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QA

We will establish a stableearnings structure throughthe execution of ourmedium-term managementplan.
For the first year of our medium-term management plan, “NEXT
100: Beyond 100 years, Ver. 2,” we have successfully increasedorders received and net sales, and made steady progress towards
the strengthening of our management foundation. In the followinginterview, I will hereby explain our progress so far.

President

1Kenzo Terashima

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Please tell us about the business conditions offiscal 2016.
We have achieved net sales of over 40.0 billion yen.
Despite a slight decrease in operating income, net incomeincreased.

For the business conditions of this fiscal year, we achieved an increase inorders received for all three segments compared with the previous fiscalyear. Net sales also increased, led by the solid sales of the Transportation
Systems and the Information Equipment Systems segments. Ourconsolidated financial results are as follows: orders received was 43.3
billion yen, net sales was 40.6 billion yen, both record-high since 2000.
Operating income declined due to the decrease in sales of the Industrial
Systems segment, despite strong sales in the Transportation Systemsand Information Equipment Systems segments. Ordinary income and net
income attributable to owners of the parent turned to an increase year
on year, due to decreased exchange losses compared to the previous
fiscal year. Furthermore, the ratio of overseas net sales were 31.1%.
Looking at it segment by segment, the Transportation Systems
segment has seen a decrease in orders received for products for thehigh-speed railroads in China due to the transition to new vehiclemodels. However, orders received increased mainly for private railway
companies in Japan which are enjoying robust results. Net sales andsegment profit both increased compared to the previous fiscal year. The
success of the Bus Systems segment in Japan, operated by our
subsidiaries, also contributed to this.
In the Industrial Systems segment, despite the fact that orders
received increased for processing machinery, as well as for products
aimed at overseas markets such as Southeast Asia and South Korea, it
declined overall due to the decrease in orders for testing equipment for
automobile development. On top of the effects of the decline in segment
profit, more man-hours were required than anticipated for product design

REVIEW OF SEGMENT OPERATIONSTOPICSin raising the performance of testing equipment for automobile
development and their application to automobile component
manufacturers. This affected profitability and led to a significant segment
loss. However, the technology and expertise gained from the endeavor areanticipated to be extremely useful in the future expansion of the market.
In the Information Equipment Systems segment, orders received, netsales, and segment profit all increased significantly due mainly to large
orders for commuter pass vending machines, which are composite ticket
vending machines capable of issuing a variety of tickets.

QA

Please tell us about the progress of themedium-term management plan.
We are steadily establishing a management foundation,
supported by the strengthening of our international
competitiveness and the restructuring of our production
systems.

Following the launch of our three-year medium-term management plan“NEXT 100: Beyond 100 years” in fiscal 2014, we have revised theplan in response to changes in business conditions into “NEXT 100:
Beyond 100 years, Ver. 2” in fiscal 2016. In the two-year period up tofiscal 2017, we plan to promote the construction of a managementfoundation through policies such as “strengthening our international
competitiveness,” “restructuring production systems” and “developing
new technology and businesses” towards future astounding progress,
while putting emphasis on the building of a stable business earnings
structure.
Due to the market environment, it may prove difficult for us toachieve the financial numbers set as the target of the final year of theplan. However, solid progress has been made with regard to theconstruction of a management foundation, as stated below.

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CORPORATE DATA /STOCK INFORMATIONWith regard to “strengthening our international competitiveness,” wehave accelerated the development in China in the Transportation
Systems segment, and successfully implemented measures to capture
the demand brought about by the introduction of standard vehicles forhigh-speed railways, as well as expanded the maintenance businessfor electrical equipment for Beijing Subway vehicles. Going forward, weare considering expanding the area of the subway-related businessfrom Beijing to Chengdu, and working towards locally producing
pantographs. Moreover, besides China, we are working on an approachto take advantage of the expansion of markets such as India and theASEAN region.
On the other hand, in the Industrial Systems segment, therepresentative office in Thailand set up in 2014 is beginning to show
results, yielding increased orders in generators and processing
machinery in Asia. We have also strengthened our approach toward
testing equipment for automobile development, selling them not only to
manufacturers of finished vehicles but also to those of components.
With regard to “restructuring production systems,” our main focus,
the construction is progressing smoothly for the new factory of theIndustrial Systems segment, Shiga Ryuo Plant, that combines bothproduction and development. The construction is expected to becompleted in January 2018, and full operations are to commence inJune 2018. Currently, by consolidating development, design, andproduction functions divided between the Yokohama and Shiga
Prefectures, we are working to raise the productivity rate by over 30%.
At the same time, we plan to expand our business field and increase
net sales through expanding our motor and inverter product lineups, aswell as through enhancing product quality such as by adding value toour generators.
Furthermore, alongside the production integration of the Industrial
Systems segment centered on Shiga Ryuo Plant, we are working on
the restructuring of the production line of Yokohama Works in an aim tostrengthen its production capabilities of the Transportation Systemssegment.

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REVIEW OF SEGMENT OPERATIONSTOPICSCONSOLIDATED FINANCIAL
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CORPORATE DATA /STOCK INFORMATION

Construction Status of Shiga Ryuo Plant as of July 2017

With regard to “developing new technology and businesses,” we are
examining the future growth area of the Transportation Systems andIndustrial Systems segments, such as inverters employing siliconcarbide devices that contribute to space-saving and energy-saving ofrail vehicles, multi-function test equipment compatible with tests for EV
and HEV, as well as power generation systems that support theeffective use of natural energy. We are currently working on
development projects as the stepping stones for these areas.
In the coming fiscal year (fiscal 2017), we plan to link the results of
the aforementioned establishment of a management foundation
towards the completion of the medium-term management plan. We
anticipate increases in both earnings and profit for the consolidated
financial results of the coming fiscal year, with increased orderbacklogs of all three segments and a further rise in orders received.

QA

these measures, we plan to secure our position as a specialized
manufacturer by expanding our business globally, alongside striving toenhance the profitability of our business. Going forward, we will further
focus on the passing-on of expertise and skills which make up the coreof our business, while cultivating human resources, aiming to form acorporate group that grows consistently and sustainably.
We hope that our shareholders look forward to the continued growthand expansion of the Company’s business and we would like to ask fortheir continued support.

SpecialFeature

Please tell us any comments you would like tomake to the shareholders.
Looking towards the 100th anniversary of our foundation
and beyond, we are working to create a Toyo Electric Groupsuited to the new age.

Dividends per share(Yen) 40

30

Concerning year-end dividends for this fiscal year (fiscal 2016), wehave decided upon 30 yen per share. We have implemented a reverse
stock split of 5 shares into 1 share on December 1, 2016. Year-end
dividends for this fiscal year is on the same scale as that of fiscal
2015, at 6 yen per share.
We are celebrating the Company’s 100th anniversary on June 20,
2018. In our medium-term management plan, “NEXT 100: Beyond 100years, Ver. 2,” we look towards the anniversary and beyond, and work
to create a Toyo Denki Seizo Group suited to the new age. Through

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20
100

Commencement of construction of a newproduction base in Ryuo Town, Shiga Prefecture
Restructuring production systems

We commenced the construction of a new production base in Ryuo Town, Shiga Prefecture this March.
Building this new production base is one of the core measures of our medium-term management plan,“NEXT 100: Beyond 100 years, Ver. 2,” implemented as a foothold to expand our business scale as well as
to establish a stable business earnings structure.
At the new production base, we aim to increase production efficiency by grouping up the previously
scattered production bases of the Industrial Systems segment, alongside working towards the expansionof our business areas and increase of sales through the strengthening of our research and development
function.
Our coming schedule

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2013/5

2014/5

2015/5

2016/52017/5* A reverse stock split of 5 common shares into 1 was conducted on December 1, 2016. Dividends
before fiscal 2016 are stated in their actual amounts before the reverse stock split. The amounts inbrackets (“[ ]”) are those after the reverse stock split.

The construction of the new production base is progressing as planned, and we are smoothly
reaching a turning point towards its completion in January 2018. We plan to start working on therelocation and installation of production equipment after completion, and commence partial operationin March 2018. Full-scale operation is expected in June of the same year, coinciding with our 100th
anniversary of foundation.
At the same time, we plan to increase the productivity of Yokohama Works, the production base ofthe Transportation Systems segment. Through expanding both of our core segments, the Industrial
Systems segment and the Transportation Systems segment, we plan to achieve further growth.

Overview of the new factory
Name

TOYO DENKI SEIZO K.K.
Shiga Ryuo Plant

Location

2911-6 Oaza Okaya
Ryuo Town, Gamo District,
Shiga Prefecture(Shiga Ryuo Industrial Park vicinity)

Land area

Approx. 32,706 m2

Total floor area

Approx. 19,997 m2

Total investment
amountApprox. ¥7.0 billion(Land, buildings, equipment)

Financingplan

Self-financing and loans

Products

Products for Industrial Systems segment(Industrial motors and inverters, etc.)4