Toyo Denki Seizo Report

Tokyo Tatemono Yaesu Building, 1-4-16, Yaesu, Chuo-ku, Tokyo 103-0028 Tel: +81-3-5202-8121 (General Affairs Division)

https://www.toyodenki.co.jp/en/

2015

Our Long-Term Vision

Toyo Denki Seizo K.K. Contributes to the Development of Social Infrastructure Systems
Integrating the exceptional motor drive technologies since establishment with our breakthrough advanced technologies to help
build social infrastructure systems that are considerate of the global environment through global business development.
A new type of light rail vehicle (LRV)
equipped with electrical equipment suppliedby the Company will start operations in Los
Angeles in autumn 2015.
In November 2012, TOYO DENKI USA, Inc., theCompany’s wholly-owned U.S. subsidiary, received anorder from KINKISHARYO International, LLC, a U.S.
subsidiary of The Kinki Sharyo Co., Ltd. The order
was for electrical equipment for LRVs of the Los
Angeles County Metropolitan Transportation Authority(LA Metro). At long last, the new type of LRV will
begin operating in autumn 2015. This marks theGroup’s second delivery of electrical equipment in the
U.S., following the delivery of equipment for LRVs to
Dallas Area Rapid Transit (DART).
By supplying high-quality electrical equipment for rail
vehicles, we will continue contributing to thedevelopment of urban transportation in the U.S.

Los Angeles● Editorial Policy ●We have been publishing this report since 2013 with thegoal of allowing a wide range of stakeholders to have abetter understanding of the Company. This report
combines our management policy with reports on ourbusinesses, CSR and finances. We are committed todescribing our initiatives during the year and our future
direction in a manner that is easy to understand.
● Period Covered by This Report ●This report focuses on our activities in fiscal 2014 (fromJune 2014 to May 2015), but also contains some
information from outside this period.
● Organizations Covered by This Report ●This report covers the Toyo Denki Group, including Toyo
Denki Seizo K.K. and its consolidated subsidiaries.

CONTENTS

1

Contents / Editorial Policy / Long-Term Vision 1
Consolidated Financial Highlights 3
Message from the President
5
Restructuring of the Production System 7● Reference Guidelines ●Business Report
9
CSR Report
15
Financial Report31
Reference Data for Management Indices 59

Company Profile
Executive Profiles
Organization Chart
Stock Related Information

60
61
62
63

• Global Reporting Initiative (GRI) “Sustainability Reporting
Guidelines Version 4”

On-site inspection by KINKISHARYO International, LLC. and TOYO DENKI SEIZO K.K.

Toyo Denki Seizo Report 20152

Consolidated Financial Highlights
Highlights of Toyo Denki Seizo K.K. and Consolidated Subsidiaries for the Consolidated Fiscal Year ended May 31 or as of May 31

Operating income

1,503

1,701

501

1,076

1,596

Net income

678

785

722

644

1,105

Comprehensive
income

272

1,071

3,761

1,421

5,468

Capital investment

1,142

1,307

1,296

612

969

Research anddevelopment costs
Fiscal Year-End

917

797

913

665

897

2012

Net assets/Total assets

Total assets

36,89238,08642,36444,75253,041

Number of
employees

1,177

1,175

1,170

1,201

1,216

295.89312.12384.14401.45516.61

15,049Net income

14.86

16.29

14.98

13.37

22.94

FY 2010

2011

6

6

6

6

6
(Unit: %)

38.7

39.5

43.7

43.2

5.4

4.3

3.4

5.0

4.0

4.4

1.6

3.1

4.0

26.5

34.7

23.7

27.3

38.0

40.4

36.8

40.0

44.9

26.2

5.1

Total assets

FY 2010

2011

2012

2013

Number of employees

2014(Unit: Persons)

FY 2010

2011

2012

2013

2014

Dividend/Dividend payout ratio (Unit: Yen)
Dividend

Dividend payout ratio2013

40.4% 36.8% 40.0% 44.9%

2014

FY 2010(Unit: %)Operating income ratio

5.4
5.0

2011

2012

2013

2014

FY 2010(Unit: %)Overseas net sales ratio

2011

2012

2013

26.2%
2014

(Unit: %)

4.4
4.0

4.0

38.0

4.3

34.7
3.1

3.4

27.3

26.5

23.7

1.6

FY 20103

2012

Return on equity (ROE)

46.9

5.1

19,350Net assets

14,268Per Share Information

18,519(Unit: Yen)

Major Management Indices
Shareholders’equity ratio
Return on equity(ROE)
Operating income
ratio
Overseas net sales
ratio
Dividend payout
ratio(Unit: Million yen)

53,041

24,895

2014

44,752

19,35042,364

18,51938,086

15,04936,892

14,268Dividend

2013

Net assets

Net assets

1,105

2011

6

9,282

644

8,097

6

7,696

722

8,834

6

8,663

785

Gross profit

639,617678

34,957

6

30,575

1,076

38,570501

37,89330,575Net sales(Unit: Million yen)

1,596

FY 2010

Fiscal YearNet income

1,216(Unit: Million yen)

(Unit: Million yen)

1,201

Fiscal 2014

1,170

Fiscal 2013

1,175

Fiscal 2012

1,503

Fiscal 2011

Operating income

1,177

Fiscal 2010

(Unit: Million yen)

39,617

154

24,895

153

34,957

152

38,570151

1,701

Net sales

150

37,893Fiscal term

2011

2012

2013

2014

FY 2010

2011

2012

2013

2014

FY 2010

2011

2012

2013

2014

Toyo Denki Seizo Report 20154

Message from the President

Contributing to the society throughtechnology based on the keywords ofenergy saving, high efficiency,
and cleanliness
The medium-term management plan “NEXT 100:
Beyond 100 years” got off to a good start as
the overseas net sales ratio grew to 38.0%.
Both revenue and profits increased significantly during the fiscal
year ended May 31, 2015 as sales grew mainly in overseas for
the Transportation Systems segment and performance was alsostrong in the Industrial Systems segment. In terms of profits, contributions were made by the effects of the improved profitability offactories in addition to foreign exchange gains.
In the Transportation Systems segment, order backlog wasmaintained at high level despite lower orders compared to theprevious fiscal year led by factors such as delays in some scheduled overseas projects. Net sales increased significantly, especially in China and the United States, boosting profits. A subsidiary inthe maintenance business for electrical equipment for railroads,
established in August 2014 in Beijing, China, is also off to asteady start. Business is developing based on the strong relationships of trust we have built in China, and further expansion going
forward can be expected.
In the Industrial Systems segment, a greater number of ordersof testing equipment for automobile development and infrastruc-

President

Kenzo Terashima

5

ture-related systems were received, and the level of orders received was restored to levels before the bankruptcy of Lehman
Brothers. Overseas, we received orders of factory systems inSoutheast Asia, centered on our representative office in Bangkok,
Thailand, which was established in September 2014, as we
responded to rising demand for energy saving at manufacturing
sites. For net sales, a significant increase in profits was achieved
as revenue grew in particular for testing equipment for automobile
development and profits were improved through structural reform.
In the Information Equipment Systems segment, the year
marked a low point in demand for updates to railway station operating equipment, and coupled with a decreased number of orders
for remote monitoring systems, net sales and profits were both
lower than the previous fiscal year.
From the results above, we believe that we were able to makea strong start for the first year of the three-year medium-term
management plan “NEXT 100” during the fiscal year ended May
31, 2015. In particular, the overseas net sales ratio grew from
27.3% in the previous fiscal year to 38.0%, as we took a big step
forward towards global growth.

We will restructure our production system as we
aim for net sales of 50.0 billion yen.
We are also promoting launch of new businesses
in preparation for the future.
In the medium-term management plan “NEXT 100,” we have set
the targets of achieving net sales of 50.0 billion yen in the fiscal
year ending May 31, 2017, of which 25.0 billion yen are overseas
net sales (overseas net sales ratio of 50%), through the promotionof globalization. In order to achieve this, we will further strengthen
overseas expansion and promote the restructuring of production
system to support future growth in orders. This will mainly consistof the expansion of the Yokohama Plant, which is the mainstay
production base for the Transportation Systems segment, and the
new establishment of a factory and consolidation of functions in
the Shiga region, which is responsible for production of the Industrial Systems segment. (Please see page 7 to 8 for information on
the strengthening of overseas expansion and the restructuring of
the production system.)

At the same time, in an aim to improve company-wide operations
efficiency in addition to production, we plan to install a core systemthat will comprehensively manage operations from the sales stage to
production processes and accounting processing. Preparations areunderway to begin operation of the system in summer 2016.
On the other hand, launching new businesses in preparation
for future growth is one of the fundamental policies of “NEXT100.” In the Transportation Systems segment, we will make themaintenance business in China for electrical equipment for railroads fully operational and capture rapidly-increasing demand forthe overhaul of electrical equipment for the Beijing Subway. In the
Industrial Systems segment, we will focus on industrial electric
power generators as a new measure as we develop markets forsales both domestically and overseas, such as renewable energy
systems including biomass power generation and waste disposal
furnaces, and emergency and non-emergency power equipment.
During this second year of “NEXT 100” (the fiscal year ending
May 31, 2016), we expect continued growth in revenue and profits through maintaining favorable performance in the Transportation Systems segment and further recovery in the Industrial Systems segment. As growth investments is planned to be increased
significantly from the fiscal year ending May 31, 2017, mainly forthe restructuring of the production system and the introduction of
the core system, the policy is to control such investments during
the current fiscal year for preparation.

We will work on establishing transparency andefficiency in management that is appropriate for
a company striving for global growth.
In response to the “Corporate Governance Code” introduced by
the Financial Services Agency and the Tokyo Stock Exchange,
which took effect on June 1, 2015, we have established independence guidelines for Outside Executives and the election of one
Outside Director was approved. We will continue to take steps tocomply with each item set forth by the “Corporate Governance
Code,” and aim to establish transparency and efficiency in management that is appropriate for a company striving for global
growth.
While we have decided upon 6 yen per share for the year-end
dividends for the current fiscal year, the same as the previous
fiscal year, based on our fundamental profit return policy of providing continuous and stable dividends, in the future, we will work
to improve return on equity (ROE) and the level of profit return.
Through technologies centered on the keywords of “energy
saving,” “high efficiency,” and “cleanliness” that contributes toenvironmental preservation, we would like to fulfill even moresignificant social contribution and live up to the expectations ofstakeholders as a sustainably developing company.

Medium-term management plan <Fiscal 2014 to Fiscal 2016>“NEXT 100: Beyond 100 years”
The Toyo Denki Group is committed to drastically enhancing its corporate value and thoroughly strengthening its management foundation in order to become a Group well adapted to the new era in anticipationof the year of our 100th anniversary of founding in 2018 and beyond.
Fundamental Policy

1
2
3

Numerical TargetsStrengtheninternational
competitiveness

Build a stablebusiness earnings
structure
Restructure
production
system4

6
5

Train humanresources tosupport global
development
Establish new
businesses

Promotedevelopment oftechnology(Unit: Billion yen)NEXT 100

Net sales

Fiscal 2013

Fiscal 2014

(Actual Results)(Actual Results
for the First Year)

34.95

39.61

Fiscal 2016
(Forecast for
the Final Year)

50.00

Operating income

1.07

1.59

3.00

(Operating income ratio)(3.1%)(4.0%)(6.0%)

Ordinary income

1.03

2.05

3.20

Net income

0.64

1.10

1.90

Overseas net sales

9.55

15.06

25.00

(Overseas net sales ratio)(27.3%)(38.0%)(50.0%)

Toyo Denki Seizo Report 20156

Special Report

Restructuring of the Production System

The current situation of the production system and future development

Details of reorganization plans for Yokohama and Shiga have been specified and the plans have started, as we work
toward achieving net sales of 50.0 billion yen. By strengthening development and production capabilities of bothproduction bases, we will respond to increased orders both domestically and overseas.

Current Situation

March 2018 (Scheduled)

Yokohama Plant

Yokohama Plant

Transportation systems works

Transportation systems works(Rearrange layout)

From June 1, 2014, we began a medium-term management plan, “NEXT 100: Beyond 100 years.” As we work toward achieving the final
goals of net sales of 50.0 billion yen and an overseas net sales ratio of 50%, we have set “restructure production system” as one part of theIndustrial systems works

fundamental policy. We recognize that our most important challenge is to establish a production system that can respond to expanded orders
both domestically and overseas.
To respond to an anticipated expansion of orders in the future, we will expand production capabilities of the Yokohama Plant, which is theInformation equipment systems works

Information equipment systems works

Research Laboratory

Research Laboratory(Excluding manufacturing)

main production base for the Transportation Systems segment, and newly establish a factory and consolidate functions in the Shiga region, whichis responsible for production of the Industrial Systems segment, in order to establish a structure to support net sales of 50.0 billion yen.

New Shiga Factory

Shiga Factory
Industrial systems works

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

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

Manufacturing, sales, and repair of industrial motors

Manufacturing, sales, and repair of industrial motors

Excluding sales employees of the Industrial Systems segment, all employees of thedevelopment, design, manufacturing, and quality assurance divisions and of the current
TD. Drive Mfg. Co., Ltd. will be moved to the new base. (TD. Drive Mfg. Co., Ltd. is alsoscheduled to relocate to the same premises.)

Shiga Factory (Inverter manufacturing workshop)

Improve productivity of the Industrial Systems segment by establishing a new base in Shiga
Byestablishing a new base in Shiga Prefecture, we will advance efficient development and creation centered on high value-added
system products at a base that combines development, design, manufacturing, and quality assurance divisions.

Concerning
the production system in the Industrial Systems segment, land has been acquired in Ryuoh Town, Shiga Prefecture, which
is near our existing Shiga Factory (Moriyama City), and our plans call for construction of a new factory that will begin operations inspring 2018. Also at the new factory, we will promote segmentation of production lines, striving to create the ideal next-generation
production base where female employees can play an even greater role.

303

477

Details of industrial land to be acquired
Location

2982 Aza-Tsutsumigatani, Aza-Okaya, Ryuoh-cho, Gamo-gun, Shigaand others (Within Shiga Ryuoh industrial park)

Area

Land: 34,400 m2 (tentative size)

Acquisition cost
Current state

1,112 million yen (tentative price)
Forest. The land is being prepared as an industrial park by Shiga
Prefecture Land Development Public Corporation.

o
aid

in
nL

i

Ma

k

Current Shiga Factory(Moriyama City)

To

Ryuoh
Kyoto

e

Lake Biwa

Kus

atsu

Maibara Junction

senMeishin Express
way

Kyoto
Prefecture

Maibarakan

Shiga
Prefecturehin

On March 23, 2015, to secure land for building a new factory withthe aim of strengthening production capabilities and improving
production efficiency, we concluded a purchase reservationagreement for a piece of industrial land.

oS


Due
to increased workloads in the Transportation Systems segment, an expansion of manufacturing space was required. By combining
the industrial systems factories that were split into the Yokohama Plant and the Shiga Factory, and rearranging the layout of thetransportation systems factory, we will work on improving our production capability.
Specifically,
the Yokohama Plant currently has design, development, and quality assurance divisions for industrial systems products, andby consolidating these functions in the Shiga region, the production system for electrical equipment for railroads will be strengthened at
the Yokohama Plant. Production lines will also be replaced with high-efficiency facilities and we plan on achieving an increase of
between 30% and 40% in production capacity as an end result.

Regarding the acquisition of fixed assets (conclusion of purchase reservation agreement)

aid

Rearrangement of layout of transportation systems factory at Yokohama Plant

Tok

Specific measures for the restructuring of the production system

7

Industrial systems works

Kose
i LineYokohama Plant (aerial photo)(Design and manufacturing of some products)

Gifu
Prefecture258
306

Mie Prefecture

421

Shiga Ryuoh Industrial Facility
Line(Scheduled location of construction)
1.5 km from the Ryuoh Interchange on the Meishin Expressway

Schedule of acquisition
Details of counterparty

Conclusion date of purchase reservation agreement

March 23, 2015

Name

Shiga Prefecture Land Development Public Corporation

Conclusion date of purchase agreement

Businessdomains

Acquisition, management, disposal, etc., of land for public works
projects, public land, etc.

March 2017
(Scheduled completion of preparations)

Date of land transfer

March 2017 (Same as above)
Toyo Denki Seizo Report 20158

Transportation Systems Segment

Electrical equipment for rail vehicles that responds to robust demand for railway infrastructure development in global market
Business Overview
We delivered electrical equipment including motors for the Hokuriku Shinkansen, which started its
service in March 2015. Overseas, we received orders for subway contracts in Southeast Asia and the
Middle East and got started in preparation for service launch from 2017. In the future, we will pursue
overseas expansion even more aggressively as a driver of growth through means such as expansion ofmaintenance business for the Beijing Subway.

(Up 21.0% year on year)

Segment Income

10Transportation Systems segment

11

Industrial Systems segment

12

Information Equipment Systems
segment

13

Expansion of New Businesses

14

Research and Development/
Intellectual Property

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

Profits increased as the effects of significant increase in revenue and improved
profitability at factories absorbed negative factors such as an increase in
expenses.

FY 2012

2013

2014

FY 2012

2013

2014

FY 20122,374

26,8693,117

Segment Income (Unit: Million yen)

1,913

26,869 million yen

While sales decreased slightly in Japan,
revenue increased significantly as aresult of growth in subways and highspeed railroad in China.

22,198Business Report

Net Sales

17,324(Down 16.9% year on year)

67.8%

Net Sales (Unit: Million yen)

24,75924,759 million yen

While orders increased in Japan, overseas orders decreased due to a reboundfrom major orders received in the previous year and a delay in contracts thatwere scheduled.

20,940Orders Received

29,790Orders Received (Unit: Million yen)

Results for fiscal 2014

Percentage of
total net sales

2013

2014

TOPICS

Jointly developed high-speed circuit
breakers for control devices with HitachiWe agreed to a business and capital alliance involving
the overseas electrical equipment for rail vehicle

business with Hitachi on October 2010, and both companies
have since promoted activities including order-taking, the joint
development of products, and joint purchases. Recently, we
have jointly developed a high-speed circuit breaker for control

High-speed circuit breakers

devices such as VVVF inverters, and we exhibited this product at the world’s largest railway
technology trade fair, InnoTrans2014, which was held in Berlin, Germany in September 2014. This
product has attracted the attention of many customers, and we have received many inquiries from

Exhibit at InnoTrans2014

not only overseas, but also from Japanese railway operators and electrical manufacturers.
We will fully utilize the resources of both companies as we work to expand this business.

9

Toyo Denki Seizo Report 201510

Industrial Systems Segment

Information Equipment Systems Segment

Enhance functions of high-efficiency inverters andcontribute to further energy savings for production facilities

Provision of railway station operating equipmentthat achieve multi-functions and a compact sizeand IoT/M2M solutions in various fields

Business Overview
Percentage of
total net sales

Business Overview

1,127 million yen(Down 38.3% year on year)

Segment Income
FY 2012

2013

2014

FY 2012

2013

2014

FY 2012

2013

2014

71 million yen

Sales decreased for the same reason
underlying the decrease in orders received.
Profits declined sharply due to decreased
revenue.

348

Net Sales

1,828

536

11,613985 million yen(Down 41.1% year on year)

Segment Income (Unit: Million yen)Orders for both railway station operating equipment and remote monitoring
equipment decreased.

1,701

848

Orders Received

Net Sales (Unit: Million yen)

265

848 million yen(Up 58.1% year on year)

Profits increased due to the contributionof increased revenue, improved profitability at factories, and increased earnings at subsidiaries.

Orders Received (Unit: Million yen)

2.8%

1,127

Segment Income

Segment Income (Unit: Million yen)433

(Up 6.3% year on year)

10,924

11,613 million yen

While sales for processing equipment
were sluggish, revenue increased as aresult of strong sales for testing systems
for automobile development.

11,542Net Sales

Net Sales (Unit: Million yen)

Results for fiscal 2014

13,319(Up 20.0% year on year)

Orders Received (Unit: Million yen)

11,097

13,319 million yen

There was a significant increase in orders
received for testing systems for automobile development and infrastructure-related, and the levels were back to those before the bankruptcy of Lehman Brothers.

11,457

Orders Received

985

Results for fiscal 2014

Percentage of
total net sales

We develop and manufacture railway station operating equipment that can achieve mechanization andreduction of labor in railway station operations of railway operators. We also contribute to improvementsof efficiency in operations through IoT/M2M solutions and power visualization solutions using mobile
phone networks and cloud servers which enable monitoring and control to be conducted at the same
time.

1,673

29.3%

1,544

In our “VF66 series” of intelligent inverters, we now support distributed power source systems such as
wind power generation and hydropower generation by adding a lineup that supports interconnected systems. For factories in areas such as Southeast Asia, we will actively work to receive orders for systems
such as “biomass power generation systems” that serve as independent power generation facilities as
we also work to expand the power generation business.

71(Down 79.5% year on year)

TOPICS

DC drive mode of
the intelligent inverter VF66B

D

irect current motors (DC motors) were used as the main type of

FY 2012

The DC drive mode of our latest inverter “VF66B” helps to control

Thyristor panel

DC motor

1st Step : From thyristor panel to VF66B DC drive mode

Short installation timethat continues to operate. This can also lead to gradual updates to AC

High performance

FY 2012

2013

2014

VF66B
(DC drive mode)

DC motor

analog input, digital input and output, serial
communication, as well as CAN and Ethernet,

2st Step : From DC motor to ED motor (AC motor)

moving bodies such as automobiles and
VF66B

ED motor(AC motor)*ED motor: our permanent magnet-type high-efficiency motor

GPS antennaFOMAantenna
Cloud serverInternal GPS(Option)Internal FOMAand because it has cleared stringent vibration

ment more high performance through adoption of various latest

High efficiency

Connectable Devices

IoT/M2M terminal with cloud service

test it can also be used for the monitoring ofproducts that leverage our advanced motor drive technologies.

11

e have developed the “IORemoter,” anable total digital control for all forms of control, but also make equip-

Going forward, we will support the needs of customers with the2014

New product, “IORemoter,” terminal that supports remote monitoring and control system

and multiple interfaces. This product supports

motors, which is the next step.

networks and PLC.

2013

TOPICSW

Low cost

an inverter with the DC motors as is for equipment using DC motors

In addition, the introduction of the DC drive mode will not only en-

FY 2012Current state

1990s, and they were adopted in various production facility lines ininvestment costs as DC drive mode can convert control equipment into

2014

Update steps through the introduction of the VF66B DC drive mode

variable-speed drive from the 1970s to the first half of the

combination with thyristor Leonard equipment.

2013

trains. We will continue to provide productsthat contribute to improvements of efficiency

Ethernet
CAN
Serial communication(RS-232C)(RS-422/485)

Analog input
Digital input/output

Thermistor
Handheld terminal
Smart card/tag reader
Door sensor
MetersElectronic lockControllers
PLC
Power conditioner
ECU
Pump
BoilerLighting, otherin the operations of customers.

Toyo Denki Seizo Report 201512

Expansion of New Businesses

Research and Development/Intellectual Property

Entering the maintenance business forelectrical equipment for the Beijing Subway

R&D to support the development of social
infrastructure and supporting frameworks

Business Overview
We have developed business in China with a focus on delivering electrical equipment for high-speed rail and subway vehicles up until

Research and Development

now, and in August 2014, we established the new company Beijing Jingche Shuangyang Traction System Co., Ltd., and entered the

The Group’s R&D activities are based on seeking to create prod-

opment of technologies of our existing businesses and basic

maintenance business.

ucts that fully satisfy our customers and challenging the creation

technology developments that support this development as welland expansion of these products, and we actively promote devel-

as development of new products that expand our businesses.

We are a manufacturer with a top share that delivers over 30% of the electrical equipment used in the Beijing Subway. Backed bythis track record, we will capture all of the rapidly-increasing demand for the overhaul of electrical equipment for the Beijing Subway
and we will work to further expand our business.

Results and topics from fiscal 2014

Segment

Project
Fully enclosed induction traction motor

TOPICSTransportation
Guidance display system development
Systems

Map of Beijing Subway Lines (as of August 2015)
Lines which we delivered our products
Subway Line 1 (Subway Fuba Line)
Subway Line 9
Subway Line 10
Subway Yizhuang Line
Subway Line 13

Huoying

Xierqi

Beitucheng

National
Library
Xizhimen
Pingguoyuan

Developed electrical equipment for high-speed new transportation systems (propulsion
equipment, power supply, etc.) and implemented tests on actual vehicles equipped with thedeveloped equipment.

Expansion of water cooling
ED motors lineup

Expanded the lineup of water cooling ED motors set and sold for models of 45KW andabove as low-noise motor support to cover the 22KW class.

Development of Control Circuit less electric
power generators

Developed the Control Circuit less electric power generators that can be operated
without electric power generator control equipment (inverters) as low cost products for
distributed power source systems.

Information
Equipment
Systems

New remote monitoring terminal

Completed development of a new remote monitoring terminal (product name: IORemoter).As
an IoT/M2M device, we will work to deploy it not only as environmental monitoring equipment, but also as vehicle monitoring equipment for automobiles, rail vehicles, etc.

Research
Laboratory

Research on practical application ofWireless In-Wheel Motor

Conducted industry-academia joint research together with the University of Tokyo and NSK
Ltd. A method in which electric power is delivered wirelessly from the body to motors and inverters stored inside the wheel was applied to a small passenger vehicle which was then run
for the first time in the world.

Shaoyaoju
Huixinxijie
NankouZhichunlu

Fuxingmen
Gongzhufen
Liuliqiao

Industrial
Systems

Dongzhimen

Baishiqiao
SouthCishousi

Sanyuanqiao

Xidan

Tian’anmen
EastTian’anmen
West

Jianguomen

Dongdan

Huijialou
Sihui East
GuomaoSihui
TuqiaoXiju
Jiaomen West

Songjiazhuang

Adopted guidance display system for rail vehicles jointly developed with FUJI ELECTRIC CO.,LTD., to actual vehicles.

Electrical equipment for high-speed
new transportation systems

Lishuiqiao
Wangjingxi

HaidianHuangzhuang

Description
Commenced deployment of fully enclosed induction traction motor for trains with both outerand inner fans to customers. In particular, an inner fan type for narrow gauges was fullylaunched on an operating line in Japan for the first time.

Guogongzhuang
Yizhuang Railway Station

Intellectual Property
Details of the new company
Company nameBeijing Jingche Shuangyang Traction System Co., Ltd.

Location

No.9 Kechang 2nd Street, East District, Economy Technology Development Zone Metro Industrial Park B2-3, Beijing

Date of establishment

August 19, 2014

End of the fiscal year

December 31

and the development divisions in each business unit actively apply

Capital20 million RMB

for patents and utility models.

Description of business

Maintenance of urban transit vehicle traction system equipment; sales, import,
and export of related equipment; and ancillary work

Investment ratio

50%
Toyo Denki (Beijing) Co., Ltd.*
Others50%*A wholly-owned subsidiary of Toyo Denki Seizo K.K.

Patent applications granted

Our intellectual property is placed as a key corporate resource.
Our intellectual property department is responsible for the

Patent applications:
Granted cases:(Applications)80

management of intellectual property and our research laboratory

In the overseas markets which we expect to further expand ourbusinesses, we have started to actively engage in activities
concerning our intellectual property in order to protect our

60

8

59
40

40

51

20

36

1

51

2

5

54

4
50 25 3

52 22

22

22

2011

2012

2
0

35
33

30
30

0
FY

2010

2013

0

Japan
Japan

Overseas
Overseas

62

57
16 0
16
2014

technologies and brand.

13

Toyo Denki Seizo Report 201514

Management

In an effort to continuously enhance its corporate value, the Company is striving to ensure transparency ofmanagement and compliance, along with the maintenance and operation of an adequate governance framework while reinforcing its risk management framework.

Business Principles

Prioritize ethics and contribute to the prosperityof customers and society as a whole

1. Respond to customers in a timely and speedy manner

Encourage creativity and enterprisingspirit to meet the challenges of the future

4.	Keep a broad perspective and influence each other toward growth

Build trust by focusing on quality first

Corporate Governance

CSR Report

Our philosophy of corporate governanceManagement

16

Corporate Governance

18

Internal Control/Compliance18

Risk Management

18

Information Security

19

Business Risk

Report by Stakeholder

20

With Our Customers

21

With Our Suppliers

22With Our Shareholders and Investors

23

With Our Employees

Actions to Deal with the Environment and Local Communities

15

25

Actions to Protect the Environment

28

Contributions to Local Communities

Code of Conduct

The Group’s business activities are based on the business principles that “prioritize ethics and contribute to the prosperity of customers and society as a whole.” We therefore strive to attainsound corporate management through strengthening and reinforcing corporate governance, fully appreciating the significanceof compliance based on corporate ethics. At the same time, we
review as appropriate our management monitoring system to ensure its conformity to the changes in the business environment
including social environment and relevant legislation.
Corporate governance
We have corporate bodies established in accordance with laws
and regulations as well as the Articles of Incorporation, including
the Board of Directors, Statutory Auditors, the Board of Statutory
Auditors, Accounting Auditors, along with the General Meeting of
Shareholders and Directors. At its regular monthly meetings aswell as extraordinary meetings held when appropriate, the Boardof Directors, which is composed of eight Directors including one
Outside Director, discusses and decides on important management matters such as reports on Directors’ business execution
and matters to be decided solely at the discretion of the Board of
Directors, while supervising Directors’ business execution. In addition, the Company has meeting bodies including the Manage-

2. Tackle all challenges with forethought and creativity
3.	Continuous efforts toward self-development and skill improvement

5.	Act with awareness and pride of a good member of society andbusinessman
Established in June 2001

ment Strategy Meeting and Executive Officer Liaison Meeting.
Through these bodies, critical management matters including
specific matters related to their execution of duties and/or thosesubject to the deliberation of the Board of Directors are reported
to the President by the general managers of business execution
departments, and are deliberated and discussed preliminarily. As
for the matters discussed at meetings, matters subject to thedeliberation of the Board of Directors are decided by the Board of
Directors and other matters are decided by employees with business execution authority through means such as circulars basedon the Management Authority Rules.
Internal audit and statutory auditor’s audit
Action plans and results of internal audits are reported to theBoard of Directors and Statutory Auditors by the Audit Division, as
part of an effort to reinforce corporate governance. Statutory Auditors hold preliminary meetings with Accounting Auditors after
the Ordinary General Meeting of Shareholders to exchange opinions regarding the audit plan. Statutory Auditors receive the results of quarterly reviews from Accounting Auditors both verballyand in writing, and confirm their action plans (if required by thereviews) to be taken at a fiscal year-end audit. Statutory Auditors
also receive the results of the reviews on the fiscal year-end audit
from Accounting Auditors in a statutory document along withverbal reviews. Furthermore, Statutory Auditors are in principle
required to be present at inventory taking or on-site inspection at
subsidiaries by Accounting Auditors.

Toyo Denki Seizo Report 201516

Management

External Statutory Auditors and Outside Directors
The Company has established independence guidelines
regarding independence required for a candidate for its Outside Executive, and appoints Outside Directors and External
Statutory Auditors who have excellent insight in their areasof expertise. Currently, the Company appointed one Outside
Director and three External Statutory Auditors. Note thateach of the External Statutory Auditors is playing a role toenhance audit functions required by laws and regulations
while remaining independent from the Company.
Mr. Hirokazu Chinone, our Outside Director, is qualified asa lawyer and provides useful advice regarding managementin general, drawing on his wealth of experience and specialized knowledge regarding corporate law developed throughout his career.
Mr. Hiroshi Hamao and Mr. Eiichi Suzuki, our External Statutory Auditors, are engaged in the auditing activities for theCompany, drawing on their wealth of experience and broad
knowledge developed in corporate management and service
at a financial institution.
Mr. Toshio Ikeda, our External Statutory Auditor, is a certi-

fied public accountant who utilizes his professional expertisein the area of corporate financial accounting for the Company’s auditing work. Meanwhile, the Company has appointed
Mr. Ikeda as an independent director and registered him as
such at stock exchanges.
Executive remuneration
Amounts of remuneration for Directors and Statutory Auditors are
decided by a resolution at the General Meeting of Shareholders.
Basic remuneration for Directors is a fixed salary while a bonus ispayable as determined by each Director’s contribution to management as well as business results of the Company. Basic remuneration for both Standing and Part-time Statutory Auditors is a fixedsalary without bonus payments.
As of the end of May 2015
Number of
executives
applicable

Total amount of
remuneration(Unit: Million yen)

Directors

8

197

Statutory Auditors(excluding External Statutory Auditors)

2

17

Outside Executives(External Statutory Auditors)

4

22

Category of executives

Note: The number of executives applicable mentioned above includes two Statutory Auditors who respectively retired from their office at the end of the 153rd Ordinary General Meeting of Shareholders, held on August 27, 2014.

Corporate governance framework
General Meeting of Shareholders
Appointments/dismissals

Accounting Auditors

Reporting

ReportingAppointments/dismissals
Legal audit

Statutory Auditors

Directors

Business audit

Appointments/dismissals Reporting on business execution

Accounting audit
Reporting/decisions
Instruction/reporting
Internal audit

Appointments/dismissals

Board of Directors

Reporting

Audit Division

ReportingBoard of Statutory Auditors

Internal Control Oversight Committee
Appointments/reporting(Secretariat)
General Affairs Division(Contact for whistle-blowers)(Contact for legal consulting)

Whistle-blowings

Internal control
The Company views the development and operation of an internal
control system to be an important management issue, and it hasdeveloped an efficient, legal and appropriate business execution
system that is reviewed on an ongoing basis in accordance with
Article 362 of the Companies Act and Article 100 of the Ordinance for Enforcement of the Companies Act.
Principles of compliance
The Company has set “1. adherence to rules,” “2. observance ofconfidentiality,” “3. distinction between private and public matters,” “4. strictness with money,” “5. prohibition of side jobs,” and“6. prohibition of discriminatory and sexually suggestive statements or behavior” as principles of compliance.
Compliance promotion framework
To focus on business principles and fulfill its social responsibility,
the Company has provided all officers and employees with a copyof the Compliance Manual (Toyo Denki Seizo Ethical Standards)
that stipulates its code of conduct. The move is part of an effort tohave the code and the basic rules of work fully known.
The Company has also introduced a whistle-blowing systemthat allows employees to provide information directly to the management. The system is aimed at ensuring that any illegal orinappropriate conduct within the Company is detected at theearliest possible stage and that adequate measures are taken
promptly and as needed so that such conduct is rectified.

President
Management Strategy Meeting
Executive Officer Liaison Meeting
National and Global Group Company Meetings

Appointments/
dismissals

Instruction/reporting

Directors and Executive Officers
Instruction/reporting

Each business department
Oversight

Internal control and compliance

Instruction/reporting

Each Group company

Instruction/
reportingCompliance education
The Company is organizing scheduled and systematic training
sessions based on a compliance training master plan to enhanceknowledge on compliance while promoting a conscious respect
for corporate ethics.

Risk Management
Basic policy
The Company is engaged in developing rules and a framework forrisk management according to the Basic Rules for Risk Management established in August 2006.
Promotion framework
The Company has established the Internal Control OversightCommittee, an advisory body chaired by the President and hassome of its authority delegated from the Board of Directors. It
analyzes and assesses all the risks that exist in the Group anddevelops an effective risk management framework capable ofdealing precisely with the risks of the types and degrees that theGroup is exposed to. The committee specifically reviews the way
such a risk management framework ought to be, and it reports
periodically to the Board of Directors on the recommendations
resulting from its deliberations.
Furthermore, the committee is committed to enhancing theGroup-wide risk management framework in accordance with the
Basic Rules for Risk Management.

Information Security
Basic policy
The Company holds a vast amount of information assets including
information presented by customers related to its businessexecution and confidential information concerning the Group’s
proprietary technologies and its trade. Each Group company istaking various measures in this respect based on an awarenessof shared security under the Group’s Information Security Guidelines, which have been established to adequately manage anduse these information assets.
Information security training
The Company is conducting educational activities to develop
information security awareness among all employees including
various training sessions, some involving the use of educational
DVDs.

17

Toyo Denki Seizo Report 201518

Management

Risk Factors
From the perspective of proactive information disclosure, theGroup intends to disclose a wide range of recognizable risks. Major risks that may affect its earnings and financial position are set
out below. The Group aims for thorough understanding of theserisks in order to establish a necessary risk management framework designed to prevent the risks from materializing or minimize
the impact of risks if they do materialize.
(1) Business activities, business structure, economic trends, and other factors
The Group’s sales heavily rely on the Transportation Systems
and Industrial Systems segments. Its customers conduct business operations at home and overseas. As such, businessclimates and individual spending conditions in different
countries may affect the Group’s business performance.
(2) Production bases
The great majority of the Group’s production bases are locatedin the Kanto area. Production capacity may be severely affected by large-scale disasters in the area.
(3) Intensifying competition
The Japanese market for the Transportation Systems segment
has matured and thus faces intensifying competition. The Industrial Systems segment is under pressure from intensifying
competition for product development. The Group’s businessperformance may be affected by such intensifying competition.
(4) Product quality
Defects in products may link to materialization of a risk that
requires large-scale compensation for damages. The possibility exists that insurance may not be able to cover associatedcosts, which may affect the Group’s business performance.
(5) Product development
With a view to providing attractive products to customers, theGroup applies itself to gathering information about customer
needs and leverages it in the development of new products to
support its future growth. However, delays in the developmentof new products to respond to rapid technological or environmental changes may affect the Group’s performance.
(6) Material procurement
Owing to the fact that the Group’s business has various distinctive characteristics, some of the materials it procures are noteasily available due to factors such as a limited number of suppliers. Delays in supply or discontinuation in production of suchmaterials may affect the Group’s performance. In addition, disruptions to the entire supply chain caused by a large-scaledisaster or other incidents could impact the Group’s operations.

19

Reports by Stakeholder

Moreover, its business may be affected by the fluctuation in
prices of raw materials, notably steel products and copper.
(7) Overseas expansion
The Group proactively pursues the expansion of overseas
operations including the Chinese market. Its performance may
be affected by major changes in situations overseas.
(8) Intellectual property rights
The Group attends to the protection of intellectual property
rights. However, amid drastically advancing technical innovations and accelerating globalization of business, the Group isinevitably exposed to potential disputes with third parties overintellectual property rights. If a dispute occurs, the Group’sbusiness may be affected.
(9) Business alliances
With the aim of business expansion and enhancing competitiveness, the Group proactively pursues various alliances withthird parties. However, if these alliances do not deliver expected results due to a failure in forging favorable relationships
with partners, the Group may face an impact on its performance.
(10) Exchange rate fluctuations
On the back of aggressive expansion into overseas markets,
the Group will inevitably face heavier impact of foreign currency exchange rate fluctuations on its earnings as itincreases foreign currency denominated transactions.
(11) Holding assets
Fluctuations in the fair value of assets held by the Group may
affect its performance.
(12) Financing
The Group’s financing programs may be affected by unexpected changes in financial conditions.
(13) Information security
The Group retains customer information related to its businessexecutions. Also, it possesses various types of confidential information concerning the Group’s proprietary technologies andoperations. If these information assets leak outside the Groupfor unforeseeable reasons, it may impact its performance.
(14) Compliance
The Group proactively pursues expansion in overseas operations, particularly the Chinese market; therefore its operations are subject to the laws and regulations of each country.
Although the Group has established and conducts a robust
compliance system, its operations are still at risk from the effects of unforeseeable events.
(15) Litigation
If the Group becomes the subject of any legal action or otherlegal procedures, its business may be affected.

With Our Customers
The Company makes it one of our business principles to “build trust by focusing on quality first.” As such, we strive
to enhance customer satisfaction through our commitment to thorough-going quality control as we believe delivering safe and secure products and services to customers is the Company’s most important mission.

Quality Control– Providing Safe and High-Quality Products
Basic policy on quality control
The Company’s electrical equipment for rail vehicles is installed inmany rail vehicles. These extremely important products play a
direct role in ensuring the safety of human life and property
during rail transportation. In the Industrial Systems and Information Equipment Systems segments as well, the Company’s products and services are used in customers’ production facilities,
development sites and in the field of social infrastructure, andthey form the foundation supporting the sustainable developmentof a society that is safe and comfortable to live in.
In order to ensure the high quality of our products and services, the Company has established a “Basic Policy on Quality
Control” which is deployed at all production bases as we strive tomaintain and improve our human resources education, compliance with rules, and our facilities.
Promotion framework
With regard to quality control, each fiscal year the Company
develops policies and the promotion framework aimed at further
maintaining and improving quality in each business unit, alongwith specific policies pertaining to the reduction of flaws andother issues. The Company’s Corporate Quality Control Division
works together with the quality control department or the quality
assurance department in each business unit to put together areport on the status of quality control and results in each unit.
The report is delivered to top management at the monthly Executive Officer Liaison Meeting where measures are debated anddecided. Furthermore, in the event that a flaw is discovered
after a product has been shipped, the necessary steps are
swiftly taken, mainly by the quality assurance department ineach business unit, while at the same time the causes that led
to the flaw and its mechanism are investigated, and this information is put into a database so that the information can beshared in-house in an effort to prevent recurrence.

Quality management system
The Company has created and operates a quality management
system at its production bases, the Yokohama Plant and the Shiga
Factory, and has obtained ISO 9001 certification.
Year ISO 9001 certification obtained

Yokohama Plant
1994

Shiga Factory
2000

Extended companywide
2007

Responding to the Global Market
Proper export controls
The Export Control Department at General Affairs Division is responsible for export management as the export management
control department. We have created a system for the proper
management of exports in order to ensure compliance with thelaws and regulations concerning export management in the countries and regions where we engage in business activities as wellas to avoid involvement in transactions that could hinder the
maintenance of international peace and safety.
The Export Control Department handles cargo and technology
parameters used in determining whether or not export permits are
required, as well as investigation of transactions. In addition, theDepartment carries out employee education and guidance andsupport for Group companies.

Towards Greater Customer Satisfaction
Implementation of customer satisfaction survey
Through its sales department, the Company regularly conducts
surveys on topics such as customer requests and customer satisfaction. The results are reported to the top management at Executive Officer Liaison Meetings, and the information is shared within
the Company. We strive to maintain good relations with our customers by identifying problems that need to be solved and swiftly
addressing them in order to raise customer satisfaction.
Toyo Denki Seizo Report 201520

Reports by Stakeholder

With Our SuppliersWith Our Shareholders and Investors

The Company responds to the needs of our customers through the strong network we have built with suppliers inline with our unique characteristics as a business based on an individual build-to-order/multi-product small lot
manufacturing model.

We strive to ensure transparency of management through the timely and proper disclosure of information and various modes of communication in order to receive an appropriate evaluation of the Company from our shareholders
and investors.

Towards Just and Fair Procurement
Communication with suppliers
The Company’s products possess various distinctive characteristics such as being individually built-to-order, manufactured in
multi-product small lots, and demanding high reliability. Therefore,
the Company can be affected by the performance of our suppliers
as a result of issues such as delays in supply due to fluctuationsin production quantity or delays in processing due to the quality of
products received.
In order to reduce these risks as much as possible, the Company carries out instruction and support related to quality, technology, and skills for our suppliers, as well as guidance for improvement of manufacturing sites, in order to ensure stableprocurement of even better quality products. In addition, we
actively promote information sharing through the “Toyo Denki
Cooperation Association” to which our leading suppliers belong.

Training for material procurement officers
The Company endeavors to maintain proper execution of operations by implementing a variety of training programs for material
procurement officers to deepen their knowledge of the Act against
Delay in Payment of Subcontract Proceeds, Etc. to Subcontractors
and related laws and regulations and to cultivate awareness oflegal compliance.
External whistle-blower system (for suppliers)
The Company has established an external whistle-blower system
to receive consultations or reports on compliance from our suppliers. The legal compliance department handles complaints andconsultations about transactions, and the Company’s retained
lawyer resolves issues when necessary.

TOPICS

Establishment of “Procurement Action Guidelines”

In March 2014, the Company improved its procurement-related regulations and established the “Procurement
Action Guidelines.” The details of the guidelines are as follows:

Procurement Action Guidelines
These guidelines indicate the codes of conduct that the Company’s executives and employees should comply with in the procurement ofpurchased parts and outsourced parts as required for the manufacturing of products ordered by customers (“procurement transactions”).
1. Procurement transactions shall be conducted in compliance with the laws of the relevant countries.
2. Information concerning suppliers in procurement transactions shall only be obtained within the scope necessary for conducting procurement activities in accordance with contracts. Furthermore, efforts shall be made to carefully manage and observe the confidentiality of information gained during business operations.
3. Personal interests with suppliers shall be prohibited in procurement transactions, including the lending and borrowing of money.
4. Receiving of remuneration or any other forms of personal rewards from suppliers shall be prohibited in procurement transactions.
In addition, entertainment or gifts beyond the scope of normal social behavior shall be prohibited.
5. Forceful requests for entertainment, gifts, or donations from suppliers shall be prohibited in procurement transactions.

Towards Enhancement of Corporate Value
Basic philosophy
Through timely and appropriate disclosure of information to ourshareholders and investors, the Company accurately conveys ourmanagement policy and business conditions while making use of
IR tools such as our website to promote a full range of IR activities
that contribute to the improvement of our corporate value.

Dividends
Maintenance of stable dividends forms the basis of the Company’s distribution of profit, and the dividend for the fiscal year ended May 31, 2015 was 6 yen per share (interim dividend of 0 yen,fiscal year-end dividend of 6 yen). The Company also intends tomaintain dividends at 6 yen or more per share from the fiscal year
ending May 31, 2016 onward.
Dividend per share
(Yen)

8

Development of IR activities
IR activities for institutional investors and securities analysts
The Toyo Denki management team holds a financial results briefing each quarterly period to provide opportunities for institutional
investors and securities analysts to understand the summary of
our financial results. The management team gives a report including the state of progress of the medium-term management plan
and an overview and forecast for each segment as well as neworders received and other topics.
In addition, we strive to deepen understanding of the Company
through individual visits to institutional investors or holding factory
tours to provide opportunities for them to actually see our manufacturing sites, as well as participating in small meetings organized by securities companies, and taking other measures.

6

6

6

6

6

6

FY 2010

2011

2012

2013

2014

4
2
0

Record of 154th Ordinary General Meeting of Shareholders
Date held: Thursday, August 27, 2015
Attendance: 102 people

IR activities for individual shareholders and individual investors
The Company website includes a “For Individual Investors” page
which offers a clear introduction to our business activities and our
results, as well as making available a variety of IR materials.
URL “For Individual Investors”
https://www.toyodenki.co.jp/ir/individual.php
Holding of company presentations for individual investors
Tuesday, January 27, 2015
Mitsubishi UFJ Morgan Stanley Securities (Head Office)Attendance: 109 people
Holding of factory tour for shareholders
Friday, April 17, 2015 at the Yokohama Plant
Attendance: 33 people (107 applicants)

President Terashima making a presentation (at the factory tour for shareholders)*Inquiries from outside are accepted via the following phone number and e-mail address:
Legal Compliance Department, General Affairs Division: +81-3-5202-8121

21

e-mail address for inquiries to Toyo Denki Seizo K.K.: contact@toyodenki.co.jp
Toyo Denki Seizo Report 2015

22

Reports by Stakeholder

With Our Employees

Creating a Pleasant Workplace

The Company seeks to cultivate a dynamic corporate culture and to create a pleasant and safe workplace where
each and every employee can unleash his or her diverse capabilities.

Executive manager development training

Department heads

Training for middle-management executives

II Hands-on learning
III Basic knowledge course
IV Practical training
V Individual training

IT education
Training inbusiness manners

Life-planning seminarOn-the-job
I Introductory training sales training
Training for new employees

Mental health training

Follow-up training (1st year)

Various distance learning courses

Follow-up training (3rd year)
Follow-up training (2nd year)

Compliance training

Comprehensive training for newly appointed senior general staff

TOEIC challenge system

Pre-promotion training for managers and professionals Coaching training

Pre-promotion training for senior general staff

Non-managerial employees

Training programs at the Company are divided into several categories according to the employee’s year of service, type of workand role, and training is carried out after clarifying what part each
employee is expected to play.
Furthermore, in response to globalization of the Company’s operations, we offer English and Chinese language programs. The Company covers the full cost for a variety of courses tailored to the levelof the participating employees, including distance learning, enrollment in schools, and classes provided by teachers in-house.

Supervisors

Education and training system

Evaluator training
Training for newly appointed managers and professionals

System for fostering specialists

Fundamental policy(1)	To develop human resources who understand and practice ourbusiness principles and code of conduct and who are of value
both as company employees and as members of society.
(2)	To develop human resources who are professionals, eachpossessing a high degree of specialized expertise, by enhancing the knowledge, techniques, and skills they need tocarry out their duties.
(3)	To provide a variety of educational opportunities in order topromote personal development, with emphasis on a self-directed approach to study and growth.

Training for newly appointed division heads
Incentive system for acquiring certification

The Company has set the following policy on human resources
development and carries out education and training.

Other/Personal development

Executive training

Division heads

Human resources development policy

Executives

Towards the Development of Human
Resources with Competitive Strengths

Training system

Follow-up
Training(within 1 year)

Training for unofficial new hires (graduates)

The Company holds monthly meetings of the Safety and Hygiene
Committee jointly with labor and management, where ongoing
discussions are held in order to build a safer working environment
and to reduce workplace injuries to zero, and to find solutions tomental health issues at each of our bases. In particular, sub-committees are set up to address important topics related to safety
and hygiene at production bases in an effort to create an evenbetter workplace.
Acquisition of the “Kurumin” certification logo (June 2014)
In recognition of our efforts as a “company that
supports child-rearing,” which includes a substantial childcare system, educational activities concerning a work-life balance, the creation of an environment in which it iseasy to obtain childcare leave, and the acquisition record of childcare leave by male employees, we received the “Kurumin” certification logo from the Tokyo Labor Bureau in June 2014.
Initiatives for diverse work-styles

On-the-job
factory training(sales staff)
Introductory
training IT education

Safety and hygiene initiatives

Supportsystemfor acquiring
publiccertification

Languageeducation(TOEIC)(Chinese)

Regular new hires (general staff group) Mid-career hires

Passing on skills
In order to proactively promote the transmission of outstanding
skills to maintain high quality, the Company encourages employees to obtain official certifications. Furthermore, employees withexceptional manufacturing skills or expertise are recognized as“My Star” internally and given responsibility to instruct and train
younger workers.
In April 2013, the Technical Training Center was newly established within the Yokohama Plant, where training is carried out fortechnical staff through lectures and various hands-on workshops.

The Company has implemented a flexible work-style including a
flextime system for sales staff and those involved in development.
Furthermore, in order to encourage retention and utilization of
employees with knowledge and skills, we have put in place the“System for Rehiring Employees” for employees who have resigned due to life events that occur in the course of their career(childbirth, childcare, family care, spouse’s transfer, etc.), so thatWork andfamily life
balancethey can be rehired when they reach the stage when it is possible
to return to work.
As for employees who wish to be rehired after they reach themandatory retirement age (60), in principle, we continue to employ them until the age of 65.
Initiatives for employment of the disabled
The Company makes improvements to the workplace environmentand carries out workplace training with the aim of creating aworkplace where the disabled and those in normal health canwork together energetically. We also promote collaboration withlocal governing agencies and special-needs schools regarding
employment of the disabled.
Mental health measures
As measures to address mental health, the Company conducts“Line care training” for administrative professionals and “Self caretraining” for employees. In addition, we have partnered with an
external medical institution to set up a telephone and e-mail consultation service to provide support for prevention, treatment, andreturn to work.
Implementation of employee satisfaction survey
The Company conducts an “employee satisfaction survey”
once per year, and relevant departments work to resolve
various issues extracted from the survey results. In addition,
the company-wide “Dynamism Committee,” whose purpose
is to create a “dynamic corporate culture,” leads various
activities aimed at revitalizing internal communication.

Encouraged to do my best by the smiles of my child!
Megumi Komatsu (Design Division, Transportation System Works)

I took maternity and childcare leave for about one year until my childbecame ten months old.
As I spent every day together with my child while I was on leave,
I think I felt even lonelier than my child when I first came back to work.
Because the time I could spend relaxing together with my child was
reduced after I was reinstated and because I also came to work laterand returned home earlier than the ordinary time as I used the shorter
working hour system for childcare, I initially felt some uncertainty
towards whether I could continue working as both work and childcare
felt somewhat incomplete.
However, as I kept busy every day, I became used to this life and now

I don’t feel any of this uncertainty.
I feel extremely happy thesedays when I return home fromwork to have my smiling childgreet me.
I would also like to do my bestat work, housework, and child raising so that my child, who is growing
fast every day, will be proud of me.
Finally, I would like to thank my coworkers who showed concern for
my health during pregnancy and who continue to demonstrate anunderstanding of my childcare duties.

Training for new employees

23

Toyo Denki Seizo Report 201524

Initiatives to Deal with the Environment and Local Communities

Initiatives to Protect the Environment

Initiatives to Prevent Global WarmingWith a view to realizing an environment-friendly society, the Company will further strive to promote the reduction ofenvironmental burden, while providing more efficient products that contribute to energy conservation.

Environmental Philosophy
The Toyo Denki Group sets initiatives to protect the global environment as its priority task and contributes to the development of a sustainable society.

Action Guidelines
We will continue to provide products and services that are considerate of the burden on the global environment by drawing on our “future-oriented technologies friendly to the Earth and mankind.”
1.
2.
3.
4.

We will comply with all environmental requirements including those under the relevant laws and regulations.
We will strive to minimize environmental burden through a reduction of energy consumption and other measures at
all stages of product lifecycle, namely planning, development, design, production, sales, use and disposal.
We will establish and execute a system to continuously promote activities to protect the global environment.
We will raise environmental awareness among individuals through enlightenment activities within the Group

Initiatives to reduce greenhouse gas (CO2) emissions

Targeted reduction of CO2 emissions and progress status

The Company is promoting energy conservation at each of its
production bases and offices to reduce its CO2 emissions. At the
production bases in particular, we are promoting power-savingand streamlining at production facilities. In addition, the Yokohama
Plant uses solar power generation for peak shaving of power demands.

Aiming to reduce CO2 emissions per unit of production output by
1% year on year, the Company’s main production base, the Yokohama Plant, achieved a 9.8% reduction in fiscal 2014.

Total energy input at Yokohama Plant (electricity and gas)
(Unit: 10,000 kWh)

800

Electricity

Total CO2 emissions at Yokohama Plant

Gas (Unit: 1,000 Nm )
3

400

(t)

720.7
317.2

631.8

3,000

400

200

2,000

200

100

1,000

0

0

Aiming for Realization of a Sustainable Society

244.6

Environment technologies of the Company
Energy conservation at each baseUse of sustainable energy

Low-carbon society
Implementation of measuresagainst global warming

590.9

284.7

2010

2011

3,307.3
2,905.0

252.0

0Recycling-based society

3,479.2

651.8
300

600

A sustainable society as envisaged by the Company is the combination of a “low-carbon society,” a “recycling-based society” anda “nature-symbiotic society.”
The environment technologies of the Company have produced
numerous products that contribute to energy conservation, including
high efficiency motors and inverters that capitalize on the amalgamation of our outstanding motor drive technology and other state-of-theart technologies. In the meantime, the Company has been striving toconserve resources through not only the efficient use of energy but
also the reduction of the size and weight of its products.
In addition, the Company is working on the development of
products with lower levels of noise involved in their use to makethem friendlier to the surrounding environment.
The Company will make further contribution to make society
more sustainable, fully utilizing on its environmental technologies
on a global scale, while carrying out various environmental
actions at each of its bases.

628.5
284.0

4,095.0

3,936.0

4,000

2012

2013

2014

2010

(year*)

2011

2012

2013

2014

(year*)

Waste reduction andrecycling at each basePromotion of waste reduction
and recycling

Total solar power generation at Yokohama Plant(kWh)

Based on 500 kW generator

750,000

Nature-symbiotic society

Initiatives for control overchemical substances

Conservation of biodiversity

Total water input/output
at Yokohama Plant
横浜製作所
水資源投入量・排出量674,893.0

25

676,000.0

22.5

600,000

450,000

Water input(Unit: 1,000 m3)

21.1

20

433,862.6

15

15.8

Water output

19.9
15.8
13.9

14.2

14.1 14.1
12.3

300,000

10

150,000

5Environmental Management System
0

0
2012

In order to tackle environmental issues on an independent and continuous basis, the Company has developed and operates an environmental management system and thereby obtained ISO 14001
certification. This certification has been acquired for all offices andthe production bases Yokohama Plant and Shiga Factory.

25

2013

2014

(year*)

2010

2011

2012

2013

2014

(year*)

Years of ISO 14001 certification

Shiga Factory

2001

Yokohama Plant

2004

Extended to all offices

2010

Toyo Denki Seizo Report 201526

Initiatives to Deal with the Environment and Local Communities

Initiatives for Control over Chemical Substances
Volatile organic compounds (VOCs) emitted as a result of ourbusiness activities are adequately controlled and the amount ofemission is monitored under the Pollutant Release and Transfer
Register (PRTR).
We will further engage in the reduction of waste through suchmeasures including using non-VOC materials and implementing
recovery and reuse of solvents. PCB waste is also subject to adequate control, storage and disposal in accordance with Japan’s
Act on Special Measures concerning Promotion of Proper Treatment of PCB Wastes.

Notification volume for Pollutant Release and Transfer Register (PRTR) substances
Total amount of air emissions(kg)

10,000

9,600

8,000

6,000

Total amount of shift

7,700

8,300

Contributions to Local Communities
We are committed to various social contribution activities, to contribute to society through our business while facilitating our own co-existence with communities and to foster young people who will represent the next generation.

7,900

7,300
6,120

5,320
4,600

4,810

5,290

To Convey the Mission and the Appeal of
Electrical Industry as Well as of Toyo Denki

4,000

2,000

Receiving interns
0
2010

2011

2012

2013

2014 (year*)

Initiatives for Reducing Disposed
Waste as Well as Recycling
Main actions

Factory tours

We are committed to activities that raise awareness and appreciation of our manufacturing expertise by accepting interns from local technical high schools and providing them with hands-on experience at manufacturing sites. This internship system serves as
an effective means of recruiting outstanding technical staff on aconsistent basis as some students in the schools apply for positions at the Company.
Six high school students participated in internships during fiscal 2014 and learned about our manufacturing expertise.

The Company successfully reduced its landfill waste rate to 1.3% in
fiscal 2014, as a result of thoroughly implementing waste processing rules, sorting of metal waste and recycling of paper resources.
Volume of landfill waste

Output of general and valuable waste
廃棄物・有価物排出量の推移
(t)

25

703.5
637.4

600

652.2

24.2

682.6
20

587.9

Measurement using a caliper

15

Instruction and practice of rotor
dynamic balance panning work at
a motor assembly workshop

The Company cooperates in small woodlands conservation activities led mainly by the city of Yokohama by donating part of theproceeds from vending machines installed at the Engineering
Center of the Yokohama Plant to the fund.
Cleanup campaigns within the vicinity of the production bases

400

10
200

Participation in university endowment courses and hands-on courses

9.0

5

5.6

5.0

2011

2012

5.9

0

0
2010

27

We are conducting “factory
tours” to provide opportunities for members of local
communities to actually see
our manufacturing facilities
and products in order to deA factory tour
velop deeper understanding
about the business operations of the Company. During these tours, we inform the participants of our products as well as our actions for environmental
protection and factory facilities, in an effort to build up relationships built on trust with local communities.
Cooperation with Yokohama Kyodo no Mori Fund

(t)

800

We conduct lectures leveraging the know-how fostered throughoperations and our business activities in corporate-participating
courses held by educational institutions including universities.

2011

2012

2013

2014

(year*)

2010

2013

2014

(year*)

We participated in endowment courses sponsored by
the Yokohama Green Purchasing Network so thatparticipants can deepen
their knowledge on historyof railway and the environEndowment course at a university
ment through our businessactivities.
In addition, in fiscal 2014, we also participated in hands-on
courses sponsored by Kanagawa Shimbun Co., Ltd., and Asahi
Kasei Amidas Corporation, during which one of our PR spokespersons gave a lecture for the “newspaper reporter hands-on lecture.”

In cooperation with neighboring companies, we conduct cleanup
campaigns within the vicinity of the Yokohama Plant and theShiga Factory.

Cleanup campaign(Yokohama Plant)

Cleanup campaign(Shiga Factory)

Toyo Denki Seizo Report 2015

28

Data
Data Concerning Personnel and Labor

Environmental Data
Indices

Data concerning personnel and labor (at Toyo Denki Seizo K.K.)
Item

Unit

Fiscal 2010

Total
Men

Number of employees

748
Persons

Women%

Ratio of female employees
Total
Men

Number of administrative professionals

Persons

Women%

Ratio of female administrative professionals
OverallMen

Average age

Age

Women
OverallMen

Average years of employment

1744

Fiscal 2012
1

791

Fiscal 2013
2

797

2

804

697

693

735

737

740

51

51

56

60

64

6.8

6.9

7.1

7.5

8.0

171

155

152

156

151

170

153

151

155

149

1

2

1

1

2

0.6

1.3

0.7

0.6

1.3

40.8

41.1

41.0

41.1

40.5

41.1

41.4

41.1

41.2

40.7

36.5

38.2

38.9

39.0

38.7

16.4

16.5

16.1

16.3

15.8

16.7

16.3

16.5

15.9

13.5

14.6

14.5

14.5

14.5

Yen

5,953,210

6,039,332

5,885,559

5,750,453

5,888,577

%

5.9

13.5

3.8

0.0

0.0

Number taking childcare leave

Persons

1

2

3

1

5

Number taking family care leave

Persons

0

0

0

0

0

Number of temporary staff (including part-timers)

Persons

155

149

167

158

153

Overturn rate (within 3 years of joining the Company)

Electric power (10,000 kWh)Fiscal 2014

16.6

Years

Women
Average annual salaryFiscal 20112

Urban gas (1,000 Nm3)

Water input (1,000 m3)CO2 emissions (t)Solar power generation (kWh)Water output (1,000 m3)

Indices
Total amount of air emissions (kg)
Total amount of shift (kg)
Total amount of
air emissions
Ethylbenzene (kg)
Total amount of
shift
Total amount of
air emissions
Xylene (kg)

Reference data I: Number of Officers (at Toyo Denki Seizo K.K.)
Item

Unit
Total
Men

Number of Officers

Persons

Women
Notes

Fiscal 2010

Fiscal 2011

Fiscal 2012

Fiscal 2013

Fiscal 2014

12

10

10

11

12

12

10

10

11

12

0

0

0

0

0

PRTR

Total amount of
Tetrahydromethylphthalic air emissions
anhydride(kg)
Total amount of
shift
Total amount of
air emissions

Reference data II: Number of employees at the Group Companies in Japan and overseas (at the 6 consolidated subsidiaries of Toyo Denki Seizo K.K.)
Unit

Fiscal 2010

Fiscal 2011

Fiscal 2012

Fiscal 2013

Fiscal 2014

Persons

1,177

1,175

1,170

1,201

1,216

Number of employees at Group companies in Japan and overseas Persons

429

431

379

404

412

Number of temporary staff on a consolidated basis(including part-timers; stated in the Annual Securities Report)

Persons

262

235

256

255

214

Number of temporary staff (including part-timers)

Persons

107

86

89

97

61

Number of employees on a consolidated basis

Notes

Toluene (kg)
Total amount of
shift

IndicesIndustrial waste (tons)

Reference data III: System for support of work-family balance (at Toyo Denki Seizo K.K.)

Maternity andchildcare related

Family care related
Other

29

Prenatal leave
Maternity leave

Can be taken for up to 8 weeks after birth.

Childcare leave

In principle, childcare leave can be taken for a period as needed from the day after 8 weeks have elapsed since birth (completion of maternity leave), until
the day before the child turns 1 year old. In cases where it is difficult to find a place in daycare, etc., it is possible to apply for an extension of childcare
leave until the child is 1 year and 6 months, or until the last day of the month of March after the child has reached the age of 1 year, whichever is longer.

If an employee has taken childcare leave within the 8-week period after his spouse has given birth, he may take repeat childcare leave until
Repeat childcare leave
the child reaches one year of age. Further, if the employee and spouse both take childcare leave, the childcare leave period can be extended(Mom and Dad Childcare Leave Plus)
until the child reaches 1 year and 2 months.
Shorter working hours forchildcare

Working hours may be set at 5 hours 45 minutes or 6 hours 45 minutes per day for a period as needed from the end of childcare leave until
the child graduates from elementary school.

Nursing leave

Up to 5 special days off may be taken per family member for nursing care for pre-elementary school age children.

Family care leave

A total of up to 3 years of family care leave may be taken per person needing care.

Family care work hours

Employees not taking family care leave may limit working hours to 5 hours and 45 minutes or 6 hours and 45 minutes per day.

System for Rehiring
Employees

Employees who have resigned due to marriage, infertility treatment, childbirth, childcare, family care, or spouse’s transfer, etc., may be rehired
when they are able to return to work depending on the employee’s request and workplace needs.

Fiscal 2012
624.1
590.9
33.2
31.2
252.0
252.0
19.9
19.9
0.0
3,456.3
3,307.3
149.0
169.0
433,862.6
13.9
13.9
0.0

Fiscal 2013
664.8
628.5
36.3
27.9
284.0
284.0
14.2
14.2
0.0
4,122.0
3,936.0
186.0
168.0
674,891.0
12.3
12.3
0.0

Fiscal 2014
684.3
651.8
32.5
30.1
284.7
284.7
14.1
14.1
0.0
4,265.0
4,095.0
170.0
180.0
676,000.0
14.1
14.1
0.0

Remarks

Fiscal 2011
7,700
4,600
1,800
1,800
0
550
550
0
3,300
3,300
0
450
450
0
0
0
0
1,600
1,600
0
2,600
2,600
0
2,000
2,000
0

Fiscal 2012
7,300
4,810
1,800
1,800
0
330
330
0
2,900
2,900
0
280
280
0
0
0
0
3,000
3,000
0
2,600
2,600
0
1,200
1,200
0

Fiscal 2013
8,300
5,290
2,000
2,000
0
430
430
0
3,300
3,300
0
360
360
0
0
0
0
2,900
2,900
0
3,000
3,000
0
1,600
1,600
0

Fiscal 2014
7,900
6,120
2,000
2,000
0
670
670
0
3,400
3,400
0
550
550
0
0
0
0
2,500
2,500
0
2,500
2,500
0
2,400
2,400
0

Remarks

Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory

Fiscal 2010
9,600
5,320
2,300
2,300
0
450
450
0
4,000
4,000
0
370
370
0
0
0
0
2,800
2,800
0
3,300
3,300
0
1,700
1,700
0

Applicable premises
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory

Fiscal 2010
319.8
292.8
27.0
130.2
130.2
280.5
280.5
730.5
703.5
27.0
524.3
524.3
24.2
24.2
3.3
3.4
-

Fiscal 2011
316.7
282.4
34.3
114.9
114.9
240.1
240.1
671.7
637.4
34.3
436.4
436.4
5.6
5.6
0.8
0.9
-

Fiscal 2012
279.9
244.1
35.8
101.9
101.9
255.6
255.6
637.3
601.5
35.8
435.2
435.2
5.0
5.0
0.8
0.8
-

Fiscal 2013
290.3
262.0
28.3
99.3
99.3
290.9
290.9
680.5
652.2
28.3
462.4
462.4
5.9
5.9
0.9
0.9
-

Fiscal 2014
303.1
303.1
30.3
105.4
105.4
274.1
274.1
682.6
682.6
30.3
598.2
598.2
9.0
9.0
1.3
1.3
-

Remarks

1

2

3

4

Applicable premises

Waste Data

As of May 31 for each fiscal year

Can be taken from 8 weeks prior to due date (14 weeks prior in the case of multiple births).
(6 weeks is required by law)

Total amount of
shift

5

For each fiscal year as of May 31 (Executives include Directors, Internal Statutory Auditors, and External Statutory Auditors)

Item

Fiscal 2011
667.1
631.8
35.3
28.9
244.6
244.6
21.1
21.1
0.0
3,014.0
2,905.0
109.0
231.0
15.8
15.8
0.0

PRTR Data*1 Number of regular employees including Executive Officers and number of special employees, temporary employees and temporary and part-time employees*2 Number of regular employees including Executive Officers, and number of special employees, temporary employees, contract employees and staff on loan from other companies, etc.

Notes

Fiscal 2010
756.9
720.7
36.2
35.5
317.2
317.2
22.5
22.5
0.0
3,585.2
3,479.2
106.0
212.0
15.8
15.8
0.0

Applicable premises
Production bases total
Yokohama Plant
Shiga FactoryNon-production bases total
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga Factory
Production bases total
Yokohama Plant
Shiga FactoryNon-production bases total
Based on 500 kW generator Yokohama Plant
Production bases total
Yokohama Plant
Shiga Factory

General waste (tons)

Valuable metal waste (tons)

WastesWaste output () (tons)

Recycled amount (tons)

Volume of landfill waste (tons)
Percentage of landfill waste (%)
Yearly comparison

6

6

6

*The fiscal year is from April to March of the following year. *Non-production bases: Toyo Denki Seizo Head Office, Osaka Branch, Nagoya Branch, Hokkaido Branch, Kyushu Branch, Hiroshima Branch*1 ISO 14001 certification was obtained for non-production bases in June 2010.
*4 Production activities at Shiga Factory recorded close to zero water output.
*2 Production activities at Shiga Factory recorded close to zero water input.
*5 PPTR: Pollutant Release and Transfer Register*3 500 kW solar panel became operational in July 2012.
*6 The recycled amount and the volume of landfill waste at the Shiga Factory are scheduled for investigation starting in fiscal 2015.

Toyo Denki Seizo Report 201530

Financial Review

Consolidated Operating Results, Consolidated Financial Position, and Consolidated Cash Flow for Fiscal
2014 (from June 1, 2014 to May 31, 2015) are as follows:

Results of Operation
Orders received
YoY -8.2%

Net sales
YoY +13.3%
Profit/Loss
Net income
YoY +71.6%

Orders received decreased 8.2% compared with the previous fiscal year to 39,070 million yen. This overall result
reflected a decrease in orders received in the Transportation Systems segment and the Information Equipment
Systems segment, despite a surge in orders in the Industrial Systems segment.
Net sales increased 13.3% year on year to 39,617 million yen. Despite a decrease in the Information Equipment
Systems segment, this result reflected a significant surge in the Transportation Systems segment outside Japan
as well as an increase in the Industrial Systems segment.
From a profit perspective, operating income increased 48.3% compared with the previous fiscal year to 1,596 million yen, mainly due to increased revenue in the Transportation Systems segment and the Industrial Systems segment. Ordinary income grew by 98.5% to 2,056 million
yen as a result of recording foreign exchange gains from a progressively weaker yen, and net income increased 71.6% to 1,105 million yen.

Financial Position

Financial Report

AssetsTotal assets
53,041 million yen

Total assets as of May 31, 2015 stood at 53,041 million yen, an increase of 8,288 million yen compared with the end of the previous fiscal year. The increase

Liabilities
Total liabilities
28,145 million yen

Total liabilities amounted to 28,145 million yen, an increase of 2,743 million yen compared with the previous fiscal year end. Despite a

Net assets
Total net assets
24,895 million yen

Net assets as of May 31, 2015 stood at 24,895 million yen, an increase of 5,545 million yen compared with the previous fiscal year. This in-

Financial Report

32

Financial Review

33

Consolidated Balance Sheets

35

Consolidated Statements of Income
and Comprehensive Income

36

Consolidated Statements of Changes in Net Assets

37

Consolidated Statements of Cash Flows

in total assets was largely attributable to an increase in investment securities of 6,063 million yen, which was the result of an increase in the market price ofheld listed securities, in addition to an increase in trade notes and accounts receivable of 2,033 million yen, which reflected an increase in net sales.

2,799 million yen decrease in accrued expenses, the increase in total liabilities was largely attributable to increases in electronically recorded obligations – operating of 3,022 million yen, deferred tax liabilities of 1,965 million yen, and long-term debt of 706 million yen.

crease was largely attributable to a 4,327 million yen increase in unrealized holding gain on available-for-sale securities and a 93 million yen
increase in foreign currency translation adjustments despite a decrease of 84 million yen from remeasurements of defined benefit plans.

Cash Flows
Cash flow fromoperating activities
Net cash provided byoperating activities
1,514 million yen
Cash flow frominvesting activities
Net cash used ininvesting activities
988 million yen

Net cash provided by operating activities amounted to 1,514 million yen. Major cash outflow was a decrease of
2,802 million yen in accrued expenses. Principal cash inflows were income before income taxes and minority interests at 2,014 million yen and an increase of 2,765 million yen in trade notes and accounts payable.

Net cash used in investing activities totaled 988 million yen for the fiscal year under review and mainly comprised
funds used for the purchases of property, plant and equipment at 830 million yen, which included 111 million yen
as a deposit for the acquisition of land for the new Shiga Factory.

Cash flow fromfinancing activities Net cash provided by financing activities was 18 million yen. The principal cash inflow was an increase in longNet cash provided by term debt at 1,500 million yen, while major cash outflows were repayment of long-term debt at 1,073 million yen
financing activities and cash dividends paid at 287 million yen.
18 million yen

31

Toyo Denki Seizo Report 201532

TOYO DENKI SEIZO K.K.
Consolidated Balance Sheets

As of

May 31,
2015

May 31,
2014(Millions of yen)

May 31,
2015(Thousands of
U.S. dollars)(Note 3)

AssetsCurrent assets:
Cash on hand and in banks (Notes 18 and 20)¥3,571¥2,998$28,861

Trade notes and accounts receivable (Notes 4 and 18)

14,83912,806

119,930

Inventories (Note 5)

6,395

7,101

51,686

Deferred tax assets (Note 13)

660

545

5,335

Other current assets

169

140

1,365

Allowance for doubtful accounts

(40)

(34)

(324)

25,59423,556

206,853

Total current assets

As of

May 31,
2015

May 31,
2014(Millions of yen)

LIABILITIES AND NET ASSETS
Current liabilities:
Trade notes and accounts payable (Notes 4 and 18)
Electronically recorded payables (Note 18)
Short-term borrowings and current portion of long-term debt
(Notes 8 and 18)
Income taxes payable (Note 13)
Accrued expenses
Accrued directors’ bonuses
Accrued employees’ bonuses
Reserve for losses on order acknowledgements (Note 5)
Reserve for ecological countermeasures
Other
Total current liabilities

May 31,
2015(Thousands of
U.S. dollars)(Note 3)

¥5,1163,023¥5,286—$41,348
24,429

1,784

1,988

14,417

652
992
41
928
301
65
1,077
13,979

375
3,792
28
915
130
—
983
13,497

5,274
8,022
335
7,497
2,435
526
8,701
112,984

7,640
2,619
3,726
—
141
41
14,167

6,934
653
4,045
44
146
84
11,906

61,747
21,16730,111—
1,142
328
114,495

Buildings and structures

2,738

2,847

22,127

Machinery and vehicles

862

909

6,970

Land

289

289

2,340

Construction in progress

227

63

1,837

Long-term liabilities:
Long-term debt (Notes 8, 18 and 21)
Deferred tax liabilities (Note 13)
Liability for retirement benefits (Note 9)
Reserve for ecological countermeasures
Long-term payables
Other
Total long-term liabilities

Other

487

548

3,931

Commitments and contingencies (Note 16)

4,603

4,656

37,205

Net assets (Notes 10 and 17):
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity¥4,998
3,178
8,698
(172)
16,702¥4,998
3,178
7,511
(168)
15,519$40,397
25,68170,300(1,389)134,989

Accumulated other comprehensive income:Unrealized holding gain on securities
Deferred loss on hedging instruments
Translation adjustments
Retirement benefits liability adjustments (Note 9)
Total accumulated other comprehensive income
Total net assets

8,317
—
260
(384)
8,193
24,895

3,990
(26)
166
(299)
3,831
19,35067,221—
2,096(3,098)66,219201,208

Total liabilities and net assets¥53,041¥44,753$428,687

Property, plant and equipment (Note 6):

Total property, plant and equipment

Investments and other assets (Note 7):

20,327

14,263

164,282

7

36

59

349

268

2,820

2,174

1,986

17,568

Allowance for doubtful accounts

(13)

(12)

(100)

Total investments and other assets

22,844

16,541

184,629

Total assets (Note 22)¥53,041¥44,753$428,687

Investment securities (Notes 7, 18 and 19)
Deferred tax assets (Note 13)
Intangible assets
Other

See notes to consolidated financial statements.

33

Toyo Denki Seizo Report 201534

TOYO DENKI SEIZO K.K.
Consolidated Statements of Income

For the Years Ended

Net sales (Note 22)
Cost of sales (Note 5)
Gross profit
Selling, general and administrative expenses (Note 11)
Operating income (Note 22)
Non-operating income (expenses):
Interest and dividend income
Interest expense
Equity in earnings (losses) of unconsolidated subsidiaries and affiliates
Dividend income on life insurance
Foreign exchange gain (loss)
Loss on disposal of property, plant and equipment
Other income, net
Ordinary income
Special gains (losses), net (Note 12)
Income before income taxes and minority interests
Income taxes (Note 13):
Current
DeferredIncome before minority interests
Minority interests
Net income

TOYO DENKI SEIZO K.K.
Consolidated Statements of Changes in Net Assets
May 31,
2015

May 31,
2014(Millions of yen)

May 31,
2015(Millions of yen)
Shareholders’ equity(Thousands of
U.S. dollars)(Note 3)

¥39,61730,335
9,282¥34,958
26,8608,098$320,189
245,168
75,021

7,686
1,596

7,022
1,076

62,12012,901

169
(182)
(14)
6
(15)
(13)
9
(40)
1,036
(6)
1,030

1,648
(1,118)
407
64
2,940
—
(221)
3,720
16,621(338)
16,283

624
(238)
386
644
—
¥644

7,712
(366)
7,346
8,937
—
$8,937

See notes to consolidated financial statements.

Unrealized
holding
gain onsecurities¥(164) ¥15,168¥3,367¥—¥ (15)¥—¥3,352¥18,520

(289)
644
(4)

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

(289)
644
(4)

CapitalsurplusRetainedearnings¥4,998¥3,178¥7,156

—
—
—

—
—
—

(289)
644
—

Balance as of May 31, 2014——
¥4,998——¥3,178—355¥7,511——(4)351¥(168) ¥15,519

623
623¥3,990

(26)
(26)
¥(26)

181
181
¥166

(299)
(299)
¥(299)

479
479¥3,831

479
830¥19,350

Balance as of June 1, 2014

¥4,998¥3,178¥7,511¥(168) ¥15,519¥3,990

¥(26)

¥166

¥(299)¥3,831¥19,350371

371

Balance as of June 1, 2013

Treasurystock

Total net
assetsChanges during the year
Cash dividends paid
Net income
Net changes in items
other than those inshareholders’ equity
Total changes during the year

Cumulative effect ofchanges in accounting
policies (Note 2)
Restated balance as ofJune 1, 2014
Cash dividends paid

954
(45)
909
1,106
—
¥1,106

Total
Deferred
Retirement accumulated
loss
benefitsotheron hedging Translation
liability comprehensive
instruments adjustments adjustments
incomeTotal
shareholders’equityCommonstock

Purchase of treasury stock

204
(138)
50
8
364
—
(27)
461
2,057
(42)
2,015

Accumulated other comprehensive income

Net income
Purchase of treasury stock
Net changes in items
other than those inshareholders’ equity
Total changes during the year
Balance as of May 31, 2015

—
—
(4)

371

4,998
—
—
—

3,178
—
—
—

7,882
(290)
1,106
—

(168)
—
—
(4)

15,890
(290)
1,106
(4)

3,990
—
—
—

(26)
—
—
—

166
—
—
—

(299)
—
—
—

3,831
—
—
—

19,721
(290)
1,106
(4)

—
—
¥4,998——¥3,178—816¥8,698——(4)812¥(172) ¥16,702

4,327
4,327
¥8,317

26
26
¥—

94
94
¥260

(85)
(85)
¥(384)

4,362
4,362¥8,193

4,362
5,174¥24,895

Total
Deferred
Retirement accumulated
loss
benefitsotheron hedging Translation
liability comprehensive
instruments adjustments adjustments
incomeTotal net
assets(Thousands of U.S. dollars) (Note 3)
Shareholders’ equity

TOYO DENKI SEIZO K.K.
Consolidated Statements of Comprehensive Income

For the Years Ended

Income before minority interests
Other comprehensive income (Note 14):
Unrealized holding gain on securities
Deferred loss on hedging instruments
Translation adjustments
Retirement benefits liability adjustments
Share of other comprehensive income of affiliates accounted for by theequity method
Total other comprehensive income

Balance as of June 1, 2014

May 31,
2015

May 31,
2014(Millions of yen)

May 31,
2015(Thousands of
U.S. dollars)(Note 3)

¥1,106¥644$8,937

4,327
26
(11)
(85)

623
(26)
14
—

34,974
210
(91)
(682)

105
4,362

167
778

847
35,258Comprehensive income¥5,468¥1,422$44,195

Comprehensive income attributable to:
Owners of the parent
Minority interests¥5,468—¥1,422—$44,195—

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityUnrealized
holding
gain onsecurities$40,397$25,681$60,703$(1,353) $125,428$32,247

2,997

2,997

Cumulative effect ofchanges in accounting
policies (Note 2)
Restated balance as ofJune 1, 2014
Cash dividends paid
Net income
Purchase of treasury stock
Net changes in items
other than those inshareholders’ equity
Total changes during the year
Balance as of May 31, 2015

Accumulated other comprehensive income$(210)$1,340$(2,416) $30,961 $156,389
2,997

40,397———

25,681———

63,700(2,337)
8,937—(1,353) 128,425—(2,337)
—
8,937
(36)
(36)

32,247
—
—
—

(210)
—
—
—

1,340
—
—
—

(2,416)———30,961———

159,386(2,337)
8,937
(36)

—
—
$40,397——$25,681—
6,600$70,300

—
—
(36)
6,564
$(1,389) $134,989

34,974
34,974$67,221

210
210
$—

756
756
$2,096(682) 35,258
35,258(682) 35,258
41,822$(3,098) $66,219 $201,208

See notes to consolidated financial statements.

See notes to consolidated financial statements.

35

Toyo Denki Seizo Report 201536

TOYO DENKI SEIZO K.K.
Consolidated Statements of Cash Flows

For the Years Ended

TOYO DENKI SEIZO K.K.
Notes to Consolidated Financial Statements
May 31,
2015

May 31,
2014(Millions of yen)

Operating activities
Income before income taxes and minority interests
Depreciation and amortization
Provision for (reversal of) allowance for doubtful accounts
Provision for accrued employees’ bonuses
Increase in reserve for ecological countermeasures
Reversal of accrued retirement benefits(Decrease) increase in liability for retirement benefits
Interest and dividends income
Interest expenses
Changes in operating assets and liabilities:
Trade notes and accounts receivable
Inventories
Trade notes and accounts payable
Reserve for losses on order acknowledgements
Advances received
Accrued expenses
Impairment loss
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Investing activities
Purchases of property, plant and equipment
Purchases of investment securities
Other payments
Other receipts
Other, net
Net cash used in investing activities
Financing activities
Decrease in short-term loans payable
Increase in long-term debt
Repayment of long-term debt
Redemption of bonds payable
Purchases of treasury stock
Cash dividends paid
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 20)

37

May 31,
2015(Thousands of
U.S. dollars)(Note 3)

¥ 2,015
882
6
13
21
—
(106)
(204)
139

¥1,030
1,001
(157)
143
—
(3,289)
3,580
(169)
182

$16,283
7,127
50
99
172
—
(861)
(1,648)1,118(1,926)
737
2,765
171
(15)
(2,803)
31
391
2,117
220
(140)
(682)
1,515

586
(430)
635
(68)
(142)
902
—
384
4,188
169
(168)
(568)
3,621

(15,564)
5,958
22,3491,385(118)(22,652)
248
3,161
17,107
1,777(1,131)(5,511)
12,242

(830)
(14)
(76)
6
(75)
(989)

(635)
(13)
(75)
4
(34)
(753)

(6,709)
(108)
(617)
51
(605)
(7,988)

(115)
1,500
(1,073)
—
(4)
(288)
(1)
19
28
573
2,998
¥3,571(2,265)2,650(1,172)
(120)
(3)
(288)
(1)
(1,199)
27
1,696
1,302
¥2,998(929)
12,123(8,672)—(36)(2,327)
(8)
151
228
4,633
24,228$28,861

1. Summary of Significant Accounting Policies(a) Basis of presentation
The accompanying consolidated financial statements of TOYO DENKI SEIZO K.K. (the “Company”) and consolidated subsidiaries(collectively the “Group”) are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain
respects as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled from theconsolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Act of Japan.
Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year’s presentation.
(b) Principles of consolidation and accounting for investments in unconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements included the accounts of the Company and any significant companies controlled
directly or indirectly by the Company.
Companies over which the Company exercises significant influence in terms of their operating and financial policies have beenaccounted for by the equity method. The Company applies the “Practical Solution of Unification of Accounting Policies Applied toForeign Subsidiaries for Consolidated Financial Statements” (Accounting Standards Board of Japan (ASBJ) Practical Issues Task
Force (PITF) No. 18) and “Practical Solution on Unification of Accounting Policies Applied to Associates Accounted for using Equity
Method” (PITF No. 24). In accordance with these PITF, the accompanying consolidated financial statements have been preparedby using the accounts of foreign consolidated subsidiaries and affiliates prepared in accordance with either International Financial
Reporting Standards (IFRS) or accounting principles generally accepted in the United States as adjusted for certain items including
goodwill, actuarial differences and capitalized development costs.
As of May 31, 2015, the numbers of consolidated subsidiaries and affiliates accounted for by the equity method were 6 and 2 (6and 2 in 2014). A subsidiary, TOYO DENKI USA, INC., whose fiscal year end is December 31, is consolidated by using their pro forma
financial statements as of March 31 which are prepared solely for consolidation purposes and necessary adjustments are made totheir financial statements to reflect any significant transactions from April 1 to May 31. All significant intercompany balances andtransactions have been eliminated in consolidation.
Investments in subsidiaries and affiliates which are neither consolidated nor accounted for by the equity method are carried at costor less. Where there has been a permanent decline in the value of such investments, the Company has written down the investments.
(c) Foreign currency translation
Receivables and payables denominated in foreign currencies are translated into yen at the rates of exchange in effect at the balance
sheet date, and differences arising from the translation are included in the consolidated statements of income.
The balance sheet accounts of the foreign consolidated subsidiaries are translated into yen at the rates of exchange in effect atthe balance sheet date, except for the components of net assets excluding minority interests which are translated at their historicalexchange rates. Revenue and expense accounts are translated at the average rate of exchange in effect during the year. Differences
arising from the translation are presented as translation adjustments in the consolidated financial statements.
(d) Cash and Cash equivalents
Cash and cash equivalents consist of cash on hand, cash in banks which can be withdrawn at any time and short-term investmentswith a maturity of three months or less from the date of purchase, which can easily be converted to cash and are subject to little riskof change in value.
(e) Inventories
Inventories are stated principally at the lower of cost or market, cost being determined principally by the specific identification method
for finished products and work in process and by the moving average cost method for raw material and supplies.
(f) Short-term investments and investment securities
Securities other than equity securities issued by subsidiaries and affiliates are classified into three categories: trading, held-tomaturity or other securities (available-for-sale securities). Trading securities are carried at fair value and held-to-maturity securities
are carried at amortized cost. Available-for-sale securities with market quotation are carried at fair value with changes in unrealized
holding gain or loss, net of the applicable income taxes, included directly in net assets. Available-for-sale securities without market
quotation are carried at cost. Cost of securities sold is determined by the moving average method.

Toyo Denki Seizo Report 201538

(g) Property, plant and equipment (except for leased assets) and depreciation
Depreciation of property, plant and equipment of the Company and its consolidated subsidiaries is calculated principally by
the declining-balance method based on the estimated useful lives and the residual value, while buildings except for leasehold
improvements acquired on or after April 1, 1998 are depreciated by the straight-line method. The estimated useful lives of theseassets are as follows:
Buildings and structures:		
8 to 60 years
3 to 12 years
Machinery and vehicles:		
Significant renewals and additions are capitalized at cost. Maintenance and repairs are charged to income.
(h) Intangible assets (except for leased assets)
Intangible assets are amortized using the straight-line method. Software for internal use is amortized over the internal available period(5 years) using the straight-line method.
(i) Leases
Leased assets capitalized under the finance lease arrangements which do not transfer ownership to the lessee are depreciated overthe lease period without any residual value using the straight-line method.
All other lease transactions are accounted for as operating leases and related payments are charged to income as incurred.
(j) Allowance for doubtful accounts
Allowance for doubtful accounts is provided based on past experience for normal receivables and on an estimate of the collectabilityof receivables from companies in financial difficulty.
(k) Accrued directors’ bonuses
Accrued directors’ bonuses are provided to cover the current fiscal year’s portion of the estimated amounts to be paid in future forthe performance incentive bonuses.
(l) Accrued employees’ bonuses
Accrued employees’ bonuses are provided to cover the current fiscal year’s portion of the estimated amounts to be paid in future.
(m) Reserve for losses on order acknowledgements
Reserve for losses on order acknowledgements is provided based on the amounts expected to be incurred during the current fiscal
year and which are able to estimate the losses reasonably to cover the future losses on order acknowledgements. Provision of reserve
for losses on order acknowledgements in the amounts of ¥171 million ($1,385 thousand) and ¥(66) million is included in cost of
sales for the years ended May 31, 2015 and 2014, respectively.
(n) Reserve for ecological countermeasures
Reserve for ecological countermeasures is provided based on the amounts expected to be incurred in future to cover the costs on
ecological countermeasures such as soil pollution countermeasures.
(o) Retirement benefits
Retirement benefit obligation is attributed to each period by the benefit formula method (straight-line method in 2014) over theestimated years of service of the eligible employees.
Prior service cost is amortized as incurred by the straight-line method over a fixed period (10 years) within the average remaining
years of service of the employees.
Actuarial differences are amortized in the year following the year in which gain or loss is recognized primarily by the straight-line
method over a fixed period (10 years) within the average remaining years of service of the employees.
Net retirement benefit obligation at transition is amortized principally over a period of 15 years by the straight-line method.
(p) Income taxes
Deferred tax assets and liabilities have been recognized in the consolidated financial statements with respect to the differences
between the financial reporting and tax bases of the assets and liabilities, and were measured using the enacted tax rates and laws
which will be in effect when the differences are expected to reverse.

39(q) Construction revenue and costs
Construction revenue and construction costs are recognized by the percentage-of-completion method, if the outcome of aconstruction contract can be estimated reliably. The percentage of completion is measured based on the percentage of the costs
incurred to the estimated total costs. For other construction contracts, the completed-contract method is applied.
(r) Research and development expenses
Research and development expenses are charged to income when incurred.
(s) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(t) Derivative financial instruments
The Company and certain consolidated subsidiaries enter into various derivative transactions in order to manage certain risks arisingfrom adverse fluctuations in interest rates. Derivative financial instruments are carried at fair value with changes in unrealized gain orloss charged or credited to operations, except for these which meet the criteria for deferred hedge accounting under which unrealized
gain or loss is deferred as a component of net assets.
Deferred hedge accounting is adopted for derivatives which qualify as hedges, under which unrealized gain or loss is deferred.
Hedging instruments are derivative transactions and hedged items are primarily interest on debts. Hedge effectiveness is notassessed if the substantial terms and conditions of the hedging instruments and the hedged items are the same.
(u) Standards issued but not yet adopted
Accounting standards for business combinations
On September 13, 2013, the ASBJ issued “Revised Accounting Standard for Business Combinations” (ASBJ Statement No. 21),
“Revised Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22), “Revised Accounting Standard forBusiness Divestitures” (ASBJ Statement No. 7), “Revised Accounting Standard for Earnings Per Share” (ASBJ Statement No. 2),“Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures” (ASBJ
Guidance No. 10), and “Revised Guidance on Accounting Standard for Earnings Per Share” (ASBJ Guidance No. 4).
(1) Overview
Under these revised accounting standards, the accounting treatment for any changes in a parent’s ownership interest in a
subsidiary when the parent retains control over the subsidiary and the corresponding accounting for acquisition-related costs
were revised. In addition, the presentation method of net income was amended, the reference to “minority interests” was changed
to “non-controlling interests,” and accounting treatment for adjustments to provisional amount during measurement period was
also changed.
(2) Scheduled date of adoption
The Company expects to adopt these revised accounting standards and guidance from the beginning of the fiscal year ending May
31, 2016.
(3) Impact of adopting revised accounting standards and guidance
The Company is currently evaluating the effect of adopting these revised standards on its consolidated financial statements.
2. Accounting Changes
The Company and its domestic subsidiaries adopted Section 35 of “Accounting Standard for Retirement Benefits” (ASBJ Statement
No. 26 of May 17, 2012) and the main clause of Section 67 of “Guidance on Accounting Standard for Retirement Benefits” (ASBJ
Guidance No. 25 of May 17, 2012) effective from June 1, 2014. As a result, the methods for calculating the retirement benefit
obligation and service cost have been revised in the following respects: the method for attributing projected benefits to each period
has been changed from the straight-line method to the benefit formula method, and the method for determining the discount rate has
been changed to use a single weighted-average discount rate reflecting the expected timing and amount of benefit payments.
The cumulative effect of changing the method for calculating the retirement benefit obligation and service cost was recognized byadjusting retained earnings at June 1, 2014, in accordance with the transitional treatment provided in Paragraph 37 of AccountingStandard for Retirement Benefits.
As a result, liability for retirement benefits decreased by ¥576 million ($4,657) and retained earnings increased by ¥371 million($2,997). The effects on operating income, ordinary income and income before income taxes and minority interests were immaterial.
The effect on per share information is described in Note 17.

Toyo Denki Seizo Report 201540

3. U.S. Dollar Amounts
The accompanying consolidated financial statements are expressed in yen, and solely for the convenience of the reader, havebeen translated into U.S. dollars at the rate of ¥123.73=U.S.$1, the approximate rate of exchange prevailing at May 31, 2015. Thistranslation should not be construed as a representation that all amounts shown could be converted into U.S. dollars at such rate.
4. Notes Receivable and Payable
As May 31, 2015 and 2014 fall on a bank holiday, the following notes receivable and payable were accounted for as if they weresettled on the maturity date:

As of

May 31,
2015

May 31,
2014(Millions of yen)

¥184
20

Notes receivable
Notes payableMay 31,
2015(Thousands of
U.S. dollars)

¥155
66

$1,488160

5. Inventories
Inventories as of May 31, 2015 and 2014 were as follows:

As ofMerchandise and finished products
Work in process
Raw materials and supplies

May 31,
2015

May 31,
2014(Millions of yen)

¥1,2832,962
2,150¥6,395

May 31,
2015(Thousands of
U.S. dollars)¥1,483
3,459
2,159¥7,101$10,371
23,942
17,373$51,686

Inventories related to construction contracts which are estimated to make losses are stated after deducting the corresponding reserve
for losses on order acknowledgements in the following amounts:

May 31,
2015

May 31,
2014(Millions of yen)

¥172
21
¥193

Merchandise and finished products
Work in process

May 31,
2015(Thousands of
U.S. dollars)

¥18
147
¥165

$1,392
166$1,558

Buildings and structures
Machinery and vehicles
Other
Accumulated depreciation

41

May 31,
2015

May 31,
2014(Millions of yen)¥7,058
6,793
3,273
17,124(13,037)¥4,087¥7,076
6,679
3,171
16,926(12,623)¥4,303May 31,
2015(Thousands of
U.S. dollars)$57,045
54,901
26,449138,395(105,367)$33,028

May 31,
2015

May 31,
2014(Millions of yen)¥882

May 31,
2015(Thousands of
U.S. dollars)¥1,001$7,127

Accumulated depreciation of property, plant and equipment amounted to ¥13,037 million ($105,367 thousand) and ¥12,623
million as of May 31, 2015 and 2014, respectively.
7. Investments and Other Assets
Investments in unconsolidated subsidiaries and affiliates included in “Investment securities” as of May 31, 2015 and 2014 were as
follows:

As of

May 31,
2015

May 31,
2014(Millions of yen)

¥1,174

May 31,
2015(Thousands of
U.S. dollars)¥1,034$9,485

8. Short-Term Borrowings and Long-Term Debt
As of May 31, 2015 and 2014, short-term borrowings and the current portion of long-term debt consisted of the following:

As ofLoans, principally from banks
Current portion of long-term debt

May 31,
2015

May 31,
2014(Millions of yen)

¥990
794
¥1,784

May 31,
2015(Thousands of
U.S. dollars)

¥915
1,073
¥1,988$8,000
6,417$14,417

The annual weighted average interest rates applicable to short-term borrowings and current-portion of long-term debt as of May
31, 2015 were 1.091% and 1.712%, respectively.
As of May 31, 2015 and 2014, long-term debts were as follows:

As ofLong-term debt, excluding current portion, serially due from 2016 through 2020

May 31,
2015

May 31,
2014(Millions of yen)

¥7,640

May 31,
2015(Thousands of
U.S. dollars)¥6,934$61,747

The annual weighted average interest rate applicable to long-term debt as of May 31, 2015 was 1.271%.
The maturities of long-term debt are summarized as follows:

Years ended May 31

6. Property, Plant and Equipment
The following table sets forth the acquisition costs and related accumulated depreciation:

As of

For the Years Ended

Investments in capital

Inventories are stated at the lower of cost or market and the Company recognized losses on write-down of inventories held for theordinary sales purpose due to a decline in profitability in the amount of ¥191 million ($1,541 thousand) and ¥200 million for the years
ended May 31, 2015 and 2014, respectively. These amounts were included in “Cost of sales”.

As ofDepreciation of property, plant and equipment for the years ended May 31, 2015 and 2014 were as follows:

2016
2017
2018
2019
2020 and thereafter(Millions of yen)(Thousands of
U.S. dollars)

¥794
352
4,002
3,182
104
¥8,434$6,417
2,845
32,34525,717840$68,164

Toyo Denki Seizo Report 2015

42

The assets pledged as collateral for short-term borrowings of ¥1,479 million ($11,952 thousand) and long-term debt of ¥1,440
million ($11,638 thousand) as of May 31, 2015 were as follows:

As of May 31
Buildings and structures
Machinery and vehicles
Other property, plant and equipment
Land(Millions of yen)(Thousands of
U.S. dollars)¥1,713628
373
158¥2,872$13,844
5,072
3,017
1,281
$23,214

For the Years Ended
Service cost
Interest cost
Amortization of actuarial loss
Amortization of prior service cost
Amortization of net retirement benefit obligation at transition
Retirement benefit expenses

The following assets included in the above are set by factory foundation fixed collateral security:

As of May 31
Buildings and structures
Machinery and vehicles
Other property, plant and equipment(Millions of yen)(Thousands of
U.S. dollars)¥1,713628
373¥2,714$13,844
5,072
3,017$21,933

For the Years Ended
Retirement benefit obligation as of June 1
Cumulative effect of changes in accounting policies
Restated balance as of June 1
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Retirement benefit obligation as of May 31

May 31,
2014(Millions of yen)

¥4,045
(576)
3,469
257
50
364
(414)
¥3,726As of

May 31,
2015(Thousands of
U.S. dollars)¥4,052
—
4,052
211
59
5
(282)
¥4,045$32,691(4,657)28,034
2,079
406
2,938
(3,346)$30,111

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets as of
May 31, 2015 and 2014 for the Company’s and the consolidated subsidiaries’ defined benefit plans:

As of

May 31,
2015

May 31,
2014(Millions of yen)

May 31,
2015

May 31,
2014(Millions of yen)

¥257
50
31
(39)
269
¥568

May 31,
2015(Thousands of
U.S. dollars)

¥211
59
44
(10)
270
¥574

$2,079
406
254
(318)
2,174
$4,595Retirement benefits liability adjustments included in other comprehensive income (before tax effect) as of May 31, 2015 and 2014
are as follows:

9. Retirement Benefit Plans
The Company and its consolidated subsidiaries have retirement benefit plans combined by defined contribution plans and lump-sum
payment plans.
Under defined contribution plans and lump-sum payment plans held by certain consolidated subsidiaries, the liability for retirement
benefits and retirement benefit expenses are calculated using a simplified method.
The changes in the retirement benefit obligation during the years ended May 31, 2015 and 2014 are as follows:

May 31,
2015

The components of retirement benefit expenses for the years ended May 31, 2015 and 2014 are as follows:

May 31,
2015(Thousands of
U.S. dollars)

Unfunded retirement benefit obligation
Net liability (asset) for retirement benefits on the consolidated balance sheets¥3,726
3,726¥4,045
4,045$30,11130,111

Liability for retirement benefits
Net liability (asset) for retirement benefits on the consolidated balance sheets¥3,726
3,726¥4,045
4,045$30,11130,111

Prior service cost
Actuarial loss
Unamortized net retirement benefit obligation at transition
Total

May 31,
2015

May 31,
2014(Millions of yen)

¥ (39)(332)
269¥(102)

May 31,
2015(Thousands of
U.S. dollars)

¥—
—
—
¥—

$ (318)(2,685)2,174$ (829)Retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as of May 31,2015 and 2014 are as follows:

As ofUnrecognized prior service cost
Unrecognized actuarial loss
Unamortized net retirement benefit obligation at transition
Total

May 31,
2015

May 31,
2014(Millions of yen)

¥ —
567
—
¥567

May 31,
2015(Thousands of
U.S. dollars)¥(39)
234
269
¥464

$—
4,582
—
$4,582Major actuarial assumptions (weighted average) used in accounting for the above plans as of May 31, 2015 and 2014 were as
follows:

For the Years Ended
Discount rate

May 31,
2015
0.4%

May 31,2014
1.5%

The amounts of the required contribution to the defined contribution plans of the Company and its consolidated subsidiaries were¥113 million ($914 thousand) and ¥109 million for the years ended May 31, 2015 and 2014, respectively.

Note: The plan adopting the simplified method is included.

43

Toyo Denki Seizo Report 201544

11. Selling, General and Administrative Expenses
The main components of “Selling, general and administrative expenses” for the years ended May 31, 2015 and 2014 were as follows:

10. Net Assets
Information regarding changes in net assets for the years ended May 31, 2015 and 2014 is as follows:a. Shares issued and outstanding/ Treasury stock

May 31,2015

For the Years Ended

For the year ended May 31, 2015

Number ofshares as ofJune 1, 2014

Type of shares

Increase

Decrease

Number ofshares as of
May 31, 2015

(Shares)

Shares issued:
Common stock
Treasury stock:
Common stock
Note:
Detail of the increase is as the following:
Increase due to purchase of shares of less than standard unit

48,675,000——

48,675,000

474,527

10,210—484,737

10,210 shares(Millions of yen)

¥1,882
41
397
313
6
898

Salaries and allowances
Provision for accrued directors’ bonuses
Provision for accrued employees’ bonuses
Retirement benefit expenses
Provision for allowance for doubtful accounts
Research and development expenses

May 31,2015

Type of shares

Increase

Decrease(Shares)

Shares issued:
Common stock
Treasury stock:
Common stock
Note:
Detail of the increase is as the following:
Increase due to purchase of shares of less than standard unit

48,675,000——

48,675,000

463,566

10,961—

474,527

For the year ended May 31, 2015

Common stock

Total dividends Total dividends
Dividends per(Millions of (Thousands of Dividends per share (U.S.
yen)
U.S. dollars)
share (Yen)dollars)¥290

Special gains:
Gain on sales of intangible assets (land leasehold right)
Special losses:
Impairment loss (Note)
Provision of reserve for ecological countermeasures
Loss on liquidation of an affiliate
Total

Location
Hiratsuka Plant of the Company(Hiratsuka city, Kanagawa Pref.)1) Dividends paid

Type of shares¥1,849
28
389
317
(21)
666

$15,211
335
3,205
2,532
49
7,258

May 31,
2014

May 31,
2015(Thousands of
U.S. dollars)

¥13

¥—

$104

(31)
(24)
—
¥(42)

—

(248)
(194)
—
$(338)(6)¥ (6)Note: The Group recognized an impairment loss on the following assets for the year ended May 31, 2015:
10,961 sharesb. Dividends

Resolution
Annual general meetingof the shareholders on
August 27, 2014

(Thousands of
U.S. dollars)(Millions of yen)

For the year ended May 31, 2014

Number ofshares as of
May 31, 2014

May 31,
2015

12. Special Gains (Losses), net
The components of “Special gains (losses), net” for the years ended May 31, 2015 and 2014 were as follows:

For the Years Ended

Number ofshares as ofJune 1, 2013

May 31,2014$2,337

¥6.00

$0.05

Total dividends(Millions of Dividends per
yen)share (Yen)

Cut-off date

Effective dateCut-off date

Effective date

Use

Type

Plant

Buildings and structures(Millions of yen)(Thousands of
U.S. dollars)

¥31

$248

In determining an impairment loss, the Group is grouping assets based on the minimum unit generating cash flows independently
from other assets or asset groups.
For the year ended May 31, 2015, the Group reduced the carrying amount of an asset group expected to be removed at the time ofrepairing and expansion of Hiratsuka Plant down to the recoverable amount and recognized such reduced amount as an impairment
loss in an amount of ¥31 million ($248 thousand) under “Special losses.”
In calculating the recoverable amount, it is measured by the value in use based on the future cash flows, but the discount rate is
not considered, because the removal will be conducted in the near future and the monetary effect is immaterial.

May 31, 2014 August 28, 2014

For the year ended May 31, 2014
Resolution
Annual general meetingof the shareholders on
August 27, 2013

Type of shares
Common stock¥289¥6.00 May 31, 2013 August 28, 2013

2) Dividends with the cut-off date in the year ended May 31, 2015 and the effective date in the year ending May 31, 2016
Total
dividends Total dividends
Dividends per(Millions of (Thousands of Source of Dividends per share (U.S.
Type of shares
yen)
U.S. dollars) dividends
share (Yen)dollars)Cut-off date Effective date
Resolution
Annual general meetingof the shareholders on
CommonRetained
May 31,
August 28,
August 27, 2015
stock
2015
¥289
$2,337 earnings¥6.00$0.05 201545

Toyo Denki Seizo Report 201546

13. Income Taxes
Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of corporation tax, inhabitants’taxes and enterprise tax, which, in the aggregate, resulted in a statutory rate of approximately 35.6% and 38.0% for the years
ended May 31, 2015 and 2014, respectively. Income taxes of a foreign consolidated subsidiary are based generally on the tax rates
applicable in the country of incorporation.
The information for the year ended May 31, 2014 is omitted since the difference between the effective statutory tax rate andeffective tax rate is less than 5% of the effective statutory tax rate.
The reconciliation between the effective tax rates reflected in the consolidated statements of income and the effective statutory tax
rate for the year ended May 31, 2015 was as follows:

For the Year Ended
Effective statutory tax rate
Effect of:
Non-deductible expenses for income tax purpose
Non-taxable income such as dividends income, etc.
Per capita inhabitant tax
Valuation allowance
Income from affiliates accounted for by the equity method
Unrecognized tax benefits from losses of subsidiaries
Effect of income tax rate change
Other
Effective tax rate

May 31,
2015
35.6%
1.4
(1.5)
1.4
(0.4)
(0.9)
2.4
7.9
(0.8)
45.1%

The significant components of deferred tax assets and liabilities as of May 31, 2015 and 2014 were as follows:

As ofDeferred tax assets:
Write-down of inventories
Liability for retirement benefits
Accrued employees’ bonuses
Reserve for losses on order acknowledgements
Other
Total gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax liabilities

May 31,
2015

May 31,
2014(Millions of yen)

May 31,
2015(Thousands of
U.S. dollars)

¥193
1,209
309
100
932
2,743
(774)
1,969

¥140
1,444
328
36
854
2,802
(674)
2,128

$1,557
9,771
2,501
805
7,532
22,166(6,252)
15,914(3,919)(2)(3,921)¥(1,952)(2,196)(4)(2,200)¥(72)(31,674)(13)(31,687)$(15,773)

Adjustments of deferred tax assets and liabilities due to a change in the income tax rate:
The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 9 of 2015) and the “Act for Partial Amendment of the Local Tax
Act, etc.” (Act No. 2 of 2015) were promulgated on March 31, 2015. As a result, the effective statutory tax rate used to measure theCompany’s deferred tax assets and liabilities was reduced from 35.6% to 33.1% for the temporary differences expected to be realized
or settled in the year beginning June 1, 2015 and to 32.3% for the temporary differences expected to be realized or settled in theyears beginning on and after June 1, 2016. The effect of the announced reduction of the effective statutory tax rate was to decreasedeferred tax liabilities, net of deferred tax assets, and retirement benefits liability adjustments by ¥269 million ($2,173 thousand) and¥18 million ($149 thousand), respectively and increase unrealized holding gain on securities and income taxes – deferred by ¥447
million ($3,615 thousand) and ¥160 million ($1,293 thousand), respectively.

47

14. Other Comprehensive Income
The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive income
for the years ended May 31, 2015 and 2014:

For the Years Ended
Unrealized holding gain on securities:
Amount arising during the year
Amount before tax effectTax effectUnrealized holding gain on securities

May 31,
2015

May 31,
2014(Millions of yen)

May 31,
2015(Thousands of
U.S. dollars)¥6,0506,050(1,723)
4,327

¥990
990
(367)
623

$48,899
48,899(13,925)
34,974

Deferred gains or losses on hedging instruments:
Amount arising during the year
Amount before tax effectTax effect
Deferred gains or losses on hedging instruments

40
40
(14)
26

(40)
(40)
14
(26)

326
326
(116)
210

Translation adjustments
Amount arising during the year
Amount before tax effectTranslation adjustments

(11)
(11)
(11)

14
14
14

(91)
(91)
(91)

Retirement benefits liability adjustments
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTax effect
Retirement benefits liability adjustments

(364)
261
(103)
18
(85)

—
—
—
—
—

(2,939)
2,110
(829)
147
(682)

105

167

847

105
¥4,362

167

847

¥778

$35,258

Share of other comprehensive income of affiliates accounted forby the equity method
Amount arising during the year
Share of other comprehensive income of affiliates accounted forby the equity method
Total other comprehensive income

15. Lease Transactions
The information about finance leases that do not transfer ownership of the leased property to the lessee is omitted since there is nomateriality in terms of value.
In addition, finance leases that do not transfer ownership of the leased property to the lessee and whose lease inception was onor before March 31, 2008 are permitted to continue to be accounted for as operating lease transactions if certain “as if capitalized”
information is disclosed in the note to the financial statements, but such information is omitted since there is no materiality in termsof value.
16. Contingent Liabilities
As of May 31, 2015 and 2014, the Company was committed to provide guarantees on bank borrowings of the following affiliates:

As of
Hunan Xiangyang Electric Co., Ltd.
Changzhou Ruiyang Transmission Technology Co., Ltd.

May 31,
2015

May 31,
2014(Millions of yen)

¥196
200

May 31,
2015(Thousands of
U.S. dollars)

¥138
185

$1,5801,620

Toyo Denki Seizo Report 201548

17. Amounts Per Share

For the Years Ended
Net income:Basic

May 31,
2015

May 31,
2014(Yen)

May 31,
2015(U.S. dollars)¥22.94¥13.37

$0.19

As of

May 31,
2015

May 31,
2014

May 31,
2015

Net assets¥516.61(Yen)(U.S. dollars)¥401.45$4.18

Diluted net income per share is omitted since there is no dilution of equity.
The bases for calculation are as follows:
Basic net income per share

For the Years Ended

May 31,
2015

May 31,
2014(Millions of yen)

Net income
Net income not attributable to common shareholders
Net income attributable to common stock¥1,106—
1,106

Average number of shares of common stock during the year

48,195

May 31,
2015(Thousands of
U.S. dollars)

¥644
—
644

$8,937—
8,937(Thousand shares)

48,206

As noted in Note 2, the Company applied the Accounting Standard for Retirement Benefits, etc. and followed the provisional treatment
set out in Paragraph 37 of the Accounting Standard for Retirement Benefits. As a result, net assets per share increased by ¥7.70 ($0.06)
as of May 31, 2015. The effect on net income per share for the year ended May 31, 2015 is immaterial.
18. Financial Instruments
Overview(1) Policy for financial instruments
The Group raises its necessary funds for capital investments to reinforce and renew production facilities and working capital
principally through bank borrowings. The Group manages temporary cash surpluses through low risk financial assets. The Group
uses derivatives in order to avoid the following risks and does not enter into derivatives for speculative or trading purposes.
(2) Types of financial instruments and related risk
Trade receivables—trade notes and accounts receivable—are exposed to credit risk in relation to customers. Trade receivables
denominated in foreign currencies arising from international business are exposed to foreign exchange fluctuation risk, but the Grouputilizes forward foreign exchange contracts to reduce such risk as a hedging instrument.
Investment securities are composed of mainly the shares of common stock of other companies with which the Group has business
relationships and exposed to market risk.
Certain long-term debt raised for the purpose of making capital investments with variable interest rates is exposed to interest rate
fluctuation risk. However, to reduce such risk and fix interest expense for long-term debt bearing interest at variable rates, the Grouputilizes interest rate swap transactions as a hedging instrument.
Regarding hedging instruments and hedged items in hedge accounting, hedging policy, and assessment of the effectiveness ofhedging activities, etc., please see Note 1(t) “Derivative financial instruments.”

49(3) Risk management for financial instruments(a) Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies of the Group for managing credit risk arising from receivables, each related division monitors
credit worthiness of their main customers periodically, and monitors due dates and outstanding balances by individual customer. In
addition, the Group is making efforts to identify and mitigate risks of bad debts from customers who are having financial difficulties.
Investment securities are composed of mainly the shares of common stock of highly rated companies with which the Group hasbusiness relationships. Accordingly, the Group believes that the credit risk deriving from such investment securities is insignificant.
The Group also believes that the credit risk of derivatives is insignificant as it enters into derivative transactions only with financial
institutions which have a sound credit profile.
(b) Monitoring of market risks (the risk arising from fluctuations in foreign exchange rates, interest rates and others)
The Group utilizes interest rate swap transactions to reduce interest rate fluctuation risk on long-term debt.
For investment securities, the Group periodically reviews the fair values of such financial instruments and the financial position of
the issuers.
In conducting derivative transactions, the division in charge of each derivative transaction follows the internal policies, which set
forth delegation of authority and maximum upper limit on positions. Monthly reports including actual transactions data are submitted
to the Board of Directors for their review.
(c) Monitoring of liquidation risk (the risk that the Group may not be able to meet its obligations on scheduled due dates)
Based on the report from each division, the Group prepares and updates its cash flow plans on a timely basis to manage liquidationrisk.
(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market priceavailable, fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in different fair value. In addition, the notional amounts of derivatives in Note 21, Derivative
Transactions are not necessarily indicative of the actual market risk involved in derivative transactions.
Estimated Fair value of Financial Instruments
Carrying value of financial instruments on the consolidated balance sheets as of May 31, 2015 and 2014 and estimated fair value areshown in the following table. The following table does not include financial instruments for which it is extremely difficult to determine
the fair value (Please refer to Note 2 below):

As of May 31, 2015

Carrying value

Fair value

Difference(Millions of yen)

Assets1) Cash on hand and in banks2) Trade notes and accounts receivable3) Investment securities
Total assets
Liabilities
4) Trade notes and accounts payable5) Electronically recorded payables
6) Short-term borrowings
7) Long-term debt
Total liabilities
8) Derivative transactions*¥3,571
14,83919,685¥38,095¥3,571
14,83919,685¥38,095

¥—
—
—
¥—

¥5,116
3,023
990
8,434
¥17,563¥(22)¥5,116
3,023
990
8,484
¥17,613¥(22)¥——(50)¥(50)¥—

Toyo Denki Seizo Report 201550

As of May 31, 2015

Carrying value

Fair value

Difference(Thousands of U.S. dollars)

Assets1) Cash on hand and in banks2) Trade notes and accounts receivable3) Investment securities
Total assets
Liabilities
4) Trade notes and accounts payable5) Electronically recorded payables
6) Short-term borrowings
7) Long-term debt
Total liabilities
8) Derivative transactions*2. Financial instruments for which it is extremely difficult to determine the fair value$28,861
119,930
159,095$307,886$28,861
119,930
159,095$307,886

$—
—
—
$—

$41,348
24,4298,000
68,164$141,941$(181)$41,348
24,4298,000
68,571$142,348$(181)

$—
—
—
(407)
$(407)$—Fair value

Difference

Carrying value(Millions of yen)

Assets1) Cash on hand and in banks2) Trade notes and accounts receivable3) Investment securities
Total assets
Liabilities
4) Trade notes and accounts payable
5) Short-term borrowings
6) Bonds payable
7) Long-term debt
Total liabilities
8) Derivative transactions¥642

May 31,
2015(Thousands of
U.S. dollars)¥642$5,187

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are not included in the above table.
3. Redemption schedule for receivables and securities with maturities at May 31, 2015 and 2014 are as follows:

As of May 31, 2015

Due in One Yearor Less

Due after One
Year throughFive Years

Due after Five
Years throughTen Years

Due after
Ten Years(Millions of yen)

Cash on hand and in banks
Trade notes and accounts receivable

As of May 31, 2015

¥3,568
13,145¥16,713¥—
1,694¥1,694

¥—
—
¥—

¥—
—
¥—

Due in One Yearor Less

Due after One
Year throughFive Years

Due after Five
Years throughTen Years

Due after
Ten Years$28,836
106,241$135,077$—
13,689$13,689

$—
—
$—

$—
—
$—

Due in One Yearor Less

Due after One
Year throughFive Years

Due after Five
Years throughTen Years

Due after
Ten Years¥2,995
10,933¥13,928¥—
1,873¥1,873(Thousands of U.S. dollars)¥2,998
12,806
13,621¥29,425¥2,998
12,806
13,621¥29,425

¥—
—
—
¥—

¥5,286915—
8,007¥14,208¥(40)¥5,286915—
8,020¥14,221¥(40)

¥—
—
—
(13)
¥(13)¥—

Notes:
1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions
Assets:Cash on hand and in banks and trade notes and accounts receivable
Since these items are settled in a short period of time, their carrying value approximates fair value.
However, if they are settled in a long period of time, the fair value of receivables is based on the present value of the receivables classified by definite periods discounted
using interest rates on the corresponding period until settlement.
Investment securities
The fair value of stocks is based on quoted market prices. Investment securities held by the Group are classified as available-for-sale securities and please see Note 19“Securities”.
Liabilities:
Trade notes and accounts payable, electronically recorded payables and short-term borrowings
Since these items are settled in a short period of time, their carrying value approximates fair value.
Long-term debt
The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new borrowings
were entered into. The fair value of long-term debt with variable interest rates, which is hedged by the interest rate swaps and to which hedge accounting is applied (referto the following paragraph), is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new borrowings wereentered into.
Derivative transactions
The fair value of interest rate swaps accounted for by the hedge accounting is included in the fair value of the related long-term debt, since such interest rate swaps areaccounted for together with long-term debt as hedged items.
The fair value of interest rate swaps accounted for by the normal method is determined based on the price, etc. provided by the financial institutions.

51

May 31,
2014(Millions of yen)

Unlisted equity securities*Derivative transactions are presented in a net amount of receivables and payables and net payables are shown in parenthesis.

As of May 31, 2014

May 31,
2015

As of

Cash on hand and in banks
Trade notes and accounts receivable

As of May 31, 2014

(Millions of yen)

Cash on hand and in banks
Trade notes and accounts receivable

¥—
—
¥—

¥—
—
¥—

4. The redemption schedule for long-term debt is disclosed in Note 8.

19. Securities
As of May 31, 2015
Information regarding securities classified as available-for-sale securities
Available-for-sale securities

As of May 31, 2015

Carrying value Acquisition cost

Unrealized
Gain (Loss)(Millions of yen)

Securities whose carrying value exceeds their acquisition cost:
Stock
Subtotal
Securities whose acquisition cost exceeds their carrying value:
Stock
Subtotal
Total¥19,685¥19,685¥7,449¥7,449¥12,236¥12,236¥—¥—¥19,685¥—¥—¥7,449¥—¥—¥12,236

Toyo Denki Seizo Report 201552

As of May 31, 2015

Carrying value Acquisition cost

Unrealized
Gain (Loss)(Thousands of U.S. dollars)

Securities whose carrying value exceeds their acquisition cost:
Stock
Subtotal
Securities whose acquisition cost exceeds their carrying value:
Stock
Subtotal
Total$159,095$159,095$60,200$60,200$98,895$98,895$—$—$159,095$—$—$60,200$—$—$98,895

Types and purpose of derivative transactions
The Company primarily uses forward foreign exchange contracts to hedge against the fluctuations in foreign currency exchange rates
on trade receivables denominated in foreign currencies and interest rate swaps to hedge against the adverse impact of fluctuations ininterest rates on interest-bearing debt.
Derivative transactions to which hedge accounting is not applied:

Notes: 1. Unlisted stocks are not included in the above table because there were no quoted market prices available and they are extremely difficult to determine the fair value.
2.	If the market value of the securities declines by 50% or more from the acquisition cost as of the end of the fiscal year, the Group recognizes the difference between
the market value and the acquisition cost as an impairment loss. If the decline ranges between about 30% and 50%, the Group recognizes an impairment loss forthe necessary amount considering its recoverability.

As of May 31, 2014

Currency-related derivatives:

As of May 31, 2015

Maturing after
one year

Fair value

Unrealized Gains(losses)(Millions of yen)

Forward foreign exchange contracts:
Sold:
USD

As of May 31, 2015

Information regarding securities classified as available-for-sale securities

Contract amount¥596
Contract amount

¥—

¥(22)

Maturing after
one year

Fair value¥(22)
Unrealized Gains(losses)(Thousands of U.S. dollars)

Available-for-sale securities

As of May 31, 2014

Carrying value Acquisition cost

Unrealized
Gain (Loss)(Millions of yen)

Securities whose carrying value exceeds their acquisition cost:
Stock
Subtotal
Securities whose acquisition cost exceeds their carrying value:
Stock
Subtotal
Total¥6,962¥6,962¥6,266¥6,266¥393¥393¥13,621

¥405
¥405
¥7,367¥(12)¥(12)¥6,254

Notes: 1. Unlisted stocks are not included in the above table because there were no quoted market prices available and they are extremely difficult to determine the fair value.
2.	If the market value of the securities declines by 50% or more from the acquisition cost as of the end of the fiscal year, the Group recognizes the difference between
the market value and the acquisition cost as an impairment loss. If the decline ranges between about 30% and 50%, the Group recognizes an impairment loss forthe necessary amount considering its recoverability.

20. Supplementary Cash Flow Information
Cash and cash equivalents in the consolidated statements of cash flows for the years ended May 31, 2015 and 2014 are reconciled to
cash on hand and in banks in the consolidated balance sheets as follows:

As ofCash on hand and in banks
Cash and cash equivalents

May 31,
2014(Millions of yen)

¥3,571¥3,571

May 31,
2015(Thousands of
U.S. dollars)¥2,998¥2,998$4,817$—$(181)$(181)

Notional amount
Major hedged
Maturing after
item
Contract amount
one year

Fair value

Note: Fair value is determined based on the forward foreign exchange rate.

¥13,228¥13,228

May 31,2015

Forward foreign exchange contracts:
Sold:
USD

$28,861$28,861

As of May 31, 2014, there were no currency-related derivatives to which hedge accounting is not applied.
Derivative transactions to which hedge accounting is applied:Interest-related derivatives:

As of May 31, 2015

(Millions of yen)Interest rate swaps accounted for by the exceptional method:
Receive/floating and pay/fixedLong-term debt

As of May 31, 2015

Notional amount
Major hedged
Maturing after
item
Contract amount
one year

The Company utilizes forward foreign exchange contracts and interest rate swaps for the purpose of hedging its exposure tofluctuations in foreign exchange rates and interest rates, respectively. However, based on internal management rules on financial
market risk approved by the Company’s Board of Directors, Group companies do not enter into transactions involving derivatives for
speculative or trading purposes.

¥7,360Note

Fair value(Thousands of U.S. dollars)Interest rate swaps accounted for by the exceptional method:
Receive/floating and pay/fixedLong-term debt

$63,760$59,484

Note

Note: Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value, but the differential paid or received
under the swap agreement is recognized and included in interest expenses. Accordingly, the fair value of interest rate swaps is included in the fair value of long-term
debt. The notional amount of long-term debt includes current portion of long-term debt.

21. Derivative Transactions
Hedging policies¥7,889As of May 31, 2014

Notional amount
Major hedged
Maturing after
item
Contract amount
one year

Fair value(Millions of yen)Interest rate swaps accounted for by the normal method:
Receive/floating and pay/fixedInterest rate swaps accounted for by the exceptional method:
Receive/floating and pay/fixedLong-term debt

¥1,500¥1,500Long-term debt

¥7,152¥6,389¥(40)
Note 2

Notes: 1. The fair value of interest rate swaps accounted for by the normal method is determined based on the price, etc. provided by the financial institutions.
2.	Interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value, but the differential paid or received
under the swap agreement is recognized and included in interest expenses. Accordingly, the fair value of interest rate swaps is included in the fair value of long-term
debt. The notional amount of long-term debt includes current portion of long-term debt.

53

Toyo Denki Seizo Report 20155422. Segment Information
The reportable segments of the Group are components for which discrete financial information is available and whose operating
results are regularly reviewed by the Board of Directors to make decisions about resource allocation and to assess performance.
The Group establishes business units by product and each business unit designs domestic and overseas comprehensive strategies
for its products and is developing business activities. Accordingly, the Group consists of the three reportable segments by productbased on the business units, which are Transportation Systems, Industrial Systems and Information Equipment Systems.
The accounting policies of the segments are substantially same as those described in the significant accounting policies in Note 1.
Segment profit is evaluated based on operating income.
Inter-segment sales are recorded at the same prices used in transactions with third parties.
As noted in Note 2 “Accounting Changes,” the methods for calculating the retirement benefit obligation and service cost have beenrevised effective from the year ended May 31, 2015 and accordingly, the methods for calculating benefit obligation and service cost of
the reportable segments have been changed as well. The effect on segment profit of each reportable segment was immaterial.
For the year ended May 31, 2015
Reportable segments
Transportation
Systems

Industrial
Systems

Information
Equipment
Systems

Other(Note)

Total

Adjustments

Consolidated(Millions of yen)

Sales, profits orlosses and asset byreportable segments
Net sales:
Sales to third parties
Inter-segment sales
and transfers
Segment profit
Segment assets
Other items:
Depreciation
Capital expenditures

For the year ended May 31, 2014
Reportable segments
Transportation
Systems

Industrial
Systems

Information
Equipment
Systems

Other(Note)

Total

Adjustments

Consolidated(Millions of yen)

Sales, profits orlosses and asset byreportable segments
Net sales
Sales to third parties
Inter-segment sales
and transfers¥22,198¥10,925¥1,829¥6¥34,958¥—¥34,958

Segment profit
Segment assets

35
22,233¥2,374¥17,199

1
10,926¥537¥7,923

—
1,829
¥348
¥731

490
496
¥41
¥525

526
35,484¥3,300¥26,378

(526)
(526)
¥(2,224)¥18,375—
34,958¥1,076¥44,753

Other items:
Depreciation
Capital expenditures

¥594
¥392

¥208
¥121

¥24
¥17

¥0
¥2

¥826
¥532

¥175
¥80

¥1,001¥612

Note: “Other” represents business units which are not included in reportable segments and consists of worker dispatching service related activities, etc.

Geographical information¥26,870¥11,613¥1,128¥6¥39,617¥—¥39,61741
26,911¥3,118¥18,335

2
11,615¥848¥8,175

—
1,128
¥71
¥801

588
594
¥59
¥587

631
40,248¥4,096¥27,898

(631)
(631)
¥(2,500)¥25,143—
39,617¥1,596¥53,041

¥546
¥554

¥161
¥205

¥26
¥22

¥1
¥1

¥734
¥782

¥148
¥187

¥882
¥969

Net sales to third parties by countries or areas grouped according to geographical classification for the years ended May 31, 2015
and 2014 are summarized as follows:

For the Years Ended

May 31,
2015

May 31,
2014

Japan
China
Other
Consolidated¥24,547
11,634
3,436¥39,617¥25,3997,1192,440¥34,958(Millions of yen)(Thousands of
U.S. dollars)¥5,489$44,363(Millions of yen)

May 31,
2015(Thousands of
U.S. dollars)$198,395
94,02827,766$320,189

Note: Net sales information above is based on customers’ location.

For the year ended May 31, 2015
Reportable segments
Transportation
Systems

Industrial
Systems

Information
Equipment
Systems

Major customer information
Other(Note)

Total

Adjustments

Consolidated(Thousands of U.S. dollars)

Sales, profits orlosses and asset byreportable segments
Net sales:
Sales to third parties
Inter-segment sales
and transfers

55

Major customer information for the year ended May 31, 2015 is as follows:
Customer
Meiji Sangyo Co., Ltd.

$217,165$93,859$9,116$49$320,189$—$320,189

Segment profit
Segment assets

333
217,498$25,196$148,188

17
93,876$6,856$66,071

—
9,116
$576
$6,470

4,753
4,802
$478
$4,745

5,103
325,292$33,106$225,474(5,103)(5,103)$(20,205)$203,213—
320,189$12,901$428,687

Other items:
Depreciation
Capital expenditures$4,415$4,478$1,302$1,660

$208
$176

$9
$6

$5,934$6,320$1,193$1,513$7,127$7,833

Segment
Transportation Systems

Major customer information for the year ended May 31, 2014 is omitted since there was no customer to whom sales exceeds 10% of
net sales recorded in the accompanying consolidated statements of income.

Toyo Denki Seizo Report 2015

56

Report of Independent Auditors

Information regarding an impairment loss on fixed assets by reportable segments
Impairment loss on fixed assets by reportable segments for the years ended May 31, 2015 and 2014 is summarized as follows:

For the Years Ended
Transportation Systems
Industrial Systems
Information Equipment Systems
Reportable segment total
Other
Adjustments
Consolidated

May 31,
2015

May 31,
2014(Millions of yen)

May 31,
2015(Thousands of
U.S. dollars)

¥31
—

¥—
—

$248
—

—

—

—

31
—
—
¥31

—
—
—
¥—

248
—
—
$248

23. Significant Subsequent Events
There were no significant subsequent events to be noted.

57

Toyo Denki Seizo Report 201558

Reference Data for Management Indices

Research and development costs (Unit: Million yen)

897

913
798

665

881

612

969

1,000

917

1,144

1,145

Depreciation and amortization (Unit: Million yen)
1,169

(Unit: Million yen)

1,296

1,142

1,307

Capital investment

Company Profile

Cash flows from operating activities (Unit: Million yen)

FY 2010

2011

2012

2012

-1,457

2011

2012

2013

2014

China

OthersCompany NameTOYO DENKI SEIZO K.K.
(TOYO ELECTRIC MFG. CO., LTD.)

Established

June 20, 1918

Capital4,998,390,000 yen

Hokkaido Branch

Number of Employees

1,216 (Consolidated) 804 (TOYO DENKI SEIZO K.K.)

Head Office

Tokyo Tatemono Yaesu Building,
1-4-16, Yaesu, Chuo-ku, Tokyo, 103-0028, Japan
TEL +81-3-5202-8121 (General Affairs Division)
http://www.toyodenki.co.jp/

Stock Exchange Listing

The Tokyo Stock Exchange, First Section

Code Number

6505

Number of Shares Authorized

180,000,000 shares

Number of Shares Issued

48,675,000 shares

Number of Shareholders

6,690

Sendai Branch
Niigata Branch

Yokohama Branch
Shiga Factory
Nagoya Branch
Hiroshima Branch Osaka Branch
Kyushu Branch

Cash flows from financing activities (Unit: Million yen)

Subsidiaries and Affiliates
TOYOKOUKI Co., Ltd.

Head
officebuilding

Taihei Electric Co., Ltd.
Toyo Sangyo Co., Ltd.
TD Drive Co., Ltd.
Toyo Shoji Co., Ltd.
TOYO DENKI USA, INC.

Okinawa
BranchToyo Denki (Beijing) Co., Ltd.

-1,199

Taiping Zhanyun Automatic Door (Changzhou) Co., Ltd.
Hunan Xiangyang Electric Co., Ltd.
Changzhou Ruiyang Transmission Technology Co., Ltd.
Beijing Jingche Shuangyang Traction System Co,. Ltd

FY 2010

2011

2012

2013

Net sales by region
Japan

2014

2014

-3,3452013

FY 2010-2,148

1,514

1,069
-1,328
2012

2013

-753

3,621

2011

2,495
2011

2014

Cash flows from investing activities (Unit: Million yen)
FY 2010

FY 2010

2013

18

2014

155

2013

2,563

2012

836

2011

-988

FY 2010Company Profile

Yokohama Plant

2014(Unit: Million yen)Overseas net sales ratio

FY 2010

2011

2012

2013

2014

Japan

27,83525,20023,34025,39824,547China*

8,110

10,081

5,495

7,118

11,634

Others

1,947

3,289

1,738

2,440

3,435

Total

37,89338,57030,57534,95739,617

Overseas net sales
ratio

26.5%

34.7%

23.7%

27.3%

38.0%

Beijing Jingche Shuangyang Traction System Co., Ltd.

Toyo Denki (Beijing) Co., Ltd.

Changzhou Ruiyang Transmission Technology Co., Ltd.

Taiping Zhanyun Automatic Door (Changzhou) Co., Ltd.

TOYO DENKI SEIZO K.K. DELHI LIAISON OFFICETOYO DENKI USA, INC.

Hunan Xiangyang Electric Co., Ltd.
TOYO DENKI SEIZO K.K. Bangkok Representative Office* Classified under “Asia” for fiscal 2010.

FY 2010

59

2011

2012

2013

2014

Toyo Denki Seizo Report 201560

Executive Profiles

Organization Chart

Management Planning Division
Group Administration Office
General Affairs Division

Human Resources Division
Financial Affairs DivisionCorporate Quality Management Division

President, Representative Director

Kenzo Terashima

Corporate Production Planning Division
Personnel Affairs Committee

Director, Advisor

Hiroshi Shimotakahara

Hiroshi Tsuchida

National and Global Group
Company Meetings

Executive Officer
Liaison Meeting

Management Strategy
Meeting

President

Senior Managing Director

Masami Tsuchiya

Board of Directors

Senior Managing Director, Representative Director

General Meeting of Shareholders

Purchasing Division

Business Development Division

Transportation Business Unit

Audit DivisionInternal Control Oversight Committee

Director

Director

Akihiko Ishii

Hirokazu Chinone

Office of
Auditors

Director

Kenichi Gotoh

Auditors

Director

Hiroyuki Arai

Board ofAuditors

Industry Business Unit

IT Business Unit

61

Standing Statutory Auditor

Standing Statutory Auditor

Statutory Auditor

Statutory Auditor

Hiroshi Hamao

Yoshihiko Yoshino

Toshio Ikeda

Eiichi Suzuki

Senior Executive Officers

Executive Officers

Shuji Horie
Yoshifumi Otsubo

Hitoshi Katayama
Tetsuto Iwaki

Isami Takase
Akira Watanabe

Toshihiko Akihiro
Yuji Nagano

Kenji Tanimoto

Research Laboratory
Yokohama Plant
Osaka Branch
Nagoya BranchManagement Planning Department
PR, IR, and CSR Department
Information Systems Department
General Affairs Department
Legal Compliance Department
Export Management Department
Intellectual Property Management Department
Human Resources Department
Education and Development Department
Finance and Accounting Department
Group Administrative Control Department
Planning and Research Department
Quality Management Department 1
Quality Management Department 2
Production Planning Department
Production Innovation Department
Production Engineering Department
Planning and Research Department
Procurement Department 1
Procurement Department 2
Procurement Department 3
Logistics Department
Development Promotion Department
EV Systems Department
Transportation Business Planning Division
Domestic Sales Control Division
JR Group Sales Division
Commuter Rail and Subway Sales Division
Osaka Sales Division
Nagoya Sales Division
Engineering Division
China Sales Division
Global Sales Division
India Promotion Office
Global Project Promotion Division
Development Division
Transportation Systems Works
Production Management Division
Design Division
Quality Assurance Division
Manufacturing Division
Industrial Systems Planning Division
Domestic Sales Division
Osaka Sales Division
Nagoya Sales Division
Global Sales Division
Engineering Division
Development Division
Industrial Systems Works
Production Management Division
Design, Development & Engineering Division
Quality Assurance Division
Shiga Factory
Manufacturing Division
Information Systems Planning Division
Information Systems Sales Division
Monitoring and Control Systems Development Division
Information Systems Works
Design Division
Quality Assurance Division
Engineering Management Division
Engineering Research Division
Administration Division

Kyushu Branch
Hokkaido Branch

Toyo Denki Seizo Report 2015

62

Stock Related Information

Number of shares (As of May 31, 2015)
Number of shares authorized

180,000,000

Number of shares issued

48,675,000

Number of shareholders

6,690

Distribution of shares by type of shareholder
Treasury stock
1.00%

Financial instruments
business operators
10.61%

Major shareholders
Number of shares held
% of(Thousands)
total shares held
East Japan Railway Company
2,400
4.98
Employees Stock Ownership Plan
2,141
4.44
TOYOTA INDUSTRIES CORPORATION
2,100
4.35
Hitachi, Ltd.
2,100
4.35
NIPPON LIFE INSURANCE COMPANY
1,688
3.50
Japan Trustee Services Bank, Ltd.
1,688
3.50
(Trust account)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
1,350
2.80
The Bank of Yokohama, Ltd.
1,038
2.15
Ohkuraya Juutaku Co., Ltd.
1,030
2.13
Toyo Denki Subcontract Factories
987
2.04
Shareholding Association
Shareholders

Foreigncorporations, etc.
7.28%
Financial
institutions
13.88%

Other corporations
25.52%

Individuals and others

41.71%(Note) The percentages of total shares held are calculated excluding 484,000 treasury stocks held by the Company.

Transition of share price
Share price
(Yen)

600

(Yen)

600
400
400
200
200

0
(Thousands)

15,0000
Trading
volume(Thousands)

15,00010,00010,000
5,000
5,000
0

2012.62013.1

2014.1

2015.12012.62013.1

2014.1

2015.10Disclaimer on the forward-looking statements
Information in this corporate report contains forward-looking statements. Such statements were developed based on the information available
at the time when this report was prepared. These forward-looking statements may be largely revised in the future, and the actual outcome
could significantly vary from the stated or implied contents of such statements subject to various factors. This report is not intended to solicit
investment. Investors are kindly asked to make your investment decision at your own judgment and responsibility. Numbers presented in 100
million yen or million yen are rounded down to the nearest respective unit.

63