The 122nd Ordinary General Meeting of Shareholders Q & A

Q1. Can you tell us why sales of energy devices increased?

A1. Our lithium polymer batteries are thin and light, which allows a greater degree of freedom in shape. Sales for the ICT market remained strong on the back of our production system that can flexibly respond to demand fluctuations.

Q2. What is your view on reducing the investment unit?

A2. We acknowledge that reducing the investment unit is an effective way to broaden the investor base and revitalize the stock market. We will take appropriate actions in light of the trend of the stock market and the liquidity of TDK Corporation’s shares among other factors in the future. We will also promote information disclosure and IR activities in order to ensure that TDK Corporation’s shares will continue to be held by a multitude of diverse shareholders over the long term.

Q3. Can you tell us why an increase in operating income is anticipated in the forecast of consolidated financial results for the fiscal year ending March 2019?

A3. It is expected that earnings for the sensor business will improve due to the absence of acquisition costs which had been recorded for the fiscal year ended March 2018, among other factors. In addition, further improvement in profitability is anticipated for the passive components business against the backdrop of brisk demand, mainly for automobiles, and improvement in productivity.

Q4. Can you explain the dividend forecast for the fiscal year ending March 2019?

A4. Regarding shareholder returns, the fundamental policy of TDK Corporation (the “Company”) is to work to consistently increase cash dividends through growth in earnings per share. Net income attributable to the Company / basic per common share for the fiscal year ended March 2018 is approximately 500 yen, and the annual dividend is 130 yen per share including the year-end dividend proposed today. For the fiscal year ending March 2019, we currently forecast net income attributable to the Company / basic per common share of approximately 550 yen and an annual dividend of 140 yen per share in line with the growth in net income per share.

Q5. What impact will international issues such as the U.S.-China trade dispute have on your financial results?

A5. As we conduct business in both the U.S. and China, it is hard to say that there will be no impact. However, our current view is that there will be no significant influence on our earnings. Although there will be limited things that we can do on our own, we will take possible measures in order to minimize the effects.

Q6. I would like you to explain about the situation concerning the collection of recalled humidifiers.

A6. The current collection rate for the applicable four products is approximately 60% overall. We will continue to reinforce our efforts to collect the applicable products in the future. While such collection is a cost for us, we regard it as our social responsibility.

Q7. I would like to hear your views on the venue of the General Meeting of Shareholders.

A7. The reasons for holding the meeting in our own facility include that it is easier to ensure security, smooth preparation of the site is possible, and it is cost efficient. However, since the current venue is not necessarily convenient in terms of site access, we have been endeavoring to enhance accessibility by providing a shuttle bus service and so forth. We will take flexible measures in light of the convenience of shareholders as well as the pros and cons of operational procedures.

Q8. I would like to know the ratio of overseas production.

A8. Our overseas production ratio for the fiscal year ended March 2018 was approximately 85%. While we do not disclose a detailed breakdown, China accounts for the majority of overseas production. In selecting overseas production bases, we take into account the competitiveness from the technology, quality, cost and delivery perspectives in addition to the demand within the region.

Q9. How did you realize the “Shorten the cycle time for business operations” which was explained by President during his presentation entitled “Issues to be Addressed by the TDK Group”? What are your measures for making further reduction in the future?

A9. By considering the input process of order management to the output process which covers Monozukuri (supplying components) through inventory management as the “business lead time,” we have strived to streamline the lead time. In the phase of Monozukuri, we shortened the lead time by implementing various measures including the integration of production lines which had been divided by process method as well as automation and optimization of processes by utilizing robots. We will continue to take steps to further shorten the cycle time through the improvement of method for conveying information from the sales department to the manufacturing department as well as the reduction of stagnant time and intermediate stock by improving the physical flow for the production line in the future.

Q10. Can you explain about the reinforcement of sales and development capabilities?

A10. From the perspective of capturing customer needs as quickly as possible, we have been taking measures including the active utilization of technical staff in the sales department, reduction of the lead time for designing and prototyping through automation of the evaluation system, and shortening the cycle of customer feedback. We plan to realize “First to Market” by further strengthening collaboration between the sales department and the development department.

Q11. Can you provide details of investment securities?

A11. As of the end of the fiscal year ended March 2018, we held four listed stocks as policy holdings, which are worth approximately 8.2 billion yen in book value. The purposes of the holdings are either based on business strategies such as the pursuit of synergy in operational alliance or the reinforcement of business relationships. We verify the holdings every year and dispose of stocks accordingly if they no longer meet the original purpose for holding.

Q12. As a result of the changes in U.S. GAAP (Generally Accepted Accounting Principles), valuation difference on investment securities will be recorded in income statements from the fiscal year commencing on December 2017. How will this impact your consolidated profit and loss going forward?

A12. While our consolidated net profit and loss may be affected by fluctuations in the price of stocks held, we cannot forecast the specific amount of impact at this stage as it depends on future stock prices.

Q13. What is the percentage of employees with disabilities at your company? Does it meet the legally mandated ratio?

A13. Yes, the percentage of employees with disabilities at our company has been above the legally mandated ratio.

Q14. Can you tell us about the appointment of female officers and females in managerial positions as well as your numerical targets for them?

A14. We think that diversity has been well established in our company, including diversity in terms of nationality. We would like to appoint female officers in the near future. With regard to the appointment of females in managerial positions, we will continue our efforts although we have not set specific numerical targets.