December 9, 2019

Name of Company

KAGA ELECTRONICS CO., LTD.

Stock Code8154 Tokyo Stock Exchange, First Section

Head office

20-Kanda Matsunaga-cho, Chiyoda-ku, Tokyo, Japan

Representative

Ryoichi Kado, President and COO

Contact

Eiji Kawamura, Managing Director,
Head of Administration Headquarters
Tel: +81-(0)3-5657-0111

Notice Regarding Conclusion of Share Transfer Agreement with CITY INDEX ELEVENTH CO.,Ltdfor Acquisition of Shares in EXCEL CO., LTD.,
and Expected Recognition of Extraordinary Income (Gain on Bargain Purchase)At the board of directors meeting held on December 9, 2019, Kaga Electronics Co., Ltd (“Kaga Electronics” or “theCompany”) resolved to conclude a share transfer agreement with CITY INDEX ELEVENTH CO.,Ltd (“CI11") withrespect to the outstanding shares issued by EXCEL CO., LTD. (“EXCEL”), and concluded the said agreement on the samedate. The acquisition of EXCEL shares under the said agreement (“the Share Acquisition”) is scheduled to be executed on
April 1, 2020, upon which EXCEL will become the Company’s wholly-owned subsidiary effective the same date.
Pursuant to the integrated contract entered into between the Company, EXCEL, Office Support K.K. (“Office Support”),
the parent company of CI11, and CI11 on December 9, 2019, the Share Acquisition shall be executed upon (1) CI11
making EXCEL a wholly-owned subsidiary through share exchange for cash consideration (“the Share Exchange”), andsubsequently (2) payment of dividend in kind being made to CI11 using a portion of assets owned by EXCEL as dividend
property (“the Dividend in Kind").
For details on the Share Exchange and the Dividend in Kind, please refer to “Notice Regarding Conclusion of Share
Exchange Agreement with CITY INDEX ELEVENTH CO.,Ltd and Management Integration with Kaga Electronics Co.,
Ltd. (Japanese only) ” issued by EXCEL on December 9, 2019.
In connection with the Share Acquisition, the Company anticipates recognition of extraordinary income (gain onbargain purchase) in the fiscal year ending March 31, 2021.
1. Reasons for the management integration and acquisition of the shares
Since its foundation, Kaga Electronics has been expanding its business domain by responding to the various needsof customers in accordance with its philosophy of “everything we do is for our customers”. As an independent general
trading company that specializes in electronics, Kaga Electronics is engaged in a wide variety of business activities andoffers a variety of services to customers both in Japan and abroad, ranging from distribution of Electronic Parts andSemiconductors that leverages its expertise in the segment, the EMS business (contracted manufacturing of electricalsubstrates) where it has a competitive advantage in high-mix low-volume production, to support for customers inplanning, development and design of their products, creation of software/video images, and provision of network
solutions and other system support services.
Meanwhile, changes are taking place with increasing speed in the business environment surrounding the electronics
trading industry, where there still are many players competing with each other. We have seen reorganization andconsolidation of semiconductor/device manufacturers, our suppliers, which have led to review of their policies on
distribution agents, moves by end-products manufacturers, our customers, to relocate their production facilities tooverseas sites for assembly of finished products, changes in demand and supply and price fluctuations in both domestic
and overseas markets reflecting US-China tariff policies and uncertainty in the future of the global economy. There has1

also been shortening of product life cycles as a result of ongoing technological innovations. Against this backdrop, webelieve that the competition for survival among electronic trading companies will become more and more intense in thecoming years.
Under these circumstances, the Company has formulated the three-year “Medium Term Management Plan 2021”
that runs from the fiscal year ending March 31, 2020 to March 31, 2022 (announced on November 6, 2018, “theMedium Term Plan”), in line with which it is working on enhancement of revenue base, stabilization of managementbase and creation of new businesses, being guided by its medium to long-term vision of becoming “Japan’s No. 1
corporate group in the industry” by establishing “profit-focused management” and putting it firmly in place, with theaim of developing into a competitive “world-class company”.
In January this year, Fujitsu Electronics Inc., a core trading company of the Fujitsu Group, was converted to a
subsidiary of the Group, to achieve expansion the Group’s trading company business. In October, the Companyacquired from Pioneer Corporation shares of Towada Pioneer Corporation (currently Kaga EMS Towada Co., Ltd.), a
manufacturing subsidiary of Pioneer, to strengthen manufacturing capabilities.
The decision to make EXCEL a subsidiary based on the share transfer agreement concluded with CI11 also forms apart of the Company’s efforts to achieve its growth strategy. Around April 2019, the Company was approached byOffice Support, which is one of the major stockholders of EXCEL, and Mr. Yoshiaki Murakami (“Mr. Murakami") who
has close relationship with Office Support, CI11 and others, with proposal on the Share Acquisition. The Company set
out to study the proposal and from around May, the three parties, including EXCEL, conducted earnest discussions anddeliberations on the matter. In the course of the deliberation, the Company recognized that EXCEL’s strengths in its key
domestic and overseas products in the area of liquid crystal devices as well as its customer base in China wereparticularly attractive for the Company as it seeks to achieve its growth strategy, and concluded that synergies could beachieved at an early stage.
From the standpoint of acquiring EXCEL’s business at an appropriate price, the Company commissioned SMBC
Nikko Securities Co., Ltd. as third-party appraisal organization and, after serious deliberations, proceeded to enter into
the management integration agreement with EXCEL, CI11 and Office Support.
The acquisition price in the Share Acquisition is the amount equivalent to the appraised value of EXCEL stock
calculated by SMBC Nikko Securities Co., Ltd. after deducting EXCEL’s assessed value of its property (real estate,securities, etc.) to be paid to CI11 as the Dividend in Kind. The Company deems the acquisition price to be appropriate.
As for the consideration for the Share Exchange, this was determined solely through deliberations and negotiations
between EXCEL and Office Support along with other major shareholders of EXCEL (for details, please refer to thepress release dated December 9, 2019 issued by EXCEL,“Notice Regarding Conclusion of Share Exchange Agreementwith CITY INDEX ELEVENTH CO.,Ltd and Management Integration with Kaga Electronics Co., Ltd. (Japaneseonly)) ”. The Company was not involved in any way in the contract negotiations relating to the consideration for theShare Exchange.
The Company plans to provide financing of around 8 billion yen to EXCEL as working capital on the execution
date of the Share Acquisition. This is because, as EXCEL will be paying the Dividend in Kind using cash and deposits
that it holds and is likely to obtain a sizeable amount of additional loan in connection with the series of relevanttransactions, EXCEL’s financial position would deteriorate significantly without additional funding from the Company.
EXCEL operates a business focusing on electronic devices led by liquid crystal, semiconductors and integrated
circuits, and its integration into the Group is expected to generate the following synergies.
(1) Market share expansion for the Electronic Parts and Semiconductor businessWe will seek to strengthen ability to respond to customer needs and expand share in the electronic parts andsemiconductor markets by complementing the respective companies’ offerings and sales channels. In particular,2realization of synergies can be expected with EXCEL’s strengths in its key domestic and overseas products in the LCD
domain to expand sales to the Company’s customers, as well as EXCEL’s customer base in China to strengthen
distribution of the Company’s products.
(2) Expansion in the scale of the EMS businessWe will strive to further strengthen the profitability of the Company’s EMS business by sharing the Company’s
global network of EMS manufacturing bases with EXCEL, and reaching out to the EXCEL customer base with theCompany’s EMS business.
(3) Acquisition of new businesses
We will bring in EXCEL’s promising new businesses such as EV-related business and mobilize the collective
strength of the Group to achieve early commercialization.
(4) Further improvement in management efficiency through business collaboration between the two companies
We will seek to improve the profitability of both the Company and EXCEL by optimizing and sharing to thegreatest extent possible the two firms’ sales related organizations and other functions.
Through the Share Acquisition, we will seek to solidify our footing as “Japan’s No. 1 corporate group in theindustry” as set out in the Medium Term Plan, and will continue efforts to expand and improve the scale and the qualityof Group management, with the aim of achieving sustainable growth as a competitive “world-class company” which
can stand up to overseas competition with their sales crossing the trillion yen mark.

2. Overview of the Target Company（EXCEL CO., LTD.）(1)

NameEXCEL CO., LTD.

(2)

Address of Head Office

3-12-10, Nishi-Shinbashi, Minato-ku, Tokyo, Japan(3)

Representative’s title and namePresident and CEO : Nobuaki Ohtaki(4)Business(5)

Capital3,086 million yen(6)Date of establishment

July 25, 1961

(7)

(8)

Major shareholders and theirownership ratios

Relationships with
Kaga Electronics Co., Ltd.

Sale, import and export of LCD devices, integrated circuits, semiconductor devices andother electronic components and equipment

Minami-Aoyama Real Estate K.K.

9.25%

C&I Holdings Co.,Ltd.

8.54%

CITY INDEX THIRD CO.,Ltd

8.41%

BBH FOR FIDELITY LOW-PRICED STOCK FUND (PRINCIPAL ALL

8.08%

SECTOR SUBPORTFOLIO)(Standing Proxy MUFG Bank, Ltd.）
Reno, Inc.

7.18%

Office Support K.K.

6.54%

The Master Trust Bank of Japan ,Ltd. (Trust Account)

3.33%

Ryosan Company,Limited

2.44%

Mizuho Bank, Ltd.

2.35%

Sumitomo Mitsui Banking Corporation

1.80%

Capital relationships

None

Personal relationships

None
The Company procures electronics components and other

Business relationships

products from EXCEL.

3(9)Consolidated business performance and financial position over the last three years
Fiscal period

FYE March 2017

FYE March 2018

FYE March 2019

Consolidated net assets

23,440 million yen

27,249 million yen

24,611 million yen

Consolidated total assets

49,057 million yen

54,479 million yen

43,739 million yen

2,676.65 yen

2,965.60 yen

2,839.99 yen

Consolidated net sales

98,703 million yen

100,425 million yen

67,499 million yen

Consolidated operating income

1,760 million yen

1,433 million yen

369 million yen

Consolidated ordinary income1,448 million yen

1,283 million yen

252 million yen

1,065 million yen

2,874 million yen

569 million yen

122.94 yen

331.67 yen

65.72 yen

34.00 yen

75.00 yen

26.00 yen

Consolidated net assets per share

Ordinary income attributable toowners of parent
Consolidated net income
per share
Dividends per share

Note:

The scheduled effective date of the Share Exchange is April 1, 2020, and it is expected that all of EXCEL shareswould be held by CI11 at the time the Company acquires EXCEL shares from CI11.

3. Overview of the Selling Shareholder(1)Name

CITY INDEX ELEVENTH CO.,Ltd(2)

Address of head office

3-22-14, Higashi, Shibuya-ku, Tokyo,Japan(3)

Representative’s title and name

CEO Hironao Fukushima(4)

Business(5)

Capital1 million yen(6)Date of establishment

May 20, 2009(7)

Net assets-3 million yen(8)

Total assets

193 million yen

Major shareholders and their

Office Support K.K.

66.5％

ownership ratios

Minami-Aoyama Real Estate K.K.

33.5％

(9)

(10)

Investment business, management consulting, real estate brokerage, real estate sale andpurchase, and real estate leasing

Capital relationships

None

Relationships with

Personal relationships

None

Kaga Electronics Co., Ltd.

Business relationships

None

Related party status

None

4. Number of Shares to Be Acquired, Acquisition Price and Share Ownership Before and After Acquisition(1)

Shares held before theacquisition(2)

Shares to be acquired(3)

Acquisition price(4)

Shares held after theacquisition－8,666,084 shares （Note 1）(Voting rights: 86,632)
Shares of common stock in EXCEL CO., LTD. (estimate)

100 million yen(Note 2)

Advisory and other fees (estimate)

250 million yen

Total (estimate)

350 million yen

8,666,084 shares（Note 1）(Voting rights: 86,632)(Percentage of voting rights held: 100.0%)

4Basis for calculation of the(5)acquisition price

The acquisition price was determined upon consultation with the selling shareholder,
based on the appraised value of EXCEL stock calculated by SMBC Nikko Securities
Co., Ltd.

Note 1: The number indicated herein is the total number of outstanding shares of EXCEL as of September 30, 2019(9,086,755 shares), net of the number of treasury shares as of the same date (420,671 shares). However, as weunderstand that EXCEL is planning to cancel the treasury shares it holds at the time immediately preceding theeffective date of the Share Exchange, “the number of shares to be acquired” and “the number of shares held after
the acquisition” may change according to change in the number of EXCEL’s treasury shares.
It is anticipated that the Company will recognize approximately 8.2 billion yen of gain on bargain purchase fromthe Share Acquisition.
Note 2: The Company plans to provide financing of around 8 billion yen to EXCEL as working capital on the execution
date of the Share Acquisition. This is because, as EXCEL will be paying the Dividend in Kind using cash anddeposits that it holds immediately prior to the Share Acquisition and, furthermore, is likely to obtain a sizeable
amount of additional loan in connection with the series of relevant transactions, EXCEL’s financial position would
deteriorate significantly without additional funding from the Company.
5. Timeline of the Share Acquisition(1)

Board of directors meeting

December 9, 2019(2)

Execution of the agreement

December 9, 2019(3)

Execution of the Share Acquisition

April 1, 2020(scheduled)

Note:

The scheduled effective date of the Share Exchange is April 1, 2020, and it is expected that all of EXCEL shareswould be held by CI11 at the time the Company acquires EXCEL shares from CI11.

6. Financing
The Company intends to use its cash on fund for payment of the consideration for the Share Acquisition.
7. Future Prospects
As the scheduled effective date of the Share Acquisition is April 1, 2020, the transactions presented herein will have noimpact on the Company’s consolidated financial results for the fiscal year ending March 31, 2020.
In the accounting treatment associated with the Share Acquisition, the Company anticipates recognition ofapproximately 8.2 billion yen of extraordinary income as gain on bargain purchase in the consolidated financial statements
for the fiscal year ending March 31, 2021. The amount of the gain on bargain purchase will be examined and details will beannounced as soon as they become clear.
End(Reference) Consolidated forecast for the fiscal year ending March 31, 2020 (announced on November 7, 2019) andconsolidated results of the fiscal year ended March 31, 2019
(Millions of yen)Net sales

Operating income

Ordinary income

Profit attributable toowners of parent

Consolidated forecast for
the fiscal year ending

430,000

7,000

7,000

5,000

292,779

7,570

7,859

8,014

March 31, 2020
Consolidated results ofthe fiscal year ended
March 31, 20195