ESG/CSR Report

Environment

Initiatives to Protect the Environment
With a view to realizing an environment-friendly society, the Company will further strive to promote the reduction ofenvironmental burden, while providing more efficient products that contribute to energy conservation.

Environmental
Philosophy
Action Guidelines

The Toyo Denki Group sets initiatives to protect the global environment as its priority task
and contributes to the development of a sustainable society.
We will continue to provide products and services that are considerate of the burden on the global
environment by drawing on our “future-oriented technologies friendly to the Earth and mankind.”1.

We will comply with all environmental requirements including those under the relevant laws and regulations.

2.

We will strive to minimize environmental burden through a reduction of energy consumption and other measuresat all stages of product lifecycle, namely planning, development, design, production, sales, use and disposal.

3.

We will establish and execute a system to continuously promote activities to protect the global environment.

4.

We will raise environmental awareness among individuals through enlightenment activities within the Group

Aiming for Realization of a Sustainable Society
A sustainable society as envisaged by the Company is the combination of a “low-carbon society,” a “recycling-based society” anda “nature-symbiotic society.”
The environment technologies of the Company have produced
numerous products that contribute to energy conservation, including
high efficiency motors and inverters that capitalize on the amalgamation of our outstanding motor drive technology and other state-of-theart technologies. In the meantime, the Company has been striving toconserve resources through not only the efficient use of energy but
also the reduction of the size and weight of its products.
In addition, the Company is working on the development of
products with lower levels of noise involved in their use to makethem friendlier to the surrounding environment.
The Company will make further contribution to make society
more sustainable, fully utilizing on its environmental technologies
on a global scale, while carrying out various environmental
actions at each of its bases.

Environmental Management System
In order to tackle environmental issues on an independent andcontinuous basis, the Company has developed and operates anenvironmental management system and thereby obtained ISO
14001 certification. This certification has been acquired for all
offices and the production bases Yokohama Plant and Shiga
Ryuo Plant.
Years of ISO 14001 certification

Yokohama Plant
2004

Shiga Ryuo Plant*
2001

Extended to all offices
2010

Low-carbon society
Implementation of measuresagainst global warming

Energy conservation throughthe Company’s technologies
and products
Energy conservation in
production activities
Use of sustainable energy

Recycling-based society
Promotion of 3Rs(reduce, reuse, recycle)

Improvement of logistics
efficiency
Proper treatment of wastes
Reduction of amount of final
disposal of wastes

Nature-symbiotic society

Proper management ofchemical substances

Conservation of biodiversity

Cleanup around offices

Our Website
Information on the
Company’s environmental initiatives canbe found at our website.

https://www.toyodenki.co.jp/
esg_csr/*The Shiga Ryuo Plant was the Shiga Factory (Moriyama) when it obtained the certification.

Toyo Denki Seizo Report 2021

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Environment

ESG/CSR Report

ESG/CSR Report

Initiatives to Prevent Global Warming

Initiatives for Control over Chemical Substances

Initiatives to reduce greenhouse gas (CO2) emissions

Volatile organic compounds (VOCs) emitted as a result of our businessactivities are adequately controlled and the amount of emission ismonitored under the Pollutant Release and Transfer Register (PRTR).
We will further engage in the reduction of waste through suchmeasures including using non-VOC materials and implementing
recovery and reuse of solvents. PCB waste is also subject to adequate control, storage and disposal in accordance with Japan’s
Act on Special Measures concerning Promotion of Proper Treatment of PCB Wastes.

The Company is promoting energy conservation at each of its
production bases and offices to reduce its CO2 emissions. At the
production bases in particular, we are promoting power-savingand streamlining at production facilities. In addition, the Yokohama
Plant uses solar power generation for peak shaving of power demands.

Targeted reduction of CO2 emissions and progress status
Although the CO2 reduction goal for the Company’s production
bases, the Yokohama Plant and Shiga Ryuo Plant, is to reduce
CO2 emissions per unit of production output by 1% year on year,
CO2 emissions on a per unit basis regrettably increased 8.4% at
the Yokohama Plant and 27.9% at the Shiga Ryuo Plant in fiscal
2020, due to lower production output caused by COVID-19. The
Company will make efforts to further reduce CO2 emissions going
forward.
Total energy input (electricity)
Yokohama Plant(Unit: 10,000 kWh)

Shiga Ryuo Plant (formerly Shiga Factory)

1,000
800
600

839.2
680.3
176.5
648.8
647.2
36.0
31.0
31.6

400
200

617.8

615.6

644.3

2015

2016

2017

662.7

2018

743.9
178.3

751.6
171.4

565.6

580.2

2019

2020

(year*)

Total energy input (gas)
Yokohama Plant

500
400
300

286.0

294.1

350.0

200

443.4
74.3

369.1

100

8,000 7,700
6,000

328.0

5,260

2016

2017

2018

2019

2,000
0
2015

2016

4,000
3,000
2,000
1,000

4,905

4,097
3,924
3,895
183
165
161

933

General waste output
Valuable waste output

300

338.6

424.5

(year*)

441.9

246.2

3,734

3,914

109.6

0
2016

2017

3,972

4.1

3,410

2017

2018

2019

2020

5.0

5
(year*)

Shiga Ryuo Plant
Shiga Ryuo Plant

490.6
55.1 402.0
36.9

2019

2020

Yokohama Plant

Shiga Ryuo Plant(year*)

12.4
1.1

10.4

5.0

2.3
2016

2018

15

4,184
774

Yokohama Plant
Yokohama Plant

Volume of landfill waste

0
2015

450.7
48.8

(t)

3,379

(year*)

435.5
365.1
401.9
134.7
134.8
123.6
107.6
17.6
16.6
19.8
115.0
107.0
117.1

10

3,759

2020

2016

2017

7.2
3.2

6.3

0
2015

With Our Customers
The Company makes it one of our business principles to “build trust by focusing on quality first.” As such, we strive
to enhance customer satisfaction through our commitment to thorough-going quality control as we believe delivering safe and secure products and services to customers is the Company’s most important mission.

Quality Control – Providing Safe and High-Quality Products
Basic policy on quality control
The Company’s electrical equipment for rail vehicles is installed inmany rail vehicles. These extremely important products play a
direct role in ensuring the safety of human life and property
during rail transportation. In the Industrial Systems and Information Equipment Systems segments as well, the Company’s products and services are used in customers’ production facilities,
development sites and in the field of social infrastructure, andthey form the foundation supporting the sustainable developmentof a society that is safe and comfortable to live in.
In order to ensure the high quality of our products and services,
the Company has established a quality policy, which is deployed at all
production bases as we strive to maintain and improve our humanresources education, compliance with rules, and our facilities.
Quality Policy

600

Shiga Ryuo Plant (formerly Shiga Factory)

4,185
806

2019

Output of general and valuable waste

2015
Yokohama Plant

5,000

2018

The Company has been thoroughly implementing waste processing rules, sorting metal waste and recycling paper resources. As aresult, its landfill waste rate was 2.3% in fiscal 2020. The increasein the volume of landfill waste at the Yokohama Plant is mainly
due to sewage sludge generated from large-scale maintenance ofwater supply facilities.

Total CO2 emissions
(t)

2017

Initiatives for Reducing Disposed Waste
as Well as Recycling

450 434.3

2020

5,750
6,990
6,490 7,200
6,800
6,700
6,150 6,600

(t)

424.7
86.1

0

15

7,000
5,800

150
2015

Total amount of shift

4,000

Shiga Ryuo Plant (formerly Shiga Factory)

408.2
80.2

Total amount of air emissions

10,000Main actions

0(Unit: 1,000 m3)

Notification volume for Pollutant Release and Transfer Register (PRTR) substances(kg)

Social2018*The fiscal year is from April to March of the following year *Figures for the Shiga Ryuo Plant include those of TD Drive Co., Ltd. from fiscal 2018.
*Prior to fiscal 2017, total energy input (gas) data is available only for the Yokohama Plant due to zero input of the Shiga Plant.
*Prior to fiscal 2017, data on output of general and valuable waste and volume of landfill waste is presented only for the Yokohama Plant.

11.3

2020

Challenge to achieve “zero” complaints.

(year*)

Yokohama Plant
1997

Shiga Ryuo Plant*
2000

Extended to all offices
2005*The Shiga Ryuo Plant was the Shiga Factory (Moriyama) when it obtained the certification.

Responding to the Global Market
Proper export controls
The Export Control Department at Human Resources and General
Affairs Division is responsible for export management as the export management control department. We have created a system
for the proper management of exports in order to ensure compliance with the laws and regulations concerning export management in the countries and regions where we engage in businessactivities as well as to avoid involvement in transactions that could
hinder the maintenance of international peace and safety.
The Export Control Department handles cargo and technology
parameters used in determining whether or not export permits
are required, as well as investigation of transactions. In addition,
the Department carries out employee education and guidanceand support for Group companies.

Promotion framework

Acquisition of International Standards

With regard to quality control, each fiscal year the Company develops policies and the promotion framework aimed at further maintaining and improving quality in each business unit, along withspecific policies pertaining to the reduction of flaws and other issues. The Company’s Corporate Quality Control Division works together with the quality control department or the quality assurance
department in each business unit to put together a report on thestatus of quality control and results in each unit. The report is delivered to top management at the monthly Operating Officer Liaison
Meeting where measures are debated and decided. Furthermore, inthe event that a flaw is discovered after a product has been
shipped, the necessary steps are swiftly taken, mainly by the quality
assurance department in each business unit, while at the sametime the causes that led to the flaw and its mechanism are investigated, and this information is put into a database so that the information can be shared in-house in an effort to prevent recurrence.

High level of safety is essential for rail vehicles. UNIFE, the Association of European Rail Industry, established the International
Railway Industry Standard (IRIS) in 2007 to ensure the quality ofrail vehicles.
In 2013, we became the first company in Japan to obtain an IRIS certification
for auxiliary power supply (SIV).
In 2 0 1 4, we were also accredited to
the China Railway Certification Center’s (CRCC) certification for
driving gear units. CRCC, a state-owned enterprise set up in
April 2003 after obtaining approval of the Certification and Accreditation Administration of the People’s Republic of China, isan organization that mainly manages the quality of railway products. It is necessary to obtain this certification to sell high-speed
rail products in China.
We will continue to acquireinternational standards and further expand our business globally.

Quality Management System

4.0
2019

Quality assurance to satisfy our customers.

Year ISO 9001 certification obtained

The Company has created and operates a quality management
system at its production bases, the Yokohama Plant and theShiga Ryuo Plant, and has obtained ISO 9001 certification.
Toyo Denki Seizo Report 2021

16

ESG/CSR ReportSocialWith Our Shareholders and Investors

Contributions to Local Communities

We strive to ensure transparency of management through the timely and proper disclosure of information and various modes of communication in order to receive an appropriate evaluation of the Company from our shareholders
and investors.

We are committed to various social contribution activities, to contribute to society through our business while facilitating our own co-existence with communities and to foster young people who will represent the next generation.

Towards Enhancement of Corporate Value
Basic philosophy
Through timely and appropriate disclosure of information to ourshareholders and investors, the Company accurately conveys ourmanagement policy and business conditions while making use of
IR tools such as our website to promote a full range of IR activities
that contribute to the improvement of our corporate value.

Dividends
Based on a comprehensive consideration of factors such as maintaining a stable and continuous return of profits, and strengthening the corporate structure, the Company paid a year-end
dividend of 30 yen per share for fiscal 2020. We will continue toaim to pay dividends with reference to the dividend payout ratio of
30%, a management target outlined in the medium-term management plan.
Dividend per share

Development of IR activities
IR activities for institutional investors and securities analysts
The Toyo Denki management team holds a financial results briefing each quarterly period to provide opportunities for institutional
investors and securities analysts to understand the summary of
our financial results. The management team gives a report including the state of progress of the medium-term management plan
and an overview and forecast for each segment as well as neworders received and other topics.
Briefing sessions, which are aimed to help institutional investors to deepen their understanding of the Company, were held
online during fiscal 2020 to prevent COVID-19 infection.
IR activities for individual shareholders and individual investors
The Company website includes a “For Individual Investors” page
which offers a clear introduction to our business activities and our
results, as well as making available a variety of IR materials.

Common dividend

(Yen)

40
30

Commemorative dividend

50
20

50

30

30

30

30

30

30

20
10
0
FY 2016

2017

2018

2019

2020

2021

(Forecast)

Record of 160th Annual General Meeting of Shareholders
Date held: Friday, August 27, 2021

The Company issues Business Reports for shareholders once every six months. They are also available on the website.

We are committed to activities that raise awareness and appreciation of our manufacturing expertise by accepting interns from local technical high schools and providing them with hands-on
experience at manufacturing sites. This internship system serves
as an effective means of recruiting outstanding technical staff on
a consistent basis as some students from these schools apply for
positions at the Company.
Participation in university endowment courses and hands-on
courses
We participated in endowment courses sponsored by the Yokohama Green Purchasing Network so that participants can deepen
their knowledge on history of railway and the environment throughour business activities. These courses were conducted online infiscal 2020 to prevent COVID-19 infection.
We conduct lectures leveraging the know-how
fostered through operations and our business activities in on-site training
courses held by educational institutions including
universities.
Installation of a solar power generation system at the
Yokohama Plant

https://www.toyodenki.co.jp/ir/individual.php

Interim Business Report for Fiscal 202017

Receiving interns

Material used for an endowment course

URL “For Individual Investors”

Plant tour for shareholders

To Convey the Mission and Appeal of
Electrical Industry as Well as of Toyo Denki

Business Report for Fiscal 2020

We installed a solar power generation system (500 kW) on the roofof the Yokohama Plant in 2012. In recent years, the system has
generated 600,000 to 650,000 kWh of electricity annually, all ofwhich is consumed internally. This contributes to reducing greenhouse gas emissions (equivalent to approximately 300 tons of CO2
per year) andcurbing global
warming. The
Company wasawarded by Yokohama City in recognition of thisaccomplishment.
Solar power generation system at
the Yokohama Plant

Cooperation with Yokohama Kyodo no Mori Fund
The Company cooperates in small woodlands conservation activities led mainly by the city of Yokohama by donating part of theproceeds from vending machines installed at the Engineering
Center of the Yokohama Plant to the fund.
Factory tours
Although we had to cancel them in fiscal 2020 due to the impact
of COVID-19, we normally conduct “factory tours” to provide opportunities for members of local communities to actually see our manufacturing facilities and products in order to develop deeper
understanding about the business operations of the Company.
During these tours, we inform the participants of our products aswell as our actions for environmental protection
and factory facilities, in an effort
to build up relationships built on
trust with local
communities.
A factory tour

Cleaning activities around the plants
As part of our efforts to respect people and local communities,
employees at the Shiga Ryuo Plant regularly participate in rivercleanup operations hosted by the Ryuo Clean River Community.
By carrying out river cleanup activities in cooperation with local
governments and companies, we protect the local environmentand contribute tonature conservation.

Cleanup activity

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18

ESG/CSR ReportSocialWith Our SuppliersWith Our Employees

The Company responds to the needs of our customers
through the strong network we have built with suppliersin line with our unique characteristics as a businessbased on an individual build-to-order/multi-productsmall lot manufacturing model.

To improve corporate value, we strive to be a company
where each and every employee can unleash his or hercapabilities in good health and in safe environments.

Towards Just and Fair Procurement

Striving to be a company where employees can play active roles
in good physical and mental health, the Company promotes“health and productivity management” together with the healthinsurance association and labor union. With the “Health and Productivity Management Declaration” in place, our efforts focus on
the following six priority items.

Communication with suppliers
The Company’s products possess various distinctive characteristics such as being individually built-to-order, manufactured in
multi-product small lots, and demanding high reliability. Therefore,
the Company can be affected by the performance of our suppliers
as a result of issues such as delays in supply due to fluctuationsin production quantity or delays in processing due to the quality of
products received.
In order to reduce these risks as much as possible, the Company carries out instruction and support related to quality, technology, and skills for our suppliers, as well as guidance for
improvement of manufacturing sites, in order to ensure stableprocurement of even better quality products. In addition, we
actively promote information sharing through the “Toyo Denki
Cooperation Association” to which our leading suppliers belong.

Formulation of “Procurement Action Guidelines”(formulated in February 2016)
Procurement Action Guidelines
These guidelines indicate the codes of conduct that the Toyo
Denki Group’s executives and employees should observe in the
procurement of purchased parts and outsourced parts as required for the manufacturing of products ordered by customers(“procurement transactions”).
1. Procurement transactions shall be carried out in observanceof the laws of the relevant countries.
2. Information concerning suppliers in procurement transactions
shall only be obtained within the scope necessary for conducting procurement activities in accordance with contracts. Furthermore, efforts shall be made to carefully manage andobserve the confidentiality of information gained through procurement transactions.
3. Personal interests with suppliers shall be prohibited in procurement transactions, including the lending and borrowing of money.
4. Receiving of support beyond the socially accepted practices or
receiving of money or inappropriate gifts or any other forms of
personal rewards from suppliers shall be prohibited in personaltransactions. In addition, forceful requests for any of the abovefrom suppliers shall be prohibited in procurement transactions.

* Inquiries from outside are accepted via the following phone number
and e-mail address:

Legal Compliance Department, Human Resources and General Affairs Division +81-3-5202-8121
email address for inquiries to Toyo Denki Seizo K.K.: contact@toyodenki.co.jp

19

Promotion of “health and productivity management”

Health and Productivity Management Declaration
The Toyo Denki Group expresses in its business principles
its commitment to “ensure the growth of its business, earn
the confidence and understanding of shareholders andstakeholders, and foster the development of its employees.”
Recognizing that the realization of the commitment involves
each employee to be physically and mentally healthy andable to play an active role with enthusiasm, the Company
will support its employees to achieve good health.

Disease prevention, prevention of illness aggravation
We will maintain a 100% participation rate for regular healthcheckups, improve the take up rate for specific health guidance
aimed to prevent adult diseases, and support the attendance offollow-up examinations.
Work-life balance
We are expanding systems that support flexible working
styles to achieve a balance between work and home. In
addition to a flextime system and annual leave on an hourly
basis, we have a rehiring system for employees who have toleave their jobs due to childbirth, childcare, family care,spouse’s transfer, and other life events. In addition, efforts
are underway to establish staggered commuting and remote
work that are currently in place to prevent COVID-19 infection
as part of a permanent system.
In 2014, we were certified as a “company that supports
child-rearing” and received the “Kurumin” certification logo
from the Tokyo Labor Bureau, in recognition of our efforts
including an extensive childcare-related scheme, educational
activities related to work-lifebalance support, the creation of anenvironment in which it is easy toobtain childcare leave, and thetrack record of male employees
taking childcare leave. We willcontinue to improve the childrearing support program.

Promotion of health and safety activities and realization of acomfortable working environment
To secure a safe working environment and achieve zero
occupational accidents, we have in place the “Company-Wide
Safety and Hygiene Management Policy,” and the Safety andHygiene Committee at each office addresses any issues atworkplace. Information on the committees’ actions is shared at
the Company-Wide Safety and Hygiene Committee, whichconvenes quarterly, in order to raise the level of health andsafety activities at each office.
 Improvement of employee health, communication promotion
and support
We support employees’ voluntary health maintenance andimprovement efforts, internal club activities, and social events
at each workplace. We also hold health events together withthe health insurance association and labor union to improve
the health of employees and promote communication.
Prevention of mental health problems and support for returning
to work
We annually carry out stress checks on our employees toprevent and detect mental health problems at an early stage.
In addition, we provide line care training for managers so thatthey recognize the importance of communication and promptly
coordinate with occupational health staff at each office.
Health management of employees at overseas posts
In addition to properly conducting health checkups before
overseas postings, we aim to regularly check the healthconditions of employees and follow up on the results of healthcheckups after their postings.

Training and skill development of employees
We aim to grow the capabilities of our employees and be acompany where each and every one works as a professional.

Education and training system
The Company’s education and training system is divided into level-specific training, individual training according to job types androles, a support program aimed at helping employees to obtainacademic degrees and official qualifications, and division education conducted by each division. Furthermore, new employees intechnical positions receive lectures and practical training at theTechnical Training Center for one year. They are assigned to each
workplace after receiving basic and specialized training for technical staff.
Skill transfer
Employees with exceptional manufacturing skills or expertise arerecognized as “Technical My Star” and assigned to instruct andtrain younger employees. Three employees of the Company haveaccepted Contemporary Master Craftsman awards from the Minister of Health, Labour and Welfare, and two have been awarded
to the Medal with Yellow Ribbon by the Japanese government.
Moreover, a large number of employees have become certified as
special-grade skilled workers.
Initiatives for employment of the disabled
Aiming to be a company where both the disabled and nondisabledwork together lively, the Company makes improvements to the workplace environment and carries out workplace training. We also offer
work experience in collaboration with local support organizations andspecial-needs schools. The percentage of employees with disabilities
at the Company is 2.67% (as of June 2021).

Data concerning personnel and labor (at Toyo Denki Seizo K.K.)
Item
Number of employees

Unit
Total
Men
Women

Ratio of female employees
Number of administrative professionals

%
Total
Men
Women

Ratio of female administrative professionals
Average age

Average years of employment
Average annual salary
Turnover rate (within 3 years of joining the Company)
Number of employees taking childcare leave
Number of employees taking family care leave
Number of temporary staff (including part-timers)
Notes

Persons

Persons%

OverallMen
Women
Overall
Men
Women

Age

Years
Yen
%
Persons
Persons
Persons

Fiscal 2016
832
768
64
7.7
150
146
4
2.7
40.4
40.4
40.1
15.2
15.2
14.8
5,990,250
2.0
9
0
152

Fiscal 2017
843
771
72
8.5
140
136
4
2.9
40.2
40.3
39.5
14.9
15.1
12.7
6,049,512
2.7
4
0
130

Fiscal 2018
831
762
69
8.3
143
139
4
2.8
40.8
40.8
40.9
15.4
15.5
14.1
5,756,046
6.5
6
0
119

Fiscal 2019
841
773
68
8.1
136
133
3
2.2
41.0
40.9
41.7
15.4
15.5
14.1
5,634,571
4.7
2
0
106

Fiscal 2020
847
766
81
9.6
139
136
3
2.2
41.7
41.6
42.8
16.0
16.2
13.9
5,518,761
2.4
8
0
86

*Number of regular employees including Operating Officers, and number of special employees, temporary employees, contract employees and staff
on loan from other companies, etc.

Toyo Denki Seizo Report 2021

20

ESG/CSR Report

GovernanceIn an effort to continuously enhance its corporate value, the Company is striving to ensure transparency ofmanagement and compliance, along with the maintenance and operation of an adequate governance framework while reinforcing its risk management framework.

Corporate GovernanceOur philosophy of corporate governance
The Group’s business activities are based on the business principles that “prioritize ethics and contribute to the prosperity of customers and society as a whole.” We therefore strive to attainsound corporate management through strengthening and reinforcing corporate governance, fully appreciating the significanceof compliance based on corporate ethics. At the same time, we
review as appropriate our management monitoring system to ensure its conformity to the changes in the business environment
including social environment and relevant legislation.
Corporate governance

21Internal audit and Statutory Auditor’s audit
Internal audit
Internal audits of the Company are carried out by the Audit Division based on internal audit plans decided by the Board of Directors. The Audit Division has staff with qualifications such as theCertified Information Systems Auditor (CISA). It reports its actionplans and internal audit results to the Board of Directors and theBoard of Statutory Auditors.
Statutory Auditors’ audit
Statutory Auditors work with the Audit Division and Accounting
Auditors and exchange information on audit plans and contents ofaccounting audits to perform appropriate auditing tasks. Statutory
Auditors receive the results of quarterly reviews from Accounting

Outside Directors and External Statutory Auditors
The Company’s Outside Executives currently include three Outside
Directors and three External Statutory Auditors as shown below.
Each Outside Executive has excellent insight in each expertiseand satisfies the independence guidelines for Outside Executives
defined by the Company.
Mr. Hirokazu Chinone, Director (Outside Executive)
Mr. Hirokazu Chinone is qualified as a lawyer and provides usefuladvice regarding management in general, drawing on his specialized knowledge regarding corporate law and his wealth of experience developed throughout his career.
Mr. Koji Mizumoto, Director (Outside Executive)
Mr. Koji Mizumoto is expected to provide useful advice, drawing
on his wealth of corporate management experience at a predecessor firm to NIPPON STEEL CORPORATION and his knowledgeof financial accounting as CFO.
Mr. Taizo Makari, Director (Outside Executive)
Mr. Taizo Makari was newly appointed as Director at the 160th
Annual General Meeting of Shareholders on August 27, 2021. He
is expected to provide advice to ensure the legality and appropriateness of the Board of Directors of the Company, drawing on his
extensive insight and global perspectives developed throughout
his career.
Mr. Toshiaki Akechi, Statutory Auditor
Mr. Toshiaki Akechi is engaged in auditing activities, drawing on
his wealth of corporate management experience at a predecessor
firm to JR East Foods Co., Ltd. and other places.

Mr. Yoshinori Kawamura, Statutory Auditor (Outside Executive)
Mr. Yoshinori Kawamura serves as Professor of Faculty of Commerce, Waseda University, and is engaged in auditing activities,
drawing on his expertise regarding corporate finance and accounting
developed thus far. He also has experiences as Secretary and Special Member of the Business Accounting Council of the Financial
Services Agency, and an examiner of the Certified Public Accountant
Examination, etc.
Mr. Yasushi Miki, Statutory Auditor
Mr. Yasushi Miki is engaged in auditing activities, drawing on his
wealth of experience developed at a predecessor bank to MUFG
Bank, Ltd. and other places and his global perspective.
Executive Remuneration
Directors
Remuneration for the Company’s Directors is determined within
the maximum remuneration amount resolved at the Annual General
Meeting of Shareholders held in August 2006, with reference tothe policy for determining remuneration for Directors resolved by
the Board of Directors. To ensure the independence of Outside
Directors, the Company provides no bonuses to them. Decisions
on remuneration for Directors are made at the Nomination andCompensation Advisory Committee set up under the Board of Directors, with the participation of Outside Directors, in order toenhance objectivity and transparency of the decision process for
executive remuneration.
Statutory Auditors
Remuneration for the Company’s Statutory Auditors is determinedthrough discussion among Statutory Auditors within the maximum
total remuneration, which was fixed at the Ordinary General Meeting of Shareholders held in August 2006. It takes form of fixed remuneration for each standing and part-time position. There are nobonuses for Statutory Auditors.

Corporate governance framework
General meeting of shareholders
Appointments/dismissals

Accounting Auditors

Reporting

ReportingAppointments/dismissals

Legal audit

Board of Statutory Auditors

ReportingDirectors

Statutory Auditors
Reporting

Reporting/decisions
Instruction/reporting

Internal Control Committee
Internal audit(Secretariat)

Legal counsel(Contact for whistle-blowers)

Reporting

Reporting

Human Resources andGeneral Affairs Division(Contact for whistle-blowers)(Contact for legal consulting)

Reporting on
business execution

Appointments/dismissals

Business audit

Accounting audit

Audit Division

Appointments/dismissals

Board of Directors

Appointments/
reporting/recommendations
Whistle-blowings
Oversight
Whistle-blowings

President
Management Strategy Meeting
Operating Officer Report Meeting
National and Global Group Company Meetings
Instruction/reporting

Appointments/dismissals

We have corporate bodies established in accordance with laws
and regulations as well as the Articles of Incorporation, including
the General Meeting of Shareholders, Directors and the Board of
Directors, Statutory Auditors and the Board of Statutory Auditors,
and Accounting Auditors. To strengthen corporate governance, thesupervision and execution functions of the Board of Directors are
separated, through the adoption of a structure where the Board of
Directors is mainly in charge of governance, and Operating Officers are primarily in charge of business execution.
The Company strives to ensure that both the supervision function of the Board of Directors and the audit function of (the Boardof) Statutory Auditors work effectively and believes that the current system is sufficiently running.
Specifically, each of the following bodies and meeting bodies isin place to function effectively.
Directors and the Board of Directors
At its regular monthly meetings as well as extraordinary meetings held when appropriate, the Board of Directors, which iscomposed of seven Directors including three Outside Directors,
discusses and decides on important management matterssuch as reports on Operating Officers’ business execution andmatters to be decided solely at the discretion of the Board of
Directors, while supervising the execution of duties by Operating Officers.
 Management Strategy Meeting and Operating Officer Report
Meeting, etc.
The Company has meeting bodies including the Management
Strategy Meeting and Operating Officer Report Meeting. Throughthese bodies, specific matters related to their execution of duties
and critical management matters including those subject to thedeliberation of the Board of Directors are reported to the President by Operating Officers and the general managers of business execution departments, deliberated and discussed

preliminarily. In addition, Outside Directors and Statutory Auditors
attend these meeting bodies, as necessary. As for the matters
discussed at meetings, matters subject to the deliberation of theBoard of Directors are decided by the Board of Directors andother matters are decided by employees with business execution
authority through means such as circulars based on the Management Authority Rules.
Statutory Auditors and the Board of Statutory Auditors
The Board of Statutory Auditors is made up of four members
including three External Statutory Auditors. Statutory Auditors
oversee management by attending the Board of Directors’
meetings, etc. and expressing appropriate opinions in the process of deliberating business execution reports from Operating
Officers and matters to be decided solely at the discretion of
the Board of Directors. In addition, Statutory Auditors audit thebusiness activities and assets of the Company and Group companies in accordance with audit policies and division of duties
set by the Board of Statutory Auditors.
Voluntary committees
a. Nomination and Compensation Advisory Committee
Under the Board of Directors, the Company has in place theNomination and Compensation Advisory Committee, whose
members include Outside Directors. Its purpose is to list
candidates for Directors and Statutory Auditors and nominate Operating Officers, and to ensure transparency andobjectivity regarding decisions on compensation for Directors and Operating Officers.
b. Internal Control Committee
The Internal Control Committee is in place under the Boardof Directors to develop a system stipulated in the basic policy of internal control systems, check the operation status,and conduct constant reviews. The Committee meets quarterly, and the contents of deliberation are reported to theBoard of Directors each time.

Auditors both verbally and in writing, and confirm their actionplans to be taken at a fiscal year-end audit. Statutory Auditors
also receive the results of fiscal year-end audits from Accounting
Auditors in statutory documents along with verbal reviews. Furthermore, Statutory Auditors are in principle required to be present at inventory taking or on-site inspection at subsidiaries by
Accounting Auditors.

Operating Officers
Instruction/reporting

Each business department
Instruction/reporting

Instruction/
reporting

Each Group company

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GovernanceKoji Mizumoto

Executive Profiles (as of October 1, 2021)

Chairman,
Representative
Director

President,
Representative
Director

Director

Akihiko Ishii

Director

Director (Outside)

Director (Outside)

Director (Outside)

Yoshifumi Otsubo Hirokazu Chinone Koji Mizumoto

Taizo Makari

Kenzo Terashima Akira Watanabe
Director Skill Matrix

NameStanding Statutory Auditors

Areas of expertise and experience
OutsideSales/ Research and Manufacturing/ Global Accounting/Directors Corporate
management Marketing development/ Quality control business FinanceTechnology

Kenzo Terashima
Akira Watanabe
Akihiko Ishii
Yoshifumi Otsubo
Hirokazu Chinone
Koji Mizumoto
Taizo Makari

Toshiaki Akechi Kenji Ueda
Legalaffairs

Statutory Auditors

Yoshinori Kawamura Yasushi Miki
Senior Executive Officers

Akihiko Ishii Yoshifumi Otsubo
Executive Officers

Shuji Horie Kenji Tanimoto

Points of discussion and advice at the Board of Directors

The Ministry of Economy, Trade and Industry published practicalguidelines on outside directors to strengthen corporate governance, raising expectation that the independent officer system
will play more serious role.
I worked for a material manufacturer for more than 40 years,
during which I experienced many good and bad things that happened in varying degrees to corporations. I recognize that it is
my main mission entrusted by shareholders to supervise management effectively and positively with the eyes of an outsider
while making the best use of my experience.
Specifically, I hope to give advice to the current executive
team and management for the Company’s future development
based on my experience including past reflections and newstudies. In particular, I would like to fulfill my role in the Company’s efforts to survive and become highly profitable and future-oriented with everyone’s participation through mechanisms(systems).

I think what is often lacking in the resolutions made by boards of directors is the viewpoints of outsiders and perspectives in terms ofwhether they meet the mandates given by various stakeholders.
Below is a checklist that should be reviewed by members of boardsof directors in my opinion. I will participate in discussions and give
advice based on these points.
Clarity of top management’s instructions and responsibility forbusiness earnings
Level of targets, achievements, and internal dissemination of
medium- and long-term management plansM easures to increase our stock price, awareness and actions for SDGs
Information-gathering function and concrete actions for takeover defense
Product pricing power, sales capabilities, material procurement
capabilities, financial positionH ealth and safety track records and measures at plants
B CP and risk managementH uman resource development measures (development of staff andnext management team) and management of personnel systemsF uture orientation of the company, new products and R&D status
General management issues such as the operation status ofcomputer systems

Operating Officers

Naoki Okuyama Toshihito Nakanishi Shini Furutsuki
Takuya Hatakeyama Toshiharu Takagi Chiaki Nakano
Yuji Nagano Hiroyuki Imaizumi Jun Nukina

Taizo Makari

Messages from Outside Directors

Hirokazu Chinone

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Role of Outside Director

Role of Outside Director

Points of discussion and advice at the Board of Directors

The Companies Act stipulates that the authority of a board of directors is to make decisions on important business execution
matters and oversee the execution of duties, and this also applies to directors who make up the board of directors.
Furthermore, the main role of outside directors is to oversee
the execution of duties in particular. The reason for this is that itis thought to be beneficial to have independent outside directors
who have no ties of obligation to internal directors and few
stakes, in order to prevent illegal and unfair decisions with compliance issues.
I am a lawyer by profession. I don’t have any experience inrunning a company, making it difficult to give useful and appropriate advice to improve the Company’s business performance,
but I believe monitoring business execution is my area of expertise to prevent the Company’s scandals and various risks.

Since my appointment as Director, fortunately no agenda itemor proposal that would become a compliance issue has beenpresented to the Board of Directors.
However, it is generally understood that even when a compliance issue emerges, that information rarely reaches the Boardof Directors, and in many cases, it is too late when the problem
is discovered. In order to avoid this, it is necessary to havemechanisms in place that allow negative information to beraised to executives. Such mechanisms include an internal audit
department that is independent of business divisions and whistleblowing systems. I believe that it is important to ensure thatsuch bodies function successfully and dot not end up just being
a formality.

Role of Outside Director

Points of discussion and advice at the Board of Directors

The enforcement of the revised Companies Act has tightened thecriteria for independence, and the application of the Corporate
Governance Code has made it practically mandatory for listedcompanies to have a certain number of outside directors. My understanding is that outside directors are expected to fulfill the following three roles, from their external and objective viewpoints,
without conflict of interest: monitoring and supervision of corporate governance; advice for and screening and approval of corporate strategies and plans; and appropriate incorporation of
stakeholder opinions into business execution. There are strong
calls for the appropriate involvement of outside directors in response to a number of scandals, including quality frauds in the
manufacturing industry that still continue to occur. I will perform
my job with a strong awareness of these three expected roles.
I am keenly aware that, to effectively fulfill these roles, it isnecessary to not only harness various knowledge and insightgained from the experience of company management, but also
make efforts to understand well the Company’s business operations, history, culture, and feelings, and to continuously grasp thechanges in social needs from the present to the future.

My experiences in business execution include roles for both business implementation and company-wide functions, such as capital investment for domestic and overseas production facilities andengineering in general for my company, engineering business forother companies, governance of overseas group companies as
the president of an overseas supervisory company, director of an
IT company, disaster prevention and safety management of important facilities, energy strategies as part of measures for SDGs,
and utilization of ICT for production. In these roles, I experienced
various failures, difficulties, and recoveries, and I think that I reasonably understand the main points and risks of each issue.
At the Board of Directors, I intend to discuss and advise on
strategic direction in line with future needs and demands of society, particularly in terms of production technology, technology andproduct development, quality control, capital investment, safety
management, measures for SDGs, development of technical human capital, and overseas expansion, which are important aspects for the manufacturing industry. By doing so, I would like tocontribute to the sound development of the Company’s businessand the improvement of corporate value.
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GovernanceInternal Control and ComplianceInternal Control
The Company views the development and operation of an internal
control system to be an important management issue, and it hasdeveloped an efficient, legal and appropriate business execution
system pursuant to Article 362 of the Companies Act and Article
100 of the Ordinance for Enforcement of the Companies Act. The
Internal Control Committee established under the Board of Directors reviews the operational status of the internal control system
and will revise it as necessary.
Principles of compliance
The Company has set “1. adherence to rules,” “2. observance ofconfidentiality,” “3. distinction between private and public matters,” “4. strictness with money,” “5. prohibition of side jobs,” and“6. prohibition of discriminatory and sexually suggestive statements or behavior” as principles of compliance.
Compliance promotion framework
To focus on business principles and fulfill its social responsibility,
the Company has provided all officers and employees with a copyof the Compliance Manual (Toyo Denki Seizo Ethical Standards)
that stipulates its code of conduct. The move is part of an effort tohave the code and the basic rules of work fully known.
The Company has also introduced a whistle-blowing systemthat allows employees to provide information directly to the management. The system is aimed at ensuring that any illegal orinappropriate conduct within the Company is detected at theearliest possible stage and that adequate measures are taken
promptly and as needed so that such conduct is rectified.
Compliance education
We conduct compliance training every year for all employees of
the Group in order to enhance knowledge of compliance and foster awareness to respect corporate ethics.

Risk Management
Basic policy
The Company is engaged in developing rules and a framework forrisk management according to the Basic Rules for Risk Management established in August 2006.

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Promotion framework
The Company has established the Internal Control Committee under the Board of Directors, chaired by the President. It analyzes
and assesses all the risks that exist in the Group and develops aneffective risk management framework capable of dealing precisely with the risks of the types and degrees that the Group is exposed to. The committee specifically reviews risk verifications andcountermeasures, and periodically reports details of its deliberations to the Board of Directors.

Risk Factors
From the perspective of proactive information disclosure, theGroup intends to disclose a wide range of recognizable risks. Major risks that may affect its earnings and financial position are set
out below. The Group aims for thorough understanding of theserisks in order to establish a necessary risk management framework designed to prevent the risks from materializing or minimize
the impact of risks if they do materialize.
Forward-looking statements below are based on the judgmentof the Group as of the end of the fiscal year ended May 2020.
(1) Changes in domestic and international economic trends
The Group’s sales heavily rely on the Transportation Systems
and Industrial Systems segments. Its customers conduct business operations at home and overseas. As such, business climates and individual spending conditions in different countries
may affect the Group’s business performance.
(2) Large-scale disasters and outbreak of infectious diseases
The great majority of the Group’s production bases for theTransportation Systems segment are located in the Kanto area
and those for the Industrial Systems segment are in the Kansai area. Production capacity may be severely affected bylarge-scale disasters and the outbreak of infectious diseases
in either of these areas. Furthermore, large-scale disasters
and the outbreak of infectious diseases may hinder the entire
supply chain and impact order trends, thus affecting the Company’s production and earnings.
Since January 2020, COVID-19 has been spreading in Japan and overseas. The Group is taking actions to help preventthe spread of infections, while prioritizing the safety and healthof employees through measures such as staggered commuting
and working from home and minimizing hindrance to production. Although the impact on our business operations has been
limited as a whole, orders and sales have been somewhat affected due to restrictions on movement and overseas travel.
The Company’s earnings forecast announced already takesthese effects into account. However, if infections spread morethan expected in the future, the Company’s business may befurther affected.
(3) Intensifying competition
The Japanese market for the Transportation Systems segment
has matured and thus faces intensifying competition. The Industrial Systems segment is also under pressure from intensifying competition for product development. The Group’sbusiness performance may be affected by such intensifying
competition.
(4) Occurrence of large-scale damages
If large-scale damages are incurred due to product defects
and other causes and cannot be covered by insurance, it may
affect the Group’s business performance.
(5) Delays in product development
With a view to providing attractive products to customers, theGroup applies itself to gathering information about customer
needs and leverages it in the development of new products to
support its future growth. However, delays in the developmentof new products to respond to rapid technological or environmental changes may affect the Group’s performance.
(6) Delays and other problems in the supply of materials
Owing to the fact that the Group’s business has various distinctive characteristics, some of the materials it procures are
not easily available due to factors such as a limited number ofsuppliers. Delays in supply or discontinuation in production ofsuch materials may affect the Group’s production. Moreover,the Group’s business performance may be affected by thefluctuation in prices of raw materials, notably steel products
and copper.
(7) Changes in overseas situations
The Group proactively pursues the expansion of overseas operations including the Chinese market. Its business performance may be affected by major changes in situations
overseas.
(8) Litigations and other legal proceedings
If the Group becomes the subject of any litigation or other legal proceeding, its business operations and performance may
be affected. Although the Group particularly attends to theprotection of intellectual property rights, amid drastically advancing technical innovations and accelerating globalization ofbusiness, the Group is inevitably exposed to potential disputes
with third parties over intellectual property rights.
(9) Relationships with business alliance partners
With the aim of business expansion and enhancing competitiveness, the Group proactively pursues various alliances withthird parties. However, if these alliances do not deliver expected results due to a failure in forging favorable relationships
with partners, the Group may face an impact on its performance.

(10) Exchange rate fluctuations
As the Group is aggressively expanding into overseas markets, an increase in foreign currency denominated transactions will heighten the impact of exchange rate fluctuations
on the Group’s performance.
(11) Fluctuations in the value of holding assets
Fluctuations in the fair value of assets held by the Group may
affect its performance.
(12) Changes in financial conditions
The Group’s financing programs may be affected by unexpected changes in financial conditions.
(13) Breach of confidential information
The Group retains customer information related to its business executions. Also, it possesses various types of confidential information concerning the Group’s proprietary
technologies and operations. If these information assets leakoutside the Group for unforeseeable reasons, it may impact
its business operations and performance.
(14) Domestic and foreign laws and regulations
The Group proactively pursues expansion in overseas operations, particularly the Chinese market, and as such, its operations are subject to not only Japanese laws but also the laws
and regulations of each country. Although the Group has established and operates a robust compliance system, its business operations and performance are still at risk from theeffects of unforeseeable events.

Information Security
Basic policy
The Company holds a vast amount of information assets including
information presented by customers related to its businessexecution and confidential information concerning the Group’s
proprietary technologies and its trade. Each Group company istaking various measures in this respect based on an awarenessof shared security under the Group’s Information Security Guidelines, which have been established to adequately manage anduse these information assets.
Information security training
The Company is conducting educational activities to develop
information security awareness among all employees including
various training sessions, some involving the use of educationalDVDs.

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