2021 - 2022

Financial Results Briefing Material
for the Fiscal Year ended March 2023

KAGA ELECTRONICS CO., LTD.
TSE Prime Market 8154

May 25, 2023

I am Kado, the President of KAGA ELECTRONICS. Thank you for your continued
support and cooperation in our IR activities.

Management Topics
Representative Director,
President & COO

Ryoichi Kado

I will now present our management topics for FY2022. The three main topics are:financial results, the medium-term management plan, and the sustainability mediumterm management plan.

Alternative Proposal / Alternative Sales
Revenue of alternative sales

JPY

7.5bn

Composition by Product
FY2022 Results

Others30%

JPY7.0bn

MOSFET
7%
Analog IC
9%88

companies

87

companies

FPGA
24%

Others24%

FY2023
Outlook

OthersPower
18% Semiconductor
24%
MOSFET
26%

FPGA
24%

Analog IC
8%

Composition by Industry
FY2022 Results

new customers : 17
Existing customers : 71

FY2022
Results

Power
Semiconductor30%

FY2023 Outlook

Insustrial
32%

Telecommunucation
6%
In-vehicle
Consumer
12%
26%

FY2023 Outlook
Others17%
Telecommunication
7%
In-Vehicle
34%

Industrial
20%
Consumer
22%

2First, I would like to discuss two points regarding FY2022 financial results.
The first is regarding alternative proposals and alternative sales. In previous financial
results briefings, we have said that spot sales are a one-time revenue stream and inparallel, we would propose and sell alternative products that lead to sustainableearnings. This page summarizes how many alternative sales there have been.
In FY2022, we made alternative sales to 88 customers. Of these, 71 were existingcustomers and 17 were new. Total sales amounted to approximately JPY7 billion. In
FY2023, we expect to sell approximately JPY7.5 billion to approximately the same
number of customers.
The graph on the right shows what products were sold and to what industries. By
product, power semiconductors, FPGAs, and analog ICs accounted for the majority ofthe total. By industry, industrial equipment, consumer electronics, and automotive, inthat order, are expected to grow significantly in FY2023.

Inventory Reduction
Changes in Inventory Amount and Inventory Turnover
900

800

700

600

Inventory amount303(trading company business)
Inventory turnover

JPY 37.9 bn

120

JPY 62.6 bn(manufacturing business)
500

JPY 71.2 bn(trading company business)
Inventory turnover(consolidated)
Inventory turnover

80.1

76.7

271

100

46.1

145

43.7

32.8
34.3
26.4

100

80

268
65.5days

53.4

200

JPY 56.2 bn

304
84.0

400

300

140

JPY 78.8 bn(manufacturing business)
Inventory amount

354

38.9
32.6

408

60

47.9

485

233

33.7days
23.4days

40

20

293
0

0
2021/32022/32022/92022/122023/33

The second is inventory reduction.
In my presentation at the previous financial briefing, I mentioned that inventory reduction isan urgent management issue. Global shortages of semiconductors and electronic components
and longer lead times. In addition, many manufacturers have been reviewing theirprocurement policies against the backdrop of disruptions in international logistics networks,
and have been building up parts inventories over the past year or two.
We are no exception, and in our component sales business, we have had to secure thenumber of goods as a result of prior and overlapping orders from our customers. In addition,
the EMS business experienced an increase in work in the process due to difficulties inprocuring some parts and materials, as well as the securing of safety stock as a BCP.
As a result, inventories, which were JPY62.6 billion at the beginning of FY2022, built up to
JPY71.2 billion at the end of September and JPY78.8 billion at the end of December.
Unfortunately, the inventory at the end of this fiscal year did not reach reduction target,
which I said we would normalize to below JPY50 billion, but we were still able to reduce it byover JPY20 billion, bringing it back to JPY50 billion range.
In this graph, our consolidated inventory is broken down into our manufacturing business,
mainly EMS, and our trading company business, mainly component sales. As you can see, thetrading company business is not hard to hand off, so we were able to drop our position
quickly since the end of December. However, the manufacturing business is still somewhat
heavy with some work-in-process inventory. We hope to achieve our overall goal of 30 daysof turnover by the end of this quarter.

Medium-Term Management Plan 2024 : Targets
Initial plan

Latest outlook(Announced on November 25, 2021)（Announced on May 11, 2023）

FY2022~FY2024
JPY 750 bn
Organic growth: JPY 600 bn

Planned year

[No change]

Net Sales[No change]

Including new M&As: JPY 150 bn

JPY 20 bn

stable8.5% or higher

Operating
IncomeJPY

ROE

stable30 bn or higher
10% or higher
4

Next, I will discuss three points in the medium-term management plan.
The first is the latest forecast of the medium-term management plan, which wasannounced on May 11, at the same time as the financial results.
At the previous meeting, I stated that the revision of the operating income target forthe medium-term management plan would be disclosed in the announcement offinancial results in May. The reasons cited were to determine the final landing of
FY2022 earnings, which are expected to be higher, and to improve the accuracy of
the FY2023 forecast, which is concerned about downward pressure on earnings dueto the elimination of spot sales, inventory adjustments, and other factors.
Based on these upside and downside factors, we have announced this latest outlook
for our management targets for FY2024, the final year of the plan. The plan period
remains unchanged from FY2022 to FY2024, a three-year plan. There is no change tothe original forecast of achieving JPY600 billion in sales through autonomous growth,
and JPY750 billion in reflecting new M&A challenges.
Operating income was revised to exceed JPY30 billion or higher. ROE was set at astable 10% or higher, in line with the revision of operating income.
On the next page, we will discuss the concepts of operating income and ROE in moredetail.

Direction of Increase/Decrease Factors on Operating Income
In FY2023, there are risks of income decrease due to a decline attributable to suchfactors as the absence of spot demand and customersʼ BCP inventory adjustment
Decreasefactors

Increasefactors

FY2021

FY2022

FY2023

FY2024FY2025~2027

―

―

―

Sales Volume /inventory adjustment
Spot Sales
Expansion of EMS business
Improved profitability ofacquired companies
Human capital investment(salaries, bonuses, etc.)

500
450

JPY 209 bn

400

JPY 300 bn
or higher

JPY 322 bn

Profit from
Spot Sales
JPY 4.6 bn

JPY 250 bn

350
300

Latest outlook

250

JPY 200 bn

200

Profit from
Spot Sales
JPY 4.2 bn

Initial targets

150
100
50

FY2021Results

FY2022
Results

FY2023
Forecasts

FY2024
Management
Targets0

FY2027Image

5

Operating income was set at more than JPY30 billion, based on the expectation that
operating income will decline once from the highest income level in FY2022 to FY2023,
and then return to the growth phase in FY2024.
As the main indicators on which these assumptions are based, we have indicated the
direction of each fiscal year for each of the following factors -- sales volume, spot
sales, EMS business expansion, PMI, and human investment -- with blue arrows
indicating factors for increased incomes and red arrows indicating factors for
decreased incomes.
Operating income forecast for the components sales business and the EMS business,
which had led the Company to four consecutive years of record incomes throughFY2022, is lower in FY2023 due to recession risk, the impact of temporary inventory
adjustments, and a drop-off in spot sales. After FY2024, there is no change in themedium-term business expansion scenario, such as EVs, 5G, IoT, and AI.
On the other hand, we expect the improvement in profitability of acquired companies
to continue. In addition, we will continue to invest in human resources, includingsalaries and bonuses.

Concept of ROE
Maintain a stable ROE of 10% or higher
with cost of shareholdersʼ equity (7%–8%) in mind

13.5%
15.7%

10.0%

FY2024
Management Targets

19.6%

Total asset turnover

7.6%
1.9
2.1
2.6

1.9
2.6

2.7
1.3
FY2019Results

10.0% or higher

Stable2.2
2.4

Approx.

2.0

Financial leverage

2.0 〜 2.5

Net profit margin

2.7

3.1

FY2020Results

FY2021Results

3.8

3.0 〜 3.5

FY2022
Results
6

This page is a graphical representation of ROE trends broken down into its threecomponents.
The bottom line is a net income margin of 3% to 3.5%, based on an operating income
margin of about 5%.
We believe that the key factor in improving ROE is to maintain a high income margin.
Second, financial leverage is 2 to 2.5 times, based on an equity ratio in the range
between 40% and 50%.
If we assume the third factor, total asset turnover, to be around the current two
times, we believe that ROE will be stable around 12% to 15%.
Based on these estimates, we have now revised our ROE target to a stable 10% or
higher.
We recognize that our cost of equity is roughly 7% or 8%, so our message here is tomaintain ROE at 10% or higher to consistently exceed that level.

Shareholder Return (Dividend Policy)
Dividends shall be a combination of “ordinary dividend +special dividend“ linked to business performance.

Concept ofshareholder
returnWe shall maintain stable dividends with a target consolidated

dividend payout ratio of 25% to 35%.

Decisions on the acquisition of treasury shares shall bemade flexibly, in consideration of capital efficiency and shareprice, etc.

25.5%

25.6%

■ Ordinary dividend■ Commemorative
dividend■ Special dividend

32.8%

29.6%

28.6%

Total return trend︓44.3%
Acquisition of treasury shares(JPY 3,674 mil)

32.1%
24.1%

27.4%

25.0%

Total return trend︓45.4%
Acquisition of treasury shares(JPY 1,499 mil)

25%

20.8%

19.3%

※Including negative goodwill
about JPY8 bn

JPY220 JPY22070

JPY120

JPY35 JPY40

35%

JPY55

JPY60
20

FY2016
Results

5
30

10
30

15
40

FY2013Results

FY2014
Results

FY2015Results

40

JPY70

JPY80

60

5
5
70

FY2017
Results

FY2018Results

10

JPY70

JPY80

10

20

60

60

FY2019Results

FY2020Results

10
220

40
140
80
FY2021Results

FY2022
Results

FY2023
Forecasts

7

In connection with the medium-term management plan, I would like to mention a few
things about shareholder returns.
The dividend for FY2022 was JPY220 per share, which, like our business performance,
is a record high. Despite the forecasted decrease in income for FY2023, the dividend
forecast remains unchanged at JPY220 per share.
As discussed earlier, although single-year operating results will fluctuate from FY2022
to FY2024, with both increases and decreases, due to the rapidly changing businessenvironment, we have decided that it is desirable to maintain the dividend level forshareholders who will hold our shares for the long term.
In February of this year, we resumed our overseas IR activities for the first time inthree years, and met with investors and 11 companies in the UK. In the discussion
with them, we were asked what we think of the dividends. There were also discussions
among shareholders and new investors alike that dividend cuts are fatal to long-term
investors. This real feedback was helpful.
We hope the investors will hold our stocks for the long term with peace of mind, andthat is the message we embed here.

Materiality
The Kaga Electronics Group is committed to seriously addressing a variety of issues relevant not
only to itself but also communities around the world and thereby living up to the expectations ofsociety. In line with this commitment, the Group has employed four perspectives̶ Environmental(E), Social (S), Governance (G) and Business (B)̶to identify priority issues that are deemed toexert significant impact on its business operations, as listed below. Through its efforts to tackle themateriality of these issues, the Group will practice corporate activities aimed at contributing to therealization of a sustainable society, with the aim of further improving its corporate value.
Materiality

E

Create a clean
globalenvironment

S

Create aninclusive company
as well as anaffluent societyG

Createa sustainable
management base

B

Realizesustainablebusiness growth

Related SDGs

Changes in the socio-economic
environment• Growing seriousness of global warming
and other environmental problems• Urgent call for carbon neutrality• Changes in social structure as we movetoward the popularization of the newnormal• Human resource shortages attributable
to a low birthrate and an aging
population• Public calls for more robust corporate
governance• Growing need for business resilienceagainst changes in the operating
environment• Progress in digital transformation• Coming of a “super-smart” society due
to the popularization of ICT, such as
IoT and AI• Intensification of global competition

Our initiatives• Provide products and services designed tohelp resolve environmental and energy
issues• Continue initiatives to reduce theenvironmental burden• Promote workforce diversity andinnovative work styles to better adapt to
the new normal• Develop human resources by passing
down and updating KAGA-ism• Further strengthen corporate governanceand compliance• Thoroughly practice a profit-focusedmanagement approach• Provide products and services that
contribute to the transition to a digitaldriven society• Create new businesses aimed at helping

8

Next, I will discuss the progress made in the first year of the sustainability mediumterm management plan.
This page is related to prominent issues of our group, but I have already discussed
them previously, so I will omit them here.

Medium- to long-term sustainability targets
Key themesE

Achievement of shift to100% renewable energy

Issues to address and issues to
examine• Adoption of renewable energy atdomestic sales offices• Adoption of renewable energy atdomestic manufacturing sites• Adoption of renewable energy atoverseas manufacturing sites

Shift to electricity for• Switch to electric vehicles for domestic
sales vehicles (EV, HV, PHV, FCV)
company-owned vehicles

2024: 40% (1%)

2030: 100%
2030: 50%
2050: 100%

2024: 85% (78.5%)• Ensuring diversity in core humanresources (Women, foreign
nationals, mid-career hires)• Initiatives to employ elderly workers
and persons with disabilities

Percentage of female newgraduates in general positions
2023: 30% (5.8%)
Percentage of women in
management positions
2024: 15% (13.3%)

Work–life management
and enhancement of
productivity• Enhancement of programs such as
childcare/family-care and telework• Acquisition of certification as a Healthand Productivity Management
Organization

2022: Implementation of review
2023: Certification

Restructuring the• Independent Outside Directors: atgovernance structure in
least 1/3
response to the revision of
the Corporate Governance • Establishment of Nomination and
Code and the reorganization
Compensation Committeeof Tokyo Stock Exchange

Further strengthening
the supervisory andoversight functions of
top management overbusiness execution• Diversification of the Board of
Directors• Full compliance with Corporate
Governance Code for Prime Market• Adoption of delegation-based
executive officer structure• Transition to structure of company
with committees

Long-term targets

By 2024: Information
gathering/analysis and determinationof policy
・In-house power generation/external
procurement
・Solar panel/biomass power
generation/renewable energy
businesses

Diversity and humanresource management

S

G

Medium-term targets

2030: 30%
2050: 100%

2030: 100%
Percentage of female
new graduates ingeneral positions
2028: 40%
Percentage of women in
management positions
2029: 17%2025: Certification byoutside party
2024 onward:
Continuation ofcertification

Performed in June 2021

By June 2022: Determination ofpolicyPerformed in November 2021

Setting of targets inline with next
Corporate Governance
Code revision

April 2022: Enactment
By March 2023: Determination ofpolicy*Numbers in parentheses represent values when the plan was formulated in November 2021.

9This page shows the medium-term and long-term targets for each theme establishedin the sustainability medium-to long-term management plan.
From the following pages, I will report on the progress in ESGs per category.

Progress of medium- to long-term sustainability targets︓
Environmental
Key themesE

Achievement of shift
to 100% renewableenergyShift to electricity forcompany-owned
vehiclesIssues to address and issues to examine

Main activities and progress in FY2022• Adoption of renewable energy at domestic
sales offices

 Introduced 1.2% of total electricity from renewableenergy sources. Continue study to achieve 40% in
FY2024.

• Adoption of renewable energy at domestic
manufacturing sites

 Calculated power generation to install solar panels atsites in Aomori, Fukushima, and Tottori. Started thedetailed design.

• Adoption of renewable energy at overseas
manufacturing sites

 Started to introduce renewable energy-derived
electricity using solar panels at sites in China (Hubei)
and Vietnam. Expected to cover 30%-50% of annual
electricity usage at each site.

• Switch to electric vehicles for domestic sales
vehicles (EV, HV, PHV, FCV) The ratio of electric vehicles increased by 1.2% year
on year to 82.0% (as of March 31, 2023).

Solar panels installed on the roof
of Head Office

Solar panels installedat Vietnam factory

10First, the “E” of Environment.
In this category, we are working to achieve 100% renewable energy.
As for major progress in FY2022, we have started designing for the installation ofsolar panels at our manufacturing sites in Japan.
In addition, at our overseas manufacturing bases, the Hubei Plant in China and theVietnam Plant have begun to install renewable electricity from solar panels.
These sites are expected to cover 30% to 50% of their annual electricity use.

Progress of medium- to long-term sustainability targets︓
Social
Key themes

Diversity andhuman resource
management

S
Work–life
management
and enhancementof productivity

Issues to address and issues to examine

Main activities and progress in FY2022

 Ensuring diversity in core humanresources (Women, foreign nationals,
mid-career hires) Percentage of female new graduates in general
positions increased by 12.3pt year on year to 18.1%
as a result of hiring activities based on the Action Plan.
 Discussions held within the group to improve
percentage of women in management positions andset targets for the number of women in management
positions at each group company. As of April 2023,
the percentage of women in management positions
has increased by 3.2pt year on year to 16.5%.

 Initiatives to employ elderly workers andpersons with disabilities

 Employment of persons with disabilities is 100% of
the legally mandated rate (as of March 31, 2023)

 Enhancement of programs such as
childcare/family-care and telework

 Revised regulations and rules to make telework apermanent system Acquisition of certification as a Healthand Productivity Management
Organization

 Certified in March 2023

11

Next is the “S” of Society.
The key theme here is diversity.
Our ultimate goal is to develop and promote women to officers and boards, and as astart, we started working to increase the ratio of female managers and the ratio of
female career-track employees.
Progress in FY2022 was as follows: the ratio of female career-track positions
increased by 12.3pt from the previous year to 18.1%, and the ratio of female
managerial positions increased by 3.2pt from the previous year to 16.5%.
One of our achievements in FY2022 as work-life balance management was thecertification of Health & Productivity Management Outstanding Organizations we
received in March of this year.
In addition, remote work, which took root during the pandemic, did not go away evenin the post-COVID-19 period; instead, it was institutionalized as one of the normal
work styles. We estimate the rate of remote workers to be 40% to 60%.

Progress of medium- to long-term sustainability targets︓
GovernanceG

Key themes

Issues to address and issues to examine

Main activities and progress in FY2022

Restructuring thegovernance structure
in response to therevision of the
Corporate
Governance Codeand thereorganization ofTokyo Stock
Exchange Independent Outside Directors: at least
1/3
 Establishment of Nomination andCompensation Committee Effective June 2023, 6 directors (including threeoutside directors), with a majority of directors beingoutside directors. Established the Nomination andCompensation Committee.

 Diversification of the Board of Directors

 Decided to nominate a female candidate as a newoutside auditor. Continued to work to appoint a
female director.

 Full compliance with Corporate
Governance Code for Prime Market

 TCFD-compliant information to be disclosed from
June 2022.

Furtherstrengthening thesupervisory andoversight
functions of top
management overbusiness execution

 Adoption of delegation-based executive
officer structure Implemented from April 2022.

 Transition to structure of company withcommittees

 Continue the company-with-auditors system, but
shorten the term of directors from the current 2
years to 1 year (planned in June 2023).

Enhancement of the Board of
Directorsʼ functions
InsideDirector

11
Outside Director

InsideDirector

6

Outside Director

Adoption of Delegation-based
Executive Officer Structure
Outline: Management (conventionally, directors)
with roles (e.g., Founder & CEO, President & COO,
senior managing executive officer, managing executive
officer, and senior executive officer)
Inside directors concurrently serve as delegatedexecutive officers.
Term of office: 1 year
Nomination: Deliberated by the Nomination Committee
and resolved at the Board of Directors meeting.
12

Finally, the “G” of Governance.
An important theme here is the restructuring of the governance structure.
As for the results for FY2022, we will review the number of directors, and from Juneof this year, the number of directors will be reduced from seven internal and four
external, for a total of 11; to three internal and three external, for a total of six. The
purpose is to clarify the supervisory and executive functions of management toenhance management transparency and speedy execution of business operations.
On the other hand, with respect to the diversification of the Board of Directors,
unfortunately, we were unable to submit a female candidate for the Board of Directors
at this year's General Meeting of Shareholders, but we have decided to introduce a
female outside corporate auditor with the future transition to a company with an
Audit Committee System in mind.
That is all for my explanation. Thank you very much for your attention.

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

■ 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.