My name is Kado, and I am the President of Kaga Electronics. Thank you for yourconstant support of the Company and our IR activities. Today, my part is titled“Kaga Electronics Group Growth Scenario” and I will give an explanation focusingon the outline of Medium Term Management Plan 2021, which was released on the6 th of this month.

· To begin with, I will review our major achievements since 2016 in relation to themajor themes identified to achieve growth for the Group, in order to reflect on thecurrent medium term management plan.
· The first theme is “expanding the EMS business.” For the last several years, wehave given priority to expanding overseas manufacturing sites. With regard to EMSsites, we follow our customers as they expand from Japan by establishing Chineseproduction sites, and continue to do so as customers expand into Thailand and theASEAN region following China + 1 policies, as well as into the Americas and Europeincluding Mexico and Turkey, and most recently into India. By doing this, we havenearly completed the first phase of the Company’s global EMS site plan in theperiod from 2016 to 2018.
· The second theme is “structural reform.” Group companies have promotedrestructuring and integration. The purpose of doing this is to eliminate unproductivecompanies, organizations, and people, and to transition to an efficient and sturdycorporate structure.
· The final theme is “venture investment.” In the three-year period from fiscal 2017to fiscal 2019, the Company promoted investment activities in venture companiesand start-ups that provide unique technologies, products, and services, with abudget of 5 billion yen. To date, approximately 1 billion yen has been invested in 21companies. Each investment has been small, ranging from tens of millions of yenthrough to hundreds of millions of yen. The purpose of these investments is not togain management rights, but to sow the seeds of the Group’s future revenue, suchas by supporting the investment target’s products and services with the Company’ssales and manufacturing capabilities and by developing new products andbusinesses by combining the technologies of the Company and the investmenttarget.

· The current medium term management plan listed three KPIs for the final year ofthe plan (FY2018) as shown on this slide. As you are aware, we released the fiscal2018 results forecasts a while ago, which we did not release at the beginning ofthis fiscal year. Having acquired Fujitsu Electronics as a subsidiary, it looks asthough we will achieve our net sales and ROE targets; however, unfortunately, it

looks as though we will not meet our ordinary income target.
· The main reasons we didn’t reach our ordinary income target are as follows.
Firstly, the full-scale start up of overseas factories, such as in Vietnam and Mexico,was slower than initially projected, and rather than contributing income, theyended up being a source of costs. Secondly, the income contributed by theacquisition of Fujitsu Electronics as a subsidiary was limited. Thirdly, the bankruptcyof one of our major customers caused us to record a loss. Each of these factorsimpacted the Company by hundreds of millions of yen.

· This slide indicates my medium to long term vision. That is the fundamentalprinciples that underlie the current medium term plan, as well as the next mediumterm plan.
· The first fundamental principle is “profit-oriented management.” During the threeyear period of the current medium term management plan, we gave priority toestablishing this profit-oriented management and ensuring it takes root. As part ofthis policy, we simultaneously expanded the EMS business and conducted structuralreforms, as explained previously.
· In the three years leading up to now, we set our sights on implementing profitoriented management, so we put our hand up to acquire Fujitsu Electronics as asubsidiary, with the aim of becoming the “industry leader in Japan.” In addition,having achieved that, the next target for the Group to achieve is to become a“world-class company.”· When we say “an industry leader,” we are talking about scale ― namely, the scale ofnet sales and the scale of profit. I will go into more detail in the following slides, but weaim to achieve net sales of 500 billion yen.
· Our next goal is to become a “world-class company.” Specifically, this entails theGroup being “victorious in global competition.” Internationally, we have competitorswith net sales of around one trillion yen. In order to compete with them and bevictorious, we must increase our scale accordingly. Thus, I believe that we mustcontinue to actively work to increase our scale.

· I will now talk about Medium Term Management Plan 2021, which is the maintopic of my presentation.
· As shown on this slide, our three basic policies are “enhancement of revenuebase,” “stabilization of management base,” and “creation of new business.”· In terms of “enhancement of revenue base,” our initiatives are focused on marketsin which high growth potential and profitability are expected. The fields in which wewillconduct

initiatives

areautomotive

devices,communicationequipment,environment, industrial equipment, and medical & healthcare, and we aim toachieve our goals through expansion of the EMS business and enhancement of theoverseas electronic components business.
· In terms of “stabilization of management base,” we are working to quicklyimprove profitability, which may drop sharply after acquisition of Fujitsu Electronicsas a subsidiary, as well as group management efficiency and financial soundness.
In order to do this, we are promoting group-wide cost reduction measures andestablishment of a group-wide organizational structure. Furthermore, we are awarethat enhancing corporate governance and cultivating human resources areimportant issues for us as we are rapidly growing in scale as a corporate group.
· In terms of “creation of new business,” in addition to venture investment activities,we are considering engaging in businesses that tackle social issues, such aschildcare, welfare, and nursing care.

· This slide shows the management targets for fiscal 2021, which is the final year ofMedium Term Management Plan 2021.
· The target of 500 billion yen of net sales is a 72% increase over fiscal 2018.
· From this plan, income targets are for operating income, which indicates profitfrom our primary business, rather than ordinary income. The final-year target of 13

billion yen of operating income is a 69% increase over fiscal 2018.
· The ROE target is 8% or better. Firstly, I will address the frequently askedquestion of “why is the target lower than the outlook for fiscal 2018 of 9.9%?”Actually, due to the acquisition of Fujitsu Electronics as a subsidiary, net sales infiscal will increase greatly in 2019, which is the first year of the new medium termplan; however, the amount of profit will be limited, so the profit ratio willtemporarily fall. ROE may even drop below 8%. We anticipate a scenario where,after bottoming out, we expect profitability to begin to improve from fiscal 2020,and recover to 8% or higher by fiscal 2021. I hope that we are able to hit 10% or

higher, but I am cautious by nature, so I set the medium term target at 8% orhigher.

· This slide shows a diagram of the positioning of Medium Term Management Plan2021.
· In the middle of the slide, it is written in large letters that we hope to leverage theacquisition of Fujitsu Electronics as a subsidiary to expand discontinuously theelectronic component business, which is the central pillar on which the Group wasfounded, and become the industry leader in Japan that we aim to be.
· Our short term goal is to expand the trading company business. This means toquantitatively expand the net sales and profit of the trading company business bysharing products and customer bases between companies.
· Next, we will use the quantitatively expanded trading company business to addvalue to our EMS business, which is our strength. This is our medium term goal. Inthis way, we will effect qualitative improvements, and thereby increase our profitratio. First, we will achieve quantitative expansion, and then we will achievequalitative improvements. This is the Company’s scenario.
· With this acquisition, our goal of becoming a 500 billion yen corporation is withinreach. Our next goal is to be the first to become a trillion yen corporation. Inaddition to the organic growth of the EMS and overseas businesses, we aim todaringly challenge ourselves to acquire more businesses and become a world-classcompany that is victorious over its global competitors.

· The final slide is about shareholder returns.
· Returning profits to shareholders is an important management issue for theCompany, and we are working to achieve stable dividends in accordance with thebasic policies described here. The essential elements of this are “a payout ratio of25 to 35%”, “actively using funds for growth investments”, and “making appropriateand flexible decisions with regard to acquisition of treasury stock”.
· For the period ending March 2019, the interim dividend was 30 yen per share asinitially forecast, which amounted to 35 yen per share with the inclusion of our 50 thanniversary commemorative dividend of 5 yen. Our annual dividend will be 75 yen.
· As shown by this graph, dividends have increased for six consecutive years fromthe period ended March 2014. Going forward, we hope to achieve stable andcontinuous dividend increases on the assumption of sustainable profit growth.
This concludes my explanation of the outline of Medium Term Management Plan

2021, which was released on November 6. However, I have prepared two moresupplementary slides. I will now explain what we will expand and how we willexpand it in order to reach our target of 500 billion yen.

· This slide is a diagram of the segment composition with sales of 500 billion yen.
Furthermore, under the next medium term plan we plan to revise businesssegments and change the four existing classifications of “electronic components,”“information equipment,” “software,” and “others” to “electronic components,”“EMS,” “CSI (Consumer & System Integrator),” and “others.” The major change isto separate the EMS business from the electronic components business in which ithas been contained, until now, so that it can be easily understood from an externalperspective.
· Light blue indicates the electronic components business and the so-called tradingcompany business. With the addition of Fujitsu Electronics, this will become ourlargest business, accounting for 60% of the Group’s sales in 2021.
· Dark blue indicates the EMS business. This is our second largest business,accounting for about 30% of our sales. In the medium to long term, we would liketo increase its presence to around 40 to 50%.
· In the short term, increasing the profitability of the trading company business,which is our largest business, is the key to the Group’s profit growth. In themedium to long term, increasing the weight of the EMS business is the key to theGroup’s profit growth.

· The next slide is a diagram of the growth scenario for the EMS business.
· It illustrates how the net sales of 83.8 billion yen in 2017 will expand to 140billion yen in 2021 under the next medium term plan. Growth drivers will beorganic growth in fields such as air conditioning, industrial machinery, and medical& healthcare, with a particular focus on automotive devices, and we hope tochallenge ourselves to introduce EMS to the customers of Fujitsu Electronics and toconduct further M&As.
This concludes my explanation of the outline of Medium Term Management Plan2021. The following slides are excerpts from the explanatory materials concerningthe acquisition of Fujitsu Electronics as a subsidiary, which have been prepared foryour reference. I have touched on the essence of these slides in my explanation sofar, so I will refrain from further explanation.

I hope my explanation has proved useful. If you have any questions, we will takesome time for questions and answers from now. Thank you for your attention.

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