KAGA ELECTRONICS
CO., LTD.

Next Medium-Term Management Plan

Medium-Term Management
Plan 2024 (FY2022-FY2024)
KAGA
ELECTRONICS CO., LTD.
加賀電子株式会社
November 25, 2021
TSE 1st section 8154

Review of Medium-Term Management Plan 2021: Management Measures
Undertaking priority issues in line with basic policy, with overall achievement of initial targets forecasted

Focus on markets and areas in which high growth and profitability areexpected
Enhancement ofRevenue Base

▲ Revenue increase effect of about ¥200 bn through acquisition of companies including
KAGA FEI and EXCEL▲ Growth of EMS business: ¥89.4 bn (FY18 results) ➔ ¥110 bn (FY21 forecast)(Contribution from growth in vehicular, medical care, and other priority markets)

Early improvement of efficiency and financial soundness following
Stabilization ofManagement
Base

incorporation of KAGA FEI as a Group company▲ KAGA FEI: Gross profit margin

6.3% (FY18 results) ➔ 9.3% (FY21 2Q results)▲ Kaga Electronics: Equity ratio

35.8% (end/Mar 2019 results) ➔ 39.6%▲ Kaga Electronics: Consolidated SG&A ratio 9.5% (FY18 results) ➔ 8.4% (FY21 2Q results)(end/Sep 2021 results)Active utilization of in-house resources and M&As to strengthen
Creation of New
Businesses

resistance to changes in the external environment▲ Social issues solutions-oriented business: Entry into disaster-readiness helicopter andEV bus mobility business, preparation for entry into medical device business▲ Venture investments: 18 projects executed (investments in 41 companies from Apr 2017to Nov 2021)
1Review of Medium-Term Management Plan 2021： Management Targets
Predict for exceeding operating income and ROE targets by executing “profit-focused management”,
despite unmet net sales target due to losses of major commercial rights
Net sales
Operating income

ROE

Opareting income margin

JPY443.6bn
10.9%

JPY292.7bn

JPY422.3bn

JPY470bn
JPY15bn

13.5%
7.6%

JPY10.0bn

JPY11.4bn

JPY500bn

9.7%

JPY13bn8%

JPY7.5bn

Net sales
Operatingincome
ROE

3.2%

2.5%

2.2%

2.7%

FY2018Results

FY2019Results

FY2020Results

FY2021
Forecasts

FY2021
Management
Targets

JPY292.7bn

JPY443.6bn

JPY422.3bn

JPY470bn

JPY500bn

JPY7.5bn

JPY10.0bn

JPY11.4bn

JPY15bn

JPY13bn

10.9％

7.6％

13.5％

9.7％８％ or higherMedium-Term Management Plan 2021
2

Systemization of Corporate Philosophy/Vision/Action Guidelines
Systematize the philosophy at the core of Kaga Electronics' thinking and conduct
The core of Kaga Electronics' thinking and conduct is reflected in our Corporate Philosophy thathas remained unchanged since our founding in 1968, our Management Vision that indicates
our medium- to long-term visions for the company 5 and 10 years into the future,and our Action Guidelines that set forth the behavior that forms norms
by which Kaga Electronics employees can achieve these visions.

Everything we do is for our customers
Aim to be “Japan’s No.1 corporate group in the industry”
Aim to become a competitive “World Class Company”“F.Y.T.”“3G”: Flexibility, Young at heart, Try: General, Global, Group“KAGA-ism”: Management mindset,
Sales mindset,
Readiness as a member of society
3Medium-Term Management Plan 2024： Management Targets
Realize sustainable growth by organic growth and further M&A challenges

FY2021 Forecasts

Net Sales

JPY 470 bn

Operating
IncomeJPY 15 bn

FY2024 Management Targets
Organic growth

Including new M&As

JPY 600 bn

JPY 750 bn

JPY 20 bn

With cost of shareholders’ equity (7–8%) in mind,
ROE

9.7 %

stable8.5 % or higher

4Medium-Term Management Plan 2024: Basic Policy
Basic policy and key issues/actions

FurtherReinforcementof Profitability

Predicting the era to focus on markets
with potential for high growth andprofitability

Reinforcementof Management
Base

Pursuit of further efficiency andsoundness, and transformation toa Group management foundation
worthy of "Japan’s No. 1 corporategroup in the industry"

Creation of New
Businesses

Active use of venture investments andM&As to create new businesses andstrengthen resistance to change inthe external environment

Promotion ofSDGs
Management

Promotion of management that seeks toachieve solutions to social issues andsustainable growth as a company• Selection and concentration in growth fields:
Mobility, Communications, Environment,
Industrial equipment, Medical/Health care
• Reinforcement and expansion of EMS
business and overseas business• Reinforcement of corporate governance• Efficient Group management• Investments in human capital• Initiatives in new fields• Promotion of open innovation throughventure investments• M&A efforts aimed at discontinuous growth(See “Medium-Term Sustainability ManagementPlan” for details)

5Medium-Term Management Plan 2024：Business Portfolio*CSI: Consumer & System Integrator

Electronic Componens

EMS

CSI

1,000
CAGR
800

600

CAGR

JPY292.7bn
13.9
44.3

200

Net Sales: 17％ Operating Income: 10％45

Net Sales: 17％ Operating Income: 26％

43.5
93.3

JPY470bn
12.0
40.0

JPY10.0bn

FY2019Results

FY2020Results

40

New M&As
150.0

35

16.0
54.0
150.0
JPY20bn

JPY15bn

JPY11.4bn

262.3

JPY750bn

110.0

99.6

89.5 JPY7.5bn
292.9

FY2018Results

JPY422.3bn
12.1
48.4

145.0050

Initial plan:
Net sales: 20%; Operating income: 20%

JPY443.6bn
13.9400Others

Excluding new M&A:
Net sales: 8.5%

308.0

Medium-Term Management Plan 2021

252015380.0

FY2021
Forecasts

30105

FY2024
Management Targets

0

Medium-Term Management
Plan 2024
6Basic Strategy for Four Major Businesses

FY2024 sales targets

ElectronicComponents
Business

EMS
Business

CSI
Business

OtherBusiness

JPY 380 bn

JPY 150 bn
JPY 54 bn
JPY 16 bn

Priority measures• Expansion of industrial equipment business• Rollout of new products in vehicular markets• Enhancement of products in communications
field• Reinforcement and expansion of customer base• Shift in value chain to high value-added areas• Reinforcement of business base• Acquisition of new products/suppliers and newsales channels• Promotion of collaboration within Group andintegration of overlapping organizations• Review of unprofitable businesses• Creation of new businesses through venture
investments and M&As

7

Priority Strategy for the EMS Business
Reinforce and expand our customer base in high quality markets, with shift to higher value-added areas
Qualityrequirements

Shift in Value
chain to Highvalue-added
areas• Expansion of businesses with highquality requirements and stable longterm demand orientation• Expansion of US, European, and Asiancustomer bases

Large lot,
short lifeoriented• Design/Development + EMS service• Support for software and hardware
design and development• External sales of production
equipment/IT systems developed inhouse

High
Added value

Reinforcementand Expansionof Customerbase

MegaEMS

KagaElec.

Stablelong-term
demandoriented

Cost
requirements

Development

Equipment/ICT

Manufacturing
Low
Upstream

Downstream• Global site collaboration and construction of human resource development structure,with EMS Towada (Production Center) at the core

Reinforcementof Business base

• Fast and flexible launch of new factories with limited initial investment (development of"convenience store-type EMS")• Promotion of smart factories through automation and visualization• Reinforcement of BCP (fast and flexible inter-Group collaboration on
procurement/production/logistics risks)8Medium-Term Management Plan 2024：Summary

JPY 1 tn

Aim to become a competitive “World classcompany”
Aim to be “Japan’s No. 1
corporate group in the industry”

Organic
growth+Further M&A
Challenges

Expansion oftrading company business

IncreasedSales

JPY750 bn
Growth fields

Increased
ProfitRatio

Mobility
Communications
Environment

will lead to
growth of the EMS business
Quantitative
expansion of trading
company businessIndustrialequipment

Qualitative improvement
through EMS business

Reinforcement and expansion of overseas business, EMS business

MedicalHealth care

（Net Sales）

Medium-Term Management Plan 2024
Further reinforcement ofprofitability

Reinforcement ofmanagement basePromotion of newbusinesses

Promotion of SDGs
management“CHALLENGE 1.60"
Sales of ¥1 tn in yearof 60th anniversary offounding
9Initiatives to aimed at becoming a "trillion-yen company"

1

Formulate M&A strategies to achieve the targets of the next Medium-Term Management Plan, and becomea "trillion-yen company"

AimDirection

ElectronicComponents
BusinessEMS Business• Expansion of business scale• Study large-scale projects on scaleof tens of billions of yen

CSI Business
Others Business• Acquisition of new
fields/products/sales channels• Study projects with high growthpotential in collaboration withventure investments

2

Development of core human resources to support the "trillion-yen company" of the future, and restructuringof personnel management

Specific measures

Key points inRestructuring ofPersonnel
Management• Development of management human resources: Cross-departmental strategic
personnel rotation, human resource pooling, etc.
• Reform of personnel systems and operation: Review of evaluation processes,
shortening of length of service until determination of promotions, etc.
• Utilization of diverse human resources: Utilization of female and elderly
employees, development of specialists, etc.

10

A Sound Financial Foundation to Support Growth Strategies
Borrowing capacity▲ Net D/E ratio: 0.04 times▲ Cash position: JPY 40.1 bn▲ Commitment line: JPY 15 bn*End of September 2021

Capital efficiency▲ ROE: 13.5% ＞ Cost of shareholders’equity 7.6%
Assumptions for calculations①Risk-free interest rate ：0.02%/10-year Japanese
government bond, five-year average②Market risk premium：6.3%/TOPIX yield③β (beta)：1.2%/Five-year, weekly

Cash generation ability▲ Total 3-year operating cash flow: JPY 30.8 bn*FY2018–FY2020▲ Use of cash: ① Growth investments② Shareholder returns③ Repayment of borrowing

Stability and credit rating▲ Equity ratio: 39.6%*End of September 2021

▲ Bond rating: A- (Stable)*Japan Credit Rating Agency, Ltd. (JCR)*FY2020 results
11

Shareholder Return

Basic Policy on
Dividends ofSurplusWe shall perform stable dividends, while securing a consolidated dividend payout
ratio of 25 to 35%.
We shall use funds for business investments, capital investments, and M&A, etc.
in order to contribute to future growth.
Decisions on the acquisition of treasury shares shall be made appropriately,in consideration of capital efficiency and share price, etc.

25.5% 25.6%■ Commemorative
dividend

27.4%

25%
19.3%Total return trend：45.4%※Including negative goodwill
about JPY8 bn

Acquisition of treasury shares(JPY 1,499 mil)

■ Special dividend

JPY35530FY2013
Results

JPY80
JPY705JPY6010JPY555JPY402015107060404030
FY2014
Results

FY2015Results

FY2016
Results

35%

26.7%（Forecast）

24.1%■ Ordinary dividend

32.8%

29.6%

28.6%

Total return trend：67.1%
Acquisition of treasury shares(JPY 3,674 mil)

FY2017
Results

FY2018Results

JPY70

JPY80

10206060

FY2019Results

FY2020Results

JPY901080

FY2021
ForecastsFY2022
Image

FY2023Image

FY2024Image
12

＜ｍemo＞

13

“Everything we do isfor our customers
20 Kandamatsunagacho, Chiyoda-ku, Tokyo 101-8629
Contact: Investor Relations & Public Relations Office
TEL:+81-3-5657-0106
FAX:+81-3-3254-7133
E-mail： webmaster@taxan.co.jp
https://www.taxan.co.jp

■ Forward-looking statements in these materials are based on information available to management
at the time this report was prepared and assumptions that management believes are reasonable.
Actual results may differ significantly from these statements for a number of reasons.
■ Display method in this material
Number : Truncated less than the display unit.
Ratio: After calculation in yen units, Round down one digit of Display unit.