Toyo Denki Seizo Report2018

Our Heart and Technology for the Future

Our Long-Term Vision

Toyo Denki Seizo K.K. Contributes to theDevelopment of Social Infrastructure Systems
Based on a firm management foundation, we help build social infrastructure systems that are considerate of the global
environment through the global provision of high-quality products that integrate our exceptional motor drive technologies
since establishment with our breakthrough advanced technologies.
Toyo Denki Seizo K.K. has contributed with new technologies to the development of railways, industries and social infrastructure in Japan and theworld. Toyo Denki Seizo K.K. was founded in 1918 in an aim to “domestically manufacture electrical equipment for rail vehicles” and has celebrated
the 100th 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 the development of industry and enrichment of people’s lives through our manufacturing expertise byleveraging high technological skills.
We will continue to promote global development and aggressively 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 the development of advanced technologies,
and create new businesses. Furthermore, through ensuring compliance and enhancing governance, we will strive to build a solid presence in theworld as a manufacturer trusted by all stakeholders.

CONTENTS
Contents/Editorial Policy/Long-Term Vision…… 1
Consolidated Financial Highlights………… 2
Message from the President……………… 3
Special Report 1 New Medium-Term
Management Plan………………………… 5
Special Report 2 Shiga Ryuo Plant………… 6
Special Report 3 100th Anniversary ofFoundation……………………………… 7
Business Report
Transportation Systems Segment……… 8
Industrial Systems Segment…………… 9
Information Equipment Systems Segment…… 10
Business Development………………… 11	Research and Development/Intellectual
Property……………………………… 12
ESG/CSR Report
Environment
		Initiatives to Protect the Environment…… 13
Social		 With Our Customers………………… 15
		 With Our Suppliers…………………… 16
		With Our Shareholders and Investors…… 17
		 With Our Local Communities………… 18

1

		 With Our Employees………………… 19
Governance		Corporate Governance……………… 21
		 Internal Control and Compliance……… 23
		Risk Management…………………… 23
		Information Security………………… 23
		Risk Factors………………………… 24
		Data………………………………… 25
Financial Report
Financial Review……………………… 27
Reference Data for Management Indices…… 28
Consolidated Balance Sheets…………… 29
	Consolidated Statements of Income
and Consolidated Statements ofComprehensive Income………………… 31
	Consolidated Statements of
Changes in Net Assets………………… 32
Consolidated Statements of Cash Flows… 33
Company Profile………………………… 54
Executive Profiles………………………… 55
Organization Chart………………………… 56
Stock Related Information………………… 57

Editorial Policy
We have been publishing this report since2013 with the goal of allowing a wide range ofstakeholders to have a better understanding of
the Company. This report combines our management policy with reports on our businesses, CSR and finances. We are committed todescribing our initiatives during the year andour future direction in a manner that is easy tounderstand.
Period Covered by This Report
This report focuses on our activities in fiscal
2017 (from June 2017 to May 2018), but also
contains some information from outside thisperiod.
Organizations Covered by This Report
This report covers the Toyo Denki Group, including Toyo Denki Seizo K.K. and its consolidated subsidiaries.
Reference Guidelines
Global Reporting Initiative (GRI) “Sustainability
Reporting Guidelines Version 4”

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

Fiscal term

153

154

155

156

157

Fiscal 2013

Fiscal 2014

Fiscal 2015

Fiscal 2016

Fiscal 2017
(Unit: Million yen)

Fiscal YearNet sales

34,95739,61739,746

40,66842,527Gross profit

8,097

9,282

9,119

9,221

8,072

Operating income

1,076

1,596

1,638

1,571

366

Net income attributableto owners of the parent

644

1,105

889

1,174

692

Comprehensive income

1,421

5,468

(925)

1,513

2,009

Capital investment

612

969

902

4,606

4,772

Research anddevelopment costs

665

897

868

927

840

Net assets

19,35024,89523,676

24,603

26,327

Total assets

44,75253,041

50,23354,927

63,740

Number of employees

1,201

1,216

1,245

1,262

1,267

Fiscal Year-End(Unit: Yen)

Per Share Information
Net assets

2,007.25

2,583.04

2,457.05

2,605.09

2,788.01

Net income

66.85

114.72

92.33

123.87

73.33

6

6

6

30

50*

Dividend

Note: Effective as of December 1, 2016, the Company implemented a share consolidation (five shares consolidated into one share). Net assets and net income are calculated on the assumptionthat the share consolidation was implemented at the beginning of the 152nd fiscal term.
Dividends are presented in the actual amounts paid.
*The dividend for the 157th fiscal term includes a commemorative dividend of 20 yen for the 100th anniversary.

(Unit: %)Major Management Indices
Shareholders’equity ratio

43.2

46.9

47.1

44.8

41.3

Return on equity (ROE)

3.4

5.0

3.7

4.9

2.7

Operating income ratio

3.1

4.0

4.1

3.9

0.9

Overseas net sales ratio

27.3

38.0

32.0

31.1

25.3

Dividend payout ratio

44.9

26.2

32.5

24.2

68.2

Toyo Denki Seizo Report 20182

Message from the President

Establishing a strong operating system by formulating the
new medium-term management plan “Revitalize 2020”

In the fiscal year ended May 31, 2018, net sales were 42.5 billion yen
owing to increases in the Industrial Systems segment and the Information Equipment Systems segment, an all-time high since 2000. As aresult of the close examination of profitability, orders received declined
from the previous fiscal year to 39.5 billion yen. Operating income was
0.36 billion yen as the Transportation Systems segment and the Industrial Systems segment continued to have unprofitable projects.
Ordinary income and net income attributable to owners of the parent were 0.51 billion yen and 0.69 billion yen, respectively, due to theimpact of expenses incurred for integrating all production bases in the
Industrial Systems segment at the Shiga Ryuo Plant, despite a gain on
sales of investment securities. The overseas net sales ratio was 25.3%
due to a decrease in orders received for Chinese high-speed railways
as it was the replacement period for rail vehicles.
As for performance by segment, in the Transportation Systems segment, orders received were 25.8 billion yen as orders decreased in Japan. Net sales were 27.9 billion yen due to the decrease in orders for
Chinese high-speed railways. Segment income was 2.57 billion yen,owing to the additional treatment of engineering expenses for someoverseas projects.
In the Industrial Systems segment, orders received decreased to11.3 billion yen, as a result of the thorough implementation of the profitability-focused approach for testing equipment for automobile development and orders for power sources. Net sales were 11.7 billion yen,owing to increases in orders for electrical equipment such as processing equipment and printing machines as well as orders for powersources. Segment income was 0.27 billion yen, attributable to the depreciation and amortization of the Shiga Ryuo Plant that was incurredahead of schedule, and costs of some testing equipment for automobile development that are in progress increasing more than initially

We will improve our earning power based on the new
medium-term management plan and establish astrong operating system that generates steady profits.
In the medium-term management plan “Next 100: Beyond 100 years”
that began in the fiscal year ended May 31, 2015, and the medium-term management plan “NEXT 100: Beyond 100 years, Ver. 2” thatbegan in the fiscal year ended May 31, 2017, in view of the years afterits 100th anniversary of foundation, the Company adopted a policy offocusing on initiatives aimed to “establish a stable business earnings
structure” and to “restructure production system,” and promoted measures aimed at strengthening the management foundation, so as tocreate a Toyo Denki Group befitting of the new era.
As a result, we made progress in the restructuring of the production
system in Japan, including consolidating bases in the Industrial Systems segment that were divided between a part of the Yokohama Plant
and the former Shiga Factory (Moriyama, Shiga Prefecture) through thelaunch of the new “Shiga Ryuo Plant.” Furthermore, we advanced
foundation building for the Transportation Systems segment in China,
such as through the establishment of the joint venture “Chengdu Yonggui Toyo Rolling Stock Equipment Co., Ltd.” as the pantograph production base in Chengdu, and making additional investments in “Taiping
Zhanyun Automatic Door (Changzhou) Co., Ltd. (Current company
name: CHANGZHOU YANGDIAN ZHANYUN TRANSPORT EQUIPMENT
Co., Ltd.),” a production base of important components. In addition, theAll-time high since 2000 posted in net sales on a consolidated basis

Orders received

40

39.5

42.5

45 (Billion yen)

expected. With the aim of improving profits, the following initiatives are
conducted across all business units: review of the sales management
system by model, restructuring of the supply chain, and the strengthening of process management.
In the Information Equipment Systems segment, orders received,
net sales, and segment income all increased significantly to 2.4 billion
yen, 2.8 billion yen, and 0.31 billion yen, respectively, owing to largescale projects of composite commuter pass issuing machines that cansinglehandedly issue a variety of tickets.

Net sales

40.9
42.5

While net sales were robust and increased year on
year, profits decreased. In the fiscal year ending May
31, 2019, we will maintain the net sales level while
striving to improve profits.

35

30

25
2001/5 2002/5 2003/5 2004/5 2005/5 2006/5 2007/5 2008/5 2009/5 2010/5 2011/5 2012/5 2013/5 2014/5 2015/5 2016/5 2017/5 2018/5

3

2019/5(Forecast)commercialization of products such as the following are in sight: thesuper-high-speed, 20,000 rpm dynamo with low-inertia that is compatible with testing equipment for electric vehicles (EVs) development,
the flat-type dynamo applicable for autonomous cars development, andthe large capacity inverter applicable for overseas markets. Meanwhile,regarding the numerical management targets listed in the medium-term management plan, factors that weaken our earning power
remain as issues that we face, especially in terms of profitability improvement and the speed of product development.
Using the above results and issues as our starting point, in line withthe 100th anniversary of our founding, we reexamined our corporate
resources once again and, with 2020 as our immediate target, formulated the four-year medium-term management plan “Revitalize 2020”
with the fiscal year ending May 31, 2022 as the final year.
We have set the two-year period (fiscal 2018 to fiscal 2019) that
forms the first half of the plan as the time to gain a firm footing, where
we will focus on the pressing issue of profitability improvement. As forthe second half of the plan, we have set the two-year period (fiscal
2020 to fiscal 2021) as the time to realize our growth with the aim ofachieving net sales of more than 47.0 billion yen, where we will consider new alliances and M&As, and focus on strategically developing
our business, including our overseas business.
In this plan, we have newly added equity in earnings of unconsolidated subsidiaries and affiliates, return on equity (ROE), and dividend
payout ratio as numerical management targets. We will aim to achieveequity in earnings of unconsolidated subsidiaries and affiliates of 0.4
billion yen through the expansion of our overseas business, ROE of 5%
through building a stable business earnings structure, and realize stable returns to shareholders with a target dividend payout ratio of 30%.
The Company will improve its earning power based on the fundamental policy of this new plan and take a new step towards establishing a strong operating system that generates steady profits.

The Company, which views contributing to social
infrastructure as its mission, will focus on ESG
measures to achieve long-term growth and further
raise its position as a specialized manufacturer
befitting the name of “Toyo as a technology company.”
Since the Company was founded in 1918 in an aim to “domesticallymanufacture electrical equipment for rail vehicles,” it has managed toovercome numerous difficulties and arrive at where it is today owing to
the customers, business partners, shareholders, financial institutions,employees, local communities and other stakeholders who have guided and supported the Company tangibly or intangibly. We would like totake this opportunity to express our deepest gratitude to all the above
parties.
We operate in the railway transportation business domain, which isof a highly public nature and requires a high level of safety. Throughproduct development and innovation that contributes to environmentalloading reduction, based on such keywords as “energy conservation,”“high efficiency” and “clean,” we aim to be a “company needed by society” and “build a solid position as a specialized manufacturer.” At thesame time, we will enhance our foundation for growth by pushing forward with utilization of diverse human resources and diverse work
styles in order to raise the job satisfaction of employees, those ofwhich are the starting point of value creation cycle of the Company.
Looking ahead, using the motor drive technologies cultivated over a
century since our establishment as the main pillar, we will realize acompany that is trusted by all stakeholders and live up to their expectations by achieving sustainable development and further raising ourposition as a specialized manufacturer befitting the name of “Toyo as atechnology company.”

The Shiga Ryuo Plant, the new production base of
the Industrial Systems segment, began operations inJune 2018. Visible results have begun to show
immediately after the integration.
We consolidated bases in the Industrial Systems segment that were divided between a part of the Yokohama Plant and the former Shiga Factory (Moriyama, Shiga Prefecture) at the Shiga Ryuo Plant, whichbegan operations in June 2018. By integrating the development, design, and manufacturing functions at this new base, to those outside
the Company, our management policy of having Transportation Systems and Industrial Systems as our two main businesses becomes
clear. As a result, the Industrial Systems segment has received greater
recognition and expectations from customers, leading to an increase ininquiries and site inspections. Within the Company, communication between departments has increased, effects such as boosted employee
motivation due to workplace environment improvements have appeared, and with closer cooperation between the design, manufacturing and quality assurance functions owing to the base consolidation,
we expect productivity to improve.
Going forward, we will further advance our research and development efforts in the new R&D building, and strive to provide productsthat meet the diverse needs of our customers.

President,
Representative Director

Kenzo Terashima
Toyo Denki Seizo Report 20184

1
SpecialReport“Revitalize2020”
New Medium-Term
Management Plan

Toyo Denki Group today announced revisions to the “Next 100: Beyond 100 years, Ver.2” medium-term management plan announced on
July 12, 2016 as described below, in the light of changing business conditions and hurdles that need to be addressed since the previous
announcement and the newly developed “Revitalize 2020”medium-term management plan that will come to an end in the fiscal year ending May 31, 2022.

Gist
Based on the fundamental policy under the “Next 100”medium-term management plan, while Toyo Denki Seizo K.K. (hereinafter “Toyo Denki”) has promoted reinforcements to its management foundations by taking actions such as commencing operation of the new Shiga Ryuo Plant in June 2018 to commemorate the100th anniversary of its founding, Toyo Denki still has hurdles that need to be addressed; i.e., improving profitability and accelerating product development. Starting from the results achieved and the hurdles that remain under the “Next 100”plan, as well as are view of its business resources at the 100th anniversary of its
founding, Toyo Denki has decided to develop the new “Revitalize 2020”four-year medium-term management plan, which targets 2020 foritsnearest goal.
Toyo Denki will improve its earning power based on the fundamental policy of this new plan and take a new step towards establishing a strong operating system that generates steady profits.

Long-term Vision

Numerical Management Targets (Consolidated)

We will contribute to realizing a social infrastructure system that is friendly to theglobal environment by providing high-quality products that combine the excellent
motor drive technologies we have cultivated since our founding and advanced
breakthrough technologies worldwide based on our solid business foundations.

In order to aggressively promote actions for the medium-term management plan listed above, we will add equity in profit of unconsolidated subsidiaries and affiliates, ROE (Return on Equity) and dividend
payout ratio to targets.

Fundamental Policy

CorporateToyo Denki Group will establish a strong operating system that generates steadyprofits by strengthening its organizational power and promptly providing high-quality products to our customers.
In the first two years (from the fiscal year ending May 31, 2019 to the fiscal
year ending May 31, 2020), which we regard as a period for strengthening ourbase, we will focus on the pressing issue of improving our profitability. In the latter
two years (from the fiscal year ending May 31, 2021 to the fiscal year ending May
31, 2022), which we regard as a period for achieving growth to realize net sales ofmore than 47 billion yen, we will focus on strategically developing our businesses,
including new business alliances and M&As, inside and outside Japan.

(1)
Expandingoverseasbusiness(2)
Expanding our businessareas using our coretechnologies

Fiscal year ended Fiscal year ending Fiscal year ending
May 31, 2018
May 31, 2020
May 31, 2022
(Results)(Plan)(Plan)Net sales

42.52743.0

Over 47.0

Operating income(Operating margin)

0.366
0.9%

0.9
2.1%

2
4.3%

Ordinary income

0.515

1.1

2.4

Net income

0.692

0.7

1.6

Equity in profit ofunconsolidated
subsidiaries andaffiliates

0.116

0.12

0.4

ROE
(Return on Equity)

2.7%

3.3%

5.0%

68.2%

30.0%

30.0%

Transportation Systems

27.94929.0

31.0

Industrial Systems

11.76913.0

15.0

Information Equipment
Systems

2.801

1.0

1.0

Dividend payout ratio

(3)
(4)
(5)
Promoting development of Establishing a stable Developing foundations fortechnologies in advance of business earnings expanding our production
market needs
structure
capacity(6)
Developing humanresources to play
important roles in
the future

5(7)
Promoting
ESG(Unit: Billions of yen)

(Note)

Segment net sales(Note) For the fiscal year ended May 31, 2018, we will pay a commemorative dividend of 20 yen per shareto mark the 100th anniversary of our founding in addition to the regular dividend of 30 yen per share.
Dividend payout ratio for the fiscal year ended May 31, 2017 was 24.2%.

Shiga Ryuo Plant: Main entrance

Surface plate area

Cafeteria

Shiga Ryuo Plant: Overview

Control panel assembly area

Rotary machine assembly area2

New factory “Shiga
Ryuo Plant” begins
operations

SpecialReportThe “Shiga Ryuo Plant,” the new factory constructed in the Shiga Ryuo Industrial Park vicinity, has been completed. The completion ceremony washeld on May 28, 2018 where many guests graced us with their presence,and operations began on June 1 of the same year.
Through the launch of the Shiga Ryuo Plant, we consolidated bases in the
Industrial Systems segment that were divided between a part of the Yokohama Plant and the former Shiga Factory (Moriyama, Shiga Prefecture), thereby
enabling efficient production. Furthermore, we will strengthen our researchand development efforts in the new R&D building. The Yokohama Plant will
be designated as the base for the Transportation Systems segment, and restructuring of production lines will be conducted with the aim of expanding
production capabilities.
Going forward, in the Industrial Systems segment, production capabilities
will be raised through improving the operating rate of production lines at the
Shiga Ryuo Plant, and we will globally provide high-quality products that utilize our technological capabilities.

Toyo Denki Seizo Report 20186

3

Celebration of the 100th
SpecialAnniversary of Foundation Report
Address by President Terashima

The Company celebrated the 100th anniversary of its founding on June 20, 2018. Thiswas wholly attributable to the support and patronage we have received from our customers, business partners, shareholders, and industry groups over the years, and wewould like to express our sincerest gratitude to them.
Going forward, keeping in mind the dignity of being a “100-year company,” the Company will continue contributing to the railway infrastructure and social infrastructure ofJapan and countries all over the world.
Name of ceremony

Celebration of the 100th Anniversary of Toyo
Denki Seizo K.K.’s Foundation

Date and time

May 16, 2018 (Wednesday), 6:00 -8:00 p.m.

Venue

Fuji Room, 3F, Imperial Hotel Tokyo

Number of participants Around 300
Celebration venue

Presentation of the Company’s 100-year history

A cigar case gift that came home to
Toyo Denki Seizo after a century—story delivered from the U.K. to Japan at the 100th-year turning point
One day in September 2016, out of the blue, theCompany received a letter from the U.K.
The contents of the letter were as follows: “At an auction, I bought a silver cigar
case with a carved seal that was a gift from the first president of Toyo Denki
Seizo, Mr. Kaichi Watanabe, to an executive of Dick Kerr & Co., Ltd. Is this a pieceof memorabilia of your company? I have plans to visit Japan, and I can bring it
along if you would like me to.”As we unraveled the history of the Company, we confirmed that the cigar casewas most likely a commemorative gift that our first president, President Watanabe,gave to our technical cooperation partner Dick Kerr & Co., Ltd. a hundred years
ago when the Company was founded.
The letter was sent by Mr. Charles and his family, who are fans of Japanese antiques and curios. Apparently, he was mesmerized by the cigar case when he firstsaw it at the auction and bought it. Subsequently, he noticed the company name andname carved on the back of the case, did some research, and found the Company.

Cigar case

Name of the firstpresident, President
Watanabe, is carved
on the back

There was a reason behind why he found the Company so quickly.

SAMPLE

7

Even today, President Watanabe, the first president of the Company, is known as a famous technician
in the U.K. As he was the designer of the cantilever structure of the Forth Bridge, which is renowned asa World Heritage Site and is also printed on the 20 pound note of Scotland, Mr. Charles recognized thename carved on the cigar case right away.
Although it is not known how President Watanabe presented the gift back in the day, or how the cigar case later ended up at the auction house, it has returned home to Toyo Denki Seizo after a century.

Business Report

BUSINESS

Transportation Systems Segment

Support railway transportation that connects people and cities withsafety and trust, through manufacturing that merges electronics
technologies and mechanical technologies in a highly advanced mannerBusiness Overview

Percentage of
total net sales

Electrical equipment for rail vehicles manufactured by the Company using its technological capability developed over about a century covers a wide range of fields, including propulsion systems (drive systems),
auxiliary power supply and door-closing units of trains, and we contribute to the maintenance and development of railway infrastructure overseas, not to mention in Japan, by pursuing safety and comfort oftrains.

(Down 0.9% year on year)

Segment Income

2,578 million yen(Down 16.2% year on year)

TOPICSFY 2015 2016

2017

2,578

2017

3,079

2,964

27,94927,949 million yen

28,199Net Sales

Segment Income (Unit: Million yen)

26,757(Down 11.9% year on year)

Net Sales (Unit: Million yen)

25,86625,866 million yen

Orders received decreased 11.9% compared with the previous fiscal year to
25,866 million yen, due to a decrease inJapan despite an increase overseas(China).

29,366

Orders Received

27,092

Orders Received (Unit: Million yen)

Results for fiscal 2017

65.7%

Net sales totaled 27,949 million yen,largely unchanged from the previous fiscal year, due to a decrease overseas(China) despite an increase in Japan.
Segment income decreased 16.2%
compared with the previous fiscal year to
2,578 million yen, due to the increase incosts of some overseas projects.

FY 2015 2016

FY 2015 2016

2017

Establishment of a new Group company “Chengdu Yonggui Toyo Rolling Stock Equipment Co., Ltd.” in China—20 years since launching business in China, we are starting a pantograph business“Yonggui Toyo,” the new company established in Chengdu, Sichuan Province in August 2017, finally began
its operations. Yonggui Toyo mainly assembles and tests pantographs for urban transit railway vehicles,
and will deliver to operators such as the Chengdu Metro. As the population of Chengdu is larger than thatof Tokyo and more metro lines will be constructed going forward, business growth is expected.
To further strengthen our business in Chengdu, we made additional investments in Taiping Zhanyun,
which previously was engaged mainly in the business of door engines, changed the company name to“Yangdian Zhanyun” and its structure to one that takes on the process of pantograph production. Throughsuch efforts, we have set up the structure of assembly by Yonggui Toyo and components processing by
Training for pantograph assembly at Jingche Shuangyang
Yangdian Zhanyun for our pantograph business in Chengdu.
Furthermore, Jingche Shuangyang acquired a new operating license,
Toyo Denki (Beijing) Co., Ltd.
adding “product assembly” to the management scope on top of the mainteBeijing Jingche Shuangyang Traction System Co., Ltd.
nance operations conducted to date. At the end of 2017, technicians were
Changzhou Ruiyang Transmission
Beijing
Technology Co., Ltd.
dispatched from the Yokohama Plant to the local site and conducted training
Chengdu Yonggui
Changzhou Yangdian Zhanyun
for pantograph assembly there.
Toyo Rolling Stock
Transport Equipment Co., Ltd.
Equipment Co., Ltd.
As seen from the above, we are strengthening the cooperation between
Changzhou
ChengduGroup companies, and further expanding the business for urban transit railHunan Xiangyang Electric Co., Ltd.
Changshaway vehicles in China.

Toyo Denki Seizo Report 20188

Business Report

BUSINESS

Industrial Systems Segment

Deliver technologies and gratitude to customers with highly
precise, highly responding and highly efficient powerelectronics, for realization of an environment-friendly society
Business Overview
The Company is extensively contributing to customers at home and abroad through general industrial
machinery and equipment, testing equipment for automobile development and social infrastructure
equipment that is indispensable to the daily lives of people. In addition, we address manufacturing that
contributes to the prevention of global warming, while providing products manufactured through highsystem-building technologies that make full use of energy-saving motors, inverters, FA controllers andnetworks.

(Up 6.3% year on year)

Segment Income

276 million yen(Down 63.0% year on year)

TOPICS

Segment income totaled 276 million yen, a
63.0% decrease compared with the previous
fiscal year, due to the effects of a lower operating rate in line with the transfer to a newfactory, and the greater weight of projects
where the development element is large, suchas testing equipment for automobile development.

747

1,019

11,769Segment Income (Unit: Million yen)276

11,769 million yen

Net sales increased 6.3% year on year to
11,769 million yen, due to increased orders
for power sources and electrical equipment
such as processing equipment and printing
machines.

11,073

Net Sales

27.7%

Net Sales (Unit: Million yen)

12,027(Down 7.2% year on year)

11,30911,309 million yen

Orders received decreased 7.2% comparedwith the previous fiscal year to 11,309 million
yen, due to decreased orders for testing equipment and power sources, despite increasedorders for electrical equipment such as processing equipment and printing machines.

12,194

Orders Received

11,421

Orders Received (Unit: Million yen)

Results for fiscal 2017

Percentage of
total net sales

FY 2015 20162017

FY 2015 20162017

FY 2015 20162017

New products being developed at the Shiga Ryuo Plant
We are developing new products at the new factory that began operations in June 2018.

9

Flat-type Dynamo

20,000 rpm Dynamo

By evolving the dynamo into a flat-type model that is the same size as an actual tire, it
can now fit inside the wheel well of the vehicle body. As a result, the possibilities of its
applications are expanding, including in development test for autonomous cars where
many sensors are used.

The super-high-speed large-capacity dynamo, which
has a rotary part that performs 20,000 rotations per
minute, is applicable for development tests of electricvehicles.

Business Report

BUSINESS

Information Equipment Systems Segment

Provision of products that make the execution of operations
on station premises and trains smooth and convenient andM2M solutions based on mobile phone networks and cloudservers using remote monitoring system
Business Overview
In the Information Equipment Systems segment, we operate in the two fields of railway station operating
equipment and remote monitoring systems, by merging advanced telecommunication technologies andmechatronics.
With regard to railway station operating equipment systems, we develop and manufacture commuter
pass issuing machines that quickly became IC card compliant and portable terminal devices for conductors,
and provide systems for smooth toll collection and income management system to railway operators.
Our remote monitoring systems greatly contribute to labor saving and maintenance saving of customers through realization of various equipment monitoring and position monitoring, by leveraging cloudcomputing.

(Up 3.1% year on year)

TOPICS314

314 million yen

Segment income increased 3.1% compared with the previous fiscal year to
314 million yen, owing to an increase in
net sales, despite the effects of someprojects where orders were received
strategically.

304

Segment Income

FY 2015 2016

2017

95

(Up 101.8% year on year)

Segment Income (Unit: Million yen)

1,388

2,801 million yen

Net sales increased 101.8% year on year
to 2,801 million yen for a reason similar
to that for increased orders received.

954

Net Sales

2,416(Up 35.1% year on year)

Orders received increased 35.1% compared with the previous fiscal year to2,416 million yen, due to the receipt of alarge-scale order for railway station operating equipment.

Net Sales (Unit: Million yen)

1,788

2,416 million yen

1,369

Orders Received

6.6%

2,801

Orders Received (Unit: Million yen)

Results for fiscal 2017

Percentage of
total net sales

FY 2015 20162017

FY 2015 20162017

Delivery of in-car supplementary ticket issuing machine for WEST JAPAN RAILWAY COMPANY

The Company delivered a total of some 2,700 in-car supplemental ticket issuing machines to West Japan Railway Techsia Co., Ltd. for use on the Shinkansen lines and existing railway lines of WEST JAPAN RAILWAY COMPANY. Compared with conventional machines, it can not
only read but also write on transportation IC cards, it accepts payments by IC cards and credit
cards (magnetic stripe) in addition to cash, and English can be printed on tickets for the convenience of foreign visitors.
The machine 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.

Toyo Denki Seizo Report 201810

Business Report

BUSINESS

Expansion of New Businesses

Order received for consigned research and development ofsuperconducting flywheel power storage system for railways
The Company received an order from East Japan Railway Company to conduct operations related to equipment manufacturing and the
preparation of test reports for verification tests of a superconducting flywheel power storage system for railways.
Based on the “Basic Agreement on Technology Development of Superconducting Flywheel Power Storage System for Railways” concluded on March 29, 2018 between Yamanashi Prefecture, the Railway Technical Research Institute, and East Japan Railway Company,
this system is being developed for the world’s first practical use in the railway field. The Company will conduct the design and manufacturing of the power conversion equipment, and will be responsible for the overall coordination of this power storage system’s construction, in
cooperation with MIRAPRO Co., Ltd. (Hokuto, Yamanashi Prefecture; President & CEO: Hiroyuki Tsugane).
Through this business, the Company will work on the construction of a new power storage system that contributes to the improvementof energy efficiency, the stable usage of renewable energy and technology development in the railway field.

Superconducting Flywheel PowerThe flywheel power storage system is a systemthat, by rotating a large disk (flywheel) within thedevice, stores regenerative electric power as kinet-

When charging
Regenerative electric power of the train
is absorbed, and flywheel accelerates
When discharging
Power is supplied to the train,
and flywheel decelerates

ic energy (charging), and converts kinetic energy

Rotational speedof flywheel

Storage System for Railways

Charging

Discharging

Time

Superconducting Flywheel Power Storage Systemback to electric power (discharging) as necessary.
The bearing portion of the superconducting fly-

Generator motor

wheel power storage system adopts the superconductivity technology designed by the Railway

Discharging

rayama, Yamanashi Prefecture. The technology al-

Charging

through verification tests conducted in Komeku-

FlywheelSuperconducting
magnetic bearing

Power conversion
equipment

Technical Research Institute, and established

Strong magnetic
repulsive force realized
by the superconducting
magnetic bearing
allows the flywheel tofloatlows the flywheel to float, reducing rotational loss
as there is no contact, and realizes a reduction inmaintenance efforts.

Overhead wires

When braking

When accelerating

When the train decelerates:
Regenerative electric power is generated

When the train accelerates:
Train consumes electric power

 nnouncement of new product IORemoterLTE: IoT terminal for Toyo IoT/M2M
A
solutions/remote monitoring and control systems
The Company has announced IORemoterLTE, a new product that is an IoT terminal for remote monitoring
and control systems, for Toyo IoT/M2M solutions.
The IORemoterLTE is a high-speed IoT terminal integrated in the LTE module. Through the use of the
Toyo IoT/M2M solutions cloud service, the remote monitoring and control of various facilities, controllers,
devices, and mobile entities can be conducted faster and at a larger capacity.

11Business Report

BUSINESS

Research and Development/Intellectual Property

R&D to support the development of social
infrastructure and supporting frameworks
Research and Development
The Group’s R&D activities are based on seeking to create products that fully satisfy our customers and challenging the creation and expansion of these products, and we actively promote development of technologies of our existing businesses and basic technology developments that support this development as well as development of new products that expand our businesses.
Results and topics from fiscal 2017

Segment

Project
Development of electric doorclosing unit

Transportation
Systems
Right-angle cardan electricalequipment for super low floor
type trains
Development of 20,000 rpm
and 350 Nm high-speed motor
Industrial
for automobile testing facilities
Systems
Development of inverter compliant
with 690 V power sources
Information
Development of IC-exclusive
Equipment
ticket issuing machine
Systems
Function expansion of remotemonitoring unit
Expansionof New
Reduction in size and weight
Businesses from structural improvements
in water-cooled inverter unit

Research
Laboratory

Description
Developed electric door-closing units that can be installed in existing spaces (the Company’s air-operated
door-closing units of type Y2, Y4, etc.), utilizing our many years of experience in the design and manufacturing of air-operated door-closing units.
Developed a self-ventilating main motor with the aim of reducing size and weight, as well as a drive unit withthe aim of reducing noise and the burden of maintenance.
Developed a motor with a highest rotational speed of 20,000 rpm and a rated torque of 350 Nm, for use intesting facilities to test on-board motors for driving used in electric cars, hybrid cars, etc.
Developed a 500 kW-class inverter unit compliant with 690 V power sources, for use at large-scale facilities
overseas.
Developing a ticket issuing machine that is IC-exclusive, as more operators choose not to use magnetic tickets and operate only with transportation IC cards.
Added the new functions of Wi-Fi compatibility, routing function within a FOMA-Ethernet, LTE compatibility, andthe remote maintenance function to the IORemoter, an existing product, and launched it as IORemoterLTE.
To achieve further reductions in size and weight in the water-cooled inverter unit for on-board use, a main
circuit structure that applies double-side cooling elements was designed, and it was confirmed that a 70%
size reduction compared with conventional models is possible. Going forward, verification will be conducted
through prototype manufacturing, and its application in small and light products will be promoted.

Development of main motor
insulation system for overseas
markets

Developed a motor insulation system that enables a reduction in man hours and the application of lowpriced materials, with the purpose of reducing costs of main motors for rail vehicles overseas.

Improvement in strength ofvehicle cogwheels

Shot peening treatment for vehicle cogwheels is being considered, with the aim of increasing the strength,
improving the reliability, extending the lifetime, and reducing the weight of vehicle cogwheels. It is confirmedthat shot peening treatment increases strength, and final endurance tests are being conducted using testing
equipment that simulates actual vehicle cogwheels in action with this treatment applied.
Patent applications grantedIntellectual Property
Our intellectual property is placed as a key corporate resource.
Our intellectual property department is responsible for the management of intellectual property and our research laboratory andthe development divisions in each business unit actively apply forpatents 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 cases:(Applications)

80

60

5

40

2
20

35
33

62

1
0

30
30

0
2014

0

57
16 0
16
2015

4
65 27
14
14

2016

0

Overseas
Overseas

66

45

45

Japan
Japan

51
33

1

47

26

24

2017

2018

9

Toyo Denki Seizo Report 201812

ESG/CSR Report

Environment

Initiatives to Protect the Environment
With 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
Action Guidelines

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

We will comply with all environmental requirements including those under the relevant laws and regulations.

2.

We will strive to minimize environmental burden through a reduction of energy consumption and other measuresat all stages of product lifecycle, namely planning, development, design, production, sales, use and disposal.

3.

We will establish and execute a system to continuously promote activities to protect the global environment.

4.

We will raise environmental awareness among individuals through enlightenment activities within the Group

Aiming for Realization of a Sustainable Society
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.

Environmental Management System
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.

13

Energy conservation throughthe Company’s technologies
and products

Low-carbon society
Implementation of measuresagainst global warming

Energy conservation in
production activities
Use of sustainable energy

Recycling-based society

Improvement of logistics
efficiency

Promotion of 3Rs(reduce, reuse, recycle)

Proper treatment of wastes
Reduction of amount of final
disposal of wastes

Nature-symbiotic society

Proper management ofchemical substances

Conservation of biodiversity

Cleanup around offices

Years of ISO 14001 certification

Yokohama Plant
2004

Shiga Factory*
2001

Extended to all offices
2010*The Company is scheduled to undergo a transition assessment for the transfer and integration from the old Shiga Factory (Moriyama) to the Shiga Ryuo Plant in March 2019.

ESG/CSR

Initiatives to Prevent Global Warming

Initiatives for Control over Chemical Substances

Initiatives to reduce greenhouse gas (CO2) emissions

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

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.
Targeted reduction of CO2 emissions and progress status
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 7% in fiscal
2017.

8,000

8,300

800

651.8

617.8

615.6

5,290

200

7,000
5,800

6,800
6,150

2014

2015

2016

2017

(year*)

2015

2016

2017

(year*)

Main actions

Total energy input (gas)(Unit: 1,000 Nm3)

The Company successfully reduced its landfill waste rate to 0.9%
in fiscal 2017, as a result of thoroughly implementing waste processing rules, sorting of metal waste and recycling of paper resources.

400

350.0
284.7

2014

Initiatives for Reducing Disposed Waste
as Well as Recycling

0

284.0

5,260

0
2013

300

7,700

6,120

2,000

644.3

400

2013

7,900

Total amount of shift

4,000(Unit: 10,000 kWh)

628.5

Total amount of air emissions

10,0006,000

Total energy input (electricity)600Notification volume for Pollutant Release and Transfer Register (PRTR) substances
(kg)

286.0

294.1

200

Output of general and valuable waste

100
(t)

General waste output

500

0
2013

2014

2015

2016

2017

(year*)

Total CO2 emissions
(t)

4,000

3,936

400
300

4,095

3,759

3,734

361.3
290.9

408.5
274.1

200

3,914

434.3

441.9

246.2
109.6

100

3,000

424.5

Valuable waste output

107.6

0
2013

2,000

2014

2015

2016

2017

5.0

5.0

2016

2017

(year*)

Volume of landfill waste

1,000
(t)

10

0
2013

2014

2015

2016

*The fiscal year is from April to March of the following year.
*Figures in the graphs on this page are those of the Yokohama Plant.

2017(year*)

9.0

8
6

5.9

4

2.3

2
0
2013

2014

2015

(year*)

Toyo Denki Seizo Report 201814

ESG/CSR ReportSocialWith 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.

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

Yokohama Plant
1997

15

Shiga Factory*
2000

Extended companywide
2005*The Company is scheduled to undergo a transition assessment for the transfer and integration from the old Shiga Factory (Moriyama) to the Shiga Ryuo Plant in March 2019.

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
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.

ESG/CSR

With Our Suppliers
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.

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

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

Formulation of “Procurement Action Guidelines” (formulated in February 2016)
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.

* Inquiries from outside are accepted via the following phone number and e-mail address:

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

email address for inquiries to Toyo Denki Seizo K.K.: contact@toyodenki.co.jp
Toyo Denki Seizo Report 201816

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

Dividends
Maintenance of stable dividends forms the basis of the Company’s distribution of profit. In commemoration of the 100th anniversary of our founding, and to express our gratitude to all ourshareholders, we added a commemorative dividend of 20 yen to
the common dividend of 30 yen per share, and the fiscal year-end
dividend for the current fiscal year (fiscal year ended May 31,2018) was 50 yen per share.

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.
URL “For Individual Investors”
https://www.toyodenki.co.jp/ir/individual.php

17

Dividend per share
Common dividend

(Yen)

40
30

(30)

(30)

(30)

30

30
30

20
10

Commemorative dividend

50
20

50

6

6

6

FY 2013

2014

2015

0
2016

2017

2018

(Forecast)*Effective as of December 1, 2016, the Company implemented a stock consolidation of its commonshares at the ratio of five shares to one share. For the status of dividends before fiscal 2016, the actual dividend amounts before the said stock consolidation are stated. The figures in parentheses are
the amounts calculated based on the standard after the stock consolidation.

Record of 157th Ordinary General Meeting of Shareholders
Date held: Tuesday, August 28, 2018
Attendance: 77 people

ESG/CSR

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

To Convey the Mission and Appeal of ElectricalIndustry as Well as of Toyo Denki
Receiving interns
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
a consistent basis as some students from these schools apply for
positions at the Company.

Factory tours
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,
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.

Participation in university endowment courses and hands-on
courses
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.

Endowment course at a university

A factory tour

Received the General Manager Prize for the “5th activity
commendation that is kind to Kanazawa Ward environment”
In Kanazawa Ward, Yokohama, with the aim of protecting the environment of Kanazawa and passing it on to the next generation, anaward is given for environmentally-friendly activities conducted in
the ward that are pioneering, exemplary, and has achieved visible
results.
This year, the “Joint Cleanup Activity” received the General Manger Prize. The activity has been held once a year since fiscal 2015
and jointly by companies, fire departments, the police, and universities, to collect litter on the streets and illegally disposed waste.
Last year, some 250 people participated and collected around
90 kg of trash.

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.
Participants of Joint Cleanup Activity
Toyo Denki Seizo Report 201818

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

Towards the Development of Human
Resources with Competitive Strengths

and role, and training is carried out after clarifying whatpart each employee is expected to play.
Furthermore, for the purpose of developing humanresources that support global development, we offer anoverseas trainee programand support for language Training for new employees
courses tailored to the level of participating employees.
To maintain high quality and pass on outstanding technologies
and skills, the Company works on education on maintenance andimprovement of expertise individually at each division and encourages employees on a company-wide basis to obtain public certifications.
Furthermore, employees with exceptional manufacturing skills
or expertise are recognized as “Technical My Star” internally andgiven responsibility to instruct and train younger employees. At
the Technical Training Center, established within the Yokohama
Plant, we train our technical staff through lectures, practical training and hands-on workshops.

Human resources development policy
The Company has set the following policy on human resources
development and carries out education and training under the education and training system diagram as shown below.
(1)	To develop human resources who understand and practice our business principles and code of conduct and who
are of value both as company employees and as members of society.
(2)	To develop human resources who are professionals, eachpossessing a high degree of specialized expertise, by enhancing the knowledge, techniques, and skills they needto carry out their duties.
(3)	To provide a variety of educational opportunities in orderto promote personal development, with emphasis on aself-directed approach to study and growth.

Education and training system
Training programs at the Company are divided into several categories according to the employee’s year of service, type of work
Education and training system diagram

OJT

Other

Audit

SafetyOperation chief

Field

Skill

Technology

Sales

Staff

Skill

Technology

Sales

Staff

Introductory training
Correspondence course for unofficial new hires (graduates)

Support for acquiring certifications
necessary for operation of business andoffices as well as execution of duties

Skill

Training in business manners

Education including
computer operation

Expansion toother divisions

Technology

I. Common basic course
II. Speciality basic course
III. Workplace hands-on learning

Division education and training
Maintenance andimprovement ofexpertise

Sales

Basic technical training

Technical education
for the first year

Support for correspondence training

Practical training

Support for language training (TOEIC, e-learning, sending employees to English conversation classes and others)

Follow-up training (First year)

Support for acquiring certification (Chief Electricity Engineer, Electrician, Information Technology Engineer, bookkeeping, business law)

Follow-up training (Second year) Follow-up training (Third year after graduation from high school)

On site hands-on learning

19

Regular new hires(Clerical staff)

Follow-up training (Fifth year after graduation from high school)

Seminars outside the company

Non-managerial employees

Follow-up training (Third year)

Regular new hires(Technical staff)

Overseas trainees

Job Instruction (JI), Training Within Industry (TWI)

Regular new hires(General staff)

Training for transmission, maintenance and improvement of advanced expert skills (My Star Recognition Committee)

Pre-promotion training for workplace overseers:

Training for maintenance and improvement of specific technologies, common technologies and patent technologies (Engineer Development Committee)

Mid-career hires

Training for workplace overseers:
Job Instruction (JI), Job Relations (JR), Training Within Industry (TWI)

Training for improvement of innovative thinking capability

Deputydepartment heads

Comprehensive training for newly appointed senior general staff: basic financial training, coaching training
Pre-promotion training for senior general staff

Support for fostering specialists (Doctor of Engineering, Master of Business Administration (MBA), Management of Technology (MOT) and Professional Engineer)

Training for newly appointed managers and professionals: evaluator training, basic financial training, coaching training
Pre-promotion training for managers

Inspection program for foreign affairs

Department
heads

Training for third-year managers and professionals

Life-planning training (including DC)

Divisionheads

Training for newly appointed division heads

Mental health training

Executives

Executive training

Support for
self-development andacquisition of certification(Human Resources Division)

Individual training(Human Resources Division)

Staff

Level-specific education and training(Human Resources Division)ESG/CSR

Creating a Pleasant Workplace
Safety and hygiene initiatives
Under the “Company-Wide Safety and Hygiene Management Policy,” formulated every fiscal year, the Company holds the Safety
and Hygiene Committee monthly at each office, where annual
plans are drawn up and ongoing discussions are held in order tobuild a safe working environment, to reduce workplace injuries tozero and to find solutions to issues, including mental health. In
addition, the Company holds the “Company-Wide Safety and Hygiene Committee” every quarter to promote sharing of information
between offices as well as between Group companies.
Acquisition of the “Kurumin” certification logo (June 2014)
In recognition of our efforts as a “company that
supports child-rearing,” which includes a substantial childcare system, educational activities concerning a work-life balance, the creation of an environment inwhich it is easy to obtain childcare leave, and the acquisition record of childcare leave by male employees, we received the “Kurumin”
certification logo from the Tokyo Labor Bureau in June 2014.
Initiatives for diverse work-styles
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.
Taking childcare
leave

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 hold on-site job experience
sessions in collaboration with local 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, to create a “dynamic
corporate culture,” discussion meetings and such between executives and employees are regularly held.
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.

We interviewed Mr. Shintaro Tanpo, an employee of the Design Division,
Transportation Systems Works, who took about two months of childcare leave.

 hy did you decide to take childcare leave?
W
As my wife was not returning to her hometown for the labor, I decided to take the leave.
 lease tell us about how you felt when your child was born.
P
Although it is mundane, I felt extremely grateful that she was bornsafely and thought she was really precious.
 ow did you spend the time during your childcare leave?
H
I changed my child’s diapers, bathed her, bought groceries, cooked
for my family and did other housework.
 as there anything that you thought was especially hard forWyour wife?
In the first two months after our child was born, my wife had tobreastfeed her every two to three hours. A newborn can’t drink mother’s milk very well, and most of all, because our daughter would wakeup every two or three hours feeling hungry, my wife could not get
much sleep, and I thought that must have been really hard on her.

 id your mindset change in any way
Dafter taking the childcare leave?
Before I took the childcare leave, I did not realize how hard it would be to raise a child.
However, after I took the childcare leave, I realized that there is no time
to rest when you raise a child and it can be quite exhausting. Therefore, I
strongly felt that our child should be raised through a joint effort between
my wife and me.
Were you worried about returning to work in any way?
My superior and colleagues assured me that they understood the needfor me to take childcare leave, so I did not have any worries.
 fter returning to work, how are you currently interacting withA
your child?
On weekdays, as my child’s waking times are different from mine, I only
get to see her sleeping before and after I go to work. On weekends, I
read picture books to my child, and play with her using a rattle.

Toyo Denki Seizo Report 201820

ESG/CSR Report

GovernanceIn 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.

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

Directors, while supervising Executive Officers’ business execution. In addition, the Company has meeting bodies including theManagement Strategy Meeting and Executive Officer Report
Meeting. Through these bodies, specific matters related to their
execution of duties and critical management matters including
those subject to the deliberation of the Board of Directors are reported to the President by the general managers of business execution departments, deliberated and discussed preliminarily. As
for the matters discussed at meetings, matters subject to the deliberation of the Board of Directors are decided by the Board of
Directors and other matters are decided by employees with business execution authority through means such as circulars basedon the Management Authority Rules.

Corporate governance
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. In June this year, to strengthen corporate governance, the supervision and execution functions of theBoard of Directors were separated, through the adoption of astructure where the Board of Directors is mainly in charge of governance, and Executive Officers are primarily in charge of business execution. At its regular monthly meetings as well as
extraordinary meetings held when appropriate, the Board of Directors, which is composed of seven Directors including two Outside Directors, discusses and decides on important management
matters such as reports on Executive Officers’ business execution
and matters to be decided solely at the discretion of the Board of21

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 with verbal reviews. Furthermore, Statutory Auditors are in principle required to be present at inventory taking or on-site inspection at
subsidiaries by Accounting Auditors.

ESG/CSR

External Statutory Auditors and Outside Directors
The Company has established independence guidelines regarding
independence required for a candidate for its Outside Executive,
and appoints Outside Directors and External Statutory Auditors
who have excellent insight in their 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 to enhance audit functions required by laws
and regulations while remaining independent from the Company.
Mr. Hirokazu Chinone, our Outside Director, is qualified as alawyer and provides useful advice regarding management in general, drawing on his specialized knowledge regarding corporate
law and his wealth of experience developed throughout his career.
Mr. Takashi Yamagishi, our Outside Director, provides usefuladvice, drawing on his wealth of corporate management experience in Japan and overseas and his superior expertise. In addition,
he is a member of the “Nomination and Remuneration Advisory
Committee,” an advisory body to the Board of Directors regarding
the nomination and remuneration of Directors and Executive Officers.
Mr. Toshiaki Akechi, our External Statutory Auditor, was newly
appointed as an External Statutory Auditor at the 157th Ordinary
General Meeting of Shareholders (August 28, 2018). We look forward to his auditing activities, drawing on his wealth of corporate
management experience developed thus far.
Mr. Yoshinori Kawamura, our External Statutory Auditor, is engaged in auditing activities, drawing on his expertise regarding
corporate finance and accounting developed thus far. He serves
as Professor of Faculty of Commerce, Waseda University, withexperiences as Secretary and Special Member of the BusinessAccounting Council of the Financial Services Agency, and an
examiner of the Certified Public Accountant Examination, etc.

Mr. Koji Miki, our External Statutory Auditor, was newly appointed as an External Statutory Auditor at the 157th Ordinary General
Meeting of Shareholders (August 28, 2018). We look forward to
his auditing activities, drawing on his wealth of experience developed in service at financial institutions and his global perspective.
The Company has appointed Mr. Hirokazu Chinone, Mr. Takashi
Yamagishi and Mr. Yoshinori Kawamura as independent directors
and registered them as such at Tokyo Stock Exchange, Inc.
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 abonus is payable as determined by each Director’s contribution to
management as well as business results of the Company. Basic
remuneration for both Standing and Part-time Outside Directors
and Statutory Auditors is a fixed salary without bonus payments.
(As of the end of May 2018)
Number of
executives
applicable

Total amount of
remuneration(Unit: Million yen)

Directors(excluding Outside Directors)

7

153

Statutory Auditors(excluding External Statutory Auditors)

1

14

Outside Executives(Outside Directors and External Statutory Auditors)

5

40

Category of executives(Note) The number of executives applicable mentioned above includes one Director and one Statutory
Auditor who retired from office at the end of the 156th Ordinary General Meeting of Shareholders held on August 29, 2017.

Corporate governance framework
General meeting of shareholders
Appointments/dismissals

Accounting Auditors

Reporting

ReportingAppointments/dismissals

Board of Statutory Auditors

Legal audit

Statutory Auditors
ReportingAppointments/dismissals Reporting on business execution

President

Reporting/decisions
Instruction/reporting

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

Appointments/dismissals

Directors

Business audit

Accounting audit

Audit Division

ReportingBoard of Directors

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

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

Appointments/
dismissals

Instruction/reporting

Directors and Executive Officers
Instruction/reporting

Each business department

Instruction/
reportingInstruction/reporting

Each Group company

Toyo Denki Seizo Report 201822

ESG/CSR Report

GovernanceInternal Control and Compliance

Risk Management

Internal Control

Basic policy

The Company views the development and operation of an internal
control system to be an important management issue, and it hasdeveloped an efficient, legal and appropriate business execution
system pursuant to Article 362 of the Companies Act and Article
100 of the Ordinance for Enforcement of the Companies Act. The
Internal Control Committee established under the Board of Directors reviews the operational status of the internal control system
and will revise it as necessary.

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

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

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 aneffective risk management framework capable of dealing precisely with the risks of the types and degrees that the Group is exposed to. The committee specifically reviews risk verifications andcountermeasures, and periodically reports details of its deliberations to the Board of Directors.
Furthermore, the committee is committed to enhancing theGroup-wide risk management framework in accordance with the
Basic Rules for Risk Management.

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

23

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

ESG/CSR

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, andother 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.
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.

Toyo Denki Seizo Report 201824

ESG/CSR Report

Data

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

Unit

Fiscal 2013

Fiscal 2014

Fiscal 2015

Fiscal 2016

797

804

824

832

843

Persons

737

740

761

768

771

60

64

63

64

72

%

7.5

8.0

7.6

7.7

8.5

156

151

155

150

140

Persons

155

149

151

146

136

1

2

4

4

4

%

0.6

1.3

2.6

2.7

2.9

41.1

40.5

40.4

40.4

40.2

Age

41.2

40.7

40.4

40.4

40.3

Total
Men

Number of employees

Women
Ratio of female employees
Total
Men

Number of administrative professionals

Women
Ratio of female administrative professionals
OverallMen

Average age

Fiscal 2017

Women

39.0

38.7

39.5

40.1

39.5

Overall

16.3

15.8

15.4

15.2

14.9

Men

Average years of employment

Years

Women

16.5

15.9

15.5

15.2

15.1

14.5

14.5

14.1

14.8

12.7

Average annual salaryYen

5,750,453

5,888,577

6,024,175

5,990,250

6,049,512

Overturn rate (within 3 years of joining the Company)

%

7.7

0.0

3.4

2.0

2.7

Number taking childcare leave

Persons

4

5

7

9

4

Number taking family care leave

Persons

0

0

0

0

0

Number of temporary staff (including part-timers)

Persons

158

153

160

152

130

Notes

* Number of regular employees including Executive Officers, and number of special employees, temporary employees, contract employees and staff on loan from other companies, etc.

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

Unit
Total
Men

Number of Officers

Persons

Women
Notes

Fiscal 2013

Fiscal 2014

Fiscal 2015

Fiscal 2016

11

12

13

13

Fiscal 2017
12

11

12

13

13

12

0

0

0

0

0

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

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

Unit

Fiscal 2013

Fiscal 2014

Fiscal 2015

Fiscal 2016

Fiscal 2017

Number of employees on a consolidated basis

Persons

1,201

1,216

1,245

1,262

1,234

Number of employees at Group companies in Japan and overseas Persons

404

412

421

430

391

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

Persons

255

214

274

233

197

Number of temporary staff (including part-timers)

Persons

97

61

114

81

72

Notes

As of May 31 for each fiscal year

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

Maternity andchildcare related

Family care related

Other

25

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)

Maternity leave

Can be taken for up to 8 weeks after the following day of 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 8-week period after his spouse has given birth, he may take repeat childcare leave until the
Repeat childcare leavechild reaches one year of age. Further if the employee and spouse both take childcare leave, the period of childcare leave 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 (by day or half day) may be taken per family member each leave year 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 subject family member, and the leave can be divided into up to 3 parts.

Family care work hours

Separately from family care leave, employees may use short working hours for family care twice or more during the 3-year period from thestarting of use (Working hours may be set at 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.

ESG/CSR

Environmental Data
Indices
Electric power (10,000 kWh)Solar power generation (kWh)Urban gas (1,000 Nm3)

Water input (1,000 m3)

Water output (1,000 m3)CO2 emissions (t)Fiscal 2013
664.8
628.5
36.3
27.9
67.5
284.0
284.0
14.2
14.2
0.0
12.3
12.3
0.0
4,122.0
3,936.0
186.0
168.0

Fiscal 2014
684.3
651.8
32.5
30.1
67.6
284.7
284.7
14.1
14.1
0.0
14.1
14.1
0.0
4,265.0
4,095.0
170.0
180.0

Fiscal 2015
648.8
617.8
31.0
26.6
63.6
286.0
286.0
15.2
15.2
0.0
15.2
15.2
0.0
3,924.0
3,759.0
165.0
152.0

Fiscal 2016
647.2
615.6
31.6
26.7
62.8
294.1
294.1
15.2
15.2
0.0
15.2
15.2
0.0
3,895.0
3,734.0
161.0
158.0

Fiscal 2017
680.3
644.3
36.0
25.2
64.4
350.0
350.0
15.2
15.2
0.0
15.2
15.2
0.0
4,097.0
3,914.0
183.0
143.0

Remarks

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

Fiscal 2016
7,000
5,800
2,400
2,400
0
600
600
0
2,100
2,100
0
400
400
0
0
0
0
2,800
2,800
0
2,500
2,500
0
2,000
2,000
0

Fiscal 2017
6,800
6,150
2,400
2,400
0
690
690
0
2,000
2,000
0
460
460
0
0
0
0
2,700
2,700
0
2,400
2,400
0
2,300
2,300
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 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

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 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
2.3
2.3
0.8
0.8
-

Fiscal 2016
334.1
308.7
25.4
115.8
115.8
109.6
109.6
559.5
534.1
25.4
477.2
477.2
5.0
5.0
0.9
0.9
-

Fiscal 2017
340.8
313.3
27.5
128.6
128.6
107.6
107.6
577.0
549.5
27.5
504.7
504.7
5.0
5.0
0.9
0.9
-

Remarks

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

*1
*3

*2

*2

*4

PRTR Data
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)
PRTR

Total amount of
shift

*5

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

Applicable premises

Waste Data
IndicesIndustrial waste (tons)

General waste (tons)

Valuable metal waste (tons)

WastesWaste output () (tons)

Recycled amount (tons)

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

*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.
*3 500 kW solar panel became operational in July 2012.
*6 The recycled amount and the volume of landfill waste at the Shiga Factory are scheduled for investigation starting in fiscal 2015.

Toyo Denki Seizo Report 201826

Financial Report

FINANCIAL

Financial Review

Consolidated Operating Results, Consolidated Financial Position, and Consolidated Cash Flow for Fiscal
2017 (from June 1, 2017 to May 31, 2018) are as follows:

Results of Operation
Orders received
YoY -8.7%

Orders received decreased 8.7% compared with the previous fiscal year to 39,599 million yen due to a decreasein orders received in the Transportation Systems segment and the Industrial Systems segment, despite an increase in the Information Equipment Systems segment.

Net sales
YoY +4.6%

Net sales increased 4.6% compared with the previous fiscal year to 42,527 million yen due to an increase in the
Industrial Systems segment and the Information Equipment Systems segment.

Profit/Loss
Net Income
attributable toowners of the parent
YoY -41.0%

From a profit perspective, operating income decreased 1,204 million yen compared with the previous fiscal year to 366 million yen, and ordinary income decreased 1,148 million yen compared with the previous fiscal year to 515 million yen. Net income attributable to owners of the parent decreased 481 million yen to 692 million yen, due to the recording of 806 million
yen in gain on sales of investment securities owing to the cutting of some cross-shareholdings, despite 339 million yen offactory integration expenses incurred for the integration between the Industrial Systems segment and TD Drive Co., Ltd.

Financial Position
AssetsTotal Assets
63,740 million yen

Total assets as of May 31, 2018 stood at 63,740 million yen, an increase of 8,813 million yen compared with theend of the previous fiscal year. The increase in total assets was largely attributable to an increase of 3,543 million
yen in property, plant and equipment in line with the construction of the Shiga Ryuo Plant, as well as increases of
1,750 million yen in trade notes and accounts receivable and 1,352 million yen in inventories.

Liabilities
Total liabilities
37,413 million yen

Total liabilities as of May 31, 2018 stood at 37,413 million yen, an increase of 7,089 million yen compared withthe end of the previous fiscal year. This increase was largely attributable to increases of 4,416 million yen in
debts and of 1,517 million yen in trade notes and accounts payable.

Net Assets
Total net assets
26,327 million yen

Net assets as of May 31, 2018 stood at 26,327 million yen, an increase of 1,723 million yen compared with theend of the previous fiscal year. This increase was largely attributable to a 1,231 million yen increase in unrealized
holding gain on available-for-sale securities.

Cash Flows27

Cash flow fromoperating activities
Net cash used inoperating activities
1,572 million yen

Net cash used in operating activities amounted to 1,572 million yen (net cash of 1,505 million yen provided in
the previous fiscal year), principally due to increases in trade notes and accounts receivable and inventories.

Cash flow frominvesting activities
Net cash used ininvesting activities
3,087 million yen

Net cash used in investing activities totaled 3,087 million yen (net cash of 4,691 million yen used in the previous
fiscal year), mainly comprising funds used in the purchases of property, plant and equipment, despite an increasein proceeds from sales of investment securities.

Cash flow fromfinancing activities
Net cash provided byfinancing activities
4,140 million yen

Net cash provided by financing activities was 4,140 million yen (net cash of 2,868 million yen provided in theprevious fiscal year), owing to an increase in short-term loans payable.

Financial Report

FINANCIAL

Reference Data for Management Indices

2014

2015

2016

927
840

897

801
2017

FY 2013

2016

2015

2016

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

2017

18

(3,087)(1,199)(4,691)

FY 2013

2017

2014

2015

2016

Net sales by region
Japan

FY 2013

China

2014

Others

2015

2017

4,140

2015

2014

2,868

(753)

2014

(1,572)
FY 2013

2016

1,505

3,621

1,135

2015

Cash flows from investing activities (Unit: Million yen)
FY 2013

1,514

2014

(1,341)

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

FY 2013

665

1,237
2017

850

2016

(937)

2015

881

2014

(988)

902

1,000
969

612
FY 2013

Research and development costs (Unit: Million yen)

868

Depreciation and amortization (Unit: Million yen)

4,772

(Unit: Million yen)

4,606

Capital investment 

2017(Unit: Million yen)Overseas net sales ratio

2016

FY 2013

2014

2015

2016

2017

Japan

25,39824,54727,09428,00632,124

China

7,118

11,634

8,374

5,882

4,085

Others

2,440

3,435

4,277

6,778

6,317

Total

34,95739,61739,746

40,66842,527

Overseas net sales
ratio

27.3%

38.0%

32.0%

31.1%

25.3%

2017

Toyo Denki Seizo Report 201828

TOYO DENKI SEIZO K.K.
Consolidated Balance Sheets

As of

May 31,
2018

May 31,
2017(Millions of yen)

May 31,
2018(Thousands of
U.S. dollars)(Note 2)

AssetsCurrent assets:
Cash on hand and in banks (Notes 16 and 18)¥1,555¥2,091$14,308

Trade notes and accounts receivable (Note 16)

16,961

15,831

156,032

Electronically recorded receivables (Note 16)

1,153

532

10,604Inventories (Note 3)

7,832

6,479

72,049

533

577

4,906

1,113

291

10,237

(2)

(2)

(17)

29,14525,799268,119

Buildings and structures

7,274

2,705

66,918

Machinery and vehicles

1,432

791

13,177

Land

1,301

1,346

11,971

Construction in progress

321

2,337

2,951

Other

838

444

7,708

11,166

7,623

102,725

19,681

18,154

181,060

Deferred tax assets (Note 11)

11

66

103

Intangible assets

904

1,082

8,322

2,846

2,216

26,178

Allowance for doubtful accounts

(12)

(12)

(114)

Total investments and other assets

23,43021,506

215,549

Total assets (Note 20)¥63,741¥54,928$586,393

Deferred tax assets (Note 11)
Other current assets
Allowance for doubtful accounts
Total current assets

Property, plant and equipment (Note 4):

Total property, plant and equipment

Investments and other assets (Note 5):
Investment securities (Notes 5, 16 and 17)

Other

29

As of

May 31,
2018

May 31,
2017(Millions of yen)

LIABILITIES AND NET ASSETS
Current liabilities:
Trade notes and accounts payable (Note 16)
Electronically recorded payables (Note 16)
Short-term borrowings and current portion of long-term debt
(Notes 6 and 16)
Income taxes payable (Note 11)
Accrued expenses
Accrued directors’ bonuses
Accrued employees’ bonuses
Reserve for losses on order acknowledgements (Note 3)
Other
Total current liabilities

May 31,
2018(Thousands of
U.S. dollars)(Note 2)

¥4,057
6,295¥3,3475,489$37,327
57,913

7,242

4,970

66,623

181
841
26
815
690
2,174
22,321

437
1,069
33
953
366
879
17,543

1,663
7,741
236
7,493
6,344
19,999205,339

8,930
2,206
3,863
36
58
15,093

6,786
1,793
3,913
158
131
12,781

82,154
20,29235,536331539
138,852

Net assets (Notes 8 and 15):
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity¥4,998
3,178
10,579(481)
18,274¥4,998
3,178
10,170(478)
17,868$45,983
29,232
97,324(4,418)168,121

Accumulated other comprehensive income:Unrealized holding gain on securities
Translation adjustments
Retirement benefits liability adjustments (Note 7)
Total accumulated other comprehensive income
Total net assets

8,112
188
(247)
8,053
26,327

6,880
157
(301)
6,736
24,604

74,6191,734(2,272)
74,081
242,202

Total liabilities and net assets¥63,741¥54,928$586,393

Long-term liabilities:
Long-term debt (Notes 6, 16 and 19)
Deferred tax liabilities (Note 11)
Liability for retirement benefits (Note 7)Long-term payables
Other
Total long-term liabilities
Commitments and contingencies (Note 14)

See notes to consolidated financial statements.

Toyo Denki Seizo Report 201830

TOYO DENKI SEIZO K.K.
Consolidated Statements of Income

For the Years Ended

May 31,
2018

Net sales (Note 20)
Cost of sales (Note 3)
Gross profit¥42,527
34,454
8,073¥40,668
31,4479,221$391,235
316,970
74,265

7,706
367

7,649
1,572

70,890
3,375

236
(148)
116
6
(61)
149
516
449
965

228
(123)
68
(17)
(64)
92
1,664
44
1,708

2,169
(1,366)
1,068
59
(562)
1,368
4,743
4,132
8,875

333
(60)
273
692
—
¥692

663
(129)
534
1,174
—
¥1,174

3,059
(554)
2,505
6,370
—
$6,370

May 31,
2018

May 31,
2017

May 31,
2018

Selling, general and administrative expenses (Note 9)
Operating income (Note 20)
Non-operating income (expenses):
Interest and dividend income
Interest expense
Equity in earnings of unconsolidated subsidiaries and affiliates
Foreign exchange gain (loss)
Other expenses, net
Ordinary income
Special gains, net (Note 10)
Income before income taxes
Income taxes (Note 11):
Current
Deferred
Net income
Net income attributable to non-controlling interests
Net income attributable to owners of the parent

May 31,
2017(Millions of yen)

May 31,
2018(Thousands of
U.S. dollars)(Note 2)

See notes to consolidated financial statements.

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

For the Years Ended(Thousands of
U.S. dollars)(Note 2)

¥ 692

¥1,174$ 6,370

1,232
(5)
54

410
(12)
51

11,331
(43)
495

36
1,317

(109)
340

335
12,118Comprehensive income¥2,009¥1,514$18,488

Comprehensive income attributable to:
Owners of the parent
Non-controlling interests¥2,009—¥1,514—$18,488—

Net income
Other comprehensive income (Note 12):
Unrealized holding gain on securities
Translation adjustments
Retirement benefits liability adjustments
Share of other comprehensive income (loss) of affiliates accounted forby the equity method
Total other comprehensive income

See notes to consolidated financial statements.

31(Millions of yen)

TOYO DENKI SEIZO K.K.
Consolidated Statements of Changes in Net Assets(Millions of yen)
Shareholders’ equity

Commonstock

Accumulated other comprehensive income
Unrealized
holding
gain onsecurities

Translation
adjustments

Total
Retirement
accumulated
benefitsotherliability
comprehensive
adjustments
incomeCapitalsurplusRetainedearnings¥4,998¥3,178¥ 9,299¥(176)¥17,299¥6,469¥ 261¥(352)¥6,378¥23,677

Cash dividends paid

—

—

(289)

—

(289)

—

—

—

—

(289)

Net income attributable toowners of the parent

—

—

1,174

—

1,174

—

—

—

—

1,174

—

—

(14)
—

(302)

(14)
(302)

—

—

—

—

(14)
(302)

Balance as of May 31, 2017——
¥4,998——¥3,178—871¥10,170—(302)¥(478)—
569¥17,868411
411¥6,880

(104)
(104)
¥ 157

51
51
¥(301)

358
358¥6,736358
927¥24,604

Balance as of June 1, 2017

¥4,998¥3,178¥10,170¥(478)¥17,868¥6,880¥ 157¥(301)¥6,736¥24,604

Cash dividends paid

—

—

(283)

—

(283)

—

—

—

—

(283)

Net income attributable toowners of the parent

—

—

692

—

692

—

—

—

—

692

—

—

—
—

(3)

—
(3)

—

—

—

—

—
(3)

—
—
¥4,998——¥3,178—409¥10,579—(3)¥(481)—
406¥18,274

1,232
1,232
¥8,112

31
31
¥ 188

54
54
¥(247)

1,317
1,317¥8,053

1,317
1,723¥26,327

Balance as of June 1, 2016

Treasury
stock

Total
shareholders’equityTotal net
assetsChanges during the year

Change in scope of equity
method application
Purchase of treasury stock
Net changes in items
other than those inshareholders’ equity
Total changes during the year

Changes during the year

Change in scope of equity
method application
Purchase of treasury stock
Net changes in items
other than those inshareholders’ equity
Total changes during the year
Balance as of May 31, 2018

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

Accumulated other comprehensive income
Total
Retirement
accumulated
benefitsotherliability
comprehensive
adjustments
incomeCommonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityUnrealized
holding
gain onsecurities$45,983$29,232$93,561$(4,394) $164,382$63,288$1,442$(2,767)$61,963$226,345

Cash dividends paid——

(2,607)—(2,607)

—

—

—

—

(2,607)

Net income attributable toowners of the parent

—

—

6,370

—

6,370

—

—

—

—

6,370

—
—

—
—

—
—

—
(24)

—
(24)

—
—

—
—

—
—

—
—

—
(24)

—
—
$45,983——$29,232—
3,763$97,324

—
—
(24)
3,739
$(4,418) $168,121

11,331
11,331$74,619292
292$1,734495
495$(2,272)

12,118
12,118$74,081

12,11815,857$242,202

Balance as of June 1, 2017

Translation
adjustments

Total net
assetsChanges during the year

Change in scope of equity
method application
Purchase of treasury stock
Net changes in items
other than those inshareholders’ equity
Total changes during the year
Balance as of May 31, 2018

See notes to consolidated financial statements.

Toyo Denki Seizo Report 201832

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

For the Years Ended

May 31,
2018

May 31,
2017(Millions of yen)

Operating activities
Income before income taxes
Depreciation and amortization
Provision for (reversal of) allowance for doubtful accounts(Reversal of) provision for accrued employees’ bonuses(Decrease) increase in liability for retirement benefits
Interest and dividends income
Interest expenses
Gain on sales of investment securities
Loss on sales of property, plant and equipment
Loss on consolidation of plants
Changes in operating assets and liabilities:
Trade notes and accounts receivable
Inventories
Trade notes and accounts payable
Reserve for losses on order acknowledgements
Advances received
Accrued expenses
Other, net
SubtotalInterest and dividends income received
Interest expenses paid
Income taxes paid
Net cash (used in) provided by operating activities(Thousands of
U.S. dollars)(Note 2)

¥965
1,237
0
(138)
(46)
(236)
148
(807)
2
66

¥1,708
802
(1)
24
61
(228)
123
(67)
23
—

$8,875
11,3842(1,272)(428)(2,169)1,366(7,422)
23609(1,813)(1,370)
1,568
341
69
(234)
(670)
(918)
244
(148)
(751)
(1,573)(1,618)
829
(168)
70
37
(182)
158
1,571
236
(118)
(183)
1,506

(16,676)(12,607)
14,422
3,133
631(2,149)(6,162)(8,440)2,248(1,366)(6,912)(14,470)

Investing activities
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of intangible assets
Purchases of investment securities
Proceeds from sales of investment securities
Payments of loans receivableCollection of loans receivable
Payments for investments in capital of subsidiaries and affiliates
Other, net
Net cash used in investing activities(3,448)
79
(132)
(171)
1,100
(70)
35
(491)
11
(3,087)(3,902)
—
(619)
(321)
93
—
—
—
58
(4,691)(31,725)731(1,216)(1,571)
10,121(644)
322(4,521)
103(28,400)

Financing activities
Increase 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 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 18)

2,930
5,500
(4,002)
(3)
(284)
(1)
4,140
(16)
(536)
2,091
¥1,555

314
3,500
(352)
(302)
(290)
(1)
2,869
6
(310)
2,401
¥2,091

26,95350,598(36,817)(24)(2,609)(9)38,092(152)(4,930)19,238$14,308

See notes to consolidated financial statements.

33

May 31,
2018TOYO DENKI SEIZO K.K.
Notes to Consolidated Financial Statements
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 (IFRS), and are compiled
from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Act ofJapan.
Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year’s presentation.
(b) Principles of consolidation and accounting for investments in unconsolidated subsidiaries and affiliates
The accompanying consolidated financial statements included the accounts of the Company and any significant companies controlled
directly or indirectly by the Company.
Companies over which the Company exercises significant influence in terms of their operating and financial policies have beenaccounted for by the equity method. The Company applies the “Practical Solution of Unification of Accounting Policies Applied toForeign Subsidiaries for Consolidated Financial Statements” (Accounting Standards Board of Japan (ASBJ) Practical Issues Task
Force (PITF) No. 18) and “Practical Solution on Unification of Accounting Policies Applied to Associates Accounted for using Equity
Method” (PITF No. 24). In accordance with these PITF, the accompanying consolidated financial statements have been preparedby using the accounts of foreign consolidated subsidiaries and affiliates prepared in accordance with either International Financial
Reporting Standards (IFRS) or accounting principles generally accepted in the United States as adjusted for certain items including
goodwill, actuarial differences and capitalized development costs.
As of May 31, 2018, the numbers of consolidated subsidiaries and affiliates accounted for by the equity method were 6 and 3 (6and 3 in 2017). A subsidiary, TOYO DENKI USA, INC., whose fiscal year end is December 31, is consolidated by using their pro forma
financial statements as of March 31 which are prepared solely for consolidation purposes and necessary adjustments are made totheir financial statements to reflect any significant transactions from April 1 to May 31. All significant intercompany balances andtransactions have been eliminated in consolidation.
Investments in subsidiaries and affiliates which are neither consolidated nor accounted for by the equity method are carried at costor less. Where there has been a permanent decline in the value of such investments, the Company has written down the investments.
(c) Foreign currency translation
Receivables and payables denominated in foreign currencies are translated into yen at the rates of exchange in effect at the balance
sheet date, and differences arising from the translation are included in the consolidated statements of income.
The balance sheet accounts of the foreign consolidated subsidiaries are translated into yen at the rates of exchange in effect 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.
(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 and net realizable value, cost being determined principally by the specificidentification method for finished products and work in process and by the moving average cost method for raw material andsupplies.
(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 201834

(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 facilities attached tobuildings acquired on or after April 1, 1998 and facilities attached to buildings and structures acquired on or after June 1, 2016 aredepreciated by the straight-line method. The estimated useful lives of these assets 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 for the
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 ¥152 million ($1,398 thousand) and ¥70 million is included in cost of sales
for the years ended May 31, 2018 and 2017, respectively.
(n) 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 by the straight-line method over a fixed period (10 years) within the average remaining years ofservice of the employees from the following year when incurred.
(o) 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.
(p) 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.

35

(q) Research and development expenses
Research and development expenses are charged to income when incurred.
(r) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
(s) 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.
(t) Accounting standards issued but not yet adopted
Revised Implementation Guidance on Tax Effect Accounting and Revised Implementation Guidance on Recoverability of Deferred Tax
AssetsOn February 16, 2018, the ASBJ issued “Revised Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance No. 28) and“Revised Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26).
(1) Overview
The accounting treatment for taxable temporary differences related to investments in subsidiaries in stand-alone financial statements
and the treatment of recoverability of deferred tax assets for entities that fall under Category 1 have been revised.
(2) Scheduled date of adoption
The Company expects to adopt the revised implementation guidance from the beginning of the fiscal year ending May 31, 2019.
(3) Effect of adopting the implementation guidance
The effect of adopting the revised implementation guidance on its consolidated financial statements is insignificant.
Accounting Standard and Implementation Guidance on Revenue Recognition
On March 30, 2018, the ASBJ issued “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 29) and “Implementation
Guidance on Accounting Standard for Revenue Recognition" (ASBJ Guidance No.30).
(1) Overview
This is a comprehensive accounting standard for revenue recognition. Specifically, the accounting standard establishes the following
five-step model that will apply to revenue from customers:
1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognize revenue when (or as) the entity satisfies a performance obligation(2) Scheduled date of adoption
The Company expects to adopt the accounting standard and implementation guidance from the beginning of the fiscal year ending
May 31, 2022.
(3) Impact of the adoption of accounting standard and implementation guidance
The Company is currently evaluating the effect of the adoption of this accounting standard and implementation guidance 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 ¥108.70=U.S.$1, the approximate rate of exchange prevailing at May 31, 2018. Thistranslation should not be construed as a representation that all amounts shown could be converted into U.S. dollars at such rate.

Toyo Denki Seizo Report 201836

3. Inventories
Inventories as of May 31, 2018 and 2017 were as follows:

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

May 31,
2018

May 31,
2017(Millions of yen)

¥1,006
3,507
3,319¥7,832

May 31,
2018(Thousands of
U.S. dollars)

¥ 871
3,373
2,235
¥6,479$ 9,256
32,25730,536$72,049

Inventories were stated at the lower of cost and net realizable value and the Company recognized losses on write-down of
inventories held for the ordinary sales purpose due to a decline in profitability in the amount of ¥75 million ($686 thousand) and ¥11
million for the years ended May 31, 2018 and 2017, respectively. These amounts were included in “Cost of sales.”Inventories related to construction contracts which are estimated to make losses were stated after deducting the corresponding
reserve for losses on order acknowledgements in the following amounts:

As of

May 31,
2018

May 31,
2017(Millions of yen)

May 31,
2018(Thousands of
U.S. dollars)

¥ 1
57
¥58

¥46
41
¥87

$ 7
530
$537

May 31,
2018

May 31,
2017

May 31,
2018

Merchandise and finished products
Work in process

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(Millions of yen)¥11,982
7,742
3,954
23,678(14,134)¥9,544(Thousands of
U.S. dollars)¥7,416
7,030
3,364
17,810(13,870)¥3,940$110,229
71,22936,375
217,833(130,030)$87,803

Depreciation of property, plant and equipment for the years ended May 31, 2018 and 2017 were as follows:

For the Years Ended

May 31,
2018

May 31,
2017(Millions of yen)

¥1,237

May 31,
2018(Thousands of
U.S. dollars)¥802$11,384

Accumulated depreciation of property, plant and equipment amounted to ¥14,134 million ($130,030 thousand) and ¥13,870
million as of May 31, 2018 and 2017, respectively.
5. Investments and Other Assets
Investments in unconsolidated subsidiaries and affiliates included in “Investment securities” as of May 31, 2018 and 2017 were as
follows:

As ofInvestments in capital37

May 31,
2018

May 31,
2017(Millions of yen)

¥1,980

May 31,
2018(Thousands of
U.S. dollars)¥1,345$18,218

6. Short-Term Borrowings and Long-Term Debt
As of May 31, 2018 and 2017, 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,
2018

May 31,
2017(Millions of yen)

¥3,886
3,356¥7,242

May 31,
2018(Thousands of
U.S. dollars)

¥968
4,002
¥4,970$35,751
30,872$66,623

The annual weighted average interest rates applicable to short-term borrowings and current-portion of long-term debt as of May
31, 2018 were 1.243% and 1.274%, respectively.
As of May 31, 2018 and 2017, long-term debts were as follows:

As of

May 31,
2018

May 31,
2017(Millions of yen)

Long-term debt, excluding current portion, serially due from 2019 through 2032

¥8,930

May 31,
2018(Thousands of
U.S. dollars)¥6,786$82,154

The annual weighted average interest rate applicable to long-term debt as of May 31, 2018 was 0.494%.
The maturities of long-term debt are summarized as follows:

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

2019
2020
2021
2022
2023 and thereafter¥ 3,356
509
557
525
7,339
¥12,286$ 30,872
4,678
5,127
4,833
67,517$113,027

The assets pledged as collateral for short-term borrowings of ¥5,132 million ($47,212 thousand) and long-term debt of ¥4,930
million ($45,356 thousand) as of May 31, 2018 were as follows:

As of May 31
Buildings and structures
Machinery and vehicles
Other property, plant and equipment
Land
Investment securities(Millions of yen)(Thousands of
U.S. dollars)¥ 6,165
689
424
1,233
3,468
¥11,979$ 56,717
6,338
3,901
11,33931,904$110,199

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)¥1,673689
424¥2,786$15,391
6,338
3,901$25,630

Toyo Denki Seizo Report 201838

7. 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, 2018 and 2017 were as follows:

For the Years Ended
Retirement benefit obligation as of June 1
Service cost
Interest cost
Actuarial loss
Retirement benefits paid
Retirement benefit obligation as of May 31

May 31,
2018

May 31,
2017(Millions of yen)

¥3,913
288
15
(4)
(349)
¥3,863

May 31,
2018(Thousands of
U.S. dollars)¥3,853
284
15
(1)
(238)
¥3,913$36,000
2,650
137
(36)
(3,215)$35,536

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets as of
May 31, 2018 and 2017 for the Company’s and the consolidated subsidiaries’ defined benefit plans:

As of

May 31,
2018

May 31,
2017(Millions of yen)

May 31,
2018(Thousands of
U.S. dollars)

Unfunded retirement benefit obligation
Net liability (asset) for retirement benefits on the consolidated balance sheets¥3,863
3,863¥3,913
3,913$35,536
35,536

Liability for retirement benefits
Net liability (asset) for retirement benefits on the consolidated balance sheets¥3,863
3,863¥3,913
3,913$35,536
35,536

Note: The plan adopting the simplified method is included.

The components of retirement benefit expenses for the years ended May 31, 2018 and 2017 were as follows:

For the Years Ended
Service cost
Interest cost
Amortization of actuarial loss
Retirement benefit expenses

May 31,
2018

May 31,
2017(Millions of yen)

¥288
15
74
¥377

May 31,
2018(Thousands of
U.S. dollars)

¥284
15
73
¥372

$2,650137
679$3,466Retirement benefits liability adjustments included in other comprehensive income (before tax effect) as of May 31, 2018 and 2017
were as follows:

As ofActuarial gain
Total

39

May 31,
2018

May 31,
2017(Millions of yen)

¥78
¥78

May 31,
2018(Thousands of
U.S. dollars)

¥74
¥74

$715
$715

Retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as of May 31,
2018 and 2017 were as follows:

May 31,
2018

As of

May 31,
2017

May 31,
2018(Millions of yen)

¥356
¥356

Unrecognized actuarial gain
Total

(Thousands of
U.S. dollars)

¥434
¥434

$3,275$3,275Major actuarial assumptions (weighted average) used in accounting for the above plans as of May 31, 2018 and 2017 were as
follows:

May 31,
2018
0.4%

For the Years Ended
Discount rate

May 31,
2017
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¥118 million ($1,084 thousand) and ¥117 million for the years ended May 31, 2018 and 2017, respectively.
8. Net Assets
Information regarding changes in net assets for the years ended May 31, 2018 and 2017 was as follows:a. Shares issued and outstanding/ Treasury stock
For the year ended May 31, 2018

Type of shares

Number ofshares as ofJune 1, 2017

Increase

Decrease

Number ofshares as of
May 31, 2018

(Shares)

Shares issued:
Common stock
Treasury stock:
Common stock

9,735,000——

9,735,000

290,569

1,338—

291,907

Decrease

Number ofshares as of
May 31, 2017

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

1,338 shares

For the year ended May 31, 2017

Type of shares

Number ofshares as ofJune 1, 2016

Increase(Shares)

Shares issued:
Common stock
Treasury stock:
Common stock

48,675,000—

38,940,000

9,735,000

493,478956,297

1,159,206

290,569

Notes: 1. The Company implemented a share consolidation of 5 shares of common stock into 1 share of common stock on December 1, 2016.
2. The decrease in the number of shares of common stock issued is due to the share consolidation.
Details of the changes in common stock under treasury stock are as the following:
Increase due to purchase of shares of less than standard unit before the share consolidation:
3,529 shares
768 shares
Increase due to purchase of shares of less than standard unit after the share consolidation:
952,000 shares
Increase due to purchase of treasury stock based on the resolution of the Board of Directors’ meeting:Decrease is due to the share consolidation.

Toyo Denki Seizo Report 201840

b. Dividends
1) Dividends paid
For the year ended May 31, 2018
Resolution
Annual general meetingof the shareholders on
August 29, 2017

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)¥283$2,607¥30.00$0.28

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

Cut-off date

Effective dateCommon stock

Cut-off date

Effective date

May 31, 2017 August 30, 2017

For the year ended May 31, 2017
Resolution
Annual general meetingof the shareholders on
August 26, 2016

Type of shares
Common stock¥289¥6.00 May 31, 2016 August 29, 2016

2) Dividends with the cut-off date in the year ended May 31, 2018 and the effective date in the year ending May 31, 2019
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 28, 2018
stock
2018
¥472
$4,344 earnings¥50.00$0.46 2018
9. Selling, General and Administrative Expenses
The main components of “Selling, general and administrative expenses” for the years ended May 31, 2018 and 2017 were as follows:

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

May 31,
2018

May 31,
2017(Millions of yen)

¥2,006
26
333
213
0
841

May 31,
2018(Thousands of
U.S. dollars)¥1,975
33
404
217
(1)
927

$18,458
236
3,063
1,963
2
7,733

10. Special Gains (Losses), Net
The components of “Special gains (losses), net” for the years ended May 31, 2018 and 2017 were as follows:

For the Years Ended
Special gains:
Gain on sales of property, plant and equipment
Gain on sales of investment securities
Other
Special losses:
Loss on consolidation of plants
Commemorative project cost for the 100th anniversary of foundation
Loss on sales of property, plant and equipment
Total

41

May 31,
2018

May 31,
2017(Millions of yen)

May 31,
2018(Thousands of
U.S. dollars)

¥5
807
3

¥—
67
—

$46
7,422
26

(340)
(18)
(8)
¥449

—
—
(23)
¥44

(3,127)(166)(69)$4,13211. 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 30.9% for the years ended May 31,
2018 and 2017. Income taxes of a foreign consolidated subsidiary are based generally on the tax rates applicable in the country ofincorporation.
The reconciliation between the effective tax rates reflected in the consolidated statements of income and the effective statutory tax
rate for the year ended May 31, 2018 was as follows:
The reconciliation between the effective tax rates reflected in the consolidated statements of income and the effective statutory tax
rate for the year ended May 31, 2017 was omitted since the difference was less than 5% of the effective statutory tax rate.

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
Difference arising from the rates used by subsidiaries
Tax deductible loss on valuation of shares of affiliates
Other
Effective tax rate

May 31,
2018
30.9%
2.0
(1.5)
3.0
10.7
(3.7)
2.2
(17.5)
2.1
28.2%

The significant components of deferred tax assets and liabilities as of May 31, 2018 and 2017 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,
2018

May 31,
2017(Millions of yen)

May 31,
2018(Thousands of
U.S. dollars)

¥209
1,188
255
156
509
285
2,602
(655)
1,947

¥165
1,204
301
115
387
431
2,603
(703)
1,900

$1,923
10,933
2,345
1,435
4,684
2,617
23,937(6,030)17,907(3,597)(11)(3,608)¥(1,661)(3,049)(1)(3,050)¥(1,150)(33,092)(98)(33,190)$(15,283)

Adjustments to the amounts of deferred tax assets and deferred tax liabilities due to income corporation tax rate change:
As the Tax Reform Act was enacted on December 22, 2017 in the U.S., the federal corporation tax rate was reduced from the fiscal
year beginning on or after January 1, 2018. Accordingly, the federal corporation tax rate applied to the Company’s subsidiaries in the
U.S. has been changed from 35% to 21%.
The effect of this tax rate change is insignificant.

Toyo Denki Seizo Report 201842

12. 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, 2018 and 2017:

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

May 31,
2018

May 31,
2017(Millions of yen)

May 31,
2018(Thousands of
U.S. dollars)¥2,587
(807)
1,780
(548)
1,232

¥ 669
(67)
602
(192)
410

$23,795(7,422)
16,373(5,042)
11,331

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

(5)
(5)
(5)

(12)
(12)
(12)

(43)
(43)
(43)

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

4
74
78
(24)
54

0
74
74
(23)
51

36
679
715
(220)
495

36

(109)

335

36
¥1,317

(109)
¥ 340

335
$12,118

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

13. 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.
14. Contingent Liabilities
As of May 31, 2018 and 2017, the Company was committed to provide guarantees on bank borrowings of the following affiliates:

As of
Changzhou Ruiyang Transmission Technology Co., Ltd.
Beijing Jingche Shuangyang Traction System Co., Ltd.

43

May 31,
2018

May 31,
2017(Millions of yen)

¥198
85

May 31,
2018(Thousands of
U.S. dollars)

¥164
49

$1,825782

15. Amounts Per Share

For the Years Ended
Net income:Basic

May 31,
2018

May 31,
2017(Yen)

May 31,
2018(U.S. dollars)¥73.33¥123.87

$0.67

As of

May 31,
2018

May 31,
2017

May 31,
2018

Net assets¥2,788.01(Yen)(U.S. dollars)¥2,605.09$25.65

Notes: 1. Diluted net income per share is omitted since there is no dilution of equity.
2.	The Company implemented a share consolidation of 5 shares of common stock into 1 share of common stock on December 1, 2016. Accordingly, above amounts
per share were computed as if the share consolidation had been implemented at the beginning of the fiscal year ended May 31, 2017.

The bases for calculation are as follows:
Basic net income per share

For the Years Ended

May 31,
2018

May 31,
2017(Millions of yen)

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

¥692
—
692

Average number of shares of common stock during the year

9,443

May 31,
2018(Thousands of
U.S. dollars)¥1,174—
1,174$6,370—
6,370(Thousand shares)

9,479

16. 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(s) “Derivative financial instruments.”

Toyo Denki Seizo Report 201844

(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 19, 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, 2018 and 2017 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, 2018

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*45¥1,555
16,961
1,153
18,735¥38,404¥1,555
16,961
1,153
18,735¥38,404

¥—
—
—
—
¥—

¥4,057
6,295
3,886
12,286¥26,524¥—¥4,057
6,295
3,886
12,272¥26,510
¥—

¥—
—
—
14
¥14
¥—

As of May 31, 2018

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*$14,308
156,032
10,604
172,360$353,304$14,308
156,032
10,604
172,360$353,304

$—
—
—
—
$—

$37,327
57,91335,751
113,027$244,018$—$37,327
57,91335,751
112,896$243,887
$—

$—
—
—
131
$131
$—

Fair value

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

As of May 31, 2017

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*¥2,091
15,831
532
17,209¥35,663¥2,091
15,831
532
17,209¥35,663

¥—
—
—
—
¥—

¥3,347
5,489
968
10,788¥20,592¥—¥3,347
5,489
968
10,803¥20,607
¥—

¥—
—
—
15
¥15
¥—

*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 17“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.

Toyo Denki Seizo Report 201846

2. Financial instruments for which it is extremely difficult to determine the fair value

May 31,
2018

As of

May 31,
2017(Millions of yen)

¥946

Unlisted equity securities

May 31,
2018(Thousands of
U.S. dollars)¥946$8,700Because 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 on May 31, 2018 and 2017 were as follows:

As of May 31, 2018

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

As of May 31, 2018

¥1,552
16,593
1,153¥19,298
Due in One Yearor Less

¥—
368
—
¥368

¥—
—
—
¥—

¥—
—
—
¥—

Due after One
Year throughFive Years

Due after Five
Years throughTen Years

Due after
Ten Years(Thousands of U.S. dollars)

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

As of May 31, 2017

$14,279
152,647
10,604$177,530

$—
3,385
—
$3,385

$—
—
—
$—

$—
—
—
$—

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

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

47¥2,088
15,012532¥17,632

¥—
819
—
¥819

¥—
—
—
¥—

¥—
—
—
¥—

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

As of May 31, 2018

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, 2018¥18,618¥18,618¥6,906¥6,906¥11,712¥11,712

¥117
¥117
¥18,735

¥121
¥121
¥7,027¥(4)¥(4)¥11,708

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$171,281$171,281$63,536$63,536$107,745$107,745$1,079$1,079$172,360$1,113$1,113$64,649$(34)$(34)$107,711

Notes: 1.	Unlisted stocks were not included in the above table because there were no quoted market prices available and they were extremely difficult to determine the fairvalue.
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.

As of May 31, 2017

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¥17,209¥17,209¥7,280¥7,280¥9,929¥9,929¥—¥—¥17,209¥—¥—¥7,280¥—¥—¥9,929Notes: 1.	Unlisted stocks were not included in the above table because there were no quoted market prices available and they were extremely difficult to determine the fairvalue.
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.

Toyo Denki Seizo Report 201848

Information regarding available-for-sale securities soldFor the Years Ended
Stock:
Sales proceeds
Gain on sales
Loss on sales

May 31,
2018

May 31,
2017(Millions of yen)

¥1,230807—

May 31,
2018(Thousands of
U.S. dollars)

¥232
67
—

$11,320
7,422—

18. Supplementary Cash Flow Information
Cash and cash equivalents in the consolidated statements of cash flows for the years ended May 31, 2018 and 2017 were reconciled
to cash on hand and in banks in the consolidated balance sheets as follows:

As ofCash on hand and in banks
Cash and cash equivalents

May 31,
2018

May 31,
2017(Millions of yen)

¥1,555¥1,555

May 31,
2018(Thousands of
U.S. dollars)¥2,091¥2,091$14,308$14,308

19. Derivative Transactions
Hedging policies
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:49

Currency-related derivatives:
As of May 31, 2018 and 2017, there were no currency-related derivatives.
Derivative transactions to which hedge accounting is applied:Interest-related derivatives:

As of May 31, 2018

Notional amount
Major hedged
Maturing after
item
Contract amount
one year

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

As of May 31, 2018

Notional amount
Major hedged
Maturing after
item
Contract amount
one year¥3,216¥104

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

$29,586

$957

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.

As of May 31, 2017

Notional amount
Major hedged
Maturing after
item
Contract amount
one year

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

¥7,128¥3,216

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.

Toyo Denki Seizo Report 201850

20. 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.
For the year ended May 31, 2018
Reportable segments
Transportation
Systems

Industrial
Systems

Information
Equipment
Systems

Other(Note)

Total

Adjustments

Consolidated(Millions of yen)

Sales, profits orlosses and asset byreportable segments
Net sales:
Sales to third parties
Inter-segment sales
and transfers¥27,950¥11,770¥2,801¥6¥42,527¥—¥42,527

Segment profit
Segment assets

13
27,963¥2,579¥22,234

2
11,772¥277¥15,076

—
2,801
¥314
¥2,238

712
718
¥41
¥597

727
43,254¥3,211¥40,145

(727)
(727)
¥(2,844)¥23,596—
42,527¥367¥63,741

Other items:
Depreciation
Capital expenditures

¥649
¥747

¥290
¥3,844

¥24
¥23

¥1
¥—

¥964
¥4,614

¥273
¥158

¥1,237¥4,772

Total

Adjustments

Consolidated

For the year ended May 31, 2018
Reportable segments
Transportation
Systems

Industrial
Systems

Information
Equipment
Systems

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

Sales, profits orlosses and asset byreportable segments
Net sales:
Sales to third parties
Inter-segment sales
and transfers$257,127$108,277$25,771$60$391,235$—$391,235

Segment profit
Segment assets

125
257,252$23,725$204,547

17
108,294$2,543$138,697—
25,771$2,890$20,587

6,542
6,602
$381
$5,491

6,684
397,919$29,539$369,322(6,684)(6,684)$(26,164)$217,071—
391,235$3,375$586,393

Other items:
Depreciation
Capital expenditures$5,966$6,873$2,672$35,363

$218
$212

$12
$—

$8,868$42,448$2,516$1,457$11,384$43,905

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

51

For the year ended May 31, 2017
Reportable segments
Transportation
Systems

Industrial
Systems

Information
Equipment
Systems

Other(Note)

Total

Adjustments

Consolidated(Millions of yen)

Sales, profits orlosses and asset byreportable segments
Net sales:
Sales to third parties
Inter-segment sales
and transfers¥28,200¥11,073¥1,388¥7¥40,668¥—¥40,668

Segment profit
Segment assets

38
28,238¥3,079¥19,926

3
11,076¥747¥11,791

—
1,388
¥305
¥817

672
679
¥60
¥601

713
41,381¥4,191¥33,135

(713)
(713)
¥(2,619)¥21,793—
40,668¥1,572¥54,928

Other items:
Depreciation
Capital expenditures

¥516
¥518

¥172
¥3,520

¥18
¥21

¥1
¥3

¥707
¥4,062

¥95
¥544

¥802
¥4,606

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, 2018and 2017 were summarized as follows:

For the Years Ended

May 31,
2018

Japan
China
Other
Consolidated¥32,125
4,085
6,317¥42,527

May 31,
2017(Millions of yen)

May 31,
2018(Thousands of
U.S. dollars)¥27,987
7,640
5,041¥40,668$295,535
37,584
58,116$391,235

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

Major customer information
Major customer information for the year ended May 31, 2018 was omitted since there was no customer to whom sales exceeds 10%of net sales recorded in the accompanying consolidated statements of income.
Major customer information for the year ended May 31, 2017 was as follows:
Customer
Segment
Meiji Sangyo Co., Ltd.
Transportation Systems(Millions of yen)

¥4,64021. Significant Subsequent Events
There were no significant subsequent events to be noted.

Toyo Denki Seizo Report 2018

52

Report of Independent Auditors

53

Company Profile (as of May 31, 2018)

Company Profile
Company Name
Established
Capital
Number of Employees
Head Office

Stock Exchange Listing
Code Number
Number of Shares Authorized
Number of Shares Issued
Number of Shareholders

TOYO DENKI SEIZO K.K.
(TOYO ELECTRIC MFG. CO., LTD.)
June 20, 1918
4,998,390,000 yen
1,234 (Consolidated)
843 (TOYO DENKI SEIZO K.K.)
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/
The Tokyo Stock Exchange, First
Section6505
36,000,000 shares
9,735,000 shares
5,940

Subsidiaries and Affiliates (as of September 1, 2018)

Hokkaido Branch

Shiga Ryuo
Plant
Sendai Branch
Niigata Branch

Yokohama
BranchShiga Ryuo Plant

NagoyaHiroshima Branch Osaka Branch
Kyushu Branch
BranchTOYOKOUKI Co., Ltd.

Head
officebuilding

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

Okinawa
BranchToyo Denki (Beijing) Co., Ltd.
CHANGZHOU YANGDIAN ZHANYUN TRANSPORT EQUIPMENT Co., Ltd.
Hunan Xiangyang Electric Co., Ltd.
Changzhou Ruiyang Transmission Technology Co., Ltd.
Chengdu Yonggui Toyo Rolling Stock Equipment Co., Ltd.
Beijing Jingche Shuangyang Traction System Co,. Ltd

Yokohama plant

Beijing Jingche Shuangyang Traction System Co., Ltd.

Changzhou Ruiyang Transmission Technology Co., Ltd.
Chengdu Yonggui Toyo Rolling Stock Equipment Co., Ltd.
TOYO DENKI SEIZO K.K. DELHI LIAISON OFFICE

Toyo Denki (Beijing) Co., Ltd.

TOYO DENKI USA, INC.

CHANGZHOU YANGDIAN ZHANYUN TRANSPORT EQUIPMENT Co., Ltd.
Hunan Xiangyang Electric Co., Ltd.
TOYO DENKI SEIZO K.K. Bangkok Representative Office

Toyo Denki Seizo Report 201854

Executive Profiles (as of August 28, 2018)

President,
Representative Director

Kenzo Terashima

Director, Senior
Managing Director

Director,
Managing Director

Director,
Managing Director

Director,
Managing Director

Hiroshi Shimotakahara

Kenichi Gotoh

Akihiko Ishii

Akira Watanabe

Managing Directors
Executive Officers

55

Director (Outside)

Director (Outside)

Hirokazu Chinone

Takashi YamagishiStanding Statutory
AuditorStanding Statutory
Auditor

Statutory Auditor

Statutory Auditor

Yoshihiko Yoshino

Toshiaki Akechi

Yoshinori Kawamura

Koji Miki

Shuji Horie
Yoshifumi Otsubo Kenji Tanimoto
Yukimasa Tanabe Kenji Fujiwara
Naoki Okuyama Toshihito Nakanishi Shini Furutsuki

Organization Chart (as of September 1, 2018)
Management Planning Division

Management Planning Department
PR, IR, and CSR Department
Information Systems Department

Group Administration OfficeNomination andCompensation Advisory
Committee

General Affairs Division

General Affairs Department
Legal Compliance Department
Export Management Department

Human Resources Division

Human Resources Department

Financial Affairs Division

Education and Development Department
Finance Department

Corporate Quality Management Division

Accounting Department
Planning and Research Department
Quality Management Department 1

National and Global Group
Company Meetings

Executive Officer Liaison
Meeting

Management Strategy
Meeting

President

Board of Directors

Business Development Division

Transportation Business Unit

Production Planning Department
Planning and Research Department
Development Promotion Department
EV Systems Department
IoT Solutions Department
Transportation Business Planning Division
Japan Sales Division
JR Group Sales Division
Commuter Rail and Subway Sales Division
Osaka Sales Division

Audit Division

Nagoya Sales Division
Engineering Division
China Sales DivisionInternational Sales DivisionInternational Project Division
Development Division
Transportation Systems Works
Production Management Division
Design DivisionInternal Control Committee

Audit
Officer

Auditors

Quality Assurance Division
Manufacturing Division
Procurement Division

Board ofAuditors

General Meeting of Shareholders

Quality Management Department 2
Corporate Production Planning Division
Purchasing Division

Industry Business Unit

Industrial Systems Planning Division
Sales Division 1
Sales Division 2
Sales Division 3
Sales Division 4
Engineering Division
Industrial Systems Works
Production Management Division
Development Division
Design Division
Quality Assurance Division

IT Business Unit

Manufacturing Division
Procurement Division
Information Systems Planning Division
Information Systems Sales Division
Information Systems Works
Design Division
Quality Assurance Division

Research Laboratory

Yokohama Plant
Shiga Ryuo Plant

Engineering Strategy Division
Engineering Research Division
Engineering Management Division
Administration Division
Administration Division

Osaka Branch
Nagoya Branch
Kyushu Branch
Hokkaido Branch

Toyo Denki Seizo Report 201856

Stock Related Information

Number of shares (As of May 31, 2018)
Number of shares authorized

36,000,000

Number of shares issued

9,735,000

Number of shareholders

5,940

Distribution of shares by type of shareholder
Financial instruments
business operators
1.70%

Major shareholders
Shareholders
BNP PARIBAS SECURITIES SERVICESLUXEMBOURG/JASDEC/HENDERSON HHF SICAV
East Japan Railway Company
The Master Trust Bank of Japan, Ltd. (Trust account)
TOYOTA INDUSTRIES CORPORATION
Employees Stock Ownership PlanNIPPON LIFE INSURANCE COMPANYMUFG Bank, Ltd.
Masayoshi Yamauchi
Toyo Denki Subcontractor Factories
Shareholding Association
Hitachi, Ltd.

Number of shares held
% of(Thousands)
total shares held
489

5.18

480
443
420
416
337
270
232

5.08
4.69
4.44
4.41
3.57
2.86
2.46

223

2.37

220

2.33

(Note) The percentages of total shares held are calculated excluding 291,907 treasury stocks.

Treasury stock
3.00%

Foreigncorporations, etc.
7.96%
Other
corporations
23.21%

Individuals
and others
40.63%

Financial
institutions
23.50%

Share consolidation and change to the number of sharesconstituting one share unit
Effective as of December 1, 2016, the Company implemented ashare consolidation (five shares consolidated into one share) andrevised the number of shares constituting one share unit (from1,000 shares to 100 shares).

Transition of share price
Share price
Before stock consolidation
(Yen)

600

Before stock consolidation(Yen)

Stock consolidation (5:1)

After stock consolidation(Yen)

Stock consolidation (5:1)

After stock consolidation
(Yen)

3,000

600

3,000

400

2,000

400

2,000

200

1,000

200

1,000

0

0

(Thousands) 2015.6

Trading volume

2016.12017.1

2018.1(Thousands)(Thousands) 2015.6

2016.12017.1

2018.1(Thousands)

15,00003,000015,0003,000

10,0002,000

10,000

2,000

5,000

1,000

5,000

1,000
0

0
2016.1200
2016.12Disclaimer 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.

57

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

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