Sixth Mid-Term Management Plan
(FY2016－FY2018)
May 12, 2016

Contents
1. The 5th Mid-Term Management Plan Review

2. Long-Term Vision and Positioning of Mid-TermManagement Plan
3. Basic Policies of the 6th Mid-Term Management Plan
1) Strengthening profitability and investing for growth2) Reinforcing the management foundation
4. Target Figures of the 6th Mid-Term Management Plan1

1. The 5th Mid-Term Management PlanReview

2Basic Policies of The 5th Mid-Term Management Plan

Reconstructing business portfolio around ourWatch segment as group’s core business tomaximize profitability, as well as realizingthe qualitative reinforcement of group’s
management foundation

3Target Figures and results
FY2012FY2015（Billions of yen）

5th Mid-Term
Management Plan
（Final year）

ActualActual

283.7

320.0

296.7

Operating
Income

5.5

20.0

13.3%

1.9%

6.3%

4.5％

Interest Bearing
Debt
Equity Capital
Ratio
Net Debt
Equity Ratio

203.4

175.0

127.5

11.0%

17.6%

28.7%

3.9

2.1

0.8

Sales4

Profit and Loss by Reported Business Segment
FY2012FY2015（Billions of yen）

5th Mid-Term
Management Plan
（Final year）

Actual

121.0

150.0

7.8

13.0

125.2*

115.0

-1.5*

7.0－*35.0

Income

－*

2.0

Sales

45.8

27.0

0.0

1.0

164.4
12.7
94.9
2.9
19.4
0.3
28.2
0.9

283.7

320.0

296.7

5.5

20.0

13.3

Sales

Watches

Operating
IncomeSales

Electronic Devices

Operating
IncomeSales

Systems Solutions Operating

OthersOperating
IncomeSales

Cons. Total

ActualOperating
Income＊Net sales and operating income values for the Electronic Devices Business in FY2012 are included the Systems Solutions Business.

5Reconstructing the Business Portfolio
Sales increased in the Watches Business, our core business, achieving
the targets of the 5th Mid-Term Management Plan.

The Watches Business saw increased sales, including steady performance in Japan.
The Electronic Devices Business helped reconstruct business portfolio by concentrating
and selecting business lines, including spinning off the semiconductor business andtransferring the wide format printer business.
FY2012Others &Cons. Adj.

Systems
Solutions

13%

FY2015

6%

Others &Cons. Adj.

Systems
Solutions

6% 7%

8%
Electronic Devices
36%

Watches
43%

Electronic Devices
32%

Watches55%

6

Maximizing Business Profitability
Consolidated net sales and consolidated operating income fell short of the 5th
Mid-Term Management Plan targets (final fiscal year).

Downturns in the Electronic Devices Business and Systems Solutions Businessresulted in a failure to achieve targets for maximizing business profitability,despite expansion in the Watches Business and revitalization of other businesses(Clocks, Wako).
Net Sales

Operating Income(Billions of yen)(Billions of yen)

283.7

320.0

296.7

28.0

350.0

SystemsSolutions

300.0
250.0
200.0
150.0

Others20.0

13.3

FY2012FY2015FY2015

TargetActual

24.0
20.0
16.0

ElectronicDevices

12.0
8.0

100.0
50.0

5.5

Watches

4.00.0Cons. Adj.

-50.0
FY2012FY2015FY2015Target

Actual0.0-4.0

7Qualitatively reinforcing the management foundation
Achieved the 5th Mid-Term Management Plan targets (final fiscal year)
for reducing interest bearing debt and improving equity capital ratio.

Promoted qualitative reinforcement of the financial constitution by improving
profitability, selling/liquidating real estate, selling securities, etc.
Interest Bearing Debt
(Billions of yen)

Equity Capital Ratio(Billions of yen)
150.0

11.0%

200

120.0

Equity Capital
Equity Capital Ratio

150

90.0

250

203.4

175.0

127.5

17.6%

28.7%
28.7%

36.0%
30.0%24.0%

17.6%
18.0%

10060.0

11.0%
94.5

50

30.0

60.0

6.0%

39.0
00.0
End of Mar.
2013

End of Mar.
2016
TargetEnd of Mar.
2016
Actual12.0%

0.0%
End of Mar.
2013

End of Mar.
2016
TargetEnd of Mar.
2016
Actual8Challenges for the 6th Mid-Term Management Plan
【Maximizing Business Profitability】
 The Watches Business saw expansion of both sales and profits, butneeds to strengthen profitability and invest for growth in order to growfurther as a core business.
 Improving profitability in the Electronic Devices Business and Systems
Solutions Business is an urgent task. Further selection andconcentration of management resources are required.

【Qualitatively Reinforcing the Management Foundation】
 While our financial constitution improved greatly, we still need tocontinue enhancing equity capital and reducing interest bearing debt
with the aim of further qualitative reinforcement.

92. Long-Term Vision andPositioning of Mid-Term Management Plan

10

Group Slogan

Seiko has continued to drive innovation since our founding while supporting

the management position of “Always one step ahead of the rest.” We formulated ourcorporate slogan in an easy-to-understand expression to incorporate this long-standing
idea as well as the new idea of wanting to appeal to customers’ sensitivities. The slogan
conveys Seiko’s strong will and commitment to continue creating the future based on thetechnological expertise and sensitivities that have driven the times.

11Long-Term Vision

Long-Term Vision （What we aim to be）
We aim to be a trend-setting and innovative
global group that shares excitement withall its stakeholders around the world by
providing products and services that exceed
the highest expectations of our customers.
The Seiko Holdings Group has established its long-term vision of what the Groupaims to be 10 years in the future, based on the Group slogan,“SEIKO Moving ahead. Touching hearts.”

12

Positioning of the Mid-Term Management Plan to Achieve Long-Term Vision

7th Mid-Term Management Plan(FY2019-FY2021)

Aggressive-approach

To be a leading company in the global market by 2020

6th Mid-Term Management Plan(FY2016-FY2018)
Aiming to be a highly profitable group with the Watches Businessat its core:1) Strengthening profitability and investing for growth2) Reinforcing the management foundation

Continuingorganizational
reform to take on
the aggressiveapproach

5th Mid-Term Management Plan(FY2013-FY2015)
Aiming to change to a business structure with the Watches Business at its core:1) Expanding, revitalizing, and reorganizing businesses
Defensiveapproach2) Improving the financial constitution
13

3. Basic Policies of the 6th Mid-TermManagement Plan

14

Basic Policies of the 6th Mid-Term Management Plan

Basic policies of the 6th Mid-Term Management Plan
aimed at achieving the long-term vision

1) Strengthening profitability and investing forgrowth2) Reinforcing the management foundation
We will promote strengthening of profitability and investing for
growth with the aim of being a highly profitable group withthe Watches Business at its core, while pursuing all-out
reinforcement of the management foundation.

15

Basic Policies of the 6th Mid-Term Management Plan

Basic policies of the 6th Mid-Term Management Plan
aimed at achieving the long-term vision

1) Strengthening profitability and investing forgrowth2) Reinforcing the management foundation16

– Watches Business Segment (policy) –Toward greater growth in the Watches Business as theGroup’s core business (expanding profits)
Net Sales(Billions of yen)

164.4

Operating Income
190.0

210

(Billions of yen)

12.7

17.0

FY2015FY2018ActualTarget

20.0
18.0

180

16.0

150

14.0
12.0

120

10.0

90

8.0

60

6.0
4.0

30

2.00
FY2015FY2018ActualTarget0.0

17

– Watches Business Segment (strategy) – Increasing the value of the Seiko Brand• Expanding sales of globally strategic brands such as the Grand Seiko,Astron, and Prospex, while shifting to the mid- to high-price range.
• Continuing to boost investment in advertising and promotion and actively
expanding Seiko Boutiques with the aim of raising brand value andexpanding sales and profit.

 Further expanding sales and profit focused on themechanical watches business• Further expanding sales by developing global marketing for mechanicalwatches in the mid- to high-price range.

• Carrying out ongoing capital investment to strengthen the system forincreasing production of mechanical watches in the mid- to high-pricerange.
18

– Electronic Devices Business Segment (policy) –Generating profit by prioritizing allocation of management
resources to core businesses in the Electronic Devices
Business (increasing profitability)
Net Sales

Operating Income(Billions of yen)
120

(Billions of yen)

94.9

75.0

4.0

2.9

2.5

FY2015
Actual

FY2018Target*

100Semiconductorbusiness

8060

3.0

2.0

40
1.0
200

FY2015
Actual

FY2018Target*0.0* Assuming exclusion of the joint venture semiconductor business company in FY2018.

19

– Electronic Devices Business Segment (strategy) – Strengthening business profitability through reorganizationof the semiconductor business• Establishing the inkjet print heads business as the next leadingbusiness.
• Securing stable earnings in the precision mechatronics business andin the electronic devices business other than the inkjet print headsbusiness.
• Restructuring and dissolving unprofitable businesses.
• The semiconductor business is scheduled to be accounted for underthe equity method in 2018.** A portion of the shares in the semiconductor business company established as a joint
venture with the Development Bank of Japan Inc. (DBJ) are to be transferred to the DBJ
from January 2018 onward.

rthepurposeof growthand engaging in cooperation for theMaking
investments
purpose of growth• Prioritizing investment in focus areas in the precision mechatronics
business and in the electronic devices business.
• Considering and promoting cooperation with other companies.
20

– Systems Solutions Business Segment (policy) –Reinforcing the business foundation of the Systems Solutions
Business as a third main segment (strengthening profitability)
Net Sales

Operating Income(Billions of yen)
30

(Billions of yen)

19.4

25.0

2.0

0.3

1.5

25
1.5

20

15

1.0

10
0.5
50

0.0
FY2015FY2018FY2015FY2018ActualTargetActualTarget21

– Systems Solutions Business Segment (strategy) – Shifting management resources and carrying out selectionand concentration of businesses to strengthen profitability• Turning unprofitable businesses around by restructuring andchanging business models.
• Downsizing back-office sections.
• Shifting to stock business in order to achieve a stable earnings
structure.

 Accelerating launch of new strategic businesses• Promoting and carrying out alliance businesses with other companies.
• Establishing a strategic business section to effect acquisition of large
projects.

22

– Others (policy) –Maintaining stable earnings structure in other businesses(stable profitability)
Net Sales(Billions of yen)
35

28.2

Operating Income
30.0(Billions of yen)

0.9

1.0

1.2

30
1.0
250.8200.6

150.4

100.2

500.0
FY2015FY2018FY2015FY2018ActualTargetActualTarget Putting top priority on continuing to earn operational profits in the Clocks, Wako,and Seiko Time Systems businesses
 Contributing to an increase in Seiko’s brand value through each business23

Basic Policies of the 6th Mid-Term Management Plan

Basic policies of the 6th Mid-Term Management Plan
aimed at achieving the long-term vision

1) Strengthening profitability and investing for
growth2) Reinforcing the management foundation

24

Reinforcing the management foundation

Enhancing corporate communication Continuing and strengthening corporate branding activities• Continuing and strengthening PR and CSR activities through sports
and music, based on the Group slogan “SEIKO Moving ahead.
Touching hearts.”

 Enhancing and continuing IR activities• Continuing and strengthening constructive dialogue with shareholders
and investors, with the aims of sustainable growth and increasing
mid- to long-term corporate value.

25

Reinforcing the management foundation
Continuing basic policies on capital and financial policy Enhancing equity capital• Aiming for an equity capital ratio of 35% or higher (final fiscal year).

 Considering capital efficiency and stable distribution ofprofits to shareholders• Continuing to pay stable dividends, targeting a full-year dividend of
15 yen or more.

 Reducing interest bearing debt
• Continuing to reduce interest-bearing debt funded from operating
cash flow.
• Further reducing interest-bearing debt by improving efficiency offunding.
26

Reinforcing the management foundation
Enhancing corporate governance Pressing ahead with enhancement of the governancesystem, taking into consideration response to the Corporate
Governance Code• Introducing a performance-based compensation system for directors.
• Setting up advisory committees focused on independent directors.

• Introducing mechanisms to evaluate the effectiveness of the Boardof Directors.

27

Reinforcing the management foundation

Enhancing organizational and group functions, andcontinuing with basic policies on human resources Realigning organization and functions of SHD Group• Integrating functions of corporate sections within the Group.
• Integrating and reorganizing businesses within the Group .

 Cultivating diverse human resources• Cultivating and promoting global human resources.
• Furthering efforts to promote active participation by women.
- Aiming for a 12% ratio of women in management positions
by FY2018 (for the Group as a whole).
• Providing a labor environment and career plans that enable diverse
working styles.
28

Investment, financial and capital policies

Generating cash flows
through business activities
Well-balanced
distribution
Return on
investment
for growth

Investment toincrease brandvalue
・Advertising andpromotional investment
・Capital investment
・Strategic investment

Reinforcing thefinancialfoundation• Reducing interestbearing debt

Return toshareholders• Continuing to pay
stable dividends• Improving equity capital
ratio
29

4.Target Figures of the 6th Mid-Term
Management Plan
<Condition>
・Exchange Rate (JPY) : USD1=¥110 EUR1=¥125
・The joint venture semiconductor business company will be excluded
from the scope of consolidation of Seiko Holdings from FY2018 .
(when the company is accounted for under the equity method)30

Consolidated Target Figures and Performance for Business Operation

Consolidated target figures of FY2018 (final fiscal year)

Net sales

JPY 310.0 billion

Operating income

JPY 17.0 billion

Equity capital ratio

35% or higher

Net interest bearing debt

JPY 75.0 billion or less31Consolidated Net Sales and Profit（Billions of yen）

FY2015 Actual

6th Mid-Termmanagement Plan
FY2018Net Sales

296.7

310.0

Operating Income

13.3

17.0%

4.5%

5.5%

11.8

18.0

4.0%

5.8%

12.1

12.5

4.1%

4.0%

Ordinary Income%

Profit attributable toowners of parent%

32Net sales and Operating income by Reported Business Segment
6th Mid-Term management
Plan FY2018

FY2015 Actual（Billions of yen）
NetSalesOperating
Income%NetSalesOperatingIncome%

Watches

164.4

12.7

7.7%

190.0

17.08.9%

Electronic Devices*

94.92.9

3.1%

75.0

2.5

3.3%

Systems Solutions

19.4

0.3

1.9%

25.0

1.5

6.0%

Others

28.2

0.9

3.2%

30.0

1.0

3.3%

Cons. Adj.

-10.3

-3.6

－-10.0-5.0－Cons. Total

296.7

13.3

4.5%

310.0

17.0

5.5%

* Assuming exclusion of the joint venture semiconductor business company from theElectronic Devices Business in FY2018.
33

Consolidated Balance Sheet（Billions of yen）

FY2015 Actual

6th Mid-Termmanagement Plan
FY2018

Total Assets

329.1

340.0

Net Assets

102.6

120.0

Equity Capital Ratio

28.7%

35%

88.4

75.0

Net Debt34

◆ The forecasted results which appear in this report have been
prepared based solely on the information which was available
to us as of the date on which the report was released.
As a result, actual results may differ from the forecasted
figures due to a number of factors, such as changes in thebusiness environment in the future.
Numbers are rounded to the unit indicated.
Percentages are cut off to one decimal place.

35