Toyo Denki Seizo Report

2016

O u r H e a r t a n d Te c h n o l o g y f o r t h e F u t u r eTokyo Tatemono Yaesu Building, 1-4-16, Yaesu, Chuo-ku, Tokyo 103-0028 Tel: +81-3-5202-8121 (General Affairs Division)

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

Our Long-Term Vision

Toyo Denki Seizo K.K. Contributes to the Development ofSocial Infrastructure Systems
Integrating the exceptional motor drive technologies since establishment with our breakthroughsystems that are considerate of the global environment through global business development.

advanced technologies to help build social infrastructure

Toyo Denki Seizo K.K. has contributed with newtechnologies to the development of railways,
industries and social infrastructure in Japan and theworld. Toyo Denki Seizo K.K. was founded in 1918 inan aim to “domestically manufacture electricalequipment for rail vehicles” and will celebrate the100th anniversary of its founding in June 2018.
We are developing businesses in transportation,industry and information equipment sectors, and all
the three sectors shares a high relevancy to society
and the public interest. We contribute to thedevelopment of industry and enrichment of people’s
lives through our manufacturing expertise byleveraging high technological skills.
We will continue to promote global development andaggressively work to develop advanced technologies
befitting the name of “Toyo as a technology company,”promote transfer of expertise and skills as well as
training of human resources for supporting thedevelopment of advanced technologies, and create
new businesses. Furthermore, through ensuring
compliance and enhancing governance, we will strive
to build a solid presence in the world as amanufacturer trusted by all stakeholders.

●

Editorial Policy ●We have been publishing this report since 2013 with thegoal of allowing a wide range of stakeholders to have abetter understanding of the Company. This report
combines our management policy with reports on ourbusinesses, CSR and finances. We are committed todescribing our initiatives during the year and our future
direction in a manner that is easy to understand.
●

CONTENTS
Contents / Editorial Policy / Long-Term Vision
Consolidated Financial Highlights
Message from the President
Revisions to Medium-Term
Management Plan “NEXT 100:
Beyond 100 years”
Business Report
CSR Report
Financial Report
Reference Data for Management IndicesCompany Profile
Executive Profiles
Organization Chart
Stock Related Information

1

1
3
5

●

Organizations Covered by This Report ●This report covers the Toyo Denki Group, including Toyo
Denki Seizo K.K. and its consolidated subsidiaries.
●

7
9
15
31
60
61
62
63
64

Period Covered by This Report ●This report focuses on our activities in fiscal 2015 (fromJune 2015 to May 2016), but also contains some
information from outside this period.

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

Toyo Denki Seizo Report 20162

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

Operating income

1,701

501

1,076

1,596

1,638

Net income attributableto owners of the parent

785

722

644

1,105

889

Comprehensive income

1,071

3,761

1,421

5,468

(925)
FY 2011

Capital investment

1,307

1,296

612

969

902

Research anddevelopment costs

797

916

665

897

868

2012

2013

Net assets/Total assets

(Unit: Million yen)

38,08642,36444,75253,041

50,233

Number of employees

1,175

1,170

1,201

1,216

1,245

53,041

Total assets

Net assets

312.12384.14401.45516.61491.41

Net income

16.29

14.98

13.37

22.94

18.47

6

6

6

6

6
(Unit: %)15,049Per Share Information

FY 201139.5

Return on equity (ROE)

5.4

4.3

3.4

5.0

3.7

Operating income ratio

4.4

1.6

3.1

4.0

4.1

Overseas net sales ratio

34.7

23.7

27.3

38.0

32.0

Dividend payout ratio

36.8

40.0

44.9

26.2

32.5

43.7

43.2

46.9

2013

2014

Return on equity (ROE)

FY 2011

2012

2013

2014

Number of employees

Total assets

2015

FY 2011(Unit: %)Operating income ratio

5.4

1,105

1,638
2015

(Unit: Persons)

2012

2013

2014

4.4

5.0

Major Management Indices
Shareholders’equity ratio

2012

24,89523,67644,752

24,895

19,35019,35042,364

18,51918,51915,04938,086

Net assets(Unit: Yen)

47.1

FY 2011

2012

2013

2014

Dividend

36.8% 40.0%

44.9%

Dividend payout ratio

4.0

26.2% 32.5%

FY 2011(Unit: %)Overseas net sales ratio

2012

2013

4.1

2014

(Unit: %)

32.0

3.1

3.7

2015

38.0
34.7

3.4

2015

Dividend/Dividend payout ratio (Unit: Yen)

2015

4.3

27.3
23.7
1.6

FY 20113

2015

Net assets

Fiscal Year-End

Dividend

2014

889

9,119

6

9,282

6

8,097

644

7,696

6

8,834

722

Gross profit

639,746785

39,617

6

34,957

1,245

30,575

1,076

38,570Net income attributable to owners of the parent (Unit: Million yen)

501

Net sales

30,575

Fiscal Year

(Unit: Million yen)

1,216

(Unit: Million yen)

1,201

Fiscal 2015

1,170

Fiscal 2014

1,701

Fiscal 2013

Operating income

1,175

Fiscal 2012

39,746

Fiscal 2011

(Unit: Million yen)

50,233

155

23,676

154

39,617

153

34,957152

1,596

Net sales

151

38,570Fiscal term

2012

2013

2014

2015

FY 2011

2012

2013

2014

2015

FY 2011

2012

2013

2014

2015

Toyo Denki Seizo Report 20164

Message from the President

Seeking to further strengthen our managementfoundation as a manufacturer aiming for global
growthAlthough the Industrial Systems segment havebeen influenced by capital investment restraint, theTransportation Systems segment and Information
Equipment Systems segment are expected to show
growth both in Japan and overseas.
With regard to consolidated financial results for the fiscal year
ended May 31, 2016, net sales remained at nearly the same level
as the previous fiscal year, and we maintained a positive growthin operating income. However, due to exchange losses resulting
from the appreciation of the yen, ordinary income and net income
attributable to owners of the parent decreased.
In the Transportation Systems segment, increase in orders
continued in Japan, and orders increased outside Japan as well,mainly for Chinese projects. However, net sales fell from the previous fiscal year due to a decrease in overseas deliveries. Profits
declined due to an increase in design costs from new projects.
The maintenance business for electrical equipment for railroads
in Beijing, China, which was launched in the previous fiscal year,
became fully operational.
In the Industrial Systems segment, reflecting the more cautious
investment approach of Japanese corporations and the sluggish
emerging economies, the situation for order-taking has become
more severe. As a result, orders for testing equipment for automobile development, production facilities such as processing
equipment, and social infrastructure decreased. Net sales andPresident

Kenzo Terashima

5

profits were both higher than the previous fiscal year, but did notreach the target figures as planned.
In the Information Equipment Systems segment, due to demand
for upgrades of in-train ticket issuing machines and new acquisitionof orders of composite ticket vending machines, orders increased,
but were not reflected in the recording of sales for the current fiscal
year. As a result, the segment posted a decrease in sales. Profits
turned positive from the slump of the previous fiscal year.
Looking at the future business environment, there is a growing
uncertainty about the economic outlook due to factors such as
the slowdown in economic growth in emerging countries and theprogressive appreciation of the yen. However, in the Transportation Systems segment, investments in railway infrastructure areprojected to remain at a high level in China and ASEAN countries,
and increase in rail vehicles that responds to increase in numberof foreign tourists and demand ahead of the Olympic Games is
expected to continue in Japan as well. Furthermore, in the Industrial Systems segment, although there are concerns about further
decline in capital expenditures, new initiatives such as orders received for small-scale hydropower generators using agricultural
water are producing positive results.
Under these circumstances, based on the revisions to the medium-term management plan described below, we are committed toincrease earnings potential, while ensuring further growth potential.

We have reformulated the two-year medium-term
management plan “Ver. 2.” We will work to solve
the issues on business earnings structure andproduction system.
Under the three-year medium-term management plan “Next 100:
Beyond 100 years” launched in the previous fiscal year, we havebeen working to expand overseas net sales and strengthen the
management foundation by restructuring production system inanticipation of the year of our 100th anniversary of founding in2018 and beyond. However, after its announcement, new issues
came to the fore in relation to our business earnings structure
and production system. In particular, boosting the efficiency ofdesign operations and promoting the productivity reform are required in order to increase earnings potential in the Transportation
Systems segment. In addition, to expand the Industrial Systems
segment and stabilize earnings structure, we need to expand production items in our lineup and specification zones.
To address these issues, we have formulated “Next 100:

Beyond 100 years, Ver. 2” to reset the period of the plan and forecast the numerical targets, while maintaining the fundamental
policy of the previous medium-term management plan. The plan
“Ver. 2” covers the two-year period from fiscal 2016 to fiscal
2017. We will promote “building a stable business earnings structure” and “restructuring production system” as key strategies inan aim to achieve numerical targets including net sales of 46.0
billion yen and operating income of 2.4 billion yen (operating income ratio of 5.2%).
In the first half of 2018, a new factory in the Shiga, Ryuoh region, where production of the Industrial Systems segment is to beconsolidated, will start operations, thereby forming a production
system with two bases including the Yokohama Plant which is responsible for production of the Transportation Systems segment.
We will advance measures as we aim to address the issues completely under the plan “Ver. 2” in two years by this time.

In addition to utilizing diverse human resources
and implementing diverse work-style, we willcontinue to enhance corporate governance.
The Act on Promotion of Women’s Participation and Advancementin the Workplace has come into force in April 2016, and we took
it as our duty to formulate action plans, etc. We consider the utilization of diverse human resources and implementation of diverse
work-style as key requirements for sustainable growth, and haveproduced results in measures of promoting acquisition of childcare leave, return to work, etc. Female employees currently account for 7.2% of permanent employees which goes to show thatthe number of our female employees in the workplace is not high.
As our point of focus for the future, in the new factory in the
Ryuoh region, we will work to create a better working environment
for women and promote opportunities for women.
On the other hand, in the development and design divisions,skilled employees start to retire, and our challenge is in how totransfer their expertise and skills. Hence, we will create a workplace
which enables more effective utilization of human resource capabilities in order to increase technological capability of the entire organization by sharing, standardizing and systematizing the know-how.
In addition to Mr. Hirokazu Chinone who assumed office as
Outside Director, Mr. Takashi Yamagishi who served as Vice President and Advisor of TEIJIN LIMITED was newly appointed as Outside Director. This brought the number of Outside Directors to
two. We expect Mr. Yamagishi, who has been engaged in management of manufacturing companies for many years, to provide
advice on various technical issues based on his extensive experience and technical insight.
We will continue to enhance corporate governance, and establish a solid management foundation as a manufacturer aiming for
global growth by consistently implementing the medium-term
management plan “Ver. 2” described above. We would like to fulfill even more significant social contribution and live up to the expectations of stakeholders.

Medium-term management plan“NEXT 100: Beyond 100 years, Ver. 2”
Fundamental Policy

Numerical Targets (Consolidated)
NEXT 100

1

2

Build a stablebusiness earnings
structure

3

Restructure
production
systemVer. 1

Strengtheninternational
competitivenessFiscal 2014 Fiscal 2015 Fiscal 2016 Fiscal 2017

Train humanresources to support
global development

NEXT100

Fundamental Policy

5

Establish new
businesses

4

Promotedevelopment oftechnology

Ver. 2(Actual Results for(Actual Results)
the First Year)

6

Medium-Term
Management Plan

(Unit: Billion yen)

(Forecast)(Forecast for the
Final Year)Net sales

39.61

39.74

43.00

46.00

Operatingincome

1.59

1.63

1.90

2.40

(Operating
income ratio)(4.0%)(4.1%)(4.3%)(5.2%)

Ordinary
income

2.05

1.49

1.80

2.50

Net income

1.10

0.88

1.20

1.70

Overseas net
sales

15.06

12.65

—

23.00

(38.0%)(32.0%)—(50.0%)(Overseas net
sales ratio)

Toyo Denki Seizo Report 20166

Special Report

Revisions to Medium-Term
Beyond 100 years”

Management Plan “NEXT 100:

The Toyo Denki Group is committed to drastically enhancing its corporate value and thoroughly strengthening its
100th anniversary of founding in 2018 and beyond.

management foundation in order to become a Group well adapted to the new era in anticipation of the year of our

Gist

1

Strengtheninternational
competitiveness

2

The Toyo Denki Group has decided to revise the medium-term management plan“NEXT 100: Beyond 100 years” covering
the period from June 1, 2014 to May 31,2017 to the medium-term management
plan “NEXT 100: Beyond 100 years, Ver.
2,” in light of changing business conditions and issues to be addressed which
emerged after the previously announced
plan.

Build a stablebusiness earnings
structure

3

Restructure
production system

Medium-Term
Management Plan

NEXT 100
Fundamental Policy

6

Train humanresources to support
global development

5

Establish new
businesses

4

Promote developmentof technology

While maintaining the fundamental policy of the initially formulated plan, the Toyo Denki Group will set“building a stable business earnings structure” and“restructuring production system” as key policies,and newly add and promote strategies where bothof these key policies are interrelated.
Furthermore, as a major pillar of “restructure
production system,” New Shiga Factory is scheduled to start operations in the first half of 2018, theyear of the 100th anniversary of Toyo Denki’s foundation. Aiming to complete the related strategies by
this time, the Toyo Denki Group will revise the period of the plan.

Ryuoh
Interchange

Mitsui Outlet Park

Ryuoh Sports Park
(Dragon Hat)
Tanigawa Line
Municipal Road
Nidono Line
Municipal Road

Disasterprevention
facility

Balancing reservoir No. 1

Sofugawa River

Photo: Area around Shiga Ryuoh Industrial Facility. Planned location of construction of our
new factory is indicated with the red line.

Details after Revision

Period of the plan

Numerical Management Targets (Consolidated)

(Unit: Billion yen)NEXT 100

June 1, 2014 – May 31, 2018 (Period of Ver. 2: June 1, 2016 – May 31, 2018)
Ver. 1Main strategies newly added

Restructure
production
system7

Increase earnings potential by strengthening promotion of productivity reformin Transportation Systems segment
Stabilize earnings potential by establishing medium- to long-term vision ofbusiness structure in Industrial Systems segment



Build a stablebusinessearnings
structureS trengthen production capacity based on productivity reform in Transportation
Systems segment
Integrate production system based on vision of business structure inIndustrial Systems segment

Ver. 2

Fiscal 2014

Fiscal 2015

Fiscal 2016

Fiscal 2017

(Actual Results for the First Year)(Actual Results)(Forecast)(Forecast for the Final Year)Net sales

39.61

39.74

43.00

46.00

Operating income(Operating income ratio)

1.59(4.0%)

1.63(4.1%)

1.90(4.3%)

2.40(5.2%)

Ordinary income

2.05

1.49

1.80

2.50

Net income

1.10

0.88

1.20

1.70

15.06
(38.0%)

12.65(32.0%)——

23.00(50.0%)

Overseas net sales(Overseas net sales ratio)

Toyo Denki Seizo Report 20168

Transportation Systems Segment

Electrical equipment for rail vehicles
that responds to demand for railway
infrastructure in Japan and worldwide
Business Overview
We delivered electrical equipment for the Hokkaido Shinkansen, which started its service in March 2016.

Percentage of
total net sales

Overseas, we received orders for subway contracts in Southeast Asia and the Middle East. In the future,

67.3%

we will promote overseas expansion even more aggressively as a driver of growth through means suchas expansion of maintenance business in China.

(Down 0.4% year on year)

Segment Income

2,964 million yen

TO
PIC
S

(Down 4.9% year on year)

Segment profit decreased 4.9% compared with the previous fiscal year to2,964 million yen.

FY 2013

2014

2015

FY 2013

2015

2,964

3,117

2014

2,374

26,75726,757 million yen

Net sales totaled 26,757 million yen, a
0.4% decrease from the previous fiscal
year, due to a decrease outside Japan,
despite an increase in Japan.

Segment Income (Unit: Million yen)

26,869Net Sales

22,198(Up 9.4% year on year)

Net Sales (Unit: Million yen)

27,092

27,092 million yen

Orders received increased 9.4% compared with the previous fiscal year to
27,092 million yen, led by upturns bothin Japan and outside Japan.

24,759Orders Received

29,790Orders Received (Unit: Million yen)

Results for fiscal 2015

FY 2013

2014

2015

Development and Delivery of Regenerative Power Storage System“E3 Solution System” with Large Capacity

ith regard to “E Solution System,” our highly acclaimed regenerative power storage system, we developed the system with large capacity and
W delivered
it for the Tokyo Tama Intercity Monorail. The system has an output of 1,000 kW per set, and realizes an output of 2,000 kW by provid3

BUSINESSing two sets. In addition to the existing functions such as regenerative power absorption, the system has a function for emergency running when trains
are stopped between stations due to power failures at substations, so that trains can safely evacuate to the nearest stations. We will continue to contribute to disaster countermeasures and an energy-saving society through the spread of the system.
Features of E3 Solution System

910Transportation Systems segment

11

Industrial Systems segment

12

Information Equipment Systems
segment

13

Expansion of New Businesses

14

Research and Development/
Intellectual PropertyInemergency

Supplying power as power source systems
for train running

In normal
conditions

Storage of regenerative power and supplyof power when needed
Lithium-ion battery

Lithium-ion battery
Interruption of
power supply

Substation

Powered travel

Interruption of
power supply

Discharge

Supplying power for
emergency

Substation

Powered travel

Substation

Effective use of regenerative
power (energy saving)

Regenerative braking

ChargeDischarge

Reduced power supply
loss (energy saving)

Substation

Powered travel

Toyo Denki Seizo Report 201610

Industrial Systems Segment

Information Equipment Systems Segment

Enhance functions of high-efficiency inverters and contribute to upgrades, energy savings and space savings for production facilities

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

Business Overview
We develop and manufacture general industrial machinery and equipment, testing equipment for automobile development and infrastructure equipment.
For the “VF66 series” of intelligent inverters, we developed “VF66G” as a lineup that supports interconnected systems, and strengthened support to small-scale hydropower generation, wind power generation and other distributed power source systems. In addition, we developed a 500 kW-class inverter
configured with single unit, as compared to a previous configuration of units connected in parallel, thereby significantly reducing the space required for installation of a control panel. We will continue to respondto demands for upgrades, energy savings and space savings for production facilities, and work to expand
the business in and outside Japan.

Percentage of
total net sales

Business Overview

30.3%

We develop and manufacture railway station operating equipment that can achieve mechanization andPercentage of
total net sales

reduction of labor in railway station operations of railway operators. We also contribute to improvements

2.4%

of efficiency in operations through IoT/M2M solutions and power visualization solutions using mobile
phone networks and cloud servers for monitoring and control.

Results for fiscal 2015

TO
P

ICS

D

DC drive mode of the intelligent inverter
VF66B

irect current motors (DC motors) were used as the main type of variable-speed drive from the 1970s to the first half of the 1990s, andthey were adopted in various production facility lines in combination withthyristor Leonard equipment.
The DC drive mode of the latest inverter “VF66B” helps to control investment costs as DC drive mode can convert control equipment into an
inverter with the DC motors as is for equipment using DC motors that
continues to operate. This can also lead to gradual updates to AC motors,
which is the next step.
In addition, the introduction of the DC drive mode will not only enabledigital control, but also enables construction of interface with various latest networks and PLC, thereby making equipment of higher performance.
Going forward, we will support the needs of customers with the products that leverage our advanced motor drive technologies.

FY 2013

2014

2015

FY 2013

2014

2015

FY 2013

2014

2015

(Up 34.1% year on year)

FY 2013

2014

2015

FY 2013

2014

2015

348

1,828
1,369

Segment profit increased 34.1% compared with the previous fiscal year to 95
million yen.

FY 201395

95 million yen

985

Segment Income

1,673

1,019

848

12,027

11,613954 million yen

Net sales decreased 15.4% year on year
to 954 million yen mainly due to a decrease in sales of remote monitoring
systems.

71(Up 20.2% year on year)

Net Sales

Segment Income (Unit: Million yen)Orders received increased 39.0% to
1,369 million yen, due to increased orders for railway station operating equipment.

954

1,019 million yen

Segment profit totaled 1,019 million yen,a 20.2% increase compared with theprevious fiscal year.

(Up 39.0% year on year)

Net Sales (Unit: Million yen)

1,127

Segment Income

1,369 million yen

2014

2015

Update steps through the introduction of the VF66B DC drive mode

Current
situation
Thyristor board

DC motor

1st Step

Equipment can be
upgraded with lower
cost and shorter
installation time.

Change from thyristor board to VF66B DC mode

TO
PIC
S

(Up 3.6% year on year)

Orders Received (Unit: Million yen)

Results for fiscal 2015

(Down 15.4% year on year)536

12,027 million yen

Net sales increased 3.6% year on year to
12,027 million yen due to increases insales of testing equipment for automobile
development and outside Japan, despite adecrease in those for social infrastructure.

Segment Income (Unit: Million yen)Orders Received

10,924

Net Sales

Net Sales (Unit: Million yen)

11,421(Down 14.2% year on year)

Orders Received (Unit: Million yen)

13,31911,421 million yen

Orders received decreased 14.2% compared with the previous fiscal year to
11,421 million yen due to decreased orders for testing equipment for automobile development, processing equipment,
and social infrastructures.

11,097

Orders Received

Low cost
Short
installation
time

High
performance

Inverter
Board

VF66B

DC motor(DC drive mode)

2nd Step

Change from DC motor to ED motor (AC motor)Highefficiency
EnergysavingInverter Board

ED motor
VF66B(AC motor)

Running costs arelower thanks to thehigh efficiency of our
ED motor.

Order received for commuter pass vending machines for
the Transportation Bureau of the City of Yokohama

order for 50 commuter pass vending machines for the Transportation BuW ereauhaveof received
the City of Yokohama. This product is a composite ticket vending machine that cansinglehandedly issue a variety of tickets such as commuter passes, standard tickets, books oftickets and special tickets. This machine is compatible with tickets of various media such as
smart cards, magnetic PET tickets, large magnetic tickets, and Edmondson old style tickets.
Furthermore, the machine enables reduction of power consumption and improved operability
thanks to a color LCD with touchscreen, and conforms to the security authorization standards of
the Congress of Japan Railway Cybernetics.
We will continue to develop and provide easier-to-use railway station operating equipment.

Composite ticket vending
machine (TID6000) Separate type

* ED motor : Toyo Denki s permanent magnet high efficiency motor

11

Toyo Denki Seizo Report 201612

Expansion of New Businesses

Initiatives in distributed power source (small-scale hydropower, wind power, biomass, wave power, tidal power, etc.)
We have been working to safely make the most of natural energy sources such as small-scale hydropower, wind power, biomass, wave
power and tidal power, by leveraging the know-how of permanent magnet synchronous generators and interconnected systems we havedeveloped over many years.
Take the small-scale hydropower generation system for instance. The system uses water as renewable energy, and effectively utilizes
water resources which have not been utilized before, such as agricultural waterways and agricultural dams. We will continue working on
effective utilization of various natural energy sources.

Research and Development
technology developments that support this development as well
as development of new products that expand our businesses.

Power Conditioner
Results and topics from fiscal 2015

Segment

Project
3

Delivery of “E Solution System” with large
Transportation capacity
Systems
Development of electric door operating
equipment

EDG Permanent magnet
synchronous generator(supports 10 - 750kW)

We contribute to improvements of efficiency in operations through IoT/M2M solutions using mobile phone networks and cloud servers formonitoring and control.

Joint development of data acquisition and analysis systems for fuel cell lift trucks
In cooperation with TOYOTA INDUSTRIES CORPORATION, we have developed data acquisition andanalysis systems for fuel cell lift trucks. With this system, operation data is collected, stored in cloudservers using mobile phone communication systems, and analyzed. For the remote data management system owned by Toyo Denki Seizo K.K., we developed a data logger capable of on-board use,which enables real-time analysis of cloud servers and is equipped with information transmissionfunction. This system analyses and visualizes data on location information and operation states,
thereby contributing to optimization of maintenance services and improvement of merchantability.

Developed electric door operating equipment, in addition to the conventional pneumatic door operating equipment, in an aim of higher performance and reduction of maintenance work.
Developed a 500 kW-class inverter configured with single unit (install panels), as compared to aprevious configuration of units connected in parallel, thereby significantly reducing the space required for installation of a control panel.

Development of VF66G, inverter that supports interconnected systems

Developed “VF66G” as an inverter that supports interconnected systems for distributed powersource systems. In addition to the conventional self-supporting and linkage mode, governor control mode was added. In linkage operation, the invertor is adapted to FRT requirements*1 as astandard feature.

Enhanced security of composite ticket
vending machine

Mounted the function of protecting internal data, etc. against tampering, such as surreptitious
reading from operation screen and attacks from networks, in composite ticket vending machines
which deal with smart cards.

Zooming of monitoring items using remoteterminals

In order to zoom monitoring items, coordination function of short range wireless (ZigBee) was
added, and as the additional units, multiple battery-powered ZigBee sensors can be used.

Research Research on globally compatible insulation
Laboratory systems for motors

Conducted research on high-voltage insulation systems for traction motors for overseas railroads,
high heat-resistance insulation systems for which materials of global standards are used, etc., in
anticipation of further advancement of globalization and overseas development. We had clear ideaof actually using such systems.

Information
Equipment
Systems*1 FRT requirements: Fault Ride Through requirements

Data logger unit

Intellectual Property
Fuel cell lift trucks

Joint development of communication power generator mounted with remote monitoring system

In cooperation with Denyo Co., Ltd., we developed a communication power generator mounted witha remote monitoring system, and commenced its services. The communication power generator wasdeveloped by mounting “IORemotor,” Toyo Denki Seizo K.K.’s remote monitoring terminal, to Denyo
Co., Ltd.’s engine power generator. It enables sending email alerts in case of failure and remotemonitoring through cloud services utilizing mobile phone lines. Customers can use various functions
through ASP services. We will continue to contribute to operational efficiency through provision ofeasy-to-install and affordable IoT/M2M solutions.

Description
Developed a system with large capacity for “E3 Solution System,” a regenerative power storage
system, and delivered it for the Tokyo Tama Intercity Monorail. The system comes in two sets andhas an output of 2000kW, or 1000kW per set.

Development of a 500 kW single inverter
Industrial
Systems

Initiatives in remote monitoring(IoT/M2M solutions)

13

R&D to support the development of social
infrastructure and supporting frameworks
The Group’s R&D activities are based on seeking to create products that fully satisfy our customers and challenging the creationand expansion of these products, and we actively promote development of technologies of our existing businesses and basic

 ystem upgrades of distributed power source sysStems of Toyo Denki Seizo K.K.
Bountiful experience with power companies in Japan
Interconnected system protective function
Higher efficiency by combining with permanent magnet synchronous
generators
Islanding detection function is incorporated in inverters that support
interconnected systems
Switchable from interconnected system operation to self-supporting
operation
Black start in the absence of power source systems is possible
System upgrades of overload protection, external signal input, etc.
Output control function
A wide range of lineup with output from 10 to 750 kW, in particular,bountiful experience with output from 10 to 200 kW

Research and Development/Intellectual Property

IORemoter
Communication
power generator

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 the development divisions in each business unit actively apply
for patents and utility models.
In the overseas markets which we expect to further expand ourbusinesses, we have started to actively engage in activities
concerning our intellectual property in order to protect our
technologies and brand.

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

80
60

1

51

2

5

54

40

50 25 3

20

52 22

22

22

2011

2012

2
0

35
33

30

0
FY

2013

0

Overseas
Overseas

62
0

30

Japan
Japan

57
16 0
16
2014

45

45

14
14

0

2015

Toyo Denki Seizo Report 201614

Management

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

Business Principles

Code of Conduct
1. Respond to customers in a timely and speedy mannerPrioritize ethics and contribute to the prosperityof customers and society as a whole

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 other toward growth

Encourage creativity and enterprisingspirit to meet the challenges of the future
Build trust by focusing on quality first

Corporate GovernanceOur philosophy of corporate governance
The Group’s business activities are based on the business principles that “prioritize ethics and contribute to the prosperity of customers and society as a whole.” We therefore strive to attainsound corporate management through strengthening and reinforcing corporate governance, fully appreciating the significanceof compliance based on corporate ethics. At the same time, we
review as appropriate our management monitoring system to ensure its conformity to the changes in the business environment
including social environment and relevant legislation.
Corporate governance

CSR Report

15

Management

Reports by Stakeholder

Initiatives to Deal with the Environment and Local Communities

16

Corporate Governance

20

With Our Customers

25

Initiatives to Protect the Environment

18Internal Control and Compliance

21

With Our Suppliers

28

Contributions to Local Communities

18

Risk Management

22

With Our Shareholders and Investors

18

Information Security

23

With Our Employees

19

Business Risk

We have corporate bodies established in accordance with laws
and regulations as well as the Articles of Incorporation, including
the General Meeting of Shareholders, Directors and the Board of
Directors, Statutory Auditors and the Board of Statutory Auditors,
and Accounting Auditors. At its regular monthly meetings as well
as extraordinary meetings held when appropriate, the Board of
Directors, which is composed of nine Directors including two Outside Directors, discusses and decides on important management
matters such as reports on Directors’ business execution andmatters to be decided solely at the discretion of the Board of Directors, while supervising Directors’ business execution. In addition, the Company has meeting bodies including the Management

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

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

Toyo Denki Seizo Report 201616

Management

External Statutory Auditors and Outside Directors
The Company has established independence guidelines regarding independence required for a candidate for its Outside Executive, andappoints Outside Directors and External Statutory Auditors who haveexcellent insight in their areas of expertise. Currently, the Company appointed two Outside Directors and three External Statutory Auditors.
Note that each of the External Statutory Auditors is playing a role toenhance audit functions required by laws and regulations while remaining independent from the Company.
Mr. Hirokazu Chinone, our Outside Director, is qualified as a lawyer
and provides useful advice regarding management in general, drawing
on his specialized knowledge regarding corporate law and his wealthof experience developed throughout his career.
Mr. Takashi Yamagishi our Outside Director, was newly appointed as
an Outside Director at the 155th Ordinary General Meeting of Shareholders. We look forward to his useful advice and recommendations,drawing on his wealth of corporate management experience and his
superior expertise gained in Japan and overseas.
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 experience and broad knowledge developed in corporate management and service at a financial institution.
Mr. Toshio Ikeda, our External Statutory Auditor, is a certified 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. Chinone, Mr. Yamagishi and Mr. Ikeda
as independent directors and registered them as such at stock exchanges.
Executive Remuneration
Total 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 asdetermined by each Director’s contribution to management as well as
business results of the Company. Basic remuneration for both Standing and Part-time Statutory Auditors is a fixed salary without bonus
payments.
(As of the end of May 2016)
Number of
executives
applicable

Total amount of
remuneration(Unit: Million yen)

Directors(excluding Outside Directors)

9172

Statutory Auditors(excluding External Statutory Auditors)

2

14

Outside Executives(Outside Directors and External Statutory Auditors)

4

31

Category of executives

Reporting

ReportingNote: The number of executives applicable mentioned above includes two Directors and one Statutory
Auditor who respectively retired from their office at the end of the 154th Ordinary General Meeting of Shareholders held on August 27, 2015.

Appointments/dismissals

Board of Statutory Auditors

Legal audit

Instruction/reporting

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

Legal counsel(Contact for whistle-blowers)

17

The Company views the development and operation of an internal control system to be an important management issue, and it has developed
an efficient, legal and appropriate business execution system whereby
the Internal Control Committee established under the Board of Directors
will review and revise the operational status of the internal control system in accordance with Article 362 of the Companies Act and Article
100 of the Ordinance for Enforcement of the Companies Act.

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

The Company has set “1. adherence to rules,” “2. observance ofconfidentiality,” “3. distinction between private and public matters,” “4. strictness with money,” “5. prohibition of side jobs,” and“6. prohibition of discriminatory and sexually suggestive statements or behavior” as principles of compliance.

To focus on business principles and fulfill its social responsibility,
the Company has provided all officers and employees with a copyof the Compliance Manual (Toyo Denki Seizo Ethical Standards)
that stipulates its code of conduct. The move is part of an effort tohave the code and the basic rules of work fully known.
The Company has also introduced a whistle-blowing systemthat allows employees to provide information directly to the management. The system is aimed at ensuring that any illegal orinappropriate conduct within the Company is detected at theearliest possible stage and that adequate measures are taken
promptly and as needed so that such conduct is rectified.

President

Reporting/decisions

Internal audit

Appointments/dismissals

Appointments/dismissals Reporting on business execution

Business audit

Accounting audit

Audit Division

ReportingBoard of Directors
Directors

Statutory Auditors
Reporting

Basic policy

Appointments/
reporting/recommendations
Whistle-blowings
Oversight
Whistle-blowings

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

Appointments/
dismissals

Instruction/reporting

Directors and Executive Officers
Instruction/reporting

Each business department
Instruction/reporting

Each Group company

Promotion framework
The Company has established the Internal Control Committee under the
Board of Directors, chaired by the President. It analyzes and assesses
all the risks that exist in the Group and develops an effective risk management framework capable of dealing precisely with the risks of thetypes and degrees that the Group is exposed to. The committee specifically reviews risk verifications and countermeasures, and periodicallyreports details of its deliberations to the Board of Directors.
Furthermore, the committee is committed to enhancing the Groupwide risk management framework in accordance with the Basic Rules
for Risk Management.

Compliance promotion framework

General meeting of shareholders
Appointments/dismissals

Risk Management

Internal control

Principles of complianceCorporate governance framework

Accounting Auditors

Internal Control and Compliance

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

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

Toyo Denki Seizo Report 201618

Management

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

19

Reports by Stakeholder

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

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

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

Year ISO 9001 certification obtained

Yokohama Plant
1994

Shiga Factory
2000

Extended companywide
2007

Responding to the Global Market
Proper export controls
The Export Control Department at General Affairs Division is responsible for export management as the export management
control department. We have created a system for the proper
management of exports in order to ensure compliance with thelaws and regulations concerning export management in the countries and regions where we engage in business activities as wellas to avoid involvement in transactions that could hinder the
maintenance of international peace and safety.
The Export Control Department handles cargo and technology
parameters used in determining whether or not export permits are
required, as well as investigation of transactions. In addition, theDepartment carries out employee education and guidance andsupport for Group companies.
Acquisition of International Standards
The Company has acquired International Railway Industry Standard (IRIS)* and China Railway Certification Center (CRCC) certification.
Going forward, we will continue to acquire international standards as we aim to further promote global expansion and sales
growth.
* Acquired for the first time in Japan with our auxiliary power supply (SIV).

Towards Greater Customer Satisfaction
Good Relations with our Customers

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

Information based on customer opinions and requirements obtained by the sales department is periodically reported to the top
management at the executives’ briefing sessions, and that information is shared within the Company. We strive to maintain good
relations with our customers by identifying problems that need tobe solved and swiftly addressing them in order to raise customer
satisfaction.
Toyo Denki Seizo Report 201620

Reports by Stakeholder

With Our SuppliersWith Our Shareholders and Investors

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

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

Towards Just and Fair Procurement
Communication with suppliers

TO
P

ICS

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

I

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

Establishment of “Procurement Action Guidelines”

n February 2016, the Company improved its procurement-related regulations and established the “Procurement Action Guidelines.” The details of
the guidelines are as follows.

Procurement Action Guidelines
These guidelines indicate the codes of conduct that the Toyo Denki Group’s executives and employees should observe in the procurementof purchased parts and outsourced parts as required for the manufacturing of products ordered by customers (“procurement transactions”).
1. Procurement transactions shall be carried out in observance of the laws of the relevant countries.
2. Information concerning suppliers in procurement transactions shall only be obtained within the scope necessary for conducting procurement activities in accordance with contracts. Furthermore, efforts shall be made to carefully manage and observe the confidentiality of
information gained through procurement transactions.
3. Personal interests with suppliers shall be prohibited in procurement transactions, including the lending and borrowing of money.
4. Receiving of support beyond the socially accepted practices or receiving of money or inappropriate gifts or any other forms of personal
rewards from suppliers shall be prohibited in personal transactions. In addition, forceful requests for any of the above from suppliers shallbe prohibited in procurement transactions.

Towards Enhancement of Corporate Value
Basic philosophy
Through timely and appropriate disclosure of information to ourshareholders and investors, the Company accurately conveys ourmanagement policy and business conditions while making use of
IR tools such as our website to promote a full range of IR activities
that contribute to the improvement of our corporate value.
Development of IR activities
IR activities for institutional investors and securities analysts
The Toyo Denki management team holds a financial results briefing each quarterly period to provide opportunities for institutional
investors and securities analysts to understand the summary of
our financial results. The management team gives a report including the state of progress of the medium-term management plan
and an overview and forecast for each segment as well as neworders received and other topics.
In addition, we strive to deepen understanding of the Company
through individual visits to institutional investors or holding factory
tours to provide opportunities for them to actually see our manufacturing sites, as well as participating in small meetings organized by securities companies, and taking other measures.
IR activities for individual shareholders and individual investors
The Company website includes a “For Individual Investors” page
which offers a clear introduction to our business activities and our
results, as well as making available a variety of IR materials.

Dividends
Maintenance of stable dividends forms the basis of the Company’s distribution of profit, and the dividend for the fiscal year ended May 31, 2016 was 6 yen per share (interim dividend of 0 yen,fiscal year-end dividend of 6 yen). And as of December 1, 2016,
the number of shares constituting one share unit will be changed
from 1,000 shares to 100 shares, and a stock consolidation offive shares into one share will be carried out at the same time.
This will allow the investment unit (price) of the Company’s shares
to be reduced to approximately one half of the current amount.
We would like to ask for your understanding of this change, which
has been made with the objective of increasing the liquidity of theCompany’s shares and allowing the potential for more investors.
Dividend per share
(Yen)

8
6

6

6

6

6

6

FY 2011

2012

2013

2014

2015

4
2
0

Record of 155th Ordinary General Meeting of Shareholders
Date held: Friday, August 26, 2016
Attendance: 114 people

URL “For Individual Investors”
https://www.toyodenki.co.jp/ir/individual.php
Holding of factory tour for shareholders
Thursday, April 14, 2016 at the Yokohama Plant
Attendance: 33 people (78 applicants)* Inquiries from outside are accepted via the following phone number and e-mail address:

Legal Compliance Department, General Affairs Division +81-3-5202-8121

21

email address for inquiries to Toyo Denki Seizo K.K.: contact@toyodenki.co.jp

President Terashima making a presentation (at the factory tour for shareholders)

Toyo Denki Seizo Report 2016

22

Reports by Stakeholder

With Our Employees

Creating a Pleasant Workplace

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

Executive manager development training

The Company holds monthly meetings of the Safety and Hygiene
Committee jointly with labor and management, where ongoing discussions are held in order to build a safer working environment andto reduce workplace injuries to zero, and to find solutions to mental
health issues at each of our bases. In particular, sub-committees
are set up to address important topics related to safety and hygiene
at production bases in an effort to create an even better workplace.

Training for newly appointed division heads

Acquisition of the “Kurumin” certification logo (June 2014)

Training for new employees

On-the-job

I Introductory training sales training
II Hands-on learning
IT education
III Basic knowledge course
IV Practical training
Training inV Individual training business manners

Life-planning seminar

Follow-up training (1st year)

Mental health training

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

Various distance learning courses

Comprehensive training for newly appointed senior general staff

Compliance training

Pre-promotion training for managers and professionals Coaching training

TOEIC challenge system

Evaluator training
Training for newly appointed managers and professionals

System for fostering specialists

Training for middle-management executives

Pre-promotion training for senior general staff

Non-managerial employees

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

Supervisors

Education and training system

Other/Personal development

Executive training

Incentive system for acquiring certification

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

Department heads

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

Division heads

Human resources development policy

Training system
Executives

Towards the Development of Human
Resources with Competitive Strengths

Safety and hygiene initiatives

Initiatives for diverse work-styles

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

Training for unofficial new hires (graduates)

Supportsystemfor acquiring
publiccertification

In recognition of our efforts as a “company that
supports child-rearing,” which includes a substantial childcare system, educational activities concerning a work-life balance, the creation of an environment in which it iseasy to obtain childcare leave, and the acquisition record of childcare leave by male employees, we received the “Kurumin” certification logo from the Tokyo Labor Bureau in June 2014.

Languageeducation(TOEIC)(Chinese)

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

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

The Company has implemented a flexible work-style including a
flextime system for sales staff and those involved in development.
Furthermore, in order to encourage retention and utilization of
employees with knowledge and skills, we have put in place the“System for Rehiring Employees” for employees who have resigned due to life events that occur in the course of their career(childbirth, childcare, family care, spouse’s transfer, etc.), so thatthey can be rehired when they reach the stage when it is possible
to return to work.
As for employees who wish to be rehired after they reach themandatory retirement age (60), in principle, we continue to employ them until the age of 65.

Initiatives for employment of the disabled
The Company makes improvements to the workplace environmentand carries out workplace training with the aim of creating aworkplace where the disabled and those in normal health canwork together energetically. We also promote collaboration withlocal governing agencies and special-needs schools regarding
employment of the disabled.
Mental health measures
As measures to address mental health, the Company conducts“Line care training” for administrative professionals and “Self caretraining” for employees. In addition, we have partnered with an
external medical institution to set up a telephone and e-mail consultation service to provide support for prevention, treatment, andreturn to work.
Implementation of employee satisfaction survey
The Company conducts an “employee satisfaction survey”
once per year, and relevant departments work to resolve
various issues extracted from the survey results. In addition,
the company-wide “Dynamism Committee,” whose purpose
is to create a “dynamic corporate culture,” leads various
activities aimed at revitalizing internal communication.
Response to the Act on Promotion of Women’s Participation and Advancement in the Workplace
In accordance with The Act on Promotion of Women’s Participation and Advancement in the Workplace (Women’s Advancement
Promotion Act) that was enacted on April 1, 2016, the Company
is formulating an action plan to create an environment where
women can continue working with a sense of security as they advance their careers.

Work and family life balance

I returned to work after taking childcare leave twice, and have also been on an overseas business trip.
Shiho Kajita (International Sales Division, Transportation Business Unit)
I returned to work after taking a childcare leave for about a year after
my first child was born, and then doing the same after the birth of mysecond child. I think that partly due to the fact that it was my second
time, I had less anxiety over leaving my child in daycare and it didn’t
take as long as the first time to get back into working mode. I was extremely thankful that I had a place to go back to after taking leave andthat I was able to continue working. Although there are so much morethings to do now that I have two children, such as getting them readyfor daycare, the amount of laundry, and what to do when they are sick,which all-in-all is very time-consuming, I am somehow able to manage
both work and child raising thanks to the understanding of my cowork-ers and the cooperation of myhusband and parents.
At one point, I was given theopportunity to participate in an
overseas exhibition. I felt anxious because I needed the cooperation of
everyone around me if I was to be separated from my children duringthat time, but as a result we all gained new experiences. Although there
are difficulties in working while raising children that remain, I still wantto find the right path for myself. My children are growing up to bestrong; motivating one another and staying involved with their friends
from daycare and the various adults in their lives.

Training for new employees

23

Toyo Denki Seizo Report 201624

Initiatives to Deal with the Environment and Local Communities

Initiatives to Protect the Environment

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

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

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

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

Initiatives to reduce greenhouse gas (CO2) emissions

Targeted reduction of CO2 emissions and progress status

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

Aiming to reduce CO2 emissions per unit of production output by
1% year on year, the Company’s main production base, the Yokohama Plant, reduced emissions by approximately 1.0% in fiscal
2015.

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

4,000

300

3,000

400

200

2,000

200

100

1,000

0

0

631.8

Aiming for Realization of a Sustainable Society

590.9

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

Implementation of measuresagainst global warming

628.5
284.0

651.8

617.8
286.0

284.7

0
2011

Recycling-based society
Promotion of waste reduction
and recycling

2012

2013

2,905.0

2014

2015

2011

(year*)

2012

2013

2014

2015

(year*)

Waste reduction andrecycling at each base

(kWh)Conservation of biodiversity

3,759.0

3,307.3

Total solar power generation at Yokohama Plant

Nature-symbiotic society

4,095.0

3,936.0

252.0

244.6

Low-carbon societyGas (Unit: 1,000 Nm )

(t)

400

800

600

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

Electricity

Total CO2 emissions at Yokohama Plant
3

Based on 500 kW generator

750,000

Initiatives for control overchemical substances

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

676,000.0

600,000

635,843.0

2520

450,000

Water input(Unit: 1,000 m3)

15

21.1

Water output

19.9
15.8
13.9

14.2

14.1 14.1

15.2 15.2

12.3
300,000

10

150,000

5Environmental Management System
0

0
2013

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

25

2014

2015

(year*)

2011

2012

2013

2014

2015

(year*)

Years of ISO 14001 certification

Yokohama Plant
2004

Shiga Factory
2001

Extended to all offices
2010

Toyo Denki Seizo Report 201626

Initiatives to Deal with the Environment and Local Communities

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

Initiatives for Control over Chemical Substances

Total amount of air emissions(kg)

10,000Volatile organic compounds (VOCs) emitted as a result of ourbusiness activities are adequately controlled and the amount ofemission is monitored under the Pollutant Release and Transfer
Register (PRTR).
We will further engage in the reduction of waste through suchmeasures including using non-VOC materials and implementing
recovery and reuse of solvents. PCB waste is also subject to adequate control, storage and disposal in accordance with Japan’s
Act on Special Measures concerning Promotion of Proper Treatment of PCB Wastes.

8,000

7,700

8,300

7,900

7,300

Total amount of shift

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

7,700

6,120

6,000

4,600

4,810

5,260

5,290

4,000

2,000

0
2011

2012

2013

2014

2015 (year*)

Main actions

we inform the participants of our products as well as our actions
for environmental protection and factory facilities, in an effort tobuild up relationships built on trust with local communities.

We are committed to activities that raise awareness and appreciation of our manufacturing expertise by accepting interns from local technical high schools and providing them with hands-on experience at manufacturing sites. This internship system serves as
an effective means of recruiting outstanding technical staff on aconsistent basis as some students from these schools apply for
positions at the Company.
Participation in university endowment courses and hands-on courses

The Company successfully reduced its landfill waste rate to 0.8%
in fiscal 2015, as a result of thoroughly implementing waste processing rules, sorting of metal waste and recycling of paper resources.

We participated in endowment courses sponsored by the Yokohama Green Purchasing Network so that participants can deepen
their knowledge on history of railway and the environment throughour business activities.
We conduct lectures leveraging the know-how fostered throughoperations and our business activities in on-site training courses
held by educational institutions including universities.

Volume of landfill waste

Output of general and valuable waste
(t)

(t)

10

800

637.4

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

Initiatives for Reducing Disposed
Waste as Well as Recycling

600

Contributions to Local Communities

652.2

682.6

9.0

680.5

A factory tour

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 theproceeds from vending machines installed at the Engineering
Center of the Yokohama Plant to the fund.

8

601.5

Cleanup campaigns within the vicinity of the production bases
6

5.6

400

5.9

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

5.5

5.0

4

200

2

0

0
2011

2012

2013

2014

2015

(year*)

2011

2012

2013

2014

2015

(year*)

Endowment course at a university

Factory tours

Cleanup campaign(Yokohama Plant)

Cleanup campaign(Shiga Factory)

We are conducting “factory tours” to provide opportunities formembers of local communities to actually see our manufacturing
facilities and products in order to develop deeper understanding
about the business operations of the Company. During these tours,

27

Toyo Denki Seizo Report 2016

28

Data
Data Concerning Personnel and Labor

Environmental Data
Indices

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

Unit

Fiscal 2011

Total
Men

Number of employees

744
Persons

Women%

Ratio of female employees
Total
Men

Number of administrative professionals

Persons

Women%

Ratio of female administrative professionals
OverallMen

Average age

Age

Women
OverallMen

Average years of employment

Years

Women

Fiscal 2012
1

791

Fiscal 2013
2

797

Fiscal 2014
2

804

Electric power (10,000 kWh)Fiscal 2015
2

824

693

735

737

740

761

51

56

60

64

63

6.9

7.1

7.5

8.0

7.6

155

152

156

151

155

153

151

155

149

151

2

1

1

2

4

1.3

0.7

0.6

1.3

2.6

41.1

41.0

41.1

40.5

40.4

41.4

41.1

41.2

40.7

40.4

38.2

38.9

39.0

38.7

39.5

16.5

16.1

16.3

15.8

15.4

16.7

16.3

16.5

15.9

15.5

14.6

14.5

14.5

14.5

14.1

Average annual salaryYen

6,039,332

5,885,559

5,750,453

5,888,577

6,024,175

Overturn rate (within 3 years of joining the Company)

%

13.5

3.8

7.7

0.0

3.4

Number taking childcare leave

Persons

2

3

4

5

7

Number taking family care leave

Persons

0

0

0

0

0

Number of temporary staff (including part-timers)

Persons

149

167

158

153

160

2
3

Urban gas (1,000 Nm )Water input (1,000 m3)CO2 emissions (t)Solar power generation (kWh)3

Water output (1,000 m )Indices
Total amount of air emissions (kg)
Total amount of shift (kg)
Total amount of
air emissions
Ethylbenzene (kg)
Total amount of
shift
Total amount of
air emissions
Xylene (kg)

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

Unit
Total
Men

Number of Officers

Persons

Women
Notes

Fiscal 2011

Fiscal 2012

Fiscal 2013

Fiscal 2014

Fiscal 2015

10

10

11

12

13

10

10

11

12

13

0

0

0

0

0

PRTR

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

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

Fiscal 2011

Fiscal 2012

Fiscal 2013

Fiscal 2014

Fiscal 2015

Persons

1,175

1,170

1,201

1,216

1,245

Number of employees at Group companies in Japan and overseas Persons

431

379

404

412

421

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

Persons

235

256

255

214

274

Number of temporary staff (including part-timers)

Persons

86

89

97

61

114

Number of employees on a consolidated basis

Notes

Toluene (kg)
Total amount of
shift

IndicesIndustrial waste (tons)

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

Maternity andchildcare related

Family care related
Other

29

Prenatal leave
Maternity leave

Can be taken for up to 8 weeks after birth.

Childcare leave

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

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

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

Nursing leave

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

Family care leave

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

Family care work hours

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

System for Rehiring
Employees

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

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

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

Fiscal 2015
648.8
617.8
31.0
26.6
286.0
286.0
15.2
15.2
0.0
3,924.0
3,759.0
165.0
152.0
635,843.0
15.2
15.2
0.0

Remarks

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

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

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

Fiscal 2015
7,700
5,260
2,200
2,200
0
470
470
0
2,600
2,600
0
390
390
0
0
0
0
2,700
2,700
0
2,900
2,900
0
1,700
1,700
0

Remarks

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

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

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

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

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

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

Fiscal 2014
333.4
303.1
30.3
105.4
105.4
274.1
274.1
712.9
682.6
30.3
598.2
598.2
9.0
9.0
1.3
1.3
-

Fiscal 2015
355.0
335.9
19.1
98.4
98.4
246.2
246.2
699.6
680.5
19.1
584.0
584.0
5.5
5.5
0.8
0.8
-

Remarks

1

2

2

3

4

Applicable premises

Waste Data

As of May 31 for each fiscal year

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

Total amount of
shift

5

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

Item

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

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

Notes

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

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

General waste (tons)

Valuable metal waste (tons)

WastesWaste output () (tons)

Recycled amount (tons)

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

6

6

6

6

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

Toyo Denki Seizo Report 201630

Financial Review

Consolidated Operating Results, Consolidated Financial Position, and Consolidated Cash Flow for Fiscal
2015 (from June 1, 2015 to May 31, 2016) are as follows:

Results of Operation
Orders received
YoY +2.1%

Orders received increased 2.1% compared with the previous fiscal year to 39,890 million yen due to an increasein orders received in the Transportation Systems segment and the Information Equipment Systems segment, despite a decrease in orders in the Industrial Systems segment.

Net sales
YoY +0.3%

Net sales increased 0.3% compared with the previous fiscal year to 39,746 million yen, mainly due to an in-

Profit/Loss
Net income
attributable toowners of the parent
YoY -19.5%

From a profit perspective, operating income increased 2.7% compared with the previous fiscal year to 1,638 million yen, main-crease in the Industrial Systems segment.

ly due to increased revenue in the Industrial Systems segment. However, ordinary income decreased 27.4% compared with theprevious fiscal year to 1,492 million yen due to the recording of foreign exchange losses of 418 million yen caused by a progressively stronger yen. As a result, net income attributable to owners of the parent decreased 19.5% to 889 million yen.

Financial Position
AssetsTotal assets
50,233 million yen

Total assets as of May 31, 2016 stood at 50,233 million yen, a decrease of 2,807 million yen compared with the end of the previous fiscal year. The de-Liabilities
Total liabilities
26,556 million yen

Total liabilities as of May 31, 2016 stood at 26,556 million yen, a decrease of 1,589 million yen compared with the end of the previous fiscal year. De-

Net assets
Total net assets
23,676 million yen

Net assets as of May 31, 2016 stood at 23,676 million yen, a decrease of 1,218 million yen compared with thecrease in total assets was largely attributable to a decrease of 2,930 million yen in investment securities, which was partly due to a fall in the market priceof held listed securities, in addition to a decrease of 1,169 million yen in cash on hand and in banks, despite an increase of 924 million yen in inventories.
spite increases of 881 million yen in trade notes and accounts payable and 257 million yen in accrued expenses, the decrease in total liabilities waslargely attributable to decreases in debts of 1,118 million yen, deferred tax liabilities of 982 million yen, and income taxes payable of 398 million yen.
end of the previous fiscal year. This decrease was largely attributable to a 1,847 million yen decrease in unrealized holding gain on available-for-sale securities, despite an increase of 600 million yen from retained earnings.

Cash Flows

Financial Report
Financial Report

32

Financial Review

33

Consolidated Balance Sheets

35

Consolidated Statements of Income
and Comprehensive Income

3136

Consolidated Statements of Changes in Net Assets

37

Consolidated Statements of Cash Flows

Cash flow fromoperating activities
Net cash provided byoperating activities
1,135 million yen
Cash flow frominvesting activities
Net cash used ininvesting activities
937 million yen
Cash flow fromfinancing activities
Net cash used infinancing activities
1,341 million yen

Net cash provided by operating activities amounted to 1,135 million yen. Principal cash inflows were income before income taxes at 1,404 million yen, an increase of 972 million yen in trade notes and accounts payable andan increase of 274 million yen in accrued expenses.
Net cash used in investing activities totaled 937 million yen, and mainly comprised funds used in for the purchase of property, plant and equipment at 451 million yen, as well as funds used in for the purchase of intangible
assets at 336 million yen.

Net cash used in financing activities was 1,341 million yen. Major cash outflows were repayment of long-term
debt at 794 million yen and cash dividends paid at 295 million yen.

Toyo Denki Seizo Report 201632

TOYO DENKI SEIZO K.K.
Consolidated Balance Sheets

As of

May 31,
2016

May 31,
2015(Millions of yen)

May 31,
2016(Thousands of
U.S. dollars)(Note 3)

AssetsCurrent assets:
Cash on hand and in banks (Notes 18 and 20)¥2,401¥3,571$21,645

Trade notes and accounts receivable (Notes 4 and 18)

13,790

14,233

124,302

966

606

8,703

7,320

6,395

65,982

Deferred tax assets (Note 13)

518

660

4,666

Other current assets

529

169

4,769

Allowance for doubtful accounts

(3)

(40)

(25)

25,521

25,594230,042

Electronically recorded receivables (Note 18)
Inventories (Note 5)

Total current assets

Property, plant and equipment (Note 6):
Buildings and structures

2,635

2,738

23,749Machinery and vehicles

715

862

6,446

Land

289

289

2,610

Construction in progress

269

227

2,426

Other

453

487

4,079

4,361

4,603

39,31017,396

20,327

156,808

Deferred tax assets (Note 13)

55

7

499

Intangible assets

544

349

4,906

2,369

2,174

21,348

Allowance for doubtful accounts

(12)

(13)

(112)

Total investments and other assets

20,352

22,844

183,449

Total assets (Note 22)¥50,234¥53,041$452,801

Total property, plant and equipment

Investments and other assets (Note 7):
Investment securities (Notes 7, 18 and 19)

Other

33

As of

May 31,
2016

May 31,
2015(Millions of yen)

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

May 31,
2016(Thousands of
U.S. dollars)(Note 3)

¥3,743
5,278¥5,116
3,023$33,736
47,573

1,018

1,784

9,173

254
1,250
37
928
295
—
781
13,584

652
992
41
928
301
65
1,077
13,9792,289
11,268
335
8,368
2,659
—
7,042
122,443

7,288
1,637
3,853
158
37
12,973

7,640
2,619
3,726
141
41
14,167

65,693
14,75334,727
1,424
340
116,937

Net assets (Notes 10 and 17):
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity¥4,998
3,178
9,299
(176)
17,299¥4,998
3,178
8,698
(172)
16,702$45,055
28,642
83,818(1,581)
155,934

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

6,469
261
(352)
6,378
23,677

8,317
260
(384)
8,193
24,89558,313
2,344(3,170)57,487
213,421

Total liabilities and net assets¥50,234¥53,041$452,801

Long-term liabilities:
Long-term debt (Notes 8, 18 and 21)
Deferred tax liabilities (Note 13)
Liability for retirement benefits (Note 9)Long-term payables
Other
Total long-term liabilities
Commitments and contingencies (Note 16)

See notes to consolidated financial statements.

Toyo Denki Seizo Report 201634

TOYO DENKI SEIZO K.K.
Consolidated Statements of Income
For the Years Ended

Net sales (Note 22)
Cost of sales (Note 5)
Gross profit
Selling, general and administrative expenses (Note 11)
Operating income (Note 22)
Non-operating income (expenses):
Interest and dividend income
Interest expense
Equity in earnings of unconsolidated subsidiaries and affiliates
Dividend income on life insurance
Foreign exchange gain (loss)
Other income (expenses), net
Ordinary income
Special gains (losses), net (Note 12)
Income before income taxes
Income taxes (Note 13):
Current
Deferred
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of the parent

TOYO DENKI SEIZO K.K.
Consolidated Statements of Changes in Net Assets
May 31,
2016

May 31,
2015(Millions of yen)

May 31,
2016(Millions of yen)
Shareholders’ equity(Thousands of
U.S. dollars)(Note 3)

¥39,746
30,627
9,119¥39,61730,3359,282$358,267
276,067
82,200

7,480
1,639

7,686
1,596

67,427
14,773

233
(127)
76
70
(418)
20
(146)
1,493
(88)
1,405

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

2,102
(1,149)689
629(3,768)177(1,320)13,453(793)
12,660

369
146
515
890
—
¥890

954
(45)
909
1,106
—
¥1,106

3,324
1,316
4,640
8,020
—
$8,020

See notes to consolidated financial statements.

Balance as of June 1, 2014

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

371

371

¥(26)

¥166

¥(299)¥3,831

Total net
assets¥19,350
371

4,998

3,178

7,882

(168)

15,890

3,990

(26)

166

(299)

3,831

19,721

Cash dividends paid

—

—

(290)

—

(290)

—

—

—

—

—

(290)

—

—

1,106

—

1,106

—

—

—

—

—

1,106

Purchase of treasury stock

—

—

—

(4)

(4)

—

—

—

—

—

(4)

Balance as of May 31, 2015——
¥4,998——¥3,178—816¥8,698——(4)812¥(172) ¥16,702

4,327
4,327
¥8,317

26
26
¥—

94
94
¥260

(85)
(85)
¥(384)

4,362
4,362¥8,193

4,362
5,174
¥24,895

Balance as of June 1, 2015

¥4,998¥3,178¥8,698¥(172) ¥16,702¥8,317¥—¥260¥(384)¥8,193¥24,895

Net changes in items
other than those inshareholders’ equity
Total changes during the year

Changes during the year
Cash dividends paid

—

—

(289)

—

(289)

—

—

—

—

—

(289)

Net income attributable toowners of the parent

—

—

890

—

890

—

—

—

—

—

890

Purchase of treasury stock

—

—

—

(4)

(4)

—

—

—

—

—

(4)

—
—
¥4,998——¥3,178—601¥9,299——(4)597¥(176) ¥17,299(1,848)(1,848)¥6,469

—
—
¥—

1
1
¥261

32
32
¥(352)Net changes in items
other than those inshareholders’ equity

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

Other comprehensive income (loss) (Note 14):
Unrealized holding gain (loss) on securities
Deferred gain on hedging instruments
Translation adjustments
Retirement benefits liability adjustments
Share of other comprehensive income (loss) of affiliates accounted for by theequity method
Total other comprehensive income (loss)¥3,990

Capitalsurplus

Total
Deferred
Retirement accumulated
loss
benefitsotheron hedging Translation
liability comprehensive
instruments adjustments adjustments
incomeNet income attributable toowners of the parent

Balance as of May 31, 2016

Net income

Unrealized
holding
gain onsecurities

Changes during the year

Total changes during the year

For the Years Ended

Treasury
stock

Total
shareholders’equityCommonstock

Cumulative effects ofchanges in accounting
policies
Restated balance as ofJune 1, 2014

Accumulated other comprehensive income(1,815)(1,815)(1,815)(1,218)¥6,378 ¥23,677(Thousands of U.S. dollars) (Note 3)
Shareholders’ equity

May 31,
2016

May 31,
2015(Millions of yen)

¥890

May 31,
2016(Thousands of
U.S. dollars)(Note 3)

¥1,106$8,020(1,848)
—
49
32

4,327
26
(11)
(85)

(16,657)
—
440
285

(48)
(1,815)

105
4,362

(434)
(16,366)

Comprehensive income (loss)¥(925)¥5,468$(8,346)

Comprehensive income (loss) attributable to:
Owners of the parent
Non-controlling interests¥(925)—¥5,468—$(8,346)—

Balance as of June 1, 2015

Accumulated other comprehensive income
Total
Deferred
Retirement accumulated
loss
benefitsotheron hedging Translation
liability comprehensive
instruments adjustments adjustments
incomeCommonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityUnrealized
holding
gain onsecurities$45,055$28,642$78,404$(1,549) $150,552$74,970$—$2,338

Total net
assets$(3,455) $73,853 $224,405

Changes during the year
Cash dividends paid——

(2,606)—(2,606)

—

—

—

—

—

(2,606)

Net income attributable toowners of the parent

—

—

8,020

—

8,020

—

—

—

—

—

8,020

Purchase of treasury stock

—

—

—

(32)

(32)

—

—

—

—

—

(32)

—
—
$45,055——$28,642—5,414$83,818

—
—
(32)
5,382
$(1,581) $155,934(16,657)(16,657)$58,313

—
—
$—

6
6
$2,344

Net changes in items
other than those inshareholders’ equity
Total changes during the year
Balance as of May 31, 2016

285 (16,366) (16,366)
285 (16,366) (10,984)$(3,170) $57,487 $213,421

See notes to consolidated financial statements.

See notes to consolidated financial statements.

35

Toyo Denki Seizo Report 201636

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,
2016

May 31,
2015(Millions of yen)

Operating activities
Income before income taxes
Depreciation and amortization(Reversal of) provision for allowance for doubtful accounts
Provision for accrued employees’ bonuses(Decrease) increase in reserve for ecological countermeasures
Increase (decrease) in liability for retirement benefits
Interest and dividends income
Interest expenses
Loss 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
Impairment loss
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by operating activities
Investing activities
Purchases of property, plant and equipment
Purchases of intangible assets
Purchases of investment securities
Proceeds from sales of investment securities
Payments for investments in capital of subsidiaries and affiliates
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
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 (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 20)

37

May 31,
2016(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.

¥1,405
851
(37)
0
(65)
116
(233)
127
12

¥2,015
882
6
13
21
(106)
(204)
139
—

$12,660
7,669
(336)
7
(587)
1,048
(2,102)
1,149
105

(3)
(957)
972
1
(206)
274
—
(87)
2,170
242
(131)
(1,145)
1,136(1,926)
737
2,765
171
(15)
(2,803)
31
391
2,117
220
(140)
(682)
1,515

(31)
(8,629)8,762
9(1,856)
2,475
—
(784)
19,5592,181(1,184)(10,319)
10,237(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, 2016, the numbers of consolidated subsidiaries and affiliates accounted for by the equity method were 6 and 2 (6and 2 in 2015). 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.

(452)
(336)
(13)
19
(197)
41
(938)

(830)
(127)
(14)
—
—
(18)
(989)

(4,071)(3,031)(121)
174(1,773)375(8,447)(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 at thebalance sheet date, except for the components of net assets excluding non-controlling 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.

(247)
—
(794)
(4)
(295)
(1)
(1,341)(27)(1,170)3,571¥2,401

(115)
1,500
(1,073)
(4)
(288)
(1)
19
28
573
2,998
¥3,571(2,230)—(7,157)(32)(2,662)(9)(12,090)(243)(10,543)
32,188$21,645(d) Cash and Cash equivalents
Cash and cash equivalents consist of cash on hand, cash in banks which can be withdrawn at any time and short-term investmentswith a maturity of three months or less from the date of purchase, which can easily be converted to cash and are subject to little riskof change in value.
(e) Inventories
Inventories are stated principally at the lower of cost or market, cost being determined principally by the specific identification method
for finished products and work in process and by the moving average cost method for raw material and supplies.
(f) Short-term investments and investment securities
Securities other than equity securities issued by subsidiaries and affiliates are classified into three categories: trading, held-tomaturity or other securities (available-for-sale securities). Trading securities are carried at fair value and held-to-maturity securities
are carried at amortized cost. Available-for-sale securities with market quotation are carried at fair value with changes in unrealized
holding gain or loss, net of the applicable income taxes, included directly in net assets. Available-for-sale securities without market
quotation are carried at cost. Cost of securities sold is determined by the moving average method.

Toyo Denki Seizo Report 201638

(g) Property, plant and equipment (except for leased assets) and depreciation
Depreciation of property, plant and equipment of the Company and its consolidated subsidiaries is calculated principally by
the declining-balance method based on the estimated useful lives and the residual value, while buildings except for leasehold
improvements acquired on or after April 1, 1998 are depreciated by the straight-line method. The estimated useful lives of theseassets are as follows:
Buildings and structures:		
8 to 60 years
3 to 12 years
Machinery and vehicles:		
Significant renewals and additions are capitalized at cost. Maintenance and repairs are charged to income.
(h) Intangible assets (except for leased assets)
Intangible assets are amortized using the straight-line method. Software for internal use is amortized over the internal available period(5 years) using the straight-line method.
(i) Leases
Leased assets capitalized under the finance lease arrangements which do not transfer ownership to the lessee are depreciated overthe lease period without any residual value using the straight-line method.
All other lease transactions are accounted for as operating leases and related payments are charged to income as incurred.
(j) Allowance for doubtful accounts
Allowance for doubtful accounts is provided based on past experience for normal receivables and on an estimate of the collectabilityof receivables from companies in financial difficulty.
(k) Accrued directors’ bonuses
Accrued directors’ bonuses are provided to cover the current fiscal year’s portion of the estimated amounts to be paid in future forthe performance incentive bonuses.
(l) Accrued employees’ bonuses
Accrued employees’ bonuses are provided to cover the current fiscal year’s portion of the estimated amounts to be paid in future.
(m) Reserve for losses on order acknowledgements
Reserve for losses on order acknowledgements is provided based on the amounts expected to be incurred during the current fiscal
year and which are able to estimate the losses reasonably to cover the future losses on order acknowledgements. Provision of reserve
for losses on order acknowledgements in the amounts of ¥1 million ($9 thousand) and ¥171 million is included in cost of sales forthe years ended May 31, 2016 and 2015, respectively.
(n) Reserve for ecological countermeasures
Reserve for ecological countermeasures is provided based on the amounts expected to be incurred in future to cover the costs on
ecological countermeasures such as soil pollution countermeasures.
(o) Retirement benefits
Retirement benefit obligation is attributed to each period by the benefit formula method over the estimated years of service of theeligible employees.
Prior service cost is amortized as incurred by the straight-line method over a fixed period (10 years) within the average remaining
years of service of the employees.
Actuarial differences are amortized in the year following the year in which gain or loss is recognized primarily by the straight-line
method over a fixed period (10 years) within the average remaining years of service of the employees.
(p) Income taxes
Deferred tax assets and liabilities have been recognized in the consolidated financial statements with respect to the differences
between the financial reporting and tax bases of the assets and liabilities, and were measured using the enacted tax rates and laws
which will be in effect when the differences are expected to reverse.

39(q) Construction revenue and costs
Construction revenue and construction costs are recognized by the percentage-of-completion method, if the outcome of aconstruction contract can be estimated reliably. The percentage of completion is measured based on the percentage of the costs
incurred to the estimated total costs. For other construction contracts, the completed-contract method is applied.
(r) Research and development expenses
Research and development expenses are charged to income when incurred.
(s) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(t) Derivative financial instruments
The Company and certain consolidated subsidiaries enter into various derivative transactions in order to manage certain risks arisingfrom adverse fluctuations in interest rates. Derivative financial instruments are carried at fair value with changes in unrealized gain orloss charged or credited to operations, except for these which meet the criteria for deferred hedge accounting under which unrealized
gain or loss is deferred as a component of net assets.
Deferred hedge accounting is adopted for derivatives which qualify as hedges, under which unrealized gain or loss is deferred.
Hedging instruments are derivative transactions and hedged items are primarily interest on debts. Hedge effectiveness is notassessed if the substantial terms and conditions of the hedging instruments and the hedged items are the same.
(u) Standards issued but not yet adopted
Revised Implementation Guidance on Recoverability of Deferred Tax Assets
On March 28, 2016, the ASBJ issued “Revised Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance
No. 26).
(1) Overview
Regarding the treatment of the recoverability of deferred tax assets, a review was conducted following the framework of the
JICPA Audit Committee Report No. 66 “Auditing Treatment on Determining the Recoverability of Deferred Tax Assets,” wherebycompanies are categorized into five categories and deferred tax assets are calculated based on each of these categories.
a. Treatment of companies that do not satisfy any of the category requirements for (Category 1) through (Category 5)
b. Category requirements for (Category 2) and (Category 3)c. Treatment related to future deductible temporary differences which cannot be scheduled in companies that qualify as(Category 2)
d. Treatment related to the reasonable estimable period of future pre-adjusted taxable income in companies that qualify as(Category 3)
e. Treatment in cases that companies that satisfy the category requirements for (Category 4) but qualify as (Category 2) or(Category 3)(2) Scheduled date of adoption
The Company expects to adopt the revised implementation guidance from the beginning of the fiscal year ending May 31, 2017.
(3) Effect of adopting revised implementation guidance
The Company is currently evaluating the effect of adopting the revised implementation guidance on its consolidated financial
statements.
2. Accounting Changes
The Company and its domestic subsidiaries adopted “Revised Accounting Standard for Business Combinations” (ASBJ Statement
No. 21 of September 13, 2013), “Revised Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22 ofSeptember 13, 2013), “Revised Accounting Standard for Business Divestitures” (ASBJ Statement No. 7 of September 13, 2013),
etc. effective from June 1, 2015. As a result, under these revised accounting standards, the presentation method of net income wasamended, and the reference to “minority interests” was changed to “non-controlling interests.” In order to reflect these changes in
the presentation, the related amounts in the previous comparative financial information were reclassified to conform to such changes
in the current fiscal year presentation.

Toyo Denki Seizo Report 201640

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 ¥110.94=U.S.$1, the approximate rate of exchange prevailing at May 31, 2016. Thistranslation should not be construed as a representation that all amounts shown could be converted into U.S. dollars at such rate.
4. Notes Receivable and Payable
As May 31, 2015 fell 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,
2016

May 31,
2015(Millions of yen)¥——

Notes receivable
Notes payableMay 31,
2016(Thousands of
U.S. dollars)

¥184
20

$—
—

5. Inventories
Inventories as of May 31, 2016 and 2015 were as follows:

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

May 31,
2016

May 31,
2015(Millions of yen)

¥1,491
3,172
2,657¥7,320

May 31,
2016(Thousands of
U.S. dollars)¥1,2832,962
2,150¥6,395$13,438
28,592
23,952$65,982

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

May 31,
2016

May 31,
2015(Millions of yen)

¥4
68
¥72

Merchandise and finished products
Work in process

May 31,
2016(Thousands of
U.S. dollars)

¥172
21
¥193

$35
615
$650

Buildings and structures
Machinery and vehicles
Other
Accumulated depreciation

41

May 31,
2016

May 31,
2015(Millions of yen)¥7,1726,729
3,281
17,182(13,380)¥3,802¥7,058
6,793
3,273
17,124(13,037)¥4,087

May 31,
2016(Thousands of
U.S. dollars)$64,645
60,651
29,578
154,874(120,600)$34,274

May 31,
2016

May 31,
2015(Millions of yen)¥851

May 31,
2016(Thousands of
U.S. dollars)¥882$7,669

Accumulated depreciation of property, plant and equipment amounted to ¥13,380 million ($120,600 thousand) and ¥13,037
million as of May 31, 2016 and 2015, respectively.
7. Investments and Other Assets
Investments in unconsolidated subsidiaries and affiliates included in “Investment securities” as of May 31, 2016 and 2015 were as
follows:

As of

May 31,
2016

May 31,
2015(Millions of yen)

¥1,390

May 31,
2016(Thousands of
U.S. dollars)¥1,174$12,527

8. Short-Term Borrowings and Long-Term Debt
As of May 31, 2016 and 2015, 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,
2016

May 31,
2015(Millions of yen)

¥666
352
¥1,018

May 31,
2016(Thousands of
U.S. dollars)

¥990
794
¥1,784$6,0003,173$9,173

The annual weighted average interest rates applicable to short-term borrowings and current-portion of long-term debt as of May
31, 2016 were 1.415% and 1.535%, respectively.
As of May 31, 2016 and 2015, long-term debts were as follows:

As of

May 31,
2016

May 31,
2015(Millions of yen)

Long-term debt, excluding current portion, serially due from 2017 through 2020

¥7,288

May 31,
2016(Thousands of
U.S. dollars)¥7,640$65,693

The annual weighted average interest rate applicable to long-term debt as of May 31, 2016 was 1.258%.
The maturities of long-term debt are summarized as follows:

Years ended May 31

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

As of

For the Years Ended

Investments in capital

Inventories are stated at the lower of cost or market and the Company recognized losses on write-down of inventories held for theordinary sales purpose due to a decline in profitability in the amount of ¥(205) million ($(1,850) thousand) and ¥191 million for theyears ended May 31, 2016 and 2015, respectively. These amounts were included in “Cost of sales.”As ofDepreciation of property, plant and equipment for the years ended May 31, 2016 and 2015 were as follows:

2017
2018
2019
2020
2021 and thereafter(Millions of yen)(Thousands of
U.S. dollars)

¥352
4,002
3,182
72
32
¥7,640$3,173
36,074
28,682649
288$68,866

Toyo Denki Seizo Report 201642

The assets pledged as collateral for short-term borrowings of ¥858 million ($7,731 thousand) and long-term debt of ¥1,248
million ($11,249 thousand) as of May 31, 2016 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)¥1,643558
355
158¥2,714$14,806
5,030
3,203
1,429
$24,468

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

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

As of May 31
Buildings and structures
Machinery and vehicles
Other property, plant and equipment(Millions of yen)(Thousands of
U.S. dollars)¥1,643558
355¥2,556$14,806
5,030
3,203$23,039Retirement benefit obligation as of June 1
Cumulative effect of changes in accounting policies
Restated balance as of June 1
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Retirement benefit obligation as of May 31

May 31,
2016

May 31,
2015(Millions of yen)

¥3,726
—
3,726
287
14
10
(184)
¥3,853¥4,045
(576)
3,469
257
50
364
(414)
¥3,726

As of

As of

May 31,
2015(Millions of yen)

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

May 31,
2015(Millions of yen)

¥287
14
70
—
—
¥371

May 31,
2016(Thousands of
U.S. dollars)

¥257
50
31
(39)
269
¥568

$2,583129
632——$3,344

May 31,
2016(Thousands of
U.S. dollars)

Unrecognized prior service cost
Unrecognized actuarial loss
Unamortized net retirement benefit obligation at transition
Total$33,583—
33,5832,583
129
95(1,663)$34,727

May 31,
2016

May 31,
2016

May 31,
2015(Millions of yen)

¥—
60
—
¥60

May 31,
2016(Thousands of
U.S. dollars)¥(39)(332)
269¥(102)

$—
537
—
$537

Retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as of May 31,
2016 and 2015 are as follows:

As of

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets as of
May 31, 2016 and 2015 for the Company’s and the consolidated subsidiaries’ defined benefit plans:

May 31,
2016

May 31,
2016

Retirement benefits liability adjustments included in other comprehensive income (before tax effect) as of May 31, 2016 and 2015
are as follows:

9. Retirement Benefit Plans
The Company and its consolidated subsidiaries have retirement benefit plans combined by defined contribution plans and lump-sum
payment plans.
The Company and its consolidated subsidiaries introduced the point system in the lump-sum payment plans, under which
retirement benefit amounts are computed based on the accumulated points granted according to the job ranking and performances.
Under the lump-sum payment plans held by certain consolidated subsidiaries, the liability for retirement benefits and retirement
benefit expenses are calculated using a simplified method.
The changes in the retirement benefit obligation during the years ended May 31, 2016 and 2015 are as follows:

For the Years Ended

The components of retirement benefit expenses for the years ended May 31, 2016 and 2015 are as follows:

May 31,
2016

May 31,
2015(Millions of yen)

¥—
507
—
¥507

May 31,
2016(Thousands of
U.S. dollars)

¥—
567
—
¥567

$—
4,573
—
$4,573Major actuarial assumptions (weighted average) used in accounting for the above plans as of May 31, 2016 and 2015 were as
follows:

For the Years Ended
Discount rate

May 31,
2016
0.4%

May 31,2015
0.4%

Note: The Company does not use the expected rate of salary increase in computing retirement benefit obligation since the Company adopts the point system.

The amounts of the required contribution to the defined contribution plans of the Company and its consolidated subsidiaries were¥115 million ($1,039 thousand) and ¥113 million for the years ended May 31, 2016 and 2015, respectively.

(Thousands of
U.S. dollars)

Unfunded retirement benefit obligation
Net liability (asset) for retirement benefits on the consolidated balance sheets¥3,853
3,853¥3,726
3,726$34,727
34,727

Liability for retirement benefits
Net liability (asset) for retirement benefits on the consolidated balance sheets¥3,853
3,853¥3,726
3,726$34,727
34,727

Note: The plan adopting the simplified method is included.

43

Toyo Denki Seizo Report 201644

11. Selling, General and Administrative Expenses
The main components of “Selling, general and administrative expenses” for the years ended May 31, 2016 and 2015 were as follows:

10. Net Assets
Information regarding changes in net assets for the years ended May 31, 2016 and 2015 is as follows:a. Shares issued and outstanding/ Treasury stock

May 31,2016

For the Years Ended

For the year ended May 31, 2016

Number ofshares as ofJune 1, 2015

Type of shares

Increase

Decrease

Number ofshares as of
May 31, 2016

(Shares)

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

48,675,000——

48,675,000

484,737

8,741—

493,478

8,741 shares(Millions of yen)

¥1,966
37
392
196
(37)
868

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,
2016

Type of shares

Increase

Decrease(Shares)

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

48,675,000——

48,675,000

474,527

10,210—484,737

For the year ended May 31, 2016

Common stock

Total dividends Total dividends
Dividends per(Millions of (Thousands of Dividends per share (U.S.
yen)
U.S. dollars)
share (Yen)dollars)¥289$2,606

¥6.00

$0.05

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

Cut-off date

Effective dateCut-off date

Effective date

May 31, 2015 August 28, 2015

For the year ended May 31, 2015
Resolution
Annual general meetingof the shareholders on
August 27, 2014

Special gains:
Gain on sales of intangible assets (land leasehold right)
Special losses:
Impairment loss (Note)
Provision of reserve for ecological countermeasures
Removal expenses for property, plant and equipment
Loss on sales of investment securities
Other
Total

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

Type of shares

Type of shares
Common stock¥290¥1,882
41
397
313
6
898

$17,723
335
3,532
1,771
(336)
7,828

May 31,
2015

May 31,
2016(Thousands of
U.S. dollars)

¥—

¥13

$—

—
—
(72)
(12)
(4)
¥(88)

(31)
(24)
—
—
—
¥(42)

—
—
(650)
(105)
(38)
$(793)

Note: The Group recognized no impairment loss for the year ended May 31, 2016.
The Group recognized an impairment loss on the following assets for the year ended May 31, 2015:

10,210 sharesb. Dividends

Resolution
Annual general meetingof the shareholders on
August 27, 2015

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

For the year ended May 31, 2015

Number ofshares as of
May 31, 2015

May 31,
2016

12. Special Gains (Losses), Net
The components of “Special gains (losses), net” for the years ended May 31, 2016 and 2015 were as follows:

For the Years Ended

Number ofshares as ofJune 1, 2014

May 31,
2015

Use

Type

Plant

Buildings and structures(Millions of yen)

¥31

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

¥6.00 May 31, 2014 August 28, 2014

2) Dividends with the cut-off date in the year ended May 31, 2016 and the effective date in the year ending May 31, 2017
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 29,
August 26, 2016
stock
2016
¥289
$2,606 earnings¥6.00$0.05 201645

Toyo Denki Seizo Report 201646

13. Income Taxes
Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of corporation tax, inhabitants’taxes and enterprise tax, which, in the aggregate, resulted in a statutory rate of approximately 33.1% and 35.6% for the years
ended May 31, 2016 and 2015, respectively. Income taxes of a foreign consolidated subsidiary are based generally on the tax rates
applicable in the country of incorporation.
The reconciliation between the effective tax rates reflected in the consolidated statements of income and the effective statutory tax
rate for the years ended May 31, 2016 and 2015 was as follows:

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

May 31,
2016
33.1%

May 31,
2015
35.6%

2.0
(1.1)
1.9
(11.4)
(1.8)
7.0
5.6
1.4
36.7%

1.4
(1.5)
1.4
(0.4)
(0.9)
2.4
7.9
(0.8)
45.1%

The significant components of deferred tax assets and liabilities as of May 31, 2016 and 2015 were as follows:

As ofDeferred tax assets:
Write-down of inventories
Liability for retirement benefits
Accrued employees' bonuses
Reserve for losses on order acknowledgements
Tax loss carryforwards
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,
2016

May 31,
2015(Millions of yen)

May 31,
2016(Thousands of
U.S. dollars)

¥153
1,186
292
105
312
448
2,496
(684)
1,812

¥193
1,209
309
100
345
587
2,743
(774)
1,969

$1,375
10,690
2,632
948
2,809
4,043
22,497(6,159)16,338(2,857)(19)(2,876)¥(1,064)(3,919)(2)(3,921)¥(1,952)(25,755)(171)(25,926)$(9,588)

Adjustments of deferred tax assets and liabilities due to a change in the income tax rate:
The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 15 of 2016) and the “Act for Partial Amendment of the Local
Tax Act, etc.” (Act No. 13 of 2016) were enacted at the Diet on March 29, 2016. As a result, the effective statutory tax rate used tomeasure the Company’s deferred tax assets and liabilities was reduced from 32.3% to 30.9% for the temporary differences expected
to be realized or settled in the years beginning June 1, 2016 and 2017 and to 30.6% for the temporary differences expected to berealized or settled in the years beginning on and after June 1, 2018. The effect of the announced reduction of the effective statutory
tax rate was to decrease deferred tax assets, net of deferred tax liabilities, and retirement benefits liability adjustments by ¥66 million($596 thousand) and ¥8 million ($74 thousand), respectively and increase unrealized holding gain on securities and income taxes –deferred by ¥154 million ($1,386 thousand) and ¥79 million ($716 thousand), respectively.

14. Other Comprehensive Income (Loss)
The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive income(loss) for the years ended May 31, 2016 and 2015:

For the Years Ended

May 31,
2016

Unrealized holding gain (loss) on securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTax effectUnrealized holding gain (loss) on securities¥(2,921)
11(2,910)1,062(1,848)¥6,050—
6,050(1,723)
4,327$(26,333)
105(26,228)
9,571(16,657)

Deferred gain on hedging instruments:
Amount arising during the year
Amount before tax effectTax effect
Deferred gain on hedging instruments

—
—
—
—

40
40
(14)
26

—
—
—
—

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

49
49
49

(11)
(11)
(11)

440
440
440

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

(10)
70
60
(28)
32

(364)
261
(103)
18
(85)

(95)
632
537
(252)
285

(48)

105

(434)

(48)
¥(1,815)105¥4,362(434)$(16,366)

Share of other comprehensive income (loss) of affiliates accounted forby the equity method
Amount arising during the year
Share of other comprehensive income (loss) of affiliates accounted forby the equity method
Total other comprehensive income (loss)(Millions of yen)

May 31,
2016(Thousands of
U.S. dollars)

15. Lease Transactions
The information about finance leases that do not transfer ownership of the leased property to the lessee is omitted since there is nomateriality in terms of value.
In addition, finance leases that do not transfer ownership of the leased property to the lessee and whose lease inception was onor before May 31, 2008 are permitted to continue to be accounted for as operating lease transactions if certain “as if capitalized”
information is disclosed in the note to the financial statements, but such information is omitted since there is no materiality in termsof value.
16. Contingent Liabilities
As of May 31, 2016 and 2015, 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.

47

May 31,
2015

May 31,
2016

May 31,
2015(Millions of yen)

¥ 30
169

May 31,
2016(Thousands of
U.S. dollars)

¥196
200

$273
1,525

Toyo Denki Seizo Report 201648

17. Amounts Per Share

For the Years Ended
Net income:Basic

May 31,
2016

May 31,
2015(Yen)

May 31,
2016(U.S. dollars)¥18.47¥22.94

$0.17

As of

May 31,
2016

May 31,
2015

May 31,
2016

Net assets¥491.41(Yen)(U.S. dollars)¥516.61$4.43

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 attributable to owners of the parent
Net income not attributable to common shareholders
Net income attributable to owners of the parent related to common stock

May 31,
2016

May 31,
2015(Millions of yen)

¥890
—
890

May 31,
2016(Thousands of
U.S. dollars)¥1,106—
1,106$8,020—8,020(Thousand shares)

Average number of shares of common stock during the year

48,18548,195

18. Financial Instruments
Overview(1) Policy for financial instruments
The Group raises its necessary funds for capital investments to reinforce and renew production facilities and working capital
principally through bank borrowings. The Group manages temporary cash surpluses through low risk financial assets. The Group
uses derivatives in order to avoid the following risks and does not enter into derivatives for speculative or trading purposes.
(2) Types of financial instruments and related risk
Trade receivables—trade notes and accounts receivable and electronically recorded receivables—are exposed to credit risk inrelation to customers. Trade receivables denominated in foreign currencies arising from international business are exposed to foreignexchange fluctuation risk, but the Group utilizes forward foreign exchange contracts to reduce such risk as a hedging instrument.
Investment securities are composed of mainly the shares of common stock of other companies with which the Group has business
relationships and exposed to market risk.
Certain long-term debt raised for the purpose of making capital investments with variable interest rates is exposed to interest rate
fluctuation risk. However, to reduce such risk and fix interest expense for long-term debt bearing interest at variable rates, the Grouputilizes interest rate swap transactions as a hedging instrument.
Regarding hedging instruments and hedged items in hedge accounting, hedging policy, and assessment of the effectiveness ofhedging activities, etc., please see Note 1(t) “Derivative financial instruments.”

49(3) Risk management for financial instruments(a) Monitoring of credit risk (the risk that customers or counterparties may default)
In accordance with the internal policies of the Group for managing credit risk arising from receivables, each related division monitors
credit worthiness of their main customers periodically, and monitors due dates and outstanding balances by individual customer. In
addition, the Group is making efforts to identify and mitigate risks of bad debts from customers who are having financial difficulties.
Investment securities are composed of mainly the shares of common stock of highly rated companies with which the Group hasbusiness relationships. Accordingly, the Group believes that the credit risk deriving from such investment securities is insignificant.
The Group also believes that the credit risk of derivatives is insignificant as it enters into derivative transactions only with financial
institutions which have a sound credit profile.
(b) Monitoring of market risks (the risk arising from fluctuations in foreign exchange rates, interest rates and others)
The Group utilizes interest rate swap transactions to reduce interest rate fluctuation risk on long-term debt.
For investment securities, the Group periodically reviews the fair values of such financial instruments and the financial position of
the issuers.
In conducting derivative transactions, the division in charge of each derivative transaction follows the internal policies, which set
forth delegation of authority and maximum upper limit on positions. Monthly reports including actual transactions data are submitted
to the Board of Directors for their review.
(c) Monitoring of liquidation risk (the risk that the Group may not be able to meet its obligations on scheduled due dates)
Based on the report from each division, the Group prepares and updates its cash flow plans on a timely basis to manage liquidationrisk.
(4) Supplementary explanation of the estimated fair value of financial instruments
The fair value of financial instruments is based on their quoted market price, if available. When there is no quoted market priceavailable, fair value is reasonably estimated. Since various assumptions and factors are reflected in estimating the fair value, different
assumptions and factors could result in different fair value. In addition, the notional amounts of derivatives in Note 21, Derivative
Transactions are not necessarily indicative of the actual market risk involved in derivative transactions.
Estimated Fair value of Financial Instruments
Carrying value of financial instruments on the consolidated balance sheets as of May 31, 2016 and 2015 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, 2016

Carrying value

Fair value

Difference(Millions of yen)

Assets1) Cash on hand and in banks2) Trade notes and accounts receivable3) Electronically recorded receivables
4) Investment securities
Total assets
Liabilities
5) Trade notes and accounts payable6) Electronically recorded payables
7) Short-term borrowings
8) Long-term debt
Total liabilities
9) Derivative transactions*¥2,401
13,790966
16,757¥33,914¥2,401
13,790966
16,757¥33,914

¥—
—
—
—
¥—

¥3,743
5,278
666
7,640
¥17,327¥43¥3,743
5,278
666
7,724
¥17,411
¥43

¥—
—
—
84
¥84
¥—

Toyo Denki Seizo Report 201650

As of May 31, 2016

Carrying value

Fair value

Difference(Thousands of U.S. dollars)

Assets1) Cash on hand and in banks2) Trade notes and accounts receivable3) Electronically recorded receivables
4) Investment securities
Total assets
Liabilities
5) Trade notes and accounts payable6) Electronically recorded payables
7) Short-term borrowings
8) Long-term debt
Total liabilities
9) Derivative transactions*2. Financial instruments for which it is extremely difficult to determine the fair value$21,645
124,302
8,703
151,051$305,701$21,645
124,302
8,703
151,051$305,701

$—
—
—
—
$—

$33,736
47,5736,000
68,866$156,175$383$33,736
47,5736,000
69,626$156,935
$383

$—
—
—
760
$760
$—

As of May 31, 2016

Fair value

Difference

As of May 31, 2016

Carrying value(Millions of yen)

Assets1) Cash on hand and in banks2) Trade notes and accounts receivable3) Electronically recorded receivables
4) Investment securities
Total assets
Liabilities
5) Trade notes and accounts payable6) Electronically recorded payables
7) Short-term borrowings
8) Long-term debt
Total liabilities
9) Derivative transactions*¥639

May 31,
2016(Thousands of
U.S. dollars)¥642$5,757

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are not included in the above table.
3. Redemption schedule for receivables and securities with maturities at May 31, 2016 and 2015 are as follows:

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
Electronically recorded receivables¥2,398
12,942966¥16,306

¥—
848
—
¥848

¥—
—
—
¥—

¥—
—
—
¥—

Due in One Yearor Less

Due after One
Year throughFive Years

Due after Five
Years throughTen Years

Due after
Ten Years(Thousands of U.S. dollars)¥3,571
14,233606
19,685¥38,095¥3,571
14,233606
19,685¥38,095

¥—
—
—
—
¥—

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

¥—
—
—
(50)
¥(50)¥—*Derivative transactions are presented in a net amount of receivables and payables and net payables are shown in parenthesis
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, trade notes and accounts receivable and electronically recorded receivables
Since these items are settled in a short period of time, their carrying value approximates fair value.
However, if they are settled in a long period of time, the fair value of receivables is based on the present value of the receivables classified by definite periods discounted
using interest rates on the corresponding period until settlement.
Investment securities
The fair value of stocks is based on quoted market prices. Investment securities held by the Group are classified as available-for-sale securities and please see Note 19“Securities.”
Liabilities:
Trade notes and accounts payable, electronically recorded payables and short-term borrowings
Since these items are settled in a short period of time, their carrying value approximates fair value.
Long-term debt
The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new borrowings
were entered into. The fair value of long-term debt with variable interest rates, which is hedged by the interest rate swaps and to which hedge accounting is applied (referto the following paragraph), is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new borrowings wereentered into.
Derivative transactions
The fair value of interest rate swaps accounted for by the hedge accounting is included in the fair value of the related long-term debt, since such interest rate swaps areaccounted for together with long-term debt as hedged items.
The fair value of interest rate swaps accounted for by the normal method is determined based on the price, etc. provided by the financial institutions.

51

May 31,
2015(Millions of yen)

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

As of May 31, 2015

May 31,
2016

As of

Cash on hand and in banks
Trade notes and accounts receivable
Electronically recorded receivables

As of May 31, 2015

$21,611
116,661
8,703$146,975

$—
7,641
—
$7,641

$—
—
—
$—

$—
—
—
$—

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
Electronically recorded receivables¥3,568
12,539606¥16,713

¥—
1,694
—
¥1,694

¥—
—
—
¥—

¥—
—
—
¥—

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

19. Securities
Information regarding securities classified as available-for-sale securities
Available-for-sale securities

As of May 31, 2016

Carrying value Acquisition cost

Unrealized
gain (loss)(Millions of yen)

Securities whose carrying value exceeds their acquisition cost:
Stock
Subtotal
Securities whose acquisition cost exceeds their carrying value:
Stock
Subtotal
Total¥16,744¥16,744¥7,416¥7,416¥9,328¥9,328¥13¥13¥16,757¥15¥15¥7,431¥(2)¥(2)¥9,326

Toyo Denki Seizo Report 201652

As of May 31, 2016

Carrying value Acquisition cost

Unrealized
Gain (Loss)

Hedging policies(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$150,928$150,928$66,851$66,851$84,077$84,077

$123
$123
$151,051

$132
$132
$66,983

$(9)
$(9)
$84,068

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

Available-for-sale securities

As of May 31, 2015

Carrying value Acquisition cost

Unrealized
Gain (Loss)(Millions of yen)

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

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

Stock:
Sales proceeds
Gain on sales
Loss on sales

May 31,
2016

May 31,
2015(Millions of yen)

¥19
—
12

May 31,
2016(Thousands of
U.S. dollars)

¥—
—
—

$174
—
105

20. Supplementary Cash Flow Information
Cash and cash equivalents in the consolidated statements of cash flows for the years ended May 31, 2016 and 2015 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

The Company utilizes forward foreign exchange contracts and interest rate swaps for the purpose of hedging its exposure tofluctuations in foreign exchange rates and interest rates, respectively. However, based on internal management rules on financial
market risk approved by the Company’s Board of Directors, Group companies do not enter into transactions involving derivatives for
speculative or trading purposes.
Types and purpose of derivative transactions
The Company primarily uses forward foreign exchange contracts to hedge against the fluctuations in foreign currency exchange rates
on trade receivables denominated in foreign currencies and interest rate swaps to hedge against the adverse impact of fluctuations ininterest rates on interest-bearing debt.
Derivative transactions to which hedge accounting is not applied:
Currency-related derivatives:

As of May 31, 2016

Contract amount

Maturing after
one year

Fair value

Unrealized gain
(loss)(Millions of yen)

Forward foreign exchange contracts:
Sold:
USD

As of May 31, 2016

¥486
Contract amount

¥—

¥43

Maturing after
one year

Fair value¥43
Unrealized gain
(loss)(Thousands of U.S. dollars)

Forward foreign exchange contracts:
Sold:
USD

$4,377$—$383

Maturing after
one year

Fair value$383

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

Information regarding available-for-sale securities soldFor the Years Ended

21. Derivative Transactions

May 31,
2016

May 31,
2015(Millions of yen)

¥2,401¥2,401

May 31,
2016(Thousands of
U.S. dollars)¥3,571¥3,571$21,645$21,645

As of May 31, 2015

Contract amount

Unrealized gain
(loss)(Millions of yen)

Forward foreign exchange contracts:
Sold:
USD

¥596

¥—

¥(22)

¥(22)

Notional amount
Major hedged
Maturing after
item
Contract amount
one year

Fair value

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

Derivative transactions to which hedge accounting is applied:Interest-related derivatives:

As of May 31, 2016

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

As of May 31, 2016

Notional amount
Major hedged
Maturing after
item
Contract amount
one year¥7,360¥7,128Note

Fair value(Thousands of U.S. dollars)Interest rate swaps accounted for by the exceptional method:
Receive/floating and pay/fixed53

Long-term debt

$66,342$64,251

Note

Toyo Denki Seizo Report 201654

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

Notional amount
Major hedged
Maturing after
item
Contract amount
one year

As of May 31, 2015

Transportation
Systems

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

¥7,889¥7,360For the year ended May 31, 2016
Reportable segments

Note

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

22. Segment Information
The reportable segments of the Group are components for which discrete financial information is available and whose operating
results are regularly reviewed by the Board of Directors to make decisions about resource allocation and to assess performance.
The Group establishes business units by product and each business unit designs domestic and overseas comprehensive strategies
for its products and is developing business activities. Accordingly, the Group consists of the three reportable segments by productbased on the business units, which are Transportation Systems, Industrial Systems and Information Equipment Systems.
The accounting policies of the segments are substantially same as those described in the significant accounting policies in Note 1.
Segment profit is evaluated based on operating income.
Inter-segment sales are recorded at the same prices used in transactions with third parties.

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

Industrial
Systems

Other(Note)

Segment profit
Segment assets
Other items:
Depreciation
Capital expenditures

Adjustments

Consolidated¥26,758¥12,027¥955¥6¥39,746¥—¥39,74630
26,788¥2,965¥19,605

4
12,031¥1,020¥8,035

—
955
¥96
¥587

597
603
¥31
¥569

631
40,377¥4,112¥28,796

(631)
(631)
¥(2,473)¥21,438—
39,746¥1,639¥50,234

¥550
¥470

¥151
¥126

¥20
¥12

¥1
¥0

¥722
¥608

Adjustments

Consolidated$8,605$59$358,267$—$358,267

Segment profit
Segment assets

272
241,464$26,722$176,720

34
108,445$9,193$72,423

—
8,605
$862
$5,294

5,377
5,436
$284
$5,127

5,683
363,950$37,061$259,564(5,683)(5,683)$(22,288)$193,237—
358,267$14,773$452,801

Other items:
Depreciation
Capital expenditures$4,957$4,231$1,358$1,137

$182
$110

$6
$1

$6,503$5,479$1,166$2,659$7,669$8,138

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

For the year ended May 31, 2015
Reportable segments(Millions of yen)

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

Total$108,411

Transportation
Systems
Total

Other
(Note)$241,192

For the year ended May 31, 2016
Transportation
Systems

Information
Equipment
Systems(Thousands of U.S. dollars)

Reportable segments
Information
Equipment
Systems

Industrial
Systems

¥129
¥295

¥851
¥903

Industrial
Systems

Information
Equipment
Systems

Other(Note)

Total

Adjustments

Consolidated(Millions of yen)

Sales, profits orlosses and asset byreportable segments
Net sales:
Sales to third parties
Inter-segment sales
and transfers¥26,870¥11,613¥1,128¥6¥39,617¥—¥39,617

Segment profit
Segment assets

41
26,911¥3,118¥18,335

2
11,615¥848¥8,175

—
1,128
¥71
¥801

588
594
¥59
¥587

631
40,248¥4,096¥27,898

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

Other items:
Depreciation
Capital expenditures

¥546
¥554

¥161
¥205

¥26
¥22

¥1
¥1

¥734
¥782

¥148
¥187

¥882
¥969

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, 2016
and 2015 are summarized as follows:

For the Years Ended

May 31,
2016

Japan
China
Other
Consolidated¥27,094
8,375
4,277¥39,746

May 31,
2015(Millions of yen)

May 31,
2016(Thousands of
U.S. dollars)¥24,547
11,634
3,436¥39,617$244,226
75,48738,554$358,267

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

55

Toyo Denki Seizo Report 2016

56

Major customer information(3) Effect on per share information
Per share information for the year ended May 31, 2016 would have been as follows, assuming the share consolidation had been
undertaken at June 1, 2015:
Net assets per share: ¥2,457.05 ($22.15)
Net income per share: ¥92.33 ($0.83)

Major customer information for the year ended May 31, 2016 is as follows:
Customer
Meiji Sangyo Co., Ltd.

Segment
Transportation Systems

Major customer information for the year ended May 31, 2015 is as follows:
Customer
Segment
Meiji Sangyo Co., Ltd.
Transportation Systems(Millions of yen)(Thousands of
U.S. dollars)¥5,506$49,626

b. Resolution regarding share repurchase and buyback of shares
At the meeting of the Board of Directors held on July 25, 2016, the Company resolved to acquire its own shares pursuant to Article
156 of the Companies Act of Japan applicable in lieu of Paragraph 3, Article 165 of the same act.

(Millions of yen)

¥5,489

Information regarding an impairment loss on fixed assets by reportable segments
Impairment loss on fixed assets by reportable segments for the years ended May 31, 2016 and 2015 is summarized as follows:

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

May 31,
2016

May 31,
2015(Millions of yen)

May 31,
2016(Thousands of
U.S. dollars)

¥—
—

¥31
—

$—
—

—

—

—

—
—
—
¥—

31
—
—
¥31

—
—
—
$—

(1) Reason for the share repurchase
To implement capital policy in response to changes in the business and market environment and to return profits to shareholders(2) Type of shares to be acquired:
Common stock(3) Total number of shares to be acquired: Up to 1,000,000 shares(4) Total value of shares to be acquired:
Up to ¥300 million ($2,704 thousand)From July 26 to September 21, 2016
(5) Acquisition schedule:(6) Method of acquisition:
Open market purchase using a trust(7) Result of acquisition:
Total number of shares acquired:
952,000 shares
Total value of shares acquired:¥299,860 thousand		
($2,703 thousand)Acquisition of own shares pursuant to the resolution was terminated on August 12, 2016.

23. Significant Subsequent Eventsa. Share consolidation
At the meeting of the Board of Directors held on July 12, 2016, the Company resolved to submit the matter of the share consolidation(five shares into one share) to the 155th annual general meeting of the shareholders scheduled to be convened on August 26, 2016
and this proposal was approved at the meeting of the shareholders.
(1) Purpose of share consolidation
All securities exchanges in Japan announced an Action Plan for Consolidating Trading Units and under this action plan, trading
units of shares (number of shares per share unit) for all domestic listed companies are to be uniformly set at 100 shares.
In light of the intent of this plan, and as a company listed on the Tokyo Stock Exchange, the Company decided to change thenumber of shares per share unit from 1,000 to 100 and also to undertake a share consolidation under which every 5 shares will beconsolidated into 1 share to achieve the desirable share unit price level quoted by the stock exchanges, namely between ¥50,000
and ¥500,000.
(2) Particulars of the consolidation(i) Type of shares to be consolidated: Common stock(ii) Consolidation method and ratio:	Shares held by shareholders recorded in the latest register of shareholders as of November
30, 2016 will be consolidated at the ratio of 5 shares to 1 share on December 1, 2016.
(iii) Number of shares reduced through consolidation:
Outstanding shares before consolidation (as of May 31, 2016) 48,675,000 shares
Number of shares reduced through consolidation
38,940,000 shares
Outstanding shares after consolidation
9,735,000 shares
Note: The number of shares reduced through consolidation and the outstanding shares after consolidation are theoreticalvalues calculated by multiplying the number of outstanding shares before consolidation by the share consolidation ratio.

57

Toyo Denki Seizo Report 201658

Reference Data for Management Indices

665

868

897

916
881

798

2012

Research and development costs (Unit: Million yen)

850

FY 2011

1,000

1,144

2012

Depreciation and amortization (Unit: Million yen)
1,145

1,296

FY 2011(Unit: Million yen)

612

969

1,307

Capital investment 

902

Report of Independent Auditors

2014

2015

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

2013

2014

2015

FY 2011

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

2013

2014

155

(937)

(988)

2014

(1,199)FY 2011

2015

2012

2013

(1,341)(753)(1,457)

1,135

1,514
2013

2014

Net sales by region
Japan

FY 2011

59

China

2012

Others2013

2015

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

(2,148)
2012

2014

2015

3,621
1,069
(1,328)FY 2011

2013

2,563

FY 2011

2012

18

2013

2015

(Unit: Million yen)Overseas net sales ratio

2014

FY 2011

2012

2013

2014

2015

Japan

25,20023,34025,39824,54727,094

China

10,081

5,495

7,118

11,634

8,374

Others

3,289

1,738

2,440

3,435

4,277

Total

38,57030,57534,95739,61739,746

Overseas net sales
ratio

34.7%

23.7%

27.3%

38.0%

32.0%

2015

Toyo Denki Seizo Report 2016

60

Company Profile (as of May 31, 2016)

Executive Profiles (as of August 26, 2016)

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

1,245 (Consolidated) 824 (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)
https://www.toyodenki.co.jp/

Hokkaido Branch

Stock Exchange Listing

The Tokyo Stock Exchange, First Section

Code Number

6505

Number of Shares Authorized

180,000,000 shares

Number of Shares Issued

48,675,000 shares

Number of Shareholders

6,183

President,
Representative Director

Kenzo Terashima
Sendai Branch
Niigata Branch

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

Subsidiaries and Affiliates
TOYOKOUKI Co., Ltd.

Senior Managing Director,
Representative Director

Senior Managing
Director

Masami Tsuchiya

Hiroshi ShimotakaharaHeadofficebuilding

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

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

Director

Director

Director

Director (Outside)

Director (Outside)

Kenichi Gotoh

Akihiko Ishii

Akira Watanabe

Hirokazu Chinone

Takashi YamagishiStanding Statutory
Auditor (External)

Standing Statutory
Auditor

Statutory Auditor(External)

Statutory Auditor(External)

Yoshihiko Yoshino

Toshio Ikeda

Eiichi Suzuki

Yokohama plant

Beijing Jingche Shuangyang Traction System Co., Ltd.

Toyo Denki (Beijing) Co., Ltd.

Changzhou Ruiyang Transmission Technology Co., Ltd.

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

TOYO DENKI SEIZO K.K. DELHI LIAISON OFFICE

Director

Hiroyuki AraiTOYO DENKI USA, INC.

Hiroshi Hamao

Hunan Xiangyang Electric Co., Ltd.
TOYO DENKI SEIZO K.K. Bangkok Representative OfficeSenior Executive Officers Shuji Horie
Executive Officers

61

Isami Takase

Yoshifumi Otsubo
Toshihiko Akihiro

Kenji Tanimoto
Tetsuto Iwaki

Yuji Nagano
Yukimasa Tanabe

Toyo Denki Seizo Report 201662

Organization Chart (as of July 1, 2016)

Stock Related Information
Management Planning Division
Group Administration Office
General Affairs Division

Human Resources Division
Financial Affairs DivisionCorporate Quality Management DivisionCorporate Production Planning Division
Personnel Affairs Committee

National and Global Group
Company Meetings

Executive Officer Liaison
Meeting

Management Strategy
Meeting

President

Board of Directors

General Meeting of Shareholders

Purchasing Division

Business Development Division

Transportation Business Unit

Audit Division
Ryuoh Factory Integration DivisionInternal Control Committee

Office of
Auditors

Statutory
Auditors

Board of
Statutory
Auditors

Industry Business Unit

IT Business Unit

Research Laboratory
Yokohama Plant
Osaka Branch
Nagoya BranchManagement Planning Department
PR, IR and CSR Department
Information Systems Department
General Affairs Department
Legal Compliance Department
Export Management Department
Intellectual Property Management Department
Human Resources Department
Education and Development Department
Finance and Accounting Department
Group Administrative Control Department
Planning and Research Department
Quality Management Department 1
Quality Management Department 2
Production Planning Department
Production Innovation Department
Production Engineering Department
Planning and Research Department
Procurement Department 1
Procurement Department 2
Procurement Department 3
Logistics Department
Development Promotion Department
EV Systems Department
Transportation Business Planning Division
Japan Sales Division
JR Group Sales Division
Commuter Rail and Subway Sales
Osaka Sales Division
Nagoya Sales Division
Engineering Division
China Sales DivisionInternational Sales Division
India Promotion OfficeInternational Project 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
Osaka 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

63

Number of shares (As of May 31, 2016)
Number of shares authorized

180,000,000

Number of shares issued

48,675,000

Number of shareholders

6,183

Distribution of shares by type of shareholder
Treasury stock
1.01%

Major shareholders
Shareholders
East Japan Railway Company
TOYOTA INDUSTRIES CORPORATION
Hitachi, Ltd.
Employees Stock Ownership PlanNIPPON LIFE INSURANCE COMPANY
Japan Trustee Services Bank, Ltd. (Trust account)
Trust & Custody Services Bank, Ltd. (Pension trust account)
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
BNP PARIBAS SECURITIES SERVICES LUXEMBOURG/JASDEC/HENDERSON HHF SICAV
Toyo Denki Subcontract Factories
Shareholding Association

Number of shares held
% of(Thousands)
total shares held
2,400
4.98
2,100
4.35
2,100
4.35
1,887
3.91
1,688
3.50
1,403
2.91
1,377
2.85
1,350
2.80

Financial instruments
business operators
0.64%

Foreigncorporations, etc.
7.07%
Financial
institutions
23.99%

Other
corporations
25.27%

Individuals
and others
42.02%

1,239

2.57

Changes to share consolidation and the number of sharesconstituting one share unit

1,086

2.25

Effective as of December 1, 2016, the Company will implement a
share consolidation (five shares consolidated into one share) andrevise the number of shares constituting one share unit (from 1,000
shares to 100 shares).

(Note) T he percentages of total shares held are calculated excluding 493,000 treasury stocks held by
the Company.

Transition of share price
Share price
(Yen)

600

(Yen)

600
400
400
200
200
0

(Thousands)

15,0000
Trading
volume(Thousands)

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

2013.62014.1

2015.1

2016.1

2013.62014.1

2015.1

2016.10Disclaimer on the forward-looking statements
Information in this corporate report contains forward-looking statements. Such statements were developed based on the information available at the time
when this report was prepared. These forward-looking statements may be largely revised in the future, and the actual outcome could significantly varyfrom the stated or implied contents of such statements subject to various factors. This report is not intended to solicit investment. Investors are kindly
asked to make your investment decision at your own judgment and responsibility. Numbers presented in 100 million yen or million yen are rounded down
to the nearest respective unit.

Toyo Denki Seizo Report 201664