Annual Results Briefing for FY2018 - Summary of Questions and Answers -Date andFriday, May 10, 2019 10:30 a.m. - 11:30 a.m.

TimePresenter

TOKAI Holdings

President & CEO

Katsuhiko Tokita

TOKAI CORPORATION

Representative Director and President

Katsuo Oguri

TOKAI Communications

Representative Director and President

Yasuhiro Fukuda

Representative Director and President

Mitsuhaya Suzuki

Director and Managing Executive Officer

Hidetsugu Mizoguchi

TOKAI Holdings

Executive Officer, and General Manager

Toshikatsu Nakamura

Corporationof Next Generation Management StrategyCorporationCorporation

TOKAI Cable Network
Corporation

TOKAI Holdings
CorporationDivisionTOKAI Holdings

Executive Officer, and in charge ofCorporation

Corporate Management Division andToshinori Nakamura

Accounting Division
Chairperson

TOKAI Holdings

Executive Officer, and Head of Investor

CorporationRelations Office1

Yoshihiro Taniguchi

Q.

In regard to the relationship between the increase in number of customers and earnings in the LPgas business, many other companies in the same business point out that increase in number ofcustomers does not easily link to earnings due to increasing additional expenses. In case of yourcompany, however, increase in number of customers is linked effectively.
Please explain the situation.

A.

Under the present situation, trade area acquisitions are conducted more than M&As in LP gas business.
We are saving fixed costs and this is because we are controlling customer acquisition and maintenancecosts.
Furthermore, while an increase of 20,000 to 30,000 customers are expected through business alliance forthe current fiscal year, since we will be succeeding customers of other companies, the number ofcustomers can be increased without having to spend costs on acquisition and others. New business areas
are also continuously expanded.
Many LP gas operators are going out of business every year. Operators fell from a peak of 48,000 to thecurrent level of less than 18,000. Since this trend is expected to accelerate in due course, we will increase
the number of customers by acquiring or forming business alliance with such operators without cost.

Q.

Please explain your views on system reform (electricity deregulation, city gas deregulation).

A.

In regard to electricity deregulation, we have formed an alliance with Tokyo Electric Power Company(TEPCO) to mainly provide electricity and gas as a set. This product service is intended to be used as ameans to retain our customers when solicited by rival companies.
Customer acquisition in gas business requires specific know-how, but with our know-how developed in
the past, acquisition will be possible.
In regard to city gas deregulation, currently, there are approximately 200 operators nationwide including
both public and private. There are many operators who have been protected under an authorized systemdeveloped before the deregulation, and public operators will be privatized in the future. The city gas
business will now be starting in Gunma Prefecture and Akita Prefecture. In that sense, we intend to
greatly make use of deregulation.

Q.

Please explain the achievements in the overseas business and its future potentials.

A.

Overseas business is currently being developed in China, Taiwan, and Myanmar.
In China, a local company was established in 2012 and drinking water business is being developed.
Stylish in-house water dispensers, which were developed in the following year, are now being
manufactured and exported. Currently, business is expanding through manufacture and sales ofadvanced-function water dispensers with energy saving and automatic washing functions. Surplus wasachieved in the FY2018 and further expansion is planned in the future.
In Taiwan, we established a joint venture in 2013 with SYSCOM (SYSCOM Computer Engineering Co.,Ltd.), Taiwan’s top IT company, and business was launched. Now, the business is developed mainly in SIand development related areas, and surplus has already been achieved. Efforts toward business expansion
will continue to be made.
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In Myanmar, a local company was established in 2014. Its business initially started from installation workof gas pipelines targeting corporates, facilities, and others. As orders increased in the following year, thecompany shifted to a joint venture with ITO (ITO Corporation) to strengthen its organizational structure.
Orders of gas pipeline construction work including ones in plants advancing into industrial parks and inlarge scale commercial facilities have been received. Sales for FY2018 have been approximately five fold
as compared to FY2016.
Currently, Myanmar is showing remarkable economic development. Commercial and industrial demands
are significantly growing and its future business is with expectation. Surplus is planned to be achieved in
FY2019.
We are further reviewing future possibilities of developing LP gas business in other countries following
Myanmar.
Incidentally, since Myanmar was subject to restriction on foreign investment, a local company wasestablished initially as a gas pipeline construction company. With the recent deregulation of restriction on
foreign investment, we will consider developing a full-scale gas business which originally had been ourobjective.

Q.

What are views toward the future Information and Communications business such as data centerand corporate customer businesses?

A.

Currently, Ministry of Economy, Trade and Industry (METI) and Ministry of Internal Affairs andCommunications (MIC) are collectively working on a digital-based corporate reform in a form of digitaltransformation (DX), and we, too, are making advancement in the digitalization accordingly. Smoothsystem development is expected at this point. On the other hand, the 2025 digital cliff and shortfall inhuman resources are raised by the public. We also recognize this as a business challenge.
Corporate customer business, however, is favorable. This business recorded increase in income and profit
year on year, and is planned to record a significant increase in income and profit under the end of thecurrent fiscal year forecast.
In addition, while digital transformation is promoted, improvements in legacy systems are worked on.
Large growth in SI and entrusted development businesses is expected in the future.

Q.

FY2018 is exceeding IP20 when excluding the impact of procurement cost. FY2019 is almost thesame as IP20 when excluding the impact of procurement cost. Why is FY2019 budget formed byleaving IP20 as it is?

A.

The FY2019 budget is compiled by taking into account a considerable amount of increase in profit due tothe increase in number of customers. Meanwhile, system enhancement and infrastructure development arenecessary to some extent when aiming to achieve the final year of IP20 “JUMP”. These costs have also
been taken into account in the budget.

3Q.

Please explain the background to the exceedance of the medium-term management plan in theCATV business together with its future outlook.

A.

CATV business is progressing smoothly. Until several years ago, although a situation continued where
there was a net decrease in the number of broadcasting customers, business has entered into a netincreasing trend from FY2016. We are able to increase the number of customers, including
communication customers, to more than 20,000 every year. We see this trend will likely be continued forthe time being.
Meanwhile, CATV business has a characteristic of a process industry in a sense. Since the business isdeveloped by setting up various equipment including fiber-optic related investment, costs such as
investment cost, deprecation cost, and leasing cost are reflected in profit.
We have been winding coaxial cables for the past two years while smoothly proceeding with thefiber-optic related investment. Although this is carried out according to the plan responding to 4K/8K
broadcasting, the public is not showing much excitement toward it. Consequently, the plan wasreconsidered, and as a result, for the past two years, more is linked to profit. In the future, we will invest
appropriately while looking at the social trend, and continue increasing the number of customers. M&Awill also be further actively promoted with a hope to enhance growth of CATV business.

Q.

Please explain more in detail the present situation on how M&A has been reviewed, and based onsuch review, how M&A will be reviewed in the future.

A.

In the previous briefing, we explained 26 deals were under review. Now, there are 44.
In the past six months, deals related to city gas and CATV have come up. TLC is our strength and sinceboth city gas and CATV are community-based businesses, to promote TLC, these businesses are mostappropriate. It takes approximately one and a half years to two years until M&A deals are closed from thetime information is disclosed. At this moment, approximately 10 deals are simultaneously under review.
We feel that it is a matter of how merits of a counterparty and ours can reach an agreement. Current
situation is that various talks are being made. We view that they will be realized to some extent in the
coming two years.
City gas and CATV are process industries, and currently each operator is about to enter into a period ofreinvestment. This situation is what existing operators are concerned with. We will review M&A by also
taking this matter into account, and hope to attain results in the next two years.

4Q.

M&A has been achieved in CATV business but not in city gas business. What are the plans toachieve surplus after acquisition?

A.

City gas comes in all sizes. Yet, under the decreasing population and number of household, existing
operators are having an extremely hard time thinking of their stance after acquisition. Presently, we areconducting a 50,000 scale city gas business in Yaizu City and Fujieda City in Shizuoka Prefecture. There,
we have been able to securely acquire and maintain customers, developing this as our strength. Inaddition, since we are strong in the LP gas business in addition to city gas business, when consideringcommunity wise, we believe that our strength in both will allow us to maintain and not decrease thenumber of customers.
Besides, there is sufficient room for development in commercial and industrial use. Such areas previously
left unlaunched will be developed to improve profit.
Furthermore, various daily-life related services are provided group-wide. These product services can becomprehensively offered in community-based city gas or CATV businesses.
We believe the crossing of these three will allow us to create a vision where large scale demands can be
developed and agreements will be accumulated without decreasing the number of customers.

Q.

Gas business in Shimonita-machi has started in April. When is surplus planned to be achieved?

A.

Shimonita-machi gas business has already achieved a surplus and will be increasing its margin from nowon.
Meanwhile, investment such as exchange of gas pipelines is necessary. Appropriate investment will
increase the number of customers, develop demands, progress TLC promotion, and increase surplus
margin.

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