ANNUAL
REVIEW2017
Fiscal year ended
January 31, 2017

Change, Challenge, Speed

Aboutthe Ryoyo Group
Ryoyo Electro Corporation was founded in 1961 as a semiconductor trading company. Since
its foundation, the Company has continued to expand the range of its operations in step withchanges in the electronics industry while maintaining close and functional business relationships
with world-leading suppliers. In our semiconductor and device business, we have establisheda robust product lineup featuring a wide range of promising products from both Japan andoverseas, and we take great pride in our skillful support services, which are backed by theexperience accumulated over our long history. Meanwhile, in our information and communication
technology (ICT) and solutions business, we handle a diverse range of solutions that begins
with kitting services in which we select hardware, operating systems, applications, and otheritems after providing consultation to determine customer needs. Our solutions do not end
with sales, however, as we also provide follow-up support after systems are introduced.
By merging the products and services offered in its core semiconductor and device businessand ICT and solutions business, the Ryoyo Group is currently deploying an Internet of Things(IoT) approach to help customers implement their strategies and resolve the issues they face.
Furthermore, we will differentiate our lineup with new services and solutions arising fromboth businesses in order to raise the value of our business and subsequently increase ourcorporate value.

CONTENTS

01 About the Ryoyo Group

10 Financial Section

03 To Our Shareholders

18 Corporate Data /07 Corporate Governance

Investor Information

Caution on Forward-Looking Statements
The contents of this annual review that are not historical fact represent projections based on expectations andplans for the future. These projections contain elements of risk and uncertainty. As a result, forward-looking
statements made in this annual review may differ from actual results and performance.
Notes on Performance Figures in this Annual Review
The performance figures used in this annual review, including those from previous fiscal years, are based on
Ryoyo Electro Corporation’s audited Japanese financial reviews.
Notes on the Scope of this Annual Review
With respect to the contents of this annual review, “the Company” refers to Ryoyo Electro Corporation, while“the Ryoyo Group” refers to Ryoyo Electro Corporation and its consolidated subsidiaries Ryoyo Semicon Corporation,
Ryoyo Electro (Shanghai) Co., Ltd., Ryoyo Electro Hong Kong Ltd., and Ryoyo Electro Singapore Pte., Ltd.

01

Corporate Philosophy“Creating value in tune with the times”
MissionWe shall strive to always be a corporate groupthat grows together with stakeholders.
Medium-Term Vision
The Ryoyo Group will act as a solutions-providing partner thatleaves an impression on the intrinsicallyinterconnected “smart society.”

Basic Policy

Create new strengths with IoT
approach to contribute tocustomers’ value improvements

Smartphone

Office automationequipment

New generationof vehicles

Industry andfactory automation

TabletM2M

Medical careand healthcare

Energy saving

Businesscreation
aptitude
Semiconductors
andDevices

Solutionsprovision
capabilities

Customer
relations(understanding ofcustomers)

Information
andCommunication
Technology

02

To Our Shareholders

Takayoshi Oouchi

Kenhachiro Ogawa

President andChief Operating Officer

Chairman andChief Executive Officer

Progress of the Medium-Term Business Plan
Creating New Strengths with an IoT Approach
The Ryoyo Group kicked off a new medium-term business planthat merges the products and services of our core semiconductorin the fiscal year ended January 31, 2017. Under this plan, weand device business and ICT and solutions business to help

will pursue higher corporate value through measures tocustomers implement their strategies and resolve the issues

expand core businesses with an IoT approach, make strategic

they face. Through initiatives based on this approach, we haveinvestments in growing areas, accelerate global strategies,sought out key devices and services and steadily stepped up

reinforce business bases for sustainable growth, and promote

cooperation with partner companies.
To serve the railway industry, for example, we aim to provide

CSR management.
The IoT approach, positioned as the core of our growthstrategies, represents a high-value-added business model

solutions to address customer issues related to abnormality
sensors for level crossings and safety and anti-terrorism
RYOYO

Overview of Initiatives with
Railway Company

Business Design
andSystem Coordination

Understanding of customers’ true issues

Combination of fundamental
technologies and products

Business design

System coordination

Creation of cloud-based image
monitoring solutions

03

Cloud

We will continue to pursue
higher corporate value.

measures for trains and train stations with an IoT approach. To

into the Greater China and ASEAN regions. Recently, we havethis end, we created a cloud-based image monitoring systembeen working to enhance the support services we provide forby coordinating with partner companies to supply comprehensive

such business relocations while also turning our attention to

support that encompasses everything from the provision ofcreating unique, new businesses at overseas sites to acquire

solutions and the selection of products that incorporate IoT

local customers, uncover viable local products, and develop

concepts to system coordination. The next step in our efforts

ICT businesses.

to cater to the railway industry will be to package this system

In addition, we established a new subsidiary in Bengaluru,

with the Group’s original solutions. In addition to aiding railway

India, in October 2016. With our entry into this market, we willcompanies, we also plan to utilize these solutions to serve

strive to expand overseas operations in three regions: Greater

other industries and customers with unmet image monitoring

China, ASEAN, and now India. Our operating site in the Unitedneeds, such as convenience stores and drugstores.

States, which is positioned as a base for gathering information,

A common challenge faced in IoT approach initiatives is thatprojects generally require more time to come to fruition thanwill be utilized to contribute to enhanced service quality acrossthe Group.

initially anticipated, as the adoption of IoT concepts is often a
new undertaking for customers. For this reason, we areconducting mergers and acquisitions and other strategic
investments and working to link these efforts to quicker results

Expansion of overseas
operations in three regions

in order to accelerate our IoT approach.

DalianShanghaiAccelerated Development of
Global Operations
Our overseas operations are undergoing a major transformation,
stimulated by the shrinkage of the domestic market amidsluggish consumer spending and the trend toward customers
developing their operations globally. These operations were
initially focused on supporting customers seeking to expand

Greater China
ShenzhenJapan

TaipeiHong Kong

India
Bengaluru

Bangkok

ASEAN
Kuala Lumpur
Singapore04

To Our Shareholders

Returns to Shareholders

Pursuit of Higher Corporate Value

It is the Company’s policy to target a total return ratio ofSince its founding, the Ryoyo Group has continued to operate

100% of profit attributable to owners of parent for thein accordance with its corporate philosophy of “creating value

foreseeable future by issuing dividend payments andin tune with the times.” Guided by this philosophy, we haveconducting share buybacks. In the year under review,

defined “Change, Challenge, Speed” as our management

we increased dividend payments by ¥10, making for an annual

principle and are advancing various measures to realize ourcash dividend of ¥40 per share of common stock, and also

vision—the Ryoyo Group will act as a solutions-providing

acquired 150,000 shares of treasury stock. For the fiscal year

partner that leaves an impression on the intrinsically intercon-

ending January 31, 2018, we plan to raise dividend payments

nected “smart society.”by another ¥20 for an annual cash dividend of ¥60 per share.

Going forward, we will continue to pursue higher corporate

We will also consider the possibility of additional share buy-

value. Measures to this end will include quickly transitioning

backs and dividend increases based on performance trends.

to a higher-value-added business model and reinforcing businessbases for sustainable growth through work style reforms and2015.1

2016.12017.1

2018.1(Forecast)

Annual Cash Dividend
(Yen)

30.00

30.00

40.00

60.00

Payout Ratio
(%)

44.9

100.0

119.2

133.7

CSR management.

Overview of Business Performance
Operating Environment and Performance in the Year under Review
In the electronics industry, where the Ryoyo Group operates, we are

In regard to performance in the year under review, the conclusion

seeing the acceleration of the movement to realize practical appli-of large-scale orders led to a year-on-year decrease in net sales.

cation of IoT technologies. However, the semiconductor andHowever, operating income and profit attributable to owners

device market was impacted by a slowdown in China and theof parent rose due to the absence of losses on disposal and the

major earthquake that struck Kumamoto Prefecture in April 2016.

write-down of inventories recorded in the previous fiscal year.

In this environment, the Ryoyo Group worked to reinforce andexpand the foundations of its core semiconductor and device and
ICT and solutions businesses. We also stepped up initiatives
targeting the IoT field.

05

Net Sales

Operating Income /Operating Income Margin

Millions of yenMillions of yen

110,107 112,332

98,417100,000

110,000

ROE

%

2,600
2.4

2,053
1.9
1,373
876

%

2.7

2.6
1.7

1,550
1.1

1.6

1.3

1.4

0.8

15.1

16.1

17.1

18.1

19.1

15.1

16.1

(Forecast) (Forecast)

17.1

18.1

19.1

15.1

16.1

(Forecast) (Forecast)

Operating Income

Outlook for the Fiscal Year Ending
January 31, 2018
Looking ahead, we expect to see proactive investments in theelectronics industry in preparation for the full-fledged spread

17.1

18.1

19.1

(Forecast) (Forecast)

Operating Income Margin

products include the Wi-Fi solutions we began offering in 2016as well as products with competitive advantages in relation to
artificial intelligence and deep learning.

Games. However, there is a rising sense of uncertainty in the

Revision of the Medium-Term Business Plan
Performance Targets

industry stemming from lingering concerns related to foreign

The operating environment has undergone substantial changes

exchange circumstances and unstable global economic andsince the current medium-term business plan was establishedpolitical trends.

in August 2015. Based on a comprehensive evaluation ofof IoT and the upcoming Tokyo 2020 Olympic and Paralympic

For the fiscal year ending January 31, 2018, we forecast

these changes and the progress of the plan’s various mea-

net sales of ¥100.0 billion, up 1.6% year on year; operatingsures, we chose to revise the performance targets of theincome of ¥1.5 billion, up 12.9%; and profit attributable tomedium-term business plan. The new targets for the fiscal

owners of parent of ¥1.1 billion, up 33.7%. Sales in theyear ending January 31, 2019, call for net sales of ¥110.0 billion,

semiconductor and device business are projected to decrease,

down from the previous target of ¥150.0 billion. Likewise,

primarily due to the impacts of the transfer of distribution rights.

the operating income target was lowered from ¥5.0 billion toAlso, traditional operations in the ICT and solutions business,¥2.6 billion and the return on equity target was loweredsuch as those dealing in standalone hardware, are expectedfrom 5.0% to 2.7%. While we have revised our target for ROE,

to face a difficult operating environment. In the focus area of

we will continue to aim to promptly raise ROE to over 5%.

IoT-related businesses, meanwhile, we anticipate that several
businesses centered around high-margin products will get off
the ground in the fiscal year ending January 31, 2018. These

Kenhachiro Ogawa

Takayoshi Oouchi

06

Corporate Governance
Board of Directors, Audit & Supervisory Board, and Corporate Officers
As of April 27, 2017
Audit & Supervisory Board Member

Yutaka Horikiri
Outside Audit & Supervisory
Board Members

Ryoji Kimura
Tsutomu Nobechi
Kazumi Akiyama
Managing Executive Officer

Kenhachiro Ogawa

Takayoshi Oouchi

Nobuo Kikutsugi

Masaaki Tanabe

Chairman and CEO

President and COO

Director

Director

Nobuo Kikutsugi
Senior Executive Officers

Masaaki Tanabe
Kiyoshi Waki
Yoshitsugu Tamakoshi
Shigeharu Hanazaki
Executive Officers

Takumi Tokunaga
Seiju Yasuda
Kiyoshi Waki
Director

Yoshitsugu Tamakoshi
Director

Yoshiharu Hayakawa

Tsumiko Nakahara

Outside Director(Independent Director)

Outside Director(Independent Director)

Basic Corporate Governance Philosophy
At the Company, we recognize enhancing corporate governance as an important task for management. Therefore, inorder to continue to guarantee the soundness, transparency,
and effectiveness of management, as well as increase corporate value and fulfill our responsibilities to society, we are
striving to develop internal systems that ensure the functionality of corporate governance.

In principle, the Board of Directors meets once a month andmet a total of 12 times during the year under review.
Audit & Supervisory Board Members andAudit & Supervisory Board
The Company is a Company with an Audit & Supervisory
Board as defined by the Companies Act of Japan, whereby
Audit & Supervisory Board Members act independently of
directors and oversee directors’ execution of operations. The
Audit & Supervisory Board consists of four Audit & Supervi-

Company Organizations
Outline of the Corporate Governance Frameworksory Board Members (as of April 27, 2017), of whom three are

Organizational format

Company with Audit & Supervisory Board

outside Audit & Supervisory Board Members. In principle, theChairman of the Board of Directors

Chairman and CEO

Audit & Supervisory Board meets once a month and met a

Number of directors

8 (including 2 outside directors)

total of 15 times during the year under review.

Number of Audit & Supervisory Board
Members

4 (including 3 outside Audit & Supervisory
Board Members)

Independent officers

2 outside directors and 3 outside Audit &Supervisory Board Members

Policy for Appointment of Independent Directors
The Company’s basic policy is to appoint two or more inde-

Number of Board of Directors’ meetings
held during the fiscal year ended
12
January 31, 2017

pendent directors, and the Company currently has two inde-

Number of Audit & Supervisory Board
meetings held during the fiscal year
ended January 31, 2017

Company’s own criteria for judging independence in order to15pendent directors. These directors are selected based on theensure that they are able to effectively fulfill their role andresponsibilities in facilitating the ongoing growth of the Com-

Directors and Board of Directors

pany and the medium-to-long-term improvement of its corpo-

The Board of Directors, which consists of eight directors (as ofrate value.

April 27, 2017), is responsible for making decisions as stipulated in laws, regulations, and the articles of incorporation;
making important management decisions; and overseeing
the execution of operations.

07

Board of Directors, Outside Directors, and Outside Audit & Supervisory Board Members
Directors

Reason for appointment

Kenhachiro Ogawa

Kenhachiro Ogawa has extensive business experience at the Company and, having been involved in the management of the Company as a director
for many years, he possesses broad insight into the overall management of electronics trading companies and has demonstrated strong leadership.
For these reasons, the Company believes that he is suited to the position of director and capable of improving the Company’s corporate value.

Takayoshi Oouchi

Takayoshi Oouchi has extensive management experience across a wide range of areas, including that gained in sales and technology divisions andthe Company’s Corporate Strategy Division, and he possesses broad insight into the overall management of electronics trading companies. For thesereasons, the Company believes that he is suited to the position of director and capable of improving the Company’s corporate value.

Nobuo Kikutsugi

Nobuo Kikutsugi has many years of management experience in the semiconductor and device business and possesses extensive experience andbroad insight into the Company’s business. For these reasons, the Company believes that he is suited to the position of director and capable ofimproving the Company’s corporate value.

Masaaki Tanabe

Masaaki Tanabe has many years of management experience in the ICT and solutions business and possesses extensive experience and broad
insight into the Company’s business. For these reasons, the Company believes that he is suited to the position of director and capable of improving
the Company’s corporate value.

Kiyoshi Waki

Kiyoshi Waki has cultivated a wealth of experience in Japan and overseas by working for a financial institution. Since joining the Company, he has
gained management experience through positions in the Corporate Strategy Division, the Overseas Marketing Division, and the Administration
Division. He also possesses highly specialized knowledge and broad insight into accounting and finance. For these reasons, the Company believes
that he is suited to the position of director and capable of improving the Company’s corporate value.

Yoshitsugu Tamakoshi

Yoshitsugu Tamakoshi has many years of experience in the semiconductor and device business of Mitsubishi Electric Corporation and, having been
involved in management as a general manager responsible for the semiconductor and device business since joining the Company, he possesses
extensive experience and broad insight into this business area. For these reasons, the Company believes that he is suited to the position of director
and capable of improving the Company’s corporate value.

Outside directors

Reason for appointment

Yoshiharu Hayakawa

Yoshiharu Hayakawa was selected to be an outside director with the aim of utilizing his expert knowledge as
Certified Public Accountant, as well as his extensive experience and broad insight as a management consultant,
to help strengthen the corporate governance systems of the Company.

10/12

Tsumiko Nakahara

Tsumiko Nakahara was selected to be an outside director with the aim of utilizing her sophisticated expertise withregard to all areas of corporate legal affairs based on her long history as Attorney and related scholarly knowledge
and experience to help strengthen the corporate governance systems of the Company.

12/12

Attendance at meetingsof the Board of Directors

Attendance at meetings of theBoard of Directors and the
Audit & Supervisory Board

Outside Audit &Supervisory Board Members

Reason for appointment

Ryoji Kimura

Ryoji Kimura was selected to be an outside Audit & Supervisory Board Member due to his highly professional
insight into all areas of corporate legal affairs based on his long career as Attorney and related scholarly knowledge and experience, as well as the extensive corporate management insight he gained through this experience.

11/12

15/15

Tsutomu Nobechi

Tsutomu Nobechi was selected to be an outside Audit & Supervisory Board Member due to his considerable insight
into financial and accounting matters gained through his experience at accounting firms as well as the extensive
corporate management insight he gained through this experience.

12/12

15/15

Kazumi Akiyama

Kazumi Akiyama was selected to be an outside Audit & Supervisory Board Member due to his wealth of insightbased on his employment experience at central government offices as well as the extensive corporate management insight he gained through this experience.

10/10

11/11

Board ofDirectors

Audit & Supervisory Board

Criteria for the Selection of Outside Officers
In order to ensure the independence of the candidates it recommends for positions as outside officers (outside directors and outside Audit &Supervisory Board Members), the Company has formulated criteria for the selection of outside officers. Please see the following website for moredetails: http://www.ryoyo.co.jp/english.html
Compensation of Directors and Audit & Supervisory Board Members
Compensation by type (millions of yen)
Total compensation

Number of applicable

Basic compensation Stock options

Retirement benefits individuals

Bonuses

Directors (excluding outside directors)

122

122

—

—

—

7

Audit & Supervisory Board Members(excluding outside Audit & Supervisory Board
Members)

12

12

—

—

—

2

Outside officers

30

30

—

—

—

6

Note: The amount for compensation of directors does not include the portion paid to directors who serve concurrently as employees.

In regard to compensation decision policies and calculation methods,
compensation amounts for directors and Audit & Supervisory Board
Members are to be less than the upper limit approved at the generalshareholders’ meeting. Compensation amounts for directors are

decided based on the responsibilities of directors and their individual
performance as well as the performance of the Company as a whole.
Compensation amounts for Audit & Supervisory Board Members are
decided by the Audit & Supervisory Board.

08

Corporate GovernanceAnalysis of Board of Directors’ Effectiveness andRisk Management Systems

Results of Evaluation

Risks that may affect our operations include those related to

The Company implements self-surveys to analyze the overall

compliance, the environment, disasters, information security,

effectiveness of the Board of Directors.

product quality, foreign exchange rates, and financial report-

The most recent survey evaluated the structure of the Board

ing. Each department maintains effective risk managementof Directors, how it is operated, how outside officers are

systems managed by employees that are responsible for risktreated, and other matters. Through this survey, the Company

management. In the event that any disruption occurs, these

confirmed that the Board of Directors was generally functioning

employees will guide their department in responding quickly

appropriately and that it was indeed effective. Furthermore,and effectively to those disruptions in order to minimize thedirectors and Audit & Supervisory Board Members provided

impact on operations.

various suggestions through the survey regarding factors
such as materials for Board of Directors’ meetings, thePolicy for Proactive Communication with Shareholders

amount of time allocated to discussions of agenda items,

The Company endeavors to ensure that disclosure of management

and training opportunities.

information is conducted accurately, impartially, and promptly.

The Board of Directors will discuss these suggestions going

In addition, we recognize that facilitating mutual understanding

forward and continue to improve its effectiveness with thethrough proactive communication with shareholders andaim of creating an ideal corporate governance system.

incorporating feedback from shareholders into management
decision making is crucial to the Company’s ongoing growthInternal Control Systems

and to the medium-to-long-term improvement of corporate

The following are our basic principles for establishing internal

value. Accordingly, the following provisions have been put incontrol systems. These principles help us maintain systems

place to support proactive communications activities.

for sound internal control.

(1) The director in charge of the Corporate Strategy Division(1) System for ensuring that the execution of duties by directors and employees is in compliance with all laws, regulations, and the articles of incorporation(2) Items concerning the storage and management ofassistance from the general manager of the Corporate
Strategy Division.
(2) The Corporate Planning Department functions as a venue

information related to the execution of duties by directors

for communication with shareholders while preparations(3) Rules and other systems for containing the risk of damages

for communications activities are advanced through coordi-(4) System for ensuring the efficient execution of duties by

nation between the Corporate Planning, General Affairs

directors(5) System for ensuring the appropriateness of operationsand Human Resources, and Accounting departments.
(3) Explanatory forums are held for institutional investors andundertaken by the corporate group consisting of Ryoyo

analysts twice a year in conjunction with the release of

Electro and its subsidiaries

second quarter and annual financial reviews at which we(6) System concerning employees requested by the Audit &Supervisory Board to serve as assistants and items concerning
the independence of these employees from directors(7) System concerning reports submitted by directors andemployees to the Audit & Supervisory Board and othersystems concerning reports submitted to the Audit &Supervisory Board(8) Other systems for ensuring effective auditing by the
Audit & Supervisory Board

09

oversees shareholder communications activities, receiving

report on and explain current business conditions and thefuture direction of the Company.
(4) Systems are in place to ensure that feedback received
through shareholder communications activities is sharedwith management in a timely manner.
(5) In-house workshops regarding insider information are held
and other steps are taken to ensure the appropriate management of insider information.
Note: T he Company strives to ensure timely and appropriate disclosure of management
information through its corporate website and other venues.
http://www.ryoyo.co.jp/english.html

Financial Section

Consolidated Financial Highlights
Ryoyo Electro Corporation and Consolidated Subsidiaries
For the years ended January 31, 2017, 2016, 2015, 2014, and 2013

Thousands of
U.S. dollars*Millions of yen

2017.1

2016.1

2015.1

2014.1

2013.12017.1¥  98,417¥ 112,332¥ 110,107¥  97,887¥  87,183$864,756

Gross profit

8,099

7,852

8,801

8,279

7,373

71,170

Selling, general and administrative expenses

6,726

6,976

6,747

6,627

6,651

59,106

Operating income

1,373

876

2,053

1,651

722

12,064

For the YearNet sales

Net income

822

743

1,683

1,342

423

7,228

6,874

4,392

467

(1,369)328

60,401¥  77,973¥  76,865¥ 82,937¥  79,893¥   72,490$685,124

64,85963,921

65,583

63,112

61,303569,894

Net income¥   33.54¥   30.01¥   66.74¥   52.17¥   16.41$   0.29

Total net assets

2,644.10

2,591.70

2,595.83

2,498.70

2,371.67

23.23

Cash dividends

40.00

30.00

30.00

30.00

30.00

0.35

Gross profit margin

8.2

7.0

8.0

8.5

8.5

Operating margin

1.4

0.8

1.9

1.7

0.8

Free cash flows
At Year-End
Total assets
Total net assets
Per Share of Common Stock (Yen / U.S. dollars)

Ratios (%)

Net income margin

0.8

0.7

1.5

1.4

0.5

Equity ratio

83.1

83.1

79.0

78.9

84.5

Return on equity

1.3

1.1

2.6

2.2

0.7

Other Information
Number of shares issued**

24,507,328 24,636,009 25,237,095 25,226,060 25,826,926

Number of employees

501

498

510

513

517

* U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥113.81=U.S.$1.00, the exchange rate prevailing on January 31, 2017.
** Number of shares issued does not include treasury stock.
Notes: 1. The financial section is a translation of the Japanese financial statements. The Japanese version will be used for matters of a legal nature.
2. Unless otherwise noted, figures are rounded down to the nearest million.

Net Sales

Free Cash Flows

Total Assets / Total Net Assets

Millions of yen

Millions of yen

Millions of yen

110,107 112,332

6,874
98,417

97,88787,18379,893

4,392

82,93772,49061,303

63,112

76,86565,583

77,97363,92164,859467

328(1,369)

13.1

14.1

15.1

16.1

17.1

13.1

14.1

15.1

16.1

17.1

13.1

14.1

Total Assets

15.1

16.1

17.1

Total Net Assets

10Financial Section

Consolidated Financial Review‌Operating Environment
During the year under review, the fiscal year ended January 31,
2017, the domestic economy witnessed a recovery with regard tocorporate earnings and the job market. However, the outlook
continued to warrant caution given the foreign exchange circumstances and the unstable global economic and political trends.
In the electronics industry, where the Ryoyo Group operates,
the movement to realize practical application of IoT technologies
accelerated and other trends contributing to a positive outlook
emerged. However, the semiconductor and device sector was
impacted by a slowdown in China and the major earthquake thatstruck Kumamoto Prefecture. In ICT-related sectors, performance
was firm in the service, support, and software fields, despitesluggish capital investment in hardware.

‌Results for the Fiscal Year Ended January 31, 2017
Under these conditions, the Ryoyo Group worked to reinforce
and expand the foundations of its core businesses—namely, its
semiconductor and device business and its ICT and solutions
business. At the same time, we focused efforts on shifting tohigher-value-added business models while positioning IoT as acentral aspect of future growth strategies.
As a result of these factors, consolidated net sales decreased
12.4% year on year, to ¥98.4 billion. Operating income meanwhile increased 56.6%, to ¥1.3 billion, due to the absence oflosses on disposal and the write-down of inventories recorded in
the previous fiscal year. Also, ordinary income increased 41.0%,
to ¥1.5 billion. Similarly, profit attributable to owners of parentrose 10.7%, to ¥0.8 billion.

Semiconductors and Devices
Net sales of semiconductors and devices decreased ¥13.9 billion
year on year, or 19.2%, to ¥58.4 billion.
Sales of products for communications systems decreased
43.5%, to ¥8.6 billion, because of the conclusion of large-scaleorders for LCDs that contributed to sales in the previous fiscal year.
Sales of products for digital consumer electronics and other
home electronics fell 21.2%, to ¥8.0 billion, following a decline insales for televisions and amusement equipment.
Sales of vehicle installations were down 26.7%, to ¥2.7 billion,
following the conclusion of certain orders.
Sales of products for PCs and peripherals decreased 5.9%, to¥19.9 billion, as a result of the persistence of difficult conditionsin the PC market.
Sales of products for industrial and other applications were
down 13.0%, to ¥19.2 billion, as performance struggled due tothe impacts of the Kumamoto earthquake and the postponementof certain orders.

11

Sales by Applications
Billions of yen

72.3
15.3
–43.5%

58.4
8.6

10.1
3.7

–21.2%–26.7%

21.1

–5.9%

19.9

22.1

–13.0%

19.2

16.1

8.0
2.7

17.1

Communications
Digital consumer electronics andother home electronics

Vehicle installations
PCs and peripherals
Industrial and others

ICT and Solutions
Net sales of ICT and solutions were relatively unchanged year on
year at ¥40.0 billion.
Sales of PC, server, and network products decreased 13.0%,
to ¥10.0 billion, as the drop in large-scale system orders and thedecline in selling prices, which exceeded forecasts, outweighed
strong performance in service, support, and other business operations.
Sales of I/O equipment increased 14.2%, to ¥8.0 billion, due inpart to contributions from large-scale printer-related projects.
Sales of software were up 5.5%, to ¥12.5 billion, as a result ofrobust corporate demand for PCs.
Sales of embedded products decreased 1.8%, to ¥9.5 billion,
as the impacts of the contraction of businesses related to financial
terminals offset the brisk growth in sales of ­graphics-related products.

Sales by Products
Billions of yen

40.0

40.0
11.5

–13.0%

10.0

7.0+14.2%

8.0

11.8

+5.5%

12.5

9.7

–1.8%

9.5

16.1
PC / Server / Network

17.1
I/O equipment

Software

Embedded and others

Sales by Region
Japan
In the year under review, sales to external customers in Japandecreased ¥11.1 billion year on year, or 12.4%, to ¥79.2 billion,
following a decline in sales of LCDs for communications equipment
and semiconductors for industrial applications. The operating incomeof this regional segment was up ¥0.5 billion, or 70.4%, to ¥1.2 billion,
as a result of the absence of losses on disposal and the write-down of
inventories recorded in the previous fiscal year.
Asia
Sales to external customers in Asia decreased ¥2.7 billion year
on year, or 12.5%, to ¥19.1 billion, as a result of lower sales of
embedded products for financial terminals and semiconductors
for televisions. However, the operating income of this segment
increased ¥6 million, or 4.7%, to ¥0.1 billion.
The figure for operating income presented on the consolidated
statements of income includes operating income from eachsegment as well as from intersegment transactions.

‌Financial Position
Total assets at the end of the fiscal year amounted to ¥77.9
billion, ¥1.1 billion higher than at the previous fiscal year-end.
This was primarily due to increases in cash and deposits andinvestment securities.
Total liabilities were up ¥0.1 billion, to ¥13.1 billion, mainly due
to an increase in deferred tax liabilities.
Total net assets increased ¥0.9 billion, to ¥64.8 billion. This
was largely due to an increase attributable to valuation difference
on available-for-sale securities.

‌Cash Flows
Cash and cash equivalents totaled ¥19.3 billion at the fiscal
year-end, a ¥5.8 billion year-on-year increase. Major factors
included a decrease in working capital.
Net cash provided by operating activities was ¥6.6 billion, compared with ¥1.1 billion in the previous fiscal year. This outcome wasa result of income before income taxes of ¥1.3 ­billion being recorded and of working capital declining due to the ¥3.8 billion decreasein notes and accounts receivable–trade.
Net cash provided by investing activities was ¥0.1 billion,
compared with ¥3.2 billion in the previous fiscal year. This waslargely because proceeds from sales of investment securities
totaling ¥1.8 billion offset outflows for the purchase of investment securities of ¥3.1 billion.
Net cash used in financing activities amounted to ¥1.0 billion,
compared with ¥1.6 billion in the previous fiscal year. Major
outflows included cash dividends paid.

‌Returning Profits to Shareholders
Shareholder Returns Policy
The Company views returning profits to its shareholders as oneof its most important management tasks. Accordingly, we return

profits to shareholders while considering the Company’s financial
position and the operating environment, while also retaining
internal revenues sufficient enough to maintain a stable operating
foundation and pursue future business expansion. The Company
plans to target a total return (dividend payments and share buybacks) ratio of 100% of profit attributable to owners of parent for
the foreseeable future. Returns will be issued in the form of
dividend payments and treasury stock acquisitions.

Dividend Payments in the Fiscal Year Ended January 31,
2017, and the Fiscal Year Ending January 31, 2018
For the fiscal year ended January 31, 2017, the Company paid
¥20 per share of common stock for the year-end cash dividend,
making for an annual cash dividend of ¥40 per share of common
stock when combined with the interim dividend. In the fiscal year
ending January 31, 2018, the Company is planning to issue a total
annual cash dividend of ¥60 per share of common stock, comprising an interim dividend and a year-end dividend of ¥30 each.

Acquisition and Cancellation of Treasury Stock
The Company acquired a total of 150,000 shares of its own stock
worth ¥0.1 billion over the period from March 10 to April 15,
2016. The goal of this acquisition was to facilitate the implementation of more flexible capital measures in response to operating
environment changes.
It is the Company’s basic policy to maintain treasury stock
holdings equivalent to roughly 10% of the total number of sharesissued to be used for future business base reinforcement measures. The portion of treasury stock exceeding that level will becanceled in a single batch at the end of each fiscal year, in principle. Accordingly, the Company canceled 800,000 shares oftreasury stock (or 2.90% of issued shares prior to the cancellation) on March 17, 2017.

‌Risks Pertaining to the Company’s Business
Risks that may affect the business performance, stock price, andfinancial condition of the Company include, but are not limited to,the following.
(1)	Abrupt changes in economic conditions(2)	Fall in the price of products(3)	Contracts with suppliers(4)	Fluctuations in foreign exchange rates(5)	Customers moving operations overseas(6)	Country-based risks(7)	Product defects, service problems, and delivery andintellectual property rights issues(8) Natural disasters and other acts of God(9)	Collection of accounts receivable(10)	Disposal and the write-down of inventories(11)	Impairment losses on the write-down of investment securities(12)	Retirement benefit obligations

12

Financial Section

Consolidated Balance Sheets
Ryoyo Electro Corporation and Consolidated Subsidiaries
At January 31, 2017 and 2016

Thousands of
U.S. dollars

Millions of yen

2017.1

2016.12017.1

Cash and deposits¥19,517¥13,535$171,494

Notes and accounts receivable–trade29,291

33,523257,373

AssetsCurrent assets

Securities

1,000

1,538

8,786

Merchandise and finished goods

10,582

11,184

92,985

Deferred tax assets

291

354

2,561

1,247

2,110

10,957

(5)

(5)

(46)

61,92562,241

544,112

		 Tools, furniture and fixtures, net

92

102

809

		Land

5

5

50

Other
Allowance for doubtful accounts
			Total current assets
Noncurrent assets
Property, plant and equipment

		Other, net

63

71

556

			Total property, plant and equipment

161

180

1,415

Intangible assets

630

669

5,540

Investment securities

13,368

11,670117,462

Net defined benefit asset

1,216

1,075

10,691

716

1,064

6,291

Investments and other assets

Other
Allowance for doubtful accounts

13

(44)

(36)

(389)

			Total investments and other assets

15,256

13,774

134,055

			Total noncurrent assets

16,048

14,624141,011

			Total assets¥77,973¥76,865$685,124

Thousands of
U.S. dollars

Millions of yen

2017.1

2016.12017.1¥ 9,633¥ 9,565$ 84,646

205

142

1,807

Liabilities
Current liabilities
Notes and accounts payable–trade
Income taxes payable
Accrued consumption taxes

25

6

221

Provision for bonuses

186

130

1,637

Other
			Total current liabilities

910

1,150

7,997

10,961

10,99496,311

778

802

6,843

1,162

542

10,212

211

603

1,862

Noncurrent liabilities
Net defined benefit liability
Deferred tax liabilities
Other
			Total noncurrent liabilities

2,153

1,948

18,918

			Total liabilities

13,114

12,943

115,229

Capital stock

13,672

13,672

120,130

Capital surplus

13,336

13,336

117,182

Retained earnings

38,24438,997

336,035

Treasury stock(3,649)(4,178)(32,070)

61,602

61,827541,277

2,446

1,085

21,495

Net assets
Shareholders’ equity

			Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
			Total accumulated other comprehensive income

(0)

9

(2)

528

743

4,644

222

183

1,953

3,197

2,021

28,091

59

72

525

			Total net assets

64,85963,921569,894

			Total liabilities and net assets¥77,973¥76,865$685,124

Subscription rights to shares

14

Financial Section

Consolidated Statements of Income andConsolidated Comprehensive Statements of Income
Ryoyo Electro Corporation and Consolidated Subsidiaries
For the years ended January 31, 2017 and 2016
Thousands of
U.S. dollars

Millions of yen
Consolidated Statement of Income

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Provision of allowance for doubtful accounts
Salaries and bonuses
Provision for bonuses
Retirement benefit expenses
Rent expenses
Depreciation
Other
		 Total selling, general and administrative expenses
Operating income
Non-operating income
Interest income
Dividend income
Purchase discounts
Gain on valuation of investment securities
Gain on investments in partnership
Other
		 Total non-operating income
Non-operating expenses
Sales discounts
Loss on redemption of securities
Loss on valuation of investment securities
Foreign exchange losses
Commission fee
Loss on abandonment of noncurrent assets
Other
		 Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of investment securities
		 Total extraordinary income
Extraordinary losses
Loss on sales of investment securities
Loss on valuation of investment securities
Impairment loss
Loss on valuation of shares of subsidiaries and associates
Other
		 Total extraordinary losses
Income before income taxes and minority interests
Income taxes–current
Income taxes–deferred		 Total income taxes
ProfitProfit attributable to owners of parent

2017.1

2016.12017.1¥98,41790,3188,099¥112,332
104,479
7,852$864,756
793,585
71,170

7
2,750
187
136
334
249
3,059
6,726
1,373

20
2,869
130
107
339
197
3,311
6,976
876

70
24,171
1,648
1,195
2,940
2,195
26,885
59,106
12,064

65
111
10
66
71
28
353

96
113
11
–
179
19
420

571
981
91
580
631
246
3,102

4
50
–
108
11
0
5
180
1,545

4
–
73
103
14
2
2
201
1,096

35
441
–
956
97
7
49
1,587
13,579

105
105

370
370

926
926

100
104
–
99
4
309
1,341
396
122
519
822
¥ 822

101
–
141
–
–
243
1,222
611
(132)
479
743
743

886
917
–
869
41
2,715
11,790
3,486
1,075
4,561
7,228
$  7,228

822

743

7,228

1,360
(9)
(214)
38
1,175
1,998

(758)
9
(161)
(28)
(937)
(194)

11,958(84)(1,885)338
10,327
17,555

1,998
–

(194)
–

17,555–¥

Consolidated Comprehensive Statement of Income

Profit attributable to owners of parent
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
		 Total other comprehensive income
Comprehensive income(Details)
Comprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests
15

Consolidated Statements of Changes in Net Assets
Ryoyo Electro Corporation and Consolidated Subsidiaries
For the years ended January 31, 2017 and 2016

Millions of yen
Shareholders’ equity

Accumulated other comprehensive income

From January 31, 2016
to January 31, 2017

Capitalstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityBalance at January 31, 2016
Changes of items during
the period¥13,672¥13,336¥38,997¥(4,178)¥61,827

Dividends from surplus
Profit attributable to ownersof parent

(859)

–

–

¥13,672¥13,336

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasurements ofdefinedbenefit plans

Subscription
rights tosharesTotal
net assets¥1,085

¥9

¥ 743

¥183

¥ 72

¥63,921

(859)

822

(859)

822

822

(200)

(200)

(200)

(703)

703

–

–

(13)

25

12

12

Purchase of treasury stock
Retirement of treasury stockExercise subscription rights
to sharesNet changes of items otherthan shareholders’ equity
Total changes of items during
the period
Balance at January 31, 2017

Valuationdifferenceonavailablefor-salesecurities(753)¥38,244528¥(3,649)(224)¥61,602

1,360

(9)

(214)

38

(12)

1,162

1,360
¥2,446

(9)
¥0

(214)
¥ 528

38
¥222

(12)
¥ 59

937
¥64,859

Millions of yen
Shareholders’ equity

Accumulated other comprehensive income

Capitalstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityValuationdifferenceonavailablefor-salesecurities

Balance at January 31, 2015
¥13,672
Cumulative effects of changes
in accounting policies
Restarted balance
13,672
Changes of items during
the period
Dividends from surplus
Profit attributable to ownersof parent
Purchase of treasury stock
Net changes of items otherthan shareholders’ equity
Total changes of items during
the period–
Balance at January 31, 2016
¥13,672¥13,336¥38,813¥(3,270)¥62,551¥1,843

¥(0)

¥ 904

¥211

¥72

¥65,583

13,336

188
39,002(3,270)188
62,740

1,843

(0)

904

211

72

188
65,772

From January 31, 2015
to January 31, 2016

(748)
743
(908)

–
¥13,336(4)¥38,997(908)¥(4,178)

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasurements ofdefinedbenefit plans

Subscription
rights tosharesTotal
net assets

(748)

(748)

743
(908)

743
(908)

–

(758)

9

(161)

(28)

–

(937)

(913)
¥61,827(758)¥1,085

9
¥9

(161)
¥ 743

(28)
¥183

–
¥72

(1,850)¥63,921

Thousands of U.S. dollars
Shareholders’ equity

Accumulated other comprehensive income

Retainedearnings

Treasury
stock

Total
shareholders’equityBalance at January 31, 2016
Changes of items during
the period$120,130 $117,182 $342,657$(36,717)$543,251

Dividends from surplus
Profit attributable to ownersof parent(7,553)

From January 31, 2016
to January 31, 2017

Capitalstock

Capitalsurplus

Valuationdifferenceonavailablefor-salesecurities

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasurements ofdefinedbenefit plans

Subscription
rights tosharesTotal
net assets$ 9,537$ 81$ 6,529$1,615$ 638$561,654(7,553)
7,228

7,228

(1,761)(1,761)(1,761)Retirement of treasury stock(6,181)6,181
Exercise subscription rights
to shares(115)
228
Net changes of items otherthan shareholders’ equity
Total changes of items during
the period––(6,622)
4,647
Balance at January 31, 2017
$120,130 $117,182 $336,035 $(32,070)

–

–

112

112

Purchase of treasury stock

7,228(7,553)(1,974)$541,277

11,958(84)(1,885)338

11,958$21,495

(84)
$ (2)

(1,885)$ 4,644338$1,953(112)

10,214(112)
8,240$ 525 $569,894
16

Financial Section

Consolidated Statements of Cash Flows
Ryoyo Electro Corporation and Consolidated Subsidiaries
For the years ended January 31, 2017 and 2016

Thousands of
U.S. dollars

Millions of yen

2017.1

2016.12017.1¥ 1,341
249
1
–
(71)
(10)
66
(24)
(176)
50
(4)
38
99
3,879
486
381
19
569
6,894
190
(409)
6,675

¥ 1,222
239
2
141
(179)
35
30
(12)
(209)
–
(268)
73
–
802
3,286
(3,188)
3
(43)
1,936
235
(1,002)
1,169$ 11,790
2,195
9
–
(631)
(95)
582
(218)
(1,553)
441
(39)
337
869
34,085
4,278
3,348
170
5,006
60,5781,676(3,600)58,653

II. Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Proceeds from redemption of securities
Purchase of property, plant and equipment and intangible assets
Proceeds from sales of property, plant and equipment and intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of investment securities
Purchase of shares of subsidiaries and associates
Payments of loans receivable from subsidiaries and associates
Proceeds from distribution of investment in partnerships
Purchase of insurance funds
Other, net
Net cash provided by (used in) investing activities(1,180)
1,015
1,470
(193)
0
(3,149)
1,801
300
–
(33)
169
(3)
1
198

–
750
2,000
(411)
–
(3,290)
2,774
1,200
(204)
–
393
–
11
3,223

(10,368)
8,921
12,922(1,702)
0(27,673)
15,826
2,635
–
(289)
1,488
(29)
16
1,747

III. Cash flows from financing activities
Cash dividends paid
Purchase of treasury stock
Net cash provided by (used in) financing activities

(857)
(201)
(1,058)

(746)
(908)
(1,654)(7,534)(1,766)(9,300)(8)
5,807
13,535¥19,343(71)
2,666
10,868¥13,535(72)
51,028
118,930$169,959

I.

Cash flows from operating activities
Income before income taxes
Depreciation and amortization
Loss (gain) on sales and retirement of noncurrent assets
Impairment loss
Loss (gain) on investments in partnership
Foreign exchange losses (gains)
Increase (decrease) in provision
Increase (decrease) in net defined benefit liability
Interest and dividends income
Loss (gain) on redemption of securities
Loss (gain) on sales of investment securities
Loss (gain) on valuation of investment securities
Loss on valuation of shares of subsidiaries and associates
Decrease (increase) in notes and accounts receivable–trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable–trade
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividends income received
Income taxes refund (paid)
Net cash provided by (used in) operating activities

IV. Effect of exchange rate changes on cash and cash equivalents
V. Net increase (decrease) in cash and cash equivalents
VI. Cash and cash equivalents at beginning of period
VII. Cash and cash equivalents at end of period17Corporate Data / Investor Information
As of January 31, 2017

Corporate Name
Ryoyo Electro Corporation

Composition of Shareholders
Foreign corporations and other foreign investors

26.4%

Address
Konwa Building, 1-12-22
Tsukiji, Chuo-ku, Tokyo
104-8408, Japan

Other corporations

23.3%

Individuals and other

19.3%

Financial institutions

19.2%

Treasury stock

11.2%

Phone
+81-3-3543-7711

Securities companies, etc.

0.6%

Fax
+81-3-3545-3507
Websitehttp://www.ryoyo.co.jp/
english.html
Date of Incorporation
February 27, 1961
Paid-in Capital¥13,672 million
Authorized Shares
119,628,800
Shares Issued
27,600,000
Shareholders
5,063
Stock Trading Unit
100 shares
Stock Listing
Tokyo Stock Exchange,
First Section

Major Shareholders
Thousandsof shares%

CGML PB CLIENT ACCOUNT/COLLATERAL

3,931

Mitsubishi Electric Corporation

2,246

16.04
9.17

SHC Corporation

2,118

8.64

Japan Trustee Services Bank, Ltd. (Trust account)

1,916

7.82

Aya Nomura

1,110

4.53

The Master Trust Bank of Japan (Trust account)

642

2.62

Sheep Shokai Co.

523

2.14

Nippon Life Insurance Company

409

1.67

CBNY DFA INTL SMALL CAP VALUE PORTFOLIO

390

1.59

Japan Trustee Services Bank, Ltd. (Trust account 9)

349

1.43

Note: Calculations for the ownership percentages above did not account for the 3,092,672 shares of treasury stock.

Stock Price Chart
Stock Price
Yen

Nikkei Stock Average
Yen

25,000

2,500

2,000

20,0001,500

15,0001,000

10,000

Trading Volume
Thousands of shares

4,500

Ticker Code
8068
3,000

Transfer Agent
Mitsubishi UFJ Trust andBanking Corporation

1,500

0

2

3

4

5

6

7

8

15.1

9 10 11 12

1

2

3

4

5

6

7

8

16.1

9 10 11 12

1

2

3

4

5

6

7

8

9 10 11 12

1

17.1

18

EMS 576112 / ISO 14001
FS 576113 / ISO 9001
IS 511311 / ISO 27001• Registered Offices
Headquarters
Branch offices (Sendai, Matsumoto, Omiya,
Hachioji, Yokohama, Nagoya, Osaka)
Sales offices（Kyoto, Fukuoka)
Ryoyo Semicon Corporation
Ryoyo Security Service Corporation
In consideration for the environment, this annual review uses paper that has been approved by the
Forest Stewardship Council (FSC). Additionally, this annual review is printed using highly biodegradable
vegetable oil ink.

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