ANNUAL REPORT2017

For the ﬁscal year ended March 31, 2017

Connection
SystemDivisionHigh Speed Data Connectors（Right Angle Type）

Functional
Components
Division

Research &Development
CenterBluetooth® Smart-supported
Standard Voice
Remote Control“BTS04 Series”
Bluetooth® Smart Module“CapSleek Touch”
Capacitive Touch Panelwith a Curved Surface

LGMCard

Touch Panel
Division

SMK CORPORATIONTo Our Shareholders and Investors

Financial Highlights

We are obliged to you for your continued support and good patronage.
We would like to report on the outline and results of the SMKGroup’s business for the 95th fiscal year (from April 1, 2016 to March

Years ended and as of March 31

31, 2017).

Operating Results

We look forward to your continuing support and encouragement.

June 2017
Yasumitsu Ikeda

Percent change
2016/2017

Millions of yen

Thousands of
U.S. dollars

2016

2017

¥ 77,206¥ 62,971

Operating income

4,171

630

(84.9)

5,615

Profit attributable to owners of parent

2,678

1,017

(62.0)

9,065¥ 67,606¥ 62,318

33,28731,318Net sales2017(18.4) %$561,289

President and CEO/COO

Financial Position

Performance Overview

During the 95th fiscal year ended March 31, 2017, the global economy was influenced by changes in the politicalsituations of major countries such as the U.K.’s decision to exit from the European Union and the inauguration of
the new U.S. President Donald Trump. While the U.S. economy maintained a steady growth path and theJapanese economy also experienced a moderate recovery despite unstable exchange rates, the global economy
was limited to maintaining gradual growth mainly due to the slowdown in the Chinese economy and increased
geopolitical risk.
At the SMK Group, despite favorable sales growth in products such as connectors for the healthcare market
and switches for automobiles, sales of products such as connectors for smartphones for the Chinese region,
remote control units for set-top boxes for the U.S. market and touch panels for automobiles, were sluggish due
to intensified competition in the market environment.
Due to profit decreasing factors including the impact of currency fluctuations in addition to these decreases insales, the SMK Group recorded year-on-year decreases both in net sales and profit for the fiscal year ended
March 31, 2017.

Total assets
Total net assets

1
2
4
5
6
7
8
10
10
11
12
13
28
29
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 Sheet
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.

Contribute 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.

279,151
U.S. dollars

Profit attributable to owners of parent¥ 37.94¥15.17

Diluted

37.86

15.16

(60.0)

0.14

Cash dividends

14.00

10.00

(28.6)

0.09

Basic

(60.0) %$0.14

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥112.19 = U.S. $1.00.

Net sales

Operating income (loss)

Millions of yen

Profit (loss) attributable to owners of parent

Millions of yen

90,000Millions of yen
4,171

4,500

3,000

65,79660,00066,23062,97154,475

2,678

2,541

77,206

1,982
3,000

2,330

2,000
2,113
1,017

1,500

1,000
630

30,000
0

0

(198)

(853)
2013

2014

2015

2016

2017

Total assets / Total net assets
Millions of yen

Total assets(1,500)

2013

2014

2015

80,000

2013

2014

2015

2016

2017

Cash dividends per shareYen

62,318

14.00

15

37.94

35.58

67,60656,235(1,000)

Basic profit (loss) attributable to owners of parent per share45

60,000 52,498

2017

Yen

Total net assets

65,029

2016

27.61

30

14.00

10.00

10.00

10

SMK Action Guidelines

1
2
3
4
5

(5.9)

Per Share Data

0

CONTENTS$ 555,468

Yen

Challenge for Innovations

As for the outlook for the next fiscal year, although uncertainty remains in the business environment, the SMKGroup will work towards improving its profitability by continuing our previous efforts to enhance productivity andreduce cost, as well as increase sales and profits through new business. In addition to responding to changes inexisting businesses and expanding shares in current markets as a matter of course, the SMK Group will build
corporate systems to achieve sustainable growth by expanding its business in new markets such as ecology,energy, healthcare, wearable devices, and IoT. We will also proactively pursue initiatives to create new businessthrough collaboration with partners and promotion of open innovation.
By having a spirit of challenge to solve the various issues which society and customers face, having thecreativity to generate ingenious ideas, and having the capability to come up with solutions to these issues, we
aim to become a company that is able to contribute to the creation of a better society and future.

(7.8) %

15.17
40,00028,204

31,47634,18733,28731,318155.00
520,000

0

0

2013

2014

2015

2016

2017

(15)

(2.78)

2013

2014

2015

2016

2017

0

2013

2014

2015

2016

2017

ANNUAL REPORT 2017 1

Overview of Consolidated Results by Division(April 1, 2016 to March 31, 2017)

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.

Sales by Division

Others¥ 263 Million

Touch Panel
Division

0.4%

18.9%

¥ 11,931 Million¥ 62,971
Million

37.4%

43.3%

¥ 27,238 Million¥ 23,539 Million

Sales by Market
ICT

12.8%

18.8%

Coaxial Connectors
Board to Board Connectors
FPC Connectors
Jacks

Functional
Components Division

Major Products
Remote Control Units
Wireless Units
Switches
Camera Modules

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

Industry・Others¥ 8,077 Million

Major Products

Connection
SystemDivision

Net sales

Functional
Components
Division

Connection System
Division¥ 11,825 Million

Touch Panel
Division

In our mainstay communication market, sales of connectors for smartphones
were sluggish due to intensified competition with other connector manufacturers
among our customers in the Chinese region and the negative impact from thebusiness slump of some of our Japanese customers. In our priority area of the
car electronics market, against the backdrop of accelerating development of car
electronics, sales of safety driving-related connectors expanded steadily led bythose for rearview cameras. In the healthcare market in which our efforts to finda new market led to the adoption of our new connectors in the previous fiscal
year, sales continued in a favorable trend, resulting in a significant increase fromthe previous fiscal year. On the other hand, in the ecological market, sales
dropped compared to the previous fiscal year due to a decrease in sales ofconnectors for photovoltaic modules.
As a result, net sales of the Connection System Division amounted to \23,539
million, or a 13.1% decrease year on year. Operating income was \1,919 million,
a 13.4% decrease year on year.

Net sales / Operating income

Sales of remote control units, our mainstay products for this division, remainedsolid for sanitary goods and medical equipment in Japan. However, sales of the
products for set-top boxes dropped year on year due to the impact of a decreasein demand volume triggered by the delay in launch of new products for satellite
broadcasting in the U.S. and the increase in competition with othermanufacturers of remote control units for Internet protocols and over-the-top
set-top boxes. As for units, although sales of automotive camera modules andhome automation related products are on an expansion trend with new orders inplace, due to cutbacks in production by U.S. home equipment manufacturers,
sales of units fell below that of the previous year. On the other hand, sales ofswitches in the car electronics and smartphone markets increased significantly,
while sales in switches for digital cameras decreased.
As a result, net sales of the Functional Components Division amounted to \27,238
million, or a 23.2% decrease year on year. Operating loss was \786 million(compared to an operating income of \370 million in the previous fiscal year).

Net sales / Operating income (loss)

In the touch panel market for car navigation systems and for automotive center

Net sales / Operating income

consoles, which are our mainstay products for this division, the competitiveenvironment is growing more severe due to the substantial advancement of thevolumes remained at the same level as the previous year, product prices

Net sales

Car Electronics¥ 18,982 Million

sales falling below that of the previous year. Although we had acquired neworders for our products in markets other than automotive applications, such as

Home
Appliance¥ 24,086 Million

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

The SMK Group’s market segments have been changed from the fiscal year ended March 31, 2017.

2 ANNUAL REPORT 2017

25,901

2,215

23,53920,00010,000

0

1,919

921

2015

40,000

2,000

1,000

2016

2017

0

Millions of yen
4,000

35,44927,23825,02720,000

2,000

370
0

0

(723)

2015

（786）

2016

2017

(2,000)Millions of yen

20,0004,000

15,00015,184

14,467decreased due to the entry of Chinese touch panel manufacturers, resulting in

Million

38.3%

3,000
27,095shift in demand towards capacitive type from resistive type, in response to users’
requests for operability similar to that of smartphones. In addition, while sales

30.1% ¥ 62,971

Millions of yen

30,0003,000
11,931

10,000

1,909

2,000

1,838

for wearable devices and for office equipment, we were unable to offset the
Major Products
Resistive Touch Panels
Capacitive Touch Panels
Optical Touch Panels

decline in products sales for automotive applications, which resulted in a decline
in overall sales from the previous year.

5,000

1,000

As a result, net sales in the Touch Panel Division amounted to \11,931 million,
or a 17.5% decrease year on year. Operating income was \113 million, or a
93.9% decrease year on year.

113
0

2015

2016

2017

0

ANNUAL REPORT 2017 3

SMK’s New Lineup

TopicsCS Division :1

Small Coaxial Connector for Automotive Camera Module
We have developed a small coaxial connector capable of digital transmission withheightened pixel quality for camera modules for the purpose of rear viewing andsurround monitoring, etc. of vehicles. This product features excellent waterproof
performance by its compact design and waterproof airtight structure, and we
intend to expand our business in order to meet future demand growth in the car
electronics market.

Main applications:
Automotive devices (view camera,electronic control unit, etc.)

FC Division :2 Megapixel Automotive Camera Module
Responding to the demand for heightened pixel quality along with the increasing
adoption of ADAS (advanced driver assistance systems), we have developed acamera module that can transmit 2 million-pixel image output. This product adopts
coaxial digital output and supports high-speed image transmission as well as
bidirectional communication. Moreover, due to its unique structural design, it has
high EMC performance so that transmission of digital terrestrial broadcasting is noteasily affected. From now on, we will promote development with a view tocontributing to autonomous driving.

TP Division :“Wing Touch

TM

Main applications:
Automotive front view, front sensing,drive recorderMM” Capacitive Touch Panel

We have developed the “Wing TouchTM MM” capacitive touch panel for medium andlarge sized display equipment used in industrial machinery and digital sinage, etc.
The new capacitive touch panel featuring a metal mesh (MM) sensor in the form ofcopper has low resistance and excellent conductivity compared to conventional ITO
sensors, which makes it easy to handle larger sized displays up to 34 inches. The
copper mesh sensor has excellent flexibility and can be attached to curved cover
panels. We are seeking orders, targeting medium and large sized display
equipment.

Main applications:
Industrial machinery, digital sinage,
office equipment, POS registers

Research & Development Center ：SIGFOX RF Module“WF923”

SIGFOX is a LPWA (Low Power Wide Area) communication technology, which is
attracting attention as an IoT network method realizing low cost, low power andwide area transmission using the unlicensed 920 MHz band. “WF923” is a modulewith a built-in SIGFOX stack, compliant with the Radio Act of Japan and implements
in-house developed applications for various uses such as location information andenvironmental monitoring, and it is the first wireless module to obtain SIGFOX
certification in Japan.

Main applications:
Equipment for water supply and gas,
etc., environmental monitor

SMK LOGOMOTION :microSD Memory Card with built-in NFC Antenna“LGMCard”
This product is a microSD card with a built-in miniature antenna not easily affectedby metal, and also has the technology to control radio waves. Various types ofmobile payment services are growing in the market, but this product is targeted at
low-price SIM free phones, etc. which are mainly increasing in emerging countries
in this growth field. Mobile phone users can easily make mobile paymenttransactions by inserting this card. The technology behind this card istransformative and we have obtained over 30 patents related to this technology.

4 ANNUAL REPORT 2017

Main applications:
Mobile payment and eID

The Showa Ikeda
Memorial Foundation celebrated
its 40th anniversary

The Showa Ikeda Memorial Foundation is anestablishment formed in 1976 in celebration of the50th anniversary of the founding of SMK Corporation(formerly known as Showa Musen Kogyo Co., Ltd.) tohelp social welfare activities, under authorization by
the Tokyo Metropolitan Government. Funds wereraised privately by the late Mr. Heishiro Ikeda, thefounder of SMK, and his wife, the late Mrs. Shizuko
Ikeda, and partial contributions were made by SMK.
Following the amendment of the Charitable
Corporations Act, the Foundation was certified by
the Governor of Tokyo as an incorporated charitableorganization in 2013, and it thus became officiallyknown as the Showa Ikeda Memorial Foundation(Incorporated Charitable Organization). The
Foundation celebrated its 40th anniversary in May
2016 and the “Commemorative Ceremony of the40th Anniversary” was held grandly at Hotel Okura
Tokyo in November 2016.

Foundation founders:Late Mr. & Mrs. Heishiro and
Shizuko Ikeda

Terutaka Ikeda, Chairman, givinga greeting at the Commemorative
Ceremony of the 40th Anniversary

Since its establishment, the Foundation has been
engaged in various activities such as scholarshipprograms, welfare grants for persons withdisabilities, youths, and the elderly. Since 1981, aspart of the scholarship programs, the Foundation has
set up a program to collect essays from students atjunior colleges, universities and graduate schools,
and awards the Showa Ikeda Prize for student
research papers under the auspices of the Ministryof Education, Culture, Sports, Science andTechnology. This year marks the 36th occasion of
the awards. As well as
this, it continues tocontribute broadly tosocial causes such as its
funding for projects
aimed at encouraging
the pursuit of traditionalarts and crafts.
Taking a walk with a donated stroller

2

Certified as a“Tokyo Sports
Promotion Company”

We have been certified as a
“Tokyo Sports Promotion
Company” for fiscal 2016 under“Tokyo Sports Promotion
Company Certification Program”
implemented by Bureau of
Olympic and Paralympic GamesTokyo 2020 Preparation.
We employed Masayuki Haga,a wheelchair rugby player, in
2014, and have supported him
as an athlete, which wasregarded as an activity that
contributes to the enhanced
recognition and promotion ofwheelchair rugby, resulting inthis certification.

3

Masayuki Haga,
wheelchair rugby player

SMK Shenzhen (China) celebrated
its 20th anniversary

SMK Electronics (Shenzhen) Co., Ltd. (SMK
Shenzhen) celebrated its 20th anniversary in July
2016. In celebration, an anniversary commemorative
ceremony was held grandly and we also organizedcommemorative tree planting at the Dapeng
afforestation base in Shenzhen as part of our social
contribution activities.
SMK Shenzhen has been steadily expanding its
production every year these past few years,
supported by strong orders for automotive related
components in addition to conventional smartphone
related components.

The Commemorative Ceremony of the 20th Anniversary

Tree planting activities

ANNUAL REPORT 2017 5

Financial Section

Financial Review

SMK’s net sales for the fiscal year ended March
31, 2017, decreased 18.4% year on year to¥62,971 million (US$561,289 thousand),Five-Year Summary(US$5,615 thousand) and profit attributable tothousand) were recorded.

Thousands of
U.S. dollars

Millions of yen
2014

2015

2016

2017

2017

Operating income (loss)
Profit (loss) attributable toowners of parent

34,18733,28734,000

Despite favorable sales growth in products such as connectors for

31,47632,00031,31830,000the healthcare market and switches for automobiles, sales of

28,204

products such as connectors for smartphones for the Chinese

0

region, remote control units for set-top boxes for the U.S. market

2013

2014

2015

2016

2017

and touch panels for automobiles were sluggish due to intensified

Operating Results
Net sales

Millions of yen
36,000owners of parent of ¥1,017 million (US$9,065

Net Sales2013(As of March 31)

whereas operating income of ¥630 million

SMK Corporation and Consolidated Subsidiaries

Years ended andas of March 31

Total net assets

competition in the market environment and other factors.

¥54,475(853)¥ 65,796¥ 66,230

2,330

2,113

¥ 77,206
4,171¥62,971$ 561,289

630

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

As a result, net sales were ¥62,971 million (US$561,289
thousand), down 18.4% year on year.

5,615

%
12

Operating Income
(198)

2,541

1,982

2,678

1,017

9,065

Despite our efforts such as proactive launch of new products,

8.5
8

8.0
6.0

provision of more competitive prices and strengthening of oursales capabilities, operating income amounted to ¥630 million(US$5,615 thousand) due to profit decreasing factors such as
decreases in net sales and currency fluctuations.

Financial Position
Total assets
Total net assets

3.2

4¥52,498¥ 56,235¥ 65,029¥ 67,606¥ 62,318$555,468

28,204

31,47634,18733,28731,318279,151

Profit attributable to owners of parent

0
(0.7)

Profit attributable to owners of parent was ¥1,017 million(US$9,065 thousand) as a result of recording rent income, rent
expense, gain on sales of fixed assets, loss on impairment of fixed

(4)

2013

2014

2015

2016

2017

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

U.S. dollars(US$555,468 thousand), with ROA of 1.6%.

¥394.81¥ 437.84¥ 475.42¥ 471.02¥473.50$DilutedCash dividends

%
6
4.7
4.0

Total Net Assets / ROE

4

3.3

As of March 31, 2017, total net assets were ¥31,318 million(2.78)
—
5.00

35.58
35.52
10.00

27.61
27.56
14.00

37.94
37.86
14.00

15.17
15.16
10.00

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥112.19 = U.S. $1.00.
6 ANNUAL REPORT 2017

(Years ended March 31)

4.22

Profit (loss) attributableto owners of parent
Basic

Total Assets / ROA
As of March 31, 2017, total assets were ¥62,318 million

Per Share Data
Total net assets

Return on assets (ROA)

0.14
0.14
0.09

(US$279,151 thousand), with ROE of 3.2%.

2
1.6

Cash FlowsNet cash provided by operating activities amounted to ¥4,604

0

million (US$41,038 thousand), net cash used in investing activities(0.4)

totaled ¥3,465 million (US$30,885 thousand), and net cash used infinancing activities was ¥1,541 million (US$13,736 thousand).

(2)

2013

2014

2015

2016

2017

ANNUAL REPORT 2017 7

Consolidated Balance Sheets

Consolidated Balance SheetSMK Corporation and Consolidated Subsidiaries
As of March 31, 2016 and 2017

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

Assets2016

2017

Liabilities and net assets

2017Time deposits (Note 16)
Notes and accounts receivable, trade (Note 16)
Allowance for doubtful accounts
Inventories (Note 3)
Deferred tax assets (Note 13)
Other current assets (Note 16, 17 and 21)

2017

2017

¥12,287¥13,592$121,152

4,808

6,118

54,532

Accrued income taxes

489

647

5,767

Accrued bonuses

966

626

5,580

Short-term loans payable (Note 5 and 16)¥10,668¥10,011$89,233

110

106

945

16,50914,853132,391

(47)

(48)

(428)

7,187

7,199

64,168

Accrued directors’ and officers’ bonuses

75

24

214

Accounts payable, non-trade (Note 16)

6,245

1,407

12,541

657

431

3,842

Other current liabilities

1,793

1,710

15,242

3,282

1,719

15,322

26,66624,127215,055

38,36834,274

305,500

Long-term debt (Note 5 and 16)

5,258

4,855

43,275

Deferred tax liabilities (Note 13)

1,121

974

8,682

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

2016

Current liabilities

Current assets
Cash and cash equivalents (Note 16)

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

Notes and accounts payable, trade (Note 16)

Long-term liabilities

2,406

2,305

20,546Long-term loans receivable (Note 21)

96

117

1,043

Accrued directors’ and officers’ retirement benefits

188

203

1,809

Liability for retirement benefits (Note 6)

49

54

481

Asset for retirement benefits (Note 6)

541

860

7,666

Other long-term liabilities

1,033

784

6,988

Other investments (Note 21)

593

554

4,938

7,651

6,872

61,253

Allowance for doubtful accounts

(60)

(102)

(909)

3,577

3,736

33,301

7,996

7,996

71,272

Capital surplus

12,30912,057

107,469

Retained earnings

18,14916,614148,088

Treasury stock(4,353)(3,995)(35,609)

34,102

32,672291,220

Net unrealized gains (losses) on other securities

176

348

3,102Net unrealized gains (losses) from hedging instruments—(3)(1,506)(1,976)

 (17,613)

223

263

2,344(1,106)(1,368)(12,194)

Share subscription rights (Note 8)

25

—

—

Non-controlling interests

266

14

125

33,28731,318279,151¥67,606¥62,318$555,468

Land (Note 4)

7,426

7,027

62,635

Buildings

21,544

21,275

189,634

Machinery and vehicles

21,181

22,025

196,319

Tooling and office furniture

23,492

23,494

209,413

213

100

891

73,85873,923658,909(50,946)(51,953)(463,083)

22,912

21,970195,829

Less-accumulated depreciation

Authorized : 195,961,274 shares
Issued :79,000,000 shares as of March 31 2016
75,000,000 shares as of March 31 2017

Accumulated other comprehensive income

Foreign currency translation adjustments

Other assets
Deferred tax assets (Note 13)

216

487

4,341

Goodwill (Note 12)

380

—

—

Intangible assets

2,151

1,850

16,490

2,748

2,337

20,831¥67,606¥62,318$555,468

Total assets

Shareholders’ equity (Note 7)
Common stock

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

Construction in progress

Net assets

Retirement benefits asset and liability adjustments

Total liabilities and net assets



(27)

See accompanying notes to consolidated financial statements.
8 ANNUAL REPORT 2017

ANNUAL REPORT 2017 9

Consolidated Statement of Income

Consolidated Statement of Changes in Net Assets

Years ended March 31, 2016 and 2017

Years ended March 31, 2016 and 2017

SMK Corporation and Consolidated Subsidiaries

SMK Corporation and Consolidated Subsidiaries

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

2016

2017

¥77,206
62,412
10,6224,171$561,289
465,380
90,293
5,615

103
1,263
134
294
307
2,102

95
1,243
459
99
378
2,275

847
11,079
4,091
882
3,369
20,278Other expenses
Interest expense
Rent expense (Note 21)
Foreign exchange loss, net
Loss on disposal of fixed assets (Note 11)
Loss on impairment of fixed assets (Note 12)
Loss on liquidation of subsidiaries and affiliates
Other
Total other expenses

124
623
1,334
209
—
198
212
2,701

124
615
25
260
443
—
195
1,664

1,105
5,482
223
2,317
3,949
—
1,738
14,832

3,573

1,241

11,062

1,229
(249)
2,592
(85)
¥2,678

749
(272)
764
(252)
¥1,017

6,676(2,424)6,810(2,246)$9,065¥471.02¥473.50$4.22

37.94
37.86
14.00

15.17
15.16
10.00

0.14
0.14
0.09

See accompanying notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income
SMK Corporation and Consolidated Subsidiaries
Years ended March 31, 2016 and 2017

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

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

2016

2017

(431)
—
(809)
(574)
(1,815)
¥776

171
(3)
(469)
39
(262)
¥502

1,524
(27)
(4,180)348(2,335)$4,475

¥862
(85)
¥

¥754
¥(252)$6,721$(2,246)¥ 2,592

Number ofshares ofcommonstock

Balance at April 1, 2015 79,000,000
Cash dividends paid
Profit 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, 2016 79,000,000
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

¥

764

2017

$

6,810

Commonstock

Capitalsurplus¥7,996¥12,325

—
7,996
7,996

—
¥7,996

Retainedearnings

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¥16,537 ¥(3,417) ¥33,442(1,066)(1,066)2,678
2,678(1,015) (1,015)
(16)
79
63
—

¥ 608

¥—

¥ (697)

¥ 798

¥ 709
—
—
—
—
—

¥ 35

¥ —

¥34,187(1,066)
2,678(1,015)
63
—

—

(431)

—

(809)

(574)

(1,815)(10)

266(1,559)659
34,102
34,102(891)
1,017(1,579)
24
—

(431)
176
176

—
—
—

(809)
(1,506)(1,506)

(574)
223
223

(1,815)(1,106)(1,106)
—
—
—
—
—

(10)
25
25

266
266
266

(899)
33,28733,287(891)
1,017(1,579)
24
—

—

171

(3)

(469)

39

(262)

(25)

(252)

(539)

(252) (1,534)
357 (1,429)¥12,057 ¥16,614 ¥(3,995) ¥32,672

171
¥ 348

(3)
(469)
¥(3) ¥(1,976)

39
¥ 263

(262)
¥(1,368)(25)¥—(252) (1,969)¥ 14 ¥31,318(16)
12,30912,3091,611
18,14918,149
(891)
1,017

(0)
(251)

(0)
(1,660)(935)(4,353)(4,353)(1,579)25
1,911

Thousands of U.S. dollars (Note 2)

U.S. dollars(Note 2)Yen

Per share data (Note 15)
Total net assets
Profit attributable to owners of parent
Basic
DilutedCash dividends

Shareholders’ equity

2017¥62,971
52,211
10,130630

Other income
Interest and dividend income (Note 21)
Rent income
Gain on sales of fixed assets (Note 11)
Gain on sales of investment securities (Note 17)
Other
Total other income

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

Millions of yen

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

Shareholders’ equity

Commonstock

Balance at April 1, 2016
Cash dividends paid
Profit 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, 2017

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$71,272 $109,716 $161,770 $(38,800) $303,966(7,942)(7,942)
9,065
9,065(14,074) (14,074)
(0)
(0)
223
214
(2,237) (14,796) 17,034—$1,569$ — $(13,424)

—

1,524

(27)

— (2,246) (13,673) 3,182 (12,737)$71,272 $107,469 $148,088 $(35,609) $291,220

1,524$3,102(27) (4,180)$(27) $(17,613)(4,180)$1,988 $ (9,858)
—
—
—
—
—
348

(2,335)348 (2,335)$2,344 $(12,194)

Noncontrollinginterests

Total net
assets$ 223$ 2,371 $296,702(7,942)
9,065(14,074)
214
—

(223)

(2,246)(4,804)(223) (2,246) (17,551)$ — $ 125 $279,151

See accompanying notes to consolidated financial statements.
10 ANNUAL REPORT 2017

ANNUAL REPORT 2017 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, 2016 and 2017

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 sales of fixed assets
Loss on disposal of fixed assets
Loss on liquidation of subsidiaries and affiliates(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
Purchases of intangible fixed assets
Purchases of investment securities
Proceeds from sales of investment securities
Purchase of subsidiaries’ shares resulting in changes in scope of consolidation
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
Proceeds from non-controlling shareholders
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 2017

2016

2017

2017

¥3,573
3,970
—
86
(51)
38
(584)
(103)
124
(294)
(134)
209
198
(959)
(1,190)
1,887
97
106
426
7,399
104
(118)
(1,173)6,211¥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

$11,062
39,0503,949
1,221(3,004)134(2,291)
(847)
1,105
(882)
(4,091)
2,317
—
9,894
(1,711)
18,246
13,005(38,898)(365)
47,874847(1,105)(6,569)41,038(108)
169(5,265)107(2,362)
(35)
360
(37)
(84)
74
—
(7,182)(103)
101(4,680)
1,039
(162)
(50)
430
—
(125)
97
(11)
(3,465)(918)
900(41,715)
9,261(1,444)
(446)
3,833
—
(1,114)865(98)(30,885)

4,700
600(2,005)(1,014)65352(1,062)
1,636
3
668
9,999
¥10,668

1,395
1,494
(1,987)(1,578)24—(889)(1,541)(254)(656)
10,668¥10,011

12,434
13,317(17,711)(14,065)
214—(7,924)(13,736)(2,264)(5,847)95,089$89,233

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 areprepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to theapplication 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 theprior year’s consolidated financial statements to conform to the current year’s presentation.
( b ) Basis of consolidation and investments in affiliated companies			The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries over which
substantial control is exercised either through majority ownership of voting stock and/or by other means.
			All significant intercompany balances and transactions have been eliminated in consolidation.
			Certain foreign subsidiaries’ fiscal period ends on December 31, which differs from the year-end date of the Company;
however, the accounts of these companies were tentatively closed as of March 31 and the necessary adjustments forconsolidation were made.
			Investments in affiliates (companies over which the Company has the ability to exercise significant influence) are accounted
for by the equity method. Consolidated profit attributable to owners of parent includes the Company’s equity in the current
profit attributable to owners of parent or loss of such companies, after the elimination of unrealized intercompany profits.
			All assets and liabilities of the Company’s subsidiaries are revalued at the acquisition, if applicable, and the excess of costover the underlying net assets at the date of acquisition is amortized over a period of five years on a straight-line basis if
such excess is material, or charged to income when incurred if immaterial.
( c ) Scope of consolidation
			 Number of consolidated subsidiaries: 30( 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
year-end exchange rates. Shareholders’ equity, which is translated at rates of exchange prevailing at the time thetransactions occurred. Revenue and expense accounts are translated at the average rates of exchange prevailing during theyear. 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 andmanufacturing 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.

ANNUAL REPORT 2017 13

( j ) Property, plant and equipment and depreciation( s ) Per share information

			Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is calculated principally by			Basic net income per share is computed based on the net income available for distribution to shareholders of common stock

the declining-balance method for the Company and its domestic subsidiaries, and by the straight-line method mainly for

and weighted-average number of shares of common stock outstanding during the year. Diluted profit attributable to owners

foreign subsidiaries. Certain buildings of the Company and its domestic subsidiaries acquired on or after April 1, 1998 andof parent per share is computed based on the profit attributable to owners of parent available for distribution to shareholders

facilities attached to buildings and other non-building structures acquired on or after April 1, 2016 are depreciated by theand average number of shares of common stock outstanding during each year after giving effect to the dilutive potential ofstraight-line method.

shares of common stock to be issued upon the conversion of convertible bonds.

			 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 overa period of 5 years starting from the year following the year in which they have been depreciated up to their depreciable
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.
( 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			Net assets per share is computed based on the net assets available for distribution to shareholders of common stock and thenumber 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.
( 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 ) Change in method of accounting			The Company and its domestic consolidated subsidiaries adopted “Practical Solution on a change in depreciation method due
to Tax Reform 2016” (Accounting Standards Board of Japan (ASBJ) Practical Issues Task Force (PITF) No.32, June 17,2016) as a result of revisions to the Corporate Tax Act of Japan. Accordingly, the depreciation method for both facilities
attached to buildings and other non-building structures acquired on or after April 1, 2016 was changed from the decliningbalance method to the straight-line method.
			The effects of this change on the consolidated financial statements for the year ended March 31, 2017 were immaterial.
( v ) Additional information
			The Company and its consolidated subsidiaries adopted “Revised Implementation Guidance on Recoverability of Deferred Tax
Assets” (ASBJ Guidance No.26, March 28, 2016) from the beginning of the fiscal year ended March 31, 2017.

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 thebalance 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.

14 ANNUAL REPORT 2017

ANNUAL REPORT 2017 15

Note 2. U.S. dollar amounts

Note 6. Retirement benefits plans

The U.S. dollar amounts are stated solely for the convenience of the reader at the rate of U.S.$1.00 = ¥112.19, the approximate
rate of exchange at March 31, 2017. 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.

Note 3. Inventories
Inventories as of March 31, 2016 and 2017 consisted of the following:
Finished products
Work in process
Raw materials and supplies
Total

2016

Millions of yen¥3,326
991
2,869¥7,1872017¥2,881738
3,579¥7,199

Thousands of U.S. dollars
2017$25,680
6,578
31,901$64,168

The write-downs of inventories resulting from decreased profitability for the years ended March 31, 2016 and 2017 were as
follows:
Millions of yen

Cost of sales

2016

Thousands of U.S. dollars
2017

¥281

¥251

2017

$2,237

Reduction entries due to acceptance of prefectural governmentʼs grants relating to property, plant and equipment as of March 31,
2016 and 2017 were as follows:
2016

Millions of yen

¥101

2017

¥101

Thousands of U.S. dollars
2017

$900

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

Short-term loans payable and long-term debt as of March 31, 2016 and 2017 consisted of the following:
Millions of yen
Short-term loans payable

Average interest rate on short-term loans payable, principally from banks, is 0.46%
SecuredUnsecured
Total
Long-term debt
Average interest rate on long-term debt, principally from banks, is 0.87%
SecuredUnsecured
Less: portion due within one year
Total

2016

2017

Thousands of U.S. dollars
2017¥4,600
5,705¥10,305¥5,500
6,200¥11,700$49,024
55,263$104,288

2017

Thousands of U.S. dollars
2017¥2,969
3,778(1,892)¥4,855$26,464
33,675(16,864)$43,275

2016

Millions of yen¥2,839
4,402(1,982)¥5,258
Millions of yen

Thousands of U.S. dollars

2016

2017

2017

¥1,582229
81256¥2,151¥1,476
161
86
256¥1,981$13,156
1,435
767
2,282
$17,658

¥451
4
563
¥1,019

¥55
3
39
¥98

$490
27
348
$874

The aggregate annual maturities of long-term debt (including current portion) outstanding as of March 31, 2017 weresummarized as follows:
Millions of yen
Thousands of U.S. dollars
Year ending March 31,
2018¥1,892$16,864
2,365
21,080
2019
2020
1,559
13,896
768
6,846
2021
2022 and thereafter
163
1,453
$60,139
Total¥6,747

16 ANNUAL REPORT 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

2016

Millions of yen¥8,184
335
50
78
(785)
0
¥7,865

2017

Thousands of U.S. dollars
2017

2017

Thousands of U.S. dollars
2017¥7,865
322
49
120
(693)
(4)
¥7,660

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

2016

Millions of yen¥8,968
238
(593)
521
(778)
¥8,357¥8,357
225
338
231
(686)
¥8,466$70,104
2,870
437
1,070
(6,177)(36)$68,277$74,490
2,006
3,013
2,059
(6,115)$75,461

The funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31, 2016 and 2017
were as follows:

The assets pledged as collateral for short-term and long-term debt as of March 31, 2016 and 2017 were summarized as follows:(1) Factory foundation
Buildings
Machinery and vehicles
Tooling and office furniture
Land
Total
(2) Other
Buildings
Tooling and office furniture
Land
Total

The changes in the retirement benefit obligation during the years ended March 31, 2016 and 2017 were as follows:

The changes in plan assets during the years ended March 31, 2016 and 2017 were as follows:

Note 4. Reduction entries

Land

The Company and certain of its domestic consolidated subsidiaries have either funded or unfunded defined benefit pension plansand 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 a plan
participantʼs account based on the points according to the employeeʼs years of service and job performance and the points arecalculated 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.

¥7,645(8,466)
(820)
14
(806)

Thousands of U.S. dollars
2017

Unfunded retirement benefit obligation
Net liability for retirement benefits in the balance sheet¥7,849(8,357)
(507)
15
(491)

2017

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

49
(541)
¥(491)54(860)¥(806)481(7,666)$(7,184)

Funded retirement benefit obligation
Plan assets at fair value

2016

Millions of yen

The components of retirement benefit expense for the years ended March 31, 2016 and 2017 were as follows:
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain and loss
Retirement benefit expense

2016

Millions of yen

¥335
50
(238)
(190)
¥(42)

2017

¥322
49
(225)
(161)
¥(14)$68,143(75,461)(7,309)125(7,184)

Thousands of U.S. dollars
2017$2,870437(2,006)(1,435)$(125)The components of retirement benefits asset and liability adjustments included in other comprehensive income (before tax effect)
for the years ended March 31, 2016 and 2017 were as follows:
Actuarial gain and loss

2016

Millions of yen(¥861)

2017¥56

Thousands of U.S. dollars
2017

$499

The components of retirement benefits asset and liability adjustments included in accumulated other comprehensive income(before tax effect) as of March 31, 2016 and 2017 were as follows:
Unrecognized actuarial gain and loss

2016

¥325

Millions of yen

2017

¥382

Thousands of U.S. dollars
2017$3,405

ANNUAL REPORT 2017 17

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2016 and 2017 were as
follows:
2016

Bonds
StocksLife insurances
Funds
Other
Total

2017

3.9%
38.9
39.5
14.3
3.4
100.0%

Resolution

4.3%
41.8
38.3
14.4
1.2
100.0%

2017

0.6%
1.23%
3.0%

2016

Increase

Decrease

Number ofshares at
March 31, 2016

Number ofshares at
April 1, 2016

Total

Retainedearnings

331

79,000,000—

4,000,000

75,000,000

7,164,192

1,924,222

140,561

8,947,853

8,947,853

3,994,537

4,054,950

8,887,440

Number of shares
2016

2017

1,901,000
17,491
2,992
2,739

3,979,000
11,3504,187—

124,000—
14,7391,822

54,0004,000,000—
950

Description

Share subscription rights as stock options
granted during the year ended March 31, 20112017

March 31, 2017

June 23, 2017

Total dividends(Thousands of
U.S. dollars)

Dividends per share(U.S. dollars)

2,950

0.04

Note 8. Stock options
1. The account and the amount of stock options charged as expenses
For the years ended March 31, 2016 and 2017, there was no expenses charged.
2. The amount of stock options charged as income due to their forfeiture resulting from nonuse
2016

0Millions of yen

2017

20

269 employees of the Company, and a director and 35 employees of
its subsidiaries
1,141,000 common shares
August 11, 2011
Subscription holders shall remain employees, directors or auditors of
the Company or its subsidiaries at the time of exercise
From August 11, 2011 to August 11, 2013
From August 12, 2013 to August 11, 2016

4. Change in stock options
Stock option activity during the year ended March 31, 2017 was as follows:

79,000,000

Millions of yen

Effective date

Vesting period
Exercise period

—

2016

5

2017

Cut-off date

Decrease

2. Share subscription rights

Parent company

Shareholders’Commonmeeting on
stock
June 22, 2017

Exercise condition—

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 held by subsidiaries
Decrease due to sales of shares of less than standard unit

June 23, 2016

Number ofshares at
March 31, 2017

79,000,000

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
Increase due to purchase of company that holds sharesCompany

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

Number of stock options
Grant date2017

Increase

March 31, 2016

3. Description of stock options

Information regarding changes in net assets for the years ended March 31, 2016 and 2017 were as follows:
1. Shares issued and outstanding / Treasury stock

Shares issued:
Common stock
Tresury stock:
Common stock

Resolution

Category and number of grantees

Number ofshares at
April 1, 20158

Effective date

Gain on reversal of share subscription rights

Note 7. Net asset

Types of shares

561

Cut-off date

2017

Assumptions to calculate the actuarial present value of the benefit obligation and the expected return on plan assets as ofMarch 31, 2016 and 2017 were as follows:
0.6%
1.40%
3.0%

Retainedearnings

2016

Dividends with the cut-off date in the year ended March 31, 2017 and the effective date in the year ending March 31, 2018

The required contributions to the defined contribution plans by the Company and its consolidated subsidiaries for the years
ended March 31, 2016 and 2017 amounted to \84 million and \90 million ($802 thousand), respectively.

2016

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

Shareholders’Commonmeeting on
stock
June 22, 20161. ‌The total plan assets include retirement benefit trusts which constitute 11.8% for the year ended March 31, 2016 and 11.5%
for the year ended March 31, 2017.
2. ‌The expected rates of return on plan assets has been estimated based on the anticipated allocation of plan assets to each asset
category and the expected long-term returns on plan assets held in each category.

Discount rate
Re-evaluation rate
Expected rates of return on plan assets(2) Dividends with the cut-off date in the year ended March 31, 2016 and the effective date in the year ending March 31, 2017

Thousands of U.S. dollars
2017

25

—

—

25

—

—

Share subscription rights which are not yet vested
Outstanding as of March 31, 2016
GrantedForfeited
VestedOutstanding as of March 31, 2017
Share subscription rights which have already been vested
Outstanding as of March 31, 2016
VestedExercised
Forfeited
Outstanding as of March 31, 2017
Exercise price
Weighted average exercise price
The fair value of stock options when granted

—
—
—
—
—
314,000—
54,000260,000—¥
360 ($3.21)¥
573 ($5.11)
80.5 ($0.72)¥

5. Estimation of the number of stock options vested
Because it is difficult to reasonably estimate the number of unexercised stock options in the future, the actual number of
unexercised stock options is presented.

3. Dividends(1) Dividends paid
Resolution

Type of shares

Shareholders’ meeting on Common
June 23, 2015
stock
Board of Directors’
meeting on October 23, Common
stock
2015

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

2016

Cut-off date

Effective date

647

9

March 31, 2015

June 24, 2015

420

6

September 30,
2015

November 19,
2015

2017

Resolution

Type of shares

Shareholders’ meeting on Common
June 22, 2016
stock
Board of Directors’Commonmeeting on October 25,
stock
2016
18 ANNUAL REPORT 2017

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

2017

Cut-off date

Effective date

Total dividends(Thousands of
U.S. dollars)

Dividends per share(U.S. dollars)

561

8

March 31, 2016

June 23, 2016

5,000

0.07

331

5

September 30,
2016

November 21,
2016

2,950

0.04
ANNUAL REPORT 2017 19

Note 9. Research and development costs

Note 13. Income taxes

Research and development costs included in cost of sales and selling, general and administrative expenses for the years ended
March 31, 2016 and 2017 amounted to ¥3,620 million and ¥3,314 million ($ 29,539 thousand), respectively.

Note 10. Selling, general and administrative expenses
Major elements of selling, general and administrative expenses for the years ended March 31, 2016 and 2017 were as follows:
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

2016

Millions of yen¥4,591
439
75
24
41
18

Thousands of U.S. dollars
2017

2017

¥4,384
316
23
38
33
(0)

$39,077
2,817
205
339
294
(0)

Note 11. Gains and losses of fixed assets
The components of gains and losses of fixed assets for the year ended March 31, 2016 and 2017 were as follows:
Gains on sales of fixed assets
2016

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

Millions of yen

¥0
22
4
103
5
¥134

Loss on disposal of fixed assets
2016

Buildings
Machinery and vehicles
Tooling and office furniture
Intangible asset
Total

¥2
175
31
—
¥209

Thousands of U.S. dollars
2017

2017

¥232
9
5
208
3
¥459
Millions of yen$2,068
80
45
1,854
27
$4,091

Thousands of U.S. dollars
2017

2017

¥1
240
18
0
¥260

$9
2,139
160
0
$2,317

Note 12. 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, 2016, there was no major impairment loss recognized.
For the year ended March 31, 2017, impairment losses were recognized for the following assets.

Asset group

Functional components

LocationJapan

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

Asset group

Functional components

LocationJapan

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

Use

Other
Remote controls/Switch/Unit
production facilities

Use

Other
Remote controls/Switch/Unit
production facilities

Machinery andvehicles¥—

Millions of yen
2017

Tooling and officefurniture

Goodwill

Total

¥—

¥263

¥263

151

28

—

179

¥151

¥28

¥263

¥443

Machinery andvehicles$—

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 32.9% and 30.8% for the years ended March 31, 2016
and 2017, respectively.
A reconciliation between the statutory tax rate and the effective tax rate for the years ended March 31, 2016 and 2017 was asfollows:
Statutory tax rate
Items such as entertainment expenses permanently nondeductible for tax purposes
Items such as dividend income permanently non-taxable
Change in valuation allowance
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 tax assets at fiscal year-end by the change of tax rate
Liquidation of subsidiaries
Other
Effective tax rate

2016

32.9%

2017

30.8%

1.2

1.3

(27.2)
4.5
5.0
0.6(20.9)
27.2
(1.1)
1.5
2.3
1.4
27.4%

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

The significant components of deferred tax assets and liabilities at March 31, 2016 and 2017 were as follows:
2016

Millions of yen

2017

Thousands of U.S. dollars
2017

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

¥20
268
70
132
19
536
934
721
(1,643)
1,059

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

$187
1,489
553
36
294
5,428
11,106
6,222(15,590)
9,760

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

—
(81)
(54)
(25)
(64)
(577)
(361)
(141)
(1,307)¥(247)

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

(250)
(722)
(446)
(187)
(1,239)(3,048)(2,941)(1,382)(10,250)$(481)Thousands of U.S. dollars
2017

Tooling and officefurniture$—

Goodwill$2,344

Total$2,344

1,346

250

—

1,596

$1,346$250$2,344$3,949

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 Functional Components Division and SMK Manufacturing, Inc. suffered declining trends in net sales and income due to intense
price competition in the market, future cash flows from their asset groups were estimated after reviewing their business plans. As
a result, it was found that they could not generate sufficient earnings to recover the carrying value of the respective asset groups,
therefore their book value was reduced to the recoverable amounts.
The recoverable amount of the asset group of the Functional Components Division was measured at value in use, and since nofuture cash flows are expected regarding one of the newly acquired businesses, the book value of goodwill regarding this businessin the fiscal year ended March 31, 2017 was entirely recognized as an impairment loss. The recoverable amount of the asset
group of SMK Manufacturing, Inc. was measured at value in use, which was calculated by discounting future cash flows at 5.9%.

20 ANNUAL REPORT 2017

ANNUAL REPORT 2017 21

Note 14. Other comprehensive income

Note 16. Financial instruments

The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive
income for the years ended March 31, 2016 and 2017.
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

Thousands of U.S. dollars
2017¥(362)¥345$3,075

(278)

(98)

(874)

(641)
209
(431)

246
(74)
171

2,193
(660)
1,524

—

(3)

(27)

—

—

—

—
—
—

(3)
—
(3)

(27)
—
(27)

(874)

(469)

(4,180)

2016

65

—

—

(809)
—
(809)

(469)
—
(469)

(4,180)—(4,180)

(670)

217

1,934

(190)

(161)

(1,435)

(861)
286
(574)
¥(1,815)

56
(16)
39
¥(262)

499
(143)
348
$(2,335)

Note 15. Amounts per share
1. Profit attributable to owners of parent per share of common stock is based on the following information
Basic profit attributable to owners of parent per share:
Profit attributable to owners of parent
Profit attributable to owners of parent not attributable tocommon stockholders
Profit attributable to owners of parent attributable to common
stock
Average number of shares of common stock outstanding during
the year

Millions of yen

2017

Thousands of U.S. dollars
2017¥2,678¥1,017$9,065

—

—

—

2,678

1,017

9,065

2016

2016

Thousands of shares

70,6002017

67,064

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

Millions of yen

2016

¥—
2016

2017

Thousands of U.S. dollars
2017

¥—

$—

Thousands of shares

139
139
—

2017

15
15
—

(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,
the Company 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 ofeffectiveness of 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 18. Derivatives themselves do not serve as indicators of market risk involved in derivatives
transactions.
			 Information regarding fair value of financial instruments at March 31, 2016 and 2017 was summarized as follows:

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

2016

Millions of yen

2017

Thousands of U.S. dollars
2017Book value

Fair value

DifferenceBook value

Fair value

DifferenceBook value

Fair value

Difference

16,50916,509—14,853

14,853—132,391

132,391

—

2,147

2,147

—

2,063

2,063

—

18,38818,388—

4,808
10,305
6,245
7,241
26

4,808
10,305
6,245
7,201
26

—
—
—
(39)
—

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

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

—
—
—
(3)
—

54,532104,287
12,54160,13918

54,532104,287
12,541
60,103
18

—
—
—
(27)
—

¥10,668110¥10,668
110

¥—
—

¥10,011
106¥10,011
106

¥—
—

$89,233
945$89,233
945

$—
—

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

2016

¥258

Millions of yen

2017

¥306

Thousands of U.S. dollars
2017$2,728

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.

22 ANNUAL REPORT 2017

ANNUAL REPORT 2017 23

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

2016

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

2017

(Interest related)Thousands of U.S. dollars
2017

Due within
one year

Due after
one yearthroughfive years

Due after
five years
throughten years

16,509

—

—

—

56

—

64

—

—

570

—

—

¥27,141

¥56

¥—

¥24,914¥—¥—$222,070

$—

$—

¥10,631¥—¥—

Due within
one year

Due after
one yearthroughfive years

Due after
five years
throughten years

Due within
one year$89,099$—$—

14,853——132,391——¥9,996¥—¥—Due after
one yearthroughfive years

Due after
five years
throughten years

Note 17. Securities

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

Fair value

Cost

Millions of yen

Unrealized
gain (loss)

2017

Fair value

Cost

Unrealized
gain (loss)

Thousands of U.S. dollars
2017

Fair value

Cost

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

2016

2017

¥—
¥5,314

Unrealized
gain (loss)¥1,76756
1,824¥1,367
21
1,389

¥400
34
435

¥1,63264
1,697¥1,051
21
1,073

¥581
42
623

$14,547
570
15,126$9,368
187
9,564$5,179
374
5,553

323
323
¥2,147517
517¥1,906

(193)
366
(193)
366
¥241 ¥2,063

502
502¥1,575

(135)
3,262
(135)
3,262
¥487 $18,388

4,475
4,475
$14,039(1,203)(1,203)$4,341

Unlisted stocks of ¥57 million at March 31, 2016 and ¥95 million ($847 thousand) at March 31, 2017 are not included in theabove table because there were no quoted market prices available and the fair value is extremely difficult to determine.

Millions of yen

2016

Investment securities

¥201

2017

¥210

Thousands of U.S. dollars
2017$1,872

Information regarding sales of securities classified as other securities for the years ended March 31, 2016 and 2017 were as
follows:
Millions of yen

2016

Proceeds from sales of securities
StocksGains on sales
Stocks
Losses on sales
Stocks

¥360
360
294
294
0
0

2017

¥430
430
99
99
0
0

Thousands of U.S. dollars
2017$3,833
3,833
882
882
0
0

Impairment of investment securities classified as other securities for the years ended March 31, 2016 and 2017 were as follows:2016

StocksMillions of yen

¥16

2017

¥—

Thousands of U.S. dollars
2017

$—

Note 18. Derivatives
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 amount2016
Forward foreign exchange contracts:
Sell: US$ / Buy: Yen¥653
Sell: US$ / Buy: GBP—
Sell: US$ / Buy: EUR
—
Total
¥653

2017

¥1,28144
29¥1,355

Fair value

2016

¥26
—
—
¥26

2017

Unrealized gain (loss)2016¥6 ¥26(0)—0—¥6 ¥26

2017

Contract
amount2017

Fair value
2017

Fair value

2017

Contract
amountDue after
one year

Fair value

2016

2017

2016

¥800

¥—

¥800

¥—

¥(3) $7,131$7,131$(27)¥3,598¥3,598¥1,938¥—¥—$32,071$17,274

$—

2017

2017

2017

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

The profit of investment and rental property for the years ended March 31, 2016 and 2017 amounted to ¥639 million and ¥627
million ($5,589 thousand), respectively.
Information on the fair value of investment and rental property at March 31, 2016 and 2017 was summarized as follows:
Millions of yen

2016

Investment securities in unconsolidated subsidiaries and affiliates are as follows:

Thousands of U.S. dollars

Due after one year

Note 19. Investment and rental property

Information regarding securities classified as other securities at March 31, 2016 and 2017 was summarized as follows:
2016

Millions of yen

Contract amount

Unrealized
gain (loss)
2017¥6 $11,418 $53 $53
(0)
392
(0)
(0)
0
258
0
0
¥6 $12,078 $53 $53

Book value Book value
beginning end of theof the year
year

¥9,019¥8,875

Fair value¥16,132

Thousands of U.S. dollars
2017

2017

Book value Book value
beginning end of theof the yearyear

¥8,875¥8,410

Fair value¥15,481

Book value Book value
beginning end of theof the year
year

$79,107

Fair value$74,962 $137,989

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 20. 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.
1. Business segment information

2016

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

2017

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¥27,095—
27,0952,215
14,687¥35,449—
35,449370
15,459¥14,467—
14,467
1,838
6,298¥77,011—
77,011
4,423
36,445

2,093

780

703

3,577

108

2,116

2,080

652

4,850

3,065

Other

Adjustment

Consolidated

¥—
—
—
—
18,511¥77,206—
77,206
4,171
67,606

3,686

—

3,686

7,916

—

7,916

Adjustment

Consolidated

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

Total¥195 ¥77,206——
195
77,206(252)
4,171
12,64949,094

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

2,117

1,131

636

3,885

258

4,143

—

4,143

2,263

1,637

543

4,443

152

4,595

—

4,595

(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.
24 ANNUAL REPORT 2017

ANNUAL REPORT 2017 25

2017

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

5. Information about the amortization of goodwill and the balance of goodwill

Thousands of U.S. dollars

Subtotal

Other

Total

Adjustment

Consolidated
2016$209,814—
209,814
17,105
122,818$242,785 $106,346——
242,785
106,346(7,006)
1,007
125,41253,900$558,945—
558,945
11,106302,139$2,344 $561,289
—
—
2,344
561,289(5,491)
5,615
106,311
408,450$————
147,010$561,289—
561,289
5,615
555,468

18,87010,081

5,669

34,6292,300

36,928—36,92820,171

14,591

4,840

39,602

1,355

40,957—40,957

Other is business segments not included in the reportable segments. It includes other parts, leasing, property rental, factoring
and worker dispatch businesses.
Adjustment includes corporate assets which are not allocable to the reportable segments.
2. Geographical information(1 ) Net sales
2016

Net sales
2017

Net sales
2017

Net sales

Fixed assets
2017

Fixed assets

Fixed assets

Amortization
BalanceJapan¥12,938Japan¥13,545
Japan$120,733

China

Asia

¥19,470
China

China

¥11,968

Asia¥16,014

Other

Japan

¥15,843

Other

Japan

Other

$66,485

China

Asia
Philippines¥15,402

China¥1,181

Other

Consolidated¥2,873¥1¥77,206

North America
U.S.A.
Other

EuropeConsolidated¥22,083¥591¥3,277¥62,971

EuropeConsolidated$29,209$561,289

Thousands of U.S. dollars$142,740¥3,528¥28,771

EuropeMillions of yen¥7,459

Asia

North America
U.S.A.
Other¥2,439
Asia
Philippines¥3,198¥2,344

China

Asia
Philippines

North America
U.S.A.
Other$196,836$5,268

Millions of yen

Other

2017

Amortization
Balance

¥91
—

¥45
—

Subtotal

¥86
380

Other

Adjustment

Consolidated

Other

Adjustment

Consolidated

Adjustment

Consolidated

¥—
—

¥—
—

¥86
380

Millions of yen

Subtotal

¥137
—

¥—
—

¥—
—

¥137
—

$—
—

$811
—

$401
—

Subtotal$1,221
—

Other

$—
—

$—
—

$1,221
—

¥285

North
America

EuropeConsolidated

¥377

¥437

¥22,912

North
America

EuropeConsolidated¥411¥21,970

Japan

EuropeConsolidated$137,285$28,505$20,893$3,663$195,829

Note 21. Related party transactions
Significant transactions with related parties for the years ended March 31, 2016 and 2017 were as follows:
Millions of yen

2016

Terutaka Ikeda (Auditor)
2017

Terutaka Ikeda (Supreme corporate adviser)

Other

¥379

¥233

Other

$3,378

Paul Evans (Director)$2,077

Terutaka Ikeda (Supreme corporate adviser)

2016

¥—
—
—
—
—
—
¥—

2017

¥—
443
—
443
—
—
¥443

Purchase ofgolf
membership

¥12

¥14

Transactions
Guaranty
money
deposited

¥—

¥14

Millions of yen

Rent

¥14

¥1

Balances
Other
Other
current
investments
assets¥14¥1Transactions
Collectionof loanInterest
receivable
income¥1¥1Balances
Other
Long-term
current
loans
assetsreceivable

¥1

¥35

Purchase ofgolf
membership$107

Transactions
Guaranty
money
deposited

$—

Rent

$125

Balances
Other
Other
current
investments
assets$125$9Thousands of U.S. dollars

Paul Evans (Director)
Millions of yen¥—Balances
Other
Other
current
investments
assetsThousands of U.S. dollars

2017

North
AmericaTransactions
Guaranty
money
deposited
Rent

Millions of yen

Millions of yen

4. Information about the loss on impairment of fixed assets

26 ANNUAL REPORT 2017

Connection
SystemDivision

Reportable Segments
Functional
Components Touch Panel
Division
Division

¥—
—

¥2
45

Thousands of U.S. dollars

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

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

Connection
SystemDivision¥83
335

Impairment loss on goodwill in the amount of ¥263 million ($2,344 thousand) was recognized for the year ended March 31, 2017.

Thousands of U.S. dollars

2017

2017

Reportable Segments
Functional
Components Touch Panel
Division
Division¥——Millions of yen

Millions of yen(2 ) Fixed assets
2016

Amortization
Balance

Connection
SystemDivision

Reportable Segments
Functional
Components Touch Panel
Division
DivisionTransactions
Collectionof loanInterest
receivable
income$11$13Balances
Other
Long-term
current
loans
assetsreceivable

$12

$315

Thousands of U.S. dollars
2017

$—
3,949
—
3,949
—
—
$3,949

ANNUAL REPORT 2017 27

Report of Independent Auditors
SMK Corporation and Consolidated Subsidiaries

Officer Introduction(As of June 22, 2017)

Directors

Yoshiyuki Kaku

Mikio Wakabayashi

Director andExecutive Deputy President,
Chief Technology Officer

Yasumitsu Ikeda

Director andExecutive Vice President

President,
Chief Executive Officer andChief Operating Officer

Paul Evans

Toshio Nakamura

Director andExecutive Vice President

Kaoru Ishikawa

Director

Director

Auditors

Tetsuya Nakamura
Auditor andChairman of Auditors’Meeting

Naru Nakashima
AuditorIchiro Shimizu
AuditorMorikazu Fukui
AuditorCorporate Executive Officers

Kohei Ohgaki

Executive Vice President,
Chief Financial Officer

Mitsuhiko Goto
Vice President

28 ANNUAL REPORT 2017

Shigechika Yanagi Hideo Matsumoto Hiroshi Miyakawa
Executive Vice President

Vice President

Vice President

Tetsuo Hara

Mitsuyuki Masubuchi

Hiroshi Usami

Vice President

Vice President

Vice President,
Chief Information Officer

Takemi Ishibashi

Masanobu Ikeo

Atsushi Obinata

Fumikazu Hata

Vice President

Vice President

Vice President

Vice President

ANNUAL REPORT 2017 29

Corporate Information(As of March 31, 2017)

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

Primary business

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

Number of shareholders

Major Shareholders (top ten)

7,509

Shares Owned(1,000 shares)

Percentageof Shares (%)

Capital¥ 7,996,828,021

Mizuho Bank, Ltd.

3,287

4.96

Stock exchange listing

Tokyo Stock Exchange

Administrator ofshareholders register

Mitsubishi UFJ Trust and Banking
Corporation

SMK Cooperating Company Share
Holding Association

3,266

4.93

Nippon Life Insurance Company

3,241

4.89

Independent auditors

Ernst & Young ShinNihon LLC
Tokyo, Japan

Dai Nippon Printing Co., Ltd.

3,200

4.83

Employees (SMK-Group)

6,188

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

2,508

3.79

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

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

2,134

3.22

SMK Employees Share Holding Association

1,845

2.78

Mitsubishi UFJ Trust and Banking Corporation

1,800

2.72

The Showa Ikeda Memorial Foundation

1,500

2.26

Japan Trustee Services Bank, Ltd.
(Trust Account)

1,454

2.19

Global Network
Domestic Bases（9 Bases）

Overseas Bases（18 Countries/Areas, 37 Bases）

Shinagawa, Tokyo（Head office）
Gate City Ohsaki, Toyama,
Hitachi, Osaka, Nagoya, Ibaraki,
Hokuriku and Fukuoka
Taiwan, Hong Kong, China,
Singapore, Thailand, Malaysia,
Philippines, Korea, Ireland, U.K.,
France, Germany, Belgium,
Hungary, Slovakia, U.S.A., Mexico
and Brazil

Note:SMK holds 8,745 thousand shares of treasury stock, but theseare excluded from the above list. Figures for percentage ofshares are calculated excluding the treasury stock.

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

21,072,685 (28.10%)

Financial instruments dealers

1,036,631 ( 1.38%)

Other entities

10,087,406 (13.45%)

Foreign entities, etc.

8,304,021 (11.07%)

Individuals and others

34,499,257 (46.00%)

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 Office

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

Gate City Office＊ The Bluetooth® word mark and logos are registered trademarks owned by Bluetooth SIG, Inc. and any use of such marks by SMK Corporation isunder license.
＊ microSD is a registered trademark or trademark of SD-3C, LLC.
＊ 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