INTEGRATED REPORTCITIZEN REPORT

2022

CITIZEN Group’s Value Creation Story
Our Corporate Philosophy

Inputs“Loved by citizens, working for citizens.”

Financial CapitalSee page 27

prProduct
planning

Research anddevelopment

Number of trademarksthat the Group holds

ita

lt

ra

ns

fo

CITIZEN Group
long-term visionr

DesignCITIZEN’s technical capabilities andcontinuous devotion to refining themto enable high-precision manufacturing

more than 5,000
Sales andafter-sales
services

Manufactured Capital

dig

n

Im

pr

ncy t hr oughiomore than 5,000g

efficieatNumber of patents
that the Group holds

in

od

ion
uct

Products and services
Watches, machine tools, devices and components,
electronic and other productsmovIntellectual Capital

Amount ofcapital investment

Provide sustainable products

Sustainable Management394.9 billion yen
238.6 billion yen

Net assets

Outputs▼

Total assets■ Changes in people’s values■ Digitalization■ Changes in mobility■ Aging population

Changes in the external
environment(as of March 2022)

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 and trusted by citizens.

Miniaturization

Precision
Processing

Automation
Technology

Low Power
Consumption

10.7 billion yen

Outcomes

Procurement

Business activities that
reduce environmental impact
Give customers excitement
and high satisfaction
Solve customers’ problems
and contribute tobusiness success

Production system centeredon Japan, China and Thailand
Sales

Production

Improve each otherthrough business activities
Achieve sustainable growth

Environment

Social CapitalBusiness
Partners

Customers

Logistics

Global supply chain network

Crafting
a new tomorrow

Reliability

Human Capital

Security

16,161

Materiality
Material issues toaddress to achievesustainable growthin corporate value

Natural Capital

Water intake

1,890,000m

Increasing job satisfaction and cultivating human resources
Fulfilling social responsibility

Business foundation

73%

Risk
management

Sustainability
promotion system

See page 33

See page 35

See page 27

Chapter 02 Our Strategy

Chapter 01 Our Business

1

Provide growth
opportunities
Realize job satisfactionand employee friendlinessCorporate
Governance▼

Recycling rate

Responding to climate change and contributing to a recycling-oriented society

See page 25

3Community

Shareholders
and Investors

Solve social issues
Create jobs and increasedevelopment
in communities

Improve shareholder value▼

2,862,000GJ

Emotion

Employees

Providing solutions in industry▼

Total energy
consumption

Contributing to high-quality life▼

Number of employees

Chapter 03 Our Sustainability

Chapter 04 Our Governance

History of the CITIZEN Group

3

Watches11

Identification of Materiality

25

Corporate Governance

33

The CITIZEN Group Today

5

Machine Tools

15

Sustainable Management

27

Message from an Outside Director

36

Message from the President & CEO

7

Devices and Components

19

Environment

28

Management Team

37

Electronics and Other Products

20

Employees

29

Corporate Information

38

Financial Strategies

21

Customers

30

Financial and Non-financial Highlights

23

Business Partners

31

Local Communities/Citizen of the Year

32

Financial Data FY2021

39

Editorial Policy

Forward-Looking Statements

The CITIZEN Report summarizes and compiles
details of the CITIZEN Group’s corporate stanceand business direction, aiming to convey themto stakeholders in an easily understandable
manner while at the same time giving care andconsideration to the environment. For more
information, please visit our
official website.

This report contains forward-looking
statements regarding the CITIZEN Group’s
future performance. These statements are
based on information currently available.
Statements regarding future forecasts involverisks and uncertainties such as exchange rate
fluctuations and changes in demand for
products. Readers should understand that
actual Group performance might differ fromthe outlook provided in this report.

https://www.citizen.co.jp/global

2Chapter01

Our BusinessHistory of the CITIZEN Group

CITIZEN has always focused on continuous technology development including miniaturization,
automation, precision machining and power-saving technologies.

1918

1956

1959

1970

1976

1993

2011

2016

2021

The first shock-resistantwatch movement madein Japan[Parashock]The first fully waterproof
watch made in Japan[Parawater]

The world’s firsttitanium wristwatch

The world’s firstsolar-powered
analog watch

The world’s firstmulti-band radiocontrolled watch

The world’s first watch
capable of receiving
satellite signals

The world’s thinnest
light-powered watch with amovement just 1 mm thickMechanical models featuring acompletely new mechanicalmovement manufactured in-house

Eco-Drive One

Caliber 0200

CITIZEN designed and developed
all components from scratch tocreate the world’s thinnest
movement.

These models are equipped with the Caliber
0200 movement, a new high-accuracy
mechanical movement offering bothaccurate timekeeping and aesthetic appeal.

Establishment of Shokosha
Watch Research Institute,the predecessor of Citizen
Watch Co., Ltd.

The technology was demonstrated
by dropping Parashock watchesfrom a helicopter.

Waterproofing was achieved byusing special seals. The image
shows the container used to carry
the watch across the Pacific during
testing.

X-8 Cosmotron

Crystron

Chronometer

Solar Cell

The light, strong, corrosion-resistanttitanium was machined using
CITIZEN’s proprietary technologies.

Titanium Processing Technologies
See page 14

CITIZEN’s in-house production of watch
manufacturing equipment developed into a fullyfledged machine tool manufacturing business.

The desire to
produce Japanesemade watches
Founded in 1918
CITIZEN was founded based on the strong desire offounder Kamekichi Yamazaki to produce Japanesemade watches at a time when pocket watches
manufactured in countries such as Switzerland andthe United States were the mainstream. We
manufactured machine tools for parts to improve
the precision of our own watches, opened a watch
school to train excellent skilled engineers, andengaged in manufacturing with a thorough focus ontechnology.

CITIZEN developed the world’s firstwatch powered by a solar cell,
eliminating the need for batterychanges.
Eco-Drive

3

CITIZEN launched the world’s firstmulti-band radio-controlled watch aspart of its efforts to create even moreaccurate timepieces.

Satellite Wave

Equipped with a “satellite system,”the Eco-Drive Satellite Wave
receives GPS signals from satellites
to automatically adjust the date andtime.

See page 14

Development of high-value-added watches

Machine Tools

Innovative manufacturing that solves issues in the manufacturing workplace

1936

1986

2013

Internalized manufacturingof precision machinery forwatch production

Sliding headstock type
NC automatic lathe

Multi-station
machining cell

B-0 automatic lathe

L16

MC20

CITIZEN developed in-house
precision machinery to replace
expensive Swiss-made machines.
Commenced external sales in 1961.

Became a bestseller withimproved versatility, operability
and cost performance, which had
been challenges in the past.

The multi-station configuration withmodular design optimally allocatesmachining processes with 3–4
processing stations, shortening takt
times. Achieved simultaneousmixed-flow production of various models.

since 1918
Kamekichi Yamazaki

Eco-Drive

Cal. 7400

See page 14

2018
Development of
LFV (low frequency
vibration) cutting
technology

Development offriction bonding
technology

CITIZEN developed LFV (low frequency
vibration) cutting technology, which
reduces problems in production processes
and contributes to improved productivity.

CITIZEN developed a technology called
friction bonding that drastically reduces
the amount of leftover materials after
machine processing. This has reduced
material costs and contributed to moreenvironmentally friendly production.

LFV technology

See page 18

Application of precision processing technologies developed in theassembly of watch parts

Devices andComponents
1983

Manufacture of micro device products

1990

Began mass production of surface-mounted chip LEDs (a world first)

Began manufacturing of automotive parts

The name of our first pocket watch is the origin of
our company name

CITIZEN caters to market needs with proprietary technologies and is working to further minimize and increase the precisionof crystal devices, switches and motors, etc.

The pocket watch, which was completed using a proprietary design, became the first
CITIZEN Watch. It was named by Count Shinpei Goto, the mayor of Tokyo at the time,
who was also a close friend of Kamekichi Yamazaki. It was named “CITIZEN” so that it
would be loved widely by citizens for a long time. The name “CITIZEN” wasincorporated into the company name, and Citizen Watch Co., Ltd., was established in
1930. Since then, the Group has continued to uphold its corporate philosophy of
being “loved by citizens, working for citizens.”

Electronics andOther Products
1964

Applying high-precision technology to solve challenges in various fields

W at c h es

Manufacture of electronic devices close topeople’s lifestyles

Expansion into the office equipment field
Starting from the use of precision technologies for electric adding machines, CITIZEN went on to produce a diverse
range of products such as typewriters, printers and healthcare products.

4

Chapter 01 Our Business

The CITIZEN Group TodayMore than a century since it was founded in 1918 with the desire to produce Japanese-made watches, the CITIZEN Grouphas evolved into a corporate entity engaged in a wide range of businesses. Here we outline our four businesses, throughwhich we contribute widely to the lives of people around the world.

Watches

Machine Tools

We are driving the future of watches with the Eco-Drive technology
for converting light into power that we were the first in the world todevelop, a leading-edge GPS satellite radio-controlled watch, andother products and technologies. We are doing this under thephilosophy, “Better Starts Now,” which means that no matter who
you are and what you do, it is always possible to make something
better and now is the time to start doing it. We are one of theworld’s few manufacture d’horlogerie, capable of the integrated inhouse manufacturing of everything from individual parts tocompleted products.

CITIZEN began production of machine tools in 1936, utilizing
the technologies and know-how developed through the
manufacture of watch parts, which demand small size and highprecision. Machine tools for creating components essential fora wide range of fields, including the automotive, medical and IT
industries, contribute to the development of manufacturingindustries all over the world.

Overseas Expansion of the CITIZEN Group
CITIZEN Watch—which began with our founder’s desire to produce Japanese-made watches—is actively expanding
overseas by utilizing Citizen’s core technological capabilities such as miniaturization, automation technologies, precision
machining and low power consumption. With 64 overseas subsidiaries and a 74% overseas sales ratio, we are contributing
to the lives of people around the world through reliable technologies and products and services that meet their needs.
Net sales by region (billions of yen)

Europe

Asia

Japan

U.S.

87.6

70.1

65.6

Other 1%

74.4
62.5

53.6

FY2021

Ratio of overseas
sales to total sales

Main Operating Companies

Citizen Watch Co., Ltd.
Citizen Watch Manufacturing Co., Ltd.
Citizen Retail Planning Co., Ltd.
Citizen T.I.C. Co., Ltd.

Citizen Machinery Co., Ltd.

Top class share in the U.S. middle-range market
A global leader in movement sales

A leader in global share for small and midsized computer
numerical control (CNC) automatic lathes

46%
Devices and Components 18%

Main Operating Companies

Watches

5

FY2021

Composition of
net sales by business

Devices and Components

29% Machine Tools
7% Electronic and Other ProductsElectronics and Other Products

CITIZEN supplies products for various electronic devices that
support society, by applying the core technologies ofminiaturization, precision machining and low power consumption
developed through our watchmaking operations. This makes it
possible to reduce the power consumption and prolong theservice life of products, making people’s lives more convenientand comfortable, while also contributing to reducing the burden
placed on the global environment.

CITIZEN’s POS/barcode printers and high-definition digital photo
printers—made by applying the miniaturization, precision
machining and low power consumption technologies developed
through our watchmaking operations—play active roles in various
scenes in society. Our electronic blood pressure monitors,
electronic thermometers and pedometers—which have further
developed our core technologies—also contribute to the creationof healthy lifestyles for many people.

Main Operating Companies

Main Operating Companies

Citizen Finedevice Co., Ltd.
Citizen Electronics Co., Ltd.
Citizen Micro Co., Ltd.
Citizen Chiba Precision Co., Ltd.
Fujimi Corporation
Citizen Electronics Timel Co., Ltd.

Citizen Systems Japan Co., Ltd.
Tokyo Bijutsu Co., Ltd.

Applying our
proprietary coretechnologies to highvalue-added products

34.9

33.6

Application ofsmall precision technology

U.S.
22%
(FY)

2020

2021

Japan 26%

Europe
19%

2020

2021

2020

2021

74 %

Asia 31%2020 2021

Major Social Recognition
The CITIZEN Group has been engaged in various business activities that put into practice its corporate philosophy of
being “loved by citizens, working for citizens.” Based on our belief that we must never violate social norms, be dishonestor cause our customers or business partners to feel distrust, we are working to deepen the level of our sustainable
management (see page 27) to solve social issues and contribute to the development of a sustainable society. In
recognition of these ideas and initiatives by external organizations, CITIZEN has been selected for inclusion in various
ESG-related stock price indexes.

MSCI Japan ESG Select Leaders Index
and MSCI Japan Empowering Women Select Index (WIN)We have been included in the MSCI Japan ESG Select Leaders Index since December
2019 and the MSCI Japan Empowering Women Index (WIN) since June 2017.

FTSE Blossom Japan Index

S&P/JPX
Carbon Efficient Index

Since December 2019, we have been includedin the FTSE Blossom Japan Index.

CITIZEN has been selected as a constituent of
the S&P/JPX Carbon Efficient Index.

CDP Supplier
Engagement Rating

SOMPO
Sustainability Index

In 2021, we were listed on CDP’s Supplier
Engagement Leaderboard, which recognizes
only the highest rated companies.

Since 2017, we have been included in the
SOMPO Sustainability Index (previously the
SNAM Sustainability Index).

6

Chapter 01 Our BusinessMessage from the President & CEO

Creating new value forcrafting a new tomorrow
We will work under the new
medium-term management planto achieve our Corporate
Philosophy.

Citizen Watch Co., Ltd.
President & CEO

Toshihiko Sato
Reaffirming unchangeable value amid majorchanges in the environment

7

and environmental issues existing in the world with thestrengths and value of our businesses. One thing that we
found in the COVID-19 pandemic is the fact that watches are

Since the beginning of 2022, the world has been growing

firmly rooted in the lives of citizens, and there are certainly

increasingly uncertain, with rising international tensions andcustomers who recognized the value of watches andan increasingly complex social environment. Looking back onpurchased CITIZEN products. In the U.S. market, which at one

the Medium-Term Management Plan 2021 for the period until

point contracted significantly due to the lockdowns, theFY2021, we could not achieve the plan’s goals due to thesegment of high-end watches, the prices of which exceed

unprecedented challenges created by the COVID-19

1,000 U.S. dollars, is also recovering thanks in part to thepandemic. This underscores the gravity of the pandemic’s

strategic marketing and branding measures that we have

impact. Above all, Watches, which is basically a BtoC

taken. This indicates one major direction that the CITIZEN

business, was greatly affected by the restrictions on going out

Group should take. Furthermore, I learned a lesson throughbecause in many cases customers check out our products inthe experience of struggling with the launch of, andperson at stores when buying them. Moreover, sales in Japan

withdrawal from, many businesses during the 1980s anddeclined significantly, by around 60% compared with FY2018,1990s. The lesson is that a robust business model for what

the pre-COVID-19 level, given a decline in the demand fromvalue to create in which market is essential for creating andinbound tourists. On the other hand, the Machine Tools

developing a core business. Thinking again about thebusiness has continued to enjoy strong orders, mainly for

CITIZEN Group’s strengths and the value created from them

CITIZEN-proprietary LFV (low frequency vibration) cutting

based on these findings and lessons, you will reach thetechnology. This gives us the sense that manufacturing has

Corporate Philosophy, the linchpin of our management thatnot stopped even amid the COVID-19 pandemic.

has remained unwavering since our founding.

How should the CITIZEN Group continue to create value into

Since its founding in 1918, the CITIZEN Group has continued

the future while the business environment is going throughgrowing by including “CITIZEN” in its name and widely

such major changes and while we see technologicalcontributing to the lives of people around the world throughinnovations and the rise of new industries? Although it is

the manufacturing of products that are loved and trusted bydifficult to make long-term predictions, we have based our

citizens. As for our business domains, while Watches as aconsiderations on a comparison of the large number of social

BtoC business was where we started, we have successfully

developed BtoB businesses derived from precision

worked to expand sales by offering area-specific models,

processing and assembly technologies that we cultivatedwhich are designed for the characteristics of each region, inthrough Watches, and further, from automation, surface

diverse price ranges while also rolling out a global brand. The

processing and surface hardening technologies. However,expansion of area-specific models, or the launch of new

considering that C (customers) exist ahead of BtoB

products tailored to regional characteristics, had a strong

businesses, all businesses eventually contribute to citizens.

impact in each region. However, it was also a factor in theThis is the philosophy that we embody. With thisfragmentation of the brand image in the global market.

unchangeable philosophy as our linchpin, we haveMoving forward, we will establish a global brand image based

determined what we should be like 10 years from now, whichon the value created by CITIZEN in the lives of citizens, thus

is a long-term vision, and the areas of focus that we willbuilding a brand presence and improving investment

address on a priority basis (materiality), keeping in mind theefficiency. One example of the value is the accuracy of ±1

next 100 years of the CITIZEN Group. We have reflected thesesecond per year that only CITIZEN watches achieve. One year

priorities in the Medium-Term Management Plan 2024, whichis 31,536,000 seconds, and even watches that are generally

began in FY2022.

regarded as high-performance models gain or lose a few
seconds each day. With this in mind, we would like to deliver
the value of making every second count, which we have been

Crafting a new tomorrow,
our long-term vision

pursuing with our technological capabilities at CITIZEN, as
our common message in Japan and other Asian countries,

At the CITIZEN Group, we have declared Crafting a new

Europe and the United States, and the global market. While

tomorrow as our long-term vision for 2030. While responding
to social changes toward 2030, such as the progress toward asustainable and digital society, the CITIZEN Group isincreasingly moving in the direction of not only enriching the
lives of people around the world but also creating spiritual
wealth and passing down that wealth to future generations.
Positioning this as the CITIZEN Group’s mission, we will strive
to deliver reliability, security and emotion to the world
through our business operations.
A measure we will take to embody this long-term vision is tobreak away from the product-out approach (product-oriented
approach), with which we create something because we havetechnologies, and develop business strategies with theoutside-in approach, which is focused on what value we
intend to bring to society through the businesses we create.
For example, in the Watches business, we have hitherto

branding takes time, we will build the brand during the 10
years of our long-term vision.
We came up with this long-term vision, not by developing aplan on a business-by-business basis but rather through aprocess in which we involved mid-career members from eachbusiness and discussed the long-term growth of the Groupand what we want to be like, from the perspective of theoverall Group. In this process, communications within theGroup gained momentum, and many discussions were heldfrom the Group’s perspective, transcending boundaries
between businesses. That was most impressive for me. Thereappeared to be a somewhat strong centrifugal force in theGroup’s corporate governance, although our Corporate
Philosophy was at the center. Through the above process,however, the centripetal force was also strengthened, leading
to a better balance between the two forces in the Group’s

Social Issues to Address by 2030

Draw up a vision of how the CITIZEN Group could be(CITIZEN Group Vision 2030) from a long-term perspective andrevision materiality using the backcasting method.

Identify management issues from a medium-term
perspective and develop business strategies
for the medium-term management plan.

Corporate Philosophy

Loved by citizens,working for citizens

CITIZEN
Group Vision 2030

Medium-Term
Management Plan
2024

Crafting a
new tomorrow

Present
Materiality ▶See page 25■ Responding to climate change and contributing to a recycling-oriented society■ Contributing to high-quality life

■ Increasing job satisfaction and cultivating human resources■ Providing solutions in industry■ Fulfilling social responsibility

8Chapter 01 Our BusinessMessage from the President & CEO
CITIZEN Group Vision 2030
corporate governance. I think the process was highly

economy. Based on this design, a sustainable world will exist

bidirectional communications with them, thus

meaningful on this point.

10 to 20 years from now. In terms of our businesses, customers

shifting to a domain where our products do nothave already found sustainable value in our mechanicalcompete with smartwatches.

watches, which can be passed down to their grandchildren

The Machine Tools business is predicted todue to our comprehensive after-sales services. We will

expand over the long term. For example,

continue to deliver the message that CITIZEN is implementing

demand related to capital expenditures for

To the CITIZEN Group, which works under the Corporate

sustainable management. This will also lead to the rebranding

automation and reducing labor is expected in

Philosophy of “Loved by citizens, working for citizens,”of the overall Group.

a wide range of industries, including

sustainable management means continuing to create new

Concerning human resources, we have set increasing job

automobiles, medical care andvalue for future citizens. To practice this sustainablesatisfaction and cultivating human resources as one of oursemiconductors. In particular, demand ismanagement, we have identified material issues with a largematerial issues. Diverse experience and communication are

expected to grow significantly in the Asian

impact that the CITIZEN Group should address preferentiallyessential factors for the development of human resources. We

region, including China and India. The CITIZEN

amid the changes in society, the environment and our planet

have been developing human resources with a focus on new

Group has also continued to enjoy strong orders.

by backcasting from our long-term vision. We have identified

graduates. To drive businesses that contribute to theWe will build a business foundation for thefive priority issues: responding to climate change andacceleration of customers’ DX, however, we also need toachievement of net sales of 100 billion yen bycontributing to a recycling-oriented society, contributing toproactively recruit human resources with digital expertise who

reinforcing our sales and service structures in Asia,

high-quality life, providing solutions in industry, increasing job

are mid-career and help them develop professionally from awhere long-term growth is expected, through the increasesatisfaction and cultivating human resources, and fulfilling

long-term perspective. Although learning through classroomof the production capacity of our factories in China andsocial responsibility.

lectures is important, we would also like to develop humanThailand as well as Citizen Machinery’s Karuizawa factory.

Among them, responding to climate change is one of theresources who will play a leading role in the implementation of

Moreover, the CITIZEN-proprietary LFV (low frequency

most important tasks that companies face because thereforms based on the diverse experiences that they havevibration) cutting technology, which breaks up chips during

Government of Japan has declared that Japan will achieve

accumulated internally and externally. Innovation is the result

the cutting process, has been praised by customers since its

carbon neutrality by 2050. To allow future citizens to live onof training your brain in places where people with different

introduction in 2013 as an innovation leading to thedividends based on a target dividend payout ratio of aroundthis planet with a sense of security, we have created our road

opinions communicate. We will value opportunities to meet

improvement of the efficiency of a variety of machine tools.

50% and attach importance to stably and continually paying

map toward achievement of carbon neutrality by 2050, inmany people inside and outside the Company and

We are enjoying the growth of its sales not only in thehigh dividends. We will make flexible decisions on thewhich we will drive initiatives to address climate change

communicate directly with them.

Japanese, European and U.S. markets but also in Asia.

acquisition of treasury stock to reflect circumstances.

preferentially from now until 2030. In FY2020, we expressedMoving forward, we will strengthen customer marketing by

Furthermore, we will strengthen our financial foundation by

our support for the TCFD.* Moving forward, we will strive torefining our differentiating technologies, like LFV, torepaying interest-bearing debt.

Material issues identified to practicesustainable management

1

What will the CITIZEN of 2030 look like?
Since our founding in 1918 as one of Japan’s first watchmakers, we haveused our technological expertise to expand into other fields, including
machine tools, devices, electronics and countless products and services,
all built on two key promises: Reliability and a Sense of Security.
Now the time has come for a third promise: Emotion to enrich the soulwith products that make life better and build a brighter, richer world forthe generations to come. That is our new mission.
In 2030, CITIZEN will be known around the world for reliability,
security and emotion. That is how we will contribute to bringing
about a better world.

acquire SBT* certification for our GHG reduction targets by

Medium-Term Management Plan 2024

contribute to customers’ manufacturing. We will also focus

Growth in step with earnings capacity and the creation of

FY2024. We have been hearing the term circular economy

Under our new Medium-Term Management Plan that started inour efforts on proposing new solutions that will lead to thevalue make it possible to contribute to a sustainable society.

recently in relation to a recycling-oriented society. The most

FY2022, the Watches business and the Machine Tools businessautomation of processes and the reduction of labor required

During the Medium-Term Management Plan 2024 we will work

important thing for making a circular economy a reality is thewill remain as the core businesses that drive the Group’s growth,

in processes before and after the use of machine tools.

with strong awareness of steady growth.

design of the system that will be the foundation of the circularand we will invest our resources in them strategically to achieve

New businesses are difficult to cultivate in a short span of timefurther growth. For the Devices and Components business andlike one or two years. We will therefore envision the future andElectronic and Other Products business, we will move ahead

set numerical targets decade by decade, thus striving to create

with selection and concentration while aiming for stable growth.

businesses that will contribute to citizens. For example, ourMore than anything, I want to tell our stakeholders that I want

We will also make progress in exploring and initiating newhealthcare device business, including items such asthem to look forward to seeing what the CITIZEN Group willbusiness areas with growth potential.

thermometers and blood pressure monitors, embodies ourbe like in 10 years. As I mentioned earlier, it is important to

The watch market is experiencing environmental changes,

corporate philosophy of working for citizens and conforms todesign a concept before starting anything. It was by starting

including the continuing expansion of demand for mechanicalthe SDGs. The domain of medical care and healthcare is one

with this design phase that we developed the long-term

watches, the rising awareness of sustainability, changes in

direction for our new businesses. While there has been progressvision. Moving forward, we will invest our management

consumers’ behavior and values, and expansion of thein the digital shift, we are also driving DX. The purpose of ourresources and achieve steady growth in line with the newsmartwatch market. Although shipping quantity in the watch

DX is to create customer value. Therefore, we share thisMedium-Term Management Plan, a specific plan reflecting themarket as a whole has been declining gradually, shipment

awareness internally, mainly through the DX Vision, so that thelong-term vision. This will be realized by the CITIZEN Group’s

value has been trending upward and demand for mechanicalDX itself will not be regarded as our purpose. We will also create

diverse human resources and technological capabilities

watches is expected to increase stably and continuously.

new user value by transforming the products and services thatcultivated over 100 years of history, including technologies for

Therefore, we will focus our efforts on enhancing our lineup of

use our technologies, by integrating them with DX.

miniaturization, precision processing, low power consumption

mechanical watches in response to trends and communicating

As for the allocation of management resources, we will divert

and automation.

our brand concept clearly. Meanwhile, we will draw attention

60 billion yen to 70 billion yen to growth and streamlining

While continuing to grow sustainably as a company, we willto the use of environmentally conscious materials, such as theinvestments using cash to be gained through operating cash

also contribute to society and the environment, thus

features of the eco-friendly Eco-Drive and the use of recycled

flow and the optimization of assets owned in the coming threeembodying our Corporate Philosophy, “Loved by citizens,materials, to take advantage of rising awareness ofyears. We plan to appropriate more than 70% of the cash toworking for citizens.” I appreciate your continued support.

sustainability. We will also provide consumers with experience

Watches and Machine Tools as our core businesses. We willvalue, including product value, and seek to establish

also continue to invest in DX. We determine the amount of2

9

Crafting a new tomorrow*1 TCFD： Task Force on Climate-related Financial Disclosures*2 SBT： Science Based Targets, which are in line with the levels set out under the Paris Agreement

To our valued stakeholders

10Our Strategy

Watches

Medium-Term Management Plan Policy

Improved profitability andsustainable growth
Key Strategies

CITIZEN will enhance its brandpresence to ensure renewed growth.

Managing Director

Yoshitaka Oji

160.0 billion yen
Operating profit
14.5 billion yen
Operating profit margin
9.0%
Net sales

1

Global brand strategy

2Premium brand and mechanical watch strategy

3

Continued enhancement of user contact points and data utilization

1 Global brand strategy

Review of the Previous Medium-Term Management Plan
Business conditions during the term of the previous
Medium-Term Management Plan were extremely
challenging and CITIZEN posted a significant operating
loss in FY2020 due to the impact of the COVID-19
pandemic that began in FY2019.
In the meantime, CITIZEN has continued to steadily
advance initiatives related to CITIZEN’s basic policies,
including the promotion of digital marketing, theexpansion of our product ranges, the creation of a multibrand strategy centered on the core CITIZEN brand, andboosting the cost competitiveness of movements andfinished products through manufacturing innovation. We
have seen significant progress and results so far, but westill have some way to go.

Market Conditions

sustainability, and they are now making purchasing
decisions based on the company or brand’s willingness toengage in initiatives to promote the SDGs. CITIZEN
intends to increase awareness of sustainability evenfurther by promoting CITIZEN’s proprietary light-powered
watch technology Eco-Drive and the use of eco-friendly
materials.
Changes in consumer behavior and values have changed
the kind of product value that customers expect fromwatches. CITIZEN intends to communicate its brandconcept and messages more clearly, allowing us toconnect and interact more effectively with users to create
new kinds of value together.

Watch Market Trend Forecast
CITIZEN’s Forecast

30,000The watch market saw a significant downturn in FY2020
due to the COVID-19 pandemic, but we believe that themarket as a whole is on the road to recovery. Quantities
of watches sold in the watch market are expected to
decline, particularly in lower price ranges, due to theemergence of smartwatches. From a price perspective,
we expect that the continued expansion of high-valueadded watches and mechanical watches will result infurther market growth. Demand for mechanical watches is
steady, and the market is expected to expand further in
the near future. In response, CITIZEN will be launching
new mechanical watch models as well as enhancing its
mechanical watch lineup in keeping with industry trends.
Many of our customers have a strong interest in

300

200

20,000100

10,000

0

0
(CY)

2016

2017

2018

Hong Kong Analog Quartz
Swiss Analog Quartz
Unit: Million US$

2019

2020

2021

2024

Hong Kong Mechanical
Swiss Mechanical

2030

AUP

Unit: US$AUP: Average Unit Price■ Shipment quantities are expected to decline, but shipment
values will rise due to stable demand for mechanical watches
and unit price increases.
■ Inbound demand will recover to some extent, but we do not
expect a return to pre-COVID levels in 2024.

Source: Estimates by CITIZEN based on Hong Kong trade statistics and data from the Federation of the Swiss Watch Industry

11

Numerical Targets for FY2024

Promoting the growth of PROMASTER
and CITIZEN L as global brands
CITIZEN sells a large number of watches in the global
market, and our product lineups are based around areaspecific models designed to suit the characteristics of eachregion. There is a wide variety of CITIZEN-branded models
available on the global market, further disseminating theimage of the CITIZEN brand worldwide. The current
situation has created a number of issues related to building
our brand presence and improving investment efficiency.
While our main price range in overseas markets is currently
300–800 U.S. dollars, we need to increase the lower end to
400 U.S. dollars and above, a price range where our
products are less likely to be affected by competition fromsmartwatches. To do so, we must focus on producing
products that will appeal to customers and improve thebrand image and product value of CITIZEN watches. This is
the only way we can enhance CITIZEN as a whole. We havechosen PROMASTER and CITIZEN L to be our global
brands and we will work to ensure that they achieve growth
worldwide. PROMASTER is already a globally recognizedbrand in the sports watch category where the number ofcompetitors is limited. The CITIZEN L brand focuses on theconcept of ethical production, and we believe it will attract
more customers who are aligned with CITIZEN’s initiatives
on a global level. Obviously, this includes Generation Z andother younger customers who have a strong awareness ofenvironmental issues. These two brands will be establishedas our global brands, and we will expand them even further
by shifting investments, including advertising investments,
to these brands. At the same time, we will shift fromfocusing on area-specific models for individual regions toenhancing global models for launch in multiple regions.

The PROMASTER brand provides experience value throughprofessional sports watches that can be used in the most extreme
environments. The CITIZEN L brand provides experience value throughsustainable watches that are kind to both people and the environment.

Medium-Term Management Plan 2024 CITIZEN Brand
Global Strategy
High

Global brands

Current Situation■ Marketing is carried out in keepingwith the characteristics of eachregion to expand sales, building
around the core of area-specificmodels designed to suit each region.
■ The focus on area-specific models
has led to issues related to building
brand presence in the global market
and improving investment efficiency.

Average Unit Price

02

Area-specificmodelsLow

High
Mid- to Long-Term Initiatives■ Shift investments to global brands toimprove investment efficiency■ Increase brand presence in the
global market and build a brandimage that truly represents CITIZEN

High

Brand presence in the global market

Average Unit Price

Chapter

Global brands
Shift in investments

Area-specificmodelsLow

High

Brand presence in the global market

12Chapter 02 Our Strategy

W a t ch e s
For crafting a new tomorrow

Technologies powering CITIZEN watches

2 Strategy for premium brands and mechanical watches

Enhancing the strength of our brand focusing on The CITIZEN and
Series 8 mechanical watches
As noted in Market Conditions above, we expect
continued growth for high-value-added watches andmechanical watches. In FY2021, we focused on ourflagship The CITIZEN brand and introduced Series 8
as our new brand of mechanical watches. Bothreceived an overwhelmingly positive response fromthe market, further raising expectations for future
releases from CITIZEN. Moving forward, we will further
refine CITIZEN’s technologies to enhance our lineup
of mechanical watches. We will also implement
strategic marketing activities to communicate brandconcepts clearly.
In the Japanese market, we have already launched

CITIZEN Premium Doors, a group of exclusive retailspaces offering premium brand watches from CITIZEN.
We will expand the number of Premium Doors storesby 30% compared with FY2021 as part of efforts toenhance our brand presence. As a first step, we will
increase brand awareness by focusing on theJapanese market to build a foundation for sales in our
premium price range.
In overseas markets, we will gradually strengthen sales
efforts using CITIZEN flagship stores and direct-sales
e-commerce sites. In the long term, we intend toensure the full expansion of The CITIZEN and Series 8
into overseas markets as our global brands.

Environmentally friendly technology
Eco-Drive
In 1976, CITIZEN developed the world’s first analog light-powered watch. This
proprietary CITIZEN technology, named Eco-Drive, converts even small
amounts of light into energy to power watches and stores excess power in asecondary battery. In 1996, Eco-Drive products became the first watches toobtain Eco Mark certification, a label given by the Japan Environment
Association (JEA). Eco-Drive went on to be awarded the Gold Prize at the JEA’s
Eco Mark Awards in 2014.

Technologies that create

value

Development of high-value-added watches
Our high-value-added models include the Eco-Drive One, a light-powered watch witha movement just 1.00 mm thick; The CITIZEN Caliber 0100, a light-powered watch
accurate to ±1 second per year; and the Caliber 0200 mechanical movement, which
combines elements from the watchmaking traditions of both Japan and Switzerland.
These models, which offer added value beyond that of conventional watches, createa unique lineup made possible through CITIZEN’s in-house capabilities that span
design, manufacture of components, assembly, and final adjustments.

Technologies that are kind topeopleTitanium processing technologies

3 Continued enhancement of user contact points and data utilization

Developing customer touch points based on the analysis of user data
In the past, a product’s functionality was seen as themain source of value for users. Once a product was
sold, the provision of value to users tended to taper
off. However, more recently, value for users includes
their purchasing and watch wearing experiences,the background and story of each product, as wellas maintenance and after-sales service. Moving
forward, we will stay connected with users byoffering after-sales maintenance as well as providing
new products and product information to build asystem to strengthen our relationships with users.
We will develop multifaceted customer touchpoints,
including customer management via members-onlywebsites (My CITIZEN and the CITIZEN Owners
Club), the provision of after-sales service, and
CITIZEN Timeless City, a virtual city where visitors
can experience different aspects of time online. The
data obtained through these touchpoints will beeffectively shared and analyzed in-house toimprove the value of our products and services and13

build a cycle of repeated purchases among users.
We will connect with users, deepen our
understanding of them, and maintain theseconnections to facilitate the proposal of newservices.

https://city.citizen.jp/

Titanium is soft and difficult to process, so CITIZEN uses specialized proprietary processing technologies to process the metal. In
addition to pressing, cutting, and polishing processes, we have established a new case processing method in recent years.
This new method no longer requires the conventional molds that used to be an essential part of titanium processing. We have also
developed automated polishing equipment that delivers a level of polishing comparable to that of an experienced technician. These
processes are used to create Super Titanium™ with CITIZEN’s proprietary titanium processing and surface hardening technologies tocreate a unique material that is scratch-resistant, lightweight, gentle on the skin, and resistant to corrosion.

Multi-brand expansion

Increasing brand power through enhancement of our brand portfolio

BULOVA was founded by Joseph Bulova in
New York in 1875. With its advanced
technological capabilities, the brand has long
been a leader in the watch market. Over theyears, BULOVA has created many world-firsts,
including the world’s first tuning fork watch.

Frederique Constant takes inspiration from theconcept of “accessible luxury,” and all aspects ofproduction are carried out in-house, from design anddevelopment to final assembly. The brand’s mission
is to use its superior manufacturing capabilities tooffer high-quality watches at affordable prices.

Arnold & Son bears the name of John
Arnold, an English watchmaker who madea name for himself in the 18th century.
Inspired by his work, the brand continues
to create watches using traditional
watchmaking techniques.

14

Chapter 02 Our Strategy

Machine Tools

Policy in the Medium-Term Management Plan

Achieve further growth

Key Strategies

We will enhance our production
capacity and reinforce sales andservice systems, aiming to achieve
continued growth.

Director

FY2024 numerical target

86.0 billion yen
Operating profit
12.5 billion yen
Operating profit margin
14.5%
Net sales

1

Establishment of business foundations with an eye toward achieving net sales of
100 billion yen.

2

Differentiation by leveraging processing technologies.

3

Expansion of areas where automation/labor-saving measures are applied.

Keiichi Nakajima
1 Establishment of business foundations with an eye toward achieving net sales of 100 billion yen.

Review of the Previous Medium-Term Management Plan
In the previous Medium-Term Management Plan, weestablished the business vision, “Create the world’s mostadvanced production innovation solution to establish ourposition as a new manufacturing (monozukuri) company.”
Under this vision, we aimed to establish a firm foundationfor our business that would enable us to operate smoothlywith annual net sales of 80 billion yen by achieving
production innovation that would maximize the efficiencyof our current management resources.
We automated Citizen Machinery’s Karuizawa
Headquarters factory, drove sales activities focused on
attracting customers and proceeded with businessprocess reform. We also built a system for producing andselling MC20, a multi-station machining cell, and worked
to expand the sales of existing business by reinforcing ourglobal production and sales system. In addition, we
expanded businesses tailored to the age of IoT and
explored new business domains, for example, byincreasing productivity using an operational monitoring
system and reviewing the content of alkapplysolution,
which provides total solutions using the latest network
technologies and the technologies accumulated by our
Machine Tools business.
Despite the impact of the COVID-19 pandemic and the
difficulty of procuring components, we almost achieved
our net sales and operating profit targets. In the new
Medium-Term Management Plan, we will continue toenhance the production capacity of our factory in Thailand
and Citizen Machinery’s Karuizawa Headquarters factoryand reinforce our sales and service systems.

Enhancement of production and sales/service systems

Market Conditions
The machine tools market is expected to go in the
direction of a full-scale recovery, with the world
economy shifting to a post-COVID-19 phase, although
the shortage of parts and raw materials and priceincreases will be inhibiting factors. In the long run,demand for factory automation (FA), labor-saving
solutions and automation has been growing, mainlyreflecting the decline in the working population andrising labor expenses.
In addition, it is expected that CASE* technologies will
significantly impact the automotive industry, which will
include the expected rapid ubiquitization of electricvehicles (EVs). We need to monitor this trend closely as
it could influence the automotive industry greatly.
Demand in emerging markets such as China has also
been growing, and there is demand for advanced
machines with higher-level technologies. At the sametime, local manufacturers who are improving theirtechnological capabilities are increasing their presencein these markets.

15

bases. At the same time, we built a new showroom building
with the goal of enhancing our sales and service provisionfunctions. Thus, we have reinforced our structure in the
aspects of both manufacturing and sales.
In addition, we will construct a new precision machining
factory on a site adjacent to Citizen Machinery’s Karuizawa
Headquarters factory because we need to secure theproduction capacity of core components, including
spindles, in line with the enhanced capacity to produce
main units. By increasing our capacity to produce corecomponents, we will establish a system ensuring stablesupply.
As a result of these investments, our production capacity is
expected to increase 40% from the level in FY2021 by
FY2023. After securing adequate production capacity, we
will work to enhance our sales and service systems further
with a focus on Asia, where growth is expected.

Forecast trends in the machine tools market
CITIZEN’s forecast
2
1

1.6

1.3

2.0

1.8
1.2

1.5

1.6

0.9

Business
cycle

0
(CY)

2016
Japan

2017

China

2018

India

2019

2020

Other Asian regions

2021

Americas2024
Europe2030
Unit: trillion yen

Source: Estimates of CITIZEN based on the Trends in Orders (calendar year)of the Japan Machine Tool Builders’ Association*CASE: Connected, Autonomous/Automated, Shared and Electric

Anticipating the achievement of net sales at 100.0 billion
yen, we relocated and expanded our factory in China,
expanded our factory in Thailand and built a new buildingat Citizen Machinery’s Karuizawa Headquarters factory in
FY2021, aiming to enhance production capacity. In China,
there is demand for automation and labor-reducing
solutions due to rising labor expenses and other changes inthe structure of industry. This has led to an increase indemand for machine tools with high added value fromJapanese manufacturers. Large-scale projects of major
enterprises are also expected to increase. Determining thatthe improvement and expansion of production systems
was urgently needed to continue supplying machine tools
stably in the Chinese market, we expanded our factory. The
expanded factory began operating in August 2021 with thegoal of achieving automation and smart operation. We also
worked to enhance the production capacity of our factoryin Thailand, which is also one of our key manufacturing

New factory in China

Thai Factory

Started operation in August 2021
Introduced equipment in stages

The building in the left back is an expandedfacility. The building in the front right is ashowroom building.
Scheduled for completion in November 2022

Citizen Machinery’s Karuizawa
Headquarters factory
Constructing a new precision machining plant on asite adjacent to its current factory (Front)
Scheduled for completion in March 2023

16

Chapter 02 Our Strategy

M a ch i n e Tools

A quick guide to CNC lathes

2 Differentiation by leveraging processing technologies

Expanding sales with a focus on products with LFV technology, CITIZEN’s
proprietary processing technology
The low frequency vibration (LFV) cutting technology is
CITIZEN’s proprietary control technology. During the
cutting process, LFV technology creates moments when
the tool is not in contact with the workpiece, thereby
breaking up chips. This helps solve a range of problems at
production sites derived from chips and makes asignificant contribution to bolstering productivity. We
began to incorporate LFV technology in our products in
2013. In 2016, we made it available on the Cincom L20,
a long-selling model of the sliding headstock typeautomatic CNC lathe. We later gradually began to apply
this technology in more of our products. Thus, we havecontinued to provide customers with processing
technology solutions, not limited to solutions to chiprelated problems. In recent years, sales have slowed dueto the COVID-19 pandemic. However, we have strived to

expand sales by holding hybrid events combining thevirtual and physical worlds and by making full use of social
media. As a result, the cumulative global number of units
shipped has exceeded 3,700 (as of January 31, 2022).
We first sold products incorporating LFV technology inJapan and began selling them in Europe and the UnitedStates in the autumn of 2016. And we began sales in Asia
the following year. Customers who purchased the units
reaped the benefits of LFV technology, which led torepeat purchases. Thus, the number of customers desiring
to purchase machines using LFV technology is increasing
all over the world. At present, sales of machines using LFV
are increasing in the Asian market, where efficiency isdemanded, in addition to the Japanese, European and
U.S. markets, where they have been competitive. We aim
to increase sales in these regions.

Workpiece

Computer-controlled machine
tools for making components
A CNC automatic lathe is a kind of machine tool that is used to makecomponents by cutting metal materials. A lathe is a machine that isused to cut a rotating metal material by placing a blade against it. A
lathe that uses a computer to control the position and speed of the cut
is called a computer numerical control (CNC) lathe.

Cut

Tool

Types of CNC lathes
Difference in the type of material fed to the tool
Bar workmachineIt cuts products out of a bar-shapedmaterial, just like slicing a candy bar
into pieces.

Chuck workmachineOne workpiece is supplied at a time.

Difference in machine construction
The shaft holding the workpiece moves.
Lathe with aThis design is appropriate for processing
sliding headstock workpieces that are long and thin.
Sliding headstock typeautomatic CNC lathe

Sliding headstock typeautomatic CNC lathe

The cutting tool moves. It is
Lathe with aappropriate for processing
fixed headstock workpieces that are short and thick.

Number of LFV-equipped machines shipped globally (as of January 31, 2022)

Total

Europe

Asia

Japan

Americas1,120 units

740 units

1,500 units

340 units

3,700 units

Reduce labor and automate processes atmanufacturing sites using

CITIZEN’s solutions
Helping improve productivity by using a vibrating servo shaft to break up chips

3 Expansion of areas where automation/labor-saving measures are applied.

17

Conventionalchips

LFV Technology
Low frequency vibration (LFV) cutting technology is a next-generation processing
technology for productivity improvement. It applies CITIZEN’s proprietary control
technology to vibrate the servo shaft in the cutting direction, creating moments when thetool is not in contact with the workpiece during the cutting process. This breaks up chips
during the cutting process, which has solved many long-standing, chip-related problems
involved in cutting. This technology dramatically reduces chip volume and helps prevent
scratches and other defects on the workpiece surface, permitting high-precision
machining over extended periods of time.

Strengthening product development
and sales systems through the
adoption of FA Friendly
Although machine tools were being made capable ofcomplicated and high-precision processing, post-cutting
processes that had to be handled by humans were stillnecessary. As the labor shortage is an ongoing persistentproblem, demand from customers for automation andlabor-reducing solutions has been growing.
FA Friendly is a new solution that caters to suchautomation and labor-saving needs of customers. We have
prepared a series of items that are highly compatible withfactory automation, including robot systems, material
feeding systems, loaders and unloaders, workpiecestockers and conveyors between machines. We are
increasing the variety of these items. By enabling robots todo these post-processes, operators can devote themselves

Chips broken into
pieces with the
LFV technology

Customizable factory automation system

FA Friendly

to high-added-value tasks.
We will build systems that are necessary for the development
and sale of factory automation–friendly products. At thesame time, we collect and analyze information about
customer needs to propose new solutions for further
automating processes and reducing labor.

FA Friendly is a new solution from our Machine Tools business. We have prepared thisseries of items that are highly compatible with factory automation, including robot
systems, conveyors between machines, product conveyors, product storage devices andmaterial feeding systems. We provide on-cart-type units, which are compatible with manydifferent factory layouts, and on-machine-type units, which feature a robot mounted on
the machine to save space. With this lineup of solutions, we cater flexibly to customers’automation and labor-reduction needs.

18Chapter 02 Our Strategy

Devices and Components

Electronic and Other Products

Establishing a top position in specificfields by offering differentiated products
creating the next generation of growthbusinesses

Provide electronic products close topeople’s lifestyles

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.
Our goal is to establish competitive advantages centeredon automotive components, for which we have establisheda reputation for our precise metal part machining
technology. In automotive components, we offer productsin the areas of safety, comfort, the environment andcontrols. We supply automotive manufacturers around theworld, primarily with functional components. We are also
working to create added value through the rationalizationand integration of processing systems made possible with
manufacturing facilities we have designed ourselves, as we
aim to expand into areas beyond automotive-related

Motorsproducts.
Our LEDs for lighting are next-generation light sources
designed in pursuit of high performance, point light source
and light quality. Our tactile switches, crystal device
components and motors are vital in smartphones, home
appliances, consumer electronics and medical devices. We
will use these and other proprietary, differentiatedtechnologies to expand our offering of high-quality, highvalue-added products in response to market changes.
We will continue to focus on advancing our technologies
to achieve greater levels of miniaturization, precision
processing and low power consumption. We will work tocreate the next generation of growth businesses by
establishing a top position in specific fields and we will
move to enhance management stability by transitioning toa leaner earnings structure.

Crystal units, crystal oscillators

Automotive components

Compact printer

Key Strategies

Quartz devices
MotorsChip LEDs

19

Thermometers

Healthcare productsElectronics

Promote orders for high-value-added products; expand sales of EV
parts; develop fields other than the auto parts field
Expand the wafer business; commercialize new products, using brittle
materials and precision processing technology
Further develop specific markets and develop next-generation
technologies to maintain a highly profitable business structure

Opto-devices
LEDs for lighting

Photo printer

Key Strategies

Precision components
Automotive components

Our Electronic and Other Products business is based on theminiaturization, precision machining and low power
consumption technologies accumulated throughwatchmaking. The business encompasses the printerbusiness, including photo printers and compact printers, andthe healthcare device business, including blood pressure
monitors and digital thermometers. Building on our corebusinesses of high-quality, high-functionality photo printersand healthcare devices made from the customer’s
perspective, we will work to expand into global niche markets
with the goal of driving stable profits.
Electronic devices are increasingly important in a businessenvironment that demands constant evolution, and in day-today life, where we seek to promote healthy, active lifestyles.
We will continue to pursue new value and convenience while
monitoring people’s health and lifestyle needs.

Expand high-efficiency, long-life, environmentally friendly productsEnter and expand into new business areas

LEDs for lighting

Photo printerGrow the sublimation printer business and expand
market share

Compact printerReinforce the development and sales of productsthat are strong in specific areas

Healthcare products

Expand e-commerce sales and supportinga healthy lifestyle by enabling at-home healthcare
management

Publishing

20

Chapter 02 Our Strategy

Financial Strategies
Medium-Term Management Plan 2024

8.0

7.9

Net sales (Billion yen)
Operating profit margin (%)

278.5

We will accelerate growth investment toachieve high dividends.

320.0

281.4

2.2

206.6

2019

2020

-4.6
(FY)

2024

2021

Targets in the Medium-Term
Management Plan

COVID-19 started to impact
businesses in 4Q of FY2019.

Cash inflow

2030

Aim to raise sales to the pre-COVID level whileat the same time improving profitability.

Cash outflow

Policies on capital expenditure

Operating cash flow
・Creation of operating profit
・Inventory reduction

Investment for
growth andrationalization of
60.0 billion–
70.0 billion yen

■

■

■
■

 ore than 70% of capital expenditure is expenditure in the core businesses
M(Watches and Machine Tools)Watches Business: Investments for increasing the presence of the brand andinvestment for rationalization to increase profitability
Machine Tools Business: Active investment for increasing production capacity
Investment for advancing digital transformation

Dividend policy for FY2022–FY2024■

Managing Director

Optimization ofassets owned

Toshiyuki Furukawa

Total amounts in the three years
from FY2022 to FY2024

FY2021 financial results and FY2022 forecast
The financial results for the fiscal year ended March 31,
2022, showed a significant year-on-year increase in both
net sales and operating profit. This mainly reflects theconsiderable recovery in Watches and Machine Tools, ourmainstay businesses, from FY2020 when they were greatly
affected by the COVID-19 pandemic. In addition, ordinaryBusiness Results (Operating Profit/ROE)
Operating profit (Billion yen)

Return on equity (ROE) (%)

22.4

22.2

22.5

10.2
5.2

6.1
-9.5
-7.0
-11.8

(FY)

21

2018

2019

2020

2021

2022

Forecast

profit increased due to foreign exchange gains andother factors, and tax expenses decreased chiefly due toa decrease in the valuation allowance for deferred tax
assets. As a result, we posted a record-high profit
attributable to owners of parent.
For FY2022, we forecast net sales of 293.5 billion yen, up
12.0 billion yen year on year; operating profit of 22.5
billion yen; ordinary profit of 24.0 billion yen; and profit
attributable to owners of parent of 18.0 billion yen. In
FY2021, we tightly controlled expenses, partly reflecting
the COVID-19 pandemic. In FY2022, however, operating
profit is expected to increase only slightly due to an
expected increase in advertising and other expenses
reflecting the normalization of business activities, as well
as more aggressive investment in growth and rising parts,
logistics and energy costs, among other factors.
In the Watches business, we expect North America toremain strong and we anticipate a recovery in Japan andAsia. However, the forecast indicates that China willremain flat year on year.
In the Machine Tools business, we will steadily respond tothe high level of orders. The Devices and Components
business is also expected to trend toward recovery
overall. In the Electronic and Other Products segment,
printer production is expected to be affected bysemiconductor procurement difficulties.
We expect to secure an increase in profit, with themainstay Watches and Machine Tools businesses
remaining the driving force for this.

Shareholder returns
Enhancement offinancial structure■■

 mphasis on continued payment of stable dividendsEA dividend payout ratio of around 50%
Acquisition of treasury stock: to be determined flexibly depending on the situation

Enhancement of the financial structure■Repayment of interest-bearing debt, etc.

Capital strategy under the Medium-Term
Management Plan 2024

Shareholder returns policy

We position the Watches and Machine Tools businesses
as our core businesses that drive the Group’s growth, andwe will strategically invest our resources in thesebusinesses, aiming to achieve further growth. We will
improve profitability to increase net sales to exceed thelevel before the COVID-19 pandemic by FY2024. From thefunds gathered through these initiatives, we plan toappropriate 60.0 billion–70.0 billion yen for growth andrationalization investments to be made throughout theperiod from FY2022 to FY2024, and we will allocate morethan 70% of this to our core Watches and Machine Tools
businesses.
In the Watches business, we will shift investments to
global brands, thereby enhancing brand presence toestablish a unified brand image in the global market. We
will also make rationalization investments to improve
profitability.
In the Machine Tools business, we will accelerate growthinvestment to increase our production capacity inanticipation of further growth.
In addition, we will utilize a variety of data and develop
user touchpoints, aiming to be a corporate group that isable to create and increase value continuously from theuser’s perspective. We will also continue investments
aimed at furthering digital transformation.

Following our dividend policy in the Medium-Term
Management Plan 2024, we determine the amount ofdividends based on a target dividend payout ratio ofaround 50% and attach importance to stably andcontinually paying high dividends. We will make flexible
decisions on the acquisition of treasury stock to reflect
circumstances.
We plan to pay a full-year dividend of 30 yen per share for
FY2022, comprehensively taking into consideration stabledividend payments and results trends, among otherfactors.
Dividend per share and payout ratio
Dividend per share (yen)Payout ratio (%)

49.7

47.6

30
20
25.2
12

18

5
(FY)

2018

2019

2020

2021

2022

Forecast

22

Chapter 02 Our Strategy

Financial and Non-financial Highlights
2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

(Unit) Million yen

279,786

272,050

309,994

328,456

348,267

312,559

320,047

321,652

278,531206,641

281,417Gross profit

Million yen

98,80995,451

119,376

129,876

134,759

120,236

124,393

123,557

101,100

65,898106,839

Operating profit

Million yen

16,528

11,54923,70627,88930,46721,501

24,92022,411

6,136(9,551)

22,273

5.9

4.2

7.6

8.5

8.7

6.9

7.8

7.0

2.2

(4.6)

7.9

(FY)
Operating Results
Net sales％

Operating profit margin
Ordinary profit

Million yen

16,727

13,80525,307

31,40330,61921,985

26,66426,602

7,531(4,143)27,342

Profit attributable to owners of parent

Million yen

7,698(8,855)

17,434

17,572

13,201

16,573

19,303

13,369(16,667)(25,173)

22,140Cash flows from operating activities

Million yen

19,54518,78932,72429,05329,98032,781

32,53919,897

17,347

7,489

34,693

Cash flows from investing activities

Million yen(15,135)(23,853)(11,000)(9,246)(24,637)(27,861)(7,862)(19,861)(15,498)(7,627)(9,550)Cash flows from financing activities

Million yen(3,198)95

181(9,745)(12,205)(20,626)(11,716)(5,888)(7,049)18,336(19,956)

Free cash flow

Million yen

4,410(5,064)

21,72419,807

5,343

4,920

24,677

36

1,849

(138)

25,142

Total assets

Million yen

338,025354,670

383,920

421,563

406,462

395,887

409,909

413,911369,575

365,811

394,962

Net assets

Million yen

188,853

192,409

217,412

247,972

237,469

249,215

263,713

267,547

230,791

212,864

238,673

Interest-bearing liabilities

Million yen

73,22273,961

78,34869,16467,44453,031

49,02751,06555,15774,862

66,155

Status of Cash Flows

Financial
Data

Key Financial Indicators

Return on equity (ROE)

％

4.2

(4.7)

8.7

7.8

5.7

7.1

7.8

5.2

(7.0)

(11.8)

10.2

Return on assets (ROA)

％

2.3

(2.6)

4.7

4.4

3.2

4.1

4.8

3.2

(4.3)

(6.8)

5.8

Equity ratio

％

55.5

53.3

55.8

56.6

56.0

60.5

61.9

62.2

60.0

55.8

58.1

Capital expenditures

Million yen

17,265

19,78014,003

18,913

22,822

23,621

16,85423,75621,14010,907

10,770Depreciation

Million yen

14,24915,406

14,282

14,386

14,934

12,50913,795

13,947

15,438

11,558

11,191R&D expenses

Million yen

8,012

7,595

7,440

8,169

7,500

7,113

7,161

6,339

6,164

5,576

5,542

Total amount of dividends

Million yen

2,592

2,591

4,211

5,183

5,411

5,410

7,002

6,365

3,752

1,565

5,504

23,72522,66822,23323,651

21,665

21,27920,882

20,23919,593

17,044

16,161

Number of employees(Unit) People
％

−

−

−

−

18.6

19.4

19.4

23.8

20.6

20.3

20.5

Number of female employees in management positions

People

−

−

−

−

35

35

35

36

36

38

42

Percentage of female employees in management positions

％

−

−

−

−

3.6

3.5

3.6

3.7

3.7

4.4

4.8

Percentage of female employees

Nonfinancial
Data

Percentage of overseas employees％

CO2 emissions (Scope 1 + Scope 2)

t-CO2

Total energy consumption

GJ

62.1

64.5

65.3

60.5

60.0

59.7

58.2

56.7

59.5

59.2

212,170

198,041

217,145

196,152

193,318

186,169

183,932

169,882

138,566

151,9193,474,206

3,438,042

3,227,134

3,504,700

3,242,847

3,314,308

3,298,296

3,296,280

3,099,085

2,645,607

2,862,789

Water intake

1,000 m

3,445

3,086

2,333

2,639

2,751

2,309

2,191

2,232

1,965

1,774

1,890

Recycling rate

％

63.0

66.4

75.9

59.5

64.6

66.6

74.3

78.6

77.3

78.3

73.1

3

Net sales

Operating profit(Millions of yen)

(Millions of yen)

321,652

22,411

278,53163.0
218,586

281,417

206,641

Operating profit margin（％）

22,2737.0

7.9

Net assets

Equity ratio

ROE

ROA

(Millions of yen)

(%)

(%)

(%)

267,547

4.8

10.2

238,673
230,791
212,864
6,136

Percentage of female employees
in managerial positions (%)

5.8

5.2

4.4

3.2

CO2 emissions (t-CO2)

Total energy consumption (TJ)
3,296

183,932
169,882
151,919
138,566

Water intake (1,000 m3)

2,232

3,099
2,645

2,862

1,965
1,774

1,890

2.2
62.2
60.0
58.1

(9,551)(FY) 2018 2019 2020 2021

23

55.8
(4.6)

(FY) 2018 2019 2020 2021

(4.3)
(7.0)

3.7

3.7

(6.8)
(11.8)(FY) 2018 2019 2020 2021

(FY) 2018 2019 2020 2021

(FY) 2018 2019 2020 2021

(FY) 2018 2019 2020 2021

(FY) 2018 2019 2020 2021

(FY) 2018 2019 2020 2021

24

Chapter03

Our Sustainability
Identifying Material Issues

In line with the formulation of our long-term vision, we evaluated the importance of social issues from the perspective of
our company and society, and identified material issues, which are key issues that the CITIZEN Group should prioritize inthe medium to long term.
Process 1

Identifying social issues

Process 3

Identify social issues based on medium- to long-term social
trends; company direction; external ESG evaluations and reviews;
SDGs; macro trends in the environmental, social and economic
fields; GRI standards; and the ISO26000 standard, etc.
Process 2

Evaluating the validity of the material issues proposal

Confirm with external experts and discuss in the Sustainability
Committee, then reconsider the material issues proposal
considering the applicable measures for each business

Evaluating the importance of social issues

Process 4

Major risks and opportunities

Responding toclimate change
and contributing
to a recyclingoriented society

Risks

Specifying material issues

Contributing tohigh-quality life

Evaluate the degree of impact on society and importance to the Company
and create a list of material issues

■

Risks

■

Environment/
PlanetReduction of emissions of hazardous
substances

SDGs that apply

Responses to climate change

Resource conservation

 rowing demand for products andG
services that contribute to energy
and resource conservation andimproved productivity■ Advancement of CASE
 idespread adoption of smart
W
watches■ 
Intensifying competition in thehealthcare market■ 
Regulatory reforms for medical
devices■ 
Leakage of personal information(Including carbon neutrality and EV)

Management of chemical substances
contained in products

Opportunities

■

Risks

■

Respect for human rights

Society/
PeopleImpact on society

Progress in digitalization

Increasing health consciousness

Providingsolutions inindustry

Expanding the sterilization market
Improving the efficiency of foodproduction

 ffice damage from wind and floodOdamage■ 
Increased energy costs■ 
Dependency on specific industries
and customers■ 
Violation of laws and regulations
concerning chemical substances
contained in products■

Opportunities

After repeat checking by the Sustainability Committee, theManagement Committee and Board of Directors meet toformally specify material issues

Evaluate the degree of impact on society and importance to theCompany and create a draft proposal of material issues

Conservation of biodiversity

Materiality

Management of personal information

Pursuing spiritual enrichment

Medical issues due to an aging
population

Widely adopting wearable devicesS hift from functional value tosentimental/emotional value■ S hift from treatment to preventive
medicineL oss of business opportunities
Decline of competitiveness■ Market entry by competitors fromother industries armed with digitaltechnologies■

Securing and cultivating humanresources

Opportunities
Sustainable procurement

Economy/ProfitImproving the efficiency of logistics
management
Implementing anti-corruption
measuresLow probability of occurrence/
small financial impact

Improve job satisfaction

Addressing labor shortages/
Passing on skills

Ensure quality-related compliance

Improving the efficiency of
manufacturing management

Widely adopt next-generation
communications infrastructure

Medium probability of occurrence/
medium financial impact

 actory automation/labor saving/F
automation/digitalization■ 
Advancement of CASE
■ 
Widespread adoption of nextgeneration communications
infrastructure■

Key measures
Business activities

 upply parts to eco-cars (EV, HV); sell LEDs for lighting
SExpand products in which LFV technology and friction
bonding technology are embedded■ 
Reduce CO2 emissions and expand the use ofrenewable energy■■

Business foundation

 ell photovoltaic watches and mechanical watches thatS
can be used for a long time■ 
Reduce water consumption, promote recycling,
manage hazardous chemical substances and reducepackaging materials■

Business activities

 rovide customized watches and services
PProvide an IoT platform for personalized experience■ 
Provide LCD devices for digital cameras, headmounted displays, etc.
■ 
Promote sales of UVC modules with high disinfection
efficiency and sample holding plates for bacterial
analysis■ 
Provide thermometers and blood pressure monitorsthat everyone can use■ Provide Health Appointment, a digital healthcare
service■■Business activities se and provide machines and digital technology, andUtechniques for the effective use of them■ 
Provide solution-oriented production facilities andself-service terminal solutions■ 
Provide time reference information to organizations
that need accurate time information■ 
Develop and sell sensing devices (including remotecontrolled robots)■ 
Develop and sell lasers for signal lamps of electricvehicles■ 
Supply parts for advanced brake systems,
communications systems and sensors■

Advancement of CASE

High probability of occurrence/large financial impact

Importance to the CITIZEN Group (businesses)

■ 
Risks
Outflux of human resources
Increasing job■ Worsening business performancesatisfaction andcultivating humanresources
Opportunities ■ Improvement of employee■

engagement
Promotion of DX/innovations

Business foundation

 ake steps to improve employee engagement; provideTeducation opportunities■ 
Focus on developing management talent who will
promote transformation and strengthen cooperation
among Group companies■ 
Systematically foster female candidates for managerial
positions and promote women to management;
encourage male employees to take childcare leave■

Identified material issues
Responding to climate change
and contributing to a recyclingoriented society

Contributing to ahigh quality of life

Increasing job satisfaction andcultivating human resources

25

Providing solutionsin industry

Fulfilling social
responsibility

Fulfilling social
responsibilityRisks

 amage to corporate valueDReputation■ 
Weakening of business/management base■■Opportunities■■ reation of sustainable factories
CConforming with the terms andconditions for transactions withmajor customers

Business foundation

 pdate significant risks at the Group and implementUrisk management■ 
Make employees aware of the Quality Code of
Conduct■ 
Establish human rights due diligence procedures■ 
CSR procurement, green procurement, responsible
procurement of minerals, etc.
■26

Chapter 03 Our Sustainability

Sustainable Management

https://www.citizen.co.jp/global/csr/index.html

At the CITIZEN Group, we aim to remain needed and loved by people all over the world. For this purpose, our creation of
products and services in response to changes in society, our consideration of procurement and production processes forthe creation of those products and services, and the corporate attitude that supports our foundation must be accepted bysociety. Instead of just providing good products and services, we strive to earn the trust of stakeholders as we expand ourbusinesses and improve our corporate value, by managing the Group in consideration of human rights, the global
environment and other social issues. This is what we believe to be sustainable management at the CITIZEN Group.

Environment
Value we create for stakeholders

Related material issues

Business activities that reduce
the environmental impact

Responding to climate change andcontributing to a recycling-oriented society■Structure for Promoting Sustainable Management
In April 2020, we established the Sustainability Committee, which is chaired by the president of Citizen Watch. Its
members are full-time directors of Citizen Watch and presidents of operating companies. With this committee playing aleading role, each company examines sustainability-related issues and regularly monitors the progress of sustainability
activities, etc.
Sustainability promotion structure
Board of Directors

CITIZEN Group Environmental Goals 2030

We also aim to acquire SBT certification by FY2024.

management for the realization of a sustainable civil society by

We will continue to increase the use of renewable energy in ourfollowing the CITIZEN Group Environmental Policy, which is thefacilities all over the world and push forward initiatives to reduce thecore of our environmental measures. In 2020, we established theCO2 emissions of the entire supply chain, with the goal of enabling

CITIZEN Group Environmental Vision 2050, expressing our

the realization of a decarbonized society.

to substantially zero and the sustainable use of resources. To
Sustainability Committee

Group Quality Compliance Committee
Group Information GovernanceCommittee
Group Legal Compliance Committee

Group Human Resources Committee

achieve the CITIZEN Group Environmental Goals 2030, which are
Sustainability Committee Administrative Office

Corporate Planning Department, Environment Division and
CSR Division of Citizen Watch Co., Ltd.

Group Environment Committee
Group Sustainable Procurement
Committee

Sustainable Factory
At the CITIZEN Group, we value the concept of the
Sustainable Factory, under which we consider theprocesses for manufacturing products and providing
services in the operation of our businesses. Sustainable
Factory refers to sustainable production facilities,business facilities and business processes that reflectcomprehensive consideration for matters such ascompliance, human rights, labor practices, BCP* andproductivity improvement, as well as environmental
considerations. The target of the CITIZEN Group overall
is to achieve the Sustainable Factory concept by 2030.
To achieve the sustainability of factories throughout thevalue chain as well as the factories within the Group, wemust cooperate with the entire supply chain, including
our business partners. Therefore, we are pushing forwardwith activities to enable our stakeholders to understandthis concept.
*BCP (Business Continuity Plan): A business continuity plan is formulated during
normal times to prepare for the possible impact of large disasters and similar eventson business activities. These plans include systems, functions, response procedures
and other elements necessary for continuing to supply products and services or forenabling the fast resumption of operations.

27

MachineTools

Devices andComponents

Electronic
and Other
Products

Organizational structures for promoting sustainability ateach operating company

Value that we create for stakeholders throughsustainable management (outcomes)
Reducing the environmental
impact in our business activities
Giving customers
excitement and highsatisfaction
Solving customers’
problems and contributing
to their business success

Environment

Customers

Improving each otherthrough businessactivities and achieving
sustainable growth

forward with initiatives to establish a decarbonized, resource-serious global environmental risks, we are working to reduce the GHG

recycling, safe, secure and spiritually wealthy society.

emissions of the CITIZEN Group as a whole. To express ourcommitment to mitigating climate change, we participate in the Japan

EmotionShareholders
Providing growth
opportunities
Realizing job satisfactionand employee
friendliness
Improve shareholder value

Solve social issues
Create jobs andincreasedevelopment incommunities

recommendations of the Task Force on Climate-related Financial

The CITIZEN Group revised its Scope 1 and 2 CO2 emission

Disclosures (TCFD). Based on the TCFD recommendations, we are

reduction target in FY2022 to push forward with initiatives

assessing and identifying risks and opportunities that could

addressing climate change, which we regard as a material issue. As

significantly impact the Group’s businesses and finances using thea result, we now aim to reduce emissions by 50.4% from the FY2018

1.5°C scenario and the 4°C scenario. In addition, we have set targets

CITIZEN Group Environmental Goals 2030 (Revised in February 2022)
Targets

Metrics
Greenhouse gas emissions(Scope 1, Scope 2)5
 0.4% reduction
30% reduction →Greenhouse gas emissions(Scope 3)

15% reduction (from the FY2018 level)

Percentage of renewableenergy (Japan)

30%→62%(from the FY2018 level)

for reducing Scope 1, 2 and 3 GHG emissions and increasing thepercentage of renewable energy that we use in Japan in the CITIZEN
Group Environmental Vision 2050 and the CITIZEN Group
Environmental Goals 2030 for the purpose of assessing and managing
the risks and opportunities related to climate change. We will continue
working to disclose more climate change–related information inaccordance with the TCFD recommendations while pushing forward
initiatives to achieve the targets.

Results of scenario analysis
Category

Transition
risks

Local
Communities

Climate Initiative, and in FY2020, we announced our support for the

Response to climate change

Physical
risks

Large

Small

Cost increase resulting from the introduction or tightening of laws or regulations (carbon pricing
schemes)

Technologies and markets

Small

Large

Rising cost of raw materials, etc., and shortage or suspension of their supply

Reputation

MediumSmall

Decline in evaluation and reputation resulting from a delay in actions to address climate change,
and the resulting decline in our stock price and sales

Acute risks

Small

Large

MediumSmall

Cost reduction resulting from energy conservation

Chronic risks

Products, services and markets
Resilience

Time span

Impact on CITIZEN

4℃

Energy and resource
efficiency

Opportunities

Material issues(risk/opportunity)

1.5℃
Policies and legal restrictions

Security
Employees

As a measure to mitigate climate change, which is one of the most

Suppliers

Reliability

TCFD—Risks and opportunities

five goals aimed at helping to achieve the SDGs, we are pushing

Administrative Office Committee

Corporate Planning Department, Environment Division and
CSR Division of Group companies

Watch

Group Business Continuity Management
Committee

reduction target, which applies to emissions from the supply chain.

At the CITIZEN Group, we promote global environmental

commitment to decarbonization, the reduction of CO2 emissions

Management Committee
CITIZEN-SIRT

level by FY2030. We are also revising our Scope 3 emission

Until 2024

From 2031

●

●

●

●

●

●

Increasing seriousness and frequency of damage from natural disasters

●

●

Large

Increase in operating expenses due to the impact of, and measures against, abnormal weather

●

●

Large

Disruptions to production activities due to supply chain disruptions

●

●

●

●

Large

Small

MediumMediumMediumSmall

MediumSmall

MediumMediumMediumLarge

Cost reduction resulting from resource conservation, 3R activities, zero waste emissions andconservation of water resources
Differentiation and greater competitiveness achieved by developing products using alternative materials
Realizing decarbonization of the entire life cycle of products using alternative substances and weight reduction
Increase in earnings resulting from an increase in demand for environmentally friendly products
and services
Higher customer trust resulting from implementation of countermeasures against natural
disasters
Minimization of physical risks and damages enabled by taking measures in a well-planned
manner●2025–2030

●

●

●

●

●

●

●

●

●

●

●

●

●

●

28

Chapter 03 Our Sustainability

Employees
Value we create for stakeholders■

Providing growth opportunities■

Realizing job satisfaction and employee friendliness

Customers
Related material issues

Increasing job satisfaction and cultivating
human resourcesWork-style reform andhuman resource development

Health and productivity management

At the CITIZEN Group, we believe that securing and developing

The CITIZEN Group published its Health Declaration as part of its

excellent human resources leads to reinforcement of ourefforts to create a comfortable workplace environment. We promotebusiness foundation. Each Group company takes the initiative in

health and productivity management, and as part of this we consider

driving the creation of a comfortable workplace environment

and practice employee health management from a management

where diverse human resources can fulfill their potential. For

perspective. The percentage of our employees who have healthhuman resource development, the 360-degree evaluation, whichcheckups is 100%, and 94.3% of them undergo stress checks. In

Citizen Watch has been conducting since FY2019, is used toaddition, many employees are involved in voluntary health measuresenhance human resource management and training content.

such as cancer screenings. We also implement mental health

We also support diverse work styles. For example, in FY2021 wemeasures. Our health and productivity management received a highintroduced the Full-Remote System, under which employees canevaluation from an external organization, and Citizen Watch waswork fully from home, in principle.

recognized by the 2022 Certified Health & Productivity Management
Outstanding Organizations Recognition Program.

Diversity and inclusion
Management has a duty to create an environment where the

Occupational safety and healthpersonal qualities of every employee are respected and diversity is

The CITIZEN Group attaches importance to safety and health in therecognized and leveraged. The CITIZEN Group is introducing

workplace environment, as stipulated in Article 4 of the CITIZEN

working arrangements focused on the enhancement of career

Group Code of Conduct, which says, “Respect human rights andtraining and a work-life balance, aiming to establish an employment

diversity, and provide a safe and pleasant working environment.” In

environment that enables women to continue to participate

June 2022, we revised the CITIZEN Group Basic Policy on Health andactively. We have set a target of increasing the percentage of

Safety, which we formulated to ensure that employees are fully

managers who are women to 10% or higher by FY2025. We are also

informed of safety and health-related laws and regulations and toproactively hiring people with disabilities. For more than 40 years,

ensure compliance. Through this revision, we expanded the scope of

we have been outsourcing tasks such as the counting of wristwatch

the application of the safety policy from the Group’s employees toparts and other components, packaging and watch disassembly toinclude our suppliers, including our business partners, with the goal of

support the employment of people with disabilities.

improving safety and health throughout the supply chain.

Value we create for stakeholders■

Related material issues

Giving customers excitement and high satisfaction

Contributing to high-quality life

Solving customers’ problems and contributing totheir business success

Providing solutions to industry■

Quality compliance

Customer engagement

At the CITIZEN Group, we make Group-wide efforts to strengthen

Citizen Watch compiles inquiries and requests received by its

quality compliance, aiming for the sustainable provision of products

customer service office in the VOC Report to share with the relevant

and services reflecting full consideration of reliability, safety, quality

departments. The aim is to drive initiatives leveraging customers’

and the environment.

voices to improve customer satisfaction further. In addition, we
implemented New TiMe, New Me, a social campaign. We use

Framework for promoting quality complianceTo effectively share an understanding of quality compliance, we arehttps://www.citizen.co.jp/global/csr/policy

valuable customer opinions obtained through this campaign toimprove our products and services, ensure safety and encourage
universal design.

taking steps to raise awareness of the CITIZEN Group Quality Code of
Conduct across the Group, including our overseas branches. The
leading role in these activities is being played by the CITIZEN Group

Ensuring quality compliance

Quality Compliance Committee, which consists of officers responsible

At the CITIZEN Group, we are pursuing initiatives to ensure quality

for quality from Group companies. In addition to striving to instill

compliance by setting KPIs for achieving our goals by FY2030. In

quality compliance, this Committee endeavors to fulfill requests fromFY2021, we achieved the target of implementing activities to raise

stakeholders from a range of business fields, while also seeking toawareness of the CITIZEN Group Quality Code of Conduct twice. In

improve the effectiveness of the whistleblowing system and the

addition, the percentage of employees who received e-learning wasperspectives of ESG and the SDGs.

98.8% and that of employees who are aware of the Compliance
Hotline increased to 82.0%. Moreover, the CITIZEN Group Quality
Compliance Committee had opportunities to share information about

Quality compliance framework

quality issues and discuss the determination of causes of the issues

Management Committee

and measures to prevent them four times during the year as part of its
efforts to strengthen and improve quality compliance.

Sustainability Committee

Group Quality Compliance Committee
See the following webpage for the CITIZEN Group
Basic Policy on Health and Safety.

Fulfilling our social responsibility

Officers responsible for quality from Group companies

Watch

MachineTools

Devices andComponents

Electronic
and Other
Products

Quality assurance departments of each businessTraining provided in FY2021
Training program

Compliance training
Details■ I mproving understanding of the CITIZEN Group

Quality Code of Conduct■R aising awareness of the Compliance Hotline

Roles and achievements■ Formulation of the CITIZEN Group Quality Code of Conduct,

CITIZEN Forest was created under the concept of being able to work bothindoors and outdoors. At Tokyo Works, we planted 215 trees and created aspace that is richly endowed with nature, attracting local birds and insects. This
space won a 2021 Good Design Award.

29

implementation of measures to raise awareness of it and provision of
relevant training■ Quality compliance training■ Integration of the CITIZEN Group Quality Code of Conduct with ISO
and QMS

Number of participants (targets)e-learning: 6,250
Individual training: 53

The Group’s new officers: 14
The Group’s new employees: 39

Total: 6,303

30

Chapter 03 Our Sustainability

Business Partners

Local Communities

Value we create for stakeholders

Related material issues

Improving each other through business activities andachieving sustainable growth

Fulfilling social responsibility■Value we create for stakeholders

Related material issues■ Solutions to social issues

Fulfilling social responsibility■ Job creation and development in communities

CSR procurement

Human rights initiatives

At the CITIZEN Group, we aim to achieve the Sustainable Factory in

Human rights risks within the CITIZEN Group are overseen by thethe overall supply chain. For this purpose, we have established theGroup Human Resources Committee. On the other hand, those

CITIZEN Group Basic Procurement Policy and request our businessrisks expected in the supply chain are identified and addressed bypartners all over the world to comply with, and raise their awarenessthe CITIZEN Group Sustainable Procurement Committee. Inof, the CITIZEN Group CSR Procurement Guidelines. These

FY2021, we identified human rights risks in the supply chain by

Guidelines summarize the requirements, including respect fortargeting primary suppliers (manufacturing factories) andhuman rights, environmental protection, labor safety and health,secondary suppliers (raw material suppliers) in the Watches

and fair trade, based on the UN Global Compact and the CITIZEN

business. Specifically, we identified the risks by referring to theGroup Code of Conduct. At the CITIZEN Group, we conduct amethod of identifying human rights risks that we acquired throughSelf-Assessment Questionnaire (SAQ) survey of all our businessan expert study session held by the CITIZEN Group Sustainable

partners in Japan and a fact-finding survey of our business partners

Procurement Committee and materials used in the Stakeholderthat we have created on our own, as part of measures to identify

Engagement Program of Caux Round Table, among others. We

CSR procurement risks. Moreover, for important suppliers, which

also collected information by interviewing people who have lived

are ranked in the top 90% in terms of the volume of procurement

overseas. As a result, we discovered potential risks about conflicttransactions or that deal in important items, we hold explanatory

minerals and the work environment of raw material suppliers. We

sessions and take other measures in addition to conducting SAQ

will consider how to minimize the risks.

surveys, thus requesting that they comply with the CITIZEN GroupRegarding children’s rights, we support the Children’s Rights and

CSR Procurement Guidelines. We aim to achieve compliance with

Business Principles (CRBP) of the Japan Committee for UNICEF

the CITIZEN Group CSR Procurement Guidelines of 100% at theand engage in activities to avoid infringement of children’s rights

CITIZEN Group and 70% among important suppliers by 2030.

in business and to realize children’s rights. Since FY2013, we have

Honoring individuals who inspire society
At the CITIZEN Group, we commend citizens residing in Japan who have made a mark on civil society, who have contributed to thedevelopment and happiness of civil society, or who have helped make civil society attractive, as CITIZEN OF THE YEAR every year. This award
program was established by Citizen Watch in 1990. Although we live in an era when citizens are considered the main players in society, there
was virtually no award program for commending citizens from a broad perspective. Recognizing this, the Company, which
includes “CITIZEN ” in its name, established the program. Here we introduce the initiatives and activities of the threeoutstanding individuals to whom we granted the award in FY2021.

https://www.citizen.co.jp/global/coy/index.html
Computer programming classes forhigh school students from
economically disadvantaged families

Support for researchfor curing Rett syndrome

Contributing to rehabilitating
juveniles with education of themind through painting

Daiki Hirai

Tetsuji Tanioka

Kazuyuki Iida

Mr. Hirai provides high school students
from disadvantaged backgrounds with avariety of support, including free computer
programming study support and career
support. He aims to build a society whereanyone can have hopes in their future,
regardless of the environment where they
were born and raised.

Mr. Tanioka founded an NPO immediately after
his daughter was found to have Rett syndrome,an intractable disease designated by thegovernment. He has been supporting
exchanges between patients and their families,
serving as a bridge between patients andresearchers, and providing grants to research
aimed at establishing a treatment method ordeveloping a therapeutic drug. He has also
developed an app with which patients and theirfamilies can share information about the disease.
The information is provided to researchers andused for the development of a therapeutic drug.

Mr. Iida, an artist, has been teaching painting
at Obihiro Juvenile Training School for morethan 30 years as a volunteer who helps
juveniles rehabilitate and return to society. He
observes each inmate in the classroom, where
talking is prohibited, aiming to have themcomplete each piece of work with patience.
Thus, he has been teaching inmates how
important it is to find something one can beabsorbed in and carry it through without giving
up on it.

A teacher (left) and a student (right): Free PCs andtravel expenses are provided to high school
students who attend computer programmingclasses.

Mr. Tanioka (far left): Reflecting the desire of people
on the patients’ side to support research, hecollected donations and used the funds to provide
grants to research aimed at establishing a treatment
method or developing a therapeutic drug.

Mr. Iida (second from right): Feeling that juveniles
have something in common with him, he has been
engaging in this activity for more than 30 years

been supporting the activities of Plan International, an

Initiatives related to minerals

international NGO. In FY2021, we participated in a project toimprove the environment of female student dormitories ofAt the CITIZEN Group, we are aware that conflict minerals involving

elementary and junior high schools in Vietnam. In addition torisks of funding armed groups and violating human rights are material

assisting with the dormitories, we contributed to education andprocurement risks. In addition to the application of the EU Conflicttraining activities.

Minerals Regulation in 2021, we recognized the expansion of thescope of target minerals, areas and risks and updated the CITIZEN
Group Conflict Minerals Response Policy into the CITIZEN Group
Responsible Minerals Procurement Policy in January 2021. In revising
the policy, we referred to international guidelines and other resources
and clarified measures to take when we have confirmed the expansionof target minerals and areas as procurement sources or have identified
a risk, among other matters. Moreover, we strive to eliminate conflictminerals as a supplier. For example, together with suppliers fromwhom we procure target minerals, we at the CITIZEN Group observe
the Responsible Business Alliance (RBA) Code of Conduct at therequest of customers to whom we deliver parts or other products. The
overall Group’s measures related to procurement of conflict minerals
are taken under the initiative of the CITIZEN Group Sustainable
Procurement Committee.

31

A remote supplier audit

32

Chapter04

Our GovernanceCorporate Governance

Loved by citizens, working for citizens—This is the sentiment from which 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 throughsustainable 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 ensure transparency in management and multifaceted management oversight. Accordingly,
the Company is striving to expand and enhance its corporate governance.
CITIZEN has implemented all the principles set forth in the Corporate Governance
Code revised in June 2021.

Officer Compensation
Compensation for Directors of the Company (excluding Outside Directors) consists of fixed compensation and performance-linked
compensation. Our policy for setting the payout ratio of these two types of compensation is based on a level that will increase
motivation to produce good business performance and enable the Company to attract and retain talent and that will be effective inincreasing motivation to contribute to improving business performance and enhancing corporate value in the medium to long term,
considering factors such as changes in the business environment, external data, general compensation levels and the businesssituation. Compensation of Outside Directors and Audit & Supervisory Board Members consists only of fixed compensation.
Composition of compensation for Directors

https://www.citizen.co.jp/cms/cwc/global/files/CGR2022E.pdf

46%

Fixed compensation

Corporate Governance System

Compensation Committee Chairperson: Outside Director▼

FY2022 Number of meetings: 17

Nomination Committee Chairperson: Outside Director▼

The main duties of the Nomination Committee include deliberatingon matters regarding the selection and/or dismissal ofRepresentative Directors, the President and CEO, and/or the
Chairperson of the Board of Directors, and offering its proposals to
the Board of Directors.

The main duties of the Compensation Committee include
deliberating on matters relating to policies and standards forcompensation, etc., received by Directors and making
recommendations to the Board of Directors.
▼

CITIZEN’s Board of Directors comprises six Directors who supervise
the corporate group and perform executive duties regarding major
businesses and three Outside Directors who check and supervise
management from an independent standpoint, using theirabundant experience and broad-ranging insights as business
managers. The Board of Directors makes decisions on andsupervises the execution of business.

FY2022 Number of meetings: 3

Audit & Supervisory Board Members carry out strict audits ofexecution of duties by Directors in accordance with the audit policy
and audit plans formulated by the Audit & Supervisory Board.
Audit & Supervisory Board Members also receive reports fromAccounting Auditors and conduct audits of the Company and its
subsidiaries efficiently in cooperation with the Accounting Auditors.
FY2022 Number of meetings: 13

FY2022 Number of meetings: 3

Corporate governance system schematic diagram<Legend>General Meeting of Shareholders
Selection/
Dismissal

Selection/
Dismissal
Inside Directors
Full-time Audit & Supervisory
Board Members

Nomination Committee
4 (including 3 Outside Directors)
Proposal/Reporting

Audit & Supervisory
Board(1) One-third of the Directors are independent
Outside Directors(2) An Outside Director is appointed as thechairperson of the Nomination andCompensation committees(3) Two-thirds of the Audit & Supervisory Board
Members are independent Outside Audit &Supervisory Board Members

33

Auditing

3 (including two Outside Audit &Supervisory Board Members (one female))

Cooperation

Selection/
Dismissal

Compensation
Committee

4 (including 3 Outside Directors)
Proposal/ReportingBoard of Directors

9 (including three Outside Audit &Supervisory Board Members (one female))

ReportingInternal Audit
Department

Fixed
compensation

The Company sets the amount of fixedcompensation at a level that will motivate
Directors to fully demonstrate their
qualities and abilities and to strive forsustainable growth based on the
Company’s corporate philosophy andthat will enable it to attract and retain
talent, while considering changes in thebusiness environment, external data,
general compensation levels and thebusiness situation.

Appointment/
Removal/Supervision

Accounting
Audit

Reporting

Independent
Auditors

Internal Audit
Divisions and Operating Companies

Performancelinked
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 (3)

263 (28)

153 (28)82 (ー)

26 (ー)

Audit & Supervisory Board Members [ofwhom, Outside Audit & Supervisory
Board Members]

3 (2)

43 (24)43 (24)

ー (ー)

ー (ー)

Total
[of whom, Outside Officers]

13 (5)

306 (53)

196 (53)

82 (ー)

26 (ー)

Notes: 1. The above includes Directors who retired as of the closing of the 136th Ordinary General Meeting of Shareholders held on June 25, 2021.
2. Bonuses of 82 million yen for Directors (excluding Outside Directors) is the amount paid after the conclusion of the 137th Ordinary General Meeting of Shareholders held on June 28, 2022.
3. The performance-linked share-based compensation of 26 million yen for Directors (excluding Outside Directors and non-residents in Japan) is the amount posted as expenses for FY2021. Of the performancelinked share-based compensation for the three fiscal years corresponding to the Medium-Term Management Plan with FY2021 as the final business year, the total amount of stock benefit obligations calculated
based on the number of shares expected to be delivered to the six Directors (excluding Outside Directors and non-residents in Japan) corresponding to the 135th and 136th fiscal years was 47 million yen. This
amount was posted as expenses for FY2021.
4. Performance indicators relating to bonuses are consolidated net sales and operating profit related to the single-year plan and consolidated net sales, consolidated operating profit and ROE related to theMedium-Term Management Plan, for the purpose of increasing motivation to contribute to improving performance for a single fiscal year and in the medium to long term and increasing corporate value. In
FY2021, the Company recorded consolidated net sales of 281,417 million yen, consolidated operating profit of 22,273 million yen and an ROE of 10.2%. Bonuses are calculated by multiplying the monthly basic
compensation for each post by a coefficient calculated considering the degree of achievement of performance indicators and non-financial items.
5. Performance-linked share-based compensation is in the form of shares of the Company, and the conditions, etc., for allotment are as stated in “(1) Policies, etc., on determination of officer compensation, etc.” ofthe Notice of the 136th Ordinary General Meeting of Shareholders. Furthermore, the status of granting shares during FY2021 is stated in “II 1. (5) Status of shares delivered to officers of the Company ascompensation for the performance of the duties during the fiscal year under review.” Performance indicators for performance-linked share-based compensation are consolidated net sales, consolidated
operating profit and ROE as outlined in the Medium-Term Management Plan to clarify the link between Directors’ compensation and the Company’s share value, and to increase motivation toward contributing
to the improvement of medium- to long-term performance as well as to the enhancement of corporate value. In FY2021, the Company recorded consolidated net sales of 281,417 million yen, consolidated
operating profit of 22,273 million yen and an ROE of 10.2%. Performance-linked share-based compensation is calculated according to the level of achievement of performance indicators, etc.
6. The 133rd Ordinary General Meeting of Shareholders held on June 27, 2018, passed a resolution to make the total amount of compensation, etc., for Directors (excluding Outside Directors) 370 million yen orless per year, to which eight Directors (excluding Outside Directors) were eligible as of the conclusion of said General Meeting of Shareholders. The Company has decided not to pay employee salaries to
Directors who are also the Company’s employees.
7. Apart from No. 6 above, the 133rd Ordinary General Meeting of Shareholders held on June 27, 2018, passed a resolution to make the total amount of performance-linked share-based compensation for Directors(excluding Outside Directors and non-residents in Japan) 300 million yen or less for three fiscal years (100 million yen or less for one fiscal year when such compensation was established initially in 2018), to whicheight Directors were eligible as of the conclusion of said General Meeting of Shareholders.
8. The 134th Ordinary General Meeting of Shareholders held on June 26, 2019, passed a resolution to make the total amount of compensation, etc., for Outside Directors 40 million yen or less per year, to which
three Outside Directors were eligible as of the conclusion of said General Meeting of Shareholders. The Company has decided not to pay bonuses to Outside Directors.
9. The 122nd Ordinary General Meeting of Shareholders held on June 26, 2007, passed a resolution to make the total amount of compensation, etc., for Audit & Supervisory Board Members 80 million yen or less per year, towhich four Audit & Supervisory Board Members were eligible as of the conclusion of said General Meeting of Shareholders. The Company has decided not to pay bonuses to Audit & Supervisory Board Members.
10. To increase the transparency of compensation for Directors, the Board of Directors has delegated the determination of the content of individual compensation, etc., for Directors for FY2021 to theCompensation Committee chaired by Outside Director Fumiaki Terasaka and with Outside Directors Toshiko Kuboki and Yoshio Osawa, and President and CEO Toshihiko Sato as members. Given that thedetermination of such content has been delegated to the Compensation Committee by resolution of the Board of Directors and that the content of the compensation, etc., is in line with the policy on thedetermination of the content of individual compensation, etc., for Directors resolved by the Board of Directors, the Compensation Committee has deemed that individual compensation, etc., for Directors for
FY2021 conforms with said policy.

Evaluation of Effectiveness
CITIZEN aims to continuously improve its governance system and function effectively through analysis and evaluation of theeffectiveness of its Board of Directors.

Management
Committee

Representative Director
Direction/Supervision(1) Bonuses
The Company determines bonus amounts based on the financial evaluation
criteria (e.g., net sales, operating profit) and non-financial evaluation criteria(e.g., global situation, disasters, M&A) stipulated in the Directors’ bonus
payment standards.
(2) Performance-linked share-based compensation
Shares of the Company are acquired through a trust funded by amounts of
Directors’ compensation contributed by the Company according to position,and shares of the Company or cash in the amount equivalent to theconversion value of the shares are delivered or paid (“delivered, etc.”)
according to the level of achievement of business targets.

Total Officer Compensation

Audit & Supervisory Board▼

Board of Directors

Key Points of the Corporate
Governance System

54 %Note: In the case of the maximum amount of performance-linked compensation

CITIZEN has established the following corporate governance system with the aim of ensuring appropriate and efficient execution ofduties, transparency of management and monitoring of management from various perspectives.

Outside Directors
Outside Audit & Supervisory
Board Members

Performance-linked compensation

Cooperation

1

Initiatives for FY2021
Based on Last Year’s Issues

The Company changed themethod of distributing
preliminary information materials
from paper to electronic data to
improve convenience.
●Meetings of the Board of
Directors were held in various
formats using Web conferences.
●

2

3

Evaluation of
Effectiveness

Surveys Conducted
From February to March 2022,
the Company conducted aquestionnaire (an effectivenessevaluation tool provided by an
external organization) of all
Directors and Audit & Supervisory
Board Members.

●

Directors and Audit & Supervisory
Board Members generally gavehigh grades, and it was confirmedthat the Board of Directors
functioned effectively.

●

4
Challenges for FY2022
Ensure effectiveness by repeating
the PDCA cycle, which identifies
issues every year, and work to solve
those issues and identify newissues.

34

Chapter 04 Our Governance

Message from an Outside Director
Skills Matrix
The Company has specified the knowledge, experience and skills needed to fulfill the roles and duties of the Board of Directors
effectively for achieving business strategies and discloses the skills matrix as an indicator of the overall balance of knowledge,
experience and skills, and diversity of its Board of Directors as a whole.
The expected roles that each Director will take on are as follows.
Corporate
Management/
Management
Strategy
President and CEO

Toshihiko SatoManaging Director

Toshiyuki Furukawa
Managing Director

Yoshitaka Oji
Director

Keiichi Nakajima
Director

Shinji Shirai
Director

Yoshiaki Miyamoto

Sales/Marketing/DX

R&D/
Technology

Global Business

●
●
●

●

●

●

●
●

●

●

●

●

●

●
●

Outside Director

Katsuhiko Yoshida

●
●

ESG/
Sustainability●●

Toshiko Kuboki

Yoshio Osawa

Finance/
Accounting●

Outside Director

Outside Director

HR Development/
Diversity

●

●

●

●

●

●

●
Note: Up to three items are listed as the role expectations for each Director.

Advanced Precision Processing Technologies Developed
through Watchmaking Will Drive the Growth of the
CITIZEN GroupQ appointed as an Outside Director. What is

Q a medium- to long-term perspective andWhen many people hear the name Citizen Watch, they probably have theWe, the Outside Directors, and Audit & Supervisory Members regularly

impression that it is a Japanese company that has been engaged in the

check our internal controls (once every two months). CITIZEN has amanufacture of precision watches filled with craftsmanship for more thancorporate culture that respects manufacturing, and its quality control–a hundred years. Before I became an Outside Director, I also had such an

related governance as a manufacturer is impeccable. On the other hand,

image. In reality, however, it is a global company that generates nearly

while there are no internal control problems at this time, to further

70% of its sales overseas and boasts the top share of mid-range watches,

strengthen our checking function, it will also be necessary to further revitalize

especially in the United States. The Machine Tools business—which ishuman resources and the organization through the introduction of strategic

derived from the advanced precision processing technologies developed

personnel rotation beyond the boundaries of business divisions. From thethrough watchmaking—has grown as a core business along with theperspective of group governance, further digital transformation and theWatches business, and there are many precision manufactured products

use of IT will also be key issues to enhance the management system ofthat cannot be produced without CITIZEN’s technologies. CITIZEN’s

the CITIZEN Group, which has approximately 90 member companies.

factories are visited by some of the world’s most famous companies, inIn the Watches business, even with the exclusion of the impact of theindustries completely different from the watch industry. As the world

COVID-19 pandemic, there is a need for changes that adapt to the businessaccelerates its drive toward carbon neutrality, CITIZEN has beenenvironment due to the abandonment of watches among young people

developing, commercializing and selling solar-powered analog watches

and the emergence of smart watches. However, we recognize that we havethat can generate electricity using solar power and other artificial light for

high-value-added technological capabilities as one of the world’s leading

more than 40 years, showing that CITIZEN is a company that has been

manufacturers that can make watches through integrated production fromworking to tackle environmental issues ahead of the rest of the world.

parts to finished products, and that there is ample potential for growth in the

Because CITIZEN has made a name for itself in the world with its watches,

global market by developing marketing and branding strategies based on

there is a strong impression of the Company being in the watch business,these technologies. The CITIZEN Group’s advanced precision processing

but I feel that the potential of the Machine Tools business; the Devices

technologies are expected to attract more attention not only in the watch

and Components business, which handles many precision parts; and theindustry but also in a wide range of industries such as the automobile industry,

Electronic and Other Products business are not fully recognized aroundthe space industry, and the medical and healthcare industries in the future.

the world.

As an Outside Director, I will work to help the Group achieve sustainable

It has been one year since you wereyour impression of the CITIZEN Group?

Please tell us about the business issues fromwhat you expect from CITIZEN.

growth as a corporate brand that is loved by citizens, working for citizens,

Group Risk Management

Cross-Shareholding

The Group is actively engaged in initiatives that lead to theenhancement of Group governance to centrally manage andrespond promptly to risks throughout the Group. The
Sustainability Committee—established in FY2020—ischaired by the President and CEO of the Company and has
established subcommittees according to major risk themes,
including ESG risks such as human rights and labor
practices, environmental issues, and procurement andsupply chain risks. The committee enables top-level
management to ascertain and respond to material risks. In
addition to financial risks, by placing committees andorganizations for risks directly related to compliance, BCP(Business Continuity Planning), intellectual property,
information and cybersecurity-related management
infrastructure under the direct control of the Management
Committee, we share information on important risks
common to the Group and risks specific to each company
throughout the Group. In addition to sharing risk
management know-how among Group companies, thisenables us to achieve consistent risk management
throughout the Group. The Group will continue to makecontinuous improvements to enhance risk management
throughout the Group.

The Company will hold shares when it is judged,
comprehensively, to contribute to the maintenance andenhancement of the Group’s medium- to long-term business
relationships, the smooth operation of the Company’s business
operations and business development. Regarding verificationof individual cross-shareholdings, the Board of Directors
follows a basic policy of verifying the rationality and necessityof such cross-shareholdings every year considering factors suchas the relationships between business partners and the Groupand the possibility of mutual enhancement of corporate value
and strives to reduce holdings of shares for which thesignificance of continuous retention has been diluted. In
FY2021, we sold shares in two companies after verifying thesignificance of the holdings.

while actively communicating the high growth potential of CITIZEN to theworld.

I recognize my primary role and function, as stipulated in the Companies
Act, is to supervise and check the execution of business management,
and I am always conscious of not losing my perspective with respect tominority shareholders. I also actively advise the Board of Directors andother parts of the Company so that the experience and know-how I havegarnered so far, including management and investment decisions(including M&A), human resource development, risk management andcrisis management, can be utilized in the management of CITIZEN.
Outside Directors are also members of the Nomination andCompensation committees. In particular, the Nomination Committee—of
which I am the chair—formulates succession plans, examines anddevelops candidates for the next generation of leaders, and provides avariety of advice on personnel rotation with a view to increasing diversity

Number of cross-shareholdings

and enhancing human capital, such as increasing the number of female

38

(FY)

35

Q

What are your thoughts on your role as an
Outside Director?

2017

37

2018

managers and developing global human resources.

34

2019

31

2020

29

2021

Outside Director

Yoshio Osawa
36

Chapter 04 Our GovernanceManagement Team

Corporate Information

Directors

Company Overview (As of March 31, 2022)

ToshihikoSatoToshiyuki
Furukawa

YoshitakaOji

President and CEO

Managing Director
In charge of Corporate
Planning Division,
Accounting Department,
Public & Investor
Relations Department
and IT Management
Department

Managing Director
Senior General Manager ofWatch Business Division

Toshihiko Sato, with his record of achievements and experience
including running the Devices and Components business andbeing responsible for watch manufacturing, continues to contributeto the advancement of the CITIZEN Group’s businesses. Assumed
current role in 2019.

As General Manager of the Corporate Planning Division, Toshiyuki
Furukawa has a record of achievements in formulating Groupmanagement 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 2022.

After being involved in watch and clock sales at one of theCompany’s overseas subsidiaries, Yoshitaka Oji gained experienceas General Manager of the Corporate Planning Division, promoting
management strategy in the Watch business and productdevelopment of watches. He assumed his current post in 2022.

KeiichiNakajima

ShinjiShirai

YoshiakiMiyamoto

Director

Director
Senior General Manager of
Manufacturing Technology
Center, Watch Business
Division

Director
Group Risk Management,
General Manager of General
Affairs Division and in chargeof Personnel Division,
CSR Department andEnvironmental Management
Department

Keiichi Nakajima has mainly been involved in the Machine Tools
business, driving the Machine Tools business as a whole andpromoting business strategies as President of Citizen MachineryCo., Ltd. He assumed his current post in 2013.

After being involved in watch 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 productdevelopment. He assumed his current post in 2017.

After being involved in the start-up of new plants at Groupoverseas subsidiaries engaged in watch and clock manufacturing,
Yoshiaki Miyamoto managed overseas subsidiaries responsible forwatch and clock sales. He also has experience as Director withresponsibility for Group risk management, general affairs andpersonnel. He assumed his current post in 2018.

Stock Information (As of March 31, 2022)

Corporate name

Citizen Watch Co., Ltd.

Securities code

7762

EstablishedMay 28, 1930

Stock exchange listing

Headquarters

6-1-12, Tanashi-cho, Nishi-Tokyo-shi, Tokyo 188-8511, JapanTokyo Stock Exchange
Prime Market

Representative

Toshihiko Sato, President and CEO

Total number of authorized shares 959,752,000

Capital¥32,648 million

Total number of shares issued

314,353,809

Employees

16,161 (consolidated)

Number of shareholders

46,256

Business
description

Manufacturing and sale of watches and their components, and as a holding company, planningand implementation of Group management strategies, Group business auditing, development ofGroup technologies, intellectual property management and other administrative operations.

(After April 4, 2022)

Principal Places of Business and Group Companies●Watches●Machine Tools●Devices and Components●Electronic and Other Products

31
42

61

62

YoshioOsawa

Katsuhiko
YoshidaIndependent

Independent

Independent

Outside Director

Outside Director

Outside Director

57
58
35

25
20

17

30 51

28

24
27 21 2956 54 37

22 23
Career Summary

Career Summary

Career Summary

1987 Registered as an attorney-at-law
2002 Conciliation commissioner of Tokyo Family Court(present)
2009 Retirement Benefit Examination Committee memberof Board of Audit of Japan (present)2012 Visiting Professor of Graduate School of Law, Chuo
University (present)2013 Municipal Board of Education member of Chuo-ku, Tokyo
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)
2021 Chuo-ku Specially Appointed Civil Servant
Remuneration, etc. Council Member (present)

2003 Corporate Officer and General Manager of Network
Division of Sumitomo Corporation2005 Executive Officer and General Manager of Network
Division of Sumitomo Corporation2007 Executive Officer and General Manager of MediaDivision 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)

2007 Executive Officer of Kao Corporation2012 Managing Executive Officer of Kao Corporation2014 Representative Director, Managing Executive Officer of
Kao Corporation
2015 Representative Director, Senior Managing Executive
Officer of Kao Corporation
2019 President of Japan Childcare Support Association(present)
2022 Outside Director of the Company (present)

Kazunori
Yanagi

Yaeko
IshidaAuditors

NoboruAkatsuka
Independent

Audit & Supervisory Board
Member (Full-time)
Outside Audit &Supervisory Board
MemberAudit & Supervisory
Board Member(Full-time)37

Independent

Career Summary

Career Summary

Career Summary

1981 Joined Dai-Ichi Kangyo Bank, Limited.
2005 General Manager of Asia Corporate Banking of Mizuho
Corporate Bank, Ltd. (Currently Mizuho Bank, Ltd.)
2007 General Manager of Overseas Business Promotion
Division of Mizuho Corporate Bank, Ltd.
2008 General Manager of Corporate Banking Division No.
18 of Mizuho Corporate Bank, Ltd.
2009 Executive Officer of Mizuho Corporate Bank, Ltd.
2011 Managing Executive Officer of Century Tokyo Leasing
Corporation
2016 Counselor of Century Tokyo Leasing Corporation
2016 Chairman of Fujitsu Leasing Co., Ltd.
2018 Full-time Audit & Supervisory Board Member (Outside)of the Company (present)

1986 Joined the Company
2007 General Manager of Accounting Department,
Administration Division of Citizen Watch Co., Ltd.
2011 General Manager of Accounting Department of
Citizen Watch Co., Ltd.
2012 Executive Officer of Citizen Jewelry Co., Ltd.
2014 Director of ROYAL TIME CITI CO., LTD.
2014 Representative Director and President of ROYAL TIMECITI CO., LTD.
2017 Director of ROYAL TIME CITI CO., LTD.
2019 Director of Citizen Watch Manufacturing Co., Ltd.
2022 Full-time Audit & Supervisory Board Member (Outside)of the Company (present)

2000 Registered as an attorney-at-law
2007 Judicial Commissioner of Tokyo Summary Court
2016 Conciliation Commissioner of Tachikawa Branch ofTokyo Family Court (present)
2019 Outside Audit & Supervisory Board Member of theCompany (present)

Independent

26

19

45

40

18

48 53

38 32
43 47

Works

OVERSEAS GROUP

1 Headquarters, Tokyo Works
2 Tokorozawa WorksEUROPEDOMESTIC GROUP

Outside Audit &Supervisory Board
Member

60

63

DOMESTIC GROUP

34

ToshikoKuboki59

3 CITIZEN MACHINERY CO., LTD.
4 CITIZEN FINEDEVICE CO., LTD.
5 CITIZEN ELECTRONICS CO., LTD.
6 CITIZEN SYSTEMS JAPAN CO., LTD.
7 CITIZEN WATCH MANUFACTURING CO., LTD.
8 CITIZEN RETAIL PLANNING CO., LTD.
9 CITIZEN T.I.C. CO., LTD.
10 TOKYO BIJUTSU CO., LTD.
11 CITIZEN CUSTOMER SERVICE CO., LTD.
12 CITIZEN LOGISTICS SERVICE CO., LTD.
13 CITIZEN MICRO CO., LTD.
14 CITIZEN CHIBA PRECISION CO., LTD.
15 FUJIMI CORPORATION
16 CITIZEN ELECTRONICS TIMEL CO., LTD.

17 CITIZEN WATCH EUROPE G.M.B.H.
18 CITIZEN WATCH IBÉRICA S.A.U.
19 CITIZEN WATCH ITALY S.P.A.
20 CITIZEN WATCH UNITED KINGDOM, LTD.
21 FREDERIQUE CONSTANT HOLDING S.A.
22 MANUFACTURE LA JOUX-PERRET S.A.
23 CITIZEN MACCHINE ITALIA S.R.L.
24 CITIZEN MACHINERY EUROPE G.M.B.H.
25 CITIZEN MACHINERY UK LTD.
26 EGASCA, S.A.
27 HESTIKA FRANCE S.A.S.
28 C-E (DEUTSCHLAND) G.M.B.H.
29 CITIZEN SYSTEMS EUROPE G.M.B.H.

Note: Ms. Yaeko Ishida, an Outside Audit & Supervisory
Board Member, uses the name Yaeko Kitadai in her
profession as an attorney-at-law.

5 16
4 15

13 12
2
7
1
6
9

10 11
8

14

33 36 39 49
50 52 55
44 46

42 CITIZEN (CHINA) PRECISION MACHINERY CO., LTD.
43 CITIZEN MACHINERY ASIA CO., LTD.
44 CITIZEN MACHINERY PHILIPPINES INC.
45 CITIZEN MACHINERY VIETNAM CO., LTD.
46 CITIZEN FINEDEVICE PHILIPPINES CORP.
47 CITIZEN SEIMITSU (THAILAND) CO., LTD.
48 MASTER CROWN ELECTRONICS (WUZHOU) LTD.
49 MOST CROWN INDUSTRIES LTD.
50 C-E (HONG KONG) LTD.
51 CITIZEN ELECTRONICS (CHINA) CO., LTD.
52 FIRSTCOME ELECTRONICS LTD.
53 JIANG XING ELECTRONICS LTD.
54 CITIZEN SYSTEMS (DONGGUAN) CO., LTD.
55 CITIZEN SYSTEMS (H.K.) LTD.
56 CITIZEN SYSTEMS (JIANGMEN) CO., LTD.

ASIA, OCEANIA
30 CITIZEN (SHANGHAI) TRADING CO., LTD.
31 CITIZEN WATCH (CHINA) CO., LTD.
32 CITIZEN WATCH MANUFACTURING(THAILAND) CO., LTD.

3

41

33 CITIZEN WATCHES (H.K.) LTD.
34 CITIZEN WATCHES (INDIA) PVT. LTD.
35 CITIZEN WATCHES (MALAYSIA) SDN. BHD.
36 CIVIS MANUFACTURING LTD.
37 GUANGZHOU MOST CROWN ELECTRONICS LTD.
38 ROYAL TIME CITI CO., LTD.
39 SUNCITI MANUFACTURERS LTD.
40 CITIZEN WATCHES AUSTRALIA PTY LTD.
41 CINCOM MIYANO TAIWAN CO., LTD.

NORTH AMERICA, SOUTH AMERICA
57 CITIZEN DE MEXICO, S. DE R. L. DE C. V.
58 CITIZEN LATINAMERICA CORPORATION
59 CITIZEN WATCH CANADA, LTD.
60 CITIZEN WATCH COMPANY OF AMERICA, INC.
61 MIYOTA DEVELOPMENT CENTER OF AMERICA INC.
62 CECOL, INC.
63 CITIZEN SYSTEMS AMERICA CORP.

Independent officer pursuant to Rule 436-2 of the Securities Listing Regulations of Tokyo Stock Exchange, Inc.

38

FINANCIAL DATA FY2021

Business Risks

Analysis of Operating Results
Fiscal Year End Operating Results(Millions of yen)

Year ended March 31,
2021

Year ended March 31,
2022

Year-on-year change%

Net sales

206,641

281,417+74,775+36.2%

Operating profit or loss

(9,551)

22,273+31,824-

Ordinary profit or loss

(4,143)27,342+31,485-

Profit or loss attributable to owners of parent(25,173)

22,140+47,314-

During the fiscal year under review, the Japanese economy faced anincreasingly uncertain situation partly due to the spread of newvariants and a shortage of parts, mainly semiconductors, offsetting
signs of a gradual recovery from the impact of COVID-19. In North
America and Europe, where concern had also been growing over adecline in consumer spending due to the resurgence of COVID-19
and an overall increase in consumer prices, the economy generally
remained on a recovery path. In Asia, economic activity remained
weak given economic weakness in response to uncertainties
surrounding business conditions in the Chinese market, attributableto restrictions on economic activity in that country, and varying
levels of recovery in other Asian regions, depending on the extent
of infection control.
In this environment, the Citizen Group instituted a range ofinitiatives such as facilitating the growth of the Watch business andMachine Tools business, promoting sustainable management andstrengthening compliance with quality, with a view to raising thelevel of traditional manufacturing and addressing the challenge of
new value creation.
As a result, the consolidated financial results for the fiscal year
under review showed an increase in sales and profits, with net salesof 281.4 billion yen (up 36.2% year on year) and operating profit of
22.2 billion yen (compared with an operating loss of 9.5 billion yen
in the same period of the previous fiscal year). Ordinary profit andprofit attributable to owners of parent also increased to 27.3 billion
yen (compared with an ordinary loss of 4.1 billion yen in the same
period of the previous fiscal year) and 22.1 billion yen (comparedwith a loss attributable to owners of parent of 25.1 billion yen in thesame period of the previous fiscal year), respectively.
The Company has applied the Accounting Standards for
Revenue Recognition (ASBJ Statement No. 29 issued on March 31,2020) since the beginning of the first quarter of the consolidated
fiscal year under review. For details, please see “ Notes on Changes
in accounting policies."

Analysis of Financial Position
1. Assets Outstanding at Fiscal Year End
As of the end of the consolidated fiscal year under review, total
assets had increased by 29.1 billion yen to 394.9 billion yen. Total
assets increased by 29.1 billion yen to 394.9 billion yen. Total assets
increased by 29.1 billion yen to 394.9 billion yen.Noncurrent assets
increased 3.4 billion yen due to increases of 3.9 billion yen in
investment securities and 1.0 billion yen in buildings and structures,
and a decrease of 1.6 billion yen in construction in progress. Total
fixed assets increased by 3.4 billion yen, mainly due to a 1.6 billion
yen decrease in construction in progress.
Liabilities increased by 3.4 billion yen, mainly due toincreases of 2.7 billion yen in notes and accounts payable-trade and4.8 billion yen in electronically recorded liabilities, and decreases of
4.8 billion yen in short-term loans payable and 1.6 billion yen in
long-term loans payable. Total liabilities amounted to 156.2 billion
yen, up 3.3 billion yen, mainly due to decreases of 4.8 billion yen in
short-term loans payable and 3.8 billion yen in long-term loans
payable.

39

Net assets amounted to 156.2 billion yen, up 3.3 billion yen,
due to increases of 11.7 billion yen in foreign currency translation
adjustments and 17.5 billion yen in retained earnings, respectively.
Net assets amounted to 238.6 billion yen, up 25.8 billion yen, mainly
due to a 7.1 billion yen repurchase of treasury stock, while foreign
currency translation adjustments and retained earnings increasedby 11.7 billion yen and 17.5 billion yen, respectively.

2. Cash FlowsThe cash status of the Citizen Group includes an increase of 34.6
billion yen in cash flow from operating activities from the previous
fiscal year due to an increase of 27.2 billion yen in income. This was
attributable primarily to factors of increase such as 26.6 billion yen
in profit before income taxes, 3.9 billion yen in trade payables, and11.1 billion yen in depreciation, which more than offset factors suchas an increase of 2 billion yen in trade receivables and 3.1 billion inincome taxes paid.
Cash used in investing activities was 9.5 billion yen due to anincrease of 1.9 billion yen in expenditure from the previous fiscal
year. Contributing factors include 9.5 billion yen in purchase ofproperty, plant and equipment and 2.1 billion yen in purchase ofintangible assets, which more than offset factors such as proceedsfrom the sale of property, plant and equipment of 2.3 billion yen.
Cash used in financing activities was 19.9 billion yen due toan increase of 38.2 billion yen in expenditure from the previous
fiscal year. This resulted chiefly from factors such as 8 billion yen in
repayments of long-term borrowings, 7.1 billion yen in purchase oftreasury shares, and 3.5 billion yen in dividends paid.
As a result, cash and cash equivalents increased 11.6 billion
yen year on year to total 111.2 billion yen at the end of the fiscal
year under review.

3.

Fundamental Policy Regarding the Distribution ofProfits and Dividends for the Fiscal Year Under Review
and the Fiscal Year Ending March 2023

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. Based on this concept,
it established a basic policy of ensuring that the ratio of the return toshareholders is at least 60% on average for three years. It
determines dividends by considering the balance between
consolidated results-based dividend payments and stable dividend
payments.
The year-end dividend for the fiscal year under review will be
9.00 yen per share. Consequently, the full-year dividend for the
fiscal year under review will be 18.00 yen per share.
In the next and subsequent fiscal years, the Group will emphasize
the stable and continuous payment of dividends as its shareholder
return policy in the Medium-term Management Plan 2024, and aim
for a dividend payout ratio of approximately 50%. The Company
expects that the full-year dividend for the next fiscal year will be
30.00 yen per share, comprehensively taking into consideration
stable dividend payments and results trends, among other factors.

Of the matters regarding business and accounting situations, etc.
described in the financial statements in security reports, the mainrisks that the operator recognizes as having the possibility ofsignificantly impacting the financial condition, businessperformance, or cash flow condition of consolidated companies
are as follows.
Forward-looking statements in this document are based on
judgments of the Company’s management as of the end of the
fiscal year under review.

chains for semiconductors, etc.

2. Overseas sales ratio
Overseas sales account for a high percentage of the Group’s
overall product sales. As its products are sold worldwide, its
operating results may be affected by economic and consumer
trends in each area, as well as by political and socioeconomic factors.
(Millions of yen)

(April 1, 2020
to March 31, 2021)

1. Risks in each of the Group’s businesses
The Citizen Group’s main business is to manufacture and sell
watches, machine tools, electronic devices, and electronic
products. The Group operates its business across the globe, andits customer base is extensive, including both individuals andvarious manufacturers. Accordingly, the Group’s businessperformance is affected by a wide spectrum of factors. Factors that
may affect the operating results include, but are not limited to:(April 1, 2021
to March 31, 2022)

Net sales

Composition
rate (%)

Net sales

Composition
rate (%)

Japan

70,10833.9

74,41826.4

Asia65,65931.8

87,681

31.2

U.S.

34,916

16.9

62,52522.2

W a t ch e s

Europe33,612

16.3

53,58519.0

Competition 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.
With respect to movements, demand for analog quartz
movements is trending downwards, primarily in the low-end range,
reflecting an increase in demand for smartwatches. In addition,
unit prices are falling due to an intensifying competitiveenvironment resulting mainly from the rise of Chinese
manufacturers. Consequently, there is a risk of a decline in thequantity and market share.
Moreover, if the adverse outcomes of the COVID-19
pandemic, such as restrictions on outings, suspension or reduced
hours of store and restaurant operation, and stagnation of supply
chains, are aggravated or prolonged, the Group’s operating results
may be affected even more severely due to a global decline in
consumer confidence.

Other

2,345

1.1

3,207

1.1

Total
overseassales

136,533

66.1

206,998

73.6

Total

206,641100.0

281,417100.0

3. Risk of exchange fluctuations
As overseas sales account for a high percentage of the Group’s
product sales, as mentioned in 2 above, it hedges exchange
fluctuation risk using foreign currency contracts, currency options,etc. Although the Group is expanding and strengthening overseas
production, currency fluctuations may still affect the Group’s
operating results.

M a chi ne Tool s

4. Ratio of production in China

The machine tools business is susceptible to the effects of decline
in demand for capital investment caused by economic fluctuations,soaring natural resource and raw material prices, regulations or
significant changes in laws and regulations in countries andregions in which the Group operates its business, fierce
competition in the market, and stagnation, confusion, etc. of
supply chains. There is a risk that the Group’s businessperformance may be adversely affected by the above in the future.

China is one of Group’s main production bases for its products.
Accordingly, there is risk that its business performance be affectedby factors in China, such as interruption in production due toproblems, the enactment of new regulations, etc. that could affectproduction, or a sharp appreciation of the Chinese yuan.

Dev i ces a nd Com ponent s
The devices and components business is characterized by the
rapid pace of technological innovation, changes in customer
requirements, and high rates of new product and service
introduction. Accordingly, declining sales prices, etc. caused byobsolescence of existing products and services may significantly
affect the Group’s business performance. Precision machining
components are susceptible to the trends of technical innovation
among customers, including automotive and smart phone
manufacturers. As for opto-devices, patent licensing agreements
are concluded for manufacturing certain products. The Group’sbusiness performance could be affected should a cooperative
relationship underpinning a patent agreement break down andaccess to the patent be lost.

El ect roni cs a nd Ot her Product s
The electronic and other products business is susceptible tostagnation in capital investment, customers’ business activities,
and personal spending associated with changing economic
conditions and stricter laws and regulations relating productsafety. The Group’s operating results may be affected by those in
the future. Moreover, with intense competition from electronics
manufacturers in China and other countries in addition todomestic manufacturers, and rapid technological innovation,business results may also be impacted by factors such as declining
sales prices, development delays, and confusion, etc. in supply

5. Impairment losses
When market values of the assets held by the Group decreasesignificantly, or business profitability deteriorates, an impairment
loss in noncurrent assets may be recorded by applying impairment
accounting, which would affect the Group’s businesses andfinancial position.

6. Patent and other intellectual property
As part of the Group’s R&D and production activities, it uses avariety 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 havelegitimately received licenses to use. Nevertheless, should a third
party claim, based on grounds of which we are unaware, that its
intellectual property rights have been violated, a dispute could
arise that could affect the Group’s business results.
For some products in particular, manufacturing is based on
patent licensing agreements. If a cooperative relationshipunderpinning such an agreement were to break down, or accessto the relevant patent were to be lost, it may affect our businessresults.

7. Risk related to natural disaster such as earthquakes
We have established a risk management system and conduct drills
and other disaster simulation activities to ensure facilities safety
and avoid any human casualties or damage to facilities, including40Consolidated Balance Sheets
the Group’s head office and plants, in the event of a fire, anearthquake or other natural disaster. In the event of a greater-thanexpected earthquake or other such disaster, however, the Group’s
production activities and product supplies may be affected. There
may also be a significant impact on its business performance andfinancial position due to reconstruction costs, for example.

8. Risks related to M&As and business alliances
The Group is committed to strengthening its business foundations
through M&As, business alliances, etc. When undertaking suchactivities, it carries out comprehensive research into andexaminations of the companies involved. Nevertheless, if
unrealized liabilities are discovered or if projects do not progressas planned, among other things, it may materially affect theGroup’s operating results and financial position.

9. Risks related to borrowings
The Group’s borrowings include syndicated loans andcommitment line agreements with financial institutions. Any
violation of financial restrictions under such agreements could
result in demands for accelerated repayment of the relevantborrowings, which may affect the Group’s financial position.

10. Risks related to information security
With the number of illegitimate accesses and external cyberattacks
continuously growing globally, the Group has been working tostrengthen information security. However, in the event of any
damages to its information system function due to an externalcyberattack or for other reasons, or the occurrence of incidents
such as the suspension of services by service providers, theGroup’s business activities, business performance and financial
conditions may be seriously affected.
The Group holds and manages, in a variety of forms,
personal information obtained from customers and other sources,
as well as confidential information related to the technologies,
research and development, manufacture and sales of the Groupand customers. The Group has been taking measures to protect
such confidential information. Even so, such measures may notwork effectively, if any matters that are not expected to occur
initially arise. If, therefore, such information is disclosed without
any authority, the Group may be asked for compensation for losses
and damages, or face lawsuits, which may affect the businessperformances, financial conditions, reputation and credibility of
the Group.

11. Other risks
The Group’s operating results may be affected by a variety offactors in addition to the above, including changes in social
infrastructure and market competition as a result of rapid advancesin technology, changes in the Group’s financial or managerial
situation, trading restrictions and other regulations in major
markets in Japan or overseas, international taxation risk includingtransfer pricing taxation system, or substantial fluctuations in stockor bond markets.

41

Citizen Watch Co., Ltd. and Consolidated Subsidiaries
March 31, 2020 and 2021
Millions of yen
As of March 31, 2021

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade
Electronically recorded monetary claims - operating
Merchandise and finished goods
Work in process
Raw materials and supplies
Consumption taxes refund receivable
Other
Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures, net
Machinery, equipment and vehicles, net
Tools, furniture and fixtures, net
Land
Leased assets, net
Construction in progress
Total property, plant and equipment
Intangible assets
SoftwareLeased assets
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term loans receivable
Deferred tax assets
Other
Allowance for doubtful accounts
Allowance for investment loss
Total investments and other assets
Total non-current assets
Total assets¥

101,816
44,102
1,371
52,01819,372
18,8572,129
5,926(1,150)244,444

As of March 31, 2022¥

110,901
49,3082,037
50,97922,74923,3152,661
9,254(1,069)270,139

*1

*4*5

*4*5

39,877*4
15,811
4,275
10,649
1,249
4,085
*2
75,94840,893
16,567
3,616
10,371975
2,437*2
74,862
*4

3,590
2
1,059
4,652

3,879
1
954
4,834

*3

¥

33,341
251
5,293
2,185
(306)
－
40,765
121,366
365,811*3¥

37,275
184
5,894
2,151
(236)
(144)
45,125
124,823
394,96242

Consolidated Statements of Income
Citizen Watch Co., Ltd. and Consolidated Subsidiaries
March 31, 2020 and 2021
Millions of yen

Millions of yen
As of March 31, 2021

Liabilities
Current liabilities
Notes and accounts payable - trade
Electronically recorded obligations - operating
Notes payable - facilities
Electronically recorded obligations - non-operating
Short-term borrowings
Income taxes payable
Accrued expenses
Asset retirement obligations
Provision for bonuses
Provision for bonuses for directors (and other officers)
Provision for product warranties
Provision for environmental measures
Provision for loss on reorganization
Other
Total current liabilities
Non-current liabilities
Bonds payable
Long-term borrowings
Provision for loss on guarantees
Deferred tax liabilities
Provision for loss on reorganization
Retirement benefit liability
Asset retirement obligations
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders' equity
Share capital
Capital surplus
Retained earnings
Treasury shares
Total shareholders' equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities

¥

43

¥

10,00055,212－2,281
103
22,59075
2,937
93,201
152,946¥

18,354
13,910
25
598
*6
4,773
2,826
10,604
26
5,821
279
1,181
1
362
10,571
69,33810,00051,38223
2,772
74
20,28149
2,369
86,951
156,289*6

Foreign currency translation adjustment
Remeasurements of defined benefit plans
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets

15,576
9,041
241
395
*6
9,648
1,381
9,451
－
4,778
157
984
2
715
7,369
59,745

As of March 31, 2021

As of March 31, 2022

*6

32,64833,740128,393(1,069)193,71332,64833,740145,912(8,225)204,076

6,503

8,977

4,871

16,646(1,100)10,273
8,878
212,864
365,811(394)
25,2289,367
238,673
394,962¥

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit (loss)
Non-operating income
Interest income
Dividend income
Rental income
Share of profit of entities accounted for using equity method
Foreign exchange gains
Subsidy income
Other
Total non-operating income
Non-operating expenses
Commission for syndicated loans
Interest expenses
Loss on sale of notes receivable - trade
Depreciation of assets for rent
Provision of allowance for doubtful accounts
Other
Total non-operating expenses
Ordinary profit (loss)
Extraordinary income
Gain on sale of investment securities
Gain on sale of non-current assets
Gain on sale of businesses
Other
Total extraordinary income
Extraordinary losses
Loss on sale of non-current assets
Loss on retirement of non-current assets
Impairment losses
Loss on valuation of investment securities
Loss on valuation of inventories
Reorganization cost
Extra retirement payments
Loss on COVID
Other
Total extraordinary losses
Profit before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
Profit (loss)
Profit (loss) attributable to non-controlling interests
Profit (loss) attributable to owners of parent¥

206,641
140,742
65,898*2 *375,450(9,551)

As of March 31, 2022

¥

*12

*4

*1

281,417
174,578
106,839*2 *3
84,56522,273
*12

256
1,129
166
440
854
3,357
297
6,501

*4

215
415
16
51
125
268
1,093
(4,143)

*5

71
294
17
8
－
343
735
27,342

1,452
819
350
141
2,762

*5

*7

¥

19
*6
241
*8
2,857
1,220
－
*10
238
*11
4,374
*13
3,034
394
12,381(13,761)920
10,756
11,677(25,439)(265)(25,173)

276
1,369
161
813
2,192
484
505
5,804

*7
*6
*8

*9
*10
*11
*13

¥

94
1,033
－
93
1,221
38
79
742
－
346
209
15
166
272
1,869
26,694
5,342(1,075)
4,266
22,427286
22,14044

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Equity

Citizen Watch Co., Ltd. and Consolidated Subsidiaries
March 31, 2020 and 2021

Financial year ended March 31, 2021
Millions of yen
Millions of yen

Profit (loss)

Year ended
March 31, 2021

Year ended
March 31, 2022¥¥

(25,439)

Balance at beginning of period

Valuation difference on available-for-sale securities

2,924

2,474

Foreign currency translation adjustment

6,000

11,578Remeasurements of defined benefit plans, net of tax

(174)

692

66

438

for using equity method
Total other comprehensive income*

Comprehensive income¥

Capital surplus

32,64833,730Retainedearnings

Treasury shares

Total
shareholders'equity(1,069)220,165

154,855

Cumulative effects of changes
in accounting policies
Restated balance

32,64833,730154,855(1,069)220,165

Changes during period

15,182

Purchase of shares of
consolidated subsidiaries(16,622)

37,610

Increase by merger(16,460)

37,096

Change in scope of
consolidation

(506)

(506)

Dividends of surplus

(782)

(782)

(25,173)(25,173)

8,817*

Comprehensive income attributable toComprehensive income attributable to owners of parent

Share capital

22,427

Other comprehensive income

Comprehensive income attributable to non-controlling interests

Shareholders' equity

(161)

¥

513

9

Profit (loss) attributable toowners of parent

9

Purchase of treasury shares

(0)

(0)

Disposal of treasury shares

1

1

Transfer of loss on disposal oftreasury shares
Transfer from retained earnings
to capital surplus
Net changes in items otherthan shareholders' equity-

Total changes during period
Balance at end of period-

9(26,462)

0(26,451)

32,64833,740128,393(1,069)193,713

Accumulated other comprehensive income

Balance at beginning of period

Valuationdifference on
available-forsale securities

Foreigncurrencytranslation
adjustment

Remeasurementsof defined
benefit plans

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests

Total net
assets

3,578(1,095)

(921)

1,560

9,066

230,791

Cumulative effects of changes
in accounting policies
Restated balance

3,578(1,095)

(921)

1,560

9,066

230,791

Changes during period
Purchase of shares of
consolidated subsidiaries
Change in scope of
consolidation

9
(506)

Dividends of surplus(25,173)

Purchase of treasury shares(0)

Disposal of treasury shares

1

Transfer of loss on disposal oftreasury shares
Net changes in items otherthan shareholders' equity

45

(782)

Profit (loss) attributable toowners of parent

2,924

5,966

(179)

8,712

(187)

8,524

Total changes during period

2,924

5,966

(179)

8,712

(187)

(17,927)

Balance at end of period

6,503

4,871

(1,100)10,273

8,878

212,86446

Consolidated Statements of Cash Flows
Financial year ended March 31, 2022
Millions of yen

Citizen Watch Co., Ltd. and Consolidated Subsidiaries
March 31, 2020 and 2021
Millions of yen

Shareholders' equity

Balance at beginning of period

Share capital

Capital surplus

32,64833,740

Cumulative effects of changes
in accounting policies
Restated balance

Retainedearnings

As of March 31, 2021
Treasury shares

Total
shareholders'equity(1,069)193,713

128,393(1,068)32,64833,740(1,068)

127,324(1,069)

192,644

Changes during period
Purchase of shares of
consolidated subsidiaries-

Increase by merger

46

46

Dividends of surplus(3,599)(3,599)Profit (loss) attributable toowners of parent

22,14022,140Purchase of treasury shares
Disposal of treasury shares(0)

Transfer of loss on disposal oftreasury shares
Net changes in items otherthan shareholders' equity(7,157)

0

0

0

(0)

-

-

18,588(7,156)

11,43132,64833,740145,912(8,225)204,076

Total changes during period
Balance at end of period(7,157)

Accumulated other comprehensive income

Balance at beginning of period

Valuationdifference on
available-forsale securities

Foreigncurrencytranslation
adjustment

Remeasurementsof defined
benefit plans

Total
accumulated
othercomprehensive
incomeNoncontrollinginterests

Total net
assets

6,503

4,871

(1,100)10,273

8,878

212,864

Cumulative effects of changes
in accounting policies
Restated balance(1,068)
6,503

4,871

(1,100)10,273

8,878

211,796

Changes during period
Purchase of shares of
consolidated subsidiaries
Increase by merger

46

Dividends of surplus(3,599)Profit (loss) attributable toowners of parent

22,140Purchase of treasury shares(7,157)

Disposal of treasury shares

0

Transfer of loss on disposal oftreasury shares
Net changes in items otherthan shareholders' equity

47

-

2,474

11,774706

14,955489

15,444

Total changes during period

2,474

11,774706

14,955489

26,876

Balance at end of period

8,977

16,646(394)

25,2289,367

238,673

Cash flows from operating activities
Profit (loss) before income taxes
Depreciation
Increase (decrease) in provision for loss on reorganization
Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in other provisions
Increase (decrease) in retirement benefit liability
Interest and dividend income
Subsidy income
Interest expenses
Loss (gain) on valuation of investment securities
Loss (gain) on sale of investment securities
Loss (gain) on sale of non-current assets
Loss on retirement of non-current assets
Impairment losses
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase (decrease) in trade payables
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes refund (paid)
Subsidies received
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of investment securities
Proceeds from sale of investment securities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of intangible assets
Loan advances
Proceeds from collection of loans receivable
Other, net
Net cash provided by (used in) investing activities
Cash flows from financing activities
Net increase (decrease) in short-term borrowings
Proceeds from long-term borrowings
Repayments of long-term borrowings
Dividends paid
Dividends paid to non-controlling interests
Purchase of treasury shares
Proceeds from sale of treasury shares
Purchase of shares of subsidiaries not resulting 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 period
Increase (decrease) in cash and cash equivalents resulting
from change in scope of consolidation
Cash and cash equivalents at end of period¥¥(13,761)
11,557(1,849)132(441)(1,683)(1,386)(3,357)415
1,220(1,452)
(799)
241
2,857
1,402
13,737(3,559)
(201)
3,072
1,380
(421)
212
3,245
7,489

As of March 31, 2022¥

26,694
11,191
(387)
(251)
1,427
(1,790)(1,645)
(484)
294
－
(94)
(995)
79
742
(2,025)(1,800)3,920
1,121
35,996
1,633(300)(3,120)484
34,693(0)
3,163(9,240)1,534(2,892)
(153)
103
(141)
(7,627)(1)
165(9,566)
2,338(2,117)
(23)
309
(656)
(9,550)(1,785)35,180(13,738)
(782)
(34)
(0)
1

(737)
－
(8,048)(3,599)(55)(7,157)
0

(0)

－

(503)
18,336
2,843
21,041
77,996(359)(19,956)
6,430
11,616
99,561522

59

99,561¥

111,23748

Notes(Significant Matters that Serve as the Basis for the
Preparation of Consolidated Financial Statements)
1. Scope of consolidation(1) Number of consolidated subsidiaries: 76
Deconsolidation: 4During the consolidated fiscal year under review, the Company
implemented deconsolidation of Bulova Swiss S.A., Citizen
Electronics Funehiki Japan Co., Ltd., and Citizen Plaza Co., Ltd.
due to corporate liquidation, and BWI de Mexico S.R.L. due toabsorption-type merger with Citizen De Mexico, S. de R.L. de
C.V., the Company’s consolidated subsidiary.
(2) Non-consolidated subsidiaries :11
Major non-consolidated subsidiaries
CITIZEN CUSTOMER SERVICE CO., LTD.
(Reason for exclusion from scope of consolidation)
They were excluded from the scope of consolidation because
the sum of total assets, net sales, current term net profit or loss
(amount corresponding to equity), retained earnings (amountcorresponding to equity), etc. of each of the deconsolidated
subsidiaries is negligible compared to total assets, net sales,
current term net profit or loss, retained earnings, etc. in the
consolidated financial statements and does not have significant
impact on the said statements as a whole.

2. Matters related to the application of the equity method(1) Number of affiliates accounted for using equity method: 2
Marubeni Citizen-Cincom Inc., First Cainta Resources
Corporation(2) Non-consolidated subsidiaries (Citizen Customer Service Co.,
Ltd., etc.) and affiliates (VELDT Inc., etc.) that are not accounted
for using the equity method are excluded from the scope of
application of equity method because they have minimal
impact on the consolidated financial statements in light of theirrespective current term net profit or loss (amountcorresponding to equity), retained earnings (amountcorresponding to equity), etc. and because they are notmaterial as a whole.
3. Fiscal years of consolidated subsidiaries(1) Consolidated subsidiaries whose account closing dates aredifferent from the consolidated account settlement date are as
follows.
December 31 closing dates: 55 companies(2) The Company makes necessary adjustments for formulating
consolidated financial statements on the account closing date,by preparing financial statements that are the basis forconsolidated financial statements.
4. Matters related to accounting policies
Accounting policies adopted by consolidated subsidiaries conformto the standards used by the Company, in principle, and there are
no differences to be specified. Major accounting policies adopted
by the Company and its consolidated subsidiaries are as follows.
(1) Valuation standards and methods for important assets(i) Securities
Other securities
Securities other than shares, etc. without market prices
These securities are stated using market value method.
(Unrealized gains and losses are reported as a component of
net assets, and cost of sales is computed primarily by themoving-average method.)
Shares, etc. without market prices
These securities are stated using moving average cost
method.
(ii) Derivatives
These securities are stated using market value method.
(iii) Inventories
Inventories are stated at cost mainly using the periodic averagemethod (The amount stated in the balance sheet is calculatedusing the book value write-down method based on reductionin profitability.)

49(2) Depreciation method of important depreciable assets(i) Property, plant and equipment (excluding lease assets)
The straight-line method is applied.
The principal useful lives of property, plant and equipment are
as follows:
Buildings and structures:
2 to 60 years
Machinery, equipment and vehicles:
2 to 10 years(ii) Intangible assets (excluding lease assets)
The straight-line method is applied.
(iii) Leased assets
For depreciation of leased assets for finance lease transactions
other than those involving ownership transfer, the useful life isbased on the duration of the lease period, and the straight-line
method is applied with an assumed residual value of zero.
(3) Accounting method for significant deferred assets.
Bond issuance costs
They are collectively amortized in the fiscal year in which they are
incurred.
(4) Accounting for significant allowances and reserves(i) Allowance for doubtful accounts
To reserve for losses on doubtful accounts such as tradereceivables and loans, the Company and its consolidated
subsidiaries in Japan provide an allowance, based on historical
write-off rates for ordinary receivables and estimated amountsof irrecoverable debt for specified receivables such as debt
with a possibility of default which takes into account therecoverability of individual debt. Moreover, estimated amountsof allowance are recorded for overseas consolidated
subsidiaries, considering the recoverability of individual
receivables.
(ii) Allowance for investment loss
To reserve for a loss from significant declines in the value ofshares, etc. in non-consolidated subsidiaries (excluding thoseto which impairment accounting is applied), an allowance isprovided considering the carrying amount, etc. of the shares,
etc. as of the end of the consolidated fiscal year under review.
(iii) Provision for bonuses
To provide for the payment of bonuses to employees of theCompany and certain of its consolidated subsidiaries,
allowance for bonuses is provided based on estimated future
payments.
(iv) Provision for bonuses for directors (and other officers)
To provide for the payment of bonuses to officers of theCompany and certain of its consolidated subsidiaries,
allowance for bonuses is provided based on estimated future
payments.
(v) Provision for product warranties
A portion of sales is provided for costs for after-sale services,
etc. of products at certain consolidated subsidiaries.
(vi) Provision for loss on business reorganization and liquidation
To reserve for expenses and losses from business restructuring,an estimated required amount is recorded.
(vii) Provision for environmental measures
To provide for expenditures for future environmental measures,a reasonably estimated amount is recorded.
(5) Accounting method for retirement benefits(i) Method for attributing expected retirement benefits toperiods of service
In calculating projected benefits obligations, the periodic
allocation of projected retirement benefits up to the end ofcurrent period is based mainly on the benefit formula basis.
(ii) Treatment of unrecognized actuarial differences and past
service costs
Past service cost is treated as an expense over a fixed numberof years (using the declining balanced method on the basis of
5 years, in principle) within the average remaining years ofservice of employees as of the year in which the past service
costs occur.
Actuarial differences are to be charged to expenses from thefiscal year following the year in which the past service costs
occur, over a fixed number of years (using the decliningbalanced method on the basis of 5 years, in principle) within
the average remaining years of service of employees as ofeach fiscal year in which the past service costs occur.

(iii) Adoption of the simplified method by companies that aresmall in size
Some consolidated subsidiaries adopt, for the purpose of
calculating retirement benefit liability and retirement benefit
expenses, a simplified method involving the recognition ofretirement benefit obligations as the amount of retirement
benefit payable at fiscal year-end due to voluntary termination.
(6) Accounting standards for income and expenses
The Citizen Group’s main business is to manufacture and sell
watches, machine tools, electronic devices, and electronic
products.
The Company believes that its performance obligation regarding
the recognition of revenues from sale of goods is satisfied when
the control over the goods is transferred to customers andrevenues are recognized at the time of the transfer.
Transaction prices are calculated by deducting variableconsideration, including future sales returns and other rebates,from the consideration the customer promises in a contract.
Variable consideration is estimated based on the past trackrecord and information available as of the end of theconsolidated fiscal year under review, and is revaluated at every
fiscal year end.
In the watches segment, membership-based inspection services
are provided to customers. In the said services, performanceobligations related to the sale of products and performanceobligations related to inspection services are identified
separately and revenue is recognized when each performanceobligation is satisfied. As considerations regarding these
performance obligations are generally paid within one year fromthe time they are satisfied, no significant financing component isinvolved.
(7) Standard for translation of significant foreign currency
denominated assets or liabilities into yen
Foreign currency monetary assets and liabilities are translated
into yen at the year-end spot exchange rate, and translation
adjustments are accounted for as profit or loss. For overseas
subsidiaries, etc., assets and liabilities are converted into yen
based on the spot exchange rate on consolidated accountsettlement day, and revenue and expenses are converted into
yen by using the average exchange rate during the fiscal year,
while the difference arising from the conversion is shown in the
net assets section as foreign currency translation adjustment andnon-controlling interests.
(8) Scope of funds in the consolidated statement of cash flows
Cash and cash equivalents are composed of cash on hand,deposits that can be withdrawn at any time and short-term
investments that are readily convertible into cash and face only
slight risks of fluctuation in value, with redemption due dates
arriving within three months from the acquisition date.
(9) Other significant matters for preparing consolidated financial
statements(Application of the Practical Solution on the Treatment of Tax
Effect Accounting for the Transition from the Consolidated
Taxation System to the Group Tax Sharing System)
In relation to the transition to the group tax sharing system, which
is newly established under the Act for Partial Revision of the
Income Tax Act and Other Acts (Act No. 8 of 2020) and the items
regarding which the non-consolidated taxation system wasreviewed in line with the transition to the group tax sharing
system, the Company and part of its consolidated domestic
subsidiaries do not implement the provisions of Paragraph 44 of
the Partial Amendments to Accounting Standard for Tax EffectAccounting (ASBJ Statement No. 28, February 16, 2018) but
comply with the provisions of the tax regulations prior to therevision with respect to amounts of deferred tax assets anddeferred tax liabilities, in accordance with the treatment
stipulated in Paragraph 3 of the Practical Solution on theTreatment of Tax Effect Accounting for the Transition from theConsolidated Taxation System to the Group Tax Sharing System(ASBJ PITF No.39, March 31, 2020).
From the beginning of the next fiscal year, the Company will
apply “Handling of Accounting and Disclosure When Applying
the Group Tax Sharing System” (Practical Issues Task Force No.
42, August 12, 2021), which specifies the handling of accounting

treatment and disclose of income taxes and local income taxes
when the group tax sharing system is applied.

(Significant Accounting Estimates)
1. Recoverability of deferred tax assets(1) Amounts posted to the consolidated financial statements forthe fiscal year under review
The amount of deferred tax assets is the same as that describedin 1 under Notes to Consolidated Financial Statements (Tax effectaccounting).
(2) Information about important accounting estimates related toitems identified
In the calculation of deferred tax assets, the Group makes acareful decision in deducting valuation allowance from deferred
tax assets based on business plans of domestic consolidated
companies, considering feasibility of future taxable income andcollectability.

2. Impairment loss on non-current assets(1) Amounts posted to the consolidated financial statements forthe fiscal year under review
The amount of impairment loss on non-current assets is the sameas that described in Notes (Consolidated Statement of Income) 8.
Impairment losses.
(2) Information about important accounting estimates related toitems identified
Regarding assets or assets group that are determined to show
indications of having suffered impairment losses based onmarket prices of non-current assets and gains/losses stemmingfrom business activities that use the said assets or assets group, if
the carrying amount of the said asset or asset group exceeds thesum of the undiscounted future cash flows, the Group reduces
the book value to their recoverable value and recognizes the
reduction as impairment loss. The recoverable value is defined as
the higher of net selling value and value in use, and value in use
is calculated as present discounted value of expected future cash
flows. Expected future cash flows are calculated based on
business plans approved by the board of directors, etc., markets
outlook, etc.
Accounting estimates regarding the recoverability of deferred tax
assets and impairment losses of non-current assets are madebased on the assumption that the world economy in the next
consolidated fiscal year will generally continue recovering, given
the removal of restrictions on economic activities associated with
the COVID-19 pandemic, despite uncertainties such as surges in
raw material prices and delays in parts procurement.
This assumption has inevitable uncertainty and may affect theconsolidated financial statements of the next fiscal year, being
susceptible to protracted and exacerbated impact from thepandemic.

(Change in Accounting Policies)(Application of Accounting Standard for Revenue Recognition andother standards)
The Company has decided to apply the Accounting Standard for
Revenue Recognition (ASBJ Statement No. 29, March 31, 2020;
hereinafter the “Revenue Recognition Accounting Standard”), etc.
from the beginning of the fiscal year under review and recognize
revenue from goods or services which the Company promised toprovide at an amount expected to be received in exchange for the
goods or services at the time when control over the promised
goods or services has been transferred to a customer. Majorchanges in the application of Revenue Recognition AccountingStandard, etc. are shown below.

50

1. Recognition of revenue related to membership-based
inspection services
Revenue related to membership-based inspection services in thewatches segment was not recognized in the past, but theCompany has changed this to the method of identifying
performance obligations related to the sale of products andperformance obligations related to the inspection services andrecognizing revenue when each performance obligation issatisfied.

2. Variable considerations
Variable considerations such as rebates in product sales were in
the past deducted from net sales when the amount was fixed, but
the Company has changed this to the method of estimating theamount of the variable portion of the consideration for atransaction and including in the transaction price only the portion
that is highly unlikely to cause a significant reduction in therecognized revenue.

3. Considerations to be paid to customers
Considerations to be paid to customers, such as salescommissions, were accounted for as selling, general andadministrative expenses in the past, but the Company haschanged it to the method of reducing them from transaction
prices.

4. Sales with return rights
For transactions of product sales that could be returned, theCompany has changed to the method of not recognizing
revenue at the time of sales in accordance with the provisions
regarding variable considerations.
The application of the Revenue Recognition Accounting Standard
follows the provisional treatment stipulated in the proviso of
Paragraph 84 of the Revenue Recognition Accounting Standard.
The cumulative effects in the case of retroactively applying the new
accounting policy to before the beginning of the fiscal year underreview are adjusted in retained earnings at the beginning of the
fiscal year under review, and the new accounting policy is applied
from this initial balance. However, applying the method stipulated
in Paragraph 86 of the Revenue Recognition Accounting Standard,
the Company does not retroactively apply the new accounting
policy to the contracts almost all of whose revenue was recognizedin compliance with the conventional method before the beginningof the fiscal year under review.
In addition, applying the method prescribed in the note (1) for
Paragraph 86 of the Revenue Recognition Accounting Standard,
the Company accounts for contract changes made prior to thebeginning of the fiscal year under review based on the contract
terms after reflecting all contract changes, and added or subtracted
their cumulative effect to or from retained earnings at the
beginning of the fiscal year under review.
As a result, compared to before the application of the AccountingStandard for Revenue Recognition and other standards, net sales
decreased by 270 million yen, the cost of sales increased by 141
million yen, selling, general and administrative expenses dropped
by 406 million yen, while operating profit, ordinary profit and profit
attributable to owners of parent each decreased by 5 million yen, inthe consolidated fiscal year under review.
The initial balance of retained earnings in the consolidated
statement of changes in equity decreased by 1,068 million yen due
to the application of the cumulative effect to net assets as of the
beginning of the fiscal year under review.
According to the transitional measures prescribed in Paragraph 893 of the Revenue Recognition Accounting Standard, informationthat breaks down revenue from contracts with customers for theprevious fiscal year is not presented.
The effect on per-share information is stated in relevant sections.
(Application of Accounting Standard for Fair Value Measurement
and other standards)
The Group began applying the Accounting Standard for Fair Value
Measurement (ASBJ Statement No. 30, July 4, 2019), etc. from the
beginning of the fiscal year under review. Accordingly, theCompany will apply the new accounting policies prescribed in the
Accounting Standard for Fair Value Measurement, etc. in the future51

in accordance with transitional measures stipulated in paragraph
19 of the standard and paragraph 44-2 of the Accounting Standard
for Financial Instruments (ASBJ Statement No. 10, July 4, 2019). The
application of the accounting standard has no impact on the
consolidated financial statements.
Moreover, the Company decided to add notes on matters regarding
the breakdown, etc. of financial instruments according to the level of
their market values in Notes on Financial Instruments. In the note on abreakdown of financial instruments, a breakdown of financial
instruments in the previous fiscal year is not included in accordancewith the transitional procedures set out in Paragraph 7-4 of the
Implementation Guidance on Disclosures about Fair Value of
Financial Instruments (ASBJ Guidance No. 19, July 4, 2019).

*4. The accumulated amount of tax purpose reduction entry ofproperty, plant and equipment due to the acceptance ofnational subsidies, etc. is as follows.

As of March 31,
2022

Buildings and structures

249

243

Machinery, equipment andvehicles20

14*5. Assets pledged as collateral and secured liabilities
Assets pledged as collateral are as follows:

As of March 31,
2022

1,118

1,208

*6. The Group has signed overdraft agreements and commitmentline agreements with five correspondent banks in order toefficiently procure operating funds. The unused balance ofborrowings under these agreements at the consolidated fiscal
year-end is as follows.

(Millions of yen)

As of March 31,
2021

Total of overdraft limit andloan commitment
Outstanding borrowing
balance
Difference*1. Of notes receivable-trade and accounts receivable-trade, theamounts of those receivables arising from contracts withcustomers are as follows.

(Millions of yen)

As of March 31,
2022

Notes receivable

843

Accounts receivable

48,465*2. The accumulated depreciation of property, plant andequipment is as follows.

(Millions of yen)

As of March 31,
2021

As of March 31,
2022

221,719

227,669*3. Items provided to non-consolidate subsidiaries and affiliates are
as follows:

Investment securities (shares)

As of March 31,
2022

59,37659,348‒‒59,37659,348

As of March 31,
2022

4,818

5,593

3,357

484

Subsidy income in the previous consolidated fiscal year mainly
consisted of subsidies for employment adjustment associatedwith the impact of the spread of the COVID-19 infection.
Subsidy income in the consolidated fiscal year under review
mainly consisted of subsidies for employment adjustment
associated with the impact of the spread of the COVID-19
infection.
*5. Gain on sale of non-current assets mainly consisted of thefollowing.

(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2021
March 31, 2022

Machinery, equipment andvehicles

54

32

Land

737

814

*6. Loss on retirement of non-current assets mainly consisted of thefollowing.

(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2021
March 31, 2022

Buildings and structures

88

6

Machinery, equipment andvehicles42

27

Tools, furniture and fixtures

56

17(Notes to Consolidated Statement of Income)*1. Revenue from contracts with customers
Net sales are not broken down into revenue from contracts withcustomers and other revenue. The amount of revenue fromcontracts with customers is stated in Notes to the Consolidated
Financial Statements (Revenue Recognition) 1. Information on the
breakdown of revenue from contracts with customers.

*7. Loss on sale of non-current assets mainly consisted of thefollowing.

(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2021
March 31, 2022

Buildings and structures

025

Machinery, equipment andvehicles18

8Tools, furniture and fixtures02(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2021
March 31, 2022

Depreciation
Provision of allowance for
doubtful accounts
Provision for bonuses
Provision for bonuses for
directors (and other officers)
Retirement benefit expenses
Personnel expenses
Advertising expenses
Provision for productwarranties
Research and development
expenses

4,554

4,257

(126)

(33)

1,778

2,414

78

278

1,427
26,476
12,168

1,646
29,15815,360

2

87

5,576

5,542

*8. Impairment losses
The Group posted an impairment loss in the asset groups below.
Fiscal year ended March 31, 2021
Location

Japan

Use

Thailand Watch production facilities

China

Category

Tools, furniture andFurniture and fixtures,fixtures, software,
software, idle facilities, etc. machinery, equipment,
vehicles, etc.

Watch production
facilities, electronic device
production facilities

Machinery, equipment
and vehicles, buildings
and structures, tools,
furniture and fixtures, etc.
Machinery, equipment,
and vehicles, etc.

*3. The total amount of research and development expenses
included in general and administrative expenses is as follows:(Millions of yen)

(Millions of yen)

As of March 31,
2021

Subsidy income(Millions of yen)

As of March 31,
2021*2. Major components of selling, general and administrative
expenses and their amounts are as follows.

(Consolidated Statement of Income)Accumulated depreciation

Buildings and structures(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2021
March 31, 2022

(Millions of yen)

As of March 31,
2021(Additional Information)(Performance-linked stock remuneration plan)(1) Transaction overview
The Company has introduced a performance-linked
compensation system (the “System”) for its Directors (excluding
Outside Directors and non-residents in Japan; hereinafterreferred to as “Directors”) for the purpose of further clarifying thelink between the compensation to the Directors and value of theCompany’s stock and giving them greater motivation to makecontributions to improve business performance and increase
enterprise value over the medium and long term.
The System employs a framework called Board Incentive Plantrust (hereinafter “the BIP Trust”). The BIP Trust is similar to theperformance-based stock compensation (Performance Share)plan and the restricted stock compensation (Restricted Stock)plan in the United States. Under the BIP Trust, shares of theCompany’s stock are issued, and money obtained by realizing
the said shares is delivered to Directors according to theirpositions and degree of contribution to achievement of theCompany’s performance targets.
(2) The Company’s shares remaining in the Trust
The Company’s shares remaining in the Trust are posted astreasury shares in the net assets section. The book value andnumber of such treasury shares were 242 million yen and
374,652 shares, respectively, at the end of the previous
consolidated fiscal year, and 241 million yen and 373,362 shares,
respectively, at the end of the consolidated fiscal year underreview.

*4. The content of subsidy income is as follows.

Fiscal year ended Fiscal year ended
March 31, 2021
March 31, 2022

Research and development
expenses

5,576

5,542

52

*11. Extra retirement payments comprise the following.

Fiscal year ended March 31, 2022
Location

Japan

China

Use

(Millions of yen)

Type

Software, electronic
device production
facilities, etc.

Software, tools, furnitureand fixtures, machinery,equipment, vehicles, etc.

Idle assets

Buildings and structures

Switzerland Watch production
facilities, etc.

Machinery, equipment,
and vehicles, etc.

The Company and its consolidated subsidiaries group eachbusiness unit based on managerial accounting categories, andthese groups are regarded as the smallest units that generatecash flows, in principle. Regarding certain consolidate
subsidiaries, each subsidiary forms a group in light of their size.
Moreover, assets whose association with a specific business is notclear, such as those for head office, are considered shared assets.
In the previous consolidated fiscal year, carrying amounts havebeen reduced to recoverable amounts, mainly for assets with noplan to be used in the future, operating assets with aggravatedprofitability, and operating assets for a business whose
management environment has been significantly deteriorated,
and the said reduction was recorded as impairment loss (2,857
million yen) under extraordinary losses. It mainly consisted ofmachinery, equipment, vehicles, etc. amounting to 1,365 million
yen, software amounting to 646 million yen, tools, furniture andfixtures amounting to 519 million yen, and buildings andstructures amounting to 280 million yen.
In the consolidated fiscal year under review, carrying amounts
have been reduced to recoverable amounts, mainly for assets
with no plan to be used in the future and operating assets withdeteriorated profitability, and the said reduction was recorded as
impairment loss (742 million yen) under extraordinary losses. It
mainly consisted of buildings and structures amounting to 287
million yen, machinery, equipment, vehicles, etc. amounting to
203 million yen, software amounting to 141 million yen and tools,
furniture and fixtures amounting to 76 million yen.
The recoverable value is calculated based on net realizable saleprice or value in use. The net realizable sale price is stated using
disposal value, while value in use is calculated by discounting
expected future cash flows at a discount rate of 8%.
*9. Loss on valuation of inventories for Russia is recorded under
extraordinary losses.
*10. Reorganization cost comprises the following.

(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2021
March 31, 2022

Reorganization cost

238

209

Reorganization cost in the previous consolidated fiscal year
mainly comprised business structural reform expenses for thewatches segment and structural reform expenses arising from thewithdrawal from the leisure and services segment (of which
provision of allowance for reorganization cost was 80 million
yen.)
Reorganization cost in the consolidated fiscal year under review
mainly comprises business structural reform expenses for thewatches segment.

Fiscal year ended Fiscal year ended
March 31, 2021
March 31, 2022

Extra retirement payments

4,374(Notes to Consolidated Statement of Changes in Equity)* Reclassification adjustment and tax effect related to othercomprehensive income

Fiscal year ended March 31, 2021

(Millions of yen)

15

Extra retirement payments in the previous consolidated fiscal
year mainly comprised those arising from business structuralreform for the watches segment.
Extra retirement payments in the consolidated fiscal year underreview mainly comprise those arising from business structuralreform for the watches segment.
*12. Year-end inventories indicate an amount after the carrying
amount is lowered due to a decline in profitability, and thefollowing loss on valuation of inventories is included in cost of
sales. The amounts below indicate those obtained by offsetting
against reversals.

(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2021
March 31, 2022

2,006

(Notes to Consolidated Statement of Comprehensive Income)

2,479*13. Fixed costs, etc. arising from suspension of operation of plants,
stores, etc. due to the impact of the spread of COVID-19 arerecorded as a loss arising from COVID-19 under extraordinary
losses.

Fiscal year
Fiscal year
ended March 31, ended March 31,
2021
2022

1. Class and number of issued shares and class and numberof treasury shares
Number ofshares at
beginning of
consolidated
fiscal year
under review

Valuation difference on
available-for-sale securities:
Amount that occurred in thefiscal year under review

2,490

3,175

Reclassification adjustment

1,452

51

Before tax effectadjustment

3,942

3,226

Amount of tax effect(1,017)

Valuation difference on
available-for-salesecurities

2,924

5,533

Decrease in
number ofshares duringconsolidated
fiscal year
under review

Number ofshares at endofconsolidated
fiscal year
under review

IssuedsharesCommonshares314,353,809‒‒ 314,353,809

(752)

Total

314,353,809‒‒ 314,353,809

2,474

TreasurysharesOrdinaryshares(Notes 1,
2, 3, 4)

1,714,407

2,420

1,948

1,714,879

Total

1,714,407

2,420

1,948

1,714,879

Foreign currency translation
adjustment:
Amount that occurred in thefiscal year under review

Increase in
number ofshares duringconsolidated
fiscal year
under review

11,578

467

‒

6,000

11,578

‒

‒

6,000

11,578Amount that occurred in thefiscal year under review

(405)

559

Reclassification adjustment

209

256

(Notes) 1. The increase of 2,420 shares in the number of treasury
stock resulted from purchases of shares of less than one
unit.
2. The decrease of 1,948 shares in the number of treasury
stock resulted from the issuance and sales of shares of
the Company’s stock to persons who had served as
Directors based on the executive compensation BIP trust.
3. The number of treasury stock at the beginning of theconsolidated fiscal year under review includes 376,600
shares held by the executive compensation BIP trust.
4. The number of treasury stock at the end of theconsolidated fiscal year under review includes 374,652
shares held by the executive compensation BIP trust.

(195)

816

2. Dividends

21

(123)

Reclassification adjustment
Before tax effectadjustment
Amount of tax effectForeign currencytranslation adjustment
Remeasurements of defined
benefit plans, net of tax:

Before tax effectadjustment
Amount of tax effectRemeasurements ofdefined benefit plans, netof tax(174)

692

Share of othercomprehensive income ofentities accounted for using
equity method:Amount that occurred in thefiscal year under review

66

438

Reclassification adjustment‒‒

Share of othercomprehensive income ofentities accounted forusing equity method

66

438

Total othercomprehensive income

8,817

15,182(1) Dividends paid

Resolution

Class ofsharesBoard ofDirectors
meeting on
November
12, 2020

CommonsharesTotalamount of Dividends
dividends per share(millions of
(yen)
yen)

782

2.50

Recorddates

Effective
date

September
30, 2020

December4, 2020(Note) Total dividend resolved at the Board of Directors’ meeting on
November 12, 2020 included dividend associated with shares of theCompany’s stock held by the executive compensation BIP trust
amounting to 0 million yen.

(2) Of dividends whose record date is in the consolidated fiscal
year under review, those whose effective date in the next
consolidated fiscal year

Resolution

Total
amountDividends
Class of Source ofofper shareshares dividends dividends(yen)(millionsof yen)Ordinary
GeneralCommon Retained
Meeting ofsharesearnings
Shareholders
on June 25,
2021

782

2.50

Recorddates

Effective
date

March June 28,
31, 2021 2021

(Note) Total dividends resolved at the ordinary general meeting ofshareholders on June 25, 2021 included dividends associated withshares of the Company’s stock held by the executive compensation BIP
trust amounting to 0 million yen.

53

54

Fiscal year ended March 31, 2022

1. Class and number of issued shares and class and numberof treasury shares
Number ofshares at
beginning of
consolidated
fiscal year
under review

Increase in
number ofshares duringconsolidated
fiscal year
under review

Decrease in
number ofshares duringconsolidated
fiscal year
under review

Number ofshares at endofconsolidated
fiscal year
under review

Issued shares
Commonshares314,353,809‒‒

314,353,809

Total

314,353,809‒‒

314,353,809

TreasurysharesOrdinaryshares(Notes 1, 2,
3, 4)

1,714,879

14,424,435

1,414

16,137,900

Total

1,714,879

14,424,435

1,414

16,137,900(Notes)1. The increase of 14,424,435 shares in the number of treasury
stock resulted from an increase of 14,421,100 shares throughmarket purchases and an increase of 3,335 shares throughpurchases of shares less than one unit.
2. The decrease of 1,414 shares in the number of treasury stock
resulted from a decrease of 1,290 shares through the issuance andsales of shares of the Company’s stock to persons who had served
as Directors based on the executive compensation BIP trust as well
as a decrease of 124 shares through purchases of shares of lessthan one unit in response to demand for additional purchases.
3. The number of treasury stock at the beginning of theconsolidated fiscal year under review includes 374,652 shares heldby the executive compensation BIP trust.
4. The number of treasury stock at the end of the consolidated
fiscal year under review includes 373,362 shares held by the
executive compensation BIP trust.

2. Dividends(1) Dividends paid

Resolution

Class ofsharesTotalamount of Dividends
dividends per share(millions of
(yen)
yen)

Ordinary
GeneralMeeting of
Shareholders
on June 25,
2021

Commonshares782

Board ofDirectors
meeting on
November11, 2021

Commonshares2,817(Notes)

2.50

9.00

Recorddates

Effective
date

March 31,2021

June 28,
2021

September
30, 2021

December
3, 2021

1. Total dividends resolved at the ordinary general meeting ofshareholders on June 25, 2021 included dividends associated withshares of the Company held by the executive compensation BIP
trust amounting to 0 million yen.
2. Total dividends resolved at the Board of Directors’ meeting on
November 11, 2021 included dividends associated with shares of
the Company held by the executive compensation BIP trust
amounting to 3 million yen.

55

(Financial Instruments)(2) Of dividends whose record date is in the consolidated fiscal
year under review, those whose effective date in the next
consolidated fiscal year

Resolution

Total
amountDividends
Class of Source ofofper shareshares dividends dividends(yen)(millionsof yen)Ordinary
GeneralMeeting ofCommon Retained
Shareholders
sharesearnings
on June 28,
2022

2,687

9.00

Recorddates

1. Matters related to the status of financial instruments

Effective
date

March June 29,
31, 2022 2022

(Note) Total dividend resolved at the ordinary general meeting ofshareholders on June 28, 2022 included dividend associated withshares of the Company held by the executive compensation BIP trust
amounting to 3 million yen.

(Notes to Consolidated Statement of Cash Flows)* Relationship between “Cash and cash equivalents at end of year”
and account items listed in the Consolidated Balance Sheets(Millions of yen)

Fiscal year ended Fiscal year ended
March 31, 2021
March 31, 2022

Cash and deposits

101,816

110,901“Other” under current assets(deposits paid in securities
firms)‒

2,844

Time deposits whose deposit
period is more than threemonths(2,254)(2,505)Specified deposits for BIP
trust

(0)

(2)

Cash and cash equivalents

99,561

111,237(2) Description of financial instruments and their risks
Notes and accounts receivable - trade, which are operatingreceivables, are exposed to the credit risk of customers. Foreign
currency-denominated trade receivables arising from conducting
business in overseas markets are exposed to foreign exchange
fluctuation risk. Investment securities consist primarily of stock ofbusiness partners and are exposed to market price fluctuation
risk. Moreover, the Group provides long-term loans to business
partners, etc.
Most of the notes payable - trade and accounts payable - trade,which are operating payables, mature in one year or less.
Borrowings and bonds are mainly for procuring funds that areused for working capital, refinancing for long-term loans andstrategic investment. The Group is exposed to liquidity risk fromits operating payables and loans payable.
Regarding derivative transactions, the Group uses forward
foreign exchange contracts for the purpose of hedging currency
fluctuation risk associated with foreign currency-denominatedtrade receivables and payables.
(3) Risk management system related to financial instruments(i) Credit risk (risk related to business connections’ contract nonperformance) management
In accordance with the receivable management rules, theCompany and its consolidated subsidiaries have systems
enabling the management of due dates and balances andperiodic assessment of major trading partners’ credit standing.
In using derivative transactions, the Group uses financial
institutions with high credit standing to mitigate credit risk inthe event of nonperformance by counterparties.

(Lease Transactions)(Lessee)
1. Finance lease transactions
Non-ownership-transfer finance lease transactions(i) Leased assets
Property, plant and equipment
They mainly consist of production facilities (machinery,equipment, vehicles, etc.) and office equipment (tools, furnitureand fixtures).
(ii) Method of depreciation/amortization of leased assets
As stated in 2. Depreciation method of important depreciable
assets, 4. Matters related to accounting policies underSignificant Matters that Serve as the Basis for the Preparation ofConsolidated Financial Statements.

2. Operating lease transactions
Noncancelable future operating lease payments(1) Policy on financial instruments
The Group has the policy of limiting its fund management
activities to short-term deposits and the like and to conduct fundprocurement primarily through loans from banks and otherfinancial institutions and issuance of bonds. The Group uses
derivative transactions only for the purpose of avoiding the risks
described below and does not conduct derivative transactions
for speculative purposes.

(Millions of yen)

As of March 31,
2021

As of March 31,
2022

Within 1 year

109Over 1 year

17

8

Total

27

17

(ii) Market risk management
Regarding foreign currency-denominated trade receivables
arising from conducting business in overseas markets, theGroup uses forward foreign exchange contracts for the
purpose of hedging certain currency fluctuation risk, inprinciple, excluding trade receivables denominated in thesame currencies.
Regarding investment securities, their market values are
periodically reported to the Board of Directors. Moreover, theshareholding status is continually reviewed, taking into
consideration relationships with, and the financial conditions,etc. of, business partners.
Derivative transactions are executed and managed by thesections in charge in accounting divisions, etc. of the respective
companies, and the results of transactions are reported to
executives in charge of accounting or the relevant generalmanagers.

(4) Supplementary explanation regarding the fair value of financial
instruments
The fair value of financial instruments is based on market prices
or reasonable calculations in the absence of market quotations.
Since the calculations of fair values include variable factors, fairvalues could change when different assumptions are used. In
addition, the contract amounts, etc. of derivatives transactions
described in (Note to derivatives transactions) are not anindicator of risk associated with derivatives transactions.

2. Matters related to the market prices of financial
instruments, etc.
Consolidated balance sheet amounts, market prices anddifferences between them are as follows:
As of March 31, 2021

(Millions of yen)

Consolidatedbalance sheet
amountFair value

Difference(1) Investment securities(*2)
Available-for-salesecurities

17,747

17,747‒(2) Long-term loans
receivable

251

251

‒

Total assets

17,99817,998‒(1) Bonds payable(including current
portion of bonds
payable)10,000

9,979

(21)

(2) Long-termborrowings(including current
portion of long-termborrowings payable)

63,22963,066(162)

Total liabilities

73,22973,045(183)

Derivative transactions
(*3)

(117)

(117)

‒

*1. Information regarding “cash and deposit,” “notes and accounts receivable- trade,” “electronically recorded monetary claims - operating,” “notes andaccounts payable - trade,” “electronically recorded obligations operating,” “electronically recorded obligations - non-operating,” and“short-term borrowings” has been omitted because they are cash and theirfair values are proximate to their book values due to settlement in shortperiods.
*2. As the financial instruments below do not have market quotations and as it
is considered extremely difficult to assess their fair values, they are notincluded in (1) Investment securities.

Category

Unlisted sharesFiscal year ended March 31, 2021 (millionsof yen)10,775*3. Net claims and obligations resulting from derivative transactions areshown at net amounts. Net obligations are shown in parentheses.

(iii) Management of liquidity risk in financing (risk of failure to pay
on due dates)
The Company and the Group prepare and update cash flowplans in a timely manner based on reports from the groupcompanies and manage liquidity risk by such means as
maintaining liquidity on hand.

56

As of March 31, 2022

(Millions of yen)

Consolidatedbalance sheet
amountFair value

As of March 31, 2022

Within 1
year

Over 5years butwithin 10
years

Over 10years

Cash and deposits

110,901‒‒‒

Difference(1) Investment securities(*2)
20,906

20,906‒

Notes and accounts
receivable - trade49,165142‒‒(2) Long-term loans
receivable

184

191

6

2,037

‒

‒

‒

Total assets

21,09021,097

6

Electronicallyrecorded monetaryclaims - operating

‒

184

‒

‒
‒

Available-for-salesecurities(1) Bonds payable(including current
portion of bonds
payable)10,000

9,979

Total

55,244

Total liabilities

65,24464,872(372)

Derivative transactions (*3)

(351)

(351)

‒

54,893(351)*2. Stocks and others without quoted market prices are not included in (1)Investment securities. The said financial instrument’s consolidated balance
sheet amount is as follows.

Fiscal year ended March 31, 2022
(millions of yen)

Category
Unlisted shares

16,369(Note 1) Amount of money claims to be redeemed after consolidated closing
date
As of March 31, 2021

(Millions of yen)

Within 1
year

Over 1year butwithin 5
years

Over 5years butwithin 10
years

Over 10years

Cash and deposits

101,816‒‒‒

Notes and accounts
receivable - trade

43,880

222

‒

‒

Total

162,104327‒(Note 2) Scheduled redemption amounts of bonds, long-term borrowings,
lease obligations and other interest-bearing liabilities with maturity
after consolidated accounts settlement date
As of March 31, 2021
(Millions of yen)

3 Over 4
Over 1 Over 2 Over
years
years
Within 1 year but years
but
but
but
year
within 2 within3
within4
within
5
years
years
years
years
Short-termborrowings

As of March 31, 2022

1. Available-for-sale securities

Category

As of March 31, 2021

Fair value (millions of yen)
Level 1

Level 2

Level 3

1,371

‒

‒

‒

‒

251

‒

‒

147,067473‒‒

Over 5years

Type

Investment securities
Available-for-salesecurities
Shares

20,906‒‒

20,906

Currency

‒

16

‒

16

Total assets

20,90616‒

20,922Currency

‒

368

‒

368

Total liabilities

‒

368

‒

368

(2) Financial instruments other than those stated at fair value in the
consolidated balance sheet
As of March 31, 2022

Fair value (millions of yen)

‒

‒

‒

‒

‒

Category‒‒

10,000‒‒‒Long-term loans
receivable

‒

191

‒

191

Long-term
borrowings

8,016

3,837

1,036

10,03615,03625,266

Total assets

‒

191

‒

191

Lease
liabilities

Bonds payable

‒

9,979

‒

9,979

293

226

68

61

71

402

Total

9,942

Bonds
payable

4,064

11,104

10,098

As of March 31, 2022

15,10825,669(Millions of yen)

3 Over 4
Over 1 Over 2 Over
years
years
Within 1 year but years
but
but
but
year
within 2 within
3 within 4 within 5
years
years
years
years

Over 5years

Level 1

Level 2

Level 3Total

Long-term borrowings‒

54,893‒54,893

Total liabilities‒

64,872‒64,872(Note) Explanations about assessment techniques used in thecalculation of fair value and inputs related to the calculationof fair value
Investment securities

911

‒

‒

‒

‒

‒

Listed shares are assessed using fair values Listed shares are tradedon an active market and their fair values are categorized into Level1.

‒

10,000‒‒‒‒Derivative transaction

Long-term
borrowings

3,862

1,043

10,03915,03910,03915,219Leaseliabilities

295

182

70

78

43

414

Total

5,069

11,226

10,11015,11810,082

15,634

Short-termborrowings
Bonds
payable3. Breakdown of financial instruments by level of market value
The fair values of financial instruments are classified into thefollowing three levels according to the observability andimportance of inputs used in the calculation of fair values.
Level 1 fair value:
fair value calculated using market prices, on an active market, ofassets or liabilities whose fair value is calculated of theobservable inputs related to the calculation of fair value
Level 2 fair value:
fair value calculated using inputs other than the inputs used forLevel 1 of the observable inputs related to the calculation of fairvalue
Level 3 fair value:
fair value calculated using inputs that are not observable related
to the calculation of fair value
If more than one input that has a significant effect on thecalculation of fair value is used, the fair value is classified to thelevel of inputs whose priority is lowest in the calculation of fairvalue.

(Millions of yen)

Total

1,632

*3. Net claims and obligations resulting from derivative transactions areshown at net amounts. Net obligations are shown in parentheses.

Long-term loans
receivable(Note to Securities)

Derivative transaction(2) Long-term borrowings(including current
portion of long-termborrowings payable)

Electronicallyrecorded monetaryclaims - operating(1) Financial instruments stated at fair value in the consolidatedbalance sheet

Derivative transaction

Long-term loans
receivable(21)*1. Information regarding “cash and deposit,” “notes and accounts receivable- trade,” “electronically recorded monetary claims - operating,” “notes andaccounts payable - trade,” “electronically recorded obligations operating,” “electronically recorded obligations - non-operating,” and“short-term borrowings” has been omitted because they are cash and theirfair values are proximate to their book values due to settlement in shortperiods.

57(Millions of yen)Over 1year butwithin 5
years

Fair values of exchange contracts are calculated by the present
discounted value method, using interest rates, foreign exchange
rates and other observable inputs and are categorized under Level
2 fair value.
Long-term loans receivable
Fair values of long-term loans receivables are grouped by a certain
period of time and calculated by present discounted value method,using future cash flows and individual rates based on the categoryof credit risks in credit management which consist of appropriate
indicators, such as government bond yield, and credit spreads.
These loan receivables are categorized under Level 2 fair value.
Bonds payable
Fair value of bonds issued by the Company is calculated by present
discounted value method, using the total amount of principal andinterest and a rate adjusted by remaining periods of the said bonds
and credit risk. These bonds are categorized under Level 2 fairvalue.
Long-term borrowings
Fair values of long-term borrowings are calculated by the present
discounted value method, using the total amount of principal andinterest and a rate adjusted by remaining periods of the saidborrowings and credit risk. These borrowings are categorizedunder Level 2 fair value.

Consolidated
Acquisition
balance
Difference
costsheet amount(1) Stocks
Other(2) Bonds
securities
whose book(i) Government
carrying
bonds, local
amount on
government
thebonds, etc.
consolidated(ii) Bonds
balancepayablesheets(iii) Other
exceed theacquisition (3) Other
cost
Subtotal

17,167

9,121

8,045

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

17,167

9,121

8,045

(1) Stocks
Other
securities(2) Bonds
whose book(i) Government
carrying
bonds, local
amount on
government
thebonds, etc.
consolidated
(ii)
Bonds
balancepayablesheets do
not exceed(iii) Othertheacquisition (3) Other
cost
Subtotal

580

618

(37)

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

580

618

(37)

Total

17,747

9,739

8,008

As of March 31, 2022

(Millions of yen)Type

Consolidated
Acquisition
balance
Difference
costsheet amount(1) Stocks
Other(2) Bonds
securities
whose book(i) Government
carrying
bonds, local
amount on
government
thebonds, etc.
consolidated(ii) Bonds
balancepayablesheets(iii) Other
exceed theacquisition (3) Other
cost
Subtotal

20,581

9,311

11,270

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

20,581

9,311

11,270(1) Stocks
Other
securities(2) Bonds
whose book(i) Government
carrying
bonds, local
amount on
government
thebonds, etc.
consolidated(ii) Bonds
balancepayablesheets do
not exceed(iii) Othertheacquisition (3) Other
cost
Subtotal

324

359

(35)

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

‒

324

359

(35)

Total

20,906

9,671

11,23458

2. Available-for-sale securities that were sold

As of March 31, 2022

Fiscal year ended March 31, 2021

Type

(Millions of yen)

Total gain on
sales

Sale price(1) Stocks

3,163

Total loss on
sales

1,452

Category

Type

‒

‒

‒

‒

(ii) Bonds payable

‒

‒

‒

(iii) Other

‒

‒

‒

(3) Other
Total

‒

‒

‒

3,163

1,452

‒

Fiscal year ended March 31, 2022

Type

Sale price(1) Stocks

165

94

‒

‒

(ii) Bonds payable

‒

‒

‒

(iii) Other

‒

‒

‒

‒

‒

‒

165

94

‒

(3) Other
Total

‒

‒

3. Investment securities on which impairment losses were posted
Fiscal year ended March 31, 2021
The Company recognized impairment losses on investment
securities of 1,220 million yen.
Fiscal year ended March 31, 2022
Not applicable(Notes to Derivatives Transactions)
1. Derivative transactions to which hedge accounting is not applied.
Currencies
As of March 31, 2021

Value ofContract contract
Valuation
value,
for more Fair value gains or
etc.
than onelossesyear

Longposition

(3)

(3)

EUR

3,296

CNY

2,868

‒

(134)

(134)

‒

(165)

(165)

Short
position
EUR

901

‒

(8)

(8)

GBP

872

‒

(40)

(40)

8,233

‒

(351)

(351)

(2) Reconciliation of balance of plan assets at beginning and end of
period(Millions of yen)

Fiscal year
Fiscal year
ended March 31, ended March 31,
2021
2022
Plan assets at beginning of
period

1,952

2,875

Expected return on plan assets

30

67

Amount of net actuarial
gain/loss

65

236

Employer contribution

163

125

Retirement benefits paid

(97)

(179)

Exchange adjustments

200

380

The difference arising from theshift from the simplified
method to the standard
method573

Amount of retirement benefit
trust

‒

2,000

(12)

31

2,875

5,538

OthersPlan assets at end of period

2. Fair values to which hedge accounting is applied
Notes related to interest rates
As of March 31, 2021
Not applicable.
As of March 31, 2022
Not applicable.

(Millions of yen)

(Retirement Benefits)
1. Outline of the retirement benefits system
The Company and its domestic consolidated subsidiaries haveadopted lump-sum withdrawal payment systems and retirement
benefit systems under defined contribution systems.
In addition, some of the overseas consolidated subsidiaries haveadopted defined benefit systems or defined contribution systems.
In calculating their retirement benefits obligations, some of theconsolidated subsidiaries have adopted the simplified method
under which an amount required to be paid for voluntary
resignations at fiscal year-end is assumed to be equal to retirement
benefits obligations.
Moreover, the Company has instituted a retirement benefit trust.

2. Defined benefit plans(1) Reconciliation of defined benefit obligation at beginning andend of period

As of March 31,
2021

As of March 31,
2022

Defined benefit obligation for
funded plan

4,272

5,027

Plan assets(2,875)(5,538)

1,397

(511)

21,193

20,792Retirement benefit obligation
for unfunded plan
Net amount of liability and asseton the consolidated balance
sheets

22,590Retirement benefit liability

22,59020,281

Net amount of liability and asseton the consolidated balance
sheets

22,59020,281(4) Breakdown of retirement benefit expenses(Millions of yen)

Fiscal year
Fiscal year
ended March 31, ended March 31,
2021
2022
Defined benefit obligation at
beginning of period

25,99025,465Service costs

1,402

1,392

Interest costs

124

116

Amount of net actuarial
gain/loss

221

(299)

Retirement benefits paid

(3,233)(1,449)

298

587

‒

(18)

(18)

Exchange adjustments

EUR

2,496

‒

(42)

(42)

CNY

1,011

‒

(42)

(42)

The difference arising from theshift from the simplified
method to the standard
method

676

‒

USD

265

‒

(4)

(4)

Other

(15)

7

EUR

809

‒

13

13

25,46525,820

315

‒

(24)

(24)

5,831

‒

(117)

(117)

Defined benefit obligation at
end of period

20,281(Millions of yen)

Fiscal year
Fiscal year
ended March 31, ended March 31,
2021
2022
Service costs

1,402

1,392

Interest costs

124

116

Expected return on plan assets

(30)

(67)

Expense for actuarial losses

206

250

Amortization of prior service
costs

3

5

1,706

1,696

Retirement benefit expenses
related to defined benefit plans(5) Remeasurements of defined benefit plans, net of tax
Breakdown of remeasurements of defined benefit plans, net oftaxes, is as shown below.

(Millions of yen)

Fiscal year
Fiscal year
ended March 31, ended March 31,
2021
2022
Prior service costs

15

(5)

Actuarial gains and losses

180

(810)

Total

195

(816)

(6) Remeasurements of defined benefit plans
Breakdown of items posted as remeasurements of defined
benefit plans (before deduction of tax effect) is as follows:(Millions of yen)

As of March 31,
2021

As of March 31,
2022

Unrecognized prior service
costs

220

214

Unrecognized actuarial gains
and losses

1,103

293

Total

1,323

507

‒

(3) Reconciliation of retirement benefit obligation and plan assets
with net retirement benefit liability and asset reflected on the
consolidated balance sheets

933

GBP

59

‒

USD

Short
position

Total

294

(Millions of yen)

Forwardexchange
contracts

Transactions
other thanmarkettransactions

USD

Total

(i) Government
bonds, local
government bonds,
etc.

Type

Transactions
other thanmarkettransactions

Total loss on
sales(2) Bonds

CategoryLong
position(Millions of yen)

Total gain on
sales

Value ofContract contract
Valuation
value,
for more Fair value gains or
etc.
than onelossesyear

Forwardexchange
contracts(2) Bonds(i) Government
bonds, local
government bonds,
etc.

(Millions of yen)

(Note) Retirement benefit expenses are included in service cost at
consolidated subsidiaries using the simplified method.

(7) Pension plan assets(i) Breakdown of plan assets
The ratios of each of the major categories to total pension
assets are as follows:
As of March 31,
2021

As of March 31,
2022

Stocks

47.5%

19.4%

Bonds

10.7%

13.0%

Cash and deposits

0.5%

38.1%

General account in life
insurance

37.4%

27.1%

Others

3.9%

2.4%

Total

100.0%

100.0%(Note) Of total plan assets, the retirement benefit trust for the fiscal
year ended March 31, 2022 accounts for 36%.
(ii) Method for setting expected long-term rate of return
To determine the expected long-term rate of return on pension
plan assets, the Company takes into consideration the current
and expected pension plan asset mix and expected long-term
rates of return on a variety of pension plan assets.
(8) Basis for the calculation of actuarial gains and losses
Major assumptions for the calculation of actuarial gains andlosses (weighted average)
As of March 31,
2021

As of March 31,
2022

Discount rate

0.32 - 3.15%

0.32 - 3.45%

Expected long-term rate of
return0.14 - 4.00%

0.15 - 4.00%

3. Defined contribution plan
The required contribution amounts for the Company and its
consolidated subsidiaries were 1,105 million yen and 1,172 million
yen for the fiscal years ended March 31, 2021 and 2022,
respectively.

(Note) Retirement benefit expenses are included in service cost at
consolidated subsidiaries using the simplified method.

60

(Tax Effect Accounting)
1. Breakdown of key factors contributing to deferred tax
assets and deferred tax liabilities(Millions of yen)

As of March 31,
2021

Deferred tax assets
Depreciable assets
Inventory write-down andunrealized gain
Retirement benefit liability
Allowance for doubtful
accounts
Provision for bonuses
Losses carried forward (Note)
Investment securities
Provision for loss on businessreorganization and liquidation
OthersDeferred tax assets sub-total
Valuation allowance related to
tax losses carried forward(Note)
Valuation allowance related todeductible temporary
differences
Valuation allowance subtotal
Total deferred tax assets

As of March 31,
2022

5,421

4,472

5,289

4,745

6,051

6,233

336

408

1,363
10,906
2,052

1,631
10,214
2,086

225

107

4,712
36,358

6,398
36,299(9,765)

Deferred tax liabilities
Valuation difference on
available-for-sale securities
Undistributed profits ofoverseas affiliated companies
Reserve for special
depreciation
OthersTotal deferred tax liabilities
Net deferred tax assets(9,398)(18,662)(17,414)(28,427)
7,930(26,813)
9,485(1,568)(2,326)(2,926)(3,510)

(156)

(168)

(424)
(4,918)
3,012

(357)
(6,362)
3,122(Note) Tax losses carried forward and the related deferred tax
assets allocated to each fiscal year when carryforwards
expired.
As of March 31, 2021

(Millions of yen)Over 1 Over 2 Over 3 Over 4
year
years
years
years Over 5
Within
but
but
but
but
1 year within
within within within years
2 years 3 years 4 years 5 years
Tax losses
carriedforward (*)
Valuation
allowance
Deferredtax assets

Total

457

255

132

247

307

(421)

(255)

(132)

(244)

(307) (8,403) (9,765)

35

‒

‒

2

‒

9,507 10,906

1,103

1,141

(*) The tax losses carried forward is an amount obtained bymultiplying the effective statutory tax rate.
As of March 31, 2022

(Millions of yen)Over 1 Over 2 Over 3 Over 4
year
years
years
years Over 5
Within
but
but
but
but
1 year within
within within within years
2 years 3 years 4 years 5 years
Tax losses
carriedforward (*)
Valuation
allowance
Deferredtax assets

419

224

274

273

(276)

(184)

(238)

(273)

142

40

35

‒

176

8,846 10,214(176) (8,248) (9,398)‒

597(*) The tax losses carried forward is an amount obtained bymultiplying the effective statutory tax rate.

61

Total

816

2. Breakdown of major items that caused a significant
difference between a effective statutory tax rate and apercentage of income taxes after the application of tax
effect accounting
As of March 31, 2021

Statutory tax rate
(Adjustments)
Expenses not deductible
for tax purposes
Dividends income, etc.
that is excluded fromtaxable income
Change in valuation
allowance
Differences in tax rates
between the parent andsubsidiaries
Increase/decrease inamount of tax
consequences
pertaining to overseas
retained earnings
OthersPercentage of effective
income tax rate after theapplication of tax effectaccounting(Revenue Recognition)

Fiscal year ended March 31, 2022

As of March
31, 2022

Not indicated in theprevious consolidated
fiscal year because profit
before income taxes was
negative.

(Millions of yen)

1. Information on the breakdown of revenue from contracts
with customers(Millions of yen)

30.6%
0.2%
(0.1%)(11.9%)(3.3%)(2.2%)
2.7%
16.0%

Devices
Electronics
andand Other
Components Products

Watches

Machine
Tools

Japan

24,152

17,223

24,954

8,015

74,346

Asia

37,71527,81917,405

4,739

87,681

U.S.

48,798

7,726

3,554

2,445

62,525

Europe18,11327,441

4,091

3,939

53,585

Others

2,292

800

39

74

3,207

131,072

81,01150,045

19,215281,344

‒

‒

‒

72

72

131,072

81,01150,045

19,288281,417

Revenuefromcontractswithcustomers
Otherrevenue
Sales toexternalcustomers

1. Asset retirement obligations posted in the consolidatedbalance sheets(1) Outline of the asset retirement obligations
Asset retirement obligations are recorded, which includes
asbestos removal costs arising from demolition of a building heldby the Group and restoration costs accompanying real estateleasing contracts for stores.
(2) Method of calculating asset retirement obligations
Regarding asbestos removal costs, useful life of the main unit of
the property, plant, and equipment is assumed to be 38 years. As
the expected period of use has already passed, the amount isassumed to be equal to the amount of expected expenditure at
the end of the consolidated fiscal year under review.
Regarding restoration costs, the amount of asset retirement
obligations is calculated based on expected period of use of 5
years from the time of acquisition and a discount rate of 0.0%.

(Note) Other income comprises real estate rents, etc.

(3) Increase/decrease in the asset retirement obligations(Millions of yen)
Fiscal year ended
March 31, 2021

Fiscal year ended
March 31, 2022

Balance at beginning of period

66

75

Increase due to purchase ofproperty, plant and equipment

8‒

Adjustment due to passage of
time

‒

‒

Change due to fulfillment ofasset retirement obligations‒‒

Balance at end of period

7575

2. Of asset retirement obligations, those not recorded in
the consolidated balance sheet
In addition to asset retirement obligations recorded in the
consolidated balance sheet, the Company has restoration
obligations upon withdrawal from the land, etc. in use based onlease contracts. However, the amount of the said asset retirement
obligations cannot be estimated with reasonable reliability,
because the period of use of the leased assets relating to the said
obligations is not clear and because no relocations, etc. arescheduled as of the date of this document. Accordingly, theCompany does not recognize such obligation as a liability.

3. Information about the relationship between thefulfillment of performance obligations based on thecontract with the customer and the cash flow generated
from the contract, and the amount of revenue expected
to be recognized from the contract with the customer
existing at the end of the current fiscal year after the
next fiscal year and the timing of cash flows(1) Balance of contract liabilities(Millions of yen)
Fiscal year ended March 31, 2022

Contract liabilities

1,376

116

Over 1 year

423

Total

540

(Segment Information)
1. Outline of reportable business segments
The Citizen Group’s reportable segments are group components
for which separate financial information can be obtained. Eachsegment is subject to periodic examinations to allow the Board of
Directors to decide how to allocate management resources andassess performance.
The Citizen Group has adopted an operating holding company
structure and comprehensive strategies are proposed andbusinesses are pursued by individual operating companies.
Consequently, the Citizen Group, starting from a foundation ofoperating companies, manages its businesses through four
reportable segments – Watches, Machine tools, Devices andcomponents, and Electronic products – based on factors likesimilarity of types and characteristics of products.
Each segment and its major products are as shown below.
Segment

Underlying information for understanding income is as stated in (6)Accounting standards for income and expenses, 4. Matters related
to accounting policies.

Balance at beginningof period

Within 1 year

Total

2. Basic information for understanding revenue fromcontracts with customers(Asset Retirement Obligations)Fiscal year ended March 31, 2022

Balance at endof period
2,071

Contract liabilities are presented under “Other” in current
liabilities in the consolidated balance sheet. Contract liabilities
are recognized mainly when consideration for transactions
accompanying the sale of products is received as advances prior
to delivery of products and when consideration for transactions
accompanying sales of products is received as advances in alump sum in relation to membership-based inspection services in
the watches segment. Contract liabilities are reversed as revenue
is recognized.
The amount of revenue recognized in the fiscal year under review
included in the balance of contract liabilities at the beginning of
the fiscal year is 912 million yen.
(2) Transaction prices allocated to outstanding performanceobligations
The Company and its consolidated subsidiaries apply thepractical expedient to notes on the transaction prices allocated to
outstanding performance obligations, and information withrespect to contracts that have an original expected duration of
one year or less is not included in the scope of notes. The sum oftransaction value allocated to remaining performance obligations
and the period of expected income recognition are as follows.

Major products

Watches

Watches, Movements

Machine Tools

NC automatic lathes

Devices

Auto parts, Switches, Chip LEDs, micro LCDs,
Quartz crystals

Electronics andOther Products

Printers, Health care equipment, etc.

2. Method for calculating sales, profit/loss, assets,
liabilities, and other items for reportable segments
The accounting methods applied to the business segments
reported are generally the same as those described under Basis of
Presenting the Consolidated Financial Statements.
Reportable segment income is based on operating profit.
Inter-segment earnings and transfers are based on market prices.

3. Net sales, profit or loss, assets, liabilities and other items
by reportable segment
Fiscal year ended March 31, 2021

(Millions of yen)

MachineTools

Watches

Devices
Electronics
andand Other
Components Products

Net sales
Sales to externalcustomers
Inter-segment
sales and transfers

95,62546,70745,91918,389

64

161

922

630

Total

95,69046,86946,841

19,019Segment income(losses)(8,192)

2,935

(493)

394

Segment assets

155,522

63,31871,486

18,908Other items
Depreciation

5,097

1,951

3,270

137

Investment inequity method
affiliates

‒

3,945

‒

‒

Increase inproperty, plantand equipment
and intangible
assets

3,687

3,197

2,965

231

62

Amount posted
in theconsolidated
financialstatements(Note) 2

Adjustments(Note) 1

Total

Net sales
Sales to externalcustomers

206,641

Inter-segment
sales and transfers

1,779(1,779)‒

Total

208,421(1,779)206,641

Segment income(losses)(5,355)(4,195)(9,551)

Segment assets

309,235

56,575

365,811‒

206,641

Other items
Depreciation

10,457

1,100

11,557

Investment inequity method
affiliates

3,945

‒

3,945

Increase inproperty, plantand equipment
and intangible
assets

10,081825

10,907(Notes) 1. The following is descriptions of adjustments.
(1) The 4,195 million yen negative adjustment to segment
income (operating profit) includes 139 million yen ininter-segment eliminations and 4,335 million yen incorporate expenses that could not be allocated to aparticular segment.
(2) The 56,575 million yen positive adjustment to segment
assets includes 83,143 million yen in corporate assetsthat could not be allocated to a particular segment and26,567 million yen to eliminate inter-segment
obligations.
(3) Depreciation cost adjustments apply to the entire
company.
(4) The adjusted increases in property, plant andequipment and intangible assets apply to the entire
company.
2. Segment income and losses are adjusted with
operating profit on the consolidated financial statements.

Fiscal year ended March 31, 2022

MachineTools

Watches

Devices
Electronics
andand Other
Components Products

Net sales
Sales to externalcustomers

131,072

81,01150,045

19,288

83

60

1,479

669

Total

131,155

81,071

51,525

19,958Segment income

10,305

12,591

2,864

1,172

Segment assets

169,526

82,90475,206

20,455

4,382

1,917

3,638

261

Inter-segment
sales and transfers

Depreciation

Impairment Loss on Non-current Assets by Reportable Segment
Fiscal year ended March 31, 2021

Fiscal year ended March 31, 2021

This information is omitted because the same information isdisclosed in the segment Information section.
Impairment
loss

2. Information by region(1) Net sales(Millions of yen)

Asia
Japan

U.S.
Of
which, Europe Others
theUnitedStatesOf
which,
China

70,108 65,659 50,149 34,916 30,252 33,612

Investment inequity method
affiliates‒

Increase inproperty, plantand equipment
and intangible
assets

3,371

4,732

‒

3,431

3,277

‒

381

(Note) Net sales are based on the geographical area of thecustomers and categorized by country or region.
(2) Property, plant and equipment(Millions of yen)

Asia
Japan
Amount posted
in theconsolidated
financialstatements(Note) 2

Adjustments(Note) 1

Total

Net sales
Sales to externalcustomers

281,417‒

281,417

Inter-segment
sales and transfers

2,292(2,292)‒

Total

283,710(2,292)

281,417

Segment income

26,934(4,661)

22,273

Segment assets

348,092

46,870394,962

Of which,
Thailand

50,45818,004

7,782

Others

Total

7,485

Depreciation

10,199992

11,191

Investment inequity method
affiliates

4,732

‒

4,732

Increase inproperty, plantand equipment
and intangible
assets

10,462

307

10,77075,948

3. Information by major customer
There is no information to state because net sales to any particularoutside customer do not account for 10% or more of net sales on
the consolidated statement of income.
Fiscal year ended March 31, 2022

DevicesandComponents

2,751

‒

106

This information is omitted because the same information isdisclosed in the segment Information section.

2. Information by region(Millions of yen)

Asia
Japan

U.S.
Of
which, Europe Others
theUnitedStatesOf
which,
China

74,418 87,681 63,966 62,525 51,593 53,585

Electronics
Corporate /and Otherelimination
Products‒

Impairment
loss

Watches

Machine
Tools

365

221

Total

‒ 2,857(Millions of yen)
Devices
Electronics
andCorporate /and Other
Compoelimination
Products
nents

132

‒

Total

22

742

Information Related to Amortization of Goodwill and Unamortized
Balance by Reportable Segment
Fiscal year ended March 31, 2021
Not applicable.
Fiscal year ended March 31, 2022
Not applicable.
Information on Negative Goodwill Generated for Each Reportable
Segment
Fiscal year ended March 31, 2021
Not applicable.
Fiscal year ended March 31, 2022
Not applicable.
Related Party Information
Fiscal year ended March 31, 2021
(1) Transactions between the company submitting consolidated
financial statements and related parties
No applicable significant matter.

1. Information by product/service(1) Net sales

Other items

MachineTools

Fiscal year ended March 31, 2022

Total

2,345 206,641(Millions of yen)

Watches

1. Information by product/service

Other items(Notes) 1. The following is descriptions of adjustments.
(1) The 4,661 million yen negative adjustment to segment
income (operating profit) includes 121 million yen ininter-segment eliminations and 4,782 million yen incorporate expenses that could not be allocated to aparticular segment.
(2) The 46,870 million yen positive adjustment to segment
assets includes 73,692 million yen in corporate assetsthat could not be allocated to a particular segment and26,821 million yen to eliminate inter-segment
obligations.
(3) Depreciation cost adjustments apply to the entire
company.
(4) The adjusted increases in property, plant andequipment and intangible assets apply to the entire
company.
2. Segment income is adjusted with operating profit on
the consolidated financial statements.

63(Reference Information)(Millions of yen)Total

3,207 281,417(Note) Net sales are based on the geographical area of thecustomers and categorized by country or region.

(2) Transactions between consolidated subsidiaries of the company
submitting consolidated financial statements and related parties
No applicable significant matter.
Fiscal year ended March 31, 2022
(1) Transactions between the company submitting consolidated
financial statements and related parties
No applicable significant matter.
(2) Transactions between consolidated subsidiaries of the company
submitting consolidated financial statements and related parties
No applicable significant matter.

(2) Property, plant and equipment(Millions of yen)

Asia
Japan
47,607

Of which,
Thailand
20,032

8,016

Others7,222

Total
74,862

3. Information by major customer
There is no information to state because net sales to any particularoutside customer do not account for 10% or more of net sales on
the consolidated statement of income.

64

Consolidated Supplementary Schedules(Per Share Information)

Net assets per share

652.47 yen

768.92 yen

Earnings (loss) per share(80.52) yen

71.38 yen

(Notes) 1. Diluted earnings per share for the fiscal year underreview is not stated because there is no potential
dilution. The diluted earnings per share for the previous
fiscal year is not stated because it is net loss per shareand there are no residual shares.
2. As described in Changes in Accounting Policies, theCompany applied the Revenue Recognition AccountingStandard, etc. (ASBJ Statement No. 29 dated March 31,2020) and followed the transitional measures prescribedin the proviso of Paragraph 84 of the Revenue
Recognition Accounting Standard. Consequently, net
assets per share decreased 3.60 yen and basic earnings
per share decreased 0.02 yen during the fiscal year
under review.
3. The basis for calculation of earnings (loss) per share is
as shown below.
Fiscal year
Fiscal year
ended March 31, ended March 31,
2021
2022
Earnings (loss) per share
Profit (loss) attributable toowners of parent (millions ofyen)Amount not attributed tocommon shareholders(millions of yen)
Profit(loss) attributable toowners of parent in relation tocommon shares (millions ofyen)
Average number of shares ofcommon stock outstanding
during the period (thousand
shares)(25,173)‒(25,173)

312,639‒

22,140310,189

As of March 31,
2021

As of March 31,
2022

Net assets (millions of yen)

212,864

238,673

Amount deducted from total
net assets (millions of yen)

8,878

9,367

8,878

Net assets related to commonshares at the end of the fiscal
year (millions of yen)

203,986

229,305

Number of common shares at
end of term used in thecalculation of net assets per
share (thousand shares)

312,638

298,215

5. The computation of the amount of net assets per shareis based on the number of shares calculated bydeducting the number of treasury shares at the end of aterm and the number of shares owned under the BIP
trust at the end of the term from the total number ofoutstanding shares at the end of that term. The
calculation of earnings per share or loss per share isbased on the number of shares calculated by deducting
the average number of treasury shares during a term andthe average number of shares owned under the BIP trust
during the said term from the average total number ofoutstanding shares during the said term.
The average number of the Company’s shares owned
under the BIP trust for the previous consolidated fiscal
year was 375,140 and the number of the Company’s
shares at the end of the fiscal year was 374,652. The
average number of the Company’s shares owned underthe BIP trust for the consolidated fiscal year under review
was 373,686 and the number of the Company’s shares atthe end of the fiscal year was 373,362.

9,367

Balance atBalance at end
beginning ofof period
period (millions(millions of yen)of yen)Company nameStock

Date ofissuance

Citizen Watch
Co., Ltd.

3rd unsecured
bonds

September 25,
2018

10,000

Total

‒

‒

10,000Interest rate(%)

Collateral

Maturity date

10,000‒None

September 25,
2023

10,000‒‒‒(Note) The scheduled amount of depreciation for five years from the consolidated account settlement date is as follows.
Millions of yen

Within 1 year‒

Over 1 year but
within 2 years

Over 2 years but
within 3 years

10,000Over 3 years but
within 4 years‒‒

Over 4 years but
within 5 years‒

Borrowings Schedule
Category

Balance at beginning of
period(millions of yen)

Balance at end of
period(millions of yen)

Averageinterest rate (%)

Due date

Short-term borrowings

1,632

911

1.3

‒

Current portion of long-termborrowings

8,016

3,862

0.4

‒

Current portion of lease liabilities

293

295

‒

‒

(Significant Subsequent Events)

Long-term borrowings (excluding
current portion of long-termborrowings)

55,212

51,3820.42023 - 2039

(Cancellation of Treasury Shares)
The Company resolved at a meeting of the Board of Directors heldon June 21, 2022 to retire treasury stock in accordance with theprovisions of Article 178 of the Companies Act. Details are as
follows.

Lease liabilities (excluding current
portion of lease liabilities)

831

790

‒

2023 - 2065

22,1404. The basis for calculating net assets per share is asfollows:

Non-controlling interests

Bonds Schedule(millions of yen)
Fiscal year
Fiscal year
ended March 31, ended March 31,
2021
2022

1. Type of shares to be cancelled
Common shares of the Company
2. Total number of shares to be cancelled
20,353,809 shares (Percent of the total number of shares
outstanding before cancellation: 6.47%)
3. The total number of outstanding shares after cancellation
294,000,000 shares
4. Scheduled date of cancellation
July 29, 2022

Other interest bearing debts
Total

‒

‒

‒

‒

65,98657,241‒‒(Notes) 1. Average number for the period is used to calculate average rate.
2. The average interest rate for lease obligations is not stated because lease obligations before the deduction of interest included in total lease
payments is posted in the consolidated balance sheets.
3. Lease obligations are accounted for by including the amounts in Other (current liabilities) and Other (non-current liabilities).
4. Long-term borrowings and lease liabilities (excluding the current portion of them) scheduled to be repaid within five years of the end of the
fiscal year are as shown below.
Millions of yen

Category

Over 1 year but
within 2 years

Over 2 years but
within 3 years

Over 3 years but
within 4 years

Over 4 years but
within 5 years

Long-term borrowings

1,043

10,03915,03910,039

182

70

78

43

Lease liabilities

Asset Retirement Obligations Schedule
The amount of asset retirement obligations at both the beginning and end of fiscal year ended March 31, 2022 are less than 1% of the
combined total of liabilities and net assets at the beginning and end of fiscal year ended March 31, 2022, and so have been omitted inaccordance with Article 92-2 of the Regulations for Consolidated Financial Statements.

Other
Quarterly information in the fiscal year under review(Cumulative period)

2nd quarter3rd quarter

Net sales (millions of yen)

65,759135,737

215,608

281,417

Profit (loss) before income taxes(millions of yen)

5,839

12,84422,985

26,694

Profit (loss) attributable to ownersof parent (millions of yen)

4,396

9,870

17,192

22,140Earnings (loss) per share (yen)

14.06

31.57

55.03

71.38

1st quarter2nd quarter3rd quarter

4th quarter

14.06

17.51

23.47

16.31

(Accounting period)
Earnings per share (yen)65

Fiscal year ended
March 31, 2022

1st quarter66Impairment of Long-Lived Assets

English Translation

INDEPENDENT AUDITOR’S REPORT

June 29, 2022
To the Board of Directors of
Citizen Watch Co., Ltd.
Nihombashi Corporation
Chuo-Ku, Tokyo
Shigehiro Chiba
Designated and Engagement Partner
Certified Public Accountant
Hidekazu Takahashi
Designated and Engagement Partner
Certified Public Accountant
Tatsuya Oritoya
Designated and Engagement Partner
Certified Public Accountant

OpinionPursuant to Article 193-2, paragraph 1 of the Financial Instruments and Exchange Law of Japan, we have audited theconsolidated financial statements of Citizen Watch Co., Ltd. and its subsidiaries (the Group), which comprise the consolidatedbalance sheet as at March 31, 2022, and the consolidated statements of income, comprehensive income, changes in net assets
and cash flows for the year then ended, and notes to the consolidated financial statements.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Group as at March 31, 2022, and its consolidated financial performance and its consolidated cash flows
for the year then ended in accordance with accounting principles generally accepted in Japan.

Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our responsibilities under thosestandards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements sectionof our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of
the consolidated financial statements in Japan, and we have fulfilled our other ethical responsibilities in accordance with theserequirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.

Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated
financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

67

Description of Key Audit Matter

How the Key Audit Matter Was Addressed in the Audit

Property, plant and equipment of JPY 74,862 million andintangible assets of JPY 4,834 million were recorded in the
consolidated balance sheet for the year ended March 31,
2022, and they account for 20.2% of the total assets.
As disclosed in “Note to the consolidated financial
statements,” an impairment loss of JPY 742 million wasrecorded in the consolidated income statement for the year
ended March 31, 2022 for assets that are not expected to be
used in the future and business assets with deteriorated
profitability.
The Company examines the need to recognize an
impairment loss for the assets or the asset group that has
been determined to show signs of impairment. When it isdetermined that an impairment loss should be recognized,
the Company reduces the carrying amount to therecoverable amount and records the decrease as an
impairment loss. The recoverable amount is calculated
based on the net selling price or the value in use.
The value in use is the discounted present value of future
cash flows. Estimates of future cash flows are based on
business plans approved by management, and significant
assumptions, such as future market projections and sales
projections including the likelihood of winning orders, aresubject to management’s subjective judgment. Thesesignificant assumptions are also highly influenced by thetiming of the end of the pandemic and are subject touncertainty.
Based on the aforementioned factors, we identified the
impairment of long-lived assets as a key audit matter.

We performed the following audit procedures in examining
the impairment of long-lived assets:• Evaluated the design and tested the operating
effectiveness of internal controls over the signs,
recognition and measurement of impairment loss,• Reviewed the materials prepared by the Company thatwere used to assess signs of impairment and comparedthem with the underlying supporting documentation,• Assessed the reasonableness of the period utilized in the
future cash flows compared to remaining economic livesof the related assets,• Analyzed the future cash flows by comparing themanagement’s business plans, Assessed the accuracy ofmanagement’s estimates by comparing prior-year
management’s business plans to actual financial results,and• For future market projections and sales projections
including the likelihood of winning orders that are
significant assumptions contained in business plans,
including the timing of the end of the pandemic,
discussed with management and assessed thereasonableness of the assumptions by reviewing the
supporting documentation used therefor and conducting
comparative analysis with forecast data published byexternal organizations.

Valuation of Inventories Held by the Watch Division
Description of Key Audit Matter
Inventories of JPY 50,979 million were recorded in the
consolidated balance sheet for the year ended March 31,
2022, and they account for 12.9% of the total assets. About
two-thirds of these inventories are held by the Watch
Division, and there are certain risks of a profitability decline
due to slow-moving inventories and obsolescence causedby changes in the market environment and the negative
impact of COVID-19.
In addition, as disclosed in “Note to the consolidated
financial statements,” the cost method based on the grossaverage method (for balance sheet values, the method of
write-down of book values based on the profitability
decline) is adopted as the basis for valuation of inventories.
In order to properly reflect the fact of a decline inprofitability, a method of regularly writing down bookvalues is adopted for slow-moving inventories orinventories that are expected to be disposed of, that are
not included in the operating cycle, by setting a write-down
ratio for each item according to a certain duration. This

How the Key Audit Matter Was Addressed in the Audit
We performed the following audit procedures to examine
the reasonableness of valuation of inventories held by the
Watch Division:• Evaluated the design and tested the operating
effectiveness of internal controls over the Company’s
inventory valuation process,• Evaluated the reasonableness of the method of identifying
slow-moving inventories related to profitability decline andthe method of calculating the write-down ratio by
examining historical data, and• Obtained the materials on the write-down of book values
prepared by the Company, tested the completeness ofinventories subject to the write-down, and examined theappropriateness of the write-down of book values byreviewing and recalculating related internal materials.

68write-down ratio was estimated based on internal inventory
disposal rules and historical data. However, as it is affectedby changes in the market environment and thus subject touncertainty, management’s judgment is required.
Based on the aforementioned factors, we identified the
impairment of long-lived assets as a key audit matter.

Other Information
The other information comprises the information included in the Annual Securities Report, but does not include theconsolidated financial statements, the financial statements and our auditor’s reports thereon. Management is responsible forpreparation and disclosure of the other information. The Audit & Supervisory Board Member and the Audit & Supervisory Board
are responsible for overseeing the Group’s reporting process of the other information.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form ofassurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to report in this regard.

Responsibilities of Management and Audit & Supervisory Board and its member for theConsolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordancewith accounting principles generally accepted in Japan, and for such internal control as management determines is necessary
to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue asa going concern and disclosing, as required by accounting principles generally accepted in Japan, matters related to going
concern.
The Audit & Supervisory Board Member and the Audit & Supervisory Board are responsible for overseeing the Group’s financial
reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free frommaterial misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of our audit in accordance with auditing standards generally accepted in Japan, we exercise professional judgment andmaintain professional skepticism throughout the audit.
We also:• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on theGroup’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’sreport. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures,and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves
fair presentation in accordance with accounting principles generally accepted in Japan.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within theGroup to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision andperformance of the group audit. We remain solely responsible for our audit opinion.
We communicate with Audit & Supervisory Board Member and the Audit & Supervisory Board regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control
that we identify during our audit.
We also provide Audit & Supervisory Board Member and the Audit & Supervisory Board with the ethical requirements regarding
independence that are relevant to our audit of the financial statements in Japan, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with corporate auditors and the board of corporate auditors, we determine those mattersthat were of most significance in the audit of the consolidated financial statements of the current period and are therefore the
key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in ourreport because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefitsof such communication.

Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
We do not have any interest in the Group which is required to be disclosed pursuant to the provisions of the Certified Public
Accountants Act of Japan.

Notes to the Readers of Independent Auditor’s Report
This is merely an English translation of the Independent Auditor’s Report as required by the Financial Instruments and Exchange
Act of Japan for the conveniences of the reader. The original Auditor's Report shows an audit opinion for the full set of
consolidated financial statements based on the Financial Instrumentals and Exchange Act of Japan.Therefore this English audit
report does not show our opinion for this English annual report which is only the abbreviation of the above full set of consolidated
financial statements.

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate toprovide a basis for our opinion.
• Consider internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances
for our risk assessments, while the purpose of the audit of the consolidated financial statements is not expressing an opinion on
the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by management.

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September 2022