ANNUAL REPORT2016

For the ﬁscal year ended March 31, 2016
Connection
SystemDivision

SMB Coaxial Connector(FAKRA)

Functional
Components
Division

Research &Development
CenterSmall Coaxial
Camera Module”BTS01 Series”
Bluetooth®
Smart Module

Full-Flat Structure Resistive
Touch Panel with
Force Feedback

LGM Card

Touch Panel
Division

SMK CORPORATION

Financial Highlights

To Our Shareholders
We are obliged to you for your continued support and good patronage.
We would like to report on the outline and results of the SMK

Years ended and as of March 31

2016¥ 66,230¥ 77,206

Operating income

2,113

4,171

97.4

37,016

Profit attributable to owners of parent

1,982

2,678

35.1

23,766¥ 65,029¥ 67,606

4.0 %$ 599,982

34,18733,287(2.6)

295,412

Operating Results

March 31, 2016).

Net sales

June 2016
Yasumitsu Ikeda
President and CEO/COO

During the fiscal year ended March 31, 2016, although the global economy maintained a moderate recovery

Total net assets

path led by the favorable U.S. economy, the gradual economic expansion in the second half of the year wassigns of instability in its growth.
The SMK Group achieved strong sales of products such as touch panels for car navigation systems and center
consoles, as well as connectors for rearview cameras, in the car electronics market we focus on. Moreover, due
to business expansion with our customers in the U.S. and the Chinese regions, sales of remote control units forinternet protocol, as well as for over-the-top set-top boxes, have increased significantly.
As a result, the SMK Group saw increases both in net sales and operating income for the fiscal year ended
March 31, 2016. Therefore, we set the annual dividend for the fiscal year at ¥14 per share, including a

16.6 %$685,179

Yen

negatively affected by the slowdown of the Chinese economy and the decline of oil prices. The Japanese
economy, also affected by the above factors, as well as the rapid appreciation of the yen as 2016 started, saw

2016

Financial Position
Total assets

Performance Overview

Thousands of
U.S. dollars

2015Group’s businesses for the 94th fiscal year (from April 1, 2015, toWe look forward to your continuing support and encouragement.

Percent change
2015/2016

Millions of yen

U.S. dollars

Per Share Data
Profit attributable to owners of parent¥ 27.61¥37.94

Diluted

27.56

37.86

37.4

0.34

Cash dividends

14.00

14.00

ー

0.12

Basic

37.4 %$0.34

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥112.68 = U.S. $1.00.

commemorative dividend for the SMK Group’s 90th anniversary of ¥4 per share.

Towards a Company that can Grow Sustainably

As for the outlook for the next fiscal year, the SMK Group will continue to seek share expansion in its mainstay
markets, including car electronics, information and communication, and distribution services for video, music,

Net sales
Millions of yen
90,0004,500

65,79660,00055,3403,000

54,475

1
2
4
5
6
7
8
10
10
11
12
13
28
29
back cover

SMK Philosophy
To Our Shareholders
Financial Highlights
Overview of Consolidated Results by Division
SMK’s New Lineup
TopicsFinancial Section
Financial Review
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Net Assets
Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors
Officer Introduction
Corporate Information

SMK is committed to the advancement of mankind throughdevelopment of the information society, by integrating its current
technological strengths and creating advanced technology.

2,330

2,113

1,000

0

0

30,000(1,166)
0

2012

2013

2014

2015

2016

Total assets / Total net assets
Millions of yen

2012

2013

80,0002014

2015

60,000 53,883

52,498Contribute to society with pride and confidence.
Be customer-oriented, with zeal and sincerity.
Challenge courageously for higher goals without fear of failure.
Trust and respect each other for a brighter working atmosphere.
Keep an open mind, and view SMK from a global perspective.

40,00028,25728,204(1,000)

2012

2013

2014

2015

2016

Cash dividends per shareYen

45
65,0292016

Basic profit (loss) attributable to owners of parent per share

37.94

35.58

67,60656,235

(198)
(799)

Yen

Total net assets

Total assets(1,500)

(853)

15

27.61

30

14.00

14.00

2015

2016

10.00
10

SMK Action Guidelines

1
2
3
4
5

2,678

2,541

2,000

1,500

line with the SMK Vision “Challenge, Creativity, Solutions”, predict changes, turn them into chances, and make

CONTENTS

3,000

1,982

66,230through holding Mini-TEXPO for individual customers in and outside Japan.

all-out efforts to build a company that is capable of growing sustainably.

Millions of yen
4,171

77,206in November, 2015, which we will follow up, alongside creating businesses with new technology and solutions
Although the instable business environment is expected to persist, all employees strive to achieve targets, in

Profit (loss) attributable to owners of parent

Millions of yengames, etc., while focusing on new markets such as ecology, energy, healthcare, wearable devices, and Internetof Things (IoT). Moreover, we received many business inquiries at “TEXPO2015,” our technology exposition held

Operating income (loss)

31,47634,18733,287

15

6.00
5.00
5

20,0000(2.78)(11.04)

0

2012

2013

2014

2015

2016

(15)

2012

2013

2014

2015

2016

0

2012

2013

2014

ANNUAL REPORT 2016 1

Overview of Consolidated Results by Division(Year ended March 31, 2016)

The many different electronic components that SMK produces are widelyused by electronics manufacturers in and outside Japan. The markets forthese components can be broadly classified into five markets:
Communication Market, Information Market, Home Appliance Market, Car
Electronics Market and Audio Visual Market.
Three divisions, namely the Connection System (CS) Division, theFunctional Components (FC) Division and the Touch Panel (TP) Division, as
well as the Research & Development Center, are responsible for developing
products that continually meet market requirements in the wide range ofmarkets outlined above. The three divisions handle operations ranging fromproduct planning and design to mass production, whereas the Research &Development Center is primarily in charge of designing and developing
products mainly in new fields.
In this section, we present an overview of our results achieved in eachof the three divisions in the fiscal year under review.

Sales by Division
Touch Panel
Division¥ 14,467 Million

Others¥ 195 Million

18.7%¥ 35,449 Million

In our mainstay communication market, sales for connectors were strong, despite

Net sales / Operating income

connectors for smartphones whose sales decreased drastically during the fourth

30,000quarter of the fiscal year. This was mainly due to customers in North America andMillion

35.1%

45.9%

20,000other hand, due to changes in the ecological market, sales of connectors for

2,000

1,403

photovoltaic modules dropped compared to the previous fiscal year. As a result ofMajor Products
Coaxial Connectors
Board to Board Connectors
FPC Connectors
Jacks

Functional
Components Divisiondeveloping new markets, a new connector was adopted in markets related to921

10,0001,000

healthcare, which led to a significant rise in its sales.
As a result, net sales of the Connection System Division amounted to ¥27,095
million, or a 4.6% increase year on year. Operating income was ¥2,215 million, a140.5% increase year on year.

0

2014

2015

2016

Sales of remote control units, our mainstay products, expanded significantly, with

Net sales / Operating income (loss)

remote control units for overseas Internet Protocol that offer movies, music and40,000game playing, as well as over-the-top set-top boxes, being particularly successful
business in the Chinese region. Sales of housing equipment, such as home

22,4380Millions of yen
4,000

35,449with U.S. customers. Moreover, sales further expanded with the commencement ofConnection
SystemDivision¥ 27,095 Million

2,215

marketing them as safety driving products with significantly rising demand. On theappliances, with a focus on air conditioners, and sanitary products expanded¥ 77,206

25,901

27,095

employment of our products as standard connectors. In the car electronics market
we are focusing on, we expanded sales of mainly connectors for rearview cameras,

Millions of yen
3,000

27,416China who are increasingly adopting our new products and promoting the

0.3%

Net sales

Functional
Components
Division

Connection System
Division

25,02720,0002,000

significantly due to sales from new customers, as well as an increase in the market
share. For units, in addition to automotive camera modules and capacitance multi370

touch pad for automotive applications, products for housing equipment were also
Major Products
Remote Control Units
Wireless Device Units
Switches
Camera Modules

successful. Furthermore, sales of small switches for smartphones and the car00electronics market also increased significantly year on year.
As a result, net sales of the Functional Components Division amounted to

(963)

(723)

¥35,449 million, or a 41.6% increase year on year. Operating income was ¥370
million (compared to an operating loss of ¥723 million in the previous fiscal year).

(20,000)

2014

2015

2016

(2,000)

Others: businesses of other electronic parts, lease, real-estate rental, factoring andworker dispatching undertakings.

Sales by Market
Communication¥ 14,662 Million

Others¥ 2,100 Million

2.7%

Audio Visual¥ 18,446 Million

Car Electronics¥ 21,178 Million

19.0%

23.9%

Net sales¥ 77,206

6.2%

27.4%

4,000

15,80815,00015,184

14,4673,000

production adjustments of some customers in the Chinese region, Korea andTaiwan, as well as adjustments made as a result of the economic situation in the
ASEAN market. Moreover, due to a tough price competition, sales of touch panels

Home
Appliance¥ 16,034 Million

Millions of yen

Sales of our mainstay products for the car electronics market decreased despite
maintained at a high level by North American customers. This is mainly due toMillion

20.8%

Net sales / Operating income
20,000sales of touch panels for car navigation systems and center consoles being

Information¥ 4,783 Million

Others: markets of Medical Equipment, Rehabilitation Equipment, Industrial Robot, NC Machine,
Electrical Measuring Equipment, etc.

2 ANNUAL REPORT 2016

Touch Panel
Division

10,000

1,866

1,909

1,838

2,000

for ATMs in the Chinese region declined year on year.
As a result, net sales of the Touch Panel Division amounted to ¥14,467 million,
Major Products
Resistive Touch Panels
Capacitive Touch Panels
Optical Touch Panels

or a 4.7% decrease year on year. Operating income was ¥1,838 million, or a

5,000

1,000

3.7% decrease year on year.
0

2014

2015

2016

0

ANNUAL REPORT 2016 3

SMK’s New Lineup

TopicsResearch & Development Center
Piezoelectric Seamless
Touch Switch
This product utilizes the piezoelectric effect thatgenerates a weak electric charge by bending thepiezoelectric element with the pressure when it ispushed. The surface of the switches can be madefrom different materials, including metal, resin orwood, and the look and feel of these materials are
retained. Moreover, since it utilizes physical pressure,the product can be operated accurately even undersituations with various interference. Going forward,
we will work to expand the business bycommercializing a piezoelectric seamless touch
switch supposed to suit more uses.

Applications:Home Appliances, AV Devices,
Housing Equipment,
Medical Equipment, etc.

FC Division
ECHONETLiteTM
Wired LAN Adaptor
This product is a wired LAN adaptor compatible with
ECHONETLiteTM, a product that allows the easy
construction of a network by connecting home
appliances or domestic products such as boilers, airconditioners, and door keys. Utilizing various interfaces
such as UART and RS-232C, this product is made forHome IoT connecting home appliances and housing
equipment from different manufacturers. Since theconnection is made using sockets and switch boxes
commonly found on the market, cables are hidden fromsight. We have started to receive orders and organize
sales activities, branding it as a product that cancontribute to the future IoT society.

CS Division
FPC to Board Connectors“FB-8 Series” for Battery Connection
We have newly developed this battery connector in
response to the need for the miniaturization and highelectric currents of smartphones and tablets.
Categorized as having the lowest profile and thesmallest in the industry, this product boasts a matedheight of 0.6 mm, and has dimensions of width 2.3
mm x height 4.35 mm. At the same time, the rated
current of its power terminal is set to 8A, an
extremely high current, which allows for a productthat is thin and high current to charge quickly.

4 ANNUAL REPORT 2016

November 4 to 6, 2015, our technology exposition, “TEXPO2015,” was held at GardenCity
SHINAGAWA, in Tokyo. This was the 9th TEXPO since the 1st in 1985, and with thetheme “Creative Connectivity.” We exhibited approximately 260 new products, newtechnologies, and technologies for the near future. Products that allowed visitors to try
out and product demonstrations were especially popular, therefore, “TEXPO2015”
attracted a total of 2,538 visitors, surpassing last time’s count.

Network Zone
We showcased our new
products to connect“people, things andinformation” for smart
house and the IoT
market, to realized“comfortable lifestyle.”

Applications:
Connect with Internal Batteries
in Mobile Devices(Smartphones, Tablets)

Service Gateway

TP Division“CapSleek TouchTM” Capacitive
Touch Panel with a Curved Surface
Demand for touch panels with a curved surface has
been rising due to the enhancement of designs ofautomotive instrument panels. To respond to thesemarket demands, we have developed “CapSleek
TouchTM,” a capacitive touch panel with a curved
surface. This product, receiving mainly positive
reviews from the market, achieves its curved surface
by utilizing a film sensor, while special molding
technology is used in manufacturing its operating
cover panel. Moreover, its design is further enhancedwith various decorative technologies.
*CapSleek TouchTM is currently undergoing trademark registration in Japan.

*ECHONETLite™ is a trademark of ECHONET CONSORTIUM.

Applications:Control and Cloud Managementof Home Appliances and Housing
Equipment

T E X PO2 0 1 5

Applications:
Automotive Center Consoles

Small Component Zone
Small Components for
Wearable Devices

Human Interface Zone
Module for Active Mirror
with Air Gesture

RF/High Speed
Transmission Zone
USB Type-CTM Connector

Future Technology Zone
Introduction of the Next
Generation Healthcare System* USB Type-CTM is a trademark of
USB Implementers Forum.

Establishment of
SMK-LOGOMOTION Corporation
We have established a joint venture, “SMK-LOGOMOTION
Corporation”, with the Slovakian company Logomotion, s.r.o. asof May 7, 2015. SMK-LOGOMOTION has plans to develop various
businesses by utilizing technology related to Near Field
Communication, held by Logomotion.

ANNUAL REPORT 2016 5

Financial Section

Financial Review

SMK’s net sales for the fiscal year ended March
31, 2016, increased 16.6% year on year to¥77,206 million (US$685,179 thousand),Five-Year Summary

Total net assets(As of March 31)

Millions of yen
36,000whereas operating income of ¥4,171 million(US$37,016 thousand) and profit attributable

34,18733,28734,000to owners of parent of ¥2,678 million (US$SMK Corporation and Consolidated Subsidiaries

23,766 thousand) were recorded, on a

31,47632,000consolidated basis.
Thousands of
U.S. dollars

Millions of yen
Years ended andas of March 31

2012

2013

2014

2015

2016

2016

Operating income (loss)
Profit (loss) attributable toowners of parent

30,000

Our products for the information and communication market

28,257

enjoyed favorable sales owing to the rapid spread of smartphones

0

2012

28,204
2013

2014

2015

2016

and tablet PCs. Sales of products for the automobile market grew

Operating Results
Net sales

Net Saleschiefly in overseas markets. Sales for new markets, including¥55,340(1,166)(799)¥54,475¥65,796

(853)

2,330

(198)

2,541

¥66,230
2,113
1,982

¥77,206$685,179

4,171

37,016

2,678

23,766Return on equity (ROE)

wearable devices, medical and healthcare, increased steadily.
As a result, consolidated net sales were ¥77,206 million(US$685,179 thousand), up 16.6% year on year.

Operating Income
Consolidated operating income amounted to ¥4,171 million(Years ended March 31)

%
12
8.5
8

8.0
6.0

(US$37,016 thousand), as a result of efforts to proactively
develop new products and provide more competitive prices, as

Financial Position
Total assets
Total net assets

4well as continued cost-cutting efforts.

¥ 53,883¥ 52,498¥ 56,235¥ 65,029¥ 67,606$599,982

28,25728,204

31,47634,18733,287295,412

Yen

U.S. dollars

Per Share Data

Profit attributable to owners of parent

0
(0.7)

Although there was foreign exchange loss due to yen
appreciation, consolidated profit attributable to owners of parent

(2.8)
(4)

2012

2013

2014

2015

2016

was ¥2,678 million (US$23,766 thousand).

Return on assets (ROA)

Total Assets / ROA
As of March 31, 2016, total assets were ¥67,606 million(US$599,982 thousand), with ROA of 4.0%.

(Years ended March 31)

%
6
4.7

Total net assets¥392.59¥394.81¥ 437.84¥ 475.42¥471.02$

4.18

Profit (loss) attributableto owners of parent
Basic
DilutedCash dividends

As of March 31, 2016, total net assets were ¥33,287 million

4.0
4

3.3

(US$295,412 thousand), with ROE of 8.0%.

(11.04)(2.78)

35.58

27.61

37.94

0.34

—

—

35.52

27.56

37.86

0.34

6.00

5.00

10.00

14.00

14.00

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥112.68 = U.S. $1.00.
6 ANNUAL REPORT 2016

Total Net Assets / ROE

0.12

2

Cash FlowsNet cash provided by operating activities amounted to ¥6,211
million (US$55,121 thousand), net cash used in investing activities

0

totaled ¥7,182 million (US$63,738 thousand) and net cash provided
by financing activities was ¥1,636 million (US$14,519 thousand).

(2)

(1.5)

(0.4)

2012

2013

2014

2015

2016

ANNUAL REPORT 2016 7

Consolidated Balance Sheets

Consolidated Balance SheetSMK Corporation and Consolidated Subsidiaries
As of March 31, 2015 and 2016

Thousands of
U.S. dollars(Note 2)Millions of yen

Assets2015

2016

Liabilities and net assets

2016

Time deposits (Note 16)
Notes and accounts receivable, trade (Note 16)
Allowance for doubtful accounts
Inventories (Note 3)
Deferred tax assets (Note 13)
Other current assets (Note 16 and 21)

2015

2016

2016

¥7,605¥12,287$109,043

4,542

4,808

42,670

594

489

4,340

1,021

966

8,573

Accrued directorsʼ and officersʼ bonuses

70

75

666

Accounts payable, non-trade (Note 16)

5,970

6,245

55,422Other current liabilities

1,448

1,793

15,912

21,253

26,666236,652

Long-term debt (Note 5 and 16)

6,641

5,258

46,663

Deferred tax liabilities (Note 13)

1,776

1,121

9,949

Accrued directorsʼ and officersʼ retirement benefits

138

188

1,668

Liability for retirement benefits (Note 6)

56

49

435

Other long-term liabilities

976

1,033

9,168

9,589

7,651

67,900

7,996

7,996

70,962Current liabilities

Current assets
Cash and cash equivalents (Note 16)

Thousands of
U.S. dollars(Note 2)Millions of yen¥9,999¥10,668$94,675

183

110

976

16,97916,509146,512

(44)

(47)

(417)

6,422

7,187

63,782

551

657

5,831

3,241

3,282

29,12737,33338,368340,504

Short-term loans payable (Note 5 and 16)
Notes and accounts payable, trade (Note 16)
Accrued income taxes
Accrued bonuses

Long-term liabilities
Investments and long-term loans
Investment securities (Note 16 and 17)

3,104

2,406

21,353Long-term loans receivable

108

96

852

Asset for retirement benefits (Note 6)

841

541

4,801

Other investments (Note 21)

654

593

5,263

Allowance for doubtful accounts

(108)

(60)

(532)

4,600

3,577

31,745

Net assets
Shareholdersʼ equity (Note 7)

Property, plant and equipment (Note 5, 12 and 19)

Common stock

Land (Note 4)

7,449

7,426

65,903

Buildings

20,824

21,544

191,196

Machinery and vehicles

21,15821,181

187,975

Capital surplus

12,32512,309109,239

Tooling and office furniture

23,05823,492

208,484

Retained earnings

16,537

18,149161,067

438

213

1,890

Treasury stock(3,417)(4,353)(38,632)

72,92873,858655,467

33,442

34,102

302,645(50,394)(50,946)(452,133)

22,53422,912

203,337

Net unrealized gains (losses) on other securities

608

176

1,562

Foreign currency translation adjustments(697)(1,506)(13,365)

242

216

1,917

Retirement benefits asset and liability adjustments

798

223

1,979

—

380

3,372

709

(1,106)(9,815)

318

2,151

19,089

Share subscription rights (Note 8)

35

25

222

561

2,748

24,388Non-controlling interests

—

266

2,361

34,18733,287295,412¥65,029¥67,606$599,982¥65,029¥67,606$599,982

Construction in progressLess-accumulated depreciation
Other assets
Deferred tax assets (Note 13)
Goodwill
Intangible assets (Note 12)

Total assets

Authorized:195,961,274 shares

Issued and outstanding : 79,000,000 shares

Accumulated other comprehensive income

Total liabilities and net assets

See accompanying notes to consolidated financial statements.
8 ANNUAL REPORT 2016

ANNUAL REPORT 2016 9

Consolidated Statement of Income

Consolidated Statement of Changes in Net Assets

Years ended March 31, 2015 and 2016

Years ended March 31, 2015 and 2016

SMK Corporation and Consolidated Subsidiaries

SMK Corporation and Consolidated Subsidiaries

Net sales (Note 20)
Cost of sales (Note 3 and 9)
Selling, general and administrative expenses (Note 9 and 10)
Operating income (Note 20)

2015

2016

¥66,230
54,7289,388
2,113$685,179
553,887
94,26737,016

106
953
2,199
101
90
292
3,744

103
1,263
—
134
294
307
2,102

914
11,209
—
1,189
2,609
2,725
18,655

Other expenses
Interest expense
Rent expense
Foreign exchange loss, net
Loss on disposal of fixed assets (Note 11)
Loss on impairment of fixed assets (Note 12)
Loss on liquidation of subsidiaries and affiliates
Other
Total other expenses

124
460
—
82
1,361
—
170
2,199

124
623
1,334
209
—
198
212
2,701

1,100
5,529
11,839
1,855
—
1,757
1,881
23,971

3,658

3,573

31,709

1,098
578
1,982
—
¥1,982

1,229
(249)
2,592
(85)
¥2,678

10,907(2,210)23,003(754)$23,766
U.S. dollars(Note 2)Yen

Per share data (Note 15)
Total net assets
Profit attributable to owners of parent
Basic
DilutedCash dividends

Shareholdersʼ equity

2016¥77,206
62,412
10,622
4,171

Other income
Interest and dividend income
Rent income
Foreign exchange gain, net
Gain on sales of fixed assets (Note 11)
Gain on sales of investment securities (Note 17)
Other
Total other income

Profit before income taxes
Income taxes (Note 13)
Current
DeferredProfitLoss attributable to non-controlling interests
Profit attributable to owners of parent

Millions of yen

Thousands of
U.S. dollars(Note 2)Millions of yen¥475.42¥471.02$4.18

27.61
27.56
14.00

37.94
37.86
14.00

0.34
0.34
0.12

Number ofshares ofcommonstock

Balance at April 1, 2014 79,000,000
Cumulative effect of changein accounting principle
Restated balance at April 1, 2014
Cash dividends paid
Change in the scope of consolidation
Profit attributable to owners of parent
Acquisition of treasury stock
Disposition of treasury stock
Net changes in items otherthan shareholdersʼ equity
Total changes—
Balance at March 31, 2015 79,000,000
Balance at April 1, 2015 79,000,000
Cumulative effect of changein accounting principle
Restated balance at April 1, 2015
Cash dividends paid
Change in the scope of consolidation
Profit attributable to owners of parent
Acquisition of treasury stock
Disposition of treasury stock
Net changes in items otherthan shareholdersʼ equity
Total changes—
Balance at March 31, 2016 79,000,000

Commonstock

CapitalsurplusRetainedearnings

Total
Net unrealized
Foreign Retirement accumulated
other Subscription
Total gains (losses)
currency benefits asset
rights toTreasury shareholdersʼon other translation and liability comprehensive
sharesincomestock
equitysecurities adjustments adjustments¥7,996¥12,326¥15,981¥(3,433)

(696)
7,996

12,326

15,285
(719)
(10)
1,982

(1)
—
7,996
7,996

(1)
12,325
12,325

1,252
16,537
16,537

7,996

12,325

16,537(1,066)
2,678

(16)
—
¥7,996

Years ended March 31, 2015 and 2016

Thousands of
U.S. dollars(Note 2)Millions of yen

ProfitOther comprehensive income (Note 14)
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

2015

2016

¥ 2,592$ 23,003

334
1,473
335
2,143
¥4,125

(431)
(809)
(574)
(1,815)¥776(3,825)(7,180)(5,094)(16,108)$6,887¥4,125—¥¥862¥(85)$7,650$(754)¥ 1,982

2016

¥274

¥(2,171)¥462¥(1,434)¥39

Total net
assets¥ ―¥31,476(696)(3,433)(7)
23
16(3,417)(3,417)(696)

32,175
(719)
(10)
1,982
(7)
22

274

(2,171)462(1,434)
—
—
—
—
—

39

—

334

1,473

335

2,143

(4)

1,267
33,44233,442

334
608
608

1,473
(697)
(697)

335
798
798

2,143
709
709

(4)
35
35

―

(16)
¥12,309

1,611¥18,149(3,417)30,780
(719)
(10)
1,982
(7)
22
2,139

―
―
―

3,406
34,18734,187—33,442(1,066)—
2,678(1,015)
63

608

(697)

798

709
—
—
—
—
—

35

―

34,187(1,066)—
2,678(1,015)
63

—

(431)

(809)

(574)

(1,815)(10)

266(1,559)659¥34,102

(431)
¥176

(809)
¥(1,506)

(574)
¥223

(1,815)¥(1,106)

(10)
¥25

266
¥266

(899)
¥33,287

Total
Net unrealized
Foreign Retirement accumulated
other Subscription
Total gains (losses)
currency benefits asset
rights toTreasury shareholdersʼon other translation and liability comprehensive
sharesincomestock
equitysecurities adjustments adjustments

Noncontrollinginterests

Total net
assets(1,015)79(935)¥(4,353)

Thousands of U.S. dollars (Note 2)

Shareholdersʼ equity

Commonstock

SMK Corporation and Consolidated Subsidiaries¥32,871

Noncontrollinginterests—

See accompanying notes to consolidated financial statements.

Consolidated Statement of Comprehensive Income

Accumulated other comprehensive income

Balance at April 1, 2015
Cumulative effect of changein accounting principle
Restated balance at April 1, 2015
Cash dividends paid
Change in the scope of consolidation
Profit attributable to owners of parent
Acquisition of treasury stock
Disposition of treasury stock
Net changes in items otherthan shareholdersʼ equity
Total changes
Balance at March 31, 2016

CapitalsurplusRetainedearnings$70,962 $109,381 $146,761

Accumulated other comprehensive income$(30,325) $296,787$5,396$(6,186)$7,082$ 6,292$311$— $303,399—
70,962

109,381

146,761(9,460)23,766(142)—(142) 14,297$70,962 $109,239 $161,067(30,325)(9,008)701—

296,787(9,460)—23,766(9,008)559

5,396(6,186)

7,082

6,292
—
—
—
—
—

311

—

303,399(9,460)—23,766(9,008)559—(3,825)(7,180)(5,094)(16,108)

(89)

2,361

(13,836)(5,094) (16,108)$1,979 $(9,815)

(89)
$222

2,361
(7,978)$2,361 $295,412(8,298)
5,848$(38,632) $302,645(3,825) (7,180)$1,562 $(13,365)

See accompanying notes to consolidated financial statements.
10 ANNUAL REPORT 2016

ANNUAL REPORT 2016 11

Consolidated Statement of Cash Flows

Notes to Consolidated Financial Statements
SMK Corporation and Consolidated Subsidiaries

SMK Corporation and Consolidated Subsidiaries

Years ended March 31, 2015 and 2016

Thousands of
U.S. dollars(Note 2)Millions of yen

Cash flows from operating activities
Profit before income taxes
Depreciation and amortization
Loss on impairment of fixed assets
Amortization of goodwill
Increase (decrease) in accrued bonuses
Increase (decrease) in accrued directorsʼ and officersʼ retirement benefits
Increase (decrease) in asset and liability for retirement benefits
Interest and dividend income
Interest expense
Gain (loss) on sales of investment securities
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 payable, non-trade
Other
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Other
Net cash provided by (used in) operating activities
Cash flows from investing activities
Payments into time deposits
Proceeds from time deposits
Purchases of fixed assets
Proceeds from sales of fixed assets
Purchases of intangible fixed assets
Purchases of investment securities
Proceeds from sales of investment securities
Purchase of subsidiariesʼ shares resulting in changes in scope of consolidation
Payments for execution of loans
Collection of loans receivable
Other
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
Other
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
Increase in cash and cash equivalents from newly consolidated subsidiaries
Cash and cash equivalents at end of the year
12 ANNUAL REPORT 20162015

¥3,658
3,669
1,361
—
(55)
(42)
(537)
(106)
124
(90)
82
—
258
163
(1,952)
(56)
(499)
5,978
128
(127)
(1,151)
(7)
4,820

2016

¥3,573
3,970
—
86
(51)
38
(584)
(103)
124
(294)
209
198
(959)
(1,190)
1,887
106
389
7,399
104
(118)
(1,173)
—
6,211

2016

$31,709
35,233
—
763
(453)
337
(5,183)(914)
1,100(2,609)1,855
1,757(8,511)(10,561)
16,747941
3,452
65,664923(1,047)(10,410)—
55,121(163)
158(4,086)
184
(187)
—
125
(1,991)(46)
70(4)(5,938)(108)
169(5,265)107(2,362)
(35)
360
(37)
(84)
74
—
(7,182)

(958)
1,500
(46,725)950(20,962)
(311)
3,195
(328)
(745)
657
—
(63,738)909
3,200(3,487)
(6)
13
—
(716)
(68)
(155)
125
(1,148)
11,13414¥ 9,999

4,700
600(2,005)(1,014)65352(1,062)
—
1,636
3
668
9,999
—
¥10,668

41,711
5,325(17,794)(8,999)577
3,124(9,425)—
14,51927
5,928
88,738—$94,675

Note 1. Summary of significant accounting policies( a ) Basis of presenting financial statements			The accompanying consolidated financial statements of SMK Corporation (the “Company”) and consolidated subsidiaries areprepared on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to theapplication and disclosure requirements of International Financial Reporting Standards, and are compiled from theconsolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Act ofJapan. For the purpose of this document, certain reclassifications have been made in the accompanying consolidated financial
statements to facilitate understanding by readers outside Japan. In addition, certain reclassifications have been made to theprior year’s consolidated financial statements to conform to the current year’s presentation.
( b ) Basis of consolidation and investments in affiliated companies			The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries over which
substantial control is exercised either through majority ownership of voting stock and/or by other means.
			All significant intercompany balances and transactions have been eliminated in consolidation.
			Certain foreign subsidiaries’ fiscal period ends on December 31, which differs from the year-end date of the Company;
however, the accounts of these companies were tentatively closed as of March 31 and the necessary adjustments forconsolidation were made.
			Investments in affiliates (companies over which the Company has the ability to exercise significant influence) are accounted
for by the equity method. Consolidated profit attributable to owners of parent includes the Company’s equity in the current
profit attributable to owners of parent or loss of such companies, after the elimination of unrealized intercompany profits.
			All assets and liabilities of the Company’s subsidiaries are revalued at the acquisition, if applicable, and the excess of costover the underlying net assets at the date of acquisition is amortized over a period of five years on a straight-line basis if
such excess is material, or charged to income when incurred if immaterial.
( c ) Scope of consolidation
			 Number of consolidated subsidiaries: 30			The Company established SMK-LOGOMOTION Corporation in May 2015 and acquired shares of Mitec Co., Ltd. in December
2015, which were newly included in the scope of consolidation.
			SMK Europe N.V. and SMK (U.K.) Ltd. were liquidated for the years ended March 31, 2016, which were excluded from thescope of consolidation.
( d ) Application of equity method of accounting			Number of affiliated companies accounted for by the equity method: 1( e ) Translation of foreign currencies
			All asset and liability accounts of foreign subsidiaries and affiliates are translated into Japanese yen at the appropriate
year-end exchange rates. Shareholders’ equity, which is translated at rates of exchange prevailing at the time thetransactions occurred. Revenue and expense accounts are translated at the average rates of exchange prevailing during theyear. Differences arising from the translation are presented as translation adjustments in the consolidated financial
statements.
( f ) Cash and cash equivalents			Cash and cash equivalents are composed of cash and time deposits all of which are low-risk, short-term financial instruments
readily convertible into cash.
( g ) Inventories
			Inventories are mainly stated at the lower of cost or market. The following inventories are measured principally by theirrespective methods:
			Finished products: Retail cost method			Work in process: Actual raw material cost, determined by the most recent purchase cost method, plus direct labor costs andmanufacturing overheads
			Raw materials and supplies: Most recent purchase cost method			Consolidated subsidiaries adopt mainly the moving average method.
( h ) Securities
			Marketable securities classified as other securities are carried at fair value with any changes in unrealized holding gain or
loss, net of the applicable income taxes, included directly in net assets. Non-marketable securities classified as othersecurities are carried at cost. Cost of securities sold is determined by the moving average method.
( i ) Derivatives
			 Derivatives are stated at fair value.

ANNUAL REPORT 2016 13

( j ) Property, plant and equipment and depreciation( t ) Consumption taxes

			Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is calculated principally by			Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Nondeductible

the declining-balance method for the Company and its domestic subsidiaries, and by the straight-line method mainly for

consumption taxes are expensed in the consolidated financial statements.

foreign subsidiaries. Certain buildings of the Company and its domestic subsidiaries acquired on or after April 1, 1998 are( u ) Standards issued but not yet effective

depreciated by the straight-line method.

			
Implementation Guidance on Recoverability of Deferred Tax Assets

			 The estimated useful lives of the assets are as follows:			On March 28, 2016, the Accounting Standards Board of Japan (ASBJ) issued “Revised Implementation Guidance on

			 Buildings:

10 to 50 years

Recoverability of Deferred Tax Assets” (ASBJ Guidance No.26).

			 Machinery and vehicles:

4 to 10 years(1 ) Overview

			 Tooling and office furniture:

2 to 6 years

			Regarding the treatment of the recoverability of deferred tax assets, a review was conducted following the framework of			The residual values of the property, plant and equipment acquired on or before March 31, 2007 are depreciated equally overJapanese Institution of Certified Public Accountants Audit Committee Report No.66 “Audit Treatment on Determining thea period of 5 years starting from the year following the year in which they have been depreciated up to their depreciable

Recoverability of Deferred Tax Assets,” whereby companies are categorized into five categories and deferred tax assets

limit or 5% of the acquisition cost.

are calculated based on each of these categories.

( k ) Intangible assets				Treatment of companies that do not satisfy any of the category requirements for (Category 1) through (Category 5)			Amortization of intangible assets is calculated by the straight-line method. Software for own use is amortized based on the				Category requirements for (Category 2) and (Category 3)

utilizable period (5 years).
			Goodwill is amortized by the straight-line method mainly over 5 years.
( l ) Allowance for doubtful accounts
			The allowance for doubtful accounts is provided at the amount of estimated uncollectable accounts, based on individualcollectability with respect to identified doubtful receivables and past experience of doubtful receivables.
(m ) Accrued bonus			Accrued bonuses are provided on the estimate of the amounts to be paid in the future by the Company, domestic
consolidated subsidiaries and certain overseas subsidiaries based on an accrual basis at the balance sheet date.
( n ) Accrued directors’ and officers’ bonuses			Accrued directors’ and officers’ bonuses are provided on the estimate of the amounts to be paid subsequent to the balance
sheet date.
( o ) Accrued directors’ and officers’ retirement benefits			Accrued directors’ and officers’ retirement benefits have been provided at an amount equal to 100% of the amount which
would be required to be paid based on the Company’s bylaws if all directors and officers resigned from the Company on thebalance sheet date.

				Treatment related to future deductible temporary differences which cannot be scheduled in companies that qualify as(Category 2)				Treatment related to the reasonable estimable period of future pre-adjusted taxable income in companies that qualify
as (Category 3)				Treatment in cases that companies that satisfy the category requirements for (Category 4) but qualify as (Category 2)or (Category 3)(2 ) Scheduled date of adoption			The Company expects to adopt the revised implementation guidance from the beginning of the fiscal year ending March
31, 2017.
(3 ) Impact of adopting revised implementation guidance			The Company is currently evaluating the effect of adopting these revised implementation guidance on its consolidated
financial statements.
( v ) Change in method of accounting			The Company adopted “Revised Accounting Standard for Business Combinations” (ASBJ Statement No. 21 hereinafter“Business Combinations Standard”), “Revised Accounting Standard for Consolidated Financial Statements” (ASBJ Statement( p ) Retirement benefits

No. 22 hereinafter “Consolidated Financial Statements Standard”) and “Revised Accounting Standard for Business			Asset for retirement benefits and liability for retirement benefits for employees are recorded mainly at the amount calculated

Divestitures” (ASBJ Statement No. 7 hereinafter “Business Divestitures Standard”), etc. effective from April 1, 2015. As abased on the retirement benefit obligation and the fair value of the pension plan assets as of balance sheet date.

result the Company’s accounting policies have been changed; the difference arising from a change in a parent’s ownership			The retirement benefit obligation for employees is attributed to each period by the benefit formula method over theinterest in a subsidiary when the parent retains control over the subsidiary is recorded as capital surplus and acquisition-

estimated years of service of the eligible employees. Actuarial gain or loss is amortized in the year following the year in

related costs are expensed in the consolidated fiscal year when they are incurred. Furthermore, for business combinations towhich the gain or loss is recognized primarily by the straight-line method over a period of 5 years, which is within thebe performed at and after the beginning of the fiscal year under review, the accounting method was changed to reflect

estimated average remaining years of service of employees.

adjustments to the allocation of acquisition cost under provisional accounting treatment on the consolidated financial( q ) Hedge accounting

statements of the fiscal year in which the days of relevant business combinations are included. In addition, the Company has(1) Method of hedge accountingchanged the presentation of Profit, etc. and the presentation of “Minority interests” to “Non-controlling interests.” To reflect			The exceptional method of hedge accounting is applied for the transactions of interest rate swaps, in cases meeting

this change in presentation, reclassifications of accounts have been made to the consolidated financial statements for thecertain conditions.
(2) Hedge instrument and hedged item

fiscal year ended March 31, 2015.
			The Business Combinations Standard, etc. were applied in accordance with transitional treatments stipulated in Paragraph			 Hedge instrument: interest rate swap

58-2 (4) of the Business Combinations Standard, Paragraph 44-5 (4) of the Consolidated Financial Statements Standard and			 Hedged item: interest rate for long-term debt subject to interest rate fluctuations.

Paragraph 57-4 (4) of the Business Divestitures Standard, and they have been applied from the beginning of the fiscal year(3 ) Hedge policy			The Company uses interest rate swaps to avoid risks from interest rate fluctuations on borrowings, only when approvedby the management.
(4) Assessment of hedge effectiveness			 As the exceptional method is applied for interest rate swap, the assessment of hedge effectiveness is omitted.

under review onwards.
			The effects of these changes on the Operating income and Profit before income taxes of the fiscal year under review are
immaterial.
			In the Consolidated Statements of Cash Flows for the fiscal year under review, cash flows associated with the purchase orsales of shares of subsidiaries not resulting in change in the scope of consolidation are presented under “Cash flows from( r ) Income taxes

financing activities,” while expenses incurred associated with the costs related to the purchase of shares of subsidiaries

			Deferred income taxes are recognized based on the differences between financial reporting and the tax bases of the assets

resulting in change in the scope of consolidation or expenses incurred associated with the purchase or sales of shares ofand liabilities and are calculated using the enacted tax rates and laws which will be in effect when the differences are
expected to reverse.
( s ) Per share information
			Basic net income per share is computed based on the net income available for distribution to shareholders of common stock

subsidiaries not resulting in change in the scope of consolidation are presented under “Cash flows from operating activities.”			The effects of these changes in the consolidated statement of changes in net assets and on capital surplus at end of the
fiscal year under review are immaterial.
			The effects of these changes on per share information for the fiscal year under review are described in Note 15.

and weighted-average number of shares of common stock outstanding during the year. Diluted profit attributable to ownersof parent per share is computed based on the profit attributable to owners of parent available for distribution toshareholders and average number of shares of common stock outstanding during each year after giving effect to the dilutive
potential of shares of common stock to be issued upon the conversion of convertible bonds.
			Net assets per share is computed based on the net assets available for distribution to shareholders of common stock and thenumber of shares of common stock outstanding at the balance sheet date. Cash dividends per share shown for each period
in the consolidated statement of income represent the dividends applicable to the respective period.

14 ANNUAL REPORT 2016

ANNUAL REPORT 2016 15

Note 2. U.S. dollar amounts

Note 6. Retirement benefits plans

The U.S. dollar amounts are stated solely for the convenience of the reader at the rate of U.S.$1.00 = ¥112.68, the approximate
rate of exchange at March 31, 2016. The translation should not be construed as a representation that the Japanese yen amounts
actually represent, have been or could be converted into U.S. dollars at that or any other rate.

Note 3. Inventories
Inventories as of March 31, 2015 and 2016 consisted of the following:
Finished products
Work in process
Raw materials and supplies
Total

2015

Millions of yen¥3,161955
2,306¥6,4222016¥3,326
991
2,869¥7,187

Thousands of U.S. dollars
2016$29,517
8,795
25,461$63,782

The write-downs of inventories resulting from decreased profitability for the years ended March 31, 2015 and 2016 were as
follows:
Millions of yen

Cost of sales

2015

Thousands of U.S. dollars
2016

¥193

¥281

2016

$2,494

Note 4. Reduction entries
Reduction entries due to acceptance of prefectural governmentʼs grants relating to property, plant and equipment as of March 31,
2015 and 2016 were as follows:
Land

2015

Millions of yen

¥101

2016

¥101

Thousands of U.S. dollars
2016

$896

Note 5. Short-term loans payable and long-term debt

Short-term loans payable and long-term debt as of March 31, 2015 and 2016 consisted of the following:
Millions of yen
Short-term loans payable

Average interest rates on short-term loans payable, principally from banks, is 0.52%
SecuredUnsecured
Total
Long-term debt
Average interest rates on long-term debt, principally from banks, is 0.98%
SecuredUnsecured
Less: portion due within one year
Total

2015

2016

Thousands of U.S. dollars
2016¥2,300
3,300¥5,600¥4,600
5,705¥10,305$40,824
50,630$91,453

2016

Thousands of U.S. dollars
2016¥2,839
4,402(1,982)¥5,258$25,195
39,066(17,590)$46,663

2015

Millions of yen¥3,423
5,224(2,005)¥6,641

The assets pledged as collateral for short-term and long-term debt as of March 31, 2015 and 2016 were summarized as follows:
Millions of yen(1) Factory foundation
Buildings
Machinery and vehicles
Tooling and office furniture
Land
Total
(2) Other
Buildings
Tooling and office furniture
Land
Total

Thousands of U.S. dollars

2015

2016

2016

¥1,220296
80
256¥1,854¥1,582229
81256¥2,151$14,040
2,032
719
2,272
$19,089

¥463
0
563
¥1,027

¥451
4
563
¥1,019$4,00235
4,996$9,043

The aggregate annual maturities of long-term debt (including current portion) outstanding as of March 31, 2016 weresummarized as follows:
Millions of yen
Thousands of U.S. dollars
Year ending March 31,2017¥1,982$17,590
2018
1,772
15,7262019
2,246
19,933
2020
640
5,680
2021 and thereafter
600
5,325
$64,262
Total¥7,241

16 ANNUAL REPORT 2016

The Company and certain of its domestic consolidated subsidiaries have either funded or unfunded defined benefit pension plansand defined contribution benefit pension plans.
The Company has funded corporate pension fund plans and defined contribution pension plans. As a defined benefit pension plan,
the Company has adopted a cash balance plan. Under the cash balance plan, the plan sponsor contributes money into a plan
participantʼs account based on the points according to the employeeʼs years of service and job performance and the points arecalculated with an interest credit that reflects changes in market interest rates.
Certain subsidiaries have funded and unfunded lump-sum payment plans and defined contribution pension plans. The simplified
method is applied for the calculation of liability for retirement benefits and retirement benefit expense of certain domestic
subsidiaries.
The changes in the retirement benefit obligation during the years ended March 31, 2015 and 2016 were as follows:
Balance at the beginning of the year
Cumulative effect of change in accounting principle
Restated balance at the beginning of the year
Service cost
Interest cost
Actuarial gain and loss
Retirement benefit paid
Other
Balance at the end of the year

2015

Millions of yen¥7,485
696
8,181
342
50
36
(433)
6
¥8,184

2016

Thousands of U.S. dollars
2016

2016

Thousands of U.S. dollars
2016¥8,184
—
8,184
335
50
78
(785)
0
¥7,865

The changes in plan assets during the years ended March 31, 2015 and 2016 were as follows:
Balance at the beginning of the year
Expected return on plan assets
Actuarial gain and loss
Contributions by the Company
Retirement benefits paid
Balance at the end of the year

2015

Millions of yen¥7,960
214
700
522
(429)
¥8,968¥8,968
238
(593)
521
(778)
¥8,357$72,630—
72,630
2,973
444
692
(6,967)0$69,799$79,588
2,112(5,263)
4,624(6,905)$74,166

The funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31, 2015 and 2016
were as follows:¥7,849(8,357)
(507)
15
(491)

Thousands of U.S. dollars
2016

Unfunded retirement benefit obligation
Net liability for retirement benefits in the balance sheet¥8,127(8,968)
(841)
56
(784)

2016

Liability for retirement benefits
Asset for retirement benefits
Net liability for retirement benefits in the balance sheet

56
(841)
¥(784)49(541)¥(491)435(4,801)$(4,357)

Funded retirement benefit obligation
Plan assets at fair value

2015

Millions of yen

The components of retirement benefit expense for the years ended March 31, 2015 and 2016 were as follows:
Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial gain and loss
Retirement benefit expense

2015

Millions of yen

¥342
50
(214)
(198)
¥(20)

2016

¥335
50
(238)
(190)
¥(42)$69,657(74,166)(4,499)133(4,357)

Thousands of U.S. dollars
2016$2,973444(2,112)(1,686)$(373)The components of retirement benefits asset and liability adjustments included in other comprehensive income (before tax effect)
for the years ended March 31, 2015 and 2016 were as follows:
Actuarial gain and loss

2015

Millions of yen

¥463

2016

¥(861)Thousands of U.S. dollars
2016$(7,641)

The components of retirement benefits asset and liability adjustments included in accumulated other comprehensive income(before tax effect) as of March 31, 2015 and 2016 were as follows:
Unrecognized actuarial gain and loss

2015

¥1,187

Millions of yen

2016

¥325

Thousands of U.S. dollars
2016$2,884

ANNUAL REPORT 2016 17

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2015 and 2016 were as
follows:
2015

Bonds
StocksLife insurances
Funds
Other
Total

2016

4.2%
41.2
39.0
13.4
2.2
100.0%

Resolution

3.9%
38.9
39.5
14.3
3.4
100.0%

2016

0.6%
1.40%
3.0%

2015

Increase

Decrease

Number ofshares at
March 31, 2015

Number ofshares at
April 1, 2015

561—

79,000,000

79,000,000——

79,000,000

7,198,819

16,32350,9507,164,192

7,164,192

1,924,222

140,561

8,947,853

Number of shares
2016

1,901,000
17,4912,992
2,739

2. Details of the decrease are as follows:
Decrease due to exercising stock options
Decrease due to sales of shares held by subsidiaries
Decrease due to sales of shares of less than standard unit

50,000—950

124,000
14,7391,822

2. Share subscription rights
Description

Share subscription rights as stock options
granted during the year ended March 31, 20112016

March 31, 2016

June 23, 2016

Total dividends(Thousands of
U.S. dollars)

Dividends per share(U.S. dollars)

4,979

0.07

Note 8. Stock options
1. The account and the amount of stock options charged as expenses
For the years ended March 31, 2015 and 2016, there was no expenses charged.
2. The amount of stock options charged as income due to their forfeiture resulting from nonuse
2015—

Millions of yen

2016

0

269 employees of the Company, and a director and 35 employees of
its subsidiaries
1,141,000 common shares
August 11, 2011
Subscription holders shall remain employees, directors or auditors of
the Company or its subsidiaries at the time of exercise
From August 11, 2011 to August 11, 2013
From August 12, 2013 to August 11, 2016

4. Change in stock options
Stock option activity during the year ended March 31, 2016 was as follows:—

Millions of yen

8

Effective date

Vesting period
Exercise period—
13,027
3,296
—

Total

Retainedearnings

2016

Cut-off date

Decrease

2015

Parent company

ShareholdersʼCommonmeeting on
stock
June 22, 2016

Exercise condition

79,000,000

2015

June 24, 2015

Number ofshares at
March 31, 2016

1. Details of the increase are as follows:
Increase due to purchase of shares
Increase due to purchase of shares of less than standard unit
Increase in shares held by affiliates accounted for by the equity method
Increase due to purchase of company that holds sharesCompany

Total dividends Dividends per share
Type of shares Source of dividends (Millions of yen)
(Yen)

Number of stock options
Grant date2016

Increase

March 31, 2015

3. Description of stock options

Information regarding changes in net assets for the years ended March 31, 2015 and 2016 were as follows:
1. Shares issued and outstanding / Treasury stock

Shares issued:
Common stock
Tresury stock:
Common stock

Resolution

Category and number of grantees

Number ofshares at
April 1, 2014

9

Effective date

Gain on reversal of share subscription rights

Note 7. Net asset

Types of shares

647

Cut-off date

2016

Assumptions to calculate the actuarial present value of the benefit obligation and the expected return on plan assets as of March
31, 2015 and 2016 were as follows:
0.6%
1.55%
3.0%

Retainedearnings

2015

Dividends with the cut-off date in the year ended March 31, 2016 and the effective date in the year ending March 31, 2017

The required contributions to the defined contribution plans by the Company and its consolidated subsidiaries for the years ended
March 31, 2015 and 2016 amounted to \81 million and \84 million ($745 thousand), respectively.

2015

Total dividends Dividends per share
Type of shares Source of dividends (Millions of yen)
(Yen)

ShareholdersʼCommonmeeting on
stock
June 23, 2015

1. ‌The total plan assets include retirement benefit trusts which constitute 13.4% for the year ended March 31, 2015 and 11.8%
for the year ended March 31, 2016.
2. ‌The expected rates of return on plan assets has been estimated based on the anticipated allocation of plan assets to each asset
category and the expected long-term returns on plan assets held in each category.

Discount rate
Re-evaluation rate
Expected rates of return on plan assets(2) Dividends with the cut-off date in the year ended March 31, 2015 and the effective date in the year ending March 31, 2016

Thousands of U.S. dollars
2016

35

25

222

35

25

222

Share subscription rights which are not yet vested
Outstanding as of March 31, 2015
GrantedForfeited
VestedOutstanding as of March 31, 2016
Share subscription rights which have already been vested
Outstanding as of March 31, 2015
VestedExercised
Forfeited
Outstanding as of March 31, 2016
Exercise price
The fair value of stock options when granted

—
—
—
—
—
441,000—
124,000
3,000
314,000¥
360 ($3.19)¥
80.5 ($0.71)

5. Estimation of the number of stock options vested
Because it is difficult to reasonably estimate the number of unexercised stock options in the future, the actual number of
unexercised stock options is presented.

3. Dividends(1) Dividends paid
Resolution

Type of shares

Shareholdersʼ meeting on Common
June 24, 2014
stock
Board of Directorsʼ
meeting on October 23, Common
stock
2014

Total dividends Dividends per share(Millions of yen)
(Yen)

2015

Cut-off date

Effective date359

5

March 31, 2014

June 25, 2014359

5

September 30,
2014

November 19,
2014

2016

Resolution

Type of shares

Shareholdersʼ meeting on Common
June 23, 2015
stock
Board of Directorsʼ
Commonmeeting on October 23,
stock
2015
18 ANNUAL REPORT 2016

Total dividends Dividends per share(Millions of yen)
(Yen)

2016

Cut-off date

Effective date

Total dividends(Thousands of
U.S. dollars)

Dividends per share(U.S. dollars)

647

9

March 31, 2015

June 24, 2015

5,742

0.08

420

6

September 30,
2015

November 19,
2015

3,727

0.05

ANNUAL REPORT 2016 19

Note 9. Research and development costs

Note 13. Income taxes

Research and development costs included in cost of sales and selling, general and administrative expenses for the years ended
March 31, 2015 and 2016 amounted to ¥3,472 million and ¥3,620 million ($ 32,126 thousand), respectively.

Income taxes applicable to the Company and its domestic subsidiaries comprised corporation, inhabitants’ and enterprise taxes
which, in the aggregate, resulted in statutory tax rates of approximately 35.5% and 32.9% for the years ended March 31, 2015
and 2016, respectively.
A reconciliation between the statutory tax rate and the effective tax rate for the years ended March 31, 2015 and 2016 was asfollows:

Note 10. Selling, general and administrative expenses
Major elements of selling, general and administrative expenses for the years ended March 31, 2015 and 2016 were as follows:
Millions of yen

2015

Salaries and wages of employees
Provision for bonus
Provision for directorsʼ and officersʼ bonus
Retirement benefit cost
Provision for directorsʼ and officersʼ retirement benefits
Provision for doubtful accounts¥4,286
444
70
47
50
2

Thousands of U.S. dollars
2016

2016

¥4,591
439
75
24
41
18

$40,744
3,896
666
213
364
160

Note 11. Gains and losses of fixed assets
The components of gains and losses of fixed assets for the year ended March 31, 2015 and 2016 were as follows:
Gains on sales of fixed assets
Millions of yen

2015

Buildings
Machinery and vehicles
Tooling and office furniture
Land
Intangible asset
Total

¥28
17
23
28
2
¥101

Loss on disposal of fixed assets
Buildings
Machinery and vehicles
Tooling and office furniture
Intangible asset
Total

¥0
22
4
103
5
¥134
Millions of yen

2015

Thousands of U.S. dollars
2016

2016

¥6
66
8
0
¥82

$0
195
35
914
44
$1,189

¥2
175
31
—
¥209

$18
1,553
275
—
$1,855

Note 12. Loss on impairment of fixed assets
An impairment loss is recognized when the carrying amount of an asset exceeds undiscounted future net cash flows which are
expected to be generated by such asset. The impairment loss is measured by the amount by which the carrying amount of theasset exceeds its recoverable amount being the higher of the discounted future net cash flows or net realizable value.
For the year ended March 31, 2015, impairment losses were recognized for the following assets.
Millions of yen
2015

Asset group

Location

Connection System

Japan

FunctionalJapan
components
KOSCO Tatebayashi
Japanand others
Total

Use

Connectors/Jack production
facilities
Remote controls/Switch/Unit
production facilities
Buildings

Land

Buildings

Machinery
Toolingandand officevehiclesfurniture

Software

Goodwill

2015

35.5%

2016

32.9%

0.9

1.2

(20.4)
13.4
(1.4)
2.9
0.6
(20.0)
20.1
5.8
1.5
6.0
—
0.9
45.8%

(27.2)
4.5
—
5.0
0.6
(20.9)
27.2
(1.1)
1.5
(0.4)
2.3
1.8
27.4%

The significant components of deferred tax assets and liabilities at March 31, 2015 and 2016 were as follows:

Thousands of U.S. dollars
2016

2016

Statutory tax rate
Items such as entertainment expenses permanently nondeductible for tax purposes
Items such as dividend income permanently non-taxable
Change in valuation allowance
Tax credit for R&D expenses
Foreign withholding taxes
Inhabitant tax on per capita basis
Statutory tax rate differences in subsidiaries
Elimination of dividend income
Accumulated surplus of subsidiaries
Decrease of tax assets at fiscal year-end by the change of tax rate
Income taxes current for prior years
Liquidation of subsidiaries
Other
Effective tax rate

Total

—

9

358

76

—

—

444

—

—

37

51

10

—

98

—

818

—

—

—

—

818

¥—

¥827

¥396

¥127

¥10

¥—

¥1,361

The Companyʼs assets for business operations are categorized into groups on a division-by-division basis and the Companyʼsrental property on an individual basis, whereas consolidated subsidiariesʼ assets for business operations are categorized into
groups on a subsidiary-by-subsidiary basis and their rental property on an individual basis. Of the above asset groups, because
the Connection System Division and the Functional Components Division suffered declining trend in net sales and income due tointense price competition in the market, future cash flows from their asset groups were estimated after reviewing their businessplans. As a result, it was found that they could not generate sufficient earnings to recover the value of the respective asset
groups, therefore their book value was reduced to the recoverable amounts. For KOSCO Tatebayashi and others, the fair value
thereof declined below the book value, which was therefore reduced to the recoverable amount.
The recoverable amount of the asset group of the Connection System Division was measured at value in use, which was
calculated by discounting future cash flows at 6.6%. The recoverable amount of the asset group of the Functional Components
Division was measured at value in use, and since no future cash flows are expected, the book value thereof in the second quarterof the fiscal year ended March 31, 2015 was entirely recognized as impairment loss. The recoverable amount of the assets of
KOSCO Tatebayashi and others were measured at net realizable value, which was calculated based on valuations by external
independent real estate appraisers.

2015

Millions of yen

2016

Thousands of U.S. dollars
2016

Deferred tax assets:
Inventory write-down disallowed
Accrued bonuses disallowed
Intercompany profit on inventory
Liability for retirement benefits
Allowance for doubtful accounts
Impairment loss
Operating loss carryforwards for tax purposes
Other
Valuation allowance
Deferred tax assets

¥28
310
79
—
38
569
539
681
(1,425)
820

¥20
268
70
132
19
536
934
721
(1,643)
1,059

$177
2,378
621
1,171
169
4,757
8,289
6,399
(14,581)
9,398

Deferred tax liabilities:
Asset for retirement benefits
Deferred gain on land
Advanced depreciation on buildings
Reserve for special depreciation
Net unrealized gains on other securities
Accumulated surplus of foreign subsidiaries
Valuation difference on subsidiaries
Other
Deferred tax liabilities
Net deferred tax assets

(216)
(86)
(62)
(31)
(261)
(620)
(369)
(166)
(1,815)¥(994)

—
(81)
(54)
(25)
(64)
(577)
(361)
(141)
(1,307)¥(247)

—
(719)
(479)
(222)
(568)
(5,121)(3,204)(1,251)(11,599)$(2,192)

The “Act to partially revised the Income Tax Act and Others” (Act No. 15 of 2016) and the “Act to partially revise the Local Tax
Act and Others” (Act No. 13 of 2016) were enacted on March 31, 2016. As a result, the effective statutory tax rate used tomeasure the Company’s deferred tax assets and liabilities was changed from 32.2% to 30.8% and 30.5% for the temporary
differences expected to be realized or settled in the year beginning April 1, 2016 and for the temporary differences expected to berealized or settled from April 1, 2018, respectively.
The effects of these changes on consolidated financial statements for the year ended March 31, 2016 are immaterial.

For the year ended March 31, 2016, there was no major impairment loss recognized.

20 ANNUAL REPORT 2016

ANNUAL REPORT 2016 21

Note 14. Other comprehensive income

Note 16. Financial instruments

The following table present reclassification adjustments and tax effects allocated to each component of other comprehensive
income for the years ended March 31, 2015 and 2016.
Net unrealized gains (losses) on other securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in
profit attributable to owners of parent
Amount before tax effectTax effectNet unrealized gains (losses) on other securities
Foreign currency translation adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses included in
profit attributable to owners of parent
Amount before tax effectTax effectForeign currency translation adjustments
Retirement benefits asset and liability adjustments:
Amount arising during the year
Reclassification adjustments for gains and losses included in
profit attributable to owners of parent
Amount before tax effectTax effect
Retirement benefits asset and liability adjustments
Total other comprehensive income

Millions of yen

2016

Thousands of U.S. dollars
2016

¥563

¥(362)$(3,213)

(90)

(278)

(2,467)

472
(138)
334

(641)
209
(431)

(5,680)1,855(3,825)

1,473

(874)

(7,756)

—

65

577

1,473
—
1,473

(809)
—
(809)

(7,180)—(7,180)

662

(670)

(5,946)

2015

(198)

(190)

(1,686)

463
(128)
335
¥2,143

(861)
286
(574)
¥(1,815)(7,641)
2,538(5,094)$(16,108)

Note 15. Amounts per share
1. Profit attributable to owners of parent per share of common stock is based on the following information
Basic profit attributable to owners of parent per share:
Profit attributable to owners of parent
Profit attributable to owners of parent not attributable tocommon stockholders
Profit attributable to owners of parent attributable to common
stock
Average number of shares of common stock outstanding during
the year

Millions of yen

2016

Thousands of U.S. dollars
2016¥1,982¥2,678$23,766

—

—

—

1,982

2,678

23,7662015

2015

Thousands of shares

71,80770,600

Diluted profit attributable to owners of parent per share:
Adjustments
Increase in number of shares of common stock(Share subscription rights)
Description of dilutive securities which were not included in thecalculation of diluted profit attributable to owners of parent per
share of common stock as they have no dilutive effects

Millions of yen

¥—
2015

2016

Thousands of U.S. dollars
2016

¥—

$—

Thousands of shares

106
106
—

			 Information regarding fair value of financial instruments at March 31, 2015 and 2016 was summarized as follows:

Cash and cash equivalents
Time deposits
Notes and accounts receivable,
trade
Investment securities
Notes and accounts payable, trade
Short-term loans payable
Accounts payable, non-tradeLong-term debt
Derivatives

Millions of yen

2015

2016

Thousands of U.S. dollars
2016Book value

Fair value

DifferenceBook value

Fair value

DifferenceBook value

Fair value

Difference

16,97916,979—16,50916,509—146,512

146,512

—

2,874
4,542
5,600
5,970
8,647
(11)

2,874
4,542
5,600
5,970
8,581
(11)

—
—
—
—
(66)
—

2,147
4,808
10,305
6,245
7,241
26

2,147
4,808
10,305
6,245
7,201
26

—
—
—
—
(39)
—

19,05442,67091,45455,42264,262
231

19,05442,67091,45455,422
63,907
231

—
—
—
—
(346)
—

¥9,999183¥9,999183¥——¥10,668110¥10,668
110

¥—
—

$94,675
976$94,675
976

$—
—

Investment securities include securities recorded as other current assets in the consolidated balance sheets.
Long-term debt includes current portion of long-term debt recorded as short-term loans payable in the consolidated balance
sheets.

2016

2. Diluted profit attributable to owners of parent per share of common stock is based on the following information
2015(1 ) Policy for financial instruments			‌The Company and consolidated subsidiaries raise funds through bank borrowings.
			‌The Company and consolidated subsidiaries use derivatives for the purpose of reducing risk and do not enter into derivatives
for speculative or trading purposes.
(2 ) Types of financial instruments and related risk			‌Trade receivables—trade notes and accounts receivable—are exposed to credit risk in relation to customers. Regarding thisrisk, the credit management is executed periodically.
			‌Marketable securities and investment securities are exposed to market risk. The fair value of those securities is reported in aboard meeting periodically.
			‌Substantially all trade payables – trade notes and accounts payable – have payment due dates within one year.
			‌Short-term loans payable are raised mainly in connection with business activities, and the repayment dates of long-term debt
extend up to four years from the balance sheet date. Long-term debt with variable interest rates is exposed to interest rate
fluctuation risk. However, to reduce such risk and fix interest expense for long-term debt bearing interest at variable rates,
the Company and consolidated subsidiaries utilizes interest rate swap transactions as a hedging instrument.
			‌Execution and management of derivatives transactions are carried out in accordance with the company regulations specifying
the transaction authority. In addition, in order to alleviate credit risk, derivative transactions are restricted to banks with highcredit ratings. Although operating liabilities and loans payable are exposed to liquidity risk, the Group’ s companies are able tomanage it by using methods such as preparing monthly cash management plans.
(3 ) Additional information regarding fair value of financial instruments			‌Fair value of financial instruments includes the value based on the market price. In addition, if such information is absent,
reasonable assessments of their value are included. Furthermore, the contract amounts, etc. relating to derivatives
transactions described in Note 18. Derivatives themselves do not serve as indicators of market risk involved in derivatives
transactions.

2016

139
139
—

As described in Note 1.(v), the Company adopted “Revised Accounting Standard for Business Combinations” , etc. effective from
April 1, 2015. The effects of these changes on per share data for the year ended March 31, 2016 are immaterial.

1.	Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivativetransactions
		Cash and cash equivalents, time deposits, and notes and accounts receivable, trade		Since these items are settled in a short period of time, their carrying value approximates fair value.
		Investment securities
		The fair value of stocks is based on quoted market prices.
		Short-term loans payable, notes and accounts payable, trade and accounts payable, non-trade		Since these items are settled in a short period of time, their carrying value approximates fair value.
		Long-term debt
		‌The fair value of long-term debt is based on the present value of the total of principal and interest discounted by the interest
rate to be applied if similar new loans were entered into.
		Derivatives
		Please refer to Note 18 Derivatives of the notes to the consolidated financial statements.
2. Financial instruments whose fair value is extremely difficult to determine

Millions of yen

2015

Unlisted securities¥230

Thousands of U.S. dollars
2016

2016

¥258

$2,290

Unlisted securities are not included in the investment securities because there were no quoted market prices available and the fairvalue is extremely difficult to determine.
3. The schedules for redemption of monetary assets and securities with maturities
Millions of yen

2015

Cash equivalents and time deposits
Notes and accounts receivable,
trade
Investment securities (other)Total
22 ANNUAL REPORT 2016

Due within
one year¥9,987

Due after
one yearthroughfive years¥—

Due after
five years
throughten years

Due within
one year¥—¥10,631

2016

Due after
one yearthroughfive years¥—

Thousands of U.S. dollars
2016

Due after
five years
throughten years

Due within
one year¥—$94,347

Due after
one yearthroughfive years$—

Due after
five years
throughten years$—16,979——16,509——146,512———¥26,966

61
¥61

—
¥—

—
¥27,141

56
¥56

—
¥—

—
$240,868

497
$497

—
$—

ANNUAL REPORT 2016 23

Note 17. Securities

Note 19. Investment and rental property

Information regarding securities classified as other securities at March 31, 2015 and 2016 was summarized as follows:
2015

Securities whose fair value exceeds
their cost
StocksOthersSubtotal
Securities whose cost exceeds theirfair value
StocksSubtotal
Total

Millions of yen

2016

Thousands of U.S. dollars
2016

Fair value

Cost

Unrealized
gain (loss)

Fair value

Cost

Unrealized
gain (loss)

Fair value

Cost

Unrealized
gain (loss)¥2,40761
2,469¥1,472
21
1,494

¥935
39
974

¥1,76756
1,824¥1,367
21
1,389

¥400
34
435

$15,682
497
16,187$12,132
186
12,327$3,550
311
3,860

404
404
¥2,874

527
527¥2,022

(123)
323
(123)
323
¥851 ¥2,147

517
517¥1,906

(193)
2,867
(193)
2,867
¥241 $19,054

4,588
4,588
$16,915(1,721)(1,721)$2,139

Unlisted stocks of ¥30 million at March 31, 2015 and \57 million ($506 thousand) at March 31, 2016 are not included in theabove table because there were no quoted market prices available and the fair value is extremely difficult to determine.
Investment securities in unconsolidated subsidiaries and affiliates were as follows:
2015

Investment securities

Millions of yen

¥200

2016

¥201

Thousands of U.S. dollars
2016$1,784

Information regarding sales of securities classified as other securities for the years ended March 31, 2015 and 2016 were as
follows:
Millions of yen

2015

Proceeds from sales of securities
StocksGains on sales
Stocks
Losses on sales
Stocks

¥125
125
90
90
—
—

2016

¥360
360
294
294
0
0

Thousands of U.S. dollars
2016$3,195
3,195
2,609
2,609
0
0

Impairment of investment securities classified as other securities for the years ended March 31, 2015 and 2016 were as follows:
Stocks¥

2015

Millions of yen

—

2016

¥16

Thousands of U.S. dollars
2016

$142

Note 18. Derivatives
As a matter of policy, the Company does not speculate in derivative transactions. The Company does not anticipate
nonperformance by any of the counterparties to the derivative transactions, all of whom are leading domestic financial institutions
with high bond ratings.
In accordance with the Companyʼs policy, the accounting department controls derivative transactions and requires approval by
the director responsible for accounting and the representative directors of the Company. The director who has the responsibility
to control the performance and the related risks connected with derivatives reports these to the Management Committee of theCompany.
The Company uses interest rate swaps to hedge the risks from interest rate fluctuations on borrowings. The exceptional methodof hedge accounting is used to account for those transactions.
Millions of yen
Thousands of U.S. dollars(Currency related)
Contract amount2015
Forward foreign exchange contracts:
Sell:
US$
¥769
Total
¥769

2016

¥653
¥653

Fair value

Unrealized gain (loss)

Contract
amount¥(11) ¥26
¥(11) ¥26

¥(11) ¥26
¥(11) ¥26

$5,795$5,795

2015

2016

2015

2016

2016

Fair value

Unrealized
gain (loss)

$231
$231

$231
$231

2016

2016

(1 ) Calculation of fair value
			 The fair value is calculated by the forward exchange rate.
(2 ) Derivative transactions to which hedge accounting was applied are excluded from the above table.
Millions of yen
Thousands of U.S. dollars(Interest related)
Contract amountInterest rate swaps

2015¥6,4302016¥5,314

Due after one year2015

¥4,7142016¥3,598

Contract
amountDue after
one year$47,160$31,931

2016

The profit of investment and rental property for the years ended March 31, 2015 and 2016 amounted to ¥492 million and \639
million ($5,671 thousand), respectively.
Information on the fair value of investment and rental property at March 31, 2015 and 2016 was summarized as follows:
Millions of yen

2015Book value Book value
beginning end of theof the yearyear

¥3,873¥9,019

Fair value¥15,116

Thousands of U.S. dollars
2016

2016

Book value Book value
beginning end of theof the year
year

¥9,019¥8,875

Fair value¥16,132

Book value Book value
beginning end of theof the year
year

$80,041

Fair value$78,763 $143,166

1. The fair value represents the acquisition cost less accumulated depreciation.
2. The fair value is mainly based upon the amount appraised by outside independent real estate appraisers.

Note 20. Segment information(Overview)
The reportable segments of the Company and consolidated subsidiaries are designed as business segments whose segregatedfinancial information can be obtained and to which the management reviews to decide on the allocation of managerial andfinancial resources and to evaluate their financial performance.
The Company and consolidated subsidiaries are primarily engaged in the three divisions as follows;
CS (Connection System) Division: The division produces and sells connectors and jacks.
FC (Functional Components) Division: The division produces and sells switches, remote controls and camera modules.
TP (Touch Panel) Division: The division produces and sells touch panels.
The business segment information is prepared in a manner similar to the accounting treatment as described in Note 1. Segment
performance is evaluated based on operating income or loss.
As described in Note 1.(v), the Company adopted “Revised Accounting Standard for Business Combinations” , etc. effective from
April 1, 2015. The effects of these changes on segment data are immaterial.
1. Business segment information

2015

Net sales
Outside customers
Intersegment sales
Total
Operating income (loss)
Identifiable assets
OthersDepreciation
Increase in fixed assets and intangible
fixed assets

2016

Net sales
Outside customers
Intersegment sales
Total
Operating income (loss)
Identifiable assets
OthersDepreciation
Increase in fixed assets and intangible
fixed assets

Connection
SystemDivision

Reportable Segments
Functional
Components Touch Panel
Division
Division

Millions of yen

Subtotal

Other

Total

Adjustment

Consolidated¥25,901—
25,901921
16,072¥25,027—
25,027(723)
12,768¥15,184—
15,184
1,909
7,756¥66,112—
66,112
2,107
36,597

¥118
—
118
6
9,613

¥66,230—
66,2302,113
46,210¥————
18,819¥66,230—
66,2302,113
65,029

2,355

490

647

3,493

1

3,495

—

3,495

2,221

991

438

3,651

164

3,816

—

3,816

Adjustment

Consolidated

¥—
—
—
—
18,511¥77,206—
77,206
4,171
67,606

Millions of yen

Connection
SystemDivision

Reportable Segments
Functional
Components Touch Panel
Division
Division

Subtotal¥27,095—
27,0952,215
14,687¥35,449—
35,449370
15,459¥14,467—
14,467
1,838
6,298¥77,011—
77,011
4,423
36,445

2,093

780

703

3,577

108

3,686

—

3,686

2,116

2,080

652

4,850

3,065

7,916

—

7,916

Other

Total

¥195 ¥77,206——
195
77,206(252)
4,171
12,64949,0942016

Since exceptional treatment is applied to interest rate swaps transactions, they are accounted for as if they were an integral partof the hedged long-term debt, and their fair value is included in the fair value of long-term debt in Note 16.

24 ANNUAL REPORT 2016

ANNUAL REPORT 2016 25

2016

Net sales
Outside customers
Intersegment sales
Total
Operating income (loss)
Identifiable assets
OthersDepreciation
Increase in fixed assets and intangible
fixed assets

Connection
SystemDivision$240,460—
240,460
19,657130,343$314,599—
314,599
3,284
137,194$128,390—
128,390
16,31255,893$683,449—
683,449
39,253
323,438

18,575

6,922

6,239

31,745

18,77918,4595,786

Note 21. Related party transactions

Thousands of U.S. dollars

Reportable Segments
Functional
Components Touch Panel
Division
Division

Significant transactions with related parties for the years ended March 31, 2015 and 2016 were as follows:
Subtotal

Other

Total

$1,731 $685,179
—
—
1,731
685,179(2,236)37,017112,256435,694958

43,042Adjustment

Consolidated

$—
—
—
—
164,279$685,179—
685,179
37,016599,982—

32,712

32,712

27,201

70,252—70,252Other is business segments not included in the reportable segments. It includes other parts, leasing, property rental, factoring
and worker dispatch businesses.
Adjustment includes corporate assets which are not allocable to the reportable segments.
2. Geographical information(1 ) Net sales
2015

Net sales
2016

Net sales
2016

Net sales

Japan

Millions of yen¥12,168

Asia¥27,548

North America

Japan

Asia

North America¥12,938
Japan

Fixed assets¥31,439

2016

Fixed assets

Asia

North America

Japan

Asia

North America

2016

Fixed assets¥15,843
Japan$140,602

Consolidated

EuropeOther areas

Consolidated

EuropeConsolidated

EuropeConsolidated

EuropeConsolidated¥2,873$265,815

¥303

Asia

¥6,252

North America¥377$55,485

North America$3,346$685,179¥22,534¥437

Thousands of U.S. dollars¥77,206

$9

¥460

Millions of yen¥66,230¥1$25,497

Millions of yen¥7,071

Asia

Other

Thousands of U.S. dollars$279,011

Japan

Consolidated¥21

Europe¥29,952$114,821¥14,699

Other¥2,115

Millions of yen(2 ) Fixed assets
2015

Europe¥24,375$203,337

3. Information about major customers
		The Company and consolidated subsidiaries have no major customers which account for 10% or more of net sales.
4. Information about the loss on impairment of fixed assets
2015

Connection System Division
Functional Components Division
Touch Panel Division
Subtotal
Other
Adjustments and eliminations
Consolidated

Millions of yen

¥444
98
—
543
818
—
¥1,361

2016

¥—
—
—
—
—
—
¥—

Terutaka Ikeda (Auditor)

Transactions
Guaranty
money
deposited
Rent

—

¥13

Balances
Other
Other
current
assetsinvestments

¥14

¥1

Millions of yen

2016

Terutaka Ikeda (Auditor)

Transactions
Guaranty
money
deposited
Rent

—

¥14

Balances
Other
Other
current
investments
assets¥14¥1

Thousands of U.S. dollars

2016

Terutaka Ikeda (Auditor)

Transactions
Guaranty
money
deposited
Rent

—

$124

Balances
Other
Other
current
assetsinvestments

$124

$9

Note 22. Subsequent events
1.	Acquisition of treasury stock	The Company resolved to acquire treasury stock in accordance with Article 165 (3) of the Companies Act at the Board of
Directors’ meeting held on June 22, 2016.
1) Objective: To enable flexible management in response to changes in the business environment2) Class of treasury stock: Common stock3) Total treasury stock the Company may acquire: 2,000,000 shares, at maximum4) Total acquisition amount: \700 million ($6,212 thousand), at maximum5) Acquisition period: From July 1, 2016 to August 26, 20166) Method of acquisition: Market transactions on the Tokyo Stock Exchange
2.	Cancellation of treasury stock	The Company resolved to cancel treasury stock in accordance with Article 178 of the Companies Act at the Board of Directors’
meeting held on June 22, 2016.
1) Class of treasury stock: Common stock2) Total treasury stock cancelled: 4,000,000 shares (5.06% of total number of treasury stock issued before cancellation)3) Date of cancellation: June 30, 20164) Total number of treasury stock issued after cancellation: 75,000,000 shares¥22,912$3,878

Millions of yen

2015

Thousands of U.S. dollars
2016

$—
—
—
—
—
—
$—

5. Information about the amortization of goodwill and the balance of goodwill
		For the year ended March 31, 2015, there was no amortization and balance of goodwill.

2016

Amortization
Balance

Connection
SystemDivision

Reportable Segments
Functional
Components Touch Panel
Division
Division

Connection
SystemDivision

Reportable Segments
Functional
Components Touch Panel
Division
Division

¥—
—

¥83
335

¥—
—

Millions of yen

Subtotal

¥83
335

Other

¥2
45

Adjustment

Consolidated

Adjustment

Consolidated

¥—
—

¥86
380

Thousands of U.S. dollars

2016

Amortization
Balance26 ANNUAL REPORT 2016

$—
—

$737
2,973

$—
—

Subtotal

$737
2,973

Other

$18
399

$—
—

$763
3,372

ANNUAL REPORT 2016 27

Report of Independent Auditors
SMK Corporation and Consolidated Subsidiaries

Officer Introduction(As of June 22, 2016)

Directors

Yoshio Sakurai

Yoshiyuki Kaku

Director andExecutive Deputy President

Yasumitsu Ikeda

Director andExecutive Vice President,
Chief Technology Officer

President,
Chief Executive Officer andChief Operating Officer

Mikio Wakabayashi

Paul Evans

Director andExecutive Vice President

Toshio Nakamura

Director andExecutive Vice President

Director

Auditors

Tetsuya Nakamura
Auditor andChairman of Auditors
Meeting

Naru Nakashima
AuditorIchiro Shimizu
AuditorMorikazu Fukui
AuditorCorporate
Executive
Officers

Kohei Ohgaki

Shigechika Yanagi Hideo Matsumoto Hiroshi Miyakawa
Executive Vice President

Vice President

Vice President

Masanobu Ikeo

Mitsuhiko Goto

Tetsuo Hara

Mitsuyuki Masubuchi

Executive Vice President,
Chief Financial Officer

Harutaka Seki
Vice President

28 ANNUAL REPORT 2016

Vice President

Vice President

Vice President

Vice President

Takemi Ishibashi
Vice President

Hiroshi Usami

Vice President,
Chief Information Officer

ANNUAL REPORT 2016 29

Corporate Information(As of March 31, 2016)

Corporate Data

Shares and Shareholders

Name

SMK Corporation

Authorized shares

195,961,274

Established

April 3,1925

Issued shares

79,000,000

Registered

January 15, 1929

Primary business

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

Capital¥ 7,996,828,021

Stock exchange listing

Tokyo Stock Exchange

Administrator ofshareholders register

Mitsubishi UFJ Trust and Banking
Corporation

Independent auditors

Ernst & Young ShinNihon LLC
Tokyo, Japan

Employees (SMK-Group)

6,179

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

Global Network
Domestic Bases（9 Bases）

Overseas Bases（18 Countries/Areas, 38 Bases）

Shinagawa, Tokyo（Head office）
Gate City Ohsaki, Toyama,
Hitachi, Osaka, Nagoya, Ibaraki,
Hokuriku and Fukuoka
Taiwan, Hong Kong, China,
Singapore, Thailand, Malaysia,
Philippines, Korea, Ireland, U.K.,
France, Germany, Belgium,
Hungary, Slovakia, U.S.A., Mexico
and Brazil

Number of shareholders

Major Shareholders (top ten)

7,175

Shares Owned(1,000 shares)

Percentageof Shares (%)

Mizuho Bank, Ltd.

3,480

4.96

Nippon Life Insurance Company

3,241

4.62

Dai Nippon Printing Co., Ltd.

3,200

4.56

The Master Trust Bank of Japan, Ltd.
(Trust Account)

3,032

4.32

SMK Cooperating Company
Share Holding Association

2,964

4.22

Japan Trustee Services Bank, Ltd.
(Trust Account)

2,774

3.95

The Bank of Tokyo-Mitsubishi UFJ, Ltd.

2,508

3.57

Mitsubishi UFJ Trust and Banking Corporation

1,800

2.56

SMK Employees Share Holding Association

1,704

2.43

The Showa Ikeda Memorial Foundation

1,500

2.14

Note:SMK holds 8,809 thousand shares of treasury stock, but theseare excluded from the above list. Figures for percentage ofshares are calculated excluding the treasury stock.

Share ownership by shareholder type (unit : share)
Financial institutions
Financial instruments dealers

25,788,685 (32.65%)
646,343 ( 0.82%)

Other entities

9,772,718 (12.37%)

Foreign entities, etc.

10,501,143 (13.29%)

Individuals and others

32,291,111 (40.87%)

Please see our website for detailed IR information.
The IR Information section of SMK’ s website includes
annual reports and presentation materials. The website
also carries information about SMK’ s products, corporate
data, CSR initiatives, and commitment to the environment.

WebsiteHead Office

Gate City Office

SMK CORPORATION
5-5, Togoshi 6-chome, Shinagawa-ku, Tokyo 142-8511, JAPAN
Tel: +81-3-3785-1111 Fax: +81-3-3785-1878

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