Sanshin Electronics : Other Matters Subject to Electronic Provision Measures in Connection with the Notice of the 73rd Ordinary General Meeting of Shareholders

This document has been translated from the original document in Japanese. In the event of any discrepancy between this English translation and the original document in Japanese, the original document in Japanese shall prevail.

Other Matters Subject to Electronic Provision Measures in Connection with the Notice of the 73rd Ordinary General Meeting of Shareholders

Notes to Consolidated Financial Statements

Notes to Non-consolidated Financial Statements

(From April 1, 2023 to March 31, 2024)

Sanshin Electronics Co., Ltd.

The items above are omitted from the document provided to shareholders who requested documented delivery in accordance with the applicable laws and regulations, and the provision of the Company's Articles of Incorporation. In addition, regardless of whether shareholders requested document delivery, the same document listing matters subject to electronic provision measures with the items above omitted will be provided to all shareholders at the general meeting of shareholders.

Notes to Consolidated Financial Statements

(Notes on the Basic Important Points for Preparing the Consolidated Financial Statements of This Term) 1. Scope of consolidation

Number of consolidated subsidiaries: 9 Names of companies:

SANSHIN ELECTRONICS (HONG KONG) CO., LTD.

SANSHIN ELECTRONICS SINGAPORE (PTE) LTD. TAIWAN SANSHIN ELECTRONICS CO., LTD. SANSHIN ELECTRONICS CORPORATION SANSHIN ELECTRONICS KOREA CO., LTD. SANSHIN ELECTRONICS (THAILAND) CO., LTD. SANSHIN ELECTRONICS (SHANGHAI) CO., LTD. TAKUMI CORPORATION

SANSHIN NETWORK SERVICE CO., LTD.

On April 1, 2024, Sanshin Electronics merged with Sanshin Network Service Co., Ltd., in an absorption merger, in which the Company became the surviving company and Sanshin Network Service became the absorbed company.

Number of non-consolidated subsidiaries: 5 Names of companies:

SANSHIN MEDIA SOLUTIONS CO., LTD.

AXIS DEVICE TECHNOLOGY CO., LTD.

SANSHIN SYSTEM DESIGN CO., LTD.

SANSHIN ELECTRONICS (SHENZHEN) CO., LTD.

SAN SHIN ELECTRONICS (MALAYSIA) SDN. BHD. Rationale for exclusion of non-consolidated subsidiaries from the scope of consolidation:

The size of each of the non-consolidated subsidiaries is small, and each company's total assets, net sales and net profit or loss (amount corresponding to equity) and retained earnings (amount corresponding to equity) are small in size and neither does significantly affect the consolidated financial statements.

The standards for judging whether or not the subsidiary has materiality are based on the past five-year average net profit or loss on the part of both the Company and the subsidiaries.

On April 1, 2024, Sanshin Electronics merged with SANSHIN MEDIA SOLUTIONS CO., LTD. in an absorption merger, in which the Company became the surviving company and Sanshin Network Service became the absorbed company.

2. Application of equity method

Non-consolidated subsidiaries and affiliated companies to which the equity method is not applied Names of companies:

SANSHIN MEDIA SOLUTIONS CO., LTD.

AXIS DEVICE TECHNOLOGY CO., LTD.

SANSHIN SYSTEM DESIGN CO., LTD.

SANSHIN ELECTRONICS (SHENZHEN) CO., LTD.

SAN SHIN ELECTRONICS (MALAYSIA) SDN. BHD. SHINEI COMMUNICATION SYSTEMS CO., LTD.

Rationale for non-application of the equity method:

Based on each company's net profit or loss (amount corresponding to equity) and retained earnings (amount corresponding to equity) etc., neither does significantly affect the Company's consolidated financial statements, nor have importance as a whole, even if excluded from the subject of equity method.

The standards for judging whether or not the company has materiality are based on the past five-year average net profit or loss on the part of the Company, its subsidiaries and affiliated companies.

On April 1, 2024, Sanshin Electronics merged with SANSHIN MEDIA SOLUTIONS CO., LTD. in an absorption merger, in which the Company became the surviving company and Sanshin Network Service became the absorbed company.

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3. Matters concerning accounting principles

A. Valuation standards and methods for major assets

1. Securities Other securities

Securities other than stocks, etc., without fair market values:

At market value. (Appraisal differences are dealt with by means of the direct capital influx method, with cost of securities sold calculated by means of the moving average method.) Furthermore, among the other securities other than stocks, etc., without fair market values, for which the difference between the "acquisition cost" and the "debenture amount" is judged to be the result of interest rate adjustments, are calculated by amortized cost method.

Stocks, etc., without fair market values:

At cost, using the moving average method.

b. Derivatives

At market value.

c. Inventories

Merchandise: Primarily at cost, using the moving average method. (Figures stated on balance sheets are calculated by means of the write-down method based on a decline in profitability.)

Partly-finished work: At cost, using the specific identification method. (Figures stated on balance sheets are calculated by means of the write-down method based on a decline in

	profitability.)
B. Depreciation method for major depreciable assets
a. Property and equipment:	Primarily the declining-balance method
(Excluding leased	However, buildings (excluding equipment and installations), and the equipment
assets)	and installations of buildings and structures acquired on or after April 1, 2016
	are depreciated by the straight-line method.
	The useful life of buildings and structures is 15 to 45 years; for other property
	and equipment, it is 3 to 20 years.
b. Intangible assets:	Straight-line method
(Excluding leased	The estimated useful life of software for internal use is 3 to 5 years.
assets)
c. Leased assets:	Straight-line method using the lease period as the useful life and zero residual
	value.
C. Accounting standards for major allowances

a. Allowance for doubtful accounts:

Provided at an amount sufficient to cover probable losses on collection. It consists of the estimated uncollectible amount with respect to certain identified doubtful receivables and an amount calculated using the rate of actual collection losses with respect to the remaining receivables.

b. Allowance for bonuses to employees:

Allowance for employees' bonuses is provided at an amount applicable to this consolidated fiscal year based on the estimated amount to be paid in the next year.

c. Allowance for bonuses to Directors and Audit & Supervisory Board members:

Allowance for Directors' bonuses is provided at an amount applicable to this consolidated fiscal year based on the estimated amount to be paid in the next year.

d. Allowance for stock compensation:

Allowance for stock compensation is an allowance established to provide shares of the Company to the Directors (excluding the External Directors) based on the Performance-Based Stock Compensation Plan for Directors. The allowance is calculated based on the estimated amount of payment of Sanshin Shares to be delivered to the Directors according to the points granted to each of them in accordance with the Sanshin Share delivery rules.

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D. Accounting standards for revenue and expenses

The Group applies the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29; March 31, 2020), etc. We recognize revenue in the amount expected to be received in exchange for a good or service when a promised good or service is transferred to the customer.

The Group operates two businesses: the device business, which mainly sells semiconductors and electronic components in Japan and overseas, and the solution business, which mainly develops ICT solutions.

In the device business, we mainly identify the delivery to customers of products purchased from suppliers as obligation of performance. In principle, we judge the obligation of performance as satisfied when control of the products is transferred to the customer, and we recognize revenue at that time. For domestic sales, if the period from the time of shipment to the time of delivery is the normal period, we recognize revenue at the time of shipment. For export sales, we recognize revenue when the burden of risk is transferred to the customer based on trade conditions stipulated by Incoterms (international commercial terms), etc.

In the solution business, we mainly combine network equipment, security products, and Line-of-Business systems, etc., to provide the optimum ICT infrastructure for each customer. For these products, providing the functions required by the customer is recognized as the obligation of performance. In principle, we judge the obligation of performance as satisfied when the customer accepts the product, and we recognize revenue at that time. For construction work performed per a contract agreement, etc., and for made-to-order software, we judge obligation of performance to be satisfied over a certain period of time, and we recognize revenue based on the extent of progress in satisfying obligation of performance. For contracts that provide services such as maintenance services during the contract period, we judge obligation of performance to be satisfied over a certain period of time in conjunction with the passage of the period of time, and we recognize revenue uniformly during the contract period.

For the sale of merchandise and services, if the Group is trading as the principal party, we display revenue as the total amount of compensation. If the transaction is being conducted as an agent, we display revenue as the net amount after deducting the purchasing cost from the total amount of compensation. When determining the status as principal party or agent, we make a comprehensive judgment based on the following three indicators.

・Does the Group possess the main responsibility for executing the promise of providing the specified merchandise or services?

・Does the Group possess the inventory risk before transferring the specified merchandise or services to the customer, or after transferring control to the customer?

・Does the Group have discretion in setting the price of the specified merchandise or services? Furthermore, in accordance with the separately specified terms of payment, compensation for transactions is received within approximately 6 months after obligation of performance has been satisfied, and does not include important financial elements.

E. Major foreign currency transactions

Receivables and payables denominated in foreign currencies are translated into Japanese yen at the consolidated-fiscal-year-end spot market exchange rates; any foreign exchange gains and losses from transactions are specified in the profit and loss statement. Assets and liabilities of overseas subsidiaries are translated into yen at the exchange rates in effect as of the fiscal year end, and revenues and expenses are translated into yen at the average exchange rates for the fiscal year. The resulting translation adjustments are included in the foreign currency translation adjustment in net assets.

F. Significant hedge accounting a. Hedge accounting methods:

Primarily the deferred hedge accounting method

Hedge accounting is adopted for foreign currency receivables and payables, etc. on exchange forward contracts.

b. Hedging instruments and hedged items:

Hedging instrument:	Foreign currency forward contracts
Hedged items:	Both payables and receivables, and forecasted transactions denominated in
	foreign currencies

c. Hedge policy:

The Company uses foreign currency derivatives as a means of hedging exposure to foreign currency risk. Such transactions are all carried out with the finance department of the Company as the lead department, according to Company regulations. The Company does not enter into derivatives for trading

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or speculative purposes not stated in its regulations. d. Hedge effectiveness assessment:

Hedge effectiveness is evaluated at least every six months by evaluating whether the cash flow changes in the hedged item and cash flow changes in the hedge instrument cancel each other out at a high level.

G. Accounting standards for net defined benefit liability and remeasurements of defined benefit plans

Net defined benefit liability and remeasurements of defined benefit plans are provided in the amount equal to the benefit obligations minus the pension assets based on the projected amount at the end of this consolidated fiscal year, in order to prepare for the allowance for employees' severance and retirement benefits. The retirement benefit obligations are calculated using a payment calculation standard which is a method of attributing projected retirement benefits for the service period up to the current consolidated fiscal year.

The prior service expenses are amortized by the straight-line method for a given number of years (10 years) within employees' average remaining years of service, at the time of occurrence. The actuarial gains and losses are amortized in the year subsequent to their occurrence, by the straight-line method or a given number of years (10 years) within employees'average remaining period of service.

Unrecognized actuarial gains and losses and unrecognized past service expenses are reflected in remeasurements of defined benefit plans in the accumulated other comprehensive income of net assets, after adjusting for tax effects.

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(Notes to Changes in Accounting Principles)

None

(Notes to Changes in Presentation Methods)

None
(Notes to Accounting Estimates)
(Valuation of Inventories)
Merchandise inventories	¥22,927 million

The Company holds a certain amount of merchandise inventories for the purpose of achieving stable supply of merchandise to customers and shortening lead time. As described in "3. Matters concerning accounting principles" in the "Notes to Consolidated Financial Statements (Notes on the Basic Important Points for Preparing the Consolidated Financial Statements of This Term)," figures of merchandise inventories stated on the balance sheets are calculated using the write-down method based on the decline in profitability. Valuation of merchandise inventories is estimated using the ordering forecast based on the customer's production plan. If the customer's production plan is changed, canceled, etc., a valuation loss on merchandise will be recorded and there is the possibility of a significant impact on the consolidated financial statements. Furthermore, the Company has established an Inventory Committee and strives to evaluate inventory appropriately.

(Notes to the Consolidated Balance Sheets)
1. Accumulated depreciation of property and equipment	¥4,157 million
2. Liabilities for guarantees
Liabilities for bank borrowings
Employees*	¥15 million

• Of loan guarantees to financial institutions concerning employee's borrowings to acquire housing, the portion to which home loan insurance applies has almost no risk attached and thus is excluded from liabilities for guarantees.

3. Commitment line contracts

The Company has entered into commitment line contracts with three correspondent financial institutions with the aim of securing a flexible and stable funding framework. The balance of unexecuted borrowings related to the commitment line contracts at the end of the consolidated fiscal year under review is as follows.

Total amount of commitment line contracts	¥6,000 million
Balance of borrowing	¥－ million
Balance after deduction	¥6,000 million

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(Notes to the Consolidated Statement of Changes in Shareholders' Equity)
1. Matters concerning types and numbers of outstanding shares and treasury shares	(share)
	No. of shares at the	Increase in no. of shares	Decrease in no. of shares	No. of shares at the end
	beginning of Fiscal 2022	during Fiscal 2022	during Fiscal 2022	of Fiscal 2022
	(consolidated)	(consolidated)	(consolidated)	(consolidated)
Outstanding shares
Common shares	16,281,373	－	－	16,281,373
(Note 1)
Total	16,281,373	－	－	16,281,373
Treasury shares
Common shares	4,089,037	149	11,200	4,077,986
(Notes 2, 3)
Total	4,089,037	149	11,200	4,077,986

Notes: 1. The number of treasury shares at the beginning and end of this consolidated fiscal year includes shares of the Company held by a trust established in connection with the Performance-Based Stock Compensation Plan for Directors (excluding the External Directors).

(Beginning of this consolidated fiscal year: 162,400 shares; End of this consolidated fiscal year: 151,200 shares)

2. The breakdown of the numbers listed in the fields of increase/decrease of the common treasury shares is as follows.

Increase due to acquisition of shares in amounts of less than one investment unit: 149 shares

Decrease due to issuance of shares caused by resignation of directors related to the Performance-Based Stock Compensation Plan: 11,200 shares

2. Matters concerning dividends A. Payment of dividends

		Total amount of	Dividends per
Resolution	Type of shares	dividends	Record date	Effective date
share (¥)
		(¥million)
The Ordinary
General Meeting of	Common shares	1,297	105	March 31, 2023	June 23, 2023
Shareholders
on June 22, 2023
The Board of
Directors Meeting	Common shares	432	35	September 30, 2023	December 1, 2023
on November 6,
2023

Notes: 1. Dividends of ¥17 million against the Company's shares held by a trust established in connection with the Performance-Based Stock Compensation Plan for Directors (excluding the External Directors) are included in the total amount of dividends resolved by the Ordinary General Meeting of Shareholders held on June 22, 2023.

2. Dividends of ¥5 million against the Company's shares held by a trust established in connection with the Performance-Based Stock Compensation Plan for Directors (excluding the External Directors) are included in the total amount of dividends resolved by the Board of Directors meeting held on November 6, 2023.

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B. Out of dividends whose record date is within this consolidated fiscal year, those for which the effective date will come after the end of this fiscal year

		Total amount of	Sources of	Dividends per
Resolution	Type of shares	dividends	Record date	Effective date
dividends	share (¥)
		(¥million)
The Ordinary
General Meeting of			Retained
Shareholders	Common shares	864	70	March 31, 2024	June 24, 2024
earnings
on June 21, 2024
(scheduled)

Note: Dividends of ¥10 million against the Company's shares held by a trust established in connection with the Performance-Based Stock Compensation Plan for Directors (excluding the External Directors) are included in the total amount of dividends by a resolution of the Ordinary General Meeting of Shareholders scheduled to be held on June 21, 2024

(Financial Instruments)

1. Matters Concerning the State of Financial Instruments

1. Policy Initiatives for Financial Instruments
   The Group manages funds with safe and secure financial instruments, and primarily performs fund procurement through bank loans. Derivatives are used to avoid the risk of exchange rate fluctuations, and we do not perform speculative trading.
2. Financial Instruments, Risks Involved and Risk Management Systems

Notes receivable-trade, accounts receivable-trade and electronically recorded monetary claims, which are operating receivables, are exposed to customer credit risks. Operating receivables in foreign currency, which arise from our efforts to globally expand business, are also exposed to the risk of exchange rate fluctuations. Regarding customer credit risk, in accordance with company regulations, we have established systems for performing term administration and balance management, as well as regularly evaluating major clients' credit statuses. As for exchange rate fluctuation risks, we use forward exchange contracts to offset any risks relating to business in foreign currency within the scope of actual demand required to conduct such business.

Investment securities are mainly debentures and shares in companies that we have business relations with, and although they are exposed to the risk of fluctuations in market values, these market values are periodically evaluated and reported to the Board of Directors.

Notes payable-trade, accounts payable-trade and electronically recorded obligations, which are business debts, all have a payment deadline of within one year. Although some of these are exposed to exchange rate fluctuation risks, as a result of being derived from imports from overseas and therefore being in foreign currency, we use forward exchange contracts to offset any risks relating mainly to the relevant business in foreign currency within the scope of actual demand required to conduct such business.

Loans are mainly funds procured for business transactions. Although floating-rate borrowings are exposed to interest rate fluctuation risks, the Group manages these by distributing repayment dates so that short term loans may be repaid flexibly when there is a financing surplus.

Regarding execution and management of derivatives transactions, the Group complies with company regulations specifying authority to perform transactions, and when using derivatives, in order to reduce credit

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risk, we only deal with high-rating financial institutions.

Business debts and loans are also exposed to liquidity risks. However, the Group manages this through methods such as having each company produce monthly financing plans.

In preparation for unforeseen circumstances, we have entered into commitment line contracts with three correspondent financial institutions with the aim of securing a flexible and stable method of procuring funds.

C. Further Notes on Matters Concerning Market Values of Financial Instruments

Market values of financial instruments include values based on market prices, or, where no market price exists, reasonably calculated values. Because variable factors are incorporated in the calculation of these values, the values may change when different assumptions are used.

2. Items Concerning Market Values of Financial Instruments

Consolidated balances sheet amounts, market values and their differences, as of March 31, 2023 are as outlined below.

				Millions of yen
		Amount stated on Consolidated	Market value (*2)	Difference
		Balance Sheets (*2)
(1)	Investment securities	3,107	3,107	－
(2)	Derivative transactions (*2)	(75)	(75)	－

*1: Descriptions are omitted for "Cash and deposits," "Notes and accounts receivable-trade," "Electronically recorded monetary claims," "Accrued income," "Consumption taxes receivable," "Notes and accounts payable-trade," and "Short-term loans payable" because these items consist of cash and items which are settled in a short period of time and therefore have market values that are close to the book value.

*2: Items appropriated as liabilities are listed in parentheses ( ).

*3: Net credits and debts arising from derivatives transactions are displayed as net values.

*4: Unlisted stocks (amount listed on consolidated balance sheet: ¥181 million) are not included in "(1) Investment securities" because they do not have market prices.

3. Items related to appropriate breakdown for each classification of market values for financial instruments The market values of financial instruments are classified into the following three levels according to the observability and importance of the inputs used to calculate the market values.

Level 1 market values: From among the inputs related to the calculation of the observable market values, the

market values calculated from the market prices of the asset or liability subject to the calculation of market values formed in the active market

Level 2 market values: From among the inputs related to the calculation of the observable market values, the market values calculated using the inputs related to the calculation of the market values, other than the inputs in Level 1

Level 3 market values: The market values calculated using inputs related to the calculation of unobservable market values

If multiple inputs that have a significant impact on the calculation of market values are used, from among the levels to which those inputs belong, the market values are classified as the level with the lowest priority level in the market values calculation.

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Financial assets and financial liabilities for which market values are the amount recorded on the consolidated balance sheet

				Millions of yen
Classification		Market Values
Level 1	Level 2	Level 3	Total
Investment securities
Other securities
Stocks	2,121	－	－	2,121
Corporate bonds	－	985	－	985
Derivative transactions
Currency related	－	(75)	－	(75)

Note: Explanation of valuation methods and inputs used to calculate market values Investment securities

Listed stocks and corporate bonds are valued using quoted market prices. The market values of listed stocks are classified as Level 1 market values because listed stocks are traded in active markets. On the other hand, the market values of corporate bonds held by the Company are classified as Level 2 market values because the frequency of transactions in the market is low and corporate bonds held by the Company are not recognized as having quoted market prices in active markets.

Derivative transactions

The market values of forward exchange contracts are calculated by the discounted cash flow method using observable inputs such as exchange rates, and are classified as Level 2 market values. Furthermore, forward exchange contracts and other transactions accounted for using deferral hedge accounting are processed together with the accounts receivable-trade and accounts payable-trade that are hedged, and their fair market value is included in the accounts receivable-trade and accounts payable-trade concerned.

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