ANNUAL REPORT
For the fiscal year ended March 31, 2020 CREATIVE CONNECTIVITY 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 Group’s business for the 98th fiscal year (from April 1, 2019 to March 31, 2020). We look forward to your continuing support and encouragement. June 2020 Yasumitsu Ikeda President and CEO/COO
Financial Highlights

CONTENTS
To Our Shareholders and Investors Financial Highlights Overview of Consolidated Results by Division Financial Section 22 4 5 Financial Review Consolidated Balance Sheet 6 8 Consolidated Statement of Income 8 9 10 Consolidated Statement of Comprehensive Income Consolidated Statement of Changes in Net Assets Consolidated Statement of Cash Flows 11 Notes to Consolidated Financial Statements 27 Report of Independent Auditors 29 Officer Introduction Corporate Information SMK is committed to the advancement of mankind through development of the information society, by integrating its current technological strengths and creating advanced technology.
SMK Action Guidelines
1 Contribute to society with pride and confidence. 2  Be customer-oriented, with zeal and sincerity. 3  Challenge courageously for higher goals without fear of failure. 4 Trust and respect each other for a brighter working atmosphere. 5  Keep an open mind, and view SMK from a global perspective.
Basic earnings per share and diluted earnings per share have been calculated on the assumption that the said consolidation of share was carried out at the beginning of the year ended March 31, 2016.
3. The Corrian and it s consoloned carried fared one of the "Partial Amendments to Accounting Standard for Tax applied retrospectively. 4. In the calculation of loss per share, the Company’s s shares remaining in the Board Benefit Trust (BBT), which are recorded as treasury stock under shareholders' equity, are included in the treasury stocks that are deducted in the calculation of the average number of shares
SMK Philosophy
The many different electronic components that SMK produces are widely used by electronics manufacturers in and outside Japan. The markets for these components can be broadly classified into four markets: ICT Market, Home Appliance Market, Car Electronics Market and Industry Market. Two divisions, namely the Connection System (CS) Division and the Sensing, Communications and Interface (SCI) Division, as well as the Research & Development Center, are responsible for developing products that continually meet market requirements in the wide range of markets outlined above. The two divisions handle operations ranging from product planning and design to mass production, whereas the Research & Development Center is primarily in charge of designing and developing products mainly in new fields. In this section, we present an overview of our results achieved in each of the two divisions and the Research & Development Center in the fiscal year under review. Others: businesses of other electronic parts, lease, real-estate rental, and worker dispatching undertakings.
Connection System
Division
Major Products ■ Connectors (Coaxial, FPC) ■ Jacks Sales of connectors in the previously burgeoning car electronics market began to decrease compared to the previous year. The downturn is attributable to factors including impacts from the global slump of automotive sales mainly in China due partly to ramifications of U.S.-China trade friction, compounded by the impact of COVID-19 ensuing since February. In the ICT market, the Company generated robust sales of connectors for smartphones made to customers in China, despite the impact of COVID-19. On the other hand, sales of connectors for smartphones and tablet devices made to customers in the U.S. fell year on year, due to the effects of factors including decrease in demand and customers encountering sluggish sales. Sales of connectors for the industry and other markets decreased year on year as connectors for healthcare-related products encountered falling demand due to sufficient spread in the mainstay market, despite special demand for such connectors in emerging countries. As a result, net sales of the Connection System Division amounted to ¥18,670 million (14.0% decrease year on year), and operating income was ¥141 million (45.4% decrease year on year).
Sensing,
Communications and Interface Division Major Products ■ Remote Control Units ■ Switches ■ Camera Modules ■ Touch Panels Sales of remote control units increased substantially year on year, as orders from U.S. customers of remote control units for set-top boxes steadily expanded sales throughout the year, despite the impact of COVID-19 ensuing since February. As for units, sales decreased slightly year on year amid lower sales of units for home equipment, despite a growth in sales of automotive camera modules due to a rising number of adopted models. Sales of switches increased year on year amid rising sales of switches for smartphones. On the other hand, regarding touch panels mainly for the car electronics market, sales decreased compared to the previous year, due to factors including a downturn in automotive sales in the Chinese market and the impact of COVID-19. Sales in the Sensing, Communications and Interface Division overall were on par with those of the previous year as a growth in the remote control units business offset decreased sales in the touch panels business. As a result, net sales of the Sensing, Communications and Interface Division amounted to ¥35,137 million (0.1% decrease year on year), and operating income was ¥10 million (compared to an operating loss of ¥862 million in the previous fiscal year). Sales by Market Research & Development Center Major Products ■ Wireless Modules Regarding wireless communication modules, the mainstay business of the Research & Development Center, sales of Bluetooth® modules for printers expanded steadily, but sales of Bluetooth® modules for payment terminals decreased largely as a result of customers switching to different models. As a result, net sales of the Research & Development Center amounted to ¥281 million (40.4% decrease year on year), and operating loss was ¥279 million (compared to an operating loss of ¥316 million in the previous fiscal year). The Research & Development Center aims to commercialize its IoT operational management technologies in the next fiscal year, while engaging in field testing performed on the basis of new wireless modules and technology development commissioned by the Ministry of Internal Affairs and Communications.
Five-Year Summary
SMK Corporation and Consolidated Subsidiaries
2. The Company carried out a consolidation of share at the ratio of 10 shares to 1 share on October 1, 2018. Basic earnings per share and diluted earnings per share have been calculated on the assumption that the said consolidation of share was carried out at the beginning of the years ended March 31, 2016. 3. The Company and its consolidated subsidiaries have adopted "Partial Amendments to Accounting Standard for Tax Effect Accounting"
 applied retrospectively. 4. In the calculation of profit (loss) per share, the Company's shares remaining in the Board Benefit Trust (BBT), which are recorded as treasury stock under shareholders' equity, are included in the treasury stocks that are deducted in the calculation of the average number of shares in the period. SMK’s net sales for the fiscal year ended March 31, 2020 decreased 5.6% year on year to ¥54,161 million (US$497,666 thousand), whereas operating loss of ¥244 million (US$2,242 thousand) and loss attributable to owners of parent of ¥2,651 million (US$24,359 thousand) were recorded.
Net Sales
Sales of products such as remote control units for set-top boxes for the U.S. customers and automotive camera modules steadily increased. However, sales of products such as connectors and touch panels in the car electronics market decreased year on year due to lower customer demand and the lower operating ratios of the production works in China, the Philippines and Malaysia due to the governments’ restrictions on factories amid the spread of COVID-19 infections in the fourth quarter. As a result, net sales were ¥54,161 million (US$497,666 thousand), down 5.6% year on year.
Operating Income
The cost of sales ratio improved year on year due to our efforts such as proactive launch of new products and initiatives taken to reduce fixed costs, but operating loss amounted to ¥244 million (US$2,242 thousand) due to a decrease in net sales.
Profit attributable to owners of parent
Loss attributable to owners of parent was ¥2,651 million (US$24,359 thousand) as a result of recording rent income/ expense, foreign exchange loss, net, los on impairment of fixed assets, etc. in other income/expenses.
Total Assets / ROA
As of March 31, 2020, total assets were ¥50,204 million (US$461,307 thousand), with ROA of (0.3) %.
Total Net Assets / ROE
As of March 31, 2020, total net assets were ¥24,629 million (US$226,307 thousand), with ROE of (9.9) %.
Cash Flows
Net cash provided by operating activities amounted to ¥6,345 million (US$58,302 thousand), net cash used in investing activities totaled ¥2,525 million (US$23,201 thousand), and net cash used in financing activities was ¥4,176 million (US$38,372 thousand). (2) 2016 2020
Return on equity (ROE)
12 (12) 2018 2020 Return on assets (ROA) ended March 31) 10 Total net assets

Consolidated Statement of Income
SMK Corporation and Consolidated Subsidiaries Years ended March 31, 2019 and 2020

Consolidated Statement of Comprehensive Income
SMK Corporation and Consolidated Subsidiaries
Years ended March 31, 2019 and 2020

Consolidated Statement of Changes in Net Assets
SMK Corporation and Consolidated Subsidiaries Years ended March 31, 2019 and 2020

Consolidated Statement of Cash Flows
SMK Corporation and Consolidated Subsidiaries
Years ended March 31, 2019 and 2020

Note 1. Summary of significant accounting policies

All significant intercompany balances and transactions have been eliminated in consolidation. Certain foreign subsidiaries' fiscal period ends on December 31, which differs from the year-end date of the Company; however, the accounts of these companies were tentatively closed as of March 31 and the necessary adjustments 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 profit attributable to owners of parent includes the Company's equity in the current profit attributable to owners of parent or loss of such companies, after the elimination of unrealized intercompany profits. All assets and liabilities of the Company’s subsidiaries are revalued at the acquisition, if applicable, and the excess of cost over the underlying net assets at the date of acquisition is amortized over a period of five years on a straight-line basis if such excess is material, or charged to income when incurred if immaterial. ( c ) Scope of consolidation Number of consolidated subsidiaries: 28 ( d ) Application of equity method of accounting Number of affiliated companies accounted for by the equity method: 1 ( e ) Translation of foreign currencies All asset and liability accounts of foreign subsidiaries and affliates are translated into Japanese yen at the appropriate year- end exchange rates. Shareholders' equity, which is translated at rates of exchange prevailing at the time 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 (except for leases) 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 and its 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 and facilities attached to buildings and other non-building structures acquired on or after April 1, 2016 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 5 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 (except for leases) 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 mainly over 5 years.
( l ) Leased assets
Noncancellable lease transaction that transfer substantially all risks and rewards associated with the ownership of assets are accounted for as finance leases. Depreciation of leased assets is calculated by the straight-line method based on the lease life as the useful life and the residual value is zero. (m) Right of use assets Depreciation of right of use assets is calculated by the straight-line method based on the lease term as the useful life and the residual value is zero. ( n ) Allowance for doubtful accounts The allowance for doubtful accounts is provided based on past experience for normal receivables and on an estimate of the collectability of receivables from companies in financial difficulty. ( o ) Accrued bonus Accrued bonuses are provided on the estimate of the amounts to be paid in the future by the Company, domestic consolidated subsidiaries and certain overseas subsidiaries based on an accrual basis at the balance sheet date. ( p ) Accrued directors' and officers' bonuses Accrued directors’ and officers’ bonuses are provided on the estimate of the amounts to be paid subsequent to the balance sheet date. ( q ) 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. ( r ) Accrued board benefit trust Accrued board benefit trust 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 exercised board benefit trust on the balance sheet date. ( s ) Retirement benefits Asset and liability for retirement benefits for employees are recorded mainly at the amount calculated based on the retirement benefit obligation and the fair value of the pension plan assets as of balance sheet date. The retirement benefit obligation for employees is attributed to each period by the benefit formula 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 the estimated average remaining years of service of employees.
( t ) Hedge accounting
(1) Method of hedge accounting
Deferral hedge accounting is applied for interest rate swap transactions. The exceptional treatment is applied for interest rate swap transactions meeting certain conditions. (2) Hedging instruments and hedged items Hedging instruments: interest rate swaps Hedged items: long-term debt subject to interest rate fluctuation risk. (3) Hedging policy The Company uses interest rate swaps to hedge risks from interest rate fluctuations on borrowings, only when approved by the management. (4) Assessment of effectiveness of hedging activities The Company evaluates the hedge effectiveness by comparing accumulated fluctuations of the hedging instrument and hedged item every quarter. When the exceptional treatment is applied for interest rate swaps, the assessment of hedge effectiveness is omitted. ( u ) 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. ( v ) 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 of common stock outstanding during the year. Diluted profit attributable to owners of parent per share is computed based on the profit attributable to owners of parent available for distribution to shareholders and average number of shares of common stock outstanding during each year after giving effect to the dilutive potential of shares of common stock to be issued upon the conversion of convertible bonds. Net assets per share is computed based on the net assets available for distribution to shareholders of common stock and the number of shares of common stock outstanding at the balance sheet date. Cash dividends per share shown for each period in the consolidated statement of income represent the dividends applicable to the respective period. ( w ) Consumption taxes Transactions subject to consumption taxes are recorded at amounts exclusive of consumption taxes. Nondeductible consumption taxes are expensed in the consolidated financial statements. ( x ) Consolidated taxation system The Company and its consolidated subsidiaries apply consolidated taxation system. ( y ) Adoption of tax effect accounting for the transition from the consolidated taxation system to the group tax sharing system For items that have transitioned to the group tax sharing system and those for which the non-consolidated tax payment system have been reviewed in line with the transition to the group tax sharing system, established under the “Act for Partial Revision of the Income Tax Act and Other Acts” (Act No. 8 of 2020), the Company adopts the treatment set forth in Paragraph 3 of the “Practical Solution on the Treatment of Tax Effect Accounting for the Transition from the Consolidated Taxation System to the Group Tax Sharing System” (ASBJ Practical Issues Task Force No. 39, March 31, 2020) not to apply provisions of Paragraph 44 of the “Implementation Guidance on Tax Effect Accounting” (ASBJ Guidance No. 28, February 16, 2018). The amounts of deferred tax assets and deferred tax liabilities are, therefore, based on provisions of the tax code prior to the revision.
( z ) Change in method of accounting
Subsidiaries that adopt the International Financial Reporting Standards have adopted International Financial Reporting Standard No. 16 "Leases" (hereinafter, "IFRS 16") from the fiscal year ended March 31, 2020. Accordingly, lessees in principle are required to record all leases as assets and liabilities on the balance sheet. Upon adopting IFRS 16, the Company has applied a transitional approach of recognizing cumulative effects of accounting policy changes on the date of the initial application. As a result, the effect on the consolidated financial statements for the current fiscal year is immaterial. (aa) Accounting standards issued but not yet effective Accounting Standards and Implementation Guidance on Revenue Recognition On March 31, 2020, the Accounting Standards Board of Japan (ASBJ) issued "Accounting Standard for Revenue Recognition" (ASBJ Statement No.29) and "Implementation Guidance on Accounting Standard for Revenue Recognition" (ASBJ Guidance No.30). (1) Overview This is a comprehensive accounting standard for revenue recognition. Specifically, the accounting standard establishes the following five-step model that will apply to revenue from customers: 1. Identify the contract(s) with a customer 2. Identify the performance obligations in the contract 3. Determine the transaction price 4. Allocate the transaction price to the performance obligations in the contract 5. Recognize revenue when(or as) the entity satisfies a performance obligation (2) Schedule date of adoption The Company expects to adopt the accounting standard and implementation guidance from the beginning of the fiscal year ending March 31, 2022. (3) Impact of the adoption of accounting standard and implementation guidance The Company is currently evaluating the effect of the adoption of this accounting standard and implementation guidance on its consolidated financial statements. Accounting Standard for Fair Value Measurement and Related Implementation Guidance The Accounting Standards Board of Japan (ASBJ) issued "Accounting Standard for Fair Value Measurement" (ASBJ Statement No. 30), and "Implementation Guidance on Accounting Standard for Fair Value Measurement" (ASBJ Guidance No. 31), along with related updates to "Accounting Standard for Financial Instruments" (ASBJ Statement No. 10), and "Implementation Guidance on Disclosures about Fair Value of Financial Instruments." (ASBJ Guidance No. 19). (1) Overview The ASBJ has developed an "Accounting Standard for Fair Value Measurement" and "Implementation Guidance on Accounting Standard for Fair Value Measurement" (hereinafter collectively, the "Fair Value Measurement Standard"  ), which provide guidance for fair value measurement in order to improve comparability with internationally recognized accounting standards. The Fair Value Measurement Standard is applied with respect to the fair value of the following items; • Financial instruments defined in "Accounting Standard for Financial Instruments" “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” has been revised requiring disclosure of financial instruments broken down by level in the fair value hierarchy. (2) Scheduled date of adoption The Company expects to adopt the accounting standards and related implementation guidance from the beginning of the fiscal year ending March 31, 2022. (3) Impact of adoption of revised accounting standard and related implementation guidance The Company is currently evaluating the effect of the adoption of the accounting standards and related implementation quidance on its consolidated financial statements. Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections. On March 31, 2020, the ASBJ issued the revised "Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections" (ASBJ Statement No. 24) (1) Overview This accounting standard has been released to provide an outline of the applicable accounting principles and procedures in cases where directly relevant accounting standards are not available. (2) Scheduled date of adoption The Company expects to adopt the accounting standard from the end of the fiscal year ending March 31, 2021. (ab) Change in presentation (Consolidated Statement of Income) Loss on sales of fixed assets previously presented as "other" in other expenses have been reclassified to loss on sales of fixed assets in other expenses for the year ended March 31, 2020 in terms of the materiality of amount. As a result, ¥1 million ($9 thousand) of “other” in other expenses previously presented in consolidated statement of income for the year ended March 31, 2019 have been reclassified to ¥1 million ($9 thousand) of loss on sales of fixed assets in other expenses in consolidated statement of income for the year ended March 31, 2020.
(ac)  Additional information
Introduction of Board Benefit Trust
We introduced a new share-based compensation plan, a "Board Benefit Trust (BBT)" (the "Plan"  ) for directors (including executive officer, excluding outside directors; "Directors"  ) based on the resolution at the 96th General Meeting of Shareholders on June 22, 2018 for the purpose of raising awareness of contributing to the improvement of medium- to long-term business results. Regarding the accounting treatment for the plan, the gross method is adopted based on the “Practical Solution on Transactions of Delivering the Company's Own Stock to Employees, etc. through Trusts" (ASBJ Practical Issue Task Force No.30, March 26, 2015). (1) Outline of the Plan The Plan is a share-based compensation plan under which our shares are acquired through a trust (the trust established in accordance with the Plan, the “Trust”  ) by using the funds contributed by us. Directors will receive our shares as well as the amount of money equivalent to the market value of our shares (as at the date of the retirement of Directors) through the Trust in accordance with the officer stock benefit rules formulated by us. In principle, Directors will receive benefits, such as our shares, on their retirement. (2) The Company's shares remaining in the Trust The Company's shares remaining in the Board Benefit Trust (BBT) are recorded by the Company as treasury stock under net assets at their book value in the BBT (excluding the amount of ancillary expenses). As of March 31, 2020, the book value of the said treasury stock was ¥160 million ($1,470 thousand), and the number of shares was 43,800. Impact of COVID-19 infections As for the impact of COVID-19 infections, the Company forecasts the business environment to remain unstable in the first half of the fiscal year ending March 31, 2021 and thereafter recover gradually. Given such assumptions, the Company has produced accounting estimates, including those for loss on impairment of fixed assets and the recoverability of deferred tax assets, based on information available as of March 31, 2020. Amid this situation where the assumptions underpinning such estimates are highly uncertain, consolidated financial statement results for the next fiscal year and beyond may be affected by timing as to when the COVID-19 pandemic will subside and the impact that the pandemic will have on the economic environment.
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 = ¥108.83, the approximate rate of exchange at March 31, 2020. The translation should not be construed as a representation that the Japanese yen amounts actually represent, have been or could be converted into U.S. dollars at that or any other rate.
Note 3. Inventories
Inventories as of March 31, 2019 and 2020 consisted of the following:
The write-downs of inventories resulting from decreased profitability for the years ended March 31, 2019 and 2020 were as

Note 4. Reduction entries
Reduction entries due to acceptance of prefectural government's grants relating to property, plant and equipment as of March 31, 2019 and 2020 were as follows:
Thousands of U.S. dollars 2020 Land 928 S
Note 5. Short-term loans payable and long-term debt

The aggregate annual maturities of long-term debt (including current portion) outstanding as of March 31, 2020 were

Note 6. Notes receivable and payable maturing on the balance sheet date
Notes receivable and payable maturing on the balance sheet date are treated as if they were settled at the clearing date of notes. Consequently, as the balance sheet date for the fiscal year ended March 31, 2019 was a bank holiday, the following notes receivable and payable maturing on the balance sheet date were included in the amount of each balance at March 31, 2019. Thousands of U.S. dollars
4 s
Note 7. Retirement benefits plans
The Company and certain of its domestic consolidated subsidiaries have either funded or unfunded defined benefit pension plans and defined contribution benefit pension plans. The Company has funded corporate pension fund plans and defined contribution pension plans. As a defined benefit pension plan, the Company has adopted a cash balance plan. Under the cash balance plan, the plan sponsor contributes money into a plan participant’s account based on the points according to the employee’s years of service and job performance and the points are calculated with an interest credit that reflects changes in market interest rates. Certain subsidiaries have funded and unfunded lump-sum payment plans and defined contribution pension plans. The simplified method is applied for the calculation of liability for retirement benefits and retirement benefit expense of certain domestic subsidiaries. The changes in the retirement benefit obligation during the years ended March 31, 2019 and 2020 were as follows:
The funded status of the plans and the amounts recognized in the consolidated balance sheet as of March 31, 2019 and 2020 were as follows:
The components of retirement benefit expense for the years ended March 31, 2019 and 2020 were as follows:
The components of retirement benefits asset and liability adjustments included in other comprehensive income (before tax effect) for the years ended March 31, 2019 and 2020 were as follows:
The components of retirement benefits asset and liability adjustments included in accumulated other comprehensive income (before tax effect) as of March 31, 2019 and 2020 were as follows:
1. The total plan assets include retirement benefit trusts which constitute 12.5% for the year ended March 31, 2019 and 10.5% for the year ended March 31, 2020. 2. The expected rates of return on plan assets has been estimated based on the anticipated allocation of plan assets to each asset category and the expected long-term returns on plan assets held in each category. The required contributions to the defined contribution plans by the Company and its consolidated subsidiaries for the years ended March 31, 2019 and 2020 amounted to ¥89 million and ¥86 million ($790 thousand), respectively. Assumptions to calculate the actuarial present value of the benefit obligation and the expected return on plan assets as of March 31, 2019 and 2020 were as follows:

Note 8. Net assets
Information regarding changes in net assets for the years ended March 31, 2019 and 2020 was as follows:
The Company's shares remaining in the Board Benefit Trust (BBT) are included in treasury stock (43,800 shares at March 31, 2019 and 2020).
(1) Dividends paid
1. The Company carried out a consolidation of share at the ratio of 10 shares to 1 share on October 1, 2018 and dividends per share was calculated taking into the effect of the consolidation of share 2. Dividends of the Company's shares remaining in the Board Benefit Trust (BBT) are included in total dividends based on the resolution at shareholders' meeting on June 23, 2020.
Note 9. Research and development costs
Research and development costs included in cost of sales and selling, general and administrative expenses for the years ended March 31, 2019 and 2020 amounted to ¥2,982 million and ¥2,845 million ($ 26,142 thousand), respectively. Note 10. Selling, general and administrative expenses Major elements of selling, general and administrative expenses for the years ended March 31, 2019 and 2020 were as follows:

Note 11. Gains and losses of fixed assets
The components of gains and losses of fixed assets for the years ended March 31, 2019 and 2020 were as follows: Gains on sales of fixed assets 2020
2020

Note 12. Loss on impairment of fixed assets
An impairment loss is recognized when the carrying amount of an asset exceeds undiscounted future net cash flows which are expected to be generated by such asset. The impairment loss is measured by the amount by which the carrying amount of 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, 2019, impairment losses were recognized for the following assets.
The Company's assets for business operations are categorized into groups on a division-by-division basis and the Company's rental property on an individual property basis, whereas consolidated subsidiaries' assets for business operations are categorized into groups on a subsidiary-by-subsidiary basis and their rental property on an individual property basis. Of the above asset groups, because the CS Division, SCI Division, Research & Development Center, SMK Manufacturing, Inc., SMK Electronica S.A. de C.V., SMK Electronics (Dongguan) Co. Ltd. and SMK Electronics (Phils.) Corporation suffered declining trends in net sales and income due to intense price competition in the market, the future cash flows from their asset groups were estimated after revising their business plans. As a result, it was found that they could not generate sufficient earnings to recover the carrying value of the asset groups, and therefore their book value was reduced to the recoverable amounts. As for SMK- LOGOMOTION Corporation, because operating loss has been recorded continually and future plan was not certain, its book value was reduced to the recoverable amount. The recoverable amount of the asset group of the CS Division, SCI Division, Research & Development Center, SMK Manufacturing, Inc., SMK Electronica S.A. de C.V. and SMK-LOGOMOTION Corporation were measured at value in use, and since no future cash flows are expected, the full amount of the book value of the fixed assets regarding this business is recorded as impairment loss. The recoverable amount of the asset group of SMK Electronics (Dongguan) Co. Ltd was measured at value in use, which was calculated by discounting future cash flows at 13.0%. The recoverable amount of the asset group of SMK Electronics (Phils.) Corporation was measured at value in use, which was calculated by discounting future cash flows at 10.3%.
Note 13. Income taxes
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 30.5% for the year ended March 31, 2019. A reconciliation between the statutory tax rate and the effective tax rate for the year ended March 31, 2019 was as follows. For
1. Valuation allowance has increased ¥539 million ($ 4,953 thousand). This increase is due to the additional recognition of valuation allowance for impairment loss in SMK Corporation ¥175 million ($ 1,608 thousand), valuation allowance for net operating loss carryforwards in SMK Corporation ¥151 million ($ 1,387 thousand) and valuation allowance for net operating loss carryforwards in subsidiaries ¥154 million ($ 1,415 thousand). 2. A breakdown of net operating loss carryforwards and valuation allowance by expiry date as of March 31, 2019 and 2020 is as follows:
Millions of ven
Millions of ven Due after three years
through four years大
4 4
(a) The amount is determined by multiplying the corresponding net operating loss carryforwards by the effective statutory tax rate.
Note 14. Other comprehensive income
The following table presents reclassification adjustments and tax effects allocated to each component of other comprehensive

Note 15. Amounts per share
1. The Company carried out a consolidation of share at the ratio of 10 shares to 1 share on October 1, 2018. Basic earnings per share have been calculated on the assumption that the said consolidation of share was carried out at the beginning of the year ended March 31, 2019. 2. In the calculation of loss per share, the Company’s shares remaining in the Board Benefit Trust (BBT), which are recorded as treasury stock under shareholders' equity, are included in the treasury stocks that are deducted in the calculation of the number of shares as of March 31, 2019 and 2020 and the average number of shares for the year ended March 31, 2019 and 2020. In the calculation of total net assets per share, the said treasury stock deducted as of March 31, 2019 and 2020 is 43,800 and 43,800, respectively. In the calculation of loss per share, the said treasury stock deducted for the year ended March 31, 2019 and 2020 is 27,375 and 43,800, respectively. 3. Loss attributable to owners of parent per share of common stock is based on the following information

Note 16. Financial instruments
(1) Policy for financial instruments The Company and consolidated subsidiaries manage temporary cash surpluses through low-risk financial assets. 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 five 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 the method of hedge accounting, hedging instruments and hedged items, hedging policy, and the assessment of effectiveness of hedging activities is found in Note 1 (t). Execution and management of derivatives transactions are carried out in accordance with the company rules specifying the transaction authority. In addition, in order to alleviate credit risk, derivative transactions are restricted to banks with high credit ratings. Although operating liabilities and loans payable are exposed to liquidity risk, the Group' s companies are able to manage it by using methods such as preparing monthly cash management plans. (3) Additional information regarding fair value of financial instruments Fair value of financial instruments includes the value based on the market price. In addition, if such information is absent, reasonable assessments of their value are included. Furthermore, the contract amounts, etc. relating to derivatives transactions are described in Note 18. Derivatives themselves do not serve as indicators of market risk involved in derivatives transactions.
sheets. The assets and liabilities arising from derivatives are shown on a net basis with the amount in parentheses representing a net liability position. 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 entered into. Derivatives Please refer to Note 18. Derivatives of the notes to the consolidated financial statements. 2. Financial instruments whose fair value is extremely difficult to determine
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.

Note 17. Securities
Information regarding securities classified as other securities at March 31, 2019 and 2020 was summarized as follows:
Unlisted stocks of ¥347 million at March 31, 2019 and ¥532 million ($4,888 thousand) at March 31, 2020 are not included in the above table because there were no quoted market prices available and the fair value is extremely difficult to determine. Investment securities in unconsolidated subsidiaries and affiliates are as follows:
Investment securities Information regarding sales of securities classified as other securities for the years ended March 31, 2019 and 2020 was as
Impairment of investment securities classified as other securities for the years ended March 31, 2019 and 2020 were as follows: Thousands of U.S. dollars Millions of yen Stocks * 86ス23 4 211 2019 2020 2020
Note 18. Derivatives
As a matter of policy, the Company does not speculate in derivative transactions. The Company does not anticipate nonperformance by any of the counterparties to the derivative transactions, all of whom are leading domestic financial institutions with high bond ratings. In accordance with the Company's policy, the accounting department controls derivative transactions and requires approval by the director responsible for accounting and the representative directors of the Company. The director who has the responsibility to control the performance and the related risks connected with derivatives reports these to the Management Committee of the Company. The Company uses interest rate swaps to hedge the risks from interest rate fluctuations on borrowings. The exceptional method

(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.
The fair value is calculated by the forward interest rate. (2) Regarding interest rate swaps to which the exceptional treatment applied, they are accounted for as if they were an integral part of the hedged long-term debt, and their fair value is included in the fair value of long-term debt in Note 16.
Note 19. Investment and rental property
The profit of investment and rental property for the year ended March 31, 2019 amounted to ¥520 million and the gain on sales of fixed assets amounted to ¥1,288 million. The profit of investment and rental property for the year ended March 31, 2020 amounted to ¥491 million ($4,512 thousand), the gain on sales of fixed assets amounted to ¥50 million ($459 thousand) and the loss on sales of fixed assets amounted to ¥17 million ($156 thousand). Information on the fair value of investment and rental property at March 31, 2019 and 2020 was summarized as follows:
1. The fair value represents the acquisition cost less accumulated depreciation. 2. The components of net change in book value for the year ended March 31, 2019 included increases mainly due to acquisitions in the amount of ¥57 million and decrease mainly due to sales and disposal of fixed assets ¥1,182 million and depreciation ¥149 million. The components of net change in book value for the year ended March 31, 2020 included increases mainly due to acquisitions in the amount of ¥578 million ($5,311 thousand) and reclassifications from assets for business operation ¥147 million ($1,351 thousand), and decrease mainly due to sales and disposal of fixed assets ¥50 million ($459 thousand) and depreciation ¥142 million ($1,305 thousand). 3. The fair value is mainly based upon the amount appraised by outside independent real estate appraisers.
Note 20. Segment information
(Overview) The reporting 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. SCI (Sensing, Communications and Interface) Division: The division produces and sells remote controls, switches, camera modules and touch panel. Research & Development Center: The center produces and sells wireless module.
(Changes in reporting segments)
In line with changes in the company organization as of April 1, 2019, the reporting segments were changed from "CS Division" , “FC Division”, “TP Division” and “Research & Development Center” to “CS Division”, “SCI Division” and “Research & Development Center". Also, the segment information of the previous fiscal year has been presented based on the classification and calculation methods after the change to the reporting segments. The business segment information is prepared in a manner similar to the accounting treatment as described in Note 1. Segment performance is evaluated based on operating income or loss.
dispatch businesses. Adjustment includes corporate assets which are not allocable to the reportable segments.
(1) Company name is not disclosed because there is a confidentiality clause in the contract with Company A. (2)  For the year ended March 31, 2019, note is omitted because sales amount of Company A is less than 10% of net sales.
5. Information about the amortization of goodwill and the balance of goodwill For the years ended March 31, 2019 and 2020, there was no amortization and balance of goodwill.
2. Terutaka Ikeda was the parent of President and CEO/COO Yasumitsu Ikeda.
Note 22. Subsequent Events
There were no subsequent events for the year ended March 31, 2020.
Independent Auditor’s Report
The Board of Directors SMK Corporation
Opinion
We have audited the accompanying consolidated financial statements of SMK Corporation and its consolidated subsidiaries (the Group), which comprise the consolidated balance sheet as at March 31, 2020, and the consolidated statements of income, comprehensive income, changes in net assets, and cash flows for the year then ended, and notes to the consolidated financial statements. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at March 31, 2020, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management, the Corporate Auditor and the Board of Corporate Auditors for
the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in Japan, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern and disclosing, as required by accounting principles generally accepted in Japan, matters related to going concern. The Corporate Auditor and the Board of Corporate Auditors are responsible for overseeing the Group's financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. • Consider internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances for our risk assessments, while the purpose of the audit of the consolidated financial statements is not expressing an opinion on the effectiveness of the Group's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation in accordance with accounting principles generally accepted in Japan. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Corporate Auditor and the Board of Corporate Auditors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Corporate Auditor and the Board of Corporate Auditors with a statement that we have complied with the ethical requirements regarding independence that are relevant to our audit of the financial statements in Japan, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March 31, 2020 are presented solely for convenience. Our audit also included the translation of Japanese yen amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 2 to the consolidated financial statements. Ernst & Young ShinNihon LLC Tokyo, Japan June 23, 2020 /s/ Takeo Sato Designated Engagement Partner Certified Public Accountant Auditors
Corporate Executive Officers

Overseas bases (15 Countries/Areas, 32 Bases) Shinagawa-ku, Tokyo 142-8511, Japan Tel: +81-3-3785-1111 Fax: +81-3-3785-1068
Philippines, Korea, Ireland, U.K., France, Germany, Belgium, U.S.A. and Mexico
but is excluded from the above list. Figures for percentage of shares are calculated after subtracting the number of treasury stock. The number of treasury stock includes the 43 thousand shares of the Company held by the Officer Stock Benefit Trust.
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. https://www.smk.co.jp/ Website * The Bluetooth® word mark and logos are registered trademarks owned by Bluetooth SIG, Inc. and any use of such marks by SMK Corporation is under license. * Other products and company names listed in this report are the registered trademarks or trademarks of their respective holders. SMK CORPORATION Tel: +81-3-3785-111 Fax: +81-3-3785-1068