2021 - 2022

Financial Results Briefing Materialfor the First Half of theFiscal Year ending March 2023

KAGA ELECTRONICS CO., LTD.
TSE Prime Market 8154

November 24, 2022

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

Management Topics
Representative Director,President & COO

Ryoichi Kado

I would now like to report on management topics for H1 of FY2022.

Review of the new medium-term management plan

IR schedule forrevisionannouncement

Reasons forchange ofschedule At the announcement of financial results for the fiscal year ending
March 31, 2023, in May 2023, revised management targets forthe final fiscal year (ending March 31, 2025) of the medium-term
management plan will be disclosed together with earnings
forecasts for the fiscal year ending March 31, 2024.
 In revising management targets, a comprehensive review ofKPIs encompassing not only operating income but also net
sales and ROE will be conducted.

 To assess the final income level in the fiscal year ending March 31,2023, as the upward momentum is expected to be maintained toexceed the targets.
 To improve the accuracy of income forecast for the fiscal year
ending March 31, 2024, given concerns about downward
pressure on earnings from the absence of spot sales, customers’
inventory adjustment, and other factors.

2First, I would like to report on the revision of the operating income target of the mediumterm management plan 2024, which was announced last November.
The financial results for this March exceeded the operating income announced in the midterm business plan 2024. Therefore, we had said that we would announce the revised figures
this November after assessing the figures for H1 of the current fiscal year. However, we havedecided to disclose the management target figures together with the forecast for the fiscal
year ending March 31, 2024, at the announcement of the fiscal year ending March 31, 2023, inMay next year.
The primary reason for the change is to determine the profit level at the end of FY2023/03,
as we expect earnings momentum to keep continuing in H2, which has been progressing
above plan in Q1 and Q2. The second reason is to improve the accuracy of the profit
forecast for FY2024/03, where there are concerns about downward pressure on earnings dueto the elimination of spot sales, inventory adjustments by customers, and other factors.
In this way, we would like to report you our management targets with a high degree ofcertainty of realization based on a thorough assessment of both upside and downside risks.

EMS Business growth investment: new factory in Malaysia【Outline of the new factory in Malaysia】
Site area

11,300㎡

Floor area

11,150㎡

Number ofemployee

900（max. 950）

Scheduledcommencementof operations

October, 2022Items produced

・Various power supply products
・Sanitary equipment,
Industrial equipment,
and electrical equipment
substrates for consumer
electronics

Sales Plan for FY22 to FY26
11200

（million Yen）

8,500

9200

10,000

7,000
7200

4,500

5,500

5200

3200

1200

-800

2023/32024/32025/32026/32027/3

3

From here, I would like to report on two growth investments in the EMS business.
The first is a new plant in Malaysia. As we have already announced in a press release, wehave been producing electrical circuit boards for power supply products, sanitary equipment,and consumer electronics in Malaysia since 2000. With the semiconductor shortage andsupply chain disruptions beginning to dissipate, and with a rapid recovery in customer
requests for increased production and new inquiries, we have decided to renew our existing
aging factory buildings and facilities and establish a system that can respond to strong
demand. Mass production began from the end of October.
The new plant is 1.3 times larger than the old plant, and cutting-edge equipment is installed
to further improve production quality and efficiency. In addition to an increase in orders fromexisting customers, we aim to achieve sales of JPY10 billion within five years of the start ofoperations, with a view to meeting the needs for distributed production in the ASEAN region
and receiving new orders from local companies.

EMS Business growth investment: new factory in Turkey【Outline of the new factory in Turkey】
Site area

15,000㎡

Floor area

11,600㎡

Number ofemployee

330

Scheduledcommencementof operations

June, 2023

Items produced・Electrical units for airconditioners
・Substrates for electric tools
・Automotive equipment
substrates

Sales Plan for FY22 to FY26

8000

57000（million Yen）

5,000

6000

0

5000

3,500

4000

2000

1000

-5

2,000

3000

500

-10

1,000

-15

-20

0

2023/32024/32025/32026/32027/34

Another new plant is under construction in Turkey to start mass production in June nextyear.
In Turkey, we made a capital investment in 2018 as a branch plant of the Czech plant, andsince then we have been developing production mainly for air conditioning equipment-relatedunit assembly. This time, we have decided to construct a new plant in order to expand its
functions and establish a system that can handle the mounting of electrical circuit boards inTurkey as well. In addition to meeting the needs of customers who are strengthening local
production and local procurement in Europe, we will use Turkey as a base to expand ourEuropean operations for board mounting.
We aim to expand our customer base from air-conditioning equipment to in-vehicle andindustrial equipment, and to achieve sales of JPY5 billion within five years of the start ofoperations.

Inventory reduction
Background to inventory buildup（million Yen, day）
100,000

Inventory turnover (%) 46.1

▶ Prolonged global supply shortages of

43.7

50.0

90,00032.8

32

semiconductors and electronic
components, and extended lead time

80,000

JPY71.2bn

30.0▶ Components sales business: secured sales

volume to respond to advanced andduplicate orders from customers

70,000JPY62.6bn
10.0

60,000

JPY50.0bn or less

Inventories
50,000-10.0

JPY37.9bn▶ EMS business: increase in work inprogress and secured safety stock as partof BCP

40,000

Policy and target for the reduction-30.0
30,000▶ Components sales business:targeting 15 days in inventory

20,000-50.0▶ EMS business:

10,000targeting 45 days in inventory

0-70.02021/32022/32022/92023/3
TargetNote︓ Inventory turnover ＝ Inventories ÷ Net Sales × 365（day）▶ By achieving the aboves, targeting

inventory level of ¥50 billion or less and
30 days in inventory at March 31, 2023
5So far, I have explained offensive management, but in this slide, I will explain defensivemanagement.
One of the most pressing management issues is inventory reduction. Many manufacturers
have been reviewing their procurement policies and building up parts inventories over thepast year or two against a backdrop of global shortages of semiconductors and electronic
components, longer lead times, and disruptions in international logistics networks.
We are no exception. In our parts sales business, we need to secure the quantity of goods ascustomers place advance or duplicate orders. In the EMS business, there was an increase inwork in process due to difficulties in procuring some components and securing safety stock
as BCP.
As a result, inventories at the beginning of the current period were approximately JPY25billion higher than a year ago, and the one in this September were approximately JPY8 billion
higher than at the beginning of the period. Since these inventories are all on a firm orderbasis with customers, they will not remain stagnant, but in any case, we are working toconvert them to cash as soon as possible.
We believe that the increase in turnover days peaked out in Q2, and we will continue toreduce turnover days toward the end of March to 15 days in the parts sales business and 45days in the EMS business.
By achieving these goals, we expect to normalize inventory levels to less than JPY50 billion
and turnover days to 30 days at the end of the current fiscal year. At the same time,needless to say, cash will be generated.

Human capital investment: from the Integrated Report 2022
Number of annual paid leave granted /Utilization ratio of annual paid leave

Average length of service / Job turnover rate
242235

Average length of service (years)
Job turnover rate (%)

3.1

2.9

1.9

2.0

2.1

100

Number of annual paid leave granted (days)
Utilization ratio of annual paid leave (%)

1030

556.857.9

63.1

53.2

80

54.3
60

20

250

18

16

14.1

14.7

14.7

15.4

14.8

-5

20

18.7

18.4

18.7

18.7

40

18.7

20-10

14

15

0-15
12

2018/3

2019/32020/32021/3

-20

10-20

10

2018/32022/3

Number of employees who took childcare leave /Ratio of employees reinstated following childcare leave

2019/32020/32021/32022/3

Average annual wage (including bonus)
8500(thousands Yen)

(Male)

8,081

8300

Number of employees who took childcare leave (persons, Female)
Ratio of employees reinstated following childcare leave

100.0
86.6

92.9

100.0

100.0

7900
110

100

7700

7,567

17

231

19

1722

2018/3

2019/32020/3

171

220

7,815

120

7,646

-5

7,504

90

19

5

8100

7500
80

-10

70

2

7300

60
-15

16

20

2021/32022/3

7100

6900

-20

2018/3

2019/32020/32021/32022/3

Note: The average annual wage for the fiscal year ending March
31, 2022 includesspecial stock incentives.

6The last two slides were prepared from the perspective of sustainability management.
First, in terms of human investment, I have shown four graphs here. All of this information
was disclosed in this year's integrated report. The average length of service is roughly 15years, which is neither good nor bad, but the turnover rate is around 2%, which I believe isquite low.
The number of paid holidays granted is around 18 days, which is on par with the average, but
we grant 6 days of refreshment leave in addition to this, which is not counted here. The paid
leave utilization rate is around 55%, which is higher than the average of 48.6% for thewholesale and retail industries, according to data from the Ministry of Health, Labour andWelfare.
About 20 employees take parental leave every year, and almost 100% return to work.
Recently, some male employees have finally taken parental leave. Since there are still so few,
we are in the process of educating our employee through internal newsletters and othermeans.
The average annual salary has been increasing aggressively every year, driven by the recent
expansion of business performance. We recognize that our salaries are among the highest in
the industry.

Distribution and return of profits to stakeholders
66.6

66.6

Dividend per share & Total dividends

Labor share
65.2

57.1

53.2
9000

Extraordinary dividendLabor share (%)
Taxes and dues

71,45060,517

Payroll

43,742

33,595
29,135

Operating

46,78730,487

Income34,571

38,0002,195

Payroll¥200(Up ¥80 per share)

¥120
¥80

¥80

22,377

1,921

2,197

(Up ¥10 per share)

¥70

5570

1060

20

2020/3Results

2021/3Results(Up ¥40 per share)(Up ¥10 per share)（Down ¥10 per share)）

60

7000
5000

3,149

Total amount of dividends

addedvalue

Operating Income

5,252

Ordinary dividend

Rent expenses
Depreciation(Million Yen)

Commemorative dividend

50
1040

3000
1000-1000-3000

14080-5000-7000

2019/3
2018/3Results

2020/3
2019/3Results

2021/32020/3Results

2022/32021/3Results

2023/32022/3

Forecasts

2019/3Results

2022/3Results

2023/3
Forecasts

Monthly salary: aiming for industry’s top level

Ordinary dividend: focus on stability and continuity

Periodic bonus (summer/winter): focus on stability

Extraordinary dividend: focus on performance linkage

Fiscal year-end bonus: focus on performance linkage

Commemorative dividend: focus on event
elements such as anniversaries
7Since we have talked about salaries, the last slide presents two data on thedistribution and return of profits to stakeholders.
First, the labor share has remained around 60%. We are aware that the average for thewholesale industry is about 50%, so this level is higher than that. In addition tomonthly salaries and regular bonuses, we have a unique system of performance-linked
year-end bonuses. The payment will be made when the financial results exceed theprofit forecast.
At the same time, the return of profits to shareholders is also an importantmanagement issue. As noted here, the dividends are divided into three categories:
ordinary dividends, special dividends, and commemorative dividends.
We emphasize stable and sustainable dividends for ordinary dividends, andperformance-linked dividends for special dividends. We usually pay an ordinary
dividend at the beginning of the fiscal year, and then revise the profit forecast upward
during the fiscal year, or pay a special dividend if the financial results ultimately
exceed the profit forecast.
We have again revised our forecast to JPY200 per share by adding a special dividendof JPY50 to the initial forecast of JPY150 per share.
This is the KAGA ELECTRONICS way of distributing and returning profits tostakeholders that reward employees with year-end bonuses and shareholders withspecial dividends in return for their good performance. This is the policy of ourfounder, Isao Tsukamoto, since the establishment of the Company: profits are sharedby all, and we will continue to cherish this policy as part of our company DNA to bepassed on to the next generation. We hope that all the investors gathered here today
will join us in the circle of sharing.

“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/en/

This concludes my explanation. Thank you very much for your time today.