To Our Shareholders

110

The

th Fiscal YearBusiness Report
Apr il 1, 2018

March 31, 2019

Stock Exchange Code: 6623

To Our Shareholders
We are pleased to extend
our greetings to our share­
holders in presenting our110th annual report for the
fiscal year ended March
31, 2019.

Overview of business
During the period under review the Japanese
economy gradually improved against thebackground of steady corporate earnings andbetter employment conditions. Looking
overseas, while the global economy has been
improving, a gradual slowdown has become
apparent under the shadow of the US-China
trade friction.
In regards to the business conditions of ourgroup, the Motor Products Group enjoyed ahealthy market for air conditioners andelectronics components that resulted inincreasing demand for hermetic motors andprinted wiring boards. In the Electric Power
Products Group, electric power companies,
who are our main customers, suffered from
intensifying competition fueled by the electricity

Net sales 80,000 million yen
Electric Power Products GroupOperating income 4,200 million yen
Motor Products Group(Millions of Yen)

80,00060,000072,06574,88340,832

41,05480,034

6,000
5,000

46,66850,714

5,135
4,497

4,235

4,000
3,000
2,000

31,233107th(FY2016)1

6,767(Millions of Yen)

78,23240,00020,000deregulation, and therefore further streamlined
management efficiency.
Under such circumstances, our Group has
exerted itself to achieve the managementtargets (net sales of 80,000 million yen, ordinary
income of 4,500 million yen, and an ROA of
5.5%) for the final fiscal year of our 2018
medium-term management plan “Create thefuture with reliable technology.” Together with
this, the Group has strived to further expand
our businesses and products and reinforce oursustainable growth base. The Electric Power
Products Group has been moving forward withthe development of sophisticated power
distribution products and other new products,
while focusing on sales promotions of “TOPRUNNER” low loss transformers and biogas
power generation systems. The Motor ProductsGroup has worked to ramp up production
capacity of hermetic motors and printed wiringboards, while also promoting initiatives such as
new customer acquisition for our motors andactuators.
As a result, compared with the previous
year, net sales increased by 2.3% to 80,034
million yen thanks to a better performance int h e M o t o r P ro d u c t s G ro u p , b u t i n c o m e

33,828108th(FY2017)

31,563109th(FY2018)

29,319110th(FY2019)

1,000
0

107th

(FY2016)

108th(FY2017)

109th(FY2018)

110th(FY2019)

decreased because of a worse cost-to-sales
ratio in the Motor Products Groups and lower
sales in the Electric Power Products Group.
Compared with the previous year, operating
income was 4,235 million yen (a decrease of
17.5%) and ordinary income was 4,852 million
yen (a decrease of 4.4%), while net income
attributable to owners of parent was 3,109
million yen (a decrease of 7.2%).
Dividend
Our final dividend was 45 yen per share.
Combined with the interim dividend, the total
dividend was 90 yen per share.
Future prospects
In regards to the future, the Electric Power
Products Group is expected to see further
progress in streamlining and prolonging the lifeof equipment against the background of thecurtailment of wheeling charges in electric
power companies, who are our key customers,
as well as the termination of special demand for
PCBs. The Motor Products Group projects
stronger demand for on-vehicle motors, but its
concern is that more customers might opt fori n - h o u s e p ro d u c t i o n . A s s u c h , t h e c i r-

cumstances surrounding our Group areshowing increasingly severe change.
In order to quickly respond to thesechanging circumstances, we have formulated a
new 2023 medium-term management plan
“Create the future with reliable technology Innovation and Challenge -” that spans five
years from April 2019 to March 2024. The newplan sets out four basic policies: “developing
new products and new businesses,” “enhancing
the competitiveness of existing businesses,”“expanding overseas businesses,” and“strengthening our management base.” Inaccordance with these policies, we will aim forcontinued growth through steady im­
plementation of key initiatives.
As part of our efforts to strengthen groupmanagement, on April 1, 2020, the Company
will absorb and merge with a wholly-owned
subsidiary AICHI ELEC CO., a hermetic motors
maker.
We appreciate your continued un­
derstanding and support.
June 2019

Toru SatohPresident

Ordinary income 4,800 million yen

Net income attributable to owners of parent 3,100 million yen(Millions of Yen)

(Millions of Yen)

7,231

7,000
5,000

5,073

4,732

4,852

4,000

4,000
3,000

3,000

3,351

2,880

3,109

2,000

2,000

1,000

1,000
0

5,293

5,000

6,000

107th

(FY2016)

108th(FY2017)

109th(FY2018)

110th(FY2019)

0107th(FY2016)

108th(FY2017)

109th(FY2018)

110th(FY2019)2Performance at each GroupElectric Power Products GroupNet sales 29,300 million yen
Sales breakdown

Business description
This Group supports electric power infrastructure through overseas
substation construction and the design and manufacture of electricalequipment, such as different types of electric power transformers,
electric power protection and control devices, and equipment related torenewable energy.
breakdown
Overview Salesof FY2019
Both sales and income decreased owing to lower
sales of step voltage regulators for powertransformers,
distribution lines and pole-mounted
37%
although “TOP RUNNER” low loss transformers
yielded higher sales. Compared with theprevious year, net sales were 29,319 million yen(a decrease of 7.1%) and segment income was4,114 million yen (a decrease of 18.7%).

37%

Net sales trend (Millions of Yen)
33,828108th(FY2017)

31,56329,319

109th

110th

(FY2018)(FY2019)

Main products

Pole-mounted transformers

3“TOP RUNNER”
low loss transformers

Digital-type protection
and control devices

Step voltage regulators(SVR)

Power conditioners

On-load tap-changing
transformers (LRT)

Installation of substations

Motor Products GroupNet sales 50,700 million yen
Sales breakdown

Business description
This Group supplies products that facilitate daily living, including linear
actuators, controllers and handsets for electric beds, various small
motors including hermetic motors for air conditioners, printed wiringboards and shutter operators.

breakdown
Overview Salesof FY2019
Net sales increased thanks to favorable
performances of hermetic motors and printed
wiring boards, but income fell slightly short ofthe last fiscal63
year,
affected by climbing raw%
material prices and changes in the sales
distribution. Compared with the previous year,
net sales were 50,714 million yen (an increaseof 8.7%) and segment income was 1,664 million
yen (a decrease of 3.5%).

63%

Net sales trend (Millions of Yen)
41,054108th(FY2017)46,668109th(FY2018)

50,714110th(FY2019)

Main products

Linear actuators,
controllers and handsets

Boilers

Hermetic motors

Powder processing &drying equipment

Printed wiring boards

Shutter operators

Fans and controllers for
cattle farms

4

Financial report
Consolidated Balance Sheets
Assets

FY2019FY2018(As of March 31, 2019) (As of March 31, 2018)

Current assets
Non-current assets
Property, plant and equipment
Intangible assets
Investments and other assets

Total assets

64,88525,27015,241
182
9,847

90,156

63,79924,871
15,431
165
9,274

88,671(Millions of Yen)

Liabilities andNet Assets

FY2019Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

Consolidated Statements of Income

28,518
7,962
36,481

27,741
9,552
37,29450,556
1,687
1,430
53,67490,15648,4372,341
598
51,37788,671(Millions of Yen)FY2019FY2018(From April 1, 2018
to March 31, 2019)(From April 1, 2017
to March 31, 2018)

Net sales

80,03478,232

Cost of sales

68,70665,434Gross profit

11,327

12,798Selling, general and administrative expenses

7,091

7,662

Operating income

4,235

5,135

Non-operating income

819

500

Non-operating expenses
Ordinary income

203

563

4,852

5,073

Extraordinary income

19

20

Extraordinary losses

325

321

Net Income before income taxes

4,546

4,772

Income taxes-current

1,149

1,464

Income taxes-deferred
Net income

5

FY2018(As of March 31, 2019) (As of March 31, 2018)

246

(59)

3,149

3,367

Net income attributable to non-controlling interests

39

15

Net income attributable to owners of parent

3,109

3,351

Non-Consolidated Balance Sheets
Assets

FY2019FY2018(As of March 31, 2019) (As of March 31, 2018)

Current assets
Non-current assets
Property, plant and equipment
Intangible assets
Investments and other assets

Total assets

30,97523,2907,221
48
16,02054,26533,933
20,4787,490
3612,951

54,411(Millions of Yen)

Liabilities andNet Assets

FY2018FY2019(As of March 31, 2019) (As of March 31, 2018)

Liabilities
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Valuation and translation adjustments
Total net assets
Total liabilities and net assets

Non-Consolidated Statements of Income

12,3562,440
14,797

12,436
3,342
15,77838,3771,090
39,46754,26537,3801,252
38,632
54,411(Millions of Yen)FY2019FY2018(From April 1, 2018
to March 31, 2019)(From April 1, 2017
to March 31, 2018)

Net sales

34,96437,453

Cost of sales

28,56430,184Gross profit

6,399

7,269

Selling, general and administrative expenses

3,912

3,763

Operating income

2,487

3,506

Non-operating income

582

509

Non-operating expenses

64

81

3,005

3,933

Extraordinary income

18

508

Extraordinary losses

317

150

2,706

4,291

Income taxes-current

818

1,121

Income taxes-deferred

36

15

1,851

3,154

Ordinary income

Income before income taxes

Net income

6Topics
Management
Inauguration of 2023 medium-term management plan - Create the futurewith reliable technology - Innovation and Challenge
We have formulated a new 2023 medium-term management plan that spans five years
from FY2020 to FY2024, which commenced in April 2019.
We will aim to achieve consolidated net sales of 100,000 million yen, consolidated ordinary
income of 6,000 million yen and an ROA of 6.0% or more by FY2024 through our basic policiesof “developing new products and new businesses,” “enhancing the competitiveness ofexisting businesses,” “expanding overseas businesses,” and “strengthening our managementbase.”

2023 Medium-Term Management Plan
Create the Future with Reliable Technology

Innovation and Challenge
How we want to be
An electronics manufacturer that continues to grow by creating products andservices for the future with reliable technology

Basic Policies
Developing
new products
and newbusinesses
Enhancingthe competitivenessof existing
businesses• Create new products by advancing andintegrating proprietary technologies• Develop advanced automation products
and expand the segment• Create new products and new businesses
by restructuring the R&D system• Tap into new businesses and new markets
by collaborating with group companies
and external organizations• I mprove productivity and realize lower
costs and shorter delivery terms by factoryreforms• Improve quality by transforming design,
manufacturing and inspection system

Expandoverseasbusinesses

Strengthening
our management base

Numerical targets
Consolidated
FY2024 targets
net sales
100,000 million yen

Profit sharing

7

Consolidated
ordinary income
6,000 million yen

ROA*
6.0% ormore• Proactively develop overseas businesses in areas such as Asia andAfrica• Promote overseas production andoverseas procurement• C hange from personal skills andtechnology to organizational skills andtechnology• Promote activities for fundamental
changes in quality• Provide an environment that securesand trains human resources and thatallows them to work to the fullest• S trengthen compliance and groupmanagement

AICHI ELECTRIC GROUP* ROA (return on assets) =Ordinary income / Total
assetsThe basic policy is to have stable dividends with a target payout ratio
ranging between 25 and 40%.

Electric Power Products
Delivery of palm oil on-load tap changing transformers
In recent years, greater awareness of global warming
prevention and environmental impact reduction has drawn
people’s attention to the use of palm oil instead of mineral
oil as an insulating oil for transformers, a shift from a fossil
fuel to a vegetable oil. We have already developed, andare selling, palm oil transformers. Utilizing this technology
for on-load tap-changers, we have developed a palm oil
on-load tap changing transformer, and delivered it to
Tohoku Electric Power Co., Inc.
The advantages of this product are the following: he use of palm oil, which has good biodegradability,•T
as an insulating oil means that in the unlikely event ofan oil leakage, the oil is easily broken down into waterand carbon dioxide by microorganisms with no soil contamination.
 alm oil produces the carbon neutral effect, which expectedly reduces CO2 emissions.
•P xcept for the seal (the gasket), the palm oil on-load tap changing transformer is composed•Eof the same materials and structure as our existing product, minimizing the price increase.
•W e have adopted our proprietary vacuum valve (1 valve) type on-load tap-changer withreasonable maintenance cost.
We will utilize the results and strive to proactively expand the product’s sales to electric powercompanies and other industries.
Electric Power Products
Development of next generation step voltage regulator (Next generation SVR)
Recent years have seen a problem of reverse current flow (RCF) caused byconnection of distributed generators like solar power. As a means of addressing
this problem, we developed a next generation step voltage regulator (nextgeneration SVR) that handles RCF using a function of detecting the substation side.
Equipped with the substation side detecting function, the next generation SVR
distinguishes the substation side from the load side, regardless of the direction of
the current flow. In this way, the SVR helps control voltage appropriately.
Furthermore, we reduced the weight and eccentric loading of the entire
mechanism. This allowed us to mount the SVR on one electric pole, rather than two
as had previously been required. The reduction also enabled SVRs’ installation in
urban areas that have limited land availability.
Moreover, the control and communication units are independent from the main
mechanism for easier maintenance.
Last but not least, we added remote measurement and control functions to gain
information on voltage and current of distribution lines remotely and change set
points in real time.
Accordingly, this product made it possible to control the voltage of the entire
distribution lines at suitable control values. Going forward, we will push forward with promotional activities
focusing mainly on electric power companies.
8Electric Power Products
Development of 3rd-generation digital-type protective and control panel for
distributing substation (D-distribution panel)
Installed in distributing substations of power companies, a digital-type protective andcontrol panel for distributing substation (D-distribution panel) protects, monitors, andcontrols distribution equipment.
After more than ten years since its launch, the 2nd-generation D-distribution
panel has been met with a growing number of requests from customers, such as
response to solar power and other distributed generators, relay set points and otherremote control functions, and smaller, space-saving panels.
In response to these requests, we teamed up with Chubu Electric Power Co., Inc.
to develop a 3rd-generation D- distribution panel. Chubu Electric Power received the
product in December 2018, and commenced its operation.

Electric Power Products
Completion of construction work for new substation in the Republic of Mozambique
Construction of a Namialo Substation began in September 2016 in
Namialo, Nampula Province, which is located in the north of the Republicof Mozambique, and was completed in January 2019.
In this Official Development Assistance (ODA) project, the Company
designed and manufactured transformers and other equipment, procured
construction materials, constructed the substation on-site, and carried out
commissioning. Furthermore, we installed a supervisory control and dataacquisition system (SCADA system (*)) into the newly constructed
Namialo Substation and two other pre-existing substations (Nampula
Central Substation and Nampula 220 Substation) in Nampula Province.
The installation enabled the Nampula Central Substation to supervise andCompleted Namialo
control the Nampula 220 Substation and Namialo Substation remotely.
Substation
We were faced with flooding during construction and struggled tosecure the construction schedule in such a severe natural environment. It was a relief that we safely
completed the substation.
In the future as well, we will actively help African countries, Southeast Asian countries, island
countries, and other countries and regions with electrical power infrastructure.
(*) SCADA system: Abbreviation of Supervisory Control And Data Acquisition system.

Motor Products Group
Increasing production capacity of nursing bed actuators
In order to ramp up production capacity to manufacture nursing bed
actuators, we introduced production line automation equipment, which
commenced operation in March 2019.
Newly introduced were a grease applicator and an actuatorsconveyor. The grease applicator automatically assembles components
and applies grease to them, a process previously done manually. The
actuators conveyor automatically conveys assembled actuators andplaces them into inspection equipment.
With the introduction of the equipment, our goal is to shorten manhours and increase production capacity by 25%.
We will work on further improvements in order to reinforce our actuator
production capacity.

9

Actuators conveyor

Outline of the Company and Status of Shares
Corporate Data (As of March 31, 2019)

Status of Shares (As of March 31, 2019)
Total number of shares authorized to be issued 23,912,200 shares
9,500,000 shares

Total number of shares issued
Established:

May 27, 1942

Capital:¥4,053 million

Number of Employees: 840 (Consolidated: 2,370)
Head Office:3,234 persons

Number of shareholders
Major shareholders (top ten shareholders)

1, Aichi-cho, Kasugai city, Aichi pref.,Number of shares Shareholding ratio (%)(thousand shares)

486-8666, JAPAN
Phone: +81-568-31-1111

Board of Directors and Auditors(As of June 27, 2019)

President

Toru SatohManaging Director

Kazuo Kobayashi

Managing Director

Toshiyuki Miyakawa

Director

Katsumi Nonomura

Chubu Electric Power Co., Inc.

2,326

24.5

TSUCHIYA CORPORATION

1,000

10.5

Furukawa Electric Co., Ltd.

807

8.5

MUFG Bank, Ltd.

446

4.7

BBH FOR FIDELITY LOW — PRICED STOCK FUND
(PRINCIPAL ALL SECTOR SUBPORTFOLIO)

323

3.4

Japan Trustee Services Bank,
Ltd. (trust account 4)

303

3.1

Kawaguchi Kosan Co., Ltd.

200

2.1

192

2.0

Director

Naoji Yamashita

NORTHERN TRUST CO. (AVFC)
RE FIDELITY FUNDS

Director

Hisashi Tajima

HIKARI TSUSHIN, INC.

186

1.9

Director

Junichi Takahashi

175

1.8

Director

Masaki Kakihara

Meiji Yasuda Life Insurance
Company

Director

Yoshikazu Suda

Director

Shinobu Kato

Director (Outside)

Nozomu Amano

Director (Outside)

Hideshige Seo

Auditor

Hideki Hosoe

Auditor (Outside)

Kazuhiro Matsubara

Auditor (Outside)

Masatoshi Hori

Note 1	Numbers of shares are rounded down to the nearest
thousand shares.
Note 2	The treasury shares (4,065 shares) were excluded in thecalculation of the shareholding ratio.

Distribution of shares by shareholder
Foreign investors
10.5%
Individual
investors
17.9%
Domestic
investors
89.5%

Financial institutions
and securities firms
18.4%

Other companies,
etc.
53.2%

10

Shareholder Data
Shareholder Data
Business Year

April 1 to March 31 of the following year

Ordinary General Meeting Juneof Shareholders
Reference Date

Ordinary General Meeting of Shareholders
March 31
Year-end dividendMarch 31
September 30
Interim dividend

Stock Transfer Agent andSumitomo Mitsui Trust Bank, Limited
1-4-1, Marunouchi, Chiyoda-ku, Tokyo, JAPANAccount Management
Institution for Special Accounts
Handling Office

Stock Transfer Agency Business
Planning Department,
Sumitomo Mitsui Trust Bank, Limited
3-15-33, Sakae, Naka-ku, Nagoya, JAPAN

Reference

Stock Transfer Agency Business
Planning Department,
Sumitomo Mitsui Trust Bank, Limited
2-8-4, Izumi, Suginami-ku, Tokyo
168-0063, JAPAN
Telephone 0120-782-031 (toll-free)

Public Notices

Public notices shall be madeelectronically.
Public notice URL:
http://www.aichidenki.jp
If electronic notice is impossible due toaccidents or other unavoidable
circumstances, the notice shall be
posted in the Chunichi Shimbun which
is published in Nagoya city.

Information regarding the share buyback
and additional purchase program for
fractional shares less than one unit
(shares less than 100 shares)
Frameworks are in place to ask the Company to buyback or request additional purchases of fractional
shares less than one unit. If you are interested, pleasecontact the following.

Contacts for various procedures(Changes in name or address, buyback and additionalpurchase of fractional shares less than one unit)
For shareholders who have an account with asecurities company
Please contact your securities company.
For shareholders who do not have an account with asecurities company
P lease contact Sumitomo Mitsui Trust Bank,
Limited.

Concerning outstanding dividend payments
Please contact Sumitomo Mitsui Trust Bank, Limited.

Create the future with reliable technology - Innovation and Challenge A valuable company that creates good products,
develops good human resources, and establishes good relationship