Top Management Interview

Please review and comment on

Q the business performance forthe current fiscal year.

AThe four-year medium-term
management plan “Revitalize2020” made a good start and isprogressing as planned.
In the year marking the 100th anniversary of our founding, we
formulated the medium-term management plan “Revitalize2020” in an aim to establish a leaner business operationstructure.
Here I will introduce our business performance for the fiscal
year ended May 2019 and initiatives for the future.
President

Kenzo Terashima

The efforts made in the initial
year for fully fledged operationof the Shiga Ryuo Plant and forstrengthening the operational
structure improved the profit
structure of the Industrial
Systems segment, providing asolid footing for the secondyear.

Net sales were 41.1 billion yen on a consolidated basis due toa negative rebound in the Information Equipment Systems
segment from the previous fiscal year and a decrease in theTransportation Systems segment. Orders received were 40.6
billion yen, boosted by the growth of the Industrial Systems
segment. Operating income was 550 million yen, positive
growth almost as expected in the revised plan, due todramatically improved efficiency and productivity through“Ryuo Integration,” the integration of production sites to theShiga Ryuo Plant. The first year of fully fledged operation at
the Ryuo site was a great success. Ordinary income was 490
million yen, negatively affected by foreign exchange losses
and a decrease in equity in profit of unconsolidated
subsidiaries and affiliates, while net income attributable toowners of the parent was 690 million yen, unchanged fromthe previous fiscal year, as a result of efforts to reduce certain
cross holdings. Overseas sales accounted for 22.9% of net
sales amid the process of switching vehicle models for thehigh-speed railroads in China.
By segment, the Transportation Systems segment saw a YoY
increase in orders received, boosted by those from both
Japan and overseas excluding China. Net sales decreased
due to a fall in sales in China and other overseas markets.

Segment profit fell because the decrease in profit in China
exceeded the increase in domestic profit.
The Industrial Systems segment saw a YoY increase inorders received, helped by an increase in orders for testing
equipment for automobile development and for processingmachinery. On a non-consolidated basis, orders received
exceeded 10 billion yen for the first time in four years. Netsales increased YoY accordingly. Segment profit rosesignificantly despite an increase in depreciation andamortization expenses due to greater-than-expected
improvements in efficiency and productivity resulting from theRyuo Integration.
In the Information Equipment Systems segment, both orders
received and net sales decreased YoY due to a rebound froma large-scale project in the previous fiscal year, but segment
profit was unchanged, boosted by software improvement
projects and others.

Please summarize the progress

Q of the medium-term

management plan.
We will go further as plannedwith the aim of increasing our“earning power” and establish a“leaner” business operation
structure that generates a stableprofit.

AWe are implementing “Revitalize 2020,” the medium-term
management plan that runs for four years from June 2018,
when the Company marked its 100th anniversary, until theend of the fiscal year ending May 2022.
During the first two years, we focus on enhancing profitability,
and successfully increased operating income due mainly to asignificant improvement in the Industrial Systems segment in
the fiscal year ended May 2019, the first year of the plan. Theearnings forecast for the year ending May 2020 is net sales of
42 billion yen, operating income of 900 million yen, and net
income attributable to owners of the parent of 900 million yen.
With this in mind, we will strive to gain a foothold for the latter
half of the medium-term management plan.
Ryuo Integration effect by the Shiga Ryuo Plant which began
operation in June 2018 and a shift to a business promotion
system by product have brought about changes in theattitudes of employees. In fact, this was reflected in the
improved profitability of the Industrial Systems segment. Amidsound orders received, we will take advantage of theintegration effect so that we can meet greater productionneeds in the future. In addition, for the Yokohama Plant, aproduction site of the Transportation Systems and Information
Equipment Systems segments, we have started modifying thelayout for greater productivity.
Among overseas development, the Industrial Systems
segment has started fully fledged operation of SIAM TOYODENKI Co., Ltd., a local subsidiary that has been upgradedfrom a local representative office in Bangkok, Thailand, inresponse to increased demand for power generators andprocessing machinery in China and the ASEAN regions.
Moreover, in China, we have established Chalco-Toyo
Permanent Magnet Motor Co., Ltd., a three-way joint venturewith Chinalco Rare Earth & Metals Co., Ltd., an affiliate of a
primary state-owned enterprise Aluminum Corporation ofChina(CHINALCO), and Beijing Ling Yang Trading Co., Ltd., a local
trading company. The aim is to begin manufacturing motors
on a fully fledged basis in China starting from 2020. As for theTransportation Systems segment, we delivered electricalequipment for railway vehicles to Jakarta Mass Rapid Transit(MRTJ), the first subway construction project in Indonesia,
where a group of Japanese companies was responsible forhandling from facilities to vehicles. In China, we plan tofurther expand the maintenance business of electricalTop Management Interview
equipment for railway vehicles on Beijing Subway, so as tocontribute to development of the railway infrastructure in Asia
for years to come.

could you send aQ Lastly,message to your shareholders?
believe we have made a goodA Istart
toward creating a robust

As for the succession of technologies and skills, one of theemployees at the Yokohama Plant was honored to receive a
Medal with Yellow Ribbon for the spring of 2019 for being amodel employee endeavoring to manufacture electric motor
coils for railway vehicles. Currently, he is engaged incoaching the younger members of the workforce so that they
can succeed our manufacturer spirit and expert techniques.
I would highly appreciate our shareholders’ understanding
and continued support for further development of ourbusiness.

Toyo Denki Seizo Group.

Dividends per share

The year-end dividends for the fiscal year under review are
30 yen per share in line with the Company's distribution policy
based on a payout of stable dividends. We will continue topay dividends on the basis of a payout ratio of 30% that is amanagement index given in the medium-term management
plan. With the medium-term management plan progressing
well in the first year, we will contribute to internal and external
stakeholders for further growth.
From an ESG point of view, we revised the Executive Officer
system to strengthen governance by having a Director
responsible for governance, while transferring executive
authority to Executive Officers for higher management
flexibility. Moreover, we will reconsider the significance of ourcross holdings in compliance with the Corporate Governance
Code so that we make effective use of our assets. As forenvironmental contributions, we received the Yokohama
Global Warming Countermeasures Award from Yokohama
City for our global warming prevention activity.
We were particularly recognized for installing 500 kW PV
solar power panels on the roof of the Yokohama Plant in 2012
with an output of approximately 600,000 kWh per year,achieving a plant-wide CO2 emission reduction ofapproximately 330 tons (about 8%).

Ordinary
dividend(Yen)

5/2015

Commemor
ativedividend

5/20165/20175/20185/20195/2020(Forecast)*

The Company conducted a one-for-five consolidation of common shares
as of December 1, 2016. Dividend distributions for the fiscal year ended
May 2017 or earlier are expressed in actual dividend payment amounts
before consolidating shares. Values in parentheses are the amounts
converted by the ratio reflecting the consolidation of shares.