ANNUAL REPORT 2014
For the fiscal year ended March 31, 2014

Automotive capacitive
touch panel

Touch
Panel
Division

Connection
SystemDivision

Functional
Components
Division

SMB coaxial connector
with a molded
locking provision

Rectangular coaxial
connector

Wide-angle
camera module

Top push switch(long stroke type)

FPC connector

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

2014¥ 54,475¥ 65,796

Operating income (loss)

(853)

2,330

—

22,639Net income (loss)

(198)

2,541

—

24,689¥ 52,498¥ 56,235

28,204

31,476

Operating Results

March 31, 2014).

Net sales

June 2014

Thousands of
U.S. dollars

2013Group’s businesses for the 92nd fiscal year (from April 1, 2013 to
We look forward to your continuing support and encouragement.

Percent change
2013/2014

Millions of yen

2014

20.8 %$639,293

Yasumitsu Ikeda
President and COO

Financial Position
Total assets

Taking Changes as Opportunities for Growth

Total net assets

Overview
During the fiscal year ended March 31, 2014, the global economy saw a moderate recovery. The U.S. economy was on a recovery trend,
reflecting improved employment and the shale revolution. In China, despite some signs of deceleration, the growth trend continued as awhole.
The Japanese economy is also on a recovery path, as the Abenomics measures successfully corrected yen’s appreciation, leading to theimprovement of corporate earnings.
The SMK Group achieved favorable sales mainly in products for the information and communication, automobile, Internet protocol set-top
boxes and photovoltaic power generation systems, whereas sales of products for flat-panel televisions and digital cameras remained sluggish.
Under these circumstances, we continued aggressive introduction of new products and enhancement of our marketing capabilities. As aresult, the Group’s consolidated net sales for the fiscal year under review achieved a year-on-year increase.
The Group’s consolidated income also improved significantly from a year earlier, owing to the corrected yen’s appreciation, as well as theincreased net sales, cost-cutting efforts and other measures such as reduction of fixed costs.

CONTENTS
1
2
4
5
6
7
8
10
10
11
12
13
20
21
back cover

SMK Philosophy
To Our Shareholders
Financial Highlights
Overview of Consolidated Results by Division
SMK’s New Lineup
BCM Activities, Topics
Financial 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.

Net income (loss)
—%

Basic

¥(2.78)¥35.58

Diluted

—

35.52

—

0.35

5.00

10.00

100.0

0.10

Cash dividends$0.35

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥102.92 = U.S. $1.00.

Operating income (loss)
3,000

64,371

Net income (loss)

Millions of yen

90,000Millions of yen
2,754

3,000

2,479

55,3402,000

54,475

2,541

2,330

65,796

61,91460,000

1,862

1,500
1,037
1,000

30,000

0

(799)
0

(198)

(853)
(1,166)
0

2010

2011

2012

2013

2014

(1,500)Total assets / Total net assets
Millions of yen
60,000 56,113

Total assets
53,059

2011

2012

2013

2014

56,23552,498(1,000)

Basic net income (loss) per share

2010

2011

2012

2013

2014

Cash dividends per share
Yen

Yen

Total net assets

53,883

2010

12

45
35.58

10.00
9.00

30

SMK Action Guidelines

Contribute 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.

305,830

U.S. dollars

8.00

25.19
8

40,000

1
2
3
4
5

11.6

Per Share Data

Millions of yen

The Japanese economy is expected to reach a stable growth track, owing to the continuation of monetary easing measures and the weaker
yen tendency. However, future uncertainties remain due to negative factors, such as the deceleration of emerging economies andgeopolitical risks.
The SMK Group will endeavor to accommodate the changing market environments, while making focused efforts to enhance
management efficiency and reinforce the corporate structure through the continuation of cost-cutting measures. To ensure medium- tolong-term corporate growth, we will explore business opportunities in new markets such as wearable devices, the field of the environment
and energy, healthcare and smart life, based on our accumulated experience in the information and communication and automobile
industries, as well as in the emerging nations’ markets with high growth potential. In addition, we will make all-out efforts to ensure a
corporate structure that enables sustainable growth by promoting the development of new products and technologies that best suitcustomer needs and the sophistication of production technologies.

$ 546,395

Yen

Net sales

Toward a New Growth Path

7.1 %31,127

29,862

28,25728,204

31,476

6.00

14.14

5.00

15
4

20,0000(2.78)(11.04)

0

2010

2011

2012

2013

2014

(15)

2010

2011

2012

2013

2014

0

2010

2011

2012

2013

2014

ANNUAL REPORT 2014 1

Overview of Consolidated Results by Division(Year ended March 31, 2014)

The many different electronic components that SMK
produces are widely used by electronics
manufacturers in and outside Japan. The markets forthese components can be broadly classified into
seven markets: the communications market, theinformation market, the home appliance market, theindustry market, the car electronics market, theaudiovisual market and the eco market.
Three divisions, namely the Connection System (CS)Division, the Functional Components (FC) Division andthe Touch Panel (TP) Division, as well as the Research &Development Center, are responsible for developing
products that continually meet market requirements inthe wide range of markets outlined above. The threedivisions handle operations ranging from productplanning and design to mass production, whereas the
Research & Development Center is primarily in charge ofdesigning and developing products mainly in new fields.
In this section, we present an overview of our results
achieved in each of the three divisions in the fiscal
year under review.

Touch Panel
Division¥ 15,808 Million

Other¥ 134 Million
0.2%

24.0%
Net sales

Functional
Components
Division¥ 22,438 Million¥ 65,796
MillionConnection
SystemDivision
41.7%¥ 27,416 Million

Connection System
Division

Major Products
RF coaxial connectors
FPC connectors
Board to Board connectors
Jacks

Functional Components
Division

Major Products
Remote controls
Switches
Wireless devices units
Camera modules

Touch Panel
Division

34.1%

Major Products

In addition to net sales for the divisions presented above, net sales of ¥134 million were earned by “Other”
businesses in the fiscal year under review, which include net sales of the Research & Development Center.

2 ANNUAL REPORT 2014

Resistive touch panels
Capacitive touch panels
Optical touch panels

In the first half of the fiscal year under review, our net sales increased
significantly due to favorable performance in the automobile, environmental
and energy markets, as well as in our mainstay communications market
where our new products were increasingly adopted into smartphones,
which enjoyed remarkable demand growth, and an increasing number ofour products were employed as standard components.
In the second half, however, the poor performance of our primarycustomers in the highly volatile smartphone market and the lowering ofproduct prices resulted in a sharp sales decline. As a result, the year-on-year
growth of our net sales for the year under review was relatively mild at 7.5%.
With an emphasis on the information and communications, automobileand environmental markets, we will continue to develop new products
targeted at devices with high growth potential.

Net sales

Millions of yen

30,00027,41625,49823,242

22,63920,00010,000

0

2011

2012

2013

Net sales

2014

Millions of yen

40,000

Sales of remote controls, our mainstay products, increased significantly foroverseas Internet protocol set-top boxes, especially for the new media
that offer video viewing and game play. Meanwhile, we were affected bysluggish sales of digital home appliances, including flat-panel televisions,and the shrinking market share of the smartphone manufacturers that
employ our products.
Going forward, we will strive to expand businesses with a focus on thepromising housing equipment sector, which draws attention from anenergy-saving viewpoint; the audiovisual sector centering on set-top
boxes; and the rapidly growing automobile market.

30,00030,08022,43822,04920,00018,803

10,000

0

2011

2012

2013

Net sales

2014

Millions of yen

20,000Due to the favorable market condition, sales of our products for car
navigation systems and center consoles increased significantly, mainly for
the North American market. Sales of our touch panels for the ATM market
remained strong as planned, despite inventory adjustments in someproducts for the Chinese market. Sales of touch panels for smartphones
suffered from severe competition, although they enjoyed growing demand.
To meet the growing demand for capacitive touch switches for home
appliances, we will intensify our efforts to develop and promote innovative
products, such as those that can be pasted onto a curbed surface.

15,80815,00010,41810,000

9,923

8,350

5,000

0

2011

2012

2013

2014

ANNUAL REPORT 2014 3

BCM (Business Continuity Management) Activities

SMK’s New Lineup

Research & Development Center“FBS Series” Quick ActiveTM Actuator

We have developed
the “FBS Series”
Quick ActiveTM
Actuator. Built in an
input device, suchas touch panels andApplications:
touch pads, thisPC-related and Amusement devices,
Health appliances, etc.
actuator feeds backcontact sensation to the fingertips when theoperation screen of the input device is touched.
Compared with conventional methods using
vibration motors and piezoelectric elements, thisproduct is capable of providing a strong force
momentarily, thereby producing a good “clicking”
feel. This leads to enhanced operability of the input
device and prevention of faulty operation, which is
expected to provide this actuator with a wide range
of applications.

FC Division“Long-stroke type” top push switches

While retaining thethin shape of theconventional top
push switches, thisnew switch ensuresa long stroke of
0.27 mm, which isApplications:
Tablet PCs, Smartphones and MFPs
1.8 times longer
than that of the Company’s conventional switches.
This produces a stronger operational feeling and alonger operating life of 500,000 clicks, which isfive times more than that of the Company’s
conventional switches. This product is expected
to find an extensive range of applications,
including multi-function printers (MFPs), for whichthinner and longer-life switches are increasingly indemand, and various industrial and vehiclemounted devices.
4 ANNUAL REPORT 2014

CS Division“FB-5 Series” FPC-to-board connectors forbattery connection

To enlarge the lineup
of FPC-to-board
connectors forbattery connection,
we have developed
the “FB-5 Series”
Applications:connectors by
Mobile phones, Smartphones,
Digital cameras and other mobile devices
upgrading the FB
Series connectors for large current applications interms of lower height and space saving.
This new connector achieves a joint height of as
low as 0.9 mm and a packaging area that is 72%
smaller than that of the Company’s conventional
connectors. This space-saving structure cancontribute to making the end products smaller
and thinner.
We will continue to promote product development
in response to market needs.

TP Division“CapBeat Touch®” capacitive touch panelswith 2-step input and vibration

We have developed atouch panel thatallows input when thearea of fingertip
contact with thepanel is large enoughand disallows input
Applications:
Car navigation systems, Tablet PCs, etc.
when such contact
area is too small. This feature can prevent theunintentional input that tends to occur with conventional
capacitive touch panels for which only the slightest touch
can trigger an inputting operation unintentionally. In
addition, the new touch panel incorporates the alreadywell-reputed force feedback technology, a feature thatdelivers a sense of vibration to fingertips when an input isaccomplished, to produce a good “inputting” feel.
We will continue to engage in the development of
new products from the viewpoint of users.

SMK has previously endeavored to establish a business recovery and continuity response at times of disaster.
When the Great East Japan Earthquake struck on March 11th, 2011, companies in the supply chain such as
suppliers were badly affected.
SMK responded to this by changing suppliers and implementing alternate production at overseas factories,
which helped to minimize the impact on the customers. Taking the lessons learned from this unprecedented
disaster, SMK has reviewed BCP that are based on combination between site substitution strategy and site
recovery strategy across group companies.
As management measures to improve business continuity of Head Office functions, SMK relocated IT systems
to a data center with seismic isolation technology. Additionally, SMK installed an electric generator to continue
daily business operations without delay in the event of power outage.

Topics1 Land is acquired for second plant in the Philippines
We are pleased to announce that our Philippine production base, SMK
Electronics (Phils.) Corporation, has acquired land for a second plantfrom the Clark Development Corporation.
The existing plant in the Philippines serves as a major production
facility for touch panels, whereas the second plant is primarily intended
to prepare for a possible increase in demand for touch panels, mainly
for automobiles, and for the full-scale production of memory cardconnectors for smartphones and connectors for solar cell modules.
Adjoining the current plant, the second plant will have around 5,000
square meters of manufacturing space, resulting in a combined 16,000
square meters and 1.5 times the existing space. The workforce is also
anticipated increase from 2,300 to 3,500 eventually.
SMK Electronics (Phils.) Corporation will respond to growing demand
as a major production base of the SMK Group.

SMK Electronics (Phils.)
Corporation
Clark Field, Pampanga, PHILIPPINES

2 We employ and support the physically challenged athlete Masayuki Haga.
To encourage the spread and development of sports for athletes with physicaldisabilities, we have established an employment contract with Masayuki Haga, acandidate for membership on the national wheelchair rugby team representing Japan.
Aiming for an appearance in the 2016 Rio de Janeiro and 2020 Tokyo
Paralympics, Mr. Haga will pursue his competitive career on a priority basis,
while taking on the duties relating to human resources and public relations for
SMK Corporation.
Profile of Masayuki Haga
Born in November 1984 in Chiba Prefecture. When he was a technical school student, a traffic accident
condemned him to a wheelchair. In 2006, he learned about wheelchair rugby, and went to New Zealand in 2009
to play wheelchair rugby and study English. Currently, he belongs to the wheelchair rugby team AXE.
Major competitive career
2010
2012
2013

Designated as a candidate for national team membership for 2010. The team won the bronze medal at the world championships.
Designated as a candidate for national team membership for 2012. He participated in the London Paralympics as an alternate
for the team.
Designated as a candidate for national team membership for 2013. The team won the silver medal at the Asia-Oceania zone championships.
ANNUAL REPORT 2014 5

Financial Section

Financial Review
SMK’s net sales for the fiscal year ended March 31,
2014, increased 20.8% year on year to ¥65,796
million (US$639,293 thousand), whereas an
operating income of ¥2,330 million (US$22,639

Five-Year Summary

Total net assets(As of March 31)

Millions of yen
32,00031,476
31,12731,000thousand) and a net income of ¥2,541 million(US$24,689 thousand) were recorded, on a

SMK Corporation and Consolidated Subsidiaries

29,86230,000consolidated basis.
29,000Net Sales

Thousands of
U.S. dollars

Millions of yen
Years ended andas of March 31

2010

2011

2012

2013

2014

2014

Operating Results

Our products enjoyed favorable sales, especially for the informationand communication market owing to rapid spreading of smartphones
and tablet PCs, as well as for the automotive market and Internet
protocol set-top boxes, for which our components enjoy growing
demand overseas, and photovoltaic generation systems which is
rapidly expanding in Japan.
As a result, consolidated net sales were ¥65,796 million(US$639,293 thousand), up 20.8% year on year.

28,000

0

2010

2011

28,25728,204

2012

2013

2014

Return on equity (ROE)(Years ended March 31)

%
12

8.5

Net sales¥64,371¥61,914¥55,340¥54,475¥65,796$ 639,293

Operating income (loss)

2,479

2,754

(1,166)

(853)

2,330

22,639Net income (loss)

1,862

1,037

(799)

(198)

2,541

24,689Operating Income
Consolidated operating income reached ¥2,330 million (US$22,639
thousand), owing to such measures as aggressive promotion
activities and the introduction of new products, cost-cutting efforts
and the slashing of fixed costs, in addition to the significant increasein net sales.

Financial Position
Total assets
Total net assets

8

6.2

3.4
4

0

¥56,113
31,127¥53,059
29,862¥ 53,883
28,257¥ 52,498
28,204¥ 56,235$546,395

31,476

305,830(0.7)

Net Income
The favorable operating income, combined with foreign exchange
gain due to the correction in yen appreciation, brought about net
income of ¥2,541 million (US$24,689 thousand).

(2.8)
(4)

2010

2011

2012

2013

2014

Return on assets (ROA)
Yen

U.S. dollars

Per Share Data
Total net assets¥420.07¥408.12¥392.59¥394.81¥437.84$

4.25

Net income (loss)
Basic
DilutedCash dividends

As of March 31, 2014, total assets were ¥56,235 million (US$546,395
thousand). ROA jumped to 4.7%.

Total Net Assets / ROE
25.19

14.14

(11.04)(2.78)

35.58

0.35

—

—

—

—

35.52

0.35

8.00

9.00

6.00

5.00

10.00

0.10

Note: The U.S. dollar amounts represent translations of Japanese yen, for convenience only, at the rate of ¥102.92 = U.S. $1.00.

6 ANNUAL REPORT 2014

Total Assets / ROA(Years ended March 31)

%
6
4.7

4

3.3

As of March 31, 2014, total net assets were ¥31,476 million(US$305,830 thousand). ROE jumped to 8.5%.

1.9
2

Cash FlowsNet cash provided by operating activities amounted to ¥7,645 million(US$74,281 thousand), net cash used in investing activities totaled¥3,420 million (US$33,230 thousand) and net cash used in financing
activities was ¥1,521 million (US$14,778 thousand).

0

(2)

2010

2011

(1.5)

(0.4)

2012

2013

2014

ANNUAL REPORT 2014 7

Consolidated Balance Sheets

Consolidated Balance SheetSMK Corporation and Consolidated Subsidiaries
As of March 31, 2013 and 2014

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

Assets2013

2014

Liabilities and net assets

2014

Time deposits (Note 15)
Notes and accounts receivable, trade (Note 15)
Allowance for doubtful accounts
Inventories (Note 3)
Deferred tax assets (Note 8)
Other current assets (Notes 15 and 19)

2013

2014

2014

¥7,141¥5,119$ 49,738

3,194

3,733

36,271

Accrued income taxes

370

798

7,754

Accrued bonuses

476

1,069

10,387

Accrued directors’ and officers’ bonuses

—

70

680

Accounts payable, non-trade (Note 15)

6,657

5,928

57,598Other current liabilities

1,326

1,405

13,651

19,164

18,122

176,079

4,347

5,447

52,925

Accrued employees’ retirement benefits (Note 13)

162

—

—

Accrued directors’ and officers’ retirement benefits

143

180

1,749

Liability for retirement benefits (Note 13)

—

36

350

Other long-term liabilities

478

974

9,462

5,130

6,637

64,486

7,996

7,996

77,691

Capital surplus

12,345

12,327

119,773

Retained earnings

14,154

15,982

155,286

Treasury stock (Note 11)(3,697)(3,434)(33,366)

30,79832,871

319,384

70

274

2,662

(2,742)(2,171)(21,094)

—

463

4,499

(2,672)(1,434)(13,933)

78

39

379

28,204

31,476

305,830¥52,498¥ 56,235$ 546,395

Current liabilities

Current assets
Cash and cash equivalents (Note 15)

Thousands of
U.S. dollars(Note 2)Millions of yen¥8,631¥ 11,134$ 108,181

82

93

904

14,551

14,681

142,645

(53)

(36)

(350)

5,466

5,905

57,375

472

744

7,229

3,484

2,704

26,272

32,63335,225342,256

Short-term loans payable (Notes 4 and 15)
Notes and accounts payable, trade (Note 15)

Long-term liabilities
Long-term debt (Notes 4 and 15)

Investments and long-term loans
Investment securities (Notes 12 and 15)

1,908

2,656

25,806Long-term loans receivable

141

126

1,224

Asset for retirement benefits (Note 13)

—

511

4,965

Other investments (Note 19)

619

635

6,171

Allowance for doubtful accounts

(112)

(111)

(1,079)

2,556

3,817

37,087

Net assets
Shareholders’ equity (Note 10)
Common stock

Property, plant and equipment (Notes 4, 7 and 16)

Authorized : 

195,961,274 shares

Land

4,358

4,254

41,333

Buildings

17,055

17,337

168,451

Machinery and vehicles

17,132

18,276

177,575

Tooling and office furniture

21,17421,753211,359

Construction in progress

357

246

2,390

60,076

61,866601,108

Accumulated other comprehensive income(43,370)(45,035)(437,573)

Net unrealized gains (losses) on other securities

16,706

16,831

163,535

Foreign currency translation adjustments

Less-accumulated depreciation

Issued and outstanding : 79,000,000 shares

Retirement benefit asset and liability adjustments

Other assets
Deferred tax assets (Note 8)

290

167

1,623

Intangible assets (Note 7)

313

195

1,894

603

362

3,517

Subscription rights to shares (Note 18)

Total liabilities and net assets
Total assets¥52,498¥ 56,235$ 546,395

See accompanying notes to consolidated financial statements.
8 ANNUAL REPORT 2014

ANNUAL REPORT 2014 9

Consolidated Statement of Income

Consolidated Statement of Changes in Net Assets

SMK Corporation and Consolidated Subsidiaries

SMK Corporation and Consolidated Subsidiaries

Years ended March 31, 2013 and 2014

Years ended March 31, 2013 and 2014

Net sales (Note 17)
Cost of sales (Notes 3 and 5)
Selling, general and administrative expenses (Notes 5 and 6)
Operating income (loss) (Note 17)

2013

2014

2014

¥ 54,475
47,0478,281(853)¥ 65,796
54,3899,077
2,330$ 639,293
528,459
88,195
22,639

73
718
1,963
144
352
203
3,453

89
743
1,421
44
225
199
2,721

865
7,219
13,807
428
2,186
1,933
26,438Other income
Interest and dividend income
Rent income
Foreign exchange gain, net
Gain on sales of fixed assets
Gain on sales of investment securities (Note 12)
Other
Total other income
Other expenses
Interest expense
Rent expense
Loss on disposal of fixed assets
Loss on liquidation of subsidiaries and affiliates
Special retirement benefit expenses
Loss on impairment of fixed assets (Note 7)
Other
Total other expenses
Income (loss) before income taxes and minority interests
Income taxes (Note 8)
Current
DeferredIncome (loss) before minority interests
Minority interests
Net income (loss)

127
294
256
108
99
200
169
1,253

107
266
280
—
41
613
149
1,456

1,040
2,585
2,721
—
398
5,956
1,447
14,147

1,347

3,595

34,930

488
1,062
(203)
(5)
¥ (198)

1,041
13
2,541
—
¥ 2,541

10,115
126
24,689—$ 24,689
U.S. dollars(Note 2)Yen

Per share data
Total net assets
Net income (loss)
Basic
DilutedCash dividends¥394.81¥437.84$4.25(2.78)

35.58
35.52
10.00

0.35
0.35
0.10

—

5.00

Millions of yen

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

Shareholders’ equity

Number ofshares ofcommon Common
stock
stock

2013

Income (loss) before minority interests
Other comprehensive income (Note 9)
Net unrealized gains(losses) on other securities
Foreign currency translation adjustments
Total other comprehensive income
Comprehensive income
Total comprehensive income attributable to:Shareholders of the Company
Minority interests

2014

(203)

¥2,541$24,689

(77)
757
680
¥477

204
571
775
¥ 3,316

1,982
5,548
7,530
$ 32,219

¥482
(5)

¥ 3,316—$ 32,219—¥32 ¥5 ¥28,257

(433)

—

(433)

Net income (loss)

(198)

(198)

—

(198)

(143)

(143)

—

(143)

0

0

—

0

Acquisition of treasury stock
Disposition of treasury stock(0)

Net changes in items otherthan shareholders’ equity
Total changes

—

(77)

757

680

46

(5)

721

—

—

(0)

(631)

(143)

(774)

(77)

757

—

680

46

(5)

(53)

Balance at March 31, 2013 79,000,000

7,996

12,345

14,154(3,697)30,79870(2,742)—(2,672)78—

28,204

Balance at April 1, 2013

7,996

12,345

14,154(3,697)30,79870(2,742)—(2,672)78—

28,20479,000,000

Cash dividends paid

(713)

(713)

—

(713)

Net income (loss)

2,541

2,541

—

2,541

(21)

(21)

—

(21)

284

266

—

266

Acquisition of treasury stock
Disposition of treasury stock(18)

Net changes in items otherthan shareholders’ equity
Total changes

—

—

(18)

1,828

263

—

204

571

463

1,238

(39)

2,073

204

571

463

1,238

(39)

Balance at March 31, 2014 79,000,000 ¥7,996 ¥12,327 ¥15,982 ¥ (3,434) ¥ 32,871 ¥ 274 ¥ (2,171) ¥

463 ¥ (1,434) ¥

1,199
—

3,272

39 ¥— ¥31,476

Thousands of U.S. dollars (Note 2)

Shareholders’ equity

Commonstock

2014

Total net
assets(433)

SMK Corporation and Consolidated Subsidiaries
Millions of yen

Minority
interests

Cash dividends paid

Consolidated Statement of Comprehensive Income
Thousands of
U.S. dollars(Note 2)Net
Total
unrealized
Foreign Retirement accumulated
gains
Total (losses) on currency benefit asset
other Subscription
rights to
Capital Retained Treasury shareholders’
other translation and liability comprehensive
equity securities adjustments adjustments
sharessurplus earnings
stock
incomeBalance at April 1, 2012 79,000,000 ¥7,996 ¥12,345 ¥14,785 ¥(3,554) ¥31,572 ¥147 ¥(3,499) ¥— ¥(3,352) ¥

See accompanying notes to consolidated financial statements.

Years ended March 31, 2013 and 2014

Accumulated other comprehensive income

Balance at April 1, 2013

Accumulated other comprehensive income

Total
Net unrealized
Foreign Retirement accumulated
Total gains (losses)
other Subscription
currency benefit asset
Capital Retained Treasury shareholders’rights to Minority Total net
on other translation and liability comprehensive
surplus earnings
stock
assetsequity securities adjustments adjustments
shares interests
income$ 77,691 $ 119,948 $ 137,524 $ (35,921) $ 299,242 $

680 $(26,642) $

—(25,962) $

758 $— $274,038

Cash dividends paid

(6,927)(6,927)—(6,927)

Net income (loss)

24,68924,689—24,689

(204)

(204)

—

(204)

2,759

2,584

—

2,584

Acquisition of treasury stock
Disposition of treasury stock(175)

Net changes in items otherthan shareholders’ equity
Total changes
Balance at March 31, 2014

—

(175)

17,762

2,555

—

1,982

5,548

4,499

12,029(379)

20,142

1,982

5,548

4,499

12,029(379)$ 77,691 $ 119,773 $ 155,286 $ (33,366) $ 319,384 $ 2,662 $ (21,094) $ 4,499 $ (13,933) $

11,650—31,792

379 $— $ 305,830

See accompanying notes to consolidated financial statements.
10 ANNUAL REPORT 2014

ANNUAL REPORT 2014 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, 2013 and 2014

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

2013

Cash flows from operating activities
Income (loss) before income taxes and minority interests
Depreciation and amortization
Loss on impairment of fixed assets
Amortization of goodwill
Increase (decrease) in accrued bonuses
Increase (decrease) in accrued directors’ and officers’ retirement benefits
Increase (decrease) in accrued employees’ retirement benefits
Increase (decrease) in liability for retirement benefits(Increase) decrease in prepaid pension costs
Interest and dividend income
Interest expense
Loss on disposal of fixed assets
Loss on liquidation of subsidiaries and affiliates
Special retirement benefit expenses(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
Income taxes refunded
Payments of liquidation of subsidiaries and affiliates
Payments of special retirement benefit expenses
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
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 sale of treasury stock
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 the year
12 ANNUAL REPORT 2014

2014

2014

¥1,347
3,439
200
110
(159)
25
138
—
410
(73)
127
256
108
99
2,520
541
(2,236)
(925)
(196)
5,731
79
(129)
(181)
16
(107)
(99)
5,310

¥ 3,595
3,378
613
62
590
37
(163)
248
—
(89)
107
280
—
41
1,239
(51)
(1,072)
(848)
380
8,347
102
(108)
(655)
0
—
(41)
7,645

$ 34,930
32,822
5,956
602
5,733
360
(1,584)
2,410
—
(865)
1,040
2,721
—
398
12,038(496)(10,416)(8,239)
3,692
81,102991(1,049)(6,364)0—(399)
74,281(65)
77(3,823)
439
(62)
—
38
(112)
70
36
(3,402)(82)
79(3,797)
200
(91)
(491)
745
(136)
166
(13)
(3,420)(797)
768(36,893)
1,943
(884)
(4,771)
7,239(1,321)
1,613(127)(33,230)

(800)
2,940
(2,928)
(142)
0
(430)
(1,360)
(307)
241
8,390
¥ 8,631

(600)
1,790
(2,201)
(20)
218
(708)
(1,521)
(201)
2,503
8,631
¥11,134(5,830)17,392(21,386)
(194)
2,118
(6,878)(14,778)(1,953)24,32083,861$108,181

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 are prepared on the basis of accounting principles
generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards, and arecompiled from the consolidated financial statements prepared by the Company as required by the Financial Instruments and Exchange Law of Japan. For the purpose of thisdocument, 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 the prior 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 throughmajority 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 weretentatively closed as of March 31 and the necessary adjustments for consolidation 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 net income
includes the Company’s equity in the current net income 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 cost over the underlying net assets at the date ofacquisition 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: 26
			The remaining 2 subsidiaries which are unconsolidated are deemed immaterial and, accordingly, their results of operations had no significant effect on the consolidated financial
statements.
			 Ibaraki SMK Co., Ltd. finished being liquidated during the current consolidated accounting year and was excluded from the scope of consolidation.
( d ) Application of equity method of accounting			Number of affiliated companies accounted for by the equity method: 1			The 2 unconsolidated subsidiaries are deemed immaterial. As the effect of their results of operations on the consolidated financial statements would be insignificant, the equity
method of accounting has not been applied to these companies.
( 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 istranslated at rates of exchange prevailing at the time the transactions occurred. Revenue and expense accounts are translated at the average rates of exchange prevailing
during the year. 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 their respective 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 and manufacturing 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 other securities are carried at cost. Cost of securities sold is determined by the moving average method.
( i ) Derivatives
			 Derivatives are stated at fair value.
( j ) Property, plant and equipment and depreciation
			Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is calculated principally by the declining-balance method for the Company andits domestic subsidiaries, and by the straight-line method mainly for foreign subsidiaries. Certain buildings of the Company and its domestic subsidiaries acquired on or after
April 1, 1998 are depreciated by the straight-line method.
			 The estimated useful lives of the assets are as follows:
			 Buildings:
10 to 50 years
			 Machinery and vehicles:
4 to 10 years
			 Tooling and office furniture:
2 to 6 years
			The residual values of the property, plant and equipment acquired on or before March 31, 2007 are depreciated equally over a period of five years starting from the year
following the year in which they have been depreciated up to their depreciable limit or 5% of the acquisition cost.
( k ) Intangible assets
			 Amortization of intangible assets is calculated by the straight-line method. Software for own use is amortized based on the utilizable period (5 years).
			 Goodwill is amortized by the straight-line method over 5 years.
( l ) Leases
			 Finance leases which are deemed to transfer the ownership of the leased assets to the lessee are capitalized and depreciated over their lease term with no residual value.
( m ) Allowance for doubtful accounts
			The allowance for doubtful accounts is provided at the amount of estimated uncollectable accounts, based on individual collectability with respect to identified doubtfulreceivables and past experience of doubtful receivables.
( n ) Accrued bonuses			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.
( o ) Accrued directors’ and officers’ bonuses			Accrued directors’ and officers’ bonuses are provided on the estimate of the amounts to be paid in the future by the Company based on an accrual basis at the balance sheetdate.
( p ) 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 the balance sheet date.
( q ) Retirement benefits			Asset for retirement benefits and liability for retirement benefits for employees are recorded mainly at the amount calculated based on the retirement benefit obligation and thefair value of the pension plan assets at the balance sheet date.
			The retirement benefit obligation for employees is attributed to each period by the straight-line method over the estimated years of service of the eligible employees. Actuarial
gain or loss is amortized in the year following the year in which the gain or loss is recognized primarily by the straight-line method over a period of 5 years, which is within theestimated average remaining years of service of employees.
( r ) Hedge accounting( 1 ) Method of hedge accounting
			 The exceptional method of hedge accounting is applied for the transactions of interest rate swaps, in cases meeting certain conditions.
( 2 ) Hedge instrument and hedged item
			 Hedge instrument: interest rate swap
			 Hedged item: interest rate for long-term debt subject to interest rate fluctuations.
( 3 ) Hedge policy
			 The Company uses interest rate swaps to avoid risks from interest rate fluctuations on borrowings, only when approved by the management.
( 4 ) Assessment of hedge effectiveness			 As the exceptional method is applied for interest rate swap, the assessment of hedge effectiveness is omitted.
( s ) Income taxes
			Deferred income taxes are recognized based on the differences between financial reporting and the tax bases of the assets and liabilities and are calculated using the enacted
tax rates and laws which will be in effect when the differences are expected to reverse.
( t ) Per share information
			Basic net income per share is computed based on the net income available for distribution to shareholders of common stock and weighted-average number of shares ofcommon stock outstanding during the year. Diluted net income per share is computed based on the net income available for distribution to shareholders and weighted-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 the number of shares of common stock outstandingat 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.
( u ) Consumption taxes
			Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes.
( v ) Standards issued but not yet effective			On May 17, 2012, the Accounting Standards Board of Japan (ASBJ) issued “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26) and “Guidance on
Accounting Standard for Retirement Benefits” (ASBJ Guidance No. 25), which replaced the Accounting Standard for Retirement Benefits that had been issued by the BusinessAccounting Council in 1998 with an effective date of April 1, 2000 and the other related practical guidance, being followed by partial amendments from time to time through2009.
			The revised accounting standard and guidance were adopted as of the fiscal year ended March 31, 2014. However, revisions to the calculation methods for the retirement
benefit obligation and service costs are scheduled to be adopted from the beginning of the fiscal year ending March 31, 2015. The Company is currently evaluating the effectthese modifications will have on its consolidated results of operations and financial position.

ANNUAL REPORT 2014 13

( w ) Change in method of accounting			The Company adopted “Accounting Standard for Retirement Benefits” (ASBJ Statement No. 26 of May 17, 2012) and “Guidance on Accounting Standard for Retirement
Benefits” (ASBJ Guidance No. 25 of May 17, 2012) (except for certain provisions described in the main clause of Section 35 of the standard and in the main clause of Section
67 of the guidance) as of the end of the fiscal year ended March 31, 2014. These accounting standards require entities to apply a revised method for recording the retirement
benefit obligation, after deducting pension plan assets, as asset for retirement benefits and liability for retirement benefits. In addition, unrecognized actuarial differences arerecorded as asset for retirement benefits and liability for retirement benefits. Concerning the application of the Accounting Standard for Retirement Benefits, based on theprovisional treatment set out in Clause 37 of the standard, the effects of such changes in the current fiscal year have been recorded in retirement benefits asset and liability
adjustments of accumulated other comprehensive income. As a result of this change, asset for retirement benefits was recognized in the amount of ¥511 million ($4,965
thousand), liability for retirement benefits was recognized in the amount of ¥36 million ($350 thousand), and accumulated other comprehensive income increased by ¥463($4,499 thousand) as of March 31, 2014.

Note 2. U.S. dollar amounts
The U.S. dollar amounts are stated solely for the convenience of the reader at the rate of U.S.$1.00 = ¥102.92, the approximate rate of exchange at March 31, 2014. 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.

Thousands of U.S. dollars
2014

Asset group
Toyama works
Functional components
SMK Electronics(Dongguan) Co., Ltd.
SMK-Link Electronics
Corporation
Total

Location
Japan
Japan
China

Use
Unutilized assets
Remote controls/Switch/Unit production facilities
Connector, Remote controls/Switch/Unit, Touchpanel production facilities

U.S.A.

OtherLand$1,195—

Buildings$185—

Machineryandvehicles
$—
87

—

—

2,487

Tooling andofficefurniture
$—
78
797

Software$—
29

Goodwill
$—
—

Total
$1,380
194

—

—

3,284

—

—

—

—

—

1,098

1,098

$1,195$185$2,574

$875

$29

$1,098$5,956

Note 8. Income taxes
Note 3. Inventories

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 37.9% for the year ended March 31, 2013 and 2014.
A reconciliation between the statutory tax rate and the effective tax rate for the years ended March 31, 2013 and 2014 were as follows:

Inventories as of March 31, 2013 and 2014, consisted of the following:
Millions of yen
2013

Finished products
Work in process
Raw materials and supplies
Total¥2,805731
1,930¥5,466

2014

Thousands of U.S. dollars
2014

2014

Thousands of U.S. dollars
2014¥3,188726
1,991¥5,905$30,976
7,054
19,345$57,375

The write-downs of inventories resulting from decreased profitability for the years ended March 31, 2013 and 2014 were as follows:
Millions of yen
2013

Cost of sales

¥311

¥227

$2,206

Short-term loans payable and long-term debt as of March 31, 2013 and 2014 consisted of the following:
Short-term loans payable

Thousands of U.S. dollars
2014

2014

¥1,364
3,576¥4,940¥1,1173,312¥4,429$10,853
32,181$43,034

Millions of yen
2013

2014

Thousands of U.S. dollars
2014¥4,160
2,388(2,201)¥4,347¥3,9312,206(690)¥5,447$38,195
21,434(6,704)$52,925

The assets pledged as collateral for short-term and long-term debt as of March 31, 2013 and 2014 were summarized as follows:
Millions of yen

Property, plant and equipment-book value

2013

Thousands of U.S. dollars
2014

2014

¥2,206¥2,892$28,099

The aggregate annual maturities of long-term debt (including current portion) outstanding as of March 31, 2014 were summarized as follows:Year ending March 31,
2015
2016
2017
2018
2019 and thereafter
Total

Millions of yen

Thousands of U.S. dollars

¥690
800
992
1,748
1,907
¥6,137$6,704
7,773
9,639
16,984
18,529$59,629

Research and development costs included in cost of sales and selling, general and administrative expenses for the years ended March 31, 2013 and 2014 amounted to ¥3,172
million and ¥3,302 million ($32,083 thousand), respectively.

Note 6. Selling, general and administrative expenses
Major elements of selling, general and administrative expenses for the years ended March 31, 2013 and 2014 were as follows:
Millions of yen
2013

Thousands of U.S. dollars
2014

2014

¥3,443
211
—
403
42

¥3,928
445
70
242
37

$38,166
4,324
680
2,351
360

Note 7. 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 the asset exceeds its recoverable amount being the higher of the discounted future net cash flows or
net realizable value.
For the year ended March 31, 2013 and 2014 impairment losses were recognized for the following assets.
Millions of yen
2013

Asset group
Functional components

LocationJapan

Use
Remote controls/Switch/Unit production facilities

Buildings¥46

Machineryandvehicles¥118

Tooling andofficefurniture¥29

Software
¥7

Total
¥200

14 ANNUAL REPORT 2014

Location
Japan
Japan
China

Use
Unutilized assets
Remote controls/Switch/Unit production facilities
Connector, Remote controls/Switch/Unit, Touchpanel production facilities

U.S.A.

Other

Land
¥123
—

Buildings¥19—

Machineryandvehicles
¥—
9

—

—

256

Tooling andofficefurniture¥—
882

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

2013

2014

Thousands of U.S. dollars
2014

¥60
153
71
670
—
44
144
472
549
(1,195)
968

¥51
359
82
—
411
42
284
560
656
(1,488)
957

$496
3,488
797
—
3,993
408
2,759
5,441
6,374
(14,458)
9,298

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

(95)
(81)
(4)
(37)
—
(215)
(432)
¥536

(95)
(74)
(0)
(136)
(407)
(26)
(738)
¥219

(923)
(719)
(0)
(1,321)(3,955)(252)(7,170)$2,128

Note 9. Other comprehensive income
The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive income for the years ended March 31, 2013 and 2014.
Millions of yen

Net unrealized gains (losses) on other securities:
Amount arising during the year
Reclassification adjustments for gains and losses included in net income
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 net income
Amount before tax effectTax effectForeign currency translation adjustments
Total other comprehensive income

2013

2014

Thousands of U.S. dollars
2014

¥170
(293)
(123)
46
(77)

¥528
(224)
304
(100)
204

$5,130(2,176)
2,954
(972)
1,982

806
—
806
(49)
757
¥680

571
—
571
—
571
¥775

5,548
—
5,548
—
5,548
$7,530

Note 10. Shareholders’ equity
The Corporation Law of Japan provides that an amount equal to 10% of the amount to be distributed as distributions of capital surplus (other than the capital reserve) and retained
earnings (other than the legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of the capital reserve and the legal reserve equals 25% of
the common stock account. Such distributions can be made at any time by resolution of the shareholder’s meeting or by the Board of Directors if certain conditions are met, butneither the capital reserve nor the legal reserve is available for distributions.

Note 11. Treasury stock
The number of common stock of the Company held by the Company, consolidated subsidiaries and affiliated companies subject to the equity method at March 31, 2013 and 2014
totaled 7,760,765 shares and 7,198,819 shares, respectively.

Millions of yen
2014

Asset group
Toyama works
Functional components
SMK Electronics(Dongguan) Co., Ltd.
SMK-Link Electronics
Corporation
Total

37.9%
1.2
(13.9)
4.0
0.6(22.5)
14.0
6.6
1.2
0.2
29.3%

The “Act for Partial Amendment of the Income Tax Act, etc.” (Act No. 10 of 2014) was promulgated on March 31, 2014 and, as a result, the Company is no longer subject to theSpecial Reconstruction Corporation Tax effective for fiscal years beginning on or after April 1, 2014. As a result, the effective statutory tax rate used to measure the Company’sdeferred tax assets and liabilities was changed from 37.9% to 33.5% for the temporary differences expected to be realized or settled from fiscal years beginning April 1, 2014. The
effect of the announce reduction of the effective statutory tax rate was to decrease deferred tax assets after offsetting deferred tax liabilities by 44 million ($428 thousand) andincrease deferred income taxes by ¥ 44 million ($428 thousand) as of and for the year ended March 31, 2014.

Note 5. Research and development costs

Salaries and wages of employees
Provision for bonuses
Provision for directors’ and officers’ bonuses
Retirement benefit cost
Provision for directors’ and officers’ retirement benefits

2014

37.9%
2.3
(22.8)
66.0
1.6
7.1
23.1
—
—
(0.1)
115.1%
Millions of yen

Millions of yen

2013Long-term debt
Average interest rates on long-term debt, principally from banks, is 1.14%
SecuredUnsecured
Less: portion due within one year
Total

2013

The significant components of deferred tax assets and liabilities at March 31, 2013 and 2014 were as follows:

Note 4. Short-term loans payable and long-term debt

Average interest rates on short-term loans payable, principally from banks, is 0.61%
SecuredUnsecured
Total

Statutory tax rate
Items such as entertainment expenses permanently non-deductible for tax purposes
Items such as dividend income permanently non-taxable
Change in valuation allowance
Inhabitant tax on per capita basis
Statutory tax rate differences in subsidiaries
Elimination of dividend income
Accumulated surplus of foreign subsidiaries
Decrease in deferred tax assets at fiscal year-end due to the change in tax rate
Other
Effective tax rates

Software¥—
3

Goodwill
¥—
—

Total
¥142
20

—

—

338

—

—

—

—

—

113

113

¥123

¥19

¥265

¥90

¥3

¥113

¥613

ANNUAL REPORT 2014 15

Note 12. Securities

The retirement benefit cost as of March 31, 2013 was as follows:
Millions of yen
2013

Information regarding securities classified as other securities at March 31, 2013 and 2014 was summarized as follows:
Millions of yen
2013

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

Thousands of U.S. dollars
2014

2014

Fair value

Cost

Unrealized
gain (loss)

Fair value

Cost

Unrealized
gain (loss)

Fair value

Cost

Unrealized
gain (loss)

¥298
40
338

¥152
21
173

¥146
19
165

¥1,984
53
2,037¥1,503
22
1,525

¥481
31
512

$19,277
515
19,792$14,604
214
14,818$4,673
301
4,974

1,368
1,368
¥1,706

1,425
1,425
¥1,598

(57)
(57)
¥108

399
399
¥2,436500
500¥2,025

(101)
(101)
¥411

3,877
3,877
$23,669

4,858
4,858
$19,676

(981)
(981)
$3,993

Unlisted stocks of ¥31 million at March 31, 2013 and ¥31 million ($301 thousand) at March 31, 2014 are not included in the above table because there were no quoted market
prices available and the fair value is extremely difficult to determine.
Information regarding sales of securities for the years ended March 31, 2013 and 2014 was as follows:
Millions of yen

Proceeds from sales of securities
StocksOthersGains on sales
StocksOthers

2013

¥493
476
17
352
349
3

2014

¥289
289
—
225
225
—

Thousands of U.S. dollars
2014$2,808
2,808
—
2,186
2,186
—

Note 13. Retirement benefits plans
The Company and certain of its consolidated subsidiaries have either funded or unfunded defined benefit plans and defined contribution pension plans. The Company has funded
corporate pension fund plans and defined contribution pension plans. Certain subsidiaries have 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 subsidiaries.
The changes in the retirement benefit obligation during the year ended March 31, 2014 were as follows:

Retirement benefit obligation at April 1, 2013
Service cost
Interest cost
Actuarial loss
Retirement benefit paid
Other
Retirement benefit obligation at March 31, 2014

Millions of yen
2014¥7,624
326
153
(153)
(465)
0
¥7,485

Thousands of U.S. dollars
2014$74,077
3,168
1,487
(1,487)(4,518)0$72,727

The changes in plan assets during the year ended March 31, 2014 were as follows:

Plan assets at April 1, 2013
Expected return on plan assets
Actuarial loss
Contributions by the Company
Retirement benefit paid
Plan assets at March 31, 2014

Millions of yen
2014¥7,275
196
413
537
(461)
¥7,960

Thousands of U.S. dollars
2014$70,686
1,904
4,013
5,218
(4,479)$77,342

The funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31, 2014 were as follows:

Retirement benefit obligation under funded plans
Plan assets at fair value

Millions of yen
2014

Thousands of U.S. dollars
2014

Retirement benefit obligation under unfunded plans
Net liability for retirement benefits in the balance sheet¥7,449(7,960)
(511)
36
(475)

$72,377(77,342)(4,965)350(4,615)

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

36
511¥(475)350
4,965$(4,615)

Millions of yen
2014

Thousands of U.S. dollars
2014

The components of retirement benefit expense for the year ended March 31, 2014 was as follows:

Service cost
Interest cost
Expected return on plan assets
Amortization of actuarial loss
Retirement benefit expense

¥326
152
(196)
345
¥627

$3,168
1,477(1,904)3,352$6,093

Unrecognized actuarial loss included in accumulated other comprehensive income (before tax effect) as of March 31, 2014 was as follows:

Unrecognized actuarial loss

Millions of yen
2014

¥743

Thousands of U.S. dollars
2014$7,219

The fair value of plan assets, by major category, as a percentage of total plan assets as of March 31, 2014 were as follows:
Bonds
StocksLife insurances
Funds
Other
Total

2014

4.0%
35.2
42.1
14.6
4.1
100.0%

1. The total plan assets include retirement benefit trusts which constitute 12.4%.
2. The expected 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.
The required contributions to the defined contribution plans by the Company and its consolidated subsidiaries for the year ended March 31, 2014 amounted to ¥78 million ($758
thousand).

Service cost, net of plan participants’ contributions
Interest cost
Expected returns on plan assets
Amortization of unrecognized actuarial (gains) losses
Contribution to defined contribution pension plan
Net periodic cost

¥325
150
(176)
812
80
¥1,191

Assumptions to calculate the actuarial present value of the benefit obligation and the expected return on plan assets as of March 31, 2013 and 2014 were as follows:
2013

Discount rate
Expected return on plan assets

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 derivativetransactions, all of whom are leading domestic financial institutions with high bond ratings.
In accordance with the Company’s policy, the accounting department controls derivative transactions and requires approval by the director responsible for accounting and therepresentative directors of the Company. The director who has the responsibility to control the performance and the related risks connected with derivatives reports these to theManagement Committee of the Company.
The Company uses interest rate swaps to hedge the risks from interest rate fluctuations on borrowings. The exceptional method of hedge accounting is used to account for thosetransactions.
Millions of yen
Thousands of U.S. dollars(Currency related)
Contract
Unrealized
Contract amount
Fair value
Unrealized gain (loss)
amountFair value
gain (loss)
2013
2014
2013
2014
2013
2014
2014
2014
2014
Forward foreign exchange contracts:
Sell:
US$
¥1,237$(10)¥371¥(84)¥(1)¥(84)¥(1)$3,605$(10)
18
(0)
49
(0)
(0)
MXN
556
5
18
(0)
Total
¥1,793$(10)¥376¥(66)¥(1)¥(66)¥(1)$3,654$(10)( 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.
(Interest related)

Millions of yen

Contract amountInterest rate swaps

2013¥3,635

16 ANNUAL REPORT 20142014

¥3,606

Thousands of U.S. dollars

Due after one year2013

¥3,3162014¥3,230

Contract
amount2014$35,037

Due after
one year2014$31,384

Since exceptional treatment is applied to interest rate swaps transactions, they are accounted for as if they were an integral part of the hedged long-term debt, and their fair value isincluded in the fair value of long-term debt in Note 15.

Note 15. Financial instruments( 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 this risk, 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 a board 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.
			 Information regarding fair value of financial instruments at March 31, 2013 and 2014 was summarized as follows:
Millions of yen
2013

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

Book value¥8,63182
14,551
1,706
3,194
4,940
6,657
6,548
(66)

Fair value¥8,63182
14,551
1,706
3,194
4,940
6,657
6,542
(66)

Thousands of U.S. dollars
2014

2014

Difference
¥—
—
—
—
—
—
—
(6)
—

Book value¥11,134
93
14,681
2,436
3,733
4,429
5,928
6,137
(1)

Fair value¥11,134
93
14,681
2,436
3,733
4,429
5,928
6,105
(1)

Difference
¥—
—
—
—
—
—
—
(32)
—

Book value$108,181
904
142,645
23,66936,271
43,03457,59859,629(10)

Fair value$108,181
904
142,645
23,66936,271
43,03357,59859,318(10)

Difference
$—
—
—
—
—
—
—
(311)
—

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.
1. Methods to determine the estimated fair value of financial instruments and other matters related to securities and derivative transactions
		 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 enteredinto.
		Derivatives
		 Please refer to Note 14 Derivatives of the notes to the consolidated financial statements.
2. Financial instruments whose fair value is extremely difficult to determine
Millions of yen
2013

Unlisted securities

Thousands of U.S. dollars
2014

2014

¥202

¥220

$2,137

Unlisted securities are not included in the investment securities because there were no quoted market prices available and the fair value is extremely difficult to determine.
3. The schedules for redemption of monetary assets and securities with maturities
Millions of yen
2013

Millions of yen
2013¥7,623(7,274)
349
(187)
162
¥162

2.0%
3.0%

Note 14. Derivatives

The retirement benefit obligation as of March 31, 2013 was as follows:

Retirement benefit obligation
Fair value of plan assets
Funded status
Unrecognized actuarial gains (losses)
Net amount recognized in the consolidated balance sheet
Accrued employees’ retirement benefits

2014

2.0%
3.0%

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

Due within
one year¥8,705
14,551—¥23,256

Due after
one yearthroughfive years
¥—
—
40
¥40

Thousands of U.S. dollars
2014

2014

Due after
five years
throughten years
¥—
—
—
¥—

Due within
one year¥11,125
14,681—¥25,806

Due after
one yearthroughfive years
¥—
—
53
¥53

Due after
five years
throughten years
¥—
—
—
¥—

Due within
one year$108,094
142,645—$250,739

Due after
one yearthroughfive years
$—
—
515
$515

Due after
five years
throughten years
$—
—
—
$—

ANNUAL REPORT 2014 17

Note 16. Investment and rental property

4. Information about the loss on impairment of fixed assets
Millions of yen

The profit of investment and rental property for the years ended March 31, 2013 and 2014 amounted to ¥424 million and ¥476 million ($4,625 thousand), respectively.
Information on the fair value of investment and rental property at March 31, 2013 and 2014 was summarized as follows:
Millions of yen
2013

Book value
beginningof the year¥4,100

Thousands of U.S. dollars
2014

2014

Book value
end of theyear¥4,057

Fair value¥10,010

Book value
beginningof the year¥4,057

Book value
end of theyear¥3,873

Book value
beginningof the year$39,419

Fair value¥10,053

Book value
end of theyear$37,631

Fair value$97,678

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.

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

2014

Thousands of U.S. dollars
2014

2014

Thousands of U.S. dollars
2014

Functional Components
Division
¥109
¥61
164
—

Functional Components
Division
$593
—

2013

¥—
200
—
200
—
—
¥200

¥182
278
11
471
—
142
¥613

5. Information about the amortization of goodwill and the balance of goodwill
Millions of yen
2013

Note 17. Segment information(Overview)
The reportable segments of the Company and consolidated subsidiaries are designed as business segments whose segregated financial information can be obtained and to which
the management reviews to decide on the allocation of managerial and financial 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, units, 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.
1. Business segment information
Millions of yen

2013

Net sales
Outside customers
Intersegment sales
Total
Operating income (loss)
Identifiable assets
OthersDepreciation
Increase in fixed assets and intangible fixed assets$1,768
2,701
107
4,576
—
1,380
$5,956

Connection
SystemDivision

Reportable Segments
Functional
Components Touch Panel
Division
Division

Subtotal

Other

Total

Adjustment

Consolidated¥25,498—
25,498521
15,907¥18,803—
18,803(1,430)10,430¥9,923
—
9,923
12
6,000

¥54,224—
54,224(897)
32,337

¥251
—
251
44
4,646

¥54,475—
54,475(853)
36,983¥————15,515¥54,475—
54,475¥(853)52,498

2,245
2,402

651
393

435
667

3,331
3,462

3
30

3,334
3,492

—
—

3,334
3,492

Amortization
Balance

Note 18. Changes in stock options
At the board of directors meeting held on July 27, 2011, a stock option plan was approved. Under this plan, certain employees of the Company and a director and employees ofaffiliated companies were granted options to purchase common stock of 1,141,000 shares in total at an exercise price of ¥360.
Stock option activity during the year ended March 31, 2014 was as follows:
July 27, 2011
Share subscription rights which are not yet vested
Outstanding as of March 31, 2013
1,109,000
Granted—Forfeited—
Vested1,109,000
Outstanding as of March 31, 2014—
Share subscription rights which have already been vested
Outstanding as of March 31, 2013—
Vested1,109,000
Exercised606,000
Forfeited
12,000
Outstanding as of March 31, 2014
491,000
The fair value of stock options when granted¥81 ($0.79)

Millions of yen

2014

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

Subtotal

Other

Total

Adjustment

Consolidated¥27,416—
27,416
1,403
15,702¥22,438—
22,438(963)
9,876¥15,808—
15,8081,866
7,863¥65,662—
65,662
2,306
33,441

¥134
—
134
24
4,133

¥65,796—
65,7962,330
37,574¥————18,661¥65,796—
65,7962,330
56,235

2,312
2,649

445
427

524
933

3,281
4,009

4
43

3,285
4,052

—
—

3,285
4,052

Note 19. Related party transactions
Significant transactions with related parties for the years ended March 31, 2013 and 2014 were as follows:
Millions of yen
2013

Terutaka Ikeda

2014

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

Connection
SystemDivision

Subtotal

Other

Total

Adjustment

Consolidated$266,382—
266,382
13,632
152,565$218,014—
218,014(9,357)
95,958$153,595—
153,595
18,131
76,399$637,991—
637,991
22,406
324,922$1,302—
1,302
233
40,157$639,293—
639,293
22,639365,079$————
181,316$639,293—
639,293
22,639546,395

22,46425,738

4,324
4,149

5,091
9,065

31,87938,95239
418

31,91839,370——31,91839,370Terutaka Ikeda

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

Balances
Other
Other
current
investments
assets¥14¥1Millions of yen
2014

Thousands of U.S. dollars

Reportable Segments
Functional
Components Touch Panel
Division
DivisionTransactions
Guaranty
money
deposited
Rent
—
¥13
Transactions
Guaranty
money
deposited
Rent
—
¥13

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

Thousands of U.S. dollars
2014

Terutaka Ikeda

Transactions
Guaranty
money
deposited
Rent
—
$126

Balances
Other
Other
current
investments
assets$136$10Note 20. Subsequent events
The following appropriation of retained earnings of the Company, which has not been reflected in the accompanying consolidated financial statements for the year ended March 31,
2014, was approved at a shareholders’ meeting held on June 24, 2014.

Cash dividends (¥5.00 = $0.05 per share)

Millions of yen
2014

¥359

Thousands of U.S. dollars
2014$3,488

Millions of yen
2013

Net salesJapan¥14,130

Asia¥24,737

North America¥14,551

Japan¥13,878

Asia¥28,664

North America¥21,153

Japan$134,843

Asia$278,508

North America$205,529

Japan¥10,161

Asia¥5,820

North America
¥294

Japan
¥10,045

Asia¥5,994

North America
¥287

Japan
$97,600

Asia$58,239

Europe¥1,048

Other¥9Consolidated¥54,475

Europe¥2,067

Other
¥34

Consolidated¥65,796

Europe$20,084

Other areas$329

Consolidated$639,293

Europe¥431

Consolidated¥16,706

Europe¥505

Consolidated¥16,831

Europe$4,907

Consolidated$163,535

Millions of yen
2014

Net sales

Thousands of U.S. dollars
2014

Net sales( 2 ) Fixed assets

Millions of yen
2013

Fixed assets

Millions of yen
2014

Fixed assets

Thousands of U.S. dollars
2014

Fixed assets

North America$2,789

3. Information about major customers
		 The Company and consolidated subsidiaries have no major customers which account for 10% or more of net sales.

18 ANNUAL REPORT 2014

ANNUAL REPORT 2014 19

Report of Independent Auditors
SMK Corporation and Consolidated Subsidiaries

Officer Introduction(As of June 24, 2014)

Directors

Yasumitsu Ikeda

Yoshio Sakurai

Yoshiyuki Kaku

Mikio Wakabayashi

Yuji Tanahashi

President and COO

Representative Director,
Executive Deputy President,
Chief Information Officer

Director,
Executive Vice President,
Chief Technology Officer

Director,
Executive Vice President

Director

Auditors

Terutaka Ikeda

Hajime Yamada

Chairman ofAuditors Meeting

Statutory Auditor

Kouichiro Sugihara

Naru Nakashima

Statutory Auditor

Statutory Auditor

Corporate
Executive
Officers

20 ANNUAL REPORT 2014

Paul Evans

Kohei Ohgaki

Hideo Matsumoto

Tsutomu Isoda

Executive Vice President

Executive Vice President,
Chief Financial Officer

Vice President

Vice President

Hiroshi Miyakawa

Shigechika Yanagi

Takemi Ishibashi

Harutaka Seki

Vice President

Vice President

Vice President

Vice President

Masanobu Ikeo

Mitsuhiko Goto

Tetsuo Hara

Vice President

Vice President

Vice President

ANNUAL REPORT 2014 21

Corporate Information(As of March 31, 2014)

Corporate Data

Shares and Shareholders

Name
Established

SMK Corporation
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

79,000,000
9,139

Number of shareholders
Major Shareholders (top ten)

Shares Owned(1,000 shares)

Percentageof Shares (%)

Mizuho Bank, Ltd.

3,531

4.90

Capital¥ 7,996,828,021

Nippon Life Insurance Company

3,421

4.75

Stock exchange listing

Tokyo Stock Exchange

Dai Nippon Printing Co., Ltd.

3,200

4.44

Administrator ofshareholders register

Mitsubishi UFJ Trust and Banking
Corporation

2,855

3.96

Independent auditors

Ernst & Young ShinNihon LLC
Tokyo, JapanSMK Cooperating Company Share
Holding Association
The Bank of Tokyo-Mitsubishi UFJ, Ltd.

2,508

3.48

Employees (SMK-Group)

6,470

1,800

2.50

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
SMK Employees Share Holding Association

1,703

2.36

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

1,611

2.23

The Showa Ikeda Memorial Foundation

1,500

2.08

Terutaka Ikeda

1,454

2.02

Global Network
Domestic Bases

Overseas Bases

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

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.

Websitehttp://www.smk.co.jp/

Note: SMK holds 7,054 thousand shares of treasury stock, but these areexcluded from the above list. Figures for percentage of shares arecalculated excluding the treasury stock.

Share ownership by number
1 - 999 shares

1,951 (21.35%)

1,000 - 9,999 shares

6,559 (71.77%)

10,000 - 99,999 shares

548 ( 6.00%)

100,000 - 499,999 shares

57 ( 0.62%)

500,000 shares -24 ( 0.26%)

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

22,155,685 (28.05%)

Financial instruments dealers

1,700,615 ( 2.15%)

Companies and other entities

11,102,739 (14.05%)

Foreign investors

8,429,325 (10.67%)

Individuals and others

35,611,636 (45.08%)

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/