CONSOLIDATED FINANCIAL HIGHLIGHTSTOP INTERVIEWTOP INTERVIEW

tell us about the business
Q Pleaseconditions and results of fiscal 2014.

SPECIAL FEATURE

A

Centered on the Transportation Systems segment,overseas net sales expanded. We are off to a good start in
the first fiscal year of the medium-term management plan.

Photograph taken at the 9th UIC World Congress on High Speed Rail
Exhibition

Aiming to realize net sales of50.0 billion yen, we will
accelerate measures tostrengthen our managementfoundation.
The fiscal year ended May 31, 2015 served as the first fiscal year ofthe three-year medium-term management plan “NEXT 100: Beyond
100 years,” and we were able to make tangible progress during thisyear toward achieving our goals. President Kenzo Terashima hereby
explains the results and plans for future development.
President

1Kenzo Terashima

Consolidated business results for this fiscal year (fiscal year ended May31, 2015) were led by the robust performance of the Transportation
Systems segment and the Industrial Systems segment, achieving steady
growth in both net sales and profits. Results were also produced in theareas of strengthening international competitiveness and restructuring
the production system, which are part of the fundamental policy of thethree-year medium-term management plan, and we feel that we haveachieved a good start in the first fiscal year of the plan. Particularly, theoverseas net sales ratio increased from 27.3% in the previous fiscal year
to 38.0%, taking a significant step forward toward achieving the target of
50% in the final fiscal year of the plan (fiscal year ending May 31, 2017).
In the Transportation Systems segment, factors such as delays inscheduled overseas projects led to lower orders compared to theprevious fiscal year, but net sales to overseas railroads increased
significantly, especially in China and the United States, boosting profits. A
subsidiary in the maintenance business for electrical equipment for
railroads, established in August 2014 in Beijing, China, is also off to asteady start, demonstrating the strength of the relationships of trust we
have built in China.
In the Industrial Systems segment, in addition to a greater number oforders of testing equipment for automobile development andinfrastructure-related systems, increased orders of factory systems inSoutheast Asia, centered on our representative office in Bangkok,
Thailand, which was established in September 2014, led to higher
revenue and profits.
In the Information Equipment Systems segment, the year marked alow point in demand for updates to railway station operating equipment,
and coupled with a decreased number of orders for remote monitoring
systems, net sales and profits were both lower than the previous fiscalyear.

REVIEW OF SEGMENT OPERATIONSTOPICS

explain the restructuring ofQ Please
the production system.

CONSOLIDATED FINANCIAL STATEMENTS

A

Working toward achieving net sales of 50.0 billion yen, wewill advance the strengthening of the Yokohama Plant andnewly establishing a factory in the Shiga region.

In the “NEXT 100” medium-term management plan, we have set forth
net sales of 50.0 billion yen as a goal for the fiscal year ending May 31,
2017. As we work toward achieving this target, our most important
challenge is to establish a production system that can respond to
expanded orders both domestically and overseas. Specifically, we will
primarily advance measures to expand the capabilities of the YokohamaPlant, which is the mainstay production base for the Transportation
Systems segment, and newly establish a factory and consolidate
functions in the Shiga region, which is responsible for production of theIndustrial Systems segment.
The Yokohama Plant currently has design, development, and quality
assurance divisions for industrial systems products, and by consolidatingthese functions in the Shiga region, the production system for electricalequipment for railroads will be strengthened at the Yokohama Plant.
Production lines will also be replaced with high-efficiency facilities andexpanded, and through implementing optimizations at affiliates as well,
we plan on achieving an increase of between 30% and 40% in
production capacity as an end result.
Concerning the production system in the Industrial Systems segment,
land has been acquired in Ryuoh Town, Shiga Prefecture, which is near
our existing Shiga Factory (Moriyama City), and our plans call for
construction of a new factory that will begin operations in spring 2018.
Aside from testing equipment for automobile development, we plan toestablish a production system for creating high value-added products inindustrial systems products, including control panels and motors. Also at
the new factory, we will promote segmentation of production lines,
striving to create the ideal next-generation production base wherefemale employees can play an even greater role.
Meanwhile, for future overseas production, we have alreadyestablished local production systems in the Transportation Systems

CORPORATE DATA/STOCK INFORMATION

segment, centered on subsidiaries in China and the United States.
Concerning overseas orders in the Industrial Systems segment, centeredon Southeast Asia, production will occur in Japan for the foreseeable
future, but we will seek opportunities for local production in the future.

tell us about the outlook andQ Pleasemeasures for the current fiscal year.

AThrough maintaining favorable performance in theTransportation Systems segment and further recovery in
the Industrial Systems segment, we forecast higher
revenue and higher profits.

The current fiscal year (fiscal year ending May 31, 2016), the second
fiscal year where we work toward achieving 50.0 billion yen in net sales
under the medium-term management plan, will be a year in which wemust further accelerate strengthening our management foundation aspart of the fundamental policy.
As we steadily progress in the aforementioned restructuring of theproduction system, we will make the maintenance business in China forelectrical equipment for railroads fully operational and establish an
operational system. In the Industrial Systems segment, we will focus on
industrial electric power generators as a new measure, entering newareas both domestically and overseas, such as the biomass power
generation, waste disposal furnace, and power equipment markets.
Furthermore, we plan on installing a new core system that willcomprehensively manage operations from the sales stage to production
processes and accounting processing. Preparations are underway tobegin operation of this system in summer 2016.
Concerning the outlook for the current fiscal year, through maintaining
favorable performance in the Transportation Systems segment andfurther recovery in the Industrial Systems segment, we forecast higher
revenue and higher profits.

26666

4
203

2011/5

2012/5

2013/5

2014/5

2015/5Due to increased workloads in the Transportation Systems segment, an expansion of manufacturing space was required. By combining the industrialsystems factories that were split into the Yokohama Plant and the Shiga Factory, and rearranging the layout of the transportation systems factory,
we will work on improving our production capability.

(2) Improve productivity of the Industrial Systems segment by establishing a new base in Shiga
By establishing a new base in Shiga Prefecture, we will advance efficient development and creation centered on high value-added system products
at a base that combines development, design, manufacturing, and quality assurance divisions.

2
Build a stable businessearnings structure

3
Restructure
production
systemMedium-Term
Management Plan

NEXT 100

Fundamental Policy
4Promote developmentof technology

Current Situation

March 2018 (Scheduled)

Yokohama Plant

Yokohama Plant

Transportation systems works

Transportation systems works(Rearrange layout)

Industrial systems works (Excluding manufacturing)
Information equipment systems works

Information equipment systems works

Research Laboratory

Research Laboratory

New Shiga Factory
Shiga Factory

Industrial systems works

Industrial systems works (Design and manufacturing of some products)
TD. Drive Mfg. Co., Ltd. (Subsidiary)

TD. Drive Mfg. Co., Ltd. (Subsidiary)

Manufacturing, sales, and repair of industrial motors

Manufacturing, sales, and repair of industrial motors
Excluding sales employees of the Industrial Systems segment, all employees of the development, design,manufacturing, and quality assurance divisions and of the current TD. Drive Mfg. Co., Ltd. will be moved to the newbase. (TD. Drive Mfg. Co., Ltd. is also scheduled to relocate to the same premises.)

6
Train human resources tosupport global development
5
Establish newbusinesses

Regarding the acquisition of fixed assets (conclusion of purchase reservation agreement)
On March 23, 2015, to secure land for building a new factory with the aim of strengthening production capabilities
and improving production efficiency, we concluded a purchase reservation agreement for a piece of industrial land.
Details of industrial land to be acquired
LocationArea

2982 Aza-Tsutsumigatani, Aza-Okaya,
Ryuoh-cho, Gamo-gun, Shiga and others(Within Shiga Ryuoh industrial park)
Land: 34,400 m2 (tentative size)

303

Shiga
Prefecture
Kyoto
Prefecture

Maibara477

Schedule of acquisition
Conclusion date of purchasereservation agreement

March 23, 2015

Conclusion date ofpurchase agreement

March 2017 (Scheduledcompletion of preparations)

Date of land transfer

March 2017 (Same as above)

idoainMka

Current Shiga Factory(Moriyama City)

ToRyuohKyotoe

Lake BiwaKusatsu

LinMaibara Junction

ay6(1) Rearrangement of layout of transportation systems factory at Yokohama Plant

1
Strengthen international
competitiveness(Yen) 86

Specific measures for the restructuring of the production system

From June 1, 2014, we began a new three-year mediumterm management plan, “NEXT 100: Beyond 100 years.” As
we work toward achieving the final goals of net sales of 50.0billion yen and an overseas net sales ratio of 50%, we haveset “restructure production system” as one part of thefundamental policy.
To respond to an anticipated expansion of orders in thefuture, we will further expand production capabilities of theYokohama Plant, which is the main production base for theTransportation Systems segment, and optimize production at
the Shiga Factory and affiliates, which are responsible for
production of the Industrial Systems segment, in order toestablish a structure to support net sales of 50.0 billion yen.

Dividends per share

CORPORATE DATA/STOCK INFORMATION

kansenMeishin Expressw

The election of one Outside Director was approved for our company. This
was to comply with the “Corporate Governance Code” from the Financial
Services Agency and the Tokyo Stock Exchange, which took effect onJune 1, 2015. We will continue to take steps to comply with each item
set forth by the “Corporate Governance Code,” and aim to establish
transparency and efficiency in management that is appropriate for acompany striving for global growth.
Concerning year-end dividends for the current fiscal year, based on
our fundamental profit return policy of providing continuous and stabledividends, we have decided upon 6 yen per share, the same as theprevious fiscal year. Taking into account factors such as restructuring theproduction system and necessity for capital investment to prepare for
future growth, we have considered the balance between returning profits
and internal reserves, but in the future, we will work to improve return on
equity (ROE) and the level of profit return.
We would like to ask for the continued support of our shareholders
into the future.

Details of reorganization plans for Yokohama and Shiga
have been specified and the plans have started, as wework toward achieving net sales of 50.0 billion yen. Bystrengthening development and production capabilities ofboth production bases, we will respond to increasedorders both domestically and overseas.

CONSOLIDATED FINANCIAL STATEMENTS

oS
hinA

TOPICSaid

We will work on establishing transparency andefficiency in management that is appropriate for acompany striving for global growth.

Regarding the restructuringof the production system

REVIEW OF SEGMENT OPERATIONSTok

you have any comments you
Q Dowould
like to make to shareholders?

SPECIAL FEATUREi LineSpecialFeature

TOP INTERVIEWKoseCONSOLIDATED FINANCIAL HIGHLIGHTSTOP INTERVIEWGifuPrefecture258306

Mie Prefecture421

Shiga Ryuoh Industrial FacilityLine(Scheduled location of construction)
1.5 km from the Ryuoh Interchange on the Meishin Expressway4CONSOLIDATED FINANCIAL HIGHLIGHTSNSREVIEW OF SEGMENT OPERATIOTOP INTERVIEWSPECIAL FEATURE

REVIEW OF SEGMENT OPERATIONSTOPICSCONSOLIDATED FINANCIAL STATEMENTS

CORPORATE DATA/STOCK INFORMATION

Transportation Systems Segment
Manufacturing, sales and related construction for electrical equipment for rail vehicles,magnetic levitation vehicles (high speed surface transport or HSST) systems, light railvehicles (LRV), alternative rail vehicles and special purpose vehicles, as well as railway
power storage systems.

Percentage of
total net sales

67.8%

Orders
Received
Net Sales

24,759 million yen(Down 16.9% year on year)

26,869 million yen

Orders Received (Unit: Million yen)
29,79020,9403,117

22,1982,374

17,324

1,913

3,117 million yen(Up 31.3% year on year)
2013/5

Propulsion inverter

Segment Income (Unit: Million yen)

26,86924,759(Up 21.0% year on year)Segment
IncomeNet Sales (Unit: Million yen)

2014/5

2015/5

2013/5

2014/5

2015/5

2013/5

2014/5

Although orders received in Japan increased, factors such as
delays in scheduled projects overseas caused a decrease outside
Japan, yielding overall orders received of 24,759 million yen, adecrease of 16.9% compared with the previous fiscal year.
Net sales increased significantly outside Japan, totaling 26,869
million yen, a 21.0% year-on-year increase.
Due to the effects of increased revenue and improved
profitability at factories, segment income totaled 3,117 millionyen, representing a 31.3% year-on-year increase.

2015/5

Driving gear unit

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

Percentage of
total net sales

29.3%

Orders
Received
Net Sales

13,319 million yen

Orders Received (Unit: Million yen)

11,613 million yen

11,457 11,097(Up 20.0% year on year)

Net Sales (Unit: Million yen)

13,319High-speed, low-inertia dynamos

433

848 million yen

2013/5

Information Equipment Systems Segment
Percentage of
total net sales

2.8%

Orders
Received
Net Sales985 million yen(Down 41.1% year on year)

2014/5Composite ticket vending machine

5

Toyo M2M Solution

2015/5

Orders Received (Unit: Million yen)
1,544

1,127 million yen

2013/5

2014/5

2015/5Net Sales (Unit: Million yen)
1,701

1,673

2013/5

2014/5

2015/5

Segment Income (Unit: Million yen)

1,828

348
1,127985(Down 38.3% year on year)

Segment
Income536(Up 58.1% year on year)

Example of system configuration of testing
equipment for automobile development

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

848

11,542 10,924 11,613(Up 6.3% year on year)

Segment
IncomeSegment Income (Unit: Million yen)

265

71 million yen71(Down 79.5% year on year)
2013/5

2014/5

2015/5

2013/5

2014/5

2015/5

2013/5

2014/5

2015/5Centered on increases in orders for testing equipment for
automobile equipment, along with infrastructure system related
and overseas orders, orders received increased 20.0% comparedwith the previous fiscal year, to 13,319 million yen.
Although net sales for processing equipment decreased,increases were seen primarily in testing equipment for automobileequipment, leading to a 6.3% year-on-year increase, to 11,613
million yen.
Due to the effects of increased revenue, segment income
increased 58.1% year-on-year, to 848 million yen.

Orders received in this segment decreased 41.1% compared withthe previous fiscal year to 985 million yen, due to decreases inboth railway station operating equipment and remote monitoring
systems.
Net sales in this segment decreased 38.3% year-on-year to
1,127 million yen, mainly for the same reasons underlying thedecrease in orders received.
Segment income for this segment decreased 79.5% year-onyear to 71 million yen, which was attributable to lower revenue.

6