ANNUAL REPORT 2013
For the fiscal year ended March 31, 2013

Capacitive Touch Panels

Board to Board Connectors

Micro-USB Connectors

Slide Switches

To Our Shareholders

Financial Highlights

We are obliged to you for your continued support
and good patronage.
We would like to report on the outline andresults of the SMK Group’s businesses for the 91st
fiscal year (from April 1, 2012 to March 31, 2013).
We look forward to your continuing support andencouragement.

Years ended and as of March 31

Thousands of
U.S. dollars

2012

2013

¥ 55,340¥ 54,475(1,166)(853)—(9,070)

(799)

(198)

—

(2,105)¥ 53,883¥ 52,498(2.6)%$ 558,192

28,25728,204(0.2)

299,884

2013

Operating Results
Net sales
Operating income (loss)
Net income (loss)
Yasumitsu Ikeda

June 2013

Percent change
2012/2013

Millions of yen

President and COO(1.6)%$ 579,213

Tetsuya Nakamura
Chairman and CEO

Taking Changes as Opportunities for Growth

Financial Position
Total assets
Total net assets

Overview
During the fiscal year ended March 31, 2013, the global economy remained uncertain with such phenomena as the lingering debt issue inEurope and a decline in growth rates in the emerging nations including China.
The Japanese economy continued to face severe circumstances due to issues such as the persistently strong yen and energy matters.
The electronic components industry followed a steady track, spurred by expanding demand mainly for components for the informationand communication market owing to the rapid spread of smartphones and tablet PCs, as well as for automotive components with highgrowth overseas, and for components for the eco market. However, sales of components for digital home appliances represented byflat-panel televisions remained sluggish.
Under these circumstances, we took diverse belt-tightening measures to strengthen our business structure, such as the curtailment oflabor costs and operating expenses, the restriction on capital investments and the elimination and consolidation of domestic and overseas
works. We also actively launched new products, bolstered our sales capability by increasing sales bases in China, the U.S. and EU andproposed our new technologies and ideas at TEXPO 2012, SMK’s technical exhibitions and mini TEXPO 2012 exhibitions. Nevertheless, the
SMK Group’s consolidated net sales for the year under review declined year on year accompanied by harsh profit results.

Implement new growth strategy andbuild corporate systems to cope with changing markets
Since the beginning of 2013, several bright signs have emerged in the Japanese economy, which is expected to head for recovery,
supported by positive factors such as the U.S. economic recovery and correction of the yen appreciation as well as rebound in Japanesestock prices due to expectations of the economic stimulus policies of the new Abe administration.
Looking ahead, to recover business performance, we will further improve management efficiency and reinforce corporate structure
through continued cost-cutting and downsizing efforts. Furthermore, we will strive to build corporate systems to cope with changing
markets and ensure sustainable growth via the following initiatives: taking a swift approach to those emerging nations with high growthpotential, gaining shares in the communications and car electronics fields, and developing business in new markets such as theenvironment-related and healthcare-related industries.

CONTENTS
1
2
4
5
6
7
8
10
10
11
12
13
20
21
back cover

SMK Philosophy
To Our Shareholders
Financial Highlights
Overview of Consolidated Results by Division
SMK’s New Lineup
TopicsFinancial Section
Financial Review
Consolidated Balance Sheets
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors
Officer Introduction
Corporate Information

SMK is committed to the advancement of mankind throughdevelopment of the information society, by integrating its current
technological strengths and creating advanced technology.

Yen

U.S. dollars

Per Share Data
Net income (loss)Basic¥ (11.04)

Cash dividends

¥

6.00

(2.78)—%$(16.7)

5.00

0.05

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥94.05 = U.S. $1.00.

Operating income (loss)

Net sales
Millions of yen

Net income (loss)

Millions of yen

90,000Millions of yen
2,754

3,000

1,862

2,000

2,479

72,742

1,037

64,371

61,91455,34060,00054,475

1,000
1,500
0

238
30,000

(198)

0

(799)

(1,000)(853)(1,620)(1,166)
0

2009

2010

2011

2012

2013

(1,500)Total assets / Total net assets
Millions of yen
60,00058,168

Total assets
56,11353,883

2010

2011

2012

2013

52,498(2,000)

Basic net income (loss) per share

2009

2010

2011

2013

Cash dividends per share
10

25.19

30

9.00

9.00
8.00

14.14

8
6.00

40,000Contribute to society with pride and confidence.
Be customer-oriented, with zeal and sincerity.
Challenge courageously for higher goals without fear of failure.
Trust and respect each other for a brighter working atmosphere.
Keep an open mind, and view SMK from a global perspective.

2012

Yen

Yen

Total net assets

53,0592009

15

Action Guidelines
1
2
3
4
5

(0.03)

29,07931,127

29,862

28,257

6
28,2040(2.78)

20,0005.00

4(11.04)(15)2(21.68)

0

2009

2010

2011

2012

2013

(30)

2009

2010

2011

2012

2013

0

2009

2010

2011

2012

2013

ANNUAL REPORT 2013 1

Overview of Consolidated Results by Division(Year ended March 31, 2013)

The many different electronic components that SMK
produces are widely used by electronics manufacturers inand outside Japan. The markets for these components canbe broadly classified into seven markets: the communication market, the information market, the home appliancemarket, the industry market, the car electronics market, theaudiovisual market and the eco market.
Three divisions, namely the Connection System (CS)Division, the Functional Components (FC) Division and the
Touch Panel (TP) Division, as well as the Research &Development Center, are responsible for developing
products that continually meet market requirements in thewide range of markets outlined above. The three divisions
handle operations ranging from product planning anddesign to mass production, whereas the Research &Development Center is primarily in charge of designing anddeveloping products in new and other fields.
In this section, we present an overview of our results
achieved in each of the three divisions in the fiscal year
under review.

Connection System
Division

Major Products
RF Coaxial connectors
FPC connectors
Board to Board connectors
Jacks

Functional Components
Division

Major Products
Remote controls
Switches
Bluetooth® units
Camera modules

Touch Panel
Division¥ 9,923 Million

Other¥ 251 Million
0.5%

18.2%
Net sales

Functional
Components
Division¥ 18,803 Million¥ 54,475
MillionConnection
SystemDivision
46.8%¥ 25,498 Million

Touch Panel
Division

34.5%
Major Products
Resistive touch panels
Capacitive touch panels
Optical touch panels

In the IT market, our mainstay, the adoption of our connectors favorablyincreased for new smartphones and tablet device models by leading
manufacturers, which are our primary customers, and sales increased for
manufacturers in the Chinese cultural zone. In addition, along with thecontribution of the steady expansion of automotive connectors, sales grew
remarkably compared with the previous year due to the extended adoptionof photovoltaic modules for mega solar systems in the environment field.
However, the serious impact of the plunge in sales in the audiovisual (AV)market and unsatisfactory sales of mobile game consoles, as well as
sluggishness at several major customers in the communication market,
kept us from achieving our target.
We will strive to develop new products and product series in our priority
markets including the information and communication, automobile andenvironmental markets.

Net sales

Sales remained stagnant, reflecting a rapid decline in sales of digital home
appliances with flat-panel televisions from the second half of the year anddeclines in the market shares of smartphone manufacturers for which SMK
products are adopted. However, after orders received reached bottom
during the second quarter, sales of our functional components for air
conditioners and of new products for set-top boxes in Western countries
rallied in the fourth quarter, contributing to sales and creating a momentum
for an undertone of recovery. Nevertheless, overall sales were weak.
Going forward, we will strive to expand sales particularly for thepromising home appliance and air-conditioner sector, which draws
attention from an energy-saving viewpoint, the audiovisual sector centering
on set-top boxes, and the vehicle-mounted and eco-friendly sectors.

Net sales

27,71225,49823,242

22,63920,00010,000

0

2010

2011

2012

2013

Millions of yen

30,00030,08027,521
20,00022,04918,803

10,000

0

Sales of our touch panels for the automotive products market werefavorable with strong demand for touch panels for car navigation systems
supported by vigorous inquiries from North American car manufacturers.
Meanwhile, demand for optical touch panels for ATMs expanded in the
Chinese market and sales grew steadily. However, sales of touch panels
for the smartphone market dropped considerably due to intensified pricecompetition.
We will strive to expand sales further for the automotive products
market, where high growth in demand is anticipated, and promote sales
especially of capacitive touch panels for the smartphone and tablet device
markets.

Millions of yen

30,000

2010

2011

2012

2013

Net sales

Millions of yen

12,00010,418
9,923
9,000

8,952
8,350

6,000

3,000

0

2010

2011

2012

2013

In addition to net sales for the divisions presented above, net sales of ¥251 million were earned by “Other” businesses in the fiscal year under review.
Net sales for the Research & Development Center were included in net sales for “Other” businesses.

2 ANNUAL REPORT 2013

ANNUAL REPORT 2013 3

SMK’s New Lineup
Research & Development Center
Touchless operation panel

In recent years, touch
panels have been
increasingly employedin various equipment
and devices such as
car navigation
systems and PCs,
and the need fortouchless operation is Applications:
Car navigation systems, PCs, game controllers
and medical equipment
increasing from asafety or hygiene viewpoint. This product enables
touchless operation without a camera or an infrared
ray sensor by ensuring high sensitivity using an
original capacitance detection method.
We will expand our relevant businesses throughcontinued R&D efforts toward the commercializationof touchless operation panels, of which the evolution
for various applications is forecast.

FC Division
Car-mounted camera module with
1 million pixels (MDC 100 Series)

The current standard
for car-mounted
cameras is 0.3 million
pixels. We havepioneered, ahead ofour global
competitors, thedevelopment andApplications:mass-production of
Car-mounted view cameras, sensing cameras
car-mounted camera and security cameras
modules with one million pixels to comply with alarge display and sophisticated sensing function. The
product outputs digital signals via an LVDS interface.
As the product uses a CMOS sensor, high-dynamic
range image is produced, according to which
images at both high- and low-illuminance spots (e.g.,
entrances/exits of tunnels) can be simultaneously
captured.
4 ANNUAL REPORT 2013

TopicsCS Division
Connector for LED lighting (COB type)
LT-10/LT-11 Series

We have extended
the product lineup by
adding thesereceptacles for the
LT-10 series
COB-type LED
package as part of
the LED lighting for
LT-11 series
which a high energyApplications:saving effect is
Lighting devices overall such as lighting devices
for high-ceiling lamps and street lamps using the
expected.
COB-type LEDs
This productconsists of a lower cover and an upper cover toefficiently dissipate heat from the LED to the heatsink, considerably improving assembling operability
and reliability. We will continue to promote productdevelopment in response to market needs.

TP Division
Odd-shaped capacitive touch panels

The outer shape oftouch panels is
usually quadrangular,
but recently a variety
of profiles have beenrequested from theviewpoint ofdifferentiation indesign, for example, Applications:
Smartphones, tablet devices and car navigation
making gentle curbs systems
at the four corners and piercing at some fixed points.
To meet such market requests, we have establishedtechnology that allows us to create different outerforms via a special chemical process, ensuring
further degree of freedom in profile design ofcapacitive touch panels.

1 Exhibition Information
TEXPO 2012 — mini TEXPO 2012
From June 6 (Wednesday) to June 8 (Friday) 2012, we held SMKTEXPO 2012, SMK’s technical exhibition at Garden City Shinagawa,Tokyo. Our first exhibition was held in 1985, and this was the eighth
such event. With a theme of “Navigating smartly for the people, thefuture and the environment,” we exhibited approximately 300 items
consisting of new products and our latest technologies. Many
demonstrations were shown, and we received high evaluations fromamong the 2,430 guests attending the event.

For the period from July 2012 to March 2013,
we held mini TEXPO 2012 exhibitions by directly
visiting business partners both at home andoverseas to introduce our new products and technologies, which had beenpresented at TEXPO 2012. A total of 93 exhibitions were held in Japan andoverseas, and our latest products and technological developments were viewed
by approximately 4,500 guests.

2 Integrating the operational bases in Mexico,
one-site operation has started
We have moved the location of the production sites of
SMK Electronica S.A. DE C.V. in Mexico, and aconsolidated plant started operation in January 2013.
Previously, three plants were located at two sites
in Mexico. They were moved and integrated into a
new plant located about 10 km from the previous
production bases which enables one-site operation
for more efficient operational management.
In addition, the total space of the plant was
expanded from 13,962 m2 to 14,790 m2, and thequality level and the in - house production were
improved in order to accommodate the possible
expansion of production scale due to future
increases in demand.
This new Mexican plant is aimed at not only thedemand in North America but also the rising needfor digital home appliances, automobiles and otheritems in the Central and South American markets,

SMK Electronica S.A. DE C.V.
TIJUANA, MEXICO

for which market expansion is highly expected.
Going forward, we will endeavor to provide
customers in the North, Central and South American
markets with our best products in a smooth andflexible manner through initiatives from this locallyunified base for both manufacture and sales.
ANNUAL REPORT 2013 5

Financial Section

Financial Review
SMK’s net sales for the year ended March 31, 2013
decreased 1.6% year on year to ¥54,475 million(US$579,213 thousand), whereas an operating lossof ¥853 million (US$9,070 thousand) and a net loss

Five-Year Summary

Total net assets(As of March 31)

Millions of yen
32,00031,12731,000of ¥198 million (US$2,105 thousand) wererecorded, on a consolidated basis.

SMK Corporation and Consolidated Subsidiaries

29,86230,00029,000Net Sales

Thousands of
U.S. dollars

Millions of yen
Years ended andas of March 31

2009

2010

2011

2012

2013

2013

Although the global economy and the Japanese economy remained
uncertain and harsh on the whole, the electronic components industry
experienced steady demand mainly for components in the informationand communication market, supported by the rapid popularization ofsmartphones and tablet PCs, as well as for components forautomotive and environment-friendly products where growth isconsiderable overseas.
As a result, consolidated net sales were ¥54,475 million(US$579,213 thousand), down 1.6% year on year.

29,07928,20428,25728,000

0

2009

2010

2011

2012

2013

Return on equity (ROE)(Years ended March 31)%
9Operating Results

Operating Income (Loss)

Net sales

Despite our efforts to strengthen profitability by introducing new
products, expanding sales through a reinforced sales structure,
reducing costs, consolidating manufacturing bases and cutting fixed
costs, in the face of a decline in profits attributable to decreased net
sales from worsening market conditions and a rise in production
costs, an operating loss of ¥853 million (US$9,070 thousand) wasrecorded.

Operating income (loss)
Net income (loss)¥ 72,742¥ 64,371¥ 61,914¥ 55,340¥ 54,475$ 579,213

238

2,479

2,754

(1,166)(853)(9,070)(1,620)

1,862

1,037

(799)

(198)

(2,105)

Financial Position
Total assets
Total net assets

Net Income (Loss)¥ 58,168¥ 56,113¥ 53,059¥ 53,883¥ 52,498$ 558,192

29,07931,127

29,862

28,25728,204

299,884

Yen

U.S. dollars

Total Assets / ROA¥ 392.15¥ 420.07¥ 408.12¥ 392.59¥ 394.81$

4.20

Net income (loss)
Basic
Cash dividends

6
3.4
3

0
(0.7)

(3)

(2.8)
(5.3)

(6)

2009

2010

2011

2012

2013

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

Per Share Data
Total net assets

A net loss of ¥198 million (US$2,105 thousand) was recorded,
affected by negative factors such as the posting of deferred income
taxes through a partial reversal of deferred tax assets despite foreignexchange gains resulting from recovery of the U.S. economy and therecent depreciation of the yen in anticipation of the economic policiesof the new Abe administration.

6.2

4

3.3

As of March 31, 2013, total assets were ¥52,498 million (US$558,192
thousand). ROA stood at negative 0.4%.

1.9
2(21.68)

25.19

14.14

(11.04)(2.78)(0.03)

9.00

8.00

9.00

6.00

5.00

0.05

Total Net Assets / ROE
As of March 31, 2013, total net assets were ¥28,204 million(US$299,884 thousand). ROE stood at negative 0.7%.

0
(0.4)

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥94.05 = U.S. $1.00.

Cash FlowsNet cash provided by operating activities amounted to ¥5,310 million(US$56,459 thousand), net cash used in investing activities totaled¥3,402 million (US$36,172 thousand) and net cash used in financing
activities was ¥1,360 million (US$14,459 thousand).

6 ANNUAL REPORT 2013

(1.5)
(2)
(2.6)

(4)

2009

2010

2011

2012

2013

ANNUAL REPORT 2013 7

Consolidated Balance Sheets

Consolidated Balance SheetSMK Corporation and Consolidated Subsidiaries
As of March 31, 2012 and 2013

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

Assets2012

2013

Liabilities and net assets

2013¥8,390¥8,631$91,770

83

82

872

15,223

14,551

154,716

(45)

(53)

(564)

Inventories (Note 3)

5,473

5,466

58,118Deferred tax assets (Note 8)

1,149

472

5,019

Other current assets (Notes 15 and 19)

3,213

3,484

37,04433,48632,633346,975

Time deposits (Note 15)
Notes and accounts receivable, trade (Note 15)
Allowance for doubtful accounts

2012

2013

2013

¥9,675¥7,141$75,928

3,283

3,194

33,961

Accrued income taxes

94

370

3,934

Accrued bonus

630

476

5,061

Accounts payable, non-trade (Note 15)

7,517

6,657

70,781Other current liabilities

1,357

1,326

14,09922,556

19,164

203,764

2,483

4,347

46,220Accrued employees’ retirement benefits (Note 13)

21

162

1,722

Accrued directors’ and officers’ retirement benefits

119

143

1,520

Other long-term liabilities

447

478

5,082

3,070

5,130

54,544

7,996

7,996

85,019

Capital surplus

12,345

12,345

131,260

Retained earnings

14,785

14,154150,494

Treasury stock (Note 11)(3,554)(3,697)(39,309)

31,57230,798327,464

147

70

744

(3,499)(2,742)(29,155)(3,352)(2,672)(28,411)

Subscription rights to shares (Note 18)

32

78

831

Minority interests

5

—

—

28,25728,204

299,884¥53,883¥52,498$558,192

Current liabilities

Current assets
Cash and cash equivalents (Note 15)

Short-term loans payable (Notes 4 and 15)
Notes and accounts payable, trade (Note 15)

Long-term liabilities
Long-term debt(Notes 4 and 15)

Investments and long-term loans
Investment securities (Notes 12 and 15)

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

2,212

1,908

20,287Long-term loans receivable

102

141

1,499

Other investments (Note 19)

1,044

619

6,582

Allowance for doubtful accounts

(117)

(112)

(1,191)

3,241

2,556

27,177

Net assets
Shareholders’ equity (Note 10)
Common stock

Property, plant and equipment (Notes 4, 7 and 16)
Land

4,418

4,358

46,337

Authorized : 

Buildings

17,242

17,055

181,340

Issued and outstanding : 79,000,000 shares

Machinery and vehicles

16,975

17,132

182,158

Tooling and office furniture

20,716

21,174225,136

19

357

3,796

59,37060,076

638,767(43,171)(43,370)(461,138)

16,19916,706

177,629

Construction in progressLess-accumulated depreciation

195,961,274 shares

Accumulated other comprehensive income
Net unrealized gains (losses) on other securities
Foreign currency translation adjustments

Other assets
Deferred tax assets (Note 8)

567

290

3,083

Intangible assets

390

313

3,328

957

603

6,411

¥53,883¥52,498$558,192

Total assets

Total liabilities and net assets

See accompanying notes to consolidated financial statements.

8 ANNUAL REPORT 2013

ANNUAL REPORT 2013 9

Consolidated Statement of Income

Consolidated Statement of Changes in Net Assets

SMK Corporation and Consolidated Subsidiaries

SMK Corporation and Consolidated Subsidiaries

Years ended March 31, 2012 and 2013

Years ended March 31, 2012 and 20132012

Net sales (Note 17)
Cost of sales (Notes 3 and 5)
Selling, general and administrative expenses (Notes 5 and 6)
Operating income (loss) (Note 17)¥55,340
48,564
7,942(1,166)

Millions of yen

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

2013

2013

¥ 54,475
47,0478,281(853)$ 579,213
500,223
88,060(9,070)Shareholders’ equity

Number ofshares ofcommon stock

Balance at April 1, 2011

Commonstock

CapitalsurplusRetainedearnings

Accumulated other comprehensive income
Net unrealized
Total gains (losses)
Treasury shareholders’on otherstock
equitysecurities

Total
Foreign accumulated
currency
other Subscription
rights totranslation comprehensive
sharesadjustments
incomeMinority
interests

Total net
assets79,000,000 ¥7,996 ¥12,353 ¥15,876 ¥(3,308) ¥32,917 ¥266 ¥(3,449) ¥(3,183) ¥123 ¥5 ¥29,862

Other income
Interest and dividend income
Rent income
Foreign exchange gain, net
Gain on sales of fixed assets
Gain on sales of investment securities (Note 12)
Gain on reversal of subscription rights to shares
Other
Total other income

67
590
—
45
106
121
241
1,170

73
718
1,963
144
352
—
203
3,453

776
7,634
20,872
1,531
3,743
—
2,158
36,714

Cash dividends paid

(292)

(292)

—

(292)

Net income (loss)

(799)

(799)

—

(799)

(263)

(263)

—

(263)

17

9

—

9

Other expenses
Interest expense
Rent expense
Foreign exchange loss, net
Loss on disposal of fixed assets
Loss on liquidation of subsidiaries and affiliates
Special retirement benefit expenses
Loss on compensation for products
Loss on impairment of fixed assets (Note 7)
Other
Total other expenses

152
309
246
35
23
—
102
—
114
981

127
294
—
256
108
99
—
200
169
1,253

1,350
3,126
—
2,722
1,148
1,053
—
2,127
1,797
13,323

Total changes

(977)

1,347

14,321

263
(441)
(799)
0
¥(799)

488
1,062
(203)
(5)
¥ (198)

5,189
11,290(2,158)(53)$ (2,105)

Income (loss) before income taxes and minority interests
Income taxes (Note 8)
Current
DeferredIncome (loss) before minority interests
Minority interests
Net income (loss)

Disposition of treasury stock(8)

Net changes in items otherthan shareholders’ equity

—

(119)

(50)

(169)

(91)

0

(260)

—

—

(8)

(1,091)(246)(1,345)

(119)

(50)

(169)

(91)

0

(1,605)

Balance at March 31, 2012 79,000,000

7,996

12,345

14,785(3,554)

31,572147(3,499)(3,352)32

528,25779,000,000

7,996

12,345

14,785(3,554)

31,572147(3,499)(3,352)32

528,257

Balance at April 1, 2012
Cash dividends paid

(433)

(433)

—

(433)

Net income (loss)

(198)

(198)

—

(198)

(143)

(143)

—

(143)

0

0

—

0

Acquisition of treasury stock
Disposition of treasury stock(0)

Net changes in items otherthan shareholders’ equity
Total changes

—

—

(0)

(631)

(143)

—

(77)

757

680

46

(5)

721

(774)

(77)

757

680

46

(5)

(53)

Balance at March 31, 2013 79,000,000 ¥7,996 ¥12,345 ¥14,154 ¥(3,697) ¥30,798 ¥70 ¥(2,742) ¥(2,672) ¥78 ¥— ¥28,204

U.S. dollars(Note 2)Yen

Per share data
Total net assets
Net income (loss)
Basic
Cash dividends

Acquisition of treasury stock¥392.59¥394.81$4.20(11.04)
6.00(2.78)
5.00(0.03)
0.05

Thousands of U.S. dollars (Note 2)

Shareholders’ equity

Accumulated other comprehensive income

See accompanying notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income

Commonstock

SMK Corporation and Consolidated Subsidiaries
Years ended March 31, 2012 and 2013

Balance at April 1, 2012
Millions of yen

2012

Income (loss) before minority interests
Other comprehensive income (Note 9)
Net unrealized gains(losses) on other securities
Foreign currency translation adjustments
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to:Shareholders of the Company
Minority interests¥(799)2013¥CapitalsurplusRetainedearnings

Net unrealized
Total gains (losses)
Treasury shareholders’on otherstock
equitysecurities

Total
Foreign accumulated
currency
other Subscription
rights totranslation comprehensive
sharesadjustments
incomeMinority
interests

Total net
assets$85,019 $131,260 $157,204 $(37,788) $335,695 $1,563 $(37,204) $(35,641) $340 $53 $300,447

Thousands of
U.S. dollars(Note 2)

Cash dividends paid

(4,605)(4,605)—(4,605)

Net income (loss)(2,105)(2,105)—(2,105)2013

Acquisition of treasury stock(1,521)(1,521)—(1,521)

0

0

—

0

(203)

$ (2,158)

(119)
(50)
(169)
¥(968)

(77)
757
680
¥477

(819)
8,049
7,230
$5,072¥(968)
0

¥482
(5)

$5,125(53)

Disposition of treasury stock(0)

Net changes in items otherthan shareholders’ equity
Total changes
Balance at March 31, 2013—

(0)

(6,710)(1,521)

—

(819)

8,049

7,230

491

(53)

7,668

(8,231)

(819)

8,049

7,230

491

(53)

(563)

$85,019 $131,260 $150,494 $(39,309) $327,464 $744 $(29,155) $(28,411) $831 $— $299,884

See accompanying notes to consolidated financial statements.

10 ANNUAL REPORT 2013

ANNUAL REPORT 2013 11

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements

SMK Corporation and Consolidated Subsidiaries

SMK Corporation and Consolidated Subsidiaries

Years ended March 31, 2012 and 2013

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

2012

Cash flows from operating activities
Income (loss) before income taxes and minority interests
Depreciation and amortization
Loss on impairment of fixed assets
Amortization of goodwill
Increase (decrease) in accrued directors’ bonus
Increase (decrease) in accrued employees’ retirement benefits(Increase) decrease in prepaid pension costs
Increase (decrease) in accrued directors’ and officers’ retirement benefits
Interest and dividend income
Interest expense
Gain on reversal of subscription rights to shares
Loss on disposal of fixed assets
Loss on liquidation of subsidiaries and affiliates
Special retirement benefit expenses
Loss on compensation for products(Increase) decrease in notes and accounts receivable, trade(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable, trade
Increase (decrease) in accounts payable, non-trade
Other
SubtotalInterest and dividends received
Interest paid
Compensation for products paid
Income taxes paid
Income taxes refunded
Payments of liquidation of subsidiaries and affiliates
Payments of special retirement benefit expenses
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 sale of fixed assets
Purchases of intangible fixed assets
Proceeds from sale 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 sale of treasury stock
Dividends paid
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
12 ANNUAL REPORT 2013

2013

2013

¥(977)
3,664
—
184
(36)
6
522
(7)
(67)
152
(121)
35
—
—
102
(339)
196
(166)
(121)
(275)
2,752
68
(147)
(246)
(644)
218
—
—
2,001

¥1,347
3,439
200
110
—
138
410
25
(73)
127
—
256
108
99
—
2,520
541
(2,236)
(925)
(355)
5,731
79
(129)
—
(181)
16
(107)
(99)
5,310

$14,322
36,566
2,127
1,170
—
1,467
4,359
266
(776)
1,350
—
2,722
1,148
1,053
—
26,794
5,752(23,775)(9,835)(3,773)60,937840(1,372)—(1,925)170(1,138)(1,053)56,459(138)
118(3,926)
130
(31)
87
(145)
112
29
(3,764)(65)
77(3,823)
439
(62)
38
(112)
70
36
(3,402)(691)
819(40,649)
4,668
(659)
404
(1,191)
744
383(36,172)

3,261
816
(840)
(262)
3
(292)
2,686
84
1,007
7,383
¥ 8,390

(800)
2,940
(2,928)
(142)
0
(430)
(1,360)
(307)
241
8,390
¥ 8,631(8,506)
31,260(31,132)(1,510)1(4,572)(14,459)(3,266)
2,562
89,208$ 91,770

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 to application and disclosure requirements of International Financial Reporting Standards, and arecompiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan. For the purpose of thisdocument, 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 throughmajority 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 weretentatively closed as of March 31 and the necessary adjustments for consolidation 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 net income
includes the Company’s equity in the current net income 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 cost over the underlying net assets at the date ofacquisition 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: 26
			The remaining 2 subsidiaries which are unconsolidated are deemed immaterial and, accordingly, their results of operations had no significant effect on the consolidated financial
statements.
( d ) Application of equity method of accounting			Number of affiliated companies accounted for by the equity method: 1			The 2 unconsolidated subsidiaries are deemed immaterial. As the effect of their results of operations on the consolidated financial statements would be insignificant, the equity
method of accounting has not been applied to these companies.
( e ) Translation of foreign currencies
			All asset and liability accounts of foreign subsidiaries and affiliates are translated into Japanese yen at the appropriate year-end exchange rates . Shareholders’ equity, which istranslated 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.
( 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
			 The following inventories are measured principally by their respective 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( h ) Securities
			 Securities are classified into three categories depending upon the holding purpose and accounted for as follows:			i) trading securities, which are held for the purpose of earning capital gains in the short-term, are stated at fair market value, with related gain and loss realized on disposal andunrealized gain and loss from market fluctuations recognized as gain or loss in the statement of income in the year of the change; ii) held-to-maturity debt securities, which acompany has the positive intent to hold until maturity, are stated at amortized cost; and iii) other securities, which are not classified as either of the aforementioned categories
but are stated at fair market value if such value is available, or, if not, at moving-average cost, with unrealized gain and loss, net of the applicable taxes, reported as a separate
component of net assets. Realized gain and loss on sales of such securities are calculated based on the moving-average cost.
( i ) Derivatives
			 Derivatives are stated at fair value.
( j ) Property, plant and equipment and depreciation
			Property, plant and equipment is stated at cost. Depreciation of property, plant and equipment is calculated principally by the declining-balance method for the Company andits domestic subsidiaries, and by the straight-line method mainly for foreign subsidiaries.
( k ) Intangible assets
			 Amortization of intangible assets is calculated by the straight-line method. Software for own use is amortized based on the utilizable period (5 years).
			 Goodwill is amortized by the straight-line method over 5 years.
( l ) Leases
			 Finance leases which are deemed to transfer the ownership of the leased assets to the lessee are capitalized and depreciated over their lease term with no residual value.
( m ) Allowance for doubtful accounts
			The allowance for doubtful accounts is provided at the amount of estimated uncollectable accounts, based on individual collectability with respect to identified doubtfulreceivables and past experience of doubtful receivables.
( n ) Accrued bonus			Accrued bonus 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.
( o ) Accrued directors’ bonus
			 Accrued directors’ bonus are provided on the estimate of the amounts to be paid in the future by the Company based on an accrual basis at the balance sheet date.
( p ) Accrued employees’ retirement benefits			To cover projected employee retirement benefits, the Company and consolidated subsidiaries record the estimated obligations at the end of the fiscal year based on projected
year-end benefit obligations and plan assets, as adjusted for unrecognized actuarial gains or losses and unrecognized prior service cost.
			Unrecognized actuarial gains or losses are amortized in the year following the year in which the gains or losses are incurred by the straight-line method over the period of 5
years which is within the average remaining years of service of the employees.
( q ) 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.
( r ) Hedge accounting( 1 ) Method of hedge accounting
			 The exceptional method of hedge accounting is applied for the transactions of interest rate swaps, in cases meeting certain conditions.
( 2 ) Hedge instrument and hedged item
			 Hedge instrument: interest rate swap
			 Hedged item: interest rate for long-term debt subject to interest rate fluctuations.
( 3 ) Hedge policy
			 The Company uses interest rate swaps to avoid risks from interest rate fluctuations on borrowings, only when approved by the management.
( 4 ) Assessment of hedge effectiveness			 As the exceptional method is applied for interest rate swap, the assessment of hedge effectiveness is omitted.
( s ) Income taxes
			Deferred income taxes are recognized based on the differences between financial reporting and the tax bases of the assets and liabilities and are calculated using the enacted
tax rates and laws which will be in effect when the differences are expected to reverse.
( t ) Per share information
			Basic net income per share is computed based on the net income available for distribution to shareholders of common stock and weighted-average number of shares ofcommon stock outstanding during the year. Diluted net income per share is computed based on the net income available for distribution to shareholders and weighted-average
number of shares of common stock outstanding during each year after giving effect to the dilutive 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 and the number of shares of common stock outstanding at
the balance sheet date. Cash dividends per share shown for each period in the consolidated statement of income represent the dividends applicable to the respective period.

ANNUAL REPORT 2013 13

( u ) Standards issued but not yet effective			On May 17, 2012, the Accounting Standards Board of Japan (ASBJ) issued “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26) and “Guidance on
Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25), which replaced the Accounting Standard for Retirement Benefits that had been issued by the BusinessAccounting Council in 1998 with an effective date of April 1, 2000 and the other related practical guidance, being followed by partial amendments from time to time through 2009.
			This standard and related guidance are effective as of the end of fiscal years beginning on or after April 1, 2013. The Company is currently evaluating the effect thesemodifications will have on its consolidated results of operations and financial position.
( v ) Change in method of accounting			In accordance with an amendment to the Corporation Tax Law effective April 1, 2012, the Company and its domestic consolidated subsidiaries have changed their depreciation
method for property, plant and equipment acquired on or after April 1, 2012, other than certain buildings, to reflect the methods prescribed in the amended Corporation Tax
Law. The impact of this change on net loss for the year ended March 31, 2013 was minor.

Note 7. 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 an of the asset exceeds its recoverable amount being the higher of the discounted future net cash flows or net
realizable value.
For the year ended March 31, 2013 an impairment loss was recognized for the following assets.
Millions of yen
2013

Asset group
Functional components

LocationJapan

Use
Remote controls/Switch/Unit production facilities

Machinery andvehicles¥118

Buildings¥46

Tooling andoffice furnitures¥29

Software
¥7

Total
¥200

Software
$74

Total
$2,127

Note 2. U.S. dollar amounts
Thousands of U.S. dollars

The U.S. dollar amounts are stated solely for the convenience of the reader at the rate of U.S.$1.00 = ¥94.05, the approximate rate of exchange at March 31, 2013. The translation
should not be construed as a representation that the Japanese yen amounts actually represent, have been or could be converted into U.S. dollars at that or any other rate.

2013

Asset group
Functional components

Note 3. Inventories

LocationJapan

Use
Remote controls/Switch/Unit production facilities

Machinery andvehicles$1,256

Buildings$489

Tooling andoffice furnitures$308

Inventories as of March 31, 2012 and 2013, consisted of the following:
Millions of yen

Thousands of U.S. dollars

2012

Finished products
Work in process
Raw materials and supplies
Total¥2,749539
2,185¥5,473

2013

2013

¥2,805731
1,930¥5,466$ 29,825
7,772
20,521$58,118

The write-downs of inventories resulting from decreased profitability for the years ended March 31, 2012 and 2013 were as follows:
Millions of yen

Thousands of U.S. dollars

2012

Cost of sales

¥205

2013

2013

¥311

$3,307Note 4. Short-term loans payable and long-term debt
Short-term loans payable and long-term debt as of March 31, 2012 and 2013, consisted of the following:
Short-term loans payable

Millions of yen

Thousands of U.S. dollars

2012

Average interest rate on short-term loans payable, principally from banks, is 0.67%
SecuredUnsecuredTotal¥1,293
4,329¥5,622Long-term debt
Average interest rate on long-term debt, principally from banks, is 1.23%
SecuredUnsecured
Less: portion due within one year
Total

2013

2013

¥1,364
3,576¥4,940$14,503
38,022$52,525

Millions of yen

Thousands of U.S. dollars

2012

2013

2013

¥3,786
2,750(4,053)¥2,483¥4,160
2,388(2,201)¥4,347$44,232
25,391(23,403)$46,220

The assets pledged as collateral for short-term and long-term debt as of March 31, 2012 and 2013 were summarized as follows:
Millions of yen
2012

Property, plant and equipment-book value¥2,277

Thousands of U.S. dollars
2013

2013

¥2,206$23,456

The aggregate annual maturities of long-term debt (including current portion) outstanding as of March 31, 2013 were summarized as follows:Year ending March 31,
2014
2015
2016
2017
2018 and thereafter
Total

Millions of yen¥2,201
632
1,308
1,285
1,122
¥6,548

Thousands of U.S. dollars$23,403
6,720
13,907
13,663
11,930$69,623

Note 8. Income taxes
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 40.5% and 37.9% for the years ended March 31, 2012 and 2013, respectively.
A reconciliation between the statutory tax rate and the effective tax rate for the year ended March 31, 2013 was as follows. A reconciliation for the year ended March 31, 2012 isomitted because a loss before income taxes and minority interests was recorded:2012

Statutory tax rate
Items such as entertainment expenses permanently non-deductible for tax purposes
Items such as dividend income permanently non-taxable
Change in valuation allowance
Inhabitant tax on per capita basis
Statutory tax rate differences in subsidiaries
Elimination of dividend income
Other
Effective tax rate

2013

—%
—
—
—
—
—
—
—
—%

37.9%
2.3
(22.8)
66.0
1.6
7.1
23.1
(0.1)
115.1%The significant components of deferred tax assets and liabilities at March 31, 2012 and 2013 were as follows:
Millions of yen

Deferred tax assets:
Inventory write-down disallowed
Accrued bonus disallowed
Intercompany profit on inventory
Retirement benefits disallowed
Allowance for doubtful accounts
Impairment loss
Operating loss carryforwards for tax purposes
Undistributed earnings of consolidated subsidiaries
Other
Valuation allowance
Deferred tax assets
Deferred tax liabilities:
Deferred gain on land
Advanced depreciation on buildings
Reserve for special depreciation
Net unrealized gains on other securities
Other
Deferred tax liabilities
Net deferred tax assets

Thousands of U.S. dollars

2012

2013

2013

¥64
222
60
481
43
104
403
329
650
(321)
2,035

¥60
153
71
670
44
144
472
—
549
(1,195)
968

$638
1,627
755
7,124
468
1,531
5,019
—
5,836
(12,706)
10,292

(95)
(88)
(13)
(128)
(110)
(434)
1,601

(95)
(81)
(4)
(37)
(215)
(432)
536

(1,010)
(861)
(43)
(393)
(2,286)(4,593)$ 5,699¥¥

Note 9. Other comprehensive income
Note 5. Research and development costs

The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive income for the years ended March 31, 2012 and 2013.
Millions of yen

Research and development costs included in cost of sales and selling, general and administrative expenses for the years ended March 31, 2012 and 2013 amounted to ¥3,080
million and ¥3,172 million ($33,727 thousand), respectively.

Note 6. Selling, general and administrative expenses
Major elements of selling, general and administrative expenses for the years ended March 31, 2012 and 2013 were as follows:
Millions of yen
2012

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

14 ANNUAL REPORT 2013

¥3,389262
384—

Thousands of U.S. dollars
2013

2013

¥3,443211
403
42$36,608
2,243
4,285
447

Thousands of U.S. dollars

2012

Net unrealized gains (losses) on other securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTax effectNet unrealized gains (losses) on other securities
Foreign currency translation adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
Amount before tax effectTax effectForeign currency translation adjustments
Total other comprehensive income

¥

¥

2013

2013

(190)
(22)
(212)
93
(119)

¥170
(293)
(123)
46
(77)

$1,808(3,115)(1,307)
488
(819)

(99)
—
(99)
49
(50)
(169)

806
—
806
(49)
757
680

8,570
—
8,570
(521)
8,049
7,230

¥

$

ANNUAL REPORT 2013 15

Note 10. Shareholders’ equity

Note 14. Derivatives

The Corporation Law of Japan provides that an amount equal to 10% of the amount to be distributed as distributions of capital surplus (other than the capital reserve) and retained
earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of
the common stock account. Such distributions can be made at any time by resolution of the shareholder’s meeting, or by the Board of Directors if certain conditions are met, butneither the capital reserve nor the legal reserve is available for distributions.

Note 11. Treasury stock
The number of common stock of the Company held by the Company, consolidated subsidiaries and affiliated companies subject to the equity method at March 31, 2012 and 2013
totaled 7,119,784 shares and 7,760,765 shares, respectively.

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 derivativetransactions, all of whom are leading domestic financial institutions with high bond ratings.
In accordance with the Company’s policy, the accounting department controls derivative transactions and requires approval by the director responsible for accounting and therepresentative directors of the Company. The director who has the responsibility to control the performance and the related risks connected with derivatives reports these to theManagement Committee of the Company.
The Company uses interest rate swaps to hedge the risks from interest rate fluctuations on borrowings. The exceptional method of hedge accounting is used to account for thosetransactions.
(Currency related)

Millions of yen

Contract amount

Note 12. Securities
Information regarding securities classified as other securities at March 31, 2012 and 2013 was summarized as follows:
Millions of yen

Thousands of U.S. dollars

2012

2013

Fair value

Cost

Unrealized
gain (loss)

¥719
46
765

¥364
36
400

1,264
1,264
¥2,029

1,399
1,399
¥1,799

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

2013

Fair value

Cost

Unrealized
gain (loss)

Fair value

Cost

Unrealized
gain (loss)

¥355
10
365

¥

298
40
338

¥152
21
173

¥146
19
165

$ 3,169
425
3,594$1,616
223
1,839$1,553
202
1,755

(135)
(135)
¥230

1,368
1,368
¥1,706

1,425
1,425
¥1,598

(57)
(57)
¥108

14,545
14,545$18,139

15,15215,152$16,991

(607)
(607)
$1,148

Unlisted stocks of ¥32 million at March 31, 2012 and ¥31 million ($330 thousand) at March 31, 2013 are not included in the above table because there were no quoted market
prices available and the fair value is extremely difficult to determine.

Millions of yen

Thousands of U.S. dollars

2012

¥

Fair value

Unrealized gain (loss)

2013

2012

2013

2012

2013

2013

2013

2013

¥2,218—¥2,218¥1,237556¥1,793¥(105)—¥(105)¥¥(105)—¥(105)¥(84)
18¥(66)$ 13,153
5,912$19,065$(893)191$(702)$(893)191$(702)(84)
18¥(66)( 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.
(Interest related)

Millions of yen

Contract amountInterest rate swaps

Thousands of U.S. dollars

Due after one year

Contract
amountDue after
one year

2012

2013

2012

2013

2013

2013

¥1,969¥3,635¥200¥3,316$38,650$35,258

Since exceptional treatment is applied to interest rate swaps transactions, they are accounted for as if they were an integral part of the hedged long-term debt, and their fair value isincluded in the fair value of long-term debt in Note 15.

2013

47
47
—
22
22
—
(0)
(0)
—

¥

493
476
17
352
349
3
—
—
—

2013

$

5,242
5,061
181
3,743
3,711
32
—
—
—

( 1 ) Policy for financial instruments
			 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 this risk, 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 a board 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, the Company and consolidated subsidiaries utilizes interest rate swap transactions as a hedging instrument.
			 Information regarding fair value of financial instruments at March 31, 2012 and 2013 was summarized as follows:
Millions of yen

Note 13. Accrued employees’ retirement benefits( a ) Outline of retirement benefit plans			The Company and certain of its domestic consolidated subsidiaries transferred the retirement benefit plans to the corporate pension fund plans under the Defined Benefits
Enterprise Pension Law of Japan on April 1, 2004. On the same day the approval was obtained for the exemption from the substituted portion of the welfare pension fund plansfrom the Minister of Health, Labor and Welfare. At the same time, the Company and certain of its domestic consolidated subsidiaries revised the retirement benefit schemes andadopted the cash balance pension plans and the defined contribution pension plans for a part of future contribution.
( b ) Retirement benefit obligation as of March 31, 2012 and 2013
Millions of yen

Thousands of U.S. dollars

2012

2013

2013

¥7,486(6,455)
1,031(1,420)
(389)
410
¥21

¥7,623(7,274)
349
(187)
162
—
¥
162

$81,053(77,342)
3,711(1,989)1,722—$ 1,722( c ) Retirement benefit cost
Millions of yen

Service cost, net of plan participants’ contributions
Interest cost
Expected returns on plan assets
Amortization of unrecognized actuarial (gains) losses
Contribution to defined contribution pension plan
Net periodic costThousands of U.S. dollars

Thousands of U.S. dollars

2012

2013

2013

¥324
147
(195)
810
82
¥
1,168

¥325
150
(176)
812
80
¥ 1,191$3,456
1,595(1,871)
8,634
851$ 12,665

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

Book value¥8,39083
15,223
2,029
3,283
5,622
7,517
6,536
(105)

Fair value¥8,39083
15,223
2,029
3,283
5,622
7,517
6,534
(105)

2013

Difference
¥—
—
—
—
—
—
—
(2)
—

Book value¥8,63182
14,551
1,706
3,194
4,940
6,657
6,548
(66)

16 ANNUAL REPORT 2013

2012

2013

2.0%
3.0%
5 years

2.0%
3.0%
5 years

Fair value¥8,63182
14,551
1,706
3,194
4,940
6,657
6,542
(66)

2013

Difference
¥—
—
—
—
—
—
—
(6)
—

Book value$91,770
872
154,716
18,13933,96152,52570,781
69,623(702)

Fair value$91,770
872
154,716
18,13933,96152,52570,781
69,559(702)

Difference
$—
—
—
—
—
—
—
(64)
—

Investment securities includes securities recorded as other current assets in the consolidated balance sheets.
Long-term debt includes current portion of long-term debt recorded as short-term loans payable in the consolidated balance sheets.
1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions
		 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 enteredinto.
		Derivatives
		 Please refer to Note 14 Derivatives of the notes to the consolidated financial statements.
2. Financial instruments whose fair value is extremely difficult to determine
Millions of yen( d ) Assumptions to calculate the actuarial present value of the benefit obligation and the expected return on plan assets
Discount rate
Expected return on plan assets
Amortization period of unrecognized actuarial gains or losses

Unrealized
gain (loss)

2012

2012

Retirement benefit obligation
Fair value of plan assets
Funded status
Unrecognized actuarial gains (losses)
Net amount recognized in the consolidated balance sheets
Prepaid pension costs
Accrued employees’ retirement benefits

Fair value

Note 15. Financial instruments

Information regarding sales of securities for the years ended March 31, 2012 and 2013 was as follows:

Proceeds from sales of securities
StocksOthersGains on sales
StocksOthers
Losses on sales
StocksOthersForward foreign exchange contracts:
Sell:
US$
MXN
Total

Thousands of U.S. dollars

Contract
amountThousands of U.S. dollars

2012

Unlisted securities

¥

198

2013

¥

202

2013

$

2,148

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

ANNUAL REPORT 2013 17

2. Geographical information( 1 ) Net sales

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

Thousands of U.S. dollars

2012

Cash equivalents and time deposits
Notes and accounts receivable, trade
Investment securities (other)
Total

Due within
one year¥8,465
15,22315¥23,703

2013

Due after
one yearthroughfive years————

Due after
five years
throughten years
¥—
—
31
¥31

Due within
one year¥8,705
14,551—¥23,256

Millions of yen

2013

Due after
five years
throughten years————

Due after
one yearthroughfive years
¥—
—
40
¥40

Due within
one year$ 92,557
154,716—$ 247,273

Due after
one yearthroughfive years
$
—
—
425
$
425

Due after
five years
throughten years
—
—
—
—

2012

Net salesJapan¥17,150

Asia¥22,496

North America¥14,096Japan¥14,130

Asia¥24,737

North America¥14,551

Japan$150,239

Asia$263,019

North America$154,716Japan¥11,210

Asia¥4,337

North America
¥277

Japan
¥10,161

Asia¥5,820

North America
¥294

Japan
$108,038

Asia$61,882

Europe¥1,524

Other
¥74

Consolidated¥55,340

Europe¥1,048

Other¥9Consolidated¥54,475

Europe$11,143

Other
$96

Consolidated$579,213

Europe¥375

Consolidated¥16,199

Europe¥431

Consolidated¥16,706

Europe$4,583

Consolidated$177,629

Millions of yen
2013

Net sales

Thousands of U.S. dollars
2013

Net sales( 2 ) Fixed assets

Note 16. Investment and rental property

Millions of yen

The profit of investment and rental property for the years ended March 31, 2012 and 2013 amounted to ¥281 million and ¥424 million ($4,508 thousand), respectively.
Information on the fair value of investment and rental property at March 31, 2012 and 2013 was summarized as follows:
Millions of yen
2013

Book value
end of theyear¥4,101

Fair value¥8,259

Fixed assets

Thousands of U.S. dollars

2012Book value
beginningof the year¥4,055

2012

Book value
beginningof the year¥4,100

Millions of yen

2013

Book value
end of theyear¥4,057

Fair value¥10,010

Book value
beginningof the year$43,594

Book value
end of theyear$43,137

2013

Fair value$106,433

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.

Fixed assets

Thousands of U.S. dollars
2013

Fixed assets

North America$3,126

3. Information about major customers
		 The Company and consolidated subsidiaries have no major customers which account for 10% or more of net sales.

Note 17. Segment information(Overview)
The reportable segments of the Company and consolidated subsidiaries are designed as business segments whose segregated financial information can be obtained and to which
the management reviews to decide on the allocation of managerial and financial 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, units, remote controls and camera modules.
TP (Touch Panel) Division: The division produces and sells touch panels.

4. Information about the amortization of goodwill and the balance of goodwill
Millions of yen

Thousands of U.S. dollars

2012

Amortization
Balance2013

Functional Components
Division
¥184
¥109
252
164

2013

Functional Components
Division$1,159
1,744

The business segment information is prepared in a manner similar to the accounting treatment as described in Note 1.

Note 18. Changes in stock options

1. Business segment information
Millions of yen

2012

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

Connection
SystemDivision

Reportable Segments
Functional
Components Touch Panel
Division
Division

Subtotal

Other

Total

Adjustment

Consolidated¥22,639—
22,639(312)
14,914¥22,049—
22,049(717)
11,610¥10,418—
10,418(154)
6,282¥55,106—
55,106(1,183)32,806

¥234
—
234
17
4,433

¥55,340—
55,340(1,166)37,239¥————
16,644¥55,340—
55,340(1,166)53,883

2,321
2,698

826
615

405
290

3,552
3,603

4
198

3,556
3,801

—
—

3,556
3,801

Millions of yen

2013

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

Connection
SystemDivision

Reportable Segments
Functional
Components Touch Panel
Division
Division

Subtotal

Other

Total

Adjustment

Consolidated¥25,498—
25,498521
15,907¥18,803—
18,803(1,430)10,430¥9,923
—
9,923
12
6,000

¥54,224—
54,224(897)
32,337

¥251
—
251
44
4,646

¥54,475—
54,475(853)
36,983¥————15,515¥54,475—
54,475(853)
52,498

2,245
2,402

651
393

435
667

3,331
3,462

3
30

3,334
3,492

—
—

3,334
3,492

2013

April 24, 2008
Share subscription rights which are not yet vested
Outstanding as of March 31, 2012
GrantedForfeited
VestedOutstanding as of March 31, 2013
Share subscription rights which have already been vested
Outstanding as of March 31, 2012
Forfeited
Outstanding as of March 31, 2013
The fair value of stock options when granted

Connection
SystemDivision

Reportable Segments
Functional
Components Touch Panel
Division
Division

Subtotal

Other

Total

Adjustment

Consolidated$271,111—
271,111
5,540
169,133$199,926—
199,926(15,205)
110,898$105,508—
105,508
128
63,796$576,545—
576,545(9,537)
343,827$2,668—
2,668
467
49,399$579,213—
579,213(9,070)393,226$————
164,966$579,213—
579,213(9,070)558,192

23,87025,540

6,922
4,179

4,625
7,092

35,41736,81132
319

35,44937,130——35,44937,130

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

July 27, 2011
—
—
—
—
—

1,116,000—
7,000—
1,109,000

16,000—16,000¥115 ($1.22)———¥81 ($0.86)

Note 19. Related party transactions
Significant transactions with related parties for the years ended March 31, 2012 and 2013 were as follows:
Millions of yen
2012

Terutaka Ikeda

Transactions
Guaranty
money
deposited
Rent
—
¥14

Balances
Other
Other
current
investments
assets¥15¥1Millions of yen
2013

Thousands of U.S. dollars

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

At the board of directors meeting held on April 24, 2008, a stock option plan was approved. Under this plan, certain employees of the Company and a director and employees ofaffiliated companies were granted options to purchase common stock of 1,102,000 shares in total at an exercise price of ¥509. Those eligible could exercise the options when themarket price exceeded 130% of the exercise price for preceding day within the term of exercise, which was from June 1, 2010 to May 31, 2013.
At the board of directors meeting held on July 27, 2011, a stock option plan was approved. Under this plan, certain employees of the Company and a director and employees ofaffiliated companies were granted options to purchase common stock of 1,141,000 shares in total at an exercise price of ¥360.
Stock option activity during the year ended March 31, 2013 was as follows:

Terutaka Ikeda

Transactions
Guaranty
money
deposited
Rent
—
¥14

Balances
Other
Other
current
investments
assets¥15¥1

Thousands of U.S. dollars
2013

Terutaka Ikeda

Transactions
Guaranty
money
deposited
Rent
—
$149

Balances
Other
Other
current
investments
assets$159$11Note 20. Subsequent events
The following appropriation of retained earnings of the Company, which has not been reflected in the accompanying consolidated financial statements for the year ended March 31,
2013, was approved at a shareholders’ meeting held on June 21, 2013.
Millions of yen

Thousands of U.S. dollars

2013

Cash dividends (¥5.00 = $0.05 per share)

18 ANNUAL REPORT 2013

¥

356

2013

$

3,785

ANNUAL REPORT 2013 19

Report of Independent Auditors
SMK Corporation and Consolidated Subsidiaries

Officer Introduction(As of June 21, 2013)

Directors

Tetsuya Nakamura

Yasumitsu Ikeda

Chairman and CEO

President and COO

Yoshio Sakurai

Yoshiyuki Kaku

Yuji Tanahashi

Director,
Executive Deputy President,
Chief Information Officer

Director,
Executive Vice President,
Chief Technology Officer

Director

Auditors

Terutaka Ikeda

Hajime Yamada

Auditor and Chairman ofAuditors Meeting

AuditorKouichiro Sugihara

Naru Nakashima

Auditor

AuditorCorporate Executive Officers

20 ANNUAL REPORT 2013

Paul Evans

Mikio Wakabayashi

Kohei Ohgaki

Hideo Matsumoto

Tsutomu Isoda

Executive Vice President

Executive Vice President

Executive Vice President,
Chief Financial Officer

Vice President

Vice President

Hiroshi Miyakawa

Shigechika Yanagi

Takemi Ishibashi

Harutaka Seki

Masanobu Ikeo

Vice President

Vice President

Vice President

Vice President

Vice President

ANNUAL REPORT 2013 21

Corporate Information(As of March 31, 2013)

Corporate Data

Shares and Shareholders

Name
Established

SMK Corporation
April 1925

Registered

January 15, 1929

Primary business

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

Authorized shares

195,961,274

Issued shares

79,000,000
10,371

Number of shareholders
Major Shareholders (top ten)

Shares Owned(1,000 shares)

Percentageof Shares (%)

Nippon Life Insurance Company

3,601

5.05

Capital¥ 7,996,828,021

Mizuho Corporate Bank, Ltd.

3,531

4.94

Stock exchange listing

Tokyo Stock Exchange

Dai Nippon Printing Co., Ltd.

3,200

4.48

Administrator ofshareholders register

Mitsubishi UFJ Trust and Banking
Corporation

3,008

4.21

Independent auditors

Ernst & Young ShinNihon LLC
Tokyo, JapanSMK Cooperating Company Share
Holding Association
The Bank of Tokyo-Mitsubishi UFJ, Ltd.

2,508

3.51

Employees (SMK-Group)

7,121

1,969

2.76

Head office5-5, Togoshi 6-chome,
Shinagawa-ku,
Tokyo 142-8511, JapanTEL 81-3-3785-1111
FAX 81-3-3785-1878

SMK Employees Share Holding
Association
Mitsubishi UFJ Trust and Banking
Corporation

1,937

2.71

The Showa Ikeda Memorial Foundation

1,500

2.10

Terutaka Ikeda

1,471

2.06

Meiji Yasuda Life Insurance Company

1,379

1.93

Subsidiaries & affiliates
Domestic
Overseas

Subsidiaries - 4companies
Affiliates 1company
Subsidiaries - 22companies
http://www.smk.co.jp/

WebsiteNote: SMK holds 7,620 thousand shares of treasury stock, but these areexcluded from the above list. Figures for percentage of shares arecalculated excluding the treasury stock.

Please see our website for detailed IR information.

Share ownership by number

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.

1 - 999 shares

2,110 (20.34%)

1,000 - 9,999 shares

7,521 (72.52%)

10,000 - 99,999 shares

669 ( 6.46%)

100,000 - 499,999 shares

55 ( 0.53%)

500,000 shares -16 ( 0.15%)

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

Home page

IR Information

20,853,685 (26.40%)

Financial instruments dealers

925,751 ( 1.17%)

Companies and other entities

11,413,948 (14.45%)

Foreign investors

3,643,581 ( 4.61%)

Individuals and others

34,542,242 (43.72%)

Treasury stock

7,620,793 ( 9.65%)

5-5, Togoshi 6-chome, Shinagawa-ku, Tokyo 142-8511, JAPAN
Telephone: 81-3-3785-1111 Fax: 81-3-3785-1878

http://www.smk.co.jp/