Kaga Electronics Group

Integrated Report

2018Corporate Philosophy

Everything we do is forour customers
Kaga Electronics Co., Ltd. had very humble beginnings 50 years ago,
starting out in a very small office. We have since grown into a generalelectronics trading company with operations that now span the globe. Our
corporate philosophy, “Everything we do is for our customers,” hasremained unchanged since our earliest days. Based on this philosophy, we
will keep contributing to the creation of an affluent society by continuing tosupport the development of our customers.
F.Y.T. (fight) action guidelines

F= Flexibility

Y= Young at heart

Agility to respondto change

Always take a fresh
approach to creating new
ideas or taking action

T= TryNever forget yourcommitment to take on
daring challenges

The spirit behind the acronym F.Y.T. (pronounced “fight”) personifies our action
guidelines. “F” stands for “Flexibility” and represents our commitment to be agile inresponse to change; “Y” stands for “Young at heart,” representing our fresh approachto creating new ideas and taking action regardless of career or age; and “T” stands
for “Try,” demonstrating our dedication to boldly take on daring challenges.

3G action guidelines

GeneralNo matter what
the product

Global

We will look aroundthe world, andGroup
Leverage group strengths
to give customers
what they need

The opportunities granted to us by our customers have provided the impetus for
growth, and we have always sought to leverage the power of the Group as a means togive back to our customers. The 3G action guidelines reflect our willingness to meetthe needs of our customers through the products and services we handle.

1 KAGA ELECTRONICS CO.,LTD.

Integrated Report 2018 2

Integrated Report

2018

INDEX

Who We Are

Medium- to Long-term Growth Strategy

Foundations for Value Creation

05 Message from the CEO

11

Corporate Governance

50 Years in Business“Everything we do is for our customers,” in the past andinto the future

Solidifying Foundations for the Next
50 Years
We aim to outstrip the global competition and be the

Isao Tsukamoto, Founder & CEO

09 Value Creation Process

Message from the COO

industry leader

15

based on tangible and intangible capital for its global

31

Special Feature 1

Internal Control / Compliance

Overview of FY2018/3 Results
Outline of business segments

Period covered

Scope of report

Financial figures

Notation and coverage
The Company: K aga Electronics Co., Ltd.
The Group: K aga Electronics Co., Ltd. and its 43 consolidated
subsidiaries
Domestic facilities: K aga Electronics Co., Ltd. and its
15 domestic consolidated subsidiaries

Data calculation in this report covers Kaga Electronics Co.,
Ltd. and its 43 consolidated subsidiaries (15 in Japan and28 overseas), all companies included in the scope of theCompany’s consolidated accounting, except where stated.

41 10-Year Financial Summary
43 Consolidated Balance Sheet
45	Consolidated Statement of Income and47
49

Comprehensive Income

Consolidated Statement of Cash Flows
Corporate Information

Special Feature 2

Interview with Outside Director
Susumu Miyoshi, Outside Director

Director, Division Manager of EMS Sales Division

19
22

3 KAGA ELECTRONICS CO.,LTD.

Corporate Governance

Motonori Toshinaricustomers, for continued growth.

Figures related to financial content in this report are rounded to
the nearest unit. Ratios are rounded to one decimal place after
calculation in yen.

Directors and Auditors

Ryoichi Kado, President & COO

Kaga Electronics Group’s EMS Business

Kaga Electronics will make effective use of its strengths,

This report covers from April 1, 2017 to March 31, 2018, except
certain parts that include information prior and subsequent tothese dates, as required.

25
27
29

Financial and Corporate Information

CSR Management

35
39

Social Report
Environmental Report
Forward-looking statements

Certain statements in this document may constitute “forwardlooking statements.” Such statements are based on currently
available information and certain premises deemed rational at
the time of writing. As such, actual results may differ from thoseprojected due to various factors. Key factors that could cause
actual results to differ from those projected include, but are notlimited to, general economic conditions in Japan and overseas
surrounding the Company’s business domains, as well as trends
in demand for the Company’s products and services, and trends
in foreign exchange rates and stock markets.

Integrated Report 2018 4

Message from the CEO

50 Yearsin Business“Everything we do is for ourcustomers,” in the past andinto the future

Never say “no”
In this first Integrated Report for the Kaga Electronics
Group, I would like to touch on the intangible assets thathave become our cornerstone—the strengths that wehave built up over our history of 50 years—before I talkabout our medium- to long-term growth strategy.
Half a century ago, when the Company was established,
I had very little money and had achieved very few results.
Fortunately, I was able to make a number of good
personal connections and was committed to delivering
whatever a customer ordered with a single phone call. As
such, Kaga Electronics started out by selling electronics
parts, basically handling anything and everything related
to those parts.
Later, I noticed a change in the kind of requests ourcustomers made, due in part to advancements in thetimes and technology, and in part to exchange rates
and the economic environment. The vacuum tube is
an example of a product we handled around the time
we were founded. This product soon made way for thetransistor, integrated circuit (IC) and ultralarge-scale
integration (LSI), ushering in a rapid shift from the analog
to the digital. By continuing to meet customer needs
with simple honesty, we succeeded in enhancing andexpanding our product lineup, handling everything fromparts procurement to kit-parts sales and even contract
production, known as electronics manufacturing services(EMS). We have also spread our wings beyond our

Isao Tsukamoto
Founder & CEO

position as a trading company to include assistance with
development and support services. These factors havehelped to form the backbone of the company known as
Kaga Electronics today.
Although it would be trendy to refer to our operations
as offering one-stop services, our true origin lies in ourcustomer-first approach. In addition, our present global
network, one of our strengths, evolved from our efforts toventure overseas to procure parts and meet EMS needs
locally in conjunction with our customers. This was a
response to Japanese companies that transferred theirproduction operations to China and other parts of Asia tocounter the rising yen in particular.
A key to our business is the enhancement of customer
satisfaction. Over the past 50 years, we have worked
tirelessly to gain the trust of our customers based on themotto “Never say no,” according to which we strive tofulfill any and all requirements, whatever they may be.

Personal connections
are intangible assets
Over the years, the idea that “personal connections areintangible assets” has formed one of the pillars of what
we call KAGAism, the essence of who we are.
To begin with, independent trading companies likeKaga Electronics handle an incredibly large number of
product items by necessity to ensure that the customer

comes first. This is because there are no limitations,unlike with manufacturing-type trading companies thatare bound to a certain supplier for a certain product.
This has enabled us to build up an exceptionally broadbusiness network for an exclusive electronics trading
company, with approximately 4,000 customers and 2,000
suppliers. But that does not mean we have createdthis network solely by dealing with products we think
our customers really want. We combine the wealth of
information we gain through frequent conversations withmany customers so that we can constantly anticipate
what the next trend may be. In other words, as humanconnections intensify, our ability to look ahead grows
stronger and more refined.
Our capacity to respond quickly and accurately tochanges in the environment and needs can be attributed
to our personal connections and business networks that
we have built up through our relationships of trust. These
connections and networks have become an integral partof our management foundation, as intangible assets in
our work as a trading company.

Inventory is a liability
There are also benefits to being free of inventory. In
our earliest days, we had no choice but to place orders
for products after receiving an order from a customer,
since we lacked ample capital. There was really noother option, as it was more a case of not being able

Since 1968

History of the Kaga Electronics Group

Sep. 1968 KAGA ELECTRONICS CO., LTD. founded at 3-8-3 Soto-Kanda,
Chiyoda-ku, Tokyo, with a paid-in capital of ¥1 million.

Mar. 1980 Net sales exceed ¥10 billion.
July 1981 TSK ELECTRONICS CORPORATION established in the United States.
Dec. 1986 Stock listed on the Second Section of the Tokyo Stock Exchange.

Our founder outside the Company’s first office

5 KAGA ELECTRONICS CO.,LTD.

Integrated Report 2018 6

Message from the CEO

to have any inventory than not having any inventory.
Nonetheless, such zero inventory management became
the fundamental principle for Kaga Electronics and has
evolved into how we receive and place orders, a criticalfeature of the Company. This may seem like a harsh way
to phrase it, but without surplus capital, inventory would
have been a dormant capital investment. Investing what
capital we had in inventory would have meant borrowing
money at interest when we required capital for otherpurposes. In addition, inventory would mean incurringother costs, including rent fees for storage space andinsurance premiums. This is why we view inventory as
a liability.
Because we do not have any inventory, sales managers
throughout the Group actively go out to gather orderinformation from customers as swiftly as possible, whichenables us to respond even more quickly to changing
needs. In addition, conveying order schedule information
to suppliers helps them to plan production better, whichis greatly appreciated.
Based on this information cycle, we have been able
to create a sustainable business model built on win-win
relationships with customers and suppliers. In a trading
company business, the emphasis is on being quick toseize an opportunity. Ever since realizing that we canestablish a culture in which we never miss an opportunity
by being inventory free, we have continued to consciously
communicate to employees the advantages this bringsand hone them into our own unique ordering system.

1990-

An organization driven
by communication
The Kaga Electronics Group consists of more than 40
companies covering a wide range of business domains,from electronic parts and semiconductors to informationequipment, amusement equipment and sports. There
are limits to a person’s capacity to respond to changes
and uncertainty in the environment and to quickly
seize an opportunity. To maximize our capabilities, ourorganizational approach is critical.
The keys to this are never saying “no” when it comesto the ambitions of employees and actively delegating
authority once a decision has been made. People
inherently want to grow and develop. That is why it isimportant to entrust them with tasks that help them togrow. A company will not grow if it does not nurture its
people. Naturally, not all challenges go well, but it is vitalto learn from failure. I have personally learned a great
deal from my many mistakes, and these experiences havelaid the platform for a culture in which we never fail toreward good work or punish bad work.
Moreover, it is communication that really grabs theattention when encouraging employees to take onchallenges and when delegating authority. Soon after
founding the Company, I discovered that socializing with
employees after work and communicating with themclosely brought about a sense of unity. Having comradesaround you makes you want to do your very best and work

People are a finite
asset; companies areperpetual entities
On a global basis, Japanese companies often lag in
responding to changes in the business environment. Thechanging speed of business is high not only in Silicon
Valley but also in China, South Korea and Taiwan. In a
short space of time, we have seen the steady emergenceof high-growth companies in China in particular in suchfields as robotics and fuel cells.

2000-

History of the Kaga Electronics Group

June 1992 KAGA (H.K.) ELECTRONICS LIMITED established in Hong Kong.
July 1994 KAGA (SINGAPORE) ELECTRONICS PTE. LTD. establishedin Singapore.

Feb. 1995 KAGA (KOREA) ELECTRONICS CO., LTD. established in the
Republic of Korea.

Mar. 1995 Net sales exceed ¥50 billion.
Dec. 1995 KAGA (TAIWAN) ELECTRONICS CO., LTD. establishedin Taiwan.

Stock listed on the First Section of the Tokyo Stock Exchange

The electronics industry is expected to change andgrow dramatically, driven by advancements in the Internetof Things (IoT) and artificial intelligence (AI) related
technologies across the board. Against this backdrop, in
the fast-changing domains of automotive electrificationand computerization, it is now more important than ever
to make decisions with overwhelming speed to succeed
in business. And that is exactly why we need to keepa watchful eye from a broad perspective and remainsensitive to changes in the industry. This may mean
trying to determine which parts are required for electricvehicles (EVs), what kind of ICs the market demands, andwhich units to focus on.
People are a finite asset; companies are perpetualentities. There is no end goal to corporate activities.
Even at Kaga Electronics—a company with 50 yearsof experience that aims to thrive and celebrate its
centenary—we must keep changing to drive sustainablegrowth. With this in mind, our efforts include earmarking¥5 billion for investment in a venture company anddeveloping new products and services to meet growing
needs in society for safety, security and environmental
preservation. As we take on these new endeavors, one
thing has remained unchanged from times gone by
and will continue into the future: our philosophy that“Everything we do is for our customers.”

History of the Kaga Electronics Group

Aug. 2000
Mar. 2001
Apr. 2002

KAGA (SHANGHAI) ELECTRONICS CO., LTD. established in China.

Dec. 2003
Aug. 2006
Mar. 2008
Apr. 2009

KAGA ELECTRONICS (USA) INC. established in the United States.

Mar. 2014

Sep. 1997 Stock listed on the First Section of the Tokyo Stock Exchange.

7 KAGA ELECTRONICS CO.,LTD.

together to achieve goals. Based on such experience,
we strive to create an organization that promotes
communication in its different forms and the reconcilingof values to ensure a more open workplace where
everyone works toward the same objectives.
This idea is connected to our belief that the Company
belongs to everyone, not merely the founder, andthat all finances should be transparent as a result. If
the Company is profitable because of its employees’
efforts, then everyone should have a share in its profits.
During hard times, everyone should practice a little
perseverance and aim for the next leap forward. I believethat true management lies in creating an environment
in which the Company’s condition is open to scrutiny
and all employees are free to discuss the future from amanagerial point of view.

Jan. 2017
July 2017

Net sales exceed ¥100 billion.
KAGA ELECTRONICS (THAILAND) COMPANY LIMITED establishedin Thailand.
KAGA (DALIAN) ELECTRONICS CO., LTD. established in China.
Net sales surpassed the ¥290 billion mark.
KAGA (EUROPE) ELECTRONICS LTD. established in the UK.
KD TEC s.r.o. established in the Czech Republic.
Transferred to current Head Office building (company-ownedbuilding)
TAXAN MEXICO S.A. de C.V. established in Mexico.

Head Office building (Chiyoda Ward, Tokyo)

KAGA ELECTRONICS (VIETNAM) CO.,LTD. established in Vietnam.

Integrated Report 2018 8

Value Creation Process

Kaga Electronics will make effective use of its
strengths, based on tangible and intangible capitalfor its global customers, for continued growth.
Capital amassed over 50 years
Based on our corporate philosophy that“Everything we do is for our customers,” thecapital we have accumulated over the past
50 years forms our management foundation,
which is irreplaceable to the Kaga Electronics
Group. Maximizing our strengths by leveraging
our tangible and intangible capital, we seek
to continue creating new value for our global
customers and achieve sustainable growth.

Social and related capital

Manufacturing capital

Financial capital

Human capitalIntellectual capital

Suppliers

Our ownmanufacturing sites

ROE

Group employees

Technical staff

2,000 companies

14

Customers

4,000 companies

worldwide

9.5

5,427

%

OUTCOMEINPUT
The three strengths of the Kaga Electronics Group2

Strength

3

Strength

Sales, logistics

Support,after-sales service

Business segment
EMS,
contract manufacturing

We provide one-stop solutions that meetcustomer needs, from upstream to downstream
processes, by leveraging Group strengths
that extend beyond parts procurement
as an independent general electronics
trading company.

Business and core needs in the field

Procurement

One-stop service
capability

Plan, design, develop

1

Strength

1

Electronic components
We provide a wide range of electronic
components such as semiconductors
as well as electronics equipment,
meeting customers’ one-stop needs.
Business segment

2

Information equipment

Global network capability

We sell PCs, PC peripherals and homeelectric appliances as well as sell andinstall LED products.

We provide peace of mind to customers andinstill confidence through our sales andproduction network, which spans 16 countries
and regions worldwide, as well as our global
procurement and information-gathering
competencies that we have built up overmany years.

Business segment

Software3

We produce computer graphics,
and plan, develop and sellamusement-related products such as
game software.

Responsiveness to awide range ofapplications

Automotive

Electronic technology is becoming
increasingly important as technologicalinnovation accelerates. We seek to expand
our business fields by continuing to meet
new customer needs.

Amusementmachines

9 KAGA ELECTRONICS CO.,LTD.

1,181

Air conditioning

FA, robotics

Officeequipment

Business segment

OthersPower tools

MedicalCommunications
equipment

Automotive field

Advancements in technologicalinnovation for autonomous
driving and a growing needfor eco cars

Value provided

We contribute to the creation ofan enriched future by meetingcustomers’ diverse needs
with comprehensive
capabilities in electronics.

Communications
field

IoT-related technical needs
such as low power wide-area
wireless technology

New fields

4

Business in this segment consists
primarily of repairing and providing
support for electronics equipment andselling sports goods.

Response to social needs
such as health andhealthcare

Integrated Report 2018 10

Message from the COO

Solidifying
Foundations
for the Next
50 Years

We aim to outstrip the
global competition and be
the industry leader

Review of the fiscal year ended March 31, 2018

Achieved record-high ordinary
income for the first time in 13 periods
To begin with, I would like to report the main points of theKaga Electronics Group’s consolidated financial results
for the year ended March 31, 2018 (from April 1, 2017 toMarch 31, 2018).
Performance for the fiscal year exceeded initialprojections in all items, from net sales to profit
attributable to owners of the parent. While businessconditions for amusement machines were tougher
than anticipated, this was offset by strong sales forelectronics manufacturing services (EMS) and housing
and commercial facilities, enabling us to revise forecasts
upward twice during the period, and I believe wesucceeded in following through on our commitments. We
were able to firmly put down roots with these businesses
as the foundation for profit, which helped us to post arecord high for ordinary income for the first time in 13
fiscal years. This shows that we have taken a solid step
forward to establishing profit-oriented management, oneof the aims of our Medium-Term Management Plan 2018.

While the absolute value of SG&A expenses as wellas the ratio of SG&A expenses to sales increased in thefiscal year ended March 31, 2015 compared with thefiscal year ended March 31, 2005, in the past three years
we have worked to hold both of these indicators in checkas we forge ahead with structural reforms at Group
companies. In 2016 we merged three Group companies
engaged in the information equipment business. In
2017, we transferred shares in a subsidiary developing
and producing SiC boards to an outside entity, and thisfiscal year we integrated two domestic manufacturingsubsidiaries. For our next step, we aim to lower the ratioof SG&A expenses to sales to under the 10% mark.

I will outline the initiatives we have taken from theperspective of profit-oriented management using grossprofit and selling, general and administrative (SG&A)
expenses. The graph you see here presents these financial
indicators for the fiscal year ended March 31, 2005 (atleft), when we posted our previous record high for ordinary
income, as a comparison with the four years starting in thefiscal year ended March 31, 2015, when I was appointed
president, up to the fiscal year under review (at right). The
current Medium-Term Management Plan commenced in
the fiscal year ended March 31, 2017.
Gross profit has increased significantly, and the grossprofit margin is also improving. On analysis, we can seethat the keys to this were twofold—expanding the highvalue-added EMS business and actively cultivating new
fields that we did not have in 2005 such as the automotive,
medical and power tools domains. We have achieved
this based on efforts to strengthen organizational
capabilities and business foundations through suchmeans as allocating the right person to the rightposition with the aim of enhancing profitability.
As the next step, we will look to achieve a profit
ratio around the 14% or 15% range.

President & COO

Ryoichi Kado
11 KAGA ELECTRONICS CO.,LTD.

Consolidated net sales and breakdown (billions of yen )Products not handled now Sales of amusement machines
Sales excluding products not handled now and sales ofamusement machines

291.3
44.8

255.1
245.4
235.9
6.0
6.5 227.2
30.6
16.7
24.9
27.7

70.6

Gross profit and SG&A expenses
Gross profit (millions of yen)

Gross profit margin (%)

SG&A expenses (millions of yen)

Ratio of SG&A expenses to sales (%)

10.2%
6.9%
25,62413.8%
12.8% 13.7% 13.7%
10.3% 10.5% 10.7% 10.3%
32,738 33,648
31,225 32,498
26,376 25,859 24,346 24,379

17,149Gross profit and SG&A expenses

Aiming for profit-oriented management

regulations, driving sales down by more than ¥50 billion
over that 10-year period. Excluding these factors, however,net sales for the fiscal year ended March 31, 2018
increased relative to 10 years ago in real terms.

2005/3

2015/3

2016/32017/3

2018/3

Strengthening resistance to changes in theexternal environment

Expanding the scale of the
EMS businessChanges in trading rights, channels and amounts arepractically an everyday occurrence for a trading company:
losing, for example, agency rights for merchandise thathave been painstakingly nurtured or facing a decline
in orders of parts following a slowdown in customers’
product sales despite the recent strong showing. The
most important management challenge for us is towork out how to respond quickly to such changes in theexternal environment.
With this in mind, if we compare net sales between thefiscal year ended March 31, 2008, when we achieved ourprevious record high, and the fiscal year ended March 31,
2018, we can see that the figure has dropped by more than
¥50 billion over that 10-year period. At the start of that
period, we actually posted more than ¥40 billion in salesof products that we no longer handle, including PCs madeby Apple and SanDisk memory. In addition, the businessfor amusement machines, which peaked around the sametime, has witnessed a contraction in the market overtime due to the impact of the repeated reinforcement of

218.5

175.9

2008/3

2015/3

211.2

2016/3202.3

2017/3

219.2

2018/3

One of the biggest reasons we have been able to raise
our resistance to changes in the external environment
and ensure stable profit has been expansion of the EMS
business. We have leveraged our ability to procure a wide
range of parts as an independent general electronics
trading company and our production system capableof high-mix, low-volume manufacturing to move into
different industries and expand the applications we canhandle. We have also established production bases aroundthe world. As a result of these efforts, we have grown more
resilient to changes in the environment and developed intoa business that is more diversified and flexible.
I would like to see us double sales in the EMS business,
which amounted to just under ¥90 billion for the fiscal
year ended March 31, 2017, during the period of our next
Medium-Term Management Plan. We will aim to drive
further growth by targeting growing fields: namely, theautomotive field, where automation and computerization
continue to advance; the air conditioning field, where
there is demand for greater environmental compatibility;
the industrial device field, including robots and factory
automation (FA) equipment; and the medical field, where
precise processing technology is required.
Projected growth in sales ratio by application
Industrial devices
MedicalOther
Power tools
Automotive

2017/3 819

8 17 7 6 5 822Amusement (%)
Officemachines
equipment
Air conditioning
Communications
equipment
Air
Industrial
Automotive
conditioning
devices

2022/320

18

16

Communications
equipment
Amusementmachines
OfficePower
equipment tools
Medical Other

15

7

7

7

5 5
(%)

Integrated Report 2018 12

NEWS Notice related to making Fujitsu Electronics Inc. a subsidiary (released on September 10, 2018)
Forecast for the fiscal year ending March 31, 2019

A commitment to achieving thetargets of the Medium-Term
Management Plan

We have already secured a series of new projects for the
fiscal year ending March 31, 2019 on the back of efforts to
expand overseas sites for the EMS business, and the future
looks extremely bright. The demand-supply situation
has tightened up for certain electronic components andsemiconductors, however. In the EMS business, if we runout of just one part, our line stops flowing, so it is crucial
for us to ensure the stable procurement of everything weneed. We decided not to disclose financial forecasts at thestart of the fiscal year given these uncertain factors.
Nonetheless, since the fiscal year ending March 31,
2019 marks the final year of the current Medium-Term
Management Plan, I remain committed to the end toachieve our targets. We are still within range, especiallyafter factoring in the contribution upon making FujitsuElectronics Inc. a subsidiary, a move announced recently(see page 14). We plan to announce financial forecasts
when we present results for the second quarter in
November, when the outlook is clearer.

Shareholder return

Increased dividends for the fifth
consecutive term
Kaga Electronics has positioned the return of profits toshareholders as one of its most important management
policies. We would like to reciprocate our shareholders’support by providing dividends from our surplus so thatthey feel they can continue to support us by retaining
the Company’s shares over the long term. Based on the
belief that we have held since our earliest days that profit
generated by everyone’s hard work will be shared witheveryone, we make it a principle to conduct transparent
management in which we return profits to shareholders
through extraordinary dividends when we expect togenerate a level of profit that exceeds our initial target.
I am pleased to report that we increased dividends once
again for the fiscal year ended March 31, 2018, making it
five consecutive years of dividend growth since the fiscal
year ended March 31, 2014, as a result of revising thedividend forecast upward twice following dual financial
forecast revisions during the period. Going forward,
our basic policy regarding the distribution of profit wegenerate is to maintain a stable and continuous payment ofdividends to shareholders while investing to drive further
growth toward the next leap ahead as well as to ensure asound financial position from a long-term perspective.

13 KAGA ELECTRONICS CO.,LTD.

Direction of the next Medium-Term Management Plan

Aiming to be a leading global company
We are now within reach of our targets under the current
Medium-Term Management Plan 2018, including the
aforementioned targets. As such, we are pushing ahead
with formulation of our next Medium-Term Management
Plan. We plan to report the full picture when we announce
results for the second quarter of the fiscal year.
We aim to become the industry leader in Japan and bea world-class company, a goal common to the current
plan as well. To achieve this, we will further pursue
establishment of profit-oriented management, where itis essential for us to considerably raise the scale of bothsales and profit. Not even a specialist trading company
can lay claim to be top in the industry unless it canachieve ¥500 billion in sales in quantitative terms. Froma global point of view, the trillion yen mark has become
the benchmark. That is the level required to outstrip the
global competition and develop a profile that will makethe international community take notice. At the sametime, we aim to boost ROE, which currently sits just over
9%, to beyond the 10% level, from the perspective ofmanagement efficiency.
A key theme from a qualitative standpoint is theestablishment of a corporate style and governancesystem befitting the aforementioned company scale
and industry positioning. We are currently engaged indeep discussions inside the Company about a rangeof matters in accordance with set priorities, including
whether to shift to a flexible holding company structure
in preparation for further corporate acquisitions andindustrial reorganization; whether we need to strengthen
personnel by adding another two outside directors;
determining if our diversity policy is progressing
effectively; and determining if our shareholder returns
are sufficient. In any event, we will continue to strive for
new growth without fear of change.

Dividends (yen)Ordinary dividend
Commemorative dividend
Extraordinary dividend

55
5

40
10

30

30

2014/3

2015/3

35

15

60

70
10

70

20

40

40

2016/32017/360

Toward our goal of becoming industry leader in Japan by evolving
into a corporate group with net sales of ¥500 billion
At the board of directors meeting held on September
10, 2018, Kaga Electronics resolved to acquire sharesin Fujitsu Electronics Inc. and make it a subsidiary.
A share transfer agreement was concluded
between the Company and Fujitsu Semiconductor
Limited, the parent company of Fujitsu Electronics.
Under the agreement, as the first phase, 70% of
the shares of Fujitsu Electronics will be acquired in
January 2019 and it will become a subsidiary. The
remaining 30% will be split into two lots of 15% to betransferred in December 2020 and December 2021, at
which time Fujitsu Electronics will become a wholly
owned subsidiary of Kaga Electronics. The acquisition
price may be adjusted based on the consolidated net
assets of Fujitsu Electronics. At this time, we projectaround ¥20.5 billion and plan to finance the acquisition
through self-funding and a new bridge loan. We willconsider switching to the procurement of long-term
funding for this bridge loan.
Fujitsu Electronics has an engineering teamcapable of developing, designing and mass
producing electronic devices internally, andprovides state-of-the-art solutions to a broadarray of customer needs as a trading company of
the Fujitsu Group dealing with electronic devices.
By adding this company to the Kaga Electronics
Group, we believe we can evolve into a corporategroup with net sales of ¥500 billion and solidify

our management foundation toward the goal of
becoming the industry leader in Japan, as set out
in out Medium-Term Management Plan. Based on
this, we will further promote an ongoing growthstrategy, aiming to be a world-class company thatcan stand up to overseas competitors with sales
crossing the trillion yen mark.

Top 10 electronics trading companies in terms of sales (2018/3)

Top 5 in terms of sales following acquisition

The share acquisition is expected to produce thefollowing synergies.
1 Market share expansion for the electronic partsand semiconductor businessWe seek to expand our share in the electronic partsand semiconductor markets by complementing theofferings and sales channels of both companies.
2 Expansion in scale of the EMS businessWe will strive to achieve discontinuous growth of thehigh-value-added EMS business, an area ofcomparative strength, by adding Fujitsu Electronics’
broad customer base, one of its competitive
advantages, to our global network of EMS
business bases.
3 Further improvement in management efficiency

through business integration
We will strive to further improve profitability by
optimizing and sharing, to the greatest extent
possible, the sales-related organizations and otherfunctions of the two companies.

Order

Company

Net sales(billions of yen )

Order

1

MACNICA FUJI ELECTRONICS HOLDINGS, INC.

504.1

1

MACNICA FUJI ELECTRONICS HOLDINGS, INC.

504.1

2

MARUBUN CORPORATION

347.5

3

UKC Holdings Corporation

301.4

2

494.6

4

Fujitsu Electronics Inc.

258.7

KAGA ELECTRONICS CO., LTD.
+
Fujitsu Electronics Inc.

5

Ryosan Company, Limited

254.1

3

MARUBUN CORPORATION

347.5

6

Ryoden Corporation

236.5

4

UKC Holdings Corporation

301.4

7

KAGA ELECTRONICS CO., LTD.

235.9

5

Ryosan Company, Limited

254.1

8

SIIX Corporation

233.2

9

TOMEN DEVICES CORPORATION

197.6

10

Elematec Corporation

196.2

Overview of Fujitsu Electronics

Net sales(billions of yen )Company

Notes:
1. Sales figure for Kaga Electronics + Fujitsu Electronics determined
via simple sum. SIIX figures are for the year ended December 31, 2017.
2. Aside from Fujitsu Electronics, this table includes only listed companies.
3. Data source: Kaga Electronics research.

Name

Fujitsu Electronics Inc.

Net sales¥258.7 billion (fiscal year ended March 31, 2018)

Location of
Headquarters

Kohoku-ku, Yokohama-shi, Kanagawa Prefecture, Japan

Number of
employees

892

Representative

Junji Ogihara, President and Representative Director

Business

Design, development and sale of electronic devices

Capital¥4,878 million

Following acquisition of the 70% stake in January 2019, Isao Tsukamoto(current Founder & CEO of Kaga Electronics) is scheduled to take office aschairman and representative director of the company.

2018/3 2019/3 forecast

Integrated Report 2018 14

Special Feature 1
Kaga Electronics Group’s EMS Business

EMS business evolving to meetcustomers’ needs
The Electronics Manufacturing Service (EMS) business of Kaga Electronics leverages the strengthsof a flexible production system enabling high-mix, low-volume production. From semi-finished tofinished products, we continue to pursue higher quality, higher performance and lower cost to meetthe needs of our customers. In our EMS business, we are aiming to further expand and enhance our
global hubs and drive evolution in our production process as a means to satisfy the growing needs ofEuropean, U.S. and Chinese companies.
Everything we do is for our customers around the world. We introduce the unique form of our EMS
business, as we continue seeking to provide even greater levels of convenience in close proximity to
the customer.

EMS business and our corporate philosophy of“Everything we do is for our customers”“Everything we do is for our customers.” This is the philosophy of Kaga Electronics
that also runs through the veins of the EMC business.
Some 40 years ago, when the EMS business got underway, Kaga Electronics
referred to the segment as “processing transactions.” The EMS business was bornfrom service that came perfectly naturally to Kaga Electronics, a company thathas continued to respond to the increasingly sophisticated needs of customers.
Starting from orders for standalone electronic parts, these have evolved to ones fordelivery of multiple components as a kit and the actual assembly and processing ofthese kits.
Now, our EMC business is one of the Kaga Electronics Group’s growth drivers
based on two key advantages unique to a trading company. First, we make effective
use of our ability to procure items from suppliers in the United States, Europe andAsia, which makes it possible to propose alternative parts and materials that suiteach customer best. Second, our production system enables high-mix, low-volume
production. The Kaga Electronics Group produces around 3,000 different circuitboard models a month, with annual production volume amounting to 100 million
units. As such, even with small orders of, say, 100 units a month, we can make highvolume orders to our suppliers by combining similar orders. This enables us to cut
down on component costs.
Also, in the EMS business, relationships with customers tend to be long term, as
in 10–20 years, rather than short term. I am confident that our sustained efforts tolower costs and raise quality have helped us to gain the trust of the market.

Constant evolution in the EMS business 1

Establishment of a global EMS network
The Kaga Electronics Group is working to expand and enhance its overseas bases,
a core program aimed at bolstering the EMS business.
In the beginning, we outsourced production to affiliated factories in Japan before
building our own first facility in Shenzhen, China in 1999. The objective of this move wasto meet the increasingly complex quality requirements of customers as applications
expanded for precision products with advanced mounting accuracy for office automationequipment, information and communication devices and other areas. Following
construction of this facility, we set about building a host of other production bases inThailand, Czechia, Malaysia, Indonesia and Shanghai, Suzhou and Hubei in China in
response to our customers’ shift of production bases and an increase in applicationcompatibility. By doing so, we established a framework facilitating the provision of EMS
business locally in line with customer requirements and created a substantial support
system based on local subsidiaries.

Motonori Toshinari

Director,
Division Manager of EMS Sales Division

15 KAGA ELECTRONICS CO.,LTD.

Integrated Report 2018 16

Special Feature 1
Kaga Electronics Group’s EMS Businessarise and where, and thereby control the various elements we must contend withand respond in real time.

Constant evolution in the EMS business 3
Global EMS network

The Kaga Electronics Group’s global EMS network is nearing completion
with the establishment of a production base in India (planned for 2018).
This marks a move toward further expansion in the EMS business,framed around our 15 production facilities worldwide.
Sales bases

Production bases

New factory in Mexico

Considering entry

In recent years, the core application of the Kaga Electronics Group’s EMS
business has shifted to new fields, namely, automotive devices, information andcommunication and IoT-related devices, beginning with modules for the low power
wide area (LPWA)* market, industrial devices and medical devices. As customers
for these products set their sights firmly on the global stage, the Group has pushedahead with the establishment of new EMS bases at a quick pace. We have set
up production bases in different parts of the world such as Vietnam to reinforce
our production system in the ASEAN region, in Mexico to expand business forautomotive devices in North America, and in Turkey, where our production baseis increasing in importance as the hub servicing Europe. Nowadays, our mission
is to cultivate new markets, and with the establishment of a production base in
India (planned for later in 2018), where we have already started activities to receive
orders, we will be close to completing the Group’s global EMS network.

* LPWA refers to a wireless communications technology that is indispensable in theadvancement of the IoT, since it significantly reduces traditional power consumption and helps
achieve wide area, long distance communications.

Toward a convenience store type of EMS close to
our customers
Moving ahead, we expect the basic direction of global manufacturing to change
due in part to economic advancement in emerging nations. This means a shift
from a conventional “export model,” where producing country and consuming
country differ, to a “local production for local consumption model,” where bothmanufacturing and consumption occur locally. As such, in terms of our customers’
production systems, we believe that the number of relatively small-scale factories
will increase while production and sales lots will decrease. By necessity, this will
drive higher demand for small EMS factories that can handle detailed customer
requirements locally.
In light of these market changes, we aim to create a new EMS business model.
Using the distribution industry as an analogy, this would mean rather than provide
service from a large supermarket, we would do so from multiple convenience
store locations. To respond to high-mix, low-volume orders at factories closest
to the customer, we are pushing ahead with the creation of shared platforms andcompiling information into a manual so that we can control logistics, procurement,
production and quality control in a centralized manner at headquarters. We will also
leverage the comprehensive capabilities of the Group to provide one-stop service up
to and including after-sales maintenance.
The Kaga Electronics Group’s EMS business has, over many years, gained thetrust of customers by meeting all of their needs through its bases that are close
to the community. By ensuring an excellent balance between the competencies
at individual locations and the advantages of a global framework based onstandardized platforms, we are confident that we can realize a convenience store
type of EMS that is both convenient and valuable for customers.

Constant evolution in the EMS business 2

Creation of a system that meets global standards
To drive growth in the EMS business going forward, it is important to increase thenumber of international companies we have as customers to complement theJapanese companies we deal with, an area of comparative strength for the Group. In
the near future, we would like to boost the proportion of European, U.S. and Chinese
customers to 20% and then eventually to up to 50% of the total. To achieve this, it iscritical for us to build a management structure that enables more advanced quality
control and greater speed, at levels that are global standards, in addition to creating
a value chain for procurement, production and logistics.
With this in mind, the Group is currently activating a project to innovate coresystems with the aim of strengthening global business management foundations.
This means ensuring that every layer of our global EMS network, which is nearing
completion, has integrated into it a system for standardizing and boosting efficiency
and quality of operations. Specifically, we will centralize parts and materials
procurement, standardize manufacturing equipment, incorporate stricter quality
control processes and take other steps to enhance competitiveness. By doing so,
we are looking to the future in creating a global EMS headquarter function in which
we can access massive amounts of information without delay, including issues that

17 KAGA ELECTRONICS CO.,LTD.

Power
tools
MedicalCommunications
equipment

Phase

1

Create EMS
global bases

Phase

2

Standardize andenhance quality,
procurement andequipment

Phase

3

Automotive

Deploy a small factory
convenience store
type modelFA,
robotics

Air
conditioning
Officeequipment
Amusementmachines

Integrated Report 2018 18

Overview of FY2018/3 Results

Financial highlights
Gross profit (millions of yen)
Gross profit margin (%)

Net sales (millions of yen)
257,852 255,143

245,387

227,209 rofit attributable to owners ofP
the parent (millions of yen)
Net income per share (yen)235,92132,522 32,738

33,648

6,975

31,225 32,498

6,490

5,437

12.6% 12.8%

13.7% 13.7% 13.8%

3,877

4,416

137.22
2014/3 2015/3 2016/3 2017/3 2018/3

Return on equity (ROE) (%)

2014/3 2015/3 2016/3 2017/3 2018/3

C ash flows from operating
activities (millions of yen)Free cash flow (millions of yen)

9,127
9.0%
7.3%

10.9% 9.5%

7,661

7.4%
3,334

9,546

156.28249.43236.58192.43Equity ratio (%)

10,077
10,4878,283

2014/3 2015/3 2016/3 2017/3 2018/3

41.9%

46.6%

49.7% 52.4% 54.5%

2014/3 2015/3 2016/3 2017/3 2018/3

Overview of FY2018/3 results
In the fiscal year ended March 31, 2018, the Japanese
economy witnessed a gradual recovery on the backof resurging economies overseas, which improved
corporate earnings, and steady growth in capital
expenditures, despite a break seen in the recovery trendof consumer spending.
In the electronics industry, the principal sector of
the Kaga Electronics Group, the markets for PCs andamusement machines remained stagnant, but steady
growth was observed in the smartphone market. This
reflected increasing demand in emerging countries
and more advanced functionality, as well as the market

19 KAGA ELECTRONICS CO.,LTD.

Other

Electronic components

13,522 million
5.7%¥172,248 million
73.0%

Software¥2,568 million
1.1%
Informationequipment

Net sales¥235,921¥47,582 million
20.2%

millionOutlook for FY2019/3, and progress in
the Medium-Term Management Plan 2018-5
2014/3 2015/3 2016/3 2017/3 2018/3

Net sales by segment and composition

2014/3 2015/3 2016/3 2017/3 2018/3

10,746

5,904

As a result, consolidated net sales in the fiscal
year ended March 2018 totaled ¥235,921 million, up¥8,712 million, or 3.8%, from the previous fiscal year,
driven by the electronic components and informationequipment businesses. Operating income amounted to¥8,119 million, an increase of ¥1,240 million, or 18.0%,
due to an improvement in the gross profit marginreflecting mainly enhanced productivity as well as efforts
to control selling, general and administrative (SG&A)
expenses. Ordinary income was ¥8,740 million, up¥1,397 million, or 19.0%, marking yet another record high.
Profit attributable to owners of the parent decreased to¥6,490 million, down ¥485 million, or 7.0%, due largely toa rise of ¥1,950 million in total income taxes.

for automotive devices, where use of electronics is
expanding. Furthermore, innovative technologyrelated markets, including the Internet of Things (IoT),
big data and artificial intelligence (AI), also showedfavorable growth.
Against this backdrop, based on our corporate
philosophy of “Everything we do is for our customers,”
the Group focused on boosting sales to existing
major customers in Japan and expanding theelectronics manufacturing service (EMS) business,particularly overseas.

In the fiscal year ended March 31, 2018, Kaga Electronics
implemented numerous measures that included
expanding the EMS business and reorganizing Group
companies in the interim year of the Medium-Term
Management Plan 2018 in line with the plan’s basic
policy. As a result, we were able to achieve a profit ratiothat exceeded our start-of-term forecasts by improving
on target figures such as net sales and profit attributableto owners of the parent, even though we revised these
forecasts upward twice during the fiscal year.
With regard to financial forecasts for the next fiscal
year ending March 31, 2019, the final year of theMedium-Term Management Plan 2018, we expect thematerialization of a tight demand-supply situation
for certain electronic components such as power
semiconductors and capacitors, and as a result of theensuing uncertainty, we are refraining from disclosing
full-year financial forecasts. Nonetheless, we willcontinue to work Groupwide to boost earnings to achieve
the targets of the final fiscal year of the plan, whilepersevering with the management policies we haveexecuted thus far.

Overview of Medium-Term Management Plan 2018
Basic Policy

Management Target(FY2019/3)( 1 ) Enhance the revenue
base

Net sales:( 2 ) Create new business

Ordinary income: ¥10.0 billion( 3 ) Strengthen the
management foundation

ROE:¥290.0 billion

8.0% or higher

Integrated Report 2018 20

Overview of FY2018/3 Results

The Kaga Electronics Group’s“One-Stop Service System”

Outline of business segments

Electronic components
73.0%

43 Kaga Electronics Group companies
Research,planning, design,development

Procurement

Production,
quality control

Sales, logistics

Support service

Business segment 1: Electronic components > Page 22
Parts selection,customization

Sale of partsand provisionof kitting serviceParts
procurement

Parts selection and procurement

EMS (contract production)

A range ofmanufacturers,
including forconditioning,
office automation,communication
devices, factory
automation, andautomotiverelated sectors

Business segment 2: Information equipment > Page 23
Product selection
and system design

Equipment
procurement

Product planningand customization
proposalEngineering

Installation, construction,
management andmaintenance of equipment
Sale of information equipment
and consumer electronics

OEM procurement

Consumerelectronics massretailers,commercial
facilities,
convenience stores,
government
agencies,and others

Procurement of
copyright, etc.

Production ofcomputer graphics
and animation

Business segment 4: Other >Page 24
Planning anddevelopment of
amusement equipment

Equipment
procurement

Suppliers,
affiliated companies

Japanesevendors

OEM production

Overseas
vendors

The Kaga Electronics Group, as an independent general
trading company, has been expanding its businessdomains in accordance with customer needs that changewith the times.
We currently have four business segments: electronic
components, information equipment, software, and other.

21 KAGA ELECTRONICS CO.,LTD.

Business description

Development, manufacture and sale of semiconductors,
general electronic components and other products, EMS, andother activities

Net sales

Segment income(millions of yen)(millions of yen)

171,227 172,248
4,917

5,312

Review of FY2018/3 performance

In the electronic components segment, EMS business forelectronic equipment and sales of semiconductors in particularshowed favorable growth. As a result, net sales increased 0.6%
year on year to ¥172,248 million and segment income rose 8.0%
to ¥5,312 million.

2017/3 2018/3

2017/3 2018/3

TOPICS
Contributing to evolution in next-generation eco cars and streamlining ofproduction processes through advanced technology

Business segment 3: Software > Page 24
Planning, development
and design of computer
graphics and software

2018/3Customers

Sale of amusement equipment
and repair and recycling ofelectronics equipment

Amusement/
entertainment
industry, general
consumers
and others

OEMs

In each of these businesses, Group companies worldwide
work together to create a “one-stop service system”
that transcends the boundaries of a trading company
and covers everything from upstream to downstream
processes, providing diverse added value to customers.

Kaga Electronics has released its IVT-S series ofshunt resistor type current sensor modules that apply
Ohm’s law, a world first for mass-produced products.
In conventional current sensor modules, multiple
sensors were required to measure a wide range ofcurrents whereas this can be accomplished with asingle device in this series. This contributes to a morecompact design in the measurement system. The seriesalso enables current measurement at the microlevel, allowing detailed control of battery charge anddischarge, and precise calculation of electric power.
The products are expected to be in high demand forbattery management systems in next-generation eco
cars such as electric vehicles (EVs) and plug-in hybrid
electric vehicles (PHEVs), areas where adoption is set tocontinue growing.
In addition, an AI inference accelerator board*developed by the Company saves on energy and space,and achieves a lower cost than conventional graphics
processing units. The device uses AI to facilitate theidentification of specific physical objects in images takenwith a camera, for instance, as well as computation of
position. The technology has raised expectations forbroad application in such domains as inspection lines,
security and behavioral analysis inside factories.
* An accelerator board is a circuit board built into equipment
such as small, space-saving edge computers and surveillance(object detection) cameras to amplify functions.

Integrated Report 2018 22

Overview of FY2018/3 Results

Outline of business segments

Outline of business segments

Information equipment

Software
20.2%

1.1%

2018/3

Net sales
Business description

42,547(millions of yen)

Business description

47,582
2,202
1,491

Review of FY2018/3 performance

In the information equipment segment, sales of housingrelated and commercial facilities-related products showedsolid growth. As a result, net sales increased 11.8% year on
year to ¥47,582 million and segment income rose 47.7% to¥2,202 million.

2017/3 2018/3

2017/3 2018/3

TOPICS
Developing energy-saving products
for large commercial facilities and convenience stores
The Kaga Electronics Group company KAGATECHNOSERVICE CO., LTD. is an engineering-based
company boasting construction technologies in suchareas as communications, electricity and interiors. Byutilizing the extensive procurement and sales channels
that are a competitive advantage of the Group, KAGATECHNOSERVICE is able to enhance efficiency in theoffice environment for its customers and provide highquality service in the network solutions, energy savingand security fields.
In the fiscal year ended March 31, 2018, as part ofefforts in its business activities the company installed
LED lighting in large commercial facilities andconvenience stores with multiple locations nationwide,
which contributed to financial results. In addition to
procuring the optimal LED lighting equipment throughthe Group’s companies to satisfy customer needs, theconstruction is done after closing time to ensure there

23 KAGA ELECTRONICS CO.,LTD.

Net sales

Segment income(millions of yen)

Sales of PCs, PC peripherals, home electric appliances,photograph and imaging products, original brand products, andother products

2018/3is no interference with everyday operations, which isespecially helpful to retailers. Moreover, extra effort ismade to protect the many products while the construction
is carried out. Further, the company works hard toprovide service unique to the Kaga Electronics Group
that guarantees high levels of satisfaction. This includes
thorough safety management and quality control toensure zero accidents in construction and a satisfied
customer, underlining our commitment to ensure that“Everything we do is for our customers.”

Production of computer graphics, planning and development of
amusement products, and other activities

Segment income(millions of yen)(millions of yen)

3,159
2,568

Review of FY2018/3 performance

In the software segment, orders for production of computer
graphics animation and development of game software weresluggish compared with typical years. As a result, net sales
decreased 18.7% year on year to ¥2,568 million and segment
income was down 67.4% to ¥172 million.

528
172
2017/3 2018/3

2017/3 2018/3

Other
5.7%
2018/3

Net sales
Business description

Repair and supports for electronics equipment, manufactureand sales of amusement equipment, and sales of sports goods,
and other activities

Segment income(millions of yen)(millions of yen)

13,522
10,274
308

Review of FY2018/3 performance

In the other segment, sales in Japan of arcade amusement
machines and golf products showed solid growth. As a result,net sales increased 31.6% year on year to ¥13,522 million andsegment income was ¥308 million whereas a segment loss of¥212 million was recorded in the previous fiscal year.

-212
2017/3 2018/3

2017/3 2018/3

Integrated Report 2018 24

Corporate GovernanceDirectors and Auditors (As of June 28, 2018)

Directors
Founder & CEO 1

President & COO 2

1967
1968

1980
1991

Isao Tsukamoto
1968
2007

Joined Sanko Electronics Co., Ltd.
Founded Kaga Electronics (private
management)
Established Kaga Electronics Co.,Ltd.
President & COO
Founder & CEO

2002
2005
2012
2014

Senior Managing Director 3

Senior Managing Director 4

1980
1991
1995
2002
2005

Joined Kaga Electronics Co., Ltd.
Division Manager of SpecificIndustry Sales Department
Director
Managing Director
Senior Managing Director

1977
1991
1996
1996
2005

Joined Kaga Electronics Co., Ltd.
Division Manager of Sales
Department No. 2, Sales
Headquarters
Director
Managing Director
Senior Managing Director

7

9

6

5

1982
1997

8

10

2010
2012

3

1

2

4
2015

Joined Kaga Electronics Co., Ltd.
President & COO of Kaga (H.K.)
Electronics Limited
President of Taxan USA Corp.
Division Manager of Overseas
Sales Division, Overseas
Business Division, Electronics
Business Headquarters
President & COO of Kaga (H.K.)
Electronics Limited
Executive Officer, Division
Manager of EMS Business
Division and President & COO of
Kaga (H.K.) Electronics Limited
Director, Division Manager of
EMS Business Division8

Mitsuhiro Nohara

2003
2004
2011
2012

2015

Joined Kaga Electronics Co., Ltd.
Division Manager of Domestic
Sales Department No. 1, Sales
Headquarters
President & CEO, Kaga
(Shanghai) Electronics Co., Ltd.
President of Kaga Electronics(USA) Inc.
Division Manager of Electronics
Business Division
Executive Officer
Division Manager of Electronics
Business Division, and Division
Manager of Special Sales Department
Director, Division Manager ofElectronics Business Division

Outside Director 9

Outside Director 10

1963

1970
1978

Susumu Miyoshi
2001
2002
2005

2009
2015

Joined Toyota Motor Co., Ltd.
(currently Toyota Motor
Corporation)
Executive Vice President andRepresentative Director
President & COO of Osaka
Toyopet Co., Ltd. (currently Osaka
Toyota Motor Co., Ltd.)
Advisor to Toyota Motor
Corporation
Chairman of Osaka Toyopet Co.,
Ltd.
Executive Advisor to Hitachi
Maxell, Ltd. (currently Maxell
Holdings, Ltd.) (present position)
Director of the Company

Akira Tamura

1998
2008

2011
2012
2015

Joined the Bank of Japan
Deputy Director of theInternational Finance Bureau,
Ministry of FinanceDirector of Information Systems
Department, the Bank of Japan
Representative Director andSenior Executive Officer, Sohgo
Security Services Co., Ltd.
(ALSOK)
Advisor to Okigin Economic
Research Institute
Advisor to Niigata Sohgo Security
Services Co., Ltd. (ALSOK)
Director of the Company

Auditors
Senior Managing Director 5

Shintaro Kakei
1980
1993
2000
2000
2005
2014

Joined ITOMAN Co., Ltd.
Division Manager of Overseas
Business Division, Electronics
Business Headquarters
Joined Kaga Electronics Co., Ltd.
Director
Managing Director
Senior Managing Director

Managing Director

6

Eiji Kawamura
1979
1985
1993
2005
2012
2012
2015

25 KAGA ELECTRONICS CO.,LTD.

1982
1992
1998
2004

Joined Kaga Electronics Co., Ltd.
Division Manager of Sales
Department No. 3, Sales
Headquarters
Division Manager of East Japan
Sales Department, High TechBusiness Division
Managing Director
Senior Managing Director,
General Manager of SpecificIndustry Business Headquarters
Vice President
President & COO

Shinsuke Takahashi Yukio Takashi

Director

Motonori Toshinari

Ryoichi Kado

1995

Director 7

Joined Kaga Electronics Co., Ltd.
President, Taxan (U.K.) Ltd.
Division Manager of Overseas Sales
Department, Sales Headquarters No. 2
Executive Officer
Head of Accounting Division and Headof Information Systems Department
Executive Officer
Head of Administration Headquartersand Head of Accounting Division
Director, Head of Administration
Headquarters and Head of
Accounting Division
Managing Director, Head of
Administration Headquarters

Auditor (Full-time)

Kazunori Kameda

Auditor (Full-time)

Takahiro Ishii

Outside Auditor

Susumu Kitsunai

Outside Auditor

Yoichi Sato
Integrated Report 2018 26

Corporate GovernanceCorporate Governance
Basic approach and structure of corporate governanceOutside officers

Kaga Electronics recognizes that enhancing corporate
governance is a key management issue. The Company
is creating a corporate governance system with thefundamental policies and aims of ensuring total
compliance with corporate ethics and laws andregulations, reinforcing internal control systems, andensuring the soundness, efficiency and transparency ofbusiness operations.
Kaga Electronics adopts a system of corporate
auditors and a corporate governance system based oncollaborations between the Board of Directors, auditors
and Board of Auditors, and the accounting auditor. The
Board of Directors comprises 10 directors and four
auditors. In principle, the Board meets once a month

The Company has appointed two outside directors andtwo outside auditors. Based on the Tokyo Stock Exchange
standards on independence, we appoint outside officers
who do not have any special interests with the Company
and that they have extensive experience and broad
powers of judgment in corporate management. The
auditors are also required to have highly specialized
knowledge and maintain independence frommanagement executives.
The Company has established a staff office of theBoard of Directors, which distributes materials related

and holds extraordinary meetings when necessary.
The Board makes decisions on important mattersrelated to items stipulated by laws and regulations
and to management, and supervises the execution ofduties by directors. Auditors regularly attend Board of
Directors meetings and participate in other importantinternal meetings as part of efforts to monitor andaudit the business conditions of the Company. Kaga
Electronics has appointed two outside directors and four
auditors (including two outside auditors) to ensure theeffectiveness of the corporate governance system.
The Company implements and complies with all ofthese principles in consideration of the principles andspirit of Japan’s Corporate Governance Code.

General Meeting of Shareholders

Board of Auditors 4 Auditors

External audit
by audit company

Board of Directors 10 Directors
Founder & CEO

Management Meeting
Directors Responsible for Operations,Internal Management

Audit OfficeBusiness Administration
Department

Attendance at Board of Directors and Board of Auditors meetings
Board of Directors meetings(held 18 times)
Attendance Attendance rate
(times)(%)

Reasons for appointing two new outside auditors

Board of Auditors meetings(held 17 times)
Attendance Attendance rate
(times)(%)

Outside Director
Susumu Miyoshi

18

100.0

—

—

Outside Director
Akira Tamura

18

100.0

—

—

Outside Auditor
Yuichiro Tanaka

18

100.0

17

100.0

Outside Auditor
Isamu Yonekawa

17

94.4

16

94.1

Susumu Kitsunai
The Company appointed Susumu Kitsunai because he will
be able to provide meaningful checks and balances fromthe standpoint of a certified public accountant on decisions
concerning the fairness and transparency of management
policy relating to financial accounting.

Yoichi Sato
The Company appointed Yoichi Sato because he will be able
to provide meaningful checks and balances that leverage
his knowledge as a lawyer on decisions concerning suchmatters as compliance and legal risk.

Remuneration system for officers

President & COO
CSR Promotion
Committee*

to matters of deliberation by the Board to all officers
including outside officers, ahead of the meeting day. The
staff office provides supplementary explanations to theoutside officers when needed to ensure that adequate
information is imparted in advance. This helps support
lively debate at Board of Directors meetings. By the endof each fiscal year, the staff office sets the schedule forthe regular Board of Directors meetings for the following
fiscal year and notifies all officers including outside
officers, as a means to improve attendance.

Business Guidance
Project*The Company has established the following committees under the CSR Promotion Committee.

Remuneration of directors is determined by a resolutionof the Board of Directors and remuneration of auditors isdetermined through discussion by the auditors, within an
amount approved at the General Meeting of Shareholders.
For executive directors, in addition to fixed remuneration,
the Company has established an incentive system thatinvolves bonuses commensurate with performance andthe granting of restricted stock compensation. Upon
discussion, approval was gained at the General Meeting of

Shareholders held in June 2018 to abolish the retirement
benefit plan for officers and introduce a system of granting
restricted stock compensation.
Remuneration of officers for the year ended March 31, 2018
Directors(of which, outside directors)
Auditors(of which, outside auditors)

Allowance(millions of yen)

Number ofrecipients

524 (23)

10 (2)

47 (10)4 (2)1. Compliance Committee 2. Risk Management Committee 3. Information Disclosure Committee 4. Personal Information Management Committee

Dialog with shareholders and investors
CSR Promotion Committee

Audit Office

The Company has established a CSR Promotion
Committee chaired by the President and COO, which
promotes corporate social responsibility (CSR) alongside
efforts to enhance corporate value. The Information
Disclosure Committee, Risk Management Committee,
Compliance Committee and Personal information
Disclosure Committee have been established under the
CSR Promotion Committee. Each of these committees
actively implements activities in their respective domains.

The Company has established an Audit Office to handle
internal audits in conjunction with the auditors. The
Audit Office discusses audit plans with the auditors
in advance and regularly reports audit findings to theauditors. The Office also cooperates with the auditors as
required, such as when requested for reports.

27 KAGA ELECTRONICS CO.,LTD.

Kaga Electronics has established an Investor Relations& Public Relations Office as a department specializing
in investor relations (IR). The Office works to disclose
information in a timely manner through the Company’s
website and other means, and to enhance the quality
and quantity of information. The Company also makes
efforts to facilitate communication with shareholders
and investors, which includes holding financial results
briefings for analysts and institutional investors following
announcement of interim and full-year financial results
as well as actively holding company information sessions
for individual investors.

An information meeting for individual investors

Integrated Report 2018 28

Corporate GovernanceInternal Control / Compliance
Basic approach to internal control systems
The Kaga Electronics Group has established afundamental policy for the creation of internal control
systems in order to ensure compliance with corporate
ethics and laws and regulations as well as the soundness,
efficiency and transparency of management. Based on
this policy, the Company is working to establish
internal control systems and make sure that they arecontinually improved.
The Company has established Rules on Officers andBoard of Directors Rules to ensure the proper executionof duties by directors and the Board of Directors.
The directors monitor the execution of duties of one
another at regular and extraordinary meetings of theBoard of Directors. The Company has also established
Organization Rules, Rules on the Allocation of Work
Duties, Rules on Work Authority and Rules on Internal
Approval to clarify the scope of authority of each director.

Ensuring appropriate operations of Group companies
As a company adopting a system of corporate auditors,
each auditor, including each outside auditor, conducts
detailed audits on the execution of duties by directors.
In addition, the Company has formulated the Basic
Compliance Rules, which serve as a code of conduct toensure compliance with laws and regulations and the
Articles of Incorporation as a means to enable proper
execution of duties by employees of the Company andGroup companies.
The Company has also established the CSR Promotion
Committee chaired by the President & COO and set up theInformation Disclosure Committee, Risk Management
Committee, Compliance Committee and Personal
Information Management Committee under its umbrella.
Through these initiatives, the Company strives to ensure
appropriate execution of business throughout the Group.

Risk management systemappropriate systems to manage risk. In the event thatrisk materializes, the division responsible for dealing
with said risk will immediately adopt the necessary,
appropriate response to minimize damage under the
direction of the risk control officers and managers.
In addition, with the establishment of the Risk
Management Committee under the CSR Promotion
Committee, the Company has established a system torespond promptly and appropriately to risks foreseen by
the Group.

The Kaga Electronics Group has established an internalreporting (whistleblowing) system concerning actionthat violates laws and regulations or the Articles ofIncorporation. This allows employees to directly reportsuch conduct to the Founder & CEO, President &COO, auditors, CSR Promotion Committee and Sexual
Harassment Investigation and Countermeasures
Committee without having to go through anyone else.
There is a system in place enabling reports to be madeanonymously and through the use of a private comments
box so that reporting individuals are not disadvantaged.

29 KAGA ELECTRONICS CO.,LTD.

Information management
Kaga Electronics has established the Information
Disclosure Committee, Risk Management Committee,
Compliance Committee and Personal Information
Management Committee under the CSR Promotion
Committee to strengthen its information
management system.
Additionally a Corporate Planning Department has
been set up to manage information in an integrated
manner from the Group’s subsidiaries and affiliatedcompanies as a division under the direct control of
the President & COO in an effort to ensure timely andappropriate information disclosure throughout the Group.

Online system for anonymous reporting

Information disclosure system
Information disclosure

Board of Directors… Via TDnet, EDINET, Company
website and through a press club… Approving authority

Information Disclosure… Investigating authority
Committee
In charge ofPR and IR

Confirmation

Head of Administration … In charge of managing information
disclosure (decision-making on
Headquarters
important matters in accordance
Investor
Reportwith rules on timely disclosure)
Relations &Public Relations
General Affairs… In charge of managing information
OfficeDepartment
disclosure
Report Corporate Planning … Department for deliberating on
Department
information disclosure
ReportReport Divisional subsidiaries(report and consult on
matters for disclosure)

Efforts toward the elimination of antisocial forces
The basic approach of the Kaga Electronics Groupis not to maintain any relationships whatsoever with
antisocial forces that threaten social order and safety
and to maintain a resolute attitude regarding therefusal of all improper demands from antisocial forces
as set forth in its Fundamental Compliance Rules andEmployment Rules. In cases where the Company receives
improper demands from antisocial forces, the General

Internal reporting systemappropriateness of overall business activities throughout
the Group as well as ensure compliance with laws
and regulations and the Articles of Incorporation. The
Office also provides guidance to make improvements inbusiness activities.
Further, Group companies submit the minutes from all
Board of Directors meetings to the Company and makemonthly reports on business activities, status of budget
implementation, and important matters relating toensuring the appropriateness of business activities.

…

Potential risks that the Group faces include a wide
range of factors relating to economic conditions,exchange rates, country risks, price competition, productprocurement capabilities, internal brand risks, legal
regulation, market risks, major litigation, severance
pay obligations, personal information, accidents, theenvironment, and information management.
Divisions have been set up and risk control officers
and managers appointed to each to deal with each riskin the Group as part of efforts to create the necessary,

The Company has established the Rules on Managementof Affiliated Companies to ensure appropriate business
operations at Group companies and executes controls
based on these rules. In addition, it is an obligation thatany coordination between Group companies as well as
important matters are first discussed by the Company’s
Management Meeting and Board of Directors before
decisions are made. The Company’s Audit Office works
in collaboration with the Business Administration
Department, which is the Company’s legal affairs
division, to conduct audits primarily regarding the

Affairs Department and CSR Promotion Committee
collaborate and cooperate with crisis managementadvisors and company attorneys to make the requiredorganizational response. The Company also holds
regular discussions with the company attorneys, meetswith police departments and other external specializedorganizations, and participates in training and otheractivities in an effort to gather information.

Private comments box

Integrated Report 2018 30

Special Feature 2
Interview with Outside Director

I contribute to our growth as a global
company through monitoring of andadvice on corporate management.
Companies are public entities of society with a responsibility
to contribute to the advancement of society.
Based on this belief, I monitor and check corporate managementfrom the perspectives of compliance and CSR,
and leverage my experience and backgroundto provide advice aimed at driving future growth.

Susumu Miyoshi
Outside Director
Apr. 1963
Sept. 1994
June 2001
June 2002
June 2002
June 2005

June 2008
June 2009

June 2015

Joined Toyota Motor Co., Ltd. (currently
Toyota Motor Corporation)
Director
Executive Vice President and Representative
Director
Consultant
President and COO of Osaka Toyopet Co.,
Ltd. (currently Osaka Toyota Motor Co., Ltd.)
Advisor to Toyota Motor Corporation(present position)
Chairman of Osaka Toyopet Co., Ltd.
Advisor to Osaka Toyota Motor Co., Ltd.
Executive Advisor to Hitachi Maxell, Ltd.
(currently Maxell Holdings, Ltd.) (present
position)
Director of the Company (present position)

31 KAGA ELECTRONICS CO.,LTD.

Role as Outside Director
I have served as Outside Director for Kaga Electronics since June 2015. I was
appointed with the brief of leveraging my experience as a businessperson of morethan 50 years and as a management member over many years to take part inmanagement of the Company to strengthen the function of the Board of Directors.
The Kaga Electronics Group, founded by Chairman Isao
Tsukamoto in his younger days, has achieved growth over
the years through his charismatic leadership. Now, however,
it is time to look ahead to the next 50 years and makethe changes that need to be made to evolve, including in
corporate management, corporate governance and humanresource development. As Outside Director, I am well awarethat I am expected to carry out the role of broadly changing
direction in line with the goals of the Group from a mediumto long-term standpoint.
To fulfill this role, it is necessary to first discuss whotruly owns a business corporation. Some take the viewthat a company is the property of its shareholders, whileothers say it is the property of its employees. There are also
some who think that it is not the property of any specificInspecting Kaga (Shenzhen) Electronics Co., Ltd., a key site for EMS business (June 2016)
stakeholder. I believe that a company is owned by society.
Increased awareness of the importance of CSR in recent
years is evidence of this. Companies occupy important positions in society at large,
and so any approaches that place a company above everything else and aim solely
to increase profits do not sit well in today’s world. Companies must strive to be ofpractical use to society as well as to be needed and trusted by society.
Based on this awareness, I believe that in broad terms I have two concrete roles
to play as Outside Director.
The first is the function of monitoring and checking corporate management.
This means monitoring and checking that the business of the Group contributes
to the advancement of society and leads to higher corporate value, from an
objective perspective. The second is the function of providing advice on corporate
management. All companies differ in the way they develop and the environment inwhich they operate, and although this can make offering advice more difficult, myjob is to give guidance on medium- and long-term direction. I will make effective
use of my management experience and the personal connections I have built up
over many years at Toyota Motor Corporation and other companies to support thesustainable growth of the Kaga Electronics Group on a range of fronts.

Monitoring and checking corporate management
In monitoring and checking corporate management, I believe it is important tomake decisions from the two perspectives of compliance and CSR. Althoughcompliance is generally perceived to mean legal compliance, I think it also meansthat a company ought to declare its ideal state and work toward this realization.
At the same time, since the “eyes of the public” are on companies now more thanever, CSR refers to the evaluation of a company by shareholders and other outside

Integrated Report 2018 32

Special Feature 2
Interview with Outside Director

stakeholders. In the event that a company makes light of this fact, there may beclaims of liability from society, which could impair corporate value.
In principle, I have the opportunity to express my views at each Board of Directors
meeting held once a month and explain my thoughts from the standpoints of bothcompliance and CSR. Kaga Electronics has 10 directors, including two outside
directors. Looking at the Group as it is now, this is the right number for adequately
discussing management issues and making quick decisions. I have determined thatthe Board of Directors is functioning appropriately at Kaga Electronics by engaging
in lively debate.

Passing down the corporate philosophy and KAGAism

Booklet explaining management philosophies

One of the things I emphasize when giving advice on corporate management is
to make sure efforts are being made to pass down the corporate philosophy and
KAGAism. Over the years, the Kaga Electronics Group has continued to grow basedon the corporate philosophy that “Everything we do is for our customers” and bymeeting diverse customer requirements. Although these concepts, known as
KAGAism, ought to be passed down to each coming generation, it is also inevitablethat after 50 years in business the founding spirit tends to wane. It is important tochange the way these concepts are communicated to fit with the times instead ofsteadfastly defending traditions.
At Toyota Motor Corporation, where I have been employed
in a management capacity, the philosophy of the founderhas been compiled into the “Five Main Principles of Toyoda”
and shared as conduct guidelines for all employees. Kaga
Electronics has also compiled its management philosophies
into a booklet and disseminated it to all employees inJapan. Strenuous efforts are being made to ensure thatthe philosophies are reflected in daily action. As overseas
business grows, however, it is important to spread awarenessof KAGAism and the corporate philosophy among employees
at our overseas bases. I felt this strongly when I inspected
an EMS factory in Shenzhen, China and met with local
employees. The booklet is already being translated into
multiple languages, and I will support the passing down of
KAGAism and the corporate philosophy using my knowledge
and experience.

Promoting diversity
Amid a dwindling birthrate and aging population, Japan is heading quickly toward
an inverted population pyramid, generating an urgent need to establish anenvironment in which diverse human resources can operate. Promoting diversity
is the driving force to boost corporate value and vitality and is recognized as a
key component of management worldwide. Despite this, there are cases wheretraditional Japanese companies lag behind in initiatives aimed at ensuring diversity,
including the empowerment of women, and Kaga Electronics is no exception.

33 KAGA ELECTRONICS CO.,LTD.

I raised this matter after I was appointed Outside Director. As a concrete goal,
I indicated a target for the Company of boosting the number of women in managerial
positions by 10–15 and really pushed for efforts to strive with a higher degreeof awareness toward becoming a “Nadeshiko Brand” (a list of enterprises thatencourage women to play active roles in the workplace), an initiative of the Ministryof Economy, Trade and Industry (METI) and the Tokyo Stock Exchange (TSE). I also
explained in depth the need to create a framework for promoting diversity to achieve
this goal. This resulted in steady advancements that included the appointment offemale managers and an increase in the proportion of employees who returned
to work after taking childcare leave. I think it is critical to implement measuresthat reflect the opinions of employees and to ensure the penetration of this kindof awareness among workers as a way to further accelerate this movement. After
explaining this concept at the Board of Directors meeting, aninternal survey was conducted and the findings were released
in an internal newsletter. Although it will take time to create
an environment that activates human resources, I am hopefulthat Kaga Electronics goes beyond promoting the role ofwomen and looks to more broadly encourage diversity throughthe employment of elderly people and non-Japanese workers
as well as increase understanding of lesbian, gay, bisexual andtransgender (LGBT) human resources.

Challenges to future growth
A wave of major technological innovation is currently sweeping
the electronics industry, characterized by the Internet of Things (IoT)
and artificial intelligence (AI). Since the Kaga Electronics Group is a dedicatedtrading company in the electronic components sector and a manufacturer engagedin EMS business, this presents expanding opportunities for significant growth. At
the same time, the management environment is changing at a far quicker rate than
before, and to survive in the market and realize sustainable growth going forward,
it is necessary to undertake bold challenges that are not merely an extension of thepast. That means promoting open innovation to maximize the strengths of the Groupand thus expand business scale and enable diversification. It is also important for
the Company to consider carefully the possibility of business tie-ups and M&A.
In addition, the Company needs to boost the management efficiency of the Group
as a whole. Although at present there are 43 subsidiaries in Japan and overseas,
there may be a lack of optimum balance in individual companies and overall as well
as some duplication in functions. More simplified management and greater speedof decision-making will become increasingly important going forward. These need
to be strongly addressed, and it is essential to strengthen the governance system ineach area, for example, with the establishment of regional headquarters.
Despite the many challenges that need to be tackled, the Group has a creative
business model and the energy of human resources to face the severe competitionin the electronics industry. I will do my utmost to play an effective role so that theCompany can achieve sustainable growth and meet the expectations of society
at large.

Integrated Report 2018 34

CSR Management

Social ReportSocial Report

The Kaga Electronics Group proposes and provides value-added products and services that swiftly meet changes inthe times based on its corporate philosophy of “Everything we do is for our customers.” By doing so, we support thetechnological innovation and production streamlining of our customers worldwide.

The most important management resource for a trading company is undoubtedly its human resources. To drive sustainablegrowth, we promote the development of human resources and the creation of an environment that enables the execution of
our action guideline FYT (pronounced “fight”). This guideline expresses our commitment to always be Flexible and to think
and act Young when Trying to take on challenges.

To deliver high-quality products and services

Implementing the idea that “everyone is a corporate manager”

Quality control system

Human resource strategy/Diversity management

The Kaga Electronics Group established the Production
Center in its EMS Business Division, thus enablinga system of quality control that centers on KAGA(SHENZHEN) ELECTRONICS CO., LTD., its flagship basefor production activities. At the Center, we manage theentire Group’s resources as cross-functional capabilities
in such areas as production technology and quality
control, and promote the optimal distribution of resources
and the strengthening of technological competencies on a
global basis.
The Center also liaises with production sites in China as
well as countries in the ASEAN region, Europe and North
America to advance the standardization of production
facilities and operations, and the sharing of information,for example to prevent the recurrence of issues. In
addition, regular exchange meetings are held to reinforce
quality on a Groupwide basis.

As our business activities become more global and themarket environment undergoes abrupt change, diversity andtaking on challenges are keys to driving sustainable growth.
This is because diversity enables us to look at risk as anopportunity, and when we take on challenges we can takefull advantage of these opportunities. To make this a reality,
the Kaga Electronics Group promotes diversity managementin terms of making effective use of diversity in humanresources and in work style. At the same time, we respect
our human resources who continue to take on challenges
and see each person as a corporate manager. With thisin mind, we will keep protecting our corporate culture oftolerating failure as a consequence of tackling challenges.

Together with our customers

Together with our employees

Global exchange meeting between production bases

27.3%

2014/3

5,238

5,092

27.1%

2015/3

5,427

5,216

26.9%

2016/3

26.6%

26.3%

2018/32017/3

Education and welfare program

Efforts to enhance quality
The Company’s Engineering Department handles theintegrated management of technological resources forthe entire Group, from planning and development todesign, production and quality assurance, and works tooptimize resources, strengthen technological capabilities
and expand business across the organization. The
Quality Assurance Department, one of the bodies of
the Engineering Department, drafts and implements
measures to boost quality throughout the Group. The
Department connects with quality control officers andsuppliers to strengthen quality throughout the Group.
A production factory overseas

Status of ISO 9001 certification

35 KAGA ELECTRONICS CO.,LTD.

4,752

To create a safe work environment

Pursuing our philosophy of “Everything we do is for our customers”

Kaga Electronics and the following Group companies haveattained ISO 9000 series certification, an international
standard for quality management. The Company is striving tofurther enhance customer satisfaction through continuous
improvement of its quality management system.

Number of employees (persons)/
Ratio of female employees (Consolidated) (%)

KAGA ELECTRONICS CO., LTD., KAGA DEVICES
CO., LTD., KAGA MICRO SOLUTION CO., LTD., KAGATECHNOSERVICE CO., LTD.
Overseas: KAGA TAXAN (SUZHOU) ELECTRONICS CO., LTD.,
KAGA (SHENZHEN) ELECTRONICS CO., LTD., KAGAELECTRONICS (THAILAND) COMPANY LIMITEDAt the Kaga Electronics Group, we support the careerdevelopment of employees through training to newrecruits, annual training, rank-based training and otherforms of education, as well as by providing assistancewith correspondence courses.
In addition, we grant refreshment leaves every year to
all employees separate from normal paid leave. We haveestablished welfare facilities that include resorts in Japanand abroad, a contract golf course, a company getaway
house and a cruisers boat, with utilization rates at a highlevel. Through such initiatives as these, we aim to strikea good work-life balance for a safer work environment
for employees.

Length of service (years)/Job turnover rate (%)

10.6

11.6
4.3%

5.8%
12.4

3.1%

2014/3

14.9

13.1

2.8%

2015/3

2016/32017/3

3.4%

2018/3

Annual prescribed working hours (hours)/M onthly average overtime work per employee (hours)
1,807.5

1,815.0

1,822.5

10.1

9.3

9.2

9.7

2015/3

2016/32017/3

2018/3

1,807.5
1,807.5
12.6

Japan:

2014/3Integrated Report 2018 36

CSR Management

Contributing to the local community

Social Report

Together with the community
Cognizant of the importance of the social responsibility that ought to be addressed as a company, the Kaga Electronics
Group contributes to sports promotion and to the local community through our business sites worldwide, and actively
undertakes activities that help drive the advancement of education, art and culture.

Sports promotion

Sponsorship of golf tournaments
The Kaga Electronics Group contributes to the promotionof golf, primarily through the sponsorship of golf
tournaments. This includes special sponsorship of
The Ladies Professional Golfers’ Association of Japan(LPGA)’s “LPGA Rookies Championship Kaga Electronics
Cup” since 1996. Many of this tournament’s winners
have gone on to do well on the LPGA tour, proving that
it is a great gateway to success for young female
professional golfers.

Contributing to the development of golf

One of the Company’s golf schools

37 KAGA ELECTRONICS CO.,LTD.

One of our golf driving ranges

Kanazawa City in Ishikawa Prefecture is the place that
the Founder and CEO of Kaga Electronics Isao Tsukamoto
was born and raised. With this as the background, theCompany signed an agreement with Kanazawa City
related to the promotion of regional revitalization and has
been donating to a project aimed at driving revitalizationof the local area through the Tokyo 2020 Olympic andParalympic Games.
We are also taking steps to contribute to thecommunity through such means as supporting the
Kanazawa Marathon, which is open to the public, eversince its first event, and employee participation involunteer activities at a water station.

Supporting the Kanazawa Marathon

Social contribution activities atoverseas sites
LPGA Rookies Championship Kaga Electronics Cup 2017

Four professional golfers, both male and female, areon the books at Kaga Electronics, including Fumika
Kawagishi, who signed on as a member of the Company
in February 2017. Contracted athletes take part intournaments around the world wearing clothing and caps
adorned with the Kaga Electronics logo, which plays apart in our PR strategy.
The Group company KAGA SPORTS CO., LTD. takes
a multifaceted approach to business that includes the
direct sale and wholesale of golf supplies at its own
stores and the running of golf driving ranges and golf
schools, which contributes to the development of the
sports industry through golf.

Social contribution activities in
Kanazawa, where it all began

The Kaga Electronics Group, which conducts businessactivities around the world, takes on a variety of social
contribution activities at overseas sites as well. As
an example, a production subsidiary in Thailand isundertaking initiatives closely rooted to different regionsthat included having its employees clean up around thecompany in a show of mourning when King Bhumibol
passed away.

A cleanup activity in Thailand

Education, art and culture related activities
Eric Sugimoto

Sayaka Tsuchida Hiroko Azuma

Professional golfers employed at Kaga Electronics

A Kaga Electronics golf shop

Fumika Kawagishi

Kaga Electronics supports a Nationwide Rhythm andDance Contest for Elementary and Junior High SchoolStudents that is backed by the Cabinet Office and theMinistry of Education, Culture, Sports, Science andTechnology as well as the Kyogen-inspired opera “The
Marriage of Figaro” co-sponsored by the Ministry of

Nationwide Rhythm and Dance Contest for
Elementary and Junior High School Students

Foreign Affairs. Isao Tsukamoto, the Company’s Founder& CEO, contributes to society in a wide range of fields
related to education, the arts and culture, such as giving
lectures to students as a specially appointed professor at
the Faculty of Service Innovation, the Chiba Universityof Commerce.

Kyogen-inspired opera “The Marriage of Figaro”

Founder & CEO Isao Tsukamoto gives a lecture to
students at the Chiba University of Commerce

Integrated Report 2018 38

CSR Management

Initiatives to reduce environmental burden

Environmental Report

Together with the earth

Reduction of CO2 emissions

The Kaga Electronics Group views the 21st century as the century for protection of the global environment and with this inmind conducts business activities based on an awareness of energy and resource conservation that include reducing CO2
and other greenhouse gases and verifying the environmental load of the products and services it handles.

Environmental policy
The Kaga Electronics Group looks to the future ofelectronics at all times, striving to meet customer needs
as well as preserve and enhance the natural environment
in order to protect our irreplaceable earth.
1 The Kaga Electronics Group shall establish an environmental
management system that involves all employees and promote
ongoing improvement of this system to preserve the global
environment and prevent pollution in all of our businessactivities to provide products and services.

2 In executing our business activities, we shall strictly adhere
to environmental laws, regulations and related requirements
as well as comply with all other requirements agreed uponby the Kaga Electronics Group.

3 We shall strive to prevent pollution and enhance the

4 We shall set targets for the following requirements to theextent possible for the products and services that the Kaga
Electronics Group handles and regularly review the progressof our activities.
• Must be comprised of environmentally friendly substances• Must be able to cut waste through reuse and recycling• Must be designed with energy and resource conservation inmind using the latest electronics technology
awareness of the need for environmental protection and toensure their understanding of our Environmental Policy.

6 Our Environmental Policy shall be disseminated widely
throughout society through such means as the Kaga
Electronics Group website and corporate profile.

Environmental management system
In addition, we have attained ISO 14001 certification, aninternational standard for environmental management
systems, at the Company and 20 sites at four Group
companies in Japan. We are strengthening our systemthrough a PDCA cycle.

Environmental management system
Founder & CEO
President (COO)
Environmental officers

Internal environmental
auditors
Environmental Manager
Meeting
ISO Secretariat

39 KAGA ELECTRONICS CO.,LTD.

*	Double-skin technology refers to a method of construction inwhich part or all of a building exterior is covered in glass.

Power consumption and CO2 emissions at Head Officebuilding
Power consumption (kwh)

999,973

CO2 emissions (kg CO2)

887,877
706,423

377,990

2015/3335,618

2016/3

267,0282017/3764,780

289,087

2018/35 We shall provide education to all employees to increase theirenvironment through non-wasteful office and businessactivities based on a philosophy of conserving energy andresources.

The Kaga Electronics Group established an environmental
management system based on its Environmental Policy.
With the system, environmental officers, ISO Secretariat,
Environmental Promotion Committee and internal
environmental auditors team up under the guidance of thepresident to conduct environmental management at Kaga
Electronics and its Group companies.

The Kaga Electronics Head Office building employs an
air supply type double-skin* curtain wall on the exterior,allowing air to flow into the office, thus reducing heat loadand providing natural ventilation. The energy efficientdesign also enhances sound insulation.
In addition, the building features a variety ofenvironmental technologies, with the use of solar panelson the roof enabling eco energy and the installation of
LED lighting throughout. These technologies serve tosave energy and reduce CO2 emissions.

• KAGA DEVICES • KAGA TECH • AD DEVICE• Kaga Solution Network Co., Ltd. (SOLNET Company)• EMS Business Division, Engineering Department, Specific Industry
Business Division, Electronics Business Division,Communication Network Division, Special Sales Department,
Sales Promotion Division
Administration Headquarters• Business Administration Department, Information Systems Department,
Personnel Department, Accounting Department, General Affairs Department,
Corporate Planning Department, Audit Office, Investor Relations & Public
Relations Office, Secretarial Office

PC product reuse and recycling business
The Kaga Electronics Group company KAGA MICROSOLUTION CO., LTD. has flexibly changed and expandedbusiness domain to meet a wide range of customer
demands, from the development, production and sale ofelectronic products to their repair, maintenance, reuse
and recycling. The company leverages know-how in the
production of electronic equipment and an extensive
procurement route for electronic parts and materials—
both of which were accumulated in EMS business, astrength of the Group—to focus on a reuse and recycling
business for PC products in recent years.
Although the number of reused units decreased in theyear to March 2016 following unusually high demand theprevious year, the figure rebounded gradually thereafter,
and in the year to March 2018, actually increased by 15%
year on year.
In addition to “reduce programs” that look especiallyat cutting CO2 and rubbish, the Group will contribute toa reduction in environmental burden from a reuse andrecycling perspective and to the realization of a recyclingoriented society.

Repair work at KAGA MICRO SOLUTION

Number of PC products reused (Thousands)

81.0
66.0

2014/356.6

2015/3

2016/365.8

2017/376.0

2018/3Integrated Report 2018 40

Financial and Corporate Information

10-Year Financial Summary
Kaga Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years Ended March 31

Fiscal year
Net sales (millions of yen)
Gross profit (millions of yen)
Operating income (millions of yen)
Ordinary income (millions of yen)
Profit attributable to owners of parent (millions of yen)
Cash flows from operating activities (millions of yen)
Cash flows from investing activities (millions of yen)Free cash flow (millions of yen)
Cash flows from financing activities (millions of yen)
Depreciation (millions of yen)
Capital expenditures/Investment and loans (millions of yen)
Fiscal year end
Total assets (millions of yen)
Net assets (millions of yen)
Equity (millions of yen)Interest bearing debts (millions of yen)
Cash and cash equivalents (millions of yen)
Per share data
EPS (yen)
Annual dividend (yen)Payout ratio (%)
BPS (yen)
Major indicators
Gross profit margin (%) *1
Operating income margin (%) *2
Ordinary income margin (%) *3
Profit attributable to owners of parent margin (%)
ROE (%) *4
ROA (%) *5
Equity ratio (%)
Debt equity ratio (times) *6
Inventories (millions of yen)
Inventory turnover period (days) *7

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

273,61030,383
2,249
2,208
(806)
5,435
(4,212)(1,222)(3,407)
1,709
3,392

239,391
28,237
1,582
1,280
(318)
5,728
(3,040)2,687(2,307)
2,050
3,960

237,81130,512
3,423
3,598
1,768
6,321
(6,369)
(47)
478
1,578
6,536

229,856
28,506
2,067
2,569
914
958
(2,645)(1,686)
(242)
2,181
2,999

216,405
27,462
1,260
1,931
444
7,041
(4,910)
2,131
(403)
2,303
3,398

257,852
32,522
5,106
5,847
3,877
3,334
(3,339)
(5)
1,024
2,418
4,087

255,143
32,738
6,362
7,664
4,416
9,127
(1,465)
7,661(4,431)
1,907
2,649

245,387
33,648
7,788
7,908
5,437
9,546
(1,263)8,283(3,067)
1,604
2,166

227,20931,225
6,879
7,343
6,975
10,746(258)
10,487(6,118)
1,452
1,464

235,92132,498
8,119
8,740
6,490
10,077(4,173)
5,904(2,811)
1,481
4,520

117,251
49,56047,77012,936
11,368113,962
48,553
46,841
11,506
11,797

114,599
48,512
46,84813,45011,796

114,71447,936
46,41014,3499,695

111,888
48,806
48,65615,08911,878126,028
52,82552,786
17,244
13,361

127,948
59,60359,564
14,573
17,569124,281
61,80861,764
12,73921,879125,751
65,93265,872
9,805
26,021

129,493
70,631
70,5568,900
28,879(28.91)40.00—
1,730.98(11.55)30.00—
1,697.27

64.07
30.00
46.8
1,697.55

33.13
30.00
90.5
1,681.73

16.09
30.00
186.5
1,721.86

137.22
35.00
25.5
1,868.07

156.2840.00
25.6
2,108.04

192.4355.00
28.6
2,185.94

249.4360.00
24.1
2,401.00

236.5870.00
29.6
2,571.79

11.1
0.8
0.8
(0.3)
(1.6)
(0.7)
40.7
0.27
18,296
27.5

11.8
0.7
0.5
(0.1)
(0.7)
(0.3)
41.1
0.25
18,141
31.4

12.8
1.4
1.5
0.7
3.8
1.5
40.9
0.29
19,519
34.4

12.4
0.9
1.1
0.4
2.0
0.8
40.5
0.31
21,554
39.1

12.7
0.6
0.9
0.2
0.9
0.4
43.5
0.31
18,779
36.3

12.6
2.0
2.3
1.5
7.6
3.3
41.9
0.33
21,219
34.4

12.8
2.5
3.0
1.7
7.8
3.5
46.6
0.24
22,703
37.3

13.7
3.2
3.2
2.2
9.0
4.3
49.7
0.21
19,175
33.1

13.7
3.0
3.2
3.1
10.9
5.6
52.4
0.15
19,325
36.0

13.8
3.4
3.7
2.8
9.5
5.1
54.5
0.13
19,45534.9*1 Gross profit margin=Gross profit/Net sales × 100 (%)*2 Operating income margin=Operating income/Net sales × 100 (%)*3 Ordinary income margin=Ordinary income/Net sales × 100 (%)*4 ROE=Profit attributable to owners of parent/Average equity × 100 (%)*5 ROA=Profit attributable to owners of parent/Average total assets × 100 (%)*6 Debt equity ratio=Interest bearing debts/Equity (times)*7 Inventory turnover period=Inventory/Cost of sales × 365 (days)

41 KAGA ELECTRONICS CO.,LTD.

Integrated Report 2018 42

Financial and Corporate Information
Kaga Electronics Co., Ltd.
and Consolidated
Subsidiaries
Consolidated
Balance
Sheet

Kaga Electronics Co., Ltd. and Consolidated Subsidiaries

Kaga Electronics Co., Ltd. and Consolidated Subsidiaries
Consolidated
At
March 31, 2018Balance Sheet

Consolidated Balance SheetAt March 31, 2018

At March 31, 2018

Millions of Yen
2017
2018

ASSETS
CURRENT ASSETS:
Cash and bank deposits
Notes and accounts receivable-trade
Electronically recorded monetary claims
Short-term investment securities
Merchandise and finished goods
Work in process
Raw materials and supplies
Deferred tax assets
OthersAllowance for doubtful accounts
Total CURRENT ASSETS

Thousands of
U.S. Dollars(Note 1)
2018

¥ 26,423
46,774
5,234
188
14,675
365
4,284
1,340
4,562
(166)
103,684¥ 30,803
45,8094,032
295
15,060
575
3,818
1,028
3,807
(133)
105,097

NONCURRENT ASSETS:PROPERTY, PLANT AND EQUIPMENT
Buildings and structures
Accumulated depreciation
Buildings and structures, net

7,902(3,043)
4,859

8,102
(3,232)
4,870

76,268(30,424)
45,844

Machinery, equipment and vehicles
Accumulated depreciation
Machinery, equipment and vehicles, net

5,593(3,579)
2,014

6,315
(3,731)
2,583

59,441(35,120)
24,320Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net

3,774(3,032)742

3,556(2,846)709

33,474(26,792)
6,681

Land
Construction in progress
Total PROPERTY, PLANT AND EQUIPMENT

4,126
3
11,7454,036
10
12,21037,991
98
114,937

406
363
71
841

317
515
46
878

2,986
4,849
435
8,270

INVESTMENTS AND OTHER ASSETS:
Investment securities
Deferred tax assets
Guarantee deposits
Insurance funds
OthersAllowance for doubtful accounts
Total INVESTMENTS AND OTHER ASSETS

6,761
240
735
936
1,529
(723)
9,479

8,688
240
657
943
1,363
(587)
11,305

81,778
2,262
6,187
8,883
12,837(5,531)
106,418

Total NONCURRENT ASSETS

22,067

24,395

229,626¥ 125,751¥ 129,493$ 1,218,875

INTANGIBLE ASSETS
Goodwill
Software
OthersTotal INTANGIBLE ASSETS

Total ASSETS-1-

43 KAGA ELECTRONICS CO.,LTD.

$

289,939
431,190
37,954
2,776
141,763
5,417
35,945
9,677
35,837(1,254)989,249

Millions of Yen
2017
2018

LIABILITIESCURRENT LIABILITIES:
Notes and accounts payable-trade
Short-term loans payable
Accrued expenses
Income taxes payable
Provision for directors' bonuses
OthersTotal CURRENT LIABILITIESThousands of
U.S. Dollars(Note 1)
2018

¥ 37,553
4,883
3,387
888
204
3,325
50,242¥ 36,392
5,385
3,711
901
247
3,070
49,708$ 342,552
50,69334,9308,482
2,332
28,897
467,889

4,603
1,213
1,222
1,669
144
723
9,576

3,161
2,013
1,264
1,737
175
800
9,152

29,757
18,952
11,903
16,353
1,654
7,531
86,15259,81958,861

554,041

NET ASSETS:SHAREHOLDERS’ EQUITY
Capital stock
Capital surplus
Retained earnings
Treasury stock
Total SHAREHOLDERS’ EQUITY

12,133
13,91240,476(2,040)64,481

12,133
13,85345,183(2,042)
69,127

114,208
130,399425,295(19,228)
650,675

ACCUMULATED OTHER COMPREHENSIVE INCOME
Changes in the fair value of available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit obligations
Total ACCUMULATED OTHER COMPREHENSIVE INCOME

1,159
0
421
(190)
1,391

1,504
(16)
148
(208)
1,428

14,162(151)
1,395(1,960)13,44659
65,93275
70,631

712
664,833¥ 125,751¥ 129,493$ 1,218,875

NONCURRENT LIABILITIES:Long-term loans payable
Deferred tax liabilities
Provision for directors' retirement benefits
Net defined benefit liabilities
Asset retirement obligations
OthersTotal NONCURRENT LIABILITIES
Total LIABILITIES

Non-controlling interests
Total NET ASSETS
Total LIABILITIES AND NET ASSETS

Note 1: The translations of Japanese yen amounts into U.S. dollar amounts are included
solely for the convenience of readers outside Japan and have been made at the rate of¥106.24 to $1, the rate of exchange at March 31, 2018.

-2Integrated Report 2018 44

Financial and Corporate Information
Kaga Electronics Co.,Statement
Ltd. and Consolidated
Subsidiaries andConsolidatedof IncomeComprehensive
IncomeConsolidated Statement of Income
and Comprehensive Income

Kaga Electronics Co., Ltd. and Consolidated Subsidiaries
Consolidated Statement of Income and Comprehensive Income
For the Year Ended March 31, 2018

ForElectronics
the YearCo.,
Ended
March
31, 2018
Kaga
Ltd. andConsolidated
Subsidiaries
For the Year Ended March 31, 2018

Millions of Yen
2017
2018
Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income
NON-OPERATING INCOME
Interest income
Dividend income
Commission fee
Foreign exchange gains
House rent income
OthersTotal NON-OPERATING INCOME

Thousands of
U.S. Dollars(Note 1)
2018

¥ 227,209
195,983
31,225¥ 235,921
203,423
32,498$ 2,220,648
1,914,749
305,898

24,346
6,879

24,3798,119

229,472
76,426

59
103
222
－
77
282
745

124
119
279
44
99
228
896

1,175
1,127
2,630
422
940
2,146
8,442

128
－
88
63
280
7,343

132
111
－
32
275
8,740

1,243
1,047
－
303
2,594
82,274EXTRAORDINARY INCOME
Gain on sales of property, plant and equipment
Gain on sales of investment securities
Gain on bargain purchase
Gain on sales of shares of subsidiaries
Gain on transfer of businessSettlement income received
Total EXTRAORDINARY INCOME

23
110
28
－
89
372
624

28
591
－
467
12
－
1,101

268
5,571
－
4,403
122
－
10,365EXTRAORDINARY LOSS
Loss on disposal of property, plant and equipment
Impairment loss
Loss on sales of investment securities
Loss on valuation of investment securities
Loss on valuation of golf club membership
OthersTotal EXTRAORDINARY LOSS

15
16
31
47
11
13
¥ 136

7
228
24
269
6
5
¥ 541

72
2,152
227
2,539
59
50
5,101

NON-OPERATING EXPENSES
Interest expenses
Share of loss of entities accounted for using equity method
Foreign exchange losses
OthersTotal NON-OPERATING EXPENSES
Ordinary income-3-

45 KAGA ELECTRONICS CO.,LTD.

$

Millions of Yen
2017
2018
Income before income taxes

Thousands of
U.S. Dollars(Note 1)
2018

¥ 7,832¥ 9,300$ 87,538

Income taxes-current
Income taxes-deferred
Total income taxes
Net income

1,610
(768)
842
6,989

1,840
952
2,792
6,507

17,3208,964
26,28561,253

Profit attributable to:
Owners of the parent
Non-controlling interests

6,975
14

6,490
16

61,093
159

479
(4)
(292)
147
330

345
(16)
(273)
(17)
37

3,253
(158)
(2,577)(167)349¥ 7,320¥ 6,544$ 61,602¥ 7,30515¥ 6,52816$ 61,445
156

OTHER COMPREHENSIVE INCOME
Changes in the fair value of available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit obligations, net of tax
Total OTHER COMPREHENSIVE INCOME
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

Note 1: The translations of Japanese yen amounts into U.S. dollar amounts are included
solely for the convenience of readers outside Japan and have been made at the rate of¥106.24 to $1, the rate of exchange at March 31, 2018.

-4Integrated Report 2018 46

Financial and Corporate Information
Kaga Electronics Co.,Statement
Ltd. and Consolidated
Subsidiaries
Consolidatedof CashFlows

Kaga Electronics Co., Ltd. and Consolidated Subsidiaries

Kaga Electronics Co., Ltd. and Consolidated Subsidiaries
Consolidatedof Cash FlowsFor
the Year Ended Statement
March 31, 2018

Consolidated Statement of Cash Flows
For the Year Ended March 31, 2018

For the Year Ended March 31, 2018

Millions of Yen
2017
2018
NET CASH PROVIDED BY OPERATING ACTIVITIESIncome before income taxes
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase in net defined benefit liability
Increase in provision for directors' retirement benefits
Increase in provision for directors' bonuses
Decrease in allowance for doubtful accounts
Interest and dividend income
Interest expenses
Share of profit of entities accounted for using equity method
Gain on sales of shares of subsidiaries
Gain on sales of property, plant and equipment
Loss on retirement of property, plant and equipment
Gain on sales of investment securities
Loss on valuation of investment securities
Decrease in notes and accounts receivable-trade
Increase in inventories
Increase (Decrease) in notes and accounts payable-trade(Increase) Decrease in accounts receivable-other
Increase in accrued expenses
Decrease (Increase) in advance payments
Decrease (Increase) in consumption taxes refund receivable
Decrease (Increase) in other current assets
Decrease in other current liabilities
Others, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Others, net
Net cash provided by operating activities¥ 7,832
1,452
16
88
124
14
18
(11)
(162)
128
－
－
(18)
15
(79)
47
2,602
(240)
933
(390)
45
143
92
89
(94)
(138)
12,509164(128)(1,792)(5)¥ 10,746¥ 9,300
1,481
228
88
40
41
43
(85)
(244)
132
111
(467)
(23)
7
(567)
269
2,076
(226)
(1,101)
1,087
338
(135)
(163)
(88)
(362)
(47)
11,734242(130)(1,770)2¥ 10,077

Thousands of
U.S. Dollars(Note 1)
2018$

87,538
13,948
2,152
837
384
394
410
(808)
(2,302)
1,243
1,047(4,403)(218)
72(5,343)
2,539
19,542(2,133)(10,363)
10,232
3,188(1,279)(1,541)(830)(3,408)(451)
110,449
2,278(1,224)(16,666)
24$ 94,860

Thousands of
U.S. Dollars(Note 1)
2018

Millions of Yen
2017
2018
NET CASH USED IN INVESTING ACTIVITIESPayments for time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sales of investment securities
Proceeds from purchase of shares of subsidiaries resulting in change
in scope of consolidation
Proceeds from sales of shares of subsidiaries resulting in change inscope of consolidation
Payments of short-term loans receivableCollection of short-term loans receivable
Purchase of insurance funds
Proceeds from cancellation of insurance funds
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Other payments
Other proceeds
Net cash used in investing activities¥

NET CASH USED IN FINANCING ACTIVITIES(Decrease) Increase in short-term loans payable
Proceeds from long-term loans payable
Repayment of long-term loans payable
Purchase of treasury stock
Cash dividends paid
Payments from changes in ownership interests in subsidiaries that do
not result in change in scope of consolidation
Others, net
Net cash used in financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents-beginning balance
Cash and cash equivalents-ending balance

¥

(630)
854
(967)
119
(109)
(387)
855

¥

(2,773)
1,158(1,678)87(360)(2,481)
1,331$(26,105)
10,902(15,798)821(3,396)(23,353)
12,532

20

－

－

－

504

4,745

(2)
5
(17)
2
(15)
22
(90)
81
(258)

(1)
1
(15)
14
(58)
136
(74)
36
(4,173)

(16)
16
(146)
132
(550)
1,285
(697)
342
(39,286)(397)
66(2,428)(1,501)(1,693)825－(1,641)(2)(1,780)

7,773－(15,454)(25)(16,760)

－

(58)

(554)

(164)
(6,118)(153)(2,811)(1,447)(26,468)

(227)
4,141
21,87926,021(234)
2,857
26,021¥ 28,879(2,207)
26,898244,932$ 271,831

Note 1: The translations of Japanese yen amounts into U.S. dollar amounts are included
solely for the convenience of readers outside Japan and have been made at the rate of¥106.24 to $1, the rate of exchange at March 31, 2018.

-8 -47 KAGA ELECTRONICS CO.,LTD.

-9 Integrated Report 2018 48

Financial and Corporate Information

Corporate Information
As of March 31, 2018

Company overview

Major affiliates overseas
China

Name

KAGA ELECTRONICS CO., LTD.

Address

20 Kanda Metsunagacho, Chiyoda-ku, Tokyo 101-8629, JapanTel+81-3-5657-0111

Fax+81-3-3254-7131

Business description

Sale of electronic parts and semiconductors, EMS*, and sale offinished products such as PCs and PC peripherals, etc.
*E lectronics manufacturing services: Provision of productdevelopment and manufacturing services on a contract basis

Founded

September 12, 1968

Capital¥12,133 million

Number of Group
companies

43 (15 in Japan and 28 overseas)

KAGA (SHENZHEN)ELECTRONICS CO., LTD.

KAGA TAXAN (SUZHOU)ELECTRONICS CO., LTD.

KAGA (SHANGHAI)
ELECTRONICS CO., LTD.

Southeast Asia

KAGA ELECTRONICS (THAILAND)COMPANY LIMITEDKAGA COMPONENTS(MALAYSIA) SDN.BHD.

KAGA ELECTRONICS(USA) INC.

Executive Officers (As of June 28, 2018)

Founder & CEO

Isao Tsukamoto

Shoji Seki

President of KAGA SPORTS CO., LTD.

President & COO

Ryoichi Kado

Hiroki Suzuki

Senior Managing Director

Shinsuke Takahashi

Division Manager of Specific Industry
Business Division

Senior Managing Director

Yukio Takashi

Takeshi Tsukamoto

Total number of shares authorized

80,000,000 shares

Senior Managing Director

Shintaro Kakei

Head of Corporate Planning
Department

Managing Director

Eiji Kawamura
Head of Administration Headquarters

Takao Okabe

Responsible for China Headquarters
and President & COO of KAGA (H.K.)
ELECTRONICS LIMITED

Total number of shares outstanding

28,702,118 shares

Director

Motonori Toshinari
Division Manager of EMS Business
Division

Mitsuhito Ikeda

President of KAGA SOLUTIONNETWORK CO., LTD.

Number of shareholders

Hiroaki Maruyama

Division Manager of Personnel
Department, Administration
Headquarters

Kazuhira Watanabe

Division Manager of Communication
Network Sales Division

Mitsuhiro Nohara
Division Manager of Electronics
Business Division

Outside Director

Susumu Miyoshi

Outside Director

Akira Tamura

Takahiro Urazawa

President of DIGITAL MEDIA LAB., INC.

Auditor (Full-time)

Kazunori Kameda

Hironaga Nagasaka

Responsible for ASEAN Headquarters

Auditor (Full-time)

Takahiro Ishii

Yasuhiro Ishihara

Outside Auditor

Susumu Kitsunai

Head of Accounting Division,
Administration Headquarters

Outside Auditor

Yoichi Sato

Katsutoshi Suzuki

Division Manager of Sales Promotion
Division and President of KAGA (KOREA)
ELECTRONICS CO., LTD.

Major affiliates in JapanKAGA TECH CO., LTD.
Sale of electronic parts and electronicequipment, etc.

Number of shares constituting one unit

AD DEVICE CO., LTD.
Sale of electronic parts and electronicequipment, etc.

KAGA SPORTS CO., LTD.
Manufacture, wholesale and sale ofsporting goods, etc.

KAGA MICRO SOLUTION CO., LTD.
Development, manufacture and sale of
PCs and PC peripherals, etc.

KAGA AMUSEMENT CO., LTD.
Sale of electronic parts and electronicequipment, etc.

KAGA SOLUTION NETWORK CO., LTD.
Development, design, construction
and maintenance of computer network
systems, etc.

DIGITAL MEDIA LAB., INC.
Planning, development and sale ofcomputer graphics

KAGA TECHNOSERVICE CO., LTD.
Electrical and communication facilities
installation, interior work, etc.

100 shares
5,703

Financial Instruments
Business Operators

1.29%

370.048 shares(37)

5,460,382 shares(174)
Financial Institutions

26.37%

7,569,679 shares(38)

Individuals

24.04%

Total number ofshareholders
5,703
28,702,118
sharesKD TEC s.r.o.

TAXAN MEXICO S.A. de C.V.

Principal shareholders

Breakdown by type of shareholder

19.02%KAGA DEVICES CO., LTD.
Sale of electronic parts and electronicequipment, etc.

49 KAGA ELECTRONICS CO.,LTD.

Stock information

Foreign Corporations

KAGA (H.K.) ELECTRONICS
LIMITED

Europe and North America

Board members (As of June 28, 2018)

Director

DONGGUAN POWERTEKELECTRONICS CO., LTD.

6,899,325 shares(5,344)
Other JapaneseCorporations

29.28%

8,402,684 shares
(110)

Name

Number of Percentage
shares heldof total(thousandsharesshares)issued (%)

SANKYO CO., LTD.

3,824

13.94

OKOZE CO., LTD.

1,840

6.71

Japan Trustee Services Bank, Ltd.

1,575

5.74

The Bank of Tokyo-Mitsubishi UFJ,
Ltd.

1,212

4.42

Kaga Electronics Employee
Shareowners Association

1,123

4.10

Mizuho Bank, Ltd.

950

3.46

Isao Tsukamoto

735

2.68

The Master Trust Bank of Japan,
Ltd.

632

2.30

GOVERNMENT OF NORWAY

545

1.99

Oki Electric Industry Co., Ltd.

526

1.92

Notes: 1. The number of shares held have been rounded down to thenearest thousand shares.
2. In addition to the above, there are 1,267 thousand shares oftreasury stock.
3. The number of shares held by Japan Trustee Services Bank,
Ltd. and The Master Trust Bank of Japan, Ltd. are the sums ofthe number of shares held by the trust business of each bank.
4. The Bank of Tokyo-Mitsubishi UFJ, Ltd. was renamed MUFG
Bank. Ltd. on April 1, 2018.

Integrated Report 2018 50

20 Kandamatsunagacho, Chiyoda-ku, Tokyo 101-8629, Japan
Tel: +81-3-5657-0111
https://www.taxan.co.jp/en/