ANNUAL
REVIEW
2016
Fiscal year ended
January 31, 2016

Change, Challenge, Speed

ABOUT

the 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 core semiconductor and device business,
we have established a robust product lineup featuring a wide range of promising products
from both Japan and overseas, and we take great pride in our skillful support services, which
are backed by the experience 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 other items 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.
The Ryoyo Group is currently working to contribute to customers’ Internet of Things (IoT)
growth strategies while further improving its corporate value. Utilizing the strengths born out
of our core businesses—the semiconductor and device business as well as the ICT andsolutions business—we make customer value proposals through our business model thatprovides comprehensive support encompassing devices, networks, services, and everything
between (IoT approach).

CONTENTS

01 About the Ryoyo Group

10 Financial Section

03 To Our Shareholders

18 Corporate Data /07 Corporate Governance /Investor Information

Corporate Social Responsibility

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”
MISSION
We shall strive to always be a corporate groupthat grows together with stakeholders.
MEDIUM-TERM VISIONThe 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

Semiconductors&
Devices

Solutionsprovision
capabilities

Businesscreation
aptitude

Information andCommunication
Technology

Customer
relations(understanding ofcustomers)02

To Our Shareholders

Kenhachiro Ogawa

Takayoshi Oouchi

Chairman andChief Executive Officer

President andChief Operating Officer

ACCELERATE ALL ACTIONS,TARGETING “REFORM TO AN IOTSOLUTIONS PARTNER”

03

Operating Environment andPerformance in the Year Under Review
During the year under review, the fiscal year ended January

namely, its semiconductor and device business as well as its

31, 2016, in the electronics industry, where the Ryoyo GroupICT and solutions business. At the same time, we devoted

operates, the communications and industrial equipment

effort to creating high-value-added business models that

sectors initially experienced solid conditions that continued onmerge the products and services of these businesses to aid

from the beginning of the fiscal year. However, these sectors

major customers in advancing their strategies and in resolving

later came to suffer from demand slumps that accompanied

any issues they may face. Conversely, we were forced tothe economic slowdown in China. ICT-related sectors,

record disposal and write-off losses due to an inability tomeanwhile, witnessed market structure changes driven by

secure customer orders for large-sized computers. As a result

the trend toward cloud computing technologies.

of these factors, net sales increased 2.0% year on year, toUnder these conditions, the Ryoyo Group worked to¥112.3 billion, while operating income decreased 57.3%, toreinforce and expand the foundations of its core businesses—¥0.8 billion, and net income dropped 55.9%, to ¥0.7 billion.

Net Sales

Operating Income /Operating Income Margin

Millions of yen

Millions of yen

97,887110,107112,332

1.7

Net Income / ROE%

Millions of yen

%

1.9

2.6
2.2

2,053

1,683

1,651
1,342

1.1

876

743
0.8

14.1

15.1

16.1

14.1
Operating Income

15.1

16.1

Operating Income Margin

14.1
Net Income

15.1

16.1

ROE

Medium-Term Initiatives
The Ryoyo Group’s new medium-term business plan, which

are differentiating operations based on our core semiconductor

started in the fiscal year ending January 31, 2017, has aand device business as well as our ICT and solutions­basic policy of “create new strengths with IoT approach tobusiness, which represent areas of cultivated strength for thecontribute to customers’ value improvements.” Together

Ryoyo Group, by developing new services and solutions thatwith this policy, the Ryoyo Group will advance four basic

are driven by both business sectors. Specifically, we are

strategies: “expand core businesses with IoT approach,”focused on expanding proposition of value (IoT approach)“make strategic investments in growing areas,” “accelerate

through a business model that leverages the strengths ofglobal strategies,” and “reinforce business bases forthese core businesses to provide comprehensive support

sustainable growth.”

encompassing devices, networks, and services.
Looking ahead, we intend to enhance our new value

Expand core businesses with IoT approach

offerings through value chains, which will include proposing

Currently, we are pushing forward with efforts to develop

business models and creating solutions that are directly linked

even higher levels of value in our business. To this end, we

to customers’ issues and strategies. This new value will04

To Our Shareholders

complement the value we offer through our traditional supply

Accelerate global strategies

chains, which consist of sales agents and commercial rights,

In regard to overseas businesses, as Japanese electronics

distribution functions, and inventory functions. By providing

manufacturers increasingly shift production operations

much higher quality solutions, we believe that we will be able tooverseas, we will enhance the support services we provide

boost our profitability and differentiate the Ryoyo Group fromfor such business relocations. In addition, we are working tocompetitors by contributing to customers’ value improvements

acquire local customers, uncover viable local products,

and thereby establish stable and long-term business foundations.

develop ICT businesses, and strengthen design anddevelopment functions, especially in the Greater China andMake strategic investments in growing areas
Our first move on this front will be to actively position humanresources in markets in which the IoT trend is expected to

ASEAN regions, in order to expand operations in overseas
markets displaying strong growth potential.
Going forward, we will work to further expand and improveadvance rapidly. As one fact of these efforts, we have establishedthe profitability of locally originated business operations while

the IoT Project, a specialized organization for supporting thealso cooperating with local companies in Thailand and China

Companywide deployment of new business models

and developing overseas ICT businesses.

established through our initiatives to date. In the future, wewill seek to expand core businesses by accumulating examplesof advanced initiatives, applying expertise in a cross-organiza-‌
Reinforcebusiness bases forsustainable growth

tional manner, and enhancing product and service offerings.

During the period of the new medium-term business plan,

During the year under review, we commenced three business

which began in 2016, we aim to reinforce operating foundations

alliances entailing capital investment, and we remain commit-

to achieve ongoing growth.

ted to uncovering, cultivating, and commercializing new

To establish solid operating foundations, we will promote

products and technologies with the potential to serve as

diversity management and cultivate human resources capable

future sources of value.

of responding to drastically changing times. Other efforts tothis end will include supporting sales activities through the
installation of IT infrastructure and the improvement ofworkflow efficiency and strengthening alliances with partnercompanies.

Vision for the Ryoyo Group

Value to beenhanced

Accelerate global strategies

Value

Value throughvalue chains• ‌Business model
proposal• ‌Solutions creation• ‌Close coordination
with partners• ‌Discovery ofventure companies

Directly linked to customers’issues and strategies
Difficult to define and replace
Pursuit of specialty and diversity

Asia network

Japan

Traditionalvalue

Value throughsupply chains• ‌Sales agents andcommercial rights• ‌Distributionfunctions• ‌Inventory functions• ‌Financial functions
Time

05

Continue and further
accelerate global
strategies of the current
medium-term business plan
(FY2013–FY2015)

Indefinite value

By 2014
Launch locallyoriginated business

Finite value
Low-cost operations
Pursuit of scale

2015 onward
Ensure profitability of
locally originated businessOutlook for the Fiscal Year Ending January 31, 2017
The electronics industry, where the Ryoyo Group operates, is2017, down 2.1% following the closure of large-scale orders

anticipated to see further growth as the IoT and M2M trends

for communications equipment. Conversely, we will be freed

spread. At the same time, however, there is a rising sense offrom the impacts of the losses on disposal and the write-

uncertainty resulting from the economic slowdown currently

down of inventories recorded during the year under review,

seen in China and other emerging countries as well as thepotentially resulting in substantial year-on-year increases of

persistence of yen depreciation, stock price declines, and139.5% in operating income and 87.0% in profit attributable

natural resource price drops.

to owners of parent, which are expected to come to ¥2.1 billion

In this environment, we expect consolidated net sales toand ¥1.3 billion, respectively.

amount to ¥110.0 billion in the fiscal year ending January 31,

Returns to Shareholders
For the fiscal year ended January 31, 2016, the Company paidof ¥40 per share of common stock in the fiscal year ending¥15 per share of common stock for the year-end cash divi-

January 31, 2017.

dend, making for an annual cash dividend of ¥30 per share of

In addition, we bought back 600,000 shares of treasury

common stock when combined with the interim dividend.

stock in the year under review. We will examine the possibility

The Company plans to target a total return (dividend payments
and share buyback) ratio of 100% of net income for the fore-of further enhancing shareholder returns in the future whileconsidering performance trends.

seeable future. Returns will be issued in the form of dividend
payments and treasury stock acquisitions.
In the fiscal year ending January 31, 2017, the Company­intends to pay a special commemorative dividend of ¥5 pershare (celebrating the 55th anniversary of the Company’s
founding) together with the standard interim dividend of ¥15 per

Dividends Per Share
Yen

40
30

30

15.1

16.1

share, and will also increase the year-end dividend to ¥20 per
share, up ¥5 from ¥15 in the year under review. Accordingly,
the Company is planning to issue a total annual cash dividend

17.1 (Target)

In Closing
Since its founding, the Ryoyo Group has continued to operate

cultivated until today to improve its corporate value by

in accordance with its corporate philosophy of “creating value

creating new forms of value as it pursues ongoing growth.

in tune with the times.” Guided by this philosophy, we havedefined “Change, Challenge, Speed” as our management

I would like to thank our shareholders for their ongoingsupport and ask for their continued support and understanding.

principle and are advancing various measures to realize ourvision—the Ryoyo Group will act as a solutions-providing
partner that leaves an impression on the intrinsically interconnected “smart society.” In the new era characterized by IoT
and M2M, the Ryoyo Group will leverage the strengths it has

Kenhachiro Ogawa

Takayoshi Oouchi

06

Corporate Governance / Corporate Social Responsibility
Board of Directors, Audit & Supervisory Board, and Corporate Officers
As of April 27, 2016
Audit & Supervisory Board Member

Yutaka Horikiri
Outside Audit & Supervisory
Board Members

Kenhachiro Ogawa

Takayoshi Oouchi

Nobuo Kikutsugi

Kenjiro Kobayashi

Chairman and CEO

President and COO

Director

Director

Ryoji Kimura
Tsutomu Nobechi
Kazumi Akiyama
Managing Executive Officer

Nobuo Kikutsugi
Senior Executive General Managers

Kenjiro Kobayashi
Masaaki Tanabe
Kiyoshi Waki
Yoshitsugu Tamakoshi
Kiyoshi Waki

Masaaki Tanabe

Director

Director

Yoshiharu Hayakawa

Tsumiko Nakahara

Outside Director(Independent Director)

Outside Director(Independent Director)

Executive General Manager

Takumi Tokunaga

Basic Corporate Governance Philosophy

Directors and Board of Directors

At the Company, we recognize enhancing corporate governance

The Board of Directors, which consists of eight directors (as of

as an important task of management. Therefore, in order toApril 27, 2016), is responsible for making decisions as

continue to guarantee the soundness, transparency, andstipulated in laws, regulations, and the articles of incorporation;effectiveness of management, as well as increase corporate

making important management decisions; and overseeing thevalue and fulfill our responsibilities to society, we are striving

execution of operations. In principle, the Board of Directors

to develop internal systems that ensure the functionality ofmeets once a month, and met a total of 12 times during thecorporate governance.

year under review.

Company Organizations
Outline of the Corporate Governance Framework

Audit & Supervisory Board Members andAudit & Supervisory Board

Organizational format

Company with Audit & Supervisory Board

The Company is a company with an Audit & Supervisory Board

Chairman of the Board of Directors

Chairman and CEO

as defined by the Companies Act of Japan, whereby Audit &Number of directors

Eight (including two outside directors)

Number of Audit & Supervisory
Board Members

Four (including three outside Audit &Supervisory Board Members)

Supervisory Board Members act independently of directors

Independent officers

Two outside directors and three outside Audit& Supervisory Board Members

Number of Board of Directors’ meetings
held during the fiscal year ended
January 31, 2016

12

Number of Audit & Supervisory Board
meetings held during the fiscal year
ended January 31, 201615

and oversee directors’ execution of operations. The Audit &Supervisory Board consists of four Audit & Supervisory Board
Members (as of April 27, 2016), of whom three are outside
Audit & Supervisory Board Members. In principle, the Audit &Supervisory Board meets once a month, and met a total of
15 times during the year under review.

Outside Directors and Outside Audit & Supervisory Board Members
Attendance at meetings of theBoard of Directors

Outside directors

Reason for appointment

Yoshiharu Hayakawa

The Company intends to utilize his expert knowledge as a Certified Public Accountant, as well as his extensive experienceand broad insight as a management consultant, to help strengthen the corporate governance of the Company.

11/12

Tsumiko Nakahara

The Company intends to utilize her sophisticated expertise with regard to all areas of corporate legal affairs based onher long history as an attorney and related knowledge and experience to help strengthen the corporate governanceof the Company.

10/10**Attended all 10 meetings of the Board of Directors held after her appointment

07

Outside Audit &Supervisory Board
Members

Reason for appointment

Ryoji Kimura

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

Audit & Supervisory
Board

Ryoji Kimura was selected with the aim of incorporating his highly professional insight into overall corporate legal affairs
based on his scholarly wisdom and professional experience as an attorney into audits of the Company’s management.

12/12

15/15

Tsutomu Nobechi

Tsutomu Nobechi was selected with the aim of incorporating his considerable insight into financial and accounting­matters gained through his experience at accounting firms into audits of the Company’s management.

12/12

15/15

Kazumi Akiyama

Kazumi Akiyama was selected with the aim of incorporating his wealth of insight based on his employment experienceat central government offices into audits of the Company’s management.

——3. A shareholder that holds 10% or more of the voting rights of theCompany’s shares (in the case of an institutional shareholder, thisshall apply to business executives at such an institutional shareholder)
4. A provider of specialist services** that has received ¥10 million
or more of remuneration on an annual basis from the Ryoyo
Group in the past five years
5. A party that has received a donation of ¥10 million or more on anannual basis from the Ryoyo Group in the past five years
6. A party that has a relationship with the Ryoyo Group in which an
exchange of directors is carried out by mutual dispatch
7. Any other party with a significant interest in the Ryoyo Group

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.
The criteria for the selection of outside officers require that candidates shall not fall under any of the following categories.
1. A party who is or has been a director, an Audit & Supervisory
Board Member, or an employee at the Ryoyo Group in the past
10 years or a relative within the second degree of kinship of sucha party
2. A party that is or has been a director, an Audit & Supervisory
Board Member, or an employee of a major business partner* of
the Ryoyo Group in the past five years* ‌This signifies a business partner that has a relationship with the Ryoyo Group that
constitutes 2% or more of the consolidated net sales of the Ryoyo Group in the mostrecent fiscal year.
** This signifies an attorney, a certified public accountant, a certified public tax
accountant, a judicial scrivener, a consultant, or an advisor.

Compensation of Directors and Audit & Supervisory Board Members
Compensation by type (millions of yen)

Directors(excluding outside directors)
Audit & Supervisory Board Members(excluding outside Audit & Supervisory Board Members)
Outside officers

Total compensation(millions of yen)

Basic compensation

Stock options

Bonuses

Retirement benefits

Number of applicable
individuals

121

121

—

—

—

6

12

12

—

—

—

1

27

27

—

—

—

5

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

the responsibilities of directors and their individual performance

methods, compensation amounts for directors and Audit &as well as the performance of the Company as a whole.

Supervisory Board Members are to be less than the upper

Compensation amounts for Audit & Supervisory Board

limit approved at the general shareholders’ meeting.

Members are decided by the Audit & Supervisory Board.

Compensation amounts for directors are decided based on
Internal Control Systems

7. System concerning reports submitted by directors

The following are our basic principles for establishing internaland employees to the Audit & Supervisory Board and othercontrol systems. These principles help us maintain systems

systems concerning reports to the Audit & Supervisory Boardfor sound internal control.
1. System for ensuring that the execution of duties by

8. Items concerning policies for handling of expenses ordebts resulting from execution of duties by Audit & Super-

directors and employees is in compliance with all laws,

visory Board Members, including procedures for advance

regulations, and the articles of incorporation

payment or indemnification of expenses or other matters

2. Items concerning the storage and management of information related to the execution of duties by directors

9. Other systems for ensuring effective auditing by the
Audit & Supervisory Board

3. Rules and other systems for containing the risk of damages
4. System for ensuring the efficient execution of duties
by directors
5. System for ensuring the appropriateness of operations

Risk Management Systems
Risks that may affect our operations include those related tocompliance, the environment, disasters, information security,

undertaken by the corporate group consisting of Ryoyo

product quality, foreign exchange rates, and financial report-

Electro and its subsidiaries

ing. Each department maintains effective risk management

6. System concerning employees requested by the Audit &systems managed by employees that are responsible for risk

Supervisory Board to serve as assistants and items

management. In the event that any disruption occurs, theseconcerning the independence of these employees

employees will guide their department in responding quickly

from directors

and effectively to those disruptions in order to reduce theimpact on operations.
08Corporate Governance / Corporate Social Responsibility

Investor Relations Activities

information about the current business situation and future

Ryoyo Electro recognizes that disclosing accurate, unbiased,

direction of the Company through our website* as well as at

and timely information about the management of the Com-

information sessions held for analysts and institutional inves-pany to its shareholders and other investors is an important

tors. Through these efforts, we will continue to disclosefunction of management. In correspondence with the releaseaccurate, unbiased information in a timely manner.

of second quarter and annual financial reviews, we also offer* http://www.ryoyo.co.jp/english

Corporate Social Responsibility
Outlining Our Basic CSR Philosophy

Implementing Green Procurement Initiatives

In accordance with our corporate philosophy of “creating

In selecting business partners, we assess them on the basis ofvalue in tune with the times,” the Ryoyo Group conducts its

their compatibility with Ryoyo’s Green Procurement Guidelines.

business with high ethical standards for the greater good ofIn this way, we are actively promoting green procurement

society. In order to fulfill our responsibilities toward society inthroughout the supply chain. Additionally, we are working toevery aspect of our business, we will continue to act inreduce the environmental impact of the products andcompliance with this philosophy, as well as with all laws andsecondary supplies that we use by examining their compatibility

regulations, throughout our domestic and overseas operations.

with our Management Standards on Chemical Substancesfrom the procurement stage onward. We will continue toPromoting Compliancepromote environmental consideration in our operations andIn 2007, we established the Ryoyo Group Codes of Conduct,

strive to be an increasingly environment-friendly corporation.

which serves as a foundation for our operations moving forward.
We have also set up the “Ryoyo Group Compliance Hotline”

Addressing Conflict Mineral Issues

so that we can quickly identify violations of the Ryoyo Group

While the Dodd–Frank Act enacted by the United States does

Codes of Conduct and carry out the necessary steps to rectify

not apply to the Company directly, Ryoyo Electro is supportive

such issues. This hotline serves as a communication channelof the act’s goal of protecting human rights. Accordingly, thefor employees to discuss and report compliance-related concerns.

Company is supporting this act through activities in two
different areas. Firstly, we are addressing this issue throughout

Implementing Environmental Protection, Quality

the supply chain by encouraging suppliers to refrain from using

Control, and Information Security Initiatives

conflict minerals. Secondly, we are responding to conflict

All domestic Ryoyo Group companies (excluding satellite

mineral inspections of products delivered to companies to

offices) have acquired ISO 14001, ISO 9001, and ISO 27001

which the Dodd–Frank Act applies.

certification, and the Group effectively employs an integrated
management system that collectively functions as an environ-Ryoyo’s CSR Website

mental management system, a quality management system,

http://www.ryoyo.co.jp/english/csr.html

and an information security management system. This
integrated management system allows us to contribute to theprotection of the environment by reducing the environmental
impact and the environmental risks of our operations, respondto customer needs through ongoing efforts to improve thequality of our products, and raise awareness regarding information security within the Company. This will help to further
enhance the trust placed in us by our customers, our business
partners, and society as a whole.

09

Financial Section

Consolidated Financial Highlights
Ryoyo Electro Corporation
For the years ended January 31, 2016, 2015, 2014, 2013, and 2012

Thousands of
U.S. dollars*Millions of yen

2016.1

2015.1

2014.1

2013.12012.1

2016.1¥ 112,332¥ 110,107¥  97,887¥  87,183¥ 85,108$929,364

Gross profit

7,852

8,801

8,279

7,373

7,932

64,970

Selling, general and administrative expenses

6,976

6,747

6,627

6,651

6,559

57,714

876

2,053

1,651

722

1,372

7,255

For the YearNet sales

Operating income
Net income

743

1,683

1,342

423

879

6,149

4,392

467

(1,369)

328

3,359

36,344¥  76,865¥ 82,937¥  79,893¥   72,490¥ 70,602$635,933

63,921

65,583

63,112

61,30361,155

528,848

Net income¥   30.01¥   66.74¥   52.17¥   16.41¥   33.00$   0.25

Total net assets

2,591.70

2,595.83

2,498.70

2,371.67

2,367.83

21.44

Cash dividends

30.00

30.00

30.00

30.00

30.00

0.25

Gross profit margin

7.0

8.0

8.5

8.5

9.3

Operating margin

0.8

1.9

1.7

0.8

1.6

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

Ratios (%)

Net income margin

0.7

1.5

1.4

0.5

1.0

Equity ratio

83.1

79.0

78.9

84.5

86.6

Return on equity

1.1

2.6

2.2

0.7

1.4

Other Information
Number of shares issued**

24,636,009 25,237,095 25,226,060 25,826,926 25,827,768

Number of employees

510

501

513

517

504

* U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥120.87=U.S.$1.00, the exchange rate prevailing on January 31, 2016.
** 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
97,887
85,108

4,392
3,359

87,18379,89370,60282,93772,49061,15561,303

63,112

76,86565,58363,921467

328(1,369)

12.1

13.1

14.1

15.1

16.1

12.1

13.1

14.1

15.1

16.1

12.1

13.1

Total Assets

14.1

15.1

16.1

Total Net Assets

10Financial Section

Consolidated Financial Review‌Operating Environment
During the year under review, the fiscal year ended January
31, 2016, there was a growing sense of uncertainty in theJapanese economy stemming from the economic slowdown
in China. Corporate capital investment, which was anticipatedto serve as a growth driver in the domestic economy, wasdelayed by an increasingly wider scope of companies, and therecovery of consumer spending and exports was sluggish
as a result.
In the electronics industry, where the Ryoyo Group operates,
the communications and industrial equipment sectors initiallyexperienced solid conditions that continued on from the
beginning of the fiscal year. However, these sectors latercame to suffer from demand slumps that accompanied theeconomic slowdown in China. ICT-related sectors, meanwhile,
witnessed market structure changes driven by the trend
toward cloud computing technologies.

‌‌Results for the Fiscal Year Ended
January 31, 2016
Under these conditions, the Ryoyo Group worked to reinforce
and expand the foundations of its core businesses—namely,
its semiconductor and device business as well as its ICT andsolutions business. At the same time, we devoted effort tocreating new, high-value-added business models that merge
the products and services of these businesses to aid major
customers in advancing their strategies and in resolving any
issues they may face. In addition, losses on disposal and thewrite-down of inventories were recorded due to an inability tosecure large-scale system orders.
Due to these factors, net sales increased 2.0% year on year,to ¥112.3 billion, while operating income decreased 57.3%, to¥0.8 billion, and net income dropped 55.9%, to ¥0.7 billion.
Semiconductors and Devices
Net sales of semiconductors and devices increased ¥4.1 billion
year on year, or 6.1%, to ¥72.3 billion.
Sales of products for communications systems increased
13.4%, to ¥15.3 billion, due to the expansion of manufacturingsubcontracting businesses for LCDs for use in communications
equipment.
Sales of products for digital consumer electronics and other
home electronics grew 15.8%, to ¥10.1 billion, due to higher
sales primarily for products for use in televisions.
Sales of vehicle installations were relatively unchanged year on
year, increasing only 0.1%, to ¥3.7 billion.
Sales of products for PCs and peripherals decreased 2.9%, to¥21.1 billion, as firm sales of products for use in printers, HDDs,

and other peripherals partially offset the trend toward temporary
production adjustment for PCs.
Sales of products for industrial and other applications wereup 7.9%, to ¥22.1 billion, as solar power generation-related
equipment sales drove performance, counteracting theimpacts felt in certain industrial machinery-related businesses
from the economic slowdown in China.
Sales by Applications
Billions of yen

13.5+13.4%

15.3

8.7
3.7

+15.8%

10.1

+0.1%

3.7

21.7

–2.9%

21.1

20.5

+7.9%

22.1

15.1

16.1

Communications
Digital consumer electronics andother home electronics

Vehicle installations
PCs and peripherals
Industrial and others

ICT and Solutions
Net sales of ICT and solutions decreased ¥1.9 billion year on
year, or 4.6%, to ¥40.0 billion.
Sales of PC, server, and network products decreased 18.2%,
to ¥11.5 billion, due to issues related to large-scale systemorders that had been initially anticipated.
Sales of I/O equipment increased 9.6%, to ¥7.0 billion, due inpart to the startup of new projects.
Sales of software and embedded products were down 0.1%,
to ¥21.5 billion, as higher sales of embedded products, such asgraphics and industrial boards, were offset by a decrease insales of PC software.
Sales by Products
Billions of yen

42.0

40.0

14.0

–18.2%

11.5

6.4

+9.6%

7.0

21.5

–0.1%

21.5

15.1
PC / Server / Network

11

72.3

68.1

16.1
I/O equipment

Software / Embedded

Sales by Region
Japan
In the year under review, sales to external customers in Japandecreased ¥0.3 billion year on year, or 0.3%, to ¥90.3 billion,
following a decline in sales of semiconductors and softwarefor use in PCs. The operating income of this regional segment
was down ¥1.1 billion, or 61.6%, to ¥0.7 billion, as a result of therecording of losses on disposal and the write-down of inventories.
Asia
Sales to external customers in Asia increased ¥2.5 billion year
on year, or 13.1%, to ¥21.9 billion, as a result of higher sales ofsemiconductors for televisions and LCDs for communications
equipment. However, the operating income of this segment
decreased ¥60 million, or 32.2%, to ¥0.1 billion, due to therecording of losses on the write-down of inventories.
The figure for operating income presented on the consolidated statements of income includes operating income fromeach segment as well as from intersegment transactions.

‌Financial Position
Total assets at the end of the fiscal year amounted to ¥76.8
billion, ¥6.0 billion lower than at the previous fiscal year-end.
This was primarily due to decreases in securities andmerchandise and finished goods.
Total liabilities were down ¥4.4 billion, to ¥12.9 billion, mainly
due to a decrease in notes and accounts payable–trade.
Total net assets decreased ¥1.6 billion, to ¥63.9 billion.
This was largely due to an increase in treasury stock.

‌Cash Flows
Cash and cash equivalents totaled ¥13.5 billion at the fiscal
year-end, a ¥2.6 billion year-on-year increase. Major factors
included a decrease in working capital.
Net cash provided by operating activities was ¥1.1 billion,
compared with net cash used in operating activities of ¥4.8
billion in the previous fiscal year. This outcome was a resultof income before income taxes of ¥1.2 billion being recorded
and working capital decreasing.
Net cash provided by investing activities was ¥3.2 billion, a¥2.0 billion year-on-year decrease. This was largely because
proceeds from sales and redemption of investment securities
totaling ¥3.9 billion counteracted outflows for purchase ofinvestment securities of ¥3.2 billion.
Net cash used in financing activities amounted to ¥1.6
billion, compared with ¥0.7 billion in the previous fiscal year.
Major outflows included the purchase of treasury stock.

‌Returning Profits to Shareholders
Shareholder Returns Policy
The Company views returning profits to its shareholders as
one of 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.
Dividend Payments in the Fiscal Year Ended January 31,
2016, and the Fiscal Year Ending January 31, 2017
For the fiscal year ended January 31, 2016, the Company
paid ¥15 per share of common stock for the year-end cash
dividend, making for an annual cash dividend of ¥30 per shareof common stock when combined with the interim dividend.
The Company plans to target a total return (dividend payments
and share buyback) ratio of 100% of net income for theforeseeable future. Returns will be issued in the form of
dividend payments and treasury stock acquisitions.
In the fiscal year ending January 31, 2017, the Company
intends to pay a special commemorative dividend of ¥5 pershare (celebrating the 55th anniversary of the Company’s
founding) together with the standard interim dividend of ¥15
per share, and will also increase the year-end dividend to ¥20
per share, up ¥5 from ¥15 in the year under review. Accordingly, the Company is planning to issue a total annual cash
dividend of ¥40 per share of common stock in the fiscal year
ending January 31, 2017.

‌Risks Pertaining to the Company’s Business
Risks that may affect the business performance, stock price,and financial condition of the Company include, however are
not limited to, the following.
(1) Abrupt changes in economic conditions(2) Fall in the price of products(3) Contracts with suppliers(4) Fluctuation in foreign exchange rates(5) Customers moving operations overseas(6) Country-based risks(7) Product defects and delivery issues and problems related
to services(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
More information pertaining to business risks can be foundon the Company’s website.
http://www.ryoyo.co.jp/english/ir-library/business-risk.html
12

Financial Section

Consolidated Balance Sheets
Ryoyo Electro Corporation
At January 31, 2016 and 2015

Thousands of
U.S. dollars

Millions of yen

2016.1

2015.1

2016.1

Cash and deposits¥13,535¥11,616$111,983

Notes and accounts receivable–trade33,52334,446277,354

AssetsCurrent assets

Securities

1,538

2,000

12,728Merchandise and finished goods

11,184

14,482

92,531

Deferred tax assets
Other
Allowance for doubtful accounts
		 Total current assets

354

214

2,931

2,110

2,438

17,462

(5)

(20)

(48)

62,241

65,177514,944

102

81

846

5

5

47

Noncurrent assets
Property, plant and equipment
		 Tools, furniture and fixtures, net
		Land		Other, net

71

109

595

			 Total property, plant and equipment

180

196

1,489

669

645

5,539

11,67014,97996,552Intangible assets
Investments and other assets
		Investment securities
		 Net defined benefit asset

1,075

798

8,897

		Other

1,064

1,141

8,810

		 Allowance for doubtful accounts

13

(36)

(1)

(299)

			 Total investments and other assets

13,774

16,917

113,960

			Total noncurrent assets

14,62417,759120,989

Total assets¥76,865¥82,937$635,933

Thousands of
U.S. dollars

Millions of yen

2016.1

2015.1

2016.1¥ 9,565¥12,753$ 79,137

142

573

1,178

Liabilities
Current liabilities
Notes and accounts payable–trade
Income taxes payable
Accrued consumption taxes
Provision for bonuses
Other
		 Total current liabilities

6

3

52

130

119

1,075

1,150

1,356

9,521

10,994

14,80690,964

802

895

6,636

Noncurrent liabilities
Net defined benefit liability
Deferred tax liabilities

542

948

4,488

Other

603

703

4,995

		 Total noncurrent liabilities

1,948

2,547

16,120		Total liabilities

12,943

17,353

107,085

13,672

13,672

113,113

Net assets
Shareholders’ equity
Capital stock
Capital surplus

13,336

13,336110,337

Retained earnings

38,99738,813322,643

Treasury stock(4,178)(3,270)(34,573)

61,82762,551

511,520

1,085

1,843

8,980

		 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

9

(0)

77

743

904

6,148

183

211

1,521

2,021

2,959

16,726

72

72

601

		 Total net assets

63,921

65,583528,848

		 Total liabilities and net assets¥76,865¥82,937$635,933

Subscription rights to shares

14

Financial Section

Consolidated Statements of Income andConsolidated Comprehensive Statements of Income
Ryoyo Electro Corporation
For the years ended January 31, 2016 and 2015
Thousands of
U.S. dollars

Millions of yen
Consolidated Statements 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 investments in partnership
Other
		 Total non-operating income
Non-operating expenses
Sales discounts
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
Gain on bad debts recovered
Surrender value of insurance		 Total extraordinary income
Extraordinary losses
Loss on sales of investment securities
Impairment loss
Special extra retirement payments
Settlement package
		 Total extraordinary losses
Income before income taxes and minority interests
Income taxes
Income taxes–current
Income taxes–deferred		 Total income taxes
Income before minority interests
Net income

2016.1

2015.1

2016.1¥112,332
104,479
7,852¥110,107
101,306
8,801$929,364
864,394
64,970

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

3
2,842
119
137
349
153
3,142
6,747
2,053

168
23,737
1,075
889
2,811
1,630
27,401
57,714
7,255

96
113
11
179
19
420

145
137
12
205
22
523

800
935
98
1,483
164
3,482

4
73
103
14
2
2
201
1,096

3
49
15
7
1
0
78
2,498

38
606
859
119
22
23
1,669
9,068

370
–
–
370

212
1
78
292

3,063
–
–
3,063

101
141
–
–
243
1,222

11
–
70
20
101
2,689

842
1,171
–
–
2,014
10,116

611
(132)
479
743
¥    743

980
25
1,005
1,683
¥  1,683

5,061(1,094)
3,966
6,149$  6,149

743

1,683

6,149

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

595
0
738
–
1,333
3,017

(6,272)81(1,335)(232)(7,758)(1,609)

(194)
–

3,017
–

(1,609)–Consolidated Comprehensive Statements of Income

Income before minority interests
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 the parent
Comprehensive income attributable to minority interests
15

Consolidated Statements of Changes in Net Assets
Ryoyo Electro Corporation
For the years ended January 31, 2016 and 2015

Millions of yen
Shareholders’ equity

Accumulated other comprehensive income
Valuationdifferenceonavailablefor-salesecurities

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasurements ofdefinedbenefit plans

Subscription
rights tosharesTotal
net assets

Capitalstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityBalance 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
Net income
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

(908)

(748)
743
(908)

From January 31, 2015
to January 31, 2016

(748)
743

–
¥13,336(4)¥38,997(908)¥(4,178)

(748)
743
(908)

–

(758)

9

(161)

(28)

–

(937)

(913)
¥61,827(758)¥1,085

9
¥9

(161)
¥ 743

(28)
¥183

–
¥72

(1,850)¥63,921

Millions of yen
Shareholders’ equity

Accumulated other comprehensive income

From January 31, 2014
to January 31, 2015

Capitalstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityValuationdifferenceonavailablefor-salesecurities

Balance at January 31, 2014
Changes of items during
the period
Dividends from surplus
Net income
Purchase of treasury stock
Retirement of treasury stock
Exercise subscription rights
to shares
Net changes of items otherthan shareholders’ equity
Total changes of items during
the period
Balance at January 31, 2015

¥13,672¥13,336¥38,555¥(3,945)¥61,618¥1,248

(662)

(1)
662

(756)
1,683
(1)
–

(756)
1,683
(1)
–

(6)

13

6

6

(756)
1,683

–
¥13,672–¥13,336258¥38,813674¥(3,270)

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasurements ofdefinedbenefit plans

Subscription
rights tosharesTotal
net assets

¥(0)

¥166

¥  –

¥79

¥63,112

–

595

0

738

211

(6)

1,538

932
¥62,551595¥1,843

0
¥(0)

738
¥904

211
¥211

(6)
¥72

2,471
¥65,583

Thousands of U.S. dollars
Shareholders’ equity

From January 31, 2015
to January 31, 2016

Capitalstock

CapitalsurplusRetainedearnings

Treasurystock

Balance at January 31, 2015
$113,113 $110,337 $321,119 $(27,059)
Cumulative effects of changes
in accounting policies
1,563
Restarted balance
113,113 110,337 322,682(27,059)
Changes of items during
the period
Dividends from surplus(6,189)Net income
6,149
Purchase of treasury stock(7,514)
Net changes of items otherthan shareholders’ equity
Total changes of items during
the period––(39)(7,514)
Balance at January 31, 2016
$113,113 $110,337 $322,643 $(34,573)

Accumulated other comprehensive income

Total
shareholders’equityValuationdifferenceonavailablefor-salesecurities

Deferred
gains orlosses onhedgesForeigncurrencytranslation
adjustment

Remeasurements ofdefinedbenefit plans

Subscription
rights tosharesTotal
net assets$517,511$15,252$ (4)$ 7,483$1,753$601$542,597

1,563
519,074

15,252

(4)

7,483

1,753

601

1,563
544,160(6,189)6,149(7,514)(6,189)6,149(7,514)–(6,272)81(1,335)(232)–(7,758)(7,553)$511,520(6,272)$ 8,98081$77(1,335)$ 6,148(232)$1,521–$601(15,312)$528,848

16Financial Section

Consolidated Statements of Cash Flows
Ryoyo Electro Corporation
For the years ended January 31, 2016 and 2015

Thousands of
U.S. dollars

Millions of yen

2016.1

2015.1

2016.1¥ 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¥ 2,689
217
(0)
–
(205)
146
(923)
927
(283)
(201)
49
(78)
(3,645)
(908)
(998)
(33)
(838)
(4,086)310(1,052)(4,827)$ 10,116
1,983
22
1,171
(1,483)
293
255
(103)
(1,735)(2,220)606–
6,641
27,186(26,376)27(362)
16,024
1,945(8,292)
9,676

II. Cash flows from investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits
Purchase of short-term investment securities
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
Proceeds from distribution of investment in partnerships
Proceeds from cancellation of insurance funds
Other, net
Net cash provided by (used in) investing activities

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

(757)
315
(1,000)
9,500
(287)
4
(5,766)
2,066
–
–
514
578
125
5,293

–
6,207
–
16,546(3,407)–(27,226)
22,9589,928(1,695)
3,259–
96
26,667

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

(746)
(908)
(1,654)

(754)
(1)
(755)

(6,176)(7,514)(13,690)

(71)
2,666
10,868¥13,535

135(154)
11,023¥10,868(592)
22,061
89,922$111,983

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 sales of investment securities
Loss (gain) on valuation of investment securities
Surrender value of insurance
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 the beginning of the period
VII. Cash and cash equivalents at the end of the period17Corporate Data / Investor Information
As of January 31, 2016

Corporate Name
Ryoyo Electro Corporation

Composition of Shareholders

Address
Konwa Building, 1-12-22
Tsukiji, Chuo-ku, Tokyo
104-8408, JapanPhone+81-3-3543-7711
Fax+81-3-3545-3507
Websitehttp://www.ryoyo.co.jp/english
Date of Incorporation
February 27, 1961

Foreign corporations and other foreign investors

24.5%

Other corporations

22.5%

Individuals and other

20.3%

Financial institutions

18.8%

Treasury stock

12.6%

Securities companies, etc.

1.3%

Major Shareholders
Thousandsof shares

CGML PB CLIENT ACCOUNT/COLLATERAL

4,065

Mitsubishi Electric Corporation

2,246

9.12

SHC Corporation

2,118

8.60

Japan Trustee Services Bank, Ltd. (Trust account)

1,671

6.78

C&I Holdings Co., Ltd.

1,098

4.46

552

2.24

The Master Trust Bank of Japan (Retail trust account)
Paid-in Capital¥13,672 million
Authorized Shares
119,628,800
Shares Issued
28,200,000
Shareholders
5,446
Stock Trading Unit
100 shares
Stock Listing
Tokyo Stock Exchange,
First Section
Ticker Code8068
Transfer Agent
Mitsubishi UFJ Trust andBanking Corporation

%

16.50

The Master Trust Bank of Japan (Trust account)

547

2.22

Sheep Shokai Co.

523

2.12

CBNY DFA INTL SMALL CAP VALUE PORTFOLIO

433

1.76

Nippon Life Insurance Company

409

1.66

Notes: 1
 . Ryoyo Electro Corporation possesses 3,563,991 shares of treasury stock, which represents a 12.63% holding in the Company.
2. Calculations for the ownership percentages above did not account for treasury stock.
3. Ryoyo Electro Corporation canceled 600,000 shares of the above-mentioned treasury stock on March 2, 2016.

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

3,000

1,500

0

2

3

4

5

6

7

8

14.1

9 10 11 12

1

2

3

4

5

6

7

8

15.1

9 10 11 12

1

2

3

4

5

6

7

8

9 10 11 12

1

16.1

18

EMS 576112 / ISO 14001
FS 576113 / ISO 9001
IS 511311 / ISO 27001

Ryoyo Electro has acquired the following certification at all offices in Japan (excluding the satellite office).
• ISO 14001 (Environmental management systems)• ISO 9001 (Quality management systems)• ISO 27001 (Information security management systems)

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.

Printed in Japan