KAGA GROUP HEAD OFFICE (in Ochanomizu, Tokyo)

The Investor Meeting for a Results
Briefing of the First Half FY 2006
, its brand name for original I.C. and PC peripheralproducts, and highly penetrated in many countries all over the world,
comes from a Japanese “Takusun” which means “many,” in hoping
to distribute lots of quality products to make more people muchhappier.

KAGA ELECTRONICS CO., LTD.
(Tokyo Stock Exchange, First Section
Stock code: 8154)
2-2-9, Hongo, Bunkyo-ku, Tokyo, Japan
113-8503
URL：http：//www.taxan.co.jp
TEL：03-4455-3131
FAX：03-3815-6757
November 21, 2005
1

Table of contents
2, Outlook for KAGA ELECTRONICS group
1, KAGA ELECTRONICS group outlinebusiness・ Company profile
・ Establishing CE sales department, sales
・ Management policies
force specializing in cars
・ Sales transition
・ Full-blown entry into golf related
・ Sales by products category
equipment business・ World network
・ Entering food business・ Main business connection
・ Continued expansion of information
・ KAGA ELECTRONICS group identity
equipment business
3, Financial highlights for interim FY2006

Front entrance of headquarter building(Ochanomizu, Tokyo)
21, KAGA ELECTRONICS group outline

3

Company profileEstablished
CapitalSeptember 12, 1968
11.9 billion yen(As of September 30,2005)
Isao Tsukamoto

Founder & CEO
Net sales :FY2005 <actual>
Non-consolidated : 186.9 billion yen
Consolidated : 250.2 billion yen
FY2006 <plan>Non-consolidated : 163.0 billion yen
Consolidated : 259.0 billion yen

Sales transition
3,000
2,500

(Unit : billion yen)200
Net sales

150

Ordinary income

2,000
1,500
1,000

100
50500
00
2001.3

2002.3

2003.3

2004.32005.32006.3(Plan)

Number of consolidated subsidiaries (As of September 30, 2005)
35 (Domestic : 17 / Overseas : 18)
Number of group employees (As of September 30, 2005)
4,162 (Non-consolidated : 618 / Consolidated : 3,544)
Group business outline
・ Sale of general electronic components.
・ Sale of semiconductors (memories, ASIC’s).
・ EMS business (Electronic manufacturing service.
Manufacturing and sale of AC adapter and charger).
・ Sale of computers and computers peripherals. Sale of computers peripherals on a private-label basis.
・Development and design of dedicated integrated circuit. Planning, development and sale of various
4
type of Software and information network system.

Management policies
Statement of management policies“KAGA ELECTRONICS becomes a company which could please its
stockholders, its customers, its employees and all others, who
associate with us. Hope and contribute to the society.”

The spirit of “FYT”
F ＝ Flexibility
T = Try

Y = keeping Young

The keyword is “3G”
GENERALGLOBALGROUP“We always think of tomorrowand eventually become thenumber one.”Founder & CEO
Isao Tsukamoto
5

Sales transition(Unit : billion yen)

300
Kashimura Company Limited become a subsidiary.
KGF CO., LTD. is established.

250

FYT CO., LTD. is established.
KAGA DEVICES (H.K.) LIMITED is established.
Digital Media Lab., Inc. become a subsidiary.
KAGA ELECTRONICS (THAILAND) CO., LTD. is established.

200

KAGA SHENZHEN ELECTRONICS TECHNOLOGY DEVELOPMENT CO., LTD. is established.
KAGA (SHANGHAI) ELECTRONICS CO., LTD. is established.
AD DEVICE CORPORATION become a subsidiary.
DIGITAL GAIN CO., LTD. is established.

150

KAGA (TAIWAN) ELECTRONICS CO., LTD.
KAGA SOLUTION NETWORK CO., LTD. are established.
KAGA (SINGAPORE) ELECTRONICS PTE LTD.
KAGA (KOREA) ELECTRONICS CO., LTD. are established.

100

KAGA (H.K.) ELECTRONICS LIMITED is established.
Sales department for Apple computer products is transferred.
KAGA DEVICE CO., LTD. is established.
KAGA COMPONENT CO., LTD. become a subsidiary.

50

TAXAN (EUROPE) LTD. becomes a subsidiary.
Taxan USA Corporation is established.

0 '70 '71 '72 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06(Plan)

6Net sales by products category
Information equipment

Others (IT(IT-related business)

6%
18%

11%

FY2006<Interim actual>
Consolidated
Net sales
122.3 billion yen

EMS (Processed business)

General electroniccomponents

30%

35%

Semiconductors

General electronic components
Semiconductors
EMS (Processed business)
Information equipment
Others (IT-related business)7World network- EDMS business

The newly established sales office in the Czech republic is now in full operation!
The office should now play a pivotal role in developing operations in Europe,
particularly in the field of EDMS.

8Main business connection
Merchandise(About 2,000 companies)

Sales(About 4,000 companies, 7,000 accounts)

9

KAGA ELECTRONICS group identity
Upon customer’s requests, KAGA ELECTRONICS “Gathers anything, Can do anything,
the Answer to everything

Customer’s needs●We need various components.
●We need engineering development designed.
●We need a product created.
●We need a choice of locations fordevelopment and manufacturing.
●We need a distributor of our products.

Our motto since the foundation“Covering All the Customer Needs”
Electronic products,
semiconductor and EDMS
business
Ready to accommodate all requirements, as
far as electronic components andsemiconductors go, fromdesign/development & other EDMS services
to all procurement needs across the world

Information equipment
business

Offshoots of Electronics business

PC & peripherals, including iPod,and digital cinema servers &players, along with other productlines, are intended to showcase theDigital Age.

The operation of golf shops & practicefacilities, and the entry into the foodbusiness via Solacche demonstrate theeagerness to accommodate customers’
customers’ needs
and the enthusiasm to explore now fieldsrelevant to electronics.

10Business model
Companies
Being ready togo public・・・
public・・・

Provision ofservice for
digital satellite
broadcasting

Development,
manufacture and saleof electronic equipment

Internet cafe

Development,
manufacture and sale
electronic components

CellCell-phone service
providerPlanning anddevelopment ofDevelopment andmanufacture of board for personal
computer andsemiconductor
peripheral devices

KAGA ELECTRONICS Group
Semiconductors & system technology
Development engineers
About 250 employees

Planning anddevelopment ofvoicevoice-recognition
systemPlanning andmanufacture of gamecomponents andgamegame-related goodsKAGA ELECTRONICS Group
System technology development engineers
About 440 employees

Planning anddevelopment ofgroupware

Planning anddevelopment ofnetwork security

Direct investments in 40 companies and indirect investments in
380 electronics-related companies in domestic & international
entrepreneurial venture through 18 funds⇒ Expansion of commercial rights

Planning anddevelopment ofgame software

Sale of electronic
components onelectronics commerce

Development,
manufactureand sale of LSI

11

2, Operating highlights during First Half

12

Establishing CE sales department,
sales force specializing in cars
Fortifying in-car component operations
In October 2005, the CE (Car Electronics) Sales Department
was set up in the Electronics Sales Headquarters to specialize inin
the inin-car component related business.
The inin-car component business is demanding of quality andreliability, which on the flip side means opportunities for longlongrange stable earnings once a contract is won.
The specialized department’
department’s establishment reflects theCompany’Company’s confidence in this market’market’s growth potential, andits readiness to test the Group’Group’s collective strength to attack thismarket, beginning with sales of inin-car electronics.

Realization of hands-free calls with a mobile phone andBluetooth® wireless communication!

A longer-term strategy is to grow high value-adding EDMS
operations, in conjunction with sales operations.
13Entry into Golf-related equipment business
Established of FYT CO., LTD.
Established in December 2004, as a fully invested subsidiary of KAGAELECTRONICS.
FYT handles Japanese and foreign namename-brand golf equipment for
distribution to specialist and general retailers, as well as operates
operates its golfshops, branded ACTIVE, across the country. FYT’FYT’s establishment ofACTIVE AKIBA, a newnew-style golfing spot, marks a starting point in its
pursuit of developing a new field of sports related business wherewhere IT comes
into play.

Inaugurated on September 16 in the Yodobashi Camera Multimedia
Akiba complex in Akihabara, ACTIVE AKIBA is a new type of golfing
spot that combines a golf shop and a golf practice facility. This
This is a
cuttingcutting-edge golf spot where KAGA ELECTRONICS makes a differenceby taking full advantage of high technology equipment.

Cultivating new business models through supply chain management, IT technology,and KAGA ELECTRONICS experience and know-how.
14

ACTIVE AKIBA Opens its Doors !
ACTIVE AKIBA, Japan’s Cutting-edge First-of-its-kind Golf Spot, is Now Open in Yodobashi
Camera Multimedia Akiba

The 1,0001,000-squaresquare-meter extensive golfshop carries the gamut of golf equipment
and related merchandise, including clubs,wear, bags, and shoes, supplied by morethan 50 Japanese and foreign
manufacturers.
<FYT released the golf simulator DVD “Virtual Golf Guide”
Guide”>

An enclave amid a busy urban center known as Akihabara,
the golf practice facility enjoys a large 3535-yard 3030-bay
driving range. This is also a
cuttingcutting-edge facility where KAGA
ELLECRONICS, as being aspecialist distributor of electronics,
makes a difference by putting togood use high technology equipment,
including a swing measuring device
and a booking system via mobile phone.

A collaboration with DIGITAL GOLF, Inc., in which the Company is invested,
is now in progress to produce and distribute Virtual Golf Guide, a software
simulator of golf courses.
Virtual Golf Guide uses aerial and groundground-level photo data for therealistic 3D reconstruction of physical golf courses, and enables
enables
the player to simulate shots, clubclubbyby-club, according to distance andtrajectory characteristics, in a real
golfgolf-course environment. The
database is currently available forsimulating a total of 30 golf courses,including Great Island Club (inChiba Prefecture), and is scheduled
to be extended to cover 500 courses
by the end of 2006.

15

Entering Food Business
Establishment of KGF CO., LTD.
KAGA ELECTRONICS set up the subsidiary in September 2005.
KGF now operates a Solacche stand for serving fresh juice with no addition of water or sugar, on thesecond floor of Yodobashi Camera Multimedia Akiba, one of Japan’s largest home electronics retailcomplexes, open since September 16, 2005.
<Outline of Solacche>
Shop name:

Solacche

Address:

2F, Yodobashi Multimedia Akiba,
1-1, Hanaoka-cho, Kanda,
Chiyoda-ku, Tokyo 101-0028 Japan
03-5207-5524

TEL:

Business hour:

9:30〜22:00

Seating capacity: Thirty-five seats total
Menu:

・100% natural fresh juice
・Soft serve ice cream・Panini・Soup16KGF’s Future Growth Strategy
Tapping KAGA ELECTRONICS Group’s Knowledge to Participate in Food Businessin a Variety of Ways
<Operation of restaurant “Solacche”>
KGF operates a Solacche stand to offer fresh juices and panini,panini, using
natural ingredients. The first Solacche outlet in Yodobashi Camera
Multimedia Akiba was joined by a new food stand, inaugurated on
November 18 in Yodobashi Camera Multimedia Yokohama, whose menu
features curry.

<Sale of foods>
KGF distributes via mail order and at Solacche curry
prepared by Curry Citizen Alba, a 3030-oddodd-yearyear-old curry
specialty restaurant renowned for the rich flavor of its
curry sauce produced by stewing beef, onion, garlic, andginger ingredients until they fall apart.

<Sale of beverage and health supplements>
In addition to operating Solacche and distributing
curry, KGF is going to participate aggressively inthe food business, beginning with distribution ofhealth supplements and wholesale of beveragevending machines.

17

Continued Expansion of Information
Equipment Operations
Adding to List of Subsidiaries Kashimura Company Limited, a Wholesale Distributorof Photography & Imaging Products

Information Technology Management Headquarters(formerly Information Equipment Headquarters)
Retains 7,0007,000-account marketing routes, mostly homeelectronics mass retail outlets, through which todistribute a full spectrum of information equipment,
including PC & peripherals, and digital cameras.

Enjoys different distribution channels than those used by
KAGA ELECRONICS, comprising photo camera
specialist stores and DPE shops, as well as home
improvement centers, discount sales outlets, schools,
hospitals, and government agencies.

Sharing Marketing Expertise &Channels of DistributionMutual complementation and increased synergies should provide opportunities
both for further expansion of information equipment operations and fordevelopment of new services across the KAGA ELECTRONICS Group.
18

3, Financial highlights for Interim FY2006

19

(Consolidated)
Financial highlights in interim FY2005 & interim FY2006(Unit : million yen)

Net sales
Gross profit
Gross profit
ratio
SG & A
expenses
Operatingincome

Ordinary income
Net income

Total assets(T o t al sh ar e h o lde r s'e qu i t y)
(In t e r e st - be ar in gde bt )Interim FY2005

Interim FY2006

Increase/decrease

112,481
11,767
10.5%

122,385
14,059
11.5%

9,904
2,292
1.0%

8.8%
19.5%

8,124
3,643
3,748
2,404

9,378
4,681
4,947
3,340

1,254
1,038
1,199
936

15.4%
28.5%
32.0%
38.9%

Interim FY2005

Interim FY2006

98,50534,951
10,037

117,993
45,341
12,857

Increase/decrease

19,488
10,390
2,820

19.8%
29.7%
28.1%
20

(Consolidated)
Results by business category in interim FY2005 & interim FY2006(Unit : million yen)
Net sales

Increase/decrease

Business
Interim FY2005

Interim FY2006

Informationequipment

18,76922,463

3,694

19.7%

EMS

32,22442,612

10,38832.2%

Semiconductors

45,44737,358(8,089)(17.8)%

General electroniccomponents

9,665

13,036

3,371

34.9%

Others

6,373

6,916

543

8.5%

Total

112,480

122,387

9,907

8.8%

Amount％21

(Consolidated)
Financial highlights and plan in FY2005 & FY2006(Unit : million yen)

FY2005Net sales
Gross profit
Gross profit
ratio
SG & A
expe nses

Operating income
Ordinary income
Net income

250,244
25,624
10.2%
17,149
8,474
8,644
4,731
FY2005

Total assets(T o t al sh ar e h o lde r s'e qu it y)(In t e r e st - be ar in gde bt )115,901
40,661
11,009FY2006 (Plan)

259,000
28,25010.9%
19,250
9,000
9,470
5,960
FY2006 (Plan)

121,985
47,392
11,607

Increase/decrease

8,756
2,626
0.7%
2,101
526
826
1,229

3.5%
10.2%
12.3%
6.2%
9.6%
26.0%

Increase/decrease

6,084
6,731
598

5.2%
16.6%
5.4%
22(Consolidated)
Sales and sales plan by business category in FY2005 & FY2006(Unit : million yen)

Net sales

Increase/decrease

BusinessFY2005

FY2006 (Plan)

Amount％Informationequipment

40,25456,00015,746

39.1%

EMS

76,09987,00010,901

14.3%

Semiconductors

97,07573,500(23,575)(24.3)%

General electronic
components

23,75824,000242

1.0%

Others13,056

18,500

5,444

41.7%

Total

250,244

259,000

8,756

3.5%
23