Kaga Electronics Co., Ltd.
Financial Results Briefing
for the Fiscal Year Ended March 2023
Main Questions and Answers
Date and time: 4:00-5:00 pm, Thursday, May 25, 2023
(Online Briefing)<Points to note>
The “Main Questions and Answers” has been posted as a reference for the convenience of those who were unable
to attend the financial results briefing. Please be aware that it is not a transcription of all matters discussed at thefinancial results briefing, but rather a brief summary of those points that Kaga Electronics deems to be key.
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.

Results for the fiscal year ended March 2023 and earnings forecasts for the fiscal year ending March 2024
Q: What factors were behind the strong earnings in the fiscal year ended March 2023? Iunderstand that spot sales grew more than expected in the 1Q, 2Q, and 3Q, but are
there any factors contributing to the strong 4Q results?

A: We believe that our solid efforts to reduce inventory have resulted in our earnings performance.
Q: The EMS business was strong in the previous fiscal year but a decrease in profit isprojected for the current fiscal year. How much is this decrease in profit expected tobe? Also, why does Kaga Electronics see a decrease in profit, whereas other EMS

companies in the same industry expect an increase in profit? Please explain yourforecast for the current year.

A: In the fiscal year ended March 2023, the EMS business posted sales of about 150 billion yen,and the budget for the fiscal year ending March 2024 is 140 billion yen, which would result in a
10 billion yen decrease. We project a decrease of 0.5 billion yen in profit from 9.5 billion yen to
9.0 billion yen. These figures are based on a conservative estimate, by adding up figures fromall business sites and segments. I expect that our profit will be at least as high as in theprevious fiscal year.
Q: Amid a downturn in the electronics industry as a whole since the second half of fiscal

2022, I find it remarkable that sales have continued to increase in the fourth quarter offiscal year ended March 2023. What is your forecast for the fiscal year ending March

2024? Should we accept that the situation is getting worse and more difficult or not?
A: I would say that all companies are experiencing an excess of inventory. Our company began
inventory adjustment in 2022, but quite a few companies had not yet started it until thebeginning of 2023. We think that many trading companies and manufacturers are also in theprocess of adjusting their inventories, so the adjustment will not be completed in the first half,
and in some cases, it may not even be completed by the end of the year.

-1-Q: The forecast for the fiscal year ending March 2024 states that spot sales would be

reduced to zero, but will there be any residual sales? Also, you say that SG&A will be
reduced by 2.3 billion yen, but do you have a specific target in mind?

A: For the fiscal year ending March 2024, we can assume that there will be almost no spot sales.
We expect to achieve cost reductions as well.
Q: Regarding Kaga Electronics’ plans for the first and second half of the fiscal year ending
March 2024, in the first half, net sales and operating income are expected to be 148billion yen and 7.2 billion yen, respectively, and in the second half, operating income isexpected to be 11 billion yen on net sales of 172 billion yen. Please explain the level ofoperating income of 7.2 billion yen in the first half versus 11.0 billion yen in the secondhalf, as well as the rationale for this, even if it is only a rough estimate. You expect anincrease in the EMS business, given the absence of spot sales. Does this mean thatprofit margin of the EMS business will rise in the second half? Or do you see the profit

margin rising to some extent from the sales of electronic components trading

companies?

A: Looking at the quarterly results, the profit margin in the second half of the fiscal year ended
March 2023 was low at 5.4% due to one-time payments of inflation allowances and year-end
bonuses to employees.
Year-end bonuses will be paid once profits exceed expectations, so the current budget for thefiscal year ending March 2024 does not reflect one-time payments, including inflation
allowances. This is one of the factors behind SG&A reductions, and we expect the profit margin
to rise at 6.4% in the second half of the fiscal year ending March 2024.

Q: What is the scale of the business for Socionext products at Kaga FEI? Please also explain
your plan for the future.

A: Kaga FEI is the distributor for Socionext’s business, which had sales of about 80 billion yen inthe fiscal year ended March 2023. We expect sales for the fiscal year ending March 2024 to beabout the same as in the fiscal year ended March 2023.

Medium-Term Management Plan 2024 and Medium- to Long-Term Sustainability Management Plan
Q: Regarding the revisions to the Medium-Term Management Plan, you announced achange of the operating income target from the previous 20 billion yen to 30 billion yenor more. What is the reason for this change?

A: The premise for the revisions was the fact that operating income in the fiscal year ended March2023 surpassed 30 billion yen even with an increase in expenses that included inflation
allowances and one-time payments. In addition, even though spot sales are excluded fromthese figures, we see that actual results have clearly demonstrated a true earning potentialthat exceeds 30 billion yen. This is why we decided to revise the plan.
For the fiscal year ending March 2024, we are forecasting a decrease in profit due to inventory
adjustments by our customers and other factors that may depress earnings. However, we-2-

expect to return to a growth path in the fiscal year ending March 2025, the final year of theMedium-Term Management Plan, as the situation is expected to be resolved.
Q: Recently, semiconductor trading companies are moving toward a business integration
with each other, but I would like to ask you about your M&A policy in terms ofmanagement targets. What, if any, partners are you considering?

A: We will continue to actively consider partners, including those in the same industry.
Q: The fiscal year ending March 2025 marks the final year of the Medium-Term

Management Plan. It may be early to say, but would it be a good idea to aim to becomea 1 trillion-yen company in the next medium-term management plan, which is twoyears ahead of schedule?

A: Yes, we are aiming for that. We would like to go beyond the 1 trillion-yen target and aim evenhigher.
Q: Regarding the introduction of renewable energy at domestic manufacturing sites, as
stated in the Medium- to Long-Term Sustainability Management Plan to use 100%

renewable energy, do you have any specific details or timelines for the installation ofsolar panels and the calculation of power generation?

A: In Japan, Kaga EMS Towada Co., Ltd. in Aomori Prefecture is calculating the amount ofelectricity to be generated and designing the site to install solar panels in the fiscal year ending
March 2024. In addition, we are also considering installing solar panels at Kyokuto Electric Co.,
Ltd. in Tottori Prefecture, which is expected to be installed during the fiscal year ending March2025.

Other
Q: When Satori Electric recently conducted a share buyback, your company was selling its

shares. What made you become a major shareholder of Satori Electric, and why did you
sell your shares this time?

A: As to how we became the major shareholder, we decided to invest in Satori Electric in the belief
that its stock price was not valued in terms of the price-to-book ratio and that such a situation
was unusual for a company in the same industry. Then, as we continued to purchase thecompany’s shares, we eventually acquired a large shareholding of more than 10% of thecompany.
Even though we were able to purchase shares of Satori Electric, when it came time to sell ourshares, the illiquidity of the company’s stock made it difficult for us to sell our holdings in themarket in a single transaction. At that time, Satori Electric approached us about acquiring its
shares through a tender offer, and we agreed to accept the offer if the company agreed tounderwrite the transaction in a lump sum.

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Q: Did you hold Satori Electric’s shares as a net investment? Were you not considering abusiness alliance with the company?

A: Yes, it was a net investment.
Q: Macnica achieved sales of 1.0 trillion yen in the fiscal year ended March 2023. Now that
Ryosan and Ryoyo Electro have announced their management integration, how do you
see the changes in the industry as a whole?

A: We think that Macnica’s achievement of 1.0 trillion yen in sales is truly remarkable. We also findit impressive that Ryosan and Ryoyo Electro are integrating their management. I personally
hope that such reorganizations will take place more frequently in the future. Kaga Electronics
would also like to take aggressive steps to survive in this challenging environment.

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