ANNUAL REPORT2019

For the ﬁscal year ended March 31, 2019

Connection
SystemDivision
USB Type-C™
Receptacle

Research &Development
CenterBluetooth®
low energy Module“BTS05 Series”

FormerFunctional
Components
Division

2 Million-Pixel
Automotive Camera
ModuleSensing,
Communication& Interface
Division

FormerTouch Panel
Division
CapDuo Touch-2

LGMCard

SMK CORPORATIONTo Our Shareholders and Investors

SMK Philosophy

CONTENTS
To Our Shareholders and Investors

SMK is committed to the advancement of mankind
through development of the information society, byintegrating its current technological strengths andcreating advanced technology.

Financial Highlights

We are obliged to you for your continued support andgood patronage.
We would like to report on the outline and resultsof the SMK Group’s business for the 97th fiscal year
(from April 1, 2018 to March 31, 2019).
We look forward to your continuing support andencouragement.
June 20192

Overview of Consolidated Results by Division

4

Financial Section

5

Financial Review

6

Consolidated Balance Sheet

8

Consolidated Statement of Income

8

Consolidated Statement of Comprehensive Income

1 Contribute to society with pride and confidence.

9

Consolidated Statement of Changes in Net Assets

10Consolidated Statement of Cash Flows

2 Be customer-oriented, with zeal and sincerity.

11

Notes to Consolidated Financial Statements

27

Report of Independent Auditors

28

Officer Introduction

29

TopicsSMK Action Guidelines

3 Challenge courageously for higher goals without

fear of failure.

4 Trust and respect each other for a brighter working

atmosphere.

5 Keep an open mind, and view SMK from a global

Corporate Information

Yasumitsu Ikeda

perspective.

President and CEO/COO

Financial Highlights
Percent change
2018/2019

Millions of yen
Years ended and as of March 31

Thousands of
U.S. dollars

2019

2018

Years ended and as of March 31

2019

Operating Results¥ 59,786¥ 57,386

Operating income (loss)

485(1,834)ー(16,524)

Basic

Loss attributable to owners of parent

(288)

(834)

ー

(7,514)

Diluted

2018

2019

(4.0) %

$ 517,038

Financial Position
Total assets
Total net assets

Net sales¥ 61,474¥ 58,713

30,63728,612Millions of yen

90,0005,000$ 528,994
257,789(6.6)

Millions of yen
3,000

4,171

77,206(4.5) %

Profit (loss) attributable toowners of parent

Operating income (loss)

Millions of yen¥(43.63)¥(126.47)

ー

ー

ー

ー

8.00

50.00

ー

0.45

Total assets / Total net assets

59,786

Total assets

Millions of yen

Total net assets

65,02962,31861,474

2,500

2,113

1,500

630
30,000379.38300

40,00034,18733,28731,31860
50.00

276.05

200

1,017

485

0

58,71340

151.65100

30,63728,612
0

0
(288)

20

20,000(43.63)
(100)

(834)

2015

2016

2017

2018

2019

(2,500)

2015

2016

2017

2018

2019

(1,500)

2015

2016

2017

2018

2019

0

2015

2016

2017

2018

2019

(200)

14.00

14.00
10.00

8.00

(126.47)(1,834)0Cash dividends per share
yen

yen

67,60660,00057,386

Basic profit (loss) attributable toowners of parent per share

400

80,0002,678$(1.14)ー%Note 1. The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥110.99 = U.S. $1.00.
2. The Company carried out a consolidation of share at the ratio of 10 shares to 1 share on October 1, 2018.
Basic earnings per share and diluted earnings per share have been calculated on the assumption that the said consolidation of share wascarried out at the beginning of the year ended March 31, 2015.
3. The Company and its consolidated subsidiaries have adopted “Partial Amendments to Accounting Standard for Tax Effect Accounting”(ASBJ Statement No. 28, February 16, 2018) (hereinafter, the “Partial Amendments”) from the beginning of the fiscal year ended March
31, 2019. As such, financial position for the year ended March 31, 2018 is calculated on the assumption that “Partial Amendments” isapplied retrospectively.
4. In the calculation of loss per share, the Company’s shares remaining in the Board Benefit Trust (BBT), which are recorded as treasury
stock under shareholders’ equity, are included in the treasury stocks that are deducted in the calculation of the average number of sharesin the period.

1,982

60,0002019

Loss attributable to owners of parent

Cash dividends

62,971

U.S. dollars

Per Share Data

Net sales

66,230Percent change
2018/2019

Yen

2015

2016

2017

2018

2019

0

2015

2016

2017

2018

2019

ANNUAL REPORT 2019 1

Overview of Consolidated Results by Division(April 1, 2018 to March 31, 2019)

The many different electronic components that SMK produces are widely used by electronics manufacturers inand outside Japan. The markets for these components can be broadly classified into four markets: ICT Market,
Home Appliance Market, Car Electronics Market and Industry Market.
Three divisions, namely the Connection System (CS) Division, the Functional Components (FC) Division and the
Touch Panel (TP) Division, as well as the Research & Development Center, are responsible for developing productsthat continually meet market requirements in the wide range of markets outlined above. The three divisions handle
operations ranging from product planning and design to mass production, whereas the Research & Development
Center is primarily in charge of designing and developing products mainly in new fields.
In this section, we present an overview of our results achieved in each of the three divisions and the Research& Development Center in the fiscal year under review.
From the fiscal year ending March 31, 2019, the reporting segment was changed and the segment informationof the previous fiscal year has been calculated based on the changed reporting segment.

Sales by Division
Research &Development
Center¥ 471 Million

Others¥ 21 Million

Net sales¥ 57,386

Touch Panel
Division

37.8%

Million45.3%

Connection
SystemDivision¥ 21,712 Million
Functional
Components
Division

Major Products
Connectors (Coaxial, FPC)

Net sales / Operating income Millions of yen
30,0003,600

28,422 3,401

Jacks

21,71220,000

Sales of connectors in the car electronics market continued to show steady growth with the accelerating
development of car electronics serving as a tailwind. Sales of connectors for automotive cameras, which
are maintaining a high market share, and those for high-speed transmissions also expanded steadily. In
the ICT market, however, sales of connectors for smartphones fell year on year, due to the effects ofintensified competition with other connector manufacturers for supply to customers in China and the
U.S., as well as decreased demand in the Chinese market. Sales of connectors for the industry andother markets decreased year on year, as connectors for healthcare-related products, which hadenjoyed steady growth, saw a sufficient spread in its mainstay market, causing demand to fall sharply.
As a result, net sales of the Connection System Division amounted to ¥21,712 million (23.6%
decrease year on year), and operating income was ¥258 million (92.4% decrease year on year).

Functional
Components Division
Major Products
Remote Control Units
Camera Modules

Sales of remote control units, our mainstay products, increased year on year on the whole, as orders
from U.S. customers for new products for set-top boxes contributed greatly to sales, in addition to thesolid performance of those for home and sanitary equipment, despite a drop in sales of products for air
conditioners due to intensified price competition. As for units, sales increased significantly year on year
as sales of units for home equipment, control units for car electronics, and automotive camera modules
expanded. Sales of switches decreased year on year due to the effects of a large decrease in sales of
those for POS, although sales of those for smartphones remained flat.
As a result, net sales of the Functional Components Division amounted to ¥26,007 million (21.4%
increase year on year), and operating loss was ¥412 million (compared to an operating loss of ¥1,250
million in the previous fiscal year).

2 ANNUAL REPORT 201910,000

1,200

258
2017

2019

2018

0

Net sales / Operating income (loss) Millions of yen
40,0004,000

27,238Switches

35.6%

ICT
¥ 9,464 Million

Home
Appliance¥ 20,397 Million

Others: markets of medical equipment, rehabilitation equipment, etc.

Touch Panel
Division

Net sales / Operating income (loss) Millions of yen
15,0003,000
11,931
9,581

10,000

9,173

2,000

2,400
1,919

0

Net salesCar¥
57,386
Electronics
Million35.4%¥ 20,338 Million

Major Products
Touch Panels (Resistive, Capacitive, Optical)

23,53912.6% 16.4%¥ 26,007 Million
Others: businesses of other electronic parts, lease, real-estate rental, andworker dispatching undertakings.

Connection System
Division

Industry・Others¥ 7,185 Million

0.1%

16.0%

0.8%

¥ 9,173 Million

Sales by Market

Regarding our mainstay touch panels for the car electronics market, as demand sharply shifts from resistive touch
panels to capacitive touch panels, competition against competing touch panel manufacturers has intensified. Amidsuch changes in the environment, although sales of capacitive touch panels for the car electronics market remained
steady in North America, they were not enough to offset the fall in sales of resistive touch panels, leading to a dropin sales compared to the previous year.
In markets other than the car electronics market, although sales of resistive touch panels for machine tools andoffice equipment, and sales of capacitive touch panels for wearable devices and home appliances showed steadyincreases year on year, there was a minor drop in overall sales of the touch panels business from the previous year.
As a result, net sales of the Touch Panel Division amounted to ¥9,173 million (4.3% decrease year on year), andoperating loss was ¥449 million (compared to an operating loss of ¥756 million in the previous fiscal year).

Research &Development Center

113
0

0

(449)
(756)
2017

2018

2019

(1,000)Net sales / Operating income (loss) Millions of yen
471

500

Major Products
Wireless Modules

26,007

1,000

5,000

500

354

21,42020,000

2,000

0

0
(412)
（786）
(1,250)
2017

2018

2019

(2,000)Regarding wireless communication modules, the mainstay business of the Research & Development
Center, sales of Bluetooth® modules for payment terminals and printers for the industry market have
expanded steadily. In addition, the mass production of Low Power Wide Area (LPWA) modules, used in the
IoT field where growth is expected, began. The IoT foundational technology development project in which
SMK is involved has been adopted by the Public/Private R&D Investment Strategic Expansion PrograM(PRISM) of Japan’s Cabinet Office. In the home appliance market, the Piezoelectric Switch Unit for sanitaryequipment was ordered and developed.
As a result, net sales of the Research & Development Center amounted to ¥471 million (32.9%
increase year on year), and operating loss was ¥316 million (compared to an operating loss of ¥358
million in the previous fiscal year).

0

0

(358)

2018

(316)

2019

(500)

ANNUAL REPORT 2019 3

Financial Section

Financial Review

SMK’s net sales for the fiscal year ended March
31, 2019 decreased 4.0% year on year to¥57,386 million (US$517,038 thousand),Five-Year Summary

Total net assets(As of March 31)

Millions of yen
36,000whereas operating loss of ¥1,834 million(US$16,524 thousand) and loss attributable to34,18734,00033,287owners of parent of ¥834 million (US$7,514

SMK Corporation and Consolidated Subsidiaries

thousand) were recorded.

32,00031,318Net Sales
Thousands of
U.S. dollars

Millions of yen
Years ended andas of March 31

2015

2016

2017

2018

2019

2019

66,230 ¥77,206 ¥62,971 ¥

59,786 ¥57,386$ 517,038

Operating income (loss)

2,113

4,171

630

485

(1,834)(16,524)

Profit (loss) attributable toowners of parent

1,982

2,678

1,017

(288)

(834)

(7,514)

Operating Results
Net sales¥

There was favorable sales growth in products such as remotecontrol units for set-top boxes for the U.S. customers, automotive
connectors, units for home equipment, control units for car
electronics, and automotive camera modules. However, sales of
products such as connectors for smartphones for Chinese
customers and touch panels for car electronics were sluggish due
to intensified competition in the market environment, as
connectors for the healthcare market saw a sufficient spread inits mainstay market, causing demand to fall.
As a result, net sales were ¥57,386 million (US$517,038
thousand), down 4.0% year on year.

Operating Income
Financial Position
Total assets
Total net assets¥

65,029 ¥67,606 ¥62,318 ¥61,474 ¥58,713$ 528,994

34,18733,28731,31830,63728,612257,789

Despite our efforts such as proactive launch of new products andinitiatives taken to reduce cost of sales and cut expenses,
operating loss amounted to ¥1,834 million (US$16,524 thousand)due to profit decreasing factors such as a decrease in net sales,
the product mix, and loss on valuation of inventories.

30,63730,00028,612
0

2015

2016

2017

2018

Return on equity (ROE)(Years ended March 31)

%
12

8.0
8

6.0
4
3.2

(0.9)

0

(2.8)

Profit attributable to owners of parent
Yen

U.S. dollars

Per Share Data
Total net assets¥ 4,754.15 ¥ 4,710.19 ¥ 4,734.95 ¥ 4,635.03 ¥ 4,415.09

$

39.78

Profit (loss) attributableto owners of parent
276.05379.38151.65(43.63)(126.47)(1.14)

Diluted275.65378.63151.62

－

－

－

8.00

50.00

0.45

14.00

14.00

10.00

Note 1. The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥110.99 = U.S. $1.00.
2. The Company carried out a consolidation of share at the ratio of 10 shares to 1 share on October 1, 2018.
Basic earnings per share and diluted earnings per share have been calculated on the assumption that the said consolidation of share wascarried out at the beginning of the years ended March 31, 2015.
3. The Company and its consolidated subsidiaries have adopted “Partial Amendments to Accounting Standard for Tax Effect Accounting”(ASBJ Statement No. 28, February 16, 2018) (hereinafter, the “Partial Amendments”) from the beginning of the fiscal year ended March
31, 2019. As such, financial position for the years ended March 31, 2018 is calculated on the assumption that “Partial Amendments” isapplied retrospectively.
4. In the calculation of profit (loss) per share, the Company’s shares remaining in the Board Benefit Trust (BBT), which are recorded astreasury stock under shareholders’ equity, are included in the treasury stocks that are deducted in the calculation of the average numberof shares in the period.
4 ANNUAL REPORT 2019

(4)

2015

2016

2017

2018

2019

Return on assets (ROA)(Years ended March 31)

Total Assets / ROA
As of March 31, 2019, total assets were ¥58,713 million(US$528,994 thousand), with ROA of (1.2) %.

BasicCash dividends

Loss attributable to owners of parent was ¥834 million (US$7,514
thousand) as a result of recording rent income/expense, gain on
sales of fixed assets, foreign exchange gain, net, etc. in otherincome/expenses.

2019

Total Net Assets / ROE
As of March 31, 2019, total net assets were ¥28,612 million(US$257,789 thousand), with ROE of (2.8) %.

%
10
8.1
8

6
5.3
4
2.2

Cash FlowsNet cash provided by operating activities amounted to ¥1,608
million (US$14,488 thousand), net cash used in investing activities
totaled ¥2,091 million (US$18,840 thousand), and net cash provided
by financing activities was ¥997 million (US$8,983 thousand).

2

0.6

0

(2)

(1.2)

2015

2016

2017

2018

2019

ANNUAL REPORT 2019 5

Consolidated Balance Sheets

Consolidated Balance SheetSMK Corporation and Consolidated Subsidiaries
As of March 31, 2018 and 2019

Thousands of
U.S. dollars(Note 2)Millions of Yen

Assets2018

2019

Liabilities and net assets

2019

2018

2019

2019

¥ 12,731¥ 14,263$ 128,507

6,807

5,301

47,761

Accrued income taxes

542

524

4,721

Accrued bonuses

668

623

5,613

Accrued directors’ and officers’ bonuses

1

—

—

Current liabilities

Current assets
Cash and cash equivalents (Note 16)

Thousands of
U.S. dollars(Note 2)Millions of Yen¥

Time deposits (Note 16)

10,482¥

10,776$

97,090

Short-term loans payable (Note 5 and 16)
Notes and accounts payable, trade (Note 6 and 16)

117

112

1,009

Notes and accounts receivable, trade (Note 6 and 16)

15,251

14,496130,606

Inventories (Note 3)

8,775

8,071

72,718Other current assets (Note 18 and 21)

1,439

932

8,397

Accounts payable, non-trade (Note 16)

1,919

1,491

13,434

(56)

(106)

(955)

Other current liabilities (Note 18)

1,688

1,573

14,17236,00934,283308,884

24,35823,778214,236

Long-term debt (Note 5 and 16)

4,526

4,601

41,454

Deferred tax liabilities (Note 13)

1,000

799

7,199

Accrued directors’ and officers’ retirement benefits

171

176

1,586

Allowance for doubtful accounts

Long-term liabilities

Investments and long-term loans
Investment securities (Note 16 and 17)

2,460

2,548

22,957Long-term loans receivable (Note 21)

93

61

550

Asset for retirement benefits (Note 7)

1,440

1,219

10,983Liability for retirement benefits (Note 7)

40

53

478

Other investments (Note 21)

599

678

6,109

Other long-term liabilities

738

691

6,226

Allowance for doubtful accounts

(87)

(40)

(360)

6,478

6,323

56,969

4,506

4,466

40,238

7,996

7,996

72,043

Capital surplus

12,057

12,057

108,631

Retained earnings

15,73014,597

131,516

Treasury stock(4,001)(4,313)(38,859)

31,78330,338273,340

Net assets
Shareholders’ equity (Note 8)

Property, plant and equipment (Note 5, 12 and 19)

Common stock
Authorized : 195,961,274 shares as of March 31, 2018
19,596,127 shares as of March 31, 2019
Issued : 75,000,000 shares as of March 31, 2018
7,500,000 shares as of March 31, 2019Land (Note 4)

6,615

6,001

54,068

Buildings

19,32019,063

171,754

Machinery and vehicles

22,077

23,585

212,497

Tooling and office furniture

23,05022,737

204,856

327

681

6,136

71,39072,069649,329(51,266)(52,376)(471,898)

Accumulated other comprehensive income

20,124

19,693

177,430

Net unrealized gains (losses) on other securities

331

297

2,676

Net unrealized gains (losses) from hedging instruments

(9)

(7)

(63)

(1,907)(2,027)(18,263)

440

10

90

(1,145)(1,726)(15,551)

30,63728,612257,789¥ 61,474¥ 58,713$ 528,994

Construction in progressLess-accumulated depreciation

Other assets
Deferred tax assets (Note 13)

618

115

1,036

Intangible assets (Note 12)

215

154

1,388

834

269

2,424

58,713$ 528,994

Total assets¥

61,474¥Foreign currency translation adjustments
Retirement benefits asset and liability adjustments

Total liabilities and net assets

See accompanying notes to consolidated financial statements.
6 ANNUAL REPORT 2019

ANNUAL REPORT 2019 7

Consolidated Statement of Income

Consolidated Statement of Changes in Net Assets

Years ended March 31, 2018 and 2019Years ended March 31, 2018 and 2019

SMK Corporation and Consolidated Subsidiaries

SMK Corporation and Consolidated Subsidiaries

Net sales (Note 20)
Cost of sales (Note 3 and 9)
Selling, general and administrative expenses (Note 9 and 10)
Operating income (loss) (Note 20)

¥

2018

59,78649,429
9,871
485

¥

Millions of yen

Thousands of
U.S. dollars(Note 2)Millions of Yen

2019

Shareholders’ equity

2019

57,38649,962
9,258(1,834)$ 517,038
450,149
83,413(16,524)

Other income
Interest and dividend income (Note 21)
Rent income
Foreign exchange gain, net
Gain on sales of fixed assets (Note 11)
Gain on sales of investment securities (Note 17)
Gain on redemption of investment securities
Other
Total other income

98
1,175
—
2,341
0
46
297
3,960

93
1,076
350
1,317
195

838
9,695
3,153
11,866
1,757

373
3,407

3,361
30,696

Other expenses
Interest expense
Rent expense (Note 21)
Foreign exchange loss, net
Loss on disposal of fixed assets (Note 11)
Loss on impairment of fixed assets (Note 12)
Loss on valuation of investment securities
Loss on liquidation of subsidiaries and affiliates
Other
Total other expenses

114
571
921
172
1,815
181
—
96
3,875

114
556
—
199
148
86
67
96
1,269

1,027
5,009
—
1,793
1,333
775
604
865
11,433

570

303

2,730

821
51
(302)
(14)
(288)

620
517
(834)
—
(834)

5,586
4,658
(7,514)—(7,514)

Profit before income taxes
Income taxes (Note 13)
Current
Deferred
Loss
Loss attributable to non-controlling interests
Loss attributable to owners of parent

¥

—

¥

Yen

Per share data (Note 15)
Total net assets
Loss attributable to owners of parent
Basic
DilutedCash dividends¥ 4,635.03¥ 4,415.09(43.63)—8.00(126.47)
—
50.00

—

$

$

(1.14)—
0.45

SMK Corporation and Consolidated Subsidiaries

Loss
Other comprehensive income (Note 14)
Net unrealized gains (losses) on other securities
Net unrealized gains (losses) from hedging instruments
Foreign currency translation adjustments
Retirement benefits asset and liability adjustments
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests

¥

2018

Thousands of
U.S. dollars(Note 2)

(302)

¥

(17)
(5)
69
177
223
(79)

¥
¥

(65)
(14)

¥

2019

(834)

CapitalsurplusRetainedearnings¥7,996¥12,057¥16,614
(594)
(288)

2019

$

(7,514)

¥

(33)
2
(119)
(430)
(580)
(1,414)(297)
18(1,072)(3,874)(5,226)$ (12,740)¥¥(1,414)—$ (12,740)
$
—

Total
Net unrealized Net unrealized
Foreign Retirement accumulated
otherTotal gains (losses) gains (losses)
currency benefits asset
Treasury shareholders’on other from hedging translation and liability comprehensive
incomestock
equitysecurities instruments adjustments adjustments¥(3,995)(5)¥32,672
(594)
(288)
(5)
—

¥348

¥(3)

¥(1,976)¥263¥(1,368)
—
—
—
—

—

—
7,996
7,996

—
12,057
12,057(883)
15,73015,730
(264)
(834)

(34)
34

—
¥7,996—¥12,057(5)(4,001)(4,001)
(507)
196

(34)

(1,133)¥14,597¥14—

Total net
assets¥31,318
(594)
(288)
(5)
—
—

—

(17)

(5)

69

177

223

(14)

208

(889)
31,78331,783
(264)
(834)
(507)
161

(17)
331
331

(5)
(9)
(9)

69
(1,907)(1,907)

177
440
440

223
(1,145)(1,145)
—
—
—
—

(14)
—
—

(680)
30,63730,637
(264)
(834)
(507)
161

—

(311)
¥(4,313)

Noncontrollinginterests

—

—

—

(33)

2

(119)

(430)

(580)

—

(580)

(1,445)¥30,338

(33)
¥297

2
¥(7)

(119)
¥(2,027)

(430)
¥ 10

(580)
¥(1,726)—¥—(2,025)¥28,612

Noncontrollinginterests

Total net
assetsThousands of U.S. dollars (Note 2)

Shareholders’ equity

39.78

Consolidated Statement of Comprehensive Income
Millions of Yen

Balance at April 1, 2017 75,000,000
Cash dividends paid
Loss attributable to owners of parent
Acquisition of treasury stock
Disposition of treasury stock
Transfer to capital surplus
from retained earnings
Net changes in items otherthan shareholders’ equity
Total changes—
Balance at March 31, 2018 75,000,000
Balance at April 1, 2018 75,000,000
Cash dividends paid
Loss attributable to owners of parent
Acquisition of treasury stock
Disposition of treasury stock
Transfer to capital surplus
from retained earnings
Net changes in items otherthan shareholders’ equity
Total changes(67,500,000)
Balance at March 31, 2019 7,500,000

Commonstock

U.S. dollars(Note 2)

See accompanying notes to consolidated financial statements.

Years ended March 31, 2018 and 2019

Number ofshares ofcommonstock

Accumulated other comprehensive income

Commonstock

Balance at April 1, 2018
Cash dividends paid
Loss attributable to owners of parent
Acquisition of treasury stock
Disposition of treasury stock
Transfer to capital surplus
from retained earnings
Net changes in items otherthan shareholders’ equity
Total changes
Balance at March 31, 2019

CapitalsurplusRetainedearnings

Accumulated other comprehensive income
Total
Net unrealized Net unrealized
Foreign Retirement accumulated
otherTotal gains (losses) gains (losses)
currency benefits asset
Treasury shareholders’on other from hedging translation and liability comprehensivestock
incomeequitysecurities instruments adjustments adjustments$72,043 $108,631 $141,724 $(36,048) $286,359(2,379)(2,379)(7,514)(7,514)(4,568) (4,568)
(306)
1,766
1,451
306

(306)

$2,982$(81) $(17,182)$3,964

—
—

(297)

18

(1,072)—— (10,208) (2,802) (13,019)$72,043 $108,631 $131,516 $(38,859) $273,340(297)$2,67618(1,072)$(63) $(18,263)(3,874)$(10,316)————$— $276,034(2,379)(7,514)(4,568)
1,451

—

—

(5,226)(3,874) (5,226)$ 90 $(15,551)—(5,226)— (18,245)$— $257,789

See accompanying notes to consolidated financial statements.
8 ANNUAL REPORT 2019

ANNUAL REPORT 2019 9

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

SMK Corporation and Consolidated Subsidiaries

SMK Corporation and Consolidated Subsidiaries

Years ended March 31, 2018 and 2019

Thousands of
U.S. dollars(Note 2)Millions of Yen

Cash flows from operating activities
Profit before income taxes
Depreciation and amortization
Loss on impairment of fixed assets
Increase (decrease) in accrued bonuses
Increase (decrease) in accrued directors’ and officers’ retirement benefits
Increase (decrease) in asset and liability for retirement benefits
Interest and dividend income
Interest expense(Gain) loss on sales of investment securities(Gain) loss on redemption of investment securities(Gain) loss on sales of fixed assets(Gain) loss on valuation of investment securities
Loss on disposal of fixed assets(Increase) decrease in notes and accounts receivable, trade(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable, trade(Increase) decrease in accounts receivable, non-trade
Increase (decrease) in accounts payable, non-trade
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from time deposits
Purchases of fixed assets
Proceeds from sales of fixed assets
Payments for retirement of fixed assets
Purchases of intangible fixed assets
Purchases of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of investment securities
Payments for execution of loans
Collection of loans receivable
Other
Net cash provided by (used in) investing activities
Cash flows from financing activities
Increase (decrease) in short-term loans payable
Proceeds from long-term debt
Payments of long-term debt
Purchases of treasury stock
Proceeds from sales of treasury stock
Dividends paid
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
10 ANNUAL REPORT 2019

2018

2019

2019

¥

¥

303
3,664
148
(44)
4
(367)
(93)
114
(193)
—
(1,316)
86
199
924
784
(1,659)
(35)
(692)
230
2,057
103
(113)
(439)
1,608

$

(116)
108
(3,626)
3,161
(29)
(59)
(282)
0
68
(39)
70
(43)
(787)

(30)
32
(4,639)
2,556
—
(47)
(223)
241
—
(28)
45
0
(2,091)(270)
288(41,797)
23,029—(423)(2,009)
2,171
—
(252)
405
0
(18,840)(1,668)2,490(2,007)
(4)
—
(594)
10
(1,774)242
470
10,011¥ 10,482

2,228
2,090
(2,704)
(506)
161
(264)
(8)
997
(219)
294
10,482¥ 10,776

20,074
18,831(24,363)(4,559)1,451(2,379)(72)
8,983(1,973)
2,649
94,441$ 97,090

570
4,187
1,815
40
(31)
(382)
(98)
114
(0)
(46)
(2,339)
181
172
(626)
(1,662)
777
160
692
209
3,735
87
(110)
(923)
2,788

2,730
33,012
1,333
(396)
36
(3,307)(838)
1,027(1,739)—(11,857)
775
1,793
8,325
7,064
(14,947)(315)(6,235)
2,072
18,533928(1,018)(3,955)
14,488Note 1. Summary of significant accounting policies( a ) Basis of presenting financial statements
The accompanying consolidated financial statements of SMK Corporation (the “Company”) and consolidated subsidiaries
are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as tothe application and disclosure requirements of International Financial Reporting Standards, and are compiled from theconsolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Act ofJapan. For the purpose of this document, certain reclassifications have been made in the accompanying consolidated
financial statements to facilitate understanding by readers outside Japan. In addition, certain reclassifications have been
made to the prior year’s consolidated financial statements to conform to the current year’s presentation.
( b ) Basis of consolidation and investments in affiliated companies
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries over which
substantial control is exercised either through majority ownership of voting stock and/or by other means.
All significant intercompany balances and transactions have been eliminated in consolidation.
Certain foreign subsidiaries’ fiscal period ends on December 31, which differs from the year-end date of the Company;
however, the accounts of these companies were tentatively closed as of March 31 and the necessary adjustments forconsolidation were made.
Investments in affiliates (companies over which the Company has the ability to exercise significant influence) are accounted
for by the equity method. Consolidated profit attributable to owners of parent includes the Company’s equity in the current
profit attributable to owners of parent or loss of such companies, after the elimination of unrealized intercompany profits.
All assets and liabilities of the Company’s subsidiaries are revalued at the acquisition, if applicable, and the excess of costover the underlying net assets at the date of acquisition is amortized over a period of five years on a straight-line basis if
such excess is material, or charged to income when incurred if immaterial.
( c ) Scope of consolidation
Number of consolidated subsidiaries: 28( d ) Application of equity method of accounting
Number of affiliated companies accounted for by the equity method: 1( e ) Translation of foreign currencies
All asset and liability accounts of foreign subsidiaries and affiliates are translated into Japanese yen at the appropriate yearend exchange rates. Shareholders’ equity, which is translated at rates of exchange prevailing at the time the transactions
occurred. Revenue and expense accounts are translated at the average rates of exchange prevailing during the year.
Differences arising from the translation are presented as translation adjustments in the consolidated financial statements.
( f ) Cash and cash equivalents
Cash and cash equivalents are composed of cash and time deposits all of which are low-risk, short-term financial
instruments readily convertible into cash.
( g ) Inventories
Inventories are mainly stated at the lower of cost or market. The following inventories are measured principally by theirrespective methods:
Finished products: Retail cost method
Work in process: Actual raw material cost, determined by the most recent purchase cost method, plus direct labor costs
and manufacturing overheads
Raw materials and supplies: Most recent purchase cost method
Consolidated subsidiaries adopt mainly the moving average method.
( h ) Securities
Marketable securities classified as other securities are carried at fair value with any changes in unrealized holding gain or
loss, net of the applicable income taxes, included directly in net assets. Non-marketable securities classified as othersecurities are carried at cost. Cost of securities sold is determined by the moving average method.
( i ) Derivatives
Derivatives are stated at fair value.
( j ) Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is calculated principally by
the declining-balance method for the Company and its domestic subsidiaries, and by the straight-line method mainly forforeign subsidiaries. Certain buildings of the Company and its domestic subsidiaries acquired on or after April 1, 1998 andfacilities attached to buildings and other non-building structures acquired on or after April 1, 2016 are depreciated by thestraight-line method.
The estimated useful lives of the assets are as follows:
Buildings:
10 to 50 years
Machinery and vehicles:
4 to 10 years
Tooling and office furniture:
2 to 6 years
The residual values of the property, plant and equipment acquired on or before March 31, 2007 are depreciated equally
over a period of 5 years starting from the year following the year in which they have been depreciated up to theirdepreciable limit or 5% of the acquisition cost.
( k ) Intangible assets
Amortization of intangible assets is calculated by the straight-line method. Software for own use is amortized based on theutilizable period (5 years).
Goodwill is amortized by the straight-line method mainly over 5 years.

ANNUAL REPORT 2019 11

( l ) Allowance for doubtful accounts
The allowance for doubtful accounts is provided based on past experience for normal receivables and on an estimate of thecollectability of receivables from companies in financial difficulty.
(m ) Accrued bonus
Accrued bonuses are provided on the estimate of the amounts to be paid in the future by the Company, domestic
consolidated subsidiaries and certain overseas subsidiaries based on an accrual basis at the balance sheet date.
( n ) Accrued directors’ and officers’ bonuses
Accrued directors’ and officers’ bonuses are provided on the estimate of the amounts to be paid subsequent to the balance
sheet date.
( o ) Accrued directors’ and officers’ retirement benefits
Accrued directors’ and officers’ retirement benefits have been provided at an amount equal to 100% of the amount which
would be required to be paid based on the Company’s bylaws if all directors and officers resigned from the Company on
the balance sheet date.
( p ) Accrued board benefit trust
Accrued board benefit trust have been provided at an amount equal to 100% of the amount which would be required to be
paid based on the Company’s bylaws if all directors and officers exercised board benefit trust on the balance sheet date.
( q ) Retirement benefits
Asset and liability for retirement benefits for employees are recorded mainly at the amount calculated based on theretirement benefit obligation and the fair value of the pension plan assets as of balance sheet date.
The retirement benefit obligation for employees is attributed to each period by the benefit formula method over theestimated years of service of the eligible employees. Actuarial gain or loss is amortized in the year following the year inwhich the gain or loss is recognized primarily by the straight-line method over a period of 5 years, which is within theestimated average remaining years of service of employees.
( r ) Hedge accounting(1 ) Method of hedge accounting
Deferral hedge accounting is applied for interest rate swap transactions.
The exceptional treatment is applied for interest rate swap transactions meeting certain conditions.
(2 ) Hedging instruments and hedged items
Hedging instruments: interest rate swaps
Hedged items: long-term debt subject to interest rate fluctuation risk.
(3 ) Hedging policy
The Company uses interest rate swaps to hedge risks from interest rate fluctuations on borrowings, only when approvedby the management.
(4) Assessment of effectiveness of hedging activities
The Company evaluates the hedge effectiveness by comparing accumulated fluctuations of the hedging instrument andhedged item every quarter.
When the exceptional treatment is applied for interest rate swaps, the assessment of hedge effectiveness is omitted.
( s ) Income taxes
Deferred income taxes are recognized based on the differences between financial reporting and the tax bases of the assets
and liabilities and are calculated using the enacted tax rates and laws which will be in effect when the differences are
expected to reverse.
( t ) Per share information
Basic net income per share is computed based on the net income available for distribution to shareholders of common
stock and weighted-average number of shares of common stock outstanding during the year. Diluted profit attributable toowners of parent per share is computed based on the profit attributable to owners of parent available for distribution toshareholders and average number of shares of common stock outstanding during each year after giving effect to thedilutive potential of shares of common stock to be issued upon the conversion of convertible bonds.
Net assets per share is computed based on the net assets available for distribution to shareholders of common stock andthe number of shares of common stock outstanding at the balance sheet date. Cash dividends per share shown for eachperiod in the consolidated statement of income represent the dividends applicable to the respective period.
( u ) Consumption taxes
Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Nondeductible
consumption taxes are expensed in the consolidated financial statements.
( v ) Accounting standards issued but not yet effective
Accounting Standards and Implementation Guidance on Revenue Recognition
On March 30, 2018, the Accounting Standards Board of Japan (ASBJ) issued “Accounting Standard for Revenue
Recognition” (ASBJ Statement No.29) and “Implementation Guidance on Accounting Standard for Revenue Recognition”(ASBJ Guidance No.30).
(1 ) Overview
This is a comprehensive accounting standard for revenue recognition. Specifically, the accounting standard establishes
the following five-step model that will apply to revenue from customers:
1. Identify the contract(s) with a customer
2. Identify the performance obligations in the contract
3. Determine the transaction price
4. Allocate the transaction price to the performance obligations in the contract
5. Recognize revenue when(or as) the entity satisfies a performance obligation(2 ) Schedule date of adoption
The Company expects to adopt the accounting standard and implementation guidance from the beginning of the fiscal
year ending March 31, 2022.
(3 ) Impact of the adoption of accounting standard and implementation guidance
The Company is currently evaluating the effect of the adoption of this accounting standard and implementation
guidance on its consolidated financial statements.

12 ANNUAL REPORT 2019( w ) Change in presentation
Partial Amendments to Accounting Standard for Tax Effect Accounting
The Company and its consolidated subsidiaries have adopted “Partial Amendments to Accounting Standard for Tax EffectAccounting” (ASBJ Statement No. 28, February 16, 2018) (hereinafter, the “Partial Amendments”) from the beginning of
the fiscal year ended March 31, 2019. As such, deferred tax assets and deferred tax liabilities are included within
investments and other assets and long-term liabilities, respectively, and related income tax disclosures have been
expanded.
As a result, ¥539 million of deferred tax assets in current assets and ¥28 million of deferred tax liabilities included in othercurrent liabilities in current liabilities and ¥303 million of deferred tax liabilities in long-term liabilities previously presented
in consolidated balance sheet as of March 31, 2018 have been reclassified and included within ¥618 million of deferred tax
assets in other assets and ¥1,000 million of deferred tax liabilities in long-term liabilities, respectively.
Also, “Note 13 Income Taxes” in the Notes to the consolidated financial statements has been expanded in accordance withNote 8 and Note 9 of Interpretive Notes to Accounting for Tax Effect Accounting. However, comparative information for theyear ended March 31, 2018 has not been disclosed in Note 13 in accordance with the transitional provisions set forth in
Article 7 of the Partial Amendments.
( x ) Additional information
Introduction of consolidated taxation system
The Company and some of its consolidated subsidiaries have introduced consolidated taxation system from the fiscal year
ended March 31, 2019.
Introduction of Board Benefit Trust
From the year ended March 31, 2019, we introduced a new share-based compensation plan, a “Board Benefit Trust (BBT)”(the “Plan”) for directors (including executive officer, excluding outside directors; “Directors”) based on the resolution at
the 96th General Meeting of Shareholders on June 22, 2018 for the purpose of raising awareness of contributing to theimprovement of medium-to long-term business results.
Regarding the accounting treatment for the plan, the gross method is adopted based on the “Practical Solution on
Transactions of Delivering the Company’s Own Stock to Employees, etc. through Trusts” (ASBJ Practical lssue Task Force
No. 30, March 26, 2015).
(1) Outline of the Plan
The Plan is a share-based compensation plan under which our shares are acquired through a trust (the trust
established in accordance with the Plan, the “Trust”) by using the funds contributed by us. Directors will receive ourshares as well as the amount of money equivalent to the market value of our shares (as at the date of the retirement of
Directors) through the Trust in accordance with the officer stock benefit rules formulated by us. In principle, Directors
will receive benefits, such as our shares, on their retirement.
(2) The Company’s shares remaining in the Trust
The Company’s shares remaining in the Board Benefit Trust (BBT) are recorded by the Company as treasury stock
under net assets at their book value in the BBT (excluding the amount of ancillary expenses). As of March 31, 2019, thebook value of the said treasury stock was ¥160 million ($1,442 thousand), and the number of shares was 43,800.

Note 2. U.S. dollar amounts
The U.S. dollar amounts are stated solely for the convenience of the reader at the rate of U.S. $1.00 = ¥110.99, the approximate
rate of exchange at March 31, 2019. The translation should not be construed as a representation that the Japanese yenamounts actually represent, have been or could be converted into U.S. dollars at that or any other rate.

Note 3. Inventories
Inventories as of March 31, 2018 and 2019 consisted of the following:
Finished products
Work in process
Raw materials and supplies
Total

¥

¥

2018

Millions of yen

3,891
839
4,044
8,775

¥

¥

2019

3,477
854
3,739
8,071

Thousands of U.S. dollars
2019$ 31,327
7,694
33,688$ 72,718

The write-downs of inventories resulting from decreased profitability for the years ended March 31, 2018 and 2019 were as
follows:
Millions of yen

Cost of sales

¥

2018

333

Thousands of U.S. dollars

¥

2019

1,215

2019

$ 10,947

Note 4. Reduction entries
Reduction entries due to acceptance of prefectural government’s grants relating to property, plant and equipment as of March 31,2018 and 2019 were as follows:
Land

¥

2018

101

Millions of yen

¥

2019

101

Thousands of U.S. dollars
2019

$

910

ANNUAL REPORT 2019 13

Note 5. Short-term loans payable and long-term debt

Short-term loans payable and long-term debt as of March 31, 2018 and 2019 consisted of the following:
Millions of yen
Short-term loans payable

Average interest rate on short-term loans payable, principally from banks, is 0.47%
SecuredUnsecured
Total¥

Long-term debt
Average interest rate on long-term debt, principally from banks, is 0.83%
SecuredUnsecured
Less: portion due within one year
Total

2019

Thousands of U.S. dollars
2019

4,400
7,848
¥ 12,248$ 39,643
70,709$ 110,352

2019

Thousands of U.S. dollars
2019

3,598
3,018
(2,015)¥ 4,601$ 32,417
27,192(18,155)$ 41,454

2018

¥

3,400
6,627
10,027
2018

¥

¥

¥

Millions of yen

3,485
3,745
(2,704)4,526

Note 7. Retirement benefits plans¥

The assets pledged as collateral for short-term and long-term debt as of March 31, 2018 and 2019 were summarized as follows:
Millions of yen(1) Factory foundation
Buildings
Machinery and vehicles
Tooling and office furniture
Land
Total
(2) Other
Buildings
Tooling and office furniture
Land
Total

Thousands of U.S. dollars

2018

¥

¥
¥

¥

2019

1,240
76
82
256
1,655

¥

¥

51
2
39
92

¥

¥

1,180
70
134
256
1,642
205
2
39
246

2019

$ 10,632
631
1,207
2,307
$ 14,794
$

$

1,847
18
351
2,216

The aggregate annual maturities of long-term debt (including current portion) outstanding as of March 31, 2019 weresummarized as follows:
Millions of yen
Thousands of U.S. dollars
Year ending March 31,
2020¥ 2,015$ 18,155
2,024
18,236
2021
2022
619
5,577
340
3,063
2023
2024 and thereafter
1,618
14,578
Total¥ 6,616$ 59,609

Note 6. Notes receivable and payable maturing on the balance sheet dateNotes receivable and payable maturing on the balance sheet date are treated as if they were settled at the clearing date of notes.
Consequently, as the balance sheet date for the fiscal year was a bank holiday, the following notes receivable and payablematuring on the balance sheet date were included in the amount of each balance at March 31, 2018 and 2019.
Notes receivable
Notes payable

¥
¥

2018

138
2

Millions of yen

¥
¥

2019

190
1

Thousands of U.S. dollars
2019

$
$

1,712
9

The Company and certain of its domestic consolidated subsidiaries have either funded or unfunded defined benefit pension
plans and defined contribution benefit pension plans.
The Company has funded corporate pension fund plans and defined contribution pension plans. As a defined benefit pension
plan, the Company has adopted a cash balance plan. Under the cash balance plan, the plan sponsor contributes money into aplan participant’s account based on the points according to the employee’s years of service and job performance and the points
are calculated with an interest credit that reflects changes in market interest rates.
Certain subsidiaries have funded and unfunded lump-sum payment plans and defined contribution pension plans. The simplified
method is applied for the calculation of liability for retirement benefits and retirement benefit expense of certain domestic
subsidiaries.
The changes in the retirement benefit obligation during the years ended March 31, 2018 and 2019 were as follows:
Balance at the beginning of the year
Service cost
Interest cost
Actuarial gain and loss
Retirement benefit paid
Other
Balance at the end of the year

¥

¥

2018

Millions of yen

7,660
326
48
(135)
(849)
(6)
7,042

2019

Thousands of U.S. dollars
2019

2019

Thousands of U.S. dollars
2019¥ 7,042
301
45
108
(969)
1
¥ 6,530

The changes in plan assets during the years ended March 31, 2018 and 2019 were as follows:
Balance at the beginning of the year
Expected return on plan assets
Actuarial gain and loss
Contributions by the Company
Retirement benefits paid
Balance at the end of the year

¥

¥

2018

Millions of yen

8,466
154
343
323
(845)
8,443

¥ 8,443
152
(259)
324
(963)
¥ 7,696$ 63,447
2,712
405
973
(8,731)9$ 58,834$ 76,070
1,369(2,334)
2,919(8,676)$ 69,340

The funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31, 2018 and 2019were as follows:¥ 6,509(7,696)(1,187)21(1,165)

Thousands of U.S. dollars
2019

Unfunded retirement benefit obligation
Net liability for retirement benefits in the balance sheet

7,021(8,443)(1,421)20(1,400)2019

Liability for retirement benefits
Asset for retirement benefits
Net liability for retirement benefits in the balance sheet

40(1,440)¥ (1,400)

53(1,219)¥ (1,165)

478(10,983)$ (10,496)

Funded retirement benefit obligation
Plan assets at fair value

¥

2018

Millions of yen$ 58,645(69,340)(10,695)
189(10,496)

The components of retirement benefit expense for the years ended March 31, 2018 and 2019 were as follows:
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain and loss
Retirement benefit expense

¥

¥

2018

Millions of yen

326
48
(154)
(237)
(16)

¥

¥

2019

301
45
(152)
(246)
(51)

Thousands of U.S. dollars
2019

$

2,712
405
(1,369)(2,216)$(460)

The components of retirement benefits asset and liability adjustments included in other comprehensive income (before tax
effect) for the years ended March 31, 2018 and 2019 were as follows:
Actuarial gain and loss

¥

2018

Millions of yen

241

¥

2019

(614)

Thousands of U.S. dollars
2019$ (5,532)

The components of retirement benefits asset and liability adjustments included in accumulated other comprehensive income(before tax effect) as of March 31, 2018 and 2019 were as follows:
Unrecognized actuarial gain and loss

14 ANNUAL REPORT 2019

¥

2018

623

Millions of yen

¥

2019

8

Thousands of U.S. dollars
2019

$

72

ANNUAL REPORT 2019 15

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2018 and 2019 were as
follows:
2018

Bonds
StocksLife insurances
Funds
Other
Total

2019

4.1%
43.6
36.2
14.8
1.3
100.0%

Resolution

4.5%
37.9
36.8
16.0
4.8
100.0%

0.6%
0.84%
2.0%

Number ofshares at April
1, 20172018

Increase

Decrease

Number ofshares at March
31, 2018

Number ofshares at April
1, 2018

2019

Increase

Decrease

Number ofshares at March
31, 2019——

75,000,000

75,000,000—

67,500,000

7,500,000

8,887,440

12,319—8,899,759

8,899,759

147,708

8,027,984

1,019,483

Number of shares

2. Details of the increase of treasury stock are as follows:
Increase due to purchase of shares
Increase due to purchase of shares of less than standard unit
Increase due to purchase of fraction of shares
Increase in shares held by affiliates accounted for by the equity method
3. Details of the decrease of treasury stock are as follows:
Decrease due to consolidation of shares
Decrease due to sales of shares of less than standard unit

2018

2019

—

67,500,000

Total dividends Dividends per share
Type of shares Source of dividends (Millions of yen)
(Yen)

Shareholders’Commonmeeting on
stock
June 25, 2019

Retainedearnings

326

50

Cut-off date

Effective date

March 31, 2019

June 26, 2019

2,937

Dividends per share(U.S. dollars)

0.45

1. The Company carried out a consolidation of share at the ratio of 10 shares to 1 share on October 1, 2018 and dividends per
share was calculated taking into the effect of the consolidation of share.
2. Dividends of the Company’s shares remaining in the Board Benefit Trust (BBT) are included in total dividends based on the
resolution at shareholders’ meeting on June 25, 2019.

—
8,891
—
3,428

125,900
20,981
466
361

—
—

8,025,253
2,731

Type of shares

Shareholders’ meeting on Common
June 22, 2017stock
Board of Directors’
meeting on October 25, Common
stock
2017

Total dividends Dividends per share(Millions of yen)
(Yen)

Effective date

331

5

March 31, 2017

June 23, 2017265

4

September 30,
2017

November 20,
2017

2019

Type of shares

Shareholders’ meeting on Common
June 22, 2018stock

Total dividends Dividends per share(Millions of yen)
(Yen)

264

4

¥

Millions of yen

4,531
338
1
37
5
(1)

2019

¥ 4,395
317
—
26
3
6

Thousands of U.S. dollars
2019$ 39,598
2,856
—
234
27
54

Note 11. Gains and losses of fixed assets

Buildings
Machinery and vehicles
Tooling and office furniture
Land
Total

¥

¥

2018

Buildings
Machinery and vehicles
Tooling and office furniture
Intangible asset
Total

¥

¥

Millions of yen

1,610
25
64
640
2,341

Loss on disposal of fixed assets

2018

Cut-off date

Salaries and wages of employees
Provision for bonus
Provision for directors’ and officers’ bonus
Retirement benefit cost
Provision for directors’ and officers’ retirement benefits
Provision for doubtful accounts

2018

The components of gains and losses of fixed assets for the year ended March 31, 2018 and 2019 were as follows:
Gains on sales of fixed assets

2. Dividends(1) Dividends paid

16 ANNUAL REPORT 2019

Resolution

2019

Total dividends(Thousands of
U.S. dollars)

Major elements of selling, general and administrative expenses for the years ended March 31, 2018 and 2019 were as follows:

75,000,000

1. Details of the decrease of shares issued are as follows:
Decrease due to consolidation of shares

Resolution

June 25, 2018

Note 10. Selling, general and administrative expenses

The Company’s shares remaining in the Board Benefit Trust (BBT) are included in treasury stock (43,800 shares at March 31, 2019).

Resolution

March 31, 2018

Research and development costs included in cost of sales and selling, general and administrative expenses for the years ended
March 31, 2018 and 2019 amounted to ¥3,150 million and ¥2,982 million ($ 26,867 thousand), respectively.

Information regarding changes in net assets for the years ended March 31, 2018 and 2019 was as follows:
1. Shares issued and outstanding / Treasury stock

Shares issued:
Common stock
Treasury stock:
Common stock4

Effective date

Note 9. Research and development costs

2019

Note 8. Net assets

Types of shares

264

Cut-off date

2019

Assumptions to calculate the actuarial present value of the benefit obligation and the expected return on plan assets as ofMarch 31, 2018 and 2019 were as follows:
0.6%
1.00%
2.0%

Retainedearnings

2018

Dividends with the cut-off date in the year ended March 31, 2019 and the effective date in the year ending March 31, 2020

The required contributions to the defined contribution plans by the Company and its consolidated subsidiaries for the years
ended March 31, 2018 and 2019 amounted to ¥91 million and ¥89 million ($802 thousand), respectively.

2018

Total dividends Dividends per share
Type of shares Source of dividends (Millions of yen)
(Yen)

Shareholders’Commonmeeting on
stock
June 22, 2018

1. The total plan assets include retirement benefit trusts which constitute 12.5% for the year ended March 31, 2018 and 12.5%
for the year ended March 31, 2019.
2. The expected rates of return on plan assets has been estimated based on the anticipated allocation of plan assets to each asset
category and the expected long-term returns on plan assets held in each category.

Discount rate
Re-evaluation rate
Expected rates of return on plan assets(2) Dividends with the cut-off date in the year ended March 31, 2018 and the effective date in the year ending March 31, 2019

2018

84
69
17
0
172

¥

2019

Thousands of U.S. dollars
2019

2019

Thousands of U.S. dollars
2019

91
15
12
1,198
¥ 1,317
Millions of yen

¥

¥

42
147
9
0
199

$

820
135
108
10,794$ 11,866

$

378
1,324
81
0
$ 1,7932019

Cut-off date

Effective date

March 31, 2018

June 25, 2018

Total dividends(Thousands of
U.S. dollars)

2,379

Dividends per share(U.S. dollars)

0.04

ANNUAL REPORT 2019 17

Note 12. Loss on impairment of fixed assets

Note 13. Income taxes

An impairment loss is recognized when the carrying amount of an asset exceeds undiscounted future net cash flows which are
expected to be generated by such asset. The impairment loss is measured by the amount by which the carrying amount of theasset exceeds its recoverable amount being the higher of the discounted future net cash flows or net realizable value.
For the year ended March 31, 2018, impairment losses were recognized for the following assets.
Millions of yen
2018

Asset group

Location

Use

Touch panel
TP DivisionJapan
production facilities
Remote controls/Switch/
SMK Manufacturing, Inc. U.S.A.
Unit production facilities
SMK Electronica S.A. de
Remote controls/Switch/
MEXICO
C.V.
Unit production facilities
SMK-LOGOMOTION Corporation Japan
Other
Total

Buildings¥¥

Machinery and Tooling andvehiclesoffice furniture

171

¥

89

¥

9

Constructionin progress

Intangible
assets

¥

¥

—

Total

0

¥

271

Location

TP Division

Japan

Use

Touch panel
production facilities
Remote controls/Unit
SMK Hungary Kft.
Hungary
production facilities
SMK Electronics (Phils.)
Remote controls
Phillipine
production facilities and other
Corporation
Total

Asset group

Location

Use

Touch panel
TP DivisionJapan
production facilities
Remote controls/Unit
SMK Hungary Kft.
Hungary
production facilities
SMK Electronics (Phils.)
Remote controls
Phillipine
production facilities and other
Corporation
Total

Items such as dividend income permanently non-taxable

57

0

2

133

Change in valuation allowance

22

30

4

—

0

56

Foreign withholding taxes

—
0

1,347
¥ 1,350

1,353¥ 1,815

¥

—
188

6
77

¥

¥

Buildings

MachineryandvehiclesToolingand officefurniture

¥

¥

¥

0

13

4

Land

¥

—

Intangible
assets

¥

0

Other

¥

—

Total

¥

18

—

—

14

—

—

62

55

8

—

—

—

4

68

4

¥ 148

¥

21

¥

4

¥

14

¥

0

¥

Thousands of U.S. dollars
2019

Buildings

MachineryandvehiclesToolingand officefurniture

Constructionin progress

Intangible
assets

$

0

$ 117

$

$

$

423

—

—

126

496

72

—

—

$ 919

$ 189

36

$ 126

$

36

—

Inhabitant tax on per capita basis
Statutory tax rate differences in subsidiaries
Elimination of dividend income
Decrease of tax assets at fiscal year-end by the change of tax rate

47

¥ 102

Tax credit for R&D expenses

Accumulated surplus of subsidiaries

Millions of yen
2019

$

0

Other

—

$ 162

—

—

559

—

36

613

36

$1,333

0

$

Total

$

The Company’s assets for business operations are categorized into groups on a division-by-division basis and the Company’s
rental property on an individual property basis, whereas consolidated subsidiaries’ assets for business operations are categorized
into groups on a subsidiary-by-subsidiary basis and their rental property on an individual property basis.
Of the above asset groups, because the TP (Touch Panel) Division suffered declining trends in net sales and income due to intense
price competition in the market, the future cash flows from their asset groups were estimated after revising their business plans.
As a result, it was found that they could not generate sufficient earnings to recover the carrying value of the asset groups, andtherefore their book value was reduced to the recoverable amounts. As for SMK Hungary Kft., because of the decline in market
price of their buildings and land, their book value was reduced to the recoverable amounts. As for SMK Electronics (Phils.)
Corporation, because the relocation of manufacturing site for remote control was scheduled, the future cash flows from theirasset groups until the relocation were estimated. As a result, it was found that they could not generate sufficient earnings torecover the carrying value of the asset groups, and therefore their book value was reduced to the recoverable amounts.
The recoverable amount of the asset group of the TP Division was measured at value in use, and since no future cash flows are
expected, the full amount of the book value of the fixed assets regarding this business is recorded as impairment loss. The
recoverable amount of the asset group of SMK Electronics (Phils.) Corporation was measured at value in use, which was
calculated by discounting future cash flows at 10.3%. The recoverable amount of the asset group of SMK Hungary Kft. wasmeasured at net realizable value, which was calculated based on valuations by external independent real estate appraisers.

2019

30.8%
5.8
(106.4)
121.7
(8.9)
2.9
3.6
(31.9)
109.5(12.2)
38.6(0.4)
153.1%

Items such as entertainment expenses permanently non-deductible for tax purposes

68

—
199

2018

Statutory tax rate

5

For the year ended March 31, 2019, impairment losses were recognized for the following assets.

Asset group

Income taxes applicable to the Company and its domestic subsidiaries comprised corporation, inhabitants’ and enterprise taxes
which, in the aggregate, resulted in statutory tax rates of approximately 30.8% and 30.5% for the years ended March 31, 2018and 2019, respectively.
A reconciliation between the statutory tax rate and the effective tax rate for the years ended March 31, 2018 and 2019 was asfollows:

Other
Effective tax rate

30.5%
10.6
(238.5)307.3(24.5)
7.8
7.0
23.3
274.0
(21.9)—(0.9)
374.8%The significant components of deferred tax assets and liabilities at March 31, 2018 and 2019 were as follows:
Millions of yen

2018

Deferred tax assets:
Inventory write-down
Accrued bonuses
Intercompany profit on inventory
Liability for retirement benefits
Allowance for doubtful accounts
Impairment loss
Operating loss carryforwards for tax purposes
Other
Total gross deferred tax assets
Valuation allowance for net operating loss carryforwards
Valuation allowance for deductible temporary differences
Total valuation allowance
Total deferred tax assets¥

Deferred tax liabilities:
Asset for retirement benefits
Deferred gain on land
Advanced depreciation on buildings
Reserve for special depreciation
Net unrealized gains on other securities
Accumulated surplus of foreign subsidiaries
Valuation difference on subsidiaries
Other
Deferred tax liabilities
Net deferred tax assets

57
213
62
6
46
1,020
1,210
732
3,350
—
—
(2,324)
1,026

2019

¥

(439)
(81)
(7)
(17)
(134)
(265)
(338)
(124)
(1,408)¥(382)

Thousands of U.S. dollars
2019

352
198
63
8
41
877
1,566
480
3,589
(1,477)(1,703)(3,180)409$ 3,171
1,784
568
72
369
7,902
14,1094,325
32,336(13,308)(15,344)(28,651)
3,685

(372)
(36)
(6)
(12)
(118)
(206)
(311)
(27)
(1,093)¥ (684)(3,352)
(324)
(54)
(108)
(1,063)(1,856)(2,802)(243)(9,848)$ (6,163)

1. Valuation allowance has increased ¥856 million ($7,712 thousand). This increase is due to the additional recognition ofvaluation allowance for net operating loss carryforwards in subsidiaries ¥845 million ($7,613 thousand).
2. A breakdown of net operating loss carryforwards and valuation allowance by expiry date as of March 31, 2019 is as follows:

Net operating loss carryforwards (a)Valuation allowance
Deferred tax assets

Net operating loss carryforwards (a)Valuation allowance
Deferred tax assets

Due inone yearor less

¥

¥

0
(0)
—

Due inone yearor less

$

$

0
(0)
—

Due after
one yearthrough
two years

Due after
two years
throughthree years

Due after
three years
throughfour years

¥

¥

¥

¥

9
(9)
—

¥

15
(15)
—

¥

1
(1)
—

Due after
one yearthrough
two years

Due after
two years
throughthree years

Due after
three years
throughfour years

$

$

$

$

81
(81)
—

$

135
(135)
—

$

9
(9)
—

Due after
four years
throughfive years

¥

¥

4
(4)
—

Due after
four years
throughfive years

$

$

36
(36)
—

Due after
five years¥ 1,534(1,445)¥88

Due after
five years$ 13,821(13,019)
$
793

Total

¥ 1,566(1,477)
¥
88

Total

$ 14,109(13,308)$793(a) The amount is determined by multiplying the corresponding net operating loss carryforwards by the effective statutory tax rate.

18 ANNUAL REPORT 2019

ANNUAL REPORT 2019 19Note 16. Financial instruments

Note 14. Other comprehensive income
The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive
income for the years ended March 31, 2018 and 2019.
Net unrealized gains (losses) on other securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in
profit attributable to owners of parent
Amount before tax effectTax effectNet unrealized gains (losses) on other securities
Net unrealized gains (losses) from hedging instruments:
Amount arising during the year
Reclassification adjustments for gains and losses included in
profit attributable to owners of parent
Amount before tax effectTax effectNet unrealized gains (losses) from hedging instruments
Foreign currency translation adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses included in
profit attributable to owners of parent
Amount before tax effectTax effectForeign currency translation adjustments
Retirement benefits asset and liability adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses included in
profit attributable to owners of parent
Amount before tax effectTax effect
Retirement benefits asset and liability adjustments
Total other comprehensive income

Millions of Yen

2018

¥

¥

23

Thousands of U.S. dollars
2019

2019

¥

145

$ 1,306

(46)

(193)

(1,739)

(23)
5
(17)

(48)
15
(33)

(432)
135
(297)

(9)

(7)

(63)

3

9

81

(5)
—
(5)

2
—
2

18
—
18

90

(119)

(1,072)

—

—

—

90
(20)
69

(119)
(0)
(119)

(1,072)(0)(1,072)

478

(368)

(3,316)

(237)

(246)

(2,216)

241
(63)
177
223

(614)
184
(430)
(580)

(5,532)
1,658(3,874)$ (5,226)¥

Note 15. Amounts per share
1. The Company carried out a consolidation of share at the ratio of 10 shares to 1 share on October 1, 2018. Basic earnings per
share have been calculated on the assumption that the said consolidation of share was carried out at the beginning of the year
ended March 31, 2018.
2. In the calculation of loss per share, the Company’s shares remaining in the Board Benefit Trust (BBT), which are recorded astreasury stock under shareholders’ equity, are included in the treasury stocks that are deducted in the calculation of thenumber of shares as of March 31, 2019 and the average number of shares for the year ended March 31, 2019. In thecalculation of total net assets per share, the said treasury stock deducted as of March 31, 2019 is 43,800. In the calculation ofloss per share, the said treasury stock deducted for the year ended March 31, 2019 is 27,375.
3. Loss attributable to owners of parent per share of common stock is based on the following information
Basic loss attributable to owners of parent per share:
Loss attributable to owners of parent
Loss attributable to owners of parent not attributable tocommon stockholders
Loss attributable to owners of parent attributable to common
stock
Average number of shares of common stock outstanding during
the year

Millions of yen

2018

¥

(288)

Thousands of U.S. dollars
2019

2019

(834)

$ (7,514)

—

—

—

(288)

(834)

(7,514)2018¥

Thousands of shares

6,610

2019

6,598

(1) Policy for financial instruments
The Company and consolidated subsidiaries manage temporary cash surpluses through low-risk financial assets.
The Company and consolidated subsidiaries raise funds through bank borrowings.
The Company and consolidated subsidiaries use derivatives for the purpose of reducing risk and do not enter into derivatives
for speculative or trading purposes.
(2) Types of financial instruments and related risk
Trade receivables—trade notes and accounts receivable—are exposed to credit risk in relation to customers. Regarding thisrisk, the credit management is executed periodically.
Marketable securities and investment securities are exposed to market risk. The fair value of those securities is reported in aboard meeting periodically.
Substantially all trade payables – trade notes and accounts payable – have payment due dates within one year.
Short-term loans payable are raised mainly in connection with business activities, and the repayment dates of long-term debt
extend up to four years from the balance sheet date. Long-term debt with variable interest rates is exposed to interest rate
fluctuation risk. However, to reduce such risk and fix interest expense for long-term debt bearing interest at variable rates, theCompany and consolidated subsidiaries utilizes interest rate swap transactions as a hedging instrument. Information regarding
the method of hedge accounting, hedging instruments and hedged items, hedging policy, and the assessment of effectivenessof hedging activities is found in Note 1 (r).
Execution and management of derivatives transactions are carried out in accordance with the company rules specifying thetransaction authority. In addition, in order to alleviate credit risk, derivative transactions are restricted to banks with highcredit ratings. Although operating liabilities and loans payable are exposed to liquidity risk, the Group’s companies are able tomanage it by using methods such as preparing monthly cash management plans.
(3) Additional information regarding fair value of financial instruments
Fair value of financial instruments includes the value based on the market price. In addition, if such information is absent,
reasonable assessments of their value are included. Furthermore, the contract amounts, etc. relating to derivatives
transactions are described in Note 18. Derivatives themselves do not serve as indicators of market risk involved in derivatives
transactions.
Information regarding fair value of financial instruments at March 31, 2018 and 2019 was summarized as follows:

Cash and cash equivalents
Time deposits
Notes and accounts receivable,
trade
Investment securities
Notes and accounts payable, trade
Short-term loans payable
Accounts payable, non-tradeLong-term debt
Derivatives

2018

Millions of yen

2019

Thousands of U.S. dollars
2019Book value

Fair value

DifferenceBook value

Fair value

DifferenceBook value

Fair value

Difference

15,251

15,251—

14,496

14,496—130,606

130,606

—

2,019
6,807
10,027
1,919
7,230
37

2,019
6,807
10,027
1,919
7,228
37

—
—
—
—
(2)
—

1,926
5,301
12,248
1,491
6,616
(18)

1,926
5,301
12,248
1,491
6,595
(18)

—
—
—
—
(21)
—

17,35347,761
110,352
13,43459,420(162)

17,35347,761
110,352
13,43459,420
(162)

—
—
—
—
(189)
—

¥10,482
117¥10,482
117

¥

—
—

¥10,776
112¥10,776
112

¥

—
—

$97,090
1,009$97,090
1,009

$

—
—

Long-term debt includes current portion of long-term debt recorded as short-term loans payable in the consolidated balance
sheets.
The assets and liabilities arising from derivatives are shown on a net basis with the amount in parentheses representing a net
liability position.
1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivativetransactions
Cash and cash equivalents, time deposits, and notes and accounts receivable, trade
Since these items are settled in a short period of time, their carrying value approximates fair value.
Investment securities
The fair value of stocks is based on quoted market prices.
Short-term loans payable, notes and accounts payable, trade and accounts payable, non-trade
Since these items are settled in a short period of time, their carrying value approximates fair value.
Long-term debt
The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest
rate to be applied if similar new loans were entered into.
Derivatives
Please refer to Note 18. Derivatives of the notes to the consolidated financial statements.
2. Financial instruments whose fair value is extremely difficult to determine
Unlisted securities

¥

2018

440

Millions of yen

¥

2019

622

Thousands of U.S. dollars
2019$ 5,604

Unlisted securities are not included in the investment securities because there were no quoted market prices available and the fairvalue is extremely difficult to determine.

20 ANNUAL REPORT 2019

ANNUAL REPORT 2019 21

3. The schedules for redemption of monetary assets and securities with maturities
Millions of yen

2018

Cash equivalents and time deposits
Notes and accounts receivable,
trade
Total

Due inone yearor less

Due after
one yearthroughfive years

Due after
five years
throughten years

15,251—¥ 10,590¥ 25,841

¥
¥

—
—

¥
¥

2019

Due inone yearor less

Due after
one yearthroughfive years

Due after
five years
throughten years—$ 98,018—

14,496——130,606—¥ 25,376—$ 228,633—¥ 10,879

¥

—

¥

—

¥
¥

Note 18. Derivatives

Thousands of U.S. dollars
2019

Due inone yearor less

Due after
one yearthroughfive years$—

Due after
five years
throughten years

$

—
$

—

—
—

$

—

Note 17. Securities

Contract amountInformation regarding securities classified as other securities at March 31, 2018 and 2019 was summarized as follows:
Book
value

Securities whose Book value exceeds
their Acquisition
Stocks¥ 1,562
Subtotal
1,562
Securities whose Acquisition exceeds
their Book value
Stocks457
Subtotal
457
Total¥ 2,0192018

Acquisition¥ 1,055
1,055
499
499
¥ 1,554

Millions of yen

Unrealized
gain (loss)

¥

¥

507
507

2019

Book
value

Acquisition

Unrealized
gain (loss)¥¥¥ 1,501
1,501

(42)
424
(42)
424
464 ¥ 1,926

982
982

527
527
¥ 1,509

¥

519
519

Thousands of U.S. dollars
2019

Book
value

Acquisition

Unrealized
gain (loss)$ 13,524
13,524$ 8,848
8,848$ 4,676
4,676

(102)
3,820
(102)
3,820
416 $ 17,353

4,748
4,748
$ 13,596

(919)
(919)
$ 3,748

Unlisted stocks of ¥191 million at March 31, 2018 and ¥347 million ($3,126 thousand) at March 31, 2019 are not included in theabove table because there were no quoted market prices available and the fair value is extremely difficult to determine.
Investment securities in unconsolidated subsidiaries and affiliates are as follows:
Investment securities

¥

2018

Millions of yen

248

¥

2019

275

Thousands of U.S. dollars
2019$ 2,478

Information regarding sales of securities classified as other securities for the years ended March 31, 2018 and 2019 was asfollows:
Proceeds from sales of securities
StocksGains on sales
Stocks
Losses on sales
Stocks¥

2018

Millions of yen

0
0
0
0
—
—

¥

2019

241
241
195
195
1
1

Thousands of U.S. dollars
2019$ 2,171
2,171
1,757
1,757
9
9

Impairment of investment securities classified as other securities for the years ended March 31, 2018 and 2019 were as follows:
Stocks

22 ANNUAL REPORT 2019As a matter of policy, the Company does not speculate in derivative transactions. The Company does not anticipate
nonperformance by any of the counterparties to the derivative transactions, all of whom are leading domestic financial institutions
with high bond ratings.
In accordance with the Company’s policy, the accounting department controls derivative transactions and requires approval by
the director responsible for accounting and the representative directors of the Company. The director who has the responsibility
to control the performance and the related risks connected with derivatives reports these to the Management Committee of theCompany.
The Company uses interest rate swaps to hedge the risks from interest rate fluctuations on borrowings. The exceptional methodof hedge accounting is used to account for those transactions.
Millions of yen
Thousands of U.S. dollars(Currency related)

¥

2018

181

Millions of yen

¥

2019

86

Thousands of U.S. dollars
2019

$

775

2018
Forward foreign exchange contracts:
Sell: US$ / Buy: Yen¥ 1,853
Sell: US$ / Buy: GBP
39
Sell: US$ / Buy: EUR78
Total¥ 1,9712019¥ 1,06414—¥ 1,079

Fair value

¥

¥

2018

47
0
0
47

¥

¥

2019

Unrealized gain (loss)(11) ¥
0—(11) ¥

2018

47
0
0
47

¥

2019

Contract
amount2019(11) $ 9,586 $
0
126
—
—
(11) $ 9,722 $¥(1) Calculation of fair value
The fair value is calculated by the forward exchange rate.
(2) Derivative transactions to which hedge accounting was applied are excluded from the above table.
Millions of yen(Interest related)
Contract amountInterest rate swaps(Deferral hedge accounting)Interest rate swaps(Exceptional treatment)

2018

2019

¥ 1,941¥ 1,938

Due after one year

Fair value

2019

2019

Unrealized
gain (loss)(99) $
0—(99) $

2019

(99)
0
—
(99)

Thousands of U.S. dollars

Contract
amountDue after
one year

Fair value

2018

2019

¥ 1,872¥ 1,872¥ 1,004¥(9) ¥(7) $ 16,866$ 9,046$(63)¥ 1,240¥ 1,240

¥

¥

—

—

$ 5,406

$

—

600

2018

Fair value

¥

2019

$ 11,172

2019

2019

(1) Calculation of fair value
The fair value is calculated by the forward interest rate.
(2) Regarding interest rate swaps to which the exceptional treatment applied, they are accounted for as if they were an integral
part of the hedged long-term debt, and their fair value is included in the fair value of long-term debt in Note 16.

Note 19. Investment and rental property
The profit of investment and rental property for the years ended March 31, 2018 amounted to ¥604 million and the gain on salesof fixed assets amounted to ¥2,251 million.
The profit of investment and rental property for the years ended March 31, 2019 amounted to ¥520 million ($4,685 thousand)and the gain on sales of fixed assets amounted to ¥1,288 million ($11,605 thousand).
Information on the fair value of investment and rental property at March 31, 2018 and 2019 was summarized as follows:
Millions of yen

2018Book value
Book value
beginning
end of theof the year Net change
year

¥

8,410

(¥

806)

¥

7,603

Fair value
end of theyear¥14,158

2019Book value
Book value
beginning
end of theof the year Net change
year

¥

7,603

(¥ 1,200)

¥

6,402

Fair value
end of theyear¥ 12,541

Thousands of U.S. dollars
2019Book value
Book value
beginning
end of theof the year Net changeyear$ 68,502($ 10,812)$ 57,681

Fair value
end of theyear$ 112,992

1. The fair value represents the acquisition cost less accumulated depreciation.
2. The components of net change in book value for the years ended March 31, 2018 included increases mainly due to acquisitionsin the amount of ¥103 million and decrease mainly due to sales and disposal of fixed assets ¥753 million and depreciation ¥236
million. The components of net change in book value for the years ended March 31, 2019 included increases mainly due toacquisitions in the amount of ¥57 million ($514 thousand) and decrease mainly due to sales and disposal of fixed assets¥1,182 million ($10,650 thousand) and depreciation ¥149 million ($1,342 thousand).
3. The fair value is mainly based upon the amount appraised by outside independent real estate appraisers.

ANNUAL REPORT 2019 23

Note 20. Segment information(Overview)
The reporting segments of the Company and consolidated subsidiaries are designed as business segments whose segregatedfinancial information can be obtained and to which the management reviews to decide on the allocation of managerial andfinancial resources and to evaluate their financial performance.
The Company and consolidated subsidiaries are primarily engaged in the four divisions as follows;
CS (Connection System) Division: The division produces and sells connectors and jacks.
FC (Functional Components) Division: The division produces and sells switches, remote controls and camera modules.
TP (Touch Panel) Division: The division produces and sells touch panels.
Research & Development Center: The center produces and sells wireless module.
(Changes in reporting segments)
In line with changes in the company organization aimed at strengthening the management structure, while “Research &Development Center” has previously been included in “Others,” the Company shall change it into a reporting segment. In line withthis change, with the aim of managing the performance of each segment more accurately, a portion of the expenses that werepreviously allocated to the “Connection System Division,” “Functional Components Division” and “Touch Panel Division” have been
allocated to the “Research & Development Center.”Also, the segment information of the previous fiscal year has been presented based on the classification and calculation methods
after the change to the reporting segments.
The business segment information is prepared in a manner similar to the accounting treatment as described in Note 1. Segment
performance is evaluated based on operating income or loss.

Net sales
Outside customers
Intersegment sales
Total
Operating income (loss)
Identifiable assets
OthersDepreciation
Increase in fixed assets andintangible fixed assets

2019

Net sales
Outside customers
Intersegment sales
Total
Operating income (loss)
Identifiable assets
OthersDepreciation
Increase in fixed assets andintangible fixed assets

2018

Net sales
2019

Net sales
2019

Net sales

Connection
SystemDivision

Reporting Segments
Functional
Research &Components Touch Panel Development
Division
Division
Center¥ 28,422—
28,4223,401
16,359¥ 21,420 ¥—
21,420(1,250)13,2899,581 ¥
—
9,581
(756)
5,107

2,234

942

579

15

2,052

542

442

14

Millions of yen

2018

Fixed assets
2019

Fixed assets

Fixed assets

Subtotal

354 ¥ 59,779——
354
59,779
(358)
1,036
262
35,018

Other

¥

Total

7 ¥ 59,786——
7
59,786
(551)
485
9,291
44,310Adjustment

Consolidated

¥

—
—
—
—
17,164¥ 59,786—
59,786
485
61,474

3,772

414

4,187

—

4,187

3,052

108

3,160

—

3,160

Adjustment

Consolidated

21 ¥ 57,386 ¥
—
—
—
—
21
57,386—(914)(1,834)—
7,636
42,30916,403¥ 57,386—
57,386(1,834)58,713

Millions of yen

Connection
SystemDivision

Reporting Segments
Functional
Research &Components Touch Panel Development
Division
Division
Center¥ 21,712—
21,712
258
12,944¥ 26,007 ¥—26,007(412)
16,3329,173 ¥
—
9,173
(449)
5,054

1,869

1,013

575

15

3,472

191

3,664

—

3,664

1,993

1,798

413

16

4,222

64

4,287

—

4,287

SubtotalOther

471 ¥ 57,365 ¥——471
57,365
(316)
(919)
341
34,673

Total

Japan

¥ 14,368

China¥ 14,797Japan¥ 15,754

China$ 141,941

China

¥

¥

Japan

¥ 13,951¥

Japan¥ 12,608
Japan$ 113,596

¥

China

China

China

¥ 15,071¥

Europe

508

¥

7,307

Consolidated¥ 59,786

North America
U.S.A.
Other¥ 18,372¥

Europe

791

¥

2,995

Consolidated¥ 57,386

North America
U.S.A.
Other$ 165,528

$

7,127

EuropeConsolidated$ 26,984$ 517,038

Millions of yen

¥

Other

2,364

North
America¥

18

Europe¥Consolidated

406¥ 20,124

Millions of yen

¥

Asia

$ 43,085

6,867$ 61,870

Asia

4,782

Other

Other

Asia

3,383

7,731

North America
U.S.A.
Other

Thousands of U.S. dollars

Asia$ 113,569

Other

Millions of yen

Asia¥ 12,605

Japan

Millions of yen

Asia(2 ) Fixed assets

2019

1. Business segment information2018

2. Geographical information(1 ) Net sales

Other

1,971

North
America¥29

Europe¥Consolidated

300¥ 19,693

Thousands of U.S. dollars

Other$ 17,758

North
America$

261

Europe$Consolidated

2,703$ 177,430

3. Information about major customers
The Company and consolidated subsidiaries have no major customers which account for 10% or more of net sales.
4. Information about the loss on impairment of fixed assets
Connection System Division
Functional Components Division
Touch Panel Division
Research & Development Center
Subtotal
Other
Adjustments and eliminations
Consolidated

¥

¥

2018

—
190
271
—
461
1,353
—
1,815

Millions of yen

¥

2019

¥

—
125
18
—
143
—
4
148

Thousands of U.S. dollars
2019

$

—
1,126
162
—
1,288
—
36
$ 1,333

5. Information about the amortization of goodwill and the balance of goodwill
For the year ended March 31, 2018 and 2019, there was no amortization and balance of goodwill.

Thousands of U.S. dollars

2019

Net sales
Outside customers
Intersegment sales
Total
Operating income (loss)
Identifiable assets
OthersDepreciation
Increase in fixed assets andintangible fixed assets

Connection
SystemDivision

Reporting Segments
Functional
Research &Components Touch Panel Development
Division
Division
CenterAdjustment

Consolidated$ 195,621—
195,621
2,325
116,623$ 234,318 $ 82,647 $ 4,244 $ 516,848 $189 $ 517,038 $
—
—
—
—
—
—
—
—
234,318
82,647
4,244
516,848189
517,038—(3,712)(4,045)(2,847)(8,280)(8,235)(16,515)—
147,148
45,536
3,072
312,398
68,799381,197
147,788$ 517,038—
517,038(16,524)
528,994

Subtotal

Other

Total

16,839

9,127

5,181

135

31,282

1,721

33,012—33,012

17,957

16,2003,721

144

38,039577

38,625—38,625

Other is business segments not included in the reporting segments. It includes other parts, leasing, property rental and worker
dispatch businesses.
Adjustment includes corporate assets which are not allocable to the reporting segments.

24 ANNUAL REPORT 2019

ANNUAL REPORT 2019 25

Note 21. Related party transactions

Report of Independent Auditors

Significant transactions with related parties for the years ended March 31, 2018 and 2019 were as follows:

SMK Corporation and Consolidated Subsidiaries

Millions of yen

2018

Terutaka Ikeda (Supreme corporate adviser)Transactions
Guaranty
money
deposited
Rent

¥

—

¥

14

Balances
Other
Other
current
assetsinvestments

¥

14

¥

1

Millions of yen

Paul Evans (Director)

Transactions
Collectionof loanInterest
receivable
income¥1¥

Balances
Other
Long-term
current
loans
assetsreceivable

1

¥

30

¥

2

Millions of yen

2019

Terutaka Ikeda (Supreme corporate adviser)Paul Evans (Director)

Transactions
Guaranty
money
Rent
deposited¥—

Increase ofloan
receivable

¥

30

¥

14

Transactions
Collectionof loanreceivable¥

31

Balances
Other
Other
current
assetsinvestments¥

14

Millions of yen

Interest
income¥1¥1Balances
Other
Long-term
current
loans
assetsreceivable

¥

1

¥

31

Thousands of U.S. dollars

2019

Terutaka Ikeda (Supreme corporate adviser)Transactions
Guaranty
money
deposited
Rent

$

—

$ 126

Balances
Other
Other
current
assetsinvestments

$ 126

$

9

Thousands of U.S. dollars

Paul Evans (Director)

Increase ofloan
receivable$ 270

Transactions
Collectionof loanreceivable$ 279

Interest
income$9Balances
Other
Long-term
current
loans
assetsreceivable

$

9

$ 279

1. Business transactions with related parties are carried out on an arm’s-length basis similar to third party transactions.
2. Terutaka Ikeda was the parent of President and CEO/COO Yasumitsu Ikeda.

Note 22. Subsequent Events
Acquisition of treasury stock
The Company resolved to acquire treasury stock in accordance with Article 156 of the Companies Act as applied pursuant to
Article 165, Paragraph 3 thereof, at a meeting of the Board of Directors held on June 25, 2019.
Objective: To enable flexible management in response to changes in the business environment
Class of treasury stock: Common stock
Total treasury stock the Company may acquire: 50,000 shares, at maximum
Total acquisition amount: ¥140 million ($1,261 thousand), at maximum
Acquisition period: From July 1, 2019 to August 30, 2019
Method of acquisition: Market transactions on the Tokyo Stock Exchange

26 ANNUAL REPORT 2019

ANNUAL REPORT 2019 27

Officer Introduction

Topics(As of June 25, 2019)

Directors

1 New Division Structure
As of April 1, 2019, the Functional Components (FC) Division and the Touch Panel (TP) Division have beencombined into the Sensing, Communication and Interface (SCI) Division.
SMK will envision a new growth strategy by integrating FC and TP technologies to create new products andbusinesses. We will also pursue efficient operation, such as by effectively utilizing the power of design and the
production structure both within and outside Japan, as well as strengthening our efforts to enter new markets,
strengthening our ability to provide automotive quality responses, and promoting the automation of production.
Yoshiyuki Kaku

Paul Evans

Director andExecutive Deputy President,
Chief Technology Officer

Director andExecutive Vice President

SCI Division

SCI＝Sensing, Communication & Interface

Yasumitsu Ikeda

MAJOR PRODUCTS
Remote Control Units, Switches, Composite Units, Touch Panels

President,
Chief Executive Officer andChief Operating Officer

Tetsuo Hara

Toshio Nakamura

Director andExecutive Vice President

Kaoru Ishikawa

Director (Outside)

FC Division

Director (Outside)

Auditors

Bluetooth® low energy-supported
Standard Voice Remote Control

Control Unit
for Storage Batteries“D2 F/G”
Resistive Decorative Film Touch Panel“Wing Touch MM”
Capacitive Touch Panel

TP Division

Morikazu Fukui
Full-Time Auditor(Outside)

Naru Nakashima
Auditor (Outside)

Fumio Nishimura
Auditor (Outside)

2 Initiatives Targeting the Future of Cars
technological development to contribute to the evolution of vehicles andUses of automotive
biometric sensor

has been focusing on the development of the in-cabin sensors that will be

Expected to be used in many situations

SMK is proactively working on open innovation to promote new

Corporate Executive Officers

essential for autonomous vehicles (e.g. camera modules for drivermonitoring systems).
As part of the open innovation initiatives, SMK and Israeli company

Prevent drowsy
drivingPrevent
accidents

Prevent leaving
children in vehicle

Seatbeltreminders

CAARESYS LTD. have announced a business partnership in developing
automotive biometric sensor. SMK and CAARESYS are going to develop the
Kohei Ohgaki

Executive Vice President,
Chief Financial Officer

Shigechika Yanagi
Executive Vice President

Masanobu Ikeo

Executive Vice President

Takemi Ishibashi
Vice President

world’s first sensors that bring new features compatible with the newstandards of safety in future vehicles.
Furthermore, to ensure quality levels for the auto industry and to
expand the car electronics business, SMK has obtained the IATF
16949:2016 certification* for its Mexico manufacturing facility (SMKElectronica S.A. de C.V.). The Mexico factory is the third IATF16949certified manufacturing facility in the SMK Group after the one in thePhilippines and the one in Shenzhen, China.
SMK will continue working on developing the latest technologies, andMitsuhiko Goto
Vice President

28 ANNUAL REPORT 2019

Mitsuyuki Masubuchi
Vice President

Hiroshi Usami

Vice President,
Chief Information Officer

Atsushi Obinata
Vice President

Fumikazu Hata
Vice President

striving to further enhance its product line-up.
*Note: The IATF 16949:2016 is an international standard for automotive quality
management system published by the International Automotive Task Force (IATF).
ANNUAL REPORT 2019 29

Corporate Information(As of March 31, 2019)

Corporate Data

Shares and Shareholders

Name

SMK Corporation

Established

April 3, 1925

Registered

January 15, 1929

Primary business

Manufacture and sale ofvarious parts forelectro-communication device
and electronic equipment

Capital¥ 7,996,828,021

Stock exchange listing

Tokyo Stock Exchange

Administrator ofshareholders register

Mitsubishi UFJ Trust and Banking
Corporation

Independent auditors

Ernst & Young ShinNihon LLC
Tokyo, Japan

Employees (SMK-Group)

5,835

Head office5-5, Togoshi 6-chome,
Shinagawa-ku,
Tokyo 142-8511, Japan
Tel: +81-3-3785-1111
Fax: +81-3-3785-1068

Global network（As of July 31, 2019）

Domestic bases

Shinagawa, Tokyo（Head office）,
Toyama, Hitachi, Osaka, Nagoya,
Ibaraki and Fukuoka

Overseas bases

Taiwan, Hong Kong, China,
Singapore, Thailand, Malaysia,
Philippines, Korea, Ireland, U.K.,
France, Germany, Belgium,
Slovakia, U.S.A., Mexico
and Brazil（7 Bases）（17 Countries/Areas, 36 Bases）

Authorized shares

19,596,127
7,500,000(including 1,004,543 shares of treasury stock)

Issued shares
Number of shareholders

7,251

Note: The Company conducted a share consolidation of its commonshares at the ratio of 10 shares to 1 share, effective October 1,
2018. As of the above date, the number of authorized shareschanged from 195,961,274 to 19,596,127, and the number ofissued shares changed from 75,000,000 to 7,500,000.

Major shareholders (top ten)

Shares owned(1,000 shares)

Percentage ofshares (%)

SMK Cooperating Company Share
Holding Association

368

5.67

Mizuho Bank, Ltd.

327

5.05

Nippon Life Insurance Company

324

4.99

Dai Nippon Printing Co., Ltd.

320

4.93

MUFG Bank, Ltd.

250

3.86

SMK Employees Share Holding Association

194

2.99

Mitsubishi UFJ Trust and Banking Corporation

180

2.77

The Showa Ikeda Memorial Foundation

150

2.31

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

142

2.19

Meiji Yasuda Life Insurance Company

137

2.12

Note: The Company holds 1,004 thousand shares of treasury stock,
but is excluded from the above list. Figures for percentage ofshares are calculated after subtracting the number of treasury
stock. The number of treasury stock includes the 43 thousand
shares of the Company held by the Officer Stock Benefit Trust.

Share ownership by shareholder type (unit : share)
Financial institutions
Financial instruments dealers
Other entities

1,969,566 (26.26%)
98,976 ( 1.32%)
1,001,229 (13.35%)

Foreign entities, etc.

436,101 ( 5.81%)

Individuals and others

3,994,128 (53.26%)

Please see our website for detailed IR
information.
The IR Information section of SMK’ s website includes

Head Officeannual reports and presentation materials. The website
also carries information about SMK’ s products, corporate
data, CSR initiatives, and commitment to the environment.

WebsiteToyama Works

https://www.smk.co.jp/

Hitachi Works＊ The Bluetooth® word mark and logos are registered trademarks owned by Bluetooth SIG, Inc. and any use of such marks by SMK Corporation isunder license.
＊ USB Type-CTM is a trademark of USB Implementers Forum.
＊ Other products and company names listed in this report are the registered trademarks or trademarks of their respective holders.

SMK CORPORATION
5-5, Togoshi 6-chome, Shinagawa-ku, Tokyo 142-8511, JAPAN
Tel: +81-3-3785-1111 Fax: +81-3-3785-1068