ANNUAL
REVIEW
2015
Fiscal year ended
January 31, 2015

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 instep with changes 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. The second pillar
supporting the Company’s operations is its information and communication technology (ICT)and solutions business. The diverse range of solutions we provide in this business begins
with kitting services in which we select hardware, operating systems, applications, and otheritems after providing consultation to determine customer needs. Our solutions do not end
with sales, however, as we also provide follow-up support after systems are introduced.
The Ryoyo Group has been guided by its corporate philosophy of “creating value in tune
with the times” since its foundation. Exercising this philosophy, we will continue to raise
corporate value by creating new business opportunities as we aim to act as a solutionsproviding partner that leaves an impression on the intrinsically interconnected “smart society.”

CONTENTS

01 About the Ryoyo Group08 Corporate Social Responsibility

03 To Our Shareholders

09 Financial Section

06 Corporate Governance18 Corporate Data /Investor Information

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

01

CORPORATE PHILOSOPHY“Creating value in tune with the times”

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.”

Smartphone

TabletM2M

Office automationequipment

New generationof vehicles

Industry andfactory automation

Medical careand healthcare

Semiconductors&
Devices

Energy saving

Information andCommunication
Technology
INTEGRATE

02

To Our Shareholders

Kenhachiro Ogawa

Takayoshi Oouchi

Chairman andChief Executive Officer

President andChief Operating Officer

ACCELERATING INITIATIVES GEAREDTOWARD REALIZING OUR MEDIUM-TERM VISION
Operating Environment and Performance in the Year Under Review
During the year under review, the fiscal year ended January

devices, and ICT-related products. We also endeavored to31, 2015, the electronics industry, which the Ryoyo Groupdevelop new high-value-added services and solutions

operates in, saw PC-related products benefit from special

targeting increased revenue in the medium to long term. As ademand in early spring 2014. Sales of industrial equipment-

result of these efforts, we witnessed increases in both sales

and smartphone-related products remained strong after thisand income as net sales increased 12.5% year on year, todemand ended.

¥110.1 billion; operating income rose 24.3%, to ¥2.0 billion;

Under these conditions, the Ryoyo Group promoted sales of its

and net income was up 25.4%, to ¥1.6 billion.

products and services—including its mainstay semiconductors,

Three Basic Strategies for Charting a Course Toward Ongoing Growth03

Since its founding, the Ryoyo Group has continued to operatepartner that leaves an impression on the intrinsicallyin accordance with its corporate philosophy of “creating valueinterconnected “smart society.”in tune with the times.” Guided by this philosophy, we have

In charting a course toward ongoing growth, the Ryoyo

defined “Change, Challenge, Speed” as our management

Group has formulated three basic strategies: (1) reinforce andprinciple, based on which we strive to realize our medium-

expand the base of core businesses, (2) develop high-value-

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

added businesses, and (3) accelerate global strategies.

The semiconductor / device business and the ICT / solutions

Leveraging this business model, we are creating new value

business are our two core businesses, and both represent

in tune with the times, which is currently characterized byareas in which we have continued to accumulate strength

trends such as seen in the Internet of things (IoT) andsince the Company’s founding. Firmly grounded on themachine to machine (M2M) fields. For example, as part of our

foundation formed by these businesses, we will differentiateinter-connectivity growth strategies, we are focusing on field

ourselves from the competition by developing new services

and mobile work innovations, which entail using IoT systems

and solutions that derive from these core businesses toto evolve customers’ work styles.

develop high-value-added businesses as we strive to increase
corporate value.

In overseas businesses, meanwhile, we are enhancing our
support services for our clientele of Japanese electronics

The two core businesses of semiconductors / devices andmanufacturers amidst the rising trend of these companies shifting

ICT / solutions have both traditionally extended beyond simply

manufacturing operations overseas. In addition, we aresupplying customers with parts. We have always conducted

accelerating efforts to acquire local customers, uncover viable

these businesses together with customers, expanding points

local products, develop ICT businesses, and strengthenof contact and positioning the people we serve as “businessdesign and development functions, especially in the Greater

partners” rather than merely as “one of our customers.”

China and ASEAN regions, in order to take advantage of theTo create such a relationship, we provide support for

growth potential of overseas markets. Furthermore,developing business schemes that begin from the businessinformation on leading-edge technologies and industry trends

plan proposal phase, and follow this up with a range of services

is being collected through bases in the United States to help

including sales of products and after sales maintenance.

improve service quality on a global basis.

At the same time, we have worked to link our networks in

In the fiscal year ending January 31, 2016, the Company will

the device field, where we develop our semiconductor /work to expand and strengthen self-driven businessdevice business, and in the service field, which is home to ouroperations while also cooperating with local companies in

ICT / solutions business. In this manner, we have constructed

Thailand and China and developing overseas ICT businesses.

a business model for providing comprehensive support
encompassing devices, networks, services, andeverything between.

MEDIUM-TERM VISIONThe Ryoyo Group will act as a solutions-providing partner that leaves animpression on the intrinsically interconnected “smart society.”

Basic Strategy I

Reinforce and expand
the base of core businesses

Increase scale of sales

Basic Strategy II

Develop high-value-added
businesses

Advance inter-connectivity growth strategies

Basic Strategy III

Accelerate global strategies

Expand overseas businesses

Chart a course toward ongoing growth by accelerating initiatives
geared toward realizing our medium-term vision

04

DEVELOP HIGH-VALUE-ADDED “IoT BUSINESSES”
Field and mobile work innovations that evolve the businesses of all industries (customers)

Partner companies
Businessplanning

Service

Product
planning

Cloud
Medicalinstitutions

Big Data
Wide-area networks

Facility
maintenanceRouters, Wi-Fi APs

Network

Device networks

Publictransportation

Wi-Fi, Zigbee,
Bluetooth

Factories

DeviceSmartphones
POSs

Sensors

RobotsTablets

Automotive equipment

Signage terminals

IC cards

STBs
Distribution /retailCamerasConstruction /civil engineering

Creating new value at all work sites
Cost reductions

Improved quality

Energy saving

Higher speed and operating ratios

Increased safety

Value-breeding communication

New Trial of Becoming “One Ryoyo”
In the fiscal year ending January 31, 2016, the Ryoyo Group

interconnected “smart society.” In particular, we will endeavor

will come together under the corporate ideal of “One Ryoyo”

to rapidly develop high-value-added businesses by advancing

to further accelerate initiatives geared toward realizing ourefforts related to field and mobile work innovations as we

medium-term vision—the Ryoyo Group will act as a solutions-target our third consecutive year of increases in both sales

providing partner that leaves an impression on the intrinsicallyand income.

Shareholder Returns
The Company views returning profits to its shareholders as

January 31, 2016, we plan to target a total payout ratio of

one of its most important management tasks. Accordingly,

100% of net income for the foreseeable future.

we issue cash dividend payments in consideration of theCompany’s financial position and the operating environment,

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

while also retaining internal revenues sufficient enough tomaintain a stable operating foundation and pursue futurebusiness expansion. Beginning with the fiscal year ending
Kenhachiro Ogawa

05

Takayoshi Oouchi

Corporate Governance
As of April 28, 2015

Kenhachiro Ogawa

Takayoshi Oouchi

Yutaka Horikiri

Nobuo Kikutsugi

Kenjiro Kobayashi

Masaaki Tanabe

Chairman and CEO

President and COO

Director

Director

Director

Director

Yoshiharu Hayakawa
Outside Director(Independent Director)

Aug. 1973 Registered as Certified Public Accountant
Apr. 1985 Representative Director, Chuo Coopers andLybrand Consulting Co., Ltd.
Jan. 1992 Representative, Chuo Audit Corporation
Nov. 1997 Representative, Kasumi Empowerment
Research Institute (incumbent)
June 2007 Outside Director, Mitsui Fudosan Co., Ltd.
June 2012 External Director, Kakaku.com, Inc. (incumbent)
Apr. 2013 Outside Director, Ryoyo Electro (incumbent)
June 2014 Outside Director, Sanrio Company, Ltd.
(incumbent)
Reason for appointment
The Company intends to utilize his expert knowledge
as a Certified Public Accountant, as well as his extensive
experience and broad insight as a management consultant,
to help strengthen the corporate governance of the Company.

Apr. 1990 Joined Tokio Marine & Fire Insurance Co., Ltd.
(currently Tokio Marine & Nichido Fire Insurance Co., Ltd.)
Oct. 2000 Registered as attorney (Yokohama Bar Association)
Dec. 2000 Joined Shoji Ninpei Law Office (currently Yokohama
Kannai Law Office)Apr. 2007 Established Yokohama Kaikou Law Firm
Apr. 2013 Domestic Relations Conciliation Commissioner,
Yokohama Family Court
Apr. 2015 Outside Director, Ryoyo Electro (incumbent)

Tsumiko Nakahara
Outside Director(Independent Director)

Reason for appointment
Ms. Nakahara possesses sophisticated expertise with regard to
all areas of corporate legal affairs based on her long history as
an attorney and related knowledge and experience. She wasselected to be an outside director with the aim of utilizing thisexpertise in strengthening the Company’s corporate governance systems.

Standing Statutory Auditor

Senior Managing Executive Officer

Managing Executive Officer

Akio Tanaka

Yutaka Horikiri

Nobuo Kikutsugi

Outside Auditors

Katsumasa Yasui

Senior Executive General Managers

Ryoji Kimura

Tsutomu Nobechi

Kenjiro Kobayashi

Masaaki Tanabe

Kiyoshi Waki

Haruo Nakayama

Executive General Managers

Satoru Fukumoto

Takumi Tokunaga

Basic Corporate Governance Philosophy

Outline of the corporate governance framework

At Ryoyo Electro, we recognize enhancing corporate

Organizational format

Company with a corporate auditor systemgovernance as an important task of management. Therefore,

Chairman of the Board of Directors

Chairman and CEO

in order to continue to guarantee the soundness, transparency,

Number of directors

Eight (including two outside directors)

Number of auditors

Four (including three outside auditors)

Independent officers

Two outside directors and two outside auditorsand effectiveness of management, as well as increase corporate value and fulfill our responsibilities to society, we are
striving to develop internal systems that ensure the functionalityof corporate governance.
Company Organizations
Directors and Board of Directors
The Board of Directors, which consists of eight directors (as ofApril 28, 2015), is responsible for making decisions as stipulated
in laws, regulations, and the articles of incorporation; making

Number of Board of Directors’ meetings
held during the fiscal year ended
January 31, 2015
Number of Board of Auditors’
meetings held during the fiscal year
ended January 31, 201512

17

Attendance rate
Board of Directors’ meetings

Board of Auditors’ meetings

Outside director

Yoshiharu Hayakawa

75%—

Outside auditors

Katsumasa Yasui
Ryoji Kimura
Tsutomu Nobechi

100%
100%
100%

Katsumasa Yasui
Ryoji Kimura
Tsutomu Nobechi

100%
100%
100%

important management decisions; and overseeing the execu-

Corporate Auditors and Board of Auditors

tion of operations. In principle, the Board of Directors meets

Ryoyo Electro is a Company with a corporate auditor system,

once a month, and met a total of 12 times during the year

whereby corporate auditors act independently of directors andunder review.

oversee directors’ execution of operations. The Board ofAuditors consists of four corporate auditors (as of April 28, 2015),
of which three are external corporate auditors. In principle,
the Board of Auditors meets once a month, and met a total of
17 times during the year under review.

06

The Criteria for the Selection of Outside Officers
In order to ensure the independence of the candidates it
recommends for outside officer (outside Director and outside
Audit & Supervisory Board Member), the Company has
formulated criteria for the selection of outside officers.
The criteria for the selection of outside officers require thatcandidates shall not fall under any of the following categories.
1. A
 party who is or has been a Director, an Auditor, or an employee
at the Ryoyo Group in the past ten years or a relative within thesecond degree of kinship of such a party
2. A party that is or has been a Director, an Auditor, or an employee
of a major business partner* of the Ryoyo Group in the past
five years
3. A shareholder that holds 10% or more of the voting rights of theCompany’ shares (in the case of an institutional shareholder, this shallapply to business executives at such an institutional shareholder)
4. A provider of specialist services** that has received ¥10 million ormore of remuneration on an annual basis from the Ryoyo Groupin 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
exchange of Directors is carried out by mutual dispatch
7. Any other party with a significant interest in the Ryoyo Group* ‌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.
** T his signifies an attorney, a certified public accountant, a certified public tax
accountant, a judicial scrivener, a consultant, or an advisor.

5. System for ensuring the appropriateness of operations undertaken by
the corporate group consisting of Ryoyo Electro and its subsidiaries
6. System concerning employees requested by the Board
of Auditors to serve as assistants and items concerning
the independence of these employees from directors
7. System concerning reports submitted by directors andemployees to the Board of Auditors and other systems concerning reports to the Board of Auditors
8. O ther systems for ensuring effective auditing by the Board
of Auditors

Risk Management Systems
Risks that may affect our operations include those related tocompliance, the environment, disasters, information security,
product quality, foreign exchange rates, and financial reporting.
Each department maintains effective risk management systems managed by employees who are responsible for risk
management. In the event that any disruption occurs, these
employees will guide their department in responding quickly
and effectively to those disruptions in order to reduce theimpact on operations.
Investor Relations Activities
Ryoyo Electro recognizes that disclosing accurate, unbiased,
and timely information about the management of the Company to our shareholders and other investors is an importantfunction of management. In correspondence with the release

Internal Control Systemsof second quarter and annual financial reviews, we also offer

The following are our basic principles for establishing internal

information about the current business situation and futurecontrol systems. These principles help us maintain systems

direction of the Company through our website* as well as atfor sound internal control.

information sessions held for analysts and institutional

1. S
 ystem for ensuring that the execution of duties by directors andemployees is in compliance with all laws, regulations, and thearticles of incorporation
2. Items concerning the storage and management of information
related to the execution of duties by directors
3. R ules and other systems for containing the risk of damages
4. System for ensuring the efficient execution of duties by directors

investors. Through these efforts, we will continue to disclose
accurate unbiased information in a timely manner.
* http://www.ryoyo.co.jp/english

General Shareholders’ Meeting
Appointment /Dismissal

Appointment / Dismissal

Board of Auditors

Auditing Firm

07

Board of Directors

AuditsFinancial audits

Internal Auditing
Department
Reports

Cooperation

External Legal Advisor

Appointment / Dismissal

Advice /Instruction

Internal audits

Instruction

Appointment / Dismissal

CEO / COO

Directors in Charge of Operations,Executive General Managers
Operational Execution Organization

Management CommitteeCorporate Social Responsibility
Outlining our Basic CSR Philosophy

products, and raise awareness regarding information security

In accordance with our corporate philosophy of “creating value

within the Company. This will help to further enhance the trustin tune with the times,” the Ryoyo Group conducts its busi-

placed in us by our customers, our business partners, andness with high ethical standards for the greater good ofsociety as a whole.

society. In order to fulfill our responsibilities toward society inevery aspect of our business, we will continue to act in

Implementing Green Procurement Initiatives

compliance with this philosophy, as well as with all laws andIn selecting business partners, we assess them on the basis

regulations, throughout our domestic and overseas operations.

of their compatibility with Ryoyo’s Green Procurement Guidelines. In this way, we are actively promoting green procurement

Promoting Compliancethroughout the supply chain. Additionally, we are working to

In 2007, we established the Ryoyo Group Codes of Conduct,

reduce the environmental impact of the products and secondary

which serves as a foundation for our operations moving forward.

supplies that we use by examining their compatibility with our

We have also set up the “Ryoyo Group Compliance Hotline”

Management Standards on Chemical Substances from theso that we can quickly identify violations of the Ryoyo Groupprocurement stage onward. We will continue to promote

Codes of Conduct and carry out the necessary steps to rectify

environmental consideration in our operations and strive to besuch issues. This hotline serves as a communication channel for

an increasingly environment-friendly corporation.

employees to discuss and report compliance-related concerns.
Addressing Conflict Mineral Issues
Implementing Environmental Protection,

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

Quality Control, and Information Security Initiatives

not apply to the Company directly, Ryoyo Electro is supportive

All domestic Ryoyo Group companies (excluding the satelliteof the Act’s goal of protecting human rights. Accordingly, theoffice) have acquired ISO 14001, ISO 9001, and ISO 27001

Company is supporting this Act through activities in twocertification, and the Group effectively employs an integrated

different areas. First of all, we are addressing this issue

management system that collectively functions as an environ-throughout the supply chain by encouraging suppliers tomental management system, a quality management system,

refrain from using conflict minerals. Secondly, we are respond-

and an information security management system. This integrated

ing to conflict mineral inspections of products delivered to

management system allows us to contribute to the protection

companies to which the Dodd–Frank Act applies.

of the environment by reducing the environmental impact andthe environmental risks of our operations, respond to customer

Ryoyo’s CSR website

needs through ongoing efforts to improve the quality of our

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

Advancing the Women’s Diversity Plan
Conditions in Japan’s labor market have changed substantially against the backdrop ofan aging population and a declining birth rate. Consequently, it will be important for theCompany to promote female employees to management positions, including those in senior
management, in order to keep growing in a sound manner. To accomplish this goal, theCompany is advancing the Women’s Diversity Plan as a voluntary initiative. Under this plan,
we have established a special in-house women’s empowerment taskforce, and are taking
steps to actively utilize the skills of female employees, steadily increase the number offemale managers, and otherwise assist female employees in shaping their careers.
Specifically, we are conducting measures focused on the following key areas: proactively employing women, broadening the range ofwork fields (roles) in which female employees are able to work actively, providing training to support these employees in their careerdevelopment, and improving the Company’s workplace environment and systems in order to give all employees peace of mind whengoing through life events, such as child birth, child rearing, and nursing relatives.

08

FINANCIAL SECTION

Consolidated Financial Highlights
Ryoyo Electro Corporation
For the years ended January 31, 2015, 2014, 2013, 2012, and 2011

Thousands of
U.S. dollars*Millions of yen

2015.1

2014.1

2013.12012.1

2011.1

2015.1¥ 110,107¥  97,887¥  87,183¥ 85,108¥ 94,353$931,140

Gross profit

8,801

8,279

7,373

7,932

8,158

74,428Selling, general and administrative expenses

6,747

6,627

6,651

6,559

6,790

57,061

Operating income

2,053

1,651

722

1,372

1,368

17,367

Net income

1,683

1,342

423

879

1,112

14,239467(1,369)

328

3,359

(8,145)

3,955¥ 82,937¥  79,893¥   72,490¥ 70,602¥ 72,857$701,374

65,583

63,112

61,30361,15562,227554,619

Net income¥   66.74¥   52.17¥   16.41¥   33.00¥   40.48$   0.56

Total net assets

2,595.83

2,498.70

2,371.67

2,367.83

2,329.00

21.95

Cash dividends

30.00

30.00

30.00

30.00

30.00

0.25

Gross profit margin

8.0

8.5

8.5

9.3

8.6

Operating margin

1.9

1.7

0.8

1.6

1.5

For the YearNet sales

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

Ratios (%)

Net income margin

1.5

1.4

0.5

1.0

1.2

Equity ratio

79.0

78.9

84.5

86.6

85.4

Return on equity

2.6

2.2

0.7

1.4

1.8

Other Information
Number of shares issued**

25,237,095 25,226,060 25,826,926 25,827,768 26,718,436

Number of employees

510

513

517

504

528

* U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥118.25=U.S.$1.00, the exchange rate prevailing on January 31, 2015.
** 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

Sales by Product (2015.1)

Millions of yen

Gross Profit /Gross Profit Margin
Millions of yen / %110,107
97,887

94,353
85,108

8,158

8,279

7,932

8,801

7,373

87,183

9.3
8.5

8.6
ICT/Solutions
38.1%

11.1

12.1

13.1

14.1

15.1

Semiconductors/
Devices
61.9%

11.1

12.1

Gross Profit

09

13.1

8.5

14.1

Gross Profit Margin

8.0

15.1

Consolidated Financial Review

OPERATING ENVIRONMENT

Semiconductors/Devices

During the year under review, the fiscal year ended January

Net sales of semiconductors increased ¥9.1 billion year on

31, 2015, the Japanese economy saw an improved export

year, or 15.6%, to ¥68.1 billion.

market and increased internal demand stemming from theSales of products for communications systems increased

benefits of the economic stimulus measures instituted by the

68.8%, to ¥13.5 billion, due to the expansion of our LCD

Japanese government and the depreciated yen. These factors

business that deals with communications equipment.

offset the negative impact of the consumption tax hike on

Sales of products for digital consumer electronics and otherconsumer spending, and the overall economy continued tohome electronics grew 13.3%, to ¥8.7 billion, due to higher sales

display a modest recovery trend as a result.

of semiconductors for use in gaming devices and televisions.

In the electronics industry, which the Ryoyo Group operates

Sales of vehicle installations decreased 42.3%, to ¥3.7

in, PC-related products benefited from special demand inbillion, following the transfer of certain sales channels.

early spring 2014, and sales of industrial equipment- andSales of products for PCs and peripherals grew 23.8%, tosmartphone-related products remained strong after this¥21.7 billion, as sales of PC-use products rose on the back ofdemand ended.

special demand while sales of semiconductors for use in officeautomation equipment and other peripherals also increased.

RESULTS FOR THE FISCAL YEAR ENDEDJANUARY 31, 2015

Sales by Applications

Under these conditions, the Ryoyo Group promoted sales ofBillions of yen

its products—including its mainstay semiconductors, devices,and ICT-related products. We also endeavored to develop

68.1

high-value-added services and solutions to increase revenue

59.0

in the medium to long term.

8.0
6.4

on year, to ¥110.1 billion; operating income rose 24.3%, to

17.6¥2.0 billion; and net income was up 25.4%, to ¥1.6 billion.

‒42.3%

8.7
3.7+23.8%

21.7

+6.4%

20.5

+13.3%

7.7

As a result of these efforts, net sales increased 12.5% year

13.5

+68.8%

19.2

14.1

15.1

Communications
Digital consumer electronics andother home electronics

Vehicle installations
PCs and peripherals
Industrial and others

Selling, General and Administrative
Expenses / Number of Employees

Operating Income /Operating Margin

Net Income /Return on Equity

Millions of yen / People

Millions of yen / %Millions of yen / %

1,683
6,790

6,559

6,651

6,627

6,747

2,053
1,342
1,651
1,368

528

1,372

1.5

517

1.9

1.6

513 510

1,112
879
2.2

1.7

1.8

722

504

2.6

1.4

423

0.8
0.7

11.1

12.1

13.1

14.1

15.1

Selling, General and Administrative Expenses
Number of Employees

11.1

12.1

Operating Income

13.1

14.1

15.1

Operating Margin

11.1

12.1

Net Income

13.1

14.1

15.1

Return on Equity

10

FINANCIAL SECTION

Sales of products for industrial and other applications were up

Sales of I/O equipment decreased 3.8%, to ¥6.4 billion, due in

6.4%, to ¥20.5 billion, following strong sales of products for use

part to certain suppliers withdrawing from their business operations.

in factory automation equipment and heavy electric machinery.

Sales of software and embedded products were up 18.7%,
to ¥21.5 billion, as a result of higher sales of PC software

ICT/Solutions

coupled with a rise in sales of embedded products for indus-

Net sales of ICT and solutions increased ¥3.0 billion year on

trial applications.

year, or 7.8%, to ¥41.9 billion.
Sales of PC, server, and network products were relatively

Sales by Region

unchanged year on year, decreasing only 0.8%, to ¥14.0

Japanbillion. This outcome was a result of the full-year sales contri-

In the year under review, sales to external customers in Japanbutions of our enterprise business being counteracted by aincreased ¥9.7 billion year on year, or 12.0%, to ¥90.7 billion,

decline in large-scale orders and by certain orders being

due to higher sales of LCDs for communications equipment

delayed until the fiscal year ending January 31, 2016.

and semiconductors for industrial equipment. The operating
income of this regional segment was up ¥0.4 billion, or
30.3%, to ¥1.8 billion.

Sales by Products
Billions of yen

Asia

41.9

38.9

Sales to external customers in Asia increased ¥2.5 billion year
14.1

‒0.8%

14.0

6.7

‒3.8%

6.4

on year, or 14.8%, to ¥19.4 billion, as a result of an increase insales of semiconductors for gaming devices and LCDs forcommunications equipment. However, the operating incomeof this segment decreased ¥27 million, or 12.6%, to ¥187 million.
The figure for operating income presented on the consoli-

21.5+18.7%

18.1

dated statements of income includes operating income fromeach segment as well as from intersegment transactions.

14.1

15.1

PC / Server / Network

I/O equipment

Software / Embedded

Total Assets /Total Net Assets

Free Cash Flows

Cash Dividends per Share

Millions of yen

Millions of yen

Yen

79,89372,85770,60262,22782,93772,49061,15561,303

63,11265,583

30.00

30.00

30.00

30.00

30.00

11.1

12.1

13.1

14.1

15.1

3,359
467

328
(1,369)(8,145)

11.1

12.1

Total Assets

11

13.1

14.1

Total Net Assets

15.1

11.1

12.1

13.1

14.1

15.1

OUTLOOK FOR THE FISCAL YEAR ENDING

while also retaining internal revenues sufficient enough to

JANUARY 31, 2016

maintain a stable operating foundation and pursue future

As of March 11, 2015, the Company forecasts net sales ofbusiness expansion.

¥122.0 billion, up 10.8% year on year, in the fiscal year
ending January 31, 2016, which will result in operating income

Dividend Payments in the Fiscal Year Ended January 31,of ¥2.5 billion, up 21.7%, and net income of ¥1.9 billion, up

2015, and the Fiscal Year Ending January 31, 2016

12.8%. This performance will make for our third consecutive

For the fiscal year ended January 31, 2015, the Company will

year of higher sales and income, a feat that is expected to be

pay ¥15 per share of common stock for the year-end cash

achieved due to the expansion of semiconductor and device

dividend, making for an annual cash dividend of ¥30 per shareoperations as well as ICT and solutions operations.

of common stock when combined with the interim dividend.
In regard to the fiscal year ending January 31, 2016, and

FINANCIAL POSITION

subsequent fiscal years, the Company plans to target a total

Total assets at the end of the fiscal year amounted to ¥82.9

payout ratio of 100% of net income for the foreseeable future.

billion, ¥3.0 billion higher than at the previous fiscal year-end.

Returns will be issued in the form of dividend payments andThis was primarily due to an increase in notes and accounts

treasury stock acquisitions.

receivable–trade.
Total liabilities rose ¥0.5 billion, to ¥17.3 billion, mainly due
to an increase in deferred tax liabilities.
Total net assets increased ¥2.4 billion, to ¥65.5 billion. This waslargely due to a rise in foreign currency translation adjustment.

In the fiscal year ending January 31, 2016, the Company
intends to pay ¥15 per share of common stock for both theinterim and year-end cash dividends, for an annual cash
dividend of ¥30 per share of common stock, the same as in
the fiscal year ended January 31, 2015. We will examine
options for enhancing shareholder returns going forward

CASH FLOWS

based on future trends in business performance.

Cash and cash equivalents totaled ¥10.8 billion at the fiscal
year-end, a ¥0.1 billion year-on-year decrease. Major factors
included an increase in working capital.
Net cash used in operating activities was ¥4.8 billion,
compared with ¥3.0 billion in the previous fiscal year. Income

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.

before income taxes of ¥2.6 billion was recorded, but this was
outweighed by the rise in working capital resulting from

(1) Abrupt changes in economic conditions

increase in notes and accounts receivable–trade of ¥3.6

(2) Fall in the price of products

billion, which was due to higher net sales.

(3) Contracts with suppliers

Net cash provided by investing activities was ¥5.2 billion,(4) Fluctuation in foreign exchange rates

a ¥3.5 billion year-on-year increase. This was because proceeds(5) Customers moving operations overseas

from redemption of securities of ¥9.5 billion counteracted(6) Country-based risks

outflows for purchase of investment securities of ¥5.7 billion.

(7) Product defects and delivery issues and problems

Net cash used in financing activities amounted to ¥0.7

related to services

billion, compared with ¥1.4 billion in the previous fiscal year.

(8) Natural disasters and other Acts of God

Major outflows included cash dividends paid of ¥0.7 billion.

(9) Collection of accounts receivable(10) Retirement benefit obligations

RETURNING PROFITS TO SHAREHOLDERS(11) Impairment losses on write-down of investment securities

Shareholder Returns Policy
The Company views returning profits to its shareholders as

More information pertaining to business risks can be found

one of its most important management tasks. Accordingly,

on the Company’s website.

we return profit to shareholders while considering the

http://www.ryoyo.co.jp/english/ir-library/business-risk.html

Company’s financial position and the operating environment,

12

FINANCIAL SECTION

Consolidated Balance Sheets
Ryoyo Electro Corporation
At January 31, 2015 and 2014

Thousands of
U.S. dollars

Millions of yen

2015.1

2014.1

2015.1

Cash and deposits¥11,616¥11,215$ 98,235

Notes and accounts receivable–trade34,44630,185291,302

AssetsCurrent assets

Short-term investment securities

2,000

8,500

16,913Merchandise and finished goods

14,482

13,313

122,472

Deferred tax assets

214

218

1,814

2,438

934

20,623

(20)

(17)

(175)

65,17764,350551,186

		 Tools, furniture and fixtures, net

81

95

687

		Land5548

		Other, net

109

139

925

			 Total property, plant and equipment

196

240

1,660

645

536

5,457

14,97912,558

126,673

798

–

6,753

1,141

2,209

9,655

(1)

(1)

(12)

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

Intangible assets
Investments and other assets
		Investment securities
		 Net defined benefit asset
		Other
		 Allowance for doubtful accounts

13			 Total investments and other assets

16,917

14,766

143,069

			Total noncurrent assets

17,75915,543150,187

Total assets¥82,937¥79,893$701,374

Thousands of
U.S. dollars

Millions of yen

2015.1

2014.1

2015.1¥12,753¥13,022$107,855

573

620

4,847

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

3

36

27

119

128

1,010

1,356

727

11,47314,806

14,534125,214

Noncurrent liabilities
Provision for retirement benefits

–

917

–

Net defined benefit liability

895

–

7,569

Deferred tax liabilities

948

477

8,021

703

851

5,949

		 Total noncurrent liabilities

Other

2,547

2,246

21,540		Total liabilities

17,353

16,781

146,755

Capital stock

13,672

13,672

115,619

Capital surplus

13,336

13,336

112,782

Retained earnings

38,81338,555328,234

Treasury stock(3,270)(3,945)(27,658)

62,551

61,618528,977

1,843

1,248

15,590Net assets
Shareholders’ equity

		 Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities

(0)

(0)

(4)

Foreign currency translation adjustment

Deferred gains or losses on hedges

904

166

7,649

Remeasurements of defined benefit plans

211

–

1,792

2,959

1,413

25,028

72

79

614

		 Total accumulated other comprehensive income
Subscription rights to shares
		 Total net assets

65,583

63,112554,619

		 Total liabilities and net assets¥82,937¥79,893$701,374

14

FINANCIAL SECTION

Consolidated Statements of Income andConsolidated Comprehensive Statements of Income
Ryoyo Electro Corporation
For the years ended January 31, 2015 and 2014
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
Non-operating income
Interest income
Dividends 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
Special extra retirement payments
Settlement package
		 Total extraordinary losses
Income before income taxes and minority interests
Income taxes–current
Income taxes–deferred		 Total income taxes
		 Income before minority interests
Net income

2015.1

2014.1

2015.1¥110,107
101,306
8,801¥97,887
89,6078,279$931,140
856,71174,428

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

(3)
2,791
128
137
356
180
3,036
6,627
1,651

27
24,039
1,010
1,161
2,951
1,296
26,57357,061
17,367

145
137
12
205
22
523

191
59
11
137
32
432

1,230
1,166
102
1,734
191
4,425

3
49
15
7
1
0
78
2,498

3
–
–
0
0
1
6
2,077

26
421
132
67
13
3
666
21,126

212
1
78
292

20
–
–
20

1,796
16
660
2,474

11
70
20
101
2,689
980
25
1,005
1,683
¥ 1,683

–
–
–
–
2,097
830
(75)
755
1,342
¥ 1,342

94
594
169
858
22,742
8,289
213
8,502
14,239$ 14,239¥ 1,683¥ 1,342$ 14,239

595
0
738
1,333
3,017

733
(0)
1,128
1,861
3,204

5,034
0
6,244
11,27925,519

3,017
–

3,204
–

25,519–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
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, 2015 and 2014

Millions of yen
Shareholders’ equity

Accumulated other comprehensive income

From January 31, 2014
to January 31, 2015

Capitalstock

CapitalsurplusRetainedearnings

Treasurystock

Balance at January 31, 2014

¥13,672¥13,336¥38,555¥(3,945)

Valuationdifference
RemeasureForeign
Deferredonments ofcurrency
available- gains or
Total
Subscription
definedlosses on translation
for-saleshareholders’rights to
Totalhedges adjustment benefit planssecurities
equitysharesnet assets¥61,618¥1,248

¥(0)

¥166

¥  –

¥79

¥63,112Net increase (decrease)during the fiscal year
Cash dividends

(756)

(756)

(756)

Net income for the fiscal year

1,683

1,683

1,683

Purchase of treasury stock
Retirement of treasury stockExercise subscription rights
to shares

(1)

(1)

(1)

(662)

662

–

–

(6)

13

6

6

Net increase (decrease) otherthan shareholders’ equity
Total increase (decrease)during the fiscal year
Balance at January 31, 2015

–

595

0

738

211

(6)

1,538

–

–

258

674

932

595

0

738

211

(6)

2,471

¥13,672¥13,336¥38,813¥(3,270)¥62,551¥1,843

¥(0)

¥904

¥211

¥72

¥65,583

Foreigncurrencytranslation
adjustment

Subscription
rights tosharesTotal
net assets¥ (962)¥50¥61,303

Millions of yen
Shareholders’ equity

Accumulated other comprehensive income
Deferred
Valuationdifference on gains or
Total
shareholders’ available-for- losses onsale securities hedges
equityFrom January 31, 2013
to January 31, 2014

Capitalstock

CapitalsurplusRetainedearnings

Treasurystock

Balance at January 31, 2013¥13,672¥13,336¥37,987¥(3,295)¥61,700¥  514¥0Net increase (decrease)during the fiscal year
Cash dividends

(774)

(774)

(774)

Net income for the fiscal year

1,342

1,342

1,342

(649)

(649)

(649)

0

0

0

Purchase of treasury stock
Disposal of treasury stock(0)Net increase (decrease) otherthan shareholders’ equity–

Total increase (decrease)during the fiscal year
Balance at January 31, 2014

733

(0)

1,128

28

1,890

–

–

567

(649)

(82)

733

(0)

1,128

28

1,808

¥13,672¥13,336¥38,555¥(3,945)¥61,618¥1,248¥(0)¥  166¥79¥63,112

Thousands of U.S. dollars
Shareholders’ equity

From January 31, 2014
to January 31, 2015

Balance at January 31, 2014

Capitalstock

Capitalsurplus

Accumulated other comprehensive income

Retainedearnings

Treasurystock$115,619 $112,782 $326,047$(33,362)

Valuationdifference
RemeasureForeign
Deferredonments ofcurrency
available- gains or
Total
Subscription
definedlosses on translation
for-saleshareholders’rights to
Totalhedges adjustment benefit planssecurities
equitysharesnet assets$521,087$10,555$(4)$1,405$    –$673$533,716Net increase (decrease)during the fiscal year
Cash dividends(6,399)(6,399)(6,399)Net income for the fiscal year

14,23914,23914,239Purchase of treasury stockRetirement of treasury stockExercise subscription rights
to shares

(9)

(9)

(9)

(5,600)

5,600

–

–

(52)

112

59

59

Net increase (decrease) otherthan shareholders’ equity
Total increase (decrease)during the fiscal year
Balance at January 31, 2015

–
–

–

2,186

5,034

0

6,244

1,792

(58)

13,013

5,703

7,889

5,034

0

6,244

1,792

(58)

20,902$115,619 $112,782 $328,234 $(27,658)$528,977$15,590$(4)$7,649$1,792$614$554,619

16

FINANCIAL SECTION

Consolidated Statements of Cash Flows
Ryoyo Electro Corporation
For the years ended January 31, 2015 and 2014

Thousands of
U.S. dollars

Millions of yen

I. Cash flows from operating activities
		 Income before income taxes
		 Depreciation and amortization
		 Loss (gain) on sales and retirement of noncurrent assets
		 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
		Subtotal
		 Interest and dividends income received
		 Income taxes refunded (paid)
		 Net cash provided by (used in) operating activities
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
		 Purchase of stocks of subsidiaries and affiliates
		 Proceeds from distribution of investment in partnerships
		 Proceeds from cancellation of insurance funds
		 Other, net
		 Net cash provided by (used in) investing activities
III.     Cash flows from financing activities
		 Cash dividends paid
		 Purchase of treasury stock		 Other, net
		 Net cash provided by (used in) financing 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 period

17

2015.1

2014.1

2015.1¥ 2,689
217
(0)
(205)
146
(923)
927
(283)
(201)
49
(78)
(3,645)
(908)
(998)
(33)
(837)
(4,084)310(1,052)(4,826)¥ 2,097
192
0
(137)
(29)
41
–
(251)
(20)
–
–
(6,013)(1,592)
3,370
13
(603)
(2,931)243(397)(3,084)$ 22,742
1,836(0)(1,734)
1,241(7,812)
7,847(2,397)(1,702)421(660)(30,829)(7,686)(8,441)(282)(7,080)(34,540)
2,625(8,898)(40,813)(757)
315(1,000)
9,500
(287)
4
(5,766)
2,066
—
514
578
125
5,293

(2,692)
4,500(3,500)10,500(96)
0(7,189)
185
(10)
111
–
(92)
1,715

(6,403)
2,668(8,456)80,338(2,432)
40(48,763)
17,479
—
4,349
4,888
1,060
44,768

(754)
(1)
(1)
(757)

(772)
(649)
(2)
(1,425)(6,382)(9)(14)(6,405)135(154)
11,023¥10,868591(2,202)
13,226¥11,023

1,146(1,303)
93,218$ 91,914

Corporate Data / Investor Information
As of January 31, 2015

Corporate Name

Composition of Shareholders

Ryoyo Electro Corporation
Foreign corporations and other foreign investors

26.4%

Individuals and other

24.3%

Konwa Building, 1-12-22

Other corporations

18.8%

Tsukiji, Chuo-ku, Tokyo

Financial institutions

18.0%

Treasury stock

10.5%

Securities companies, etc.

2.0%

Address

104-8408, JapanPhone+81-3-3543-7711
Fax

Major Shareholders
Thousandsof shares+81-3-3545-3507%

CGML PB CLIENT ACCOUNT/COLLATERAL

2,725

10.80

WebsiteMitsubishi Electric Corporation

2,246

8.90

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

SHC Corporation

2,118

8.39

Japan Trustee Services Bank, Ltd. (Trust account)

1,559

6.18

Date of Incorporation

CBNY DFA INTL SMALL CAP VALUE PORTFOLIO

767

3.04

February 27, 1961

The Master Trust Bank of Japan (Retail trust account)

552

2.19

Sheep Shokai Co.

523

2.07

Paid-in Capital

The Master Trust Bank of Japan (Trust account)

513

2.03

¥13,672 million

Nippon Life Insurance Company

409

1.62

NORTHERN TRUST CO. (AVFC) RE FIDELITY FUNDS

358

1.42

Authorized Shares
119,628,800

Notes: 1
 . Ryoyo Electro Corporation possesses 2,962,905 shares of treasury stock, which represents a 10.51% holding in the Company.
2. Calculations for the ownership percentages above did not account for treasury stock.

Shares Issued
28,200,000
Shareholders

Stock Price Chart

6,461
Stock Price
Yen

Stock Trading Unit

Nikkei Stock Average
Yen

18,0001,500

100 shares
Stock Listing

1,200

13,000900

8,000Tokyo Stock Exchange,
First Section
Ticker Code8068

Trading Volume
Thousands of shares

4,500

Transfer Agent
Mitsubishi UFJ Trust and

3,000

Banking Corporation
1,500

0

2

3

4

5

6

7

8

13.1

9 10 11 12

1

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

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