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Toyo Denki Seizo Report

2014Tokyo Tatemono Yaesu Building, 1-4-16 Yaesu, Chuo-ku, Tokyo 103-0028 Tel: +81-3-5202-8121 (General Affairs Division)

http://www.toyodenki.co.jp/

Half a century of supporting safe

Our Long-Term Visiontransportation and development of the

Toyo Denki Seizo K.K., Contributes to theDevelopment 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.

Panama Canal
August 15th, 2014 marked the 100th
anniversary of the opening of the Panama
Canal. Since the 1960’s, we have been
supplying electrical equipment for electric
towing locomotives that tow ships using ropes
to prevent the ships from colliding with thelocks and banks as they pass through thenarrow canal.
Currently, the electric towing locomotives
used in the Panama Canal (third generation)

CONTENTS

are sourced jointly from four companies:
Mitsubishi Corporation, Toyo Denki Seizo K.K.,

Contents / Editorial Policy /Long-Term Vision1

Consolidated Financial Highlights

3

Mitsubishi Heavy Industries, Ltd. We oversee

Top Message

5

Overseas Expansion in New MediumTerm Management Plan “NEXT 100:
Beyond 100 years”

the technical aspects of the electric towing

7

Business Report

9

CSR Report

15

Financial Report

31

Kawasaki Heavy Industries, Ltd., andlocomotives, and make electric equipment
such as motors that drive electric locomotives,
as well as the winding mechanism for the
towing rope.

Reference Data for Management Indices 59
Company Profile

60

Executive Profiles

61

Organization Chart

62

Stock Related Information

63

Editorial Policy
We have been publishing this report since 2013
with the goal of allowing a wide range ofstakeholders to have a better understanding of theCompany. This report combines our management
policy with reports on our businesses, CSR andfinances. We are committed to describing 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 2013
(from June 2013 to May 2014), 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.

Reference Guidelines∙ Global Reporting Initiative (GRI) “Sustainability
Reporting Guidelines Version 3.1”
∙ Ministry of the Environment “Environmental
Reporting Guidelines 2012”1

Toyo Denki Seizo Report 20142

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

Net sales

7,696

8,097

Operating income

975

1,503

1,701

501

1,076

Net Income

512

678

785

722

644

-

272

1,071

3,761

1,421
FY 2009

2,073

1,142

1,307

1,296

612

719

917

797

913

665

15,04918,51919,350Total assets

34,38536,89238,08642,36444,752

Number of
employees

1,073

1,177

1,175

1,170

1,201

38,086

14,26836,892

12,58534,385

Net assets

295.89312.12384.14401.45

Net income

11.63

14.86

16.29

14.98

13.37

6

6

6

6

6

Dividend

FY 2009

15,049285.86

14,268

Net assets

12,585Per Share Information

2010

2011

5.1

39.5

43.7

2013

43.2

4.1

5.1

5.4

4.3

3.4

2.8

4.0

4.4

1.6

3.1

20.0

26.5

34.7

23.7

27.3

51.6

40.4

36.8

40.0

44.9

FY 2009

2010

2011

2012

Number of employees

Total assets

2013

FY 2009(Unit: %)Operating income ratio

2010

5.4

2013

2011

FY 2009

2010

722
644
2011

2012

2013

(Unit: Persons)

Dividend/Dividend payout ratio (Unit: Yen)
Dividend

2012

Dividend payout ratio

51.6%

40.4% 36.8% 40.0% 44.9%

2013

FY 2009(Unit: %)Overseas net sales ratio

2010

4.4

2011

2012

2013

(Unit: %)

34.7

4.0

Major Management Indices

38.7

2012

Return on equity (ROE)(Unit: %)36.6

42,364

Net assets(Unit: Yen)

4.3

4.1

3.4

2.8

27.3

26.5

3.1

23.7
20.0

1.6

FY 20093

2012

Net assets/Total assets (Unit: Million yen)

Fiscal Year-End

Shareholders’equity ratio
Return on equity(ROE)
Operating income
ratio
Overseas net
sales ratio
Dividend payout
ratio

785

2011

678

2010

18,519Comprehensive
incomeCapitalinvestment
Research anddevelopment costs

6

8,834

6

8,663

6

7,403

6

Gross profit

512

34,957

6

30,575

1,076

38,5701,201

37,893(Unit: Million yen)

501

35,4291,170

Net sales

975

Fiscal YearNet income

1,701(Unit: Million yen)

(Unit: Million yen)

1,175

Fiscal 2013

1,503

Fiscal 2012

1,177

Fiscal 2011

1,073

Fiscal 2010

Operating income

34,957

Fiscal 2009

(Unit: Million yen)

44,752

153

19,350152

30,575

151

38,570150

37,893

149

35,429Fiscal term

2010

2011

2012

2013

FY 2009

2010

2011

2012

2013

FY 2009

2010

2011

2012

2013

Toyo Denki Seizo Report 2014

4

Top Message

Expanding businesses globally that supports
transportation and social infrastructure and the industry,
while contributing to environmental conservation

Although both revenue and operating income
increased, profit did not reach planned figures.
Orders received reached a record-high level.
Although we were able to largely meet our revenue growth plan in
fiscal year ended May 31, 2014 as the growth in theTransportation Systems segment made up for the decreased
revenue in the Industrial Systems segment, we failed to achieve
our profit plan due to factors such as development and design
costs being recorded in advance for increased number of newcontracts in the Transportation Systems segment. Orders received
reached a record-high level due to the robust Transportation
Systems segment, and we are in a situation where an increase inrevenue for this fiscal year (fiscal year ending May 31, 2015) canbe expected.
Both revenue and profits for the Transportation Systems
segment increased significantly, backed by the recovery indemand for rail vehicles in Japan and strong maintenancedemand for high-speed railroad networks and city transit
networks mainly in China and the U.S. Overseas railroad contracts
including electrical equipment for a new type of light rail vehicle(LRV) in Los Angeles, U.S., for which the order was received in theprevious fiscal year and driving gear units for the Chinese highspeed railroads, contributed to the expansion of sales, and wehave newly received orders for electrical equipment for increasedrail vehicles on Beijing Subway Line 10.

President

Kenzo Terashima

5

In the Industrial Systems segment, while the testing equipment
for automobile development was strong, production facilities
including printing equipment and processing equipment was
weak and overall revenue declined. Nevertheless, we were able tomaintain an increase in profits due to the effects of improved
profitability of factories. Overseas, we proceeded with businessdevelopment of factory system solutions, such as high-efficiency
motors and inverters, in order to capture rising demand for energy
saving at manufacturing sites centering on the Southeast Asianmarket.
Both sales and profits expanded for the Information Equipment
Systems segment through reprogramming of railway station
operating equipment, etc. corresponding to the increase in
consumption tax.

New three-year medium-term management plan“NEXT 100: Beyond 100 years” has been launched.
We will accelerate our overseas expansion to achieve
net sales of 50.0 billion yen.
Although we promoted our three-year medium-term management
plan “DASH 2015” for two years, we have formulated a new
medium-term management plan “NEXT 100: Beyond 100 years,”with the fiscal year ending May 31, 2017 as its final year, after
reviewing our strategies and goals based on the changes in thebusiness environment and new challenges facing the Company.
In “NEXT 100,” we plan to achieve net sales of 50.0 billion yen
and operating income of 3.0 billion yen (operating income ratio of6%) through promotion of globalization and increase our overseas
net sales ratio to 50% from the current 27.3%. Also, byimplementing the six principal measures, we will build the basefor “next” growth focusing on the year of our 100th anniversary offounding to come in 2018 (see page 6 for details).
Going forward, to promote globalization, we will accelerate
overseas expansion of the Transportation Systems and Industrial
Systems segments, while implementing measures such as
strengthening production capacity, increasing the number of
employees, developing suppliers, and improving quality andcapabilities.
In the Transportation Systems segment, we plan to proceedwith our global operations of the Japanese and overseas rail
vehicle manufacturers mainly from our business bases in China,
the U.S., Southeast Asia, and India, and enter the local rail vehicle

maintenance business.
In the Industrial Systems segment, while promoting increased
sales of factory systems in Southeast Asia from our base at the
representative office in Thailand, we will launch two new
businesses. One is the sales of biomass power generation system
mainly focusing on the Philippines. This is a circulating energy
system that generates power from strained lees of sugar canes
emitted by sugar mills, and that enables utilization of generated
power and refined ethanol at sugar mills. The other business ismechanicalizing of presses, molds, and other production facility
equipment. Leveraging our strength in servo-control technologies
using permanent magnet motors, we will advance the business incollaboration with machine manufacturers.

We aim to increase our level of contribution to thesociety by our businesses and achieve sustainablecorporate growth through promoting globalization.

of transportation and social infrastructure and the industry
through the offering of superior and highly reliable products, butalso largely contribute to protecting the environment throughelectrification and energy-conservation technologies.
As such, we aim to promote our business, in which such
relationships play a key role, through overseas expansion andincreasing our level of contribution to the society while further
improving efficiency and reducing environmental burden withrespect to our production activities. We will also aim to promote
globalization and diversification of our organization, through suchmeans as hiring foreign employees at our head office, and hiring
locals at our overseas offices. We believe that, going forward,these initiatives will be vital themes for our CSR as well as
essential elements for achieving sustainable corporate growth.
We would like to ask for the continued support of our
stakeholders as we continue our commitment to meeting yourexpectations for future business development.

Looking from the perspective of relationships with the society, ourbusinesses not only play the role of supporting the development

New three-year 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 anticipation of the yearof our 100th anniversary of founding in 2018 and beyond.

2
3

Build a stablebusiness earnings
structure
Restructure
production system

1

Strengtheninternational
competitiveness

Fundamental Policy

4

Promotedevelopment oftechnology

6
5Train humanresources to support
global development
Establish new
businesses

Numerical Targets (Billions of yen)
Net sales
Operating income
Operating income ratio
Ordinary income
Net income
Overseas net sales
Overseas net sales ratio

Fiscal 2013 (Actual Results) Fiscal 2016 (Forecast)
34.95
50.00
1.07
3.00
3.1%
6.0%
1.03
3.20
0.64
1.90
9.56
25.00
27.3%
50.0%

Segment Net Sales (Billions of yen)Transportation Systems Segment
Industrial Systems Segment
Information Equipment Systems Segment

Fiscal 2013 (Actual Results) Fiscal 2016 (Forecast)
22.20
31.00
10.92
16.00
1.83
3.00

Overseas net sales
Domestic net sales
Overseas net sales ratio

50.00 billion yen

40.00 billion yen
34.95 billion yen

50.0%

27.3%

Domestic net sales around 25.00 billion yen
Fiscal 2013
Actual Results

Fiscal 2014

Fiscal 2015

Fiscal 2016

NEXT 100 Targets

Toyo Denki Seizo Report 20146

Special Report

Overseas Expansion in New Medium-Term Management Plan

“NEXT 100: Beyond 100 years”

Measures for Transportation Systems segment
We will promote the following measures to achieve dramatic global expansion of our Transportation Systems segment.
Utilization of alliances
Through alliances with FUJI ELECTRIC and Hitachi, we willproceed with development of new markets such as North America,
Southeast Asia and India, and promote joint purchasing and joint
development of products and systems based on market needs tostrengthen international competitiveness.
Approaching rail vehicle manufacturers
We will leverage our strengths as a dedicated manufacturer ofelectrical equipment for rail vehicles and actively seek export
opportunities with rail vehicle manufacturers in Japan andoverseas.

Photo of Beijing Subway Line 10

Deployment of maintenance businessWe have been delivering electrical equipment for rail vehicles tothe Beijing Subway since the late 1990’s, boasting the top share of
approximately 40% in the electrical equipment delivered to the
Subway. In October 2014, we founded a new company, “Beijing
Jingche Shuangyang Traction System Co,. Ltd.” to further
strengthen our businesses by capturing demand for maintenanceof such equipment.
Additionally, used rail vehicles that were manufactured in Japanare exported to Indonesia and other countries, where they areused for transportation by the local population. We are also aiming
to launch a business to upgrade and maintain the electricalequipment for these vehicles.

Measures for Industrial Systems segment
The Industrial Systems segment will promote specialization in high value-added segments in an aim to achieve steady revenues, whileadvancing global expansion as a key measure for business growth.
Respond to demand for energy saving in Southeast Asia
We will grow our business by responding to demand for energysaving production facilities in Southeast Asia, by offering industrial
systems products based on high-efficiency motors and inverters
leveraging our motor drive technology, with a center for
information collection at our representative office in Bangkok,
Thailand opened in September 2014.

Restructure production system
We will restructure our production system including our subsidiaries and joint ventures in Japan and overseas, centering on the Company’s
major production base, the Yokohama Plant, and aim to build a foundation to achieve net sales of 50.0 billion yen by the fiscal year ending
May 31, 2017.

(1) Strengthen order-taking
and maintenance structure
for electrical equipment forrail vehicles in China
Photo of LRV in Dallas(5) Establish order-taking
structure for electricalequipment for rail
vehicles in India

Production base
Bases for sales andcollection of information
Key regions
Future target regions

7

Expand overseas sales of testing equipment for automobile development
Based on the technologies for testing systems for automobile
development we have built for automobile manufacturers in Japan,
we will promote initiatives aimed at receiving orders fromoverseas manufacturers as well.

(2) Enhance order-taking ofelectrical equipment for rail
vehicles in North America(3) Capture demand for upgrading
electrical equipment of rail
vehicles in Southeast Asia
(4) Strengthen order-taking ofindustrial systems products inSoutheast Asia
(6) Expand overseas sales oftesting equipment for
automobile development

Toyo Denki Seizo Report 20148

Transportation Systems Segment

Supporting the development of railway
infrastructure worldwide through the supply of highquality electrical equipment for rail vehicles
Business Overview

Percentage of
total net sales

We contribute to the development of railway infrastructure by supplying the world withelectrical equipment for rail vehicles used for various forms of city transit such as
subways, LRVs (light rail vehicles), and APMs (automated people movers), as well as
high-speed railroads such as the Shinkansen.

22,198 million yen(Up 28.1% year on year)

Segment Income

2,374 million yen(Up 24.1% year on year)

Profits increased due mainly toincreased revenue andi m p ro v e m e n t s i n s u b s i d i a r yearnings.

2012

2013

FY 2011

2012

2013

FY 2011

2012

2,374

2,701

29,790FY 2011

Segment Income (Unit: Million yen)

22,198

Sales increased sharply as aresult of a recovery in vehicle
demand in Japan, as well as
strengthened efforts for overseas.

17,324

Net Sales

20,940(Up 42.3% year on year)

In addition to an increase inJapan, overseas orders increased
significantly, including high-speed
railroad and subway contracts in
China as well as LRV in the U.S.

17,506

Orders Received

29,790 million yen

Net Sales (Unit: Million yen)

23,991

Orders Received (Unit: Million yen)

Results for fiscal 2013

63.5%

1,913

Business Report

2013

T O P I C SInternational Railway Industry Standard (IRIS) certification acquired for rail vehicle auxiliary power supply
Company acquired International Railway Industry
T heStandard(IRIS) certification for “auxiliary power supply(SIV)” in September 2013 in the field of rail vehicle auxiliary
systems.
The IRIS is an international standard that calls for highquality and safety in the rail industry, and acquisition of the
IRIS certification is recommended in Europe for railwayre l a t e d t r a n s a c t i o n s i n c l u d i n g m a j o r r a i l v e h i c l emanufacturers.
This marks the first time that certification has beenacquired for an auxiliary power supply in Japan, and we will
work to acquire IRIS for other products as well. We will also
work to further promote global expansion of theTransportation Systems segment as we aim to expand
sales of our electrical equipment for rail vehicles.

10 Transportation Systems segment
11 Industrial Systems segment
12 Information Equipment Systems segment
13 Expansion of New Businesses
Auxiliary power supply (SIV)

14 Research and Development/Intellectual Property
9

Toyo Denki Seizo Report 201410

Industrial Systems Segment

Information Equipment Systems Segment

Supplying advanced motor drive technology tocontribute to improvement of efficiency in ourcustomers’ production facilities

Developing and manufacturing railway station
operating equipment and remote monitoring systems
that contribute to improvement of operational efficiency

Business Overview

Business Overview

536 million yen

FY 2011

2012

2013

FY 2011

2012

2013

FY 2011

2012

2013

348 million yen(Up 31.3% year on year)

FY 2011

2012

2013

FY 2011

2012

2013

FY 2011

2012

348

1,828

2,303

Segment Income (Unit: Million yen)

Profits increased due to increased
revenue.

2013

T O P I C S

Testing system for automobile development

Remote monitoring system for agricultural facilitiesr testing system for automobile
O udevelopment
is composed of a high-cooperation with JAPAN OPERATOR CO.,I nLTD.,a company that manufactures products

speed and high-response inverter, low-inertia
motor, mechanical system, and measurement
operation system, and is used in thedevelopment sites by major automobile
manufacturers and automobile parts
manufacturers in performance evaluation tests
and endurance tests for the traction systems
of not only standard gasoline vehicles, but also
for hybrid vehicles (HEVs) and electric vehicles(EVs) that are expected to become increasingly
widespread in the future.
We support the development of nextgeneration vehicles by providing highly
accurate and reliable testing systems that canhelp customers reduce development time.

1,701

Sales increased due toreprogramming of railway station
operating equipment, etc.
corresponding to the increase in
consumption tax.

Net Sales (Unit: Million yen)

1,673

536
11,542

12,265433(Up 7.5% year on year)

Segment Income

T O P I C S

Testing system for automobile
development
System configuration
High-speed andhigh-response inverter
Low-inertia motor and DSD series
Measurement operation system

Machine system

Transmission testing bench for FF vehicles

11(Up 8.4% year on year)

1,828 million yen

Profits increased due to improved
profitability at factories.

(Up 23.8% year on year)

1,673 million yen

Orders for both railway station
operating equipment and remotemonitoring systems increased.

5.2%

265

Segment Income

Orders Received (Unit: Million yen)

Results for fiscal 2013

Net Sales

253(Down 5.4% year on year)

Segment Income (Unit: Million yen)

10,924

10,924 million yen

Sales decreased slightly for thesame reason underlying thedecrease in orders received.

11,097

Net Sales

Net Sales (Unit: Million yen)Orders Received

11,457(Down 3.1% year on year)

Orders Received (Unit: Million yen)

12,439

11,097 million yen

Orders decreased slightly due toslightly weak orders received forinfrastructure-related despite
being robust for testing systems
for automobile development andcapital investment-related.

1,544

31.3%

Results for fiscal 2013

Orders Received

Percentage of
total net sales

We provide “railway station operating equipment” including commuter pass issuingmachines and onboard ticket vending machines (ticket issuing handy terminals) as well
as remote monitoring systems that offer excellent customization qualities incombination with remote monitoring terminals developed based on programmablecontrollers (PLC), various communication networks, and our cloud servers.

2,714

We propose optimal systems that suit needs of our customers using programmablecontrollers (PLC), intelligent inverters, and high-efficiency motors and allow customers
to improve the efficiency of production facilities and shorten the period for development
work.

666

Percentage of
total net sales

including control equipment for greenhouseenvironments, we have developed the “House
Mail F” remote monitoring system for agricultural
facilities that allows the visualization of aspects
including temperature and moisture within vinyl
plastic hothouses and greenhouses.
This system contributes to efficient agricultural
management by not only allowing standard
monitoring of agricultural facilities, but also byimmediately delivering warning emails tocustomers in the event of abnormalities, such as
power outages or sudden changes intemperature at greenhouses, and by allowing
customers to check the status of agricultural
facilities in real-time as necessary from their
computer or mobile phone at home or the office.

Cloud
serverHouse Mail F Agricultural facility
Home or officecomputer

Customer’s mobile phone

Example of a cucumber farmToyo Denki Seizo Report 201412

Expansion of New Businesses

Research and Development/Intellectual Property

Continually expanding our unique motor drive
technologies to “automotive electric equipment”
and “mechanicalizing of industrial machines” fields

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

Business Overview

Reference:
Orders received and net sales

Net Sales (Unit: Million yen)

396

504

507

Orders Received (Unit: Million yen)507
FY 2011

2012

2013

FY 2011

2012

2013

Our new business starts with the receipt of orders for the development and design of prototypes frommanufacturers of construction machinery, automobiles, industrial machinery, and other products.
Above figures are our orders received and net sales for the past three years for reference.

T O P I C S

Dissolution of ELETT CORPORATION
Reason for the dissolution
The Company and TOYOTA INDUSTRIES CORPORATION( “ T O Y O TA I N D U S T R I E S ” ) e s t a b l i s h e d E L E T T
CORPORATION (“ELETT”) as a joint venture andconducted operations in an aim to jointly develop andprovide motors, inverters, and electric traction systems
with excellent environmental performance for the industrial
machine field. However, while it is certain that growth canbe expected for the market for motors and inverters forindustrial machineries and electric traction systems in the
future, dissolution of ELETT has been decided as we are
currently locked in the prototype stage before mass
production and it is not possible to secure sufficient sales
for maintaining this joint venture project.

Cooperation between the two companies going forward
It has been decided to partially revise the Business andCapital Alliance Agreement concluded between the Company and TOYOTA INDUSTRIES on February 21, 2011
and continue the capital alliance and cooperation in a new

13

form. This cooperation will include (1) joint development
aimed at improving mechanicalizing technologies and (2)entry into industries and fields not restricted to the conventional framework.
Both companies will continue to contribute to the development of electric traction of industrial machines supported by increasing environmental awareness and needs forfuel economy improvements.

Sequence of events up to the dissolution of ELETT
February 21, 2011 Conclusion of Business and Capital
Alliance Basic Agreement between the
Company and TOYOTA INDUSTRIES
May 16, 2011

Establishment of the joint venture “ELETT”

February 20, 2014 Conclusion of new Business and Capital
Alliance Basic Agreement between the
Company and TOYOTA INDUSTRIESMarch 31, 2014

Dissolution of ELETT

creation and expansion of these products. That is, we
actively promote development of technologies of ourexisting businesses and basic research that support
this development as well as development of new
products that expand our businesses.

Results and topics from fiscal 2013

278

261

We develop and manufacture “automotive electrical equipment,” which
supports hybrid electric vehicles (HEVs), electric vehicles (EVs), andconstruction machinery and motors and inverters supporting themechanicalizing of industrial machines as a new core business for theCompany alongside our Transportation Systems and Industrial Systems
segments.
Currently, orders received, net sales, and profits and losses of theseproducts are included in our results for the Industrial Systems segment.
We will continue R&D going forward with this business as the drive for
expansion of our businesses and actively work to receive orders with aneye to the global market.

Our research and development system consists of theresearch laboratory and the development divisions ineach business unit. With regard to our R&D activities,
we seek to create products that fully satisfy ourcustomers in Japan and overseas and challenge theSegment

Project
Fully enclosed induction traction
motorTransportation
Guidance display system
Systems

Description
Completed a fully enclosed induction traction motor for trains that
focuses on the reduction of maintenance labor.
Completed joint development of guidance display system for inside rail
vehicles as part of a business alliance with FUJI ELECTRIC CO., LTD.

Electric door operating equipment

Completed an electrically-powered door device that reduces air
compressor volume and enables finely-tuned door operation.

Inverter-compatible products

Developed the unique “DC66” product that operates DC motors ininverters is compatible with VF66B inverters.

Programmable controller (PLC)

Completed the embedding of function in the μGPCsH part of our PLCs
that enables desktop simulation of machinery and motor operations.

Motors for automotive test
equipment

Developing a 20,000min-1 motor to follow the 16,000min-1 motor(already developed) in ultra-fast motors for EVs and HEVs.

Next-generation all-in-one ticketingmachines (railway station operating
Information equipment)
Equipment
Systems
New remote monitoring terminal

Completed preparations for the mass production of next-generation all-inone ticketing machines that are main products for the Information Equipment
Systems segment.

Industrial
Systems

Scheduled to complete mass production during fiscal 2014 of remotemonitoring terminals for four promising fields (industries) that are sales
targets.

Intellectual Property
Our intellectual property is placed as a key corporate
resource. Our intellectual property department is
responsible for the management of intellectual
property and our research laboratory and thedevelopment divisions in each business unit actively
apply for patents and utility models.
In the overseas markets which we expect to further
expand our businesses, we have started to actively
engage in activities concerning our intellectual
property in order to protect our technologies andbrand.

Patent applications granted
Patent applications: Japan
Granted cases: Japan(Applications)

80

2

60

66
8
45
0

40

64
20

45

59
40
51
36

1

51

2

54

4
50 25 3

Overseas
Overseas

52 22

22

22

2011

2012

2
0

35
33

30

0

30

0
FY

2009

2010

2013

Toyo Denki Seizo Report 201414

Management

CSR Report

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

Prioritize ethics and contribute to the prosperityof customers and society as a whole
Encourage creativity and enterprising spirit tomeet the challenges of the future
Build trust by focusing on quality first

Code of Conduct

1. Respond to customers in a timely and speedy manner
2. Tackle all challenges with forethought and creativity
3. Continuous efforts toward self-development and skill
improvement
4. Keep a broad perspective and influence each othertoward growth
5. Act with awareness and pride of a good member ofsociety and businessman
Established in June 2001

Corporate GovernanceOur philosophy of corporate governanceManagement

16 Corporate Governance17 Internal Control/Compliance
18 Risk Management
18 Information Security
18 Business Risk

Report by Stakeholder

20 With Our Customers
21 With Our Suppliers
22 With Our Shareholders and Investors
23 With Our Employees

Actions to Deal with the Environment and Local Communities

26 Actions to Protect the Environment
30 Contributions to Local Communities
15

The Group’s business activities are based on the businessprinciples that “prioritize ethics and contribute to theprosperity of customers and society as a whole.” We
therefore strive to attain sound corporate management
through strengthening and reinforcing corporate
governance, fully appreciating the significance ofcompliance based on corporate ethics. At the same time,
we review as appropriate our management monitoring
system to ensure its conformity to the changes in thebusiness environment including social environment andrelevant legislation.

Corporate governance
We are a company with a board of statutory auditors,
furnished with corporate bodies established in accordancewith laws and regulations as well as the Articles ofIncorporation, and include 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 as well as extraordinary meetings held whenappropriate, the Board of Directors 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, theCompany has meeting bodies including the Management
Strategy Meeting and Executive Officer Liaison Meeting.
Through these bodies, critical management matters
including matters related to their execution of duties and/or those subject to the deliberation of the Board of
Directors are reported to the President by the generalmanagers of business execution departments, and aredeliberated and discussed preliminarily.

Internal audit and statutory auditor’s audit
Action plans and results of internal audits are reported to
the Board of Directors and Statutory Auditors by the Audit

Division under the direct control of the President as afunction independent of all business operations subject toaudit, 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 ofquarterly reviews from Accounting Auditors both verballyand in writing, and confirm their action plans (if required by
the reviews) to be taken at a fiscal year-end audit.
Statutory Auditors also receive the results of the reviewson the fiscal year-end audit from Accounting Auditors in a
s t a t u t o r y d o c u m e n t a l o n g w i t h v e r b a l re v i e w s .
Furthermore, Statutory Auditors are in principle required to
be present at inventory taking or on-site inspection at
subsidiaries by Accounting Auditors.

External Statutory Auditors and Outside Directors
Although the Company has established neither guidelines
nor policies regarding the independence required for a
candidate for its External Statutory Auditor, we used thecriteria for the independence of members of an
independent committee established by stock exchanges
as a reference in appointing the External Statutory
Auditors, who have excellent insight in their areas ofexpertise. The Company appointed three External
Statutory Auditors, each of whom is playing a role toenhance audit functions required by laws and regulations
while independent from the Company.
Mr. Hiroshi Hamao and Mr. Eiichi Suzuki, our External
Statutory Auditors, are engaged in the auditing activities
for the Company, drawing on their wealth of experienceand broad knowledge developed in corporate
management and service at a financial institution.
Mr. Toshio Ikeda, our External Statutory Auditor, is acertified public accountant who utilizes his professional
expertise in the area of corporate financial accounting for
the Company’s auditing work. Meanwhile, the Company
has appointed Mr. Ikeda as an independent director andregistered him as such at stock exchanges.
Toyo Denki Seizo Report 201416

Management

The Board of Directors consists of Directors who arefamiliar with the Company’s business operations, so thatmaintenance and enhancement of management efficiency
can be ensured. External Statutory Auditors are in place tothoroughly perform auditing functions to ensure
management soundness. As such, the Company has notappointed Outside Directors as of the date of submission.

each Director’s contribution to management as well as
business results of the Company. Basic remuneration forboth Standing and Part-time Statutory Auditors is a fixedsalary without bonus payments.
-As of the end of May 2014Number of executives Total amount of remuneration
applicable(Unit: Million yen)
7
147

Category of executives

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 is payable as determined by

Directors
Statutory Auditors (excluding
External Statutory Auditors)
Outside Executives (External
Statutory Auditors)

2

27

2

11

Basic policy
General Meeting of Shareholders

Accounting Auditors

Reporting

ReportingAppointments/dismissals

Board of Statutory Auditors

Reporting

Legal audit

Instruction/reporting

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

Whistle-blowings

Reporting on business execution

Promotion framework

President

Reporting/decisions

Internal audit

The Company is engaged in developing rules and aframework for risk management according to the Basic
Rules for Risk Management established in August 2006.

Directors
Appointments/dismissals

Business audit

Accounting audit

Audit Division

Appointments/dismissals

Board of Directors

Statutory Auditors
ReportingManagement Strategy Meeting
Executive Officer Liaison Meeting
National and Global Group Company Meetings

Compliance education
The Company is organizing scheduled and systematictraining sessions based on a compliance training masterplan to enhance knowledge on compliance while
promoting a conscious respect for corporate ethics.

Risk Management

Corporate governance framework
Appointments/dismissals

conduct. The move is part of an effort to have the codeand the basic rules of work fully known.
The Company has also introduced a whistle-blowing
system that allows employees to provide information
directly to the management. The system is aimed atensuring that any illegal or inappropriate conduct within
the Company is detected at the earliest possible stage
and that adequate measures are taken promptly and asneeded so that such conduct is rectified.

Appointments/
dismissals

The Company has established the Internal Control
Oversight Committee, an advisory body chaired by the
President and has some of its authority delegated from theBoard of Directors. It analyzes and assesses all the risks
that exist in the Group and develops an effective risk
management framework capable of dealing precisely withthe risks of the types and degrees that the Group 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 therecommendations resulting from its deliberations.
Furthermore, the committee is committed to enhancing
t h e G ro u p - w i d e r i s k m a n a g e m e n t f r a m e w o r k i n
accordance with the Basic Rules for Risk Management.

Instruction/reporting

Executive Officers (including those concurrently serving as Directors)
Instruction/reporting

Each business department
Oversight

Instruction/reporting

Instruction/
reportingInformation Security

Each Group company

Basic policy

Internal control and complianceInternal control
The Company has developed an internal control system
based on the Rules for the Internal Control OversightCommittee established in June 2006. The system
reasonably ensures the achievement of objectives
including effectiveness and efficiency of operations,reliability of financial reporting, compliance with relevantlaws and regulations and protection of corporate assets.
The Company has also introduced a self-inspection
system to enhance monitoring so that an effectivefunctioning of internal control can be ensured.
Furthermore, the Company has developed andoperates an internal control system appropriately toensure the reliability of its financial reporting, based on the
Financial Instruments and Exchange Act (the so-called
J-SOX Law). Accordingly, we determined that the internal
control with respect to the Group’s financial reporting was
effective as of fiscal 2013, and we submitted an internal
control report to the relevant authorities in August 2014.

17

The report has been endorsed as adequate by an audit
report submitted by the Accounting Auditor. The reporthas been endorsed as adequate by an audit reportsubmitted by the Accounting Auditor.

Principles of compliance
The Company has set “1. adherence to rules,” “2.
observance of confidentiality,” “3. distinction between
private and public matters,” “4. strictness with money,” “5.
p ro h i b i t i o n o f s i d e j o b s , ” a n d “ 6 . p ro h i b i t i o n o f
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 andemployees with a copy of the Compliance Manual (ToyoDenki Seizo Ethical Standards) that stipulates its code of

The Company holds a vast amount of information assets
including information presented by customers related toits business execution and confidential information
concerning the Group’s proprietary technologies and its
trade. Each Group company is taking various measures inthis respect based on an awareness of shared security
under the Group’s Information Security Guidelines, whichhave been established to adequately manage and use
these information assets.

Information security training
The Company is conducting educational activities todevelop information security awareness among all
employees including various training sessions, someinvolving the use of educational DVDs.

Risk Factors
From the perspective of proactive information disclosure,t h e G ro u p i n t e n d s t o d i s c l o s e a w i d e r a n g e o frecognizable risks. Major risks that may affect its earnings
and financial position are set out below. The Group aims
for thorough understanding of these risks in order toestablish 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 andoverseas. As such, business climates and individual
spending conditions in different countries may affect
the Group’s business performance.

Toyo Denki Seizo Report 201418

Management(2) Production bases
The great majority of the Group’s production bases arelocated in 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 underpressure from intensifying competition for productdevelopment. The Group’s business performance may
be affected by such intensifying competition.
(4) Product quality
Defects in products may link to materialization of a riskthat requires large-scale compensation for damages.
The possibility exists that insurance may not be able tocover associated costs, which may affect the Group’sbusiness performance.
(5) Product development
With a view to providing attractive products tocustomers, the Group 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 development of new
products to respond to rapid technological orenvironmental changes may affect the Group’s
performance.
(6) Material procurement
Owing to the fact that the Group’s business hasvarious distinctive characteristics, some of thematerials it procures are not easily available due tofactors 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-scale disaster or other incidents could
impact the Group’s operations. Moreover, its businessmay be affected by the fluctuation in prices of raw
materials, notably steel products and copper.
(7) Overseas expansion
The Group proactively pursues the expansion ofoverseas operations including the Chinese market. Its
performance may be affected by major changes insituations overseas.
(8) Intellectual property rights
The Group attends to the protection of intellectual
property rights. However, amid drastically advancing
technical innovations and accelerating globalization ofbusiness, the Group is inevitably exposed to potential
disputes with third parties over intellectual property
rights. If a dispute occurs, the Group’s business may
be affected.
(9) Business alliances
With the aim of business expansion and enhancing
competitiveness, the Group proactively pursues
various alliances with third 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

19

Report by Stakeholder

of foreign currency exchange rate fluctuations on its
earnings as it increases foreign currency denominatedtransactions.
(11) Holding assets
Fluctuations in the fair value of assets held by theGroup 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
business executions. Also, it possesses various typesof confidential information concerning the Group’s
proprietary technologies and operations. If theseinformation assets leak outside the Group for
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 regulationsof each country. Although the Group has establishedand 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 other legal procedures, its business may beaffected.

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 believedelivering 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 isinstalled in many rail vehicles. These extremely important
products play a direct role in ensuring the safety of humanlife and property during rail transportation. In the Industrial
Systems and Information Equipment Systems segments
as well, the Company’s products and services are used incustomers’ production facilities, development sites and in
the field of social infrastructure, and they form thefoundation supporting the sustainable development of asociety that is safe and comfortable to live in.
In order to ensure the high quality of our products andservices, the Company has established a “Basic Policy on
Quality Control” which is deployed at all production bases
as we strive to maintain and improve our human resources
education, compliance with rules, and our facilities.

Promotion framework
With regard to quality control, each fiscal year theCompany develops policies and the promotion framework
aimed at further maintaining and improving quality in eachbusiness unit, along with specific policies pertaining to the
reduction of flaws and other issues. The Company’s
Corporate Quality Control Division works together with thequality assurance department in each business unit to put
together a report on the status of quality control andresults in each unit. The report is delivered to top
management at the monthly Executive Officer Liaison
Meeting where measures are debated and decided.
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 in eachbusiness unit, while at the same time the causes that led
to the flaw and its mechanism are investigated, and thisinformation is put into a database so that the information
can be shared 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, theYokohama Plant and the Shiga Factory, and has obtained
ISO 9001 certification.
Year ISO 9001 certification obtained

Yokohama Plant

1994

Shiga Factory

2000

Extendedcompanywide

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 asystem for the proper management of exports in order toensure compliance with the laws and regulations
concerning export management in the countries andregions where we engage in business activities as well as
to avoid involvement in transactions that could hinder the
maintenance of international peace and safety.
The Export Control Department handles cargo andtechnology parameters used in determining whether or
not export permits are required, as well as investigation oftransactions. In addition, the Department carries out
employee education and guidance and support for Group
companies.

Towards Greater Customer Satisfaction
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 byidentifying problems that need to be solved and swiftly
addressing them in order to raise customer satisfaction.
Toyo Denki Seizo Report 201420

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 in line with our unique characteristics as a business based on an individual build-to-order/multi-

Through the timely and proper disclosure of information and various modes of communication, we strive to
receive an appropriate evaluation of the Company from our shareholders and investors.

product small lot manufacturing model.

Towards Enhancement of Corporate Value

Towards Just and Fair Procurement

Basic philosophy
Communication with suppliers

Training for material procurement officers

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 suchas delays in supply due to fluctuations in production
quantity or delays in processing due to the quality of
products received.
In order to reduce these risks as much as possible, theCompany carries out instruction and support related toquality, technology, and skills for our suppliers, as well as
guidance for improvement of manufacturing sites, in orderto ensure stable procurement of even better quality
products. In addition, we actively promote information
sharing through the “Toyo Denki Cooperation Association”
to which our leading suppliers belong.

The Company endeavors to maintain proper execution ofoperations by implementing a variety of training programsfor material procurement officers to deepen theirknowledge of the Act against Delay in Payment of
Subcontract Proceeds, Etc. to Subcontractors and related
laws and regulations and to cultivate awareness of legal
compliance.

External whistle-blower system (for suppliers)
The Company has established an external whistle-blower
system to receive consultations or reports on compliancefrom our suppliers. The legal compliance department
handles complaints and consultations about transactions,and the Company’s retained lawyer resolves issues whennecessary.

T O P I C S

Establishment of “Procurement Action Guidelines”

In March 2014, the Company improved its procurement-related regulations and established the “Procurement Action
Guidelines.”

Procurement Action Guidelines
These guidelines indicate the codes of conduct that the Company’s executives and employees should
comply with in the procurement of purchased 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 scopenecessary for conducting procurement activities in accordance with contracts. Furthermore, efforts
shall be made to carefully manage and observe the confidentiality of information gained duringbusiness operations.
3. Personal interests with suppliers shall be prohibited in procurement transactions, including thelending and borrowing of money.
4. Receiving of remuneration or any other forms of personal rewards from suppliers shall be prohibitedin 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.

21

Through timely and appropriate disclosure of information
to our shareholders and investors, the Company
accurately conveys our management policy and businessconditions 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 theCompany’s distribution of profit, and the dividend for the
fiscal year ended May 31, 2014 was 6 yen per share(interim dividend of 0 yen, fiscal year-end dividend of 6yen). The Company also intends to maintain dividends at
6 yen or more per share from the fiscal year ending May
31, 2015 onward.

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 and gives a report including
the state of progress of the medium-term management
plan, an overview and forecast for each segment, major
orders, and other topics.
In addition, we strive to deepen understanding of theCompany through individual visits to institutional investors
or holding factory tours, participating in small meetingsorganized by securities companies, and so on.

IR activities for individual shareholders and individual
investors
The Company website includes a “For Individual Investors”
page which offers a clear introduction to our businessactivities and our results, as well as making available avariety of IR materials.

Dividend per share
(Yen)

8
6

6

6

6

6

6

2009

2010

2011

2012

2013

4
2
0
FY

Record of 153rd Ordinary General Meeting of Shareholders
Date held: Wednesday, August 27, 2014
Attendance: 97 people

URL “For Individual Investors”
http://www.toyodenki.co.jp/html/ir_individual.html
Holding of company presentations for individual investors- Friday, September 6, 2013
Mitsubishi UFJ Morgan Stanley Securities (Osaka Branch)
Attendance: 89 people- Tuesday, February 18, 2014
Mitsubishi UFJ Morgan Stanley Securities (Head Office)Attendance: 98 people
Holding of factory tour for shareholders
Friday, April 11, 2014 at the Yokohama Plant
Attendance: 31 people (120 applicants)

President Terashima greeting visitors at the factory tour for shareholders

Toyo Denki Seizo Report 201422

Reports by Stakeholder

With Our Employees
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.

Towards the Development of Human Resources with Competitive Strengths
Human resources development policy
Executives
Division heads

The Company holds monthly meetings of the Safety andHygiene Committee jointly with labor and management,
where ongoing discussions are held in order to build asafer working environment and to reduce workplace
injuries to zero, and to find solutions to mental healthissues 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 aneven better workplace.

Acquisition of the “Kurumin” certification logo (June 2014)
Training for newly appointed division heads

Pre-promotion training for senior general staff

Follow-up training (3rd year)
Follow-up training (2nd year)
Follow-up training (1st year)
Training for new employees On-the-job
sales training
I Introductory training
II Hands-on learning
IT education
III Basic knowledge course
IV Practical training
Training inV Individual training business manners

Mental health training

Comprehensive training for newly appointed senior general staff

Life-planning seminar

Pre-promotion training for managers and professionals Coaching training

Compliance training

Evaluator training
Training for newly appointed managers and professionals

Various distance learning courses

Training for middle-management executives

TOEIC challenge system

Department heads

Safety and hygiene initiatives

Executive manager development training

Incentive system for acquiring certification

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

Other/Personal development

Executive training

System for fostering specialists

Education and training system

Supervisors

Fundamental policy(1) To develop human resources who understand andpractice our business principles and code of conduct
and who are of value both as company employees andas members of society.
(2) To develop human resources who are professionals,
each possessing a high degree of specialized
expertise, by enhancing the knowledge, techniques,
and skills they need to carry out their duties.
(3) To provide a variety of educational opportunities inorder to promote personal development, with emphasis
on a self-directed approach to study and growth.

Non-managerial employees

The Company has set the following policy on humanresources development and carries out education andtraining.

Training system

Creating a Pleasant Workplace

Follow-up Training(within 1 year)
On-the-job
factory training(sales staff)
Introductory
IT education
training

Support system for Language education(TOEIC)acquiring public(Chinese)certification

Training for unofficial new hires (graduates)
Regular new hires (general staff group) Mid-career hires

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 anenvironment in which it is easy 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.

As for employees who wish to be rehired after theyreach the mandatory 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 workplaceenvironment and carries out workplace training with theaim of creating a workplace where the disabled and thosein normal health can work together energetically. We also
promote collaboration with local governing agencies andspecial-needs schools regarding employment of thedisabled.

Mental health measures
As measures to address mental health, the Company
conducts “Line care training” for administrative
professionals and “Self care training” 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.

Initiatives for diverse work-styles
The Company has implemented a flexible work-styleincluding a flextime system for sales staff and those
involved in development. Furthermore, in order toencourage retention and utilization of employees withknowledge 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 that they can be rehired when they reach the stage
when it is possible to return to work.
Work and family life
balance

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.

“Childcare leave is for men too!!” It was a very valuable period for me.
Daisuke Yokomizo (Human Resources Division)

Passing on skills

Training for new employees

23

In order to proactively promote the transmission ofoutstanding skills to maintain high quality, the Company
encourages employees to obtain official certifications.
Furthermore, employees with exceptional manufacturing
skills or expertise are recognized as “My Star” internallyand given responsibility to instruct and train younger
workers.
In April 2013, the Technical Training Center was newly
established within the Yokohama Plant, where training iscarried out for technical staff through lectures and various
hands-on workshops.

When I learned of my wife’s pregnancy, I decided to takechildcare leave in consideration of my wife’s recovery after
giving birth.
I took leave for approximately three and a half months,
and during this time I did all that I could to support my wife
24 hours a day, day and night with tasks such as preparing
milk, changing diapers, daily shopping, and giving medicine
to my child when she felt unwell. I also actively participatedin events that were mainly for mothers and babies (such as
baby massage classes), and I was able to share withpeople about concerns such as how to communicate withmy child and concerns related to childcare.
During this leave, I was able to realize how hard it mustbe for my wife to take care of our child everyday, as well as

the fact that while childcare is difficult,it is also a lot of fun. Although it was a
short period of time, I feel that thisvaluable experience has added to mylife. The fact that my one-year olddaughter is very fond of me provesthat the leave has really paid off, andthis makes me extremely happy.
I am very grateful to my superiors and coworkers whoenabled me to have this valuable opportunity. Thanks tothis I was the first male employee at the Company to apply
for childcare leave, and I hope that my experience willencourage other male employees to apply for childcare
leave as well.

Toyo Denki Seizo Report 201424

Reports by Stakeholder

Initiatives to Deal with the Environment and Local Communities

Data Concerning Personnel and Labor

Initiatives to Protect the Environment

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

Unit

Fiscal 2009

Total
Number of employees

Men

700

Men

2

791

3

797

51

51

51

56

60

6.8

6.9

7.1

7.5

170

171

155

152

156

169

170

153

151

155

1

1

2

1

1

0.6

0.6

1.3

0.7

0.6

39.7

40.8

41.1

41.0

41.1
41.2

Persons

Overall
Men

744

7.3

%

Average age

2

Fiscal 2013

%

Women
Ration of female administrative professionals

748

Fiscal 2012

649

Total
Number of administrative professionals

1

Fiscal 2011

Persons

Women
Ratio of female employees

Fiscal 2010

693

735

40.0

41.1

41.4

41.1

35.7

36.5

38.2

38.9

39.0

Overall

16.2

16.4

16.5

16.1

16.3

Years

16.4

16.6

16.7

16.3

16.5

13.3

13.5

14.6

14.5

14.5

Average annual salaryYen

5,831,972

5,953,210

6,039,332

5,885,559

5,750,453

Overturn rate (within 3 years of joining the Company)

%

5.9

5.9

13.5

3.8

0.0
1

Men
Women

3

737

Women
Average years of employment

Age

697

Number taking childcare leave

Persons

0

1

2

3

Number taking family care leave

Persons

0

0

0

0

0

Number of temporary staff (including part-timers)

Persons

222

155

149

167

158

*1 Number of regular employees excluding Executive Officers*2 Number of regular employees including Executive Officers and number of special employees, temporary
employees and temporary and part-time employees*3 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

With a view to realizing an environment-friendly society, the Company will further strive to provide more
efficient and energy-saving products that generate lower noise, while promoting the reduction ofenvironmental burden.

Environmental Philosophy
The Toyo Denki Group sets initiatives to protect the global environment as its priority task and contributes to thedevelopment 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 measuresat 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

Aiming for Realization of a Sustainable Society

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

Unit
Total

Number of Officers

Men

Persons

Women

Fiscal 2009

Fiscal 2010

Fiscal 2011

Fiscal 2012

Fiscal 2013

10

12

10

10

11

10

12

10

10

11

0

0

0

0

0

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

Notes

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.)
Item

Fiscal 2009

Fiscal 2010

Fiscal 2011

Fiscal 2012

Fiscal 2013

Number of employees at Group companies in Japan and overseas Persons

Unit

373

429

431

379

404

Number of temporary staff (including part-timers)

353

262

235

256

243

Notes

Persons

As of May 31 for each fiscal year

Reference data III: System for support of work-family balance (at Toyo Denki Seizo K.K.)
Prenatal leave
Maternity leave
Childcare leave
Maternity andchildcare related

Repeat childcare leave(Mom and Dad Childcare
Leave Plus)
Shorter working hours forchildcare
Nursing leave
Family care leave

Family care related

Other

25

Family care work hours
System for Rehiring
Employees

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)Can be taken for up to 8 weeks after birth.
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 the child reaches one year of age. Further, if the employee andspouse both take childcare leave, the childcare leave period can be extended until the child reaches 1
year and 2 months.
Working hours may be set at 5 hours 45 minutes or 6 hours 45 minutes per day for a period as neededfrom the end of childcare leave until the child graduates from elementary school.
Up to 5 special days off may be taken per family member for nursing care for pre-elementary school age
children.
A total of up to 3 years of family care leave may be taken per person needing care.
Employees not taking family care leave may limit working hours to 5 hours and 45 minutes or 6 hours
and 45 minutes per day.
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.

A sustainable society as envisaged by the Company is the
combination of a “low-carbon society,” a “recycling-basedsociety” and a “nature-symbiotic society.”
The Company has produced numerous products thatfacilitate the efficient use of energy, including highefficiency motors and inverters that capitalize on theamalgamation of our outstanding motor drive technology
and other state-of-the-art technologies. In the meantime,
the Company has been striving to reduce the size andweight of its products as part of its efforts to conserve
resources, while lowering the level of noise involved in theiru s e t o m a k e t h e m f r i e n d l i e r t o t h e s u r ro u n d i n genvironment. As a member of society, the Company will
make further contribution to make society moresustainable, fully utilizing on its environmental technologies
on a global scale, while following through various
environmental actions at each of its bases.

Environment technologies of theCompany
Energy conservation at each baseUse of sustainable energy

Low-carbon society
Implementation of measures against
global warming

Recycling-based society

Waste reduction and recyclingat each basePromotion of waste reduction
and recycling

Nature-symbiotic society

Initiatives for control overchemical substances

Conservation of biodiversity

Environmental Management System
In order to tackle environmental issues on an independentand continuous basis, the Company has developed andoperates an environmental management system andthereby obtained ISO 14001 certification. This certification
has been acquired for all offices and the production bases
Yokohama Plant and Shiga Factory.

Years of ISO 14001 certification

Shiga Factory

2001

Yokohama Plant

2004

Extended to all
offices

2010

Toyo Denki Seizo Report 201426

Initiatives to Deal with the Environment and Local Communities
Environmental Data
Indices
Electric power (10,000 kWh)

Initiatives to Prevent Global Warming

Urban gas (1,000 Nm3)

Initiatives to reduce greenhouse gas (CO2) emissions

Targeted reduction of CO2 emissions and progress status

The Company is promoting energy conservation at eachof its production bases and offices to reduce its CO2
emissions.
At the production bases in particular, the progress ofenergy-saving efforts at workplaces is checked on amonthly basis to encourage an energy-saving awarenessamong employees, along with general power-saving andstreamlining at production facilities.

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 1.3%
reduction in fiscal 2013 with growth in production output
despite an increase in power and gas consumption.

600

3

720.7
317.2

637.0

244.6

232.0

400

400

631.8

590.9
252.0

628.5
284.0

0

3,479.2

200

2,000

2011

2012

2013

20

Water input

22.5
17.9

15

21.1
15.8

0
2009

(year*)

Water output

19.9
15.8

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
15,388.5
15,388.5
15.8
15.8
0.0

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
450,138.2
433,862.6
16,275.6
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
691,187.0
674,891.0
16,296.0
12.3
12.3
0.0

Remarks

1

2

3

4
5

6

3,307.3

2010

2011

2012

2013

(year*)

Total solar power generation at Yokohama Plant(Unit: 1,000 m3)

22.8

2,905.0

2,896.7

1,000

0
2010

Based on 500 kW generator
Yokohama Plant
Based on 12 kW generator
Production bases total
Yokohama Plant
Shiga Factory

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
16,219.7
16,219.7
15.8
15.8
0.0

Initiatives for Control over Chemical Substances

3,936.0

4,000
3,000

Total water input/output at Yokohama Plant
25

(t)

300

100

200

2009

Solar power generation (kWh)Fiscal 2009
662.1
637.0
25.1
24.8
232.0
232.0
22.8
22.8
0.0
2,985.7
2,896.789.0
3,217.1
3,217.1
17.9
17.9
0.0

Total CO2 emissions at Yokohama Plant

Gas (Unit: 1,000 Nm )Electricity

800

CO2 emissions (t)Water output (1,000 m3)

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

Water input (1,000 m3)

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
Power generation total

Based on 12 kW generator(kWh)

750,000

Based on 500 kW generator

Volatile organic compounds (VOCs) emitted as a result ofour business activities are adequately controlled and theamount of emission in monitored under the Pollutant
Release and Transfer Register (PRTR).
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.
We will further engage in the reduction of waste
through such measures including using non-VOC materials
and implementing recovery and reuse of solvents.

Notification volume for Pollutant Release and Transfer Register (PRTR) substances(kg)

Total amount of air emissions

10,0008,000
6,000

Total amount of shift

9,600
7,900
6,060

7,700
5,320

4,000

4,600

7,300
4,810

8,300
5,290

2,000
0
2009

674,891.0

2010

2011

2012

2013

(year*)

600,000

13.9

10

14.2

433,862.6

450,000

12.3

20,00016,219.7

15,388.5

16,275.6

16,296.0

2010

2011

2012

2013

Initiatives for Reducing Disposed Waste as Well as Recycling

10,0005

Main actions

0

0
2009

2010

2011

2012

2013

(year*)(year*)The Company successfully reduced its landfill waste rate
to 0.9% in fiscal 2013, as a result of thoroughly
implementing waste processing rules, sorting of metal
waste and recycling of paper resources.

Output of general and valuable waste
(t)

800

710.0

703.5

2009

2010

600

652.2

637.4

587.9

2011

2012

2013

5.6

5.0

5.9

2011

2012

2013

400
200
0

Promotion of green procurement
The Company is promoting green procurement withrespect to office equipment and supplies, stationery andworker’s clothes used at the Yokohama Plant. A 75%
green procurement ratio was achieved in fiscal 2013
based on purchase value.

(year*)

Volume of landfill waste
(t)

25

24.2

20
15
10

12.4

5
0
2009

27

2010

(year*)

Toyo Denki Seizo Report 201428

Initiatives to Deal with the Environment and Local Communities

PRTR Data
Indices
Total amount of air emissions (kg)
Total amount of shift (kg)

PRTR 7

Applicable premises

Production bases total
Total amount of
Yokohama Plant
air emissions
Shiga Factory
Bisphenol A (kg)
Production bases total
Total amount
Yokohama Plantof shift
Shiga Factory
Production bases total
Total amount of
Yokohama Plant
air emissions
Shiga Factory
Ethylbenzene (kg)
Production bases total
Total amount
Yokohama Plantof shift
Shiga Factory
Production bases total
Total amount of
Yokohama Plant
air emissions
Shiga Factory
Xylene (kg)
Production bases total
Total amount
Yokohama Plantof shift
Shiga Factory
Production bases total
Total amount of
Yokohama Plant
air emissions
Shiga Factory
Tetrahydromethylphthalicanhydride (kg)
Production bases total
Total amount
Yokohama Plantof shift
Shiga Factory
Production bases total
Total amount of
Yokohama Plant
air emissions
Shiga Factory
Toluene (kg)
Production bases total
Total amount
Yokohama Plantof shift
Shiga Factory

Fiscal 2009
7,900
6,060
0
0
0
940
940
0
1,700
1,700
0
230
230
0
2,900
2,900
0
190
190
0
0
0
0
3,700
3,700
0
3,300
3,300
0
1,000
1,000
0

Fiscal 2010
9,600
5,320
0
0
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

Fiscal 2011
7,700
4,600
0
0
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
0
0
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
0
0
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

Remarks

Fiscal 2009
242.5
242.5
113.1
113.1
354.4
354.4
710.0
710.0
556.5
556.5
12.4
12.4
1.7
1.7
-

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

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

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

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

Remarks

10

10

10

10

24.2
24.2

5.6
5.6

5.0
5.0

5.9
5.9

8

Industrial waste (tons)
General waste (tons)
Valuable metal waste (tons)
WastesWaste output ( + + ) (tons)
Recycled amount (tons)
Volume of landfill waste (tons)
Percentage of landfill waste (%)
Yearly comparison

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

10

10

10

10

3.3
3.4

0.8
0.9

0.8
0.8

0.9
0.9

10

10

10

10

We are committed to various social contribution activities, to facilitate our own co-existence with
communities and to foster young people who will represent the next generation.

To Convey the Mission and the Appeal of Electrical Industry as Well as of Toyo Denki
As an electrical manufacturer that contributes to thedevelopment of social infrastructures, the Company
performs various activities to promote understanding of
our missions and business contents among many people.

Receiving interns
We are committed to activities that raise awareness andappreciation of our manufacturing expertise by acceptinginterns from local technical high schools and providingthem with hands-on experience at manufacturing sites.
This internship system serves as an effective means ofrecruiting outstanding technical staff on a consistent basis
as some students in the schools apply for positions at theCompany.

Waste Data
Indices

Contributions to Local Communities

9

9

9

9

9

On-demand lectures on career workshops
The Company also
dispatches its
employees, primarily
engineers, for a career
workshop at educational
institutions. The
employees provide useful
information to promoteautonomous career
A career workshop at a highchoice among theschoolstudents at junior highschools and highschools. We offer audience-friendly presentations thatprovide practical information on the design anddevelopment work at manufacturers and give advice tostudents who are interested in becoming engineers.

Factory tours
We are conducting“factory tours” to provide
opportunities formembers of local
communities to actually
see our manufacturing
facilities and products inorder to develop deeper
understanding about the
A factory tour
business operations of
the Company. During
these tours, we inform the participants of our products aswell as our actions for environmental protection, in aneffort to build up relationships built on trust with local
communities.

Cooperation with Yokohama Kyodo no Mori Fund
The Company cooperates in small woodlands
conservation activities led mainly by the city of Yokohama
by donating part of the proceeds from vending machines
installed at the Engineering Center of the Yokohama Plant
to the fund.

Cleanup campaigns within the vicinity of the production bases
In cooperation with neighboring companies, we conductcleanup campaigns within the vicinity of the Yokohama
Plant and the Shiga Factory.

*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 inJune 2010.
*2 Production activities at Shiga Factory recorded close to zero water
input.
*3 Data collection started in fiscal 2010.
*4 500 kW solar panel became operational in July 2012.
*5 12 kW solar panel became operational in January 2010.

29*6 Production activities at Shiga Factory recorded close to zero water output.
*7 PPTR: Pollutant Release and Transfer Register*8 Bisphenol A has been inapplicable thus outside the scope of registration since fiscal
2010.
*9 Data collection started at Shiga Factory in fiscal 2010, prior to which no data existed.
*10 The recycled amount and the volume of landfill waste at the Shiga Factory are scheduled
for investigation starting in fiscal 2014.

Cleanup campaign(Yokohama Plant)

Cleanup campaign(Shiga Factory)

Toyo Denki Seizo Report 201430

Financial Review

Financial Report

Consolidated Operating Results, Consolidated Financial Position, and Consolidated Cash Flow for Fiscal
2013 (from June 1, 2013 to May 31, 2014) are as follows:

Results of Operation
Orders received
YoY +25.4%

Orders received increased 25.4% compared with the previous fiscal year to 42,568 million yen. Thisoverall result reflected a surge in orders received in the Transportation Systems segment both in andoutside Japan.

Net sales
YoY +14.3%

Net sales increased 14.3% year on year to 34,957 million yen. Despite a slight decrease in the
Industrial Systems segment, this overall result reflected a significant surge in the Transportation
Systems segment both in and outside Japan, and a slight increase in the Information Equipment
Systems segment.

Profit/Loss
Net Income
YoY -10.8%

From a profit perspective, operating income increased 575 million yen compared with the previous
fiscal year to 1,076 million yen, mainly due to the increase in net sales and reductions in expenses.
Ordinary income decreased 115 million yen to 1,035 million yen, which was partly attributable toforeign exchange losses, albeit small. Net income declined 78 million yen to 644 million yen.

Financial Position
AssetsTotal Assets
44,752 million yen

Total assets as of May 31, 2014 stood at 44,752 million yen, an increase of 2,388 million yen
compared with the end of the previous fiscal year. Despite a decrease in trade notes and accounts
receivable of 578 million yen, the increase in total assets was largely attributable to increases in cash
and cash equivalents of 1,695 million yen, inventories of 436 million yen, and investment securitiesof 944 million yen.

Liabilities
Total liabilities
25,402 million yen

Total liabilities amounted to 25,402 million yen, an increase of 1,558 million yen compared with theprevious fiscal year end. While short-term debt contracted 2,308 million yen, this upswing in total
liabilities reflected a 1,521 million yen increase in long-term debt and a 909 million yen increase inaccrued expenses as well as an increase of 755 million yen in net defined benefit liability (deductionof decrease in the provision for employees’ retirement benefits) as a result of application of therevised retirement benefits accounting standards.

Net Assets
Total net assets
19,350 million yen

Net assets as of May 31, 2014 stood at 19,350 million yen, an increase of 830 million yen comparedwith the previous fiscal year. This increase was largely attributable to a 355 million yen increase inretained earnings and a 622 million yen increase in unrealized holding gain on available-for-salesecurities despite a decrease of 298 million yen from remeasurements of defined benefit plans.

Cash Flows
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
38 Notes to Consolidated Financial Statements
58 Report of Independent Auditors
31

Cash flow fromoperating activities
Net cash provided byoperating activities
3,621 million yen

Net cash provided by operating activities amounted to 3,621 million yen. Apart from accrued
expenses, major cash outflows were an increase of 1,537 million yen in accrued expenses and tradenotes and accounts payable. Principal cash inflows were income before income taxes and minority
interests at 1,030 million yen and depreciation and amortization at 1,000 million yen.

Cash flow frominvesting activities
Net cash used ininvesting activities
753 million yen

Net cash used in investing activities totaled 753 million yen for the fiscal year under review andmainly comprised funds used for the purchases of property, plant and equipment at 635 million yen.

Cash flow fromfinancing activities
Net cash used infinancing activities
1,199 million yen

Net cash used in financing activities was 1,199 million yen. The principal cash inflow was an increasein long-term debt at 2,650 million yen, while major cash outflows were a decrease in short-termloans payable at 2,265 million yen and repayment of long-term debt at 1,172 million yen.
Toyo Denki Seizo Report 201432

TOYO DENKI SEIZO K.K.
Consolidated Balance Sheets

As of

May 31,
2014

May 31,
2013(Millions of yen)

May 31,
2014(Thousands of
U.S. dollars)(Note 3)

AssetsCurrent assets:
Cash on hand and in banks (Notes 19 and 21)¥ 2,998¥ 1,302$ 29,488

Trade notes and accounts receivable (Notes 4 and 19)

12,806

13,384125,964

Inventories (Note 5)

7,101

6,665

69,855

Deferred tax assets (Note 14)

545

453

5,360

Other current assets

140

179

1,376

Allowance for doubtful accounts

(34)

(40)

(335)

23,556

21,943

231,708

Total current assets

As of

May 31,
2014

May 31,
2013(Millions of yen)

LIABILITIES AND NET ASSETS
Current liabilities:
Trade notes and accounts payable (Notes 4 and 19)
Short-term borrowings and current portion of long-term debt
(Notes 8 and 19)
Current portion of bonds payable (Note 9)
Income taxes payable (Note 14)
Accrued expenses
Accrued directors’ bonuses
Accrued employees’ bonuses
Reserve for losses on order acknowledgements (Note 5)
Other
Total current liabilities

May 31,
2014(Thousands of
U.S. dollars)(Note 3)

¥ 5,286¥ 4,647$ 51,993

1,988

4,296

19,555

—
375
3,792
28
915
130
983
13,497

120
319
2,883
17
773
196
1,029
14,280—3,685
37,302
279
9,004
1,278
9,666
132,762

6,934
—
653
44
4,045
146
84
11,906

5,413
3,289
615
44
—
165
38
9,564

68,208—6,424
431
39,7881,433
832
117,116

Buildings and structures

2,847

2,985

28,007

Machinery and vehicles

909

1,109

8,938

Land

289

289

2,848

Construction in progress

63

81

623

Long-term liabilities:
Long-term debt (Notes 8, 19 and 22)
Accrued retirement benefits (Note 10)
Deferred tax liabilities (Note 14)
Reserve for ecological countermeasures
Liability for retirement benefits (Note 10)Long-term payables
Other
Total long-term liabilities

Other

548

548

5,386

Commitments and contingencies (Note 17)

4,656

5,012

45,802

Net assets (Notes 11 and 18):
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity¥ 4,998
3,178
7,511
(168)
15,519¥ 4,998
3,178
7,156
(164)
15,168$ 49,168
31,25673,882(1,647)
152,659

Accumulated other comprehensive income:Unrealized holding gain on securities
Deferred loss on hedging instruments
Translation adjustments
Retirement benefits liability adjustments (Note 10)
Total accumulated other comprehensive income
Total net assets

3,990
(26)
166
(299)
3,831
19,350

3,367
—
(15)
—
3,352
18,52039,247(256)
1,631(2,940)37,682
190,341

Total liabilities and net assets¥44,753¥42,364$440,219

Property, plant and equipment (Note 6):

Total property, plant and equipment

Investments and other assets (Note 7):

14,263

13,318140,301

Deferred tax assets (Note 14)

36

39

352

Intangible assets

268

322

2,636

1,986

1,893

19,541

Allowance for doubtful accounts

(12)

(163)

(121)

Total investments and other assets

16,541

15,409

162,709

Total assets¥44,753¥42,364$440,219

Investment securities (Notes 7, 19 and 20)

Other

See notes to consolidated financial statements.

33

Toyo Denki Seizo Report 201434

TOYO DENKI SEIZO K.K.
Consolidated Statements of Income

For the Years Ended

TOYO DENKI SEIZO K.K.
Consolidated Statements of Changes in Net Assets
May 31,
2014

May 31,
2013(Millions of yen)

Net sales (Note 23)
Cost of sales (Note 5)
Gross profit
Selling, general and administrative expenses (Note 12)
Operating income

May 31,
2014(Millions of yen)
Shareholders’ equity(Thousands of
U.S. dollars)(Note 3)¥34,958
26,8608,098¥30,575
22,8797,696$343,869
264,21479,655

7,022
1,076

7,195
501

69,06910,586

Balance as of June 1, 2012

Ordinary income
Special gains (losses), net (Note 13)
Income before income taxes and minority interests
Income taxes (Note 14):
Current
DeferredIncome before minority interests
Minority interests
Net income

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

160
(215)
(16)
91
630
(16)
16
650
1,151
122
1,273

1,660
(1,790)
(140)
57
(144)
(131)
93
(395)
10,191(53)
10,138

624
(238)
386
644
—
¥ 644

496
55
551
722
—
722

6,139
(2,340)
3,799
6,339
—
$ 6,339¥

Unrealized
holding
gain onsecurities¥(162) ¥14,736

¥ 415

—

¥(102)—¥ 313¥15,049

(288)
722
(2)

—
—
—

—
—
—

—
—
—

—
—
—

—
—
—

(288)
722
(2)

Commonstock

CapitalsurplusRetainedearnings

Treasurystock¥4,998¥3,178¥6,722

Cash dividends paid
Net income

—
—
—

—
—
—

(288)
722
—

Net changes in items
other than those inshareholders’ equity
Total changes during the year——
¥4,998——¥3,178—434¥7,156——(2)432¥(164) ¥15,168

2,952
2,952
¥3,367

—
—
—

87
87
¥ (15)

—
—
—

3,039
3,039
¥3,352

3,039
3,471¥18,520

Balance as of May 31, 2013
Balance as of June 1, 2013
Cash dividends paid

¥4,998———¥3,178———¥7,156(289)
644—¥(164) ¥15,168
—
(289)
—
644
(4)
(4)

¥3,367
—
—
—

—
—
—
—

¥ (15)
—
—
—

—
—
—
—

¥3,352———¥18,520
(289)
644
(4)

Net income
Purchase of treasury stock
Net changes in items
other than those inshareholders’ equity
Total changes during the year——
¥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 May 31, 2014

Total
Deferred
Retirement accumulated
loss
benefitsotheron hedging Translation
liability comprehensive
instruments adjustments adjustments
incomeTotal net
assets——(2)

Balance as of June 1, 2013

For the Years Ended

Cash dividends paid
Net income
Purchase of treasury stock
Net changes in items
other than those inshareholders’ equity

May 31,
2014

May 31,
2013(Millions of yen)

May 31,
2014(Thousands of
U.S. dollars)(Note 3)

¥ 644

¥ 722

$ 6,339

623
(26)
14

2,951
—
27

6,127
(256)
138

167
778

61
3,039

Comprehensive income¥1,422¥3,761$13,985

Comprehensive income attributable to:
Owners of the parent
Minority interests¥1,422—¥3,761—$13,985—

Income before minority interests
Other comprehensive income (Note 15):
Unrealized holding gain on securities
Deferred loss on hedging instruments
Translation adjustments
Share of other comprehensive income of affiliates accounted for by theequity method
Total other comprehensive income

Total net
assets(Thousands of U.S. dollars) (Note 3)
Shareholders’ equity

Accumulated other comprehensive income

See notes to consolidated financial statements.

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

Total
Deferred
Retirement accumulated
loss
benefitsotheron hedging Translation
liability comprehensive
instruments adjustments adjustments
incomeTotal
shareholders’equityChanges during the year

Purchase of treasury stock

Non-operating income (expenses):
Interest and dividend income
Interest expense
Equity in 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

Accumulated other comprehensive income

Total changes during the year
Balance as of May 31, 2014

Total
shareholders’equityUnrealized
holding
gain onsecurities

Commonstock

CapitalsurplusRetainedearnings

Treasurystock$49,168———$31,256———$70,388(2,845)
6,339—$(1,613) $149,199—(2,845)
—
6,339
(34)
(34)

$33,120
—
—
—

—
—
—
—

$ (144)—————$49,168——$31,256—
3,494$73,882

—
—
(34)
3,460
$(1,647) $152,659

6,127
6,127
$39,247

(256)
(256)
$(256)

1,775
1,775$1,631————$32,976 $182,175—(2,845)
—
6,339
—
(34)

(2,940)4,706
4,706(2,940)4,706
8,166$(2,940) $37,682 $190,341

See notes to consolidated financial statements.

1,637
7,646

See notes to consolidated financial statements.

35

Toyo Denki Seizo Report 201436

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,
2014

May 31,
2013(Millions of yen)

Operating activities
Income before income taxes and minority interests
Depreciation and amortization(Reversal of) provision for allowance for doubtful accounts
Provision for (reversal of) accrued employees’ bonuses(Reversal of) provision for accrued retirement benefits
Increase in liability for retirement benefits
Interest and dividends income
Interest expenses
Gain on sales of investment securities
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
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
Proceeds from sales 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 (used in) provided by financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 21)

37

May 31,
2014(Thousands of
U.S. dollars)(Note 3

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.

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

¥ 1,273
1,144
158
(118)
153
—
(160)
215
(72)

$ 10,138
9,843(1,544)
1,400(32,355)
35,219(1,660)
1,790
—

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

231
(1,123)
100
(6)
201
(29)
(243)
1,724
172
(211)
(615)
1,070

5,766
(4,231)
6,249(671)(1,399)8,876
3,778
41,1991,660(1,654)(5,583)35,622

(635)
(13)
—
(75)
4
(34)
(753)

(1,426)
(13)
127
(178)
124
(92)
(1,458)(6,251)
(131)
—
(734)
40
(338)
(7,414)(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.

(2,265)2,650(1,172)
(120)
(3)
(288)
(1)
(1,199)
27
1,696
1,302
¥ 2,998(2,000)3,800(1,196)
(160)
(1)
(288)
(0)
155
46
(187)
1,489
¥ 1,302(22,281)
26,067(11,529)(1,180)(34)(2,830)(9)(11,796)264
16,676
12,812$ 29,488(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.

(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, 2014, the numbers of consolidated subsidiaries and affiliates accounted for by the equity method were 6 and 2 (6and 3 in 2013). 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.

(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 201438

(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
Machinery and vehicles:
3 to 12 years
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
Non-cancellable lease transactions that transfer substantially all risks and rewards associated with the ownership of assets to thelessee are accounted for as finance leases. Leased assets capitalized under the finance lease arrangements are depreciated over thelease 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 ¥(66) million ($(650) thousand) and ¥(2) million is included in cost of sales
for the years ended May 31, 2014 and 2013, 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.

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
On May 17, 2012, the ASBJ issued “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26) and “Guidance on
Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25), which replaced the Accounting Standard for Retirement
Benefits that had been issued by the Business Accounting Council in 1998 with an effective date of April 1, 2000 and other related
practical guidances, followed by partial amendments from time to time through 2009.
(1) Overview
The standard provides guidance for the accounting for unrecognized actuarial differences and unrecognized prior service costs,
the calculation methods for the retirement benefit obligation and service costs, and enhancement of disclosures taking into
consideration improvements to financial reporting and international trends.
(2) Scheduled date of adoption
The revised accounting standard and guidance were adopted as of the end of the fiscal year ended May 31, 2014. However,revisions to the calculation methods for the retirement benefit obligation and service costs are scheduled to be adopted from the
beginning of the fiscal year ending May 31, 2015.
(3) Impact of adopting revised accounting standard and guidance
The Company is currently evaluating what effect these modifications will have on its consolidated financial statements.

(o) Retirement benefits
Retirement benefit obligation is attributed to each period by the straight-line method over the estimated 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 following 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.

2. Accounting Changes
The Company adopted “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26 of May 17, 2012; hereinafter the“Standard”) and “Guidance on Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25 of May 17, 2012; hereinafter
the “Guidance”) (excluding provisions described in the main clause of Paragraph 35 of the Standard and in the main clause of
Paragraph 67 of the Guidance) as of the end of the fiscal year ended May 31, 2014. Accordingly, retirement benefit obligation has
been changed to the method where it is recorded as liability for retirement benefits and unrecognized actuarial differences andunrecognized prior service cost are recorded under liability for retirement benefits. Concerning the application of the Standard, in
accordance to the provisional treatments set out in Paragraph 37 of the Standard, the effects of such changes in the current fiscal
year have been recorded in retirement benefits liability adjustments included in accumulated other comprehensive income. As resultof this change, liability for retirement benefits was recognized in the amount of ¥4,045 million ($39,788 thousand) and accumulated
other comprehensive income decreased by ¥299 million ($2,940 thousand) as of May 31, 2014. The effect on per share information
is described in Note 18.

(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.

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 ¥101.66=U.S.$1, the approximate rate of exchange prevailing at May 31, 2014. Thistranslation should not be construed as a representation that all amounts shown could be converted into U.S. dollars at such rate.
Toyo Denki Seizo Report 201440

4. Notes Receivable and Payable
As May 31, 2014 falls on a bank holiday, the following notes receivable and payable were accounted for as if they were settled on thematurity date:

As of

May 31,
2014

May 31,
2013(Millions of yen)

¥155
66

Notes receivable
Notes payable$1,520652

5. Inventories
Inventories as of May 31, 2014 and 2013 were as follows:

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

May 31,
2014

May 31,
2013(Millions of yen)

¥1,483
3,459
2,159¥7,101

May 31,
2014(Thousands of
U.S. dollars)¥1,465
3,082
2,118¥6,665$14,593
34,027
21,235$69,855

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 ¥200 million ($1,968 thousand) and ¥55 million for the years
ended May 31, 2014 and 2013, respectively. These amounts were included in “Cost of sales”.
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:

As of

May 31,
2014

May 31,
2013(Millions of yen)

¥ 18
147
¥165

Merchandise and finished products
Work in process

May 31,
2014(Thousands of
U.S. dollars)

¥ 8
30
¥38

$ 176
1,447
$1,623

Buildings and structures
Machinery and vehicles
Other
Accumulated depreciation

May 31,
2013(Millions of yen)

¥1,001

May 31,
2014(Thousands of
U.S. dollars)¥1,144$9,843

Accumulated depreciation of property, plant and equipment amounted to ¥12,623 million ($124,167 thousand) and ¥12,113
million as of May 31, 2014 and 2013, respectively.
The following amount of deferred gain was directly deducted from the acquisition costs of the related property, plant and equipment
acquired during the year ended May 31, 2013:
Buildings and structures:¥29 million
Other:
6 million
No deferred gain was recorded as of May 31, 2014.
7. Investments and Other Assets
Investments in unconsolidated subsidiaries and affiliates included in “Investment securities” as of May 31, 2014 and 2013 were as
follows:

As ofEquity securities
Investments in capital

May 31,
2014

May 31,
2013(Millions of yen)

¥

—
1,034

May 31,
2014(Thousands of
U.S. dollars)

¥ 59
856

$

—
10,175

8. Short-Term Borrowings and Long-Term Debt
As of May 31, 2014 and 2013, 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,
2014

May 31,
2013(Millions of yen)

¥ 7,076
6,679
3,171
16,926(12,623)¥ 4,303¥ 6,973
6,757
3,025
16,755(12,113)¥ 4,642

May 31,
2014(Thousands of
U.S. dollars)

May 31,
2014

May 31,
2013(Millions of yen)

¥ 915
1,073
¥1,988

May 31,
2014(Thousands of
U.S. dollars)¥3,180
1,116¥4,296$ 9,000
10,555$19,555$ 69,600
65,70031,198
166,498(124,167)$ 42,331

As of May 31, 2014 and 2013, long-term debts were as follows:

As ofLong-term debt, excluding current portion, serially due from 2015 through 2020

May 31,
2014

May 31,
2013(Millions of yen)

¥6,934

May 31,
2014(Thousands of
U.S. dollars)¥5,413$68,208

The annual weighted average interest rate applicable to long-term debt as of May 31, 2014 was 1.312%.
The maturities of long-term debt are summarized as follows:

Years ended May 31
2015
2016
2017
2018
2019 and thereafter41

May 31,
2014

The annual weighted average interest rates applicable to short-term borrowings and current-portion of long-term debt as of May
31, 2014 were 1.125% and 1.847%, respectively.

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

As of

For the Years Ended

May 31,
2014(Thousands of
U.S. dollars)¥——

Depreciation of property, plant and equipment for the years ended May 31, 2014 and 2013 were as follows:(Millions of yen)(Thousands of
U.S. dollars)¥1,073
794
352
4,002
1,786
¥8,007$10,555
7,810
3,463
39,367
17,568$78,763

Toyo Denki Seizo Report 2014

42

The assets pledged as collateral for short-term borrowings of ¥1,638 million ($16,112 thousand) and long-term debt of ¥1,929
million ($18,975 thousand) as of May 31, 2014 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)¥1,731
711
399
158¥2,999$17,023
6,996
3,923
1,559
$29,501

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

The Company(Millions of yen)(Thousands of
U.S. dollars)¥1,731711
399¥2,841$17,023
6,996
3,923$27,942

May 31,
2013(Millions of yen)

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

¥—
¥—

May 31,
2014(Thousands of
U.S. dollars)

¥120
¥120

$—
$—

10. Retirement Benefit Plans
For the year ended May 31, 2014
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 year ended May 31, 2014 are as follows:
Retirement benefit obligation as of June 1, 2013
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Retirement benefit obligation as of May 31, 2014

(Thousands of
U.S. dollars)

¥211
59
44
(10)
270
¥574

$2,079
581
430
(99)
2,653
$5,644(Millions of yen)(Thousands of
U.S. dollars)¥ (39)
234
269
¥464

$ (386)
2,309
2,646$4,569Major actuarial assumption (weighted average) used in accounting for the above plans as of May 31, 2014 were as follows:
Discount rate:
1.5%

May 31,2014
5th unsecured bonds issued on Mar. 25, 2009 at 1.12%, dueon Mar. 25, 2014

(Millions of yen)

Retirement benefits liability adjustments (before tax effect) as of May 31, 2014 are as follows:

9. Bonds Payable
As of May 31, 2014 and 2013, bonds payable consisted of the following:

As ofIssued by:

The components of retirement benefit expenses for the year ended May 31, 2014 are as follows:(Millions of yen)(Thousands of
U.S. dollars)¥4,052
211
59
5
(282)
¥4,045$39,860
2,079
581
48
(2,780)$39,788

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheet as of
May 31, 2014 for the Company’s and the consolidated subsidiaries’ defined benefit plans:(Millions of yen)(Thousands of
U.S. dollars)

Unfunded retirement benefit obligation
Net liability (asset) for retirement benefits on the consolidated balance sheet¥4,045
4,045$39,788
39,788

Liability for retirement benefits
Net liability (asset) for retirement benefits on the consolidated balance sheet¥4,045
4,045$39,788
39,788The amount of the required contribution to the defined contribution plans of the Company and its consolidated subsidiaries was¥109 million ($1,074 thousand) for the year ended May 31, 2014.
For the year ended May 31, 2013
The Company and its consolidated subsidiaries have retirement benefit plans combined by defined contribution plans and lump-sum
payment plans.
The following table sets forth the components of the amounts recognized in the consolidated balance sheets as of May 31, 2013
for the Company and its consolidated subsidiaries’ benefit plans:(Millions of yen)

Retirement benefit obligation
Unrecognized net retirement benefit obligation at transition
Unrecognized actuarial loss
Unrecognized prior service costAccrued retirement benefits¥(4,052)
539
273
(49)
¥(3,289)

Consolidated subsidiaries adopted a simplified method in the calculation of their retirement benefit obligation.
The components of retirement benefit expenses for the year ended May 31, 2013 are outlined as follows:(Millions of yen)

Service cost
Interest cost
Amortization of net retirement benefit obligation at transition
Amortization of actuarial loss
Amortization of prior service cost
Other
Retirement benefit expenses

¥229
61
270
44
(10)
112
¥706

Notes: 1. Retirement benefit expenses for consolidated subsidiaries adopting the simplified method are included in “Service cost.”
2. “Other” represents contributions paid to defined contribution pension plans.

Notes: The plan adopting the simplified method is included.

43

Toyo Denki Seizo Report 2014

44

The assumptions used in accounting for the above plans for the year ended May 31, 2013 were as follows:
Inter-period allocation method of estimated retirement benefits
Discount rate
Amortization period of actuarial loss
Amortization period of prior service cost
Amortization period of net retirement benefit obligation at transition

b. Dividends

Straight-line method

1) Dividends paid

1.5%
10 years
10 years
15 years

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

11. Net Assets
Information regarding changes in net assets for the years ended May 31, 2014 and 2013 are as follows:a. Shares issued and outstanding/ Treasury stock

Type of shares

Note:
Detail of the increase is as the following:
Increase due to purchase of shares of less than standard unit

Number ofshares as ofJune 1, 2013

Increase

Decrease

Number ofshares as of
May 31, 2014

48,675,000——

48,675,000

463,566

10,961—

474,527

Decrease

Number ofshares as of
May 31, 2013

10,961 shares

For the year ended May 31, 2013

Type of shares

Number ofshares as ofJune 1, 2012

Increase(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

$2,845

¥6.00

$0.06

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

Cut-off date

Effective dateCut-off date

Effective date

May 31, 2013 August 28, 2013

For the year ended May 31, 2013

(Shares)

Shares issued:
Common stock
Treasury stock:
Common stock¥289

Common stock

For the year ended May 31, 2014

Type of shares

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

48,675,000——

48,675,000

458,570

4,996—

463,566

4,996 shares

Resolution
Annual general meetingof the shareholders on
August 28, 2012

Type of shares
Common stock¥289¥6.00 May 31, 2012 August 29, 2012

2) Dividends with the cut-off date in the year ended May 31, 2014 and the effective date in the year ending May 31, 2015
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, 2014
stock
2014
¥289
$2,845 earnings¥6.00$0.06 201412. Selling, General and Administrative Expenses

For the Years Ended
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,
2014

May 31,
2013(Millions of yen)

¥1,849
28
389
317
(21)
666

May 31,
2014(Thousands of
U.S. dollars)¥1,760
17
320
347
165
917

$18,189
279
3,828
3,121
(209)
6,550

13. Special Gains (Losses), net
The components of “Special Gains (Losses), net” for the years ended May 31, 2014 and 2013 were as follows:

For the Years Ended
Special gains:
Gain on sales of investment securities
Refund of temporary exceptional enterprise tax
Special losses:
Office relocation costs
Loss on liquidation of an affiliate
Total

45

May 31,
2014

May 31,
2013(Millions of yen)

May 31,
2014(Thousands of
U.S. dollars)

¥—
—

¥ 72
65

$—
—

—
(6)
¥ (6)

(15)
—
¥122

—
(53)
$(53)

Toyo Denki Seizo Report 201446

14. 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 38.0% for the years ended May 31,
2014 and 2013. Income taxes of a foreign consolidated subsidiary are based generally on the tax rates applicable in the country ofincorporation.
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, 2013 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
Other
Effective tax rate

May 31,
2013
38.0%
1.3
(1.7)
2.1
(4.4)
0.5
5.2
2.2
43.2%

The significant components of deferred tax assets and liabilities as of May 31, 2014 and 2013 were as follows:

As ofDeferred tax assets:
Write-down of inventories
Accrued retirement benefits
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,
2014

May 31,
2013(Millions of yen)

May 31,
2014(Thousands of
U.S. dollars)

¥ 140
—
1,444

¥ 177
1,187
—

$ 1,376—
14,200

328

295

3,228

36
854
2,802
(674)
2,128

65
776
2,500
(792)
1,708

359
8,402
27,565(6,634)20,931(2,196)(4)(2,200)¥ (72)(1,828)(3)(1,831)¥ (123)(21,602)(41)(21,643)$ (712)

15. 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, 2014 and 2013:

For the Years Ended

May 31,
2014

May 31,
2013(Millions of yen)

May 31,
2014(Thousands of
U.S. dollars)

Unrealized holding gain on securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTax effectUnrealized holding gain on securities

¥990
—
990
(367)
623

¥ 4,568(73)
4,495(1,544)
2,951$9,741—
9,741(3,614)
6,127

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)

—
—
—
—

(398)
(398)
142
(256)

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

14
14
14

27
27
27

138
138
138

167

61

1,637

167
¥778

61
¥ 3,039

1,637$7,646

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

16. 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.

Adjustments of deferred tax assets and liabilities due to a change in the income tax rate:“Act on Partial Revision, etc. of the Income Tax Act, etc.” proclaimed on March 31, 2014 repealed the special reconstruction corporate
tax from the year beginning on or after April 1, 2014. As a result, the effective statutory tax rate used in computing deferred tax assets
and liabilities has been reduced from 38.0% to 35.6% for the temporary differences expected to be settled in the year beginning on
June 1, 2014. The effects from this rate change were a decrease in net deferred tax assets (after deducting deferred tax liabilities) asof May 31, 2014 by ¥50 million ($494 thousand) and an increase in income taxes – deferred for the year ended May 31, 2014 by thesame amount.

47

Toyo Denki Seizo Report 201448

17. Contingent Liabilities
As of May 31, 2014 and 2013, 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,
2014

May 31,
2013(Millions of yen)

May 31,
2014

Overview(Thousands of
U.S. dollars)(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 and issuance of corporate bonds. The Group manages temporary cash surpluses through low
risk financial assets. The Group uses interest rate swaps for the purpose of reducing the interest rate fluctuation risk on long-term
debt and fixing the interest expenses and does not enter into derivatives for speculative or trading purposes.

¥138
185

¥198
187

$1,361
1,817

May 31,
2014

May 31,
2013

May 31,
2014

18. Amounts Per Share

For the Years Ended
Net income:
Basic

(Yen)

(U.S. dollars)¥13.37¥14.98

$0.13

As of

May 31,
2014

May 31,
2013

May 31,
2014

Net assets¥401.45(Yen)(U.S. dollars)¥384.14$3.95

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
Net income
Net income not attributable to common shareholders
Net income attributable to common stock

May 31,
2014

May 31,
2013(Millions of yen)

¥644
—
644

May 31,
2014(Thousands of
U.S. dollars)

¥722
—
722

$6,339—
6,339(Thousand shares)

Average number of shares of common stock during the year

48,206

19. Financial Instruments

48,214

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 decreased by ¥6.20 ($0.06)
as of May 31, 2014.

(2) Types of financial instruments and related risk
Trade receivables—trade notes and accounts receivable—are exposed to credit risk in relation to customers.
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.”(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 22, Derivative
Transactions are not necessarily indicative of the actual market risk involved in derivative transactions.

49

Toyo Denki Seizo Report 201450

Estimated Fair value of Financial Instruments

As of May 31, 2013

Carrying value

Fair value

Difference(Millions of yen)

Carrying value of financial instruments on the consolidated balance sheets as of May 31, 2014 and 2013 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, 2014

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 payable
5) Short-term borrowings
6) Bonds payable
7) Long-term debt
Total liabilities
8) Derivative transactions*

As of May 31, 2014

¥ 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)¥—

Fair value

Difference

Carrying value(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 payable
5) Short-term borrowings
6) Bonds payable
7) Long-term debt
Total liabilities
8) Derivative transactions*$ 29,488
125,964
133,988$289,440$ 29,488
125,964
133,988$289,440

$ —
—
—
$ —

$ 51,993
9,000—
78,763$139,756$ (397)$ 51,993
9,000—
78,889$139,882$ (397)

$ —
—
—
(126)
$(126)$ —*Derivative transactions are presented in a net amount of receivables and payables and net payables are shown in parenthesis.

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¥ 1,302
13,384
12,618¥27,304¥ 1,302
13,384
12,618¥27,304¥———¥—¥ 4,647
3,180
120
6,529
¥14,476¥ —¥ 4,647
3,180
121
6,494
¥14,442
¥ —

¥—
—
(1)
35
¥ 34
¥—

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 20“Securities”.
Liabilities:
Trade notes and accounts payable and short-term borrowings
Since these items are settled in a short period of time, their carrying value approximates fair value.
Bonds payable
The fair value of bonds payable is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new bonds were
issued.
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.
2. Financial instruments for which it is extremely difficult to determine the fair value

As ofUnlisted equity securities

May 31,
2014

May 31,
2013(Millions of yen)¥642

May 31,
2014(Thousands of
U.S. dollars)¥700$6,313

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.

51

Toyo Denki Seizo Report 201452

3. Redemption schedule for receivables and securities with maturities at May 31, 2014 and 2013 are as follows:

As of May 31, 2014

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, 2014

¥ 2,995
10,933¥13,928¥ —1,873¥1,873

¥—
—
¥—

¥—
—
¥—

Due in One Yearor Less

Due after One
Year throughFive Years

Due after Five
Years throughTen Years

Due after
Ten Years(2) Impairment of investment securities
No impairment loss on investment securities was recognized for the year ended May 31, 2014.
(3) No securities classified as available-for-sale securities were sold for the year ended May 31, 2014
As of May 31, 2013
(1) Information regarding securities classified as available-for-sale securities
Available-for-sale securities(Thousands of U.S. dollars)

Cash on hand and in banks
Trade notes and accounts receivable

As of May 31, 2013

$ 29,461
107,540$137,001$ —18,424$18,424

$—
—
$—

$—
—
$—

Due in One Yearor Less

Due after One
Year throughFive Years

Due after Five
Years throughTen Years

Due after
Ten Years¥ 1,299
12,095¥13,394¥ —1,289¥1,289(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.

(Millions of yen)

Securities whose carrying value exceeds their acquisition cost:
Stock
Subtotal
Securities whose acquisition cost exceeds their carrying value:
Stock
Subtotal
Total¥12,083¥12,083¥6,777¥6,777¥5,306¥5,306¥ 535¥ 535¥12,618

¥ 575
¥ 575
¥7,352¥ (40)¥ (40)¥5,266

Note: 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.

For the Year ended May 31, 2013

Sales proceeds

Gain on sales

Loss on sales(Millions of yen)

(1) Information regarding securities classified as available-for-sale securities

Stock

Available-for-sale securities

Carrying value Acquisition cost

Unrealized
Gain (Loss)(Millions of yen)

As of May 31, 2014

Unrealized
Gain (Loss)(3) Sales of securities classified as available-for-sale securities and the aggregate gain and loss for the year ended May 31, 2013

As of May 31, 2014

Securities whose carrying value exceeds their acquisition cost:
Stock
Subtotal
Securities whose acquisition cost exceeds their carrying value:
Stock
Subtotal
Total

Carrying value Acquisition cost(2) Impairment of investment securities
No impairment loss on investment securities was recognized for the year ended May 31, 2013.

20. Securities

As of May 31, 2014

As of May 31, 2013¥13,228¥13,228¥6,962¥6,962¥6,266¥6,266¥ 393¥ 393¥13,621

¥ 405
¥ 405
¥7,367¥ (12)¥ (12)¥6,254

Carrying value Acquisition cost

¥127

¥72

¥—

21. Supplementary Cash Flow Information
Cash and cash equivalents in the consolidated statements of cash flows for the years ended May 31, 2014 and 2013 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

May 31,
2013(Millions of yen)

¥2,998¥2,998

May 31,
2014(Thousands of
U.S. dollars)¥1,302¥1,302$29,488$29,488

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$130,123$130,123$68,479$68,479$61,644$61,644$ 3,865$ 3,865$133,988$ 3,987$ 3,987$72,466$ (122)$ (122)$61,522

Note: 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.

53

Toyo Denki Seizo Report 20145422. Derivative Transactions
Hedging policies
The Company utilizes interest rate swaps for the purpose of hedging its exposure to fluctuations in interest rates. However, based oninternal 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.
Types and purpose of derivative transactions

23. 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.

The Company primarily uses interest rate swaps to hedge against the adverse impact of fluctuations in interest rates on interestbearing debt.
There is no derivative transaction to which hedge accounting is not applied.

Interest-related derivatives:

Major hedged
item

Notional amount
Maturing within Maturing after
one year
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/fixed

As of May 31, 2014

Transportation

Industrial

Information
Equipment

Other(Note)

Total

Adjustments

Consolidated(Millions of yen)

Derivative transactions to which hedge accounting is applied:

As of May 31, 2014

For the year ended May 31, 2014
Reportable segments

Long-term debt

¥1,500¥1,500Long-term debt

¥7,152¥6,389Major hedged
item

Notional amount
Maturing within Maturing after
one year
one year¥(40)

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

¥
¥

¥
¥

¥
¥

¥ 0
¥ 2

¥
¥

¥
¥

175
80

¥ 1,001¥ 612

Adjustments

Consolidated

Note 2

Fair value

594
392

208
121

24
17

826
532

(Thousands of U.S. dollars)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/fixed

As of May 31, 2013

Long-term debt

$14,755$14,755

Long-term debt

$70,352$62,847

Major hedged
item

Notional amount
Maturing within Maturing after
one year
one yearLong-term debt

¥5,789¥4,988Transportation

Industrial

Information
Equipment

Other(Note)

Total(Thousands of U.S. dollars)

Fair value
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.

55

Reportable segments

Note 2(Millions of yen)Interest rate swaps accounted for by the exceptional method:
Receive/floating and pay/fixed

For the year ended May 31, 2014$(397)

Sales, profits orlosses and asset byreportable segments
Net sales:
Sales to third parties
Inter-segment sales
and transfers$218,358$107,462$17,988$61$343,869$—$343,869

Segment profit
Segment assets

348
218,706$ 23,357$169,18213
107,475$ 5,279$ 77,941—
17,988$ 3,426$ 7,190

4,818
4,879
$ 403
$5,164

5,179
349,048$ 32,465$259,477(5,179)(5,179)$ (21,879)$180,742—
343,869$ 10,586$440,219

Other items:
Depreciation
Capital expenditures$ 5,839$ 3,859$ 2,049$ 1,188$$$$$ 8,126$ 5,237$ 1,717$785$ 9,843$ 6,022

232
170

6
20

Toyo Denki Seizo Report 2014

56

Report of Independent Auditors

For the year ended May 31, 2013
Reportable segments
Transportation

Industrial

Information
Equipment

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¥17,325¥11,543¥1,701¥ 6¥30,575¥—¥30,575

Segment profit
Segment assets

37
17,362¥ 1,914¥16,680

2
11,545¥ 434¥ 8,614

—
1,701
¥ 265
¥ 823

545
551
¥ 41
¥525

584
31,159¥ 2,654¥26,642

(584)
(584)
¥ (2,153)¥15,722—
30,575¥ 501¥42,364

Other items:
Depreciation
Capital expenditures

¥
¥

¥
¥

¥
¥

¥ 0
¥—

¥
¥

¥
¥

¥ 1,144¥ 1,296

691
792

239
159

28
29

958
980

186
316

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

Geographical information
Net sales to third parties by countries or areas grouped according to geographical classification for the years ended May 31, 2014
and 2013 are summarized as follows:

For the Years Ended

May 31,
2014

Japan
China
Other
Consolidated¥25,3997,1192,440¥34,958

May 31,
2013(Millions of yen)

¥23,341
5,495
1,739¥30,575

May 31,
2014(Thousands of
U.S. dollars)$249,838
70,02624,005$343,869

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

Major customer information
Major customer information for the years ended May 31, 2014 and 2013 is omitted since there was no customer to whom sales
exceeds 10% of net sales recorded in the accompanying consolidated statements of income.

57

Toyo Denki Seizo Report 201458

Reference Data for Management Indices

Depreciation and amortization (Unit: Million yen)

913
665

719

798

1,000

917

1,144

Research and development costs (Unit: Million yen)

612

1,296

1,307

1,142

950

2,073

1,145

(Unit: Million yen)

1,169

Capital investment

Company Profile

FY 2009

2010

2011

2012

2013

FY 2009

2010

2011

2012

2013

FY 2009

2010

2011

2012

2013

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

Established

June 20, 1918

Capital4,998,390,000 yen

Number of Employees

1,201 (Consolidated) 797 (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

Cash flows from investing activities (Unit: Million yen)
2012

2012

-753

2013

China

OthersHiroshima
BranchKyushu Branch

Yokohama
Plant

NagoyaOsaka Branch
BranchSubsidiaries and Affiliates
Head office building

TOYOKOUKI Co., Ltd.

468

TD Drive Co., Ltd.
Toyo Shoji Co., Ltd.
Okinawa
Branch-1,199TOYO DENKI USA, INC.
Toyo Denki (Beijing) Co., Ltd.
Taiping Zhanyun Automatic Door (Changzhou) Co., Ltd.
Hunan Xiangyang Electric Co., Ltd.
Beijing Jingche Shuangyang Traction System Co., Ltd.

FY 2009

2010

2011

2012

Net sales by region
Japan

6,808

Changzhou Ruiyang Transmission Technology Co., Ltd.

-3,3452011

Yokohama Branch

Toyo Sangyo Co., Ltd.

-1,457

1,069-1,328
2010

Niigata Branch

Taihei Electric Co., Ltd.

-2,148-1,6432,495
673
FY 2009

2013

155

2011

2,563

2010

3,621

FY 2009

Sendai Branch

Shiga Factory

Cash flows from financing activities (Unit: Million yen)

836

Cash flows from operating activities (Unit: Million yen)

Hokkaido Branch

2013

Yokohama Plant(Unit: Million yen)Overseas net sales ratio

FY 2009

2010

2011

2012

2013

Japan

28,35827,83525,20023,34025,398China*

4,873

8,110

10,081

5,495

7,118

Beijing Jingche Shuangyang Traction System Co,. Ltd.
Toyo Denki (Beijing) Co., Ltd.

Others

2,198

1,947

3,289

1,738

2,440

Changzhou Ruiyang Transmission Technology Co., Ltd.
Taiping Zhanyun Automatic Door (Changzhou) Co., Ltd.

Hunan Xiangyang Electric Co., Ltd.
TOYO DENKI SEIZO K.K. DELHI LIAISON OFFICE

Total

35,42937,89338,57030,57534,957

Overseas net sales
ratio

20.0%

26.5%

34.7%

23.7%

27.3%

TOYO DENKI USA, INC.

TOYO DENKI SEIZO K.K. Bangkok Representative Office*Reported classified as Asia from fiscal 2009 to fiscal 2010.

FY 2009

59

2010

2011

2012

2013

Toyo Denki Seizo Report 201460

Executive Profiles

Organization Chart

Management Planning Division
Group Administration Office
General Affairs Division

Human Resources Division
Financial Affairs Division

Chairman, Representative Director

President, Representative Director

Hiroshi Tsuchida

Kenzo Terashima

Corporate Quality Management Division

Managing Director

Yoshio Hosoda

Hiroshi Shimotakahara

Masami Tsuchiya

Purchasing Division
National and Global
Group Company
Meetings

Executive Officer Liaison
Meeting

Management Strategy
Meeting

Corporate Production Planning Division

President

Managing Director

Board of Directors

Senior Managing Director

General Meeting of Shareholders

Personnel Affairs
Committee

Business Development Division

Transportation Business Unit

Audit DivisionInternal Control Oversight Committee

Director

Yoshihiko Yoshino

Hiroyuki Arai

Kenichi Gotoh

Auditors

Director

Board ofAuditors

Industry Business Unit

Director

IT Business Unit

Standing Statutory Auditor

Standing Statutory Auditor

Statutory Auditor

Statutory Auditor

Akira Isogai

Hiroshi Hamao

Toshio Ikeda

Eiichi Suzuki

Research Laboratory
Yokohama Plant
Osaka Branch
Nagoya Branch

Executive Officers

Hisashi Sone
Akihiko Ishii
61

Hitoshi Katayama
Toshihiko Akihiro

Shuji Horie
Kenji Tanimoto

Yoshifumi Otsubo
Tetsuto Iwaki

Isami Takase(Revised on June 1, 2014)

Management 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
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 Engineering 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 201462

Stock Related Information

Number of shares (As of May 31, 2014)
Number of shares authorized

180,000,000

Number of shares issued

48,675,000

Number of shareholders

6,808

Distribution of shares by type of shareholder
Treasury stock
0.98%

Major shareholders
Number of shares held(Thousands)% of total
shares held

East Japan Railway Company

2,400

4.98

Employees Stock Ownership Plan

2,153

4.47

TOYOTA INDUSTRIES CORPORATION

2,100

4.36

Hitachi, Ltd.

2,100

4.36

NIPPON LIFE INSURANCE COMPANY

2,044

4.24

Japan Trustee Services Bank, Ltd. (Trust account)

1,778

3.69

The Master Trust Bank of Japan, Ltd. (Trust account)

1,425

2.96

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

2.14

Shareholders

Financial instruments
business operators
0.97%

Foreigncorporations, etc.
4.32%
Financial
institutions
23.66%

Other
corporations
26.47%

Individuals
and others
43.60%(Note) The percentages of total shares held are calculated excluding 475,000
treasury stocks held by the Company.

Transition of share price
Share price
(Yen)
(Yen)
600

600
400
400
200
200

Trading volume00(Thousands)(Thousands)
12,00012,000

8,000
8,000
4,000
4,000
0
0

2011.62011.62012.12012.1

2013.1
2013.1

2014.1
2014.1

Disclaimer on the forward-looking statements
Information in this corporate report contains forward-looking statements. Such statements were developed based on theinformation 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 tovarious factors. This report is not intended to solicit investment. Investors are kindly asked to make your investment decision atyour own judgment and responsibility. Numbers presented in 100 million yen or million yen are rounded down to the nearest
respective unit.

63