to create an environment where they management, enhance can improve by learning from each other. In addition, in order their perspectives and to provide support to employees who are aiming to acquire broaden their horizons. qualifications, the “First-class Registered Architects School” is provided within the Company. Management Skills Training for Managers

Diversity demands of our customers and other stakeholders, and culti- We strive to create a workplace where diverse human vate a corporate culture that thrives on diversity. resources can exercise their full potential, regardless of job category, generation or gender. We effectively utilize various Promoting Women’s Success in the Workplace viewpoints and values stemming from individual “differ- Based on the results of an assessment of the present con- ences,” in an effort to create an environment where we can ditions and an analysis of issues, in accordance with the respond swiftly to changing economic conditions and the Act on the Promotion of Female Participation and Career Advancement in the Workplace, we have formulated an Ratio of women in regular/ action plan that we should undertake. In accordance with this mid-career recruitment for career-track positions plan, we will steadily proceed with the creation of systems and establishment of working environments in which women can FY 2016 2017 2018 2019 fully demonstrate their abilities in their professional lives. Number of recruits 103 111 127 129 Number of women 20 18 22 25 Our Action Plan Based on the Act on the Promotion of Female Participation and Career Advancement in the Workplace (Available Ratio of women 19.4% 16.2% 17.3% 19.4% in Japanese) https://www.tokyu-cnst.co.jp/csr/human_resources/action_plan_w.html Number of Female Managers and Candidates Employment of Persons with Disabilities FY 2016 2017 2018 We continue to employ people with disabilities under the Manager Main 2 2 1 philosophy of realizing an “inclusive society” where anyone Manager Main 1(M1) 4 3 5 can participate in society through work. candidate C4 (L) 15 22 25 Employment rate in 2018 2.46% *As of the fiscal year-end. The letters in parentheses indicate promotion under the former personnel system. *Has remained above the legal employment rate since 2015.

Promotion of Health and make each employee’s dreams come true. For this purpose, Productivity Management we will establish the Health and Productivity Management Declaration to promote health and productivity management. We have promoted health improvement initiatives and work-style reforms with a focus on the health of employees Initiatives for Health and Productivity Management (Available and their families. We will further strengthen these initiatives in Japanese) with the intention of remaining an organization that can https://www.tokyu-cnst.co.jp/csr/management/index.html

52 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Occupational Safety (Safety and Health)

Basic Approach to Health and Safety

Trend in occurrence of accidents Story of Value Creation Under the strong leadership of top management, we will cooperate with all members involved in the construction FY 2014 2015 2016 2017 2018 business, in order to realize safe, healthy and comfortable Safety index 0.76 0.17 0.12 0.20 0.43 work environments, by implementing a PDCA cycle through the united efforts of the head office, branches and work sites. *Safety index: (Frequency rate x Strength rate)

Safety and Health Policies

1 Identifying Risk 3 Maintaining and Enhancing Physical and Mental Health We work to prevent accidents, by identifying dangerous and We promote the health of all our employees and those involved injurious factors that may be hazardous sources from the stand- in construction work to create a stress-free workplace. point of work-related health and safety. 4 Compliance with Laws and Regulations 2 Setting Priority Implementation Activities We clarify laws and regulations related to industrial safety and 1) Eradication of public accidents, fatal accidents and major accidents health and internal regulations, and comply therewith. 2) Reduction of accidents due to crash and fall Initiatives for Value Creation 5 Systems Operation/Improvements 3) Reduction of accidents involving construction machinery and We operate the established Safety and Health management cranes, etc. systems, and continuously make improvements. 4) Reduction of accidents due to collapse 6 We take initiatives regarding all of our employees and workers involved in construction work.

Activities Based on Health and Safety We are also working to ensure safety at worksites, by Management Systems thoroughly implementing “The Tokyu Construction Ten Safety Rules.” Please see the following for details.

Under the Construction Occupational Health and Foundation That Supports Value Creation Safety Management Systems (COHSMS) operated by Our Health and Safety Activities (Available in Japanese) the Company, our head office, branches and work sites https://www.tokyu-cnst.co.jp/csr/safety/index.html cooperate in implementing a PDCA (Plan – Do – Check – Act) cycle to pro- Collaboration with Subcontractors mote continuous health and safety activ- Collaboration with subcontractors is essential for Safety and ities, in an effort to prevent industrial Health management at work sites. We carry out a variety of accidents, while also promoting worker activities to eliminate accidents, such as operating a system health and the creation of comfortable to certify superior foremen as Meisters, while collaborating work environments, with the aim of with the Accident Prevention Cooperative Association, com- enhancing health and safety standards. prising subcontractors engaged in our construction work.

Status of Human Resource

Development and Training TOPICS

We have established a Safety and Health training system, Evolution of Safety Management and provide mandatory training in the form of lectures on In light of a deterioration in the index, we will review our safety Corporate Data health and safety management, in which employees are management system in FY 2019, and implement the following grouped into eight levels, from new employees to those in four items towards the evolution of safety management. their 28th year. Rather than focusing on classroom lectures, 1 Strengthen the safety management system by these lectures feature expanded practical training, with the increasing top management’s participation aim of raising awareness of safety, and incorporate many 2 Review the safety construction work cycle group discussions along with group work called “buzz 3 Strengthen communication sessions.” This fiscal year in particular, we are providing 4 Comply with the latest management systems such practical training on the themes of “hazard predictions,” as the NEW COHSMS and new risk assessments, as “preparation of work plans,” “new risk assessments” and other revisions “accident case studies” according to years of employment.

TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 53 Quality Control

Basic Approach to Quality Control Tokyu Construction, we want to provide solutions tai- In the construction industry, we regard the end users lored to these kinds of user needs. This is our under- of our infrastructure as customers, as well as those standing of customer-oriented business management, who order construction jobs. Those ordering construc- and with this understanding as our foundation, we tion work also want to build a trustworthy relationship are working with subcontractors to improve technical with locals throughout the duration of the project. At capacity and quality.

Quality Policies

In order to assure the quality of our products (civil engineering 3 Setting Quality Targets structures and buildings), with the aim of improving customer We set effective quality targets for the following business divisions, for satisfaction, we carry out the following activities when undertak- the purpose of assuring product quality and increasing customer satis- ing design, construction supervision and construction work. faction, while supporting our management policies. 1 Initiatives for Risk Civil Engineering Business Division We will identify risks that may exert an influence on the assurance of Building Construction Business Division product quality and improvement of customer satisfaction, and consider The support division for management establishes targets related the extent of their potential influence in order to respond accordingly. to the effective utilization of resources (human resources, infor- 2 Understanding Needs and Expectations mation and communication technology and other infrastructure, To meet customer needs and expectations as well as applicable regu- employee work environments, know-how, etc.), in order to assist latory requirements, we will explore, clarify and understand such needs the business divisions in achieving the above-mentioned targets. and expectations. 4 System Operations and Improvements We will operate the quality management system, and make continuous improvements.

Quality Control System and following our 7th re-certification audit and audit of our Status of Its Operation transition to ISO 9001: 2015. In addition, on April 1, 2018, we established the After the civil engineering division and the build- Quality Control Department within the Business ing construction division of the Tokyo Branch each Management Department of the Building Construction obtained ISO 9001 certification in March 1997, all Division. Through establishment of the Quality Control branches and divisions throughout Japan obtained cer- Department, we will promote the implementation of tification by October 2000. In April 2004, the Company the PDCA cycle in quality control, by strengthening made a full transition to a company-wide integrated collaboration among the quality control divisions quality management system (QMS), which was regis- at our divisions, branches and business divisions. tered in September of the same year. In addition, since Furthermore, we will promote the implementation of 2005, combined external audits with an environmental training and job rotations, with the aim of increasing management system (EMS) have also been conducted the awareness of quality control and fostering human each year. In October 2017 (partly in February 2018), resources who support quality, through collaboration both re-certification and transition were approved, with the division responsible for training.

Status of Human Resource We are strongly aware that the enhancement of “the Development and Training ability to find and solve problems on their own” is an urgent challenge, and we believe that enhancing the capabilities of Each year, we periodically conduct training related to QMS each individual leads to the strengthening of our organization, for internal auditors, and encourage acquisition of qualifi- including “maintaining and improving safety and quality,” cations. In addition, we provide a mandatory training pro- “appropriate processes” and “pursuing high profit margins.” gram for engineers and technicians of the appropriate year, In September 2015, the Building Construction and also conduct training to enhance the skills of internal Division began holding study sessions called “Site- auditors and follow up on the management system. Learning” at each work site, as an initiative to strengthen We also provide education on the quality manage- on-site capabilities. “Site-Learning” is conducted on-site ment system to employees, contract employees and throughout Japan, with monitoring performed by each subcontractors, as needed, at each division, department branch, as well as the Building Construction Division, in and work site. order to standardize and improve the contents.

54 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 55 - - - - - TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. sign in all of our design projects, by promoting de by promoting sign in all of our design projects, into sign that takes the global and local environment our environ consideration, as a priority initiative in mental policies. environment-friendly management in order to realize to realize in order management environment-friendly that achieves a harmonious a ‘sustainable society’ and the economy.” environment balance between the our we will take advantage of this opportunity, Taking to demonstrate In order further. initiatives one step we have company, an environment-friendly that we are of for the disclosure our structure decided to review the aim of proactively information, with environmental disclosing information. Policies Charter and Environmental Our Environmental in Japanese) (Available impact in the building management phase. ronmental de endeavor to incorporate environment-friendly We https://www.tokyu-cnst.co.jp/csr/environment/index.html - - - - Green Infrastructure: A concept and methodology that proactively incorporates the functions and A concept and methodology that proactively Infrastructure: Green conservation in infrastructure useful for humans and environmental that are mechanisms of nature (social capital) development and land use. Green Infrastructure Demonstration Facility Demonstration Facility Infrastructure Green demonstration facility within our infrastructure 2018, we established a green In March sustainable community development, including to promote Institute of Technology, utilizing the and biodiversity conservation through disaster prevention/mitigation of the facility. the effectiveness verifying and are functions of the natural environment, to of technologies related with the advancement and improvement will proceed We experimental data, and plan to factors based on the collected infrastructure green facilities, which infrastructure for the installation of green with proposals push forward in the future. expected to see further utilization in urban areas are * -free energy sources (solar power, geothermal heat and hydrogen) (solar power, sources energy -free 2 emissions during building use, which account for 86.9% emissions during building use, which account 2 Energy creation: Best mix of CO creation: Energy Energy-saving: External heat load reduction (double-skin curtain wall, exterior thermal External heat load reduction Energy-saving: glass) insulation of exterior wall, multi-layered Installed the first hydrogen production, storage and power generation system for a production, Installed the first hydrogen private business in Japan • • * - emissions in the supply chain, we carried out ZEB renovations on our Institute of ZEB renovations emissions in the supply chain, we carried out 2 teristics Charac rently achieved a 76% energy reduction, which is the highest level in Japan. We will con which is the highest level in Japan. We reduction, achieved a 76% energy rently (Net reduction aimed at a 100% energy with further improvements, tinue to push forward of existing buildings. demand for renovation to a growing to respond in order Zero), With CO reducing the aim of consumption to nearly zero) energy Building: A building that reduces Energy *ZEB (Zero ZEB Renovations Technology, which has stood for 25 years since its completion. As a result, we have cur its completion. As a result, which has stood for 25 years since Technology, of CO Environment-Friendly Design Environment-Friendly TOPICS 2 TOPICS 1 Considering the environment during the design during the design Considering the environment the envi in reducing phase is an important process Endeavors as an Environment- Friendly Company *We introduced the environmental management system (ISO 14001) in and 1999, expanded it to a company-wide integrated management system in 2014. tamination and protect the environment, and promote and promote the environment, tamination and protect The management philosophy of the Tokyu Group is Group of the Tokyu The management philosophy with the natural environ to “do business in harmony Basic Approach to Considering Basic Approach the Environment ment.” We established our “Environmental Charter” established our “Environmental ment.” We in SDGs interest amid growing in 1997*. In addition, to being required companies are and ESG investment, and customers that their eco demonstrate to investors Against sustainable with solid basis. nomic activities are policies in our environmental we revised this backdrop, con to prevent April 2019, declaring that, “we will work Considering the Environment the Considering Considering the Environment

Initiatives for Biodiversity relevant local communities and the development of We added “Biodiversity Conservation” to our environ- environment-friendly technologies. mental policies in July 2010, and implement a variety of initiatives based on these policies. Regarding bio- Our Initiatives for Biodiversity (Available in Japanese) diversity, we will continue pursuing initiatives such as https://www.tokyu-cnst.co.jp/csr/environment/index.html biodiversity conservation activities, cooperation with

TOPICS Ecological Corridor Simple Evaluation Tool (CSET) We developed the Ecological Corridor* Simple Evaluation Tool (CSET) under the guidance of Professor Akira Tanaka of the Landscape Ecosystems Lab, in the Department of Restoration Ecology and Built Environment, Faculty of Environmental Studies at Tokyo City University, with the aim of developing an ecosystem network evaluation system that is useful in biodiversity-conscious urban planning. CSET is a tool for the simple assessment of biodiversity potential in urban areas. Creating a green network We utilize the results of analysis by CSET, mainly in bidding proposals. *Ecological Corridor: A corridor-like habitat that continuously connects important bases where migratory wildlife can travel.

Status of Environment-related Activities

Environmental target

Activity FY 2018 Targets Achievement of FY 2018 Targets Evaluation FY 2019 Targets

Overall 23.7 t-CO2 per 100 million yen Overall 18.0 t-CO2 per 100 million yen Overall 23.4 t-CO2 per 100 million yen Civil engineering Civil engineering Civil engineering Reduction of CO2 Prevention •Tunnels :134.4 t-CO2 per 100 million yen •Tunnels :121.2 t-CO2 per 100 million yen •Tunnels :133.1 t-CO2 per 100 million yen emissions ◎ of global •Others :36.9 t-CO2 per 100 million yen •Others :29.3 t-CO2 per 100 million yen •Others :36.6 t-CO2 per 100 million yen warming Building construction Building construction Building construction 13.2 t-CO2 per 100 million yen 8.5 t-CO2 per 100 million yen 13.0 t-CO2 per 100 million yen Reduction of electric 50.1 kWh per m2 Company-wide 43.0 kWh per m2 Company-wide 42.57 kWh per m2 power consumption ◎ Civil engineering 26.2 m3 per 100 million yen Civil engineering 23.37 m3 per 100 million yen Civil engineering 26.0 m3 per 100 million yen Reduction of amount 3 2 3 2 3 2 of waste Building construction 0.084 m per m Building construction 0.079 m per m ◎ Building construction 0.083 m per m Effective (Construction completed in FY 2018) (Construction completed in FY 2019) utilization of Overall 70.2% Overall 72.87% Overall 70.9% resources Improvement of Civil engineering 82.8% Civil engineering 78.51% Civil engineering 83.6% sorting rate ○ Building construction 68.6% Building construction 71.98% Building construction 69.3%

Flow of Materials INPUT>>> >>>OUTPUT

Electric power 2.55 million kWh Construction byproducts Sludge 145,007 t Office 1,658 t-CO2 3 Concrete mass 117,781 t Energy consumed Office City gas 148 thousand m CO2 emissions Construction 54,265 t-CO2 Asphalt concrete mass 32,966 t Tap water used 18 thousand m3 Work Wood chips 22,412 t Electric power 29.17 million kWh Scrap metal 5,247 t Con- Diesel oil 14,546 kl Waste paper 1,435 t struction Gasoline 212 kl Plasterboards 6,733 t Final disposal 6.0% 22,741 t Work Kerosene 203 kl Special controlled industrial waste 115 t Others 45,253 t Tap water used 552 thousand m3 Amount recycled 94.0% 354,208 t Amount of construction 376,949 t byproducts generated

5,837,982 t-CO2 CO2 Supply Scope 1 33,084 t-CO2 emis- chain Scope 2 12,633 t-CO2 sions Scope 3 5,792,266 t-CO2 Emissions in the supply chain are based on estimates for FY 2018

56 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Social Initiatives 1 2 3 28 Years of Continuous Participating in Charity Production and Screening of Clothing Aid Activities for Events to Support Cancer the Movie “Signpost of Africa Patients Reconstruction” Story of Value Creation Motherland Academy International, a non- We have sponsored and participated in the We produced a documentary film about resto- governmental organization made up of moth- Saitama Relay of “Relay for Life Japan,” a ration work on the North Rias Line of the Sanriku Railway, which suffered tremendous damage ers who convey the equality and preciousness community-based charity event that supports during the Great East Japan Earthquake in 2011. of life to children through actions, conducts cancer patients and their families, for 10 con- This movie documents the struggles and shared aid activities in West Africa. Through this or- secutive years since 2009. Employees, their hopes of civil engineers engaged in the resto- ganization, every year since 1991, we have families, and subcontractors helped with the ration work, as they continued contributing to carried out activities to provide clothing do- 24-hour charity walk and fundraising activities, reconstruction after the earthquake, through the nated by Tokyu Construction Group employ- with the aim of increasing awareness of can- resumption of operation of the entire North Rias Line. We held a screening of the film in February ees and our subcontractors to regions of cer prevention and conveying the precious- 2019, with the aim of preventing the weathering Africa, where aid does not reach. For 28 years, ness of life to the next generation. We also of the earthquake traces, and deepening the through 2018, we have delivered a total of provide voluntary support for the operation of understanding of the work of civil engineers over 160,000 pieces of clothing to countries the event, including preparation of drawings among the general public. The movie is currently such as the Republic of Mali. of the venue and setup/removal work on the available on YouTube as well. Our endeavor to increase interest in the civil engineers who support day of the event. social infrastructure was highly acclaimed, and the movie won the grand prize at the 2018 Japan Society of Civil Engineers Film Competition. Initiatives for Value Creation

Signpost of Reconstruction (YouTube) (Available in Japanese) https://youtu.be/CoC5qWFTTuo

Our Key CSR Themes Foundation That Supports Value Creation

e Core ees of IS ey ees ain Initiatives tivities ein onitore

Principles of social responsibility

1.Organizational Dialogue with stakeholders Dialogue with shareholders and investors Consideration of stakeholders governance Collaboration with stakeholders Customer satisfaction and employee awareness surveys Exchange of ideas and collaboration with subcontractors

Securing sound profit Corporate Governance Status of activities to strengthen corporate governance 2.Human rights Efforts in sound management Compliance and enhance compliance, business continuity management training, etc. Risk Management

Status of activities, HR development, and training based Health and safety measures in construction on health and safety policies and health and safety 3.Labor practices Efforts in health and safety Working environment improvement measures management systems, activities to improve working environment, etc.

Employment/diversity Status of activities based on HR strategies/ (women, foreigners, etc.) the HR development master plan Efforts to increase employee 4.The environment Work-life balance initiatives Action plans based on Act on Promotion of Women’s satisfaction in the workplace Participation and Advancement in the Workplace, Act on Human resource development/ Advancement of Measures to Support Raising education and training activities Next-Generation Children, etc. Corporate Data Promotion of environmental conservation Status of activities, HR development, and training 5.Fair operating in construction Efforts to consider the environment based on the environmental charter, policies and practices Promotion of environmentally-conscious design environmental management systems (ISO 14000), etc. Development of environmentally-friendly technology

Improvement of construction quality Status of activities based on quality policies and quality management systems (ISO 9000) 6.Consumer issues Efforts in improvement of quality Development of construction technology Transmission and improvement of construction Status of HR development and training, etc. techniques and skills Status of development based on the guidance of the Technical Committee and the technology Promotion of social contribution activities development roadmap 7.Community involvement Active involvement in society Promotion of increased interest and and development and the local community understanding of the construction industry Social contribution activities, interaction with Interaction with communities in offices and on-site the local community in offices and on-site, etc.

TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 57 10-year Main Consolidated Financial and Non-Financial Data

(Millions of yen)

For the fiscal year FYE Mar. 2010 FYE Mar. 2011 FYE Mar. 2012 FYE Mar. 2013 FYE Mar. 2014 FYE Mar. 2015 FYE Mar. 2016 FYE Mar. 2017 FYE Mar. 2018 FYE Mar. 2019

Operating Results

Orders received 218,361 205,726 212,410 210,933 290,647 341,992 303,758 293,539 299,436 285,476

Net sales 236,655 244,974 227,843 228,570 226,164 262,815 296,393 243,618 320,711 331,437

Operating income 5,282 7,584 1,572 1,154 2,630 6,009 18,178 17,211 21,416 21,987

Ordinary income 4,912 7,811 1,884 2,301 3,559 8,024 19,768 18,839 22,128 22,932

Profit or loss attributable to owners of parent 1,901 4,087 1,799 △566 2,685 5,805 13,340 13,691 16,118 15,504

Financial Position

Total assets 162,893 146,781 154,442 154,195 169,685 192,226 214,526 204,813 249,756* 264,996

Total capital 27,936 30,287 31,390 32,487 35,258 44,861 54,238 66,380 79,175 92,981

Cash Flow

Cash flows from operating activities 28,301 20,540 (11,486) 14,264 (9,302) 2,111 39,003 (23,545) 16,226 29,694

Cash flows from investing activities (2,395) 481 20 (619) (2,072) (1,525) (334) (1,717) (3,383) (5,786)

Cash flows from financing activities (25,107) (9,813) 4,704 (8,569) 6,476 (675) (6,035) (2,788) (6,457) (3,575)

Cash and cash equivalents at end of year 13,526 24,663 17,881 23,097 18,215 18,318 50,674 22,582 28,865 49,145

Per Share Data

Net income or loss (Yen) 17.81 38.29 16.86 (5.31) 25.16 54.40 125.00 128.30 151.05 145.37

Total net assets (Yen) 261.35 283.29 293.46 303.61 329.35 418.59 506.04 619.91 739.87 868.87

Cash dividends (Yen) 6.00 10.00 3.00 0.00 5.00 13.00 25.00 26.00 31.00 30.00

Payout ratio (%) 33.7 26.1 17.8 — 19.9 23.9 20.0 20.3 20.5 20.6

Financial Indicators

Equity ratio (%) 17.1 20.6 20.3 21.0 20.7 23.2 25.2 32.3 31.6* 35.0

ROE (%) 7.3 14.1 5.8 (1.8) 7.9 14.5 27.0 22.8 22.2 18.1

PER (Times) 15.8 6.5 12.6 — 17.4 12.5 7.4 6.8 7.6 5.7

Non-Financial Indicators (Non-Consolidated)

Number of employees at end of year (People) 2,453 2,460 2,446 2,403 2,313 2,340 2,412 2,464 2,537 2,523

Gender breakdown (Male/Female) (People) 2,304/149 2,302/158 2,285/161 2,231/172 2,148/165 2,161/179 2,219/193 2,249/215 2,303/234 2,275/248

Employment rate for persons with disabilities (%) 1.79 1.94 1.81 2.16 2.07 1.84 2.22 2.26 2.30 2.46

Office 1,270 1,387 1,060 1,370 1,607 1,841 1,913 1,820 1,754 1,658 CO2 emissions (t-CO2) Workplaces 38,496 40,008 37,260 51,069 44,397 59,394 66,112 67,333 51,602 54,265

Construction by-products generated (t) 307,549 350,320 361,347 451,353 490,293 403,918 473,004 395,309 410,245 376,949

Recycling rate (%) 93.5 94.4 93.3 94.7 96.8 96.1 95.9 98.4 99.4 94.0

Accident frequency rate 0.65 0.53 1.07 1.02 1.04 0.84 0.73 0.70 0.79 0.32

*Tokyu Construction has adopted the Partial Amendments to Accounting Standard for Tax Effect Accounting, etc. (“the Standard”) from the start of the current fiscal year, and the Standard has been retroactively applied to the figures as of March 31, 2018.

58 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 (Millions of yen)

For the fiscal year FYE Mar. 2010 FYE Mar. 2011 FYE Mar. 2012 FYE Mar. 2013 FYE Mar. 2014 FYE Mar. 2015 FYE Mar. 2016 FYE Mar. 2017 FYE Mar. 2018 FYE Mar. 2019 Story of Value Creation Operating Results

Orders received 218,361 205,726 212,410 210,933 290,647 341,992 303,758 293,539 299,436 285,476

Net sales 236,655 244,974 227,843 228,570 226,164 262,815 296,393 243,618 320,711 331,437

Operating income 5,282 7,584 1,572 1,154 2,630 6,009 18,178 17,211 21,416 21,987

Ordinary income 4,912 7,811 1,884 2,301 3,559 8,024 19,768 18,839 22,128 22,932

Profit or loss attributable to owners of parent 1,901 4,087 1,799 △566 2,685 5,805 13,340 13,691 16,118 15,504

Financial Position

Total assets 162,893 146,781 154,442 154,195 169,685 192,226 214,526 204,813 249,756* 264,996

Total capital 27,936 30,287 31,390 32,487 35,258 44,861 54,238 66,380 79,175 92,981 Initiatives for Value Creation

Cash Flow

Cash flows from operating activities 28,301 20,540 (11,486) 14,264 (9,302) 2,111 39,003 (23,545) 16,226 29,694

Cash flows from investing activities (2,395) 481 20 (619) (2,072) (1,525) (334) (1,717) (3,383) (5,786)

Cash flows from financing activities (25,107) (9,813) 4,704 (8,569) 6,476 (675) (6,035) (2,788) (6,457) (3,575)

Cash and cash equivalents at end of year 13,526 24,663 17,881 23,097 18,215 18,318 50,674 22,582 28,865 49,145

Per Share Data

Net income or loss (Yen) 17.81 38.29 16.86 (5.31) 25.16 54.40 125.00 128.30 151.05 145.37 Foundation That Supports Value Creation

Total net assets (Yen) 261.35 283.29 293.46 303.61 329.35 418.59 506.04 619.91 739.87 868.87

Cash dividends (Yen) 6.00 10.00 3.00 0.00 5.00 13.00 25.00 26.00 31.00 30.00

Payout ratio (%) 33.7 26.1 17.8 — 19.9 23.9 20.0 20.3 20.5 20.6

Financial Indicators

Equity ratio (%) 17.1 20.6 20.3 21.0 20.7 23.2 25.2 32.3 31.6* 35.0

ROE (%) 7.3 14.1 5.8 (1.8) 7.9 14.5 27.0 22.8 22.2 18.1

PER (Times) 15.8 6.5 12.6 — 17.4 12.5 7.4 6.8 7.6 5.7

Non-Financial Indicators (Non-Consolidated)

Number of employees at end of year (People) 2,453 2,460 2,446 2,403 2,313 2,340 2,412 2,464 2,537 2,523

Gender breakdown (Male/Female) (People) 2,304/149 2,302/158 2,285/161 2,231/172 2,148/165 2,161/179 2,219/193 2,249/215 2,303/234 2,275/248

Employment rate for persons with disabilities (%) 1.79 1.94 1.81 2.16 2.07 1.84 2.22 2.26 2.30 2.46 Corporate Data

Office 1,270 1,387 1,060 1,370 1,607 1,841 1,913 1,820 1,754 1,658 CO2 emissions (t-CO2) Workplaces 38,496 40,008 37,260 51,069 44,397 59,394 66,112 67,333 51,602 54,265

Construction by-products generated (t) 307,549 350,320 361,347 451,353 490,293 403,918 473,004 395,309 410,245 376,949

Recycling rate (%) 93.5 94.4 93.3 94.7 96.8 96.1 95.9 98.4 99.4 94.0

Accident frequency rate 0.65 0.53 1.07 1.02 1.04 0.84 0.73 0.70 0.79 0.32

TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 59 Financial Overview

Overview of Business Results

Overview of Business Results problem-solving skills,” “promoting the diversification of The Japanese economy continued to slowly recover during revenue sources by expanding strategic businesses” and FYE March 2019 as capital investment increased and per- “shoring up our management and financial foundations sonal consumption showed signs of recovery alongside in support of heightened profitability,” we endeavored to improvements in corporate earnings and the employment enhance our relationships with clients as business part- and income environment, despite weaknesses in some ners, and to improve productivity by utilizing ICT, in order exports and production. In the construction industry, the to further enhance the domestic construction business. In market environment remained strong, reflecting high con- addition, we strived to obtain profitable real estate in the struction demand related to the 2020 Tokyo Olympic Games real estate business, while endeavoring to receive orders and Paralympic Games, as well as steady capital investment. for ODA projects in the international business. Under these circumstances, the Group achieved strong As a result, the Group’s business results for FYE March performance in its core businesses, posting increases 2019 were net sales of ¥331,437 million (up 3.3% from the in both sales and profits, primarily due to an increase in previous year) due to an increase in completed construc- completed construction sales as a result of progress of tion sales. Regarding profit and loss, operating income was large-scale construction work, as well as an increase in ¥21,987 million (up 2.7% from the previous year), mainly due renovation work at subsidiaries, despite factors such as to an increase in completed construction gross profit and a a lower gross profit margin, reflecting a deterioration decrease in selling, general and administrative expenses. in the profitability of some of our construction work. In Ordinary income increased by 3.6% against the previous addition, under the four basic policies of our “Mid-Term year to ¥22,932 million due to recording ¥790 million of Management Plan (2018-2020): Shinka 2020,” which is investment income using the equity method. After consid- in its first fiscal year, namely “transforming our human ering tax expenses, etc., profit attributable to owners of the resources and organization to elicit employee motivation parent was ¥15,504 million (down 3.8% from the previous and capabilities,” “reinforcing the domestic construction term). Net sales, operating income and ordinary income business through a customer-centric perspective and reached new record-high levels, as in the previous year.

Full-year results (consolidated) (Millions of yen) FYE Mar. 2019 Difference FYE Mar. Rate of change Item TOKYU compared to 2018 Subsidiary Consolidated (%) CONSTRUCTION previous year Net sales 320,711 309,946 23,810 331,437 10,725 3.3 Gross profit 35,720 33,370 2,960 36,073 353 1.0 Selling, general and administrative expenses 14,303 13,571 876 14,086 (217) (1.5) Operating income 21,416 19,798 2,084 21,987 570 2.7 Ordinary income 22,128 20,084 2,057 22,932 804 3.6 Profit attributable to owners of parent 16,118 — — 15,504 (614) (3.8)

Full-year results (unconsolidated) (Millions of yen) FYE Mar. 2019 Difference FYE Mar. Rate of change Item compared to 2018 (%) Settlement Ratio previous year Completed construction sales 310,761 308,623 100.0 (2,138) (0.7) Civil engineering 73,863 70,381 22.8 (3,481) (4.7) Building construction 236,898 238,241 77.2 1,343 0.6 Completed construction gross profit 34,767 33,316 10.8 (1,450) (4.2) Civil engineering 7,198 9,892 14.1 2,694 37.4 Building construction 27,568 23,423 9.8 (4,145) (15.0) Real estate sales 1,725 1,323 100.0 (402) (23.3) Real estate gross profit 534 54 4.1 (480) (89.8) Net sales 312,487 309,946 100.0 (2,540) (0.8) Gross profit 35,301 33,370 10.8 (1,931) (5.5) Selling, general and administrative expenses 13,851 13,571 4.4 (279) (2.0) Operating income 21,450 19,798 6.4 (1,651) (7.7) Ordinary income 21,514 20,084 6.5 (1,429) (6.6) Net income 15,555 14,025 4.5 (1,530) (9.8)

60 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 61 - Overseas Tokyu Group General public Domestic public sector Overseas Tokyu Group General public Domestic public sector Overseas Tokyu Group General public Domestic public sector 23,00323,003 34,610 34,610 155,028 50,411 22,988 22,988 14,495 14,495 12,096 12,096 28,185 28,185 155,028 50,411 15 20,114 20,114 142,932 142,932 22,225 22,225 15 2019 2019 2019 FYE Mar. FYE Mar. FYE Mar. 77,76677,766 (Millions of yen) (Millions of yen) (Millions of yen) 263,053 185,287 263,053 185,287 2018 2018 2018 FYE Mar. FYE Mar. FYE Mar. OverseasOverseas (252)(252) OverseasOverseas (208)(208) 2017 2017 2017 FYE Mar. FYE Mar. FYE Mar. 0 0 0 80,000 60,000 40,000 20,000 400,000 100,000 300,000 200,000 100,000 300,000 200,000 100,000 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. Real Estate Business etc. Real Estate Business amounted to ¥1,888 estate sales, sales net real Regarding year). As for profit the previous million (down 5.8% from of ¥304 million (segment incomeand loss, a segment loss fiscal year) was consolidated previous of ¥245 million in the of an allowance for loss in the recording due to the incurred the of etc. in connection with a review estate business, real devel of the long-term, large-scale and expenses revenues rental the in of profit a recording opment business, despite business, etc. 0.1 1.3 2.4 2.9 4.2 9.6 (9.7) 61.7 (66.2) (99.1) (13.6) (53.3) (18.1) (15.6) (15.6) (38.7) 332.4 230.9 (%) (%) (%) (Millions of yen) (Millions of yen) (Millions of yen) Rate of change Rate of change Rate of change - 15 982 3,339 8,481 4,401 1,077 1,062 (1,621) (9,287) 17,672 16,050 (39,464) (29,265) (39,448) (28,283) (36,125) (35,047) (17,768) Difference Difference Difference Difference Difference Difference compared to compared compared to compared compared to compared previous year previous previous year previous previous year previous 15 14,495 22,988 20,114 34,610 77,766 23,003 22,225 28,185 26,592 12,096 50,411 185,287 263,053 163,046 142,932 189,638 155,028 FYE Mar. 2019 FYE Mar. FYE Mar. 2019 FYE Mar. FYE Mar. 2019 FYE Mar. General public General public General public Tokyu Group companies Group Tokyu Tokyu Group companies Group Tokyu Tokyu Group companies Group Tokyu Overseas Overseas Overseas

Domestic private Domestic public Domestic private Domestic public Domestic private

Domestic public Orders (building construction) Orders Orders (civil engineering) Orders Orders (company-wide) Orders Company-wide Civil engineering Building construction Reference data (Tokyu Construction’s performancearea) by Construction’s data (Tokyu Reference Construction Business (Building Construction) completed construction sales, although we saw a Regarding in domestic government office construction proj decrease the previous from ¥258,896 million (up 5.8% ects, sales were construction in domestic private year) due to an increase was profit Segment and overseas construction projects. year), mainly the previous ¥20,200 million (down 8.7% from profit gross due to a decline in the completed construction of some a deterioration in the profitability reflecting margin, of our construction projects. Construction Business (Civil Engineering) Construction Business although we saw completed construction sales, Regarding government office construction in domestic an increase to by 4.6% to ¥70,652 million due sales decreased projects, construction and domestic private in overseas a decrease was ¥7,993 profit Meanwhile, segment construction projects. an year), reflecting the previous million (up 53.3% from of construction projects. in the profitability improvement Segment Performance Financial Overview

Overview of Financial Situation

Assets Total Capital Compared to the end of March 2018, total assets increased Shareholders’ equity increased by ¥12,100 million due by ¥15,239 million (up 6.1% from the previous year) to to an increase in retained earnings due to the recording ¥264,996 million due to a decrease of ¥15,476 million in of ¥15,504 million in profit attributable to owners of the notes and accounts receivable for trade and completed parent, despite paying out ¥3,307 million in dividends. construction work, etc., as well as an increase of ¥20,279 mil- In addition, accumulated other comprehensive income lion in cash and cash equivalents and an increase of ¥5,204 increased by ¥1,582 million, primarily due to an increase of million in incomplete construction expenses. ¥1,854 million in valuation difference on available-for-sale securities affected by stock prices. As a result, total capital Liabilities was ¥92,981 million—an increase of ¥13,806 million (up While construction accounts payable decreased by ¥1,454 17.4%) compared to the end of March 2018. In addition, million and accrued corporate taxes decreased by ¥868 the equity ratio was 35.0%, up 3.4 points compared to the million, deposits received increased by ¥1,670 million, end of March 2018. provision for loss on construction contracts increased by ¥1,466 million, and electronic payment obligations increased by ¥1,094 million, bringing our total liabilities to ¥172,014 million—an increase of ¥1,433 million (up 0.8%) from the end of March 2018.

Consolidated financial position (Millions of yen) Equity ratio (%) Difference 45 Item FYE Mar. 2017 FYE Mar. 2018 FYE Mar. 2019 compared to previous year

Total assets 204,813 249,756 264,996 15,239 30 Total liabilities 138,433 170,581 172,014 1,433 Interest-bearing 4,804 1,721 1,638 (83) 15 liabilities (Short-term debt) 3,082 83 80 (2) (Long-term debt) 1,721 1,638 1,557 (80) 0 FYE Mar. FYE Mar. FYE Mar. 2017 2018 2019 Total capital 66,380 79,175 92,981 13,806 Equity ratio (%) 32.3 31.6 35.0 3.4P

Overview of Cash Flow

Cash Flow from Business Operations Cash Flow from Investments Although we experienced decreases in funds, such as Funds decreased by ¥5,786 million (funds decreased by an increase in income taxes paid and an increase in ¥3,383 million in FYE March 2018) mainly due to payments costs on construction contracts in progress, a total of to acquire tangible and intangible fixed assets, and pur- ¥22,932 million in net income before taxes and other chase of shares of subsidiaries and associates. adjustments, along with increases in funds such as a decrease in accounts receivable contributed to a ¥29,694 Cash Flow from Financing million increase in funds (funds for FYE March 2018 had Payment of dividends etc. resulted in a ¥3,575 million increased by ¥16,226 million). decrease in funds (FYE March 2018 saw a decrease in funds of ¥6,457 million).

As a result, the balance of cash and cash equivalents as of the end of March 2019 increased by ¥20,279 million from the end of the previous fiscal year, to ¥49,145 million (compared to ¥28,865 million for the end of March 2018).

62 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 63 (52) ( 8.3%) ( 8.5%) ( 8.5%) ( 7.8%) ( 58.3%) ( 5.5%) ( 10.0%) ( -10.0%) ( -9.3%) ( -5.5%) (Millions of yen) (3,575) (5,786) 49,145 20,279 29,694 2019 FYE Mar. FYE Mar. ¥700 million ¥6,000 million ¥1,200 million ¥24,200 million ¥18,200 million ¥24,900 million ¥77,400 million ¥291,800 million ¥214,400 million ¥293,000 million ¥26 (Consolidated dividend payout ratio 20.3%) ¥31 (Consolidated dividend payout ratio 20.5%) ¥30 (Consolidated dividend payout ratio 20.6%) ¥30 (Consolidated dividend payout ratio 36.8%) (102) 6,283 (6,457) (3,383) 28,865 16,226 2018 FYE Mar. FYE Mar.

(40) TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. Civil engineering Building construction Civil engineering Building construction Breakdown of gross profit by area profit of gross Breakdown forecast Dividend results/dividend Breakdown of sales by area Breakdown (2,788) (1,717) 22,582 Gross profit from completed from profit Gross construction sales profit Real estate gross Total Dividend paid for 2017 FYE March Dividend paid for 2018 FYE March Dividend paid for 2019 FYE March Dividend planned for 2020 FYE March Completed construction sales Real estate sales Total (28,091) (23,545) Figures in parentheses indicate profit margin indicate profit in parentheses Figures Figures in parentheses indicate rate of change in parentheses Figures 2017 FYE Mar. FYE Mar. ------Under these circumstances, the Tokyu Construction Construction the Tokyu Under these circumstances, Although we expect a decline in performance in While the domestic construction market is expected While the domestic construction market Consolidated cash flow results flow Consolidated cash Net increase (decrease) in cash and cash equivalents in cash and cash (decrease) Net increase Cash and cash equivalents at end of year Effect of exchange rate changes on cash and cash equivalents of exchange rate changes on cash Effect Cash flows from financing activities financing Cash flows from Cash flows from investing activities investing Cash flows from Item Cash flows from operating activities operating Cash flows from ers, and will also proceed with reforms of our construc of with reforms ers, and will also proceed systems, as well as a rationalization of tion production our administrative divisions. sary to take actions to eliminate long working hours and work-style reform. realize that can into a corporate group aims to grow Group by continuing to cope with the changing environment, based on the basic policies steadily embody measures Management Plan (2018-2020): Shinka of the “Mid-Term that into a corporate group 2020,” while aiming to grow construction comprehensive customer-specific provides Group’s utilization of the Tokyu solutions, mainly through acquisitions of proactive strengths, comprehensive and M&A. human resources to 2020 due to temporary factors, in order FYE March orders we will focus on receiving performance, improve our custom with relationships by further strengthening nance and repairs), combined with increasing numbers combined with increasing nance and repairs), in a will result of elderly construction workers retiring, it is neces shortage. As a result, serious human resource ernment construction investment, there is a concern ernment construction investment, there from that tight supply-demand conditions stemming mainly projects, redevelopment multiple large-scale will lead to substantially areas, in major metropolitan is expected higher construction costs. In addition, it the medium- that a qualitative change in demand over construction of flow (predominantly to long-term from mainte new buildings, etc.) to stock (predominantly to continue to perform well due to an increase in gov in to continue to perform well due to an increase ally recover, as corporate earnings as well as employ ally recover, continue to improve. ment and income environments of uncertainty in the we still need to be aware However, overseas environment. *Based on statement of accounts (as of May 9, 2019) the outlook for the Japanese economy, Regarding the consumption concerns regarding are although there will gradu tax hike, it is expected that the economy Prospects Company Profile(June 1, 2019)

Company name TOKYU CONSTRUCTION CO., LTD. Founded on March 12, 1946 Date of establishment April 10, 2003 Capital ¥16,354 Million (as of March 31, 2019)） Head office 1-16-14, Shibuya, Shibuya-ku, Tokyo 150-8340 Representative Mitsuhiro Terada Number of employees 2,523 Construction license (TOKU-29) No. 20220 by Minister of Land, Infrastructure, Transport and Tourism Civil Engineering and Building Construction Contracting/Investigation, Construction Plan, Geologi- Main services cal Survey, Measurement, Architectural Design for Civil Engineering and Building Construction, etc. Head office/13 Branches/12 Sales offices, etc. [Branch offices] Sapporo Branch, Tohoku Branch (Sendai-shi), Hokuriku Branch (Niigata-shi), Chiba Branch, Civil Proj- ect East Japan Branch (Shibuya-ku, Tokyo), Urban Development Branch (Shibuya-ku, Tokyo), Building Project Metropolitan Branch (Shibuya-ku, Tokyo), Building Project East Japan Branch (Shibuya-ku, Locations Tokyo), Nagoya Branch, Osaka Branch, Hiroshima Branch, Shikoku Branch (Takamatsu-shi), Kyushu Branch (Fukuoka-shi) [Institute] Institute of Technology (Sagamihara-shi, Kanagawa) [Overseas offices] Singapore, Thailand, Indonesia, Myanmar, Bangladesh, Vietnam

Token Industry Co., Ltd. (Shibuya-ku, Tokyo) Tokyu Renewal Co., Ltd. (Shibuya-ku, Tokyo) Purantaru farm,Ltd. (Miho-mura, Inashiki-gun, Ibaraki) Affiliated companies CH. KARNCHANG-TOKYU CONSTRUCTION CO., LTD. (Thailand) PT. TOKYU CONSTRUCTION INDONESIA (Indonesia) GOLDEN TOKYU CONSTRUCTION CO., LTD. (Myanmar)

Website Detailed information about the Tokyu Construction Group is available on our website.

Corporate Profile Investor Relations https://www.tokyu-cnst.co.jp/english/company/index.html https://www.tokyu-cnst.co.jp/english/ir/index.html

64 TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 Story of Value Creation Initiatives for Value Creation Foundation That Supports Value Creation Corporate Data 65 - - Financial - 1.80 2.06 2.39 2.76 2.81 2.98 3.30 3.75 4.44 14.40 instruments dealers Financial institutions shares issued (%) shares Percentage of total of Percentage Shareholders istriution of 1,924 2,200 2,550 2,945 3,000 3,177 3,520 4,000 4,732 15,362 (Thousands) Foreign companies, etc. Other companies Treasury shares Individuals and others No. of shares held No. of shares TOKYU CONSTRUCTION CO., LTD. Integrated Report 2019 TOKYU CONSTRUCTION CO., LTD. The JPX-Nikkei Mid and Small Cap applies the concept of the JPX-Nikkei Index 400, which is an index composed of highly attractive listed companies, to mid and small cap equities by selecting companies that focus on capital management, and aim efficiency and investor-orientated of such issues among corpo awareness to foster greater rate executives. Companies are chosen by the Tokyo Stock chosen by the Tokyo rate executives. Companies are Exchange and the Nihon Keizai Shimbun. (March 31, 2019) 31, (March 400,000,000 shares shares) (Including 57,629 treasury 106,761,205 shares 32,345 Stock Exchange First section of the Tokyo 1720 Limited Bank, Sumitomo Mitsui Trust Japan Tokyo, 1-4-1, Marunouchi, Chiyoda-ku, (Top 10) (Top Tokyu Corporation has contributed 7.5 million shares to retirement benefit trust accounts, including 3.52 million shares to the Japan Trustee Ser to the Japan 3.52 million shares benefit trust accounts, including to retirement has contributed 7.5 million shares Corporation Tokyu vices Bank (re-trustee of Sumitomo Mitsui Trust Bank - Tokyu Corporation retirement benefits trust account) and we hold the authority to direct how benefits trust account) and we hold the authority to direct retirement Corporation Bank - Tokyu of Sumitomo Mitsui Trust vices Bank (re-trustee should be executed. voting rights for these shares Name Major Shareholders Major Shareholders KINDEN CORPORATION Japan Trustee Services Bank, Ltd. (Trust Account 9) Services Bank, Ltd. (Trust Japan Trustee MUFG Bank, LTD. Sumitomo Mitsui Trust Bank, Limited Sumitomo Mitsui Trust SHIMIZU CORPORATION Japan Trustee Services Bank, Ltd. (Trust Account) Services Bank, Ltd. (Trust Japan Trustee Japan Trustee Services Bank, Ltd. (Sumitomo Mitsu Trust Bank, Ltd. Re-trust - Services Bank, Ltd. (Sumitomo Mitsu Trust Japan Trustee benefits trust account) Corporation retirement Tokyu TOKYU CORPORATION benefits trust retirement CORPORATION & Banking Co., Ltd. TAISEI Mizuho Trust Services Bank, Ltd. & Custody trustee Trust account re-trust The Master Trust Bank of Japan, Ltd. (Trust Account) Bank of Japan, Ltd. (Trust The Master Trust tations of our investors. The JPX-Nikkei 400 index is composed of companies with high appeal for investors, which meet requirements such as efficient use of of global investment standards, management perspectives. capital and investor-focused Stock Exchange and chosen by the Tokyo Companies are the Nihon Keizai Shimbun. Our company has been selected as a constituent stock in the JPX-Nikkei Index 400 and JPX-Nikkei Mid Our company has been selected as a constituent stock in the JPX-Nikkei our corporate value and meet the expec will continue to work to improve and Small Cap Index brand. We (Note) Total number of shares number of shares Total authorized to be issued Outstanding stock Number of shareholders Stock Exchange listing Securities code registry Shareholder administrator Stock InformationStock Integrated Report