+

Annual Report 2020
For the year ended March 31, 2020

Meiko Electronics Co., Ltd.

The Meiko Group consists of Meiko Electronics Co., Ltd. (the “Company”), and its 22
subsidiaries (10 consolidated subsidiaries and 12 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 ................................................................................. 13
Principal Subsidiaries and Affiliates ................................................................................ 37
Principal Shareholders ...................................................................................................... 38
Corporate History ............................................................................................................... 39
Corporate Data (As of March 31, 2020) ............................................................................ 41
Meiko Share Performance in FY2020 Compared with Indices ...................................... 422

Five-year Financial Summary(For the years ended/as of March 31)
2016

2017

2018

2019

2020

(millions of yen, except per share amounts)
Consolidated financial indicators:¥95,287¥95,912¥108,542¥118,911¥115,479

(492)

2,981

4,795

8,611

4,790

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

1,767

4,373

6,744

2,586

Comprehensive income(14,709)

(32)

5,633

6,482

(419)

Net assets

28,76428,54033,04233,58832,482

Total assets

109,605

103,578

110,316

120,656

129,238

Net assets per share (yen)897.97882.84

1,071.37

1,283.24

1,233.61(429.83)54.14

160.34257.65

98.81

—

44.06

108.67——

Equity ratio

26.0%

27.3%

30.0%

27.8%

25.0%

Return on equity (ROE)-33.5%

6.2%

14.3%

20.2%

7.9%

Price earnings ratio (PER) (times)

—

16.2

11.4

6.7

13.5

Cash flows from operating activities

9,932

11,612

10,42911,467

11,240Cash flows from investing activities(1,737)(4,322)(8,868)(17,293)(14,937)

Cash flows from financing activities

1,967(9,030)(3,531)

1,957

6,249

Cash and cash equivalents
at the end of the period

19,313

17,19615,19011,41913,646

Number of employees

9,491

10,677

11,64011,89912,232[Average number of temporary
staff]

[633]

[885]

[1,182][1,351][1,450]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(yen)(millions of yen)

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

2016
2016

2017

2018

2019

2020

2017

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

2018

2019

2020

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

2016

2017

2018

2019

2020

(percentage)(millions of yen)

¥40,000¥30,000

0.0%-10.0%¥10,000-20.0%

2016

2017

2018

2019

2020

-30.0%
2016

2017

2018

2019

2020

-40.0%

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

2020

10.0%

Total assets¥120,000

20.0 times¥90,000

15.0 times¥60,000

10.0 times¥30,000

5.0 times
2016

2017

2018

2019

0.0 times

2020

Net assets per share¥2,000.00
(yen)

2019

Cash flows from investing activities

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

2018

30.0%

¥50,000¥0

2017

Return on equity (ROE)

Net assets

¥0

2016

Cash flows from operating activities
Cash flows from financing activities

2016

2017

2018

2019

2020

4

2016

2017

2018

2019

2020

Financial Review: Management’s Discussion and Analysis
The forward-looking statements in this section are based on the Group’s assumptions
as of the end of the current consolidated fiscal year.
(1) Significant accounting policies and estimates
The consolidated financial statements of the Group have been prepared in conformity
with accounting principles generally accepted in Japan (“Japanese GAAP”). The
presentation of these consolidated financial statements requires estimates that affectthe selection and application of accounting policies, the reporting amounts of assets,
liabilities, profits and expenses and the disclosure thereof. The management has
assessed those estimates in view of past results and reasonable assumptions,however, actual results may differ from the estimates presented due to uncertainties
that are intrinsic to estimates.
(2) Analysis of the Group’s financial position
AssetsAssets as of March 31, 2020 were ¥129,238 million, up ¥8,582 million from the end of
the previous fiscal year. This change mainly comprised an increase of ¥2,227 million in
cash and cash equivalents, a decrease of ¥1,386 million in trade notes and accounts
receivable, and an increase of ¥2,981 million in inventories in current assets, inaddition to an increase of ¥4,443 million in property, plant and equipment, an increaseof ¥1,696 million in investment securities and a ¥2,038 million decrease in other ininvestments and other assets in non-current assets.
Liabilities
Liabilities as of March 31, 2020 were ¥96,756 million, up ¥9,688 million from the end of
the previous fiscal year. This change mainly comprised an increase of ¥1,935 million intrade notes and accounts payable, an increase of ¥2,048 million in short-termborrowings, an increase of ¥1,158 million in the current portion of long-termborrowings, and a ¥897 million decrease in other in current liabilities, in addition to anincrease of ¥5,714 million in long-term borrowings in non-current liabilities.
Net assets
Net assets as of March 31, 2020 were ¥32,482 million, down ¥1,106 million from theend of the previous fiscal year. This mainly reflected a ¥1,670 million increase inretained earnings, and a ¥2,947 million decrease in foreign currency translation
adjustment.

5(3) Analysis of business results
1) Net sales
The Group’s net sales for the fiscal year under review decreased ¥3,432 million, or
2.9%, from the previous fiscal year to ¥115,479 million, primarily due to poor sales of
PCBs (printed circuit boards) for smartphones caused by a sluggish smartphonemarket.
2) Gross profit
Cost of sales decreased ¥130 million, or 0.1%, from the previous fiscal year to ¥98,733
million, reflecting a decline in net sales. Gross profit for the fiscal year under review fell
¥3,302 million, or 16.5%, from the previous fiscal year to ¥16,746 million. The grossmargin dropped 2.4 percentage points from the previous fiscal year to 14.5%.
3) Operating income
Selling, general and administrative expenses increased ¥435 million, or 3.9%, from theprevious fiscal year to ¥11,557 million due to an increase in research and development
costs. Operating income for the fiscal year under review decreased ¥3,737 million, or
41.9%, from the previous fiscal year to ¥5,189 million, with an operating margin of
4.5%, down 3.0 percentage points, from the previous fiscal year.
4) Ordinary income
Non-operating income decreased ¥992 million to ¥761 million primarily due to adecrease in foreign exchange gains. Non-operating expenses decreased ¥908 million
to ¥1,160 million, mainly due to declines in interest expenses and commission for
syndicated loans. As a result, ordinary income for the fiscal year under review
decreased ¥3,821 million, or 44.4%, from the previous fiscal year to ¥4,790 million.
5) Profit attributable to owners of parent
In the fiscal year under review, extraordinary income amounted to ¥332 million due tothe recording of gain on reversal of loss on valuation of investment securities of ¥327
million. Extraordinary losses totaled ¥1,856 million. This reflected the recording ofexpenses for factory shutdown of ¥1,250 million. The total amount of income taxes–
current and income taxes–deferred decreased ¥402 million to ¥717 million. The loss
attributable to non-controlling interests was ¥37 million.
As a result of the above, the profit attributable to owners of parent was ¥2,586 million,
down 61.6% compared with the previous fiscal year.

6(4) Analysis of source of funds and liquidity
1) Cash flows
Cash and cash equivalents (hereafter, “net cash”) as of March 31, 2020 increased¥2,227 million from the previous fiscal year, to ¥13,646 million.
Cash flows of each category and their causes during the consolidated fiscal year
ended March 31, 2020 were as follows.
Net cash provided by operating activities for the fiscal year under review was ¥11,240
million, down ¥227 million from the previous fiscal year. Increases were mainly fromprofit before income taxes of ¥3,266 million, depreciation and amortization of ¥6,587
million, a decrease in trade notes and accounts receivable of ¥2,362 million and anincrease in trade notes and accounts payable of ¥1,006 million. The major decrease
was an increase in inventories of ¥2,449 million.
Net cash used in investing activities was ¥14,937 million, down ¥2,356 million from theprevious fiscal year. The major outflows were ¥13,570 million for the purchase ofproperty, plant and equipment and ¥1,502 million for the purchases of investment
securities.
Net cash provided by financing activities was ¥6,249 million, up ¥4,292 million from theprevious fiscal year. The major inflows comprised a net increase in short-termborrowings of ¥1,133 million and proceeds from long-term borrowings of ¥21,500
million. The major outflows comprised repayments of long-term borrowings of ¥14,672
million and cash dividends paid of ¥915 million.
Trends in cash flow indicators of the Group are as follows:Year ended
March 31, 2018Year ended
March 31, 2019Year ended
March 31, 2020

Equity ratio (%)

30.0

27.8

25.0

Market value equity ratio (%)

43.2

37.6

27.1

Cash flows versus Interest-bearing debt ratio(years)

4.9

5.2

6.1

Interest coverage ratio (times)

8.8

14.0

16.3

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

2) Financial policy
The Group procures funds for its operations from funds on hand or borrowings fromfinancial institutions. The Group has a policy of procuring funds for investment andloans as well as funds to acquire manufacturing equipment inside and outside Japan
via long-term borrowings from financial institutions. With regard to procuring suchfunds and the conditions of procurement, the Group strives to select the mostfavorable timing and conditions.
7Business Risks
Below are some of the major risks from among those described in the securities report(provided/filed in Japanese only) which may significantly affect any decisions made byinvestors.
Forward-looking statements are based on the Group’s best judgment during theconsolidated fiscal year under review.
(1) Risks related to the business environment(External factors)
1) Risk related to the Group’s major customers and their industries’ trends
The Group’s major customers are manufacturers of automotive products, smartphones
and tablets, IoT & AI household appliances, amusement equipment, and storage
devices, among others. The Group’s major business is the manufacture and sale ofPCBs, which are parts that constitute a core function of finished products. Furthermore,
the Group endeavors to strengthen and expand the module board and EMS businesses
as new mainstay businesses with the aim of minimizing influence from overdependence
on PCBs. However, should economic trends or a natural disaster adversely impact theGroup’s major customers or the markets of the industries in which the Group’s
customers operate, or lead to sluggish sales of their finished products, such factors
could impact the volume of orders received by the Group and affect the Group’sbusiness performance and financial position. The monitoring of customers and trends intheir industries and measures to minimize influence implemented by the Group cannot
eliminate said risk completely. Therefore, the Group realizes that such risk could emerge
in the event of a sudden change in market conditions, with the influence depending on
the timing and size of the incident.
2) Raw materials market fluctuation risk
The Group purchases the raw materials necessary for manufacturing from externalmaterials manufacturers and trading companies. The Group strives to minimize risk tosome extent, using commodity derivatives. However, an unexpected surge in the prices
of crude oil, copper, gold, etc., could impact the prices of the raw materials the Grouppurchases and adversely affect the Group’s business performance and financial
position. As said risk cannot be lessened or eliminated completely by the above
mentioned measures to minimize risk alone, the Group realizes that it is inevitable that it
will suffer some degree of impact if such risk actually emerges.
3) Risk related to technological development and price competition
The time will come when all things are connected, due to the increase in the use ofelectronics in vehicles, the dissemination of electric vehicles, the emergence ofconnected cars based on 5G communication, and the worldwide spread of IoT. Although
the Group expects expansion of demand for PCBs, to address intensifying global
competition stemming from downward pressure on prices from China and Southeast
Asia, the Group needs to differentiate its products with technology. To this end, theGroup is developing technologies such as element technologies to make wires thinnerand hole diameters smaller, as well as cost-reduction technologies. However, shouldsuch technologies diverge from market needs and not be accepted, the Group may getembroiled in a price war, which could affect its business performance and financial
position. The Company closely monitors customers’ needs, competitors’ technology, andprice movements, etc. However, as this type of risk is inherent in business management
and is difficult to eliminate completely, such risk might ordinarily emerge in the processof business management. The Group realizes that it is difficult to make a definite
estimate of the influence when such risk actually emerges, since the influence may
depend on the timing and conditions of the incident.
8

(Internal factors)
4) Risks related to the timing of capital investments
The Group conducts appropriate capital investment to enhance productivity andmaintain product competitiveness in accordance with demand trends. Althoughoverseas and domestic capital investments are carefully determined considering market
trends and brand manufacturers’ business performance, should the Group’s capital
investments become excessive upon a downturn in the economy or manufacturers
change strategies, or the operation of new facilities be delayed, factors such as theburden of depreciation costs could adversely affect the Group’s business results andfinancial position. In addition, should the Group’s asset value or business profitability
decline, it could result in the occurrence of impairment loss, adversely affecting theGroup’s business performance and financial position. The Group believes that there is
not a high possibility that any individual capital investment will lead to the occurrence ofimpairment loss. However, risk caused by external factors, such as a sudden change inmarket conditions, natural disasters, and infectious diseases, cannot be lessened oreliminated by the Group’s risk management alone. There is a possibility that the Groupwill suffer impact in the event of the occurrence of such risk, with the influence
depending on the timing and size of the incident.
5) Risk related to equipment failures and accidents
Although the Group conducts regular inspections and maintenance work on its
production equipment as well as plant monitoring using IoT technology in manufacturingbases inside and outside Japan and strives to minimize the occurrence of equipment
failures, fire, or other accidents, which may result in the suspension of line operations,
there is no guarantee that these will be prevented or reduced completely. Should
production or shipping be suspended for a long period of time due to these factors, theGroup’s business performance and financial position could be adversely affected. Saidrisk cannot be lessened or eliminated by the Group’s own risk management alone.
There is a possibility that the Group will suffer impact in the event of the occurrence ofsuch risk, with the influence depending on the frequency and size of the incident.
However, the Group realizes that it is difficult to make a definite estimate of the influencein light of the conditions of such risk.
6) Risk related to 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 a large-scale recall or a product liability claim occur, such an incident would incur
significant costs that cannot be covered by insurance amounts and harm the value of
our corporate brand, which could adversely affect the Group’s business performanceand financial position. The Group believes that there is not a high possibility that said
risk will emerge. However, as such risk cannot be lessened or eliminated by the Group’s
own risk management alone, the Group realizes that it is inevitable that it will suffer
some degree of impact if such risk actually emerges.
(2) Risk related to natural disasters, etc.
1) Risk related to natural disasters
As the Group has manufacturing bases inside and outside Japan, there is a possibility
that part or all of facilities will be suspended, causing production and shipment to bedelayed, if natural disasters, such as earthquakes, tsunami, floods, storms, andtorrential downpours occur. As its Ishinomaki Factory suffered damage from the Great
East Japan Earthquake, the Group reviews its risk management system and tries tosecure the safety of its employees and protect its facilities against natural disasters.
9However, should a disaster of that scale occur in the future, it could adversely affect theGroup’s business performance and financial position due to the payment of expenses torestore facilities and decreases in production and sales. Said risk cannot be lessened oreliminated by the Group’s own risk management alone. There is a possibility that theGroup will suffer impact in the event of the occurrence of such risk, with the influence
depending on the frequency and size of the incident. However, the Group realizes that itis difficult to make a definite estimate of the influence in light of the conditions of suchrisk.
2) Risk related to infectious diseases
At the onset of the novel coronavirus infection (COVID-19), the Group conducted
several measures, including thorough implementation of preventive measures based on
the guidance issued by the health authorities in each country, prohibition in principle ofjourneys and business trips to countries and areas where the risk of infection is high,and telecommuting mainly in indirect departments, to secure the safety of customers,
business partners, and employees and to prevent the further spread of COVID-19
cases. However, should a continuation of the pandemic, such as a prolonging of or asecond wave of COVID-19, or the spread of a new infectious disease occur, such an
incident would result in the suspension of the Group’s factories, worsening of theJapanese and global economy and contraction of economic activities, which could
adversely affect the Group’s business performance and financial position. Said risk
cannot be lessened or eliminated by the Group’s own risk management alone. There isa possibility that the Group will suffer impact in the event of the occurrence of such risk,
with the influence depending on the frequency and size of the incident. However, theGroup realizes that it is difficult to make a definite estimate of the influence in light of theconditions of such risk.
(3) Risk related to compliance
As the Group operates its business in bases inside and outside Japan, it needs tocomply with a wide range of laws and regulations and restrictions. In Japan, the Groupis required to obey the Companies Act, Financial Instruments and Exchange Act, AntiMonopoly Act, tax laws, labor laws, and environmental laws, etc. while it must observe
laws and regulations and restrictions in each country and region it operates in overseas.
The Group not only established the Risk and Compliance Committee to supervise
compliance with laws and regulations and restrictions but also strives to raise its
employees’ awareness of compliance issues by formulating and implementing its own
compliance measures. However, there is a possibility that risk related to compliance will
not be dodged completely by implementing these measures. Should the Group fail toperform obligations required by laws and regulations and restrictions, it could adversely
affect the Group’s business performance and financial position. The Group believes that
there is not a high possibility that risk related to compliance will emerge. However, as
the type and timing of the occurrence, etc. of such incident cannot be controlled by theGroup, it realizes that it is difficult to make an estimate of the influence beforehand.
(4) Risk related to finance, etc.
1) Financial risks
The Group has made aggressive capital investments of amounts higher than the funds it
has acquired from operating activities to prepare for the anticipated increase in demandfor PCBs for automotive products and smartphones, as well as responses to new
products in line with technological innovation. As a result, the ratio of borrowings to total
assets as of March 31, 2020, was 50.8%. Should new borrowings or refinancing ofoutstanding borrowings for capital investments necessary from the perspective of its
business strategy become difficult in the future due to a change in monetary conditions
or banks’ situations, it could affect the Group’s fund raising plans. In addition, a rise ininterest rates on borrowings could adversely affect the Group’s business performance10and financial position. As risk related to monetary conditions or each bank’s situation is
hard to reduce or eliminate by the Group’s own measures, the Group believes that it will
suffer impact in the event of the occurrence of such risk, with the influence depending on
the timing, size, and conditions of the incident. However, the Group realizes that it isdifficult to make a definite estimate of the influence.
2) Credit risk
As the Group extends credit to its business partners in the form of trade credit, including
accounts receivables and advance payments, it is therefore exposed to credit risk in theform of losses arising from deterioration in the credit of or bankruptcy of business
partners. To manage such risk, the Group responds depending on the credit profile ofthe counterparty based on internal rules that determine the credit limit for each business
partner. However, failure to collect receivables and other credit could affect the Group’sbusiness performance and financial position. The Group believes that it will suffer only
limited impact, even if said risk emerges, since it monitors obligors’ credit conditions anddiversifies risk, which maintains the frequency and influence within the range of normal
fluctuation of business results. Although the possibility of the abrupt emergence of
unexpected credit risk from a large obligor is not completely eliminated, the Grouprealizes that the probability is quite low.
3) Risk related to foreign currency rate fluctuation
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, yen-toU.S. dollar and other currencies exchange rate fluctuations. These fluctuations could
result in losses. The Group strives to minimize risks to some extent by conducting
exchange marry or currency exchange hedge, etc. However, should an unexpected
foreign currency rate fluctuation occur, it could adversely affect the Group’s businessperformance and financial position. As said risk depends on the fluctuation of foreignexchange rates and cannot be lessened or eliminated by its effort alone, the Grouprealizes that it is difficult to make a definite estimate on the timing of the occurrence andinfluence.
4) Risk related to M&A, joint venture, and alliance
The Group forms capital alliances with and conducts joint ventures with other companies
that have the technology, products, sales network, customer base, and personnel
necessary for business growth. However, there is a possibility that the Group may notreceive the anticipated effects or will need to spend additional expenses or incur
impairment loss when the market and competition environments significantly change or
the business does not develop as planned. Should such incident occur, the Group may
fail to earn the forecast profits, adversely affecting its business performance andfinancial position. As such risk cannot be lessened or eliminated by its own risk
management alone, the Group realizes that it is inevitable that it would suffer somedegree of impact if such risk actually emerges.
(5) Other risk
1) Risk 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. In these countries, the Group may face
the following difficulties—hygiene-related issues such as infectious diseases; change or
introduction of environmental regulations, legal restrictions and the tax system; failure of
infrastructure such as electricity, water and transportation; political uncertainty and public
security-related issues; anti-Japanese demonstrations and/or labor disputes;
expropriation of assets, destruction of facilities by wars and conflicts, and limitation on
the transfer of funds (transfer restriction), etc. Should unexpected events such aschanges in the political or legal environment, economic situation or environmental
11

regulations occur, the Group’s business performance 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 the execution of other operations, or a large
amount of liabilities or obligations associated with the compliance of environmental
conservation and other regulations. Said risk cannot be lessened or eliminated by theGroup’s own risk management alone. There is a possibility that the Group will suffer
impact in the event of the occurrence of such risk, with the influence depending on thefrequency and size of the incident. However, the Group realizes that it is difficult to makea definite estimate of the influence in light of the conditions of such risk.
2) Risk related to information security
The Group sometimes obtains customer information, etc. through its business activities
and also owns confidential information on technology, sales, and individual persons, andoverall business. It pays the closest attention to the protection of its confidential
information. To prevent unauthorized access, falsification, corruption, leakage, and loss,
etc. of information caused by cyberattacks, etc. and human errors, etc., the Groupestablished its information management system, takes appropriate safety procedures,such as the implementation of rational technological measures, and conducts drills to
prepare for cyber security risk. However, should the leakage or loss of information occur,
it could adversely affect the Group’s business performance and financial position. As theGroup strives to appropriately operate its confidential information management system, it
realizes that the probability of emergence of such risk is quite low.
3) Risk related to 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, theGroup’s business performance and financial position could be adversely affected as aresult of the compensation or damages paid to customers due to the suspension of
production and payment of license fees, etc., related to patent use in order to resume
production. Although the possibility of abrupt emergence of the risk is not completely
eliminated, the Group realizes that the probability is quite low.

12

Consolidated Financial Statements

Consolidated Balance Sheets
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
As of March 31, 2020 and 2019
Thousands ofMillions of yen

ASSETS

2020

U.S. dollars (Note 1)

2019

Current Assets:
Cash and cash equivalents (Notes 3, 6 and 17) ............................................................................................................................
\
13,646\
11,419Receivables －Trade notes and accounts receivable (Notes 6 and 17) ...................................................................................................................
24,44825,834
Other receivables ........................................................................................................................................
1,505
1,479
Less: Allowance for doubtful accounts ........................................................................................................................
(135)
(144)
Inventories －Merchandise and finished goods .........................................................................................................5,148
5,885Work in process ..................................................................................................................................
5,505
4,675
Raw materials and supplies .................................................................................................................8,302
5,414
Other (Note 17) ...................................................................................................................................................................
1,298
1,460
Total current assets ..........................................................................................................................
59,71756,022

2020$

224,687
13,830(1,244)47,31550,59576,30011,922548,819

Property, Plant and Equipment, at Cost:
Land ................................................................................................................................................................
1,488
1,488
Buildings and structures (Note 5)..........................................................................................................................
43,77936,732
Machinery and vehicles (Note 5)..........................................................................................................................
83,58876,155
Leased assets..............................................................................................................................................................
4,120
6,476
Construction in progress .............................................................................................................
4,909
9,581
Other (Note 5)........................................................................................................................................................................
4,914
4,458
142,798
134,890
Less: Accumulated depreciation ........................................................................................................ (79,801)(76,336)
Net property, plant and equipment ......................................................................................................
62,99758,554
Intangible Assets

828

Investments and Other Assets:
Investment securities (Notes 4 and 17) ....................................................................................................................
3,221
Long-term loans receivable .................................................................................................................... 256
Deferred tax assets (Note 16) ..................................................................................................................1,029
Other .....................................................................................................................................................................
1,296
Less: Allowance for doubtful accounts ..........................................................................................................
(106)
Total investments and other assets ..........................................................................................................
5,696
Total ..............................................................................................................................................
\
129,238\

See notes to consolidated financial statements.

13

125,414

13,678402,340
768,20237,86845,11845,154
1,312,360(733,396)
578,964

269

7,606

1,525
238
867
3,334
(153)
5,811
120,656

29,603
2,355
9,456
11,908(973)
52,3491,187,738$

Thousands of

LIABILITIES AND
NET ASSETS

Millions of yen

2020

U.S. dollars (Note 1)

2019

2020

Current Liabilities:
Trade notes and accounts payable (Notes 6 and 17) ..................................................................................................................
\
17,732\
15,797$
Short-term borrowings (Notes 7 and 17) ............................................................................................................…
9,686
7,638
Current portion of long-term borrowings (Notes 7 and 17) ........................................................................................................
15,544
14,386
Income taxes payable (Note 16) .....................................................................................................................
204
221
Accrued bonuses .................................................................................................................................. 688
667
Accrued bonuses to directors and corporate auditors ..................................................................................................................................
40
19
Lease obligations (Notes 7 and 17)..................................................................................................................................
561
698
Other (Notes 7 and 17) ................................................................................................................................................................
7,610
8,507
Total current liabilities ..................................................................................................................52,065
47,933

162,963
89,021
142,859
1,877
6,320
369
5,151
69,931
478,491

Long-term Liabilities:
Long-term borrowings (Notes 7 and 17) ........................................................................................................
40,47934,765
Lease obligations (Notes 7 and 17) .............................................................................................................................
935
1,112
Provision for directors' retirement benefits ................................................................................................217
217
Net defined benefit liability (Note 8) .............................................................................................
2,696
2,689
Other (Note 16)......................................................................................................................................................................
364
352
Total long-term liabilities ..................................................................................................................................................
44,691
39,135372,013
8,590
1,997
24,781
3,345
410,726

Commitments and Contingent Liabilities (Note 12) :Net Assets (Note 9):
Shareholders' Equity:
Common stock:
Authorized:
70,000,000 shares in 2020 and 2019
Issued:26,803,320 shares in 2020 and 2019
Preferred stock:
Authorized:
None in 2020 and 2019
Issued:None in 2020 and 2019...............................................................................................................

12,88912,889118,450
Capital surplus ................................................................................................................................................................
6,464
6,464
59,411Retained earnings ......................................................................................................................................................................
13,16011,490120,944
Less: Treasury stock, at cost; Common stock,629,427 shares in 2020, 629,378 shares in 2019 .......................................................................................(397)(397)(3,646)
Total shareholders' equity...............................................................................................................................................…
32,11630,446295,159
Accumulated Other Comprehensive Income:Unrealized gains on available-for-sale securities .......................................................................................................................
(8)
(65)
(78)
Deferred gains on hedges ...........................................................................................................................…
30
183
277
Foreign currency translation adjustments ..................................................................................
375
3,322
3,451
Remeasurements of defined benefit plans (Note 8) ......................................................................
(225)
(298)
(2,067)
Total accumulated other comprehensive income...............................................................................................................................................…
172
3,142
1,583
Non-controlling interests........................................................................................................................................................
194
1,779
Total net assets ..................................................................................................................................................
32,48233,588298,521
Total ........................................................................................................................................................
\
129,238\
120,656$
1,187,738

See notes to consolidated financial statements.

14

Consolidated Statements of Operations
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2020, 2019 and 2018
Thousands ofMillions of yen

2020

U.S. dollars (Note 1)

2019

2018

2020

Net Sales ...........................................................................................................................................................
\
115,479\
118,911\
108,542 $
1,061,292
Cost of Sales (Note 13) ..................................................................................................................................................
98,733
98,863
90,115907,393
Gross profit ......................................................................................................................................................
16,746
20,04818,427
153,899
Selling, General and Administrative Expenses (Note 13) ........................................................................................................................................................................
11,557
11,122
10,970106,207
Operating income ....................................................................................................................................…
5,189
8,926
7,457
47,692Other Income (Expenses):
Interest expense, net ...............................................................................................................................................
(595)
(742)
Dividend income ...............................................................................................................................................
6
7
Foreign exchange gain (loss).............................................................................…....................…
(61)
518
Net loss on sales and disposal of property, plant and equipment (Note 15)............................................… (139)(222)
Subsidy income..............................................................................................................................................................…
183
302
Gain on liquidation of subsidiaries .....................................................................................................................
Insurance income................................................................................................................................................................
325
655
Impairment loss ............................................................................................................
Gain on sales of investment securities, net (Note 4)...........................................................................................
4
0
Gain on reversal of loss on valuation of investment securities (Note 14)...........................................................................................
327
Expenses for business structure improvement (Note 10).........................................................................................................
(210)
(526)
Expenses for factory shutdown (Note 11).........................................................................................................
(1,250)
Other, net ......................................................................................................................................................................................
(513)(1,055)
Total ...............................................................................................................................................
(1,923)(1,063)(1,111)26(1,668)
(193)
93
163
674
(57)
136
(676)
(2,613)(5,470)58(563)(1,281)
1,684
2,991
33
3,009
(1,929)(11,487)(4,723)(17,678)

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

4,844

30,014

3,266

7,863

Income Taxes (Note 16):
Current ...............................................................................................................................................…875
753
834
Deferred .................................................................................................................................................
(158)
366
(337)
Total income taxes ............................................................................................................................717
1,119
497
Net income...........................................................................................................................…
2,549
6,744
4,347
Net Loss attributable to non-controlling interests............................................................................................
(37)
(26)
Net Income attributable to owners of the Company ..........................................................................................................................................
\
2,586
\
6,744
\
4,373 $Yen

Per Share of Common Stock:
Net income per share..........................................................................................................................................
Basic ...............................................................................................................................................................................
\
98.81
\
257.65
Diluted ..........................................................................................................................................
Cash dividends applicable to the year ......................................................................................................................
30.00
35.00

See notes to consolidated financial statements.

15

8,043
(1,452)
6,591
23,423(346)
23,769U.S. dollars (Note 1)\

160.34108.67
20.00

$

0.91
0.28

Consolidated Statements of Comprehensive Income
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2020, 2019 and 2018
Thousands ofMillions of yen

2020
Net Income ...........................................................................................................................................................
\
2,549
\

U.S. dollars (Note 1)

2019\

23,423

Other Comprehensive Income (Note 19):
Unrealized gains (losses) on available-for-sale securities ......................................................................................................................................................
57
(87)
(64)
Deferred gains (losses) on hedges ......................................................................................................................................................
(153)
(116)
240
Foreign currency translation adjustments ......................................................................................................................................................
(2,945)(190)
1,069
Remeasurements of defined benefit plans ..............................................................................................................
73
131
41
Total other comprehensive income ......................................................................................................................................................
(2,968)(262)
1,286
Comprehensive Income......................................................................................................................................................
\(419) \
6,482\
5,633 $

525
(1,408)(27,063)675(27,271)(3,848)Comprehensive Income Attributable to:
Owners of the Company ................................................................................................................................…
\(383) \
6,482
Non-controlling interests ......................................................................................................................................................
(36)-(3,519)
(329)

16

\

4,347

2020
$

See notes to consolidated financial statements.

6,744

2018

5,665 $
(32)

Consolidated Statements of Changes in Net Assets
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2020, 2019 and 2018

Millions of yen
Shareholders' Equity
Common Stock

Accumulated Other Comprehensive Income

Preferred Stock

Number of
Number of
CapitalSharesAmountSharesAmountSurplus
Balance as at March 31, 2017.............................................................................................
26,803,320 \
12,88950- \11,745\
Net income attributable to owners of the Company............................................................
Cash dividends paid....................................................................................................................................
Purchase of treasury stock............................................................................................................. Change in scope of consolidation........................................................................................................................................................................
Net increase (decrease)............................................................................................................................
Balance as at March 31, 2018....................................................................................................................
26,803,320 \
12,88950- \11,745\
Net income attributable to owners of the Company............................................................
Cash dividends paid.......................................................................................................................................................................................................................................
Purchase of treasury stock......................................................................................................................................................................................................................................
Retirement of treasury stock......................................................................................................................................................................................................................................
(50)(5,281)
Net increase (decrease)......................................................................................................................................................................................................................................
Balance as at March 31, 2019....................................................................................................................
26,803,320 \
12,889
- \
- \
6,464
Net income attributable to owners of the Company............................................................
Cash dividends paid.......................................................................................................................................................................................................................................
Purchase of treasury stock......................................................................................................................................................................................................................................
Net increase (decrease)......................................................................................................................................................................................................................................
Balance as at March 31, 2020....................................................................................................................
26,803,320 \
12,889
- \
- \
6,464

\

\

\

\

Retained
Earnings
1,932
4,373
(875)
(30)
5,400
6,744
(654)
11,4902,586(916)
13,160Treasury
Stock at Cost;
Common
Stock
(396)
\
(0)
(396)
\
(5,282)
5,281
(397)
\
(0)
(397)
\

Retained
Earnings
105,594
23,769(8,419)120,944

Treasury
Stock at Cost;
CommonStock$(3,646)(0)$(3,646)

Total
Shareholders'Equity26,170
\
4,373
(875)
(0)
(30)
29,638
\
6,744
(654)
(5,282)30,446
\
2,586
(916)
(0)
32,116\

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

\

85
(63)
22
(87)
(65)
57
(8)

\

\

\

Deferred
Gains(Losses) on
Hedges
59
\
240
299
\
(116)
183
\
(153)
30
\

Foreign Currency
Translation
Adjustments

\

\

\

\

2,438
1,074
3,512
(190)
3,322
(2,947)375

Total
Accumulated
Other
Comprehensive
IncomeRemeasurementsof Defined Benefit
Plans

\

(470)
41
(429)
131
(298)
73
(225)

\

\

\

\

\

\

\

2,112 \
1,292
3,404 \
(262)
3,142 \
(2,970)172 \Non-controlling
Interests
258
(258)
194
194

\

Total Net
Assets28,540
4,373
(875)
(0)
(30)
1,034
33,042
6,744(654)(5,282)(262)
33,588
2,586
(916)
(0)
(2,776)32,482

Non-controlling
Interests- $1,779
1,779 $

Total Net
Assets308,680
23,769(8,419)(0)(25,509)298,521\\\

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

CommonPreferred
Capital
Stock
Stock
Surplus
Balance as at March 31, 2019.......................................................................................................................................
$
118,450$- $59,411
Net income attributable to owners of the Company............................................................
Cash dividends paid.........................................................................................
Purchase of treasury stock....................................................................................
Net increase (decrease)......................................................................................................................................................................................................................................
Balance as at March 31, 2020....................................................................................................................
$
118,450$- $59,411

Accumulated Other Comprehensive Income$$

See notes to consolidated financial statements.

17

Total
Shareholders'Equity$279,80923,769(8,419)(0)$295,159

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

$

$

(603)
525
(78)

Deferred
Gains(Losses) on
Hedges$
1,685(1,408)$277

Foreign Currency
Translation
Adjustments$$

30,531(27,080)
3,451

Total
Accumulated
Other
Comprehensive
IncomeRemeasurementsof Defined Benefit
Plans

$

$

(2,742)675(2,067)$$28,871 $(27,288)
1,583 $

Consolidated Statements of Cash Flows
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2020, 2019 and 2018
Thousands ofMillions of yen

2020
Operating Activities:
Income before income taxes ......................................................................................................................................................
\

3,266

U.S. dollars (Note 1)

2019
\

7,863

2018
\

4,844

2020
$

30,014

Adjustments to reconcile income before income taxes
to net cash provided by operating activities:
Depreciation and amortization ...................................................................................................................................................... 6,587
6,281
5,816
Amortization of goodwill ......................................................................................................................................................
20
Impairment loss...........................................................................................................................................................................................................................................
57
Increase (decrease) in allowance for doubtful accounts ...................................................................................................................................
(46)
(170)
239
Increase in net defined benefit liability ...........................................................................................................................................................................
80
161
147
Increase in accrued bonuses .......................................................................................................................…........................
22
25
132
Increase (decrease) in accrued bonuses to directors and corporate auditors .......................................................................................................................…
21
(41)
20
Decrease in provision for directors' retirement benefits........................................................................................................................................................
(22)
Interest income and dividend income ....................................................................................................................................................................................
(103)
(66)
(67)
Interest expenses ............................................................................................................................................................................................................................
692
801
1,152
Foreign exchange loss (gain)..................................................................................................................................................................................................
249
(55)
709
Net loss on sales and disposal of property, plant and equipment................................................................................................................................
139
222
193
Gain on sales of investment securities, net..............................................................................................................................................................................
(4)
(0)
(136)
Loss on valuation of investment securities..............................................................................................................................................................................
168
Gain on reversal of loss on valuation of investment securities..............................................................................................................................................................................
(327)
Insurance income ......................................................................................................................................................................................................................
(325)
(655)
(674)
Expenses for business structure improvement...................................................................................................................................................…
210
526
Expenses for factory shutdown...................................................................................................................................................… 1,250
Decrease (increase) in trade notes and accounts receivable ..........................................................................................................................
2,362(1,205)(3,464)
Increase in inventories ...........................................................................................................................................
(2,449)(1,528)(1,949)
Increase (decrease) in trade notes and accounts payable ...................................................................................................................................
1,006
(310)
2,884
Decrease (increase) in other assets ...........................................................................................................................................................
614
183
(575)
Increase in other liabilities ..................................................................................................................................................
(85)
19
1,800
Other ...........................................................................................................................................................................................................
35
272
725
Subtotal
13,382
12,323
11,831
Interest and dividend received ....................................................................................................................................................................................
101
67
67
Interest paid .................................................................................................................................................................................................................
(689)
(821)
(1,192)
Proceeds from insurance income .......................................................................................................................................................................
325
655
674
Payments for business structure improvement ................................................................................................................................................................
(210)
Payments for factory shutdown ................................................................................................................................................................
(760)
Income taxes paid .............................................................................................................................................................................................................
(909)
(757)
(951)
Net cash provided by operating activities .........................................................................................................................................................................................
11,24011,467
10,42960,541
187
(426)
740
199
196
(947)
6,358
2,290
1,281
(33)
1,543
(3,009)(2,991)
1,929
11,487
21,707(22,505)
9,243
5,644
(781)
322
122,989929(6,329)2,991(1,929)(6,985)(8,362)
103,304

Investing Activities:
Payments for purchases of property, plant and equipment ..........................................................................................................................
(13,570)(14,719)
Proceeds from sales of property, plant and equipment ................................................................................................................................
1
40
Payments for purchases of intangible assets ..........................................................................................................................
(182)
(113)
Payments for liquidation of subsidiaries and affiliates ..........................................................................................................................
Payments for purchases of investment securities .......................................................................................................................... (1,502)(974)
Proceeds from sales of investment securities ..........................................................................................................................
6
1
Purchase of shares of subsidiaries resulting in change in scope of consolidation (Note 3)................................................................................................
(562)
Payments for insurance policies .................................................................................................................................................................................
(2)(2)
Proceeds from maturity of insurance funds .............................................................................….................................................
Other, net .................................................................................................................................................................................................................................................
874(1,526)
Net cash used in investing activities ..................................................................................................................................................
(14,937)(17,293)(8,381)
4
(81)
(279)
(188)
588
(3)
98
(626)
(8,868)(124,710)
11(1,672)(13,806)
55(5,163)(22)
8,029(137,278)

Financing Activities:
Increase (decrease) in short-term borrowings ..........................................................................................................................
1,133(5,725)
Proceeds from long-term borrowings ........................................................................................................................................... 21,500
25,655
Payments for long-term borrowings ........................................................................................................................................... (14,672)(10,841)
Repayments of lease obligations...........................................................................................................................................................(797)(1,197)
Payments for purchase of treasury stock ...............................................................................................................................................................................
(0)(5,282)
Cash dividends paid ................................................................................................................................................................................................................
(915)
(653)
Dividends paid to non-controlling interests............................................................................................................................................ Net cash provided by (used in) financing activities ..................................................................................................................................................
6,249
1,957

993
10,017(12,273)(1,392)
(0)
(875)
(1)
(3,531)

10,414
197,592(134,840)(7,323)(1)(8,409)57,433

See notes to consolidated financial statements.

18

Thousands ofMillions of yen

2020
2019
Effect of Exchange Rate Changes
on Cash and Cash Equivalents ......................................................................................................................................................................................
(325)
98
Net Increase (Decrease) in Cash and Cash Equivalents ..........................................................................................................................
2,227(3,771)

Cash and Cash Equivalents at the Beginning of the Year .............................................................................................................................................
11,41915,190Cash and Cash Equivalents at the End of the Year (Note 3)..................................................................................................................................................................
\
13,646\
11,419\See notes to consolidated financial statements.

19

U.S. dollars (Note 1)

2018

2020

(36)

(2,994)(2,006)

20,465

17,19615,190$104,949
125,414

Notes to Consolidated Financial Statements
Meiko Electronics Co., Ltd. and Consolidated Subsidiaries
For the Years ended March 31, 2020, 2019 and 2018
1. Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Meiko Electronics
Co., Ltd. (the “Company”) have been prepared in accordance withthe provisions set forth in the Financial Instruments and Exchange Law of Japanand its related accounting regulations, and in conformity with accounting
principles generally accepted in Japan (“Japanese GAAP”), which are different
in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards.
In preparing the accompanying consolidated financial statements,
certain reclassifications and rearrangements have been made to present
them in a form that is more familiar to readers outside Japan.
In addition, the notes to the consolidated financial statements include
information that is not required under Japanese GAAP, but ispresented herein as additional information.
The consolidated financial statements are denominated in Japanese yen,
the currency of the country in which the Company is incorporated
and operated. The conversion of Japanese yen amounts into U.S. dollar
amounts is included solely for the convenience of readers outside Japanand has been made at the approximate exchange rate as at March 31, 2020($1=\108.81). 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 10 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 the cost method due to immateriality
in view of consolidation.
(b) Cash Equivalents
Cash equivalents are short-term investments that are readily convertible
into cash and are exposed to insignificant risk of changes in value.
Cash equivalents include time deposits that mature or become due
within three months of the date of acquisition.
(c) Translation of Foreign Currency Accounts
Current and non-current receivables and payables in foreign currencies
are translated at current rates prevailing at the balance sheet date andthe resulting exchange gains or losses are recognized in the consolidated
statements of operations.
Financial statements of consolidated overseas subsidiaries are translated
into Japanese yen at the exchange rate as at the balance sheet date, exceptthat shareholders' equity accounts are translated at historical rates andstatement of income items resulting from transactions with the Company
at the rates used by the Company.
Foreign currency translation adjustments resulting from translation offoreign currency financial statements prepared by consolidated overseas
subsidiaries are presented in net assets in the consolidated balance sheets.

(f) Leased Assets
Leased property under finance lease arrangements that transfer ownershipof the leased property to the lessee is depreciated using the same method as
the one applied to property, plant and equipment owned by the Company.
Leased property under finance lease arrangements that do not transfer
ownership of the leased property to the lessee is capitalized to recognize
leased assets and lease obligations in the balance sheets and depreciatedover the lease term of the respective assets with zero residual value.
(g) Allowance for Doubtful Accounts
The Company and its consolidated subsidiaries provide for doubtful
accounts principally at an amount computed based on the historical bad debt
ratio during a certain reference period plus an estimated uncollectible amountbased on the analysis of certain individual accounts including claims inbankruptcy.
(h) Accrued Bonuses
Accrued bonuses to employees are provided for the estimated amounts,
which the Company and its consolidated subsidiaries are obligated to
pay to employees after the fiscal year end based on services rendered during
the current fiscal year.
(i) Accrued Bonuses to Directors and Corporate Auditors
The Company provides allowance for directors' and corporate auditors'
accrued bonuses based on the estimated amounts as at the balance sheet date.
(j) Impairment Losses on Fixed Assets
The Group reviews its long-lived assets for impairment whenever eventsor changes in circumstance indicate the carrying amount of an asset or
asset group may not be recoverable. An impairment loss would berecognized if the carrying amount of an asset or asset group exceeds
the sum of the undiscounted future cash flows expected to result fromthe continued use and eventual disposition of the asset or asset group.
The impairment loss would be measured as the amount by which
the carrying amount of the asset exceeds its recoverable amount,which is higher of asset's or cash-generating unit's fair valueless costs to sell and its value in use.
(k) Investment Securities
The Company has classified all the equity securities as available-forsale securities based on management’s intention. Available-for-salesecurities other than non-marketable securities are reported at fair value withunrealized gains or losses, net of applicable taxes, reported in a separate
component of net assets.
Non-marketable available-for-sale securities are stated at cost determinedby the moving-average method.
(l) Income Taxes
The provision for income taxes is computed based on the pretax
income included in the consolidated statements of operations. The asset
and liability approach is used to recognize deferred tax assets andliabilities for the expected future tax consequences of temporary
differences between the carrying amounts and the tax bases ofassets and liabilities. Deferred tax assets are measured by applying
currently enacted tax laws to the temporary differences.

(d) Inventories
Inventories are stated at cost, determined by the first-in-first-out method.
However, they are written down based on decreased profitability,
where appropriate.
(e) Depreciation and Amortization (excluding leased assets)
Depreciation of property, plant and equipment for the Company and its
domestic subsidiaries is computed mainly by the declining-balance method.
Buildings (excluding facilities attached to buildings), acquired on or after
April 1, 1998 and facilities attached to buildings and structures, acquiredon or after April 1, 2016 are computed by the straight-line method.
Certain buildings and property, plant and equipment for overseas
subsidiaries are computed by the straight-line method.
The ranges of useful lives are summarized as follows:
Buildings and structures: 2–47 years
Machinery and vehicles: 2–10 years
Software for company use is carried at cost less accumulated amortization,
which is calculated by the straight-line method over its estimated usefullife of five years.

20

(m) Derivative Financial Instruments
The Group uses interest rate swaps, currency swaps andcopper price swaps as a means of hedging exposure to foreign
currencies, interest risks and market fluctuation. The Group
does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as
follows: a) all derivatives are recognized as either assets or liabilities andmeasured at fair value, and gains or losses on transactions arising fromderivative except for hedge purposes are recognized in the consolidated
statements of operations and b) for derivatives used for hedging purposes,
if derivatives qualify for hedge accounting because of high correlation andeffectiveness between the hedging instruments and the hedged items,
gains or losses on derivatives are deferred until maturity of the hedgedtransactions.
If interest rate swap contracts are used as hedge and meet certain
criteria, the net amount to be paid or received under the swap
contract is added to or deducted from the interest on the assets or
liabilities for which the swap contract was executed.
For currency swaps that qualify for hedge accounting, gain or loss
is translated at the exchange rate stipulated in the contract under
the allocation method.
(n) Retirement Benefits for Employees
The benefit formula method is used as a method of attributing
expected benefits to the periods through the end of the fiscal year
in calculating projected benefit obligation.
Actuarial gain or loss is amortized using the declining balance method
over 10 years, which is less than the average remaining years of serviceof the employees, and the amortization will be started in the following year
in which the gain or loss is recognized.
Past service cost is amortized using the straight-line method over 10
years, which is less than the average remaining years of service of theemployees.
Certain consolidated subsidiaries apply the simplified method in which
the retirement benefit amount required for voluntary termination at year end
is deemed a projected benefit obligation for the calculation of liability
associated with retirement and retirement benefit expenses.
(o) Provision for Directors' Retirement Benefits
The Company and its domestic consolidated subsidiaries account for the provision
for directors' retirement benefits as at the balance sheet date in accordance withinternal regulations.
(p) Appropriations of Retained Earnings
Appropriations of retained earnings are reflected in the accompanying
consolidated financial statements for the following year uponshareholders' approval.
(q) Per Share Information
Dividends per share shown in the consolidated statements of operations havebeen presented on an accrual basis and include, in each fiscal period,
dividends approved after each balance sheet date, but applicable to the fiscal
period then ended.
Net income per share is computed by dividing net income attributable
to common shareholders of the Company by the weighted-average
number of common shares outstanding for the period.
The diluted net income per share is omitted as the Company has no dilutive sharesfor the year ended March 31, 2020.
(r) Unification of Accounting Policies Applied to Foreign Subsidiaries
for Consolidated Financial Statements
The Accounting Standards Board of Japan has issued ASBJ Practical Issues Task Force
No. 18 “Practical Solution on Unification of Accounting Policies Applied to Foreign
Subsidiaries for Consolidated Financial Statements” (“PITF No. 18”). PITF No. 18
requires that accounting policies and procedures applied by a parent company and its
subsidiaries to similar transactions and events under similar circumstances should,
in principle, be unified for the preparation of the consolidated financial statements.
PITF No. 18, however, as a tentative measure, allows a parent company to prepare
consolidated financial statements using foreign subsidiaries’ financial statements
prepared in accordance with either International Financial Reporting Standards
or U.S. generally accepted accounting principles. In this case, adjustments
for the following four items are required in the consolidation process so that
their impacts on net income are accounted for in accordance with Japanese GAAP
unless the impact is not material.
(1) Goodwill not subjected to amortization(2) Actuarial gains and losses of defined benefit plans recognized outside profit or loss
(3) Capitalized expenditures for research and development activities(4) Fair value measurement of investment properties, and revaluation ofproperty, plant and equipment, and intangible assets(s) Change in Accounting Policy
From the beginning of the fiscal year ended March 31, 2020, overseas consolidated
subsidiaries of the Company subject to application of IFRS have applied
IFRS 16 ("Leases"), an accounting method in which borrower lease transactions
are viewed either as right-of-use assets or lease obligations.
Accordingly, an approach was adopted in which any cumulative impact of the applicationof this standard, regarded as a transitional measure, is recognized on the start date of its
application.
As a result, "Other" in Current Assets decreased by \27 million ($250 thousand), "Leased
assets (net)" in Property, Plant and Equipment, at Cost increased by \1,204 million ($11,067
thousand), "Other" in Investments and Other Assets decreased by \790 million ($7,261 thousand),while "Lease obligations" in Current Liabilities and Long-term Liabilities increased by \105 million($962 thousand) and \268 million ($2,460 thousand), respectively, as of March 31, 2020.
The impact of this change on profit or loss for the year ended March 31, 2020 was immaterial.
(t) Accounting Standards and Guidance Issued but Not Yet Adopted“Accounting Standard for Revenue Recognition” (ASBJ Statement No.
29, March 31, 2020) and“Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30, March 31, 2020)(1) Overview
The above standard and guidance provide comprehensive principles for revenue
recognition. Under the standard and guidance, revenue is recognized by applying thefollowing five steps:
Step 1: Identify contract(s) with customers.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligation in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
(2) Effective date
The above standard and guidance will become effective from the beginning of the
fiscal year ending March 31, 2022.
(3) Impact of the adoption of the standard and guidance
The Company and its domestic consolidated subsidiaries are currently in the process ofdetermining the impact of the new standard and guidance on the consolidated financial statements.
“Accounting Standard for Accounting Policy Disclosures, Accounting Changes andError Corrections” (ASBJ Statement No. 24, March 31, 2020)(1) Overview
The ASBJ made required revisions and issued the revised “Accounting Standard for Accounting
Policy Disclosures, Accounting Changes and Error Corrections” for the purpose of disclosing
the outline on accounting policies and procedures adopted when requirements under the relating
accounting standards are not clearly defined.
(2) Effective date
The above standard will become effective at the end of the fiscal year ending March 31, 2021.
“Accounting Standard for Disclosure of Accounting Estimates”(ASBJ Statement No. 31, March 31, 2020)(1) Overview
The ASBJ developed and issued “Accounting Standard for Disclosure of Accounting Estimates”
for the purpose of disclosing information on the items of accounting estimates made on financial
statements of the current fiscal year that may significantly affect financial statements of the next
fiscal year, which is highly useful for users of financial statements.
(2) Effective date
The above standard will become effective at the end of the fiscal year ending March 31, 2021.
(u) Additional Information(Accounting Estimates Relating to the Spread of the Novel Coronavirus (COVID-19))
The Company made accounting estimates for recoverability of deferred tax assets, impairmentof fixed assets and others, based on the information available at the time of the preparation of theconsolidated financial statements.
The spread of COVID-19 infection has far-reaching effects on economies and corporate activities, and
it is difficult to forecast the spread of the infection and the timing of the return to normal in the future.
However, the Company made accounting estimates based on the assumption that the impactof the COVID-19 will continue for a certain period of time for the year ending March 31, 2021.
There are many uncertain factors for estimating the impact of the spread of COVID-19, which may
influence the Company's financial conditions and operating results for the next consolidated
accounting period.

21

3. Principal Breakdown of Assets and Liabilities of a Company that Became a Consolidated Subsidiary through the Acquisition of Stock
For the year ended March 31, 2020
Breakdown of assets and liabilities at the time of commencement of consolidation in connection with the new consolidation of Meiko Towada Vietnam Co., Ltd.
through the acquisition of stock and the relationship between acquisition cost of shares and expenditures for acquisition (net) are as follows:

Millions
Thousands ofof yenU.S. dollars
Current assets ...........................................................................................................................................................................................................................................................................................................................................
\
2,265 $
20,819Non-current assets ......................................................................................................................................................................................................................................................................................................................................................................
873
8,027
Goodwill ................................................................................................................................................................................................................................................................................................
406
3,730
Current liabilities .........................................................................................................................................................................................................................................................................................................................................................................
(2,467)(22,671)
Non-current liabilities ...................................................................................................................................................................................................................................................................................................................................................................
(98)
(904)
Non-controlling interests ..............................................................................................................................................................................................................................................................................................................................................................
(229)(2,108)Acquisition cost of shares........................................................................................................................................................................................................................................................................................................................................................
750
6,893
Cash and cash equivalents ...........................................................................................................................................................................................................................................................................................................................................................
(188)(1,730)
Expenditures for acquisition ....................................................................................................................................................................................................................................................................................................................................................
\
562 $
5,163
There were no applicable matters for the year ended March 31, 2019.

4. 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, 2020 and 2019 are as follows:
2020
Millions of yen

Thousands of U.S. dollars

Fair

Acquisition

Unrealized

Fair

Acquisition

Unrealized

Value

Cost

Gains (Losses)

Value

Cost

Gains (Losses)

Securities whose carrying values
exceed their acquisition cost:
Equity securities ...............................................................................................................
\
38 \
20 \
18 $
347 $
180 $
Securities whose carrying values do not
exceed their acquisition cost:
Equity securities .................................................................................................................................................................................................................
153
309
(156)
1,412
2,845
Total ...............................................................................................................
\
191 \
329 \
(138) $
1,759 $
3,025 $

167

(1,433)(1,266)2019
Millions of yen
Fair

Acquisition

Unrealized

Value

Cost

Gains (Losses)

Securities whose carrying values
exceed their acquisition cost:
Equity securities ...............................................................................................................
\
64 \
26 \
38
Other ...............................................................................................................
99
96
3
Securities whose carrying values do not
exceed their acquisition cost:
Equity securities .................................................................................................................................................................................................................
199
306
(107)
Total ...............................................................................................................
\
362 \
428 \
(66)
Information on available-for-sale securities whose fair values are not readily determinable as of March 31, 2020 and 2019 are described in Note 17.
Information regarding the sale of securities classified as available-for-sale securities for the years ended March 31, 2020 and 2019 are summarized as follows:
2020
Millions of yen

Thousands of U.S. dollars

Proceeds

Aggregate

Aggregate

Proceeds

Aggregatefrom Sales

Gains onLosses on

from Sales

Gains on

Sales

Sales

Equity securities ...............................................................................................................
\
6\
Total ...............................................................................................................
\
6\

4\
4\

Aggregate
Losses on

Sales

0$
0$

55 $
55 $

Sales

33 $
33 $

0
0

2019
Millions of yen
Proceeds

Aggregate

Aggregatefrom Sales

Gains onLosses on

Sales

Equity securities ...............................................................................................................
\
1\
Total ...............................................................................................................
\
1\

Sales

0\
0\

0
0

The Company recorded impairment loss of investment securities in the amount of \168 million ($1,543 thousand) for the year ended March 31, 2020.
It consists of \118 million ($1,084 thousand) for available-for-sale securities and \50 million ($459 thousand) for shares of subsidiaries and associates.
The Company recorded no impairment loss of investment securities for the year ended March 31, 2019.

5. Reduction Entry for Property, Plant and Equipment
The amount deducted from the acquisition costs of property, plant and equipment due to government subsidies received and others as of March 31, 2020 and 2019 is as follows:
Thousands ofMillions of yen
U.S. dollars
2020
2019
2020
Buildings and structures ..........................................................................................................................................................................................................................................
\
270 \
- $
2,483
Machinery and vehicles ..........................................................................................................................................................................................................................................
162
1,489
Other ..........................................................................................................................................................................................................................................
7
60
Total ..........................................................................................................................................................................................................................................
\
439 \
- $
4,032

6. Notes that Matured at the End of the Fiscal Year
March 31, 2019, the end of fiscal year, coincided with a bank holiday and the following notes that matured at the end of the fiscal year
were accounted for as if they were settled on their dates of maturity.
Thousands ofMillions of yen
U.S. dollars
2020
2019
2020
Notes receivable ......................................................................................................................................................................................................................................
\
- \
120 $
Notes payable - trade .........................................................................................................................................................................................................................................
\
- \
217 $
-

22

7. Short-term Borrowings and Long-term Debt
Short-term borrowings and long-term debt as of March 31, 2020 and 2019 consist of the following:Thousands ofMillions of yen
2020
2019

U.S. dollars

2020

Short-term borrowings with average interest rate of 0.98% for 2020 and 1.19% for 2019..........................................................................................................................................................................
\
9,686 \
7,638 $
89,021
Current portion of long-term borrowings with average interest rate of 0.95% for 2020 and 1.34% for 2019........................................................................................................................................................
15,544
14,386
142,859
Current portion of lease obligations ...........................................................................................................................................................
561
698
5,151
Current portion of other liabilities with average interest rate of 0.57% for 2020 and 2019...........................................................................................................................................................
1,300
1,300
11,948
Total short-term borrowings ................................................................................................................................................................................................
27,091
24,022248,979
Long-term borrowings with average interest rate of 0.73% for 2020 and 0.91% for 2019, less current portion ....................................................................................................................................................
40,47934,765372,013
Lease obligations, less current portion .................................................................................................................................................................................................................
935
1,112
8,590
Total long-term borrowings...................................................................................................................................................................................................................................…
41,41435,877
380,603
Total ..............................................................................................................................................................................................................................................
\
68,505 \59,899 $629,582* Average interest rate of borrowings represents the weighted average rate for the outstanding balances as at March 31, 2020 and 2019.
Average interest rate of lease obligations is not disclosed since the amount equivalent to interest expense included in total lease payments is allocated over the lease term using the straight-line method.
Average interest rate of other liabilities represents the weighted average rate for the average of the outstanding balances as at April 1, 2019 and March 31, 2020.
The aggregate annual maturities of long-term debt as of March 31, 2020 are as follows:
Millions
Year ending March 31
of yen2021...........................................................................................................................................................................................................................................................
\
14,163 $2022...........................................................................................................................................................................................................................................................
11,9192023...........................................................................................................................................................................................................................................................
10,3302024...........................................................................................................................................................................................................................................................
4,067
Total ...........................................................................................................................................................................................................................................................
\
40,479 $Thousands of
U.S. dollars

130,163
109,540
94,93637,374372,013

The aggregate annual maturities of lease obligations as of March 31, 2020 are as follows:
Millions
Year ending March 31
of yen2021...........................................................................................................................................................................................................................................................
\
505 $
2022...........................................................................................................................................................................................................................................................
109
2023...........................................................................................................................................................................................................................................................
88
2024...........................................................................................................................................................................................................................................................
91
2025 and thereafter .................................................................................................................................................................................................................................
142
Total .........................................................................................................................................................................................................................................................
\
935 $Thousands of
U.S. dollars

4,640
1,001
808
835
1,306
8,590

Financial covenants
For the year ended March 31, 2020
Short-term borrowings and long-term borrowings, including the current portion amounting to \58,091 million ($533,880 thousand), include certain financial covenants that 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) \20,589 million ($189,220 thousand), or (ii) 75% 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, 2019
Short-term borrowings and long-term borrowings, including the current portion amounting to \49,628 million, include certain financial covenants that forfeit the benefit of termwith regard to the debts on certain loan agreement in the event the Company is in breach of either of the following covenants (stricter covenants are described if there are several covenants).
(1) For each fiscal year, ordinary losses shall not be recorded on the consolidated statement of operations under Japanese GAAP for two consecutive years.
(2) Total net assets on the consolidated balance sheet at each fiscal year end shall be maintained at least higher of either (i) \21,962 million, or (ii) 80% of the total net assets
recorded on the consolidated balance sheet as of the end of the previous fiscal year.
(3) The total amount of interest-bearing debts on the consolidated balance sheet at each fiscal year end shall be lower than the amount equivalent to the net sales on the consolidated statement of operations
for that fiscal year divided by 12 and multiplied by 8.

23

8. Retirement Benefits
The Company and some of its consolidated subsidiaries provide a lump-sum retirement plan and a defined contribution plan as a defined benefit pension plan for employees' retirement benefits.
Certain consolidated subsidiaries apply the simplified method in computing net defined benefit liability and benefit costs for their lump-sum retirement plans.
Defined benefit pension plans, except plan applying the simplified method(1) Movement in projected benefit obligations
Thousands ofMillions of yen
2020
2019
Balance at the beginning of the year .............................................................................................................................................................................................…
\
2,300 \
2,244 $
Service cost ...........................................................................................................................................................................................…
135
127
Interest cost .............................................................................................................................................................................................…
5
7
Actuarial loss.............................................................................................................................................................................................… (29)(67)
Benefits paid .............................................................................................................................................................................................… (99)(12)
Other ............................................................................................................................................................................................................… 1
Balance at the end of the year.............................................................................................................................................................................................…
\
2,312 \
2,300 $

U.S. dollars

2020
21,138
1,243
42
(265)
(906)
21,252(2) Reconciliation from projected benefit obligations to net defined benefit liability
Thousands ofMillions of yen
2020
2019
Unfunded projected benefit obligations ...........................................................................................................................................................................................…
\
2,312 \
2,300 $
Total liability at the end of the year ...........................................................................................................................................................................................…
\
2,312 \
2,300 $

U.S. dollars

2020
21,252
21,252

Net defined benefit liability ...........................................................................................................................................................................................…
\
2,312 \
2,300 $
Total liability at the end of the year ...........................................................................................................................................................................................…
\
2,312 \
2,300 $

21,252
21,252(3) Retirement benefit costs
Thousands ofMillions of yen
2020
2019
Service cost ...........................................................................................................................................................................................…
\
135 \
127 $
Interest cost ...........................................................................................................................................................................................…
5
7
Amortization of actuarial loss .............................................................................................................................................................…
6
24
Amortization of past service cost .............................................................................................................................................................................................…
38
39
Total benefit costs .............................................................................................................................................................................................…
\
184 \
197 $

U.S. dollars

2020
1,243
42
53
357
1,695

(4) Remeasurements of defined benefit plans
Thousands ofMillions of yen
2020
2019
Past service cost ...........................................................................................................................................................................................…
\(38) \(39) $
Actuarial loss ............................................................................................................................................................................................................
(35)
(92)
Total ......................................................................................................................................................................................................….
\(73) \(131) $

U.S. dollars

2020
(357)
(318)
(675)

(5) Accumulated remeasurements of defined benefit plans
Thousands ofMillions of yen
2020
2019
Unrecognized past service cost ...........................................................................................................................................................................................…
\
231 \
270 $
Unrecognized actuarial loss (gain)................................................................................................................................................................… (6)28
Total ......................................................................................................................................................................................................….
\
225 \
298 $

U.S. dollars

2020
2,126
(59)
2,067

(6) Actuarial assumptions
2020
2019
Discount rate .................................................................................................................................................................................................................................................
0.4%
0.2%
Defined benefit pension plan applying the simplified method(1) Movement in net defined benefit liability
Thousands ofMillions of yen
2020
2019
Balance at the beginning of the year .............................................................................................................................................................................................…
\
389 \
414 $
Benefit costs .........................................................................................................................................................................................................
122
Benefits paid .............................................................................................................................................................................................… (17)(26)
Others .........................................................................................................................................................................................................................................
(1)
Balance at the end of the year .............................................................................................................................................................................................…
\
384 \
389 $

U.S. dollars

2020
3,578
115
(164)
3,529

(2) Reconciliation from projected benefit obligations to net defined benefit liability
Thousands ofMillions of yen
2020
2019
Unfunded projected benefit obligations ...........................................................................................................................................................................................…
\
384 \
389 $
Total liability at the end of the year ...........................................................................................................................................................................................…
\
384 \
389 $
Net defined benefit liability ...........................................................................................................................................................................................…
\
384 \
389 $
Total liability at the end of the year ...........................................................................................................................................................................................…
\
384 \
389 $

U.S. dollars

2020
3,529
3,529
3,529
3,529

(3) Retirement benefit costThousands ofMillions of yen
U.S. dollars
2020
2019
2020
Retirement benefit costs calculated using the simplified method ...........................................................................................................................................................................................…
\
12 \
2$
115
Total costs at the end of the year ...........................................................................................................................................................................................…
\
12 \
2$
115

Defined contribution plan
The amount required to contribute to the defined contribution plans is \167 million ($1,539 thousand) and \161 million for the years ended March 31, 2020 and 2019, respectively.

24

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

10. Expenses for Business Structure Improvement
For the year ended March 31, 2020
The Group recorded expenses for business structure improvement for the payment of financial compensation, equivalent to severance payment, with the aim of
improving business structure of overseas subsidiaries.
For the year ended March 31, 2019
The Group recorded expenses for business structure improvement to correspond to changes in business environment with the aim of improving its corporate
competitiveness and stability in line with the Group's structural reforms through downsizing its total assets and the improvement of asset efficiency.
It consists of \421 million for loss on disposal of fixed assets and \105 million for impairment loss.

11. Expenses for Factory Shutdown
The Company recorded expenses for the shutdown of factories of Meiko Electronics (Wuhan) Co., Ltd. and Meiko Electronics (Guangzhou Nansha) Co., Ltd. caused by
the spread of COVID-19 infection for the year ended March 31, 2020.
There were no applicable matters for the year ended March 31, 2019.

12. Contingent Liabilities
Contingent liabilities of the Company as of March 31, 2020 and 2019 are as follows:
Thousands ofMillions of yen
2020
2019

U.S. dollars

2020

Trade notes discounted........................................................................................................................................................................
\
33 \
37 $
300

13. Research and Development Costs
Research and development costs included in selling, general and administrative expenses and manufacturing costs are \1,212 million ($11,138 thousand),\1,041 million and \816 million for the years ended March 31, 2020, 2019 and 2018, respectively.

14. Gain on Reversal of Loss on Valuation of Investment Securities
The Company recorded gain on reversal of loss on valuation of investment securities carried out at overseas subsidiaries under the International Financial Reporting Standards
for the year ended March 31, 2020.
There were no applicable matters for the year ended March 31, 2019.

15. Net Gain and Net Loss on Sales and Disposal of Property, Plant and Equipment
Significant components of net gain and net loss on sales and disposal of property, plant and equipment for the years ended March 31, 2020, 2019 and 2018 are as follows:
Thousands ofMillions of yen
U.S. dollars
Gain:
2020
2019
2018
2020
Buildings and structures ........................................................................................................................................................................
\
- \
- \
- $
Machinery and vehicles........................................................................
1
2
0
7
Land ....................................................................................................................
Construction in progress .........................................................................................................................................................................
Others ........................................................................................................................................................................
Total gain ................................................................................................................................................................................................
1
2
0
7
Loss:
Buildings and structures ........................................................................................................................................................................
(9)
(3)
(6)
(83)
Machinery and vehicles ........................................................................................................................................................................
(115)
(204)
(168)
(1,057)
Land ...................................................................................................................
Construction in progress ........................................................................................................................................................................
(6)(10)
Intangible assets ........................................................................................................................................................................
Others ........................................................................................................................................................................
(16)
(11)
(9)
(148)
Total loss ................................................................................................................................................................................................
(140)
(224)
(193)
(1,288)Net loss ....................................................................................................................................................................................................................................
\(139) \
(222) \
(193) $
(1,281)25

16. Income Taxes
Income taxes applicable to the Company consist of corporate tax, inhabitant tax and enterprise tax, which in the aggregate resulted in the normal statutory
tax rates of approximately 30.6%, 30.6% and 30.8% for the years ended March 31, 2020, 2019 and 2018, respectively.
The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities as of March 31, 2020 and 2019 are as follows:
Thousands ofMillions of yen
2020
2019

U.S. dollars

2020
Deferred Tax Assets:
Elimination of unrealized profits .........................................................................................................................…
\
51 \
65 $
473
Accrued bonuses .....................................................................................................................................................
196
190
1,803
Net defined benefit liability ......................................................................................................................................
770
745
7,074
Provision for directors' retirement benefits ........................................................................................................................................................................
66
66
611
Accrued enterprise tax ........................................................................................................................................................................
3
22
24
Allowance for doubtful accounts.....................................................................................................................................................................…
66
83
608
Valuation loss of inventories.....................................................................................................................................................................…
80
98
739
Difference on depreciation period.....................................................................................................................................................................…
373
435
3,430
Impairment loss .....................................................................................................................................................................…
1,007
1,248
9,253
Loss on valuation of investment securities.....................................................................................................................................................................…
20
60
183
Loss on revaluation of golf club memberships ........................................................................................................................................................................
15
15
140
Tax loss carryforwards ........................................................................................................................................................................
2,867
2,474
26,344
Unrealized losses on available-for-sale securities.....................................................................................................................................................................…
3
20
24
Deduction of foreign corporation tax carried forward ....................................................................................................................................................
663
600
6,096
Other ...................................................................................................................................................................................................
72
136
656
Gross deferred tax assets................................................................................................................................
6,252
6,257
57,458Valuation allowance for tax loss carryforwards (*2)..................................................................................
(2,414)(2,371)(22,190)
Valuation allowance for deductible temporary differences.......................................................................
(2,625)(2,780)(24,124)
Less: valuation allowance (*1)......................................................................................................................
(5,039)(5,151)(46,314)
Total .................................................................................................................................................................. \1,213 \
1,106 $
11,144
Thousands ofMillions of yen
2020
2019

U.S. dollars

2020

Deferred Tax Liabilities:
Retained earnings of foreign subsidiaries...................................................................................................................................
\(427)(401) $
Deferred gains on hedges..................................................................................................................................................................
(13)
(81)
Other.............................................................................................................................................................................................................
(3)(2)
Total .........................................................................................................................................................................................
\(443) \
(484) $

(3,920)(122)(26)(4,068)Deferred Tax Assets, Net: ........................................................................................................................................................................
\
770 \

7,076

622 $

(*1) The valuation allowance decreased by \112 million ($1,028 thousand), mainly due to the decrease of \106 million ($976 thousand) invaluation allowance for impairment loss at consolidated subsidiaries for the year ended March 31, 2020.
The valuation allowance decreased by \212 million, mainly due to the decrease of \261 million in valuation allowancefor tax credit carryforwards at the Company and at consolidated subsidiaries for the year ended March 31, 2019.
(*2) Gross deferred tax assets, valuation allowances and total deferred tax assets recognized for tax loss carryforwards, broken down by expiration dates are as follows:
Millions of yen
Within one
One to twoOver two toOver three toOver four to
year
years
three years
four years
five years
Gross deferred tax assets for tax loss carryforwards (*a) ......................................................................................................................................................................................
\
-\
- \
-\
74 \
1,194 \
Valuation allowance ......................................................................................................................................................................................
(74)
(742)
Total deferred tax assets recognized ......................................................................................................................................................................................
452
March 31, 2020

Millions of yen
Within one
One to twoOver two toOver three toOver four to
year
years
three years
four years
five years
Gross deferred tax assets for tax loss carryforwards (*a) ......................................................................................................................................................................................
\
- \
- \
- \
- \
74 \
Valuation allowance ......................................................................................................................................................................................
(74)
Total deferred tax assets recognized ......................................................................................................................................................................................
March 31, 2019

Thousands of U.S. dollars
Within one
One to twoOver two toOver three toOver four to
year
years
three years
four years
five years
Gross deferred tax assets for tax loss carryforwards (*a) ......................................................................................................................................................................................
$
-$
- $
-$
684 $
10,972 $Valuation allowance ......................................................................................................................................................................................
(684)(6,818)
Total deferred tax assets recognized ......................................................................................................................................................................................
4,154
March 31, 2020(*a) Gross deferred tax assets for tax loss carryforwards are calculated using the enacted statutory tax rates.
(*b) Deferred tax assets of \452 million ($4,154 thousand) are recognized for tax loss carryforwards of \2,866 million ($26,344 thousand) (calculated using the enacted statutory tax rates),
which the Company and its consolidated subsidiaries recognized for a part of tax loss carryforwards of \1,465 million ($13,464 thousand) for the year ended March 31, 2020.
These tax loss carryforwards resulted from loss before income taxes for the year ended March 31, 2016 and the year ended March 31, 2020, which are expected to be recoverable judging fromthe estimated taxable income in the future. Accordingly, the Company does not recognize the valuation allowance for this for the year ended March 31, 2020.
Deferred tax assets of \103 million are recognized for tax loss carryforwards of \2,474 million (calculated using the enacted statutory tax rates),
which the Company recognized for a part of tax loss carryforwards of \1,022 million for the year ended March 31, 2019.
These tax loss carryforwards resulted from loss before income taxes of \9,540 million for the year ended March 31, 2016, which are expected to be recoverable judging fromthe estimated taxable income in the future. Accordingly, the Company does not recognize the valuation allowance for this for the year ended March 31, 2019.
A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statements
of income for the years ended March 31, 2020, 2019 and 2018 are as follows:
2020

2019

2018

Statutory tax rate ............................................................................................................................................................................................................................
30.6%
30.6%
30.8%
Expenses not deductible for tax purpose ........................................................................................................................................................................
0.3%
0.1%
0.2%
Per capita inhabitant tax ............................................................................................................................................................................................
0.5%
0.2%
0.3%
Directors' bonuses ....................................................................................................................................................................................................................................
0.6%
0.1%
0.4%
Tax deduction ....................................................................................................................................................................................................................................
(3.6)%(2.1)%-%Tax rate difference in foreign subsidiaries ...................................................................................................................................................................................................................
(12.9)%(13.8)%(23.3)%
Retained earnings of foreign subsidiaries ................................................................................................................................................
0.8%
0.6%
(0.4)%
Foreign tax credit ..................................................................................................................................................................................................................................................
8.0%
2.4%
5.0%
Effect of amendments of consolidation ...............................................................................................................................................
-%-%(0.2)%
Valuation allowance ............................................................................................................................................................................................................
(3.5)%(1.9)%(15.3)%
Expiration of tax loss carryforwards............................................................................................................................................................................................................
-%
-%
7.8%
Other, net ................................................................................................................................................................................................................................
1.2%(2.0)%
5.0%
Actual effective tax rate ....................................................................................................................................................................................................
22.0%
14.2%
10.3%

26

Over five years
1,598 \
(1,598)-Over five years
2,400 \
(2,297)103

Over five years
14,688 $(14,688)
-

Total
2,866
(2,414)(*b) 452

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

Total
26,344(22,190)4,154

17. Financial Instruments(a) Qualitative information on financial instruments(1) Policies for using financial instruments
The Group finances necessary funds mainly through bank loans according to the capital investment plan for the production and sales of PCB.
Temporary and excessive funds are operated by highly stable financial instruments and the Group finances short-term operating capital by bank loans.
Derivative transactions are only utilized to hedge the risks mentioned in (2) below.
(2) Details of financial instruments used and exposures to risk and how they arise
Operating receivables such as trade notes and accounts receivable are exposed to credit risk. Some operating receivables, which are denominated in foreign currencies
due to global operations, are exposed to foreign currency fluctuation risk. The Group might utilize foreign exchange forward contracts, if necessary, except for thosewithin the range of the operating payables dominated in the same foreign currency. Investment securities mainly consist of securities of companies in whicha business relationship has been established and they are exposed to market fluctuation risk.
Operating payables such as trade notes and accounts payable are due within one year.
Some of the operating payables relating to imports of raw materials are dominated in foreign currencies and exposed to foreign currency fluctuation risk.
The Group might utilize foreign exchange forward contracts, if necessary, except for those within the range of the operating receivables dominated in the same foreign currency.
Loans and lease obligations for finance lease transactions are mainly used for the purpose of financing capital investments.
Some of them are variable interest loans and exposed to interest and foreign currency fluctuation risk.
The Group utilizes interest rate swaps and currency swaps to hedge the risk. Regarding derivative transactions, the Group utilizes foreign exchange forward contracts tohedge foreign currency fluctuation risk of receivables and payables dominated in foreign currencies. The Group utilizes interest rate swaps and currency swaps
to hedge interest fluctuation risk. The Group utilizes commodity forward contracts to hedge copper price fluctuation risk.
(3) Policies and processes for managing the risk(i) Credit risk management (risk of default by the counterparties)
The sales management department in the Company follows sales management rules, monitors the customers’ credit conditions periodically and manages the due dateand balance per customer. The Company keeps track of the adverse financial conditions of its customers in the early stage to mitigate the uncollectible risk.
The Company enters into derivative transactions only with the credit-worthy financial institutions to mitigate the credit risk.
(ii) Market risk management (risk of foreign currency fluctuations and interests)
Regarding the trade receivables and trade payables dominated in foreign currencies, the Company utilizes foreign exchange forward contracts, if necessary, to hedge
the foreign currency fluctuation risk, which is controlled by each currency and on a monthly basis. For investment securities, the Company regularly reviews the fair value
and issuers' financial condition and readjusts its portfolio on an ongoing basis considering the business relationship with counterparties. Derivative transactions
are based on the internal rules and executed after getting the approval from the approver and managed by the finance department. 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 that 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 18, the contract amount itself does not indicate market risk related to derivativetransactions.
(b) Fair values of financial instruments
Book values of the financial instruments included in the consolidated balance sheets and their fair values as at March 31, 2020 and 2019 are as follows:
2020
Millions of yen
Book

Fair

Value

Value

Thousands of U.S. dollars
Difference

AssetsCash and cash equivalents ...........................................................................................................
\
13,646 \13,646 \Time deposits ..................................................................…
244
244
Trade notes and accounts receivable ...................................................................................................
24,44824,448Investment securities:
Available-for-sale securities....................................................................................................................
191
191
Liabilities
Trade notes and accounts payable .................................................
\
17,732 \
17,732 \Short-term borrowings......................................................................................................
9,686
9,686
Long-term borrowings............................................................................
56,02356,035
Lease obligations ........................................................................…
1,496
1,503
Derivative financial instruments ........................................................................…
\
44 \
44 \

Book

Fair

Value

Value

- $
-

125,414 $
2,238
224,687

125,414 $
2,238
224,687

-

-

1,759

1,759

-

- $
12
8
- $

162,963 $89,021
514,872
13,741400 $

162,963 $89,021
514,982
13,812
400 $

110
71
-

2019
Millions of yen
Book

Fair

Value

Value

Difference

AssetsCash and cash equivalents ...........................................................................................................
\
11,419 \11,419 \Time deposits ..................................................................…
238
238
Trade notes and accounts receivable ...................................................................................................
25,83425,834
Investment securities:
Available-for-sale securities....................................................................................................................
361
361
Liabilities
Trade notes and accounts payable .................................................
\
15,797 \
15,797 \Short-term borrowings......................................................................................................
7,638
7,638
Long-term borrowings..............................................................................................
49,151
49,203
Lease obligations.........................................................................................................................
1,810
1,823
Derivative financial instruments ........................................................................…
\
264 \
264 \

52
13
-

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

27

Difference(1) Valuation method of the fair value of financial instruments and information of investment securities and derivative transactions(i) Cash and cash equivalents, (ii) Time deposits, (iii) Trade notes and accounts receivable
The carrying value is deemed as the fair value since it is scheduled to be settled in a short period of time.
(iv) Investment securities
Fair value of equity securities is based on the quoted price on stock exchange. Please refer to Note 3 regarding the information of the fair value for the investment
in securities by classification.
(v) Trade notes and accounts payable, (vi) Short-term borrowings
The carrying value is deemed as the fair value since it is scheduled to be settled in a short period of time.
(vii) Long-term borrowings, (viii) Lease obligations
The fair values are measured as the net present value of estimated future cash flows by discounting the principal and interest value using the loan interest rate applied
to the new loans or the lease contracts. If the variable interest rate loans meet certain criteria for the short-cut method for interest rate swaps (if interest rate swap
contracts are used as a hedge and meet certain hedging criteria, the interest rate swaps are not remeasured at market price and the amount to be received under theinterest rate swap contract is added to or deducted from the interest on the liabilities for which the swap contract was executed) and for the allocation method for
currency swaps, the sum of principal and the interest processed as interest rate swaps and currency swaps are discounted by using the reasonably estimated loaninterest rate applied to the same kind of loans.
(ix) Derivative transactions
Please refer to Note 18.
(2) Unlisted securities of \3,030 million ($27,844 thousand) as of March 31, 2020 and \1,164 million as of March 31, 2019 are not included in the above tablebecause the securities do not have fair market values and it is extremely difficult to estimate fair values.
(c) The redemption schedule for financial instruments as of March 31, 2020 and 2019 is as follows:
2020
Millions of yen
Due in one

Due after one

Due after fiveDue after ten

year
or less

year throughfive years

year throughten years

years

Cash and cash equivalents ...........................................................................................................
\
13,646 \- \- \Time deposits ......................................................................................................
244
Trade notes and accounts receivable ...................................................................................................
24,448Investment securities:
Available-for-sale securities with maturities....................................................................................................................
2020
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 ...........................................................................................................
$
125,414 $- $- $Time deposits ......................................................................................................
2,238
Trade notes and accounts receivable ...................................................................................................
224,687
Investment securities:
Available-for-sale securities with maturities....................................................................................................................
2019
Millions of yen-

Due in one

Due after one

Due after fiveDue after ten

year
or less

year throughfive years

year throughten years

years

Cash and cash equivalents ...........................................................................................................
\
11,419 \- \- \Time deposits ......................................................................................................
238
Trade notes and accounts receivable ...................................................................................................
25,834
Investment securities:
Available-for-sale securities with maturities....................................................................................................................
-

28

-

18. Derivatives
There are no derivative transactions for which hedge accounting has not been applied for the years ended March 31, 2020 and 2019.
Derivative transactions for which hedge accounting has been applied for the years ended March 31, 2020 and 2019 are as follows:
2020

Contract
amountHedged item

Millions of yen
Contract
amountdue after
one yearThousands of U.S. dollars
Contract
amountContract
due after
amountone year
Fair value

Fair value

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

Long-term
borrowings \

996 \

65 \

(4) $

9,155 $

600 $

(40)

Currency swap
contracts
Payable fixed/
Receive floating

Long-term
borrowings \4,507 \

2,437 \

40 $

41,422 $22,398 $364

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

Long-term
borrowings \1,400 \

1,000 \

(9) $12,866 $9,190 $

(86)

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

Long-term
borrowings \4,507 \

2,437 \

(168) $

41,422 $22,398 $(1,547)

Commodity related :Benchmark Method
Copper swap
contractsRawmaterials

617 \

- \

8 $

5,670 $

- $

76

\

Contract
amountHedged item

2019
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\

3,922 \

1,201 \

(2)

Currency swap
contracts
Payable fixed/
Receive floating

Long-term
borrowings\

6,577 \

4,507 \

266

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

Long-term
borrowings\

2,220 \

1,400 \

(18)

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

Long-term
borrowings\

6,577 \

4,507 \

(313)

There were no commodity-related transactions for which hedge accounting has been applied for the year ended March 31, 2019.

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.

29

19. Comprehensive Income
Reclassifications and income tax effects attributable to other comprehensive income for the years ended March 31, 2020, 2019 and 2018 are as follows:
Thousands of2020

Millions of yen
2019

U.S. dollars

2018

Unrealized gains (losses) on available-for-sale securities:
Gains (losses) arising during the year ........................................................................................................................................................................
\(57) \(123) \
Reclassifications and adjustments ........................................................................................................................................................................
114
26
Before income tax effects .....................................................................................................................................................................…
57(97)
Income tax effects .....................................................................................................................................................................…
10
Total ......................................................................................................................................................................................
\
57 \(87) \
Deferred gains (losses) on hedges:
Gains (losses) arising during the year ........................................................................................................................................................................
\(143) \
(100) \
Reclassifications and adjustments ........................................................................................................................................................................
(78)
(67)
Before income tax effects .....................................................................................................................................................................…
(221)
(167)
Income tax effects .....................................................................................................................................................................…
68
51
Total ......................................................................................................................................................................................
\(153) \(116) \
Foreign currency translation adjustments:
Adjustments arising during the year ........................................................................................................................................................................
\(2,945) \(190) \
Reclassifications and adjustments ........................................................................................................................................................................
Total ......................................................................................................................................................................................
\(2,945) \(190) \
Remeasurements of defined benefit plans:
Adjustments arising during the year ........................................................................................................................................................................
\
28 \
67 \
Reclassifications and adjustments ........................................................................................................................................................................
45
64
Before income tax effects .....................................................................................................................................................................…
73
131
Income tax effects .....................................................................................................................................................................…
Total ......................................................................................................................................................................................
\
73 \
131 \
Total other comprehensive income ......................................................................................................................................................................................
\(2,968) \(262) \

2020

53 $
(145)
(92)
28
(64) $

(527)
1,052
525
525

441 $
(96)
345
(105)
240 $

(1,315)(713)(2,028)620(1,408)1,234 $
(165)
1,069 $

(27,063)(27,063)(23) $
64
41
41 $
1,286 $

265
410
675
675
(27,271)

20. Business Combination
Business combination through acquisition(1) Overview of business acquisition
1) Name and business of acquired company
Name of acquired company ...............................................................................................................................................................................................…
Towada Electronics Vietnam Co., Ltd.
Business of acquired company ...............................................................................................................................................................................................…
Implementation, assembly and sales of electronic parts
2) Purpose of business combination
To increase orders by strengthening the Group's integrated supply system from board design to manufacturing and assembly, and mass production system
in Hanoi, Vietnam
3) Date of business combination
Share acquisition date ...............................................................................................................................................................................................…
November 25, 2019
Deemed acquisition date...............................................................................................................................................................................................…
October 1, 20194) Legal form of business combination ...............................................................................................................................................................................................…
Share acquisition
5) Corporate name after business combination ...............................................................................................................................................................................................…
Meiko Towada Vietnam Co., Ltd.
6) Percentage of acquired share...............................................................................................................................................................................................…
60%7) Grounds for determining acquiring company ...............................................................................................................................................................................................…
The Company's cash acquisition of shares(2) Period of business results for the acquired company included in the consolidated financial statements.....................................................................................................................................................…
October 1, 2019 to March 31, 2020
Millions(3) Breakdown of acquisition cost and type of compensationof yenCash………………………………………………………………………………………………………………………………………..
\750
Total………………………………………………………………………………………………………………………………………..
\750

Thousands of
U.S. dollars
$
6,893
$
6,893

Millions
Thousands of(4) Description and amount of principal acquisition-related expensesof yenU.S. dollars
Advisory costs and others………………………………………………………………………………………………………………………………………..
\
53
$
485
(5) Amount of goodwill, reasons for occurrence, depreciation method
Millions
Thousands ofand depreciation periodof yenU.S. dollars
1) Amount of goodwill ...............................................................................................................................................................................................…
\
406
$
3,730
2) Reasons for occurrence:
Future surplus earning capacity anticipated from business development going forward
3) Depreciation method and depreciation period ...............................................................................................................................................................................................…
Depreciated on a straight-line basis over 10 years

Millions
Thousands of(6) Amount and principal breakdown of assets and liabilities assumed on date of business combinationof yenU.S. dollars
Current assets………………………………………………………………………………………………………………………………………..
\
2,265
$
20,819Non-current assets………………………………………………………………………………………………………………………………………..
873
8,027
Total assets………………………………………………………………………………………………………………………………………..
\
3,138
$
28,846
Current liabilities………………………………………………………………………………………………………………………………………..
\
2,467
$
22,671
Non-current liabilities………………………………………………………………………………………………………………………………………..
98
904
Total liabilities………………………………………………………………………………………………………………………………………..
\
2,565
$
23,57530

21. Segment Information
Information about reported segment sales, segment profit, segment assets and other items under the new accounting standards is not disclosed as the Group's
reportable segment is mainly printed circuit boards (“PCB”), and the related business and other business are immaterial.
(Supplementary information)(1) Information about products and services
Information about products and services is not disclosed since the sales amount of a 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

2020
Millions of yen
Japan

Net sales .............................................................................................................................
\
35,174

China\

Vietnam\

34,642

12,747

Asia\

North America

17,225\

13,169Europe

\

2,522

Total

\

115,479$

1,061,292

2020
Thousands of U.S. dollars
Japan

Net sales .............................................................................................................................
$
323,256

China$

Vietnam

318,372$

117,153

Asia$

North America

158,300$

121,032

Europe$23,179Total

2019
Millions of yen
Japan

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

Vietnam\

40,593

12,168

Asia\

North America

19,092\

13,729Europe

\

2,901

Total

\

118,9112018
Millions of yen
Japan

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

China\

Vietnam\

38,86012,533

Asia\

North America

15,461\

12,091

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

2020
Millions of yen
Japan

China

Vietnam

Property, plant and equipment .............................................................................................................................
\
7,588
\
24,716\30,689

Other

\

Total

4

\

42

$

2

\

62,997

2020
Thousands of U.S. dollars
Japan

China

Vietnam

Property, plant and equipment .............................................................................................................................
$
69,739$227,142$

282,041

Other

$

Total

578,964

2019
Millions of yen
Japan

China

Vietnam

Property, plant and equipment .............................................................................................................................
\
7,886
\
27,710\22,956(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, 2020 is not disclosed as the Group's reportable segment issolely printed circuit boards (“PCB”) and the related business and other business are immaterial.
Information about impairment loss by reportable segment for the year ended March 31, 2019 is not disclosed as the Group's reportable segment ismainly printed circuit boards (“PCB”) and the related business and other business are immaterial.
Information about impairment loss by reportable segment for the year ended March 31, 2018 is not disclosed as the Group's reportable segment issolely printed circuit boards (“PCB”) and the related business and other business are immaterial.

31

Other

\

Total

58,554

Europe

\

2,954

Total

\

108,54222. Related Party Transactions
For the year ended March 31, 2020
Transactions with related parties(1) Unconsolidated subsidiary
There were no applicable matters for the year ended March 31, 2020.
(2) Directors and major individual shareholders

Name
M.D. Systems Co., Ltd.
※2

Location
Atsugi City,
Kanagawa

Capital\15 million

Details of business
Board design

Percentage forpossession of voting rights
Directly own (%)
14.7

Relationship
Businessrelationship

Details oftransaction ※3
Purchase of
products

Transaction
amount ※1\219 million($2,016 thousand)Sales of products\13 million($124 thousand)

Balance as at
March 31,2020
\24 million($218
thousand)in accounts
payable\3 million($23 thousand)in accounts
receivable

Notes: ※1 Consumption taxes are not included in the transaction amount, and included in the balance as at March 31, 2020.
※2 Seiichi Naya, a close relative of Yuichiro Naya, representative director and executive officer of the Company, directly owns 81.3% of voting rights in M. D. Systems Co., Ltd.
※3 The terms and conditions of the transactions for sales and purchase of products are determined through negotiations considering the market price, total costs and others.

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

Name
M.D. Systems Co., Ltd.
※2

Dapara Tech Co., Ltd. ※3

Location
Atsugi City,
Kanagawa

Seoul City,
South Korea

Capital\15 million₩50 million

Details of business
Board design

Sales ofboard and its
relatedfacilities

Percentage forpossession of voting rights
Directly own (%)
14.7

Directly own (%)-

Relationship
Businessrelationship

Businessrelationship/
Concurrent positionsof director

Transaction
amount ※1\11 million($98 thousand)Sales of products\4 million($33 thousand)\0 million($1 thousand)in accounts
receivable

Sales commission\340 million($3,124 thousand)\20 million($187
thousand)in otherpayableSales of products\131 million($1,202 thousand)\18 million($162
thousand)in accounts
receivable

Notes: ※1 Consumption taxes are not included in the transaction amount, and included in the balance as at March 31, 2020.
※2 Seiichi Naya, a close relative of Yuichiro Naya, representative director and executive officer of the Company, directly owns 81.3% of voting rights in M. D. Systems Co., Ltd.
※3 Yoon Ho Shin, director of the Company, directly owns 60.0% of voting rights in Dapara Tech Co., Ltd.
※4 The terms and conditions of the transactions for sales and purchase of products are determined through negotiations considering the market price, total costs and others.
The terms and conditions of the sales commission are determined through negotiations considering those with other companies.

32

Balance as at
March 31,2020
\1 million($11 thousand)in accounts
payableDetails oftransaction ※4
Purchase of
products

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

Name
M.D. Systems Co., Ltd.
※2

Location
Atsugi City,
Kanagawa

Capital\15 million

Details of business
Board design

Percentage forpossession of voting rights
Directly own (%)
14.7

Relationship
Businessrelationship

Details oftransaction ※3
Purchase of
products

Transaction
amount ※1\242 million

Sales of products\16 million

Balance as at
March 31,2019
\31 million
in accounts
payable\2 million
in accounts
receivable

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

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

Name
M.D. Systems Co., Ltd.
※2

Dapara Tech Co., Ltd. ※3

Location
Atsugi City,
Kanagawa

Seoul City,
South Korea

Capital\15 million₩50 million

Details of business
Board design

Sales ofboard and its
relatedfacilities

Percentage forpossession of voting rights
Directly own (%)
14.7

Directly own (%)-

Relationship
Businessrelationship

Businessrelationship/
Concurrent positionsof director

Transaction
amount ※1\16 million

Sales of products\5 million\0 million
in accounts
receivable

Sales commission\398 million\29 million
in otherpayableSales of products\74 million\9 million
in accounts
receivable

Notes: ※1 Consumption taxes are not included in the transaction amount, and included in the balance as at March 31, 2019.
※2 Seiichi Naya, a close relative of Yuichiro Naya, representative director and executive officer of the Company, directly owns 81.3% of voting rights in M. D. Systems Co., Ltd.
※3 Yoon Ho Shin, director of the Company, directly owns 60.0% of voting rights in Dapara Tech Co., Ltd.
※4 The terms and conditions of the transactions for sales and purchase of products are determined through negotiations considering the market price, total costs and others.
The terms and conditions of the sales commission are determined through negotiations considering those with other companies.

33

Balance as at
March 31,2019
\2 million
in accounts
payableDetails oftransaction ※4
Purchase of
products

34

35

36

Principal Subsidiaries and Affiliates

Principal
Business

Paid-in Capital

Investment
Ratio (%)

Name or Trade Name

Address

Meiko Tech Co., Ltd.

Ayase City,
Kanagawa Prefecture

45

PCBs forelectronics

100.0

Yamagata Meiko
Electronics Co., Ltd.

Kahoku-cho,Nishimurayama-gun,
Yamagata Prefecture

75

PCBs forelectronics

100.0

Meiko Techno Co.,Ltd.

Yokohama City,
Kanagawa Prefecture

50

PCBs forelectronics

100.0

Meiko Elec. HongKong. Co., Ltd.

Hong Kong

US$391,179
thousand

PCBs forelectronics

100.0

Meiko Electronics(Guangzhou Nansha)
Co., Ltd.

Guangzhou,
Guangdong Province,
P.R.C.

US$120,800
thousand

PCBs forelectronics

100.0

Meiko Electronics(Wuhan) Co., Ltd.

Wuhan,
Hubei Province,
P.R.C.

US$173,800
thousand

PCBs forelectronics

100.0

Meiko Electronics
America, Inc.

CA, U.S.A.

US$1,500
thousand

PCBs forelectronics

100.0

Meiko Electronics
Vietnam Co., Ltd.

Hanoi, Vietnam

US$90,000
thousand

PCBs forelectronics

Meiko Electronics
Thang Long Co., Ltd.

Hanoi, Vietnam

US$15,000
thousand

PCBs forelectronics

100.0

Meiko Towada
Vietnam Co., Ltd.

Hai Duong Province,

US$21,000
thousand

PCBs forelectronics

60.0(Millions of yen)

Vietnam37(66.3)(40.7)

100.0(100.0)Principal Shareholders

Number of
Shares Held

Name of Shareholder(Thousands of shares)

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

Yuichiro Naya

4,703

17.97

Japan Trustee Services Bank, Ltd.

2,650

10.12

1,114

4.26

1,080

4.13

684

2.62

Meiko Kosan Co., Ltd.

608

2.32

Trust & Custody Services Bank, Ltd.

551

2.11

Yuho, Ltd.

521

1.99

STATE STREET BANK AND TRUST COMPANY
505019

484

1.85

435

1.66

12,83249.03(trust account)
The Master Trust Bank of Japan, Ltd.
(trust account)
BNP PARIBAS SECURITIES SERVICESLUXEMBOURG/JASDEC/FIM/LUXEMBOURG
FUNDS/UCITS ASSETS(Standing Agent: Custody Department, Tokyo
Branch, The Hongkong and Shanghai Banking
Corporation Limited)
JP MORGAN CHASE BANK 385632(Standing Agent: Mizuho Bank, Ltd. Settlement &Clearing Services Department)(securities investment trust account)(Standing Agent: Custody Department, Tokyo
Branch, The Hongkong and Shanghai Banking
Corporation Limited)
Seiichi Naya
Total

38

Corporate History

November 1975

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

April 1978

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

October 1978

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

September 1980

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

December 1980

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

December 1981

Developed the world’s first multi-video processor.

March 1982

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

September 1982

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

August 1984

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

June 1990

Constructed the Fukushima Factory.

April 1991

Changed company name to Meiko Electronics Co., Ltd.

November 1997

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

August 1998

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

December 1998

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

June 1999

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

December 2000

Stock listed on the Japan Securities Dealers Association.

January 2001

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

December 2004

Stock listed on JASDAQ Securities Exchange, Inc.

July 2005

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

November 2005

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

39

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.

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.

November 2019

Acquired equity interests in EMS (Electronic Manufacturing Services) in
Vietnam and turned it into a subsidiary (currently consolidated subsidiary),
Meiko Towada Vietnam Co., Ltd.

40

Corporate Data (As of March 31, 2020)

Corporate Name:
Meiko Electronics Co., Ltd.
Date of Establishment:
November 25, 1975
Paid-in Capital:¥12,888 million
Fiscal Year:
April 1 to March 31
Number of Shares Authorized:
70,000,000
Number of Shares Issued:
26,803,320
Number of Shareholders:
4,504
Securities Code:
6787
Stock Exchange Listing:Tokyo Stock Exchange, JASDAQ standard market
Number of Employees:
12,232 (Consolidated)
Number of Subsidiaries:
22
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: https://www.meiko-elec.com/

41

Meiko Share Performance in FY2020 Compared with Indices160.0
Meiko Electronics (JASDAQ: 6787)
140.0

JASDAQ INDEX

120.0

100.0

80.0

60.0

40.0

Fiscal year ended March 31, 2020
Index
In %

42

43