CONSOLIDATED FINANCIAL HIGHLIGHTS

SPECIAL FEATURETOP INTERVIEWREVIEW OF SEGMENT OPERATIONSTOPICSCONSOLIDATED FINANCIAL STATEMENTS

CORPORATE DATA / STOCK INFORMATIONTOP INTERVIEW

tell us about the business
Q Pleaseconditions of fiscal 2015.

A While we’re maintaining the growth trend forour revenue and profits, due to sluggishness
in the Industrial Systems segment and foreignexchange losses, ordinary income and net
income decreased.

As a manufacturer aiming
for global growth, we will
improve our earnings
structure and production
system.
In the second year of our medium-term management plan,
realizing the need to strengthen our management foundation inorder to accomplish our goal of becoming a 50.0 billion yen
enterprise, we have implemented revisions to our plan.
In the following interview, we will hereby explain these goals anddirections.
President

1

Kenzo Terashima

As for orders for this fiscal year, although the Transportation Systems
segment and Information Equipment Systems segment continued toshow steady growth, orders of the Industrial Systems segment havebeen influenced by capital investment restraint, and overall we fell shortof our plans. In terms of consolidated profit and loss, net sales slightly
increased and we have maintained the positive growth in operating
income. However, due to exchange losses resulting from appreciation ofthe yen, ordinary income and net income decreased. Furthermore, theoverseas net sales were 32.0%.
Looking at it segment by segment, the Transportation Systemssegment has seen an increase in Japanese orders. As for overseas,
despite favorable Chinese railway project orders and good news on theregularization of the Beijing railroad electrical equipment maintenancebusiness, there has been a slip in some periods that has led to a slightdecrease in net sales. From a profit perspective, there has been adecline as a result of an increase in design costs from new projects.
In the Industrial Systems segment, as a result of the more cautious
investment approach of Japanese corporations, and the influence of thesluggish economy in emerging nations, orders received decreased fortesting equipment for automobile development, products for production
facilities such as processing equipment, and products for the socialinfrastructure. Net sales and profits have surpassed the last fiscal year,
but have not reached our planned goals.
In the Information Equipment Systems segment, due to demands for
updates and new acquisition of onboard ticket vending machines andcomposite ticket vending machines, orders have increased but have notresulted in recorded sales for this financial year, and there has been adecline. In terms of profits, there has been a slight increase from theslump of the last financial year.

tell us about the revisions to theQ Pleasemedium-term management plan.

A We need to deal with challenges of thebusiness earnings structure and production
systems, so we revised our plan period andtarget numbers.

In the fiscal year ended May 31, 2015, the Company started the threeyear medium-term management plan “Next 100: Beyond 100 years” andlooking beyond 2018 when we will have our 100th anniversary offoundation, we are working to strengthen our management foundation
beginning with an expansion of overseas sales and restructuring ourproduction systems. However, in that process, changes in the external
environment have been striking since the second half of the financial
year under review. New challenges related to our business earnings
structure and production systems have arisen internally as well.
In concrete terms, there is a need to plan for more earning power in
the Transportation Systems segment, and to make further improvements
in design effectiveness and productivity reform. Also in order to expand
our Industrial Systems segment and stabilize our earnings structure, wemust expand our production items and specification zones.
Taking these conditions into account, we will continue with the basic
policies of the medium-term management plan and have implemented
the “Next 100: Beyond 100 years Ver. 2” plan which incorporates rollingchanges to the term period and target numbers. This plan, “Ver. 2,” in the
two years between the fiscal year ending May 31 2017 and the fiscalyear ending May 31 2018, sets forth as a goal to achieve 46.0 billion
yen of net sales and 2.4 billion yen of operating income (operatingincome ratio of 5.2%), with an overseas net sales ratio of 50%.
Moreover, among the basic policies we will place an emphasis on“building a stable business earnings structure” and “restructuring
production systems,” and promote additional measures to deal with thepreviously stated challenges.
At the factory in Ryuoh Town, Shiga Prefecture, where production will
be integrated for the Industry Systems segment, the new organization,“Ryuoh Integrated Promotion Headquarters” which was established on
July 1, 2016, we will continue to build and promote the Beyond 100years Industry Systems segment structural vision and aim to begin
operation in the first half of 2018. With this achieved, we will haveestablished a two-base system to handle production for theTransportation Systems segment. The Company will, in these two years,complete our challenges addressed in “Ver. 2” and strengthen ourmanagement foundation for realizing our goal of becoming a 50.0 billion
yen enterprise.
* Please see page 6 for details on the “Next 100: Beyond 100 years Ver. 2” plan.

is the outlook for the current fiscal year
Q How
(fiscal year ending May 31, 2017)?

A Driven by the Transportation Systems segment
demands in Japan and overseas, we areprojecting an increase in revenue and profits.

The current external environment is increasingly unpredictable as aresult of the turmoil caused by the slowing down of the growth of Chinaand emerging nations in Asia and British secession from the EU as well
as resulting appreciation of the yen. However, with regards to theTransportation Systems segment, there is no sign of shrinking in the2

CONSOLIDATED FINANCIAL HIGHLIGHTSREVIEW OF SEGMENT OPERATIONSTOP INTERVIEWTOP INTERVIEW

give a message toQ Please
your shareholders.

AWe will expand the corporate value by making
use of the abundant experience and technicalknowledge of our outside directors.

Concerning year-end dividends for the fiscal year under review, based on
our fundamental profit return policy of providing continuous and stabledividends, we have decided upon 6 yen per share, the same as theprevious fiscal year. Furthermore, the year-end dividends for the end of
the 156th term are, for the time being, planned to be set atapproximately the same price.
Moreover, regarding our stock, as of December 1, 2016, the numberof shares constituting one unit will be changed from 1,000 shares to
100 shares, and at the same time we will implement a reverse stock

3CONSOLIDATED FINANCIAL STATEMENTS

split of 5 shares into 1 share. In accordance with this, it will be possible
to invest in our company stock’s trading unit at approximately half of theprevious price. The above changes have been made with a view toimprove the liquidity of our stock and broaden the scope of ourshareholders. We ask for your understanding.
At this time, understanding the need to further expand our company’scorporate governance, we have increased the number of outside
directors and revised the basic policies for our internal control system. As
an outside director, in addition to Mr. Hirokazu Chinone, a lawyer who has
already assumed his office, we have elected Mr. Takashi Yamagishi who
has held the position of vice president and advisor of TEIJIN LIMITED. toestablish a two-person system. We would like to use the experience andtechnical knowledge they have gained over long years in themanagement of a manufacturer to expand our corporate value.
Regarding our internal control, we have reformed our basic policies inline with reorganizing and expanding our Internal Control Committee. We
plan to further enhance our business operation system, making it more
efficient, legal and appropriate through compliance adherence, risk
management formulation, etc.
Our shareholders can expect continued growth and expansion of ourcompany’s business and we would like to ask for their continued
support.

Regarding Revisions to Medium-Term Plan
“Next 100: Beyond 100 years”

Looking towards the 100th anniversary of our foundation and beyond, in order to create Toyo Electric Group suited to the new age,
we continue to plan to radically strengthen our management foundation and aim to rapidly expand our corporate value.
Following “Next 100: Beyond 100 years” (hereafter, “current plan”),
our medium-term management plan from June 2014 to May 2017,
we have revised the plan in response to the changes to the businessenvironment as well as challenges, etc. as the “Next 100 years:
Beyond 100 years Ver. 2.”

Main Points
While continuing with the basic policies put forth in the current plan,we will put efforts into emphasizing “building a stable businessearnings structure” and “restructuring production systems,” andinstitute and promote new policies that mutually support both goals.
Furthermore, the operation of the Shiga factory which is one of themain pillars of the “restructuring production systems” is planned forthe first half of 2018, the Company’s 100th anniversary of foundation,and that, along with the completion of other related policy matters isthe reason for the change in the plan’s period.

Photo: Shiga Ryuoh Industrial Park vicinity. The red borders indicate planned site of our factory.

1Dividends per share(Yen) 86666

6

4
20

2012/5

2013/5

2014/5

2015/5

2016/5“Building a stable business earnings structure”· Earnings improvements by productivity reform promotion
reinforcement of the Transportations Systems segment· Earnings stabilization by the medium-term structural vision
construction of the Industrial Systems segment“Restructuring production systems”· Productive capacity increase based on the Transportation Systems
segment productivity reform· Production systems integration based on the Industrial Systems
segment structural vision

Strengthen international
competitiveness3

basic policies

NEXT 100

Restructure
productionsystem

Details after Revision

New additional main policy measures

2

Build a stable6business earnings
Train human resources tostructure
Medium-term plan support global development

New plan period: June 2014~May 2018(Ver. 2 June 2016~May 2018)

6CORPORATE DATA / STOCK INFORMATIONSPECIAL FEATURE

SpecialFeatureplans for China’s railway infrastructure. In Japan as well, there is a great
deal of activity involving railway renovation and replacement of railway
station operating equipment in expectation of the increase in foreign
visitors and the 2020 Tokyo Olympics. Furthermore, in the Industrial
Systems segment also, expansion in clients for testing equipment for
automobile development, acquisition of update projects for rotarypresses for newspaper printing, orders for small hydroelectric generators
for agricultural water, etc. continue to be made and so we can expect anexpansion in sales.
If the above conditions are met, our expected consolidated financial
results for the current fiscal year anticipate an increase in revenue andprofits driven chiefly by the Transportation Systems segment. For the firsthalf of the two years, which carries the burden of the success or failureof the “Next 100: Beyond 100 years Ver. 2” plan, we are working towards
building sound accomplishments.

TOPICS

5

Establish newbusinesses

4

Promote developmentof technology

Numerical targets (consolidated)(unit: 100 million yen)NEXT 100
Ver. 15/2015(Actual Results forthe First Year)

Ver. 25/2016(Actual Results)

5/2017(Forecast)

5/2018(Forecast for theFinal Year)Net sales

396.1

397.4

430

460

Operating income(Operating income ratio)

15.9(4.0%)

16.3(4.1%)

19(4.3%)24(5.2%)

Ordinary Income

20.5

14.9

1825

Net income

11.0

8.8

1217

150.6
(38.0%)

126.5(32.0%)——

230(50%)Overseas net sales(Overseas net sales ratio)

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CONSOLIDATED FINANCIAL HIGHLIGHTSTOP INTERVIEWSPECIAL FEATURECONSOLIDATED FINANCIAL STATEMENTS

TOPICSREVIEW OF SEGMENT OPERATIONSCORPORATE DATA / STOCK INFORMATIONREVIEW OF SEGMENT OPERATIONSTransportation Systems Segment
Manufacturing, sales and related construction for electrical equipment for rail vehicles,
magnetic levitation vehicles (high speed surface transport or HSST) systems, light railvehicles (LRV), alternative rail vehicles and special purpose vehicles, as well as railway
power storage systems.

Percentage oftotal net sales

67.3%Orders
Received
Net Sales

27,092 million yen(Up 9.4% year on year)

26,757 million yen

Orders Received (Unit: Million yen)
29,79027,09224,759Net Sales (Unit: Million yen)Segment Income (Unit: Million yen)
3,117

26,869 26,757
22,198

2,964

2,374

(Down 0.4% year on year)

Segment
Income2,964 million yen(Down 4.9% year on year)
2014/5

Propulsion inverter

2015/5

2016/5

2014/5

2015/5

2016/5

2014/5

2015/5Due to an increase in Japan and overseas orders, overall orders
received increased 9.4% compared to the previous fiscal year
and reached 27,092 million yen.
Net sales showed increased in Japan sales, but due to a small
decrease in overseas sales, there was a 0.4% reduction year-onyear to 26,757 million yen.
Segment income decreased by 4.9% from the previous fiscal
year and totaled 2,964 million yen.

2016/5

Driving gear unit

Industrial Systems Segment
Manufacturing, sales and related construction services for motors, inverters, testing
equipment, water supply and sanitation equipment systems, power generating
equipment, alternative power generating systems and Automobile electrical equipment.

Percentage of
total net sales

30.3%

Orders
Received
Net Sales

11,421 million yen

Orders Received (Unit: Million yen)

12,027 million yen

11,097

Net Sales (Unit: Million yen)

13,319(Down 14.2% year on year)

11,421

10,924High-speed, low-inertia dynamos

1,019

11,613 12,027(Up 3.6% year on year)

Segment
IncomeSegment Income (Unit: Million yen)

848
536

1,019 million yen(Up 20.2% year on year)
2014/5

Example of system configuration of testing
equipment for automobile development

2015/5

2016/5

2014/5

2015/5

2016/5

2014/5

2015/5

2016/5Due to a decrease in orders for testing equipment for automobiledevelopment, products for processing equipment and socialinfrastructure, total orders received decreased 14.2% comparedto the previous fiscal year and totaled 11,421 million yen.
Although there was a slight decrease in the sales of products
for social infrastructure, etc. due to an increase in testing
equipment for automobile development and overseas sales, there
was an overall 3.6% increase compared to the previous fiscal
year and net sales totaled 12,027 million yen.
Segment income increased by 20.2% and totaled 1,019
million yen.

Information Equipment Systems SegmentManufacturing, sales and related construction services for composite ticket vending
machine, onboard ticket vending machines, smart card vending machines, remotemonitoring systems and other systems and information systems equipment.

Percentage of
total net sales

2.4%

Orders
Received

1,369 million yen

Net Sales

954 million yen(Up 39.0% year on year)

Orders Received (Unit: Million yen)

Composite ticket vending machine

5Toyo M2M Solution

1,828

1,673

Segment Income (Unit: Million yen)
348

1,369
1,127985(Down 15.4% year on year)

Segment
IncomeNet Sales (Unit: Million yen)954

95 million yen

71(Up 34.1% year on year)
2014/5

2015/5

2016/5

2014/5

2015/5

2016/5

2014/5

2015/595

2016/5Due to a significant increase in orders from railway station
operating equipment, orders received increased 39.0%
compared to the previous fiscal year and totaled 1,369 million
yen.
Net sales however, due mainly to a reduction in remotemonitoring systems, decreased 15.4% year-on-year to 954
million yen.
Segment income increased by 34.1% and reached 95 millionyen.

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