+

Annual Report 2017
For the year ended March 31, 2017

Meiko Electronics Co., Ltd.

The Meiko Group consists of Meiko Electronics Co., Ltd. (the “Company”), and its 16
subsidiaries (12 consolidated subsidiaries and 4 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, 2017) ............................................................................ 36
Meiko Share Performance in FY2017 Compared with Indices ...................................... 372

Five-year Financial Summary(For the years ended/as of March 31)
2013

2014

2015

2016

2017

(millions of yen, except per share amounts)
Consolidated financial indicators:¥60,709¥79,232¥90,895¥95,287¥95,912

(387)

1,932

1,075

(492)

2,981

Profit (loss) attributable to owners ofparent(1,568)23(9,573)(11,250)

1,767

Comprehensive income

1,822

3,522

(5,954)(14,709)(32)

Net assets

36,72744,70838,62328,76428,540Total assets

102,046

115,427

122,964

109,605

103,578

Net assets per share (yen)1,956.24

1,708.09

1,475.59

897.97882.84(83.52)

1.11(365.76)(429.83)

54.14

—

—

—

—

44.06

Equity ratio

36.0%

38.7%

31.4%

26.0%

27.3%

Return on equity (ROE)

-4.4%

0.1%

-23.0%-33.5%

6.2%

Price earnings ratio (PER) (times)

—

583.5

—

—

16.2

Cash flows from operating activities

3,594

2,426

2,238

9,932

11,612

Cash flows from investing activities(5,075)(4,021)(6,986)(1,737)(4,322)

Cash flows from financing activities

5,358

1,187

4,861

1,967

(9,030)Cash and cash equivalents
at the end of the period

8,788

8,759

9,491

19,313

17,196

Number of employees

9,966

11,858

10,895

9,491

10,677[Average number of temporary staff]

[528]

[700]

[609]

[633]

[885]

Net sales
Ordinary income (loss)

Net income (loss) per share (yen)Net income per share (diluted) (yen)3Net sales

Net income (loss), basic per share
Net income, diluted per share¥100.00(yen)(millions of yen)¥120,000¥100,000¥80,000¥0.00(¥100.00)(¥200.00)¥60,000(¥300.00)¥40,000(¥400.00)¥20,000(¥500.00)
¥0

2013
2013

2014

2015

2016

2017

Profit (loss) attributable to owners ofparent

2015

2016

2017

Net income, diluted per share (yen)Cash flows¥15,000(millions of yen)(millions of yen)

2014

Net income (loss), basic per share (yen)¥4,000¥0(¥4,000)¥10,000¥5,000¥0(¥5,000)(¥8,000)(¥10,000)(¥12,000)

2013

2014

2015

2016

2017

(percentage)(millions of yen)

¥40,000¥30,000

2016

2017

Cash flows from investing activities¥20,000

0.0%

2013

2014

2015

2016

2017

-10.0%-20.0%-30.0%

2013

2014

2015

2016

2017

-40.0%

Total assets

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

2015

10.0%

¥50,000¥10,000¥120,000

600.0 times¥90,000
400.0 times¥60,000
200.0 times¥30,000
¥0

2013

2014

2015

2016

0.0 times

2017

Net assets per share¥2,500.00
(yen)

2014

Return on equity (ROE)

Net assets

¥0

2013

Cash flows from operating activities
Cash flows from financing activities¥2,000.00¥1,500.00¥1,000.00¥500.00
¥0.00

2013

2014

2015

2016

2017

4

2013

2014

2015

2016

2017

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”). Prior to
the presentation of these consolidated financial statements, the Company used its
most relevant accounting principles in accordance with the Ordinance on Terminology,
Forms, and Preparation Methods of Consolidated Financial Statements (Ordinance ofthe Ministry of Finance No. 28 of 1976). The statements of estimates have been
prepared in view of past results and reasonable assumptions, however, they involve
uncertainties and actual results may differ from the estimates presented.
(2) Analysis of the Group’s financial position
Current assets
Current assets as of March 31, 2017 were ¥54,401 million, down ¥929 million from theend of the previous fiscal year. This change mainly comprised a decrease of ¥2,117
million in cash and deposits, an increase of ¥276 million in trade notes and accounts
receivable, an increase of ¥912 million in inventories, and a decrease of ¥526 million inother receivables.
Non-current assets
Non-current assets as of March 31, 2017 were ¥49,177 million, down ¥5,098 million
from the end of the previous fiscal year. Major factors for this decrease were a ¥4,979
million decrease in property, plant and equipment and a ¥229 million decrease indeferred tax assets.
Current liabilities
Current liabilities as of March 31, 2017 were ¥45,005 million, up ¥3,015 million fromthe end of the previous fiscal year. This change mainly consisted of a ¥1,590 million
increase in trade notes and accounts payable, a ¥321 million decrease in short-termborrowings, a ¥577 million increase in the current portion of long-term borrowings, anda ¥711 million increase in lease obligations.
Non-current liabilities
Non-current liabilities as of March 31, 2017 were ¥30,033 million, down ¥8,818 million
from the end of the previous fiscal year. The major factor in this decrease was ¥8,361
million in long-term borrowings.
Net assets
Net assets as of March 31, 2017 were ¥28,540 million, down ¥224 million from the endof the previous fiscal year. This mainly reflected an ¥8,000 million decrease in capitalsurplus, a ¥9,592 million increase in retained earnings, and a ¥2,038 million decreasein foreign currency translation adjustments. By resolution of the annual shareholders’meeting held on June 28, 2016, the Company reduced its legal capital surplus by¥8,000 million and transferred it to other capital surplus, and transferred ¥8,000 millionof other capital surplus to retained earnings brought forward.

5

(3) Analysis of business results
1) Net sales
The Group’s net sales for the fiscal year under review increased ¥625 million, or 0.7%,
from the previous fiscal year to ¥95,912 million due to robust sales of PCBs (printed
circuit boards) for automotive products on the back of strong global vehicle demand, as
well as favorable sales of PCBs for smartphones mainly in emerging markets, despite
an overall slowdown in growth in the global market.
2) Cost of sales and selling, general and administrative expenses
Cost of sales decreased ¥2,275 million, or 2.8%, from the previous fiscal year to¥79,826 million, reflecting a rise in productivity due to an improvement in product yield,
as well as efforts in reduction in fixed costs. As a result, gross profit increased ¥2,900
million, or 22.0%, from the previous fiscal year to ¥16,086 million. The gross marginincreased 3.0 percentage points, from the previous fiscal year to 16.8%.
Selling, general and administrative expenses increased ¥437 million, or 4.4%, from theprevious fiscal year to ¥10,298 million due to an increase in packing and freight
expenses on the back of increased sales.
3) Operating income
Operating income increased ¥2,463 million, or 74.1%, from the previous fiscal year to¥5,788 million due to increased sales and reduced costs, with an operating margin of
6.0%, up 2.5 percentage points, from the previous fiscal year.
4) Non-operating income and non-operating expenses
Non-operating income increased ¥75 million from the previous fiscal year to ¥376
million.
Non-operating expenses decreased ¥934 million from the previous fiscal year to¥3,184 million.
5) Ordinary income
Ordinary income was ¥2,981 million, compared with an ordinary loss of ¥492 million in
the previous fiscal year, due to the posting of higher operating income.
6) Extraordinary income (loss)
Extraordinary loss decreased ¥8,818 million from the previous fiscal year to ¥256
million. This primarily reflected the recording of a net loss on sales and disposal ofproperty, plant and equipment of ¥206 million for the fiscal year under review.
There was no posting of extraordinary income during the fiscal year under review.
7) Profit attributable to owners of parent
The total amount of income taxes–current and income taxes–deferred decreased ¥778
million from the previous fiscal year to ¥940 million.
As a result of the above, the profit attributable to owners of parent was ¥1,767 million,
compared with a loss attributable to owners of parent of ¥11,250 million for theprevious 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, 2017 decreased¥2,117 million from the previous fiscal year, to ¥17,196 million.
Cash flows of each category and their causes during the consolidated fiscal year
ended March 31, 2017 were as follows.
Net cash provided by operating activities for the fiscal year under review was ¥11,612
million, up ¥1,680 million from the previous fiscal year. Increases were mainly fromprofit before income taxes of ¥2,726 million, depreciation and amortization of ¥5,508
million, foreign exchange losses of ¥1,236 million, and an increase in trade notes andaccounts payable of 2,179 million. The major decrease was an increase in inventoriesof ¥1,240 million.
Net cash used in investing activities was ¥4,322 million, up ¥2,585 million from theprevious fiscal year. The major outflow was ¥3,222 million for the purchase of property,
plant and equipment.
Net cash used in financing activities totaled ¥9,030 million (net cash of ¥1,967 million
was provided in the previous fiscal year). The major outflows comprised payments forlong-term borrowings of ¥11,567 million. The major inflows comprised proceeds fromlong-term borrowings of ¥3,723 million.
Trends in cash flow indicators of the Group are as follows:Year ended
March 31, 2015

Year ended
March 31, 2016

Year ended
March 31, 2017

Equity ratio (%)

31.4

26.0

27.3

Market value equity ratio (%)

7.9

8.2

22.2

Cash flows versus Interest-bearing debt ratio

27.5

6.1

4.5

Interest coverage ratio (times)

2.1

7.8

8.8

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 internal reserves or borrowings. The
Group has a policy of procuring funds for investment and loans and funds to acquire
manufacturing equipment inside and outside Japan via long-term borrowings. With
regard to procuring such funds and the conditions of procurement, the Group strives toselect the most favorable 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 automobile electronic control
equipment, communications equipment and devices, digital household appliances, andpersonal computers, among others. The Group’s major business is the manufacture andsale of PCBs, which are parts that constitute a core function of finished products. Shoulda natural disaster or global economic turmoil occur and thus adversely impact themarkets of the industries in which the Group’s major customers operate, or lead tosluggish sales of their finished products, such factors could impact the volume of orders
received by the Group and affect the Group’s business performance.
(2) Risks related to the timing of capital investments
The Group conducts appropriate capital investment to enhance productivity and maintainproduct competitiveness. Although overseas and domestic capital investments arecarefully determined considering brand manufacturers’ business performance and market
trends, should manufacturers change strategies or the Group’s capital investments
become excessive upon a downturn in the economy, or the operation of new facilities bedelayed, factors such as the burden of depreciation costs could adversely affect theGroup’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
Although the Group expects long-term expansion of demand for PCBs due to theworldwide spread of digital household appliances and the further advancement ofelectronic automobile components, to address intensifying global competition stemmingfrom downward pressure on prices from Southeast Asia, Japanese manufacturers needto differentiate their products by adding more value. To this end, the Group is developing
technologies such as element technologies to make wires thinner and hole diameters
smaller, as well as cost-reduction technologies. However, should such technologies
diverge from market needs and not be accepted, the Group may get embroiled in a pricewar, 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 works on
its production equipment in manufacturing bases inside and outside Japan and strives tominimize the occurrence of fire, equipment failures, accidents, etc. which may result inthe 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 thesefactors, the Group’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 medium- and longterm increase in demand for digital household appliances and automobiles, 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, 2017, was 46.8%.
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 may continue to build new plants or establish new production lines in order toexpand its production capacity in the future in accordance with demand of major
customers around the world. However, should such construction works be delayed or
new production lines not launched smoothly, it could result in a delay in delivery of
products to customers or a decline in plant productivity, and the subsequent drop in 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, 2017 and 2016
Thousands ofMillions of yen

ASSETS2017

U.S. dollars (Note 1)

2016

Current Assets:
Cash and cash equivalents (Note 12) .............................................................................................................................
\
17,196\
19,313
Receivables －Trade notes and accounts receivable (Note 12) ...................................................................................................................
22,03521,759Other receivables ........................................................................................................................................
873
1,399
Less: Allowance for doubtful accounts ........................................................................................................................
(17)
(24)
Inventories －Merchandise and finished goods .........................................................................................................4,550
3,855Work in process ..................................................................................................................................
3,390
3,263
Raw materials and supplies .................................................................................................................4,587
4,497
Deferred tax assets (Note 11) .................................................................................................................. 256
44
Other (Note 12) ...................................................................................................................................................................
1,531
1,224
Total current assets ..........................................................................................................................
54,401
55,330Property, Plant and Equipment, at Cost:
Land ................................................................................................................................................................
1,488
Buildings and structures ..........................................................................................................................
35,582
Machinery and vehicles..........................................................................................................................
66,818
Leased assets...........................................................................................................
6,145
Construction in progress .............................................................................................................
1,117
Other .......................................................................................................................................................................
3,896
115,046
Less: Accumulated depreciation ........................................................................................................ (69,291)
Net property, plant and equipment ......................................................................................................
45,755Intangible Assets

220

Investments and Other Assets:
Investment securities (Notes 3 and 12) ....................................................................................................................
1,003
Long-term loans receivable .................................................................................................................... 25
Deferred tax assets (Note 11) .................................................................................................................. 798
Other .....................................................................................................................................................................
1,591
Less: Allowance for doubtful accounts ..........................................................................................................
(215)
Total investments and other assets ..........................................................................................................
3,202
Total ..............................................................................................................................................
\
103,578\

See notes to consolidated financial statements.

11

2017

$

153,276
196,408
7,778(149)
40,55230,21740,8882,278
13,650484,898

1,488
36,67769,542
5,363
1,735
3,835
118,640(67,906)
50,734

13,266317,160
595,583
54,772
9,959
34,7201,025,460(617,621)
407,839

213

1,959

872
51
1,027
1,397
(19)
3,328
109,605

8,945
220
7,117
14,179(1,915)28,546923,242$

Thousands of

LIABILITIES AND
NET ASSETS

Millions of yen

2017

U.S. dollars (Note 1)

2016

2017

Current Liabilities:
Trade notes and accounts payable (Note 12) ..................................................................................................................
\
13,195\
11,605$
Short-term borrowings (Notes 4 and 12) ............................................................................................................…
12,292
12,613Current portion of long-term borrowings (Notes 4 and 12) ........................................................................................................
12,323
11,746
Income taxes payable (Note 11) .....................................................................................................................
210
147
Accrued bonuses .................................................................................................................................. 547
495
Accrued bonuses to directors and corporate auditors ..................................................................................................................................
40
Lease obligations (Notes 4 and 12)..................................................................................................................................
1,288
577
Other (Notes 4, 11 and 12) ................................................................................................................................................................
5,110
4,807
Total current liabilities ..................................................................................................................45,005
41,990117,611
109,567
109,840
1,875
4,872
357
11,48045,547401,149

Long-term Liabilities:
Long-term borrowings (Notes 4 and 12) ........................................................................................................
23,89332,254
Lease obligations (Notes 4 and 12) ........................................................................
2,483
2,140
Provision for directors' retirement benefits ................................................................................................239
239
Net defined benefit liability (Note 5) .............................................................................................
2,699
2,287
Other (Note 11)......................................................................................................................................................................
719
1,931
Total long-term liabilities ..................................................................................................................................................
30,03338,851

212,968
22,131
2,130
24,0596,414
267,702

Commitments and Contingent Liabilities (Note 8) :Net Assets (Note 6):
Shareholders' Equity:
Common stock:
Authorized:
70,000,000 shares in 2017 and 2016
Issued:26,803,320 shares in 2017 and 2016
Preferred stock:
Authorized:
50 shares in 2017 and 2016
Issued:50 shares in 2017 and 2016...............................................................................................................

12,88912,889114,881
Capital surplus ................................................................................................................................................................
11,74519,745
104,697
Retained earnings (accumulated deficit) ......................................................................................................................................................................
1,932(7,660)17,225
Less: Treasury stock, at cost; Common stock,629,244 shares in 2017 and 2016 ......................................................................................................................
(396)
(396)
(3,533)
Total shareholders' equity...............................................................................................................................................…
26,17024,578233,270
Accumulated Other Comprehensive Income:Unrealized gains on available-for-sale securities .......................................................................................................................
85
32
760
Deferred gains (losses) on hedges ...........................................................................................................................…
59
(337)
522
Foreign currency translation adjustments ..................................................................................
2,438
4,476
21,728Remeasurements of defined benefit plans (Note 5) ......................................................................
(470)
(246)
(4,185)
Total accumulated other comprehensive income...............................................................................................................................................…
2,112
3,925
18,825
Non-controlling interests……………………………………………..………………...…………
258
261
2,296
Total net assets ..................................................................................................................................................
28,54028,764
254,391
Total ........................................................................................................................................................
\
103,578\
109,605$
923,242

See notes to consolidated financial statements.

12

Consolidated Statements of Operations
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2017, 2016 and 2015
Thousands ofMillions of yen

2017

U.S. dollars (Note 1)

2016

2015

2017

Net Sales ...........................................................................................................................................................
\
95,912\
95,287\90,895$854,905
Cost of Sales (Note 9) ..................................................................................................................................................
79,826
82,101
83,063
711,524
Gross profit ......................................................................................................................................................
16,086
13,186
7,832
143,381
Selling, General and Administrative Expenses (Note 9) ........................................................................................................................................................................
10,298
9,861
10,69891,786
Operating income (loss) ....................................................................................................................................…
5,788
3,325
(2,866)
51,595
Other Income (Expenses):
Interest expense, net ...............................................................................................................................................
(1,329)(1,262)
Dividend income ...............................................................................................................................................
23
24
Foreign exchange gain (loss).............................................................................…....................…
(702)(1,818)Net loss on sales and disposal of property, plant and equipment (Note 10)............................................… (206)(376)
Subsidy income ..............................................................................................................................................................…
106
71
Compensation income (Note 14) ..............................................................................................................................................................…
13
Gain on liquidation of subsidiaries .........................................................................
8
Insurance income.............................................................................................................................
70
40
Impairment loss (Note 7) ............................................................................................................
(11)(7,978)Provision of allowance for investment loss ...................................................................................
Loss on valuation of derivatives.......................................................................................................
(978)
Gain on sales of scraps.................................................................................................................
45
30
Other, net ......................................................................................................................................................................................
(80)(1,610)Total ...............................................................................................................................................
(3,062)(12,858)(1,027)
21
5,051
(480)
39
258
39
(8,821)
(332)
35
(277)
(5,494)(11,850)
205(6,259)(1,838)
947
627
(94)
(8,715)401(724)(27,300)

Income (Loss) before Income Taxes ..........................................................................................

(8,360)24,295

Income Taxes (Note 11):
Current ...............................................................................................................................................…916
453
1,166
Deferred ................................................................................................................................................. 24
1,265
47
Total income taxes ............................................................................................................................940
1,718
1,213
Net income (Loss)...........................................................................................................................… 1,786(11,251)(9,573)Net Income (Loss) attributable to non-controlling interests............................................................................................
19(1)
Net Income (Loss) attributable to owners of the Company ..........................................................................................................................................
\
1,767
\
(11,250) \(9,573)

8,159
217
8,376
15,919168
15,751

2,726(9,533)$Yen

Per Share of Common Stock:
Net income (loss) per share..........................................................................................................................................
Basic ...............................................................................................................................................................................
\
54.14
\
(429.83)
Diluted .......................................................................................................................................... 44.06
Cash dividends applicable to the year ......................................................................................................................
10.00-

See notes to consolidated financial statements.

13

U.S. dollars (Note 1)\(365.76)
-

$

0.48
0.39
0.09

Consolidated Statements of Comprehensive Income
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2017, 2016 and 2015
Thousands ofMillions of yen

2017

U.S. dollars (Note 1)

2016

Net Income (Loss) ...........................................................................................................................................................
\
1,786
\
(11,251)

2015\(9,573)

Other Comprehensive Income (Note 15):
Unrealized gains (losses) on available-for-sale securities................................................................................................................................…
53(98)
Deferred gains (losses) on hedges ......................................................................................................................................................
396
(175)
Foreign currency translation adjustments ......................................................................................................................................................
(2,043)(3,094)Remeasurements of defined benefit plans ...............................................................
(224)
(91)
Total other comprehensive income ......................................................................................................................................................
(1,818)(3,458)Comprehensive Income......................................................................................................................................................
\(32) \(14,709) \

33
(80)
3,688
(22)
3,619
(5,954)Comprehensive Income Attributable to:
Owners of the Company ................................................................................................................................…
\(46) \(14,709)
Non-controlling interests ......................................................................................................................................................
14(0)(5,954)-

See notes to consolidated financial statements.

14

\

2017
$

15,919

$

471
3,526
(18,209)(1,991)(16,203)
(284)

$

(409)
125

Consolidated Statements of Changes in Net Assets
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2017, 2016 and 2015

Millions of yen
Shareholders' Equity
Common Stock

Accumulated Other Comprehensive Income

Preferred Stock

Number of
Number of
SharesAmountSharesBalance at March 31, 2014...............................................................................................................
26,803,320
12,889- \\Net loss attributable to owners of the Company............................................................
Cash dividends paid................................................................................................................
Net increase (decrease)........................................................................................................
Balance at March 31, 2015..................................................................................................
26,803,320
12,889- \\Net loss attributable to owners of the Company............................................................
Issuance of new shares..........................................................................................................
50
Transfer to capital surplus from preferred stock...........................................................
Change of scope of consolidation........................................................................................
Change of scope of consolidation - foreign currency translation adjustments..............................................................................................................
Sales of shares of consolidated subsidiaries................................................................................
Net increase (decrease)...............................................................................................................
Balance at March 31, 2016............................................................................................. 26,803,320
12,88950\\
Net income attributable to owners of the Company............................................................
Deficit disposition........................................................................................................................................
Cash dividends paid....................................................................................................................................
Net increase (decrease)............................................................................................................................
Balance at March 31, 2017....................................................................................................................
26,803,320
12,88950\\

Amount2,500(2,500)
-

\

\

\

\

CapitalSurplus14,81014,810
2,500
2,500
(65)
19,745(8,000)11,745\\\\Retained
Earnings
13,756(9,573)(131)
4,052(11,250)(462)(7,660)
1,767
8,000
(175)
1,932

Treasury
Stock at cost;
Common
Stock
(396)
\
(396)
\
(396)
\
(396)
\

Total
Shareholders'Equity41,059\(9,573)(131)
31,355\(11,250)
5,000
(462)
(65)
24,578
\
1,767
(175)
26,170\

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

\

98
33
131
(99)
32
53
85

\

\

\

Deferred
Gains(Losses) on
Hedges
(82)
\
(80)
(162)
\
(175)
(337)
\
396
59
\

Foreign Currency
Translation
Adjustments

\

\

\

\

3,766
3,688
7,454
116
(3,094)4,476(2,038)
2,438

Total
Accumulated
Other
Comprehensive
IncomeRemeasurementsof Defined Benefit
Plans

\

(133)
(22)
(155)
(91)
(246)
(224)
(470)

\

\

\

\

\

\

\

3,649 \
3,619
7,268 \
116
(3,459)3,925 \
(1,813)
2,112 \

Non-controlling
Interests
262
(1)
261
(3)
258

\

Total Net
Assets44,708(9,573)(131)
3,619
38,623(11,250)
5,000
(462)
116
197
(3,460)28,7641,767(175)(1,816)28,540Non-controlling
Interests
2,323 $
(27)
2,296 $

Total Net
Assets256,388
15,751(1,560)(16,188)
254,391\\\

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

CommonStock
Balance at March 31, 2016.......................................................................................................................................
$
114,881Net income attributable to owners of the Company............................................................
Deficit disposition........................................................................................................................................
Cash dividends paid....................................................................................................................................
Net increase (decrease)............................................................................................................................
Balance at March 31, 2017.................................................................................................................... $114,881

Preferred
Stock
$

$

-

$

$

CapitalSurplus176,004(71,307)
104,697

Accumulated Other Comprehensive Income$$

See notes to consolidated financial statements.

15

Retained
Earnings(68,273)
15,751
71,307(1,560)17,225

Treasury
Stock at cost;
CommonStock$(3,533)$(3,533)

Total
Shareholders'Equity$219,079
15,751(1,560)$233,270

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

$

$

290
470
760

Deferred
Gains(Losses) on
Hedges$(3,004)
3,526
$
522

Foreign Currency
Translation
Adjustments$$

39,894(18,166)
21,728

Total
Accumulated
Other
Comprehensive
IncomeRemeasurementsof Defined Benefit
Plans

$

$

(2,194)(1,991)(4,185)$$34,986 $(16,161)
18,825 $Consolidated Statements of Cash Flows
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2017, 2016 and 2015
Thousands ofMillions of yen

2017
Operating Activities:
Income (loss) before income taxes ......................................................................................................................................................
\
2,726

U.S. dollars (Note 1)

2016\(9,533)

2015\(8,360)2017$

24,295Adjustments to reconcile income (loss) before income taxes
to net cash provided by operating activities:
Depreciation and amortization ...................................................................................................................................................... 5,508
Impairment loss...........................................................................................................................................................
11
Increase in allowance for doubtful accounts ................................................................................................................................... 189
Increase (decrease) in allowance for investment loss ........................................................................................…..
Increase in net defined benefit liability .......................................................................................................................
189
Increase (decrease) in accrued bonuses .......................................................................................................................…
52
Increase in accrued bonuses to directors and corporate auditors .......................................................................................................................…
40
Decrease in provision for directors' retirement benefits................................................................................................
Interest income and dividend income ......................................................................................................................
(52)
Interest expenses ..................................................................................................................................................
1,358
Foreign exchange gain (loss).......................................................................................................................................
1,236
Loss on valuation of derivatives.............................................................................................................................
978Net loss on sales and disposal of property, plant and equipment................................................................................
206
Compensation income ...........................................................................................................................................
Gain on liquidation of subsidiaries ...................................................................................................................................................… Decrease (increase) in trade notes and accounts receivable ..........................................................................................................................
7
Decrease (increase) in inventories ...........................................................................................................................................
(1,240)
Increase (decrease) in trade notes and accounts payable ...................................................................................................................................
2,179
Decrease (increase) in other assets .......................................................................................................................…
(399)
Increase (decrease) in other liabilities ............................................................................................................
651
Other ..............................................................................................................................................................
(19)
Subtotal
13,620Interest and dividend received .................................................................................................................................
52
Interest paid ............................................................................................................................................................
(1,312)
Proceeds from compensation income ............................................................................................................................................…
Proceeds from insurance income ............................................................................................................................
70
Payments for business structure improvement ........................................................................................................
(22)
Income taxes refund ..................................................................................................................................................
124
Income taxes paid ..................................................................................................................................................
(920)
Net cash provided by operating activities .................................................................................................................................. 11,612

6,471
7,978
7
(361)
124
35
(51)
1,287
2,141
376
(13)
(8)
129
1,153
(31)
894
(1,090)
1,468
10,97651(1,275)
13
1,764
(600)
(997)
9,932

7,186
8,821
0
332
182
(41)
(22)
(55)
1061
(4,167)480(258)(3,173)
(515)
1,281
(36)
1,239
61
4,016
55
(1,073)258(1,018)2,238

49,096
94
1,686
1,681
463
357
(462)
12,107
11,018
8,715
1,838
65
(11,050)
19,423(3,560)5,805(160)
121,411462(11,696)
627
(199)
1,102
(8,200)103,507

Investing Activities:
Payments for purchases of property, plant and equipment ..........................................................................................................................
(3,222)
Proceeds from sales of property, plant and equipment ................................................................................................................................
24
Payments for purchases of intangible assets ..........................................................................................................................
(90)
Proceeds from liquidation of subsidiaries and affiliates .......................................................................................................................... Payments for purchases of investment securities ..........................................................................................................................
(55)
Payments for insurance policies .............................................................................….................................................
(5)
Payments for derivatives settlement.............................................................................….................................................
(954)
Proceeds from maturity of insurance funds .............................................................................….................................................
Other, net ...................................................................................................................................................................
(20)
Net cash used in investing activities ..................................................................................................................................................(4,322)(2,395)
75
(46)
524
(10)
(5)
120
(1,737)(6,146)
48
(68)
(969)
(8)
92
65
(6,986)(28,717)
210
(806)
(493)
(44)
(8,498)(173)(38,521)

Financing Activities:
Increase (decrease) in short-term borrowings ..........................................................................................................................
(578)
Proceeds from long-term borrowings ........................................................................................................................................... 3,723
Payments for long-term borrowings ........................................................................................................................................... (11,567)
Proceeds from issuance of common stock.................................................................................................................
Repayments of lease obligations.....................................................................................................................
(1,221)
Proceeds from sales and leasebacks transactions............................................................................................
805
Payments for installment liabilities .............................................................................................................................
Cash dividends paid ..................................................................................................................................................
(175)
Dividends paid to non-controlling interests......................................................................................................
(17)

(87)
12,627(14,328)
4,812
(695)
(559)
(0)
-

3,609
14,805(12,860)
(85)
(477)
(131)
-

(5,151)33,188(103,108)(10,884)
7,176(1,560)
(152)

197
1,967

0
4,861

(80,491)

Proceeds from changes in ownership interests in subsidiaries that do not result in change in scope of consolidation...............................................................................................................
-

Other.......................................................................................................................................................................
Net cash provided by (used in) financing activities ..................................................................................................................................................
(9,030)See notes to consolidated financial statements.

16

Thousands ofMillions of yen

U.S. dollars (Note 1)

2017

2016

2015

2017

(377)

(704)

619

(3,364)Net Increase (Decrease) in Cash and Cash Equivalents ..........................................................................................................................
(2,117)

9,458

732

(18,869)

Cash and Cash Equivalents at Beginning of Year .............................................................................................................................................
19,313
9,491
Increase in Cash and Cash Equivalents
resulting from Change of Scope of Consolidation (Note 16).............................................................................................................................................
364
Cash and Cash Equivalents at End of Year ............................................................................................................ \17,196\
19,313

8,759

172,145

Effect of Exchange Rate Changes
on Cash and Cash Equivalents .....................................................................................................................................

See notes to consolidated financial statements.

17

\

9,491

$

153,276

Notes to Consolidated Financial Statements
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2017, 2016 and 2015
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 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 operates. The translation of Japanese yen amounts into U.S. dollar
amounts is included solely for the convenience of readers outside Japanand have been made at the rate of \112.19 to $1, the approximate rate ofexchange at March 31, 2017. 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 12 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) Equity Method
Investments in unconsolidated subsidiaries and affiliates are accounted forby the equity method. However, certain investments in unconsolidated
subsidiaries and affiliates are not accounted for by the equity method and arestated at cost because the effect of their net income or losses and retained
earnings on the accompanying consolidated financial statements is immaterial.
(c) Cash Equivalents
Cash equivalents are short-term investments that are readily convertible
into cash and that are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits which matures or becomes due
within three months of the date of acquisition.
(d) 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 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.
(e) 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.
(f) 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 sinceApril 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 equipments 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 their estimated useful
lives (five years).

(Change in accounting policies)
Due to amendments to the Japanese Corporation Tax Act, the Company and its domestic
subsidiaries adopted “Practical Solution on a change in depreciation method due to Tax Reform
2016” (Practice Issue Task Force No.32, June 17, 2016 (hereinafter, “PITF No.32”)) fromthe current fiscal year and changed the depreciation method for buildings, facilities
attached to buildings and structures, which were acquired since April 1, 2016, from thedeclining balance method to the straight-line method.
The impact of this change on profit or loss for the year ended March 31, 2017, was immaterial.
(Change in accounting estimates)
The useful lives of machinery of the Company andconsolidated domestic subsidiaries were fundamentally
reviewed upon renewal of machineries for the purpose of moresuited depreciation which reflect the actual situation of use.
Accordingly, useful lives were changed from 6 to 10 years from theyear ended March 31, 2016. As a result of this change,
operating income increased by \117 million and loss before income taxes
decreased by the same amounts for the year ended March 31, 2016.
(g) Leased assets
Leased property under finance lease arrangements which transfer ownershipof the leased property to the lessee is depreciated in 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.
(h) 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.
(i) 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.
(j) Accrued bonuses to directors
The Company provides allowance for directors' accrued bonuses basedon the estimated amounts at the balance sheet date.
(k) 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.
(l) 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 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.
(m) 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.

18

(n) Derivative Financial Instruments
The Group uses foreign currency forward contracts, interest rate swaps
and copper 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.
However, if the foreign currency forward contracts qualify for hedge
accounting, hedged items such as foreign currency receivables andpayables are translated at the contracted rates.
Also, 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.
(o) 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.
(p) Provision for Directors' Retirement Benefits
The Company and its domestic consolidated subsidiaries account for the provision
for directors' retirement benefits at balance sheet date in accordance with internal
regulations.

(t) Application of “Revised Accounting Standards regarding Business Combinations”
The Company and its domestic subsidiaries adopted “Revised AccountingStandard for Business Combinations” (ASBJ Statement No.21, September 13,
2013 (hereinafter, “Statement No.21”)), “Revised Accounting Standard forConsolidated Financial Statements” (ASBJ Statement No.22, September 13,
2013 (hereinafter, “Statement No.22”)) and “Revised Accounting Standard forBusiness Divestitures” (ASBJ Statement No.7, September 13, 2013
(hereinafter, “Statement No.7”)) (together, the “Business Combination
Accounting Standards”) from the year ending 2016. As a result, the Company
changed its accounting policies to recognize in capital surplus the differences
arising from changes in the Company’s ownership interest of subsidiaries
over which the Company continues to maintain control and to record acquisition
related costs as expenses in the fiscal year in which the costs are incurred.
In addition, the Company changed its accounting policy for the reallocation of
acquisition costs due to the completion following provisional accounting to reflect
such reallocation in the consolidated financial statements for the fiscal year
in which the business combination took place.
The Company also changed the presentation of net income and of the term
“non-controlling interests” is used instead of “minority interests”. Certain
amounts in the prior year comparative information were reclassified
to conform to such changes in the year ending 2016 presentation.
With regard to the application of the Business Combination Accounting Standards,
the Company followed the provisional treatments in article 58-2 (3) ofStatement No.21, article 44-5 (3) of Statement No.22 and article 57-4 (3) ofStatement No.7 and recognized in capital surplus or retained earnings
the cumulative effect as of the beginning of the year ending 2016 that
resulted from the retrospective application of the new accounting policies forall of the previous fiscal years.
As a result of these changes, capital surplus as of March 31, 2016 decreased by\64 million.
In the consolidated statement of cash flows, cash flows from acquisition or
disposal of shares of subsidiaries with no changes in the scope of
consolidation are included in “Cash flows from financing activities”.
The effects on earnings per share are immaterial.
(u) Application of New and Amended Standards and Interpretations
The Company and its domestic subsidiaries adopted “Revised Implementation Guidance on
Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016 (hereinafter,“Guidance No.26”)) from the current fiscal 2017.
(v) Reclassifications
Certain prior year amounts have been reclassified to conform to the presentations
for the year ended March 31, 2017.

(q) Appropriations of Retained Earnings
Appropriations of retained earnings are reflected in the accompanying
consolidated financial statements for the following year uponshareholders' approval.
(r) 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 (loss) per share is computed by dividing net income (loss) 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 was in net loss
for the years ended March 31, 2016 and 2015.
(s) 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, 2017 and 2016 are as follows:
2017
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 value
exceeds their acquisition cost:
Equity securities ...............................................................................................................
\
327 \
130 \
197 $
2,919 $
1,163 $
1,756
Other ...............................................................................................................
63
56
7
561
493
68
Securities whose carrying value doesn't
exceed their acquisition cost:
Equity securities .................................................................................................................................................................................................................
472
553
(81)
4,208
4,933
(725)
Total ...............................................................................................................
\
862 \
739 \
123 $
7,688 $
6,589 $
1,099
2016
Millions of yen
Fair

Acquisition

Unrealized

Value

Cost

Gains (Losses)

Securities whose carrying value
exceeds their acquisition cost:
Equity securities ...............................................................................................................
\
230 \
126 \
104
Securities whose carrying value doesn't
exceed their acquisition cost:
Equity securities .................................................................................................................................................................................................................
500
557
(57)
Total ...............................................................................................................
\
730 \
683 \
47
Information on available-for-sale securities whose fair value is not readily determinable as of March 31, 2017 and 2016 are described in Note 12.
There were no impairment losses for the year ended March 31, 2017.
The Company recognized impairment losses of \361 million and \24 million on available-for-sale securities during the years ended March 31, 2016 and 2015.

4. Short-term Borrowings and Long-term Debt
Short-term borrowings and long-term debt as of March 31, 2017 and 2016 consist of the following:Thousands ofMillions of yen
2017
2016

U.S. dollars

2017

Short-term borrowings with average interest rate of 2.64% for 2017 and 2.08% for 2016..........................................................................................................................................................................
\
12,292 \12,613 $109,567
Current portion of long-term borrowings with average interest rate of 2.23% for 2017 and 1.71% for 2016........................................................................................................................................................
12,323
11,746
109,840
Current portion of lease obligations ...........................................................................................................................................................
1,288
577
11,480Current portion of other liabilities with average interest rate of 0.56% for 2017 and 1.79% for 2016...........................................................................................................................................................
476
528
4,241
Total short-term ................................................................................................................................................................................................
26,37925,464
235,128

Long-term borrowings with average interest rate of 2.50% for 2017 and 1.98% for 2016, less current portion ....................................................................................................................................................
23,89332,254
212,968
Lease obligations, less current portion .................................................................................................................................................................................................................
2,483
2,140
22,131Long-term other payable, less current portion with average interest rate of 1.88% for 2016...............................................................................................................................................................................................................
960
Total long-term ...................................................................................................................................................................................................................................…
26,37635,354
235,099
Total ..............................................................................................................................................................................................................................................
\
52,755 \60,818 $
470,227* Average interest rate of borrowings represents the weighted average rate for the outstanding balances at March 31, 2017 and 2016.
Average interest rate of lease obligations are 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 at April 1, 2016 and March 31, 2017.
The aggregate annual maturities of long-term debt as of March 31, 2017 are as follows:
Millions
Year ending March 31
of yen2018...........................................................................................................................................................................................................................................................
\
12,323 $2019...........................................................................................................................................................................................................................................................
9,443
2020 ..........................................................................................................................................................................................................................................................
7,170
2021...........................................................................................................................................................................................................................................................
4,093
2022 and thereafter ...........................................................................................................................................................................................................................................
3,187
Total .........................................................................................................................................................................................................................................................
\
36,216 $Thousands of
U.S. dollars

109,840
84,164
63,911
36,482
28,411
322,808

The aggregate annual maturities of lease obligations as of March 31, 2017 are as follows:
Millions
Year ending March 31
of yen2018...........................................................................................................................................................................................................................................................
\
1,288 $
2019...........................................................................................................................................................................................................................................................
1,087
2020 ..........................................................................................................................................................................................................................................................607
2021...........................................................................................................................................................................................................................................................346
2022 and thereafter ...........................................................................................................................................................................................................................................
443
Total .........................................................................................................................................................................................................................................................
\
3,771 $

20

Thousands of
U.S. dollars

11,480
9,687
5,410
3,088
3,946
33,611

Financial covenants
For the year ended March 31, 2017
Short-term borrowings and long-term borrowings including the current portion amounting to \31,135 million ($277,519 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 ($195,757 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, 2016
Short-term borrowings and long-term borrowings including the current portion amounting to \36,060 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 (except for the year ended March 31, 2016).
(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.
5. Retirement Benefits
The Company and some of its consolidated subsidiaries provide a lump-sum retirement plan as 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, related benefit obligation, plan assets and benefit costs were excluded from thefollowing calculation because it is not possible to reasonably calculate the plan assets that correspond to the contribution by the Company.
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
2017
2016
2017
Balance at beginning of year .............................................................................................................................................................................................…
\
1,775 \
1,674 $
15,823Service cost ...........................................................................................................................................................................................…
142
144
1,266
Interest cost .............................................................................................................................................................................................…511
47
Actuarial loss.............................................................................................................................................................................................…
(35)
61
(311)
Benefits paid .............................................................................................................................................................................................…
(60)
(99)
(533)
Past service cost .............................................................................................................................................................................................…
307
2,737
Other (decrease due to employment transfer).............................................................................................................................................................................................…
8
(16)
69
Balance at end of year.............................................................................................................................................................................................…
\
2,142 \
1,775 $
19,098(2) Reconciliation from projected benefit obligations to net defined benefit liability
Thousands ofMillions of yen
U.S. dollars
2017
2016
2017
Unfunded projected benefit obligations ...........................................................................................................................................................................................…
\
2,142 \
1,775 $
19,098
Total liability at end of year ...........................................................................................................................................................................................…
\
2,142 \
1,775 $
19,098Net defined benefit liability ...........................................................................................................................................................................................…
\
2,142 \
1,775 $
Total liability at end of year ...........................................................................................................................................................................................…
\
2,142 \
1,775 $

19,09819,098(3) Retirement benefit costs
Thousands ofMillions of yen
2017
2016
Service cost ...........................................................................................................................................................................................…
\
142 \
144 $
Interest cost ...........................................................................................................................................................................................… 5
11
Amortization of actuarial loss .............................................................................................................................................................… 41
36
Amortization of past service cost .............................................................................................................................................................................................…
8
8
Total benefit costs .............................................................................................................................................................................................…
\
196 \
199 $

U.S. dollars

2017
1,266
47
363
72
1,748

(4) Remeasurements of defined benefit plans
Thousands ofMillions of yen
2017
2016
Past service cost ...........................................................................................................................................................................................…
\
299 \
(8) $
Actuarial loss ................................................................................................................................................................…
(75)
25
Total ......................................................................................................................................................................................................….
\
224 \
17 $

U.S. dollars

2017
2,665
(674)
1,991

(5) Accumulated remeasurements of defined benefit plans
Thousands ofMillions of yen
2017
2016
Unrecognized past service cost ...........................................................................................................................................................................................…
\
348 \
49 $
Unrecognized actuarial loss ................................................................................................................................................................… 122
197
Total ......................................................................................................................................................................................................….
\
470 \
246 $

U.S. dollars

2017
3,099
1,086
4,185

(6) Actuarial assumptions
2017
2016
Discount rate .................................................................................................................................................................................................................................................
0.4%
0.3%

21

Defined benefit pension plan applying the simplified method(1) Movement in net defined benefit liability
Thousands ofMillions of yen
2017
2016
Balance at beginning of year .............................................................................................................................................................................................…
\
512 \
472 $
Benefit costs .........................................................................................................................................................................................................
83
83
Benefits paid .............................................................................................................................................................................................…
(28)
(57)
Increase due to employment transfer..........................................................................................................................................................................................…
(8)
16
Others .............................................................................................................................................................................................… (2)(2)
Balance at end of year .............................................................................................................................................................................................…
\
557 \
512 $

U.S. dollars

2017
4,563
742
(254)
(69)
(21)
4,961

(2) Reconciliation from projected benefit obligations to net defined benefit liability
Thousands ofMillions of yen
U.S. dollars
2017
2016
2017
Unfunded projected benefit obligations ...........................................................................................................................................................................................…
\
557 \
512 $
4,961
Total liability at end of year ...........................................................................................................................................................................................…
\
557 \
512 $
4,961
Net defined benefit liability ...........................................................................................................................................................................................…
\
557 \
512 $
Total liability at end of year ...........................................................................................................................................................................................…
\
557 \
512 $

4,961
4,961

(3) Retirement benefit costThousands ofMillions of yen
U.S. dollars
2017
2016
2017
Retirement benefit costs calculated using the simplified method ...........................................................................................................................................................................................…
\
83 \
83 $
742
Total costs at end of year ...........................................................................................................................................................................................…
\
83 \
83 $
742

Multi-employer pension plan
The amount required to contribute to the multi-employer pension plan which is accounted for in the same way as defined contribution plans is\45 million ($402 thousand) and \90 Million for the years ended March 31, 2017 and 2016, respectively.

Millions of yen(1) Funded status
2016
2015
Fair value of plan assets .............................................................................................................................................................................................................................
\- \67,202
Total amount of pension benefit obligation recorded by pension fund and minimum actuarial reserve.......................................................................................
65,969Funded status ............................................................................................................................................................................................................…
\
- \
1,233
The above funded status is presented based on the most recent available information (as of March 31, 2016 and 2015 for fiscal 2017 and 2016, respectively).

(2) Contribution share ratio of the Company
2016
2015
Contribution share ratio .................................................................................................................................................................................................................................................
-%
6.80%
Note: The above ratio does not match the Group's actual share ratio.

(3) Supplementary information
As of March 31, 2016, the difference is not disclosed because it was settled as described below.
As of March 31, 2015, the difference described in (1) above was calculated by the sum of the balance of the unamortized past service cost of \ 1,940 million,
accumulated deficit of the fund of \ (707) million and the past service cost is amortized equally over a remaining period of 6 years and 1 month.
(Dissolution of the Social Welfare Pension Fund)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 liquidation process as of March 31, 2017.
No additional burdens to the Company are expected in relation to the dissolution of the Fund.

22

6. 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
reserve 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.

7. Impairment loss
Impairment losses recognized for the year ended March 31, 2017 are omitted due to their immateriality.
Impairment losses recognized for the years ended March 31, 2016 and 2015 are as follows:

Use
Business assets

Type of assets
Buildings and structures and Machinery andvehicles, etc.

Millions of yen
2016

Location\

Ishinomaki, Miyagi, Japan

998

Buildings and structures and Machinery andHanoi, Vietnam
6,980
vehicles, etc.
Total ................................................................................................................................................................................................
7,978\

Business assets

The Group carries out grouping mainly based on each plant for business assets.
For the year ended March 31, 2016, the Group recognized impairment losses of \7,978 million due to decline in profitability,
which resulted in decreasing the book values of such assets to recoverable amounts.
Impairment losses comprise of \3,161 million for Buildings and structures, \3,327 million for Machineryand vehicles, \837 million for Construction in progress, \213 million for Land and \440 million for others.
The recoverable value of this assets group was measured based on the higher of net selling price or the value in use.
The net selling price is computed based on the fixed asset tax valuation with reasonable adjustments.
The value in use is computed based on the future cash flow discounted at 14.0%.

Use
Business assets

Type of assets
Buildings and structures and Machinery andvehicles, etc.

Millions of yen
2015

Location\

Wuhan, Hubei, China

4,244

Buildings and structures and Machinery andHanoi, Vietnam
4,508
vehicles, etc.
Idle assets
Machinery and vehicles
Yamato, Kanagawa, Japan
69
Total ................................................................................................................................................................................................
8,821\
Business assets

The Group carries out grouping mainly based on each plant for business assets and based on each asset for idle assets.
For the year ended March 31, 2015, the Group recognized impairment losses of \8,821 million due to decline in profitability,
which resulted in decreasing the book values of such assets to recoverable amounts for business assets and to the net selling price for idle assets.
Impairment losses comprise of \3,448 million for Buildings and structures, \4,551 million for Machineryand vehicles, \460 million for Construction in progress and \362 million for others.

8. Contingent Liabilities
Contingent liabilities of the Company as of March 31, 2017 and 2016 are as follows:
Thousands ofMillions of yen
2017
2016

U.S. dollars

2017

Trade notes discounted........................................................................................................................................................................
\
43 \
55 $
386

9. Research and Development Costs
Research and development costs included in selling, general and administrative expenses and manufacturing costs are \743 million ($6,621 thousand),\828 million and \908 million for the years ended March 31, 2017, 2016 and 2015, respectively.

2310. Net Loss on Sales and Disposal of Property, Plant and Equipment
Significant components of net loss on sales and disposal of property, plant and equipment for the years ended March 31, 2017, 2016 and 2015 are as follows:
Thousands ofMillions of yen
U.S. dollars
Gain:
2017
2016
2015
2017
Buildings and structures ........................................................................................................................................................................
\
- \
- \
- $
Machinery and vehicles ........................................................................................................................................................................
4
0Land ...................................................................................................................
Construction in progress ........................................................................................................................................................................
3
Others ........................................................................................................................................................................
80
Total gain ................................................................................................................................................................................................
12
3
Loss:
Buildings and structures ........................................................................................................................................................................
(4)
(4)
(12)
(31)
Machinery and vehicles ........................................................................................................................................................................
(139)
(365)
(266)
(1,240)Land ...................................................................................................................
(0)(0)
Construction in progress ........................................................................................................................................................................
(38)
(84)
(340)
Intangible assets ........................................................................................................................................................................
(24)
(114)
(212)
Others ........................................................................................................................................................................
(1)
(19)
(7)
(15)
Total loss ................................................................................................................................................................................................
(206)
(388)
(483)
(1,838)Net loss ....................................................................................................................................................................................................................................
\(206) \
(376) \
(480) $
(1,838)

11. 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 30.8%, 32.2% and 35.6% for the years ended March 31, 2017, 2016 and 2015, respectively.
The tax effects of significant temporary differences which resulted in deferred tax assets and liabilities as of March 31, 2017 and 2016 are as follows:
Thousands ofMillions of yen
2017
2016

U.S. dollars

2017
Deferred Tax Assets:
Elimination of unrealized profits .........................................................................................................................…
\
38 \
25 $
337
Accrued bonuses ..................................................................................................................................................... 171
161
1,521
Net defined benefit liability ...................................................................................................................................... 693
635
6,179
Provision for directors' retirement benefits ........................................................................................................................................................................
73
73
651
Accrued enterprise tax ........................................................................................................................................................................
21
16
187
Allowance for doubtful accounts.....................................................................................................................................................................…
79
13
705
Valuation loss of inventories.....................................................................................................................................................................…
56
57
495
Difference on depreciation period.....................................................................................................................................................................…
482
598
4,292
Impairment loss.......................................................................................................................................................1,690
1,977
15,061
Loss on valuation of investment securities.....................................................................................................................................................................…
60
60
537
Loss on revaluation of golf club memberships ........................................................................................................................................................................
20
20
178
Tax loss carryforwards ........................................................................................................................................................................
3,589
3,269
31,987
Deferred losses on hedges.....................................................................................................................................................................…
14
82
128
Deduction of foreign corporation tax carried forward ....................................................................................................................................................
341
179
3,041
Other ...................................................................................................................................................................................................
58
57
524
Less: valuation allowance ........................................................................................................................................................................
(6,267)(6,141)(55,858)
Total ......................................................................................................................................................................................
\
1,118 \
1,081 $
9,965

Thousands ofMillions of yen
2017
2016
Deferred Tax Liabilities:
Retained earnings of foreign subsidiaries...................................................................................................................................
\(371)
Deferred gains on hedges........................................................................................................................................ (41)Deferred gains on transfer.........................................................................................................................................
Other.........................................................................................................................................................................…
(37)
Total .........................................................................................................................................................................................
\(449) \

U.S. dollars

2017

(182)
(72)
(14)
(268) $

(3,303)(363)(339)(4,005)

Deferred Tax Assets, Net: ........................................................................................................................................................................
\
669 \
813 $

5,960

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statements
of income for year ended March 31, 2017 is as follows:2017
Statutory tax rate ............................................................................................................................................................................................................................
30.8%
Expenses not deductible for tax purpose ........................................................................................................................................................................
0.3%
Per capita inhabitant tax ............................................................................................................................................................................................
0.5%
Directors' bonuses ....................................................................................................................................................................................................................................
0.5%
Tax rate difference in foreign subsidiaries ...................................................................................................................................................................................................................
(19.5)%
Retained earnings of foreign subsidiaries ................................................................................................................................................6.9%
Foreign tax credit ..................................................................................................................................................................................................................................................
6.0%
Effect of amendments of consolidation ............................................................................................................................................... 1.7%
Valuation allowance ............................................................................................................................................................................................................
3.5%
Other, net ................................................................................................................................................................................................................................
3.8%
Actual effective tax rate ....................................................................................................................................................................................................
34.5%

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, 2016 and 2015 are omitted due to pre-tax loss.

24

12. Financial Instruments(a) Qualitative information on financial instruments(1) Policies for using financial instruments
The Group finances necessary funds mainly through bank loans and bond issues 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. Investments 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 are 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 are exposed to interest fluctuation risk.
The Group utilizes interest rate swaps to hedge the risk. Regarding derivative transactions, the Group utilizes foreign exchange forward contracts to hedge foreign
currency fluctuation risk of operating receivables and payables dominated in foreign currencies and interest rate 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 readjust Company's 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 13, 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 at March 31, 2017 and 2016 are as follows:
2017
Millions of yen
Book

Fair

Value

Value

Thousands of U.S. dollars
Difference

AssetsCash and cash equivalents ...........................................................................................................
\
17,196 \17,196 \- $Time deposits ..................................................................…
226
226
Trade notes and accounts receivable ...................................................................................................
22,03522,035Investment securities:
Available-for-sale securities....................................................................................................................
862
862
Liabilities
Trade notes and accounts payable .................................................
\
13,195 \13,195 \- $Short-term borrowings......................................................................................................
12,292
12,292Long-term borrowings............................................................................
36,21636,340124
Lease obligations ........................................................................…
3,771
3,803
32
Long-term other payable ........................................................................…
Derivative financial instruments ........................................................................…
\
61 \
61 \
- $
2016
Millions of yen
Book

Fair

Value

Value

Difference

AssetsCash and cash equivalents ...........................................................................................................
\
19,313 \19,313 \Time deposits ..................................................................…
219
219
Trade notes and accounts receivable ...................................................................................................
21,75921,759Investment securities:
Available-for-sale securities....................................................................................................................
730
730
Liabilities
Trade notes and accounts payable .................................................
\
11,605 \11,605 \Short-term borrowings......................................................................................................
12,613
12,613Long-term borrowings..............................................................................................
44,00044,287287
Lease obligations.........................................................................................................................
2,717
2,751
34
Long-term other payable ........................................................................…
1,488
1,500
12
Derivative financial instruments ........................................................................…
\(337) \
(337) \
-

25

Book

Fair

Value

Value

Difference

153,276 $2,010
196,408

153,276 $2,010
196,408

-

7,688

7,688

-

117,611 $109,567
322,808
33,611
540 $

117,611 $109,567
323,91333,900
540 $

1,105
289
-

The financial instruments whose fair value is 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 5 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, (ix).Long-term other payable
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 (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 the interest rate swap contract is added to or
deducted from the interest on the liabilities for which the swap contract was executed), the sum of principal and the interest processed as interest rate swaps are discounted byusing the reasonably estimated loan interest rate applied to the same kind of loans.
(x). Derivative transactions
Please refer to Note 13.
(2) Unlisted securities of \141 million yen ($1,257 thousand) as of March 31, 2017 and \142 million yen as of March 31, 2016 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 and securities with maturity as of March 31, 2017 and 2016 is as follows:
2017
Millions of yen
Due in one
year

Due after one
year throughDue after five
year throughor less

five years

ten years

Due after ten
years

Cash and cash equivalents ...........................................................................................................
\
17,196 \- \- \Time deposits ..................................................................…
226
Trade notes and accounts receivable ...................................................................................................
22,035Investment securities:
Available-for-sale securities with maturities....................................................................................................................
Total ...............................................................................................................
\
39,457 \
- \
- \
2017
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 ...........................................................................................................
$
153,276 $- $- $Time deposits ..................................................................…
2,010
Trade notes and accounts receivable ...................................................................................................
196,408
Investment securities:
Available-for-sale securities with maturities....................................................................................................................
Total ...............................................................................................................
$
351,694 $
- $
- $
2016
Millions of yen
Due in one
year

Due after one
year throughDue after five
year throughor less

five years

ten years

Due after ten
years

Cash and cash equivalents ...........................................................................................................
\
19,313 \-\-\Time deposits ..................................................................…
219
Trade notes and accounts receivable ...................................................................................................
21,759Investment securities:
Available-for-sale securities with maturities....................................................................................................................
Total ...............................................................................................................
\
41,291 \
-\
-\

26

-

13. Derivatives
Derivative transactions for which hedge accounting has not been applied for the year ended March 31, 2017 are as follows:
2017

Contract
amountForward exchange
contracts
Buy: U.S. dollars\

3,343 \

Millions of yen
Contract
amountdue after
one year
Fair value- \Unrealized
loss(24) \(24) $

Thousands of U.S. dollars
Contract
amountdue after
one year
Fair value

Contract
amount29,800 $- $Unrealized
loss(217) $

Fair value is based on the prices obtained from forward exchange market or financial institutions.
There are no derivative transactions for which hedge accounting has not been applied for the year ended March 31, 2016.

Derivative transactions for which hedge accounting has been applied for the years ended March 31, 2017 and 2016 are as follows:
2017

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 \18,696 \11,953 \(47) $

166,649 $

106,542 $(421)

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

Long-term
borrowings \1,440 \

930 \(14) $

12,835 $8,290 $

(129)

Commodity related :Benchmark Method
Copper price swap
contractsRawmaterials

459 \

- \

132 $

4,089 $

- $

1,179

\

Contract
amountHedged item

2016
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\

22,586 \15,792 \(282)

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

Long-term
borrowings\

1,950 \

1,440 \

(28)

Commodity related :Benchmark Method
Copper price swap
contractsRawmaterials

\

331 \

- \

(55)

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.

14. Compensation Income
Compensation income consists of compensation payments from Tokyo Electric Power Company for lost earnings due to accidents at Fukushima Daiichi Nuclear Power
Station ("NPS") and Fukushima Daini NPS of Tokyo Electric Power Company.

27

(217)

15. Comprehensive Income
Reclassifications and income tax effects attributable to other comprehensive income for the years ended March 31, 2017, 2016 and 2015 are as follows:
Thousands of2017

Millions of yen
2016

U.S. dollars

2015

Unrealized gains (losses) on available-for-sale securities:
Gains (losses) arising during the year ........................................................................................................................................................................
\
76 \(146) \
26 $Reclassifications and adjustments ........................................................................................................................................................................
16
Before income tax effects .....................................................................................................................................................................…
76
(146)
42
Income tax effects .....................................................................................................................................................................…
(23)
48
(9)
Total ......................................................................................................................................................................................
\
53 \(98) \
33 $Deferred gains (losses) on hedges:
Gains (losses) arising during the year ........................................................................................................................................................................
\
322 \(406) \
(304) $
Reclassifications and adjustments ........................................................................................................................................................................
100
300
196
Before income tax effects .....................................................................................................................................................................…
422
(106)
(108)
Income tax effects .....................................................................................................................................................................…
(26)
(69)
28
Total ......................................................................................................................................................................................
\
396 \(175) \
(80) $
Foreign currency translation adjustments:
Adjustments arising during the year ........................................................................................................................................................................
\(2,043) \(3,094) \3,688 $
Total ......................................................................................................................................................................................
\(2,043) \(3,094) \3,688 $
Remeasurements of defined benefit plans:
Adjustments arising during the year ........................................................................................................................................................................
\(273) \
(61) \(59) $
Reclassifications and adjustments ........................................................................................................................................................................
49
44
37
Before income tax effects .....................................................................................................................................................................…
(224)
(17)
(22)
Income tax effects .....................................................................................................................................................................…
(74)
0
Total ......................................................................................................................................................................................
\(224) \
(91) \(22) $
Total other comprehensive income ......................................................................................................................................................................................
\(1,818) \(3,458) \3,619 $

2017
680
680
(209)
471
2,868
893
3,761
(235)
3,526
(18,209)(18,209)(2,426)435(1,991)(1,991)(16,203)

16. Supplementary Cash Flow Information
Details of assets and liabilities at the beginning of the consolidation relating to Meiko Electronics Thang Long Co., Ltd., a newly consolidated
subsidiary due to increased its materiality, are as follows:
Millions of yen
2016
Current assets........................................................................................................................................................................
\
589
Non-current assets ........................................................................................................................................................................
2,342
Total assets .....................................................................................................................................................................…
\
2,931
Current liabilities ........................................................................................................................................................................
\
634
Non-current liabilities ........................................................................................................................................................................
1,718
Total liabilities.....................................................................................................................................................................…
\
2,352

Significant non-cash transactions
Thousands ofMillions of yen
2017
2016

U.S. dollars

2017

Assets and liabilities relating to finance lease transactions.........................................................................................................................................................................
\- \2,965 $-

28

17. 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 is 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

2017
Millions of yen
Japan

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

Asia\

North America\

55,760Europe12,366

\

1,826

Other

\

Total

-

\

-

$

-

\

-

\

95,912

2017
Thousands of U.S. dollars
Japan

Net sales .............................................................................................................................
$
231,389

Asia$

North America

497,014$Europe110,223$

16,279

Other

$

Total

854,905

2016
Millions of yen
Japan

Net sales .............................................................................................................................
\
26,570

Asia\

North America\

52,994

Europe12,016

\

3,707

Other

\

Total

95,2872015
Millions of yen
Japan

Net sales .............................................................................................................................
\
25,274

Asia\

North America\

50,024

10,916

Europe\4,681

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

2017
Millions of yen
Japan

Asia

Other

Property, plant and equipment .............................................................................................................................
\
5,278
\
40,473

\

Total

4

\

32

$

4

\

45,7552017
Thousands of U.S. dollars
Japan

Asia

Other

Property, plant and equipment .............................................................................................................................
$
47,046$
360,761$

Total

407,839

2016
Millions of yen
Japan

Asia

Property, plant and equipment .............................................................................................................................
\
5,448
\
45,282Other\(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, 2017 is not disclosed as the Group's reportable segment ismainly printed circuit boards (“PCB”) and the related business, and other business is immaterial.
Information about impairment loss by reportable segment for the year ended March 31, 2016 is not disclosed as the Group's reportable segment issolely printed circuit boards (“PCB”) and the related business, and other business is immaterial.
Information about impairment loss by reportable segment for the year ended March 31, 2015 is not disclosed as the Group's reportable segment issolely printed circuit boards (“PCB”) and the related business.

29

Total

50,734

Other

\

Total

90,895

18. Related party transactions
For the year ended March 31, 2017
Transactions with related parties(1) Unconsolidated subsidiary
There were no applicable matters for the year ended March 31, 2017.
(2) Directors and major individual shareholders
There were no applicable matters for the year ended March 31, 2017.

For the year ended March 31, 2016
Transactions with related parties(1) Unconsolidated subsidiary
There were no applicable matters for the year ended March 31, 2016.
(2) Directors and major individual shareholders

Name
Seiichi Naya

Location-

Capital
-Occupation
Director and senior managing
executive officer of theCompany

Percentage forpossession of Voting
RightsDirectly owned (%)
1.7

Relationship-

Details oftransaction ※2
Sales of subsidiaries'
sharesTransaction
amount ※1\197 million

Notes: ※1 Seiichi Naya is the younger brother of Yuichiro Naya, representative director and executive officer of the Company.
※2 The terms and conditions of the transactions for sales of subsidiaries' shares are determined based on negotiation with reference to the stock price calculated by a third party appraiser.

30

Balance at
March 31, 2016-

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

20

PCBs forelectronics

100.0

Yamagata Meiko
Electronics Co., Ltd.

Kahoku-cho,Nishimurayama-gun,
Yamagata Prefecture

75

PCBs forelectronics

100.0

M.D. Systems Co.,
Ltd.

Atsugi City,
Kanagawa Prefecture

15

PCBs forelectronics

19.0

Meiko Techno Co.,Ltd.

Yamato City,
Kanagawa Prefecture

50

PCBs forelectronics

100.0

Meiko Elec. HongKong. Co., Ltd.

Hong Kong

US$127,569
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$148,800
thousand

PCBs forelectronics

100.0

MDS Circuit
Technology, Inc.

Manila, thePhilippines

PHP12,000
thousand

PCBs forelectronics

Meiko Electronics
America, Inc.

CA, U.S.A.

US$1,500
thousand

PCBs forelectronics

100.0

Guangzhou MeikoPCB Co., Ltd.

Guangzhou,
Guangdong Province,
P.R.C.

US$10,000
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

[77.0](66.3)(47.6)
100.0(100.0)(100.0)100.0(100.0)100.0

Principal Shareholders(Thousands of shares)

Percentage ofTotal Number of
Shares Issued (%)

Yuichiro Naya

4,702

17.54

Japan Trustee Services Bank, Ltd.

1,848

6.90

757

2.83

628

2.35

Meiko Kosan Co., Ltd.

608

2.27

Yuho, Ltd.

521

1.94

BNY GCM CLIENT ACCOUNT JPRD AC ISG(FE–AC)

514

1.92

Haruyuki Naya

468

1.75

SBI SECURITIES Co., Ltd.

446

1.67

Seiichi Naya

445

1.66

10,941

40.82

Number of
Shares Held

Name of Shareholder(trust account)
The Master Trust Bank of Japan, Ltd.
(trust account)
GOLDMAN SACHS INTERNATIONAL(Standing Agent: Goldman Sachs Japan Co.,Ltd.)

(Standing Agent: The Bank of Tokyo-Mitsubishi
UFJ, Ltd.)

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.

July 1988

Established M.D. Systems Co., Ltd. to design PCBs (currently a consolidated
subsidiary of the Company).

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.].

June 2001

Established MDS Circuit Technology, Inc. (currently a non-consolidated
subsidiary of the Company) in Manila, the Philippines, to design PCBs.

34

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).

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, 2017)

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:
26,803,370
Number of Shareholders:
5,689
Securities Code:
6787
Stock Exchange Listing:Tokyo Stock Exchange, JASDAQ standard market
Number of Employees:
10,677 (Consolidated)
Number of Subsidiaries:
16
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 FY2017 Compared with Indices340.0
Meiko Electronics (JASDAQ: 6787)
290.0

JASDAQ INDEX

240.0
190.0
140.0
90.0
40.0

Fiscal year ended March 31, 2017
Index
In %

37

38