Q2/FY2015 (56th)
Results Briefing

September 1, 2015

(Tokyo Stock Exchange‐8068)

http://www.ryoyo.co.jp

1Overview

Date ofestablishment: February 27, 1961

Domesticnetwork: Sendai, Koriyama, Matsumoto,Takasaki, Omiya, Hachioji,
Yokohama, Nagoya, Kyoto, Osaka,
Fukuoka

Capital: 13.672 million yen

Represented by : Kenhachiro Ogawa– Chairman & CEO
Takayoshi Oouchi– President & COO

Overseas
network: Dalian, Shanghai, Shenzhen, HongKong, Taipei, Bangkok, Kuala
Lumpur, Singapore, Silicon Valley

Number ofemployees: (As at April 30, 2015)
Consolidated: 521
Non-consolidated: 465*Whole group: 607

Domestic: Ryoyo Semicon, Ryoyo Security
subsidiaries
ServiceBusiness areas: ◇Sales of semiconductors/devices◇Sales of ICT products (HW/SW)◇Sales of embedded devices◇Various engineering support◇Various services

Sales by product (H1/FY2015)35%
ISO 9001 / 14001 / 27001 :All offices and subsidiaries in Japan(excluding Takasaki Satellite Office)65%
Semiconductors/Devices
ICT/Solution2

AgendaH1/FY2015 Business results
FY2015 Business plan
Medium-term action- Medium-term business plan (FY2016-FY2018) -3

H1/FY2015 Business results

4P/L: Higher sales and operating income thanthe previous year and the original plan
(Unit: 100 million yen, %)FY2014
H1FY2015
Original plan
H1YoY

Comments
Higher both of the previous year and the originalplan

Sales

540

585

587

+8.6%

Gross profit

41.8

46.5

46.2

+10.6%

(%)

7.7%

7.9%

7.9%

SG&A

33.2

35.5

35.0

+5.6%

8.6

11.0

11.2

+30.1%

1.6%

1.9%

1.9%

Ended with a massive increase exceeding
130% of the previous year, which is also higher
than the original plan

2.2

2.0

3.2+42.3%

Increase in gain from investment securities

Ordinary income

10.8

13.0

14.4+32.7%

(%)

2.0%

2.2%

2.5%

1.1

0.0

2.7+138.5%

12.0

13.0

17.1

+42.6%

Income taxes

4.5

4.5

6.1

+35.5%Net quarterly profit

7.5

8.5

11.0

+46.9%

1.4%

1.5%

1.9%

Operating income(%)
Non-operating income

Extraordinary income
Income before income taxes(%)

The rate is generally as per the original plan,
while the amount is higher than the previous
year by over 10%
In addition to labor cost, with effects of higher
sales (e.g. logistics expenses)

Gain and loss on sale of investment securities

Much higher than both of the previous year andthe original plan due to higher non-operating
income than expected and extraordinary income

5Sales by segment: Significant increase in semiconductors/devices

FY2014
H1(Unit: 100 million yen, %)FY2015YoY
H1Comments

Semiconductors/Devices

540
321

587
379

+18.3%

Communications

4496+116.0%

Significant increase in the contract manufacturingbusiness for communication devices

Digital consumer electronics andother home electronics

4149+19.7%

Increase mainly in products for TVs

Vehicle installation

1920+7.0%

No significant change from the previous year

By application

Total

PC and peripherals

114

107

Continuously-stable sales in products for printers and(6.0%) other peripherals, but decrease in those for PCs due tothe backlash of the last year's special demand

Industries and others

103

107

+4.7%

219

207(5.5%)

PC/Server/Network6959(15.3%) Affected partly due to loss of some large-volume orders

I/O equipment

3337+14.0%

117

111(5.2%)

ICT/Solution

By product+8.6%

Software/Embedded devices

Higher than the previous year, but below expected at thebeginning of the year

Contributed by start of new orders
Decreased in software for PCs due to the backlash of
the last year's special demand6Quarterly change in sales: Continue to keep high sales

Despite the effect of slowdown of large-volume orders inQ2/FY2015, sales is growing to the next level compared to theprevious year
(Unit: 100 million yen)

301
277
235

299

188

195

185

Semiconductors/devices

ICT/Solution

270

287

238

205

172

146

263

292

159

147

161

173

102

96

104

105

102Q2Q3Q4Q1Q2

125

80

9091

Q1Q2Q3
FY2013129118

Q4Q1

FY2014FY2015

7

Segment information (sales by region)(Unit: 100 million yen)

587

Higher sales than the previous yearin both Japan and Asia

540

482

Japan

86

104

Asia

FY2016FY2015

H1H1454

Japan:
Significant increase in LCD for
communication devices

Asia (Singapore, Hong Kong, Shanghai):
Increase in semiconductors for TVs and LCD
for communication devices

8

B/S: Change from FY2014 (as at January 31, 2015)(Unit: 100 million yen)829
Cash in handand at banks

11681812812446
Notes andaccounts
receivable trade

344

119
44

Notes andaccouns payable- trade

Other liabilities

332656655

Inventories

145

Other currentassets

4650

Fixed assets

178

157

Assets Liabilities
and netassets

Assets Liabilities
and netassets

As of January 2015

As of July 2015

Continue to maintain the strong
financial positionInventories:
Increased due to increasing sales aswell as slow-moving orders in H1



Fixed assets:
Investment securities (e.g. bonds) beingtransferred to current assets

Net assets:
Implemented payback (600,000 shares)

Equity ratio:80.0%

Net assets

1559FY2015 Business plan

10P/L (Plan): No change
Sales, gross profit and operating income in H1 are generally as planned.
No change in the original plan, except minor revision in sales
composition in H2

Over 10% increase in sales and over 20% increase in operating income(Unit: 100 million yen, %)FY2014
TotalSales
Gross profit(%)
SG&A
Operating income(%)
Ordinary income
Net profit
(%)
(ROE)

1,101
88.0
8.0%
67.5
20.5
1.9%
25.0
16.8
1.5%
2.6%

H1 (Actual)

FY2015
H2 (Plan)587
46.27.9%
35.0
11.2
1.9%
14.4
11.0
1.5%

633
51.8
8.1%
38.0
13.8
2.2%
14.6
8.0
1.7%

Total (Plan)

1,220
98.0
8.0%
73.0
25.0
2.0%
29.0
19.0
1.6%
2.9%

YoY
(Total)YTD
achievement+10.8%

48.1%+11.3%

47.2%

+8.2%

48.0%

+21.7%

44.7%+16.1%

49.6%+12.8%

57.8%

11Semiconductors/Devices (sales by application)(Unit: 100 million yen)

750

750

165

165

135

Digital consumer
electronics and other
home electronics

90
87

100
Vehicle installations

40

40

37
200
217

205

Actual
FY2014Considering slowdown of Chinese
economy, the sales forecast ofindustries modified

Communications

681

255

Original plan220

PC and peripherals

225

Industrials and othersCommunications:
Production adjustment has been observed in
the LCD business which achieved goodresults in H1



PC and peripherals:
With the effect of backlash of the special
demand for products for PCs, but it is minor.
Continuously stable in products forperipherals

Industrials and others:
Below expectations at the beginning of theyear, mainly in the Chinese market

Revisedplan

FY2015

12ICT/Solution (sales by product)(Unit: 100 million yen)

470

470

Decrease in PC/Server/Network to becompensated by I/O equipment andSoftware

420
150

185

PC/Server/Network

1408564215



PC/Server/LAN:
Affected by temporary factors such as adownward trend in H1 and significantlydelayed contribution of new products as well
as sluggish demand for on-premises due toincreasing use of cloud computingI/O equipment:
Projects which have been delayed in H1 due tosome troubles will return to normal in H2

Software/Embedded devices:
The effect of backlush of special demand for
PCs is minor, same as the semiconductorbusiness

I/O equipment

75235

210

Software/ Embedded

ActualOriginal plan Revised plan

FY2014FY201513

Return to shareholders
 Dividend policy:
Allocation of profit earning through our business activity is one of our mostimportant matters. While we seek to maintain the stable management base andexpand business, we also seek a return for shareholders based on our financial
condition and business performance.
In FY2015 and the subsequent periods, we will target 100% of the payout ratio to anet profit of each period through dividend payment and payback

Dividend per share

FY2015FY2014

Payout ratio

Payback

30 yen39.3%

Not yetdetermined---600,000 shares

15 yen30 yen44.9%-Interim(Q2)

Yearend

Total(Forecast)-

15 yen(Actual)

15 yen(Actual)

15 yen14

Medium-term action- Medium-term business plan (FY2016-FY2018) -15

External environment and our challenges
Community/ Shareholders
Abenomics: Improving the ability tomake money
Corporate governance code
ISS Policy (focusing on ROE)

- Challenge -Suppliers

Improve profitability (profit rate)

Customers

Restructuring by manufacturers
within and outside Japan

Relocation of design/production
function to overseas (Use ofOEM/ODM)

Limiting the number of distributors(improving efficiency)

Intensive cost reduction

Higher requirements to distributors

Value chain restructuring (gamechanging)- Challenge -- Challenge -Establish the stable business baseCompetitors

Reinforce demand creation

Accelerated industrial restricting
Fiercer competition among distributors
Deteriorated profitability as the wholeindustry- Challenge Differentiate from competitors(strong points)

16

Basic policy●Business Philosophy●Enhance the existence value with the times●Mission●Group that achieves sustainable growth together with stakeholders●Vision●Become the solution partner creating an impression to the “all-connected smart society”

Basic policy

17

FY2018 Target
12Sales

Operating income３

Net profit / ROE(Unit: 100 million yen)

5%

1,500
1,101

2.6%

2.9%

50.0

1,220

34.0
20.5

FY2014 FY2015
ActualPlan→

25.0
16.8

FY2018FY2014 FY2015

TargetActualPlan→

19.0

FY2018FY2014 FY2015

TargetActualPlan→

FY2018Target18Basic strategies
Segments

Basic strategies

Semiconduct
ors/ Devices

ICT/ Solution

1Expand the core businesses with IoT approach✔

✔

2

Make strategic investments in growing areas✔

✔

3

Accelerate the global strategy

✔

✔

4

Reinforce the business base for sustainable growth19[Basic strategy 1] Expand the core businesses with IoT approach

M2M NetworkBig Data

M2M Network

Customers’ IoT growth strategy
Spreading IoT acceleratingreform of industrial structure

Problem-solving
capability

Business creation
capability

Core competencies

Value proposal matchingcustomers’ IoT growth strategy(IoT approach)

Customer relationship(Understanding customers)

Core businesses

Semiconductorsbusiness

ICT business

Expand the core businesses bycreating business
opportunities

20[Basic strategy 1] RYOYO strengths IoT approach
RYOYO strength (3)Demand creating meeting
untapped demands from themarket and customers“Become the solution partner creating an
impression to the “all-connected smart society”

New value creation
CVCV CV CV CV CV CV CV
Cost reduction
Improvement of leadtime/operating
rate
Improvement of quality
Improvement of safety
Energy-saving
Communication creating value

2121

[Basic strategy 1] IoT strategy roadmapExpansion
GrowthExpansion of new businessareas

Best practiceaccumulation
Introduction
HR development

Company-wide
development with supportof a dedicated teamBusiness model design
IoT product lineup / capitalalliance
2013

2014

2015

Expansion of corebusinesses
2016

2017

2018

New business design
Value creation driver inthe market / forcustomers
2019

2020

New medium-termbusiness plan
22

[Basic strategy 2] Make strategic investments in growing areas

Manufacturing(Robot)Vehicleinstallation

MedicalCaring

Wholesaling
Retailing

Community
Infrastructure

ServiceNetwork/Gateway

Mobile/PC

Device/Sensor

Security

23

[Basic strategy 3] Accelerate the global strategy

Asia networkJapanBy 2014<<Launch self-businesses>>2015 onward<<Ensure profitability of selfbusinesses>

24[Basic strategy 4] Reinforce the business base for sustainable growth

Reinforce corporate governance to practice transparent management

Demand creation; Further reinforce global HR development
Establish IT environment contributing to active marketing activities
Reinforce collaboration with business partners (including M&A)
Further improve operating efficiency (Expand BPO within and outsideJapan)
Promote diversity management25Capital policy Growth potential Reinforced business base New growth strategy

Stable dividend;
Active payback

Best use ofcapital Funding ability Improved profitability

Return toshareholders

Target ROE:

5% (FY2018)

Basic policy:
Consolidated
payout ratio: 100%-> Over 8%

Stablefinancial
position

Establishment of the optimum capital structure whichenables constant “investments” and “return to shareholders”
Improvement of cash-making ability
26

Summary<H1/FY2015 Business result>
Sales, operating income, ordinary income and net profit are higher thanboth of the previous year and the original plan
According to the return to shareholders policy, payback (600,000 shares)
implemented<FY2015 Business plan>
No change to the original plan except minor revision of sales composition;
Target increase in sales and profit three years in a row<New medium-term business plan (FY2016-FY2018)>
Accelerate all actions, targeting “reform to an IoT solution partner”
FY2018 Target:
Sales: 150,000 million yen, Operating income: 5,000 million yen, ROE: 5%

27

About this report Notice
The business forecast and other forecasts contained in thisreport are based on certain assumptions, which we deemed
reasonable at the time of release, and the actual results may
differ due to the economic environment or various otherfactors.

- Contact Corporate Strategy Office
Corporate Planning Department
Ryoyo Electro Corporation
Tel: +81-3-3546-5088
e-mail: irmanager@ryoyo.co.jp

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