Kaga Electronics Co., Ltd. andSubsidiaries
Unaudited Consolidated Semi-Annual
Financial Statements for the Six Months
Ended September 30, 2007 and 2006

Kaga Electronics Co., Ltd. and Subsidiaries
Consolidated Balance Sheets
September 30, 2007 and 2006-unaudited

Millions of Yen
2007
2006

ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Marketable securities
Notes and accounts receivable:
Trade
Other
Allowance for doubtful receivables
Inventories
Deferred tax assets
Prepaid expenses and other current assets

Thousands ofU.S. Dollars(Note 2)2007

¥ 14,164191¥ 14,638
274$65,515
4,342(521)
20,507420
1,027

59,7803,111(187)
19,481491
1,009

569,696
37,757(4,530)178,322
3,652
8,930

105,645

98,597

918,653

LIABILITIES AND EQUITYCURRENT LIABILITIES:
Short-term bank loans
Current portion of long-term bank loans
Notes and accounts payable
Trade
Other
Income taxes payable
Accrued expenses and other current liabilities

123,165
1,661

Total current liabilities
Total current assets
PROPERTY, PLANT AND EQUIPMENT:Land
Buildings and structures
Machinery, equipment and vehicles
Molding dies and furniture
Construction in Progress
Total
Accumulated depreciation
Net property, plant and equipment

1,522
2,059
3,486
2,193
167
9,427
(4,295)

1,921
3,459
2,752
1,715
9,847
(4,634)

13,235
17,90430,313
19,0701,452
81,974(37,348)

5,132

5,213

44,626

LONG-TERM LIABILITIES:Long-term bank loans
Liability for employees' retirement benefits
Retirement benefits for directors and corporate
auditors
Deferred tax liabilities
Other long-term liabilities
Total long-term liabilities

Millions of Yen20072006¥ 7,636
2,188¥

2,215
2,500

Thousands of
U.S. Dollars(Note 2)
2007$

66,40019,02650,128
1,213
1,253
3,773

48,218
768
1,490
3,196

435,896
10,548
10,89632,80866,191

58,387575,574

1,370
1,125

3,438
1,030

11,913
9,783

965
737
377

1,115
769
389

8,391
6,409
3,278

4,574

6,741

39,774

12,134
13,912
25,211
624
(0)
1,090
(83)
52,8886252,95012,134
13,912
23,038
870
2
457
(77)
50,336282
50,618105,513
120,974
219,226
5,426
(0 )
9,479
(722)
459,896539
460,435¥ 123,715¥ 115,746$ 1,075,783

CONTINGENT LIABILITIES (Note 3)
INVESTMENTS AND OTHER ASSETS:
Investment securities
Guarantee deposits
Refundable insurance premium
Deferred tax assets
Other assets
Total investments and other assets

TOTAL

7,399
2,092
829
106
2,512

6,504
2,473
863
68
2,028

64,33918,191
7,209
922
21,843

12,938

11,936

112,504¥ 123,715¥ 115,746$ 1,075,783

EQUITY
Common stock
Capital surplus
Retained earnings
Unrealized gain on available-for-sale securities
Deferred gain(loss) on derivatives under hedge accounting
Foreign currency translation adjustments
Treasury stock—at cost
Total
Minority interests
Total equity
TOTAL

See notes to unaudited consolidated financial statements.

-2-

Kaga Electronics Co., Ltd. and Subsidiaries
Consolidated Statements of Income
Six Months Ended September 30 , 2007 and 2006-unaudited
Thousands ofU.S. Dollars(Note 2)
2007

Millions of Yen
2007
2006
NET SALES (Note 4 )¥ 136,139¥126,184$ 1,183,817

COST OF SALES (Note 4)

119,311

110,654

1,037,487

Gross profit

16,82815,530146,330SELLING, GENERAL AND ADMINISTRATIVEEXPENSES (Note 4)

13,951

12,704

121,313

Operating income

2,877

2,826

25,017OTHER INCOME(EXPENSE):
Interest and dividend income
Interest expense
Gain on sales of marketable and investment securities
Provision for allowance for doubtful receivables
Exchange (loss) gain
Other—net

204(60)
15(335)
(245)
(159)

115
(100)
66
1565

1,774(522)130(2,913)(2,130)(1,382)Other income (expense)—net

(580)

161

(5,043)

INCOME BEFORE INCOME TAXES AND
MINORITY INTERESTS

2,297

2,987

19,974

INCOME TAXES
Current
Deferred

1,4591311,448(102)

12,687
1,139

1,590

1,346

13,826(59)

(5)

(513)

Total income taxes
MINORITY INTERESTS IN NET LOSSNET INCOME

¥766

¥

1,646

Yen

$6,661

U.S. Dollars

PER SHARE OF COMMON STOCK
Basic net income
Cash dividends applicable to the period¥

See notes to unaudited consolidated financial statements.
.

-3-26.72
25.00

¥

57.43
20.00

$

0.23
0.22

Kaga Electronics Co., Ltd. and Subsidiaries
Consolidated Statements of Changes in Equity
Six Months Ended September 30, 2007 -unauditedThousands

BALANCE, APRIL 1, 2007
Reclassified balance as of April 1, 2007
Net income
Cash dividends, ¥25.00 per share
Repurchase of treasury stock
Disposal of treasury stock
Net change in the period
BALANCE, SEPTEMBER 30, 2007

Millions of Yen

Outstanding
Number ofShares ofCommon
Stock

CommonStockCapitalSurplusRetained
Earnings

28,657¥ 12,134¥ 13,912¥

DeferredGain(Loss)On
Derivatives
Under Hedge
Accounting

Unrealized
Gain onAvailable-for-sale
Securities

25,162

¥ 758

¥(1)

Foreign
Currency
Translation
Adjustments

TreasuryStock¥ 1,030¥

Total(80 ) ¥ 52,915(3)00(134)28,656¥ 12,134¥ 13,912¥ 25,211

¥

624

¥

160(0)¥ 1,090¥¥135766(717)
(3)
0(73)

766(717)(1)0Minority
Interests(83) ¥52,888

TotalEquity¥

766(717)(3)0(146)

(73 )
¥

62

53,050¥52,950Thousands of U.S. Dollars (Note 2)

BALANCE, APRIL 1, 2007

CommonStockCapitalSurplusRetained
Earnings

Unrealized
Gain onAvailable-for-sale
Securities$105,513$120,974$ 218,800$ 6,591

Reclassified balance as of April 1, 2007
Net income
Cash dividends, $0.2 per share
Repurchase of treasury stock
Disposal of treasury stock
Net change in the period
BALANCE, SEPTEMBER 30, 2007

DeferredGain(Loss)On
Derivatives
Under Hedge
Accounting$(9)

ForeignCurrency
Translation
Adjustments$ 8,957

TreasuryStock$(696 )

6,661
(6,235)(26)
00(1,165)$105,513$120,974$ 219,226$ 5,426

See notes to unaudited consolidated financial statements.

- 4-$

9522

(0)

$ 9,479$(722)

Total

MinorityInterests$ 460,130

1,174

6,661
(6,235)(26)0(634)$ 459,896

Total
Equity$6,661(6,235)(26)0(1,269)

(635)
$539

461,304$460,435

Kaga Electronics Co., Ltd. and Subsidiaries
Consolidated Statements of Changes in Equity
Six Months Ended September 30, 2006 –unaudited
Thousands

Millions of Yen

Outstanding
Number ofShares ofCommon
Stock

CommonStockCapitalSurplusRetained
Earnings

28,660¥ 12,134¥ 13,912¥ 22,430

Unrealized
Gain onAvailable-for-sale
Securities

DeferredGain onDerivatives
Under Hedge
Accounting

Foreign
CurrencyTransl
ation
Adjustments

Treasury
Stock

Minority
Interests

Total

Total
EquityBALANCE, APRIL 1, 2006

Reclassified balance as of April 1, 2006
Net income
Cash dividends, ¥30.00 per share
Bonuses to directors and corporate auditors
Repurchase of treasury stock
Net change in the period
BALANCE, SEPTEMBER 30, 2006

¥

1,020

¥

420

¥

(76)

¥49,840

¥
¥

1,646
(860)
(178)
(1)

28,6591,646(860 )(178 )(1 )(111 )(1)¥ 12,134¥13,912¥ 23,038

(150)

¥

2870

¥

2

¥

- 5-37
¥

457

¥

(77)

¥50,336329

329
1,646(860)
(178)
(1)
（158)

(47)
¥

282

49,840¥50,618Kaga Electronics Co., Ltd. and Subsidiaries
Consolidated Statements of Cash FlowsSix Months Ended September 30, 2007 and 2006-unaudited

Millions of Yen
2007
2006
OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Income taxes—paidDepreciation and amortization
Loss on disposals of property, plant and equipment
Provision for directors’ and corporate auditors’ bonuses
Gain on sales of marketable and investment securities
Loss on sales of marketable and investment securities
Devaluation losses on investment securities
Provision for employees’ retirement benefits(Reversal of) provision for directors’ and corporate auditors’
retirement benefits
Increase in allowance for doubtful accounts
Payment of directors and corporate auditors’ bonuses
Changes in assets and liabilities:
Decrease in notes and accounts receivable
Increase in inventories
Decrease in prepaid expenses and other current assets(Decrease) increase in trade notes and accounts payable
Decrease in accrued expenses and other current
liabilities
Other—net
Total adjustments
Net cash used in operating activities
INVESTING ACTIVITIES:
Purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchases of investment securities
Cash decrease due to acquisition of newly consolidated subsidiaries
Proceeds from sales of investment securities
Increase in short-term loans
Other-net
Net cash used in investing activities
FORWARD-6-

Thousands of
U.S. Dollars(Note 2)2007

¥ 2,297¥ 2,987$ 19,974(2,126)781
148
83(15)(3,084)546
3955(66)
631
18(18,487)
6,791
1,287
722
(130)

(184)
329

29200
(179)

(1,600)2,861

2,450(687)
1,200(4,378)

1,388(4,517)583
340

21,304(5,974)
10,435(38,070)

(86)
(533)
(2,953)(471)
116(4,966)（748 )(4,635)(25,678)(656)(1,979)（5,704 )

(634)
700
(847)
(150)
164
(38)
(14)

(525)
64
(559)
613
(25)
(130)

(5,513)
6,087(7,365)(1,304)
1,426
(330)
(122)

(819)

(562)

(7,121)¥ (1,475)¥ (2,541)$ (12,825 )

2144

183
383

Kaga Electronics Co., Ltd. and Subsidiaries
Consolidated Statements of Cash FlowsSix Months Ended September 30 , 2007 and 2006-unaudited
Thousands ofU.S. Dollars(Note 2)
2007

Millions of Yen
2007
2006
FORWARD
FINANCING ACTIVITIES:
Increase(decrease) in short-term bank loans
Repayments of long-term bank loans
Dividends paid
Purchases of treasury stock—net
Other-net
Net cash provided by (used in) financing
activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS
ON CASH AND CASH EQUIVALENTS
NET DECREASE IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIODCASH AND CASH EQUIVALENTS, END OF THE PERIOD

See notes to unaudited consolidated financial statements.

-7-¥ (1,475 )¥ (2,541)$ (12,825)

3,085(1,321 )(713 )
(3)
(14)

(907)
(1,250)
(873)
(2)
80

26,826(11,487)(6,200)
(26)
(122)

1,034

(2,952)

8,991

47

(1)

408

(394 )(5,494)(3,426)

14,55820,132

126,591¥ 14,164¥ 14,638$ 123,165

Kaga Electronics Co., Ltd. and Subsidiaries
Notes to Consolidated Financial Statements
Six Months Ended September 30, 2007 and 2006 –unaudited

1.

PRINCIPLES OF CONSOLIDATION
The accompanying consolidated semi-annual financial statements include the accounts of Kaga Electronics
Co., Ltd (the “Company”) and its subsidiaries.
These notes disclosed herein do not cover all the notes which are generally required to be disclosed in theconsolidated financial statements prepared in accordance with the provisions set forth in the Japanese laws andregulations.

2.

TRANSLATIONThe consolidated semi-annual financial statements are stated in Japanese yen, the currency of the country inwhich the Company is incorporated and operates. The translation of Japanese yen amounts into U.S. dollar
amounts are included solely for the convenience of readers outside Japan and have been made at the rate of¥115 to $1, the approximate rate of exchange at September 30, 2007. Such translations should not be
construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any
other rate.

3.

CONTINGENT LIABILITIESAt September 30, 2007, the Company and subsidiaries had the following contingent liabilities:

Millions of yen¥ 185690

Trade notes discounted
Guarantees of employee’s loans
Guarantees for customer’s lease contract-8-Thousands ofU.S.Dollars$ 1,6096004

4.

SEGMENT INFORMATIONa.

Operations in Different Industries
The Company and subsidiaries operate within one business segment, which is the electronic component trading business.

b.

Operations by Geographic Area
The following table shows segment information by geographic area for the six months ended September 30, 2007 and 2006.
Millions of Yen
2007
NorthAmerica

Japan

Sales to customers
Interarea transfer¥

Total sales
Operating expenses
Operating income(loss)¥107,149
8,172¥

EuropeEast Asia

Eliminations
or Corporate

¥

560
58

¥ 27,770
3,476¥ (12,019)

660
313

Consolidated¥ 136,139

115,321973

618

31,246(12,019)

136,139

113,570

1,044

779

29,894(12,025)

133,262(71)¥ (161)

1,751

¥

¥

1,352

¥

6¥

2,877

Thousands of U.S. Dollars
2007
Japan

Sales to customers
Interarea transfer$

Total sales
Operating expenses
Operating income(loss)$931,730
71,061

North
America

Europe

$

$

5,739
2,722

East Asia

Eliminations
or Corporate

4,870
504

$ 241,478
30,226$(104,513 )Consolidated$ 1,183,817

1,002,791

8,461

5,374

271,704(104,513 )$ 1,183,817

987,565

9,078

6,774

259,948(104,565 )

1,158,800(1,400)$ 11,756$52

15,226$(617)$-9-$25,017

Millions of Yen2006
Japan

Sales to customers
Interarea transfer¥ 98,220
9,462

Total sales
Operating expenses
Operating incomec.

¥

NorthAmericaEurope

East Asia

Eliminationsor Corporate

¥

¥

53572

¥ 26,570
3,992¥ (13,854)

859
328

Consolidated¥

126,184

107,682

1,187

607

30,562(13,854 )

126,184

106,280

1,168

600

29,150(13,840 )

123,3587¥ 1,412

1,402

¥

19¥

¥

(14 )

¥

Sales to Foreign Customers
Sales to foreign customers for the six months ended September 30, 2007 and 2006 amounted to ¥ 36,233 million ($315,069 thousand) and ¥ 38,581 million, respectively.

Millions of Yen
2007
2006
Sales to:
North America
EuropeEast Asia¥ 1,073
1,350
33,810--10 -¥

1,271
1,037
36,273Thousands ofU.S. Dollars
2007$ 9,330
11,739294,000

2,826