My name is Eiji Kawamura, and I am Managing Director of Kaga Electronics. Weappreciate your ongoing support and thank you for attending today’s briefingsession despite your busy schedules.
I will now go over our consolidated financial results for the first half of the fiscalyear ending March 2019.

As for the summary of financial results of Kaga Electronics for the second quarterended September 30, 2018, our net sales at 115.3 billion yen were by and large thesame level year-on-year, driven by our EMS business. Meanwhile, although operatingincome and net profit both declined, we had already factored in those decreases at thebeginning of the period. As President Ryoichi Kado previously explained, the decreaseswere primarily caused by production adjustments resulting from model switching atmajor customers in the EMS business, and upfront expenses of new overseas factorysites at their start-up phase. The decreases were also caused by one-off expensesassociated with changes made this fiscal year to the directors’ retirement benefits plan.
Next, let’s turn to the overview of our main business segments. In the electroniccomponents business, our EMS business for medical equipment was slow, but that forautomotive and air conditioning devices maintained a steady performance. Meanwhile,our components sales business remained sluggish. In the information equipmentbusiness, our PC-related business was sluggish but sales of our housing-related homeelectric appliances and commercial facilities-related LED installation business continuedto show robust growth.
Next, let’s turn to our forecasts for the fiscal year ending March 31, 2019. As wasexplained previously, we anticipate net sales of 290 billion yen, ordinary income of 8billion yen, profit attributable to owners of parent of 7.3 billion yen, and ROE of 9.9%.
Results of Fujitsu Electronics will be included in the consolidated accounts effectivefrom the fourth quarter when it becomes a subsidiary of Kaga Electronics. We expectto achieve our net sales and ROE targets in the final fiscal year of our Medium-termManagement Plan. Meanwhile, the 7.3 billion yen profit figure factors in 2.1 billion yenin negative goodwill related to the acquisition of Fujitsu Electronics. We aim to achievethe 7.3 billion yen profit figure, and in so doing will attain a new record high for thefirst time in fourteen years.
As for shareholder returns, we will pay a commemorative dividend of five yen pershare in celebration of our 50th anniversary this year. Our total interim dividend willamount to 35 yen per share.

Next, let’s turn to the company’s financial highlights. The net sales figure shown onthis income statement is as previously mentioned. Gross profit amounts to 16,023million yen for a year-on-year decrease of 195 million yen. Meanwhile, the grossprofit margin has remained unchanged at 13.9%. Operating income decreased by622 million yen to 3,772 million yen, amid a 427 million yen increase in SG&A

expenses. Ordinary income decreased by roughly the same amount to 4,049 millionyen, and profit attributable to owners of parent decreased by 766 million yen to2,750 million yen. As such, profit attributable to owners of parent decreased by awide margin relative to the decreases in operating income and ordinary income.
This outcome is largely attributable to a situation where we are once again subjectto standard tax rates this fiscal year, after having benefited from tax effects up untilthe previous fiscal year, partially as a result of having carried out restructuring withrespect to an unprofitable subsidiary.

4

Next, let’s turn to the company’s financial highlights in its individual businesssegments. Total net sales amounted to 115,383 million yen, which includes netsales of 83,455 million yen generated by the electronic components segment. Thatamount constitutes a decrease of 2,463 million yen. Net sales in the informationequipment segment decreased by 2,302 million yen to 21,143 million yen. Totaloperating income amounted to 3,772 million yen, which includes an operatingincome of 2,474 million yen in the electronic components segment for a decreaseof 419 million yen. Net sales in the information equipment segment decreased by252 million yen to 864 million yen.

Financial highlights of the electronic components segment are shown on this slide,and those of the information equipment segment are provided on the next slide. Assummarized at the outset of this presentation, the electronic componentssegment’s EMS business generated favorable results, but component sales weresluggish.

In the information equipment segment, although sales of the housing-related homeelectric appliances and LED installation businesses showed robust growth, net salesand income decreased mainly because sales of PCs and other such products wereslow.

Next, let’s turn to net sales by geographic region. Net sales in Japan amounted to70,288 million yen, which is a year-on-year decrease of 3,500 million yen such, netsales decreased by 4.7%. Net sales in North America decreased by 593 million yento 3,987 million yen.
Meanwhile, in Europe net sales increased by 241 million yen to 2,020 million yen,and in East Asia they increased by 2,653 million yen to 39,086 million yen. As aresult, net sales in Japan and East Asia respectively accounted for 60.6% and33.7% of our total net sales, meaning that those two markets constitute somewhatmore than 90% of our total net sales. Those results on a percentage basis areroughly unchanged from the previous fiscal year.

Next, we turn to the balance sheet. Net assets amount to 130,811 million yen,which is an increase of 4,435 million yen in comparison with the net asset amountas of September 30, 2017. Meanwhile, current assets increased by 1,086 millionyen to 104,264 million yen, and non-current assets increased by 3,349 million yento 26,547 million yen. As for total liabilities and net assets, total liabilities increasedby 195 million yen to 57,564 million yen. Total net assets increased by 4,241million yen to 73,247 million yen.

Turning to the main items on the balance sheet, inventories increased by 2,940million yen to 22,076 million yen. Inventory turnover was at 40.7 days. As foraccounts receivable and accounts payable, total notes and accounts receivabledecreased by 1,671 million yen to 48,353 million yen. Meanwhile, total notes andaccounts payable decreased by 131 million yen to 35,381 million yen. Notes

payable, accounts payable, and other disbursement amounts decreased along witha decrease in accounts receivable and other such amounts. Turnover of accountsreceivable amounted to 76.7 days, and turnover of accounts payable amounted to65.2 days.

Next, let’s turn to cash and deposits, interest bearing debt and cash flows. Cashand deposits amounted to 30,412 million yen, largely unchanged in comparisonwith the previous fiscal year. Interest bearing debt was also largely unchanged at9,573 million yen.
As for cash flows, cash provided by operating activities was 1,898 million yen. That

was mainly attributable to profit generated.
Cash used in investing activities was 4,938 million yen. Whereas that was mainlyattributable to payment into time deposits, we are placing cash in time depositsamid a situation where our overseas subsidiaries maintain cash and depositholdings. That sum constitutes the largest factor with respect to the use of cash ininvesting activities. Cash relating to investment is the next factor in this regard.
Cash used in financing activities was 685 million yen. That was mainly attributableto repayments of long-term loans payable and cash dividends paid.

Finally, let’s turn to our results forecasts for the fiscal year ending March 31, 2019.
We anticipate net sales of 290,000 million yen, operating income of 7,700 millionyen, ordinary income of 8,000 million yen, and profit attributable to owners ofparent of 7,300 million yen. We estimate that negative goodwill amounting to2,100 million will be factored in after ordinary income and before profit attributableto owners of parent. Consequently, we estimate that earnings per share currentlystands at 266.4 yen. Meanwhile, our outlook projects ROE of 9.9%.

Turning to our results forecasts by business segment, we anticipate total net salesof 290,000 million yen, of which we forecast sales of 227,200 million yen in theelectronic components segment and segment income of 5,200 million yen. Weproject sales of 43,000 million yen in the information equipment segment, therebygenerating segment income of 1,700 million yen; sales of 2,800 million yen in thesoftware segment, thereby generating segment income of 300 million yen; andsales of 17,000 million yen in the others segment, thereby generating segmentincome of 500 million yen.

Next, please refer to slides 14 and subsequent slides for details on financialhighlights on a quarterly basis.

Lastly, refer to slide 16 for details on prevailing exchange rates and FOREXsensitivity. Here, the second column from the left in this table lists exchange ratesof currencies against the Japanese yen as of the second quarter of the fiscal yearending March 31, 2019. The yen trades at 110.26 yen to the US dollar, 3.4 yen tothe Thai baht, 17.09 yen to the Chinese renminbi, and 14.05 yen to the Hong Kongdollar. The next two columns list effects on net sales and ordinary income of a onepercent change in respective exchange rates. Meanwhile, our assumptions withrespect to exchange rates in the second half of the fiscal year stand at 110 yen tothe US dollar, 3.4 yen to the Thai baht, 17 yen to the Chinese renminbi, and 14 yento the Hong Kong dollar.
This concludes our presentation on our consolidated financial results for the firsthalf of the fiscal year ending March 2019. Thank you for your attention.

17