CITIZEN REPORT2019

Our Corporate Philosophy“Loved by citizens, working for citizens.”
CITIZEN’s corporate philosophy,“Loved by citizens, working for citizens,”
is to deeply contribute to the lives of people around the world
through the manufacturing of products that are loved andtrusted by citizens.

Our Strategy

Medium-Term Management Plan 2021

Innovation for the next
Sense the Time and Create an Impression for the Future

Our Strength

Manufacture
Never matched
Creating the one and only
Outstanding technology and skills

The CITIZEN Group Corporate Story
The CITIZEN Group was founded in 1918 with the dream of producing awatch made in Japan. This year marks the Group’s 101st anniversary.
We have grown into a manufacture d’horlogerie capable of integrated
in-house manufacture of everything from individual parts to completed
products. Through our core Watches and Machine Tools businesses,
we have contributed to the lives of people around the world. The company
name “CITIZEN” embodies the aspiration of our Corporate Philosophy,“Loved by citizens, working for citizens.” As such, our mission is to besensitive to changing times, and to create inspiration for a sustainable
future. We will continue to go beyond conventional manufacturing as wetake on the challenge of creating new value.

CONTENTS
02 Message from the President & CEO
06 Sustainable Management
10 Our Businesses
12 Growth Strategy
16 Our Business Portfolio
16 Watches
22 Machine Tools
26 Devices and Components
27 Electronic Products / Other Products
28 Corporate Governance
31 Management Team
32 Analysis of Operating Results
33 Risks
34 Financial Statements
52 Global Network

Editorial Policy
Citizen Watch Co., Ltd. publishes the CITIZEN REPORT to communicate the mid- to long-term
corporate value of the CITIZEN Group. This report has been compiled to convey the Group’s
position and business direction in plain terms to stakeholders.

Forward-Looking Statements
This report contains forward-looking statements regarding the CITIZEN Group’s future performance.
These statements are based on information currently available. Statements regarding futureforecasts involve risks and uncertainties such as exchange rate fluctuations and changes indemand for products. Readers should understand that actual Group performance may differ
from the outlook provided in this report.

CITIZEN REPORT 201901

Message from the President & CEO“Loved by citizens,working for citizens.”
We will renew our connection to
our Corporate Philosophy as
we create new value.
Toshihiko Sato
President & CEO
Citizen Watch Co., Ltd.

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CITIZEN REPORT 2019

As the CITIZEN Group marks its 101st anniversary, we have established a new medium-term management
plan aimed at achieving further growth while looking to the long-term over the next 100 years. We willtake on the challenge of creating new value as we respond to changes in the business environment andsocial conditions.

Realizing Our Corporate Philosophy

Looking to Our Roots as We Trace a Path to Growth
I became president of the CITIZEN Group in April 2019. Assuming the post at this juncture—our
101st anniversary—I am firmly committed to leading the CITIZEN Group in achieving solid growth
as it embarks on its next 100 years as a major global player.
The Company was founded with the ambitious goal of producing a watch made in Japan.
We are proud of and confident in the experience and results that have grown from our century-longcommitment to manufacturing. With that pride and confidence, it is time for each of us to lookto our roots, and envision the future. It is not enough to simply acknowledge the Corporate
Philosophy of “Loved by citizens, working for citizens.” We must recapture its meaning, and ask
ourselves who these “citizens” are, what they “love,” and how we are expected to “work” forthem. As a company whose very name is “CITIZEN,” I believe we must be even more sensitive tothese questions because every one of our products touches the lives of “citizens” in some way.
Even products for commercial customers made by the Machine Tools and Devices andComponents businesses are used in other products, or used in their processing and manufacture.
While that may happen out of our sight, I believe that ultimately the aspirations embodied in our
products endure, eventually finding their way to the customer. For this reason, we must stay
conscious of how CITIZEN Group products support the day-to-day lives of people everywhere.
Another of our goals is to realize manufacturing that is “Loved by citizens, working for
citizens.” Therefore, it essential to future growth that we confront global environmental and social
issues and treat them as our own. We have included promotion of sustainable management(including activities addressing the United Nations’ Sustainable Development Goals (SDGs))
among our key strategies for achieving our management vision under the new medium-term
management plan. We will fulfill our social responsibility by contributing to the realization of asustainable society through our business activities and processes, which will also lead to thecreation of value aligned with rapidly changing social trends. I believe that this will ensure that we
continue to be a company in which every employee can have pride and confidence.

CITIZEN REPORT 201903

Message from the President & CEO

Medium-Term Management Plan 2021:

Innovation for the next—Sense the Time and Create an Impression for the Future

Enhancing Development of Personnel Able to Respond to Changing TimesIn FY2019, the CITIZEN Group launched the new medium-term management plan with the vision,
Innovation for the next—Sense the Time and Create an Impression for the Future. Over the years,
we have continued our era-defining technology development and released many world firsts,
including radio-controlled and waterproof watches. I am proud of our outstanding passion for
innovative technology and products. That passion is not limited to the Watches business, but has
spread to encompass the entire Group, with Group companies aggressively taking on newtechnical challenges. Our in-house development is making solid progress, and we will continue toinnovate in production technology, technology development, and basic development—fundamental
platforms for the Group.
Looking at global markets, we are seeing a shift from competition to collaboration. The CITIZEN
Group also intends to be proactive in moving toward open innovation, including collaboration withother industries. We are looking at a variety of ways to do this, among them technology exchanges
with partner companies as well as the assignment of development personnel to work with universities
and research institutions. These efforts will lead to the cultivation of development personnel with abroad perspective who have an extensive understanding of new markets. Proactive collaborations withpartner companies will play an important role as we work to understand the present and anticipate thefuture, rather than constantly playing catch-up.
As the emphasis of consumer behavior shifts from the tangible to the intangible, companies
must transition from a technology-driven development approach, to manufacturing centered on
the individual and society. People do not need technology for its own sake; rather, they arelooking for value to be gained from a product. Developers must therefore avoid a nearsighted
approach that sees technology as the end goal. We can only create new customer value andachieve technological innovation when we set our sights beyond technology; on the goal ofbringing customers inspiring experiences.
The “next” in “Innovation for the next” refers to trends and changing times. We need to
identify the “next” that will serve as our path forward. Encountering new technologies and ideas
through open innovation and exchange with external partners enables us to change ourperspective and our focus. My hope is that through such experiences, employees will cultivate theability to see things for what they really are. A variety of experiences outside the Company
provides employees with insights they might have missed otherwise—insights into reading
markets or tracking changes in values. One example is the CITIZEN Social Contribution Dispatch
System, launched in 2018 to mark our centenary. Under this program, employees travel tolocations in Japan and overseas to support activities targeting social issues in local communities.
Participants share their experiences after their return, thereby contributing to internal change.
This acts to boost employee awareness, and through such dialogue we can turn untapped
information into shareable knowledge. We are thus working to foster a rich communicativeenvironment in the Group, built on mutual understanding.
One issue in creating new markets and establishing new businesses is how to change ourconventional thinking and embrace new values. The key is diversity. We believe that people withdiverse values, understanding each other and working together, are capable of creatingcompetitive products with high added value. Therefore, we are strengthening our efforts in thisarea. In particular, we plan to make bold advances throughout the Group in promoting activeroles for women.

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CITIZEN REPORT 2019

CITIZEN Group Initiatives for FY2019

Promoting Digital Innovation by Enhancing Communication
Targeting further growth, the whole CITIZEN Group is working together to promote digital
innovation. Our focus is on enhancing communication to drive the creation of unprecedented
new value.
Organization-wide revitalization is essential to promoting this strategy. I am personallyworking to enliven employee communication—following my appointment as president, I havecontinued my practice of visiting the front lines. My presence can facilitate communication, andencourages both bottom-up and top-down communication. In innovation, it is also important tothink in terms of a goal point. Based on my own experience, I believe it is vital to establish a goaland stay focused on working toward it, rather than trying to solve individual problems as theyarise. Having a big-picture perspective also enables those on the front lines to devise optimal
processes based on an ultimate goal. This means that our business can take action with greater
speed. Communication is an important key in that process as well. We will put these ideas into
practice as we look to enliven communication between frontline workers and management inways that transcend the barriers between divisions and positions.
Backed by stronger communication, we aim for digital innovation through the application ofdigital technology in manufacturing innovation and operational reforms. In manufacturing
innovation, the automation of our manufacturing process will enable us to concentrate humanresources on operations that generate added value, while allowing us the scope to further
advance craftsmanship skills that require a human hand. In operational reforms, we will work
toward faster, more sophisticated management decision-making, while streamlining back-office
operations by optimizing the allocation of Group human resources to high-value-added work.
A sense of unity and brand enhancement will be a natural product of the embodiment of our
Corporate Philosophy of “Loved by citizens, working for citizens.” Further, to “Sense the Time
and Create an Impression for the Future,” the CITIZEN Group will work to anticipate change in atimely manner, evolving ourselves as we embrace that change.

Toshihiko Sato
President & CEO

CITIZEN REPORT 201905

Sustainable Management

The CITIZEN Group’s Commitment
For over a century, the CITIZEN Group has conducted its businessbased on the Corporate Philosophy, “Loved by citizens, working for
citizens.” To continue growing sustainably in tandem with society forthe next hundred years, we will realize further business expansion bycontributing to the solution of social issues, including achieving theUnited Nations’ SDGs, through our operations. We identify social
issues to address with reference to our Corporate Philosophy, Codeof Conduct, Sustainability Strategy, CITIZEN Environmental Vision
2050 and business domains, take actions to solve them, andproactively disclose our progress.

Our Approach to Sustainable Management

Overview of Sustainability Strategy

For the CITIZEN Group to earn a place in the hearts and

The CITIZEN Group’s Sustainability Strategy is based on two

lives of people around the world, we must gain society’s

approaches: solving social issues through products andacceptance of our underlying business approach, as well as

solving social issues through business processes (i.e.

our products and services. We view sustainable

addressing material issues).

management as more than simply providing quality

In solving social issues through products, each of the

products and services. Through sustainable management

Group’s business segments will work through 2030 to createthat takes into consideration social issues such as human

Sustainable Products and achieve Sustainable Factories

rights and the environment, we will secure the trust of

through comprehensive measures considering humanstakeholders as we enhance corporate value and pursue

rights, the environment, the workplace, compliance,business expansion. Under the new medium-termbusiness continuity planning, productivity and other topics.

management plan beginning in FY2019, we are pursuing

To address the task of solving social issues throughsustainable management that will bring us closer to thebusiness processes, under the new medium-term

citizens of the world and earn a place in their hearts.

management plan formulated in FY2019 the Group refinedits previous approach to materiality by defining six
categories based on trends in global social conditions.
Through efforts encompassing all of its business activities,
including the supply chain, the CITIZEN Group willcontribute to achieving the SDGs.

2019

2020

2021

Solving social issues through products
Begin activities in each business segment, andcultivate understanding and implement measuresacross the Group

Solving social issues through business processes
Introduce initiatives in business processes to addressmaterial issues

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CITIZEN REPORT 2019

2030

Create Sustainable Products producedin Sustainable Factories that aredesigned to address social issues

Sustainable
Products andSustainable
Factories

The CITIZEN Group’s Approach to Materiality
Based on the Corporate Philosophy, “Loved by citizens,makes decisions about important matters regarding Group-working for citizens,” the CITIZEN Group works to fulfill its

wide SDG-related activities. Acting as the secretariat of the

responsibility as a member of international society and as acommittee, the Corporate Planning Division and CSR

Solid Global Company, and to grow sustainably. We have

Department of Citizen Watch Co., Ltd. advance the SDG-

identified priority material issues accordingly.

related activities of the Group, and in addition to running

To ensure the effectiveness of our efforts, we haveestablished the Sustainability Committee. This committee

the committee, handle duties including progress
management and external disclosure of information.

The CITIZEN Group’s Priority Material Issues
Material Issues

Relevant SDGs

Strengthening Corporate
GovernanceWe aim to continually enhance the CITIZEN Groupʼs corporate value by
improving the internal control system to ensure transparent and soundmanagement, streamlining operational processes across the Group andadministering appropriate supervision.

Commitment to Quality

Defining the maintenance and improvement of reliability and safety as
the core of our Corporate Philosophy of “Loved by citizens, working for
citizens,” we strive to maintain and improve effective quality assurance
systems in all manufacturing processes.

Respecting Human Rights
and Labor Practices

As a globally operating corporate group, we are committed to fulfilling
our responsibility for respecting human rights throughout our value
chain. We will reinforce a corporate culture that embraces diversity andwhere we help one another to hone our abilities. We will create a safe
and supportive work environment for all employees.

Advancing Responsible
Procurement

With the aim of optimizing procurement activities throughout the Group,
we are working to resolve social issues throughout our value chain.

Promoting Environmental
Innovation

We endeavor to create value through environmentally friendly
innovation and in business processes throughout our value chain.

Pursuing Social
Contribution Activities

CITIZEN Group employees, coming face to face with social issues incommunities around Japan and across the world, and engaging insocial contribution activities in the fields of learning and education,
environment, sports, and disaster relief, aim to live in harmony withlocal communities.

Policies toward Achieving the SDGs

The CITIZEN Group’s Human Rights Policy

Statement on Modern Slavery and Human Trafficking

In April 2005, the CITIZEN Group joined the United Nations
Global Compact (UNGC), and we adopt a Group-wide approachto practicing the Ten Principles of the UNGC. Specifically, we
strive to fulfill our responsibility to respect the rights of all people
throughout the value chain.

In FY2018, we established the CITIZEN Group Human Rights Policy
to clarify our approach to ensuring respect for human rights. We havealso issued a statement in accordance with the requirements of the
U.K.ʼs Modern Slavery Act 2015. We strive to ensure that we are notcomplicit in human rights violations, either in our own businesses or
anywhere in our supply chain. We work to eliminate such risks in our
supply chain, including measures to eradicate modern slavery andhuman trafficking.

The CITIZEN Group’s Policy on Conflict Minerals
The CITIZEN Groupʼs policy forbids the use of conflict minerals
mined or brokered by armed groups. We work with our suppliers
to ensure that the proceeds of transactions are not used to financehuman rights violations, including child labor and forced labor,
committed by armed groups.

The CITIZEN Group’s Social Contribution Policy
As a good corporate citizen, the CITIZEN Group strives to contribute to
and work in harmony with the local communities in which it operates
under the Corporate Philosophy, “Loved by citizens, working for
citizens.” We provide and support opportunities that encourage
employees to take the initiative in engaging with social issues.

CITIZEN REPORT 201907

Sustainable Management

FY2018 Material Issue Highlights

Strengthening Quality Compliance
Strengthening Group GovernanceWe established the Group Risk Management Committee

governance and quality compliance, ascertaining the

as a framework for centralized management of and rapid

status of measures to address priority risks common

response to Group-wide risks, which is essential for

across the Group, and responding to new risks. Throughensuring the achievement of business targets andthis framework, we are working to share expertise among

sustainable development. This committee is responsible

Group companies and ensure uniform risk management

for verifying the progress of measures to enhance Groupacross the Group.

Quality compliance research at Citizen Finedevice

Quality Initiatives
In FY2018, we established the Group Quality Complianceand audits. Moreover, we have implemented

Committee. In addition to formulating the CITIZEN Group

organizational changes to ensure the independence of

Quality Assurance Code of Conduct to serve as unified

the quality department. Among key efforts in FY2018 was

guidelines, we are creating a framework for reducing

the formation of a quality department working team,risks involving quality. We also plan to enhance ourwhich has been conducting discussions regarding

quality audit function by conducting regular monitoring

compliance from the perspective of quality control.

Establishing CITIZEN Environmental Vision 2050
Promoting Environmental Innovation
In CITIZEN Group Medium-Term Environmental Plan 2024,

Long-Term Environmental Goals 2030 consists of five

we set goals for practicing sustainable management. This

goals to contribute to achieving the SDGs, while

represents our commitment to engaging in sustainable

Environmental Vision 2050 aims to contribute to enriching

manufacturing that encompasses the environment, humansociety through a focus on decarbonization, resourcerights, compliance, and business continuity planning

recycling, safety and security. With this long-term

across the Group, not only at our own Sustainable

perspective, we will continue to evolve toward our goals

Factories, but throughout the supply chain. In April 2019,of creating Sustainable Products and working for citizens

we established Long-Term Environmental Goals 2030 andthrough the practice of sustainable management.

Environmental Vision 2050, both intended to clarify the
direction of environmental initiatives over the long term.

08

CITIZEN REPORT 2019

The CITIZEN Social Contribution Dispatch System
Promoting Social Contribution Activities
The CITIZEN Group engages in social contribution toachieve harmony with local communities as a good
corporate citizen. In 2018, our centenary year, we launched
the CITIZEN Social Contribution Dispatch System, a new
initiative aimed at further evolution and development of
our activities. Under this program, employees travel tolocations in Japan and overseas to support activities
targeting social issues in local communities. The systemgives participating employees an opportunity to broaden

In the Philippines, where we operate, the CITIZEN Social
Contribution Dispatch System conducted the CITIZEN First
Watch Project, a watchmaking workshop that offers satisfying
and fun make-and-learn experiences to children living apartfrom their families as a result of delinquency or abuse.

their horizons and acquire new values beyond the confinesof their everyday lives and work. In doing so, our aim is that
employees will return to their workplaces with new ideas
and new energy for creating products and services that will
be loved by citizens and society. In FY2018, activities wereconducted in seven locations, including Miyagi Prefecture,
which was affected by the Great East Japan Earthquake,and Thailand, where we operate. A total of 210 people
from across the CITIZEN Group participated.

Ogatsu-cho, part of Ishinomaki City in Miyagi
Prefecture, suffered serious tsunami damage in
the Great East Japan Earthquake. Group employees
gave assistance at the Ogatsu Rose Factory
Garden, a project established with the goal ofregional vitalization and local community building.

Contributing to biodiversity preservation byplanting mangrove trees in Cambodia

Formulating Human Rights Policies That Include Human Rights in the Supply Chain
Respect for Human Rights and Labor Practices“Manufacturing products that are loved and trusted bycitizens” is our basis for ensuring dignity and respect for therights of all people throughout the value chain. We supportand respect international norms regarding human rights,
including the International Labour Organization Declaration
on Fundamental Principles and Rights at Work, and comply

with all laws and regulations that apply to the countries andregions in which we operate. In the event of a conflict
between local laws or regulations and internationallyrecognized human rights, we seek approaches that respect
principles of international human rights.

Advancing Responsible Procurement
We are strengthening our ties with suppliers in procurement
activities based on an awareness of corporate responsibility
in the manufacturing process, and in accordance with the
CITIZEN Group CSR Procurement Guidelines. We also
participate in the GCNJ Supply Chain Working Group of the
Global Compact Network Japan, and assisted in the

preparation of a specialized publication on supply chain
management and CSR procurement issued by the working
group. In FY2019, we will conduct a supplier survey atoperating subsidiaries to further advance CSR procurement.

CITIZEN REPORT 201909

Our Businesses

Company founded

1918“We want to produce a watch made in Japan.”In 1918, at a time when imports dominated, Shokosha Watch ResearchInstitute, the forerunner of Citizen Watch, was founded with the goal of
producing a watch made in Japan. The finished pocket watch, basedon an original design, was given the name “CITIZEN” by the Mayor ofTokyo, Count Shinpei Goto, in the hope that it would be widely loved
by citizens over the ages. This became the inspiration for the company
name we have today.

The CITIZEN Caliber 0100
(Watches)

Multi-function movements(Movements)

Business Characteristics

Watches

1924
The company’s first pocket
watch, CITIZEN, after which
the company was later named.

51%

Machine Tools

A Portfolio of Watchmaking Assets
Our Core
Technologies

1956	Parashock
First Japanese-made watch featuring a
shock-proof mechanism (Parashock)・ Miniaturization
・ Precision processing・ Low power
consumption

1959	ParawaterFirst fully waterproof Japanese-madewatch1971	Hi-sonicFirst Japanese-made tuning fork
electronic watch

22%

Devices andComponents

1973	Citizen Quartz
CITIZEN’s first quartz watch

1976	
Chrystron Solar Cell
World’s first analog light-powered watch

19%

1993	Radio-Controlled Watch
World’s first multi-band radio-controlled watch (Japan,
Germany, U.K.)
2003	ATTESA Eco-Drive Radio-Controlled Watch
World’s first thin-type radio-controlled watch with afull-metal case (Eco-Drive)

Electronic
Products

2011	Eco-Drive Satellite Wave
World’s first satellite system analog watch

2016	Eco-Drive One
World’s thinnest* analog light-powered
watch (2.98 millimeters)
2018

10

CITIZEN REPORT 2019

Announcement of Caliber 0100
World’s most precise* lightpowered movement withtimekeeping accuracy of ±1
second per year (Eco-Drive)

6%

Other
Products* As a light-powered watch. As of June 2019, CITIZEN survey.

Inspiring people through beautiful designs
perfected with the latest technology—the
fusion of technology and beauty guides
CITIZEN in providing citizens around the world
with better watches. We are one of the world’s
few manufactures d’horlogerie, capable ofintegrated in-house manufacture of everythingfrom individual parts to completed products.

We began the production of machine tools in
1936, leveraging technology and expertise
gained in the manufacture of watch parts, whichmust be compact and extremely precise.
Machine tools for creating components essential
for a wide range of industries—including the
medical, automotive, semiconductor and IT
fields—support today’s technology advancesand social development.

We leverage our core technologies developed
through the Watches business, including
miniaturization, precision processing and low
power consumption technologies, to manufacturedevices for use as components in everyday
electronic products. Our devices enable lower
power consumption and longer product lifespan,thus reducing environmental impact and creating
more comfortable and convenient lifestyles.

We apply precision processing and assembly
technologies developed through the Watchesbusiness to manufacture point-of-sales systems,
barcode printers and high-resolution digital
photo printers, which play important roles inretail stores, factories and society in general.
Electronic thermometers and electronic bloodpressure monitors assist people in managing
their health, and contribute to healthy living.

Jewelry products, leisure services and others

LEDs for lighting(Opto-devices)

Cincom(Machine tools)

Automotive components(Precision processed components)

Line thermal printer(Electronic products)

Main Customers

Main Products

Net Sales and Operating Profit(Millions of yen)
172,280	Top share of the
U.S. mid-priced
market	A global leader inmovement sales	Watches●	Movements●

	System clocks

●

●

●

●

181,241

163,619

163,718

163,525

16,183

12,440	General consumers
	Retail stores

19,66920,582
14,493	Dealersand others

2014

2015

Net sales

2016

2017

2018 (FY)Operating profit(Millions of yen)	Cincom, sliding headstock type
CNC automatic lathe●	A leader in global
share for small- andmid-sized computer
numerical control(CNC) automatic lathes

	Miyano, fixed headstock type CNC
automatic lathe●	MC20, multi-station machining cell	Automotive manufacturers●	Semiconductor
manufacturers

51,70251,517

49,694●●	alkapplysolution, solution service
utilizing IoT

64,04972,16413,082

10,443

	Medical device
manufacturers

6,794

7,151

6,406

2014

2015

2016

●

●



and others

Net sales

20172018 (FY)Operating profit(Millions of yen)	Automotive components●	Compact switches●

A global leader incompact chip LEDs

	Chip LEDs●

	LEDs for lighting●	Crystal devices●

	Ferroelectric LCDs●	
Automotive manufacturers●

80,632	Lighting manufacturers●

65,59660,807

2,782

2,543

2017

2018 (FY)

6,880

	
Home appliancemanufacturers

4,721

	
Consumer electronics
manufacturersand others

2014

●

69,462

67,536

3,983

●

2015

Net sales

2016

Operating profit(Millions of yen)●

Application ofcompact precision
technology

24,717

Digital photo printers●

Line thermal printers●

Calculators●

Electronic thermometers●

Electronic blood pressure monitors

●

●

●

23,371Retailers
Wholesalers
Household applianceretailersand others

21,774

20,58019,330

904

507

513

2016

2017

342
2014

2015

Net sales

438
2018 (FY)Operating profit

CITIZEN REPORT 201911

Growth Strategy

We will focus on improving
capital efficiency andaccelerate growth in
Watches and Machine Tools.
Toshiyuki Furukawa

Director

CITIZEN Global Plan 2018: Achievements and Issues
Promoting Structural Reforms to Becomea Solid Global Company
Beginning in FY2013, the CITIZEN Group advanced the
CITIZEN Global Plan 2018, a six-year medium-term
management plan aimed at making CITIZEN a Solid Global
Company capable of competing successfully around theworld. During the first three years of the plan, we worked to
implement thorough structural reforms and organizational
improvements in order to cultivate a lean managementfoundation. We pursued a selection and concentration
strategy, reorganizing and expanding our manufacturing
capabilities inside and outside Japan, primarily in Watches,to ensure we can respond flexibly to changes in demand,
withdrawing from unprofitable businesses and merging
device companies.
During the second three years of the plan, we focusedfurther on strengthening our manufacturing capabilities, withthe goal of improving profitability to ensure our ability to win
in the midst of increasingly intense global competition.

Other measures to improve our performance included active
growth investments. Despite our efforts, we fell short of ourtargets for FY2018, primarily due to the impact of changes in
conditions surrounding the Watches business.
Nonetheless, to build a business portfolio capable ofexecuting our growth strategy, we strategically developed
Machine Tools into the Group’s second core business,delivering significant results and achieving our goal in thisregard. The Machine Tools business grew from the inhouse manufacture of machines for making precision
watch components, and carries with it CITIZEN’s DNA.
A hundred years on from our founding, the Machine
Tools business is now established as our second corebusiness—an accomplishment of substantial significance.
Over the past six years, we have laid the foundations fordramatic growth. Under the new medium-term management
plan beginning this fiscal year, we will accelerate our efforts
to create new value, thereby improving corporate value.

Environment Surrounding the Citizen Group

Changes in lifestyleBusiness
Environment

Changes and diversification inbusiness environment

・Changes and diversification in distribution due to the development of e-commerce
・Need for sustainable management, including on SDGs and ESG issues
・Intensified competition globally and diversified axis of competition
・End of labor-intensive manufacturing

Changes in drivers of growth・Deceleration trend for growth rates in North America, Europe and China in themedium term
・Negative economic impact of trade friction between the U.S. and China
・Countries in Asia emerging as a growth center
・Demand in Japan will change significantly due to the consumption tax hike andhosting of the Olympic Games

MarketEnvironment

12・Rapid development of digital innovation, including IoT and AI
・Social changes due to environmental regulations and super aging
・Changes and diversification in lifestyle
・Labor force in Japan will peak in 2021, resulting in a serious labor shortage

Macro
Environment

CITIZEN REPORT 2019

Business Results (Operating Profit by Segment, ROE)
(Millions of yen, %)

6,880

904
4,721
1,457
4,481

7,151

6,794

3,805

342

3,983

2,782

339
507

2,543

10,443146
438

13,082

6,406

20,582

19,669311
513

17,215

16,183
14,493
12,440

8.7

7.8

7.8

7.1

5.7

5.2

(25)

(464)

(542)

2013

2014

2015

2016

Devices and Components

Electronic Products

Watches

Machine Tools

20172018 (FY)

Other Products

Return on equity (ROE)

CITIZEN Global Plan 2018
Aiming to be a Solid Global Company—A business group with speed and dynamics

Watches

Reaffirm as our core business todevelop the Group’s growth

Small Precision
Components

Growing business withgreat potential

Machine Tools

To be developed as the second corebusiness to the Watches business

Devices, Electronics
and Other Products

Increase profits and achieve
stable management

Key Strategies

1◯ Improved organization through structural reconfiguration,
including consolidation or elimination of production sites
in Japan and overseas, primarily in the Watches business△ Progress with manufacturing innovations was behind schedule2

investments in the Watches business◯ Consolidated and established sales companies to boost marketing△ Shift to digital marketing was behind schedule・ Integrated six watch-related companies and established
Citizen Watch Manufacturing・ Consolidated or eliminated overseas production sites
・ Shifted to a holding company structure, adopting asingle Group organization

・ Completed Miyota Saku Factory, the world’s largest
movement assembly factory, and consolidated
movement manufacturing lines
・ Acquired Frederique Constant, a Swiss luxury watchmaker・ Signed a partnership agreement with Fossil Group, Inc.
for hybrid smartwatches

Selection and concentration in products and businesses◯ Promoted selection and concentration by withdrawing from
unprofitable businesses and merging device companies

4△ = Partially achieved

Proactive investment and enhancement of marketing capabilities aimed at business growth◯ Acquired brands and signed licensing agreements as growth3◯ = Achieved

Comprehensive organizational improvements and enhancement of manufacturing capabilities

・ Merged two device companies to establish Citizen
Finedevice
・ Withdrew from the large dot-matrix printer business,among other measures

Employee productivity improvements and strengthening human resources◯ Switched to a compensation system better aligned with roles and results◯ Began Group-wide hiring, rotation of Group executive candidates and other measures
CITIZEN REPORT 201913

Growth Strategy

Innovation for the next

Medium-Term
Management Plan 2021

Sense the Time and Create an Impression for the Future

Sensitive to changes over time, CITIZEN will take on the challenge of creating new, unique value,
not merely continuing manufacturing as in the past, and moving toward a sustainable future.
Medium-Term Management Plan FY2021 Targets
Net Sales

370.0 billion yen

Operating Profit

ROE1

30.0 billion yen

8.0 %1. ROE = Annual net profit / Net worth

Key Strategies
Promotion of growth in Watches
and Machine Tools

Promotion of sustainable
management

Enhancement of quality compliance

P. 16

P. 6

P. 8

Dividends per Share and Payout Ratio

Shareholder Return Policy

(Yen)

25

CITIZEN Global Plan 2018

22

24

(%)

52.7

60

80

20

Basic policy: Payout ratio of 30% or more on averagefor three years

20

16

17

17

41.1

15

32.6

29.5

47.6
36.3

40

10

Medium-Term Management Plan 2021
Basic policy:

Payout ratio of 60% or more on averagefor three years
Dividend policy: Decided in consideration of the balance ofperformance-based and stable dividend

30
20

5

2

0

2014

2015

2016

Dividends per share (left)

2017

2018

2019

(FY)

0

(Forecast)

Payout ratio (right)

2. Payout ratio = The ratio of the total amount of dividends and share buybacks to
profit attributable to owners of parent

FY2018 Results
Net Sales

Operating Profit

Profit Attributable to
Owners of Parent

ROE

321.6 billion yen

22.4 billion yen

13.3 billion yen

5.2%(down 10.1% year-on-year)(down 30.7% year-on-year)(up 0.5% year-on-year)

Data by Region

Japan

Others

33.7%

0.8%

Domestic

8,379

Europe17.1%

Number of
Employees

Net Sales
Overseas
Americas

19.6%

14

CITIZEN REPORT 2019

(down 2.6 pts. year-on-year)

Asia

28.9%

11,860(58.6%)(41.4%)

Financial Strategy for Medium-Term Management Plan 2021
Background and Key Points of Medium-Term
Management Plan 2021
The Group’s vision under Medium-Term Management Plan
2021 is Innovation for the next—Sense the Time and Create
an Impression for the Future. It expresses our determination
to be sensitive to changes over time as we take on thechallenge of creating completely new value, not merely
continuing manufacturing as in the past, and moving towarda sustainable future.
Year after year, conditions faced by the CITIZEN Groupare changing at an increasingly rapid pace. In Watches, thosechanges demand that we gain a grasp of transformations inlifestyles and the diversification of values. This means not
only proposing personalized products suited to individual
lifestyles, but offering highly attractive customer experiencesthat include the time spent in anticipation of those products.
To accomplish this, we plan to make a number of digitalmarketing-related investments in the Watches business. We
will also expand our product range, which will include making
a full-scale entry into the growing smartwatch sector. Overall,
we plan to focus resources on achieving results through themulti-brand strategy advanced under CITIZEN Global Plan
2018, our previous medium-term management plan. Throughthese efforts, we will return Watches to a growth path.
Furthermore, in watch manufacturing, we will strengthen ourefforts to pursue high-mix, low-volume production in line withchanges in our marketing strategy, and improve productivity
through rationalization and automation. As we pursue
manufacturing innovation, we will also work with Group
companies to achieve greater synergies, including with the
Machine Tools business, which is championing the conceptof Ko No Ryosan (mass customization in CITIZEN’s style).
Now positioned as a core business, Machine Tools will
aim for even greater growth by enhancing production
innovation and management efficiency, and by expanding
sales in emerging markets.

Capital Policy
Under CITIZEN Global Plan 2018, funds generated throughstructural reforms in the first three years were allocated toactive growth investments. In addition to establishing abrand portfolio to propel our multi-brand strategy
forward—including our acquisition of Frederique Constantof Switzerland and our sponsorship agreement with The
Walt Disney Company to be the Official Timepiece for its
theme parks outside of Japan—we moved ahead with the
integration of our overseas sales companies, putting inplace a solid foundation in preparation for expanding sales
using a multi-brand strategy, centered on the CITIZEN
brand. We also made focused investments in the next stageof growth, including building the world’s largest movement
assembly factory in Saku, Nagano Prefecture.
Under Medium-Term Management Plan 2021, our policyof putting growth investment first will remain unchanged.
We will continue making proactive capital investments in
production innovation. However, following the completion of
our latest round of large-scale investments, we will reexamine
the balance between investment and shareholder returns,
based on our policy of delivering an average total return ratioof 60% or greater for the three years of the plan.
Another of the target indicators set in Medium-Term
Management Plan 2021 is ROE. Internally, we will also apply
return on invested capital (ROIC) as another key performanceindicator. Use of these indicators will enhance investment
efficiency in each of our businesses and build a stronger
awareness of the balance sheet, with the goal of enhancing
capital efficiency and earning power. We will put the assets
we have built to date to best use and focus on increasing
profitability as we work to balance growth investment withshareholder returns.

Business Portfolio Concept
Watches・Actively invest Group management resources to promote thegrowth of the CITIZEN Group

Machine Tools

・Accelerate growth through continued investment in line withthe expansion of the market

Core

Generate
profitAutomotive business(metal parts and LEDs)

Improve
profitability

Devices and Components,
Electronic Products andOther Products

・Generate profit in parts processing business forautomotive market
・Achieve top manufacturing capacity in the category

・Selection and concentration of business and products

CITIZEN REPORT 201915

Our Business Portfolio
Watches
Main Operating Companies
Citizen Watch Co., Ltd.; Citizen Watch Manufacturing Co., Ltd.;
Citizen Retail Planning Co., Ltd.; Citizen T.I.C. Co., Ltd.

Create New Value and Experience over Time

Target Indices (FY2021)

Net Sales




187.0

billion yen

Operating Profit

17.0

billion yen

Key Strategies

1

Promote digital marketing

2

Expand product range

3

Achieve results of multi-brand strategy centered on
the CITIZEN brand4

Improve the cost competitiveness of watch movements andfinished products through manufacturing innovation

Review of CITIZEN Global Plan 2018
During the first three years (FY2013–FY2015) of the previous
medium-term management plan, CITIZEN Global Plan 2018,
the Watches business strengthened its brand marketing
under the slogan “From ‘Product’ to ‘Brand,’” andpromoted a multi-brand strategy. In the early 2000s, thewatch market entered an era of “brand business,” as Swisscompanies with powerful brands, and fashion brands took
center stage. A plethora of brands emerged worldwide,
each brand with its own pedigree and character. Foreseeing
limits in its ability to expand by meeting diverse needs
solely with its own brands, CITIZEN shifted its businessstrategy to a multi-brand strategy. Central to that shift was
M&A. Starting in 2008 with the acquisition of Bulova
Corporation, which held a unique position in the mid-pricemarket segment in the U.S., CITIZEN went on to acquire
Prothor Holding SA, a Swiss company with luxury brands aswell as techniques for making high-end mechanicalwatches, in 2012, and Frederique Constant Holding SA,

16

CITIZEN REPORT 2019a Swiss high-end watchmaker, in 2016. In this way, CITIZEN
built a powerful brand portfolio extending from the mid- tothe high-price range.
In the second three years (FY2016–FY2018) of the plan,
we focused on active investments to grow earnings. In the
U.S., we integrated sales companies across brands,
establishing a dominant share of the mid-price market
segment in North America. The first success of the multibrand strategy was substantial sales growth for BULOVA.
In FY2014, we began worldwide marketing activities
for our core CITIZEN brand, whose brand statement“Better Starts Now” encapsulates our beliefs. We arepoised to become a Solid Global Company capable ofcompeting successfully around the world. Centered on the
CITIZEN brand, we intend to communicate a compellingstory for each brand to accelerate our segmentation
strategy, which aims to respond in detail to market needs
down to the distribution level, while further advancing ourmulti-brand strategy.

Message from the
Director in Charge

Our aim is to discover new expressionsof “Time” to realize “Better Starts Now”
Norio Takeuchi

Managing Director

Areas of Focus under Medium-Term
Management Plan 2021
In the Watches business, we forecast steady demand in themarket for luxury watches, particularly Swiss brands, andmechanical watches, as well as continued growth of thesmartwatch market. In Medium-Term Management Plan 2021,
we are aiming for full entry into smartwatches—a sector thatis growing in popularity among consumers worldwide. To
execute this key strategy, we are collaborating with Fossil
Group, Inc. of the U.S. in the area of hybrid smartwatches.
We will work on our new IoT platform service, Riiiver, as acompletely new business model that creates organic links
between products, including a wide variety of devices across
B2B and B2C, and watches, services, and people. This
autumn, we plan to launch a Riiiver compatible smartwatch:
the Eco-Drive Riiiver. At the same time, we will continue toenhance initiatives in the mechanical and luxury watch fields
from a medium-to-long-term perspective.

Even in areas such as smartwatches, where functionality is
the top priority, our strategy is not to compromise on
product aesthetics. Our strength is in our technological anddevelopment prowess and the high quality we havemaintained as a manufacture d’horlogerie with a history ofover 100 years of integrated in-house manufacture ofeverything from individual parts to finished products. These
strengths have enabled us to offer many “world firsts.”
We have created new value that only we are capable of,broadening the range of possibilities for watches, forexample, the ability to receive time signals from GPS
satellites with the world’s fastest signal reception speed. In
March 2019 in Switzerland, at the world’s largest trade fair
for watches and jewelry, Baselworld 2019, we unveiled theCaliber 0100, an Eco-Drive watch that is accurate to ±1
second per year—under the theme of “We Explore Time.”
The watch industry is now facing a major paradigm shiftthat will redefine the times. To realize our vision for thisbusiness, we will further refine the value of the products thatemerge from our evolution as a manufacture d’horlogerie.
At the same time, we will explore an expanding world of
possibilities for watches, overhauling our entire value chain
to provide new experiences and valuable services for all of
today’s active citizens leading innovative lifestyles.
Furthermore, we will update the value of the analog watch,with the aim of creating novel expressions of “Time” for the
new digital era.

Eco-Drive Riiiver

While we remain firmly committed to the value of
traditional watches, we have a flexible and innovative
culture and do not hesitate to take on challenges in new
fields. In the early 2000s, we launched our first productsthat might be described as the forerunners of today’ssmartwatches. Since then, we have consistently been at theforefront of each new wave of technology, as exemplified by
the world’s first Bluetooth watch, i:VIRT, launched in 2006.

Baselworld 2019

CITIZEN REPORT 201917

Our Business Portfolio | Watches

LuxuryMulti-Brand Strategy
ANGELUSARNOLD & SON

Angelus, a Swiss watchmakerfounded in 1891, has developed
a succession of watches with
innovative movements,
including high-precision
chronographs and complicatedmechanical watches.

Arnold & Son is a Swiss
manufacture d’horlogeriewith a long heritage ofEnglish craftsmanship andexpertise in the making of
luxury watches. Boasting
unique designs with
innovative ﬂair, the brandoffers aesthetic eleganceand technical sophistication.

The CITIZEN
As the premier CITIZEN brand, The CITIZEN watches feature expertly designed movements based onreliable technology and the strictest standards of accuracy. With this brand we strive for designs thattranscend passing trends. In autumn 2019, we will launch the world’s most precise light-powered watch,equipped with an Eco-Drive movement “Caliber 0100”—accurate to ±1 second per year. The CITIZEN
expresses our ardent pursuit of the essence of the watch.

High

Frederique Constant
The watches of Frederique Constant, which began innovating over three decades ago in 1988, are inspiredby the concept of “accessible luxury,” and all aspects of watch production are conducted in-house, fromdesign and development to ﬁnal assembly. Since 2004, Frederique Constant has developed, manufactured
and assembled 28 original calibers. The brand’s mission is to use outstanding manufacturing to offer
high-quality watches at sensible prices to a broader selection of watch enthusiasts.

CAMPANOLA

AlpinaCAMPANOLA offers aselection of creative models
that combine the ultimate inwatch mechanisms andbeauty under the concept of“Enjoy time. Enjoy daily life.
Enjoy individuality.”

With a proud history datingback more than 130 years,
this pioneer of the Swiss
watchmaking industry holds
numerous patents and has
developed a number ofinnovative calibers.

Focus Areas
1

Smartwatches

To establish its position in the smartwatch
industry, in 2019 CITIZEN will launch the IoT
platform service “Riiiver” and the Eco-Drive
Riiiver, a smartwatch compatible with theRiiiver platform.
We have also entered into a businessalliance with Fossil Group, Inc., a U.S.-based

18

CITIZEN REPORT 20192
fashion watch brand and lifestyle accessories
company, to step up the development,
manufacture and sale of hybrid smartwatch
movements and complete watches. CITIZEN
intends to lead the smartwatch market.

Mechanical Watches

CITIZEN is a true manufacture d’horlogerie,capable of in-house production of
everything from hairsprings—which few
companies are capable of producing—tojewels and gears. Through our integrated
in-house manufacturing, we have produced
a total of more than 100 million mechanical

CITIZEN
CITIZEN was founded in 1918, and its watches are now available in about 140 countries and regions
around the world. From pioneering light-powered technology with Eco-Drive to Satellite Wave GPS thatenables a watch to receive time signals from a GPS satellite, CITIZEN’s watch development is constantly
driven by exploration of the new potential of the watch. Core product lines include ATTESA, a watch forbusiness use that continues to evolve with the times; xC, offering high performance in tune with thelifestyles of women today; and CITIZEN L, a new style of luxury watch.

Mid

Eco-Drive One

ATTESA

PROMASTER

CITIZEN L

xC

Eco-Drive Bluetooth

BULOVA

Fashion/Low

BULOVA’s achievements in the development and modernization of watches are expressed in the brandmessage “A History of Firsts.” Since 1875, BULOVA’s various advanced technological capabilities havebeen a driving force in the market. For over 140 years, BULOVA has marked many ﬁrsts in the industry,including the world’s ﬁrst tuning fork electronic watch and the ﬁrst curved chronograph, and has played
an innovative and important role in the history of timepieces.

Q&Q

wicca

Beginning with Q&Q SmileSolar,a light-powered watch that does
not require periodic battery
replacement and developed
under the concept “Creating theMoments of Happiness to theWorld. TIME FOR EVERYONE,”
this brand sells more than
10 million watches per year in
120 countries.

The name brings to mind amagic through which dreams
come true. This brandsupports young women who
strive every day to enjoy lifein their own way.

3
watch movements. Leveraging thetechnological capabilities of other brands,
including La Joux-Perret and Frederique
Constant, we have relentlessly pursued
innovation in the manufacture of mechanicalmovements and other components.

Premium Segment Watches

Our core technologies support watch
aesthetics. While demonstrating unparalleledinnovation and originality, CITIZEN hascontinuously emphasized technology.
Focusing on luxury watches that offer
value unique to CITIZEN, such as CITIZEN

Eco-Drive One and Frederique Constant,
we aim for the fusion of technology andbeauty on a higher plane.

CITIZEN REPORT 201919

Our Business Portfolio | Watches

Advanced Manufacturing
Light-Power Technology
Eco-Drive technology is one of CITIZEN’s core technologies.
In 1976, CITIZEN was the ﬁrst in the world to work with thistechnology, in which light passing through the watch dial isconverted to electrical energy by a solar cell. This charges asecondary battery which conveys power to the motor that moves
the hands. Sunlight will charge the battery, but even a minusculeamount of artiﬁcial light will sufﬁce. With Eco-Drive, a watch canrun for six months or more on a single full charge, and periodic
battery replacement is unnecessary. We are engaged in a varietyof efforts in pursuit of further possibilities.

Three Featuresof Eco-Drive

1. Runs even in dim light
2. No need for regular battery replacement
3. Runs for over six months even in darkness

Radio-Control Technology
CITIZEN has developed a number of radio-controlled watches,
including the world’s thinnest analog quartz radio-controlledmodel made with full-metal watch case and a watch featuring theworld’s smallest movement (less than 20 millimeters diameter).
We have also developed Eco-Drive radio-controlled watches thatcan receive radio signals in four regions around the world. We are
the leader of radio-controlled watch evolution. We also developed
Eco-Drive Satellite Wave, the world’s ﬁrst analog light-powered
watch that receives time signals from GPS satellites orbiting theearth at an altitude of approximately 20,000 kilometers. In addition
to receiving time signals, the Eco-Drive Satellite Wave GPS watch
is equipped with a function to receive position information thatenables the watch to automatically identify the time zone andupdate time and date information.

Technologies for Watch Exteriors
Anti-reﬂection coating is a surface treatment technology thatenhances dial visibility. Thin ﬁlm is stacked in multiple layers with athickness of just a few nanometers to reduce glare on the crystal(glass surface) of the watch. Coating is generally applied to theinside of the crystal, but CITIZEN has developed a thin, highly
transparent ﬁlm that is scratch- and stain-resistant, making double
anti-reﬂective coating a reality.
Duratect is a surface-hardening technology. Applied to amaterial’s surface it can increase the surface hardness of thematerial by three to ﬁve times, making it possible to maintain abeautiful, long-lasting shine.

20

CITIZEN REPORT 2019

Untreated

Titanium pressing

TreatedDuratect scratch comparison

Watch Assembly Techniques“Super Meister” is the title given to our highest-ranking
craftsperson—someone who has acquired the most advanced
skills and successfully completed a challenging skill examination
program. The Super Meister is responsible for assemblinghigh-end product line items, including The CITIZEN andhigh-end radio-controlled watches. A serial number is engravedon the back of each watch, making it possible to identify thewatchmaker. Among past and present Super Meisters, one has
been awarded the Medal with Yellow Ribbon by the Emperor ofJapan, and two have been selected for the Contemporary Master
Craftsman Award by Japan’s Ministry of Health, Labour andWelfare. CITIZEN continues to uphold the tradition of passing
down the techniques of its craftspeople person-to-person, whichmachines cannot hope to reproduce.

Technologies for Mechanical Movements
CITIZEN has not only developed processing and assembly
equipment exclusively for manufacturing watches, but is a true
manufacture d’horlogerie that can carry out in-house productionof everything from hairsprings—critical parts that require highly
advanced technology and few companies are capable ofproducing—to jewels and gears. Our original manufacturing
technologies have enabled us to achieve high productivity and thehigh level of quality our customers trust. These technologies arealso used in quartz watches and Eco-Drive products.

Movements
The movement is the controller at the heart of a watch. CITIZEN’ssales of movements to outside customers are among the highest
in the industry. They are highly regarded in the global market for
quality and reliability. In Japan, we apply rigorous quality control to
produce mechanical and quartz movements, which incorporate
high-precision metal parts, for use in a variety of watch brands. We
have made continuous improvements to the long-selling Cal. 2035,
which has a 30-year history, and in mechanical movements, we aredeveloping the Cal. 9000 series. As a pioneer in the movement
industry, we will continue to create new value.

CITIZEN REPORT 201921

Our Business Portfolio

Machine Tools
Main Operating Companies
Citizen Machinery Co., Ltd.;
Miyano Service Engineering, Inc.

Establish a Position as a “New Manufacturing ( Monozukuri ) Company”
Creating the World’s Most Advanced Solution for Innovative Manufacturing

Target Indices (FY2021)

Net Sales




80.0

billion yen

Operating Profit

13.0

Key Strategies

1

Establish a firm business base through innovative manufacturing2

Promote sales in existing businesses

3

Expand business tailored to the age of IoT and ICT(solutions business)billion yen

Review of CITIZEN Global Plan 2018
Under the previous medium-term business plan, CITIZEN
Global Plan 2018, we faced a difficult start in FY2013, a
period when customers were reining in capital investments.
Our business vision was to establish a position as a “newmanufacturing ( monozukuri ) company” creating the world’s
most advanced solution for innovative manufacturing, tobuild Machine Tools into CITIZEN’s second core business.
As a result, with an upturn in the domestic and global
machine tools market as the impetus, we were able toachieve the quantitative goals of CITIZEN Global Plan 2018ahead of schedule, generating solid performance both inJapan and globally. We outperformed the market in termsof growth, enabling Machine Tools to take its place as
CITIZEN’s second core business.
Following its establishment, Citizen Machinery has
undergone a number of organization and business
transformations. Since 2013, we have strived to realize
the business vision formulated at that time, achieving

22

CITIZEN REPORT 2019alignment between employees with different
backgrounds and vectors to act as a single unit.
Our successes are the result of those efforts.
Ko No Ryosan (mass customization in CITIZEN’s style) is
the key to realizing our vision. This concept combines theefficiency of mass production with the flexibility of giving
customers “what they want, as much as they want, when theywant it, where they want it.” That is what we mean by theworld’s most advanced solution for innovative manufacturing.
In product development, our basic philosophy is that theanswer can always be found in the field. Listening to what ourcustomers say is a source of development insights. A good
example of this is our development of low frequency vibration
cutting (LFV) technology, an innovative way to deal with
cuttings, which are a common issue in lathing. Rolling out thisinnovation across a range of products was a major success.
At the Japan International Machine Tool Fair in 2018, we
proposed integrating “machinery,” “IoT,” and “mastering
technology” into one solution, representing our theme forthe fair “Leveraging engineers, leveraging machines,
leveraging technology,” and unveiled new products aimed
at solving customer issues.

Message from the
Director in Charge

Our aim is to provide customers
with total solutions that offer
the best possible performance.
Keiichi Nakajima Director

Customer factory

Machinery
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Leveraging engineers
Leveraging machines
Leveraging technology

CI

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ta

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Mastering
technology

Reflecting customer
knowhow and ideas

IoT

Da

For the past few years, the machine tools sector has seen
brisk activity worldwide, but in the second half of 2018 it
showed signs of slowing down. In some ways, the Machine
Tools business is susceptible to economic trends, but in themedium-to-long term, we think IoT, automation andemerging markets will spur new demand, and becoming
established under our business vision as a “new manufacturing(monozukuri ) company” will lead us to a new period of growth.
Under Medium-Term Management Plan 2021, tosupport the creation of customer value, we will take steps torealize three priorities: 1) Establish a firm business basethrough innovative manufacturing; 2) Promote sales inexisting businesses; and 3) Expand business tailored to theage of IoT and ICT (solutions business).
To establish a firm business base, we will realize
innovative manufacturing that maximizes the efficiency of
current management resources, and thereby promote thecreation of a framework for growth. We will review and revise
processes for manufacturing and operations to promotetransformation toward robust profitability. More specifically,
we need to identify what optimization means. We will
promote automation and smart technologies in our factories
in Japan and worldwide, and eliminate waste in allprocesses, including development, production, sales andservice. Our employees must take responsibility and realizethat their own evolution is the source of our customers’competitiveness, and they must act quickly and resolutely tomaximize our customers’ ability to create value, seeing
themselves as partners and contributors in this process.
Promoting sales in existing businesses will entail
increasing sales in China, India and the ASEAN region.
We must focus on promoting sales of low-priced models,
LFV models, automation equipment and mid-priced models
capable of process integration. In Japan, the U.S. andEurope, our goal is to maintain or increase market share.
We are focused on trends in the automotive sector, which
has the greatest influence on sales of automatic lathes.
Our plan is to strengthen global sales and service systems

for the MC20 Multi-Station Machining Cell, which has astrong record in the machining of automobile parts. We willcontinue to focus our efforts on the MC20, which, as anext-generation automatic lathe capable of both mass
production and high-mix, variable-volume production,
combines the strengths of the Cincom and Miyano ranges.
Expanding business tailored to the age of IoT and ICT(solutions business) will require us to provide greater added
value to our customers. This means not simply products, but
solutions that combine “machinery,” “IoT,” and “mastering
technology.” In all of this, we will remain a step ahead. Morespecifically, as part of our “alkapplysolution” concept forbuilding up stock-type services, we will develop new kinds ofservices for machinery, such as support for greater capacity
utilization and program creation. By promoting this approach,
we will continue to provide total solutions that contribute tocustomers’ growth.

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Areas of Focus under Medium-Term
Management Plan 2021

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Accumulating
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veri
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CITIZEN REPORT 201923

Our Business Portfolio | Machine Tools

Advanced Manufacturing
LFV Technology
Low frequency vibration cutting (LFV1) technology is a nextgeneration processing technology that leads to productivity
improvements. LFV technology applies proprietary CITIZEN
control technology that vibrates the servo axis in the cutting
direction, allowing for “air cutting” time in which the tool is
not in contact with the workpiece and thereby breaking up
chips during the cutting process. This solves a number oflong-standing chip-related issues, such as how to improvethe efficiency of small-diameter, deep-bore machining, or
break up chips produced when working with difficult-to-cut
materials, which tend to generate long strips. In addition,
this technology dramatically reduces chip volume and helps
prevent defects on the workpiece surface, thereby achieving
high-precision machining over extended periods of time.
CITIZEN has also developed a new “threading mode.”
A step beyond conventional LFV technology, LFV utilized inthreading mode (patent pending) is an innovative technologythat breaks up chips when threading by vibrating the servo
axis in the thread cutting direction (X-axis) while cutting in thelongitudinal direction (Z-axis).

Chips from conventional cutting

1. LFV is a registered trademark of Citizen Watch Co., Ltd.

alkartshop

alkartproduction
alkartschoolalkartsite

alkartoperation

alkartjoin

alkartlive

alkartstationOverview of alkapplysolution services

Remote support by engineers

24

CITIZEN REPORT 2019

Repair service

Chips from LFVtechnology cutting

alkapplysolution:
A Total Solution
alkapplysolution is an innovative online-enabled service thatoffers diverse solutions. It combines an array of technical andfunctional expertise accumulated at Citizen Machinery over many
years with information and communication technology. It brings
together many of the key elements required for Ko No Ryosan(mass customization in CITIZEN’s style), including employee
development, program creation and independent maintenance;
production instructions; machine control and monitoring; andremote maintenance support. At the same time, it serves tocombine and integrate a wide range of mechanical equipment
functions and technical expertise from engineers, plant managers
and others. With our sights set on global-scale manufacturing, we
will soon make it possible to connect multiple remote plants tooperate as one.

CNC Automatic Lathes
Lathes, which cut materials as they turn, are an essential tool in manufacturing. In the 1950s, computer numerical control
technology brought about the creation of NC lathes, which automated manual operation processes. Automation continued
to advance, and in 1968 we developed the world’s first computerized CNC automatic lathe. Today we are a leader in global
share.

Sliding Headstock Type CNC Automatic Lathes
CincomIn addition to small-diameter, high-precision processing andminiaturization technologies accumulated through the manufacturingof watch components, with Cincom we have developed andcommercialized a number of other advanced technologies, including
numerical control technologies for achieving high productivity as well
as networking technologies. Cincom offers high-precision, highspeed machining performance and a reputation for ease of use. We
also offer software applications optimized to meet the machining
needs of individual parts, and contribute to manufacturing innovation
in a wide range of industries, including the automotive, medical andIT sectors.

Cincom A20

Fixed Headstock Type CNC Automatic Lathes
MiyanoBNC42

Miyano began as a manufacturer of superfine industrial files. In 1948,
using its own technology, Miyano succeeded in developing the first
fixed headstock automatic lathe in Japan. The high rigidity of thelathe’s headstock made heavy cutting cycles possible, and it has been
well received by customers around the world. We meet a diverse
range of manufacturing needs through total solutions that include anextensive lineup of products and peripheral equipment. We continue
to provide highly reliable, durable machines, primarily for customers
in the automotive, construction equipment and hydraulic/pneumatic
equipment fields.

Multi-Station Machining Cell
MC20
Manufacturing in the twenty-first century must be able to accommodate
two extremes: mass production and high-mix, variable-volume production.
The MC20 Multi-Station Machining Cell makes Ko No Ryosan (masscustomization in CITIZEN’s style) a reality. It offers a combination ofprocessing modules that allow for optimized allocation of processing
steps and flexible handling of a variety of process layouts.
MC20

CITIZEN REPORT 201925

Our Business Portfolio

Devices and Components
Main Operating Companies
Citizen Electronics Co., Ltd.; Citizen Finedevice Co., Ltd.;
Citizen Micro Co., Ltd.; Citizen Electronics Timel Co., Ltd.;
Citizen Electronics Funehiki Co., Ltd.; Fujimi Corporation;
Citizen Chiba Precision Co., Ltd.

Establishing a Top Position in Specific Fields
by Offering Differentiated Products

Creating the Next Generationof Growth Businesses
Key Strategies

1

Develop a diverse lineup of automotiverelated products centered on the precise
metal part machining business・Establish competitive advantages centered on
the automotive components business・Advance the shift to high-value-added products,
mass production and rationalization, expanding
into areas beyond automotive-related products

2

Expand the range of high-quality,
high-value-added products in
response to market changes
・Expand market share using proprietary anddifferentiated technologies, including LEDs
and tactile switches

3

Enhance management stability by
improving profitability

LEDs for lighting

26

CITIZEN REPORT 2019

Automotive components

Areas of Focus under Medium-Term
Management Plan 2021
Leveraging our miniaturization, precision processing, andlow power consumption technologies developed in the
manufacture of watches, we make a wide range ofcomponents and products that support the lives of people
and society.
Under Medium-Term Management Plan 2021, we will
establish competitive advantages centered on our core
precise metal part machining technology. In automotive
components, we offer products in the areas of safety,
comfort, the environment, and controls, and primarily
supply functional components to automotive manufacturers
around the world. We are working to create added value
through the rationalization and integration of processing
systems made possible with manufacturing facilities wehave designed ourselves, as we pursue expansion into areas
beyond automotive-related products.
We develop products to be compact, lightweight andlong-lasting. Our LEDs for lighting offer superior design andperformance. Our tactile switches and crystal device
components are vital in smartphones and digital cameras.
Along with our ferroelectric liquid crystal on silicon (FLCOS)
display technology, we will use these and other proprietary,differentiated technologies to expand our offering of
high-quality, high-value-added products in response tomarket changes.
Our focus going forward will be on achieving greaterlevels of miniaturization, precision, and low power
consumption. We will work to create the next generation of
growth businesses by establishing a top position in specificfields and transitioning to a leaner earnings structure as wemove to enhance management stability.

Crystal units, crystal oscillators

Ferroelectric LCDsElectronic Products

Other Products

Main Operating Company

Main Operating Companies

Citizen Systems Japan Co., Ltd.

Citizen Jewelry Co., Ltd.;Tokyo Bijutsu Co., Ltd.;
Citizen Plaza Co., Ltd.

Providing Value to People around the WorldOur Electronic Products business, based on compact
precision technology originating from watchmaking,encompasses the printer business, including photo
printers and compact printers; the health maintenancedevice business, including blood pressure monitors anddigital thermometers; and the calculator business.
Building on our core business of high-quality, highreliability commercial printers and photo printers, we will
work to expand into global niche markets with the goalof driving stable profits.
Electronic devices are increasingly important in abusiness environment that demands constant evolution,and in day-to-day life, where we seek to promote healthy,
active lifestyles. We will continue to pursue new value
and convenience while monitoring people’s health andlifestyle needs.

Digital thermometers

Digital blood pressure monitors

CTD711 ear/forehead
thermometer

Digital photo printers

Turning Technology for Keeping Time
into Services for Providing Joy
The CITIZEN Group is also engaged in a variety of otherbusinesses, including wedding rings and other jewelry,and leisure services such as ice skating and bowling
facilities. In jewelry, we have launched a number of
unique, trend-conscious products, including
collaborations with fashion designers and the Disney
Bridal Collection. Meanwhile, Citizen Plaza in
Takadanobaba, Tokyo, operates a sports complex
offering a year-round ice skating rink and a bowling alley
with authentic wood lanes, as well as a culture center. It isalso available for extracurricular school events.
We will continue to provide products and services
that satisfy our customers by precisely responding to theneeds of society and the needs of the times.

Citizen Plaza Ice Skating Rink

Citizen Plaza Bowling Center

CITIZEN REPORT 201927

Corporate Governance
Basic Approach to Corporate Governance
Loved by citizens, working for citizens—This is the sentiment fromwhich Citizen Watch Co., Ltd. (“the Company”) derives its nameand which it has made its Corporate Philosophy. The Company
works to contribute to society and increase its corporate value
through sustainable corporate activities, in harmony with the local
community and the global environment. To continue to promote
its aims, the Company believes it is important to ensuretransparency in management and multi-faceted management
oversight. Accordingly, the Company is striving to expand andenhance its corporate governance.
Corporate Governance System
The Board of Directors of the Company consists of eight Inside
Directors who oversee the Group and are responsible forbusiness execution in principal operations, and three Outside
Directors who review and monitor business management froman independent position, making the most of their extensive
experience and knowledge of management. The Company is acompany with an Audit & Supervisory Board, and audits are
conducted by three Audit & Supervisory Board Members (two ofwhom are Outside Audit & Supervisory Board Members), whopossess a high degree of knowledge and expertise regarding

Selection/Dismissal

Selection/Dismissal

Proposal/Reporting

Auditing

Cooperation

corporate finance and corporate law.
The Company has voluntarily established the Nomination
Committee and the Compensation Committee to increase thetransparency of management.
The main duties of the Nomination Committee include
discussing matters concerning the appointment of Representative
Directors, the President and CEO, and the Chairperson of the Boardof Directors, and making proposals on such matters to the Board of
Directors. The main duties of the Compensation Committee include
discussing matters concerning the policies and standards ofcompensation for Directors, and providing advice on such matters to
the Board of Directors.
Committee members are appointed by resolution of the Boardof Directors. Each committee consists of at least three Directors,
the majority of whom are Outside Directors and at least one ofwhom is a Representative Director. The Chairperson of eachcommittee is an Outside Director, elected through the mutual
consensus of committee members.
The Company has determined that the corporate governancesystem described above is adequate for ensuring the proper andefficient execution of duties, management transparency andmulti-faceted management oversight.

Selection/Dismissal

Advice/ReportingAccounting Audit

Appointment/
Removal/Supervision

Reporting

ReportingInternal Audit

Direction/Supervision* Chairperson: Outside Director
Members: Three or more Directors (majority Outside Directors, at least one Representative Director)

Outside Officers
The Company has appointed three Outside Directors and two
Outside Audit & Supervisory Board Members. The three Outside
Directors have extensive experience and broad insights as managers
and as an attorney-at-law, which they use to review and monitor theCompany’s management. The two Outside Audit & Supervisory Board
Name

Reasons for Appointment

Fumiaki Terasaka

To utilize his considerable experience in and extensive knowledge of management to check and supervise theCompany’s management, the Company has appointed him as Outside Director.

Outside Director

Toshiko Kuboki

Ms. Toshiko Kuboki has extensive experience and knowledge as an attorney-at-law, and the Company expects that
she will be able to utilize her professional point of view as an attorney-at-law and her experience as an outside
director of another company to check and supervise the Company’s management, and in light of her achievements
as an Outside Audit & Supervisory Board Member of the Company, the Company believes she is suitable for the
position of Outside Director. While Ms. Kuboki has not been involved in the management of a company aside fromher position as an outside director or as an Outside Audit & Supervisory Board Member of the Company, theCompany deems that she has thorough knowledge of corporate legal affairs as an attorney-at-law and will be able
to properly perform her duties as an Outside Director, and has newly appointed her as Outside Director.

Outside Director

Yoshio Osawa

In the belief that Mr. Yoshio Osawa will utilize his considerable experience in and extensive knowledge ofmanagement to check and supervise the Company’s management, the Company has newly appointed him as
Outside Director.

Outside Audit &Supervisory Board
MemberNoboru Akatsuka

Mr. Noboru Akatsuka has been managing banks and companies for many years and has extensive knowledge andexperience thereof. The Company believes he will utilize such knowledge and experience to audit the Company,and has appointed him as Outside Audit & Supervisory Board Member.

Yaeko Ishida

Ms. Yaeko Ishida has extensive experience and knowledge as an attorney-at-law, and since she will be able toutilize her professional point of view as an attorney-at-law to audit the Company, the Company believes that she
is suitable for the position of Outside Audit & Supervisory Board Member. While Ms. Ishida has not been involvedin the management of a company, the Company deems that she has thorough knowledge of corporate legal
affairs as an attorney-at-law and will be able to properly perform her duties as an Outside Audit & Supervisory
Board Member, and has newly appointed her as Outside Audit & Supervisory Board Member.

Outside Director

Outside Audit &Supervisory Board
Member28

Members have extensive experience, broad insights, and expertise
relating to finance and accounting as a banker and an attorney-at-law,which they use to audit the Company. The Company has determinedthat the system described above is adequate for maintaining andpromoting corporate governance.

CITIZEN REPORT 2019

Officer Compensation
Regarding the amount of officer compensation, the Company
bases its decisions on the amount of earnings improvement it
desires, the level considered appropriate to secure outstanding
personnel, changes in the management environment, externaldata, levels prevalent at other companies, as well as details ofmanagement duties. Also, regarding decisions about executive
bonuses, in addition to the above considerations, it considers
financial benchmarks (sales, operating profit, etc.) and non-financial
benchmarks (corporate structure improvement, systemic
improvement, ideas for the future, etc.).

Total Officer Compensation
Category

No. of officers

Total amount ofcompensation, etc.
(millions of yen)

Of which, fixedcompensation(millions of yen)

Of which, bonuses(millions of yen)

Of which, performance-linked
share-based compensation(millions of yen)

Directors [of whom, Outside Directors]

10 [2]

271 [19]174 [19]85 [—]

11 [—]

Audit & Supervisory Board Members[of whom, Outside Audit & Supervisory
Board Members]

4 [3]

42 [24]42 [24]

— [—]

— [—]

Total [of whom, Outside Officers]

14 [5]

313 [43]

216 [43]

85 [—]

11 [—](Notes) 1. The above figures include Audit & Supervisory Board Members who retired at the conclusion of the 133rd Ordinary General Meeting of Shareholders held on June 27, 2018.
2. The above amount of bonuses (85 million yen) for Directors (excluding Outside Directors) is the amount to be paid after the conclusion of the 134th Ordinary General Meeting of
Shareholders scheduled to be held on June 26, 2019.
3. The above amount of performance-linked share-based compensation (11 million yen) for Directors (excluding Outside Directors; excluding Directors who are non-residents ofJapan) is the amount that was recorded as an expense in the fiscal year under review.
4. The maximum allowance for the total amount of compensation, etc. for Directors (excluding Outside Directors) was set at 370 million yen per year (inclusive of bonuses, etc.) at the133rd Ordinary General Meeting of Shareholders held on June 27, 2018. Compensation for the performance of the duties of employees who also serve as Directors is included in
the above compensation, etc.
5. Separate from Note 4 above, at the 133rd Ordinary General Meeting of Shareholders held on June 27, 2018, the maximum allowance for the total amount of performance-linked
share-based compensation for Directors (excluding Outside Directors; excluding Directors who are non-residents of Japan) was set at 300 million yen for a period of three fiscal
years (and 100 million yen for the initial period starting from 2018).
6. The maximum allowance for the total amount of compensation, etc. for Outside Directors was set at 30 million yen per year at the 122nd Ordinary General Meeting of
Shareholders held on June 26, 2007. No bonuses will be paid to Outside Directors.
7. The maximum allowance for the total amount of compensation, etc. for Audit & Supervisory Board Members was set at 80 million yen per year at the 122nd Ordinary General
Meeting of Shareholders held on June 26, 2007. No bonuses will be paid to Audit & Supervisory Board Members.

Evaluation of the Board of Directors’ EffectivenessRegarding the status of directors and auditors holding concurrent
posts, facts are made public in the Company’s business reports andin reference materials for the General Meeting of Shareholders.
One Outside Director and one Outside Audit & Supervisory Board
Member concurrently hold posts as outside officers of other listedcompanies as of March 2019. The other Directors and Audit &Supervisory Board Members do not concurrently hold posts asofficers of other listed companies, and hold positions only at
the Company.

1. Method of Evaluation

2. Summary of Evaluation Results

The Company administered a questionnaire to allmembers of the Board of Directors and the Audit &Supervisory Board for the purpose of analyzing andevaluating the effectiveness of the Board of Directors.
The Board of Directors then discussed the analysis andevaluation of the questionnaire.

Based on the analysis and evaluation of the questionnaire regarding the effectiveness of the Board of
Directors, the Directors and the Audit & Supervisory Board Members generally gave high grades, and it was
confirmed that the Board of Directors functioned effectively. The results of the evaluation for each question
are as shown below.

• Respondents: All Directors and Audit & Supervisory
Board Members (13 people)• Method: Questionnaire survey(non-anonymous; names will not be disclosed, in principle)• Period: March 2019
• Questions: 21 in totala. Questions regarding the structure of the Board of
Directors (4 questions)b. Questions regarding the management/administrationof the Board of Directors (6 questions)c. Questions regarding the agenda items at meetingsof the Board of Directors (7 questions)d. Questions regarding the systems that support theBoard of Directors (4 questions)a. Structure of the Board of Directors
The structure of the Board of Directors was evaluated as generally appropriate, consisting of an appropriate
number of members and reflecting an appropriate level of diversity. The opinion was expressed that, going
forward, it would be desirable to increase the number of female members, and promote additional diversity.
b. Management/Administration of the Board of Directors
The management/administration of the Board of Directors was evaluated as generally appropriate. Items to
be deliberated are determined in advance and the frequency of the meetings is within an appropriate
range. In particular, it was evaluated that the meeting materials for the Board of Directors have beenenhanced and are easier to understand than previously.
c. Agenda items at meetings of the Board of Directors
It was evaluated that agenda items are appropriately selected and discussions are held on agenda items
that demonstrate the direction of the corporate strategy. Looking ahead, comments were made suggestingthat the Board of Directors deepen the discussion on business reports, including progress, major risks andtopics related to the medium-term management plan.
d. Systems that support the Board of Directors
It was evaluated that training opportunities are appropriately provided to each Director and Audit &Supervisory Board Member and that opportunities for requesting submission of information have beenenhanced. In addition, the Nomination Committee and Compensation Committee were evaluated asfunctioning and providing reports appropriately.

3. Future Initiatives
The Company will strive to improve issues recognized in the evaluation of the Board of Directors and further enhance the effectiveness of the Board of Directors.
・The Board of Directors appointed one female Outside Director and one female Outside Audit & Supervisory Board Member at the Ordinary General Meeting of
Shareholders in 2019. The Company will make efforts to ensure diversity for further enhancement of the function of the Board of Directors.
・Regarding business reports, including progress, major risks and topics related to the medium-term management plan, the Company will make efforts to further enhance
agenda items by creating opportunities to discuss them on a regular basis at meetings of the Board of Directors.

CITIZEN REPORT 201929

Corporate Governance

Enhancing Group Governance
The CITIZEN Group has established the Group Risk Management
Committee to help achieve the Group’s operating objectives andcontinue its sustainable development through the integrated
management of and timely response to risks.
The Group Risk Management Committee’s primary responsibilities
are to identify and deal with key risks faced by the Group, and respondto new risks.
The President and CEO of the Company chairs the committee,
which has established subcommittees for main risk themes. The
officers in charge and risk management departments participate inthese subcommittees. As a result, senior management is able toidentify and address key risks including financial risks, compliance,business continuity planning, intellectual property, information
security, labor practices, and ESG risks including those related toenvironmental issues. This system allows the Group to share risk

management expertise and information on managing key risks
common to all Group companies and risks specific to each Group
company, enabling consistent risk management Group-wide.
The CITIZEN Group has newly established the Group Quality
Compliance Committee in order to consider and formulate
measures to strengthen quality compliance for the entire Group.
The committee is chaired by the Director in charge of Group risk
management and is composed of quality officers for each Group
company. Its primary responsibility is to handle quality compliancerisks. In addition, we regularly conduct training, education andaudits on the newly formulated CITIZEN Group Quality Assurance
Code of Conduct to improve awareness of quality compliancethroughout the Group.
The CITIZEN Group will continue to make improvements tostrengthen risk management Group-wide.

Group Risk Management Committee

Group Quality
Compliance
Committee

Group Legal
Affairs andCompliance
Committee

Group
Environmental
Management
Committee

Group
Accounting
Committee

Group Intellectual
Property
Management
Committee

Group
Information
GovernanceCommittee

Group Human
Resources
Committee

Group BusinessContinuity
Management
Committee

Ensuring Appropriate Conduct of Business by Subsidiaries
Based on rules and regulations for subsidiaries and affiliates, theCompany manages and guides the development of management
systems and internal control systems at its subsidiaries.
With regard to the individual business activities of the CITIZEN
Group, the Company thoroughly disseminates the management
policies and plans it has formulated, and clarifies the authority andresponsibility of Group companies. Group companies are
responsible for autonomous management based on the industry
characteristics and other aspects of each business.

In addition, the Group shares information about andcollaborates on key issues for Group businesses through meetings
including Management Committee meetings and liaison
conferences attended by Group companies.
Furthermore, subsidiaries are required to submit regular
reports at Business Control and Management Committee meetingsand Watch Group Control Committee meetings on the status ofbusiness conduct. The Audit Office also monitors subsidiaries
through audits.

Other Corporate Governance Matters
Company Institutions and Internal Control System
The Company holds meetings of the Management Committee
comprising full-time Directors and full-time Audit & Supervisory
Board Members to ensure prompt management decision-making
and management transparency. The committee fully discusses andconducts advance deliberations on matters relevant to management
decisions and other important management matters of the Boardof Directors.

30

CITIZEN REPORT 2019

The Board of Directors makes decisions relevant to businessexecution and supervises business execution. With regard tobusiness execution, Representative Directors, Directors in charge,
and operating officers manage businesses.
The Board of Directors met 17 times during FY2018, and all
Directors and all Audit & Supervisory Board Members attended all
meetings held during their respective terms of office.

Management Team

1

2

3

4

5

6

7

8

9

10

11

12

13

14

Directors
1

Toshio Tokura

2

Toshihiko Sato

3

Norio Takeuchi

Chairman of the Board of Directors
Toshio Tokura has a wealth of experience and connections in all areas ofcorporate management and an extensive track record as the former President
and CEO in charge of the management of the Group. He assists the current
President and CEO in carrying out duties pertaining to the Group’s external
activities and governance by making use of his experience, connections andtrack record. He assumed his current post in 2019.
President and CEO
Toshihiko Sato has a record of achievements and experience in running theDevices and Components business, as well as being responsible for watch
manufacturing. He leverages this record to promote Group business as heleads management through the execution of CITIZEN Group Medium-Term
Management Plan 2021. He assumed his current post in 2019.

Managing Director, Senior General Manager of WatchBusiness Division
Norio Takeuchi has an impressive record in sales strategy and brandstrategy in the Watches business as Director, and experience inmanaging overseas subsidiaries involved in watch and clock sales. He
assumed his current post in 2017.

4

Toshiyuki Furukawa

5

Keiichi Nakajima

6

Shinji Shirai

7

Yoshitaka Oji

8Yoshiaki Miyamoto irector, General Manager of Corporate Planning Division andDin charge of Accounting Department, Public & Investor
Relations Department and IT Management Department
As General Manager of the Corporate Planning Division, Toshiyuki Furukawa
has a record of achievements in formulating Group management strategy,
and as Director has experience leading the Corporate Planning Division,
Accounting Department, and the Public & Investor Relations Department.
He assumed his current post in 2016.
Director
Keiichi Nakajima has mainly been involved in the Machine Tools
business, driving the Machine Tools business as a whole and promoting
business strategies as President of Citizen Machinery Co., Ltd. He
assumed his current post in 2013.
Director, Senior General Manager of Manufacturing Technology
Division and in charge of Quality Assurance Department
After being involved in watch and clock manufacturing at the Company’s
subsidiaries, Shinji Shirai gained experience managing watch
manufacturing subsidiaries. He also has experience in operations
involving watch manufacturing, technologies and product development.
He assumed his current post in 2017.

Director, Senior General Manager of Product Development

Division and Watch Development Division, and Senior General
Manager of R&D Center
After being involved in watch and clock sales at one of the Company’s
overseas subsidiaries, Yoshitaka Oji gained experience as General Managerof the Corporate Planning Division, promoting management strategy in
the Watches business and product development of watches and clocks. He
assumed his current post in 2017.

Auditors
9

Fumiaki Terasaka

Outside Director Independent(Career Summary)
2004 Operating Officer and Director of Kyushu Sales & Marketing
Division of Sapporo Breweries Ltd.
2004 Director and Senior Officer, Director of Marketing Division of
Sapporo Breweries Ltd.
2005 Director and Executive Managing Officer, Director of Marketing
Division of Sapporo Breweries Ltd.
2009 Executive Managing Officer of Sapporo Breweries Ltd.
2010 President and Representative Director of Sapporo Breweries Ltd.
2010 Managing Director and Group Operating Officer of Sapporo
Holdings Limited
2013 Advisor of Sapporo Breweries Ltd.
2014 Senior Advisor of Sapporo Breweries Ltd.
2015 Outside Audit & Supervisory Board Member of Daisyo Corporation(present)2017 Outside Director of Fujitsu General Limited (present)2017 Outside Director of the Company (present)

10 Toshiko Kuboki

Outside Director Independent(Career Summary)1987 Registered as an attorney-at-law
2002 Conciliation Commissioner of Tokyo Family Court (present)
2009 Retirement Benefit Examination Committee Member of Board ofAudit of Japan (present)2012 Visiting Professor of Graduate School of Law, Chuo University (present)2013 Municipal Board of Education Member of Chuo-ku, Tokyo (present)2015 Outside Director of Qol Co., Ltd. (Currently Qol Holdings Co., Ltd.)(present)
2015 Outside Auditor of Kyodo News (present)2016 Outside Audit & Supervisory Board Member of the Company
2019 Outside Director of the Company (present)

11 Yoshio Osawa

Outside Director Independent(Career Summary)
2003 Corporate Officer and General Manager of Network Division of
Sumitomo Corporation
2003 Director of Sumisho Electronics Co., Ltd.
2003 Director of Sumisho Computer Systems Corporation (Currently
SCSK Corporation)2005 Executive Officer and General Manager of Network Division of
Sumitomo Corporation2007 Director of Jupiter Telecommunications Co., Ltd.
2007 Executive Officer and General Manager of Media Division of
Sumitomo Corporation
2008 Managing Executive Officer and General Manager of Media,
Network & Lifestyle Retail Business Unit of Sumitomo Corporation
2008 Representative Director and Managing Executive Officer of
Sumitomo Corporation2011 Representative Director and Senior Managing Executive Officer of
Sumitomo Corporation2013 Representative Director, President and Chief Operating Officer of
SCSK Corporation
2015 Representative Director and President of SCSK Corporation
2016 Director and Chairman of the Board of SCSK Corporation2017 Director of SCSK Corporation2018 Outside Director of Canon Marketing Japan Inc. (present)
2019 Outside Director of the Company (present)

12 Yoshio Takada

Audit & Supervisory Board Member (Full-time)
Yoshio Takada has mainly been involved in accounting operations,having held several managerial positions in accounting departments of
the Company, following which he also had experience managing a
subsidiary as Director and CEO. He assumed his current post in 2017.

Akatsuka
13 Noboru
Audit & Supervisory Board Member (Full-time), Outside Audit &Supervisory Board Member Independent(Career Summary)
1981 Joined Dai-Ichi Kangyo Bank, Limited
2005 G eneral Manager of Asia Corporate Banking of Mizuho Corporate
Bank, Ltd. (Currently Mizuho Bank, Ltd.)
2007 G eneral Manager of Overseas Business Promotion Division ofMizuho Corporate Bank, Ltd.
2008 G eneral Manager of Corporate Banking Division No. 18 of Mizuho
Corporate Bank, Ltd.
2009 E xecutive Officer of Mizuho Corporate Bank, Ltd.
2011 M anaging Executive Officer of Century Tokyo Leasing Corporation
2016 Counselor of Century Tokyo Leasing Corporation
2016 Chairman of Fujitsu Leasing Co., Ltd.
2018 Audit & Supervisory Board Member (Full-time) of the Company(present)

14 Yaeko Ishida

Outside Audit & Supervisory Board Member Independent(Career Summary)
2000 Registered as an attorney-at-law
2007 Judicial Commissioner of Tokyo Summary Court
2016 C onciliation Commissioner of Tachikawa Branch of Tokyo Family
Court (present)
2019 O utside Audit & Supervisory Board Member of the Company(present)

Independent
Independent officer pursuant to Rule 436-2 of the Securities Listing
Regulations of Tokyo Stock Exchange, Inc.
Notes: For more information on the nomination of Outside Directors andOutside Audit & Supervisory Board Members, see page 28.
Yaeko Ishida uses the name Yaeko Kitadai in her profession as an
attorney-at-law.

 irector, Group Risk Management, General Manager of GeneralD
Affairs Division and in charge of Personnel Division, CSR
Department and Environmental Management Department
After being involved in the startup of new plants at Group overseas
subsidiaries engaged in watch and clock manufacturing, Yoshiaki
Miyamoto managed overseas subsidiaries responsible for watch andclock sales. He also has experience as Senior Operating Officer withresponsibility for Group risk management, general affairs and personnel.
He assumed his current post in 2018.

CITIZEN REPORT 201931

Analysis of Operating Results

Fiscal Year-End Operating Results(Millions of yen)

Year ended
March 31, 2018Year ended
March 31, 2019Year-on-yearchangePercentagechangeNet sales

320,047

321,652+1,604+0.5%

Operating profit

24,92022,411(2,509)(10.1%)

Ordinary profit

26,66426,602(62)(0.2%)

Profit attributable toowners of parent

19,303

13,369(5,934)(30.7%)

During the fiscal year under review, the Japanese economy
maintained a moderate recovery, although consumer spending
continued to be weak. In the United States, capital investment andconsumer spending remained steady, despite concern overdevelopments related to trade with other countries.
Meanwhile, economic recovery in Europe slowed due to thegrowing seriousness of trade issues and political uncertainty. The
Asian economy continued its overall growth and recovery trend,
despite some weakness evident in the Chinese market.
Against this backdrop, in the final year of CITIZEN Global Plan
2018, the medium-term management plan launched in February 2013,
the CITIZEN Group sought to facilitate the implementation of new
growth strategies, mainly in the Watches business, to achieve the aimof becoming a Solid Global Company, while simultaneously
strengthening its earning capacity through manufacturing innovations.
In the CITIZEN Group’s consolidated results for the fiscal year
under review, net sales increased 0.5% year on year, to 321.6 billion
yen, while operating profit decreased 10.1%, to 22.4 billion yen.
Ordinary profit decreased 0.2% year on year, to 26.6 billion yen, andprofit attributable to owners of parent declined 30.7%, to 13.3 billion
yen, due to the posting of an extraordinary loss.

・ Cash FlowsNet cash provided by operating activities decreased by 12.6 billion
yen year on year, to 19.8 billion yen. Major factors contributing to thisresult included 19.2 billion yen in profit before income taxes, 13.9
billion yen in depreciation, and 5.6 billion yen in impairment loss,
offset by a 7.0 billion yen increase in inventories and 9.6 billion yen inincome taxes paid.
Net cash used in investing activities increased by 11.9 billion yen
year on year, to 19.8 billion yen. Major factors contributing to thisresult included 19.3 billion yen for the purchase of property, plantand equipment, offset by 4.1 billion yen in proceeds from sales ofinvestment securities and 0.7 billion yen in proceeds from sales ofproperty, plant and equipment.
Net cash used in financing activities decreased by 5.8 billion yen
year on year, to 5.8 billion yen. Major factors contributing to this result
included 3.7 billion yen in repayments of long-term loans payable and7.4 billion yen in cash dividends paid, offset by factors increasing cash
flow such as 5.0 billion yen in proceeds from long-term loans payable.
For the consolidated fiscal year under review, cash and cash
equivalents decreased by 6.1 billion yen year on year, to 84.5 billion
yen as of the end of the fiscal year.

Analysis of Financial Position

Fundamental Policy Regarding the Distribution of Profitsand Dividends for the Fiscal Year Under Review and the
Fiscal Year Ending March 2020

・ Assets at Fiscal Year End
As of March 31, 2019, total assets increased by 4.0 billion yen year on
year, to 413.9 billion yen. Current assets increased by 5.9 billion yen, to258.9 billion yen, mainly attributable to factors such as a 7.6 billion yen
rise in inventories and a 2.1 billion yen increase in notes and accounts
receivable – trade, despite a 5.2 billion yen decrease in cash anddeposits. Non-current assets (property, plant and equipment, net plus
total investments and other assets) decreased by 1.9 billion yen,primarily due to a 6.0 billion yen decrease in investment securities and a
4.3 billion yen decrease in goodwill, offsetting increases of 2.2 billion
yen, 1.6 billion yen and 1.4 billion yen in deferred tax assets, machinery,equipment and vehicles – net, and construction in progress, respectively.
Liabilities increased by 0.1 billion yen year on year, to 146.3 billion
yen, mainly reflecting a 2.0 billion yen increase in the total of long-termand short-term loans payable and a 0.7 billion yen increase inelectronically recorded obligations – operating, in spite of a 2.7 billion
yen decrease in income taxes payable.
Net assets increased by 3.8 billion yen year on year, to 267.5 billion
yen, mainly as a result of a 5.8 billion yen increase in retained earnings
and a 1.2 billion yen increase in foreign currency translation adjustment,in spite of a 3.7 billion yen decline in valuation difference on availablefor-sale securities.

32

CITIZEN REPORT 2019

The Company considers the proportion of the total amount ofdividends and share buybacks to profit attributable to owners ofparent as the ratio of return to shareholders, and established a basic
policy of maintaining a ratio of 30% or higher on average for three
years. The ratio is determined in consideration of the balance
between dividend payments based on consolidated results and stabledividend payments.
The year-end dividend for the fiscal year under review will be
10.00 yen per share. As a result, the full-year dividend for the fiscal
year under review will be 20.00 yen per share.
For the next fiscal year and beyond, the Company has decided totake steps to ensure that the ratio of the return to shareholders
exceeds 60% on average for the three-year period of Medium-termManagement Plan 2021. It plans to pay a full-year dividend of 24.00
yen per share in the next fiscal year by comprehensively taking into
consideration stable dividend payments and expectations for its
business performance for the next year, among other factors.

Risks

The following factors may affect the CITIZEN Group’s operating
results, financial position, stock price and other figures.
(i) Risks regarding our businesses
The CITIZEN Group’s main business is to manufacture and sell
watches, machine tools, devices and components, and electronic
products.
The Group operates its business all over the world, and our customers
include both individuals and a wide range of manufacturers. Ouroperating results are therefore influenced by a variety of factors, someof which are listed below.
WatchesCompetition in the watch market is intensifying, not only fromJapanese brands, but also from high-end Swiss brands, low-end
Chinese manufacturers, and smartwatch manufacturers, along withalternative products such as smartphones with watch functions. In the
movement sector, the analog quartz market centering on low-priced
products has been contracting, and we are facing an environment inwhich prices are declining as a result of increasing competition due tothe rise of Chinese manufacturers. Consequently, there is a risk ofdeclines in our product sales and market share.
Machine Tools
The Machine Tools business is susceptible to the effects of economic
cycles and fluctuations in corporate capital investment. The global
economy has been showing signs of slowing, due mainly to the trade
friction between the U.S. and China, and Brexit. This may affect theGroup’s operating results.
Devices and Components
The Devices and Components business is characterized by rapid
technological innovation and fierce competition between companies,
meaning that declining sales prices or delays in development, forexample, can have a significant impact on business results. Precision
machining components are susceptible to customer trends, including
automotive and smart phone manufacturers. As for opto-devices,
patent licensing agreements are concluded for manufacturing certain
products. Our business results could be affected should a cooperative
relationship underpinning a patent agreement break down and accessto the patent be lost.
Electronic Products
The Electronic Products business is susceptible to declining capital
expenditure and personal spending as a result of changing economic
conditions. With intense competition, not only from domestic
manufacturers but also from electronics manufacturers in China andother countries, and rapid technological innovation, business results
could also be impacted by declining sales prices or development
delays, for example.
(ii) Overseas sales
Overseas sales account for a high percentage of the Group’s overall
product sales. As our products are sold worldwide, our operating
results may be affected by economic and consumer trends in eacharea, as well as by political and socioeconomic factors.
(iii) Foreign currency fluctuation risks
As overseas sales account for a high percentage of the Group’s
product sales, as mentioned in (ii) above, we enter into foreign
currency contracts, currency options and other such transactions tohedge against risks. Although we are expanding and strengthening
our overseas production, currency fluctuations may still affect theGroup’s operating results.

(iv) Manufacturing in China
China is one of the Group’s main production bases. It is therefore
possible for our operating results to be affected by factors in China,
such as the suspension of production due to problems, the enactmentof new regulations that could affect production, or the sharp
appreciation of the Chinese yuan.
(v) Impairment loss
An impairment loss would be applicable if the market values of theGroup’s assets were to decline significantly or the profitability of ourbusiness were to deteriorate. This may affect the Group’s operating
results and financial position.
(vi) Patents and intangible property
As part of the Group’s R&D and production activities, we make use ofa variety of technologies covered by intellectual property rights. These
include intellectual property rights that are owned by the CITIZEN
Group, and others for which we believe we have legitimately received
licenses to use.
Nevertheless, should a third party claim, based on grounds ofwhich we are unaware, that its intellectual property rights havebeen violated, a dispute could arise that could affect the Group’sbusiness results.
For some products in particular, manufacturing is based on patent
licensing agreements. If a cooperative relationship underpinning suchan agreement were to break down, or access to the relevant patent
were to be lost, it may affect our business results.
(vii) Risks related to natural disaster such as earthquakes
We have established a Group risk management system to avoid any
injury or damage to facilities in the event of a fire, an earthquake or otherdisaster through drills and other safety activities at our headquarters andworks. In the event of a particularly serious earthquake or other suchdisaster, however, our production activities and product supplies may beaffected. There may also be a significant impact on our operating results
and financial position due to reconstruction costs, for example.
(viii) Risks related to M&As and business alliances
We are committed to strengthening the Group’s business foundations
through M&As and business alliances. When undertaking suchactivities, we carry out comprehensive research into and examinationsof the companies involved. Nevertheless, there may be issues that we
discover later, such as unrealized liabilities or obstacles in
implementing projects, which may materially affect the Group’s
operating results and financial position.
(ix) Risks related to borrowings
The Group’s borrowings include syndicated loans and commitmentline agreements with financial institutions. Any violation of financial
restrictions under such agreements could result in demands for theaccelerated repayment of the relevant borrowings, which may affect
the Group’s financial position.
(x) Other risks
The Group’s operating results may be affected by a variety of factors
in addition to the above, including changes in social infrastructure
and market competition as a result of rapid advances in technology,changes in the Group’s financial or managerial situation as a result of
ongoing restructuring initiatives, trading restrictions in major markets
in Japan or overseas, international taxation risks including thetransfer pricing taxation system, or substantial changes in stock orbond markets.

CITIZEN REPORT 201933

Consolidated Balance Sheets
Citizen Watch Co., Ltd. and Consolidated Subsidiaries
March 31, 2018 and 2019ASSETS20182019¥ 92,079¥ 86,875$ 782,664

62,013914
90,541
8,405(957)
252,997

64,1391,225
98,202
9,653(1,111)
258,985

577,831
11,041
884,710
86,972(10,013)2,333,205

LandConstruction in progress Property, plant and equipment, net

110,398
125,640
44,4782,600
283,118(212,404)
70,714
10,293
3,971
84,979111,177
127,353
45,7972,764
287,092(213,186)
73,905
10,326
5,437
89,6691,001,597
1,147,332
412,591
24,903
2,586,423(1,920,603)
665,820
93,02848,986
807,834

Investments and other assets:
Investment securities (Note 3 and 12)Long-term loans (Note 12)
Goodwill (Note 10 and 15)
Software
Other intangible assets (Note 10)
Deferred tax assets (Note 2 and 5)
Others (Note 12)
Less: Allowance for doubtful accounts
Less: Allowance for loss on investments
Total investments and other assets
Total assets (Note 15)

46,043
931
4,356
3,940
3,744
9,583
3,556
(199)
(26)
71,932¥ 409,909

39,974
942
㸫
4,402
4,323
11,847
4,057
(268)
(23)
65,256¥ 413,911

360,1328,494
㸫
39,661
38,946
106,735
36,552(2,417)(207)
587,896$ 3,728,935

Current assets:
Cash and time deposits (Note 2 and 12)
Notes and accounts receivable – trade (Note 12)
Electronically recorded monetary claims (Note 12)
Inventories (Note 4)
Other current assets
Less: Allowance for doubtful accounts
Total current assets
Property, plant and equipment (Note 10 and 15):
Buildings and structures
Machinery and equipment
Tools, furniture and fixtures
Leased assets
Less: accumulated depreciation

See notes to consolidated financial statements.

34

Thousands of
U.S. dollars (Note 1)

Millions of yen

CITIZEN REPORT 20192019

LIABILITIES AND NET ASSETSCurrent liabilities:
Short-term loans payable and current portion of long-termloans payable (Note 6 and 12)
Current portion of unsecured bonds (Note 6 and 12)
Notes and accounts payable – trade (Note 12)
Electronically recorded obligations – operating (Note 12)
Income taxes payable
Accrued expenses
Accrued bonuses
Provision for reorganization costs (Note 13)
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term loans payable (Note 6 and 12)
Unsecured bonds (Note 6 and 12)
Deferred tax liabilities (Note 2 and 5)
Liability for retirement benefits (Note 7)
Provision for reorganization costs (Note 13)
Other long-term liabilities
Total long-term liabilities
Total liabilities
Net assets:
Common stock
Authorized㸫959,752,000 shares in 2019 and 2018
Issued㸫320,353,809 shares in 2019 and 2018
Capital surplus
Retained earnings
Less: treasury stock, at cost
(2,070,969 shares in 2019 and 2,068,533 shares in 2018)
Total shareholders’ equity
Accumulated other comprehensive income
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Accumulated adjustments for retirement benefits
Total accumulated other comprehensive income
 Non-controlling interests
Total net assets
Total liabilities and net assets

Thousands of
U.S. dollars (Note 1)

Millions of yen

2018

2019

2019

¥ 6,880¥ 13,987$ 126,010

10,00021,267
14,164
4,884
13,509
5,936
822
9,353
86,818

㸫
20,496
14,896
2,139
13,395
5,712
484
10,62881,741

㸫
184,656
134,201
19,274
120,680
51,4684,364
95,753
736,406

32,146
㸫
1,587
22,721913
2,008
59,377

27,077
10,000791
23,328816
2,609
64,622

243,941
90,0907,130
210,163
7,358
23,505582,187

146,195

146,363

1,318,593

32,64832,648294,134

34,000176,117

34,019181,995

306,481
1,639,597(1,783)(1,773)(15,981)240,983

246,889

2,224,231

11,9092,067(1,047)
12,928
9,801

8,111
3,303
(855)
10,55910,09873,07929,761(7,705)
95,13590,976

263,713

267,547

2,410,342¥ 409,909¥ 413,911$ 3,728,935

CITIZEN REPORT 201935

Consolidated Statements of Income
Citizen Watch Co., Ltd. and Consolidated Subsidiaries
March 31, 2018 and 2019

Thousands of
U.S. dollars (Note 1)(except per share amounts)

Millions of yen

Net sales (Note 15)
Cost of sales
Gross profit
Selling, general and administrative expenses (Note 7 and 8)
Operating profit (Note 15)

Other income (expenses):
Interest income
Dividend income
Interest expense
Foreign currency exchange gain (loss)
Subsidy income
Loss on disposal of property, plant and equipment
Gain on sales of property, plant and equipment
Gain on sales of investment securities
Gain on sales of shares of subsidiaries
Impairment loss (Note 10 and 15)
Reorganization costs (Note 13)
Special compliance expenses, etc. (Note 14)
Others, net

Income before income taxes and non-controlling interests
Income taxes (Note 5):
Current
Deferred
Total income taxes
Net income
Attributable to:
Owners of parent
Non-controlling interests

2018

2019

2019

¥ 320,047¥ 321,652$ 2,897,768

195,653
124,393

198,094
123,557

1,784,637
1,113,131

99,47324,920101,146
22,411

911,229
201,902

401
1,348
(470)
(343)
766
(528)
2,368
1,480
14
(378)
(1,532)
(312)
(291)
2,522

525
1,775
(387)
492
754
(884)
239
2,195
㸫
(5,688)(2,507)(216)
542(3,159)4,732
15,996(3,494)
4,432
6,801(7,967)
2,155
19,778
㸫
(51,251)(22,588)(1,951)
4,891(28,466)

27,442

19,251

173,436

7,633
108
7,741
19,7007,010(1,550)5,459
13,792

63,155(13,972)
49,183
124,253¥ 19,303¥ 13,369$ 120,445

397

422

3,808
U.S. dollars(Note 1)Yen

Per share of common stock:
Net income
Basic
Cash dividends applicable to the year
See notes to consolidated financial statements.

36

CITIZEN REPORT 2019

¥ 60.65¥ 42.00$ 0.38

22.00

20.00

0.20

Consolidated Statements of Comprehensive Income
Citizen Watch Co., Ltd. and Consolidated Subsidiaries
March 31, 2018 and 2019

Thousands of
U.S. dollars (Note 1)

Millions of yen

Net income
Other comprehensive income
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Adjustments for retirement benefits
Share of other comprehensive income of associates
accounted for using equity method
Total other comprehensive income
Total comprehensive income
Total comprehensive income attributable to:
Owners of parent
Non-controlling interests

2018

2019

2019

¥ 19,700¥ 13,792$ 124,253

1,577
(990)
122

(3,797)1,159
209(34,214)
10,445
1,891

(151)

126

1,135

557

(2,302)(20,743)¥ 20,258¥ 11,489$ 103,510¥ 19,979¥ 11,000$ 99,105

278

488

4,405

See notes to consolidated financial statements.

CITIZEN REPORT 201937

Consolidated Statements of Changes in Net Assets
Citizen Watch Co., Ltd. and Consolidated Subsidiaries
March 31, 2018 and 2019

Thousands of
U.S. dollars (Note 1)

Millions of yen

2018
Shareholders’ equity
 Capital stock  Balance at beginning of year  Balance at end of year Capital surplus  Balance at beginning of year  Changes of items during period
Capital increase from acquisition of
consolidated subsidiaries  Disposal of treasury stock  Transfer of loss on disposal of treasury stock  Total changes of items during period  Balance at end of year Retained earnings
  Balance at beginning of year  Changes of items during period  Dividends of surplus  Profit attributable to owners of parent
Transfer of loss on disposal of treasury stock  Total changes of items during period  Balance at end of year Treasury stock at cost  Balance at beginning of year  Changes of items during period  Purchase of treasury stock  Disposal of treasury stock  Total changes of items during period  Balance at end of year
Total shareholders’ equity
  Balance at beginning of year  Changes of items during period
Capital increase from acquisition of
consolidated subsidiaries  Dividends of surplus  Profit attributable to owners of parent  Purchase of treasury stock  Disposal of treasury stock  Total changes of items during period  Balance at end of year

38

CITIZEN REPORT 2019

2019

2019

¥ 32,648¥ 32,648$ 294,134¥ 32,648¥ 32,648$ 294,134¥ 34,074¥ 34,000$ 306,308

(74)

19

173

(0)
0
(74)
¥ 34,000

(10)
10
19
¥ 34,019

(98)
98
173
$ 306,481¥ 162,224¥ 176,117$ 1,586,643(5,410)19,303(0)
13,892¥ 176,117(7,480)13,369(10)5,877¥ 181,995(67,393)
120,445(98)
52,954$ 1,639,597¥ (1,780)¥ (1,783)$ (16,064)

(3)
0
(2)
¥ (1,783)(1)10
9¥ (1,773)

(15)
98
83
$ (15,981)¥ 227,168¥ 240,983$ 2,171,021

(74)

19

173

(5,410)19,303(3)
0
13,815¥ 240,983(7,480)13,369(1)
0
5,906¥ 246,889(67,393)
120,445(15)
053,210$ 2,224,231

Thousands of
U.S. dollars (Note 1)

Millions of yen

2018
Accumulated other comprehensive income
Valuation difference on available-for-sale securities  Balance at beginning of year  Changes of items during period  Net changes of items other than shareholders’ equity
  Total changes of items during period  Balance at end of year Foreign currency translation adjustments  Balance at beginning of year  Changes of items during period  Net changes of items other than shareholders’ equity
  Total changes of items during period  Balance at end of year Remeasurements of defined benefit plans  Balance at beginning of year  Changes of items during period  Net changes of items other than shareholders’ equity
  Total changes of items during period  Balance at end of year Total accumulated other comprehensive income  Balance at beginning of year  Changes of items during period  Net changes of items other than shareholders’ equity
  Total changes of items during period  Balance at end of year
Non-controlling interests  Balance at beginning of year  Changes of items during period  Net changes of items other than shareholders’ equity
  Total changes of items during period  Balance at end of year
Total net assets  Balance at beginning of year  Changes of items during period
Capital increase from acquisition of consolidated
subsidiaries  Dividends of surplus  Profit attributable to owners of parent  Purchase of treasury stock  Disposal of treasury stock  Net changes of items other than shareholders’ equity
  Total changes of items during period  Balance at end of year

2019

2019

¥ 10,332¥ 11,909$ 107,292

1,577
1,577
¥ 11,909(3,797)(3,797)¥ 8,111(34,213)(34,213)$ 73,079¥ 3,088¥ 2,067$ 18,622(1,021)(1,021)¥ 2,067

1,236
1,236
¥ 3,303

11,139
11,139$ 29,761¥ (1,168)¥ (1,047)$ (9,441)120120¥ (1,047)

192
192¥ (855)

1,736
1,736
$ (7,705)¥ 12,252¥ 12,928$ 116,473

676
676¥ 12,928(2,368)(2,368)¥ 10,559(21,338)(21,338)$ 95,135¥ 9,795¥ 9,801$ 88,29966¥ 9,801297
297¥ 10,098

2,677
2,677
$ 90,976¥ 249,215¥ 263,713$ 2,375,793

(74)

19

173

(5,410)19,303(3)
0682
14,497¥ 263,713(7,480)13,369(1)
0(2,071)
3,834¥ 267,547(67,393)
120,445(15)
0(18,661)
34,549$ 2,410,342

CITIZEN REPORT 201939

Consolidated Statements of Cash Flows
Citizen Watch Co., Ltd. and Consolidated Subsidiaries
March 31, 2018 and 2019

Thousands of
U.S. dollars (Note 1)

Millions of yen

Cash flows from operating activities:
Income before income taxes
Depreciation
Increase (decrease) in provision for loss on business restructuring
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in other provisions
Increase (decrease) in net defined benefit liability
Amortization of goodwill
Interest and dividend income
Interest expenses
Loss (gain) on sales of investment securities
Loss (gain) on sales of shares of subsidiaries
Loss (gain) on sales of property, plant and equipment
Loss on retirement of property, plant and equipment
Decrease (increase) in notes and accounts receivable – trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts payable – trade
Impairment loss
Other, net
SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchase of investment securities
Proceeds from sales of investment securities
Purchase of property, plant and equipment
Proceeds from sales of property, plant and equipment
Purchase of intangible assets
Payments of loans receivableCollection of loans receivable
Proceeds from sales of shares of subsidiaries resulting inchange in scope of consolidation
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Net increase (decrease) in short-term loans payable
Proceeds from long-term loans payable
Repayments of long-term loans payable
Proceeds from issuance of bonds
Repayments for redemption of bonds
Cash dividends paid
Dividends paid to non-controlling interests
Purchase of treasury stock
Proceeds from sales of treasury stock
Payments from changes in ownership interests in
subsidiaries that do not result in change in scope of
consolidation
Other, net
Net cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of term
Cash and cash equivalents at end of term (Note 2)

40

CITIZEN REPORT 2019

2018

2019

2019

¥ 27,442¥ 19,251$ 173,436

13,795
(882)
(91)
683
840
1,579
(1,750)470(1,480)(14)(2,368)480(1,480)(6,705)
2,669
378
2,959
36,5271,753(480)(5,260)32,53913,947
(429)
216
(4)
817
400
(2,300)387(2,195)㸫(239)
863(1,646)(7,051)
(415)
5,688
329
27,6222,300(388)(9,636)
19,897

125,656(3,869)
1,949
(36)
7,367
3,608
(20,728)
3,494(19,778)㸫
(2,155)
7,779(14,829)(63,523)(3,742)
51,251
2,968
248,848
20,724(3,498)(86,817)
179,257(1)
2,158(15,583)
5,288(1,346)
(4)
107

(305)
4,194
(19,350)764(3,884)(160)
146(2,748)37,790(174,332)
6,887(34,999)(1,445)
1,324

75

㸫

㸫

1,445
(7,862)(1,266)(19,861)(11,408)(178,931)

(152)
8,689
(3,221)
㸫(10,000)(5,410)
(192)
(3)
0

794
5,063
(3,719)10,000(10,000)(7,480)
(136)
(76)
74

7,154
45,612(33,505)
90,090(90,090)(67,393)(1,232)
(686)
671

(199)

(172)

(1,552)(1,225)(11,716)(235)(5,888)(2,120)(53,051)(192)
12,76877,887¥ 90,655(270)(6,122)90,655¥ 84,533(2,434)(55,159)
816,719$ 761,560

Notes to Consolidated Financial Statements
Citizen Watch Co., Ltd. and Consolidated Subsidiaries
March 31, 2018 and 2019

Note 1. Basis of presenting consolidated financial
statements

Realized gains and losses are determined on the moving averagemethod and included in the consolidated statements of income.

The accompanying consolidated financial statements of Citizen Watch
Co., Ltd. (the “Company”) and consolidated subsidiaries (collectively,
the “Companies”) are prepared on the basis of accounting principles
generally accepted in Japan, which are different in certain respects as
to the application and disclosure requirements of International Financial
Reporting Standards, and have been compiled from the consolidated
financial statements prepared by the Company as required by the
Financial Instruments and Exchange Act of Japan.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order topresent them in a form which is more familiar to readers outside Japan.
The consolidated financial statements are stated in Japanese yen,
the currency in which the Company is incorporated and mainly
operates. The translation of Japanese yen amounts into U.S. dollar
amounts is included solely for the convenience of readers outside
Japan and has been made at the rate of ¥111 to U.S.$1, theapproximate rate of exchange as of March 31, 2019. Such translation
should not be construed as a representation that Japanese yenamounts could be converted into U.S. dollars at that or any other rate.
As permitted by the Financial Instruments and Exchange Act, for theyears ended March 31, 2019 and 2018, amounts of less than one
million yen have been omitted. Consequently, totals shown in theaccompanying consolidated financial statements for the years ended
March 31, 2019 and 2018 do not necessarily agree with the sums of
the individual amounts.

Note 2. Summary of significant accounting policies

a. Consolidation
The consolidated financial statements include the accounts of theCompany and its subsidiaries (collectively, the “Companies”). All
significant intercompany accounts and transactions have been
eliminated in consolidation.
The Company has 110 subsidiaries at March 31, 2019 (113 for 2018).
The consolidated financial statements include the accounts of theCompany and 92 (96 for 2018) of its significant consolidated
subsidiaries (collectively, the “Group”).
The remaining 18 (17 for 2018) non-consolidated subsidiaries whose
combined assets, net sales, net income and retained earnings are notsignificant in the related consolidated totals, are not consolidated with
the Company.
Investments in non-consolidated subsidiaries and affiliates (generally
20% - 50% ownership) over which the Company has the ability to
exercise significant influence in operating and financial policies areaccounted for by the equity method. Equity method is applied to 2
affiliates for 2019 (2 for 2018).
Investments in non-consolidated subsidiaries and affiliatedcompanies other than the above (companies owned 20% - 50%) whichhave immaterial effect on the consolidated financial statements areaccounted for at cost.
b. Cash and cash equivalents
Cash equivalents comprise demand deposits in financial institutions
and highly liquid, short-term investments with low risk of fluctuations invalue for which the maturity expires within three months.
The balance of cash and cash equivalents as of March 31, 2019 and2018 is reconciled with the balance sheet as follows:
Millions of yen

Balance sheet:
Cash and time deposits
Less:Time deposits over threemonthsSeparate deposits for BIP
Cash and cash equivalents

Thousands of
U.S. dollars

2018

2019

2019

¥ 92,079¥ 86,875$ 782,664

1,423
̿

2,340
1

21,09014¥ 90,655¥ 84,533$ 761,560

c. Marketable and investment securities
The Companies clarify all of their marketable and investment securities
as available-for-sale. Available-for-sale securities are carried at market
value with the corresponding recognition of net unrealized gains andlosses as a separate component of equity, net of related taxes.

d. Allowance for doubtful accounts
An allowance for doubtful accounts is established based on past credit
loss experience and management’s evaluation of potential losses inoutstanding receivables and loans.
e. Inventories
Inventories held for sale in the ordinary course of business aremeasured at the lower of cost or net realizable value, which is defined
as selling price less estimated additional manufacturing costs andestimated direct selling expenses, determined by the weighted averagemethod.
f. Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation iscomputed on the straight-line basis at the rates based on the estimateduseful lives of the respective assets ranging from 2 to 60 years forbuildings and from 2 to 10 years for machinery and equipment.
Property, plant and equipment are reviewed for impairment
whenever events or changes in circumstances indicate that thecarrying amount of the assets might be unrecoverable. Recoverabilityof assets to be held and used is measured by a comparison of thecarrying amount to undiscounted future cash flows expected to begenerated by the assets. When the recoverable amount of assets is
estimated to be less than their carrying amount, the carrying amount of
the assets is reduced to its recoverable amount, and an impairment
loss is recognized.
Maintenance and repairs, including minor renewals andimprovements, are expensed in the consolidated statements of income
as incurred.
g. Goodwill and other intangible assets
Goodwill is amortized on the straight-line basis over reasonableeconomic life up to 20 years, though immaterial goodwill is charged to
expense in the period of acquisition.
Software and other intangible assets are amortized on thestraight-line basis over the estimated useful lives of the respective
assets.
h. Leases
Finance leases that do not transfer ownership of the leased property to
the lessees are depreciated on the straight-line basis over the leaseterms with no residual value.
i. Retirement benefits(1) Calculation of retirement benefit obligation
The retirement benefit obligation is calculated based on benefit-formulabasis.
(2) Amortization of actuarial differences and prior service costs
Actuarial differences are amortized on the declining-balance basis fromthe next fiscal year over the period (5-years) which is less than the
average remaining years of employment.
Prior service costs are amortized on the declining-balance basis overthe period (5-years) which is less than the average remaining years of
employment.
j. Foreign currency translation
Assets and liabilities denominated in foreign currencies are translated
into Japanese yen at the spot exchange rates at the reporting date.
The foreign currency exchange gains and losses resulting from thesettlement of these items are included in the consolidated statements
of income.
Balance sheet accounts of foreign subsidiaries are translated into
Japanese yen at the reporting date rates except for equity accounts,
which are translated at the historical rates. Income statements offoreign subsidiaries are translated at average rates during the year.
Exchange differences arising from the translation are recognized in“Foreign currency translation adjustments” and “non-controllinginterests” in net assets.
k. Per share information
The computation of net income per common share is based on theweighted average number of shares outstanding during each year.
The average number of common shares used in the computation
was 318,284 thousand shares and 318,287 thousand in 2019 and 2018,
respectively.

CITIZEN REPORT 201941

Diluted net income per common share assumes full conversion of theoutstanding convertible bonds at the beginning of the year or at thedate of issuance with applicable adjustment for related interest
expense, net of tax.
Cash dividends per common share presented in the accompanying
consolidated statements of income are dividends applicable to therespective years including dividends to be paid after the end of theyear.
l. Derivative financial instruments
The Companies have derivative financial instruments, such as foreign
currency forward contracts and interest rate swaps to manage its
exposure to foreign exchange rate and interest rate risks. The
Companies do not enter into derivative financial instruments for trading
purposes.
Foreign currency forward contracts are not designated for hedge
accounting and stated at fair value; gains and losses are recognized in
the consolidated statements of income.
The interest rate swaps that qualify for hedge accounting and meet
specific matching criteria are not remeasured at market value.
m. Change of the indication method(Adoption of Partial Amendments to Accounting Standard for Tax EffectAccounting, etc.)
The Company, effective from the beginning of the consolidated firstquarter of this fiscal year, adopted “Partial Amendments to AccountingStandard for Tax Effect Accounting (ASBJ Guidance No. 28, February
16, 2018),” etc.
Deferred tax assets are classified as investments and other assets
and deferred tax liabilities are classified as non-current liabilities,
respectively.
Accordingly, with respect to the consolidated balance sheet for theprevious consolidated fiscal year deferred tax assets posted as current
assets decreased by ¥6,673 million ($60,118 thousand), while deferred
tax assets posted as investments and other assets increased by¥4,416 million ($39,786 thousand). Deferred tax liabilities recorded as
current liabilities declined by ¥197 million ($1,779 thousand), while
deferred tax liabilities recorded as non-current liabilities decreased by¥2,059 million ($18,552 thousand).
In addition, total assets decreased by ¥2,256 million ($20,332
thousand) because deferred tax assets and deferred tax liabilities wereoffset to the extent that they were considered to be taxed on the same
entity.

Note 3. Investment securities

Investment securities consist of equity securities. Unrealized gain andfair value pertaining to available-for-sale securities as of March 31,
2019 and 2018 are as follows:
Millions of yen

2018

Available-forsale equity
securities

2019

Cost

Fair
value

Unrealized
gain¥ 14,586

30,043

15,456

Fair
value

Unrealized
gain¥ 12,588 22,727

10,139

Cost

Thousands of U.S. dollars

2019

Available-forsale equity securities

Cost

Fair value

Unrealized
gain$ 113,406$ 204,753$ 91,347

n. New accounting pronouncements(Accounting standard for revenue recognition, etc.)
࣭“Accounting Standard for Revenue Recognition” (ASBJ Statement
No. 29 on March 30, 2018)
࣭“Implementation Guidance on Accounting Standard for Revenue
Recognition” (ASBJ Guidance No. 30 on March 30, 2018)

Major securities with no market value and their amounts on the
consolidated balance sheets as of March 31, 2019 and 2018 are as
follows:

2018

2019

2019

(1) Overview
The International Accounting Standards Board (IASB) and the
Financial Accounting Standards Board (FASB) in the United States
jointly developed comprehensive accounting standards for revenue
recognition and published the “Revenue from Contracts with
Customers” (IFRS 15 in the IASB and Topic 606 in the FASB) in May
2014. Given that IFRS 15 will be applied from a fiscal year starting on
or after January 1, 2018 and that Topic 606 will be applied from a fiscal
year starting after December 15, 2017, ASBJ has developed
comprehensive accounting standards for revenue recognition andpublished them in step with the Implementation Guidance.
The basic policy of the ASBJ in developing accounting standards forrevenue recognition is thought to be setting accounting standards, with
the incorporation of the basic principles of IFRS 15 as a starting point,
from a standpoint of comparability between financial statements, which
is one of the benefits of ensuring consistency with IFRS 15, and to be
adding alternative accounting treatments without losing comparability if
there is an item that we should take into account in practices, etc. thathave been conducted in Japan.

Subsidiaries and affiliates¥ 3,639¥ 4,886$ 44,025

Unlisted equity securities¥ 12,361¥ 12,360$ 111,354(2) Planned date of application
To be applied from the beginning of the fiscal year ending March 31,
2022.
(3) Impact of the application of the accounting standards, etc.
The amount of the impact on consolidated financial statements iscurrently under review.

42o. Additional information(Board Incentive Plan)
In this fiscal year, the Company introduced a performance-based stock
remuneration plan (hereafter, “the plan”) for directors and titledcorporate officers of the Company (excluding outside directors andcorporate officers who are non-residents of Japan), with the aim ofdefining the relationship between remuneration of Directors, etc. andthe Company’s stock value, and providing an incentive for increasing
mid- and long-term business performance and corporate value.
The Plan adopted a scheme called the Board Incentive Plan
(hereafter, referred to as “BIP Trust”). The BIP Trust refers to an
incentive plan for officers with reference to the performance share planand restricted stock plan in the U.S., under which the BIP Trustpurchases Company’s stocks and then grants and provides suchstocks, as well as cash corresponding to realization value ofCompany’s stocks to Directors, etc. according to the performanceachieved upon their retirement.
The shares of the Company remaining in the trust are recorded astreasury stock under equity based on the book value (excluding
incidental costs) in the trust. The book value of the treasury stock andthe number of shares at the end of the current fiscal year were ¥74
million ($671 thousand) and 99,100 shares.

CITIZEN REPORT 2019

Thousands of
U.S. dollars

Millions of yen

Allowance for loss on investments of ¥23 million ($207 thousand)and ¥26 million were recorded in the consolidated balance sheets as ofMarch 31, 2019 and 2018, respectively.

Note 4. Inventories

Inventories as of March 31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Finished goods¥ 52,737¥ 55,614$ 501,033

Work-in-process

20,59022,982207,054

Raw materials

17,213

19,605

176,623¥ 90,541¥ 98,202$ 884,710

Total

Note 5. Income taxes

The Company and its domestic consolidated subsidiaries are subject toJapanese national and local taxes based on income. Overseas
subsidiaries are subject to income taxes of the countries in which they
operate.
Major components of deferred tax assets and liabilities as of March
31, 2019 and 2018 are as follows:
Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

Inter-company profits andwrite down on inventory
Liability for retirement
benefits
Net operating loss
carry-forward
Provision forreorganization costs
OthersTotal deferred tax assets
Valuation allowance of tax
loss carried forward
Valuation allowance,othersLess: Total valuation
allowance
Total deferred tax assets¥ 846¥ 1,186$ 10,688

3,964

4,311

38,839

6,527

6,707

60,431

2,136

2,779

25,041

512

290

2,619

9,148

9,323

83,995¥ 23,136¥ 24,599$ 221,613

㸫

(2,469)(22,245)

㸫

(5,702)(51,371)(7,418)(8,171)(73,616)¥ 15,718¥ 16,427$ 147,997

Deferred tax liabilities:
Unrealized gain on
securities
Undistributed earnings offoreign subsidiaries
OthersTotal deferred tax liabilities
Net deferred tax assets

2018

2019

30.9%

30.6%

0.3%

0.7%

(0.7%)(1.0%)(1.6%)

1.9%

1.8%

7.0%

(3.1%)(4.7%)

0.9%(3.1%)

Change in tax law(0.1%)(0.0%)

Others, net(0.1%)(3.0%)

Effective tax rate

28.2%

28.4%

Statutory tax rate
Expenses not deductible fortax purposes
Non-taxable dividend income
Changes in valuation
allowance

Deferred tax assets:
Depreciation in excess

Reconciliation between the statutory and the effective tax rate as ofMarch 31, 2019 and 2018 is as follows:¥ (3,609)¥ (2,085)$ (18,788)(3,444)(2,840)(25,586)

(667)

(445)

(4,017)¥ (7,722)¥ (5,371)$ (48,391)¥ 7,996¥ 11,056$ 99,606

Amortization of goodwill
Difference of statutory tax rate
in subsidiaries
Changes in tax effect offoreign subsidiaries

Note 6. Short-term loans payable, long-term loans payable
and unsecured bonds
Short-term loans payable represent loans from banks as of March 31,
2019 and 2018, respectively. The weighted average interest rate foreach balance is 1.8% for 2019 and 1.9% for 2018.
Short-term bank loans as of March 31, 2019 and 2018 consist of thefollowing:
Millions of yen

UnsecuredThousands of
U.S. dollars

2018

2019

2019

¥ 3,180¥ 3,987$ 35,920

Long-term loans payable represent loans principally from banks andinsurance companies due through 2039 with interest rate of 0.9% in2019 (1.0% in 2018).
Long-term loans payable as of March 31, 2019 and 2018 consist of
the following:
Millions of yen

UnsecuredLess amount due within
one yearThousands of
U.S. dollars

2018

2019

2019

¥ 35,846¥ 37,077$ 334,031

3,700

10,00090,090¥ 32,146¥ 27,077$ 243,941

CITIZEN REPORT 201943

(2) Reconciliation of plan assets

The annual maturities of long-term loans payable as of March 31,
2019 are as follows:
Millions of yen

Thousands of
U.S. dollars

Long-termloans payable

Long-termloans payable2020¥ 10,000$ 90,090

2021

14,170127,666

2022

8,018

72,243
41,612

Year ending March 31

2023

4,618

2024

18

170

2025 and thereafter

249

2,250

¥ 37,077$ 334,031

Unsecured bonds as of March 31, 2019 and 2018 consist of thefollowing:

UnsecuredLess amount due within
one year

2018

2019

2019

¥ 1,785¥ 1,485$ 13,383

46

45

411

Actuarial differences

22

(92)

(831)

Employer contributions

28

24

218

Benefits paid

(420)

(168)

(1,521)

Translation adjustments

(55)

40

364

Others

77

76

691

¥ 1,485¥ 1,411$ 12,715

Balance at beginning ofyear
Expected return on plan
assetsBalance at end of year

(3) Reconciliation from retirement benefit obligations and plan assets
to liability for retirement benefits on the consolidated balance sheets

Thousands of
U.S. dollars

Millions of yen

2018

2019

2019

¥ 10,000¥ 10,000$ 90,090

10,000㸫㸫¥0¥ 10,000$ 90,090

Funded retirement benefit
obligations

The annual maturities of unsecured bonds as of March 31, 2019 are
as follows:
Millions of yen

Thousands of
U.S. dollars

Long-termloans payable

Long-termloans payable

2020

㸫

㸫

2021

㸫

㸫

2022

㸫

㸫

2023

㸫

㸫

2024

¥ 10,000$ 90,090

Note 7. Liability for retirement benefits

Plan assets

2019¥ 23,788¥ 24,206$ 218,079

Service costs

1,694

1,366

12,307

Interest costs

122

122

1,100

118

(109)

(986)

(1,582)(929)(8,377)

Translation adjustments

(50)

47

429

Others

115

36

326

¥ 24,206¥ 24,739$ 222,878

Balance at end of year

44

CITIZEN REPORT 2019benefits
Net liability for retirement
benefits(1,485)(1,411)(12,715)

1,378

1,352

12,181

21,342

21,975

197,982

22,721

23,328210,163

22,721

23,328210,163¥ 22,721¥ 23,328$ 210,163(4) Retirement benefit costs
Thousands of
U.S. dollars

Millions of yen

Service costs

2018¥ 1,6942019¥ 1,366

2019$ 12,307

Interest costs

122

122

1,100

(46)

(45)

(411)

278

324

2,921

(27)

(35)

(317)

¥ 2,021¥ 1,731$ 15,600

Amortization of priorThousands of
U.S. dollars

2019

Benefits paid

Liability for retirement$ 24,896

Amortization of actuarial

2018

Actuarial differences

benefits2019¥ 2,763differences

Millions of yen

year

Net liability for retirement2019¥ 2,864

assets

2. Defined benefit plan
(1) Reconciliation of retirement benefit obligations

Balance at beginning of

benefit obligations

2018

Expected return on plan

1. Summary of retirement benefit plan
The Company and its domestic consolidated subsidiaries adopt
retirement lump-sum plan and defined contribution pension plan.

Thousands of
U.S. dollars

Millions of yen

Unfunded retirement

Year ending March 31

Thousands of
U.S. dollars

Millions of yen

service costs
Retirement benefit costs(5) Adjustments for retirement benefits
Thousands of
U.S. dollars

Millions of yen

Service costs
Actuarial differences
Total

2018
¥ 27

2019
¥ 35

2019
$ 317

(270)

(323)

(2,911)¥ (243)¥ (287)$ (2,594)

(6) Accumulated adjustments for retirement benefits
Thousands of
U.S. dollars

Millions of yen

2018
Unrecognized priorservice costs
Unrecognized actuarial
differences
Total

2019

2019

¥ 136

¥ 172

$ 1,552

1,063

740

6,668

¥ 1,200¥ 912$ 8,220

For the year 2019
Location
Switzerland

Use
OthersChina
OthersFor the year 2018
Location
Fujikawaguchiko-machi,
Yamanashi
China(7) Plan assets
ձBreakdown for plan assets
(%)
2018

2019

78.6%

80.2%

Bonds

5.3

5.2

Cash and deposits

4.0

2.0

Others

12.1

12.6

Total

100.0%

100.0%

Equity securities

The main breakdown of impaired assets for the years ended March
31, 2019 and 2018 is as follows:

OthersAssets forbusiness
Assets forbusiness

Type
Goodwill and otherintangible assets
Buildings andstructures
Tools, furniture andfixtures

Use
Assets forbusiness
Assets forbusiness
Assets forbusinessType
Other intangible
assets
Machinery andequipment
Buildings andstructures

Note 11. Derivative transactions

Fair values of derivative transactions as of March 31, 2019 and 2018
are as follows:(a) Derivative transactions not designated for hedge accounting
Millions of yen

2018

2019

ղLong-term expected rate of return
In order to determine the long-term expected rate of return, present andexpected portfolio of plan assets and estimated long-term rate ofvarious assets have been considered.

Foreign currency forward contract:
To Sell¥ 5,891¥ 7¥ 5,347¥ (17)(8) Assumptions of actuarial differences

To Buy¥ 1,845¥ (2)AmountFairon contract

value

on contractvalue¥ 2,016¥ (27)

Thousands of U.S. dollars

2019

Discount rate

0.32~3.25

0.32~4.00

Expected rates of long-term
return on plan assets

1.50~5.00

1.00~5.00

2019
AmountFairon contract

Value

Foreign currency forward contract:
To Sell$ 48,176$ (153)

3. Defined contribution plan
Contributions to defined contribution plan for the years ended March 31,
2019 and 2018 are ¥1,149 million ($10,351 thousand) and ¥1,166
million, respectively.

Note 8. Research and development costs

Research and development costs incurred and charged to income forthe years ended March 31, 2019 and 2018 were ¥6,339 million($57,108 thousand) and ¥7,161 million, respectively.

To Buy$ 16,627(b) Derivative transactions designated for hedge accounting
Millions of yen

2018
Amount

The amounts of outstanding future lease payments due in respect ofoperating lease contracts as of March 31, 2019 and 2018 aresummarized as follows:
Thousands of
U.S. dollars

Millions of yen

Within one year

2018
¥2

2019
¥3

2019
$ 33

Over one year

1

11

103

¥3

¥ 15

$ 136

The Company and its subsidiaries classify their fixed assets into groups
by the type of respective operations based on the business segment
divided by managerial accounting categories, which are regarded as
the smallest units independently generating cash flows.
The Group recognized impairment loss of ¥5,688 million ($51,251
thousand) and ¥378 million for the years ended March 31, 2019 and2018, respectively. The Group mainly recognized impairment loss of¥4,004 million ($36,073 thousand) for goodwill, ¥979 million ($8,827
thousand) for other intangible assets, ¥349 million ($3,144 thousand)for tools, furniture and fixtures and ¥316 million ($2,852 thousand) for
the year ended March 31, 2019. The main components of impairment
losses for the year ended March 31, 2018 are ¥65 million for buildings
and structures, ¥218 million for machinery and equipment and ¥67
million for other intangible assets.

$ (24)Note:
The fair values of foreign currency forward contracts are based on market
quotations.

Note 9. Leases

Note 10. Impairment loss

Fair

(%)

2018

Total

Amounton contract

Interestrate
swap¥ 22,800

Amounton contractover 1 year

¥ 21,100

2019
Fair

Amountvalue

on contract

Note¥ 21,100

Amounton contractover 1 year

¥ 11,100

Fair
value

Note

Thousands of U.S. dollars

2019

Amounton contract

Interestrate
swap$ 190,090

Amounton contractover 1 year

$ 100,000

Fair
value

Note

Note:
Interest rate swap is qualified for hedge accounting and meets specific criteria.
The fair value of the interest rate swap is included in fair value of long-term debt.

CITIZEN REPORT 201945

Note 12. Financial instruments

Millions of yen

2019(a) Status of financial instruments(1) Policies
Under the Company’s policy, the Group is limited to utilize short-term
deposits for fund management and obtains fund through financial
institutions. Derivatives are made only for hedging purposes, and theGroup does not use derivative transactions for trading purposes.

Carrying
amountFair value

Unrealized¥ 92,079¥ 92,079¥ 㸫

62,01362,013

(0)

914

914

㸫

30,04330,043㸫Long-term loans

931

932

0

Doubtful accounts

81

Allowance for doubtful
accounts

(81)
㸫

㸫

㸫

¥ 185,983¥ 185,983¥ (0)¥ 21,267¥ 21,267¥ 㸫

14,164

14,164

㸫

3,180

3,180

㸫

10,00010,011

11

Long-term loans payable

35,84636,067220¥ 84,458¥ 84,690¥ 231¥ (19)¥ (19)¥ 㸫

Total

64,13964,139

(0)

1,225

1,225

㸫

22,72722,727㸫Long-term loans

942

943

0

Long-term receivables

76

Allowance for long-term
receivables

(76)
㸫

㸫

¥ 175,911¥ 175,911¥ (0)¥ 20,496¥ 20,496¥ 㸫

14,896

14,896

㸫

Short-term loans payable

3,987

3,987

㸫

Unsecured bonds

10,00010,04545

Long-term loans payable

37,07737,309231¥ 86,457¥ 86,734¥ 276¥ (19)¥ (19)¥ 㸫

Total
Notes and accounts payable– tradeElectronically recorded
obligations-operating

Note:
Long-term receivables are included in “Others” in the consolidated balance
sheets.
Current portion of long-term loans is included in “Long-term loans” in the table
above.

㸫Note:Long-term receivables are included in “Others” in the consolidated balance
sheets.
Current portion of long-term loans is included in “Long-term loans” in the table
above.
Thousands of U.S. dollars

2019

Cash and time deposits
Notes and accounts
receivable – trade
Electronically recordedmonetary claims

Carrying
amountFair value$ 782,664$ 782,664$ 㸫

577,831

577,829(2)

Unrealized

11,041

11,041

㸫

204,753

204,753

㸫

8,494

8,501

7

㸫

㸫

㸫

$ 1,584,783$ 1,584,788$5$ 184,656$ 184,656$ 㸫

134,201

134,201㸫

Short-term loans payable

35,92035,920㸫

Unsecured bonds

90,09090,495405

Investment securities

Unsecured bonds

Derivatives¥ 㸫

Derivatives

Millions of yen

Short-term loans payable¥ 86,875

Total

2018

Total
Notes and accounts payable– tradeElectronically recorded
obligations – operating¥ 86,875

Investment securities(b) Fair value of financial instruments
The table below shows the amounts of financial instruments recordedin the consolidated balance sheets, their fair values and unrealized
gains or losses as of March 31, 2019 and 2018.

Investment securities

Unrealized

Notes and accounts
receivable – trade
Electronically recordedmonetary claims(3) Fair value estimation
The fair value of financial instruments is based on market price, if
available. The fair value of financial instruments might be reasonably
estimated with adequate assumption and factors when market price is
not available. Estimated fair value depends on applied assumptions
and factors.

Notes and accounts
receivable – trade
Electronically recordedmonetary claims

Fair value

Cash and time deposits(2) Risk management
The Group performs ongoing credit evaluations of significant
customers to avoid credit risks of notes and accounts receivables.
The Group monitors the market price or fair value of the investment
securities and continuously reconsiders investment in each company.
Debt and bonds are mainly for refunding of long-term debt andcapital expenditure in accordance with investment strategy.
The Group has derivative financial instruments, such as foreign
currency exchange forward contracts, foreign currency options andinterest rate swaps, and all derivative financial instruments aredesignated for hedging purposes.

Cash and time deposits

Carrying
amountLong-term loans
Long-term receivables

689

Allowance for long-term
receivables

(689)

Total
Notes and accounts payable– tradeElectronically recorded
obligations – operating

Long-term loans payable
Total
Derivatives

334,031

336,1202,089$ 778,898$ 781,392$ 2,494$ (178)$ (178)$ 㸫Note:Long-term receivables are included in “Others” in the consolidated balance
sheets.
Current portion of long-term loans is included in “Long-term loans” in the table
above.

46

CITIZEN REPORT 2019

(i) Method of fair value measurement of financial instruments:
Assets:Cash and time deposits
The carrying amount of these accounts approximates their fair value
because these accounts are settled in a short period of time.
Notes and accounts receivable
Certain notes and accounts receivable that take time to collect aremeasured at present value; it shows amounts discounted atreasonable rate under corresponding terms to maturity.
The carrying amounts of other notes and accounts receivables thatare settled in a short period of time, approximate their fair value.
Electronically recorded monetary claims
The carrying amounts of the accounts approximate their fair value
because the accounts are settled in a short period of time.
Investment securities
The fair values of equity securities are based on the prices at
exchange market.
Long-term loans
The fair value of long-term loans receivable is measured at present
value obtained by discounting the future cash flows classified bycertain period at an adequate rate such as market rate withcredit-spread taken into account.
However, as the interest rates of long-term loans receivable withfloating rate are to be revised by certain prescribed period, theircarrying amounts approximate their fair value.
Liabilities:
Notes and accounts payable, short-term loans payable andelectronically recorded obligations-operating
The carrying amount of these accounts approximates their fair value
because these accounts are settled or repaid in a short period oftime.
Unsecured bonds
Since the market price is not available, the fair value of bonds ismeasured at present value by discounting principles, interests andguarantee fees at a rate with term to maturity and credit risk taken
into account.
Long-term loans payable
The fair value of long-term debt is measured at present value by
discounting total amount of principles and interests at an assumed
rate for new borrowings under similar conditions.
However, as the interest rates of long-term loans payable withfloating rate are to be revised by certain prescribed period, theircarrying amounts approximate their fair value.
(ii) Unmarketable securities of ¥12,360 million ($111,353 thousand) and¥12,361 million as of March 31, 2019 and 2018 are not included in“Investment securities, Available-for-sale securities”, since theirmarket prices are not available and it is not possible to estimate their
future cash flows, and therefore it is deemed extremely difficult toassume their fair value.
(iii) Expected maturities of cash and time deposits, notes and accounts
receivable, electronically recorded monetary claims and long-termloans as of March 31, 2019
Millions of yen
Within one
year

Over oneyear within
five years

Over fiveyears
within ten
years

Over tenyears¥ 86,875

¥ 㸫

¥ 㸫

¥ 㸫

Notes and accounts
receivable – trade

63,929209㸫㸫Electronicallyrecorded monetaryclaims

1,225

㸫

㸫

㸫

㸫

866

76

㸫

Cash and time
deposits

Long-term loans

Cash and time
deposits
Notes andaccounts
receivable – trade
Electronicallyrecordedmonetary claims

Thousands of U.S. dollars
Over five
Over ten
years
within ten
years
years

Within one
year

Over oneyear within
five years$ 782,664

$ 㸫

$ 㸫

$ 㸫

575,942

1,889

㸫

㸫

11,041

㸫

㸫

㸫

㸫

7,807

687

㸫

Long-term loans

Note 13. Reorganization costs

The total amount of reorganization costs is as follows:
Thousands of
U.S. dollars

Millions of yen

Reorganization
costs

2018

2019

2019

¥ 1,532¥ 2,507$ 22,588

Reorganization costs in the consolidated statements of income for theyears ended March 31, 2019 and 2018 are related to expenses for
restructuring of the Company and its consolidated subsidiaries.
The major item in the costs for the year ended March 31, 2019 isreorganization costs for the factory in China.
Allowance for loss for reorganization costs of ¥1,301 million ($11,722
thousand) and ¥1,735 million were recorded in the consolidatedbalance sheets as of March 31, 2019 and 2018, respectively.

Note 14. Special compliance expenses, etc.

With regard to the inappropriate activities of a consolidated subsidiaryof the Company, special compliance expenses, etc. were incurred forinvestigation costs by the third-party committee.

Note 15. Segment information(a) General information about reportable segments:
The CITIZEN Group’s reportable segments are group components forwhich separate financial information can be obtained. Each segment issubject to periodic examinations to allow the Board of Directors todecide how to allocate management resources and assess
performance.
The CITIZEN Group has adopted an operating holding company
structure and comprehensive strategies are proposed and businesses
are pursued by individual operating companies.
Consequently, the CITIZEN Group, starting from a foundation ofoperating companies manages its businesses through five reportablesegments – Watches, Machine tools, Devices and components,
Electronic products, and Other products – based on factors likesimilarity of types and characteristics of products.
(b) Basis of measurement of reportable segment net sales, profit (loss),and other items:
The accounting methods applied to the business segments reported
are generally the same as those described under “Basis of presenting
the consolidated financial statements.”
Inter-segment earnings and transfers are based on market prices.

CITIZEN REPORT 201947

March 31, 2018
WatchesI. Net sales, segment
profit (loss) andsegment assets
Net sales(1) Sales to outside
customers(2) Inter-segment
sales and transfers
Total
Segment profit (loss)
Segment assets
II. Other
Depreciation
Amortization of
goodwill
Investment in affiliates
Capital expenditures¥ 163,718

Machine tools

Devices andcomponents¥ 64,049¥ 65,596

II. Other
Depreciation
Amortization of
goodwill
Investment in affiliates
Capital expenditures

Consolidated¥ 320,047¥ 㸫¥ 320,047

357

2,223

107

826

3,599

(3,599)㸫

64,407
10,44359,17667,8202,782
81,382

20,687513
15,822

6,929
311
6,819

323,646
30,234352,124(3,599)(5,313)57,784320,047
24,920409,909

6,813

1,422

4,421

366

29

13,053741

13,795

1,566

㸫

12

㸫

㸫

1,579

㸫

1,579

㸫
7,995

2,761
2,378

㸫
5,020

㸫
254

㸫
27

2,761
15,677

㸫
1,176

2,761
16,854

Machine tools

Devices andcomponents

Segment total

Adjustments

Consolidated¥ 163,525¥ 72,164¥ 60,807¥ 19,330¥ 5,824¥ 321,652¥

㸫¥ 321,652

108

1,201

1,930

115

829

4,185

(4,185)

㸫

163,633
12,440189,683

73,365
13,082
66,55862,7372,543
82,501

19,446438
15,761

6,654
146
6,770

325,837
28,651
361,276(4,185)(6,240)52,635

321,652
22,411
413,911

7,379

1,574

3,876

295

23

13,149798

13,947

400

㸫

㸫

㸫

㸫

400

㸫

400

㸫
12,095

3,533
3,260

㸫
7,113

㸫
425

㸫
27

3,533
22,921

㸫
834

3,533
23,756

Watches

Machine tools

Devices andcomponents

Segment total

Adjustments

Consolidated$ 1,473,200$ 650,130$ 547,811$ 174,153$ 52,474$ 2,897,768$ 㸫$ 2,897,768

974

10,822

17,394

1,043

7,473

37,706(37,706)

㸫

1,474,174
112,074
1,708,862

660,952
117,863599,630

565,205
22,917743,259

175,196
3,946
141,997

59,947
1,319
60,9962,935,474
258,119
3,254,744(37,706)(56,217)474,191

2,897,768
201,9023,728,935

66,483

14,181

34,9272,660

215

118,466

7,190

125,656

3,608

㸫

㸫

㸫

㸫

3,608

㸫

3,608

㸫
108,965

31,83329,371

㸫
64,081

㸫
3,837

㸫
246

31,833
206,500

㸫
7,518

31,833214,018

March 31, 2019
I. Net sales, segment
profit (loss) andsegment assets
Net sales(1) Sales to outside
customers(2) Inter-segment
sales and transfers
Total
Segment profit (loss)
Segment assets¥ 6,102

Adjustments

83

WatchesII. Other
Depreciation
Amortization of
goodwill
Investment in affiliates
Capital expenditures¥ 20,580

Segment total

163,801
16,183
188,924

March 31, 2019
I. Net sales, segment
profit (loss) andsegment assets
Net sales(1) Sales to outside
customers(2) Inter-segment
sales and transfers
Total
Segment profit (loss)
Segment assets

Millions of yen
Electronic
Other
products
products

Millions of yen
Electronic
Other
products
products

Thousands of U.S. dollars
Electronic
Other
products
products

Notes:For the year ended March 31, 2018
1.“Adjustments” segment profit (loss) totaling ¥(5,313) million includes inter-segment elimination of ¥19 million and general corporate expenses of ¥(5,333) million notallocated to any reportable segments.
2.“Adjustments” segment assets totaling ¥57,784 million includes inter-segment elimination of ¥(38,258) million and general corporate assets of ¥96,043 million notallocated to any reportable segments.
3.Reported segment profit (loss) is reconciled to operating profit in the consolidated statements of income.
For the year ended March 31, 2019
1.“Adjustments” segment profit (loss) totaling ¥(6,240) million ($(56,217) thousand) includes inter-segment elimination of ¥(191) million ($(1,729) thousand) and general
corporate expenses of ¥(6,048) million ($(54,488) thousand) not allocated to any reportable segments.
2.“Adjustments” segment assets totaling ¥52,635 million ($474,191 thousand) includes inter-segment elimination of ¥(38,082) million ($(343,084) thousand) and general
corporate assets of ¥90,717 million ($817,275 thousand) not allocated to any reportable segments.
3.Reported segment profit (loss) is reconciled to operating profit in the consolidated statements of income.

48

CITIZEN REPORT 2019

(c) Other information
1) Overseas sales for the years ended March 31, 2019 and 2018
Millions of yen

Japan
Asia
Americas
EuropeOthersTotal

2018¥ 105,259
99,56561,47250,7542,995¥ 320,047

2019¥ 108,463
92,81562,98354,8622,528¥ 321,652

Thousands of
U.S. dollars

2019$ 977,145
836,178
567,418494,253
22,774$ 2,897,768

Note: Overseas sales are reported based on locations of customers.

2) Property, plant and equipment as of March 31, 2019 and 2018
Millions of yen

Japan
Asia
OthersTotal

2018¥ 60,123
18,473
6,382¥ 84,979

2019¥ 63,056
19,174
7,438¥ 89,669

3) Impairment loss for the years ended March 31, 2019 and 2018
Millions of yen

Impairment loss
Watches
Machine tools
Devices and components
Electronic products
Other products
Eliminations or general corporate
Consolidated

2018
¥ 25
㸫
352
㸫
㸫
0
¥ 378

2019
¥ 5,6523
31
00
㸫
¥ 5,6884) Goodwill information as of and for the years ended March 31, 2019 and 2018
Amortization
Watches
Machine tools
Devices and components
Electronic products
Other products
Eliminations or general corporate
Consolidated
Goodwill
Watches
Machine tools
Devices and components
Electronic products
Other products
Eliminations or general corporate
Consolidated

Millions of yen

2018¥ 1,566㸫12㸫㸫㸫¥ 1,579

2019
¥ 400
㸫
㸫
㸫
㸫
㸫
¥ 400

Millions of yen

2018¥ 4,356㸫㸫㸫㸫㸫¥ 4,356

2019
¥ 㸫
㸫
㸫
㸫
㸫
㸫
¥ 㸫

Thousands of
U.S. dollars

2019$ 568,074
172,744
67,016$ 807,834
Thousands of
U.S. dollars

2019$ 50,921
36
286
2
6
㸫
$ 51,251
Thousands of
U.S. dollars

2019$ 3,608㸫㸫㸫㸫㸫$ 3,608
Thousands of
U.S. dollars

2019
$ 㸫
㸫
㸫
㸫
㸫
㸫
$ 㸫

CITIZEN REPORT 201949

Note 16. Subsequent events(a) Cash dividends
The General Meeting of Shareholders of the Company held on June 26, 2019 approved the following appropriations ofretained earnings for the year ended on March 31, 2019:
Millions of yen

Thousands of
U.S. dollars¥ 3,183$ 28,678

Cash dividends(b) Acquisition of treasury stock
At a meeting of Board of Directors held on May 28, 2019, Citizen Watch Co., Ltd. resolved to acquire treasury stock under
Article 156 of the Companies Act applied by the reading of terms pursuant to Article 165, Paragraph 3 of the Companies
Act. Details are as follows:
1. Reason for the acquisition of treasury stock
To enhance shareholder return and increase capital efficiency in accordance with the shareholder return policy specified
in the Medium-Term Management Plan 2021
2. Details of the acquisition(1) Type of stock to be acquired: Common shares in the Company(2) Number of shares that can be acquired: 7,000,000 shares (upper limit)(ratio to the total number of shares issued (excluding treasury stock) 2.20%)(3) Total acquisition cost: ¥3 billion (upper limit)(4) Acquisition period: May 29, 2019 - August 31, 2019(For reference) Holding of treasury stock as of May 31, 2019
Total number of shares issued (excluding treasury stock)
Treasury stock

50

CITIZEN REPORT 2019317,891,296 shares
2,462,513 sharesReport of Independent Auditors (Translation)

NIHOMBASHI CORPORATION
Sansho Building, 3-2-9, Nihonbashi, Chuo-ku, Tokyo, 103-8283, Japan
Telephone: 81-3-3274-5837
Fax: 81-3-3274-2600
Report of Independent Auditors (Translation)
To the Board of Directors of
Citizen Watch Co., Ltd.:We have audited the accompanying consolidated balance sheet of Citizen Watch Co., Ltd. and consolidated
subsidiaries as of March 31, 2019, and the related consolidated statements of income, comprehensive income,changes in net assets and cash flows for the year then ended, and a summary of significant accounting policies
and other explanatory notes.
Managements’ responsibility for the consolidated financial statements:
The managements are responsible for the preparation and the true and fair presentation of the consolidated
financial statements in conformity with accounting principles generally accepted in Japan. This responsibility
includes designing, implementing and maintaining internal control relevant to the preparation and the true and fairpresentation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error; selecting and applying appropriate accounting policies; and making accounting estimates that arereasonable in the circumstances.
Auditors’ responsibility:
Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance as to whether the consolidated
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditors’ judgments, including the assessment of
the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In
making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and trueand fair presentation of the consolidated financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentationof the financial statements.
We believe that audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion:In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Citizen Watch Co., Ltd. and consolidated subsidiaries as of March 31, 2019, andthe consolidated results of their operations and their cash flows for the year then ended in conformity withaccounting principles generally accepted in Japan.
Emphasis of matter:
We draw attention to Note 16 (b) to the consolidated financial statements, which describes that Citizen Watch
Co., Ltd. resolved to acquire its own shares at the meeting of the Board of Directors held on May 28, 2019.
Our opinion is not qualified in respect of this matter.

Nihombashi Corporation
Tokyo, Japan
June 26, 2019

CITIZEN REPORT 201951

Global Network

Principal Places of Business and Group Companies
1 Headquarters, Tokyo Works

15 CITIZEN ELECTRONICS TIMEL CO., LTD

ASIA

2 Tokorozawa Works

16 CITIZEN ELECTRONICS FUNEHIKI CO., LTD.

1 CITIZEN (SHANGHAI) TRADING CO., LTD.

17 FUJIMI CORPORATION

2 CITIZEN WATCH (CHINA) CO., LTD.

18 CITIZEN CHIBA PRECISION CO., LTD.

[DOMESTIC GROUP]

5 CITIZEN WATCHES (MALAYSIA) SDN. BHD.

3 CITIZEN MACHINERY CO., LTD.

6 GUANGZHOU MOST CROWN

4 CITIZEN ELECTRONICS CO., LTD.

[OVERSEAS GROUP]

5 CITIZEN FINEDEVICE CO., LTD.

EUROPE

7 ROYAL TIME CITI CO., LTD.

6 CITIZEN SYSTEMS JAPAN CO., LTD.

1 CITIZEN WATCH IBÉRICA S.A.U.

8 SUNCITI MANUFACTURERS LTD.

7 CITIZEN WATCH MANUFACTURING

2 CITIZEN WATCH EUROPE G.M.B.H

9 SUNCITI PVD (JIANGMEN) LTD.

3 CITIZEN WATCH ITALY S.P.A.

10 CITIZEN (CHINA) PRECISION MACHINERYCO., LTD.
8 CITIZEN RETAIL PLANNING., LTD.
9 CITIZEN T.I.C. CO., LTD.
10 CITIZEN JEWELRY CO., LTD.
11 TOKYO BIJUTSU CO., LTD.
12 CITIZEN PLAZA CO., LTD.

52

3 CITIZEN WATCHES (H.K.) LTD.
4 CITIZEN WATCHES (INDIA) PVT. LTD

4 CITIZEN WATCH UNITED KINGDOM, LTD.

ELECTRONICS LIMITED

CO., LTD.

5 MANUFACTURE LA JOUX-PERRET S.A.

11 CITIZEN MACHINERY ASIA CO., LTD.

6 CITIZEN MACHINERY EUROPE GMBH

12 CITIZEN MACHINERY PHILIPPINES, INC.

7 CITIZEN MACHINERY UNITED

13 CITIZEN MACHINERY VIETNAM CO., LTD.

KINGDOM, LTD.

14 CITIZEN ELECTRONICS (CHINA) CO., LTD.

13 CITIZEN MICRO CO., LTD.

8 C-E (DEUTSCHLAND) GMBH.

15 C-E (HONG KONG) LTD.

14 MIYANO SERVICE ENGINEERING, INC.

9 CITIZEN SYSTEMS EUROPE GMBH

16 FIRSTCOME ELECTRONICS LTD.

CITIZEN REPORT 2019

Company Overview (As of March 31, 2019)17 JIANG XING ELECTRONICS LTD.
18 MASTER CROWN ELECTRONICS(WUZHOU) LTD.

NORTH AMERICA,
SOUTH AMERICA, OCEANIA
1 CITIZEN DE MEXICO, S.A. DE C.V.

19 MOST CROWN INDUSTRIES LTD.

2 CITIZEN LATINAMERICA CORP.

20 CITIZEN SEIMITSU (THAILAND) CO., LTD.

3 CITIZEN WATCH CO. OF AMERICA, INC.

21 CITIZEN FINEDEVICE PHILIPPINES CORP.

4 CITIZEN WATCH CO. OF CANADA, LTD.

22 CITIZEN SYSTEMS (H.K.) LTD.

5 CITIZEN WATCHES AUSTRALIA PTY LTD.

23 CITIZEN SYSTEMS (JIANGMEN) CO., LTD.

6 CECOL, INC.

24 CITIZEN SYSTEMS (DONGGUAN) CO., LTD.

7 MIYOTA DEVELOPMENT CENTER OFAMERICA, INC.
8 CITIZEN SYSTEMS AMERICA CORP.

Corporate name Citizen Watch Co., Ltd.
EstablishedMay 28, 1930
Headquarters
6-1-12, Tanashi-cho, Nishi-Tokyo-shi,
Tokyo 188-8511, Japan
Representative
Toshihiko Sato, President and CEO
Capital¥32,648 million
Employees
20,239 (consolidated)
Business description
Manufacturing and sale of watches andtheir components, and as a holding
company, planning and implementation ofGroup management strategies, Groupbusiness auditing, development of Grouptechnologies, intellectual property
management, and other administrative
operations.

Stock Information (As of March 31, 2019)
Securities identification code 7762
Stock exchange listing
Tokyo Stock Exchange (First Section)
Total number of authorized shares
959,752,000
Total number of shares issued 320,353,809
Number of shareholders
31,240

CITIZEN REPORT 201953

Citizen Watch Co., Ltd.
6-1-12, Tanashi-cho, Nishi-Tokyo-shi, Tokyo 188-8511, Japan
TEL. 81-42-466-1231 FAX. 81-42-466-1280
https://www.citizen.co.jp/global
CITIZEN is a registered trademark and a trade name of Citizen Watch Co., Ltd.
Eco-Drive is a registered trademark and a trade name of Citizen Watch Co., Ltd.