The Investors Meeting for a Results
Briefing of the Interim FY 2008

September 26, 2007
KAGA ELECTRONICS CO., LTD. (TSE 1st section, 8154)
2-2-9 Hongo, Bunkyo-ku, Tokyo 113-8503 Tel: (03) 4455-3131 Fax: (03) 3815-6807

http://www.taxan.co.jp

Financial Highlights of the Interim FY 20082
© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Financial Highlights of Interim FY 2008
Consolidated Statements of income
Interim FY2007
Net sales
Cost of sales
Gross Profit

126,183

100.00%87.69%
平成18年3月期 110,653
平成19年3月期（予）15,53012.31%

Selling,general andadministrative expenses（million yen）
Interim FY2008

Change136,139 100.00%

9,956

119,31087.64%

8,657

16,82812.36%

1,298

12,70410.07%

13,951

10.25%

1,247

2,826

2.24%

2,876

2.11%

50

Non-operating income

424

0.34%

482

0.36%

58

Non-operating expenses

209

0.17%

471

0.35%

262

3,040

2.41%

2,887

2.12%

-153

-54

-0.04%-591-0.43%

-537

2,987

2.37%

2,297

1.69%

-690

1,448

1.15%

1,459

1.07%

11

-102

-0.08%

131

0.10%

233

-4

-0.003%-59-0.04%

-55

1,645

1.30%

765

0.56%

-880

Operating income

Ordinary income
Extraordinary income
Income before income taxes
and minority interests
Income,Inhabitants andenterprise taxes
Income tax adjustment
Minority interest
income/loss of
consolidated subsidiaries
Net income

3© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Consolidated Sales by Business Category (Interim FY 2007 and 2008)(million yen)

Information equipment

EMS
Semiconductors
General electronic
components

OthersTotal

160,000

Interim FY2007

Interim FY2008

Change140,000

28,17338,00729,855

22.3%
30.1%
23.7%

28,30142,431
29,843

20.8%
31.2%
21.9%

128
4,424
-12

120,000

13,62810.8%

16,626

12.2%

2,998

16,51913.1%

18,936

13.9%

2,417

20,000126,183

100.0%

136,139100.0%

9,956

0(million yen)
136,139
126,183

18,936

100,000

16,51913,62880,00029,85529,84338,00742,43160,00040,000

Others

16,626

General electronic
components
Semiconductors
EMS
Information equipment

28,17328,301

Interim FY2007

Interim FY2008

Major changes■EMS : Sales up ¥ 4,424 million （+11.6%）
Sales in this segment increased by 4,424 million yen year on year to 42,431 million yen. The primary reason was
higher orders for LCD units used in amusement equipment in Japan, a market sector where the KAGAELECTRONICS Group has a strong position.
■「General electronic components : Sales up ¥ 2,998million （+21.9%）
OTSUKA ELECTRIC, which sells thermal products and general electronic components, joined the KAGAELECTRONICS Group in December 2006. As a result, this company is making its first full-year contribution to
consolidated performance in the current fiscal year. In addition, sales in this segment benefited from growth insales of electronic components used in amusement equipment in Japan. The result was a year-on-year increase of
2,998 million yen in segment sales.

4© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

・Selling, General and Administrative Expenses (Interim 2007 and 2008)
Changes in SG&A expenses(million yen)Interim FY2007

Interim FY2008

AmountAmountPacking andfreight
R&D
OthersPct.

ChangePct.

14,000

1,340

10.5%

1,411

10.1%

71

324
930

2.6%
7.3%

295
1,126

2.1%
8.1%

-29
196

Total selling expenses

2,594

20.4%

2,832

20.3%

238

Depreciation
Rent
Personnel
Others

172
991
5,639
3,308

1.4%
7.8%
44.4%
26.0%

164
1,050
6,348
3,557

1.2%
7.5%
45.5%
25.5%

-8
59
709
249

Total administrative
expenses

10,11079.6%

11,119

79.7%

1,009

Total SG&A

12,704100.0%

13,951100.0%

16,0001,247

12,704

13,951
3,557

12,0003,308
10,000(million yen)
Others
Personnel
Rent
Depreciation
OthersR&D
Packing and freight

8,000
6,348
5,639
6,000

4,000

2,000

991
172
930
324

1,050
164
1,126
295

1,340

1,411

Interim FY2007

Interim FY2008

0

Major changes
Selling expenses: OTSUKA ELECTRIC, which was consolidated in the second half of the previous fiscal year, HANZAWA(HK), which was consolidated in the current fiscal year, and newly established subsidiary KAGA AMUSEMENT allcontributed to growth in selling expenses. There was also growth in advertising, marketing and sales promotion expenses at
KAGA COMPONENTS. The result was a year-on-year increase of 238 million yen in selling expenses.
Administrative expenses: Due to the inclusion of expenses at OTSUKA ELECTRIC, HANZAWA (HK) and KAGAAMUSEMENT, administrative expenses were 1,009 million yen higher than one year ago. In addition, personnel expenses
climbed because of growth in the workforce as the scale of operations increased.
*Increase in personnel expenses: The Group’s workforce increased by 229 during the first half of the current fiscal year (43 insales departments, 59 in administrative departments, 48 in technical departments and 79 in manufacturing and other positions).

5© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Financial Highlights of Interim FY 2008
Consolidated Balance sheets（ASSETS）
Current assets
Cash and cash equivalents

Notes and accounts
Inventories
OthersFixed assets
Property,plant andequipment
Intagible assets
Investment and otherassetsTotal assets

InterimInterim
FY2007
FY2008
115,745
123,714
98,597
105,644
平成18年3月期
14,64914,17459,78065,515
19,481
20,506
4,687
5,449
17,14818,070(million yen)

Change(LIABILITIES)
7,969
Current liabilities
7,047
Notes and accounts
平成19年3月期（予）-475
payable5,735
Short-term bank
1,025
loans
762
Others
922

5,212

5,132

-80

1,324

1,884

560

10,611

11,052

441

115,745

123,714

7,969

Long-term liabilities
Long-term bank
loans
Oters
（NET ASSETS）
Owners' equity
Paid-in capital
Capital surplus
Earned surplus
Treasury stock
Valuation and translation
Minority interests
Total liabilities and net
assetsInterimInterimChangeFY2007
FY200865,12870,764
5,636
58,387
66,1907,803
48,21750,127

1,910

4,714

9,823

5,109

5,456
6,741

6,240
4,574

784
-2,167

3,437

1,370

-2,0673,304
50,617

3,204
52,950-100
2,333

12,133
13,912
23,037
-76
1,329
281

12,133
13,912
25,210
-83
1,714
61

0
0
2,173
-7
385
-220

115,745

123,7147,969

6© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Cash Flows (FY 2007 and Interim FY 2008)(million yen)

Fiscal 2007

Interim FY 2008

ChangeOperating activities-1,120-655

465

Investing activities-2,141

-818

1,323

平成18年3月期-2,586
平成19年3月期（予）

1,034

3,620

Effect of foreign exchange
Net change in cash and cash
equivalents
Cash and cash equivalents at
beginning of year
Cash and cash equivalents at end of
year

274

46

-228

-5,573

-394

5,179

20,131

14,558-5,573

14,558

14,164-394

Financing activities

Major changes
Operating activities
Net cash used in operating activities was 655 million yen . The major reasons were a decrease in notes and accounts receivable and anincrease in income tax payments.
Investing activities
Net cash used in investing activities was 818 million yen. The primary uses of cash were payments for the purchase of investment securities
and for the purchase of property, plant and equipment.
Financing activities
Net cash provided by financing activities was 1,034 million yen.. Cash was provided mainly by proceeds from short-term bank loans.

7© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Forecast for the Fiscal Year Ending March 2008
Statements of income FY07 Performance and FY08 (Consolidated)(million yen)

Fiscal07
Net sales
Cost of sales

Fiscal 2008 (est.)

Change

平成18年3月期 269,014
平成19年3月期（予）100.0%

290,000

100.0%

20,986236,21487.8%

254,350

87.7%

18,13632,79912.2%

35,650

12.3%

2,851

25,8849.6%

27,800

9.6%

1,916

6,915

2.6%

7,850

2.7%

935

490

0.2%

250

0.1%

-240

7,404

2.8%

8,100

2.8%

696

5

0.0%

-150

-0.1%

-155

7,410

2.8%

7,950

2.7%

540

3,067

1.1%

3,750

1.3%

683

4,343

1.6%

4,200

1.4%

-143

Gross profit
Selling,general andadministrative expenses
Operating income
Non-operating income
Ordinary income
Extraordinary income
end losses
Income before income taxes
and minority interest
Income tax
Net income

8© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Consolidated Sales Forecast by Business Category (Fiscal 2007 and 2008)(million yen)

Informationequipment
EMS
Semiconductors
Generalelectronic
components
OthersTotal

Interim FY2007

Interim FY2008

58,73721.8%

58,50084,29060,849

31.3%
22.6%

88,60069,000Change

％

20.2%

-237

-0.4%

30.6%
23.8%

4,310
8,151

5.1%
13.4%

300,000
250,000
200,000
150,000

28,75410.7%

33,000

11.4%

4,246

14.8%

36,382
269,01413.5%
100.0%

40,900290,000

14.1% 4,518
100.0% 20,986

12.4%
7.8%

Major changes(million yen)

350,000

100,000
50,000290,000
269,014

36,38228,75460,84940,90033,00069,000

OthersGeneral electronic
components
Semiconductors
EMS

84,29088,60058,73758,500FY2007

FY2008

Information equipment

0

EMS: Sales were up 4,310 million yen (5.1%) because of strong sales of LCD units used in amusement equipment in Japan and growth inapplications for overseas EMS operations.
Information equipment: Although a downturn in sales of PC-related products is foreseen, sales were down only 237 million yen (0.4%) year
on year because of higher sales of new models of portable audio products in the United States.
Semiconductors: Higher sales of semiconductors used in amusement equipment and digital televisions were mainly responsible for the 8,151
million yen (13.4%) increase in sales.
General electronic components: Sales increased 4,246 million yen (14.8%) because of higher sales at OTSUKA ELECTRIC and growth insales of electronic components used in amusement equipment.
Others: Higher sales of Kodak products and new products resulted in sales growth of 4,518 million yen (12.4%).

9© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

・Selling, General and Administrative Expense Forecast (Fiscal 2007 and 2008)
Changes in SG&A expenses

Packing andfreight
R&D
OthersTotal selling
expenses
Depreciation
Rent
Personnel
OthersTotal administrative
expenses
Total SG&A
expenses(million yen)Interim FY2007

Interim FY2008

AmountAmount

2,786

Pct.
10.8%

2,835

30,000Change25,884

Pct.
10.2%

49

364
1,711

1.4%
6.6%

618
2,147

2.2%
7.7%

254
436

4,861

18.8%

5,600

20.1%

739

367
1,999
11,731
6,926

1.4%
7.7%
45.3%
26.8%

346
2,236
12,750
6,868

1.2%
8.0%
45.9%
24.7%

-21
237
1,019
-58

27,800 (million yen)

25,000

6,868
6,926

20,00015,00021,02325,88481.2%
100.0%

22,20027,80079.9%
100.0%

1,177
1,916

Others
Personnel
Rent
Depreciation
OthersR&D
Packing and freight

12,75011,731

10,000

5,000

1,999
367
1,711
364

2,236
346
2,147
618

2,786

2,835

Fiscal 2006

Fiscal 2007

0

Major changes
Selling expenses: OTSUKA ELECTRIC, which was consolidated in the second half of the previous fiscal year, HANZAWA (HK), which wasconsolidated in the current fiscal year, and newly established subsidiary KAGA AMUSEMENT all contributed to growth in selling expenses.
There was also growth in research and development expenses and advertising, marketing and sales promotion expenses at KAGACOMPONENTS. The result was a year-on-year increase of 739 million yen in selling expenses.
Administrative expenses: Due to the inclusion of expenses at OTSUKA ELECTRIC, HANZAWA (HK) and KAGA AMUSEMENT,
administrative expenses were 1,177 million yen higher than one year ago. In addition, personnel expenses climbed because of growth in theworkforce as the scale of operations increased.
*Increase in personnel expenses: There was a net increase of 51in the Group’s workforce during the first half of the current fiscal year (increasesof 25 in sales departments, 31 in administrative departments and 70 in technical departments and a decrease of 75 in manufacturing positions).

10© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Highlights of First Half of Fiscal 2008
〜KAGA ELECTRONICS Group Subsidiaries andOverseas Strategy〜

I. KAGA COMPONENTS
II. KAGA HIGHTECH
III. Overseas Strategy
IV. KAGA SPORTS/KGF

11© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

I. KAGA COMPONENTS

12© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Profile of KAGA COMPONENTS
Name:

KAGA COMPONENTS CO., LTD.

Established: March 1968
Capital:¥400 million

Head office: 2-2-9 Hongo, Bunkyo-ku, Tokyo
President:

Yukio Takashi (director of KAGA ELECTRONICS)

Employees: 318
Activities:

Development, design, manufacture and sale of power upplies
Accessories for AV remote controls, etc.
Development, manufacture and sale of projectors and other finishedelectronic products and outsourced assembly of circuit boards

Branches:

Osaka, Hamamatsu

Factories:

Niigata, Kumamoto

Affiliates:

KAGA COMPONENTS (MALAYSIA), KAGA COMPONENTS (HONG
KONG), GUANGZHOU KEIDENKI, DONGGUAN POWERTEKELECTRONICS, KAGA INSTRUMENTS SHANTOU

13© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Activities of KAGA COMPONENTS〜KAGA COMPONENTS handles all EDMS operations of the KAGAELECTRONICS Group〜
Advancing from EMS to EDMS → The transition from a “kitting business” to a “fabrication business”① Projector business‥Planning, development, manufacture and sale of
TAXAN projectors② DMS business‥Development and manufacturing services for
manufacturers in Japan③ Power supply assembly business‥Planning, development, manufacture and sale ofpower supply products using KAGA’s own brands

14© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ KAGA COMPONENTS Sales and Earnings＜Net sales＞＜Ordinary income＞(Unit: Million yen)

(Unit: Million yen)

1000

30,00025,000

500

806

544

13,000324

558

20,000

170

85

124

0
-17

6,568
10,0005,000

0Projectors
Power supplies/DMS

8,600

15,000

0

9,235

FY04

0

0

-801

-500

3,658

-1,332

14,000

8,396

9,447

9,499

FY05

FY06

FY07

9,942

10,000

FY08(Plan)

FY09(Target)

-856

-1000

FY10
(Target)

-1500

FY04

FY05

FY06

FY07

FY08

(Plan)FY09

FY10(Target)(Target)※DMS business is included in the power supply business in the graphs.

15© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ KAGA COMPONENTS and the Projector Business (1)〜Highlights of the Projector Business〜

2000 Started selling the projectors of PLUS Vision, a subsidiary of officeproducts manufacturer PLUS, at major home electronics retailers inJapan.

2001 In addition to selling finished products,
KAGA ELECTRONICS started assisting Plus Vision
by supplying components and providing EMS services.

TAXAN projector
PS Series

2006 Plus Vision asked KAGA ELECTRONICS to take over the projectorbusiness, and the business was transferred to KAGACOMPONENTS.
16© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ KAGA COMPONENTS and the Projector Business (2)① Strategy for the EMS business＜Future Threats＞・・・『Intense Competition』 and 『Slowing Growth』• Improvements in component procurement and technological skills at
companies in China and other countries• Generalization of the EMS business• Return to internal manufacturing by customers (manufacturers)＜Create a distinctive EMS business＞• Specialize in specific markets (office equipment, heating and cooling equipment,
automotive devices, etc.) → Maintain current level of activities• Base EMS operations on exclusive core technologies• Offer skills for all processes, beginning with planning and designs (ODM)

The need to add EDMS to the existing EMS business

Become a 『fabrication business』
17© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ KAGA COMPONENTS and the Projector Business (3)② Why did we select the projector business?
Leverage existing technologies of the KAGA ELECTRONICS
Group and establish core technologies
Optical technology

Establish image-related technologies
that can become the nucleus of
future core technologies

Developed LCOS television
Pursue new technologies for lightsources

DLP opticaltechnology

Acquire through joint development activities with
PLUS Vision

Imagingtechnology

Development of TAXAN monitors

Further refinements in existing
technologies

Power supply
technology

Ballast power supply* technology developed by KAGACOMPONENTS will be a key device for projectors

Start increasing sales of projector
light source power supplies*Ballast power supply: A power supply that converts high voltages and controls current.

・・・Use 『existing technologies』 of the KAGA ELECTRONICS Group→ Capture synergies with the projector business
Create a new EDMS business by leveraging and building on technological skills

18© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ KAGA COMPONENTS and the Projector Business (4)〜Strategy for projector business〜
Today

Offer a broad line of models as a projector
manufacturer using its own brand■ Product strategy
・・Sell projectors using KAGA’s
TAXAN brand■ Regional strategy‥80% share of overseas sales‥The entire world is the targetedmarket■ Sales strategy
・・Sell products anywhere
opportunities exist

Goal

Offer specialized products for specific markets as aprojector manufacturer using its own brand■ Differentiation from competitors
・・Dust-prevention/Durability to prevent
malfunctions■ Limit sales to selected areas
・・Focus on regions (markets) where KAGA has apowerful sales network
・ In China, 26 sales bases/Strength in educationand public-sector markets
・ In India, 8 sales bases/Strength in education
market■ Sales strategy for specific markets
・・Focus on schools and other public-sector
institutions
・・Markets that are growing and that competitors
cannot enter※ Reexamine business plan through FY08, including the possibility of withdrawing from this business19© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ KAGA COMPONENTS and the Projector Business (Additional information)【Additional information】Strategy for the projector business＜Problems involving profitability＞① Started development activities from the ground up .. There were no new products when the business was sold (April2006) because product development activities had stopped.
・・・Develop new products → Substantial up-front R&D expenses and expenses for new product development
workforce② Shortage of products that match market needs
・・・No products that reflect market needs → Insufficient sales

Unable to reach the break-even point＜Cost cuts and sales growth＞① Focus on product development・・・Develop products for specific markets (concentration of R&D and new productdevelopment personnel expenses)② Use a different production system・・・Move production to China (was forced to manufacture products in Japan when
the business was purchased)③ Focus sales activities on selected regions・・・Concentrate sales resources on KAGA’s own sales channels →Increase sales by using efficient sales activities『Tight strategic focus』 → Target only selected markets, use local manufacturing and sales(FY09 target is sales of 85,000 units)（Sales plan: ¥8.6 billion）© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

20

II. KAGA HIGHTECH

21© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Profile of KAGA HIGHTECHName:KAGA HIGHTECH CO., LTD.

Established: November 1947
Capital:¥310 million

Head office: 2-2-9 Hongo, Bunkyo-ku, Tokyo
President:

Shinsuke Takahashi (director of KAGA ELECTRONICS)

Employees: 232
Activities:

Sale of film, color paper and other photography products, cameras and digital cameras
Sales agent for Kodak products in Japan
Sale of PCs, audio devices, media and other products to major retailers in Japan

Branches:

Sendai (Eastern Japan Sales Division)
Nagoya, Osaka, Fukuoka (Western Japan Sales Division)

Factories:

Niigata, Kumamoto

Affiliate:

Kashimura Agency Co., Ltd.

22
© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ KAGA HIGHTECH Sales（¥100 million）
900

84

800
83

700

81

207

63

203

600

71

500

0

199

Kodak
Photography
ITM

217

112

200

400
300

550
500
450

200
325

276

305

274

297

FY04??

FY05

381

383

FY06

FY07

336

100
0

FY00

FY01

FY02

FY08

(Plan)

FY09(Target)

FY10(Target)FY11(Target)＊KASHIMURA (now KAGA HIGHTECH) became a consolidated subsidiary in October 2006.
＊KASHIMURA became the Japanese sales agent for Kodak in July 2006 following the sale by Kodak of its domestic
sales operations for consumer products.
＊KASHIMURA was renamed KAGA HIGHTECH in October 2006. At the same time, the major operations of KAGAELECTRONICS’ ITM business were combined with this company. In the above graph, ITM sales for FY00 through FY04
are the performance as the ITM business of KAGA ELECTRONICS.
© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

23

■ Activities of KAGA HIGHTECH(Unit: Million yen)
FY07
Products soldPhotographybusiness

Kodakbusiness

ITM business• Cameras• Digital cameras・Single-use
cameras• Film• Photo printing paper• Camera-related products• Batteries〜Kodak products〜• Digital cameras・Single-use
cameras• Film• Photo printing paper• Camera-related products• Batteries• Personal computes• Portable audio players• Digital cameras• Memory cards• Projectors• Printers• DVD players

FY08

FY09 (Target)

Customers• Camera shops• DPE shops• Convenience stores• Drug stores• Home improvement centers• Large retailers• Kiosk• Large consumer electronics stores• Consumer electronics specialty shops• Camera shops• DPE shops• Convenience stores• Drug stores• Home improvement centers• Large retailers• Kiosk• Large consumer electronics stores• Consumer electronics specialty shops• Large consumer electronics stores• PC specialty shops• EC shops

1H

2H

1H

2H

1H

2H

Net sales

9,810

11,312

10,062

10,0009,000

11,000Operatingincome

-425

-156

-20

-39

60

60

Net sales

2,681

4,310

3,753

3,418

3,700

4,300

Operatingincome

88

-19

34

-7

36

40

Net sales

20,194

16,20817,41518,00021,000Operatingincome

490

33

214

207

240

＊KASHIMURA became the Japanese sales agent for Kodak in July 2006 following the sale by Kodak of its domestic sales operations for consumer products.
＊KASHIMURA was renamed KAGA HIGHTECH in October 2006. At the same time, the major operations of KAGA ELECTRONICS’ ITM business were combined with this company.
＊In FY07, ITM sales and earnings are available only for the second half.
© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

24

■ KAGA HIGHTECH Issues and Risks＜Issues＞
1. New products and businesses
・・・Add new domestic and overseas suppliers
Increase sales and improve the gross margin by adding new products and businesses
2. Improve sales efficiency① Integrate core IT systems・・To be completed by March 2008
② Review distribution costs・・Consolidate distribution warehouses and improve how eachcustomer is served③ Realign organization and use workers more productively→ SG&A expense ratio: Goal is to cut this ratio from 10.1% (FY07) to 7.6% in FY09

＜Risks＞
z Switch by suppliers to direct sales →Example) Sale of Apple products directly to large retailers
z Contraction of chemical film market

25© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ New Businesses at KAGA HIGHTECH＜Development of new businesses＞① Photo and imaging products
Photo catcher
Digital photo frame
Photo book

Digital photo frame
Photo catcher② PC data devices
Create original products that use
KAGA ELECTRONICS technologies③ Content
Operation of e-commerce site

Photo book26
© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

III. Overseas Strategy of
the KAGA ELECTRONICS Group

27© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Overseas strategy
Sales at Overseas Subsidiaries(¥100 million)

600
12
13
29

500
12
9
36

16
9
52

17
28
46

85
113

400

130

83

U.S.
EuropeOther Asia
Thailand
China

300

200

22
17

77

100

19
75

0

30

8
35
18

52

60

56

1998

2000

14

17

37

27

44

110

20
11
38

14
4
43
325

38

125

2002

156

395

34

360

330

169

2004

2006

2008

FY

(Plan)

28© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Overseas strategy＜EMS business＞ 〜Achieve greater specialization and efficiency by focusing on selected applications〜〜Shift focus from electronics to mechatronics〜

KAGA (HONG
KONG)

〜Current major applications〜〜Applications to be added〜(FY07 actual)(FY08 plan)

Multi-function printers, printers, projectors
Net sales

FY11 target

ATMs, information equipment, video equipment(simple TVs), automotive devices¥17.3 billion¥19.9 billion¥25 billion

Multi-function printers, printers, projectors
Musical instruments (electronic pianos), healthmonitoring and related devices,

KAGA SHANGHAIELECTRONICS¥11.5 billion
Heating and cooling equipment, officeequipment, consumer electronics (TVs)

Net sales

Net sales

Net sales
KAGA COMP
MALYSIA

Automotive equipment, flat-screen TVs

0
Information equipment, optical products

Net sales¥1.7 billion¥16.8 billion¥12.7 billion
Automotive equipment, flat-screen TVs¥4.0 billion¥1.1 billion
Amusement products, educational toys soldunder its own brand

HANZAWA HK¥9.0 billion¥11.5 billion
Air conditioning equipment, office equipment

KAGA EUROPE¥25 billion

Housing devices
Net sales

KAGA
ELECTRONICS(THAILAND)

automotive devices, industrial devices¥2.9 billion
Educational toys
¥4.8 billion¥2.1 billion
Information equipment, optical products¥2.0 billion¥3.0 billion

29© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Overseas strategy＜Components business＞ 〜Closely monitor opportunities associated with shift of manufacturingfrom Japan to other countries〜〜Increase efforts to start operations in areas where KAGA is not yet active〜〜Current major applications〜(Fiscal 2007 results)
KAGA USA

Amusement /video equipment

Net sales¥1.9 billion
Air conditioning equipment,
video/audio equipment

KAGA EUROPE〜New applications〜(Fiscal 2011 plan)
Provide group companies with information about advanced technologies etc. in the U.S.

¥1.8 billion

Fiscal 2011 targets¥5.0 billion

Increase sales to European operations of Japanese companies and search for new
products to sell
Start operations in Central and Eastern Europe, including Turkey¥4.0 billion

Focus on digital televisions, including automotive products

Net sales¥1.0 billion
Communication equipment

KAGA KOREA

Net sales
KAGA
SINGAPORE
KAGA (TAIWAN)
ELECTRONICS
KAGA DEVICES(H.K.)KAGA (DALIAN)
ELECTRONICS
KAGA IMPEX¥900 million
Video/audio equipment

Net sales¥3.9 billion
IT devices

Net sales

Video equipment¥8.4 billion
IT/video equipment¥900 million

Net sales¥4.5 billion¥1.5 billion
Increase sales to current customers and serve as a market research base for the
ASEAN region¥6.0 billion¥3.8 billion
Manufacturers of semiconductors, LCDs and other products in Taiwan¥3.5 billion

Net sales¥2.9 billion
Increase sales to major overseas communications equipment manufactures anddevelop ties with new customers

Marketing

Net sales© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

¥2.6 billion
Increase sales to current customers and increase sales in China. Search for new
products.

¥17.5 billion¥8.0 billion
Provide component kitting and EMS services to the Japanese companies with
operations in northern China.

¥2.5 billion¥900 million
Marketing and sales for Electronics-related businesses in Russia

0¥10.0 billion0¥6.0 billion30

■ Overseas Strategies〜New overseas strategies〜
1. The Components Business・Locate new vendors→Purchase quality, value-added products at low prices
・A closer relationship with sales activities in Japan→Target opportunities created by the shift of manufacturing from Japan toother countries
・Increase overseas sales activities targeting foreign companies→Work more closely with overseas trading companies

Take advantage of KAGA’s position as an independent trading company→ Able to do business with all electronic component manufacturers worldwide→ Use the KAGA global network to gather information on new technologies andcapture sales agency contracts© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

31

■ Overseas strategies〜New overseas strategies〜
2. The EMS Business・Improve procurement capabilities→Establish a system for the procurement of parts・・・Use IT to enable component
manufacturers and the KAGA ELECTRONICS Group to share information
・Expand operations to more regions→ Look for more opportunities in regions where KAGA already has operations(Hong Kong, Shanghai, Thailand, etc.)→ Start operations in countries with emerging economies
・Asia・・・Vietnam, Philippines
・BRICS・・・India, Brazil, Russia, Eastern Europe
・Target more applications → Extend operations to cover mechatronics
Focus on marketing activities in regions where KAGA already has operations tocapitalize on growth opportunities
Start operations in countries with emerging economies to benefit from new sources ofdemand32© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

IV. Operations of KAGA SPORTS and KGF

33© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ KAGA SPORTS and KGF① KAGA SPORTS② KFG

・Became profitable as lease negotiations
produced an improvement in profit margin

・Smaller loss because of separation of external sales
operations and other actions

3,000
2,489
2,500
2,000

2,314

2,170

17

(Unit: Million yen)

(Unit: Million yen)
50
2,752

173
29

155

0

-12

-30

Net Sales

1,500

100
-100

1,000

-123
-159

Ordinary
income

-150

-162

0

-200
2H/05

1H/06

2H/06

1H/07

2H/07

-10
-20

150

1,862
-50

500

0

200

91

84

-40

-44

-50

-51
50

Net Sales
Ordinary
income

-60

61
-70

-70

1H/06

2H/06

-70
-80

0
1H/05

1H/07

2H/07

＜Cost cutting and higher sales of new products・・・Back to profitability＞＜Improved organization and reviewed exhibition plans・・・Smaller loss＞

・Negotiated lower leases for unprofitable stores and reduced floor area ofstores・Spun off external sales operations to focus exclusively on the restaurant
business

・Negotiated lower prices from vendors

・Restricted new restaurants to sites with good prospects for strong
earnings

・Prioritized sales of original products with high profit margins
・Increased sales of golf club head speed meters and other electronic products

・Reviewed the cost of food and other materials procured

34© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

KAGA ELECTRONICS CO., LTD.
Century Tower, 2-2-9 Hongo, Bunkyo-ku, Tokyo 113-8503

Contact: Public Relations DepartmentTel:03-4455-3131

Fax: 03-3815-6807
E-mail：webmaster@taxan.co.jp

http://www.taxan.co.jp
35© 2007 KAGA ELECTRONICS CO.,LTD All Rights Reserved.