Quarterly Consolidated Financial Statements
Included in the Quarterly Report

Meiko Electronics Co., Ltd.
and its consolidated subsidiaries
For the third quarter and nine months ended December 31, 2015
(ENGLISH TRANSLATION)NOTE:This document is an excerpt translation of the Quarterly Report (“Shihanki Houkokusho”) of Meiko
Electronics Co., Ltd. (the “Company”), for the third quarter and nine months ended December 31,
2015, filed with the Director of the Kanto Local Finance Bureau of the Ministry of Finance of Japanpursuant to the Financial Instruments and Exchange Law of Japan on February 12, 2016.
Please note that the quarterly consolidated financial statements in this document are a translation of
the reviewed quarterly consolidated financial statements presented in Japanese. The translation of thequarterly consolidated financial statements and notes has NOT been audited by KPMG AZSA LLC,
who reviewed the original Japanese figures.
The Company provides this translation for your reference and convenience only without any warranty
as to its accuracy. In case of any discrepancy between the translation and the Japanese original, thelatter shall prevail. The final decision and responsibility for investments rests solely with the reader ofthis document.

Financial Information
1 Basis of preparation of the quarterly consolidated financial statements
The quarterly consolidated financial statements of the Company are prepared in accordance with the“Ordinance on the Terminology, Forms, and Preparation Methods of Quarterly Consolidated Financial
Statements” (Cabinet Office Ordinance No. 64 of 2007).

2 Review reports
The quarterly consolidated financial statements of the Company for the third quarter (October 1, 2015 –December 31, 2015), and those for the nine months ended December 31, 2015, were reviewed by
KPMG AZSA LLC, pursuant to Article 193-2, Paragraph 1 of the Financial Instruments and Exchange
Law of Japan.

-1-1 Consolidated Financial Statements(1) Consolidated Balance Sheets
Meiko Electronics Co., Ltd. and its consolidated subsidiaries

Thousands of
U.S. dollars

Millions of yen
March 31, 2015

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Merchandise and finished goods
Work in process
Raw materials and supplies
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, net
LandConstruction in progress
Other, net
Total property, plant and equipment
Intangible assets
Investments and other assets
Total non-current assets
Total assets

¥

*2, 3

¥

-2-

9,710
22,743
5,680
3,170
4,833
5,429
(17)
51,54827,53030,966
1,702
3,241
1,475
64,914294
6,208
71,416
122,964

December 31, 2015

¥
*4

*2

¥

14,85822,952
5,216
3,451
4,951
3,122
(25)
54,52523,201
26,494
1,488
2,292
1,667
55,142245
3,652
59,039113,564

December 31, 2015

$
*4

*2

$

123,269
190,425
43,27628,631
41,07825,905(211)452,373

192,490
219,813
12,34819,014
13,827457,492
2,035
30,301
489,828
942,201

Thousands of
U.S. dollars

Millions of yen
March 31, 2015

Liabilities
Current liabilities
Notes and accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable
Income taxes payable
Provision for bonuses
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Provision for directors’ retirement benefits
Net defined benefit liability
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Total net assets
Total liabilities and net assets

¥
*6
*6

*6

¥

-3-

December 31, 2015

12,613
13,25914,100
720
460
5,967
47,119*4

32,475
239
2,146
2,362
37,222
84,341

*6

¥

*6
*6

*4

December 31, 2015

13,50815,866
13,30694
268
6,155
49,197*4

31,368
239
2,219
4,325
38,151
87,348

*6

$

*6
*6

*4

112,068
131,633
110,393779
2,220
51,076408,169
260,254
1,983
18,40835,885316,530
724,699

12,88914,8104,052(396)
31,355

12,88914,810(6,281)(396)
21,022

106,932
122,874(52,107)(3,289)174,410

131
(162)
7,454
(155)
7,268
38,623
122,964

102
(349)
5,637
(196)
5,194
26,216
113,564

850(2,896)
46,765(1,627)43,092
217,502942,201¥$

(2) Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
Consolidated Statements of Income
For the Nine Months Ended December 31, 2015
Meiko Electronics Co., Ltd. and its consolidated subsidiaries
Thousands of
U.S. dollars

Millions of yen

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating income (loss)
Non-operating income
Interest income
Dividend income
Subsidy income
Foreign exchange gains
Other
Total non-operating income
Non-operating expenses
Interest expenses
Foreign exchange losses
Commission for syndicate loan
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of non-current assets
Compensation income
Gain on liquidation of subsidiaries and associates
Total extraordinary income
Extraordinary losses
Loss on sales and retirement of non-current assets
Impairment loss
Loss on valuation of investment securities
Business structure improvement expenses
Total extraordinary losses
Income (loss) before income taxes
Income taxes
Net income (loss)
Profit (loss) attributable to owners of parent

Nine months ended
December 31, 2014

Nine months ended
December 31, 2015

Nine months ended
December 31, 2015

¥

¥

$

¥

-4-

67,47661,758
5,718
7,863(2,145)71,882
62,232
9,650
7,545
2,105

596,383
516,31780,06662,601
17,465

29
20
38
5,086
111
5,284

17
24
58
－
102
201

142
203
485
－
836
1,666

770
－
123
135
1,028
2,111

950
91
559
166
1,766
540

7,879
757
4,635
1,377
14,648
4,483

3
－
－
3

11
13
8
32

95
104
69
268

143
－
9
32
184
1,930
1,384
546
546

*1

¥

140
8,061
－
587
8,788
(8,216)
1,655(9,871)(9,871)

*1

$

1,162
66,882－
4,867
72,911(68,160)
13,738(81,898)(81,898)

Consolidated Statements of Comprehensive Income
For the Nine Months Ended December 31, 2015
Meiko Electronics Co., Ltd. and its consolidated subsidiaries
Thousands of
U.S. dollars

Millions of yen

Profit (loss)
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controlling interests

Nine months ended
December 31, 2014

Nine months ended
December 31, 2015

Nine months ended
December 31, 2015

¥

¥

$

546
(36)
(98)
4,747
15
4,628
5,174

¥

-5-

5,174
－

(9,871)(29)(187)(1,933)(41)(2,190)(12,061)¥(12,061)－(81,898)(238)(1,553)(16,036)(341)(18,168)(100,066)$(100,066)－

Notes to the Consolidated Financial Statements
Matters concerning Going Concern Assumption
Not applicable
Change in Scope of Consolidation and Application of the Equity Method(Important change in the scope of consolidation)
Effective from the first quarter ended June 30, 2015, Meiko Electronics Thang Long Co., Ltd., which was a
non-consolidated subsidiary in the previous consolidated fiscal year, has been included in the scope of
consolidation, due to a rise in its importance.
Effective from the second quarter ended September 30, 2015, Meiko Techno Co., Ltd. has been included in
the scope of consolidation due to its establishment.
Basis of Presenting Consolidated Financial Statements
The accompanying consolidated financial statements of Meiko Electronics Co., Ltd. (the “Company”) havebeen prepared in accordance with the provisions set forth in the Financial Instruments and Exchange Law ofJapan and its related accounting regulations, and in conformity with accounting principles generally acceptedin Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure
requirements of International Financial Reporting Standards.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translation of Japanese yen amounts into U.S. dollar amounts is
included solely for the convenience of readers outside Japan and have been made at the rate of ¥120.53 to $1,
the approximate rate of exchange at December 31, 2015. Such translation should not be construed as
representation that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
Change in Accounting Policies(Application of accounting standards for business combinations)
Effective from the first quarter ended June 30, 2015, the Company and its consolidated domestic subsidiaries
have adopted the “Accounting Standard for Business Combinations” (ASBJ Statement No. 21, September 13,2013), the “Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22,
September 13, 2013), the “Accounting Standard for Business Divestitures” (ASBJ Statement No. 7,
September 13, 2013) and other standards. Accordingly, the Company has changed the presentation of net
income, etc., and the presentation of minority interests to non-controlling interests. To reflect this change inpresentation, reclassification of accounts has been made to the consolidated financial statements for the ninemonths ended December 31, 2014 and the consolidated financial statements for the fiscal year ended March
31, 2015.
Change in Accounting Estimate(Revision of useful life)
The machinery and equipment owned by the Company and its consolidated domestic subsidiaries had
previously been written off for depreciation based on a useful life of six years. However, upon replacement ofmachinery and equipment during the first quarter ended June 30, 2015, the Company has carried out afundamental review of their useful life in order to calculate depreciation that more accurately reflects theactual circumstances. To reflect the actual utilization of machinery and equipment, the Company has revised
their useful life to 10 years, and this change will continue to be applied in the future.
Due to this change, operating income and ordinary income for the nine months ended December 31, 2015
increased by ¥86 million each, while loss before income taxes decreased by ¥86 million compared to theprevious accounting method.
Specific Accounting Treatments Adopted in Preparing the Quarterly Consolidated Financial Statements
Nine months ended December 31, 2015
Computation of Tax Expense
Tax expenses are calculated by reasonably estimating the effective tax rate after the adoption of tax-effectaccounting that is applicable to income before income taxes for the fiscal year ending March 31, 2016, andmultiplying income before income taxes for the period under review by this estimated effective tax rate.
As a result of a review of the realizability of deferred tax assets in the first quarter ended June 30, 2015, theCompany has recorded tax expense (reversal of deferred tax assets) of ¥950 million.

-6-

Consolidated Balance Sheets
1 Guarantee obligation
We provide debt guarantee for installment payables of the following affiliate.
Thousands of
U.S. dollars

Millions of yen
March 31, 2015

Meiko Electronics Thang Long Co., Ltd.
For contracts in US dollars･････････････････････

¥

2,328

December 31, 2015¥－

December 31, 2015－$

(US$19,375 thousand)Note: Meiko Electronics Thang Long Co., Ltd. has been excluded from the above table since it has been
included in the scope of consolidation effective from the first quarter ended June 30, 2015.
*2 Amount of allowance for doubtful accounts directly deducted from the amount of assets
Thousands of
U.S. dollars

Millions of yen
March 31, 2015

Investments and other assets･･･････････････････¥

19

December 31, 2015¥19

December 31, 2015$161

*3 Amount of allowance for investment loss directly deducted from the amount of assets
Thousands of
U.S. dollars

Millions of yen
March 31, 2015

Investment and other assets････・・・・・・・・・･･････¥

361

December 31, 2015¥－

December 31, 2015－$

*4 Accounting treatment for notes maturing on December 31, 2015
Notes maturing on the final day of a quarterly reporting period are accounted for as if they had been settled on
the final day of the period.
As the final day of the third quarter was a bank holiday, the following notes that matured on that day were
accounted for as though they had been settled on the maturity date, December 31, 2015.
Thousands of
U.S. dollars

Millions of yen
March 31, 2015

Notes receivable-trade････・・・・・・・・・･･････････
Notes payable-trade･･･････････････････････・・・
Notes payable-facilities････････････････････････

¥
¥
¥

－
－
－

December 31, 2015

¥
¥
¥

44
59
1

December 31, 2015

$
$
$

362
489
8

5 Discounted notes receivable-trade are summarized below:
Thousands of
U.S. dollars

Millions of yen
March 31, 2015

Discounted notes receivable-trade･･････････････

-7-

¥

72

December 31, 2015¥30

December 31, 2015$249

*6 Financial covenants
Consolidated fiscal year ended March 31, 2015
Of short-term loans payable and long-term loans payable (including loans payable scheduled for repayment
within one year), ¥34,635 million have financial covenants attached under which the breaching of any of thefollowing will require the accelerated repayment of the obligation in the corresponding funding agreement(when there is more than one covenant, the one with stricter conditions is stated).
(1) Two consecutive ordinary losses shall not be recorded in the consolidated statements of income for eachfiscal year.
(2) The total amount of net assets recorded in the consolidated balance sheet as of the close of each fiscal
year shall be at least the higher of: (i) 75% of the total amount of net assets recorded in the consolidatedbalance sheet as of March 31, 2014; and (ii) 75% of the total amount of net assets recorded in the
consolidated balance sheet as of the close of the immediately preceding fiscal year.
(3) The total amount of interest-bearing debt recorded in the consolidated balance sheet as of the close ofeach fiscal year shall be no more than the amount of net sales recorded in the consolidated statement ofincome for the same fiscal year, divided by 12 and multiplied by 8.
Nine months ended December 31, 2015
Of short-term loans payable and long-term loans payable (including loans payable scheduled for repayment
within one year), ¥34,430 million have financial covenants attached under which the breaching of any of thefollowing will require the accelerated repayment of the obligation in the corresponding funding agreement(when there is more than one covenant, the one with stricter conditions is stated). The details of the agreement
are stated based on the agreement as of the submission date of this quarterly report.
(1) Two consecutive ordinary losses shall not be recorded in the consolidated statements of income for eachfiscal year.
(2) The total amount of net assets recorded in the consolidated balance sheet as of the close of each fiscal year
shall be at least the higher of: (i) ¥21,962 million; or (ii) 80% of the total amount of net assets recorded in
the consolidated balance sheet as of the close of the immediately preceding fiscal year. However, (ii) shallexclude the fiscal year ended March 31, 2016.
(3) The total amount of interest-bearing debt recorded in the consolidated balance sheet as of the close ofeach fiscal year shall be no more than the amount of net sales recorded in the consolidated statement ofincome for the same fiscal year, divided by 12 and multiplied by 8.
Consolidated Statements of Income*1 Impairment loss
Nine months ended December 31, 2014
Not applicable
Nine months ended December 31, 2015
The Group recorded impairment loss for the following asset group.
Use

Business assets

Type of assets
Buildings and structures
Machinery, equipment and vehicles
OthersBuildings and structures
Machinery, equipment and vehicles
Others
Total

Location

AmountIshinomaki,
Miyagi, Japan¥995 million

Hanoi, Vietnam¥7,066 million¥8,061 million-8-The Group carries out grouping mainly based on each plant for business assets. During the nine months ended
December 31, 2015, the Group reduced the book value of business assets to the recoverable amount due to a
decline in profitability, and recorded the reduced amount as an impairment loss of ¥8,061 million under
extraordinary losses. The breakdown is: ¥3,193 million for buildings and structures; ¥3,364 million formachinery, equipment and vehicles; ¥213 million for land; ¥847 million for construction in progress; and¥444 million for others.
The recoverable amount of this asset group uses the higher of net realizable value and use value. Net
realizable value is evaluated based on the amount obtained by making reasonable adjustments to the assessedvalue of non-current assets. Use value is obtained by discounting future cash flow by 14.0%.
Consolidated Statements of Cash Flows
No consolidated statements of cash flow were prepared for the nine months ended December 31, 2015.
Depreciation (including amortization related to intangible assets) for the nine months ended December 31, 2015 isshown below:
Thousands of
U.S. dollars

Millions of yen
Nine months ended
December 31, 2014¥

Depreciation･････････････････････････････････

5,183

Nine months ended
December 31, 2015

¥

5,021

Nine months ended
December 31, 2015$

41,658

Total Shareholders’ Equity
Nine months ended December 31, 2014
1 Cash dividends paid
Resolution
Board meeting on May 28, 2014
Type of shares ･････････････････････････・・・･･・
Total dividends (Millions of yen) ･････････････・
Dividend per share (Yen)･････････････････････・
Record date･････････････････････････････････・
Effective date････････････････････････････････
Dividend resource･･････････････････････・・･･･・

Common stock131
5.00
March 31, 2014
June 12, 2014
Retained earnings

2 Of the dividends whose record date falls during the nine months ended December 31, 2014, those dividends
whose effective date fell after the last day of the third quarter
Not applicable
Nine months ended December 31, 2015
1 Cash dividends paid
Not applicable
2 Of the dividends whose record date falls during the nine months ended December 31, 2015, those dividends
whose effective date will fall after the last day of the third quarter
Not applicable3 Significant changes in shareholders’ equity
Effective from the first quarter ended June 30, 2015, Meiko Electronics Thang Long Co., Ltd., which was a
non-consolidated subsidiary in the previous consolidated fiscal year, has been included in the scope of
consolidation, due to a rise in its importance. As a result, retained earnings as of the beginning of the term
have decreased by ¥462 million.

-9-

Segment Information
As the Group’s businesses are primarily in PCB design, manufacturing, sales, and ancillary operations, thedescription of other businesses is omitted as they are of little significance.
Per Share Information
The basis for calculating profit or loss per share is shown below:
Nine months ended
December 31, 2014
20.84

Item

Profit (loss) per share (Yen)Basis for calculation
Profit (loss) attributable to owners of parent (Millions of yen)
546
Amounts not attributable to common shareholders－(Millions of yen)
Profit (loss) attributable to owners of parent pertaining to546
common shares (Millions of yen)
Average number of common shares outstanding for the period
26,174,076(Shares)
Note: Diluted profit per share is not disclosed as there were no diluted shares.

Nine months ended
December 31, 2015(377.14)(9,871)－(9,871)
26,174,076

Significant Subsequent Events
The Company passed resolutions on the following matters 1 and 2 at its Board of Directors’ meeting held on
February 4, 2016.
1

Issue of Class A preference shares through third-party allotment(1) Class of new shares to be issued:
Class A preference shares(2) Payment date:
March 31, 2016(3) Number of new shares to be issued:
50 shares(4) Issue price (amount paid) and amount of paid-in capital to be increased:
Issue price (amount paid):¥100,000,000 per share
Amount of paid-in capital to be increased:¥50,000,000 per share(5) Total amount of issue price and total amount of paid-in capital to be increased:
Total amount of issue price:¥5,000,000,000
Total amount of paid-in capital to be increased:¥2,500,000,000(6) Method of allotment
Third-party allotment of all shares to Chiiki Chukakukigyo Kasseika Fund (hereinafter referred to as the“Allottee”).
(7) Use of funds
The funds are planned to be used mainly for capital expenditure to seek future business expansion,as well as for the improvement in equity capital.
(8) Other important matters
The dividend rate (annual) of Class A preference shares is set at 7.0%, cumulative and non-participating.
In addition, holders of preference shares can receive a dividend in preference to holders of commonshares.
Class A preference shares do not carry voting rights, and have transfer restrictions.
Class A preference shares have put options or subject to call using cash as consideration, as wellas put options or subject to call using common shares as consideration.
For all Class A preference shares, the maximum dilution rate in cases where all the put options using
common shares as consideration is exercised is approximately 152.84%, with no amount equivalent tocumulative unpaid dividends nor daily prorated unpaid preferred dividends.

- 10 -

The Company and the Allottee consent to the conditions of exercise of put options for the Class A
preference shares using common shares as consideration in the investment agreement, whereunder theput option using common shares as consideration can be exercised if March 31, 2020 has passed,
and if an event stipulated in the investment agreement has occurred.
Payment by the Allottee pertaining to the Class A preference shares is subject to the approval of eachof the following proposals at the extraordinary shareholders’ meeting to be held on March 30, 2016:(1) revision of the Articles of Incorporation; (2) issue of preference shares; and (3) the appointment of
one outside director and one outside auditor of the Company nominated by the Allottee in advance.
2 Reduction of capital and capital reserve (hereinafter referred to as the “Reduction of Amount of Capital,etc.”)(1) Purpose
With the aim of achieving soundness in finance and early recording of distributable amount, the capitaland capital reserve will be reduced by the amount to be increased due to the payment for the Class A
preference shares, and the amount so reduced shall be transferred to “Other capital surplus.”(2) Outline of the Reduction of Amount of Capital, etc.
(i) Amount of capital to be reduced:¥2,500,000,000(ii) Amount of capital reserve to be reduced:¥2,500,000,000(iii) Method of reduction of the amount of capital, etc.
After the Reduction of Amount of Capital, etc. in accordance with the provisions of Article 447,
Paragraph 3 and Article 448, Paragraph 3 of the Companies Act, the amount so decreased willbe transferred entirely to “Other capital surplus.”(iv) Schedule
February 4 (Thursday), 2016: Resolution by the Board of Directors concerning the Reduction ofAmount of Capital, etc.
February 15 (Monday), 2016: Public notice for creditors to raise objections (scheduled)
March 15 (Tuesday), 2016:
Final date for creditors to raise objections (scheduled)
March 30 (Wednesday), 2016: Extraordinary shareholder’s meeting (scheduled)
March 31 (Thursday), 2016: Effective date of the Reduction of Amount of Capital, etc.
(scheduled)(3) Other
The Reduction of Amount of Capital, etc. will be carried out on the condition that the above-mentioned
issue of Class A preference shares becomes effective.
In addition, the Reduction of Amount of Capital, etc. is a process in which the capital and capitalreserve in “Net assets” of the balance sheet are transferred and recorded to the account of “Other
capital surplus,” with the “Amount of net assets” of the Company remaining unchanged.
2

Other
As per a resolution passed by the Board of Directors at its meeting held on November 12, 2015, no interim
dividend will be paid for the fiscal year ending March 31, 2016.

- 11 -