・This slide shows the outline of the company’s “Medium-TermBusiness Plan 2018”. The basic policies and management goals of thisplan are as shown here.
・In addition, the “Medium to Long-Term Vision” for which thecompany is aiming at through this Medium-Term Management Planare the three points listed. Of these, becoming a “world classcompany” is the goal to be achieved once realizing the aim ofbecoming the “Japan’s No. 1 corporate group in the industry”. Theestablishment of the “Fujitsu Electronics Subsidiary” discussed todayis a measure towards the achievement of this growth strategy.
・The definition of the term “No. 1 in the Industry” here refers toscale (size). That is, the size of sales and profit. As will be explainedon a later slide, one indicator for this is “sales of 500 billion yen”.
・The next aim that is raised is to be a “world class company”. Theintent behind this goal is to be a “company able to survive in aglobal/mega-competitive environment. Overseas, there arecompetitors on trillion-yen scales. In order to compete with thesecompanies, and ultimately to survive, it will be necessary to have asuitable scale. This acquisition, therefore, is intended as a measuretowards gaining a foothold and expanding our scale.

・This slide also notes the key themes for growth as set out in the MediumTerm Management Plan. These include expansion overseas of the Group’score “EMS business”, as well as a focus on planting seeds and cultivatingmeasures in growth areas such as “in-vehicle” “communications”.
・Then we come to today’s theme of “Promoting M&A”. Our company hasalready been in the position of “actively promoting” the restructuring of theindustry. The reasons for this are obvious if you look at the shifts in theindustry in which our company is surrounded. In every industry,restructuring has been taking place, both in upstream manufacturing anddownstream distribution. For companies to survive, there is a desperateneed to expand sales and raise competitiveness and profitability throughrepeated consolidation.
・Looking at the overall industry, the marketplace is crowded with morethan 30 listed companies . When unlisted companies are added, this listprobably grows to more than 100 companies. This year our companycelebrated its 50th anniversary, but according to our senior employees, atthe time of our foundation there were more than 1,000 companies in theindustry, including smaller brokers. Compared to this, there has alreadybeen some restructuring, but there are still too many companies. Thismakes it difficult to earn good margins.
・For this reason, our company has been on the side of promoting therestructuring of the industry. The method can be anything, frommanagement integration, to mergers, or acquisitions like this. In any case,our company should be the one taking the initiative. We need to be the onedoing the eating, and not being eaten. For this reason, our company hasbeen working on the need to strengthen our management and earningsbases as key themes in our Medium-Term Plans.

・We will now give an overview of this acquisition.
・First, regarding the scheme to establish a subsidiary of FujitsuElectronics. 70% of the company’s shares will be transferred inJanuary 2019 from the parent company Fujitsu Semiconductor toform a consolidated subsidiary of the company. Regarding theremaining 30%, 15% will be transferred in each of the end ofDecember 2020 and the end of December 2021, creating a whollyowned subsidiary of the company. (This stock acquisition isconditional on approvals by relevant authorities under Japanese andforeign competition laws.) With the commitment of the business ofFujitsu Electronics under the Fujitsu Group, by holding shares for acertain period of time, including in Fujitsu Semiconductors, we aim toprovide a smooth transition for various stakeholders, includingcustomers and employees.
・The acquisition price is expected to be a total of 20.5 billion yen,including FA expenses. However, the acquisition price is expected tobe adjusted based on fluctuations to the consolidated net assets ofFujitsu Electronics etc. and is estimated to be 20.5 billion yen at thepresent time.
・The funds for acquisition will be procured by self-funding and anewly contracted bridging loan. Also, for the bridging loan, long-termfunds are planned to be procured early.
・Regarding the impact on financial affairs, no major impacts areanticipated at the present time. Given that the “acquisition price ≦net assets”, there is not expected to be any amortization of goodwilland intangible assets arising from this.

・This slide summarizes the purposes of this acquisition.
・As can be seen written in large letters, the aim of this acquisition is tobecome the “Japan’s No. 1 corporate group in the industry” as part of ourMedium-Term Plan, by continually expanding the core business of theGroup, our electronic parts business.
・The business areas of the Group are shown in the upper right. These arethe “Electronic Parts Business” made up of the founding electronic parts andsemiconductor “trading company business” and the “EMS business”. Thecompany’s other business segments are “information equipment business”,“software business” and “other business”.
・The short-term purpose of this Fujitsu Electronics acquisition is theexpansion of the trading company business. By sharing the two company’sproducts and customer bases, the first area of synergy will be thequantitative expansion of the trading company business.
・The next step is to take the quantitative expansion of the trading companybusiness to the value-added EMS business. This is the second area ofsynergy, as part of the medium-term purposes of the company. We willattempt to improve the quality of our electronic parts business and profitmargins. First, we will try to expand quantitatively, and then improvequalitatively. This is the scenario. With this acquisition, the company isprepared for a temporary drop in our profit ratio, prioritizing scale forsustainable growth in the future. By prioritizing scale, we will eventually beable to build profitability in our way of management (EMS). How manyyears would it take to create 100 or 200 billion yen in sales organically? Wefeel a sense of crisis, knowing that we don’t have that kind of time to sitaround and wait.

・The three aims of this acquisition are summarized on this slide Again,・The first is to expand the product offerings of the two companies,sharing our customer bases to form a corporate group that can be“the No. 1 electronics trading company in Japan”.
・Secondly, to increase the scale of revenue through the expansion ofour trading company business. Next, by sharing this from the tradingcompany business to the EMS business, we will improve profitability.
・Then finally (and this is our long-term vision), we aim, as a result ofthis acquisition to become a world class company, whereby ourGroup is able to survive in a global and mega-competitiveenvironment. Our current state is insufficient for achieving this, andwe believe that a scale in at least the trillion-yen class will benecessary. If the chance is there, we will also seek discontinualgrowth opportunities, with a mission of achieving this and connectingwith the coming generation.

・This slide sets out the “strengths” and “weaknesses” of our company and Fujitsu Electronics, as well as the“opportunities” and “threats” facing the “trading company business” and “EMS business” of the two operatingcompanies. This is a so-called SWOT analysis.
・Firstly, as for the “strengths” of our company, we have developed an “independent trading” company suchas not found in any other manufacturer, in the 50 years since our founding. With the managementphilosophy of “all for the customer”, we have sought to provide a wide range of services both domesticallyand internationally, thinking of the customer first, including the sale of electronics parts and semiconductorsto our EMS business, as well as the planning and development of products for customers, and software,AR/VR and system support etc. Our policy is to do whatever is asked of us by our customers, and to neversay “No”.
In terms of the “weaknesses” facing Fujitsu Electronics, we have a “shortage of new products”, but webelieve that this can be complemented by the broad procurement capabilities of an independent tradingcompany.
・The main strength of Fujitsu Electronics is certainly its backbone of the IT industry leading Fujitsu Group.
Also, it is in our technical capabilities, as well as IoT and solutions support. The company also have a globalsupport system in the United States, China, Hong Kong, Korea and Germany. This is thought to be a verypowerful weapon in our Group’s business activities.
・Next are the “opportunities” and “threats”. In terms of the electronic parts and semiconductor tradingcompany businesses which are the core businesses of both companies, there is a significant opportunity toexpand into the on-board vehicle field with the development of automotive electronics for automatic drivingand driving support etc. as hybrid and EV vehicles expand. While the issue of demand is common for all ofhumanity, both citizens and corporations, in order to preserve our global environment, there will be a needfor electronics technologies such as for inverters for energy-saving products that reduce our environmentalimpact.
・At the same time, as already noted, the semiconductor market fluctuates dramatically, not only due to thesilicon cycle (recently known as the super cycle) and boom/bust cycles, but with the difficulty in reading thefuture due to a faster speed of technological innovation and shortening product life cycle in recent years. Ourtrading company business also faces “threats” of an changing external environment such as the restructuringand review of the policies for agencies by manufacturers and shifts of customers to overseas production etc.
・Our company has strengthened its EMS business as a measure against such changes in the externalenvironment. We see a significant “opportunity” in the need for customers to reduce costs, and forproduction needs in overseas production, particularly in recent times outside of China, in places like ASEAN,Eastern Europe and India etc. Our company is improving and expanding our EMS global systems in responseto such needs. In addition to this infrastructure, this acquisition will make it possible to share the customerbase of Fujitsu Electronics, presenting an “opportunity” to increase the profitability of the Group.

・This slide shows the sense of scale that the Group will see as aresult of this acquisition, and its positioning in the industry.
・All figures are based on actual results from FY ended March 2018,from disclosures as a listed company, and in simple terms, thisacquisition will solidify the formation of an industry-leading classGroup with sales in the class of 500 billion yen. This in itself is not thegoal, but rather to form the core for our Group to further restructurewithin the industry, and, as mentioned earlier, the final goal is tobecome an electronics trading company with a trillion yen class sales,capable of surviving in the global marketplace.

・This slide is for reference, to help you to understand “why we areseeking to be a trillion yen class company”.
・This is a list of the top five companies by sales of specialist tradingcompanies in the four industries of “pharmaceuticals”, “foods”, “steeland metals” and “textiles and clothing”. As you can see, in most ofthese industries, the top-class companies have sales in the 2 to 3trillion-yen class. The figures for textiles and clothing are slightlysmaller, but the top company still exceeds 500 billion yen. It isdifficult for a company to show its presence as a leading company,and a leader in the industry, without this level of scale. In the past,according to “the theory that trading companies are unnecessary”,investors wouldn’t even look at companies without such a scale.
・Our company has long had an awareness and sense of crisis overthis concept. And in addition to investors, there is no way that wecan continue to achieve sustainable growth in the future globalmarketplace and leave Kaga Electronics behind to the risinggeneration without becoming a company of this kind of scale. This isan important mission, and these are the reasons behind thisacquisition.
・We are within reach of being the “Japan’s No. 1 corporate group inthe industry” but looking overseas there are competitors with trillionsof yen in sales. If we are to begin a battle with such companies, wewill have to succeed. Also, there are other top companies in thetrillion-yen class in Japan, in other industries, with which we will becompared. This is not the end, but rather the beginning for furthergrowth.

・This is an overview of Fujitsu Electronics. The company name,domestic and overseas bases, organizational system and employmentstructure are planned to continue as is.
・In terms of representatives, in addition to Mr. Ogihara, who iscurrently President and Representative Director, the current Chairmanand Representative Director of our company Mr. Isao Tsukamoto willbe appointed Chairman and Representative Director. We are planningto dispatch a majority of executives from our company, in addition toMr. Tsukamoto.

・The business of Fujitsu Electronics consists of three pillars, “devicesolutions (parts sales business)”, “IoT solutions (systems solutionsbusiness)”, and “original products and services”. Through thesebusinesses, the company aims to be a global electronics solutionsprovider.
・This graph shows the trends in sales and earnings for the last threeyears. The most recent earnings are down due to the loss of somecommercial rights and sales channel changes, but the company iscurrently working on expanding its new products etc.

・Here we will explain a little further about Fujitsu Electronics. Firstly,we will explain the four strengths of the company.
・The first, as mentioned in the SWOT analysis earlier, is the backboneof the IT industry leading Fujitsu Group. As you know, Fujitsu is thelargest IT company in Japan, and the fourth largest in the world.
・The second is the company’s sales channels and sales sites fordevice sales. There are a total of 3,500 companies in Japan andoverseas. (many of these are major companies.) Together with our4,000 companies this will lead to a very large customer base withinthe industry.
・The third is the unit of 140 engineers of the company.
・The fourth is the global support system, extended into 13 locationsdomestically, and 19 locations overseas. Here, the company has 268engineers.
・In this sense, Fujitsu Electronics has a strength in its domestic andoverseas engineer group, within the Fujitsu Group, which leads the ITindustry.

・Finally, we will discuss the direction that Fujitsu Electronics isheading in.
・As shown at the bottom of this slide, the company aims to grow outof being purely a semiconductor manufacturing trading company, tobecome a global electronics solutions provider. To accomplish this,the company is promoting three measures, “the expansion ofexternal products”, “the expansion of added value and solutions forcustomers” and “the acceleration of global expansion”. These are allconsistent with the values of our company and the directions in whichour company has been working to strengthen our business, and withthese two companies coming together to work on these areas, weare convinced that we will be able to realize a stronger name andindustry leading business.