Information Meeting for Interim FY 2010

November 16, 2009
KAGA ELECTRONICS CO., LTD. (TSE 1st section, 8154)
3-12-8 Sotokanda, Chiyoda-ku, Tokyo
Tel: (03) 4455-3131 Fax: (03) 3815-7133
http://www.taxan.co.jp

Financial Highlights
First half of fiscal year ending in March 2010
April to September 2009
(Consolidated First Half)

2© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Financial Highlights of Interim FY 2010
Comparative Consolidated Income Statement
Net sales
平成18年3月期
Cost of sales
Gross profit
Selling, general andadministrative expenses
Operating income
Non-operating income
Non-operating expenses
Ordinary income
Extraordinary losses
Income before income taxes
and minority interests
Income, residential andenterprise taxes
Income tax adjustment
Minority interest in income/lossof consolidated subsidiaries

Net income（million yen）

Interim FY2009

Interim FY2010

141,192

100.0%

113,926

100.0%-27,266-19.3%

124,29788.0%

100,26588.0%-24,032-19.3%

16,895

12.0%

13,661

12.0%-3,234-19.1%

13,6709.7%

13,293

11.7%

-377

-2.8%

3,224

2.3%

367

0.3%

-2,857-88.6%

4040.3%

363

0.3%

-41

-10.1%

185

0.1%

529

0.5%

344

185.9%

3,444

2.4%

201

0.2%

-3,243-94.2%-1,021

-0.7%

-194

-0.2%

827

2,423

1.7%

8

0.0%

-2,415-99.7%

1,680

1.2%

620

0.5%

-1,060-63.1%-191-0.14%

370

0.32%

561

-

-18

-0.01%-50-0.04%

-32

-

952

0.7%

-931

-0.8%

-1,883-

平成19年3月期（予）Change-3© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Comparison of Consolidated Sales by Business Category (Interim FY 2009 and 2010)（million yen）

Interim FY 2009
Information equipment

EMS
Semiconductors

31,32344,02930,009Interim FY 2010 Change

22.2% 29,054
31.1% 27,418
21.3% 26,029

25.5% -2,269
24.1% -16,611
22.8% -3,980

160,000
140,000
120,000

19,611

13.9% 15,682

13.8% -3,929

OthersTotal

16,218141,192

11.5% 15,741
100.0% 113,926

13.8% -477
100.0% -27,266

16,218（ million yen ）113,926

19,611

100,000
30,00915,741Others

15,682

General electronic
components
Semiconductors

80,00026,02960,000General electronic
components

141,192

27,41840,00020,000EMS

44,02931,32329,054

Interim FY 2009

Interim FY 2010

Information equipment

0Major changes■EMS sales : Down 16,611 million yen (37.7%)
There was a sharp decline in orders along with cuts in production volume at EMS client companies. In Japan, orders
were lower for LCD units used by amusement equipment manufacturers. Overseas, there was a decline in orders forcircuit boards used by Japanese manufacturers of office equipment and climate control equipment. As a result, sales
were down 37.7% to 27,418 million yen.
■Semiconductor sales : Down 3,980 million yen （13.3%）
There was a contribution to sales from ADM Inc., a semiconductor trading company that became a consolidated
subsidiary in August 2008. Despite this contribution, sales decreased 13.3% to 26,029 million yen because of declines
in the handling volume of image processing ICs for amusement equipment and signal conversion ICs for digital audiovisual products.

4© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Selling, General and Administrative Expenses (Interim FY 2009 and FY 2010)
16,000Interim FY2009
AmountPacking and freight
1,195
R&D515
Others856
Total selling expenses
2,566
Depreciation expenses
205
Rent
1,136
Personnel expenses
6,444
Others3,318
Total administrative
11,103
expenses
Total SG&A expenses
13,670Interim FY2010

Change 14,000

Pct.
Amount
8.7%
1,141
3.8%
385
6.3%
479
18.8%
2,005
1.5%
308
8.3%
1,311
47.1%
6,947
24.3%
2,721

Pct.
8.6%
2.9%
3.6%
15.1%
2.3%
9.9%
52.3%
20.5%

-54
-130 10,000-377-561 8,000
103
175 6,000
503
4,000
-597

81.2%

11,287

84.9%

184

2,000

100.0%

13,293100.0%-3770

12,00013,670（million yen）

13,293

3,318

2,721

Others ofadministrative expenses
Personnel expenses

Rent

Depreciation expenses
6,444

6,947

Others ofselling expenses
R&D
1,136
205
856
515
1,195

1,311
308
479
385
1,141

Interim FY2009

Interim FY2010

Packing and freight

Major changes■Selling expenses :R&D cost
Due to the decrease of R&D cost at SI ELECTRONICS, Selling expenses decrease 130 million yen.
■Administrative expenses：Personnel expenses increased 503 million yen.
The number of employees decrease 63. ( 5,205 → 5,142）5© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Financial Highlights of Interim FY 2010
Consolidated Balance Sheets（ASSETS）
Current assets
Cash and cash equivalents
Notes and account receiv able-trade

Merchandize and finished goods

Goods in progress
Raw materials and other supplies

OthersFixed assets
Property, plant and equipment

Intangible assets
Investments and other assets（million yen）

FY2009 InterimChange
FY end FY2010
117,251 106,764 -10,487 （LIABILITIES）
99,63988,449 -11,190 Current liabilities
平成18年3月期
平成19年3月期（予）Notes and accounts payable-trade
11,378
11,491
113
Short-term bank loans
61,05353,754-7,299Others13,96912,789-1,180577
816
239 Long-term liabilities
Long-term bank loans
3,749
2,896
-853
8,913
6,703
-2,210
Others（NET ASSETS）
Shareholders' equity
17,612
18,314702
Paid-in capital
6,168
6,660
492
Capital surplus
1,914
1,757
-157
Retained earnings
9,528
9,896
368
Treasury stock
Valuation and translation adjustment

Total assets

117,251

106,764

Minority interests-10,487 Total liabilities and net assets

FY2009 Interim
ChangeFY end FY2010
67,69058,476-9,21460,521
51,523-8,998
44,772
37,679-7,0939,291
8,508-783
6,458
5,336
-1,122
7,168
6,953
-215
3,620
3,050
-570
3,548
3,903
355
49,56048,288-1,272
12,133
13,91225,158-1,331-2,103
1,790
117,251

12,133
13,912
23,813-1,333-1,946
1,709
106,76400-1,345-2
157-81-10,487

6© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Consolidated Cash Flows (FY2009 and Interim FY2010)（million yen）

InterimFY2010

FY2009ChangeOperating activities

3,806

3,936

130

Investing activities-2,568-2,093

475

Financing activities-1,111-1,655-544

Effect of exchange rate changes on cash and cash equivalents-147-64

83

Increase (decrease) in cash and cash equivalents-20122142

Cash and cash equivalents, beginning of period

14,011

11,368-2,643

Cash and cash equivalents, end of period

13,99011,491-525

Major changes■Operating activities ：Net cash provided by operating activities was 3,936 million yen. A decrease in notes andaccounts receivable-trade was a major source of cash.
■Investing activities：Net cash used in investing activities was 2,093 million yen. Cash was used mainly forpayments for the purchase of property, plant and equipment.
■Financing activities：Net cash used in financing activities was 1,655 million yen. The main reason wasa net decrease in short-term bank loans.

7© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Forecast for the Fiscal Year Ending March 2010
Consolidated Income Statement (FY2009 and FY2010 Plan)
FY20089(actual)
Amount
平成18年3月期

FY2010 (plan)

Pct.
Amount
平成19年3月期（予）（million yen）

ChangePct.

ChangePct.change

273,610100.0%

250,000

100.0%-23,610-8.6%

243,22688.9%

220,500

88.2%-22,726-9.3%

30,383

11.1%

29,500

11.8%

-883

-2.9%

28,134

10.3%

27,900

11.2%

-234

-0.8%

2,249

0.8%

1,600

0.6%

-649

-28.9%-42-0.02%

400

0.2%

442

-

Ordinary income

2,208

0.8%

2,000

0.8%

-208

-9.4%

Net income

-806

-0.3%

300

0.1%

1,106

-

Net sales
Cost of sales
Gross profit
SG&A expenses
Operating income
Non-operating income8© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Consolidated Sales Forecast by Business Category (FY2009 and FY2010 plan)（million yen）

FY2009Net sales

Informationequipment
EMS

FY2010(est.)

Pct.

Net sales

Pct.

Change300,000

250,000

Change Pct.change

66,19724.2%

69,600

27.8%

3,403

5.1%

77,46528.3%

68,00027.2%-9,465-12.2%

Semiconductors

61,83722.6%

55,20022.1%-6,637-10.7%

General electronic
components

36,02413.2%

28,30011.3%-7,724-21.4%

Others32,084

11.7%

28,90011.6%-3,184

-9.9%

Total

273,610100.0% 250,000

100.0% -23,610-8.6%（million yen）

273,61032,08436,024200,000
61,837250,000
28,900

Others28,300General electroniccomponents
Semiconductors

55,200150,000
EMS

100,000

77,46568,00066,197

69,600FY2009FY2010(est.)

Informationequipment

50,0000Summary■「 Information equipment」：Sales Up 3,403 million yen due to increasing sales of portable music player made in US,
and security systems.
■「EMS」： Sales down 9,465 million yen due to decreasing sales of LCD units for amusement equipment in Japanand circuit boards of office equipment at overseas.
■「 Semiconductors」：Sales down 6,637 million yen due to decreasing sales for equipment manufacturers anddigital audio-visual products.
■「 General electronic components」：Sales down 7,724 million yen due to lower sales of electronic components
because of adjust production of makers.
■「Others」：Sales down 3,184 million yen due to lower sales of chemical film and other photography products.

9© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Selling, General and Administrative Expense Forecast (FY2009 and FY2010 plan)

FY2009FY2010(est.)

30,000ChangeAmount
2,402
1,422
1,779
5,603
517
2,233
13,2836,497

Pct.
Amount
8.5%
2,260
5.1%
863
6.3%
1,988
19.9%
5,111
1.8%
601
7.9%
2,524
47.2% 14,679
23.1%
4,985

Pct.
8.1%
3.1%
7.1%
18.3%
2.2%
9.0%
52.6%
17.9%

Total administrative
expenses

22,53080.1%

22,78981.7%

259

Total SG&A expenses

28,134100.0%

27,900100.0%-234

Packing and freight
R&D
OthersTotal selling expenses
Depreciation expenses

Rent
Personnel expenses
Others（million yen）

（million yen）

Changes in SG&A expenses-142-559
209-492
84
291
1,396
-1,51225,00028,13427,900
4,985

6,497

Others ofadministrative expenses
Personnel expenses
Rent

20,00015,000Depreciation expenses
14,67913,283

Packing and freight

10,0005,000

Others ofselling expenses
R&D

2,233
517
1,779
1,422
2,402

2,524
601
1,988
863
2,260

FY2009FY2010(est.)

0Summary■Selling expenses :R&D cost
Due to the decrease of R&D cost at SI ELECTRONICS, Selling expenses decrease 559 million yen.
■Administrative expenses：
Personnel expenses increased 1,396 million yen.

10
© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

Topics of Interim FY 2010
1. Expansion of EMS factories
2. Expanding of environmental products
3. Management principles
11© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■Topics 〜 Expansion of EMS factories〜
Back ground ⇒ Growing customer needs for EMS companies■Diverse applications・・Adoption of the latest production lines
Accept to manufacturing a wide variety and small lot products■Requested further cost ・・・Reduction of components cost by a centralized purchasing system■Requested to improve the quality ・・・Corresponds to failure rate (single PPM)
■Consideration of environmental issues・・・ Corresponds to regulation of RoHS and REACH■Response to Just-in-time needs ・・・ Construction of logistics and support system■Strengthening technology・・・ Failure analysis and cost reduction proposal by a technical staff

With the establishment of own plant, building a flexible manufacturing system
12© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Topics 〜 Expansion of EMS factories〜
Major overseas EMS factories
KAGA TAXAN ELECTRONICS (SUZHOU) CO., LTD

East China・・・Own factory 1, Partners 2South China・・・ Own factory 3, Partners 4South-East Asia・・・ Own factory 2, Partners 1

KAGA (SHENZHEN) ELECTRONICS CO., LTD

Europe・・・ Own factory 1

KD TEC S.R.O
DONGGUAN POWERTEK ELECTRONICS CO., LTD
KAGA INSTRUMENTS SHANTOU CO.,LTD.

13© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Topics 〜 Expansion of EMS factories〜
Extended transfer of KAGA (SHENZHEN) ELECTRONICS■ KAGA (SHENZHEN) ELECTRONICS CO., LTD＜ KAGA (SHENZHEN) ELECTRONICS CO., LTD＞

Address ： Shenzhen city, China

・ First own factory, established in 1999

Factory Area：20,400㎡

・Subsidiary of KAGA (H.K.) Main factory at South China

Lines ： SMT14 lines, PCB 7lines
Employees ： 700
approval ；ISO14001、9001、2000、■ Relocation benefits

TS16949、etc◆ Corresponds to needs of available applications from manufactured customers
・Corresponding improvement in manufacturing → Accept to density assemble, Assembly of Finished,

manufacturing a wide variety and small lot products and mass production
・Strengthening of quality management → Quality control for vehicle. SMT process of clean room
・Construction of environmental management systems → Corresponds to regulation of RoHS and REACH

Expansion of available products by extending new facilities
14© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Topics 〜 Expansion of EMS factories〜
Established KAGA TAXAN ELECTRONICS (SUZHOU) CO., LTD.
■ KAGA TAXAN ELECTRONICS (SUZHOU) CO., LTD.
・Established as a subsidiary factory of KAGA (Shanghai ) in 2009

＜ KAGA TAXAN ELECTRONICS (SUZHOU) CO., LTD＞

Address： Suzhou city, China
Factory Area：4,300㎡

・Expected as a main factory in East China

Lines：SMT 3 lines, PA 3 lines

・Unable to reduce the cost of processing manufactured

Employees ： 200

by subcontract factory → Reaching the limit of cost

■ Benefits of establishing its own factory
・Directly manage “quality control”, “Delivery management”→ Achieve high quality and high value-added production
・ Reduce “processing fees” by subcontract factory → Improve cost competitiveness・Established in the export processing zone → Exempt Value Added Tax (VAT) for sousing compornents
By ccustoms concentration, the distribution can be produced according to customerTaking advantage of export processing zone and the production of high added value products.

15© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Topics 〜 Expansion of EMS factories〜
Established KD TEC S.R.O■ＫＤ ＴＥＣ Ｓ.Ｒ.Ｏ （Czech Republic）
・In 2009、Established own factory in Europe＜ＫＤ ＴＥＣ Ｓ.Ｒ.Ｏ＞
Adress ： Czech Republic
Factory Area ：6,700㎡

・Changes in the production base of Japanese –electronics manufacturers

Lines ： 5 Unit assembly line
Employees：49→Increasing the transfer of production area

■ Benefits
own factoryfrom AsiaoftoestablishingEurope.
・Meet the needs of Japanese manufacturers about local production and local delivery→ Enhance the stability of the business with them・Response to the needs of EMS in the European area, and other applications

Laying a foundation as a base of EMS in the European area
16
© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Topics 〜 Expanding of environmental products 〜Increasing needs of the environment-related products→ Raising awareness of global warming and cost advantage
Expanding of environmental products■ Back ground・Concern to the global environment → To set the reduction targets of gases by countries
・Advantage → Advantage of “low power consumption”, “durability”

Promoting environment businesses in KAGA ELECTRONICS Grope
１．LED Lighting
・・ “low power consumption”, “High life” → To convenience store and Food chain

２．Solar power generation system
・・ Reducing energy bills by generation of electricity

３．Energy-saving system
・・ automatically control “lighting”, “air conditioning”→ to amusement facilities

17© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

■ Topics 〜 Management principles〜

Management principles“Everything we do, we do for our customers ”
Action guidelineＦ ・・・Ｆｌｅｘｉｂｉｌｉｔｙ『Ｆ・Ｙ・Ｔ』

Ｙ ・・・ Ｋｅｅｐ Ｙｏｕｎｇ
Ｔ ・・・ Ｔｒｙ

To respond flexibly to market changes and needs,
Keep challenging boldly to have the respect of human by all employees,
Contribute to society as electronics trading company.
18© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.

KAGA ELECTRONICS CO., LTD.
3-12-8 Sotokanda, Chiyoda-ku, Tokyo Japan
Tel: (03) 4455-3131
Fax: (03) 3815-7133
E-mail：webmaster@taxan.co.jp

http://www.taxan.co.jp
19© 2008 KAGA ELECTRONICS CO.,LTD All Rights Reserved.