ANNUAL REPORT2018

For the ﬁscal year ended March 31, 2018

Connection
SystemDivision
USB Type-CTM
Receptacle

Functional
Components
Division

Research &Development
CenterECHONETLiteTM
Adapter (Wired)Sigfox RF Module“WF923”“D2 F/G” Resistive
Decorative Film
Touch Panel

LGMCard

Touch Panel
Division

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 96th fiscal year
(from April 1, 2017 to March 31, 2018).
We look forward to your continuing support andencouragement.
June 20182

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

9

Consolidated Statement of Changes in Net Assets

10Consolidated Statement of Cash Flows11

Notes to Consolidated Financial Statements

27

Report of Independent Auditors

28

Officer Introduction

29

TopicsSMK Action Guidelines
2 Be
 customer-oriented, with zeal and sincerity.
3 Challenge
courageously for higher goals withoutfear of failure.

4 Trustand respect each other for a brighter workingatmosphere.

5 Keepan open mind, and view SMK from a globalCorporate Information

Yasumitsu Ikeda

1 Contribute to society with pride and confidence.

perspective.

President and CEO/COO

Financial Highlights
Percent change
2017/2018

Millions of yen
Years ended and as of March 31

2017

Thousands of
U.S. dollars

2018Years ended and as of March 31

2018¥ 15.17¥(4.36)630

485(23.0)

4,565

1,017

(288)

ー

(2,711)

Diluted

15.16

ー

ー

ー

Cash dividends

10.00

8.00

(20.0)

0.08(5.1) %

$562,745

Total net assets

Net sales¥62,318¥61,807

31,31830,637

Millions of yen

90,000(0.8) %
(2.2)

288,375

Millions of yen

4,500

4,171

Total assets / Total net assets
Total assets

Millions of yen

3,000

60,00059,7862,000

yen

67,606

15

27.61

30

10.00

2018

0

10.00

10
1,017

2,113

8.00

15.17
40,0001,000

31,47634,18733,28731,318 30,637

15

5
630

2017

14.00

61,80760,000 56,235

1,500

2016

14.00

37.94

35.58
62,318Cash dividends per share
yen

3,000
2,330

30,000

1,982

Basic profit (loss) attributable toowners of parent per share

45
65,02962,971

Total net assets

80,000

2,678

2,541

77,2062015$(0.04)$ 581,768

Profit (loss) attributable toowners of parent

Operating income

Millions of yen

2014

ー%

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥106.24 = U.S. $1.00.

Total assets

0

2018

¥ 59,786

Financial Position

66,2302018¥62,971

Operating income
Profit (loss) attributable to owners ofparent

65,7962017

U.S. dollars

Per Share Data
Profit (loss) attributable to owners ofparentBasic

Operating Results
Net sales

Percent change
2017/2018

Yen

2014

2015

2016

2017

20,000

0

2018

0

(288)

485

(1,000)

2014

2015

2016

2017

2018

(4.36)

0

2014

2015

2016

2017

2018

(15)

2014

2015

2016

2017

2018

0

2014

2015

2016

2017

2018

ANNUAL REPORT 2018 1

Overview of Consolidated Results by Division(April 1, 2017 to March 31, 2018)

The many different electronic components that SMK produces are widelyused by electronics manufacturers in and outside Japan. The markets forthese 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, theFunctional Components (FC) Division and the Touch Panel (TP) Division, as
well as the Research & Development Center, are responsible for developing
products that continually meet market requirements in the wide range ofmarkets outlined above. The three divisions handle operations ranging fromproduct 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 eachof the three divisions in the fiscal year under review.

Connection System
Division

Major Products
Coaxial Connectors
Board to Board Connectors
FPC Connectors
Jacks

Sales of connectors in the ICT market were on par with the previous fiscal year,
as sales grew for connectors for tablets of customers in North America, althoughconnectors for smartphones struggled due to intensified competition with otherconnector manufacturers for supply to customers in China. Sales of connectors in
the car electronics market, a priority area which continues to show stable growth,
grew steadily mainly for products for rearview cameras, with the accelerating
development of car electronics serving as a tailwind. Sales of connectors for theindustry market increased sharply year on year due to continued strong growthin connectors for the healthcare-related product.
As a result, net sales of the Connection System Division amounted to ¥28,422
million (20.7% increase year on year), and operating income was ¥3,203 million(66.9% increase year on year).

Net sales / Operating income
30,000Millions of yen

28,422

27,095

3,600

3,203
23,53920,000

2,400

2,215
1,919

10,000

0

1,200

2016

2017

2018

0

Sales by Division
OthersTouch Panel
Division¥ 362 Million

0.6%

16.0%

¥ 9,582 Million

Net sales¥ 59,786

Functional
Components
Division

47.6%

MillionConnection
SystemDivision¥ 28,422 Million

35.8%¥ 21,420 Million

Functional
Components Division

Major Products

Sales of remote control units, our mainstay products, grew steadily for sanitaryand home equipment in Japan. However, sales of the products for set-top boxes
dropped sharply year on year, affected by a decrease in sales volume to U.S.
customers due to increased competition with other manufacturers of remotecontrol units. As for units, sales increased year on year, as sales of automotive
camera modules and home-related products expanded steadily. Sales of switches
decreased year on year, due to weak sales of switches for smartphones.
As a result, net sales of the Functional Components Division amounted to¥21,420 million (21.4% decrease year on year), and operating loss was ¥1,360
million (compared to an operating loss of ¥786 million in the previous fiscal
year).

Net sales / Operating income (loss) Millions of yen
40,00027,23821,42020,000

2,000

370
0

0

Remote Control Units
Wireless Units
Switches
Camera Modules

Others: businesses of other electronic parts, lease, real-estate rental, andworker dispatching undertakings.

4,000

35,449（786）(1,360)
2016

2017

2018

(2,000)

Sales by Market
Industry・Others¥ 11,605 Million

ICT

19.4%

19.5%

¥ 11,669 Million

Touch Panel
DivisionIn the touch panel market for car navigation systems and for automotive center

Net sales / Operating income (loss) Millions of yen

consoles, which are our mainstay products for this division, the market

15,000than for car electronics, such as for machine tools and for wearable devices, sales

Net salesmodels was not offset.

Million

30.7%

Home
Appliance¥ 18,326 Million

Others: markets of Medical Equipment, Rehabilitation Equipment, Industrial Robot, NC Machine,
Electrical Measuring Equipment, etc.

2 ANNUAL REPORT 2018

10,000

9,582

1,838

2,000

of overall touch panels fell year on year because a decline in sales of resistive¥ 59,786
30.4%

3,000
11,931

capacitive touch panels from resistive touch panels. Despite new orders won forcapacitive touch panels and orders continuously received for touch panels other

Car
Electronics¥ 18,184 Million

14,467

environment continues to change significantly due to a shift in demand to

As a result, net sales of the Touch Panel Division amounted to ¥9,582 million

1,000

5,000

(19.7% decrease year on year), and operating loss was ¥832 million (compared
Major Products
Resistive Touch Panels
Capacitive Touch Panels
Optical Touch Panels

to an operating income of ¥113 million in the previous fiscal year).

113
0

0

2016

2017

(832)
2018

(1,000)ANNUAL REPORT 2018 3

Financial Section

Financial Review

SMK’s net sales for the fiscal year ended March
31, 2018, decreased 5.1% year on year to¥59,786 million (US$562,745 thousand),Five-Year Summary

Total net assets(As of March 31)

Millions of yen
36,000whereas operating income of ¥485 million(US$4,565 thousand) and loss attributable to34,18734,00033,287owners of parent of ¥288 million (US$2,711

SMK Corporation and Consolidated Subsidiaries

thousand) were recorded.

32,00031,476Net Sales
Millions of yen
Years ended andas of March 31

2014

2015

2016

2017

2018

Thousands of
U.S. dollars

Despite favorable sales growth in products such as connectors for

2018

products such as connectors for smartphones for China, remote

Operating income
Profit (loss) attributableto owners of parent

the healthcare market and automotive camera modules, sales of0

2014

competition in the market environment and other factors.

¥ 65,796
2,330¥ 66,230¥ 77,206

2,113

4,171

¥ 62,971
630¥59,786
485$ 562,745

2016

2017

2018

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

As a result, net sales were ¥59,786 million (US$562,745
thousand), down 5.1% year on year.

4,565

%
12

Operating Income
2,541

1,982

2,678

1,017

(288)

(2,711)

Despite our efforts such as proactive launch of new products and

8.5

8.0

8

initiatives taken to reduce cost of sales and cut expenses,
due to profit decreasing factors such as decreases in net sales

6.0
4

and currency fluctuations.

Financial Position

Total net assets

2015

panels for automobiles were sluggish due to intensified

operating income amounted to ¥485 million (US$4,565 thousand)Total assets

30,63730,000control units for set-top boxes for the U.S. customers and touch

Operating Results
Net sales

31,318¥ 56,235¥ 65,029¥ 67,606¥ 62,318¥ 61,807$581,768

31,47634,18733,28731,31830,637288,375

Loss attributable to owners of parent

3.2

(0.9)

0

Loss attributable to owners of parent was ¥288 million(US$2,711 thousand) as a result of recording rent income, rent
expense, gain on sales of fixed assets, loss on impairment of fixed

(4)

2014

2015

2016

2017

2018

assets, etc. in other income and other expenses.
Yen

U.S. dollars(US$581,768 thousand), with ROA of (0.5) %.

¥ 437.84¥ 475.42¥ 471.02¥ 473.50¥463.50

DilutedCash dividends

%
6
4.7
4.0

Total Net Assets / ROE

4

As of March 31, 2018, total net assets were ¥30,637 million

35.58
35.52
10.00

27.61
27.56
14.00

37.94
37.86
14.00

15.17
15.16
10.00

(4.36)－
8.00

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥106.24 = U.S. $1.00.
4 ANNUAL REPORT 2018(Years ended March 31)$4.36

Profit (loss) attributableto owners of parent
Basic

Total Assets / ROA
As of March 31, 2018, total assets were ¥61,807 million

Per Share Data
Total net assets

Return on assets (ROA)(0.04)－
0.08(US$288,375 thousand), with ROE of (0.9) %.

3.3
2
1.6

Cash FlowsNet cash provided by operating activities amounted to ¥2,788

0

million (US$26,242 thousand), net cash used in investing activities(0.5)

totaled ¥787 million (US$7,408 thousand), and net cash used infinancing activities was ¥1,774 million (US$16,698 thousand).

(2)

2014

2015

2016

2017

2018

ANNUAL REPORT 2018 5

Consolidated Balance Sheets

Consolidated Balance SheetSMK Corporation and Consolidated Subsidiaries
As of March 31, 2017 and 2018

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

Assets2017

2018

Liabilities and net assets

2018Time deposits (Note 17)
Notes and accounts receivable, trade (Note 6 and 17)
Allowance for doubtful accounts
Inventories (Note 3)
Deferred tax assets (Note 14)
Other current assets (Note 17,18,19 and 22)

2017

2018

2018

¥13,592¥12,731$119,832

6,118

6,807

64,072

Accrued income taxes

647

542

5,102

Accrued bonuses

626

668

6,288

Accrued directors’ and officers’ bonuses

24

1

9

Accounts payable, non-trade (Note 17)

1,407

1,919

18,063

Other current liabilities (Note 19)

1,710

1,716

16,152

24,127

24,387229,546

Long-term debt (Note 5 and 17)

4,855

4,526

42,602

Deferred tax liabilities (Note 14)

974

1,304

12,274

Accrued directors’ and officers’ retirement benefits

203

171

1,610

Liability for retirement benefits (Note 7)

54

40

377

Other long-term liabilities

784

738

6,947

6,872

6,782

63,837

7,996

7,996

75,264

Capital surplus

12,057

12,057

113,488

Retained earnings

16,614

15,730148,061

Treasury stock(3,995)(4,001)(37,660)

32,672

31,783299,162

Current liabilities

Current assets
Cash and cash equivalents (Note 17)

Thousands of
U.S. dollars(Note 2)Millions of Yen¥10,011¥10,482$98,663

106

117

1,101

14,853

15,251

143,552

(48)

(56)

(527)

7,199

8,775

82,596

431

539

5,073

1,719

1,439

13,54534,27436,548344,014

Short-term loans payable (Note 5 and 17)
Notes and accounts payable, trade (Note 6 and 17)

Long-term liabilities
Investments and long-term loans
Investment securities (Note 17 and 18)

2,305

2,460

23,155Long-term loans receivable (Note 22)

117

93

875

Asset for retirement benefits (Note 7)

860

1,440

13,554

Other investments (Note 22)

554

599

5,638

Allowance for doubtful accounts

(102)

(87)

(819)

3,736

4,506

42,413

Net assets
Shareholders’ equity (Note 8)
Common stock

Property, plant and equipment (Note 5, 13 and 20)

Authorized : 195,961,274 sharesLand (Note 4)

7,027

6,615

62,265

Buildings

21,27519,320181,852

Machinery and vehicles

22,02522,077

207,803

Tooling and office furniture

23,49423,050216,962

100

327

3,078

73,923

71,390671,969

Accumulated other comprehensive income(51,953)(51,266)(482,549)

Net unrealized gains (losses) on other securities

348

331

3,116

21,97020,124

189,420

Net unrealized gains (losses) from hedging instruments (Note 19)

(3)

(9)

(85)

(1,976)(1,907)(17,950)

Deferred tax assets (Note 14)

487

411

3,869

263

440

4,142

Intangible assets (Note 13)

1,850

215

2,024

(1,368)(1,145)(10,777)

2,337

627

5,902

14

—

—

31,31830,637288,375¥62,318¥61,807$581,768¥62,318¥61,807$581,768

Construction in progressLess-accumulated depreciation
Other assets

Total assets

Issued : 75,000,000 shares

Foreign currency translation adjustments
Retirement benefits asset and liability adjustments
Non-controlling interests

Total liabilities and net assets

See accompanying notes to consolidated financial statements.
6 ANNUAL REPORT 2018

ANNUAL REPORT 2018 7

Consolidated Statement of Income

Consolidated Statement of Changes in Net Assets

Years ended March 31, 2017 and 2018

Years ended March 31, 2017 and 2018

SMK Corporation and Consolidated Subsidiaries

SMK Corporation and Consolidated Subsidiaries

Net sales (Note 21)
Cost of sales (Note 3 and 10)
Selling, general and administrative expenses (Note 10 and 11)
Operating income (Note 21)

2017

2018

¥ 62,971
52,211
10,130630$562,745
465,258
92,912
4,565

95
1,243
459
99
—
378
2,275

98
1,175
2,341
0
46
297
3,960

922
11,06022,0350433
2,796
37,274

Other expenses
Interest expense
Rent expense (Note 22)
Foreign exchange loss, net
Loss on disposal of fixed assets (Note 12)
Loss on impairment of fixed assets (Note 13)
Loss on valuation of investment securities
Other
Total other expenses

124
615
25
260
443
—
195
1,664

114
571
921
172
1,815
181
96
3,875

1,073
5,375
8,669
1,619
17,084
1,704
904
36,474

1,241

570

5,365

749
(272)
764
(252)
¥1,017

821
51
(302)
(14)
¥(288)7,728
480(2,843)(132)$(2,711)

Yen

Per share data (Note 16)
Total net assets
Profit (loss) attributable to owners of parent
Basic
DilutedCash dividends¥ 473.50¥ 463.50

15.17
15.16
10.00

(4.36)—
8.00$(0.04)—0.08

SMK Corporation and Consolidated Subsidiaries

Profit (loss)
Other comprehensive income(Note 15)
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

2017

Thousands of
U.S. dollars(Note 2)

¥

764

¥

2018

Balance at April 1, 2016 79,000,000
Cash dividends paid
Profit attributable to owners of parent
Acquisition of treasury stock
Disposition of treasury stock
Retirement of treasury stock (4,000,000)
Net changes in items otherthan shareholders' equity
Total changes—
Balance at March 31, 2017 75,000,000
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
Retirement of treasury stock
Net changes in items otherthan shareholders’ equity
Total changes—
Balance at March 31, 2018 75,000,000

Commonstock

Capitalsurplus¥7,996¥12,309

—
7,996
7,996

2018

¥(302)$ (2,843)

171
(3)
(469)
39
(262)
502

(17)
(5)
69
177
223
¥(79)

$

(160)
(47)
649
1,666
2,099
(744)

¥
754
¥(252)¥(65)
¥
(14)

$
$

(612)
(132)

Accumulated other comprehensive income
Total
Net unrealized Net unrealized
Foreign Retirement accumulated
other Subscription
Total gains (losses) gains (losses) currency benefits asset
rights toTreasury shareholders’ on other from hedging translation and liability comprehensive
sharesincomestock
equity securities instruments adjustments adjustments

Noncontrollinginterests

Total net
assets¥18,149 ¥(4,353) ¥34,102
(891)
(891)
1,017
1,017
(1,579) (1,579)
(0)
(0)
25
24
(251) (1,660) 1,911
—

¥176

¥—

¥(1,506)¥223¥(1,106)
—
—
—
—
—

¥25

¥266

¥33,287(891)
1,017(1,579)
24
—

—

171

(3)

(469)

39

(262)

(25)

(252)

(539)

(1,429)32,672
32,672
(594)
(288)
(5)
—
—

171
348
348

(3)
(3)
(3)

(469)
(1,976)(1,976)

39
263
263

(262)
(1,368)(1,368)
—
—
—
—
—

(25)
—
—

(252)
14
14

(1,969)31,31831,318
(594)
(288)
(5)
—
—

—

(17)

(5)

69

177

223

—

(14)

208

(883)
(5)
(889)
¥15,730 ¥(4,001) ¥31,783

(17)
¥331

(5)
69
¥(9) ¥(1,907)

177
¥440

223
¥(1,145)

—
¥—

(14)
(680)
¥— ¥30,637(252)
12,057
12,057—¥7,996

Retainedearnings—¥12,057(1,534)
16,614
16,614
(594)
(288)

357
(3,995)(3,995)(5)

Thousands of U.S. dollars (Note 2)

Shareholders’ equity

4.36

Consolidated Statement of Comprehensive Income
Millions of Yen

Number ofshares ofcommonstock

U.S. dollars(Note 2)

See accompanying notes to consolidated financial statements.		

Years ended March 31, 2017 and 2018

Shareholders’ equity

2018¥59,786
49,4299,871
485

Other income
Interest and dividend income (Note 22)
Rent income
Gain on sales of fixed assets (Note 12)
Gain on sales of investment securities (Note 18)
Gain on redemption of investment securities
Other
Total other income

Profit before income taxes
Income taxes (Note 14)
Current
DeferredProfit (loss)
Loss attributable to non-controlling interests
Profit (loss) attributable to owners of parent

Millions of yen

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

Commonstock

Balance at April 1, 2017
Cash dividends paid
Loss attributable to owners of parent
Acquisition of treasury stock
Disposition of treasury stock
Retirement of treasury stock
Net changes in items otherthan shareholders’ equity
Total changes
Balance at March 31, 2018

CapitalsurplusRetainedearnings

Accumulated other comprehensive income
Total
Net unrealized Net unrealized
Foreign Retirement accumulated
other Subscription
Total gains (losses) gains (losses) currency benefits asset
rights toTreasury shareholders’ on other from hedging translation and liability comprehensive
sharesincomestock
equity securities instruments adjustments adjustments$75,264 $113,488 $156,382 $(37,604) $307,530(5,591)(5,591)(2,711)(2,711)
(47)
(47)
—
—

$3,276$(28) $(18,599)

—

(160)

(47)

—
— (8,311)(47) (8,368)$75,264 $113,488 $148,061 $(37,660) $299,162(160)$3,116(47)649$(85) $(17,950)

Noncontrollinginterests$2,476 $(12,877)
—
—
—
—

$—

$132 $294,785

1,666

2,099

—

(132)

1,666
2,099
$4,142 $(10,777)—$—(132) (6,401)$— $288,375(5,591)(2,711)

(47)
—
—

—

649

Total net
assets

1,958

See accompanying notes to consolidated financial statements.
8 ANNUAL REPORT 2018

ANNUAL REPORT 2018 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, 2017 and 2018

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
Amortization of goodwill
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 2018

2017

2018

2018

¥ 1,241
4,381
443
137
(337)
15
(257)
(95)
124
(99)
—
(459)
—
260
1,110
(192)
2,047
1,459
(4,364)
(41)
5,371
95
(124)
(737)
4,604

¥

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

$ 5,365
39,411
17,084—377(292)(3,596)
(922)
1,073
(0)
(433)
(22,016)
1,704
1,619
(5,892)(15,644)
7,314
1,506
6,514
1,967
35,156819(1,035)(8,688)26,242(103)
101(4,680)
1,039
—
(162)
(50)
430
—
(125)
97
(11)
(3,465)(116)
108(3,626)
3,161
(29)
(59)
(282)
0
68
(39)
70
(43)
(787)

(1,092)
1,017(34,130)
29,753(273)(555)(2,654)
0
640
(367)
659
(405)
(7,408)

1,395
1,494
(1,987)(1,578)24(889)—(1,541)(254)(656)
10,668¥10,011(1,668)2,490(2,007)
(4)
—
(594)
10
(1,774)242
470
10,011¥10,482(15,700)
23,438(18,891)(38)—(5,591)
94(16,698)
2,278
4,424
94,230$98,663

Note 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 thecurrent 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 2018 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 ) 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.
( q ) 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.
( r ) 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.
( s ) 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.
( t ) 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.
( u ) Accounting standards issued but not yet effective			Implementation Guidance on Tax Effect Accounting and Implementation Guidance on Recoverability of Deferred Tax Assets
			
On February 16, 2018, the Accounting Standards Board of Japan (ASBJ) issued “Implementation Guidance on Tax EffectAccounting” (ASBJ Guidance No.28) and “Implementation Guidance on Recoverability of Deferred Tax Assets” (revised
2018) (ASBJ Guidance No.26).
(1 ) Overview
			
The accounting treatment for taxable temporary differences related to investments in subsidiaries when an entity
prepares separate financial statements was modified. In addition, the accounting treatment related to the recoverabilityof deferred tax assets in entities that qualify as Category 1 was clarified.
(2 ) Scheduled date of adoption			
The Company expects to adopt the implementation guidance from the beginning of the fiscal year ending March 31, 2019.
(3 ) Impact of the adoption of implementation guidance			
The Company is currently evaluating the effect of the adoption of this implementation guidance on its consolidated
financial statements.

12 ANNUAL REPORT 2018			
Accounting Standards and Implementation Guidance on Revenue Recognition
			On March 30, 2018, the 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.
( v ) Additional information
			
During the consolidated fiscal year ended March 31, 2018, the Company and some of its consolidated subsidiaries applied
for the adoption of consolidated taxation regime, and the consolidated taxation regime was admitted to start from theconsolidated fiscal year ending March 31, 2019. In line with this, effective the consolidated fiscal year ended March 31,
2018, the Company and some of its consolidated subsidiaries have applied accounting procedures taking into considerationof the adoption of consolidated taxation regime, based on “Practical Solution on Tentative Treatment of Tax EffectAccounting Under Consolidated Taxation System (Part 1)” (ASBJ PITF No.5 revised on January 16, 2015) and “Practical
Solution on Tentative Treatment of Tax Effect Accounting Under Consolidated Taxation System (Part 2)” (ASBJ PITF No.7
revised on January 16, 2015).

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 = ¥106.24, the approximate
rate of exchange at March 31, 2018. 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, 2017 and 2018 consisted of the following:
Finished products
Work in process
Raw materials and supplies
Total

2017

Millions of yen¥2,881738
3,579¥7,1992018¥3,891
839
4,044¥8,775

Thousands of U.S. dollars
2018$ 36,625
7,897
38,065$82,596

The write-downs of inventories resulting from decreased profitability for the years ended March 31, 2017 and 2018 were as
follows:
Millions of yen

Cost of sales

2017

¥251

Thousands of U.S. dollars

¥

2018

333

2018

$3,134

Note 4. Reduction entries
Reduction entries due to acceptance of prefectural government’ s grants relating to property, plant and equipment as of March 31,2017 and 2018 were as follows:
Land

2017

¥101

Millions of yen

¥

2018

101

Thousands of U.S. dollars
2018

$951

ANNUAL REPORT 2018 13

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

Short-term loans payable and long-term debt as of March 31, 2017 and 2018 consisted of the following:
Millions of yen
Short-term loans payable
Average interest rate on short-term loans payable, principally from banks, is 0.48%
SecuredUnsecured
Total

2017

2018

Thousands of U.S. dollars
2018

5,500
6,200
¥ 11,700¥ 3,400
6,627¥ 10,027$ 32,003
62,378$(94,381)

2018

Thousands of U.S. dollars
2018¥ 3,485
3,745(2,704)¥ 4,526$ 32,803
35,250(25,452)$ 42,602¥Long-term debt
Average interest rate on long-term debt, principally from banks, is 0.84%
SecuredUnsecured
Less: portion due within one year
Total

The changes in the retirement benefit obligation during the years ended March 31, 2017 and 2018 were as follows:

2017

Millions of yen

¥

2,969
3,778
(1,892)¥ 4,855

The assets pledged as collateral for short-term and long-term debt as of March 31, 2017 and 2018 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

2017

2018

2018

¥1,476
161
86
256¥1,981¥1,24076
82
256¥1,655$11,672
715
772
2,410
$15,578

¥55
3
39
¥98

¥51
2
39
¥92

$480
19
367
$866

The aggregate annual maturities of long-term debt (including current portion) outstanding as of March 31, 2018 weresummarized as follows:
Millions of yen
Thousands of U.S. dollars
Year ending March 31,2019¥ 2,704$ 25,452
1,897
17,856
2020
2021
1,857
17,479
550
5,177
2022
2023 and thereafter
222
2,090
Total
¥ 7,230$ 68,054

Notes 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.
Notes receivable
Notes payable

¥—
¥—

Millions of yen

Millions of yen¥7,865
322
49
120
(693)
(4)
¥7,660

2018

Thousands of U.S. dollars
2018

2018

Thousands of U.S. dollars
2018¥7,660
326
48
(135)
(849)
(6)
¥7,042

The changes in plan assets during the years ended March 31, 2017 and 2018 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

2017

Millions of yen¥8,357
225
338
231
(686)
¥8,466¥8,466
154
343
323
(845)
¥8,443$72,101
3,069
452(1,271)(7,991)(56)$66,284$79,688
1,450
3,229
3,040
(7,954)$79,471

The funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31, 2017 and 2018
were as follows:¥7,021(8,443)(1,421)20(1,400)Thousands of U.S. dollars
2018

Unfunded retirement benefit obligation
Net liability for retirement benefits in the balance sheet¥7,645(8,466)
(820)
14
(806)

2018

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

54
(860)
¥(806)40(1,440)¥(1,400)

377(13,554)$(13,178)

Funded retirement benefit obligation
Plan assets at fair value

2017

Millions of yen$66,086(79,471)(13,375)
188(13,178)

The components of retirement benefit expense for the years ended March 31, 2017 and 2018 were as follows:
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain and loss
Retirement benefit expense

2017

Millions of yen

¥322
49
(225)
(161)
¥(14)

2018

¥326
48
(154)
(237)
¥(16)

Thousands of U.S. dollars
2018$3,069452(1,450)(2,231)$(151)

The components of retirement benefits asset and liability adjustments included in other comprehensive income (before tax
effect) for the years ended March 31, 2017 and 2018 were as follows:

Note 6. Notes receivable and payable maturing on the balance sheet date

2017

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

2017

2018

¥138
¥2

Thousands of U.S. dollars
2018$1,299$19

Note 7. Retirement benefits plans
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 participantʼs account based on the points according to the employeeʼs 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.

Actuarial gain and loss

2017

Millions of yen

¥56

2018

¥241

Thousands of U.S. dollars
2018$2,268

The components of retirement benefits asset and liability adjustments included in accumulated other comprehensive income(before tax effect) as of March 31, 2017 and 2018 were as follows:
Unrecognized actuarial gain and loss

2017

¥382

Millions of yen

2018

¥623

Thousands of U.S. dollars
2018$5,864

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2017 and 2018 were as
follows:
Bonds
StocksLife insurances
Funds
Other
Total

2017

4.3%
41.8
38.3
14.4
1.2
100.0%

2018

4.1%
43.6
36.2
14.8
1.3
100.0%

1. ‌The total plan assets include retirement benefit trusts which constitute 11.5% for the year ended March 31, 2017 and 12.5%
for the year ended March 31, 2018.
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.
The required contributions to the defined contribution plans by the Company and its consolidated subsidiaries for the years
ended March 31, 2017 and 2018 amounted to ¥90 million and ¥91 million ($857 thousand), respectively.

14 ANNUAL REPORT 2018

ANNUAL REPORT 2018 15

Note 9. Stock options

Assumptions to calculate the actuarial present value of the benefit obligation and the expected return on plan assets as ofMarch 31, 2017 and 2018 were as follows:
2017

Discount rate
Re-evaluation rate
Expected rates of return on plan assets

1. The account and the amount of stock options charged as expenses
Not applicable.
2. The amount of stock options charged as income due to their forfeiture resulting from nonuse

2018

0.6%
1.23%
3.0%

0.6%
1.00%
2.0%

Information regarding changes in net assets for the years ended March 31, 2017 and 2018 were as follows:
1. Shares issued and outstanding / Treasury stock

Types of shares

Shares issued:
Common stock
Tresury stock:
Common stock

2017

Increase

Decrease

Number ofshares at March
31, 2017

Number ofshares at April
1, 20172018

Increase

79,000,000—

4,000,000

75,000,000

75,000,000—

8,947,853

3,994,537

4,054,950

8,887,440

8,887,440

12,319

1. Details of the increase are as follows:
Increase due to purchase of shares
Increase due to purchase of shares of less than standard unit
Increase in shares held by affiliates accounted for by the equity method
2. Details of the decrease are as follows:
Decrease due to exercising stock options
Decrease due to retirement of shares
Decrease due to sales of shares of less than standard unit

Decrease

Number ofshares at March
31, 2018—

75,000,000

Resolution

Type of shares

Shareholders’ meeting on Common
June 22, 2016
stock
Board of Directors’
meeting on October 25, Common
stock
2016

—

8,899,759

2017

2018

3,979,000
11,350
4,187

—
8,891
3,428

54,0004,000,000
950

Type of shares

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

Cut-off date

Effective date8

March 31, 2016

June 23, 2016331

5

September 30,
2016

November 21,
2016

331
265

Major elements of selling, general and administrative expenses for the years ended March 31, 2017 and 2018 were as follows:———

Shareholders’Commonmeeting on
stock
June 22, 2017

Retainedearnings

331

Effective date5

March 31, 2017

June 23, 20174

September 30,
2017

November 20,
2017

5

Total dividends(Thousands of
U.S. dollars)

Dividends per share(U.S. dollars)

3,116

0.05

2,494

0.04

2017

Cut-off date

Effective date

March 31, 2017

June 23, 2017

Dividends with the cut-off date in the year ended March 31, 2018 and the effective date in the year ending March 31, 20192018

Resolution

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

Shareholders’Commonmeeting on
stock
June 22, 2018

Retainedearnings

264

4¥4,384
316
23
38
33
(0)

2018

Cut-off date

Effective date

March 31, 2018

June 25, 2018

Total dividends(Thousands of
U.S. dollars)

2,485

Dividends per share(U.S. dollars)

0.04

2017

Buildings
Machinery and vehicles
Tooling and office furniture
Land
Intangible asset
Total

2018

¥4,531
338
1
37
5
(1)

Millions of yen

¥232
9
5
208
3
¥459

Loss on disposal of fixed assets
2017

Buildings
Machinery and vehicles
Tooling and office furniture
Intangible asset
Total

Thousands of U.S. dollars
2018$42,649
3,181
9
348
47
(9)

2018

Thousands of U.S. dollars
2018

2018

Thousands of U.S. dollars
2018¥1,61025
64640—¥2,341
Millions of yen

¥1
240
18
0
¥260

¥84
69
17
0
¥172

$15,154
235
602
6,024
—
$22,035

$791
649
160
0
$1,619

Note 13. Loss on impairment of fixed assets
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, 2017, impairment losses were recognized for the following assets.
Millions of yen
2017

Asset group

Location

Functional components Japan

SMK Manufacturing, Inc. U.S.A.
Total

16 ANNUAL REPORT 2018

Millions of yen

The components of gains and losses of fixed assets for the year ended March 31, 2017 and 2018 were as follows:
Gains on sales of fixed assets(2) Dividends with the cut-off date in the year ended March 31, 2017 and the effective date in the year ended March 31, 2018
Resolution

2017

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

Cut-off date

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

Research and development costs included in cost of sales and selling, general and administrative expenses for the years ended
March 31, 2017 and 2018 amounted to ¥3,314 million and ¥3,150 million ($ 29,649 thousand), respectively.

Note 12. Gains and losses of fixed assets

561

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

Note 10. Research and development costs

Note 11. Selling, general and administrative expenses

2017

2018

Resolution—

Number of shares

2. Share subscription rights
Not applicable.
3. Dividends(1) Dividends paid
Total dividends Dividends per share(Millions of yen)
(Yen)

2018

20

3. Description of stock options
Not applicable.
4. Change in stock options
Not applicable.
5. Estimation of the number of stock options vested
Not applicable.

Note 8. Net assets

Number ofshares at April
1, 20162017

Gain on reversal of share subscription rights

Use

Other
Remote controls/Switch/
Unit production facilities

Machinery and Tooling andvehiclesoffice furniture

Goodwill

Total

¥—

¥—

¥263

¥263

151

28

—

179

¥151

¥28

¥263

¥443

ANNUAL REPORT 2018 17

For the year ended March 31, 2018, impairment losses were recognized for the following assets.

The significant components of deferred tax assets and liabilities at March 31, 2017 and 2018 were as follows:

Millions of yen
2018

Asset group

Location

TP Division

Japan

Use

Buildings

Touch panel production¥171
facilities
Remote controls/Switch/
5
SMK Manufacturing, Inc. U.S.A.
Unit production facilities
SMK Electronica S.A. de
Remote controls/Switch/
MEXICO
22
C.V.
Unit production facilities
SMK-LOGOMOTION Corporation Japan
Other
—
Total
¥199

Machinery and Tooling andvehiclesoffice furniture

Constructionin progress

Intangible
assets

Total

¥89

¥9

¥—

¥0

¥271

68

57

0

2

133

30

4

—

0

56

—
¥188

6
¥77

—
¥0

1,347
¥1,3501,353¥1,815

Constructionin progress

Intangible
assets

Total

Thousands of U.S. dollars
2018

Asset group

Location

Use

Touch panel production
TP DivisionJapanfacilities
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$1,610

$838

$85

$—

$0

$2,551

47

640

537

0

19

1,252

207

282

38

—

0

527

—
$1,873—$1,770

56
$725


—
$0

12,679$12,707

12,735$17,084

The Companyʼs assets for business operations are categorized into groups on a division-by-division basis and the Companyʼsrental property on an individual 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 basis.
Of the above asset groups, because the TP (Touch Panel) Division, SMK Manufacturing, Inc. and SMK Electronica S.A. de C.V.
suffered declining trends in net sales and income due to intense price competition in the market, the future cash flows fromtheir asset groups were estimated after revising their business plans. As a result, it was found that they could not generatesufficient earnings to recover the carrying value of the respective asset groups, and therefore their book value was reduced to
the recoverable amounts. As for SMK-LOGOMOTION Corporation, because operating loss has been recorded continually andfuture plan was not certain, its book value was reduced to the recoverable amount.
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 at the end of the second quarter isrecorded as impairment loss. The recoverable amounts of the asset group of the SMK Manufacturing, Inc., SMK Electronica S.A.
de C.V. and SMK-LOGOMOTION Corporation were measured at value in use, and since no future cash flows are expected, thefull amount of the book value of the fixed assets regarding these businesses is recorded as impairment loss.

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% for the years ended March 31, 2017 and 2018,
respectively.
A reconciliation between the statutory tax rate and the effective tax rate for the years ended March 31, 2017 and 2018 was asfollows:

Items such as entertainment expenses permanently non-deductible for tax purposes
Items such as dividend income permanently non-taxable
Change in valuation allowance
Tax credit for R&D expenses
Foreign withholding taxes
Inhabitant tax on per capita basis
Statutory tax rate differences in subsidiaries
Elimination of dividend income
Accumulated surplus of subsidiaries
Decrease of deferred tax assets at fiscal year-end due to the change of tax rate
Other
Effective tax rate

18 ANNUAL REPORT 20182018

Thousands of U.S. dollars
2018

Deferred tax assets:
Inventory write-down disallowed
Accrued bonuses disallowed
Intercompany profit on inventory
Liability for retirement benefits
Allowance for doubtful accounts
Impairment loss
Operating loss carryforwards for tax purposes
Other
Valuation allowance
Deferred tax assets

¥21
167
62
4
33
609
1,246
698
(1,749)
1,095

¥57
213
62
6
46
1,020
1,210
732
(2,324)
1,026

$537
2,005
584
56
433
9,601
11,3896,890(21,875)
9,657

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

(28)
(81)
(50)
(21)
(139)
(342)
(330)
(155)
(1,150)¥(54)

(439)
(81)
(7)
(17)
(134)
(265)
(338)
(124)
(1,408)¥(382)(4,132)
(762)
(66)
(160)
(1,261)(2,494)(3,181)(1,167)(13,253)$(3,596)

Change in deferred tax assets due to reduction in corporate income tax rate
On December 22, 2017, the Tax Cuts and Jobs Act was enacted in the United States, effectively lowering the federal corporate
income tax rate effective for the periods beginning on or after January 1, 2018. Consequently, the federal corporate income tax
rate applicable to the Company’ s consolidated subsidiaries in the U.S. was reduced from 35% to 21%.
As a result, as of and for the year ended March 31, 2018, net deferred tax assets have decreased by ¥219 million ($2,061
thousand) and income taxes-deferred have increased by ¥219 million ($2,061 thousand).

Note 15. Other comprehensive income

Note 14. Income taxes

Statutory tax rate

Millions of yen

2017

2017

30.8%
1.3
(71.1)
19.7
—
12.1
1.7
(9.5)
73.4
(18.9)
—
(1.1)
38.4%

2018

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%

The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive
income for the years ended March 31, 2017 and 2018.
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

2017

¥345

Thousands of U.S. dollars
2018

2018

¥

23

$

216

(98)

(46)

(433)

246
(74)
171

(23)
5
(17)

(216)
47
(160)

(5)

(47)

(3)



—

—

—

(3)
—
(3)

(5)
—
(5)

(47)
—
(47)

(469)

90

847

—

—

—

(469)
—
(469)

90
(20)
69

847
(188)
649

217

478

4,499

(161)

(237)

(2,231)56(16)
39¥(262)

241
(63)
177
¥223

2,268
(593)
1,666
$2,099

ANNUAL REPORT 2018 19

Note 16. Amounts per share
1. Profit (loss) attributable to owners of parent per share of common stock is based on the following information
Basic profit (loss) attributable to owners of parent per share:
Profit (loss) attributable to owners of parent
Profit (loss) attributable to owners of parent not attributable tocommon stockholders
Profit (loss) attributable to owners of parent attributable tocommon stock

Millions of yen

2017¥1,017(288)($2,711)

—

—

—

1,017

(288)

(2,711)

2017

Average number of shares of common stock outstanding during
the yearThousands of U.S. dollars
2018

2018

¥

Thousands of shares

67,0642018

66,106

2. Diluted profit attributable to owners of parent per share of common stock is based on the following information
Millions of yen

2017

Diluted profit attributable to owners of parent per share:
Adjustments

¥—
2017

Increase in number of shares of common stock(share subscription rights)
Description of dilutive securities which were not included in thecalculation of diluted profit attributable to owners of parent per
share of common stock as they have no dilutive effects		

Thousands of U.S. dollars
2018

2018

¥—

Thousands of shares

15
15

2018

—

—
—

Cash and cash equivalents
Time deposits
Notes and accounts receivable,
trade
Other current assets andInvestment securities
Notes and accounts payable, trade
Short-term loans payable
Accounts payable, non-tradeLong-term debt
Derivatives¥10,011106

2017¥10,011106

Difference¥——Book value¥10,482
117

—

2018

Fair value¥10,482
117

Difference¥——Millions of yen

2017Book value$98,663
1,101

Fair value$98,663
1,101

Cash equivalents and time deposits
Notes and accounts receivable,
trade
Other current assets andInvestment securities
Total

¥440

$4,142

Difference$——

14,853

14,853—

15,251

15,251—

143,552

143,552

—

2,063

2,063

—

2,019

2,019

—

19,00419,004—

6,118
11,700
1,407
6,747
2

6,118
11,700
1,407
6,743
2

—
—
—
(3)
—

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

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

—
—
—
(2)
—

64,072
94,381
18,06368,053348

64,072
94,381
18,06368,035
348

—
—
—
(19)
—

2018

Thousands of U.S. dollars
2018

Due within
one year

Due after
one yearthroughfive years

Due after
five years
throughten years

Due within
one year

Due after
one yearthroughfive years

Due after
five years
throughten years

Due within
one year$99,680$—$—

14,853——

15,251——

143,552

—

—

64

—

—

—

—

—

—

—

—

¥24,914¥—¥—¥25,841¥—¥—$243,232

$—

$—

¥9,996¥—¥—¥10,590¥—¥—

Due after
one yearthroughfive years

Due after
five years
throughten years

Note 18. Securities
Information regarding securities classified as other securities at March 31, 2017 and 2018 was summarized as follows:
2017

Securities whose fair value exceeds
their cost
StocksOthersSubtotal
Securities whose cost exceeds theirfair value
StocksSubtotal
Total

Millions of yen

2018

Thousands of U.S. dollars
2018

Fair value

Cost

Unrealized
gain (loss)

Fair value

Cost

Unrealized
gain (loss)

Fair value

Cost

Unrealized
gain (loss)¥1,63264
1,697¥1,051
21
1,073

¥581
42
623

¥1,562—
1,562¥1,055
—
1,055

¥507
—
507

$14,703—
14,703$9,930—9,930$4,772
—
4,772

366
366
¥2,063502
502¥1,575

(135)
(135)
¥487

457
457
¥2,019499
499¥1,554

(42)
4,302
(42)
4,302
¥464 $19,004

4,697
4,697
$14,627

(395)
(395)
$4,367

Unlisted stocks of ¥95 million at March 31, 2017 and ¥191 million ($1,797 thousand) at March 31, 2018 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

Thousands of U.S. dollars
2018Long-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.
20 ANNUAL REPORT 2018¥306

Thousands of U.S. dollars
2018

2018

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

			 Information regarding fair value of financial instruments at March 31, 2017 and 2018 was summarized as follows:
Fair value

Millions of yen

2017

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.

(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 (q).
			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 19. Derivatives themselves do not serve as indicators of market risk involved in derivatives
transactions.

Book value

2.	Financial instruments whose fair value is extremely difficult to determine
Unlisted securities$—

Note 17. Financial instruments

Millions of yen

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 19 Derivatives of the notes to the consolidated financial statements.

2017

Millions of yen

¥210

¥

2018

248

Thousands of U.S. dollars
2018$ 2,334

Information regarding sales of securities classified as other securities for the years ended March 31, 2017 and 2018 were as
follows:
Proceeds from sales of securities
StocksGains on sales
Stocks
Losses on sales
Stocks

2017

Millions of yen

¥430
430
99
99
0
0

2018

¥0
0
0
0
—
—

Thousands of U.S. dollars
2018

$0
0
0
0
—
—

Impairment of investment securities classified as other securities for the years ended March 31, 2017 and 2018 were as follows:
Stocks2017¥—Millions of yen

2018

¥181

Thousands of U.S. dollars
2018$1,704

ANNUAL REPORT 2018 21

Note 19. Derivatives

1. Business segment information

As 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 Companyʼs 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)
Contract amount2017
Forward foreign exchange contracts:
Sell: US$ / Buy: Yen¥1,281
Sell: US$ / Buy: GBP
44
Sell: US$ / Buy: EUR
29
Total¥1,3552018¥1,853
39
78¥1,971

Fair value

2017

2018

¥6 ¥47(0)000¥6 ¥47

Unrealized gain (loss)
2017

2018

Contract
amount2018

Interest rate swaps(Deferral hedge accounting)Interest rate swaps(Exceptional treatment)

2017

2018

¥800
¥3,598

Due after one year

2018

Unrealized
gain (loss)2018¥6 ¥47 $17,442 $442 $442
(0)
0
367
0
0
0
0
734
0
0
¥6 ¥47 $18,552 $442 $442(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 amount

Fair value

Fair value

2018

Thousands of U.S. dollars

Contract
amountDue after
one year

Fair value

2017

2018

2017

2018

¥1,941¥800¥1,872¥(3)¥(9) $18,270$17,620$(85)¥1,938¥1,938¥1,240¥—¥—$11,672$—$18,242

2018

2018

(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 17.

Note 20. Investment and rental property
The profit of investment and rental property for the years ended March 31, 2017 and 2018 amounted to ¥627 million and ¥604
million ($5,685 thousand), respectively.
Information on the fair value of investment and rental property at March 31, 2017 and 2018 was summarized as follows:
2017

Book value Book value
beginning end of theof the yearyear

¥8,875¥8,410

Millions of yen

Fair value¥15,481

Book value Book value
beginning end of theof the yearyear

¥8,410

Thousands of U.S. dollars
2018

2018

¥7,603

Fair value¥14,158

Book value Book value
beginning end of theof the year
year

$79,160

Fair value$71,564 $133,264

1. The fair value represents the acquisition cost less accumulated depreciation.
2. The fair value is mainly based upon the amount appraised by outside independent real estate appraisers.

Note 21. Segment information(Overview)
The reportable 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 three 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.
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.

2017

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

2018

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

2018

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

Millions of yen

Connection
SystemDivision

Reportable Segments
Functional
Components Touch Panel
Division
Division

Subtotal¥23,539—
23,5391,919
13,779¥27,238 ¥11,931——
27,238
11,931(786)
113
14,0706,047¥62,708—
62,7081,246
33,897

Other

Total

¥263 ¥62,971——
263
62,971(616)
630
11,92745,824

Adjustment

Consolidated

￥

—
—
—
—
16,493¥62,971—
62,971630
62,318

2,117

1,131

636

3,885

495

4,381

—

4,381

2,263

1,637

543

4,443

152

4,595

—

4,595

Adjustment

Consolidated

¥—
—
—
—
17,496¥59,786—
59,786
485
61,807

Millions of yen

Connection
SystemDivision

Reportable Segments
Functional
Components Touch Panel
Division
Division¥28,422—
28,422
3,203
16,359¥21,420 ¥9,582 ¥59,424———
21,4209,582
59,424(1,360)(832)
1,011
13,2895,107
34,756

2,235

943

580

2,053

542

442

Subtotal

Other

Total

¥362 ¥59,786——
362
59,786
(526)
485
9,553
44,310

3,759

427

4,187

—

4,187

3,038

121

3,160

—

3,160

Adjustment

Consolidated

$—
—
—
—
164,684$562,745—
562,745
4,565
581,768

Thousands of U.S. dollars

Connection
SystemDivision

Reportable Segments
Functional
Components Touch Panel
Division
Division$267,526—
267,526
30,149
153,982$201,619 $90,192 $559,337———
201,619
90,192559,337(12,801)(7,831)
9,516
125,085
48,070327,146

Subtotal

Other

Total

$3,407 $562,745
—
—
3,407
562,745(4,951)
4,565
89,919417,075

21,037

8,876

5,459

35,382

4,019

39,411—

39,411

19,324

5,102

4,160

28,596

1,139

29,744—29,744

Other is business segments not included in the reportable segments. It includes other parts, leasing, property rental and worker
dispatch businesses.
Adjustment includes corporate assets which are not allocable to the reportable segments.
2. Geographical information(1 ) Net sales
2017

Net sales
2018

Net sales
2018

Net salesJapan¥13,545Japan¥14,368
Japan$135,241

China

Asia

¥16,014
China

China

Other

¥7,459Asia¥14,797

Millions of yen

Other

Fixed assets
2018

Fixed assetsJapan¥15,402

Other$139,279$72,769

China

Asia
PhilippinesJapan¥13,951¥3,198China¥3,383¥591

North America
U.S.A.
Other¥15,071¥508

Thousands of U.S. dollars(2 ) Fixed assets
2017¥22,083

Millions of yen¥7,731

Asia

North America
U.S.A.
Other¥2,344
Asia
Philippines¥2,012

North America
U.S.A.
Other$141,858

EuropeConsolidated¥3,277¥62,971

EuropeIreland
Other

Consolidated

EuropeIreland
Other

Consolidated¥7,301¥6$4,782$68,722

$56

North
America

EuropeConsolidated

¥233

¥411

¥21,970

North
America

EuropeConsolidated¥406¥20,124

EuropeConsolidated$3,822$189,420¥59,786$562,745

Millions of yen

Other

¥379
Millions of yen

Other

¥352

¥18

Thousands of U.S. dollars

2018

Fixed assets
22 ANNUAL REPORT 2018Japan

$131,316

China$31,843

Asia
Philippines$18,938

Other$3,313

North
America$169

ANNUAL REPORT 2018 23

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

Millions of yen

2017

Connection System Division
Functional Components Division
Touch Panel Division
Subtotal
Other
Adjustments and eliminations
Consolidated

¥—
443
—
443
—
—
¥443

Thousands of U.S. dollars
2018

2018

¥—
190
271
461
1,353
—
¥1,815

$—
1,788
2,551
4,339
12,735—$17,084

The amount of other is related to SMK-LOGOMOTION Corporation.
5. Information about the amortization of goodwill and the balance of goodwill

2017

Amortization
Balance

Connection
SystemDivision¥——

Reportable Segments
Functional
Components Touch Panel
Division
Division

¥91
—

¥45
—

Millions of yen

Subtotal

¥137
—

Other

¥—
—

Adjustment¥——Consolidated

¥137
—

Impairment loss on goodwill in the amount of ¥263 million was recognized for the year ended March 31, 2017.
Not applicable for the year ended March 31, 2018.

Note 22. Related party transactions
Significant transactions with related parties for the years ended March 31, 2017 and 2018 were as follows:
2017

Terutaka Ikeda (Supreme corporate adviser)Transactions
Purchase of
Guaranty
golfmoney
membership deposited

¥12

¥—

Millions of yen

Rent

¥14

Balances
Other
Other
current
investments
assets¥14¥1Millions of yen

Paul Evans (Director)
2018

Terutaka Ikeda (Supreme corporate adviser)Transactions
Collectionof loanInterest
receivable
income¥1

Purchase ofgolf
membership

¥—

¥1

Transactions
Guaranty
money
deposited¥—Balances
Other
Long-term
current
loans
assetsreceivable¥1

Millions of yen

Rent

¥14

¥35

Balances
Other
Other
current
investments
assets¥14¥1Millions of yen

Paul Evans (Director)

Transactions
Collectionof loanInterest
receivable
income¥1¥1Balances
Other
Long-term
current
loans
assetsreceivable

¥30

¥2

Thousands of U.S. dollars

2018

Terutaka Ikeda (Supreme corporate adviser)

Purchase ofgolf
membership$—Transactions
Guaranty
money
deposited

$—

Rent

$132

BalancesOthercurrent
Other
assetsinvestments

$132

$9

Thousands of U.S. dollars

Paul Evans (Director)

Transactions
Collectionof loanInterest
receivable
income$9$9Balances
Other
Long-term
current
loans
assetsreceivable

$282

$19

Note 23. Subsequent Events
Change of the number of shares to constitute one unit and consolidation of shares
On April 26, 2018, the Board of Directors resolved to change the number of shares to constitute one unit. In addition, the Boardof Directors resolved to propose an agenda item of the consolidation of shares at the 96th General Meeting of Shareholders on
June 22, 2018. This proposal for the consolidation of shares was approved at the General Meeting of Shareholders. The details of
this are as follows.
(1 ) Purpose of change of the number of shares to constitute one unit and consolidation of shares			Japanese stock exchanges (including the Tokyo Stock Exchange) set a deadline of October 1, 2018 by which the trading
units of all listed companies in Japan must be unified to 100 shares. Therefore, we changed the trading unit of our common

24 ANNUAL REPORT 2018

stock from the current 1,000 shares to 100 shares to respect the spirit of this movement as a company that is listed on theTokyo Stock Exchange. In addition, we will also maintain the level with respect to the price per trading unit of our shares.
Together with this, we will implement a consolidation to turn ten of our shares into one share so that no changes occur inthe number of voting rights of each shareholder.
(2 ) Particulars of consolidation of shares( i ) Type of shares to be consolidated
			 Common shares( ii ) Consolidation ratio			
On October 1, 2018, shares held by shareholders recorded in the latest Shareholder Registry as of September 30,
2018 (actually September 28) will be consolidated at the ratio of 10 shares to 1 share.
(iii) Number of shares reduced through consolidation
Total number of shares issued before consolidation (as of March 31, 2018)
Number of shares reduced through consolidation
Total number of shares issued after consolidation

75,000,000 shares
67,500,000 shares
7,500,000 shares(3 ) Treatment of fractional shares			If any fractional shares arise as a result of the consolidation of shares, pursuant to the provisions of the Companies Act, theCompany will sell all such fractional shares and distribute the proceeds to shareholders having fractional shares inproportion to their respective fractions.
(4 ) Schedule
Resolution of the Board of Directors
Resolution of General Meeting of Shareholders
Effective date of consolidation of shares and change of the number of shares to constitute one unit

April 26, 2018
June 22, 2018
October 1, 2018(5 ) Effects on per share information
			The following provides the per share information of the previous consolidated fiscal year and this consolidated fiscal year
under the assumption that the applicable consolidation of shares was enforced at the beginning of the previous consolidated
fiscal year.
Net assets per share
Net income (loss) per share2017¥4,734.95
151.65Yen

2018¥4,635.03(43.63)

U.S. dollars
2018$43.63(0.41)

Introduction of Board Benefit TrustWe resolved at the Board of Directors’ meeting held on April 26, 2018 to introduce a new share-based compensation plan, a“Board Benefit Trust (BBT)” (the “Plan” ) and the Plan was approved at the 96th General Meeting of Shareholders on June 22,2018 (the “General Shareholders’ Meeting” ).
(1 ) Background and purpose			Our Board of Directors resolved to introduce the Plan, subject to the approval of shareholders at the General Shareholders’Meeting regarding executive compensation, for the purpose of raising awareness of contributing to the improvement of
medium- to long-term business results and increasing corporate value by further clarifying the link between thecompensation of directors (including executive officer, excluding outside directors; “Directors” ) and our share value, and by
Directors sharing with shareholders not only the benefits of share price rises, but also the risks of share price declines. Our
Board of Directors submitted a proposal for the Plan to the General Shareholders’ Meeting.
(2 ) Outline of the Plan
( i )	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 our shares as well as theamount of money equivalent to the market value of our shares (as at the date of the retirement of Directors) through theTrust in accordance with the officer stock benefit rules formulated by us. In principle, Directors will receive benefits, such as
Shares, on their retirement.
( ii ) Scope of the Plan			Directors and executive officers (excluding outside directors and auditors)(iii)	Trust period
The trust period shall be from August 2018 (planned) up to the expiry of the Trust (a specific expiry date has not been			
determined for the trust period of the Trust, and the Trust will continue as long as the Plan continues; the Plan shall beterminated if the Companyʼs shares are delisted, the Officer Stock Benefit Regulations are discontinued, or other similar
circumstances arise.)(iv) Trust amount			Subject to the approval of the Plan at the General Shareholders’ Meeting, the Company shall introduce the Plan to cover theperiod of three fiscal years from the fiscal year ending on March 31, 2019 to the fiscal year ending on March 31, 2021
(hereinafter, this period of three fiscal years is referred to as the “initial applicable period,” and the initial applicable period
and each period of three fiscal years starting after the initial applicable period are referred to as an “applicable period” )and each subsequent applicable period, and the Company shall contribute cash to the Trust as follows as funds for theacquisition of the Companyʼs shares by the Trust, in order to deliver the Companyʼs shares to Directors, etc.
			First, at the start of the trust period described in (iii) above, the Company shall contribute funds to the Trust up to ¥430
million (US$4,047 thousand) as the funds required for the initial applicable period (including ¥192 million (US$1,807
thousand) for Directors).
			In addition, after the initial applicable period, the Company shall continue to make additional contributions to the Trust up to¥430 million (US$4,047 thousand) (including ¥192 million (US$1,807 thousand) for Directors) for each applicable period, inprinciple, until the Plan is terminated. However, if the Companyʼs shares (excluding those that correspond to points granted
to Directors, etc. for each applicable period until the immediately preceding period, that have yet to be delivered to

ANNUAL REPORT 2018 25

Directors, etc.) and cash ( “residual shares, etc.” ) remain in the trust assets when making such additional contributions,the total amount of the residual shares, etc. (for the Companyʼs shares, the fair value on the final day of the immediately
preceding applicable period) and any amount additionally contributed shall be no more than ¥430 million (US$4,047
thousand) (including ¥192 million (US$1,807 thousand) for Directors).
			Furthermore, the Company may contribute funds to the Trust on multiple occasions during an applicable period, including
the initial applicable period, until the cumulative amount of contributions in that applicable period reaches theaforementioned maximum amount for each applicable period. If the Company decides to make additional contributions, theyshall be disclosed in a timely and appropriate manner.
(v )	Method of acquiring the Companyʼs shares and number of shares to be acquired
The Trust shall acquire the Companyʼs shares through trading markets or acquiring treasury shares from the Company,			using the funds contributed as described in (iv) above, and no new shares shall be issued.
			For the initial applicable period, the Trust shall acquire up to 438,000 shares promptly upon the establishment of the Trust.
			The details of the acquisition of the Companyʼs shares by the Trust shall be disclosed in a timely and appropriate manner.
(vi) Method of calculating the number of the Companyʼs shares to be delivered to Directors, etc.
			For each fiscal year, Directors, etc. shall be granted a number of points determined in consideration of their position, level ofachievement of business results, and other factors, based on the Officer Stock Benefit Regulations. However, points shallnot be granted if operating income is negative for that fiscal year. The maximum total number of points to be granted to
Directors, etc. per fiscal year shall be 146,000 points (including 65,000 points for Directors). This number has been
determined by comprehensively taking into consideration of the current level of officer remuneration paid, trends in thenumber of Directors, etc., future expectations, and other factors. The Company has determined it to be appropriate.
			Each point granted to Directors, etc. shall be converted into one share of common stock of the Company when the
Companyʼs shares are delivered as described in (vii) below (however, in case of events such as a stock split, a gratis
allotment of shares or a reverse stock split of the Companyʼs shares after approval and resolution by shareholders at thisShareholders’ Meeting, the maximum number of points, the number of points already granted and the conversion ratio shallbe reasonably adjusted in accordance with the ratio thereof and other conditions).
			In principle, the standard number of points for a Director, etc. when delivering the Companyʼs shares as described in (vii)
below shall be the number of points granted up to the time of retirement (hereinafter, the number of points thus calculated
shall be referred to as the “vested number of points” ).
(vii)	Delivery of the Companyʼs shares
If a Director, etc. retires and he or she satisfies the beneficiary requirements set forth in the Officer Stock Benefit			Regulations, he or she shall receive delivery from the Trust of a number of the Companyʼs shares corresponding to his or
her “vested number of points” determined as set forth in (vi) above after retirement, in principle, by completing theprescribed beneficiary vesting procedures.
(viii) Exercise of voting rights			Voting rights pertaining to the Companyʼs shares held in the Trust account shall not be exercised altogether, in accordancewith the directions of the trust administrator, to ensure neutrality to the Companyʼs management.
(ix)	Treatment of dividends
The Trust shall receive dividends pertaining to the Companyʼs shares held in the Trust account, and they shall be used for			
purposes such as funds for acquiring the Companyʼs shares and trust fees for the trustee. Furthermore, if the Trust is
terminated, any residual dividends, etc. in the Trust shall be distributed to incumbent Directors, etc. at that time inproportion with the respective number of points held, in accordance with the provisions of the Officer Stock Benefit
Regulations.
(x ) At the expiry of the Trust			The Trust shall be terminated if the Companyʼs shares are delisted, the Officer Stock Benefit Regulations are discontinued,
or other similar circumstances arise.
			The Company intends to acquire without consideration all of the Companyʼs shares among the Trustʼs residual assets at its
expiry and retire them by resolution of the Board of Directors. Any cash among the Trustʼs residual assets at its expiry shallbe delivered to the Company after excluding any cash to be delivered to Directors, etc. in accordance with (ix) above.
(xi) Overview of the Trust		1. Name: Board Benefit Trust (BBT)		2. Entrustor: SMK corporation
		3. Trustee: Mizuho Trust & Banking Co., Ltd. (re-entrusted by: Asset Management Trust & Custody Services Bank, Ltd.)		4. Beneficiaries: Retired Directors who meet the beneficiary eligibility requirements provided in the Officer Stock Benefit
Regulations
		5. Trust administrator: A third party with no conflict of interests with us is to be selected		6. Types of trust: Money trust other than cash trusts (third-party benefit trust)		7. Date of conclusion of this trust agreement: August 2018 (planned)
		8. Date on which the funds are entrusted: August 2018 (planned)
		9. Period of the Trust: From August 2018 (planned) until the Trust is terminated (No specific date has been set for thetermination of the Trust; the Trust will continue as long as the Plan continues).

26 ANNUAL REPORT 2018

Report of Independent Auditors
SMK Corporation and Consolidated Subsidiaries

ANNUAL REPORT 2018 27

Officer Introduction

Topics(As of June 22, 2018)

Directors

1 Relocation of SMK Shenzhen Factory

Yoshiyuki Kaku

SMK Electronics (Shenzhen) Co., Ltd. in Shenzhen, China, relocated andstarted operating from March, 2018.
The Shenzhen factory is the SMK Group's main overseas connector
factory, where it produces a wide variety of connectors and harnesses for
the ICT, car electronics and industry market.
The factory relocated to a high-tech business enterprise zone owned
by Shenzhen City, Nanshan District local government, which is locatedapproximately 6km from the old factory. This industrial park comescomplete with welfare facilities such as a kindergar ten, company
dormitory, supermarket, and canteen.
By relocating to a new factory, we will be equipped to handle a wider
range of products.

Mikio Wakabayashi

Director andExecutive Deputy President,
Chief Technology Officer

Director andExecutive Vice President

Yasumitsu Ikeda

President,
Chief Executive Officer andChief Operating Officer

Paul Evans

Toshio Nakamura

Director andExecutive Vice President

Kaoru Ishikawa

Outside Director

Outside Director

Auditors

Auditor andChairman of Auditors’Meeting

Naru Nakashima
Outside Auditor

Ichiro Shimizu
Outside Auditor

Small Coaxial Connector for Automotive
Camera Module

Morikazu Fukui

Shigechika Yanagi
Executive Vice President

Masanobu Ikeo

Executive Vice President

Waterproof FAKRA Connector for Automotive
Devices

USB Type-C™ Receptacle

Outside Auditor

2 Relocation of SMK's China
Technology Development Center

Corporate Executive Officers

Kohei Ohgaki

Section 5, Bldg. 23, Baiwangxin Industrial Area, Songbai Road, Xili Street, Nanshan District,
Shenzhen City, Guangdong, China<Main Products of the Shenzhen factory>

Tetsuya Nakamura

Executive Vice President,
Chief Financial Officer

Location

Tetsuo Hara

Executive Vice President

Hideo Matsumoto Hiroshi Miyakawa
Vice President

Vice President

SMK Electronics Technology Development (Shenzhen) Co., Ltd., in
Shenzhen, China, relocated to the New Jianxing Block in the Jianxing
Science & Technology Building, located in the
Nanshan District, Shenzhen City in June, 2017.
The new office is located on the top floor(9F) of a building in the business district thatis easily accessible by public transport.
With a beautiful view, in the most suitable Entrance
e nvir onme nt f or de sign, e ngine e r s ofDevelopment Center are working on thedevelopment of new products of connectors,
remote control units and touch panels.
Design office

Location
Takemi Ishibashi
Vice President

28 ANNUAL REPORT 2018

Mitsuhiko Goto
Vice President

Mitsuyuki Masubuchi
Vice President

Hiroshi Usami

Vice President,
Chief Information Officer

Atsushi Obinata
Vice President

New Jianxing Block A 901, Jianxing Science & Technology Building, ShaHe West Road, Nanshan
District, Shenzhen City, Guangdong, China

Fumikazu Hata
Vice President

ANNUAL REPORT 2018 29

Corporate Information(As of March 31, 2018)

Corporate Data

Shares and Shareholders

Name

SMK Corporation

Authorized shares

195,961,274

Established

April 3, 1925

Issued shares

75,000,000

Registered

January 15, 1929

Number of shareholders

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)

5,926

Head office5-5, Togoshi 6-chome,
Shinagawa-ku,
Tokyo 142-8511, Japan
Tel: +81-3-3785-1111
Fax: +81-3-3785-1878

Global Network
Domestic Bases

Shinagawa, Tokyo（Head office）
Gate City Ohsaki, Toyama,
Hitachi, Osaka, Nagoya, Ibaraki,
Hokuriku 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（9 Bases）（17 Countries/Areas, 37 Bases）

7,413

Major Shareholders (top ten)

Shares Owned(1,000 shares)

Percentageof Shares (%)

SMK Cooperating Company Share
Holding Association

3,381

5.10

Mizuho Bank, Ltd.

3,287

4.96

Nippon Life Insurance Company

3,241

4.89

Dai Nippon Printing Co., Ltd.

3,200

4.83

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

2,508

3.79

SMK Employees Share Holding
Association

1,800

2.72

Mitsubishi UFJ Trust and Banking
Corporation

1,800

2.72

The Showa Ikeda Memorial Foundation

1,500

2.26

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

1,487

2.24

Meiji Yasuda Life Insurance Company

1,379

2.08

(Notes) 1. SMK holds 8,753 thousand shares of treasury stock, butthese are excluded from the above list. Figures forpercentage of shares are calculated excluding thetreasury stock.
2. The Bank of Tokyo-Mitsubishi UFJ, Ltd. changed its
company name to MUFG Bank, Ltd. on April 1, 2018.

Share ownership by shareholder type (unit : share)
Financial institutions

20,562,685 (27.42%)

Financial instruments dealers

1,222,181 ( 1.63%)

Other entities

10,135,406 (13.51%)

Foreign entities, etc.

8,395,748 (11.19%)

Individuals and others

34,683,980 (46.25%)

Please see our website for detailed IR
information.
The IR Information section of SMK’ s website includes
annual reports and presentation materials. The website
also carries information about SMK’ s products, corporate
data, CSR initiatives, and commitment to the environment.

WebsiteHead Officehttps://www.smk.co.jp/

Gate City Office＊ ECHONETLite is a trademark of the ECHONET CONSORTIUM.
＊ 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: +81-3-3785-1878