SEMI ANNUAL REPORT2016

For the six months ended September 30, 2016

Connection
SystemDivisionHigh Speed Data Connectors（Right Angle Type）

Functional
Components
Division

Research &Development
CenterBluetooth® Smart-supported
Standard Voice
Remote Control

Bluetooth® Smart Module“BTS04 Series”“CapSleek Touch”
Capacitive Touch Panelwith a Curved Surface

LGM Card

Touch Panel
Division

SMK CORPORATION

Financial Highlights

SMK Corporation and Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen
Six months ended September 30
2015

Six months ended September 30
2016

Six months ended September 30
2016¥39,315
2,572¥ 31,708
747$ 313,568
7,387

2,077

(1,079)(10,670)

As of March 31
2016

As of September 30
2016

As of September 30
2016¥67,606
33,287¥ 65,255
28,676$ 645,322
283,584

Six months ended September 30
2016

Six months ended September 30
2016

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

Financial Position
Total assets
Total net assets

Yen
Six months ended September 30
2015

U.S. dollars

Per Share Data
Profit (loss) attributable toowners of parent
Basic
Diluted¥  (15.87)
ー¥29.18¥29.13(0.16)ー$

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ￥101.12 = U.S. $1.00.

Net sales■ Full year

■ ■ First half

Millions of yen

90,00066,23030,00026,829■ ■ First half

39,31531,70832,171Millions of yen
4,171

3,000

60,000 54,475

34,881■ Full year
4,500

77,206
65,796

Profit (loss) attributable toowners of parent

Operating income (loss)

2,330
1,988

3,000

2013

2014

2015

2016
Mar.

2016
Sep.

(1,500)

747

(327)

2013

Basic profit (loss) attributable toowners of parent per share■ Full year

■ First half

yen

(198)

(1,000)

2014

2015

■ First half

37.94

35.58

30

15

(2.78)

2013

2014

1 SEMI ANNUAL REPORT 2016

2015

2016
Mar.

(15.87)2016
Sep.

(2,000)(1,079)(1,782)2013■ Full year ■ First half

67,60665,25556,23530,00020,00020,00010,000

2013

2014

2015

2015

2016
Mar.

2016
Sep.

Total net assets

40,0000

2014

40,00060,000 52,498

27.61

(15)

2016
Sep.

Millions of yen

65,029

0

2016
Mar.

80,000

45

2,077

0

Total assets■ Full year

1,982
1,678

1,000

(853)
0

Millions of yen
2,678

2,541
1,893

2,000

2,572

1,125

1,500

0

2,113

■ Full year ■ ■ First half

2016
Mar.

2016
Sep.

0

28,2042013

31,476

2014

Millions of yen
34,18733,28728,676

2015

2016
Mar.

2016
Sep.

To Our Shareholders and Investors

We are obliged to you for your continued
support and good patronage.
We would like to report on the outline andresults of the SMK Groupʼs businesses for the
first half of the 95th fiscal year (from April 1,2016 to September 30, 2016).
We look forward to your continuing supportand encouragement.
November 2016
Yasumitsu Ikeda
President, CEO and COO

Performance Overview
During the first half of the 95th fiscal year ended September 30, 2016, uncertainty further intensified in
the environment surrounding the global economy mainly due to the U.K.ʼs exit from the European Union,
the slowdown of the Chinese economy and increased geopolitical risk. The U.S. economy maintained amoderate recovery path despite failing to eradicate the concern of an economic slowdown under such an
unstable environment. The Japanese economy showed sluggish growth due to the yen appreciation andstagnant consumer spending.
Under these circumstances, despite favorable sales growth in products such as connectors and camera
modules for safety driving-related rearview cameras, the SMK group recorded the year-on-year decrease ofsales in the whole car electronics market, its mainstay market, due to the sluggish sales of touch panels
resulting from effects of customers’ inventory adjustments. In addition, sales of connectors for smartphones
for North America and the Chinese region and remote control units for set-top boxes for the U.S. market
were sluggish due to the impact of our customers’ production cutbacks. On the other hand, sales ofconnectors for the healthcare market continued to expand.
Due to the abovementioned results in addition to impact of yen appreciation, the SMK Group recorded
year-on-year decreases both in net sales and profit for the first half of the fiscal year ended September
30, 2016. Reflecting these circumstances comprehensively, we decided to pay an interim dividend of ¥5
per share.
Going forward, the SMK Group will strive to increase sales in its mainstay car electronics,
smartphone, set-top box and healthcare markets, as well as in new markets such as wearable devices,
IoT and VR. Aiming to create new businesses by exploring startup companies and via businesscollaborations, we will also aggressively promote open innovation. Furthermore, the SMK Group will
strive for quality enhancement by promoting “front-loading product development”, the method tofacilitate early solutions of issues in the initial phase of new product development by collaboration
among related divisions, such as quality control, design and production and make all-out companywide efforts to improve business performance.
SEMI ANNUAL REPORT 2016 2

Overview of Consolidated Results by Division(April 1, 2016 to September 30, 2016)

Touch Panel Division

Others¥5,834 Million
18.4%¥87 Million
0.3%

Net sales¥ 31,708
MillionConnection System
Division¥11,461 Million
36.1%

Functional Components
Division¥14,326 Million
45.2%*Others: businesses of other electronic parts, lease, real-estate rental, factoring and worker dispatching undertakings.

Connection System Division
In our mainstay communication market, sales of connectors
for smartphones were sluggish due to our customers’
production cutbacks in North America and intensifiedcompetition among our customers in the Chinese region. In
the car electronics market, against a backdrop of acceleratingHigh Performance Pogo Terminal
Applications:
Smartphones, Wearable Devices,
Automotive Electronic Equipment ,etc.

development of car electronics, sales of safety driving-related
connectors expanded steadily centered on those for rearview
cameras. In the healthcare market in which our efforts to finda new market led to the adoption of our new connectors, sales

Major Products● Coaxial Connectors● Board to Board Connectors● FPC Connectors● Jacks

3 SEMI ANNUAL REPORT 2016

continued in a favorable trend, resulting in a significant
increase from the previous fiscal year. On the other hand, inthe ecological market, sales of connectors for photovoltaic
modules dropped compared to the previous fiscal year due tochanges in market conditions.

Functional Components Division
Sales of remote control units, our mainstay products, grewsignificantly for sanitary goods and medical equipment inJapan. However, sales of the products for set-top boxes forsatellite broadcasting in the U. S. dropped year on year due tothe impact of a decrease in the volume resulting from theBluetooth® Smart-enabled
IR blaster
Applications:Home Equipment,
Home Appliances, etc.

delay in the launch of new products by our customers.
Sales of units dropped year on year with the impact of ourcustomers' cutbacks in production of units for homeequipment in the U.S., although sales of automotive camera

Major Products● Remote Control Units● Wireless Device Units● Switches

modules with high future potential are expanding steadily byacquiring new orders. On the other hand, sales of switches
increased significantly year on year by acquiring new orders
for small switches in the smartphone market.

● Camera Modules

Touch Panel Division
Sales of touch panels for car navigation systems and forautomotive center consoles, which are our mainstay products,
decreased compared to the previous fiscal year with theimpact of the production adjustments by some of ourcustomers in North America, South Korea and Taiwan.
However, sales of the products for the Chinese market“Wing Touch MM”
Capacitive Touch Panel
Applications:
Factory Automated (FA) Equipment,
Office Equipment, POS,
Digital Signage Equipment, etc.

increased. Sales of touch panels, except for the car electronics
market, increased year on year by acquiring new orders in theindustrial machinery and medical equipment markets.

Major Products● Resistive Touch Panels● Capacitive Touch Panels● Optical Touch Panels

SEMI ANNUAL REPORT 2016 4

Topics

Introduction of new Directors and Auditor
June 22, 2016, 94th General Meeting of Stockholders was held at Gate City Hall, Gate City Ohsaki.
We introduce 2 new directors and 1 new auditor elected this time.

Director andExecutive
Vice President

Director

Toshio Nakamura

Paul Evans

Born in July 22, 1946

Born in November 22, 1961

I, Paul Evans, have contributed to the sales

I, Toshio Nakamura, have assumed important

promotion of products in the Europe andposts that contribute to commercial andAmerica Regions since joining SMK in 1984.

industrial revitalization for many years including

Our overseas production ratio is more than 70%

Director-General of Bureau of trade of theand overseas sales ratio is more than 80%, so

Ministry of International Trade and Industry andoverseas business has become more and more

Director-General of the Small and Medium

important in our company.

Enterprise Agency. As an Outside Director, I

I have a global viewpoint and will discharge myintend to utilize my extensive experience andduties accordingly.

knowledge that I gained over the years for SMKʼs
overall management.

Biography

Biography
October 1984
October 1986
April 2000
June 2006
June 2010
April 2012

Joined SMK as a "Management
Trainee" in Japan
Joined SMK Electronics (Europe) Ltd.
President of SMK Electronics
Corporation U.S.A. (until today)
Corporate Vice President, Person
in charge of America region
Corporate Executive Vice President
President of SMK Electronics(Europe) Ltd. (until today)
Person in charge of Europe andAmerica regions (until today)

April 1970
September 1999
June 2000
October 2003
November 2007

June 2011
March 2016

5 SEMI ANNUAL REPORT 2016

Joined the Ministry of International
Trade and Industry
Director-General of
Bureau of Trade
Director-General of the Small andMedium Enterprise Agency
Secretary-General of theJapan Association for the2005 World Exposition
President of the Japan Chamber ofCommerce and Industry andPresident of the Tokyo Chamber ofCommerce and Industry
Outside Director of NGKINSULATORS, LTD. (until today)
Chairman of National Associationof Trade Promotion for Small andMedium Enterprises (until today)Publication of“90 Years of SMK”

In April 2016, wepublished “90 Years of
SMK” as part of our 90th
anniversary project. As
past publications about
SMKʼs corporate history,“50 Years of SMK” wasAuditorMorikazu Fukui
Born in August 20, 1955

published in 1975,
followed by the
publication of “60 Years of

Front Cover ofJapanese Edition

SMK” and “80 Years of SMK.” This year, weselected important past episodes of SMK and
I, Morikazu Fukui, have gained extensive

compiled “Development of SMKʼs Business:Part1”

knowledge and experience through my service

which is about 60 years history of SMK from theat financial institutions. As an Outside Auditor, I

foundation of Ikeda Musen Denki Seisakujo andintend to conduct audits from an objective

the establishment of Showa Musen Kogyo

perspective utilizing my specialized skills.

Co.,Ltd. to the change of the company name to
SMK Corporation, and“ Development of SMKʼs
Business:Part2” which covers the following 30
years including the expansion of businessoverseas and transnational management amid aradically changing management environment.

Biography
April 1978
June 2001
October 2006
June 2011

Joined the Industrial Bank ofJapan, Limited ( “IBJ” )Deputy General Manager of theTokyo Sales Department I, IBJ
President of DLIBJ AssetManagement International Ltd.
Auditor of Mizuho Private WealthManagement Co., Ltd.

Round Table Talk

SMK Technologies

English Edition

Also included are “Round Table Talk” by young
managers, who will play important roles in SMK’s future (included in only Japanese edition), and“SMK Technologies ” which summarizes thehistorical changes in SMKʼs mainstay products
and technologies. In September 2016, wereconstructed “90 Years of SMK” and publishedits first English and Chinese editions.
SEMI ANNUAL REPORT 2016 6

Consolidated Balance Sheets

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

Millions of yen
As of March 31

As of September 30

As of September 30¥10,668¥11,003$108,811

110

100

989

16,50916,546

163,627

(47)

(46)

(455)

7,187

6,871

67,949Deferred tax assets

657

423

4,183

Other current assets

3,282

2,049

20,26338,36836,948365,388

2,406

2,247

22,221Long-term loans receivable

96

93

920

Asset for retirement benefits

541

525

5,192

Other investments

593

584

5,775

Allowance for doubtful accounts

(60)

(60)

(593)

3,577

3,391

33,534

Land

7,426

7,377

72,953

Buildings

21,544

21,174

209,395

Machinery and vehicles

21,181

20,353201,276

Tooling and office furniture

23,492

23,320230,617

213

313

3,095

73,85872,539717,356(50,946)(50,157)(496,015)

22,912

22,382

221,341

Deferred tax assets

216

189

1,869

Goodwill

380

348

3,441

2,151

1,995

19,729

2,748

2,533

25,049¥67,606¥65,255$645,322

Assets

2016

2016

2016

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

Investments and long-term loans
Investment securities

Property, plant and equipment

Construction in progressLess-accumulated depreciation
Other assets

Intangible assets

Total assets

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ￥101.12 = U.S. $1.00.
7 SEMI ANNUAL REPORT 2016

Thousands of
U.S. dollars

Millions of yen
As of March 31

As of September 30

As of September 30¥12,287¥17,637$174,417

4,808

5,822

57,575

Accrued income taxes

489

437

4,322

Accrued bonuses

966

713

7,051

Accrued directors’ and officers’ bonuses

75

ー

ー

Accounts payable, non-trade

6,245

3,500

34,612Other current liabilities

1,793

1,761

17,415

26,66629,873

295,421Long-term debt

5,258

4,709

46,568Deferred tax liabilities

1,121

776

7,674

Accrued directors' and officers' retirement benefits

188

199

1,968

Liability for retirement benefits

49

45

445

1,033

973

9,622

7,651

6,705

66,307

7,996

7,996

79,074

Capital surplus

12,30912,057

119,235

Retained earnings

18,14914,848146,835

Treasury stock(4,353)(3,991)(39,468)

34,10230,910305,676

176

123

1,216

(1,506)(2,770)(27,393)

223

168

1,661

(1,106)(2,477)(24,496)

Share subscription rights

25

ー

ー

Non-controlling interests

266

243

2,403

33,28728,676

283,584¥67,606¥65,255$645,322

Liabilities and net assets

2016

2016

2016

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

Other long-term liabilities

Net assets
Shareholders' equity
Common stock
Authorized : 195,961,274 shares
Issued :79,000,000 shares as of March 31 2016
75,000,000 shares as of September 30 2016

Accumulated other comprehensive income
Net unrealized gains (losses) on other securities
Foreign currency translation adjustments
Retirement benefits asset and liability adjustments

Total liabilities and net assets

SEMI ANNUAL REPORT 2016 8

Consolidated Statements of Income
SMK Corporation and Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen
Six months ended
September 30

Six months ended
September 30

Six months ended
September 30¥39,315
31,585
5,157
2,572¥31,708
26,0364,924
747$313,568
257,476
48,695
7,387

Other income
Interest and dividend income
Rent income
Gain on sales of fixed assets
Gain on sales of investment securities
Gain on reversal of share subscription rights
Other
Total other income

55
633
112
107
0
161
1,070

45
624
40
31
20
198
961

445
6,171
396
307
198
1,958
9,504

Other expenses
Interest expense
Rent expense
Foreign exchange loss, net
Loss on disposal of fixed assets
Loss on liquidation of subsidiaries and affiliates
Other
Total other expenses

53
283
95
182
191
91
897

67
297
2,021
136

663
2,937
19,986
1,345

80
2,603

791
25,742

2,745

(895)

(8,851)

628
64
2,053
(23)
¥ 2,077

274(67)(1,102)(22)¥(1,079)

2,710
(663)
(10,898)(218)$(10,670）

2015

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

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

2016

2016

ー

ー

Yen

Per share data
Profit (loss) attributable to owners of parent
Basic
Diluted¥ 29.18
29.13

U.S. dollars¥(15.87)$ (0.16)

ーー

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ￥101.12 = U.S. $1.00.

Consolidated Statements of Comprehensive Income
SMK Corporation and Consolidated Subsidiaries

Millions of yen
Six months ended
September 30

2015

Profit (loss)
Other comprehensive income
Net unrealized gains (losses) on other securities
Foreign currency translation adjustments
Retirement benefits asset and liability adjustments
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests
9 SEMI ANNUAL REPORT 2016

Six months ended
September 30

2016

Thousands of
U.S. dollars
Six months ended
September 30

2016¥ 2,053¥（1,102）$（10,898）

(197)
(188)
(63)
(448)
¥1,604(53)(1,263)(54)(1,371)¥(2,473）(524)(12,490)(534)(13,558)$
（24,456）¥1,628¥
（2,451）(22)$
（24,239）
(218)

(23)

Consolidated Statements of Cash FlowsSMK Corporation and Consolidated Subsidiaries

Thousands of
U.S. dollars

Millions of yen
Six months ended
September 30

Six months ended
September 30

Six months ended
September 30¥ 2,745
1,847
32
(116)
19
(307)
(55)
53
182
191
(2,248)
(891)
1,364
9
110
74
3,012
47
(49)
(559)
2,451

¥ (895)
2,136
52
(246)
11
(69)
(45)
67
136
ー
(2,106)
(314)
3,321
880
(2,399)
60
588
46
(62)
(328)
243

$ (8,851)
21,123514(2,433)
109
(682)
(445)
663
1,345
ー
(20,827)(3,105)32,842
8,703(23,724)
593
5,815
455
(613)
(3,244)
2,403

(48)
120
(1,744)145(1,467)(44)
40(2,480)
159
(134)

123
(65)
27
(2,908)50(25)
24(2,434)(435)
396(24,525)
1,572(1,325)
(247)
494
(247)
237
(24,070)

5,100
600(1,392)
(998)
25
352
(645)
3,041
(79)
2,505
9,999
¥12,505

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

53,352
7,911(13,786)(15,576)237
ー(5,528)26,602(1,622)
3,313
105,498$108,811

2015

Cash flows from operating activities
Profit (loss) before income taxes
Depreciation and amortization
Amortization of goodwill
Increase (decrease) in accrued bonuses
Increase (decrease) in accrued directors' and officers' retirement benefits
Increase (decrease) in asset and liability for retirement benefits
Interest and dividend income
Interest expense
Loss on disposal of fixed assets
Loss on liquidation of subsidiaries and affiliates(Increase) decrease in notes and accounts receivable, trade(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable, trade
Increase (decrease) in accounts receivable, non-trade
Increase (decrease) in accounts payable, non-trade
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from time deposits
Purchases of fixed assets
Proceeds from sale of fixed assets
Purchases of intangible fixed assets
Purchases of investment securities
Proceeds from sale of investment securities
Payment for execution of loans
Collection of loans receivable
Net cash provided by (used in) investing activities
Cash flows from financing activities
Increase (decrease) in short-term loans payable
Proceeds from long-term debt
Payments of long-term debt
Purchases of treasury stock
Proceeds from sales of treasury stock
Proceeds from non-controlling shareholders
Dividends paid
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of six months and the year

ー

2016

2016

(25)

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ￥101.12 = U.S. $1.00.
SEMI ANNUAL REPORT 2016 10

Corporate Information(As of September 30, 2016)

Corporate Data
Name

Shares and Shareholders
SMK Corporation

Established

April 3, 1925

Registered

January 15, 1929

Primary business

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

Authorized shares

195,961,274

Issued shares

75,000,000

Number of shareholders
Major shareholders (top ten)

7,922
Shares owned
Percentage(1,000 shares) of shares (%)

Mizuho Bank, Ltd.

3,287

4.96

Nippon Life Insurance Company

3,241

4.89

Dai Nippon Printing Co., Ltd.

3,200

4.82

Capital¥7,996,828,021

Stock exchange listing

Tokyo Stock Exchange

SMK Cooperating Company Share
Holding Association

3,105

4.68

Administrator ofshareholders register

Mitsubishi UFJ Trust and Banking
Corporation

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

2,508

3.78

Independent auditors

Ernst & Young ShinNihon LLC
Tokyo, JapanThe Master Trust Bank of Japan, Ltd.
(Trust Account)

2,247

3.39

Employees (SMK-Group)

6,457

SMK Employees Share Holding
Association

1,820

2.74

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

Mitsubishi UFJ Trust and Banking
Corporation

1,800

2.71

Showa Ikeda Memorial Foundation

1,500

2.26

Terutaka Ikeda

1,420

2.14

Note: SMK holds 8,738 thousand shares of treasury stock, but these areexcluded from the above list. Figures for percentage of shares arecalculated excluding the treasury stock.

Officer Introduction
Corporate Executive Officers

Directors
President,Chief Executive Officer andChief Operating Officer

Yasumitsu Ikeda

Executive Vice President, Chief Financial Officer

Kohei Ohgaki

Director and Executive Deputy President

Yoshio Sakurai

Executive Vice President

Shigechika Yanagi

Director and Executive Vice President,
Chief Technology Officer

Yoshiyuki Kaku

Vice President

Hideo Matsumoto

Director and Executive Vice President

Mikio Wakabayashi

Vice President

Hiroshi Miyakawa

Director and Executive Vice President

Paul Evans

Vice President

Takemi Ishibashi

Director

Toshio Nakamura

Vice President

Harutaka Seki

Vice President

Masanobu Ikeo

Vice President

Mitsuhiko Goto

Auditors
Auditor and Chairman of Auditors Meeting

Tetsuya Nakamura

Vice President

Tetsuo Hara

AuditorNaru Nakashima

Vice President

Mitsuyuki Masubuchi

AuditorIchiro Shimizu

Vice President, Chief Information Officer

Hiroshi Usami

AuditorMorikazu Fukui＊ The Bluetooth® word mark and logos are registered trademarks owned by Bluetooth SIG, Inc. and any use of such marks by SMK Corporation is under license.

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

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