Kaga Electronics Co., Ltd.

Financial Results Discussion
for the Third Quarter of the Fiscal Year ending March 2023
Main Questions and Answers
Date of earnings announcement: Tuesday, February 7, 2023

<Points to note>
Kaga Electronics does not hold a financial results briefing for the third quarter, but we have summarized questions
and answers from IR interviews with analysts and investors after financial results were announced, in the form of“Main Questions and Answers.” Please be aware that it is not a transcription of all matters discussed, but rather abrief summary created at Kaga Electronics’ discretion.
Please also note that the statements contained in this document that relate to the future, such as results forecasts,
are based on information currently available to Kaga Electronics and certain assumptions that have been judged
to be reasonable. Actual performance, etc. may differ substantially due to a range of factors.

Q: What was the reason for lower profit in the third quarter compared to the secondquarter?

A: While spot sales decreased due in part to easing of tight supply–demand conditions forsemiconductors and electronic components, this was offset by a production rebound in a wide
range of industries, which resulted in strong sales. Nonetheless, profit decreased because wemade a provision of approximately 1.7 billion yen for special bonuses to employees, in suchforms as inflation and one-time allowances. The information equipment business and thesoftware business are generally performing well, a trend that we expect will continue in the
coming period.
Q: What were the factors behind the decline in Kaga FEI profit compared to the second
quarter?

A: Despite an increase in net sales driven by growth in sales of Socionext products, profit declined
due to a decrease in spot sales that continued from the beginning of the fiscal year.
Q: What is the situation with respect to the components shortage? Will spot sales
continue?

A: The components shortage has almost been resolved, but the shortage is still felt in some
automotive-related products. Against this backdrop, the purchase prices of components havebeen stabilizing, and spot sales are likely to decline further toward the end of the fiscal year.
Q: Inventories have been increasing. What is your outlook for the future?
A: Inventories have been increasing in the recent quarters, but in the component sales business,these are inventories that we hold at customers’ request, while in the EMS business, theinventories are kept because the lack of even a single component can disrupt production. As
our inventories are basically tied to orders from customers, there is no risk of loss on disposal

or valuation. Still, we are looking to reduce inventories toward the end of the current fiscal
year and bring them down to around the same levels as the end of the previous fiscal year.
Q: Why have you revised upward your earnings and dividend forecasts?
A: We have revised upward our earnings forecast in view of strong third-quarter sales ofautomotive, medical equipment, and other products for a wide range of industries. Although
we anticipate that performance will continue to exceed the forecast in the fourth quarter, wehave decided to incorporate only what was overachieved in the third-quarter results because
supply–demand trends for semiconductors and electronic components, exchange rate
fluctuations, and other factors make it difficult to predict the outlook.
A forecast revision was also made to the year-end dividend, with an upward revision from theprevious forecast of 100 yen per share to 120 yen per share by adding 20 yen of extraordinary
dividend. As a result, the annual dividend will be 220 yen, an increase of 100 yen from 120
yen paid in the previous fiscal year.
Q: What is your outlook for the fiscal year ending March 31, 2024?
A: We anticipate that our operating environment in the next fiscal year will be challenging, as it isprojected that spot sales will virtually disappear and that demand for components will decrease
due to customers’ inventory adjustments. On the other hand, in terms of expenses, there will
be no increase in personnel expenses that were incurred in the current fiscal year, such as
special bonuses and inflation allowances.
Q: What is the state of earthquake damage at the Turkish plant?
A: There was no earthquake damage to our plant in the Republic of Türkiye, as it is located inDüzce, which is more than 1,000 km from the epicenter. In this connection, in order to aid
those impacted by the earthquake and contribute to recovery and reconstruction in theaffected regions, we made a 10 million yen donation in relief funds through the Embassy ofTürkiye in Japan.
<News Release: Aid to those affected by the earthquake in Türkiye >https://www.taxan.co.jp/news-information/wp-content/uploads/2023/02/E20230303r21.pdf