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I am Ishihara from KagaElectronics.
Thank you very much for your continued support and thank you for watching
our financial results briefing today.
I would like to present an overview of our financial results for the first half ofthe fiscal year ending March 31, 2024.

Results for the first half of the current fiscal year Net sales decreased by 23.7
billion yen from the previous year to 275.0 billion yen.
Operating income decreased by 4.4 billion yen from the previous year to 13.8
billion yen.
The primary cause of decreases in net sales and income is disappearance of
spot demand in our mainstay electronic components business.
Other factors that pushed down sales and income include emergence ofsome impact of customersʼ inventory adjustments, and provision of allowancefor doubtful accounts recorded in 1Q in connection with filing of a petition for
civil rehabilitation proceedings by a certain business partner.
Profit decreased by 2.0 billion yen from the previous year to 11.4 billion yen,reflecting in part posting of gain on sales of investment securities and gain on
bargain purchase associated with a corporate acquisition.
In comparison with the internal plan that factors in disappearance of spot
demand and impact of customersʼ inventory adjustments, net sales were inexcess by 15.0 billion yen and operating income by 3.8 billion yen.
Excluding disappearance of spot demand and one-off factors including
allowance for doubtful accounts, our “earning power” in real terms
maintained the previous yearʼs level. The betterthan-expected performancevis-a-vis the internal plan observed in 1Q continued in 2Q.

Full-year earnings forecasts With respect to progress in 2Q against the fullyear earnings forecasts announced on May 11, a good progress was made in
general, with net sales at 50%, operating income at 55.5%, and profit at 63.4%.
In view of such progress achieved in business performance and the resultsthat tend to exceed the internal plans, we discussed and considered whether
or not to revise upward our full-year earnings forecasts. Given that the outlook
was becoming increasingly uncertain, more so than at the start of the fiscal
year, and as we wanted to carefully assess the future demand trend, we
decided to leave the earnings forecasts unchanged at this time.

3The financial highlights on the next page are as I have just explained.
Earnings per share (EPS) in the first half was 434.23 yen.
The average exchange rate during the first half was 141 yen against the U.S.
dollar, which represents a depreciation of about 7 yen from the previous year
and a depreciation of 6 yen from the assumed exchange rate of 135 yen used
for the full-year earnings forecasts.
The year-on-year impact of foreign exchange fluctuations was an increase of
approximately 6 billion yen in net sales and an increase of approximately 190
million yen in operating income. In comparison with the internal plan, theimpact was an increase of approximately 70 million yen in operating income.

These are results by business segment.
In the mainstay electronic components business, net sales and income in thecomponent sales business both recorded decreases from the previous fiscal
year. This is attributable to disappearance of spot demand, which had
contributed to earnings until the previous fiscal year, given easing of supply
shortages of semiconductors and electronic components, combined withemergence of some impact of inventory adjustments by customers. The EMS
business also recorded decreases in net sales and income year on year, foralthough sales in the automotive sector increased due to improved supply
and demand balance of semiconductors and electronic components,
inventory adjustments by key customers had an impact on sales inapplications related to medical and industrial equipment. Against the full-year
earnings forecasts, the electronic components business is progressing at over
50% in terms of both net sales and segment income.
In the information equipment business, both net sales and income increased
from the previous fiscal year due to robust sales of PCs to educational
institutions, security software and PC peripheral products, combined with
contribution from large-scale projects in the LED installation business that
we started pushing forward on a full scale in the previous fiscal year.
Segment income progressed to over 50% of the full-year earnings forecasts,
and income margin also exceeded the result of the previous fiscal year aswell as the internal plan figures.
In the software business, net sales were almost at the same level as theprevious fiscal year, while segment income increased and, as with theinformation equipment business, income margin exceeded the result of theprevious fiscal year and the internal plan figures.
In the others business, net sales increased year on year, and segment income
was almost at the same level as the previous fiscal year.
Particularly with respect to segment income margin, all business segments
exceeded full-year internal plan figures. Overall, operating income margin
stood at 5% for the first half, against fullyear target of 4.5%.
Please also refer to pages 7 and 8, which contain information by businesssegment.

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Moving on to performance by company, I would like to explain the points that
I wish to draw your attention to.
In KagaElectronics proper, net sales and income decreased from the previous
fiscal year, largely reflecting disappearance of spot demand. However,compared with the year prior to the previous fiscal year when the benefits ofspot demand were still small, we can see that net sales, operating income,and operating income margin all increased significantly.
In the KagaFEI Group, despite disappearance of spot demand, net sales
maintained the previous fiscal yearʼs level. Comparison with the year prior to
the previous fiscal year shows significant improvement in its sales power.
Although income was pushed down notably by posting of allowance for
doubtful accounts associated with a certain customer, we can see that, aswith KagaElectronics, both operating income and operating income marginincreased significantly when compared with the year prior to the previous
fiscal year.
In Excel Group, despite a decrease in sales to a major customer, profitgenerating ability was enhanced with improved sales mix, enabling thecompany to maintain gross profit and operating income at almost the samelevels as the previous fiscal year, and improve operating income margin
significantly, to 4.4%.
Thus although in a year-on-year comparison, net sales and income bothrecorded decreases, if you look at our performance by taking into accountsuch things as one-off factors in the context of the trend to date, I believe you
can recognize that post-merger integration is progressing steadily particularly
at the KagaFEI Group and Excel Group, with dramatic changes and growth intheir sales power and profit-generating ability, and that the “earning power” of
the whole Group, including KagaElectronics proper, is steadily increasing.
Please also refer to the graphs on page 6.

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In the past three months, net sales, operating income, and income margin
were all almost at the same levels as in the first quarter and exceeded theinternal plan, maintaining the upward momentum of 1Q.
Please also refer to pages 10 to 14 for information by quarter.

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I will now explain the causes of fluctuation in operating income.
In a year-on-year comparison, operating income decreased by 4.4 billion yen,a large part of which was accounted for by disappearance of spot sales,
which resulted in an income decrease of 3.6 billion yen. Other causes of thefluctuation were an income decrease of 1.2 billion yen due to a decrease insales volume and changes in sales mix, and an income increase of 0.4 billion
yen due to reduced SG&A expenses.
Vis-a-vis the internal plan, the result was 3.8 billion yen higher. This largely
consisted of 3.1 billion yen attributable to an increase in sales volume andchanges in sales mix, and 0.7 billion yen due to reduction in SG&A expenses.

I will now move on to the balance sheet, starting with assets.
Current assets increased by 6.7 billion yen from the end of the previous fiscal
year to 252.3 billion yen, due in part to an increase in cash and deposits. Noncurrent assets decreased by 2.6 billion yen from the end of the previous fiscal
year to 38.0 billion yen, due notably to amortization and sale of investment
securities. Total assets increased by 4.1 billion yen from the end of theprevious fiscal year to 290.3 billion yen.
Liabilities decreased by 9.7 billion yen from the end of the previous fiscal year
to 146.7 billion yen, due primarily to payments of income taxes payable andaccounts payable.
Net assets increased by 13.8 billion yen from the end of the previous fiscal
year to 143.6 billion, due partly to an increase in retained earnings.
As a result of the increase in current assets and decrease in current
liabilities, the current ratio improved to 215.6%.
The equity ratio improved by 4.1 percentage points from 45.3% at the end of
the previous fiscal year to 49.4%, recovering to the level before the M&A deal
to create the KagaFEI Group.

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Inventories increased by 7.3 billion yen from the end of the previous fiscal
year to 63.5 billion yen, partly due to inventory adjustments by key customers.
Inventory turnover was 42 days, and is on a rising trend. We are strengthening
our efforts to reduce inventories by the end of the fiscal year.

21Interest-bearing debt stood at 42.5 billion yen, showing no significant change
from the end of the previous fiscal year, and the debt-to-equity ratio (D/E
ratio) was kept low at 0.3% due to an increase in equity through profit
generation.
The balance of cash and deposits increased by 9.8 billion yen from the end of
the previous fiscal year to 62.4 billion yen. As a result of the increase in cash
and deposits, the net D/E ratio stood at negative 0.14%, remaining in thenegative as it did at the end of the previous fiscal year. We are working onstrengthening our financial foundation in preparation for the next stage, tobuild a sound and stronger financial structure.

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Full-year earnings forecasts for the fiscal year ending March 2024
As I mentioned at the opening of this session, in light of the progress made in
the first half and the upward trend against the internal plan, we discussed
and considered internally whether or not to revise the full-year earnings
forecasts that we presented at the beginning of the current fiscal year,
namely net sales of 550 billion yen, operating income and ordinary income of
25 billion yen, and profit of 18 billion yen, and decided to leave the earnings
forecasts, as well as annual dividend of 220 yen, unchanged at this time inview of the ever-increasing uncertainty about the outlook and also as wewould like to carefully assess the future demand trend.
Based on the full-year earnings forecasts, we anticipate ROE at the end of
the current fiscal year to be 13.3%.
Page 24 and onwards are reference materials containing voluntary disclosure
information by segment in line with the Medium-Term Management Plan, as
well as graphs showing quarterly net sales by segment and by region, andsuch other information as exchange rates and exchange rate sensitivity.
Please do have a look.

I am Kado, President of KAGA ELECTRONICS.
Thank you for your continued support and cooperation in our IR activities.
I would now like to present our management topics for the first half of the
fiscal year ending March 2024.
There are three main topics, which are financial results, the EMS business,and human capital-related initiatives.

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First, I would like to give you a summary of our financial results for the firsthalf of the fiscal year ending March 2024, and our forecast for the full year.
For this fiscal year, we forecast decreases in net sales and income because in
the assumption, we have factored in the two aspects of “impact of inventory
adjustments” in the electronic components business resulting from easing of
the supply and demand situation for semiconductors and electronic
components, and “disappearance of spot demand,” which contributed toearnings in the previous two fiscal years.
Looking at the progress made up to the second quarter, net sales in theelectronic components business recorded a decrease of 25.9 billion yenyear
on year, butexceeded the internal plan by 17.0 billion yen. Overall, net sales
exceeded the internal plan by 15.0 billion yen. Considering these results, we
believe that disappearance of spot demand was as anticipated, while impact
of inventory adjustments did not emerge as much as anticipated.
In addition, aside from disappearance of spot demand, another major factor
behind lower net sales in the electronic components business was thedecrease in sales to a major customer of Excel. Excluding these factors, net
sales were almost flat year on year. Looking at year-on-year changes in sales

to the top 20 companies (in terms of sales), which our major customers, adecrease of approximately 13.0 billion yen was recorded in sales to theindustrial equipment, medical, and air-conditioning industries due toemergence of the impact of inventory adjustments, in contrast to the strengthof the robust sales group including in-vehicle, amusement, and consumerrelated industries with sales increasing by approximately 17.0 billion yen.
With this situation in mind, if we look ahead at the second half, we see both
positive and negative factors. Upside potential includes anticipation that
better-than-expected performance of the “group with robust sales” would
continue, supported partly by new transactions originating from alternative
sales and spot sales. As for the downside, there is risk that impact of inventory
adjustments by the “group in adjustment process” would linger to the second
half. We would need to carefully assess these trends. In addition, themanagement environment is becoming increasingly uncertain due toheightening geopolitical risks and other situations.
Taking all these circumstances into consideration, we have decided to hold off
on revising the earnings forecast at this time.

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The next topic is “inventory reduction”, which is one of our most importantmanagement issues that we pay constant attention.
This graph shows our consolidated inventory, broken down into the
manufacturing business, mainly EMS, and the trading company business,
mainly component sales.
As we mentioned in the previous briefing, we were able to bring down theinventory level, which had been gradually building up throughout FY2022, tothe 50.0 billion yen range at the end of the fiscal year.
In particular, in the trading company business which requires very little
follow-up work, we were able to rapidly reduce our inventory position.
Although subsequently, we saw an increase to 70.5 billion yen as of the endof June, a downtrend phase then resumed, bringing inventory down to 63.5
billion yen at the end of September.
That said, we have yet to reach the level of the previous fiscal year-end, andrecognize that further reduction is necessary.
We will try again to achieve our target of “50.0 billion yen or less” by the endof the current fiscal year, a target that we could not achieve in the previous
fiscal year, and aim for inventory turnover of 30 days.

Next, I would like to talk about our EMS business.
The first subject is construction of a new factory in Mexico.
As already announced in a news release, we are expanding our production
system through our wholly owned subsidiary TAXAN MEXICO to meet thegrowing EMS demand in Mexico.
Since its establishment in 2017, TAXAN MEXICO has been engaged in the
EMS business, focusing on assembly of lighting units for four-wheelers for
the U.S. market. The ongoing construction of a new factory in Mexico isintended to meet the growing production demand that is expected for North
and Latin American markets.
It is also an initiative to further promote highly efficient and environmentallyfriendly manufacturing operation by introducing the latest energy-saving
equipment. Additionally, in future, we are considering setting up an integrated
production base that includes component molding, sheet metal processing,and finished product assembly, in addition to unit assembly and circuit board
assembly.
We will use the new factory in Mexico as a base to promote local production
and production close to the markets, thereby shortening shipping time andreducing logistics costs, and build a structure for the stable supply of products
to the markets.

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Aside from Mexico, production capacity expansion is also pursued elsewhere,in Japan and overseas. The four factories on this slide are bases that
underwent facility enhancement in the past two years.
In order torespond to the growth of orders from existing customers,
production lines were increased through factory relocation and expansion in
Malaysia in October 2022, and in Turkey in June 2023. Our Turkish factory,
which is currently conducting assembly of electrical units for air conditioners,
will also be able to handle circuit board mounting once a new SMT line isinstalled.
In Japan, one assembly line and one SMT line have been added at KagaEMS
TOWADA, and two SMT lines have been added at Kyokuto Electric. Throughsuch measures, we are expanding our production capacity in accordance withthe situation in each region, both in Japan and overseas, to respond to thediversifying needs of our customers.

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In the background of production capacity enhancement is U.S.‒China trade
friction within the recent economic context and other factors that are making
the external environment increasingly complex, including country risk andexchange fluctuation risk, bringing about significant changes in customer
needs.
Specifically, we are seeing a shift to “local production for local consumption”
by customers whose manufacturing of finished products was heavily
concentrated in China, and who are now moving their production back toJapan or to ASEAN countries, the U.S., Europe and other areas close to where
their products are consumed.
What we are seeking therefore is to capture the tailwinds provided by theincreasingly complex business environment and ensuing changes in customer
needs as I have just described, and flexibly enhance production capacity inoverseas and domestic factories.
We believe that the three years starting from the current fiscal year will be aperiod of investment to achieve rapid expansion of our EMS business.

So far, I have explained the measures that will contribute to strengthening the
EMS business. I would also like to share with you our vision of future growth.
In our Medium-Term Management Plan 2024, we have set forth a basic
strategy of “connecting expansion of the trading company business to growthof the EMS business.” This is a mechanism that allows us to leverage ourstrengths by using our procurement capabilities in the component sales
business to expand volume, and realizing higher value addition andmaximizing profit generation while supporting customers in their
manufacturing.
Specifically, through expansion of production capacity at the factories that I
have just mentioned, we will focus particularly on the growth fields as
identified in the MediumTerm Management Plan, such as "mobility,""industrial equipment," and “medical,” with the aim of achieving net sales of
300 billion yen or more in about 5 years (this is not a commitment but mypersonal vision of growth).

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Lastly, I would like to talk about our human capital-related initiatives with afocus on diversity to facilitate diverse work styles.
These graphs show the percentage of women in management positions andthe percentage of male employees who took childcare leave in the fiscal year
ended March 2023, compared with our peer companies. All figures are basedon disclosed data of the top five companies in terms of operating income,taken from their annual securities reports disclosed in June this year.
As you can see, the percentage of women in management positions at
KagaElectronics is 6.1%. While we recognize that this is on a par with theindustry average, we believe it is by no means high.
As for childcare leave of male employees, the number of childcare leave
takers last year was zero.
We will actively invest in and work on improving our position in the industry,
which would also be conducive to maximizing the value of human resources
and increasing the competitiveness of the company.

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Let me explain our achievements in a little more detail, in chronological order.
On a consolidated basis, the percentage of women in management positions
was 16.5% as of the end of the previous fiscal year, which was driven byoverseas subsidiaries.
As set forth in the Medium-to Long-Term Sustainability Management Plan,
the target for 2024 is 15%, which means that we were able to achieve ourtarget ahead of schedule.
However, we believe that for KagaElectronics on a non-consolidated basis,
there is still room for upside, and thus we are working on rolling out various
initiatives, such as enriching training programs for managers.
Regarding childcare leave for male employees, we implemented a systemrevision on April 1 this year to create an environment that facilitates men to
take childcare leave.
Going forward, we will continue to promote diverse work styles to suitemployeesʼ individual circumstances and maximize the value of each
employee, through which we will seek to maintain and improve ourcompetitiveness and increase our corporate value.

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This concludes my explanation. Thank you very much for your time.

3640ご静聴ありがとうございました。

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ご静聴ありがとうございました。

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ご静聴ありがとうございました。

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ご静聴ありがとうございました。

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ご静聴ありがとうございました。

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This concludes my presentation of our financial results for the first half.
Thank you very much for listening.

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