Integrated ReportToyo Denki Seizo Report 2023
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/

Our Heart and Technology for the Future

Our Long-Term Vision

Based on a firm management foundation, we help build social and industrial
through the global provision of high-quality products that integrate ourbreakthrough advanced technologies.
Business Principles

Industry
Business
Segment

The Toyo Denki Group will practice the following business principles to ensure thegrowth of its business, earn the confidence and understanding of shareholders andstakeholders, and foster the development of its employees:

ICT Solution
Business
Segment

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

infrastructure systems that are considerate of the global environment
exceptional motor drive technologies since establishment with our
Industry Business Segment
The Company is extensively contributing to customers at home and abroad through drive systems
for general industrial machinery and equipment, automobile testing machines and power supply
systems that are indispensable to the daily lives of people. In addition, we address manufacturingthat contributes to the prevention of global warming, while providing products manufactured
through high system-building technologies that make full use of energy-saving motors, inverters, FA
controllers and networks.

Code of Conduct
1. Respond to customers in a timely and speedy manner

Automobile testing machines

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
5. Act with awareness and pride of a good member of society andbusinessman

New
Business
Development

Company Slogan
Transportation
Business
Segment

Our Heart and Technology for the FuturePower generation andpower supply systems
Production and processing
equipment drive systems

ICT Solution Business Segment
Transportation Business Segment
Electrical equipment for rail vehicles manufactured by theCompany using its technological capability developed since
its founding covers a wide range of fields, including propulsion systems (drive systems), auxiliary power supply andtotal train communication systems, and is designed to enhance the safety and comfort of trains.
In addition, the provision of maintenance services by ourGroup companies contributes to the maintenance and development of railway infrastructure in Japan and overseas.

In the ICT Solution Business segment, we operate in the two fields of railway station operating
equipment systems and IoT solutions, by merging advanced ICT and electronics. With regard to
railway station operating equipment systems, we develop and manufacture commuter pass issuingmachines that quickly became IC card compliant and supplementary on-board ticket issuing devices, and provide host systems by leveraging cloud and IoT technologies. In doing so, we supply railway operators with systems for smooth fare collection and income management.
Our IoT solutions enable monitoring and control of mobile entities and remote equipment throughservices that leverage cloud computing and mobile communication, and thus greatly contribute tocustomers’ efforts to streamline operations and optimize equipment maintenance.

Current collectors(pantographs)

IOT solutions

Door operating equipment
Driving gear units

Master controllers
Total train communication
system1

Toyo Denki Seizo Report 2023

Twin disk couplings
Propulsion inverters (VVVF inverter)

Contents/Editorial Policy/Our Long-Term Vision … 1
Over 100-Year History of Toyo Denki Seizo K.K. … 3
Consolidated Financial Highlights ………… 4
Message from the President,
Representative Director …………………… 5
Value Creation Process at Toyo Denki Seizo … 9
Special Report Medium-Term Management Plan … 11
Message from the Executive Responsible forManagement Planning …………………… 12
Business Report
Transportation Business Segment ……… 13
Industry Business Segment …………… 15
ICT Solution Business Segment ………… 17
Development Center …………………… 19
Sustainability
Sustainability Policy …………………… 21
Sustainability Roadmap ………………… 22
Disclosure based on the TCFD
recommendations ……………………… 23
Initiative in Products and Services ……… 25
Initiative in Production Activities ………… 27
Initiative in Valuing People and Communities … 30
With Our Employees ………………… 30
To Convey the Mission
and Appeal of Toyo Denki …………… 33
Governance
Governance …………………………… 34
Corporate Governance ……………… 34
Directors, Statutory Auditors ………… 36
Messages from Outside Executives…… 37
Internal Control and Compliance ……… 38
Risk Management …………………… 38
Information Security ………………… 42
Financial Report
Financial Review ……………………… 43
Reference Data for Management Indices … 44
Consolidated Balance Sheets …………… 45
Consolidated Statements of Income
and Consolidated Statements ofComprehensive Income ………………… 47
Consolidated Statements of Changes in
Net Assets ……………………………… 48
Consolidated Statements of Cash Flows … 49
TOYO DENKI SEIZO K.K. Notes toConsolidated Financial Statements ……… 50
Information
Stock Related Information ……………… 74
Company Profile ……………………… 75
Organization Chart ……………………… 76

Editorial Policy
We have been publishing this report since 2013
with the goal of allowing a wide range of stakeholders to have a better understanding of the Company.
This report combines our management policy with
reports on our businesses, sustainability, governance, finances, and other matters. We are committed to describing our initiatives during the year andour future direction in a manner that is easy to understand.
Period Covered by This Report
This report focuses on our activities in fiscal 2022
(from June 2022 to May 2023), but also contains
some information from outside this period.

Main motors

Passenger information
display system

Railway station operating
equipment systems

C O N T E N T S

Auxiliary power supply (SIV)

Organizations Covered by This Report
This report covers Toyo Denki Seizo K.K. and its
subsidiaries and affiliates listed on Page XX.
Reference Guidelines
The GRI Sustainability Reporting Standards (GRI
Standards) / IIRC / Guidance for Value Creation /TCFD / Human Capital Guidelines

Toyo Denki Seizo Report 2023

2

Consolidated Financial Highlights

Over 100-Year History of Toyo Denki Seizo K.K.
1918～1949
1918
1919

Development of 150kVA 440Hz static CVCF, first in Japan

Technical cooperation with British Dick Kerr and establishmentof the company with the capitalof 3 million yen
Operation started at Yokohama
Factory

1973
1977
1978
1983
1985

Completion of commutation ticket issuing system
Completion of large high-speed automatic drafting machine
Developed our proprietary AFE chopper device
Completion of in-train ticket issuing system
The current Yokohama Planmt was completed
Delivery of world-first superimposed field excitation control for
205 series electric train of Japanese National Railways

1988 Completion of world-first heat-pipe type 8-unit motor batch control VVVF inverter and delivery of it to Tokyu Electric Railway Co
GTO thyristor, first in Japan

Yokohama factory at the start of operations(Hodogaya-ku, Yokohama)

1920 Control equipments and traction motors
delivered directly to Keihan Electric
Railway Co.

1921 Development of pantograph, first in Japan
1926 Start of manufacturing of three-phasecommutator motor (AS motor)

1932 Development of electric equipment for

Early domestic pantographtrolleybus, first in Japan
Completion of controller with regeneration brake using compound motor, firstin Japan1935 Development of diesel electric railcar,

first in our country, and delivered to
AS motor
Sagami Railway

1949 Our stocks was listed on Tokyo Stock Exchange

1950 Development of ST type three-phase AC
Commutator motor (patented)

Cardan shaft driving device

1952 Development of Cardan shaft driving
device, first in Japan

1958 Completion of traction motor and con-troller for the Japan National Railways“Kodama”limited express

Japan National Railway 151 series

1959 Completion of automatic train stop
limited express train “Kodama”
1960 Completion of traction motor and drivefor Shinkansen testing car
Order received for electric towing locomotive for the Panama Canal
Development of constant-speed operation controller for vehicle, first in Japan
Electric towing locomotive for theDevelopment of hydraulic winch for Panama Canal
ship, first in Japan

1963 Delivery of pantograph for Shinkansen
to Japanese National Railways

1965 Development of thyristor static Leonard
equipment series, first in Japan

1969 Completion of automotive brake test Japan National Railway Series 0
equipment3

Toyo Denki Seizo Report 2023

Shinkansen

From postwar reconstruction

1950～1989

Global expansion and to the next 100 years

From foundation to postwar

1989 Development of small VVVF inverter using reverse conductive

Group photo of our employees withtechnical advisors from the partner
British Dick Kerr company.

1990～2022

to high economic growth

Our company was founded in 1918 with the intention of “domestic production of electrical machinery for railway vehicles”.
A spectacular feeling that we want to export products to domestic as well as to many Orient countries and contribute to thedevelopment of the country has come from the name of “TOYO DENKI SEIZO K.K.”. And this feeling has been handed
down to successive employees, and now our products are contributing to the development of social infrastructure systems
around the world.
1972 Development of brushless motor generator (BLMG), first in the world

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

1990 Development of stroke switching type door closing machine, first in Japan
Development of intelligent door system, first in Japan

158th fiscal term

159th fiscal term

160th fiscal term

161st fiscal term

162nd fiscal term

FYE May 2019

FYE May 2020

FYE May 2021

FYE May 2022

FYE May 2023

Financial Data
Fiscal Year
Orders received(million yen)

40,68438,52730,05530,44733,246

Net sales(million yen)

41,172

39,07133,14330,15831,025Gross profit(million yen)

7,839

8,242

7,338

6,815

7,197

Operating income(million yen)

557

1,068

423

171

517

Net income attributableto owners of the parent (million yen)

690

1,081

977

(930)

824

Comprehensive income (million yen)

(251)

(351)

94

(1,727)

2,373(million yen)

1,090

545

632

315

310

Research and development costs (million yen)

731

792

819

712

755

Capital investment

Fiscal Year-End
Net assets(million yen)

24,80424,18324,00822,012

24,582

Total assets(million yen)

58,001

55,16551,967

46,916

49,682

Net assets(yen)2,773.87

2,704.61

2,685.28

2,462.17

2,605.99

Net income

(yen)

75.27

120.98109.38(104.02)

91.85

Dividend

(yen)

30

30

30

30

30

Shareholders’ equity ratio

(%)

42.8

43.8

46.2

46.9

49.5

Return on equity (ROE)

(%)

2.7

4.4

4.1

(4.0)

3.5

Operating income ratio

(%)

1.4

2.7

1.3

0.6

1.7

Overseas net sales ratio

(%)

22.9

20.7

15.9

14.5

19.7

2014 Delivery of electrical machinery for

Dividend payout ratio

(%)

39.9

24.8

27.4

—

32.7

2018 May, Shiga Ryuo Plant completed

Non-financial Data
Number of officers (non-consolidated)

11

10

10

11

10

Number of employees on a consolidated basis
Number of employees at subsidiaries in Japan
CO2 emissions on(t)*a non-consolidated basis
Electricity consumption on a
non-consolidated basis (10,000 kWh)*

1,226

1,227

1,217

1,193

1,149

395

386

370

363

357

5,037

4,274

4,251

3,836

3,767

864.3

767.6

772.2

733.7

644.0

1991 Development of light-weight VVVF inverter using 1,500V mass-production type reverse conductive GTO thyristor, first in our Japan

1997 Completion of in-train ticket issuingmachine corresponding to automatic
ticket checker

Per Share Information

1998 Delivery of electric equipment for Beijing subway east-west line train

2000 Completion of permanent-magnet synchronous motor (ED motor)

Beijing subway east-west line train2004 Development of electrical equipment for the world’s first micro gas
turbine hybrid vehicle
Joint development of the first full-flat, super-low floor light rail vehicle (LRV) produced in Japan
Succeeded in development and running of in-wheel motor for car

2007 The new public transport smart card Pasmo

goes into service (delivery of automatic commuter ticket vending
machine with support for smart card passes and smart card chargemachines to station facilities)
Start of sales of the VF66 inverter

20082012 Order receipt of handsets for conductor for JR West

Joetsu and Hokuriku Shinkansen E7

Angeles County Metropolitan
June, Toyo Denki Seizo K.K. 100th an- Los
Transportation Bureau P3010 LRVniversaryOrder received for consigned research and development of superconducting flywheel power storage system for railways

2019 Establishment of SIAM TOYO DENKI Co., Ltd. in Thailand
2020 Establishment of TOYO DENKI RAILWAY SERVICE, LLC. in the U.S.
Delivery of electrical machinery for Tokaido and Sanyo Shinkansen N700S(mass-production model)

2022 Delivery of automobile testing systemusing in-wheel-well dynamo

Transitioned to Standard Market of the In-wheel-well dynamo
Tokyo Stock Exchange

Major Management Indices* Aggregate amount of production bases and head office/branches per fiscal year beginning in April and ending in March of the following year.

Toyo Denki Seizo Report 2023

4

Message from the President, Representative Director

As we continue to steadily advance the“revitalization and transformation of
Toyo Denki,” we will push ahead withefforts to expand our core values anddrastically strengthen ourmanagement foundations, aiming torestore sales to pre-COVID-19
pandemic levels in the fiscal year
ending May 2026.
Akira Watanabe
President, Representative Director

Pursuing our vision for Toyo Denki

A commitment to propel us into our next 100 years from the starting point
For more than 100 years, the Toyo Denki Group has built up a
history of manufacturing diverse products that have supported theenvironment and society. In April 2021 we announced our
Sustainability Policy as an embodiment of one of our businessprinciples: “prioritize ethics and contribute to the prosperity ofcustomers and society as a whole.” This policy outlines a vision for
Toyo Denki based on the business principles that we havecultivated since our founding and on our environmental philosophy,
and it declares our commitment to take a new path that will propel
us forward into our next 100 years through three approaches:“initiative in products and services,” “initiative in production
activities,” and “initiative in valuing people and communities.” In
addition, we have formulated Medium-Term Management Plan
2026 to achieve, in a true sense, our sustainable growth and theimprovement of our corporate value, based on a renewed
understanding of our purpose. The starting point for this plan is toaddress a challenge brought to the forefront by the COVID-19
pandemic, namely, the need to improve our profitability. We havestarted making steady progress in executing the plan.

Results for the fiscal year ended May 2023

A year of working toward “revitalization and transformation of Toyo Denki” and achieving steady results
We positioned the fiscal year ended May 2023, the first year of
Medium-Term Management Plan 2026, as a year to thoroughly
implement structural reforms to improve profitability, and took
action toward the “revitalization and transformation of Toyo Denki.”Fortunately, in Japan, the lifting of the COVID-19 pandemicrelated restrictions on public activity helped to bring social andeconomic activity back toward normal levels, as seen in the5

Toyo Denki Seizo Report 2023

rebound of capital investment by businesses. Many other countries
also experienced a gradual recovery of their economies, along withimprovements in the business environment. At the same time,
however, new sources of concern emerged, including heightened
geopolitical risks, increases in raw material and energy prices,persistent shortages of parts, and uncertainties in financial andforeign exchange trends.

The Transportation Business segment saw increased demand
for train equipment renewal as the improving businessenvironment prompted domestic railway operating companies toresume the plans for building new rolling stock that they had put
on hold due to the COVID-19 pandemic. Also, there was a rise inorders received in China for service parts and new projects. In the
Industry Business segment, inquiries on our Group’s products andservices rose with growing capital investment in many industries.
Trends in the ICT Solution Business segment included software
upgrades for railway station operating equipment to accommodate
fare revisions, software development for improving operational
efficiency, and efforts to enhance passenger convenience andserve the needs of inbound visitors. Although our manufacturing
processes were impacted by the persistent difficulty in procuringparts and materials—particularly in the case of the Industry
Business segment, which has comparatively short lead times—all
three segments achieved growth in their income and profits.
Medium-Term Management Plan 2026 lays out three basic
policies: “Expansion of new businesses and products,” which aims
to restore sales to the pre-COVID-19 pandemic level of 40.0 billion
yen in the fiscal year ending May 2026; “Thorough improvementof the earnings structures of existing businesses,” which seeks toboost operating income ratio to 5% and ROE to 8%; and“Improvement of asset efficiency with an awareness of capitalcosts,” which involves reviewing capital efficiency (mainly focusing
on reducing cross-shareholdings) and considering reallocation of

corporate resources. These three policies began producing resultsin the fiscal year ended May 2023.
Regarding “expansion of new businesses and products,” ourGroup as a whole pursued cross-segment development of new
businesses and products, mainly at the new development center
we opened in June 2022. We delivered a system that can monitor
railway operational conditions in real time over the public cloud byretrofitting our IORemoter to railway vehicle’s VVVF device, and acashless payment terminal app for use on the work smartphones
carried by train crews. The app is a business process applicationthat eliminates the need for crews to carry around the dedicatedterminal traditionally used. It thus helps to improve safety, qualityof service, and the working environment for crew members. In
addition, we began developing and mass-producing evaluationequipment compatible with advanced driver-assistance systems(ADAS) and on-demand motors.
Our efforts for “thorough improvement of the earnings
structures of existing businesses” included not only improvementof plant profitability, but also asking customers to agree to revisionof our selling prices to appropriate levels reflecting the increases in
raw material prices and other costs so that we could implement
cost pass-through for renewed contracts and new relationships.
For “improvement of asset efficiency with an awareness ofcapital costs” we continued to further reduce our crossshareholdings, and also sold off idle real estate such as the formersites of aging company housing.

Outlook for the fiscal year ending May 2024

Taking advantage of the business environment’s upturn to drastically strengthen our management foundations
Our forecast for the fiscal year ending May 2024 anticipates that
economic activity in Japan will further improve on the whole,buoyed by the business environment’s upturn in the fiscal year
ended May 2023. However, we also foresee a slowdown ineconomic recovery overseas, and the continuation of concerns
such as limited part supplies and uncertainties in financial andforeign exchange trends.
As for our Group’s core segment, the Transportation Business,domestic railway operating companies, which are likely to see
further recovery from the COVID-19 pandemic’s impact, including
a return of inbound visitor-related demand, are planning to invest
in sustainability initiatives. They can be expected to deploy newly
built rolling stock and switch to energy-saving devices, among
other actions. There are concerns that the Chinese market willenter a recession, but nevertheless it is likely that there will be
demand for railway vehicle maintenance that had been delayed
because of the COVID-19 pandemic, and that production of new
rolling stock will grow. In regions such as Southeast Asia, there aresigns of vigorous activity amid robust infrastructure demand.

In the Industry Business segment, we expect to see an influx oforders for production and processing equipment systems forincreasing productivity or improving energy efficiency. Looking at
automobile testing systems, it appears that companies are
re-examining their investments in light of the rapid shift toward
electric vehicles. In the medium to long run, demand will likely
increase for testing equipment that supports the switch to electricvehicles, and for power supply equipment and distributed power
supply generators that use renewable energy, in preparation
toward a sustainable society. We are pursuing technologicaldevelopment to meet the expected growth in orders received.
We are expanding the ICT Solution Business segment toencompass not only railway station operating equipment systems
that support cashless payment but also general ICT solutions suchas cloud-based remote monitoring systems that enable monitoring
and control of mobile entities, equipment, and facilities.
In May 2023, we acquired funding totaling 464 million yen
through a third-party allotment of a portion of our treasury stock to
East Japan Railway Company. We are using some of these funds

Toyo Denki Seizo Report 2023

6

Message from the President

to install new equipment to strengthen and accelerate thedevelopment of new business areas at our Yokohama Plant, which
is a production base for electrical equipment for rail vehicles, aswell as capital investments aimed at improving the productivity ofthe plant’s existing businesses. We are also using the funds toinvest in projects for reinforcing our IT platform, advancing DX(including leveraging drawing data), and implementing information
security measures.
We anticipate that these actions will lead to growth in net sales
and profit of at least 10% for orders received and net sales, and at
least 15% for operating income.

Roadmap to greater growth potential and profitability

New steps toward achieving Medium-Term Management Plan 2026
We announced our Group’s management indices under MediumTerm Management Plan 2026 in July 2023. Our goal for the fiscal
year ending May 2026 is to achieve consolidated net sales of 40.0
billion yen, operating income ratio of 5%, and ROE of 8%, as well
as segment net sales of 25.0 billion yen in the Transportation
Business, 13.0 billion yen in the Industry Business, and 2.0 billion
yen in the ICT Solution Business.
In the Transportation Business segment, demand has been
rising for railway power storage systems that store theregenerative power generated by train braking, as railway
operators seek to address a key concern for them, reduction ofenvironmental burden (through reduction of power consumption).
Our Group has a strong track record in delivering power storage
systems, particularly the E3 Solution System, but we will continue
pursuing development. We will strengthen our production system
by adding more testing equipment for development projects, andwill develop environmentally friendly products that save energy,
reduce maintenance requirements, control noise, and realize otherimprovements.

In the Industry Business segment, we will work to further
improve the in-wheel-well dynamo that we developed as testing
equipment for the automotive industry, seeking to apply it tovehicle testing that also supports the shift to EVs, and ADAS
support testing. In addition, we will respond to the recovery of
demand for capital investment in energy-saving solutions bybroadening our lineup of energy-saving devices and pursuingdevelopment of small hydroelectric power generation and wave
power generation—both of which are expected to see increased
demand going forward—with the aim of expanding the utilizationof natural energy.
In the ICT Solution Business segment, we will provide railway
operators and other customers with IoT solutions that enable themto streamline their operations and optimize maintenance. To thisend we will develop railway station operating equipment apps foruse on work smartphones and other general-purpose terminals,
and supply systems for monitoring and controlling mobile entities
and remote equipment through cloud services and mobile
networks.

Promoting sustainability management

Accelerating development of our foundations through engagement
The Group established a Sustainability Committee and carries out
company-wide initiatives to promote sustainability management. I
preside over the committee, and its members, comprising mostly
Operating Officers, generally meet once every quarter.
We consider climate change to be a particularly important topic
and have set numerical targets for reducing greenhouse gas
emissions. Specifically, the targets for reducing Scope 1 and 2 CO2emissions versus fiscal 2018 levels are 10% by fiscal 2026, 30%
by fiscal 2030, and 100% by fiscal 2050. The Sustainability
Committee is tracking progress toward those targets. The content
of committee discussions is reported to the Board of Directors andreflected in the Group’s management strategy. In July 2023 wealso announced our support for the TCFD recommendations andbegan analyzing climate change-related risks and opportunities.

7

Toyo Denki Seizo Report 2023

We view human capital as our most important corporate
resource, as it supports the continuous improvement of ourcorporate value and the achievement of our social mission.
Accordingly, we have begun to reform our personnel systems toreinvigorate our organization and talent.
As part of our actions to ensure diversity in our workforce, weare stepping up recruitment activities aimed at increasing thepercentage of female permanent employees and are carrying out
other initiatives such as career advancement seminars for female
employees. Through these efforts we will raise female
representation across our organization, with the aim of increasing
female representation at the assistant manager level and manager
level in administration divisions to at least 25% and 8%,
respectively, by the fiscal year ending May 2026. Moreover, we willfurther ensure diversity through mid-career hiring, a program thatenables fixed-term contract employees to switch to permanent
employment, a program for recruiting people with disabilities, andother actions.
Our human resources development initiatives include levelspecific training, OJT, support for acquisition of various degrees
and certifications (such as engineering doctorates, MBA, MOT,
professional engineer qualifications), and language training. Our
Engineer Development Committee meets regularly to advance thetraining of technical personnel, the Technical My Star Committee
certifies skill transfer processes and evaluates the results of those
processes. As a result of these activities, to date three of ouremployees have been recognized with the Contemporary Master
Craftsman award from the Minister of Health, Labour and Welfare.
We will also implement a program for training female manager
candidates to further support diversity, and will enhance ourtraining program for upper management candidates.
We have established and enhanced various programs forsupporting work-life balance, including the re-hiring of former
employees, limiting the working location of employees caring forchildren or other family members to a defined region, diversifying
the options for reduced working hours, and providing annual paid
leave on an hourly basis. We are also communicating informationfor encouraging more male employees to take childcare leave,
including by creating and distributing a guidebook on childbirthand childcare, and a collection of male employees’ personal

stories about their experiences in taking childcare leave. Goingforward, we will further develop our programs for flextime, remote
work, and other workstyle options.
In our efforts to further improve the working environment, weare striving to support the mental health of our employees by
setting minimum rest periods between shifts and establishingin-house and external mental health consultation services. In
addition, the management solicits and listens to the opinions of
employees through opportunities such as a regular roundtable
meeting that brings the President and employees together to share
their values. Initiatives such as these earned us recognition as a
Certified Health & Productivity Management Outstanding
Organization by the Ministry of Economy, Trade and Industry in
2022 and 2023.
To further enhance our corporate governance, we haveappointed Ms. Yukiko Machida as an Outside Director. Ms.
Machida is a lawyer who brings deep insights into labor law
gained through extensive experience, including her role as a ViceChairperson of the Daini Tokyo Bar Association’s Labor Issue
Committee. I would like to accelerate the enhancement of ourGroup’s corporate value by referring to her advice and suggestions
on how to ensure the legality and appropriateness of the Board of
Directors’ decision-making and on the HR and labor challenges
faced by the Group.

Message to our stakeholders

We will push ahead with efforts to expand our core values and drastically strengthen our management foundations
The Group’s basic policy is to conduct ongoing and stabledividends. To respond to the trust placed in us by shareholders, we
are working to strengthen the earning capacity needed to ensure
the source funds for dividends and have made it our basic policy
to maintain the payout ratio at 30% or higher. In the fiscal year
ended May 2023, under our basic policy for dividend returns toshareholders, we paid a year-end dividend of 30 yen per share.
We expect to pay a year-end dividend of 30 yen per share for the
fiscal year ending May 2024 as well. Retained earnings will beeffectively injected into growth investments, including capital andR&D investments.
The Group has sent out into the world numerous electricalequipment for railway vehicles and general industry, with the
motor drive technologies that we have cultivated since ourestablishment at its core. I consider this success to be the productof our constant pursuit of a value creation process that is driven by
our core values encompassing a broad spectrum of shareholders:“achievements and reliability in 100 years of business,” “tirelesschallenge to improve technologies,” “full commitment to facing ourcustomers squarely,” “close networks with suppliers,” and“development of manufacturing professionals.” I believe that it isimperative for us to continue pursuing business management thatvalues people and technology, in line with the Toyo Denki Group’s
company slogan of “Our Heart and Technology for the Future.” I
especially consider people to be a vital part of our commitment tosustainability and human capital management. We hope that our
stakeholders will look forward to thedevelopment and expansion of theGroup’s business and would like to ask
for their continued support, including
with regard to sustainability.

Toyo Denki Seizo Report 2023

8

Value Creation Process at Toyo Denki Seizo

Core Values and Strengths

Consolidated basis (FY2022)

Output and Outcomes[Group Business Principles]Intellectual capital
Number of patents, etc. held
(Japan and overseas)(Patents, utility models, designs)

Prioritize ethics and contribute to the prosperity of customers andsociety as a whole
Encourage creativity and an enterprising spirit to meet thechallenges of the future
Build trust by focusing on quality first255

R&D spending 750million yen

Planning/
development/design

Human capital

Number of employees 1,149(Men: 1,011; Women: 138)

Social and related capital(non-consolidated)

Needs
and
issuesidentification

Number of customers
394companies
Number of suppliers

655companies

Number of countries supplied

31

Manufacturing capital

After-sales
service[Products and Services][Sustainability]

Transportation Business Segment

Initiative in Products and Services

Electrical equipment for
railway vehicles
Railway power storage
systems
Door operating
equipment for buses

Industry Business Segment

Achievements and reliability in
100 years of business
Tireless challenge to improve
technologies
Full commitment to facing ourcustomers squarely

Procurement

Close networks with suppliers
Development of manufacturing
professionals

ICT Solution Business Segment

Production

Number of manufacturing sites
Japan 5

Automobile testingmachines
Production and processing
equipment drive systems
Power generation andpower supply systems
Car-mounted electricalequipment
Other
Railway station operating
equipment systems
IoT solutions

Overseas 5(affiliates)

Energy consumption 2,255kl

Financial capital
Total assets

49.6billion yen

Shareholders’ equity ratio

49.5%[ Fundamental Policies of the Medium-term Management Plan ](FYE May 2023 through FYE May 2026)

1. Expand new businesses and products
2. Thoroughly improve the earnings structures of existing businesses
3. Improve asset efficiency with an awareness of capital costs
Revitalization and transformation of Toyo Denki

Expand out into the whole world,
including the Chinese and Asianmarkets and the United States, as a
global brand

External Environment
Changes in demographics
Increase in geopolitical risks

9

Toyo Denki Seizo Report 2023

Initiative in Production Activitie

Reduction of environmental
footprint through energy saving,
decarbonization, andimprovement of recycling rates
Initiative in Valuing People and Communities

Realizing the happiness of
employees and their families
Development and production ofgood members of society andcorporate citizens
Contribution to local communities

Sales

Annual capital spending
310million yen
Natural capital

Development of the world’s
railway infrastructure
Development of manufacturing
and infrastructure around the world
Creation of new services throughadvanced telecommunication
technologies

Rising costs of resources and energy
Human rights considerations, human capitalmanagement

Carbon-free business management, arrival of theclosed-loop economy
Acceleration of technical innovations

Our Heart andTechnology for the
FutureToyo Denki Seizo’s goal

Long-term
VisionHelp build social and industrial infrastructure that is considerate of the
global environment, with a focus on exceptional motor drive technologies

Input (corporate resource)

Toyo Denki Seizo Report 2023

10

Special Report Medium-Term Management Plan

Message from the Executive Responsible for Management PlanningMedium-Term
Management
Plan 2026

Three Fundamental Policies

1

Expansion of new
businesses and products
Strengthen and expedite
development of new businessareas across the Company, andrespond to electrification, DX,
and decarbonization

2

3

Medium-Term Management Plan 2026 (FYE
May 2023 to FYE May 2026) was launchedlast fiscal year. Based on the progress andresults of the structural reforms carried out inthe plan’s first year, we have set managementtargets for the Group as indicated below.

Drastically strengthen profitabilityof both factories and sales fromthe viewpoint of improving
production efficiency andsecuring appropriate selling priceContinue to reduce crossshareholdings, review capitalefficiency of each business andconsider reallocation of
corporate resources

Consolidated financial targets for FYE May 2026

Net sales

40.0billion yen Operating income ratio 5%

ROE

8%

Net Sales

Operating income and ROE

Return sales to the pre-COVID-19 level of 40.0 billion yen
through “expansion of new businesses and products”

Improve operating income and ROE significantly by “thoroughimprovement of the earnings structures of existing businesses”
and “improvement of asset efficiency with an awareness ofcapital costs”(100 million yen)(100 million yen)

450

25

25

20

20 20

400

400

Operating income

Operating income ratio

ROE

(%)

15

15

350
10

8% 10

5

5

300
Medium-Term Management Plan 2026

“Revitalization andtransformation of Toyo Denki”

250

0

18.5

19.5

20.5

21.5

11 Toyo Denki Seizo Report 2023

22.5

23.5

24.5

Kenji Tanimoto

Thorough improvement of
Improvement of asset
the earnings structures of
efficiency with anexisting businesses
awareness of capital costs

25.5

26.5 (Period)

5%

0

0

-5

-5

18.5

19.5

20.5

21.5

22.5

23.5

24.5

25.5

26.5 (Period)

Director, Senior Executive Officer

Toyo Denki Group is carrying out Medium-Term Management
Plan 2026, the final year of which is the fiscal year ending May
2026. As mentioned earlier in the Message from the President,
the plan involves implementing actions under three fundamental
policies (1. growth strategy, 2. improvement in earnings structure,
3. improvement in asset efficiency) to achieve net sales of 40.0
billion yen, operating income ratio of 5%, and ROE (return on
equity) of 8%, with the aim of restoring and improving ourcorporate value.
A key focus in the preparation of this integrated report, Toyo
Denki Seizo Report 2023, was to clearly communicate theinitiatives of Medium-Term Management Plan 2026 in the context
of our business principles, long-term vision, and the values wecherish. In particular, this report highlights how we are laying thefoundation for our future growth by leveraging our technologies toexpand and enhance specific products and services. We have

IT infrastructure, advancing our DX, and other targets. As forinvestment in people, we raised basic salaries by the largest
margin to date this fiscal year, and we will expand ourinvestments in talent, including for recruitment and training.
With our financial foundation in sound condition (as of FYE May
2023, shareholder’s equity ratio was 49.5% and debt-to-equity
ratio was 0.45), the funds for these investments will be procuredby the right means at the right time, using a proper balance ofdebt and equity. We will also continue to invest in growth areasusing funds sourced by reducing our cross-shareholdings andselling off underperforming assets.
As for shareholder returns, our basic course of action is
implementing the Medium-Term Management Plan 2026
initiatives for raising ROE to 8%, with the aim of restoring andimproving our corporate value. In terms of dividends, as we follow
our basic policy of continually and stably paying dividends with aalso added new sustainability-related content to further enrich thereport, including information on our declaration of support for thetarget payout ratio of at least 30%, we will utilize effective means
to provide returns to our shareholders, including achieving larger

TCFD (Task Force on Climate-Related Financial Disclosures)
recommendations as part of our commitment to addressing
climate change, and on various personnel system reforms fortackling human capital challenges such women’s empowerment.
In order to carry out these new actions for achieving growth inprofits to fund larger dividends.

the future, we will also expand our investments. During the long
COVID-19 pandemic we limited capital investment to around 300
million yen (consolidated) for each of the past two fiscal years.
For this fiscal year (FYE May 2024), however, we plan to invest
over 900 million yen in development in new business areas,
improvement of productivity in existing businesses, strengthening

Capital investment (consolidated)(Million yen)

1,000

946

800
600

545

632

400

315

310

2022/52023/5200
02020/52021/52024/5(Plan)

Toyo Denki Seizo Report 2023

12

Business Report

Transportation Business Segment
We support railway transportation that connects
people and cities with safety and trust through thetechnologies we have cultivated since our founding
and through our environmentally
Naoki Okuyama
General Manager offriendly manufacturing.
Transportation Business Unit

Main actions
Totally enclosed induction motor with inner fan and grease-lubricated bearings
In addition to our existing model that lubricates bearings with oil, we have developed a model withgrease lubrication.
This product optimizes the trade-offs between product cost and efficiency, noise, andmaintenance requirements in order to enhance the performance of railway vehicles while also
reducing maintenance and improving comfort through noise reduction.

Power storage system for Fukuoka City Transportation Bureau

Business environment and strategy
The easing of the COVID-19 pandemic-related restrictions has beenaccompanied by the return of social and economic activities to normal
levels, including a recovery in capital investment by businesses.
Meanwhile, however, rising raw material prices, longer delivery waits,
and other changes in the post-COVID-19 pandemic businessenvironment have continued to pose daunting challenges. I believethat we need to respond by stepping up our efforts as a corporationand strengthening our actions for addressing the needs of customers.
Looking at the domestic market, the improved businessperformance of railway operators has sparked an upward trend intheir heretofore sluggish demand for new rolling stock production andequipment renewal. However, this bears close watching, as thedemand in some areas is not on par with pre-COVID-19 pandemic
levels.
As for overseas markets, demand has been significantly recoveringin China, and we are working with our affiliates there to respond to
this resurgence. Inquiries are streaming in from other Asian countries
and global regions as well, and our production and sales teams aremaking a coordinated response.
Railway operators are showing a growing interest in initiatives forachieving the SDGs and carbon neutrality. In response, we willproactively offer our railway power storage equipment as a solutionthat can support those efforts.
Main productsElectrical equipment for railway vehicles
Propulsion inverters / auxiliary power supplies / Main motors /driving gear units / pantographs / total train communication systems /passenger information display systems / twin disk couplings / door
operating equipment / high speed circuit breakers, etc.
Railway power storage systems
Door operating equipment for buses

13 Toyo Denki Seizo Report 2023

Results for FYE May 2023
Percentage of total
consolidated net sales

64.0%

Orders Received

20,963 million yen (Up 11.5% year on year)
2021
2022

18,81818,80020,9632023

Net Sales

19,857 million yen (Up 2.1% year on year)
2022

21,52819,4562023

19,857

2021

Segment Income

2,259 million yen (Up 3.2% year on year)
2022

2,211
2,190

2023

2,259

2021

Together with GS Yuasa Corporation, we supplied a power storage system for the Fukuoka
City Subway’s Nanakuma Line, which was extended in March 2023.
The regenerative power generated by train braking is stored in the system’s batteries
and can be discharged to compensate for voltage drops in the overhead lines, such as
when many trains operate during rush hour. This enables effective utilization ofregenerative power.
Moreover, the system can also function as an emergency power source for train
movement. When trains get stopped between stations because a blackout or other issue
has interrupted power transmission in the overhead lines, they can draw power from thesystem to travel to the nearest station.

Vehicle condition monitoring system forrealizing condition-based maintenance
We have begun testing a system for monitoring the condition ofrailway vehicles’ electrical equipment to realize condition-based
maintenance in the future. This project is being carried out with
Keihan Holdings Co., Ltd. and KOTSU DENGYOSHA CO., LTD.
The project is proactively leveraging digital technology inorder to expand the range of equipment that can be monitored.
This will enable maintenance to be performed more efficiently
and thus accommodate the labor shortages that are expected
to occur from population shrinking in the coming years. The
result will be safer and more stable railway vehicles.

Cloud
serverTabletSmartphone

Remote monitoring terminal

Control unit

Energy-saving solutions for existing railway vehicles
We have been commissioned by Keifuku Electric Railroad Co., Ltd. to add a regenerative
braking function to their MOBO 2001 series through modification of the controller and achange of software.
In addition, Kagoshima City Transport Bureau has contracted us to replace the VVVF
inverter controllers of their 2110 series to provide preventive maintenance and improveenergy efficiency as they have been in use for approximately 30 years since the service
began.
Since these projects will reduce power consumption and the use of worn parts while
also extending the replacement cycle, they can help our clients to lower their environmental
impact and thus contribute to achievement of the SDGs.
Toyo Denki Seizo Report 2023

14

Business ReportIndustry Business Segment
We use our high-efficiency, high-precision powerelectronics technology to provide customers withenvironmentally friendly social/industrial
infrastructure equipment, contributing toToshihito Nakanishi
Manager of Industry
the realization of a sustainable society. General
Business Unit
Business environment and strategy
We are seeing a stronger influx of inquiries as many industries
vigorously pursue capital investments amid diverse efforts to bring
forth a sustainable society. Although our manufacturing was
impacted by shortages in semiconductor chips and othercomponents in the fiscal year ended May 2023, I believe that oursituation will improve going forward.
In our production and processing equipment business, demandfor equipment renewal is rising along with growing needs forenergy-saving and low-maintenance solutions.
In the automobile testing machines business, we need to respondto the rapid shift toward EVs by adding more battery simulators totesting systems, and develop e-Axles (EV drive units).
In the area of power generation and power supply, expectations
are rising for the contributions to Japan’s energy resilience that canbe made by expansion of emergency power generation systems andrenewable energy-based power generation.
Working in this business environment we will offer solutions thatanswer such expectations and can help realize a sustainable society.
In addition, we will collaborate with the Development Center tobranch out into new fields, such as vehicle testing, where we could
move into testing of advanced driver-assistance systems (ADAS) for
automobiles.

Main products
Automobile testing machines
Various testing devices (durability, vibration, noise, etc.) for
automobile components (engine, transmission, differential gear,etc.) / testing devices for automobiles (efficiency, driverassistance systems, etc.)
Production and processing equipment drive systems
For printing machinery / tire and rubber processing machinery /paper manufacturing machinery / films processing machinery,etc.

15 Toyo Denki Seizo Report 2023

Main actions
Expanding the lineup of production/processing equipment drive systems that help
save energy and reduce maintenance
We leverage our ED (Eco-Drive) Motors that incorporate permanent magnets and our high-precisioncontrollable inverters to supply production and processing equipment drive systems that offer excellent
precision, energy efficiency, and maintainability. Also, we have made it possible to apply ED Motors to abroader range of equipment by conforming them with EU directives and expanding the lineup to include
large-capacity water- and dust-proof models. Moreover, the cooling of ED Motors can be changed from air
to water cooling, which reduces the noise of cooling fans and thus can help improve working
environments.
Going forward, we will further contribute to sustainable manufacturing by providing products that
reduce the energy and maintenance needs of production and processing equipment.

Results for FYE May 2023
Percentage of total
consolidated net sales

31.9%

Responding to the shift toward EVs with our automobile testing machines

Orders Received

10,855 million yen (Up 1.6% year on year)2021

10,5972022

10,6882023

10,855Net Sales

9,905 million yen (Up 0.0% year on year)
2022

10,541
9,902

2023

9,905

2021

Segment Income

479 million yen (Up 0.2% year on year)
718

2021
2022

477

2023

479

Power generation and power supply systems
Emergency generators / continuous-use
generators / generating equipment for
distributed power sources, etc.
Car-mounted electrical equipment
For passenger vehicles /construction machinery
OthersElectrical equipment for lifts /Water supply and sewage equipment systems, etc.

We supply automakers and automotive part manufacturers with automobile testing machines, mainly for testing drive systems. In
response to the shift toward EVs, we offer battery simulators for use in testing machines. Manufacturers are turning to high-capacity,
high-voltage batteries to address EV challenges such as limited range and charging
needs. We have responded by developing and supplying a battery
simulator model whose direct current power source supports highvoltages of up to 1,000 V. This realizes automobile testingmachines that can also be used for e-Axles and other EV drive
components.
We will continue using industry-leading technologies tocontribute to the development of next-generation automobiles.

Proposing vehicle testing devices that use in-wheel-well dynamos
The development of battery-powered EVs and other energy-efficient vehicles is picking up paceamid efforts to achieve carbon neutrality. To support the evaluation of these vehicles, we areproposing an approach to vehicle testing that replaces the traditional chassis dynamometer with
the in-wheel-well dynamo we developed. Since this system directly connects to the hub in thevehicle’s wheel well, it saves space and can be installed in a wider range of locations comparedwith the chassis dynamometer. As a result, it has potential for use in diverse types of vehicle testing, including running mode testing.
Since it enables steering to be done during running tests, it also has potential for application to testing of ADAS and autonomous driving.
We will work with the Development Center to further expand its range of application.

Approaches to power generation systems using renewable energy
We supply a distributed power supply system for small hydroelectric power generation as a
power generation system that uses renewable energy. We are also exploring new ways to utilize
renewable power, including marine energy power generation.
Our distributed power supply system is powered by our standard ED Motor, and this feature isleveraged to support a variety of applications, such as generation and sale of electricity tocommercial power grids, and, with the addition of stand-alone functionality enabling operation during grid outages, service as an
emergency power source.

Toyo Denki Seizo Report 2023

16

Business Report

ICT Solution Business Segment

Reorganized from the Information Equipment Systems segment in June 2022

Support the improvement of customers’ operational
efficiency, convenience, and added value and theconstruction and operation of DX-MaaS infrastructurewith ICT solutions that combine
Shingo Furuzawa
General Manager of ICT Solution
advanced ICT and electronics.
Business Unit
Business environment and strategy

Main actions
Railway station operating equipment systems
We combine our deep insights, reliable technologies, and extensive experience in the rail transport sector with advanced ICT to provide
railway station operating equipment systems that improve passenger convenience and reduces the workload of railway operators.
Leveraging cutting-edge cloud computing and IoT technologies to respond to needs ranging from diverse station equipment to hostsystems and applications that run on smartphones already in use, we will continue supplying transport service operators with systems that
help them to build their foundation for DX and MaaS, improve operational efficiency, reduce workloads, and improve customer service.

Results for FYE May 2023

With the lifting of COVID-19 travel restrictions, the number of railway
passengers, including inbound visitors, has been recovering andcapital investment in railway station operating systems is showing
signs of rebounding. As transportation service operators seek toimprove user convenience with MaaS, cashless, ticketless, and othersolutions, we are proactively developing systems that support suchneeds so that we can propose solutions that meet customer
expectations.
Against the backdrop of dramatic advances in technologies suchas cloud computing, communications, data analysis, and AI, as wellas labor shortages and value creation using big data, the IoT market
is starting to expand into new areas. These include countermeasuresagainst the deterioration of infrastructure equipment, particularly inthe manufacturing, public, and transportation sectors, upgrades intransportation infrastructure, and supply chains. We will leverage
cloud services and systems/services utilizing IoT terminals andmobile communication to develop solutions that enable customers tomonitor and control mobile entities and remote equipment so thatthey can improve operational efficiency, optimize maintenance, andcarry out preventive and condition-based maintenance.
We will expand our business range as we strive to provide ourcustomers with solutions that help to add value.

Percentage of total
consolidated net sales

Cloud utilization

Data aggregation

Thin client support

Online booking

Cloud
server

4.1%

Cloudcomputing

IoT

DX

Labor saving

MaaS

Customer
service
improvement

Orders Received

1,421 million yen (Up 49.7% year on year)
Commuter passissuing machines

633

2021

949

2022

1,421

2023

Net Sales

1,256 million yen (Up 59.0% year on year)
1,067

2021

790

2022

1,256

2023

Segment Income

413 million yen (Up 189.6% year on year)
267

2021
2022
2023

IC card issuingmachines

Smart in-train ticket
issuing machines

In-train ticket issuingmachines

Online commuter passservices

In-train ticket issuing system using cashless payment terminals
Previously, our solutions for in-train ticket issuing systems focused on developing dedicated terminals, but now we have developed anin-train ticket issuing system in which an in-train ticket issuing app is used on portable general-purpose cashless payment terminals witha built-in printer function, as well as a sales data aggregation system that uses a
cloud server.
Cloud serverThis use of general-purpose cashless payment terminals lowers costs, making iteasier for customers to adopt the system, and thus helps to create a cashless society.
We will develop business apps tailored to customer needs so that the terminals canalso be used for purposes other than in-train ticket issuing.
In-train ticket issuing machines(payment terminal)
Operations center

142
413

IoT solutions
Main products
Railway station operating equipment systems
Commuter pass vending machines / composite ticket vending machines / in-train
ticket issuing machines / compact vending machines / judgement engines, etc.
IoT solutions(Cloud-based remote monitoring and control systems)

We offer diverse services with systems that utilize IoT terminals,
mobile networks, and cloud servers. In doing so, we provide
solutions that enable customers to monitor and control mobile
entities and remote equipment so that they can improve
operational efficiency, optimize maintenance, and carry out
preventive and condition-based maintenance.

Customer monitoring
centerCloud
serverCustomer
mobile phones

Mobile network

Cloud
serverProduction equipment

17 Toyo Denki Seizo Report 2023

Mobile entities

Agricultural facilities

Toyo Denki Seizo Report 2023

18

Business Report

TOPICS

Development Center
Through collaboration with business units, the Development Center proactively explores and proposes new business areas
and develops new products by employing technologies that contribute to the development of power electronics products,
smart grid-supporting equipment, and autonomous driving systems for vehicles, and by utilizing monitoring systems thatuse sensor technology and information equipment that incorporate communication technology for greater sophistication.

Achievements in development of new businesses and products

VOICE
A first step toward realizing the 2030
energy mix

Remote monitoring system for electrical equipment
for railway vehicles

Located in Fujiyoshida City, Yamanashi Prefecture, theFujino Shizuku Power Plant is a small hydroelectric power generation plant that makes effective use of unusedenergy in the form of water flowing through local agricultural irrigation channels. All the electricity generated issold to an electric power company.
Also, a feature of this Toyo Denki product that contributes to local disaster resilience is that electric power canbe supplied to charge smartphones, EVs, and so on
during power outages.
We will continue to help promote the adoption of renewable energy and thus support the realization of the2030 energy mix.

We supplied Aichi Rapid Transit Co., Ltd. with a system for real-time remotemonitoring of
V V V F i n v e r te requipment.

Smartphone-based in-train ticket issuing machines
We developed an in-train ticket issuing app for Shikoku Railway
Company that operates on iPhones. Going forward, we will create a lineup of in-train ticket issuing machine
products that utilize general-purpose smartphones andtablets, such as Android devices and iPads.

Yusuke Nakanishi
Business Development Division
Development Center

Main actions
On-demand motors (BTO Motors)
Capitalizing on our fundamental technologies in power electronics andmanufacturing, we supply motors and inverters optimally tailored to thecustomer’s needs (on-demand products).
We have provided flat large-torque motors to replace engines inelectrification efforts and compact high-speed motors, but we will now
develop on-demand products such as built-in electricals for motors (akey technology going forward) and motors with built-in inverters.
Example of product deployment

Controller-integrated motor (motor + controller)
InverterBuck-boost circuit

Driver
Motor
Reduction gear

Motor

Converter

Gear-integrated motor(machine + motor)

Motor with built-in inverter(motor + inverter)

Gear and controller integrated motor (e Axel) (machine + motor + controller)

Cloud-linked cashless payment terminal solutions with general-purpose terminals
We will collaborate with the ICT Solution Business Unit to develop diverse cashless payment systems that utilize devices such as generalpurpose portable terminals and are customized for the customer’s needs. We can also create business apps designed for use on thesesystems.
Operations center

Intellectual Property
Our intellectual property is placed as a key corporate resource. Our intellectual property department is responsible
for the management of intellectual property and the development divisions in each business unit and the Development Center actively apply for patents and utility models.

Patent applications granted

Patent applications:
Granted cases:(Applications)

Japan
Japan

Overseas
Overseas

50
40

5

42
36

30
20
10

37

9

2

31

36

27

29 34

2019/52020/50

20

15 16 0 17
3

21

3

3

25

Cloud server

29

15 16

14 18

22 22

2021/52022/52023/5

7

Payment terminals

19 Toyo Denki Seizo Report 2023

Toyo Denki Seizo Report 2023

20

Sustainability

Establishment of Sustainability Policy

Sustainability Roadmap

Considering efforts for the Sustainable Development Goals (SDGs) as anLong-Term Vision

important management issue, the Group has formulated the Sustainability

Realize social and industrial infrastructure that is
considerate of the global environment, with a focus on
exceptional motor drive technologies

Policy as a guideline for specific actions.

Environment

Basic policy
The Toyo Denki Group states its commitment to contributing to society in the business principles and initiatives to protect the global
environment as its priority task in the environmental philosophy. The Group has formulated the Sustainability Policy as a guideline forits efforts to realize these principles and contribute to the sustainable development of society.

FYE May 2050 Targets
Scope1&2
CO2 emissions

Corporate principles
Business Principles
The Toyo Denki Group will practice thefollowing business principles to ensure
the growth of its business, earn theconfidence and understanding ofshareholders and stakeholders, andfoster the development of its employees:
Prioritize ethics and contribute to theprosperity of customers and society as a whole
Encourage creativity and an enterprisingspirit to meet the challenges of the future
Build trust by focusing on quality first<Action Guidelines>
1. We will strive to minimize environmental burden through a reduction of energy consumption andother measures across the entire product lifecycle, namely planning, development, design,
procurement, production, sales, distribution, use and disposal.
2. We will protect the environment by responding to climate change, reducing waste, recycling
resources, reducing hazardous chemicals, and taking other actions.
3. We will comply with laws and regulations concerning environmental protection, and withenvironmental protection-related requests to which the Group consents.
4. We will constantly strive to improve our environmental management system through a continuous PDCA cycle.
5. We will provide appropriate training to all Group employees to improve their awareness of the needto protect the environmental protection.

Our Heart and Technology for the FutureThreeperspectives

Initiative in Products and Services

Initiative in Production Activities

Initiative in Valuing People and Communities

PolicyWe will use the Group’s exceptional
technologies to provide products andservices that contribute to the realization ofa sustainable society.

We will strive to minimize environmental
burden in production activities and continue
to protect regional environments.

We will value our employees and the local
communities and carry our aspirations into
the future.

Supply of decarbonized energy, such as
small hydroelectric power generation
Popularization of energy-efficienttransportation, such as railroads andelectric vehicles
Efficiency improvement of electricalequipment and the spread of power
storage systems
Improvement of safety through a shift tobarrier-free transportation systems
etc.

Reduction of energy consumption in
production
Study of solar power generation anddecarbonization of energy currently used
Reduction of energy consumption duringtransportation of materials and products
Recycling activities at production sites
and officesetc.

Support for education through university
endowment courses and offering factory
tours for school students
Promotion of diversity and inclusion
Promotion of health and productivity
management and well-being
Protection of regional environments andcontributions to nature conservation, etc.

30%reduction

10%reduction

Established the Sustainability
Committee and theSustainability Promotion Office
Formulation of Sustainability
Policy2022

2023

Track emission volumes and promote reduction
Scope3CO2 emissions

2026
FYE May 2026 Targets
Percentage of employeeswith disabilities

Certified as 2023 CertifiedHealth & Productivity
Management Organization(Large Enterprise Category)

2050
2030
FYE May 2030 Targets

2.9% or more

Ratio of female employees(Administration divisions /Assistant manager level)

25% or more

Ratio of female employees(Administration divisions /Manager level)

8% or more

Ratio of male employees
taking childcare leave

50% or more
21 Toyo Denki Seizo Report 2023

(Compared with FYE May 2018)(Compared with FYE May 2018)(Compared with FYE May 2018)〜

Sustainability Policy

CO2 emissions

Scope1&2
CO2 emissions

Expressed support for TCFD
recommendations%
reduction

Scope1&2

FYE May 2026 Target

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

Company Slogan of the Toyo Denki GroupSpecificactions

100

FYE May 2030 Targets

Percentage of employeeswith disabilities

3.0% or more

Ratio of female employees(Administration divisions /Assistant manager level)

30% or more

Ratio of female employees(Administration divisions /Manager level)

15% or more

Ratio of male employees
taking childcare leave

70% or more

Human
CapitalToyo Denki Seizo Report 2023

22

Sustainability

Disclosure based on TCFD recommendations
Recognizing that responding to climate change is an important management issue, we expressed our support for the TCFD
(Task Force on Climate-Related Financial Disclosures) recommendations in June 2023. We will strive to further implement
climate change initiatives and appropriately disclose information as part of our commitment to helping realize a sustainable
society.

GovernanceIn order to promote sustainability management across the Group,
we established a Sustainability Committee under the Board of Directors and carry out company-wide initiatives based on our Sustainability Policy. The committee, which generally meets once
every quarter, is chaired by the President, and its members comprise mainly Operating Officers. We recognize climate change asa very important challenge and have set numerical targets for the
reduction of greenhouse gases. Progress towards these targets ismonitored by the committee, and the content of committee

discussions is reported to the Board of Directors for incorporationin the Group’s management strategy.

Examples of matters deliberated/reported at Board of
Directors meetings
Revision of our environmental philosophy
Expression of support for the TCFD recommendations andrelated disclosures
Formulation of a sustainability roadmap

Strategies

Risk management

We have analyzed the future impact of climate change on ourbusiness activities under the 1.5°C/below 2°C and 4°C scenarios, identifying the associated risks and opportunities and calculating the degree of impact in each case. The focus time horizon
was long-term (to 2050) and analysis was also done for the medium-term (to 2030) as a transitional point. The degree of financial impact on business activities was defined according to threelevels: large (L), medium (M), and small (S).

A working group made up of working-level employees engages in
discussions for advancing a company-wide approach to sustainability challenges. Meanwhile, the Sustainability Committee identifies climate change risks, discusses countermeasures, andmonitors progress in implementing those actions. It also tracks
the progress of the medium- and long-term sustainability roadmaps formulated by each division.

Scenarios

Indices and targets

1.5°C/
below 2°C
scenario

Worldview: A lower-carbon transition will take place across society
and contain the temperature rise to a certain extent. Demand forenergy-saving/eco-friendly products will grow. Legal, market, reputational, and other transition risks will increase.
Reference scenarios: SSP1-1.9, SSP1-2.6 (IPCC AR6) / NZE2050(IEA)

We have set the following targets for reducing CO2 emissions associated with our business activities to help curb global warming.

4°C
scenario

Worldview: With priority placed on economic growth, the temperature rise will not be contained and the impacts of climate change
will worsen. A lower-carbon transition will not be realized, and physical risks such as extreme weather events will increase.
Reference scenarios: SSP5-8.5 (IPCC AR6)

Scope 1 & 2CO2 emissions(Compared withFYE May 2018)

FYE May 2026 targets FYE May 2030 targets FYE May 2050 targets

10% reduction

30% reduction

100% reduction

Anticipated risks and opportunities
Transition Risks

Physical Risks

Transition Risks

Anticipated Risks

Policy &regulation

Increase in procurement/shipping costs with adoption of carbon tax and more
stringent regulations; increase in costs from equipment renewal and technological development

Technology

Increase in R&D costs of energy-saving products
Loss of sales opportunities due to stalled development
Decrease in demand for existing technologies and products

Opportunities

Impact1.5˚C / below 2˚C
4˚C
2030 2050 2030 2050
M

M

L

L

S

S

M

EnergySourceIncrease in demand for our products/services with shift
to EVs and growth of demand for renewable energy
and power storage technologies

Prevent failures through condition-based maintenance and increase value added through manpower-saving and labor-saving approaches
Develop products and systems reflecting the shift
to EVs and consider creating alliances with othercompanies

Products /Services

Increase in demand for electrical equipment for railway
vehicles driven by greater demand for highly environmentally advantageous railway service
Increase in demand for high-efficiency motors and inverters, distributed power supply, and other energy-saving products/systems
Increase in demand for new testing systems that support the shift to EVs

Markets

Potential for opening up new markets by uncovering
demand for power storage systems, small hydroelectric
power generation, wave power generation, etc.
Increase in demand for ICT remote monitoring and automatic control systems to avert climate change-related
food shortages and impacts on agricultural and livestock industries
Popularization of EV-related products

Resilience

Increase in demand for solutions that strengthen resilience and BCP in response to increased severity ofnatural disasters

L

L

M

M

Contribute to BCP preparation by supplying emergency generators for businesses and government offices
Promote prediction and early detection of natural disasters using remotemonitoring systems

Reputation

Increased trading, improvement of stock price, and securing of human resources made possible by stronger
reputation for environmental consciousness

L

L

M

M

Enhance disclosure through dialogue with shareholders, investors, suppliers,
communities, and other stakeholders

Reputation

L

L

M

M

Acute

Suspension of operation, damage to production equipment, and stoppage ofbusiness site functions due to typhoons, flooding, etc.
Difficulty in procuring parts and materials due to interruption of supply chain

S

M

M

L

Chronic

Increase in factory energy costs, decline in employee productivity, and increase
in incidence of heat stroke due to the temperature rise
Increase in costs due to tidal flooding countermeasures taken in response to rising sea levelOccurrence of malfunctions and failures in products and equipment due to thetemperature rise

23 Toyo Denki Seizo Report 2023

S

M

M

Actions

Enhance design/development systems, including
production methods, and increase sophistication of
our environmental technologies
Identify needs for existing technologies/products
through customer engagement

Decline in reputation among stakeholders due to delays in responding to climatechangeExclusion from supply chains; rise in financing costs; difficulty in securing humanresources

M

Impact1.5˚C / below 2˚C
4˚C
2030 2050 2030 2050

S

L

L

Anticipated Opportunities

Avoid carbon tax and lower production costs by reducing GHG emissions through renewable energy
use and switching to energy-efficient equipment
Consider adopting ICP

Decrease in railway product sales due to decline in railway ridership from population shrinkage and due to drop in relative environmental advantage of railtransport stemming from improvements in environmental performance of automobiles
Stagnation of testing machines business due to delays in responding to the shift
to EVsDecrease in equipment demand from manufacturers of printing machines, paper,and chemicals due to shift to paperless and plastic-free approaches

MarketActions

M

L

Enhance disclosure through dialogue with shareholders, investors, suppliers, communities, andother stakeholders

Reinforce disaster countermeasures of production
bases by strengthening business continuity planning (BCP)
Increase supply chain resilience by establishingmultiple channels, using local suppliers, and taking
other actions, and transfer risk by purchasing insurance

Resource
Efficiency

Increase in maintenance opportunities driven by longer
use and recycling of products
Decrease in costs through streamlining of product processes, optimized use of materials, and streamlining of shipping

L

L

M

M

Construct advanced production/processing systems that capitalize on
high-efficiency motors and invertors
Improve recyclability through environmentally conscious design

L

L

M

M

Promote battery storage of regenerative power, and build new storage systems, such as a superconducting flywheel railway power storage system
Develop and supply testing equipment that support the shift to EVs

M

Improve environmental friendliness of electrical equipment for railway vehicles by increasing efficiency and reducing size/weight
Make improvements to motors and inverters that enhance energy efficiency
and maintainability of production equipment
Develop testing systems that support the shift to EVs
Increase the sophistication of status monitoring, alarm notification, and remote control of generators using IoT remote monitoring systems

M

Popularize power storage systems, small hydroelectric power generation systems, and biomass generators
Participate in the demonstration of wave power generation and consider its
commercialization
Increase the sophistication of status monitoring, alarm notification, and remote control of generators using IoT remote monitoring systems

L

L

L

L

M

M

Toyo Denki Seizo Report 2023

24

Sustainability

Initiative in Products and Services
We will provide products and services that help build a sustainable society using the exceptional technologies of the Group.
Business Category

Transportation
Business
Segment

Business Description

Electrical equipment
for railway vehicles

Contribute to the world’s railway infrastructure throughthe supply of high-quality electrical equipment for
railway vehicles

Railway power storage
systems

Contribute to energy-saving and stable railway
transportation with the effective use of regenerative
power

Automobile testingmachines

Support the development of next-generation vehicles
with testing systems that use industry-leading
high-performance motors and inverters

Production andprocessing equipment
drive systems

Contribute to manufacturing around the world by
providing customers with optimal control systems using
a wealth of technologies and products

Industry
Business
Segment

ICT Solution
Business
Segment

25 Toyo Denki Seizo Report 2023

Value We Offer

Power generation andpower supply systems

Supply power generation systems for continuous/
emergency use and generators using natural energy tosupport public infrastructure

Car-mounted electricalequipment

Contribute to the development of electric vehicles (EVs)and hybrid electric vehicles (HEVs) with power electronics technologies

Railway station
operating equipment
systems

Achieve greater convenience for railway patrons andlabor-saving for railway operators by combining
advanced ICT and mechatronics

IoT solutions

Realize monitoring and control of mobile entities andremote facilities with a variety of simple, inexpensive
IoT/M2M solutions

Focus SDGs

Examples[Ongoing actions]
Adoption of propulsion systems that are smaller, lighter, and highly energy efficient (drive systems such as VVVF inverters and low-noise motors)
Establishment of condition-based maintenance (CBM) with real-time monitoring of product operation status and analysis of accumulated data to prevent product failureand save manpower and labor[Future actions]
Promote the development of autonomous driving technology for the realization of driverless driving
Establish a new maintenance model using digital twin technology
Improve recyclability and eliminate specified hazardous substances with promotion of environmentally conscious design[Ongoing actions]
Battery storage of regenerative power generated by train braking and supply of power to trains in emergencies[Future actions]
Further reduction of energy consumption through adoption of systems combining solar power generation, hydrogen fuel use, etc.
Build new storage systems, such as a superconducting flywheel railway power storage system[Ongoing actions]
Popularization of next-generation automobile testing systems using in-wheel-well dynamo, which saves space and is quiet, suitable for various driving test evaluations
Development and supply of testing equipment in response to the shift to automobile electrification, such as ultra-high-speed dynamos and high-capacity battery simulators[Future actions]
Adapt in-wheel-well dynamo to advanced driver-assistance systems (ADAS) and popularize autonomous driving systems[Ongoing actions]
Construction of advanced systems that capitalize on high-efficiency motors and invertors
Improvement of energy-saving performance and maintainability of production facilities with economical and eco-friendly Eco-Drive Motor (ED motor)[Future actions]
Design products with better recyclability and develop rare-earths-free motors and control systems for them
Expand RoHS compliant products and promote responses to REACH regulations[Ongoing actions]
Establishment of power generation infrastructure by providing continuous-use generators to developing countries
Popularization of small hydroelectric power generation systems and biomass generators
Contribution to BCP preparation by supplying emergency generators for government offices, financial institutions, etc.
[Future actions]
Realize small and highly efficient pumps using Eco-Drive Motor (ED motor)
Develop emergency generators using hydrogen and biofuels
Popularize distributed power supply systems (mechanism in which power is supplied by small-scale generators distributed near consumption areas) for local production
and local consumption of energy
Participate in the demonstration of wave power generation and consider its commercialization[Ongoing actions]
Supply of on-board electrical equipment in response to the shift to electrification, such as for construction machinery[Future actions]
Promote recycling of used invertors, motors, and batteries of EVs[Ongoing actions]Improvement of rail service convenience through popularization of railway station operating equipment systems (commuter pass issuing machines and in-train ticket issuing machines)[Future actions]
Provide low-price ticketless systems to areas where IC has not yet been introduced, using QR codes, touch payment credit cards, and facial recognition technology
Provide QR code payment systems shared by private railway companies and online booking services for commuter passes[Ongoing and future actions]
Provide train operation information systems and bus location systems to improve the convenience of transportation systems
Status monitoring, alarm notification, and remote control of generators using IoT remote monitoring systems
Prediction and early detection of natural disasters (heavy rains, flooding and inundation, landslides) using IoT remote monitoring systems
Conduct remote monitoring and control of agricultural greenhouses, poultry farms, pig farms, and onshore aquaculture facilities to support stable agricultural production
Conduct remote monitoring and control of frozen food trucks and refrigerated containers to support safe and stable distribution of foods
Toyo Denki Seizo Report 2023

26

Sustainability

Initiative in Production Activities

1,000

We will strive to minimize environmental burden in production activities and continue to protect regional environments.

400

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.
Decarbonized society
Implementation of measuresagainst global warming

Energy conservation throughthe Company’s technologies andproducts
Energy conservation in
production activities

Recycling-based society
Promotion of 3Rs(reduce, reuse, recycle)

Nature-symbiotic society
Conservation of biodiversity

Use of sustainable energy
Improvement of logistics
efficiency
Proper treatment of wastes
Reduction of amount of final
disposal of wastes
Proper management of chemical
substances
Cleanup around offices

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 Ryuo Plant.
Years of ISO 14001 certification

Yokohama Plant
2004

Shiga Ryuo Plant*
2001

Extended to all offices
2010*The Shiga Ryuo Plant was the Shiga Factory (Moriyama) when it obtained the certification.

Initiatives to Prevent Global Warming
Initiatives to reduce greenhouse gas (CO2) emissions
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.

Yokohama Plant

200

As described in the sustainability roadmap (page 20), the Company has set a target of reducing CO2 emissions at the Company’s
production bases, the Yokohama Plant and the Shiga Ryuo Plant,by 10% in fiscal 2026. CO2 emissions per unit of production output in fiscal 2022 increased by 3.3% at the Yokohama Plant anddramatically decreased by 17.8% at the Shiga Ryuo Plant as aresult of emissions control efforts, against the target of 1% reduction year on year.The Company will continue to make efforts to
reduce CO2 emissions per unit of production output by 1% year
on year in the next fiscal year.

Yokohama Plant initiatives(1) Installation of a solar power generation system
We installed a solar power generation system (500 kW) on theroof of the Yokohama Plant in 2012. In recent years, the system
has generated 600,000 to 650,000 kWh of electricity annually, allof which is consumed internally. This contributes to reducing
greenhouse gas emissions (equivalent to approximately 300 tonsof CO2 per year) and curbing global warming.
(2) Modal shift in logistics
The plant is expanding its shift of some outgoing customer shipments from truck transport to railway container transport, whichplaces a smaller burden on the environment.

Total amount of air emissions(kg)

10,000

6,990
5,750
6,490
7,200
6,700
6,150 6,600

Total amount of shift

8,000 6,800
6,000

4,520
5,300

4,000

3,440
4,400

2,000
0

2017

2018

2019

2020

2021

2022

2017

(year*)

2018

2019

2020

2021

2022

(year*)

Total energy input (gas)
Yokohama Plant

500

400

350.4

443.4
74.3

300
200

369.1

100

Shiga Ryuo Plant (formerly Shiga Factory)

408.2
80.2

424.7

419.2

86.1

392.7

89.9

80.6

328.0

338.6

329.3

312.1

2017

2018

2019

2020

2021

2022

Initiatives for Reducing Disposed Waste as Well as Recycling
Main actions

0(year*)The Company has been thoroughly implementing waste processing rules, sorting metal waste, and recycling paper resources. As
a result, its landfill waste volume rate was 1.1% in fiscal 2022,
reduced to the previous level.

Total CO2 emissions
(t)

6,000

Yokohama Plant

Shiga Ryuo Plant (formerly Shiga Factory)

Head Office ∙ Regional Offices

4,000

4,240
143
183

5,037
132 4,274
4,251
933
3,767
121
105 3,836
105
774
736
94
829
670

2,000

3,914

3,972

2017

2018

3,379

3,410

2019

2020

2,902

3,003

2021

2022

Output of general and valuable waste
General waste output(t)Yokohama Plant

Shiga Ryuo Plant

Valuable waste output Yokohama Plant Shiga Ryuo Plant
450.7
48.8 416.5
368.3
365.5
55.1
325.5
34.3
300
39.2 291.3
37.1
286.3
361.4
401.9
254.2
331.2
147.6
150
138.5
129.6
131.6
29.8
101.5
19.8
21.8
21.7 95.4
16.4
117.8
116.7
111.8
107.9
79.0

450

0
(year*)

0

2017

Initiatives for Control over Chemical Substances
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.

Shiga Ryuo Plant initiatives(1) Revision of compressor operation
The duration of compressor operation was revised based on theconditions of use.
(2) Revision of air conditioning system operation
1. An automatic air conditioning control system was installed andthe conditions of use were visualized. The air conditioning system’s operating program was revised to reduce the duration of
automatic operation.
2. Thermal barrier film was applied to windows in some areas
significantly heated by sunlight.

Head Office ∙ Regional Offices0(Unit: 1,000 m3)

Targeted reduction of CO2 emissions and progress status

Shiga Ryuo Plant (formerly Shiga Factory)

864.3
772.2
25.0 767.6
705.2
20.6 733.721.2 644.0
23.5
24.9 176.6
171.4
178.5
18.0
179.3
36.0
158.0
662.7
580.2
644.3
565.6
533.2
468.0

800
600

Aiming for Realization of a Sustainable Society

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

Total energy input (electricity)(Unit: 10,000 kWh)

2018

2019

2020

2021

2022

Volume of landfill waste
Yokohama Plant

(t)

15

4.1
5

5.0

0
2017

7.2
3.2

6.3
2018

Production Management Division
Transportation Systems Works
Transportation Business Unit

Shiga Ryuo Plant

12.4
1.1

10.4

10

11.3

6.8

4.0
2019

7.1
0.3

2020

2021

5.3
1.6
3.7
2022

Striving to be more environmentally conscious and address the 2024 logistics issue

Shinsuke Suzuki(year*)(year*)VOICE

We place top priority on quality for the transportation products we supply to railway operating companies.
Traditionally we relied mostly on trucks to make customer deliveries, but we have been shifting more
toward railway container transport as part of our efforts to be more environmentally conscious (reduction of CO2 emissions) and to address issues
posed by the cap that will be placed on truck driver overtime hours in
2024. This approach is being applied particularly to shipments to the Kansai, Chugoku, and Kyushu regions.
Since the transportation efficiency and CO2 emissions-reducing effect ofrail freight shipping increase with distance, we are proactively utilizing thisenvironmentally friendly mode of transport.

*The fiscal year is from April to March of the following year *Figures for the Shiga Ryuo Plant include those of TD Drive Co., Ltd. from fiscal 2018.
*Prior to fiscal 2017, total energy input (gas) data is available only for the Yokohama Plant due to zero input of the Shiga Plant.
*Prior to fiscal 2017, data on output of general and valuable waste and volume of landfill waste is presented only for the Yokohama Plant.

27 Toyo Denki Seizo Report 2023

Toyo Denki Seizo Report 2023

28

Sustainability

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, and they
form the foundation supporting the sustainable development of asociety 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 quality policy, which is deployed across the Group as we strive to maintain and improve ourhuman resources education, compliance with rules, and our facilities.
Quality Policy
1. T he Toyo Denki Group’s commitment to quality
Based on our commitment to make quality our top priority, we willcontribute to society by reliably providing safe and high-quality products and services that satisfy our customers.
2. E fforts to improve quality
We will make efforts to further improve quality, with the involvementof all Group employees and with the cooperation of partner companies.
3. C ompliance with laws and regulations
We will comply with quality-related laws and regulations, and with requirements to which the Group consents.
4. C ontinuous improvement
We will set quality targets and continuously strive to improve ourquality management system.

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, alongwith specific 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
the status of quality control and results in each unit. The report isdelivered to top management at the monthly Operating 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 same time 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.

29 Toyo Denki Seizo Report 2023

Initiative in Valuing People and Communities

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

We will value our employees and the local communities and carry our aspirations into the future.
With Our Employees

Year ISO 9001 certification obtained

Yokohama Plant
1997

Shiga Ryuo Plant*
2000

Extended to all offices
2005*The Shiga Ryuo Plant was the Shiga Factory (Moriyama) when it obtained the certification.

Acquisition of International Standards
High level of safety is essential for rail vehicles. UNIFE, the Association of European Rail Industry, established the International Railway Industry Standard (IRIS) in 2007 to ensure the quality of rail
vehicles. In 2013, we became the first company in Japan to obtain an IRIS certification (current international standard: ISO
22163) for auxiliary power supply (SIV).
In 2014, we were also accredited to the China Railway Certification Center’s (CRCC) certification for driving gear units. CRCC, astate-owned enterprise set up in April 2003 after obtaining approval of the Certification and Accreditation Administration of thePeople’s Republic of China, is an organization that mainly manages the quality of railway products. It is necessary to obtain thiscertification to sell high-speed rail products in China. We will continue to acquire international standards and further expand ourbusiness globally.

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 Seizo
Cooperation Association” to which our leading suppliers belong.
Policies and Guidelines for Procurement
The Toyo Denki Group will, in its procurement of raw materials, services,
etc. for the products that it supplies to customers, engage in practices
mindful of society’s expectations concerning human rights and the environment, and in doing so will advance sustainability initiatives and will
work together with suppliers to help realize a sustainable society.
*For details on the Policies and Guidelines for Procurement, please see our corporate website.
https://www.toyodenki.co.jp/en/procurement/

local special-needs schools and support organizations. We willcontinue pursuing efforts to be a company where everyone canwork vibrantly.

Ensuring diversity
Female empowerment
We have 792 employees, and women make up 7.2% of our permanent employees. The ratio of women in administrative professional positions is 1.5%, and raising female representation acrossthe board is a challenge that we need to address.
We have started tackling this challenge by setting targets forincreasing the ratio of female employees in administration divisions for fiscal 2026 and fiscal 2030, and are working to meetthose targets.
As part of our new graduate recruitment activities, we hostcompany briefings for women that provide the opportunity forthem to speak with female employees and gain a better idea ofwhat it is like to work for Toyo Denki. We further strive to recruit
diverse talent through mid-career hiring and a program that enables fixed-term contract employees to switch to permanent employment.
We will continue engaging in these efforts while also providing
career development training targeted at female employees.

Ratio of female employees
Administration divisions
Assistant manager level(%)

Manager level

40
30
20

15

10
0

30

25

22.7

8

3.8
FYE May 2023

FYE May 2026 FYE May 2030
targets
targets*As noted above, women make up 7.2% of our permanent employees, and work needs to be done toraise female representation across the board. We are initially targeting administration divisions in ourefforts to increase the ratio of female managers.

Employment of the disabled
Aiming to be a company where both the disabled and nondisabledwork together lively, the Company makes improvements to theworkplace environment and carries out workplace training. We
have promoted the hiring of people with disability by offering
hands-on workplace training opportunities in collaboration with

Percentage of employees with disabilities
Percentage of employees with disabilities
(%)

3.0

2.67

2.84

3.08*

2.9

3.0

2.0
1.0
0
June 2021 June 2022 June 2023

FYE May 2026 FYE May 2030
targets
targets*The percentage of employees with disabilities rose above the target for fiscal 2030 in conjunction
with a year-on-year drop in the number of all employees. We will continue promoting the hiring ofpeople with disabilities.

Improvement of working environment
Flexible workstyles
We are expanding our systems supporting flexible workstyles in order to help
employees achieve a good work-life balance. In 2014, we were certified as a“company that supports child-rearing”
and received the “Kurumin” certification
logo from the Tokyo Labor Bureau. Since then, we have also implemented various support systems, including for: rehiring former
employees who had to leave their jobs due to reasons such as
childbirth, child-rearing, family care, or their spouse’s reassignment; limiting the working location of employees caring for children or other family members to a defined region; offering diverse
options for reduced working hours; and providing annual leave onan hourly basis.
Our efforts to encourage more male employees to take childcare leave include providing information to those who are expecting a child. Specifically, we created and distribute a guidebook onchildbirth and childcare, and a collection of male employees’ personal stories about their experiences in taking childcare leave.
Going forward, we will continue developing an environment thatenables employees to work with peace of mind as they balance

Toyo Denki Seizo Report 2023

30

Sustainability

their job and private life, including by further enhancing childcare
support programs, expanding the range of flextime options, andestablishing a remote work system.

Health and productivity management promotion framework

Toyo Denki Health
Insurance Association

Ratio of male employees taking childcare leave
Toyo Denki
Labor Union

Ratio of male employees taking childcare leave
(%)

80

70

60
40

50
33.3

0
FYE May 2026 FYE May 2030
targettarget*The above ratios were calculated for childcare leave, etc. as prescribed in Article 71-4, Item 1 of theOrdinance for Enforcement of the Act on Childcare Leave, Caregiver Leave, and Other Measures for
the Welfare of Workers Caring for Children or Other Family Members (Ordinance of the Ministry of Labor No. 25 of 1991), pursuant to the provisions of the Act on Childcare Leave, Caregiver Leave, andOther Measures for the Welfare of Workers Caring for Children or Other Family Members (Act No. 76
of 1991).
*The ratio of female employees taking childcare leave is 100%, and we will strive to maintain that levelby further working to support work-life balance of women.

Direct dialogue between the President and employees
Roundtable meetings have been held regularly since December
2022 to share values between the President and employees andto practice management that listens to employees’ opinions. The
President has visited each of our domestic bases and held themeetings 10 times so far, with a total of 46 employees participating. We will continue toplace importance on twoway communication with
employees.

Health management
Promotion of “health and productivity management”
We promote health and productivity management with the health insurance association and labor union, with the aim of being
a company where employees can play active roles in good physical and mental
health. With the “Health and Productivity Management Declaration” in place, our efforts focus on the following six priority items.

Health and Productivity Management Declaration
The Toyo Denki Group expresses in its business principles its commitment to “ensure the growth of its business, earn the confidence andunderstanding of shareholders and stakeholders, and foster the development of its employees.” Recognizing that the realization of the commitment involves each employee to be physically and mentally healthy
and able to play an active role with enthusiasm, the Company will support its employees to achieve good health.

31 Toyo Denki Seizo Report 2023

Officers in charge
Human Resources Division
Yokohama Plant
Administration Division

Shiga Ryuo Plant
Administration Division

Occupational physician

Occupational physician

Occupational health staff

Occupational health staff

Promotion framework members meet twice a year

20
FYE May 2023

Group company
administration divisions

Toyo Denki Seizo K.K.

In addition, we provide line care training for managers so thatthey recognize the importance of communication and promptly
coordinate with occupational health staff at each office.
Moreover, we have set up in-house and external mental healthconsultation services to further support mental health care for our
employees.
Health management of employees at overseas posts
In addition to properly conducting health checkups before andafter overseas postings, we manage employee health during
those assignments by utilizing external healthcare services toprovide access to medical care, including for emergencies.

Disease prevention, prevention of illness aggravation
We will maintain a 100% participation rate for regular healthcheckups, improve the take-up rate for specific health guidance
aimed at preventing lifestyle diseases, and support the attendanceof follow-up examinations.
Work-life balance
We are expanding our systems supporting flexible workstyles toenable employees to balance their jobs with family life. Specificexamples of our efforts in this regard are given under “Flexible
workstyles” on the preceding page.
Promotion of health and safety activities and realizationof a comfortable working environment
To secure a safe working environment and achieve zero occupational accidents, we have in place the “Company-Wide Safety andHygiene Management Policy,” and the Safety and Hygiene Committee at each office addresses any issues at workplace. Information on the committees’ actions is shared at the Company-Wide
Safety and Hygiene Committee, which convenes quarterly, in order to raise the level of health and safety activities at each office.

We have established minimum rest periods between the end ofeach day’s work and the start of the next day’s work to ensurethat employees can get sufficient rest and sleep. In addition, we
support employees’ voluntary health maintenance and improvement efforts, internal club activities, and social events at each
workplace. We also hold health events together with the healthinsurance association and labor union to improve the health of
employees and promote communication.
Prevention of mental health problems and support for
returning to work
We annually carry out employee stress checks and analyze
stress-related conditions of each organization to prevent and detect mental health problems at an early stage.

Our education and training system is designed to closely support
the growth of each employee. We provide level-specific trainingthat develops the skills needed for each year, individual training
according to job types and roles, a support program aimed at
helping employees to obtain academic degrees and official qualifications, and division education conducted by each division.
Furthermore, new employees in technical positions receive lectures and practical training at the Technical Training Center for
one year to equip them with basic and specialized technical skills
before their assignment to a workplace.

Skill transfer

Human resources development
Human resources development policy
Guided by the following policy, we strive to be a company that continuously develops the competencies of its employees so that everyone canmake the most of their talents as professionals.
(1) To develop human resources who understand and practice ourbusiness principles and code of conduct and who are of value bothas company employees and as members of society.

Employees with exceptional manufacturing skills or expertise arerecognized as “Technical My Star” and assigned to instruct andtrain younger employees. Three employees of the Company haveaccepted Contemporary Master Craftsman awards from the Minister of Health, Labour and Welfare, and two have been awarded
to the Medal with Yellow Ribbon by the Japanese government.
Moreover, a large number of employees have become certified as
special-grade skilled workers.

(2) To develop human resources who are professionals, each possessing a high degree of specialized expertise, by enhancing the knowledge, techniques, and skills they need to carry out their duties.
(3) To provide a variety of educational opportunities in order to promotepersonal development, with emphasis on a self-directed approachto study and growth.

Workforce data (at Toyo Denki Seizo K.K.)*
Item

Unit

FYE May 2019

FYE May 2020

FYE May 2021

FYE May 2022

FYE May 2023

831

841

847

830

792

Persons

762

773

766

746

708

69

68

81

84

84

%

8.3

8.1

9.6

10.1

10.6

Total

Improvement of employee health, communication
promotion and support

Education and training system

Number of employees

Men
Women

Ratio of female employees
Number of administrative
professionals

143

136

139

134

133

Persons

139

133

136

132

131

4

3

3

2

2

%

2.8

2.2

2.2

1.5

1.5

40.8

41.0

41.7

42.3

42.6

40.8

40.9

41.6

42.2

42.5

Women

40.9

41.7

42.8

43.0

43.5

Overall

15.4

15.4

16.0

16.5

16.9

15.5

15.5

16.2

16.7

17.2

14.1

14.1

13.9

14.0

14.2

Total
Men
Women

Ratio of female administrative professionals
Overall

Average age

Average years of employment

Men

Men
Women

Age

Years

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

Toyo Denki Seizo Report 2023

32

Sustainability

Governance

GovernanceContributions to Local Communities

To Convey the Mission and Appeal 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.

Participation in university endowment courses andhands-on courses
We conduct lectures leveraging the know-how fostered throughoperations and our business activities in on-site training courses
held by educational institutions including universities. This year,
we continued to participate in endowment
courses sponsored by
the Yokohama Green
Purchasing Network sothat participants candeepen their knowledge
on history of railway andthe environment throughour business activities.

Donation to Yokohama Kyodo no Mori FundOur Yokohama Plant cooperates in small woodlands conservation
activities led mainly by the city of Yokohama by donating part ofthe proceeds from its vending machines to the Yokohama Kyodo
no Mori Fund.

Conducting cleanup activities
As part of our “initiativein valuing people andcommunities,” employees
at the Yokohama Plant
and the Shiga Ryuo Plant
conduct community
cleanup activities.
The Shiga Ryuo Plant
also expressed its endorsement of Shiga Prefecture’s MotherLake Goals (MLGs) and carries out rivercleanup operations near Lake Biwa in cooperation with local communities.

Certification under the Shiga Businesses Supporting
Facilities for People with Disabilities program
The Shiga Ryuo Plant’s support for the employment of people withdisabilities includes outsourcing site landscaping and other work
to an agency that employs disabled people. This and other contributions were recognized in 2023 with the plant’s certification under the Shiga Businesses Supporting Facilities for People with
Disabilities program.

Yokohama Plant internships for people with disabilities
The Yokohama Plant provides internships for students of local
special-needs schools as another initiative for promoting the employment of disabled people.

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

Our basic policy on corporate governanceAt its regular monthly meetings as well as extraordinary meetings
held when appropriate, the Board of Directors, which is composedof seven Directors including three Outside Directors, discusses
and decides on important management matters such as reports
on Operating Officers’ business execution and matters to be decided solely at the discretion of the Board of Directors, while supervising the execution of duties by Directors and Operating
Officers.

Overview of corporate governance structure andreasons for its adoption

Management Strategy Meeting and Operating Officer
Report Meeting, etc.

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. To strengthen corporate governance, thesupervision and execution functions of the Board of Directors are
separated, through the adoption of a structure where the Board of
Directors is mainly in charge of governance, and Operating Officers are primarily in charge of business execution.
The Company strives to ensure that both the supervision function of the Board of Directors and the audit function of (the Boardof) Statutory Auditors work effectively and believes that the current system is sufficiently running.

The Company has meeting bodies including the Management
Strategy Meeting and Operating Officer Report Meeting. Throughthese bodies, specific matters related to their execution of duties
and critical management matters including those subject to thedeliberation of the Board of Directors are reported to the President
by Operating Officers and the general managers of business execution departments, deliberated and discussed preliminarily. In
addition, Outside Directors and Statutory Auditors attend thesemeeting bodies, as necessary. As for the matters discussed atmeetings, 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 based on the Management Authority Rules.

Corporate governance framework
General meeting of shareholders
Appointments/dismissals
ReportingAccounting Auditors

ReportingAppointments/dismissals
Legal audit

Board of Statutory Auditors
Statutory Auditors
ReportingBusiness audit

ReportingAppointments/dismissals
Appointments/
Board of Directors
advising
ReportingDirectors

Appointments/dismissals

Nomination andCompensation
Advisory Committee

Reporting

Reporting/decisions

Appointments/
reporting/recommendations

Instruction/reporting

Audit Division

Factory tours

Internal audit

President
Management Strategy Meeting
Operating Officer Report Meeting
National and Global Group Company Meetings

Sustainability Committee
Internal Control Committee

Requests/reporting

Instruction/reporting

ReportingAppointments/dismissals

Accounting audit

As part of its activities for giving back to the community, our Shiga
Ryuo Plant donates a portion of the proceeds from charity-purpose vending machines to the Omi Victim Support Center.

33 Toyo Denki Seizo Report 2023

Directors and the Board of Directors

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.

Donations to Omi Victim Support Center

We conduct “factory tours” that enable the public to gain a deeper
understanding about the business operations of the Company.
During these tours, we inform the participants of our products aswell as our actions for environmental protection.

Specifically, each of the following bodies and meeting bodies isin place to function effectively.

Corporate GovernanceOperating Officers
Contact for whistle-blowers（internal） Whistle-blowings
Contact for legal consulting
Oversight[General Affairs Division]
Legal counsel(Contact for whistle-blowers)

Whistle-blowings

Instruction/reporting

Each business department

Instruction/
reportingInstruction/reporting

Each Group company

Toyo Denki Seizo Report 2023

34

GovernanceStatutory Auditors and the Board of Statutory Auditors
The Board of Statutory Auditors is made up of four members including three External Statutory Auditors. Statutory Auditors oversee management by attending the Board of Directors’ meetings,
etc. and expressing appropriate opinions in the process of deliberating business execution reports from Operating Officers andmatters to be decided solely at the discretion of the Board of Directors. In addition, Statutory Auditors examine the business activities and assets of the Company and Group companies inaccordance with audit policies and division of duties set by the
Board of Statutory Auditors.
Voluntary committees
a. Nomination and Compensation Advisory Committee
Under the Board of Directors, the Company has in place theNomination and Compensation Advisory Committee, whose
members include Outside Directors. Its purpose is to list candidates for Directors and Statutory Auditors and nominate Operating Officers, and to ensure transparency and objectivity
regarding decisions on compensation for Directors and Operating Officers.
b. Internal Control Committee
The Internal Control Committee is in place under the Board of
Directors to develop a system stipulated in the basic policy ofinternal control systems, check the operation status, and conduct constant reviews. In principle, the Committee meetsquarterly, and the contents of deliberation are reported to theBoard of Directors each time.
c. Sustainability Committee
The Company has a Sustainability Committee in place underthe Board of Directors for tracking the progress of specific
SDG initiatives and continually reviewing them. In principle,
the Committee meets quarterly, and the contents of its deliberations are reported to the Board of Directors each time.

Auditors both verbally and in writing, and confirm their actionplans to be taken at a fiscal year-end audit. Statutory Auditors
also receive the results of fiscal year-end audits from Accounting
Auditors in statutory documents 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.

Outside Directors and External Statutory Auditors
The Company’s Outside Executives currently include three Outside
Directors and three External Statutory Auditors as shown below.
Each Outside Executive has excellent insight in each expertiseand satisfies the independence guidelines for Outside Executives
defined by the Company.

Internal audit
Internal audits of the Company are carried out by the Audit Division based on internal audit plans decided by the Board of Directors. The Audit Division has staff with qualifications such as theCertified Information Systems Auditor (CISA). It reports its actionplans and internal audit results to the Board of Directors and theBoard of Statutory Auditors.
Statutory Auditors’ audit
Statutory Auditors work with the Audit Division and Accounting
Auditors and exchange information on audit plans and contents ofaccounting audits to perform appropriate auditing tasks. Statutory
Auditors receive the results of quarterly reviews from Accounting

35 Toyo Denki Seizo Report 2023

Directors
Remuneration for the Company’s Directors is determined within
the maximum remuneration amount resolved at the Annual General Meeting of Shareholders held in August 2006, with reference
to the policy for determining remuneration for Directors resolvedby the Board of Directors. To ensure the independence of Outside
Directors, the Company provides no bonuses to them. Decisions
on remuneration for Directors are made at the Nomination andCompensation Advisory Committee set up under the Board of

Directors, with the participation of Outside Directors, in order toenhance objectivity and transparency of the decision process for
executive remuneration.
Statutory Auditors
Remuneration for the Company’s Statutory Auditors is determinedthrough discussion among Statutory Auditors within the maximum
total remuneration, which was fixed at the Ordinary General Meeting of Shareholders held in August 2006. It takes form of fixed remuneration for each standing and part-time position. There are nobonuses for Statutory Auditors.

Executive Profiles (as of December 1, 2023)
Directors

Mr. Koji Mizumoto, Director (Outside Executive)
Mr. Koji Mizumoto provides useful advice on management in general, drawing on his wealth of corporate management experience at apredecessor firm to NIPPON STEEL CORPORATION and his knowledge of financial accounting as CFO.

Mr. Taizo Makari, Director (Outside Executive)
Mr. Taizo Makari provides useful advice on the Company’s management in general, drawing on his extensive insight and global perspectives developed throughout his career at Teijin Group.

Ms. Yukiko Machida, Director (Outside Executive)
Ms. Yukiko Machida was newly appointed as Director at the 162nd
Annual General Meeting of Shareholders on August 29, 2023. She
is a qualified lawyer and has a deep understanding of labor law
gained through extensive experience, including her role as aVice-Chairperson of the Daini Tokyo Bar Association’s Labor Issue
Committee. She leverages her experience to provide her advice andsuggestions on how to ensure the legality and appropriateness of
the Board of Directors’ decision-making and on HR and labor challenges.

Mr. Hitoshi Kobayashi, Statutory Auditor

Internal audit and Statutory Auditor’s audit

Executive Remuneration

Mr. Hitoshi Kobayashi provides useful advice, drawing on his wealthof experience and knowledge as a statutory auditor to contribute toauditing activities.

President,
Representative Director

Chairman, Director

Kenzo Terashima

Akira Watanabe

Director, Senior
Executive Officer

Director, Senior
Executive Officer

Yoshifumi Otsubo Kenji Tanimoto

Statutory Auditors

Full-time Audit andSupervisory Board
Member (Outside)

Director (Outside)

Director (Outside)

Director (Outside)

Koji Mizumoto

Taizo Makari

Yukiko Machida

Operating Officers

Full-time Audit andSupervisory Board
MemberHitoshi Kobayashi Toshiharu Takaki

Audit andSupervisory Board
Member (Outside)

Audit andSupervisory Board
Member (Outside)

Koichi Abe

Keiichi Hasegawa

Director, Senior Executive Officer

Executive Officers

Operating Officers

Yoshifumi Otsubo

Shuji Horie

Takuya Hatakeyama

Kenji Tanimoto

Naoki Okuyama

Chiaki Nakano

Toshihito Nakanishi

Hiroyuki Imaizumi

Jun Nukina

Takatoshi Otsuka
Toshinori Yamai
Akihiro Otsuka

Director Skill Matrix

Areas of expertise and experience

Mr. Koichi Abe, Statutory Auditor

OutsideDirectors

Mr. Koichi Abe provides useful advice, drawing on his wealth ofexperience at financial institutions and extensive knowledge
regarding corporate management to contribute to auditing activities.

Name

Mr. Keiichi Hasegawa, Statutory Auditor (Outside Executive)

Akira Watanabe

●

●

●

●

●

Kenzo Terashima

●

●

●

●

●

Yoshifumi Otsubo●●

Kenji Tanimoto●●●

Mr. Keiichi Hasegawa was newly appointed as Statutory Auditor atthe 162nd Annual General Meeting of Shareholders on August 29,
2023. While concurrently serving as Professor for Waseda University’s Faculty of Commerce, he utilizes his voluminous experience incorporate finance and accounting to provide helpful advice on
maintaining the soundness of financial and accounting practices
and on business management in general.

Corporate
Sales/
management Marketing

Koji Mizumoto●●

Taizo Makari●●

Yukiko Machida●

Research andManufacturing/development/
Quality control
Technology

Globalbusiness

Personnel/
Labor

●

●
●

●

Accounting/
Legal affairs
Finance

●

●

●

●

●

●

●

●
●

●
Toyo Denki Seizo Report 2023

36

Governance

Messages from Outside Executives

Internal Control and ComplianceInternal Control

Yukiko Machida

Koichi Abe

Director (Outside)

Audit and Supervisory
Board Member (Outside)

Labor law, my area of expertise, has typically followed a regulatory approach—laws are written to clearly define the dos anddon’ts for employers, and administrative agencies provide guidance and supervision to prevent violations and, when violations do
occur, penalize the offenders. A classic example of this is the Labor Standards Act.
However, the enactment of the Act on the Promotion of Women’s Active Engagement in Professional Life in August 2015
marked a pivot from that traditional approach. This law enjoins
employers to analyze their company’s response to various legal
requirements and to disclose their findings, but it does not regulate the content of what is reported (for example, it does not
specify a minimum percentage for female representation in management). At first glance, this approach may seem considerablylooser than the traditional regulatory model, but is that actually
the case?
The world of labor law is now being swept with a growing callfor companies to (just) disclose certain information such as thepercentage of male employees who take childcare leave. And,
looking outside the realm of labor law, items such as human capital and diversity have been added to the list of disclosures expected for annual securities reports. This trend has made it easier tocompare companies by creating a uniform measuring stick forevaluating them. More than ever, businesses need to seriously
envision what it will take for them to remain companies that attract talent and shareholders on into the future, and to constantly
strive to achieve that vision. Those that just keep looking at therear-view mirror may end up getting left behind by the market.
Compliance is more than just not doing illegal things; it means
taking action aligned with the spirit of the law, with “law” here including soft law. I would like for Toyo Denki to remain mindful ofthe importance of staying abreast of the times and taking action
with a forward-looking perspective.

37 Toyo Denki Seizo Report 2023

It has been over a year since I was appointed Audit and Supervisory Board Member (Outside) for Toyo Denki. The Company has laidout a medium-term management plan toward the fiscal year ending May 2026 and is pursuing corporate activities for drasticallystrengthening its management foundations. I believe that Toyo
Denki’s strength lies in its commitment to sincerely addressing theneeds of customers while honestly striving to improve quality withthe power of trust backed by more than 100 years of history.
The Japanese economy has been gradually recovering following the lifting of the COVID-19 pandemic restrictions, with many
positive signs being seen, including growth in both wages andstock prices. As for the latter, the Nikkei average as of end-August
had climbed roughly 25% since January—likely buoyed in part by
the management reforms that businesses implemented in response to the Tokyo Stock Exchange’s call for improvement oflackluster price--book ratios—and average PBR on the TSE stoodat 1.3 for the Prime Market index and at 0.99 for the Standard
Market index. While Toyo Denki’s share price has likewise grownby around 23%, PBR nevertheless stands at 0.4. I believe that theshare price can at least double if the Company leverages its potential.
Across its over 100-year history, Toyo Denki has cultivated to ahigh standard many different artisanal skills, know-how, technicalexpertise, and development capabilities in manufacturing processes. However, there are challenges that need to be addressed.
Namely, the Company needs to drastically strengthen its management foundations and ability to do business, so as to realize theaims of the Medium-Term Management Plan’s basic policies andto raise ROE to 8% or higher. Statutory Auditors are tasked withhelping to ensure the soundness of corporate management. I
think that effective utilization of corporate resources and improvement of profitability are the cornerstones of governance. I hope to
see the Company work as a team to tackle management challenges under the leadership of the senior management.

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.

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.

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
We conduct compliance training every year for all employees of
the Group in order to enhance knowledge of compliance and foster awareness to respect corporate ethics.

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 aswell as 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.

Whistle-blowing system
The Group has established a whistle-blowing system that aims toensure that any illegal, inappropriate, or unethical conduct by anindividual or an organization is detected at the earliest possible
stage and that risks are minimized, and to promote ethical and legal compliance. In addition, the number of whistle-blowing reports
received is disclosed annually in the Business Report.

Risk Management
Risk management framework
The Group’s risk management framework is as follows.
Risks pertaining to management strategy challenges such as
business strategies and new business development are discussed
at the Management Strategy Meeting, which is generally held
twice a month.
Risks concerning day-to-day business operations are reported
to the President at the Operating Officer Report Meeting, which
generally convenes at least three times a month, for three subjects: orders received, sales, inquiries, and other business activities; procurement, manufacturing, shipments, and otherproduction activities; and quality control, R&D and other technicalmatters, production reforms, and adoption of IT. The progress ofbusiness plans and the status of business execution are checkedon a monthly basis.
For Group company-related risks, the progress of each company’s business plan and the status of business execution are examined at semiannual national and global Group company
meetings.
Of these various risks, matters deemed to be especially important are discussed by the Internal Control Committee underthe Board of Directors, with the participation of the legal counsel.
Reports and recommendations based on those discussions are
made to the Board of Directors. Risks pertaining to climatechange, human capital, and other sustainability issues are discussed by the Sustainability Committee under the Board of Directors, and are reported to the Board of Directors.
Toyo Denki Seizo Report 2023

38

Governance

Risks and countermeasures

Risks & scenarios: Our Group provides products and services that broadly support social/industrial infrastructure in Japanand abroad in all of our business segments—transportation, industry, and ICT solutions. Our business environment is undergoing a drastic transformation, as seen in the decline in railway ridership due to population shrinking and the spread of
new lifestyle changes such as teleworking; the CASE* transformation in the automobile industry; the advancement of DX in
products, services, and production equipment; and the transition to a decarbonized society. If we fall behind in our efforts toadapt to these changes, we could experience a decline in our competitiveness, orders received, sales, and profitability.

This section presents risks that may affect the Group’s earnings and financial position, and countermeasures for them.
Forward-looking statements below are based on the judgment of the Group as of the end of the consolidated fiscal year ended May
2023.

Risks & scenarios: Fatal/life-threatening accidents and large-scale failures in railways or other social/public infrastructurethat stem from the Group’s products could have a very serious impact on the Group’s operation. Also, defects in quality andproduction delays that prevent the Group from fulfilling its responsibility and mission of stably supplying products could
cause a loss of trust and adversely affect our earnings.
Risks related toquality andstable supply

human resourcecompliance andhuman rights

Countermeasures: The Group has included in its business principles a commitment to prioritize ethics and contribute to
the prosperity of customers and society as a whole, and recognizes the importance of compliance aligned with the businessprinciples. As a concrete action for this, the Group provides every officer and employee with training and a copy of the business principles and the Compliance Manual (Toyo Denki Seizo Ethical Standards), which lays out our code of conduct andbasic rules on business operations, in order to ensure that everyone familiar with what constitutes compliant conduct. We
have also established contacts for whistle-blowing and consultation on harassment and implemented other measures toconstruct the framework needed to detect and take action on issues at an early stage. With regard to conflict minerals andforced labor in supply chains, we will continue to assess the state of compliance through supplier surveys and other means,and carry out appropriate measures for ensuring respect for human rights.

39 Toyo Denki Seizo Report 2023

*CASE: A concept expressing the mobility transformation in terms of four features, Connected, Automated/Autonomous, Shared & Service, and Electrification

Countermeasures: Guided by the basic policies of Medium-Term Management Plan 2026 to expand new businesses andproducts and thoroughly improve the earnings structures of existing businesses, the Group is endeavoring to maintain and further
strengthen its competitiveness through efforts such as developing new products and improving existing products and services.
Key actions include exploring alliance and M&A opportunities, developing technologies and products that contribute to decarbonization and the realization of a sustainable society, incorporating automation and renewable energy use in automobiles, and leveraging ICT. We opened the Development Center in June 2022 to strengthen company-wide development of new business fields.
With regard to trends among our competition, we are working to maintain and further strengthen our competitiveness by gathering information on tenders and markets, and by utilizing our extensive supplier network to collect client information.
Risks & scenarios: If we are unable launch products incorporating advanced technologies with the right timing or are slow
to respond to the decarbonization movement, our product competitiveness could decline. Also, slowdowns in our adoptionof new technologies for manufacturing processes could impair efforts to improve productivity and reduce costs, and thereby
lead to a deterioration in our competitiveness.

Risks related totechnology/
product
development

Countermeasures: In line with the basic policy of our rules on human resource development, we pursue human resource
development approaches aimed at continually increasing our corporate value. To support efforts for maintaining, improving,
and transferring our unique technologies, we have established a Technical Staff Development Committee and implement
measures for transferring advanced technical expertise for each high-priority specialized field. In addition, as a specific initiative of Medium-Term Management Plan 2026 we have begun to review the design and operation of our human resource
systems to promote employee and organizational vitality. To further improve employee engagement, we have clearly defined
our expectations for human resources and have started to re-examine our systems for fair evaluation and treatment and to
implement various measures, including for talent/organizational development.
Risks & scenarios: Violations of domestic/international laws and regulations in the Group’s conduct of business could result in a loss of public trust and lead to suspension of trading and other serious impacts on our business activities. Also,
failure to properly prevent or deal with harassment of employees could reduce employee motivation, prompt employees toquit, cause a loss of trust, and reduce our competitiveness. In addition, failure to appropriately deal with issues surrounding
conflict minerals and forced labor could result in a loss of trust and thus lead to reduced trade and exclusion from supply
chains.

Risks related tochanges inbusiness
environment

Countermeasures: The Group’s business principles include a commitment to build trust by focusing on quality first. The
production bases Yokohama Plant and Shiga Ryuo Plant have constructed and operate quality management systems, andhave acquired ISO 9001 certification. As part of the monthly sessions of the Operating Officer Report Meeting, information
on quality control and production management is shared with upper management, risks are identified, and countermeasures are discussed and promptly implemented, so as to ensure quality standards and stably supply products. In preparation for the potential occurrence of product liability issues or recalls, the necessary insurance policies are in place so thatthe impact of quality issues on earnings can be minimized.
Risks & scenarios: We consider human resources to be the most important management asset supporting the Group’s
growth. If retirement by experienced technicians, exodus of talent, slowdowns in human resource development, or othersuch issues make it impossible to secure and develop the human resources needed, quality could decline due to the resulting difficulty in transferring technical expertise, and the creation of new business areas and development of new products
could be hindered. This could make it impossible to maintain our competitiveness in the industry, and thus adversely affectour earnings.

Risks related to

Risks related toCountermeasures: We are working to supply customers with products that appeal to them by identifying their needs andincorporating new technologies in the products we develop. In addition to enhancing existing products and services, to expand new business and products, we are seeking to strengthen and accelerate company-wide development of new business domains, particularly by utilizing the Development Center that we opened in June 2022. To address the technical challenges standing in the way of new business development, we have formed project teams at the Development Center andare focusing our internal resources on these efforts. In addition, we are taking action to maintain and further strengthen our
technical expertise and product development capabilities, including by pursuing R&D in collaboration with other businesses
and academia and by exploring M&A opportunities.
Risks & scenarios: Our Group’s products and services use many different types of raw materials. If supply of those materials is delayed or interrupted by shifts in the global economy, market trends, or natural disasters, or if suppliers of raw materials that are hard to substitute go bankrupt or suspend operation, we could experience slowdowns in our production andshipment, among other issues. Also, increases in our manufacturing costs due to raw material price hikes driven by risingenergy prices could adversely affect the Group’s earnings.

Risks related to

procurement of
raw materials,
etc.

Countermeasures: The Group is striving to ensure stable access to raw materials through approaches such as bulk purchasing and multivendor procurement. While there recently have been global shortages, price hikes, and longer delivery times forcertain products such as semiconductors, our Group is implementing measures to mitigate the impact of those challenges, including by using our closely connected network of suppliers to establish multiple supply chains, and by switching the raw materials used to other alternatives. We also endeavor to regularly collect information on the risk for suppliers to fail or stop operating,and pursue permanent measures such as securing access to alternative suppliers. To address the risk of manufacturing costs
being driven up by rising raw material prices, we are seeking to lower cost prices by improving the operational efficiency of ourmanufacturing equipment, and by reducing energy costs through energy-saving measures, including the use of solar energy.
Risks & scenarios: The risk of violation of the Group’s intellectual property rights by other parties is growing with the acceleration of technological innovation and business globalization. Conversely, if the Group is found to have violated the intellectual property rights of other parties, it could be subjected to expensive damage claims or other responses that adversely affect its earnings.

Risks related tointellectual
property

Countermeasures: The Group recognizes the importance of intellectual property rights and carefully strives to protect
those rights. Our R&D units are collaborating to acquire rights on our intellectual property through strategic patent applications and other means. We are committed to swiftly taking appropriate action in response to violations of our intellectual
property, and to take appropriate measures to avoid violating the intellectual property rights of other parties.

Toyo Denki Seizo Report 2023

40

Governance

Risks related toenvironmental
and climatechangeRisks & scenarios: Any violation of environmental laws and regulations or noncompliance with environmental regulations
could lead to a loss of trust among our suppliers, local communities, and society as a whole. Also, our failure to make progress in climate change actions, such as decarbonization of our products and measures for reducing our environmental impact, could reduce the competitiveness of our products and thus cause orders received and sales to fall, and could harm
our reputation among stakeholders as a whole.
Countermeasures: The Group properly manages this area of risk by constantly monitoring our business operations’ compliance with environmental laws and regulations and conformity with environmental regulations. In addition, senior management regularly discusses climate change actions at Sustainability Committee meetings, and we set targets, develop and implement measures, and monitor progress for our initiatives in products and services, in production activities, and in valuing
people and communities in accordance with our Sustainability Policy.

Risks related tooverseasbusinesses

in the Kanto area and those for the Industrial Systems segment are in the Kansai area. Production capacity may be severely
affected by large-scale disasters and the outbreak of infectious diseases in either of these areas. Furthermore, large-scaledisasters and the outbreak of infectious diseases may hinder the entire supply chain and impact order trends, thus affecting
the Company’s production and earnings.
natural disasterand infectious
diseases

Countermeasures: Our Internal Control Committee under the Board of Directors discusses and makes decisions on thepolicies and courses of action for developing preventive measures against large-scale disasters and building the emergency
response formation for disasters that occur. We implement disaster mitigation measures and training at each production
base, and will work to further strengthen company-wide business continuity planning and to increase resilience across our
supply chains. In the event of a large-scale infectious disease outbreak occurs, we will apply the lessons learned from our
response to the COVID-19 pandemic, which began in January 2020, and take action to prevent the spread of infection with
an approach that prioritizes employee safety and health with measures such as staggered commuting and working from
home, while aggressively minimizing hindrances to production.

Risks related tofinance andaccounting

Risks & scenarios: Occupational accidents (including those stemming from excessive working hours), fires, or equipment
failures that lead to employee injuries/fatalities or production stoppages could harm our public trust and a deterioration ofbusiness performance.
Risks related towork-related
disasters andaccidents

Countermeasures: In order to ensure a safe working environment and completely eliminate occupational accidents, theGroup has instituted a Company-Wide Safety and Hygiene Management Policy, and the local Safety and Hygiene Committeeof each workplace establishes and implements concrete measures. Information on these initiatives is shared at the quarterly meetings of the Company-Wide Safety and Hygiene Committee, with the aim of further raising the level of health andsafety across the entire organization. Also, each workplace has a Time Management Optimization Committee that monitors
the overtime work situation, compliance with rules for rest periods between shifts, and other such matters.
Risks & scenarios: In the event of a leakage of customers’ personal information or corporate secrets related to business
partners could not only harm our public trust, but also lead to damage claims, termination of trading relationships, and otherimpacts that could adversely affect our earnings. Moreover, destruction/alteration of important data and system stoppages
caused by external cyberattacks or computer viruses could have serious impacts on our production and sales activities.

Risks related to

information
securityCountermeasures: The Group has included information security among its key management challenges and has formulated an Information Security Declaration as a guideline. We recognize the safeguarding of information to be a major social responsibility, comply with related laws and regulations, and implement measures to protect the information assets we possess from destruction, tampering, leaks, and other threats. In order to increase the level of information security andstrengthen the system of management, we have formed an Information Security Committee that is tasked with studying
measures, providing training, auditing, and other responsibilities. The Information Security Committee regularly reports to
the Internal Control Committee on matters such as the state of information security maintenance/management, and the occurrence of accidents and problems.

41 Toyo Denki Seizo Report 2023

Countermeasures: We have established a formation for communication and cooperation between the head office and theoverseas affiliates, and we strive to constantly remain aware of the situation in each location. We properly manage country
risk in order to minimize the impact of risks that emerge, and when necessary, we seek the counsel of lawyers and otherexperts who are well-versed in the local legal system and business practices.
Risks & scenarios: Given that the Group is proactively expanding its business in overseas markets, we are exposed to theforeign exchange risk that comes with the increase in foreign currency-based transactions. Also, since we secure financing
for our business operations through bank loans and other such sources, we face the risk that interest rate hikes will drive
up the amount of interest we need to pay. There is also the risk that finance market instability or a decline in the Group’s
creditworthiness will make it difficult to acquire financing at the levels we seek. The fixed assets we own, such as shares,
land, buildings, production equipment, etc., are subject to the risk of impairment due to a decline in their market value or
the profitability of our businesses. Trade notes and accounts receivable entail the risk of becoming difficult to collect if the
trading partner’s credit situation significantly falters.

Risks & scenarios: The great majority of the Group’s production bases for the Transportation Systems segment are locatedRisks related to

Risks & scenarios: The Group operates production bases and sales offices in China, Thailand, and the United States, andcountry risks such as political or economic changes and the outbreak of disasters could adversely affect our business activities and employee safety. Also, unforeseeable changes in laws or tax systems could negatively impact our overseas affiliates’ business operations and by extension our earnings and assets.

Countermeasures: With regard to foreign exchange risks, we monitor foreign exchange sensitivity and impacts on ourearnings, and implement risk management measures such as downsizing of our foreign currency-based assets. To manageinterest rate and liquidity risks, we are working to optimize our methods of financing and to shrink our working capital byreviewing the turnover period of trade notes and accounts receivable, inventories, and trade notes and accounts payable. At
the same time, we are striving to maintain an optimum level of liquidity on hand through monthly management of cash
flows. The purpose and benefits of our share holdings are examined annually at the Management Strategy Meeting are reported to the Board of Directors, and we are in the process of reducing our holdings based on those reviews. As for business-related fixed assets, we regularly monitor the progress of business plans and endeavor to detect early warning signsof impairment. We manage the collection risk of trade notes and accounts receivable through efforts that strengthen credit
management, including surveying of long-term debt and monitoring of trading partners’ performance.

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
and use these information assets.

Information security training
The Company is conducting educational activities to develop
information security awareness among all employees including
various training sessions, some involving the use of educationalDVDs.

Toyo Denki Seizo Report 2023

42

Financial Report

Financial Review

Reference Data for Management Indices

Consolidated Operating Results, Consolidated Financial Position, and Consolidated Cash Flow for FYE May
2023 (from June 1, 2022 to May 31, 2023) are as follows:

Capital investment

Depreciation and amortization

Research and development costs

FYE May 2019 2020

2022

2023

Cash flows from operating activitiesFYE May 2019 2020

2021

2022

2023

815 million yen

Net cash provided by operating activities
amounted to 815 million yen (net cash of
2,504 million yen provided in the previous
fiscal year), principally due to the recordingof profit before income taxes and an increase in trade notes and accounts payable.

43 Toyo Denki Seizo Report 2023

635 million yen

Net cash provided by investing activities
totaled 635 million yen (net cash of 289
million yen provided in the previous fiscal
year), principally due to proceeds fromsales of investment securities.

2022

2023

712

819
2021

(2,356)(390)

FYE May 2019 2020

2022

Cash flow from financing activities
Net cash used in financing activities

390 million yen

Net cash used in financing activities was
390 million yen (net cash of 2,356 million
yen used in the previous fiscal year), primarily owing to repayment of debt.

2019

2020

2021

2022

2023

Japan

31,74530,997

27,87625,77924,915

China

3,663

4,282

3,628

3,015

4,536

Others

5,763

3,791

1,638

1,363

1,574

41,172

39,07133,14330,15831,025

22.9%

20.7%

15.9%

14.5%

19.7%

Total
Overseas net sales ratio
FYE May 2019 2020

2021

2023

(Unit: Million yen)Japan China
OthersOverseas net sales ratio

Cash flow from investing activities
Net cash provided by investing activities

2023

289
2021

Net sales by region

Cash Flows
Cash flow from operating activities
Net cash provided by operating activitiesFYE May 2019 2020

(971)

Net assets as of May 31, 2023 stood at
24,582 million yen, an increase of 2,569
million yen compared with the end of theprevious fiscal year. This increase waslargely attributable to an increase of 1,456
million yen in unrealized holding gain on
available-for-sale securities.

(2,012)

24,582 million yen

2022(Unit: Million yen)

(155)

Total net assets

2021

Cash flows from financing activities(1,019)Total liabilities as of May 31, 2023 stood at
25,099 million yen, an increase of 195 million yen compared with the end of the previous fiscal year. This increase was largely
attributable to an increase of 1,012 million
yen in trade notes and accounts payable
and an increase of 63 million yen in provision for product warranties, partially offset
by a decrease of 585 million yen in debt.

Net assets

815

25,099 million yen

FYE May 2019 2020

(Unit: Million yen)

2,504

Total liabilities

2023

1,776

Total assets as of May 31, 2023 stood at
49,682 million yen, an increase of 2,765
million yen compared with the end of theprevious fiscal year. The increase in total assets was largely attributable to an increaseof 1,817 million yen in investment securities
and an increase of 1,145 million yen in tradenotes, accounts receivable and contract assets, partially offset by a decrease of 621
million yen in property, plant and equipment.

Liabilities

2,148

Assets49,682 million yen

2022

Cash flows from investing activities(Unit: Million yen)

41

Financial Position

Total assets

731

2021

1,257

FYE May 2019 2020

840
2021

(1,126)

From a profit perspective, operating income increased by 345 million yen to 517 million yen compared with the previous fiscal year.
Ordinary income increased by 220 million yen to 987 million yen
compared with the previous fiscal year. Net income attributable toowners of the parent improved by 1,754 million yen to 824 million
yen, due to factors such as the end of the impact of the impairment
loss on business assets related to the Industry Business segmentthat was recorded in the previous fiscal year.

635

Net sales increased 2.9%
compared with the previous
fiscal year to 31,025 million
yen, driven by increases in theTransportation Business, Industry Business, and ICT Solution
Business segments.

545(Loss of 930 million yen in the previous fiscal year)

1,413

Orders received increased 9.2%
compared with the previous fiscal year to 33,246 million yen,buoyed by increases in theTransportation Business, Industry Business, and ICT Solution
Business segments.

824 million yen(YoY +2.9%)

3,720(YoY +9.2%)

1,487

31,025 million yen

310

33,246 million yen

Profit/Loss
Net income attributable to owners of the parent

315

Net sales

632

Orders received

1,774

1,090

Results of Operation(Unit: Million yen)792

(Unit: Million yen)

755

(Unit: Million yen)

( For the Years Ended May 31 or As of May 31)

2022

2023

Toyo Denki Seizo Report 2023

44

Financial Report
TOYO DENKI SEIZO K.K.
Consolidated Balance Sheets

As of

May 31,
2023

May 31,
2022

May 31,
2023(Millions of yen)

As of(Thousands of
U.S. dollars)(Note 1)

LIABILITIES AND NET ASSETS

Current assets:

Current liabilities:
Trade notes and accounts payable (Note 16)
Electronically recorded payables
Short-term borrowings and current portion of long-term debt
(Notes 6 and 16)
Income taxes payable (Note 11)
Contract liabilities (Note 20)
Accrued expenses
Accrued directors’ bonuses
Accrued employees’ bonuses
Reserve for losses on order acknowledgements (Note 3)
Provision for product warranties
Other
Total current liabilities¥ 5,520¥ 4,449$ 39,493

Trade notes, accounts receivable and contract assets (Notes 2, 16 and 20)

13,236

12,091

94,702

Electronically recorded receivables (Note 16)

1,116

1,136

7,991

Inventories (Note 3)

6,319

6,267

45,212Other current assets

555

246

3,976

Allowance for doubtful accounts

(10)

(1)

(72)

26,73824,189191,304

Total current assets

Property, plant and equipment (Notes 4 and 6):
Buildings and structures

3,611

3,985

25,841

Machinery and vehicles

348

579

2,491

Land

1,269

1,270

9,086

Construction in progress

11

7

81

Other

459

479

3,290

5,701

6,322

40,790Total property, plant and equipment

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

14,28812,471

102,231

Deferred tax assets (Note 11)

108

883

776

Intangible assets

77

101

552

Other (Note 5)

2,775

2,953

19,856

Allowance for doubtful accounts

(7)

(6)

(56)

Total investments and other assets

17,242

16,403

123,361

May 31,
2022(Millions of yen)

AssetsCash on hand and in banks (Notes 16 and 18)

May 31,
2023

May 31,
2023(Thousands of
U.S. dollars)(Note 1)

¥ 2,060
4,768¥ 1,6104,205$ 14,740
34,115

885

585

6,333

128
84
589
39
673
989
70
411
10,699

306
47
688
6
699
963
6
449
9,569

915
606
4,218
279
4,816
7,076
504
2,944
76,552

10,2884,075
30
414,399

11,1734,113
38
615,33373,61029,160221
31103,023

Net assets (Notes 8 and 15):
Shareholders’ equity:
Common stock
Capital surplus
Retained earnings
Treasury stock
Total shareholders’ equity¥ 4,998
3,177
11,347(486)
19,036¥ 4,998
3,177
11,122(1,282)18,016$ 35,761
22,733
81,186(3,482)
136,199

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

5,370
202
(26)
5,546
24,582

3,913
144
(61)
3,996
22,012

38,422
1,445(187)
39,680175,879

Total liabilities and net assets¥49,682¥46,916$355,456

Long-term liabilities:
Long-term debt (Notes 6 and 16)
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.

Total assets (Note 21)

45 Toyo Denki Seizo Report 2023

¥49,682¥46,916$355,456

Toyo Denki Seizo Report 2023

46

Financial Report
TOYO DENKI SEIZO K.K.
Consolidated Statements of Income

For the Years Ended

Net sales (Notes 20 and 21)
Cost of sales (Note 3)
Gross profit

TOYO DENKI SEIZO K.K.
Consolidated Statements of Changes in Net Assets
May 31,
2023(Millions of yen)

May 31,
2023¥30,158
23,3436,815$221,974
170,481
51,492

6,679
517

6,643
171

47,789
3,703

191
(52)
221
104
—
4
469
987
167
1,155

154
(58)
242
227
20
8
594
766
(1,996)(1,230)

1,370
(377)
1,581
750
—
34
3,359
7,062
1,201
8,264

Non-operating income (expenses):
Interest and dividend income
Interest expense
Equity in earnings of affiliates accounted for by the equity method
Foreign exchange gain
Subsidy income
Other income, net
Ordinary income
Special gains (losses), net (Note 10)
Income (loss) before income taxes
Income taxes (Note 11):
Current
Deferred

¥

205
124
330
824
824

(Millions of yen)
Shareholders’ equity(Thousands of
U.S. dollars)(Note 1)

¥31,025
23,828
7,197

Selling, general and administrative expenses (Note 9)
Operating income (Note 21)

Net income (loss)
Net income (loss) attributable to owners of the parent

May 31,
2022

403
(703)
(299)
(930)
¥ (930)

1,472
892
2,364
5,899
$ 5,899

Commonstock

Translation
adjustments

Total net
assets¥12,320¥(1,281)¥19,214¥4,803

¥ 88

¥(97)

¥4,793¥24,008

—

—

(268)

—

(268)

—

—

—

—

(268)

—
—

—
—

(0)

—
—

—
—

—
—

—
—

Balance as of May 31, 2022——
¥4,998

Balance as of June 1, 2022

Cash dividends paid
Net loss attributable toowners of the parent

(930)

(930)

(930)

—

—
(0)

—
—
¥3,177—(1,198)¥11,122—(0)¥(1,282)—(1,198)¥18,016

(889)
(889)
¥3,913

56
56
¥144

35
35
¥(61)

(797)
(797)
¥3,996(797)(1,996)¥22,012¥4,998¥3,177¥11,122¥(1,282)¥18,016¥3,913

¥144

¥(61)

¥3,996¥22,012

—

—

(268)

—

(268)

—

—

—

—

(268)

Disposal of treasury stock

—
—
—

—
—
(331)

824
—
—

—
(0)
796

824
(0)
464

—
—
—

—
—
—

—
—
—

—
—
—

824
(0)
464

Transfer of loss on disposalof treasury stock

—

331

(331)

—

—

—

—

—

—

—

—
—
¥4,998——¥3,177—225¥11,347—795¥(486)—
1,020¥19,036

1,456
1,456
¥5,370

57
57
¥202

35
35
¥(26)

1,549
1,549
¥5,546

1,549
2,569¥24,582

Purchases of treasury stock
Net changes in items
other than those inshareholders’ equity
Total changes during the year

(0)

Changes during the year
Cash dividends paid
Net income attributable toowners of the parent
Purchases of treasury stock

TOYO DENKI SEIZO K.K.
Consolidated Statements of Comprehensive Income(Thousands of U.S. dollars) (Note 1)
Shareholders’ equity

May 31,
2023

May 31,
2022(Millions of yen)

¥ 824

May 31,
2023(Thousands of
U.S. dollars)(Note 1)¥ (930)$ 5,899

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

1,456
—
35
57
1,549

(889)
2
35
53
(797)

10,420—252
412
11,085Comprehensive income¥2,373¥(1,727)$16,984

Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

Total
shareholders’equity¥3,177

Balance as of May 31, 2023

Net income (loss)

Treasury
stock

Total
Retirement
accumulated
benefitsotherliability
comprehensive
adjustments
incomeChanges during the year

Total changes during the year

For the Years Ended

Retainedearnings

Unrealized
holding
gain onsecurities¥4,998

Balance as of June 1, 2021

Net changes in items
other than those inshareholders' equity

See notes to consolidated financial statements.

Capitalsurplus

Accumulated other comprehensive income¥(1,727)—$16,984—

Total
Retirement
accumulated
benefitsotherliability
comprehensive
adjustments
incomeCommonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
shareholders’equityUnrealized
holding
gain onsecurities$35,761$22,733$79,576$(9,173) $128,897$28,001$1,033$(440)$28,594$157,492——(1,918)—(1,918)

—

—

—

—

(1,918)

Disposal of treasury stock

—
—
—

—
—
(2,370)

5,899
—
—

—
(4)
5,696

5,899
(4)
3,326

—
—
—

—
—
—

—
—
—

—
—
—

5,899
(4)
3,326

Transfer of loss on disposalof treasury stock

—

2,370

(2,370)

—

—

—

—

—

—

—

—
—
$35,761——$22,733—
1,610$81,186

—
—
5,691
7,301
$(3,482) $136,199

10,42010,420$38,422412
412$1,445252
252$(187)

11,085
11,085$39,680

11,085
18,387$175,879

Balance as of June 1, 2022

Translation
adjustments

Total net
assetsChanges during the year
Cash dividends paid
Net income attributable toowners of the parent
Purchases of treasury stock

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

¥2,373—

Accumulated other comprehensive income

Balance as of May 31, 2023

See notes to consolidated financial statements.

See notes to consolidated financial statements.

47 Toyo Denki Seizo Report 2023

Toyo Denki Seizo Report 2023

48

Financial Report
TOYO DENKI SEIZO K.K.
Consolidated Statements of Cash Flows
For the Years Ended

TOYO DENKI SEIZO K.K.
Notes to Consolidated Financial Statements
May 31,
2023

May 31,
2022(Millions of yen)

Operating activities
Income (loss) before income taxes
Depreciation and amortization
Impairment loss
Reversal of allowance for doubtful accounts
Provision for accrued employees' bonuses(Decrease) increase in liability for retirement benefits
Interest and dividend income
Interest expense
Equity in earnings of affiliates accounted for by the equity method
Subsidy income
Gain on sales of property, plant and equipment
Gain on sales of investment securities
Loss on valuation of investment securities
Gain on reversal of foreign translation adjustment
Business restructuring expenses
Loss on valuation of investments in capital of subsidiaries and affiliates
Changes in operating assets and liabilities:
Trade notes and accounts receivable
Inventories
Trade notes and accounts payable
Reserve for losses on order acknowledgements
Provision for product warranties
Contract liabilities
Accrued expenses
Other, net
SubtotalInterest and dividend income received
Interest expense paid
Subsidies received
Income taxes paid
Net cash provided by operating activities
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
Proceeds from liquidation of an affiliate
Payments of loans receivableCollection of loans receivable
Other, net
Net cash provided by investing activities
Financing activities
Decrease in short-term loans payable
Repayment of long-term debt
Purchases of treasury stock
Proceeds from disposal of treasury stock
Cash dividends paid
Other, net
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period (Note 18)

May 31,
2023(Thousands of
U.S. dollars)(Note 1)

¥ 1,155
840
—
9
(26)
(22)
(191)
52
(221)
—
(150)
(530)
—
—
513
—

¥(1,230)
1,257
2,256
(0)
(128)
5
(154)
58
(242)
(20)
—
(366)
45
(94)
—
155

$ 8,264
6,010
—
67
(188)
(158)
(1,370)377(1,581)—(1,079)(3,797)
—
—
3,674
—

(1,125)
(51)
1,012
25
63
36
(98)
(193)
1,097
201
(53)
—
(429)
815

891
633
(557)
99
(0)
13
97
(156)
2,562
162
(60)
20
(180)
2,504

(8,053)
(370)
7,244
181
455
263
(701)
(1,387)
7,850
1,439
(381)
—
(3,076)
5,832

(324)
266
(17)
(14)
818
—
(50)
—
(42)
635

(351)
14
(18)
(73)
466
283
—
15
(45)
289

(2,319)
1,903
(127)
(101)
5,858
—
(357)
—
(306)
4,549

—
(585)
(0)
464
(267)
(2)
(390)
10
1,070
4,449
¥ 5,520(1,500)
(585)
(0)
—
(269)
(1)
(2,356)
48
485
3,964
¥ 4,449—(4,187)(4)
3,326(1,911)(17)(2,795)72
7,658
31,835$39,493

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.
Amounts of less than one million yen and one thousand U.S. dollars have been rounded down to the nearest million yen andthousand U.S. dollars, respectively, in the presentation of the accompanying consolidated financial statements. As a result, the totals
in yen and U.S. dollars do not necessarily agree with the sum of the individual amounts.
(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 prepared byusing the accounts of foreign consolidated subsidiaries and affiliates prepared in accordance with either IFRS or accounting principles
generally accepted in the United States as adjusted for certain items including goodwill, actuarial gain (loss) and capitalized
development costs.
As of May 31, 2023, the numbers of consolidated subsidiaries and affiliates accounted for by the equity method were 5 and 2 (5and 2 in 2022), respectively. All significant intercompany balances and transactions have been eliminated in consolidation. The
closing date of all consolidated subsidiaries is consistent with that of the Company.
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 or 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.

See notes to consolidated financial statements.

49 Toyo Denki Seizo Report 2023

Toyo Denki Seizo Report 2023

50

Financial Report(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
quotations are carried at cost. Cost of securities sold is determined by the moving average method.
(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
Machinery and vehicles:
3 to 12 years
Significant renewals and additions are capitalized at cost. Maintenance and repairs are charged to income.
(h) Intangible assets (except for leased assets)
Intangible assets are amortized using the straight-line method. Software for internal use is amortized over the internal available period(5 years) using the straight-line method.
(i) Leases
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.

(p) Income taxes
Deferred tax assets and liabilities have been recognized in the consolidated financial statements with respect to the temporary
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.
(q) Accounting for significant revenue and costs
The Group engages primarily in the manufacturing and sale of electronic equipment, and in installation works.
Revenue from sales of products is recognized when the product is accepted by a customer, as control of the products istransferred to the customer and performance obligations are satisfied upon the customer’s acceptance of the products.
However, in the case of domestic sales of products, revenue is recognized upon shipment if the period between the shipment of
the product and the transfer of control of the product to the customer is a normal time period.
In addition, with respect to construction contracts for which performance obligations are satisfied over time, revenue is recognizedbased on progress toward complete satisfaction of a performance obligation.
The percentage of completion is based on the costs incurred relative to the estimated total cost (input method).
(r) Research and development expenses
Research and development expenses are charged to income when incurred.
(s) Derivative financial instruments
The Company and certain consolidated subsidiaries conduct 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) Significant accounting estimates(Impairment of fixed assets in the Industrial Systems segment)(1) The amount recorded in the consolidated financial statements for the years ended May 31, 2023 and 2022
Property, plant and equipment, intangible assets and long-term prepaid expenses belonging to certain groups of assets in the
Industrial Systems segment:(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.

As of(m) Reserve for losses on order acknowledgements
Reserve for losses on order acknowledgements is provided at the amount estimated to cover future losses on orderacknowledgements for which losses are projected and reasonably estimable at the end of the current fiscal year. Provision of reserve
for losses on order acknowledgements in the amounts of ¥78 million ($559 thousand) and ¥99 million is included in cost of sales forthe years ended May 31, 2023 and 2022, respectively.

Impairment loss(n) Provision for product warranties
Provision for product warranties is provided at the amount estimated to cover the Company’s stand-ready obligation for repair under
product warranties for which future costs are projected and reasonably estimable at the end of the current fiscal year.
(o) Retirement benefits
Retirement benefit obligation is attributed to each period by the benefit formula method over the estimated years of service of theeligible employees.
Prior service cost is amortized as incurred by the straight-line method over a fixed period (10 years) within the average remaining
years of service of the employees.
Actuarial gain (loss) is 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.

51 Toyo Denki Seizo Report 2023

May 31,
2023

May 31,
2022(Millions of yen)

Property, plant and equipment, intangible assets and long-term prepaid
expenses¥

May 31,
2023(Thousands of
U.S. dollars)—¥ 2,256

3,055

3,325

$

—
21,859(2) Other information that is useful for the reader of the consolidated financial statements to understand the contents of accounting
estimates
a. Calculation method for the amounts recorded in the consolidated financial statements for the year ended May 31, 2023
In preparing the consolidated financial statements, the Group groups its assets so that the estimates on impairment of fixed
assets appropriately reflect the Group’s actual management condition, and assesses indication of impairment. Assessment of
indication of impairment is carried out based on the information available to the Group on the status of profit or loss generated
from operating activities using the assets, etc. and whether the business environment has deteriorated significantly inconnection with the business using the groups of assets. In the current fiscal year, the Group identified an indication of
impairment for some asset groups related to the Industrial Systems segment. The asset groups had recorded an operating loss
mainly due to the impact on production processes caused by the prolonged difficulty in purchasing parts and materials, as wellas the rapid electrification of testing machines for automobile development. However, the Group did not recognize an
impairment loss as the aggregated amount of undiscounted future cash flows exceeded the carrying amount of the asset
groups. The future cash flows are estimated based on the business plan approved by the management.
Toyo Denki Seizo Report 2023

52

Financial Reportb. Main assumptions used for computing the amount recorded in the consolidated financial statements for the year ended May
31, 2023
In the computation of undiscounted future cash flows, the main assumption is future net sales. Future net sales arecomputed based on historical performance and projections of order acknowledgements made mainly considering industry
trends.
c. Effects on the consolidated financial statements for the following fiscal year
Estimates on undiscounted future cash flows involve uncertainties, since they are subject to changes in demand trends ofsome customers and unforeseeable events such as natural disasters. Accordingly, when the undiscounted future cash flows
significantly differ from the assumption by the Group, the consolidated financial statements for the following year may besignificantly affected.

2. Other Explanatory Information
Note 1. U.S. Dollar Amounts
The accompanying consolidated financial statements are expressed in yen, and solely for the convenience of the reader, have beentranslated into U.S. dollars at the rate of ¥139.77=U.S.$1, the approximate rate of exchange prevailing on May 31, 2023. Thistranslation should not be construed as a representation that all amounts shown could be converted into U.S. dollars at such rate.
Note 2. Receivables and Contract Assets Arising from Contracts with Customers
Trade notes, accounts receivable and contract assets from contracts with customers as of May 31, 2023 and 2022 were as follows:
As of

May 31,
2023

May 31,
2022(Millions of yen)(u) New accounting pronouncements• Accounting Standard for Current Income Taxes (ASBJ Statement No. 27, October 28, 2022)• Accounting Standard for Presentation of Comprehensive Income (ASBJ Statement No. 25, October 28, 2022)• Guidance on Accounting Standard for Tax Effect Accounting (ASBJ Guidance No. 28, October 28, 2022)(1) Overview
The standards prescribe the accounting category of income taxes when other comprehensive income is subject to taxation and thetreatment of tax effect accounting for sale of shares of subsidiaries when the group taxation regime is applied.
(2) Scheduled date of application
The Company expects to apply these standards from the beginning of the year ending May 31, 2025.
(3) Impact of the application
The Company is currently evaluating the impact of applying these standards on the consolidated financial statements.
(v) Changes in accounting estimates(Provision for product warranties)
After updating the core system, the Company has developed a method for accumulating and collecting the data necessary to
determine future costs to repair delivered products under stand-ready obligations. As this development enables more precise
estimates, the Company changed its accounting estimates for the year ended May 31, 2023.
As a result, compared to the previous method, operating income, ordinary income and income (loss) before income taxes
decreased by ¥55 million ($399 thousand), respectively.
The amount had been included in “Reserve for losses on order acknowledgements” under “Current liabilities” in the consolidated
financial statements as of May 31, 2022. However, due to increased materiality resulting from the change in estimates, it is presented
separately as “Provision for product warranties” as of May 31, 2023. In order to reflect this change in presentation, the consolidated
financial statements as of May 31, 2022, have been reclassified.
As a result, the ¥6 million formerly included in “Reserve for losses on order acknowledgements” under “Current liabilities” as of
May 31, 2022, has been reclassified into ¥6 million in “Provision for product warranties.” Further, the ¥(0) million formerly included
in “Reserve for losses on order acknowledgements” under “Changes in operating assets and liabilities” for the year ended May 31,
2022, has been reclassified into ¥(0) million in “Provision for product warranties” under “Changes in operating assets and liabilities.”(Thousands of
U.S. dollars)

Notes receivable

¥ 377

¥ 586

$ 2,702

Accounts receivable

7,598

7,088

54,360Contract assets

5,260

4,415

37,639May 31,
2023

May 31,
2022

May 31,
2023

Note 3. Inventories
Inventories as of May 31, 2023 and 2022 were as follows:
As of(Millions of yen)(Thousands of
U.S. dollars)

Goods and finished products

¥ 376

¥ 501

$ 2,695

Work in process

3,106

3,077

22,224

Raw materials and supplies

2,836

2,688

20,293¥6,319¥6,267$45,212Inventories were stated at the lower of cost or net realizable value, and the Company recognized losses on the write-down of
inventories held for the ordinary sales purpose due to a decline in profitability in the amounts of ¥28 million ($202 thousand) and¥134 million for the years ended May 31, 2023 and 2022, respectively. These amounts were included in “Cost of sales.”Inventories related to construction contracts that are estimated to result in losses were stated after deducting the corresponding
reserve for losses on order acknowledgements in the following amounts:

As of

May 31,
2023

May 31,
2022(Millions of yen)(w) Additional information(Accounting under the group tax sharing system)
The Company and its domestic consolidated subsidiaries are shifting from the single tax filing system to the group tax sharing systemfrom the year ending May 31, 2024. Accordingly, the Company has applied the “Practical Solution on the Accounting and Disclosure
Under the Group Tax Sharing System” (ASBJ Practical Solution No. 42, August 12, 2021) to account for and disclose tax effectaccounting for national and municipal income taxes effective May 31, 2023.

53 Toyo Denki Seizo Report 2023

May 31,
2023

May 31,
2023(Thousands of
U.S. dollars)

Goods and finished products

¥12

¥ 0

$ 88

Work in process

14

153

103

¥26

¥154

$191

Toyo Denki Seizo Report 2023

54

Financial Report

Note 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

The maturities of long-term debt are summarized as follows:

May 31,
2023

May 31,
2022(Millions of yen)

¥ 9,952
8,208
5,138
23,299(18,879)¥ 4,420

May 31,
2023(Thousands of
U.S. dollars)¥ 10,326
8,185
4,977
23,488(18,444)¥ 5,044$ 71,208
58,72736,763
166,699(135,075)$ 31,623

Depreciation and amortization

May 31,
2023

May 31,
2022(Millions of yen)

¥840

2024
2025
2026
2027
2028 and thereafter

May 31,
2023(Thousands of
U.S. dollars)¥1,257$6,010

Buildings and structures
Machinery and vehicles
Other property, plant and equipment
Land

Accumulated depreciation of property, plant and equipment amounted to ¥18,879 million ($135,075 thousand) and ¥18,444
million as of May 31, 2023 and 2022, respectively.
Note 5. Investments and Other Assets
Investments in unconsolidated subsidiaries and affiliates included in “Other” under “Investments and other assets” as of May 31,
2023 and 2022 were as follows:

As ofInvestments in capital

May 31,
2023

May 31,
2022(Millions of yen)

¥1,967

May 31,
2023(Thousands of
U.S. dollars)¥2,184$14,074

Note 6. Short-Term Borrowings and Long-Term Debt
As of May 31, 2023 and 2022, 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,
2023

May 31,
2022(Millions of yen)

¥ —
885
¥885

May 31,
2023(Thousands of
U.S. dollars)

¥ —
585
¥585

$ —
6,333
$6,333

The annual weighted average interest rate applicable to current-portion of long-term debt as of May 31, 2023 was 0.580%.

As of

May 31,
2023

May 31,
2022(Millions of yen)

Long-term debt, excluding current portion, serially due from 2024 through 2032

¥10,288¥11,173

The annual weighted average interest rate applicable to long-term debt as of May 31, 2023 was 0.400%.

55 Toyo Denki Seizo Report 2023

May 31,
2023(Thousands of
U.S. dollars)$73,610(Thousands of
U.S. dollars)

¥

885
4,525
4,525
515
722
¥11,173$ 6,333
32,37632,376
3,688
5,168$79,944

May 31,
2023

May 31,
2022(Millions of yen)

¥2,961
255
121
1,201
¥4,538

May 31,
2023(Thousands of
U.S. dollars)¥3,170
368
146
1,201
¥4,886$21,186
1,825
866
8,596
$32,474

The following assets included in the above are set by factory foundation fixed collateral security for short-term borrowings as of
May 31, 2023 and 2022:

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

May 31,
2023

May 31,
2022(Millions of yen)

¥1,278255
121¥1,654

May 31,
2023(Thousands of
U.S. dollars)¥1,380368
146¥1,894$ 9,146
1,825
866$11,837

Note 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 a points system in the lump-sum payment plans, under which
retirement benefit amounts are computed based on the total number of points granted according to job ranking and performance.
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, 2023 and 2022 were as follows:

For the Years Ended

As of May 31, 2023 and 2022, long-term debt was as follows:(Millions of yen)

As of May 31, 2023 and 2022, the assets pledged as collateral for short-term borrowings and long-term debt were as follows:

As ofDepreciation of property, plant and equipment for the years ended May 31, 2023 and 2022 were as follows:

For the Years Ended

Years ended May 31

Retirement benefit obligation as of June 1
Service cost
Interest cost
Actuarial gain
Retirement benefits paid
Other
Retirement benefit obligation as of May 31

May 31,
2023

May 31,
2022(Millions of yen)

¥4,113
311
15
(15)
(349)
—
¥4,075

May 31,
2023(Thousands of
U.S. dollars)¥4,124
297
15
(16)
(287)
(19)
¥4,113$29,432
2,229
108
(113)
(2,497)—$29,160

Toyo Denki Seizo Report 2023

56

Financial Report

The following table sets forth the funded status of the plans and the amounts recognized in the consolidated balance sheets as of
May 31, 2023 and 2022 for the Company’s and the consolidated subsidiaries’ defined benefit plans:

As of

May 31,
2023

May 31,
2022(Millions of yen)

May 31,
2023(Thousands of
U.S. dollars)

Unfunded retirement benefit obligation
Net liability for retirement benefits on the consolidated balance sheets¥4,075
4,075¥4,113
4,113$29,160
29,160Liability for retirement benefits
Net liability for retirement benefits on the consolidated balance sheets¥4,075
4,075¥4,113
4,113$29,160
29,160Note: The plan adopting the simplified method is included.

The components of retirement benefit expenses for the years ended May 31, 2023 and 2022 were as follows:

For the Years Ended
Service cost
Interest cost
Amortization of actuarial loss
Extraordinary payment of increased retirement benefits
Retirement benefit expenses

May 31,
2023

May 31,
2022(Millions of yen)

¥311
15
35
7
¥368

May 31,
2023(Thousands of
U.S. dollars)

¥297
15
35
11
¥359

$2,229108250
50$2,639Note 8. Net Assets
Information regarding changes in net assets for the years ended May 31, 2023 and 2022 was as follows:a. Shares issued and outstanding / treasury stock
For the year ended May 31, 2023

Number ofshares as ofJune 1, 2022

Type of shares

Increase

Decrease

Number ofshares as of
May 31, 2023

(Shares)

Shares issued:
Common stock
Treasury stock:
Common stock

9,735,000——

9,735,000

794,608

735

493,500

301,843

Decrease

Number ofshares as of
May 31, 2022

Details of the increase are as follows:
Increase due to purchase of shares of less than standard unit
Details of the decrease are as follows:
Decrease due to disposal of treasury stock through third-party allotment

735 shares
493,500 shares

For the year ended May 31, 2022

Number ofshares as ofJune 1, 2021

Type of shares

Increase(Shares)

Retirement benefits liability adjustments included in other comprehensive income (before tax effect) as of May 31, 2023 and 2022
were as follows:

As ofActuarial gain
Total

May 31,
2023

May 31,
2022(Millions of yen)

¥50
¥50

May 31,
2023(Thousands of
U.S. dollars)

¥51
¥51

$364
$364

Retirement benefits liability adjustments included in accumulated other comprehensive income (before tax effect) as of May 31,
2023 and 2022 were as follows:

As ofUnrecognized actuarial gain
Total

May 31,
2023

May 31,
2022(Millions of yen)

¥37
¥37

May 31,
2023(Thousands of
U.S. dollars)

¥88
¥88

$270
$270

Major actuarial assumptions (weighted average) used in accounting for the above plans as of May 31, 2023 and 2022 were as
follows:

For the Years Ended
Discount rate

May 31,2023
0.4%

May 31,2022
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.

Shares issued:
Common stock
Treasury stock:
Common stock

9,735,000——

9,735,000

794,128480—

794,608

Cut-off date

Effective date

Details of the increase are as follows:
Increase due to purchase of shares of less than standard unit

480 sharesb. Dividends
1) Dividends paid
For the year ended May 31, 2023
Resolution
Annual general meetingof the shareholders on
August 25, 2022

Type of shares
Common stock

Total dividends Total dividends
Dividends per(Millions of (Thousands of Dividends per share (U.S.
yen)
U.S. dollars)
share (Yen)dollars)¥268$1,918¥30.00$0.21

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

Cut-off date

Effective date

May 31, 2022 August 26, 2022

For the year ended May 31, 2022
Resolution
Annual general meetingof the shareholders on
August 27, 2021

Type of shares
Common stock¥268¥30.00 May 31, 2021 August 30, 2021

The amounts of the required contribution to the defined contribution plans of the Company and its consolidated subsidiaries were¥113 million ($813 thousand) and ¥116 million for the years ended May 31, 2023 and 2022, respectively.

57 Toyo Denki Seizo Report 2023

Toyo Denki Seizo Report 2023

58

Financial Report2) Dividends with the cut-off date in the year ended May 31, 2023, and the effective date in the year ending May 31, 2024
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 30,
August 29, 2023
stock
2023
¥282
$2,024 earnings¥30.00$0.21 2023
Note 9. Selling, General and Administrative Expenses
The main components of “Selling, general and administrative expenses” for the years ended May 31, 2023 and 2022 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,
2023

May 31,
2022(Millions of yen)

¥1,811
39
292
199
0
755

May 31,
2023(Thousands of
U.S. dollars)¥1,868
6
315
202
(0)
712

$12,963
279
2,095
1,427
0
5,402

Note 10. Special Gains (Losses), Net
The components of “Special gains (losses), net” for the years ended May 31, 2023 and 2022 were as follows:

For the Years Ended
Special gains:
Gain on sales of investment securities
Gain on sales of property, plant and equipment
Gain on reversal of foreign translation adjustment
Special losses:
Business restructuring expenses
Impairment loss
Loss on valuation of investment securities
Loss on valuation of investments in capital of subsidiaries and affiliates
Total

May 31,
2023

May 31,
2022(Millions of yen)

May 31,
2023(Thousands of
U.S. dollars)

¥ 530
150
—

¥ 366
—
94

$ 3,797
1,079
—

(513)
—
—
—
¥ 167

—
(2,256)(45)(155)¥(1,996)(3,674)———$ 1,201

Gain on sales of property, plant and equipment
This item consists of a gain of ¥150 million ($1,079 thousand) on the sale of a condominium (buildings and structures, land andother assets) held by the Company.
Business restructuring expenses
Business restructuring expenses were incurred for a loss on valuation of investments in capital, attorneys’ fees and other items as
part of the Company’s restructuring of business development in China for Changzhou Yangdian Zhanyun Transport Equipment Co.,
Ltd., the Company’s unconsolidated subsidiary and Chalco-Toyo Permanent Magnet Motor Co., Ltd., the Company’s affiliate notaccounted for by the equity method.
Note 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 30.6% for the years ended May 31,
2023 and 2022. 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, 2023, was as follows:

For the Year Ended
Effective statutory tax rate
Effect of:
Non-deductible expenses for income tax purpose
Non-taxable income such as dividends income, etc.
Per capita inhabitant tax
Valuation allowance
Income from affiliates accounted for by the equity method
Difference arising from the rates used by subsidiaries
Retained profit of affiliates
Research and development tax credit
Other
Effective tax rate

May 31,
2023
30.6%
1.5
(1.4)
2.4
(2.8)
(5.9)
0.7
5.2
(1.2)
(0.6)
28.6%

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, 2022, is omitted since loss before income taxes was recorded for the year ended May 31, 2022.

Impairment loss
There was no applicable information for the year ended May 31, 2023.
The Group recognized an impairment loss on the following group of assets for the year ended May 31, 2022.
Loss on impairment(Millions of yen)
Location
Type of assets
Use
Manufacturing equipment of
Toyo Denki Seizo K.K. Shiga Ryuo plant
Buildings, etc.
¥2,256
Industrial Systems(Ryuo-cho, Shiga Pref.)In assessing impairment losses, the Group groups its business assets based on business classification for management
accounting purposes under which income and expenditure are managed on an ongoing basis.
Since the future cash flows were lower than the carrying value of the asset group due to a deterioration in the earnings
environment, the value of various fixed assets was reduced to their recoverable amount and the reduced amount was recorded as an
impairment loss under special losses. The recoverable amount is measured using the value in use and calculated by discounting thefuture cash flows at 4.8%.
The above assets consist of buildings and structures in the amount of ¥2,046 million, machinery, equipment and vehicles in theamount of ¥178 million and land in the amount of ¥30 million.

59 Toyo Denki Seizo Report 2023

Toyo Denki Seizo Report 2023

60

Financial Report

The significant components of deferred tax assets and liabilities as of May 31, 2023 and 2022 were as follows:

May 31,
2023

As of

May 31,
2022

May 31,
2023(Millions of yen)

Deferred tax assets:
Write-down of inventories
Impairment loss
Liability for retirement benefits
Accrued employees’ bonuses
Reserve for losses on order acknowledgements
Provision for product warranties
The carryforward of unused tax losses (Note 2)
Other
Total gross deferred tax assets
Valuation allowance for the carryforward of unused tax losses (Note 2)
Valuation allowance for deductible temporary differences
Total valuation allowance (Note 1)
Total deferred tax assets
Deferred tax liabilities:
Unrealized holding gain on securities
Other
Total deferred tax liabilities
Net deferred tax assets¥

Year ended May 31, 2022

(Thousands of
U.S. dollars)

353
661
1,255
243
123
21
121
387
3,168
(116)
(442)
(559)
2,608

¥ 307
691
1,266
252
131
2
129
496
3,278
(129)
(462)
(592)
2,686

$ 2,532
4,732
8,980
1,744
883
154
868
2,770
22,667(835)(3,168)(4,001)
18,666(2,371)(128)(2,500)¥ 108(1,736)(65)(1,802)¥ 883(16,968)(921)(17,889)$ 776(Note 1) Valuation allowance decreased by ¥32 million ($231 thousand) due primarily to a decrease for tax loss carryforwards as well
as a decrease due to an addition to deferred tax assets.
(Note 2) The breakdown of the carryforward of unused tax losses and valuation allowance by expiry date is as follows:Year ended May 31, 2023

(Millions of yen)
The carryforward of unused
tax losses (a)Valuation allowance
Deferred tax assets(Thousands of U.S.
dollars)
The carryforward of unused
tax losses (a)Valuation allowance
Deferred tax assets

Due after
One Yearthrough
Two Years

Due after
Two Years
throughThree Years

Due afterThree Years
through
Four Years

Due after
Four Years
throughFive Years

Due after
Five Years

¥—

¥—

¥—

¥ 5

¥ 47

¥ 68

¥ 121

—
—

—
—

—
—

(1)
4

(47)
—

(68)
—

(116)
4(b)

Due inOne Year or Less

Total

Due after
One Yearthrough
Two Years

Due after
Two Years
throughThree Years

Due afterThree Years
through
Four Years

Due after
Four Years
throughFive Years

Due after
Five Years

$—

$—

$—

$ 41

$ 336

$ 490

$ 868

—
—

—
—

—
—

(8)
33

(336)
—

(490)
—

(835)
33(b)

Due inOne Year or Less

Total(a) The amount is determined by multiplying the corresponding carryforward of unused tax losses by the effective statutory tax rate.
(b) Deferred tax assets of ¥4 million ($33 thousand) are recognized for the carryforward of unused tax losses of ¥121 million ($868
thousand) (amount multiplied by the effective statutory tax rate). The said deferred tax assets of ¥4 million ($33 thousand) arerecognized for the carryforward of unused tax losses of ¥96 million (690 thousand) (amount multiplied by the effective statutory
tax rate) of TD Drive Manufacturing Co., Ltd., which is a consolidated subsidiary of the Company.

61 Toyo Denki Seizo Report 2023

(Millions of yen)
The carryforward of unused
tax losses (a)Valuation allowance
Deferred tax assets

Due after
One Yearthrough
Two Years

Due after
Two Years
throughThree Years

Due afterThree Years
through
Four Years

Due after
Four Years
throughFive Years

Due after
Five Years

¥ 5

¥—

¥—

¥—

¥ 12

¥ 111

¥ 129

¥ (5)
—

—
—

—
—

—
—

(12)
—

(111)
0

(129)
0(b)

Due inOne Year or Less

Total(a) The amount is determined by multiplying the corresponding carryforward of unused tax losses by the effective statutory tax rate.
(b) Deferred tax assets of ¥0 million are recognized for the carryforward of unused tax losses of ¥129 million (amount multiplied by
the effective statutory tax rate). The said deferred tax assets of ¥0 million are recognized for the carryforward of unused tax lossesof ¥20 million (amount multiplied by the effective statutory tax rate) of Toyo Shoji Co., Ltd., which is a consolidated subsidiary of
the Company.
(Accounting under the group tax sharing system)
The Company and its domestic consolidated subsidiaries are shifting from the single tax filing system to the group tax sharing systemfrom the year ending May 31, 2024. Accordingly, the Company has applied the “Practical Solution on the Accounting and Disclosure
Under the Group Tax Sharing System” (ASBJ Practical Solution No. 42, August 12, 2021) to account for and disclose tax effectaccounting for national and municipal income taxes effective May 31, 2023.
Note 12. Other Comprehensive Income (Loss)
The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive income(loss) for the years ended May 31, 2023 and 2022:

For the Years Ended

May 31,
2023

May 31,
2022(Millions of yen)

May 31,
2023(Thousands of
U.S. dollars)

Unrealized holding gain (loss) on securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTax effectUnrealized holding gain (loss) on securities¥1,560
530
2,091
(635)
1,456

¥(1,655)366(1,289)399(889)$11,166
3,797
14,963(4,543)
10,420Translation adjustments
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTranslation adjustments

—
—
—
—

—
2
2
2

—
—
—
—

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

15
35
50
(15)
35

24
26
51
(15)
35

113
250
364
(111)
252

57

53

412

57
¥1,54953¥ (797)412$11,085

Share of other comprehensive income of affiliates accounted for by the equity
methodAmount arising during the year
Share of other comprehensive income of affiliates accounted for by theequity method
Total other comprehensive income (loss)

Toyo Denki Seizo Report 2023

62

Financial Report

Note 13. Lease Transactions
Information on finance leases that do not transfer ownership of the leased property to the lessee is omitted since there is nomateriality in terms of value.
Note 14. Contingent Liabilities
As of May 31, 2023 and 2022, the Company was committed to provide guarantees on bank borrowings of the following affiliates:

As of

May 31,
2023

May 31,
2022(Millions of yen)

May 31,
2023(Thousands of
U.S. dollars)

¥325
231

¥316
224

$2,327
1,654

For the Years Ended

May 31,
2023

May 31,
2022

May 31,2023

Net income (loss):
Basic¥91.85¥(104.02)

As of

May 31,
2023

May 31,2022

Net assets¥2,605.99

Changzhou Ruiyang Transmission Technology Co., Ltd.
Beijing Jingche Shuangyang Traction System Co., Ltd.
Note 15. Amounts Per Share(Yen)(U.S. dollars)

(Yen)

$0.66
May 31,
2023(U.S. dollars)¥2,462.17$18.64

Note: Diluted net income per share is omitted for the year ended May 31, 2023 since there is no dilution of equity. Diluted net income per share is omitted for the year ended
May 31, 2022 since there is no dilution of equity and the Company recorded net loss per share for the period.

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

For the Years Ended

May 31,
2023

May 31,
2022(Millions of yen)

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

¥824
—
824

Average number of shares of common stock during the year

8,977

May 31,
2023(Thousands of
U.S. dollars)¥(930)—(930)$5,899—5,899(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 that have sound credit profiles.
(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 positions 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 position limits. Monthly reports including data on actual transactions are submitted to the Board of
Directors for 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 reports 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
Since various assumptions and factors are reflected in estimating the fair value, different assumptions and factors could result indifferent fair values. In addition, the notional amounts of derivatives in Note 19, Derivative Transactions are not necessarily indicativeof the actual market risk involved in derivative transactions.
Fair value of financial instruments(Thousand shares)

8,940

Note 16. Financial Instruments
Overview(1) Policy for financial instruments
The Group raises the necessary funds for capital investment 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 in relation
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 as hedging instruments to reduce such risk.

63 Toyo Denki Seizo Report 2023

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 “1. Summary of Significant Accounting Policies (s) Derivative financial instruments.”

The carrying value and fair value of financial instruments on the consolidated balance sheets as of May 31, 2023 and 2022, anddifferences between the two, are shown in the following table.

As of May 31, 2023

Carrying value

Fair value

Difference(Millions of yen)

AssetsInvestment securities*1
Total assets
Liabilities
Long-term debt*2
Total liabilities¥13,226¥13,226¥13,226¥13,226¥—¥—¥11,173¥11,173¥11,178¥11,178¥ 4¥ 4

Toyo Denki Seizo Report 2023

64

Financial Report

As of May 31, 2023

Carrying value

Fair value

Difference(Thousands of U.S. dollars)

As of May 31, 2023

AssetsInvestment securities*1
Total assets
Liabilities
Long-term debt*2
Total liabilities$94,629$94,629$94,629$94,629$—$—$79,944$79,944$79,978$79,978$ 34$ 34*1 Investment securities
The fair value of investment securities is determined based on quoted prices on the stock exchange.
Securities are held as available-for-sale securities. For notes on these securities, see Note 17 “Securities.”*2 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, isbased 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 current
portion of long-term debt is included in the above table.

As of May 31, 2022

Carrying value

Fair value

Difference(Millions of yen)

AssetsInvestment securities*1
Total assets
Liabilities
Long-term debt*2
Total liabilities¥11,408¥11,408¥11,408¥11,408¥—¥—¥11,759¥11,759¥11,770¥11,770¥ 10¥ 10*1 Investment securities
The fair value of investment securities is determined based on quoted prices on the stock exchange.
Securities are held as available-for-sale securities. For notes on these securities, see Note 17 “Securities.”*2 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, isbased 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 current
portion of long-term debt is included in the above table.

Notes:
1. Cash on hand and in banks, trade notes and accounts receivable, electronically recorded receivables, trade notes and accounts
payable, electronically recorded payables, short-term borrowings, income taxes payable, etc. are omitted since these items aresettled in a short period of time and their carrying value approximates their fair value.
2. Equity securities without market quotation, etc. are not included in the above investment securities. The carrying value of suchfinancial instruments is as follows:

May 31,
2023

As of

May 31,
2022(Millions of yen)

¥1,062Unlisted equity securities

May 31,
2023(Thousands of
U.S. dollars)¥1,062$7,602

3. Redemption schedule for receivables and securities with maturities on May 31, 2023 and 2022 were as follows:

As of May 31, 2023

Due in One
Year or Less

Due after
One YearthroughFive 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

65 Toyo Denki Seizo Report 2023

¥ 5,520
7,942
1,116¥14,579

¥—
33
—
¥ 33

¥—
—
—
¥—

¥—
—
—
¥—

Due in One
Year or Less

Due after
One YearthroughFive 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, 2022

$ 39,493
56,825
7,991$104,311

$—
237
—
$237

$—
—
—
$—

$—
—
—
$—

Due in One
Year or Less

Due after
One YearthroughFive 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¥ 4,449
7,643
1,136¥13,229

¥—
32
—
¥ 32

¥—
—
—
¥—

¥—
—
—
¥—

4. The redemption schedule for long-term debt is disclosed in Note 6.
Fair value information by level within the fair value hierarchy
The fair value of financial instruments is classified into the following three levels according to the observability and materiality of
inputs used to measure fair value.
Level 1 fair value: Fair value measured using (unadjusted) quoted prices in active markets for assets or liabilities that are thesubject of the measurement.
Level 2 fair value: Fair value measured using directly or indirectly observable inputs other than Level 1 inputs.
Level 3 fair value: Fair value measured using significant unobservable inputs.
If multiple inputs that are significant to the fair value measurement are used, the fair value measurement is categorized in its entirety
in the level of the lowest level input that is significant to the entire measurement.
(1) Financial assets and liabilities measured at fair value

As of May 31, 2023

Fair value
Level 1

Level 2

Level 3

Total

(Millions of yen)

Investment securities:
Available-for-sale securities:
Equity securities
Total financial assets
Not applicable to financial liabilities

As of May 31, 2023

¥13,226¥13,226

¥—
¥—

¥—
¥—

¥13,226¥13,226

Fair value
Level 1

Level 2

Level 3

Total

(Thousands of U.S. dollars)

Investment securities:
Available-for-sale securities:
Equity securities
Total financial assets
Not applicable to financial liabilities$94,629$94,629

$—
$—

$—
$—

$94,629$94,629

Toyo Denki Seizo Report 2023

66

Financial Report

As of May 31, 2022

Note 17. Securities

Fair value
Level 1

Level 2

Level 3

Total

(Millions of yen)

Investment securities:
Available-for-sale securities:
Equity securities
Total financial assets
Not applicable to financial liabilities

Available-for-sale securities¥11,408¥11,408

¥—
¥—

¥—
¥—

¥11,408¥11,408(2) Financial assets and liabilities other than those measured at fair value

As of May 31, 2023

Fair value
Level 1

Level 2

Level 3

Total

(Millions of yen)

Not applicable to financial assets
Long-term debt
Total financial liabilities

As of May 31, 2023¥—¥—

¥11,178¥11,178¥—¥—¥11,178¥11,178

Fair value
Level 1

Level 2

Level 3

Total

(Thousands of U.S. dollars)

Not applicable to financial assets
Long-term debt
Total financial liabilities

As of May 31, 2022$—$—

$79,978$79,978$—$—$79,978$79,978

Fair value
Level 1

Level 2

Level 3

Total

(Millions of yen)

Not applicable to financial assets
Long-term debt
Total financial liabilities

Information regarding securities classified as available-for-sale securities¥—¥—¥11,770¥11,770¥—¥—¥11,770¥11,770

As of May 31, 2023

Carrying value Acquisition cost

Unrealized
gain (loss)(Millions of yen)

Securities for which carrying value exceeds acquisition cost:
Stock
Subtotal
Securities for which acquisition cost exceeds carrying value:
Stock
Subtotal
Total

As of May 31, 2023

¥13,162¥13,162¥5,411¥5,411¥7,751¥7,751¥
63¥
63¥13,226¥ 72¥ 72¥5,484¥ (9)¥ (9)¥7,741

Carrying value Acquisition cost

Unrealized
gain (loss)(Thousands of U.S. dollars)

Securities for which carrying value exceeds acquisition cost:
Stock
Subtotal
Securities for which acquisition cost exceeds carrying value:
Stock
Subtotal
Total$94,175$94,175$38,717$38,717$55,458$55,458

$ 453
$ 453
$94,629

$ 521
$ 521
$39,238$ (68)$ (68)$55,390

Note: 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 themarket value and the acquisition cost as an impairment loss. If the decline ranges between about 30% and 50%, the Group recognizes an impairment loss for thenecessary amount considering its recoverability.

As of May 31, 2022

Carrying value Acquisition cost

Unrealized
gain (loss)(Millions of yen)

Note: A description of the valuation techniques and inputs used in the fair value measurements
Investment securities
The fair value of listed equity securities is based on quoted market prices. As listed equity securities are traded in active markets, theirfair value is classified as Level 1.
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, 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 is classified
as Level 2.
The fair value of long-term debt includes the current portion of long-term debt.

Securities for which carrying value exceeds acquisition cost:
Stock
Subtotal
Securities for which acquisition cost exceeds carrying value:
Stock
Subtotal
Total¥5,539¥5,539¥5,666¥5,666¥ 202¥ 202¥11,408

¥ 218
¥ 218
¥5,758¥ (15)¥ (15)¥5,650Note: Acquisition cost in the above table represents carrying value reflecting impairment losses. In the year ended May 31, 2022, the Company recognized loss on valuationof investment securities in the amount of ¥45 million.
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 themarket value and the acquisition cost as an impairment loss. If the decline ranges between about 30% and 50%, the Group recognizes an impairment loss for thenecessary amount considering its recoverability.

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

67 Toyo Denki Seizo Report 2023

¥11,205¥11,205

May 31,
2023

May 31,
2022(Millions of yen)

¥818
530
—

May 31,
2023(Thousands of
U.S. dollars)

¥466
366
—

$5,856
3,797—

Toyo Denki Seizo Report 2023

68

Financial Report

Note 18. Supplementary Cash Flow Information
Cash and cash equivalents in the consolidated statements of cash flows for the years ended May 31, 2023 and 2022 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,
2023

May 31,
2022(Millions of yen)

¥5,520¥5,520¥4,449¥4,449May 31,
2023(Thousands of
U.S. dollars)$39,493$39,493

Note 20. Revenue Recognition
1. Disaggregation of revenue from contracts with customers
Information about disaggregation of revenue arising from contracts with customers is as follows:

Reportable segment:
Transportation Systems

Note 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 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:
As of May 31, 2023 and 2022, there were no currency-related derivatives.
Derivative transactions to which hedge accounting is applied:
As of May 31, 2023 and 2022, there were no interest-related derivatives.

May 31,2023

For the Years Ended

Industrial Systems

ICT Solution Systems

May 31,
2022(Millions of yen)Domestic railway
Overseas railway
Other
Subtotal
Processing machine
Testing machinePower generator/power source
Other
Subtotal
ICT solutions
Subtotal

Other (Note)
Total
Revenue arising from contracts withcustomers
Sales to third parties

May 31,
2023(Thousands of
U.S. dollars)¥13,333
4,492
2,031¥19,857¥ 3,321
2,341
1,561
2,680
¥ 9,905¥ 1,256¥ 1,256¥
6¥31,025¥14,705
2,831
1,919¥19,456¥ 2,719
2,173
2,187
2,822
¥ 9,902
¥ 790
¥ 790
¥
9
¥30,158$ 95,393
32,144
14,531$142,069$ 23,765
16,753
11,16919,180$ 70,868$ 8,991$ 8,991$
45$221,974¥31,025¥30,158$221,974¥31,025¥30,158$221,974

Note: “Other” represents business units which are not included in reportable segments and consists of worker dispatching services related activities, etc.
From the year ended May 31, 2023, the Group has renamed the Information Equipment Systems segment as the “ICT Solution Systems” segment. Accordingly, thesegment in the previous year is presented under the new name. This change does not have an impact on the information about disaggregation of revenue arising fromcontracts with customers by reportable segments.

2. Useful information in understanding revenue from contracts with customers
This information is as stated in (q) Accounting for significant revenue and costs under 1. Summary of Significant Accounting Policies.
Consideration for performance obligations is usually received within one year of satisfying the performance obligations and does
not include any significant financing component.
3. Balance of contract assets and liabilities and the transaction price allocated to the remaining performance obligations(1) Balance of contract assets and liabilities

As of
Receivables from contracts with customers (beginning balance)
Receivables from contracts with customers (ending balance)
Contract assets (beginning balance)
Contract assets (ending balance)
Contract liabilities (beginning balance)
Contract liabilities (ending balance)

May 31,
2023

May 31,
2022(Millions of yen)

¥8,812
9,092
4,415
5,260
47
84

May 31,
2023(Thousands of
U.S. dollars)¥10,280
8,812
3,838
4,415
34
47

$63,046
65,05531,594
37,639342
606

Contract assets relate to the right of the Group to consideration for contracts with customers which have been completed but an
invoice has not yet been issued as of the end of the fiscal period. Once the Group has an unconditional right to consideration, it
reclassifies contract assets to receivables from contracts with customers.
Contract liabilities primarily relate to advances received from customers based on the contracts with customers before theperformance obligation is satisfied. Contract liabilities are reversed as revenue is recognized.
Revenue recognized in the years ended May 31, 2023 and 2022 that was included in the contract liability balance at the beginningof the year was ¥45 million ($322 thousand) and ¥27 million, respectively.

69 Toyo Denki Seizo Report 2023

Toyo Denki Seizo Report 2023

70

Financial Report(2) Transaction price allocated to the remaining performance obligations
The total transaction prices allocated to the remaining performance obligations as of May 31, 2023 and 2022 were ¥29,496 million($211,034 thousand) and ¥27,275 million, respectively, and the Group expects to recognize revenue mainly within a period of one tothree years as such remaining performance obligations are satisfied.

For the year ended May 31, 2023
Reportable segments
Transportation
Industrial
ICT Solution
Other
Systems
Systems
Systems(Note)
Total

Adjustments

Consolidated(Thousands of U.S. dollars)Note 21. Segment Information
The reportable segments of the Group are components for which discrete financial information is available and whose operating
results are regularly reviewed by the Board of Directors to make decisions about resource allocation and assess performance.
The Group establishes business units by product, and each business unit designs domestic and overseas comprehensive
strategies for its products and develops business activities. Accordingly, the Group consists of the three reportable segments byproduct based on the business units, which are Transportation Systems, Industrial Systems and ICT Solution Systems.
From the year ended May 31, 2023, the Group has renamed the Information Equipment Systems segment as the “ICT Solution
Systems” segment. This change does not have an impact on segment information.
Accordingly, the segment in the previous year is presented under the new name.
The accounting policies of the segments are substantially the same as those described in the significant accounting policies in “1.
Summary of Significant Accounting Policies.” 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, 2023
Reportable segments
Transportation
Industrial
ICT Solution
Other
Systems
Systems
Systems(Note)
Total

Sales, profits orlosses and asset byreportable segment
Net sales:
Sales to third parties
Inter-segment sales
and transfers$142,069$70,868$8,991$45$221,974$—$221,974

Segment profit (loss)
Segment assets

240
142,310$ 16,164$110,150

7
70,876$ 3,427$82,847—
8,991$2,960$5,9762,144
2,189$ (107)$3,055

2,392
224,367$ 22,445$202,030(2,392)(2,392)$ (18,742)$153,426—
221,974$ 3,703$355,456

Other items:
Depreciation
Capital expenditures$ 2,979$ 1,204$ 2,412
$ 489

$ 134
$ 28

$
$

$ 5,546$ 1,736$$$ 6,010$ 2,218

Segment profit (loss)
Segment assets
Other items:
Depreciation
Capital expenditures

464
482

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

Adjustments

For the year ended May 31, 2022

Consolidated

Reportable segments
Transportation
Industrial
ICT Solution
Systems
Systems
Systems(Millions of yen)

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

19
14

Other
(Note)

Total

Adjustments

Consolidated(Millions of yen)

¥19,857¥ 9,905¥1,256¥ 6¥31,025¥—¥31,02533
19,890¥ 2,259¥15,395

1
9,906
¥ 479
¥11,579

—
1,256
¥ 413
¥ 835

299
306
¥ (14)¥427

334
31,359¥ 3,137¥28,237

(334)
(334)
¥ (2,619)¥21,444—
31,025¥ 517¥49,682

¥
¥

416
168

¥
¥

337
68

¥
¥

18
3

¥ 2
¥ 1

¥
¥

775
242

¥
¥

64
67

¥
¥

840
310

Sales, profits orlosses and asset byreportable segment
Net sales:
Sales to third parties
Inter-segment sales
and transfers¥19,456¥ 9,902¥790¥ 9¥30,158¥—¥30,158

Segment profit (loss)
Segment assets

10
19,467¥ 2,190¥16,276

0
9,903
¥ 477
¥10,068

—
790
¥142
¥691

329
338
¥ (19)¥434

340
30,499¥ 2,791¥27,471

(340)
(340)
¥ (2,619)¥19,444—
30,158¥ 171¥46,916

Other items:
Depreciation
Capital expenditures

¥
¥

¥
¥

¥ 21
¥ 4

¥ 3
¥—

¥ 1,008¥ 284¥¥¥ 1,257
¥ 315

513
164

470
115

248
31

Note: “Other” represents business units that are not included in reportable segments, and consists of worker dispatching services 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, 2023
and 2022 were summarized as follows:

For the Years Ended

May 31,
2023

Japan
China
Other
Consolidated¥24,915
4,536
1,574¥31,025

May 31,
2022(Millions of yen)

May 31,
2023(Thousands of
U.S. dollars)¥25,779
3,015
1,363¥30,158$178,257
32,455
11,262$221,974

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

71 Toyo Denki Seizo Report 2023

Toyo Denki Seizo Report 2023

72

Financial Report

Information

Stock Related Information

Major customer information
Major customer information for the years ended May 31, 2023 and 2022 was omitted since there was no customer to which sales
exceeded 10% of net sales recorded in the accompanying consolidated statements of income.
Information about impairment loss on property, plant and equipment

For the year ended May 31, 2022
Reportable segments
Transportation
Industrial
ICT Solution
Other
Systems
Systems
Systems(Note)
Total

Adjustments

Consolidated(Millions of yen)¥—

¥2,256Note 22. Significant Subsequent Events
There were no significant subsequent events to be noted.

¥—

Number of shares authorized

36,000,000

Number of shares issued

9,735,000

Number of shareholders

6,100

Distribution of shares by type of shareholder¥—¥2,256¥—¥2,256

Treasury stock
3.10%

Financial instruments
business operators
1.09%

Major shareholders

There was no applicable information for the year ended May 31, 2023.

Impairment loss

Number of shares (As of May 31, 2023)

Number of shares held
% of
Shareholders(Thousands)
total shares held
East Japan Railway Company
973
10.31
The Master Trust Bank of Japan, Ltd. (Trust account)676
7.17
Employees Stock Ownership Plan
495
5.25
Toyo Denki Subcontractor Factories
345
3.66
Shareholding Association
NIPPON LIFE INSURANCE COMPANY
337
3.57
MUFG Bank, Ltd.
270
2.86
Sanshin Co., Ltd.
270
2.86
The Bank of Yokohama, Ltd.
207
2.20
Ohkuraya jutaku Inc.
206
2.18
BNP PARIBAS LUXEMBOURG/2S/JASDEC/
146
1.55
JANUS HENDERSON HORIZON FUND

Foreigncorporations, etc.
4.89%
Other
corporations
22.60%
Individuals
and others
47.56%

Financial
institutions
20.76%(Note) The percentages of total shares held are calculated excluding 301 treasury stocks.

Transition of share price
Share price
(Yen)

1,500
(Yen)

1,500
1,200
1,200
900
900
600
600
300
3000
(Thousands) 2020.6

2021.12022.12023.12020.6(Thousands)
1,500

2021.12022.12023.1

Trading
volume2,0000
2,000
1,000
1,500
500
1,000
0
500
0

Disclaimer 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.

73 Toyo Denki Seizo Report 2023

Toyo Denki Seizo Report 2023

74

Information

Company Profile(as of May 31, 2023)
Hokkaido Branch

Organization Chart(Revised on December 1, 2023)

Sustainability Promotion Office

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

Established

June 20, 1918

Capital4,998,390,000 yen

Number of Employees

1,149 (Consolidated)
792 (TOYO DENKI SEIZO K.K.)

General Affairs Division

Shiga Ryuo
Plant

Okinawa
BranchYokohama plant

Subsidiaries and Affiliates
Consolidated subsidiaries

Affiliates accounted for by the equity method

Non-consolidated subsidiaries

Transportation Systems
Japan
Overseas

Affiliates not accounted for by the equity method

Industrial Systems

TOYOKOUKI Co., Ltd.
Taihei Electric Co., Ltd.

Information Equipment Systems

Toyosangyo K.K.
TD Drive Co., Ltd.

OthersToyo Shoji
Co., Ltd.

Toyo Denki (Beijing) Co., Ltd. (China)
Changzhou Yangdian Zhanyun Transport Equipment Co., Ltd. (China)
Changzhou Ruiyang Transmission Technology Co., Ltd. (China)
Beijing Jingche Shuangyang Traction System Co., Ltd.
(China)Chengdu Yonggui Toyo Rolling Stock Equipment Co., Ltd.
(China)TOYO DENKI RAILWAY SERVICE, LLC. (U.S.)

Human Resources Department

Financial Affairs Division

Education and Development Department
Finance Department

SIAM TOYO DENKI Co., Ltd.
(Thailand)
Chalco-Toyo Permanent Magnet
Motor Co., Ltd. (China)

National and Global Group
Company Council

Executive Officer Liaison
CouncilBusiness Strategy Meeting

Quality Control Department 2
Production Engineering Department

Purchasing Division

Production Planning Department
Planning and Research Department

Development Center

Audit Division

Osaka Sales Division
Nagoya Sales Division
China Sales Division
Overseas Project Division
Transportation Engineering Management Division
Transportation Engineering Division

Nomination and Compensation
Advisory Committee
Internal Control Committee

Overseas Engineering Division
Development Division
Transportation Systems Works
Production Management Division
Design Division
Quality Assurance Division

Sustainability Committee

Industry Business Unit

Yonggui Toyo

Yangdian Zhanyun
Chalco-Toyo

Industrial Systems Works
Production Management Division

SIAM TOYO

Toyosangyo K.K.
TD Drive Co., Ltd.

TOYO DENKI RAILWAY SERVICE

Toyo Shoji Co., Ltd.

ICT Solution Business Unit

Contact
Please use the inquiries form on the Company website for any questions regarding this Integrated Report.
Inquiry form URL: https://www.toyodenki.co.jp/en/inquiry/

75 Toyo Denki Seizo Report 2023

Toyo Denki (Beijing) Co., Ltd.
Beijing Jingche Shuangyang Traction System Co., Ltd.
Chengdu Yonggui Toyo Rolling Stock Equipment Co., Ltd.
Chalco-Toyo Permanent Magnet Motor Co., Ltd.
SIAM TOYO DENKI Co.,Ltd.
TOYO DENKI RAILWAY SERVICE, LLC.

Design Division
Quality Assurance Division
Manufacturing Division
Procurement Division
ICT Business Planning Division
Business Strategy Promotion Division
Sales Division
ICT Works
Design Division
Quality Assurance Division

Changzhou Yangdian Zhanyun Transport Equipment Co., Ltd.
Changzhou Ruiyang Transmission Technology Co., Ltd.

* See the table above for the full names of subsidiaries and affiliates.

Manufacturing Division
Procurement Division
Industry Business Planning Division
Sales Division 1
Sales Division 2
Sales Division 3
Sales Division 4
Engineering Division
Development Division

Taihei Electric Co., Ltd.

Changzhou Ruiyang

Transportation Business Planning Division
JR Group Sales Division
Commuter Rail and Subway Sales Division

TOYOKOUKI Co., Ltd.

Toyo Denki (Beijing)

Business Development Division
Product Development Division
Fundamental Technology Division
Technical Management Division

Subsidiaries and Affiliates

Jingche Shuangyang

Planning and Research Department
Quality Control Department 1

Production Engineering Division

Transportation Business Unit

Audit Office

6,100

NagoyaOsaka Branch
BranchPresident

Number of Shareholders

KyushuBranchHiroshima
BranchHead office

Audit andSupervisory
Board Members

9,735,000 shares

Yokohama
BranchBoard of Directors

Number of Shares Issued

Human Resources Division

Quality Control Division

Audit andSupervisory
Board

The Tokyo Stock Exchange,
Standard Market
36,000,000 shares

General Affairs Department

Group Administration Division

General Meeting of Shareholders

Stock Exchange
Listing
Number of Shares Authorized

PR, IR and CSR Department
Information Systems Department

Accounting Department

Sendai Branch

1-4-16, Yaesu, Chuo-ku, Tokyo, 103-0028, Japan
TEL +81-3-5202-8121 (General Affairs Division)
https://www.toyodenki.co.jp/

6505

Corporate Planning Department

Legal Compliance Department
Export Control Department

Head Office

Code Number

Corporate Planning Division

Yokohama Plant
Shiga-Ryuo Plant
Osaka Branch
Nagoya Branch

Administration Division
Administration Division

Kyushu Branch
Hokkaido Branch
Toyo Denki Seizo Report 2023

76