RLAST UPDATE【2016/1/25】

Tamagawa Holdings | 6838 |Research Report by Shared Research Inc.
Shared Research Inc. has produced this report by request from the company discussed in the report. The
aim is to provide an “owner’s manual” to investors. We at Shared Research Inc. make every effort to provide
an accurate, objective, and neutral analysis. In order to highlight any biases, we clearly attribute our data
and findings. We will always present opinions from company management as such. Our views are ours
where stated. We do not try to convince or influence, only inform. We appreciate your suggestions andfeedback. Write to us at sr_inquiries@sharedresearch.jp or find us on Bloomberg.

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Tamagawa Holdings | 6838 |Shared Research Report

LAST UPDATE【2016/1/25】

INDEX
Key financial data ----------------------------------------------------------------------------------------------------- 3
Recent updates --------------------------------------------------------------------------------------------------------- 4
Highlights ----------------------------------------------------------------------------------------------------------------------- 4
Trends and outlook --------------------------------------------------------------------------------------------------- 8
Business ----------------------------------------------------------------------------------------------------------------- 20
Business description ------------------------------------------------------------------------------------------------------- 20
Business segments---------------------------------------------------------------------------------------------------------- 21
Strengths and weaknesses ----------------------------------------------------------------------------------------------- 27
Market and value chain --------------------------------------------------------------------------------------------------- 29
Strategy ------------------------------------------------------------------------------------------------------------------------ 34
Past performance ----------------------------------------------------------------------------------------------------------- 35
Income statement ---------------------------------------------------------------------------------------------------------- 41
Balance sheet ---------------------------------------------------------------------------------------------------------------- 42
Cash flows --------------------------------------------------------------------------------------------------------------------- 44
Other information---------------------------------------------------------------------------------------------------- 45
History -------------------------------------------------------------------------------------------------------------------------- 45
News and topics ------------------------------------------------------------------------------------------------------------ 45
Other --------------------------------------------------------------------------------------------------------------------------- 56
Major shareholders --------------------------------------------------------------------------------------------------------- 57
Company profile ------------------------------------------------------------------------------------------------------------ 58

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Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Key financial data

LAST UPDATE【2016/1/25】

Key financial data
Income Statement

FY03/10

FY03/11

FY03/12

FY03/13

FY03/14

FY03/15

FY03/16

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Est.

Total Sales

2,803

2,640

3,106

3,672

4,171

5,095

5,410

YoY

-34.8%

-5.8%

17.7%

18.2%

13.6%

22.1%

6.2%

Gross Profit

392

326

590

1,049

1,198

1,479

YoY

-58.8%-16.8%

81.1%

77.8%

14.3%

23.4%

GPM

14.0%

12.3%

19.0%

28.6%

28.7%

29.0%

-227

-286

-30

373

477

531

159

YoY

-

-

-

-

27.8%

11.3%

-70.1%

OPM-8.1%-10.8%

-1.0%

10.2%

11.4%

10.4%

2.9%

(JPYmn)Operating Profit

Recurring Profit

-224

-284

-24

375

478

514

105

YoY

-

-

-

-

27.6%

7.5%

-79.6%

RPM-8.0%-10.8%

-0.8%

10.2%

11.5%

10.1%

1.9%

Net Income

-570

-351

-37

340

436

427

106

-

-

-

-

28.5%

-2.2%

-75.2%-20.3%-13.3%

-1.2%

9.3%

10.5%

8.4%

2.0%

Number of Shares (thousands)

6,774

6,774

6,774

10,753

41,25942,031

EPS

-35.1

-17.8

-1.9

15.7

11.7

10.4

-

-

-

14.8

10.6

10.2

YoY
Net Margin
Per Share Data

EPS (Fully Diluted)
Dividend Per ShareBook Value Per Share

-

-

-

-

-

1

58.9

40.6

38.6

54.3

64.8

75.4

2.6
1.0～3.0

Balance Sheet
Cash and Equivalents

665

493

56

390

1,764

1,524

Total Current Assets

1,918

1,530

1,293

2,114

3,421

3,606

Tangible Fixed Assets, net

295

205

133

564

718

2,410

Other Fixed Assets

89

30

18

27

38

154

Intangible Assets

39

-

-

1

31

194

2,341

1,766

1,445

2,709

4,210

6,376
620

Total Assets
Accounts Payable

443

430

364

386

474

Short-Term Debt

433

203

30

40

323

300

Total Current Liabilities

1,026

884

598

708

1,130

1,481

Long-Term Debt

67

-

-

151

294

539

Total Fixed Liabilities

153

83

85

251

442

1,733

Total Liabilities

1,179

967

683

959

1,572

3,215

Net Assets

1,162

799

761

1,751

2,638

3,161

500

203

30

192

618

839

Interest-Bearing Debt
Cash Flow Statement
Operating Cash Flow

-1

68

-332

36

764

387

Investment Cash Flow

12

93

77

-454

-265

-865

Financing Cash Flow

-82

-299

-168

783

875

238

ROA

-8.4%

-13.8%

-1.5%

18.0%

13.8%

9.7%

ROE

-43.4%-35.8%

-4.7%

27.1%

19.9%

14.7%

Equity Ratio

49.6%

45.3%

52.7%

64.6%

62.7%

49.6%

Financial Ratios

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

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Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Recent updates

LAST UPDATE【2016/1/25】

Recent updates
Highlights
On January 25, 2016, Tamagawa Holdings Co., Ltd. announced plans to install a solar power tracking system at its solarpark in Sodegaura.
As announced on March 24, 2015, the company launched electricity sales at its solar park in Sodegaura, Chiba (hereafter,
Sodegaura solar park) last year. In order to explore new possibilities for its Solar Power Plant Operations business, it has
decided to establish a solar power plant at this park which makes use of an automatic tracking system—the company’s firstusage of this technology.

About the tracking system
The tracking system the company plans to use is known as a universal-axis solar tracker. It automatically adjusts the solar
panel to the optimal angle in relation to the sun’s position, allowing it to gather more sunlight than a fixed panel and assuch make full use of the available solar energy. This in turn greatly increases its energy output. The company expects thatthe total amount of energy generated will be 20-30% more than that generated by the fixed solar panels it has been using
until now, and anticipates an increase in its power generating efficiency.

About the tracking system’s installation
Location: Sodagaura City, Chiba Prefecture
Capacity: Approx. 12Kw
Feed-in tariff: JPY32/kWh (excluding tax, fixed for 20 years)
Maker: TopperSun (Taiwan)

On the same day, Shared Research updated the report following interviews with management.

On January 12, 2016, Tamagawa Holdings Co., Ltd. announced an update on the status of its plans to construct a solarpark in Goto City, Nagasaki Prefecture.
As announced on November 18, 2014, the company is planning to construct and operate a solar park in Goto City,
Nagasaki Prefecture. Tamagawa has now selected a contractor to carry out the construction work for the solar park.
The solar park plans to utilize a 5.3MW extra high voltage system—the first of its type for Tamagawa. The company has
been preparing to start the sale of electricity there as soon as possible.
Nangoku Corporation, which is scheduled to perform construction work for the solar park, is a general trading company
based in Kagoshima that operates businesses such as construction materials, machinery and equipment,
telecommunications, and energy throughout the Kyushu region and has more than 40 subsidiaries and affiliates. Nangoku
plans to build 30 solar energy power plants on its own in Kyushu for a total generation capacity of around 200MW andhas constructed more solar power facilities.

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Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Recent updates

LAST UPDATE【2016/1/25】

About the Goto City solar park
Location:

Yoshikugi-cho, Goto City, Nagasaki Prefecture

Operator:

GP Energy 2 Co., Ltd. (wholly owned subsidiary)Area:

10 hectares

Capacity:

Approx. 5.3MW

Feed-in tariff:

JPY36/kWh (fixed for 20 years)

Generation revenue:

JPY250mn/year (tentative)

First-year generation volume:

Approx. 6,790,566kWh

Start of the sale of electricity:

April 2017 (planned)

On January 4, 2016, the company provided an update on the status of its plans to launch a power plant business in
Misawa, Aomori Prefecture.
As indicated in its December 26, 2014 announcement, the firm plans to construct and operate solar energy power plantfacilities with a total capacity of approximately ten megawatts in Misawa, Aomori Prefecture (hereafter “power plantbusiness”). It is in the process of performing the necessary procedures and hopes to start electricity sales at an early stage.
Tohoku Electric Power Co. has now officially approved a request for grid connections to Tamagawa’s power plant facilities(procedure for connecting to a power company’s grid, which is a precondition for selling power).
As the firm indicated on June 11, 2015, it reached a basic agreement with Etrion Japan KK (hereafter “Etrion”) to jointly
operate these power plant facilities. The official approval of the grid connection request should encourage quicker andmore concrete discussions with Etrion as the company looks to start operations.
Tamagawa Holdings expects this power plant business to begin selling power from FY03/17 and plans to promptly reportany concrete developments regarding this joint project with Etrion.

Power plant overview
▶
▶
▶
▶
▶
▶
▶

Location:

Misawa, Aomori

Operator:

GP Energy A, GP Energy B, GP Energy C, GP Energy D (wholly owned units)

Premises:

Approx. 153,000sqm

Capacity:

Approx. 10MW

Feed-in tariff:

JPY36/kWh (before tax; fixed for 20 years)

Revenue:

JPY390mn a year (estimate)First year output:

Approx. 10,852,814 kWh (estimate)

On December 10, 2015, the company revised its sales and earnings forecast for FY3/16, and also provided an updated
status report on its Geothermal Power Plant Operations.

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Shared Research Report

Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Recent updates

LAST UPDATE【2016/1/25】

Revised FY 3/16 forecast
Sales: JPY5.41bn (previously JPY5.6–7.3bn)
Operating profit: JPY159mn (previously JPY590–850mn)
Recurring profit: JPY105mn (previously JPY520–790mn)
Net income: JPY106mn (previously JPY400–570mn)

Reasons for the revision
Moves by telecommunications carriers to restrain abrupt spending on mobile phone infrastructure and a lull (due toseasonality) in work on large government projects hurt sales at the Electronics and Telecoms Equipment segment. As thisleft 1H sales short of the company's initial forecast and put the Electronics and Telecoms Equipment segment below its
breakeven point, the company revised its full-year earnings forecast.
Tamagawa Holdings had previously given its full-year forecast as a range estimate, owing to its Renewable Energy
Systems Sales segment, where sales and earnings vary depending on changes in the operating environment caused byexternal factors. As indicated in the Geothermal Power Plant Operations status report released the same day, the upper
end of the forecast range was based on the assumption that upon the completion of construction of the two geothermal
power plants that are currently under construction, the company would sell electrical power from the geothermal power
plant and the geothermal power plants themselves, and would also sell the sites previously acquired for two othergeothermal power plants where construction has not yet begun. However, the company has sold the two plants thatwere under construction to a third party, resold the land acquired to build the two other geothermal power plants, andhalted the sale of geothermal power plants. In addition to lowering the expected sales amount at the Electronics andTelecoms Equipment segment, these moves caused the company to revise down earnings figures at both the upper andlower end of the expected range.
The sharp drop in expected profits relative to the company’s full-year revised sales forecast is due to the fact that the
decline in sales was at the high-margin Electronics and Telecoms Equipment segment.
Given the current operating environment, company plans for restoring orders and sales at the Electronics and Telecoms
Equipment segment call for focusing on expanding sales to the defense market and the public sector disaster
preparedness-related market, and also on acquiring new customers. These efforts have brought in new large scale orders
and improved the segment's order flow but, since most of the deliveries under these orders will not be until April 2016 orlater, the contributions to earnings from will not appear until next fiscal year.
Current status of previously planned geothermal power plants
On January 29, 2015, the company announced that it planned to build a total of seven geothermal power plants, and to
this end acquired a total of seven separate plots of land. The company moved forward on construction at two of the sevensites but changed its plan. Under the new plan, the company will sell the two plants currently under construction to athird-party and sell back the sites acquired for the five other geothermal power plants to their original owners.
At the geothermal power plant located in Beppu City, Oita Prefecture, a reexamination of data acquired after work had
begun showed that Tamagawa Holdings was unlikely to get the return on the project it originally envisioned. After aseries of talks with the outside party that originally proposed the project, Tamagawa Holdings reached an agreement tosell the two power plants currently under construction to a company owned by the party that originally proposed the
project at a price that would be greater than the total amount Tamagawa Holdings had invested in the two projects. The

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Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Recent updates

LAST UPDATE【2016/1/25】

transaction and payment under this agreement are be completed by the end of January 2016.
As for the remaining five sites at which construction of geothermal power plants has not yet begun, Tamagawa Holdings
chose to exercise its right under the original purchase contract to sell the land back to the original owner at the same
price for which it was purchased. Two of the five sites have already been sold back to their original owners and the salesof remaining three sites are expected to be completed by the end of December 2015.
The company had expected to use some of the capital that was raised by a warrant issue for its geothermal power plant
operations. However, after only 10 of the warrants issued were exercised, adverse changes in the operating environment
and the stock market pushed the company's share price down to a level where it made sense for the company to buyback and cancel all of the remaining 9,990 warrants and finance construction at the first geothermal power plant site withcash on hand.

On November 12, 2015, the company announced earnings results for 1H FY03/16; see the results section for details.

For corporate releases over three months old, see the News and topics section.

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Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Trends and outlook

LAST UPDATE【2016/1/25】

Trends and outlook
Quarterly trends and results
FY03/15

Quarterly Performance (cumulative)(JPYmn)FY03/16

Q2

Sales

835

1,924

3,101

5,095

YoY

-8.7%

5.7%

13.3%

22.1%

Gross Profit

261

617

996

1,479

YoY

3.0%

12.8%

17.4%

23.4%

-13.8% -42.7%

GPM

31.2%

32.1%

32.1%

29.0%

33.0%

204

405

624

947

247

514

YoY

24.0%

22.0%

17.4%

31.4%

21.4%

27.1%

SG&A / Sales

24.4%

21.0%

20.1%

18.6%

36.2%

46.4%

Operating Profit

57

212

372

531

-22

-161

159

YoY

-35.8%

-1.3%

17.6%

11.3%

-

-

-70.1%

OPM

6.9%

11.0%

12.0%

10.4%

-

-

2.9%

56

210

364

514

-32

-190

105

YoY

-40.8%

-4.1%

14.2%

7.5%

-

-

-79.6%

RPM

6.8%

10.9%

11.7%

10.1%

-

-

1.9%

Net Income

26

120

261

427

-38

-249

106

-71.1% -36.9%-14.5%

-2.2%

-

-

-75.2%

8.4%

8.4%

-

-

2.0%

SG&A Expenses

Recurring Profit

YoY
Net Margin

3.1%

Quarterly Performance

6.3%

Q3

Q4

FY03/16

Q1

Q1

Q2

682

1,108

5,410

-18.3% -42.4%

6.2%

225

FY03/15

FY03/16

Q1

Q2

Q3

Q4

Q1

Q2

835

1,089

1,178

1,993

682

426

YoY

-8.7%

20.1%

28.3%

39.1%

Gross Profit

261

356

379

482

YoY

3.0%

21.3%

25.8%

37.8%

-13.8% -63.9%

GPM

31.2%

32.7%

32.2%

24.2%

33.0%

204

201

220

323

247

267

YoY

24.0%

20.0%

9.7%

70.5%

21.4%

33.0%

SG&A / Sales

24.4%

18.5%

18.6%

16.2%

36.2%

62.7%

Operating Profit

57

155

160

159

-22

-139

YoY

-35.8%

23.2%

57.6%

-0.9%

-

-

OPM

6.9%

14.2%

13.6%

8.0%

-

-158

225

30.2%

56

154

154

150

-32

24.1%

54.5%

-6.1%

-

-

RPM

6.8%

14.1%

13.1%

7.5%

-

-211

Net Margin

Q4

128

-40.8%

YoY

Q3-18.3% -60.9%

YoY
Net Income% of FY FY Est.

31.9%

Sales

Recurring Profit

Q4

353

(JPYmn)

SG&A Expenses

Q3

26

94

141

166

-38

-71.1%

-6.6%

22.9%

26.6%

-

-

3.1%

8.7%

11.9%

8.3%

-

-

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.
Net income is net income attributable to the parent company shareholders.

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Tamagawa Holdings | 6838 |Shared Research Report

Tamagawa Holdings ＞ Trends and outlook

LAST UPDATE【2016/1/25】

Segment Breakdown (cumulative)

FY03/15

FY03/16(JPYmn)

Q1

Q2

Q3

Q4

Q1

Q2

Sales

835

1,924

3,101

5,095

682

1,108

YoY

-8.7%

5.7%

13.3%

22.1%

-18.3%-42.4%

777

1,741

2,748

3,401

594

946

12.2%

26.0%

22.9%

5.3%

-23.5%-45.7%

33

137

293

1,606

17

27

-85.2% -67.0%-37.1%

80.4%-47.2%-80.1%

Electronics and Telecoms Equipment
YoY
Solar System Sales
YoY
Solar Power Plant Operations
YoY
Geothermal Power Plant Operations
Operating Profit
YoY
Electronics and Telecoms Equipment
YoY
Solar System Sales
YoY
Solar Power Plant Operations
YoY
Geothermal Power Plant Operations
Total
Adjustments

25

45

60

88

71

135

-

93.3%

63.9%

70.7%

179.8%

197.9%

-

-

-

-

-

-

57

212

372

531

-22

-161

-35.8%

-1.3%

17.6%

11.3%

-138.6%-175.8%

93

257

435

467

5

-90

13.7%

36.8%

33.0%

-2.7%

-95.0%-135.1%

-10

-6

-19

112

-46

-109

-

-

- 118.6%

-

-

10

16

22

29

51
217.1%

16

-

-

-

-

179.3%

-

-

-

-

-0

-0

93

268

432

602

-12

-149

-55

-60

-70

-10

-36

Segment Breakdown (quarterly)

FY03/15
Q1

Q2

Q3

Q4

Q1

Q2

835

1,089

1,178

1,993

682

426

YoY

-8.7%

20.1%

28.3%

39.1%

-18.3%-60.9%

777

964

1,007

652

594

351

12.2%

39.8%

18.0%

-34.4%-23.5%-63.6%

33

104

157

1,313

17

10

-85.2% -46.0% 202.4% 209.8%-47.2%-90.4%

Solar System Sales
YoY
Solar Power Plant Operations
YoY
Geothermal Power Plant Operations
Operating Profit
YoY
Electronics and Telecoms Equipment
YoY
Solar System Sales
YoY
YoY
Geothermal Power Plant Operations
Adjustments

20

14

28

71

65

- -14.2%

10.1%

86.8%

179.8%

220.5%

-

-

-

-

-

-

57

155

160

159

-22

-139

-35.8%

23.2%

57.6%

-0.9%

-

-

93

164

178

32

5

-95

13.7%

54.5%

27.9%

-79.0%-95.0%

-

-10

5

-13

131

-46

-63

- -79.4%

Solar Power Plant Operations

Total

25

10

Q3

Q4

-12

Sales

YoY

Q4

FY03/16(JPYmn)Electronics and Telecoms Equipment

Q3- 590.8%

6

-0

-

-

7

29

22

179.3%

287.6%--- 349.3%

-

-

-

-

-0

-0

93

175

165

169

-12

-137

-36

-20

-5

-10

-10

-2

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.
As of Q1 FY03/15, Tamagawa’s reporting segments comprised Electronics and Telecoms Equipment, Solar System Sales, Solar Power Plant
Operations, and Geothermal Power Plant Operations, but from Q1 FY03/16, the Solar System Sales segment has been renamed Renewable
Energy System Sales.

1H FY03/16 results (announced August 12, 2015)▶ Sales:▶ Gross profit:www.sharedresearch.jp

JPY1.1bn (-42.4% YoY)
JPY353mn (-42.7% YoY)

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Tamagawa Holdings | 6838 |Tamagawa Holdings ＞ Trends and outlook▶ SG&A expenses:▶ Operating loss:▶ Recurring loss:▶ Net loss:

LAST UPDATE【2016/1/25】

JPY514mn (+27.1% YoY)
JPY161mn (operating profit of JPY212mn in 1H FY03/15)
JPY190mn (recurring profit of JPY210mn in 1H FY03/15)
JPY249mn (net income of JPY120mn in 1H FY03/15)

SG&A expenses were up despite an increase in sales due to higher R&D expenses (JPY143mn; up by JPY38mn comparedto 1H FY03/15), and higher sales promotion expenses in the Renewable Energy System Sales segment.

Electronics and Telecoms Equipment▶ Orders:▶ Sales:▶ Operating loss:

JPY1.0bn (-43.5% YoY)
JPY960mn (-44.9%)
JPY90mn (operating profit of JPY257 in 1H FY03/15)

Mobile telecom providers changed their construction plans for base stations and restrained investment, hurting segment
earnings.
The company sought to win new orders in the area of 3.9-generation mobile facilities, defense facilities, and public
wireless facilities, as well as orders in new areas, focusing on new markets and customer acquisition. It also continued
measures to add value, expand and cultivate business areas, and joint development with partner companies, whileworking to strengthen proposals for its in-house products. As a result, the company saw an increase in orders from newcustomers and new markets, digital signal processing boards required for high-speed signal processing, including forfiber optic-related products for various wireless applications (excluding high-frequency analog products). However, in themobile phone infrastructure market, sales were lower year-on-year as restraint in corporate capex was greater than initial
estimates.

Sales by channel
Mobile telecoms: JPY208mn (-68.3%)
Defense: JPY305mn (-56.6%)
Other (government services, disaster prevention, analysis): JPY445mn (+16.5% YoY).
Segment sales were down due to lower sales to mobile telecoms companies, which lowered their spending on basestations. Defense related sales were down due to fizzling demand for facility renewal. In wireless transport (railways andairports), the company won orders for fiber optic-related products for use in airports. Orders for the company’s own
testing equipment for power semi-conductors were firm.
To cope with year-on-year declines in sales, Tamagawa worked to restrain fixed costs and R&D expenses from theJuly-September quarter onward. As a result, although the segment booked an operating loss for 1H due to lower sales,
the company plans to break even for the full year. According to the company, acquisition has been steady during FY03/16
for contracts of large-scale public works projects in mobile telecoms. As a result, although lower sales are forecast for
FY03/16, these are forecast to be covered by higher sales and profits and FY03/17 and beyond.
Tamagawa Electronics Vietnam Co., Ltd., the Vietnam-based manufacturing subsidiary owned by the company’s
consolidated subsidiary Tamagawa Electronics, began operation in October 2015. Following its launch, the company

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Tamagawa Holdings ＞ Trends and outlook

Tamagawa Holdings | 6838 |LAST UPDATE【2016/1/25】

began production of high-quality, high-frequency passive components for use in telecoms and broadcasting, as well as
mobile base stations, geared toward the Japanese market. Reduced costs are planned to lead to improvements in pricecompetitiveness, yielding an increase in orders. In later years the company aims to expand business into Southeast Asiaand the Middle East.

Renewable Energy System Sales▶ Orders:▶ Sales:▶ Operating loss:

JPY1.3bn (+776.1% YoY)
JPY27mn (-80.1%)
JPY109mn (loss of JPY5mn in 1H FY03/15)

In sales, the company reported gains on O&M (Operation and Management) for its power conversion and solar power
tracking frame systems, as well as the solar power plant which it sold in lots last year. In addition to the lot sales of power
plants, it is booking continuous O&M revenues following the sale.
In FY03/16, the company expects sales projects to be concentrated in 2H. During 1H, the company brought forward fixed
costs, with profits likely to be concentrated in the second half of the year. Fixed costs brought forward were primarily
those associated with capturing orders, including sales promotion expenses and expenses required to evaluate potentialsites for solar power generation plants.

Solar Power Plant Operations▶ Sales:▶ Operating profit:

JPY135mn (+197.9% YoY)
JPY51mn (+JPY217.1% YoY)

Mega solar power plants in Shimonoseki, Tateyama, and Sodegaura sold electricity in line with forecasts.

Geothermal Power Plant Operations
The company is preparing to start operations of geothermal power plants, so no sales were recorded, and operating loss
was zero.
In January 2015, the company announced that it planned to build a total of seven geothermal power plants, and to thisend acquired a total of seven separate plots of land. The company moved forward on construction at two of the sevensites but changed its plan in December 2015. The company sold the two plants currently under construction to a third
party and sold back the sites acquired for the five other geothermal power plants to their original owners.
At the geothermal power plant located in Beppu City, Oita Prefecture, a reexamination of data acquired after work had
begun showed that the company was unlikely to get the return on the project it originally envisioned. After a series oftalks with the outside party that originally proposed the project, Tamagawa reached an agreement to sell the two power
plants currently under construction to a company owned by the party that originally proposed the project at a price thatwould be greater than the total amount the company had invested in the two projects. The transaction and payment
under this agreement are be completed by the end of January 2016.
As for the remaining five sites at which construction of geothermal power plants has not yet begun, Tamagawa chose towww.sharedresearch.jp

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exercise its right under the original purchase contract to sell the land back to the original owner at the same price forwhich it was purchased. Two of the five sites have already been sold back to their original owners and the sales ofremaining three sites are expected to be completed by the end of December 2015.

For details on previous quarterly and annual results, see the Historical financial statements section.

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Full-year company forecasts
FY03/16 Forecast(JPYmn)Sales
CoGS
Gross Profit
GPM
SG&A
SG&A/Sales
Operating Profit
OPM
Recurring Profit
RPM
Net Income
Net Margin

1H Act.
1,924
1,307
617
32.1%
405
21.0%
212
11.0%
210
10.9%
120
6.3%

FY03/15
2H Act.
3,171
2,309
862
27.2%
543
17.1%
319
10.1%
304
9.6%
307
9.7%

FY Act.
5,095
3,616
1,479
29.0%
947
18.6%
531
10.4%
514
10.1%
427
8.4%

FY03/16
FY Est.
5,410

159
2.9%
105
1.9%
106
2.0%

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

Forecast by segment

Forecasts by Segment(JPYmn)
Sales
Electronics and Telecoms Equipment
Solar Systems Sales
Solar modules

Sales of electricity from power plants

Solar Power Plant Operations
Operating Profit
Electronics and Telecoms Equipment
Solar Systems Sales
Solar Power Plant Operations

FY03/15FY Act.
5,094
3,400
1,606
552
1,054
87
531
420
89
20

FY03/16
FY Est.
5,410
2,107
3,070
0
3,070
232
159
0
108
51

YoY
6.2%
-38.0%
91.1%-100.0%191.3%
166.7%-70.1%-100.0%21.3%
155.0%

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

FY03/16 forecast▶ Sales:▶ Operating profit:▶ Recurring profit:▶ Net income:

JPY5.4bn (+6.2% YoY)
JPY159mn (-70.1% YoY)
JPY105mn (-79.6% YoY)
JPY106mn (-75.2%YoY)

On December 10, 2015, Tamagawa announced a revision to its FY03/16 earnings forecasts. Compared to initial forecasts,
sales decreased by JPY190mn-1.9bn, operating profit decreased by JPY430-690mn, recurring profit decreased by
JPY414-684mn, and net income decreased by JPY293-463mn.

Electronics and Telecoms equipment▶ Sales:▶ Segment profit:www.sharedresearch.jp

JPY2.1bn (-38.0% YoY)
JPY0mn (segment profit of JPY420mn during FY03/15)

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Segment profit is a figure after allocation of corporate and other common costs; all segment profits below are on the same
basis.
Due to the FY03/16 full-year earnings forecast revision announced in December 2015, company forecasts for this segment
were reduced by JPY1.3bn for sales and JPY322mn for operating profit. Primary factors were a sudden acceleration incapex restraint in the mobile telephone infrastructure market and large-scale projects in both the public and private
sectors entering a tough phase. As a result, 1H sales were below initial estimates, coming in below the breakeven point
for this segment. Forecasts were subsequently revised.
For 1H FY03/16, segment sales were down due to lower sales to mobile telecoms companies, which lowered theirspending on base stations. Defense related sales were down due to fizzling demand for facility renewal. For the full-year,
sales forecasts by channel—assuming that trends seen in 1H will continue—are JPY472mn (-67.0% YoY) in mobile
telecoms, JPY678mn (-35.2% YoY) in defense, and JPY955mn (-3.5% YoY) in other (government services, disasterprevention, analysis).
To cope with year-on-year declines in sales, Tamagawa worked to restrain fixed costs and R&D expenses from theJuly-September quarter onward. As a result, although the segment booked an operating loss for 1H due to lower sales,
the company plans to break even for the full year. According to the company, acquisition has been steady during FY03/16
for contracts of large-scale public works projects in mobile telecoms. As a result, although lower sales are forecast for
FY03/16, these are forecast to be covered by higher sales and profits and FY03/17 and beyond.
The company expects sales of its own products, which have relatively high profitability, will total JPY1.1bn (-23.3% YoY),
accounting for 50% of the total sales in the segment (40.4% in the previous year). In the previous year, sales of test
equipment for power semiconductors and defense equipment increased. For FY03/16, Tamagawa expects that sales ofpower chip testing equipment will continue to grow and that fiber optic-related products for use in airports willcontribute to sales.
The company began manufacturing at a subsidiary in Vietnam, Tamagawa Electronics Vietnam Co., Ltd., in October 2015.
Of the two main parts for mobile telecoms facilities, filters and passive components, Tamagawa Electronics Vietnam will
manufacture passive components for the foreseeable future. According to the company, Vietnam’s working wage is about
USD3,000 per annum, less than half of that in China. Vietnam boasts a labor force full of young, talented workers, withthose under age 29 comprising over half of the population, and the literacy rate at over 95%. The company’s
manufacturing subsidiary in Vietnam was recognized as the first company to enter Kanagawa Prefecture’s Industrial Park.

Kanagawa Industrial Park was established by Shinagawa Prefecture in the Thang Long Industrial Park II near Hanoi to support Shinagawa
companies’ overseas manufacturing. Kanagawa Prefecture and the Kanagawa Industrial Promotion Center offer comprehensive support toJapanese companies.

Renewable energy sales▶ Sales:▶ Segment profit:

JPY3.1bn (+91.1% YoY)
JPY108mn (+21.3% YoY)

Due to the FY03/16 full-year earnings forecast revision announced in December 2015, company forecasts for this segment

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were reduced by JPY570mn/increased by JPY1.1bn for sales and reduced by JPY78-337mn for operating profit.
Unpredictability in the effects of external factors led the company to previously disclose earnings forecasts for thissegment in a range format. The upper limit assumed the sale of two geothermal power plants (that were underconstruction at the time) after construction had been completed, with additional sales of two geothermal power plants(for which construction had not begun). However, the two incomplete plants have been sold to a third party, and thetwo plots of land—for which additional plants were due to begin construction—have also been sold back to their original
owners. As a result, both the upper and lower limits are forecast to decrease.
The company forecasts sales and profit by selling tranches of solar power systems. Tamagawa plans to build solar power
plants totaling output of 6.3MW, and sell some parts of the plants. Sales for this segment are forecast to be concentratedin 2H.

Solar and geothermal power plant operations▶ Sales:▶ Segment profit:

JPY232mn (+166.7% YoY)
JPY51mn (+155.0% YoY)

Due to the FY03/16 full-year earnings forecast revision announced in December 2015, company forecasts for this segment
were reduced by JPY31mn for operating profit. This is attributable to a delay in receiving feed-in tariffs from geothermal
power plants.
In addition to sales of solar power at the Shimonoseki solar park, the Tateyama and Sodegaura solar parks, which began
operating in February and March 2015, respectively, will fully contribute to annual sales, leading to the expected rises inboth sales and profit. The total output of the business will increase by 3.2MW YoY to 4.8MW.

Dividend
The company plans to pay JPY1.0 to JPY3.0 in per-share annual dividend, the first dividend payment in the last eight years,
judging that it is completing preparation work for a system enabling it to pay dividends stably.

Long-term outlook
In April 2013, Tamagawa announced its medium-term plan effective through FY03/18. The plan called for sales of
JPY10.0bn, an operating profit margin of 20% and ROE of 20%. The company has not announced any medium-term plans
since then.
Tamagawa expects several factors to drive earnings growth: higher sales from the Electronics and Telecoms Equipment
segment; sales of electricity from solar and geothermal power plants that currently are or will become operational; andthe partial or entire sale of some of its solar power plant equipment and geothermal power plants.

Electronics and Telecoms Equipment
Since Masanori Kobayashi—CEO of Tamagawa Electronics—became a director at Tamagawa Holdings in June 2011, theplan has been to exit unprofitable projects, strengthen R&D, and launch new products to expand sales, while stepping up
sales of more profitable Tamagawa-brand products. The company anticipates higher demand for devices used in mobile
telecoms base stations, alongside devices for defense, disaster prevention, and environmental analysis: In particular,

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demand in mobile telecoms base stations are forecast to be led by the need for updated base stations in light of theimplementation of LTE-Advanced technology.
In FY03/16, sales are forecast to decrease due to lower sales to mobile telecoms companies, which are lowering theirspending on base stations. Defense related sales are also forecast to decrease due to fizzling demand for facility renewal.
However, to cope with year-on-year declines in sales, Tamagawa worked to restrain fixed costs and R&D expenses fromthe July-September quarter onward. As a result, although the segment booked an operating loss for 1H due to lower
sales, the company plans to break even for the full year. According to the company, acquisition has been steady during
FY03/16 for contracts of large-scale public works projects in mobile telecoms. As a result, although lower sales are forecast
for FY03/16, these are forecast to be covered by higher sales and profits and FY03/17 and beyond.

◤

Mobile network operators (MNOs) are likely to accelerate base station upgrades as they launch LTE-Advanced
high-speed data transmission services around 2016, so it expects renewal demand. According to the company, in
preparation for the 2020 Tokyo Summer Olympics there is expected to be an increase in demand, driven by demand
for small-cell infrastructure that can handle high-speed data traffic.

◤

Since FY03/14, the company has increased investments in R&D for products of its own brand. It started sales oftesting equipment for power semiconductors and a high-definition-image monitoring system in FY03/15. For the
medium term, Tamagawa has been developing new products for medical treatment. Products developed in-houseaccounted for 30% of sales in FY03/13 and more than 40% in FY03/15; the company aims to increase this figure
further to 70% in FY03/18.

In March 2015, Tamagawa established a second-tier subsidiary in Vietnam, Tamagawa Electronics Vietnam Co., Ltd. The
subsidiary began operation in October 2015. Following its launch, the company began production of high-quality,
high-frequency passive components for use in telecoms and broadcasting, as well as mobile base stations, geared toward
the Japanese market. Reduced costs are planned to lead to improvements in price competitiveness, yielding an increase inorders. In later years the company aims to expand business into Southeast Asia and the Middle East.

Solar Power Generation
Generating capacity of solar power plants
As of May 2015, the company’s solar power facilities, including those already in operation and planned facilities on
secured land, had a combined generating capacity of 11.3MW (see “Solar power plant generation in Business section”).
According to the company, it has pushed up the internal rate of return (IRR) on solar power systems by acquiring andbuilding them through leases, starting with the Tateyama, Chiba plant. The average IRR on these plants is 13.4%, and theaverage net present value of expected future cash flows is JPY3.2bn.
In December 2014, Tamagawa acquired from ISE Power the rights to produce power in the city of Misawa, Aomori
Prefecture, reaching the decision to build and operate a solar power plant there. When operations commence in March
2016, Tamagawa expects the Misawa power plant to have around 10MW of generation capacity, adding some JPY390mn
to annual earnings. The plant received formal approval in January 2016 to provide power to Tohoku-Electric Power Co.,
Inc. Sales of power from this plant are expected to begin during FY03/17. In March 2015, Tamagawa announced abusiness alliance with Etrion Japan KK. to make a joint investment in Misawa solar power plant. In June 2015, Tamagawa
said that the two companies will establish a special-purpose company (SPC) for this joint business and Tamagawa may
hold a stake of up to 30% in the SPC.

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The company is also negotiating and investigating the construction of 15 more solar power plants as shown in the tablebelow, with total potential capacity of 61.6MW (including 43.6MW already approved for grid connection by powercompanies). These projects are yet to be confirmed, and potential capacity will vary depending on negotiations with landowners and the size of investments available to the company.
Tamagawa Holdings potential power plants
RegionPowerplantsAvg.
feed-in-tariff

Kyushu5

34

East Japan

3

38.0

Central Japan

6

33.6

14.1

4,878

975

4,920

3,945

North Japan

1

36.0

24.0

8,975

1,791

6,620

4,829

Total

15

36.1

61.6

22,743

4,548

18,82914,280(JPY)

Capacity

Capex

Tamagawa's PV of future
investment
cashflows

NPV of future
cashflows(JPYmn)(MW) (JPYmn)(JPYmn)(JPYmn)

1.8

583

116

436

320

21.7

8,325

1,655

6,850

5,185

Source: Shared Research based on company data

Improving fundraising
Shared Research thinks that the recent trend of looser lending restrictions by financial institutions will allow the company
to readily expand its solar power generation business.
According to the company, lending from financial institutions has shown improvement since FY03/14, due to a recovery
in earnings at subsidiary Tamagawa Electronics and solid results from the Shimonoseki Solar Power Plant. Borrowing
activity included a loan of JPY200mn from Chiba Bank for long-term operating expenses and a JPY200mn loan from Resona
Bank (subsidiary of Resona Holdings, Inc.; TSE1: 8308) for short-term operating expenses. Development is also
progressing for a 2MW solar power plant currently scheduled to begin operation in February 2015 in Tateyama City,
Chiba. For solar power generation systems to be used at this facility, the company entered into a lease agreement with
Ricoh Leasing Co., Ltd. (TSE1: 8566) in the amount of JPY901mn. The company has finished construction of the solar
power generation systems.

Geothermal power generation business
Geothermal power generation
Geothermal power generation involves using steam and hot water produced under the earth’s surface to drive steam
turbines connected to electricity generators. This type of generation produces less carbon dioxide than thermal power
stations. Another advantage is that geothermal generation is not affected by the depletion or rising prices of fuel, and it
can be used in perpetuity. Geothermal generation also provides stable power; it is not affected by the weather, seasons,or day/night fluctuations like other major renewable energy sources such as solar and wind power.
According to the company, the Japanese government mulled over next-generation energy sources during the oil shocks
in the 1970s and determined nuclear power as a core source of electricity in Japan. However, due to the New Energy andIndustrial Technology Development Organization (NEDO)’s accumulation of data on geothermal power generation, it is
now considered a source of energy with high potential in Japan.
The two main methods of geothermal power generation are steam and binary generation.

◤

Steam generation: With this method, turbines are driven directly by natural steam at temperatures of 200–300C or
more. Subterranean water at high temperatures and pressures is dominated by either steam or hot water. With theformer, moisture can be easily removed and the dry steam routed to turbines to generate electricity. If the source iswww.sharedresearch.jp

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dominated by hot water, the fluid is first run through a flasher, which separates the steam from the hot water. In adouble-flash cycle, turbines are driven by both high- and low-pressure steam.
◤Binary generation: This method is used when hot water and steam temperatures are 150C or less, and thus cannot
drive turbines directly. Heat is exchanged from the geothermal fluid to a medium that has a lower boiling point thanwater (such as a water/ammonia mixture), and steam from that medium drives turbines to generate electricity.

Feed-in tariff system for geothermal power generation
Under the FY 2015 feed-in tariff system, the price for electricity produced by solar power plants is JPY27–29 per kilowatt
and the purchase period is 20 years (consumption tax not included for 10kW or more). In contrast, the price for electricity
produced by geothermal power plants is JPY40 per kilowatt and the purchase period is 15 years (consumption tax notincluded for 15,000kW or less).
According to the company, a 1MW solar power plant, which needs capital spending worth JPY301mn (on assumptionthat the site is rented), generates annual electricity sales of JPY29mn (on assumption of an average daily quantity of solar
radiation of 3.7kWh/sqm), annual operating profit of JPY3mn, and an average yield of 6.3%, for a payout period of 15.7
years. Meanwhile, the company expects that its 125kW geothermal plant (which generates electricity roughly equivalent
to a 1MW solar power plant ) needs capital spending worth JPY205mn (the site on rent) and generates annual sales of
JPY41mn, annual operating profit of JPY18mn, and an average yield of 15.5% for a payout period of 6.4 years.

Beppu geothermal power plant
In January 2015, the company announced that it planned to build a total of seven geothermal power plants, and to thisend acquired a total of seven separate plots of land. The company moved forward on construction at two of the sevensites but changed its plan in December 2015. The company sold the two plants currently under construction to athird-party and sold back the sites acquired for the five other geothermal power plants to their original owners.
At the geothermal power plant located in Beppu City, Oita Prefecture, a reexamination of data acquired after work had
begun showed that the company was unlikely to get the return on the project it originally envisioned. After a series oftalks with the outside party that originally proposed the project, Tamagawa reached an agreement to sell the two power
plants currently under construction to a company owned by the party that originally proposed the project at a price thatwould be greater than the total amount the company had invested in the two projects. The transaction and payment
under this agreement are be completed by the end of January 2016.
As for the remaining five sites at which construction of geothermal power plants has not yet begun, Tamagawa chose to
exercise its right under the original purchase contract to sell the land back to the original owner at the same price forwhich it was purchased. Two of the five sites have already been sold back to their original owners and the sales ofremaining three sites are expected to be completed by the end of December 2015.
Against risks of drilling springs, the company apparently considers a method of drilling based on joint investments, which
will have no direct effect on the company’s business results but will enable the company to secure preferential
concessions to springs.

Other businessHydrogen power
In January 2016, Tamagawa announced that it would establish in internal division to prepare for future developments in

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hydrogen power. Plans call for research and exploration of methods to store power generated via hydrogen.
In the renewable energy field, limitations imposed by the impact of weather conditions on systems such as solar power
and wind power generation are an ongoing concern. Hydrogen power storage systems produce hydrogen from excess
power generated by solar and wind power generation systems, and store this hydrogen for future use. The storedhydrogen is then combined with fuel cells, to release power as needed. Conventional batteries lose charge over time, buthydrogen—stored in tanks—can be stored for much greater lengths of time, allowing for efficient energy storage. This
stored energy can then be provided to various areas on an as-needed basis.

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Tamagawa Holdings ＞ Business

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Business
Business description
Tamagawa has three business segments: 1) Electronics and Telecoms Equipment business, which it has been involved insince the founding of consolidated subsidiary Tamagawa Electric Co Ltd in 1968; 2) Solar Business, launched in FY03/12;
and 3) Geothermal Power Generation Business, launched in FY03/15. In FY03/14 Tamagawa divided the Renewableenergy system sales Business into Solar Power Plant operations and Solar Systems Sales.
Earnings by segment(JPYmn)Sales
YoY
Electronics and telecoms equipment

FY03/09
Act.

FY03/10Act.

FY03/11Act.

FY03/12Act.

FY03/13Act.

FY03/14Act.

FY03/15
Act.

4,299

2,803

2,640

3,106

3,672

4,171

5,095

7.1%

-34.8%

-5.8%

17.7%

18.2%

13.6%

22.1%
3,401

3,248

2,709

2,390

2,406

3,156

3,230

YoY

-14.2%-16.6%-11.8%

0.7%

31.2%

2.3%

5.3%

Components

75.6%

96.6%

90.5%

77.5%

85.9%

77.4%

66.7%

Renewable energy system sales

19

441

890

1,606

-

2215.0%101.8%

80.4%

0.6%

12.0%

21.3%

31.5%

YoY
Components
Solar power plant operations
YoY
Components

52

88

-

70.7%

10.7%

18.8%

Solar power plant operations
YoY
Operating profit

-68

-227

-286

-30

373

YoY
Electronics and telecoms equipment

-162

-292

-236

63

YoY
Components
Renewable energy system sales

-24

YoY
Components
Solar power plant operations

477

531

27.8%

11.3%

375

480

467

497.4%

28.1%

-2.7%

100.4%

100.7%

88.0%

54

51

112

-

-5.5%

118.6%

14.5%

10.7%

21.1%

-12

-20

22

-3.3%

-4.1%

4.2%

YoY
Components
Solar power plant operations
YoY

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.
In FY03/14, the company changed segments to include solar system sales and solar power plant operations.

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Business segments
Electronics and Telecoms Equipment
66.7% of FY03/15 sales; 88.0% of FY03/15 operating profit
Since the founding of consolidated subsidiary Tamagawa Electric in 1968, Tamagawa has used its high-frequency wirelesstechnology to develop, manufacture and sell high-frequency devices (amplifiers, attenuators, filters, distributors andfrequency synthesizers). These products act as components in the wireless equipment used in mobile telecoms basestations, as well as in broadcasting, disaster prevention, and firefighting systems. High-frequency devices (circuits andmeasuring instruments) support an antenna’s radio wave transmissions by screening radio waves and adjusting signal
intensity.

Source: Shared Research based on company data

According to Tamagawa, high-frequency wireless is useful for data and video transmission as it uses wide-band radio
waves, enabling fast transmission. In recent years, the usage of digital technology in telecoms and broadcasting
equipment has been rising. However, digital technology is still not suitable for use in parts intended to directly trade
high-frequency signals with front-end parts, being unable to process these signals. As a result, these parts often make useof high-frequency analog technology, which Tamagawa holds as its specialization. While many vendors, including
Tamagawa, are able to provide digital technology, few companies specialize in making high-frequency analog technology
products. Tamagawa thus occupies a niche with high market share, with its market share in parts intended for mobile
telecoms base stations standing at around 15%.
Mobile telecoms base stations: Mobile telecoms networks are built around wireless base stations, which have large antennas connected towireless telecoms equipment joined to each other by fiber-optic and other cables. As mobile phone signals will only transmit over a limited
range, operators create a honeycomb shaped network by installing a large number of base stations throughout a service area. As of March
2015 Japan had 710,000 base stations (Source: The Ministry of Internal Affairs and Communications, SR Inc.)).

During FY03/15, approximately 41% of Electronics and Telecoms Equipment sales come from devices for mobile telecoms
base stations, about 30% from defense system-related sales, and 29% from devices for such areas as government services,
disaster prevention and terrestrial digital broadcasting. Tamagawa’s main devices for mobile telecom base stations are
high-frequency filters, distributors, synthesizers and attenuators, which identify radio waves of certain frequencies fromamong the diverse range of radio waves both transmitted and received by the antenna and amplify those specific radio
waves.

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Tamagawa Holdings ＞ Business

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Electronics and telecoms equipment sales by industry(JPYmn)FY03/13

FY03/14

3,155

3,233

3,400

1,924

1,422

1,404

YoY

-

-26.1%-1.3%% of total

-

44.0%

41.3%

Total
Mobile telecoms

Defense

FY03/15

504

905

1,026

-

79.6%

13.4%
30.2%

YoY
% of total

-

28.0%

727

906

969

YoY

-

24.6%

7.0%

% of total

-

28.0%

28.5%

Others (government etc.)

Source: Shared Research based on company data

About 60% of sales are custom orders for large electrical/electronics manufacturers, telecoms carriers and broadcasters;
40% are own-branded products sporting wider gross profit margins. The segment’s gross profit margins are higher for
products produced in-house.
In the 1990s base station components sales saw strong growth as domestic carriers aggressively built networks. Until
2005 Tamagawa tracked circa 30% market share. Thereafter foreign rivals with keen pricing gained market shareprompting Tamagawa’s growth to stall. The segment’s profitability recovered once the company stopped accepting
money-losing orders in FY03/12. The plan is to develop higher value-added products to boost profitability.

Renewable Energy System Sales
31.5% of FY03/15 sales; 21.1% of FY03/15 operating profit
In July 2011 Tamagawa entered an exclusive agreement to sell the solar modules of GPPV Solar Pte Ltd (GPPV below), andbegan selling GPPV solar systems (The exclusive selling agreement was changed to a selling agreement in February 2014,
in order to further the growth of both companies’ businesses).
Through sales agencies the company provides customers with photovoltaic (PV) modules and power conditioners. Where
necessary the company also negotiates with electric utilities on behalf of customers and assists with loan applications tofinancial institutions.
Regarding sales activities, the company has offices in Kyushu, Nagoya, and Tokyo, and has eight sales employees as of
May 2015.
Customers are primarily corporate clients that are existing customers or introduced from partner firms. Most customers
are debutants jumping on the bandwagon of the solar power build-up, supported by the Japanese government, which
has a 20 year fixed rate guarantee for feed-in tariffs of solar power facilities that generate 10kW or more. Other individuals
and companies view solar power generation as a tax conservation method, due to the generous deductions and instantdepreciation available for such developments. In December 2012, the company formed a partnership with Goto city in
Nagasaki Prefecture, based on which it is installed a solar park. This has led to an increase in inquiries from local
governments in surrounding areas.
In Japan contracts under the Feed-in Tariff (FIT, for details see later in report) scheme of the Ministry of Economy, Trade and Industry (METI)
oblige electric utilities to buy electricity generated using 10-kilowatt or more solar power plants at a fixed price for 20 years. Prices anddurations are revised every year. In 2014 (April 2013 – March 2014) the price of solar electricity was JPY36 (excluding tax) per kW for 20

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years. Prices for 2015 (April 2014 – March 2015) have been lowered to JPY32 (excluding tax) per kW. Prices for 2016 are JPY29 (excluding tax)
per kW when contracts with utilities are done by June 2015 and JPY27 (excluding tax) per kW for contracts struck in July and later. Generation
facilities must obtain FIT certifications from METI. If a solar power producer applies for Green Investment Tax Incentives, related facilities can be
fully depreciated immediately. The government also has similar regulations in place for wind, hydroelectric, geothermal, and biomass
generation.

The company sells solar systems for about JPY300,000 per kW of installed capacity. Sales are determined by multiplying
installed generating capacity (kW) by the price per kW of installed capacity. Solar system gross profit margin is 15-25%.
In FY03/15, the company obtained certain concessions to sites for solar power plants and the FIT scheme, starting partial
sales of low voltage tranches of its solar power plants. By selling 2.3MW tranches, it reported sales of JPY1.1bn.

Solar Power Plant Operation
18.8% of FY03/15 sales; 4.2% of FY03/15 operating profit
The solar power plant operation business also includes the operation of mega solar (power generation solar parks) from
FY03/14.

What is mega solar?
Mega solar refers to solar power stations of 1MW-plus. Since the start of the FIT scheme for renewable energy in July 2012it has been easier to secure profits, and a number of players from different sectors have joined the fray. There is also atrend for local governments and private-sector businesses to join forces and build mega solar businesses on vacant land.
While output varies with the location and amount of sunlight, a 1MW mega solar plant typically generates a minimum of
1,000 MkWh per year. A normal four-person household uses 5.5 MkWh per year; a 1MW mega solar plant can normally
supply 300 households. Mega solar plants need land: a 1MW plant covers about 15,000 m2 (Tokyo Dome: 47,000 m2).
To take advantage of the FIT scheme first the operator needs METI approval to certify that the generation facilities comply
with the law. The purchase price for power generated in the scheme depends on when the facilities were certified rather
than when operations started (In April 2015 and onward, the purchase price to be applied is that at the time whenconnection contracts with utilities are struck after the facilities are certified). Other than gaining licenses for thegenerating facilities and equipment, operators face no special requirements to qualify to sell all the renewable power theygenerate under FIT. While it is necessary to appoint a chief electrical engineer company operators do not need to haveelectricity business experience.

Tamagawa’s solar power plant operating business
When Tamagawa was considering entering the mega solar business, in June 2012 it set up a planning office and in
September that year set up subsidiary GP Energy. Its first project—Shimonoseki power plant in Shimonoseki, Yamaguchi
prefecture—began operations in June 2013.
Tamagawa operates mega solar power plants in this subsegment, forming special-purpose companies (SPC). The SPC
buys or leases land on which it builds and runs solar power plants of 1MW-plus capacity. The SPC scheme enables
separate project financing, i.e., finance based on expected revenues for a particular project. As of March 2015, Tamagawa
HD had 10 subsidiaries responsible for running solar power plants, GP Energy 1 Co., Ltd. through GP Energy 6 Co., Ltd.
and GP Energy A, LLC through GP Energy D, LLC.

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The company said upfront investment in mega solar plants—covering PV modules, supporting structures, electricalfacilities and labor—runs to JPY260–320mn per MW.
Electricity is sold to electric utilities. Revenue is selling price per kW multiplied by total amount of electricity sold. FIT
defines electric utilities’ purchase prices as JPY40.0 (excluding tax) per kW for electricity generated at facilities that were
FIT-certified in 2012, JPY36.0 (excluding tax) for those certified in 2013, and JPY32.0 (excluding tax) for those certified in
2014. In 2015, the purchase prices are JPY29 (excluding tax) per kW for contracts between FIT-certified facilities andpower utilities struck by June 2015 and JPY27 (excluding tax) per kW for contracts done in July and later. Purchase
duration is fixed at 20 years.
If a solar plant generating 1.0GW to 1.4GW of electricity per year was FIT-certified in 2012, electric utilities will buy
electricity for JPY40 (excluding tax) per kW—implying revenues of JPY40mn. Weather and other factors impact the amountof power generated. Panel aging cuts output by 0.25-0.75% per year. The main costs are depreciation, land rent,
maintenance fees and insurance. Gross profit margins hover around 50% and the unlevered internal rate of return could
be 9%.

Tamagawa’s solar power plants
As of May 2015, the company’s solar power facilities, including those already in operation and planned facilities withsecured land had a combined potential generating capacity of 11.3MW. Shared Research estimates that revenue from theoperating and planned plants will be around JPY510mn.
As of May 2015, the Shimonoseki (Yamaguchi Prefecture) and Tateyama (Chiba Prefecture) plants and the Sodegaura(Chiba Prefecture) solar park were in operation.
According to the company, the expected internal rate of return (IRR) is 7.5% for the Shimonoseki plant, 16.5% for the
Tateyama plant, and 13.2% for the Sodegaura solar park. As Tamagawa leveraged financial leases for the Tateyama andSodegaura facilities, it could obtain the higher expected IRR than that for the Shimonoseki plant, which was built on thecompany’s own funds.
The company is also building a 1MW solar park in Minami Shimabara, Nagasaki Prefecture, and preparing to begin
construction of a 5.5MW solar park in Goto City, Nagasaki Prefecture, which it expects to begin operations in Q4 FY03/16.
Shimonoseki Solar Power Plant

Source: Shared Research based on company data

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Tamagawa Holdings solar power plants
Tamagawa Holdings solar power plants
Feed-in-tariff

Output
(MW)

Area
(sqm)

Completion Investment
date(JPYmn)Shimonoseki,
Yamaguchi

40.0

1.6

24,081Q1 FY03/13

440

77

Tateyama

Tateyama, Chiba

40.0

1.9

35,386Q4 FY03/15

637

91

Sodegaura

Sodegaura, Chiba

36.0

1.3

15,000Q4 FY03/15

488

56

Minamishimabara,
NagasakiMinamishimabara,
Nagasaki

40.0

1.0

12,000Q4 FY03/16

299

48

Goto Islands

Goto,
Nagasaki

36.0

5.5

100,000

Q4 FY03/16

-

238

Total

-

-

11.3

-

-

-

510

Solar parks

Location

Shimonoseki

Sales(JPYmn)Source: Shared Research based on company data
Shared Research estimate for sales, based on annual electricity sales of 1,200MW per 1MW solar power facility.

In addition, in December 2014 three Tamagawa subsidiaries acquired a power operator license in the city of Misawa,
Aomori Prefecture, from ISE Power. At the same time, Tamagawa announced plans to build and operate the 10MW
Misawa solar power plant. The company expects to begin selling electricity from the plant by FY03/16, contributing
around JPY390mn to annual sales. In March 2015, Tamagawa announced a business alliance with Etrion Japan KK., an
Etrion Group company under parent company Etrion Corporation. Tamagawa and Etrion Japan signed a memorandum of
understanding to make a joint investment in Misawa solar power plant. In June 2015, Tamagawa said that the twocompanies will establish a special-purpose company (SPC) for this joint business and Tamagawa may hold a stake of up to
30% in the SPC. The alliance with Etrion Japan enables Tamagawa to expand valuation for business development,
including fund procurement, and to build larger solar parks than those it has constructed.
In 2012, Etrion struck a deal with Hitachi High-Technologies Corporation (TSE1: 8036, Hitachi High-Tech) on a joint solar
power generation business in Japan. In September 2014, the two companies announced an initial plan to build solar
power stations for a total of 34 megawatts. Sumitomo Mitsui Trust Bank. Ltd. will provide project finance loans for 80% of
the cost of the first stations. Of the remaining 20% of the cost, Etrion and Hitachi High-Tech will shoulder 87% and 13%,respectively. Shared Research supposes that the joint project for the Misawa solar power plant between Tamagawa andEtrion Japan will also use a scheme like project financing via an SPC.
Misawa power plant details
Solar park

Location

Misawa power plant

Misawa, Aoyama
Prefecture

Feed-in-tariff

Output
(MW)

Area
(sqm)

36.0

10.0

153,000

Completion Investment
date(JPYbn)FY03/16

3.4

Sales(JPYmn)390

Source: Shared Research based on company data

Fundraising in solar power generation business
For the five years from FY03/08 Tamagawa posted back-to-back net losses, making debt funding difficult. To launch the
Shimonoseki solar power plant, it raised JPY901mn (assuming all options exercised) via share placement and share option
issuance in January 2013. The company is trying different operating models.
According to Tamagawa Holdings, it has an increasing number of financing options, owing to its three consecutive years

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of profitability as of FY03/15, and earnings results at the three solar power plants.
The 1.9MW solar power plant in Tateyama, Chiba Prefecture, has been operating since February 2015. For solar power
generation systems being used at this facility, the company has entered into a lease agreement with Ricoh Leasing in theamount of JPY901mn.
Tamagawa is considering project finance and investment from sleeping partners. In June 2013 the company was certified
as a qualified institutional investor.

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Strengths and weaknesses
Strengths◤

Benefiting from stable demand the electronics business has regained competitiveness: The company said it
has regained its competitive edge in high-frequency devices. Selling higher value-added products via original
equipment manufacturer (OEM) channels and measures to cope with new product development and public(defense and disaster prevention) demand has borne fruit. In public demand a preference for Japanese suppliers
lends Tamagawa an advantage over overseas rivals. Restarting R&D and selling under its own brand should enhanceearnings.

◤

Correct size and skills for solar success: Although Tamagawa is building its solar power generation business fromscratch it already has experience in solar installations and project financing. It is listed and sports a profitable corebusiness but given its modest size tackling small projects makes sense. Tamagawa appears to have the qualities toattract partners. A big plus: the government guarantees selling prices. If funding crystalizes watch for the solar parks
to fuel earnings growth.

◤

Entrepreneurial management wants to rekindle investor trust: Shared Research flags a resolve to get it right
this time. It has entrepreneurial energy although is aware of investor skepticism. Liaising with investors and partners,
Tamagawa wants to rebuild its image. According to the company, investors appreciate its full disclosure.

Weaknesses◤

Reputation: Tamagawa has a history of business failures. CEO Toru Masuzawa is the subject of controversy.
Masuzawa has been a defendant in a number of civil lawsuits relating to his time at J Bridge, but asserts that he was a
victim of circumstance, and will rebuild his reputation and prove his management acumen. In addition todeveloping procedures to deal with reputational risk, in February 2014, the company established a compliancecommittee, and contracts with an outside legal firm for advisory services.

◤

Shortage of manpower in Solar: The renewable energy-related businesses had a staff of 9 as of May 2015. The
complexity of projects requires personnel with high entrepreneurship, strong motivation and expansive knowledge
from fundraising to electrical engineering. However, efforts to hire appropriate personnel quickly may block soundcorporate growth. Considering the downtrend in the feed-in-tariffs of renewable energy and limited business
opportunities, this lack of human resources is concerning.

◤

Potential rate cuts for fixed-rate feed-in tariffs: The fixed FIT rate has been lowered each consecutive year, and
it is likely that demand for solar power generation construction will decline in the medium term and that the
expected profitability of new solar parks will decrease. According to the company, it will combat these issues byimproving power conversion efficiency of its solar cells and other components in an effort to continue providing
benefits to consumers. Tamagawa also plans to develop businesses using other renewable energy sources than solar
power.

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Group companies
At June 2015, the group comprised Tamagawa Holdings Co Ltd and 14 consolidated subsidiaries.
▶ Tamagawa Electronics Co Ltd (100%): electronic and telecoms equipment business.

▶ Tamagawa Electronics Vietnam Co Ltd (100%): subsidiary of Tamagawa, electronic and telecoms equipment

manufacturing and sales.
▶ Tamagawa Energy (100%): renewable energy system sale business.

▶ GP Energy Co Ltd (100%): solar power plant business, geothermal power plant business.

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Market and value chain
Market overview
Wireless telecoms infrastructure
Smartphones and tablets are revolutionizing the wireless telecoms market. Smartphones generate 10-20x as
much data traffic as traditional mobile phones. As bandwidth-hungry content mushrooms, data volumes swell. Dealing
with the traffic surge is a pressing issue, creating demand for network infrastructure that can handle serious data volumes
and speeds. As of 2015, telecoms operators have rolled out high-speed mobile services like LTE and WiMAX. Spectrum
reallocation is helping too. There is also a nationwide trend toward data offloading—using wi-fi and the like to funnel data
through the fixed-line network.
Mobile data traffic is forecast to grow by 20.8x from 2010 to March 31 2016 (1.84x per year on average); traffic
could swell by as much as 39.1x (2.08x per year). Source: Wireless LAN Business Study Group Report, published in July2012 by the Ministry of Internal Affairs and Communications. Who knows whether network infrastructure will keep up?

LTE Advanced
In February 2015, NTT DoCoMo announced that it will launch a new telecoms service in March 2015 using
LTE-Advanced, the next-generation mobile telecoms standard following LTE, paving the way for speedier datatransmission. NTT DoCoMo begins with urban areas in 22 prefectures and plans to expand the service to major cities
nationwide during FY2015. KDDI has announced that it will provide its LTE-Advanced service during FY2015.
LTE Advanced is a fourth generation mobile telecoms standard recognized by the International Telecommunication Union(ITU)*, offering higher speeds than LTE which has spread globally. Under development, it aims at providing speeds of up
to 1Gbps when the user is stationary and up to 100Mbps when moving on a train.
* In mobile and electronic telecoms the ITU aims to establish standards and regulations between countries. Main activities: standardization,
allocation of mobile spectrum and coordinating connections between countries to enable international telephone calls.

Evolution of Telecommunications Technology

Source: Shared Research based on Various data

Faster speeds under LTE Advanced will be attained by adding technical elements to existing LTE technology. Twoelements are key: upgrading the multiple-input and multiple-output (MIMO) technology used in spatial multiplexing, andwww.sharedresearch.jp

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carrier aggregation to enable bandwidth expansion.
MIMO technology is used to increase the volume of data that can be handled at any one time by sending different data packets and separating
the mixed signals once received. In addition to the currently prescribed 2x2 MIMO and 4x4 MIMO, under LTE Advanced it will be possible toimplement 8x8 MIMO using eight pairs of antennas. The upshot: higher maximum transmission speeds. Under current LTE technology where
MIMO is not installed on the uplink side (sending data from the mobile device) it is handled by 2x2 MIMO and 4x4 MIMO.

It is Shared Research’s understanding that NTT DoCoMo’s current LTE network is composed mostly of 3G base stations
that have been updated with LTE components. In contrast, new frequency allocations are planned for the introduction of
LTE Advanced, and this will require changes to base stations, including the antennas. In the long term, it is reasonable tothink that demand for capital investment in mobile telecom equipment will increase, with NTT DoCoMo leading the way
for implementation of LTE Advanced.

New frequency bands for LTE-Advanced
In December 2014, the Ministry of Internal Affairs and Communications announced the allocation of 3.5GHz bandwidth
for the LTE-Advanced 4G mobile communications system to three companies: NTT DoCoMo, KDDI and SoftBank Mobile.
KDDI plans to begin service in the 3,520–3,560MHz band in June 2016, NTT DoCoMo plans on 3,480–3,520MHz in
October 2016, and SoftBank Mobile on 3,560–3,600MHz in December 2016. Shared Research expects that capex
demand related to the new frequency bands for the LTE-Advanced services will emerge toward 2016 and later.

Capex trends of mobile telecoms operators
Referring to LTE-related investments, NTT DoCoMo, Inc. (TSE1: 9437), which had 24,400 base stations as of end March2013 and 55,300 as of end March 2014, planned to increase its base stations to 95,300 by end March 2015. KDDI
Corporation (TSE1: 9433) increased its capital spending on mobile telecoms facilities from JPY374bn in FY03/14 to
JPY385.2bn in FY03/15.
Both NTT DoCoMo and KDDI increased their LTE-related capital investments in FY03/15 from FY03/14, but they plan todecrease their spending in FY03/16.

Trends of mobile telecoms operators(JPYbn)FY03/14

FY03/15

FY03/16

Act.

Act.

Est.

NTT Docomo
LTE related
KDDI

703.1

661.8

630.0

331.1

406.7

366.0

571.8

576.2

600.0

Mobile

374.0

385.2

380.0

Softbank

712.5

535.5

390.0

Source: Shared Research based on company data

Solar power market
Outlook for Japan’s solar power market
Underpinned by government policies promoting solar power in Japan, the number of solar power installations ismultiplying. However, according to the Ministry of Economy, Trade and Industry, the amount of electrical power
produced by renewable sources in Japan in FY 2013, including hydroelectric, was 10.7% of total power output, and solar

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power accounted for just 1.0% (0.2% during FY 2011; 0.4% during FY 2012).
Approved by the Cabinet in April 2014, the new Strategic Energy Plan includes items such as maximizing growth ofrenewable energy sources for three years after 2013, focusing on growth in the sector beyond 2016, and aiming to go
above and beyond the measures outlined in the plan.
The existing Strategic Energy Plan, approved in August 2009, called for 13.5% (141.4bn kWh) of energy to come from renewable sources by
2020. Additionally, the Advisory Committee for Natural Resources and Energy published a recommendation in 2010 that 20% (214.0bn kWh)of energy come from renewable sources by 2030.

The accumulated amount of solar power generation capacity in Japan was 20.2GW at end November 2014 (estimated by
Shared Research based on materials of the Agency for Natural Resources and Energy). According to the JPEA PV Outlook
2030, published by the Japan Photovoltaic Energy Association (JPEA) in March 2015, the amount of solar power
generation capacity is estimated to reach 65.7GW by 2020, and 100.1GW by 2030. Concerning early installation figures,2015 is expected to be slightly higher than 2014, gradually tapering off in 2018 and subsequent years.

Japan’s policies to promote solar power
The Act on Special Measures Concerning Procurement of Renewable Electric Energy by Operators of Electric Utilities(abbreviated to FIT Act) was enacted in August 2011 and implemented in July 2012, and became fully eligible for the FIT
scheme.

Feed-in Tariff (FIT) scheme
Under the FIT scheme, to promote the use of renewables, electric utilities are required to buy all the power generated
by five types of renewable energy sources, including solar and wind. Solar power was popular in Spain and Germany
owing to a similar system. A high tariff is designed to stimulate the development of renewables. As of May 2015, surplus
power from solar generated from sub 10kW systems is bought under FIT and all power from solar power generated fromsystems over 10kW is bought under FIT.
For less than 10kW solar power generated systems, the FIT scheme is applied, and surplus solar power generated byhouseholds is sold to electric utility companies. When the scheme was launched in 2009, the feed-in tariff for surplus
power was JPY48/kWh (including tax). The tariff remains fixed for 10 years from installation of the solar power system. The
scheme envisages annually lowering the tariff for newly installed generation capacity. For FY2015 (from April 2015 toMarch 2016), the FIT for new installations was JPY33/kWh (for facilities not obliged to install output control equipment,
excluding tax) and JPY35/kWh (for facilities obliged to install output control equipment, excluding tax).
Installation of output control equipment is obliged at solar power facilities whose applications for grid connection contracts are approved on
April 1, 2015 and later in regions related to supply-and-demand control plans of Hokkaido Electric Power Co., Inc., Tohoku Electric Power Co.,
Inc., Hokuriku Electric Power Company, Chugoku Electric Power Co., Inc., Shikoku Electric Power Co., Inc., Kyushu Electric Power Co., Inc., andOkinawa Electric Power Company, Incorporated.

Separate from the surplus power FIT scheme (net metering), a different scheme covering all power generated by arenewable electricity producer has also been established. This scheme enables producers to sell all power generated
regardless of their own consumption. In Japan, a FIT scheme for over 10kW capacity was launched in July 2012. FIT tariff
rates for 2012 were JPY40 (excluding tax) per kWh, and power companies are required to purchase power at this rate for20 years. Prices have since been pushed down, with the rate being JPY36 (excluding tax) per kWh in 2013 to JPY32(excluding tax) per kWh in 2014. In 2015, the purchase prices is JPY29 (excluding tax) per kW for contracts between

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FIT-certified facilities and power utilities struck by June 2015 and JPY27 (excluding tax) per kW for contracts done in Julyand later.
The tariff and purchase period set under the FIT schemes are set each year by METI before the start of the financial year.
The minister is required to take into account the opinions of a neutral, third-party committee (Feed-in Tariff Calculation
Committee), which conducts public deliberations. To promote solar power supplementary provisions, the law requires
power producer profits to be taken into consideration when determining the feed-in tariff for three years from the start ofthe scheme. The cost of purchasing power is recouped by utilities as an extra amount on electricity charges.

Solar power operators to have difficulty in forecasting profitability due to output curtailment
In September 2014, electric power companies suspended approvals of applications for grid connection by operators of(non-residential) solar power facilities. The suspension came as the utilities were concerned over possible disruption tostable supply of electricity as expansion of approved solar power generating facilities may disturb the supply-demandbalance at a time when the burden of electricity demand remains light.
As a measure to cope with the situation, where some utilities had suspended acceptance of applications for gridconnection by operators of renewable energy facilities, the Agency for Natural Resources and Energy (ANRE) in January
2015 decided to revise part of the Act on Special Measures Concerning Procurement of Electricity from Renewable Energy
Sources by Electricity Utilities (the "Renewable Energy Act") and renew the operation system for the FIT scheme under
new output control rules.
After the enforcement of revised ministerial ordinances (in January 2015 and later), solar power facilities calling for gridconnection are obliged to restrict output when needed and install equipment to curtail output when relevant utilities
require to do so.
Before the law revision, power companies were allowed to request suspension of power purchases for up to 30 days ayear without compensation, but only at facilities with output of 500kW or more, when there was need to control output
at solar power facilities. Under the revised ordinances, utilities are allowed to curtail purchases of power output from solar
power plants for up to 360 hours a year, with the coverage expanding to facilities of less than 500kW. In regions coveredby Tokyo Electric Power Company, Incorporated, Chubu Electric Power Co., Inc. and Kansai Electric Power Co., Inc.,
which are the companies usually with abundant grid connection volumes, solar power facilities with less than 50kW are
not subject to the new output control rule. Meanwhile, the other utilities without room for grid connection volumes areallowed to curtail purchases of power output from solar power plants for up to 360 hours a year without compensation.
They are Hokkaido Electric Power, Tohoku Electric Power, Hokuriku Electric Power, Chugoku Electric Power, Shikoku
Electric Power, Kyushu Electric Power, and Okinawa Electric Power. As of April 2015, grid connection volumes of
Hokkaido Electric Power, Tohoku Electric Power and Kyushu Electric Power exceeded their maximum limits. Solar power
facilities in these regions are to connect themselves to the utilities’ transmission grids on condition of being subject tocurtailment of purchases for over 360 hours a year.
Shared Research recognizes that the extended coverage of the curtailment of solar power purchases under the revised
ordinances make it difficult for operators of solar power plants to forecast volumes, revenues and profitability of electricity
to be sold by facilities that newly apply for grid connection.

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Stricter facility certification?
Purchase prices under the FIT scheme are set to enable the supplier to earn a reasonable rate of return. Prices are likely tofall given that solar generation costs are falling.
As a result Shared Research thinks that some solar park operators are rushing to get certification and lock in highelectricity purchase prices. Construction may not start straightaway if in turn they are waiting for construction costs to fall.
METI said some operators locked in procurement prices from the first year of the scheme (JPY40/kWh pretax) and thendelayed the start of construction.
A June 2014 report from METI on the state of renewable energy power plants said that between the introduction of FIT in
July 2012 and the end of June 2014 non-residential solar facilities with 66.0mn KW of generating capacity gained
certification. As of June 2014, about 8.5mn kW of capacity was online, equal to 13% of certified capacity.
In March 2014, in line with the Administrative Procedure Act and in light of the findings of requests for information fromfacilities with more than 400kW of output prior to operation, METI began questioning operators of non-residential solar
power plants (output of 10kW or more) certified in FY 2013 (April 2012-March 2013) without confirmed details regarding
location or facilities. In cases where it could not confirm the necessary information, METI stripped the facilities of theirapproval in September 2014. As of August 2014, the total output for non-residential solar power plants certified in FY
2013 was 18.7mn kW—METI removed certification for 1.8mn kW of output, and plans to further question the operators of
2.7mn kW worth of output. In total, 8.8mn kW is produced by plants that have already begun operating, or fulfilled
METI’s requirements for certification.
Regarding the 2.7mn kW operators subject to further questioning, METI will begin stripping these plants of theircertification after confirming details of location and facility if they do not satisfy requirements. METI also plans to request
information from operators of plants certified in FY 2014.
Shared Research understands that power plant operators of renewable energy sources may lose their certification if they
do not make efforts to bring their plants online.

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Strategy
Tamagawa aims to be a company that contributes to the development of social infrastructure. The company engages inthe Electronics and telecoms equipment business for the telecoms infrastructure and the Solar system sales, Solar power
plant operations, and Geothermal power plant operations for the electricity infrastructure.
Strengthening existing businesses. In Electronics and telecoms equipment, Tamagawa aims to increase sales andprofitability by fortifying existing businesses. In the electricity infrastructure businesses (Solar system sales, Solar power
plant operations, and Geothermal power plant operations), it hopes to grow via a bumper investment program. The
company may also develop renewable energy businesses besides solar power and geothermal power (such as biomass
and wind power generation).
In May 2015 the company said it holds several potential projects, which will be operational if it can procure necessary
funds. Constraints: insufficient funding and lack of skilled workers.
Raise capital, build its own solar park. Solar and geothermal power plant operations provide stable cash flows but
need big upfront investment. Selling solar systems (including the partial sale of solar power plants) does not require any
upfront capital, but does not provide long-term revenues. Accordingly changes in profitability of solar system sales maychange the company’s business results.
Tamagawa recognizes its need to push forward with the solar and geothermal power plant businesses to generate funds
for capex—through loans from financial institutions and operating cash flows—as well as to cover personnel costs. To
boost investment efficiency, the company intends to restructure its portfolio with measures that include the partial sale ofpower plants.

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LAST UPDATE【2016/1/25】

Past performance
Q1 FY03/16 results (announced August 12, 2015)▶ Sales:▶ Gross profit:▶ Operating loss:▶ Recurring loss:▶ Net loss:

JPY682mn (-18.3% YoY)
JPY225mn (-13.8% YoY)
JPY22mn (operating profit of JPY57mn in Q1 FY03/15)
JPY32mn (recurring profit of JPY56mn in Q1 FY03/15)
JPY38mn (net income of JPY26mn in Q1 FY03/15)

SG&A expenses were up 21.4% YoY to JPY247mn despite lower sales because of investments in R&D, rent and land, andhiring.
According to the company, Q1 sales and profits were down YoY, but this was in line with its initial forecasts, which projectsales and profits to be concentrated in 2H.

Electronics and Telecoms Equipment▶ Orders:▶ Sales:▶ Operating profit:

JPY455mn (-41.6% YoY)
JPY609mn (-21.7%)
JPY5mn (-95.0%)

Mobile telecom providers changed their construction plans for base stations during Q4 FY03/15.
The company sought to win new orders in the area of transport infrastructure such as train radios, defense facilities, andpublic wireless facilities, as well as orders in new areas, focusing on new markets and customer acquisition. It also
continued measures to add value, expand and cultivate business areas, and joint development with partner companies,
while conducting joint technology development through research with universities. The company also installed a new
high-definition monitoring system essential for the safe and smooth management of its group solar-power plants.

Sales by channel
Mobile telecoms: JPY120mn (-36.1%)
Defense: JPY214mn (-46.6%)
Other (government services, disaster prevention, analysis): JPY260mn (+38.4% YoY).
Segment sales were down due to lower sales to mobile telecoms companies, which lowered their spending on basestations. Defense related sales were down due to fizzling demand for facility renewal. Still, the company expects
year-on-year growth in the full year due to ongoing defense projects. In transport (bullet trains, subways, and airports),
the company won orders for fiber optic-related products. Orders for the company’s own testing equipment for powersemi-conductors were firm.
In the full-year, the company forecasts a decline in mobile telecoms sales due to mobile telecoms companies lowering
their spending on base stations. However, this may be offset by an increase in orders for defense-related products,
wireless devices for transport, and other products outside of the mobile telecoms channel. The company also plans totake advantage of the many channels and high capacity of its analog communication technology to increase orders in the

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wireless transport field. The company tended to book losses following poor sales of its mobile telecoms products but
plans to avoid booking losses due to exiting unprofitable projects and proceeding with development of its own products
after FY03/12.
Tamagawa Electronics Vietnam Co., Ltd., the Vietnam-based manufacturing subsidiary owned by the company’s
consolidated subsidiary Tamagawa Electronics, continued preparations to begin operation in October 2015. Following its
launch, there are plans for it to begin production of high-quality, high-frequency passive components for use in telecomsand broadcasting, as well as mobile base stations, geared toward the Japanese market. In later years the company aims to
expand business into Southeast Asia and the Middle East.

Renewable Energy System Sales▶ Orders:▶ Sales:▶ Operating loss:

JPY202mn (+43.3% YoY)
JPY17mn (-47.2%)
JPY46mn (loss of JPY10mn in Q1 FY03/15)

In sales, the company reported gains on O&M (Operation and Management) for its power conversion and solar power
tracking frame systems, as well as the solar power plant which it sold in lots last year. In addition to the lot sales of power
plants, it is booking continuous O&M revenues following the sale.
In FY03/16, the company expects sales projects to be concentrated in 2H. Power plant lot sales, which contributesignificantly to sales, are projected to be JPY1.6bn–2.1bn (+47.6%–97.0% YoY) this year, from the JPY1.1bn seen last year.
According to the company, orders had reached about JPY4.0bn as of the end of Q1.

Solar Power Plant Operations▶ Sales:▶ Operating profit:

JPY71mn (+179.8% YoY)JPY29mn (+JPY179.3% YoY)

Mega solar power plants in Shimonoseki, Tateyama, and Sodegaura sold electricity in line with forecasts.

Geothermal Power Plant Operations
The company is preparing to start operations of geothermal power plants, so no sales were recorded, and operating loss
was zero.
The company is preparing to bring online geothermal operations in Beppu City, Oita Prefecture. It officially received anotice on September 30, 2015 from Kyushu Electric Power Co. regarding the approval and timing for grid connections of
Tamagawa’s two geothermal power plants. It plans to begin electricity sales around April 2016.
According to the company, as of September 2015 it began considering operating geothermal power plants in regions
other than Beppu City, Oita Prefecture.

FY03/15 results (announced May 13, 2015)▶ Sales:▶ Operating profit:www.sharedresearch.jp

JPY5.1bn (+22.1% YoY)
JPY531mn (+11.3%)

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LAST UPDATE【2016/1/25】

JPY514mn (+7.5%)
JPY427mn (-2.2%)

Electronics and Telecoms Equipment▶ Orders:▶ Sales:▶ Operating profit:

JPY3.2bn (-7.8% YoY)
JPY3.4bn (+5.3%)
JPY467mn (-2.7%)

Mobile telecom providers increased their investments in wireless facilities at the beginning of 2H. However, they changed
construction plans during Q4.
The company sought to win new orders in the area of 3.9-generation mobile facilities, defense facilities, and public
wireless facilities. As a new business area, the company began to sell testing equipment for power semiconductors in June
2014. Since Tamagawa has secured orders in the new business, it expects to report sales in FY03/16. The company also
installed a new high-definition monitoring system essential for the safe and smooth management of its group solar-power
plants. Sales of the company’s own products totaled JPY1.4bn (+22.5% YoY), accounting for 40.4% in the segment.
Operating profit declined due to spending on research and development worth JPY239mn (JPY124mn in the previousyear).
Segment profit after allocation of corporate costs and others was JPY420mn (-7.3% YoY), surpassing the initial target of
JPY370mn. The company attributed the more profit than planned to a rise in sales of its own products, efficient
procurement of materials due to the introduction of a core system, and disappearance of the cost to cope with defects.

Solar System Sales▶ Orders:▶ Sales:▶ Operating profit:

JPY1.7bn (+102.8% YoY)
JPY1.8bn (+101.8%)
JPY112mn (+118.6%)

The company streamlined its operations and expanded sales reach to all parts of the country.
The company started sales of low voltage tranches of its solar power plants. By selling 2.3MW tranches, it reported sales of
JPY1.1bn.

Solar Power Plant Operations▶ Sales:▶ Operating profit:

JPY87mn (+70.7% YoY)
JPY22mn (operating loss of JPY19mn a year earlier)

The Shimonoseki solar park, which operated for nine months in the previous year, was in full-year operation in FY03/15.
Plants in Tateyama (1.9MW) and Sodegaura (1.3MW), both in Chiba Prefecture, began operations in February and March,
respectively, of 2015.

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Geothermal Power Plant Operations
This segment was created during FY03/15. The company is preparing to start operations of geothermal power plants
during FY03/16. No sales were recorded, and operating loss was zero.

Q3 FY03/15 results (announced February 13, 2015)▶ Sales:▶ Operating profit:▶ Recurring profit:▶ Net income:

JPY3.1bn (+13.3% YoY)
JPY372mn (+17.6%)
JPY364mn (+14.2%)
JPY261mn (-14.8%)

Net income declined year-on-year because robust revenues in recent years eliminated losses carried forward at
subsidiaries, meaning income tax returned to a normal level.

Electronics and Telecoms Equipment▶ Orders:▶ Sales:▶ Operating profit:

JPY2.7bn (-4.9% YoY)
JPY2.7bn (+22.9%)
JPY435mn (+33.0%)

Operating profit exceeded the company’s initial full-year forecast of JPY370mn.
Mobile telecoms companies changed construction plans, resulting in lower orders year-on-year, but a recovery has been
underway beginning in 2H FY03/15. According to the company, some sales to mobile telecoms companies were brought
forward to Q3, meaning sales are unlikely to increase year-on-year in Q4. Public expenditure on defense facilities andpublic wireless facilities continued.
Tamagawa secured orders in its new business, testing equipment for power semiconductors. It expects to report sales in
FY03/16. The company also promoted its new optical transmission device for high-definition video to companies thatplan exhibitions, nursing facilities, and security companies, as part of its focus on winning orders in this business.

Solar System Sales▶ Orders:▶ Sales:▶ Operating loss:

JPY1.5bn (+107.5% YoY)JPY293mn (-37.1%)
JPY18mn (operating profit of JPY32mn in Q3 FY03/14)

Although the company worked to make sales operations more efficient, there were shipment delays as clients pushed
back construction commencement dates. Sales and profits were down year-on-year as a result.
Initial forecasts called for full-year segment sales of JPY1.0bn and operating profit of JPY104mn. As of Q3, the company has
achieved 28.8% of its sales target, and has booked an operating loss. According to the company, it may still achieve its
targets due to the division and sale of solar parks in Q4 (January to March 2015). Specifically, the company expects tobook sales of about JPY900mn and operating profit of about JPY90mn from the division and sale of solar parks in
Yokohama (Kanagawa Prefecture), Kagoshima Prefecture, and Nagasaki Prefecture, after having first bought the land andwww.sharedresearch.jp

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constructed the facilities.

Solar Power Plant Operations▶ Sales:▶ Operating profit:

JPY59mn (+63.8% YoY)
JPY15mn (operating loss of JPY21mn in Q3 FY03/14)

Sales of electricity at the Shimonoseki solar park were in line with targets, yielding higher sales and profits year-on-year.
The company expects to complete construction on a 2.0MW output solar park in Tateyama (Chiba Prefecture) and a
1.3MW output solar park in Sodegaura (Chiba Prefecture) during this year, FY03/15.

Geothermal Power Plant Operations
Newly established during Q3 FY03/15, this segment is working to commence operations of geothermal power plants assoon as possible. No sales were recorded, and due to miscellaneous expenses, the company booked an operating loss of
JPY0mn for the segment.
The company also plans to construct a geothermal power plant across seven plots in Beppu (Oita Prefecture) with a total
output of about 875kW. According to the company, this is equivalent to a solar park with an output of about 7MW, aseach geothermal plot of 125kW or so provides the same amount of electricity as a solar power plant with an output of
about 1MW. The company plans to bring the new facility online in FY03/16, and is targeting electricity sales of about
JPY250mn per year.

FY03/14 results (announced May 13, 2014)
Results by segment:

Electronics and Telecoms Equipment
This segment saw mobile telecoms companies increase their capex spending on base stations and public expenditure
increase for defense facilities and public wireless facilities. Orders received totaled JPY3.5bn (+7.3% YoY) and sales were
JPY3.2bn (+2.5%). Specifically, sales in mobile telecoms were JPY1.4bn (-26.5%) due to a large-scale order that wascompleted in FY03/13 causing a relative decrease. Sales related to defense systems were JPY905mn (+79.6%).
According to the company, it is becoming increasingly adept at developing products in-house. As a result, sales ofinternally developed products were JPY1.3bn (+36.6% YoY).
Operating profit for the segment was JPY480mn (+28.1% YoY). In addition to the effects of increased revenue, the sales
composition of internally developed products—which have relatively higher margins compared to other products in thesegment—went up from 30% in FY03/13 to 35% in FY03/14.

Solar system sales
Orders for solar power systems have been increasing since the Act on Special Measures Concerning Procurement ofRenewable Electric Energy by Operators of Electric Utilities (FIT Act—for feed-in tariffs) came into effect (August 2011).
The company also worked to make its sales operations more efficient. Thus, orders received were JPY845mn (+27.3%
YoY), sales were JPY890mn (+83.0%), and operating profit was JPY54mn (-5.5%).

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Tamagawa Holdings ＞ BusinessTamagawa Holdings | 6838 |LAST UPDATE【2016/1/25】

Solar power plant operations
Sales of electricity began, following the completion of construction of the solar park in Shimonoseki, Yamaguchi
Prefecture. The company booked sales revenue from the project from July 2013. However, other solar power projects
required startup investment. In the end, sales were JPY52mn (there were no sales recorded for this segment the previousyear), and the company made an operating loss of JPY20mn (against an operating loss of JPY12mn the previous year).

Full-year FY03/13 results
Sales hit JPY3.7bn (+18.2% YoY). Operating profit was JPY373mn vis-à-vis a JPY29mn loss in FY03/12. Recurring profit was
JPY374mn contrasting with a JPY23mn loss in FY03/12. Net income was JPY339mn compared with a JPY37mn loss in
FY03/12. Segment results:

Electronics and telecommunications equipment
Owing to a recovery in mobile telecoms companies’ base station capex and a resumption of public investment in defense
and public wireless facilities, sales touched JPY3.2bn (+31.1% YoY) and operating profit nudged JPY374mn (+497.4%
YoY).

Solar energy business
The introduction of FIT in July 2012 and better marketing boosted solar generating system orders. Sales rose to JPY486mn
from JPY19mn in FY03/12. Operating profit came in at JPY41mn vis-à-vis a JPY24mn loss in FY03/12.

Biomass energy business
Sales were JPY74mn (-89.0% YoY). Operating loss reached JPY30mn compared with a JPY47mn loss in FY03/12. The
company exited this business in the wake of consolidated subsidiary Bioenergy Resources Co Ltd filing for bankruptcy.

FY03/12 results
Sales were JPY3.1bn (+17.7% YoY). There was an operating loss of JPY29mn from a JPY286mn loss in the previous year. In
the Electronics and Telecoms Equipment division there was a recovery in capex for mobile base stations. Sales were up
0.7% YoY. Margins improved due to lowered COGS and operating expenses. In the biomass energy business, sales rose
172.3% YoY but operating losses were largely in line with the previous year due to cost increases. There was a recurring
loss of JPY23mn compared with a JPY284mn loss in the previous year. We flag an impairment loss of JPY3mn, a loss on saleof investment securities of JPY3mn and an annual net loss of JPY37mn (JPY351mn loss in the previous year).

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Tamagawa Holdings ＞ Business

LAST UPDATE【2016/1/25】

Income statement
Income Statement(JPYmn)Total Sales

FY03/07

FY03/08

FY03/09

FY03/10

FY03/11

FY03/12

FY03/13

FY03/14

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

3114.413 4012.487

4,299

2,803

2,640

3,106

3,672

4,171

5,095
22.1%

FY03/15

22.1%

28.8%

7.1%

-34.8%

-5.8%

17.7%

18.2%

13.6%

CoGS

2622.228

3274.348

3,348

2,412

2,314

2,516

2,623

2,973

3,616

Gross Profit

526.225738.139

951

392

326

590

1,049

1,198

1,479
29.0%

YoY

GPM

SG&A
SG&A / Sales

Operating Profit
YoY
OPM

16.9%

18.4%

22.1%

14.0%

12.3%

19.0%

28.6%

28.7%

457.18620.046

1,020

619

612

619

675

721

947

14.7%

15.5%

23.7%

22.1%

23.2%

19.9%

18.4%

17.3%

18.6%

69.044118.092

-68

-227

-286

-30

373

477

531

271.9%

71.0%

-

-

-

-

-

27.8%

11.3%
10.4%

2.2%

2.9%

-1.6%

-8.1%

-10.8%

-1.0%

10.2%

11.4%

Non-Operating Income

42.22248.762

45

16

18

14

19

9

8

Non-Operating Expenses

12.13157.908

105

14

16

8

17

8

25

99.135108.946

-128

-224

-284

-24

375

478

514

226.7%

9.9%

-

-

-

-

-

27.6%

7.5%
10.1%

Recurring Profit
YoY

3.2%

2.7%

-3.0%

-8.0%

-10.8%

-0.8%

10.2%

11.5%

Extraordinary Gains

RPM

44.10716.377

52

0

45

-

1

2

5

Extraordinary Losses

2.722

491.954

341

346

109

7

0

0

0

Tax Charges

2.29

38.883

-7

-1

3

6

36

44

92

Implied Tax Rate

2%

-11%

1.6%

0.1%

-0.8%

-20.9%

9.6%

9.1%

17.7%

Net Income

138.23-408.487

-408

-570

-351

-37

340

436

427

YoY

-169.0%-395.5%

-

-

-

-

-

28.5%

-2.2%

4.4%

-10.2%-9.5%-20.3%-13.3%

-1.2%

9.3%

10.5%

8.4%

Net Margin

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

Historical forecast accuracy
Initial CE vs. Results

FY03/07

FY03/08

FY03/09

FY03/10

FY03/11

FY03/12

FY03/13

FY03/14

FY03/15

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Sales (Initial CE)

2,650

3,000

3,870

3,389

3,110

2,980

3,378

4,504

4,534

Sales (Results)

3,114

4,012

4,299

2,803

2,640

3,106

3,672

4,171

5,095

17.5%

33.7%

11.1%

-17.3%-15.1%

4.2%

8.7%

-7.4%

12.4%

40

129

139

191

22

69

493

506

118

-68

-227

-286

-30

373

477

531

441.1%

-3.2%

5.0%

(JPYmn)Initial CE vs. Results
Operating Profit (Initial CE)-

Operating Profit (Results)
Initial CE vs. Results

69-

195.2% ----Recurring Profit (Initial CE)

101

52

71

133

179

18

65

488

489

Recurring Profit (Results)

99

109

-128

-224

-284

-24

375

478

514
5.1%

Initial CE vs. Results-1.8%

476.5%-2.0%

Net Profit (Initial CE)

92

109.5% 50

63

133

179

13

60

449

450

Net Profit (Results)

138

-408

-408

-570

-351

-37

340

436

427

Initial CE vs. Results

50.3% -

466.3%

-2.8%

-5.1%

-

-

-

-

-

-

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

From FY03/09 through FY03/12 the company initially forecast profits every year but delivered a series of losses. However,in the absence of a solid profitability roadmap, results fell short of company forecasts. Results in FY03/13 and subsequent
years, though, came in well above or in line with Tamagawa’s forecasts. In addition to a profit recovery in the Electronics
and telecoms equipment business, Solar system sales chipped in.

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Tamagawa Holdings ＞ Business

LAST UPDATE【2016/1/25】

Balance sheet
Balance Sheet

FY03/07

FY03/08

FY03/09

FY03/10

FY03/11

FY03/12

FY03/13

FY03/14

FY03/15(JPYmn)Non-cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

1,074

706

820

665

493

56

390

1,764

1,524

256

-

-

-

-

-

-

-

1,343

2,046

1,033

915

663

864

1,345

1,112

1,377

Inventories

306

580

345

275

328

299

328

347

447

Other Current Assets

192

134

47

63

45

74

52

197

258

Total Current Assets

ASSETSCash and Equivalents
Marketable securities
Accounts Receivable

2,915

3,722

2,245

1,918

1,530

1,293

2,114

3,421

3,606

Buildings

186

174

162

132

94

80

87

114

130

Equipment, Plant

62

458

88

36

5

1

58

87

126

Machinery and equipment

3

20

2

1

1

0

22

430

1,458

198

198

198

126

106

52

Land
Construction in Progress
Acc. Depreciation

52

52

540

346

35

156

973

1,142

1,151

997

959

899

884

908

966

453

855

451

295

205

133

564

718

2,410

Investments

630

90

251

69

23

8

14

19

23

Other

156

7

16

20

7

9

13

19

131
154

Total Tangible Fixed Assets

Total Other Fixed Assets

786

97

267

89

30

18

27

38

Software

17

301

25

25

-

-

1

19

88

Other

25

22

22

14

-

-

-

12

106

Total Intangible Assets

42

323

47

39

-

-

1

31

194

Total Fixed Assets

1,281

1,275

765

423

235

150

593

788

2,759

Total Assets

4,195

4,997

3,010

2,341

1,766

1,445

2,709

4,210

6,376

Accounts Payable

145

1,301

511

443

430

364

386

474

620

Short Term Debt

615

404

507

433

203

30

40

323

300

Accrued Amount Payable

38

253

108

39

31

48

108

86

169

Other Current Liabilities

512

336

99

111

220

156

173

247

392

Total Current Liabilities

1,310

2,293

1,226

1,026

884

598

708

1,130

1,481

242

441

216

67

151

294

LIABILITIESLong Term Debt
Lease obligations

539
947

Other Fixed Liabilities

84

208

101

86

83

85

100

148

247

Total Long Term Liabilities

327

649

318

153

83

85

251

442

1,733

Total Interest Bearing Debt

858

844

724

500

203

30

192

618

839

1,636

2,942

1,544

1,179

967

683

959

1,572

3,215

Issued Capital

1,029

1,029

1,029

1,102

1,102

1,102

1,387

1,625

1,656

Reserves

1,196

1,196

1,024

1,096

1,096

1,096

1,381

1,620

1,077

322

-119

-619

-983

-1,335-1,372

-991

-555

445

Total Shareholder Equity (Net Assets)

4,195

2,055

1,466

1,162

799

761

1,751

2,638

3,161

Working Capital

1,204

Total Liabilities
SHAREHOLDER EQUITY (NET ASSETS)

Retained Earnings

1,504

1,325

867

747

562

800

1,287

986

Interest Bearing Debt

858

844

724

500

203

30

192

618

839

Net Debt

-216

138

-96

-165

-290

-26

-198

-1,146-685

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

AssetsDuring FY03/15, current assets accounted for 56.6% of total assets. The ratio of fixed assets has increased since FY03/13.
Primary factors of current assets were cash and equivalents (42.3% of current assets in FY03/15) and accounts receivable(38.2%). Operating cash flows stemming from improved profitability, stock issuances, and financing activity were factors
in cash and equivalents increasing from JPY390mn in FY03/13 to JPY1.5bn in FY03/15.

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Tangible fixed assets shrank from JPY451mn in FY03/09 to JPY133mn in FY03/12 owing to a string of impairment losses
amid slumping profits. In FY03/13 and onward, tangible fixed assets have been on an uptrend due to construction of solarparks and capex in the Electronics and telecoms equipment business.

Liabilities
In FY03/15, a majority of liabilities is comprised of accounts payable, interest-bearing liabilities, and lease obligations.
Interest-bearing liabilities shrank from JPY844mn in FY03/08 to JPY30mn in FY03/12. Shared Research estimates thatborrowing was difficult due to the profit slump, so Tamagawa repaid short- and long-term borrowings, corporate bondredemptions continued, and there was no debt refinancing. In FY03/13 interest-bearing liabilities increased for the firsttime in five years and amounted to JPY192mn. In FY03/15 the figure increased to JPY839mn.
In FY03/15 net debt (interest-bearing liabilities minus cash and deposits) was positive, amounting to positive JPY685mn.
The company newly reported lease obligations worth JPY947mn in FY03/15 because it built the solar parks in Tateyama
and Sodegaura, both in Chiba Prefecture, on leases.

Net assets
Due to the extended profit slump and net losses, net assets declined from JPY4.2bn in FY03/07 to JPY761mn in FY03/12.
Retained earnings were minus JPY1.3bn in FY03/12. In FY03/13 net income returned to the black, leading to an increase inretained earnings for the first time in five years. Capital and additional paid-in capital increased due to the placement of
2.1mn shares in January 2013 and the issuance of options (potential issuance: 4.8mn additional shares). We note that
1.8m additional shares were issued in FY03/13 on the exercising of options.
During FY03/14, net assets increased by JPY477mn from the exercise of share subscription rights issued in January 2013
and by JPY436mn in net income.
In FY03/15 net assets totaled JPY3.2bn due to JPY427mn in net income and others.

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Cash flows
Cash Flow Statement

FY03/07

FY03/08

FY03/09

FY03/10

FY03/11

FY03/12

FY03/13

FY03/14

FY03/15(JPYmn)Non-cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Cons.

Operating Cash Flow (1)

-305

-136

259

-1

68

-332

36

764

387

Investment Cash Flow (2)

59

-111

-17

12

93

77

-454

-265

-865

Free Cash Flow (1+2)

-246

-247

242

11

162

-255

-418

499

-478

-43

-121

-194

-82

-299

-168

783

875

238

Depreciation & Amortization (A)

48

58

217

76

20

14

22

84

106

Capital Expenditures (B)

-31

-134

-82

-22

-7

-12

-446

-254

-866

381

-179

-459

-120

-186

238

488

-301

219

-226

-305

186

-397

-152

-272

-572

568

-552

Financial Cash Flow

Working Capital Changes (C)Simple FCF (NI + A + B - C)

Source: Shared Research based on company data
Figures may differ from company materials due to differences in rounding methods.

Operating cash flow
Operating cash flow hinges on net income, depreciation, goodwill amortization and changes in working capital. The
reason that operating cash flow topped net losses plus depreciation and goodwill amortization from FY03/09 throughFY03/11 was impairment losses, valuation losses on investment securities and a drop in working capital. In FY03/12
operating cash flow fell despite a narrower net loss due to an increase in accounts receivable. In FY03/13 and later
operating cash flow stayed in the black as the company continued to report annual net income. .

Investment cash flow
Through FY03/12 Tamagawa was restrained in its investments with capex below JPY100mn, so cash flows from investing
activities were minus JPY17mn in FY03/09 but positive from FY03/10 through FY03/12. Tamagawa’s investment cash flow
remained in negative territory in FY03/13 and the subsequent years due to capital investments in the Electronics andtelecoms equipment business and capex in the solar parks.

Financial cash flow
Interest-bearing debt declined from FY03/09 through FY03/12, so financing cash flows remained negative. In January
2013 Tamagawa made a placement of 2.1mn shares and issued options (if exercised would prompt the issuance of 4.8mn
additional shares) to fund solar park construction. There were 1.8m shares issued in FY03/13 on the exercising of options.
In FY03/13 Tamagawa saw JPY783mn in financing cash flows: JPY554mn from the issuance of shares; JPY47mn from option
issuance; JPY170mn from long-term borrowing; and JPY100mn from corporate bond issuance.
During FY03/14, inflows included JPY450mn from the issuance of shares, and inflows from borrowings, leading to
JPY875mn in financing cash flows.
In FY03/15, financing cash flows came to JPY238mn, due to JPY58mn in revenue from issuing new shares, JPY26mn inrevenue from issuing share purchase warrants, and borrowings.

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Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/1/25】

Other information
HistoryFounded in 1968, the company was a leader in analog high-frequency wireless technology. By the mid-2000s
the business was derailed by Korean competitors. After several missteps and ownership changes Tamagawa found itself
with the current leadership in 2012.
J Bridge Corp became a shareholder in 2007. In 2007 J Bridge Corp (now Asia Alliance Holdings Co Ltd; TSE2: 9318)
became a shareholder. J Bridge in turn installed an executive from a company in which it held an equity stake (J CapitalManagement Co Ltd, 14.7% stake) to Tamagawa’s board in 2007. The new board member was then made CEO andproceeded to make a number of failed acquisitions, speculative investments and unwise decisions, leading to further
deterioration.
Raised capital for biomass energy in 2010. After the J Bridge-appointed CEO stepped down in 2009, the company
liquidated some money-losing subsidiaries in a bid to regain profitability. But amid declining sales its core electronics andtelecommunications equipment business continued to lose money in FY03/09-FY03/11. In 2010 the company raised
JPY144mn in new capital to launch a biomass energy business. It was liquidated in March 2012 after posting operating
losses in FY03/11 through Q2 FY03/13.
Masanori Kobayashi joins core business in June 2011. In June 2011, Masanori Kobayashi, a veteran of the company,
was appointed a director of Tamagawa Electronics Co Ltd, a subsidiary that is the core business. Kobayashi wassubsequently appointed CEO of Tamagawa Electronics in April 2012 and he took charge of rebuilding the electronics andtelecommunications equipment business. The reform included exiting unprofitable projects, something Tamagawa wasroutinely doing while battling overseas rivals. The segment returned to operating profitability in FY03/12.
Focusing on profits. In April 2012, following a request from a major Tamagawa HD shareholder, Toru Masuzawa became
executive director of Tamagawa Holdings, and CEO in June 2012. In June 2014, Tamagawa shifted to a joint leadershipsystem of two representative directors to cope with difficult market conditions. In addition to the incumbent
Representative Director Toru Masuzawa, the company promoted Masanori Kobayashi to new representative director withthe aim to establish a fair and transparent management base by maintaining and improving its compliance system andensuring strong corporate governance. In the same month, Yasuhiko Noguchi assumed presidency of Tamagawa Solar
Systems (currently Tamagawa Energy).
The company’s main task is to ensure profitability. The focus is on Tamagawa Energy, headed by Mr. Noguchi, and solarpark management where FIT pricing is guaranteed by the government. Another priority is ensuring stable profitability at
Tamagawa Electronics under the command of Kobayashi.

News and topics
Octobe 2015
On October 1, 2015, the company announced the current status of its Geothermal Power Plant Operations (inplanning).

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As announced on December 26, 2014, the company has been carrying out administrative procedures and construction
work for its new Geothermal Power Plant Operations in order to initiate electric power sales at an early stage. The
company officially received a notice on September 30, 2015 from Kyushu Electric Power Co. regarding the approval andtiming for grid connections of Tamagawa’s two geothermal power plants.

Overview of the Geothermal Power Generation segment◤◤

Connection date:Around April 2016

Business:

Geothermal power generation is not affected by the weather, seasons, or day/night

fluctuations like solar power. As a result, one 125Kw geothermal power plant generates electricity roughly
equivalent to a 1MW solar power plant. Geothermal power plants can be built on small plots of land, which makes
efficient power procurement possible. The feed-in tariff of electricity produced by geothermal power plants is JPY40
per kilowatt (consumption tax not included for 15,000kW or less).

Overview of the geothermal power plant◤◤

Location:

Beppu, Oita Prefecture

Output capacity:

About 250kW(equivalent to a 1MW solar power plant; two plants equivalent to a 2MW solar plant)

◤
◤
◤
◤

Feed-in tariff:

JPY40/kWh (fixed for 15 years)

Feed-in revenue:

About JPY80mn/year (estimated)

Generation capacity:

About 2.2mn kWh/year (estimated)

Sales start date: Around April 2016

The company projects that this geothermal power plant will begin operations in FY03/17. Although it expects the effecton FY03/16 earnings to be negligible, it will swiftly announce any updates as soon as it is possible to calculate earnings
forecasts.

September 2015
On September 18, 2015, the company announced the acquisition and cancellation of No. 6 stock warrants (with an
option to adjust the exercise price).
At a board of directors meeting on the same day, the company resolved to acquire and cancel all No. 6 stock warrants
issued to Macquarie Bank Limited on January 16, 2015.

Details of the acquisition and cancellation of warrants▶ Name: No. 6 stock warrant (with an option to adjust the exercise price)▶ Allottee: Macquarie Bank Limited▶ Number of warrants: 10,000 (1,000 shares per warrant)▶ Allocation date: January 16, 2015
▶ Payment amount: JPY1,960 per share▶ Exercise price: JPY218 per warrant

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LAST UPDATE【2016/1/25】▶ Exercise period: January 19, 2015 to January 18, 2017
▶ Number outstanding: 9,990 warrants▶ Acquisition and cancellation date: October 16, 2015

Reasons for the acquisition and cancellation of No. 6 stock warrants
The company issued No. 6 stock warrants on January 16, 2015 to the allottee, Macquarie Bank Limited, in order toprocure funds for the development of its solar and geothermal power plants. However, Tamagawa Holdings’ stock pricehas remained at a low level following the issuance of the warrants, owing to the company’s operating environment andthe stock market, and so the company believes the allottee is unlikely to voluntarily exercise the warrants. It is also
possible for the company to meet the abovementioned funding needs using cash on hand and indirect financing. Further,
the company has determined that it is necessary to alleviate market concerns of possible dilution owing to the continued
existence of unexercised warrants that the company believes are unlikely to be exercised.
Tamagawa Holdings believes that the acquisition and cancellation of the warrants will have a negligible impact on its
FY03/16 investment plans.

July 2015
On July 24, 2015, the company released the update on its geothermal power plant operations.
On December 26, 2014, the company had announced that it was planning to kick off selling electricity of its geothermal
power plant in August 2015. However, it now states that this may be pushed back, because of a surge in applications forgrid connections to its geothermal power plant in Beppu, Oita Prefecture, where it is driving geothermal business while
engaging in grid-connection talks with Kyushu Electric Power Co. This has created a potential need to procure voltage
regulators (SVCs, or Static Voltage Controllers) in the grid-connection project with Kyushu Electric to begin selling
power.
Tamagawa has already completed the negotiation stage for grid connection with Kyushu Electric and has received
confirmation that it can proceed with the connection. Going forward, the company will crystallize timelines for thecompletion date and the selling start date based on the detailed blueprint for grid connection by Kyushu Electric.

June 2015
On June 11, 2015, the company announced the progress of a business alliance with Etrion Japan KK.
The company has concluded a Memorandum of Understanding regarding the business alliance with Etrion Japan, and thetwo companies have discussed the process for establishing a solar power business in Misawa, Aomori. Both parties have
now agreed upon a Term Sheet setting forth the specific process for this business and each company’s stake. The
company is analyzing the effect of this alliance on earnings for FY03/16 and plans to make an announcement as soon as
possible.

Key points▶ The two companies will establish a special-purpose company (SPC) for this joint business.
▶ Tamagawa may hold a stake of up to 30% in the SPC.

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LAST UPDATE【2016/1/25】▶ The two companies aim to complete all procedures necessary to begin construction by December 2015.

▶ The two companies will jointly decide the method of funding and appoint engineering, procurement, andconstruction agents.

Overview of the power plant▶ Location:▶ Operator:▶ Premises:▶ Capacity:▶ Feed-in tariff:▶ Revenue:▶ First year output:

Misawa, Aomori
GP Energy A, GP Energy B, GP Energy C, GP Energy D (wholly owned units)
153,000sqm
10MW
JPY36/kWh (before tax; fixed for 20 years)
JPY390mn a year (estimate)
10,852,814 kWh (estimate)

May 2015
On May 12, 2015, the company announced a reduction in capital reserves and the distribution of a surplus.
At a meeting of the board of directors held on the same day, the company resolved to reduce capital reserves by
JPY200mn and transfer the entire amount to the capital surplus account. It plans to use JPY41mn of the increase in capitalsurplus to pay a dividend of JPY1 per share. The aim of the above is to secure shareholder return, and ensure a flexible
capital policy in future.
The planned record date for this distribution is March 31, 2015, provided the proposal to reduce capital reserves isapproved at the general meeting of shareholders on June 26, 2015, and the necessary procedures to protect creditors arecompleted.

April 2015
On March 30, 2015, the company announced a business alliance with Etrion Japan KK.

On the day of announcement, the two companies signed a Memorandum of Understanding to make a joint investment ina solar power plant in Misawa, Aomori Prefecture.

Etrion Japan KK is part of the Etrion Group under parent company Etrion Corporation, which constructs, owns, andoperates full-scale solar power plants. It is an independent power producer (IPP) with solar power plants totaling 130MW
in output in Italy and Chile, and is listed on the Toronto and Stockholm stock exchanges. Headquartered in Canada, thisinternational renewable energy provider also has branches in Geneva, Miami, Rome, Santiago, and Tokyo.

As announced on December 26, 2014, the company has acquired the land for a solar power plant in Misawa, and ismaking preparations to begin selling electricity as soon as possible. Per this Memorandum of Understanding, Tamagawa
and Etrion will raise funds for this project once both companies have completed their due diligence. The company thus

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expects to complete the construction soon and with no major issues. The company has yet to decide on the method ofraising funds, and how the plant will be operated.

Overview of the power plant
Location:

5-chome, Mukawame, Misawa City, Aomori Prefecture

Operator:

GP Energy A, GP Energy B, GP Energy C, GP Energy D (wholly owned units)

Premises:

153,000sqm

Capacity:

10MW

Feed-in tariff:

JPY36/kWh (before tax; fixed for 20 years)

Revenue:

JPY390mn a year (estimate)First year output:

10,852,814 kWh (estimate)

On March 24, 2015, the company announced the start of electricity sales at its solar park in Sodegaura (Chiba
Prefecture).

The company launched electricity sales on March 24, 2015, after connecting to the Tokyo Electric Power (TEPCO) grid.
The company does not expect this to have any material impact on earnings results for FY03/15.

Overview of the Sodegaura solar park
Name:

Sodegaura Hayashi Power Plant

Footprint:

Approx. 15,000sqm

kW output:Approx. 1,300kW
Feed-in tariff:

JPY36/kWh (pre-tax; fixed for 20 years)

Expected revenue:

Approx. JPY60mn per year from the sale of electricity(cumulative total for 20 years: JPY1.2bn).

March 2015
On March 30, 2015, the company announced a business alliance with Etrion Japan KK.

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On the day of announcement, the two companies signed a Memorandum of Understanding to make a joint investment ina solar power plant in Misawa, Aomori Prefecture.
Etrion Japan KK is part of the Etrion Group under parent company Etrion Corporation, which constructs, owns, andoperates full-scale solar power plants. It is an independent power producer (IPP) with solar power plants totaling 130MW
in output in Italy and Chile, and is listed on the Toronto and Stockholm stock exchanges. Headquartered in Canada, thisinternational renewable energy provider also has branches in Geneva, Miami, Rome, Santiago, and Tokyo.
As announced on December 26, 2014, the company has acquired the land for a solar power plant in Misawa, and ismaking preparations to begin selling electricity as soon as possible. Per this Memorandum of Understanding, Tamagawa
and Etrion will raise funds for this project once both companies have completed their due diligence. The company thus
expects to complete the construction soon and with no major issues. The company has yet to decide on the method ofraising funds, and how the plant will be operated.
Overview of the power plant
Location:

5-chome, Mukawame, Misawa City, Aomori Prefecture

Operator:

GP Energy A, GP Energy B, GP Energy C, GP Energy D (wholly owned units)

Premises:

153,000sqm

Capacity:

10MW

Feed-in tariff:

JPY36/kWh (before tax; fixed for 20 years)

Revenue:

JPY390mn a year (estimate)First year output:

10,852,814 kWh (estimate)

On March 24, 2015, the company announced the start of electricity sales at its solar park in Sodegaura (Chiba Prefecture).
The company launched electricity sales on March 24, 2015, after connecting to the Tokyo Electric Power (TEPCO) grid.
The company does not expect this to have any material impact on earnings results for FY03/15.
Overview of the Sodegaura solar park
Name:

Sodegaura Hayashi Power Plant

Footprint:

Approx. 15,000sqm

kW output:Approx. 1,300kW
Feed-in tariff:

JPY36/kWh (pre-tax; fixed for 20 years)

Expected revenue:

Approx. JPY60mn per year from the sale of electricity(cumulative total for 20 years: JPY1.2bn).On March 5, 2015, the company announced revisions to

its full-year earnings forecasts.

Full-year FY03/15 forecast revisions (previous forecasts in parentheses)▶ Sales:▶ Operating profit:▶ Recurring profit:▶ Net income:www.sharedresearch.jp

JPY5.0bn (JPY4.5bn)
JPY517mn (JPY506mn)
JPY507mn (JPY489mn)
JPY455mn (JPY450mn)

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Reasons for the revisions
The company expects sales and profits to outperform previous forecasts, due to it being able to secure land for a
low-voltage solar power plant to be sold in lots, as well as robust sales conditions.

February 2015
On February 23, 2015, the company announced that its mega solar power plant in Tateyama City, Chiba Prefecturecommenced operations.
According to the company, connections from its mega solar power plant in Tateyama City to the Tokyo Electric Power(TEPCO) grid have been completed, and sales of power began on February 23, 2015. The company does not expect thisto have a material impact on its FY03/15 earnings results.

Summary of Tateyama City mega solar power plant▶ Plant name: Tateyama Power Plant▶ Land area: approx. 35,386sqm▶ Generation capacity: 1,999kW▶ Feed-in tariff (fixed rate for 20 years): JPY40/kWh (tax exclusive)▶ Estimated feed-in revenue: JPY95mn/year, JPY1.9bn cumulative total for 20 years

On February 6, 2015, the company announced that it will borrow long-term operating funds.
Funds will be loaned to the company from the Chiba Bank in the amount of JPY100mn, with a due date of January 31,
2018.

On February 3, 2015, the company announced that a subsidiary will secure a site for a low-voltage solar power plant, tobe sold in lots.
Subsidiary Tamagawa Solar Systems Co., Ltd. decided at a meeting of the board of directors that it will secure land for
low-voltage power plant, to be sold in lots. According to the company, after acquiring the rights to a feed-in tariff of JPY36
set by the Ministry of Economy, Trade and Industry (METI), it will be able to divide ownership of the low-voltage power
plant into 13 lots, to sell to outside buyers. This is expected to boost group earnings.

Details of the low-voltage lot sales▶ Location: Kanoya City, Kagoshima Prefecture▶ Total area: about 11,070sqm (for all 13 lots)▶ Output capacity: about 650Kw (for all 13 lots)▶ Feed-in tariff: JPY36/kWh (fixed for 20 years)▶ Acquisition date: February 3, 2015

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January 2015
On January 29, 2015, the company announced that it would acquire additional land for its geothermal power
operations.

PurposeTamagawa Holdings, which plans to launch a geothermal power generation business, has already acquired land in Beppu
City, Oita Prefecture, to build a 125kW plant. The construction is currently underway to providing electricity as early as
possible. The company has decided to acquire six additional plots to build plants with a total capacity of 750kW. As aresult, the group will have seven plots for a total capacity of 875kW. A 125kW geothermal plant generates electricity
equivalent to a 1MW solar power plant. Thus, the company will have power plants with a combined generation capacityof a 7MW solar power plant.

The choice of Beppu City
The company will build binary cycle power plants that use underground steam to rotate turbines. Binary power plants
generate electricity through a medium that has a lower boiling point than water. There is no need for the company toseek a new energy source because it will use a power source already being used for a hot spring nearby. Thus, thecompany will be able to start operations within a short period of time at a relatively low cost. In addition, the company
has determined that the location is suitable for geothermal power generation because another binary cycle power plant is
operating nearby and there is an ample supply of hot water.

Overview of the land
▶ Location: Beppu City, Oita Prefecture▶ Size: 2,100sqm▶ Output: 750kW (One plot accommodates a 125kW geothermal plant, equivalent to a 1MW solar plant. Thus, six plotsof land would allow for power generation equivalent toa 6MW solar plant.)▶ Electricity price: JPY40/kWh (fixed for 15 years)▶ Expected annual revenue: JPY250mn▶ Expected initial year output: 6,800,000kWh▶ Transfer date: January 30, 2015

On January 16, 2015, the company announced the completion of payments related to the issuance of warrants (with an
option to adjust the exercise price).
The payments related to warrants announced on December 26, 2014.

December 2014
On December 26, 2014, the company announced the launch of a new business (geothermal power generation) andthe issuance of warrants (No. 6 warrants with an option to adjust the exercise price).
The company held a board meeting on December 26, 2014 and decided to start a geothermal power business.

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New operations
Tamagawa, which operates a solar-power business, has been seeking another source of renewable energy to bolster its
earnings. The company held talks with the holder of rights to the geothermal power source in Beppu City, Oita
Prefecture, and conducted feasibility studies. (The company stated that it would build a 125kW geothermal plant and that
it would submit the plan to Kyushu Electric Power Co. and the Ministry of Economy, Trade and Industry on December 26,
2014 or later.) The power plant can be built on a small plot of land, and it will provide the company with a stable andefficient source of electricity.
Geothermal power plants, according to the company, are environmentally sustainable because they use steam fromunderground reservoirs. Unlike solar power generation, geothermal plants can provide stable electricity 24 hours a day,365 days a year, regardless of weather conditions. Moreover, geothermal plants do not require a large amount of space,allowing for efficient operations. Under the FY2014 feed-in-tariff system, the price for electricity produced by solar power
plants is JPY32 per kilowatt and the purchase period is 20 years (consumption tax not included for 10kW or more). In
contrast, the price for electricity produced through geothermal power plants is JPY40 per kilowatt and the purchaseperiod is 15 years (consumption tax not included for 15,000Kw or less).
Tamagawa will build a binary cycle power plant that uses underground steam to rotate a turbine. Binary power plants
generate electricity through a medium that has a lower boiling point than water. The medium is vaporized with hot wateror steam. There is no need for the company to seek a new energy source because it will use a power source already being
used for a hot spring nearby. Thus, the company will be able to start operations within a short period of time at a
relatively low cost. Most of the steam taken from the underground reservoir will be returned to its source. Therefore, theplant will have little impact on the environment.
The company will spend JPY92mn to build facilities, install pipes, acquire rights to the power source, and purchase land.
The project began on December 26, 2014. The company plans to sell electricity starting in July 2015.
Tamagawa also decided to allocate No. 6 warrants to Macquarie Bank Limited. The purchase agreement will be signed
after regulatory filings based on the Financial Instruments and Exchange Act.

Overview of the warrants▶ Allocation date: January 16, 2015
▶ Number of warrants: 10,000▶ Issuance amount: JPY2.2bn (JPY1,960 per warrant)▶ Potential new shares: 10,000,000 (1,000 shares per warrant): the number of potential new shares remains unchanged

even if the exercise price is changed.
▶ Amount to be raised: JPY2.2bn (After fees: JPY2.18bn; JPY20mn from warrants and JPY2.18bn from the exercise of

warrants)▶ Exercise price: The exercise price is fixed at JPY218 per share. However, the company has an option, if necessary forfund-raising purposes, to adopt a mechanism in which the exercise price is adjusted based on the closing price of thestock. The company may adopt the mechanism on January 16, 2015 and afterward upon the board’s approval. When
this option is adopted, the exercise price will be adjusted to 90% of the closing price on the Tokyo Stock Exchange on

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a day immediately prior to the effective date of the exercise. (No maximum exercise price has been set.) However, if
the adjusted price falls below JPY153 (the minimum exercise price), it will be re-adjusted to JPY153.
▶ Allocation method: third-party allocation▶ Party to which warrants are allocated: Macquarie Bank Limited▶ Exercise period: January 19, 2015-January 18, 1917

The party to which the warrants are allocated must guarantee that it will exercise the option and acquire a certain number of shares during theexercise period provided that certain conditions are fulfilled. The company may write letters to the party to which the warrants are allocatedand specify the period during which the party must guarantee share purchases. The company may do so up to five times. During the period ofguaranteed share purchases, the party must exercise the purchase option and make payments equivalent to the guaranteed exercise price inaccordance with the liquidity of the shares at that time. The guaranteed exercise price will be based on whichever is lowest: the average daily
trading price during a five-day period prior to the period of purchase guarantee, or the average daily trading price during a 20-day periodprior to the period of purchase guarantee.

Use of funds
Tamagawa will use the funds to finance subsidiaries’ solar power and geothermal power projects.
Use
To repay loans used to acquire land for a power plant in Misawa City,
Aomori Prefecture
To invest in, or provide loans to, four subsidiaries that will operate theMisawa plant
To invest in, or provide loans to, a subsidiary that operates a power plantin Minamishimabara City, Nagasaki Prefecture
To invest in, or provide loans to, a subsidiary that operates a geothermal
plant in Beppu City
To invest in, or provide loans to, subsidiaries that may operate solar
power or geothermal power plants other than those mentioned above
Total

AmountTime Frame

JPY250mn

January 2015-March 2015

JPY879mn

January 2015-March 2016

JPY127mn

January 2015-March 2016

JPY21mn

January 2015-August 2015

JPY904mn

January 2015-January 2017

JPY2,183mn－

On the same day, the company released an update on its partnership with ISE Power.
Tamagawa on May 30, 2014 signed an agreement with ISE Power to cooperate on the operation of solar power plants.
Tamagawa and ISE Power agreed that three Tamagawa subsidiaries will acquire a power operator license in Misawa City,
Aomori Prefecture from ISE Power, effective December 26, 2014, and build and run a solar power plant. The move is partof the two companies’ plan to expand their cooperation in solar businesses.
Tamagawa acquired the land for the power plant on December 16, 2014. The flat land located on the Pacific Ocean side
was previously used by Ise Foods Inc. for a chicken farm. The company stated that the land is suitable for a power plant
because it has plenty of sunlight and not much snow.
Tamagawa expects to start selling electricity generated at the plant by March 2016. (It is not certain, however, when the

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LAST UPDATE【2016/1/25】

company will sign a contract with Tohoku Electric Power Co.)
Tamagawa added that these developments will have little impact on the company’s earnings for FY03/15.

Overview of the power plant▶ Location: 5-chome, Mukawame, Misawa City, Aomori Prefecture▶ Operator: GP Energy A, GP Energy B, GP Energy C, GP Energy D (wholly owned units)▶ Premises: 153,000sqm▶ Capacity: 10 megawatt▶ Electricity price: JPY36/kWh (tax excluded; fixed for 20 years)▶ Revenue: JPY390mn a year (estimate)▶ Initial-year power generation: 10,852,814 kWh (estimate)

November 2014
On November 25, 2014, the company announced the establishment of a second-tier overseas subsidiary.
Tamagawa Electronics Co., Ltd., a wholly owned subsidiary of the company, will form a subsidiary in Vietnam on March
31, 2015.

Purpose of establishment
Tamagawa Electronics is engaged primarily in the design, manufacture, and sales of mobile high frequency
telecommunications base stations, and other high frequency devices used in television transmission and public wirelessinfrastructure. Tamagawa Electronics has been a manufacturer and supplier to major domestic telecommunications
manufacturers. In recent years, price competition has caused a greater portion of manufacturing and procurement tooccur overseas, and in order to meet this demand and further reduce manufacturing costs for high frequency devices, thecompany has decided to establish a subsidiary in Vietnam with the intent of expanding its sales overseas and providing
higher quality products.

Subsidiary details▶ Name:▶ Location:▶ Capital:▶ Owner:▶ Business:

Tamagawa Electronics Vietnam Co., Ltd.
Socialist Republic of Vietnam
JPY50.0mn
Tamagawa Electronics Co., Ltd. (100%)
Manufacture and sales of telecommunications equipment

On November 18, 2014, the company announced progress regarding construction of the solar park in Goto City,
Nagasaki Prefecture.
As disclosed on May 29, 2013, the company has acquired land in Goto City for the construction of a solar park, and iscontinuing preparations to begin operations. Tamagawa has now received approval from Nagasaki Prefecture to develop
in a forested area.

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Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/1/25】

As the company continues preparations to begin construction, it has been applying to relevant authorities for permits
required to begin work. Approval from Nagasaki Prefecture to develop in a forested area was one such requirement tobegin construction of the solar park. The solar park is planned to utilize a 5.5MW extra high voltage system—the first of its
type for Tamagawa.

About the Goto City solar park
▶ Location:

Yoshikugi-cho, Goto City, Nagasaki Prefecture▶ Operator:

GP Energy 2 Co., Ltd. (wholly owned subsidiary)▶ Area:10 hectares▶ Capacity:

Approx. 5.5MW▶ Feed-in tariff:

JPY36/kWh (fixed for 20 years)▶ Generation revenue:▶ First-year generation volume:

JPY250mn/year (tentative)
Approx. 6,790,566kWh

The company has modified its capacity estimates for this facility from 6.0MW to 5.5MW.

July 2014
On July 22, 2014, the company announced the progress of work on its solar park in Minami Shimabara, Nagasaki
Prefecture.
The company has completed construction of a 49kW low voltage generator, and is now expanding the facility into a 1MW
solar power plant. In a bid to ensure the smooth operation of the new plant, the company also changed the contract froma land lease contract to a contract establishing superficies (surfaces rights) on July 22—thus securing the surface rights
necessary to build a 1MW solar power plant. The company has already completed development work on the area
required for the expansion, and now plans to begin full-fledged construction work.

Overview of the Minami Shimabara Solar Park
▶ Location:▶ Operator:▶ Area:▶ Capacity:▶ Tariff:

Nagasaki Prefecture, Minami Shimabara
GP Energy 3-A Co., Ltd. (wholly-owned subsidiary)
22,112sqm
Approx. 1MW
JPY40/kWh (fixed for 20 years)▶ Revenue from the sale of electricity (planned): approx. JPY50mn / year
▶ Output in the first year (planned): approx. 1.3mn kWh.

Other
The company has been subject to harmful internet rumors, and is taking steps to improve its reputation, including filing
civil and criminal actions, to bring the perpetrators to account.

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Tamagawa Holdings ＞ Other information

LAST UPDATE【2016/1/25】

Major shareholders
Top Shareholders

Amount Held

Marilyn Hweetiang Tang

12.90%CBSG Bank Julius Bär Group Ltd. (Singapore)

10.20%

Japan Securities Finance Co., Ltd

5.10%

Hiromasa Shimanuki

4.60%

Yadi Perman

3.60%

Yugen Kaisha Sato Sogo Kikaku

3.30%

Sada Kubota

2.40%

Masuzawa Toru

2.20%

Rakuten Securities, Inc.

2.00%

Noriyuki Arai

1.90%

Source: Shared Research based on company data
As of March 31, 2015

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Company profile
Company

Head officeTamagawa Holdings Co., Ltd

1-6-15, Hamamatsu-cho, Minato-ku

VORT Hamamatsu-cho I,
Tokyo, Japan 105-0013
Phone

Listed on+81-3-6435-6933

JASDAQ

EstablishedExchange listing

May 7, 1970

August 31, 1999

WebsiteFiscal year-end

http://www.tmex.co.jp/english/index.html

March

IR Webhttp://www.tmex.co.jp/english/ir-info.html

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