Contact: Investor Relations & Public Relations Office
20 Kandamatsunagacho, Chiyoda-ku, Tokyo 101-8629, Japan
Tel: +81-3-5657-0106
Fax: +81-3-3254-7133
Email: webmaster@taxan.co.jp

Toward the Next Stage
Integrated Report 2019
Kaga Electronics GroupINDEXKaga Electronics Group Explained• Philosophy and Spirit ................................................................................................... 4• Business and Strengths ............................................................................................. 6

Vision and Strategy

Message from the CEO ...................................................................................... 8
Message from the COO ...................................................................................... 10
Message from the CFO ....................................................................................... 14
Value Creation Process ...................................................................................... 16
Special Feature 1 On the Front Line of Business

Expanding trading company businessto drive further growth in EMS business ............................................. 18
Special Feature 2 Dialogue on the Power to Create Group Synergies

Key points on post-merger integration
with Fujitsu Electronics ...................................................................................... 22
Special Feature 3 New Business Introduction

Toward the Next Stage
Becoming an industry leader in Japan through M&A andembarking on a challenge to realize the next stage of growth
The Kaga Electronics Group has become a top-class electronics trading company
in Japan in terms of business scale through the acquisition of Fujitsu Electronics Inc.
in the fiscal year ended March 31, 2019, when we celebrated our 50th anniversary.
The Group will use this as a springboard into the next 50 years as we start a new

A series of businesses that resolve social issues ......................... 24
Overview of FY2019/3 Results ..................................................................... 26
Foundations for Value Creation

Corporate Governance• Directors and Auditors ................................................................................................ 30• Corporate Governance ................................................................................................ 32• Internal Control / Compliance ............................................................................... 34• Message from Outside Director ........................................................................... 36

CSR Management
Social Report• Together with our customers ................................................................................. 38• Together with our employees ................................................................................ 39• Together with the community................................................................................. 40
Environmental Report• Together with the earth ............................................................................................... 42
Financial and Corporate Information

Financial Data
• 10-Year Financial Summary .................................................................................... 44• Analysis of Financial Condition and Results of Operations .............. 46• Consolidated Balance Sheet....................................................................................... 48• Consolidated Statement of Income and Comprehensive Income .... 50• Consolidated Statement of Cash Flows ............................................................. 52

challenge to realize the goal of becoming an industry leader in Japan and to become

Corporate Information........................................................................................................ 54

a company capable of trillion-yen sales that can outstrip the global competition.

Period covered
This report covers from April 1, 2018 to March 31, 2019, except certain parts
that include information prior and subsequent to these dates, as required.
Financial figures
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.
Scope of report
Data calculation in this report covers Kaga Electronics Co., Ltd. and its
52 consolidated subsidiaries (16 in Japan and 36 overseas), all companies
included in the scope of the Company’s consolidated accounting, except
where stated.
Notation and coverage
The Company: Kaga Electronics Co., Ltd.
The Group: Kaga Electronics Co., Ltd. and its 52 consolidated subsidiaries
Domestic facilities: Kaga Electronics Co., Ltd. and its 16 domestic
consolidated subsidiaries
Forward-looking statements
Certain statements in this document may constitute “forward-looking
statements.” Such statements are based on currently available informationand certain premises deemed rational at the time of writing. As such, actual
results may differ from those projected due to various factors.
Key factors that could cause actual results to differ from those projected
include, but are not limited to, general economic conditions in Japan andoverseas surrounding the Company’s business domains, as well as trends
in demand for the Company’s products and services, and trends in foreignexchange rates and stock markets.

2 KAGA ELECTRONICS CO.,LTD.

Integrated Report 20193

Kaga Electronics Group Explained

Philosophy and Spirit
History of Group expansion

Since 1968

Corporate Philosophy

Kaga Spirit (The Words of Isao Tsukamoto)

Everything
we do is forour customers

1

Kaga Electronics Co., Ltd. had very humble
beginnings about 50 years ago, starting out
in a very small office. We have since growninto a general electronics trading company
with operations that now span the globe.
Our corporate philosophy, “Everything we
do is for our customers,” has remained
unchanged since our earliest days. Basedon this philosophy, we will keep
contributing to the creation of an affluent
society by continuing to support thedevelopment of our customers.

2
3“Personal connections are intangible assets”
The Kaga Electronics Group is capable of responding quickly andaccurately to changes in the business environment and customer needs
to drive continuous growth. This ability stems from the personalconnections, or business network, we have built up over the years basedon relationships of trust with customers and suppliers. These
relationships form a vital part of our management foundations in
conducting business as a trading company. The idea that “personalconnections are intangible assets” has been passed down over the years
as one of the pillars of what we call KAGAism, the essence of who we are.

4

“Inventory is a liability”
In our earliest days, a lack of ample working
capital forced us to place orders for products
after receiving an order from a customer. This
gave birth to the idea that “inventory is aliability,” which has currently evolved into thesystem for receiving and placing orders, acritical feature of the Company. Responding as
quickly as possible to order information has
enabled us to build win-win relationships withcustomers and suppliers.

“An organization driven by communication”
It is important to have a corporate culture that makes maximum use of apersonal capability in order to be quick to seize an opportunity in achanging business environment full of future uncertainty. Based on thisphilosophy, the Kaga Electronics Group is working to build an open
workplace that encourages different ways of communication to achievecommon goals.

5

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

Mar. 1980
July 1981

Net sales exceed ¥10 billion.

Dec. 1985

Stock registered on the Japan Securities
Dealers Association as an over-the-countercompany.
TAXAN (UK) LTD. established in the UK.

Dec. 1986

Stock listed on the Second Section of theTokyo Stock Exchange.

1990–
KAGA (H.K.) ELECTRONICS LIMITED
established in Hong Kong.

July 1994

KAGA (SINGAPORE) ELECTRONICS PTE. LTD.
established in Singapore.

Feb. 1995

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

Mar. 1995
Dec. 1995

Net sales exceed ¥50 billion.

“People are a finite asset;
companies are perpetual entities”

Sep. 1997

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

The Kaga Electronics Group continues totackle new challenges with a view that there isno end goal to corporate activities based on
the philosophy that “people are a finite asset;
companies are perpetual entities.” Acquiring
Fujitsu Electronics and developing new
products and services that resolve social
issues are some of the initiatives we areundertaking to drive sustainable growth. We
will remain committed to pushing theenvelope as a Group as we head toward a
century in business.

2000–
Aug. 2000
Mar. 2001
Apr. 2002
Dec. 2003
Aug. 2006
Apr. 2009
Mar. 2014
Jan. 2017
July 2017
Sep. 2018
Jan. 2019

4 KAGA ELECTRONICS CO.,LTD.

TSK ELECTRONICS CORPORATION establishedin the United States.

June 1992“Never say ‘no’”
Based on the motto “Never say no’,” the Kaga Electronics Group has been
expanding its business domain from parts procurement to kit-parts sales
and even contract production, planning and development, andmaintenance services, while enhancing the lineup of products to meetcustomer needs. The origins of our global “one-stop service system,” anenduring strength of the Company, lies in this customer-first approach.

Sep. 1968

KAGA (TAIWAN) ELECTRONICS CO., LTD.
established in Taiwan.

KAGA (SHANGHAI) ELECTRONICS CO., LTD.
established in China.
Net sales exceed ¥100 billion.
KAGA ELECTRONICS (THAILAND) COMPANY
LIMITED established in Thailand.
KAGA ELECTRONICS (USA) INC. established in
the United States.
KAGA (DALIAN) ELECTRONICS CO., LTD.
established in China.
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-owned building).
TAXAN MEXICO, S.A. DE C.V. established in
Mexico.
KAGA ELECTRONICS (VIETNAM) CO.,LTD.
established in Vietnam.
KAGA ELECTRONICS (INDIA) PVT.LTD.
established in India.
Fujitsu Electronics Inc. made into a Group
company.

Integrated Report 20195

Kaga Electronics Group Explained

Business and Strengths
Electronic parts and semiconductor business

EMS businessIn this business, the Kaga Electronics Group provides a wide rangeof electronics-related parts and materials that include
semiconductors, general electronic components, LEDs, sensors
and liquid crystal displays. We leverage our network of more than
40 companies in the United States, Europe, Asia and other partsof the globe to deliver world-class parts and components tocustomers. Our exceptional support system enables us to meet theneeds of customers globally.

The Kaga Electronics Group utilizes production facilities in China
and other parts of Asia as well as in Europe and the Americas in a
production system that allows us to manufacture in regions thatbest suit our customers. In addition to the design and developmentof products, we have developed a total support system that isgeared to flexibly meet different demands from high-mix,
low-volume production and semi-finished to finished products. In
addition, our global supplier network enables us to propose optimalalternatives to parts and materials that suit each customer best.

● Major Domestic Group Companies
Fujitsu Electronics Inc.
KAGA TECH CO., LTD.
KAGA DEVICES CO., LTD.
AD DEVICE CO., LTD.

● Major Domestic Group Companies
KAGA MICRO SOLUTION CO., LTD. / KAGA DEVICES CO., LTD.

● Major Overseas Group Companies
KAGA ELECTRONICS (USA) INC.
KAGA (SINGAPORE) ELECTRONICS PTE. LTD.
KAGA (KOREA) ELECTRONICS CO., LTD.
KAGA (TAIWAN) ELECTRONICS CO., LTD.
KAGA DEVICES (H.K.) LIMITEDKAGA (DALIAN) ELECTRONICS CO., LTD.

Research, planning,
design, development

Procurement● Major Overseas Group Companies
KAGA (H.K.) ELECTRONICS LIMITED / KAGA (SHENZHEN) ELECTRONICS CO.,LTD. / KAGA (SHANGHAI) ELECTRONICS CO., LTD. / KAGA TAXAN (SUZHOU)ELECTRONICS CO., LTD. / KAGA ELECTRONICS (THAILAND) COMPANY
LIMITED / KAGA COMPONENTS (MALAYSIA) SDN.BHD / KD TEC s.r.o. /TAXAN MEXICO, S.A. DE C.V. / KAGA ELECTRONICS (USA) INC. / KAGA(DALIAN) ELECTRONICS CO., LTD. / KAGA ELECTRONICS INDONESIA, PT /KAGA ELECTRONICS (VIETNAM) CO., LTD. / KD TEC TURKEY ELEKTRONIKSANAYI VE TICARET LIMITED SIRKETI / KAGA DEVICES INDIA PVD. LTD.

Production,
quality control

Sales, logistics

Support service

Strength

Strength

Strength

Information equipment business

Other business

The Kaga Electronics Group carries out the functions of a sales
agency in providing such places as domestic consumer electronics
mass retailers, camera stores, general companies and educational
institutes with PCs and PC peripherals made by major Japaneseand overseas brands. In addition, we offer a one-stop service for
network solutions from the proposal to the construction andmaintenance of local area network (LAN) systems, security
systems and eco-friendly energy systems for corporations andgovernment agencies.

In addition to the planning, manufacture and sale of amusementrelated equipment such as arcade amusement machines, the Kaga
Electronics Group produces commercials, movies and animation
as well as original content using advanced computer graphics
technology. Our diverse business also includes environmentallyfriendly PC reuse and recycling, and the retail and wholesale ofgolf supplies.

● Major Group Companies
KAGA SOLUTION NETWORK CO., LTD.
KAGA TECHNOSERVICE CO., LTD.

6 KAGA ELECTRONICS CO.,LTD.

1

One-stop service capability

2

Global network capability

3Comprehensive capability in the electronics field

The Kaga Electronics Group, as an independent general electronics trading company, has been expanding its
business domains in accordance with customer needs. At present, Group companies worldwide are working
together to create a “one-stop service system” that transcends the boundaries of a trading company andcovers everything from upstream processes, including planning and design in addition to parts procurement,
to downstream maintenance services. By doing so, we are providing diverse added value to customers.

We provide peace of mind to customers and instill confidence through our sales and production network, whichspans 16 countries and regions worldwide, as well as our global procurement and information-gathering
competencies that we have built up over many years, which have been reinforced by the addition to the Groupof Fujitsu Electronics.

Another strength of the Kaga Electronics Group is the broad range of products and services it handles. We
meet a wide variety of needs by providing modules and finished products in addition to electronics-relatedparts and materials as well as hardware, software and systems. Our business covers everything fromlarge-lot consumer goods to small-lot industrial devices. This comprehensive capability, coupled with our
one-stop service capability, allows us to meet customer needs with exceptional precision.

● Major Group Companies
DIGITAL MEDIA LAB., INC.
KAGA MICRO SOLUTION CO., LTD.
KAGA SPORTS CO., LTD.
KAGA AMUSEMENT CO., LTD.

Integrated Report 20197

Message from the CEO

To our stakeholders

Aiming to become
a competitive“world-classcompany”

Positioning of the Medium- to Long-Term Vision and the Medium-Term Management Plan 2021¥

Organic Growth+
Further M&A
Challenges

Isao Tsukamoto
Founder & CEO

trillion

Aim to become a competitive“world-class company”
Become “Japan’s No. 1
company in the industry”

Kaga
Electronics Group+
FujitsuElectronics

1

Increased
sales

Increased
profitratio

Expansion of
the trading company
business

Quantitative
expansion

will lead to
growth of
the EMS business

500 billion¥

Qualitative
improvementof trading company
business

Further expansionof the EMS
business
Enhancement andexpansion ofoverseas businessthrough the EMS
business(Net sales)

Medium-Term Management Plan 2021
(1) Enhancement of the revenue base(2) Stabilization of the management base (3) Creation of new businessToward the next 50 years of growthTurning the changing times into
growth opportunities

Medium- to
Long-Term Vision

Become a ¥1 trillion company witha strong presence in the global market

Create universal value as a company
that benefits society“People are a finite asset; companies are perpetual

Our business environment indeed signals a turning point,

Based on an awareness of this environment, the Kaga

In addition to this growth strategy, over the long term

entities.” Based on the philosophy we have upheld sincea shift in the era that offers a chance for growth.

Electronics Group formulated its Medium- to Long-Term

we will seek to develop new products and services that

our earliest days that there is no end goal to corporate

Advances in the Internet of Things (IoT) and artificial

Vision covering the next 50 years of becoming a corporate

contribute to the resolution of social issues in the realms

activities, I have continued to take on a variety ofintelligence (AI) have accelerated a digital transformationgroup capable of generating ¥1 trillion in sales, the scaleof safety and security and environmental preservation on

challenges. Fortunately, we have received great support

in which every industry utilizes electronics-related

required to compete and rank with rivals overseas at the

top of meeting customer needs. While I do not expect tofrom customers and other concerned parties, and thanks

products and services. In addition, against the backdrop ofseveral trillion yen level in the intensely competitive global

see results from this endeavor overnight, I am sure thatto this, we successfully reached the milestone of 50 years

trade friction between the United States and China andmarket. We have also formulated a new Medium-Termour efforts will start to bear fruit if we just persevere in a

in business in 2018. I would like to extend my warmest

other such factors, we are heading toward a new stage ofManagement Plan with the aim of becoming Japan’s No. 1

way that typifies who we are. I would like Kaga Electronics

appreciation to our stakeholders for your unending

globalization in the supply chain of manufacturers both incompany in the industry with sales of ¥500 billion

to be a leader in how to effectively raise universal

cooperation. With these feelings of gratitude foremost

Japan and abroad.

in the next three years. The plan sets out three key

corporate value by showing that the key to sustainable

challenges: Enhancement of the revenue base, stabilization

growth is being a company that benefits society.

in mind, I have newly resolved to boldly tackle further

On the other hand, competition with global corporatechallenges aimed at the next 50 years of growth. Ingroups boasting sales of ¥2–3 trillion is inevitable in theof the management base and creation of new business.

2017, we established an internal fund of ¥5 billion for

future world market. To outstrip our rivals over the next

The addition of Fujitsu Electronics to the Group in

investment in a venture company, reaffirming our DNA as

50 years and lead the Group along a new path to growth, it

January 2019 forms part of this growth strategy. Goingan organization that perceives changes in the times as

is imperative that we have a vision and strategy that is

forward, we will strive to quantitatively expand ouropportunities for growth.

global in nature.

revenue base through mergers and acquisitions in theI humbly ask all of our stakeholders for your continued
support of the Kaga Electronics Group and our initiatives.

trading company business domain, develop our customer
base for EMS business and utilize our global production
base to significantly enhance Group management.

8 KAGA ELECTRONICS CO.,LTD.

Integrated Report 20199

Message from the COO

Aiming to become an industry leader in Japan

Forecast for the fiscal year ending March 31, 2020

A cautious outlook given theuncertain business environment

We will tackle three priority issues
to maximize synergies.
Review of the fiscal year ended March 31, 2019

Creating foundations for the nextstage of growth
The fiscal year ended March 31, 2019 was the final year of
our previous Medium-Term Management Plan. Overall, thethree years of the plan were very productive as we wereable to build foundations for a new stage of growth, which
included creating infrastructure to drive growth in EMS
business and securing a new trading company businessnetwork and resources through M&A. In terms ofquantitative results, we achieved our targets for net sales
and return on equity (ROE). This was mainly because net
sales benefited from the consolidation of FujitsuElectronics in the fourth quarter of the final year of
the plan, 2019, while in ROE we enhanced our financial
leverage by borrowing acquisition funds. Conversely,
ordinary income stood at ¥7,859 million, which was
unfortunately below our medium-term target. Primarily
this result reflected delays in the contribution to earnings

Targets and results (2019/3)
Previous Medium-Term
Management Plan targets

FY2019/3 (results)

Net sales¥290.0 billion¥292.8 billion

Ordinary
income¥10.0 billion¥7.8 billion

ROE

8.0% or higher

10.9%

from a new factory overseas and a limited contribution to
income from the acquired company.
As a key initiative in the fiscal year ended March 31,
2019, we enhanced our production system overseas inresponse to requests from customers. In addition, we
focused on expanding EMS business by means such as
relocating sites and strengthening functions in Japan. In
January 2019, we solidified our foothold to drive further
growth by making Fujitsu Electronics a Group company.
As a result of these activities, net sales for the fiscal
year ended March 31, 2019 totaled ¥292,779 million, up
24.1% from the previous fiscal year. This was primarily the
result of a solid showing overall in EMS business and theconsolidation of Fujitsu Electronics in the fourth quarter.
In terms of profit, operating income was ¥7,570 million,
down 6.8% year on year, due to large upfront expenses forthe startup period of new factories in Vietnam, Mexico andTurkey. Nonetheless, profit attributable to owners of theparent grew 23.5% year on year to ¥8,014 million, owing
mainly to the recording of a gain on negative goodwill as
extraordinary income in line with the consolidation. In lightof these results, we paid an extraordinary dividend to ourshareholders.

Ryoichi Kado
President & COO

10 KAGA ELECTRONICS CO.,LTD.

Net sales are forecast to increase by a significant 46.9%
year on year to ¥430 billion in the fiscal year ending March
31, 2020, since Fujitsu Electronics will contribute toconsolidated results for the entire year. On the other hand,operating income is projected to decrease by 7.5% to¥7.0 billion, due to such factors as an increase in expenses
associated with the startup of new EMS factories inJapan and overseas, namely Fukushima and India, andinvestment in IT in line with the addition to the Group of
Fujitsu Electronics.
Profit attributable to owners of the parent is forecast tobe ¥5.0 billion, down 37.6%, due to the absence of a gain
on negative goodwill as was recorded in the previous
fiscal year. The Group overall is conservative in its
projections due to uncertain domestic and overseas
conditions and the risk of cancellation of large-lotcommercial rights held by Fujitsu Electronics. Accordingly,
we have set targets that we believe we can achieve
without any shortfall in the first fiscal year of our new
Medium-Term Management Plan. Going forward, we willseek to improve performance gradually each year andrealize the management targets stated under the plan.

Impact of making Fujitsu Electronics
a Group company
Looking at a breakdown of the net sales forecast for the
fiscal year ending March 31, 2020, Kaga Electronics on aparent alone basis is projected to post ¥235.0 billion, which
is roughly unchanged from the previous fiscal year, andFujitsu Electronics is projected to post ¥195.0 billion,
marking a year-on-year decline of ¥38.3 billion. This decline
includes approximately ¥20.0 billion related to the risk ofcancellation of large-lot commercial rights, which will bereflected in the second half of the fiscal year ending March
31, 2020 (sales will continue in the first half). Discussions
are still ongoing and details cannot be disclosed yet, but wewill report on this policy as soon as it has been decided.
With regard to gross profit, Kaga Electronics is projected
to secure a gross profit margin and profit on par with theprevious fiscal year, while Fujitsu Electronics is projected toregister an increase of about one percentage point in the
gross profit margin compared to a year ago. We plan tominimize any decline in gross profit due to a loss of sales.
Although profitability (in terms of the gross profit
margin) differs widely at both companies, we will work to
make steady improvements each year to contribute to the
profit growth of the Kaga Electronics Group on the whole.
A one percentage point improvement in the gross profit
margin would result in an increase in profit of ¥2.0 billion,
and a two percentage point increase would result in a
twofold rise in profit, to ¥4.0 billion.

Net sales outlook (2020/3)(Millions of yen)

468,995
FujitsuElectronics

195,000

430,000

FujitsuElectronics

Consolidated

233,306
235,000

KAGA
ELECTRONICS

235,689

KAGA
ELECTRONICS

2020/3

2019/3Gross profit and gross profit margin outlook (2020/3)(Millions of yen)

46,725
FujitsuElectronics

14,59014,00046,50032,50032,135KAGA
ELECTRONICS

13.6%

13.8%
7.2%

6.3%
KAGA
ELECTRONICS

2019/3

FujitsuElectronics

10.8%
Consolidated

2020/3

Industry positioning

Reorganization aimed at becoming
an industry leader in JapanThe addition of Fujitsu Electronics to the Kaga Electronics
Group provides an instant boost to sales, placing us third
in the industry for electronics trading companies basedon results for the fiscal year ended March 31, 2019. We
expect to jump to second in the industry according to our
projections for the fiscal year ending March 31, 2020,
getting us within range of challenging for the No. 1 spot.
Now that we have a strong foothold, we will strive torealize our goal of becoming an industry leader in Japan.
There are currently more than 30 electronics trading
companies listed on stock exchanges in Japan, with
net sales ranging from ¥6.0 billion to ¥500.0 billion. If
non-listed companies are included, this figure jumps
to more than 300, and it is said that the number ofindustry players exceeds the scale of the market. Global
reorganization is taking place in nearly every industry andbusiness category, and electronics trading companies will
not be able to avoid it.

Integrated Report 201911

Message from the COO

Top 5 electronics trading companies in terms of sales (Kaga Electronics research)
2018/3 (results)

2019/3 (results)

Medium-Term Management Plan basic policies(billions of yen)

2020/3 (forecast) (billions of yen)

Macnica Fuji Electronics Holdings, Inc. 524.2

Macnica Fuji Electronics Holdings, Inc. 540.0(billions of yen)

1

Macnica Fuji Electronics Holdings, Inc. 504.1

2

Marubun Corporation

347.5

Marubun Corporation

326.7

KAGA ELECTRONICS CO., LTD.

430.0

3

UKC Holdings Corporation

301.4

KAGA ELECTRONICS CO., LTD.

292.8

Restar Holdings Corporation

410.0

4

Ryosan Company, Limited

254.1

Ryosan Company, Limited

249.7

Marubun Corporation

291.5

5

Ryoden Corporation

236.5

SIIX Corporation

242.8

SIIX Corporation

244.0

KAGA ELECTRONICS CO., LTD. (No. 6) 235.9

Priority issues

Concrete initiatives

1. Enhance
the revenue baseUtilizing the Group’s DNA to see things ahead oftime, we will focus on markets forecast to havehigh growth potential and profitability, and aim tostrengthen the revenue base.

• Strengthen initiatives for growth fields:
Automotive, communications, environmental, industrial
devices, medical and healthcare• Enhance and expand EMS business and overseas business

2. Stabilize themanagement baseAiming to stabilize the management base toachieve early improvement in efficiency andfinancial soundness after making FujitsuElectronics a subsidiary.

• Continue Groupwide cost reduction measures• Promote improvement of Group management efficiency by
establishing an organizational structure• Enhance corporate governance and cultivate humanresources to lead the next generation

3. Create new
business

Seeking to create new business through the active
use of our own resources and M&A to enhance ourability to respond to changes in the external
environment.

• Launch businesses related to social issues (childcare,welfare, nursing care, etc.) and materials business• Promote open innovation through venture investment• Actively implement M&A

Note: Listed companies only

Against this backdrop, Kaga Electronics aims to be thecorporate group to spearhead reorganization in theindustry. The acquisition of Fujitsu Electronics is one of
the moves characterizing our approach.

Medium-Term Management Plan 2021 andgrowth strategy

Aiming to become an industry leader
in Japan and outstrip the global
competition
In November 2018, Kaga Electronics formulated its
three-year Medium-Term Management Plan 2021. The
plan includes ambitious targets of 71% growth for both net
sales and operating income after three years in the fiscal
year ending March 31, 2022, compared with the fiscal year
ended March 2019.
Medium-Term Management Plan 2021
management targets (billions of yen)
Net sales

Operating income

10.9%

ROE

8.0% or higher

6.4%

500.0
430.0
292.8

7.6
2019/3
results

Growth rate

Projected sales composition (billions of yen)
Electronic components

71%

EMS

CSI

Other

Growth rate

500.0

71%

7.0
2020/3
forecast

430.0

13.0
2022/3

New Medium-Term
Management Plan target

The three basic policies of the new Medium-Term
Management Plan are to enhance the revenue base,stabilize the management base and create new business.
Through these policies, the Kaga Electronics Group will
strive as one to become an industry leader in Japan and

12 KAGA ELECTRONICS CO.,LTD.

outstrip the global competition, which is our Medium- to
Long-Term Vision.
In terms of concrete initiatives, we will pursue growthin both trading company business for electronic
components, which we have expanded by bringing FujitsuElectronics into the fold, and EMS business, where wewill focus on such growing fields as automotive andcommunications. Through these efforts, we aim to boost
the level of business within the Kaga Electronics Group.
In EMS business, we have vigorously looked to expand
production system overseas in response to increasing
customer requirements in recent years. We added
production bases in Mexico and Vietnam in 2017 and in
Turkey and India in 2018 to our production network,
which was previously concentrated in China and theASEAN region. We now have EMS production factories in
16 locations through 10 countries, including Japan.
In addition, Towada Pioneer Corporation will be added
to the Group in October 2019. Since it is a manufacturingsubsidiary of Pioneer Corporation, a dedicated electronics
maker, we will be able to incorporate the production
know-how it has amassed over many years, outstanding
production site human resources and production
equipment into the Group with the aim of strengthening

13.0 (3%)
40.0 (9%)
95.0 (22%)

292.8
13.9 (5%)
44.3 (15%)
89.4 (30%)

282.0 (66%)

10.0 (2%)
50.0 (10%)
140.0 (28%)

300.0 (60%)

145.0 (50%)

2019/3
results

2020/3full-year
financial forecast

2022/3

final fiscal year
management targets

our growing automotive business. Another goal is tobolster capacity to meet rising production demand inJapan. We are also constructing a new factory planned for
operation in autumn 2019 in Fukushima Prefecture tocater to this growing demand.
Overseas, there is a remarkable trend amongcustomers to shift production of products earmarked for
the United States out of China and elsewhere to avoid theimpact of trade issues between the two countries. In linewith this, we have started building a second factory inThailand and we aim to start operations there before theend of 2019. We plan to actively take advantage of thedemand brought about by this trend at each of ourfactories in Vietnam, Malaysia and Mexico. In seeking togrow EMS business, we are executing a variety of suchinitiatives concurrently.

Shareholder return

Maintain a payout ratio between 25%
and 35%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 theCompany’s shares over the long term. Based on the beliefof our founder that we have held since our earliest
days—that profit generated by everyone’s hard work will
be shared with everyone—we make it a principle toconduct transparent management in which we return
profits to shareholders through extraordinary dividends
when we expect to generate a level of profit that exceeds
our initial target. In quantitative terms, our basic policy is

to provide stable payment of dividends while maintaining a
consolidated payout ratio of 25% to 35%.
In the fiscal year ended March 31, 2019, the payout ratio
was 27.4% based on a dividend of ¥80 per share as aresult of twice revising the dividend forecast upward
during the period. In the fiscal year ending March 31, 2020,
we are forecasting a year-on-year decline in profit andtherefore the dividend will drop to ¥60 per share and thepayout ratio will be 32.9%. Although we succeeded inincreasing dividends for six consecutive years from thefiscal year ended March 31, 2014, unfortunately we expect
a break in this pattern. Going forward, with regard to the
distribution of profit, we aim to maintain a stable andcontinuous payment of dividends to shareholders while
investing to drive further growth toward the next leap
ahead, as well as ensuring a sound financial position froma long-term perspective.
Dividends (yen)Ordinary dividend
Extraordinary dividend

Commemorative dividend
Payout ratio

32.9% 35%
29.6%

28.6%
25.5%

25.6%

27.4%
24.1%

80
70

35

15

40
5

10

30

30

10

60

55

60

20
60

40

5
5

25%

70

40

2014/3 2015/3 2016/3 2017/3 2018/3 2019/3 2020/3
forecast

Integrated Report 201913

Message from the CFO

Toward realization of
our Medium- to Long-Term Vision

We will support expansionof the Group’s scale while
carrying out sound profitoriented management.
Eĳi Kawamura
Managing Director,
Chief of Administration Headquarters

Aiming to achieve both investment for growth andfinancial discipline
In the fiscal year ended March 31, 2019, the Kaga Electronics
Group took its first step toward growing into a corporategroup boasting sales of more than ¥1 trillion by consolidating
Fujitsu Electronics. A bridge loan in the amount of¥23.0 billion was taken out to finance the acquisition, andas a result, interest-bearing debt exceeded ¥30.0 billion.
Despite this, the debt equity ratio (DER) was 0.43 times,
which we view as a healthy level. The net DER was
negative as we maintained a debt-free state in real terms.
The Kaga Electronics Group has worked to ensure solid
debt-free management since our earliest days. Our sales
representatives are responsible for all processes ranging
Cash and deposits and interest-bearing debt
DER = Interest bearing debt / Shareholders’ equity (times)
Net DER = Interest-bearing debt − cash and deposits) /Shareholders’ equity (times)
Cash and deposits (millions of yen)Interest-bearing debt (millions of yen)

0.43
0.15

0.13
-0.03

-0.25

26,4239,805
2017/314 KAGA ELECTRONICS CO.,LTD.

-0.31

30,80335,00332,8518,900
2018/3

2019/3from securing customers to order receipt and placement,delivery of goods and payment collection. The transactions
we enter take into careful consideration the balance
between collection and payment as well as the payment
terms at all times. We have built up cash and deposits
for investment to drive future growth through these
efforts and gradual accumulation of profit over many
years. President Kado’s long-established policy ofprofit-oriented management has also permeated ourGroup companies. Going forward, we will accelerate
investment for growth as we look to achieve the goals of
our Medium-Term Management Plan while maintaining
financial discipline based on cash.

KAGAism, or the essence of who we are. Based on thisconviction, we have positioned the reduction in days
held in inventory as a critical challenge in our salesorganizations and Group companies. At the same time, wehave formulated a principle for how Kaga Electronics
receives and places orders; in particular, sales activities inour components business apply the rule that we must notplace an order to a manufacturer unless we have firstreceived an order from a customer. This forms part of ourstrict management approach to inventory.
Nonetheless, EMS business is in the same category
as the manufacturing industry, and compared withcomponents business, the inventory turnover period tends
to be long. For this reason, the Kaga Electronics Group has
set a target for the inventory turnover period of 15 days forcomponents business and 45 days for EMS business forthe sake of streamlining. If we can achieve a Groupwide
average inventory turnover period of 30 days or less, we
can generate cash of at least ¥10.0 billion, which we canuse as capital for investment to drive growth.
We expect cash flows from investing activities to be
negative for a while as we continue investment to bolster
EMS-related production sites and in venture companies.
To build up free cash flow, we will strengthen systematic
initiatives aimed at generating operating cash flows basedon thorough inventory management.
Cash flows (millions of yen)
Cash flows from financing activities
Cash flows from operating activities
Cash flows from investing activities

Unique inventory strategy that generates cash flows
The Kaga Electronics Group has stably generated
operating cash flows of around ¥10.0 billion in recent
years. Underpinning this achievement lies our efforts toaccumulate profit, as stated earlier, coupled with thoroughmanagement of working capital. This fiscal year, however,
we registered ¥1.5 billion as net cash used in operating
activities. This was mainly due to an increase of ¥1.0 billion
in trade notes and accounts receivable and a decrease of¥5.8 billion in notes and accounts payable—trade in linewith the addition of Fujitsu Electronics as a Group
company. In EMS business, inventories rose as we
increased production and stock in response to customers’
inventory adjustments and growing sales, and thisaffected performance. In the fiscal year ending March 31,
2020, we expect a change for the better in these negative
factors on the back of efforts to shorten the inventory
turnover period in particular.
We have believed since our foundation that “inventory
is a liability,” a concept that forms part of what we call

10,746-258-6,118

11,684

10,077-4,173-1,547Return on equity (ROE)-6,860-2,811
2017/3

2018/3sales. On the other hand, when dealing with direct
financing, it is essential to consider bonds and the needfor advanced preparation, stock and the possibility ofdilution of earnings per share, and the market common toboth. We will undertake fund procurement to continue
driving sound growth. This will require a flexible approachthat takes the external environment closely into accountand a policy that is based on ensuring an appropriate
equity ratio.
Return on equity (ROE) for the fiscal year was 10.9%,
while we are forecasting 6.4% for the fiscal year ending
March 31, 2020. The temporary decline in the Group’s
profit ratio can be attributed to the full-year contribution
to consolidated results of Fujitsu Electronics. This would
be the minimum level when compared with the Company’s
capital cost, and one that we would never be satisfied
with. It is imperative that we enhance the management
efficiency and improve the profit ratio of Fujitsu Electronics
following the acquisition. Currently CEO Tsukamoto isvisiting the company every week to spread the concept of
KAGAism in a top-down manner and striving to reform thethinking of individual employees.
Under the new Medium-Term Management Plan, whichruns until the fiscal year ending March 31, 2022, we areaiming for net sales of ¥500.0 billion, operating income of¥13.0 billion and ROE of 8% or higher. Our target for ROE
constitutes the minimum amount we want to achieve, andI actually have my sights set beyond that figure. Assumingthat we do not undertake any more major M&A, our financial
leverage would be around 2.5 times based on an equity
ratio of 40% and total asset turnover would be around twotimes, which would enable us to achieve double-digit ROE,
depending on the net profit margin for the fiscal year. I
intend to implement measures at the workplace level thatwill help us achieve this goal.

2019/3

ROE
Financial leverage

10.9%

Toward steady improvement in equity ratio and ROE
The equity ratio for the fiscal year under review decreased
to 35.8% temporarily due to bank borrowings associatedwith the acquisition of Fujitsu Electronics, but it isexpected to rebound over the next few years on the backof measures based on the Medium-Term Management
Plan. We will aim for around 40% to begin with.
It is not realistic to cover all of the investment we maketo drive growth with indirect financing in our medium- tolong-term quest for ¥500.0 billion and ¥1 trillion in net

Net profit margin
Total asset turnover

9.5%

10.9%

2.7

3.1

2.8

1.9

1.8

2.8

1.8

1.8

1.4

2017/3

2018/3

2019/3Integrated Report 201915

Value Creation Process

Kaga Electronics will leverage its strengths basedon a solid capital foundation to create value
for customers worldwide.
Bolster intangible and tangible
capital through M&A
The intangible and tangible capital we have amassed
over more than 50 years forms an integral partof our management base. In January 2019, we
further bolstered our capital strength by making
Fujitsu Electronics a Group company. We aim torealize sustainable growth by leveraging this capitalstrength as a source of competitiveness in the
global market.

Social and related capital

Manufacturing capital

Financial capital

Human capitalIntellectual capital

Customers

Our own manufacturing sites

ROE

Group employees

Technical staff

7,500

companies+3,500 companies

17

worldwide+1site

10.9%
YoY

+1.4%

INPUT

Strength

Focus needs in the field

1 One-stop service capability

Electronic parts and semiconductor business

Procurement

We provide contract production services inline with customer requirements, led by theGroup’s 16 production factories worldwide.

Production,
quality control

Information equipment business

2 Global network capability

Sales, logistics

We also engage in a range of businesses,
including the planning, production and salesof amusement equipment, production ofcomputer graphics and PC recycling.

Strength

Advancements intechnological innovation
for autonomous driving
and growing needs
for eco cars

3 Comprehensive capability
in the electronics field

Environmental
field

Communications
field

Heightened global
demand for a minimal
environmental
burdenGrowth of Internet of Things(IoT)-related markets
that include low power,
wide-area wirelesstechnology

Factory
automation(FA) field

Medicaland healthcare
field

Advances in innovativetechnology for
production
processes

Support service

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

16 KAGA ELECTRONICS CO.,LTD.

+829

+186

Value provided

Automotive field

EMS businessIn this business, we provide a wide range ofelectronics-related parts and materials that include
semiconductors, general electronic components,
LEDs, sensors and liquid crystal displays.

Strength

1,478
OUTCOME

Business and Strengths

Research, planning,
design, development

6,627

We contribute to the creationof an enriched future bymeeting customers’ diverse
needs with comprehensive
capabilities in electronics.

Response to social
needs such as
health andhealthcare

Integrated Report 201917

Synergistic effects between Kaga Electronics and Fujitsu Electronics

SpecialFeature1

On the Front Lineof Business

Expanding trading company businessto drive further growth in EMS businessChange is coming faster than ever in the business environment for electronics trading companies, characterized bystructural reorganization and consolidation as well as the shift of end-product manufacturers’ production processes
overseas to combat intensifying competition among semiconductor manufacturers, and a shortening of the productlifecycle. Against this backdrop, Kaga Electronics brought Japan’s fourth largest industry player regarding net sales,
Fujitsu Electronics, into the Group and will leverage the ensuing expansion in trading company business to drive further
growth in EMS business.

Strengthen competitiveness in trading company
business with Fujitsu Electronics
The Kaga Electronics Group stated its goal of becoming an
industry leader in Japan with net sales of ¥500 billion
under its new Medium-Term Management Plan. As the firststep to achieve this goal, the Company acquired 70% of theshares of Fujitsu Electronics Inc. (FEI), a semiconductor
trading company in the Fujitsu Group, in January 2019.
One of the main objectives of the acquisition is tostrengthen our business base as an electronics trading
company and expand the market share of our electronicparts and semiconductor businesses.
As a member of the Fujitsu Group, FEI boasts anextensive range of unique products that take advantage oftechnological expertise in such areas as microcomputers
and application-specific integrated circuits (ASICs), andthe company has a proven track record of transactions
with many global firms. In particular, FEI has actively built
up close relationships of trust with the design anddevelopment departments of customers in the automotive
and communications fields, which we view as growthdomains. It is currently developing and selling basecomponents in these fields thought to be required inseveral years according to development roadmaps.
The strength of FEI lies in its ability to source a diverse
array of electronic components and semiconductors from18 KAGA ELECTRONICS CO.,LTD.

Japan and overseas, and it enjoys a solid complementary
relationship with the trading company business of ourGroup, in which we sell to customers’ purchasing
departments. As an example, on a product front FEI focuseson custom large-scale integration (LSI) and microcomputersthat leverage its technological prowess, whereas we focus
on general-purpose items. Both sectors can be applied tothe same vehicle: FEI’s products in the heart of the car suchas the engine control unit (ECU) and our products in control
boards for the peripheral parts of the car such as headlights
and power windows. In terms of the customer base, FEI
mainly deals with industry-leading global companies suchas tier-one companies in the automobile industry, while

Key products of Fujitsu Electronics

Kaga Electronics

Fujitsu Electronics

Major suppliersElectrical, electronic and semiconductor
manufacturers in Japan and overseas

Mainly Fujitsu Group companies

Key products

General-purpose products such as
semiconductors, LEDs and storage devices
for Japan and overseas

Semiconductors utilizing design anddevelopment capabilities such as
microcomputers and ASICs

Key customers/
trading divisions

Japanese manufacturingindustry-leading companies /Materials purchasing departments

Industry-leading global companies
in Japan and overseas /Design and development departments

Main markets/
applications

Consumer electronics, industrial devices,
amusement equipment

Automotive, communications

Earnings model(high-value-added
strategy)

Customer-based

Coordinator-type

Provide products with added EMS services
such as processing, assembly and kitting to meet high-mix,
low-volume needs

Increase in
the customer baseDevelop base components basedon customers’ development strategies
and supply over a long period

More opportunities tosell in growing markets

more than 80% of our customers are Japanese and we
broadly serve the manufacturing industry from large- tosmall and medium-sized companies. With regard to thepoint of contact at a customer company, FEI has been in andout of its customers’ design and development departments
and business talks have sprung from the technicalmeetings. The Kaga Electronics Group, on the other hand,starts by approaching customers’ materials purchasing
departments. Turning to the earnings model, FEI employs a“customer-based model” in which it assigns sales andtechnical staff to locations around the world, develops
unique products to meet customer needs and sells them inlarge quantities. The Kaga Electronics Group, on the other
hand, features a “coordinator-type model” in which we
accept orders for circuit boards and units and add EMS
services such as assembly and processing for high-mix,
low-volume production that meets diverse customer needs.
In this way, we can integrate the differences of thetwo companies to virtually eliminate the problem of
duplication in products handled, the customer base andsales channels in Japan and overseas, which means that
we can realize a business model capable of extremely
effective cross-selling.
We aim to make use of these advantages to help us
respond to varied customer needs and reduce costs,
thereby enhancing business competitiveness andGreater responsivenessto diverse needs

profitability. The sales departments of Kaga Electronics
and FEI are meeting weekly in an effort to make this areality. We are determined to create synergies that willserve us in these regards going forward.

Aiming for high growth in the convenience store typeof EMS by leveraging FEI’s excellent customer baseIn addition to expanding trading company business, theKaga Electronics Group has started making preparations
to expand the scale of EMS business through thecollaboration with FEI.
In recent years, many global companies have shiftedfrom a vertically integrated business model ranging fromdevelopment to production within its group to a horizontally
integrated business model in which component
procurement and production are outsourced while
enhancing product value through core technology. At thesame time, EMS operators continue to grow in size, taking
advantage of these demands for outsourcing.
Under such circumstances, Kaga Electronics started
services such as the assembly and production processes
on a contract basis as well as kitting in which we propose
alternative parts and materials as part of measures toincrease added value to trading company business that wehave been implementing for the past 40 years. EMS
business is currently being provided via a network ofIntegrated Report 201919

Special
Feature1

On the Front Line of Business

Expanding trading company business to drive further growth in EMS business

16 factories in 10 countries that has grown in response to
the overseas production needs of an increasing numberof Japanese companies on the back of global procurement
capabilities. We recently embarked on the construction of
a second factory in Thailand and further bolsteredproduction capacity in the ASEAN region.
As background to this business development, the Kaga
Electronics Group’s EMS business promotes a convenience
store type strategy in which the factory nearest thecustomer is used. This model leverages a systemenabling the contracted high-mix, low-volume productionof 3,000 different circuit board models a month,sometimes in batches of 100 units, all around the world aswell as our ability to provide high added value in the formof software and system support in addition to the circuitboard. The growth strategy we are executing demarcates
us from large EMS companies in China and other parts ofAsia and rival Japanese companies.
We aim to drive significant growth in high-value-added
EMS business by sharing in FEI’s excellent customer baseand global business foundations, which complement our
EMS site network. To give an example, we will seek togenerate a positive cycle of systematic capital investment
and continuing orders from a longer-term perspective todrive sustainable growth. This will include utilizing thebusiness know-how of FEI, which has insight into
customers’ development roadmaps, and concluding
multi-year agreements with a view that spans the
prototype stage to the mass production stage several
years down the track.
Kaga Electronics will have the opportunity to enhance

its profitability, which has been an issue, with the new
EMS services and proposals taken from the perspective of
FEI’s growth strategy as well. Our EMS managers are
already accompanying FEI staff to design anddevelopment departments that are FEI’s customers, andmultiple projects and business talks are gathering pace.

EMS business growth scenario

140.0 billion

1.5 times

Smart factory project to create a global mother factory
Kaga Electronics acquired Towada Pioneer Corporation, amanufacturing subsidiary of Pioneer Corporation, and will
make it a Group company in October 2019 to further
advance EMS business.
Through this acquisition, we will incorporate the
manufacturing know-how, exceptional production-based
human resources and production equipment that Towada
Pioneer has developed over many years as a specialized
electronics maker. This will help us to secure the capacity
needed to meet growing production demand in Japan. We
will also share in Towada Pioneer’s tangible and intangible
resources, including its extensive track record, production
facility designs, tool manufacturing and quality assurance

Towada Pioneer Corporation(The company name will be changed to KAGAEMS TOWADA CO., LTD. from October 1, 2019.)

HATTEN brand local
soldering bath

Key points for growth¥¥89.4 billion
19%
9%
12%
14%

FEI/M&A

11%

Consumer electronics,
communications, etc.

10%Medical10%

Officeequipment

10%

Industrial
devices

14%

Air
conditioning

20%

Automotive

25%

23%
23%
2019/3
results

Organic growth

FujitsuElectronics’
shift to EMS

Further M&A● Expand business in the growing fields of automotive, industrial

devices, air conditioning and medical through full-fledged
contributions from each new site in Vietnam, Mexico, Turkey andIndia, in addition to existing production capacity in China, theASEAN region and Europe● Take a “key device + EMS” approach for leading customers of

Fujitsu Electronics● Take on new M&A opportunities in Japan and overseas with the aim

2022/3targets

systems, thus providing us with an overwhelming
competitive advantage over our EMS competitors.
To further differentiate our business from that of ourrivals, we will team up with SUZHOU HATTEN INTELLIGENTEQUIPMENT CO., LTD., a facility design company establishedin Suzhou, China in October 2018. This company develops
production facilities with specifications and functions
that are optimal for the Group’s EMS model of high-mix,
low-volume production. The start of external sales of theseproducts under the HATTEN brand will lead to further
reduction in costs for Kaga Electronics and limit the needof further expanding EMS businessto make capital investment.
In the near future, we will look to optimize Towada
Pioneer for our high-mix, low-volume EMS model andposition it as our mother factory complete with internallymade production facilities and the automated processesof Towada Pioneer. We will then deploy this know-how to
our other factories around the world to further heighten
the competitiveness of our EMS business. By combining
this with our trading company business, we aim to be acompany that can outstrip the global competition, which is
our Medium- to Long-Term Vision.

Establishment of integrated system including after-sales service

KAGA MICRO SOLUTION initiatives

Global EMS network
Sales bases

Production bases

20 KAGA ELECTRONICS CO.,LTD.

The Kaga Electronics Group undertakes EMS business in avariety of departments aside from the EMS Business Division,
including the Electronics Business Division, Communication
Network Sales Division and Specific Industry Business Division
to flexibly meet customer needs. In addition, Group company
KAGA MICRO SOLUTION CO., LTD. provides one-stop service thatcovers planning and production to after-sales service, reuse andrecycling of electronics equipment, communications equipment
and amusement equipment. As such, we are contributing to thecreation of a recycling-oriented society based on production
and recycling. In October 2019 we will complete a new factory inFukushima Prefecture, and in combination with existing
facilities in Yamagata and Niigata, this will serve to bolster
production capacity in Japan.

Integrated Report 201921

Special
Feature2

Dialogue on the Power to Create Group Synergies

Key points on post-merger integration with
Fujitsu Electronics
Kaga Electronics Co., Ltd. added Fujitsu Electronics Inc. (FEI) to the Group in January 2019.
Here, Kaga Electronics’ Founder & CEO Isao Tsukamoto discusses the post-merger integration,
one of the keys to M&A success, with Fujitsu Electronics President Junji Ogihara.

Isao Tsukamoto

Junji Ogihara

Founder & CEO
KAGA ELECTRONICS CO., LTD.
Chairman and
Representative Director
Fujitsu Electronics Inc.

President andRepresentative Director
Fujitsu Electronics Inc.

Theme 1: A focus on profit and gross profit
Ogihara: CEO Tsukamoto has frequently visited the
Headquarters of FEI in Shin-Yokohama ever since wejoined the Kaga Electronics Group in January 2019 offering
extremely valuable advice from a broad perspective.
Tsukamoto: Yes, I actually got to work at FEI on the very
first workday of 2019. That’s because I know the importanceof reforming the way of thinking from the top down. I’msure there were a few stunned employees that day.
Ogihara: Over the following six months or so, you’ve
reiterated the need to change business mindset.
Tsukamoto: It’s critical that all employees are committed
to focusing on profit and the source of this, gross profit.
Gross profit is gained through the added value we provide
to customers through sales activities. As such, it’s
essential for everybody to think thoroughly about how toraise added value.
Ogihara: That’s perhaps a weakness of FEI as a trading
company of manufacturer. I feel that this is the biggest
difference in culture with the independent-type Kaga
Electronics.
Tsukamoto: Gross profit, or in other words added value,

22 KAGA ELECTRONICS CO.,LTD.

can be increased with a bit of creativity, and that’s aconcept that needs to be reaffirmed. I’m sure that there
are countless businesses where we can boost earnings,
and in fact Kaga Electronics has done so for the past
50 years. FEI boasts sales of around ¥200 billion. If we
improve the gross profit margin by 1.0 percentage point,
operating income will increase by ¥2.0 billion. By having
each person focus on this indicator, even if only a little,
we can significantly increase FEI’s profit.
Ogihara: At the same time, we’re reducing costs throughenhanced management efficiency. In concrete terms,
we’re benefiting from the reorganization of business sites
and the mutual use of human resources and sales
channels. Our Nagoya Office was integrated into a Kaga
Electronics site in September 2019. We’re examining theviability of integrating sites overseas as well.

Theme 2: Building business connections andcreating high added value
Tsukamoto: Building business connections and creatinghigh added value are also paramount. An example of thisis cross-selling, in which we provide products from our

suppliers and the venture companies we have invested inthat boast next-generation technology to customers of FEI.
Ogihara: Our Business Development Division, establishedwithin the Global Business Promotion Unit in June 2019,is undertaking activities as the point of contact in chargeof this. FEI customers have also expressed interest in a
number of Kaga Electronics’ products and agency
agreements have already been signed. In addition, we’ve
displayed Kaga Electronics Group products at private
exhibitions we hold at specific customer sites and thesetypes of our PR activities as a Group have gained a
popular response.
Tsukamoto: How is progress in the EMS business?
I’ve said in the past that the key is for FEI to develop
high-value-added business that incorporates thedevelopment services it excels at rather than follow
Kaga Electronics.
Ogihara: We’re currently in talks with the EMS Business
Division of Kaga Electronics, taking into account this pointof view. Instead of mere contract manufacturing, we
intend to develop EMS business that’s unique to FEI,
leveraging the accumulated design, evaluation andanalytical technologies of the Fujitsu Group to help resolve
our customers’ manufacturing issues. We possess
embedded technology based on know-how gained fromthe system-on-a-chip (SoC) and microcomputer sectors
and short-range wireless technology required for theInternet of Things (IoT)-related devices as well as a groupof engineers working hard on these technologies. This is astrength of FEI and one that can’t be found in other EMS
companies. It’s also possible to incorporate technology
from Fujitsu Group companies in areas that we can’t cover.
Tsukamoto: I fully expect FEI to enhance its gross profit
margin going forward by adding Kaga Electronics’
products and EMS business to the mix.
Ogihara: Following on from Japan in January 2019, we
held kickoff events for EMS business in China in March,
Europe in April and North America and the ASEAN regionin May. We’ve started discussions to boost understandingof EMS business and determine how best to proceed withkey staff from FEI’s overseas sales sites.
Tsukamoto: That’s because we aim to actively expand
business to local customers overseas in addition to
Japanese customers. In terms of global business, we’revery enthusiastic about the potential benefits we can gainfrom FEI’s track record and experience as well as its
network of sales sites in Europe, the Americas and theAsia-Pacific region.
Ogihara: At FEI’s Corporate Headquarters, in April 2019,
we established the EMS/ODM Business Department with adedicated team to promote EMS business, and personnel
there are working to secure business in conjunction withthe sales team. By June 30, we’d started business talks
for more than 20 prospective projects worldwide. We’releveraging our SoC products to expand into business forthe circuit boards they’re embedded into and cultivate
business among overseas sites.

Theme 3: Maximizing synergies
Ogihara: I’m truly surprised at the extent of Kaga
Electronics’ business domains. If there’s a business
opportunity in a field you have minimal knowledge in, you
simply employ people that have the required expertiseand go full steam ahead. It gives the impression that yourcompany is full of active personnel with good managerial
sense. By mixing with an organization that has a character
different from ours, I hope we can produce an even higher
level of vitality in our own people.
Tsukamoto: I’m definitely on the same page with yourpolicy of taking a sincere approach to your customers andstriving to be a company that they can rely on. I also
admire the way you go about achieving this. I can see thesimilarities with our corporate philosophy, “Everything we
do is for our customers.”
Ogihara: FEI has a history of more than 50 years selling
semiconductors, and we enjoy exceptional connections
that we’ve built up in dealings with market leading
companies in the fields such as imaging, automotive andcommunications. The same applies to our overseas
business, which accounts for 40% of our sales.
Tsukamoto: One of the biggest reasons we wanted tobring FEI into the Group was the scale of your operations,with a customer base of 3,500 companies worldwide, a33-site global network, around 220 overseas support
staff and around 150 engineers. By tapping into thiscompetitive advantage, the Kaga Electronics Group now
commands one of the biggest business networks in theindustry in Japan.
Ogihara: Moving ahead, we aim to generate synergies inall types of businesses without staying bound to our
traditional fields by making the most of this strong network.
Tsukamoto: On top of that, it’s vital that we help each
employee grow and develop further. As a company, weview investment in people as a management priority, andwe intend to create an environment in which everyone canmaximize their potential. If employee thinking changes,
the Company will change too. And profit will increase.
I can see the possibilities in FEI. I’m planning to keep up
my frequent visits to FEI as well.

Integrated Report 201923

Special
Feature3

New Business Introduction
Cashless Settlement via
Advanced Devices

A series of businesses
that resolve social issues
The Kaga Electronics Group is promoting the creation of new businesses
based on a desire to resolve social issues in a range of fields, including
daycare, welfare and nursing care, to drive sustainable growth. Through ourbusinesses, we also aim to contribute to the achievement of the Sustainable
Development Goals (SDGs).

Healthcare Combinedwith the IoT“Watch-Over” System inan Aging Society

In daycare centers, nursery teachers check on the conditionof each child every few minutes during naptime as part ofsafety measures. The IoT sensors that Kaga Electronics
markets for children’s futons are placed directly under themattress, and they detect and display in real time the stateof a child’s breathing and heart rate during naps to assist
nursery teachers with their checking duties. If a change is
detected, notification is given via visual and audio alerts on
the smartphone or tablet app, so that the child can bechecked on immediately. This product helps to boost thesafety of children during sleep as well as alleviate thepsychological burden on the part of the teacher.

Work-Style Reform andCollaborative Investment

24 KAGA ELECTRONICS CO.,LTD.

Kaga Electronics teamed up with Netstars Co., Ltd. and the Japan Amusement
Industry Association to develop a multi-payment settlement system using asmartphone for arcade amusement machines, a first in Japan. In the past, it
was standard for coins to be used in amusement arcades, but the introductionof this system allows people to play games without cash using payment appsthat employ a QR code or barcode.
Shifting to a cashless system leads to a reduction in expenses laid out tocollect and manage money, which is a real benefit for amusement facilities
that face a shortage of labor. A cashless system also provides an environment
in which tourists visiting Japan can easily enjoy playing games.

The number of people requiring nursing care continues to rise in Japan.
Despite this, there is a shortage of care workers, exacerbating the burden
on personnel in nursing homes.
The care support solutions provided by Kaga Electronics involve a
24-hour “watch-over” system for residents that utilizes sensors in theceiling. The sensors detect when someone wakes or gets out of bed as wellas when an incident occurs, such as a tumble over or abnormal breathing,
and a notification is sent to the worker’s smartphone along with live
images. Being able to check the state of the resident through the images
allows an appropriate action and judgment on the spot, significantly
enhancing operational efficiency. Facilities that have introduced the systemhave achieved an increase in work efficiency of around 30%.
Securing labor has become a real social challenge inJapan. Despite this, there are many women who want towork yet are unable to because they cannot put theirchildren in daycare. This has prompted the need to createa more accommodating work environment for women
during their child-rearing years.
Kaga Electronics has invested inmama square Co., Ltd., which develops
and operates working spaces equippedwith childcare facilities throughout
Japan. We are reinforcing ties withmama square in fields such as facility
layout and infrastructure creation. The
working spaces run by mama square
include an adjacent kids’ area wherechildren can spend time safely,
providing a reassuring work
environment for mothers.

Wearable Device and Support of People with Disabilities
The Kaga Electronics Group company Fujitsu Electronics
manufactures and sells Ontenna, a user interface device
that lets users sense sound with their bodies. The Ontenna
device can be worn by users in their hair or on their shirt
collar, for example, and it can convert sound vibration
patterns from an audio source between approximately 60
and 90 dB to 256 levels of vibration and light strength.
This means that people with hearing impairment can feelthe rhythm, pattern and loudness of sounds. Application of
the device is expected in such areas as sports and cultural
events as well as schools for the hearing impaired. By
providing this product, we aim to realize a future that bothpeople with hearing impairments and those with ordinary
hearing can enjoy together.

Integrated Report 201925

Overview of FY2019/3 Results

Financial Highlights
Net sales (millions of yen)

Business Topics

Gross profit (millions of yen)

Profit attributable to ownersof the parent (millions of yen)

Gross profit margin

255,143 245,387

227,209 235,921

32,738 33,648 31,225 32,498

35,546

8,014
6,975

13.8%
12.8%

2015/3 2016/3 2017/3 2018/3 2019/3

6,490

5,437
4,416

13.7% 13.7%
12.1%

2015/3 2016/3 2017/3 2018/3 2019/3

Return on equity (ROE)

Initiatives to Strengthen the EMS Business

Net income per share (yen)292,779

Cash flows from operating activities

156.28192.43249.43 236.58

292.07

2015/3 2016/3 2017/3 2018/3 2019/3

Equity ratio(millions of yen)Free cash flow (millions of yen)

10,746 10,077
10,487
8,283
7,661
5,904

9,127 9,546
10.9%
7.8%

9.0%

9.5%

10.9%

54.8%

-1,54752.4%
46.6% 49.7%

35.8%

Our Group company KAGA MICRO SOLUTION CO., LTD. isengaged in a wide array of work from the development,
production and sale of electronic components to theirrepair, reuse and recycling. A new factory was completed
for this company in Sukagawa City, Fukushima Prefecture,with operations getting underway in October 2019. The
manufacturing functions of the Iida Factory (Nagano
Prefecture) that closed down in 2018 and some of thefunctions of the Yamagata Factory (Yamagata Prefecture)
will be transferred to the new factory to strengthen
domestic manufacturing functions.
In addition, Kaga Electronics will acquire shares of
Towada Pioneer Corporation, a manufacturing subsidiaryof Pioneer Corporation, on October 1, 2019, and make it aGroup company. In the growing automotive and medical
fields, where the Company’s business is expanding, we
will share Towada Pioneer’s tangible and intangible
resources, including its extensive production track record,
production facility designs, tool manufacturing and quality
assurance systems. This is expected to contribute greatly
to the growth of our EMS business.
These two sites described above will be positioned as
mother factories in the EMS business, and by deepening
their ties with other Group bases overseas such as in
China and Thailand, we aim to promote overall

optimization, strengthening management structure andenhancing business efficiency.
Overseas, we have begun constructing a second
factory in Thailand to bolster EMS production capacity in
the ASEAN region in response to demand for increased
production from existing customers and orders from newcustomers. This initiative was undertaken with a view toshifting production bases to countries near China to avoid
the impact of trade friction between the United States andChina, especially since there are concerns that this friction
may be prolonged. We are making preparations that will
enable us to deal with these needs at other sites as well.
In this way, we are taking a range of steps to strengthen
the EMS business both in Japan and overseas.

Conceptual drawing at completion of the Fukushima Factory-8,408
2015/3 2016/3 2017/3 2018/3 2019/3

2015/3 2016/3 2017/3 2018/3 2019/3

2015/3 2016/3 2017/3 2018/3 2019/3

Investment in Venture Companies to Commemorate
our 50th Anniversary
Net sales by segment and composition

Other

Electronic components¥19,959 million¥225,598 million

6.8%

77.1%

SoftwareInformationequipment

EuropeJapan¥9,903 million¥180,306 million

3.4%

61.6%

North America¥2,876 million

1.0%

Net sales by region and composition

Net sales

292,779

4.5%

millionAsia¥¥44,344 million

292,779¥

million¥89,492 million

15.1%

30.5%
2019/326 KAGA ELECTRONICS CO.,LTD.

Net sales¥13,078 million

2019/3Kaga Electronics established the “50-oku-en fund”(¥5.0 billion fund) in commemoration of its 50th anniversary
in 2018. Through investment in venture companies thatconceive and develop unique technologies, products andbusiness models, we are working to generate new
business to support the future growth of the Group.
As an example, we invested in Spacelink Co., Ltd. in
February 2019. This company engages in the developmentof next-generation electricity storage devices and highprecision positioning systems based on know-how in thedevelopment of space technology. Through theinvestment, we aim to accelerate the mass-production
and development of “Green Capacitor™,” an energy device
advanced by Spacelink that enables high-capacity, rapid
charging. If this product can be commercialized, its broad
application will range from consumer electronics such as

mobile phones and wearable devices to industrial
equipment such as robots and drones, and electricvehicles. Kaga Electronics plans to market these products
by making effective use of its sales network.

Green Capacitor™ by Spacelink

Integrated Report 201927

Overview of FY2019/3 Results

Outline of Business Segments
Software

Electronic components

1.0%

77.1%

2019/3

2019/3Business description
Development, manufacture and sale of semiconductors,
general electronic components and other products, EMS,
and other activities

Net sales

Segment income

Net sales(millions of yen)(millions of yen)(millions of yen)

225,598
172,248

2,568
5,312

Segment income(millions of yen)

Business description

2,876

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

4,761

Review of FY2019/3 performance
In the electronic components business, the EMS businessmaintained steady performance while Fujitsu Electronics wasadded to the Group as part of our components sales business.
As a result, net sales increased 31.0% year on year to ¥225,598 million
and segment income was down 10.4% to ¥4,761 million.

172
2018/3 2019/3

2018/3 2019/3

2018/3 2019/3

247

2018/3 2019/3

Information equipment

6.8%

2019/3

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

2019/3

Net sales

Segment income

Net sales

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

47,582

44,344

Business description

19,959
2,202

1,906

Repair and supports for electronics equipment, manufacture andsales of amusement equipment, and sales of sports goods, andother activities

13,522

Review of FY2019/3 performance

Review of FY2019/3 performance
In the information equipment business, delivery date adjustments
by customers led to a decline in the home electric appliances sales
business, while sales of PCs for corporations were also weak. As aresult, net sales decreased 6.8% year on year to ¥44,344 million
and segment income was down 13.4% to ¥1,906 million.

28 KAGA ELECTRONICS CO.,LTD.

In the software business, orders for production of computer
graphics animation and development of game software wererobust. As a result, net sales increased 12.0% year on year to¥2,876 million and segment income was up 43.5% to ¥247 million.

Other

15.1%

Business description

Review of FY2019/3 performance308
2018/3 2019/3

2018/3 2019/3

2018/3 2019/3

490

2018/3 2019/3

In the other segment, sales of arcade amusement machines werestrong while the recycling business for PCs and their peripherals
also performed well. As a result, net sales increased 47.6% year
on year to ¥19,959 million and segment income was up 59.0% to¥490 million.

Integrated Report 201929

Corporate GovernanceDirectors and Auditors
As of July 1, 2019

Directors
Founder & CEO

President & COO

Isao Tsukamoto

Ryoichi Kado

Mitsuhiro Nohara

Susumu Miyoshi

1967 Joined Sanko Electronics

1980 Joined Kaga Electronics Co., Ltd.
1991 General Manager of1982 Joined Kaga Electronics

1963 Joined Toyota Motor Co., Ltd.

Co., Ltd.

1968 Founded Kaga Electronics(private management)
1968 Established Kaga Electronics
Co., Ltd.
President
2007 Founder & CEO

1995
2002
2005
2012
2014

(currently Toyota Motor
Corporation)Co., Ltd.

Sales Department No. 3,
Sales Headquarters
Director, General Manager of
East Japan Sales Department,
High Tech Business Division
Managing Director
Senior Managing Director,
Chief of Specific Industry
Business Headquarters
Vice President
President & COO

1997 General Manager of Domestic

Sales Department No. 1,
Sales Headquarters
2003 President of Kaga (Shanghai)Electronics Co., Ltd.
2004 President of Kaga Electronics(USA) Inc.
2011 Division Director of Electronics
Business Division2012 Executive Officer
Division Director of Electronics
Business Division, andDivision Director ofSpecial Sales Department
2015 Director, Division Director of
Electronics Business Division

2001 Executive Vice President andRepresentative Director

2002 President of Osaka Toyopet

Co., Ltd. (currently Osaka
Toyota Motor Co., Ltd.)2005 Advisor to Toyota Motor
Corporation
Chairman of Osaka Toyopet
Co., Ltd.
2009 Executive Advisor to Hitachi
Maxell, Ltd. (currently Maxell
Holdings, Ltd.) (present position)2015 Director of the Company

Senior Managing Director

Senior Managing Director

Outside Director

Outside Director

Shinsuke Takahashi

Shintaro Kakei

Akira Tamura

Noritomo Hashimoto

1980
1991

1980
1993
2000

1970
1978

1977 Joined Mitsubishi Electric

1995
2002
2005

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

2000
2005
2014

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

1998
2008

2011
2012
2015

Managing Director

Director

Eiji Kawamura

Motonori Toshinari

1979 Joined Kaga Electronics

1982 Joined Kaga Electronics Co., Ltd.
1992 President of Kaga (H.K.)

Co., Ltd.
1985 President of Taxan (U.K.) Ltd.
1993 General Manager of Overseas
Sales Department, Sales
Headquarters No. 2
2005 Executive Officer
General Manager of Accounting
Division and General Manager
of Information Systems
Department
2012 Executive Officer
Chief of Administration
Headquarters and General
Manager of Accounting Division2012 Director, Chief of
Administration Headquarters
and General Manager of
Accounting Division2015 Managing Director, Chief of
Administration Headquarters

30 KAGA ELECTRONICS CO.,LTD.

Outside Director

Director

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(present position)
Advisor to Niigata Sohgo
Security Services Co., Ltd.
(ALSOK) (present position)
Director of the Company

Corporation2009 Director, Chairman of theNomination Committee, Chairmanof the Compensation Committee,
Executive Officer, and in chargeof General Affairs, Human
Resources and Public Relations
2012 Director, Chairman of theNomination Committee, Chairmanof the Compensation Committee,
Senior Vice President, and in
charge of Corporate Strategic
Planning and Operations of
Associated Companies
2012 Director, Member of theNomination Committee, SeniorVice President, and in charge ofCorporate Strategic Planning andOperations of Associated Companies
2016 Director
2016 Advisor
2019 Director of the Company

Auditors

Electronics Limited

1998 President of Taxan USA Corp.
2004 General Manager of Overseas

Sales Division, Overseas
Business Division, Electronics
Business Headquarters
2010 President of Kaga (H.K.)
Electronics Limited
2012 Executive Officer, Division
Director of EMS Business
Division and President of
Kaga (H.K.) Electronics Limited
2015 Director, Division Director of
EMS Business Division

Auditor (Full-time)

Auditor (Full-time)

Outside Auditor

Outside Auditor

Kazunori Kameda

Takahiro Ishii

Susumu Kitsunai

Yoichi Sato

Integrated Report 201931

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 withthe fundamental 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

The Company has appointed three 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 powersof judgment in corporate management. The auditors arealso required to have highly specialized knowledge andmaintain independence from management executives.
The Company has established a staff office of theBoard of Directors, which distributes materials related

auditors. In principle, the Board meets once a month andholds extraordinary meetings when necessary. The Board
makes decisions on important matters related to items
stipulated by laws and regulations and to management,
and supervises the execution of duties by directors.
Auditors regularly attend Board of Directors meetings andparticipate in other important internal meetings as partof efforts to monitor and audit the business conditionsof the Company. Kaga Electronics has appointed threeoutside directors and four auditors (including two outside
auditors) to ensure the effectiveness of the corporate
governance system.

Board of Auditors 4 Auditors

Attendance at Board of Directors and Board of Auditors meetings
Board of Directors meetings(held 16 times)
Attendance
Attendance rate
(times)(%)

General Meeting of Shareholders

Board of Directors 10 Directors

External audit by audit company

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.

Outside Director
Susumu Miyoshi
Outside Director
Akira Tamura
Outside Auditor
Susumu Kitsunai
Outside Auditor
Yoichi Sato

Reasons for appointing new outside directors

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

16

100.0

—

—

16

100.0

—

—

12

100.0

13

100.0

12

100.0

13

100.0

Noritomo Hashimoto
Noritomo Hashimoto was elected as Outside
Director because it was deemed he could reflect his
extensive experience and broad views as corporate
manager in the management of the Company from an
independent standpoint, thereby strengthening thefunction of the Board of Directors.

Note: T he attendance rate of Outside Auditors Susumu Kitsunai and Yoichi Sato is calculated based on the Board of
Directors meetings and Board of Auditors meetings following their appointment as auditors.

Founder & CEO

Remuneration system for officers
President & COO
CSR Promotion
Committee*

Management Meeting
Directors Responsible for Operations,Internal Management

Audit OfficeBusiness Administration
Department

Business Guidance Project*The Company has established the following committees under the CSR Promotion Committee.
1. Compliance Committee 2. Risk Management Committee 3. Information Disclosure Committee 4. Personal Information Management Committee

CSR Promotion Committee

Audit Office

The Company has established a CSR Promotion
Committee chaired by the President & 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
Management 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 advanceand regularly reports audit findings to the auditors. The
Office also cooperates with the auditors as required, suchas when requested for reports.

32 KAGA ELECTRONICS CO.,LTD.

The Company’s basic policy is to structure its remuneration
system so as to promote its sustainable growth andenhance medium- to long-term corporate value. In termsof structure, directors’ remuneration comprises fixed
remuneration, which is paid at a fixed amount, andperformance-linked remuneration (bonus and long-term
incentive in the form of restricted stock compensation),
which is paid based on the business results of the relevant
fiscal year. Performance-linked remuneration reflects
annual performance evaluations based on evaluations
according to the directors’ respective roles. Remunerationof non-executive directors, including outside directors, andauditors consists solely of fixed remuneration, which ispaid at a fixed amount.
Remuneration of officers for the year ended March 31, 2019
Directors(of which, outside directors)
Auditors(of which, outside auditors)

Allowance(millions of yen)

Number ofrecipients

723 (20)

10 (2)

46 (10)6 (2)Note: T he figures above include those for two outside auditors who retired at the closingof the 50th General Meeting of Shareholders held on June 28, 2018.

Dialog with shareholders and investors
Kaga Electronics has established an Investor Relations &Public Relations Office under the direct control of the
President. The Office works to disclose information ina timely manner through the Company’s website andother means, and to enhance the quality and quantity of
information. The Company also makes efforts to facilitatecommunication with shareholders and investors, which
includes holding financial results briefings for analysts andinstitutional 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 201933

Corporate GovernanceInternal Control / Compliance
Basic approach to internal control systems

Ensuring appropriate operations of Group companies

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 thesoundness, 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.

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 appropriatenessAs 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 that riskmaterializes, the division responsible for dealing with said
risk will immediately adopt the necessary, appropriate
response to minimize damage under the direction of therisk 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.

34 KAGA ELECTRONICS CO.,LTD.

Kaga Electronics has established the Information Disclosure
Committee under the CSR Promotion Committee tostrengthen 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.

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

Information
Disclosure Committee … Investigating authority
Confirmation
In charge ofHead of Administration … In charge of managing information
PR and IR
disclosure (decision-making on
Headquarters
important matters in accordance
Investor
Reportwith rules on timely disclosure)
Relations &General Affairs… In charge of managing information
Public Relations
Department
disclosure
OfficeReport Corporate Planning … Department for deliberating on
Department
information disclosure
ReportReport Divisional subsidiaries(report and consult
on matters fordisclosure)

Efforts toward the elimination of antisocial forces

Internal reporting system
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 Harassment
Countermeasures Committee without having to go
through anyone else. There is a system in place enabling
reports to be made anonymously and through the use ofa private comments box so that reporting individuals are
not disadvantaged.

Information management…

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,of overall business activities throughout the Group as
well as ensure compliance with laws and regulations andthe Articles of Incorporation. The Office also provides
guidance to make improvements in business activities.
Further, Group companies submit the minutes fromall Board of Directors meetings to the Company andmake monthly reports on business activities, status ofbudget implementation, and important matters relating toensuring the appropriateness of business activities.

The basic approach of the Kaga Electronics Group is
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

Online system for anonymous reporting

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 201935

Corporate Governance

Message from Outside Director

Leveraging my many yearsof experience in corporate
management to contributeto the growth of Kaga
Electronics as a global
enterprise.
Akira Tamura
Outside Director

Apr. 1970 Joined the Bank of Japan
June 1978 Deputy Director of the International Finance Bureau,
Ministry of FinanceJan. 1998 Director of Information Systems Department,
the Bank of Japan
Apr. 1998 Director of Information System Services Department
June 2001 Managing Director, Sohgo Security Services Co., Ltd.
(ALSOK)
Apr. 2008 Representative Director and Senior Executive Officer
July 2011 Advisor to Okigin Economic Research Institute(present position)
Apr. 2012 Advisor to Niigata Sohgo Security Services Co., Ltd.
(ALSOK) (present position)
June 2015 Director of the Company (present position)

Leveraging experience in corporate management
Since leaving the Bank of Japan, where I worked for many
years, I have engaged in the management and business
operations of private companies in a variety of fields.
When I made the shift to the private sector, I contacted
Kaga Electronics and conversed on several occasions withCEO Tsukamoto, who was the president at the time. During
our talks, he asked if I was willing to use my years ofmanagement experience to assist with the managementof Kaga Electronics, which led to my appointment as
Outside Director in June 2015. I have built up experience innumerous fields, beginning with finance and including
human resource policy, general business and crisis
management, and as such, I make best use of myknowledge and expertise in supervising and offering
advice to the Company.

To enhance the effectiveness of the Board of Directors
I recognize that the roles of directors are to manage andto monitor, and in doing so, ensuring that management ison the right track and appropriately managing risk.
At Board of Directors meetings for Kaga Electronics,
the CEO and COO as well as other members conductopen-minded discussions and freely express their

36 KAGA ELECTRONICS CO.,LTD.

opinions. Agenda items are debated from proactive anddefensive points of view at all times, or in other words,
from the perspectives of opportunities and risks. Thismeans that items are not necessarily granted approval
without further scrutiny. Accordingly, the Board of
Directors is by no means a “sleeping board.”
In general, companies that do not respond quickly must
inevitably deal with small issues each day that may lead toproblems in management later on. Kaga Electronics has
established a system that helps prevent these problems inadvance, and in the event that an issue does arise, theBoard of Directors and Management Meeting take decisive
action to ascertain the cause, whether it besystem-related or technology-related, and ensure thatappropriate measures are taken to avoid reoccurrence. In
addition, outside directors and outside auditors voice theiropinions on financial and nonfinancial risk based on theirown experience as part of efforts to minimize risk throughmultifaceted discussion, including standpoints that tend to
get overlooked when the conversation involves onlyinternal executives.
In this way, the Board of Directors at Kaga Electronics
actively takes into consideration external opinions,demonstrating that it is operating in an appropriatemanner. However, in consideration of future growth, I
believe that it is necessary to enhance the diversity of theboard, especially in terms of gender and by giving it amore international flavor, while maintaining a suitablebalance in the number of members. The composition of
the board ought to reflect business strategy more closely
as well.

Information provision as the basis for improving
effectivenessI give my opinion on business management in light of thevision expressed by top management so that the Kaga
Electronics Group heads in the direction it is aiming for,and the provision of information is an essential
precondition for this to occur. This applies both tosupervising and giving advice. In the case of Kaga
Electronics, an explanation of agenda items is provided by
the day prior to Board of Directors meetings, and therequired information is shared to ensure understanding of
the Company and its business, products and services. The
opinions I offer and the questions I raise are then conveyed
to the internal divisions in charge without fail, and time isset aside to answer any queries at the Board meeting.
In addition, I attend the Management Meetings andInvestment Committee meetings held before and after
Board meetings to deepen my understanding of thecurrent state of the Group. I also regularly visit businesssites and converse with general employees.
These opportunities not only aid in my understandingof the measures and initiatives being undertaken in eachdivision but also provide an insight into the motivationsof young employees as they carry out their work. The
opportunities allow me to talk about my experiences andmy philosophies as well. In this way, I can expand my
sphere of activity, which helps me to see things that areotherwise hidden when focusing solely on explanations,
reports and materials provided by managers. I also get agood feeling of the extent to which the philosophies of top
management are permeating the Group.

Fostering leaders of the next generation
One figure looms large as a feature of the Kaga
Electronics Group’s history. CEO Tsukamoto founded
Kaga Electronics about 50 years ago literally from nothing
and grew the business from its domestic roots into aninternational enterprise through a strong will andunrelenting hard work, which have resulted in theposition the Company enjoys today. The CEO is a very
charismatic person with great breadth of vision,
foresightedness, and a sense of direction, but he is also avery attentive person and listens carefully to the opinionsof others. He is by no means a dictatorial executive. He
entrusts his COO and executives with what he ought to in
his bid for sustainable growth.
Nonetheless, it is still important to continue laying asolid platform that fosters candidates to take over positions
and serve as business executives with a view 10 and 20
years into the future of the Group. The next generationmust carry on the spirit of dedication to the Company andthe motivation for this business and take charge ofmanagement with a real sense of responsibility to achieve
continued growth. I believe it is my mission to provide
support from a range of aspects in making this a reality,
and I fully intend to fulfill my role of providing suitableadvice as Outside Director.

Permeating KAGAism and contributing tocorporate growth
A booklet on KAGAism, which epitomizes the Company’s
management philosophy, includes the statement, “Make
TAXAN effort to gain TAXAN profit, and become TAXAN
happy (a play on words in the original Japanese, since
takusan means ‘much,’ ‘large’ or ‘very’).” I am confident
that the implementation of Kaga Electronics’ corporate
philosophy, “Everything we do is for our customers,”
will lead to greater utilization of and advancement inelectronics. I believe this will be of benefit to customers,
the Company, myself and society in general. To accomplish
this, it is essential for each employee to have feelingsof gratitude toward customers and to continue providing
new value that meets their needs.
Speaking from experience, I know that there are many
obstacles to face in work, both big and small, but I also
know that the feeling of joy and achievement when thesehindrances are overcome is huge and leads to the growth
not only of oneself but also one’s colleagues, team and theCompany as a whole. I intend to actively communicate thisidea to employees of the Group and support its ongoinggrowth into the future.

Integrated Report 201937

CSR Management

Social ReportSocial Report

Together with our customers

Together with our employees

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 ouraction 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 enabling a systemof quality control that centers on KAGA (SHENZHEN)ELECTRONICS CO., LTD., its flagship base for production
activities. At the Center, we manage the entire Group’s
resources as cross-functional capabilities in such areas asproduction technology and quality control, and promote theoptimal distribution of resources and the strengthening oftechnological 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
and taking on challenges are keys to driving sustainablegrowth. This is because diversity enables us to look at
risk as an opportunity, and when we take on challenges
we can take full advantage of these opportunities. To
make this a reality, the Kaga Electronics Group promotes
diversity management in terms of making effective useof diversity in human resources and in work style. At
the same time, we respect our human resources who
continue to take on challenges and see each person asa corporate manager. With this in mind, we will keep
protecting our corporate culture of tolerating failure as aconsequence of tackling challenges.

Global exchange meeting between production bases

Education and welfare program

Efforts to enhance quality

At 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 leave every year to
all employees, which is separate from normal paid leave.
We have also established an accumulated leave system
for the three major diseases (cancer, cerebral stroke
and acute myocardial infarction) as compensation for
hospitalization after contracting a serious disease andfor missing work when recuperating, as well as hourly
paid leave system. Further, we have established welfare
facilities that include resorts in Japan and abroad, acontract golf course, a company getaway house anda cruisers boat, with utilization rates at a high level.
Through such initiatives as these, we aim to strikea good work-life balance for a safer work environment
for employees.

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 bodiesof the Engineering Department, drafts and implements
measures to boost quality throughout the Group. The
Department connects with quality control officers andsuppliers to strengthen quality in the Group’s factories.
A production factory overseas

Status of ISO 9001 certification

38 KAGA ELECTRONICS CO.,LTD.

6,627
5,238

5,092

5,427

5,216

29.9%
27.1%

2015/326.9%

2016/326.6%

2017/3

26.3%

2019/3

2018/3To 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)

Japan

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 LIMITED

Average length of service (years)/Job turnover rate

5.8%
11.6
4.3%

13.1

14.7
5.1%

12.4
2.8%

2015/314.9

2016/32017/3

3.4%

2018/3

2019/3■ Annual prescribed working hours (hours)/■ Monthly 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

1,822.5
11.3

2019/3Integrated Report 201939

CSR Management

Social Report

Contributing to the local community

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” since1996. Many of this tournament’s winners have gone on to dowell on the LPGA tour, proving that it is a great gateway tosuccess for young female professional golfers.

Social contribution activities
in Kanazawa, where it all began
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 the community
through such means as supporting the Kanazawa Marathon,
which is open to the public, ever since its first event,and employee participation in volunteer activities at awater station.
Supporting the Kanazawa Marathon

Social contribution activities atoverseas sites

LPGA Rookies Championship Kaga Electronics Cup 2018

Contributing to the development of golf
Five professional golfers, both male and female, areon the books at Kaga Electronics, including Eimi Koga,
who signed on as a member of the Company in 2019.
Contracted athletes take part in tournaments around theworld wearing clothing and caps adorned with the Kaga
Electronics logo, which plays a part in our PR strategy.
The Group company KAGA SPORTS CO., LTD. takes amultifaceted approach to business that includes the direct
sale and wholesale of golf supplies at its own stores andthe running of golf driving ranges and golf schools, which
contributes to the development of the sports industry
through golf.

One of the Company’s golf schools

40 KAGA ELECTRONICS CO.,LTD.

One of our golf driving ranges

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 Mexico
teams up with a local elementary school to undertake
community-based activities that include a volunteer
program to plant trees aimed at increasing greenery andmaking the air cleaner.

Planting trees in Mexico

Education, art and culture related activities
Eric Sugimoto Sayaka Tsuchida Hiroko Azuma Fumika Kawagishi Eimi Koga
Professional golfers sponsored by Kaga Electronics

One of our golf shops

Kaga Electronics supports the Kyogen-inspired opera“The Marriage of Figaro,” which is co-sponsored by the
Ministry of Foreign Affairs, and Hamamatsu Jazz Week
held in Hamamatsu City, Shizuoka Prefecture.
Isao Tsukamoto, the Company’s Founder & CEO,Kyogen-inspired opera “The Marriage of Figaro”

Hamamatsu Jazz Week

contributes to society in a wide range of fields related toeducation, the arts and culture, such as giving lectures tostudents as a specially appointed professor at the Facultyof Service Innovation, the Chiba University of Commerce.

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

Integrated Report 201941

CSR Management

Environmental Report

Initiatives to reduce environmental burden

Together with the earth
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 CO 2
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 andpromote ongoing improvement of this system to preserve
the global environment and prevent pollution in all of ourbusiness activities to provide products and services.

4 We shall set targets for the following requirements to■the extent possible for the products and services that theKaga Electronics Group handles and regularly review the
progress of 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 conservationin mind using the latest electronics technology
awareness of the need for environmental protection and toensure their understanding of our Environmental Policy.

adhere to environmental laws, regulations and related
requirements as well as comply with all other requirements
agreed upon by the Kaga Electronics Group.

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

3 We shall strive to prevent pollution and enhance the■environment through non-wasteful office and businessactivities based on a philosophy of conserving energy andresources.

Environmental management system
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. In addition, we haveattained ISO 14001 certification, an international standard
for environmental management systems, at the Company
and 20 sites at four Group companies in Japan. We arestrengthening our system through a PDCA cycle.

Environmental management system

President (COO)
Environmental officers

Internal environmental
auditors
Environmental Manager
Meeting

ISO Secretariat

42 KAGA ELECTRONICS CO.,LTD.

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 of environmental
technologies, with the use of solar panels on the roof
enabling eco energy and the installation of LED lighting
throughout. These technologies serve to save energy andreduce CO 2 emissions.
* Double-skin technology refers to a method of construction in which part or allof a building exterior is covered in glass.

Power consumption and CO2 emissions at Head Office building■ Power consumption (kWh) ■ CO2 emissions (kg CO2)
999,973

887,877
706,423

377,990

2015/3335,618

2016/3764,780

267,0282017/3

289,087

2018/3

744,417281,3882019/35 We shall provide education to all employees to increase their■

2 In executing our business activities, we shall strictly■

Founder & CEO

Reduction of CO 2 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, Strategic Customer Sales Division,
Sales Promotion Division

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 2019, actually increased by 34%
year on year.
In addition to “reduce programs” that look especiallyat cutting CO 2 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)
102.0
81.0
56.6

2015/3

2016/365.8

2017/376.0

2018/3

2019/3Administration 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 OfficeIntegrated Report 201943

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 the 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 the parent margin (%)
ROE (%) *4
ROA (%) *5
Equity ratio (%)
Debt equity ratio (times) *6
Inventories (millions of yen)
Inventory turnover period (days) *7

2010/3

2011/3

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/3

239,391
28,237
1,582
1,280
-318
5,728
-3,0402,687-2,3072,050
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
-1,2638,283-3,067
1,604
2,166

227,20931,225
6,879
7,343
6,975
10,746-258
10,487-6,1181,452
1,464

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

292,779
35,546
7,570
7,859
8,014
-1,547-6,860-8,408
11,684
1,740
6,426

113,962
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

128,755
70,631
70,5568,900
28,879213,761
84,25976,60432,851
32,231-11.5530.00–
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

292.0780.00
27.4
2,790.97

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
54.8
0.13
19,455
34.9

12.1
2.6
2.7
2.7
10.9
4.7
35.8
0.43
40,02640.7*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 the parent/Average equity × 100 (%)*5 ROA=Profit attributable to owners of the parent/Average total assets × 100 (%)*6 Debt equity ratio=Interest bearing debts/Equity (times)*7 Inventory turnover period=Inventory/(Cost of sales/365) (days)

44 KAGA ELECTRONICS CO.,LTD.

Integrated Report 201945

Financial and Corporate Information

Analysis of Financial Condition and
Results of Operations
Fiscal year ended March 31, 2019

Profit attributable to owners of the parent

Analysis of financial condition
Total assets as of March 31, 2019 increased by¥85,005 million from the previous fiscal year-end to¥213,761 million. Main items are as follows.

Current assets
Current assets increased by ¥78,326 million from theprevious fiscal year-end to ¥182,396 million. This islargely due to an increase of ¥50,335 million in notes
and accounts receivables — trade and an increase of¥18,673 million in merchandise and finished goods,
reflecting the significant impact of the conversion of
Fujitsu Electronics to a subsidiary.

Non-current assets
Non-current assets increased by ¥6,678 million from theprevious fiscal year-end to ¥31,364 million. This is mainly aresult of an increase of ¥1,304 million in software.

Total liabilities
Liabilities increased by ¥71,378 million from the previous
fiscal year-end to ¥129,501 million. This is primarily
attributed to an increase of ¥25,270 million in short-termloans payable due to procurement of funds notably for thepurchase of Fujitsu Electronics shares, and an increase of¥41,491 million in notes and accounts payable — trade.

Total net assets
Net assets increased by ¥13,627 million from the previous
fiscal year-end to ¥84,259 million. This is primarily
attributed to an increase of ¥6,113 million in retained
earnings and an increase of ¥7,579 million in noncontrolling interests resulting largely from the conversionof Fujitsu Electronics to a subsidiary.

Analysis of business performance
Guided by its corporate philosophy of “Everything we do
is for our customers,” the Group in the fiscal year ended
March 31, 2019 further expanded its overseas production
bases in response to calls from customers, while inJapan, the Group focused its efforts on expansion of the
EMS business including measures to enhance domestic
production facilities and functions. In January 2019,
the Group solidified its foothold for further growth byconverting Fujitsu Electronics to a subsidiary. As aresult, net sales came to ¥292,779 million, an increaseof 24.1% from the previous fiscal year, while ordinary
income decreased by 10.1% from the previous fiscal
year to ¥7,859 million. Net sales in Japan increased by
21.0% from the previous fiscal year to ¥180,306 million,
and overseas net sales increased by 29.4% to¥112,473 million.

Cost of sales, selling, general and administrative
expenses
Cost of sales increased by ¥53,810 million from theprevious fiscal year to ¥257,233 million. Ratio of cost

46 KAGA ELECTRONICS CO.,LTD.

of sales to net sales was 87.9%. Selling, general andadministrative expenses increased by ¥3,596 million
from the previous fiscal year to ¥27,976 million. Increase
in selling, general and administrative expenses is
attributable primarily to an increase of upfront expenses
for the start-up of new overseas factories.

Non-operating income and expenses
Non-operating income of ¥289 million (net) was recorded,
a decrease of ¥331 million from the previous fiscal year.
The decrease was mainly due to increase in foreignexchange losses.

Extraordinary income and loss

As a result, profit before income taxes increasedby ¥349 million from the previous fiscal year to¥9,649 million. After deducting income taxes — current,
income taxes — deferred and profit attributable tonon-controlling interests, profit attributable to owners of
the parent increased by ¥1,523 million from the previous
fiscal year to ¥8,014 million, a record high for the firsttime in 13 years, exceeding the ¥7,272 million recorded in
the fiscal year ended March 2006.
Earnings per share increased by ¥55.49 from theprevious fiscal year to ¥292.07.

Analysis of capital resources and cash liquidity
Cash flows

Funding requirements

The balance of cash and cash equivalents on a consolidated
basis as of March 31, 2019 increased by ¥3,352 million fromMarch 31, 2018 to ¥32,231 million. The status and factors
thereof for each cash flow category in the fiscal year ended
March 31, 2019 are as follows.

The main elements of working capital requirements
are operating expenses such as purchases of raw
materials and components, manufacturing costs, andselling, general and administrative expenses. Funding
requirements for investment purposes are largely inconnection with capital expenditures and costs of M&As
for acquisitions of new businesses and commercial rights.

Cash flow from operating activities
Net cash and cash equivalents used in operating activities
totaled ¥1,547 million. This was mainly due to a decreaseof ¥6,746 million in notes and accounts payable — trade.
Cash flow from investing activities
Net cash and cash equivalents used in investing activities
totaled ¥6,860 million. The decrease was mainly due tocash outflow of ¥3,027 million for purchases of property,
plant and equipment.
Cash flow from financing activities
Net cash and cash equivalents provided by financing
activities totaled ¥11,684 million. This was mainly due to anincrease of ¥15,137 million in short-term loans payable.

Financial policy
With respect to procurement of short-term working
capital, the basic stance is to work on achieving optimal
capital efficiency within the Group before resorting toborrowings from financial institutions. With respect toprocurement of funds for M&As, capital expenditures andlong-term working capital, the basic stance is to conduct
optimal procurement from among the various methods
available extending from direct to indirect financing,with due consideration given to financial condition at thetime of procurement as well as to term and purpose offunding requirement.

Extraordinary income of ¥2,403 million was recorded
reflecting notably ¥2,164 million in gain on negative
goodwill associated with the conversion of FujitsuElectronics to a subsidiary. Extraordinary loss of¥614 million was recorded, including ¥550 million in loss
on valuation of investment securities.

Integrated Report 201947

Financial and Corporate Information

Consolidated Balance Sheet
Kaga Electronics Co., Ltd. and Consolidated Subsidiaries
At March 31, 2019

Millions of Yen
2018
2019

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
OthersAllowance for doubtful accounts
Total CURRENT ASSETS

Thousands of
U.S. Dollars(Note)
2019¥ 30,803
45,8094,032
295
15,060
575
3,818
3,807
(133)
104,069¥ 35,003
96,1455,361
261
33,734
489
5,802
5,894
(296)
182,396$ 315,376
866,252
48,3082,357
303,938
4,410
52,27853,104(2,667)
1,643,361

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

8,102(3,232)
4,870

9,436
(4,526)
4,910

85,024(40,780)
44,243

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

6,315(3,731)
2,583

8,266
(4,760)3,506

74,481(42,892)
31,589Tools, furniture and fixtures
Accumulated depreciation
Tools, furniture and fixtures, net

3,556(2,846)709

5,119(4,015)
1,104

46,129(36,175)
9,954

Land
Construction in progress
Total PROPERTY, PLANT AND EQUIPMENT

4,036
10
12,2104,861
628
15,011

43,7995,660
135,248

317
515
46
878

259
1,819
126
2,206

2,340
16,397
1,139
19,878INVESTMENTS AND OTHER ASSETS:
Investment securities
Deferred tax assets
Guarantee deposits
Insurance funds
OthersAllowance for doubtful accounts
Total INVESTMENTS AND OTHER ASSETS

8,688
530
657
943
1,363
(587)
11,595

10,085
1,292
870
951
1,462
(515)
14,14790,867
11,6487,845
8,574
13,172(4,647)
127,462

Total NONCURRENT ASSETS

24,68531,364

282,588¥ 128,755¥ 213,761$ 1,925,949

INTANGIBLE ASSETS
Goodwill
Software
OthersTotal INTANGIBLE ASSETS

Total ASSETS

48 KAGA ELECTRONICS CO.,LTD.

Millions of Yen
2018
2019

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)
2019¥ 36,392
5,385
3,711
901
247
3,068
49,707¥ 77,884
30,656
5,307
1,147
105
6,239
121,340$ 701,726
276,20947,816
10,340953
56,212
1,093,257

3,161
1,276
1,264
1,737
175
800
8,416

1,882
1,300
94
1,997
280
2,606
8,161

16,96011,715852
17,9952,525
23,48173,53058,123

129,501

1,166,788

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

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

12,133
13,86551,297(2,024)75,272

109,321
124,927
462,177(18,236)
678,189

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

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

1,018
2
527
(215)
1,332

9,173
19
4,748
(1,939)12,001

75
70,631

7,654
84,25968,969759,160¥ 128,755¥ 213,761$ 1,925,949

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 ：The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and havebeen made at the rate of ¥110.99 to $1, the rate of exchange at March
31, 2019.

Integrated Report 201949

Financial and Corporate Information

Consolidated Statement of Income andComprehensive Income
Kaga Electronics Co., Ltd. and Consolidated Subsidiaries
For the Year Ended March 31, 2019

Millions of Yen
2018
2019
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)
2019¥ 235,921
203,423
32,498¥ 292,779
257,233
35,546$ 2,637,894
2,317,627
320,267

24,3798,11927,976
7,570

252,059
68,207

124
119
279
44
99
228
896

174
175
209
106
349
1,015

1,568
1,580
1,890
962
3,150
9,151

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

132
111
32
275
8,740

200
194
177
153
726
7,859

1,806
1,748
1,601
1,385
6,542
70,817EXTRAORDINARY INCOME
Gain on sales of property, plant and equipment
Gain on sales of investment securities
Gain on negative goodwill
Gain on sales of shares of subsidiaries
Gain on transfer of businessTotal EXTRAORDINARY INCOME

28
591
467
12
1,101

17
215
2,164
7
2,403

154
1,941
19,50063
21,658EXTRAORDINARY 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

7
228
24
269
6
5
¥ 541

16
31
2
550
6
8
¥ 614

144
281
25
4,960
54
73
$ 5,539

50 KAGA ELECTRONICS CO.,LTD.

Millions of Yen
2018
2019
Income before income taxes
Income taxes-current
Income taxes-deferred
Total income taxes
Net income
Profit attributable to owners of the parent
Profit attributable to non-controlling interests
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
Share of other comprehensive income of entities accounted forusing equity method
Total OTHER COMPREHENSIVE INCOME
Comprehensive income
Comprehensive income attributable to:
Owners of the parent
Non-controlling interests

Thousands of
U.S. Dollars(Note)
2019¥ 9,300¥ 9,649$ 86,936

1,840
952
2,792
6,507

1,477
120
1,597
8,051

13,307
1,085
14,39372,543

6,490
16

8,014
37

72,208
335

345
(16)
(273)
(17)

(489)
18
307
9

(4,411)
165
2,774
86

-

(49)

(444)

37

(203)

(1,829)¥ 6,544

7,848$ 70,713¥ 6,52816¥ 7,80147$ 70,287
426

Note ：The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and havebeen made at the rate of ¥110.99 to $1, the rate of exchange at March
31, 2019.

Integrated Report 201951

Financial and Corporate Information

Consolidated Statement of Cash Flows
Kaga Electronics Co., Ltd. and Consolidated Subsidiaries
For the Year Ended March 31, 2019

Millions of Yen
2018
2019
NET CASH PROVIDED BY OPERATING ACTIVITIESIncome before income taxes
Depreciation and amortization
Impairment loss
Amortization of goodwill
Increase (Decrease) in net defined benefit liability
Increase (Decrease) in provision for directors' retirement benefits
Increase (Decrease) in provision for directors' bonuses(Decrease) Increase 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
Gain on negative goodwill
Decrease (Increase) in notes and accounts receivable-trade
Increase in inventories
Decrease in notes and accounts payable-trade
Decrease (Increase) in accounts receivable-other
Increase in accrued expenses(Increase) Decrease in advance payments
Increase in consumption taxes refund receivable
Increase in other current assets(Decrease) Increase in other current liabilities
Others, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Others, net
Net cash provided by (used in) operating activities¥ 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¥ 9,649
1,740
31
85
(58)
(4)
(160)
53
(351)
200
194
(10)
16
(212)
550
(2,164)(1,152)(2,145)(6,746)
(207)
552
292
(2)
(191)
276
135
371
349
(189)
(2,078)0¥ (1,547)

Thousands of
U.S. Dollars(Note)
2019$ 86,936
15,678
281
767
(524)
(41)
(1,443)486(3,162)
1,806
1,748
(91)
144
(1,915)
4,960(19,500)(10,380)(19,331)(60,782)(1,868)
4,977
2,635
(21)
(1,728)
2,489
1,222
3,343
3,151
(1,709)(18,728)
3$ (13,940)

Thousands of
U.S. Dollars(Note)
2019

Millions of Yen
2018
2019
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
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
Increase in short-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) provided by 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¥ (2,773)
1,158(1,678)87(360)(2,481)
1,331¥ (2,661)
1,944(3,027)111(420)(2,977)575$ (23,979)
17,522(27,281)
1,005(3,788)(26,829)
5,182

-

(286)

(2,578)

504

-

-

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

(2)
3
(13)
10
(29)
25
(125)
12
(6,860)

(22)
27
(119)
97
(261)
229
(1,129)111(61,814)825(1,641)(2)(1,780)15,137(1,269)(1)(2,054)

136,385(11,435)(10)(18,511)

(58)

-

-

(153)
(2,811)(127)
11,684(1,151)
105,277

(234)
2,857
26,021¥ 28,879

75
3,352
28,879¥ 32,231

681
30,203
260,197$ 290,401

Note ：The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and havebeen made at the rate of ¥110.99 to $1, the rate of exchange at March
31, 2019.

52 KAGA ELECTRONICS CO.,LTD.

Integrated Report 201953

Financial and Corporate Information

Corporate Information
As of March 31, 2019

Company overview

Major affiliates overseas

Name

KAGA ELECTRONICS CO., LTD.

China

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 of finishedproducts such as PCs and PC peripherals, etc.
* Electronics manufacturing services: Provision of product development andmanufacturing services on a contract basis

Founded

September 12, 1968

Capital¥12,133 million

Number ofGroup companies

55 (16 in Japan, 36 overseas and three accounted for by the equity method)

Board members As of June 27, 2019

Executive Officers As of June 27, 2019

Founder & CEO

Isao Tsukamoto

Shoji Seki

President of KAGA SPORTS CO., LTD.

President & COO

Ryoichi Kado

Hiroki Suzuki

Senior Managing Director

Shinsuke Takahashi

Division Director of Specific Industry Business
Division

Senior Managing Director

Shintaro Kakei

Takeshi Tsukamoto

Director and Senior Executive Officer of FujitsuElectronics Inc.

Managing Director

Eiji Kawamura
Chief of Administration Headquarters

Takao Okabe

Supervisor of China Headquarters

Director

Motonori Toshinari
Division Director of EMS Business Division

Mitsuhito Ikeda

President of KAGA SOLUTION NETWORK CO., LTD.

Hiroaki Maruyama

Director

Mitsuhiro Nohara
Division Director of Electronics Business
Division

Deputy Division Director of Administration
Headquarters

Outside Director

Susumu Miyoshi

Outside Director

Akira Tamura

Outside Director

Noritomo Hashimoto

Auditor (Full-time)

Kazunori Kameda

Auditor (Full-time)

Takahiro Ishii

Outside Auditor

Susumu Kitsunai

Outside Auditor

Yoichi Sato

Asia

KAGA (SHENZHEN)ELECTRONICS CO., LTD.

KAGA TAXAN (SUZHOU)ELECTRONICS CO., LTD.

Asia

North America

KAGA ELECTRONICS(THAILAND) COMPANY LIMITEDKAGA ELECTRONICS (USA)INC.

TAXAN MEXICO, S.A. DE C.V.

80,000,000 shares

Total number of shares outstanding

28,702,118 shares

Takahiro Urazawa

Number of shareholders

Director and Managing Executive Officer of FujitsuElectronics Inc.

Katsutoshi Suzuki

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

Satoshi Eguchi

President of KAGA MICRO SOLUTION CO., LTD.

Fujitsu Electronics Inc.
Sale of electronic parts and electronicequipment, etc.

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

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

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

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

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

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

DIGITAL MEDIA LAB., INC.
Planning, development and sale of computer
graphics

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

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

54 KAGA ELECTRONICS CO.,LTD.

18.60%

6,135

OKOZE CO., LTD.

1,840

6.70

Japan Trustee Services Bank, Ltd.
(Trust Account)

1,346

4.90

MUFG Bank, Ltd.

1,212

4.42

Kaga Electronics Employee Shareowners
Association

1,117

4.07

The Master Trust Bank of Japan, Ltd.
(Trust Account)

986

3.59

Mizuho Bank, Ltd.

950

3.46

Isao Tsukamoto

733

2.67

Oki Electric Industry Co., Ltd.

526

1.92

5,338,568 shares(158)

NORTHERN TRUST CO.(AVFC) RE IEDU
UCITS CLIENTS NON LENDING 15 PCT
TREATY ACCOUNT

505

1.84

Financial Institutions

26.59%

7,632,979 shares(29)

Individuals

Total numberof shareholders

6,135
28,702,118
sharesNumber of Percentage
shares heldof total(thousandsharesshares)issued (%)

13.93

0.53%

Foreign Corporations

Name

3,824

Financial Instruments
Business Operators

Major affiliates in Japan

Fujitsu Electronics Europe
GmbH

SANKYO CO., LTD.

Breakdown by type of shareholder

152,331 shares(34)

KD TEC s.r.o.

100 shares

Hironaga Nagasaka Supervisor of ASEAN Headquarters
Yasuhiro Ishihara

KAGA COMPONENTS(MALAYSIA) SDN.BHD.

Principal shareholders

Total number of shares authorized

Number of shares constituting one unit

KAGA (H.K.) ELECTRONICS
LIMITED

EuropeStock information

Kazuhira Watanabe Division Director of Communication Network
Sales Division
President of DIGITAL MEDIA LAB., INC.

KAGA (SHANGHAI)
ELECTRONICS CO., LTD.

25.10%

7,204,181 shares(5,796)
Other JapaneseCorporations

29.18%

8,374,059 shares(118)

Notes: 1.	The number of shares held have been rounded down to the nearest
thousand shares.
2. 	In addition to the above, there are 1,252 thousand shares oftreasury stock.
3. 	Percentage of total shares issued is calculated after excluding
treasury stock.
4. 	The number of shares held by Japan Trustee Services Bank, Ltd.
(Trust Account) and The Master Trust Bank of Japan, Ltd. (Trust
Account) are the sums of the number of shares held by the trust
business of each bank.

Integrated Report 201955