KAGA GROUP NEW OFFICE (in Ochanomizu, Tokyo)

The Investor Meeting for a
results briefing of FY2005, its brand name for original I.C. and PC peripheralproducts, and highly penetrated in many countries all over the world,
comes from a Japanese “Takusan” which means “many,” in hoping
to distribute lots of quality products to make more people muchhappier.

KAGA ELECTRONICS CO., LTD.
(Tokyo Stock Exchange, First Section
Stock code: 8154)
2-2-9, Hongo, Bunkyo-ku, Tokyo, Japan
113-8503
URL：http：//www.taxan.co.jp
TEL：03-4455-3131
FAX：03-3815-6757
May 26, 2005
1

Table of contents
1, KAGA ELECTRONICS group outline
・ Company profile
・ Management policies
・ Sales transition
・ Net sales by products category
・ World network
・ Main business connection
2, Business outline
・KAGA ELECTRONICS group identity
・Business strategy by products category
・General electronic components &semiconductors business・Information equipment business
・EDMS business・Other business

3, Outlook for KAGA ELECTRONICS groupbusiness
・ Business model・ Entry into sports-related equipment business
4, Financial highlights for FY2005

Front entrance of headquarter building( Ochanomizu, Tokyo)
2

1, KAGA ELECTRONICS group outline

3

Company profile

Established
September 12, 1968
Capital11.1 billion yen
Founder & CEO Isao Tsukamoto
Net sales :FY2005 <actual>
Non-consolidated : 186.9 billion yen
Consolidated : 250.2 billion yen
FY2006 <Plan>
Non-consolidated : 160.0 billion yen
Consolidated : 240.0 billion yen

Sales tran sition（Unit : billion yen）
20

250
Net sales
Ordinary income

200

15

150
10
100
5

50

0

0





2001.3

2002.3

2003.3

2004.32005.32006.3

Number of consolidated subsidiaries (As of March 31, 2005)（Plan）
30 (Domestic : 11 / Overseas : 19)
Number of Group employees (As of March 31, 2005)
3,590 ( Non-consolidated : 540 / Consolidated : 3,050)
Group business outline
・ Sale of general electronic components.
・ Sale of semiconductors (memories, ASIC’s).
・ EMS business (Electronic manufacturing service.
Manufacturing and sale of AC adapter and charger）
・ Sale of computers and computers peripherals. Sale of computers peripherals on a private-label basis.
・ Development and design of dedicated integrated circuit. Planning, development and sale of various types ofSoftware and information network system.

4

Management policies
Statement of management policies“KAGA ELECTRONICS becomes a company which could please its
stockholders, its customers, its employees and all others, who associatewith us. Hope and contribute to the society.”

The spirit of “FYT”
F = Flexibility Y = keeping Young
T = Try
The keyword is “3G”
GeneralGlobalGroup“We always think of tomorrowand eventually become thenumber one.”Founder & CEO

Isao Tsukamoto
5

Sales transition(Unit : billion yen)300

FYT CO., LTD.
KAGA DEVICES (H.K.) LIMITED is established.

250

DIGITAL GAIN INC. become a subsidiary.
KAGA ELECTRONICS (THAILAND) CO., LTD. is established.
KAGA SHENZHEN ELECTRONICS TECHNOLOGY DEVELOPMENT CO., LTD. is established.
KAGA (SHANGHAI) ELECTRONICS CO., LTD. is established.

200

AD DEVICE CORPORATION become a subsidiary.
DIGITAL GAIN CO., LTD. is established.
KAGA (TAIWAN) ELECTRONICS CO., LTD.

150

KAGA SOLUTION NETWORK CO., LTD. are established.
KAGA (SINGAPORE) ELECTRONICS PTE LTD.
KAGA (KOREA) ELECTRONICS CO., LTD. are established.
KAGA (HK) ELECTRONICS LIMITED is established.

100

Sales department for Apple computer products is transferred.
KAGA DEVICE CO., LTD. is established.

50

KAGA COMPONENT CO., LTD. becomes a subsidiary
TAXAN (EUROPE) LTD. is established
Taxan USA Corporation is established

0 '69 '70 '71 '72 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05
6Net sales by products category
Information equipment

Others (IT-related business)

5%
16%

10%

FY2005<Full year, actual>
Consolidated
net sales
250.244 billion yen

EMS (Processed business)

General electronic
components

39%

30%
Semiconductors

General electronic components
Semiconductors
EMS (Processed business)
Information equipment
Others (IT-related business)7World network* KAGA ELECTRONICS provides worldwide business services upon customer needs. Plans for a branch office in Northern China
are under way.
* Business marketing has been also started in Russia and Eastern European Countries.

8

Main business connection
Merchandise(About 2,000companies)

Sales(About 4,000companies、7,000accounts）

9

2, Business outline

10

KAGA ELECTRONICS group identity
From business sales in electronic products & information equipment toa “High-Added-Value EDMS Business”
Electronic products &Semiconductor businessDistributing electronic components forall standard and custom products inaccordance with customers' requests.

Customer’s needs●We need various components.
●We need a product created.
●We need engineeringdevelopment designed.

Information equipment
business
Sales in personal computers, PC
peripherals, electronic health equipment,
electronic toys and more

Expanding EDMS Business
The Solution to Customer Problems!
11

KAGA ELECTRONICS group identity
Business identity ・・Advantage of being an independent

Our motto since the foundation“Covering All the Customer Needs”
Upon customer’s requests, KAGA ELECTRONICS “Gathers anything, Can
do anything, the Answer to everything”

Since the early stage offoundation, thoroughgoing
system has been established forhandling information frombusiness centers both domestic
and abroad.

Information gathered

Solid experience andperformance since thefoundation through diligent
focus on technologicaldevelopment.

Expanding the business market
12Electronic products & Semiconductor business ①
Business overview
Utilizing our unfettered advantage, KAGA ELECTRONICS have established a corporate structure
capable of supplying all products required by our customers, both domestically and overseas. In thesemiconductor area, our in-house engineers are the key strength behind our ability to handle
anything from the design of large-scale integrated circuits commissioned by customers to original
LSIs and components planning and development based on technical trends collected by ourdistinctive marketing division.

Products
General electronic components / Camera modules / Memories / Microcomputers / LCD panels /System LSI's / ASIC's / Original IC's (TAXAN) etc.

13

Electronic products & Semiconductor business ②
Source locally components and information world-wide

Providing stable and effective material operations
through global-networking
14

Electronic products & Semiconductor business ③
Focus on procurement of cutting-edge devices<Lamina Ceramics, Inc.>
Realization of the highest level of brightness per unit area throughthroughhigh density mounting of LED components.
Already with 42 Ceramic Packaging and OpticsOptics-related patents
acquisitioned, KAGA ELECTRONICS is currently anticipatingthese LED products to be applied for Flat Panel Displays andIndoor/Outdoor Lighting equipments.

Lamina’s LED productsInterior lighting equipment

Displays<Integrant Technologies Inc. >CMOS based RF Tuner IC
Aiming to introduce to the Japanese and European markets the next
next
technological energyenergy-efficient compact CMOS based RF tuner IC for themarket in the receiving terminals geared to Mobile Digital Broadcasting.
Broadcasting.

Cellular telephone
PDA
15

Information equipment business ①
Overview
The mainstay of this business is sales of popular brands of PC-related information systems, althoughanother key aspect is the planning, manufacture and sales of our own brand “TAXAN” of peripheral PC
devices. In addition, KAGA ELECTRONICS continue to infuse the domestic and international market withsuperior, new value-added products.

Products
Personal computers / PC peripheral devices / Monitors / Printers / Digital cameras / Scanners / HDDs /DVDs / Health equipment etc.

16

Information equipment business ②
Devoted to the demands of the Era, focusing on advanced equipments
Staying one step ahead in upcoming technology (Digital imaging, portable players, etc.)
Displays

HDDs, Memories etc.

PC peripheral
equipment

Personal computers
Sale of “iPod”
and peripheral equipments
System-related business●Sale of image editing system for digital broadcasting“Cine Wave”
Wave”●Sale of highhigh-resolution digital image server for digital cinema“QuVIS Cinema PlayerTM”●DLP front projector project17

Information equipment business ③
Business Model for the Future Expanding businesses based on the networks in China and Eastern Southern AsianKAGA ELECTRONICS has networks in China, Korea, and all other Asian regions. The
company plans on developing sales strategies, utilizing its own marketing and technologicalskills to further expand products discovered in the Asian regions to various markets together withthe brands already established in the Japanese market.

Information equipment
business network

Lead to the expansion of business

EDMS businessElectronic products &Semiconductor business
18

EDMS business ①※EDMS business・・・
A newly established business providing total solutions which utilizes
business・・・A
utilizes our expanding EMS (Electronics
Manufacturing Service: A service
service which adapts to the customer’
customer’s designs providing a variety of services fromcomponents procurement to kitting)kitting) business and design and development in accordance with thethe customer’
customer’s
desired specifications.

Business overview (EDMS：Electronics Design Manufacturing Service) Meeting customer needs, providing high value-added solutions from material
procurement to the provision of completed products
Utilizing the group's components procurement capabilities, which comprise the use of in-house technical staff
for development through manufacturing of products, both domestically and overseas, KAGA ELECTRONICS isable to supply high value-added solutions, such as the manufacture of everything from our kitting service tocompleted products (including surface mounting and partly-finished products).

 Aggressive challenges to New Fields

Sales transition and plan in EDMS business(Unit : billion yen)

83.2（Forecast）
76.0

As a future project, KAGA ELECTRONICS islooking into the digital imaging field to propel
an aggressive business focusing on providing
image engines including optical projectors andfurther expanding business with domestic andChinese manufacturers.

48.9

53.3

41.7

2002.3

2003.3

2004.32005.32006.319

EDMS business ②
EDMS business overseas
business establishment introduction
EDMS deployed in east Europe!

KAGA (SHENZHEN) ELECTRONICSTECHNOLOGY DEVELOPMENT<Content>
Development ofsemiconductors and board
for Chinese TV makers

KAGA (EUROPE) operational liaison office

ＫＡＧＡ (Ｈ.Ｋ.) / KAGA (SHENZHEN)

●
● ●
▲

GUANGZHOU KEIDENNKI /DONGGUAN POWERTEK ELCTRONICS<Content>
Power supply、
supply、AC adapter、
adapter、battery charger●

KAGA (Ｔ(ＴHAILAND)<Content>
The main board of Japanese airair-conditioner
makers and office equipment makers.
Manufacturing at inin-house and cooperativeplants<Content>
Main board and completed products
for Japanese office equipment
makersKAGA (SHANGHAI)<Content>
Main board and completed
products for Japanese officeequipment makers

KAGA COＭCOＭPONENTS (MALAYSIA)●<Content>
Power supply、
supply、AC adapter、
adapter、
battery charger

Headquarters established in nine countries worldwide (Europe, America,
America, Asia, etc).
Capable of providing EMS and collecting electronic components in any region uponcustomer needs utilizing five inin-house plants and numerous cooperative plants for
production.

20

EDMS business ③
EDMS business domestic businessestablishment introduction
Flexible towards EDMS even domestically
KAGA COMPONENTS /Niigata factory

Micro Solution / Yamagata factory<Content>
Manufacture of battery
charger and power supply<Content>
Assemble a personal computers, PC
peripheral devices, electronics
communication equipment, precisionequipment, audio equipment andmedical equipment.

KAGA COMPONENTS /Kumamoto factory●<Content>
Manufacture of battery charger andpower supply●●●

Micro Solution / Nagano factory<Content>
Assemble a Amusement machine
and a game machine.

Understanding the customer’s desires and providing totalsolutions utilizing the features of in-house andcooperative/assigned cooperative plants. (about 40 Plants) .
21

EDMS business ④
Peculiar features of the EDMS businessTotal support system encompassing design & development as well as material procurement
Procurement

Europeancomponents
venders

Japanesecomponents
venders

Design・
Design・Development

Asian
components
venders

LCOS Driver Boad
LVDS
Input

LCOS&
OpticalEngineBallastLamp Unit

Manufacture
Flexible manufacturing system
Kaga plants(Domestic & overseas)

Cooperative plant(Domestic &overseas)

Planning and development
of digital content

Customers
22

EDMS business ⑤
Reinforcing design (Design and development department)
Focus on development of optical instruments for the digital imaging Era
Taking an aggressive approach towards image engines for projectors utilizing both the DLP &LCOS systems for the digital imaging Era.
●LCOS rear projection TV project

High-quality large screen hometheater system at a low priceLCOS Driver
Boad●DLP front projector project

LVDSI
nput
LCOS&
OpticalEngineLamp Unit

Making a compact low-cost home theatersystem a reality
23

EDMS business ⑥
Reinforcing design (Design and development department)
Our focused products●I-O DATA DEVICE, INC.
Hands free in-vehicle wireless model 「PDI-B912/CAG」
Realization of hands-free calls with a mobile
phone and Bluetooth® wirelesscommunication!

●VOD (Video On Demand) development of business
Server management◆Offer of STB (Set Top Box)

Internet●Multi function
printer●Electrical toy◆Various OS server offer◆ PDP and liquid crystal
panel Offer

A school and an
educational
institution

Apartment
Hotel

Hospital24

Other business
Aggressively focus on production and development of digital contents
Planning and developing digital contents, Another new project in development to meet with the newadvanced imaging technology and CG technology markets that are taking the digital imaging Era inadvance besides electronic products.

Recent actual performances Digital Media Laboratory Projects■TOEI COMPANY, LTD.
Creation of computer graphics for inventin the movie “Year one in the north.”■SQUARE ENIX CO., LTD.
Creation of computer graphics for invent in
the game software “FINAL FANTASY X.”■NHK Educational Corporation
Creation of computer graphics for educational TV
program for children “Fun Fun English.”25

3, Outlook for KAGA ELECTRONICS group26

Business model
Provision ofservice for
digital satellite
broadcasting

Development andmanufacture ofsemiconductor

Development,
manufacture andsale of electronicequipmentInternet cafe

Development,
manufacture andsale of electronic
components

Planning anddevelopment ofboard for personal
computer andPlanning andperipheral devices development ofnickserv

KAGA ELECTRONICS Group
Semiconductors & system technology
development engineers
About 250 employees
KAGA ELECTRONICS Group
System technology development engineers
About 440 employees

CellCell-phone service
providerPlanning anddevelopment ofgroupware

Planning anddevelopmentof network
security

Direct investments in 40 companies and indirect investments in
230 electronics-related companies in domestic & international
entrepreneurial venture through 8 funds→ Expansion of Commercial Rights

Development,
manufactureand sale of LSI

Companies
being ready togo public…

Planning andmanufacture ofgame components
and gamegame-related
goods

Planning anddevelopment ofgame software

Sale of electronic
components onelectronics
commerce

27

Entry into sports-related equipment business
Establishment of FYT CO., LTD.
Established in December 2004, as a fully invested
Subsidiary of KAGA ELECTRONICS.
This company has developed distributions for sports shops
mainly handling golf equipments and expanded its
distributions to other golf shops, further expanding thebusiness under the trade name of “Golf Plaza ACTIVE”
all over Japan.
（Images）

Currently, the company is developing swing speed
measuring and swing form checking instruments for agolf manufacturer.
Cultivating new business models through supply chain management, IT technology,
and KAGA ELECTRONICS experience and know-how.
28

4, Financial highlights for FY2005

29

(Consolidated)
Financial highlights in FY2004 & FY2005(Unit : million yen)

FY 2004

FY 2005

Increase/decrease

Net sales

189,904

250,244

60,34031.8%

Gross profit

20,36525,624

5,259

25.8%

Gross profit
ratio
SG & A
expenses
Operatingincome

10.7%

10.2%

(0.5)%

14,95017,149

2,199

14.7%

5,415

8,474

3,059

56.5%

Ordinary income

5,348

8,644

3,296

61.6%

Net income

4,129

4,731

602

14.6%

FY 2004

FY 2005

Increase / decrease(Total assets)

86,993

115,901

28,908

33.2%(Total sh areholders'equity)33,027

40,661

7,634

23.1%

(Interest-bearing
debt)

7,847

12,928

5,081

64.8%
30

(Consolidated)
Results by business category in FY2004 / FY2005(Unit : million yen)

Net sales

Increase / decrease

Business
FY 2004

FY 2005

AmountPercentage

Informationequipment

40,38440,254(130)(0.3)%

EMS

53,33076,09922,76942.7%

Semiconductors

72,617

97,07524,458

33.7%

General electronic
components

14,17023,758

9,588

67.7%

Others9,401

13,056

3,655

38.9%

Total

189,904

250,244

60,34031.8%

31(Consolidated)
Financial highlights and plan in FY 2005 / FY 2006
(Unit : million yen)

FY 2005

FY 2006

Increase / decrease

Net sales

250,244

240,000(10,244)(4.1)%

Gross profit

25,62426,500876

3.4%Gross profit
ratio
SG & A
expenses

10.2%

11.0%

0.8%

17,14918,000851

5.0%Operating income

8,474

8,500

26

0.3%

Ordinary income

8,644

8,700

56

0.6%

Net income

4,731

5,200

469

9.9%

FY 2005

FY 2006

Increase / decrease(Total assets)

115,901

117,217

1,316

1.1%

(Total shareholders'equity)(Interest-bearing
debt)

40,661

44,614

3,953

9.7%

12,92812,545(383)(3.0)%
32

(Consolidated)
Sales and sales plan by business category in FY2005 / FY2006(Unit : million yen)

Net sales
Business
FY 2005

Increase / decrease
FY 2006(Plan)

AmountPercentage

Informationequipment

40,25442,000

1,746

4.3%

EMS

76,09983,200

7,101

9.3%

Semiconductors

97,07579,000(18,075)(18.6)%

General electronic
components

23,75820,300(3,458)(14.6)%

Others13,056

15,500

2,444

18.7%

Total

250,244

240,000(10,244)(4.1)%
33