An Interview withthe President

An Interview with the President

Special Feature

Please provide us with details of the business and capital alliance with Hitachi, Ltd.

Steady Progress on Full Fiscal Year Forecasts
and Our Medium-Term Management Plan
Buoyed by a recovery in the economy, Toyo Denki is working diligently
to secure an increase in both revenue and earnings for the full fiscal
year under review. In this interview, Hiroshi Tsuchida, the Company’spresident, provides details on first-half conditions and results, future
developments, and Toyo Denki’s alliance with Hitachi, Ltd., whichcontinues to attract considerable interest.

Hiroshi Tsuchida
President

Please tell us about the underlying theme of the Company’s business activities in the current fiscal
year and results for the recently completed first half.
Turning initially to the Industrial Systems segment, whereperformance has slumped due to the weak business environment,a major theme for fiscal 2010, the fiscal year ending May 31, 2011,
has been to reenergize our activities and place this segment backon a profitable track. At the same time, we are expanding ourTransportation Systems operations with a particular focus onoverseas markets including China as a means to boost
performance throughout the Toyo Denki Group. On this basis, wehave identified specific consolidated numerical targets for the fiscal
year under review, including net sales of 36 billion yen andoperating income of 1.6 billion yen.
Focusing on each of the aforementioned themes, the Group has
performed steadily throughout the first half. In the Industrial
Systems segment, our income and expenditure remained balanced
up to the end of the second quarter. However, we anticipate a profit
for the full fiscal year taking into consideration the status of orders
received and how, in our business, earnings are generally
concentrated in the second half. Results for our testing equipment
for automotive development have been particularly strong. With
interest growing not only in Japan but also from overseas, thisproduct line is emerging as a major pillar of the Industrial Systemssegment.
In the Transportation Systems segment, the Group isexperiencing steady growth in both domestic and overseas sales.

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Recently, however, the bidding requirements and processes leading
up to receiving orders, as well as securing profits, are becoming
increasingly difficult as competition intensifies and customers place
greater emphasis on curtailing costs. Against this backdrop, Toyo
Denki is taking steps to improve productivity through efficiency
measures. The Company is also focusing on efforts to reduce costs
by engaging in joint procurement with our allied companies as wellas purchasing cost negotiations in its own right.
Turning to the Information Systems segment, railway station
operation-related product sales remain firm. On a negative note,however, the recent market introduction of remote monitoring andwireless measurement systems are yet to take hold. In response,
Toyo Denki is working diligently to boost sales and marketing whiledeveloping new products that capitalize on the current demand forenergy savings. Collectively, these efforts are expected tocontribute to future performance.
In the fiscal year under review, persistent appreciation in thevalue of yen presents a major concern with respect to earnings. In
this context, Toyo Denki is stepping up its efforts to procurecomponents overseas, where a strong yen is considered a plus. As
a part of efforts to build a structure that is resilient to fluctuations inforeign currency exchange rates, the Company established aproject team that has commenced activities aimed at ramping up
overseas procurement by the Group.

While the Company entered into an alliance with Fuji Electric
Systems Co., Ltd., in July 2009, Toyo Denki also agreed to form astrategic business and capital alliance with Hitachi, Ltd., concerning
electrical components for rolling stock in overseas markets on
October 25, 2010 with the aim of further fortifying its businessoutside Japan. Building on the current upswing in demand forrailway systems across numerous overseas regional markets, theCompany has decided to leverage the benefits of joint endeavors tocover any shortfall in its own individual efforts.
In the overseas market, the world’s big three railway systems
companies—Canada’s Bombardier Inc., France’s Alstom SA andGermany’s Siemens AG—are adopting an increasingly aggressive
stance, particularly in newly emerging countries where robust
railway construction demand is forecast. In order to secure a morecompetitive position in overseas markets, Toyo Denki and Hitachi
are considering ways in which the two can better leverage theirindividual strengths. This entails the division of systems
coordination responsibilities and the supply of products to eachother for projects outside Japan as well as joint product design anddevelopment. We anticipate a substantial degree of complementary
benefit, taking into consideration Toyo Denki’s proven excellence in
DC control and drive systems as well as mechanical equipment

including pantographs and driving gear units and Hitachi’s
established track record in AC control and drive systems.
In exploring this alliance, both companies will also pursue costbenefits through such wide-ranging activities as joint externalmaterial procurement for use in overseas projects.
Working to establish and develop deep-seated cooperative ties,
this alliance further entails an agreement between Toyo Denki and
Hitachi to purchase and hold each other’s equity shares. In specificterms, Hitachi will purchase through a private placement (third-partyallocation) 2,100,000 shares of treasury stock held by Toyo Denki.
Utilizing the funds of approximately 700 million yen procured
through this transaction, Toyo Denki will undertake the marketpurchase of Hitachi common stock. In addition to developing astrong bond of mutual trust, this capital alliance is seen as
indicative of the robust commitment by each company to expand
business overseas. I appreciate our shareholders’ understanding ofthe arrangement.
Both Toyo Denki and Hitachi are today undertaking genuine
efforts to prepare for the full-fledged launch of joint businessdevelopment endeavors.

Can you please outline any initiatives that you believe should be of particular interest to shareholders
in the context of the Group’s endeavors during the second half?
During the second half we will make every effort to expand sales
and secure profits as we work toward achieving our full fiscal yeargoals. At the same time, we will make proactive sales efforts tocapture new orders in each business segment, which will support
our fiscal 2011 performance. Harnessing our motor drive
technological capabilities, we will also accelerate our second-halfdevelopment activities with the aim of better realizing the earlycreation of new businesses.
Fiscal 2011 is the final year of the Group’s Challenge Up
medium-term management plan. With the aim of achieving ourperformance targets including consolidated net sales of 42 billion
yen and lifting the ratio of overseas sales to total sales to 30%, amanagement plan priority, we are placing considerable weight ondeveloping business in the Chinese and North American markets
while carefully considering potential opportunities for entry into
other East Asian countries. As of the end of November 30, 2010,

the Company had achieved an overseas sales to total sales ratio of25%.
Looking ahead, we are confident in our ability to secure businessgrowth and to increase our corporate value. This confidence isbased on our ongoing efforts to expand and improve the quality ofour technological capabilities as well as our sales, marketing andservice structure. As we accomplish this, we will actively consider
and seize opportunities for new alliances, following those with Fuji
Electric Systems and Hitachi, if those potential new alliances arelikely to lead to new chances to build on our strengths andgenerate strong new growth.
I hope that all shareholders will take a keen interest in theCompany’s activities and future initiatives. As we work towardachieving our goals, I kindly ask for your continued support andunderstanding.

2An Interview withthe President

Special FeatureSpecial Feature

Initiatives Aimed at Expanding Overseas Railway
Infrastructure Development Plans

Achieving Growth in
the Transportation Systems
Segment through Global Development
Railway infrastructure development is expected to expand on the back ofeconomic growth in newly emerging countries. Railways are also attracting
increased worldwide interest as a means of mass transportation that exerts minimal
impact on the environment. As a result, new construction and railway line extensionactivities are intensifying across numerous regions with a major shift toward highspeed rail transportation entailing improvements in carriages and systems.
In this Special Feature, we provide an overview of global railway infrastructuredevelopment plans with a focus on our growth strategies in the Transportation
Systems segment, particularly in China and the U.S.

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Harnessing the benefits of business alliance
Promoting cooperative ties in the rail vehicle electrical equipment business,
focusing primarily on expanding overseas railway markets.

Fuji ElectricSystems Co., Ltd.
Alliance details

2Toyo Denki is leveraging its established competitive advantage in urban
transportation to actively pursue opportunities in subway construction in Asia aswell as Light Rail Transit (LRT) development plans in the U.S.

○Joint research anddevelopment
Mutually complementaryproducts○

Engineering service
cooperation○Service cooperation○

Toyo Denki is the leading supplier of electrical equipment to theBeijing Subway Line○ Engaged in the production and delivery of electrical equipment
to the Chengdu Metro lines 1 and 2China

Toyo Denki and Hitachi entered into abusiness and capital alliance withrespect to electrical components forrolling stock in overseas markets.
The goals of the alliance are to boost
each company’s competitive prowessin global markets and to expand
business overall.

Beijing Subway Line 10

At the press conference: Kenzo Terashima, Senior
Managing Director of Toyo Denki Seizo K.K. (right),
shakes hands with Gaku Suzuki, Vice President andExecutive Officer of Hitachi, Ltd.

Business allianceBusiness andcapital alliance

Hitachi, Ltd.

(announced July 14, 2009)(announced October 25, 2010)

Alliance details○

Established track record of electrical equipment
delivery to Dallas Area Rapid Transport (DART)○

Growing need for LRT due to relatively low
construction cost, backed by growing interest
toward a model shift triggered by the sharp surge
in crude oil prices

Expectations of Market Growth

Chengdu Metro Line 1

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Major regional urban areas in China○

Southeast Asia (Vietnam, Thailand, Indonesia, Other)

Targeting high-speed railway network
development projects○IndiaToyo Denki has accumulated significant technological expertise over the years
it has been involved with the Shinkansen (bullet train) in Japan. This expertiseprovides the wellspring for the Company’s high-speed rail gear units.

○○ High-speed railway network development plans in ChinaHarbin○Division of systems coordination
responsibilities○ Development of a mutuallycomplementary relationship withrespect to overseas products○ Division of product design anddevelopment responsibilities○ Joint purchase development of
externally procured materials○ Cross shareholding

Shenyang

Beijing

TianjinTaiyuanQingdao
Jinan
XuzhouXian Zhengzhou
NanjingShanghaiChengdu
Wuhan
Hangzhou
NingboShijiazhuang

Lanzhou

Chongqing

Changsha Nanchang
FuzhouGuiyangKunming Guangzhou
Shenzhen

3Light rail vehicle employed by Dallas Area Rapid Transport○

Concerning electrical components forrolling stock in overseas markets

Toyo Denki Seizo
K.K.

UnitedStates

SubwayConcerning electrical components forrolling stock in overseas markets○

Targeting new urban transportation construction
and plans for railway line extension

Work on the “Four Vertical & FourHorizontal” high-speed railway
network that connects theeast-west and north-south cornersof China is progressing rapidly.
Through the supply of high-speed
rail gear units, Toyo Denki issupporting the infrastructuredevelopment in China.
Driving gear
unit forhigh-speed
railway

Light Rail Transit
Major urban areas in the U.S.

Supplementary information:

Global High-Speed Railway Network Development Projects

PolandPortugal

RussiaPakistan

Iran

Egypt
MoroccoCountries with high-speed rail concepts
High-speed rail concepts in the U.S.

India
Qatar

Saudi Arabia

Thailand

MexicoVietnamVenezuela

Indonesia

BrazilAustralia

Argentine

Source: Japan Railway Technical Service, etc.

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