SEMI ANNUAL REPORT2017

For the six months ended September 30, 2017

Connection
SystemDivision
USB Type-CTM
Receptacle

Functional
Components
Division

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

LGMCard

Touch Panel
Division

SMK CORPORATION

Financial Highlights

SMK Corporation and Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen
Six months ended September 30
2016

Six months ended September 30
2017

Six months ended September 30
2017¥31,708747¥ 29,393
598$ 260,738
5,305(1,079)

900

7,984

Operating Results
Net sales
Operating income
Profit (loss) attributable toowners of parent

Financial Position
Total assets
Total net assets

As of March 31
2017

As of September 30
2017

As of September 30
2017¥62,318
31,318¥ 65,058
32,228$ 577,113
285,887

Six months ended September 30
2017

Six months ended September 30
2017

Yen
Six months ended September 30
2016

U.S. dollars

Per Share Data
Profit (loss) attributable toowners of parent¥  (15.87)

Basic

¥

13.62

$

0.12

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ￥112.73 = U.S. $1.00.

Net sales■ Full year

■ ■ First half

90,000Millions of yen

66,230■ Full year

3,000
39,31531,70830,0003,000

29,393

2,000

2015

2016

2017
Mar.

2017
Sep.

0

■ First half

yen

2,330
1,988

630

35.58

2016

■ Full year ■ First half

2017
Mar.

(1,079)2017
Sep.

60,000

15.17
15

2014

2015

1 SEMI ANNUAL REPORT 2017

2016

2017
Mar.

（1,500） 2014

Millions of yen

67,60656,235

2015

2016

2017
Mar.

2017
Sep.

Total net assets■ Full year ■ First half
40,00065,029

27.61

30

0

2015

598

Total assets

37.94

900

0
747

2014

1,017

2,113

80,000

45

2,077

1,500

Basic profit attributable to ownersof parent per share■ Full year

1,982
1,678

2,572

1,125

2014

Millions of yen
2,678

2,541
1,893

1,000

0

■ Full year ■ ■ First half

4,000

62,971

32,171Millions of yen

4,171

60,00034,881■ ■ First half

5,000

77,206
65,796

Profit (loss) attributable toowners of parent

Operating income

62,31865,05831,476

Millions of yen

34,18733,2872015

2016

31,31832,228

2017
Mar.

2017
Sep.

30,00040,00020,00020,00010,000

13.62

2017
Sep.

0

2014

2015

2016

2017
Mar.

2017
Sep.

0

2014

To Our Shareholders and Investors
We are obliged to you for your continued
support and good patronage.
We would like to report on the outline andresults of the SMK Groupʼs businesses for the
first half of the 96th fiscal year (from April 1,2017 to September 30, 2017).
We look forward to your continuing supportand encouragement.
November 2017
Yasumitsu Ikeda
President, CEO and COO

Performance Overview
During the first half of the 96th fiscal year ended September 30, 2017, the global economy remainedsolid despite heightened geopolitical risk. The Japanese economy maintained moderate growth against
the backdrop of recovering corporate earnings and the government’s fiscal spending, remaining in an
economic expansion phase.
Under these circumstances, the SMK Group enjoyed steady growth in sales of connectors for thehealthcare market, and sales of connectors for rearview cameras in the car electronics market werealso solid. However, 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 car electronics weresluggish partly due to intensified competition with other manufacturers.
Net sales for the first half decreased year on year despite efforts to launch new products
proactively. Although initiatives were taken to reduce cost of sales and cut expenses, the sales drop
led to a decline in operating profit.
Going forward, the SMK Group will strive to further improve its profitability by increasing
productivity and cutting expenses, secure sales in its mainstay markets and increase revenue throughnew businesses. The SMK Group will not only respond to changes in the existing businesses but also
proceed proactively with efforts to expand operations in new markets which are expected to grow inthe medium to long term, such as the environment and energy, healthcare, wearable devices and IoT(Internet of Things), and to create new businesses by cooperating with partner companies andpromoting Open Innovation.
Although the uncertainty in the business environment is expected to continue going forward, allemployees are committed to working together to build a corporate structure that realizes sustainablegrowth through swift responses to changes in the business environment.
SEMI ANNUAL REPORT 2017 2

Overview of Consolidated Results by Division(April 1, 2017 to September 30, 2017)

Touch Panel Division

Others¥4,857 Million
16.5%¥162 Million
0.6%

Net sales¥ 29,393
MillionConnection System
Division¥14,435 Million
49.1%

Functional Components
Division¥9,939 Million
33.8%*Others: businesses of other electronic parts, lease, real-estate rental, and worker dispatching undertakings.

Connection System Division
Sales of connectors in the information and communication
markets increased year on year, as sales grew for connectors
for tablets of customers in North America although connectors
for smartphones struggled due to intensified competition withother connector manufacturers for supply to customers in the
FPC to Board Connectors“FB-9 Series”
Applications:
Smartphones, Tablet PC,
other mobile devices

Chinese region. Sales of connectors in the car electronics
market, which continues to show stable growth, rose steadily
mainly for products for rearview cameras, with theaccelerating development of car electronics serving as a

Major Products

tailwind. Sales of connectors for the industrial machinery● Coaxial Connectors

market increased sharply year on year due to continued strong● Board to Board Connectors● FPC Connectors● Jacks

3 SEMI ANNUAL REPORT 2017

growth in connectors for the healthcare market.

Functional Components Division
Sales of remote control units, our mainstay products,
remained solid for sanitary goods in Japan. However, sales ofthe products for set-top boxes dropped sharply year on year,
affected by a decrease in sales volume to U.S. customers due
Bluetooth® Smart-supported
Standard Voice Remote Control
Applications:
Set-Top Box,
Home Network Devices

to increased competition with other manufacturers of remotecontrol units. As for units, sales increased year on year, as
sales of automotive camera modules expanded steadily
although products for U.S.-bound home equipment fell due to
production adjustments by customers. Sales of switches

Major Productsslightly decreased year on year, as sales of switches for● Remote Control Unitssmartphones dropped due to order adjustments associated● Wireless Units● Switcheswith changeovers to new smartphone models.

● Camera Modules

Touch Panel Division
In the market for touch panels for car navigation systems andautomotive center consoles, our mainstay products, themarket environment continues to change significantly due to ashift in demand to capacitive models from resistive models.
Capacitive Touch Panel“CapDuo Touch”
Applications:
Automotive Center Console,
Factory Automated (FA) Equipment,
etc.

Despite new orders won for capacitive models and orders
continuously received for touch panels for the industrial
machinery market, such as for machine tools other than thosefor car electronics and for office equipment, sales of overall
touch panels fell year on year because a decline in sales ofMajor Products

resistive models was not fully offset.

● Resistive Touch Panels● Capacitive Touch Panels● Optical Touch Panels

SEMI ANNUAL REPORT 2017 4

Topics

SMK’s Activity for IoT Market
SMK Corporation is focusing on developing products and proposing solutions for the Internet of Things(IoT) business, for which demand is expected to expand rapidly going forward.
SMK’s key strengths in the IoT business are hardware and software technologies for network connection,
Human Machine Interface (HMI) technology for the realization of Home Automation, and miniature
mounting, waterproof and precision molding technologies for device development. SMK is stepping up
efforts to meet new communication standards, especially for wireless communication modules.
For differentiation from competitors, SMK promotes Open Innovation and strengthen collaborations
beyond the electronic parts industry, with a view to expanding the IoT business.

Sigfox Modules

Infrastructure
Monitoring water supply andsewerage systems
Detecting gas leaks
Managing parking lots

Offices andBuildings
Ensuring security
Managing disaster
preparedness

SMK Solutions
Creating New Values

Medical Treatment
and Nursing Care
Home medical equipment
Managing personnel allocation
Increasing work efficiency

Factories
Monitoring the indoor
environment
Monitoring equipment failures

IP500™ Modules

5 SEMI ANNUAL REPORT 2017

SMK Exhibits at
CEATEC JAPAN 2017

SMK joined the CEATEC JAPAN 2017 CyberPhysical System (CPS) / Internet of Things(IoT) exhibition held at the Makuhari Messe
convention center in Chiba for a four-day run
Agriculture andFisheries
Saving labor, improving
efficiency

Bluetooth® low energy
Modulesfrom October 3 to 6.
Centering on the potentially expanding
market such as Low Power Wide Area (LPWA)

Managing crop yields

communication for the Internet of Things,

Managing quality

SMK showcased Open Innovation activities
and Home Automation among others, giving
special consideration to allowing visitors to

Logistics/
Distribution

experience them through demonstrations.
SMK demonstrated a wide product lineup of

Realizing traceability

LPWA communication modules and had many

Monitoring drivers
Increasing work efficiency

visitors recognize SMK’s competitive
advantage in and the features of module for
IP500TM, a LPWA network standard originatedin Germany, which was displayed only by SMK.

Houses andHome Appliances

As a result, SMK’s booth drew far more
visitors than the initial target.

Ensuring security
Managing home appliances
Monitoring people

Bluetooth®
Smart Modules

SEMI ANNUAL REPORT 2017 6

Consolidated Balance Sheets

SMK Corporation and Consolidated Subsidiaries
Thousands of
U.S. dollars

Millions of yen
As of March 31

As of September 30

As of September 30¥ 10,011¥10,890$ 96,603

106

99

878

14,853

16,345

144,992

(48)

(49)

(435)

7,199

7,712

68,411

Deferred tax assets

431

854

7,576

Other current assets

1,719

1,100

9,758

34,27436,954

327,810

2,305

2,635

23,374Long-term loans receivable

117

126

1,118

Asset for retirement benefits

860

921

8,170

Other investments

554

578

5,127

Allowance for doubtful accounts

(102)

(87)

(772)

3,736

4,174

37,027

Land

7,027

7,044

62,486

Buildings

21,27521,363

189,506

Machinery and vehicles

22,02522,395

198,661

Tooling and office furniture

23,49423,506

208,516

100

153

1,357

73,92374,463

660,543(51,953)(52,900)(469,263)

21,97021,563

191,280

Deferred tax assets

487

669

5,935

Intangible assets

1,850

1,696

15,045

2,337

2,366

20,988¥ 62,318¥65,058$577,113

Assets

2017

2017

2017

Current assets
Cash and cash equivalents
Time deposits
Notes and accounts receivable, trade
Allowance for doubtful accounts
Inventories

Investments and long-term loans
Investment securities

Property, plant and equipment

Construction in progressLess-accumulated depreciation

Other assets

Total assets

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ￥112.73 = U.S. $1.00.
7 SEMI ANNUAL REPORT 2017

Thousands of
U.S. dollars

Millions of yen
As of March 31

As of September 30

As of September 30¥13,592¥14,832$131,571

6,118

6,438

57,110Accrued income taxes

647

579

5,136

Accrued bonuses

626

774

6,866

Accrued directors’ and officers’ bonuses

24

ー

ー

Accounts payable, non-trade

1,407

1,487

13,191Other current liabilities

1,710

2,034

18,04324,127

26,145

231,926

4,855

4,646

41,214

Deferred tax liabilities

974

1,009

8,951

Accrued directors' and officers' retirement benefits

203

184

1,632

Liability for retirement benefits

54

68

603

Other long-term liabilities

784

775

6,875

6,872

6,684

59,292

Issued : 75,000,000 shares

7,996

7,996

70,931

Capital surplus

12,057

12,057

106,955

Retained earnings

16,614

17,183

152,426

Treasury stock(3,995)(3,998)(35,465)

32,672

33,239294,855

348

507

4,497

(3)

(10)

(89)

(1,976)(1,689)(14,983)

263

181

1,606

(1,368)(1,010)(8,959)14

ーー31,31832,228285,887¥62,318¥65,058$577,113

Liabilities and net assets

2017

2017

2017

Current liabilities
Short-term loans payable
Notes and accounts payable, tradeLong-term liabilities
Long-term debt

Net assets
Shareholders' equity
Common stock
Authorized : 195,961,274 shares

Accumulated other comprehensive income
Net unrealized gains (losses) on other securities
Net unrealized gains (losses) from hedging instruments
Foreign currency translation adjustments
Retirement benefits asset and liability adjustments
Non-controlling interests

Total liabilities and net assets

SEMI ANNUAL REPORT 2017 8

Consolidated Statements of Income
SMK Corporation and Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen
Six months ended
September 30

Six months ended
September 30

Six months ended
September 30¥31,708
26,036
4,924
747¥29,393
23,8394,954
598$260,738
211,470
43,946
5,305

Other income
Interest and dividend income
Rent income
Foreign exchange gain, net
Gain on sales of fixed assets
Gain on sales of investment securities
Gain on redemption of investment securities
Gain on reversal of share subscription rights
Other
Total other income

45
624
ー
40
31
ー
20
198
961

48
614
72
41
ー
46
ー
151
974

426
5,447
639
364
ー
408
ー
1,339
8,640

Other expenses
Interest expense
Rent expense
Foreign exchange loss, net
Loss on disposal of fixed assets
Loss on valuation of investment securities
Loss on impairment of fixed assets
Other
Total other expenses

67
297
2,021
136
ー
ー
80
2,603

55
280
ー
58
178
271
54
899

488
2,484
ー
515
1,579
2,404
479
7,975

(895)

674

5,979

274
(67)
(1,102)(22)¥(1,079)

380
(591)
885
(14)
900

3,371
(5,243)7,851(124)$ 7,984

2016

Net sales
Cost of sales
Selling, general and administrative expenses
Operating income

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

2017

¥

2017

Yen

Per share data
Profit (loss) attributable to owners of parent
Basic¥ (15.87)

U.S. dollars¥ 13.62$

0.12

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ￥112.73 = U.S. $1.00.

Consolidated Statements of Comprehensive Income
SMK Corporation and Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen
Six months ended
September 30

2016

Profit (loss)
Other comprehensive income
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
9 SEMI ANNUAL REPORT 2017

Six months ended
September 30

2017

885

Six months ended
September 30

2017¥(1,102)

¥

$

7,851

(53)
ー
(1,263)(54)(1,371)¥(2,473)

158
(6)
286
(81)
357
¥ 1,243

1,402
(53)
2,537
(719)
3,167
$ 11,026¥(2,451)(22)¥ 1,257(14)$ 11,151(124)

Consolidated Statements of Cash FlowsSMK Corporation and Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen
Six months ended
September 30

2016Cash flows from operating activities
Profit (loss) before income taxes
Depreciation and amortization
Loss on impairment of fixed assets
Amortization of goodwill
Increase (decrease) in accrued bonuses
Increase (decrease) in accrued directors' and officers' retirement benefits
Increase (decrease) in asset and liability for retirement benefits
Interest and dividend income
Interest expense(Gain) loss on sales of investment securities(Gain) loss on redemption of investment securities(Gain) loss on sales of fixed assets(Gain) loss on revaluation of investment securities
Loss on disposal of fixed assets(Increase) decrease in notes and accounts receivable, trade(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable, trade
Increase (decrease) in accounts receivable, non-trade
Increase (decrease) in accounts payable, non-trade
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from time deposits
Purchases of fixed assets
Proceeds from sales of fixed assets
Payments for disposal of fixed assets
Purchases of intangible fixed assets
Purchases of investment securities
Proceeds from sales of investment securities
Proceeds from redemption of investment securities
Payments for execution of loans
Collection of loans receivable
Net cash provided by (used in) investing activities
Cash flows from financing activities
Increase (decrease) in short-term loans payable
Proceeds from long-term debt
Payments of long-term debt
Purchases of treasury stock
Proceeds from sales of treasury stock
Dividends paid
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 six months and the year¥ (895)
2,136
ー
52
(246)
11
(69)
(45)
67
(31)
ー
(40)
ー
136
(2,106)
(314)
3,321
880
(2,399)
131
588
46
(62)
(328)
243

Six months ended
September 30

2017

Six months ended
September 30

2017

¥

674
2,085
271
ー
144
(19)
(166)
(48)
55
(0)
(46)
(40)
178
58
(1,183)
(416)
(105)
250
248
462
2,402
48
(54)
(436)
1,959

$ 5,979
18,496
2,404
ー
1,277
(169)
(1,473)
(426)
488
(3)
(408)
(355)
1,579
515
(10,494)(3,690)
(931)
2,218
2,200
4,098
21,308426(479)(3,868)17,378(44)
40(2,480)
159
ー
(134)
(25)
50
ー
(25)
24
(2,434)(39)
49(1,821)
62
(29)
(13)
(218)
0
68
(20)
47
(1,914)(346)
435(16,154)
550
(257)
(115)
(1,934)
0
603
(177)
417
(16,979)

5,395
800(1,394)(1,575)
24
(559)
2,690
(164)
335
10,668¥11,003

487
1,950(1,408)
(1)
ー
(329)
697
136
878
10,011¥10,890

4,320
17,298(12,490)(9)ー(2,918)
6,183
1,206
7,789
88,805$96,603

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ￥112.73 = U.S. $1.00.
SEMI ANNUAL REPORT 2017 10

Corporate Information(As of September 30, 2017)

Corporate Data
Name

Shares and Shareholders
SMK Corporation

Established

April 3, 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

75,000,000

Number of shareholders

Capital¥7,996,828,021

Stock exchange listing

Tokyo Stock Exchange

Administrator ofshareholders register

Mitsubishi UFJ Trust and Banking
Corporation

Independent auditors

Ernst & Young ShinNihon LLC
Tokyo, Japan

Employees (SMK-Group)

5,968

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

Major shareholders (top ten)

6,974
Shares owned
Percentage(1,000 shares) of shares (%)

SMK Cooperating Company Share
Holding Association

3,376

5.10

Mizuho Bank, Ltd.

3,287

4.96

Nippon Life Insurance Company

3,241

4.89

Dai Nippon Printing Co., Ltd.

3,200

4.83

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

2,508

3.79

SMK Employees Share Holding
Association

1,922

2.90

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）

1,441

2.18

Terutaka Ikeda

1,420

2.14

Note: SMK holds 8,749 thousand shares of treasury stock, but these areexcluded from the above list. Figures for percentage of shares arecalculated excluding the treasury stock.

Officer Introduction
Corporate Executive Officers

Directors
President,Chief Executive Officer andChief Operating Officer
Director and Executive Deputy President,
Chief Technology Officer

Yasumitsu Ikeda

Executive Vice President, Chief Financial Officer

Kohei Ohgaki

Yoshiyuki Kaku

Executive Vice President

Shigechika Yanagi

Director and Executive Vice President

Mikio Wakabayashi

Vice President

Hideo Matsumoto

Director and Executive Vice President

Paul Evans

Vice President

Hiroshi Miyakawa

Director

Toshio Nakamura

Vice President

Takemi Ishibashi

Director

Kaoru Ishikawa

Vice President

Masanobu Ikeo

Vice President

Mitsuhiko Goto

Vice President

Tetsuo Hara

Auditors
Auditor and Chairman of Auditors’ Meeting

Tetsuya Nakamura

Vice President

Mitsuyuki Masubuchi

AuditorNaru Nakashima

Vice President, Chief Information Officer

Hiroshi Usami

AuditorIchiro Shimizu

Vice President

Atsushi Obinata

AuditorMorikazu Fukui

Vice President

Fumikazu Hata

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

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

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