Financial Review

Financial Report

Information on “results of operation,” “financial position” and “cash flows” for the consolidated fiscal
year under review (from June 1, 2012 to May 31, 2013) are as follows.

Results of Operation
Orders received
YoY +3.9%

Orders received increased 3.9% compared with the previous fiscal year to 33,949 million yen. Whileorders received in the Information Equipment Systems segment dropped significantly from thesurging levels of the previous year and orders received in the Industrial Systems segment remainedon a declining trend due to environmental factors hindering incoming orders for production
equipment and overseas sales, orders received in the Transportation Systems segment surged
upward, particularly overseas.

Net sales
YoY -20.7%

Net sales decreased 20.7% year on year to 30,575 million yen. Net sales in the Transportation
Systems segment decreased significantly, particularly overseas, and net sales in the Industrial
Systems segment and Information Equipment Systems segment also decreased for the same
reasons as orders received.

Profit/loss
Net Income
YoY -8.1%

Operating income decreased 70.5% compared with the previous fiscal year to 501 million yen, mainly
due to the decrease in net sales. Ordinary income decreased 35.7% year on year to 1,150 million yen,partly due to the posting of foreign exchange gains of 629 million yen derived from the weakening
yen. Net income decreased 8.1% compared with the previous fiscal year to 722 million yen.

Financial Position
AssetsTotal assets
42,364 million yen

Total assets as of May 31, 2013 stood at 42,364 million yen, an increase of 4,278 million yen
compared with the end of the previous fiscal year. Despite a decrease in trade notes and accounts
receivable of 344 million yen, this increase was largely attributable to increases in inventories of
1,133 million yen and investment securities of 4,388 million yen.

Liabilities
Total liabilities
23,844 million yen

Total liabilities as of May 31, 2013 amounted to 23,844 million yen, an increase of 807 million yen
compared with the end of the previous fiscal year. While short-term borrowings contracted 2,080
million yen, this upswing in total liabilities reflected a 2,684 million yen increase in long-term debt.

Net assets
Total net assets
18,519 million yen

Net assets as of May 31, 2013 stood at 18,519 million yen, an increase of 3,470 million yen comparedwith the end of the previous fiscal year. This increase was largely attributable to a 433 million yen
increase in retained earnings and a 2,951 million yen increase in unrealized holding gain on securities.

Cash Flows
Financial Report

32 Financial Review
33 Consolidated Balance Sheets
35 Consolidated Statements of Income and Comprehensive Income
36 Consolidated Statements of Changes in Net Assets
37 Consolidated Statements of Cash Flows
38 Notes to Consolidated Financial Statements
58 Report of Independent Auditors
31

Cash flows fromoperating activities
Net cash provided byoperating activities
1,069 million yen

Net cash provided by operating activities amounted to 1,069 million yen for the fiscal year underreview. Major cash outflows included an increase of 1,122 million yen in inventories, while principal
cash inflows were income before income taxes and minority interests at 1,272 million yen anddepreciation and amortization at 1,144 million yen.

Cash flows frominvesting activities
Net cash used ininvesting activities
1,457 million yen

Net cash used in investing activities totaled 1,457 million yen for the fiscal year under review andmainly comprised funds used for the purchases of property, plant and equipment at 1,425 million
yen.

Cash flows fromfinancing activities
Net cash provided byfinancing activities
155 million yen

Net cash provided by financing activities was 155 million yen for the fiscal year under review. The
principal cash inflow was an increase in long-term debt at 3,800 million yen, while major cash
outflows were a decrease in short-term loans payable at 2,000 million yen and repayment oflong-term debt at 1,196 million yen.

Toyo Denki Seizo Report 201332

TOYO DENKI SEIZO K.K.
Consolidated Balance Sheets

As of

May 31,
2013

May 31,
2012(Millions of yen)

May 31,
2013(Thousands of
U.S. dollars)(Note 2)

AssetsCurrent assets:
Cash on hand and in banks (Notes 17 and 19)¥1,302¥1,489$12,873

Trade notes and accounts receivable (Note 17)

13,384

13,729132,280

Inventories (Note 3)

6,665

5,532

65,869Deferred tax assets (Note 12)

453

517

4,476

Other current assets

179

177

1,772

Allowance for doubtful accounts

(40)

(29)

(399)

21,943

21,415

216,871

Total current assets

Property, plant and equipment (Note 4):
Buildings and structures

2,985

2,374

29,507

Machinery and vehicles

1,109

1,230

10,960

Land

289

289

2,862

Construction in progress

81

495

795

Other

548

473

5,415

5,012

4,861

49,539Total property, plant and equipment

Investments and other assets (Note 5):13,318

8,930

131,630

Deferred tax assets (Note 12)

39

960

386

Intangible assets

322

347

3,178

Other

1,893

1,590

18,709Allowance for doubtful accounts

(163)

(17)

(1,610)Total investments and other assets

15,40911,810152,293

Total assets¥42,364¥38,086$418,703

Investment securities (Notes 5, 17 and 18)

As of

May 31,
2013

May 31,
2012(Millions of yen)

LIABILITIES AND NET ASSETS
Current liabilities:
Trade notes and accounts payable (Note 17)
Short-term borrowings and current portion of long-term debt
(Notes 6 and 17)
Current portion of bonds payable (Note 7)
Income taxes payable (Note 12)
Accrued expenses
Accrued directors’ bonuses
Accrued employees’ bonuses
Reserve for losses on order acknowledgements (Note 3)
Other
Total current liabilities

May 31,
2013(Thousands of
U.S. dollars)(Note 2)

¥4,647¥4,544$45,923

4,296

6,376

42,459

120
319
2,883
17
773
196
1,029
14,280

160
474
2,909
47
891
198
1,121
16,7201,186
3,156
28,494
165
7,639
1,938
10,176
141,136

—
5,413
3,289
615
44
165
38
9,564

120
2,729
3,136
—
44
252
36
6,317

—
53,49932,508
6,077
433
1,628
383
94,528

Net assets (Notes 9 and 16):
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity¥4,998
3,178
7,156
(164)
15,168¥4,998
3,178
6,722
(162)
14,736$49,401
31,40470,722(1,620)149,907

Accumulated other comprehensive income:Unrealized holding gain on securities
Translation adjustments
Total accumulated other comprehensive income
Total net assets

3,367
(15)
3,352
18,520

415
(102)
313
15,04933,277(145)
33,132
183,039

Total liabilities and net assets¥42,364¥38,086$418,703

Long-term liabilities:
Bonds payable (Notes 7 and 17)
Long-term debt (Notes 6, 17 and 20)
Accrued retirement benefits (Note 8)
Deferred tax liabilities (Note 12)
Reserve for ecological countermeasures
Long-term payables
Other
Total long-term liabilities
Commitments and contingencies (Note 15)

See notes to consolidated financial statements.

33

Toyo Denki Seizo Report 201334

TOYO DENKI SEIZO K.K.
Consolidated Statements of Income

For the Years Ended

Net sales (Note 21)
Cost of sales (Note 3)
Gross profit
Selling, general and administrative expenses (Note 10)
Operating income
Non-operating income (expenses):
Interest and dividend income
Interest expense
Equity in (losses) earnings of unconsolidated subsidiaries and affiliates
Dividend income on life insurance
Foreign exchange gain (loss)
Loss on disposal of property, plant and equipment
Other income, net
Ordinary income
Special gains (losses), net (Note 11)
Income before income taxes and minority interests
Income taxes (Note 12):Current
DeferredIncome before minority interests
Minority interests
Net income

TOYO DENKI SEIZO K.K.
Consolidated Statements of Changes in Net Assets
May 31,
2013

May 31,
2012(Millions of yen)

May 31,
2013(Millions of yen)
Shareholders’ equity(Thousands of
U.S. dollars)(Note 2)¥30,575
22,8797,696¥38,571
29,736
8,835$302,185
226,12176,064

7,195
501

7,134
1,701

71,110
4,954

116
(163)
113
48
(23)
(5)
2
88
1,789
(31)
1,758

1,577
(2,130)
(161)
898
6,225
(154)
163
6,418
11,372
1,209
12,581

714
258
972
786
—
¥786

4,904
537
5,441
7,140
—
$7,140¥4,998¥3,178¥6,226¥(160)¥14,242¥124¥(97)¥27¥14,269

—
—
—

—
—
—

(290)
786
—

—
—
(2)

(290)
786
(2)

—
—
—

—
—
—

—
—
—

(290)
786
(2)

—
—
¥4,998——¥3,178—496¥6,722—(2)¥(162)—
494¥14,736

291
291
¥415

(5)
(5)
¥(102)

286
286
¥313

286
780
¥15,049¥4,998———¥3,178———¥6,722(288)
722—¥(162)——(2)¥14,736
(288)
722
(2)

¥415
—
—
—

¥(102)
—
—
—

¥313
—
—
—

¥15,049
(288)
722
(2)

—
—
¥4,998——¥3,178—434¥7,156—(2)¥(164)—
432¥15,168

2,952
2,952
¥3,36787
87¥(15)

3,039
3,039¥3,352

3,039
3,471¥18,520

Cash dividends paid
Net income
Net changes in items other than those inshareholders’ equity
Total changes during the year
Balance as of May 31, 2012
Balance as of June 1, 2012
Cash dividends paid
Net income
Purchase of treasury stock
Net changes in items other than those inshareholders’ equity
Balance as of May 31, 2013

(Thousands of U.S. dollars) (Note 2)
Shareholders’ equity

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equity$49,401———$31,404———$66,441(2,859)7,140—$(1,607) $145,639—(2,859)
—
7,140
(13)
(13)

$4,108———$(1,012)———$3,096———$148,735(2,859)
7,140
(13)

—

—

—

—

29,169867

30,03630,036—$49,401—$31,404

4,281$70,722(13)
4,268$(1,620) $149,907

29,169$33,277867$ (145)

30,036$33,132

34,304$183,039

Net income
Purchase of treasury stock
Net changes in items other than those inshareholders’ equity
Total changes during the year
Balance as of May 31, 2013

For the Years Ended(Millions of yen)

May 31,
2013

¥786

$7,140

2,951
27

291
(6)

29,169
262

61
3,039

1
286

605
30,036Comprehensive income¥3,761¥1,072$37,176

Comprehensive income attributable to:
Owners of the parent
Minority interests¥3,761—¥1,072—$37,176—

Other comprehensive income (Note 13):
Unrealized holding gain on securities
Translation adjustments
Share of other comprehensive income of affiliates accounted for by theequity method
Total other comprehensive income—

Total net
assetsSee notes to consolidated financial statements.

(Thousands of
U.S. dollars)(Note 2)

¥722

Income before minority interests

Total
accumulated
otherTranslation comprehensive
adjustments
incomeCommonstock

Cash dividends paid

May 31,
2012

Accumulated other comprehensive income
Unrealized
holding
gain onsecurities

Balance as of June 1, 2012

May 31,2013

Total net
assetsChanges during the year

See notes to consolidated financial statements.

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

Total
accumulated
otherTranslation comprehensive
adjustments
incomeRetainedearnings

Total changes during the year

496
55
551
722
—
¥722

Unrealized
holding
gain onsecurities

Capitalsurplus

Balance as of June 1, 2011

Treasury
stock

Total
shareholders’equityCommonstock

Purchase of treasury stock

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

Accumulated other comprehensive income

See notes to consolidated financial statements.

35

Toyo Denki Seizo Report 201336

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,
2013

May 31,
2012(Millions of yen)

Operating activities
Income before income taxes and minority interests
Depreciation and amortization
Provision for (reversal of) allowance for doubtful accounts
Reversal of accrued employees’ bonuses
Provision for (reversal of) accrued retirement benefits
Interest and dividends income
Interest expenses
Gain on sales of investment securities
Loss on valuation 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
Reserve for ecological countermeasures
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities

37

May 31,
2013(Thousands of
U.S. dollars)(Note 2)

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.

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

¥1,758
1,146
(12)
(43)
(72)
(116)
163
—
23

$12,581
11,308
1,562(1,169)1,512(1,577)
2,130
(719)
—

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

(3,399)2,649(1,135)
46
(493)
(951)
(89)
(51)
(576)
135
(163)
(724)
(1,328)2,278(11,097)
989
(58)
1,985
(284)
—
(2,407)
17,034
1,698(2,079)(6,080)
10,573(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, 2013, the numbers of consolidated subsidiaries and affiliates accounted for by the equity method were 6 and 3 (6and 3 in 2012). 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.

Investing activities
Purchases of property, plant and equipment
Purchases of investment securities
Proceeds from sales of investment securities
Other payments
Other receipts
Other, net
Net cash used in investing activities(1,426)
(13)
127
(178)
124
(92)
(1,458)

(918)
(917)
—
(73)
31
(271)
(2,148)(14,090)
(129)
1,259
(1,760)1,224(909)(14,405)(c) Foreign currency translation
Receivables and payables denominated in foreign currencies are translated into yen at the rates of exchange in effect at the balance
sheet date, and differences arising from the translation are included in the consolidated statements of income.
The balance sheet accounts of the foreign consolidated subsidiaries are translated into yen at the rates of exchange in effect atthe balance sheet date, except for the components of net assets excluding minority interests which are translated at their historicalexchange rates. Revenue and expense accounts are translated at the average rate of exchange in effect during the year. Differences
arising from the translation are presented as translation adjustments in the consolidated financial statements.

Financing activities(Decrease) increase in short-term loans payable
Increase in long-term debt
Repayment of long-term debt
Redemption of bonds payable
Purchases of treasury stock
Cash dividends paid
Other, net
Net cash provided by financing activities
Effect of exchange rate change on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 19)(2,000)3,800(1,196)
(160)
(1)
(288)
(0)
155
46
(187)
1,489
¥1,302

1,500
2,300
(750)
(200)
(2)
(284)
—
2,564
(9)
(921)
2,410
¥1,489(19,767)
37,557(11,821)(1,581)(13)(2,840)
(3)
1,532
454
(1,846)
14,719$12,873(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 201338

(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.

(o) 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.

(Accounting change which is difficult to distinguish from a change in accounting estimates)
Following the corporate income tax reform, the Company and its domestic consolidated subsidiaries changed the depreciation method
for property, plant and equipment acquired on or after June 1, 2012 to the depreciation method based on the amended Corporation
Tax Act. The effect of this change was to increase operating income, ordinary income and income before income taxes and minority
interests by ¥48 million ($479 thousand) for the year ended May 31, 2013.

(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.

(h) Intangible assets (except for leased assets)
Intangible assets are amortized using the straight-line method. Software for internal use is amortized over the internal available period(5 years) using the straight-line method.
(i) Leases
Non-cancellable lease transactions that transfer substantially all risks and rewards associated with the ownership of assets to thelessee are accounted for as finance leases. Leased assets capitalized under the finance lease arrangements are depreciated over thelease period without any residual value using the straight-line method.
All other lease transactions are accounted for as operating leases and related payments are charged to income as incurred.
(j) Allowance for doubtful accounts
Allowance for doubtful accounts is provided based on past experience for normal receivables and on an estimate of the collectabilityof receivables from companies in financial difficulty.
(k) Accrued directors’ bonuses
Accrued directors’ bonuses are provided to cover the current fiscal year’s portion of the estimated amounts to be paid in future forthe performance incentive bonuses.
(l) Accrued employees’ bonuses
Accrued employees’ bonuses are provided to cover the current fiscal year’s portion of the estimated amounts to be paid in future.
(m) Accrued retirement benefits
Accrued retirement benefits for employees have been recorded at the amount calculated based on the retirement benefit obligation asof balance sheet date, as adjusted for unrecognized net retirement benefit obligation at transition, unrecognized actuarial gain or loss,
and unrecognized prior service cost. The retirement benefit obligation is attributed to each period by the straight-line method over theestimated years of service of the eligible employees. The net retirement benefit obligation at transition is being amortized principallyover a period of 15 years by the straight-line method.
Actuarial gain or loss is amortized in the following year in which the gain or loss is recognized primarily by the straight-line
method over periods (10 years) which are shorter than the average remaining years of service of the employees.
Prior service cost is being amortized as incurred by the straight-line method over periods (10 years) which are shorter than 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.

(r) Research and development expenses
Research and development expenses are charged to income when incurred.
(s) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(t) Derivative financial instruments
The Company and certain consolidated subsidiaries enter into various derivative transactions in order to manage certain risks arisingfrom adverse fluctuations in interest rates. Derivative financial instruments are carried at fair value with changes in unrealized gain orloss charged or credited to operations, except for these which meet the criteria for deferred hedge accounting under which unrealized
gain or loss is deferred as a component of net assets.
Deferred hedge accounting is adopted for derivatives which qualify as hedges, under which unrealized gain or loss is deferred.
Hedging instruments are derivative transactions and hedged items are primarily interest on debts. Hedge effectiveness is notassessed if the substantial terms and conditions of the hedging instruments and the hedged items are the same.
(u) Standards issued but not yet adopted
On May 17, 2012, the ASBJ issued “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26) and “Guidance on
Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25), which replaced the Accounting Standard for Retirement
Benefits that had been issued by the Business Accounting Council in 1998 with effective date of April 1, 2000 and the other related
practical guidance, being followed by partial amendments from time to time through 2009.
Under the revised accounting standard, taking into accounts the viewpoints of improvement of financial reporting and international
trends, accounting treatment for actuarial gains or losses and past service costs that are yet to be recognized in profit or loss, thecalculation method for retirement benefit obligations and service costs and expansion of the related disclosure requirements havebeen revised.
The Company is going to apply the new accounting standard and implementation guidance from the end of the fiscal year endingon May 31, 2014, but the revision of the computation method for retirement benefit obligation and prior service cost will be adopted
from the beginning of the fiscal year ending May 31, 2015. The Company is currently evaluating what effect these modifications will
have on its consolidated financial statements.
2. U.S. Dollar Amounts
The accompanying consolidated financial statements are expressed in yen, and solely for the convenience of the reader, havebeen translated into U.S. dollars at the rate of ¥101.18=U.S.$1, the approximate rate of exchange prevailing at May 31, 2013. Thistranslation should not be construed as a representation that all amounts shown could be converted into U.S. dollars at such rate.

(n) 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 ¥(2) million ($(16) thousand) and ¥ 49 million is included in cost of sales
for the years ended May 31, 2013 and 2012, respectively.

39

Toyo Denki Seizo Report 201340

3. Inventories
Inventories as of May 31, 2013 and 2012 were as follows:

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

May 31,
2013

May 31,
2012(Millions of yen)

¥1,465
3,082
2,118¥6,665

May 31,
2013(Thousands of
U.S. dollars)¥1,5982,243
1,691¥5,532$14,477
30,457
20,935$65,869

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 ¥55 million ($542 thousand) and ¥166 million for the years
ended May 31, 2013 and 2012, respectively. These amounts were included in “Cost of sales”.

5. Investments and Other Assets
Investments in unconsolidated subsidiaries and affiliates included in “Investment securities” as of May 31, 2013 and 2012 were as
follows:

As ofEquity securities
Investments in capital

As of

May 31,
2013

May 31,
2012(Millions of yen)

¥8
30
¥38

Merchandise and finished products
Work in process

May 31,
2013(Thousands of
U.S. dollars)

¥69
71
¥140

$83
293
$376

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

As of
Buildings and structures
Machinery and vehicles
Other
Accumulated depreciation

May 31,
2012(Millions of yen)¥6,973
6,757
3,025
16,755(12,113)¥4,642

May 31,
2013(Thousands of
U.S. dollars)¥6,279
6,405
2,715
15,399(11,322)¥4,077$68,922
66,78229,895
165,599(119,717)$45,882

Depreciation of property, plant and equipment for the years ended May 31, 2013 and 2012 were as follows:

For the Years Ended

May 31,
2013

May 31,
2012(Millions of yen)

¥1,144

May 31,
2013(Thousands of
U.S. dollars)¥1,146$11,308

Accumulated depreciation of property, plant and equipment amounted to ¥12,113 million ($119,717 thousand) and ¥11,322
million as of May 31, 2013 and 2012, respectively.
The following amount of deferred gain was directly deducted from the acquisition costs of the related property, plant and equipment
acquired during the year ended May 31, 2013:¥29 million ($284 thousand)
Buildings and structures:
Other:	   6 million ($64 thousand)

41

Loans, principally from banks
Current portion of long-term debt

(Millions of yen)

¥ 59
856

May 31,
2013(Thousands of
U.S. dollars)

¥124
758

$582
8,464

May 31,
2013

May 31,
2012(Millions of yen)

¥3,180
1,116¥4,296

May 31,
2013(Thousands of
U.S. dollars)¥5,1801,196¥6,376$31,429
11,030$42,459

The annual weighted average interest rates applicable to short-term borrowings and current-portion of long-term debt as of May
31, 2013 were 1.475% and 2.102%, respectively.
As of May 31, 2013 and 2012, long-term debts were as follows:

As of

May 31,
2013

May 31,2012

6. Short-Term Borrowings and Long-Term Debt
As of May 31, 2013 and 2012, short-term borrowings and the current portion of long-term debt consisted of the following:

As of
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,
2013

Long-term debt, excluding current portion, serially due from 2014 through 2018

May 31,
2013

May 31,
2012(Millions of yen)

¥5,413

May 31,
2013(Thousands of
U.S. dollars)¥2,729$53,499

The annual weighted average interest rate applicable to long-term debt as of May 31, 2013 was 1.430%.
The maturities of long-term debt are summarized as follows:

Years ended May 31
2014
2015
2016
2017
2018

(Millions of yen)(Thousands of
U.S. dollars)¥1,116
871
592
150
3,800
¥6,529$11,030
8,608
5,851
1,483
37,557$64,529

The assets pledged as collateral for short-term borrowings of ¥3,751 million ($37,073 thousand) and long-term debt of ¥1,188
million ($11,741 thousand) as of May 31, 2013 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)¥1,858919
372
159¥3,308$18,358
9,087
3,678
1,566
$32,689

Toyo Denki Seizo Report 2013

42

The following assets included in the above are set by factory foundation fixed collateral security:(Millions of yen)

As of May 31
Buildings and structures
Machinery and vehicles
Other property, plant and equipment

The components of retirement benefit expenses for the years ended May 31, 2013 and 2012 are outlined as follows:(Thousands of
U.S. dollars)¥1,858919
372¥3,149$18,358
9,087
3,678$31,123

7. Bonds Payable
As of May 31, 2013 and 2012, bonds payable consisted of the following:

May 31,2013

As ofIssued by:
The Company
The Company

May 31,
2012(Millions of yen)

4th unsecured bonds issued on Sep. 28, 2007 at 1.33%, due
on Sep. 28, 2012
5th unsecured bonds issued on Mar. 25, 2009 at 1.12%, dueon Mar. 25, 2014

May 31,
2013(Thousands of
U.S. dollars)

¥ —

¥ 40

$—

120
¥120

240
¥280

1,186
$1,186

Annual maturity of bonds payable as of May 31, 2013 was as the following:

Years ended May 31
2014(Millions of yen)(Thousands of
U.S. dollars)

¥120
¥120

$1,186$1,186

The following table sets forth the components of the amounts recognized in the consolidated balance sheets as of May 31, 2013
and 2012 for the Company and its consolidated subsidiaries’ benefit plans:

As ofRetirement benefit obligation
Unrecognized net retirement benefit obligation at transition
Unrecognized actuarial loss
Unrecognized prior service costAccrued retirement benefits

May 31,
2012(Millions of yen)¥(4,052)
539
273
(49)
¥(3,289)

Consolidated subsidiaries adopted a simplified method in the calculation of their retirement benefit obligation.

May 31,
2013(Millions of yen)

¥229
61
270
44
(10)
112
¥706

Service cost
Interest cost
Amortization of net retirement benefit obligation at transition
Amortization of actuarial loss
Amortization of prior service cost
Other
Retirement benefit expenses(Thousands of
U.S. dollars)

¥215
67
270
74
(10)
103
¥719

$2,266
605
2,666
437
(99)
1,102
$6,977

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

The assumptions used in accounting for the above plans were as follows:

May 31,2013

For the Years Ended
Inter-period allocation method of estimated retirement benefits
Discount rate
Amortization period of actuarial loss
Amortization period of prior service cost
Amortization period of net retirement benefit obligation at transition

May 31,
2012

Straight-line method

1.5%
10 years
10 years
15 years

1.5%(1) Information regarding changes in net assets for the years ended May 31, 2013 and 2012 are as follows:a. Shares issued and outstanding/ Treasury stock
For the year ended May 31, 2013

May 31,
2013(Thousands of
U.S. dollars)¥(4,199)
808
314
(59)
¥(3,136)

May 31,
2012

9. Net Assets

8. Retirement Benefit Plans
The Company and its consolidated subsidiaries have retirement benefit plans combined by defined contribution plans and lump-sum
payment plans.

May 31,
2013

May 31,2013

For the Years Ended$(40,049)
5,324
2,704
(487)
$(32,508)

Type of shares

Number ofshares as ofJune 1, 2012

Increase

Decrease

Number ofshares as of
May 31, 2013

(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

458,570

4,996—

463,566

Decrease

Number ofshares as of
May 31, 2012

4,996 shares

For the year ended May 31, 2012

Type of shares

Number ofshares as ofJune 1, 2011

Increase(Shares)

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

43

48,675,000——

48,675,000

452,701

5,869—

458,5705,869 shares

Toyo Denki Seizo Report 201344

11. Special Gains (Losses), net
The components of “Special Gains (Losses), net” for the years ended May 31, 2013 and 2012 were as follows:b. Dividends
1) Dividends paid

For the Years Ended

For the year ended May 31, 2013
Resolution
Annual general meetingof the shareholders on
August 28, 2012

Type of shares

Total dividends Total dividends
Dividends per(millions of (thousands of Dividends per share (U.S.
yen)
U.S. dollars)
share (yen)dollars)¥289$2,859

¥6.00

$0.06

Total dividends(millions of Dividends per
yen)share (yen)Cut-off date

Effective dateCommon stock

Cut-off date

Effective date

May 31, 2012 August 29, 2012

For the year ended May 31, 2012
Resolution
Annual general meetingof the shareholders on
August 26, 2011

Type of shares
Common stock¥290¥6.00 May 31, 2011 August 29, 20112) Dividends with the cut-off date in the year ended May 31, 2013 and the effective date in the year ending May 31, 2014
Total
dividends Total dividends
Dividends per(millions of (thousands of Source of Dividends per share (U.S.
Type of shares
yen)
U.S. dollars) dividends
share (yen)dollars)Cut-off date Effective date
Resolution
Annual general meetingof the shareholders on
CommonRetained
May 31,
August 28,
August 27, 2013
stock
2013
¥289
$2,859 earnings¥6.00$0.06 2013
10. Selling, General and Administrative Expenses

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

45

May 31,
2013

May 31,
2012(Millions of yen)

¥1,760
17
320
347
165
917

May 31,
2013(Thousands of
U.S. dollars)¥1,786
47
357
322
(12)
798

$17,391
165
3,158
3,431
1,627
9,062

Special gains:
Gain on sales of investment securities
Refund of temporary exceptional enterprise tax
Special losses:
Office relocation costs
Loss on valuation of investment securities
Loss on natural disasterTotal

May 31,
2013

May 31,
2012(Millions of yen)

May 31,
2013(Thousands of
U.S. dollars)

¥72
65

¥—
—

$719
641

(15)
—
—
¥122

—
(23)
(8)
¥(31)

(151)
—
—
$1,20912. Income Taxes
Income taxes in Japan applicable to the Company and its domestic consolidated subsidiaries consist of corporation tax, inhabitants’taxes and enterprise tax, which, in the aggregate, resulted in a statutory rate of approximately 38.0% and 40.7% for the years
ended May 31, 2013 and 2012, 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, 2013 and 2012 were as follows:

For the Years 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 (loss) from affiliates accounted for by the equity method
Unrecognized tax benefits from losses of subsidiaries
Tax rate changes
Other
Effective tax rates

May 31,
2013
38.0%

May 31,
2012
40.7%

1.3
(1.7)
2.1
(4.4)
0.5
5.2
—
2.2
43.2%

1.2
(1.0)
1.6
2.8
(2.6)
2.2
10.3
0.1
55.3%

Toyo Denki Seizo Report 2013

46

The significant components of deferred tax assets and liabilities as of May 31, 2013 and 2012 were as follows:

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

May 31,
2013

May 31,
2012(Millions of yen)

¥177
1,187
295
65
776
2,500
(792)
1,708

(Thousands of
U.S. dollars)

¥160
1,144
341
67
732
2,444
(677)
1,767

(1,828)(3)(1,831)¥(123)

May 31,
2013

(285)
(6)
(291)
¥1,476$1,752
11,736
2,919
640
7,666
24,713(7,828)16,885(18,073)(27)(18,100)$(1,215)

13. Other Comprehensive Income
The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive income
for the years ended May 31, 2013 and 2012:

For the Years Ended
Unrealized holding gain on securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTax effectUnrealized holding gain on securities
Translation adjustments
Amount arising during the year
Amount before tax effectTranslation adjustments
Share of other comprehensive income of affiliates accounted forby the equity method
Amount arising during the year
Share of other comprehensive income in affiliates accounted forby the equity method
Total other comprehensive income47

May 31,
2013

May 31,
2012(Millions of yen)

¥4,568(73)
4,495(1,544)
2,951

May 31,
2013(Thousands of
U.S. dollars)

¥437
23
460
(169)
291

$45,150(719)
44,431(15,262)
29,169

27
27
27

(6)
(6)
(6)

262
262
262

61

1

605

61
¥3,039

1
¥286

605
$30,036

14. Lease Transactions
The information about finance leases that do not transfer ownership of the leased property to the lessee is omitted since there is nomateriality in terms of value.
In addition, finance leases that do not transfer ownership of the leased property to the lessee and whose lease inception was onor before March 31, 2008 are permitted to continue to be accounted for as operating lease transactions if certain “as if capitalized”
information is disclosed in the note to the financial statements, but such information is omitted since there is no materiality in termsof value.
15. Contingent Liabilities
As of May 31, 2013 and 2012, the Company was committed to provide guarantees on bank borrowings of the following affiliates:

As of
Tianjin Toyodenki International Trade Co., Ltd.
Hunan Xiangyang Electric Co., Ltd.
Changzhou Ruiyang Transmission Technology Co., Ltd.

May 31,
2013

May 31,
2012(Millions of yen)

May 31,
2013(Thousands of
U.S. dollars)

¥—
198
187

¥6
249
100

$—
1,958
1,851

May 31,
2013

May 31,
2012

May 31,
2013

16. Amounts Per Share

For the Years Ended
Net income:
Basic

(Yen)

(U.S. dollars)¥14.98¥16.29

$0.15

As of

May 31,
2013

May 31,
2012

May 31,2013

Net assets¥384.14¥312.12$3.80

May 31,
2013

May 31,
2012

May 31,
2013

(Yen)

(U.S. dollars)

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

For the Years Ended
Net income
Net income not attributable to common shareholders
Net income attributable to common stock(Millions of yen)

¥722
—
722

(Thousands of
U.S. dollars)

¥786
—
786

$7,140—7,140(Thousand shares)

Average number of shares of common stock during the year

48,214

48,219Toyo Denki Seizo Report 201348

17. Financial Instruments

Estimated Fair value of Financial Instruments

Overview

Carrying value of financial instruments on the consolidated balance sheets as of May 31, 2013 and 2012 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):(1) Policy for financial instruments
The Group raises its necessary funds for capital investments to reinforce and renew production facilities and working capital
principally through bank borrowings and issuance of corporate bonds. The Group manages temporary cash surpluses through low
risk financial assets. The Group uses interest rate swaps for the purpose of reducing the interest rate fluctuation risk on long-term
debt and fixing the interest expenses and does not enter into derivatives for speculative or trading purposes.
(2) Types of financial instruments and related risk
Trade receivables—trade notes and accounts receivable—are exposed to credit risk in relation to customers.
Investment securities are composed of mainly the shares of common stock of other companies with which the Group has business
relationships and exposed to market risk.
Certain long-term debt raised for the purpose of making capital investments with variable interest rates is exposed to interest rate
fluctuation risk. However, to reduce such risk and fix interest expense for long-term debt bearing interest at variable rates, the Grouputilizes interest rate swap transactions as a hedging instrument.
Regarding assessment of the effectiveness of hedging activities, it is omitted since these interest rate swaps qualify for hedge
accounting and meet specific requirements.
(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.

As of May 31, 2013

Carrying value

Fair value

Difference(Millions of yen)

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

As of May 31, 2013

¥1,302
13,384
12,618¥27,304¥1,302
13,384
12,618¥27,304

¥—
—
—
¥—

¥4,647
3,180
120
6,529
¥14,476¥—¥4,647
3,180
121
6,494
¥14,442
¥—

¥—
—
(1)
35
¥34
¥—

Fair value

Difference

Carrying value(Thousands of U.S. dollars)

Assets1) Cash on hand and in banks2) Trade notes and accounts receivable3) Investment securities
Total assets
Liabilities
4) Trade notes and accounts payable
5) Short-term borrowings
6) Bonds payable
7) Long-term debt
Total liabilities
8) Derivative transactions$12,873
132,280
124,705$269,858$12,873
132,280
124,705$269,858

$—
—
—
$—

$45,923
31,4291,186
64,529$143,067$—$45,923
31,4291,193
64,185$142,730
$—

$—
—
(7)
344
$337
$—

(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 20, Derivative
Transactions are not necessarily indicative of the actual market risk involved in derivative transactions.

49

Toyo Denki Seizo Report 201350

As of May 31, 2012

Carrying value

Fair value

Difference

3. Redemption schedule for receivables and securities with maturities at May 31, 2013 and 2012 are as follows:(Millions of yen)

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

As of May 31, 2013
¥1,489
13,7298,164¥23,382¥1,489
13,7298,164¥23,382

¥—
—
—
¥—

¥4,544
5,180
280
3,925
¥13,929¥—¥4,544
5,180
283
3,953
¥13,960
¥—

¥—
—
(3)
(28)
¥(31)
¥—

Notes:
1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions
Assets:Cash on hand and in banks and trade notes and accounts receivable
Since these items are settled in a short period of time, their carrying value approximates fair value.
However, if they are settled in a long period of time, the fair value of receivables is based on the present value of the receivables classified by definite periods discounted
using interest rates on the corresponding period until settlement.
Investment securities
The fair value of stocks is based on quoted market prices. Investment securities held by the Group are classified as available-for-sale securities and please see Note 18“Securities”.

Due in One Yearor Less

Due after One
Year throughFive Years¥1,299
12,095¥13,394¥—
1,289¥1,289

¥—
—
¥—

¥—
—
¥—

Due in One Yearor Less

Due after One
Year throughFive Years

Due after Five
Years throughTen Years

Due after
Ten Years

Due after Five
Years throughTen Years

Due after
Ten Years(Millions of yen)

Cash on hand and in banks
Trade notes and accounts receivable

As of May 31, 2013

(Thousands of U.S. dollars)

Cash on hand and in banks
Trade notes and accounts receivable

As of May 31, 2012$12,841
119,538$132,379$—12,742$12,742

$—
—
$—

$—
—
$—

Due in One Yearor Less

Due after One
Year throughFive Years

Due after Five
Years throughTen Years

Due after
Ten Years¥1,486
12,569¥14,055¥—
1,160¥1,160(Millions of yen)

Cash on hand and in banks
Trade notes and accounts receivable

¥—
—
¥—

¥—
—
¥—

4. The redemption schedule for long-term debt is disclosed in Note 6.

Liabilities:
Trade notes and accounts payable and short-term borrowings
Since these items are settled in a short period of time, their carrying value approximates fair value.
Bonds payable
The fair value of bonds payable is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new bonds were
issued.
Long-term debt
The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new borrowings
were entered into. The fair value of long-term debt with variable interest rates, which is hedged by the interest rate swaps and to which hedge accounting is applied (referto the following paragraph), is based on the present value of the total of principal and interest discounted by the interest rate to be applied if similar new borrowings wereentered into.
Derivative transactions
The fair value of interest rate swaps accounted for by the hedge accounting is included in the fair value of the related long-term debt, since such interest rate swaps areaccounted for together with long-term debt as hedged items.
2. Financial instruments for which it is extremely difficult to determine the fair value

As ofUnlisted equity securities

May 31,
2013

May 31,
2012(Millions of yen)¥700

May 31,
2013(Thousands of
U.S. dollars)¥766$6,925

Because no quoted market price is available and it is extremely difficult to determine the fair value, the above financial instruments are not included in the above table.

51

Toyo Denki Seizo Report 201352

18. Securities

As of May 31, 2012

As of May 31, 2013

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

Available-for-sale securities

Available-for-sale securities

As of May 31, 2012

As of May 31, 2013

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

As of May 31, 2013

¥12,083¥12,083¥6,777¥6,777¥5,306¥5,306¥535¥535¥12,618

¥575
¥575
¥7,352¥(40)¥(40)¥5,266

Carrying value Acquisition cost

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

Securities whose carrying value exceeds their acquisition cost:
Stock
Subtotal
Securities whose acquisition cost exceeds their carrying value:
Stock
Subtotal
Total$66,979$66,979$52,437$52,437$5,289$5,289$124,705$5,685$5,685$72,664$(396)$(396)$52,041

Note: Unlisted stocks are not included in the above table because there were no quoted market prices available and they are extremely difficult to determine
the fair value.

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

For the Year ended May 31, 2013

Sales proceeds

Gain on sales

Loss on sales(Millions of yen)Stock

For the Year ended May 31, 2013

¥127
Sales proceeds

¥72

¥—

Gain on sales

Loss on sales¥5,305¥5,305¥3,966¥3,966¥1,339¥1,339¥2,859¥2,859¥8,164¥3,429¥3,429¥7,395¥(570)¥(570)¥769

Note: Unlisted stocks are not included in the above table because there were no quoted market prices available and they are extremely difficult to determine
the fair value.

(2) Impairment of investment securities

Stock

May 31,
2012(Millions of yen)

¥23(3) Sales of securities classified as available-for-sale securities and the aggregate gain and loss for the year ended May 31, 2012
No securities classified as available-for-sale securities were sold for the year ended May 31, 2012.
19. Supplementary Cash Flow Information
Cash and cash equivalents in the consolidated statements of cash flows for the years ended May 31, 2013 and 2012 are reconciled to
cash on hand and in banks in the consolidated balance sheets as follows:

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

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

For the Year Ended$119,416$119,416

Carrying value Acquisition cost

Cash on hand and in banks
Cash and cash equivalents

May 31,
2013

May 31,
2012(Millions of yen)

¥1,302¥1,302

May 31,
2013(Thousands of
U.S. dollars)¥1,489
¥1,489$12,873$12,873(Thousands of U.S. dollars)

Stock

53

$1,259$719$—

Toyo Denki Seizo Report 201354

20. Derivative Transactions
Hedging policies
The Company utilizes interest rate swaps for the purpose of hedging its exposure to fluctuations in interest rates. However, based oninternal management rules on financial market risk approved by the Company’s Board of Directors, Group companies do not enter
into transactions involving derivatives for speculative or trading purposes.
Types and purpose of derivative transactions

21. 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 the same as those described in the significant accounting policies inNote 1. Segment profit is evaluated based on operating income.
Inter-segment sales are recorded at the same prices used in transactions with third parties.

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

Transportation

Interest-related derivatives:

Major hedged
item

Notional amount
Maturing within Maturing after
one year
one year

Fair value(Millions of yen)Interest rate swaps:
Receive/floating and pay/fixedLong-term debt

As of May 31, 2013

Major hedged
item¥5,789¥4,988

Notional amount
Maturing within Maturing after
one year
one year

Note

Fair value(Thousands of U.S. dollars)Interest rate swaps:
Receive/floating and pay/fixedLong-term debt

As of May 31, 2012

Major hedged
item$57,215$49,298

Notional amount
Maturing within Maturing after
one year
one year

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

Other(Note)

Total

Adjustments

Consolidated¥11,543¥1,701¥6¥30,575¥—¥30,575

2
11,545¥434¥8,614

—
1,701
¥265
¥823

545
551
¥41
¥525

584
31,159¥2,654¥26,642(584)—

Segment profit
Segment assets

37
17,362¥1,914¥16,680(584)¥(2,153)¥15,722

30,575¥501¥42,364

Other items:
Depreciation
Capital expenditures

¥691
¥792

¥239
¥159

¥28
¥29

¥0
¥—

¥958
¥980

¥186
¥316

¥1,144¥1,296

Total

Adjustments

Consolidated

Note
For the year ended May 31, 2013
Reportable segments

Fair value

Transportation

Industrial

Information
Equipment

Other(Note)(Thousands of U.S. dollars)Long-term debt

¥2,870¥1,989Note

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.

55

Information
Equipment¥17,325(Millions of yen)Interest rate swaps:
Receive/floating and pay/fixedIndustrial(Millions of yen)

Derivative transactions to which hedge accounting is applied:

As of May 31, 2013

For the year ended May 31, 2013
Reportable segments

Sales, profits orlosses and asset byreportable segments
Net sales:
Sales to third parties
Inter-segment sales
and transfers$171,229$114,083$16,813$60$302,185$—$302,185

Segment profit
Segment assets

368
171,597$18,915$164,851

15
114,098$4,287$85,132—
16,813$2,622$8,138

5,390
5,450
$408
$5,1895,773
307,958$26,232$263,310(5,773)(5,773)$(21,278)$155,393—
302,185$4,954$418,703

Other items:
Depreciation
Capital expenditures$6,823$7,828$2,364$1,576

$276
$288

$3
$—

$9,466$9,692$1,842$3,120$11,308$12,812

Toyo Denki Seizo Report 2013

56

Report of Independent Auditors

For the year ended May 31, 2012
Reportable segments
Transportation

Industrial

Information
Equipment

Other(Note)

Total

Adjustments

Consolidated(Millions of yen)

Sales, profits orlosses and asset byreportable segments
Net sales
Sales to third parties
Inter-segment sales
and transfers¥23,992¥12,265¥2,304¥10¥38,571¥—¥38,571

Segment profit
Segment assets

36
24,028¥2,702¥15,338

1
12,266¥253¥8,712

—
2,304
¥666
¥1,119

852
862
¥54
¥567

889
39,460¥3,675¥25,736

(889)
(889)
¥(1,974)¥12,350—
38,571¥1,701¥38,086

Other items:
Depreciation
Capital expenditures

¥691
¥869

¥257
¥193

¥30
¥8

¥2
¥0

¥980
¥1,070

¥166
¥238

¥1,146¥1,308

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

Geographical information
Net sales to third parties by countries or areas grouped according to geographical classification for the years ended May 31, 2013
and 2012 are summarized as follows:

For the Years Ended

May 31,
2013

Japan
China
Other
Consolidated¥23,341
5,495
1,739¥30,575

May 31,
2012(Millions of yen)

¥25,200
10,082
3,289¥38,571

May 31,
2013(Thousands of
U.S. dollars)$230,685
54,315
17,185$302,185

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

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

For the Years Ended
Major customer/ related reportable segment
Meiji Sangyo K.K./ Transportation Systems

57

May 31,
2012(Millions of yen)

¥4,102

Toyo Denki Seizo Report 201358