+

Annual Report 2019
For the year ended March 31, 2019

Meiko Electronics Co., Ltd.

The Meiko Group consists of Meiko Electronics Co., Ltd. (the “Company”), and its 19
subsidiaries (9 consolidated subsidiaries and 10 non-consolidated subsidiaries) (the“Group”). As the Group’s businesses are primarily in PCB design, manufacturing, sales,
and ancillary operations, the description of other businesses is omitted as they are of little
significance.

Forward-looking Statements:
This annual report contains forward-looking statements that are based on the information
currently available to management, and estimates involving uncertain factors thought likely
to have an effect on future results. As such, they include various risks and uncertainties.
Actual results may differ materially from these projections for a variety of reasons, includingchanges in business environments, market trends and exchange rate fluctuations relevantto the business of Meiko Electronics Co., Ltd.

1

Contents
Five-year Financial Summary ............................................................................................ 3
Financial Review: Management’s Discussion and Analysis ........................................... 5
Business Risks ................................................................................................................... 8
Consolidated Financial Statements ................................................................................ 11
Principal Subsidiaries and Affiliates ............................................................................... 32
Principal Shareholders ..................................................................................................... 33
Corporate History ............................................................................................................. 34
Corporate Data (As of March 31, 2019) ........................................................................... 36
Meiko Share Performance in FY2019 Compared with Indices ...................................... 372

Five-year Financial Summary(For the years ended/as of March 31)
2015

2016

2017

2018

2019

(millions of yen, except per share amounts)
Consolidated financial indicators:¥90,895¥95,287¥95,912¥108,542¥118,911

Ordinary income (loss)

1,075

(492)

2,981

4,795

8,611

Profit (loss) attributable to ownersof parent(9,573)(11,250)

1,767

4,373

6,744

Comprehensive income(5,954)(14,709)

(32)

5,633

6,482

Net assets

38,62328,76428,54033,04233,588

Total assets

122,964

109,605

103,578

110,316

120,656

Net assets per share (yen)1,475.59

897.97882.84

1,071.37

1,283.24

Net income (loss) per share (yen)(365.76)(429.83)54.14

160.34257.65

—

—

44.06

108.67—

Equity ratio

31.4%

26.0%

27.3%

30.0%

27.8%

Return on equity (ROE)-23.0%-33.5%

6.2%

14.3%

20.2%

Price earnings ratio (PER) (times)

—

—

16.2

11.4

6.7

Cash flows from operating activities

2,238

9,932

11,612

10,42911,467

Cash flows from investing activities(6,986)(1,737)(4,322)(8,868)(17,293)

Cash flows from financing activities

4,861

1,967

(9,030)(3,531)

1,957

Cash and cash equivalents
at the end of the period

9,491

19,313

17,19615,19011,419Number of employees

10,895

9,491

10,677

11,64011,899

[609]

[633]

[885]

[1,182][1,351]

Net sales

Net income per share (diluted)(yen)[Average number of temporary
staff]

3

Net sales

Net income (loss), basic per share
Net income, diluted per share(yen)(millions of yen)

¥150,000¥120,000¥90,000¥60,000¥30,000
¥0

2015
2015

2016

2017

2018

2019

2016

Net income (loss), basic per share (yen)Profit (loss) attributable to owners ofparent

2017

2018

2019

Net income, diluted per share (yen)Cash flows¥15,000(millions of yen)(millions of yen)¥300.00¥200.00¥100.00¥0.00(¥100.00)(¥200.00)(¥300.00)(¥400.00)(¥500.00)¥8,000¥4,000¥0¥10,000¥5,000¥0(¥5,000)(¥10,000)(¥4,000)(¥15,000)(¥8,000)(¥20,000)(¥12,000)

2015

2016

2017

2018

2019

(percentage)(millions of yen)

¥40,000¥30,000

0.0%-10.0%¥10,000-20.0%

2015

2016

2017

2018

2019

-30.0%
2015

2016

2017

2018

2019

-40.0%

Price earnings ratio (PER)
50.0 times(times)¥150,000(millions of yen)

2019

10.0%

Total assets¥120,000

40.0 times¥90,000

30.0 times¥60,000

20.0 times¥30,000

10.0 times
2015

2016

2017

2018

0.0 times

2019

Net assets per share¥2,500.00
(yen)

2018

Cash flows from investing activities

20.0%¥20,000¥2,000.00¥1,500.00¥1,000.00¥500.00
¥0.00

2017

30.0%

¥50,000¥0

2016

Return on equity (ROE)

Net assets

¥0

2015

Cash flows from operating activities
Cash flows from financing activities

2015

2016

2017

2018

2019

4

2015

2016

2017

2018

2019

Financial Review: Management’s Discussion and Analysis
The forward-looking statements in this section are based on the Group’s assumptions
as of the end of the current consolidated fiscal year.
(1) Significant accounting policies and estimates
The consolidated financial statements of the Group have been prepared in conformity
with accounting principles generally accepted in Japan (“Japanese GAAP”). The
presentation of these consolidated financial statements requires estimates that affectthe selection and application of accounting policies, the reporting amounts of assets,
liabilities, profits and expenses and the disclosure thereof. The management has
assessed those estimates in view of past results and reasonable assumptions,however, actual results may differ from the estimates presented due to uncertainties
that are intrinsic to estimates.
(2) Analysis of the Group’s financial position
AssetsAssets as of March 31, 2019 were ¥120,656 million, up ¥10,340 million from the end of
the previous fiscal year. This change mainly comprised a decrease of ¥3,771 million in
cash and cash equivalents, an increase of ¥923 million in trade notes and accounts
receivable, and an increase of ¥1,678 million in inventories in current assets, inaddition to an increase of ¥8,821 million in property, plant and equipment and a ¥1,808
million increase in investments and other assets in non-current assets.
Liabilities
Liabilities as of March 31, 2019 were ¥87,068 million, up ¥9,794 million from the end of
the previous fiscal year. This change mainly comprised a decrease of ¥5,625 million in
short-term borrowings, an increase of ¥3,908 million in the current portion of long-termborrowings, and a ¥1,399 million increase in other in current liabilities, in addition to anincrease of ¥11,462 million in long-term borrowings and a ¥705 million decrease inlease obligations in non-current liabilities.
Net assets
Net assets as of March 31, 2019 were ¥33,588 million, up ¥546 million from the end of
the previous fiscal year. This mainly reflected a ¥5,281 million decrease in capitalsurplus due to the purchase of Class A preference shares, and a ¥6,090 million
increase in retained earnings.

5(3) Analysis of business results
1) Net sales
The Group’s net sales for the fiscal year under review increased ¥10,369 million, or
9.6%, from the previous fiscal year to ¥118,911 million primarily due to robust sales of
PCBs (printed circuit boards) for automotive products on the back of the use ofelectronics in vehicles and a rise in demand for electric vehicles.
2) Gross profit
Cost of sales increased ¥8,748 million, or 9.7%, from the previous fiscal year to¥98,863 million, reflecting an increase in labor costs. Gross profit for the fiscal year
under review increased ¥1,621 million, or 8.8%, from the previous fiscal year to¥20,048 million. The gross margin dropped 0.1 percentage points from the previous
fiscal year to 16.9%.
3) Operating income
Selling, general and administrative expenses increased ¥152 million, or 1.4%, from theprevious fiscal year to ¥11,122 million due to an increase in personnel expenses.
Operating income for the fiscal year under review increased ¥1,469 million, or 19.7%,
from the previous fiscal year to ¥8,926 million, with an operating margin of 7.5%, up
0.6 percentage points, from the previous fiscal year.
4) Ordinary income
Non-operating income increased ¥671 million to ¥1,752 million primarily due to anincrease in foreign exchange gains. Non-operating expenses decreased ¥1,674 million
to ¥2,067 million, mainly due to a decrease in foreign exchange losses. As a result,ordinary income for the fiscal year under review increased ¥3,816 million, or 79.6%,
from the previous fiscal year to ¥8,611 million.
5) Profit attributable to owners of parent
Extraordinary income decreased ¥342 million to ¥1 million. Extraordinary losses
increased ¥453 million to ¥749 million. This reflected the recording of a net loss on
sales and disposal of property, plant and equipment of ¥224 million and businessstructure improvement expenses of ¥526 million for the fiscal year under review. The
total amount of income taxes–current and income taxes–deferred increased ¥622
million to ¥1,119 million.
As a result of the above, the profit attributable to owners of parent was ¥6,744 million,
up 54.2% compared with the previous fiscal year.

6(4) Analysis of source of funds and liquidity
1) Cash flows
Cash and cash equivalents (hereafter, “net cash”) as of March 31, 2019 decreased¥3,771 million from the previous fiscal year, to ¥11,419 million.
Cash flows of each category and their causes during the consolidated fiscal year
ended March 31, 2019 were as follows.
Net cash provided by operating activities for the fiscal year under review was ¥11,467
million, up ¥1,038 million from the previous fiscal year. Increases were mainly fromprofit before income taxes of ¥7,863 million and depreciation and amortization of¥6,281 million. The major decreases were an increase in trade notes and accounts
receivable of ¥1,205 million and an increase in inventories of ¥1,528 million.
Net cash used in investing activities was ¥17,293 million, up ¥8,425 million from theprevious fiscal year. The major outflow was ¥14,719 million for the purchase ofproperty, plant and equipment.
Net cash provided by financing activities was ¥1,957 million (net cash of ¥3,531 million
was used in the previous fiscal year). The major inflow comprised proceeds from longterm borrowings of ¥25,655 million. The major outflows comprised a net decrease in
short-term borrowings of ¥5,725 million, repayments of long-term borrowings of¥10,841 million, repayments of lease obligations of ¥1,197 million, and ¥5,282 million
for the purchase of treasury stock.
Trends in cash flow indicators of the Group are as follows:Year ended
March 31, 2017

Year ended
March 31, 2018Year ended
March 31, 2019

Equity ratio (%)

27.3

30.0

27.8

Market value equity ratio (%)

22.2

43.2

37.6

Cash flows versus Interest-bearing debt ratio(years)

4.5

4.9

5.2

Interest coverage ratio (times)

8.8

8.8

14.0

Equity ratio = Equity capital / Total assets
Market value equity ratio = Stock market capitalization / Total assets
Cash flow versus interest-bearing debt ratio = Interest-bearing debt / Operating cash flow
Interest coverage ratio = Operating cash flow / Interest payment
Notes:
1. Each indicator is calculated based on consolidated financial values.
2. The stock market capitalization is calculated as follows: term-end closing stock price x term-end
number of shares issued (after deducting shares of treasury stock). Common stocks are subject tothe calculation.
3. The operating cash flow represents the cash flow provided by (used in) operating activities as
indicated in the consolidated statements of cash flows. Of the liabilities posted on the consolidatedbalance sheets, the interest-bearing debt covers all the liabilities for which interest was paid. Theinterest payment represents the payment of interest indicated in the consolidated statements ofcash flows.

2) Financial policy
The Group procures funds for its operations from funds on hand or borrowings fromfinancial institutions. The Group has a policy of procuring funds for investment andloans as well as funds to acquire manufacturing equipment inside and outside Japan
via long-term borrowings from financial institutions. With regard to procuring suchfunds and the conditions of procurement, the Group strives to select the mostfavorable timing and conditions.
7Business Risks
Below are some of the major risks from among those described in the securities report(provided/filed in Japanese only) which may significantly affect any decisions made byinvestors.
Forward-looking statements are based on the Group’s best judgment during theconsolidated fiscal year under review.
(1) The Group’s major customers’ business performance
The Group’s major customers are manufacturers of automotive products, smartphones,
storage devices, office machinery, and digital household appliances, among others. The
Group’s major business is the manufacture and sale of PCBs, which are parts that
constitute a core function of finished products. Should economic trends or a natural
disaster adversely impact the Group’s major customers or the markets of the industries inwhich the Group’s customers operate, or lead to sluggish sales of their finished products,
such factors could impact the volume of orders received by the Group and affect theGroup’s business performance.
(2) Risks related to the timing of capital investments
The Group conducts appropriate capital investment, such as the construction of its third
plant in Vietnam, to enhance productivity and maintain product competitiveness inaccordance with demand trends. Although overseas and domestic capital investments
are carefully determined considering market trends and brand manufacturers’ businessperformance, should the Group’s capital investments become excessive upon adownturn in the economy or manufacturers change strategies, or the operation of new
facilities be delayed, factors such as the burden of depreciation costs could adversely
affect the Group’s business results and financial position.
(3) Possibility of product defects
PCBs are mounted with electronic components and then embedded in finished products
by brand manufacturers. The Group manufactures PCBs in compliance with globally
accepted quality control standards. In addition, brand manufacturers conduct inspections
upon receipt of the finished product checking for product defects. However, should alarge-scale recall or a product liability claim occur, such an incident would incur
significant costs and harm the value of our corporate brand, which could adversely affect
the Group’s performance.
(4) Technological development and price competition
The time will come when all things are connected, due to the increase in the use ofelectronics in vehicles, the dissemination of electric vehicles, the emergence ofconnected cars based on 5G communication, and the worldwide spread of IoT. Although
the Group expects expansion of demand for PCBs, to address intensifying global
competition stemming from downward pressure on prices from China and Southeast
Asia, the Group needs to differentiate its products with technology. To this end, the Groupis developing technologies such as element technologies to make wires thinner and holediameters smaller, as well as cost-reduction technologies. However, should suchtechnologies diverge from market needs and not be accepted, the Group may getembroiled in a price war, which could affect its business performance.

8(5) Impact of disasters
The Group’s major manufacturing bases are the Fukushima Factory, the Yamagata
Factory (Yamagata Meiko Electronics Co., Ltd.) and the Ishinomaki Branch Factory(Yamagata Meiko Electronics Co., Ltd.), which are all located in the Tohoku region. The
Group endeavors to prevent damage from natural disasters by securing the safety of its
employees and protecting facilities against earthquakes and tsunami. However, theGreat East Japan Earthquake and subsequent tsunami, which were beyond ourcapability to predict, seriously affected the Group’s business performance. Should adisaster of that scale occur in the future, it could adversely affect the Company’sbusiness performance again, despite the fact that we reviewed our risk management
system following the disaster.
In addition, although the Group conducts regular inspections and maintenance work on
its production equipment as well as plant monitoring using IoT technology inmanufacturing bases inside and outside Japan and strives to minimize the occurrence ofequipment failures, accidents, etc. which may result in the suspension of line operations,
there is no guarantee that these will be prevented or reduced completely. Should
production and shipping be suspended for a long period of time due to these factors, theGroup’s business performance and financial position could be adversely affected.
(6) Potential risks inherent in plant operations in China and Vietnam
To expand productivity and reduce production costs, the Group has established local
corporations in Hong Kong, Guangzhou and Wuhan in China, and in Vietnam, conducting
manufacturing and sales activities.
The following difficulties might occur in these countries:
1: Hygiene-related issues such as infectious diseases
2: Change or introduction of environmental regulations, legal restrictions and thetax system
3: Failure of infrastructure such as electricity, water and transportation
4: Political uncertainty and public security-related issues
5: Anti-Japanese demonstrations and/or labor disputes
Should unexpected events such as changes in the political or legal environment,
economic situation or environmental regulations occur, the Group’s businessperformance and financial position could be adversely affected as a result of the issues
which might arise in the management of production facilities and equipment and in theexecution of other operations, or a large amount of liabilities or obligations associatedwith the compliance of environmental conservation and other regulations.
(7) Foreign currency exchange rate fluctuation risk
To operate plants in China and Vietnam, we need to hold U.S. dollars and other foreign
currency-denominated assets. Therefore, the Group is exposed to yen-to-yuan and yento-U.S. dollar exchange rate fluctuations. These fluctuations could result in losses.
(8) Raw materials market fluctuation risk
The Group purchases the raw materials necessary for manufacturing from externalmaterials manufacturers and trading companies. The surge in prices of crude oil, copper,
gold, etc., could influence the prices of the raw materials the Group purchases andadversely affect the Group’s business performance and financial position.

9(9) Financial risks
The Group has made aggressive capital investments of amounts higher than the funds it
has acquired from operating activities to prepare for the anticipated increase in demandfor PCBs for automotive products and smartphones, as well as responses to new
products in line with technological innovation.
As a result, the ratio of borrowings to total assets as of March 31, 2019, was 47.1%.
Should we make further aggressive capital investments to fulfill our business strategies,
an increase in borrowings and/or interest rates could affect the Group’s businessperformance and financial position.
(10) Intellectual property rights
The Group recognizes intellectual properties as its significant management resources
and seeks to acquire intellectual property rights by applying for patents, etc. forproprietary technologies, etc. developed by the Group with the aim of protecting
intellectual properties. However, not all applications may be approved and it is also
possible that obtained rights may be rendered void due to objections by third parties.
Although the Company’s responsible department manages obtained intellectual
properties and pays attention to violation of rights by external parties, anticipated profits
could be lost in the event of illegal use, etc.
Meanwhile, should a lawsuit be filed against the Group with regard to a violation of
intellectual property rights of third parties, the Group’s business performance andfinancial position could be adversely affected as a result of the compensation ordamages paid to customers due to the suspension of production and payment of license
fees, etc., related to patent use in order to resume production.
(11) Risks associated with production activities
The Group promotes an increase in order intake in accordance with demand of major
customers around the world. However, a delay in delivery of products to customers or adecline in plant productivity may occur. Should such an event occur, the subsequent dropin sales might adversely affect the Group’s business performance.

10Consolidated Financial Statements
Consolidated Balance Sheets
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2019 and 2018
Thousands ofMillions of yen

ASSETS2019

U.S. dollars (Note 1)

2018

Current Assets:
Cash and cash equivalents (Notes 4 and 13) ............................................................................................................................
\
11,419\15,190Receivables －Trade notes and accounts receivable (Notes 4 and 13) ...................................................................................................................
25,83424,911Other receivables ........................................................................................................................................
1,479
830
Less: Allowance for doubtful accounts ........................................................................................................................
(144)
(252)
Inventories －Merchandise and finished goods .........................................................................................................5,885
4,460Work in process ..................................................................................................................................
4,675
4,719
Raw materials and supplies .................................................................................................................5,414
5,117
Other (Note 13) ...................................................................................................................................................................
1,460
1,395
Total current assets ..........................................................................................................................
56,02256,370Property, Plant and Equipment, at Cost:
Land ................................................................................................................................................................
1,488
Buildings and structures ..........................................................................................................................
36,732
Machinery and vehicles..........................................................................................................................
76,155
Leased assets..............................................................................................................................................................
6,476
Construction in progress .............................................................................................................
9,581
Other .......................................................................................................................................................................
4,458
134,890
Less: Accumulated depreciation ........................................................................................................ (76,336)
Net property, plant and equipment ......................................................................................................
58,554
Intangible Assets

269

Investments and Other Assets:
Investment securities (Notes 3 and 13) ....................................................................................................................
1,525
Long-term loans receivable .................................................................................................................... 238
Deferred tax assets (Note 12) .................................................................................................................. 867
Other .....................................................................................................................................................................
3,334
Less: Allowance for doubtful accounts ..........................................................................................................
(153)
Total investments and other assets ..........................................................................................................
5,811
Total ..............................................................................................................................................
\
120,656\

See notes to consolidated financial statements.

11

2019

$

102,879
232,735
13,324(1,297)53,016
42,116
48,771
13,155
504,699

1,488
36,58372,880
6,445
2,764
4,003
124,163(74,430)
49,733

13,408330,920
686,082
58,34586,311
40,1551,215,221(687,711)
527,510

210

2,426

646
91
1,167
2,314
(215)
4,003
110,316

13,7402,145
7,815
30,029(1,376)52,353
1,086,988$

Thousands of

LIABILITIES AND
NET ASSETS

Millions of yen

2019

U.S. dollars (Note 1)

2018

2019

Current Liabilities:
Trade notes and accounts payable (Notes 4 and 13) ..................................................................................................................
\
15,797\
16,152$
Short-term borrowings (Notes 5 and 13) ............................................................................................................…
7,638
13,263Current portion of long-term borrowings (Notes 5 and 13) ........................................................................................................
14,386
10,478
Income taxes payable (Note 12) .....................................................................................................................
221
67
Accrued bonuses .................................................................................................................................. 667
640
Accrued bonuses to directors and corporate auditors ..................................................................................................................................
19
60
Lease obligations (Notes 5 and 13)..................................................................................................................................
698
1,157
Other (Notes 5 and 13) ................................................................................................................................................................
8,507
7,108
Total current liabilities ..................................................................................................................47,933
48,925

142,319
68,807
129,603
1,989
6,012
169
6,292
76,635431,826

Long-term Liabilities:
Long-term borrowings (Notes 5 and 13) ........................................................................................................
34,76523,303
Lease obligations (Notes 5 and 13) .............................................................................................................................
1,112
1,817
Provision for directors' retirement benefits ................................................................................................217
217
Net defined benefit liability (Note 6) .............................................................................................
2,689
2,658
Other (Note 12)......................................................................................................................................................................
352
354
Total long-term liabilities ..................................................................................................................................................
39,13528,349313,197
10,018
1,958
24,2293,169
352,571

Commitments and Contingent Liabilities (Note 9) :Net Assets (Note 7):
Shareholders' Equity:
Common stock:
Authorized:
70,000,000 shares in 2019 and 2018
Issued:26,803,320 shares in 2019 and 2018
Preferred stock:
Authorized:
None in 2019 and 50 shares in 2018
Issued:None in 2019 and 50 shares in 2018...............................................................................................................
12,88912,889116,112
Capital surplus ................................................................................................................................................................
6,464
11,74558,239Retained earnings ......................................................................................................................................................................
11,4905,400
103,511
Less: Treasury stock, at cost; Common stock,629,378 shares in 2019, 629,308 shares in 2018 .......................................................................................(397)(396)(3,573)
Total shareholders' equity...............................................................................................................................................…
30,446
29,638274,289
Accumulated Other Comprehensive Income:Unrealized gains on available-for-sale securities .......................................................................................................................
(65)
22
(591)
Deferred gains on hedges ...........................................................................................................................…
183
299
1,652
Foreign currency translation adjustments ..................................................................................
3,322
3,512
29,929Remeasurements of defined benefit plans (Note 6) ......................................................................
(298)
(429)
(2,688)
Total accumulated other comprehensive income...............................................................................................................................................…
3,142
3,404
28,302
Total net assets ..................................................................................................................................................
33,58833,042
302,591
Total ........................................................................................................................................................
\
120,656\
110,316$
1,086,988

See notes to consolidated financial statements.

12

Consolidated Statements of Operations
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2019, 2018 and 2017
Thousands ofMillions of yen

2019

U.S. dollars (Note 1)

2018

2017

2019

Net Sales ...........................................................................................................................................................
\
118,911\
108,542\
95,912$
1,071,269
Cost of Sales (Note 10) ..................................................................................................................................................
98,863
90,11579,826890,654
Gross profit ......................................................................................................................................................
20,04818,427
16,086
180,615
Selling, General and Administrative Expenses (Note 10) ........................................................................................................................................................................
11,122
10,970
10,298100,198
Operating income ....................................................................................................................................…
8,926
7,457
5,788
80,417
Other Income (Expenses):
Interest expense, net ...............................................................................................................................................
(742)(1,111)Dividend income ...............................................................................................................................................
7
26
Foreign exchange gain (loss).............................................................................…....................…
518(1,668)Net loss on sales and disposal of property, plant and equipment (Note 11)............................................… (222)(193)
Subsidy income..............................................................................................................................................................…
302
93
Gain on liquidation of subsidiaries .....................................................................................................................
163
Insurance income................................................................................................................................................................
655
674
Commission for syndicate loan ..............................................................................................................................................................…
(361)
(320)
Impairment loss ............................................................................................................
(57)
Gain on sales of investment securities, net...........................................................................................
0136
Expenses for business structure improvement (Note 8).........................................................................................................
(526)
Other, net ......................................................................................................................................................................................
(694)
(356)
Total ...............................................................................................................................................
(1,063)(2,613)(1,329)
23
(702)
(206)
106
70
(13)
(11)
(22)
(978)
(3,062)(6,685)66
4,665(2,004)
2,721
5,897(3,249)2(4,739)(6,255)(9,581)

Income before Income Taxes ..........................................................................................

2,726

70,836

Income Taxes (Note 12):Current ...............................................................................................................................................…753
834
916
Deferred .................................................................................................................................................366(337)
24
Total income taxes ............................................................................................................................
1,119
497
940
Net income...........................................................................................................................…
6,744
4,347
1,786
Net Income (Loss) attributable to non-controlling interests............................................................................................
(26)
19
Net Income attributable to owners of the Company ..........................................................................................................................................
\
6,744
\
4,373
\
1,767

6,787
3,295
10,08260,75460,754

7,863

4,844

$

Yen

Per Share of Common Stock:
Net income per share..........................................................................................................................................
Basic ...............................................................................................................................................................................
\
257.65\160.34
Diluted ..........................................................................................................................................
108.67
Cash dividends applicable to the year ......................................................................................................................
35.00
20.00

See notes to consolidated financial statements.

13

U.S. dollars (Note 1)

\

54.14
44.06
10.00

$

2.32
0.32

Consolidated Statements of Comprehensive Income
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2019, 2018 and 2017
Thousands ofMillions of yen

2019
Net Income ...........................................................................................................................................................
\
6,744
\

U.S. dollars (Note 1)

2018
4,347

2017
\

1,786

Other Comprehensive Income (Note 15):
Unrealized gains (losses) on available-for-sale securities ......................................................................................................................................................
(87)
(64)
53
Deferred gains (losses) on hedges ......................................................................................................................................................
(116)
240
396
Foreign currency translation adjustments ......................................................................................................................................................
(190)
1,069
(2,043)Remeasurements of defined benefit plans ..............................................................................................................
131
41
(224)
Total other comprehensive income ......................................................................................................................................................
(262)
1,286
(1,818)Comprehensive Income......................................................................................................................................................
\
6,482
\
5,633
\
(32)

Comprehensive Income Attributable to:
Owners of the Company ................................................................................................................................…
\
6,482
\
5,665
Non-controlling interests ......................................................................................................................................................
(32)

See notes to consolidated financial statements.

14

\

(46)
14

2019
$

60,754$(787)(1,039)(1,711)
1,175(2,362)58,392$58,392-

Consolidated Statements of Changes in Net Assets
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2019, 2018 and 2017

Millions of yen
Shareholders' Equity
Common Stock

Accumulated Other Comprehensive Income

Preferred Stock

Number of
Number of
CapitalSharesAmountSharesAmountSurplus
Balance as at March 31, 2016..................................................................................................
26,803,320 \
12,88950- \19,745\
Net income attributable to owners of the Company............................................................
Deficit disposition........................................................................................................................................
(8,000)Cash dividends paid....................................................................................................................................
Net increase (decrease)............................................................................................................................
Balance as at March 31, 2017.............................................................................................
26,803,320 \
12,88950- \11,745\
Net income attributable to owners of the Company............................................................
Cash dividends paid....................................................................................................................................
Purchase of treasury stock............................................................................................................. Change of scope of consolidation........................................................................................................................................................................
Net increase (decrease)............................................................................................................................
Balance as at March 31, 2018....................................................................................................................
26,803,320 \
12,88950
11,745\\
Net income attributable to owners of the Company............................................................
Cash dividends paid.......................................................................................................................................................................................................................................
Purchase of treasury stock......................................................................................................................................................................................................................................
Retirement of treasury stock......................................................................................................................................................................................................................................
(50)(5,281)
Net increase (decrease)......................................................................................................................................................................................................................................
Balance as at March 31, 2019....................................................................................................................
26,803,320 \
12,889
- \
- \
6,464

\

\

\

\

Retained
Earnings(7,660)
1,767
8,000
(175)
1,932
4,373
(875)
(30)
5,400
6,744
(654)
11,490Treasury
Stock at cost;
Common
Stock
(396)
\
(396)
\
(0)
(396)
\
(5,282)
5,281
(397)
\

Retained
Earnings
48,65260,754(5,895)103,511

Treasury
Stock at cost;
CommonStock$(3,571)(47,582)
47,580$(3,573)

Total
Shareholders'Equity24,578
\
1,767
(175)
26,170
\
4,373
(875)
(0)
(30)
29,638
\
6,744
(654)
(5,282)30,446\

Unrealized Gains(Losses) on
Available-for-sale
Securities

\

32
53
85
(63)
22
(87)
(65)

\

\

\

Deferred
Gains(Losses) on
Hedges
(337)
\
396
59
\
240
299
\
(116)
183
\

Foreign Currency
Translation
Adjustments

\

\

\

\

4,476
(2,038)
2,438
1,074
3,512
(190)
3,322

Total
Accumulated
Other
Comprehensive
IncomeRemeasurementsof Defined Benefit
Plans

\

(246)
(224)
(470)
41
(429)
131
(298)

\

\

\

\

\

\

\

3,925 \
(1,813)
2,112 \
1,292
3,404 \
(262)
3,142 \

Non-controlling
Interests
261
(3)
258
(258)
-

\

Total Net
Assets
28,7641,767(175)(1,816)28,540
4,373
(875)
(0)
(30)
1,034
33,042
6,744(654)(5,282)(262)
33,588Non-controlling
Interests- $- $Total Net
Assets297,676
60,754(5,895)(47,582)(2,362)
302,591\\\

Thousands of U.S. dollars (Note 1)
Shareholders' Equity

CommonPreferred
Capital
Stock
Stock
Surplus
Balance as at March 31, 2018.......................................................................................................................................
$
116,112$- $105,819
Net income attributable to owners of the Company............................................................
Cash dividends paid................................................................................................
Purchase of treasury stock......................................................................................
Retirement of treasury stock...................................................................................
(47,580)
Net increase (decrease)......................................................................................................................................................................................................................................
Balance as at March 31, 2019....................................................................................................................
$
116,112$- $58,239

Accumulated Other Comprehensive Income$$

See notes to consolidated financial statements.

15

Total
Shareholders'Equity$267,01260,754(5,895)(47,582)$
274,289

Unrealized Gains(Losses) on
Available-for-sale
Securities

$

$

196
(787)
(591)

Deferred
Gains(Losses) on
Hedges$
2,691(1,039)$1,652

Foreign Currency
Translation
Adjustments$$

31,640(1,711)
29,929Total
Accumulated
Other
Comprehensive
IncomeRemeasurementsof Defined Benefit
Plans

$

$

(3,863)
1,175(2,688)$$30,664 $(2,362)28,302 $Consolidated Statements of Cash Flows
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2019, 2018 and 2017
Thousands ofMillions of yen

2019
Operating Activities:
Income before income taxes ......................................................................................................................................................
\

7,863

U.S. dollars (Note 1)

2018
\

4,844

2017
\

2,726

2019
$

70,836

Adjustments to reconcile income before income taxes
to net cash provided by operating activities:
Depreciation and amortization ...................................................................................................................................................... 6,281
5,816
Impairment loss...........................................................................................................................................................................................................................................
57
Increase (decrease) in allowance for doubtful accounts ...................................................................................................................................
(170)
239
Increase in net defined benefit liability ...........................................................................................................................................................................
161
147
Increase in accrued bonuses .......................................................................................................................…........................
25
132
Increase (decrease) in accrued bonuses to directors and corporate auditors .......................................................................................................................…
(41)
20
Decrease in provision for directors' retirement benefits........................................................................................................................................................
(22)
Interest income and dividend income ....................................................................................................................................................................................
(66)
(67)
Interest expenses ............................................................................................................................................................................................................................
801
1,152
Foreign exchange loss (gain)..................................................................................................................................................................................................
(55)
709
Net loss on sales and disposal of property, plant and equipment................................................................................................................................
222
193
Gain on sales of investment securities, net..............................................................................................................................................................................
(0)
(136)
Insurance income ......................................................................................................................................................................................................................
(655)
(674)
Expenses for business structure improvement...................................................................................................................................................…
526
Decrease (increase) in trade notes and accounts receivable ..........................................................................................................................
(1,205)(3,464)
Increase in inventories ...........................................................................................................................................
(1,528)(1,949)
Increase (decrease) in trade notes and accounts payable ...................................................................................................................................
(310)
2,884
Decrease (increase) in other assets ...........................................................................................................................................................
183
(575)
Increase in other liabilities ..................................................................................................................................................
19
1,800
Other ...........................................................................................................................................................................................................
272
725
Subtotal
12,323
11,831
Interest and dividend received ....................................................................................................................................................................................
67
67
Interest paid .................................................................................................................................................................................................................
(821)(1,192)
Proceeds from insurance income .......................................................................................................................................................................
655
674
Payments for business structure improvement ................................................................................................................................................................
Income taxes paid .............................................................................................................................................................................................................
(757)
(951)
Net cash provided by operating activities .........................................................................................................................................................................................
11,467
10,429

5,508
11
189
189
52
40
(52)
1,358
1,236
206
(70)
22
7
(1,240)
2,179
(399)
651
1,007
13,62052(1,312)
70
(22)
(796)
11,61256,587(1,536)
1,454
229
(371)
(599)
7,218
(493)
2,004
(2)
(5,897)
4,739(10,855)(13,769)(2,789)
1,653
164
2,450
111,023599(7,397)
5,897(6,816)
103,306

Investing Activities:
Payments for purchases of property, plant and equipment ..........................................................................................................................
(14,719)(8,381)
Proceeds from sales of property, plant and equipment ................................................................................................................................
40
4
Payments for purchases of intangible assets ..........................................................................................................................
(113)
(81)
Payments for liquidation of subsidiaries and affiliates ..........................................................................................................................
(279)
Payments for purchases of investment securities ..........................................................................................................................
(974)
(188)
Proceeds from sales of investment securities ..........................................................................................................................
1
588
Payments for insurance policies .................................................................................................................................................................................
(2)(3)
Proceeds from maturity of insurance funds .............................................................................….................................................
98
Other, net .................................................................................................................................................................................................................................................
(1,526)(626)
Net cash used in investing activities ..................................................................................................................................................
(17,293)(8,868)(3,222)
24
(90)
(55)
(5)
(974)
(4,322)(132,601)
364(1,017)(8,771)12(22)(13,754)(155,789)

Financing Activities:
Increase (decrease) in short-term borrowings ..........................................................................................................................
(5,725)
993
Proceeds from long-term borrowings ........................................................................................................................................... 25,655
10,017
Payments for long-term borrowings ........................................................................................................................................... (10,841)(12,273)
Repayments of lease obligations...........................................................................................................................................................
(1,197)(1,392)
Proceeds from sales and leasebacks transactions......................................................................................................................................................................
Payments for purchase of treasury stock ...............................................................................................................................................................................
(5,282)(0)Cash dividends paid ................................................................................................................................................................................................................
(653)
(875)
Dividends paid to non-controlling interests............................................................................................................................................ (1)Net cash provided by (used in) financing activities ..................................................................................................................................................
1,957(3,531)

(578)
3,723
(11,567)(1,221)
805
(175)
(17)
(9,030)(51,577)
231,122(97,665)(10,785)(47,582)(5,885)
17,628

See notes to consolidated financial statements.

16

Thousands ofMillions of yen

2019
2018
Effect of Exchange Rate Changes
on Cash and Cash Equivalents ......................................................................................................................................................................................
98(36)
Net Decrease in Cash and Cash Equivalents ..........................................................................................................................

(3,771)(2,006)

Cash and Cash Equivalents at the Beginning of the Year .............................................................................................................................................
15,19017,196
Cash and Cash Equivalents at the End of the Year ..................................................................................................................................................................
\
11,419\15,190\See notes to consolidated financial statements.

17

U.S. dollars (Note 1)

2017

2019

(377)

885

(2,117)(33,970)

19,313
17,196$

136,849
102,879

Notes to Consolidated Financial Statements
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2019, 2018 and 2017
1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Meiko Electronics
Co., Ltd. (the “Company”) have been prepared in accordance withthe provisions set forth in the Financial Instruments and Exchange Law of Japanand its related accounting regulations, and in conformity with accounting
principles generally accepted in Japan (“Japanese GAAP”), which are different
in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards.
In preparing the accompanying consolidated financial statements,
certain reclassifications and rearrangements have been made to present
them in a form which is more familiar to readers outside Japan.
In addition, the notes to the consolidated financial statements include
information which is not required under Japanese GAAP, but ispresented herein as additional information.
The consolidated financial statements are denominated in Japanese yen,
the currency of the country in which the Company is incorporated
and operated. The conversion of Japanese yen amounts into U.S. dollar
amounts is included solely for the convenience of readers outside Japanand has been made at the approximate exchange rate as at March 31, 2019($1=\111.00). Such translation should not be construed
as representation that the Japanese yen amounts could be converted
into U.S. dollars at that or any other rate of exchange.
2. Significant Accounting Policies
The following is a summary of the significant accounting policies
adopted by the Company and its consolidated subsidiaries
in the preparation of the consolidated financial statements.
(a) Consolidation
The consolidated financial statements include the accounts of
the Company and its significant 9 subsidiaries (together, the “Group”).
All significant inter-company accounts and transactions have been eliminated.
In the elimination of investments in subsidiaries, the assets and liabilities ofthe subsidiaries, including the portion attributable to minority shareholders,
are recorded based on the fair value at the time the Company acquired
control of the respective subsidiaries. Investments in certain unconsolidated
subsidiaries are accounted for by cost method due to immateriality
in view of consolidation.
(b) Cash Equivalents
Cash equivalents are short-term investments that are readily convertible
into cash and are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits which mature or become due
within three months of the date of acquisition.
(c) Translation of Foreign Currency Accounts
Current and non-current receivables and payables in foreign currencies
are translated at current rates prevailing at the balance sheet date andthe resulting exchange gains or losses are recognized in the consolidated
statements of operations.
Financial statements of consolidated overseas subsidiaries are translated
into Japanese yen at the exchange rate as at the balance sheet date, exceptthat shareholders' equity accounts are translated at historical rates andstatement of income items resulting from transactions with the Company
at the rates used by the Company.
Foreign currency translation adjustments resulting from translation offoreign currency financial statements prepared by consolidated overseas
subsidiaries are presented in net assets in the consolidated balance sheets.
(d) Inventories
Inventories are stated at cost, determined by the first-in-first-out method.
However, they are written down based on decreased profitability, where appropriate.
(e) Depreciation and Amortization (excluding leased assets)
Depreciation of property, plant and equipment for the Company and its
domestic subsidiaries is computed mainly by the declining-balance method.
Buildings (excluding facilities attached to buildings), which were acquired on or after
April 1, 1998 and facilities attached to buildings and structures, which were acquiredon or after April 1, 2016 are computed by the straight-line method.
Certain buildings and property, plant and equipment for overseas
subsidiaries are computed by the straight-line method.
The ranges of useful lives are summarized as follows:
Buildings and structures: 2–47 years
Machinery and vehicles: 2–10 years
Software for company use is carried at cost less accumulated amortization,
which is calculated by the straight-line method over its estimated usefullife of five years.

(f) Leased Assets
Leased property under finance lease arrangements which transfer ownershipof the leased property to the lessee is depreciated using the same method as
the one applied to property, plant and equipment owned by the Company.
Leased property under finance lease arrangements which do not transfer
ownership of the leased property to the lessee is capitalized to recognize
leased assets and lease obligations in the balance sheets and depreciatedover the lease term of the respective assets with zero residual value.
(g) Allowance for Doubtful Accounts
The Company and its consolidated subsidiaries provide for doubtful
accounts principally at an amount computed based on the historical bad debt
ratio during a certain reference period plus an estimated uncollectible amountbased on the analysis of certain individual accounts including claims inbankruptcy.
(h) Accrued Bonuses
Accrued bonuses to employees are provided for the estimated amounts,
which the Company and its consolidated subsidiaries are obligated to
pay to employees after the fiscal year end based on services rendered during
the current fiscal year.
(i) Accrued Bonuses to Directors and Corporate Auditors
The Company provides allowance for directors' and corporate auditors'
accrued bonuses based on the estimated amounts as at the balance sheet date.
(j) Impairment Losses on Fixed Assets
The Group reviews its long-lived assets for impairment whenever eventsor changes in circumstance indicate the carrying amount of an asset or
asset group may not be recoverable. An impairment loss would berecognized if the carrying amount of an asset or asset group exceeds
the sum of the undiscounted future cash flows expected to result fromthe continued use and eventual disposition of the asset or asset group.
The impairment loss would be measured as the amount by which
the carrying amount of the asset exceeds its recoverable amount,which is higher of asset's or cash-generating unit's fair valueless costs to sell and its value in use.
(k) Investment Securities
The Company has classified all the equity securities as available-forsale securities based on management’s intention. Available-for-salesecurities other than non-marketable securities are reported at fair value withunrealized gains or losses, net of applicable taxes, reported in a separate
component of net assets.
Non-marketable available-for-sale securities are stated at cost determinedby the moving-average method.
(l) Income Taxes
The provision for income taxes is computed based on the pretax
income included in the consolidated statements of operations. The asset
and liability approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases ofassets and liabilities. Deferred tax assets are measured by applying
currently enacted tax laws to the temporary differences.
(Changes in presentation method)(Changes due to adoption of “Partial Amendments to Accounting Standard
for Tax Effect Accounting”)
Upon application of “Partial Amendments to Accounting Standard forTax Effect Accounting” (ASBJ Statement No. 28, February 16, 2018
(hereinafter, “Statement No. 28”)) from the beginning of the fiscal
year ending Match 31, 2019, the Company and its domestic subsidiaries changed thepresentation and related notes of deferred tax assets and deferred tax
liabilities, such that deferred tax assets and deferred tax liabilities areclassified as part of “Investments and Other Assets” and “Long-term
Liabilities”, respectively.
As a result, deferred tax assets of \420 million classified as “Current
Assets” and deferred tax liabilities of \268 million classified as“Other” in “Long-term Liabilities” have been included in deferred tax
assets (\1,167 million) in “Investments and Other Assets” and“Other” in “Long-term Liabilities” has been changed to \354 million
in the balance sheet as of the fiscal year ending March 31, 2018.
Certain information is added to note “12. Income Taxes” as described innotes 8 (excluding total amount of valuation allowance) and 9 of explanatory
notes to the “Accounting Standard for Tax Effect Accounting” as prescribedin Paragraphs 3 through 5 of the Partial Amendments to Tax Effect Accounting.
However, information for the year ended March 31, 2018 is not presented
in accordance with the transitional treatment prescribed in Paragraph 7of the Partial Amendments to Tax Effect Accounting.

18

(m) Derivative Financial Instruments
The Group uses interest rate swaps, currency swaps andcopper price swaps as a means of hedging exposure to foreign
currencies, interest risks and market fluctuation. The Group
does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as
follows: a) all derivatives are recognized as either assets or liabilities andmeasured at fair value, and gains or losses on transactions arising fromderivative except for hedge purposes are recognized in the consolidated
statements of operations and b) for derivatives used for hedging purposes,
if derivatives qualify for hedge accounting because of high correlation andeffectiveness between the hedging instruments and the hedged items,
gains or losses on derivatives are deferred until maturity of the hedgedtransactions.
If interest rate swap contracts are used as hedge and meet certain
criteria, the net amount to be paid or received under the swap
contract is added to or deducted from the interest on the assets or
liabilities for which the swap contract was executed.
For currency swaps that qualify for hedge accounting, gain or loss
is translated at the exchange rate stipulated in the contract under
the allocation method.
(n) Retirement Benefits for Employees
The benefit formula method is used as a method of attributing
expected benefits to the periods through the end of the fiscal year
in calculating projected benefit obligation.
Actuarial gain or loss is amortized using the declining balance method
over 10 years, which is less than the average remaining years of serviceof the employees, and the amortization will be started in the following year
in which the gain or loss is recognized.
Past service cost is amortized using the straight-line method over 10
years, which is less than the average remaining years of service of theemployees.
Certain consolidated subsidiaries apply the simplified method in which
the retirement benefit amount required for voluntary termination at year end
is deemed a projected benefit obligation for the calculation of liability
associated with retirement and retirement benefit expenses.

(s) Accounting Standards and Guidance Issued but Not Yet Adopted“Accounting Standard for Revenue Recognition” (ASBJ Statement No.
29, March 30, 2018) and“Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30, March 30, 2018)(1) Overview
The above standard and guidance provide comprehensive principles for revenue
recognition. Under the standard and guidance, revenue is recognized by applying thefollowing 5 steps:
Step 1: Identify contract(s) with customers.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligation in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
(2) Effective date
Effective from the beginning of the fiscal year ending March 31, 2022.
(3) Impact of the adoption of the standard and guidance
The Company and its domestic consolidated subsidiaries are currently in the process ofdetermining the impact of the new standard and guidance on the consolidated financial statements.
(t) Reclassifications
Certain prior year amounts have been reclassified to conform to the presentations
for the year ended March 31, 2019.

(o) Provision for Directors' Retirement Benefits
The Company and its domestic consolidated subsidiaries account for the provision
for directors' retirement benefits as at balance sheet date in accordance with internal
regulations.
(p) Appropriations of Retained Earnings
Appropriations of retained earnings are reflected in the accompanying
consolidated financial statements for the following year uponshareholders' approval.
(q) Per Share Information
Dividends per share shown in the consolidated statements of operations havebeen presented on an accrual basis and include, in each fiscal period,
dividends approved after each balance sheet date, but applicable to the fiscal
period then ended.
Net income per share is computed by dividing net income attributable
to common shareholders of the Company by the weighted-average
number of common shares outstanding for the period.
The diluted net income per share is omitted as the Company has no dilutive sharesfor the year ended March 31, 2019.
(r) Unification of Accounting Policies Applied to Foreign Subsidiaries
for Consolidated Financial Statements
The Accounting Standards Board of Japan has issued ASBJ Practical Issues Task Force
No. 18 “Practical Solution on Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements” (“PITF No. 18”). PITF No. 18
requires that accounting policies and procedures applied by a parent company and its
subsidiaries to similar transactions and events under similar circumstances should,
in principle, be unified for the preparation of the consolidated financial statements.
PITF No. 18, however, as a tentative measure, allows a parent company to prepare
consolidated financial statements using foreign subsidiaries’ financial statements
prepared in accordance with either International Financial Reporting Standards
or U.S. generally accepted accounting principles. In this case, adjustments
for the following four items are required in the consolidation process so that
their impacts on net income are accounted for in accordance with Japanese GAAP
unless the impact is not material.
(1) Goodwill not subjected to amortization(2) Actuarial gains and losses of defined benefit plans recognized outside profit or loss
(3) Capitalized expenditures for research and development activities(4) Fair value measurement of investment properties, and revaluation ofproperty, plant and equipment, and intangible assets

19

3. Investment Securities
All the equity securities, classified as available-for-sale securities, are included in non-current investment securities.
The carrying amounts and aggregate fair values of the available-for-sale securities as of March 31, 2019 and 2018 are as follows:
2019
Millions of yen

Thousands of U.S. dollars

Fair

Acquisition

Unrealized

Fair

Acquisition

Unrealized

Value

Cost

Gains (Losses)

Value

Cost

Gains (Losses)

Securities whose carrying values
exceed their acquisition cost:
Equity securities ...............................................................................................................
\
64 \
26 \
38 $
573 $
234 $
339
Other ...............................................................................................................
99
96
3
891
861
30
Securities whose carrying values do not
exceed their acquisition cost:
Equity securities .................................................................................................................................................................................................................
199
306
(107)
1,790
2,752
(962)
Total ...............................................................................................................
\
362 \
428 \
(66) $
3,254 $
3,847 $
(593)
2018
Millions of yen
Fair

Acquisition

Unrealized

Value

Cost

Gains (Losses)

Securities whose carrying values
exceed their acquisition cost:
Equity securities ...............................................................................................................
\
177 \
127 \
50
Other ...............................................................................................................
80
66
14
Securities whose carrying values do not
exceed their acquisition cost:
Equity securities .................................................................................................................................................................................................................
173
206
(33)
Total ...............................................................................................................
\
430 \
399 \
31
Information on available-for-sale securities whose fair values are not readily determinable as of March 31, 2019 and 2018 are described in Note 13.
Information regarding the sale of securities classified as available-for-sale securities for the years ended March 31, 2019 and 2018 are summarized as follows:
2019
Millions of yen

Thousands of U.S. dollars

Proceeds

Aggregate

Aggregate

Proceeds

Aggregatefrom Sales

Gains onLosses on

from Sales

Gains on

Sales

Sales

Equity securities ...............................................................................................................
\
1\
0\
Total ...............................................................................................................
\
1\0\Aggregate
Losses on

Sales

0$
0$

12 $
12 $

Sales

2 $
2 $

0
0

2018
Millions of yen
Proceeds

Aggregate

Aggregatefrom Sales

Gains onLosses on

Sales

Sales

Equity securities ...............................................................................................................
\
597 \
182 \
Total ...............................................................................................................
\
597 \
182 \

46
46

4. Notes that Matured at the End of the Fiscal Year
March 31, 2019 and 2018, the last day of the fiscal years, coincided with a bank holiday and the following notes that matured at the end of the fiscal years
were accounted for as if they were settled on the day of their maturity.
Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Notes receivable ..........................................................................................................................................................................................................................................
\
120 \
51 $
1,082
Notes payable - trade ..........................................................................................................................................................................................................................................
\
217 \
63 $
1,954
Notes payable - equipment ..........................................................................................................................................................................................................................................
\
- \
1$
-

5. Short-term Borrowings and Long-term Debt
Short-term borrowings and long-term debt as of March 31, 2019 and 2018 consist of the following:Thousands ofMillions of yen
2019
2018

U.S. dollars

2019

Short-term borrowings with average interest rate of 1.19% for 2019 and 2.35% for 2018..........................................................................................................................................................................
\
7,638 \
13,263 $68,807
Current portion of long-term borrowings with average interest rate of 1.34% for 2019 and 1.83% for 2018........................................................................................................................................................
14,386
10,478
129,603
Current portion of lease obligations ...........................................................................................................................................................698
1,157
6,292
Current portion of other liabilities with average interest rate of 0.57% for 2019 and 0.56% for 2018...........................................................................................................................................................
1,300
1,300
11,712
Total short-term borrowings ................................................................................................................................................................................................
24,022
26,198
216,414Long-term borrowings with average interest rate of 0.91% for 2019 and 1.36% for 2018, less current portion ....................................................................................................................................................
34,76523,303
313,197
Lease obligations, less current portion .................................................................................................................................................................................................................
1,112
1,817
10,018
Total long-term borrowings...................................................................................................................................................................................................................................…
35,87725,120323,215
Total ..............................................................................................................................................................................................................................................
\
59,899 \51,318 $539,629* Average interest rate of borrowings represents the weighted average rate for the outstanding balances as at March 31, 2019 and 2018.
Average interest rate of lease obligations is not disclosed since the amount equivalent to interest expense included in total lease payments is allocated over the lease term using the straight-line method.
Average interest rate of other liabilities represents the weighted average rate for the average of the outstanding balances as at April 1, 2018 and March 31, 2019.
The aggregate annual maturities of long-term debt as of March 31, 2019 are as follows:
Millions
Year ending March 31
of yen2020...........................................................................................................................................................................................................................................................
\
14,386 $2021...........................................................................................................................................................................................................................................................11,252
2022........................................................................................................................................................................................................................................................... 9,864
2023........................................................................................................................................................................................................................................................... 7,619
2024 and thereafter ................................................................................................................................................................................................................................. 6,030
Total ...........................................................................................................................................................................................................................................................
\
49,151 $Thousands of
U.S. dollars

129,603
101,365
88,864
68,64454,324442,800

The aggregate annual maturities of lease obligations as of March 31, 2019 are as follows:
Millions
Year ending March 31
of yen2020...........................................................................................................................................................................................................................................................
\
698 $
2021........................................................................................................................................................................................................................................................... 443
2022.......................................................................................................................................................................................................................................................... 239
2023........................................................................................................................................................................................................................................................... 109
2024 and thereafter .................................................................................................................................................................................................................................
321
Total .........................................................................................................................................................................................................................................................
\
1,810 $

20

Thousands of
U.S. dollars

6,292
3,993
2,153
981
2,891
16,310Financial covenants
For the year ended March 31, 2019
Long-term borrowings, including the current portion amounting to \49,628 million ($447,095 thousand), include certain financial covenants which forfeit the benefit of termwith regard to the debts on certain loan agreement in the event the Company is in breach of either of the following covenants (stricter covenants are described if there are several covenants).
(1) For each fiscal year, ordinary losses shall not be recorded on the consolidated statement of operations under Japanese GAAP for two consecutive years.
(2) Total net assets on the consolidated balance sheet at each fiscal year end shall be maintained at least higher of either (i) \21,962 million ($197,856 thousand), or (ii) 80% of the total net assets
recorded on the consolidated balance sheet as of the end of the previous fiscal year.
(3) The total amount of interest-bearing debts on the consolidated balance sheet at each fiscal year end shall be lower than the amount equivalent to the net sales on the consolidated statement of operations
for that fiscal year divided by 12 and multiplied by 8.
For the year ended March 31, 2018
Short-term borrowings and long-term borrowings, including the current portion amounting to \30,556 million, include certain financial covenants which forfeit the benefit of termwith regard to the debts on certain loan agreement in the event the Company is in breach of either of the following covenants (stricter covenants are described if there are several covenants).
(1) For each fiscal year, ordinary losses shall not be recorded on the consolidated statement of operations under Japanese GAAP for two consecutive years.
(2) Total net assets on the consolidated balance sheet at each fiscal year end shall be maintained at least higher of either (i) \21,962 million, or (ii) 80% of the total net assets
recorded on the consolidated balance sheet as of the end of the previous fiscal year.
(3) The total amount of interest-bearing debts on the consolidated balance sheet at each fiscal year end shall be lower than the amount equivalent to the net sales on the consolidated statement of operations
for that fiscal year divided by 12 and multiplied by 8.
6. Retirement Benefits
The Company and some of its consolidated subsidiaries provide a lump-sum retirement plan as a defined benefit pension plan for employees' retirement benefits.
Certain consolidated subsidiaries apply the simplified method in computing net defined benefit liability and benefit costs for their lump-sum retirement plans.
In addition to the above, until March 31, 2017, the Company and certain domestic consolidated subsidiaries also used to contribute to a multi-employer pension plan(the Social Welfare Pension Fund of Nippon Electronic Circuits (the "Fund")), however, the Fund dissolved on March 31, 2017. To compensate for the benefits from the Fund,the retirement benefits policy was revised and the calculation method of the basis for the retirement benefits was changed as of April 1, 2017.
Also, an optional defined contribution plan was implemented as of April 1, 2017 which became to be regarded as part of the retirement benefits policy.
Defined benefit pension plans, except plan applying the simplified method(1) Movement in projected benefit obligations
Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Balance at the beginning of the year .............................................................................................................................................................................................…
\
2,244 \
2,143 $
20,222Service cost ...........................................................................................................................................................................................…127
123
1,143
Interest cost .............................................................................................................................................................................................… 7
861Actuarial gain (loss).............................................................................................................................................................................................…
(67)
23
(603)
Benefits paid .............................................................................................................................................................................................…
(12)
(72)
(109)
Decrease due to employment transfer.............................................................................................................................................................................................…
19
Other ............................................................................................................................................................................................................…
1
0
7
Balance at the end of the year.............................................................................................................................................................................................…
\
2,300 \
2,244 $
20,721(2) Reconciliation from projected benefit obligations to net defined benefit liability
Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Unfunded projected benefit obligations ...........................................................................................................................................................................................…
\
2,300 \
2,244 $
20,721
Total liability at the end of the year ...........................................................................................................................................................................................…
\
2,300 \
2,244 $
20,721
Net defined benefit liability ...........................................................................................................................................................................................…
\
2,300 \
2,244 $
Total liability at the end of the year ...........................................................................................................................................................................................…
\
2,300 \
2,244 $

20,721
20,721(3) Retirement benefit costs
Thousands ofMillions of yen
2019
2018
Service cost ...........................................................................................................................................................................................…
\
127 \
123 $
Interest cost ...........................................................................................................................................................................................… 7
9Amortization of actuarial loss .............................................................................................................................................................…
24
25
Amortization of past service cost .............................................................................................................................................................................................…
39
39
Total benefit costs .............................................................................................................................................................................................…
\
197 \
196 $

U.S. dollars

2019
1,143
61
222
350
1,776

(4) Remeasurements of defined benefit plans
Thousands ofMillions of yen
2019
2018
Past service cost ...........................................................................................................................................................................................…
\(39) \(39) $
Actuarial loss ............................................................................................................................................................................................................
(92)(2)
Total ......................................................................................................................................................................................................….
\(131) \
(41) $

U.S. dollars

2019
(350)
(825)
(1,175)(5) Accumulated remeasurements of defined benefit plans
Thousands ofMillions of yen
2019
2018
Unrecognized past service cost ...........................................................................................................................................................................................…
\
270 \
309 $
Unrecognized actuarial loss ................................................................................................................................................................…
28
120
Total ......................................................................................................................................................................................................….
\
298 \
429 $

U.S. dollars

2019
2,434
254
2,688

(6) Actuarial assumptions
2019
2018
Discount rate .................................................................................................................................................................................................................................................
0.2%
0.3%

21

Defined benefit pension plan applying the simplified method(1) Movement in net defined benefit liability
Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Balance at the beginning of the year .............................................................................................................................................................................................…
\
414 \
557 $
3,728
Benefit costs .........................................................................................................................................................................................................
2
39
18
Benefits paid .............................................................................................................................................................................................…
(26)
(15)
(231)
Increase due to employment transfer..........................................................................................................................................................................................…
(19)
Increase due to change in scope of consolidation..........................................................................................................................................................................................…
(148)
Others .........................................................................................................................................................................................................................................
(1)
0
(7)
Balance at the end of the year .............................................................................................................................................................................................…
\
389 \
414 $
3,508
(2) Reconciliation from projected benefit obligations to net defined benefit liability
Thousands ofMillions of yen
U.S. dollars
2019
2018
2019
Unfunded projected benefit obligations ...........................................................................................................................................................................................…
\
389 \
414 $
3,508
Total liability at the end of the year ...........................................................................................................................................................................................…
\
389 \
414 $
3,508
Net defined benefit liability ...........................................................................................................................................................................................…
\
389 \
414 $
Total liability at the end of the year ...........................................................................................................................................................................................…
\
389 \
414 $

3,508
3,508

(3) Retirement benefit costThousands ofMillions of yen
U.S. dollars
2019
2018
2019
Retirement benefit costs calculated using the simplified method ...........................................................................................................................................................................................…
\
2 \
39 $
18
Total costs at the end of the year ...........................................................................................................................................................................................…
\
2 \
39 $
18

Multi-employer pension plan
The Social Welfare Pension Fund of Nippon Electronic Circuits (the “Fund”) that the Company and certain domestic consolidated subsidiaries had joined dissolved on March 31, 2017
under the approval of Minister of Health, Labour and Welfare. Accordingly, it is under the liquidation process as of March 31, 2019.
No additional burdens to the Company are expected in relation to the dissolution of the Fund.
The latest funded status, contribution share ratio of the Company and supplementary information are omitted, since the Fund is under liquidation process.

Defined contribution plan
The amount required to contribute to the defined contribution plans is \161 million ($1,451 thousand) and \156 million for the years ended March 31, 2019 and 2018, respectively.

22

7. Net assets
Under the Japanese Corporation Law (“the Law”) and regulations, the entire amount paid for new shares is required to be designated as capital stock.
However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half of the price of the new sharesas additional paid-in capital, which is included in capital surplus.
In cases where dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% ofcapital stock over the total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve.
Legal earnings reserve is included in retained earnings in the accompanying consolidated balance sheets.
Additional paid-in capital and legal earnings reserve may not be distributed as dividends. However, all additional paid-in capital and all legal earnings
reserves may be transferred to other capital surplus and retained earnings, respectively, which are potentially available for dividends.
The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of
the Company in accordance with the Law.

8. Expenses for Business Structure Improvement
The Group recorded expenses for business structure improvement to correspond to changes in business environment with the aim of improving its corporate
competitiveness and stability in line with Group's structural reforms through downsizing its total assets and the improvement of asset efficiency.
It consists of \421 million ($3,795 thousand) for loss on disposal of fixed assets and \105 million ($944 thousand) for impairment loss for the year ended March 31, 2019.

9. Contingent Liabilities
Contingent liabilities of the Company as of March 31, 2019 and 2018 are as follows:
Thousands ofMillions of yen
2019
2018

U.S. dollars

2019

Trade notes discounted........................................................................................................................................................................
\
37 \
49 $
331

10. Research and Development Costs
Research and development costs included in selling, general and administrative expenses and manufacturing costs are \1,041 million ($9,379 thousand),\816 million and \743 million for the years ended March 31, 2019, 2018 and 2017, respectively.

11. Net Gain and Net Loss on Sales and Disposal of Property, Plant and Equipment
Significant components of net gain and net loss on sales and disposal of property, plant and equipment for the years ended March 31, 2019, 2018 and 2017 are as follows:
Thousands ofMillions of yen
U.S. dollars
Gain:
2019
2018
2017
2019
Buildings and structures ........................................................................................................................................................................
\
- \
- \
- $
Machinery and vehicles ........................................................................................................................................................................
2
0
15
Land ...................................................................................................................
Construction in progress ........................................................................................................................................................................
Others ........................................................................................................................................................................
Total gain ................................................................................................................................................................................................
2
0
15
Loss:
Buildings and structures ........................................................................................................................................................................
(3)
(6)
(4)
(29)
Machinery and vehicles ........................................................................................................................................................................
(204)
(168)
(139)
(1,837)
Land ...................................................................................................................
Construction in progress ........................................................................................................................................................................
(6)
(10)
(38)
(50)
Intangible assets ........................................................................................................................................................................
(24)
Others ........................................................................................................................................................................
(11)
(9)
(1)
(103)
Total loss ................................................................................................................................................................................................
(224)
(193)
(206)
(2,019)Net loss ....................................................................................................................................................................................................................................
\(222) \
(193) \
(206) $
(2,004)23

12. Income Taxes
Income taxes applicable to the Company consist of corporate tax, inhabitant tax and enterprise tax, which in the aggregate resulted in the normal statutory
tax rates of approximately 30.6%, 30.8% and 30.8% for the years ended March 31, 2019, 2018 and 2017, respectively.
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities as of March 31, 2019 and 2018 are as follows:
Thousands ofMillions of yen
2019
2018

U.S. dollars

2019
Deferred Tax Assets:
Elimination of unrealized profits .........................................................................................................................…
\
65 \
26 $
584
Accrued bonuses ..................................................................................................................................................... 190
186
1,716
Net defined benefit liability ...................................................................................................................................... 745
696
6,714
Provision for directors' retirement benefits ........................................................................................................................................................................
66
66
599
Accrued enterprise tax ........................................................................................................................................................................
22
5
195
Allowance for doubtful accounts.....................................................................................................................................................................…
83
128
748
Valuation loss of inventories.....................................................................................................................................................................…
98
63
881
Difference on depreciation period.....................................................................................................................................................................…
435
417
3,917
Impairment loss....................................................................................................................................................... 1,248
1,445
11,239Loss on valuation of investment securities.....................................................................................................................................................................…
60
57
537
Loss on revaluation of golf club memberships ........................................................................................................................................................................
15
20
137
Tax loss carryforwards ........................................................................................................................................................................
2,474
2,927
22,290
Unrealized losses on available-for-sale securities.....................................................................................................................................................................…
20
181
Deduction of foreign corporation tax carried forward ....................................................................................................................................................
600
582
5,403
Other ...................................................................................................................................................................................................
136
189
1,231
Gross deferred tax assets...................................................................................................................................................................................................
6,257
6,807
56,372
Valuation allowance for tax loss carryforwards (*2)...................................................................................................................................................................................................
(2,371)(21,361)
Valuation allowance for deductible temporary differences ...................................................................................................................................................................................................
(2,780)(25,047)
Less: valuation allowance (*1)........................................................................................................................................................................
(5,151)(5,363)(46,408)
Total ......................................................................................................................................................................................
\
1,106 \
1,444 $
9,964
Thousands ofMillions of yen
2019
2018
Deferred Tax Liabilities:
Retained earnings of foreign subsidiaries...................................................................................................................................
\(401)
Unrealized gains on available-for-sale securities............................................................................................
Deferred gains on hedges........................................................................................................................................
(81)
Other.........................................................................................................................................................................… (2)Total .........................................................................................................................................................................................
\(484) \

U.S. dollars

2019(351) $
(9)(132)(492) $

(3,617)(728)(13)(4,358)Deferred Tax Assets, Net: ........................................................................................................................................................................
\
622 \
952 $

5,606

(*1) The valuation allowance decreased by \212 million ($1,906 thousand), mainly due to decrease in valuation allowance for tax credit carryforwards
at the Company and at consolidated subsidiaries by \261 million ($2,350 thousand).
(*2) Gross deferred tax assets, valuation allowances and total deferred tax assets recognized for tax loss carryforwards, broken down by expiration dates are as follows:
Millions of yen
Within one
One to twoOver two toOver three toOver four toMarch 31, 2019
year
years
three years
four years
five years
Gross deferred tax assets for tax loss carryforwards (*a) ......................................................................................................................................................................................
\
-\
- \
-\
-\
74 \
Valuation allowance ......................................................................................................................................................................................
(74)
Total deferred tax assets recognized ......................................................................................................................................................................................
-

Over fiveyears
2,400 \
(2,297)
103

Thousands of U.S. dollars
Within one
One to twoOver two toOver three toOver four to
year
years
three years
four years
five years
Gross deferred tax assets for tax loss carryforwards (*a) ......................................................................................................................................................................................
$
-$
- $
-$
-$
671 $
Valuation allowance ......................................................................................................................................................................................
(671)
Total deferred tax assets recognized ......................................................................................................................................................................................
-

Over fiveyears
21,619 $(20,690)929

March 31, 2019(*a) Gross deferred tax assets for tax loss carryforwards are calculated using the enacted statutory tax rates.
(*b) Deferred tax assets of \103 million ($929 thousand) are recognized for tax loss carryforwards of \2,474 million ($22,290 thousand) (calculated using the enacted statutory tax rates),
which the Company recognized for a part of tax loss carryforwards of \1,022 million ($9,211 thousand).
These tax loss carryforwards resulted from loss before income taxes of \9,540 million for the year ended March 31, 2016, which are expected to be recoverable judging fromthe estimated taxable income in the future. Accordingly, the Company does not recognize the valuation allowance for this.

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statements
of income for years ended March 31, 2019, 2018 and 2017 are as follows:
2019

2018

2017

Statutory tax rate ............................................................................................................................................................................................................................
30.6%
30.8%
30.8%
Expenses not deductible for tax purpose ........................................................................................................................................................................
0.1%
0.2%
0.3%
Per capita inhabitant tax ............................................................................................................................................................................................
0.2%
0.3%
0.5%
Directors' bonuses ....................................................................................................................................................................................................................................
0.1%
0.4%
0.5%
Tax deduction ....................................................................................................................................................................................................................................
(2.1)%-%-%Tax rate difference in foreign subsidiaries ...................................................................................................................................................................................................................
(13.8)%(23.3)%(19.5)%
Retained earnings of foreign subsidiaries ................................................................................................................................................ 0.6%
(0.4)%
6.9%
Foreign tax credit ..................................................................................................................................................................................................................................................
2.4%
5.0%
6.0%
Effect of amendments of consolidation ...............................................................................................................................................
-%(0.2)%
1.7%
Valuation allowance ............................................................................................................................................................................................................
(1.9)%(15.3)%
3.5%
Expiration of tax loss carryforwards............................................................................................................................................................................................................
-%
7.8%
-%
Other, net ................................................................................................................................................................................................................................
(2.0)%
5.0%
3.8%
Actual effective tax rate ....................................................................................................................................................................................................
14.2%
10.3%
34.5%

24

Total
2,474
(2,371)(*b) 103

Total
22,290(21,361)(*b) 929

13. Financial Instruments(a) Qualitative information on financial instruments(1) Policies for using financial instruments
The Group finances necessary funds mainly through bank loans according to the capital investment plan for the production and sales of PCB.
Temporary and excessive funds are operated by highly stable financial instruments and the Group finances short-term operating capital by bank loans.
Derivative transactions are only utilized to hedge the risks mentioned in (2) below.
(2) Details of financial instruments used and exposures to risk and how they arise
Operating receivables such as trade notes and accounts receivable are exposed to credit risk. Some operating receivables, which are denominated in foreign currencies
due to global operations, are exposed to foreign currency fluctuation risk. The Group might utilize foreign exchange forward contracts, if necessary, except for thosewithin the range of the operating payables dominated in the same foreign currency. Investment securities mainly consist of securities of companies in whicha business relationship has been established and they are exposed to market fluctuation risk.
Operating payables such as trade notes and accounts payable are due within one year.
Some of the operating payables relating to imports of raw materials are dominated in foreign currencies and exposed to foreign currency fluctuation risk.
The Group might utilize foreign exchange forward contracts, if necessary, except for those within the range of the operating receivables dominated in the same foreign currency.
Loans and lease obligations for finance lease transactions are mainly used for the purpose of financing capital investments.
Some of them are variable interest loans and exposed to interest and foreign currency fluctuation risk.
The Group utilizes interest rate swaps and currency swaps to hedge the risk. Regarding derivative transactions, the Group utilizes foreign exchange forward contracts tohedge foreign currency fluctuation risk of receivables and payables dominated in foreign currencies. The Group utilizes interest rate swaps and currency swaps
to hedge interest fluctuation risk. The Group utilizes commodity forward contracts to hedge copper price fluctuation risk.
(3) Policies and processes for managing the risk(i) Credit risk management (risk of default by the counterparties)
The sales management department in the Company follows sales management rules, monitors the customers’ credit conditions periodically and manages the due dateand balance per customer. The Company keeps track of the adverse financial conditions of its customers in the early stage to mitigate the uncollectible risk.
The Company enters into derivative transactions only with the credit-worthy financial institutions to mitigate the credit risk.
(ii) Market risk management (risk of foreign currency fluctuations and interests)
Regarding the trade receivables and trade payables dominated in foreign currencies, the Company utilizes foreign exchange forward contracts, if necessary, to hedge
the foreign currency fluctuation risk, which is controlled by each currency and on a monthly basis. For investment securities, the Company regularly reviews the fair value
and issuers' financial condition and readjusts its portfolio on an ongoing basis considering the business relationship with counterparties. Derivative transactions
are based on the internal rules and executed after getting the approval from the approver and managed by Finance Dept. Contents of the derivative transactions
are reported to Board of Directors' meeting periodically.
(iii) Liquidity risk management (risk of default at the due dates)
The Company prepares and updates the cash management plan based on the reports from each department to manage liquidity risk on a timely basis.
(4) Supplemental information on fair values
As well as the values based on market prices, fair values of financial instruments include values which are reasonably calculated in case market prices do not exist.
As the calculation of those values adopts certain assumptions, those values may vary in case different assumptions are applied.
Also, for the contract amount regarding derivative transactions described in Note 14, the contract amount itself does not indicate market risk related to derivativetransactions.
(b) Fair values of financial instruments
Book values of the financial instruments included in the consolidated balance sheets and their fair values as at March 31, 2019 and 2018 are as follows:
2019
Millions of yen
Book

Fair

Value

Value

Thousands of U.S. dollars
Difference

AssetsCash and cash equivalents ...........................................................................................................
\
11,419 \11,419 \- $Time deposits ..................................................................…
238
238
Trade notes and accounts receivable ...................................................................................................
25,83425,834
Investment securities:
Available-for-sale securities....................................................................................................................
361
361
Liabilities
Trade notes and accounts payable .................................................
\
15,797 \
15,797 \- $Short-term borrowings......................................................................................................
7,638
7,638
Long-term borrowings............................................................................
49,151
49,20352
Lease obligations ........................................................................…
1,810
1,823
13
Derivative financial instruments ........................................................................…
\
264 \
264 \
- $
2018
Millions of yen
Book

Fair

Value

Value

Difference

AssetsCash and cash equivalents ...........................................................................................................
\
15,190 \15,190 \Time deposits ..................................................................…
232
232
Trade notes and accounts receivable ...................................................................................................
24,911
24,911
Investment securities:
Available-for-sale securities....................................................................................................................
430
430
Liabilities
Trade notes and accounts payable .................................................
\
16,152 \16,152 \Short-term borrowings......................................................................................................
13,263
13,263Long-term borrowings..............................................................................................
33,781
33,84968
Lease obligations.........................................................................................................................
2,974
2,988
14
Derivative financial instruments ........................................................................…
\
430 \
430 \
-

25

Book

Fair

Value

Value

Difference

102,879 $2,140
232,735

102,879 $2,140
232,735

-

3,254

3,254

-

142,319 $
68,807442,800
16,3102,380 $

142,319 $
68,807443,274
16,4282,380 $

474
118-

The financial instruments whose fair values are extremely difficult to determine are not included above.
Derivative financial instruments are stated in net of assets and liabilities. The figures in parenthesis indicate net liabilities.

(1) Valuation method of the fair value of financial instruments and information of investment securities and derivative transactions(i) Cash and cash equivalents, (ii) Time deposits, (iii) Trade notes and accounts receivable
The carrying value is deemed as the fair value since it is scheduled to be settled in a short period of time.
(iv) Investment securities
Fair value of equity securities is based on the quoted price on stock exchange. Please refer to Note 3 regarding the information of the fair value for the investment
in securities by classification.
(v) Trade notes and accounts payable, (vi) Short-term borrowings
The carrying value is deemed as the fair value since it is scheduled to be settled in a short period of time.
(vii) Long-term borrowings, (viii) Lease obligations
The fair values are measured as the net present value of estimated future cash flows by discounting the principal and interest value using the loan interest rate applied
to the new loans or the lease contracts. If the variable interest rate loans meet certain criteria for the short-cut method for interest rate swaps (if interest rate swap
contracts are used as a hedge and meet certain hedging criteria, the interest rate swaps are not remeasured at market price and the amount to be received under theinterest rate swap contract is added to or deducted from the interest on the liabilities for which the swap contract was executed.) and for the allocation method for
currency swaps, the sum of principal and the interest processed as interest rate swaps and currency swaps are discounted by using the reasonably estimated loaninterest rate applied to the same kind of loans.
(ix) Derivative transactions
Please refer to Note 14.
(2) Unlisted securities of \1,164 million ($10,486 thousand) as of March 31, 2019 and \216 million as of March 31, 2018 are not included in the above tablebecause the securities do not have fair market values and it is extremely difficult to estimate fair values.
(c) The redemption schedule for financial instruments as of March 31, 2019 and 2018 is as follows:
2019
Millions of yen
Due in one

Due after one

Due after fiveDue after ten

year
or less

year throughfive years

year throughten years

years

Cash and cash equivalents ...........................................................................................................
\
11,419 \- \Time deposits ......................................................................................................
238
Trade notes and accounts receivable ...................................................................................................
25,834
Total ...............................................................................................................
\
37,491 \
- \

- \
- \

-

2019
Thousands of U.S. dollars
Due in one

Due after one

Due after fiveDue after ten

year

year throughyear throughyears

or less

five years

ten years

Cash and cash equivalents ...........................................................................................................
$
102,879 $- $Time deposits ......................................................................................................
2,140
Trade notes and accounts receivable ...................................................................................................
232,735
Total ...............................................................................................................
$
337,754 $
- $

- $
- $

-

2018
Millions of yen
Due in one

Due after one

Due after fiveDue after ten

year
or less

year throughfive years

year throughten years

years

Cash and cash equivalents ...........................................................................................................
\
15,190 \- \Time deposits ......................................................................................................
232
Trade notes and accounts receivable ...................................................................................................
24,911
Total ...............................................................................................................
\
40,333 \
- \

26

- \
- \

-

14. Derivatives
There are no derivative transactions for which hedge accounting has not been applied for the years ended March 31, 2019 and 2018.
Derivative transactions for which hedge accounting has been applied for the years ended March 31, 2019 and 2018 are as follows:
2019

Contract
amountHedged item

Millions of yen
Contract
amountdue after
one year

Fair value

Thousands of U.S. dollars
Contract
amountContract
due after
amountone year
Fair value

Interest rate related:
Benchmark Method
Interest rate swap
contracts
Payable fixed/
Receive floating

Long-term
borrowings \3,922 \

1,201 \

(2) $35,332 $10,824 $(19)

Currency swap
contracts
Payable fixed/
Receive floating

Long-term
borrowings \6,577 \

4,507 \

266 $

59,252 $40,604 $2,399

Special Method*
Interest rate swap
contracts
Payable fixed/
Receive floating

Long-term
borrowings \2,220 \

1,400 \

(18) $

20,000 $12,613 $(162)

Currency related :Allocation Method
Foreign currency
forward contracts
Currency swap
contracts
Payable in yen/
Receive in U.S.
dollars

Long-term
borrowings \6,577 \

4,507 \

(313) $

59,252 $40,604 $(2,818)Contract
amountHedged item

2018
Millions of yen
Contract
amountdue after
one year

Fair value

Interest rate related:
Benchmark Method
Interest rate swap
contracts
Payable fixed/
Receive floating

Long-term
borrowings\

8,262 \

4,059 \

(1)

Currency swap
contracts
Payable fixed/
Receive floating

Long-term
borrowings\

8,647 \

6,577 \

431

Special Method*
Interest rate swap
contracts
Payable fixed/
Receive floating

Long-term
borrowings\

2,930 \

2,220 \

(23)

Currency related :Allocation Method
Foreign currency
forward contracts
Currency swap
contracts
Payable in yen/
Receive in U.S.
dollars

Long-term
borrowings\

8,647 \

6,577 \

(900)

There are no commodity-related transactions for which hedge accounting has been applied for the years ended March 31, 2019 and 2018.

Fair value is principally based on quoted price obtained from financial institutions signing the contract.
* Special Method
The interest rate swaps, which qualify for hedge accounting and meet specific matching criteria, are not remeasured at market value but the differential
paid or received under the swap agreements is recognized and included in interest expense or income.

27

15. Comprehensive Income
Reclassifications and income tax effects attributable to other comprehensive income for the years ended March 31, 2019, 2018 and 2017 are as follows:
Thousands of

2019

Millions of yen
2018

U.S. dollars

2017

Unrealized gains (losses) on available-for-sale securities:
Gains (losses) arising during the year ........................................................................................................................................................................
\(123) \
53 \76 $Reclassifications and adjustments ........................................................................................................................................................................
26(145)
Before income tax effects .....................................................................................................................................................................…
(97)
(92)
76
Income tax effects .....................................................................................................................................................................…
10
28
(23)
Total ......................................................................................................................................................................................
\(87) \(64) \
53 $Deferred gains (losses) on hedges:
Gains (losses) arising during the year ........................................................................................................................................................................
\(100) \441 \322 $Reclassifications and adjustments ........................................................................................................................................................................
(67)
(96)
100
Before income tax effects .....................................................................................................................................................................…
(167)
345
422
Income tax effects .....................................................................................................................................................................…
51
(105)
(26)
Total ......................................................................................................................................................................................
\(116) \
240 \396 $Foreign currency translation adjustments:
Adjustments arising during the year ........................................................................................................................................................................
\(190) \
1,234 \
(2,043) $Reclassifications and adjustments ........................................................................................................................................................................
(165)
Total ......................................................................................................................................................................................
\(190) \
1,069 \
(2,043) $Remeasurements of defined benefit plans:
Adjustments arising during the year ........................................................................................................................................................................
\
67 \(23) \(273) $
Reclassifications and adjustments ........................................................................................................................................................................
64
64
49
Before income tax effects .....................................................................................................................................................................…
131
41
(224)
Income tax effects .....................................................................................................................................................................…
Total ......................................................................................................................................................................................
\
131 \
41 \
(224) $
Total other comprehensive income ......................................................................................................................................................................................
\(262) \
1,286 \
(1,818) $28

2019(1,104)
230
(874)
87
(787)
(898)
(599)
(1,497)458(1,039)(1,711)(1,711)
603
572
1,175
1,175
(2,362)

16. Segment Information
Information about reported segment sales, segment profit, segment assets and other items under the new accounting standards is not disclosed as the Group's
reportable segment is mainly printed circuit boards (“PCB”), and the related business and other business are immaterial.
(Supplementary information)(1) Information about products and services
Information about products and services is not disclosed since sales amount of single unit of product or service to external customers accounted for more than
90% of consolidated net sales.
(2) Information about geographical areas(a) Net sales

2019
Millions of yen
Japan

Net sales .............................................................................................................................
\
30,428China\

Vietnam\

40,593

Asia\

12,168

North America

19,092\Europe13,729

\

2,901

Total

\

118,911$

1,071,269

2019
Thousands of U.S. dollars
Japan

Net sales .............................................................................................................................
$
274,128

China$

Vietnam

365,707$

Asia

109,619$

North America

172,001$

Europe123,681$

26,133Total

2018
Millions of yen
Japan

Net sales .............................................................................................................................
\
26,643

China\

Vietnam\

38,860Asia\

12,533

North America

15,461\

Europe12,091

\

2,954

2017
Millions of yen
Japan

Net sales .............................................................................................................................
\
25,960

Asia\

North America\

55,76012,366

Europe

\

Other

1,826

\

Total

-

Net sales by destination were recognized based on the location of customers and classified by country or regions.
(b) Property, plant and equipment

2019
Millions of yen
Japan

China

Vietnam

Property, plant and equipment .............................................................................................................................
\
7,886
\
27,710\22,956

Other

\

Total

2

\

18

$

2

\

58,5542019
Thousands of U.S. dollars
Japan

China

Vietnam

Property, plant and equipment .............................................................................................................................
$
71,043$249,634$

206,815

Other

$

Total

527,510

2018
Millions of yen
Japan

China

Vietnam

Property, plant and equipment .............................................................................................................................
\
5,846
\
27,133\

16,752(3) Information about major customers
Information about major customers is not presented since no single customer accounts for 10% or more of consolidated net sales.
(4) Information about impairment loss
Information about impairment loss by reportable segment for the year ended March 31, 2019 is not disclosed as the Group's reportable segment ismainly printed circuit boards (“PCB”) and the related business and other business are immaterial.
Information about impairment loss by reportable segment for the year ended March 31, 2018 is not disclosed as the Group's reportable segment issolely printed circuit boards (“PCB”) and the related business and other business are immaterial.
Information about impairment loss by reportable segment for the year ended March 31, 2017 is not disclosed as the Group's reportable segment issolely printed circuit boards (“PCB”) and the related business and other business are immaterial.

29

Other

\

Total

49,733\

95,912

Total\

108,54217. Related Party Transactions
For the year ended March 31, 2019
Transactions with related parties(1) Unconsolidated subsidiary
There were no applicable matters for the year ended March 31, 2019.
(2) Directors and major individual shareholders

Name
M.D. Systems Co., Ltd.

Location
Atsugi City,
Kanagawa

Capital\15 million

Details of business
Board design

Percentage forpossession of voting rights
Directly own (%)
14.7

Relationship
Businessrelationship

Details oftransaction ※2
Purchase of products

Transaction
amount ※1\242 million($2,180 thousand)Sales of products\16 million($144 thousand)

Balance as at
March 31,2019
\31 million($282
thousand)in accounts
payable\2 million($17 thousand)in accounts
receivable

Notes: ※1 Consumption taxes are not included in the transaction amount, and included in the balance as at March 31, 2019.
※2 Seiichi Naya, a close relative of Yuichiro Naya, representative director and executive officer of the Company, directly owns 81.3% of voting rights for M. D. Systems Co., Ltd.
※3 The terms and conditions of the transactions for sales and purchase of products are determined based on the price of other companies.

Transactions between consolidated subsidiaries and related parties
Directors and major individual shareholders

Name
M.D. Systems Co., Ltd.

Location
Atsugi City,
Kanagawa

Capital\15 million

Details of business
Board design

Percentage forpossession of voting rights
Directly own (%)
14.7

Relationship
Businessrelationship

Details oftransaction ※2
Purchase of products

Transaction
amount ※1\16 million($143 thousand)Sales of products\5 million($49 thousand)

Balance as at
March 31,2019
\2 million($14 thousand)in accounts
payable\0 million($1 thousand)in accounts
receivable

Notes: ※1 Consumption taxes are not included in the transaction amount, and included in the balance as at March 31, 2019.
※2 Seiichi Naya, a close relative of Yuichiro Naya, representative director and executive officer of the Company, directly owns 81.3% of voting rights for M. D. Systems Co., Ltd.
※3 The terms and conditions of the transactions for sales and purchase of products are determined based on the price of other companies.

For the year ended March 31, 2018
Transactions with related parties(1) Unconsolidated subsidiary
There were no applicable matters for the year ended March 31, 2018.
(2) Directors and major individual shareholders

Name
M.D. Systems Co., Ltd.

Location
Atsugi City,
Kanagawa

Capital\15 million

Details of business
Board design

Percentage forpossession of voting rights
Directly own (%)
14.7

Relationship
Businessrelationship

Details oftransaction ※2
Purchase of products

Transaction
amount ※1\117 million

Balance at
March 31, 2018
\28 million
in accounts
payableSales of products\5 million\1 million
in accounts
receivable

Notes: ※1 Consumption taxes are not included in the transaction amount, and included in the balance as at March 31, 2018.
※2 Seiichi Naya, a close relative of Yuichiro Naya, representative director and executive officer of the Company, directly owns 81.3% of voting rights for M. D. Systems Co., Ltd.
※3 The terms and conditions of the transactions for sales and purchase of products are determined based on the price of other companies.

Transactions between consolidated subsidiaries and related parties
Directors and major individual shareholders

Name
M.D. Systems Co., Ltd.

Location
Atsugi City,
Kanagawa

Capital\15 million

Details of business
Board design

Percentage forpossession of voting rights
Directly own (%)
14.7

Relationship
Businessrelationship

Details oftransaction ※2
Purchase of products

Transaction
amount ※1\14 million

Balance at
March 31, 2018
\3millionin accounts
payableSales of products\6 million\0 million
in accounts
receivable

Notes: ※1 Consumption taxes are not included in the transaction amount, and included in the balance as at March 31, 2018.
※2 Seiichi Naya, a close relative of Yuichiro Naya, representative director and executive officer of the Company, directly owns 81.3% of voting rights for M. D. Systems Co., Ltd.
※3 The terms and conditions of the transactions for sales and purchase of products are determined based on the price of other companies.

30

31

Principal Subsidiaries and Affiliates

Principal
Business

Paid-in Capital

Investment
Ratio (%)

Name or Trade Name

Address

Meiko Tech Co., Ltd.

Ayase City,
Kanagawa Prefecture

45

PCBs forelectronics

100.0

Yamagata Meiko
Electronics Co., Ltd.

Kahoku-cho,Nishimurayama-gun,
Yamagata Prefecture

75

PCBs forelectronics

100.0

Meiko Techno Co.,Ltd.

Yokohama City,
Kanagawa Prefecture

250

PCBs forelectronics

100.0

Meiko Elec. HongKong. Co., Ltd.

Hong Kong

US$315,834
thousand

PCBs forelectronics

100.0

Meiko Electronics(Guangzhou Nansha)
Co., Ltd.

Guangzhou,
Guangdong Province,
P.R.C.

US$120,800
thousand

PCBs forelectronics

100.0

Meiko Electronics(Wuhan) Co., Ltd.

Wuhan,
Hubei Province,
P.R.C.

US$173,800
thousand

PCBs forelectronics

100.0

Meiko Electronics
America, Inc.

CA, U.S.A.

US$1,500
thousand

PCBs forelectronics

100.0

Meiko Electronics
Vietnam Co., Ltd.

Hanoi, Vietnam

US$90,000
thousand

PCBs forelectronics

Meiko Electronics
Thang Long Co., Ltd.

Hanoi, Vietnam

US$15,000
thousand

PCBs forelectronics(Millions of yen)32

(66.3)(40.7)

100.0(100.0)100.0

Principal Shareholders

Number of
Shares Held

Name of Shareholder(Thousands of shares)

Percentage ofTotal Number of
Shares Issued(excluding treasury
stock) (%)

Yuichiro Naya

4,703

17.97

Japan Trustee Services Bank, Ltd.

1,997

7.63

1,123

4.29

780

2.98

755

2.88

Meiko Kosan Co., Ltd.

608

2.32

Yuho, Ltd.

521

1.99

Trust & Custody Services Bank, Ltd.

437

1.67

Seiichi Naya

435

1.66

The Nomura Trust and Banking Co., Ltd.

430

1.64

11,79045.05(trust account)
The Master Trust Bank of Japan, Ltd.
(trust account)JAPAN POST BANK Co., Ltd.
(Standing Agent: Trust & Custody Services
Bank, Ltd.)BNP PARIBAS SECURITIES SERVICESLUXEMBOURG/JASDEC/FIM/LUXEMBOURG
FUNDS/UCITS ASSETS(Standing Agent: Custody Department, Tokyo
Branch, The Hongkong and Shanghai Banking
Corporation Limited)(trust account)
Total

33

Corporate History

November 1975

Established Meiko Denshi Kogyo Co., Ltd. to manufacture and sell PCBs.
Started selling double-sided PCBs.

April 1978

Established the System Development Department (currently Meiko TechnoCo., Ltd./ Meiko Tech Co., Ltd.) to develop electronics application products.

October 1978

Developed in-house use PCB Testers for the PCB final inspection process.

September 1980

Constructed a new headquarters and factory, establishing an integrated
production system for the entire process from design to finished product.

December 1980

Introduced a multi-layer press machine and started manufacturing multilayer PCBs.

December 1981

Developed the world’s first multi-video processor.

March 1982

Established Multitech Co., Ltd. (currently Meiko Tech Co., Ltd.) to
manufacture single-sided PCBs (currently a consolidated subsidiary of theCompany).

September 1982

Established Yamagata Meiko Electronics Co., Ltd. (currently a consolidated
subsidiary of the Company) to manufacture PCBs.

August 1984

Completed construction to expand the headquarters/factory in Ayase,
Kanagawa Prefecture, and started operations.

June 1990

Constructed the Fukushima Factory.

April 1991

Changed company name to Meiko Electronics Co., Ltd.

November 1997

Constructed a new manufacturing building on the premises of the Yamagata
Factory (Yamagata Meiko Electronics Co., Ltd.) to manufacture PCBs using
the new PCB Build-Up technology.

August 1998

Established Meiko Elec. Hong Kong. Co., Ltd. in Hong Kong, China(currently a consolidated subsidiary of the Company), mainly to expand
transactions with overseas manufacturers and purchase materials locally.

December 1998

Established Meiko Electronics (Panyu Nansha) Co., Ltd. in Guangzhou,
Guangdong, China [currently Meiko Electronics (Guangzhou Nansha) Co.,
Ltd., a consolidated subsidiary of the Company], to manufacture PCBs.

June 1999

Changed the name of the PCB manufacturing department of headquarters
to Kanagawa Factory.

December 2000

Stock listed on the Japan Securities Dealers Association.

January 2001

Started operations at the Guangzhou Plant [Meiko Electronics (Guangzhou
Nansha) Co., Ltd.].

December 2004

Stock listed on JASDAQ Securities Exchange, Inc.

July 2005

Established Meiko Electronics (Wuhan) Co., Ltd. in Wuhan, Hubei, China(currently a consolidated subsidiary of the Company) to manufacture PCBs.

November 2005

Constructed a new factory building at Miyagi Factory (currently the
Ishinomaki Branch Factory).

34

April 2006

Established Meiko Electronics America, Inc. in the United States (currently aconsolidated subsidiary of the Company) to sell PCBs.

July 2006

Started operations at the WUHAN Plant [Meiko Electronics (Wuhan) Co.,Ltd.].

January 2007

Established Meiko Electronics Vietnam Co., Ltd. (currently a consolidated
subsidiary of the Company) in Hanoi, Vietnam, to manufacture PCBs.

November 2007

Constructed a new headquarters building on the premises of the Kanagawa
Factory.

March 2008

Purchased the Circuit Business from Victor Company of Japan, Limited.

April 2009

Started operation of the EMS Plant in Vietnam.

May 2009

Established the Meiko R&D Center.

July 2009

Started operation of second plant in WUHAN.

April 2010

Upon the merger of JASDAQ Securities Exchange, Inc. and Osaka Securities
Exchange Co., Ltd., the Company’s stock is listed on the Osaka Securities
Exchange, JASDAQ market.

October 2010

Subsequent to the integration of the Hercules, JASDAQ and NEO markets of
the Osaka Securities Exchange, Meiko Electronics Co., Ltd. had its stock
listed on the JASDAQ Standard market of the exchange.

July 2011

Transferred the imaging equipment and industrial equipment businesses
to Multitech Co., Ltd., and changed the trade name to Meiko Tech Co., Ltd.

November 2011

Started operation of the PCB Plant in Vietnam.

May 2013

Started operation of the Ishinomaki Factory (currently Ishinomaki Branch
Factory).

July 2013

Subsequent to the integration of cash equity markets of the Osaka Securities
Exchange Co., Ltd. and Tokyo Stock Exchange Group, Inc., Meiko
Electronics Co., Ltd. had its stock listed on the JASDAQ standard market of
the Tokyo Stock Exchange.

August 2014

Established Meiko Electronics Thang Long Co., Ltd. (currently a consolidated
subsidiary of the Company) in Hanoi, Vietnam, to manufacture and sell
PCBs.

June 2015

Established Meiko Solar Park Fukushima, a solar power generation plant on
the premises of the Fukushima Factory.

August 2015

Established Meiko Techno Co., Ltd. (currently a consolidated subsidiary of
the Company) in Yamato, Kanagawa Prefecture, to mount PCBs andmanufacture and sell imaging equipment and industrial equipment.

35

Corporate Data (As of March 31, 2019)

Corporate Name:
Meiko Electronics Co., Ltd.
Date of Establishment:
November 25, 1975
Paid-in Capital:¥12,888 million
Fiscal Year:
April 1 to March 31
Number of Shares Authorized:
70,000,000
Number of Shares Issued:
26,803,320
Number of Shareholders:
6,817
Securities Code:
6787
Stock Exchange Listing:Tokyo Stock Exchange, JASDAQ standard market
Number of Employees:
11,899 (Consolidated)
Number of Subsidiaries:
19
Transfer Agent:
Sumitomo Mitsui Trust Bank, Limited
Accounting Auditor:
KPMG AZSA LLC
Headquarters:
5-14-15, Ogami, Ayase, Kanagawa Prefecture, Japan 252-1104
Investor Relations Contact:- Tel:+81-(0)467-76-6001- E-mail: Meiko_Eng@meiko-elec.com- URL:
http://www.meiko-elec.com/

36

Meiko Share Performance in FY2019 Compared with IndicesFiscal year ended March 31, 2019
Index
In %

37

38