Hello, everyone. I am Eiji Kawamura, Managing Director and Head of Administration
Headquarters of Kaga Electronics Co., Ltd. We sincerely thank you for your participationin the briefing of our first half financial results. I would like to explain the outline of our
financial results for the first half.

First of all, I’ll introduce a summary of the first half results. Although sales of PCs grew
due to the expansion of teleworking amid the COVID‐19 outbreak, net sales declined asa result of a significant impact from changes in commercial rights and commercialdistribution with major business partners. Both operating income and ordinary income
declined despite efforts to reduce SG&A expenses in line with the decline in sales. Net
income increased due to a gain on bargain purchase following M&A.
Next is an overview of the main segments. In Electronic Components, the components
sales business benefited from the effect of Excel’s consolidation in April 2020, but thetermination of FEI sales agency agreement with Cypress Semiconductor and otherfactors pushed sales down sharply. The EMS Business maintained steady performance inthe medical equipment area, but sales fell for the automotive and air conditioning
devices due to the impact of the partial suspension of operations at overseas plants
during the lockdowns.
In the Information Equipment Segment, sales rose in the PC Sales Business due to anincrease in remote work and online classes. On the other hand, sales in the Home
Electric Appliances Business continued to post lower sales.
For the fiscal year ending March 2021, there are signs of a gradual recovery from thepandemic in some manufacturing industries. Moreover, the earnings results in the firsthalf surpassed our internal plans. Given these factors, we have raised our forecasts fornet sales, operating income, and ordinary income upward from the previous forecasts,
which were released on August 6. There was no change in the forecast of profit
attributable to owners of parent due to uncertainty in the second half.
Regarding shareholder return, we will pay an interim dividend of JPY30 per share as we
initially announced. The year‐end dividend will remain unchanged from the initial
forecast of JPY30 per share.

We will move on to the highlights of our business performance. Net sales amounted toJPY188,859 million, a decrease of 18.1% YoY. Our initial net sales forecast for the fullyear was JPY400 billion, so the progress rate is 47.2%. Operating income was JPY4,434
million, a YoY decrease of 15.4%. Against the full‐year forecast of JPY5 billion, the rate ofprogress is 88.7%.
Ordinary income was JPY4,338 million, a YoY decrease of 21.8%. Against the full‐year
forecast of JPY4.5 billion, the progress rate is 96.4%. Profit attributable to owners ofparent was JPY10,772 million, up approximately three‐fold, or 207.3%, YoY. We achieved
the initial forecast for the full fiscal year of JPY10 billion. EPS was JPY392.30.

Next, I will explain the business results by segment for the first half. Electronic
Component showed net sales of JPY156,887 million, down 21.5% YoY. Segment income
amounted to JPY3,083 million, down 27.3% YoY. Sales of information equipment rose
16.1% YoY to JPY23,192 million. Segment income was JPY1,160 million, up 87.8% YoY.
In the Software Segment, sales were JPY1,274 million, down 4.3% YoY. Segment income
amounted to JPY86 million, up 84.0% YoY. Net sales in Others decreased 21.1% YoY toJPY7,505 million. Segment income was JPY36 million, down 86.1% YoY.

We will continue to explain the impact of M&A, which has led to an increase in the scaleof the Group. First of all, net sales decreased JPY41,771 million YoY. The breakdown isas follows. Total sales at conventional Kaga Electronics group companies declined
JPY8,880 million. Sales at FEI were down JPY51,494 million. Excel, which wasconsolidated in the first quarter, posted sales of JPY18,604 million.
Gross profit of the overall Group decreased JPY2,130 million. The conventional KagaElectronics Group incurred a decline of JPY494 million, FEI saw a decline of JPY2,633
million, and Excel enjoyed a rise of JPY1,009 million. The gross profit margin for theconventional Kaga Electronics Group was 14.3%, up from 13.7% in the same period of
the previous year. FEI’s GPM was 8.0%, up from 6.7%.
SG&A expenses were down JPY1,325 million in total. The conventional Kaga Electronics
Group slashed SG&A expenses by JPY1,104 million, and FEI by JPY1,278 million. SG&A
expenses at Excel, which joined the Group in the current year, pulled up the total
expense amount by JPY1,058 million.
Finally, the Group’s overall operating income was down JPY805 million YoY. The
conventional Kaga Electronics Group posted a rise of JPY667 million, FEI incurred a fall ofJPY1,370 million, and Excel saw a decline of JPY106 million.

Next, I would like to explain the first half business results by company. The conventionalKaga Electronics Group posted sales of JPY110,535 million, down 7.4% YoY. Gross profit
was JPY15,853 million, down 3.0% YoY. Operating income was JPY4,619 million, a YoY
increase of 16.9%.
FEI posted net sales of JPY59,720 million, down a sharp 46.3% YoY. Gross profit was
JPY4,784 million, down 35.5% YoY. The company incurred operating loss of JPY84 million.
Excel posted sales of JPY18,604 million. Gross profit was JPY1,009 million. It incurredoperating loss of JPY106 million.

I will explain the results of the main segments. In the Electronic Component Segment, asI mentioned earlier, net sales decreased JPY42,931 million, down 21.5% YoY. Segment
income was down 1,155 million, or 27.3%. The Components Sales Business benefited
from the effect of Excel’s consolidation, but sales fell significantly due to the terminationof FEI sales agency agreement with Cypress Semiconductor .
The EMS Business continued to perform well in the medical equipment area, but wassluggish in the areas of automotive and air conditioning devices. The Company wasaffected by partial suspension of operations and production adjustments at overseas
plants due to the pandemic.

In the Information Equipment Segment, sales were up JPY3,223 million, or 16.1%, YoY.
Segment income increased JPY542 million, or 87.8%. Sales of PCs and PC peripherals toelectronics mass retailers, schools and educational facilities were strong during theCOVID‐19 outbreak due to the increase in remote work and online classes. On the otherhand, the Home Electric Appliances Business remained sluggish.

Next, I would like to explain the three‐month figures for the second quarter alone. Net
sales for the July‐to‐September second quarter were JPY104,729 million, down 13.5%
YoY. Against the result in the first quarter of JPY84,130 million, it was up 24.5% QoQ.
Operating income was JPY2,778 million, down 18% YoY and up 67.8% QoQ. Ordinary
income was 2,804 million, down 19.9% YoY and up 82.9% QoQ. Profit attributable toowners of parent was JPY2,128 million, down 1.1% YoY and down 75.4% QoQ. This islargely attributable to the recording of Excel's negative goodwill in the first quarter.

Next, I will explain the quarterly figures by segment. Sales in the Electronic Component
Segment were JPY88,690 million, down 15.7% YoY and up 30.1% QoQ. Segment income
amounted to JPY1,897 million, down 27.5% YoY and up 60.0% QoQ.
Sales in the Information Equipment Segment were JPY10,654 million, up 8.2% YoY anddown 15.0% QoQ. Segment income amounted to JPY577 million, up 34.6% YoY anddown 0.9% QoQ.
Sales in the Software Segment were JPY783 million, down 12.5% YoY and up 59.2% QoQ.
Segment income was JPY131 million, up 20.5% YoY.
Sales in the Others Segment were JPY4,600 million, down 9.8% YoY and up 58.4% QoQ.
Segment income was JPY137 million, down 26.2% YoY. The segment turned into theblack from loss of JPY101 million in the previous quarter.

Next, I will explain the quarterly business results by company. Sales of the conventional
Kaga Electronics Group were JPY58,041 million for the second quarter, down 6.0% YoY
and up 10.6% QoQ. Gross profit was JPY8,410 million, down 1.5% YoY and up 13.0%
QoQ . Operating income was JPY2,749 million, up 17.7% YoY and up 47.0% QoQ.
FEI posted net sales of JPY30,548 million, down 48.5% YoY and up 4.7% QoQ. Grossprofit was JPY2,455 million, down 41.1% YoY and up 5.5% QoQ . The company reported
operating loss of JPY65 million, against operating income of JPY1,057 million in thesecond quarter of the previous year. A sharp decrease in gross profit resulted in the redink.
Excel, which joined the Group in the current fiscal year, posted net sales of JPY16,139million. Gross profit was JPY779 million, and operating profit was JPY91 million. Thecompany turned into the black in the second quarter partly because results at its
overseas subsidiaries were included in its consolidated figures from the second quarter.

I will explain our balance sheet. As for assets, total assets were JPY209,908 million, an
increase of JPY2,270 million from the end of March. Current assets were JPY172,376
million, a decrease of JPY1,955 million from six months earlier. Non‐current assets wereJPY37,532 million, an increase of JPY4,226 million.
Total liabilities were JPY113,745 million, a decrease of JPY7,643 million from the end ofMarch. Net assets were JPY96,163 million, an increase of JPT9,913 million.

This is a breakdown of the assets. First of all, inventories were JPY37,729 million, anincrease of JPY5,821 million. The inventory turnover period was 36.6 days. Notes andaccounts receivable were JPY91,864 million, an increase of JPY493 million. Notes andaccounts payable were JPY54,605 million, a decrease of JPY15,583 million. The accounts
receivable turnover was 89 days, and the accounts payable turnover was 61.1 days.

Next, I will explain cash and deposits, interest‐bearing debt, and cash flows. Cash anddeposits amounted to a balance of JPY35,554 million, a decrease of JPY7,830 million
from six months earlier. Interest‐bearing debt amounted to JPY39,179 million, anincrease of JPY10,443 million. The D/E ratio was 0.44, and the net D/E ratio was 0.04.
Among cash flows, cash flows from operating activities showed a net outflow ofJPY7,017 million. Cash flows from investing activities posted a net outflow of JPY2,996
million, and those from financing activities showed a net outflow of JPY855 million.

Let me explain cash flows. Cash flows from operating activities recorded a temporary
increase in outflow due to the acquisition of Excel, loss of large commercial rights, andthe impact of COVID‐19. However, it is expected to be reversed by the end of the current
fiscal year ending March 2021.
This is a breakdown of operating cash flows. Profit before income taxes amounted toJPY12,126 million, and gain on negative goodwill led to outflow of JPY7,963 million. Adecrease in notes and accounts receivable‐trade was JPY10,547 million, a decrease ininventories was JPY1,835 million, and a decrease in notes and accounts receivable‐trade
was JPY21,540 million, leading to net cash used in operating activities worth JPY7,017
million.

Finally, I would like to explain our full‐year earnings forecasts. As of August 6, weannounced our full‐year earnings forecasts, but in light of our first half results, werevised up our net sales forecast by JPY10 billion to JPY410 billion. We increased ourforecast for operating income by JPY2.5 billion to JPY7.5 billion. We also raised ourordinary income forecast by JPY3 billion to JPY7.5 billion.
We left our forecast for profit attributable to owners of parent unchanged at JPY10billion.

These are the factors behind the increases in the earnings forecasts. I will explain them briefly.
When we previously forecast annual net sales at JPY400 billion, we estimated sales at theconventional Kaga Electronics Group at JPY240 billion, those at FEI at JPY160 billion, and those atExcel at JPY50 billion. These totaled JPY450 billion, which was the estimate before the COVID‐19
pandemic, and we estimated the risk to slash sales at JPY50 billion, leading to the previous
forecast of net sales at JPY400 billion.
Following the financial results for the first half, we newly estimated sales at the conventional
Kaga Electronics Group at JPY235 billion, down JPY5 billion from the initial projection, those atFEI at JPY125 billion, down JPY35 billion, and those at Excel at JPY50 billion, unchanged from theprevious estimate. As a result, we came up with the total net sales forecast of JPY410 billion, up
JPY10 billion.
In terms of operating income, we previously estimated the value for the conventional Kaga
Electronics Group to be JPY7.5 billion and that for FEI to be JPY1 billion, and that for Excel tobreak even, prior to the pandemic. Then we added a risk of gross profit decrease due to theimpact of COVID‐19 worth JPY5 billion, and the effect of efforts to recover profits worth JPY1.5billion, leading to a net decrease of JPY3.5 billion, and resulting in the total operating income
forecast of JPY5 billion. In response to the results in the first half, we estimated a gross profit
decrease at JPY4 billion and the effect of recovery efforts at JPY3 billion, leading to a net
decrease JPY1 billion. As a result, we revised our operating income forecast upward by JPY2.5
billion to JPY7.5 billion.
Regarding profit attributable to owners of parent, we initially estimated extraordinary profit
worth JPY8 billion from gains on negative goodwill by the acquisition of Excel, and extraordinary
loss worth JPY1.5 billion due to restructuring cost, business risks and others. In addition, weestimated income taxes at JPY1.5 billion, leading to JPY10 billion in profit. This time, weestimated extraordinary loss to be JPY3 billion and income taxes to be JPY2.5 billion, leaving theforecast unchanged at JPY10 billion.
As described above, we are pursuing our businesses in an extremely challenging environment,and our full‐year results are expected to incur YoY falls in both sales and profits. However, wewould like to do our utmost to improve our business performance of the whole Group, and weappreciate your support.
Thank you for your listening.